Philips 2005 Annual Report Download - page 66

Philips Annual Report 200566
The contract terms for current members of the Board of
Management are presented in the table below.
members Board of Management1) end of term
G.J. Kleisterlee October 1, 2008
P-J. Sivignon June 15, 2009
G.H.A. Dutiné April 1, 2007
A. Huijser April 1, 2006
1) Reference date for Board membership is December 31, 2005.
Outlook 2006
For 2006 changes are foreseen in the area of Pensions and
Annual Incentive design. The maximum base salaries for the
members of the Board of Management will be increased
in line with market developments. Both the maximum LTI
grants and the on-target Annual Incentive percentages
remain unchanged.
For the year 2006 the Annual Incentive design will be
modiedinordertobetterreectthemid-termprotand
growthobjectives.Thenancialtargetswillbebasedon
netincomewithacashowthresholdandrevenuegrowth.
As of January 1, 2006 a new pension plan will be in force
for all Philips executives in the Dutch pension fund born
after January 1, 1950 (including members of the Board of
Management and other members of the Group Management
Committee). The new plan is based on a combination of
dened-benets(careeraverage)anddened-contribution
andreplacesthenal-payplanasdecribedaboveforthose
executives born after January 1, 1950. The target retirement
age under the new plan is 62.5. The plan does not require
employee contributions.
Finally, the Supervisory Board proposes to amend the
maximum percentage of the annual LTIP pool-size to be
allocated to members of the Board of Management from
2.5% to 3%.
Both the new pension plan and the revised design of the
Annual Incentive – as an amendment to the remuneration
policy for the Board of Management – and the amendment
of the maximum percentage of the annual LTIP pool-size
to be allocated to members of the Board of Management,
will be submitted for approval to the 2006 Annual General
Meeting of Shareholders.
Report of the Audit Committee
The Audit Committee, currently consisting of four members
of the Supervisory Board, who are listed on pages 56 and
57 of this Annual Report, assists the Supervisory Board in
fulllingitssupervisoryresponsibilitiesfortheintegrityof
theCompany’snancialstatements,thenancialreporting
process, the system of internal business controls and risk
management, the internal and external audit process, the
internalandexternalauditor’squalications,independence
and performance, as well as the Company’s process for
monitoring compliance with laws and regulations and the
General Business Principles (GBP). The Audit Committee
metvetimesin2005andreporteditsndingsperiodically
to the plenary Supervisory Board. In accordance with its
charter, which is part of the Rules of Procedure of the
Supervisory Board, the Audit Committee in 2005 reviewed
theCompany’sannualandinterimnancialstatements,
includingnon-nancialinformation,priortopublication
thereof. It also assessed in its quarterly meetings the
adequacy and appropriateness of internal control policies
andinternalauditprogramsandtheirndings.Inits2005
meetings, the Audit Committee reviewed periodically
matters relating to accounting policies and compliance
with accounting standards. Compliance with statutory and
legal requirements and regulations, particularly in the
nancialdomain,wasalsoreviewed.Importantndings
andidentiedriskswereexaminedthoroughlyinorder
to allow appropriate measures to be taken. With regard
to the internal audit, the Audit Committee reviewed the
internal audit charter, audit plan, audit scope and its
coverage in relation to the scope of the external audit,
aswellasthestafng,independenceandorganizational
structure of the internal audit function. With regard to
the external audit, the Audit Committee reviewed the
proposed audit scope, approach and fees, the independence
of the external auditors, their performance and their
(re-)appointment, non-audit services provided by the external
auditors in conformity with the Philips Policy on Auditor
Independence, as well as any changes to this policy. The
Audit Committee also considered the report of the external
auditorswithrespecttotheannualnancialstatements
and advised on the Supervisory Board’s statement to
shareholders in the annual accounts.
Report of the Supervisory Board