Koninklijke Philips Electronics' CEO Hosts Annual General Meeting of Shareholders (Transcript)

May. 3.13 | About: Koninklijke Philips (PHG)

Koninklijke Philips Electronics NV (NYSE:PHG)

May 03, 2013 8:00 am ET

Executives

François Adrianus van Houten - Chairman of the Board of Management, Chief Executive Officer, President and Chairman of The Executive Committee

Ron H. Wirahadiraksa - Chief Financial Officer, Executive Vice President, Member of Board of Management and Member of The Executive Committee

Jeroen van der Veer - Chairman of the Supervisory Board, Chairman of Corporate Governance, Nomination & Selection Committee and Member of Remuneration Committee

James J. Schiro - Vice-Chairman of the Supervisory Board, Chairman of Remuneration Committee and Member of Corporate Governance, Nomination & Selection Committee

Analysts

Fabrizio Spagna - Axia Financial Research

Unknown Executive

Good afternoon, ladies and gentlemen. Let's wait for the music to go off. Well, ladies and gentlemen, I have opened the general meeting of shareholders of Royal Philips Electronics NV. And a very warm welcome to all shareholders and guests. I'm going to start off by introducing the people behind the table and some people in the room. Here, we have Frans van Houten, CEO; Ron Wirahadiraksa, CFO; we have our Corporate Secretary here, Jim Schiro; Deputy Chairman, Christine Poon, Member of the Supervisory Board; Neelam Dhawan, Member of the Supervisory Board; Jack Tai, Chairman of the Audit Committee; and there are 2 other members of the Supervisory Board behind me and the Consumer Affairs team with them. Introducing a number of people around the room. Patrick Kung, China; Ronald de Jong, who became -- last time around, I called him a long-life shell member of workforce last year, from Lighting, there we go; and Jim Andrew, Strategy. My far right, Jaap van Everdingen, our External Auditor from KPMG.

Mr. Kist has sent his apologies. He's sadly unable to be with us today. And Ms. Christine Poon will be having to leave us sadly at 3:30, but until that time, she is fully at our disposal. She does wish to give you her apologies but she has unavoidable reasons for leaving. And she particularly regrets it because we'll be discussing her reappointment.

Now we're going to start off by inviting our CEO to give us his presentation. Go ahead, please.

François Adrianus van Houten

Well, ladies and gentlemen, I would also like to wish you all a very warm welcome to this annual general meeting of shareholders. In 2012, Philips made excellent progress once again and our income shows that our long-term restructuring plan called Accelerate! is really bearing fruit. Thanks to Accelerate!, we can produce new innovations all around the world more quickly. This makes more relevant in the various local markets and adds more value. Looking at our performance in 2012, I think it's very clear that Philips is well on course to a successful and excellent future, which we can face with confidence. And bearing in mind the very difficult economic circumstances out there, in Western Europe and in North America, that is good news.

Our Accelerate! program has only been running for 2 years now. It might seem like a long time, but I'm sure you know there's a great deal more still to come. There's a great deal more we'll be showing you.

So why do I think that Philips has so much potential? Well, we are adopting leadership positions in health care, lighting, consumer lifestyle improvement. There's rapidly growing demand for affordable health care, and there's a real need to save energy. And there are 7 billion people in the world, all of whom wish to enhance their quality of life. There's a number of other trends around the world which present us with challenges and tremendous opportunities at Philips, both in the familiar markets and also in the emerging growth markets.

We have every confidence that we can be competitive in those markets, and the way we want to do that is by focusing on our CAPs, as we call them, our strong -- our strengths. CAPs means capabilities, assets and positions, CAPs, our strengths, if you like. It's important for any company to know what its trump cards are. Philips has a very skilled and committed workforce with an extremely good innovative edge. They are very familiar with health care, consumer products and obviously, in lighting. The Philips brand is rock solid. Anywhere I go around the world, I can always see this. As soon as you say the word Philips, it opens doors. We're active now in more than 100 countries around the world, and Philips has a very healthy financial situation as well.

So that's a good position from which to start, and Accelerate! is putting us in a position to achieve newer innovations more quickly all around the world. And that basically is the way in which Philips can differentiate itself and can make itself different. Because out there in the world, competition is a real threat, particularly in the Far East. We're not going to let them dash the bread from our mouths.

So I want to talk about operational excellence now. And what I mean by that is acting more quickly, acting more efficiently, showing more entrepreneurship. We are aware of these challenges, and that's exactly what the Accelerate! program aims to do. And that's why Ron and I are on what we call a roadshow a lot of the time, and we often say that we are an example of self-help. In other words, we don't just have to look for the economy to grow. No, we have to look to ourselves and see how we can address the problems that face us, as I mentioned a moment ago, for ourselves. And we do this with a very clear objective in mind.

The idea is -- our mission, our guiding star is to make the world healthier and more sustainable through innovation. Our aim is that by 2025, there'll be -- we'll be getting through to more than 3 billion people and having an impact on their lives every year. We think that's a really inspiring objective. And particularly so when you consider that we got through to 1.7 billion people in 2012, which means there's a lot of growth still to come.

In 2012, we met our eco-vision objectives once again. In 2012, we invested a record quantity of money in green innovation. We achieved 54% of our sales from green products. And in the past 5 years, we've managed to tackle our carbon footprint and reduce it by 25%. Our repeated efforts on the sustainability front have been recognized. For 2 years in a row, we have been nominated a supersector leader in the Dow Jones Sustainability Index. Now I could go on about this at considerable length, but what I'd like to do instead is switch over now to the Accelerate! program, transforming the company.

As I said earlier, Accelerate! was launched in 2011 and it's really got up and running well. Perhaps, I could just remind you all, to refresh your memories, there are 5 main prongs to the Accelerate! project. One is focusing more on customers, customer centricity, if you like. That's the most important one. Next, resourcing -- investing resources in those fields where we can make profits. Reallocating resources, so as to win. Second -- beg your pardon, third, enhancing the whole chain right the way from an idea to the shop shelf. This is what we call the End2End approach, and that really is where there's a great deal of room for improvement. We can make use of methods such as Lean and Six Sigma, support by real-time computer systems, which means you can get things out there onto the market more quickly and more efficiently, a lot of room for improvement there. Fourthly, changing our corporate culture. We're working flat out on achieving a high-performance culture. Fifthly, cutting our overheads, both direct and indirect, by making Philips simpler. Many people have said, Philips is far too complicated, it's far too bureaucratic. Well, we want to take it by the scruff of the neck and come up with a simple operating model. If we can do that, we can then achieve savings. Talk about EUR 471 million saved in 2012. This means we're ahead of timetable, and thus, becoming more and more competitive.

Now, all of these Accelerate! projects focus on making Philips into an innovative company, which is more customer-centered, more entrepreneurial and swifter in reacting. The idea is that we can come up with an entrepreneurial business which can make profits in a more sustainable way and in a repeatable way so that we don't keep on having to reinvent the wheel, and so that we can hold our own against Far Eastern competition. And this is what we call Philips Business System. A great many companies around the world have a business system along these lines. Now there's still plenty of work ahead of us because we are talking about a root and branch reform for Philips, but I, or rather we, all of us in the team, see change as a good thing. And so does all our workforce. Perhaps at the beginning, they had to -- they had some forebodings about it, but now they can see it really works and they're rearing to go.

We have every confidence that thanks to the Accelerate! program, we will be able to make further progress in the future. Our value chain can be further simplified, and we can end up having 4 Lean corporate models.

We are focusing on improving our growth margins for -- throughout 2013 and into the future. And against that background, one of the things we'll be looking at is industrial and distribution capacity in our lighting and health care divisions. We're looking at purchases, trying to enhance efficiency there. We're looking at value engineering, making our products more valuable at lower expense. And in 2012, as part of this, we achieved a real improvement, the same improvements to inventories where we have managed to enhance our situation.

So as I was saying, we're currently working on corporate culture, swifter decision-making, more entrepreneurship and enhancing our relevance to all the local markets all around the world. And I say this, of course, of course, while always observing our general code of conduct. Integrity, we will never lose sight of that.

Then our remuneration and incentive system, we'll looking -- we want to focus more and more on added value creation and sustainable profitability. We will be talking about that further this afternoon. I'm really proud of our top-quality executive team. We've got people here of 5 nationalities, 2 women and our team represents 4 of the world's continents, and a good thing, too.

Now, I've mentioned innovation a couple of times, and innovation is the driving force of the company. Philips has grown thanks to entrepreneurship and innovation. That's really in our DNA. Innovations are the way in which we want to excel. Innovation is how we create value and how we can grow and create better income. And then of course, we get onto a virtual circle and profits can be reinvested in further innovation. We think this innovation is of crucial importance to Philips, and for that reason, we increased our investment in R&D in 2012 from EUR 1.6 billion to EUR 1.8 billion. That's EUR 200 million more in a single year. This brings us to 7.3% of total sales.

So on the one hand, saving, on the other hand, stepping our investment up. And research and development efforts, of course, lead to mold-breaking new innovations, very new things. Let me give you some examples. Health care, innovation is vital in health care. If we really want to know what medical experts need in order to treat their patients better and more swiftly around the world, well if we can achieve that, then we can create much better value and help hospitals achieve their end results.

As part of our Africa program last year, we came up with the clear view ultrasound machine. And this is exactly in line with what they need in Africa. On the one hand, high quality, good functionality, but also a price they can pay out in that market. And that means that local hospitals are buying more and more of our products and services. The second example, a bit closer to home. Seeing how we're trying to find an answer to the question of how hospitals can organize themselves, focusing on their patients rather than on a structure of medical disciplines, as they used to do. Here, the Maxima Medical Center here in Veldhoven, near Eindhoven, near the South of the Netherlands, they launched a unique new mother-and-child center. And this really has totally reinvented standards and methods of health care given to children. We have an integrated approach to care for both the newborn baby and the parents before, during and after birth, also during breast-feeding and after discharge from hospital.

The child is at the center of everything, and it's all been achievable thanks to Philips advanced technology. I'm thinking of things like patient monitoring machinery; echo graphs, which can be used before, during and after the birth; solutions to premature births; and so on. We think that innovation is the future in the world of health care.

And now perhaps just a couple of words about Consumer Lifestyle. Here, our ideas for enhancement of each business market communication, BMC, we've made our developers be able to come up with clever new ideas such as electric toothbrushes, cooking machines, electric shavers, and so on, to plug into the requirements in various parts of the world. Just to give you an example, 2010. Since 2010, the number of new product launches in the kitchenware world has quadrupled. It's a huge change for Philips. The multi-cooker in Russia is a really good example. This is a product which fits in with Russian household requirements. I mean, we're learning how to make borscht recently, for example. That's a traditional Russian soup. A second example is the Soup Maker, which is doing very nicely in various European countries. You can see a picture of it here on the screen.

Philips' innovations make sure that people can produce home cooking -- healthy home cooking more easily. And thanks to this innovative approach, we're now growing our Consumer Lifetime -- Lifestyle division by 10% every quarter and have been doing so for some time despite the economic crisis, that is no mean feat.

Then what about our traditional shavers? Well, we noticed that there was a requirement for new, cheaper shavers in China. Well, we developed them very quickly. This is part of our End2End approach I was saying. We focused our End2End chain on getting this product onto the market in a competitive way and getting the goods onto the Chinese shop shelves.

In 2012, we sold more than 10 million shavers in 2012. Are your eyes coming out on stalks? That's in a single 12-month period. That was responding to the market situation, while also continuing to continue sales of our expensive top-of-the-range shavers as well that we used to.

Moving on now to Lighting. Well, in Lighting, I think it goes without saying that we want to be at the forefront of innovation. Innovation really is what makes everything work in the lighting world, as elsewhere. We're very proud to see this Philips hue product, a personal LED system with Wi-Fi control switches, selling very well in the Apple shops. If you haven't seen a hue light, I invite you to have a look outside the room later this afternoon. Have a look after the end of this meeting because it really is a breakthrough in the whole lighting experience. It's a good way of producing the atmosphere you want in your own home.

A couple of weeks ago, we had another breakthrough announced in LED. People visiting Philips research saw that they'd developed a TLED lamp, another way of replacing traditional phosphorescent strips. This is a 200-lumen per watt output, which is very good quality. The prototype TLED bulb is twice as efficient as its predecessors, which means, in fact, you're using half as much electricity as you used to with your traditional neon lighting, which is already pretty efficient.

An example of how we can work together with the customers in an innovative way, as I'm sure you all noticed, last month, the National Rijksmuseum was reopened after huge renovation works. Philips was one of the leading partners in the renovation, and we worked hand-in-glove with the Rijksmuseum in order to enhance their lighting system, making sure that the visitors could enjoy the works of art as well as possible, while at the same time, making sure that no damage is done to the works of art. We did it with more than 9,500 square meters, 7,500 works of art to be lit and 500,000 LED bulbs. This is the biggest single museum which has ever been LED-lit on earth. We are enormously proud of that achievement, and I'm sure you might be surprised to hear that we are getting phone calls from all around the world, with other museums ringing up and asking if we can tell them how we came up with this innovative and sustainable method of lighting museums.

Now, ladies and gentlemen, I'd like to look at our results for 2012.

I've spoken at length about our transformation, innovation and what did all this yield in terms of results? Our comparable sales increased by 4% in 2012 despite the ongoing tough economic slump and trouble in markets, especially in the U.S. and Europe. Growth regions accounted for 35% of our sales in 2012 compared with 33% in 2011. As a consequence, these growth regions in the emerging markets once again contributed substantially more to our sales growth. The underlying profitability of our operations improved, on the one hand, thanks to sales growth, but especially thanks to our focus on increased productivity and lower costs.

EBITDA achieved was unfortunately impacted by various costs, including restructuring costs, and our ROI improved considerably.

In 2012, health care did well with comparable sales growth of 6% and, most importantly, improved profitability in Imaging Systems.

Lighting, once again, posted considerable increase in sales from LED products, no less than 41%. The lighting sector made progress in addressing corporate divisions with substandard performance. The Lumileds and Consumer Luminaries division were both profitable again in Q4 2012.

Growth operations in Consumer Lifestyle, specifically personal care, health & wellness and domestic appliances, achieved respectable growth, thanks in part to substantial contributions from companies that we acquired in 2011 in growth regions such as China and India.

Restructuring the Consumer Lifestyle portfolio is an important step in transforming Philips. As you know, in 2012, the Philips Television division was transferred to a joint venture with TPV. Later on that year, we announced a distribution agreement with Funai for the Lifestyle Entertainment business group in North America. And this January, we announced an agreement with Funai to transfer audio, video, multimedia and accessories. This distribution agreement capitalizes on the strengths of both companies and is expected to improve Philips' market position in audio, video entertainment products, while ensuring continuity for our clients and for Philips alike, thanks to income from brand licenses. At the same time, our focus on growth course within Consumer Lighting has improved and is delivering far better results in terms of income.

After the strategic steps in Consumer Lifestyle, it's understandable that we reviewed our name, Koninklijke Philips Electronics, Royal Philips Electronics. Although we take pride in our track record in Consumer Electronics and Philips TVs will still remain in the shops, we believe this is the right time to delete electronics from our name. And that's what we'd like to propose to you, Royal Philips, the leader in innovation and health care, energy efficient lighting and consumer well being. Royal Philips, that rings true.

As a sign of our confidence in Philips' future, ladies and gentlemen, we are pleased to propose maintaining the dividend this year at EUR 0.75 per common share to be distributed in cash or stock. We're proposing this to the general meeting of shareholders. In 2012, we continued implementing our share repurchase program with a total value of EUR 2 billion at end of 2012. This program that targets a more efficient balance sheet was 73% complete, and at the end of Q1 2013, the repurchase program was 86% complete.

Now reviewing the initial results for 2013 and the prospects for this year. We note that as announced and envisaged, the year is off to a start with modest comparable growth of 1%, but our operating profits, excluding restructuring and acquisition-related costs, in the previous quarter was up considerably. It was 31% higher than in the same quarter last year, and what's particularly encouraging is that all 3 sectors contributed to this increase.

In profits, Q1 growth was attributable mainly to our consumer products, where the comparable growth was up by 10%, especially kitchen appliance, new electric toothbrushes and shavers, where we have wonderful market traction.

Once again, we see clear growth in growth markets such as China, the Middle East and Europe. Our Medical division is still coping with the fact that hospitals, especially in the U.S. and in Europe, are reluctant to make new investments. In the U.S., there's the health care reform. And right now, that's not helping us.

Our Lighting division is facing market turmoil, in which there's little investment in new construction and remodeling existing houses, but that has not affected our LED lighting sales. This year, we sold 38% more LED-related lighting than in the same quarter in 2012. 38% growth, that's impressive. Amsterdam Rijksmuseum exemplifies this, as does the Paris Metro system. All lighting there contains Philips LEDs.

Now, looking back at the rest of the year, I already mentioned that the first half of 2013 is not expected to grow very much, thanks -- primarily because of the difficult market circumstances in Europe and the U.S. But we are committed to our financial targets, which we set 2 years ago for 2011 through 2013. 4% to 6% comparable sales growth for that period, reported EBITDA margin in 2013 in a bandwidth of 10% to 12%, and a return on invested capital or ROIC equaling 12% to 14%.

We're convinced, ladies and gentlemen, that the transformation program Accelerate! is beginning to bear fruit and we're reaping the benefits. Despite the present economic circumstances, we see far more potential to continue improving our results. More specifically, this September, we'll enhance new targets for the years ahead.

Ladies and gentlemen, in 2012, we made considerable progress once again, but much still lies ahead to fully realize Philips' potential and to ensure that our company is more competitive, more customer-oriented, more flexible and more enterprising. We're fully confident that the current strategy is right and that Accelerate! is the best platform to achieve our objectives. In all 3 sectors, attractive new products and services are being launched on the market. The Philips Business System is a wonderful corporate model to effectively create value for our shareholders and that will certainly boost the share price.

Also on behalf of my team, the Executive Committee, I'm grateful to our employees for their dedication and the way that they have embraced the transformation and new corporate culture. And I'm also grateful to our customers and other stakeholders, especially our shareholders, that's you, for your ongoing support. We'll continue working to improve excellent operations and management, and we'll continue to invest in future innovations and cultivating new markets to achieve profitable growth.

Once again, our passion is innovation and entrepreneurship. That's the driving force behind Philips. It was at our start 122 years ago when Anton Philips was at the helm, and that remains the case. So that's why I'd like to wrap up with a nice little anecdote. Last month, I was in Eindhoven to open the Philips Museum there, our own Philips Museum in the old factory along the Emmsingel, together with, now, Princess Beatrix. As you may know, I don't like to reflect sentimentally on the past, but we can derive inspiration from that. And that's what this museum does. It connects past, present and future through wonderful stories, products and unique visuals. That's why I warmly recommend a visit to the Philips Museum. The museum demonstrates how ambitious entrepreneurship and innovation have brought us where we are today and will carry us forward. And in the next few minutes, I'd like to show you this video that will enhance Philips' glorious future. Thank you very much for listening.

[Presentation]

Unknown Executive

Thank you very much, Frans. Are there any questions on this? Well, we'll take it together with the following agenda item because basically, they are interconnected. But before we move on to those, a couple of practical points, if I may.

In due course, if you wish to take the floor, please would you make it easier for minuting purposes by giving your name clearly. And in order to make sure the meeting proceeds smoothly, please make your point to ask your question as briefly as possible and concisely as possible. And under each agenda item, please ask all your questions in one go. If necessary, in order to have a meaningful discussion, you can take the floor the second time and possibly even a third time. But I'm sure you understand that in a meeting with so many people, I do have to keep a hand on proceedings and make sure that we don't end up taking far too long.

Last year and this year, it's been possible to submit questions in advance. And as far as possible, Frans van Houten has responded to the questions written -- presented in writing in advance in his presentation. Questions asked here in the room will be answered as far as possible by the people on this side of the table or by the people sitting to my left or by our auditor. But of course, there's no way around the fact that we sometimes can't always get to all the facts without warning. So if necessary, we will then respond to your questions in due course. And that will be duly reflected in the minutes. We'll also iron out any mistakes made in the minutes.

Mr. Schiro, who will be taking the floor shortly under the agenda item on the remuneration system, he doesn't speak Dutch. He will therefore be speaking English. If you wish to hear the Dutch interpretation, then please make sure you have a headset.

Today's meeting, once again, the meeting is being webcast and being sent out live on the Internet. And the registration date for today's meeting was the 5th of April 2013. That is the 21st day before the meeting takes place and the notice convention of the meeting was published 42 days before the meeting. And the reason why I'm going through all this is that you need to know that all the legal requirements have been fully abided by.

As you would have seen as you entered the room today, ladies and gentlemen, it is possible to cast your vote electronically on the relevant proposals in the course of the agenda today. You've been issued with a voting handset and card. Your card is personal and corresponds to the number of shares that you are representing at today's meeting. Separately, you've also been given a little user guide, showing you how the voting handset works. You've also seen a sticker with your name on, on your user guide, which also has a bar code and shows the number of shares you're representing. When we come on to pass [ph] vote in due course, you will be invited to cast your vote. After everyone has voted, we'll wait a minute or -- wait a second or 2, and then we see the results of the vote on the screen behind me.

Right. Let's now move on to agenda item 2. After we heard the initial presentation, I'd like to proceed to agenda Items 2a and right through to 2e.

I'd like to run through each point briefly. As every year, we're going to start off with a financial report and all the topics associated therewith. Talk with such things as adopting the financial statements, policy of reserves and dividends, the proposed dividend, discharge of members of the Board of Management and the Supervisory Board. All these agenda items are intricately interlinked, and I therefore propose we deal with all 5 of them at the same point.

First, a couple of introductory words from my side and then the floor will be open for anyone who wishes to speak. Firstly, regarding the annual report for 2012, as you will all have seen, once again, the financial statements and the sustainability report have been incorporated into a single booklet. In addition, we have a Dutch language overview of 2012, which sets out the key figures with some further information in abbreviated form, also the introduction of the CEO and the report on the whole Philips Group.

As regards to the financial statements, I would just say they're in accordance with Dutch law and the corporate governance code. We have Mr. Everdingen here representing our external auditor, KPMG. He is in the room and will answer any questions regarding the auditor's declaration and the way in which the audit was performed. Any other questions will be answered by members of the Board of Management or the Supervisory Board. And any questions which you wish to put to the external auditor should be put via me. Once again, I will express the desire to have the auditor more directly involved in today's meeting. We'll do our utmost to make sure that he is fully involved.

Finally, regarding reserve and dividend policy and the specific proposal being made. The proposed dividend is EUR 0.75 per common share in cash or shares. And that is at the option of the shareholder. As Mr. van Houten said in his initial comments, this proposal is in line with the reserve and dividend policy that has applied in Philips without change for several years now. Of course, we can go into further detail on that if you wish. Well, ladies and gentlemen, the floor is now open. Who would like to take the floor?

Question-and-Answer Session

Unknown Executive

On all items under agenda Item 2, and as I said also, under Item 1, this is also your opportunity to ask any questions in response to our CEO's presentation. The floor is open. Please raise your hand if you wish to speak. And please do remember to start off speaking by giving your name clearly. I can see someone here. I've got the Philips light in my eyes, but there we are. I can see someone there. Go ahead, please.

Unknown Attendee

Thank you, Mr. Chairman. It's always wonderful to hear the team leader speak with the inspiration that Mr. van Houten has about Philips' experienced and telling us what lies ahead. I believe he omitted mention of the major Philips innovation, which is apparently a pill that's implanted in your body and repels medication, so that chemotherapy no longer rushes to your entire body, but gets only where it needs to be. I believe that might be the cash cow innovation of the future, but I hope I won't need it. That's obvious. Mr. Chairman, Mr. van Houten had told us the run up to 2013. We know what's under the bridge, but he also indicated that new targets will be disclosed in September. My experience is you never announce bad news in advance, so I think that we're sitting on the edge of our seat as shareholders about these targets. And he seems to be fairly optimistic about H2 and sees improvement. And perhaps he could indicate how we'll achieve these improvements or perhaps what the risks are. As for Lighting, I see that the margins are pressured, especially at the lower end of the market, you apparently have 70% business. Why don't you divest the bottom end of LEDs now while it might yield a substantial return until we -- rather than waiting until it's almost too late to sell? Now the main question. At one time, Mr. van Houten said you shouldn't quibble with Samsung. The blunt force of Samsung is often too great for adversaries. They're simply too strong. Samsung is going to acquire NeuroLogica, which is an American-manufacturer of medical equipment. And it's announced that it will be investing billions in manufacturing medical equipment. Now how will you deal with this in Healthcare? Or do you intend to resort to alternative solutions? As for the Chinese at the bottom of the scanner market, they're trying to -- it might be difficult to price attractively on that huge market in China. Mr. Chairman, I was amazed when I saw everything that's happening in Brussels, the screen story and chips in Poland. Apparently, you purchased some for hospitals. I'd like to ask your auditor in what measure he assesses that other such issues are in the pipeline or whether Philips is firmly in control in that respect? As for these unfortunate issues that certainly don't fit with your integrity policy, but perhaps you have some major lawsuits coming. Dell has indicated that they might be suing you, and consumer organizations are also preparing some lawsuits on cathode-ray tubes. Have you taken provisions for this? What you estimate the damage might be? Or do you say, we'll take it as it comes? And the chip industry, the same issue surfaces there. We see that penalties from the European Union are very high, and 10% of your sales would be one of the standards mentioned in that respect. Finally, Mr. Chairman, pensions. We see that Dutch companies with their own pension fund, KPN is among them, might be in trouble if they have to make very high top-up payments. I understand that Philips has a defined benefit with a maximum premium, but given a worst case scenario, if you're called upon by the pension fund to make top-up payments, do you have such an obligation? If so, what's the maximum? Those were my questions.

Unknown Executive

Your name was Mr. Yorna,[ph] is that right? From the VEB association of shareholders? Absolutely, Mr. Yorna[ph] of the VEB. How could I forget. Okay, good. So you recognize -- you won't recognize everyone with the same ease. Okay, well I noted Frans writing all your questions down. And this a question regarding scrutiny of irregularities that have taken place in the Far East. I think that's a question for Frans van Houten to deal with first. And then I'll glance across to our auditor to see whether he wishes to add anything in due course. And I'll make sure that all your questions are duly answered. Frans, please.

François Adrianus van Houten

Right, well, Mr. Yorna [ph], excellent questions. I'll go through one at a time. Okay, you referred to fresh innovations in the radiation therapy world of Healthcare. This is one of the cancer therapies that we're developing using things such as sound waves in order to achieve ultra-targeted radiation therapy inside the body. It's really wonderful. It's not yet a commercial product. You'll be hearing about it in due course, but I can't get started banging the drum because we haven't got with the end product yet. What about our objectives, which we want to tell you about in September? Well, yes, of course, they do fit in with Philips' general route plan. People often talk about the Path-to-Value. It's a buzzword, but it has a lot of potential in it. And I used the word potential many times in my presentation, so please rest assured that we will come up with meaningful objectives in September. We have no intention of presenting you with bad news. We don't think Philips is yet performing to the best of its ability, and we will, of course, be drafting objectives which are a real challenge to the Board of Management. And of course, the Supervisory Board will make sure that we don't start resting on our laurels. As regards the specific question you asked on the Lighting sector, well, I would like to stress that the world of lighting is currently undergoing a real revolution, a real revolution from traditional lightbulbs, your old incandescent light bulb, with your vacuum and your fuse and so on and your neon streetlights and so on. We're now moving on to solid state lighting, LEDs. Now we've been in this line of work now for 120 years. And obviously, this revolution is a real threat to us, and we have certainly learned from the past. Not all changeovers from analog to digital go as well as one might wish, so we're taking this challenge extremely seriously. And that's why we're so happy to see that our LED market share is actually slightly bigger than our conventional lighting market share was. We've been working flat out on making sure that we can enhance the profitability of our LED products, so that we don't have to be too frightened of a mix effect, a dilution effect, as we gradually change over to the new technology. We haven't got there yet, but we are heading down the right road. Now some ladies and gentlemen in the room may wish to know more about this, and my proposal would be for you to refer to the Capital Market presentations from last September. There was an extensive presentation of lighting, put forth by Eric Rondolat back then. And there you can read all about how we think we can emerge as winners in the LED lighting world. I don't think it's a good idea to move out of the lower market sector. What we've noticed many times is that, if you allow Asian competitors to establish a foothold at the bottom end of the market, they keep gobbling away and away until there's nothing left except the extremely expensive end of the market. Philips is the biggest lighting company in the world. We're 1.7x bigger than our closest competitor, and we have said, we are not going to allow anyone to steal the icing off our cake. We are going to compete with Samsung and compete with all the other Asian competitors, and we are rearing to go. Your question about Healthcare. Well, yes I think you've already dealt with that one. Talk about Lighting. I have no memory, Mr. Yorna, [ph]of saying you must never pick a fight with Samsung. I think that we are in a position to stand on our own 2 feet and build our own future. We are, however, fully aware that the power games out there are changing. There are hungry Asiatic companies out there, which have a lower cost base than us that are willing to make huge investments. And of course, they could represent a real threat to established companies. We often use the word relevance and that's because if we look over our shoulders, we can see that some comedies are becoming less and less relevant. And that really can happen in the space of a couple of years. That's why we're refocusing so much on transformation, Accelerate!, moving more swiftly, being more entrepreneurial, being more innovative, and also, making sure we can cut our cost base. Philips is making good progress towards being a lean and mean company, which can hold its own against our new competitors. And that's the case in all our 3 sectors. Now it is no easy task, and all you need to do to prove that is to look at some of our more traditional competitors in Japan, companies which don't want to remove the word electronics from their corporate name. And they're really getting clobbered. So please rest assured, the Board of Management is taking this challenge very seriously. Deborah DiSanzo was leading a sector on patient care and clinical informatics before she took over the Healthcare sector. She's been looking at Mindray and patient monitoring, these little bedside boxes, if you like, and all the software that fits into that. She's making sure that we are in a position to beat that company; partly beat them by price, but also what's even more important is beat them on clinical informatics. What that means is connecting all the flows of information inside hospital so that the people in hospital can work together better as a more efficient team. I think that the future of healthcare doesn't simply mean price competition. No. It's particularly a matter of making sure that we can help hospitals to run themselves more efficiently. And that means working in partnership with hospitals with a full understanding of their clinical needs. That's better than just having a cheaper gadget for them to use. That really is the vision underpinning our whole healthcare strategy. That's what we're going to do with competition. Chairman, I think I've taken a bit too much time, but I think that all the questions asked were very important. Then you asked a number of questions regarding CAT and chips. These are very painful issues to us. We really can't allow our business principles to be breached. No, we must stick to our own code of conduct, and that is an example to be set from the top. I put a lot of time in that, all the Board put a lot of time into this. We want Philips to be known for ethical and honest business practice, without any exceptions. Now of course, sometimes things can go wrong. And when that happens, we will come down like a ton of bricks. There are a number of cases which are still unresolved. The CAT, cathode tube issue is -- goes back a long way in history, and so does the chip issue, which in fact, the European Commission has announced that it is relevant to the 2003 or 2004 period. It goes without saying that we will give all the relevant authorities our full cooperation. We want to make sure they can get right down to the bottom of everything. We'll also appeal, if we feel that we are being wrongly convicted or if we think that the fines imposed are excessive, as is the case with CATs. Rest assured though, that the chip issue is on a complete different scale from the CAT case, just to give you an idea of the kind of proportions we're dealing with. I don't think it would be a good idea to go into the details of individual cases that you've mentioned, companies in America, which have taken us to court because it's all sub judice, and we have to be careful what we say. But rest assured, we're giving it our full attention. Then you were asking on whether monitoring was close enough. That's a very justified question. We often ask ourselves the same question. We carry out internal audits. We carry out assessments of monitoring. We've tightened up management responsibility. We don't want anyone to have any excuse. No one should be able to say, "Oh, but I didn't know." No. We want to make sure that management are always fully in control, and that they can keep tabs on everything that's going on. We've achieved some improvements on that front in recent years. Of course, we have. And we think that we're working in the right direction. And now, Chairman, perhaps, I could refer the floor back to you in case there's any further comments. Oh yes, pensions. Well, in the Netherlands, I think we're all acutely aware that the pension system -- I don't just mean the Philips pension system, but the pension system around the whole of the Netherlands is in a state of flux at the moment. There was legislation on this in 2011, and there was a social agreement recently reached between government and other players dealing with pension matters. People are living longer, which means that they're taking more and more money out of pension funds, which means that pension funds are getting economic difficulties, and the economic crisis doesn't help. I would like to point out that's not always a matter for the company to deal with. A defined benefit pension doesn't mean that we must foot the bill for all past commitments. And now, Chairman, if I may, I'll give [indiscernible] here the floor to add a couple more comments.

Unknown Executive

Thank you for the question. You asked what would happen in extreme case in our financing agreement with the pension fund. We've described that and the amount is a maximum of EUR 30 million a year and the principal is 15 years.

Unknown Executive

Okay, I'm just now glancing across to our auditor. Do you wish to add anything?

Unknown Executive

Thank you very much, Mr. Chairman. I have very little to add because I think that Mr. van Houten delivered a wonderful answer, and I can confirm that that's our perspective of our operations at Philips. We believe that, that attitude is appropriate in these matters, that Philips is doing more than taking the subject seriously in taking adequate measures, both to avert problems and to respond rapidly.

Unknown Executive

Thank you very much, Mr. [indiscernible]. Now we'll move on to the next question. The gentleman at the back first and then you. Go ahead, please.

Unknown Attendee

Good afternoon. I'm Mr. Spagna [ph]. My question is about Mr. van Houten's speech. In the first part, he said the Rijksmuseum is beautifully lit up and that our phone was ringing off the hook with calls from other museums who wanted the same lighting system. But in second part of his speech, he said that the construction is at its nadir. The lighting has a problem. There is this contradiction because as for the LED lighting at the museum that was in great shape, I believe that there are a lot of museums with obsolete lighting systems, so there's quite a bit of demand there. But on the other hand, construction is in the doldrums, so why don't you focus on museums that need new lighting systems? So I thought that, that contradiction was a bit odd. Second, in the last PowerPoint presentation, we saw Royal Philips. Why don't we see a crown above the name Philips because we're Royal, aren't we? Every company that is royal will place a little crown on top of his or her name. Why doesn't Philips do that? Because wouldn't that make a far better impression on the public if we're very eager to manifest the Royal logo as our regular customers are, why shouldn't we as Philips? And then I have another question. I was irritated at a football club in the south of the country that displays the name Philips across the chest and uses it in the wrong way. For example, Mr. Pieters is obviously a few short of a dozen because he couldn't get rid of his energy. Isn't it embarrassing that he was featuring the name Philips? And then we had that lens that was in somebody's cast, and isn't that a disgrace? And third, the captain, well, I don't lip read, but I don't think he was saying, "My goodness, chap, you did a great job." I'm sure it was something that can't be printed. I hope that your sports sponsoring division will cancel your contract with that football organization and say, "All the best," because our market is in the BRIC countries. And the BRIC countries such as India and China, why don't we sponsor football in China and cricket in India, that's where our market is? As for the United States, they're vacillating on the healthcare system, so that's not helping us. We need to make our money from India and China. Those are my questions.

Unknown Executive

Thank you very much, Mr. Spagna [ph]. Mr. van Houten, please?

François Adrianus van Houten

Well, Mr. Spagna [ph], I think you're absolutely right in commenting on how we should seek to reconcile our positive experiences in some areas of the lighting market with a feeling that there is room for further growth in other parts of the lighting world. Let me shed some light on this. Our Lighting segment is about EUR 8 billion sales, and that's mostly conventional lighting. An awful lot of it is conventional lighting, and that means new build and so on. LED lighting, which can save you more than 50% or 60% of your electricity, that's very good in innovation projects because it saves you so much and it gives you pleasant lighting. And that's why we're working on that, and that's why we had 41% growth in LED sales last year, the fiscal to this year. The quarter, by 38%. But of course, it's smaller, and so even that growth isn't enough to offset the stagnation in the larger, conventional lighting area. So we're trying very hard to work on growing the LED area. We're going to local authorities and saying, "Why don't you let us take your street lighting over? We can save you lots of electricity. And that's a very good way of saving money in crisis time." So we are addressing this in our business model. We're doing business in very innovative manners. We're getting involved in energy-saving projects. Please rest assured that we're giving it all we've got. We're not trying to use the sluggish construction market as an excuse. Far from it. We're developing new business models. What about a crown on our logo? I don't think I want to dwell on this too long. We'll bear your idea in mind, but we are really very proud of the Philips logo. It's very widely recognized. I think we have to take good care of it.

Unknown Attendee

But it looks much nicer with the little crown.

François Adrianus van Houten

Well, thank you for your suggestion. Now then, you were angry about how some footballers in the PSV football team have been performing, and rightly so. We sponsor PSV because it's been our corporate football club for 100 years. PSV was founded by Philips, and it’s been in our club for 100 years. Now of course, the market has moved on since then with folks over in India and China, but it still is our football club. That being said, obviously, it's all nice when PSV wins, but they must win by playing fair. And we, as sponsors, have expressed our severe disapproval towards the relevant people running PSV. We feel that proper, honest play in football is what's important. And the rest of it -- that's all I want to say. The rest of it is a matter for PSV.

Unknown Attendee

No, what I'm upset about is all that negative advertising worldwide and Philips' good name. This advertising and negative connotation is ruining our good name.

François Adrianus van Houten

I couldn't agree with you more. As I said, we have raised the issue with PSV management. And the next speaker, please.

Roland Klose

Mr. Chairman, my name is Roland Klose. I'm here for the second time representing some 500,000 German shares. And first, I would like to extend some greetings here and congratulations for the good work that you have been doing. I'm quite impressed with the progress made and the focus on innovation. I've got 2 little questions here. The first, I see some asymmetry in the way you're see -- the way you're generating your revenues and your EBIT funds, which is from the Healthcare sector. And then you're investing more in other areas rather than the Healthcare sector, so what is the reason for that? Are you seeing too many competitors moving into this particular field? And yes, shouldn't be there more investment in this very interesting area of high margin? And then secondly, you mentioned the Japanese competition. So question is, do you see, with the decline of the yen, increased competition from the Japanese side where companies have been less competitive over the last couple of years? And certainly, if you could give us some insights about your success in going on those roadshows. How has the shareholder structure been changed to what's possibly a more international shareholding as the more people are interested in Philips, the better for the present shareholders in the value of their shares?

François Adrianus van Houten

Those are great questions. You refer to a perceived asymmetry between Healthcare's income and what we -- where we invest. I've mentioned that we invest 7.3% of our revenue in innovation, EUR 1.8 billion. We invest in Healthcare more than 8% of revenue in innovation. So in other words, proportionally we invest more in Healthcare than we invest in the other 2 sectors. With regard to acquisitions, that's a next chapter. Historically, over the last 5 years, Deborah, off the top of your head, how many acquisitions did we do in Healthcare? Deborah DiSanzo, CEO of Healthcare, just mentioned that we did 17 acquisitions in the last 10 years in Healthcare. In fact, the whole Healthcare business is the success of a very careful strategy to craft an integrated portfolio of businesses along the continuum of care. Whereas, we have done some acquisitions in Lighting and in Consumer Lifestyle, but if you would add up the billions that have gone into Healthcare versus the other sectors, then also proportionately, the weight has been on Healthcare. And I think there are many opportunities in all 3 sectors, but we definitely underline and would agree with your implied focus on the Healthcare sector. The decline of the yen. This is, of course, a serious development, and I'd like to express my hope that the world will not end into currency wars because we like to have stability in the currencies. We'd like to apply, as much as possible, a natural hedging position. And hedging, in the long term, can never be a solution. The 20% yen depreciation is impactful. Although so far, we have been able to continue to grow in Japan. In fact, Ron Wirahadiraksa just confirmed to me that in the first quarter of this year, our growth in Japan was double digit. So that underlines that the product range and the innovations that we have are competitive. And that also we don't compete just on price. Because if it would have been a competition on price, we would have lost the deal because 20% is not bridgeable. That's really a lot. But our -- the hospitals, they come to us for our innovations in, for example, minimally invasive cardiac interventions, replacement of heart valves and so on. The low dose in the AlluraClarity, where you can do imaging with 70% less radiation exposure. These are innovations that in a Japan that has the trauma of Fukuyama, obviously, differentiate us. So again, the focus on innovation should be a response to these kind of economic pressures. But I hope that these currency differentiations will not go too far. Now your last question was around shareholding. We are still predominantly owned by American shareholders, approximately 50%, and then 45% is Europe and the remainder is Asia. The implication is of course, that we would like and we'd love to improve our shareholding in Asia. Both Ron and myself, we go on roadshows also in Asia in order to make the Philips investment opportunity more well known. I was not so long ago in Japan, where it has not gone unnoticed that Philips has completely reinvented itself versus some of our Japanese historical competitors, and we were seen and are seen as an attractive investment opportunity. So we are conscious of the fact that we have work to do to attract Asian shareholders.

Unknown Executive

And now the next speaker please.

Unknown Attendee

I'm Sai from Amsterdam. Mr. Chairman, I have a question about your dividend proposal. The proposal is EUR 0.75 per share -- per common share in cash or in shares. And if this is approved and if you opt for shares then the gross dividend would be 1.5% higher than the gross dividend in cash. In previous years, the difference was 3%. Why is the surplus lower now?

François Adrianus van Houten

I think that's a question for the CFO.

Ron H. Wirahadiraksa

Well, this is in line with our normal practice last year. And the previous year, in fact, it was a little bit higher. This time, however, it's lower. It's more in line with what we think is sound market practice.

François Adrianus van Houten

Just looking around the room to see whether there's any further request from the floor. Go ahead, please.

Unknown Analyst

Mr. Chairman, I'm Paul Ferbada [ph], I represent Dutch shareholders in Paribas Partners, and I'm also speaking on behalf of Triodos Investment Management. I have a question for you about antitrust matters, self evaluation by the Supervisory Board and spearhead letter of Imedium [ph]. Let's start with the antitrust matters. Mr. Yorna [ph] of the VEB already asked about this and Mr. van Houten already said something about this, but I have more to say and more to ask about that. Mr. Chairman, in the annual report in the contingent liability section, various statements are made about illegal pricing agreements. At the start of this year, we, and some other shareholders and Imedium [ph] participants at corporate governance platform for institutional investors discussed this at length with management. During these conversations, it became clear that the company has been taking measures in this field for quite some time. As shareholders, we take this very seriously, not only because of these serious penalties that might be imposed and would impact financial results, but also because it might -- the financial integrity of the company could be adjusted, and the CRTs and other screens are the subject of an investigation launched by the government in 2009. But these are not only past ghosts that have come back to haunt us. Even though in 2012, price fixing with retailers were observed. That's why I'd like to ask you, which specific measures Philips is taking to prevent illegal practices? And how do you think that you can assess the effectiveness of these measures? As you can imagine, Mr. Chairman, we're concerned about this, and at this meeting, we'd like to appeal to the Board of Management, the Supervisory Board, and the auditors to address this topic. And we'd also like t Philips, in 2013 annual report, might report at length about the measures taken and their effectiveness. Mr. Chairman, if I understand correctly, the Supervisory Board performed a self evaluation of its performance during the year under review. In the report of the Supervisory Board, I have not been able to read the conclusions and follow-up steps by the Supervisory Board based on this evaluation. Could you tell me more about this evaluation and the outcome and potential follow-up steps? Now my final point, Mr. Chairman, BNP Paribas participates in Imedium [ph], the corporate governance platform for institutional investors in October 2012, you received what was known as a spearhead letter from Imedium [ph]. And in this letter, the participants in Imedium [ph] are trying to draw your attention to various subjects. In our 2013 spearhead letter, we asked that standard text in the financial statements and annual report be avoided. Generally, Philips does quite well in this effort, our compliments, but there's one part where we see some room for improvement. And that's the section on accounting policies, especially the first 5 pages which simply seems to be filled with standard text. Of course, in this part, you can't entirely avoid standard texts. But nonetheless, I'd like to ask you if in the annual report 2013 you could review that accounting policy section for unnecessary repeats. Those were my questions, Mr. Chairman.

Unknown Executive

Those questions are clear. The first one is for the CEO, the third question is for the CFO. And I will, myself, deal with your question on self evaluation.

François Adrianus van Houten

Well, making sure you always observe ethical and ethical policy and integrity means you got to have an awful lot of principles established within the company. We keep our eye on those clearly. It's also important to make sure that everyone knows about them. Your employment contract that can be hanging on the wall and so on. It must be absolutely as plain as the nose on your face. Those are our rules, and that's how we wish our people to behave. That's how we do business. The third approach here is introducing business rules into all processes and levels and having monitoring of these. For example, monitoring our suppliers and also our retailers and looking at how our sales staff behave. A further point is continual audits to see whether management is performing its monitoring tasks successfully and then having what are known as whistleblower policies, and making it easy for people to say when they spot something going wrong. And we really do give this 100%. We look into everything thoroughly. We leave no stone unturned. And we are -- I'm certainly giving this a great deal of my attention. I expect everyone else in any leadership position do the same thing. And then you asked whether we could tell you more about our internal audit and monitoring policy in more detail in the 2013 Annual Report. We will certainly take account of that suggestion and we'll get back to you in due course. Then, the question on simplification of what I'll call boilerplate texts, standard text dotted into the reports. Well, fundamentally, we are perfectly happy to look into this question. Now we don't want to think -- people to think that the Philips financial statements published every year should be chaotic, but we can look into the question of not using the same word as verbatim every time. If you wish to compare and contrast, you'll find that we have simplified the use of language in our financial statements quite a lot, and our annual report is significantly slimmer than that of many comparable companies. And I think you should bear in mind that our annual report is read by many people whose mother tongue is not Dutch. We've got to allow for an international readership, which means that a degree of guidance is required. I hope that answers your question.

Unknown Shareholder

Absolutely. I think that every effort made to simplify the annual report is greatly appreciated, and we understand the playing field in which you operate. But as you will have read in the spearhead letter, the intention is for the annual report to be far more accessible for everybody.

Jeroen van der Veer

[Dutch]

Thank you very much. Now with regard to your self-evaluation, briefly, how the Supervisory Board's monitoring works, is that it's facilitated by a third-party from outside the company. In other words, they compile a questionnaire, which we then work through those versus the committees as for the Supervisory Board as a whole. Then, the Deputy Chairman then checks through the Chairman's assessment. Everyone keeps tabs on everyone else. To some extent, you talk about this one on one, and then we also have a meeting on the subject for the whole Supervisory Board together. You were saying that you'd like to have more information on our findings. Well if you turn to Page 100 of the annual report, you can see it reported that we've talked about the membership of the Supervisory Board and their skills, whether we give sufficient information, their training programs, the regularity of meetings and the corporate management. Now the annual report is relatively long, and we want to avoid going on and on and on about this topic. I think that we give you a pretty good impression of everything we've done on this front. I'm happy to give it another look through next year and see what else we could tell you. I think there are some things that you don't necessarily wish to make available to a readership around the whole world, but we're happy to give you an idea of what the self-monitoring system is and how it works.

Unknown Shareholder

[Dutch]

May I ask you a last question about that evaluation, please? I wasn't able to read the main conclusions. Are they in there?

Jeroen van der Veer

No. We tell you what the subjects are that I investigated. We think that's quite sufficient, and we've got to think about -- well, when it comes to the findings of the assessment, you can sometimes see them reflected in our profile, our sketches of the future and so on. So sometimes you can find people -- the findings indirectly expressed. But I think if you put all your findings in the annual report, I think it would get far too long. I think we struck a good balance of what is appropriate to mention. But some things must be simply entrusted to the Supervisory Board.

Unknown Shareholder

All I can say about this item, Mr. Chairman, is that we would have liked to read a bit more about that.

Jeroen van der Veer

I understand your point of view. Okay. Does anyone else wish to take the floor? I'd like to bring this round of questions to the end. Can I ask you to be brief? Thank you very much. Go ahead.

Unknown Shareholder

[Dutch]

I'll be very brief Mr. Chairman. I'm Mr. Karitzen [ph]. I don't have any questions. I have a recommendation for Mr. Van Houten that all he needs to do is take it seriously. For several years now, Philips Amsterdam has been the base. This is a very important week in Amsterdam. Last Tuesday, we were able to witness Mr. van Houten attending the ceremonies on the Dam. But the zenith will be the day after tomorrow at the arena. Please be careful in your response to Mr. Sponyard [ph] . I don't say that -- don't do your initial headquarters an injustice by saying which player you would like to win in that football game.

Jeroen van der Veer

Well, that was very clear. Any further speakers? Yes, a lady there wanting the floor. Yes, go ahead.

Saskia Verbunt

[Dutch]

I'm Saskia Verbunt, and I'm here on behalf of the Association of Investors for Sustainable Development. Let me warn you because I'm going to start out with some big compliments, and the VBDO which tries to be constructive in its critique. And Philips is clearly at the vanguard in sustainability, and we welcome that. We see that you're active in several innovative initiatives. For example, conflict-free mining in Congo. We also see that you're dedicated to sustainable progress in Indonesia, and you have signed on to the sustainable economy and growth coalition. In the reporting, you mentioned several exceptional achievements, and you achieved the highest standards in your sustainability report. You deserve many compliments for that. As Mr. Van Houten indicated as well, you have a supersector leader position in the Dow Jones Sustainability Index, and on the Carbon Disclosure Index, you also score beautifully, our compliments. But as VBDO, we also have some critical questions for you. Our first question concerns several environmental targets. You indicated that you're dedicated to exploring energy renewables, and we're curious what your targets are for energy renewables for 2015. Philips also indicated that they want to reduce and eliminate various hazardous substances, and we want to know what your ambitions are in that respect as well. The second topic I'd like to ask questions about is the environmental profit and loss account. In 2011, PUMA was the first company that indicated the cost of environmental damage, first at the corporate level and later on with respect to its products. We think that it's wonderful for companies to identify risks and gives them increased insight into commodities used in other things that will help them manage the company better. And we wondered in what measure Philips intends to participate in environmental profit and loss accounting to implement that. Our final question is about taxes. I'm sure you've noticed that in recent months, both in media and other types of organizations, this issue has figured on the agenda, both from a social perspective and risk element. Both Starbucks and Amazon have taken a lot of heat in the U.K. because of their tax conduct. At the VBDO, we're curious how you, as Philips, envisage the relationship between your CSR policy and your tax policy, and we would like to hear your response to that. Finally, our compliments, last year some union members were expressing their displeasure outside about the closure of the Rosendahl plant, and we read recently that you reached a mutually acceptable solution. So our compliments, and we look forward to your responses.

Jeroen van der Veer

Thank you very much. Okay, questions on environmental matters and taxes, et cetera. Frans, go ahead, please.

François Adrianus van Houten

Well, thank you. I'm just looking through all our objectives, and I've got a whole list of 2015 objectives on the table in front of me. And glancing through, there's a dozen-odd objectives, but there isn't one on the list about how much renewable energy you wish to use by 2015. It's currently 47%, so yes, we do owe you an answer. I think there's no problem establishing an objective for us, and we'll add it to the existing 10 objectives. Yes, we'll do that. That's very much in line with our practice. As regards to tax matters, perhaps I could sketch a broader picture. This is indeed a question which is very much discussed all around the world. People are increasingly aware of the fact that some companies are optimizing their tax situation. In other words, they end up, eventually, effectively paying no tax at all. What shall I say? I would like to still any misgivings you have. Our policy is to work in accordance with the OECD guidelines, the Organization for Economic Corporation Development. We use the arm's length principle, which means, in other words, that we pay tax where we ought to. Perhaps the simplest way to put it is to say that our weighted average statutory tax rate comes in at 26% to 27%. That's where it was last year. I think that goes to show that we are paying a very significant amount of tax. I therefore think we are showing that we're not trying to get up to any tax shenanigans. If you want more detail on that, we actually can get together separately to talk about the details. Then, you talked about profit and loss on the environment front. Well, there's certainly further progress we could make here, and we will take your points on board.

Jeroen van der Veer

Thank you. I'm now looking around the room to see whether we can bring this agenda item to a conclusion. I'm having a good look around the room. Excellent. Thank you very much. So we've had an extensive exchange of views. I'd now like to draw the debate to a close, and we'll move on to a vote on the various items.

First of all, however, the formalities from the notary public. The notary tells me that at the beginning of today's meeting, we have EUR 94,558,364 of capital represented at the meeting. This means that 472,791,821 shares can be cast. Bearing in mind the number of shares at issue in the company, this means 49.4% of issued capital is represented at today's meeting, which I think is about 5% up on last year, if my memory serves me correctly.

The notary public has also pointed out that all the legal and statutory requirements regarding attending and holding the meeting have been duly observed and that, in particular, the points set out in the financial statements and the annual report and all the points regarding nomination and renomination to the Board of Management and the Supervisory Board have been duly observed and decisions can be made at this meeting. We want to make sure everyone is aware of this. The meeting has been duly convened and is legally entitled to make valid decisions on all points listed on the agenda. Finally, I would say that the Board of Management and the Supervisory Board has received no requests from shareholders within the meaning of Article 25 Section 3 of the company's Articles of Association, whereby you are entitled to request items for the agenda, if you wish.

Let's now proceed to the vote. Could you please take your voting handsets, and I will now ask the operator to switch the machine on.

[Dutch]

I'm sorry, we've got a bit of a technical hitch. You should get something on your screen saying, "Please insert your card." Is it start -- is it being switched on? Okay, right. So would you please take the voting card with the gold chip facing towards you and insert it into your handset. At that point, you will see your name appearing on the screen. After that, you will see the list of options on the screen. So if everyone is ready -- if anything goes wrong, please raise your hand and ask for help. I'll just look around the room to see if anyone is having difficulty operating their voting handset. You insert the card with the gold chip towards facing you.

Is anyone having difficulties? No? Well, that's nice, then. All right. We'll now proceed to the vote. If you wish to vote in favor, if you wish to vote in favor, press 1; to vote against, press 2; to abstain, press 3. Is everyone ready? Yes? Jolly good. Right.

Let's move on to the vote. We're voting on each item separately. Firstly, we be voting on agenda Item 2a, 2a, adoption of the 2012 financial statements. Voting is open -- just a moment, sorry. Sorry, Frans is whispering in my ear.

[Dutch]

Someone had a hand up. I see he put it back down again, okay. Well, voting is now open. Please cast your vote now. We're voting on agenda Item 2a. Please vote by pressing the button of your choice.

[Voting]

Jeroen van der Veer

[Dutch]

Couple of more seconds to go. Okay, the voting on agenda Item 2a is now closed.

Just to point out, by the way, only the percentages of votes cast will be shown on screen. The actual number of votes will be published on the corporate website and of course, will be minuted in due course.

Ladies and gentlemen, at any moment now, we will see the outcome of the vote on the big screen behind me. Here we are. Well, that's very nice. My congratulations to everyone involved in the financial side of things. 100% of votes in favor. Thank you.

And now, agenda Item 2c. Is that right? Yes, it is. Okay, agenda Item 2c. Proposal to adopt a dividend of EUR 0.75 per common share in cash or shares at the option of the shareholder, to be charged against the net income of 2012 and retained earnings of the company. All the other provisions are set out in the annotated agenda. And we're proceeding to vote as further. Would the operator please switch the vote on. Just having a look to see when we convert -- okay. You should now see the 3 voting options on your handset screen again. Vote 1, in favor; 2, against; 3, to abstain.

[Voting]

Jeroen van der Veer

[Dutch]

Five seconds to go. Ladies and gentlemen, voting is now closed. And we'll see the results on the screen any moment now.

[Dutch]

99.4% in favor. Thank you very much. Let's move on now to agenda Item 2d, discharge of members of the Board of Management. Operator, please switch the system on.

[Voting]

Jeroen van der Veer

Another 5 seconds to cast your vote.

[Dutch]

Voting is closed.

[Dutch]

Votes in favor, 97.2%, as you see, so that motion has been passed.

The floor -- speak from the floor. Go ahead please.

Unknown Shareholder

[The interpreter can't hear the intervention from the floor.]

Jeroen van der Veer

[Dutch]

It's a question for Mr. Kinigan [ph]. I'll repeat your question. The question was whether you could change your mind to revise your vote. Yes, you can change your vote as long as voting is open. Once voting is closed, you can't do it anymore. That's the way it's supposed to work. You made a mistake? Once voting is closed, I'm afraid it's too late to change your mind. Perhaps someone could have a look and see whether your handset is working properly. Is there someone who could have a look at this gentleman's handset?

Unknown Shareholder

[The interpreter can't hear the speaker from the floor.]

Jeroen van der Veer

[Dutch]

Okay, so the conclusion is then make sure you vote correctly the first time round. We'll move on to agenda Item 2e, proposal to discharge the members of the Supervisory Board. Voting operator, will you please switch the system on?

[Voting]

Jeroen van der Veer

[Dutch]

Five more seconds to go. Voting is closed. 97.2% in favor. Could someone please give this gentleman a hand? Anyone who could you give him a hand? Could you please come across? Yes, someone is bringing you a new voting handset, sir.

Well, let's move on now. We dealt with agenda Item 2e. And now agenda Item 3, membership of the Supervisory Board. Now this is an agenda item which deals, among other things, with renomination of myself. So when it comes to discuss the question of whether or not to reappoint me, I will nominate Mr. Schiro, Deputy Chairman of the Supervisory Board, to take the chair over from me at that point.

I'm sure you'll understand. He will be speaking English to do this. Before I give Mr. Schiro the floor, however, I'll just deal with the proposed reappointment of Mr. Poon -- of Ms. Poon and Mr. Schiro. We have, of course, taken account of the annual appraisal of the members of the Supervisory Board in making our recommendation here. We will also take into account all the rules regarding the maximum number of boards on which an individual may serve.

We've come to the conclusion that, in view of the scale and range of Philips activities, we wanted to continue to have 8 members of the Supervisory Board. You can find further information on the annotated agenda, and I think that is all the information you require at this point.

We'd now like to move on then to agenda Item 8 -- I beg your pardon, agenda Item 3a, renomination of Ms. Poon. Does anyone wish to take the floor on this? No? Okay. Let's proceed to the vote then. Voting operator, would you please switch the system on?

[Voting]

Jeroen van der Veer

[Dutch]

A couple of more seconds. Just making sure the gentleman who had difficulties is okay now. Yes? Good. Thank you. Voting is closed. Well, there we are. Votes in favor, 99.8%. So the proposal has been adopted. Moving on now to the renomination of Mr. Schiro as member of the Supervisory Board. Does anyone wish to take the floor on this? No? Okay. Let's proceed to the vote. Operator, please switch the system on.

[Voting]

Jeroen van der Veer

[Dutch]

Couple more seconds. Voting is closed. Mr. Schiro, many congratulations, and the proposal has been adopted. Jim, I'll now give you the floor for the next agenda item.

James J. Schiro

Okay. Thank you, Jeroen. I will take this agenda item as Vice Chairman of the Supervisory Board. I have conducted an evaluation among my colleagues with respect to the functioning of Mr. van der Veer as Chairman of our Board. From that evaluation, the Supervisory Board unanimously supports the proposal to reappoint Mr. van der Veer with full conviction.

Finally, the proposal to Mr. -- to reappoint Mr. van der Veer has been explained further in the explanatory notes to the agenda. So ladies and gentlemen, would you like to address the meeting with respect to this proposal? Not seeing anyone, can I suggest to close the discussion of this matter now. And propose to vote on agenda Item 3c, the proposal to reappoint Mr. van der Veer as a member of the Supervisory Board. And I request the operator to switch on the voting system. Please cast your vote by pressing the button of your choice.

[Voting]

James J. Schiro

And we have one more second. And ladies and gentlemen, the voting procedure is now closed. And as you can see from the percentage of the voting in favor of this proposal, which means that the proposal has been adopted.

Jeroen van der Veer

Thank you very much, Jim. Thank you.

[Dutch]

We'll now move on to agenda Item 4. Ladies and gentlemen, the next agenda item is a proposal to amend the long-term incentive plan for the Board of Management and awarding them the Accelerate! grant. These are 2 separate agenda items, which will be voted on separately. It gives me great pleasure to introduce this item to Mr. Schiro, who is Chairman of the Remuneration Committee. Jim, go ahead please.

James J. Schiro

Okay. For many years, Philips has operated a long-term incentive plan. The long-term incentive plan serves to align the interest of the members of the Board of Management with the shareholders' interest and to attract, motivate and retain executives of the highest caliber. Since the introduction of the current long-term incentive plan in 2003, both Philips and the environment in which Philips is operating have changed. Philips is undertaking a worldwide transformation program to unlock our full potential and become more agile and entrepreneurial.

One of the 5 key Accelerate! initiatives is to move to a performance culture. These changes have encouraged the Supervisory Board to design a new long-term incentive plan consisting of performance shares only. For the past 12 months, the Supervisory Board has conducted through benchmark studies, reviewed market practices and consulted an independent external expert to provide recommendations on the changes to the long-term incentive plan. Having undertaken this review and after consulting a large part of our shareholder base, there are a number of planned changes to the long-term incentive plan that we believe will increase its effectiveness.

The main rationale behind this is the desire to link pay and performance more closely. The current long-term incentive plan consists of a mix of options and restricted share rights. The new plan consists of performance shares only, with 3-year post-grant performance measurement replacing the current pre-grant performance measurement over the period of 3 years preceding the grant. Consistent with the strategy of encouraging a more performance-oriented culture, the new plan has a steeper performance incentive zone, increasing the potential benefit for superior performance and reducing the payments for the lower levels of performance.

To illustrate this closer link between pay and performance, the TSR condition under the new plan will have reduced payments for below-target performance, with 0 benefit for a significant part of the possible range of performance outcomes, which currently do lead to payouts. Furthermore, stretching EPS targets are directly linked to shareholder value and are a measure over which the participants have a line of sight. The Supervisory Board is aware that the new plan will result in the CEO's total remuneration opportunity increasing at a time when executive pay is under a higher level of scrutiny, but believes that the attached performance conditions that will result only in a payment if truly superior levels of conditions -- excuse me, performance are delivered, make this level of award appropriate and in line with the mid-market level seen at other similar-sized European companies.

Finally, I would like to mention that simultaneously with the introduction of the proposed plan, the guidelines for members of the Board of Management to hold a certain number of shares in the company is highlighted: 300% of the base salary for the CEO, 200% of the base salary for the other members of the Board of Management. And also, we propose to extend our so-called clawback clause, which has been in place since 2009, to cover cases of serious violation of the Philips' general business principles or applicable law. We believe that this is an appropriate extension in line with our 0-tolerance policy.

Let me also now comment on the Accelarate! grant, which is a related agenda item to the members of the Board of Management. As you are aware, the 2011 annual report explains that senior staff, other than the 3 members of the Board of Management, received a one-off long-term incentive award to launch the Accelerate! program. The purpose of this award is to focus the key leaders on the delivery of our midterm financial targets to be achieved by the end of this year. The annual report also commented that the Supervisory Board contemplated introducing similar awards for the members of the Board of Management, subject to shareholder consent.

The Supervisory Board feels that the Accelerate! grant supports the change into a performance culture and is a good bridge between the current long-term plan and the proposed plan, which you will be voting on, as it is forward-looking and performance-based. The performance period of the Accelerate! grant started on January 1, 2013. The Supervisory Board would like to avoid making the Accelerate! grant halfway through the performance period, in view of a conditional grant as we made as of January 29 of this year, subject to the approval of the shareholders at this annual meeting today. The Supervisory Board, therefore, considered it appropriate to make an Accelerate! grant to the CEO and the 2 other Board of Management members as well. Back to you, Mr. Chairman.

Jeroen van der Veer

Thank you very much, Jim.

[Dutch]

The floor is now open for questions from the floor. I'm trying to look around the room. How many are there, 2, over there, 3? Anyone else? Can I start with you? And then you and then you.

Unknown Shareholder

My name is Frans Kahlenberg [ph]. Yes, I have a question to you. Do you ever look at the proportions of what you pay your shareholders and what you put in your pockets on your side of the table? I think things are getting rather out of proportion. 10% is going out for additional shares in yourself. And we're trying to save EUR 115 million. I can't really see how those 2 things fit together. And well, I'm sure I'll be meeting you again in a couple of weeks' time, but I've already met you a couple of times. But do something about this. Let's get things into proportion. If you want to earn more, well and good. But make sure, please, that the same percentage increase goes to the shareholders, too. And if you can't pay it up to the shareholders, then I really don't think that the Board of Management and Supervisory Board salaries must be accessible as they are. I don't see why they should be out of proportion to us. That's my question, and I really would like to have a proper answer this time.

Jeroen van der Veer

[Dutch]

Yes, so your question then is the relation between dividend and remuneration. Well, I am currently thinking about whether Mr. Schiro might like to say something about this. Looking to my left as well. I think It's rather difficult for you. Jim, would you like to speak on this?

James J. Schiro

I think that we looked at all aspects of compensation. And the design of this new compensation plan was to realign performance for all stakeholders, and that includes the shareholders. And if you looked at the older incentive plan, the older incentive plan had lower thresholds, which even included below-target performance at which bonuses were paid out. This plan is moving towards a target where there are 0 bonuses if targets are not met under certain thresholds, as explained. So I think it is an attempt on our part to align the interest of the shareholders with the interest of -- and the interest of the compensation of management. And obviously, it's something that we will continue to look at. And I think we cannot just look at, when you look at total shareholder return, the dividend. You have to look at share price performance, dividends, which are also impacted by the share buybacks the company is using to drive those levers of profitability.

Unknown Shareholder

[Dutch]

Well, I think I'd say if you can see that's the trend that's emerging, then let's have the same trend for our dividend levels, and then, we'll all be happy. That's what I'm still trying to achieve.

Jeroen van der Veer

[Dutch]

Yes, I fully understand your point of view, and I think that Mr. Schiro has given you a clear reply. I'll just say, well, you're looking at this as being an explicit relation between the 2 figures. I think the important thing for shareholders is to make sure that we have good people at the top. Now you could write volumes about what's the appropriate level of payment. We've heard Mr. Schiro's explanation of the situation. And if you give people proper incentives and proper remuneration, not silly money, then in the long term that is how you get the best possible corporate performance, which means that the best possible dividend emerges. So it seems to me that there is a clear cause-and-effect approach rather than an actual and direct relationship between the 2 figures. As I say, one could write volumes about this, but that that's how we see it. Then, next question from over there, please.

Unknown Shareholder

[Dutch]

I'm Veda [ph] from BNP Paribas Investment Partners. On this agenda, I think item -- I'm also speaking on behalf Robeco and Triodos Investment Management. Mr. Chairman, as for this agenda item, I have the following remark and 3 questions to ask. In the run up to this Annual General Meeting, I had several conversations with Philips about adjusting a long-term incentive plan for members of the Board of Management. I very much appreciated being consulted about this subject as a shareholder and was impressed with Philips' professional approach in this respect. Possible award of the long-term bonus will consist of shares and therefore, directly interest shareholders. I'm delighted that you're clearly trying to align with the shareholders by considering earnings per share and total shareholders' return as the main components of the LTIP. In addition, the long-term targets for this bonus should be transparent and easily quantifiable. The total shareholders return clearly meets this. However, the earnings per share target is only reported in retrospect, and I'm not sure what the foundation is for formulating this target. Another area of consideration, Mr. Chairman, is the absence of sustainability targets as part of the long-term incentive plan, even though the company says that it's serious about introducing sustainability in its operations. Mr. Chairman, those were my questions. I would like to explain a bit about formulating -- I'd like you to explain more about the formulating the earnings per share target. And I'd also like to know whether it's possible to learn more in advance about the directives for the level of earnings per share growth rather than exclusively being notified about that in retrospect, because this would give the shareholders an advance idea about how the Board of Management would be remunerated in this respect. As for sustainability, Mr. Chairman, I'd like to know how important the firm considers this subject, since it is not included in the LTIP? My final question, Mr. Chairman, is what measurement this long-term remuneration structure for the Board of Management might be used as a monument -- model for long-term remuneration of middle management and other staff at Philips? And you may not understand exactly what I'm referring to here, Mr. Chairman, but the main feature of the LTIP is to provide extra bonuses for excellent performance and to reduce the compensation for less good performance. Is this going to be the foundation for remuneration throughout the firm or is there no relationship? Those were my questions, Mr. Chairman.

Jeroen van der Veer

Thank you. I'm just looking to see whether Mr. Schiro has understood the answer the question. He's nodding yes, so the floor goes to Mr. Schiro.

James J. Schiro

Okay. Once again, thank you for the dialogue and the input that you and others provided during this process. It was very helpful in shaping our thinking in developing this plan. Obviously, your points were made then, and I understand them again today. And others of your comments and points were incorporated into what we developed. So first, let me comment on TSR and ESP and the retrospective application of disclosing ESP. And I think our position is one that's evolving here. I don't think it's the job of the Supervisory Board and others to give guidance to the market on what earnings per share is, as we look forward. I think enough information is given by the management in terms of guidance in terms of revenue and income targets. And when we see back once the grants are granted and approved, you'll have to make a judgment as to whether the targets we gave were aggressive enough relative to the actual performance that we looked at, at that time. And as I said to you when we were looking at this, this is something we will revisit over time, but also realize what we're trying to accomplish here as we go forward. And that is to better align performance of the management, compensation of the management with the shareholders in this particular aspect. I take well your comments on sustainability targets, and that they are not specifically articulated in the LTIP plan. But they are in the annual incentive plan. And I think that Philips has been a leader in the area of sustainability. You heard comments at this meeting and you've heard of the numerous awards that Philips has been granted. To the extent that management were to falter as it relates to continued implementation and continued best of class in sustainability, that would be reflected immediately in the annual incentive because that is a key target in the annual incentive. And once again, we always have the capability if we think that will better help drive sustainability targets and continue to keep us in that leadership position. Because at the end of the day, what gets measured is what gets done. But if you give management too many management criteria, I don't think we're going to achieve the overall goals. And for us, right now, it is transforming this culture to become much more performance-oriented which will achieve the goals that we'd like to, and that this to create more shareholder value. Clearly, this program will go down to other levels in the organization. And as we -- Frans and his team, and I think I go back to the Chairman on this, Frans, to comment on that. What I've seen and heard in the organization is that we're going through a cultural transformation at Philips. And it is not just at the top, it's throughout the organization. And you have to instill performance targets to achieve that culture. And to the extent that, is it definitively an LTIP program or some other measure to do that, I'd leave that to Frans to comment upon that. So thank you once again for your input.

Unknown Shareholder

May I ask one more follow-up question, Mr. Chairman? This concerned first question and Mr. Schiro's response. The targets or the new targets that will be communicated in September will be part of the earnings per share targets? Do I understand that correctly? And furthermore, do I understand correctly as well that it is actually, as well, a learning-by-doing kind of item in the sense that every year, we can evaluate it and learn lessons for the next year? Is that part of it as well or is that just a misunderstanding from my side?

James J. Schiro

No, I think that, as I said, it is not the job of the Supervisory Board to provide earnings guidance to the marketplace. That's management's responsibility. And we have established a target. I mean -- without getting into so much depth here, we're resetting benchmarks. And if you don't set those benchmarks aggressively enough at this point in time, as you're lapping prior performance periods, we could be setting the wrong kinds of targets for management as we go forward here. So that's the purpose. And Frans could comment on the, obviously, the earnings targets and the disclosure that he will give in September and how it incorporates into here.

Unknown Executive

That will be in September.

Jeroen van der Veer

Mr. [indiscernible], did you have a question, I think, yes? Go ahead.

Unknown Shareholder

I'll be brief. It's not like the first round, which I had a lot of questions at the EB [ph] welcomes your initiative. First, to expand the peer group from 11 to 21, we regard that as an improvement. Another improvement is the salaries to be maintained and shares during their terms of office, that is to say the board members' terms of office. And we just heard Mr. Veda's [ph] questions and the answers. And we can certainly make do with those. We do believe, however, as far as total shareholders' return is concerned, especially the combination that serves the interest of the shareholders is used to measure the performance targets and evaluations of the Board of Management. But if you're going to be 13th out of 21 and you nonetheless get 60% of your salary, we think that's rather generous. So we're good in terms of performance, but there are -- we do get upset when we hear about retention bonuses or welcome these. But this is about performance, and we're happy that, that's what matters at Philips. Especially that 60%, if you ranked 13th, we think that's rather generous. And from what I understand in the future, you'll consider -- if you score below the median, you'll consider adjusting that and we welcome that.

Jeroen van der Veer

Well, thank you very much, thank you for your kind words. The 13th, 21 and 60%. Jim?

James J. Schiro

So I think -- you know, we take that point very seriously, the last point, and appreciate that. And we believe that this shift to vesting at the 60 percentile is a significant step in that direction. And I think that as we get to looking at this plan over time, we will continue to visit that as a level of driving performance in the organization. But we think at this point, to incentivize the employees to get to the performance level that we're driving to, we're -- they're going -- they're giving up a significant -- we were paying out percentages in the past for subpar performance on that basis.

Jeroen van der Veer

Mr. Spagna [ph] in a moment, but first, there was someone on the left. Was it Ms. Verbunt? Ms. Verbunt and then Mr. Spagna [ph].

Saskia Verbunt

So this is Saskia Verbunt again. Well, it will not surprise you that I will -- just like Mr. Veda [ph] comment on your sustainability within your long-term incentive plan. Actually, we think, at VBDO it would have been a great opportunity to maybe more explicitly refer to sustainability because I think or we think that it also can help you for this transformation change or change you're aiming to create within your company. So therefore, we would like to look forward to maybe some improvements for next year. And we wish you good luck with that.

Jeroen van der Veer

Jim?

James J. Schiro

Okay, thank you very much. Obviously, as I said, this is something, as we, and Frans and the team drive towards the change in performance culture, we will continue to look at the need. And I think for us, the point in time now is we've got to measure these criteria to help support the drive. But we're not giving up the sustainability, because the employees, if they fail to consider that, will see that on a very immediate level in their annual incentive bonus. So we think we've struck a good balance there for now.

Jeroen van der Veer

Yes. I think that people who are very curious of sustainability, yourself for example, you should bear in mind that in remuneration, you've got your short-term remuneration, looking at the annual variable, and then you've got the long-term as well. But what you see in the world of remuneration is you try to have different criteria for long-term than you have for short-term. So having sustainability in short-term and long-term incentives is likely to yield further criticisms. And there is some logic in this. I think that in the long term, you need to find subjects which could be viewed as bringing together a number of corporate performance indicators. Mr. Schiro would say, for example, earnings per share and TSI. They're more along those lines. So I don't think it's necessarily logical to say that you should have sustainability indicators in the short-term and the long-term. I think that would simply be using the same thing again and again. Now Mr. Spagna [ph], can I ask you to be brief because some people are voting with their feet.

Fabrizio Spagna - Axia Financial Research

I'll be brief, Mr. van der Veer. Those shares that are granted, are they repurchased from the stock market or are they simply printed from the presses?

Jeroen van der Veer

Both.

Ron H. Wirahadiraksa

Basically, we always keep treasury shares for the long-term incentives. Of 957 million shares, is it 907 million are currently outstanding. So there's a significant share -- proportion of shares we're holding. But to answer your question, for this plan shares are purchased on the stock exchange.

Jeroen van der Veer

Does this bring us to the end? No. One further person. Is yours the last question in the room? Yes. Go ahead, please.

Unknown Shareholder

I'm Mr. [indiscernible], I'm a shareholder in Amsterdam. I just have a little question about a note on Page 5 on the agenda. The number of members of the Board of Management from the United States maybe doubled, and that's a "might' stipulation, but it doesn't list when or how. And that surprises me a bit. Because this might relate to U.S. taxes, but then it should be far clearer.

Jeroen van der Veer

Jim looks at me. This has to do -- Yes. When it comes to the structure of the incentive plan, the simple fact in the big wide world is that people who've worked in the States for a long time, or have American nationality, have a totally different remuneration structure. We nevertheless think it's a good idea for us to have or to be able to get Americans onto the Board of Management. If we did that on the basis of European remuneration policy alone, then what would actually happen is that we wouldn't be able to get any Americans on board. And that is not in the interests of the company. Thus, in line with what other companies do, we also -- we say that those persons who are recruited from the United States in order to take a position on the Board of Management, it is possible for their LTI award to be doubled. Now you could say that you don't like it, it's unfair, and so on. What it is seeking to do is to respond in a pragmatic way to an unfair world. Right.

And now, I would like to proceed to conclude the discussion on this topic, and we will go on to the vote.

Voting on agenda Item 4a. Proposal to rend the long-term incentive plan for the Board of Management. Operator, please switch the system on.

[Voting]

A few more seconds to go. And here, we see the results on the board. Votes in 7 -- 97.4% in favor, which means that the long-term incentive plan has now been adopted.

Now agenda Item 4b, the other part of what Jim Schiro was telling you about when we started off, proposal to adopt of the Accelerate! grant for the board of management. Operator, please switch the system on.

[Voting]

Last few seconds. Voting is closed. And here it is up, 96.3% in favor, thus the Accelerate! grant has been adopted as described. Ladies and gentlemen, that brings us to the end of agenda Item 4.

Moving on to agenda Item 5. The proposal is to change the company name of the company to Royal Philips NV. In the light of changes in corporate activities and the recent sale of Lifestyle Entertainment which are part of the old consumer electronic products division, we think it is appropriate to change the name of the company, so that it will better reflect the actual activities of the company nowadays. Frans van Houten mentioned this earlier in his presentation. The proposal therefore is to change the registered name of the company from Koninklijke Philips Electronics NV to Koninklijke Philips NV. And the official trade name would be changed from Royal Philips Electronics to Royal Philips. Does anyone wish to take the floor on this subject? Go ahead, please.

Unknown Shareholder

Mr. Chairman, I am Mr. Folkisma [ph]. I think it's wonderful for the Dutch-speaking sections of the world: Netherlands, Belgium, let's include South Africa as well. But is it known in the rest of the world because electronics rings a bell throughout English-speaking circles worldwide. But if we abandon that, then it will make our company unknown in the next few months. That's why I'm questioning this change of name.

François Adrianus van Houten

Thank you for expressing your concern. We've looked into this very carefully. And our clients in Healthcare, and Lighting and Consumer Lifestyle, they feel that electronics has a negative tone to it. It sounds like low-end stuff, not very sophisticated products. Whereas the name Royal Philips is well known around the world, and we don't need to tie ourselves to a name saying what we do. We think that the name Royal Philips is sound and is a good basis on which to build.

Unknown Shareholder

I'm sorry, but I happen to agree with the previous questioner and I don't necessarily agree with Mr. van Houten, the name change. The explanatory notes talk about appropriate. I don't know what that means if anything. I'm a long-term investor, a long-term shareholder of the company. I got my first job offer 50 years ago from this company, and another one 20 years later. I had the pleasure of meeting Mr. Fritz Philips in person, one of the many Philips, as an engineering student 48 years ago. And I even have still 3 original radios from 1935, '44 and '47, that had been in my family when I grew up. They're still working. I will vote against this, for what it's worth, because I see no added value, just cost of the name change. You might as well drop the name Philips. I see more benefits there because, in the rest of the world, I always have to explain that we are not in the oil business. My broker, after about 30 years, still sends me correspondence with Philips with two Ls. So I think there may be more confusion. And after all, you still have a lot of electronics business, the Healthcare is mostly electronics. So I didn't agree with what I heard you say about the rest of the world. It's definitely not true.

Jeroen van der Veer

Thank you. We note your comments. Any further questions? No? Okay, let's proceed to the vote on agenda Item 5. Proposal to amend the Articles of Association of the company to change the name of the company to Koninklijke Philips NV. Operator, please switch the system on.

[Voting]

A few more seconds. Okay. The system is closed. Well, that is interesting. Look, 100% in favor of the proposal. So the company is henceforth called Koninklijke Philips NV. Thank you very much.

And now, agenda Item 6. Ladies and gentlemen, this is the annual regular authorizing the Board of Management for a period of 18 months to issue shares or grant rights to acquire shares and to restrict or exclude preemption rights. It's 2 separate items for separate voting. This is a recurring item every year because the authorization is each time for 18 months. I don't think I need to go into any further detail in this, although the floor is open, if anyone has any questions. Does anyone wish to take the floor on this agenda item?

Unknown Shareholder

[indiscernible]

Jeroen van der Veer

No. It is the same thing every year, of course, isn't it? So let's proceed immediately to the vote. Operator, please switch the system on.

This is first on agenda Item 6a, proposal to authorize the Board of Management to issue shares or grant rights to acquire shares.

[Voting]

Voting is closed. Agenda Item 6a has been approved by 92.1%.

Now we'll move on to agenda Item 6b, proposal to authorize the Board of Management for a period of 18 months with approval of the Supervisory Board to restrict or exclude the preemption rights accruing to shareholders. Voting is open. Please cast your votes.

[Voting]

A few more seconds. Voting is closed. And agenda Item 6b has been adopted by just under 88%. That brings us to the end of agenda Item 6.

Now on to agenda Item 7, authorization of the Board of Management for a period of 18 months, with the approval of the Supervisory Board, to acquire shares in the company. This is an annual authorization granted by each year for purchasing the company's own shares. This time, as before, the proposal is subject to the conditions and provisions set out in the annotated agenda. Among others, the company may hold no more than 10% of issued share capital as of May 3, 2013, which number may be increased by 10% of issued capital as that of the same date in connection with the execution of share repurchase programs for capital reduction purposes. Anyone wish to take the floor on this? Go ahead, please.

Unknown Shareholder

I'm Peter Vandenburgh [ph]. I'm a member of the Philips Pensioner Federation [ph] representing the Limburg region. I've got a handful of questions. Inspired by the fact that as of the last 10 years, there's been about EUR 15 billion worth of shares issued -- withdrawn, but there's been no money available to underpin the pension fund. I've got a number of questions. So perhaps, Mr. Wirahadiraksa, who I talked about this last year, could answer them swiftly. Looking at the pension paragraphs on the Philips Annual Report this year, one gets the impression that Philips NV currently has not suffered any harm at all in its profit and loss account or its balance sheet because of the current situation in the Netherlands. Is that correct?

Jeroen van der Veer

Will you please ask all your questions in a row? Our CFO is noting them all down. I'm sure you'll get all the answers in one go as well. And If you're not happy, you'll get a second chance to take the floor.

You'll have to wait and see what the answer is, isn't it?

Unknown Shareholder

Are we right then to conclude that the company has no intentions to provide any support in getting out and sorting out the resources of the Philips pension fund? Can I continue? If this statement is correct, how is that to be reconciled with the existing unease among pensioners and the -- their plan to take legal resources against the company if it is not willing to get involved in sorting out the resources of the pension fund? Next question. If legal actions are taken by the pensioners, are you aware of where you would stand? If so, how do you think you would be able to say that the pensioners' point of view is irrelevant and how would you justify not responding to it? And my last question. Philips NV has asked to be authorized for -- authorization to acquire shares in the company. Has the company brought in mind that this would be of great relevance in the event of legal resources -- legal remedies being sought in terms of the availability of capital for the company?

Jeroen van der Veer

Well, Mr. Vandenburgh [ph], I think that your point is only tangentially relevant to this agenda item. However, I don't think there's much point getting into argy-bargy about the point at which you should have asked your questions. I think we'll simply go through your questions in turn and ask Mr. Wirahadiraksa, please, to address your questions as briefly as possible. And if you wish, you can go into them in more detail personally with him. But I'll ask Mr. Wirahadiraksa to give you a response now.

Ron H. Wirahadiraksa

Thank you for your questions. Regarding the first question, that's correct. And the second question, I can tell you that the contributions are cash and that does not relate to the P&L. And the funding of the pension fund is also separate from our P&L. And a recovery plan is the responsibility of the Board of Trustees, not of the firm. The firm has always observed and will continue to observe all the agreements set forth in what's known as a financing agreement. And we've explained that maximum exposure in an extreme case, in response to a previous question. We're aware that arguments have been raised to make top-up payments, but at this point, last year already, we had a long talk with the stakeholders and found that this is not opportune given the financial uncertainty. You're clearly relating this to something else, repurchase of our owned shares. I believe this surfaced last year as well, and I would like to provide the same answer, which is that the cash leverage and value creation aimed at in a share buyback program are not the same as the envisaged increase in the firm's cost structure and the Accelerate! program. We're working hard to make Philips far leaner in its operations and underlying systems and that requires a lot. And we're also adjusting the cost structure through cutting overhead, and we've successfully reduced that cost structure. In that context, there's no room for increasing the cost base. So unfortunately, the answer is that does not apply. We've met our financial obligations as set forth in the financing agreement.

Jeroen van der Veer

Mr. Vandenburgh [ph], looking across to you. Yes, yes, we're just going through your questions. We'll have the vote in due course. Does anyone else wish to take the floor on this agenda item? No? Okay. Then let's proceed to the vote on agenda Item 7. Proposal to authorize the Board of Management to acquire shares in the company. Operator, please switch the system on.

[Voting]

Another 5 seconds. Voting is closed. And here is the result on the screen. The authorization of the Board of Management to acquire shares in the company perhaps has been approved with just over 99% of the vote.

This brings us on to agenda Item 8, cancellation of shares. The proposal is to cancel common shares in the share capital of the company held or to be acquired by the company. On the basis of the authorization that we discussed moment ago, just make it quite clear, the proposal to cancel common shares also applies to shares purchased under the $2 billion repurchase plan organized and announced last year. The general meeting of shareholders is asked to authorize the cancellation of common shares to be acquired or already acquired by the company in order to reduce the capital at issue in the company in accordance with legal requirements. Does anyone wish to take the floor on this? No? Let's proceed to the vote. Operator, please switch the system on.

[Voting]

A few more seconds. Voting is closed. And as you see, the proposal has been approved by a whisker at 100%.

And now, we'll move on to the last agenda item, agenda Item 9, any other business. Does anyone wish to take the floor under any other business? I can see Mr. Folkismar [ph] and Mr. Spagna [ph]. Anyone else? Just give me an idea how many people. There's someone at the back as well. Yes. Is that all? We'll go in that order and after that, I hope we can call the meeting to a halt. Mr. Folkismar [ph].

Unknown Shareholder

I have a statistical question, Mr. Chairman. Why aren't the abstentions listed in the percentage, because it adds up to 100% the in favor and against votes. But I voted 1 abstention. Why isn't that included in the percentage?

Jeroen van der Veer

Mr. [indiscernible] will answer that for you.

Unknown Executive

Yes, thank you. When deciding whether a motion has been passed or achieved, the only relevant figures are votes for and against. And whenever there's a threshold for voting for or against, you don't include the number of abstentions. All you -- you count the abstentions, but they're not included in the percentages.

Unknown Shareholder

Mr. Chairman, I understand that you also have a fairly large number of U.S. shareholders and their practice is to pay dividend quarterly, as in your previous employer, Shell and Unilever, they do that, too. Are you considering switching to quarterly dividend payments?

Jeroen van der Veer

Let's ask our CFO about that.

Ron H. Wirahadiraksa

Yes, thank you, Chairman. We have no plans along those lines at this stage.

Unknown Shareholder

Well, never say never. Never say never.

Ron H. Wirahadiraksa

Indeed, yes. Never say never. We're always reviewing the situation to decide what is best. So please, don't worry about that. Next speaker, please?

Unknown Shareholder

I'm Mr. Say [ph] from Amsterdam. I was wondering whether Philips' slogan is still sense and simplicity or is it -- has it changed? Or is there no slogan at all?

Jeroen van der Veer

That's a really good question to finish up with. Mr. Van Houten?

François Adrianus van Houten

Thank you for your question. Currently, we're seeking to emphasize innovation and associate getting the brand name associated with innovation. And for that reason, we're considering revising our whole corporate communication strategy. And therefore, we think that we should gradually abandon sense and simplicity as a slogan. We haven't yet decided what our new slogan is going to be. So you'll just have to wait and see.

Jeroen van der Veer

Looking round one more time to make sure there's no one else wishing the floor. Ladies and gentlemen, thank you very much -- I do apologize, there's someone there. So I was just about to wrap up. Go ahead, please.

Unknown Shareholder

I'm Mr. Icing [ph]. And that's what happens when you're short and sitting near the front. I'm going to say more about your old name, Philips NV. It's very nice. Could you return to the old Philips logo? Because every evening, when I switch on my television, I discover that the television has difficulty broadcasting the name Philips because I see a round P at the left and a round S at the right. I have an HD quality Philips television, it's the most expensive one possible, but why don't you go back to the old straight Philips name, and then that will broadcast more beautifully on the screen?

François Adrianus van Houten

Well, thank you. We are aware -- how shall I put it? We're aware of some of these strange visual phenomena that can happen online and on television screens as well. So part of our brand repositioning is looking at whether our logo can come across well in digital technology. And not just televisions. Mobile phone screens and so on. There's going to be no main -- no major upheavals with the Philips logo. We're very fond of it.

Jeroen van der Veer

Well, ladies and gentlemen, thank you very much. There's a number of little desks outside where there's a number of new products and services on display. We're very, very proud of those. And I hope you'll take time to have a glance at them. Please keep yourselves informed of what's going on. Thank you, all, for your input. Thank you for coming. The meeting is closed.

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