Philips 2005 Annual Report Download - page 224

Philips Annual Report 2005224
the agenda of the General Meeting of Shareholders to other
participating Philips shareholders.
Preference shares and the Stichting Preferente Aandelen Philips
As a means to protect the Company and its stakeholders against an
unsolicited attempt to obtain (de facto) control of the Company, the
General Meeting of Shareholders in 1989 adopted amendments to the
Company’s articles of association that allow the Board of Management
and the Supervisory Board to issue (rights to) preference shares to a
third party. As then anticipated and disclosed, the Stichting Preferente
Aandelen Philips (‘the Foundation’) was created, which was granted
the right to acquire preference shares in the Company. The mere
noticationthattheFoundationwishestoexerciseitsrights,shoulda
third party ever seem likely in the judgment of the Foundation to gain
a controlling interest in the Company, will result in the preference
shares being effectively issued. The Foundation may exercise this right
for as many preference shares as there are ordinary shares in the
Company outstanding at that time.
The object of the Foundation is to represent the interests of the
Company,theenterprisesmaintainedbytheCompanyanditsafliated
companies within the Group, in such a way that the interests of Philips,
those enterprises and all parties involved with them are safeguarded as
effectively as possible, and that they are afforded maximum protection
againstinuenceswhich,inconictwiththoseinterests,mayundermine
the autonomy and identity of Philips and those enterprises, and also
to do anything related to the above ends or conducive to them. In the
event of (an attempt at) a hostile takeover this arrangement will allow
the Company and its Board of Management and Supervisory Board
to determine its position in relation to the bidder and its plans, seek
alternatives and defend Philips’ interests and those of its stakeholders
from a position of strength.
The members of the self-electing Board of the Foundation are Messrs
S.D. de Bree, F.J.G.M. Cremers, M.W. den Boogert, W. de Kleuver and
G.J. Kleisterlee. As Chairman of the Supervisory Board and the Board
of Management respectively, Messrs De Kleuver and Kleisterlee are
membersoftheBoardexofcio.MessrsDeKleuverandKleisterlee
are not entitled to vote.
The Board of Management of the Company and the Board of the
Foundation declare that they are jointly of the opinion that the Foundation
is independent of the Company as required by the Listing Requirements
of Euronext Amsterdam N.V.’s stock market.
The Company does not have any other anti-takeover measures in the
sense of other measures which exclusively or almost exclusively have
the purpose of frustrating future public bids for the shares in the capital
of the Company in case no agreement is reached with the Board of
Management on such public bid. Furthermore the Company does not
havemeasureswhichspecicallyhavethepurposeofpreventinga
bidder who has acquired 75% of the shares in the capital of the Company
from appointing or dismissing members of the Board of Management
and subsequently amending the articles of association of the Company.
It should be noted that also in the event of (an attempt at) a hostile
takeover, the Board of Management and the Supervisory Board are
authorized to exercise in the interests of Philips all powers attributed
to them.
Auditofthenancialreportingandthepositionoftheexternalauditor
Theannualnancialstatements,observingDutchlawandapplying
US GAAP, are prepared by the Board of Management and reviewed by
the Supervisory Board upon the advice of its Audit Committee and the
external auditor. Upon approval by the Supervisory Board, the accounts
are signed by all members of both the Board of Management and the
SupervisoryBoardandarepublishedtogetherwiththenalopinion
of the external auditor. The Board of Management is responsible,
under the supervision of the Supervisory Board, for the quality and
completenessofsuchpubliclydisclosednancialreports.Theannual
nancialstatementsarepresentedfordiscussionandadoptiontothe
Annual General Meeting of Shareholders, to be convened subsequently.
Philips,underUSsecuritiesregulations,separatelylesitsAnnualReport
on Form 20-F, incorporating major parts of the Annual Report as prepared
under the requirements of Dutch law.
Internal controls and disclosure policies
Comprehensive internal procedures, compliance with which is
supervised by the Supervisory Board, are in place for the preparation
and publication of the Annual Report, the annual accounts, the quarterly
guresandadhocnancialinformation.Asfrom2003,theinternal
assurance process for business risk assessment has been strengthened
and the review frequency has been upgraded to a quarterly review
cycle, in line with emerging best practices in this area.
As part of these procedures, a Disclosure Committee has been
appointed by the Board of Management to oversee the Company’s
disclosureactivitiesandtoassisttheBoardofManagementinfullling
its responsibilities in this respect. The Committee’s purpose is to ensure
that the Company implements and maintains internal procedures for
the timely collection, evaluation and disclosure, as appropriate, of
information potentially subject to public disclosure under the legal,
regulatory and stock exchange requirements to which the Company
is subject. Such procedures are designed to capture information that
is relevant to an assessment of the need to disclose developments
and risks that pertain to the Company’s various businesses, and their
effectiveness for this purpose will be reviewed periodically.
Auditor information
In accordance with the procedures laid down in the Philips Policy on
Auditor Independence and as mandatorily required by Dutch law, the
external auditor of the Company is appointed by the General Meeting
of Shareholders on the proposal of the Supervisory Board, after the
latter has been advised by the Audit Committee and the Board of
Management. Under this Auditor Policy, once every three years the
Supervisory Board and the Audit Committee conduct a thorough
assessment of the functioning of the external auditor. The main conclusions
of this assessment shall be communicated to the General Meeting of
Shareholders for the purposes of assessing the nomination for the
appointment of the external auditor. The current auditor of the
Company, KPMG Accountants N.V., was appointed by the 1995 General
Meeting of Shareholders. In 2002, when the Auditor Policy was adopted,
theappointmentofKPMGAccountantsN.V.wasconrmedbythe
Supervisory Board for an additional three years. The 2005 General
Meeting of Shareholders has resolved to re-appoint KPMG Accountants
N.V. as auditor. Mr. J.F.C. van Everdingen is the current partner of KPMG
Accountants N.V. in charge of the audit duties for the Philips Group. In
accordance with the rotation schedule determined in accordance with
the Auditor Policy, he will be replaced by another partner of the auditing
rmin2006.TheexternalauditorshallattendtheAnnualGeneral
Meeting of Shareholders. Questions may be put to him at the meeting
about his report. The Board of Management and the Audit Committee
of the Supervisory Board shall report on their dealings with the external
auditor to the Supervisory Board on an annual basis, particularly with
regard to the auditor’s independence. The Supervisory Board shall
take this into account when deciding upon its nomination for the
appointment of an external auditor.
The external auditor attends, in principle, all meetings of the Audit
Committee.Thendingsoftheexternalauditor,theauditapproach
and the risk analysis are also discussed at these meetings. The external
auditor attends the meeting of the Supervisory Board at which the
report of the external auditor with respect to the audit of the annual
accounts is discussed, and at which the annual accounts are approved.
In its audit report on the annual accounts to the Board of Management
andtheSupervisoryBoard,theexternalauditorreferstothenancial
reportingrisksandissuesthatwereidentiedduringtheaudit,internal
control matters, and any other matters, as appropriate, requiring
communication under the auditing standards generally accepted in
the Netherlands and the USA.
Auditor policy
The Company maintains a policy of auditor independence, and this
policyrestrictstheuseofitsauditingrmfornon-auditservices,inline
with US Securities and Exchange Commission rules under which the
appointed external auditor must be independent of the Company both
in fact and appearance. The policy is laid down in the comprehensive
policy on auditor independence published on the Company’s website.
Corporate governance