KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
WASHINGTON, D.C. 20549
----------------
FORM 11-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED JULY 31, 2008 COMMISSION FILE NUMBER: 001-05146-01
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE TRANSACTION PERIOD FROM ________________________ TO ___________________
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
c/o Philips Electronics North America Corporation
3000 Minuteman Road
Andover, Massachusetts 01810
Attention: Compensation and Benefits Department
(Full title of the plan and address of the plan, if different from
that of the issuer named below)
KONINKLIJKE PHILIPS ELECTRONICS N.V.
REMBRANDT TOWER, AMSTELPLEIN, 1,
AMSTERDAM 1070MX, THE NETHERLANDS
(Address of principal executive offices)
KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
TABLE OF CONTENTS
PAGE
Report of Independent Registered Public Accounting Firm 1
Statements of Financial Condition - July 31, 2008 and 2007 2
Statements of Income (Loss) and Changes in Plan Equity --
Years ended July 31, 2008, 2007 and 2006 3
Notes to Financial Statements 4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Stock Purchase Plan Committee of the Koninklijke Philips Electronics N.V.
Nonqualified Stock Purchase Plan:
We have audited the accompanying statements of financial condition of the
Koninklijke Philips Electronics N.V. Nonqualified Stock Purchase Plan (the
"Plan") as of July 31, 2008 and 2007 and the related statements of income (loss)
and changes in plan equity for each of the years in the three-year period ended
July 31, 2008. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). 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 the Plan's 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 financial statements referred to above present fairly, in
all material respects, the financial position of the Koninklijke Philips
Electronics N.V. Nonqualified Stock Purchase Plan at July 31, 2008 and 2007, and
the income (loss) and changes in plan equity for each of the years in the
three-year period ended July 31, 2008 in conformity with U.S. generally accepted
accounting principles.
/s/ KPMG LLP
New York, New York
October 28, 2008
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
Statements of Financial Condition
July 31, 2008 and 2007
(Dollar in thousands, except per share amounts)
2008 2007
------- -------
Assets:
Investment in Koninklijke Philips Electronics N.V.
common stock at market value -- 3,967,914 shares
in 2008 and 3,699,932 shares in 2007 (cost
$111,786 in 2008 and $97,290 in 2007) $132,052 $149,477
Contributions receivable from participants 1,758 1,495
------- -------
Total assets $133,810 $150,972
======= =======
Plan equity $133,810 $150,972
======= =======
See accompanying notes to financial statements
2
KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
Statements of Income (Loss) and Changes in Plan Equity
Years ended July 31, 2008, 2007 and 2006
(Dollar in thousands, except per share amounts)
2008 2007 2006
--------- -------- ---------
Changes in plan equity:
Investment income (loss):
Net change in unrealized appreciation
(depreciation) of investments $(31,921) 17,628 $ 16,301
Net realized gain on sale of investments 4,505 10,995 7,543
Dividend income from Koninklijke Philips
Electronics N.V. common stock 3,519 2,549 1,820
-------- -------- --------
Total investment income (loss) (23,897) 31,172 25,664
-------- -------- --------
Contributions:
Participant 22,599 20,337 20,965
Employer 3,941 3,590 3,768
-------- -------- --------
Total contributions 26,540 23,927 24,733
-------- -------- --------
Total additions to plan equity 2,643 55,099 50,397
Less distributions to participants (19,805) (37,475) (32,689)
-------- -------- --------
Net increase (decrease) (17,162) 17,624 17,708
Plan equity:
Beginning of year 150,972 133,348 115,639
-------- -------- --------
End of year $133,810 150,972 $133,348
======== ======== ========
See accompanying notes to financial statements
3
KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2008 and 2007
(Dollars in thousands, except per share amounts)
(1) DESCRIPTION OF THE PLAN
The following description of the Koninklijke Philips Electronics N.V.
Nonqualified Stock Purchase Plan (the "Plan") provides only general
information. Participants should refer to the Plan prospectus for a more
complete description of the Plan's provisions.
(a) GENERAL
The Plan is a voluntary stock purchase plan established for eligible
U.S.-based employees of certain subsidiaries of Koninklijke Philips
Electronics N.V. (the "Company") effective August 1, 2000. Employees'
eligible to participate in the Plan have the right to purchase shares
of the Company's common stock at a discount. The common stock of the
Company is quoted on several stock exchanges including the Amsterdam
Stock Exchange and the New York Stock Exchange ("NYSE").
(b) PARTICIPATION
U.S.-based full-time salaried and hourly employees of certain
subsidiaries of the Company, as defined by the Plan, are eligible to
participate in the Plan after completing 30 days of full-time
employment. Employees subject to collective bargaining agreements are
eligible to participate upon acceptance of the Plan by their
respective union.
(c) CONTRIBUTIONS
Each year, participants may contribute up to 10% of their cash
compensation, as defined by the Plan, through payroll withholdings.
In addition to the percentage limitation, contributions may not
exceed $20 in any calendar year.
The cost of shares to participants is 85% of the closing price on the
last day of the applicable purchase period on which stocks are traded
on the NYSE. For example, the purchase price for the first 2008
purchase period was based on the March 31, 2008 closing price.
The 15% discount between the fair value of the shares purchased and
the cost to the participants represents employer contributions.
The participants' shares are held in trust by Computershare Trust
Company, N.A., (the "Trust").
Contributions are used to purchase whole and fractional shares of the
Company common stock at the end of each purchase period (a calendar
quarter).
(d) VESTING
All contributions and common stock purchased are 100% vested.
(e) DIVIDENDS
Dividends are first declared in euros, and are paid to participants
in U.S. dollars converted at the rate of exchange on the Amsterdam
Stock Exchange at the close of business on a date announced by the
4
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2008 and 2007
(Dollars in thousands, except per share amounts)
Company. Dividends paid, net of applicable Dutch taxes withheld, are
reinvested into the participant's account and used to purchase
additional common shares at the prevailing market price during the
next purchase period. There is no discount applied to shares
purchased through the reinvested dividends.
(f) PLAN RESTRICTIONS
A participant may sell any shares held in their account at any time
without penalty.
(g) PLAN TERMINATION
The Company may suspend or terminate the Plan at any time. If the
Plan is suspended or terminated, payroll deductions will terminate
and unapplied withholdings will be used to purchase common shares or
be repaid to participants without interest as soon as practicable
following the termination of the Plan.
(h) PLAN EXPENSES
Plan expenses are paid by the Company.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF ACCOUNTING
The accompanying financial statements are prepared on the accrual
basis of accounting.
(b) INVESTMENT VALUATION AND INCOME RECOGNITION
The investment in shares held by the Plan is recorded at market
value, measured by the closing price listed by the NYSE. Purchases
and sales of securities are recorded on a trade-date basis. Realized
gains and losses are allocated using the first in, first out method.
Dividends are recorded on the ex-dividend date.
(c) USE OF ESTIMATES
The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, and changes therein, and disclosure of contingent assets
and liabilities. Actual results could differ from those estimates.
(d) DISTRIBUTIONS
Participants may request distributions in the form of Company common
stock or cash. Distributions are recorded when paid.
5
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2008 and 2007
(Dollars in thousands, except per share amounts)
(e) NEW ACCOUNTING PRONOUNCEMENTS
In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 157, Fair Value
Measurements (FASB 157). FASB 157 defines fair value, establishes a
framework for measuring fair value, and expands disclosure about fair
value measurements. It applies to other pronouncements that require
or permit fair value but does not require any new fair value
measurements. FASB 157 is effective for fiscal years beginning after
November 15, 2007. Management does not expect the provisions of FASB
157 to have a material effect on the Plan's financial statements.
(3) INVESTMENT IN COMMON SHARES
Each participant is a 100% owner of the number of shares held on their
behalf by the Trust. Participants maintain the same rights as common
stock shareholders.
As of July 31, 2008, there were 3,967,914 shares held for participants
and were valued at $33.28 per share. As of July 31, 2007, there were
3,699,932 shares were held for participants and were valued at $40.40 per
share. There were $1,758 and $1,495 of participants' contributions not
yet used to purchase shares on July 31, 2008 and 2007, respectively,
which is reflected as contributions receivable from participants on the
accompanying Statements of Financial Condition.
Proceeds from the sales of Company stock, cost of stock sold and the
related net realized gain were as follows:
Years ended July 31,
2008 2007 2006
---- ---- ----
Proceeds $ 19,805 37,475 $ 32,689
Cost of stock sold 15,300 26,480 25,146
-------- ------- -------
Net realized gain $ 4,505 10,995 $ 7,543
======== ======= =======
(4) TAX STATUS
The Plan is a non-qualified employee stock purchase plan for U.S. tax
purposes. Participants of the Plan are taxed under Section 83 of the
Internal Revenue Code. Upon purchase of the shares, the excess of the
closing market price of the shares on the purchase date over the
discounted purchase price (85% of the closing price on the last day of
the purchase period) is included as ordinary income on the participant's
W-2 form sent to the Internal Revenue Service. Any additional
appreciation on the shares from the date of purchase until the date of
subsequent sale will then be taxed to participants under Section 83 of
the Internal Revenue Code as short-term or long-term capital gain or
loss, depending on the period of time the shares are held before sale.
Participants are also required to report as ordinary income the amount of
any dividends received on common shares purchased through the Plan.
6
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2008 and 2007
(Dollars in thousands, except per share amounts)
(5) MARKET RISK
The Plan's assets are invested in one security, the common stock of the
Company. Investment securities are exposed to various risks, such as
interest rate, market, and credit risks. Recent market conditions have
resulted in an unusually high degree of volatility in the equity markets.
At October 22, 2008, the market value of Company shares traded on the New
York Stock Exchange was $17.52 per share. Shares held for participants
were valued at $33.28 per share in the statement of financial condition
as of July 31, 2008. Due to the level of risk associated with this
investment security, and the potential for additional volatility in the
equity markets, it is at least reasonably possible that changes in the
value of the investment security will occur in the near term and that
such changes could materially affect the amounts reported in the
statement of financial condition. The value of the Company common stock
is entirely dependent upon the performance of the Company and the
market's evaluation of such performance.
7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
KONINKLIJKE PHILIPS ELECTRONICS N.V.
Nonqualified Stock Purchase Plan
Date: October 28, 2008 By: /s/ Pamela Dunlap
-------------------------------------------
Name: Pamela Dunlap
Title: Chairman, Stock Purchase Plan Committee
8
EXHIBIT INDEX
Exhibit 23.1 Consent of Independent Registered Public Accounting Firm