Philips 2011 Annual Report Download - page 113

11 Corporate governance 11.4 - 11.5
Annual Report 2011 113
Enterprise Chamber of the Amsterdam Court of Appeal to commence
an inquiry procedure within the meaning of section 2:344 Dutch Civil
Code.
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 or other attempt to
obtain (de facto) control of the Company this arrangement will allow
the Company and its Board of Management and Supervisory Board to
determine its position in relation to the third party 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. No Philips board members or officers are represented
on 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 or other attempt to obtain (de facto) control of
the 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 Executive Committee 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 and
2011 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 KPMG
Accountants N.V., Mr J.F.C. van Everdingen, in the course of 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.
The policy includes rules for the pre-approval by the Audit Committee
of all services to be provided by the external auditor. The policy also
describes the prohibited services that may never be provided. Proposed
services may be pre-approved at the beginning of the year by the Audit
Committee (annual pre-approval) or may be pre-approved during the
year by the Audit Committee in respect of a particular engagement
(specific pre-approval). The annual pre-approval is based on a detailed,
itemized list of services to be provided, designed to ensure that there
is no management discretion in determining whether a service has been
approved and to ensure the Audit Committee is informed of each
services it is pre-approving. Unless pre-approval with respect to a
specific service has been given at the beginning of the year, each
proposed service requires specific pre-approval during the year. Any
annually pre-approved services where the fee for the engagement is
expected to exceed pre-approved cost levels or budgeted amounts will
also require specific pre-approval. The term of any annual pre-
approval is 12 months from the date of the pre-approval unless the
Audit Committee states otherwise. During 2011, there were no
services provided to the Company by the external auditor which were
not pre-approved by the Audit Committee.
11.5 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