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As filed with the Securities and Exchange Commission on March 29, 2000
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark one)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number 2-20193
KONINKLIJKE PHILIPS ELECTRONICS N.V.
(Exact name of Registrant as specified in charter)
THE NETHERLANDS
(Jurisdiction of incorporation or organization)
REMBRANDT TOWER, AMSTELPLEIN 1, 1096 HA AMSTERDAM, THE NETHERLANDS
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
COMMON SHARES - PAR VALUE NEW YORK STOCK EXCHANGE
EURO (EUR) 1 PER SHARE
Securities registered or to be registered pursuant to Section 12(g) of the Act:
NONE
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
COMMON SHARES - PAR VALUE EURO (EUR) 1 PER SHARE
(Title of class)
Indicate the number of outstanding shares of the issuer's classes of capital or
common stock as of the close of the period covered by the annual report:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class Outstanding at December 31, 1999
KONINKLIJKE PHILIPS ELECTRONICS N.V.
Priority Shares par value EUR 500 per share 10 shares
Common Shares par value EUR 1 per share 339,078,811 shares
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark which financial statement item the registrant has elected
to follow.
Item 17 Item 18 X
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Name and address of person authorized to receive notices and communications
from the Securities and Exchange Commission:
RICHARD C. MORRISSEY
SULLIVAN & CROMWELL
ST. OLAVE'S HOUSE
9a IRONMONGER LANE
LONDON EC2V 8EY, UNITED KINGDOM
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TABLE OF CONTENTS
<S> <C>
PAGE
EXCHANGE RATES/INTRODUCTION 3
ITEM
1. DESCRIPTION OF BUSINESS 4
2. DESCRIPTION OF PROPERTY 12
3. LEGAL PROCEEDINGS 12
4. CONTROL OF REGISTRANT 12
5. NATURE OF TRADING MARKET 12
6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS 13
7. TAXATION 13
8. SELECTED CONSOLIDATED FINANCIAL DATA 15
9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19
9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS 19
10. DIRECTORS AND OFFICERS OF REGISTRANT 19
11. COMPENSATION OF DIRECTORS AND OFFICERS 19
12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES 20
13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS 21
14. DESCRIPTION OF SECURITIES TO BE REGISTERED 21
15. DEFAULTS UPON SENIOR SECURITIES 21
16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES 21
18. FINANCIAL STATEMENTS 21
19. FINANCIAL STATEMENTS AND EXHIBITS 21
</TABLE>
EXCHANGE RATES
In this report amounts are expressed in euros ("euros" or "EUR")
or in US dollars ("dollars", "US $" or "$").
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Beginning in 1999, Philips' consolidated financial statements are
reported in euros. Previously presented financial statements denominated
in Dutch guilders have been translated into euros using the irrevocably
fixed conversion rate applicable since January 1, 1999 for all periods
presented (EUR 1 = NLG 2.20371). Historically, the consolidated financial
statements of the Group were prepared using the Dutch guilder as the
reporting currency. The euro was introduced on January 1, 1999. The
countries participating in the European single currency are: Austria,
Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Portugal,
Spain and the Netherlands.
Management believes that the consolidated financial statements
reported in euros reflect the same trends as previously reported.
Expression of these historical amounts in euros does not eliminate or
alter any translation effect that existed when they were originally
reported in Dutch guilders. The consolidated financial statements may not
be comparable with those of other companies that are also reporting in
euros if other companies restated their financial statements from a
currency other than the Dutch guilder.
Unless otherwise stated, for the convenience of the reader the
translations of euros into dollars appearing in this report have been
made at the balance sheet rate on December 31, 1999 (US $ 1 = EUR
0.9914). This rate is not materially different from the Noon Buying Rate
in New York City for cable transfers in foreign currencies as testified
for customs purposes by the Federal Reserve Bank of New York (the "Noon
Buying Rate") on such date (US $ 1 = EUR 0.9930).
The following table sets forth, for the periods and dates
indicated, certain information concerning the exchange rate for US
dollars into euros based on the Noon Buying Rate. The years prior to 1999
have been converted into euros using the irrevocably fixed conversion
rate which became effective on January 1, 1999 (EUR 1 = NLG 2.20371):
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Calendar period Period End Average (1) High Low
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(EUR per US $ 1)
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<S> <C> <C> <C> <C>
1995 0.7272 0.7290 0.7930 0.6925
1996 0.7837 0.7634 0.7968 0.7295
1997 0.9202 0.8887 0.9610 0.7850
1998 0.8517 0.8996 0.9479 0.8232
1999 0.9930 0.9455 0.9984 0.8466
2000 (through Feb. 25) 1.0243 1.0246 1.0276 0.9676
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(1) The average of the Noon Buying Rates on the last day of each
month during the period.
See also Item 8: "Selected Consolidated Financial Data".
Philips publishes its financial statements in euros while a
substantial portion of its assets, earnings and sales are denominated in
other currencies. Philips conducts its business in more than 50 different
currencies.
INTRODUCTION
In order to utilize the "Safe Harbor" provisions of the United
States Private Securities Litigation Reform Act of 1995, Philips is
providing the following cautionary statement. This document contains
certain forward-looking statements with respect to the financial
condition, results of operations and business of Philips and certain of
the plans and objectives of Philips with respect to these items. In
particular, among other statements, certain statements in Item 1
"Description of Business" with regard to management objectives, market
trends, market standing, product volumes and business risks, the
statements in Item 3 "Legal Proceedings", the statements in Item 9
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" with regard to trends in results of operations, margins,
overall market trends, risk management, exchange rates and Item 9A
"Quantitative and Qualitative Disclosures about Market Risks" are
forward-looking in nature. By their nature, forward-looking statements
involve risk and uncertainty because they relate to events and depend on
circumstances that will occur in the future. There are a number of
factors that could cause actual results and developments to differ
materially from those expressed or implied by these forward-looking
statements. These factors include, but are not limited to, levels of
consumer and business spending in major economies, changes in consumer
tastes and preferences, the levels of marketing and promotional
expenditures by Philips and its competitors, raw materials and employee
costs, changes in future exchange and interest rates, changes in tax
rates and future business combinations, acquisitions or dispositions, and
the rate of technical changes. Market share estimates contained in this
report are based on outside sources such as specialized research
institutes, industry and dealer panels, etc. in combination with
management estimates.
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Specific portions of Philips' Annual Report 1999 to Shareholders are
incorporated by reference in this report on Form 20-F to the extent noted
herein. Philips' Annual Report for 1999 comprises 2 separate booklets entitled
"Management Report" and "Financial Statements".
ITEM 1 DESCRIPTION OF BUSINESS
THE STRUCTURE OF THE PHILIPS GROUP
The following information is important for understanding the structure of
the Philips group ("Philips" or the "Group").
Koninklijke Philips Electronics N.V. (the "Company" or "Royal Philips
Electronics") is the parent company of Philips. Its shares are listed on the
Amsterdam Exchanges, the New York Stock Exchange, the London Stock
Exchange and several other stock exchanges. The management of the Company is
entrusted to the Board of Management under the supervision of the Supervisory
Board. The Group Management Committee, consisting of the members of the Board of
Management, certain Chairmen of product divisions and certain key officers, is
the highest consultative body within Philips to ensure that business issues and
practices are shared across Philips and to define and implement common policies.
Members of the Board of Management and the Supervisory Board are appointed by
the Annual General Meeting of Shareholders on the recommendation of the
Supervisory Board and the Meeting of Priority Shareholders. See Item 4: "Control
of Registrant". The other members of the Group Management Committee are
appointed by the Supervisory Board. The general management of Philips' worldwide
operations is centered in Amsterdam and Eindhoven, the Netherlands. The
activities of Philips are organized in product divisions which are responsible
for the worldwide business policy. Philips has more than 200 production sites in
over 25 countries and sales and service outlets in some 150 countries. Products,
systems and services are delivered in the fields of lighting, consumer
electronics and communications, domestic appliances and personal care,
components, semiconductors, medical systems, business electronics and
information technology. In the course of 1999 the Board of Management decided to
regroup all activities of the Business Electronics division. Upon completion of
the regrouping, this division ceased to be an organizational entity effective
January 1, 2000. The responsibilities for the various businesses have been
reallocated to other divisions. However, the financial reporting on Business
Electronics in the product sector reporting remained unchanged until this date.
The changes from January 1, 2000 onwards are described in the applicable section
of the "Product Sectors and Principal Products" under Item 1.
BUSINESS OF PHILIPS
Since it started its activities in 1891, Philips has grown from a small
incandescent lamp factory to a widely diversified multinational group of
companies, engaged primarily in the manufacture and distribution of electronic
and electrical products, systems and equipment, as well as information
technology services.
Philips has made significant progress in reviewing its portfolio of
businesses, which started in 1996. The portfolio has been cleaned up during
1997, 1998 and 1999. The number of businesses has been reduced by approximately
40, while the number of divisions has been reduced from 12 to 7, bringing more
transparency, accountability and focus. At present, rather than acquiring
businesses in new areas, Philips is focusing on strengthening its existing core
businesses, through selected acquisitions, and through disposal of businesses
that are underperforming and not essential from a strategic viewpoint. A few
examples are the sale of Philips' 75% equity interest in PolyGram N.V., the
disposition of Philips' conventional (non-ceramic) Passive Components business
group, the sale of Philips Car Systems, the termination of Philips' involvement
in the German consumer electronics company Grundig AG, the termination of
Philips' media portfolio, the divestiture of the data communication activities
and various miscellaneous activities. (For a further description see "Product
Sectors and Principal Products".)
In the course of 1996, Philips undertook a major review of its governance
model (i.e. the organizational systems, procedures and structure by which the
Group is managed). This review started at the corporate headquarters where the
corporate staff has been refocused on a limited number of corporate functions
and core processes, whereas the corporate services have been refocused on a few
shared activities. As part of the new governance model, a new set of performance
processes, such as a strictly applied budgeting system and monthly performance
review, were developed. In the course of 1997, the new governance model was
introduced at the level of businesses, product divisions, regions and countries.
The key part of this model was to decentralize decision-making and to streamline
corporate departments.
In addition to streamlining its portfolio of businesses and management,
Philips engaged in a comprehensive review of its strategy and portfolio,
involving the field of high-volume electronics - televisions, audio systems,
telephones and PC-related equipment. Philips has decided to focus on high-volume
electronics because the businesses in this field are strongly interrelated
through brand, technologies, manufacturing and sales channels and already
generate more than one third of Philips' total sales. That is why, as of January
1, 1998, Philips grouped together the relevant operations of Sound & Vision,
Philips Consumer Communications and Business Electronics into a single Consumer
Electronics organization, and created a new Business Electronics division to
coordinate business and professional applications. Given that the technologies
of TV, audio, telecommunications and computing are increasingly converging,
these combinations are appropriate.
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It is expected that they will capitalize on the strength of the Philips brand
and make new business generation easier, market intelligence more coordinated
and time-to-market shorter. In addition, the Business Electronics division has
been discontinued as an organizational entity as per January 1, 2000. To reflect
the trend that many of the Business Electronics businesses are becoming more
consumer oriented, the major part has been transferred to Consumer Electronics.
Besides high-volume electronics, there are other very important building
blocks that make up the Group. The Semiconductors and Components divisions play
a crucial role, both as internal suppliers and through their leading positions
in the external market. The capital expenditures required in this field place
considerable demands on management in terms of ensuring adequate returns by
means of flexible and cost-effective operations.
The other building blocks include the Lighting division, a world leader
with relatively consistent returns and cash flow in which Philips will continue
to invest, Medical Systems and Domestic Appliances and Personal Care. The
Company wants to extend Medical Systems' business scope with new diagnostic
modalities and clinical solutions and services. In the case of Domestic
Appliances and Personal Care, Philips wishes to see this division grow in the
personal care field by offering new functionalities and an enhanced emotional
appeal to the consumer.
In the area of information technology services, Philips is evaluating a
number of strategic options for Origin, including the merits of obtaining a
primary listing. Having successfully restructured its operations, Origin may
require greater freedom and flexibility to realize its full potential for
profitable growth in the e-commerce environment while unlocking its value for
the Philips shareholder.
Aggressive and able competition is encountered worldwide in virtually all
of Philips' business activities. Competitors range from some of the world's
largest companies offering a full range of products to small firms specializing
in certain segments of the market. In many instances, the competitive climate is
characterized by rapidly changing technology that requires continuing research
and development commitments and by capital-intensive needs to meet customer
requirements. Also, the competitive landscape is changing as a result of
increased alliances between competitors.
PRODUCT SECTORS AND PRINCIPAL PRODUCTS
In 1998, Philips changed its product sector reporting to comply with the
new requirements of Statement of Financial Accounting Standard No. 131, issued
by the Financial Accounting Standards Board of the United States. As a
consequence, the related activities are grouped together into seven product
sectors based on similar markets and the use of similar technologies. The
product sectors are as follows: Lighting, Consumer Products, Components,
Semiconductors, Professional, Origin and Miscellaneous. In the course of 1999,
the Board of Management decided to regroup all the activities of the Business
Electronics division, part of the Professional sector. Upon completion, this
division ceased to be an organizational entity, effective January 1, 2000 and
its activities have been regrouped to the Consumer Electronics and Miscellaneous
divisions. However, the financial reporting on Business Electronics in the
product sector reporting remained unchanged until this date.
For a description of the changes, and data related to aggregate sales,
segment revenues and income from operations, see Note 29: "Information relating
to product sectors and geographic areas" on pages 55 through 63 of the 1999
Annual Report -Financial Statements- incorporated herein by reference. For a
discussion of revenues and income from operations of the product sectors, see
Item 9: "Management's Discussion and Analysis of Financial Condition and Results
of Operations". For a discussion of recent acquisitions and alliances, see also
"Cooperative Business Activities and Unconsolidated Companies" under Item 1.
LIGHTING
Philips has been engaged in the lighting business since 1891 and is a
leader in the world market for lighting products with recognized expertise in
the development and manufacture of lighting products. A wide variety of
applications is served by a full range of incandescent and halogen lamps,
compact and standard fluorescent lamps, automotive lamps, high-intensity
gas-discharge and special lamps, QL induction lamps, fixtures, ballasts,
lighting electronics and batteries. Lighting products are manufactured in
facilities worldwide.
Philips' worldwide presence in the lighting market has given it a strong
international position in lighting projects, both in design and full-scale
turn-key project installation. These activities require sophisticated expertise
and help Philips to maintain its leading position in the professional lighting
market.
Philips Lighting's policy of leadership in innovation continues to bring
rewards in the marketplace. Philips is the market leader in Xenon headlamps,
which were introduced in 1997 and are achieving increasing penetration in the
upper end of the market. Providing superb illumination of the road, these lamps
dramatically improve road safety and driver comfort.
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With Mercedes Benz, Philips is also developing a new high-performance
signaling system that will last the car's entire lifetime, cut fuel consumption
and enhance styling.
Philips' position as a supplier of headlights to the car industry is very
strong in Japan, where Philips is the market leader, and Philips is rapidly
establishing a full global presence in this field. Another innovation is the UHP
(Ultra High Power) lamp which is applied in LCD projectors of leading companies
for applications such as business presentations and large-screen consumer TVs.
UHP will also increase the application possibilities of fiber-optic lighting.
Philips Lighting's PowerLife battery gives more power and longer life than
conventional alkaline batteries. Advanced graphite technology is the key to
PowerLife's success in answering consumer demand for batteries which perform
better in "high-drain" products.
Philips Lighting is concentrating on developments in the design of
electronic lighting products, which play an increasingly important role in
allowing better integration of fixture, ballast and lamp. The use of electronics
permits the design of lighting products with improved quality and reduced size,
weight and energy consumption. Major benefits for the end-user include
flexibility and comfort. Philips Lighting is the market leader in
light-regulating control gear for fluorescent lamps.
In response to the greater demand for more efficient light sources and
lighting systems, Philips has emphasized among other things the development of
more energy-efficient lighting products and projects. In addition to the TL5
system, these include a range of electronic compact fluorescent lamps, Lighting
Management Systems, as well as QL induction lamps, which are increasingly being
used in general lighting applications.
Philips Lighting is also aware of the problem of hazardous waste. The
small-diameter TL5 fluorescent lamp combines energy efficiency with a low
mercury content. Philips' low-mercury ALTO(TM) technology - the first to comply
with the relevant US environmental protection legislation - has met with
considerable success.
In Europe, the TLD Super 80 Generation fluorescent lamps are now
recyclable, minimizing end-of-life disposal problems and the impact on the
environment, while the outstanding performance of the series is not appreciably
affected. This technology enables virtually complete recycling of the lamp
materials.
Six of the ten stadiums staging the 1998 World Cup soccer finals in
France were lit by Philips' highly versatile ArenaVision systems - demonstrating
once more the Company's global leadership in sports floodlighting. ArenaVision
is specially designed for today's more dramatic, theatrical approach to sports
events. While offering optimal low-glare conditions for players, it provides
both spectators and TV audiences with more realistic action by creating accents
and preserving natural colors.
Philips' specially designed Halogena (TM) light bulb welcomed the new
millennium, lighting up the world-famous New Year's Eve in Times Square, New
York.
In recent years Philips Lighting has completed a number of strategic
acquisitions and joint ventures, seeking to strengthen its presence in the
historically faster-growing areas of the world, such as the Asia-Pacific region
and Eastern Europe. Acquisitions include the Farel Mazury luminaire operation
(1996) and Polam Pabianice (1997) in Poland. In November 1999 two new
acquisitions were added: Construlita de Queretaro in Mexico and ECS Lighting
Controls Ltd in the UK. Market leadership in LEDs (light-emitting diodes) has
been strengthened by the expansion of LumiLeds Lighting, the 50-50 joint venture
established in 1997 with Agilent Technologies -a spin-off from Hewlett-Packard-
which now employs 1,000 persons. The venture will develop, manufacture and
market LEDs, modules, products and systems worldwide for an increasingly broad
range of applications.
In 1997, the new organization of Philips Lighting worldwide became
effective. This consists of five integrally responsible businesses: Lamps,
Luminaires, Automotive, Lighting Electronics & Gear, and Batteries. Each of
these is given complete control over all its processes. Philips Lighting
continues to give top priority to cycle-time reduction. In 1998, Philips
Lighting started to give new impetus to quality improvement activities through
the BEST approach (Business Excellence through Speed and Teamwork). This program
has been implemented Philips-wide during 1999. Philips is placing strong
emphasis on value creation through profitable growth in emerging markets such as
Central and Eastern Europe and Asia Pacific, while further improving its
position in mature markets. Philips sees continued growth potential in this
division, with special opportunities in areas such as energy-saving lighting and
technologically advanced lighting applications.
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CONSUMER PRODUCTS
This sector comprises the divisions Consumer Electronics and Domestic
Appliances and Personal Care.
The Consumer Electronics division encompasses all Philips-branded
products in the fields of television, video equipment, audio, PC peripherals,
and communications. Besides Philips-branded products, Consumer Electronics is
also an important Original Equipment Manufacturer (OEM) supplier, particularly
of monitors and VCRs. The division retained its No. 3 position in the global
market for audio and video products in 1999 and its No. 2 position in Europe.
Philips has a leading role in the development of flatscreen and widescreen
television sets featuring the 16:9 format. Philips is increasingly focusing on
new digital consumer applications and products which exploit the convergence of
audio and video technologies with telecommunications and information technology.
The Consumer Electronics division is a pioneer in, for instance, Digital TV, a
medium that brings a new dimension to home entertainment, offering a wider
choice of channels, true widescreen pictures, optimum sound quality and
interactive services. The division has launched Digital TV in the UK and
introduced a widescreen rear-projection HDTV set in the US. Not included in this
reporting are the activities belonging to digital networks, which encompasses
most of the businesses which were transferred from Business Electronics as of
January 1, 2000.
Philips markets audio systems, portable audio products, speakers and
accessories under the Philips name, as well as high-end audio products and
systems under the Marantz brand. Philips was instrumental in the revolution
unleashed by CD Audio, which now has an installed base of some 700 million units
worldwide, and continues to play a leading role in the development of related
standards such as DVD, CD Recordable and CD ReWritable.
In Europe, Philips and Warner Home Video have launched a joint marketing
effort focusing on DVD-Video as the ultimate medium for a cinema-style viewing
and listening experience in the home. A full-length feature movie fits onto a
single DVD-Video disc. Philips' latest CD Recorders allow the user hear his
choice of music as he really wants it. With the Philips dual-deck CDRecorder,
the user can make his own personal CDs without the need for a second CD player.
In the field of PC Peripherals, Philips is the world's No. 2 and Europe's
No. 1 supplier of computer monitors (in volume terms). Philips makes a full
range of Cathode Ray Tubes (CRT) monitors, as well as LCD-based flat-screen
models. Philips is a leading supplier of observation systems e.g. for hospitals,
security cameras and PC video cameras, which are instrumental in the fast
growing market for video mail. They also market products for optical storage and
sound reproduction, Universal Serial Bus (USB) peripherals and LCD projectors.
Over the next few years, emphasis will be increased on wireless
interconnectivity.
Philips develops, manufactures and markets a wide range of consumer
communications products, including digital and analogue cellular phones, corded
phones, faxes and answering machines. In volume terms, Philips is one of
Europe's leading providers of corded and cordless phones and answering machines.
For the future, the main focus of cellular wireless products is on GSM
technology, which currently represents the major part of the global cellular
market. Meanwhile, development continues on third-generation digital mobile
phone technology, involving the deployment of wideband wireless networks which
will provide consumers with voice, data and multimedia services on their phones.
On October 1, 1997, Philips (60%) and Lucent Technologies (40%) formed a
joint venture for mobile communications comprising the Philips Consumer
Communications business and the Lucent Consumer Products division. Despite
ambitious plans for break-even results in the second half of 1998, PCC continued
to incur substantial losses and consequently the joint venture was dissolved on
September 27, 1998. Each party retained the business previously contributed to
the joint venture. Ambitions for the remaining activities have been scaled back
and the product offering streamlined, resulting in substantial reduction of
losses.
The Domestic Appliances and Personal Care division includes home comfort
and kitchen appliances, shavers and other personal care products. Philips
produces the Philishave, a dry shaver which is based on the Philips-invented
rotary shaving technique. The division is the world market leader in dry shaving
with leading positions in Europe, Latin America and the United States. Other
personal care products include female depilatory products, skin care, dental
care, hair care, vital body signs and sun care products.
Philips provides products for all stages of food preparation, such as
mixers, blenders, food processors, kettles, toasters, coffee makers, deep
fryers, grills and table-top cooking. Philips manufactures and markets vacuum
cleaners, irons, air cleaners and heating appliances. The division holds the
world No. 2 position in ironing. Domestic appliances and personal care products
are sold under the Philips brand and other brand names.
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Philips has long been successful on the US market under the brand name
Norelco and will continue to use this brand name for male shaving and grooming
products. To further boost growth, Philips introduced the Philips brand name
there in 1998, with initially the focus on body beauty and health. Philips has
also started re-launching products formerly sold under the Norelco brand name as
Philips products.
COMPONENTS
Philips Components is a leading supplier of display, storage and other
important sub-systems that help define the digital and electronic products that
are changing and shaping our world today.
It has major production facilities in Europe, the United States, Latin
America and the Asia Pacific region. Based on world-class technology and
customer knowledge, Philips Components provides a competitive advantage for OEMs
in the consumer electronics, electronic data-processing, telecommunications and
automotive industries. Philips Components has initiated a strategic refocus on
innovative products for these markets, exploiting the synergies available within
Philips and, where necessary, entering into alliances to access the required
competencies. In 1998, this led to an agreement on the divestiture of the
Non-Ceramic Passive Components business, which was completed in January 1999.
Philips is the world's leading manufacturer of color picture tubes for
televisions and monitors. In 1997 a majority shareholding was established in Hua
Fei Colour Display Systems Co. Ltd. in Hua Fei, China, and accordingly, the
financial statements of this joint venture are consolidated since January 1,
1997. On April 1, 1998, Philips increased its ownership in Hosiden and Philips
Display Corp., a joint venture in Japan for the development, production and sale
of active matrix LCDs, from 50% to 80%. As from the same date, Hosiden and
Philips Display Corp. (HAPD) is reported as a consolidated company. In addition
to the joint venture between Hosiden and Philips Display in Japan, a joint
venture was created in July 1999 between Philips and LG Electronics of South
Korea, under the name LG.Philips LCD. This makes Philips the world's largest
manufacturer of flat-panel displays for notebook computers, desktop monitors and
digital TVs - a market that is expected to grow rapidly. In November 1999, the
joint venture LG.Philips LCD introduced the world's first 22-inch flat panel
display. Referred to as Thin Film Transistor LCD (TFT-LCD), or Active Matrix LCD
(AMLCD), it is used in applications such as desktop-publishing monitors and
digital TV. In small display systems, Philips is the world's leading maker of
passive LCDs for cellular telephones and handheld devices. In addition, a wide
range of Active Matrix LCDs is offered for automotive applications, cockpit
navigation and electronic games.
Philips is a leading manufacturer of CD-ReWritable drives and supplier of
choice to many of the world's top ten PC manufacturers. Philips is also a
leading producer of modules for CD-ReWritable and Video CD.
SEMICONDUCTORS
Philips Semiconductors, currently No. 9 in the provisional 1999 Dataquest
ranking of global semiconductor manufacturers, is a major supplier and partner
of manufacturers in the consumer electronics, telecommunications, automotive, PC
and PC peripherals industries. Its integrated circuits and discrete
semiconductors help to make their products better, smaller, cheaper, more energy
efficient and therefore 'greener'.
In June 1999, Philips acquired the semiconductor manufacturer VLSI
Technology Inc., based in San Jose, California, and employing 2,200 persons
worldwide. VLSI and Philips Semiconductors have complementary portfolios and
operations. The combination of VLSI's digital expertise and capabilities in
wireless communications, computer networking and ASICs (application-specific
integrated circuits) with Philips' strengths are expected to create many new
opportunities for growth.
In support of the strategy of Philips Semiconductors to remain a
top-flight process technology player, strategic alliances are being strengthened
and substantial investments are being made in technology, especially in
Complementary Metal Oxide Semiconductor (CMOS). Leadership in cost/performance
will be maintained and increased by continuing to supply advanced technologies
at affordable prices, also in an era of platform-based silicon solutions.
Major production facilities are located in Europe, the United States and
Asia. Philips, Taiwan Semiconductor Manufacturing Company (TSMC) and the
Economic Development Board of Singapore (EDB Investments) are together investing
US $ 1.2 billion in a new chip factory in Singapore. This will enable the
Company to benefit from the forecast growth in demand for logic chips for
consumer electronics and communications applications toward the end of 2000. The
factory will produce the latest type of chip, with interconnects as thin as 0.25
micron (1/400th of the thickness of a human hair).
8
<PAGE> 9
PROFESSIONAL
This sector comprises two divisions: Medical Systems and Business
Electronics (the latter until Jan. 1, 2000).
Philips Medical Systems ranks among the top three diagnostic imaging
companies in the world. The division offers healthcare providers a full range of
imaging modalities and services in the areas of X-ray, computed tomography,
magnetic resonance and ultrasound systems. Its IT systems enable imaging
departments to become completely digital, with improved access to images and
seamless integration with hospital-wide IT networks. Services include management
consultancy, training and technical services to help hospitals operate more
efficiently and cost-effectively.
Philips has technology agreements with Analogic Corporation of the United
States and Hitachi Medical Corporation of Japan for the development, production
and sale of medical equipment.
Philips Medical Systems, already the world leader in X-ray imaging
systems, has significantly strengthened its position in the field of diagnostic
imaging with the acquisition of ATL Ultrasound as of October 1, 1998. This
company is one of the leaders in ultrasound imaging systems - one of the fastest
growing sectors of the market - and a clear leader in all-digital ultrasound
systems. The quality of its products and their performance is widely recognized,
and its leading ultrasound product has been selected by NASA for use in the
international space station scheduled to become operational in 2001. Demand for
diagnostic imaging products and services is expected to continue to grow as new
markets emerge and advances are made in functionality, e.g. through the further
integration of IT solutions. The synergy between Philips and ATL has already
begun to bear fruit. Philips has expanded direct sales of ATL's products in 13
countries and the Philips and ATL sales teams are working closely together in
the USA and elsewhere, the outcome being additional growth of ATL sales.
Philips is the leading innovator in cardiovascular imaging. More than
half of all cardiovascular x-ray procedures in the world are performed with
Philips' equipment and the Integris system has become the system of choice of
leading medical institutions.
The Business Electronics division focuses on the business-to-business
sector. Main product areas are digital videocommunications systems, broadband
network equipment, business communication systems, communication and security
systems, and fax equipment. The division is a major supplier of electronic
manufacturing equipment to the semiconductor industry. It also deals with
infrastructural and industrial projects. Effective January 1, 2000, Business
Electronics has for the most part been integrated into the Consumer Electronics
division. The largest business group is videocommunication systems, where
Philips is a leading supplier of digital set-top boxes. Certain smaller units of
Business Electronics are being integrated into the Miscellaneous sector.
ORIGIN
Origin (in which Philips holds a 98% majority interest) is a global,
full-service information technology services company. Today, more than 16,000
Origin professionals work in 30 countries, successfully delivering information
technology services to multinational corporations, including 100 of the Fortune
500 companies. Origin offers value-added services in the areas of consulting,
enterprise solutions, application and infrastructure management, together with
systems development, implementation, integration and management. This core set
of services is complemented by the e-service offerings focused on helping
customers extend their supply chain activities between their customers, vendors
and employees.
With a global team of more than 5,000 professionals Origin is engaged in
services supporting the implementation, operations and maintenance of complex
distributed enterprise applications. Origin is acknowledged as one of only a
handful of suppliers who can deliver these critical services. Beyond its own
internal resources, Origin has established partnerships with other industry
leaders that enable it to deliver the full range of information technology
services that business needs today.
MISCELLANEOUS
This sector comprises various activities and businesses, including other
businesses not belonging to a product division, as well as Philips Research,
Corporate Intellectual Property, Philips Centre for Industrial Technology,
Philips Machinefabrieken and Philips Design. Philips Plastics and Metalware
Factories' (PMF's) printed circuit board and metal display components activities
have been divested.
Philips Machinefabrieken, which includes the remaining activities of PMF,
manufactures customer-specific machinery, tools and precision components for
high-quality professional equipment.
9
<PAGE> 10
RESEARCH AND DEVELOPMENT
Continuous efforts to sustain the strong performance in the field of
research and development activities are of the utmost importance to Philips in
order to preserve and strengthen the Company's competitiveness in its various
markets. Through substantial investments in R&D, Philips has created a large
knowledge base. Each year, new technological breakthroughs are added to Philips'
long list of research successes.
Philips continuously adapts its research and development strategy. To
provide a direct response to the needs of the market, Philips has in recent
years adopted a more product-oriented approach to research and development, with
expenditures directed at projects with more apparent short-term commercial
prospects. In addition, projects with a mid-term range are agreed upon with the
product divisions to secure an innovative product offering a few years from now.
With a view to the longer term, Philips will seek to establish more research
alliances with the academic world. This change in strategy for research and
development activities is designed to enhance the effectiveness of expenditures
in this area.
In recent years, Philips has placed greater emphasis on research projects
that are relevant to the entire group, while the main responsibility for the
development of products and production methods in Philips currently lies with
the product divisions, which have at their disposal development laboratories and
implementation departments in 25 countries throughout the world. Approximately
20,500 employees are engaged in advanced development, product development and in
the development of production methods and equipment. In addition, approximately
3,000 employees work in Philips' corporate research laboratories. Exploratory
research and research leading to the conception of new products and technologies
is carried out in four corporate laboratories in Europe, one in the United
States and one in Taiwan.
Product development laboratories and the manufacturing operations are
supported by the Center for Industrial Technology. This organization has its
headquarters in Eindhoven and regional support centers in Asia Pacific and in
the United States. In the United States, this center also provides pilot line
facilities for advanced products. As a highly professional organization of over
900 employees, the Center for Industrial Technology is specialized in the
innovation and improvement of production processes, and the Product Creation
Process and has the capability to develop specialized advanced production
equipment. The Center also gives corporate level support in the field of
standardization issues.
The achievements of Philips' laboratories in the fields of lighting,
consumer electronics, optics, magnetics, mechanics and information technology
have been of global significance. Achievements in research and/or development by
Philips alone or, in certain circumstances, in cooperation with others, include
flat-panel displays, lighting electronics, speech recognition and dialogue
systems, optical and magnetic recording (DVD and DigaMax), low-power electronics
(new batteries and asynchronous IC design), IC technology and other. Recent
contributions applied in consumer products include various concepts for the
Nexperia Digital Video Platform introduced at the 1999 Internationale
Funkausstellung (IFA). For Philips' Flat TV, Research has also applied its
video-processing know-how to enhance the picture quality of plasma panels. This
supports Flat TV's leadership in this field, as demonstrated by its reception at
the IFA, where it won the EISA award for the second time. Another recent example
of a contribution to the product divisions, is the rotational angio software
package which has been added to Medical Systems's Integris product, allowing the
3-D reconstruction and display of vessels.
Philips participates in various European research and development
projects such as the projects for submicron IC technology (MEDEA), information
technology and telecommunications (ACTS). In the United States, Philips has
played a role in the "Grand Alliance" developing a fully digital high-definition
television system for terrestrial broadcasting. The standard has now been
adopted by the Federal Communications Commission, and broadcast service was
launched in 1998. In 1999 Philips introduced its first fully digital television
receiver, taking advantage of this.
Philips has a strong Intellectual Property Right (IPR) position
consisting of approximately 60,000 registered patent rights, 21,000 registered
trademarks, 6,000 design rights and a substantial number of license agreements.
In 1999, Philips filed over 1,400 new patent applications and more than 1,200
worldwide patent families based upon the new patent filings of 1998. Although
many of Philips' patents and licenses are significant, none is individually
material to Philips' business as a whole. Patent protection is extremely
important to Philips' operations. It spends significant resources to protect its
intellectual property rights and intellectual property licenses.
10
<PAGE> 11
COOPERATIVE BUSINESS ACTIVITIES AND UNCONSOLIDATED COMPANIES
The information set forth under the heading "Cooperative business
activities and unconsolidated companies" on pages 61 and 62 of the 1999 Annual
Report -Management Report- of the Company, is incorporated herein by reference.
EMPLOYMENT
The information set forth under the heading "Employment" on pages 48 and
49 of the 1999 Annual Report -Management Report- of the Company, is incorporated
herein by reference.
MILLENNIUM
For a more detailed discussion of this issue, see page 69 of the 1999
Annual Report -Management Report- incorporated herein by reference.
11
<PAGE> 12
ITEM 2 DESCRIPTION OF PROPERTY
Philips' manufacturing facilities, warehouses and office facilities are
located in the Netherlands, the rest of Europe, the Far East and the United
States and Canada. These plants are generally in good condition and adequate for
the manufacturing requirements of Philips. The geographic allocation of assets
employed as shown in Note 29: "Information relating to product sectors and
geographic areas" on pages 55 through 63 of the 1999 Annual Report -Financial
Statements- and incorporated herein by reference, is generally indicative of the
location of manufacturing facilities.
ITEM 3 LEGAL PROCEEDINGS
Philips is involved in proceedings concerning environmental problems
including proceedings relating to the closure of discontinued chemical
operations and the clean-up of various sites, including Superfund sites, in the
United States. The potential costs related to these proceedings and the possible
impact thereof on future operations are uncertain. However, based on current
information, management does not believe, that the outcome of these matters or
other litigation incidental to its extensive international operations and
involving, among other matters, competition issues and commercial transactions,
will result in a liability which would have a material adverse effect on the
consolidated financial position and results of operations of Philips at December
31, 1999.
ITEM 4 CONTROL OF REGISTRANT
The information required by this Item is incorporated by reference herein
on pages 71 through 77 of the 1999 Annual Report -Financial Statements.
As of February 25, 2000, no person is known to the Company to be the
owner of more than 10% of its Common Shares.
ITEM 5 NATURE OF TRADING MARKET
The Common Shares of the Company are listed on the Amsterdam Stock
Exchange, on six other European stock exchanges and on the New York Stock
Exchange. The principal markets for the Common Shares are the Amsterdam, New
York and London Stock Exchanges.
The following table shows the high and low sales prices of the Common
Shares on the Amsterdam Stock Exchange as reported in the Official Price List of
the Amsterdam Stock Exchange (1998 converted into euros using the irrevocably
fixed conversion rate which became effective on January 1, 1999: EUR 1 = NLG
2.20371) and the high and low sales prices on the New York Stock Exchange:
<TABLE>
<CAPTION>
AMSTERDAM NEW YORK
STOCK EXCHANGE (EUR) STOCK EXCHANGE (US $)
------------------------------------------------------------------------
High Low High Low
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1st quarter 73.74 51.05 78 1/4 54 7/16
2nd quarter 92.71 67.39 102 7/8 71
3rd quarter 87.58 36.12 94 13/16 42
4th quarter 61.62 36.85 71 5/16 44 5/8
1999 1st quarter 76.50 56.55 83 5/8 65 1/2
2nd quarter 97.10 71.80 100 7/8 78 1/16
3rd quarter 109.75 86.00 110 3/4 91 13/16
4th quarter 135.00 85.10 136 1/2 91 3/4
1st quarter
2000 (through Feb. 25) 201.00 121.55 195 1/2 128
</TABLE>
12
<PAGE> 13
The Common Shares are held by shareholders worldwide in bearer and
registered form. Outside the United States, shares are held primarily in bearer
form. As of February 25, 2000, approximately 81% of the Common Shares were held
in bearer form. In the United States shares are held primarily in the form of
registered Shares of New York Registry (Shares of New York Registry) for which
Citibank, N.A., 111 Wall Street, New York, New York 10043 is the transfer agent
and registrar. As of February 25, 2000, approximately 19% of the total number of
outstanding Common Shares were represented by Shares of New York Registry issued
in the name of approximately 1,200 holders of record. Only bearer shares are
traded on the Amsterdam Stock Exchange and other European stock exchanges. Only
Shares of New York Registry are traded on the New York Stock Exchange. Bearer
shares and registered shares may be exchanged for each other. Since certain
shares are held by brokers and other nominees, these numbers may not be
representative of the actual number of United States beneficial holders or the
number of Shares of New York Registry beneficially held by US residents.
ITEM 6 EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
There are currently no limitations, either under the laws of the
Netherlands or in the Articles of Association of the Company, to the rights of
non-residents to hold or vote Common Shares of the Company. Cash dividends
payable in Dutch guilders on Netherlands registered shares and bearer shares may
be officially transferred from the Netherlands and converted into any other
currency without Dutch legal restrictions, except that for statistical purposes
such payments and transactions must be reported to the Dutch Central Bank, and
furthermore, no payments, including dividend payments, may be made to
jurisdictions subject to sanctions, adopted by the government of the
Netherlands, implementing resolutions of the Security Council of the United
Nations. The Articles of Association of the Company provide that cash
distributions on Shares of New York Registry shall be paid in US dollars,
converted at the rate of exchange on the Amsterdam Exchanges N.V. ("AEX") at the
close of business on the day fixed and announced for that purpose by the Board
of Management in accordance with the Company's Articles of Association.
ITEM 7 TAXATION
The statements below are only a summary of the present Netherlands tax
laws and the Tax Convention of December 18, 1992 between the United States of
America and the Kingdom of the Netherlands (the US Tax Treaty) and are not to be
read as extending by implication to matters not specifically referred to herein.
As to individual tax consequences, investors in the Common Shares should consult
their own tax advisors.
WITHHOLDING TAX
In general, a dividend distributed by a company resident in the
Netherlands (such as the Company) is subject to a withholding tax imposed by the
Netherlands at a rate of 25%. Stock dividends paid out of the Company's paid-in
share premium recognized for Netherlands tax purposes are not subject to the
above mentioned withholding tax.
Pursuant to the provisions of the US Tax Treaty, dividends paid by the
Company to a shareholder who is a resident of the United States (as defined in
the US Tax Treaty), are generally eligible for a reduction in the rate of Dutch
withholding tax to 15%, unless (i) the beneficial owner of the dividends carries
on business in the Netherlands through a permanent establishment, or performs
independent personal services in the Netherlands from a fixed base, and the
Common Shares form part of the business property of such permanent establishment
or pertain to such fixed base, or (ii) the beneficial owner of the dividends is
not entitled to the benefits of the US Tax Treaty under the "treaty-shopping"
provisions thereof. Dividends paid to qualifying exempt US pension trusts and
qualifying exempt US organizations are exempt from Dutch withholding tax under
the US Tax Treaty. However, for qualifying exempt US organizations no exemption
at source upon payment of the dividend can be applied for; such exempt US
organizations should apply for a refund of the 25% withholding tax.
The gross amount (including the withheld amount) of dividends distributed
on Common Shares will be dividend income to the U.S. shareholder, not eligible
for the dividends received deduction generally allowed to corporations. However,
subject to certain conditions and limitations, the Dutch withholding tax will be
treated as a foreign income tax that is eligible for credit against the
shareholders' US income taxes.
13
<PAGE> 14
CAPITAL GAINS
Capital gains upon the sale or exchange of Common Shares by a
non-resident individual or by a non-resident corporation of the Netherlands are
exempt from Dutch income tax, corporation tax or withholding tax, unless (i)
such gains are effectively connected with a permanent establishment in the
Netherlands of the shareholders' trade or business or (ii) are derived from a
direct, indirect or deemed substantial participation in the share capital of a
company (such substantial participation not being a business asset).
In general, an individual has a substantial participation if he holds
either directly or indirectly and either independently or jointly with his
spouse or steady partner, at least 5% of the total issued share capital or
particular class of shares of a company. For determining a substantial
participation, other shares held by close relatives are taken into account. The
same applies to options to buy shares. A deemed substantial participation
amongst others exists if (part of) a substantial participation has been disposed
of, or is deemed to have been disposed of, on a non-recognition basis. Under the
US Tax Treaty however, the Netherlands may only tax a capital gain derived from
a substantial participation if the alienator has been a resident of the
Netherlands at any time during the five-year period preceding the alienation,
and owned at the time of alienation either alone or together with his relatives,
at least 25% of any class of shares.
NET WEALTH TAX
No net wealth tax is imposed by the Netherlands in respect of Common
Shares owned by non-resident corporations. A non-resident individual shareholder
is not subject to Netherlands net wealth tax unless he has a permanent
establishment in the Netherlands and the Common Shares are effectively connected
with that permanent establishment.
ESTATE AND GIFT TAXES
No estate, inheritance or gift taxes are imposed by the Netherlands on
the transfer of Common Shares if, at the time of the death of the shareholder or
the transfer of the Common Shares (as the case may be), such shareholder or
transferor is not a resident of the Netherlands, unless such Common Shares are
attributable to a permanent establishment or permanent representative of the
shareholder in the Netherlands.
Inheritance or gift taxes (as the case may be) are due, however, if such
shareholder or transferor:
(a) has Dutch nationality and has been a resident of the Netherlands at
any time during the ten years preceding the time of the death or
transfer; or
(b) has no Dutch nationality but has been a resident of the Netherlands
at any time during the twelve months preceding the time of transfer
(for Netherlands gift taxes only).
14
<PAGE> 15
ITEM 8 SELECTED CONSOLIDATED FINANCIAL DATA
I. IN ACCORDANCE WITH DUTCH GAAP * ** ***
Beginning in 1999, Philips' consolidated financial statements are
reported in euros. Previously presented financial statements denominated in
Dutch guilders have been translated into euros using the irrevocably fixed
conversion rate applicable since January 1, 1999 for all periods presented (EUR
1 = NLG 2.20371). Management believes that the data denominated in euros
reflects the same trends as previously reported. Philips' financial data may
not be comparable to other companies that also report in euros if those other
companies previously reported in a currency other than the Dutch guilder.
<TABLE>
<CAPTION>
(Millions, except per share data)
------------------------------------------------------------------
1995 1996 1997 1998
EUR EUR EUR EUR
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales 25,259 27,094 29,658 30,459
Income from operations 1,350 422 1,714 685
Financial income and expenses-net (312) (404) (319) (312)
Income from continuing operations 971 126 1,231 541
Net income (loss) 1,143 (268) 2,602 6,053
BASIC EARNINGS PER COMMON SHARE
(1999: EUR 1 par value; 1995 up to
and including 1998 NLG 10 par value):
Income from continuing operations 2.85 0.37 3.52 1.50
Net income (loss) 3.36 (0.79) 7.45 16.81
DILUTED EARNINGS PER COMMON SHARE:
Income from continuing operations 2.75 0.37 3.45 1.49
Net income (loss) (b) 3.24 (0.79) 7.30 16.68
Dividend per Common Share (from
prior-year profit distribution) 0.57 0.73 0.73 0.91
BALANCE SHEET DATA:
Working capital 1,389 610 1,900 1,170
Total assets 20,981 21,907 23,322 28,153
Short-term debt 1,919 2,446 821 801
Long-term debt 2,837 3,409 3,209 2,786
Short-term provisions (c) 1,022 879 938 966
Long-term provisions (c) 2,438 2,541 2,313 2,019
Minority interests 496 279 559 242
Stockholders' equity 6,626 6,585 9,154 14,560
Cash flow data:
Net cash provided by operating activities 662 911 3,210 2,140
Cash flow before financing activities (870) (925) 3,255 699
Net cash (used for) provided by
financing activities 854 777 (2,661) (814)
(Decrease) increase in cash and cash equivalents (16) (148) 594 (115)
</TABLE>
<TABLE>
<CAPTION>
(Millions, except per share data)
----------------------------
1999 1999 (a)
EUR US $
--------------------------------------------------------------------
<S> <C> <C>
INCOME STATEMENT DATA:
Sales 31,459 31,732
Income from operations 1,751 1,766
Financial income and expenses-net 32 32
Income from continuing operations 1,804 1,820
Net income (loss) 1,799 1,815
BASIC EARNINGS PER COMMON SHARE
(1999: EUR 1 par value; 1995 up to
and including 1998 NLG 10 par value):
Income from continuing operations 5.24 5.29
Net income (loss) 5.22 5.27
DILUTED EARNINGS PER COMMON SHARE:
Income from continuing operations 5.19 5.24
Net income (loss) (b) 5.18 5.22
Dividend per Common Share (from
prior-year profit distribution) 1.00 1.01
BALANCE SHEET DATA:
Working capital 1,412 1,424
Total assets 29,496 29,752
Short-term debt 577 582
Long-term debt 2,737 2,761
Short-term provisions (c) 1,056 1,065
Long-term provisions (c) 2,062 2,080
Minority interests 333 336
Stockholders' equity 14,757 14,885
Net cash provided by operating activities 1,913 1,930
Cash flow before financing activities (1,921) (1,938)
Net cash (used for) provided by
financing activities (2,606) (2,628)
(Decrease) increase in cash and
cash equivalents (4,527) (4,566)
</TABLE>
15
<PAGE> 16
ITEM 8 SELECTED CONSOLIDATED FINANCIAL DATA (continued)
I. IN ACCORDANCE WITH DUTCH GAAP (continued) * ** ***
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
1995 1996 1997 1998 1999
------------------------------------------------------------------------------
KEY RATIOS:
Income from operations:
<S> <C> <C> <C> <C> <C>
- - as a % of sales 5.3 1.6 5.8 2.2 5.6
- - as a % of net operating capital (RONA) 15.4 4.2 16.4 6.5 17.5
Turnover rate of net operating capital 2.88 2.70 2.84 2.91 3.14
Inventories as a % of sales 20.1 16.0 15.2 14.0 14.5
Outstanding trade receivables (in months' sales) 1.5 1.3 1.3 1.3 1.4
Income from continuing operations:
- - as a % of stockholders' equity (ROE) 15.8 1.9 15.9 5.1 12.6
Net debt to group equity ratio 35:65 42:58 21:79 (d) 6:94
</TABLE>
DEFINITIONS:
Working capital : current assets excluding cash and cash equivalents
and securities less current liabilities
Net operating capital : intangible assets (excluding goodwill of
unconsolidated companies), property, plant and
equipment, non-current receivables and current
assets excluding cash and cash equivalents,
securities and deferred tax positions, after
deduction of provisions and other liabilities
RONA : income from operations as a % of average net
operating capital
ROE : income from continuing operations as a % of
average stockholders' equity
Net debt : long-term and short-term debt net of cash and cash
equivalents
(a) For the convenience of the reader, the euro amounts have been
converted into US dollars at the exchange rate used for balance sheet
purposes at December 31, 1999 (US $ 1 = EUR 0.9914).
(b) See Note 9 of "Notes to the Consolidated Financial Statements" on
page 32 of the 1999 Annual Report -Financial Statements- incorporated
herein by reference for a discussion of net income (loss) on a diluted
basis.
(c) Includes provision for pensions, severance payments, restructurings
and taxes among other items; see Note 19 of "Notes to the
Consolidated Financial Statements" on page 37 of the 1999 Annual Report
-Financial Statements- incorporated herein by reference.
(d) Not meaningful: net cash in 1998 exceeded the debt level.
* 1997 and prior years have been restated to reflect the sale of
PolyGram N.V. in 1998 and to present the Philips Group accounts on a
continuing basis.
** In accordance with Dutch GAAP and trends in international
accounting, the proposed dividend distribution to shareholders,
which is subject to approval by the General Meeting of Shareholders,
is no longer recorded in the balance sheet. Prior years have been
restated for comparison purposes.
*** The consolidated financial data for 1999 have been prepared in
euros. Amounts previously reported in Dutch guilders are now reported in
euros using the irrevocably fixed conversion rate which became
effective on January 1, 1999 (EUR 1= NLG 2.20371).
16
<PAGE> 17
II. APPROXIMATE AMOUNTS IN ACCORDANCE WITH US GAAP * (a), (b)
(See Note 28 of "Notes to Consolidated Financial Statements" on pages 50
through 54 of the 1999 Annual Report -Financial Statements- incorporated
herein by reference.)
<TABLE>
<CAPTION>
(Millions, except per share data)
-------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 1999(c)
EUR EUR EUR EUR EUR US $
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Income (loss) from continuing operations 787 (519 2,500 1,025 1,595 1,609
Discontinued operations 216 176 ) 233 4,891 - -
Extraordinary items, net - - (43 ) (16 ) (5 ) (5 )
Net income (loss) in accordance with US GAAP 1,003 (343 ) 2,690 5,900 1,590 1,604
BASIC EARNINGS PER COMMON SHARE
(1999: EUR 1 par value; 1995 up to and
including 1998 NLG 10 par value):
Income (loss) from continuing operations 2.24 (1.51 ) 7.16 2.85 4.63 4.67
Net income (loss) 2.85 (1.00 ) 7.70 16.39 4.61 4.65
DILUTED EARNINGS PER COMMON SHARE:
Income (loss) from continuing operations 2.23 (1.51 ) 7.02 2.82 4.59 4.63
Net income (loss) 2.84 (1.00 ) 7.55 16.25 4.58 4.62
Dividend per Common Share (from prior-year
profit distribution) 0.57 0.73 0.73 0.91 1.00 1.01
BALANCE SHEET DATA
Stockholders' equity 6,745 6,598 9,220 14,456 16,708 16,853
Total assets 20,789 21,677 23,194 28,009 31,385 31,657
</TABLE>
(a) Under Dutch GAAP, certain product development and process development
costs are capitalized in inventory. Under US GAAP such costs are
required to be expensed when incurred. The figures previously
presented for 1995 through 1998 have been adjusted to reflect this
difference in accounting. The effect of this adjustment was to
increase (decrease) both income from continuing operations and net
income in accordance with US GAAP by (EUR 60 million), EUR 21 million
and (EUR 40 million), in 1995, 1997 and 1998, respectively and to
decrease loss from continuing operations and net loss by EUR 50
million in 1996. Additionally stockholders' equity as of the end of
1995, 1996, 1997 and 1998 was reduced by EUR 260 million, EUR 210
million, EUR 189 million and EUR 229 million, respectively.
(b) Under US GAAP, divestitures which cannot be regarded as discontinued
segments of business must be included in income from continuing
operations. Under Dutch GAAP, prior to 1999, certain material
transactions such as disposals of lines of activities, including
closures of substantial production facilities or substantial results
from disposals of interests in unconsolidated companies were accounted
for as extraordinary items, whereas under US GAAP these would have
been recorded in income from operations.
(c) For the convenience of the reader, the euro amounts have been
converted into US dollars at the exchange rate used for balance sheet
purposes at December 31, 1999 (US $ 1 = EUR 0.9914).
* The consolidated financial data for 1999 have been prepared in euros.
Amounts previously reported in Dutch guilders are now reported in
euros using the irrevocably fixed conversion rate which became
effective on January 1, 1999 (EUR 1 = NLG 2.20371).
17
<PAGE> 18
III. CASH DIVIDENDS AND DISTRIBUTIONS PAID PER COMMON SHARE
The following table sets forth in euros the gross dividends paid on the
Common Shares in the financial years indicated (from prior-year profit
distribution) and such amounts as converted into US dollars and paid to holders
of Shares of New York Registry:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- - In EUR 0.57 0.73 0.73 0.91 1.00
- - In US $ 0.80 0.97 0.85 0.97 1.09
</TABLE>
The 1999 financial statements under Dutch GAAP are presented before
profit distribution that is subject to shareholder approval after year-end. This
is in line with Dutch GAAP requirements and trends in international accounting.
Adoption of the dividend proposal by the General Meeting of Shareholders on
March 30, 2000, will result in a total dividend payment in the year 2000 of EUR
399 million (EUR 1.20 per Common Share).
The dollar equivalent of the 1999 profit distribution of EUR 1.20 - which
is subject to approval by the Annual General Meeting of Shareholders on March
30, 2000 - payable to shareholders in the year 2000, will be calculated at the
euro/dollar rate of the official Amsterdam daily fixing rate (transfer rate) on
the date fixed and announced for that purpose by the Company.
IV. EXCHANGE RATES US $ : EUR
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- - Rate at December 31,
(as reported) 0.7260 0.7896 0.9166 0.8576 0.9914
- - Average rate (a) 0.7306 0.7669 0.8849 0.8985 0.9392
- - Highest rate 0.7941 0.7987 0.9620 0.9484 0.9987
- - Lowest rate 0.6943 0.7306 0.7850 0.8213 0.8460
</TABLE>
(a) The average rates are the accumulated average rates based on daily
quotations.
18
<PAGE> 19
ITEM 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this Item is incorporated by reference herein
on pages 40 through 73 of the 1999 Annual Report -Management Report.
SUBSEQUENT EVENT
On March 27, 2000, Philips announced the sale of approximately 20% of its
shares of JDS Uniphase, resulting in an after tax gain of approximately EUR 525
million. Philips still holds 15,477,168 common shares of JDS Uniphase, of which,
subject to market conditions, Philips from time to time may sell more shares.
See also Note 3 and Note 11 of the Company's 1999 Annual Report - Financial
Statements.
ITEM 9A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The information required by this Item is incorporated by reference herein
on pages 67 through 68 of the 1999 Annual Report -Management Report.
ITEM 10 DIRECTORS AND OFFICERS OF REGISTRANT
The information required by this Item is incorporated by reference herein
on pages 74 through 78 of the 1999 Annual Report -Management Report- and pages
71, 75 and 76 of the 1999 Annual Report -Financial Statements.
Mr. L.C. van Wachem is also Chairman of the Board of the
Dr. A.F. Philips Stichting.
Messrs W. de Kleuver C.J. Oort and C. Boonstra are also member
of the Board of the Dr. A.F. Philips Stichting.
ITEM 11 COMPENSATION OF DIRECTORS AND OFFICERS
For information on the remuneration of the Board of Management and the
Supervisory Board, required by this Item, see page 23 for the aggregate amounts
and pages 71 through 75 for individually named members of the 1999 Annual Report
- -Financial Statements- incorporated herein by reference.
The aggregate direct remuneration paid in 1999 to, or for the benefit of,
the members of the Supervisory Board, the Board of Management and 68 officers in
the Netherlands, taken as a group, was as follows:
Aggregate direct remuneration: EUR 21,656,000
Contribution to retirement plans: EUR 3,135,000
19
<PAGE> 20
ITEM 12 OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
During 1999, 1,724,525 stock options to purchase Common Shares
of Koninklijke Philips Electronics N.V. were issued. In 1999 2,065,723
options were exercised; 83,889 initially allocated options were forfeited
due to resignations/dismissals prior to vesting. Until March 1, 2000,
1,182,200 stock options were newly issued, 835,909 stock options were
exercised and 1,667 initially allocated options were forfeited. As of
March 1, 2000, the number of shares issuable upon exercise of stock
options outstanding was 5,586,071 (December 31, 1999: 5,241,447 stock
options).
For a discussion of the options and the employee debentures,
see also Note 23: "Long-term debt", Note 25: "Share premium and other
reserves" and Note 26: "Stock-based compensation" of "Notes to the
Consolidated Financial Statements" on pages 42 through 47 of the 1999
Annual Report -Financial Statements- incorporated herein by reference.
For information specified in this Item for individually named
directors and officers, see pages 71 through 75 of the 1999 Annual Report
- -Financial Statements- incorporated herein by reference.
The following table provides more detailed information about
the stock options outstanding at March 1, 2000:
<TABLE>
<CAPTION>
Fixed option plans:
options exercisable
weighted
exercise options average
number price per outstanding number price per
outstanding share exercise exercisable share
at March 1, (price in period at March 1, (price in
2000 EUR) (ending) 2000 EUR)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 202,650 30.13 Feb. 14, 2001 202,650 30.13
1996 20,000 26.46 Oct. 23, 2001 20,000 26.46
1997 401,800 36.76 Feb. 12, 2002 401,800 36.76
1997 25,000 44.02 Apr. 22, 2002 25,000 44.02
1997 135,000 77.73 July 23, 2002 135,000 77.73
1997 37,800 72.70 Oct. 22, 2002 37,800 72.70
1998 741,400 65.80 Feb. 11, 2003 741,400 65.80
1998 56,000 84.09 Apr. 21, 2003 -
1998 3,000 77.73 July 22, 2003 -
1998 96,000 46.29 Oct. 21, 2003 -
1999 906,250 63.05 Feb. 10, 2004 -
1999 16,500 83.40 Apr. 21, 2004 -
1999 21,500 92.05 July 21, 2004 -
1999 31,600 89.95 Sept. 22, 2004 -
2000 1,179,700 168.10 Feb. 16, 2005 -
(price in US$) (price in US$)
1998 471,311 51.75-94.37 Oct. 1, 2008 270,758 68.81
1999 707,775 87.90-124.37 Oct. 1, 2009 -
----------------- --------------
5,053,286 1,834,408
Variable plans:
(price in US$) (price in US$)
1991 - 1992 11,042 11.81-21.38 Dec. 31, 2000 11,042 12.85
1993 - 1994 75,475 11.00-27.56 Dec. 31, 2002 75,475 11.50
1995 - 1997 446,268 30.00-56.81 Dec. 31, 2004 446,268 31.52
----------------- ---------------
532,785 532,785
</TABLE>
20
<PAGE> 21
ITEM 13 INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
The registrant does not report to its shareholders, or
otherwise make public, the information specified in this Item for
individually named directors and officers.
ITEM 14 DESCRIPTION OF SECURITIES TO BE REGISTERED
Omitted pursuant to Form 20-F General Instruction G(b).
ITEM 15 DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 16 CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES
None.
ITEM 18 FINANCIAL STATEMENTS
The following portions of the Company's 1999 Annual Report
- -Financial Statements- as set forth on pages 3 through 63 are
incorporated herein by reference and constitute the Company's response to
this Item:
"Accounting principles"
"Consolidated statements of income of the Philips Group"
"Consolidated balance sheets of the Philips Group"
"Consolidated statements of cash flows of the Philips Group"
"Consolidated statements of changes in stockholders' equity of
the Philips Group"
"Notes to the consolidated financial statements of the
Philips Group"
Schedules:
Schedules are omitted as they are either not required or not
applicable.
ITEM 19 FINANCIAL STATEMENTS AND EXHIBITS
(a) INDEX TO FINANCIAL STATEMENTS
See Item 18 above.
The total amount of long-term debt securities of the Registrant and
its subsidiaries authorized under any one instrument does not exceed 10% of the
total assets of Philips and its subsidiaries on a consolidated basis. Philips
agrees to furnish copies of any or all such instruments to the Securities and
Exchange Commission upon request.
(b) INDEX OF EXHIBITS
I Independent auditors' report and consent of the independent
auditors.
II The 1999 Annual Report to Shareholders of the Company,
consisting of the Management Report and Financial
Statements, which is furnished to the Securities and
Exchange Commission for information only and is not filed
except for such specific portions that are expressly
incorporated by reference in this report on Form 20-F.
III Articles of Association, as amended, dated as of May 29,
1999 - English translation - (incorporated by reference to
the Company's Report on Form 6-K for the period commencing
July 22, 1999 through August 9, 1999).
21
<PAGE> 22
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- ---------------------- ----------------------------------------------
I Independent auditors' report and consent of the
independent auditors.
II The 1999 Annual Report to Shareholders of the
Company, consisting of the Management Report and
Financial Statements, which is furnished to the
Securities and Exchange Commission for information
only and is not filed except for such specific
portions that are expressly incorporated by
reference in this report on Form 20-F.
III Articles of Association, as amended, dated as of
May 29, 1999 - English translation - (incorporated
by reference to the Company's Report on Form 6-K
for the period commencing July 22, 1999 through
August 9, 1999).
22
<PAGE> 23
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant certifies that it meets all the requirements for filing on Form 20-F
and has duly caused this annual report to be signed on its behalf by the
undersigned, thereunto duly authorized.
<TABLE>
<CAPTION>
KONINKLIJKE PHILIPS ELECTRONICS N.V.
<S> <C>
/s/ C. Boonstra /s/ J.H.M. Hommen
C. Boonstra J.H.M. Hommen
(President, Chairman (Executive Vice-President,
of the Board of Management and Member of the Board of
the Group Management Committee) Management and the
Group Management Committee,
and Chief Financial Officer)
Registrant
Date: March 29, 2000
</TABLE>
23
<PAGE> 1
\
I
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
TO THE SUPERVISORY BOARD AND BOARD OF MANAGEMENT OF KONINKLIJKE PHILIPS
ELECTRONICS N.V.
We have audited the consolidated financial statements of Koninklijke
Philips Electronics N.V. ('Royal Philips Electronics') and subsidiaries as
listed in Item 18 of Form 20F, included herein. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the Netherlands which are substantially equivalent to generally accepted
auditing standards in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Royal Philips
Electronics and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and cash flows for each of the years in the three-year
period ended December 31, 1999, in conformity with generally accepted accounting
principles in the Netherlands.
Generally accepted accounting principles in the Netherlands vary in certain
significant respects from generally accepted accounting principles in the United
States. Application of accounting principles generally accepted in the United
States of America would have affected results of operations for each of the
years in the three-year period ended December 31, 1999 and shareholders' equity
as of December 31, 1999 and 1998 to the extent summarized in Note 28 to the
Consolidated Financial Statements.
Eindhoven, The Netherlands
/s/ KPMG Accountants N.V.
February 15, 2000 KPMG ACCOUNTANTS N.V.
CONSENT OF THE INDEPENDENT AUDITORS
- ------------------------------------------------------------------------------
TO THE SUPERVISORY BOARD AND BOARD OF MANAGEMENT OF KONINKLIJKE PHILIPS
ELECTRONICS N.V.
We consent to incorporation by reference in the registration statement
(No. 33-80027) on Form S-8 and in the registration statement (No. 333-4582) on
Form F-3 of Koninklijke Philips Electronics N.V. ('Royal Philips Electronics')
of our report dated February 15, 2000, relating to the consolidated balance
sheets of Royal Philips Electronics and subsidiaries as of December 31, 1999 and
1998, and the consolidated statements of income, cash flows and stockholders'
equity for each of the years in the three-year period ended December 31, 1999,
included in the December 31, 1999 annual report on Form 20-F of Royal Philips
Electronics.
Eindhoven, The Netherlands
/s/ KPMG Accounts N.V.
March 29, 2000 KPMG ACCOUNTANTS N.V.
24
<PAGE> 1
II
ANNUAL REPORT TO SHAREHOLDERS FOR 1999
- -------------------------------------------------------------------------------
See attachment.
Note: the Annual Report to Shareholders for 1999, consisting of the
Management Report and the Financial Statements, is furnished to the Securities
and Exchange Commission for information only and is not filed except for such
specific portions that are expressly incorporated by reference in this report on
Form 20-F.
25
<PAGE> 2
ANNUAL REPORT 1999
MANAGEMENT REPORT
[Philips Logo]
PHILIPS
<PAGE> 3
[Pages 1 through 39 intentionally omitted.]
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion is based on the consolidated financial statements and
should be read in conjunction with those statements and the other financial
information. In connection with changes in the presentation of the consolidated
financial statements, please refer to the section 'Changes in accounting and
presentation' in Management's Discussion and Analysis (MD&A) and footnote 2 to
the income statement.
The consolidated financial statements were prepared in accordance with generally
accepted accounting principles in the Netherlands (Dutch GAAP). These accounting
policies differ in some respects from generally accepted accounting principles
in the United States (US GAAP), which are discussed in note 28 to the
consolidated financial statements.
The supplemental financial data includes earnings before interest, taxes,
depreciation and amortization, referred to as Ebitda. In Philips' definition,
Ebitda equals income from operations before depreciation and amortization
charges (including write-off of in-process R&D). Because of the significant
goodwill and other intangibles associated with the Company's acquisitions,
management believes Ebitda can be an appropriate additional measure of operating
performance. However, the reader should note that Ebitda is not a substitute for
operating income, net income, cash flows and other measures of financial
performance as defined by US GAAP and may be defined differently by other
companies.
Beginning in 1999, Philips' consolidated financial statements are reported in
euros. Previously presented financial statements denominated in Dutch guilders
have been translated into euros using the irrevocably fixed conversion rate
applicable since January 1,1999 for all periods presented (EUR 1 = NLG
2.20371). Management believes that the data denominated in euros reflects the
same trends as previously reported. Philips' financial data may not be
comparable to other companies that also report in euros if those other companies
previously reported in a currency other than the Dutch guilder. See the notes to
the consolidated financial statements.
> SUMMARY
During 1999, the overall profitability of continuing operations was improved and
brought more into line with the Company's long-term objectives. At the same
time, the Company was strengthened through several key acquisitions and
continued investment in the Philips brand.
Sales in 1999 totaled EUR 31,459 million, which is an increase of 3% over 1998.
On a comparable basis, excluding the effects of consolidations and exchange
rates, the increase was 4%. The comparable sales increase in the second half of
1999 amounted to 5%, versus 2% in the first half, reflecting an upturn in our
semiconductor business which achieved 15% growth during this period.
Income from continuing operations in 1999 improved to EUR 1,804 million (EUR
5.24 per share) as compared with EUR 541 million (EUR 1.50 per share) in 1998.
Excluding the EUR 220 million higher results from business disposals, the
increase over 1998 amounted to EUR 1,043 million. The 1999 results include a
strong contribution from unconsolidated companies, particularly Taiwan
Semiconductor Manufacturing Company (TSMC) and LG.Philips LCD Co. Income from
continuing operations in 1998 was impacted by substantial operating losses at
Philips Consumer Communications (PCC) as well as significant restructuring and
other incidental charges.
The return on net assets (RONA) rose to 17.5% in 1999, compared to 6.5% in 1998
and 16.4% in 1997. In addition to increased income, the improvement was in part
attributable to an increase in the net operating capital turnover rate to 3.14
in 1999 versus 2.91 in 1998 and 2.84 in 1997, reflecting improved operational
efficiencies. RONA in 1998 was also affected by restructuring and incidental
charges.
Cash flows from operating activities totaled approximately EUR 1.9 billion,
compared with EUR 2.1 billion in 1998 and EUR 3.2 billion in 1997. The slight
decline from 1998 is primarily attributable to increased working capital
requirements of the Company's businesses.
Cash required by investing activities in 1999 totaled approximately EUR 3.8
billion, compared to EUR 1.4 billion in 1998 (excluding the divestiture of
PolyGram). In 1997, these activities generated cash of EUR 45 million. The
increased cash requirement compared to the last two years is attributable to
several business acquisitions during the year.
The net cash utilized by financing activities in 1999 totaled approximately EUR
2.6 billion, including the return of EUR 1.5 billion to shareholders. The
requirements in 1998 and 1997 were EUR 0.8 billion and EUR 2.7 billion
(including significant debt repayments) respectively.
40
<PAGE> 5
Over the last several years, numerous actions have been taken to provide
increased focus on Philips' core competencies and core businesses. During 1999,
several strategic acquisitions were made, reinforcing segments in which Philips
aims to have a leadership position. In June 1999, Philips acquired
California-based VLSI Technology, at a cost of EUR 1.1 billion, which includes
assumed debt totaling EUR 0.1 billion. VLSI's digital expertise, particularly in
ASICs design, will be a platform for Philips' expansion in the USA and an
important step towards becoming a leading global supplier of communications and
consumer semiconductor products.
Effective July 1999, Philips acquired - for EUR 1.7 billion (of which EUR 0.2
billion has not yet been paid) - a 50% equity interest in a new joint venture
with LG Electronics of South Korea: LG.Philips LCD Co., a world-leading supplier
of active matrix liquid crystal flat panel displays (AMLCDs). Flat panels
represent the fastest-growing segment of the display industry, and one in which
Philips wants to build a leadership position.
Other 1999 acquisitions included Voice Control Systems Inc. (VCS) in the area of
speech technology, an incremental 10% interest in Origin B.V., 51% of
Construlita de Queretaro S.A., Mexico's largest seller of architectural
lighting, and Micrion Corporation, active in the field of charged particle beam
technology, which was acquired to strengthen the majority-owned subsidiary FEI
Corporation of the USA. The aggregate cost of acquisitions, approximately EUR 3
billion, was funded through the use of the large cash position which resulted
from the sale of the Company's 75% shareholding in PolyGram in 1998.
As part of its refocusing strategy, Philips sold a number
of activities in 1999. The most significant divestments were in the
Miscellaneous segment (Airpax of the USA, the DDF Logistica warehousing and
logistics operations in Brazil, several activities of Philips' Plastics and
Metalware Factories (PMF) business, and Philips Hearing Technologies) and the
remaining part of the Conventional (non-ceramic) Passive Components business
group. Additionally, with the aim of increasing efficiency and enhancing
profitability, certain production facilities were closed, integrated with other
facilities or relocated to lower cost countries. The consolidation of
manufacturing units is expected to be continued beyond 1999.
In addition to the refocusing strategy, the Company was strengthened through
continued substantial investments in the Philips brand, particularly in the USA.
A comprehensive survey of 14,000 consumers in different countries has confirmed
the success of 'Star Products', the global advertising campaign which focuses on
a select group of high-end products. The campaign has resulted in enhanced brand
awareness and brand image as well as increased market shares.
<TABLE>
<CAPTION>
> SALES AND INCOME FROM OPERATIONS
- --------------------------------------------------------------------------------
amounts in millions of euros
1999 1998 1997
<S> <C> <C> <C>
Sales 31,459 30,459 29,658
% nominal growth 3 3 9
% comparable growth 4 6 8
Ebitda 3,555 2,573 3,285
Income from operations 1,751 685 1,714
as a % of sales 5.6 2.2 5.8
- --------------------------------------------------------------------------------
</TABLE>
Sales in 1999 grew to EUR 31,459 million, 3% higher, on a nominal basis, than
the EUR 30,459 million in 1998, which in turn was 3% higher than the EUR 29,658
million total for 1997. Currency fluctuations, primarily
41
<PAGE> 6
<TABLE>
<CAPTION>
SALES 1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
in billions of euros 25.3 27.1 29.7 30.5 31.5
% comparable growth 11% 6% 8% 6% 4%
</TABLE>
the appreciation of the US dollar and the Japanese yen versus the euro, had a
positive effect (2%), while various changes in consolidations reduced sales by
2%. The unfavorable effect of changes in consolidation was primarily
attributable to the divestment of the non-ceramic activities of Passive
Components and a significant portion of the Miscellaneous sector's operations,
partially offset by the acquisitions of VLSI, Construlita de Queretaro and Voice
Control Systems. Sales growth in 1999, on a comparable basis, was 4%. This
comprised a volume increase of 11% that was partly offset by an average decrease
in selling prices of 8%. The growth was driven by Consumer Products (6%) and
Semiconductors (5%).
Geographically, sales growth in 1999 showed a divergent pattern. North America
recorded robust growth (9%), with nearly all sectors contributing. Asia Pacific
recovered from its 1998 slump and recorded 7% higher sales, realized across all
sectors. Europe registered 1% growth, which was realized in Consumer Products,
benefiting from excellent PCC sales, and Origin. In addition, Latin America
experienced a recovery in sales in the second half of the year, and came close
to positive growth for the full year.
In 1998, nominal sales were 3% higher than in 1997.
SEGMENT REVENUES
PER GEOGRAPHIC AREA
in billions of euros
<TABLE>
<CAPTION>
1998 1999
- -------- ---- ----
<S> <C> <C>
North America 8.6 9.3
Latin America 2.0 1.6
Europe 27.5 29.1
Africa 0.1 0.1
Asia 10.0 11.2
Australia and New Zealand 0.4 0.4
</TABLE>
This included unfavorable effects of currency fluctuations of 2%, mainly
relating to the depreciation of certain Asian currencies and a weakening of the
US dollar against the Dutch guilder. Consolidation changes had a net negative
impact of 2%. Adjusted for currency and consolidation changes, the comparable
sales growth was 6%, consisting of 16% volume growth, offset by 9% price
erosion.
The main deconsolidations were Philips Car Systems, Pie Medical, Philips
Optoelectronics, Philips Financial Services in the UK, the Smart Card business
and various other activities in Industrial Electronics and Components. Positive
effects on sales arose from the consolidation of the activities of the PCC joint
venture with Lucent Technologies for 9 months in 1998, as compared to only 3
months in 1997, the consolidation of Hosiden and Philips Display (HAPD) from
April 1, 1998, and the acquisitions of ATL Ultrasound, Philips Mietsysteme and
Payer Lux.
Income from operations in 1999 totaled EUR 1,751 million, or 5.6% of sales, as
compared to EUR 685 million or 2.2% of sales and EUR 1,714 million or 5.8% of
sales in 1998 and 1997, respectively. The largest increase in income from
operations was realized by PCC, whose results improved significantly in 1999.
PCC's 1998 results were adversely affected by special
42
<PAGE> 7
<TABLE>
<CAPTION>
INCOME FROM OPERATIONS
as a % of net operating capital - (RONA) 1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
15.4 4.2 16.4 6.5 17.5
</TABLE>
charges in connection with the dissolution of the joint venture with Lucent
Technologies (EUR 375 million), including subsequent restructuring costs. Income
from operations in 1999 was also favorably impacted by EUR 220 million higher
non-recurring income from divestments - principally the sale of Conventional
Passive Components. Furthermore, income was positively influenced by the
capitalization of IT software and lower pension costs. Wage costs showed a
decrease of 2% compared to 1998, reflecting the strong reduction in the average
number of personnel, the ongoing relocation of production facilities to low-wage
countries and lower pension costs.
<TABLE>
<CAPTION>
INCOME FROM OPERATIONS PER GEOGRAPHIC AREA
as a % of segment revenues
1998 1999
---- ----
<S> <C> <C>
North America (5.5) 0.9
Latin America (10.2) (2.5)
Europe 3.9 3.9
Africa (0.7) 0.9
Asia 2.9 5.2
Australia and New Zealand (1.6) 0.2
</TABLE>
On a geographic basis, North America generated the largest increase in income
from operations. This was primarily due to the aforementioned substantially
improved performance at PCC. Europe also achieved an improvement in income,
mainly for the same reason. Asia Pacific benefited from stronger results in
China, mainly Consumer Electronics and Components, improving results in the HAPD
joint venture and better PCC results. Income in Latin America reflected a
recovery from last year, driven especially by positive Consumer Electronics
results.
The year-to-year comparisons of income from operations are impacted by the
amortization of intangibles and the write-off of in-process R&D resulting from
recent acquisitions such as VLSI Technology, VCS and Micrion/FEI in 1999 and ATL
Ultrasound in 1998. Additionally the comparisons are affected by the write-down
of tangible fixed assets at PCC in 1998.
Ebitda in 1999 totaled EUR 3,555 million, which is approximately EUR 1 billion
more than in 1998 (EUR 2,573 million) and higher than in 1997 (EUR 3,285
million).
Income from operations of EUR 685 million, or 2.2% of sales in 1998, compared to
income of EUR 1,714 million, or 5.8% of sales, in 1997. In addition to the
acquisition-related charges for ATL Ultrasound and Active Impulse Systems (EUR
253 million, including asset write-downs), 1998 income was adversely affected by
special charges in connection with the dissolution of the PCC joint venture with
Lucent Technologies (EUR 375 million), including provisions for PCC's subsequent
restructuring. Other special charges include the restructuring provision for
HAPD in Japan (EUR 47 million), higher pension costs in a number of countries,
the risk relating to trade receivables in Brazil (total EUR 86 million) and
other restructuring
43
<PAGE> 8
programs (EUR 67 million).
In addition to these special items, income from operations in 1998 was adversely
affected by the recurring operating losses at PCC and declining profits at
Components, which were only partly offset by performance improvements in the
Lighting sector and at Origin.
Ebitda performance in 1998 compared to 1997 developed in line with income from
operations, except for the write-off of in-process R&D relating to the
acquisitions of ATL Ultrasound and Active Impulse Systems in 1998 (total EUR 202
million), which had the effect of reducing income from operations in that year.
> RESTRUCTURING
The competitive environment in which Philips' organizations operate requires
rapid adjustments in organizational structure, product portfolio and customer
orientation. In order to accelerate the process of reorganization, a major
restructuring program was launched in 1996 to make the organization more
flexible and thus able to respond more effectively to changing conditions. The
program led to an ongoing process of restructuring and/or discontinuance of
underperforming or non-core activities. The main loss-making operations that
have been restructured or eliminated over the past three years include Grundig,
Philips Media (including Superclub's video rental business), the Data
Communication business, various activities of Industrial Electronics, the
remaining PCC operations following the dissolution of the joint venture with
Lucent, and the HAPD activities in Japan.
Businesses that have been sold include PolyGram, Philips Car Systems,
Conventional Passive Components, Semiconductors' Complex Programmable Logic
Devices, Consumer Electronics' retail and rental operations in Australia and
sundry activities such as Philips Hearing Technologies, parts of Philips'
Plastics and Metalware Factories and Airpax. Overall, over 40 activities have
been discontinued or divested. In addition, Philips management continuously
monitors various projects to improve the performance of operations, including
such measures as the closure of factories, the ongoing shift of production
facilities to low-cost areas, and the concentration and integration of
production centers into industrial campuses.
Restructuring charges recorded against income from operations in 1999 totaled
EUR 123 million for various projects in the sectors Lighting, Components,
Consumer Products, Professional and Miscellaneous. Individually, these projects
were not of material significance, the largest being the restructuring of the
Flat Panel Display activities at Waalre in the Netherlands (EUR 38 million). In
1998, the overall restructuring charges amounted to EUR 349 million, mainly
concerning the Consumer Products, Components and Lighting sectors. The two
single largest projects in 1998 were the worldwide restructuring of the
remaining PCC activities in the Consumer Products sector and HAPD Japan in the
Components sector. These projects account for more than 75% of the total charges
in that year. None of the above charges had any direct bearing on recently
acquired businesses.
The largest portion of the 1999 restructuring charges covers the costs of
personnel lay-offs and asset write-downs. Personnel lay-off costs totaled EUR 71
million for approximately 1,500 terminations, of which 1,100 relate to direct
labor and 400 to indirect personnel (1998: EUR 124 million for approximately
4,000 terminations, the main project being PCC which involved some 1,400
lay-offs). The actual number of lay-offs effected during 1999 totaled
approximately 2,500 persons. Write-downs
44
<PAGE> 9
of assets totaled EUR 40 million (1998: EUR 192 million), of which EUR 4 million
related to inventory write-offs and EUR 36 million to write-downs of tangible
fixed assets.
Charges for write-downs of fixed assets mainly related to Components, Lighting,
Professional and Miscellaneous (1998: EUR 58 million, largely relating to the
write-off of impaired assets in the HAPD joint venture). Inventory write-off
charges in 1999 of EUR 4 million were primarily related to Components (1998: EUR
134 million; approximately 90% of these charges involved inventory write-offs at
the remaining PCC operations).
Other charges in 1999 amounted to EUR 12 million (1998: EUR 33 million), mainly
reflecting the costs involved in the cancellation of various contracts (building
leases, car leases, etc).
In 1999, releases of surplus restructuring provisions totaled EUR 78 million.
The releases were primarily related to Consumer Products, Lighting and
Components and were caused by reduced severance requirements, due to the
transfer of workers scheduled to be laid off to other positions within the
Company and by changes in restructuring plans. In 1998, these releases amounted
to EUR 28 million for Lighting, Consumer Products, Professional and
Semiconductors.
In general, the restructuring plans lead to cash outlays in the year in which
they have been recognized or in the subsequent year, and are financed from the
normal cash flow from operations without having a material impact on the
Company's financial position. Management believes that in the near future, the
Company's earnings will benefit from the restructuring plans by approximately
EUR 100 million per year, as a result of reduced salaries and wages as well as
lower depreciation costs.
In January 2000, Philips announced its intention to reduce costs at its picture
tube factory in Aachen, Germany and to relocate part of production to another
picture tube plant in Dreux in France, in order to improve efficiency. This is
expected to result in a headcount reduction of 540 out of a total of 1,600 jobs
in Aachen. The cost of this project is as yet unknown but any charges will be
recognized in 2000.
For further details on restructuring charges, see note 2 to the financial
statements.
Financial income and expenses amounted to income of EUR 32 million in 1999, as
compared to expenses of EUR 312 million in 1998 and EUR 319 million in 1997.
Beginning in 1999, the interest component of pension expense is no longer
included in financial income and expenses but included in pension cost, as part
of income from operations. This accounts for a positive variance in financing
costs of EUR 62 million in 1999. Net interest expense declined to EUR 129
million in 1999, mainly reflecting the impact of the net cash position (cash
exceeded debt) that prevailed during the first half of 1999 as a result of the
cash proceeds from the sale of PolyGram at the end of 1998. This compares to net
interest expense of EUR 244 million in 1998 and EUR 339 million in 1997. During
1999, the average cash level was higher than the average debt, resulting in an
average net cash position of EUR 0.7 billion. This compares to an average net
debt position of EUR 4.1 billion in 1998.
Financial income in each of the years contains gains from the sale of marketable
securities. In 1999, a gain of EUR 117 million was realized on the sale of a
portion of the JDS Uniphase shares received upon the sale of Philips
Optoelectronics in 1998. In addition, dividends totaling EUR 28 million were
received on the Seagram
45
<PAGE> 10
shares obtained upon the sale of Philips' 75% stake in PolyGram. Likewise, 1998
included a EUR 39 million gain from the sale of shares (mainly Flextronics) and
1997 included a EUR 72 million gain (mainly Viacom Inc. and Fluke Corporation).
The foreign exchange result in 1999, including the effect of hedging US dollar
intercompany loans to foreign subsidiaries, was a gain of EUR 13 million. By
contrast, the 1998 loss on exchange differences (EUR 40 million) was principally
due to hedging expenses in emerging markets, against a gain of EUR 12 million in
1997.
Income tax charges totaled EUR 336 million in 1999, compared to EUR 41 million
in 1998 and EUR 276 million in 1997. This corresponds to an effective tax rate
in 1999 of 19%, up from 11% in 1998, and in line with 20% in 1997. The lower
effective tax rate compared to the statutory rate resulted from the utilization
of previously unrecognized loss carryforwards in various countries in Europe and
releases of valuation allowances.
Results relating to unconsolidated companies in 1999 totaled EUR 409 million,
compared with EUR 39 million in 1998. Income in 1999 was positively influenced
by the significant contribution from LG.Philips LCD Co. of EUR 188 million, net
of charges for the amortization of goodwill and other intangibles (EUR 47
million) during the last six months of the year. Disregarding LG.Philips LCD Co.
and various non-recurring results in 1999 and 1998, the results in 1999 were
still considerably higher than the previous year, largely attributable to
improving TSMC results, which reflect TSMC's capacity increase (fifth wafer fab
operational in 1999) as well as the upturn in the semiconductor industry in
1999. Philips' results relating to unconsolidated companies also reflect a EUR
92 million gain recorded on TSMC's debt equity conversion. ASML reported a 31%
increase in earnings in 1999, reflecting a particularly strong second half of
the year. Finally, funding costs incurred at NavTech were substantially in line
with 1998, excluding the one-off gain from the sale of a portion of the NavTech
shares to a consortium of investors in the first quarter of 1999.
In 1998, the results from TSMC and ASML were significantly below 1997 due to the
global slump in the semiconductor industry and the crisis in Asia. NavTech's
losses in 1998 were below the 1997 level.
The share of third-party minority interests in the income of Group companies
amounted to EUR 52 million in 1999, in contrast to 1998 when third-party
shareholders absorbed EUR 170 million of the net losses incurred by Group
companies. This was substantially related to Lucent Technologies' share in the
losses of the PCC joint venture that was dissolved at the end of September 1998.
Excluding Lucent's contribution, minority interests in 1998 amounted to EUR 16
million. The increase in 1999 reflects the improving income performance of the
joint ventures in China and of HAPD Japan.
In 1997, minority interests amounted to EUR 18 million.
> NET INCOME
Income from continuing operations was EUR 1,804 million in 1999 (EUR 5.24 per
common share), compared to EUR 541 million (EUR 1.50 per common share) in 1998
and EUR 1,231 million (EUR 3.52 per common share) in 1997.
Income from discontinued operations in 1998 and 1997
46
<PAGE> 11
represents Philips' 75% share in the operations of PolyGram through December 10,
1998, and amounted to EUR 210 million in 1998, and EUR 263 million for the full
year 1997, both amounts net of applicable income taxes.
Philips sold its shares in PolyGram to The Seagram Company on December 10, 1998.
In connection with this sale, a gain was recognized in 1998 of EUR 4,844
million, free of taxes.
Extraordinary items in 1999 amounted to a loss of EUR 5 million as opposed to a
net gain of EUR 458 million in 1998 and a EUR 1,108 million gain in 1997. The
extraordinary losses in 1999 relate entirely to premiums paid for the early
redemption of long-term debentures.
Major items in 1998 were the sales of Philips Car Systems at a net gain of EUR
379 million and Philips Optoelectronics at a net gain of EUR 78 million.
The 1997 gain was principally attributable to the sale of a portion of Philips'
shareholding in TSMC (net gain EUR 898 million), the sale of the 50%
shareholding in United & Philips Communications, the sale of a third tranche of
the Company's shares in ASML and several other divestments. These gains were
partially offset by the final settlement relating to Grundig, which resulted in
an extraordinary loss.
Net income in 1999 amounted to EUR 1,799 million (EUR 5.22 per common share).
Net income for 1998, including EUR 5,054 million relating to the discontinued
PolyGram operation and its related sale, totaled EUR 6,053 million (EUR 16.81
per common share) compared to EUR 2,602 million (EUR 7.45 per common share) in
1997.
> CHANGES IN ACCOUNTING AND PRESENTATION
As part of an ongoing process of making Philips' financial reporting more
transparent and in order to provide a better insight into the Company's earnings
capacity, financial position and cash flows, certain accounting and presentation
changes have been implemented in 1999, which are explained below. Most of the
changes have the benefit of aligning Philips' reporting more closely with US
GAAP requirements, while still being in full compliance with Dutch regulations.
Accounting changes:
o In contrast to previous years, the 1999 financial statements do not
include the proposed dividend distribution for the year 1999, since that
dividend must be approved by the General Meeting of Shareholders in March
2000. Prior years have been restated accordingly.
o Beginning in 1999, certain expenses for the development and purchase of IT
software for Philips' internal use are capitalized and will subsequently
be amortized over its useful life. The cost of capitalized software in
1999, a year of high IT expenditure, amounted to EUR 200 million, of which
EUR 24 million was amortized.
Presentation changes:
o The presentation of extraordinary items of income has been brought fully
in accordance with US GAAP. Results from divestitures, other than a
segment of a business, are reported in income from continuing operations
and no longer as extraordinary items.
o The interest component of pension expenses has been included in pension
costs (part of income from operations) rather than in financial income and
expenses. On a comparable basis, 1998 and 1997
47
<PAGE> 12
income from operations would both decrease by EUR 59 million.
The comparable figures of previous years have not been restated for these
presentation changes. The 1999 figures in accordance with the 1998 and 1997
presentation have been provided in a footnote on the face of the income
statement. Reclassified figures for 1998 and 1997 in accordance with the 1999
presentation are provided in the notes to the consolidated financial statements.
> NEW ACCOUNTING STANDARD
On June 15, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (FAS) No. 133: 'Accounting for Derivative
Instruments and Hedging Activities'. In compliance with this guideline, Philips
will apply FAS 133 beginning on January 1, 2000. This Statement requires that
all derivative instruments be recorded on the balance sheet at fair value.
Changes in the fair value of derivatives are recorded each period either in
current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction, and if so, on the type
of hedge. The implementation of FAS 133 has led to transition adjustments in the
opening balance sheet and the earnings statement at January 1, 2000. These
transition adjustments at January 1, 2000, are not expected to have a material
impact on earnings or equity.
> US GAAP
The Group financial statements have been prepared in accordance with Dutch GAAP,
which differs in certain respects from US GAAP. Income from operations under US
GAAP was EUR 1,553 million in 1999, compared with EUR 1,309 million in 1998.
Income from continuing operations determined in accordance with US GAAP was EUR
1,595 million in 1999, compared with EUR 1,025 million in 1998 and EUR 2,500
million in 1997. These aggregate amounts correspond to basic earnings per common
share of EUR 4.63 in 1999, EUR 2.85 in 1998 and EUR 7.16 in 1997.
Please refer to note 28 to the consolidated financial statements for a
description of the primary differences between Dutch GAAP and US GAAP, and the
earnings per share information.
> DIVIDEND
A proposal will be submitted to the General Meeting of Shareholders to declare a
dividend of EUR 1.20 per common share (compared with the EUR 1.00 dividend per
common share paid in 1999, reflecting the 1998 profit distribution). Unlike
previous years, the balance sheet presented in this report as part of the
consolidated financial statements for the period ended December 31, 1999 is
before profit distribution that is subject to shareholder approval after
year-end. This is in line with Dutch GAAP requirements and trends in
international accounting. Adoption of the dividend proposal by the General
Meeting of Shareholders will result in a total dividend payment in the year 2000
of EUR 399 million (compared with EUR 361 million paid in 1999).
> EMPLOYMENT
The number of employees at the end of 1999 totaled 226,874, which translates
into a headcount reduction of 6,812 from the previous year-end. The reduction
was in part due to a number of consolidation changes. The most significant
divestments occurred in the Miscellaneous sector, where the sale of Airpax in
the USA led to a reduction of 2,002 employees. In addition, headcount was
reduced by approximately 3,632, primarily because of the sale of several
activities of PMF, mainly in the Netherlands, and the physical
48
<PAGE> 13
<TABLE>
<CAPTION>
EMPLOYEES (AT YEAR END)
in thousands 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
253 250 252 234 227
</TABLE>
distribution and warehousing activities in Brazil. Various acquisitions added
2,977 persons to the Company's payroll, the most important being VLSI with 2,257
employees.
Adjusting for these consolidation effects, the headcount reduction came to
4,155, including Lighting (1,915), Consumer Electronics (2,618) and PCC (962),
whereas increases occurred in Semiconductors (1,133) and Components (432).
Geographically, the main headcount reductions were in Asia Pacific and Latin
America, while additions to headcount were made in Europe.
<TABLE>
<CAPTION>
EMPLOYEES (at year end: 226,874)
% per sector
<S> <C>
Unallocated 3.0
Lighting 20.9
Consumer Products 21.1
Components 18.4
Semiconductors 13.2
Professional 11.1
Origin 7.4
Miscellaneous 4.9
</TABLE>
> SEGMENT SALES AND INCOME FROM OPERATIONS
The following segments are reported separately: Lighting, Consumer Products,
Components, Semiconductors, Professional, Origin, Miscellaneous and Unallocated.
For a comprehensive business description of the various product divisions,
please refer to the relevant section in the consolidated financial statements
(note 29).
In the course of 1999, the Board of Management decided to regroup all the
activities of the Business Electronics division. Upon completion of this
process, this division ceased to be an organizational entity effective January
1, 2000. Consequently, the financial reporting relating to Business Electronics
in the product sector reporting remained unchanged until this date.
<TABLE>
<CAPTION>
SALES PER PRODUCT SECTOR
% per sector
<S> <C>
Lighting 14.5
Consumer Products 39.5
Components 11.9
Semiconductors 12.1
Professional 16.5
Origin 3.4
Miscellaneous 2.1
</TABLE>
For the convenience of the reader, the following comments on the business
performance per product sector are preceded by a summary of the primary
performance indicators for the respective years. Further segment information is
provided in the notes to the financial statements.
49
<PAGE> 14
<TABLE>
<CAPTION>
> LIGHTING
- --------------------------------------------------------------------------------
amounts in millions of euros
1999 1998 1997
<S> <C> <C> <C>
Sales 4,548 4,453 4,549
% nominal growth 2 (2) 13
% comparable growth 1 1 5
Ebitda 772 776 715
Income from operations 602 595 522
as a % of segment revenues 13.1 13.2 11.3
- --------------------------------------------------------------------------------
</TABLE>
Sales in the Lighting division in 1999 totaled EUR 4.5 billion, representing
nominal growth of 2%, in line with the world market, with positive volume growth
being eroded by continuing price erosion, particularly in Europe; currency
movements had a positive effect. Geographically, Asia posted the strongest
growth, whereas the economic problems in South America and Central and Eastern
Europe resulted in lower sales in these regions.
LIGHTING
<TABLE>
<CAPTION>
in billions of euros
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
intersegment sales 0.1 0.1 0.1 0.1 0.0
sales (excluding intersegment 3.8 4.0 4.5 4.5 4.5
sales)
</TABLE>
Of our business units, Automotive achieved the strongest sales growth due
largely to the success of the Xenon high-intensity lamps, which were specified
by an increasing number of automakers. Income from operations of EUR 602
million, representing an operating margin of 13.1%, was impacted by
restructurings in both Europe and Latin
<TABLE>
<CAPTION>
LIGHTING income from operations
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
in millions of euros 446 319 552 595 602
as a % of segment revenues 11.6 7.8 11.3 13.2 13.1
</TABLE>
America as we continue to reduce the cost base. Excluding restructuring costs
and incidental items, the income improvement was due to slightly higher sales
volume and the positive effects of prior-year restructurings and cost
efficiencies. The largest income improvement was realized in the Automotive
business. Luminaires and Lamps also contributed to the improvement.
Nominal sales in 1998 decreased by 2% to EUR 4.5 billion. Currency movements had
a negative impact of 3%. Disregarding this influence, sales on a comparable
basis were 1% higher, the net balance of a 4% volume increase and 3% lower
prices. Overall, growth continued in Europe and Asia, partly offset by minor
decreases in North America and Latin America.
Income from operations in 1998 improved to EUR 595 million, or 13.2% of segment
revenues, from EUR 522 million, or 11.3% of segment revenues, in 1997. Income
benefited from cost savings associated with prior restructuring actions,
purchasing efficiencies, an improved product mix, and the sale of a factory
building in Spain.
50
<PAGE> 15
<TABLE>
<CAPTION>
> CONSUMER PRODUCTS
- --------------------------------------------------------------------------------
amounts in millions of euros
1999 1998 1997
<S> <C> <C> <C>
Sales 12,437 12,472 11,465
% nominal growth 0 9 19
% comparable growth 6 7 7
Ebitda 847 61 706
Income from operations 555 (278) 335
as a % of segment revenues 4.3 (2.2) 2.7
- --------------------------------------------------------------------------------
</TABLE>
In 1999, nominal sales in this sector were essentially flat at EUR 12.4 billion.
However, adjusted for the positive effects of higher exchange rates (1%) and
consolidation changes (minus 7%), comparable growth in 1999 amounted to 6%. The
main consolidation change was the dissolution of the PCC joint venture, which
had a substantial impact on sales in 1999. Lower prices had an impact of 11%,
whereas sales volume had a positive effect of 17%. The growth related especially
to the substantial increase in sales at PCC, where unit sales of cellular phones
almost doubled, and a favorable Consumer Electronics performance.
Income from operations in the sector increased to EUR 555 million, or 4.3% of
segment revenues, in 1999, up from a loss of EUR 278 million, or 2.2% of segment
revenues, in 1998. The significant turnaround was
CONSUMER PRODUCTS
in billions of euros
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
intersegment sales 1.1 0.8 0.7 0.3 0.3
sales (excluding intersegment sales) 8.7 9.6 11.5 12.5 12.4
</TABLE>
primarily attributable to the fact that PCC's operating performance was
drastically improved after the dissolution of the joint venture with Lucent and
the subsequent restructuring of the remaining PCC activities. The
disentanglement and restructuring had a significant negative impact on 1998
earnings. Disregarding the impact of PCC, profitability of the Consumer
Electronics division was affected by lower income performance in a number of
businesses. The income of Domestic Appliances and Personal Care benefited from
prior-year restructurings and new product introductions. Higher license income
also was a positive factor in 1999.
CONSUMER PRODUCTS income from operations
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
in millions of euros 209 191 335 (278) 555
as a % of segment revenues 2.1 1.8 2.7 (2.2) 4.3
</TABLE>
Sales in 1998 rose 9% to EUR 12.5 billion from EUR 11.5 billion in 1997. On a
comparable basis the growth was 7%. Consolidation changes - notably the
consolidation of Lucent Technologies' Consumer Products division from October
1997 through its subsequent dissolution in September 1998 - had a positive
effect on sales of 3%. Lower exchange rates had an offsetting effect of almost
2%. Prices suffered a 13% decrease and volume increased by 20%.
Income from operations in the sector fell to a loss of EUR 278 million in 1998,
compared with a profit of EUR 335 million in 1997. The 1998 figure included the
significant losses at the PCC joint venture of EUR 835
51
<PAGE> 16
million, in part relating to non-recurring charges of EUR 375 million in
connection with the dissolution of the joint venture, including restructuring
charges of EUR 216 million. In 1997, PCC incurred operating losses of EUR 273
million. Excluding the PCC losses, 1998 income for the sector was almost at the
same level as in 1997, helped by a significant increase in license revenues and
benefiting from restructuring programs carried out in prior years.
CONSUMER ELECTRONICS
In 1999, disregarding the effects of consolidation changes (minus 8%) -
principally the dissolution of the joint venture with Lucent - and currency
changes (plus 1%), sales growth was 6% on a comparable basis. This comprised 13%
lower prices and 19% higher volume. The growth in Consumer Electronics was
headed by very strong sales in PC Peripherals, particularly in monitors,
benefiting from strong market demand and reduced price erosion. In addition,
sales of PCC and Audio increased sharply. PCC benefited from the successful
launches of the Savvy product in the low-mid tier and the Xenium product in the
upper tier of the European GSM market, leading to an almost doubling of the unit
sales of cellular handsets. The significant sales growth in Audio was driven by
CD-R/RW, leading to a gain in market share, particularly in Europe and the USA.
Sales in TV were flat, virtually in line with the market. Sales in Videq (video
equipment) were virtually unchanged from the prior year, clearly outperforming
the market, which saw a sharp decline. Consumer Electronics' sales increased
strongest in North America and Asia.
The increase in income from operations was quite spectacular, and was entirely
attributable to PCC, whose losses relating to the development and introduction
of new products and delayed product launches were significantly reduced after
the disentanglement of the Lucent part of the business and the subsequent
streamlining of Philips' product offering. The resulting cost reductions and the
new product introductions resulted in PCC income ending above break-even in the
last quarter of the year. Disregarding PCC, the division's profitability was
affected by lower income performance in a number of businesses. Television
income was affected by components shortages in Europe, which limited the
availability of high-end products in Consumer TV. The Videq business was faced
with strong price pressures and incurred high development costs for DVD and
DVD-R. PC Peripherals met with severe price erosion in CD-RW and DVD-ROM,
whereas income of the Monitor business was influenced by plant restructuring
costs and unfavorable currency effects. The Audio business benefited from a
strong performance in the Americas and Europe, which was partly offset by
increased production costs in Asia Pacific.
In 1998, sales on a comparable basis increased by 9%. Steep volume growth of 24%
was partly offset by price erosion of 16%, which was particularly strong in
peripherals (monitors), video products and communications (telephony).
Income from operations in 1998 was negative, primarily due to the PCC losses,
compared with a profit in 1997. Besides non-recurring and restructuring charges,
the losses were caused by delays in the introduction of new products, among many
other factors. In 1998, a restructuring program for PCC was designed to
streamline the product offering and to reduce costs in order to achieve
profitability for the remaining business, focusing on core strengths in GSM
technology, corded and cordless phones. Most of
52
<PAGE> 17
the other consumer electronics businesses reported a profitable performance in
1998, but at a lower level than in 1997, partly due to the impact of the
difficult economic situation in Brazil. Higher start-up costs for new
activities, development costs and continuing price erosion - especially in
Monitors - further contributed to the decline in income.
DOMESTIC APPLIANCES AND PERSONAL CARE
Sales in 1999 increased by 2% on a comparable basis, mostly attributable to a
good performance in the Male shaving and grooming business in all regions. Both
the Cool Skin product and the recently introduced Quadra Action shaver performed
very well in the USA, and as a consequence the global market share in shavers
has increased. Sales in all product groups in Asia Pacific ended significantly
higher.
Income from operations in 1999 improved, benefiting from the positive effect of
prior-year restructurings and new product introductions. Additional positive
effects arose from stricter cost controls and lower incidental costs. The income
improvement was primarily attributable to stronger results in Male shaving and
grooming (notably rota shavers and trimmers), Food preparation and Garment care.
Geographically, income improved in North America, Latin America - attributable
to the effect of rationalizations in Brazil - and Asia. Income in Europe was
practically unchanged.
DAP sales in 1998 were down 4% on 1997, mainly due to sharply decreasing markets
in Asia, Latin America and Eastern Europe. Excluding the effects of changes in
consolidations and exchange rates, the comparable sales growth was negative 3%.
Income from operations in 1998 was lower, reflecting the sluggish sales. In
addition, costs increased partly because of restructuring charges and higher
expenses for advertising and promotion relating to new product introductions.
The Personal Care business maintained its strong income level, while Cooking &
Comfort recorded good results, especially in Irons. The income of the Domestic
Appliances business was affected by restructuring charges relating to various
industrial facilities and its high exposure to regions where markets have
declined.
<TABLE>
<CAPTION>
> COMPONENTS
- --------------------------------------------------------------------------------
amounts in millions of euros
1999 1998 1997
<S> <C> <C> <C>
Sales 3,754 3,814 3,664
% nominal growth (2) 4 27
% comparable growth 3 5 5
Ebitda 661 408 537
Income from operations 286 44 255
as a % of segment revenues 5.4 0.8 5.0
- --------------------------------------------------------------------------------
</TABLE>
Sales in 1999 declined by 2% to slightly less than EUR 3.8 billion from slightly
more than EUR 3.8 billion in 1998. Consolidation changes - notably the sale of
Conventional Passive Components at the end of 1998 - reduced sales by 9%, while
currency changes had a positive effect of 4%.
COMPONENTS
in billions of euros
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
intersegment sales 1.4 1.5 1.4 1.4 1.6
sales (excluding intersegment sales) 2.5 2.9 3.7 3.8 3.8
</TABLE>
53
<PAGE> 18
Comparable sales growth came to 3%, which was slightly lower than the market.
Average prices decreased 10% while volume rose by 13%. Substantial positive
sales growth was recorded in Flat Display Systems, attributable to sustained
strong growth in small LCD displays for cellular phones and in large LCD
screens, which were partly sourced from the new joint venture with LG
Electronics in South Korea. Sales in Display Components were slightly lower,
caused by TV tubes, while Color Monitor tubes increased strongly. On balance,
the market position was unchanged in Display Components. The division's sales
increased strongest in Asia Pacific and North America, partly offset by lower
sales in Latin America. Segment revenues (including intersegment sales) in 1999
were 5% higher compared to the previous year.
Income from operations in 1999 improved substantially to EUR 286 million, up
from EUR 44 million a year earlier. Disregarding one-off effects such as gains
from the sale of participations, largely the EUR 169 million gain on the sale of
the Conventional Passive Components business, and restructuring charges for the
AMLCD business in both years, income in 1999 improved. Various product groups,
but particularly Flat Display Systems, accounted for the increase in income from
operations. The results of the
COMPONENTS income from operations
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
in millions of euros 305 316 255 44 286
as a % of segment revenues 7.9 7.3 5.0 0.8 5.4
</TABLE>
HAPD joint venture steadily improved to reach break-even during the second half
of the year. For the full year 1999, the HAPD losses were substantially below
those incurred in the nine months of 1998 following HAPD's consolidation.
Display Components income was marginally up, attributable to favorable
developments in Asia Pacific and the Americas, partly offset by weak markets in
Europe and Brazil. Although Optical Storage income for the full year was down,
income performance showed a strong positive trend in the second half of the
year.
In 1998 sector sales grew by 4% to EUR 3.8 billion from EUR 3.7 billion in 1997.
Adjusted for consolidation changes (1% plus, principally HAPD) and unfavorable
currency changes of 2%, comparable sales growth came to 5% in a market that fell
by 9%. Substantial volume growth of 21% was partly offset by strong price
erosion of 16%.
Income from operations in 1998 totaled EUR 44 million, compared to EUR 255
million in 1997. The decline in income was partly due to the EUR 101 million
losses of HAPD, of which EUR 47 million was charged to income for the planned
restructuring in Japan. Significant price erosion in Display Components
(monitors), Optical Storage and Passive Components accounted for a further
decrease in results, partly offset by higher results in General Systems
Components and Magnetic Products.
54
<PAGE> 19
<TABLE>
<CAPTION>
> SEMICONDUCTORS
- --------------------------------------------------------------------------------
amounts in millions of euros
1999 1998 1997
<S> <C> <C> <C>
Sales 3,796 3,212 3,144
% nominal growth 18 2 24
% comparable growth 5 5 14
Ebitda 1,195 1,225 1,164
Income from operations 614 765 771
as a % of segment revenues 13.5 19.3 20.3
- --------------------------------------------------------------------------------
</TABLE>
Sales in 1999 were EUR 3.8 billion, up 18% from EUR 3.2 billion in 1998.
Adjusted for consolidation changes (10%, mainly attributable to the
consolidation of VLSI Technology from June 1, 1999) and currency changes (an
increase of 3%), the comparable sales growth was 5%, consisting of 14% volume
growth partially offset by price erosion of 9%. In the first half of 1999, the
sector suffered from the prior year's global crisis in the semiconductor
industry, which came on top of the economic crisis in Asia. The second half saw
a strong upturn in sales, following the strong rise in the market. All
businesses contributed to the sector's growth. The regions that accounted for
the sales growth were North America and Asia. However, the overall sales growth
was lower than the increase in the market in which these businesses compete. As
a result, Philips currently takes the ninth position in the global semiconductor
SEMICONDUCTORS
in billions of euros
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
intersegment sales 0.4 0.5 0.6 0.8 0.8
sales (excluding intersegment sales) 2.4 2.5 3.1 3.2 3.8
</TABLE>
industry - according to the provisional Dataquest ranking for 1999 - following
the eighth position in 1998. Segment revenues (including intersegment sales) in
1999 increased by 3% over 1998.
Full-year income from operations in 1999 was significantly below 1998, fully
attributable to the acquisition of VLSI. The consolidation of VLSI from June 1
had an unfavorable impact on income of this sector of EUR 201 million,
attributable to VLSI's acquisition-related charges and operational losses.
SEMICONDUCTORS income from operations
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
in millions of euros 708 363 771 765 614
as a % of segment revenues 25.1 11.8 20.3 19.3 13.5
</TABLE>
Ebitda in 1999, unaffected by in-process R&D and goodwill amortization charges
for VLSI, ended almost in line with 1998, with the 1999 quarterly results
showing an improving trend across all businesses. In 1998, the industry was in a
downturn in the latter half of the year. Excluding VLSI and the gain on the sale
of Complex Programmable Logic Devices, the operational margin in 1999 came to
18.9% of segment sales versus 19.3% in the prior year. The margins improved in
each quarter of the year in line with the upturn of the business cycle,
resulting in better factory utilization of capacity and somewhat lower price
erosion.
In 1998, sales of EUR 3.2 billion were 2% higher than the previous year's EUR
3.1 billion. On a comparable
55
<PAGE> 20
basis, growth was 5%, driven by volume growth of 15%, offset by 10% price
erosion.
Income from operations in 1998, at EUR 765 million, was almost level with the
previous year's EUR 771 million. This achievement was mainly attributable to
product, manufacturing and investing policies that have been pursued in an
industry that as a whole has been sharply affected by the Asian crisis and by
overcapacity. Weakening of the market led to lower capacity utilization in the
second half of the year and increased price erosion.
<TABLE>
<CAPTION>
> PROFESSIONAL
- --------------------------------------------------------------------------------
amounts in millions of euros
1999 1998 1997
<S> <C> <C> <C>
Sales 5,186 4,520 4,301
% nominal growth 15 5 12
% comparable growth 4 7 11
Ebitda 261 250 288
Income from operations 100 (55) 207
as a % of segment revenues 1.8 (1.2) 4.6
- --------------------------------------------------------------------------------
</TABLE>
In 1999, this sector generated sales of EUR 5.2 billion, compared to EUR 4.5
billion in 1998, a nominal increase of 15%. Excluding consolidation changes
(plus 10%) and changes in currency exchange rates (plus 1%), sales on a
comparable basis increased by 4%,
PROFESSIONAL
in billions of euros
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
intersegment sales 0.1 0.1 0.2 0.1 0.3
sales (excluding intersegment sales) 3.4 3.8 4.3 4.5 5.2
</TABLE>
entirely attributable to Medical Systems, while sales in Business Electronics
were flat. Sales volume rose 8%, while prices decreased 4% on average.
PROFESSIONAL income from operations
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
in millions of euros 172 18 207 (55) 100
as a % of segment revenues 4.9 0.5 4.6 (1.2) 1.8
</TABLE>
Income from operations in 1999 was EUR 100 million, or 1.8% of segment revenues,
up from a loss of EUR 55 million, or 1.2% of segment revenues, in 1998. Income
in 1998 had been substantially affected by the acquisition-related charges of
EUR 233 million pertaining to ATL Ultrasound in the fourth quarter. The impact
of other, smaller acquisitions (1999: Voice Control Systems and FEI/Micrion,
versus 1998: Active Impulse Systems) was practically equal in both years.
Excluding the impact of ATL, the income of the sector was down from the previous
year, primarily because of the lower income of Business Electronics, mainly due
to Digital Video-communication Systems (DVS), which is investing heavily in the
US market for digital set-top boxes.
The sector sales in 1998 of EUR 4.5 billion compared to EUR 4.3 billion in 1997,
a nominal increase of 5%. Excluding consolidation changes (minus 1%) and changes
in currency exchange rates (minus 1%), sales on a comparable basis increased by
7%. Both Medical Systems and Business Electronics contributed to the growth that
was driven by 12% higher business
56
<PAGE> 21
volume, partly offset by 5% lower prices.
Income from operations in 1998 came to a loss of EUR 55 million, down from a
profit of EUR 207 million in 1997. Excluding the acquisition-related charges for
ATL Ultrasound and AIS totaling EUR 253 million, income for the sector was EUR
197 million. The remaining decrease in income from 1997 was due to Business
Electronics, which included restructuring charges and other non-recurring
charges in 1998. Medical Systems, on the other hand, was positively influenced
by the additional contribution from ATL Ultrasound excluding acquisition
charges.
MEDICAL SYSTEMS
In 1999, Medical Systems recorded 9% comparable sales growth, significantly
exceeding the total market growth, particularly in Asia Pacific and Western
Europe. All regions, except Eastern Europe, recorded strong sales growth. The
most significant increase was realized in Asia Pacific where sales ended
significantly ahead of the prior year. The main growth areas are Customer
Support, Cardio Vascular, Magnetic Resonance, and - through the acquisition of
ATL in 1998 - the Ultrasound business. The integration of ATL has proceeded
according to plan and has generated significant incremental synergies. Volume
increased by 11%, which was partly offset by price erosion of 3%.
Income from operations in 1999 improved significantly compared to 1998, which
had been severely affected by fourth-quarter charges of EUR 233 million for the
write-offs of in-process R&D obtained in the strategic acquisition of ATL
Ultrasound and other acquisition-related charges. The advance in Ebitda was
considerably less spectacular because the 1998 comparison base was not affected
by in-process R&D write-offs. Ebitda and income in 1999 both benefited from a
strong sales performance and stricter cost control, especially in Western Europe
and Asia Pacific. ATL Ultrasound made a significant positive contribution to
income this year (excluding acquisition-related charges).
The 1998 sales increased by 6% on a comparable basis. Excluding ATL this was
virtually in line with the development of the market. The remaining growth was
attributable to the acquisition of ATL. Volume growth of 10% was partly offset
by price erosion of 4%. Income from operations in 1998, excluding the ATL
write-offs, increased 10% from 1997. The fourth-quarter ATL charge for
in-process R&D amounted to EUR 182 million. Disregarding this charge and other
acquisition-related charges (EUR 51 million) in connection with ATL, income
benefited from ATL's contribution to normal operating results from the time of
acquisition.
BUSINESS ELECTRONICS
Sales on a comparable basis were flat compared with the previous year,
reflecting the balance of contrasting developments in various businesses. Strong
growth was recorded in Electronic Manufacturing Technology (EMT), FEI, Fax and
Philips Broadband Networks (PBN). On the other hand, lower sales were recorded
in Philips Projects and in Philips Business Communications. Sales in Digital
Video-communication Systems (DVS) and Communication and Security Systems (CSS)
were virtually flat compared to 1998 levels.
Income from operations was significantly down compared to 1998. Both years were
affected by special charges. Higher acquisition-related charges - mainly for
amortization of goodwill and other identifiable intangible assets (1999: Voice
Control Systems and FEI/Micrion; 1998: Active Impulse Systems) - account for a
larger fall in income from operations than in
57
<PAGE> 22
Ebitda. Both performance measures were affected by restructuring charges (1999:
total BE division; 1998: DVS/BTS and FEI), as well as other non-recurring
charges. The main factor in the deterioration of recurring income was the
increase in DVS losses, caused by significant investments in the US markets for
digital set-top boxes, even though DVS achieved break-even in the fourth
quarter. EMT income was boosted by strong sales of high-margin products, but the
improved income was insufficient to offset the higher DVS losses.
In 1998, sales growth was 9% on a comparable basis, mainly attributable to DVS,
Projects and EMT. Income from operations was a loss in 1998, compared with a
profit in 1997. The loss was primarily caused by the write-off of in-process R&D
of AIS and restructuring costs relating to FEI and DVS, both in the United
States. EMT, Fax and DVS-Digital Receivers made positive contributions to income
in 1998.
<TABLE>
<CAPTION>
> ORIGIN
- --------------------------------------------------------------------------------
amounts in millions of euros
1999 1998 1997
<S> <C> <C> <C>
Sales 1,056 1,059 846
% nominal growth 0 25 30
% comparable growth 0 24 21
Ebitda 193 128 73
Income from operations 97 59 -
as a % of segment revenues 5.6 3.6 -
- --------------------------------------------------------------------------------
</TABLE>
Origin's sales in 1999 at EUR 1.1 billion were unchanged from the year earlier,
both in nominal and comparable terms. Following substantial sales growth in the
first six months, growth was sharply lower in the latter half of the year
because of lower IT spending by companies in anticipation of the millennium. In
particular, Enterprise Solutions and Professional Services were
ORIGIN
in billions of euros
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
intersegment sales 0.3 0.4 0.5 0.6 0.7
sales (excluding intersegment sales) 0.1 0.7 0.8 1.1 1.1
</TABLE>
affected, whereas Managed Services was strong. Sales growth was realized in
North America, Europe and Asia Pacific, offsetting a strong decrease in Latin
America.
Segment revenues (including intersegment sales) in 1999 developed favorably
compared to last year and increased by 5%.
The improvement in income from operations in 1999 was less pronounced than the
increase in Ebitda because income from operations includes higher depreciation
costs and incremental goodwill amortization charges relating to the additional
almost 10% Origin shares that were acquired in 1999. Despite an extra pension
cost charge in 1999, overall income increased as a direct reflection of
improving capacity utilization as well as cost efficiency.
ORIGIN income/(loss) from operations
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
in millions of euros 15 (73) 0.0 59 97
as a % of segment revenues 3.6 (6.6) 0.0 3.6 5.6
</TABLE>
58
<PAGE> 23
Sales in 1998 were EUR 1.1 billion, a nominal increase of 25% over the previous
year's sales of EUR 0.8 million. Disregarding favorable currency effects (1%),
growth was 24% on a comparable basis.
Income from operations in 1998 totaled EUR 59 million or 3.6% of segment
revenues versus a break-even situation in 1997. Origin's loss-making screenphone
business was discontinued in 1997 and the related costs were recorded as an
extraordinary loss.
<TABLE>
<CAPTION>
> MISCELLANEOUS
- --------------------------------------------------------------------------------
amounts in millions of euros
1999 1998 1997
<S> <C> <C> <C>
Sales 682 929 1,689
% nominal growth (27) (45) (52)
% comparable growth (11) 6 6
Ebitda (9) 64 130
Income from operations (91) (46) 14
as a % of segment revenues (11.8) (4.1) 0.6
- --------------------------------------------------------------------------------
</TABLE>
This sector comprises various activities and businesses, including other
businesses not belonging to a product division, as well as Philips Research,
Corporate Intellectual Property, Philips Centre for Industrial Technology,
Philips Machinefabrieken and Philips Design.
Included in the prior-year figures are contributions from divested activities,
which used to be reported as separate divisions under one of the former product
sectors which for the sake of comparability have been reclassified to the
Miscellaneous sector. For instance, at year-end 1997, Philips signed an
agreement with Mannesmann VDO of Germany on the sale of Philips' Car Systems
business. The 1997 sales and income contributions of this former division have
been included in the Miscellaneous sector.
MISCELLANEOUS
in billions of euros
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
intersegment sales 1.0 0.6 0.4 0.2 0.1
sales (excluding intersegment sales) 4.4 3.5 1.7 0.9 0.7
</TABLE>
The various businesses in this sector recorded combined sales of EUR 0.7 billion
in 1999, which was 27% lower than the EUR 0.9 billion sales in the year earlier.
The decrease was substantially due to divestments, including the Printed Circuit
Board and Metal Display Components activities of PMF and a number of other
non-strategic activities in the Netherlands and the USA. On a comparable basis,
sales declined 11%, which was primarily caused by PMF and miscellaneous other
activities, partially offset by higher sales in Philips Machinefabrieken.
MISCELLANEOUS income/(loss) from operations
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
in millions of euros (237) (328) 14 (46) (91)
as a % of segment revenues (4.4) (8.0) 0.6 (4.1) (11.8)
</TABLE>
Income from operations in 1999 came to a loss of EUR 91 million, or 11.8% of
segment revenues, which compared with a loss of EUR 46 million, or 4.1% of
segment revenues, in 1998. This was primarily due to
59
<PAGE> 24
PMF and Machinefabrieken achieving lower income in 1999. PMF's income was
affected by the divestment of certain of its activities, while Machinefabrieken
incurred higher costs for the new aviation project and investments in software.
In addition, various other divested activities no longer contributed to income
in 1999. Costs for corporate research projects and patent management results
were in line with 1998.
Sales in 1999 amounted to EUR 0.9 billion, 45% below the prior-year sales of EUR
1.7 billion. Changes in consolidations - principally Philips Car Systems -
resulted in a decrease of 46%. Disregarding the consolidation changes, sales
growth on a comparable basis was 6%, entirely attributable to higher business
volume.
Income from operations in 1998 fell to a loss of EUR 46 million, or 4.1% of
segment revenues, from a profit of EUR 14 million, or 0.6% of segment revenues,
in 1997. The change was primarily due to the fact that activities that were
divested in previous years, such as Philips Car Systems and some Communication
Systems activities, no longer contributed to income in 1998. In addition,
certain activities experienced lower profitability, principally Machinefabrieken
(as a result of the downturn in the semiconductor industry) and Hearing
Technologies. PMF, on the other hand, maintained income performance at the 1997
level. Research activities increased in 1998. A reduction in operating losses
occurred as a result of a higher volume of internal contract research and lower
organization costs due to lower staffing levels.
> UNALLOCATED
Costs - net of revenues - not allocated to a specific product sector comprise
the costs of the corporate center - including the Company's investment in the IT
backbone and global brand management costs - as well as country and regional
overhead costs. In 1999, non-recurring events had a negative impact of
approximately EUR 60 million, of which approximately EUR 40 million in the
fourth quarter.
> RESEARCH AND DEVELOPMENT
Continuous efforts to sustain a strong performance in the field of R&D are of
the utmost importance to Philips in order to preserve and strengthen the
Company's competitiveness in its various markets. Through substantial
investments in R&D, Philips has created a large knowledge base. Each year, new
technological breakthroughs are added to Philips' long list of research
successes.
Recent contributions applied in consumer products include various concepts for
the Nexperia Digital Video Platform introduced at the 1999 Internationale
Funkausstellung (IFA). Research has also applied its video-processing know-how
to enhance the picture quality of Philips' Flat TV plasma panels. This supports
Flat TV's leadership in this field, as demonstrated by its reception at the IFA,
where it won the EISA award for the second time. Also at the IFA, a bridge for
wireless in-home networks was demonstrated. This concept was adopted in the
standard for wireless 1394 networks. In power management, a number of new
product and/or
RESEARCH AND DEVELOPMENT expenditures
as a % of sales
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
6.9 6.8 6.2 6.7 7.3
</TABLE>
60
<PAGE> 25
technology concepts for, among others, light ballasts, GreenChip and shaver
charger ICs, were transferred to Semiconductors. Over the years, Research's
innovation has contributed to a range of products for the product divisions. A
recent example for Medical Systems is the rotational angio software package
which has been added to the Integris product and allows the 3-D reconstruction
and display of blood vessels.
> INTELLECTUAL PROPERTY MANAGEMENT
Being a technology-driven company, Philips attaches great importance to
protecting its innovations by means of intellectual property rights, in order to
safeguard its substantial investments in R&D. Philips has intensified its
efforts to strengthen its already extensive portfolio of intellectual property
rights. In 1999, Philips filed more than 1,500 new patent applications and about
1,200 international patent families based on filings made in 1998. The patent
portfolio is used to create substantial value for Philips by granting licenses
in return for royalty income, by creating freedom of operation for its
commercial activities and by obtaining or maintaining favorable market
positions. Philips' trademark portfolio comprises the Philips trademark and a
number of important product names. Trademarks are an important asset for the
business and are properly protected in order to maintain their exclusive
character in the marketplace. Design is an increasingly important marketing
tool. Investments made in good product design require adequate protection.
Philips' design rights portfolio reflects the value the Company attaches to
proper protection of its product designs.
> COOPERATIVE BUSINESS ACTIVITIES AND
UNCONSOLIDATED COMPANIES
Since its founding, Philips has engaged from time to time in cooperative
activities with other organizations. Philips' principal cooperative business
activities and participations, and the main changes therein, are set out below.
Taiwan Semiconductor Manufacturing Company Limited (TSMC) is a semiconductor
foundry operation in which Philips currently has 26.8% ownership. During 1999,
Philips' interest was reduced by 0.8% due to the conversion of eurobonds into
equity capital and dilution arising from incentive plans for TSMC management.
Nevertheless, Philips remains the single largest shareholder in TSMC. In the
second half of 1999 TSMC largely recovered from the global slump in the
semiconductor business and the Asian crisis which had a significant adverse
effect on TSMC's income performance from mid-1998 onwards. TSMC's performance
was not significantly affected by the earthquake that hit Taiwan in September
1999. On balance, TSMC's income contribution, which included a significant gain
from the conversion of bonds into equity, more than doubled compared to the
previous year.
Systems on Silicon Manufacturing Company (SSMC) is a Singapore-based wafer
fabrication firm established by Philips (48%), TSMC (32%) and the Economic
Development Board of Singapore (20%). Construction of a USD 1.2 billion wafer
fab (MOS-5) has been started and is expected to come on stream in late 2000. A
large number of key technical personnel is currently being trained at Philips'
home-base facilities in the Netherlands and at TSMC in Taiwan. Philips will be
entitled to 60% of the fab output of 0.25 micron wafers.
ASM Lithography Holding N.V. (ASML), based in the Netherlands and a world leader
in the photolithography market, develops, manufactures and markets waferstepper
and scanner equipment for the semiconductor industry. As part of a long-standing
61
<PAGE> 26
relationship, Philips Research and Philips' Centre for Industrial Technology
perform contract work for ASML. ASML's significantly improved 1999 results -
particularly in the second half of the year - reflect and underscore the upturn
in the semiconductor industry and ASML's strong position in leading-edge
products. Philips has agreed not to sell its current 23.9% shareholding before
March 22, 2000.
In the People's Republic of China, Philips currently has some 22 operational
business alliances that engage in manufacturing and marketing activities.
Generally, these companies are not wholly owned; most of them are consolidated.
The total investments in China have exceeded USD 1 billion, and with
approximately 16,000 employees in China and more than 5,000 in Hong Kong,
Philips is one of the larger private employers in the region.
Philips is active in a wide range of activities, but has particularly
strengthened its position in consumer electronics, cellular phones and
components, maintaining strong positions in shavers, CD, energy-saving lamps and
semiconductors. All product divisions in China are profitable and posted
considerable growth in sales and income in 1999.
Navigation Technologies Corporation (NavTech) of the USA is engaged in the
development of software databases for digital maps to be used for car navigation
purposes. Early in 1999, Philips sold approximately 25% of the shares in NavTech
to the Oranje Nassau Groep consortium, a transaction that is of considerable
importance to the future development of NavTech. As a consequence, Philips'
interest in NavTech was reduced to a minority shareholding (on a fully-diluted
basis).
As part of the agreement with the consortium, Philips has entered into a funding
commitment of up to USD 100 million from the date of the agreement, to be
increased by a further USD 25 million if alternative resources cannot be found
and certain further terms and conditions are met.
In August 1999, Philips invested EUR 1.7 billion (of which EUR 0.2 billion has
not yet been paid) in LG.Philips LCD Co., a 50-50 manufacturing joint venture
with LG Electronics of South Korea, the world's second largest supplier of
Active Matrix Liquid Crystal Displays (AMLCDs). This investment, which marks
Philips' commitment to the fastest-growing segment of the display industry, is
Philips' largest single investment ever, and the largest foreign investment in
South Korea. Started as a manufacturing and technology joint venture, the
company may develop further over time, incorporating all AMLCD activities of
both companies. The capacity of the two existing fabs at Kumi will be expanded,
while a third facility is expected to become fully operational in the year 2000.
The transaction has moved Philips into an immediately profitable position in the
AMLCD industry.
In November 1999, Philips and Hewlett Packard/Agilent expanded the scope of
their existing LumiLeds Lighting joint venture, that was formed over two years
earlier. Both parties hold equal shares in the venture, whose product scope has
been extended from LED traffic signal products to a variety of other
applications including automotive, signaling, contour lighting and signs,
outdoor illumination and white LEDs for indoor and outdoor applications,
demonstrating both parties' confidence in the new technology. The worldwide
operations involve about 1,000 employees and are located in California, Malaysia
and the Netherlands.
62
<PAGE> 27
CASH FLOWS
CASH FLOW
in billions of euros
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
net cash provided by operating activities 3.2 2.1 1.9
purchase/proceeds businesses and financial assets 1.5 0.0 (2.4)
net investments property, plant and equipment (1.4) (1.4) (1.4)
cash flows before financing activities 3.3 0.7 (1.9)
</TABLE>
The cash flow from operating activities in 1999 of EUR 1,913 million was below
the levels generated in the preceding two years (EUR 2,140 million and EUR 3,210
million respectively). Changes in working capital reduced 1999 cash flow from
operations by EUR 469 million, as reductions in the amounts of capital invested
in inventories less accounts payable were more than offset by the increase in
accounts receivable. Higher working capital should be seen against the
background of the increased sales level. By contrast, in 1998 the EUR 272
million positive cash flow from lower working capital requirements was
attributable to the increased use of suppliers' credit.
Expressed as a percentage of sales, the amount of inventories at the end of 1999
was the equivalent of 14.5% of sales, which represents a 0.5% increase compared
to 14.0% a year earlier and 15.2% at the end of 1997. However, excluding
currency effects, 1999 inventory as a percentage of sales was actually below
1998 levels. Outstanding trade receivables at year-end 1999 were the equivalent
of 1.4 months' sales, compared to 1.3 in the previous years.
Cash flow from investing activities in 1999 required almost 3 times the amount
used in the previous year: EUR 3,834 million versus EUR 1,441 million in 1998.
In 1997 these activities generated a cash flow of EUR 45 million.
During 1999, the Company invested EUR 2,993 million in businesses that operate
in strategic areas where Philips wants to improve its global market position.
The investments included the purchase of VLSI Technology of the USA (EUR 976
million) and a 50% share in LG.Philips LCD Co. of Korea (EUR 1,496 million; an
additional amount of EUR 228 million has not yet been paid), as well as the
acquisition of an additional 10% of the shares in Origin (EUR 124 million) and a
number of smaller businesses (EUR 397 million). The largest divestment, Philips'
Conventional Passive Components business, yielded a net amount of EUR 323
million in cash. Additionally, the sale of a minority interest in Navigation
Technologies (NavTech) generated a positive cash flow of EUR 98 million.
Furthermore, EUR 158 million was generated by the sale of a portion of the JDS
Uniphase shares held.
In 1998, the net cash outflow from acquisitions and divestments was EUR 111
million, the main transactions being the acquisitions of ATL Ultrasound and
Active Impulse Systems, offset by the sale of Philips Car Systems. It should be
noted that the 1998 sale of
INVENTORIES
as a % of sales
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
20.1 16.0 15.2 14.0 14.5
</TABLE>
63
<PAGE> 28
Philips' 75% stake in PolyGram was accounted for as the disposal of a
discontinued operation, which is not reported in the investing activities
section.
In 1997 a positive cash flow of EUR 1,382 million resulted from major
divestments of partial shareholdings in TSMC and ASML, the sale of the 50%
equity stake in UPC and various others. Acquisitions in that year related to
HAPD Japan (50%) and additional shareholdings in Origin and in NavTech.
Gross capital spending on property, plant and equipment of EUR 1,662 million in
1999 slightly exceeded the spending in the preceding two years (EUR 1,634
million and EUR 1,627 million in 1998 and 1997, respectively). The ratio of
gross investments to depreciation was 1.1, versus 1.0 in 1998 and 1.1 in 1997,
reflecting the effect of Philips' ongoing policy of prudent asset management.
CAPITAL EXPENDITURES:DEPRECIATION
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
1.7 1.5 1.1 1.0 1.1
</TABLE>
CAPITAL EXPENDITURES PER GEOGRAPHIC AREA
in millions of euros
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
North America 158 246
Latin America 74 62
Europe 973 924
Africa 4 2
Asia 405 426
Australia and New Zealand 20 2
</TABLE>
The cash flow before financing activities was negative EUR 1,921 million in 1999
versus positive cash flows of EUR 699 million in 1998 and EUR 3,255 million in
1997. In 1999 net investments in business interests resulted in a cash outflow
of EUR 2,364 million. The net impact of acquisitions and divestments (excluding
the sale of PolyGram) in 1998 was negative EUR 111 million, while in 1997
divestments exceeded investments by EUR 1,382 million.
In 1999, the net cash flow used for financing activities amounted to EUR 2,606
million, of which EUR 1,490 million was used for the 8% share reduction program.
Additionally, EUR 717 million was used to repay debt and EUR 361 million was
used for the payment of dividends to Philips' shareholders in 1999. Furthermore,
treasury stock transactions required EUR 38 million.
In 1998, the net cash flow used for financing activities of EUR 814 million
related to the repayment of interest-bearing debt of EUR 445 million and the
payment of dividends in 1998 of EUR 326 million. An amount of EUR 157 million
net cash was used for treasury stock transactions. In 1997, the larger part of
the net cash flow used for financing activities of EUR 2,661 million was used to
repay interest-bearing debt (EUR 2,279 million).
> FINANCING
Total debt outstanding at the end of 1999 was EUR 3.3 billion, compared with EUR
3.6 billion at year-end 1998 and EUR 4.0 billion at the end of 1997.
64
<PAGE> 29
In 1999 long-term debt decreased by EUR 0.1 billion to EUR 2.7 billion. This
decrease is the result of net repayments totaling EUR 0.5 billion, offset by
currency and consolidation effects of EUR 0.4 billion. In 1998, long-term debt
was reduced by EUR 0.4 billion to EUR 2.8 billion. The reduction was the result
of net repayments totaling EUR 0.3 billion and currency and consolidation
effects of EUR 0.1 billion.
Philips has two 'putable' bonds outstanding at year-end 1999 for a total amount
of EUR 266 million for which the investor may require prepayment at one specific
month during the lifetime of the respective bonds. Assuming that investors
require payment at the relevant put dates, the average remaining tenor of
long-term debt was 5.4 years compared to 6.4 years in 1998. However, assuming
that the 'putable' bonds will be repaid at final maturity dates, the average
remaining tenor at the end of 1999 was 7.4 years, compared to 8.3 years at the
end of 1998. Long-term debt in proportion to the total debt at the end of 1999
was 83%, compared to 78% at the end of 1998.
At the end of 1999, the Group had long-term committed and undrawn credit lines
available of USD 2.5 billion, unchanged from a year earlier. The USD 2.5 billion
committed credit line is a multi-currency revolving standby facility, which was
signed in July 1996 and which will mature in July 2003. Short-term debt was
reduced by EUR 0.2 billion in 1999 to EUR 0.6 billion at year-end. This
reduction was due to net repayments of EUR 0.3 billion and an increase of EUR
0.1 billion as a consequence of currency and consolidation effects. This
compares to almost no change in 1998 as a result of net repayments of EUR 0.1
billion being offset by currency and consolidation effects in that year.
The cash position was reduced by EUR 4.2 billion in 1999 to EUR 2.3 billion at
year-end. This reduction was mainly related to the investments in VLSI,
LG.Philips LCD Co. and Origin, as well as the share reduction program. The
currency and consolidation effects had an increasing impact of EUR 0.3 billion.
The EUR 5.1 billion increase in the cash position in 1998 was to a large extent
related to the proceeds of the sale of PolyGram.
The Company had a net debt position (debt net of cash and cash equivalents) of
EUR 1.0 billion at the end of 1999. This compares to a net cash position at the
end of 1998, with cash exceeding total debt of EUR 3.0 billion, following the
sale of PolyGram. The net debt at the end of 1997 amounted to EUR 2.6 billion.
The net debt to group equity ratio amounted to 6:94
ASSETS
in billions of euros
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
current assets 10.9 10.5 11.4 16.3 14.9
non-current assets 10.1 11.4 11.9 11.9 14.6
total 21.0 21.9 23.3 28.2 29.5
</TABLE>
EQUITY AND LIABILITIES
in billions of euros
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
current liabilities 5.6 5.7 6.3 6.8 8.0
provisions 3.5 3.4 3.3 3.0 3.1
total debt 4.8 5.9 4.0 3.6 3.3
group equity 7.1 6.9 9.7 14.8 15.1
total 21.0 21.9 23.3 28.2 29.5
</TABLE>
65
<PAGE> 30
5-YEAR RELATIVE PERFORMANCE: PHILIPS AND AEX
base 100 = January 2, 1995
<TABLE>
<CAPTION>
DATE PHILIPS AEX DATE PHILIPS AEX DATE PHILIPS AEX
- --------- ------- ------ --------- ------- ------ --------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
02-Jan-95 100.00 100.00 03-Sep-96 106.54 132.07 08-May-98 368.84 279.01
03-Jan-95 100.39 99.91 04-Sep-96 106.35 132.84 11-May-98 385.19 283.41
04-Jan-95 100.77 100.05 05-Sep-96 105.96 132.58 12-May-98 380.58 279.66
05-Jan-95 99.81 99.40 06-Sep-96 105.96 132.65 13-May-98 377.69 281.40
06-Jan-95 100.58 99.52 09-Sep-96 106.92 134.63 14-May-98 386.92 279.03
09-Jan-95 100.96 99.37 10-Sep-96 106.73 134.77 15-May-98 391.73 280.15
10-Jan-95 100.77 98.99 11-Sep-96 108.08 134.73 18-May-98 380.19 276.03
11-Jan-95 100.58 98.69 12-Sep-96 106.92 135.41 19-May-98 387.88 282.22
12-Jan-95 102.50 98.38 13-Sep-96 106.92 135.68 20-May-98 390.00 286.25
13-Jan-95 105.00 98.90 16-Sep-96 107.12 136.19 22-May-98 377.50 286.30
16-Jan-95 104.81 99.57 17-Sep-96 110.58 135.25 25-May-98 379.04 292.39
17-Jan-95 104.62 99.21 18-Sep-96 111.16 134.99 26-May-98 377.50 291.70
18-Jan-95 106.35 99.34 19-Sep-96 111.34 135.15 27-May-98 370.00 287.21
19-Jan-95 105.58 99.12 20-Sep-96 114.04 135.60 28-May-98 364.04 284.92
20-Jan-95 104.81 98.46 23-Sep-96 114.81 134.63 29-May-98 367.50 287.29
23-Jan-95 102.31 97.09 24-Sep-96 116.54 135.19 02-Jun-98 361.54 287.75
24-Jan-95 102.89 97.68 25-Sep-96 120.58 136.78 03-Jun-98 351.34 289.47
25-Jan-95 104.23 97.58 26-Sep-96 119.04 136.96 04-Jun-98 352.50 286.02
26-Jan-95 105.00 98.45 27-Sep-96 118.65 137.09 05-Jun-98 350.00 288.39
27-Jan-95 103.85 98.87 30-Sep-96 118.85 138.30 08-Jun-98 362.50 290.81
30-Jan-95 103.65 98.72 01-Oct-96 118.65 138.29 09-Jun-98 365.19 289.20
31-Jan-95 103.46 97.82 02-Oct-96 117.89 139.49 10-Jun-98 362.89 289.00
01-Feb-95 103.46 98.36 03-Oct-96 117.11 139.41 11-Jun-98 357.69 288.43
02-Feb-95 103.85 98.14 04-Oct-96 117.69 140.21 12-Jun-98 331.92 281.03
03-Feb-95 104.62 98.89 07-Oct-96 119.61 140.82 15-Jun-98 325.96 276.78
06-Feb-95 105.38 99.10 08-Oct-96 120.77 141.22 16-Jun-98 330.96 278.59
07-Feb-95 104.81 99.27 09-Oct-96 123.27 140.91 17-Jun-98 338.65 281.62
08-Feb-95 105.00 99.12 10-Oct-96 123.08 140.08 18-Jun-98 338.85 278.32
09-Feb-95 104.81 99.40 11-Oct-96 124.62 140.75 19-Jun-98 334.62 276.35
10-Feb-95 106.92 99.63 14-Oct-96 120.19 141.17 22-Jun-98 327.12 274.28
13-Feb-95 107.88 99.42 15-Oct-96 119.04 142.01 23-Jun-98 342.31 278.18
14-Feb-95 107.12 99.23 16-Oct-96 117.89 141.54 24-Jun-98 330.38 276.89
15-Feb-95 107.31 99.06 17-Oct-96 117.31 141.36 25-Jun-98 337.11 281.84
16-Feb-95 106.54 98.30 18-Oct-96 116.92 142.46 26-Jun-98 332.69 283.40
17-Feb-95 108.66 98.51 21-Oct-96 114.04 142.01 29-Jun-98 329.04 287.13
20-Feb-95 108.66 98.28 22-Oct-96 113.46 142.17 30-Jun-98 328.84 287.71
21-Feb-95 108.27 98.30 23-Oct-96 108.84 139.88 01-Jul-98 342.31 292.81
22-Feb-95 106.92 97.91 24-Oct-96 112.12 140.26 02-Jul-98 346.92 294.60
23-Feb-95 103.85 98.63 25-Oct-96 119.61 141.47 03-Jul-98 350.38 298.01
24-Feb-95 103.08 98.42 28-Oct-96 117.89 141.70 06-Jul-98 345.19 297.64
27-Feb-95 103.85 98.14 29-Oct-96 113.85 139.45 07-Jul-98 345.19 298.61
28-Feb-95 104.23 97.74 30-Oct-96 113.85 138.33 08-Jul-98 345.96 301.98
01-Mar-95 103.65 97.91 31-Oct-96 115.00 138.31 09-Jul-98 343.46 301.44
02-Mar-95 105.19 98.07 01-Nov-96 116.73 139.34 10-Jul-98 336.54 299.26
03-Mar-95 104.42 97.22 04-Nov-96 115.96 139.34 13-Jul-98 340.77 303.95
06-Mar-95 103.65 96.39 05-Nov-96 115.38 140.47 14-Jul-98 347.31 308.86
07-Mar-95 103.65 95.58 06-Nov-96 115.38 141.29 15-Jul-98 354.23 309.81
08-Mar-95 102.31 94.92 07-Nov-96 116.92 141.09 16-Jul-98 361.15 307.35
09-Mar-95 101.73 94.13 08-Nov-96 116.73 142.07 17-Jul-98 351.54 311.14
10-Mar-95 102.50 94.36 11-Nov-96 117.11 143.13 20-Jul-98 343.46 315.36
13-Mar-95 103.08 94.28 12-Nov-96 118.46 143.24 21-Jul-98 333.65 314.14
14-Mar-95 104.23 94.64 13-Nov-96 118.08 144.30 22-Jul-98 337.50 311.10
15-Mar-95 103.08 94.61 14-Nov-96 118.65 145.00 23-Jul-98 329.42 306.84
16-Mar-95 101.92 94.21 15-Nov-96 120.39 145.95 24-Jul-98 319.23 304.91
17-Mar-95 102.31 94.15 18-Nov-96 120.00 146.23 27-Jul-98 308.08 300.46
20-Mar-95 102.11 94.65 19-Nov-96 122.31 146.09 28-Jul-98 316.15 300.58
21-Mar-95 100.58 94.53 20-Nov-96 120.96 145.40 29-Jul-98 316.35 298.40
22-Mar-95 99.42 94.17 21-Nov-96 121.73 145.80 30-Jul-98 316.54 299.07
23-Mar-95 98.08 93.09 22-Nov-96 124.23 147.53 31-Jul-98 312.50 294.68
24-Mar-95 99.04 93.74 25-Nov-96 126.73 149.40 03-Aug-98 311.92 287.78
27-Mar-95 99.42 94.26 26-Nov-96 133.08 150.32 04-Aug-98 315.77 290.56
28-Mar-95 98.85 94.15 27-Nov-96 130.00 148.23 05-Aug-98 313.85 284.47
29-Mar-95 99.23 94.23 28-Nov-96 131.92 149.63 06-Aug-98 313.08 278.75
30-Mar-95 102.50 95.87 29-Nov-96 134.04 151.27 07-Aug-98 317.89 282.70
31-Mar-95 100.77 94.30 02-Dec-96 132.50 150.35 10-Aug-98 309.81 279.88
03-Apr-95 100.96 94.51 03-Dec-96 136.15 152.54 11-Aug-98 294.23 269.66
04-Apr-95 100.96 95.11 04-Dec-96 134.62 151.21 12-Aug-98 299.61 275.49
05-Apr-95 99.23 95.36 05-Dec-96 133.08 150.41 13-Aug-98 298.85 274.59
06-Apr-95 99.23 95.93 06-Dec-96 130.00 147.72 14-Aug-98 307.31 276.80
07-Apr-95 100.00 96.83 09-Dec-96 132.88 149.55 17-Aug-98 299.23 273.99
10-Apr-95 101.15 96.90 10-Dec-96 131.92 149.17 18-Aug-98 315.38 284.03
11-Apr-95 102.69 96.85 11-Dec-96 127.31 146.35 19-Aug-98 322.11 287.63
12-Apr-95 104.81 97.06 12-Dec-96 129.62 146.56 20-Aug-98 307.69 284.67
13-Apr-95 104.81 97.46 13-Dec-96 128.84 145.42 21-Aug-98 297.11 276.74
18-Apr-95 105.00 97.19 16-Dec-96 130.96 147.68 24-Aug-98 287.31 272.38
19-Apr-95 105.19 96.92 17-Dec-96 130.77 146.92 25-Aug-98 290.77 278.81
20-Apr-95 105.77 97.31 18-Dec-96 132.69 148.24 26-Aug-98 276.15 271.72
21-Apr-95 106.54 97.90 19-Dec-96 134.42 149.95 27-Aug-98 260.58 265.79
24-Apr-95 107.69 97.95 20-Dec-96 134.23 151.66 28-Aug-98 258.27 262.09
25-Apr-95 106.73 98.09 23-Dec-96 134.23 152.22 31-Aug-98 249.62 260.47
26-Apr-95 109.04 99.19 24-Dec-96 134.04 151.96 01-Sep-98 235.58 256.06
27-Apr-95 113.08 99.60 27-Dec-96 134.62 153.19 02-Sep-98 247.31 263.74
28-Apr-95 113.85 99.93 30-Dec-96 134.62 155.39 03-Sep-98 236.54 256.44
01-May-95 115.58 100.78 02-Jan-97 131.16 152.07 04-Sep-98 228.27 257.13
02-May-95 115.77 101.27 03-Jan-97 133.85 154.84 07-Sep-98 234.62 257.97
03-May-95 114.04 101.71 06-Jan-97 134.42 156.49 08-Sep-98 242.11 262.64
04-May-95 115.19 101.83 07-Jan-97 133.46 155.40 09-Sep-98 243.08 258.06
08-May-95 117.50 101.63 08-Jan-97 138.27 156.37 10-Sep-98 228.84 244.81
09-May-95 118.65 101.60 09-Jan-97 138.65 155.82 11-Sep-98 225.00 242.20
10-May-95 118.08 102.11 10-Jan-97 140.58 155.02 14-Sep-98 224.62 247.77
11-May-95 118.08 102.80 13-Jan-97 141.92 156.47 15-Sep-98 217.31 243.23
12-May-95 118.27 103.07 14-Jan-97 142.31 157.68 16-Sep-98 212.31 246.26
15-May-95 117.89 102.96 15-Jan-97 143.27 158.60 17-Sep-98 193.65 236.72
16-May-95 116.73 102.71 16-Jan-97 148.84 160.49 18-Sep-98 190.38 230.01
17-May-95 115.19 102.07 17-Jan-97 148.46 160.62 21-Sep-98 157.69 216.36
18-May-95 117.89 101.83 20-Jan-97 146.73 161.47 22-Sep-98 177.50 226.25
19-May-95 116.15 100.63 21-Jan-97 146.73 161.16 23-Sep-98 187.88 232.66
22-May-95 120.19 102.02 22-Jan-97 144.42 163.30 24-Sep-98 185.58 232.36
23-May-95 121.73 102.31 23-Jan-97 145.00 164.20 25-Sep-98 186.54 227.19
24-May-95 123.65 103.20 24-Jan-97 141.54 162.20 28-Sep-98 194.23 232.36
26-May-95 121.15 102.23 27-Jan-97 143.65 163.59 29-Sep-98 197.11 229.61
29-May-95 120.77 102.21 28-Jan-97 143.65 163.76 30-Sep-98 195.19 223.92
30-May-95 121.15 102.72 29-Jan-97 139.81 161.23 01-Oct-98 187.50 214.76
31-May-95 121.15 103.44 30-Jan-97 140.39 161.82 02-Oct-98 171.16 203.41
01-Jun-95 121.54 104.26 31-Jan-97 142.31 161.96 05-Oct-98 169.42 198.79
02-Jun-95 120.96 103.81 03-Feb-97 145.00 161.75 06-Oct-98 176.15 210.50
06-Jun-95 121.54 104.33 04-Feb-97 146.35 163.05 07-Oct-98 170.19 205.45
07-Jun-95 122.31 104.19 05-Feb-97 145.96 165.27 08-Oct-98 158.46 198.39
08-Jun-95 123.08 104.42 06-Feb-97 143.08 164.73 09-Oct-98 171.16 204.01
09-Jun-95 122.11 103.67 07-Feb-97 143.85 166.41 12-Oct-98 186.54 215.65
12-Jun-95 121.73 103.54 10-Feb-97 143.65 166.61 13-Oct-98 195.00 219.95
13-Jun-95 123.46 103.51 11-Feb-97 141.54 167.49 14-Oct-98 192.31 223.88
14-Jun-95 123.08 103.21 12-Feb-97 150.19 169.13 15-Oct-98 200.19 225.64
15-Jun-95 124.62 103.76 13-Feb-97 155.77 170.79 16-Oct-98 205.00 228.37
16-Jun-95 123.85 103.24 14-Feb-97 152.69 172.46 19-Oct-98 201.92 225.67
19-Jun-95 125.19 103.90 17-Feb-97 152.69 175.46 20-Oct-98 213.46 233.72
20-Jun-95 125.58 104.09 18-Feb-97 156.15 176.28 21-Oct-98 214.42 232.67
21-Jun-95 125.38 104.11 19-Feb-97 163.08 176.95 22-Oct-98 196.15 233.07
22-Jun-95 126.35 104.39 20-Feb-97 160.96 175.87 23-Oct-98 183.27 230.80
23-Jun-95 126.54 104.25 21-Feb-97 159.23 174.72 26-Oct-98 192.31 231.40
26-Jun-95 127.31 104.75 24-Feb-97 157.89 175.82 27-Oct-98 205.77 238.63
27-Jun-95 128.08 104.84 25-Feb-97 161.73 179.82 28-Oct-98 197.69 233.80
28-Jun-95 125.96 103.93 26-Feb-97 164.04 179.90 29-Oct-98 188.08 233.16
29-Jun-95 125.96 103.96 27-Feb-97 165.77 179.09 30-Oct-98 191.16 238.06
30-Jun-95 126.15 103.64 28-Feb-97 164.81 176.77 02-Nov-98 208.46 247.04
03-Jul-95 127.88 104.18 03-Mar-97 164.81 176.48 03-Nov-98 203.85 247.95
04-Jul-95 130.00 104.79 04-Mar-97 172.88 180.59 04-Nov-98 220.19 254.04
05-Jul-95 133.85 105.16 05-Mar-97 177.89 181.03 05-Nov-98 222.50 250.45
06-Jul-95 139.04 105.48 06-Mar-97 180.19 183.29 06-Nov-98 224.23 253.44
07-Jul-95 144.81 107.16 07-Mar-97 174.62 183.36 09-Nov-98 215.77 254.16
10-Jul-95 151.73 109.27 10-Mar-97 170.58 184.56 10-Nov-98 211.16 249.96
11-Jul-95 150.96 108.82 11-Mar-97 175.19 185.58 11-Nov-98 217.31 252.25
12-Jul-95 155.96 109.41 12-Mar-97 171.54 182.03 12-Nov-98 219.61 248.98
13-Jul-95 157.11 109.99 13-Mar-97 168.08 181.70 13-Nov-98 221.15 247.70
14-Jul-95 154.23 109.23 14-Mar-97 165.19 183.62 16-Nov-98 228.46 253.81
17-Jul-95 156.54 110.24 17-Mar-97 163.46 180.59 17-Nov-98 230.00 252.97
18-Jul-95 154.23 109.96 18-Mar-97 161.73 177.79 18-Nov-98 237.89 252.55
19-Jul-95 148.84 108.92 19-Mar-97 163.27 176.19 19-Nov-98 251.92 257.24
20-Jul-95 147.50 108.33 20-Mar-97 155.77 170.26 20-Nov-98 257.69 266.03
21-Jul-95 150.38 108.93 21-Mar-97 159.61 174.33 23-Nov-98 258.65 271.07
24-Jul-95 155.96 110.31 24-Mar-97 155.19 171.44 24-Nov-98 248.27 267.63
25-Jul-95 155.19 110.32 25-Mar-97 160.39 174.47 25-Nov-98 236.73 267.21
26-Jul-95 154.42 110.72 26-Mar-97 167.31 176.04 26-Nov-98 240.77 271.99
27-Jul-95 150.77 110.47 27-Mar-97 168.27 177.62 27-Nov-98 243.85 272.20
28-Jul-95 147.88 109.69 01-Apr-97 158.46 169.85 30-Nov-98 232.69 263.82
31-Jul-95 146.73 109.81 02-Apr-97 159.04 169.84 01-Dec-98 224.04 251.38
01-Aug-95 146.92 109.76 03-Apr-97 157.89 168.30 02-Dec-98 225.58 246.34
02-Aug-95 149.23 111.07 04-Apr-97 160.58 169.81 03-Dec-98 234.23 252.35
03-Aug-95 144.42 109.93 07-Apr-97 168.66 174.41 04-Dec-98 242.89 255.97
04-Aug-95 143.08 109.78 08-Apr-97 170.77 174.41 07-Dec-98 241.73 257.35
07-Aug-95 144.42 109.99 09-Apr-97 172.88 177.06 08-Dec-98 245.00 258.48
08-Aug-95 145.00 110.18 10-Apr-97 169.23 175.81 09-Dec-98 250.96 261.75
09-Aug-95 146.15 110.10 11-Apr-97 165.96 173.64 10-Dec-98 242.50 261.91
10-Aug-95 148.08 109.95 14-Apr-97 165.77 171.68 11-Dec-98 236.35 256.76
11-Aug-95 149.23 110.03 15-Apr-97 170.96 176.51 14-Dec-98 227.50 255.43
14-Aug-95 148.66 109.78 16-Apr-97 170.19 174.88 15-Dec-98 230.77 259.81
15-Aug-95 151.16 110.87 17-Apr-97 174.62 177.29 16-Dec-98 224.04 262.98
16-Aug-95 149.81 110.46 18-Apr-97 174.81 177.81 17-Dec-98 218.08 266.85
17-Aug-95 144.62 110.08 21-Apr-97 174.62 178.56 18-Dec-98 233.46 267.95
18-Aug-95 146.35 110.63 22-Apr-97 175.19 179.46 21-Dec-98 246.73 276.25
21-Aug-95 146.73 111.09 23-Apr-97 186.54 181.92 22-Dec-98 241.73 276.94
22-Aug-95 149.04 111.23 24-Apr-97 189.62 182.93 23-Dec-98 245.19 281.44
23-Aug-95 147.50 111.12 25-Apr-97 189.42 180.40 24-Dec-98 241.92 282.52
24-Aug-95 145.00 111.34 28-Apr-97 190.19 179.72 28-Dec-98 246.15 285.82
25-Aug-95 144.04 111.37 29-Apr-97 195.58 182.98 29-Dec-98 243.65 286.37
28-Aug-95 141.35 110.60 01-May-97 204.42 185.23 30-Dec-98 242.31 284.38
29-Aug-95 141.73 109.77 02-May-97 207.88 184.95 04-Jan-99 249.19 295.26
30-Aug-95 143.46 110.11 05-May-97 205.77 186.86 05-Jan-99 251.31 299.25
31-Aug-95 141.92 109.85 06-May-97 202.31 187.39 06-Jan-99 272.28 308.31
01-Sep-95 143.46 110.49 07-May-97 200.39 186.01 07-Jan-99 267.84 296.38
04-Sep-95 144.62 111.30 09-May-97 202.11 187.16 08-Jan-99 278.22 295.43
05-Sep-95 145.58 111.53 12-May-97 204.23 188.91 11-Jan-99 275.46 288.29
06-Sep-95 149.62 112.23 13-May-97 204.81 188.41 12-Jan-99 268.68 283.26
07-Sep-95 150.58 111.74 14-May-97 209.62 191.01 13-Jan-99 251.52 267.97
08-Sep-95 148.27 111.94 15-May-97 209.81 190.57 14-Jan-99 253.00 271.57
11-Sep-95 148.84 112.04 16-May-97 212.88 190.40 15-Jan-99 257.03 279.21
12-Sep-95 150.38 112.18 20-May-97 210.38 188.75 18-Jan-99 268.05 287.47
13-Sep-95 153.85 113.08 21-May-97 213.65 192.71 19-Jan-99 273.34 289.94
14-Sep-95 152.69 113.15 22-May-97 211.34 191.97 20-Jan-99 283.94 292.21
15-Sep-95 148.27 113.31 23-May-97 210.77 192.71 21-Jan-99 283.94 287.25
18-Sep-95 147.50 112.60 26-May-97 209.81 194.69 22-Jan-99 278.43 274.01
19-Sep-95 147.88 113.25 27-May-97 208.27 193.23 25-Jan-99 287.12 277.51
20-Sep-95 150.77 113.13 28-May-97 207.69 192.95 26-Jan-99 281.40 278.19
21-Sep-95 152.69 113.08 29-May-97 209.42 192.87 27-Jan-99 279.70 280.80
22-Sep-95 149.62 111.43 30-May-97 202.11 189.60 28-Jan-99 273.34 284.71
25-Sep-95 149.62 111.49 02-Jun-97 211.54 193.56 29-Jan-99 271.23 281.07
26-Sep-95 150.58 112.45 03-Jun-97 218.65 194.63 01-Feb-99 268.68 285.25
27-Sep-95 147.50 111.47 04-Jun-97 226.73 196.04 02-Feb-99 266.14 281.44
28-Sep-95 146.73 110.87 05-Jun-97 229.42 196.72 03-Feb-99 268.89 278.44
29-Sep-95 150.00 111.76 06-Jun-97 225.96 197.62 04-Feb-99 271.44 280.63
02-Oct-95 148.46 111.49 09-Jun-97 225.58 198.79 05-Feb-99 270.17 282.27
03-Oct-95 146.35 111.17 10-Jun-97 225.00 199.14 08-Feb-99 267.20 279.03
04-Oct-95 144.81 111.20 11-Jun-97 218.85 198.27 09-Feb-99 273.13 273.66
05-Oct-95 142.31 110.91 12-Jun-97 221.92 201.19 10-Feb-99 266.56 270.71
06-Oct-95 142.89 110.79 13-Jun-97 224.23 202.81 11-Feb-99 267.20 273.66
09-Oct-95 137.50 109.89 16-Jun-97 232.69 203.75 12-Feb-99 266.99 276.44
10-Oct-95 130.96 108.97 17-Jun-97 247.88 203.06 15-Feb-99 260.00 276.43
11-Oct-95 135.00 109.78 18-Jun-97 265.00 203.54 16-Feb-99 260.63 276.18
12-Oct-95 138.85 110.16 19-Jun-97 258.85 205.32 17-Feb-99 258.51 271.59
13-Oct-95 138.85 110.60 20-Jun-97 258.27 206.67 18-Feb-99 258.51 270.56
16-Oct-95 136.92 110.06 23-Jun-97 259.81 206.35 19-Feb-99 270.38 273.43
17-Oct-95 135.58 109.44 24-Jun-97 260.96 206.40 22-Feb-99 276.31 279.07
18-Oct-95 137.89 109.73 25-Jun-97 269.42 208.89 23-Feb-99 284.79 283.50
19-Oct-95 135.77 109.42 26-Jun-97 268.46 208.69 24-Feb-99 282.25 284.63
20-Oct-95 130.77 109.03 27-Jun-97 273.27 208.65 25-Feb-99 270.17 282.35
23-Oct-95 129.04 107.66 30-Jun-97 270.38 206.51 26-Feb-99 269.11 283.20
24-Oct-95 132.12 108.48 01-Jul-97 263.85 208.85 01-Mar-99 266.14 278.54
25-Oct-95 131.34 109.12 02-Jul-97 263.46 210.70 02-Mar-99 265.29 277.90
26-Oct-95 115.58 107.48 03-Jul-97 269.23 215.04 03-Mar-99 268.05 274.24
27-Oct-95 114.23 106.55 04-Jul-97 277.11 217.45 04-Mar-99 262.54 272.53
30-Oct-95 115.77 107.37 07-Jul-97 280.19 220.25 05-Mar-99 271.86 279.72
31-Oct-95 117.31 108.72 08-Jul-97 275.58 220.06 08-Mar-99 269.53 277.60
01-Nov-95 119.23 109.33 09-Jul-97 284.23 224.21 09-Mar-99 271.23 275.88
02-Nov-95 115.96 108.83 10-Jul-97 277.11 221.66 10-Mar-99 273.34 275.03
03-Nov-95 116.15 109.22 11-Jul-97 282.11 224.48 11-Mar-99 278.22 278.69
06-Nov-95 114.42 108.66 14-Jul-97 286.15 227.28 12-Mar-99 283.52 281.56
07-Nov-95 112.31 108.39 15-Jul-97 290.38 227.52 15-Mar-99 286.48 282.63
08-Nov-95 109.04 108.18 16-Jul-97 303.46 231.37 16-Mar-99 297.29 285.58
09-Nov-95 110.96 108.52 17-Jul-97 302.11 228.52 17-Mar-99 304.07 285.23
10-Nov-95 114.04 109.01 18-Jul-97 293.65 225.75 18-Mar-99 303.86 283.97
13-Nov-95 117.69 109.64 21-Jul-97 284.62 223.24 19-Mar-99 312.55 289.03
14-Nov-95 114.81 109.98 22-Jul-97 293.65 230.26 22-Mar-99 311.91 287.50
15-Nov-95 112.12 110.03 23-Jul-97 311.73 236.94 23-Mar-99 307.46 281.38
16-Nov-95 111.92 110.32 24-Jul-97 329.42 236.17 24-Mar-99 301.53 277.71
17-Nov-95 110.96 110.36 25-Jul-97 330.96 237.07 25-Mar-99 307.25 282.07
20-Nov-95 111.16 111.10 28-Jul-97 324.62 238.00 26-Mar-99 306.83 277.62
21-Nov-95 110.77 110.58 29-Jul-97 315.19 233.70 29-Mar-99 315.09 282.37
22-Nov-95 109.42 110.78 30-Jul-97 320.00 233.79 30-Mar-99 316.78 282.29
23-Nov-95 110.58 111.22 31-Jul-97 323.08 235.71 31-Mar-99 319.75 283.62
24-Nov-95 112.88 112.03 01-Aug-97 318.85 235.09 01-Apr-99 318.69 281.88
27-Nov-95 117.31 114.01 04-Aug-97 317.69 234.75 06-Apr-99 320.81 283.31
28-Nov-95 119.04 113.58 05-Aug-97 321.15 234.81 07-Apr-99 322.08 286.59
29-Nov-95 122.89 114.39 06-Aug-97 323.85 238.00 08-Apr-99 322.08 284.02
30-Nov-95 122.50 114.61 07-Aug-97 332.31 242.33 09-Apr-99 313.61 284.05
01-Dec-95 119.61 114.52 08-Aug-97 329.42 238.78 12-Apr-99 308.09 283.22
04-Dec-95 117.50 114.55 11-Aug-97 317.89 233.25 13-Apr-99 316.36 285.77
05-Dec-95 120.00 115.50 12-Aug-97 312.69 234.53 14-Apr-99 316.57 287.15
06-Dec-95 122.11 115.53 13-Aug-97 298.85 224.30 15-Apr-99 312.76 286.41
07-Dec-95 118.85 114.35 14-Aug-97 299.61 224.26 16-Apr-99 332.67 289.70
08-Dec-95 119.04 114.67 15-Aug-97 283.85 214.39 19-Apr-99 340.09 295.49
11-Dec-95 117.69 114.88 18-Aug-97 290.96 219.92 20-Apr-99 326.53 290.33
12-Dec-95 116.35 114.83 19-Aug-97 288.27 227.10 21-Apr-99 338.19 293.28
13-Dec-95 117.31 114.58 20-Aug-97 304.62 230.05 22-Apr-99 353.44 296.64
14-Dec-95 114.04 114.74 21-Aug-97 306.73 227.79 23-Apr-99 350.69 296.46
15-Dec-95 111.54 114.36 22-Aug-97 289.42 220.15 26-Apr-99 360.22 298.86
18-Dec-95 111.16 113.68 25-Aug-97 290.96 221.05 27-Apr-99 357.25 303.42
19-Dec-95 107.31 113.26 26-Aug-97 285.19 216.55 28-Apr-99 345.60 304.01
20-Dec-95 112.12 115.20 27-Aug-97 288.84 217.49 29-Apr-99 345.39 302.95
21-Dec-95 112.50 115.14 28-Aug-97 278.27 210.28 03-May-99 353.02 304.14
22-Dec-95 113.46 115.42 29-Aug-97 278.27 208.13 04-May-99 351.32 305.67
27-Dec-95 112.69 116.26 01-Sep-97 286.15 211.40 05-May-99 335.85 301.14
28-Dec-95 111.54 116.34 02-Sep-97 297.31 221.77 06-May-99 336.70 298.22
02-Jan-96 114.23 118.71 03-Sep-97 310.58 222.59 07-May-99 342.21 298.95
03-Jan-96 118.27 119.71 04-Sep-97 306.73 219.63 10-May-99 348.57 296.87
04-Jan-96 120.96 120.12 05-Sep-97 303.27 219.69 11-May-99 355.35 295.69
05-Jan-96 119.04 119.27 08-Sep-97 297.50 216.98 12-May-99 358.31 294.14
08-Jan-96 123.27 120.72 09-Sep-97 293.08 214.57 14-May-99 367.00 291.66
09-Jan-96 120.39 120.06 10-Sep-97 285.19 210.35 17-May-99 361.07 287.27
10-Jan-96 116.73 119.66 11-Sep-97 279.61 205.19 18-May-99 367.22 290.63
11-Jan-96 120.58 119.56 12-Sep-97 280.77 207.28 19-May-99 365.73 294.75
12-Jan-96 120.96 120.53 15-Sep-97 284.62 208.42 20-May-99 357.47 298.39
15-Jan-96 119.81 120.27 16-Sep-97 280.96 211.44 21-May-99 359.80 299.60
16-Jan-96 122.11 120.94 17-Sep-97 291.16 215.28 25-May-99 346.66 296.31
17-Jan-96 120.96 121.05 18-Sep-97 288.66 216.40 26-May-99 346.45 295.76
18-Jan-96 121.92 121.03 19-Sep-97 283.65 214.12 27-May-99 348.99 292.18
19-Jan-96 122.31 121.91 22-Sep-97 294.81 218.23 28-May-99 348.57 291.79
22-Jan-96 123.08 121.87 23-Sep-97 302.89 217.92 31-May-99 352.97 292.67
23-Jan-96 122.89 121.00 24-Sep-97 300.77 216.97 01-Jun-99 348.86 292.21
24-Jan-96 126.35 121.93 25-Sep-97 306.54 216.81 02-Jun-99 352.97 293.99
25-Jan-96 127.69 121.77 26-Sep-97 305.96 217.14 03-Jun-99 352.97 297.94
26-Jan-96 127.12 121.40 29-Sep-97 307.50 216.92 04-Jun-99 350.30 299.26
29-Jan-96 127.50 121.20 30-Sep-97 323.85 220.53 07-Jun-99 362.82 300.29
30-Jan-96 126.92 120.51 01-Oct-97 339.23 226.24 08-Jun-99 370.41 299.35
31-Jan-96 127.88 120.66 02-Oct-97 329.81 225.38 09-Jun-99 372.87 300.43
01-Feb-96 127.12 120.75 03-Oct-97 340.39 230.91 10-Jun-99 372.67 298.07
02-Feb-96 129.62 120.95 06-Oct-97 330.38 230.55 11-Jun-99 368.97 299.74
05-Feb-96 128.84 119.46 07-Oct-97 320.96 227.86 14-Jun-99 365.69 298.79
06-Feb-96 132.31 120.51 08-Oct-97 323.08 226.54 15-Jun-99 367.33 298.68
07-Feb-96 130.00 121.00 09-Oct-97 317.31 219.60 16-Jun-99 373.08 301.48
08-Feb-96 130.19 120.26 10-Oct-97 313.85 217.60 17-Jun-99 374.10 302.58
09-Feb-96 128.46 120.33 13-Oct-97 316.35 224.90 18-Jun-99 369.38 304.28
12-Feb-96 127.88 120.70 14-Oct-97 315.58 224.15 21-Jun-99 381.70 307.81
13-Feb-96 124.81 122.24 15-Oct-97 310.38 221.40 22-Jun-99 384.98 305.15
14-Feb-96 124.62 122.42 16-Oct-97 307.50 218.61 23-Jun-99 385.39 302.10
15-Feb-96 127.69 122.52 17-Oct-97 307.69 216.83 24-Jun-99 381.70 299.57
16-Feb-96 126.73 121.90 20-Oct-97 312.50 217.50 25-Jun-99 381.70 296.68
19-Feb-96 126.54 120.51 21-Oct-97 325.00 221.13 28-Jun-99 384.77 297.78
20-Feb-96 126.92 119.77 22-Oct-97 328.08 219.44 29-Jun-99 392.16 298.74
21-Feb-96 129.04 120.80 23-Oct-97 308.08 211.52 30-Jun-99 392.57 296.44
22-Feb-96 130.77 121.65 24-Oct-97 316.15 213.66 01-Jul-99 399.14 301.34
23-Feb-96 132.31 122.39 27-Oct-97 292.31 206.42 02-Jul-99 396.47 302.16
26-Feb-96 132.12 121.59 28-Oct-97 276.54 200.34 05-Jul-99 412.27 307.46
27-Feb-96 132.31 121.67 29-Oct-97 306.73 210.79 06-Jul-99 409.60 307.04
28-Feb-96 132.69 122.92 30-Oct-97 289.04 205.04 07-Jul-99 406.12 305.85
29-Feb-96 131.73 123.02 31-Oct-97 292.31 206.04 08-Jul-99 404.68 305.74
01-Mar-96 131.54 123.83 03-Nov-97 297.11 211.60 09-Jul-99 406.94 310.02
04-Mar-96 130.77 124.41 04-Nov-97 290.96 208.29 12-Jul-99 396.06 310.79
05-Mar-96 130.77 124.45 05-Nov-97 300.96 210.59 13-Jul-99 410.42 307.52
06-Mar-96 130.19 124.22 06-Nov-97 296.54 208.56 14-Jul-99 430.95 311.33
07-Mar-96 127.69 124.49 07-Nov-97 288.46 203.55 15-Jul-99 436.69 313.95
08-Mar-96 124.23 123.27 10-Nov-97 287.12 205.44 16-Jul-99 434.85 310.93
11-Mar-96 124.81 121.69 11-Nov-97 285.19 205.12 19-Jul-99 443.46 311.06
12-Mar-96 124.23 122.29 12-Nov-97 269.81 202.44 20-Jul-99 420.89 303.87
13-Mar-96 125.00 123.29 13-Nov-97 260.00 203.01 21-Jul-99 408.78 299.89
14-Mar-96 125.77 124.78 14-Nov-97 251.73 204.24 22-Jul-99 377.80 295.54
15-Mar-96 125.38 124.69 17-Nov-97 263.85 210.23 23-Jul-99 379.85 293.93
18-Mar-96 128.27 125.80 18-Nov-97 270.38 210.94 26-Jul-99 371.43 289.76
19-Mar-96 129.62 126.54 19-Nov-97 263.46 208.72 27-Jul-99 375.74 291.28
20-Mar-96 128.84 126.50 20-Nov-97 268.66 212.11 28-Jul-99 385.18 293.79
21-Mar-96 127.50 126.37 21-Nov-97 279.42 215.40 29-Jul-99 386.83 288.45
22-Mar-96 127.31 126.61 24-Nov-97 263.65 209.85 30-Jul-99 391.75 291.99
25-Mar-96 113.46 126.44 25-Nov-97 252.88 208.83 02-Aug-99 383.75 287.49
26-Mar-96 112.88 125.98 26-Nov-97 255.96 211.50 03-Aug-99 383.34 285.21
27-Mar-96 113.46 126.83 27-Nov-97 256.73 212.45 04-Aug-99 374.31 285.61
28-Mar-96 113.85 126.30 28-Nov-97 252.50 211.35 05-Aug-99 358.71 279.45
29-Mar-96 115.58 127.44 01-Dec-97 268.46 218.15 06-Aug-99 366.51 282.66
01-Apr-96 113.85 128.79 02-Dec-97 265.38 219.02 09-Aug-99 361.79 287.04
02-Apr-96 114.04 128.84 03-Dec-97 253.46 218.00 10-Aug-99 353.79 283.55
03-Apr-96 114.04 128.09 04-Dec-97 253.08 220.22 11-Aug-99 365.69 286.22
04-Apr-96 113.46 128.70 05-Dec-97 255.96 220.64 12-Aug-99 378.82 292.28
09-Apr-96 112.12 128.74 08-Dec-97 262.69 222.07 13-Aug-99 388.06 298.16
10-Apr-96 112.88 130.58 09-Dec-97 260.39 221.48 16-Aug-99 389.70 299.21
11-Apr-96 113.65 130.22 10-Dec-97 253.46 218.20 17-Aug-99 393.19 302.69
12-Apr-96 113.85 129.89 11-Dec-97 230.19 211.78 18-Aug-99 389.49 301.15
15-Apr-96 115.77 131.60 12-Dec-97 232.12 212.79 19-Aug-99 384.57 296.09
16-Apr-96 117.11 131.41 15-Dec-97 214.42 213.04 20-Aug-99 385.59 298.21
17-Apr-96 116.92 130.80 16-Dec-97 219.23 216.87 23-Aug-99 387.65 301.82
18-Apr-96 117.31 130.29 17-Dec-97 229.81 219.27 24-Aug-99 392.37 302.48
19-Apr-96 118.08 131.03 18-Dec-97 237.89 217.54 25-Aug-99 412.48 308.38
22-Apr-96 117.89 132.40 19-Dec-97 224.62 210.82 26-Aug-99 412.89 309.60
23-Apr-96 116.35 132.38 22-Dec-97 229.62 212.09 27-Aug-99 416.17 308.96
24-Apr-96 119.04 132.77 23-Dec-97 223.27 210.16 30-Aug-99 409.81 308.68
25-Apr-96 118.85 132.15 24-Dec-97 227.50 211.02 31-Aug-99 400.37 302.37
26-Apr-96 116.73 132.61 29-Dec-97 235.19 217.70 01-Sep-99 397.09 302.32
29-Apr-96 116.35 132.94 30-Dec-97 233.85 219.01 02-Sep-99 385.39 298.45
01-May-96 118.46 133.20 02-Jan-98 238.46 222.20 03-Sep-99 395.65 305.65
02-May-96 117.89 133.82 05-Jan-98 251.54 225.11 06-Sep-99 410.01 310.18
03-May-96 117.89 132.84 06-Jan-98 245.38 222.99 07-Sep-99 419.66 309.85
06-May-96 118.46 134.19 07-Jan-98 243.85 223.42 08-Sep-99 410.01 307.60
07-May-96 116.92 134.13 08-Jan-98 241.35 221.82 09-Sep-99 406.32 310.28
08-May-96 116.15 132.21 09-Jan-98 234.62 219.04 10-Sep-99 426.84 312.54
09-May-96 116.15 133.19 12-Jan-98 219.23 213.80 13-Sep-99 428.69 310.39
10-May-96 116.35 133.01 13-Jan-98 223.46 218.50 14-Sep-99 419.66 307.83
13-May-96 115.58 133.19 14-Jan-98 232.31 221.38 15-Sep-99 424.38 307.88
14-May-96 116.15 133.73 15-Jan-98 231.73 220.95 16-Sep-99 414.73 304.63
15-May-96 115.77 133.98 16-Jan-98 239.61 224.85 17-Sep-99 411.66 302.21
17-May-96 115.96 132.85 19-Jan-98 244.04 227.68 20-Sep-99 406.53 304.57
20-May-96 117.11 133.80 20-Jan-98 247.31 228.49 21-Sep-99 391.75 298.31
21-May-96 117.11 134.67 21-Jan-98 252.50 227.81 22-Sep-99 396.68 297.99
22-May-96 117.89 134.55 22-Jan-98 242.31 225.08 23-Sep-99 403.24 298.71
23-May-96 117.89 135.14 23-Jan-98 240.39 223.69 24-Sep-99 385.80 292.82
24-May-96 117.31 135.26 26-Jan-98 247.12 224.71 27-Sep-99 394.42 297.08
28-May-96 117.31 136.17 27-Jan-98 248.84 225.20 28-Sep-99 392.57 293.15
29-May-96 115.58 135.85 28-Jan-98 255.96 227.67 29-Sep-99 392.16 292.75
30-May-96 115.38 135.44 29-Jan-98 267.88 229.23 30-Sep-99 387.85 289.44
31-May-96 116.54 136.65 30-Jan-98 267.69 229.31 01-Oct-99 379.44 284.76
03-Jun-96 115.00 136.44 02-Feb-98 269.42 231.36 04-Oct-99 385.59 289.33
04-Jun-96 114.81 136.29 03-Feb-98 263.65 230.23 05-Oct-99 393.19 292.25
05-Jun-96 115.58 136.80 04-Feb-98 255.77 228.37 06-Oct-99 399.75 292.90
06-Jun-96 115.96 137.05 05-Feb-98 260.19 231.23 07-Oct-99 402.01 293.58
07-Jun-96 115.19 135.56 06-Feb-98 264.04 232.99 08-Oct-99 405.29 293.09
10-Jun-96 115.58 136.71 09-Feb-98 260.58 233.46 11-Oct-99 406.32 295.69
11-Jun-96 114.42 136.68 10-Feb-98 258.65 232.54 12-Oct-99 389.49 293.76
12-Jun-96 114.04 136.53 11-Feb-98 270.77 234.82 13-Oct-99 378.00 291.59
13-Jun-96 113.65 134.61 12-Feb-98 278.85 233.24 14-Oct-99 371.02 289.08
14-Jun-96 113.27 133.83 13-Feb-98 284.62 233.62 15-Oct-99 368.77 284.17
17-Jun-96 113.08 134.49 16-Feb-98 283.85 236.31 18-Oct-99 356.45 279.50
18-Jun-96 111.92 135.18 17-Feb-98 300.00 241.26 19-Oct-99 367.74 284.41
19-Jun-96 109.81 133.78 18-Feb-98 300.00 243.61 20-Oct-99 360.35 287.47
20-Jun-96 110.19 133.01 19-Feb-98 295.19 243.39 21-Oct-99 369.18 283.97
21-Jun-96 106.92 132.82 20-Feb-98 297.89 244.44 22-Oct-99 387.85 290.14
24-Jun-96 104.23 132.91 23-Feb-98 301.73 248.73 25-Oct-99 386.00 289.38
25-Jun-96 104.62 133.40 24-Feb-98 306.73 250.67 26-Oct-99 381.70 291.73
26-Jun-96 106.35 134.11 25-Feb-98 305.38 254.23 27-Oct-99 371.02 291.79
27-Jun-96 105.38 133.39 26-Feb-98 305.58 255.92 28-Oct-99 377.59 300.11
28-Jun-96 106.73 134.31 27-Feb-98 305.77 256.56 29-Oct-99 400.16 302.05
01-Jul-96 107.12 134.24 02-Mar-98 309.23 261.21 01-Nov-99 398.11 300.67
02-Jul-96 106.54 134.10 03-Mar-98 299.81 258.70 02-Nov-99 393.19 300.56
03-Jul-96 106.92 134.31 04-Mar-98 298.27 257.62 03-Nov-99 412.48 305.94
04-Jul-96 106.35 134.94 05-Mar-98 289.62 254.24 04-Nov-99 428.89 308.89
05-Jul-96 104.81 133.98 06-Mar-98 290.00 261.01 05-Nov-99 432.59 307.92
08-Jul-96 105.19 132.90 09-Mar-98 299.23 263.45 08-Nov-99 423.56 307.50
09-Jul-96 107.69 133.46 10-Mar-98 298.08 262.17 09-Nov-99 429.30 308.17
10-Jul-96 105.58 132.92 11-Mar-98 297.69 263.09 10-Nov-99 448.59 310.17
11-Jul-96 104.23 131.69 12-Mar-98 295.38 261.10 11-Nov-99 474.04 314.19
12-Jul-96 100.96 131.12 13-Mar-98 297.89 265.78 12-Nov-99 454.96 311.59
15-Jul-96 97.69 129.26 16-Mar-98 294.62 267.71 15-Nov-99 472.40 316.79
16-Jul-96 96.73 126.63 17-Mar-98 288.27 268.32 16-Nov-99 462.55 319.11
17-Jul-96 99.04 126.35 18-Mar-98 279.61 264.98 17-Nov-99 467.47 318.81
18-Jul-96 98.08 126.90 19-Mar-98 282.69 264.08 18-Nov-99 465.83 320.97
19-Jul-96 98.85 128.01 20-Mar-98 286.54 268.70 19-Nov-99 467.88 320.73
22-Jul-96 95.58 125.99 23-Mar-98 284.81 269.16 22-Nov-99 454.14 317.77
23-Jul-96 95.38 125.94 24-Mar-98 295.19 270.89 23-Nov-99 446.95 317.01
24-Jul-96 93.08 122.92 25-Mar-98 302.89 273.56 24-Nov-99 457.42 316.40
25-Jul-96 98.65 125.51 26-Mar-98 300.39 270.65 25-Nov-99 480.20 321.64
26-Jul-96 97.11 124.93 27-Mar-98 300.39 273.46 26-Nov-99 498.46 322.23
29-Jul-96 97.69 126.06 30-Mar-98 296.35 270.62 29-Nov-99 499.49 322.80
30-Jul-96 101.73 126.21 31-Mar-98 294.23 270.01 30-Nov-99 496.00 318.06
31-Jul-96 105.38 128.41 01-Apr-98 293.46 273.91 01-Dec-99 505.64 318.30
01-Aug-96 105.38 129.45 02-Apr-98 291.16 276.38 02-Dec-99 503.18 320.20
02-Aug-96 105.58 131.94 03-Apr-98 288.08 278.56 03-Dec-99 517.55 326.19
05-Aug-96 105.38 131.86 06-Apr-98 292.31 284.17 06-Dec-99 512.42 323.15
06-Aug-96 104.04 131.31 07-Apr-98 288.27 279.57 07-Dec-99 514.47 323.27
07-Aug-96 105.58 132.66 08-Apr-98 291.54 279.26 08-Dec-99 525.34 322.51
08-Aug-96 105.96 131.88 09-Apr-98 288.08 280.18 09-Dec-99 545.66 326.49
09-Aug-96 105.19 131.71 14-Apr-98 295.58 281.61 10-Dec-99 534.37 327.16
12-Aug-96 105.00 131.53 15-Apr-98 298.08 282.21 13-Dec-99 516.11 329.77
13-Aug-96 104.81 131.66 16-Apr-98 293.27 277.36 14-Dec-99 517.96 330.48
14-Aug-96 105.00 131.70 17-Apr-98 290.77 278.47 15-Dec-99 502.36 328.65
15-Aug-96 106.15 132.99 20-Apr-98 305.38 283.19 16-Dec-99 522.06 331.65
16-Aug-96 106.54 133.62 21-Apr-98 321.15 284.76 17-Dec-99 535.60 335.28
19-Aug-96 107.31 134.44 22-Apr-98 356.35 284.43 20-Dec-99 532.73 339.93
20-Aug-96 108.08 135.60 23-Apr-98 351.16 280.83 21-Dec-99 525.96 339.98
21-Aug-96 107.31 134.11 24-Apr-98 358.27 279.67 22-Dec-99 541.35 345.28
22-Aug-96 110.77 135.42 27-Apr-98 342.69 265.59 23-Dec-99 536.63 348.16
23-Aug-96 109.04 134.41 28-Apr-98 348.08 270.57 24-Dec-99 539.30 348.86
26-Aug-96 107.88 133.32 29-Apr-98 342.31 270.29 27-Dec-99 537.66 348.83
27-Aug-96 109.23 134.33 01-May-98 364.42 284.72 28-Dec-99 537.86 347.83
28-Aug-96 109.62 135.04 04-May-98 364.81 286.98 29-Dec-99 537.86 349.93
29-Aug-96 108.84 133.98 05-May-98 364.23 281.50 30-Dec-99 554.07 354.66
30-Aug-96 107.88 132.07 06-May-98 372.31 278.94 03-Jan-00 577.88 356.79
02-Sep-96 108.08 133.03 07-May-98 371.16 274.06 04-Jan-00
</TABLE>
at the end of 1999. The net cash position renders this ratio meaningless in
1998. The ratio at the end of 1997 was 21:79.
Stockholders' equity increased by EUR 0.2 billion to a level of EUR 14.8 billion
at year-end 1999. The effect of 1999 net income of EUR 1.8 billion was to a
large extent offset by the share reduction program which reduced equity by EUR
1.5 billion. The currency effects on equity resulted in an increase of EUR 0.3
billion. Furthermore, equity was reduced by dividend payments of EUR 0.4
billion. The EUR 5.4 billion increase in equity in 1998 was largely due to 1998
net income of EUR 6.1 billion, partially offset by the pay-out of dividend.
INCOME FROM CONTINUING OPERATIONS
As a % of stockholders' equity (ROE)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
15.8 1.9 15.9 5.1 12.6
</TABLE>
61
<PAGE> 31
5-YEAR RELATIVE PERFORMANCE: PHILIPS, S&P 100, S&P 500
base 100 = Jan 3, 1995
<TABLE>
<CAPTION>
Date Philips S&P 100 S&P 500 Date Philips S&P 100 S&P 500 Date Philips S&P 100 S&P 500
- ---- -------- ------- ------- ---- -------- ------- ------- ---- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
03-Jan-95 100.00 100.00 100.00 03-Sep-96 111.65 147.71 142.61 06-May-98 324.96 249.48 240.67
04-Jan-95 100.40 100.42 100.35 04-Sep-96 111.25 147.84 142.80 07-May-98 319.97 246.97 238.54
05-Jan-95 99.60 100.33 100.27 05-Sep-96 110.39 146.35 141.46 08-May-98 322.49 250.21 241.37
06-Jan-95 99.14 100.25 100.34 06-Sep-96 110.84 147.71 142.82 11-May-98 328.95 250.18 241.04
09-Jan-95 100.81 100.17 100.37 09-Sep-96 110.39 149.52 144.58 12-May-98 329.75 252.65 243.03
10-Jan-95 100.81 100.16 100.56 10-Sep-96 109.98 149.61 144.59 13-May-98 326.83 253.77 243.70
11-Jan-95 100.81 100.23 100.56 11-Sep-96 110.84 150.32 145.34 14-May-98 336.21 253.59 243.38
12-Jan-95 104.59 100.18 100.55 12-Sep-96 109.98 151.20 146.19 15-May-98 334.95 251.38 241.50
13-Jan-95 106.25 101.13 101.49 13-Sep-96 109.98 153.34 148.23 18-May-98 324.36 249.94 240.86
16-Jan-95 105.40 101.83 102.24 16-Sep-96 110.84 154.13 148.98 19-May-98 338.73 250.66 241.67
17-Jan-95 105.80 101.88 102.38 17-Sep-96 113.72 154.08 148.75 20-May-98 332.07 253.20 243.75
18-Jan-95 107.06 101.85 102.31 18-Sep-96 114.17 153.93 148.43 21-May-98 331.01 252.03 242.78
19-Jan-95 107.06 101.17 101.71 19-Sep-96 116.24 154.17 148.77 22-May-98 328.49 251.65 241.87
20-Jan-95 107.06 100.70 101.23 20-Sep-96 116.64 155.32 149.64 26-May-98 325.37 248.07 238.29
23-Jan-95 104.99 100.73 101.46 23-Sep-96 118.31 155.04 149.52 27-May-98 316.64 248.37 237.90
24-Jan-95 105.40 100.70 101.47 24-Sep-96 120.42 154.44 149.33 28-May-98 315.78 249.32 239.07
25-Jan-95 106.66 101.00 101.81 25-Sep-96 123.30 154.45 149.38 29-May-98 317.04 246.98 237.59
26-Jan-95 106.66 101.28 102.01 26-Sep-96 121.23 154.43 149.39 01-Jun-98 314.12 246.30 237.63
27-Jan-95 105.40 101.73 102.46 27-Sep-96 119.57 154.31 149.46 02-Jun-98 308.93 246.93 238.12
30-Jan-95 105.40 101.48 102.05 30-Sep-96 119.57 154.48 149.70 03-Jun-98 304.54 244.21 235.83
31-Jan-95 104.99 101.90 102.46 01-Oct-96 119.97 154.96 150.09 04-Jun-98 307.87 247.74 238.47
01-Feb-95 104.59 101.83 102.46 02-Oct-96 119.16 156.19 151.16 05-Jun-98 306.66 252.00 242.61
02-Feb-95 106.25 102.42 102.98 03-Oct-96 118.76 156.06 150.90 08-Jun-98 318.31 252.34 243.02
03-Feb-95 106.66 103.70 104.26 04-Oct-96 120.42 158.02 152.79 09-Jun-98 315.58 253.05 243.60
06-Feb-95 107.06 104.07 104.80 07-Oct-96 120.83 158.62 153.21 10-Jun-98 307.87 252.01 242.27
07-Feb-95 105.80 104.04 104.73 08-Oct-96 122.09 157.94 152.61 11-Jun-98 292.89 248.29 238.41
08-Feb-95 106.66 104.09 104.81 09-Oct-96 124.96 157.00 151.76 12-Jun-98 287.70 249.58 239.34
09-Feb-95 106.66 103.93 104.59 10-Oct-96 124.56 156.46 151.29 15-Jun-98 278.32 244.10 234.59
10-Feb-95 109.98 104.18 104.87 11-Oct-96 126.22 158.10 152.61 16-Jun-98 284.11 246.68 236.89
13-Feb-95 109.98 104.21 104.91 14-Oct-96 122.89 158.92 153.24 17-Jun-98 295.16 250.92 241.14
14-Feb-95 110.39 104.61 105.11 15-Oct-96 119.57 158.82 153.03 18-Jun-98 290.62 250.71 240.98
15-Feb-95 110.84 105.30 105.54 16-Oct-96 118.31 159.36 153.43 19-Jun-98 286.03 249.99 239.74
16-Feb-95 111.25 105.70 105.69 17-Oct-96 118.31 160.03 153.99 22-Jun-98 290.82 250.27 240.30
17-Feb-95 112.91 104.72 104.98 18-Oct-96 117.50 161.06 154.83 23-Jun-98 278.32 254.73 243.84
21-Feb-95 113.31 105.10 105.14 21-Oct-96 114.98 160.21 154.61 24-Jun-98 288.50 258.24 246.76
22-Feb-95 109.18 105.76 105.65 22-Oct-96 113.72 159.66 153.90 25-Jun-98 286.03 257.07 245.97
23-Feb-95 108.32 106.15 106.06 23-Oct-96 109.98 159.90 154.05 26-Jun-98 278.92 258.21 246.83
24-Feb-95 109.18 106.40 106.35 24-Oct-96 117.10 158.34 152.97 29-Jun-98 274.79 260.31 247.98
27-Feb-95 108.72 105.50 105.38 25-Oct-96 121.63 157.96 152.67 30-Jun-98 282.90 258.90 246.96
28-Feb-95 109.58 106.35 106.16 28-Oct-96 118.76 157.19 151.87 01-Jul-98 296.22 261.72 250.17
01-Mar-95 109.98 105.94 105.78 29-Oct-96 116.64 157.94 152.80 02-Jul-98 292.49 261.15 249.70
02-Mar-95 112.51 105.81 105.67 30-Oct-96 115.83 157.70 152.66 06-Jul-98 291.83 263.22 252.08
03-Mar-95 113.72 105.81 105.73 31-Oct-96 117.50 158.89 153.62 07-Jul-98 293.29 262.97 251.50
06-Mar-95 114.57 105.96 105.78 01-Nov-96 118.76 158.62 153.29 08-Jul-98 294.55 265.98 254.05
07-Mar-95 115.83 105.35 105.01 04-Nov-96 118.31 159.54 153.93 09-Jul-98 288.10 264.17 252.35
08-Mar-95 114.57 105.46 105.23 05-Nov-96 117.90 160.96 155.55 10-Jul-98 286.64 265.31 253.61
09-Mar-95 113.31 105.57 105.24 06-Nov-96 119.16 163.49 157.82 13-Jul-98 292.69 266.09 253.79
10-Mar-95 113.31 107.24 106.63 07-Nov-96 119.97 164.35 158.49 14-Jul-98 301.01 269.02 256.49
13-Mar-95 114.17 107.32 106.74 08-Nov-96 119.97 165.21 159.18 15-Jul-98 312.05 268.76 255.89
14-Mar-95 114.57 107.92 107.36 11-Nov-96 121.23 165.56 159.41 16-Jul-98 312.86 270.46 257.89
15-Mar-95 114.57 107.67 107.14 12-Nov-96 121.23 165.00 158.91 17-Jul-98 302.87 271.40 258.49
16-Mar-95 114.57 108.62 107.91 13-Nov-96 121.23 165.24 159.25 20-Jul-98 295.16 270.05 257.91
17-Mar-95 114.57 108.51 107.93 14-Nov-96 122.49 166.15 160.28 21-Jul-98 286.64 265.57 253.77
20-Mar-95 112.91 108.64 108.07 15-Nov-96 123.30 166.34 160.66 22-Jul-98 288.30 265.06 253.55
21-Mar-95 109.98 108.37 107.83 18-Nov-96 122.89 166.10 160.53 23-Jul-98 274.79 259.62 248.25
22-Mar-95 109.18 108.55 107.96 19-Nov-96 125.42 167.25 161.65 24-Jul-98 269.14 260.61 248.48
23-Mar-95 108.32 108.65 108.02 20-Nov-96 125.42 167.70 162.04 27-Jul-98 268.73 263.17 249.89
24-Mar-95 109.98 109.71 109.12 21-Nov-96 125.82 167.29 161.78 28-Jul-98 269.99 259.39 246.18
27-Mar-95 109.98 110.07 109.60 22-Nov-96 129.55 168.79 163.08 29-Jul-98 274.13 258.05 245.09
28-Mar-95 110.39 110.33 109.76 25-Nov-96 128.74 170.86 164.89 30-Jul-98 277.46 262.48 248.95
29-Mar-95 112.91 110.20 109.59 26-Nov-96 134.59 170.71 164.66 31-Jul-98 272.26 257.20 244.10
30-Mar-95 113.31 109.99 109.39 27-Nov-96 132.07 170.76 164.45 03-Aug-98 270.60 254.81 242.30
31-Mar-95 113.72 109.64 109.06 29-Nov-96 135.40 171.20 164.89 04-Aug-98 267.27 245.40 233.52
03-Apr-95 114.98 110.18 109.31 02-Dec-96 132.88 171.46 164.79 05-Aug-98 272.47 248.19 235.55
04-Apr-95 113.31 110.78 110.05 03-Dec-96 133.74 169.62 162.98 06-Aug-98 276.65 250.56 237.34
05-Apr-95 112.05 110.83 110.12 04-Dec-96 132.88 169.23 162.29 07-Aug-98 274.33 249.90 237.30
06-Apr-95 111.65 110.85 110.23 05-Dec-96 133.33 168.79 162.14 10-Aug-98 266.41 248.58 235.92
07-Apr-95 112.05 110.80 110.30 06-Dec-96 131.22 167.45 161.09 11-Aug-98 257.03 245.68 232.84
10-Apr-95 111.65 111.02 110.43 09-Dec-96 132.48 169.61 163.31 12-Aug-98 261.02 249.09 236.16
11-Apr-95 114.17 110.86 110.11 10-Dec-96 131.22 168.84 162.82 13-Aug-98 256.03 246.78 234.13
12-Apr-95 116.24 111.32 110.47 11-Dec-96 127.48 167.38 161.34 14-Aug-98 256.03 244.06 231.48
13-Apr-95 116.64 111.76 110.92 12-Dec-96 129.55 164.90 158.85 17-Aug-98 259.96 249.32 236.04
17-Apr-95 118.31 111.14 110.24 13-Dec-96 129.55 164.76 158.71 18-Aug-98 272.26 253.75 239.86
18-Apr-95 119.57 111.15 110.08 16-Dec-96 129.55 163.06 157.04 19-Aug-98 273.52 253.11 239.17
19-Apr-95 119.16 111.30 109.98 17-Dec-96 130.41 164.40 158.14 20-Aug-98 262.48 251.42 237.76
20-Apr-95 119.57 111.44 110.06 18-Dec-96 131.22 165.77 159.34 21-Aug-98 253.71 249.39 235.49
21-Apr-95 119.97 112.58 110.76 19-Dec-96 133.74 169.11 162.44 24-Aug-98 245.18 251.02 237.01
24-Apr-95 122.09 113.43 111.71 20-Dec-96 133.33 170.14 163.11 25-Aug-98 242.06 252.46 238.04
25-Apr-95 119.16 113.26 111.55 23-Dec-96 133.74 169.50 162.69 26-Aug-98 235.00 250.60 236.15
26-Apr-95 125.42 113.40 111.66 24-Dec-96 133.74 170.56 163.58 27-Aug-98 219.97 240.85 227.09
27-Apr-95 126.68 113.68 111.86 26-Dec-96 134.14 171.71 164.63 28-Aug-98 221.03 237.01 223.72
28-Apr-95 128.34 113.84 112.11 27-Dec-96 133.74 171.95 164.84 31-Aug-98 199.75 219.98 208.51
01-May-95 128.74 113.75 112.01 30-Dec-96 132.88 171.15 164.20 01-Sep-98 211.04 229.25 216.56
02-May-95 130.41 113.79 112.14 31-Dec-96 133.33 168.06 161.34 02-Sep-98 211.85 226.90 215.74
03-May-95 130.81 115.13 113.37 02-Jan-97 131.22 167.71 160.53 03-Sep-98 209.98 224.71 213.95
04-May-95 131.67 115.21 113.38 03-Jan-97 133.33 170.40 162.93 04-Sep-98 201.01 222.89 212.13
05-May-95 134.14 115.23 113.29 06-Jan-97 132.48 170.78 162.85 08-Sep-98 216.64 233.53 222.92
08-May-95 134.59 116.18 114.13 07-Jan-97 132.48 172.46 164.06 09-Sep-98 210.79 229.92 219.16
09-May-95 133.33 116.16 114.04 08-Jan-97 135.40 171.15 163.01 10-Sep-98 202.67 223.53 213.50
10-May-95 132.48 116.37 114.21 09-Jan-97 137.47 172.60 164.42 11-Sep-98 204.14 230.15 219.79
11-May-95 129.15 116.37 114.21 10-Jan-97 138.73 173.89 165.43 14-Sep-98 199.14 234.20 224.29
12-May-95 126.68 116.69 114.47 13-Jan-97 138.33 174.01 165.43 15-Sep-98 196.87 235.63 226.02
15-May-95 128.74 117.13 114.95 14-Jan-97 138.73 176.08 167.47 16-Sep-98 194.96 237.15 227.72
16-May-95 124.96 117.01 115.05 15-Jan-97 138.73 175.96 167.11 17-Sep-98 177.26 230.79 221.92
17-May-95 126.22 116.87 114.80 16-Jan-97 143.72 176.17 167.66 18-Sep-98 169.99 231.21 222.19
18-May-95 125.42 114.96 113.17 17-Jan-97 142.06 177.91 169.06 21-Sep-98 153.30 232.17 223.02
19-May-95 125.82 115.15 113.09 20-Jan-97 140.39 177.82 169.18 22-Sep-98 160.21 232.33 224.27
22-May-95 130.01 116.19 114.06 21-Jan-97 139.59 179.32 170.49 23-Sep-98 178.72 240.64 232.21
23-May-95 131.67 117.23 115.13 22-Jan-97 136.26 180.01 171.25 24-Sep-98 168.33 235.60 227.12
24-May-95 132.48 117.21 115.14 23-Jan-97 135.40 177.92 169.36 25-Sep-98 176.65 236.35 227.56
25-May-95 135.00 117.12 115.13 24-Jan-97 134.59 176.16 167.83 28-Sep-98 177.91 237.27 228.42
26-May-95 135.40 115.94 114.06 27-Jan-97 134.59 174.88 166.63 29-Sep-98 180.58 237.59 228.49
30-May-95 134.14 115.97 114.04 28-Jan-97 133.33 174.76 166.63 30-Sep-98 177.91 230.21 221.52
31-May-95 133.74 118.43 116.18 29-Jan-97 132.48 177.03 168.26 01-Oct-98 169.34 223.51 214.85
01-Jun-95 134.14 118.59 116.20 30-Jan-97 132.48 179.66 170.80 02-Oct-98 166.46 227.12 218.38
02-Jun-95 133.33 118.20 115.99 31-Jan-97 133.33 180.16 171.24 05-Oct-98 161.67 224.42 215.32
05-Jun-95 133.33 118.70 116.66 03-Feb-97 137.92 180.26 171.36 06-Oct-98 164.15 224.18 214.46
06-Jun-95 134.59 118.73 116.65 04-Feb-97 137.07 180.92 171.91 07-Oct-98 159.35 222.61 211.43
07-Jun-95 134.59 118.20 116.12 05-Feb-97 135.00 177.96 169.52 08-Oct-98 152.09 220.28 208.98
08-Jun-95 135.00 118.06 115.95 06-Feb-97 134.14 178.17 169.93 09-Oct-98 166.67 225.83 214.41
09-Jun-95 134.14 117.08 114.99 07-Feb-97 135.00 180.21 171.98 12-Oct-98 174.13 228.85 217.31
12-Jun-95 135.00 117.80 115.63 10-Feb-97 132.88 178.62 171.08 13-Oct-98 176.25 227.72 216.68
13-Jun-95 136.66 119.06 116.76 11-Feb-97 130.81 179.80 171.98 14-Oct-98 185.38 229.58 219.02
14-Jun-95 136.66 119.35 116.85 12-Feb-97 137.47 182.81 174.85 15-Oct-98 196.62 240.05 228.16
15-Jun-95 136.66 119.54 116.99 13-Feb-97 143.32 184.69 176.82 16-Oct-98 194.55 243.21 230.10
16-Jun-95 137.47 120.28 117.58 14-Feb-97 139.99 183.80 176.10 19-Oct-98 187.90 243.89 231.40
19-Jun-95 139.59 121.43 118.76 18-Feb-97 145.39 185.25 177.80 20-Oct-98 197.68 243.83 231.74
20-Jun-95 138.73 121.52 118.70 19-Feb-97 148.71 184.58 176.97 21-Oct-98 208.12 245.46 233.04
21-Jun-95 139.13 121.32 118.49 20-Feb-97 145.39 182.54 174.86 22-Oct-98 184.17 247.86 234.91
22-Jun-95 139.99 122.79 120.03 21-Feb-97 145.84 182.31 174.64 23-Oct-98 174.79 246.40 233.21
23-Jun-95 141.25 122.48 119.73 24-Feb-97 146.65 184.14 176.49 26-Oct-98 178.92 246.41 233.56
26-Jun-95 141.25 121.23 118.52 25-Feb-97 148.71 184.72 176.89 27-Oct-98 184.77 243.92 232.04
27-Jun-95 141.65 120.79 118.15 26-Feb-97 150.38 183.15 175.49 28-Oct-98 181.44 244.23 232.64
28-Jun-95 139.99 121.42 118.65 27-Feb-97 152.09 180.48 173.18 29-Oct-98 176.25 248.35 236.53
29-Jun-95 142.06 121.17 118.46 28-Feb-97 149.97 179.40 172.25 30-Oct-98 184.17 250.69 239.30
30-Jun-95 142.46 120.92 118.65 03-Mar-97 151.24 180.38 173.23 02-Nov-98 197.68 253.99 242.12
03-Jul-95 143.72 121.59 119.16 04-Mar-97 156.23 179.03 172.28 03-Nov-98 191.63 254.08 241.96
05-Jul-95 151.24 121.59 119.20 05-Mar-97 162.08 181.76 174.68 04-Nov-98 203.13 255.39 243.66
06-Jul-95 157.49 123.28 120.67 06-Mar-97 158.30 181.21 173.94 05-Nov-98 206.86 259.08 246.97
07-Jul-95 167.47 123.73 121.18 07-Mar-97 157.09 182.14 175.33 06-Nov-98 206.00 260.92 248.53
10-Jul-95 172.06 123.94 121.36 10-Mar-97 156.23 183.84 177.22 09-Nov-98 197.68 258.46 246.17
11-Jul-95 174.58 123.43 120.84 11-Mar-97 157.49 183.45 176.72 10-Nov-98 195.21 258.36 245.75
12-Jul-95 176.65 124.82 122.17 12-Mar-97 153.76 181.73 175.18 11-Nov-98 199.14 257.03 244.16
13-Jul-95 174.58 124.78 122.19 13-Mar-97 147.91 178.99 171.98 12-Nov-98 201.66 256.06 243.45
14-Jul-95 170.80 124.53 121.95 14-Mar-97 149.57 179.12 172.76 13-Nov-98 203.53 258.76 245.20
17-Jul-95 172.92 125.25 122.57 17-Mar-97 149.17 180.24 173.32 16-Nov-98 210.39 261.23 247.40
18-Jul-95 171.26 124.39 121.64 18-Mar-97 148.71 179.33 172.00 17-Nov-98 213.92 261.87 248.16
19-Jul-95 165.00 122.83 120.01 19-Mar-97 149.17 178.60 171.15 18-Nov-98 226.22 263.60 249.28
20-Jul-95 166.67 123.24 120.57 20-Mar-97 142.91 178.07 170.47 19-Nov-98 228.54 265.46 251.05
21-Jul-95 169.14 123.60 120.59 21-Mar-97 144.98 178.15 170.79 20-Nov-98 232.27 268.43 253.44
24-Jul-95 175.39 123.97 121.24 24-Mar-97 142.46 179.48 172.27 23-Nov-98 233.08 274.51 258.81
25-Jul-95 175.39 124.82 122.21 25-Mar-97 147.05 179.21 171.87 24-Nov-98 223.50 273.33 257.67
26-Jul-95 172.92 124.68 122.33 26-Mar-97 152.09 179.57 172.18 25-Nov-98 214.12 274.35 258.52
27-Jul-95 167.47 125.52 123.11 27-Mar-97 151.64 176.06 168.56 27-Nov-98 219.77 275.80 259.70
28-Jul-95 164.55 125.03 122.61 31-Mar-97 147.91 172.08 164.91 30-Nov-98 211.04 269.46 253.45
31-Jul-95 164.15 124.85 122.42 01-Apr-97 147.91 172.46 165.46 01-Dec-98 211.65 272.32 255.99
01-Aug-95 163.74 124.16 121.90 02-Apr-97 144.18 170.28 163.38 02-Dec-98 207.06 270.24 255.11
02-Aug-95 163.74 123.77 121.71 03-Apr-97 146.24 170.11 163.43 03-Dec-98 216.04 264.76 250.52
03-Aug-95 160.82 123.82 121.70 04-Apr-97 150.83 172.04 165.08 04-Dec-98 225.82 270.85 256.31
04-Aug-95 158.30 123.62 121.74 07-Apr-97 152.50 173.09 166.00 07-Dec-98 224.36 273.65 258.70
07-Aug-95 158.30 123.97 121.98 08-Apr-97 154.97 174.15 166.87 08-Dec-98 224.16 272.69 257.32
08-Aug-95 159.15 124.08 122.06 09-Apr-97 153.76 172.69 165.67 09-Dec-98 232.48 272.67 257.78
09-Aug-95 159.96 123.91 121.91 10-Apr-97 152.50 171.90 165.18 10-Dec-98 221.43 268.05 253.76
10-Aug-95 160.82 123.24 121.42 11-Apr-97 146.65 166.99 160.67 11-Dec-98 221.23 268.29 254.07
11-Aug-95 160.82 122.77 120.91 14-Apr-97 150.83 168.77 161.99 14-Dec-98 211.65 262.67 248.57
14-Aug-95 161.67 123.94 121.92 15-Apr-97 152.90 171.66 164.39 15-Dec-98 218.10 268.96 253.28
15-Aug-95 158.75 123.62 121.66 16-Apr-97 152.90 173.29 166.31 16-Dec-98 206.66 268.50 253.09
16-Aug-95 154.16 123.75 121.97 17-Apr-97 155.42 173.25 165.92 17-Dec-98 215.38 272.47 257.01
17-Aug-95 153.30 123.47 121.77 18-Apr-97 156.23 174.33 166.92 18-Dec-98 228.74 275.37 258.77
18-Aug-95 153.30 123.24 121.80 21-Apr-97 157.49 173.28 165.62 21-Dec-98 226.22 278.32 261.99
21-Aug-95 154.97 122.93 121.56 22-Apr-97 158.75 176.91 168.72 22-Dec-98 222.89 278.35 262.15
22-Aug-95 155.42 123.24 121.87 23-Apr-97 167.07 176.43 168.51 23-Dec-98 223.95 285.00 267.59
23-Aug-95 152.50 122.67 121.35 24-Apr-97 168.73 176.06 167.97 24-Dec-98 224.96 284.27 267.10
24-Aug-95 151.24 122.70 121.42 25-Apr-97 167.47 174.63 166.71 28-Dec-98 222.29 283.85 266.93
25-Aug-95 151.24 123.29 122.00 28-Apr-97 170.40 176.42 168.36 29-Dec-98 223.75 286.55 270.48
28-Aug-95 149.57 122.88 121.77 29-Apr-97 176.25 181.69 172.95 30-Dec-98 223.10 283.53 268.33
29-Aug-95 149.57 123.32 121.98 30-Apr-97 178.32 183.40 174.54 31-Dec-98 225.62 281.99 267.74
30-Aug-95 150.38 123.54 122.18 01-May-97 182.90 182.32 173.93 04-Jan-99 233.33 282.41 267.50
31-Aug-95 149.97 123.84 122.38 02-May-97 185.83 185.67 177.08 05-Jan-99 242.06 287.29 271.13
01-Sep-95 151.24 124.39 122.81 05-May-97 184.97 189.62 180.84 06-Jan-99 256.23 294.58 277.13
05-Sep-95 153.76 125.50 123.97 06-May-97 180.84 189.44 180.30 07-Jan-99 250.83 295.41 276.56
06-Sep-95 158.30 125.71 124.19 07-May-97 179.58 186.48 177.65 08-Jan-99 252.70 296.93 277.73
07-Sep-95 156.23 125.66 124.22 08-May-97 180.84 187.52 178.66 11-Jan-99 247.45 293.85 275.29
08-Sep-95 155.42 126.13 124.74 09-May-97 185.38 188.73 179.65 12-Jan-99 240.80 287.81 269.98
11-Sep-95 157.49 126.30 125.00 12-May-97 185.38 192.24 182.45 13-Jan-99 232.88 286.10 268.87
12-Sep-95 159.96 127.12 125.57 13-May-97 187.04 191.15 181.47 14-Jan-99 229.35 280.51 264.03
13-Sep-95 159.56 127.77 126.06 14-May-97 189.56 191.87 182.10 15-Jan-99 239.99 287.80 270.80
14-Sep-95 158.75 129.05 127.12 15-May-97 192.08 193.37 183.37 19-Jan-99 247.45 291.00 272.70
15-Sep-95 154.16 129.25 127.06 16-May-97 192.08 189.67 180.73 20-Jan-99 259.76 292.25 273.71
18-Sep-95 153.30 128.99 126.93 19-May-97 192.89 191.05 181.50 21-Jan-99 253.30 288.09 269.03
19-Sep-95 154.56 129.20 127.25 20-May-97 194.55 193.35 183.32 22-Jan-99 258.09 284.96 266.86
20-Sep-95 160.82 130.14 127.81 21-May-97 194.96 192.85 182.82 25-Jan-99 267.47 287.61 268.78
21-Sep-95 163.74 129.37 126.98 22-May-97 192.89 191.56 182.02 26-Jan-99 254.16 292.80 272.77
22-Sep-95 163.74 129.19 126.71 23-May-97 194.15 194.20 184.49 27-Jan-99 247.91 290.09 270.78
25-Sep-95 161.22 129.47 126.73 27-May-97 191.23 195.05 185.08 28-Jan-99 245.39 295.16 275.61
26-Sep-95 160.82 129.41 126.64 28-May-97 188.75 194.05 184.53 29-Jan-99 242.66 298.99 278.72
27-Sep-95 159.56 129.24 126.56 29-May-97 190.42 193.12 183.85 01-Feb-99 237.07 296.76 277.28
28-Sep-95 161.22 130.14 127.61 30-May-97 186.64 192.97 184.77 02-Feb-99 238.93 293.78 274.88
29-Sep-95 162.48 129.81 127.29 02-Jun-97 190.82 193.03 184.35 03-Feb-99 243.72 296.76 277.07
02-Oct-95 160.82 129.12 126.71 03-Jun-97 192.49 193.01 184.16 04-Feb-99 239.99 290.51 271.94
03-Oct-95 158.30 129.37 126.84 04-Jun-97 200.81 191.49 182.99 05-Feb-99 236.41 288.36 269.96
04-Oct-95 153.76 129.34 126.65 05-Jun-97 204.14 192.07 183.71 08-Feb-99 240.80 290.24 270.91
05-Oct-95 155.82 129.53 126.90 06-Jun-97 203.73 195.42 186.89 09-Feb-99 239.33 283.16 264.89
06-Oct-95 154.56 129.61 126.87 09-Jun-97 202.87 196.64 187.95 10-Feb-99 240.19 285.92 266.50
09-Oct-95 149.17 128.68 125.98 10-Jun-97 202.07 196.90 188.47 11-Feb-99 238.73 293.31 273.15
10-Oct-95 142.91 128.67 125.79 11-Jun-97 197.08 197.92 189.40 12-Feb-99 232.48 287.65 267.94
11-Oct-95 149.17 128.94 126.21 12-Jun-97 200.00 200.80 192.42 16-Feb-99 229.95 289.33 270.50
12-Oct-95 151.64 129.72 127.01 13-Jun-97 202.07 203.07 194.57 17-Feb-99 225.62 286.02 266.61
13-Oct-95 149.57 130.03 127.31 16-Jun-97 210.79 203.63 194.70 18-Feb-99 228.74 288.60 269.50
16-Oct-95 149.97 129.82 126.99 17-Jun-97 220.83 203.75 194.82 19-Feb-99 232.07 289.58 269.91
17-Oct-95 149.57 130.70 127.81 18-Jun-97 232.07 202.38 193.65 22-Feb-99 242.26 296.57 277.09
18-Oct-95 149.97 130.85 127.95 19-Jun-97 229.95 204.00 195.59 23-Feb-99 244.78 296.66 276.88
19-Oct-95 144.98 131.82 128.65 20-Jun-97 229.95 204.59 195.75 24-Feb-99 237.27 291.76 273.01
20-Oct-95 142.91 131.00 127.96 23-Jun-97 229.95 200.00 191.37 25-Feb-99 233.74 290.97 271.18
23-Oct-95 143.72 130.45 127.43 24-Jun-97 234.54 204.38 195.23 26-Feb-99 232.07 288.71 269.72
24-Oct-95 146.24 130.82 127.76 25-Jun-97 241.65 202.18 193.63 01-Mar-99 229.55 288.54 269.25
25-Oct-95 139.59 129.95 126.87 26-Jun-97 238.73 200.99 192.48 02-Mar-99 227.69 285.43 266.93
26-Oct-95 122.89 128.60 125.62 27-Jun-97 241.20 201.68 193.27 03-Mar-99 228.29 285.71 267.41
27-Oct-95 126.22 129.31 126.27 30-Jun-97 239.54 201.02 192.79 04-Mar-99 225.42 290.95 271.53
30-Oct-95 126.22 130.23 127.04 01-Jul-97 235.00 202.70 194.08 05-Mar-99 232.68 298.31 277.81
31-Oct-95 128.74 129.76 126.66 02-Jul-97 233.54 205.69 196.91 08-Mar-99 232.27 300.22 279.39
01-Nov-95 128.34 130.01 127.25 03-Jul-97 239.54 208.59 199.72 09-Mar-99 233.08 299.22 278.77
02-Nov-95 127.08 131.15 128.45 07-Jul-97 246.24 207.84 198.69 10-Mar-99 237.67 300.84 280.29
03-Nov-95 126.68 131.16 128.63 08-Jul-97 244.78 209.44 200.12 11-Mar-99 244.98 303.38 282.65
06-Nov-95 124.56 130.53 128.17 09-Jul-97 243.72 206.67 197.67 12-Mar-99 241.65 302.65 281.98
07-Nov-95 119.57 130.15 127.71 10-Jul-97 247.45 207.80 199.03 15-Mar-99 248.71 306.01 284.74
08-Nov-95 117.90 131.40 128.88 11-Jul-97 247.71 208.59 199.66 16-Mar-99 255.62 306.09 284.54
09-Nov-95 121.23 131.65 129.22 14-Jul-97 246.65 209.28 200.03 17-Mar-99 260.16 303.87 282.68
10-Nov-95 125.42 131.83 129.10 15-Jul-97 250.58 211.06 201.64 18-Mar-99 265.81 307.77 286.76
13-Nov-95 126.68 131.95 129.01 16-Jul-97 262.68 213.32 204.00 19-Mar-99 264.35 303.51 283.00
14-Nov-95 124.56 131.40 128.35 17-Jul-97 258.95 212.55 202.92 22-Mar-99 266.41 303.24 282.51
15-Nov-95 122.89 132.68 129.37 18-Jul-97 253.30 209.12 199.36 23-Mar-99 257.49 295.00 274.91
16-Nov-95 123.30 133.44 130.11 21-Jul-97 243.32 208.72 198.85 24-Mar-99 257.49 296.69 276.32
17-Nov-95 122.49 133.98 130.70 22-Jul-97 252.90 213.52 203.43 25-Mar-99 268.73 302.30 280.98
20-Nov-95 121.23 133.32 130.00 23-Jul-97 262.28 213.91 203.99 26-Mar-99 261.83 300.50 279.41
21-Nov-95 121.63 134.22 130.74 24-Jul-97 278.32 214.47 204.80 29-Mar-99 269.74 307.88 285.37
22-Nov-95 119.97 133.72 130.34 25-Jul-97 277.26 214.24 204.48 30-Mar-99 266.62 306.25 283.32
24-Nov-95 123.75 133.96 130.68 28-Jul-97 269.99 213.61 203.97 31-Mar-99 274.79 301.86 280.19
27-Nov-95 126.68 134.06 130.98 29-Jul-97 266.01 214.44 205.24 01-Apr-99 270.80 303.42 281.79
28-Nov-95 129.55 135.17 132.09 30-Jul-97 273.73 216.68 207.42 05-Apr-99 275.79 310.39 287.76
29-Nov-95 132.48 135.57 132.35 31-Jul-97 272.67 217.06 207.86 06-Apr-99 269.74 310.59 287.05
30-Nov-95 130.41 134.77 131.86 01-Aug-97 266.01 215.51 206.30 07-Apr-99 274.99 314.12 289.01
01-Dec-95 127.08 135.38 132.21 04-Aug-97 266.62 216.62 206.99 08-Apr-99 273.52 317.22 292.74
04-Dec-95 127.08 136.96 133.67 05-Aug-97 262.88 216.93 207.44 09-Apr-99 262.88 318.09 293.69
05-Dec-95 130.01 137.89 134.54 06-Aug-97 268.94 219.09 209.17 12-Apr-99 266.62 320.00 295.93
06-Dec-95 130.01 138.30 135.08 07-Aug-97 272.06 216.67 207.18 13-Apr-99 268.53 318.14 294.01
07-Dec-95 126.68 137.41 134.21 08-Aug-97 267.88 212.26 203.34 14-Apr-99 266.87 312.29 289.35
08-Dec-95 127.48 137.74 134.50 11-Aug-97 260.82 212.58 204.09 15-Apr-99 269.54 312.61 288.13
11-Dec-95 125.82 138.52 134.94 12-Aug-97 256.23 210.14 201.81 16-Apr-99 278.11 312.16 287.29
12-Dec-95 124.96 138.62 134.78 13-Aug-97 251.44 209.16 200.83 19-Apr-99 280.18 304.80 280.87
13-Dec-95 125.82 139.41 135.41 14-Aug-97 252.04 209.42 201.43 20-Apr-99 271.00 309.09 284.50
14-Dec-95 118.76 138.13 134.37 15-Aug-97 237.87 202.93 196.21 21-Apr-99 281.24 315.91 291.02
15-Dec-95 119.57 137.84 134.25 18-Aug-97 246.24 207.23 198.75 22-Apr-99 298.74 322.13 295.97
18-Dec-95 118.76 135.83 132.17 19-Aug-97 246.04 210.30 201.70 23-Apr-99 294.35 320.92 295.54
19-Dec-95 117.10 136.90 133.29 20-Aug-97 257.89 213.51 204.60 26-Apr-99 299.14 322.12 296.23
20-Dec-95 119.16 135.42 131.98 21-Aug-97 253.30 209.92 201.49 27-Apr-99 297.08 321.83 296.84
21-Dec-95 120.42 136.27 132.97 22-Aug-97 247.45 209.36 201.16 28-Apr-99 287.04 319.25 294.25
22-Dec-95 119.97 136.41 133.29 25-Aug-97 247.25 208.41 200.42 29-Apr-99 285.38 317.25 292.49
26-Dec-95 121.23 136.97 133.80 26-Aug-97 244.58 206.41 198.87 30-Apr-99 283.71 315.43 290.82
27-Dec-95 120.83 136.85 133.85 27-Aug-97 246.04 206.66 199.02 03-May-99 294.15 319.83 295.06
28-Dec-95 118.76 136.59 133.76 28-Aug-97 241.20 204.15 196.83 04-May-99 289.36 314.32 290.13
29-Dec-95 119.57 136.77 134.16 29-Aug-97 238.73 202.83 195.92 05-May-99 290.17 318.55 293.46
02-Jan-96 124.16 138.14 135.20 02-Sep-97 254.77 209.68 202.04 06-May-99 287.04 314.91 290.14
03-Jan-96 126.22 138.34 135.33 03-Sep-97 260.62 209.83 202.10 07-May-99 293.70 318.27 292.96
04-Jan-96 128.74 137.48 134.54 04-Sep-97 257.69 210.67 202.76 10-May-99 298.08 316.49 291.93
05-Jan-96 129.55 137.53 134.33 05-Sep-97 254.36 210.42 202.36 11-May-99 302.07 319.22 295.27
08-Jan-96 132.07 137.98 134.71 08-Sep-97 252.24 210.92 202.83 12-May-99 307.87 320.94 297.10
09-Jan-96 126.68 136.04 132.75 09-Sep-97 250.38 211.53 203.35 13-May-99 311.20 321.78 297.87
10-Jan-96 124.96 133.41 130.36 10-Sep-97 242.66 208.11 200.18 14-May-99 304.34 314.46 291.39
11-Jan-96 130.01 134.51 131.27 11-Sep-97 242.26 206.69 198.77 17-May-99 303.93 315.15 291.76
12-Jan-96 129.55 134.20 131.08 12-Sep-97 248.51 208.90 201.24 18-May-99 303.28 314.20 290.41
15-Jan-96 127.08 133.90 130.65 15-Sep-97 246.85 207.34 200.34 19-May-99 307.06 316.97 292.79
16-Jan-96 130.41 135.85 132.53 16-Sep-97 248.31 212.81 205.97 20-May-99 296.82 315.22 291.61
17-Jan-96 128.34 135.13 132.08 17-Sep-97 252.90 212.59 205.40 21-May-99 297.08 313.61 289.75
18-Jan-96 127.89 135.54 132.48 18-Sep-97 250.83 213.10 206.33 24-May-99 289.96 307.37 284.60
19-Jan-96 129.15 136.39 133.26 19-Sep-97 249.57 213.93 207.03 25-May-99 282.70 302.26 279.76
22-Jan-96 130.01 136.77 133.61 22-Sep-97 257.03 215.19 208.10 26-May-99 287.49 307.93 284.19
23-Jan-96 128.34 136.71 133.47 23-Sep-97 257.49 214.69 207.34 27-May-99 287.24 302.42 279.11
24-Jan-96 134.14 138.49 135.04 24-Sep-97 261.42 213.01 205.72 28-May-99 287.04 307.50 283.56
25-Jan-96 132.88 137.84 134.40 25-Sep-97 264.95 211.47 204.29 01-Jun-99 291.07 305.42 281.91
26-Jan-96 133.33 139.03 135.40 26-Sep-97 266.87 213.26 205.88 02-Jun-99 287.24 306.11 282.03
29-Jan-96 132.88 139.82 135.96 29-Sep-97 271.41 215.15 207.65 03-Jun-99 285.83 307.03 283.06
30-Jan-96 132.48 141.18 137.25 30-Sep-97 279.98 213.31 206.33 04-Jun-99 286.43 313.92 289.20
31-Jan-96 133.74 142.38 138.53 01-Oct-97 295.41 215.12 208.10 07-Jun-99 291.28 315.66 290.68
01-Feb-96 133.33 142.84 139.06 02-Oct-97 289.36 215.99 209.20 08-Jun-99 303.18 310.69 286.93
02-Feb-96 134.59 142.18 138.50 03-Oct-97 293.29 216.67 210.20 09-Jun-99 304.19 311.57 287.22
05-Feb-96 138.73 143.50 139.71 06-Oct-97 289.16 218.16 211.86 10-Jun-99 306.61 307.95 283.77
06-Feb-96 138.73 144.91 140.78 07-Oct-97 284.97 220.91 214.14 11-Jun-99 305.40 305.73 281.77
07-Feb-96 136.66 145.90 141.56 08-Oct-97 283.31 219.16 212.11 14-Jun-99 299.75 306.38 281.85
08-Feb-96 137.47 147.15 142.90 09-Oct-97 284.97 218.33 211.41 15-Jun-99 299.95 308.31 283.41
09-Feb-96 134.14 146.91 142.97 10-Oct-97 276.20 217.25 210.62 16-Jun-99 305.40 316.02 289.78
12-Feb-96 134.59 148.14 144.07 13-Oct-97 276.45 217.62 210.86 17-Jun-99 305.60 318.56 291.85
13-Feb-96 131.67 147.87 143.87 14-Oct-97 275.79 217.58 211.34 18-Jun-99 302.17 319.08 292.49
14-Feb-96 132.88 147.01 142.79 15-Oct-97 275.39 216.07 210.35 21-Jun-99 308.02 320.90 293.83
15-Feb-96 133.33 145.71 141.87 16-Oct-97 270.40 213.41 208.07 22-Jun-99 314.47 317.73 290.97
16-Feb-96 134.59 144.84 141.14 17-Oct-97 267.68 211.24 205.65 23-Jun-99 315.68 316.81 290.36
20-Feb-96 135.00 143.45 139.54 20-Oct-97 272.87 213.81 208.14 24-Jun-99 314.07 313.19 286.59
21-Feb-96 139.13 145.50 141.16 21-Oct-97 287.04 217.82 211.77 25-Jun-99 311.65 313.39 286.49
22-Feb-96 142.46 148.06 143.51 22-Oct-97 286.38 216.67 210.95 28-Jun-99 314.88 317.35 289.98
23-Feb-96 142.06 148.16 143.56 23-Oct-97 270.80 212.07 207.07 29-Jun-99 320.52 322.83 294.36
26-Feb-96 141.25 146.06 141.68 24-Oct-97 267.07 209.29 205.10 30-Jun-99 325.57 328.86 298.99
27-Feb-96 141.25 145.47 140.98 27-Oct-97 242.26 194.96 191.02 01-Jul-99 321.94 331.23 300.79
28-Feb-96 140.39 144.96 140.43 28-Oct-97 259.15 206.20 200.79 02-Jul-99 323.35 334.40 303.03
29-Feb-96 137.92 144.04 139.49 29-Oct-97 262.48 205.29 200.20 06-Jul-99 329.20 333.46 302.35
01-Mar-96 138.33 144.96 140.35 30-Oct-97 254.56 201.40 196.83 07-Jul-99 327.58 336.02 304.04
04-Mar-96 137.92 146.08 141.75 31-Oct-97 261.22 203.88 199.22 08-Jul-99 325.57 335.35 303.72
05-Mar-96 138.33 147.31 142.84 03-Nov-97 268.08 209.39 204.52 09-Jul-99 327.99 337.48 305.65
06-Mar-96 137.07 146.33 142.01 04-Nov-97 262.28 209.43 204.91 12-Jul-99 318.10 337.00 304.74
07-Mar-96 134.14 146.81 142.37 05-Nov-97 269.54 209.48 205.35 13-Jul-99 329.00 336.04 303.54
08-Mar-96 129.15 142.23 137.98 06-Nov-97 265.41 208.49 204.31 14-Jul-99 342.11 336.87 304.54
11-Mar-96 131.67 143.99 139.40 07-Nov-97 260.16 206.48 202.02 15-Jul-99 351.59 339.35 307.03
12-Mar-96 131.22 143.40 138.77 10-Nov-97 252.70 204.85 200.63 16-Jul-99 349.57 342.57 309.03
13-Mar-96 131.22 143.82 139.08 11-Nov-97 252.04 205.63 201.21 19-Jul-99 354.01 339.89 306.60
14-Mar-96 132.88 144.58 139.59 12-Nov-97 235.00 201.81 197.33 20-Jul-99 335.25 331.48 299.95
15-Mar-96 132.88 144.89 139.71 13-Nov-97 229.95 204.62 199.66 21-Jul-99 334.44 331.59 300.43
18-Mar-96 135.80 147.45 142.16 14-Nov-97 231.62 207.38 202.21 22-Jul-99 306.20 327.22 296.44
19-Mar-96 136.66 147.24 141.95 17-Nov-97 237.07 211.49 206.09 23-Jul-99 312.46 326.27 295.56
20-Mar-96 134.59 146.60 141.57 18-Nov-97 237.87 209.83 204.36 26-Jul-99 307.41 323.49 293.56
21-Mar-96 133.33 146.41 141.40 19-Nov-97 236.01 211.49 205.74 27-Jul-99 317.10 327.50 296.84
22-Mar-96 134.59 146.68 141.71 20-Nov-97 240.19 214.68 208.88 28-Jul-99 323.35 328.22 297.40
25-Mar-96 119.16 146.47 141.59 21-Nov-97 244.78 216.38 209.77 29-Jul-99 322.74 322.32 292.09
26-Mar-96 119.57 147.18 142.23 24-Nov-97 229.15 212.25 206.20 30-Jul-99 326.37 319.00 289.41
27-Mar-96 118.31 146.13 141.34 25-Nov-97 223.75 213.39 207.10 02-Aug-99 320.93 318.55 289.27
28-Mar-96 121.23 146.23 141.35 26-Nov-97 224.96 213.36 207.28 03-Aug-99 318.31 318.18 287.99
29-Mar-96 121.23 145.24 140.60 28-Nov-97 223.30 214.33 208.10 04-Aug-99 313.46 314.78 284.32
01-Apr-96 118.76 147.25 142.39 01-Dec-97 234.75 218.55 212.32 05-Aug-99 312.46 318.02 286.14
02-Apr-96 120.42 147.72 142.72 02-Dec-97 224.76 217.62 211.64 06-Aug-99 306.40 314.72 283.22
03-Apr-96 119.97 147.77 142.86 03-Dec-97 217.90 218.58 212.75 09-Aug-99 304.79 313.60 282.68
04-Apr-96 119.16 147.89 142.85 04-Dec-97 222.69 218.26 211.95 10-Aug-99 298.13 310.65 279.11
08-Apr-96 117.50 145.21 140.32 05-Dec-97 223.75 221.07 214.28 11-Aug-99 312.25 315.77 283.58
09-Apr-96 116.64 144.80 139.88 08-Dec-97 225.82 220.58 213.97 12-Aug-99 315.68 314.23 282.76
10-Apr-96 115.83 142.76 137.98 09-Dec-97 223.50 218.37 212.54 13-Aug-99 328.19 321.58 289.19
11-Apr-96 117.50 142.37 137.48 10-Dec-97 213.31 217.14 211.23 16-Aug-99 324.16 323.38 289.86
12-Apr-96 117.10 143.64 138.68 11-Dec-97 200.00 213.25 208.00 17-Aug-99 328.59 326.46 292.78
15-Apr-96 119.57 144.83 139.94 12-Dec-97 185.38 212.25 207.66 18-Aug-99 320.52 323.58 290.31
16-Apr-96 121.23 145.58 140.49 15-Dec-97 187.49 214.69 209.84 19-Aug-99 321.13 321.12 288.29
17-Apr-96 119.97 144.76 139.75 16-Dec-97 189.36 215.99 210.85 20-Aug-99 321.73 325.21 291.13
18-Apr-96 122.49 145.02 140.19 17-Dec-97 198.94 214.99 210.31 23-Aug-99 323.35 331.43 296.27
19-Apr-96 122.09 145.28 140.50 18-Dec-97 199.14 212.19 208.08 24-Aug-99 333.23 333.13 296.99
22-Apr-96 120.83 145.97 141.12 19-Dec-97 196.62 210.33 206.22 25-Aug-99 343.12 337.92 300.97
23-Apr-96 119.57 146.74 141.92 22-Dec-97 201.66 211.86 207.73 26-Aug-99 337.67 333.61 296.66
24-Apr-96 122.09 146.54 141.62 23-Dec-97 193.29 207.87 204.55 27-Aug-99 337.07 330.52 293.67
25-Apr-96 121.23 146.88 142.20 24-Dec-97 198.08 206.60 203.15 30-Aug-99 333.84 324.58 288.39
26-Apr-96 118.76 146.96 142.33 26-Dec-97 199.34 207.81 203.97 31-Aug-99 331.82 323.17 287.60
29-Apr-96 118.76 147.16 142.48 29-Dec-97 200.40 211.49 207.65 01-Sep-99 332.02 325.96 289.92
30-Apr-96 119.57 147.17 142.49 30-Dec-97 202.87 215.37 211.46 02-Sep-99 321.73 323.86 287.32
01-May-96 119.97 147.11 142.58 31-Dec-97 201.66 214.72 211.37 03-Sep-99 335.05 333.28 295.62
02-May-96 119.16 144.73 140.14 02-Jan-98 203.73 216.25 212.38 07-Sep-99 349.57 332.11 294.15
03-May-96 119.57 144.27 139.76 05-Jan-98 211.25 216.27 212.82 08-Sep-99 337.67 330.37 292.77
06-May-96 119.97 144.16 139.58 06-Jan-98 204.99 213.65 210.53 09-Sep-99 337.67 331.38 293.54
07-May-96 119.16 143.62 139.02 07-Jan-98 206.86 213.13 209.97 10-Sep-99 349.97 332.77 294.41
08-May-96 119.97 145.24 140.44 08-Jan-98 203.93 211.46 208.24 13-Sep-99 342.91 330.89 292.77
09-May-96 118.31 145.22 140.59 09-Jan-98 190.62 205.19 202.06 14-Sep-99 343.92 329.04 291.06
10-May-96 118.31 146.58 142.03 12-Jan-98 190.62 208.01 204.57 15-Sep-99 341.30 323.91 287.07
13-May-96 118.76 148.75 144.09 13-Jan-98 194.15 210.55 207.38 16-Sep-99 337.87 324.41 287.18
14-May-96 117.50 149.89 144.98 14-Jan-98 196.62 211.95 208.65 17-Sep-99 336.46 329.11 290.87
15-May-96 119.57 149.71 144.94 15-Jan-98 193.55 210.49 207.08 20-Sep-99 331.01 329.09 290.90
16-May-96 118.76 149.50 144.81 16-Jan-98 203.33 212.91 209.43 21-Sep-99 317.30 322.04 284.81
17-May-96 118.31 150.67 145.70 20-Jan-98 213.92 217.02 213.15 22-Sep-99 325.37 322.69 285.45
20-May-96 119.16 152.15 146.62 21-Jan-98 210.79 215.19 211.45 23-Sep-99 322.54 314.77 278.89
21-May-96 118.31 151.81 146.54 22-Jan-98 206.45 213.46 209.76 24-Sep-99 316.09 314.10 278.23
22-May-96 118.76 152.97 147.77 23-Jan-98 207.26 212.45 208.58 27-Sep-99 324.96 315.36 279.52
23-May-96 118.31 152.34 147.24 26-Jan-98 212.05 212.78 208.44 28-Sep-99 324.96 315.34 279.28
24-May-96 118.76 152.85 147.79 27-Jan-98 213.51 215.62 211.06 29-Sep-99 324.16 309.86 276.27
28-May-96 117.10 151.71 146.42 28-Jan-98 221.23 218.13 212.90 30-Sep-99 325.97 313.90 279.39
29-May-96 116.24 150.76 145.48 29-Jan-98 226.02 220.07 214.65 01-Oct-99 319.92 312.94 279.41
30-May-96 117.10 151.52 146.30 30-Jan-98 222.04 218.86 213.52 04-Oct-99 331.62 318.67 284.16
31-May-96 117.10 150.80 145.74 02-Feb-98 228.95 223.59 218.09 05-Oct-99 328.39 318.82 283.45
03-Jun-96 115.83 150.58 145.43 03-Feb-98 226.63 224.47 219.12 06-Oct-99 339.28 324.39 288.69
04-Jun-96 117.10 151.51 146.49 04-Feb-98 218.31 224.71 219.32 07-Oct-99 338.68 322.01 287.00
05-Jun-96 117.50 152.71 147.77 05-Feb-98 225.16 224.00 218.58 08-Oct-99 340.09 326.07 291.00
06-Jun-96 117.10 151.35 146.59 06-Feb-98 226.63 225.84 220.53 11-Oct-99 338.88 325.75 290.83
07-Jun-96 116.24 151.73 146.66 09-Feb-98 218.51 225.31 220.15 12-Oct-99 325.16 320.37 286.00
10-Jun-96 115.83 151.40 146.41 10-Feb-98 222.89 227.48 221.95 13-Oct-99 317.10 313.35 280.01
11-Jun-96 115.83 151.13 146.15 11-Feb-98 228.54 227.96 222.17 14-Oct-99 314.88 313.74 279.55
12-Jun-96 115.83 150.75 145.73 12-Feb-98 244.98 228.99 223.07 15-Oct-99 312.46 304.27 271.70
13-Jun-96 114.57 150.46 145.48 13-Feb-98 241.86 228.18 222.19 18-Oct-99 303.38 306.62 273.17
14-Jun-96 114.98 149.93 145.03 17-Feb-98 254.36 228.59 222.77 19-Oct-99 307.82 308.25 274.73
17-Jun-96 114.57 149.91 144.88 18-Feb-98 252.04 230.69 224.80 20-Oct-99 302.77 317.11 280.85
18-Jun-96 112.91 149.27 144.21 19-Feb-98 250.38 229.85 223.97 21-Oct-99 321.73 315.91 279.59
19-Jun-96 112.05 149.08 144.18 20-Feb-98 250.58 230.95 225.26 22-Oct-99 325.37 320.09 283.52
20-Jun-96 111.25 149.32 144.21 23-Feb-98 254.97 232.12 226.12 25-Oct-99 324.76 318.57 281.77
21-Jun-96 108.32 150.83 145.25 24-Feb-98 260.41 230.54 224.47 26-Oct-99 316.69 316.84 279.22
24-Jun-96 106.25 151.13 145.68 25-Feb-98 258.95 233.45 227.16 27-Oct-99 310.44 319.24 282.44
25-Jun-96 105.80 151.06 145.60 26-Feb-98 262.48 234.14 228.41 28-Oct-99 318.91 328.76 292.40
26-Jun-96 105.80 150.15 144.71 27-Feb-98 259.56 234.33 228.56 29-Oct-99 335.45 334.75 296.86
27-Jun-96 108.32 151.05 145.62 02-Mar-98 262.08 233.82 228.20 01-Nov-99 323.35 332.50 294.94
28-Jun-96 108.72 151.15 146.07 03-Mar-98 253.50 235.14 229.14 02-Nov-99 327.79 330.45 293.55
01-Jul-96 109.18 152.61 147.22 04-Mar-98 252.50 233.89 228.12 03-Nov-99 342.51 331.85 295.12
02-Jul-96 108.72 151.98 146.72 05-Mar-98 242.66 230.22 225.45 04-Nov-99 355.02 333.73 296.80
03-Jul-96 108.72 151.31 146.46 06-Mar-98 244.33 234.73 229.94 05-Nov-99 354.82 335.57 298.45
05-Jul-96 105.80 147.85 143.20 09-Mar-98 251.44 233.84 229.21 08-Nov-99 345.94 338.30 299.93
08-Jul-96 107.06 146.76 142.13 10-Mar-98 251.64 236.20 231.81 09-Nov-99 354.41 335.11 297.38
09-Jul-96 108.72 147.07 142.61 11-Mar-98 251.03 237.03 232.73 10-Nov-99 370.15 336.54 299.16
10-Jul-96 107.51 147.86 142.90 12-Mar-98 249.12 237.62 233.04 11-Nov-99 391.73 338.52 300.90
11-Jul-96 104.59 145.41 140.64 13-Mar-98 251.64 237.38 232.76 12-Nov-99 375.39 341.33 304.08
12-Jul-96 102.92 145.54 140.75 16-Mar-98 249.12 239.76 235.08 15-Nov-99 378.62 340.22 303.72
15-Jul-96 97.48 141.48 137.18 17-Mar-98 242.91 240.17 235.34 16-Nov-99 377.61 346.82 309.30
16-Jul-96 100.81 141.39 136.87 18-Mar-98 239.99 241.77 236.44 17-Nov-99 376.00 345.36 307.27
17-Jul-96 102.07 142.94 138.11 19-Mar-98 238.53 242.63 237.36 18-Nov-99 376.40 350.00 310.37
18-Jul-96 103.33 144.79 140.18 20-Mar-98 239.99 245.20 239.41 19-Nov-99 375.59 349.81 309.73
19-Jul-96 103.33 143.96 139.12 23-Mar-98 240.80 243.79 238.62 22-Nov-99 367.73 352.17 309.50
22-Jul-96 99.60 142.67 138.04 24-Mar-98 247.91 246.26 240.82 23-Nov-99 361.47 348.72 305.95
23-Jul-96 99.14 140.69 136.54 25-Mar-98 254.97 246.41 240.01 24-Nov-99 373.17 351.63 308.66
24-Jul-96 97.53 140.75 136.49 26-Mar-98 255.37 246.31 239.77 26-Nov-99 393.55 351.81 308.56
25-Jul-96 103.33 141.94 137.48 27-Mar-98 252.50 245.18 238.60 29-Nov-99 389.71 349.81 306.64
26-Jul-96 101.26 143.09 138.51 30-Mar-98 247.05 245.30 238.19 30-Nov-99 385.68 344.88 302.52
29-Jul-96 102.07 141.77 137.42 31-Mar-98 244.78 246.92 239.98 01-Dec-99 403.43 349.47 304.44
30-Jul-96 106.25 142.84 138.37 01-Apr-98 244.98 248.80 241.37 02-Dec-99 399.60 351.32 306.91
31-Jul-96 110.39 143.87 139.39 02-Apr-98 242.91 251.10 243.95 03-Dec-99 404.24 358.30 312.19
01-Aug-96 111.25 146.44 141.58 03-Apr-98 237.07 251.53 244.54 06-Dec-99 413.72 356.09 310.02
02-Aug-96 111.65 149.30 144.30 06-Apr-98 244.58 250.53 244.25 07-Dec-99 415.13 352.99 306.94
05-Aug-96 108.72 148.83 143.81 07-Apr-98 239.79 248.65 241.67 08-Dec-99 422.39 352.06 305.78
06-Aug-96 109.58 149.51 144.27 08-Apr-98 246.65 246.67 239.95 09-Dec-99 431.67 353.59 306.70
07-Aug-96 110.84 149.96 144.66 09-Apr-98 248.51 248.93 241.92 10-Dec-99 427.23 356.44 308.65
08-Aug-96 109.98 149.55 144.32 13-Apr-98 251.84 249.17 241.70 13-Dec-99 415.73 356.27 308.25
09-Aug-96 110.39 149.31 144.21 14-Apr-98 256.03 250.47 243.02 14-Dec-99 401.82 354.16 305.63
12-Aug-96 110.84 150.67 145.01 15-Apr-98 255.82 252.12 243.80 15-Dec-99 390.52 358.17 307.84
13-Aug-96 109.18 149.41 143.80 16-Apr-98 250.58 250.23 241.37 16-Dec-99 419.57 360.44 309.03
14-Aug-96 110.39 149.97 144.20 17-Apr-98 250.18 253.44 244.54 17-Dec-99 424.81 361.31 309.52
15-Aug-96 110.84 150.09 144.25 20-Apr-98 265.20 253.28 244.75 20-Dec-99 414.73 360.08 308.88
16-Aug-96 110.84 150.44 144.89 21-Apr-98 277.26 254.11 245.40 21-Dec-99 422.79 363.61 312.22
19-Aug-96 110.39 150.46 145.19 22-Apr-98 303.53 255.28 246.25 22-Dec-99 426.83 365.04 312.81
20-Aug-96 111.65 150.31 145.00 23-Apr-98 298.08 252.64 243.86 23-Dec-99 429.45 370.29 317.65
21-Aug-96 111.65 150.06 144.86 24-Apr-98 300.81 249.85 241.31 27-Dec-99 428.64 370.95 317.37
22-Aug-96 114.57 151.33 146.08 27-Apr-98 297.08 245.52 236.66 28-Dec-99 425.21 371.01 317.50
23-Aug-96 113.31 150.58 145.29 28-Apr-98 294.15 244.76 236.35 29-Dec-99 423.40 370.51 318.76
26-Aug-96 112.91 149.75 144.60 29-Apr-98 295.16 246.80 238.42 30-Dec-99 430.66 369.81 318.98
27-Aug-96 114.17 150.20 145.15 30-Apr-98 300.40 250.45 242.15 31-Dec-99 435.70 370.14 320.02
28-Aug-96 114.17 149.75 144.80 01-May-98 317.25 252.79 244.17 03-Jan-00 455.07 368.25 316.97
29-Aug-96 113.31 148.01 143.19 04-May-98 312.86 252.96 244.40
30-Aug-96 112.91 146.97 142.01 05-May-98 320.37 251.54 242.97
</TABLE>
The number of outstanding common shares of Koninklijke Philips Electronics N.V.
('Royal Philips Electronics') was reduced to 339.1 million shares at year-end
1999. This reduction was mainly due to the 8% share reduction program that was
implemented in 1999. At the same time the shares were redenominated from NLG 10
to EUR 1.
This was accomplished through the conversion of a portion of Philips' surplus
paid-in capital into nominal share capital. The resulting adjusted nominal share
capital was reduced by making a cash distribution of NLG 9.07 per common share
to all Philips' shareholders, which amount equaled 8% of the December 17, 1998
closing price of NLG 113.40 on the Amsterdam Exchanges. Subsequently, every 100
outstanding common shares were exchanged for 92 new common shares, each of which
has a par value of EUR 1.
The exercise of convertible personnel debentures led to a 0.1 million increase
in the number of outstanding shares in 1999. These shares were delivered out of
treasury stock.
The increase in shares outstanding in 1998 of 3.7 million was a result of
exercises of Superclub warrants and convertible personnel debentures.
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<PAGE> 32
At the end of 1999, the Group held 6.2 million shares in treasury as a hedge
against the 6.4 million conversion and option rights outstanding at the end of
1999. At year-end 1998 7.8 million shares were held in treasury against a 7.2
million rights overhang.
> QUANTITATIVE AND QUALITATIVE DISCLOSURES
CONCERNING MARKET RISKS
Financial risk management
The Company is exposed to market risks, including the risk of changes in foreign
exchange rates, interest rates and certain commodity prices. To manage these
risks, the Company enters into various hedging transactions that have been
authorized pursuant to its policies and procedures. The Company does not
purchase or hold derivative financial instruments for trading purposes.
The analysis below presents the sensitivity of either the fair value of the
Company's financial instruments or of earnings to certain hypothetical changes
in foreign exchange rates and interest rates. Financial instruments consist, for
the purpose of this analysis, of debt instruments, liquid assets, securities and
derivative financial instruments. The following overview of the Group's risk
management activities contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those projected.
Foreign currencies
With regard to currency risks, it is the Company's policy to cover virtually all
of its significant transaction exposures, including certain anticipated
transaction exposures. For this purpose, the Company enters into forward
exchange and option contracts. Virtually all contracts that were outstanding at
December 31, 1999 were forward exchange contracts that will expire in 2000.
Financing of subsidiaries is mostly done in the functional currency of the
borrowing entity. If the financing currency is neither the functional currency
nor the main currency of the business, the entity's exposure to foreign exchange
risks is generally hedged, if this is not restricted for regulatory reasons.
As is shown in the sensitivity analysis below, the fair value of the Group's
financial instruments is affected by changes in foreign currencies. However,
changes in the fair value of financial instruments expressed in euros do not
generally affect earnings, as:
o a substantial part of the sensitivity calculated below is related to
derivative instruments that are concluded to offset foreign exchange
exposures in the businesses, such as committed transactions. These
offsetting business exposures are not financial instruments, and therefore
are not included in this sensitivity analysis. The changes in the value of
these hedges will be offset over time by changes in the value of hedged
business assets, liabilities or transactions;
o a large portion of the non-derivative financial assets and liabilities is
held by foreign subsidiaries in the same currency as their functional
currency. As the results of these subsidiaries are measured in the
functional currency, changes in the exchange rates will only affect the
value of these financial assets and liabilities expressed in euros at
consolidated level, and will not impact earnings.
The sensitivity analysis shows the following results. An instantaneous 10%
strengthening or weakening of the non-euro currencies versus the euro from their
levels at December 31, 1999, with all other variables held constant, would
result in an estimated net change in the fair value of the Company's financial
instruments of EUR 425 million versus EUR 48 million in 1998. The main reasons
for the increase in the FX sensitivity in
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<PAGE> 33
1999 were the increased level of hedging by the businesses, and the increased
level of foreign currency indebtedness as a consequence of certain foreign
business acquisitions such as VLSI.
Interest rates
At year-end 1999 the Company had a ratio of fixed-rate debt to total outstanding
debt of approximately 73%, compared to 68% one year earlier.
During 1999, Philips entered into interest rate swaps as hedges for a portion of
the long-term bonds. Below, the effects of these swaps are taken into account.
A sensitivity analysis shows the following results. If the long-term interest
rates were to decrease instantaneously by 1% point from their level of December
31, 1999, with all other variables (including foreign exchange rates) held
constant, the fair value of the long-term debt would increase by EUR 107
million. This increase is based on the assumption that the 'putable' bonds will
be repaid at their final maturity date. If the bond-holders required repayment
of the bonds at their respective put dates, the same decrease in interest rates
would raise the market value of the long-term bonds by EUR 88 million. If the
short-term interest rates were to decrease instantaneously by 1% from their
level of December 31, 1999, with all other variables (including foreign exchange
rates and composition of financing and deposits) held constant, the annualized
interest result on the net financing would decrease by EUR 10 million.
Commodities
The Company is a purchaser of certain base metals such as copper etc., precious
metals and energy. The Company covers a limited part of the commodity price risk
exposures by entering into hedge transactions such as forward purchasing
agreements. Almost all agreements outstanding at December 31, 1999 will expire
in 2000. If all commodity prices simultaneously decreased by 10%, the fair value
of the commodity hedges would decrease by EUR 8 million.
> EURO
At the start of the Economic and Monetary Union on January 1, 1999, Philips
introduced the euro as its reporting currency. Philips is one of the few
companies in Europe that changed its reporting currency to the euro on day one.
In the previous year, Philips had to adjust a large number of computer systems
and applications. By the end of 1998, these computer systems had been tested,
and only minor IT problems still had to be fixed. The technical changeover to
the euro at the beginning of 1999 went very smoothly.
During the transition period, 1999-2002, no one can be forced to use the euro
instead of EMU currencies. From the outset, Philips has offered its customers
the possibility of being invoiced in euros. Suppliers have been requested to
start invoicing in euros as of January 1, 1999. In the course of 1999 an
increasing number of suppliers sent euro invoices, although the number of euro
invoices received was less than a third of the total. With no incentives to make
payments in euros, our customers, on the other hand, expressed little interest
in euro invoicing.
In some European countries the number of euro price tags in the shops is
growing. Also, euro prices are appearing more often in advertisements. However,
the impact on Philips' businesses and on prices thus far has been limited,
because the markets are still dominated by local currencies. Management still
believes that in the longer term Philips stands to gain from the introduction of
a single European currency.
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<PAGE> 34
> MILLENNIUM
The Philips millennium program was business-driven. It integrated the internal
and external risk factors identified in the integral business chains, operating
in many different local and regional environments. Seven impact areas - customer
base, supply base, IT applications and IT infrastructure, corporate core
processes, facilities and services, and countries and regions - were dealt with
in accordance with a standard procedure.
Remediation and testing in all seven impact areas were largely completed in the
third quarter of 1999. From November 1, 1999, strict company-wide control of
changes in ICT was introduced in order to secure the achieved millennium
compliance in products, systems and processes.
Roll-over and contingencies
From April 1999 until November 1999, all Philips units established and
implemented integral roll-over plans, including detailed activity plans,
contingencies and a common global communication and reporting system, enabling
the Board of Management to monitor the global developments on a daily basis
during the roll-over.
The roll-over proceeded according to plan. Friday, December 31, 1999 and
Saturday, January 1, 2000 were mainly dedicated to the roll-over of the internal
and external systems, services and infrastructures. On Sunday, January 2, 2000
the emphasis shifted to the resumption of normal business operations. No
disruptions were encountered apart from a few minor incidents. Continuity in
products, services and business processes was maintained. On Thursday, January
6, 2000 the Company considered the roll-over process to be completed, though all
Philips units are instructed to remain vigilant during 2000 because of potential
residual risks in external environments, especially the total supply base.
Costs
The costs associated with the millennium program, including roll-over and
contingencies, are congruent with Philips' ongoing efforts to learn from the
millennium experience and to improve its ICT systems and its business processes,
and will provide future benefits to its operations.
The Company is able to confirm that the overall costs of the total program,
including those still to be incurred in 2000, are in line with the estimates of
approximately EUR 270 million given in the 1998 Annual Report. Additional costs
expected to be incurred in the year 2000 are believed to be less than EUR 10
million.
> CORPORATE GOVERNANCE
The Company has consistently improved its corporate governance over the past
decade by increasing transparency and accountability to its shareholders through
simplification of the corporate structure, by improving the supervision of the
Company's policies and activities, and by adopting recommendations on best
practices.
Business Controls
The Philips Policy on Business Controls is communicated to all levels of
management. Key elements are: setting clear policies; issuing clear directives;
delegating tasks and responsibilities clearly; carrying out supervision; taking
corrective action; and maintaining highly responsive accounting systems
including an internal control system (internal accounting controls). The
Company's internal control structure follows current thinking and practice in
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<PAGE> 35
integrating management control over company operations, compliance with legal
requirements and the reliability of financial reporting. It makes management
responsible for implementing and maintaining effective business controls,
including internal financial controls. The effectiveness of these controls is
monitored by self-assessment and by audits performed by internal and external
auditors. Accountability is enforced through the formal issuance of a Statement
on Business Controls by each business unit, resulting, via a cascade process, in
a statement by each product division.
Audit committees at each of the product divisions ensure adherence to the policy
and take corrective action where necessary. They are also involved in
determining the desired audit coverage. The entire process is reviewed on a
regular basis by the Corporate Audit Committee chaired by the CFO and
independently by Corporate Internal Audit. Reports on the functioning of the
process are sent to the Board of Management and the Audit Committee of the
Supervisory Board.
Communication with shareholders
Philips is continuously striving to improve relations with its shareholders. In
1999 the Shareholders' Communication Channel - a pilot project of Amsterdam
Exchanges, banks in the Netherlands and several major Dutch companies to
simplify contacts between a participating company and its shareholders - became
operational for the distribution of information. Recently, amendments to Dutch
law have been adopted to enable proxy solicitation as well. Due to the fact that
the Company has its General Meeting of Shareholders relatively early in the
year, proxy solicitation could not be introduced in time for the Company's
General Meeting of Shareholders on March 30, 2000.
As in 1999, Philips will use the Shareholders' Communication Channel to
distribute its Annual Report and the Agenda for the General Meeting of
Shareholders in 2000. Philips expects to use proxy solicitation for its General
Meeting of Shareholders in the year 2001.
The participants in the Shareholders' Communication Channel will continue to
discuss further improvements to the system, also taking into account practical
experience.
In a broader context, Philips is constantly striving to improve its contacts
with the financial community at large.
Business Principles
The Philips General Business Principles were issued in February 1998. These
govern the Company's business decisions and actions throughout the world,
applying equally to corporate actions and to the behavior of individual
employees when on company business. They incorporate the values on which all
Philips activity is or should be based - business focus, integrity, speed,
simplicity, quality, people and teamwork - and in almost all countries have been
translated into the local language. The responsibility for compliance with the
Principles rests first and foremost with the management of the business. In
every country a Compliance Officer has been appointed, and the Philips Intranet
provides information on how to contact the Compliance Officer. A corporate
Review Committee supervises the practical implementation of the Principles;
Corporate Internal Audit is responsible for auditing the compliance procedure.
It is the intention of the Review Committee to issue additional guidelines where
needed. In 1999 the Review Committee met six times, discussing, among other
things, the further
70
<PAGE> 36
implementation of the Principles, the question of how to increase awareness, and
reported violations.
> ENVIRONMENTAL PERFORMANCE
With regard to eco-efficiency, management initiated a pragmatic approach in 1994
and defined measurable targets, laid down in four-year action programs. The
present four-year program, running from 1998 until 2002, is called EcoVision,
and 1999 is the second year that Philips will report in quantitative terms on
its environmental progress on a worldwide scale by means of a dedicated
Corporate Environmental Report.
Under the EcoVision program, Green Flagships, or 'green' star products, must be
developed. These are defined as products with a better environmental performance
than their predecessors or competitors in one or more of five Green Focal Areas.
The provisional results for 1999 show that 34 Philips products were selected as
Green Flagships, of which 15 have actually been marketed as such.
Of the manufacturing sites, 81% are certified and manage their activities in
accordance with ISO 14001, the internationally accepted environmental standard.
In 1998 this was at a level of 52%, in 1997 30%.
Compared with the reference year 1994, energy saving improved from 20% in 1997
to 23% in 1998 and 25% in 1999. Under the present four-year program Philips is
also monitoring a number of other important parameters. The provisional data
shows the following improvements compared with the reference year 1994:
industrial waste - from a 28% saving in 1998 to 45% in 1999; and water
consumption - from 34% in 1998 to 40% in 1999.
> INFORMATION TECHNOLOGY
Two years ago initiatives were started to implement a new IT vision and
strategy. In 1999, three projects resulting from these initiatives were
successfully completed:
o A fully standardized state-of-the-art global communication network has
been implemented. This common network consists of an international
backbone, which interconnects country-based domestic networks. It is
designed to meet the rapidly growing requirements of traffic volume,
transmission speed, and quality of service demanded by Enterprise Resource
Planning systems and e-commerce applications.
o A single company-wide e-mail, groupware and knowledge management
infrastructure was made operational in 1999. It now serves 100,000 users
across businesses and geographic regions around the globe.
o Hardware and software in the desktop environment have been standardized,
leading to increased productivity, improved communication and lower costs.
Further operational efficiency and cost reductions will be achieved by
introducing common services that take advantage of the new communication
infrastructure.
The options available for doing business electronically are proliferating
rapidly. IT technology will be the enabler for Sales and Purchasing
organizations to execute the e-commerce strategy for their business and to
support their customer/vendor relations. Success depends on building solutions
on the foundation of a robust, secure IT infrastructure. Corporate IT is
partnering the product divisions in designing and supporting the implementation
of a technical framework that will allow integration of the divisions'
e-commerce activities.
71
<PAGE> 37
> HUMAN RESOURCES MANAGEMENT
With its new Human Resources approach, Philips is deploying a clear, uniform and
integrated approach to management recruitment and development. The first steps
have already been taken: key managerial functions have been defined, and the
current and potential top talent within the Company for these positions has been
identified - some 6,500 people in all. They will now take part in the Leadership
Competencies Program, a company-wide management development process geared to
helping the most promising employees develop their managerial skills in line
with Philips' needs as a global high-performance company.
In 1999, Philips conducted its third worldwide Employee Motivation Survey, which
consulted 203,000 employees. Given that this was a voluntary survey, the 76%
response rate was outstanding. The survey showed an average improvement of
around 2%, which, given the scale of the survey, is a very significant shift.
The Company continues to make progress, especially in important domains like
performance orientation, financial awareness and cooperative working
relationships; however, in other areas, such as immediate boss support,
management support and quality, there is clear room for improvement.
Accordingly, the latter are being addressed in the above-mentioned Leadership
Competencies Program as well as the BEST program.
> BUSINESS EXCELLENCE POLICY
In July 1999, Philips launched its Business Excellence through Speed and
Teamwork (BEST) program. BEST is intended to give renewed focus and impetus to
the drive towards world-class performance in all processes along the business
chain.
Under BEST, quality becomes a leadership issue driven by committed management.
With its emphasis on speed and teamwork, the program is a real driver for
cultural change. Quality is no longer an isolated function, but crucial to how
Philips manages its business and implements its strategies. For this reason,
BEST is integrated in every business performance review cycle, providing
measurement tools and focus through Business Balanced Scorecards.
The role of speed is recognized in BEST as the fundamental driver of business
excellence. Regarding teamwork, many thousands of improvement teams are
currently active throughout the Company. Quality improvement competitions in
various businesses have given a structure to these activities, producing very
substantial benefits not only for the Group's businesses and customers, but also
in terms of recognition and the opportunities for personal growth and
self-fulfillment they offer Philips' employees.
As a key new approach in BEST, headquarters and management audits support and
reinforce the improvement process by providing cross-business exposure to
leadership practice and by ensuring that headquarters clearly define their added
value and focus on processes as well as results.
With BEST, Philips is striving for a level of excellence in performance that
results in fully satisfied customers, loyal to its brand; employees operating to
their full potential; suppliers working with us in a truly value-adding fashion;
society perceiving Philips as really contributing to the quality of life; and,
last but not least, shareholders gaining a premium return on their investment.
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<PAGE> 38
> OUTLOOK
We view the year 2000 with optimism. The economic development in the various
regions of the world - except for Japan - is encouraging. The trend of improving
earnings should continue, supported by positive signs across all our product
divisions.
Capital expenditure will exceed depreciation charges as a result of investments
in profitable growth; employment will stay at about the same level as at the end
of 1999.
We will continue to reduce the cycle time of operating processes and improve
teamwork in the organization supported by the BEST program. Our disciplined
approach to improving operations, further tightening our business controls and
enhancing value-based management will be maintained.
We remain committed to achieve double-digit earnings growth and positive cash
flow each year, while closing in on our longer-term objective of 24% return on
net assets.
Eindhoven, February 15, 2000
Board of Management
Group Management Committee
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<PAGE> 39
BOARD OF MANAGEMENT
[Photographs of members of Board of Management.]
COR BOONSTRA 1938, Dutch
President and Chairman of the Board of Management and the Group Management
Committee
Member of the Board of Management and the Group Management Committee since June
1994; Chairman and President of the Company since October 1996
JAN HOMMEN 1943, Dutch
Executive Vice-President and Chief Financial Officer
Member of the Board of Management and the Group Management Committee and Chief
Financial Officer since March 1997
ADRI BAAN 1942, Dutch
Executive Vice-President
Member of the Board of Management since May 1998; member of the Group Management
Committee since May 1996
Chairman of the Consumer Electronics division since 1998
ARTHUR VAN DER POEL 1948, Dutch
Executive Vice-President
Member of the Board of Management since May 1998; member of the Group Management
Committee since May 1996
Chairman of the Semiconductors division since 1996
JOHN WHYBROW 1947, British
Executive Vice-President
Member of the Board of Management since May 1998; member of the Group Management
Committee since April 1995
Chairman of the Lighting division since 1995
74
<PAGE> 40
GROUP MANAGEMENT COMMITTEE
The Group Management Committee is composed of the Board
of Management and the following senior officers:
[Photographs of members of Group Management Committee.]
AD VEENHOF 1945, Dutch
Member of the Group Management Committee since January 1996 and Chairman of the
Domestic Appliances and Personal Care division since 1996
HANS BARELLA 1943, Dutch
Member of the Group Management Committee since March 1997 and Chairman of the
Medical Systems division since 1997
FRED BOK 1940, Dutch
Member of the Group Management Committee since April 1998 and Chairman of the
Business Electronics division from 1998 to August 1,1999
JAN OOSTERVELD 1944, Dutch
Member of the Group Management Committee since May 1998 and Senior Director of
Corporate Strategy since 1997
NICO BRUIJEL 1945, Dutch
Member of the Group Management Committee from July 1998 to January 1, 2000;
responsible for Corporate Human Resource Management and, as of April 1999, the
Regional Organizations
GERARD KLEISTERLEE 1946, Dutch
Member of the Group Management Committee and Chairman of the Components division
since January 1999
ARIE WESTERLAKEN 1946, Dutch
Member of the Group Management Committee since May 1998, Secretary to the Board
of Management since 1997 and Chief Legal Officer since 1996
AD HUIJSER 1946, Dutch
Member of the Group Management Committee since April 1999 and Head of Corporate
Research since October 1998
75
<PAGE> 41
SUPERVISORY BOARD
[Photographs of members of Supervisory Board.]
L.C. VAN WACHEM 1931, Dutch** ***
Chairman
Member of the Supervisory Board since 1993; second term expires in 2001
Former Chairman of the Committee of Managing Directors of the Royal Dutch/Shell
Group and currently Chairman of the Supervisory Board of Royal Dutch Petroleum
Company; also member of the Supervisory Boards of Akzo Nobel, BMW and Bayer, and
member of the Board of Directors of IBM, Atco and Zurich Insurance
C.J. OORT 1928, Dutch*
Member of the Supervisory Board since 1995; reaches the statutory age limit in
2000
Former Treasurer General of the Dutch Ministry of Finance and currently Chairman
of the Supervisory Boards of KLM Royal Dutch Airlines and the Robeco Group
W. DE KLEUVER 1936, Dutch* ***
Vice-Chairman and Secretary
Member of the Supervisory Board since 1998; first term expires in 2002
Former Executive Vice-President of Royal Philips Electronics
- --------------------------------------------------------------------------------
L. SCHWEITZER 1942, French
Member of the Supervisory Board since 1997; first term expires in 2001
Chairman and Chief Executive Officer of Renault and member of the Boards of
Pechiney, Banque Nationale de Paris and Electricite de France
W. HILGER 1929, German* **
Member of the Supervisory Board since 1990; third term expires in 2001
Former Chairman of the Board of Management of Hoechst and currently member of
the Supervisory Boards of Victoria Versicherung and Victoria Lebensversicherung
SIR RICHARD GREENBURY 1936, British**
Member of the Supervisory Board since 1998; first term expires in 2002
Former Chairman and Chief Executive Officer of Marks & Spencer and former
non-executive director of Lloyds TSB, British Gas, ICI and Zeneca
J-M. HESSELS 1942, Dutch
Member of the Supervisory Board since 1999; first term expires in 2003
Chief Executive Officer of Vendex KBB and member of the Supervisory Boards of
Achmea, Amsterdam Exchanges, Barnes & Noble.com, Laurus, Schiphol Group and
Royal Vopak
* Member of the Audit Committee
** Member of the Remuneration Committee
*** Member of the Nomination and Selection Committee
76
<PAGE> 42
REPORT OF THE SUPERVISORY BOARD
Profile of the Supervisory Board
The Supervisory Board will aim for an adequate spread of knowledge and
experience among its members in relation to the global and multi-product
character of the business of the Company. Consequently, the Board will aim for
an adequate level of experience in financial, economic, social and legal aspects
of international business and government and public administration. The
Supervisory Board further aims to have available adequate experience within
Philips by having one or two former Philips executives on the Supervisory Board.
In the case of vacancies the Supervisory Board will ensure that when such
persons are recommended for appointment, these various qualifications are
reflected sufficiently.
Term of appointment
Members of the Supervisory Board are appointed for a fixed term of four years.
In principle, they may be re-elected for two additional terms of four years (for
further information, see page 75 of the separate booklet entitled 'Financial
Statements').
________________________________________________________________________________
The Supervisory Board met seven times in the course of 1999. Except in matters
regarding the composition of the Supervisory Board, the Board of Management and
the Group Management Committee, the members of the Board of Management and/or
the Group Management Committee were present at Board meetings to inform us on
the course of business, important decisions and the strategy of the Philips
Group. A number of important matters, such as the LG.Philips LCD Co. Ltd. joint
venture and the acquisition of VLSI Technology, Inc., were discussed at length.
A two-day meeting was devoted to strategy.
The Audit Committee met four times in the presence of the external auditor
before the publication of the annual and quarterly results. On behalf of the
Supervisory Board and in preparation for our decisions, this committee monitors
the effectiveness of internal financial control systems and reviews internal
audit programs and their findings. It also reviews the annual and quarterly
figures and discusses the scale and scope of the annual audit by the external
auditor. Important findings and identified risks are examined thoroughly so that
appropriate measures can be taken.
The Remuneration Committee met four times. This committee is responsible for
preparing resolutions regarding the remuneration of members of the Board of
Management and the other members of the Group Management Committee. In addition,
it advises the Supervisory Board with regard to the policy to be pursued. The
Nomination and Selection Committee met four times, in particular to discuss the
filling of vacancies in the Board of Management and/or the Group Management
Committee.
> COMPOSITION OF THE SUPERVISORY BOARD
At the General Meeting of Shareholders on March 25, 1999, Messrs A. Leysen and
F.A. Maljers retired from the Supervisory Board, while Messrs C.J. Oort and J-M.
Hessels were (re-)appointed with effect from the same date.
The Supervisory Board has appointed Mr L.C. van Wachem as its chairman as from
March 25, 1999.
At the General Meeting of Shareholders on March 30, 2000, Mr C.J. Oort will
retire from the Supervisory Board. Mr Oort joined the Supervisory Board in 1995
and has been Chairman of the Audit Committee. He reaches the statutory age limit
this year. We wish to express our gratitude to Mr Oort for his contribution to
the Company and wish him well for the future.
In agreement with the Meeting of Priority Shareholders we will propose at the
General Meeting of Shareholders on March 30, 2000 to elect Mr K. van Miert to
the Supervisory
77
<PAGE> 43
Board as from April 1, 2000. Mr van Miert (1942) served as a member of the
European Commission for ten years, and was responsible for competition policy;
he has extensive international experience.
Composition of the Board of Management / Group Management Committee
In the course of 1999, Messrs D.G. Eustace (April 1), Y.C. Lo (May 1) and R.
Pieper (June 1) retired as members of the Board of Management and the Group
Management Committee. We are most grateful to them for everything they did for
the Company, especially Mr Eustace, who served as Chief Financial Officer in
some difficult years. During 1999, Messrs M. Moakley (January 31) and K.
Bulthuis (April 1) retired as members of the Group Management Committee. Mr N.J.
Bruijel retired as a member of the Group Management Committee on January 1,
2000, and Mr F. Bok will do so on April 1, 2000. We wish to thank them for all
their efforts on behalf of the Company.
In agreement with the Meeting of Priority Shareholders we will propose at the
General Meeting of Shareholders to elect Mr G. Kleisterlee as a member of the
Board of Management and Executive Vice-President of the Company as of April 1,
2000. With effect from the same date Messrs T. Hooghiemstra and G.J.M. Demuynck
will be appointed as members of the Group Management Committee.
Financial statements
The financial statements of Koninklijke Philips Electronics N.V. for 1999, as
presented by the Board of Management, have been audited by KPMG Accountants
N.V., independent public auditors. Their report appears on page 70 of the
separate booklet entitled 'Financial Statements'. We have approved these
financial statements and recommend that you adopt them in accordance with the
proposal of the Board of Management and likewise adopt the proposal to declare a
dividend of EUR 1.20 per common share.
Eindhoven, February 15, 2000
The Supervisory Board
78
<PAGE> 44
[Pages 79 to end intentionally omitted.]
<PAGE> 45
ANNUAL REPORT 1999
FINANCIAL STATEMENTS
[Philips Logo]
PHILIPS
<PAGE> 46
[Pages 1 and 2 intentionally omitted.]
<PAGE> 47
ACCOUNTING PRINCIPLES
The consolidated financial statements are prepared on a basis consistent with
generally accepted accounting principles in the Netherlands ('Dutch GAAP').
Historical cost is used as the measurement basis unless otherwise indicated.
ACCOUNTING CHANGES
In accordance with new developments under Dutch GAAP and trends in international
accounting, the proposed dividend distribution to shareholders, which is subject
to approval by the General Meeting of Shareholders, is not recorded in the
balance sheet. Prior years are restated for comparison purposes. The amount of
dividend paid in 1999 from prior-year profit distribution amounts to EUR 361
million. Effective January 1, 1999, the Company adopted the Statement of
Position ('SOP') 98-1 issued by the Accounting Standards Executive Committee of
the American Institute of Certified Public Accountants. SOP 98-1, 'Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use',
requires companies to capitalize certain costs relating to the development and
purchase of software for internal use and to amortize these costs over the
estimated useful life of the software. The cost of capitalized software, net of
amortization in the year 1999, came to EUR 176 million.
PRESENTATION CHANGES
Beginning in 1999, results from divestitures other than segments of business,
which are represented as discontinued operations, are reported as income from
continuing operations and no longer as extraordinary items. This is in line with
recent developments in international accounting and is fully aligned with
US GAAP. Furthermore, interest on provisions for pensions has been included in
income from operations instead of financial income and expenses. Prior years
have not been restated. However, the 1999 figures in accordance with the
1998/1997 presentation have been provided in a footnote on the face of the
income statement. Additionally, the 1997 and 1998 figures have been reclassified
in accordance with the 1999 classification in the notes to the consolidated
financial statements.
3
<PAGE> 48
CONSOLIDATION PRINCIPLES
The consolidated financial statements include the accounts of Koninklijke
Philips Electronics N.V. ('Royal Philips Electronics' or 'the Company') and
companies that are majority-owned or otherwise effectively controlled. Minority
interests are disclosed separately in the consolidated statements of income and
in the consolidated balance sheets. Intercompany transactions and balances have
been eliminated.
Investments in companies in which Royal Philips Electronics does not have
majority voting interests or control the financial and operating decisions, but
does exert significant influence, are accounted for by the equity method.
Generally, significant influence is presumed to exist if at least 20% of the
voting stock is owned. The Company's share of the net income of these companies
is included in results relating to unconsolidated companies in the consolidated
statements of income. Investments in companies in which Royal Philips
Electronics does not exert significant influence are carried at cost or, if a
long-term impairment exists, at lower net realizable value.
Reporting currencies
Beginning in 1999, Philips' financial statements are reported in euros.
Previously presented financial statements denominated in Dutch guilders have
been translated into euros using the irrevocably fixed conversion rate
applicable since January 1, 1999 for all periods presented (EUR 1 = NLG
2.20371).
Foreign currencies
The financial statements of foreign operations are translated into euros. Assets
and liabilities are translated using the exchange rates on the respective
balance sheet dates. Income and expense items are translated based on the
average rates of exchange for the periods involved. The resulting translation
adjustments are charged or credited to stockholders' equity. Cumulative
translation adjustments are recognized as income or expense upon disposal of
foreign operations.
The functional currency of foreign operations is generally the local currency,
unless the primary economic environment requires the use of another currency.
However, when foreign operations conduct their business in economies considered
to be highly inflationary, they record transactions in a designated functional
currency instead of their local currency.
Gains and losses arising from the translation or settlement of
foreign-denominated monetary assets and liabilities into the local currency are
recognized in income in the period in which they arise. However, currency
differences on intercompany loans which have the nature of a permanent
investment, are accounted for as translation differences directly in
stockholders' equity.
4
<PAGE> 49
Derivative financial instruments
The Company uses derivative financial instruments principally in the management
of its foreign currency risks and to a more limited extent for interest rate and
commodity price risks. The Company measures derivatives based on spot rates.
Gains or losses arising from changes in the spot rates are recognized in the
income statement for the period in which they arise to the extent that they
hedge an asset or liability that has been recognized on the balance sheet. Gains
and losses relating to derivative financial instruments entered into as hedges
of firm commitments and risks related to securities are deferred until the
hedged transactions have been reflected in the accounts. Deferred gains and
losses on these hedges are reported in the balance sheet as deferred income or
expense under stockholders' equity.
Cash and cash equivalents
Cash and cash equivalents include all cash balances and short-term highly liquid
investments that are readily convertible into known amounts of cash. They are
stated at face value.
Securities
Securities designated as available for sale are carried at the lower of cost or
market value.
Receivables
Receivables are carried at face value, net of allowances for doubtful accounts.
Inventories
Inventories are valued at the lower of cost or market value less advance
payments on work in process. The cost of inventories comprises all costs of
purchase, costs of conversion and other costs incurred bringing the inventories
to their present location and condition. The costs of conversion of inventories
include direct labor, fixed and variable production overheads, product
development and process development costs, taking into account the stage of
completion. The cost of inventories is determined using the first-in, first-out
(FIFO) method. Provision is made for obsolescence.
Other non-current financial assets
Loans receivable are carried at face value, less a provision for doubtful
accounts. Investments in companies (securities) with a restriction on the sale
of these securities for a period of one year or more are accounted for at cost,
being the fair value upon receipt of the shares.
5
<PAGE> 50
Property, plant and equipment
Property, plant and equipment is carried at cost less accumulated depreciation.
Assets manufactured by the Company include direct manufacturing costs,
production overheads and interest charges incurred during the construction
period. Government grants are deducted from the cost of the related asset.
Depreciation is calculated using the straight-line method over the expected
economic life of the asset. Depreciation of special tooling costs is based on
the expected future economic benefit of these tools. In the event that an
impairment in value of fixed assets occurs, the loss is charged to income. Gains
and losses on the sale of property, plant and equipment are included in other
business income.
Intangible assets
Intangible assets, including goodwill arising from acquisitions, are amortized
using the straight-line method over their estimated economic lives, not to
exceed twenty years. Certain intangible assets purchased in an acquisition are
capitalized and amortized over their useful lives.
In-process Research and Development (R&D) is written off immediately upon
acquisition. Patents and trademarks acquired from third parties are capitalized
and amortized over their remaining lives.
Beginning in 1999, computer software developed by Philips or purchased from
third parties for the Company's own use is capitalized and written off over its
useful life.
If events or circumstances indicate that the carrying amount of intangible
assets may not be recoverable, an impairment test is applied based upon an
assessment of future cash flows to ensure that they are appropriately valued.
Costs of research and development are expensed in the period in which they are
incurred.
Provisions
The Company recognizes provisions for liabilities and losses which have been
incurred as of the balance sheet date and for which the amount is uncertain but
can be reasonably estimated. Additionally, the Company records provisions for
losses which are expected to be incurred in the future, but which relate to
contingencies that exist as of the balance sheet date.
The provision for restructuring relates to the estimated costs of planned
reorganizations that have been approved by the Board of Management and publicly
announced before the year-end, and which involve the realignment of certain
parts of the industrial and commercial organization.
When such reorganizations require discontinuance and/or closure of lines of
activities, the anticipated costs of closure or discontinuance are included in
restructuring provisions.
Provisions are stated at face value, with the exception of provisions for
postretirement benefits (including pensions) and severance payments in certain
countries where such payments are made in lieu of pension benefits; those
provisions are stated at the present value of the future obligations.
6
<PAGE> 51
Debt and other liabilities
Debt and liabilities other than provisions are stated at face value.
Revenue recognition
Sales are generally recognized at the time the product is delivered to the
customer, net of sales taxes, customer discounts, rebates and similar charges.
Service revenue is recognized over the contractual period or as services are
rendered. Revenues from long-term contracts are recognized in accordance with
the percentage-of-completion method. Provision for estimated contract losses, if
any, is made in the period that such losses are determined. Royalty income is
recognized on an accrual basis. Government grants, other than those relating to
assets, are recognized as income to the extent that it is more likely than not
that these grants will be received.
Financial income and expenses
Interest income and interest expense are recognized on an accrual basis.
Income taxes
Income tax expense is based on pre-tax financial accounting income. Deferred tax
assets and liabilities are recognized for the expected tax consequences of
temporary differences between the tax bases of assets and liabilities and their
reported amounts. Measurement of deferred tax assets and liabilities is based
upon the enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Deferred tax assets, including assets arising from loss carryforwards, are
recognized if it is more likely than not that the asset will be realized.
Deferred tax assets and liabilities are not discounted. Deferred tax liabilities
for withholding taxes are recognized in situations where the income of
subsidiaries is to be paid out as dividends in the near future, and in the case
of undistributed earnings of minority shareholdings.
7
<PAGE> 52
Benefit accounting
The Company accounts for the cost of pension plans and postretirement benefits
other than pensions substantially in accordance with SFAS No. 87 'Employers
Accounting for Pensions' and SFAS No. 106 'Postretirement Benefits other than
Pensions' respectively. Most of the Company's defined-benefit plans are funded
with plan assets that have been segregated and restricted in a trust to provide
for the pension benefits to which the Company has committed itself. When plan
assets have not been segregated by the Company or in such cases in which the
Company is required to make additional pension payments, the Company recognizes
a provision for such amounts. The costs related to defined-benefit pension plans
are in general terms the aggregate of the compensation cost of the benefits
promised, interest cost resulting from deferred payment of those benefits and,
in the case of plan assets segregated in a trust, the results on the amounts of
the invested plan assets. The cost component of the pension benefit
corresponding to each year of service is the actuarial present value of the
benefit earned in that year. In principle, the same amount of pension benefit is
attributed to each year of service. If and to the extent that as of the
beginning of the year the present value of the projected benefit obligation
differs from the market value of the plan assets or the existing pension
provision, the difference is amortized over the average remaining service period
of active employees. In the event, however, that at any date the accumulated
benefit obligation, calculated as the present value of the benefits attributed
to employee service rendered prior to that date and based on current and past
compensation levels, would be higher than the market value of the plan assets or
the existing level of the pension provision, the difference is immediately
charged to income.
In certain countries the Company also provides postretirement benefits other
than pensions to various employees. The cost relating to such plans consists of
the present value of the benefits attributed on an equal basis to each year of
service, and interest cost on the accumulated postretirement benefit obligation,
which is a discounted amount. The transition obligation is being recognized
through charges to earnings over a twenty-year period beginning in 1993 in the
USA and in 1995 for all other plans.
8
<PAGE> 53
Stock-based compensation
The Company accounts for stock-based compensation using the intrinsic value
method in accordance with Dutch GAAP, which is also in conformity with US
Accounting Principles Board Opinion No. 25, 'Accounting for Stock Issued to
Employees'. The Company has adopted the pro forma disclosure requirements of
SFAS No. 123, 'Accounting for Stock-Based Compensation'.
Discontinued operations
Any gain or loss from disposal of a segment of a business (product sector),
together with the results of these operations until the date of disposal, are
reported separately as discontinued operations. The financial information of a
discontinued segment of business is excluded from the respective captions in the
consolidated financial statements and related notes. Comparative figures for
prior periods are restated accordingly.
Extraordinary income and losses
Beginning in 1999, extraordinary items include transactions which occur
infrequently and are unrelated to the ordinary and typical activities of the
Company. Prior to 1999, extraordinary items included income or losses arising
from the disposal of a line of activity or closures of substantial production
facilities within a segment of business as well as significant gains or losses
from disposals of interests in unconsolidated companies.
Risks and uncertainties
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the consolidated financial
statements in order to conform with generally accepted accounting principles.
Changes in such estimates and assumptions may affect amounts reported in future
periods.
Cash flow statements
Cash flow statements have been prepared under the indirect method in accordance
with Dutch GAAP, which is in conformity with the requirements of SFAS No. 95
'Statement of Cash Flows'. Cash flows in foreign currencies have been translated
into euros using the average rates of exchange for the periods involved.
Cash flows resulting from the acquisition or sale of securities are reported
under cash flow from investing activities.
9
<PAGE> 54
CONSOLIDATED STATEMENTS OF INCOME OF THE PHILIPS GROUP
in millions of euros unless otherwise stated(1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999(2) 1998 1997
<S> <C> <C> <C>
Sales 31,459 30,459 29,658
Direct cost of sales (24,502) (24,121) (23,043)
------- ------- -------
Gross income 6,957 6,338 6,615
Selling expenses (4,337) (4,381) (4,061)
General and administrative expenses (1,212) (1,132) (924)
Other business income 388 190 132
Restructuring charges (45) (330) (48)
------- ------- -------
(2) Income from operations 1,751 685 1,714
(3) Financial income and expenses 32 (312) (319)
------- ------- -------
Income before taxes 1,783 373 1,395
(4) Income taxes (336) (41) (276)
------- ------- -------
Income after taxes 1,447 332 1,119
(5) Results relating to unconsolidated companies 409 39 94
------- ------- -------
Group income 1,856 371 1,213
(6) Minority interests (52) 170 18
------- ------- -------
Income from continuing operations 1,804 541 1,231
(7) Discontinued operations
Income from discontinued operations
(less applicable income taxes of EUR 75
million and EUR 161 million for 1998 and
1997 respectively) -- 210 263
Gain on disposal of discontinued operations
(no tax effect) -- 4,844 --
(8) Extraordinary items -- net (5) 458 1,108
------- ------- -------
(9) Net income 1,799 6,053 2,602
</TABLE>
(1) The consolidated financial statements for 1999 have been prepared in
euros. Amounts previously reported in Dutch guilders are now reported in
euros using the irrevocably fixed conversion rate which became effective
on January 1, 1999 (EUR 1 = NLG 2.20371). See the notes to the
consolidated financial statements.
(2) The 1999 results presented in line with previous years would result in
income from operations of EUR 1,644 million, financial income and expenses
of EUR 30 million (a loss), income from continuing operations of EUR 1,635
million and extraordinary items of EUR 164 million (net). Net income would
remain unchanged. See the notes to the consolidated financial statements.
10
<PAGE> 55
- --------------------------------------------------------------------------------
EARNINGS PER SHARE
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Weighted average number of common shares outstanding
(after deduction of treasury stock) during the year 344,510,238 360,056,076 349,397,603
Basic earnings per common share in euros:
Income from continuing operations 5.24 1.50 3.52
Income from discontinued operations -- 0.58 0.76
Gain on disposal of discontinued operations -- 13.45 --
Extraordinary items -- net (0.02) 1.28 3.17
Net income 5.22 16.81 7.45
Diluted earnings per common share in euros:
Income from continuing operations 5.19 1.49 3.45
Income from discontinued operations -- 0.58 0.74
Gain on disposal of discontinued operations -- 13.35 --
Extraordinary items -- net (0.01) 1.26 3.11
Net income 5.18 16.68 7.30
Dividend paid per common share in euros
(from prior-year profit distribution) 1.00 0.91 0.73
</TABLE>
11
<PAGE> 56
CONSOLIDATED BALANCE SHEETS OF THE PHILIPS GROUP
AS OF DECEMBER 31
in millions of euros unless otherwise stated
The consolidated balance sheets are presented before appropriation of profit.
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C> <C> <C>
CURRENT ASSETS
(10) Cash and cash equivalents 2,331 6,553
(11) Securities 1,523 --
(12) Receivables:
- Accounts receivable, net 5,326 4,341
- Other receivables 755 763
- Prepaid expenses 372 338
------- -------
6,453 5,442
(13) Inventories 4,566 4,274
------- -------
Total current assets 14,873 16,269
NON-CURRENT ASSETS
(5) Unconsolidated companies:
- Investments 2,060 955
- Loans 31 20
------- -------
2,091 975
(14) Other non-current financial assets 340 1,861
(15) Non-current receivables:
- Accounts receivable 185 286
- Other receivables 67 206
- Prepaid expenses 1,786 1,428
------- -------
2,038 1,920
(16) Property, plant and equipment:
- At cost 18,302 16,672
- Less accumulated depreciation (10,970) (10,098)
------- -------
7,332 6,574
(17) Intangible assets 2,822 554
------- -------
Total non-current assets 14,623 11,884
------- -------
Total 29,496 28,153
</TABLE>
The consolidated financial statements for 1999 have been prepared in
euros. Amounts previously reported in Dutch guilders are now reported in
euros using the irrevocably fixed conversion rate which became effective
on January 1, 1999 (EUR 1 = NLG 2.20371). See the notes to the
consolidated financial statements.
12
<PAGE> 57
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts and notes payable:
- Trade creditors 3,619 2,936
- Unconsolidated companies 13 12
------ ------
3,632 2,948
(18) Accrued liabilities 3,553 2,902
(19) (20) Short-term provisions 1,056 966
(21) Other current liabilities 789 929
(22) Short-term debt 577 801
------ ------
Total current liabilities 9,607 8,546*
NON-CURRENT LIABILITIES
(23) Long-term debt 2,737 2,786
(19) (20) Long-term provisions 2,062 2,019
------ ------
Total non-current liabilities 4,799 4,805
(24) Commitments and contingent liabilities
GROUP EQUITY
(6) Minority interests 333 242
Stockholders' equity:
Priority shares, par value NLG 5,000 in 1998,
EUR 500 per share in 1999:
Authorized and issued: 10 shares
Preference shares, par value EUR 1 per share:
Authorized: 749,995,000 shares
- Issued: none
Common shares, par value EUR 1 per share:
Authorized: 750,000,000 shares
- Issued: 339,078,811 shares
(368,494,824 shares, par value NLG 10, in 1998) 339 1,672
(25) Share premium 1,631 1,824
(25) Other reserves 10,988 5,011
Undistributed profit for the year 1,799 6,053
------ ------
14,757 14,560*
------ ------
Total 29,496 28,153
</TABLE>
* Restated for dividend distribution 1998
13
<PAGE> 58
CONSOLIDATED STATEMENTS OF CASH FLOWS OF THE PHILIPS GROUP
in millions of euros unless otherwise stated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 1,799 6,053 2,602
Adjustments to reconcile net income to net
cash provided by operating activities:
Income from, and net gain on disposal of,
discontinued operations -- (5,054) (263)
Depreciation and amortization 1,853 1,890 1,597
Net gain on sale of investments (491) (728) (1,393)
Income from unconsolidated companies
(net of dividends received) (410) (31) --
Minority interests (net of dividends paid) 38 (173) (45)
(Increase) decrease in working capital (469) 272 516
(Increase) decrease in non-current receivables (32) 43 (155)
Decrease in provisions (87) (177) (111)
Other items (288) 45 462
- -------------------------------------------------------- ------ ------ ------
Net cash provided by operating activities 1,913 2,140 3,210
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of securities 158 -- --
Purchase of intangible assets (software) (200) -- --
Capital expenditures on property, plant and equipment (1,662) (1,634) (1,627)
Proceeds from disposals of property, plant and equipment 286 240 225
Purchase of other non-current financial assets (119) (68) (174)
Proceeds from other non-current financial assets 67 132 239
Purchase of businesses (2,993) (867) (261)
Proceeds from sale of interests in businesses 629 756 1,643
- -------------------------------------------------------- ------ ------ ------
Net cash (used for) provided by investing activities (3,834) (1,441) 45
- -------------------------------------------------------- ------ ------ ------
Cash flows before financing activities (1,921) 699 3,255
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in short-term debt (257) (74) (1,502)
Principal payments on long-term debt (563) (565) (1,179)
Proceeds from issuance of long-term debt 103 194 402
Payments of conversion certificates -- -- (15)
Effect of other financial transactions -- 114 --
Treasury stock transactions (38) (157) (114)
Capital repayment to shareholders (1,490) -- --
Dividends paid (361) (326) (253)
- -------------------------------------------------------- ------ ------ ------
Net cash used for financing activities (2,606) (814) (2,661)
- -------------------------------------------------------- ------ ------ ------
Cash (used for) provided by continuing operations (4,527) (115) 594
</TABLE>
14
<PAGE> 59
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Cash (used for) provided by continuing operations (4,527) (115) 594
Effect of changes in exchange rates and
consolidations on cash positions 305 30 (40)
Net cash from discontinued operations -- 5,241 185
Cash and cash equivalents at beginning of year 6,553 1,397 973
- ---------------------------------------------------- ------ ------ ------
Cash and cash equivalents at end of year 2,331 6,553 1,712
Of which: cash and cash equivalents from
discontinued operations -- -- 315
------ ------ ------
Cash and cash equivalents from continuing operations 2,331 6,553 1,397
<CAPTION>
- ---------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS:
<S> <C> <C> <C>
(Increase) decrease in working capital:
Increase in accounts receivable and prepaid expenses (534) (133) (25)
(Increase) decrease in inventories 46 (60) (179)
Increase in accounts payable and accrued expenses 19 465 720
------ ------ ------
(469) 272 516
Net cash paid during the year for:
Interest 129 244 339
Income taxes 222 200 154
Additional common stock issued upon conversion of
long-term debt 29 25 65
Net gain on sale of investments:
Cash proceeds from the sale of investments 1,140 1,128 2,107
Book value of these investments (649) (400) (714)
------ ------ ------
491 728 1,393
Non-cash investing and financing information:
Assets received in lieu of cash 11 1,698 37
Treasury stock transactions:
Shares acquired (139) (323) (354)
Shares delivered upon exercise of stock options or
convertible personnel debentures 112 118 93
Exercise stock options/warrants (11) 48 147
</TABLE>
For a number of reasons, principally the effects of translation
differences and consolidation changes, certain items in the statements of
cash flows do not correspond to the differences between the balance sheet
amounts for the respective items.
The consolidated financial statements for 1999 have been prepared in
euros. Amounts previously reported in Dutch guilders are now reported in
euros using the irrevocably fixed conversion rate which became effective
on January 1, 1999 (EUR 1 = NLG 2.20371). See the notes to the
consolidated financial statements.
15
<PAGE> 60
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
OF THE PHILIPS GROUP
in millions of euros, unless otherwise stated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
number of shares* issued, share other total
--------------------------- paid-up premium reserves
outstanding issued capital
<S> <C> <C> <C> <C> <C> <C>
BALANCE AS OF DECEMBER 31, 1996 347,080,144 352,479,562 1,600 1,655 3,330 6,585
Issued upon exercise of:
- - Convertible debentures/conversion
certificates 1,544,714 6 36 42
- - Stock options (19) (19)
- - Warrants 10,752,840 49 117 166
Net income for the year 2,602 2,602
Dividend paid (253) (253)
Treasury stock transactions (224) (224)
Translation differences and other
changes 255 255
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AS OF DECEMBER 31, 1997 357,949,491 364,777,116 1,655 1,789 5,710 9,154
Issued upon exercise of:
- - Convertible debentures 80,847 3 22 25
- - Stock options (7) (7)
- - Warrants 3,636,861 17 39 56
Net income for the year 6,053 6,053
Dividend paid (326) (326)
Treasury stock transactions (205) (205)
Translation differences and other
changes (190) (190)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AS OF DECEMBER 31, 1998 360,690,217 368,494,824 1,672 1,824 11,064 14,560
Issued upon exercise of:
- - Convertible debentures 69,081 2 27 29
- - Stock options 20 (11) (11)
Net income for the year 1,799 1,799
Dividend paid (361) (361)
Treasury stock transactions (27) (27)
8% share repurchase (29,485,114) (1,333) (184) 27 (1,490)
Translation differences and other
changes 258 258
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AS OF DECEMBER 31, 1999 332,900,135 339,078,811 339 1,631 12,787 14,757
</TABLE>
* As from May 28, 1999, the par value of Philips' common shares
changed from NLG 10 to EUR 1 per share. The share repurchase program
was executed in May/June 1999.
The consolidated financial statements for 1999 have been prepared in
euros. Amounts previously reported in Dutch guilders are now
reported in euros using the irrevocably fixed conversion rate which
became effective on January 1, 1999 (EUR 1 = NLG 2.20371). See the
notes to the consolidated financial statements.
16
<PAGE> 61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF THE PHILIPS GROUP
all amounts in millions of euros unless otherwise stated
INTRODUCTION
The financial statements of Koninklijke Philips Electronics N.V. (the 'Parent
Company') are included in the statements of the Philips Group. Therefore, the
unconsolidated statements of income of Koninklijke Philips Electronics N.V.
('Royal Philips Electronics') only reflect the net after-tax income of
affiliated companies and other income after taxes.
The accompanying notes are an integral part of the consolidated financial
statements.
INTRODUCTION OF THE EURO
Beginning in 1999, Philips' consolidated financial statements are reported in
euros. Previously presented financial statements denominated in Dutch guilders
have been translated into euros using the irrevocably fixed conversion rate
applicable since January 1, 1999 for all periods presented (EUR 1 = NLG
2.20371).
Historically, the consolidated financial statements of the Group were prepared
using the Dutch guilder as the reporting currency. The euro was introduced on
January 1, 1999. The countries participating in the European single currency
are: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg,
Portugal, Spain and the Netherlands.
The Board of Management believes that the consolidated financial statements
reported in euros reflect the same trends as previously reported. Expression of
these historical amounts in euros does not eliminate or alter any translation
effect that existed when they were originally reported in Dutch guilders. The
consolidated financial statements may not be comparable with those of other
companies that are also reporting in euros if other companies restated their
financial statements from a currency other than the Dutch guilder.
PRESENTATION OF BALANCE SHEET
The current balance sheet presentation is somewhat different from the one used
under Dutch regulations and is more in line with common practice in the United
States in order to accommodate the expectations of foreign -- mainly US --
shareholders. Under the current format, the order of presentation of assets and
liabilities is based on the degree of liquidity.
17
<PAGE> 62
RECLASSIFICATIONS
In order to provide comparable financial information for 1998 and 1997 fully in
conformity with the 1999 presentation, items previously reported under
extraordinary items and financial income and expenses have been reclassified to
income from operations and results relating to unconsolidated companies, as
reflected in the following table:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------
after reclassification
----------------------
<S> <C> <C> <C>
Income from operations 1,751 1,195 1,438
Financial income and expenses 32 (253) (260)
------ ------ ------
Income before taxes 1,783 942 1,178
Income taxes (336) (142) (277)
------ ------ ------
Income after taxes 1,447 800 901
Results relating to unconsolidated companies:
- - Share in results 409 39 94
- - Results related to divestments -- -- 1,354
Minority interests (52) 170 18
------ ------ ------
Income from continuing operations 1,804 1,009 2,367
Discontinued operations -- 5,054 263
Extraordinary items -- net (5) (10) (28)
------ ------ ------
Net income 1,799 6,053 2,602
Income from continuing operations per common share 5.24 2.80 6.77
</TABLE>
(1) ACQUISITIONS AND DIVESTITURES
LG.PHILIPS LCD CO., LTD.
With effect from July 1, 1999, Philips and LG Electronics of South Korea
finalized a manufacturing joint venture agreement, creating a world-leading
supplier of Active Matrix Liquid Crystal Displays (AMLCDs).
Philips acquired a 50 per cent stake in LG's LCD business for EUR 1.7 billion
(EUR 0.2 billion of which has not yet been paid) and accounts for the investment
using the equity method. The cost of the acquisition was allocated on the basis
of the fair value of the assets acquired and liabilities assumed. The excess of
the Company's investment over its underlying equity in the recognized net
assets, commonly referred to as goodwill under Dutch GAAP, is EUR 1.3 billion.
The cost of the acquisition was allocated based upon preliminary estimates and
may be revised at a later date. Goodwill and other intangibles are being
amortized over their estimated useful lives, which average 15 years.
18
<PAGE> 63
VLSI TECHNOLOGY, INC.
In June 1999, the Company acquired all of the outstanding shares of VLSI
Technology (VLSI), a semiconductor business, at a cost of EUR 1.1 billion, which
includes EUR 0.1 billion of assumed debt. The results of operations for VLSI
have been included in the Company's consolidated financial statements from the
date of acquisition. The cost of the acquisition was allocated on the basis of
the fair value of the assets acquired and liabilities assumed. Based upon
independent appraisal, EUR 342 million was assigned to specific intangible
assets acquired, including purchased technology, in-process R&D, patents and
trademarks, and the value of the existing workforce. Of this amount, EUR 48
million, representing the value of in-process R&D that had not yet reached
technological feasibility and had no alternative future use, was charged to
expense as of the date of acquisition. EUR 305 million, representing the excess
of cost over the fair value of the net assets acquired, has been recorded as
goodwill. Goodwill and other intangibles are being amortized over their useful
lives, which average approximately 7 years.
VOICE CONTROL SYSTEMS (VCS) INC.
In June 1999, the Company completed its acquisition of Voice Control Systems at
a total cost of EUR 56 million. The results of operations for VCS have been
included in the Company's consolidated financial statements from the date of
acquisition. The cost of the acquisition was allocated on the basis of the fair
value of the assets acquired and liabilities assumed. Based upon independent
appraisal, EUR 36 million was assigned to specific intangible assets acquired,
of which EUR 7 million, relating to in-process R&D that had not yet reached
technological feasibility and had no alternative use, was charged to expense.
Additionally, EUR 26 million, representing the excess of cost over the fair
value of the net assets acquired, has been recorded as goodwill. The intangible
assets are being amortized over their estimated useful lives, which average
approximately 5 years.
MICRION/FEI CORPORATION
In August 1999, majority-owned Philips subsidiary FEI Corporation acquired all
of the outstanding common stock of Micrion Corporation in exchange for 5,064,150
newly issued FEI shares plus USD 30 million in cash. The merger was accounted
for as a purchase. The acquisition cost was allocated on the basis of the fair
value of the assets acquired and liabilities assumed. Based upon independent
appraisal, EUR 29 million was assigned to specific intangible assets acquired,
including existing technology and in-process R&D. Of this amount, EUR 13
million, representing the value of in-process R&D that had not yet reached
technological feasibility and had no alternative future use, was charged to
expense as of the date of the acquisition. EUR 22 million, representing the
excess cost over the fair value of the net assets acquired, has been recorded as
goodwill. The intangible assets are being amortized over their estimated useful
lives, which average approximately 10 years.
19
<PAGE> 64
ORIGIN B.V.
In June 1999, the Company acquired an additional 10% interest in Origin at a
cost of EUR 124 million. Philips now owns approximately 98% of Origin's
stockholders' equity. Goodwill resulting from the acquisition totaled EUR 107
million and will be amortized over 7 years.
CONVENTIONAL PASSIVE COMPONENTS
Under an agreement signed on September 27, 1998, Philips sold its Conventional
Passive Components activities to an affiliate of Compass Partners International
on January 14, 1999. Net assets were therefore no longer consolidated as of
December 31, 1998, but included under unconsolidated companies. However, sales
and income for 1998 have been included in the consolidated Group accounts of
that year.
In the first quarter of 1999, the transfer price of EUR 358 million was received
and the gain of EUR 169 million recognized.
PHILIPS CONSUMER COMMUNICATIONS
Effective September 27, 1998, Philips and Lucent Technologies terminated their
joint venture, Philips Consumer Communications (PCC).
Philips, which owned 60% of the venture, and Lucent, which owned 40%, each
regained control of the assets originally contributed. The joint venture was
formed on October 1, 1997.
Income from operations for 1998 included losses relating to the unwinding of the
joint venture, including a write-down of obsolete inventories (EUR 159 million)
and the subsequent restructuring of the PCC activities that were returned to
Philips (EUR 216 million).
Summarized financial information for the PCC joint venture, included in Philips'
consolidated financial statements in previous years, is as follows:
<TABLE>
<CAPTION>
9 months 1998 3 months 1997
<S> <C> <C>
Sales 1,376 570
Loss from operations (349) (55)
Loss before income taxes (350) (54)
Net loss (219) (30)
Net cash (used for) provided by operating
activities (378) 60
Net cash used for investing activities (48) (31)
Net cash provided by financing activities 395 53
</TABLE>
20
<PAGE> 65
ATL ULTRASOUND, INC.
ATL Ultrasound was acquired on October 2, 1998 for EUR 732 million in cash. ATL
Ultrasound is a leading company in the high-performance ultrasound market.
Included in the purchase price for ATL was goodwill of EUR 176 million,
in-process R&D of EUR 182 million and other identifiable intangible assets
amounting to EUR 228 million.
Goodwill and other intangible assets are capitalized and amortized over 12 years
and 8 years respectively. In-process R&D was charged to expense at the date of
acquisition.
PHILIPS CAR SYSTEMS
In December 1997, Philips and Mannesmann VDO signed a contract for the sale of
Philips Car Systems to Mannesmann. Car Systems' net assets were deconsolidated
as of December 31, 1997 and included under unconsolidated companies. Under the
agreement, the first tranche (EUR 460 million) of the transfer price was
received in the first quarter of 1998, while additional payments of EUR 31
million were received in 1998 for subsequently transferred activities. The final
tranche of EUR 134 million is due in the year 2000. The total net gain of EUR
379 million was recognized under extraordinary items in 1998.
(2) INCOME FROM OPERATIONS
Depreciation and amortization
Included in direct cost of sales is depreciation of property, plant and
equipment and amortization of intangible assets.
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Depreciation of property, plant and equipment 1,525 1,563 1,446
Amortization of goodwill relating to
consolidated companies 95 54 59
Amortization of other intangible assets 70 -- --
Amortization of patents and trademarks 6 2 --
Write-off of in-process R&D 68 202 --
----- ----- -----
1,764 1,821 1,505
</TABLE>
Depreciation of property, plant and equipment includes an additional write-off
in connection with the retirement of property, plant and equipment amounting to
EUR 17 million in 1999 (1998: EUR 15 million, 1997: EUR 20 million). In 1999,
additional depreciation costs relating to write-downs of EUR 40 million (1998:
EUR 67 million, 1997: EUR 66 million) arising from restructuring projects were
reported in the income statement, in the separate line item restructuring
charges.
21
<PAGE> 66
Research and development
Expenditures for research and development activities amounted to EUR 2,284
million, representing 7.3% of sales (1998: EUR 2,048 million, 6.7% of sales;
1997: EUR 1,841 million, 6.2% of sales).
These expenditures are included in direct cost of sales.
Salaries and wages
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Salaries and wages 6,910 6,878 6,885
Pension costs (42) 188 282
Other social security and similar charges:
- - Required by law 958 981 889
- - Voluntary 190 162 205
- -------------------------------------------- ------ ------ ------
Total 8,016 8,209 8,261
</TABLE>
Employees
The average number of employees during 1999 was 230,016 (1998: 252,680, 1997:
255,664). The number of employees by category is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------
beginning end average** average average
of year* of year
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Production 131,366 123,099 126,622 146,249 150,616
Research & development 20,543 21,987 21,104 20,657 21,238
Other 63,344 61,821 62,443 64,494 63,478
- --------------------------- ------- ------- ------- ------- -------
Permanent employees 215,253 206,907 210,169 231,400 235,332
Temporary employees 18,510 19,967 19,847 21,280 20,332
- --------------------------- ------- ------- ------- ------- -------
Total 233,763 226,874 230,016 252,680 255,664
</TABLE>
* including changes in consolidations at January 1, 1999
** (de)consolidation changes have not been taken into consideration in
determining the average number of employees
The number of employees at year-end 1999 decreased by 6,889 as compared to
the beginning of the year. This includes a decrease of 2,734 relating to
consolidation changes.
22
<PAGE> 67
Remuneration of the Board of Management and Supervisory Board
Board of Management
Remuneration and pension costs relating to the members of the Board of
Management amounted to EUR 9,412,000 (1998: EUR 11,711,000, 1997: EUR
7,863,000). The costs for former members of the Board of Management, which
relate to pension charges, amounted to EUR 1,470,000 (1998: EUR 7,638,000, 1997:
EUR 2,514,000).
In 1999, the present members of the Board of Management were granted 110,000
stock option rights (1998: 385,900 stock options, 1997: 331,300 stock options).
At year-end 1999, the members of the Board of Management held 370,000 stock
option rights (year-end 1998: 799,800) at a weighted average exercise price of
EUR 50.85 (year-end 1998: EUR 51.25). See note 26 to the financial statements
for further information on stock options and the tables on pages 71-76 for
further information on individual remuneration and interests in stock options
and Philips shares.
Supervisory Board
The remuneration of the members of the Supervisory Board amounted to EUR 414,000
(1998: EUR 377,000, 1997: EUR 329,000); former members received no remuneration.
The annual remuneration for individual members is EUR 40,840 and for the
Chairman EUR 74,874. Additionally, with effect from 1998, the membership of
committees of the Supervisory Board is compensated by an amount of EUR 4,538 per
year per committee. At year-end 1999 the present members of the Supervisory
Board held no stock options (1998: 28,100 stock options acquired before their
membership of the Supervisory Board; these stock options were exercised in May
1999). For further information on individual remuneration and interests in
Philips shares, see the tables on pages 74-75.
OTHER BUSINESS INCOME
Other business income consists of amounts not directly related to the production
and sale of products and services, including EUR 257 million relating to the net
gain from the disposal of certain business interests (1998: EUR 37 million,
1997: EUR 15 million). Other business income also includes gains of EUR 71
million from the sale of fixed assets (1998: EUR 74 million, 1997: EUR 42
million) and various smaller items.
23
<PAGE> 68
RESTRUCTURING CHARGES
The following table displays a rollforward of the restructuring provision from
December 31, 1997 to December 31, 1999:
<TABLE>
<CAPTION>
Type of costs balance additions utilized releases balance
December 31, December 31,
1997 1998
<S> <C> <C> <C> <C> <C>
Write-down of assets 41 192 (203) -- 30
Personnel costs 189 124 (118) (20) 175
Other costs 96 33 (61) (8) 60
---- ---- ---- ---- ----
Total 326 349 (382) (28) 265
<CAPTION>
Type of costs balance additions utilized releases balance
December 31, December 31,
1998 1999
<S> <C> <C> <C> <C> <C>
Write-down of assets 30 40 (46) (11) 13
Personnel costs 175 71 (116) (46) 84
Other costs 60 12 (33) (21) 18
---- ---- ---- ---- ----
Total 265 123 (195) (78) 115
</TABLE>
In 1999, the total restructuring charges to income amounted to EUR 123 million,
comprising EUR 71 million for personnel costs, of which EUR 35 million related
to Lighting, EUR 17 million to Professional, EUR 12 million to Miscellaneous,
EUR 6 million to Components and EUR 1 million to Consumer Products for a total
headcount reduction of approximately 1,500 persons, of whom 1,100 direct labor
and 400 indirect personnel. The 1999 charge also included EUR 40 million for
asset write-downs, mainly in Components and Lighting. Of this amount, EUR 4
million related to write-down of inventories, primarily in Components. The
restructuring charge for fixed-asset write-downs came to EUR 36 million and
related to Components, Lighting, Miscellaneous and Professional. The write-downs
are based on the discounted cash flow method. Other restructuring charges came
to EUR 12 million, largely relating to Professional, Lighting and Components.
Releases of surplus provisions amounted to EUR 78 million and were caused by
changes in the original plans.
The remaining prior-year provisions available at December 31, 1999 relate
primarily to personnel costs. The Company expects to make cash expenditures of
approximately EUR 100 million in 2000 with existing restructuring programs. All
existing programs will be completed by the end of 2000.
The 1998 restructuring charges of EUR 349 million included lay-off costs of EUR
124 million for approximately 4,000 persons. EUR 76 million of this charge
related to Consumer Products, EUR 17 million to Semiconductors, EUR 14 million
to Lighting, EUR 11 million to Components and EUR 6 million to Professional.
24
<PAGE> 69
The 1998 restructuring charges also included asset write-downs of EUR 192
million, primarily at Consumer Products, Professional and Components. Of this
amount, EUR 134 million of inventory write-downs were mostly in Consumer
Products and Professional. The restructuring charge for fixed-asset write-downs
came to EUR 58 million and related to Components, Lighting, Consumer Products,
Professional and Semiconductors.
Other restructuring charges amounted to EUR 33 million, largely relating to the
Consumer Products and Lighting sectors.
The year-end 1997 balance of EUR 326 million included provisions for all
sectors, of which Consumer Products, Lighting, Professional and Miscellaneous
were the most important ones. As of December 31, 1999, a total amount of EUR 7
million of the 1997 balance still remained in the provision, relating to
Lighting (EUR 4 million), Miscellaneous (EUR 2 million) and Professional (EUR 1
million). These remaining balances are needed for severance payments and are
believed to be adequate to complete the initiated restructuring plans.
(3) FINANCIAL INCOME AND EXPENSES
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Interest income 133 77 74
Interest expense (262) (321) (413)
- -------------------------------------------------- ---- ---- ----
Total interest expense (net) (129) (244) (339)
Gain on sale of securities 117 -- --
Other income from non-current
financial assets 39 39 72
Value adjustments of non-current
financial assets (1) (3) (4)
Interest on provisions for pensions -- (59) (59)
Foreign exchange gains (losses) 13 (40) 12
Miscellaneous financing costs (7) (5) (1)
- -------------------------------------------------- ---- ---- ----
Total 32 (312) (319)
</TABLE>
Interest income in 1999 was considerably higher than in the preceding years due
to higher cash levels principally resulting from the sale of PolyGram. Interest
expense decreased as a result of lower average debt, which declined from EUR 4.1
billion in 1998 to a net cash position of EUR 0.7 billion in 1999.
The gain on the sale of securities in 1999 represents the gain on the sale of a
portion of the JDS Uniphase shares. Other income from non-current financial
assets in 1999 mainly related to dividends received on the Seagram shares. The
corresponding results for 1998 include the gain on the sale of the equity
investment in Flextronics of EUR 27 million, whereas the 1997 results mainly
reflect the profit on the sale of the shares in Viacom and Fluke (together
amounting to EUR 58 million).
Foreign exchange gains (losses) include hedging costs of foreign currency
(mainly USD) loans to foreign subsidiaries.
Interest on provisions for pensions has been reclassified from financial income
and expenses to income from operations with effect from 1999.
25
<PAGE> 70
(4) INCOME TAXES
Tax on income from continuing operations amounted to EUR 336 million in 1999
(1998: EUR 41 million, 1997: EUR 276 million). In 1999, the tax benefit on
extraordinary items totaled EUR 2 million, compared to a EUR 96 million expense
in 1998 and a EUR 14 million benefit in 1997.
The components of income before income taxes are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Netherlands 479 330 219
Foreign 1,304 43 1,176
------ ------ ------
Income before income taxes 1,783 373 1,395
The components of income tax expense are as follows:
Netherlands:
Current taxes 45 1 (2)
Deferred taxes 35 90 74
------ ------ ------
80 91 72
Foreign:
Current taxes 229 100 179
Deferred taxes 27 (150) 25
------ ------ ------
256 (50) 204
------ ------ ------
Income tax expense from continuing operations 336 41 276
</TABLE>
Philips' operations are subject to income taxes in various foreign jurisdictions
with statutory income tax rates varying from 16% to 46%, which causes a
difference between the weighted average statutory income tax rate and the
Netherlands' statutory income tax rate of 35%.
26
<PAGE> 71
A reconciliation of the weighted average statutory income tax rate as a
percentage of income before taxes and the effective income tax rate is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Weighted average statutory income tax rate 33.3 30.7 34.5
Tax effect of:
Utilization of previously unrecognized loss
carryforwards (10.6) (93.0) (14.5)
New loss carryforwards not recognized 5.0 57.4 5.2
Changes in the valuation of other deferred taxes 5.4 16.7 (2.3)
Released valuation allowance (9.4) -- --
Exempt income and non-deductible expenses (4.0) 18.1 1.3
Tax incentives and other (0.9) (18.8) (1.5)
Effect of sale of PolyGram -- -- (3.0)
- ------------------------------------------------------- ----- ----- -----
Effective tax rate 18.8 11.1 19.7
</TABLE>
Deferred tax assets and liabilities
Deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------- -----------------------
assets liabilities assets liabilities
<S> <C> <C> <C> <C>
Intangible fixed assets 100 (20) 91 (9)
Property, plant and equipment 250 (230) 291 (322)
Inventories 90 (30) 91 (32)
Receivables 80 (80) 86 (27)
Provisions:
- - Pensions 90 (100) 127 (82)
- - Restructuring 30 -- 63 (5)
- - Guarantees 20 -- 14 --
- - Other 620 (210) 454 (86)
Other assets 151 (310) 63 (222)
Other liabilities 90 (226) 113 (140)
------ ------ ------ ------
Total deferred tax assets/liabilities 1,521 (1,206) 1,393 (925)
------ ------ ------ ------
Net deferred tax position 315 468
Tax loss carryforwards (including tax
credit carryforwards) 2,026 2,058
Valuation allowances (1,951) (2,163)
------ ------
Net deferred tax assets 390 363
</TABLE>
27
<PAGE> 72
At December 31, 1999, operating loss carryforwards expire as follows:
<TABLE>
<CAPTION>
Total 2000 2001 2002 2003 2004 2005/2009 later unlimited
- ----- ---- ---- ---- ---- ---- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5,300 50 110 130 260 190 440 320 3,800
</TABLE>
The Company also has tax credit carryforwards of EUR 170 million, which are
available to offset future tax, if any, and which expire as follows:
<TABLE>
<CAPTION>
Total 2000 2001 2002 2003 2004 2005/2009 later unlimited
- ----- ---- ---- ---- ---- ---- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
170 1 5 5 8 12 6 15 118
</TABLE>
Classification of the deferred tax assets and liabilities takes place at a
fiscal entity level as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Deferred tax assets grouped under non-current receivables 659 480
Deferred tax liabilities grouped under provisions (269) (117)
---- ----
390 363
<CAPTION>
Classification of the income tax payable and receivable is as follows:
1999 1998
<S> <C> <C>
Income tax receivable grouped under non-current receivables 20 36
Income tax receivable grouped under current receivables 92 136
Income tax payable grouped under current liabilities (196) (208)
</TABLE>
The amount of the unrecognized deferred income tax liability for temporary
differences, totaling EUR 170 million (1998: EUR 281 million), relates to
unremitted earnings in foreign Group companies, which are considered to be
permanently re-invested. Under current Dutch tax law, no additional taxes are
payable. However, in certain jurisdictions, withholding taxes would be payable.
(5) RESULTS RELATING TO UNCONSOLIDATED COMPANIES
Results relating to unconsolidated companies primarily consist of Philips' share
in the operating results of LG.Philips LCD Co. in Korea (1999 only), Taiwan
Semiconductor Manufacturing Co. and ASM Lithography. Also included are the
losses from the ongoing development costs of digitized street maps incurred by
Navigation Technologies Corporation (NavTech) and the one-off gain from the sale
of part of the shares of NavTech.
In 1998, an amount of EUR 7 million resulting from the sale of participations in
various companies was also included.
In 1997, the gain on the sale of the Company's stake in Bang & Olufsen was
included.
Furthermore, 1997 includes the Company's share in the losses of Grundig AG
through June 1997.
28
<PAGE> 73
Included in the amount presented in the income statement, but not in share in
income presented in the following table, is a charge of EUR 49 million (1998:
EUR 1 million, 1997: EUR 8 million), representing amortization of the excess of
the Company's investment over its underlying equity in the net assets of
unconsolidated companies, commonly referred to as goodwill under Dutch GAAP (EUR
47 million arising from the acquisition of LG.Philips LCD Co.).
Investments in, and loans to, unconsolidated companies
The changes during 1999 are as follows:
<TABLE>
<CAPTION>
total investments loans
<S> <C> <C> <C>
Balance as of January 1, 1999 975 955 20
Changes:
Acquisitions/additions 662 530 132
Sales/redemptions (190) (182) (8)
Share in income 412 518 (106)
Dividend declared (2) (2) --
Changes in consolidations 51 58 (7)
Translation and exchange rate differences 183 183 --
- --------------------------------------------- ------ ------ ------
Balance as of December 31, 1999 2,091 2,060 31
</TABLE>
The investments in unconsolidated companies at December 31, 1999 include EUR 28
million (1998: EUR 11 million) for companies accounted for under the cost
method.
The total book value of investments in, and loans to, unconsolidated companies
is summarized as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
LG. Philips LCD Co. 656 --
Taiwan Semiconductor Manufacturing Co. 1,021 624
ASM Lithography 146 120
Conventional Passive Components -- 102
Other 268 129
----- -----
Total 2,091 975
</TABLE>
The aggregate fair values of Philips' shareholdings in TSMC and ASML, based on
quoted market prices at December 31, 1999 were EUR 10.8 billion (1998: EUR 3.2
billion) and EUR 3.6 billion (1998: EUR 0.8 billion) respectively.
29
<PAGE> 74
Summarized financial information for the Company's equity investments in
unconsolidated companies on a combined basis is presented below:
<TABLE>
<CAPTION>
January-
December
1999
<S> <C>
Net sales 5,633
Income before taxes 1,254
Income taxes (124)
-------
Income after taxes 1,130
Net income 1,097
Total share in net income of unconsolidated companies recognized
in the consolidated statement of income 412
<CAPTION>
December
31,
1999
Current assets 3,866
Non-current assets 6,150
-------
10,016
Current liabilities (1,595)
Non-current liabilities (2,615)
-------
Net asset value 5,806
Share in net asset value of unconsolidated companies included in
the consolidated balance sheet 2,060
</TABLE>
(6) MINORITY INTERESTS
The share of third-party minority shareholders in Group income totaled EUR 52
million in 1999, in contrast to 1998 when third-party shareholders absorbed EUR
170 million of the net losses incurred by Group companies, principally the
losses at PCC (dissolved October 1998). Minority interests in 1997 amounted to
EUR 18 million.
Minority interests in consolidated companies, totaling EUR 333 million (1998:
EUR 242 million), are valued on the basis of their interest in the underlying
net asset value.
30
<PAGE> 75
(7) DISCONTINUED OPERATIONS
In December 1998, Philips completed the sale of all of its 75% shareholding in
PolyGram N.V. ('PolyGram'), to The Seagram Company Ltd. ('Seagram'). Philips
received EUR 5,233 million in cash and 47,831,952 Seagram shares, representing
approximately 12% of the outstanding Seagram shares. The sale of PolyGram
resulted in a gain of EUR 4,844 million, or EUR 13.45 per share, free of taxes.
The results of PolyGram have been classified as discontinued operations in the
accompanying financial statements.
PolyGram recorded sales of EUR 4,818 million in 1998 through the date of its
sale, and EUR 5,035 million in 1997. Philips' share in net income of PolyGram in
1998 and 1997 amounted to EUR 210 million and EUR 263 million respectively,
which is included under income from discontinued operations.
(8) EXTRAORDINARY ITEMS -- NET
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Extraordinary gains -- 589 1,445
Extraordinary losses (7) (35) (351)
Taxes 2 (96) 14
- ---------------------------------------- ------ ------ ------
Total (5) 458 1,108
</TABLE>
Extraordinary losses in 1999 amounted to EUR 7 million, resulting from the early
redemption of debt (1998: EUR 15 million, 1997: EUR 43 million).
Extraordinary items in 1998 totaled EUR 458 million, comprising the sale of
Philips Car Systems (gain of EUR 379 million) and the sale of the
Optoelectronics unit as well as various other items (gain of EUR 79 million).
Accumulated translation differences from prior years relating to the disposed
businesses reduced the gains on disposals (1998: EUR 5 million, 1997: EUR 5
million).
Those translation differences were previously accounted for directly within
stockholders' equity.
The principal components of the EUR 1,445 million extraordinary gain reported in
1997 were the sale of a 5.4% shareholding in TSMC (EUR 898 million), the sale of
50% of UPC (EUR 223 million) and the sale of a portion of ASML (EUR 184
million). Other gains related to various divestitures.
The principal components of the 1997 extraordinary losses were Grundig (EUR 221
million) and the above-mentioned costs resulting from the early repayment of
debt. Other losses related to various divestitures.
31
<PAGE> 76
(9) EARNINGS PER SHARE
The earnings per share data have been calculated in accordance with SFAS No. 128
'Earnings per Share' as per the following schedule:
<TABLE>
<CAPTION>
1999* 1998** 1997**
<S> <C> <C> <C> <C> <C> <C>
Weighted average number of shares 344,510,238 360,056,076 349,397,603
Basic EPS computation
Income from continuing operations available to holders
of common shares 1,804 541 1,231
Income from discontinued operations -- 210 263
Gain on sale of discontinued operations -- 4,844 --
Extraordinary items - net (5) 458 1,108
- ------------------------------------------------------- ----------- ----------- -----------
Net income available to holders of common shares 1,799 6,053 2,602
Diluted EPS computation
Income from continuing operations available to holders
of common shares 1,804 541 1,231
Plus interest on assumed conversion of convertible
debt, net of taxes -- 1 --
----------- ----------- -----------
Income available to holders of common shares 1,804 542 1,231
Income from discontinued operations -- 210 263
Gain on sale of discontinued operations -- 4,844 --
Extraordinary items - net (5) 458 1,108
- ------------------------------------------------------- ----------- ----------- -----------
Net income available to holders of common shares
plus effect of assumed conversions 1,799 6,054 2,602
Weighted average number of shares 344,510,238 360,056,076 349,397,603
Plus shares applicable to:
- - Options 1,738,688 2,010,923 3,406,612
- - Warrants -- -- 2,630,931
- - Convertible debt 1,057,638 952,124 906,763
--------- --------- ---------
Dilutive potential common shares 2,796,326 2,963,047 6,944,306
----------- ----------- -----------
Adjusted weighted average number of shares 347,306,564 363,019,123 356,341,909
</TABLE>
* par value EUR 1
** par value NLG 10
(10) CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes time deposits with banks totaling EUR 17
million (1998: EUR 20 million) that are not freely available for withdrawal.
32
<PAGE> 77
(11) SECURITIES
Securities of EUR 1,523 million principally relate to the JDS Uniphase shares
and the Seagram shares, both carried at the original acquisition price of the
shares.
The JDS Uniphase shares were received in connection with the sale of Philips
Optoelectronics to Uniphase Corporation in 1998. Philips received 3,259,646
common shares and 100,000 preference shares of Uniphase Corporation. During 1999
a portion of the originally obtained JDS Uniphase shares was sold. Upon the sale
of Philips' 75% equity interest in PolyGram to Seagram in 1998, Philips received
47,831,952 Seagram shares. The fair value upon receipt was EUR 161 million for
the Uniphase shares and EUR 1,403 million for the Seagram shares. The Seagram
shares are restricted from being sold until December 10, 2000.
At December 31, 1998, both shareholdings were included in other non-current
financial assets. During 1999, these shares were designated as available for
sale (immediately available or within a period of one year) and, consequently
they have been reclassified to securities.
The net realizable value (including deferred foreign exchange hedge results) of
the JDS Uniphase and Seagram shares at the balance sheet date amounted to EUR
1,533 million and EUR 1,939 million respectively (see note 27).
To assure the euro value of these shares, USD foreign-exchange contracts
totaling EUR 1,822 million were outstanding at year-end. On these hedges, a
pre-tax result of EUR 214 million has been deferred until the result on the sale
of the shares is realized.
(12) RECEIVABLES
Trade accounts receivable include installment accounts receivable of EUR 13
million (1998: EUR 2 million) and receivables from unconsolidated companies,
primarily representing trade balances, totaling EUR 52 million (1998: EUR 66
million). Discounted drafts of EUR 22 million (1998: EUR 29 million) have been
deducted.
Income taxes receivable (current portion) totaling EUR 92 million (1998: EUR 136
million) are included under other receivables.
The changes in the allowances for doubtful accounts are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Balance as of January 1, 186 155 114
Additions charged to income 198 179 122
Deductions from allowances* (13) (60) (59)
Other movements** (93) (88) (22)
- ------------------------------------------ --------- --------- --------
Balance as of December 31, 278 186 155
</TABLE>
* Write-offs for which allowances were provided
** Including the effect of translation differences and consolidation changes
33
<PAGE> 78
(13) INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Finished products 2,089 2,101
Work in process, materials, parts and supplies 2,477 2,173
- ----------------------------------------------------- ---------- ---------
Total 4,566 4,274
</TABLE>
Included in work in process, materials, parts and supplies is EUR 303 million
(1998: EUR 242 million) of customer orders, net of advance payments of EUR 149
million (1998: EUR 110 million).
(14) OTHER NON-CURRENT FINANCIAL ASSETS
The changes during 1999 are as follows:
<TABLE>
<CAPTION>
total security loans restricted
investments liquid
assets
<S> <C> <C> <C> <C>
Balance as of January 1, 1999 1,861 1,691 98 72
Changes:
Transfer to current assets (1,564) (1,564) -- --
Acquisitions/additions 119 5 89 25
Sales/redemptions (66) (6) (42) (18)
Value adjustments (3) (2) (1) --
Translation and exchange differences 8 -- 8 --
Changes in consolidations (15) 1 (16) --
- ----------------------------------------- -------- -------- -------- --------
Balance as of December 31, 1999 340 125 136 79
Accumulated total of write-downs
included in the book value 16 4 12 --
</TABLE>
Other non-current financial assets include security investments that generate
income unrelated to normal business operations.
Security investments include EUR 117 million of shares that are not available
for trade or redemption (1998: EUR 90 million).
The opening balance sheet position included the JDS Uniphase and Seagram
shareholdings, which were reclassified to securities under current assets in the
course of 1999 (see note 11).
(15) NON-CURRENT RECEIVABLES
Non-current receivables include receivables with a remaining term of more than
one year and the non-current portion of income taxes receivable totaling EUR 20
million (1998: EUR 36 million). Prepaid expenses in 1999 include prepaid pension
costs of EUR 1,065 million (1998: EUR 910 million) and deferred tax assets of
EUR 659 million (1998: EUR 480 million).
34
<PAGE> 79
(16) PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment and the changes during 1999 were
as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
total land machinery other prepayments no longer
and and equipment and productively
buildings installations construction employed
in progress
<S> <C> <C> <C> <C> <C> <C>
Balance as of January 1, 1999:
Cost 16,672 3,453 9,753 2,727 699 40
Accumulated depreciation (10,098) (1,690) (6,268) (2,108) -- (32)
- --------------------------------- --------- --------- --------- --------- --------- ---------
Book value 6,574 1,763 3,485 619 699 8
Changes in book value:
Capital expenditures 1,662 182 1,133 357 (14) 4
Retirements and sales (230) (89) (88) (43) (9) (1)
Depreciation (1,510) (124) (1,032) (352) (2) --
Write-downs (38) (15) (16) (6) (1) --
Translation differences 505 140 307 26 32 --
Changes in consolidations 369 156 101 3 109 --
- --------------------------------- --------- --------- --------- --------- --------- ---------
Total changes 758 250 405 (15) 115 3
Balance as of December 31, 1999:
Cost 18,302 3,787 10,995 2,659 814 47
Accumulated depreciation (10,970) (1,774) (7,105) (2,055) -- (36)
- --------------------------------- --------- --------- --------- --------- --------- ---------
Balance 7,332 2,013 3,890 604 814 11
</TABLE>
Land is not depreciated.
The expected service lives as of December 31, 1999 were as follows:
<TABLE>
<S> <C>
Buildings from 14 to 50 years
Machinery and installations from 5 to 10 years
Other equipment from 3 to 5 years
</TABLE>
35
<PAGE> 80
(17) INTANGIBLE ASSETS
The changes during 1999 were as follows:
<TABLE>
<CAPTION>
total goodwill software other
----------------------------- intangibles
relating to relating to
consolidated unconsolidated
companies companies*
<S> <C> <C> <C> <C> <C>
Balance as of January 1, 1999:
Acquisition cost 905 850 5 -- 50
Accumulated amortization (351) (349) (2) -- --
- --------------------------------- -------- -------- -------- -------- --------
Book value 554 501 3 -- 50
Changes in book value:
Reclassifications -- (176) -- -- 176
Acquisitions 2,426 486 1,332 200 408
Amortization and write-downs (288) (95) (49) (24) (120)
Translation differences 114 53 (3) 13 51
Changes in consolidation 16 -- -- 16 --
- --------------------------------- -------- -------- -------- -------- --------
Total changes 2,268 268 1,280 205 515
Balance as of December 31, 1999:
Acquisition cost 3,221 1,029 1,334 232 626
Accumulated amortization (399) (260) (51) (27) (61)
- --------------------------------- -------- -------- -------- -------- --------
Balance 2,822 769 1,283 205 565
</TABLE>
* Represents the excess of the Company's investment over its underlying
equity in the net assets of the unconsolidated companies.
A portion of the intangible assets recorded in conjunction with the acquisition
of ATL in 1998, primarily consisting of developed product technology, core
technology and assembled workforce, which was previously presented as goodwill,
has been reclassified to other intangibles.
The acquisitions of a 50% interest in LG.Philips LCD Co. of Korea, VLSI
Technology, VCS and a 10% incremental ownership in Origin led to an increase in
goodwill of EUR 1,767 million (see note 1). The remaining goodwill arose from
various smaller acquisitions.
As from January 1, 1999, Philips began to capitalize software for the Company's
own use. The amortization period for software is three years.
The amount of other intangibles acquired (EUR 408 million) includes the amounts
paid for in-process R&D relating to the acquisitions of VLSI, VCS and Micrion in
1999 (EUR 68 million), which amount was charged directly to the 1999 income
statement.
Additionally, it includes other specific intangible assets acquired in these
transactions, such as purchased technology, patents and trademarks and the value
of the assembled workforce.
36
<PAGE> 81
Amortization of goodwill relating to unconsolidated companies totaling EUR 49
million (1998: EUR 1 million, 1997: EUR 8 million) was not included in income
from operations but was charged against results relating to unconsolidated
companies. The major part, EUR 47 million, related to the acquisition in 1999 of
a 50% equity interest in a new joint venture with LG Electronics: LG.Philips LCD
Co.
(18) ACCRUED LIABILITIES
Accrued liabilities are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Salaries and wages payable 522 390
Income tax payable 196 208
Accrued holiday rights 234 206
Accrued pension costs 131 166
Commissions, freight, interest and rent payable 392 311
Other liabilities 2,078 1,621
- -------------------------------------------------- ------- -------
Total 3,553 2,902
</TABLE>
Other liabilities in 1999 include an amount of EUR 228 million, representing the
deferred payment in connection with the acquisition of LG.Philips LCD Co.
(19) PROVISIONS
Provisions are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Pensions (see note 20):
- - defined benefit plans 993 1,060
- - other postretirement benefits 356 294
Post-employment benefits 98 93
Deferred tax liabilities (see note 4) 269 117
Restructuring (see note 2) 115 265
Obligatory severance payments 206 195
Replacement and guarantees 411 395
Other provisions 670 566
- -------------------------------------- --------- --------
Total 3,118 2,985
Long-term 2,062 2,019
Short-term 1,056 966
</TABLE>
OBLIGATORY SEVERANCE PAYMENTS
The provision for obligatory severance payments covers the Company's commitment
to pay employees a lump sum upon reaching retirement age, or upon the employee's
dismissal or resignation. In the event that a former employee has died, the
Company may have a commitment to pay a lump sum to the deceased employee's
relatives.
37
<PAGE> 82
REPLACEMENT AND GUARANTEES
The provision for replacement and guarantees reflects the estimated costs of
replacement and free-of-charge services that will be incurred by the Company
with respect to products sold.
OTHER PROVISIONS
Other provisions include provisions for expected losses on existing
projects/orders totaling EUR 28 million (1998: EUR 45 million) and environmental
provisions of EUR 205 million (1998: EUR 162 million).
The changes in the provisions for obligatory severance payments, replacement and
guarantees and other provisions are as follows:
<TABLE>
<S> <C>
Balance as of January 1, 1999 1,156
Changes:
- - Additions 583
- - Utilization (452)
- -------------------------------------------------------------------- ---------
Balance as of December 31, 1999 1,287
</TABLE>
(20) PENSIONS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Employee pension plans have been established in many countries in accordance
with the legal requirements, customs and the local situation in the countries
involved. The majority of employees in Europe and North America are covered by
defined-benefit plans. The benefits provided by these plans are based primarily
on employees' years of service and compensation near retirement.
In addition to providing pension benefits, the Company provides other
postretirement benefits, primarily retiree healthcare benefits, in certain
countries.
Provided below is a table with a summary of the changes in the pension benefit
obligations and defined pension plan assets for 1999 and 1998, and a
reconciliation of the funded status of these plans to the amounts recognized in
the consolidated balance sheets.
Also provided below is a table with a summary of the changes in the accumulated
postretirement benefit obligation and plan assets for 1999 and 1998, and a
reconciliation of the obligation to the amount recognized in the consolidated
balance sheets.
38
<PAGE> 83
<TABLE>
<CAPTION>
1999 1998 1999 1998
--------------------------- ---------------------------
pension benefits postretirement benefits
<S> <C> <C> <C> <C>
BENEFIT OBLIGATION
Benefit obligation at beginning of year 17,526 16,427 519 451
Service cost 424 364 13 11
Interest cost 977 933 35 33
Employee contributions 35 33 -- --
Actuarial (gains) and losses (612) 317 16 76
Plan amendments (109) 3 3 --
Settlements (205) (129) (4) --
Curtailments (2) (3) (2) --
Changes in consolidations 144 325 1 --
Benefits paid (889) (798) (40) (34)
Exchange rate differences 483 (290) 37 (22)
Miscellaneous (41) 344 2 4
- --------------------------------------------------- ----------- ----------- ----------- -----------
Benefit obligation at end of year 17,731 17,526 580 519
PLAN ASSETS
Fair value of plan assets at beginning of
year 19,622 18,333 16 --
Actual return on plan assets 4,419 2,012 2 --
Employee contributions 35 32 -- --
Plan participants' contribution (37) (40) 3 --
Settlements (193) (105) -- --
Changes in consolidations 187 161 -- 16
Benefits paid (798) (738) (4) --
Exchange rate differences 577 (322) (3) --
Miscellaneous (13) 289 -- --
- --------------------------------------------------- ----------- ----------- ----------- -----------
Fair value of plan assets at end of year 23,799 19,622 14 16
Funded status 6,068 2,096 (566) (503)
Unrecognized net transition (asset)
obligation (283) (373) 167 176
Unrecognized prior service cost 61 171 6 3
Unrecognized net (gain) loss (5,905) (2,210) 37 30
- --------------------------------------------------- ----------- ----------- ----------- -----------
Net balances (59) (316) (356) (294)
Classification of the net balances is as follows:
- - prepaid pension costs under
non-current receivables 1,065 910
- - accrued pension costs under accrued
liabilities (131) (166)
- - provisions for pensions under
provisions (993) (1,060)
----------- -----------
(59) (316)
</TABLE>
39
<PAGE> 84
The weighted average assumptions underlying the pension computation at December
31 were:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Discount rate 6.1% 5.4%
Rate of compensation increase 3.4% 3.3%
Expected return on plan assets 7.0% 6.4%
</TABLE>
Contributions are made by the Company, as necessary, to provide assets
sufficient to meet the benefits payable to defined-benefit pension plan
participants. These contributions are determined based upon various factors,
including legal and tax considerations as well as local customs. The Company
funds certain defined-benefit pension plans and other postretirement benefit
plans as claims are incurred. The projected benefit obligation, accumulated
benefit obligation and fair value of plan assets for defined-benefit pension
plans with accumulated benefit obligations in excess of plan assets were EUR 340
million, EUR 318 million and EUR 278 million respectively as of December 31,
1999 (1998: EUR 555 million, EUR 520 million and EUR 441 million respectively).
The components of net periodic pension costs of major defined-benefit plans are
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Service cost - benefits earned during the period 424 364 287
Interest cost on the projected benefit obligation 977 933 941
Expected return on plan assets (1,353) (1,113) (996)
Net amortization of unrecognized net transition assets (100) (94) (90)
Net actuarial gain recognized (13) (56) (25)
Amortization of prior service cost 14 27 21
Settlement (gain) loss 8 (26) --
Minimum pension liability (gain) loss (29) 46 --
- ------------------------------------------------------- --------- --------- ---------
Net periodic pension cost (72) 81 138
</TABLE>
The Company also sponsors defined-contribution and similar-type plans for a
significant number of salaried employees. The total cost of these plans amounted
to EUR 30 million in 1999 (1998: EUR 166 million, 1997: EUR 203 million).
40
<PAGE> 85
The components of the net periodic cost of postretirement benefits other than
pensions are:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Service cost - benefits earned during the period 13 11 9
Interest cost on accumulated postretirement benefit
obligation 35 33 32
Expected return on plan assets (2) -- --
Amortization of unrecognized transition obligation 13 14 14
Net actuarial (gain) loss recognized 2 -- (1)
Curtailment cost 9 -- --
Settlement gain (5) -- --
------- ------- -------
65 58 54
</TABLE>
The accumulated postretirement benefit obligation was determined using a
weighted average discount rate of 6.6% (1998: 6.3%), an assumed compensation
increase, where applicable, of 4.8% (1998: 4.25%), and an expected return on
plan assets, where applicable, of 12.8% (1998: 12.8%). For measurement purposes,
the rate of increase in per capita healthcare costs is assumed to be on average
5.9% for 2000, reaching 5% by the year 2003. Healthcare cost trend assumptions
have a significant effect on the amounts reported for other postretirement
benefits. Increasing the assumed healthcare cost trend rate by 1 percentage
point would increase the accumulated postretirement benefit obligation as of
December 31, 1999 by approximately EUR 68 million and increase the net periodic
postretirement benefit cost for 1999 by EUR 5 million. Conversely, decreasing
the assumed healthcare cost trend by 1 percentage point would decrease the
accumulated postretirement benefits as of December 31, 1999 by approximately EUR
56 million and decrease the net periodic postretirement benefit cost for 1999 by
EUR 5 million.
(21) OTHER CURRENT LIABILITIES
Other current liabilities are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Advances received from customers on orders not covered by work in
process 147 146
Other taxes including social security premiums payable 389 392
Other short-term liabilities 253 391
- ------------------------------------------------------------------ ------- ------
Total 789 929
</TABLE>
(22) SHORT-TERM DEBT
Short-term debt consists of short-term bank borrowings totaling EUR 383 million
(1998: EUR 588 million), other short-term loans totaling EUR 98 million (1998:
EUR 70 million) and the current portion of long-term debt totaling EUR 96
million (1998: EUR 143 million). During 1999, the weighted average interest rate
on the bank borrowings was 5.5% (1998 and 1997: 6.5%).
41
<PAGE> 86
(23) LONG-TERM DEBT
<TABLE>
<CAPTION>
range of average rate amount due in due after due after average
interest rates of interest outstanding 2000 2000 2004 remaining
term
(in years)
<S> <C> <C> <C> <C> <C> <C> <C>
Convertible debentures 2.1-3.1 2.7 77 -- 77 -- 4.0
Other debentures 5.6-8.8 7.3 2,270 2 2,268 1,216 6.0
Private financing 3.0-3.5 3.3 11 4 7 -- 4.5
Bank borrowings 1.3-6.5 6.4 201 45 156 10 2.4
Other long-term debt 4.2-7.0 4.8 274 45 229 52 3.3
- -------------------------- ---------- ---------- ------- ----------- ------------
Total 6.8 2,833 96 2,737 1,278
Corresponding data previous year 6.7 2,929 143 2,786 1,530
</TABLE>
The following amounts of long-term debt as of December 31, 1999 are due in the
next five years:
<TABLE>
<S> <C>
2000 96
2001 663
2002 268
2003 234
2004 294
-------
1,555
Corresponding amount previous year 1,399
</TABLE>
In 1999 and 1998 a certain amount of debt was repaid prior to maturity,
resulting in payment of a redemption premium which was classified as an
extraordinary item (see note 8).
In the Netherlands, Philips issues personnel debentures with a 5-year right of
conversion, all of which are convertible into common shares of Royal Philips
Electronics. Personnel debentures which were issued after December 31, 1998 may
not be converted within a period of 3 years after the date of issue. These
personnel debentures are available to most permanent employees and are purchased
by them with their own funds. The personnel debentures issued on or before
December 31, 1998 are redeemable on demand but in practice are considered to be
a form of long-term financing. The personnel debentures become non-convertible
debentures at the end of the conversion period. At such time, they will be
reported as other long-term debt.
At December 31, 1999 an amount of EUR 77 million (1998: EUR 76 million) of
personnel debentures was outstanding, with an average conversion price of EUR
66.39 and an average interest rate of 2.7%. The conversion price varies between
EUR 25.68 and EUR 135.90, with various conversion periods ending between January
1, 2000 and December 31, 2004.
At the end of 1999, the Group had long-term committed and undrawn credit lines
available of USD 2.5 billion, unchanged from a year earlier.
42
<PAGE> 87
(24) COMMITMENTS AND CONTINGENT LIABILITIES
Long-term lease commitments totaled EUR 810 million in 1999 (1998: EUR 630
million). These leases expire at various dates during the next 40 years. The
payments which fall due in connection with these obligations during the coming
five years are:
<TABLE>
<S> <C>
2000 184
2001 73
2002 192
2003 165
2004 30
</TABLE>
Guarantees given with regard to unconsolidated companies and third parties
amounted to EUR 290 million (1998: EUR 363 million). The amount of conditional
liabilities was EUR 27 million (1998: EUR 26 million).
Royal Philips Electronics and certain of its Group companies are involved as
plaintiff or defendant in litigation relating to such matters as competition
issues, commercial transactions, product liability, participations and
environmental pollution. On the basis of information received to date, the Board
of Management believes that this litigation should not materially affect Royal
Philips Electronics' financial position and results of operations.
During 1999 the Company entered into agreements for the construction of the
first phase of the High Tech Campus. A third party will construct the Campus on
land already in the possession of the Company and will lease these buildings to
Philips until 2007.
Commitments have been entered into, and a guarantee has been issued, for all
present and future monetary payment obligations of the lessee, being Philips
Electronics Nederland B.V., with a maximum amount of EUR 130 million. The actual
contingent liability outstanding at year-end from this guarantee is EUR 10
million, which is the amount spent so far. The first lease payments are
anticipated to be due as from 2001, when the first premises will become
available for use.
(25) SHARE PREMIUM AND OTHER RESERVES
Share capital/share premium
Both share capital and the share premium account have been influenced by the
share reduction program which was adopted by the General Meeting of Shareholders
in March 1999 and completed in June 1999. The first step involved a EUR 184
million increase of Philips' share capital from a corresponding reversal of the
share premium account, with an increase in the par value of Philips' outstanding
common shares to NLG 11.0974132 from NLG 10 per share. The second step was a
reduction of the par value of the common shares to NLG 2.0274132 and the return
of NLG 9.07 (per share) of share capital to the shareholders in cash (total
amount of share capital returned: EUR 1,490 million). The third step was to
convert the authorized share capital (92 'new' shares for 100 'old' shares = 8%
reduction) in combination with an increase of the par value to NLG 2.20371. The
last step involved the redenomination of the par value of Philips shares from
guilders to euros (EUR 1).
43
<PAGE> 88
Share premium is fully exempt from Dutch taxes upon distribution to Dutch
shareholders.
Warrants
Warrants for the purchase of common shares of Royal Philips Electronics were
issued in 1992 to the remaining shareholders in Superclub Holding & Finance S.A.
with an exercise price of EUR 15.43 (NLG 34.00). All remaining warrants expired
on June 30, 1998.
Option rights
Certain officers of the Company have been granted stock options on shares of
Royal Philips Electronics at original exercise prices equal to market prices of
the shares at the date of grant (see note 26).
Other reserves
The regular repurchase and delivery upon exercise of options and convertible
personnel debentures of Royal Philips Electronics' shares held as treasury stock
are accounted for in stockholders' equity under other reserves.
In order to reduce potential dilution effects, a total of 1,481,027 shares were
acquired during 1999 at an average market price of EUR 93.87 per share, and a
total of 2,579,640 shares were delivered at an average exercise price of EUR
64.64. A total of 6,178,676 shares were being held by Group companies as of
December 31, 1999 (1998: 7,804,607 shares), acquired at an average price of EUR
75.71 per share.
A net deferred foreign-exchange hedge loss (net of taxes) of EUR 161 million
(1998: EUR 2 million gain ) is included under other reserves.
(26) STOCK-BASED COMPENSATION
The Company has granted stock options on its common shares to members of the
Group Management Committee, Senior Management and certain key employees in the
USA. The purpose of the stock option plans is to align the interests of
management with those of shareholders by providing additional incentives to
increase the Company's performance on a long-term basis, thereby increasing
shareholder value. Under the Company's plans, options are granted at fair market
value on the date of grant. Exercise of all options is restricted by the
Company's rules on insider trading.
In 1999, stock options were granted to the members of the Group Management
Committee and to approximately 300 members of the Senior Management under the
Dutch Philips Stock Option Plan 1999 and the Global Philips Stock Option Plan
1999. Dutch grantees under these plans may opt for either the Dutch Plan or the
Global Plan. Under both plans, options are granted for five years, with a
three-year restriction period during which no stock options can be exercised.
44
<PAGE> 89
The main difference between the two plans is the Dutch tax consequences for the
participants. Options granted under the Dutch Plan are taxable upon the date of
grant, the taxable value being fixed at 20% of the exercise price, irrespective
of whether the options will be exercised or not. Options granted under the
Global Plan are taxable upon exercise; no tax is due if there is no share price
increase above the exercise price or if the options are not exercised.
In 1999, stock options were granted to approximately 500 employees in the USA
participating in the Philips Electronics North America Corporation Long Term
Incentive Plan. Under this plan, options are granted for ten years and vest
within three years. In prior years, options were issued with terms of either
five or ten years, all vesting within three years from the date of grant.
Additionally, prior to 1998, options were granted in the USA under the Company's
variable plans, subject to the achievement of certain financial objectives
during multi-year performance cycles.
The shares subject to the Plans are existing issued shares of the Company.
USD-denominated stock options are granted to employees in the USA only.
The pro forma net income, calculated as if the fair value of the options granted
to option holders would have been considered as compensation costs, is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Net income, as reported 1,799 6,053 2,602
Pro forma net income 1,775 6,034 2,597
Basic earnings per share, as reported 5.22 16.81 7.45
Pro forma basic earnings per share 5.15 16.76 7.43
</TABLE>
Pro forma net income may not be representative of that to be expected in future
years.
The fair value of the Company's 1999, 1998 and 1997 option grants was estimated
using a Black-Scholes option pricing model and the following assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------------
(EUR-denominated)
<S> <C> <C> <C>
Risk-free interest rate 3.19% 4.16% 3.87%
Expected dividend yield 1.2% 1.4% 1.5%
Expected option life 4 yrs. 3 yrs. 3 yrs.
Expected stock price volatility 37% 36% 29%
</TABLE>
45
<PAGE> 90
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------------
(USD-denominated)
<S> <C> <C> <C>
Risk-free interest rate 5.32% 5.30% 6.30%
Expected dividend yield 1.2% 1.4% 1.5%
Expected option life 5 yrs. 5 yrs. 4 yrs.
Expected stock price volatility 37% 34% 30%
</TABLE>
The assumptions were used for these calculations only and do not necessarily
represent an indication of management's expectations of future development.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion the existing models do not necessarily provide a reliable single measure
of the fair value of its employee stock options.
The following table summarizes information about the stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Fixed option plans
options outstanding options exercisable
------------------------------------------------- --------------------------------------
number exercise weighted number weighted
outstanding price per average exercisable average
at Dec. 31, share remaining at Dec. 31, price per
1999 (price in EUR) contractual 1999 share
life (years) (price in EUR)
<S> <C> <C> <C> <C> <C>
1995 92,000 25.23 0.2 92,000 25.23
1996 271,850 26.46-30.13 1.2 271,850 29.86
1997 639,800 36.76-77.73 2.3 639,800 48.01
1998 1,315,900 46.29-84.09 3.2 --
1999 995,850 63.05-92.05 4.2 --
<CAPTION>
(price in USD) (price in USD)
<S> <C> <C> <C> <C> <C>
1998 534,722 51.75-94.37 8.3 130,280 69.11
1999 694,525 87.90-124.37 9.4 --
---------- ----------
4,544,647 1,133,930
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Variable plans
(price in USD) (price in USD)
<S> <C> <C> <C> <C> <C>
1991-1992 14,832 11.81-20.62 1.0 14,832 12.63
1993-1994 86,278 11.00-27.56 3.0 86,278 11.45
1995-1997 595,690 30.00-56.81 5.0 235,326 31.33
---------- ----------
696,800 336,436
</TABLE>
46
<PAGE> 91
A summary of the status of the Company's stock option plans as of December 31,
1999, 1998 and 1997 and changes during the years then ended is presented below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Fixed option plans
1999 1998 1997
------------------------ ------------------------ ---------------------------
shares weighted shares weighted shares weighted
average average average
exercise exercise exercise
price in EUR price in EUR price in EUR
<S> <C> <C> <C> <C> <C> <C>
Outstanding at the beginning of the year 3,844,200 46.45 5,290,500 31.20 6,805,600 24.94
Granted 995,850 64.87 1,316,900 65.18 1,376,400 44.01
Exercised (1,515,650) 33.86 (2,763,200) 26.18 (2,891,500) 22.55
Forfeited (29,000) 36.76 -- --
----------- ---------- ----------
Outstanding at the end of the year 3,295,400 57.77 3,844,200 46.45 5,290,500 31.20
Weighted average fair value of options
granted during the year in EUR 19.04 15.57 8.43
<CAPTION>
(price in USD) (price in USD)
<S> <C> <C> <C> <C>
Outstanding at the beginning of the year 621,150 69.34 --
Granted 728,675 92.47 626,900 71.61
Exercised (73,911) 70.07 --
Forfeited (26,667) 81.88 (5,750) 73.34
--------- -------
Outstanding at the end of the year 1,249,247 82.62 621,150 69.34
Weighted average fair value of options
granted during the year in USD 34.18 24.50
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Variable plans
shares weighted shares weighted shares weighted
average average average
exercise exercise exercise
price in USD price in USD price in USD
<S> <C> <C> <C> <C> <C> <C>
Outstanding at the beginning of the year 1,201,184 27.80 1,819,038 26.32 2,367,051 23.32
Granted -- -- 32,440 40.26
Exercised (476,162) 26.47 (399,860) 18.94 (532,351) 12.74
Forfeited (28,222) 31.94 (217,994) 31.65 (48,102) 38.19
-------- -------- --------
Outstanding at the end of the year 696,800 28.54 1,201,184 27.80 1,819,038 26.32
Weighted average fair value of options
granted during the year in USD -- -- 11.87
</TABLE>
47
<PAGE> 92
(27) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Concentrations of credit risk
Credit risk represents the loss that would be recognized at the reporting date
if counterparties failed completely to perform as contracted. The Company does
not have significant exposure to any individual customer or counterparty.
To reduce exposure to credit risk, the Company performs ongoing credit
evaluations of the financial condition of its customers but generally does not
require collateral.
The Company invests available cash and cash equivalents with various financial
institutions.
The Company is also exposed to credit risks in the event of non-performance by
counterparties with respect to derivative financial instruments. It is our
policy to conclude financial transactions, where possible, under an ISDA master
netting agreement. Wherever possible, cash is invested and financial
transactions are concluded with financial institutions with strong credit
ratings.
Fair value of financial assets and liabilities
The estimated fair value of financial instruments has been determined by the
Company using available market information and appropriate valuation methods.
The estimates presented are not necessarily indicative of the amounts that the
Company could realize in a current market exchange or the value that ultimately
will be realized by the Company upon maturity or disposition. Additionally,
because of the variety of valuation techniques permitted under SFAS No. 107,
comparisons of fair values between entities may not be meaningful. The use of
different market assumptions and/or estimation methods may have a material
effect on the estimated fair value amounts.
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------------- -----------------------
carrying estimated carrying estimated
amount fair value amount fair value
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents 2,331 2,331 6,553 6,553
Securities 1,523 3,686 -- --
Accounts receivable - current 6,081 6,081 5,133 5,133
Other financial assets 340 340 1,861 2,039
Accounts receivable - non-current 252 231 492 492
Liabilities:
Accounts payable (3,632) (3,632) (2,948) (2,948)
Debt (3,314) (3,427) (3,587) (3,803)
Derivative financial instruments (net) (139) (130) (14) (14)
</TABLE>
48
<PAGE> 93
The following methods and assumptions were used to estimate the fair value of
financial instruments:
Cash, accounts receivable and accounts payable
The carrying amounts approximate fair value because of the short maturity of
these instruments.
Cash equivalents
The fair value is based on the estimated aggregate market value.
Securities
The fair value of equity investments is based on quoted market prices.
Other financial assets
For other financial assets, fair value is based upon the estimated market
prices.
Debt
The fair value is estimated on the basis of the quoted market prices for certain
issues, or on the basis of discounted cash flow analyses based upon Philips'
incremental borrowing rates for similar types of borrowing arrangements with
comparable terms and maturities.
Currency exchange agreements
The fair value is the amount that the Company would receive or pay to terminate
the exchange agreements, considering currency exchange rates and remaining
maturities.
49
<PAGE> 94
(28) APPLICATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED
STATES OF AMERICA
The accounting policies followed in the preparation of the consolidated
financial statements differ in some respects from those generally accepted in
the United States of America.
To determine net income and stockholders' equity in accordance with generally
accepted accounting principles in the United States of America (US GAAP),
Philips has applied the following accounting principles:
o Under US GAAP, divestitures which cannot be regarded as discontinued
segments of business must be included in income from continuing
operations. Under Dutch GAAP, prior to 1999, certain material transactions
such as disposals of lines of activities, including closures of
substantial production facilities, were accounted for as extraordinary
items, whereas under US GAAP they would have been recorded in income from
operations.
o In 1999, Philips reported a credit to net income of EUR 62 million (versus
charges of EUR 34 million in 1998 and EUR 63 million in 1997) because the
excess amount of the accumulated benefit obligation over the market value
of the plan assets or the existing level of the pension provision in
certain Company pension plans was lower than in the preceding two years.
For US GAAP purposes, when recording the additional minimum liability, a
portion of this amount is capitalized as an intangible asset and the
remaining balance is charged to equity, net of applicable taxes.
o Under Dutch GAAP, certain product development and process development
costs are capitalized in inventory. Under US GAAP such costs are required
to be expensed when incurred. The 1998 and 1997 figures have been adjusted
to reflect this difference in accounting.
o Under Dutch GAAP, securities available for sale are valued at the lower of
cost or net realizable value. Under US GAAP they are valued at market
price, unless such shares are restricted by contract for a period of one
year or more, and unrealized holding gains or losses with respect to
securities available for sale are credited or charged to stockholders'
equity.
o Under Dutch GAAP, the results of foreign-exchange contracts relating to
hedges of securities are deferred to stockholders' equity. Under US GAAP,
changes in the value of these forward exchange contracts are reported in
income when sale of the securities is restricted for a period of one year
or more.
o Philips reported a charge to income from operations of EUR 329 million for
restructurings in its 1998 financial statements. With regard to a portion
of this restructuring, EUR 40 million (EUR 23 million net of taxes), the
plans had not been communicated to employees until early 1999 and,
accordingly, this portion has been recorded under US GAAP as a charge in
1999.
50
<PAGE> 95
o In July 1995, Philips contributed the net assets of its cable networks,
with a book value of approximately EUR 91 million, to UPC, a newly
established joint venture in which Philips had acquired a 50% interest.
Under Dutch GAAP, this transfer resulted in a gain of EUR 58 million
relating to the partial disposal of its interest in these assets to the
other joint venture party (UIH). For US GAAP purposes, this gain was not
considered realized because the consideration received by Philips
principally consisted of equity and notes issued by UPC and equity in UIH.
In 1997, Philips sold its 50% interest in this joint venture and the gain
of EUR 58 million on this transaction was recognized.
o Under Dutch GAAP, majority-owned entities are consolidated. Under US GAAP,
consolidation of majority-owned entities is not permitted if minority
interest holders have the right to participate in operating decisions of
the entity. Although Philips owned 60% of the Philips Consumer
Communications joint venture, under US GAAP the venture with Lucent
Technologies could not be consolidated but was accounted for under the
equity method (see note 1).
o Under Dutch GAAP, catalogues of recorded music, music publishing rights,
film rights and theatrical rights belonging to PolyGram (which was sold in
1998) were written down to the extent that the present value of the
expected income generated by the acquired catalogues was below their book
value. Under US GAAP the rights were initially amortized over a maximum
period of 30 years. As a result of the sale of PolyGram, the cumulative
amortization has been credited to the gain on disposal in 1998 income
under US GAAP.
o Under Dutch GAAP, goodwill arising from acquisitions prior to 1992 was
charged directly to stockholders' equity. Under US GAAP, goodwill arising
from acquisitions, including those prior to 1992, is capitalized and
amortized over its useful life up to a maximum period of 20 years. As a
result of the sale of PolyGram, the related goodwill has been fully
amortized and charged to the gain on disposal in 1998 income under US
GAAP.
o Under Dutch GAAP, funding of NavTech's activities is accounted for as
results relating to unconsolidated companies (1999: EUR 44 million, 1998:
EUR 61 million, 1997: EUR 95 million) whereas under US GAAP these amounts
have to be included in income from operations as research and development
costs.
o Under Dutch GAAP, the excess of the Company's investment over its
underlying equity in the net assets of unconsolidated companies has been
classified as part of intangible fixed assets, whereas under US GAAP it
would be included in investments in unconsolidated companies.
51
<PAGE> 96
RECONCILIATION OF NET INCOME ACCORDING TO DUTCH GAAP VERSUS US GAAP
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Income from continuing operations as per the
consolidated statements of income 1,804 541 1,231
Reclassification of extraordinary items under Dutch
GAAP -- 474 1,151
---------- ---------- ----------
1,804 1,015 2,382
Adjustments to US GAAP (net of taxes):
Additional minimum liabilities under SFAS No. 87 (62) 34 63
Reversal of capitalized development costs in inventories (12) (40) 21
Reversal of provisions for restructuring (23) 23 --
Reversal of gain on UPC transaction -- -- 58
Amortization of goodwill from acquisitions prior to
1992 -- -- (10)
Reversal of deferred hedge result on securities (90) -- --
Other items (22) (7) (14)
- -------------------------------------------------------- ---------- ---------- ----------
Income from continuing operations in accordance
with US GAAP 1,595 1,025 2,500
Income from discontinued operations -- 210 233
Gain on disposal of discontinued operations -- 4,681 --
Extraordinary items - net (5) (16) (43)
- -------------------------------------------------------- ---------- ---------- ----------
Net income in accordance with US GAAP 1,590 5,900 2,690
Basic earnings per common share in EUR:
Income from continuing operations 4.63 2.85 7.16
Income from discontinued operations -- 0.58 0.66
Gain on disposal of discontinued operations -- 13.00 --
Extraordinary items - net (0.02) (0.04) (0.12)
Net income 4.61 16.39 7.70
Diluted earnings per common share in EUR:
Income from continuing operations 4.59 2.82 7.02
Income from discontinued operations -- 0.58 0.65
Gain on disposal of discontinued operations -- 12.89 --
Extraordinary items - net (0.01) (0.04) (0.12)
Net income 4.58 16.25 7.55
</TABLE>
52
<PAGE> 97
In addition to the reconciliation of net income, 'comprehensive income' is
required to be reported under US GAAP.
Comprehensive income is defined as all changes in the equity of a business
enterprise during a period, except investments by, and distributions to, equity
owners. Accordingly, comprehensive income consists of net income and other items
that are reflected in stockholders' equity on the balance sheet and have been
excluded from the income statement. Such items of other comprehensive income
include foreign currency translation adjustments, deferred gains and losses on
currency transactions qualifying for hedge treatment, certain pension
liability-related losses not yet recorded as pension costs, and unrealized
holding gains and losses on securities available for sale.
Statement of comprehensive income
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Net income in accordance with US GAAP 1,590 5,900 2,690
Other comprehensive income (net of taxes):
Translation differences 419 (152) 293
less: reclassification for translation losses included in net
income -- (42) (38)
Deferred foreign exchange results (71) 15 --
Minimum pension liability adjustment 43 (49) --
Holding gains (losses) on securities available for sale 2,131 32 (64)
- -------------------------------------------------------------- ---------- ---------- ----------
Comprehensive income in accordance with
US GAAP 4,112 5,704 2,881
</TABLE>
53
<PAGE> 98
RECONCILIATION OF STOCKHOLDERS' EQUITY ACCORDING TO DUTCH GAAP VERSUS US GAAP
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Stockholders' equity as per the consolidated balance sheets 14,757 14,560
Equity adjustments that affect net income:
Intangible assets relating to additional liabilities under SFAS No. 87 29 48
Reversal of capitalized development costs in inventories (241) (229)
Reversal of provisions for restructuring -- 23
Adjustment for highly inflationary countries, mainly to property, plant
and equipment -- 22
Equity adjustments not affecting net income under US GAAP:
Holding gain on securities available for sale 2,163 32
- ------------------------------------------------------------------------ ------- -------
Stockholders' equity in accordance with US GAAP 16,708 14,456
Translation differences as included in stockholders' equity (991) (1,410)
</TABLE>
54
<PAGE> 99
(29) INFORMATION RELATING TO PRODUCT SECTORS AND GEOGRAPHIC AREAS
In 1998, the Company changed its product sector reporting to comply with the new
requirements of Statement of Financial Accounting Standard No. 131, issued by
the Financial Accounting Standards Board of the USA.
As a consequence, the Philips activities are grouped together into seven product
sectors, which are reported separately: Lighting, Consumer Products, Components,
Semiconductors, Professional, Origin and Miscellaneous.
The Company evaluates the performance of its sectors and allocates resources to
them based on several performance measures, including earnings before interest,
taxes, depreciation and amortization from consolidated companies (Ebitda). While
not a standard measurement under US GAAP, the Company believes Ebitda is an
appropriate measure of operating performance, given the goodwill and other
intangibles associated with the Company's acquisitions. In Philips' definition,
Ebitda equals income from operations before depreciation and amortization
charges.
However, Ebitda could be defined differently by other companies and should be
considered in addition to, not as a substitute for, other measures of financial
performance including revenues, operating income and cash flows. The Company
does not allocate interest income, interest expense, income taxes or unusual
items to segments.
The consolidated financial statements for 1999 have been prepared in euros.
Amounts previously reported in Dutch guilders are now reported in euros using
the irrevocably fixed conversion rate which became effective on January 1, 1999
(EUR 1 = NLG 2.20371). See 'Introduction of the euro' on page 17.
Lighting
Philips is a leader in the world lighting market. A wide variety of applications
are served by a full range of incandescent and halogen lamps, automotive lamps,
high-intensity gas-discharge and special lamps, QL induction lamps, fixtures,
ballasts, lighting electronics and batteries.
Consumer Products
This sector comprises the divisions Consumer Electronics and Domestic Appliances
and Personal Care. Moreover, the revenues from license agreements are included
in this sector.
Consumer Electronics
This division markets a wide range of consumer products in the following areas:
video products (TV, VCR, tuners, remote controls), audio (audio systems,
portable products, speaker systems, CD-Recordable), PC peripherals (monitors, PC
add-ons), personal communication (mobile phones, corded/cordless phones) and new
digital products (DVD, Flat TV, mobile computing products).
55
<PAGE> 100
Domestic Appliances and Personal Care
This division markets a wide range of products in the following areas: male
shaving & grooming (shavers, trimmers, etc.), body beauty & care (depilators,
hair dryers, suncare, electric toothbrushes, skincare, thermometers, etc.), food
& beverage (mixers, coffee makers, toasters, etc.) and home environment care
(vacuum cleaners, air cleaners, steam irons, fans, etc.).
Components
Philips Components is a leading supplier of display, storage and other key
components. It produces a wide range of products such as picture tubes (for TV
and monitors), LCDs, passive components, magnetic products and modules for
optical storage.
Semiconductors
Philips Semiconductors is a major supplier of integrated circuits (ICs) and
discrete semiconductors to the consumer electronics, telecommunications,
automotive, PC and PC peripherals industries.
Professional
This sector comprises the divisions Medical Systems and Business Electronics.
Due to the reorganization of Business Electronics as of January 1, 2000, these
activities will be included in other sectors in future.
Medical Systems
Philips is among the top three makers of systems for diagnostic imaging, based
on x-ray, computed tomography, magnetic resonance and ultrasound technologies.
It also provides consultancy services, information management, training and
technical services to its customers in the healthcare sector.
Business Electronics
This division focuses on the business-to-business sector. Main product areas are
digital video-communication systems, broadband network equipment, business
communication systems, communication and security systems, and fax equipment.
The division is a major supplier of electronic manufacturing equipment to the
semiconductor industry. It also deals with infrastructural and industrial
projects. Effective January 1, 2000, Business Electronics has been fully
integrated into the Consumer Electronics division, with the exception of certain
units which are being integrated into the Miscellaneous sector.
Origin
Origin is a global IT service company delivering systems and a full range of
services that facilitate total business solutions for clients. It is represented
in more than 30 countries. Philips holds an interest of 98% in Origin B.V.
56
<PAGE> 101
Miscellaneous
This sector comprises not only various ancillary businesses, including Philips
Plastics and Metalware Factories and Philips Machinefabrieken, but also various
(remaining) activities that have been sold, discontinued, phased out or
deconsolidated in earlier years, such as Grundig, Philips Media, Philips Car
Systems, Superclub and ASM Lithography. The costs of basic research and patents
are included in the Miscellaneous sector.
Unallocated
The sector Unallocated includes general and administrative expenses in the
corporate center and the country organizations.
All years presented have been restated to eliminate the activities of PolyGram,
which also ceased to be a separate product sector. For a description of the
various product divisions included in the product sectors, please refer to the
relevant section of this report.
Sales to third parties by product sector and by geographic area are shown in the
following tables. Sales to third parties by geographic area represent the total
proceeds from products and services supplied to third parties in the geographic
area concerned. The sales growth rates are also presented on a comparable basis,
adjusted for the effects of changes in consolidations and exchange rate
movements.
The sales volumes of the various business activities and the associated income
from operations by product sector and by geographic area are set forth in the
following tables. Segment revenues include sales to third parties ('sales') as
well as sales of products and services between the product sectors
('intersegment revenues').
Included in segment revenues by geographic area is the total revenue from
worldwide sales to third parties by companies located within that geographic
area, as well as the total value of sales to consolidated companies in other
geographic areas ('interregional revenues'). The transfer prices charged for all
intersegment (including interregional) sales are based on the arm's length
principle as set forth in internationally accepted transfer pricing policies and
guidelines.
Car Systems was deconsolidated as of December 31, 1997. However its results of
operations were consolidated for the year then ended. Group sales for 1997
included EUR 0.8 billion relating to Car Systems.
The divested activity has been included in the Miscellaneous sector.
The Consumer Products sector includes 3 months of operations of the PCC/Lucent
joint venture in 1997 and 9 months in 1998.
For further details, please refer to note 1.
57
<PAGE> 102
- --------------------------------------------------------------------------------
SALES, SALES GROWTH AND NUMBER OF EMPLOYEES BY PRODUCT SECTOR
<TABLE>
<CAPTION>
1999
- ------------------------------------------------------------------------------------------------------------
sales (to third % growth number of
parties) ------------------------------------------- employees
nominal comparable
<S> <C> <C> <C> <C>
Lighting 4,548 2 1 47,453
Consumer Products 12,437 0 6 47,970
Components 3,754 (2) 3 41,709
Semiconductors 3,796 18 5 29,952
Professional 5,186 15 4 25,187
Origin 1,056 0 0 16,690
Miscellaneous 682 (27) (11) 11,181
Unallocated 6,732
- ------------------- ------- -------
Total 31,459 3 4 226,874
1998
- ------------------------------------------------------------------------------------------------------------
Lighting 4,453 (2) 1 48,997
Consumer Products 12,472 9 7 51,643
Components 3,814 4 5 42,613
Semiconductors 3,212 2 5 26,583
Professional 4,520 5 7 24,646
Origin 1,059 25 24 16,948
Miscellaneous 929 (45) 6 15,150
Unallocated 7,106
- ------------------- ------- -------
Total 30,459 3 6 233,686
1997
- ------------------------------------------------------------------------------------------------------------
Lighting 4,549 13 5 51,727
Consumer Products 11,465 19 7 66,046
Components 3,664 27 5 46,131
Semiconductors 3,144 24 14 26,916
Professional 4,301 12 11 21,208
Origin 846 30 21 15,464
Miscellaneous 1,689 (52) 6 17,109
Unallocated 7,667
- ------------------- ------- -------
Total 29,658 9 8 252,268
</TABLE>
58
<PAGE> 103
- --------------------------------------------------------------------------------
SALES, SALES GROWTH AND NUMBER OF EMPLOYEES BY MAIN COUNTRY
<TABLE>
<CAPTION>
1999
- ------------------------------------------------------------------------------------------------------------
sales (to third % growth number of
parties) ------------------------------------------- employees
nominal comparable
<S> <C> <C> <C> <C>
Netherlands 1,619 (2) (1) 43,153
United States 7,535 5 9 26,282
Germany 2,727 (2) 2 13,964
France 1,962 (6) (8) 12,521
United Kingdom 2,281 18 16 7,938
China (incl. Hong Kong) 2,023 8 4 22,097
Other countries 13,312 3 2 100,919
- ------------------- ------- -------
Total 31,459 3 4 226,874
1998
- ------------------------------------------------------------------------------------------------------------
Netherlands 1,653 14 22 44,476
United States 7,164 11 6 25,178
Germany 2,777 (2) 4 14,181
France 2,092 (4) 4 12,228
United Kingdom 1,931 9 12 8,801
China (incl. Hong Kong) 1,878 14 14 21,929
Other countries 12,964 (3) 4 106,893
- ------------------- ------- -------
Total 30,459 3 6 233,686
1997
- ------------------------------------------------------------------------------------------------------------
Netherlands 1,448 (1) 4 46,032
United States 6,425 26 8 30,407
Germany 2,840 (22) 1 15,448
France 2,176 (4) 8 14,779
United Kingdom 1,775 11 2 9,963
China (incl. Hong Kong) 1,654 68 31 20,727
Other countries 13,340 11 9 114,912
- ------------------- ------- -------
Total 29,658 9 8 252,268
</TABLE>
59
<PAGE> 104
- --------------------------------------------------------------------------------
PRODUCT SECTORS
<TABLE>
<CAPTION>
1999
- ------------------------------------------------------------------------------------------------------------------------
segment Ebitda* income as % of income
revenues (loss) from segment (loss) from
operations revenues operations**
<S> <C> <C> <C> <C> <C>
Lighting 4,597 772 602 13.1 631
Consumer Products 12,781 847 555 4.3 519
Components 5,325 661 286 5.4 311
Semiconductors 4,557 1,195 614 13.5 612
Professional 5,479 261 100 1.8 125
Origin 1,735 193 97 5.6 97
Miscellaneous 769 (9) (91) (11.8) (83)
Unallocated (365) (412) (416)
- -------------------------------------- ------ ----- ----- -----
Total 35,243 3,555 1,751 1,796
Intersegment revenues (3,784)
- -------------------------------------- ------
Sales 31,459
Income from operations as a % of sales 5.6 5.7
1998
- ------------------------------------------------------------------------------------------------------------------------
Lighting 4,504 776 595 13.2 620
Consumer Products 12,760 61 (278) (2.2) (54)
Components 5,259 408 44 0.8 91
Semiconductors 3,963 1,225 765 19.3 781
Professional 4,649 250 (55) (1.2) (33)
Origin 1,654 128 59 3.6 59
Miscellaneous 1,138 64 (46) (4.1) (47)
Unallocated (339) (399) (403)
- -------------------------------------- ------ ----- ----- -----
Total 33,927 2,573 685 1,014
Intersegment revenues (3,468)
- -------------------------------------- ------
Sales 30,459
Income from operations as a % of sales 2.2 3.3
1997
- ------------------------------------------------------------------------------------------------------------------------
Lighting 4,602 715 522 11.3 562
Consumer Products 12,194 706 335 2.7 342
Components 5,099 537 255 5.0 254
Semiconductors 3,793 1,164 771 20.3 785
Professional 4,454 288 207 4.6 205
Origin 1,324 73 -- -- --
Miscellaneous 2,102 130 14 0.6 (1)
Unallocated (328) (390) (385)
- -------------------------------------- ------ ----- ----- -----
Total 33,568 3,285 1,714 1,762
Intersegment revenues (3,910)
- -------------------------------------- ------
Sales 29,658
Income from operations as a % of sales 5.8 5.9
</TABLE>
* In Philips' definition, Ebitda represents income from operations before
depreciation and amortization charges
** Excluding restructuring
60
<PAGE> 105
- --------------------------------------------------------------------------------
GEOGRAPHIC AREAS
<TABLE>
<CAPTION>
1999
- ------------------------------------------------------------------------------------------------------------------------
segment Ebitda* income as % of income
revenues (loss) from segment (loss) from
operations revenues operations**
<S> <C> <C> <C> <C> <C>
Netherlands 12,452 927 513 4.1 565
Europe excl. Netherlands 16,600 1,118 611 3.7 622
USA and Canada 9,310 507 82 0.9 60
Latin America 1,642 15 (41) (2.5) (31)
Africa 107 3 1 0.9 1
Asia 11,188 981 584 5.2 578
Australia and New Zealand 424 4 1 0.2 1
- -------------------------------------- ------ ----- ----- -----
Total 51,723 3,555 1,751 1,796
Interregional revenues (20,264)
- -------------------------------------- ------
Sales 31,459
Income from operations as a % of sales 5.6 5.7
1998
- ------------------------------------------------------------------------------------------------------------------------
Netherlands 11,089 795 446 4.0 462
Europe excl. Netherlands 16,430 1,278 638 3.9 696
USA and Canada 8,572 (50) (473) (5.5) (290)
Latin America 2,013 (140) (205) (10.2) (201)
Africa 126 0 (1) (0.7) (1)
Asia 10,013 681 287 2.9 355
Australia and New Zealand 419 9 (7) (1.6) (7)
- -------------------------------------- ------ ----- ----- -----
Total 48,662 2,573 685 1,014
Interregional revenues (18,203)
- -------------------------------------- ------
Sales 30,459
Income from operations as a % of sales 2.2 3.3
1997
- ------------------------------------------------------------------------------------------------------------------------
Netherlands 9,684 752 380 3.6 398
Europe excl. Netherlands 15,831 1,260 687 4.3 714
USA and Canada 7,644 221 10 0.1 1
Latin America 2,104 16 (55) (2.6) (55)
Africa 113 6 3 2.8 3
Asia 10,803 1,020 703 6.5 715
Australia and New Zealand 598 10 (14) (2.4) (14)
- -------------------------------------- ------ ----- ----- -----
Total 46,777 3,285 1,714 1,762
Interregional revenues (17,119)
- -------------------------------------- ------
Sales 29,658
Income from operations as a % of sales 5.8 5.9
</TABLE>
* In Philips' definition, Ebitda represents income from operations before
depreciation and amortization charges
** Excluding restructuring
61
<PAGE> 106
- --------------------------------------------------------------------------------
PRODUCT SECTORS
<TABLE>
<CAPTION>
1999
- ---------------------------------------------------------------------------------------------------------
total net (in)tangible capital depreciation
assets operating fixed assets expenditures
capital
<S> <C> <C> <C> <C> <C>
Lighting 2,849 1,875 1,275 176 161
Consumer Products 4,500 1,689 884 296 285
Components 5,179 2,078 3,197 259 364
Semiconductors 5,188 3,194 2,917 622 467
Professional 3,432 1,780 916 99 84
Origin 683 240 275 56 68
Miscellaneous 913 318 328 68 79
Unallocated 6,752 (728) 362 86 40
- -------------------------- ------ ------ ------ ----- -----
Total 29,496 10,446 10,154 1,662 1,548
1998
- ---------------------------------------------------------------------------------------------------------
Lighting 2,607 1,764 1,194 191 173
Consumer Products 4,350 1,689 822 380 333
Components 3,112 2,070 1,865 299 357
Semiconductors 3,106 1,905 1,584 437 455
Professional 2,810 1,377 755 88 77
Origin 572 147 184 69 63
Miscellaneous 1,021 509 403 93 106
Unallocated 10,575 212 321 77 51
- -------------------------- ------ ------ ------ ----- -----
Total 28,153 9,673 7,128 1,634 1,615
1997
- ---------------------------------------------------------------------------------------------------------
Lighting 2,723 1,819 1,240 216 187
Consumer Products 5,085 2,434 1,001 286 337
Components 3,146 2,216 1,955 400 278
Semiconductors 3,136 1,970 1,646 362 369
Professional 2,188 881 392 123 98
Origin 492 126 202 63 58
Miscellaneous 1,098 270 378 128 107
Unallocated 3,972 341 333 49 58
Total 21,840 10,057 7,147 1,627 1,492
- -------------------------- ------ ------ ------ ----- -----
Discontinued operations 1,482
- -------------------------- ------
Total 23,322
</TABLE>
62
<PAGE> 107
- --------------------------------------------------------------------------------
MAIN COUNTRIES
<TABLE>
<CAPTION>
1999
- ---------------------------------------------------------------------------------------------------------
total net (in)tangible capital depreciation
assets operating fixed assets expenditures
capital
<S> <C> <C> <C> <C> <C>
Netherlands 7,452 2,439 1,811 435 370
United States 5,139 2,839 2,476 249 228
Germany 1,558 86 632 134 147
France 1,118 164 392 92 113
United Kingdom 1,041 607 321 55 53
China (incl. Hong Kong) 1,570 635 635 91 123
Other countries 11,618 3,676 3,887 606 514
- -------------------------- ------ ------ ------ ----- -----
Total 29,496 10,446 10,154 1,662 1,548
1998
- ---------------------------------------------------------------------------------------------------------
Netherlands 11,863 2,778 1,633 404 343
United States 3,518 1,538 1,167 155 189
Germany 1,536 669 698 143 250
France 1,130 158 410 76 129
United Kingdom 907 504 298 60 64
China (incl. Hong Kong) 1,273 517 574 124 96
Other countries 7,926 3,509 2,348 672 544
- -------------------------- ------ ------ ------ ----- -----
Total 28,153 9,673 7,128 1,634 1,615
1997
- ---------------------------------------------------------------------------------------------------------
Netherlands 4,913 2,958 1,688 265 347
United States 3,661 1,363 1,028 138 181
Germany 1,833 684 701 156 161
France 1,370 401 509 140 147
United Kingdom 907 521 339 73 57
China (incl. Hong Kong) 1,289 627 580 255 68
Other countries 7,867 3,503 2,302 600 531
- -------------------------- ------ ------ ------ ----- -----
Total 21,840 10,057 7,147 1,627 1,492
Discontinued operations 1,482
- -------------------------- ------
Total 23,322
</TABLE>
63
<PAGE> 108
[Pages 64 to 70 intentionally omitted.]
<PAGE> 109
PROPOSED DISTRIBUTION OF INCOME OF ROYAL PHILIPS ELECTRONICS
Pursuant to article 35 of the Articles of Association, EUR 1,400 million of the
income for the financial year 1999 shall be retained by way of reserve. A
proposal will be submitted to the General Meeting of Shareholders to declare a
dividend of EUR 1.20 per common share from the remaining income (EUR 399
million).
CORPORATE GOVERNANCE OF THE PHILIPS GROUP
General
Koninklijke Philips Electronics N.V. (the `Company') is the parent company of
the Philips Group. Its shares are listed on the Amsterdam Exchanges, the New
York Stock Exchange, the London Stock Exchange and several other stock
exchanges.
The management of the Company is entrusted to the Board of Management under the
supervision of the Supervisory Board. The activities of the Philips Group are
organized in product divisions, which are responsible for the worldwide business
policy. Philips has more than 200 production sites in over 25 countries and
sales and service outlets in some 150 countries. It delivers products, systems
and services in the fields of lighting, consumer electronics and communications,
domestic appliances and personal care, components, semiconductors, medical
systems, business electronics and information technology. The Company's
activities are grouped in seven sectors: Lighting, Consumer Products,
Components, Semiconductors, Professional, Origin and Miscellaneous. The
statutory list of all subsidiaries and affiliated companies, prepared in
accordance with the relevant legal requirements (The Netherlands Civil Code,
Book 2, Articles 379 and 414), forms part of the notes to the financial
statements and is deposited at the office of the Commercial Register in
Eindhoven, the Netherlands (file no. 1910).
In its report to shareholders, the Board of Management referred to the progress
made in recent years in improving the governance of the Company and the Philips
Group, in particular in respect of the supervisory function, the rights of
shareholders and transparency. These improvements were in response to
developments in the international capital markets, such as the United States,
where the Company's shares have been traded since 1962 and listed on the New
York Stock Exchange since 1987. Philips also generally endorses the
recommendations of the Committee of the Amsterdam Exchanges of October 1997 on
best practices in corporate governance.
Remuneration of the Board of Management and Supervisory Board
General policy
The objective of the remuneration policy for members of the Board of Management
is in line with that for Senior Management within the Philips Group, i.e. to
attract, motivate and retain highly qualified executives who improve the
performance of the Company. In order to maintain a competitive remuneration
package for Board-level executive talent, benchmarking against comparable
companies is carried out systematically.
71
<PAGE> 110
The remuneration package consists of a base salary, an annual incentive in the
form of a cash bonus, and a long-term incentive in the form of stock options.
Base salary
Base salaries are based on a functional salary system. The functional scale
salary levels are adapted annually to developments in the market. They were not
increased in 1999 as compared to 1998.
Each year, on the proposal of the Remuneration Committee, the Supervisory Board
decides on a possible salary increase for the individual members of the Board of
Management. Progression of the salary of an individual Board of Management
member to his functional salary level is usually over a 3-year period from
appointment.
Annual incentive
Each year, a bonus can be earned: in principle, up to a maximum of 50% of the
annual base salary. The bonus criteria and the targets for the members of the
Board of Management are determined annually by the Remuneration Committee of the
Supervisory Board. Targets are set at a challenging level and are partly linked
to the Philips Group results and partly to the businesses for which the member
of the Board of Management has direct responsibility. The bonus pay-out depends
on the degree to which targets were met in the preceding financial year.
The Remuneration Committee may decide to grant a higher bonus percentage if
special targets are realized.
Long-term incentive
Long-term incentives for members of the Board of Management are provided through
Philips' stock option plans. These plans align the interests of shareholders and
members of the Board of Management.
Acting on the advice of the Remuneration Committee, the Supervisory Board has
the discretionary power to grant Royal Philips Electronics stock options to
members of the Board of Management. The conditions attached to the stock options
have to be decided each year by the Supervisory Board.
For details of the plan, see page 44.
The Supervisory Board has decided that from 2000 onward the number of stock
options to be granted will be partly related to the performance of the Philips
Group.
The total remuneration (in euros) of the members of the Board of Management in
1999 can be specified as follows:
<TABLE>
<S> <C>
Salaries 3,575,000
Bonuses 1,619,000
Severance payments 1,095,000
---------
6,289,000
Pension charges 3,123,000
- ----------------------------- ---------
Total 9,412,000
</TABLE>
72
<PAGE> 111
The bonuses paid (in euros) are related to the level of performance achieved in
1998. The remuneration of the individual members of the Board of Management was
as follows:
<TABLE>
<CAPTION>
severance
salary bonus payment total
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
C. Boonstra 794,115 363,024 1,157,139
D.G. Eustace (Jan./March) 136,134 113,445 249,579
J.H.M. Hommen 589,914 200,571 790,485
A. Baan 521,847 83,344 605,191
Y.C. Lo (Jan./June) 243,907 119,117 799,561 1,162,585
A.P.M. van der Poel 521,847 133,109 654,956
J.W. Whybrow 521,847 229,763 751,610
R. Pieper (Jan./May) 245,798 98,319 294,957 639,074
- --------------------------------------- --------- --------- --------- ---------
3,575,409 1,340,692 1,094,518 6,010,619
H. Bodt 96,806 96,806
W. de Kleuver 158,823 158,823
D.J. Dunn 22,689 22,689
--------- --------- --------- ---------
3,575,409 1,619,010 1,094,518 6,288,937
</TABLE>
The table below gives an overview of the interests of the members of the Board
of Management under the stock option plans of Royal Philips Electronics.
<TABLE>
<CAPTION>
number of options amounts in euros
------------------------------------------------ ---------------------
as of granted exercised as of exercise share expiry
Jan. 1, during during Dec. 31, price price on date
1999 1999 1999 1999 exercise
date
------- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
C. Boonstra 63,000 -- 63,000 -- 30.13 81.73 15.02.2001
87,000 -- 27,000 60,000 36.76 81.73 13.02.2002
-- 30,000 -- 30,000 63.05 -- 11.02.2004
J.H.M. Hommen 120,000 -- -- 120,000 36.76 -- 13.02.2002
20,000 -- -- 20,000 65.80 -- 12.02.2003
-- 20,000 -- 20,000 63.05 -- 11.02.2004
A. Baan * 14,100 -- 7,100 -- 36.76 94.55 13.02.2002
-- 7,000 -- 36.76 100.50 13.02.2002
20,000 -- -- 20,000 65.80 -- 12.02.2003
-- 20,000 -- 20,000 63.05 -- 11.02.2004
A.P.M. van der Poel 4,600 -- 4,600 -- 36.76 87.30 13.02.2002
20,000 -- -- 20,000 65.80 -- 12.02.2003
-- 20,000 -- 20,000 63.05 -- 11.02.2004
J.W. Whybrow 20,000 -- -- 20,000 65.80 -- 12.02.2003
-- 20,000 -- 20,000 63.05 -- 11.02.2004
------- ------- ------- -------
368,700 110,000 108,700 370,000
</TABLE>
* Mr Baan's interests in Philips securities, including stock options, are
held by an independent trustee, having exclusive discretionary power to
take investment decisions. The terms thereof comply with internal rules
and those of the Securities Board of the Netherlands.
The share price on the exercise date is based on the closing price of
Philips shares on the date of exercise of the options.
73
<PAGE> 112
The Supervisory Board and the Board of Management have decided to adjust
upwards the exercise price of all options granted to, but not yet
exercised by, members of the Board of Management as of May 29, 1999 by EUR
1.75 per share in connection with the share reduction program effected
mid-1999. This increase is not incorporated in the above table.
Pensions
The pensions are mainly funded by Philips Pension Fund. The Company can also
grant additional pension benefits. The by-laws of Philips Pension Fund apply,
with the proviso that the pensionable age has been set at 60. If members of the
Board of Management continue in the employment of the Company until the age of
62, the pension payments are postponed accordingly. Because the retirement age
is different from the date of commencement of the state pension, the pension
scheme provides for a temporary payment in order to compensate for the adverse
effect. The Board of Management members' own contribution comprises 4% of EUR
50,827 and 6% of the difference between the gross pensionable salary minus the
franchise and the above-mentioned amount of EUR 50,827. The vested pension
benefits (in euros) of individual members of the Board of Management are as
follows:
<TABLE>
<CAPTION>
age at ultimate increase accumulated
31-12-1999 retirement in accrued annual pension
age pension as at
during 31-12-1999
1999
---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
C. Boonstra 61 62 14,521 132,493
J.H.M. Hommen 56 62 19,013 53,472
A. Baan 57 62 10,261 280,795
A.P.M. van der Poel 51 62 10,261 173,562
J.W. Whybrow 52 62 10,261 250,717
</TABLE>
Supervisory Board
During 1999 the individual members of the Supervisory Board received, by virtue
of the positions they held, the following remuneration (in euros):
<TABLE>
<CAPTION>
Board Board total
member Committee
member
------- ------ -------
<S> <C> <C> <C>
F.A. Maljers (Jan./March) 37,437 2,269 39,706
L.C. van Wachem 74,874 7,941 82,815
A. Leysen (Jan./March) 20,420 1,135 21,555
W. de Kleuver 40,840 7,941 48,781
W. Hilger 40,840 9,076 49,916
C.J. Oort 40,840 4,538 45,378
L. Schweitzer 40,840 -- 40,840
R. Greenbury 40,840 3,403 44,243
J-M. Hessels 40,840 -- 40,840
------- ------ -------
377,771 36,303 414,074
</TABLE>
74
<PAGE> 113
Supervisory Board members' and Board of Management members' interests in Philips
shares
Members of the Supervisory Board and of the Board of Management are not allowed
to hold any interests in listed derivative Philips securities.
<TABLE>
<CAPTION>
number of shares
--------------------------------
as of as of
January 1, December 31,
1999 1999*
<S> <C> <C>
L.C. van Wachem 5,000 4,600
W. de Kleuver 54 --
L. Schweitzer 300 276
J.W. Whybrow 300 276
</TABLE>
* The number of shares as of December 31, 1999 is influenced by the 8% share
reduction program in 1999.
The above statement does not specify ownership of convertible personnel
debentures, which are held by some of the members of the Board of Management
under a scheme that since 1998 has no longer been applicable to them.
Board of Management and Supervisory Board
The Board of Management is responsible for the effective management of the
business. It is required to keep the Supervisory Board informed of developments,
to consult it on important matters and to submit certain important decisions to
it for its prior approval. The Board of Management consists of at least three
members (currently five), who are elected for an indefinite period by the
General Meeting of Shareholders. The President is appointed by the General
Meeting of Shareholders. Members of the Board of Management may be suspended by
the Supervisory Board and the General Meeting of Shareholders and dismissed by
the latter. The remuneration of the members of the Board of Management is
determined by the Supervisory Board upon a proposal from the President and on
the advice of the Remuneration Committee of the Supervisory Board.
The Supervisory Board is independent of the Board of Management and is
responsible for supervising both the policies of the Board of Management and the
general direction of the Group's business. It is also required to advise the
Board of Management. The Supervisory Board consists of at least five members
(currently seven). They elect a Chairman, Vice-Chairman and Secretary from their
midst. The Board has three permanent committees: an Audit Committee, a
Remuneration Committee and a Nomination and Selection Committee. These
committees advise the plenary Supervisory Board. Members of the Supervisory
Board are appointed by the General Meeting of Shareholders for fixed terms of
four years, and may be re-elected for two additional four-year terms.
In exceptional cases, however, the Supervisory Board and the Meeting of Priority
Shareholders may deviate from this rule. At the latest, members retire upon
reaching the age of 72. Members of the Supervisory Board may be suspended or
dismissed by the General Meeting of Shareholders. Their remuneration is fixed by
the General Meeting of Shareholders.
75
<PAGE> 114
The appointment of the members of the Board of Management and the Supervisory
Board by the General Meeting of Shareholders is upon a binding recommendation
from the Supervisory Board and the Meeting of Priority Shareholders. However,
this binding recommendation may be overruled by a resolution of the General
Meeting of Shareholders taken by a majority of at least 2/3 of the votes cast
and representing more than half of the issued share capital.
Group Management Committee
The Group Management Committee consists of the members of the Board of
Management, certain Chairmen of product divisions and certain key officers.
Members other than members of the Board of Management are appointed by the
Supervisory Board. The task of the Group Management Committee, the highest
consultative body within Philips, is to ensure that business issues and
practices are shared across the Company and to define and implement common
policies.
General Meeting of Shareholders
A General Meeting of Shareholders is held at least once a year to discuss and
resolve on the report of the Board of Management, the annual accounts with
explanation and appendices, the report of the Supervisory Board, any proposal
concerning dividends or other distributions, and any other matters proposed by
the Supervisory Board, the Board of Management, the Meeting of Priority
Shareholders or shareholders in accordance with the provisions of the Company's
Articles of Association. This meeting is held in Eindhoven, Amsterdam, Rotterdam
or The Hague no later than six months after the end of the financial year.
Meetings are convened by public notice and mailed to registered shareholders.
Extraordinary General Meetings may be convened by the Supervisory Board or the
Board of Management if deemed necessary and must be held if the Meeting of
Priority Shareholders or shareholders jointly representing at least 10% of the
outstanding capital make a written request to that effect to the Supervisory
Board and the Board of Management specifying in detail the business to be dealt
with. The agenda of the General Meeting shall contain such business as may be
placed thereon by the Board of Management, the Supervisory Board or the Meeting
of Priority Shareholders.
Requests from shareholders for items to be included on the agenda will be
honored, provided that such requests are made to the Board of Management and the
Supervisory Board by shareholders representing at least 1% of the Company's
outstanding capital at least 60 days before a General Meeting of Shareholders
and provided that the Board of Management and the Supervisory Board are of the
opinion that such requests are not detrimental to the serious interests of
Philips.
The main powers of the General Meeting of Shareholders are to appoint, suspend
and dismiss members of the Board of Management and the Supervisory Board, to
adopt the financial statements and to discharge the Board of Management and the
Supervisory Board from responsibility for performing their respective duties for
the previous financial year, to adopt amendments to the Articles of Association
and proposals to dissolve or liquidate the Company, to issue shares or rights to
shares, to restrict or pass pre-emptive rights of shareholders and to repurchase
or cancel outstanding shares.
76
<PAGE> 115
Following common practice, the Company each year requests limited authorization
to issue (rights to) shares, to pass pre-emptive rights and to repurchase
shares.
Meeting of Priority Shareholders and the Dr. A.F. Philips-Stichting
There are ten priority shares. Eight are held by the Dr. A.F. Philips-Stichting,
with Messrs F.J. Philips and H.A.C. van Riemsdijk each holding one. The
self-electing Board of the Dr. A.F. Philips-Stichting consists of the Chairman
and the Vice-Chairman and Secretary of the Supervisory Board, certain other
members of the Supervisory Board, and the President of the Company. At present,
the Board consists of Messrs L.C. van Wachem, W. de Kleuver, C.J. Oort and C.
Boonstra.
A Meeting of Priority Shareholders is held at least once a year, at least thirty
days before the General Meeting of Shareholders. Approval of the Meeting of
Priority Shareholders is required for resolutions of the General Meeting of
Shareholders regarding the issue of shares or rights to shares, the cancellation
of shares, amendments to the Articles of Association, and the liquidation of the
Company. Acting in agreement with the Supervisory Board, the Meeting also makes
a binding recommendation to the General Meeting of Shareholders for the
appointment of members of the Board of Management and the Supervisory Board,
which can be overruled by the General Meeting of Shareholders as set out before.
Meeting of Holders of Preference Shares and the Stichting Preferente Aandelen
Philips
The authorized share capital of the Company consists of ten priority shares,
750,000,000 ordinary shares and 749,995,000 preference shares. No preference
shares have been issued. However, the Stichting Preferente Aandelen Philips
('the Foundation') has been granted the right to acquire preference shares in
the Company, should a third party ever seem likely to gain a controlling
interest in the Company. The Foundation may exercise this right for as many
preference shares as there are ordinary shares in the Company outstanding at
that time. The object of the Foundation is to represent the interests of the
Company, the enterprises maintained by the Company and its affiliated companies
within the Philips Group, such that the interests of Philips, those enterprises
and all parties involved with them are safeguarded as effectively as possible,
and that they are afforded maximum protection against influences which, in
conflict with those interests, may undermine the autonomy and identity of
Philips and those enterprises, and also to do anything related to the above ends
or conducive to them.
The members of the self-electing Board of the Foundation are Messrs J.R. Glasz,
H.B. van Liemt, W.E. Scherpenhuijsen Rom, L.C. van Wachem and C. Boonstra. As
Chairman of the Supervisory Board and the Board of Management respectively,
Messrs Van Wachem and Boonstra are members of the Board ex officio. Mr Boonstra
is not entitled to vote.
The Board of Management of the Company and the Board of the Stichting Preferente
Aandelen Philips declare that they are jointly of the opinion that the Stichting
Preferente Aandelen Philips is independent of the Company as required by the
Listing Requirements of the Amsterdam Exchanges N.V. (AEX).
77
<PAGE> 116
[Pages 78 to end intentionally omitted.]
