SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

REPORT OF FOREIGN ISSUER

Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934

KONINKLIJKE PHILIPS ELECTRONICS N.V.

(Exact name of registrant as specified in its charter)

Royal Philips Electronics
(Translation of registrant’s name into English)

The Netherlands
(Jurisdiction of incorporation or organization)

Breitner Center, Amstelplein 2, 1096 BC Amsterdam, The Netherlands
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F þ            Form 40-Fo

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule101(b)(1): o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule101(b)(7): o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yeso            No þ

Name and address of person authorized to receive notices
and communications from the Securities and Exchange Commission:

E.P. Coutinho
Koninklijke Philips Electronics N.V.
Amstelplein 2
1096 BC Amsterdam — The Netherlands

 

 

This report comprises a copy of the Annual Report of the Philips Group for the year ended December 31, 2010, dated February 17, 2011, as well as a copy of the following press releases:

	-		“Philips publishes 2010 Annual Report”, dated February 17, 2011;
	-		“Jeroen van der Veer to succeed Jan-Michiel Hessels as Chairman of the Supervisory Board of Royal Philips Electronics”, dated February 17, 2011;
	-		“Philips to invest EUR 2 billion in green innovation by 2015”, dated February 18, 2011.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized at Amsterdam, on the 18^th day of February 2011.

Annual Report 2010

Financial, social and environmental performance

simply
making a
difference

Contents

		Performance highlights			4
		President’s message			6
1		Our company			11
2		Vision 2015 - our strategic focus			13
3		Our strategy in action			15
3.1		Professional Healthcare			15
3.2		Home Healthcare			20
3.3		Healthy Life & Personal Care			23
3.4		Home Living & Lifestyle Entertainment			27
3.5		Home Lighting			31
3.6		Professional Lighting			35
4		Our planet, our partners, our people			40
4.1		Climate change			40
4.2		Our environmental footprint			43
4.3		Partnerships for progress			46
4.4		Supplier sustainability			49
4.5		Working at Philips			52
4.6		Working in our communities			55
5		Group performance			58
5.1		Management discussion and analysis			58
5.2		Liquidity and capital resources			66
5.3		Other performance measures			71
5.4		Sustainability			74
5.5		Proposed distribution to shareholders			79
5.6		Outlook			80
6		Sector performance			81
6.1		Healthcare			83
6.2		Consumer Lifestyle			89
6.3		Lighting			95
6.4		Group Management & Services			101
7		Risk management			104
7.1		Our approach to risk management and business control			104
7.2		Risk categories and factors			107
7.3		Strategic risks			108
7.4		Operational risks			109
7.5		Compliance risks			111
7.6		Financial risks			112
8		Board of Management			116
9		Group Management Committee			118
10		Supervisory Board			119
11		Supervisory Board report			120
11.1		Report of the Corporate Governance and Nomination & Selection Committee			123
11.2		Report of the Remuneration Committee			124
11.3		Report of the Audit Committee			129
12		Corporate governance			131
12.1		Board of Management			131
12.2		Supervisory Board			133
12.3		General Meeting of Shareholders			135
12.4		Logistics of the General Meeting of Shareholders			136
12.5		Investor Relations			137

2     Annual Report 2010

13		Group financial statements					141
13.1		Management’s report on internal control					141
13.2		Reports of the independent auditor					142
13.3		Auditors’ report on internal control over financial reporting					142
13.4		Consolidated statements of income					143
13.5		Consolidated statements of comprehensive income					145
13.6		Consolidated balance sheets					146
13.7		Consolidated statements of cash flows					148
13.8		Consolidated statements of changes in equity					150
13.9		Information by sector and main country					151
13.10		Significant accounting policies					154
13.11		Notes					161
		1		Income from operations			161
		2		Financial income and expenses			162
		3		Income taxes			162
		4		Investments in associates			166
		5		Discontinued operations			167
		6		Acquisitions and divestments			167
		7		Property, plant and equipment			171
		8		Goodwill			172
		9		Intangible assets excluding goodwill			173
		10		Non-current receivables			174
		11		Other non-current financial assets			174
		12		Other non-current assets			175
		13		Inventories			175
		14		Current financial assets			175
		15		Other current assets			175
		16		Current receivables			175
		17		Shareholders’ equity			176
		18		Long-term debt and short-term debt			177
		19		Provisions			178
		20		Other non-current liabilities			179
		21		Accrued liabilities			179
		22		Other current liabilities			179
		23		Contractual obligations			180
		24		Contingent liabilities			180
		25		Cash from (used for) derivatives and securities			182
		26		Proceeds from non-current financial assets			182
		27		Assets in lieu of cash from sale of businesses			182
		28		Pensions and other postretirement benefits			182
		29		Share-based compensation			187
		30		Related-party transactions			189
		31		Information on remuneration			189
		32		Fair value of financial assets and liabilities			195
		33		Details of treasury risks			196
		34		Subsequent events			198
13.12		Independent auditor’s report — Group					199
14		Company financial statements					200
14.1		Balance sheets before appropriation of results					201
14.2		Statements of income					202
14.3		Statements of changes in equity					202
14.4		Notes					203
		A		Investments in affiliated companies			203
		B		Other non-current financial assets			203
		C		Receivables			203
		D		Shareholders’ equity			203
		E		Long-term debt and short-term debt			205
		F		Other current liabilities			205
		G		Net income			205
		H		Employees			205
		I		Contingent liabilities			205
		J		Audit fees			205
		K		Subsequent events			205
14.5		Independent auditor’s report — Company					206
15		Sustainability statements					207
15.1		Economic indicators					210
15.2		EcoVision5					210
15.3		EcoVision4					211
15.4		Green Manufacturing 2015					212
15.5		Social indicators					215
15.6		Supplier indicators					217
15.7		Independent assurance report					221
15.8		Global Reporting Initiative (GRI) table					222
16		Reconciliation of non-GAAP information					229
17		Five-year overview					233
18		Investor Relations					236
18.1		The Philips investment proposition					236
18.2		The year 2010					237
18.3		Share information					239
18.4		Risk management					241
18.5		Performance in relation to market indices					242
18.6		Philips’ acquisitions					243
18.7		Financial calendar					244
18.8		Investor contact					244
19		Definitions and abbreviations					246
20		Forward-looking statements and other information					248

Annual Report 2010     3

Performance highlights

Performance highlights

Financial table

all amounts in millions of euros unless otherwise stated

		2008				2009				2010
Sales			26,385				23,189				25,419
EBITA1)			744				1,050				2,552
as a % of sales			2.8				4.5				10.0
EBIT1)			54				614				2,065
as a % of sales			0.2				2.6				8.1
Net income (loss)			(92	)			424				1,452
per common share in euros
- basic			(0.09	)			0.46				1.54
- diluted			(0.09	)			0.46				1.53
Net operating capital1)			14,069				12,649				12,071
Free cash flows1)			773				863				1,333
Shareholders’ equity			15,544				14,595				15,046
Employees at December 31			121,398				115,924				119,001

4     Annual Report 2010

Performance highlights

Annual Report 2010      5

President’s message

President’s message

“We posted our best earnings margin in a decade, and retained our strong balance sheet.” Gerard Kleisterlee, President

€ 25 billion			10	%		59%
sales		EBITA as a% of sales				(co-) leadership Net Promoter Score

Dear stakeholder

2010 was a year in which you saw Philips rebounding strongly from the decline caused by the global financial crisis in 2009. Within the constraints of a much weaker economy we successfully implemented a major part of our Vision 2010 strategic plan, rounding out our transformation into a customer-focused, market-driven health and well-being company with a strong brand. We announced our new plan, Vision 2015, setting out the roadmap to growth. And we posted our best earnings margin in a decade, while retaining a strong balance sheet supported by robust cash flows from operating activities.

However, economic recovery and consumer confidence remained fragile in 2010, particularly in mature markets. Following a strong rebound in the first six months of the year, sales growth slowed in the second half, ending at 10% nominal for the full year. This growth was driven by all operating sectors, particularly Lighting, and our growing presence in emerging markets. On a comparable basis, sales were up 4.3% for the year.

We also recorded an EBITA margin of 10.0%, meeting our Vision 2010 target. I am especially pleased to report that this profitability improvement was driven by all our operating sectors, in particular Lighting, conclusively demonstrating the value of our portfolio. Our return on invested capital rose to 11.7%, compared to a cost of capital slightly in excess of 8%,putting us on the right path to achieve our Vision 2015 goals. And building upon that momentum, we continued to make strategically aligned acquisitions in each sector — no fewer than 11 in total.

During 2010 we also made good progress with the deployment of our EcoVision5 program. We brought care to the lives of some 420 million people, improved the

6     Annual Report 2010

President’s Message

energy efficiency of our product portfolio by 4% and launched a series of programs to increase the recycled content of our products. After achieving our EcoVision4 Green Product sales target of 30% last year, we achieved our Green Innovation target in 2010, two years ahead of schedule.

We are proposing to the upcoming General Meeting of Shareholders to increase this year’s dividend to EUR 0.75 per common share, in cash or shares —resulting in a yield (as of December 31, 2010) of 3.3% for shareholders.

How did we do against our Management Agenda 2010?

Drive performance

Drive top-line growth and market share

Sales amounted to EUR 25.4 billion, or 10% nominal growth. Our 4.3% comparable sales growth was driven by a strong 9% increase at Lighting and growth of 4% at Healthcare, tempered by only 1% growth at Consumer Lifestyle due to weak consumer confidence in developed markets and ongoing portfolio pruning. Regionally, the US and Europe continued to face very challenging market conditions, though we were able to drive growth through emerging markets, which accounted for 33% of revenues, up from 30% in 2009. On average, market shares remained steady.

Continue to reduce costs and improve cost agility

We have finalized most of our organization transformation programs to optimize our industrial footprint and organizational effectiveness. As a result, productivity in 2010 improved by an impressive 20%. Our fixed cost reduction, as well as our focus on managing discretionary spend, contributed to our best EBITA performance since 2000. At the same time, we have continued to invest in Research and Development and increased our Advertising and Promotion spend in preparation for our Vision 2015 growth targets.

Further increase cash flow by managing cash aggressively

We generated EUR 470 million more free cash flow than in 2009, an increase to 5.2% of sales, on the back of higher cash earnings.

Accelerate change

Increase customer centricity by empowering local markets and customer-facing staff

We realized that we cannot truly empower local markets if our strategic and financial planning processes do not allow for a voice from the market and a granular, fact-based insight into the opportunities available in these markets. We therefore decided to apply a simple three-step approach where market opportunities precede financial planning. This involves explicit dialog on growth opportunities between market organizations and business groups, allocating funds to priority opportunities, and empowering market organizations to act within the overall framework without complex decision procedures. With this process in place, we should be better placed to capture the opportunities for profitable growth in our markets.

Increase number of businesses with NPS (co-) leadership positions

Outstanding customer and consumer loyalty is critical to achieving growth. In 2010, our Consumer Lifestyle business increased its NPS leadership in a time of fragile consumer confidence in many markets. Healthcare maintained a strong position, and performed very well in China. Lighting noted a slight decrease, yet remains a clear leader in its industry, with 83% of leadership positions in 2010. The overall result is stable, with 59% of our businesses currently holding industry leadership positions, down one point from 2009. The result was negatively impacted by supply chain constraints during the year, and this will very much have our attention going forward. In line with our Vision 2015 growth targets, in 2011 we will continue to drive for further outright leadership in NPS in key markets.

Annual Report 2010      7

President’s message

Increase employee engagement to high-performance level

I am very pleased to say we made significant progress over the past year. Our overall Employee Engagement Index score reached 75%, up seven points from the previous year and one point above the worldwide high- performance benchmark. At 76%, our People Leadership Index improved by three points — clear evidence that our leaders are encouraging interaction and dialog. One of the most heartening aspects of this year’s results was that the biggest advances in our scores were in areas identified as needing improvement in the previous year’s survey. So our teams’ hard work really paid off. Nevertheless, there are still parts of the organization where we have a lot of work to do, and our growth ambitions can only be realized if we continue to challenge ourselves.

Implement strategy

Increase our market position in emerging markets

We have a strong presence in the emerging economies. We generate around one-third of our sales there, and aim to drive this figure up to at least 40% by 2015. To this end, we continue to invest in building our local organizations, competencies and resources in these markets.

In China, we made the first shipments from our industrial campus for imaging systems at Suzhou. Scheduled for completion in 2012, this state-of-the-art facility expands our presence in China’s high-growth healthcare market with a complete portfolio that serves both the needs of the value segment as well as more advanced specialized applications.

We also moved the global headquarters of our Domestic Appliances business to Shanghai — building our business creation capabilities in this important market and taking a step toward making China a “home” market.

In 2010, we entered into a full-cycle innovative partnership with Electron, Russia’s market leader in developing and manufacturing medical equipment.

Drive key strategy initiatives for each sector

We continued to invest in smaller, but strategically aligned and fast-growing businesses in 2010. In Healthcare, we made a series of acquisitions designed to strengthen our offering in clinical informatics, and in China we acquired ultrasound equipment manufacturer Shanghai Apex, enhancing our position in value-segment imaging solutions for emerging markets. Other acquisitions included Siesta’s Somnolyzer business, reinforcing our position in sleep diagnostics and OSA therapy in the strategic growth area of home healthcare.

We also unveiled our new Imaging 2.0 platform, which is set to drive innovation and efficiency in radiology. Imaging 2.0 is all about integration and collaboration — and new levels of patient focus that can help clinicians achieve what was unimaginable just a few short years ago.

In Consumer Lifestyle, we acquired Discus Holdings, the leading manufacturer of professional tooth-whitening products, complementing our existing Sonicare electric toothbrush portfolio and further building our relationship with dental professionals.

With regard to Television, we took further action to reduce our exposure, extending our brand licensing partnerships with Videocon (India) and TPV (China), which are both expected to contribute positively in 2011.

In Lighting we continued to drive the transition to LED, expanding our portfolio of LED-based solutions for both consumer and professional applications, with sales growing to 13% of sector revenues.

Value-adding acquisitions in 2010 included iconic Italian design luminaire brand Luceplan. We also acquired Burton, a leading provider of specialized lighting solutions for healthcare facilities, and Amplex’s street lighting controls activity, supporting growth of our outdoor lighting business. Toward the end of the year we bought NCW Holdings, a leading Chinese designer, manufacturer and distributor of LED and conventional entertainment lighting and lighting control solutions.

Leverage Sustainability as an integral part of our strategy

In 2010 we increased our Green Product sales to 38% of Group revenues (far ahead of our 30% target), with strong contributions from all sectors, Lighting in particular. We increased the energy efficiency of our operations by 6% and reduced our operational carbon footprint by 7% — on track to achieve our EcoVision4 reduction target for 2012. We also developed roadmaps to phase out PVC and BFR from new consumer products introduced onto the market in 2011.

8      Annual Report 2010

President’s message

Simply making a difference

In September 2010 we announced our Vision 2015 strategic plan, which focuses on fuelling growth, increasing brand preference and strengthening our market leadership in the domain of health and well-being.

This new five-year plan builds upon the achievements of Vision 2010. Through Vision 2010 we transformed Philips into a health and well-being company with a stronger focus on emerging markets. We built a strong, balanced portfolio of businesses, simplified the company in order to capitalize upon market opportunities, invested in marketing and innovation to drive future growth, and structurally lowered our cost base, thereby boosting profitability.

Now we are ready for the next step — growth. We want to become the preferred health and well-being brand in most of our chosen markets, as we leverage major global trends to expand our leadership in key businesses such as home healthcare, LED lighting solutions and healthy living and personal care. We will also focus even more strongly on emerging markets — as the number of middle-class households in these markets rises, we expect demand for our products to increase as people have more money to spend on feeling and staying healthy. Last but not least, we remain committed to leading the way in the area of sustainability through the execution of our EcoVision5 program.

With our understanding of global trends and people’s needs and aspirations, as well as our strong brand, solid financial foundation and engaged workforce, I believe we will continue to simply make a difference to people’s lives with meaningful, sustainable innovations — and so deliver structural top-line growth and consistently healthy profit margins.

In concrete terms, we have set ourselves the following challenging, yet realistic medium-term goals for the 2011-2015 period:

	•		Comparable sales growth on annual average basis at least 2 percentage points higher than real GDP growth
	•		Reported EBITA margin between 10% and 13% of sales
	•		Growth of EPS at double the rate of comparable annual sales growth
	•		Return on invested capital at least 4 percentage points above weighted average cost of capital

Management Agenda 2011 — Accelerating growth

Our overall challenge for 2011 is to accelerate growth. This year we will take a series of firm steps towards implementing our longer-term Vision 2015 objectives. This will require us to accelerate our current course and performance in order to seize the great opportunities we have in most of our markets.

Under Drive performance we stress the need to urgently accelerate the pace of growth, to take market share and deliver on our financial and sustainability objectives.

Under Improve capabilities we outline what is required to grow faster: a customer-centric culture of growth, with granular business/market plans and the resources to realize them, enabled by pragmatic teamwork across the organization. If we succeed in bringing these elements together, we will deliver, with excellence and faster time-to-market.

The final column Implement strategy refers to the strategic battles we want to win and underscores how crucial it is to succeed in the rapidly growing emerging markets.

Final thoughts

Upon approval by the Annual General Meeting of Shareholders, Frans van Houten will succeed me as President of Philips as of April 1,2011. Frans knows Philips very well and brings strong qualities to the post — energy, strong leadership and a deep understanding of both professional and consumer markets. Under his leadership Philips’ future is in very good hands.

I would like to take this opportunity to thank Pierre-Jean Sivignon for his valuable contribution to Philips in his six years as our CFO. He has been a great colleague and business partner to work with, and I wish him the very best for the future. I am delighted that in Ron Wirahadiraksa we have found a highly qualified successor from within our own ranks.

I would also like to express my deep gratitude to Jan-Michiel Hessels, who is stepping down as Chairman of our Supervisory Board, for his counsel and support during my tenure as President.

On a sadder note, toward the end of the year we lost a fine colleague with the passing of Gerard Ruizendaal, our Chief Strategy Officer. Gerard played a key role in defining the strategic focus of the company and in strengthening our business portfolio. He is deeply missed.

Annual Report 2010     9

President’s message

It has been an honor to serve this great company as President and CEO. As I prepare to hand over the reins to my successor, I see a people-focused, market-driven Philips providing innovative, simplicity-led solutions to key global issues — the demand for affordable healthcare, the desire for personal well-being and the need for energy efficiency. I see a financially sound Philips with a strong brand and leading market positions, especially in emerging markets, as well as highly engaged employees. In short, I see a Philips that is in good shape — and ready to fulfill its ambition of becoming a global leader in health and well-being.

In conclusion, I would like to thank our customers and suppliers for their loyalty and support over the past ten years, and our employees for their unstinting dedication and efforts. I would particularly like to thank our shareholders for their continued endorsement of our strategic direction. In executing our Vision 2015 program, I know that Frans van Houten and his team will do everything within their power to maximize Philips’ full potential and so grow the value of our shareholders’ investment.

Gerard Kleisterlee, President

Management Agenda 2011

Accelerate growth to achieve Vision 2015

Drive performance

	•		Make the turn to faster growth and gain market share
	•		Deliver on financial returns
	•		Deliver on our EcoVision sustainability commitments

Improve capabilities

	•		Champion customer responsiveness and adopt culture of growth
	•		Improve speed and execution to market
	•		“Resource to win” now to ensure achievement of Vision 2015

Implement strategy

	•		Strengthen and grow in all emerging markets — make China a “home” market
	•		Execute “must win” strategic battles in key business-market combinations
	•		Pursue value-creating acquisitions and invest in growth to strengthen our portfolio

10     Annual Report 2010

1

OUR COMPANY

Philips is a people-focused, market-driven company that is organized around customers and markets. By understanding trends in society and obtaining deep insight into issues confronting people in their daily lives, we ensure that people’s needs remain at the heart of everything we do.

Our mission

We improve the quality of people’s lives through the timely introduction of meaningful innovations

Innovation does not only mean “new technology”. It can also mean an exciting application, a new business model or a unique customer proposition brought about by an innovative partnership. In other words, an innovation is not the same as an invention. Technology remains very important, but insight into the needs and aspirations of consumers and customers is equally, if not more important and must always be our starting point.

Our vision

In a world where complexity increasingly touches every aspect of our daily lives, we will lead in bringing “sense and simplicity” to people

Our corporate vision describes what we see as one of the biggest challenges facing people today — and how we can help them meet that challenge. We have identified the difficulty of coping with complexity as a major challenge for people in our time. One of the things that makes life today so complex is the fact that technological progress comes to us very often in a way that is too difficult to experience. We believe that this situation can be changed, and that we can help to make the benefits of our products and solutions easier to access and more relevant people’s needs and aspirations.

Our domain

We operate in the health and well-being domain

“We seek to improve the quality of people’s lives through focusing on their health and well-being. Quite simply, we want to help people live a healthy, fulfilled life.

By “health” we mean not only medical aspects of health, but also keeping fit, having a healthy diet, and generally living a healthy lifestyle. By “well-being” we mean a general sense of fulfillment, feeling good and at ease. “Well-being” also refers to the sense of comfort, safety and security people feel in their environment — at home, at work, when shopping or on the road. Our focus on health and well-being automatically implies that we contribute to building a sustainable society.

Our brand promise

We promise “sense and simplicity”

We differentiate ourselves through our brand promise “sense and simplicity”. Our brand promise is comprised of three pillars:

•		We design our solutions around the needs of people.
•		We apply advanced thinking and technology to deliver a better solution.
•		We ensure our solutions are easy to experience.

Our values

Our values, the four Ds, are like a compass — guiding us in how we behave every day, and reminding us of the attitude we should have towards our work, our customers and our colleagues

Delight customers

We anticipate and exceed customer expectations

Deliver great results

We continually raise the bar

Develop people

We get the best from ourselves and each other

Depend on each other

We deliver more value by working as One Philips

Annual Report 2010     11

12     Annual Report 2010

2

Vision 2015 - our strategic focus

In 2007, Philips launched Vision 2010: a strategy to create a focused and globally leading health and well-being company. With a clear idea of many of the longer-term challenges our world faces, from aging populations to the need for efficient energy usage, we set out to round off the transformation of our company from a high-volume electronics group to a focused, market-driven global player in healthcare, lighting and lifestyle — businesses in which many of today’s key challenges intersect. Vision 2015 is an evolution of this strategy. By further expanding our existing leadership positions, strengthening our brand and leading in sustainability, we believe we can continue to make a profitable contribution to people’s lives. Our clearly articulated mission, our strong position in many exciting and promising markets, coupled with a highly engaged workforce and a deep desire to do right thing for our world, puts us in an excellent position for the future.

Philips wants to be a global leader in health and well-being, becoming the preferred brand in the majority of our chosen markets. We believe Philips is uniquely positioned for growth through its ability to simply make a difference to people’s lives with meaningful, sustainable innovations.

Our health and well-being offering is powered by our three operating sectors: Healthcare, Consumer and Lighting.

Healthcare: The future of healthcare is one of the most pressing global issues of our time. Our Healthcare sector’s vision is to improve the quality of clinicians’ and patients’ lives by simplifying the delivery of healthcare, improving clinical outcomes and reducing healthcare system costs around the world. This includes improve the diagnosis, treatment and management of many of today’s deadly and debilitating diseases, such as cancer and heart disease.

By approaching healthcare from the perspective of a patient or a physician, we believe we can better understand clinical needs and create more innovative and meaningful solutions. By understanding a medical condition through the entire “cycle of care” — from prevention and screening, through diagnosis and treatment, to recovery and, where needed, long-term management — we can create more effective solutions. By focusing on enabling care in the hospital, in the home, or wherever else the patient might be, we can improve the quality of life for patients and their care providers. Through our consistent focus on all of these aspects of care, we can ultimately create the best solutions — solutions that improve outcomes, save lives and reduce costs.

Consumer Lifestyle: Consumers are looking for solutions and products that are easy to use and help them to live a better and healthier life. They are more appearance-conscious and want to boost self-confidence: they want to be in charge of their health and lifestyle; they want to create a home environment where they can escape life’s complexities; they want to share moments with their family and friends. To achieve these goals, they need technology that is advanced and easy to use and designed around their specific needs. Our Consumer Lifestyle sector builds on a deep understanding of people’s needs and aspirations to create innovations that help them achieve their lifestyle ambitions.

Lighting: Human life revolves around light. Light effects our mood, improves our well-being, and enables us experience and achieve more. It is a vital part of making our lives fuller, more productive and safer. Our lighting sector focuses on innovative ways of using light to simply enhance people’s lives where they live and work — in the home, at school, at work, in shops and public places, as well as on the road. Recognizing how resource conservation and climate protection will play an increasingly significant part in human health and well-being, we pay special attention to maximizing the effect of lighting while minimizing the energy required to produce it.

Be the preferred brand in health and well-being in the majority of our chosen markets: We want to be the preferred brand in health and well-being around the world in the majority of our chosen markets, with simplicity as our competitive edge. After five years cumulative growth in our brand value, we currently rank as one of the most valued brands in the world. We are committed to further strengthening our position and building Philips into a leading health and well-being brand that delivers on our brand promise of “sense and simplicity”. We will measure our success by carefully monitoring our brand value and the Net Promoter Score or of our products and solutions.

Annual Report 2010     13

2 Vision 2015 - our strategic focus 2-2

Portfolio leverages critical global trends

Fundamental growth trends

Strengthen existing leadership positions while expanding promising businesses to become leaders: In our three sectors, we aim to strengthen our existing leadership positions while developing promising businesses to become leaders. In 2015, we want to be the market share leader in at least half of all our businesses. In Healthcare, we will further differentiate our portfolio, continue with our care-cycle approach and expand home healthcare. In Lighting, we will further strengthen our leading position in LED to capture the opportunities of a fast-changing market. In Consumer Lifestyle, we will continue to expand those businesses that provide higher growth and profitability potential.

Continued focus on emerging markets: Emerging markets are becoming more and more important to Philips. As the number of middle-class households in these markets grows, we expect demand for our products will increase as people have more money to spend on feeling and staying healthy. Therefore, we will continue to focus on emerging markets by making sure we address local needs effectively and continue to invest in having the right capabilities in place to win in these fast-growing economies. We aim to generate at least 40% of sales in emerging markets by 2015.

We want to be seen as clear leaders in sustainability: We are committed to being a leading company in matters of sustainability. We look at sustainability through the lenses of our sectors and define specific ambitions for each of them: bring care to 500 million people; improve the energy efficiency of our overall portfolio by 50%; double the amount of recycled materials in our products as well as double the collection and recycling of Philips products.

Our Vision 2015 aspirations

•		Comparable sales growth on annual average basis at least 2 percentage points higher than real GDP growth
•		Reported EBITA margin between 10% and 13% of sales
•		Growth of EPS at double the rate of comparable annual sales growth
•		Return on invested capital at least 4 percentage points above weighted average cost of capital

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3.1

Professional Healthcare

Global demographic and environmental trends, such as aging populations and the spread of chronic diseases like obesity and diabetes to the developing world, will require a fundamental shift in the way healthcare is provided.

In the professional domain, we are driven to improve the way both patients and professionals experience healthcare, to improve clinical outcomes, and to enable the delivery of quality healthcare at lower cost.

By focusing on the range of medical issues associated with oncology, cardiology and women’s health, we can deliver better, more differentiated solutions that are more clinically relevant.

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Opening the door to a new era in radiology

Today, people expect quality healthcare, yet invariably there is less money to treat them. So we are helping radiologists to go further — with a new way of working.

Based on feedback from clinicians across the globe, our answer to the dilemma of increased demand and fewer resources is simple: smarter teamwork through innovation.

Just as Web 2.0 redefined the way people connect, share and use the internet, Philips has coined “Imaging 2.0” to refer to the new era in radiology science, which is opening up a world of possibilities for clinicians and patients. Imaging 2.0 encompasses the launch of a brand new portfolio of Philips imaging solutions across multiple modalities.

For instance, with the IntelliSpace Portal, the radiologist can now integrate information from CT, MR and Nuclear Medicine to increase diagnostic confidence. Plus, it includes a feature called Collaborator — an intelligent, rapid tool linking the radiologist to colleagues and peers virtually anywhere in the world, enabling them to share images and data, and to discuss cases in real-time.

Efficient, personalized patient care — one of the key benefits delivered by Imaging 2.0.

This level of collaboration and integration, combined with increased patient focus and improved economic value, is helping clinicians achieve what was unimaginable just a few

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short years ago — faster and more accurate diagnoses and treatment, as well as lower costs for the healthcare system.

Teamwork in all dimensions

Throughout our activities in radiology we aim to facilitate and enhance clinical collaboration. For example, our 3D imaging systems are bringing surgeons and radiologists increasingly close together in daily interaction. Functioning like a ‘human GPS’, the highly detailed 3D images mean that radiologists can supply clear ‘roadmaps’ that surgeons depend on to make accurate interventions. As Osman Ratib, M.D. Professor & Chair, Nuclear Medicine in Geneva says, “If an image is worth a thousand words, then a 3D image is worth a million. We can now convey those images to our referring physicians in a way that we never could before.”

Imaging 2.0 facilitates new levels of collaboration between radiologists and referring physicians.

Host of new innovations

At the 96th annual meeting of the Radiological Society of North America (RSNA) in Chicago in November 2010, we launched Imaging 2.0 with the unveiling of a wealth of pioneering, innovative and cost-effective solutions for radiology. These include our Ingenuity CT and Ingenuity TF PET/CT, a premium hybrid imaging modality combining PET (positron emission tomography) and CT. Both the CT and PET/CT incorporate new innovations to lower radiation and contrast dose. For instance, Ingenuity CT can provide up to 80% less dose, up to 15% less injected contrast, high image quality and fast reconstruction in seconds rather than minutes.

Other introductions designed to advance diagnosis and radiology workflow include our revolutionary whole- body Ingenuity TF PET/MR solution*, which integrates the molecular imaging capabilities of PET with the superior soft tissue contrast of MR. Another groundbreaking introduction was our Ingenia MR solution*, the first-ever digital broadband MRI system. Ingenia can improve signal- to-noise ratio by up to 40%. This enables the delivery of crisp image clarity that clinicians need to make informed decisions in a wide range of procedures, including traditional applications like neuro and musculoskeletal and fast-growing applications like body and cardiac.

When combined with other new solutions in Ultrasound and Diagnostic X-Ray, these innovations provide a powerful illustration of how Imaging 2.0 is opening up a new era in radiology. As Steven Braff, M.D. Professor and Chairman of Radiology at Fletcher Allen Health Care says, “I’d seen the advent of CAT scanning, PET scanning and MRI scanning. And I was beginning to think, ‘Well maybe that’s it, there’s not going to be anything that exciting anymore’. But I’m very pleased to say that I was wrong.”

* 510(k) pending; not available for sale in the USA

Our imaging technology is opening up richer views, so clinicians can perform procedures that are less invasive while delivering the information they need.

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Confidence and speed in clinical diagnosis

All solutions start with insight. But groundbreaking ones start with truly deep, expert understanding — as in the case of the Stroke Navigator.

In the event of a stroke, some 2 million brain cells start to die every minute. Fast diagnosis and treatment is essential, as captured by the slogan ‘time is brain’. The best possible care requires hospitals to provide 24/7 access to neurological services. Small, rural hospitals however can often not afford to have neurologists on staff around the clock. Such hospitals increasingly make use of telemedicine centers that provide remote, 24/7 neurological services to subscribers. To minimize time-to-treatment, and to help prevent clinical errors due to miscommunication, efficient and reliable collaboration between bedside care providers and telemedicine center is needed.

Both hospitals and telemedicine centers can now benefit from Stroke Navigator, a new clinical decision support tool developed by Philips Research in close cooperation with Philips Healthcare Visicu. As a collaborative tool, it provides contextual forms that allow care providers on both sides to efficiently access and exchange patient data.

A doctor performs on initial assessment of the presence/severity of stroke.

It also assists them in following stroke care protocols, for example, by helping to make sure that all relevant data is collected and is known when, where and by whom it is

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needed; and progress bars indicate how much time is left for critical steps. In short, Stroke Navigator helps to improve a stroke patient’s chances of successful recovery.

Stroke Navigator helps clinicians diagnose the correct stroke sub-type.

For several years our researchers worked closely with the Philips business and healthcare professionals in Europe and the United States, designing the system and testing the results in the field. It was a long and detailed process, a journey of discovery and understanding.

“Sometimes groundbreaking solutions don’t require new technology,” says Charles Lagor of Philips Research. “What they do require is a thorough understanding of users’ needs.”

Medical staff conduct a patient re-assessment after treatment for ischemic stroke.

Visicu utilized the diagnostic and therapeutic timers, societal guidelines and back-end reporting structure in Stroke Navigator to develop its first version of eConsultant. Visicu clients now have the best multiple user software for managing remote stroke care that is integrated into the elCU center and provides for a coordinated tele-stroke network.

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3.2

Home Healthcare

Overburdened hospitals with limited resources and challenging financial circumstances will be hard pressed to care effectively for the growing numbers of long-term patients with chronic ailments such as sleep disorders and heart disease. New solutions must be found.

Addressing the growing demographic need for care in the home, we provide both equipment — for sleep-disordered breathing, home respiratory care and respiratory drug delivery — and home monitoring services to support cardiac and elderly care.

We work together with our clinical provider customers to improve the quality of life for at-risk individuals in the home through better awareness, diagnosis, treatment, monitoring and management of their conditions.

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This year, millions of older people will suffer a fall and some may be unable to press their help button. That’s why we developed a new way to access help.

For an elderly person, a fall can have devastating consequences. Without immediate help, they may be incapacitated for hours — suffering physical pain, emotional distress, or serious secondary medical problems such as dehydration or hypothermia. For many of these people, it takes just a single press on one of our Lifeline pendants to raise the alarm. But some fallers will be disoriented, unconscious, immobilized, or otherwise unable to push the help button.

To ensure that everyone is able to access help when needed, we developed the AutoAlert option for our Philips Lifeline medical alert service. Lifeline with AutoAlert provides an added layer of protection by automatically placing a call for help if a fall is detected.

AutoAlert distinguishes between normal movements and falls by monitoring not just movement but also the associated acceleration and change in height. This ensures that daily activities such as sitting down or walking down stairs are not falsely interpreted as a fall.

The AutoAlert option is just one of many ways we are helping older people to continue living independently — by helping to provide the backup and support they need as soon as it’s required

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Helping people in India get a good night’s sleep

In enabling healthcare institutes to diagnose and treat sleeping disorders, we are having a positive impact on people’s quality of life — and much more.

Sleep is not optional — it is absolutely essential to people’s health and well-being. There is growing evidence that lack of sleep affects our mental and physical health, work performance, mood and personal relationships. So when a nationwide survey in India found that 95% of the working population was sleep-deprived, we decided to take action.

Over the last year we helped establish around 120 sleep labs across the country. Each lab contains a complete diagnostic system, with various sensors for attachment to the head and chest of a patient, who is monitored during sleep. The collected data is then used to determine the type and severity of the sleep disorder. Patients diagnosed with Obstructive Sleep Apnea (OSA), for example, are often given a Philips CPAP (Continuous Positive Airway Pressure) device, which ensures continual airflow throughout the night and thereby a healthier sleep.

As a global leader in the sleep management market and the treatment of OSA, Philips assists hospitals and clinics across the globe in setting up sleep labs. We provide not only the required equipment, but also the specific training.

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3.3

Healthy Life & Personal Care

We look for opportunities where “sense and simplicity” can truly make a difference.

Our Healthy Life platform takes a holistic approach to enhancing consumers’ health, addressing the need for mental and physical health and for healthy relationships.

Our Personal Care platform addresses consumers’ need to look and feel their best, and so helps people feel more confident.

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Wake up the town

A unique initiative to help residents of an Arctic town wake up more naturally improves their moods and energy levels through the long months of Polar Night.

Few of us relish getting out of bed during the dark winter months, but most of us have at least a few hours of sunlight to look forward to, even on the shortest of days. But imagine living in the Arctic Circle, where almost four months of continuous darkness makes waking in the morning all that much tougher. It is total darkness when you wake up, when you go to work, and when you come home again. Getting up in winter is difficult in normal circumstances, but when there is absolutely no natural indication of night-time turning to day, the task of waking up can be even more challenging.

That is why in October 2010 we launched a special experiment called Wake up the town to help the residents of Longyearbyen — the world’s most northerly town, on the Norwegian archipelago of Svalbard — wake up more refreshed and ready to take on the day. We provided many of them with a Philips Wake-up Light, which simulates sunrise by gradually increasing light output over a half-hour period.

From October 28, to February 14, the sun never peaks over the horizon and Longyearbyen enters a period of total darkness.

This sunrise simulation has a profound effect, as Daniel Adams, light therapy expert and Senior Application Scientist at Philips, explains. “From our research we know that every person’s body clock is sensitive to light. When it is introduced naturally and slowly in the morning it effectively helps to ‘wash away’ our sleep hormones. People wake up feeling more refreshed and with higher energy levels. This is in stark contrast to the jilting effect of

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an alarm clock, which sometimes causes what we call sleep inertia, which quite literally means difficulty in getting going because your body still thinks it is sleeping time.”

High expectations fulfilled

Before the experiment, three quarters of the volunteer subjects (72%) said that they found it difficult to get out of bed during the winter darkness. Some 65% also said that their energy levels are lower during this season.

Adams continues, “Light is essential to our well-being as humans, and with the absence of natural sunlight on winter mornings, it can be challenging to wake up to a normal schedule and feel alert, in a good mood and ready for the tasks of the day ahead. The residents of Longyearbyen were acutely aware of the challenges darkness poses to waking up in the morning, which made them perfect candidates to trial the Wake-up Light.”

At the end of the six-week trial — the world’s largest light therapy field experiment-87% of respondents found that they awake feeling more refreshed, alert and ready for the day. One resident even said that the Wake-up Light made her feel as though actual sunlight came into her bedroom each morning — exactly what she needed during the season of perpetual darkness. 86% confirmed the Wake-up Light’s positive impact on their mood. And the vast majority (98%) stated that they will continue to use the Wake-up Light in preference to their previous method of waking up.

The project volunteers used Wake-up Light model HF3470, which combines advanced ‘sun rising simulation’ light technology with new, personalized sound options.

Svalbard calling the world

Designed to raise awareness of the potential of light therapy, the Wake up the town experience wasn’t just limited to those living in Longyearbyen. The residents were able to share their experiences with consumers worldwide via Facebook and the campaign website www.philips.com/wakeup, which also features a documentary by award-winning film maker Doug Pray.

“Earlier I used to snooze for at least 30 minutes before I dragged myself out of bed, now I am actually awake when I wake up.”

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Fulfilling lifestyle aspirations in emerging markets

As the growth of the urban middle class in emerging markets continues to accelerate, we are supporting their well-being with innovative lifestyle products.

With an estimated 200 million middle-class households in emerging markets by the year 2015, spending power for lifestyle products is set to explode — especially in China. Demand is expected to be high for lifestyle products that offer quality and style in answering the needs of this consumer group, which is increasingly focused on individual self-expression. This was borne out by reaction to the recent launch of our new SensoTouch 3D electric shaver.

Building upon Philips’ 70-year heritage in electric shaving, the stylish SensoTouch 3D is our most advanced shaver yet, minimizing skin irritation. It was met with tremendous enthusiasm at its launch onto the key Chinese market in October last year. Road shows featuring 3D movies ensured high impact for thousands of consumers in department stores, while web-based and broadcast marketing initiatives communicated the product benefits to millions more across the country.

As always, during face-to-face touch-point events, we gathered a wealth of customer insight. Special product demonstrations and interviews confirmed that our brand scores high in consumer perception, and we are well placed to continue answering lifestyle needs in the dynamic emerging markets.

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3.4

Home Living & Lifestyle Entertainment

Our Home Living platform addresses consumers’ pressing need to have more time to spend on themselves or with family and friends. We do this by creating high-quality solutions that enable quick and convenient cooking, preparation of beverages, cleaning, caring and home comfort.

Lifestyle Entertainment is about enjoying entertainment and the little events in everyday life: sharing time with family and friends, having time off from a hectic schedule, and moments of comfort, fun and caring.

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Making business sense with sustainable TVs

As increasing numbers of people demand sustainable products and services, we continue to make simple, but highly effective, green changes to the way we operate.

Being a leading global company in health and well-being, we are naturally committed to the principles of sustainability — after all, sustainability is essentially about the health and well-being of our planet. But in addition, we also firmly believe that minimizing our impact on the environment leads to substantial business opportunities. Firstly, because people prefer brands with a proven sustainability record, and increasingly they are placing sustainability issues at the center of their purchase decisions. Secondly, by reducing energy consumption and waste during manufacturing, we also reduce our own operating costs, which obviously makes good business sense.

That’s why more than 25 years ago we started to systematically address the challenge of environmental care. At first we implemented waste management and energy efficiency programs in our manufacturing processes, but soon after we became active in designing energy-saving products, including of course TVs. All this was combined with advanced processes that, where possible, used recycled materials.

40% reduction in TV energy consumption

In recent years we have made substantial progress in the energy efficiency of our TVs — an average 40% reduction compared to previous models. This reduction in energy consumption has been achieved through, for instance, the introduction of LED backlight technology. And it is not just when the TV is switched on that energy savings are made: in standby mode, advanced technology has driven power consumption down to less than 20% of the EU’s legal requirements — one of the lowest standby energy consumption rates available on the market today.

37,500 trees saved every year

Our Television business saves huge quantities of paper by using recycled packaging, and we also use biodegradable polystyrene. And, in addition to using recycled paper in

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our packaging, we also avoid using it in our marketing materials — for instance, by developing electronic point-of-sale information that is displayed on the TVs in each shop, and incorporating electronic user manuals within the TVs themselves. These and other measures save a total of 15 million kilos of paper, equivalent to 37,500 trees, every year.

As a leader in sustainability, Philips continuously strives to make it simple for consumers to reduce their impact on the environment.

A holistic approach to product design

A powerful example of our commitment to sustainability is the award-winning Econova LED TV. This performance LED TV consumes 60% less power than its predecessor, an impressive energy efficiency that is further enhanced by its innovative ‘zero power switch’. Even the remote control is efficient — powered by solar energy. The TV is also completely free of PVC and brominated flame retardants. Add to that the fact that 60% of the aluminum used in the set is recycled and it’s not surprising that the Econova LED TV (42PFL6805) won the prestigious EISA award ‘European Green TV 2010-2011’.

The remote control is charged via a solar cell, which works even in indoor light conditions.

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A fine blend

One year on from the acquisition of Saeco, consumers are enjoying the wonderful taste of espresso from the first dual-branded products

The acquisition of Saeco in 2009 fitted perfectly with our ambition to expand our coffee portfolio. One of the central themes during the merger has been applying the concept of simplicity — in everything, from creating new products to interacting with customers. “Saeco’s strength has always been the taste of the coffee its machines produce,” says Iwald Mons, Post-Merger Integration Leader. “This is something we obviously want to preserve. And when you mix this with simplicity, and with innovation based on real consumer insights, you get the best of both worlds. That’s a very exciting prospect.”

The same approach — combining strengths — is being taken on brand level. Over the years, Saeco has built up an excellent reputation, and it is important to leverage on this value. As a result, the first products with dual branding — Philips Saeco — were launched in 2010. Each coffee machine is a combination of exclusive design, innovative technology and cutting-edge materials: together they guarantee great-tasting espresso and ease of use. Clearly Philips and Saeco share common values: bringing “sense and simplicity” to the lives of consumers!

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3.5

Home Lighting

Our innovative home lighting solutions beautify and inspire, empowering consumers to define the ambience in their personal spaces.

Lighting can enhance form and function, improve people’s sense of well-being and enable them to express their identity and style.

We believe that making homes more beautiful, comfortable and functional — and doing so responsibly — enhances lives.

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A lighting revolution in the home

Home lighting is no longer only about practical illumination — increasingly it’s about the power of lighting to enable people to personalize their interiors.

At the end of a hard day, home is the place most of us want to go to unwind. That’s where we can be ourselves — and relax, energize or socialize. It’s where we’re surrounded by the objects we treasure, the things that reflect our identity and personality.

Transforming a house into a home is all about creating the right atmosphere. The color of the walls, the way in which a room is furnished and the amount of natural light that flows in through the windows, are all factors that contribute to the atmosphere of individual spaces.

In the home, light has traditionally been seen as something to switch on or off as needed for sight. But light is so much more than this. Today, light is no longer static. It is no longer about dimming or switching on and off a single tone of light. We have entered a new era, in which lighting can do more — much more — than simply illuminate.

Our lighting industry is in the midst of a revolution, driven by the demand for energy efficiency, the shift from components toward connected lighting systems, and the transition from analog to digital lighting. Digital or LED lighting offers unprecedented freedom in terms of color, dynamics, miniaturization, architectural integration and energy efficiency, opening up exciting new ways for consumers to use and experience light.

LEDs provide a palette of millions of colors or a thousand shades of white light and dynamic effects that conventional lighting cannot match in terms of scene-setting and ambiance. Our LED-based home lighting solutions enable

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consumers to move from homogeneous white light to variable color temperature, and from static light effects to dynamic ‘light scenes’. Thanks to the emergence of LED- based solutions, such as our Living Ambiance wireless system, they can enhance and personalize their home spaces by changing the color, brightness and dynamics of the light — creating the ideal ambiance to match the occasion or mood.

And there is even more on the horizon. Increasingly, design is an important factor in a consumer’s choice of lighting. With LEDs being so small, new designs can be created that were never possible before, as designers are no longer constricted by the form factor of legacy light sources. And this design freedom will open up new possibilities — with newly shaped luminaires enabling consumers to further define their individual style and identity.

Reflecting the growing importance of design as a differentiating factor in the consumer luminaires segment, we acquired Milan-based Luceplan, an iconic design brand in the premium design segment, in 2010. Luceplan’s portfolio includes table, suspension, wall and ceiling luminaires for residential applications, with a number also used in professional applications.

New ‘light experiences’

Our innovative LED-based home lighting solutions are designed to beautify and inspire, while empowering people to define their personal environments through design and style. The result? A completely new experience of light. Life at home will never be the same again.

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Breakthrough LED bulb for ambience and economy

At Light+Building 2010 we announced the market introduction of our new dimmable 12 W lamp — the industry’s first LED replacement for the 60 W incandescent bulb.

With this new lamp, marketed in the United States as EnduraLED A19, facility managers and property owners now have an alternative to the most common incandescent bulb — one that delivers the same warm white light they are familiar with, and that has excellent dimming properties.

Replacing a standard 60 W bulb with EnduraLED A19, which uses just 12 watts of power and delivers an industry benchmark of 806 lumens, could save a business or commercial property up to USD 120 over the course of the life of the lamp.

Fending off the competition

This breakthrough lamp first came to prominence at the end of 2009, when it was named as the 3^rd best invention of the year by TIME Magazine. “With the flick of a switch, Philips may have just dramatically lowered America’s electric bill,” TIME commented.

And at its annual conference in September, the American Lighting Association recognized EnduraLED as the best LED replacement solution in the US A19 class. Twelve other lamp companies were vying for this coveted award, so this was a particular feather in our cap — especially as the award was judged by independent US lighting industry experts such as the Pacific Northwest National Laboratory and the California Lighting Technology Center.

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3.6

Professional Lighting

The professional lighting market is in the midst of a radical transformation, driven by the energy efficiency imperative, the LED lighting revolution and the increasing focus on application-based lighting solutions.

In our endeavor to meet the needs of our customers in the office, outdoor, industry, retail, hospitality, entertainment, healthcare and automotive segments, we are delivering new, responsible forms of lighting — customer-centric, simplicity-led innovations that enhance people’s experience of light.

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Better light, better learning

Children are no different from adults — they feel better, and perform better, in an environment that is attractive, stimulating and designed around their specific needs.

We have conducted extensive research, together with leading German and Dutch universities, which shows that our dedicated classroom lighting can promote learning by boosting children’s concentration, motivation and behavior and supporting their general feeling of well- being.

SchoolVision is an innovative classroom lighting solution, which allows teachers to adjust both the brightness and warmth of the light. Settings for different lighting moods can be activated by a single button on a control panel. The teachers can choose between four settings — Energy, Calm, Standard or Concentration. Energy corresponds to the light of a bright, cloudless summer day around noon, while Calm is the equivalent of gentle evening sunshine.

“Both teachers and children now enjoy working in the classrooms”, says Jane van der Heijden, Principal of Wintelre Primary School.

Dedicated lighting enhancing performance

In collaboration with the Netherlands’ University of Twente we carried out a pilot project in two classes at Wintelre Primary School. The cool-white high-intensity light in the Energy scene was used in the morning and after lunch to give the children a boost. The standard light levels in the Standard scene were used for regular classroom activities. For more challenging tasks, the Concentration

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scene, with its cool-white, very bright light, created the right atmosphere to help the pupils focus. Finally, the warm color and lower intensity of the Calm scene helped to calm children down and encouraged them to work well together.

Both teachers and children enjoy working in the classrooms lit with SchoolVision. “We begin in the morning with bright lighting that generates energy,” explains Jane van der Heijden, Principal of Wintelre Primary School, “and we normally end the day with warm lighting that offers calm and tranquility, and in which a good discussion can be held or creative activities can be carried out.” This change in lighting is appreciated by both pupils and teachers. “We are noticing an increase in the level of concentration and calm in the class, and the pupils even let us know if they would prefer to carry out a certain type of activity under a certain type of lighting.”

Good lighting con create a sense of well-being and help pupils to stay alert and concentrated.

Additional benefit — substantial energy savings

Besides having a positive impact on the learning environment and pupil performance, our innovative school lighting offers a further, extremely significant benefit — substantial energy savings. At Elouges Primary School in the Belgian district of Dour, for example, the combination of intelligent lighting controls and the latest low-energy light sources is helping to save as much as 80% of the electricity used by the old system. With budgets everywhere under tremendous pressure, this is potentially very good news for all schools.

With SchoolVision, different lighting moods can be activated at the push of a button.

Win-win, today and going forward

Our future increasingly depends on our ability to generate and manage knowledge and innovation. This all starts with our children in schools. Our dedicated school lighting helps teachers create the ideal learning atmosphere in the classroom. In this way, we are helping deliver a dual gain for this and future generations — better learning results for children, while at the same time saving energy.

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Creating livable cities with light

Our innovative, energy-efficient lighting solutions can help municipal authorities create towns and cities that are safe and enjoyable to live, work and relax in.

The challenge of growing urbanization

Less than a century ago, fewer than 10% of the world’s population lived in cities. Today, that figure stands at over 50%, and it is estimated that by 2030 nearly six billion people — three quarters of the world’s population — will be living in cities, as some 130 million people move into urban areas every year.

Urban growth and transformation on this scale presents new social, economic and environmental challenges for those who live, work and do business in cities. Quality of life (safety, security, health and well-being), the promotion of commerce, entrepreneurism and tourism, and historic preservation are all high on municipal agendas. At the same time, towns and cities are looking to reduce their ecological impact: urban environments contribute heavily to the consumption and cost of energy, while also disturbing the balance of nature through artificial light, pollution and waste.

In the emerging markets, we are seeing a rapid expansion of the number of conurbations with 20 million or more inhabitants.

Safer, more attractive urban spaces

Quite simply, light helps make a city safer and more attractive, enhancing its brand identity — the distinctive signature that defines its appeal and differentiates it from other cities. This is important not only for civic pride, but also to ensure that the city remains viable and competitive in the global marketplace.

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To retain both private and corporate citizens, cities must maintain safety and security, by preventing crime, and by providing safer streets for both motorists and pedestrians. Choosing the right lighting can make a world of difference. For example, at the same light level, more than 80% of people feel safer with bright, white light than with traditional yellow street-lighting solutions. White light’s high levels of perceived brightness and superior color rendering help people feel safer and make it easier to distinguish objects, colors, shapes and other details.

Well-designed urban lighting not only provides city residents with safe, livable environments, but also urban spaces that are unique and beautiful, and that welcome recreation. This enriches the city fabric, attracting new residents, new businesses and inward investment that boosts tourism, retailing and other boons to economic growth and employment.

Commuters in Hong Kong enjoy brighter and safer journeys at night thanks to our LED and ceramic metal-halide lighting on the new Stonecutters Bridge.

The right light — no less, and no more

Lighting must play a balanced role in the urban landscape. We believe that our lighting solutions, powered by innovative technologies such as LED, can create more value, more beauty, more safety and more visibility — and yet can do so with less consumed power and less environmental impact. City authorities could, for example, save around EUR 3 billion in energy costs and 10 million tons of C0₂ a year, just by switching from older road lighting to our latest energy-efficient technology. No less important, light is encroaching upon our natural habits — affecting both our human sleep patterns (and therefore our health and well-being), as well as the reproductive and migratory patterns of animals. Night skies in densely populated cities can, for example, be as much as 500 times brighter than our ‘natural’ night skies. We don’t want light all the time, everywhere, so our flexible solutions offer exactly the right amount of light, in the right places, at the right time.

“To me, lighting design is not about just giving light to a space. It’s about giving the best light to the people, to give them love of their own space.”

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4

Our planet, our partners, our people

4.1

Climate change

Recognizing that energy efficiency is one essential answer to climate change, we have made a serious commitment to develop, promote and market more energy-efficient solutions for people in all markets.

We meet this challenge with our Green Products and Green Innovations and by inspiring individuals to make simple changes that can have profound results. We seek to facilitate new solutions to drive responsible energy practices, and have long focused on the energy efficiency of our products and production processes.

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		Bringing life-enhancing innovations to Africa
		From May to July, our ‘Cairo to Cape Town’ roadshow demonstrated how our solar-powered LED lighting and innovative medical solutions can improve life for millions of people in Africa.
		Our journey took us to 15 cities in nine countries, clocking up a total of 9,000 km. On the way, we hosted a number of Lighting and Healthcare events and roundtable discussions with media, stakeholders and other key decision-makers from government, industry and NGOs.
		These fruitful dialogs gave us many valuable insights that we can now feed into our innovation pipeline — to ensure we meet African needs even more effectively.

		Extending the day
		In Africa, it gets dark at about 7.00 pm all year round. As some 560 million people in Africa have no effective lighting at night, this darkness holds countries back, both socially

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4 Our planet, our partners, our people 4.1 - 4.1

		and economically, Sustainable solar lighting has the potential to transform Africa’s economic, social, educational and cultural life.
		We have developed solar lighting solutions to help people in Africa extend the day, including a small LED reading light that enables children to do their homework at night or adults to follow evening classes. These lights are affordable and offer the potential for a major boost in literacy across the continent.
		We have also developed the world’s first solar-powered LED floodlighting solution that allows people with little or no access to electricity to enjoy playing or watching sport long into the night — while at the same time increasing safety outdoors. On the tour, we partnered with Dutch soccer legend Ruud Gullit and the Right To Play Foundation, which works to improve the lives of children in some of the most disadvantaged areas of the world through sport and play. Matthijs Huizing, director of Right To Play Netherlands, said: “We are pleased to join forces in communicating the power of sport and play for development, health and peace, strengthened by the new opportunities that solar LED lighting offers.”
		As Ruud Gullit explains: “For us, floodlight is normal: as a kid you play with it, you can do training in the evening after school, ... it’s part of our life. If Africa now had this opportunity they could have the same thing, the same opportunities that I had, to use it to my advantage, to use it in the evening after school so that I could do all my sport activities.”

		Saving energy — and winning friends
		“There is significant growth potential in Africa. Philips sees partnership opportunities in Africa for innovation, solution supply, and knowledge sharing. We want to provide meaningful lighting and healthcare solutions across the continent,” says Gottfried Dutiné, Global Head of Markets & Innovation, and member of the Board of Management.
		Across the continent, our messages around solar-powered lighting and healthcare provision clearly resonated with audiences. For instance, Simon D’Ujanga, Uganda’s Minister of State for Energy, commented: “In the country, as many of our people strive for energy, we’ve been promoting renewable energy and efficiency in the use of energy, so this seems to be the right answer for our problems. This is what we have been waiting for.”
		As Young & Rubicam’s Chris Harrison said: “Just imagine how future innovation in Philips products will be received in rural communities who know that Philips brought them soccer after dark.”

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4.2		Our environmental footprint
		The significant issues for our company — and our industry — in the environmental area continue to be energy efficiency, chemical content of products, and collection and recycling. We remain committed to giving our full attention to these challenges.
		To reduce our ecological footprint we are maintaining our focus on overall environmental performance improvement, driven by our EcoVision programs.
		Working with stakeholders, we aim to share expertise and co-create innovative solutions that will make a difference to future generations.

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		Improving our footprint
		We believe that addressing the effects of mankind’s environmental footprint, such as climate change, requires meaningful, sustainable innovation.
		‘Lead in Sustainability’ is one of the key objectives of our Vision 2015 strategic plan — a goal we pursue systematically through our EcoVision programs. In the EcoVision5 program, leadership is profiled with three Key Performance Indicators (KPIs), which track our activities in the areas of Green and Social Innovation, the building blocks for Sustainable Innovation. Green Innovation focuses on reducing the Environmental or Ecological Footprint of our products. Social Innovation comprises contributions to the improvement of the Human Development Index (HDI), for instance by delivering products and services for accessible and affordable healthcare in emerging markets.
		Sustainability at the heart of health and well-being

		The Human Development Index is a United Nations parameter and incorporates three elements, life expectancy, purchasing power and education level.
		Leadership KPIs
		In our EcoVision5 program, the first leadership KPI — ‘care’ — drives Social Innovation, while the other two — ‘energy efficiency’ and ‘materials’ — drive Green Innovation.

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		Examples of such innovations can be found throughout this report, such as solar-powered LED lighting, EnduraLED and the Econova LED TV.
		Greening our operations
		With energy, waste, water and emission reduction as performance indicators, we drive a reduction of our environmental footprint in our operations.
		Philips was recognized as a leader in carbon disclosure and carbon performance by the Carbon Disclosure Project (CDP) 2010 Global 500 report. The CDP collects emissions data from over 3,000 organizations in 60 countries. Philips received a score of 94 (out of 100) for carbon disclosure results and was awarded an ‘A’ for its overall carbon performance, making it a company with “both higher degrees of maturity in their climate change initiatives and achievement of their objectives” according to the CDP.
		Green Products and Green Innovation
		In 2010, Green Products represented 38% of our revenues globally, compared to 20% in 2007, as a result of investments of more than EUR 1 billion in Green Innovation during the last three years.
		In 2010 we set a target to further increase the share of Green Products to 50% of Group sales by 2015. We use the Philips Green logo to identify an increasing number of our Green Products. To further raise awareness and encourage individuals to make smart daily choices, we have expanded the reach of our asimpleswitch.com website.
		Collection and recycling
		In 2009 we collected and recycled over 100,000 tons of Waste Electrical and Electronic Equipment (WEEE). More than 90% of WEEE was collected and recycled in Europe due to the widespread implementation of product take-back legislation. We have also expanded our voluntary collection and recycling activities in countries such as the United States, Argentina, Brazil and India. Furthermore, we continued to actively advise on and support the introduction or revision of product take-back legislation in countries like Argentina, Brazil, China, the European Union, India, Russia, Thailand, Turkey and the United States.
		Chemical content of products
		In 2010, Philips asked more than 3,000 suppliers to declare their compliance with REACH, RoHS and other chemical substances requirements by making BOMcheck declarations. BOMcheck is an online industry platform that systematically collects declarations from suppliers in order to fulfill REACH and other regulations.
		Philips introduced a large number of consumer products that are free of polyvinyl chloride (PVC) and brominated flame retardants (BFR) in 2010, including the Econova LED TV, the first PVC/BFR-free television in the world. The lessons learned from the introduction of these products in 2010 allowed us to create a detailed roadmap for new PVC/BFR-free consumer products for 2011 and clearly identify where PVC/BFR-free alternatives are not yet possible due to technical, safety or regulatory requirements.
		“The Econova TV puts Philips on track to meet its commitment to phase out these hazardous substances by the end of 2010, well ahead of other TV manufacturers.” Tom Dowdall, Greener electronics campaign co-ordinator, Greenpeace

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4 Our planet, our partners, our people 4.3 - 4.3

4.3		Partnerships for progress
		World leaders from rich and poor countries alike, representing all United Nations member states, have pledged to achieve the eight Millennium Development Goals (MDGs) by the year 2015 — to significantly reduce poverty, illiteracy, inequity, diseases and improve environmental quality in poor countries.
		Our experience has shown that developing these markets requires tailor-made solutions, a different approach to marketing and distribution, and multi-sector partnerships. Multi-stakeholder engagement is needed to improve working conditions in the supply chain — another important contribution towards the MDGs.

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		Driving sustainability in the supply chain
		We are committed to partnering with governmental and civil society organizations and business partners to further embed sustainability in the supply chain.
		As a responsible corporate citizen, we strive to conduct our business with a high level of integrity. And, in keeping with our brand values, we also support our suppliers to help them achieve higher standards. To this end, we actively seek dialog with industry partners, civil society and governmental organizations, and we are an active member of a number of initiatives implementing sustainability programs.
		For example, we are a member of the Electronic Industry Citizenship Coalition (EICC), an important sustainability alliance for the electronics industry. The EICC was established in 2004 and promotes an industry code of conduct for global supply chains to improve working and environmental conditions. Today, it includes more than 50 global electronics companies and their suppliers.
		Another initiative in which we are involved is the Dutch Sustainable Trade Initiative (IDH). IDH brings together government, frontrunner companies, civil society organizations and labor unions. The mission of IDH is to accelerate and up-scale sustainable trade in mainstream commodity markets from the emerging countries to Western Europe. In this way, IDH is working on the Millennium Development Goals for poverty reduction, environmental protection and an open trading and financial system.

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4 Our planet, our partners, our people 4.3 - 4.3

		Philips is participating in the IDH Electronics Program, which has set itself the target of improving the working conditions of 500,000 workers in China’s Pearl River delta. This multi-stakeholder program expects to engage with local civil society organizations, authorities, and management and workers of companies in the supply chain. It aims to identify needs related to a number of key themes, including workplace health and safety and communication between workers and management, and to implement improvement plans, using available best practices.
		Additional stakeholder activities
		Other stakeholder engagement activities in 2010 included workshops with representatives from civil society organizations and labor unions, such as Amnesty International, GoodElectronics, MakelTfair, FNV Global and FNV Allies. As a member of the UN Global Compact Advisory group we also provided input to the UN Global Compact Office in their development of a guidance tool for Supply Chain Sustainability. And we financially sponsored the pilot by the tin branch association ITRI to improve supply chain transparency on conflict minerals — metals that can be mined in the Democratic Republic of Congo (DRC), where profits from the minerals trade may be fueling conflict and human rights abuses. We further addressed the issue of conflict minerals via the EICC extractives working group, and by maintaining a dialog with politicians and civil society organizations, as well as requesting our relevant suppliers to ensure that they are not sourcing conflict minerals from the DRC.
		Pauline Overeem, GoodElectronics: “The GoodElectronics Network welcomes the increasingly open and collaborative stance of Philips concerning genuine engagement with civil society stakeholders. For the coming year(s), GoodElectronics encourages Philips to go that extra mile, in working towards full compliance with international labor standards, in its own operations as well as throughout its supply chain. Significant progress can be made by engaging with trade unions at the global level, and by practicing full supply chain transparency.”
		Transparency on emissions
		To further increase transparency on greenhouse gas emissions and climate strategy in our supply chain, we became a member of the Carbon Disclosure Project 2010 Supply Chain program. This program provides a tried-and-tested, standardized methodology to support effective collaboration with the company’s suppliers and peers around climate change and greenhouse gas emissions. We will use the program to create awareness and drive action in our supply chain. Furthermore, we will continue to increase the number of suppliers that we invite to participate in the years to come.

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4.4

Supplier sustainability

		We believe in engaging with our suppliers to encourage them to share our commitment to sustainability. This includes sound environmental and ethical standards as well as providing working conditions for their employees that reflect both the Philips General Business Principles and the Electronic Industry Citizenship Coalition (EICC) Code of Conduct.
		We continue to focus on the Philips Supplier Sustainability Involvement Program, closely collaborating with our supplier partners and relevant stakeholders to drive progress. It’s about improving conditions in the chain.

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		Helping to identify areas for improvement
		Our suppliers play a pivotal role in helping us achieve our EcoVision5 objectives. We continue to support them in their efforts to improve the overall sustainability of their business.
		As a leading health and well-being company taking an integrated approach to sustainability, we are committed to helping our suppliers achieve high standards that benefit their employees, the environment and, where possible, their profitability.
		Supplier Sustainability and the road to Vision 2015
		In October 2010 our Purchasing Leadership Board made a strategic change to the Supplier Sustainability Involvement Program — towards a more collaborative approach with our strategic and preferred suppliers. This has resulted in a more diversified approach on the reach and depth of a joint supplier compliance program, as well as exploration of areas of (joint) sustainable innovation. At the same time, the Program remains firm on the need for suppliers to show continued sustainable performance.
		Going forward, coaching our suppliers will become an increasingly important part of the Program, in order to further increase its effectiveness. “Within the next five years we want to have not only strengthened our reputation as a leader in supplier sustainability, but also to have engaged our global supply base to help us achieve our EcoVision5 and other sustainability objectives as defined in Vision 2015,” says Sonny Kwok, Head of Supplier Sustainability.

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		Raising the audit bar
		To enable our suppliers to continuously improve their sustainability performance, we upgraded our auditing process in 2010.
		For the past few years we have audited our suppliers in high-risk countries based on the Electronic Industry Citizenship Coalition (EICC) code of conduct, which we also supplemented with stricter requirements on freedom of association and collective bargaining.
		In 2010, in addition to auditing suppliers from acquisitions and other newly introduced suppliers, we started auditing suppliers that had already been audited in the past in order to validate their continued conformance to the code. Almost half the total number of audits conducted in 2010 were such follow-up audits.
		The main areas of non-compliance — and therefore areas for improvement — remain working hours, emergency preparedness, and the management of hazardous substances. However, thanks to our follow-up audit initiative, these shortcomings are being addressed and remedial action taken.

		Repeat recognition
		In recognition of our efforts in the area of responsible supply chain management, the Dutch Association of Investors for Sustainable Development (VBDO) ranked us first among the forty largest publicly-listed Dutch companies benchmarked for performance in this area. Our scores have showed continual improvement over the last four years, increasing from 62% in 2006 to 93% in 2010.
		We were commended for thorough and transparent reporting, dedication to supporting suppliers in improving their sustainability performance, and embedding supplier sustainability within the company strategy.
		Mr Alexander Rinnooy Kan, President of the Netherlands’ Social and Economic Council (SER) and chairman of the jury, commented: “Philips achieved the highest score in the benchmark for the fourth consecutive year. That is an unprecedented achievement. The sustainability strategy is focused both on the reduction of risks as well as the pursuit of market opportunities. Philips’ supplier sustainability program goes beyond audits and truly supports suppliers in improving their sustainability performance. Philips is leading in many areas.”

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4.5		Working at Philips
		To become an even more market-driven and people-centric company, we have been working to increase organizational effectiveness and simplify our structure.
		We believe it is important that employees are engaged — that they feel part of a team, know their ideas and suggestions count, trust their manager, and value diverse perspectives.
		It is crucial that everyone is given full opportunity to use their individual talents — and to grow with Philips, enabling them to secure their future.

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		Grow with Philips
		Developing our people is one of our core values, so in 2010 we launched ‘Grow with Philips’, a program that opens up more opportunities for change and growth.
		We have always sought to develop our employees’ skills, so that they can maximize and reach their potential and increase their contribution to the company’s success. We start by encouraging staff to annually discuss and plan their ambitions with their departmental and HR managers. Employees are then encouraged to develop themselves by gaining new skills and competences on the job, using our extensive training programs and supported by coaching and mentoring programs.
		The new ‘Grow with Philips’ program adds to those efforts, with two new important components. The first makes it easier for our employees to grow their careers across functions, business units and geographies. By simply ticking a special box on their online employee profile they indicate that they are interested in changing jobs within Philips. This enables our recruiters to pro-actively search for suitable people within our organization before conducting an external search. Although vacancies are still posted online for all Philips people to see, this new approach makes internal recruiting faster and more thorough, with less dependence on people reacting to job postings. By allowing every employee to easily indicate they are available for a move, we create a transparent internal labor market and promote internal mobility.

The second main component of ‘Grow with Philips’ is the new training possibilities that are now available. After researching the training needs of our people, we found that they prefer informal ‘bite-size’ training modules, which give them advice and information when they need it. Hence, in 2010 we created our Learning@Philips web portal, a wide-ranging database of training modules that

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		are practical and aligned with our business needs. The modules range from five-minute videos to one-minute action tips and easy-to-read PDFs. This makes it easier than ever for Philips people at all levels to develop new skills and move their careers forward.
		Securing a better future
		These latest initiatives to help our people develop and reach their potential are part of our global activities in the area of corporate social responsibility. In the Netherlands, for instance, we have for many years played a pioneering role with our national Vocational Qualification Program (CV) and the Philips Employment Scheme (WGP).
		The CV project has been running since 2004 and targets Philips employees who know their trade well, but do not have a diploma to prove it. That makes them vulnerable in today’s volatile labor market, where a job for life is a thing of the past. CV provides a solution by awarding these people a recognized qualification. To date, more than 1,500 participants have obtained a qualification that will help set them up for the future — either within Philips or elsewhere.
		Via WGP, we offer vulnerable groups of external jobseekers work experience placements, usually combined with some form of training, in order to increase their chances of finding and retaining a job. Over the 25 years that we have been running WGP, an average of 70% of the participants have found paid work within one year of completing our WGP program. Moreover, a recent doctoral research carried out by the University of Maastricht has revealed that it is still the best-performing employment scheme in the Netherlands.

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^4.6 Working in our communities

		We at Philips have long been active in the communities where we live and work. Initiatives around the world bring “sense and simplicity” to people’s health and well- being in a number of local projects.
		SimplyHealthy@Schools is the global community program we have been rolling out, with strong employee engagement, to inspire and educate children to improve their health and well-being.
		By linking our social investment initiatives with the scope of our business, we make our core competencies available to simply make a difference in people’s lives.

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		SimplyHealthy@Schools
		Our SimplyHealthy@Schools program was born out of a desire to make our health and well-being expertise and resources available to a wider community.
		Growing and aging populations, increasing healthcare demands and the growing pressure of lifestyle-related diseases make current healthcare systems unsustainable. Some of us do not have a choice, simply having no access to the essentials that many take for granted — clean air and water, adequate nutrition, basic sanitation and access to healthcare. Others do have a choice — to eat a diet lower in saturated fats, do more exercise or give up smoking, and so reduce our risk of suffering cardiovascular disease, diabetes or cancer. But for most, old habits die hard, requiring innovative lifestyle solutions to help us change.
		For the next generation we can make it much easier. By educating them from an early age about their lifestyle and what it takes to stay healthy — and hopefully nurturing attitudes and habits that will stay with them into adulthood.
		Inspiring schoolchildren around the world
		Our SimplyHealthy@Schools community program builds on past experience where employees applied their knowledge and volunteered in local schools to upgrade lighting and educate children on energy efficiency. In 2010, we expanded the program into 38 countries, reaching almost 63,000 students, going to over 660 schools and actively involving more than 3,500 employees from around the world on the ground and many thousands more online.

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		The SimplyHealthy@Schools Healthy Heroes toolkit is aimed at children aged 8-12 years old and illustrates simple ways of increasing your health and well-being by paying special attention to air, light, water and oral hygiene, as well as to exercise and environmental care. When these factors are improved, children perform better and their overall mental and physical well-being also improves. Simultaneously, the Healthy Heroes program makes children aware of the positive influence that they can have themselves on their lifestyle and their environment. The participating schools around the world also receive a free upgrade of the lighting in their classrooms to energy-efficient solutions that reduce energy consumption while enhancing teachers’ and pupils’ sense of well-being.
		In Taiwan, De-Hong Tseng, principal of Shi-Lei elementary school, enthused: “We are so happy to have Philips’ volunteers come all the way up to the mountain and engage our children with such fun and meaningful activities. Philips really cares about a sustainable society and contributes with real action.”
		Everyone benefits
		Our employee volunteers also get a lot out of the SimplyHealthy@Schools experience. 71% of all employees responded favorably to the Employee Engagement Survey question: “Philips does a good job of contributing to the communities we live in (e.g. social investment programs such as SimplyHealthy@Schools)”. When employees who had participated in the program were asked the same question, the favorable response advanced to 91%. When asked if they would recommend participation to a colleague, 58 out of 60 people replied “Yes, absolutely!”
		To be continued...
		The program’s success means it will be continued and expanded in 2011 to include more schools, extra activities and countries such as South Africa, Botswana and Ghana.

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5 Group performance 5 - 5.1

5

Group performance

		“ Our return on invested capital rose to 11.7%, and that compares to a cost of capital slightly in excess of 8% for the Group. That puts us on the path to achieve our Vision 2015 goals.”
		Pierre-Jean Sivignon, Chief Financial Officer

		€ 2,552 million		€ 1,454 million		€ 7.8 billion
		EBITA		cash flows before financing activities		liquidity

5.1		Management discussion and analysis
		Management summary The year 2010

	•		In 2010, despite experiencing a recovery in certain markets, overall worldwide market conditions remained challenging, particularly in developed countries. We recorded moderate 4% comparable sales growth; however, as a result of continued focus on cost management, significant improvements in EBIT, EBITA and Net income were achieved. Additionally, our cash flow from operating activities was higher than in 2009.
	•		EBIT of EUR 2,065 million, or 8.1% of sales, was significantly higher than the EUR 614 million, or 2.6% of sales, achieved in 2009. Significant EBIT improvement, led by Lighting, was achieved in all sectors. As a percentage of sales, 2010 EBIT and EBITA were at the highest levels since 2000.
	•		Following a strong rebound in the first six months of the year, sales growth slowed in the second half, ending at 10% nominal for the full year. Adjusted for favorable currency effects, comparable sales were 4% higher than in 2009, attributable to growth in all sectors, notably Lighting. Within Lighting, growth in automotive and LED markets was strong, partly mitigated by limited growth at Professional Luminaires due to weak construction markets in the US and Western Europe; Healthcare sales grew 4%, supported by 6% growth in

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			all businesses except Imaging Systems, which was broadly in line with 2009. Growth at Consumer Lifestyle was limited to 1%, as solid growth at Health & Wellness and Personal Care was tempered by limited growth at Television and sales declines at Audio & Video Multimedia and Accessories.
	•		12% comparable sales growth was achieved in emerging markets, while mature markets grew 1%. Emerging markets accounted for 33% of total sales, up from 30% in 2009.
	•		We continued to invest in strategically aligned, high-growth companies to strengthen our portfolio. In 2010, we completed 11 acquisitions, contributing to all three sectors, notably Discus Holdings in Consumer Lifestyle. The cash outflow related to acquisitions amounted to EUR 239 million.
	•		During the year, particularly in the first three quarters, Television showed a significant year-on-year improvement in EBITA. However, with high inventory in retail, and severe price erosion in the fourth quarter, the Television business did not achieve break-even for the year. To improve profitability in the business and reduce exposure, we concluded brand licensing agreements in India and China. We will take further action to address the profitability issue in the business in 2011.
	•		We generated EUR 2.2 billion of cash flow from operating activities, EUR 611 million higher than in 2009. Our cash flows before financing activities were EUR 128 million higher than 2009, as higher cash flow from operating activities was partly offset by lower proceeds from the sale of stakes.

Key data

in millions of euros unless otherwise stated

		2008				2009				2010
Sales			26,385				23,189				25,419
EBITA1)			744				1,050				2,552
as a % of sales			2.8				4.5				10.0
EBIT1)			54				614				2,065
as a % of sales			0.2				2.6				8.1
Financial income and expenses			88				(166	)			(122	)
Income tax expense			(256	)			(100	)			(509	)
Results of investments in associates			19				76				18
Income (loss) from continuing operations			(95	)			424				1,452
Income (loss) from discontinued operations			3				—				—
Net income (loss)			(92	)			424				1,452
Net income (loss):
Per common share — basic			(0.09	)			0.46				1.54
Per common share — diluted			(0.09	)			0.46				1.53
Net operating capital (NOC)1)			14,069				12,649				12,071
Cash flows before financing activities1)			(1,606	)			1,326				1,454
Employees (FTEs)			121,398				115,924				119,001

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5 Group performance 5.1.1 - 5.1.2

5.1.1		Sales
		The composition of sales growth in percentage terms in 2010, compared to 2009, is presented in the table below.
		Sales growth composition 2010 versus 2009 in %

		comparable				currency				consolidation				nominal
		growth				effects				changes				growth
Healthcare			3.9				6.0				(0.2	)			9.7
Consumer Lifestyle			1.2				4.7				(0.7	)			5.2
Lighting			8.7				6.0				0.7				15.4
GM&S			6.4				3.0				(2.6	)			6.8
Philips Group			4.3				5.5				(0.2	)			9.6

		Group sales amounted to EUR 25,419 million in 2010,10% nominal growth compared to 2009. Excluding a 6% favorable currency effect, comparable sales were 4% above 2009. Comparable sales were 9% higher at Lighting and 4% higher at Healthcare, though were tempered by 1% higher sales at Consumer Lifestyle.
		Healthcare sales amounted to EUR 8,601 million, which was 4% higher than in 2009 on a comparable basis, driven by 6% growth at Patient Care & Clinical Informatics, Home Healthcare Solutions, and Customer Services. Sales at Imaging Systems were broadly in line with 2009, as growth in emerging markets was largely offset by lower sales in North America.
		Consumer Lifestyle reported sales of EUR 8,906 million, which was EUR 439 million higher than in 2009, or 1% higher on a comparable basis. We achieved double-digit growth at Health & Wellness and high single-digit growth at Personal Care. This was tempered by 1% comparable growth at Television and year-on-year sales declines at Audio & Video Multimedia and Accessories.
		Lighting sales amounted to EUR 7,552 million, which was EUR 1 billion higher than in 2009, or 9% higher on a comparable basis. Growth was largely driven by double- digit growth at Lumileds, Automotive Lighting, and Lighting Systems & Controls. Ongoing weakness in residential and commercial construction markets meant our Luminaires businesses yielded little growth.
5.1.2		Earnings
		In 2010, Philips’ gross margin was EUR 9,546 million, or 37.6% of sales, compared to EUR 8,079 million, or 34.8% of sales, in 2009. Gross margin in 2010 included EUR 111 million restructuring and acquisition-related charges, whereas 2009 included EUR 268 million of restructuring and acquisition-related charges and net asbestos-related recoveries of EUR 57 million. Gross margin percentage was higher than in 2009 in all operating sectors, notably Lighting.
		Selling expenses increased from EUR 5,159 million in 2009 to EUR 5,246 million in 2010. 2010 included EUR 88 million of restructuring and acquisition-related charges, compared to EUR 185 million in 2009. The year-on-year increase was mainly attributable to higher expenses aimed at supporting higher sales, and increased investments in advertising and promotion. In relation to sales, selling expenses decreased from 22.2% to 20.6%. Expenses were lower than in 2009 in all sectors.
		General and administrative expenses amounted to EUR 735 million in 2010, compared to EUR 734 million in 2009. As a percentage of sales, costs improved from 3.2% in 2009 to 2.9%.
		Research and development costs declined from EUR 1,631 million in 2009 to EUR 1,576 million in 2010. The year-on-year decline was largely attributable to lower restructuring and acquisition-related charges, which amounted to EUR 13 million in 2010, compared to EUR 73 million in 2009, and to the discontinuation of certain activities in the field of Molecular Healthcare and 3D Displays. As a percentage of sales, research and development costs decreased from 7.0% in 2009 to 6.2%.
		The overview below shows sales, EBIT and EBITA according to the 2010 sector classifications.
		Sales, EBIT and EBITA 2010 in millions of euros unless otherwise stated

		sales				EBIT				%				EBITA1)				%
Healthcare			8,601				922				10.7				1,186				13.8
Consumer Lifestyle			8,906				595				6.7				639				7.2
Lighting			7,552				695				9.2				869				11.5
GM&S			360				(147	)			—				(142	)			—
Philips Group			25,419				2,065				8.1				2,552				10.0

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5 Group performance 5.1.2 - 5.1.3

Sales, EBIT and EBITA 2009

in millions of euros unless otherwise stated

		sales				EBIT1)				%				EBITA1)				%
Healthcare			7,839				591				7.5				848				10.8
Consumer Lifestyle			8,467				321				3.8				339				4.0
Lighting			6,546				(16	)			(0.2	)			145				2.2
GM&S			337				(282	)			—				(282	)			—
Philips Group			23,189				614				2.6				1,050				4.5

1)

For a reconciliation to the most directly comparable GAAP measures, see chapter 16, Reconciliation of non-GAAP information, of this Annual Report

		In 2010, EBIT increased by EUR 1,451 million compared to 2009, to EUR 2,065 million, or 8.1% of sales. 2010 included EUR 233 million of restructuring and acquisition-related charges, compared to EUR 551 million in 2009. In addition to lower restructuring and acquisition-related charges, the year-on-year improvement was mainly driven by higher sales and a higher gross margin percentage in each of the operating sectors, and lower costs in Group Management & Services.
		Amortization of intangibles, excluding software and capitalized product development, amounted to EUR 487 million in 2010, compared to EUR 436 million in 2009. Amortization charges were higher than in 2009 due to acquisitions.
		EBITA increased from EUR 1,050 million, or 4.5% of sales, in 2009 to EUR 2,552 million, or 10.0% of sales, in 2010. Higher EBITA was visible in all sectors, notably Lighting.
		Healthcare
		EBITA increased from EUR 848 million, or 10.8% of sales, in 2009 to EUR 1,186 million, or 13.8% of sales, in 2010. EBITA improvements were realized across all businesses, largely as a result of higher sales, favorable currency impact and cost-saving programs. Restructuring and acquisition-related charges totaled EUR 77 million, compared to EUR 106 million in 2009.
		Consumer Lifestyle
		EBITA improved from EUR 339 million, or 4.0% of sales, in 2009 to EUR 639 million, or 7.2% of sales, in 2010. Restructuring and acquisition-related charges amounted to EUR 61 million in 2010, compared to EUR 136 million in 2009. The year-on-year EBITA improvement was largely driven by higher sales, fixed cost savings, EUR 48 million product recall related charges in 2009, and lower restructuring charges. EBITA was higher than in 2009 in all businesses. Notable improvements were achieved in Domestic Appliances, Television, and Licenses.
		Lighting
		EBITA amounted to EUR 869 million, or 11.5% of sales, which included EUR 96 million of restructuring and acquisition-related charges. EUR 247 million of restructuring and acquisition-related charges were included in 2009. The EBITA improvement was also driven by higher sales, improved gross margin and fixed cost savings from restructuring programs.
		Group Management & Services
		EBITA improved from a loss of EUR 282 million in 2009 to a loss of EUR 142 million in 2010. EBITA in 2009 included a EUR 134 million gain related to curtailment for retiree medical benefit plans, EUR 57 million of net asbestos- related recoveries, and EUR 46 million of asset write-offs. 2009 also included EUR 63 million restructuring charges. 2010 results included a EUR 119 million gain from a change in a pension plan. The year-on-year EBITA improvement was largely attributable to higher license revenue, discontinuation of Molecular Healthcare, and lower costs in the global service units.
		For further information regarding the performance of the sectors, see chapter 6, Sector performance, of this Annual Report.
5.1.3		Pensions
		The net periodic pension costs of defined-benefit pension plans amounted to a credit of EUR 103 million in 2010, compared to a cost of EUR 3 million in 2009. The defined- contribution pension cost amounted to EUR 118 million, EUR 11 million higher than in 2009, mainly due to a gradual shift from defined-benefit to defined-contribution pension plans.
		The 2010 costs were impacted by the recognition of EUR 119 million of negative prior-service costs. These resulted from a reduction of pension benefits expected to be paid in the future, in part due to a change in indexation. In 2010, a curtailment gain of EUR 9 million on one of our retiree medical plans was recognized due to the partial closure of a US site.
		In 2009, curtailment gains totaling EUR 134 million, relating to changes in retiree medical plans, positively impacted the result. These curtailment gains are the result of changes in the benefit level and the scope of eligible participants of a retiree medical plan, which became effective and irreversible in 2009.
		For further information, refer to note 28.

Annual Report 2010     61

5 Group performance 5.1.4 - 5.1.5

5.1.4		Restructuring and impairment charges
		In 2010, EBIT included net charges totaling EUR 162 million for restructuring and related asset impairments. 2009 included EUR 450 million of restructuring and related asset impairment charges. In addition to the annual goodwill impairment tests for Philips, trigger-based impairment tests were performed during the year, resulting in no goodwill impairments.
		For further information on sensitivity analysis, please refer to note 8.
		Restructuring and related charges
		in millions of euros

		2008				2009				2010
Restructuring charges per sector:
Healthcare			63				42				48
Consumer Lifestyle			198				120				42
Lighting			245				225				74
GM&S			35				63				(2	)
			541				450				162
Cost breakdown of restructuring charges:
Personnel lay-off costs			374				399				155
Release of provision			(2	)			(81	)			(77	)
Restructuring-related asset impairment			116				84				19
Other restructuring-related costs			53				48	1)			65
			541				450				162

1)		Includes EUR 22 million of costs which were expensed as incurred
		The restructuring charges in 2010 were mainly attributable to the operating sectors. Within Healthcare, the largest projects related to the reorganization of the commercial organization in Imaging Systems (Germany, Netherlands, and the US). Consumer Lifestyle restructuring charges were mainly in Television, particularly in China due to the brand licensing agreement with TPV. Restructuring projects in Lighting were focused on reduction of production capacity in traditional lighting technologies, such as incandescent. The largest projects were initiated in Brazil, France, and the US.
		In 2009, the most significant restructuring projects related to Lighting and Consumer Lifestyle. Restructuring projects at Lighting centered on Lamps. The largest restructuring projects were in the Netherlands, Belgium, Poland and various locations in the US. Consumer Lifestyle restructuring projects focused on Television (primarily Belgium and France), Accessories (mainly Technology & Development in the Netherlands) and Domestic Appliances (mainly Singapore and China). Healthcare initiated various restructuring projects aimed at reduction of the fixed cost structure, mainly impacting Imaging Systems (Netherlands), Home Healthcare Solutions and Patient Care & Clinical Informatics (various locations in the US).
		Other restructuring projects focused on reducing the fixed cost structure of Corporate Technologies, Philips Information Technology, Philips Design, and Corporate Overheads within Group Management & Services.
		For further information on restructuring, refer to note 19.
5.1.5		Financial income and expenses
		A breakdown of Financial income and expenses is presented in the table below.
		Financial income and expenses
		in millions of euros

		2008				2009				2010
Interest expense (net)			(105	)			(252	)			(225	)
Sale of securities			1,406				126				162
Value adjustments on securities			(1,148	)			(58	)			(2	)
Other			(65	)			18				(57	)
			88				(166	)			(122	)

		The net interest expense in 2010 was EUR 27 million lower than in 2009, mainly as a result of lower interest expense.
		Sale of securities
		in millions of euros

		2008				2009				2010
Gain on sale of NXP shares			—				—				154
Gain on sale of TSMC shares			1,205				—				—
Gain on sale of LG Display shares			158				69				—
Gain on sale of D&M shares			20				—				—
Gain on sale of Pace shares			—				48				—
Others			23				9				8
			1,406				126				162

In 2010, income from the sale of securities of EUR 162 million was mainly attributable to the sale of NXP shares. In 2009, income from the sale of securities totaled EUR 126 million. This included a EUR 69 million gain from the sale of the remaining shares in LG Display, and a EUR 48 million gain from the sale of the remaining shares in Pace Micro Technology.

62     Annual Report 2010

5 Group performance 5.1.5 - 5.1.10

		Value adjustments on securities
		in millions of euros

		2008				2009				2010
NXP			(599	)			(48	)			—
LG Display			(448	)			—				—
TPO Display			(71	)			—				—
Pace Micro Technology			(30	)			—				—
Prime Technology			—				(6	)			(2	)
Other			—				(4	)			—
			(1,148	)			(58	)			(2	)

		2009 was impacted by impairment charges amounting to EUR 58 million, mainly from shareholdings in NXP.
		Other financial expenses amounted to a EUR 57 million expense in 2010, compared to EUR 18 million income in 2009. 2010 primarily consisted of a EUR 21 million loss related to the revaluation of the convertible bonds received from TPV Technology and CBay Systems Holdings (CBAY), and a EUR 20 million accretion expense mainly associated with discounted provisions.
		Other financial expenses in 2009 primarily consisted of a EUR 19 million gain related to the revaluation of the convertible bonds received from TPV Technology and CBAY, and dividend income totaling EUR 16 million, EUR 12 million of which related to holdings in LG Display. Other financial expenses included EUR 15 million accretion expenses, mainly associated with discounted asbestos provisions.
		For further information, refer to note 2.
5.1.6		Income taxes
		Income taxes amounted to EUR 509 million, compared to EUR 100 million in 2009. The year-on-year increase was largely attributable to higher taxable earnings.
		The tax burden in 2010 corresponded to an effective tax rate of 26.2%, compared to 22.3% in 2009. The increase in the effective tax rate was attributable to a change in the country mix of income tax rates and a change in the mix of profits and losses in the various countries, as well as 2009’s recognition of a deferred tax asset for Lumileds previously not recognized. This was partly offset by a number of tax settlements.
		For 2011, the effective tax rate excluding incidental non-taxable items is expected to be between 30% and 32%.
		For further information, refer to note 3.
5.1.7		Results of investments in associates
		The results related to investments in associates declined from EUR 76 million in 2009 to EUR 18 million in 2010.
		Results of investments in associates
		in millions of euros

		2008				2009				2010
Company’s participation in income			81				23				14
Results on sale of shares			(2	)			—				5
Gains arising from dilution effects			12				—				—
(Reversal of) investment impairment and guarantee charges			(72	)			53				(1	)
			19				76				18

		The company’s participation in income declined from EUR 23 million in 2009 to EUR 14 million in 2010, mainly due to the sale of our remaining stake in TPV Technology.
		In 2009, following recovery of the TPV share price, the accumulated value adjustment of the shareholding in TPV recognized in 2008 was reversed by EUR 55 million. The company’s participation in income of EUR 23 million in 2009 was mainly attributable to results on Intertrust.
		For further information, refer to note 4.
5.1.8		Non-controlling interests
		Net income attributable to non-controlling interests amounted to EUR 6 million in 2010, compared to EUR 14 million in 2009.
5.1.9		Net income
		Net income increased from EUR 424 million in 2009 to EUR 1,452 million. The improvement was driven by EUR 1,451 million higher EBIT and EUR 44 million lower costs in Financial income and expenses, partly offset by EUR 409 million higher income tax charges and EUR 58 million lower income from our investments in associates.
		Net income attributable to shareholders per common share increased from EUR 0.44 per common share in 2009 to EUR 1.54 per common share in 2010.
5.1.10		Acquisitions and divestments
		In 2010 Philips completed eleven strategically-aligned acquisitions, benefiting all three operating sectors.
		In 2010, acquisitions resulted in integration and purchase- accounting charges totaling EUR 70 million: Healthcare EUR 29 million, Consumer Lifestyle EUR 19 million, and Lighting EUR 22 million.

Annual Report 2010     63

5     Group performance 5.1.10 - 5.1.11

In 2009, acquisitions led to integration and purchase- accounting charges totaling EUR 101 million: Healthcare EUR 63 million, Consumer Lifestyle EUR 16 million, and Lighting EUR 22 million.

For further information, refer to note 6.

Acquisitions

Within Healthcare, we completed six acquisitions to expand our global presence, particularly in emerging markets: Somnolyzer, Tecso Informatica, Shanghai Apex Electronics, CDP Medical, Wheb Sistemas, and medSage Technologies.

Tecso Informatica in Brazil was our first acquisition in healthcare informatics in an emerging market. This acquisition was complemented by our subsequent acquisition of Wheb Sistemas in Brazil. These acquisitions position us to be one of the leading clinical informatics companies in Brazil, further strengthening our offering toward high-growth markets. In China, we purchased Shanghai Apex Electronics, a leading manufacturer of ultrasound transducers, strengthening our portfolio of high-quality transducers aimed specifically towards emerging markets.

Within mature markets in Healthcare, we acquired Israel- based CDP Medical, a provider of Picture Archiving and Communication Systems (PACS) and in Austria we acquired Somnolyzer, an automated scoring solutions business which will help improve the productivity of sleep centers. Our final acquisition of 2010 was medSage Technologies, a US-based provider of patient interaction and management applications, which will allow Philips to offer a web-based solution to aid home care providers.

Within Consumer Lifestyle, Philips acquired Discus Holdings, the leading manufacturer of professional tooth whitening products, complementing our oral healthcare portfolio and further building our relationship with professional dentists.

Within Lighting, Philips completed four acquisitions. In Italy, we acquired Luceplan SpA, a leading consumer luminaires company in the lighting design segment in Europe. In Norway, we acquired Burton Medical Products, provider of specialized lighting solutions for healthcare facilities. In Denmark, we acquired Street Controls from Amplex A/S, an energy-efficient solutions provider. Additionally, in Hong Kong, we acquired NCW Holdings, a leading designer, manufacturer and distributor of LED and conventional entertainment lighting and lighting control solutions for global markets.

Acquisitions in 2009

In 2009 we completed eight acquisitions. Healthcare acquisitions included Meditronics, Traxtal, and InnerCool. Within Lighting, Philips completed the acquisition of four companies: Dynalite, Teletrol Systems, llti Luce, and Selecon. Within Consumer Lifestyle, Philips acquired Saeco International.

Divestments

In 2010, Philips divested 9.4% of the shares in TPV Technology Ltd (TPV). The TPV shares were sold to CEIC Lrd, a Hong Kong-based technology company, for a cash consideration of EUR 98 million.

Divestments in 2009

In 2009, Philips continued to transform the Television business from one based on scale to one based on innovation and differentiation by transferring the IT Displays business to TPV Technology Limited in a brand licensing agreement. Within Healthcare, Philips sold its shares in FIMI to Barco NV, in line with its strategy to divest non-core activities and focus on expanding its growth platforms.

For details, please refer to note 6.

5.1.11

Performance by market cluster

In 2010, sales grew 4% on a comparable basis, driven by growth in all sectors, notably in emerging markets.

Sales in mature markets were EUR 824 million higher than in 2009, or 1% higher on a comparable basis. Sales in Western Europe were below the 2009, mainly due to lower sales at Consumer Lifestyle, which more than offset growth at Healthcare. Sales in North America were slightly higher than in 2009, attributable to low single-digit growth in Lighting and Consumer Lifestyle. Healthcare

5     Group performance 5.1.11 - 5.1.12

sales in North America were on par with 2009 on a comparable basis. Sales in other mature markets, however, grew by double-digits in all sectors.

In emerging markets, sales grew by 12%, driven by growth in all sectors, notably Lighting (more than 20%). Solid double-digit growth was visible in China, driven by Healthcare and Lighting. Sales in Russia also showed double-digit growth, attributable to strong sales performance at Consumer Lifestyle and Lighting.

5.1.12

Employment

The total number of employees of the Philips Group was 119,001 at the end of 2010, compared to 115,924 at the end of 2009. Approximately 45% were employed in the Lighting sector, due to the continued relatively strong vertical integration in this business. Some 30% were employed in the Healthcare sector and approximately 15% of the workforce was employed in the Consumer Lifestyle sector.

The increase in headcount in 2010 was mainly attributable to acquisitions and an increase in temporary employees in Lighting to support higher levels of activity. The number of employees increased in all sectors except Consumer Lifestyle, which was lower, mainly due to a reduction of temporary employees in Television.

Approximately 55% of the Philips workforce is located in mature markets, and about 45% in emerging markets. In 2010, the number of employees in mature markets slightly declined as additional headcount from acquisitions was more than offset by headcount reduction from organizational right-sizing projects. Emerging market headcount increased by 3,195, mainly from increases at Lighting to support higher factory production.

Employees per sector in FTEs at year-end

		2008				2009				2010
Healthcare			35,551				34,296				35,479
Consumer Lifestyle			17,145				18,389				17,706
Lighting			57,367				51,653				53,888
GM&S			11,335				11,586				11,928
			121,398				115,924				119,001

Employees per market cluster in FTEs at year-end

		2008				2009				2010
Western Europe			36,966				35,496				34,613
North America			31,336				27,069				27,883
Other mature markets			2,119				3,095				3,046
Total mature markets			70,421				65,660				65,542
Emerging markets			50,977				50,264				53,459
			121,398				115,924				119,001

Employment in FTEs

		2008				2009				2010
Position at beginning of year			123,801				121,398				115,924
Consolidation changes:
- new consolidations			12,673				2,432				1,457
- deconsolidations			(1,571	)			(276	)			(307	)
Comparable change			(13,505	)			(7,630	)			1,927
Position at year-end			121,398				115,924				119,001

Annual Report 2010     65

5     Group performance 5.2 - 5.2.1

5.2

Liquidity and capital resources

Philips’ diverse liquidity sources and strong management ensure maximum flexibility in meeting changing business needs.

5.2.1

Cash flows provided by continuing operations

Cash flows from operating activities

Net cash flow from operating activities amounted to EUR 2,156 million in 2010, compared to EUR 1,545 million in 2009. The year-on-year improvement was largely attributable to higher earnings across all sectors and last year’s EUR 485 million final asbestos settlement payment, partly offset by higher working capital requirements.

Condensed consolidated statements of cash flows for the years ended December 31, 2008, 2009 and 2010 are presented below:

Condensed consolidated cash flow statements1) in millions of euros

		2008				2009				2010
Cash flows from operating activities:
Net income (loss)			(92	)			424				1,452
Adjustments to reconcile net income to net cash provided by operating activities			1,740				1,121				704
Net cash provided by operating activities			1,648				1,545				2,156
Net cash (used for) provided by investing activities			(3,254	)			(219	)			(702	)
Cash flows before financing activities2)			(1,606	)			1,326				1,454
Net cash used for financing activities			(3,575	)			(545	)			(96	)
Cash (used for) provided by continuing operations			(5,181	)			781				1,358
Net cash (used for) discontinued operations			(37	)			—				—
Effect of changes in exchange rates on cash and cash equivalents			(39	)			(15	)			89
Total change in cash and cash equivalents			(5,257	)			766				1,447
Cash and cash equivalents at the beginning of year			8,877				3,620				4,386
Cash and cash equivalents at the end of year - continuing operations			3,620				4,386				5,833