· Philips to return approximately EUR 4 billion to shareholders through dividends and share repurchase.
· Company increases its focus on growth in Healthcare and Lifestyle sectors.
Amsterdam, The Netherlands – Royal Philips Electronics announced its intent for capital allocation following the divestment of an 80.1% majority share in its Semiconductor unit. The transaction, announced separately today, values this business at around EUR 8.3 billion.

Proceeds from the sale, after tax and transaction-related costs, will total approximately EUR 6.4 billion. Philips will return a total of EUR 4 billion to shareholders by the end of 2007 through a combination of dividends and share repurchases, including the EUR 1.5 billion share repurchase program already announced on July 17, 2006.

The company reiterated its strategy to re-invest in additional opportunities for high-margin growth, both organically and through acquisitions. In the last 12 months Philips has announced the investment of EUR 3.5 billion in eight acquisitions (some yet to be completed), predominantly in Medical Systems, Lighting and Consumer Health and Wellness. These have brought almost EUR 1 billion in new revenue and over 5,000 employees into the group. The company noted that the earlier acquisitions were performing in line with, or better than, expectations. R&D investment in targeted areas such as Lighting and Domestic Appliances has been increased, in order to stimulate organic growth. Philips also re-confirmed its intent to exit from its participations in LG.Philips LCD and TSMC in a responsible manner. In addition, Philips will continue to improve its cost structure by simplifying the organization and its ways of working.

"With this transaction we have now practically completed our shift towards more stable, cash generative businesses and away from the earnings volatility associated with cyclical industries like Components and Semiconductors, a journey we started in 2002," said Gerard Kleisterlee, President and CEO of Philips.

"We close the chapter of being a traditional, vertically integrated electronics company – which is why, going forward, we would like to be known just as Royal Philips. This emphasizes the shift in our focus to a company built around a brand with the promise of "sense and simplicity" and with a focus on Healthcare and Lifestyle," Kleisterlee said.

Kleisterlee explained that Philips was now a much simpler company, committed to improving the quality of peoples' lives through meaningful innovation. He said resources would be focused on capturing value from some of the most important global economic, social and demographic trends. Notable among these were the trend for better healthcare and more well-being, the need to provide energy efficient solutions (e.g. in lighting) and the desire for rewarding consumer lifestyle experiences.

All these elements, together with the Semiconductors transaction will contribute to redefining Philips as a core value holding stock, in contrast with the historic perception of an electronics stock exposed to the volatile technology sector.

For more information on this announcement and on the divestment of Philips Semiconductors, please visit www.newscenter.philips.com.
The webcasting of the press conference on this announcement is accessible via www.philips.com/webcast. This will be live as from 10:00 CET on Friday, August 4, 2006 with a replay available shortly afterwards. For the analysts' conference call/audiowebcast on August 4, 2006 at 11:30 CET, please visit www.philips.com/investor.

For further information, please contact:
Gerd Goetz
Philips Corporate Communications
Tel +31 20 59 77 213
Email: gerd.goetz@philips.com