UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 11-K
(Mark one)
[X] Annual Report Pursuant to Section 15 (d) of the Securities Exchange Act of
1934
For the fiscal year ended July 31, 2004 Commission file number: 001-05146-01
OR
[ ] Transition Report Pursuant to Section 15 (d) of the Securities Exchange Act
of 1934
For the transition period from ________________________ to ___________________
Koninklijke Philips Electronics N.V. Nonqualified Stock Purchase Plan
c/o Philips Electronics North America Corporation
1251 Avenue of the Americas
New York, New York 10020
Attention: Compensation and Benefits Department
(Full title of the plan and address of the plan, if different from
that of the issuer named below)
KONINKLIJKE PHILIPS ELECTRONICS N.V.
Building VO-1
Groenewouldseweg 1
5621 BA Eindhoven, The Netherlands
(Address of principal executive offices)
KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
Table of Contents
Page
Report of Independent Registered Public Accounting Firm 1
Statements of Financial Condition - July 31, 2004 and 2003 2
Statements of Income and Changes in Plan Equity -
Years ended July 31, 2004, 2003 and 2002 3
Notes to Financial Statements 4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Committee of the Koninklijke Philips Electronics N.V.
Nonqualified Stock Purchase Plan:
We have audited the accompanying statements of financial condition of the
Koninklijke Philips Electronics N.V. Nonqualified Stock Purchase Plan (the
"Plan") as of July 31, 2004 and 2003 and the related statements of income and
changes in plan equity for each of the years in the three year period ended July
31, 2004. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board of the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by the Plan's management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Koninklijke Philips
Electronics N.V. Nonqualified Stock Purchase Plan at July 31, 2004 and 2003, and
the results of its operations each of the years in the three year period ended
July 31, 2004 in conformity with US generally accepted accounting principles.
/s/KPMG LLP
New York, New York
October 29, 2004
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
Statements of Financial Condition
July 31, 2004 July 31, 2003
($ in thousands) ($ in thousands)
Assets:
Investment in Philips Electronics N.V.
common stock at market value - 3,873,077
shares in 2004 and 3,441,459 shares in 2003
(cost $84,849 in 2004 and $74,911 in 2003) 93,844 71,479
Contributions receivable from participants 2,261 1,562
------ -------
Total Assets 96,105 73,041
------ -------
Plan Equity 96,105 $73,041
====== =======
See accompanying notes to financial statements
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
Statements of Income and Changes in Plan Equity
Year ended July 31, Year ended July 31, Year ended July 31,
2004 2003 2002
($ in thousands) ($ in thousands) ($ in thousands)
Investment income (loss):
Net appreciation (depreciation) in market value
of investments 12,428 $ 5,679 (7,729)
Net realized loss on sale of investments (971) (1,462) (22)
Dividend income from Koninklijke Philips
Electronics N.V. common stock 1,329 1,039 427
-------- -------- --------
12,786 5,256 (7,324)
Contributions:
Participants 22,438 23,857 25,986
Employer 6,483 6,532 8,580
-------- -------- --------
Total contributions 28,921 30,389 34,566
-------- -------- --------
Total additions 41,707 35,645 27,242
Less: Distributions to participants (18,643) (5,086) (4,716)
-------- -------- --------
Net Increase 23,064 $ 30,559 $ 22,526
Plan Equity:
Beginning of the Year 73,041 42,482 19,956
-------- -------- --------
End of Year 96,105 $ 73,041 $ 42,482
======== ======== ========
See accompanying notes to financial statements
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2004 and 2003
(1) Description of the Plan
The following description of the Koninklijke Philips Electronics N.V.
(the "Company") Nonqualified Stock Purchase Plan (the "Plan") provides
only general information. Participants should refer to the Plan
prospectus for a more complete description of the Plan's provisions.
General
The Plan is a voluntary stock purchase plan established for eligible
U.S.-based employees of certain subsidiaries of the Company effective
August 1, 2000. The Plan makes available to eligible employees of certain
of the Company's subsidiaries in the U.S. the right to purchase common
shares of the Company's common stock at a discount. The common stock of
the Company is quoted on several stock exchanges including the Amsterdam
Stock Exchange and the New York Stock Exchange ("NYSE").
Participation
U.S.-based full-time salaried and hourly employees of certain
subsidiaries of the Company except for certain senior executives, as
defined by the Plan, are eligible to participate in the Plan after
completing 30 days of full-time employment. Employees, subject to
collective bargaining agreements, are eligible to participate upon
acceptance of the Plan by their respective union. Certain suspension
rules apply as described below in "Plan Restrictions."
Contributions
Each year, participants may contribute up to 10% of their cash
compensation, as defined by the Plan, through payroll withholdings. In
addition to the percentage limitation, contributions may not exceed
$20,000 in any calendar year.
The cost of shares to the participants will be the lesser of 85% of the
closing price on the first day of the applicable purchase period on which
stocks are traded on the NYSE, or 85% of the closing price on the last
day of the applicable purchase period on which stocks are traded on the
NYSE. The difference between the fair value of the shares purchased and
the cost to the participants represents employer contributions.
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2004 and 2003
Participant shares are held by EquiServe N.A., the Plan's custodian.
Contributions are used to purchase whole and fractional shares of the
Company at the end of each purchase period (a calendar quarter).
Vesting
All contributions and common shares are 100% vested.
Dividends
Dividends paid, net of applicable taxes withheld, are reinvested into the
participant's account and used to purchase additional common shares at
the prevailing price.
Plan Restrictions
A participant may sell any shares held in their account at any time;
however, if a participant sells shares held by the Plan for less than one
year, that participant will not be allowed to make contributions to the
Plan in the subsequent two purchase periods following the sale.
Plan Termination
The Company may suspend or terminate the Plan at any time. If the Plan is
suspended or terminated payroll deductions will terminate and unapplied
withholdings will be used to purchase common shares or be repaid to
participants without interest as soon as practicable following the
termination of the Plan.
Plan Expenses
Plan expenses are paid by the Company.
(2) Summary of Significant Accounting Policies
The following are significant accounting policies followed by the Plan:
Basis of Accounting
The accompanying financial statements are prepared on the accrual basis
of accounting.
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2004 and 2003
Investment Valuation and Income Recognition
The investment in shares held by the Plan is recorded at market value,
measured by the closing price listed by NYSE. Purchases and sales of
securities are recorded on a trade-date basis. Realized gains and losses
are recorded on first in, first out method. Dividends are recorded on the
ex-dividend date.
Use of Estimates
The preparation of financial statements in conformity with US generally
accepted accounting principal requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, and
changes therein, and disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
Distributions
Participants may request distributions of stock certificates or cash.
Distributions are recorded when paid.
(3) Investment in Common Shares
Each participant is a 100% owner of the number of shares held on their
behalf at EquiServe. Participants maintain the same rights as common
stock shareholders.
At July 31, 2004 and 2003, 3,873,077 and 3,441,459 shares were held
respectively, for participants of the Plan valued at $24.23 and $20.77
per share at July 31, 2004, and 2003, respectively. There were $2,260,697
and $1,561,869 of participants' contributions not yet used to purchase
shares on July 31, 2004 and 2003, respectively, which is reflected as
contributions receivable from participants on the statements of financial
condition.
Proceeds from the sales of Company common stock, cost of stock sold and
related realized loss were as follows:
For the year ended July 31,
2004 2003 2002
---- ---- ----
Proceeds $18,643,000 $5,086,000 $4,716,000
Cost of stock sold
19,614,000 6,548,000 4,738,000
------------ ----------- -----------
Realized loss $(971,000) $(1,462,000) $(22,000)
========== ============ ===========
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2004 and 2003
(4) Tax Status
The Plan is a non-qualified employee stock purchase plan for U.S. tax
purposes. Participants in the Plan are taxed under Section 83 of the
Internal Revenue Code. Upon purchase of the shares, the participant
generally would include in ordinary income an amount equal to the excess,
if any, of the closing market price of the shares on the purchase date
over the discounted purchase price (85% of the closing price on the first
or the last day of the purchase period, whichever is lower). Any
additional appreciation or depreciation on the shares from the date of
purchase until the date of subsequent sale will be treated by
participants as short-term or long-term capital gain or loss, depending
on the period of time the shares are held before sale. Participants will
also be required to include, as ordinary income, the amount of any
dividends on common shares purchased through the Plan.
(5) Market Risk
The Plan invested in one security, common stock of Koninklijke Philips
Electronics N.V. Investment securities are exposed to various risks, such
as interest rate, market, and credit risks. Due to the level of risk
associated with certain investment securities, it is at least reasonably
possible that the changes in the values of investment securities will
occur in the near term and that such changes could materially affect the
amounts reported in the statement of assets available for plan benefits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
KONINKLIJKE PHILIPS ELECTRONICS N.V.
Nonqualified Stock Purchase Plan
Date: October 29, 2004 By: /s/ Wilco Groenhuysen
------------------------------------------
Name: Wilco Groenhuysen
Title: Chairman, Stock Purchase Plan Committee