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, 2009 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.
BREITNER CENTER, AMSTELPLEIN, 2,
AMSTERDAM 1070MX, THE NETHERLANDS
(Address of principal executive offices)
KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
Financial Statements
July 31, 2009 and 2008
(With Report of Independent Registered Public Accounting Firm Thereon)
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 as of July 31, 2009 and 2008 2
Statements of Income (Loss) and Changes in Plan Equity for
the years ended July 31, 2009, 2008 and 2007 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, 2009 and 2008, 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, 2009. 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 Plan as of July 31, 2009
and 2008, and the income (loss) and changes in plan equity for each of the years
in the three-year period ended July 31, 2009 in conformity with U.S. generally
accepted accounting principles.
/s/ KPMG LLP
Boston, Massachusetts
October 29, 2009
1
KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
Statements of Financial Condition
July 31, 2009 and 2008
(In thousands, except share amounts)
2009 2008
--------- -------
Assets:
Investment in Koninklijke Philips Electronics N.V.
common stock at fair value - 5,172,807 shares
in 2009 and 3,967,914 shares in 2008
(cost $130,493 in 2009 and cost $111,786 in 2008) $ 117,733 132,052
Contributions receivable from participants 1,652 1,758
--------- -------
Total assets $ 119,385 133,810
========= =======
Plan equity $ 119,385 133,810
========= =======
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, 2009, 2008 and 2007
(In thousands, except share amounts)
2009 2008 2007
------- ------- -------
Changes in plan equity:
Investment income (loss):
Net change in unrealized appreciation
(depreciation) of investments $ (33,027) (31,921) 17,628
Net realized gain (loss) on sale of investments (2,966) 4,505 10,995
Dividend income from Koninklijke Philips
Electronics N.V. common stock 3,413 3,519 2,549
------- ------- -------
Total investment income (loss) (32,580) (23,897) 31,172
------- ------- -------
Contributions:
Participant 23,887 22,599 20,337
Employer 4,234 3,941 3,590
------- ------- -------
Total contributions 28,121 26,540 23,927
------- ------- -------
Total additions (reductions) to plan equity (4,459) 2,643 55,099
Less distributions to participants (9,966) (19,805) (37,475)
------- ------- -------
Net increase (decrease) (14,425) (17,162) 17,624
Plan equity:
Beginning of year 133,810 150,972 133,348
------- ------- -------
End of year $ 119,385 133,810 150,972
======= ======= =======
See accompanying notes to financial statements.
3
KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2009 and 2008
(in thousands, except share and 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
employees of certain U.S. and Canadian subsidiaries and affiliates, as
defined, of Koninklijke Philips Electronics N.V. (the Company), which
provides eligible employees with 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).
The Plan became effective August 1, 2000 for certain U.S.-based employees.
The Plan was amended in November 2007 to include previously excluded
executives of certain of the Company's subsidiaries. The Plan was further
amended in December 2007 to permit certain Canada-based employees to
participate in the Plan effective October 1, 2008.
(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 as soon as administratively feasible, and Canada-based full-time
employees are eligible after completing 90 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
U.S. or Canadian dollars in any calendar year.
The cost of shares to participants equals 85% of the closing price of the
Company's common stock on the last day of the applicable purchase period on
which stocks are traded on the NYSE. The 15% discount between the fair
value of the shares purchased and the cost to the participants represents
employer contributions. Contributions are used to purchase whole and
fractional shares of the Company's common stock at the end of each purchase
period (a calendar quarter).
The shares are held by Computershare Trust Company, N.A. for U.S.-based
participants and by Computershare Trust Company Canada for Canada-based
participants.
(D) VESTING
All contributions and common stock purchased are 100% vested.
(Continued)
4
KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2009 and 2008
(in thousands, except share and per-share amounts)
(E) DIVIDENDS
Dividends are declared by the Company 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 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.
In preparing these financial statements, the Plan's management has
reviewed, as determined necessary by the Plan's management, events that
have occurred after July 31, 2009, through the issuance of the financial
statements, which occurred on October 29, 2009.
(B) INVESTMENT VALUATION AND INCOME RECOGNITION
The investment in shares held by the Plan is recorded at fair value,
measured by the closing price listed by the NYSE.
Statement of Financial Accounting Standards No. 157, Fair Value
Measurements (SFAS 157), was adopted by the Plan, effective August 31,
2008, for all financial instruments and nonfinancial instruments accounted
for at fair value on a recurring basis. SFAS 157 establishes a single
definition of fair value and a framework for measuring fair value, sets out
a fair value hierarchy to be used to classify the source of information
used in fair value measurement and expands disclosures about fair value
measurements required under other accounting pronouncements. It does not
change existing guidance as to whether or not an instrument is carried at
the fair value.
(Continued)
5
KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2009 and 2008
(in thousands, except share and per-share amounts)
SFAS 157 established market and observable inputs as the preferred source
of values, followed by assumptions based on hypothetical transactions in
the absence of market inputs.
The valuation techniques required by SFAS 157 are based upon observable and
unobservable inputs. Observable inputs reflect market data obtained from
independent sources, while unobservable inputs reflect the Company's market
assumptions. These two types of inputs create the following fair value
hierarchy:
o Level 1 - Quoted prices in active markets for identical asset or
liabilities.
o Level 2 - Observable inputs other than quoted prices included in Level
1, such as quoted prices for similar assets and liabilities in active
markets; quoted prices for identical or similar assets and liabilities
in markets that are not active; or other inputs that are observable or
can be corroborated by observable market data.
o Level 3 - Unobservable inputs that are supported by little or no
market activity and that are significant to the fair value of the
assets or liabilities. This includes certain pricing models,
discounted cash flow methodologies and similar techniques that use
significant unobservable inputs.
Information on the Plan's assets recorded at fair value is presented in
note 6.
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.
(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.
(Continued)
6
KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2009 and 2008
(in thousands, except share and per-share amounts)
As of July 31, 2009, there were 5,172,807 shares held for participants that
were valued at $22.76 per share. As of July 31, 2008, there were 3,967,914
shares held for participants that were valued at $33.28 per share. There
were $1,652 and $1,758 of participants' contributions not yet used to
purchase shares on July 31, 2009 and 2008, 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 (loss) were as follows:
YEAR ENDED JULY 31
-----------------------------------
2009 2008 2007
------ ------ ------
Proceeds $ 9,966 19,805 37,475
Cost of stock sold 12,932 15,300 26,480
------ ------ ------
Net realized gain (loss) $ (2,966) 4,505 10,995
====== ====== ======
(4) TAX STATUS
The Plan is a nonqualified employee stock purchase plan for U.S. tax
purposes. U.S. 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.
For Canada-based participants, the 15% discount is taxable as ordinary
income and is subject to federal and provincial income taxes as well as
Canadian Pension Plan/Quebec Pension Plan taxes. Taxes are automatically
withheld from the participants' next available paycheck following the stock
purchase in accordance with their regular tax withholding elections. The
ordinary income amount will be included in the T-4 and RL-Slip (Quebec
taxpayers only) statement for the year. When participants sell their
shares, the Canada Revenue Agency requires participants to report these
activities on their annual tax return. Any further gain or loss after the
purchase of these shares will be taxed as a capital gain or loss.
(5) MARKET RISK
The Plan's assets are invested in one security, the common stock of the
Company. The security is exposed to various risks, such as market risk.
Also, the value of the Company's common stock is dependent upon the
performance of the Company and the market's evaluation of such performance.
Recent market conditions have resulted in a high degree of volatility in
the equity markets. 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.
(Continued)
7
KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2009 and 2008
(in thousands, except share and per-share amounts)
(6) FAIR VALUE MEASUREMENTS
The following table sets forth by level, within the fair value hierarchy,
described in note 2(b), the Plan's assets at fair value as of July 31,
2009:
INVESTMENTS AT
FAIR VALUE AS
DETERMINED BY
QUOTED PRICES
IN ACTIVE
MARKETS
(LEVEL I)
------------------
Investment in Koninklijke Philips Electronics
N.V. common stock $ 117,733
8
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 29, 2009 By:/s/Pamela Dunlap
----------------------
Name: Pamela Dunlap
Title: Chairman, Stock Purchase
Plan Committee
9
Exhibit Index
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Exhibit 23.1 Consent of Independent Registered Public Accounting Firm
10