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Company Update

Frans van Houten, CEO Royal Philips Electronics

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In 2011 we laid the foundation to improve

performance and the first half of 2012 is a

step in the right direction

Accelerate! is working and is driving

structural change in Philips

We have expanded our cost reduction

initiatives from EUR 800 million to EUR 1.1

billion

Accelerate! will keep us on track to deliveron our 2013 targets despite economic

headwinds

Innovation and Customer intimacy will

drive sustainable competitive advantage

Key takeaways

Philips Singapore

Accelerating!

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Progressing on our Path to Value

20122013

2011Midterm

Performance

Box

Executive Committee

Growth investments

Philips Business System

BMC1 performance management

Share buy back

TV Joint Venture

Improving Lighting performance

Value

ROIC

Current

Performance

BoxGrowth

ROIC

Laying the foundation to

improve performance

Transform Philips through

Accelerate!

Accelerate! Healthcare

Restoring Lighting profitability, Leading the LEDtransformation

Reshaping Consumer Lifestyle portfolio EUR 1.1 Billion cost reduction program

Value delivery from past acquisitions

Next value creation steps beyond 2013

Growth

4-6% CSG2

10-12% EBITA

12-14% ROIC

1 BMC = Business Market Combination2 Assuming 3 to 4% real GDP growth

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Higher earnings across all businesses in Consumer Lifestyle. Lifestyle Entertainmentperformance being addressed with distribution agreement, and divestment of Speech

Operational improvements and cost savings positively impact earnings in Lighting.

Lumileds and Consumer Luminaires losses halved in Q2 compared to Q1

Sales increases in growth geographies remain strong. Macro economic concerns

remain in Europe

Solid sales increases in all Healthcare businesses. Strong order intake growth. Solid

improvement in earnings

Strict M & A discipline. 56% of EUR 2 billion share buy-back program completed. US

dollar bond issue completed to ensure access to liquidity

1H 2012 performance : a step in the right direction

Sales growth and cost reductions enable improved operating margins

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Accelerate! is working

Massive transformation, fundamentally changing the way we operate

Simpler and more accountable organization taking shape.

Cost reduction plans on track. TV stranded costs reduced by

43%. Strengthened leadership bench. Savings target raised

to EUR 1.1 billion

Increased local relevance of the product portfolio is driving

strong sales growth, e.g. Russia, Turkey, Africa, Indonesia,

etc., China and India sales growth in the teens

Over 20 projects ongoing. Success with Walmart for Male

grooming. LED lamps globally profitable after overhauling end

to end value chain. 18% reduction in inventory. IT systems

simplification started. Reduced time-to-market for new

products

New leaders embedding a Performance culture in the

organization. Improved cross functional collaboration.

Incentive schemes aligned with 2013 targets

Granular performance management has resulted in a50% improvement in BMCs delivering on plan

Operating model

Customer Centricity

End2end

Culture

Resource to win

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Overhead cost savings to reach EUR 1.1 Billion

Additional savings

Using the design principles of our

Overhead cost reduction program,

operating teams have come up with

additional opportunities to reduce

complexity and lean out processes

Overhead and duplication in the end-to-

end customer value chains have now

been included in the scope of savings

Among others, we see significant

opportunities as Healthcare and Lightingdeploy Accelerate! deeper

Head count reduction will go from 4500 to

approx. 6700

Annual restructuring costs

EUR million 2011 2012 2013 2014

Earlier Plan (37) (125) (80) (40)

New Plan (37) (210) (125) (60)

Cumulative gross savings

EUR million 2011 2012 2013 2014

Earlier Plan 25 400 700 800

New Plan 25 450 900 1100

Note All figures (except 2011) are estimated amounts

Annual investments

EUR million 2011 2012 2013 2014

Earlier Plan (37) (120) (100) (100)

New Plan (37) (120) (100) (100)

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Accelerating gross margin improvement

1. Rationalizing the industrial and distributionfootprint to drive improved margins.Especially in Lighting. Higher restructuringcosts in the second half of 2012

2. New product introductions will positivelyimpact margins, e.g.:

Value segments products for the Imagingsystems range

New design wins in Lumileds

Significant range renewal in Consumer Lifestyle

3. Significant opportunities to increase theannual savings in Bill of Materials with newinitiatives led by newly appointed CPOFredrick Spalcke

Focused actions to drive Gross Margins

Significant improvement opportunities for 2013 and beyond

Accelerating the Lighting industrial footprintrationalization

-45%

201520122009

Latest View2011 Plan

2009

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5.3%

7.4%

8

Our path to value 2011..2013

2011

EBITA

incl.TV

2013

EBITAOverhead

cost

reductions

Improve

selected

businesses

Invest-

ments

Headwinds

(Pensions

+ Medical

device

excise tax)

Volume

Margin

Mix

Restr.&

acq.

related

costs

10%

12%

TV 2011

EBITA

Accelerate!

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Our portfolio is well positioned for the future

Demand for

affordable healthcare

Need for energy

efficient solutions

Desire for increased

personal well-being

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Worlds 41st most valuable brand 2011: USD 8.7 billion

Our key assets and people drive value creation

Employee Engagement Index1 exceeds high performancebenchmark value of 70%

Culturally diverse top-200 leadership team

Global market leader in Lighting; Top 3 Healthcare player; LeadingConsumer Lifestyle brands (e.g. Philips Sonicare, Avent, Saeco)

1Based on annual Philips Employee Engagement Survey

Technology, know-how, strong IP positions (53,000registered patents)

A3 rating by Moodys and A- by Standard & Poors

Loyal customer base in 100+ countries

1/3 of group revenues from growth geographies

Philips brand

People

Domain leadership

Innovation capabilities

Solid balance sheet

Global footprint

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Innovation at the core of our value propositions

New innovations: networked LED lighting with embedded controls, City touch

Connected LED Lighting: new applications and energy savings

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Innovation at the core of our value propositions

Driving better outcomes in Healthcare

New innovations: image guided interventions and healthcare informatics

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Innovation at the core of our value propositions

Giving people a healthier and more enjoyable life

New innovation: the HomeCooker

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Key takeaways

Philips China Accelerating!

In 2011 we laid the foundation to improve

performance and the first half of 2012 is a

step in the right direction

Accelerate! is working and is driving

structural change in Philips

We have expanded our cost reduction

initiatives from EUR 800 million to EUR 1.1

billion

Accelerate! will keep us on track to deliveron our 2013 targets despite economic

headwinds

Innovation and Customer intimacy will

drive sustainable competitive advantage

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