Philips 2010 Annual Report Download - page 137

12 Corporate governance 12.4 - 12.5
Annual Report 2010 137
Company, the Board of Management and the Supervisory Board are
authorized to exercise in the interests of Philips all powers vested in
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 taking into account the report of 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; re-appointment of KPMG Accountants
N.V. is proposed to the 2011 General Meeting of Shareholders. 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 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.
12.5 Investor Relations
Introduction
The Company is continually striving to improve relations with its
shareholders. In addition to communication with its shareholders at the
Annual General Meeting of Shareholders, Philips elaborates its financial
results during (public) conference calls, which are broadly accessible. It
publishes informative annual, semi-annual and quarterly reports and
press releases, and informs investors via its extensive website. The
Company is strict in its compliance with applicable rules and regulations
on fair and non-selective disclosure and equal treatment of
shareholders.
Each year the Company organizes Philips Capital Market Days and
participates in several broker conferences, announced in advance on
the Company’s website and by means of press releases. Shareholders
can follow in real time, by means of webcasting or telephone lines, the
meetings and presentations organized by the Company. Thus the
Company applies recommendation IV.3.1 of the Dutch Corporate
Governance Code, which in its perception and in view of market
practice does not extend to less important analyst meetings and
presentations. It is Philips’ policy to post presentations to analysts and
shareholders on the Company’s website. These meetings and
presentations will not take place shortly before the publication of
annual, semi-annual and quarterly financial information.
Furthermore, the Company engages in bilateral communications with
investors. These communications either take place at the initiative of
the Company or at the initiative of individual investors. During these
communications the Company is generally represented by its Investor
Relations department. However, on a limited number of occasions the
Investor Relations department is accompanied by one or more
members of the Board of Management. The subject matter of the
bilateral communications ranges from single queries from investors to
more elaborate discussions on the back of disclosures that the
Company has made such as its annual and quarterly reports. Also here,
the Company is strict in its compliance with applicable rules and
regulations on fair and non-selective disclosure and equal treatment of
shareholders.
The Company shall not, in advance, assess, comment upon or correct,
other than factually, any analyst’s reports and valuations. No fee(s) will
be paid by the Company to parties for the carrying-out of research for
analysts’ reports or for the production or publication of analysts’
reports, with the exception of credit-rating agencies.
Major shareholders and other information for shareholders
The Dutch Act on Financial Supervision imposes a duty to disclose
percentage holdings in the capital and/or voting rights in the Company
when such holdings reach, exceed or fall below 5%, 10%, 15%, 20%, 25%,
30%, 40%, 50%, 60%, 75% and 95%. Such disclosure must be made to the
Netherlands Authority for the Financial Markets (AFM) without delay.
The AFM then notifies the Company.
As per December 31, 2010, no person is known to the Company to be
the owner of more than 5% of its common shares. The common shares
are held by shareholders worldwide in bearer and registered form. As
per December 31, 2010, approximately 93% of the common shares
were held in bearer form and approximately 7% of the common shares
were represented by registered shares of New York Registry issued in
the name of approximately 1,357 holders of record, including Cede &
Co. Cede & Co acts as nominee for the Depository Trust Company
holding the shares (indirectly) for individual investors as beneficiaries.
Citibank, N.A., 388 Greenwich Street, New York, New York 10013 is
the transfer agent and registrar.