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Philips Consumer Lifestyle Strategy

Pieter Nota

Chief Executive Officer

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Consumer Lifestyle is led by an experienced andinternational team

2

We are geared for growth in Emerging Markets and Growth Categories

Caroline Janssen-Clarke

GM Personal Care

Egbert van Acht

GM Health & Wellness

Paul VerhagenCFO

Antonio HidalgoCTO

Pieter NotaCEO

Fabian Wong

GM China,Consumer Lifestyle

Murali Sivaraman

GM Domestic Appliances

Presenting today

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Consumer Lifestyle is a significant part of Philips

vision to improve peoples health & well-being

3

35%

a global company

of leading

businesses creating

value withmeaningful

innovations that

improve peoples

health and well-

being.

Founded in 1891Headquartered in Amsterdam,Netherlands

MAT Sales of25.3 billionOver 8% comparable growth

year-to-date 2010

Emerging Markets32% of MAT sales generated inEmerging Markets

Globally recognized brandOur brand value doubled to$8.7bn since 2004

118,000 employeesSales and service outlets in over100 countries

1.6 billion investment in R&D,7% of sales48,000 patent rights, 35,000registered trademarks, 56,000design rights

Who we are Our businesses Our mission

36%34%

30%

Last 12 months

Sept 10

Consumer Lifestyle

Healthcare

Lighting

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Key takeaways

We have leading positions in health & well-being with a global footprint and a strongbrand, especially in emerging markets

We are taking furtherdecisive action toreduce our exposure in the Televisionbusiness

We will increasingly focus on growth, takinga granular approach to key categories andmarkets to ignite top-line growth

We will expand business creationcapabilities in emerging markets and areinvesting in key enablers to accelerategrowth

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We have leadingpositions in health &

well-being with a globalfootprint and a strongbrand, especially inemerging markets

5

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We have leadership positions across our portfolio

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Note: Leadership market share greater than nearest competitor by >5%; Co-leadership market share within 5% of nearest competitor

* Emerging market based on available data in Brazil, Russia, China

Market share leadership, 2010

Mature Markets

18%

Emerging Markets*(Brazil, Russia, China)

45%

28%

32%

22%

11%

Co-Leadership

Leadership

Mother &Child Care

PowerToothbrush

CoffeePreparation

Male Shaving& Grooming

NPS leadership

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We are a leading global brand

7

Consumer Lifestyle brings the Philips brand into homes and lives globally

Source: Interbrand 2010

8,696 $m42

Best Global Brands

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Our brand is strong in both emerging markets anddeveloped markets

8Source: Consumer Heart BEAT brand equity study 2010, B2C

Brand equity index, 2010Emerging markets

Global

India

China

Brazil

Brand equity index, 2010Mature markets

Positionvs. peers

Top20%

Top10%

Top

10%

Top10%

Netherlands

UK

Germany

Global

USA

Positionvs. peers

Top20%

Top20%

Top20%

Top10%

Top50%

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We see strong growth in Emerging markets wherespending power is set to explode, especially China

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Source: 1. BCG, Winning in Emerging Market Cities - BRIC

2. McKinsey analysis, Economist 2010

Note: * Compound Annual Growth Rate

The urban middle class in emerging markets willencompass more than 200M households by 20151

Consumers in emerging markets have lowpersonal debt compared to developed markets2

India

Russia

China

Brazil

Italy

France

Germany

Japan

South Korea

Spain

United States

UK

20152010

+12%CAGR*

Household debt as % of GDPEmerging markets (BRIC) urban households (millions)

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As wealth grows, purchase habits and brandpreference will drive sales beyond GDP growth

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Source: 1. U&A study, IPSOS analysis of difference in penetration between emerging middle class and middle class consumers in urban China2.TNS Heartbeat study 2010, top two box analysis

As consumers move into the middle class,penetration of key product categories grows Consumers strongly prefer Philips products

Penetration increase of key categories when

consumers move from emerging middle

class into middle class (urban China)1

Strongpreference

73%

Excellentreputation

67%

Outstandingquality

69%

Positionvs. peers

Top10%

Top10%

Top10%

% of Chinese consumers scoring

high or very high for Philips2

Men's electric shavers +7% pts

Body groomers +8% pts

Vacuum cleaners +7% pts

Steam irons +6% pts

Garment steamers +8% pts

Electric rice cookers +7% pts

Blenders +12% pts

Air purifiers +8% pts

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We have a diverse health & well-being portfolio anda global reach

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Sales split by business group Sales split by region

Emerging Markets

Western Europe

North America

Other Mature

Domestic appliances

Personal care

Health & wellness

TV

6%

8%

16%

51%

3%

7%

9%

2006

34%

41%

Audio & video multimedia

Accessories

Other (inc. licenses)

10%

17%

13%

37%

12%

5%

6%

3%

39%

45%13%

2006

2%23%

Last 12 months

Sept 10Last 12 months

Sept 10

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We are growing in emerging markets, which brings apositive impact on margins

12

Note: 1. High margin defined as business: Health & wellness, Personal care, Domestic appliances

2. LTM Last twelve months

and increase the proportion of sales in

high margin categories1We continue to grow emerging marketsales

Sep 2010 LTM

39%

2006

34%

Sep 2010 LTM2006

Base: total sales Base: total sales

2 2

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We have significantly grown our EBITA withdisciplined cost reduction, and portfolio pruning

13Note: *Adjusted EBITA excludes restructuring and acquisition related charges

Adjusted EBITA (as % of sales)*

Outlook2010

200920082007

Profitability improvement measures

Move to high margin categories,doubling proportion of total portfolio

Right-sized the organisation, delayeringfrom 8 to 5 layers, reducing FTEs byabout one third including executive level

Simplified the Supply chain, streamliningmanufacturing sites and supplier base.

Simplified the Innovation footprint from25 innovation centers to 11

Earn-2-Invest reduced the fixed costbase, and instilled a mindset of ongoingcost-discipline

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We are taking further

decisive action toreduce our exposure inthe Television business

1

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Improvement actions taken in TV

15Note: *Adjusted EBITA is EBITA corrected for restructuring charges

TV EBITA

EBITA

Adjusted EBITA*

EUR million

TV NOC

TV Sales as a % of CL SalesBrand licensingSuccessfully extended licensingpartnerships in 2010 with Videocon(India) and TPV (China), which willboth contribute positively in 2011

Cost improvements

Continue to reduce costs to improveprofitability in 2011

Strong supply partnershipsEstablished forward integration andco-location partnerships with TPV,LGD and Sharp

Negative NOC, positive ROIC impactWe continue to manage TV with anegative NOC, meaning a positivecontribution to CL and Philips ROIC

EUR million

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Outlook for TV in 2010

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Reduced lossesduring the first 9months of 2010

We have reduced adjusted EBITA loss in TV from EUR 150 million,in the first 9 months of 2009, to EUR 40 million in the same periodof 2010

Our TV revenue will be higher in Q4 than in Q3, however theenvironment is increasingly challenging, and we see:

High stock levels in retail and strong price erosion

Deterioration of results in China as a consequence of a delayin closing the licensing agreement. We now expect to closethe agreement around year end

Given the market conditions we are taking swift actions to manage

our net operating capital

TV will still deliver a significant year on year improvement inprofitability and will generate a 2% to 3% adjusted EBITA loss on arevenue of around 3 billion in 2010

Taking swift actionin an adverse

market environment

Outlook full year2010

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We continue to excite consumers with innovationthat delivers premium differentiated products

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21:9 and 3D TV Econova TV Design TV

A true cinemaexperience at home

Philips leads theway with highdefinition 21:9 TV,also in in 3D

Award winninghome cinemaexperience

Sustainable solutionsin TV

Winner of EuropeanGreen TV 2010-11

Significantly lowerenergy consumptionand body largelymade from recycledplastic

TVs designed formodern living

Iconic design TVsto suit modernliving rooms andcontemporary living

Ambilight TV

Ambilight technology

Ambilighttechnology uniqueto Philips

Ambilight mixcontinues toincrease

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We will increasinglyfocus on growth, taking

a granular approach tokey categories andmarkets to ignitetop-line growth

1

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We prioritise growth in key categories and markets

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Philips Consumer LifestyleBusinesses Geographies

Personal

Care

Health &

wellness

Domestic

Appliances

Television Audio

Video

Multimedia

Mature

Markets

EmergingMarkets

Accessories

Strong growth Managefor cash

Stronggrowth

GrowthMaintain position

Strong growth means higher than GDP-level growth

Growth means around GDP-level growth

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A granular approach to ignite growthFocusing investments at a category / country level for growth

Personal CareHealth &Wellness

EmergingMarkets

DevelopedMarkets

China

Product categories

Total

Innovation Advertising &Promotion

Localorganization

Granular growth approach Clear investment choices

Mergers &Acquisitions

20

Strong growth

Growth

Maintain position

Manage for cash

No position

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A granular approach to ignite growthExample: Driving growth in oral healthcare

Personal CareHealth &Wellness

EmergingMarkets

DevelopedMarkets

China

Product categories

Granular growth approach Clear investment choices

21

Grow oral healthcare in China

Innovation Advertising &Promotion

Localorganization

Mergers &Acquisitions

Increase above the lineinvestments to drivesales

Targeted activities todeepen relationshipswith oral healthcareprofessionals

Increase investments toequip local sales forcewith required capabilities

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We have delivered strong growth in the highermargin businesses

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Health & wellness

Personal care

Domestic appliances

Double digit growth

Double digit growth

Mid single digit growth

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We will maintain our position in Audio, Video andMultimedia (AVM)

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Docking stations MP3/4 Players

Audio Video Multimedia categories

Home Cinema Systems DVD

We are transitioning our portfolio from product areas such asDVD and MP3/4 players to growing segments such asDocking systems, Bluray and Home cinema systems

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We will expandbusiness creation

capabilities in emergingmarkets and areinvesting in keyenablers to accelerategrowth

2

E bl

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Expanding business creation capabilities in emergingmarkets and building a second global home in China

Business creation foot print in Asia

Bangalore

Pearl delta

Singapore

Shanghai

Global headquarters, Domestic appliances

Innovation hub

Other emerging market innovation centres

Building a second home in China Moved our global headquarters for domestic

appliances to Shanghai, China. Asia is thecentre of gravity for growth in domestic

appliances

Investing in local business creation capabilitiesfor kitchen appliances Building local innovation centres, reporting

to management in Shanghai

Leveraging communication and connectivityexpertise in India

Our team in India is specialized in software,internet services, inter-operability andconnectivity

25

Suzhou

Kitchen Appliances innovation centres

EnablersSecond home in China

E bl

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We are activating sales in emerging markets byexpanding our consumer reach and advertising spend

We are investing in our brand andadvertising to grow sales

We are building distribution into 2nd and 3rd

tier cities to reach more consumers

A&P spend as % of sales in (index 2007 for emerging

markets and mature markets respectively)China example: cities reached

26

EnablersGo-to-market in emerging markets

Outlook2011

Outlook2010

2009

447

2008

427

2007

418

2008 Outlook2011

Outlook2010

20092007

Emerging marketsMature markets

Enablers

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We are investing in innovation to drive NPS and winmarket share in growth categories

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Innovation for emerging markets Innovation in growth categories

Superior core products Breakthrough innovationLocal products for local needs

Innovating for local consumerneeds, and grow productaccessibility for lower income

consumers

Garment steamer innovatingof Asian garment care customs

Washable shaver affordableand designed for Chinese men

Air purifier for clean air inhomes in emerging markets

Innovating core products to driveNPS leadership & grow marketshare

SensoTouch 3D our bestshave ever

Saeco superior coffee athome

ONeil headphones designedto live life to the max

Innovating to lead in key growthcategories and newtechnologies

Lumea - Intense Pulsed Lighttechnology for stubble-freehair re-growth control

Air Fryer air-fryingtechnology for healthier

cooking without the fat

EnablersInnovation

Enablers

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We are pioneering online and social media to buildour brand and drive sales

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Developing online advicecenters

Building a presence on thirdpart social media sites

Award winning online andsocial media campaigns

Philips Avent support centerfor mothers

Impartial resource formothers, supported byhealthcare professionals

Wake-up light social mediaexperience

Live Social mediaexperiment withconsumers

Bring the benefits of theWake-up light during thedark winter in the Arctic

Philips cinema social mediacampaign

Online and social mediacampaign in collaborationwith Ridley ScottAssociates

EnablersOnline and social media

Enablers

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Avent, 2006Health and wellness

Saeco, 2009Domestic appliances

Discus, 2010Health and wellness

Building globalleadership inmother and childcare

Reinforcingleadership andbroadening ourcoffee portfolio

Expanding oralhealthcareportfolio intoadjacentcategories

We use strategic acquisitions to build leadershippositions in growth categories

EnablersMergers & Acquisitions

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Vision 2015

We will continueto grow throughacquisitions tobuild leadershippositions

We will targetacquisitions ingrowth categoriesand emergingmarkets

Enablers

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We are empowering well resourced local teams toact entrepreneurially to accelerate growth

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Resources

Localempowerment

Speed and agility

Our granular approach to growth equips country sales teams withthe right resources and funding to grow in priority categories andmarkets

We recognise the importance of tailoring activities to local marketsto drive growth. Country teams are empowered to adapt theirproduct innovation, and sales and marketing activities to win locally

We encourage speed and agility. We quickly learn from salessuccesses, invest further and replicate to grow. We quickly identifychanging market conditions and competitive challenges, and actdecisively to win

EnablersEmpowered local teams

Enablers

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We have highly engaged teams with local leaders,which is a strong platform to ignite growth

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Note: 2006/2007 scores are based on combined CE/DAP resultsSource: Employee engagement survey conducted by external consultants, Kenexa, and compared against global benchmarks; Sep 2010

Employee Engagement

20102009200820072006

High performancenorm

EnablersEngaged people

Country Leader Nationality

Brazil Brazilian

Argentina Argentinean

Turkey Turkish

Russia Dutch

Poland Polish

xxx India Indian

China Singaporean-Chinese

Local leaders

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Vision 2015: contribute to 20% of Philips Group growth

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Contribution to PhilipsGrowth per Sector

Philips Consumer LifestyleBusinesses

Personal

Care

Health &

wellness

Domestic

Appliances

Television Audio

Video

Multimedia

Accessories

~30%

~20%

~50%

Lighting

Consumer Lifestyle

Healthcare

Strong growth Managefor cash

Maintain position

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Key takeaways

3

We have leading positions in health & well-being with a global footprint and a strongbrand, especially in emerging markets

We are taking furtherdecisive action toreduce our exposure in the Televisionbusiness

We will increasingly focus on growth, takinga granular approach to key categories andmarkets to ignite top-line growth

We will expand business creationcapabilities in emerging markets and areinvesting in key enablers to accelerategrowth

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