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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 2001 COMMISSION FILE NUMBER: 001-05146-01
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE TRANSACTION 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.
Rembrandt Tower, Amstelplein 1,
Amsterdam 1070MX, The Netherlands
(Address of principal executive offices)
Name and address of person authorized to receive notices
and communications from the Securities and Exchange Commission
Andrew D. Soussloff, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
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KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
TABLE OF CONTENTS
PAGE
Independent Auditors' Report 1
Audited Financial Statements
Statement of Financial Condition - July 31, 2001 2
Statement of Income and Changes in Plan Equity -
Year ended July 31, 2001 3
Notes to Financial Statements 4
INDEPENDENT AUDITORS' REPORT
The Committee of the Koninlijke Philips Electronics N.V.
Nonqualified Stock Purchase Plan:
We have audited the accompanying statement of financial condition of the
Koninklijke Philips Electronics N.V. Nonqualified Stock Purchase Plan (the
"Plan") as of July 31, 2001 and the related statement of income and changes in
plan equity from August 1, 2000 (the effective date) to July 31, 2001. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 audit provides 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, 2001, and the
results of its operations from August 1, 2000 (the effective date) to July 31,
2001 in conformity with accounting principles generally accepted in the United
States of America.
/s/ KPMG LLP
October 26, 2001
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
Statement of Financial Condition
July 31, 2001
($ in thousands)
Assets:
Investment in Philips Electronics N.V. common stock
at market value - 673,201 shares (cost $19,983) $ 18,601
Contributions receivable from participants 1,355
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Total assets 19,956
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Plan Equity $ 19,956
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See accompanying notes to financial statements
4
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
Statement of Income and Changes in Plan Equity
From August 1, 2000
(the effective date)
to July 31, 2001
($ in thousands)
Investment income (loss)
Net depreciation in market value of investments $ (1,383)
Realized Loss on sale of investments (42)
Dividends 51
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(1,374)
Contributions:
Participants 18,749
Employer 3,115
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Total contributions 21,864
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Total additions 20,490
Less: Distributions to participants 534
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Plan Equity at end of year $ 19,956
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See accompanying notes to financial statements
5
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2001
(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 are eligible to participate in the Plan after
completing 30 days of full-time employment, except for certain senior
executives as defined by the Plan. 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 represent employer contributions.
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.
6
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2001
DIVIDENDS
Dividends paid 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.
INVESTMENT VALUATION AND INCOME RECOGNITION
The investment in shares held by the Plan are 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 generally
accepted accounting principles 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.
7
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
Notes to Financial Statements
July 31, 2001
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, 2001, 673,201 shares were held by participants of the Plan
valued at $27.63 per share. There was $1,354,920 of
participants'contributions not yet used to purchase shares on July 31,
2001 which is reflected as contributions receivable from participants on
the statement of financial condition.
Proceeds from the sales of Company common stock, cost of stock sold and
related realized loss were as follows:
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Proceeds $ 534,000
Cost of stock sold 576,000
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Realized loss $ (42,000)
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The change in the unrealized losses of Company common stock held by the
Plan was $1,383,000.
(4) TAX STATUS
The Plan is a non-qualified employee stock purchase plan for U.S. tax
purposes. Participants of 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 on the shares from the date of purchase until the
date of subsequent sale will be taxed to 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.
8
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
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Date: October 29, 2001 By: /s/ Kevin Doran
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Name: Kevin Doran
Title: Chairman, Stock Purchase Plan
Committee
9
CONSENT OF INDEPENDENT AUDITORS
To the Supervisory Board and Board of Management of
Koninklijke Philips Electronics N.V.
We consent to the incorporation by reference in the Registration Statement (No.
333-39204) on Form S-8 of Koninklijke Philips Electronics N.V. of our report
dated October 26, 2001 relating to the statement of financial condition of the
Koninklijke Philips Electronics N.V. Nonqualified Stock Purchase Plan as of July
31, 2001 and the related statement of income and changes in plan equity from
August 1, 2000 (the effective date) to July 31, 2001, which report appears in
the July 31, 2001 Annual Report of the Koninklijke Philips Electronics N.V.
Nonqualified Stock Purchase Plan on Form 11-K.
/s/ KPMG LLP
New York, New York
October 26, 2001