SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

REPORT OF FOREIGN ISSUER

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

KONINKLIJKE PHILIPS ELECTRONICS N.V.

(Exact name of registrant as specified in its charter)

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

The Netherlands
(Jurisdiction of incorporation or organization)

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

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

Form 20-F          þ                         Form 40-F          o

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

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

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

Yes          o                         No          þ

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

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

 

 

This report comprises a copy of the Quarterly Report of the Philips Group for the three months ended June 30, 2008 and a copy of each of following press releases entitled:

•		“Philips notifies Dutch Authority for the Financial Markets of holding over 5% of its own shares”, dated June 9, 2008;
•		“Philips CEO elaborates on Philips’ progress in building the leading Health and Well-being brand at JP Morgan CEO Conference”, dated June 11, 2008;
•		“Philips CFO elaborates on Philips’ progress in building the leading Health and Well-being brand at Exane BNP Seminar in Paris”, dated June 13, 2008;
•		“Philips to transfer its PC monitors business to TPV Technology, entering into a brand license agreement”, dated July 8, 2008.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized at Amsterdam, on the 15^th day of July 2008.

Forward-looking statements

This document contains certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items, in particular the outlook paragraph in this report. Examples of forward-looking statements include statements made about our strategy, estimates of sales growth, future EBITA and future developments in our organic business. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances and there are many 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 domestic and global economic and business conditions, the successful implementation of our strategy and our ability to realize the benefits of this strategy, our ability to develop and market new products, changes in legislation, legal claims, changes in exchange and interest rates, changes in tax rates, pension costs, raw materials and employee costs, our ability to identify and complete successful acquisitions and to integrate those acquisitions into our business, our ability to successfully exit certain businesses or restructure our operations, the rate of technological changes, political, economic and other developments in countries where Philips operates, industry consolidation and competition. As a result, Philips’ actual future results may differ materially from the plans, goals and expectations set forth in such forward-looking statements.

Statements regarding market share, including those regarding Philips’ competitive position, contained in this document are based on outside sources such as specialized research institutes, industry and dealer panels in combination with management estimates. Where information is not yet available to Philips, those statements may also be based on estimates and projections prepared by outside sources or management. Rankings are based on sales unless otherwise stated.

Use of non-US GAAP information

In presenting and discussing the Philips Group’s financial position, operating results and cash flows, management uses certain non-US GAAP financial measures. These non-US GAAP financial measures should not be viewed in isolation as alternatives to the equivalent US GAAP measure(s) and should be used in conjunction with the most directly comparable US GAAP measure(s). A discussion of the non-US GAAP measures included in this document and a reconciliation of such measures to the most directly comparable US GAAP measure(s) are contained in this document.

Use of fair-value measurements

In presenting the Philips Group’s financial position, fair values are used for the measurement of various items in accordance with the applicable accounting standards. These fair values are based on market prices, where available, and are obtained from sources that are deemed to be reliable.

Readers are cautioned that these values are subject to changes over time and are only valid at the balance sheet date. When a readily determinable market value does not exist, fair values are estimated using valuation models which we believe are appropriate for their purpose. They require management to make significant assumptions with respect to future developments which are inherently uncertain and may therefore deviate from actual developments. In certain cases, independent valuations are obtained to support management’s determination of fair values.

All amounts in millions of euros unless otherwise stated; data included are unaudited. Financial reporting is in accordance with US GAAP, unless otherwise stated.

Philips reports strong sales of EUR 6.5 billion, up 6% year-on-year; EBITA rises to EUR 413 million

•		Strong comparable sales growth of 6%, fueled by 16% growth in emerging markets.
•		EBITA increased to EUR 413 million from EUR 386 million in Q2 2007, mainly driven by higher earnings at Lighting.
•		Strong contribution to results from recent acquisitions, both in Home Healthcare Solutions and in Professional Luminaires.
•		Consumer Lifestyle performed well in a weaker environment; plans to improve the Television business remain well on track.
•		Net income of EUR 720 million includes a gain of EUR 780 million on the sale of TSMC shares and an impairment charge of EUR 299 million for NXP. Net income for Q2 2007 included a EUR 1.2 billion gain in respect of TSMC.

Gerard Kleisterlee,
President and CEO of Royal Philips Electronics:

“Our second quarter results are a reflection of both the quality and the resilience of our overall business portfolio in a rapidly deteriorating macro-economic environment. Revenue growth was excellent, with currency-corrected nominal growth of 14% and comparable growth of 6%, well ahead of both last year as well as the previous quarter. Also profitability developed positively, as increased contribution from the business, including the latest acquisitions, more than offset the impact of incidental results. We also

continued to successfully expand our strong position in high-growth emerging markets.

Our Healthcare sector posted strong results in Home Healthcare Solutions, Patient Monitoring and Clinical Care Systems. Imaging Systems posted lower results but continued to increase its order book backlog, with a better product mix, which gives us confidence for the full year. In a much-weakened consumer environment our Consumer Lifestyle business continued to perform well, and the implementation of our Television strategy of rightsizing and selective growth is ahead of plan. Also, Lighting continued to deliver, helped by their balanced exposure to different end markets, both from an application and a geographic perspective.

The execution of our plans kept us well on track with regard to the implementation of our Vision 2010 strategy and ambition.”

Philips Group

Net income
in millions of euros unless otherwise stated

		Q2				Q2
		2007				2008
Sales			6,033				6,463
EBITA			386				413
as a % of sales			6.4				6.4
EBIT			337				325
as a % of sales			5.6				5.0
Financial income and expenses			1,335				494
Income tax expense			(112	)			(97	)
Results equity-accounted investees			56				4
Minority interests			(2	)			(2	)
Income from continuing operations			1,614				724
Discontinued operations			(45	)			(4	)
Net income			1,569				720
Per common share (in euros) — basic			1.43				0.71

Sales by sector
in millions of euros unless otherwise stated

										% change
		Q2				Q2								compa-
		2007				2008				nominal				rable
Healthcare			1,625				1,800				11				3
Consumer Lifestyle			2,786				2,787				0				7
Lighting			1,464				1,739				19				6
I&EB			110				103				(6	)			8
GM&S			48				34				(29	)			(27	)
Philips Group			6,033				6,463				7				6

Highlights in the quarter

Net income

•

Income from continuing operations was lower than in Q2 2007, primarily due to EUR 440 million lower gains on the sale of TSMC shares and a EUR 299 million impairment charge for NXP. Additionally, Q2 2007 included dividend income from TSMC of EUR 139 million; this year’s TSMC dividend income — approximately EUR 24 million — is expected to be recorded in Q3.

•

Results relating to equity-accounted investees were below Q2 2007, when LG Display was presented as an equity-accounted investee.

•

The improvement in results from discontinued operations was mainly due to a EUR 35 million impairment of the stake in MedQuist in Q2 2007.

Sales by sector

•

Sales amounted to EUR 6,463 million, a nominal increase of 7% compared to Q2 2007. Excluding portfolio changes (8%) and a negative currency impact of 7%, comparable sales grew by 6%, driven by Consumer Lifestyle and Lighting, moderated by 3% growth at Healthcare.

•

Healthcare sales grew 11% nominally on the back of the acquisition of Respironics. On a comparable basis, sales grew 3%, driven by solid growth at Customer Services, Home Healthcare Solutions, Clinical Care Systems and Patient Monitoring.

•

Consumer Lifestyle sales increased by 7% on a comparable basis, led by strong double-digit growth at Health & Wellness and Television.

•

Lighting sales increased 19% nominally, driven by both strong organic growth and the acquisition of Genlyte. Comparable sales grew 6%, led by good growth at Lamps and Professional Luminaires.

Sales per market cluster
in millions of euros unless otherwise stated

										% change
		Q2				Q2								compa-
		2007				2008				nominal				rable
Western Europe			2,356				2,276				(3	)			(1	)
North America			1,653				2,036				23				5
Other mature markets			284				284				0				6
Total mature markets			4,293				4,596				7				2
Emerging markets			1,740				1,867				7				16
Philips Group			6,033				6,463				7				6

EBITA
in millions of euros unless otherwise stated

		Q2				Q2
		2007				2008
Healthcare			218				195
Consumer Lifestyle			106				83
Lighting			161				202
Innovation & Emerging Businesses			(36	)			(41	)
Group Management & Services			(63	)			(26	)
Philips Group			386				413
as a % of sales			6.4				6.4

EBITA
as a % of sales

		Q2				Q2
		2007				2008
Healthcare			13.4				10.8
Consumer Lifestyle			3.8				3.0
Lighting			11.0				11.6
Innovation & Emerging Businesses			(32.7	)			(39.8	)
Group Management & Services			(131.3	)			(76.5	)
Philips Group			6.4				6.4

EBIT
in millions of euros unless otherwise stated

		Q2				Q2
		2007				2008
Healthcare			185				138
Consumer Lifestyle			101				79
Lighting			150				175
Innovation & Emerging Businesses			(36	)			(41	)
Group Management & Services			(63	)			(26	)
Philips Group			337				325
as a % of sales			5.6				5.0

Sales per market cluster

•

Double-digit comparable sales growth was visible in most of the emerging markets, most notably Latin America, Eastern Europe and India, driven mainly by Lighting and Consumer Lifestyle.

•

Sales in mature markets overall showed limited comparable growth, impacted by weaker market conditions in Western Europe, albeit solid growth was seen in a few major economies.

Earnings

•

EBITA amounted to EUR 413 million, which was EUR 27 million higher than in Q2 2007. It included restructuring, acquisition and integration-related charges of EUR 121 million, which were more than offset by improved earnings from new acquisitions, a EUR 56 million gain on the sale of the Set-Top Box activity and a EUR 39 million gain on the sale of real estate in Taiwan.

•

Healthcare EBITA of EUR 195 million included EUR 35 million of acquisition and integration-related charges, largely offsetting the contribution from recent acquisitions.

•

Consumer Lifestyle EBITA included restructuring charges totaling EUR 66 million and a EUR 56 million gain on the sale of the Set-Top Box activity. Earnings from operating activities improved year-on-year, thanks to Television and Video & Multimedia Applications.

•

Lighting EBITA benefited from the addition of earnings at Genlyte and improved margins at Consumer Luminaires, partly offset by lower earnings at Lamps.

•

I&EB EBITA declined slightly, reflecting additional investments in Research and in the Healthcare Incubator.

•

GM&S EBITA improved by EUR 37 million compared to Q2 2007, mainly due to gains at the Real Estate Service Unit.

Financial income and expenses
in millions of euros

		Q2				Q2
		2007				2008
Interest expenses, net			(26	)			(30	)
TSMC
Sale of securities			1,220				780
Dividend			139				—
NXP impairment			—				(299	)
TPV option fair-value adjustment			8				5
Other			(6	)			38
			1,335				494

Cash balance
in millions of euros

		Q2				Q2
		2007				2008
Cash of continuing operations			5,779				4,657
Cash of discontinued operations			127				98
Beginning balance			5,906				4,755
Net cash from operating activities			(26	)			140
Gross capital expenditures			(237	)			(214	)
Acquisitions/divestments			(233	)			(54	)
Other cash from investing activities			1,936				1,290
Repurchase of treasury shares			(358	)			(1,116	)
Changes in debt/other			(117	)			(1,601	)
Dividend paid			(639	)			(698	)
Net cash flow discontinued operations			29				(12	)
Ending balance			6,261				2,490
Less cash of discontinued operations			131				94
Cash of continuing operations			6,130				2,396

Financial income and expenses

•

The further sale of TSMC shares resulted in a gain of EUR 780 million, compared to a gain of EUR 1.2 billion in Q2 2007. The Q2 2007 results also included a dividend on TSMC shares of EUR 139 million.

•

Due to deteriorating market conditions, a EUR 299 million impairment was recorded on the stake in NXP.

Cash balance

•

The Group cash balance declined by EUR 2.3 billion in the quarter, mainly due to repayment of debt (EUR 1.6 billion), share buy-backs (EUR 1.1 billion) and payment of the annual dividend to shareholders (EUR 698 million), partly offset by EUR 1.2 billion in proceeds from the further sale of shares in TSMC.

Cash flows from operating activities

•

Operating activities generated EUR 140 million in cash during the quarter, compared to an outflow of EUR 26 million in Q2 2007, largely thanks to improved working capital at Healthcare (mainly a reduction in accounts receivable following the implementation of a new IT system), partly offset by higher working capital requirements at Lighting and Consumer Lifestyle.

Gross capital expenditures

•

Gross capital expenditures for property, plant and equipment were EUR 6 million lower than in Q2 2007. Higher investments at Lighting were more than offset by lower expenditures in all other sectors, most notably in Group Management & Services (Real Estate).

Inventories

•

Inventories increased from 12.8% of sales in Q2 2007 to 14.1% at the end of Q2 2008, largely due to the integration of Genlyte and Respironics in Q1 2008 and proportionally higher stock levels at Consumer Lifestyle and Lighting.

Net debt and group equity

•		At the end of June, the Group had a EUR 1.5 billion net debt position (EUR 2.4 billion of cash and EUR 3.9 billion of debt), compared to a net cash position of EUR 2.3 billion in Q2 2007. The change was mainly due to EUR 6.0 billion in acquisition-related cash outflows, EUR 2.9 billion in share repurchases and a EUR 0.7 billion dividend payment, partly offset by EUR 4.5 billion proceeds from the sale of securities, mainly TSMC and LG Display.
•		Compared to Q2 2007, group equity declined by EUR 3.2 billion, as the equity reduction from share buy-backs and currency translation differences were largely offset by retained earnings (net of dividend) and the accounting reclassification of LG Display (to available-for-sale securities).

Employment

•		The decline in the number of employees compared to Q1 2008 was primarily due to a seasonal reduction in temporary employees, mainly at Lighting.
•		The higher number of employees compared to Q2 2007 was mainly due to the recent acquisitions of Genlyte, Respironics and VISICU.

Healthcare

Key data
in millions of euros unless otherwise stated

		Q2				Q2
		2007				2008
Sales			1,625				1,800
Sales growth
% nominal			2				11
% comparable			4				3
EBITA			218				195
as a % of sales			13.4				10.8
EBIT			185				138
as a % of sales			11.4				7.7
Net operating capital (NOC)			4,857				8,382
Number of employees (FTEs)			28,114				35,087

Business highlights

•		Philips significantly strengthened its presence in two key emerging markets through the acquisition of Brazilian patient monitoring and critical care company Dixtal Biomédica e Tecnologia and Chinese patient monitoring company Shenzhen Goldway Industrial. This represents a further step towards the creation of a low-cost global supply base for value-segment products.
•		Philips’ cutting-edge Brilliance iCT scanner has been installed in a few selected healthcare facilities across the globe, and full commercial delivery will start in the second half of the year.
•		The Ultrasound business announced the launch of the CX50 Compact Extreme, our first entry into the high-growth compact ultrasound market, which is estimated to be worth USD 700 million in 2008.
•		Philips launched the latest addition to its nuclear medicine product portfolio with the introduction of the BrightView XCT, which delivers high-resolution CT images while exposing patients to only low radiation doses.

Financial performance

•		Equipment order intake grew 4% on a currency-comparable basis, further strengthening the order book backlog. Strong growth was seen at Patient Monitoring and Clinical Care Systems, while Imaging Systems showed modest growth.
•		Sales grew by 11% nominally, driven by strong performance of our recent acquisition Respironics. Sales growth was 3% on a comparable basis, driven by solid growth at Customer Services, Home Healthcare Solutions, Clinical Care Systems and Patient Monitoring. Imaging Systems saw strong growth in Magnetic Resonance and Nuclear Medicine more than offset by a decline in Computed Tomography as a result of a lower-value mix, partly in anticipation of commercial delivery of the new Brilliance iCT scanner later in the year.
•		EBITA amounted to EUR 195 million, or 10.8% of sales, including EUR 35 million of acquisition and integration-related charges, mainly for Respironics. Higher earnings were reported at Home Healthcare Solutions, Healthcare Informatics (driven by higher margins) and Clinical Care Systems (thanks to a favorable product mix).
•		Net operating capital increased by EUR 3.5 billion compared to Q2 2007, mainly due to acquisitions.

Looking ahead

•		The expectation for the Healthcare sector’s full-year results remains in line with plan. Consequently, we expect sales and margins to improve during the second half of the year.
•		For 2008, acquisition and integration charges related to Respironics, VISICU and Emergin are estimated at approximately EUR 100 million, of which around EUR 30 million is expected to impact EBITA in Q3.

Consumer Lifestyle

Key data
in millions of euros unless otherwise stated

		Q2				Q2
		2007				2008
Sales			2,786				2,787
of which Television			1,258				1,359
Sales growth
% nominal			(8	)			0
% comparable			(6	)			7
Sales growth excl. Television
% nominal			3				(7	)
% comparable			5				2
EBITA			106				83
of which Television			(69	)			(112	)
as a % of sales			3.8				3.0
EBIT			101				79
of which Television			(69	)			(112	)
as a % of sales			3.6				2.8
Net operating capital (NOC)			1,551				1,499
of which Television			46				48
Number of employees (FTEs)			24,558				21,661
of which Television			7,691				7,038

Business highlights

•		Philips reached an agreement with TPV on key terms and conditions to enter into a brand-licensing agreement under which it will transfer its PC monitors business — IT Displays — to TPV. Philips will receive revenue-based royalties as part of the agreement.
•		Philips and Swarovski launched the 2008 Active Crystals range. This is the 2nd generation of this line of fashionable lifestyle technology accessories, including USB sticks and Bluetooth headsets.
•		Philips completed the sale of its Set-Top Box activity to UK-based Pace Micro Technology.

Financial performance

•		Consumer Lifestyle’s comparable sales grew 7% year-on-year, driven by double-digit growth in emerging markets.
•		Most businesses contributed to the year-on-year sales growth, in particular Health & Wellness, Television and Domestic Appliances.
•		Comparable sales growth at Television reached 14%, driven by strong growth in emerging markets and supported somewhat by demand from soccer’s Euro 2008 championship.
•		EBITA included restructuring charges of EUR 66 million — mainly at Television in connection with ongoing actions to improve profitability — and a EUR 56 million gain on the sale of the Set-Top Box activity.

Looking ahead

•		New product launches scheduled for the third quarter include the Senseo Latte and a new mid-range shaver series.
•		The brand license agreements with Funai and TPV are expected to close in Q3 and Q4 respectively.
•		Television-related restructuring charges are expected to amount to EUR 125 million for the full year, of which EUR 40 million in Q3.

Lighting

Key data
in millions of euros unless otherwise stated

		Q2				Q2
		2007				2008
Sales			1,464				1,739
Sales growth
% nominal			13				19
% comparable			6				6
EBITA			161				202
as a % of sales			11.0				11.6
EBIT			150				175
as a % of sales			10.2				10.1
Net operating capital (NOC)			3,578				6,120
Number of employees (FTEs)			53,500				59,788

Business highlights

•		Philips has launched a license program for LED-based luminaires intended for general illumination as well as for architectural and theatrical lighting, in order to unleash the full potential of new LED lighting solutions.
•		French insurer Generali will be the first company worldwide to have an entire office building lit by LED lighting, with Philips being the sole supplier for this innovative project in Paris.
•		British Gas has instigated one of the biggest green initiatives of its kind by distributing no fewer than 52 million energy-saving bulbs from Philips to some 13 million households in the UK.

Financial performance

•		Lighting sales increased by EUR 275 million compared to Q2 2007, driven by the good performance of Genlyte. On a comparable basis, sales rose 6% thanks to 16% growth in energy-efficient lighting solutions — including Lumileds — and 18% growth in emerging markets, partly tempered by softening markets in Western Europe and North America.
•		The EUR 41 million year-on-year increase in EBITA was supported by the recent acquisitions of Genlyte and Color Kinetics and profitable growth in energy-efficient lighting solutions. Restructuring and acquisition-related charges amounted to EUR 20 million, compared to EUR 18 million in Q2 2007.
•		The increase in both net operating capital and employees was primarily a result of the Genlyte and Color Kinetics acquisitions.

Looking ahead

•		Lighting will continue to drive both growth and profitability — including from recent acquisitions — in line with Vision 2010 targets.
•		Restructuring and integration-related charges are expected to amount to approximately EUR 85 million for the full year 2008, of which EUR 15 million in Q3.

Innovation & Emerging Businesses

Key data
in millions of euros unless otherwise stated

		Q2				Q2
		2007				2008
Sales			110				103
Sales growth
% nominal			(70	)			(6	)
% comparable			37				8
EBITA Technologies / Incubators			(32	)			(35	)
EBITA others			(4	)			(6	)
EBITA			(36	)			(41	)
EBIT			(36	)			(41	)
Net operating capital (NOC)			189				189
Number of employees (FTEs)			6,358				5,534

Business highlights

•		At its annual Corporate Research Exhibition, Philips Research showcased new, innovative Organic Light-Emitting Diode (OLED) lighting solutions for future use in homes, workplaces, stores, public areas and cars.
•		Philips joined forces with Axel Springer, combining Philips’ Aprico software with Axel Springer’s TV program information, thus allowing viewers to create their own Internet TV channels.
•		Philips signed a letter of intent to set up a clinical research partnership with the Maastricht University Medical Centre and the University Medical Center Aachen in the fields of cardiovascular disease and cancer treatment.

Financial performance

•

EBITA of Innovation & Emerging Businesses was in line with expectation, albeit slightly lower than in Q2 2007 due to additional investments in innovative healthcare technologies.

Looking ahead

•

Investment in Research and the Incubators is expected to remain at a quarterly run-rate of EUR 40 million for the second half of the year, with a higher spend expected in Q3.

Group Management & Services

Key data
in millions of euros unless otherwise stated

		Q2				Q2
		2007				2008
Sales			48				34
Sales growth
% nominal			33				(29	)
% comparable			61				(27	)
EBITA Corporate & Regional Costs			(38	)			(38	)
EBITA Brand Campaign			(29	)			(14	)
EBITA Service Units, Pensions and Other			4				26
EBITA			(63	)			(26	)
EBIT			(63	)			(26	)
Net operating capital (NOC)			567				1,115
Number of employees (FTEs)			6,960				5,814

Business highlights

•		Philips was recognized as one of the ‘Worlds Most Ethical Companies’ for 2008 by the Ethisphere Institute, a US-based think tank that studies business ethics and corporate responsibility.
•		Philips Singapore’s Toa Payoh Complex has been awarded a Green Mark Gold Award by the Building and Construction Authority of Singapore. This award is given to sustainable buildings — based on energy efficiency, water efficiency and management criteria — and is recognition of Philips’ commitment to further increase the energy efficiency of its operations.
•		Philips came top in a Dutch corporate reputation study by Erasmus University and Reputation Institute, winning the Reputation Institute Award 2008.

Financial performance

•		Investment in the global brand campaign was lower than expected due to a shift in seasonal spend pattern.
•		Compared to Q2 2007, EBITA at the Service Units was positively impacted by higher gains on the sale of real estate.
•		Costs of pensions and other post-retirement benefits were broadly in line with Q2 2007.
•		The increase in net operating capital mainly relates to increased prepaid pension assets in the Netherlands.

Looking ahead

•		Corporate and Regional overhead costs are expected to decrease in the second half of 2008 thanks to ongoing cost-reduction initiatives.
•		Costs of pensions and other post-retirement benefit plans allocated to Group Management & Services are expected to total approximately EUR 40 million for the full year 2008.

Highlights in the 1^st six months

The 1^st six months of 2008

•		Comparable sales were 3% higher than in the 1st half of 2007, supported by Healthcare (4%) and Lighting (4%).
•		Income from continuing operations declined by EUR 1,510 million to EUR 956 million due to lower gains on the sale of stakes in TSMC.
•		EBITA amounted to EUR 678 million, 10% lower than in the corresponding period of 2007 due to restructuring, acquisition and integration-related charges.
•		Results relating to equity-accounted investees increased by EUR 57 million, driven by improved results from LG Display in the first quarter.

Net income
in millions of euros unless otherwise stated

						January-June
		2007				2008
Sales			11,963				12,428
EBITA			756				678
as a % of sales			6.3				5.5
EBIT			649				500
as a % of sales			5.4				4.0
Financial income and expenses			2,016				540
Income tax expense			(204	)			(146	)
Results equity-accounted investees			7				64
Minority interests			(2	)			(2	)
Income from continuing operations			2,466				956
Discontinued operations			(22	)			(17	)
Net income			2,444				939
Per common share (in euros) — basic			2.22				0.91

Management summary

•		Income from continuing operations amounted to EUR 956 million, a decline of EUR 1,510 million compared to the first six months of 2007. This decline was largely attributable to a EUR 1,476 million reduction in financial income and expenses, which included lower proceeds from the sale of stakes in TSMC, higher impairment charges and lower income from LG Display.
•		Sales for the first half-year totaled EUR 12,428 million, 3% higher than in the corresponding period of 2007 on a comparable basis. Order intake at Healthcare rose 6%, which is 2 percentage points above the first half of 2007. Sales at Healthcare showed moderate comparable growth of 4% compared with the first half of 2007. On the back of 6% comparable Television sales growth, Consumer Lifestyle’s comparable sales increased by 3%. Lighting’s comparable sales grew 4% year-on-year.
•		EBITA in the first six months was EUR 678 million, 10% lower than in the corresponding period of 2007, mainly due to higher incidental charges at Consumer Lifestyle and acquisition-related charges at Healthcare and Lighting, partly offset by the gain on the sale of the Set-Top Box activity.
•		Net income in the first half of 2008 decreased by EUR 1,505 million compared to the first half of 2007. This reduction is attributable to EUR 149 million lower EBIT and a EUR 1,476 million decline in financial income mainly related to lower proceeds from the sale of TSMC shares and the EUR 299 million impairment in respect of NXP.
•		Cash flows from operating activities showed an earnings-related EUR 214 million decline compared to the first half of 2007.
•		Net operating capital increased by EUR 6.6 billion compared to Q2 2007, largely due to EUR 5.8 billion of intangible assets from acquisitions made during the past year and EUR 0.3 billion of additional working capital.

Outlook

Our second-quarter sales growth and profitability underscored the resilience of Philips’ portfolio of global businesses in the face of weaker economic conditions in many of our mature markets. While the full magnitude and duration of the current economic downturn in Europe and North America has yet to become clear, we expect the growth in emerging markets to continue — supporting sales in all three sectors during the second half of the year.

We will continue to execute our 2008 management agenda, most importantly the further integration of recent acquisitions as well as actions to improve the future profitability of our Television business. We remain confident that 2008 will be a year in which we make progress towards realizing our Vision 2010 objectives.

Amsterdam, July 14, 2008

Board of Management

Consolidated statements of income

all amounts in millions of euros unless otherwise stated

		2nd quarter								January to June
		2007				2008				2007				2008
Sales			6,033				6,463				11,963				12,428
Cost of sales			(3,945	)			(4,295	)			(7,884	)			(8,287	)
Gross margin			2,088				2,168				4,079				4,141
Selling expenses			(1,183	)			(1,284	)			(2,295	)			(2,427	)
General and administrative expenses			(193	)			(251	)			(405	)			(487	)
Research and development expenses			(401	)			(413	)			(804	)			(822	)
Other business income and expenses			26				105				74				95
Income from operations			337				325				649				500
Financial income and expenses			1,335				494				2,016				540
Income before taxes			1,672				819				2,665				1,040
Income tax expense			(112	)			(97	)			(204	)			(146	)
Income after taxes			1,560				722				2,461				894
Results relating to equity-accounted investees			56				4				7				64
Minority interests			(2	)			(2	)			(2	)			(2	)
Income from continuing operations			1,614				724				2,466				956
Discontinued operations			(45	)			(4	)			(22	)			(17	)
Net income			1,569				720				2,444				939
Weighted average number of common shares outstanding (after deduction of treasury stock) during the period (in thousands):
•     basic			1,099,261				1,011,602				1,099,684				1,030,017
•     diluted			1,110,900				1,019,557				1,111,066				1,038,849
Net income per common share in euros:
•     basic			1.43				0.71				2.22				0.91
•     diluted			1.41				0.71				2.20				0.90
Ratios
Gross margin as a % of sales			34.6				33.5				34.1				33.3
Selling expenses as a % of sales			(19.6	)			(19.9	)			(19.2	)			(19.5	)
G&A expenses as a % of sales			(3.2	)			(3.9	)			(3.4	)			(3.9	)
R&D expenses as a % of sales			(6.6	)			(6.4	)			(6.7	)			(6.6	)
EBIT or Income from operations			337				325				649				500
as a % of sales			5.6				5.0				5.4				4.0
EBITA			386				413				756				678
as a % of sales			6.4				6.4				6.3				5.5

Consolidated balance sheets

in millions of euros unless otherwise stated

		June 30,				December 31,				June 30,
		2007				2007				2008
Current assets:
Cash and cash equivalents			6,130				8,769				2,396
Receivables			4,448				4,670				4,835
Current assets of discontinued operations			198				169				170
Inventories			3,365				3,203				3,846
Other current assets			1,338				1,020				1,286
Total current assets			15,479				17,831				12,533
Non-current assets:
Investments in equity-accounted investees			2,891				1,886				255
Other non-current financial assets			5,006				3,183				2,902
Non-current receivables			162				84				82
Non-current assets of discontinued operations			195				164				136
Other non-current assets			3,471				3,726				3,482
Property, plant and equipment			3,212				3,180				3,427
Intangible assets excluding goodwill			2,152				2,154				3,807
Goodwill			4,010				4,135				7,357
Total assets			36,578				36,343				33,981
Current liabilities:
Accounts and notes payable			2,860				3,372				2,978
Current liabilities of discontinued operations			53				46				38
Accrued liabilities			3,169				2,984				2,856
Short-term provisions			619				377				397
Other current liabilities			529				509				444
Short-term debt			2,474				2,345				759
Total current liabilities			9,704				9,633				7,472
Non-current liabilities:
Long-term debt			1,334				1,212				3,152
Non-current liabilities of discontinued operations			124				111				100
Long-term provisions			2,564				2,727				3,243
Other non-current liabilities			696				934				1,008
Total liabilities			14,422				14,617				14,975
Minority interests			49				42				43
Stockholders’ equity			22,107				21,684				18,963
Total liabilities and equity			36,578				36,343				33,981
Number of common shares outstanding (after deduction of treasury stock) at the end of period (in thousands)			1,087,178				1,064,893				983,963
Ratios
Stockholder’s equity per common share in euros			20.33				20.36				19.27
Inventories as a % of sales			12.8				12.0				14.1
Net debt (cash): group equity			(12):112				(32):132				7:93
Net operating capital			10,742				10,586				17,305
Employees at end of period			125,834				123,801				133,136
of which discontinued operations			6,344				5,703				5,252

Consolidated statements of cash flows

all amounts in millions of euros unless otherwise stated

		2nd quarter								January to June
		2007				2008				2007				2008
Cash flows from operating activities:
Net income			1,569				720				2,444				939
(Income) loss discontinued operations			45				4				22				17
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization			204				264				408				516
Impairment of goodwill, equity-accounted investees and other non-current financial assets			—				299				39				299
Net gain on sale of assets			(1,217	)			(891	)			(1,991	)			(960	)
(Income) loss from equity-accounted investees (net of dividends received)			(60	)			(3	)			27				(12	)
Minority interests (net of dividends paid)			2				2				2				2
(Increase) decrease in working capital/other current assets			(619	)			(146	)			(1,216	)			(1,148	)
(Increase) decrease in non-current receivables/other assets/ other liabilities			277				(143	)			(10	)			(201	)
Increase (decrease) in provisions			(262	)			(22	)			(182	)			56
Proceeds from sales of trading securities			—				—				182				—
Other items			35				56				55				58
Net cash provided by (used for) operating activities			(26	)			140				(220	)			(434	)
Cash flows from investing activities:
Purchase of intangible assets			(53	)			(36	)			(72	)			(64	)
Capital expenditures on property, plant and equipment			(184	)			(178	)			(336	)			(326	)
Proceeds from disposals of property, plant and equipment			24				68				34				72
Cash from (to) derivatives			24				71				9				255
Proceeds from sale (purchase) of other non-current financial assets			1,888				1,151				3,029				1,888
Proceeds from sale (purchase) of businesses			(233	)			(54	)			(720	)			(5,267	)
Net cash provided by (used for) investing activities			1,466				1,022				1,944				(3,442	)
Cash flows from financing activities:
Increase (decrease) in debt			(113	)			(1,595	)			(111	)			364
Treasury stock transactions			(358	)			(1,116	)			(664	)			(2,083	)
Dividend paid			(639	)			(698	)			(639	)			(698	)
Net cash provided by (used for) financing activities			(1,110	)			(3,409	)			(1,414	)			(2,417	)
Net cash provided by (used for) continuing operations			330				(2,247	)			310				(6,293	)
Cash flows from discontinued operations:
Net cash provided by (used for) operating activities			(14	)			(11	)			(97	)			(32	)
Net cash provided by (used for) investing activities			43				(1	)			43				(1	)
Net cash provided by (used for) financing activities			—				—				—				—
Net cash provided by (used for) discontinued operations			29				(12	)			(54	)			(33	)
Net cash provided by (used for) continuing and discontinued operations			359				(2,259	)			256				(6,326	)
Effect of change in exchange rates on cash positions			(4	)			(6	)			(18	)			(61	)
Cash and cash equivalents at beginning of period			5,906				4,755				6,023				8,877
Cash and cash equivalents at end of period			6,261				2,490				6,261				2,490
Less cash of discontinued operations at end of period			131				94				131				94
Cash of continuing operations at end of period			6,130				2,396				6,130				2,396
For a number of reasons, principally the effects of translation differences, certain items in the statements of cash flows do not correspond to the differences between the balance sheet amounts for the respective items.
Ratio
Cash flows before financing activities			1,440				1,162				1,724				(3,876	)

Consolidated statement of changes in stockholders’ equity

all amounts in millions of euros

																		accumulated other comprehensive income (loss)																				January to June 2008
						capital in												unrealized gain								changes in												total
						excess								currency				(loss) on								fair value of								treasury				stock-
		common				of par				retained				translation				available-for-				pensions				cash flow								shares at				holders’
		stock				value				earnings				differences				sale securities				(FAS 158)				hedges				total				cost				equity
Balance as of December 31, 2007			228				—				25,559				(2,373	)			1,048				(590	)			28				(1,887	)			(2,216	)			21,684
Net income											939																												939
Net current period change															(284	)			204				49				43				12								12
Reclassifications into income															11				(888	)							(50	)			(927	)							(927	)
Total comprehensive income (loss), net of tax											939				(273	)			(684	)			49				(7	)			(915	)							24
Dividend											(720	)																											(720	)
Cancellation of treasury stock			(19	)							(2,591	)																							2,610				—
Purchase of treasury stock																																			(2,113	)			(2,113	)
Re-issuance of treasury stock							(51	)			(17	)																							105				37
Share-based compensation plans							51																																51
Balance as of June 30, 2008			209				—				23,170				(2,646	)			364				(541	)			21				(2,802	)			(1,614	)			18,963

Sectors

all amounts in millions of euros unless otherwise stated

Sales and income from operations

		2nd quarter
		2007												2008
						income from operations												income from operations
										as % of												as % of
		sales				amount				sales				sales				amount				sales
Healthcare			1,625				185				11.4				1,800				138				7.7
Consumer Lifestyle*			2,786				101				3.6				2,787				79				2.8
Lighting			1,464				150				10.2				1,739				175				10.1
Innovation & Emerging Businesses			110				(36	)			(32.7	)			103				(41	)			(39.8	)
Group Management & Services			48				(63	)			(131.3	)			34				(26	)			(76.5	)
			6,033				337				5.6				6,463				325				5.0
* of which Television			1,258				(69	)			(5.5	)			1,359				(112	)			(8.2	)

		January to June
		2007												2008
						income from operations												income from operations
										as % of												as % of
		sales				amount				sales				sales				amount				sales
Healthcare			3,056				258				8.4				3,274				215				6.6
Consumer Lifestyle*			5,602				239				4.3				5,449				152				2.8
Lighting			2,938				327				11.1				3,450				333				9.7
Innovation & Emerging Businesses			270				(67	)			(24.8	)			182				(109	)			(59.9	)
Group Management & Services			97				(108	)			(111.3	)			73				(91	)			(124.7	)
			11,963				649				5.4				12,428				500				4.0
* of which Television			2,551				(120	)			(4.7	)			2,586				(207	)			(8.0	)

Sectors and main countries

all amounts in millions of euros

Sales and total assets

		sales								total assets
		January to June								June 30,
		2007				2008				2007				2008
Healthcare			3,056				3,274				6,865				10,560
Consumer Lifestyle			5,602				5,449				4,277				4,247
Lighting			2,938				3,450				4,792				7,477
Innovation & Emerging Businesses			270				182				607				514
Group Management & Services			97				73				19,644				10,877
			11,963				12,428				36,185				33,675
Discontinued operations											393				306
											36,578				33,981

Sales and long-lived assets

		sales								long-lived assets *
		January to June								June 30,
		2007				2008				2007				2008
United States			3,132				3,408				4,908				10,438
Germany			849				918				293				288
China			813				857				174				162
France			766				789				97				103
United Kingdom			555				534				792				677
Netherlands			505				513				1,195				1,252
Other countries			5,343				5,409				1,915				1,671
			11,963				12,428				9,374				14,591