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, 2002 COMMISSION FILE NUMBER:
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.
BREITNER CENTER, AMSTELPLEIN 2,
1096 BC AMSTERDAM, THE NETHERLANDS
(Address of principal executive offices)
KONINKLIJKE PHILIPS ELECTRONICS N.V.
NONQUALIFIED STOCK PURCHASE PLAN
TABLE OF CONTENTS
PAGE
Independent Auditors' Report 1
Statements of Financial Condition - July 31, 2002 and 2001 2
Statements of Income and Changes in Plan Equity -
Year ended July 31, 2002 and 2001 3
Notes to Financial Statements 4
INDEPENDENT AUDITORS' REPORT
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, 2002 and 2001 and the related statements of income and
changes in plan equity for the years then ended. 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 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 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, 2002 and 2001, and
the results of its operations in conformity with accounting principles generally
accepted in the United States of America.
/s/KPMG LLP
New York, New York
October 28, 2002
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
STATEMENT OF FINANCIAL CONDITION
JULY 31, 2002 JULY 31, 2001
($ IN THOUSANDS) ($ IN THOUSANDS)
Assets:
Investment in Philips Electronics N.V. common stock at
market value - 1,798,821 shares in 2002 and 673,231
shares in 2001 (cost $49,656 in 2002 and $19,983 in
2001) 40,546 18,601
Contributions receivable from participants 1,936 1,355
------- -------
Total Assets 42,482 19,956
------- -------
Plan Equity $42,482 $19,956
======= =======
See accompanying notes to financial statements
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
INCOME AND CHANGES IN PLAN EQUITY
YEAR ENDED JULY 31, 2002 YEAR ENDED JULY 31, 2001
($ IN THOUSANDS) ($ IN THOUSANDS)
Investment income (loss):
Net depreciation in market value of investments $ (7,729) $ (1,383)
Net realized loss on sale of investments (22) (42)
Dividend income from Koninklijke
Philips Electronics N.V. Common Stock 427 51
------- -------
(7,324) (1,374)
Contributions:
Participants 25,986 18,749
Employer 8,580 3,115
------- -------
Total contributions 34,566 21,864
------- -------
Total additions 27,242 20,490
Less: Distributions to participants (4,716) (534)
------- -------
Net Increase $22,526 $19,956
Plan Equity:
Beginning of the Year 19,956 0
------- -------
End of Year $42,482 $19,956
======= =======
See accompanying notes to financial statements
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2002 AND 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 Euronext
Amsterdam 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.
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).
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2002 AND 2001
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.
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.
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2002 AND 2001
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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, 2002 and 2001, 1,798,821 and 673,231 shares were held
respectively, by participants of the Plan valued at $22.54 and $27.63 per
share at July 31, 2002 and 2001, respectively. There were $1,936,245 and
$1,354,920 of participants contributions not yet used to purchase shares
on July 31, 2002 and 2001, respectively, which is reflected as
contributions receivable from participants on the statements of financial
condition.
Proceeds from the sales of Company common stock (including the market
value of stock distributed at the date of distribution), cost of stock
sold/distributed and related realized loss were as follows:
For the year ended July 31,
2002 2001
----------- -----------
Proceeds $ 4,716,000 $ 534,000
Cost of stock sold 4,738,000 576,000
----------- -----------
Realized loss $ (22,000) $ (42,000)
=========== ===========
The change in the unrealized losses of Company common stock held by the
Plan was $7,729,000 and $1,383,000 for the years ended July 31, 2002 and
2001, respectively.
(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
KONINKLIJKE PHILIPS ELECTRONICS N.V. NONQUALIFIED STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2002 AND 2001
(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.
(5) MARKET RISK
The Plan invests in 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, 2002 BY: /S/ KEVIN DORAN
-----------------------------------------
NAME: KEVIN DORAN
TITLE: CHAIRMAN, STOCK PURCHASE PLAN
COMMITTEE
CONSENT OF INDEPENDENT AUDITORS
To the Supervisory 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 28, 2002 relating to the statements of financial condition of the
Koninklijke Philips Electronics N.V. Nonqualified Stock Purchase Plan as of July
31, 2002 and 2001 and the related statements of income and changes in plan
equity, for the years then ended which report appears in the July 31, 2002
Annual Report of Koninklijke Philips Electronics N.V. Nonqualified Stock
Purchase Plan on Form 11-K.
/s/ KPMG LLP
New York, NY
October 28, 2002