%XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ -XO\WK (YDOXDWLRQRIWKH 3KLOLSV3:(9,6HFXUHELW6PDUW &DUG&RQWUROOHU 'HYHORSHGDQGSURYLGHGE\ 3KLOLSV6HPLFRQGXFWRUV%XVLQHVV/LQH,GHQWLILFDWLRQ $FFRUGLQJWRWKH &RPPRQ&ULWHULDIRU,QIRUPDWLRQ7HFKQRORJ\ (YDOXDWLRQ && DW/HYHO($/DXJPHQWHG E\ 3KLOLSV6HPLFRQGXFWRUV+DPEXUJ 8QWHUQHKPHQVEHUHLFKGHU3KLOLSV*PE+ 6WUHVHPDQQDOOHH +DPEXUJ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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IVWHOOHGHELV,7VHFXULW\VHUY LFHV 3UIVWHOOHGHELV,7VHFXULW\VHUYLFHV OLVWRIDXWKRUV +DQV*HUG$OEHUWVHQ +DQV*HUG$OEHUWVHQ FHUWLILFERG\ VKRUW %6, %6, FHUWLILFERG\ ORQJ %XQGHVDPWIU6LFKHUKHLWLQGHU ,QIRUPDWLRQVWHFKQLN %XQGHVDPWIU6LFKHUKHLWLQGHU ,QIRUPDWLRQVWHFKQLN %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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 Philips Electronics NV 3ULQW  ,76HFXULW\5HTXLUHPHQWV   72(6HFXULW\5HTXLUHPHQWV   72()XQFWLRQDO5HTXLUHPHQWV   72($VVXUDQFH5HTXLUHPHQWV   5HILQHPHQWVRIWKH72($VVXUDQFH5HTXLUHPHQWV   6HFXULW\5HTXLUHPHQWVIRUWKH(QYLURQPHQW   6HFXULW\5HTXLUHPHQWVIRUWKH,7(QYLURQPHQW   6HFXULW\5HTXLUHPHQWVIRUWKH1RQ,7(QYLURQPHQW   72(6XPPDU\6SHFLILFDWLRQ   72(6HFXULW\)XQFWLRQV   $VVXUDQFHPHDVXUHV   33&ODLPV   5DWLRQDOH   6HFXULW\2EMHFWLYHV5DWLRQDOH   6HFXULW\5HTXLUHPHQWV5DWLRQDOH   5DWLRQDOHIRUWKHVHFXULW\IXQFWLRQDOUHTXLUHPHQWV   'HSHQGHQFLHVRIVHFXULW\IXQFWLRQDOUHTXLUHPHQWV   5DWLRQDOHIRUWKH$VVXUDQFH5HTXLUHPHQWVDQGWKH6WUHQJWKRI )XQFWLRQ/HYHO   6HFXULW\5HTXLUHPHQWVDUH0XWXDOO\6XSSRUWLYHDQG,QWHUQDOO\ &RQVLVWHQW   72(6XPPDU\6SHFLILFDWLRQ5DWLRQDOH   33&ODLPV5DWLRQDOH   $QQH[HV   'HYHORSPHQWDQG3URGXFWLRQ3URFHVV OLIHF\FOH   /LIH&\FOH'HVFULSWLRQ   6FRSHRIWKH&RPPRQ&ULWHULD$VVXUDQFH5HTXLUHPHQWV   'HVFULSWLRQRI$VVHWVRIWKH,QWHJUDWHG&LUFXLWV 'HVLJQHU0DQXIDFWXUHU  %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW  6HFXULW\$VSHFWVRIWKH6PDUWFDUG(PEHGGHG6RIWZDUH   )XUWKHU,QIRUPDWLRQUHJDUGLQJ$5HVS$SSO   ([DPSOHVRI6SHFLILF)XQFWLRQDO5HTXLUHPHQWVIRUWKH 6PDUWFDUG(PEHGGHG6RIWZDUH   ([DPSOHVRI$WWDFN6FHQDULRV   'HILQLWLRQRIWKH)DPLO\)&6B51'   'HILQLWLRQRIWKH)DPLO\)07B/,0   'HILQLWLRQRIWKH)DPLO\)$8B6$6   *ORVVDU\DQG9RFDEXODU\   /LVWRI$EEUHYLDWLRQV   )XUWKHU'RFXPHQWV  %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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‡ PDLQWDLQWKHLQWHJULW\DQGWKHFRQILGHQWLDOLW\RIGDWDVWRUHGLQQRQYRODWLOHPHPRU\XVLQJ WKH72(DQG ‡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 Philips Electronics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 Philips Electronics NV 3ULQW 7KHFKRVHQOHYHORIDVVXUDQFHLV ($/DXJPHQWHG7KHPLQLPXPVWUHQJWKOHYHO IRU WKH 72( VHFXULW\ IXQFWLRQV LV 62)KLJK 6WUHQJWKRI)XQFWLRQV+LJK  7KLVVHFXULW\7DUJHWFODLPVWKHIROORZLQJ&&FRQIRUPDQFHV 3DUWH[WHQGHG3DUWDXJPHQWHG 7KH6HFXULW\7DUJHWGRHVQ·WFODLPIRUPDOFRQIRUPDQFHWRD3URWHFWLRQ3URILOH +RZHYHUWKLV6HFXULW\7DUJHWLVZULWWHQXVLQJDGUDIWYHUVLRQRID3URWHFWLRQ3URILOH´6PDUW FDUG,&3ODWIRUP3URWHFWLRQ3URILOHµXQGHUGHYHORSPHQWE\WKHIROORZLQJ,QWHJUDWHG&LUFXLWV PDQXIDFWXUHUV • $WPHO • +LWDFKL(XURSH • ,QILQHRQ7HFKQRORJLHVDQG • 3KLOLSV6HPLFRQGXFWRUV 7KHOHYHORIHYDOXDWLRQDQGWKHIXQFWLRQDOLW\RIWKH72(DUHFKRVHQLQRUGHUWRDOORZWKHFRQILU PDWLRQWKDWWKH72(LVVXLWDEOHIRUXVHZLWKLQGHYLFHVFRPSOLDQWZLWKWKH*HUPDQ'LJLWDO6LJ QDWXUH/DZ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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 Philips Electronics NV 3ULQW 7KH72(QDPHG3:(9,LVDVLQJOHFKLSVHFXUHG%LWPLFURFRQWUROOHUZLWKILUPZDUH PDQXIDFWXUHGLQDQDGYDQFHG&026SURFHVVE\3KLOLSV7KHGHYLFHLVGHYHORSHGIRUPRVWKLJK HQG VDIHJXDUGHG DSSOLFDWLRQV DQG LV GHVLJQHG IRU HPEHGGLQJ LQWR FKLS FDUGV DFFRUGLQJ WR ,62(DFKVHFXULW\PHDVXUHLVGHVLJQHGWRDFWDVDQLQWHJUDOSDUWRIWKHFRPSOHWHV\VWHPLQ RUGHUWRVWUHQJWKHQWKHGHVLJQDVDZKROH7KHVHFXULW\PHDVXUHVFDQEHGLYLGHGLQWRKDUGZDUH FRQWUROOHGVHFXULW\PHDVXUHVWKDWGRQRWDOORZIRUVRIWZDUHJXLGHGH[FHSWLRQVDQGVHFXULW\PHDV XUHVWKDWVKDOOEHFRQWUROOHGE\VRIWZDUH,QDGGLWLRQWKHGLHLVHPEHGGHGLQWRDPRGXOHZKLFKLQ WXUQLVHPEHGGHGLQWRDVPDUWFDUG1RWHWKDW3KLOLSVGHOLYHUVZDIHUV0RGXOHSURGXFWLRQDQG PRGXOHHPEHGGLQJ FDUGSURGXFWLRQ WDNHVSODFHDWWKH&DUG0DQXIDFWXUHU 7KHPRGXOHDQGFDUGHPEHGGLQJRIWKH72(SURYLGHH[WHUQDOVHFXULW\PHFKDQLVPVEHFDXVHWKH\ PDNHLWKDUGHUIRUDQDWWDFNHUWRDFFHVVSDUWVRIWKH72(IRUSK\VLFDOPDQLSXODWLRQ 7KHIROORZLQJWDEOHOLVWVWKH72(FRPSRQHQWV 7\SH 1DPH 5HOHDVH 'DWH IRUPRIGHOLYHU\ +DUGZDUH 3KLOLSV3:(9,6HFXUH ELW6PDUW&DUG&RQWUROOHU 9,  FKLS 6RIWZDUH 7HVW5206RIWZDUH WKH,& GHGLFDWHGVRIWZDUH [ND  WHVW520RQWKHFKLS 'RFXPHQW *XLGDQFH'HOLYHU\DQG2S HUDWLRQ0DQXDO   SULQWHGGRFXPHQW 'RFXPHQW 'DWD6KHHW   SULQWHGGRFXPHQW 7DEOH&RPSRQHQWVRIWKH72( 7KH&38RIWKH3:(9,LVDGHULYDWLRQRIWKH&IDPLO\DQGKDVWKHVDPHLQVWUXFWLRQ VHW)LJXUHVKRZQDERYHJLYHVDQRYHUYLHZWRWKHFRPSRQHQWVRIWKHPLFURFRQWUROOHU 7KHGHYLFHLQFOXGHV5205$0DQG((3520PHPRU\7KH((3520FDQEHDFFHVVHGDVGDWD PHPRU\ DV ZHOO DV SURJUDP PHPRU\ 7KH 7ULSOH'(6 FRSURFHVVRU VXSSOLHV VLQJOH '(6 DQG 7ULSOH'(6RSHUDWLRQV2QO\7ULSOH'(6ZLOOEHXVHGLQWKLVHYDOXDWLRQ7KHUDQGRPJHQHUDWRU SURYLGHVWUXHUDQGRPQXPEHUVZLWKRXWSVHXGRUDQGRPFDOFXODWLRQ 7KHRQFKLSKDUGZDUHLVVRIWZDUHFRQWUROOHGYLD6SHFLDO)XQFWLRQ5HJLVWHUV7KHVHUHJLVWHUVDUH FRUUHODWHG WR WKH DFWLYLWLHV RI WKH &38 ,QWHUUXSW ,2 ((3520 7LPHUV DQG 8$57 7KH FRPPXQLFDWLRQ ZLWK WKH 3:(9, FDQ EH SHUIRUPHG WKURXJK D VHULDO LQWHUIDFH ,2 DF FRUGLQJWR,62VWDQGDUG7ZRELWWLPHUVDQGILYHYHFWRUL]HGLQWHUUXSWVSURYLGHIXUWKHU IXQFWLRQDOLW\IRU,2WLPHUVDQG((3520 7KH 3:(9, RSHUDWHV ZLWK D VLQJOH 9 RU 9 QRPLQDO SRZHU VXSSO\ DW D QRPLQDO PD[LPXP H[WHUQDO FORFN IUHTXHQF\ RI  0+] 7KH FRQWUROOHU SURYLGHV DQ LQWHUQDO FORFN WR SHUIRUP VHFXULW\ DOJRULWKPV 7KH LQVWUXFWLRQ VHW FRQWDLQV  GLIIHUHQW LQVWUXFWLRQV WKHUH WKH %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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 Philips Electronics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¶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 Philips Electronics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·VOLIHF\FOHLVGHFRPSRVHGLQWR SKDVHVZKLFKFDQEHVXPPDULVHGDVIROORZV 3KDVH 6PDUWFDUGHPEHGGHGVRIWZDUHGHYHORSPHQW 3KDVH ,&'HYHORSPHQW 3KDVH ,&PDQXIDFWXULQJDQGWHVWLQJ 3KDVH ,&SDFNLQJDQGWHVWLQJ 3KDVH 6PDUWFDUGSURGXFWDQGILQLVKLQJSURFHVV 3KDVH 6PDUWFDUGSHUVRQDOLVDWLRQ 3KDVH 6PDUWFDUGHQGXVDJH 'HWDLOVRIWKH/LIH&\FOHGHVFULSWLRQDUHJLYHQLQFKDSWHU 7KHVFRSHRIWKRVHDVVXUDQFHFRPSRQHQWVUHIHUULQJWKHSURGXFW·VOLIHF\FOHLVOLPLWHGWR3KDVHV DQG7KHVHSKDVHVDUHXQGHUWKHFRQWURORIWKH72(PDQXIDFWXUHU$OOSURFHGXUHVZLWKLQWKHVH SKDVHVDUHFRYHUHGE\WKHHYDOXDWLRQ7KLVLQFOXGHVWKHLQWHUIDFHVWRWKHRWKHUSKDVHVZKHUHLQ IRUPDWLRQDQGPDWHULDOLVEHLQJH[FKDQJHGZLWKWKHSDUWQHUVRIWKHGHYHORSHUPDQXIDFWXUHURIWKH 72( 3KLOLSVZLOOGHOLYHUWKH72(DWWKHHQGRISKDVHDIWHUWKHSURGXFWLRQWHVWLQIRUPRIZDIHUV7KH ,&3DFNDJLQJ SKDVH DQGWKHIROORZLQJSKDVHVDUHXQGHUFRQWURORIWKHFXVWRPHURI3KLOLSV 1HYHUWKHOHVVWKHFKLSLVWRWDOO\GHDOWLQDQDSSURSULDWHSDFNDJLQJZKHQEHLQJXVHGLQWKHILHOGDW SKDVH %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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 Philips Electronics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 Philips Electronics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• WDPSHUUHVLVWDQWGDWDVWRUDJH • EDVLFFU\SWRJUDSKLFIXQFWLRQV '(6FRSURFHVVRU • SK\VLFDOUDQGRPQXPEHUJHQHUDWRU • GDWDFRPPXQLFDWLRQ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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´6PDUWFDUGµ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 Philips Electronics NV 3ULQW  'LVFORVXUHRIGDWD ZKLFKPD\FRPSULVHDQ\GDWDLQFOXGLQJFRGHVWRUHGLQRUSURFHVVHG E\WKHVPDUWFDUGLQWHJUDWHGFLUFXLW PHDQVWKDWDQDWWDFNHULVUHDOLVWLFDOO\ DEOHWRGHWHU PLQHDPHDQLQJIXOEORFNRIGDWD7KLVVKRXOGEHFRQVLGHUHGIRUWKHWKUHDWV 7/HDN,QKHUHQW73K\V3URELQJ7/HDN)RUFHGDQG7$EXVH)XQF    WDNLQJLQWRDFFRXQWWKHDVVXPHGDWWDFNSRWHQWLDO DQGIRULQVWDQFHWKHSUREDELOLW\RIHUURUV %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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·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 Philips Electronics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 Philips Electronics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´3URWHFWLRQGXULQJ3DFNDJLQJ)LQLVKLQJDQG3HUVRQDOLVDWLRQ $3URFHVV&DUG µ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´8VDJHRI +DUGZDUH3ODWIRUP $3ODW$SSO µ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 Philips Electronics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´7UHDWPHQWRI 8VHU'DWD $5HVS$SSO µ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´FORQLQJRIWKHIXQFWLRQDOEHKDYLRXURIWKHVPDUWFDUGRQLWV,62 FRPPDQGLQWHUIDFHµLVDYHUWHGE\WKHFRPELQDWLRQRIPHDVXUHVZKLFKVSOLWLQWRWKRVHEHLQJ HYDOXDWHGDFFRUGLQJWRWKLV6HFXULW\7DUJHWDQGWKRVHEHLQJVXEMHFWWRWKHHYDOXDWLRQRIWKH 6PDUWFDUG(PEHGGHG6RIWZDUHRUWKH6PDUWFDUGDQGWKHFRUUHVSRQGLQJSHUVRQDOLVDWLRQSURFHVV 7KHUHIRUHIXQFWLRQDOFORQLQJLVLQGLUHFWO\FRYHUHGE\WKHVHFXULW\FRQFHUQVDQGWKUHDWVGHVFULEHG EHORZ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW $FFRUGLQJWRWKLV6HFXULW\7DUJHWWKHUHDUHWKHIROORZLQJVWDQGDUGKLJKOHYHOVHFXULW\FRQFHUQV 6& PDQLSXODWLRQRI8VHU'DWDDQGRIWKH6PDUWFDUG(PEHGGHG6RIWZDUH ZKLOHEHLQJH[H FXWHGSURFHVVHGDQGZKLOHEHLQJVWRUHGLQWKH72(·VPHPRULHV DQG 6& GLVFORVXUHRI8VHU'DWDDQGRIWKH6PDUWFDUG(PEHGGHG6RIWZDUH ZKLOHEHLQJSURFHVVHG DQGZKLOHEHLQJVWRUHGLQWKH72(·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·VFRXQWHUPHDVXUHVDUHGHVLJQHGWRDYHUWWKHWKUHDWVGHVFULEHGEHORZ1HYHUWKHOHVVWKH\ PD\EHHIIHFWLYHLQHDUOLHUSKDVHV 3KDVHVWR  7KH72(LVH[SRVHGWRGLIIHUHQWW\SHVRILQIOXHQFHVRULQWHUDFWLRQVZLWKLWVRXWHUZRUOG6RPHRI WKHPPD\UHVXOWIURPXVLQJWKH72(RQO\EXWRWKHUVPD\DOVRLQGLFDWHDQDWWDFN7KHGLIIHUHQW W\SHVRILQIOXHQFHVRULQWHUDFWLRQVDUHYLVXDOLVHGLQ)LJXUH %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW )LJXUH$WWDFN0RGHOIRUWKH72( $QLQWHUDFWLRQZLWKWKH72(FDQEHGRQHWKURXJKWKH,62LQWHUIDFHV 1XPEHU²LQ)LJXUH ZKLFKDUHUHDOLVHGXVLQJFRQWDFWVDQGRUDFRQWDFWOHVVLQWHUIDFH,QIOXHQFHVRULQWHUDFWLRQVZLWKWKH 72(DOVRRFFXUVWKURXJKWKHFKLSVXUIDFH 1XPEHU²LQ)LJXUH ,Q1XPEHUDQGJDO YDQLFFRQWDFWVDUHXVHG,Q1XPEHUDQGWKHLQIOXHQFH DUURZGLUHFWHGWRWKHFKLS RUWKH PHDVXUHPHQW DUURZVWDUWVIURPWKHFKLS GRHVQRWUHTXLUHDFRQWDFW1XPEHUDQGUHIHUWR VSHFLILFVLWXDWLRQVZKHUHWKH72(DQGLWVIXQFWLRQDOEHKDYLRXULVQRWRQO\LQIOXHQFHGEXWGHILQLWH FKDQJHVDUHPDGHE\DSSO\LQJPHFKDQLFDOFKHPLFDODQGRWKHUPHWKRGV VXFKDV 0DQ\DW WDFNVUHTXLUHDSULRULQVSHFWLRQDQGVRPHUHYHUVHHQJLQHHULQJ 1XPEHU  ([DPSOHVIRUVSHFLILFDWWDFNVDUHJLYHQLQVHFWLRQ 6WDQGDUG7KUHDWV UHIHUULQJWR6&DQG6& 7KH72(VKDOODYHUWWKHWKUHDW´,QKHUHQW,QIRUPDWLRQ/HDNDJH 7/HDN,QKHUHQW µDVVSHFLILHG EHORZ 7/HDN,QKHUHQW ,QKHUHQW,QIRUPDWLRQ/HDNDJH %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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´3K\VLFDO3URELQJ 73K\V3URELQJ µ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´PHDVXUHPHQWVµXVLQJJDOYDQLFFRQWDFWVRUDQ\W\SHRI FKDUJHLQWHUDFWLRQZKHUHDVPDQLSXODWLRQVDUHFRQVLGHUHGXQGHUWKHWKUHDW ´3K\VLFDO0DQLSXODWLRQ 73K\V0DQLSXODWLRQ µ7KHWKUHDWV´,QKHUHQW ,QIRUPDWLRQ/HDNDJH 7/HDN,QKHUHQW µDQG´)RUFHG,QIRUPDWLRQ/HDN DJH 7/HDN)RUFHG ´PD\XVHSK\VLFDOSURELQJEXWUHTXLUHFRPSOH[VLJQDO SURFHVVLQJLQDGGLWLRQ 7KH72(VKDOODYHUWWKHWKUHDW´0DOIXQFWLRQGXHWR(QYLURQPHQWDO6WUHVV 70DOIXQFWLRQ µDV VSHFLILHGEHORZ 70DOIXQFWLRQ 0DOIXQFWLRQGXHWR(QYLURQPHQWDO6WUHVV $QDWWDFNHUPD\FDXVHDPDOIXQFWLRQRI76)RURIWKH6PDUWFDUG(PEHG GHG6RIWZDUHE\DSSO\LQJHQYLURQPHQWDOVWUHVVLQRUGHUWR L GHDFWLYDWHRU PRGLI\VHFXULW\IHDWXUHVRUIXQFWLRQVRIWKH72(RU LL GHDFWLYDWHRU PRGLI\VHFXULW\IXQFWLRQVRIWKH6PDUWFDUG(PEHGGHG6RIWZDUH7KLVPD\ EHDFKLHYHGE\RSHUDWLQJWKH6PDUWFDUGRXWVLGHWKHQRUPDORSHUDWLQJFRQ GLWLRQV 1XPEHUVDQGLQ)LJXUH  %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 7RH[SORLWWKLVDQDWWDFNHUQHHGVLQIRUPDWLRQDERXWWKHIXQFWLRQDORSHUD WLRQ 7KH72(VKDOODYHUWWKHWKUHDW´3K\VLFDO0DQLSXODWLRQ 73K\V0DQLSXODWLRQ µ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·VLQWHUQDOFRQVWUXFWLRQ KHUH 1XPEHULQ)LJXUH  7KH72(VKDOODYHUWWKHWKUHDW´)RUFHG,QIRUPDWLRQ/HDNDJH 7/HDN)RUFHG ´DVVSHFLILHGEH ORZ 7/HDN)RUFHG )RUFHG,QIRUPDWLRQ/HDNDJH $QDWWDFNHUPD\H[SORLWLQIRUPDWLRQZKLFKLVOHDNHGIURPWKH72(GXULQJ XVDJHRIWKH6PDUWFDUGLQRUGHUWRGLVFORVHFRQILGHQWLDOGDWD 8VHU'DWDRU 76)GDWD HYHQLIWKHLQIRUPDWLRQOHDNDJHLVQRWLQKHUHQWEXWFDXVHGE\ WKHDWWDFNHU 7KLVWKUHDWSHUWDLQVWRDWWDFNVZKHUHPHWKRGVGHVFULEHGLQ´0DOIXQFWLRQ GXHWR(QYLURQPHQWDO6WUHVVµ UHIHUWR70DOIXQFWLRQ DQGRU´3K\VLFDO 0DQLSXODWLRQµ UHIHUWR73K\V0DQLSXODWLRQ DUHXVHGWRFDXVHOHDNDJH IURPVLJQDOV 1XPEHUVDQGLQ)LJXUH ZKLFKQRUPDOO\GRQRW FRQWDLQVLJQLILFDQWLQIRUPDWLRQDERXWVHFUHWV 7KH72(VKDOODYHUWWKHWKUHDW´$EXVHRI)XQFWLRQDOLW\ 7$EXVH)XQF µDVVSHFLILHGEHORZ 7$EXVH)XQF $EXVHRI)XQFWLRQDOLW\ $QDWWDFNHUPD\XVHIXQFWLRQVRIWKH72(ZKLFKPD\QRWEHXVHGDIWHU 72('HOLYHU\LQRUGHUWR L GLVFORVHRUPDQLSXODWH8VHU'DWD LL WRPD QLSXODWH H[SORUHE\SDVVGHDFWLYDWHRUFKDQJH VHFXULW\IHDWXUHVRUIXQF WLRQVRIWKH72(RURIWKH6PDUWFDUG(PEHGGHG6RIWZDUHRU LLL WRHQ DEOHDQDWWDFN %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 7KUHDWVUHODWHGWR6SHFLILF)XQFWLRQDOLW\ UHIHUULQJWR6& 7KH72(VKDOODYHUWWKHWKUHDW´'HILFLHQF\RI5DQGRP1XPEHUV 751' µDVVSHFLILHGEHORZ 751' 'HILFLHQF\RI5DQGRP1XPEHUV $QDWWDFNHUPD\JDWKHULQIRUPDWLRQDERXWWKHSURGXFHGUDQGRPQXPEHUV ZKLFKPLJKWEHDSUREOHPEHFDXVHWKH\PD\EHXVHGIRULQVWDQFHWRJHQHU DWHFU\SWRJUDSKLFNH\V +HUHWKHDWWDFNHULVH[SHFWHGWRWDNHDGYDQWDJHRIVWDWLVWLFDOSURSHUWLHVRI WKHUDQGRPQXPEHUVJHQHUDWHGE\WKH72(ZLWKRXWVSHFLILFNQRZOHGJH DERXWWKH72(·VJHQHUDWRU0DOIXQFWLRQVRUSUHPDWXUHDJHLQJDUHDOVR FRQVLGHUHGZKLFKPD\DVVLVWLQJHWWLQJLQIRUPDWLRQDERXWUDQGRPQXP EHUV 7KUHDWVWREH$YHUWHGE\WKH72(·V(QYLURQPHQW 7KHUHDUHQRWKUHDWVGLUHFWHGWRWKH72(·VHQYLURQPHQWRQO\7KHWDUJHWRIWKHDERYHWKUHDWVLV WKH 6PDUWFDUG FRPSULVLQJ WKH L 72( LL WKH 6PDUWFDUG (PEHGGHG 6RIWZDUH DQG LLL WKH VPDUWFDUGFDUULHU7KH6PDUWFDUG(PEHGGHG6RIWZDUHPXVWFRQWULEXWHWRDYHUWWKHWKUHDWV$W OHDVWLWPXVWQRWXQGHUPLQHWKHVHFXULW\SURYLGHGE\WKH72()RUGHWDLOUHIHUWRWKHDVVXPSWLRQV UHJDUGLQJWKH6PDUWFDUG(PEHGGHG6RIWZDUHVSHFLILHGLQVHFWLRQ  2UJDQLVDWLRQDO6HFXULW\3ROLFLHV 7KH,&'HYHORSHU0DQXIDFWXUHUPXVWDSSO\WKHSROLF\´3URWHFWLRQGXULQJ72('HYHORSPHQW DQG3URGXFWLRQ 33URFHVV72( µ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 Philips Electronics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 Philips Electronics NV 3ULQW  6HFXULW\2EMHFWLYHV 7KLVFKDSWHU6HFXULW\2EMHFWLYHVFRQWDLQVWKHIROORZLQJVHFWLRQV 6HFXULW\2EMHFWLYHVIRUWKH72( 6HFXULW\2EMHFWLYHVIRU(QYLURQPHQW  6HFXULW\2EMHFWLYHVIRUWKH72( 7KHSURGXFWVXSSRUWVWKHIROORZLQJVWDQGDUGKLJKOHYHOVHFXULW\JRDOV 6* PDLQWDLQWKHLQWHJULW\RI8VHU'DWDDQGRIWKH6PDUWFDUG(PEHGGHG6RIWZDUH ZKHQEH LQJH[HFXWHGSURFHVVHGDQGZKHQEHLQJVWRUHGLQWKH72(·VPHPRULHV DVZHOODV 6* PDLQWDLQWKHFRQILGHQWLDOLW\RI8VHU'DWDDQGRIWKH6PDUWFDUG(PEHGGHG6RIWZDUH ZKHQEHLQJSURFHVVHGDQGZKHQEHLQJVWRUHGLQWKH72(·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´3URWHFWLRQDJDLQVW,QKHUHQW,QIRUPDWLRQ/HDNDJH 2/HDN,QKHUHQW µDV VSHFLILHGEHORZ 2/HDN,QKHUHQW 3URWHFWLRQDJDLQVW,QKHUHQW,QIRUPDWLRQ/HDNDJH 7KH72(PXVWSURYLGHSURWHFWLRQDJDLQVWGLVFORVXUHRIFRQILGHQWLDOGDWD 8VHU'DWDRU76)GDWD VWRUHGDQGRUSURFHVVHGLQWKH6PDUWFDUG,&  E\PHDVXUHPHQWDQGDQDO\VLVRIWKHVKDSHDQGDPSOLWXGHRIVLJQDOV IRU H[DPSOHRQWKHSRZHUFORFNRU,2OLQHV DQG  E\ PHDVXUHPHQW DQG DQDO\VLV RI WKH WLPH EHWZHHQ HYHQWV IRXQG E\ PHDVXULQJVLJQDOV IRULQVWDQFHRQWKHSRZHUFORFNRU,2OLQHV  %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 7KLVREMHFWLYHSHUWDLQVWRPHDVXUHPHQWVZLWKVXEVHTXHQWFRPSOH[VLJQDO SURFHVVLQJZKHUHDV23K\V3URELQJLVDERXWGLUHFWPHDVXUHPHQWVRQHOH PHQWVRQWKHFKLSVXUIDFH'HWDLOVFRUUHVSRQGWRDQDQDO\VLVRIDWWDFNVFH QDULRVZKLFKLVQRWJLYHQKHUH 7KH72(VKDOOSURYLGH´3URWHFWLRQDJDLQVW3K\VLFDO3URELQJ 23K\V3URELQJ µ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´3URWHFWLRQDJDLQVW0DOIXQFWLRQV 20DOIXQFWLRQ µDVVSHFLILHGEHORZ 20DOIXQFWLRQ 3URWHFWLRQDJDLQVW0DOIXQFWLRQV 7KH72(PXVWHQVXUHLWVFRUUHFWRSHUDWLRQ 7KH72(PXVWSUHYHQWWKDWLWLVRSHUDWHGRXWVLGHWKHQRUPDORSHUDWLQJ FRQGLWLRQVZKHUHUHOLDELOLW\DQGVHFXUHRSHUDWLRQKDVQRWEHHQSURYHQRU WHVWHG7KLVLVWRSUHYHQWHUURUV7KHHQYLURQPHQWDOFRQGLWLRQVPD\LQ FOXGHYROWDJHFORFNIUHTXHQF\WHPSHUDWXUHRUH[WHUQDOHQHUJ\ILHOGV 5HPDUN$PDOIXQFWLRQRIWKH72(PD\DOVREHFDXVHGXVLQJDGLUHFWLQ WHUDFWLRQZLWKHOHPHQWVRQWKHFKLSVXUIDFH7KLVLVFRQVLGHUHGDVEHLQJD PDQLSXODWLRQ UHIHUWRWKHREMHFWLYH23K\V0DQLSXODWLRQ SURYLGHGWKDW GHWDLOHGNQRZOHGJHDERXWWKH72(VLQWHUQDOFRQVWUXFWLRQLVUHTXLUHGDQG WKHDWWDFNLVSHUIRUPHGLQDFRQWUROOHGPDQQHU %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 7KH72(VKDOOSURYLGH´3URWHFWLRQDJDLQVW3K\VLFDO0DQLSXODWLRQ 23K\V0DQLSXODWLRQ µ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´3URWHFWLRQDJDLQVW)RUFHG,QIRUPDWLRQ/HDNDJH 2/HDN)RUFHG ´DV VSHFLILHGEHORZ 2/HDN)RUFHG 3URWHFWLRQDJDLQVW)RUFHG,QIRUPDWLRQ/HDNDJH 7KH6PDUWFDUGPXVWEHSURWHFWHGDJDLQVWGLVFORVXUHRIFRQILGHQWLDOGDWD 8VHU'DWDRU76)GDWD SURFHVVHGLQWKH&DUG XVLQJPHWKRGVDVGH VFULEHGXQGHU2/HDN,QKHUHQW HYHQLIWKHLQIRUPDWLRQOHDNDJHLVQRWLQ KHUHQWEXWFDXVHGE\WKHDWWDFNHU  E\IRUFLQJDPDOIXQFWLRQ UHIHUWR´3URWHFWLRQDJDLQVW0DOIXQFWLRQGXH WR(QYLURQPHQWDO6WUHVV 20DOIXQFWLRQ µDQGRU  E\DSK\VLFDOPDQLSXODWLRQ UHIHUWR´3URWHFWLRQDJDLQVW3K\VLFDO0D QLSXODWLRQ 23K\V0DQLSXODWLRQ µ ,IWKLVLVQRWWKHFDVHVLJQDOVZKLFKQRUPDOO\GRQRWFRQWDLQVLJQLILFDQW LQIRUPDWLRQDERXWVHFUHWVFRXOGEHFRPHDQLQIRUPDWLRQFKDQQHOIRUD OHDNDJHDWWDFN 7KH72(VKDOOSURYLGH´3URWHFWLRQDJDLQVW$EXVHRI)XQFWLRQDOLW\ 2$EXVH)XQF µDVVSHFLILHG EHORZ 2$EXVH)XQF 3URWHFWLRQDJDLQVW$EXVHRI)XQFWLRQDOLW\ 7KH72(PXVWSUHYHQWWKDWIXQFWLRQVRIWKH72(ZKLFKPD\QRWEHXVHG DIWHU72('HOLYHU\FDQEHDEXVHGLQRUGHU L WRGLVFORVHFULWLFDO8VHU %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 'DWD LL WRPDQLSXODWHFULWLFDO8VHU'DWDRIWKH6PDUWFDUG(PEHGGHG 6RIWZDUH LLL WRPDQLSXODWH6RIWFRGHG6PDUWFDUG(PEHGGHG6RIWZDUHRU LY E\SDVVGHDFWLYDWHFKDQJHRUH[SORUHVHFXULW\IHDWXUHVRUIXQFWLRQVRI WKH72('HWDLOVGHSHQGIRULQVWDQFHRQWKHFDSDELOLWLHVRIWKH7HVW )HDWXUHVSURYLGHGE\WKH,&'HGLFDWHG7HVW6RIWZDUHZKLFKDUHQRWVSHFL ILHGKHUH 7KH72(VKDOOSURYLGH´72(,GHQWLILFDWLRQ 2,GHQWLILFDWLRQ ´DVVSHFLILHGEHORZ 2,GHQWLILFDWLRQ 72(,GHQWLILFDWLRQ 7KH72(PXVWSURYLGHPHDQVWRVWRUH,QLWLDOLVDWLRQ'DWDDQG3UH SHUVRQDOLVDWLRQ'DWDLQLWVQRQYRODWLOHPHPRU\7KH,QLWLDOLVDWLRQ'DWD RUSDUWVRIWKHP DUHXVHGIRU72(LGHQWLILFDWLRQ 6HFXULW\2EMHFWLYHVUHODWHGWR6SHFLILF)XQFWLRQDOLW\ UHIHUULQJWR6* 7KH72(VKDOOSURYLGH´5DQGRP1XPEHUV 251' µDVVSHFLILHGEHORZ 251' 5DQGRP1XPEHUV 7KH72(ZLOOHQVXUHWKHFU\SWRJUDSKLFTXDOLW\RIUDQGRPQXPEHUJHQ HUDWLRQ)RULQVWDQFHUDQGRPQXPEHUVVKDOOQRWEHSUHGLFWDEOHDQGVKDOO KDYHDVXIILFLHQWHQWURS\ 7KH72(ZLOOHQVXUHWKDWQRLQIRUPDWLRQDERXWWKHSURGXFHGUDQGRP QXPEHUVLVDYDLODEOHWRDQDWWDFNHUVLQFHWKH\PLJKWEHXVHGIRULQVWDQFHWR JHQHUDWHFU\SWRJUDSKLFNH\V 7KH72(VKDOOSURYLGHFU\SWRJUDSKLFIXQFWLRQDOLW\ 2'(6 µDVVSHFLILHGEHORZ 2'(6 7ULSOH'(6)XQFWLRQDOLW\ 7KH72(ZLOOSURYLGHWKHFU\SWRJUDSKLFIXQFWLRQDOLW\RI7ULSOH'(6HQ FU\SWLRQDQGGHFU\SWLRQWRWKH6PDUWFDUG(PEHGGHG6RIWZDUH 1RWH7KH72(ZLOOHQVXUHWKHFRQILGHQWLDOLW\RIWKH8VHU'DWD DQGHV SHFLDOO\ FU\SWRJUDSKLF NH\V  GXULQJ 7ULSOH '(6 RSHUDWLRQ 7KLV LV VXS SRUWHGE\2/HDN,QKHUHQW  6HFXULW\2EMHFWLYHVIRU(QYLURQPHQW 3KDVH 7KH6PDUWFDUG(PEHGGHG6RIWZDUHVKDOOSURYLGH´8VDJHRI+DUGZDUH3ODWIRUP 2(3ODW$SSO µ DVVSHFLILHGEHORZ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 2(3ODW$SSO 8VDJHRI+DUGZDUH3ODWIRUP 7KH6PDUWFDUG(PEHGGHG6RIWZDUHVKDOOEHGHVLJQHGVRWKDWWKHUHTXLUH PHQWVIURPWKHIROORZLQJGRFXPHQWVDUHPHW L KDUGZDUHGDWDVKHHWIRU WKH72( LL 72(DSSOLFDWLRQQRWHVDQG LLL ILQGLQJVRIWKH72( HYDOXDWLRQUHSRUWVUHOHYDQWIRUWKH6PDUWFDUG(PEHGGHG6RIWZDUH 7KH6PDUWFDUG(PEHGGHG6RIWZDUHVKDOOSURYLGH´7UHDWPHQWRI8VHU'DWD 2(5HVS$SSO µDV VSHFLILHGEHORZ 2(5HVS$SSO 7UHDWPHQWRI8VHU'DWD 6HFXULW\UHOHYDQW8VHU'DWD HVSHFLDOO\FU\SWRJUDSKLFNH\V DUHWUHDWHGE\ WKH6PDUWFDUG(PEHGGHG6RIWZDUHDVUHTXLUHGE\WKHVHFXULW\QHHGVRIWKH VSHFLILFDSSOLFDWLRQFRQWH[W )RUH[DPSOHWKH6PDUWFDUG(PEHGGHG6RIWZDUHZLOOQRWGLVFORVHVHFXULW\ UHOHYDQWXVHUGDWDWRXQDXWKRULVHGXVHUVRUSURFHVVHVZKHQFRPPXQLFDWLQJ ZLWKDWHUPLQDO 3KDVHXSWR72('HOLYHU\ 7KH72(0DQXIDFWXUHUVKDOOHQVXUHWKH´3URWHFWLRQGXULQJ72('HYHORSPHQWDQG3URGXFWLRQ 2(3URFHVV72( µ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´3URWHFWLRQGXULQJ3DFNDJLQJ)LQLVKLQJDQG3HUVRQDOLVDWLRQ 2(3URFHVV&DUG µ PXVWEHHQVXUHGDIWHU72('HOLYHU\XSWRWKHHQGRI3KDVHVDVZHOODVGXULQJWKHGHOLYHU\WR 3KDVHDVVSHFLILHGEHORZ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 2(3URFHVV&DUG 3URWHFWLRQGXULQJ3DFNDJLQJ)LQLVKLQJDQG3HUVRQDOLVDWLRQ 6HFXULW\SURFHGXUHVVKDOOEHXVHGDIWHU72('HOLYHU\XSWRGHOLYHU\WRWKH HQGXVHUWRPDLQWDLQFRQILGHQWLDOLW\DQGLQWHJULW\RIWKH72(DQGRILWV PDQXIDFWXULQJDQGWHVWGDWD WRSUHYHQWDQ\SRVVLEOHFRS\PRGLILFDWLRQ UHWHQWLRQWKHIWRUXQDXWKRULVHGXVH  7KLVPHDQVWKDW3KDVHVDIWHU72('HOLYHU\XSWRWKHHQGRI3KDVH UHIHU WRVHFWLRQ PXVWEHSURWHFWHGDSSURSULDWHO\ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW  ,76HFXULW\5HTXLUHPHQWV 7KLVFKDSWHU,76HFXULW\5HTXLUHPHQWVFRQWDLQVWKHIROORZLQJVHFWLRQV 72(6HFXULW\5HTXLUHPHQWV  72()XQFWLRQDO5HTXLUHPHQWV  72($VVXUDQFH5HTXLUHPHQWV  5HILQHPHQWVRIWKH72($VVXUDQFH5HTXLUHPHQWV  6HFXULW\5HTXLUHPHQWVIRUWKH(QYLURQPHQW  1RWHWKDWVHFWLRQLVQRWPDQGDWRU\DFFRUGLQJWRWKH&RPPRQ&ULWHULD7KH5HILQHPHQWVRI WKH72($VVXUDQFH5HTXLUHPHQWVWDNHLQWRDFFRXQWWKHSHFXOLDULWLHVRIWKHVPDUWFDUGGHYHORS PHQWDQGSURGXFWLRQSURFHVV FDUG·VOLIHF\FOH   72(6HFXULW\5HTXLUHPHQWV  72()XQFWLRQDO5HTXLUHPHQWV ,QRUGHUWRGHILQHWKH6HFXULW\)XQFWLRQDO5HTXLUHPHQWVWKH3DUWRIWKH&RPPRQ&ULWHULDZDV XVHG+RZHYHUVRPH6HFXULW\)XQFWLRQDO5HTXLUHPHQWVKDVEHHQQHZO\FUHDWHGDQGDUHQRWWDNHQ IURP3DUWRIWKH&RPPRQ&ULWHULD7KHUHIRUHWKLV6HFXULW\7DUJHWLVFKDUDFWHULVHGE\´3DUW H[WHQGHGµ 7KH6HFXULW\)XQFWLRQDO5HTXLUHPHQWVDUH VKRZQ LQ WKH IROORZLQJ WDEOH 7KHVH VHFXULW\ IXQF WLRQDOFRPSRQHQWVDUHOLVWHGDQGH[SODLQHGEHORZ 6HFXULW\)XQFWLRQDO5HTXLUHPHQW 1RWH )58B)/7 /LPLWHGIDXOWWROHUDQFH )37B)/6 )DLOXUHZLWKSUHVHUYDWLRQRIVHFXUHVWDWH )37B6(3 76)GRPDLQVHSDUDWLRQ )37B3+3 5HVLVWDQFHWRSK\VLFDODWWDFN %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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 Philips Electronics NV 3ULQW Limited fault tolerance (FRU_FLT.2) Failure with preservation of secure state (FPT_FLS.1) operating conditions operating conditions max. min. max. min. Technical limits without reduction due to FPT_FLS.1 Usable limits of the product as enforced due to FPT_FLS.1 )LJXUH3DUDGLJPUHJDUGLQJ2SHUDWLQJ&RQGLWLRQV )LJXUHPXVWQRWEHXQGHUVWRRGDVEHLQJWZRGLPHQVLRQDODQGGHILQLQJVWDWLFOLPLWVRQO\5HDOLW\ LVPXOWLGLPHQVLRQDODQGLQFOXGHVDYDULHW\RIWLPLQJDVSHFWV1RWHWKDWWKHOLPLWRIWKHRSHUDWLQJ FRQGLWLRQVYLVXDOLVHGE\WKHLQQHUGDVKHGURXQGHGUHFWDQJOHLQ)LJXUHLVQRWQHFHVVDULO\H[DFWO\ UHIOHFWHGE\WKHOLPLWVLGHQWLILHGLQWKH72(·VGDWDVKHHW,QVWHDGWKLVOLPLWPDUNVWKHERXQGDU\ EHWZHHQWKH´WROHUDQFHUHDFWLRQµRIWKH72(DQGWKH´DFWLYHUHDFWLRQµRIVHQVRUV DQGSHUKDSV RWKHUFLUFXLWU\  7KHVHFXULW\IXQFWLRQDOFRPSRQHQW/LPLWHGIDXOWWROHUDQFH )58B)/7 KDVEHHQVHOHFWHGLQ RUGHUWRDGGUHVVWKHUREXVWQHVVZLWKLQVRPHOLPLW DVVKRZQE\WKHLQQHUGDVKHGUHFWDQJOHLQ)LJ XUH EHIRUHDFWLYHUHDFWLRQWDNHVSODFH1RWHWKDWWKH72(GRHVQRW LQPRVWFDVHV DFWXDOO\GH WHFWIDXOWVRUIDLOXUHVDQGWKHQFRUUHFWWKHPLQRUGHUWRJXDUDQWHHIXUWKHURSHUDWLRQRIDOOWKH 72(·VFDSDELOLWLHV7KLVLVWKHZD\VRIWZDUHZRXOGLPSOHPHQW/LPLWHGIDXOWWROHUDQFH )58B)/7 ,QVWHDGWKH72(ZLOODFKLHYHH[DFWO\WKHVDPHE\HOLPLQDWLQJWKHFDXVHIRUSRVVL EOHIDXOWV E\PHDQVRIILOWHULQJIRULQVWDQFH DQGE\EHLQJUHVLVWDQWDJDLQVWLQIOXHQFHV UREXVW QHVV ,QWKHFDVHRIWKH72(WKH´UHDFWLRQWRDIDLOXUHµLVUHSODFHGE\WKH´UHDFWLRQWRRSHUDWLQJ FRQGLWLRQVµZKLFKFRXOGFDXVHDPDOIXQFWLRQZLWKRXWWKHUHDFWLRQRIWKH72(·VFRXQWHUPHDVXUH ,IWKH72(LVH[SRVHGWRRWKHURSHUDWLQJFRQGLWLRQVWKLVPD\QRWEHWROHUDWHG7KHQWKH72( PXVWGHWHFWWKDWDQG´SUHVHUYHDVHFXUHVWDWHµ XVHRIGHWHFWRUVDQGFDXVHDUHVHWIRULQVWDQFH 7KH VHFXULW\IXQFWLRQDOFRPSRQHQW)DLOXUHZLWKSUHVHUYDWLRQRIVHFXUHVWDWH )37B)/6 KDVEHHQ VHOHFWHGWRHQVXUHWKDW7KHZD\WKHVHFXUHVWDWHLVUHDFKHGGHSHQGVRQWKHLPSOHPHQWDWLRQ1RWH WKDWWKH72(FDQPRQLWRUERWKH[WHUQDORSHUDWLQJFRQGLWLRQVDQGRWKHULQWHUQDOFRQGLWLRQVDQG WKHQUHDFWDSSURSULDWHO\([SRVXUHWRVSHFLILF´RXWRIUDQJHµH[WHUQDORSHUDWLQJFRQGLWLRQV HQYL URQPHQWDOVWUHVV PD\DFWXDOO\FDXVHIDLOXUHFRQGLWLRQVLQWHUQDOO\ZKLFKFDQEHGHWHFWHGE\ )37B)/65HIHUULQJWRH[WHUQDORSHUDWLQJFRQGLWLRQVWKH72(LVH[SHFWHGWRUHVSRQGLIFRQGL WLRQVDUHGHWHFWHGZKLFKPD\FDXVHDIDLOXUH([DPSOHVIRULPSOHPHQWDWLRQVRIWKHVHFXULW\IXQF WLRQDOUHTXLUHPHQW)DLOXUHZLWKSUHVHUYDWLRQRIVHFXUHVWDWH )37B)/6 DUHDYROWDJHGHWHFWRU %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW H[WHUQDOFRQGLWLRQ DQGDFLUFXLWU\ZKLFKGHWHFWVDFFHVVHVWRDGGUHVVDUHDVZKLFKDUHQRWXVHG LQWHUQDOFRQGLWLRQ  7KRVHSDUWVRIWKH72(ZKLFKVXSSRUWWKHVHFXULW\IXQFWLRQDOUHTXLUHPHQWV´/LPLWHGIDXOWWROHU DQFH )58B)/7 µDQG´)DLOXUHZLWKSUHVHUYDWLRQRIVHFXUHVWDWH )37B)/6 µVKDOOEHSUR WHFWHGIURPLQWHUIHUHQFHRIWKH6PDUWFDUG(PEHGGHG6RIWZDUH7KHVHFXULW\IXQFWLRQDOFRPSR QHQW76)'RPDLQ6HSDUDWLRQ )37B6(3 KDVEHHQVHOHFWHGWRHQVXUHWKDW 7KH72(VKDOOPHHWWKHUHTXLUHPHQW´/LPLWHGIDXOWWROHUDQFH )58B)/7 µDVVSHFLILHGEHORZ )58B)/7 /LPLWHGIDXOWWROHUDQFH +LHUDUFKLFDOWR )58B)/7 )58B)/7 7KH76)VKDOOHQVXUHWKHRSHUDWLRQRIDOOWKH72(·VFDSDELOLWLHVZKHQWKH IROORZLQJIDLOXUHVRFFXUH[SRVXUHWRRSHUDWLQJFRQGLWLRQVZKLFKDUHQRW GHWHFWHGDFFRUGLQJWRWKHUHTXLUHPHQW)DLOXUHZLWKSUHVHUYDWLRQRIVHFXUH VWDWH )37B)/6   'HSHQGHQFLHV )37B)/6)DLOXUHZLWKSUHVHUYDWLRQRIVHFXUHVWDWH 5HILQHPHQW 7KHWHUP´IDLOXUHµDERYHPHDQV´FLUFXPVWDQFHVµ7KH72(SUHYHQWVIDLO XUHVIRUWKH´FLUFXPVWDQFHVµGHILQHGDERYH 7KH72(VKDOOPHHWWKHUHTXLUHPHQW´)DLOXUHZLWKSUHVHUYDWLRQRIVHFXUHVWDWH )37B)/6 µDV VSHFLILHGEHORZ )37B)/6 )DLOXUHZLWKSUHVHUYDWLRQRIVHFXUHVWDWH +LHUDUFKLFDOWR 1RRWKHUFRPSRQHQWV )37B)/6 7KH76)VKDOOSUHVHUYHDVHFXUHVWDWHZKHQWKHIROORZLQJW\SHVRIIDLOXUHV RFFXUH[SRVXUHWRRSHUDWLQJFRQGLWLRQVZKLFKPD\QRWEHWROHUDWHGDF FRUGLQJWRWKHUHTXLUHPHQW/LPLWHGIDXOWWROHUDQFH )58B)/7 DQG ZKHUHWKHUHIRUHDPDOIXQFWLRQFRXOGRFFXU  'HSHQGHQFLHV $'9B630,QIRUPDO72(VHFXULW\SROLF\PRGHO 5HILQHPHQW 7KHWHUP´IDLOXUHµDERYHDOVRFRYHUV´FLUFXPVWDQFHVµ7KHQWKH72(SUH YHQWVIDLOXUHVIRUWKH´FLUFXPVWDQFHVµGHILQHGDERYH 7KH72(VKDOOPHHWWKHUHTXLUHPHQW´76)GRPDLQVHSDUDWLRQµVWDWH )37B6(3 µDVVSHFLILHG EHORZ )37B6(3 76)GRPDLQVHSDUDWLRQ    >DVVLJQPHQWOLVWRIW\SHRIIDLOXUHV@   >DVVLJQPHQWOLVWRIW\SHVRIIDLOXUHVLQWKH76)@ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW +LHUDUFKLFDOWR 1RRWKHUFRPSRQHQWV )37B6(3 7KH76)VKDOOPDLQWDLQDVHFXULW\GRPDLQIRULWVRZQH[HFXWLRQWKDWSUR WHFWVLWIURPLQWHUIHUHQFHDQGWDPSHULQJE\XQWUXVWHGVXEMHFWV )37B6(3 7KH76)VKDOOHQIRUFHVHSDUDWLRQEHWZHHQWKHVHFXULW\GRPDLQVRIVXEMHFWV LQWKH76& 'HSHQGHQFLHV 1RGHSHQGHQFLHV 5HILQHPHQW 7KRVHSDUWVRIWKH72(ZKLFKVXSSRUWWKHVHFXULW\IXQFWLRQDOUHTXLUH PHQWV´/LPLWHGIDXOWWROHUDQFH )58B)/7 µDQG´)DLOXUHZLWKSUHVHUYD WLRQRIVHFXUHVWDWH )37B)/6 µ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·VXSWRWKH6PDUWFDUG(P EHGGHG6RIWZDUHWRXVHWKHVHGDWDVWRUHGDQGSURYLGHGE\WKH72( 7KH72(VKDOOSUHYHQWIXQFWLRQV SURYLGHGE\WKH,&'HGLFDWHG7HVW6RIWZDUHRUE\KDUGZDUH IHDWXUHV IURPEHLQJDEXVHGDIWHU72('HOLYHU\LQRUGHUWRFRPSURPLVHWKH72(·VVHFXULW\ $OO VXFKIXQFWLRQVDUHFDOOHG´7HVW)HDWXUHVµ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´SDVVZRUGVµ  QRQDYDLODELOLW\ IRULQVWDQFHWKURXJKUHPRYDORUGLVDEOLQJE\´IXVLQJµ RUDFRPELQDWLRQRIERWK $GHWDLOHGWHFKQLFDOVSHFLILFDWLRQZRXOGXQQHFHVVDULO\GLVFORVHGHWDLOVDQGLVEH\RQGWKHVFRSHRID 3URWHFWLRQ3URILOHRU6HFXULW\7DUJHW %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 7KH72(LVWHVWHGDIWHUSURGXFWLRQLQ3KDVH UHIHUWRVHFWLRQ XVLQJPHDQVSURYLGHGE\ WKH,&'HGLFDWHG6RIWZDUHDQGRUVSHFLILFKDUGZDUH7HVWLQJLVHYDOXDWHGDFFRUGLQJWRWKHUH TXLUHPHQWVRIWKH&RPPRQ&ULWHULDDVVXUDQFHFODVV$7(7KH,&'HGLFDWHG6RIWZDUHLVFRQVLG HUHGDVEHLQJDWHVWWRROGHOLYHUHGDVSDUWRIWKH72(DQGXVHGEHIRUH72('HOLYHU\RQO\,WGRHV QRWSURYLGHIXQFWLRQVLQODWHUSKDVHVRIWKHFDUG·VOLIHF\FOH7KHUHIRUHQRVHFXULW\IXQFWLRQDO UHTXLUHPHQWLVPDQGDWRU\DFFRUGLQJWRWKLV3URWHFWLRQ3URILOHUHJDUGLQJWHVWLQJ 7KHLPSOHPHQWDWLRQRIWKH7HVW)HDWXUHVPXVWEHDQDO\VHGWRDVFHUWDLQWKHH[LVWHQFHDQGH[SORL WDELOLW\RIYXOQHUDELOLWLHV7KLVLVVXEMHFWWRWKH9XOQHUDELOLW\$VVHVVPHQW $9$ $OOQHFHVVDU\ LQIRUPDWLRQDERXWWKH7HVW)HDWXUHV LQFOXGLQJWKH,&'HGLFDWHG6RIWZDUH PXVWEHSURYLGHGIRU 9XOQHUDELOLW\$VVHVVPHQW $9$ )RUIXUWKHULQIRUPDWLRQRIKRZWRKDQGOHWKH7HVW)HDWXUHV UHIHUWR6HFWLRQ 7KH72(VKDOOPHHWWKHUHTXLUHPHQW´/LPLWHGFDSDELOLWLHV )07B/,0 µDVVSHFLILHGEHORZ &RPPRQ&ULWHULD3DUWH[WHQGHG  )07B/,0 /LPLWHGFDSDELOLWLHV +LHUDUFKLFDOWR 1RRWKHUFRPSRQHQWV )07B/,0 7KH76)VKDOOEHGHVLJQHGLQDPDQQHUWKDWOLPLWVWKHLUFDSDELOLWLHVVRWKDW LQFRQMXQFWLRQZLWK´/LPLWHGDYDLODELOLW\ )07B/,0 µWKHIROORZLQJ SROLF\LVHQIRUFHG'HSOR\LQJ7HVW)HDWXUHVDIWHU72('HOLYHU\GRHVQRW DOORZ8VHU'DWDWREHGLVFORVHGRUPDQLSXODWHG76)GDWDWREHGLVFORVHG RUPDQLSXODWHGVRIWZDUHWREHUHFRQVWUXFWHGDQGQRVXEVWDQWLDOLQIRUPD WLRQDERXWFRQVWUXFWLRQRI76)WREHJDWKHUHGZKLFKPD\HQDEOHRWKHU DWWDFNV 'HSHQGHQFLHV )07B/,0/LPLWHGDYDLODELOLW\ 7KH72(VKDOOPHHWWKHUHTXLUHPHQW´/LPLWHGDYDLODELOLW\ )07B/,0 µDVVSHFLILHGEHORZ &RPPRQ&ULWHULD3DUWH[WHQGHG  )07B/,0 /LPLWHGDYDLODELOLW\ +LHUDUFKLFDOWR 1RRWKHUFRPSRQHQWV )07B/,0 7KH76)VKDOOEHGHVLJQHGLQDPDQQHUWKDWOLPLWVWKHLUDYDLODELOLW\VRWKDW LQFRQMXQFWLRQZLWK´/LPLWHGFDSDELOLWLHV )07B/,0 µWKHIROORZLQJ SROLF\LVHQIRUFHG'HSOR\LQJ7HVW)HDWXUHVDIWHU72('HOLYHU\GRHVQRW DOORZ8VHU'DWDWREHGLVFORVHGRUPDQLSXODWHG76)GDWDWREHGLVFORVHG RUPDQLSXODWHGVRIWZDUHWREHUHFRQVWUXFWHGDQGQRVXEVWDQWLDOLQIRUPD WLRQDERXWFRQVWUXFWLRQRI76)WREHJDWKHUHGZKLFKPD\HQDEOHRWKHU DWWDFNV    >DVVLJQPHQW/LPLWHGFDSDELOLW\DQGDYDLODELOLW\SROLF\@   >DVVLJQPHQW/LPLWHGFDSDELOLW\DQGDYDLODELOLW\SROLF\@ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 'HSHQGHQFLHV )07B/,0/LPLWHGFDSDELOLWLHV 7KH72(VKDOOPHHWWKHUHTXLUHPHQW´$XGLWVWRUDJH )$8B6$6 µDVVSHFLILHGEHORZ &RPPRQ &ULWHULD3DUWH[WHQGHG  )$8B6$6 $XGLWVWRUDJH +LHUDUFKLFDOWR 1RRWKHUFRPSRQHQWV )$8B6$6 7KH76)VKDOOSURYLGHWHVWSHUVRQQHOEHIRUH72('HOLYHU\ ZLWKWKHFD SDELOLW\WRVWRUHWKH,QLWLDOLVDWLRQ'DWDDQGRU3UHSHUVRQDOLVDWLRQ'DWD DQGRUVXSSOHPHQWVRIWKH6PDUWFDUG(PEHGGHG6RIWZDUH LQWKHDXGLW UHFRUGV 'HSHQGHQFLHV 1RGHSHQGHQFLHV 3K\VLFDO0DQLSXODWLRQDQG3URELQJ 7KH72(FDQEHVXEMHFWWR´WDPSHULQJµ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´DXWRPDWLFUHVSRQVHµWRWDPSHULQJ 7KHUHIRUHWKHVHFXULW\IXQFWLRQDOFRPSRQHQW5HVLVWDQFHWRSK\VLFDODWWDFN )37B3+3 KDV EHHQVHOHFWHG7KH72(PD\DOVRSURYLGHIHDWXUHVWRDFWLYHO\UHVSRQGWRDSRVVLEOHWDPSHULQJ DWWDFNZKLFKLVDOVRFRYHUHGE\)37B3+3 7KH72(PD\DOVROHDYHLWXSWRWKH6PDUWFDUG(PEHGGHG6RIWZDUHWRUHDFWZKHQDSRVVLEOH WDPSHULQJKDVEHHQGHWHFWHG&RPSUHKHQVLYHJXLGDQFH UHIHUWR&RPPRQ&ULWHULDDVVXUDQFHFODVV $*' ZLOOEHJLYHQIRUWKHGHYHORSHURIWKH6PDUWFDUG(PEHGGHG6RIWZDUHLQWKLVFDVH7DNLQJ WKHDVVXPSWLRQ´8VDJHRI+DUGZDUH3ODWIRUP $3ODW$SSO µLQWRFRQVLGHUDWLRQWKLVFDVHVKDOO WKHUHIRUHDOVREHFRYHUHGE\)37B3+3 7KH72(VKDOOPHHWWKHUHTXLUHPHQW´5HVLVWDQFHWRSK\VLFDODWWDFN )37B3+3 µDVVSHFLILHG EHORZ    >DVVLJQPHQWDXWKRULVHGXVHUV@   >DVVLJQPHQWOLVWRIDXGLWLQIRUPDWLRQ@   7KLVPXVWEHHYDOXDWHGIRUWKHILQDOVPDUWFDUGSURGXFW %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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´DXWRPDWLFUHVSRQVHµ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´%DVLFLQWHUQDOWUDQVIHUSURWHFWLRQ )'3B,77 µ´%DVLF LQWHUQDO76)GDWDWUDQVIHUSURWHFWLRQ )37B,77 µDQG´6XEVHWLQIRUPDWLRQIORZFRQWURO )'3B,)& µKDYHEHHQVHOHFWHGWRHQVXUHWKDWWKH72(PXVWUHVLVWOHDNDJHDWWDFNV ERWKIRU 8VHU'DWDDQG76)GDWD 7KHVHVHFXULW\IXQFWLRQDOUHTXLUHPHQWVDGGUHVVLQKHUHQWOHDNDJH:LWK UHVSHFWWRIRUFHGOHDNDJHWKH\KDYHWREHFRQVLGHUHGLQFRPELQDWLRQZLWKWKHVHFXULW\IXQFWLRQDO UHTXLUHPHQWV´/LPLWHGIDXOWWROHUDQFH )58B)/7 µDQG´)DLOXUHZLWKSUHVHUYDWLRQRIVHFXUH VWDWH )37B)/6 µRQWKHRQHKDQGDQG´5HVLVWDQFHWRSK\VLFDODWWDFN )37B3+3 µRQWKH RWKHU 7KH72(VKDOOPHHWWKHUHTXLUHPHQW´%DVLFLQWHUQDOWUDQVIHUSURWHFWLRQ )'3B,77 µDVVSHFL ILHGEHORZ )'3B,77 %DVLFLQWHUQDOWUDQVIHUSURWHFWLRQ +LHUDUFKLFDOWR 1RRWKHUFRPSRQHQWV )'3B,77 7KH76)VKDOOHQIRUFHWKH'DWD3URFHVVLQJ3ROLF\  WRSUHYHQWWKHGLVFOR VXUH RIXVHUGDWDZKHQLWLVWUDQVPLWWHGEHWZHHQSK\VLFDOO\VHSDUDWHG SDUWVRIWKH72(    >DVVLJQPHQWSK\VLFDOWDPSHULQJVFHQDULRV@   >DVVLJQPHQWOLVWRI76)GHYLFHVHOHPHQWV@ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 'HSHQGHQFLHV >)'3B$&&6XEVHWDFFHVVFRQWURORU)'3B,)&6XEVHWLQIRUPDWLRQ IORZFRQWURO@ 5HILQHPHQW 7KHGLIIHUHQWPHPRULHVWKH&38DQGRWKHUIXQFWLRQDOXQLWVRIWKH72( HJDFU\SWRJUDSKLFFRSURFHVVRU DUHVHHQDVSK\VLFDOO\VHSDUDWHGSDUWVRI WKH72( 7KH72(VKDOOPHHWWKHUHTXLUHPHQW´%DVLFLQWHUQDO76)GDWDWUDQVIHUSURWHFWLRQ )37B,77 µ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´LQIRUPDWLRQIORZFRQWURO )'3B,77 µ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 Philips Electronics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´4XDOLW\PHWULFIRUUDQGRPQXPEHUV )&6B51' µDV VSHFLILHGEHORZ &RPPRQ&ULWHULD3DUWH[WHQGHG  )&6B51' 4XDOLW\PHWULFIRUUDQGRPQXPEHUV )&6B51' 7KH76)VKDOOSURYLGHDPHFKDQLVPWRJHQHUDWHUDQGRPQXPEHUVWKDW PHHWWKHUHTXLUHPHQWWRSURYLGHELWUDQGRPQXPEHUVZLWKDQHQWURS\RI DWOHDVWELWLQHDFKE\WH  'HSHQGHQFLHV 1RGHSHQGHQFLHV &U\SWRJUDSKLF6XSSRUW 7KH72(VKDOOPHHWWKHUHTXLUHPHQW´&U\SWRJUDSKLFRSHUDWLRQ )&6B&23 µ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 Philips Electronics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 Philips Electronics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·VVLWH7KH&RPPRQ&ULWHULDDVVXUDQFH FRPSRQHQW$'2B'(/UHTXLUHVSURFHGXUHVDQGWHFKQLFDOPHDVXUHVWRGHWHFWPRGLILFDWLRQV ,QWKHSDUWLFXODUFDVHRID6PDUWFDUG,QWHJUDWHG&LUFXLWPRUH´PDWHULDODQGLQIRUPDWLRQµWKDQWKH 72(LWVHOI ZKLFKE\GHILQLWLRQLQFOXGHVWKHQHFHVVDU\JXLGDQFH LVH[FKDQJHGZLWK´XVHUVµ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 7KHUHIRUHFRQVLGHULQJWKHGHILQLWLRQRIWKH&RPPRQ&ULWHULDWKHIROORZLQJUHILQHPHQWLVPDGH UHJDUGLQJWKHLWHPV´72(µDQG´WRWKHXVHURUXVHU·VVLWHµ 7KHIROORZLQJWH[WUHIOHFWVWKHUHTXLUHPHQWVRIWKHVHOHFWHGFRPSRQHQW$'2B'(/ 'HYHORSHUDFWLRQHOHPHQWV $'2B'(/' 7KHGHYHORSHUVKDOOGRFXPHQWSURFHGXUHVIRUGHOLYHU\RIWKH72( RUSDUWVRILWWRWKHXVHU $'2B'(/' 7KHGHYHORSHUVKDOOXVHWKHGHOLYHU\SURFHGXUHV &RQWHQWDQGSUHVHQWDWLRQRIHYLGHQFHHOHPHQWV $'2B'(/& 7KHGHOLYHU\GRFXPHQWDWLRQVKDOOGHVFULEHDOOSURFHGXUHVWKDWDUH QHFHVVDU\ WR PDLQWDLQ VHFXULW\ ZKHQ GLVWULEXWLQJ YHUVLRQV RI WKH 72(WRDXVHU·VVLWH $'2B'(/& 7KHGHOLYHU\GRFXPHQWDWLRQVKDOOGHVFULEHKRZWKHYDULRXVSURFH GXUHVDQGWHFKQLFDOPHDVXUHVSURYLGHIRUWKHGHWHFWLRQRIPRGLIL FDWLRQV RU DQ\ GLVFUHSDQF\ EHWZHHQ WKH GHYHORSHU·V PDVWHU FRS\ DQGWKHYHUVLRQUHFHLYHGDWWKHXVHUVLWH $'2B'(/& 7KHGHOLYHU\GRFXPHQWDWLRQVKDOOGHVFULEHKRZWKHYDULRXVSURFH GXUHVDOORZGHWHFWLRQRIDWWHPSWVWRPDVTXHUDGHDVWKHGHYHORSHU HYHQLQFDVHVLQZKLFKWKHGHYHORSHUKDVVHQWQRWKLQJWRWKHXVHU·V VLWH (YDOXDWRUDFWLRQHOHPHQWV $'2B'(/( 7KHHYDOXDWRUVKDOOFRQILUPWKDWWKHLQIRUPDWLRQSURYLGHGPHHWV DOOUHTXLUHPHQWVIRUFRQWHQWDQGSUHVHQWDWLRQRIHYLGHQFH 5HILQHPHQW )RUGHOLYHU\´WRWKHXVHUµRU´WKHXVHU·VVLWHµ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 Philips Electronics NV 3ULQW  5HILQHPHQWVUHJDUGLQJ'HYHORSPHQW6HFXULW\ $/&B'96 ,QWURGXFWLRQ 7KH&RPPRQ&ULWHULDDVVXUDQFHFRPSRQHQWRIWKHIDPLO\$/&B'96UHIHU L WR´GHYHORSPHQW HQYLURQPHQWµ LL WRWKH´72(µRU´72(GHVLJQDQGLPSOHPHQWDWLRQµ7KHFRPSRQHQW $/&B'96UHTXLUHVDGGLWLRQDOHYLGHQFHIRUWKHVXIILFLHQF\RIWKHVHFXULW\PHDVXUHV ,QWKHSDUWLFXODUFDVHRID6PDUWFDUG,QWHJUDWHG&LUFXLWWKH72(LVGHYHORSHGDQGSURGXFHG ZLWKLQDFRPSOH[LQGXVWULDOSURFHVVZKLFKPXVWHVSHFLDOO\EHSURWHFWHG7KHUHIRUHFRQVLGHULQJ WKHGHILQLWLRQRIWKH&RPPRQ&ULWHULDWKHIROORZLQJUHILQHPHQWLVPDGHUHJDUGLQJWKHLWHPV´GH YHORSPHQWHQYLURQPHQWµ´72(µRU´72(GHVLJQDQGLPSOHPHQWDWLRQµ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´GHYHORSPHQWHQYLURQPHQWµDVUHIHUUHGWRLQWKH&RPPRQ&ULWHULDFRYHUVERWKWKHGHYHO RSPHQW 3KDVH DQGWKHSURGXFWLRQ DWOHDVW3KDVH RIWKH72(7KHVFRSHRIWKHUHTXLUH PHQWRI´'HYHORSPHQW6HFXULW\ $/&B'96 µSHUWDLQVWRWKH3KDVHXSWR72('HOLYHU\ 7KHVHSKDVHVDUHXQGHUWKHFRQWURORIWKH72(0DQXIDFWXUHU %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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´72(GHVLJQDQGLPSOHPHQWDWLRQµ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 Philips Electronics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´5HILQHPHQWUHJDUGLQJ¶&RQILJXUDWLRQ0DQDJHPHQW $&0 ·µ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´72(LPSOHPHQWDWLRQUHSUHVHQWDWLRQµ 7KHIROORZLQJWH[WUHIOHFWVWKHUHTXLUHPHQWVRIWKHVHOHFWHGFRPSRQHQW$&0B6&3 'HYHORSHUDFWLRQHOHPHQWV $&0B6&3' 7KHGHYHORSHUVKDOOSURYLGH&0GRFXPHQWDWLRQ &RQWHQWDQGSUHVHQWDWLRQRIHYLGHQFHHOHPHQWV $&0B6&3& 7KH &0 GRFXPHQWDWLRQ VKDOO VKRZ WKDW WKH &0 V\VWHP DV D PLQLPXPWUDFNVWKHIROORZLQJWKH72(LPSOHPHQWDWLRQUHSUH VHQWDWLRQGHVLJQGRFXPHQWDWLRQWHVWGRFXPHQWDWLRQXVHUGRFX PHQWDWLRQ DGPLQLVWUDWRU GRFXPHQWDWLRQ DQG &0 GRFXPHQWD WLRQDQGVHFXULW\IODZV %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW $&0B6&3& 7KH&0GRFXPHQWDWLRQVKDOOGHVFULEHKRZFRQILJXUDWLRQLWHPVDUH WUDFNHGE\WKH&0V\VWHP (YDOXDWRUDFWLRQHOHPHQWV $&0B6&3( 7KHHYDOXDWRUVKDOOFRQILUPWKDWWKHLQIRUPDWLRQSURYLGHGPHHWV DOOUHTXLUHPHQWVIRUFRQWHQWDQGSUHVHQWDWLRQRIHYLGHQFH 5HILQHPHQW 7KH´72(LPSOHPHQWDWLRQUHSUHVHQWDWLRQµZLWKLQWKHVFRSHRIWKH&0VKDOOLQFOXGHDWOHDVW  ORJLFDOGHVLJQGDWD  SK\VLFDOGHVLJQGDWD  ,&'HGLFDWHG6RIWZDUH  6PDUWFDUG(PEHGGHG6RIWZDUH  ILQDOSK\VLFDOGHVLJQGDWDQHFHVVDU\WRSURGXFHWKHSKRWRPDVNV  SKRWRPDVNVDQGSURGXFWVLQDQ\IRUP  5HILQHPHQWUHJDUGLQJ&0FDSDELOLWLHV $&0B&$3 ,QWURGXFWLRQ 7KH&RPPRQ&ULWHULDDVVXUDQFHFRPSRQHQWRIWKHIDPLO\$&0B&$3 &0FDSDELOLWLHV UHIHUVWR WKHFDSDELOLWLHVRID&0V\VWHP7KHFRPSRQHQW$&0B&$3UHIHUVWR´FRQILJXUDWLRQLWHPVµ DQG´FRQILJXUDWLRQOLVWµDQGXVHVWKHWHUP´72(µLQDGGLWLRQ ,QWKHSDUWLFXODUFDVHRID6PDUWFDUG,QWHJUDWHG&LUFXLWWKHVFRSHRI´FRQILJXUDWLRQLWHPVµDQGWKH PHDQLQJRI´72(µ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 Philips Electronics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´FRQILJXUDWLRQLWHPVµFRPSULVHDOOLWHPVGHILQHGDQGUHILQHGXQGHU$&0B6&3 VHHDERYH WREH WUDFNHGXQGHU&0 7KHLWHP´6PDUWFDUG(PEHGGHG6RIWZDUHµLVRQO\UHOHYDQWIRUWKHFRQILJXUDWLRQOLVWDVIDUDVWKH 72(PDQXIDFWXUHUFDQFRQWUROLWVLQFHWKH6PDUWFDUG(PEHGGHG6RIWZDUHLVGHYHORSHGE\DQ RWKHUFRPSDQ\DQGQRWSDUWRIWKH72(WKRXJKGHOLYHUHGWRJHWKHUZLWKLW ,IVSHFLILFUHTXLUHPHQWVDUHQRWDSSOLFDEOHIRUVWDQGDUGFHOOV VXFKDVVWDQGDUGJDWHVVWDQGDUG PHPRULHV EHLQJDOVRXVHGLQRWKHUSURGXFWVWKHFHUWLILFDWLRQERG\KDVWRGHFLGHRQDFDVHE\FDVH GHFLVLRQKRZWRKDQGOHWKHPZLWKLQWKHHYDOXDWLRQ 7KHWHUP´72(µVKDOOEHUHDGDVFRPSULVLQJDOOUHVXOWVEXLOWRQWKHEDVLVRIWKHGDWDVRXUFHV7KH UHVXOWVDUH  ILQDOSK\VLFDOGHVLJQGDWDQHFHVVDU\WRSURGXFHWKHSKRWRPDVNV  SKRWRPDVNVDQGSURGXFWV %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 3KRWRPDVNVDQGSURGXFWVPXVWEHXQLTXHO\WUDFHDEOHWRWKHDERYH´FRQILJXUDWLRQLWHPVµ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 Philips Electronics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´,QVWDOODWLRQ*HQHUDWLRQDQG6WDUWXS $'2B,*6 µ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´DGGUHVVHV WKHH[WHQWWRZKLFKWKH76)LVWHVWHGDQGZKHWKHURUQRWWKHWHVWLQJLVVXIILFLHQWO\H[WHQVLYHWR GHPRQVWUDWHWKDWWKH76)RSHUDWHVDVVSHFLILHGµ 7KHIROORZLQJWH[WUHIOHFWVWKHUHTXLUHPHQWVRIWKHVHOHFWHGFRPSRQHQW$7(B&29 'HYHORSHUDFWLRQHOHPHQWV $7(B&29' 7KHGHYHORSHUVKDOOSURYLGHDQDQDO\VLVRIWKHWHVWFRYHUDJH &RQWHQWDQGSUHVHQWDWLRQRIHYLGHQFHHOHPHQWV $7(B&29& 7KHDQDO\VLVRIWKHWHVWFRYHUDJHVKDOOGHPRQVWUDWHWKHFRUUHVSRQ GHQFHEHWZHHQWKHWHVWVLGHQWLILHGLQWKHWHVWGRFXPHQWDWLRQDQG WKH76)DVGHVFULEHGLQWKHIXQFWLRQDOVSHFLILFDWLRQ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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´/LPLWHGIDXOWWROHUDQFH )58B)/7 µPXVWEH SURYHQIRUDOO76) LQFOXGLQJWKH72(·VUDQGRPQXPEHUJHQHUDWRUUHIHUWRWKHIXQFWLRQDOUH TXLUHPHQW)&6B51' 7KHWHVWVPXVWDOVRFRYHUIXQFWLRQVZKLFKPD\EHDIIHFWHGE\´DJHLQJµ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´WHVWWRROµ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´FDOOIRUDVHFXUHWUDQVL WLRQIURPWKH72(·VLPSOHPHQWDWLRQUHSUHVHQWDWLRQEHLQJXQGHUFRQILJXUDWLRQFRQWUROWRLWVLQL WLDORSHUDWLRQLQWKHXVHUHQYLURQPHQWµ´7KHUHTXLUHPHQWVLQWKLVDVVXUDQFHIDPLO\DUHSUHVHQWHG VHSDUDWHO\IURPWKRVHLQWKH$*'B$'0IDPLO\GXHWRWKHLQIUHTXHQWSRVVLEO\RQHWLPHXVHRI WKHLQVWDOODWLRQJHQHUDWLRQDQGVWDUWXSSURFHGXUHV´ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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 Philips Electronics NV 3ULQW  5HILQHPHQWUHJDUGLQJ8VHU*XLGDQFH $*'B$'0 ,QWURGXFWLRQ 7KH&RPPRQ&ULWHULDDVVXUDQFHFRPSRQHQWVRIWKHIDPLOLHV$*'B865 XVHUJXLGDQFH DQG $*'B$'0 DGPLQLVWUDWRUJXLGDQFH ´GHVFULEHDOOUHOHYDQWDVSHFWVIRUWKHVHFXUHDSSOLFDWLRQRI WKH72(´7KHWHUPV´XVHUµDQG´DGPLQLVWUDWRUµDUHXVHG ,QWKHFDVHRID6PDUWFDUG,QWHJUDWHG&LUFXLWWKHPHDQLQJRIWKHWHUPV´XVHUµDQG´DGPLQLVWUDWRUµ DUHQRWREYLRXV7KHUHIRUHWKHIROORZLQJUHILQHPHQWVDUHJLYHQUHJDUGLQJJXLGDQFH 8VHUJXLGDQFHUHIHUVWRPDWHULDOWKDWLVLQWHQGHGWREHXVHGE\QRQDGPLQLVWUDWLYHKXPDQXVHUVRI WKH72(DQGE\RWKHUV HJSURJUDPPHUV XVLQJWKH72(·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´XVHUµRIWKH 72( DVXVHGLQWKH&RPPRQ&ULWHULDDVVXUDQFHFODVV$*'JXLGDQFH LVWKH6PDUWFDUG(PEHG GHG6RIWZDUH  8VHU*XLGDQFH UHIHUWRWKH&RPPRQ&ULWHULDDVVXUDQFHFRPSRQHQWRIWKHIDPLO\ $*'B865 PXVWEHJLYHQWRWKHGHYHORSHURIWKH6PDUWFDUG(PEHGGHG6RIWZDUHWRHQ VXUHWKDWWKH6PDUWFDUG(PEHGGHG6RIWZDUHSURSHUO\XVHVWKH72( 2QWKHRWKHUKDQGWKH6PDUWFDUG ZLWKWKH72(DVDPDMRUHOHPHQW LVXVHGLQDWHUPLQDOZKHUH FRPPXQLFDWLRQLVSHUIRUPHGWKURXJKWKH,62LQWHUIDFHSURYLGHGE\WKH72(7KHUHIRUHDQ RWKHU´XVHUµ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 Philips Electronics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 Philips Electronics NV 3ULQW  $GGLWLRQDO *XLGDQFH UHJDUGLQJ 9XOQHUDELOLW\ $QDO\VLV $9$B9/$ µ DQG 6WUHQJWKRI)XQFWLRQV $9$B62) :KHQUDWLQJDWWDFNSRWHQWLDODFFRUGLQJWRWKH&RPPRQ0HWKRGRORJ\IRU,QIRUPDWLRQ7HFKQRO RJ\6HFXULW\(YDOXDWLRQ>@IRUWKHDVVXUDQFHDVSHFWV9XOQHUDELOLW\$QDO\VLVDQG6WUHQJWKRI )XQFWLRQVDVH[SHUWLVHRIDQDWWDFNHULWLVGLVWLQJXLVKHGEHWZHHQ´H[SHUWµ´SURILFLHQWµDQG´OD\ PHQµ:LWKUHVSHFWWRWKHNQRZOHGJHRIWKH72(LWLVGLVWLQJXLVKHGEHWZHHQ´QRLQIRUPDWLRQ DERXWWKH72(µ´SXEOLFLQIRUPDWLRQFRQFHUQLQJWKH72(µDQG´VHQVLWLYHLQIRUPDWLRQDERXW WKH72(µ7KHLQIRUPDWLRQJDLQHGIURPDXVHUJXLGHLVJLYHQDVDQH[DPSOHIRUSXEOLFLQIRUPD WLRQFRQFHUQLQJWKH72(7KLVLVQRWDSSOLFDEOHKHUHVLQFHWKHSURWHFWLRQRIVXFKLQIRUPDWLRQLV GHPDQGHGDFFRUGLQJWRWKLV3URWHFWLRQ3URILOH UHIHUWRUHILQHPHQWUHJDUGLQJ´'HYHORSPHQW6H FXULW\ $/&B'96 µ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 Philips Electronics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 Philips Electronics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 Philips Electronics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 Philips Electronics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 Philips Electronics NV 3ULQW 7KHIROORZLQJPHFKDQLVPVFRQWULEXWLQJWRWKHVHIXQFWLRQVZHUHLGHQWLILHGZKLFKFDQEHDQD O\VHGIRUWKHLUSHUPXWDWLRQDORUSUREDELOLVWLFSURSHUWLHV  7KHRXWSXWRIWKH5DQGRP1XPEHU*HQHUDWRU)51*FDQEHDQDO\VHGZLWKSURE DELOLVWLFPHWKRGV  7KHTXDOLW\RIWKHPHFKDQLVPFRQWULEXWLQJWRWKH'3$UHVLVWDQFHRI)'($FDQEH DQDO\VHGXVLQJSUREDELOLVWLFPHWKRGVRQSRZHUFRQVXPSWLRQRIWKH72( 7KHUHIRUHDQH[SOLFLW62)FODLPRI´KLJKµ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 Philips Electronics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 Philips Electronics NV 3ULQW  33&ODLPV 7KLV6HFXULW\7DUJHWGRHVQ·WFODLPIRUPDOFRQIRUPDQFHWRDSURWHFWLRQSURILOH +RZHYHUWKLV6HFXULW\7DUJHWLVZULWWHQXVLQJDGUDIWYHUVLRQRID3URWHFWLRQ3URILOH´6PDUWFDUG ,&3ODWIRUP3URWHFWLRQ3URILOHµXQGHUGHYHORSPHQWE\WKHIROORZLQJ,QWHJUDWHG&LUFXLWVPDQX IDFWXUHUV • $WPHO • +LWDFKL(XURSH • ,QILQHRQ7HFKQRORJLHVDQG • 3KLOLSV6HPLFRQGXFWRUV  5DWLRQDOH 7KHFKDSWHU5DWLRQDOHLVGLYLGHGLQWRWKHIROORZLQJVHFWLRQV 6HFXULW\2EMHFWLYHV5DWLRQDOH 6HFXULW\5HTXLUHPHQWV5DWLRQDOH 72(6XPPDU\6SHFLILFDWLRQ5DWLRQDOH 33&ODLPV5DWLRQDOH  6HFXULW\2EMHFWLYHV5DWLRQDOH 7DEOHEHORZJLYHVDQRYHUYLHZKRZWKHDVVXPSWLRQVWKUHDWVDQGRUJDQLVDWLRQDOVHFXULW\SROL FLHVDUHDGGUHVVHGE\WKHREMHFWLYHV7KHWH[WIROORZLQJDIWHUWKHWDEOHMXVWLILHVWKLVLQGHWDLO %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW $VVXPSWLRQ7KUHDWRU2UJDQLVDWLRQDO 6HFXULW\3ROLF\ 6HFXULW\2EMHFWLYH 1RWH $3ODW$SSO 2(3ODW$SSO 3KDVH $5HVS$SSO 2(5HVS$SSO 3KDVH 33URFHVV72( 2(3URFHVV72( 2,GHQWLILFDWLRQ 3KDVH² $3URFHVV&DUG 2(3URFHVV&DUG 3KDVH² 3$GG)XQF 2'(6 7/HDN,QKHUHQW 2/HDN,QKHUHQW 73K\V3URELQJ 23K\V3URELQJ 70DOIXQFWLRQ 20DOIXQFWLRQ 73K\V0DQLSXODWLRQ 23K\V0DQLSXODWLRQ 7/HDN)RUFHG 2/HDN)RUFHG 7$EXVH)XQF 2$EXVH)XQF 751' 251' 7DEOH6HFXULW\2EMHFWLYHVYHUVXV$VVXPSWLRQV7KUHDWVRU3ROLFLHV 7KHMXVWLILFDWLRQUHODWHGWRWKHDVVXPSWLRQ´8VDJHRI+DUGZDUH3ODWIRUP $3ODW$SSO µLVDV IROORZV 6LQFH2(3ODW$SSOUHTXLUHVWKH6PDUWFDUG(PEHGGHG6RIWZDUHGHYHORSHUWRLPSOHPHQW WKRVHPHDVXUHVDVVXPHGLQ$3ODW$SSOWKHDVVXPSWLRQLVFRYHUHGE\WKHREMHFWLYH 7KHMXVWLILFDWLRQUHODWHGWRWKHDVVXPSWLRQ´7UHDWPHQWRI8VHU'DWD $5HVS$SSO µLVDVIROORZV 6LQFH2(5HVS$SSOUHTXLUHVWKHGHYHORSHURIWKH6PDUWFDUG(PEHGGHG6RIWZDUHWRLP SOHPHQWPHDVXUHVDVDVVXPHGLQ$5HVS$SSOWKHDVVXPSWLRQLVFRYHUHGE\WKHREMHFWLYH 7KHMXVWLILFDWLRQUHODWHGWRWKHRUJDQLVDWLRQDOVHFXULW\SROLF\´3URWHFWLRQGXULQJ72('HYHORS PHQWDQG3URGXFWLRQ 33URFHVV72( µLVDVIROORZV 2(3URFHVV72(UHTXLUHVWKH72(PDQXIDFWXUHUWRLPSOHPHQWWKRVHPHDVXUHVDVVXPHG LQ33URFHVV72(7KHUHIRUHWKHDVVXPSWLRQLVFRYHUHGE\WKLVREMHFWLYHDVIDUDVRUJDQ LVDWLRQDOPHDVXUHVDUHFRQFHUQHG7KHRQO\LVVXHQRWFRPSOHWHO\FRYHUHGE\WKHVHPHDV XUHVLVWKHIDFWWKDWWKH72(KDVWRVXSSRUWWKHSRVVLELOLW\RIXQLTXHLGHQWLILFDWLRQ7KLV LVWKHFRQWHQWRI2,GHQWLILFDWLRQ7KHUHIRUHWKHDVVXPSWLRQLVFRYHUHGE\2(3URFHVV &DUGDQG2,GHQWLILFDWLRQ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 7KHMXVWLILFDWLRQUHODWHGWRWKHDVVXPSWLRQ´3URWHFWLRQGXULQJ3DFNDJLQJ)LQLVKLQJDQG3HUVRQ DOLVDWLRQ $3URFHVV&DUG µLVDVIROORZV 6LQFH2(3URFHVV&DUGUHTXLUHVWKHUHVSRQVLEOHSDUWLHVWRLPSOHPHQWWKRVHPHDVXUHVDV VXPHGLQ$3URFHVV&DUGWKHDVVXPSWLRQLVFRYHUHGE\WKLVREMHFWLYH 7KHMXVWLILFDWLRQUHODWHGWRWKHRUJDQLVDWLRQDOVHFXULW\SROLF\´$GGLWLRQDO6HFXULW\)XQFWLRQDOLW\ 3$GG)XQF µLVDVIROORZV 2'(6VWDWHVWKDWWKH72(VKDOOLPSOHPHQW7ULSOH'(6HQFU\SWLRQDQGGHFU\SWLRQ 7KLVLVH[DFWO\ZKDWLVUHTXLUHGE\3$GG)XQF7KHUHIRUHWKLVVHFXULW\SROLF\LVFRYHUHG E\WKHREMHFWLYH 7KHMXVWLILFDWLRQUHODWHGWRWKHWKUHDWV´,QKHUHQW,QIRUPDWLRQ/HDNDJH 7/HDN,QKHUHQW µ ´3K\VLFDO3URELQJ 73K\V3URELQJ µ´0DOIXQFWLRQGXHWR(QYLURQPHQWDO6WUHVV 70DOIXQFWLRQ µ´3K\VLFDO0DQLSXODWLRQ 73K\V0DQLSXODWLRQ µ´)RUFHG,QIRUPDWLRQ/HDN DJH 7/HDN)RUFHG ´´$EXVHRI)XQFWLRQDOLW\ 7$EXVH)XQF µDQG´'HILFLHQF\RI5DQGRP 1XPEHUV 751' µ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´%DVLFLQWHUQDO WUDQVIHUSURWHFWLRQµ )37B,77´%DVLFLQWHUQDO 76)GDWDWUDQVIHUSURWHFWLRQµ )'3B,)&´6XEVHWLQIRUPD WLRQIORZFRQWUROµ 5(3KDVH´'HVLJQDQG,PSOH PHQWDWLRQRIWKH6PDUWFDUG(PEHG GHG6RIWZDUHµ 23K\V3URELQJ )37B3+3 ´5HVLVWDQFHWRSK\VLFDODWWDFNµ 5(3KDVH´'HVLJQDQG,PSOH PHQWDWLRQRIWKH6PDUWFDUG(PEHG GHG6RIWZDUHµ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 2EMHFWLYH 72(6HFXULW\)XQFWLRQDO 5HTXLUHPHQWV 6HFXULW\5HTXLUHPHQWVIRUWKHHQYL URQPHQW 20DOIXQFWLRQ )58B)/7 ´/LPLWHGIDXOWWROHUDQFHµ )37B)/6 ´)DLOXUHZLWKSUHVHUYDWLRQRI VHFXUHVWDWHµ )37B6(3 ´76)GRPDLQVHSDUDWLRQµ 23K\V0DQLSXODW LRQ )37B3+3 ´5HVLVWDQFHWRSK\VLFDODWWDFNµ 5(3KDVH´'HVLJQDQG,PSOH PHQWDWLRQRIWKH6PDUWFDUG(PEHG GHG6RIWZDUHµ HJE\LPSOHPHQW LQJ)'3B6',6WRUHGGDWDLQWHJ ULW\PRQLWRULQJ 2/HDN)RUFHG $OOUHTXLUHPHQWVOLVWHGIRU 2/HDN,QKHUHQW SOXVWKRVHOLVWHGIRU 20DOIXQFWLRQDQG 23K\V0DQLSXODWLRQ 5(3KDVH´'HVLJQDQG,PSOH PHQWDWLRQRIWKH6PDUWFDUG(PEHG GHG6RIWZDUHµ 2$EXVH)XQF )07B/,0´/LPLWHGFDSD ELOLWLHVµ )07B/,0´/LPLWHGDYDLO DELOLW\µ SOXVWKRVHIRU 2/HDN,QKHUHQW 23K\V3URELQJ 20DOIXQFWLRQ 23K\V0DQLSXODWLRQ 2/HDN)RUFHG 2,GHQWLILFDWLRQ )$8B6$6´$XGLWVWRUDJHµ 251' )&6B51'´4XDOLW\PHWULF IRUUDQGRPQXPEHUVµ SOXVWKRVHIRU 2/HDN,QKHUHQW 23K\V3URELQJ 20DOIXQFWLRQ 23K\V0DQLSXODWLRQ 2/HDN)RUFHG 5(3KDVH´'HVLJQDQG,PSOH PHQWDWLRQRIWKH6PDUWFDUG(PEHG GHG6RIWZDUHµ HJE\LPSOHPHQW LQJ)37B$07´$EVWUDFWPDFKLQH WHVWLQJµ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW 2EMHFWLYH 72(6HFXULW\)XQFWLRQDO 5HTXLUHPHQWV 6HFXULW\5HTXLUHPHQWVIRUWKHHQYL URQPHQW 2'(6 )&6B&23´&U\SWRJUDSKLF RSHUDWLRQµ SOXVWKRVHIRU 2/HDN,QKHUHQW 23K\V3URELQJ 20DOIXQFWLRQ 23K\V0DQLSXODWLRQ 2/HDN)RUFHG 5(3KDVH´'HVLJQDQG,PSOH PHQWDWLRQRIWKH6PDUWFDUG(PEHG GHG6RIWZDUHµ HJE\LPSOHPHQW LQJDSSURSULDWHNH\PDQDJHPHQW 2(3ODW$SSO 5(3KDVH´'HVLJQDQG,PSOH PHQWDWLRQRIWKH6PDUWFDUG(PEHG GHG6RIWZDUHµ 2(5HVS$SSO 5(3KDVH´'HVLJQDQG,PSOH PHQWDWLRQRIWKH6PDUWFDUG(PEHG GHG6RIWZDUHµ 2(3URFHVV72( )$8B6$6´$XGLWVWRUDJHµ 6HYHUDO$VVXUDQFH&RPSRQHQWV 2(3URFHVV&DUG 5(3URFHVV&DUGSRVVLEO\VXS SRUWHGE\5(3KDVH 7DEOH6HFXULW\5HTXLUHPHQWVYHUVXV6HFXULW\2EMHFWLYHV 7KHMXVWLILFDWLRQUHODWHGWRWKHVHFXULW\REMHFWLYH´3URWHFWLRQDJDLQVW,QKHUHQW,QIRUPDWLRQ/HDN DJH 2/HDN,QKHUHQW µ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 Philips Electronics NV 3ULQW 7KH MXVWLILFDWLRQ UHODWHG WR WKH VHFXULW\ REMHFWLYH ´3URWHFWLRQ DJDLQVW 3K\VLFDO 3URELQJ 23K\V3URELQJ µ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´3URWHFWLRQ DJDLQVW 0DOIXQFWLRQV 20DOIXQFWLRQ µ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´3URWHFWLRQ DJDLQVW 3K\VLFDO 0DQLSXODWLRQ 23K\V0DQLSXODWLRQ µ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´3URWHFWLRQDJDLQVW)RUFHG,QIRUPDWLRQ/HDNDJH 2/HDN)RUFHG ´LVDVIROORZV 7KLVREMHFWLYHLVGLUHFWHGDJDLQVWDWWDFNVZKHUHDQDWWDFNHUZDQWVWRIRUFHDQLQIRUPDWLRQ OHDNDJHZKLFKZRXOGQRWRFFXUXQGHUQRUPDOFRQGLWLRQV,QRUGHUWRDFKLHYHWKLVKHKDV WRFRPELQHDILUVWDWWDFNVWHSZKLFKPRGLILHVWKHEHKDYLRXURIWKH72( HLWKHUE\H[ SRVLQJLWWRH[WUHPHRSHUDWLQJFRQGLWLRQVRUE\GLUHFWO\PDQLSXODWLQJLW ZLWKDVHFRQG %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW DWWDFNVWHSPHDVXULQJDQGDQDO\VLQJVRPHRXWSXWSURGXFHGE\WKH72(7KHILUVWVWHSLV SUHYHQWHGE\WKHVDPHPHDVXUHVZKLFKVXSSRUW20DOIXQFWLRQDQG 23K\V0DQLSXODWLRQUHVSHFWLYHO\7KHUHTXLUHPHQWVFRYHULQJ2/HDN,QKHUHQWDOVR VXSSRUW2/HDN)RUFHGEHFDXVHWKH\SUHYHQWWKHDWWDFNHUIURPEHLQJVXFFHVVIXOLIKHWULHV WKHVHFRQGVWHSGLUHFWO\ 7KH MXVWLILFDWLRQ UHODWHG WR WKH VHFXULW\ REMHFWLYH ´3URWHFWLRQ DJDLQVW $EXVH RI )XQFWLRQDOLW\ 2$EXVH)XQF µ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´72(,GHQWLILFDWLRQ 2,GHQWLILFDWLRQ ´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 Philips Electronics NV 3ULQW WLRQWRWKHUHFRUGVEHFDXVHLWKDVQRUHDOWLPHFORFN7KHUHIRUHWKHQHZIDPLO\)$8B6$6 ZDVGHILQHGIRUWKLVVLWXDWLRQ 7KHMXVWLILFDWLRQUHODWHGWRWKHREMHFWLYH´5DQGRP1XPEHUV 251' µ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´&U\SWRJUDSKLFRSHUDWLRQµ 2'(6 µ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 Philips Electronics NV 3ULQW 7KHMXVWLILFDWLRQUHODWHGWRWKHVHFXULW\REMHFWLYH´8VDJHRI+DUGZDUH3ODWIRUP 2(3ODW$SSO µ LVDVIROORZV 5(3KDVHUHTXLUHVWKH6PDUWFDUG(PEHGGHG6RIWZDUHGHYHORSHUWRGHVLJQDQGLPSOH PHQWWKHVRIWZDUHLQDZD\ZKLFKLVVXLWDEOHWRPHHW2(3ODW$SSO 7KHMXVWLILFDWLRQUHODWHGWRWKHVHFXULW\REMHFWLYH´7UHDWPHQWRI8VHU'DWD 2(5HVS$SSO µLVDV IROORZV 5(3KDVHUHTXLUHVWKHGHYHORSHURIWKH6PDUWFDUG(PEHGGHG6RIWZDUHWRGHVLJQDQG LPSOHPHQWWKHVRIWZDUHLQDZD\ZKLFKLVVXLWDEOHWRPHHW2(5HVS$SSO 7KHMXVWLILFDWLRQUHODWHGWRWKHVHFXULW\REMHFWLYH´3URWHFWLRQGXULQJ72('HYHORSPHQWDQG3UR GXFWLRQ 2(3URFHVV72( µLVDVIROORZV 7KHREMHFWLYH2(3URFHVV72(KDVPDLQO\WREHIXOILOOHGE\RUJDQLVDWLRQDODQGRWKHU PHDVXUHVZKLFKWKH,&GHVLJQHUDQGPDQXIDFWXUHUKDVWRLPSOHPHQWLQ3KDVHVDQG 7KHVHPHDVXUHVDUHDVXEVHWRIWKRVHPHDVXUHVZKLFKDUHH[DPLQHGGXULQJWKHHYDOXDWLRQ RIWKHDVVXUDQFHUHTXLUHPHQWVRIWKHFODVVHV$&0$*'$/&DQG$'27KHWHFKQLFDO FDSDELOLW\RIWKH72(WRVWRUH,GHQWLILFDWLRQGDWDLVSURYLGHGDFFRUGLQJWR)$8B6$6 7RJHWKHUWKHVHVHFXULW\UHTXLUHPHQWVDUHVXLWDEOHWRPHHWWKHREMHFWLYH 7KHMXVWLILFDWLRQUHODWHGWRWKHVHFXULW\REMHFWLYH´3URWHFWLRQGXULQJ3DFNDJLQJ)LQLVKLQJDQG 3HUVRQDOLVDWLRQ 2(3URFHVV&DUG µ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 Philips Electronics NV 3ULQW 'HSHQGHQFLHV 1RGHSHQGHQFLHV 5HILQHPHQW 7KHZRUGLQJ´DQGLIQHFHVVDU\DIWHUSURFHVVLQJµUHIHUVWRVLWXDWLRQV ZKHUHHUURUVRFFXUUHGGXULQJDFDOFXODWLRQ  WKRXJKWKH72(SUR YLGHV)58B)/7DQG)37B)/6 ,QWKLVFDVHLWPLJKWEHQHFHV VDU\WKDWWKH6PDUWFDUG(PEHGGHG6RIWZDUHVXSSRUWVWKHRYHUDOO VHFXULW\IRULQVWDQFHE\UHGXQGDQWFDOFXODWLRQVDQGYHULILFDWLRQDI WHUWKDW ([DPSOH7KH6PDUWFDUG(PEHGGHG6RIWZDUHVKDOOPHHWWKHUHTXLUHPHQW´$EVWUDFWPDFKLQH WHVWLQJ )37B$07 µ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´UDGLDWLRQµ  >VHOHFWLRQGXULQJLQLWLDOVWDUWXSSHULRGLFDOO\GXULQJQRUPDORSHUDWLRQDWWKHUHTXHVWRIWKHDXWKRULVHGXVHUDW WKHFRQGLWLRQV>DVVLJQPHQWFRQGLWLRQVXQGHUZKLFKVHOIWHVWVKRXOGRFFXU@@ %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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 Philips Electronics NV 3ULQW GXFHHPDQDWLRQZKLFKFDQEHUHFHLYHGXVLQJDQDQWHQQDDQGDQDO\VHG)RUWKHDQDO\VLVRIWKH PHDVXUHGGDWDVSHFLILFWRROV VRIWZDUH DUHUHTXLUHG 7KHLQWHUIDFHIRUWKHDWWDFNLVWKH,62LQWHUIDFH FRQWDFWVRIWKH6PDUWFDUG EXWRWKHULQ WHUIDFHVPD\DOVREHXVHG 7KHDSSOLFDWLRQRIDSSURSULDWHFRPELQDWLRQVRIVXFKPHWKRGVLQRUGHUWRUHYHDOLQIRUPD WLRQ ZLWKRXWDIIHFWLQJWKH72(·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·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 Philips Electronics NV 3ULQW  'HILQLWLRQRIWKH)DPLO\)&6B51' 7RGHILQHWKH,7VHFXULW\IXQFWLRQDOUHTXLUHPHQWVRIWKH72(DQDGGLWLRQDOIDPLO\ )&6B51' RIWKH&ODVV)&6 FU\SWRJUDSKLFVXSSRUW LVGHILQHGKHUH7KLVIDPLO\GHVFULEHVWKHIXQFWLRQDO UHTXLUHPHQWVIRUUDQGRPQXPEHUJHQHUDWLRQXVHGIRUFU\SWRJUDSKLFSXUSRVHV )&6B51'*HQHUDWLRQRIUDQGRPQXPEHUV )DPLO\EHKDYLRXU 7KLVIDPLO\GHILQHVTXDOLW\UHTXLUHPHQWVIRUWKHJHQHUDWLRQRIUDQGRPQXPEHUVZKLFKDUH LQWHQGHGWREHXVHIRUFU\SWRJUDSKLFSXUSRVHV &RPSRQHQWOHYHOOLQJ FCS_RND Generation of random numbers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 Philips Electronics NV 3ULQW 7KHIDPLO\´/LPLWHGFDSDELOLWLHVDQGDYDLODELOLW\ )07B/,0 µLVVSHFLILHGDVIROORZV )07B/,0/LPLWHGFDSDELOLWLHVDQGDYDLODELOLW\ )DPLO\EHKDYLRXU 7KLVIDPLO\GHILQHVUHTXLUHPHQWVWKDWOLPLWVWKHFDSDELOLWLHVDQGDYDLODELOLW\RIIXQFWLRQV LQDFRPELQHGPDQQHU1RWHWKDW)'3B$&)UHVWULFWVWKHDFFHVVWRIXQFWLRQVZKHUHDVWKH /LPLWHGFDSDELOLW\RIWKLVIDPLO\UHTXLUHVWKHIXQFWLRQVWKHPVHOYHVWREHGHVLJQHGLQDVSH FLILFPDQQHU &RPSRQHQWOHYHOOLQJ FMT_LIM Limited capabilities and availability 1 2 )07B/,0 /LPLWHGFDSDELOLWLHVUHTXLUHVWKDWWKH76)LVEXLOWWRSURYLGHRQO\ WKHFDSDELOLWLHV SHUIRUPDFWLRQJDWKHULQIRUPDWLRQ QHFHVVDU\IRU LWVJHQXLQHSXUSRVH )07B/,0 /LPLWHGDYDLODELOLW\UHTXLUHVWKDWWKH76)UHVWULFWWKHXVHRIIXQF WLRQV UHIHU WR /LPLWHG FDSDELOLWLHV )07B/,0  7KLV FDQ EH DFKLHYHGIRULQVWDQFHE\UHPRYLQJRUE\GLVDEOLQJIXQFWLRQVLQD VSHFLILFSKDVHRIWKH72(·VOLIHF\FOH 0DQDJHPHQW )07B/,0)07B/,0 7KHUHDUHQRPDQDJHPHQWDFWLYLWLHVIRUHVHHQ $XGLW )07B/,0)07B/,0 7KHUHDUHQRDFWLRQVGHILQHGWREHDXGLWDEOH 7KH72()XQFWLRQDO5HTXLUHPHQW´/LPLWHGFDSDELOLWLHV )07B/,0 µLVVSHFLILHGDVIROORZV )07B/,0 /LPLWHGFDSDELOLWLHV +LHUDUFKLFDOWR 1RRWKHUFRPSRQHQWV )07B/,0 7KH76)VKDOOEHGHVLJQHGLQDPDQQHUWKDWOLPLWVWKHLUFDSDELOLWLHV VRWKDWLQFRQMXQFWLRQZLWK´/LPLWHGDYDLODELOLW\ )07B/,0 µ WKH IROORZLQJ SROLF\ LV HQIRUFHG >DVVLJQPHQW /LPLWHG FDSDELOLW\ DQGDYDLODELOLW\SROLF\@ 'HSHQGHQFLHV )07B/,0/LPLWHGDYDLODELOLW\ 7KH72()XQFWLRQDO5HTXLUHPHQW´/LPLWHGDYDLODELOLW\ )07B/,0 µLVVSHFLILHGDVIROORZV %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW )07B/,0 /LPLWHGDYDLODELOLW\ +LHUDUFKLFDOWR 1RRWKHUFRPSRQHQWV )07B/,P 7KH76)VKDOOEHGHVLJQHGLQDPDQQHUWKDWOLPLWVWKHLUDYDLODELOLW\ VRWKDWLQFRQMXQFWLRQZLWK´/LPLWHGFDSDELOLWLHV )07B/,0 µ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´$XGLWGDWDVWRUDJH )$8B6$6 µLVVSHFLILHGDVIROORZV )$8B6$6$XGLWGDWDVWRUDJH )DPLO\EHKDYLRXU 7KLVIDPLO\GHILQHVIXQFWLRQDOUHTXLUHPHQWVIRUWKHVWRUDJHRIDXGLWGDWD &RPSRQHQWOHYHOOLQJ FAU_SAS Audit data storage 1 )$8B6$6 5HTXLUHVWKH72(WRSURYLGHWKHSRVVLELOLW\WRVWRUHDXGLWGDWD 0DQDJHPHQW )$8B6$6 7KHUHDUHQRPDQDJHPHQWDFWLYLWLHVIRUHVHHQ $XGLW )$8B6$6 %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics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 Philips Electronics NV 3ULQW ,QLWLDOLVDWLRQ'DWD $Q\GDWDGHILQHGE\WKH72(0DQXIDFWXUHUDQGLQMHFWHG LQWRWKHQRQYRODWLOHPHPRU\E\WKH,QWHJUDWHG&LUFXLWV PDQXIDFWXUHU 3KDVH 7KHVHGDWDDUHIRULQVWDQFHXVHG IRUWUDFHDELOLW\DQGIRU72(LGHQWLILFDWLRQ LGHQWLILFDWLRQ GDWD  3UHSHUVRQDOLVDWLRQ'DWD $Q\GDWDVXSSOLHGE\WKH&DUG0DQXIDFWXUHUWKDWLVLQ MHFWHGLQWRWKHQRQYRODWLOHPHPRU\E\WKH,QWHJUDWHG&LU FXLWVPDQXIDFWXUHU 3KDVH 7KHVHGDWDDUHIRULQVWDQFH XVHGIRUWUDFHDELOLW\DQGRUWRVHFXUHVKLSPHQWEHWZHHQ SKDVHV 6PDUWFDUG DVXVHGLQWKLV3URWHFWLRQ3URILOH &RPSRVLWLRQRIWKH 72(WKH6PDUWFDUG(PEHGGHG6RIWZDUH8VHU'DWDDQG WKHSDFNDJH WKHVPDUWFDUGFDUULHU  6PDUWFDUG(PEHGGHG6RIWZDUH 6RIWZDUHHPEHGGHGLQDVPDUWFDUG,&DQGQRWEHLQJGHYHO RSHGE\WKH,&'HVLJQHU7KH6PDUWFDUG(PEHGGHG6RIW ZDUHLVGHVLJQHGLQ3KDVHDQGHPEHGGHGLQWRWKH6PDUW FDUG,&LQ3KDVHRULQODWHUSKDVHVRIWKHVPDUWFDUGSURG XFWOLIHF\FOH 6RPHSDUWRIWKDWVRIWZDUHPD\DFWXDOO\LPSOHPHQWD VPDUWFDUGDSSOLFDWLRQRWKHUVPD\SURYLGHVWDQGDUGVHUYLFHV 1HYHUWKHOHVVWKLVGLVWLQFWLRQGRHVQ·WPDWWHUKHUHVRWKDW WKH6PDUWFDUG(PEHGGHG6RIWZDUHFDQEHFRQVLGHUHGDV EHLQJDSSOLFDWLRQGHSHQGHQWZKHUHDVWKH,&'HGLFDWHG 6RIWZDUHLVGHILQLWHO\QRW 7HVW)HDWXUHV $OOIHDWXUHVDQGIXQFWLRQV LPSOHPHQWHGE\WKH,&'HGL FDWHG7HVW6RIWZDUHDQGRUKDUGZDUH ZKLFKDUHGHVLJQHG WREHXVHGEHIRUH72('HOLYHU\RQO\DQGGHOLYHUHGDVSDUW RIWKH72( 72('HOLYHU\ 7KHSHULRGZKHQWKH72(LVGHOLYHUHGZKLFKLV UHIHUWR VHFWLRQ HLWKHU L DIWHU3KDVH RUEHIRUH3KDVH LI WKH72(LVGHOLYHUHGLQIRUPRIZDIHUVRUVDZQZDIHUV GLFH RU LL DIWHU3KDVH RUEHIRUH3KDVH LIWKH72(LV GHOLYHUHGLQIRUPRIPRGXOHV 72(0DQXIDFWXUHU 7KH72(0DQXIDFWXUHUPXVWHQVXUHWKDWDOOUHTXLUHPHQWV IRUWKH72(DQGLWVGHYHORSPHQWDQGSURGXFWLRQHQYL URQPHQWDUHIXOILOOHG 7KH72(0DQXIDFWXUHUKDVWKHIROORZLQJUROHV L ,&'H YHORSHU 3KDVH DQG LL ,&0DQXIDFWXUHU 3KDVH ,IWKH 72(LVGHOLYHUHGDIWHU3KDVHLQIRUPRIPRGXOHVKHKDV WKHUROHRIWKH LLL ,&3DFNDJLQJ0DQXIDFWXUHU 3KDVH LQ DGGLWLRQ 76)GDWD 'DWDFUHDWHGE\DQGIRUWKH72(WKDWPLJKWDIIHFWWKH RSHUDWLRQRIWKH72(>@ IRUH[DPSOHFRQILJXUDWLRQGDWD  1RWHWKDWWKH72(LVWKH6PDUWFDUG,& %XVLQHVV/LQH ,GHQWLILFDWLRQ 6HFXULW\7DUJHW %6,'6=&& 9HUVLRQ 3DJHRI  Philips Electronics NV 3ULQW ,QLWLDOLVDWLRQ'DWDGHILQHGE\WKH,QWHJUDWHG&LUFXLWV PDQXIDFWXUHUWRLGHQWLI\WKH72(DQGWRNHHSWUDFNRIWKH SURGXFW·VSURGXFWLRQDQGIXUWKHUOLIHF\FOHSKDVHVDUHDOVR FRQVLGHUHGDVEHORQJLQJWRWKH76)GDWD 8VHU LQWKHVHQVHRIWKH&RPPRQ&ULWHULD 7KH72(VHUYHVDVD SODWIRUPIRUWKH6PDUWFDUG(PEHGGHG6RIWZDUH7KHUHIRUH WKH´XVHUµRIWKH72( DVXVHGLQWKH&RPPRQ&ULWHULDDV VXUDQFHFODVV$*'JXLGDQFH LVWKH6PDUWFDUG(PEHGGHG 6RIWZDUH*XLGDQFHLVJLYHQIRUWKH6PDUWFDUG(PEHGGHG 6RIWZDUH'HYHORSHU 2QWKHRWKHUKDQGWKH6PDUWFDUG ZLWKWKH72(DVDPD MRUHOHPHQW LVXVHGLQDWHUPLQDOZKHUHFRPPXQLFDWLRQLV SHUIRUPHGWKURXJKWKH,62LQWHUIDFHSURYLGHGE\WKH 72(7KHUHIRUHDQRWKHU´XVHUµ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 Philips Electronics NV 3ULQW 76) 72(6HFXULW\IXQFWLRQV 76), 76),QWHUIDFH 763 72(6HFXULW\3ROLF\  )XUWKHU'RFXPHQWV >@ 'DWD(QFU\SWLRQ6WDQGDUG '(6 ),%638%861%6:DVKLQJWRQ >@ ),3638%)('(5$/,1)250$7,21352&(66,1*67$1'$5'6 38%/,&$7,21'$7$(1&5<37,2167$1'$5' '(6 5HDIILUPHG 2FWREHU >@ 6PDUWFDUG,QWHJUDWHG&LUFXLW3ODWIRUP$XJPHQWDWLRQV9HUVLRQ'HFHPEHU