UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 11-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED JULY 31, 2007 COMMISSION FILE NUMBER: 001-05146-01
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE TRANSACTION PERIOD FROM ________________________ TO ___________________
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
c/o Philips Electronics North America Corporation
1251 Avenue of the Americas
New York, New York 10020
Attention: Compensation and Benefits Department
(Full title of the plan and address of the plan, if different from
that of the issuer named below)
KONINKLIJKE PHILIPS ELECTRONICS N.V.
REMBRANDT TOWER, AMSTELPLEIN, 1,
AMSTERDAM 1070MX, THE NETHERLANDS
(Address of principal executive offices)
KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
TABLE OF CONTENTS
PAGE
Report of Independent Registered Public Accounting Firm 1
Statements of Financial Condition - July 31, 2007 and 2006 2
Statements of Income and Changes in Plan Equity -
Years ended July 31, 2007, 2006 and 2005 3
Notes to Financial Statements 4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Committee of the Koninklijke Philips Electronics N.V.
Nonqualified Stock Purchase Plan:
We have audited the accompanying statements of financial condition of the
Koninklijke Philips Electronics N.V. Nonqualified Stock Purchase Plan (the
"Plan") as of July 31, 2007 and 2006 and the related statements of income and
changes in plan equity for each of the years in the three year period ended July
31, 2007. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by the Plan's management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Koninklijke Philips
Electronics N.V. Nonqualified Stock Purchase Plan at July 31, 2007 and 2006, and
the income and changes in plan equity for each of the years in the three year
period ended July 31, 2007 in conformity with U.S. generally accepted accounting
principles.
/s/KPMG LLP
New York, New York
October 29, 2007
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
STATEMENTS OF FINANCIAL CONDITION
JULY 31, 2007 AND 2006
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2007 2006
---- ----
Assets:
Investment in Koninklijke Philips
Electronics N.V. common stock at market
value - 3,699,932 shares in 2007 and
4,002,953 shares in 2006 (cost $97,290 in
2007 and $97,258 in 2006) $149,477 $131,817
Contributions receivable from participants 1,495 1,531
-------- -------
Total Assets 150,972 133,348
-------- -------
Plan Equity $150,972 $133,348
======== =======
See accompanying notes to financial statements
2
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
YEARS ENDED JULY 31, 2007, 2006 AND 2005
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2007 2006 2005
---- ---- ----
Additions to plan equity:
Investment income:
Net change in unrealized appreciation of
investments $ 17,628 $ 16,301 $ 9,261
Net realized gain on sale of
investments 10,995 7,543 2,614
Dividend income from Koninklijke Philips
Electronics N.V. common stock 2,549 1,820 1,821
--------- --------- ---------
$ 31,172 $ 25,664 $ 13,696
Contributions:
Participants 20,337 20,965 21,279
Employer 3,590 3,768 4,537
--------- --------- ---------
Total contributions 23,927 24,733 25,816
--------- --------- ---------
Total additions 55,099 50,397 39,512
Less: Distributions to participants (37,475) (32,689) (19,981)
--------- --------- ---------
Net increase 17,624 17,708 19,531
Plan Equity:
Beginning of Year 133,348 115,639 96,105
--------- --------- ---------
End of Year $150,972 $133,348 $115,639
========= ========= =========
See accompanying notes to financial statements
3
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2007 AND 2006
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) DESCRIPTION OF THE PLAN
The following description of the Koninklijke Philips Electronics N.V.
Nonqualified Stock Purchase Plan (the "Plan") provides only general
information. Participants should refer to the Plan prospectus for a more
complete description of the Plan's provisions.
GENERAL
The Plan is a voluntary stock purchase plan established for eligible
U.S.-based employees of certain subsidiaries of Koninklijke Philips
Electronics N.V. (the "Company") effective August 1, 2000. The Plan makes
available to eligible employees of certain of the Company's subsidiaries
in the U.S. the right to purchase shares of the Company's common stock at
a discount. The common stock of the Company is quoted on several stock
exchanges including the Amsterdam Stock Exchange and the New York Stock
Exchange ("NYSE").
PARTICIPATION
U.S.-based full-time salaried and hourly employees of certain
subsidiaries of the Company except for certain senior executives, as
defined by the Plan, are eligible to participate in the Plan after
completing 30 days of full-time employment. Employees subject to
collective bargaining agreements are eligible to participate upon
acceptance of the Plan by their respective union. Certain suspension
rules apply as described below in "Plan Restrictions."
CONTRIBUTIONS
Each year, participants may contribute up to 10% of their cash
compensation, as defined by the Plan, through payroll withholdings. In
addition to the percentage limitation, contributions may not exceed
$20,000 in any calendar year.
The cost of shares to participants is 85% of the closing price on the
last day of the applicable purchase period on which stocks are traded on
the NYSE. For example, the purchase price for the first 2006 purchase
period was based on the March 31, 2006 closing price.
Prior to 2005, the cost of shares to participants was 85% of the lesser
of the closing price on the first day of the applicable purchase period
or the last day of the applicable purchase period on which stocks are
traded on the NYSE.
The 15% discount between the fair value of the shares purchased and the
cost to the participants represents employer contributions.
The participants' shares are held in trust by SPP & Co., a New Jersey
partnership of Computershare Trust Company, N.A, formerly doing business
as Equiserve Trust Company, N.A.
Contributions are used to purchase whole and fractional shares of the
Company at the end of each purchase period (a calendar quarter).
VESTING
All contributions and common shares purchased are 100% vested.
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2007 AND 2006
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DIVIDENDS
Dividends are first declared in euros, and are paid to participants in
U.S. dollars converted at the rate of exchange on the Amsterdam Stock
Exchange at the close of business on a date announced by the Company.
Dividends paid, net of applicable Dutch taxes withheld, are reinvested
into the participant's account and used to purchase additional common
shares at the prevailing market price during the next purchase period.
There is no discount applied to shares purchased through the reinvested
dividends.
PLAN RESTRICTIONS
A participant may sell any shares held in their account at any time.
Beginning in 2005, the penalty for selling shares held by the Plan for
less than one year was eliminated. Prior to 2005, if shares held by the
Plan for less than one year were sold, the participant would become
ineligible to participate in the Plan for the following two quarters.
PLAN TERMINATION
The Company may suspend or terminate the Plan at any time. If the Plan is
suspended or terminated, payroll deductions will terminate and unapplied
withholdings will be used to purchase common shares or be repaid to
participants without interest as soon as practicable following the
termination of the Plan.
PLAN EXPENSES
Plan expenses are paid by the Company.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following are significant accounting policies followed by the Plan:
BASIS OF ACCOUNTING
The accompanying financial statements are prepared on the accrual basis
of accounting.
INVESTMENT VALUATION AND INCOME RECOGNITION
The investment in shares held by the Plan is recorded at market value,
measured by the closing price listed by the NYSE. Purchases and sales of
securities are recorded on a trade-date basis. Realized gains and losses
are allocated using the first in, first out method. Dividends are
recorded on the ex-dividend date.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, and
changes therein, and disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
DISTRIBUTIONS
Participants may request distributions in the form of Company shares or
cash. Distributions are recorded when paid.
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2007 AND 2006
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(3) INVESTMENT IN COMMON SHARES
Each participant is a 100% owner of the number of shares held on their
behalf by SPP & Co. Participants maintain the same rights as common stock
shareholders.
As of July 31, 2007, 3,699,932 shares were held for participants and were
valued at $40.40 per share. As of July 31, 2006, 4,002,953 shares were
held for participants and were valued at $32.93 per share. There were
$1,495 and $1,531 of participants' contributions not yet received by the
Plan on July 31, 2007 and 2006, respectively, which is reflected as
contributions receivable from participants on the statements of financial
condition.
Proceeds from the sales of Company shares, cost of shares sold and the
related net realized gain were as follows:
For the year ended July 31,
2007 2006 2005
---- ---- ----
Proceeds $ 37,475 32,689 19,981
Cost of stock sold 26,480 25,146 17,367
-------- ------- -------
Net realized gain $ 10,995 7,543 2,614
======== ======= ========
(4) TAX STATUS
The Plan is a non-qualified employee stock purchase plan for U.S. tax
purposes. Participants of the Plan are taxed under Section 83 of the
Internal Revenue Code. Upon purchase of the shares, the excess of the
closing market price of the shares on the purchase date over the
discounted purchase price (beginning 2005, 85% of the closing price on
the last day of the purchase period) is included as ordinary income on
the participant's W-2 form sent to the Internal Revenue Service. Any
additional appreciation on the shares from the date of purchase until the
date of subsequent sale will then be taxed to participants under Section
83 of the Internal Revenue Code as short-term or long-term capital gain
or loss, depending on the period of time the shares are held before sale.
Participants are also required to report as ordinary income the amount of
any dividends received on common shares purchased through the Plan.
(5) MARKET RISK
The Plan's assets are invested in one security, the shares of Koninklijke
Philips Electronics N.V. Investment securities are exposed to various
risks, such as interest rate, market, and credit risks. Due to the level
of risk associated with this investment security, it is at least
reasonably possible that the changes in the value of the investment
security will occur in the near term and that such changes could
materially affect the amounts reported in the statement of financial
condition. The underlying value of the Company shares is entirely
dependent upon the performance of the Company and the market's evaluation
of such performance.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
TRUSTEES (OR OTHER PERSONS WHO ADMINISTER THE EMPLOYEE BENEFIT PLAN) HAVE DULY
CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY
AUTHORIZED.
KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
DATE: October 29, 2007 BY: /s/ PAMELA DUNLAP
----------------------------------------------
NAME: PAMELA DUNLAP
TITLE: CHAIRMAN, STOCK PURCHASE PLAN COMMITTEE
EXHIBIT INDEX
Exhibit 23.1 Consent of Independent Registered Public Accounting Firm