SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

REPORT OF FOREIGN ISSUER

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

KONINKLIJKE PHILIPS ELECTRONICS N.V.

(Exact name of registrant as specified in its charter)

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

The Netherlands
(Jurisdiction of incorporation or organization)

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

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

Form 20-F þ          Form 40-F o

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

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

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

Yes o       Form  No þ

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

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

 

 

This report comprises a copy of the Quarterly Report of the Philips Group for the three months ended March 31, 2011 and the following press releases:

•		“Philips’ First Quarter Results 2011”, dated April 18, 2011,
•		“Philips and TPV to create strong global Television company”, dated April 18, 2011.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized at Amsterdam, on the 18^th day of April 2011.

		KONINKLIJKE PHILIPS ELECTRONICS N.V.
		/s/ E.P. Coutinho   (General Secretary)

Quarterly report Q1 2011, Royal Philips Electronics

Philips reports first-quarter net income of EUR 138 million, EBITA of EUR 437 million and sales of EUR 5.3 billion

•		Philips and TPV to create strong television company
•		Television results reported as discontinued operations
•		Nominal sales of EUR 5.3 billion, 6% higher year-on-year
•		Comparable sales increased by 4%, with solid growth at Lighting and Healthcare
•		Comparable sales in our growth markets increased by 11%
•		EBITA of EUR 437 million at 8% of sales in the quarter
•		Net income of EUR 138 million, EUR 63 million below Q1 2010
•		Free cash outflow of EUR 615 million

“Finding a solution for our Television business was our top priority and we strongly believe that the intended 30% / 70% joint venture with TPV that was announced today will enable a return to profitability for the Television business, and an increased portfolio focus for Philips in health and well-being. Philips has been active in the TV industry for many decades and the long-term strategic partnership with TPV shows our commitment to the continuity of Philips televisions for our consumers and trade partners.

The joint venture leverages the innovation and brand strength of Philips with the scale and manufacturing strength of TPV. Philips will receive a deferred purchase price and brand license income as part of the agreement. We expect certain costs in relation to the separation which will impact short-term earnings.

In the first quarter of 2011, Healthcare showed mid-single-digit comparable sales growth, with particular strength in Patient Care and Clinical Informatics. In the same period, Lighting returned to mid-single-digit growth, driven by LED. In Consumer Lifestyle, our growth businesses grew by double digits. Comparable sales in our growth markets increased by a solid 11%.

EBITA in the first quarter improved at Healthcare, while lower earnings at Lighting and Consumer Lifestyle meant that EBITA for the company as a whole was below the same quarter of 2010. The EBITA margin declined to 8.3%. Net income in the first quarter dropped to EUR 138 million from EUR 201 million in the year-earlier quarter.

We expect headwinds in 2011 due to the Japan tragedy, impacting our revenue and supply chain. We have a dedicated team working to mitigate the consequences and risks.

It is our priority to accelerate our mid-term growth and profitability trajectory. Investments will be required to achieve this. We will provide a further update in the second half of 2011.”

Frans van Houten, President and CEO of Royal Philips Electronics

Please refer to page 14 of this press release for more information about forward-looking statements, third-party market share data, use of non-GAAP information and use of fair-value measurements.

Philips Group

Net income
in millions of euros unless otherwise stated

		Q1				Q1
		2010				2011
Sales			4,982				5,257
EBITA			495				437
as a % of sales			9.9				8.3
EBIT			381				318
as a % of sales			7.6				6.0
Financial income and expenses			(69	)			(2	)
Income taxes			(125	)			(97	)
Results investments in associates			7				6
Income (loss) from continuing operations			194				225
Discontinued operations			7				(87	)
Net income			201				138
Net income — shareholders per common share (in euros) — basic			0.22				0.14

Sales by sector
in millions of euros unless otherwise stated

		Q1				Q1								% change
		2010				2011				nominal				comparable
Healthcare			1,821				1,971				8				5
Consumer Lifestyle			1,247				1,303				5				—
Lighting			1,810				1,903				5				6
GM&S			104				80				(23	)			(8	)
Philips Group			4,982				5,257				6				4

		Net income
•		Net income of EUR 138 million was EUR 63 million lower than in Q1 2010, due to lower operating earnings, partly offset by lower income taxes and lower net financial expenses.
•		EBITA decreased by EUR 58 million year-on-year to 8.3% of sales, mainly due to lower operating earnings, partly offset by lower restructuring and acquisition-related charges. Excluding those charges, EBITA amounted to 8.6% of sales.
•		Financial income and expenses improved by EUR 67 million, mainly driven by a EUR 44 million gain on the sale of TCL shares and a gain arising from the transaction with the UK Pension Fund with respect to previously owned NXP shares.
•		Tax charges were EUR 28 million lower compared to Q1 2010, mainly due to lower earnings and higher non-taxable income (largely related to the gain on the sale of TCL shares).
•		Net income includes an after-tax loss of EUR 87 million representing the results of the Television business.

		Sales by sector
•		Group nominal sales increased by 6%, including a 3% positive currency impact. Sales amounted to EUR 5,257 million and grew 4% on a comparable basis.
•		Healthcare reported 5% comparable sales growth. Double-digit sales growth in our growth markets was tempered by single-digit growth in mature markets. Strong growth was recorded at Patient Care & Clinical Informatics and Home Healthcare Solutions, while Imaging Systems and Customer Services also showed solid single-digit growth.
•		Consumer Lifestyle sales were in line with Q1 2010 on a comparable basis. Double-digit growth in growth markets was offset by sales declines in mature markets. Double-digit growth at Personal Care, Domestic Appliances and Health & Wellness was offset by lower revenue at Licenses, Accessories and Audio & Video Multimedia.
•		Lighting comparable sales increased by 6%, with double-digit growth in growth markets and single-digit growth in mature markets. Whereas Automotive and Lamps delivered low single-digit growth, Lighting Systems & Controls recorded double-digit sales growth. Professional Luminaires delivered high single-digit growth, while Consumer Luminaires showed a decline.

2     Quarterly report Q1 2011, Royal Philips Electronics

Sales per market cluster
in millions of euros unless otherwise stated

		Q1 1)				Q1								% change
		2010				2011				nominal				comparable
Western Europe			1,524				1,521				—				1
North America			1,599				1,657				4				1
Other mature markets			415				401				(3	)			(6	)
Total mature markets			3,538				3,579				1				—
Growth markets			1,444				1,678				16				11
Philips Group			4,982				5,257				6				4

		Sales per market cluster
•		In the mature markets, improved business conditions in North America were largely offset by sales declines in other mature markets. Sales in our growth markets showed a strong 11% comparable increase. Brazil, the ASEAN countries, Russia and the Middle East were the main drivers of growth.
•		Sales in our growth markets increased from 29% to 32% of Group sales.

Quarterly report Q1 2011, Royal Philips Electronics     3

EBITA
in millions of euros

		Q1				Q1
		2010				2011
Healthcare			166				199
Consumer Lifestyle			170				119
Lighting			245				193
Group Management & Services			(86	)			(74	)
Philips Group			495				437

EBITA
as a % of sales

		Q1				Q1
		2010				2011
Healthcare			9.1				10.1
Consumer Lifestyle			13.6				9.1
Lighting			13.5				10.1
Group Management & Services			(82.7	)			(92.5	)
Philips Group			9.9				8.3

Restructuring and acquisition-related charges
in millions of euros

		Q1				Q1
		2010				2011
Healthcare			(29	)			2
Consumer Lifestyle			(9	)			(13	)
Lighting			(9	)			(5	)
Group Management & Services			1				1
Philips Group			(46	)			(15	)

EBIT
in millions of euros unless otherwise stated

		Q1				Q1
		2010				2011
Healthcare			103				138
Consumer Lifestyle			162				104
Lighting			204				152
Group Management & Services			(88	)			(76	)
Philips Group			381				318
as a % of sales			7.6				6.0

		Earnings
•		EBITA was EUR 58 million below the level of Q1 2010, mainly due to lower earnings at Consumer Lifestyle and Lighting. This was partly offset by improved earnings at Healthcare and GM&S and EUR 35 million lower restructuring charges.
•		Healthcare EBITA increased by EUR 33 million, driven by higher earnings across all businesses, notably Patient Care & Clinical Informatics and Imaging Systems.
•		Consumer Lifestyle EBITA declined by EUR 51 million, mainly due to a sharp decline in license revenue.
•		Lighting EBITA declined by EUR 52 million compared to Q1 2010, mainly due to lower earnings in the Luminaires businesses, as well as Lamps, mostly related to last year’s favorable impact of a legal settlement regarding licenses.
•		GM&S EBITA came in as a EUR 12 million lower cost, mainly driven by real estate transactions.

4     Quarterly report Q1 2011, Royal Philips Electronics

Financial income and expenses
in millions of euros

		Q1				Q1
		2010				2011
Net interest expenses			(58	)			(62	)
Sale of TCL			—				44
NXP arrangement			—				19
Other			(11	)			(3	)
			(69	)			(2	)

Cash balance
in millions of euros

		Q1				Q1
		2010				2011
Beginning balance			4,386				5,833
Free cash flow			6				(615	)
Net cash flow from operating activities			160				(391	)
Net capital expenditures			(154	)			(224	)
Divestments (acquisitions) of businesses			95				(54	)
Other cash flow from investing activities			(25	)			99
Treasury shares transactions			24				17
Changes in debt/other			59				(179	)
Net cash flow discontinued operations			(157	)			(329	)
Ending balance			4,388				4,772

		Financial income and expenses
•		Financial income and expenses was EUR 67 million lower than in Q1 2010, mainly attributable to the gain on the sale of TCL shares and the favorable effect of the transaction with the UK Pension Fund with respect to previously owned NXP shares.
		Cash balance
•		The Group cash balance decreased by EUR 1,061 million in the quarter to EUR 4,772 million, mainly as a result of EUR 391 million cash outflow from operating activities, including a non-recurring pension contribution and EUR 224 million net capital expenditures.
•		In Q1 2010, the Group cash balance remained virtually unchanged at EUR 4,388 million as proceeds from the partial sale of TPV shares and changes in debt were offset by the net cash flow from discontinued operations.
		Cash flows from operating activities
•		Operating activities led to a free cash outflow of EUR 615 million, which was EUR 1,806 million lower than in Q4 2010, mainly due to higher working capital and tax payments in combination with lower cash earnings.
		Gross capital expenditure
•		Gross capital expenditures on property, plant and equipment were EUR 38 million higher than in Q1 2010, due to higher investments.

Quarterly report Q1 2011, Royal Philips Electronics     5

		Inventories
•		Inventories as a percentage of sales amounted to 15.7, in line with Q4 2010. Inventory value at the end of Q1 2011 was EUR 3.5 billion, an increase of EUR 49 million in the quarter. A decrease in inventory at Consumer Lifestyle was partly offset by an increase in inventories at Healthcare.
•		Compared to Q1 2010, inventories as a % of sales increased by 0.6 percentage points. The increase was attributable to Lighting and Consumer Lifestyle.
		Net debt and group equity
•		At the end of Q1 2011, Philips had a net cash position of EUR 437 million, compared to a net debt position of EUR 74 million at the end of Q1 2010 and a net cash position of EUR 1,175 million at the end of Q4 2010. The movement during the quarter was largely due to EUR 615 million free cash outflow.
•		Group equity decreased by EUR 965 million in the quarter to EUR 14.1 billion, largely as a result of the 2010 dividend payable and currency effects.
		Employees
•		The number of employees increased by 1,858 in the quarter, largely due to an increase in temporary headcount at Lighting.
•		Compared to Q1 2010, the number of employees increased by 5,660, driven by higher temporary headcount at Lighting, mainly in our growth markets.

6     Quarterly report Q1 2011, Royal Philips Electronics

Healthcare

Key data
in millions of euros unless otherwise stated

		Q1				Q1
		2010				2011
Sales			1,821				1,971
Sales growth
% nominal			5				8
% comparable			7				5
EBITA			166				199
as a % of sales			9.1				10.1
EBIT			103				138
as a % of sales			5.7				7.0
Net operating capital (NOC)			8,831				8,534
Number of employees (FTEs)			34,381				35,756

		Business highlights
•		Philips expanded its presence in the anesthesia market through the acquisition of Dameca, a global provider of anesthesia machines and accessories for the operating room.
•		Philips won multi-million-euro partnership contracts in Brazil with Hospital e Maternidade Christóvão da Gama in São Paulo and Mais Diagnóstico in Shopping Vitoria, under which Philips will deliver and service healthcare technology for six years.
•		Following 510(k) clearance from the U.S. Food and Drug Administration, Philips’ Ingenia MRI system, which offers exceptional image clarity as it is the first-ever digital broadband MRI solution, has also become available in the U.S. market.
•		Underscoring our expanding presence in India, Philips recently entered into an agreement with Medall, one of India’s largest chains of diagnostic centers, to deliver healthcare technology including MRI scanners and the Ambient Experience solution.
		Financial performance
•		Currency-comparable equipment order intake was in line with Q1 2010. Solid equipment orders were seen at Patient Care & Clinical Informatics, while Imaging Systems equipment order intake was lower than in Q1 2010. Excluding the impact of large multi-year orders in Q1 2010, mostly related to Imaging Systems, equipment order intake grew by 5%. Equipment orders in markets outside of North America were flat year-on-year, with growth-market equipment orders growing by 28%. Equipment orders in North American markets were in line with Q1 2010.
•		Nominal sales grew 8% compared to Q1 2010. Comparable sales were 5% higher year-on-year, with solid increases in all businesess. Notably higher growth was seen at Patient Care & Clinical Informatics and Home Healthcare Solutions. From a regional perspective, comparable sales in North America were 6% higher than in Q1 2010, while in mature markets outside North America sales grew by 3%. Growth-market sales growth was 22%, with notably better sales in India and China, particularly at Imaging Systems.

Quarterly report Q1 2011, Royal Philips Electronics     7

•		EBITA increased by EUR 33 million year-on-year to EUR 199 million, or 10.1% of sales. The EBITA improvement was driven by higher sales across all businesses, particularly Patient Care & Clinical Informatics, partly offset by higher selling and R&D costs to support our growth initiatives. Excluding restructuring and acquisition-related charges, EBITA amounted to EUR 197 million, or 10.0% of sales, compared to EUR 195 million, or 10.7% of sales, in Q1 2010.
•		Net operating capital decreased by EUR 297 million to EUR 8.5 billion, largely attributable to currency effects.
		Miscellaneous
•		Restructuring and acquisition-related charges in Q2 2011 are not expected to be material.

8     Quarterly report Q1 2011, Royal Philips Electronics

Consumer Lifestyle (excluding Television)

Key data
in millions of euros unless otherwise stated

		Q1				Q1
		2010				2011
Sales			1,247				1,303
Sales growth
% nominal			16				4
% comparable			10				—
EBITA			170				119
as a % of sales			13.6				9.1
EBIT			162				104
as a % of sales			13.0				8.0
Net operating capital (NOC)			959				1,523
Number of employees (FTEs)			13,963				14,421

		Business highlights
•		At the International Dental Show in Cologne, Germany, Philips launched the innovative Sonicare AirFloss. This device uses rapid bursts of air and water to provide an easier way for interdental cleaning.
•		At its annual global customer event, Philips launched the Fidelio SoundSphere, which combines two of Philips’ recent successful innovations in audio — its Fidelio docking stations and SoundSphere speakers. The Fidelio SoundSphere includes Apple Airplay, enabling it to wirelessly play high-fidelity music from Apple devices.
		Financial performance
•		Sales grew 4% nominally. On a comparable basis, they were broadly in line with Q1 2010. Double-digit comparable growth was achieved at Health & Wellness, Personal Care and Domestic Appliances, offset by significantly lower license revenue and declines at Accessories and Audio & Video Multimedia.
•		Double-digit growth was achieved in growth markets, led by strong growth in Brazil. Comparable sales declined in mature markets.
•		EBITA in Q1 2011 includes an amount of EUR 18 million (EUR 15 million in Q1 2010) of costs formerly reported as part of the Television business in Consumer Lifestyle.
•		EBITA was EUR 51 million lower year-on-year, which was almost fully attributable to lower license income. Excluding restructuring and acquisition-related charges of EUR 9 million in Q1 2010 and EUR 13 million in Q1 2011, EBITA declined from 14.4% to 10.1%.
•		Net operating capital increased by EUR 564 million, mainly due to Discus and higher inventory to support future growth.
•		The increase in headcount occurred mainly in temporary personnel within Personal Care and Health & Wellness.

Quarterly report Q1 2011, Royal Philips Electronics     9

		Miscellaneous
•		Philips intends to merge the businesses Audio & Video Multimedia and Accessories, into the Lifestyle Entertainment business, which will be led from Hong Kong. Together, they are best positioned for accelerated growth in categories such as docking stations, headphones, Blu-ray players and home cinema systems. The combined Business Groups accounted for 23% of the Consumer Lifestyle sector’s revenues in 2010.
•		On April 7, 2011, Philips closed the transaction to acquire the assets of the Preethi business, a leading kitchen appliances company in India. The acquisition makes Philips the clear leader in this specific fast-growing segment within the Indian domestic appliances market.
•		Restructuring and acquisition-related charges of approximately EUR 20 million are expected in the second quarter.
•		License revenues for the second quarter are expected to be EUR 50 million below the level of Q2 2010. Licence revenues for the second half of the year are expected to be in line with the second half of last year.

10     Quarterly report Q1 2011, Royal Philips Electronics

Lighting

Key data
in millions of euros unless otherwise stated

		Q1				Q1
		2010				2011
Sales			1,810				1,903
Sales growth
% nominal			20				5
% comparable			18				6
EBITA			245				193
as a % of sales			13.5				10.1
EBIT			204				152
as a % of sales			11.3				8.0
Net operating capital (NOC)			5,528				5,580
Number of employees (FTEs)			51,527				54,856

		Business highlights
•		Philips has acquired Optimum Lighting LCC, strengthening its position to deliver tailor-made turnkey solutions to renovate and upgrade offices, retail stores and buildings, providing improved lighting performance while reducing operating expenses.
•		Fashion company H&M, headquartered in Sweden, has selected Philips to become their global supplier of Compact HID Elite lamps for the coming year. The first deliveries are expected to start in the second quarter of 2011.
•		German luminaire manufacturer Trilux has joined the Philips LED Luminaire Licensing Program. Via this licensing program Philips makes its LED systems and controls patent portfolio available to third parties with the objective to foster industry growth.
		Financial performance
•		Lighting comparable sales increased by 6%, with high single-digit sales growth in growth markets and mid single-digit growth in mature markets. Whereas Automotive and Lamps delivered low single-digit growth, Lighting Systems & Controls recorded double-digit sales growth. Professional Luminaires delivered high single-digit growth, while Consumer Luminaires showed a decline.
•		LED-based sales grew 27% compared to Q1 2010, representing 14% of total Lighting sales.
•		EBITA, excluding restructuring and acquisition-related charges of EUR 5 million (Q1 2010: EUR 9 million), amounted to EUR 198 million, or 10.4% of sales. The year-on-year EBITA decrease was largely due to additional investments in selling and R&D. Q1 2010 EBITA was also favorably impacted by a legal settlement.
•		Net operating capital increased by EUR 52 million to EUR 5,580 million, mainly driven by higher working capital.
		Miscellaneous
•		Philips has signed an agreement to supply Coca-Cola Amatil with more than 150,000 ‘TLED’ lights for cooler installations in Indonesia, Australia and New Zealand in 2011 and 2012.
•		Restructuring and acquisition-related charges in Q2 2011 are expected to total approximately EUR 15 million.

Quarterly report Q1 2011, Royal Philips Electronics     11

Group Management & Services

Key data
in millions of euros unless otherwise stated

		Q1				Q1
		2010				2011
Sales			104				80
Sales growth
% nominal			41				(23	)
% comparable			49				(8	)
EBITA Corporate Technologies			(11	)			(13	)
EBITA Corporate & Regional Costs			(33	)			(32	)
EBITA Pensions			(4	)			(13	)
EBITA Service Units and Other			(38	)			(16	)
EBITA			(86	)			(74	)
EBIT			(88	)			(76	)
Net operating capital (NOC)			(1,867	)			(2,982	)
Number of employees (FTEs)			11,715				12,213

     Business highlights

•

As part of its long-term research programs, Philips Research and Eindhoven University of Technology announced an important development in MRI-guided local drug delivery for cancer treatment. The joint research team demonstrated in model studies that an improved local drug uptake in tumors has been achieved.

•

Philips has signed a patent and technology license agreement with Hansen Medical for its FOSSL technology, which employs a fiber-optic sensor to visualize both the shape and position of catheters and other tools used in minimally invasive interventions.

•

During the 2011 iF design awards ceremony in Hannover (Germany) in March, Philips received a record-breaking 28 iF product design awards. In addition, Philips was honored with a Gold iF design award for its Philips StyliD LED luminaire.

•

The Philips online annual report has been named “Best Online Annual Report 2010” by IR Global Rankings.

     Financial performance

•

Sales declined from EUR 104 million in Q1 2010 to EUR 80 million in Q1 2011, with lower revenues from licenses and services.

•

EBITA amounted to a net cost of EUR 74 million, a EUR 12 million improvement year-on-year, largely attributable to real estate transactions.

•

EBITA in Q1 2011 includes an amount of EUR 15 million (EUR 13 million in Q1 2010) of costs formerly reported as part of Consumer Lifestyle.

•

Net operating capital declined by EUR 1.1 billion year-on-year, mainly due to lower prepaid pension costs.

     Miscellaneous

•

A total of 17 Philips products, including the outdoor lighting solution SpeedStar, will receive a ‘red dot award: product design 2011’.

12     Quarterly report Q1 2011, Royal Philips Electronics

Additional information on the Television business

		Q1				Q1
		2010				2011
Television EBITA			(19	)			(106	)
Former Television net costs allocated to CL			15				18
Former Television net costs allocated to GM&S			13				15
Eliminated amortization other Television intangibles			(1	)			(1	)
EBIT discontinued operations			8				(74	)
Financial income and expenses			—				(1	)
Income taxes			(1	)			(12	)
Net income of discontinued operations			7				(87	)
Number of employees (FTEs)			4,600				3,562

Television business

•

In conjunction with the announcement of the Television Joint Venture with TPV, the results of the Television business to be carved out are reported under Discontinued operations in the Consolidated statements of income and Consolidated statements of cash flows. Consequently, Television sales are no longer included in the Consumer Lifestyle and Group financials. Prior-period comparative figures have been restated accordingly.

•

Net income includes an after-tax loss of EUR 87 million pertaining to the Television business.

•

The applicable net operating capital of this business is reported under Assets and liabilities classified as held for sale in the Consolidated balance sheets as per the end of the first quarter of 2011.

•

The EBITA of Consumer Lifestyle includes an amount of EUR 18 million of costs formerly reported under the result of the Television business, and the EBITA of Group Management & Services includes an amount of EUR 15 million of costs formerly reported as part of the Television business.

•

Management has used estimates in the calculation of the Net income result. Final results could differ from the amount presented.

•

A reconciliation between the results of the former Television business and its current representation is included in the table on this page.

Quarterly report Q1 2011, Royal Philips Electronics     13

Forward-looking statements

Forward-looking statements

This document contains certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items, in particular the sector sections “Miscellaneous”. Examples of forward-looking statements include statements made about our strategy, estimates of sales growth, future EBITA and future developments in our organic business. By their nature, these statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these statements.

These factors include but are not limited to domestic and global economic and business conditions, the successful implementation of our strategy and our ability to realize the benefits of this strategy, our ability to develop and market new products, changes in legislation, legal claims, changes in exchange and interest rates, changes in tax rates, pension costs and actuarial assumptions, raw materials and employee costs, our ability to identify and complete successful acquisitions and to integrate those acquisitions into our business, our ability to successfully exit certain businesses or restructure our operations, the rate of technological changes, political, economic and other developments in countries where Philips operates, industry consolidation and competition. As a result, Philips’ actual future results may differ materially from the plans, goals and expectations set forth in such forward-looking statements. For a discussion of factors that could cause future results to differ from such forward-looking statements, see the Risk management chapter included in our Annual Report 2010.

Third-party market share data

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

Use of non-GAAP information

In presenting and discussing the Philips Group’s financial position, operating results and cash flows, management uses certain non-GAAP financial measures. These non-GAAP financial measures should not be viewed in isolation as alternatives to the equivalent IFRS measures and should be used in conjunction with the most directly comparable IFRS measures. A reconciliation of such measures to the most directly comparable IFRS measures is contained in this document. Further information on non-GAAP measures can be found in our Annual Report 2010.

Use of fair-value measurements

In presenting the Philips Group’s financial position, fair values are used for the measurement of various items in accordance with the applicable accounting standards. These fair values are based on market prices, where available, and are obtained from sources that are deemed to be reliable. Readers are cautioned that these values are subject to changes over time and are only valid at the balance sheet date. When quoted prices do not exist, we estimated the fair values using appropriate valuation models, and when observable market data are not available, we used unobservable inputs. They require management to make significant assumptions with respect to future developments, which are inherently uncertain and may therefore deviate from actual developments. Critical assumptions used are disclosed in our 2010 financial statements. Independent valuations may have been obtained to support management’s determination of fair values.

All amounts in millions of euros unless otherwise stated; data included are unaudited. Financial reporting is in accordance with IFRS, unless otherwise stated. This document comprises regulated information within the meaning of the Dutch Financial Markets Supervision Act ‘Wet op het Financieel Toezicht’.

14     Quarterly report Q1 2011, Royal Philips Electronics

Consolidated statements of income

all amounts in millions of euros unless otherwise stated

		January to March
		2010				2011
Sales			4,982				5,257
Cost of sales			(2,931	)			(3,132	)
Gross margin			2,051				2,125
Selling expenses			(1,130	)			(1,218	)
General and administrative expenses			(186	)			(209	)
Research and development expenses			(355	)			(391	)
Other business income			9				21
Other business expenses			(8	)			(10	)
Income from operations			381				318
Financial income			11				91
Financial expenses			(80	)			(93	)
Income before taxes			312				316
Income taxes			(125	)			(97	)
Income after taxes			187				219
Results relating to investments in associates			7				6
Net income (loss) for the period			194				225
Discontinued operations — net of income tax			7				(87	)
Net income (loss) for the period			201				138
Attribution of net income for the period
Net income attributable to shareholders			200				137
Net income attributable to non-controlling interests			1				1
Weighted average number of common shares outstanding (after deduction of treasury shares) during the period (in thousands):
• basic			927,738				946,869
• diluted			936,484				957,654
Net income attributable to shareholders per common share in euros:
• basic			0.22				0.14
• diluted			0.21				0.14
Ratios
Gross margin as a % of sales			41.2				40.4
Selling expenses as a % of sales			(22.7	)			(23.2	)
G&A expenses as a % of sales			(3.7	)			(4.0	)
R&D expenses as a % of sales			(7.1	)			(7.4	)
EBIT			381				318
as a % of sales			7.6				6.0
EBITA			495				437
as a % of sales			9.9				8.3

Quarterly report Q1 2011, Royal Philips Electronics     15

Consolidated balance sheets

in millions of euros unless otherwise stated

		April 4,				December 31,				April 3,
		2010				2010				2011
Non-current assets:
Property, plant and equipment			3,302				3,265				2,878
Goodwill			7,813				8,035				7,650
Intangible assets excluding goodwill			4,338				4,198				3,899
Non-current receivables			141				88				82
Investments in associates			165				181				170
Other non-current financial assets			787				479				380
Deferred tax assets			1,301				1,351				1,306
Other non-current assets			1,622				75				132
Total non-current assets			19,469				17,672				16,497
Current assets:
Inventories			3,302				3,865				3,545
Other current financial assets			186				5				4
Other current assets			393				348				361
Derivative financial assets			124				112				122
Income tax receivable			79				79				76
Receivables			3,925				4,355				3,905
Assets classified as held for sale			—				—				695
Cash and cash equivalents			4,388				5,833				4,772
Total current assets			12,397				14,597				13,480
Total assets			31,866				32,269				29,977
Shareholders’ equity			14,605				15,046				14,082
Non-controlling interests			54				46				45
Group equity			14,659				15,092				14,127
Non-current liabilities:
Long-term debt			3,543				2,818				2,675
Long-term provisions			1,742				1,716				1,702
Deferred tax liabilities			506				171				75
Other non-current liabilities			2,126				1,714				1,658
Total non-current liabilities			7,917				6,419				6,110
Current liabilities:
Short-term debt			919				1,840				1,660
Derivative financial liabilities			534				564				377
Income tax payable			193				291				228
Accounts and notes payable			2,840				3,691				2,368
Accrued liabilities			2,662				2,995				2,439
Short-term provisions			726				623				569
Dividend declared			650				—				711
Liabilities directly associated with assets held for sale			—				—				733
Other current liabilities			766				754				655
Total current liabilities			9,290				10,758				9,740
Total liabilities and group equity			31,866				32,269				29,977
Number of common shares outstanding (after deduction of treasury shares) at the end of period (in thousands)			928,777				946,506				947,384
Ratios
Shareholders’ equity per common share in euros			15.72				15.90				14.86
Inventories as a % of sales			15.1	1)			15.7	1)			15.7
Net debt : group equity			1:99				(8):108				(3):103
Net operating capital			13,451				12,071				12,654
Employees at end of period			116,186				119,001				120,808
of which discontinued operations			4,600				3,613				3,562

16     Quarterly report Q1 2011, Royal Philips Electronics

Consolidated statements of cash flows

all amounts in millions of euros

		January to March
		2010				2011
Cash flows from operating activities:
Net income			201				138
Gain (loss) on discontinued operations			(7	)			87
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization			321				319
Net loss on sale of assets			(6	)			(55	)
Income from investments in associates			(2	)			(6	)
Dividends received from investments in associates			8				16
Dividends paid to non-controlling interests			(1	)			—
Increase in working capital:			(188	)			(744	)
Decrease in receivables and other current assets			82				180
Increase in inventories			(221	)			(198	)
Decrease in accounts payable, accrued and other liabilities			(49	)			(726	)
Increase in non-current receivables/other assets/other liabilities			(95	)			(130	)
Decrease in provisions			(42	)			(61	)
Other items			(29	)			45
Net cash provided by (used for) operating activities			160				(391	)
Cash flows from investing activities:
Purchase of intangible assets			(8	)			(48	)
Expenditures on development assets			(44	)			(50	)
Capital expenditures on property, plant and equipment			(123	)			(161	)
Proceeds from disposals of property, plant and equipment			21				35
Cash from (to) derivatives and securities			(22	)			18
Purchase of other non-current financial assets			(6	)			(6	)
Proceeds from other non-current financial assets			3				87
Purchase of businesses, net of cash acquired			(3	)			(58	)
Proceeds from sale of interests in businesses			98				4
Net cash used for investing activities			(84	)			(179	)
Cash flows from financing activities:
Increase in short-term debt			12				118
Principal payments on long-term debt			(14	)			(285	)
Proceeds from issuance of long-term debt			10				24
Treasury shares transactions			24				17
Net cash provided by (used for) financing activities			32				(126	)
Net increase (decrease) in cash and cash equivalents			108				(696	)
Cash flows from discontinued operations:
Net cash used for operating activities			(132	)			(303	)
Net cash used for investing activities			(25	)			(26	)
Net cash used for discontinued operations			(157	)			(329	)
Net cash used for continuing and discontinued operations			(49	)			(1,025	)
Effect of change in exchange rates on cash positions			51				(36	)
Cash and cash equivalents at beginning of period			4,386				5,833
Cash and cash equivalents at end of period			4,388				4,772
Ratio
Cash flows before financing activities			76				(570	)
Net cash paid during the period for
Pensions			(115	)			(233	)
Interest			(76	)			(78	)
Income taxes			(61	)			(185	)

For a number of reasons, principally the effects of translation differences, certain items do not correspond to the differences between the balance sheet amounts for the respective items.

Quarterly report Q1 2011, Royal Philips Electronics     17

Consolidated statements of changes in equity

in millions of euros

January to March 2011

																						other reserves
																		currency				unrealized gain (loss)				changes in								treasury				total				non-
		common				capital in excess				retained				revaluation				translation				on available-for-				fair value of								shares at				shareholders’				controlling				total
		shares				of par value				earnings				reserve				differences				sale financial assets				cash flow hedges				total				cost				equity				interests				equity
Balance as of December 31, 2010			197				354				15,416				86				(65	)			139				(5	)			69				(1,076	)			15,046				46				15,092
Net income											137																												137				1				138
Net current period change											2				(4	)			(336	)			(23	)			(9	)			(370	)							(372	)							(372	)
Reclassification into income																							(58	)			5				(51	)							(51	)							(51	)
Total comprehensive income											139				(4	)			(336	)			(81	)			(4	)			(421	)							(286	)			1				(285	)
Dividend declared											(711	)																											(711	)							(711	)
Movement non-controlling interests																																							—				(2	)			(2	)
Re-issuance of treasury shares																																			18				18								18
Share-based compensation plans							12																																12								12
Income tax share-based compensation plans							3																																3								3
			3				15				(711	)																							18				(678	)			(2	)			(680	)
Balance as of April 3, 2011			197				369				14,844				82				(401	)			58				(9	)			(352	)			(1,058	)			14,082				45				14,127

18     Quarterly report Q1 2011, Royal Philips Electronics

Sectors

all amounts in millions of euros unless otherwise stated

Sales and income (loss) from operations

		January to March
		2010												2011
		income from operations												income from operations
		as a % of												as a % of
		sales				amount				sales				sales				amount				sales
Healthcare			1,821				103				5.7				1,971				138				7.0
Consumer Lifestyle			1,247				162				13.0				1,303				104				8.0
Lighting			1,810				204				11.3				1,903				152				8.0
Group Management & Services			104				(88	)			(84.6	)			80				(76	)			(95.0	)
			4,982				381				7.6				5,257				318				6.0

Quarterly report Q1 2011, Royal Philips Electronics     19

Sectors and main countries

in millions of euros

Sales and total assets

		sales								total assets
		January to March								April 4,				April 3,
		2010				2011				2010				2011
Healthcare			1,821				1,971				11,555				11,281
Consumer Lifestyle			1,247				1,303				3,398				3,118
Lighting			1,810				1,903				7,168				7,221
Group Management & Services			104				80				9,745				7,662
			4,982				5,257				31,866				29,282
Assets held for sale															695
															29,977

Sales and tangible and intangible assets

		sales								tangible and intangible assets  1)
		January to March								April 4,				April 3,
		2010  2)				2011				2010  2)				2011
Netherlands			176				168				1,225				1,516
United States			1,460				1,514				9,721				9,096
Germany			321				344				286				277
China			412				478				732				750
France			266				241				108				101
Brazil			162				168				128				130
Japan			209				230				484				527
Other countries			1,976				2,114				2,769				2,030
			4,982				5,257				15,453				14,427

20     Quarterly report Q1 2011, Royal Philips Electronics

Pension costs

in millions of euros

Specification of pension costs

		January to March
										2010												2011
		Netherlands				other				total				Netherlands				other				total
Costs of defined-benefit plans (pensions)
Service cost			23				18				41				32				19				51
Interest cost on the defined-benefit obligation			130				101				231				139				102				241
Expected return on plan assets			(186	)			(83	)			(269	)			(178	)			(97	)			(275	)
Prior service cost			—				—				—				—				—				—
Net periodic cost (income)			(33	)			36				3				(7	)			24				17
of which discontinued operations			2				—				2				1				—				1
Costs of defined-benefit plans			2				29				31				2				33				35
of which discontinued operations			—				1				1				—				1				1
Costs of defined-benefit plans (retiree medical)
Service cost			—				1				1				—				—				—
Interest cost on the defined-benefit obligation			—				5				5				—				5				5
Prior service cost			—				(1	)			(1	)			—				(1	)			(1	)
Net periodic cost			—				5				5				—				4				4
of which discontinued operations			—				—				—				—				—				—

Quarterly report Q1 2011, Royal Philips Electronics     21

Reconciliation of non-GAAP performance measures

all amounts in millions of euros unless otherwise stated.

Certain non-GAAP financial measures are presented when discussing the Philips Group’s performance. In the following tables, a reconciliation to the most directly comparable IFRS performance measure is made.

EBITA (or Adjusted income from operations) to Income from operations (or EBIT)

		Philips								Consumer
		Group				Healthcare				Lifestyle				Lighting				GM&S
January to March 2011
EBITA (or Adjusted income from operations)			437				199				119				193				(74	)
Amortization of intangibles 1)			(119	)			(61	)			(15	)			(41	)			(2	)
Income from operations (or EBIT)			318				138				104				152				(76	)
January to March 2010
EBITA (or Adjusted income from operations)			495				166				170				245				(86	)
Amortization of intangibles 1)			(114	)			(63	)			(8	)			(41	)			(2	)
Income from operations (or EBIT)			381				103				162				204				(88	)

Composition of net debt to group equity

		April 4,				April 3,
		2010				2011
Long-term debt			3,543				2,675
Short-term debt			919				1,660
Total debt			4,462				4,335
Cash and cash equivalents			4,388				4,772
Net debt (cash) (total debt less cash and cash equivalents)			74				(437	)
Shareholders’ equity			14,605				14,082
Non-controlling interests			54				45
Group equity			14,659				14,127
Net debt and group equity			14,733				13,690
Net debt divided by net debt and group equity (in %)			1				(3	)
Group equity divided by net debt and group equity (in %)			99				103

22     Quarterly report Q1 2011, Royal Philips Electronics

Reconciliation of non-GAAP performance measures (continued)

all amounts in millions of euros

Net operating capital to total assets

										Consumer
		Philips Group				Healthcare				Lifestyle				Lighting				GM&S
April 3, 2011
Net operating capital (NOC)			12,654				8,534				1,523				5,580				(2,983	)
Exclude liabilities comprised in NOC:
- payables/liabilities			7,725				2,340				1,163				1,305				2,917
- intercompany accounts			—				60				103				79				(242	)
- provisions			2,271				270				328				237				1,436
Include assets not comprised in NOC:
- investments in associates			170				77				1				20				72
- other current financial assets			4				—				—				—				4
- other non-current financial assets			380				—				—				—				380
- deferred tax assets			1,306				—				—				—				1,306
- cash and cash equivalents			4,772				—				—				—				4,772
			29,282				11,281				3,118				7,221				7,662
Assets held for sale			695
Total assets			29,977
April 4, 2010
Net operating capital (NOC)			13,451				8,831				959				5,528				(1,867	)
Exclude liabilities comprised in NOC:
- payables/liabilities			9,121				2,284				1,942				1,265				3,630
- intercompany accounts			—				40				86				66				(192	)
- provisions			2,468				326				410				296				1,436
Include assets not comprised in NOC:
- investments in associates			165				74				1				13				77
- other current financial assets			185				—				—				—				185
- other non-current financial assets			787				—				—				—				787
- deferred tax assets			1,301				—				—				—				1,301
- cash and cash equivalents			4,388				—				—				—				4,388
Total assets			31,866				11,555				3,398				7,168				9,745