Proposed dividend to shareholders

Consistent with its policy Philips will submit a proposal to the 2008 Annual General Meeting of Shareholders to declare a dividend of EUR 0.70 per common share, an increase for the fourth consecutive year. Philips' shares will be traded ex-dividend as of March 28, 2008. In compliance with the listing requirements of the New York Stock Exchange and the stock market of Euronext Amsterdam, the record date will be April 1, 2008.

The dividend as proposed to the 2008 General Meeting of Shareholders will be payable as of April 7, 2008, to all shareholders. The dividend payment to holders of American shares will be made in USD at the USD/EUR rate fixed by the European Central Bank on April 2, 2008. The dividend paid over the last ten years is shown in the graph below.

Dividend policy

Philips’ present dividend policy is based on an annual pay-out ratio of 40 to 50% of continuing net income, which was revised in 2007 from an average annual pay-out ratio of 25 to 35%, and explained at the 2007 General Meeting of Shareholders. This reflects the fact that we are now becoming a higher margin, more predictable company. Our aim is to further grow the dividend over time in a sustainable way, in line with the performance of the company.

The measure is based on continuing net income, meaning recurring net income from continuing operations, or net income excluding discontinued operations and material non-recurring items. For 2007, net income amounted to EUR 4,168 million, and income from discontinued operations amounted to a loss of EUR 433 million. In 2007, material non-recurring items included the gain of EUR 3,041 million on the sale of shares in LG.Philips LCD and TSMC.

Market capitalization

Philips’ market capitalization was EUR 31.4 billion at year-end 2007. The highest closing price for Philips’ shares in 2007 was EUR 32.99 on July 12, 2007 and the lowest was EUR 26.71 on November 21, 2007, both in Amsterdam.

In 2005, 2006 and 2007, Philips completed several share repurchase programs, which reduced the shares outstanding by 17% from 1,282 million to 1,065 million shares. The shares repurchased for cancellation amounted to EUR 2,780 million in 2006 and EUR 820 million in 2007.

Listings

Philips’ shares are listed on Euronext Amsterdam (PHIA) and the New York Stock Exchange (PHG), the latter in ADR (American Depositary Receipt) form.

Euronext Amsterdam

New York Stock Exchange

Performance in relation to market indices

Relative performance of the Philips share on the New York Stock Exchange (PHG) is measured against the Dow Jones index. Due to foreign exchange developments, the Philips share experienced a better price development on the NYSE than on the Euronext.

The graph shows our share price development compared to an index of the peer group that is also used for our TSR performance.

Share capital structure

In 2007, Philips’ issued share capital remained the same during the year at a level of 1,142,826,763 common shares. The basic shares outstanding were reduced from 1,107 million per end of December 2006 to 1,065 million shares by the end of 2007. As of December 31, 2007, the shares held in treasury amount to 77.9 million shares, of which 52.1 million shares are held by Philips to cover long-term incentive and employee stock purchase plans. The share repurchase program via the second trading line reduced outstanding shares by 25.8 million. No person or group is known to Philips to be the owner of more than 5% of the common shares.

On January 18, 2008, Philips started the procedure for the cancellation of Philips' shares acquired or to be acquired pursuant to the share repurchase programs for capital reduction purposes initiated in January 2007 and January 2008. The number of shares to be cancelled shall be determined by the Board of Management but shall not exceed 114,282,676 shares. Pursuant to the relevant statutory provisions, cancellation may not be effected earlier than March 18, 2008.

Share repurchase programs for capital reduction purposes

Between January 2005 and December 2007 Philips has reduced its outstanding shares by more than 15% for capital reduction purposes. In the first half of 2005 Philips bought back EUR 500 million and in February 2006, Philips completed the EUR 1.5 billion share repurchase program for capital reduction purposes which was initiated in August 2005.

On July 17, 2006, Philips started another EUR 1.5 billion share repurchase program for capital reduction purposes. On August 3, 2006, Philips announced the expansion of the buy-back to a total of EUR 4.0 billion. Philips completed the first part, EUR 2.4 billion, in 2006. The remaining EUR 1.6 billion was to be executed via a program using a second trading line on Euronext Amsterdam and started on January 22, 2007. Through this second trading line EUR 0.8 billion worth of shares were purchased in 2007.

In December 2007, the Dutch parliament adopted an amendment to Dutch tax legislation, effective January 1, 2008, that increased the amount that companies may spend on repurchasing shares free of withholding tax. Subsequently, Philips announced that it plans to repurchase EUR 5 billion worth of common Philips shares. Philips expects that this program will be largely completed by the end of 2008. As a consequence of this new share repurchase program, which includes the portion of the second trading line program that has yet to be completed, Philips has terminated its second trading line.

On the Investor Relations website you can find the details of the current and previous share repurchase programs. For more information see the section Other information.

Financial calendar

Annual General Meeting of Shareholders

Quarterly reports 2008

Sector analysts' days 2008

2009

Shareholders Communication Channel

Philips is continually striving to improve relations with its shareholders. For instance, Philips was one of the key companies in the establishment of the Shareholders Communication Channel - a project of Euronext Amsterdam, banks in the Netherlands and several major Dutch companies to simplify contacts between a participating company and its shareholders.

Philips will use the Shareholders Communication Channel to distribute the Agenda for this year’s Annual General Meeting of Shareholders as well as an instruction form to enable proxy voting at said meeting.

For the Annual General Meeting of Shareholders on March 27, 2008, a record date (being March 5, 2008) will apply: those persons who on March 5, 2008, hold shares in the Company and are registered as such in one of the registers designated by the Board of Management for the Annual General Meeting of Shareholders will be entitled to participate and vote at the meeting.