Philips 2008 Annual Report Download - page 260

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 a result, the Stichting Preferente Aandelen Philips
(the 'Foundation’) was created, which was granted the right to acquire
preference shares in the Company. The mere notification 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. No preference shares have been issued as of December 31,
2008. In addition, the Foundation has the right to file a petition with
the Enterprise Chamber of the Amsterdam Court of Appeal to
commence in inquiry procedure within the meaning of section 2:344
Dutch Civil Code, which right was granted in 2008.
The object of the Foundation is to represent the interests of the
Company, the enterprises maintained by the Company and its affiliated
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 influences which, in conflict 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 and M.W.
den Boogert. In 2008 Messrs G.J. Kleisterlee and J-M. Hessels resigned
as board members. Consequently, no Philips board members or officers
are represented in the board of the Foundation.
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 specifically 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 financial reporting and the position of
the external auditor
The annual financial statements 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 final 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 financial reports. The annual financial statements
are presented for discussion and adoption to the Annual General
Meeting of Shareholders, to be convened subsequently. Philips, under
US securities regulations, separately files 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
figures and ad hoc financial 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 fulfilling
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
confirmed by the Supervisory Board for an additional three years.
The 2008 General Meeting of Shareholders resolved to re-appoint
KPMG Accountants N.V. as auditor. Mr M.A. Soeting is the current
partner of KPMG Accountants N.V. in charge of the audit duties for
Philips. In accordance with the rotation schedule determined in
accordance with the Auditor Policy, he will be replaced by another
partner of the auditing firm ultimately in 2012. 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 is appointed by the
Shareholders Meeting
The external auditor attends, in principle, all meetings of the Audit
Committee. The findings 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 financial
reporting risks and issues that were identified 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 US.
Auditor policy
The Company maintains a policy of auditor independence, and this
policy restricts the use of its auditing firm 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.
Philips Annual Report 2008260
180
Sustainability performance
192
IFRS financial statements
244
Company financial statements
124
US GAAP financial statements