A sustainable strategy for the Turkish market

Willem RozenbergCEO Philips Turkey

Introduction

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Recent visit to Bodrum

Common feeling with all expatriates in Turkey

Extremely welcomeBusiness is not easy

58 years oldMarriedExploding family

33 years in Philips25 years expatriate (Riyadh, Dubai, Johannesburg and Istanbul)6 years in TurkeyAlways in Healthcare

4 girls

5 grandchildren

Founded in 1891Headquartered in Amsterdam, the Netherlands

Sales over EUR 22.2 billion in 2010

Growth geographies32% of sales generated in growth geographies Globally recognized brand (world top 50)Our brand value doubled to $8.7bn since 2004

117,000 employeesSales and service outlets in over 100 countries

€1.5 billion investment in R&D, 7% of sales

A strong diversified industrial group leading in health and well-being

Note - All figures from the year 2010 onwards exclude Television as it is treated as discontinued operation

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The four global trends that are becoming increasingly relevant

The rise of growth geographies

Aging population

Increased consumer empowerment and

sustainable lifestyles

Climate change and sustainable development

Our focus on Health and Well-beingOur portfolio leverages critical global trends

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5Rise of growth geographies

Aging population

Increased consumer empowerment and sustainable lifestyles

Climate change and sustainable development

Western Europe

North America

BIC

Growth1 of markets in which Philips participates vs. GDP growth

1. Excluding TV2. Based on internal analysis

Market size growth2

GDP3

World

~ 20%

~ 30%

~ 50%

Consumer Lifestyle

Lighting

Healthcare

We expect our markets to growMost growth expected to come in lighting and healthcare markets

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100%

…translating into expected market growth per sector…

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CAGR5 % 2010-2015

3. EIU estimates4. Brazil, India, China5. CAGR: Compound Annual Growth Rate

~ 2%

161

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Growth geographies are a key growth opportunity driven by rapid expansion of the middle class

Middle class households growth in key growth geographies Millions of households1

2015

419

2009

• Philips sales show a strong correlation with middle class

• The number of middle class households in key growth geographies will more than double until 2015

• The total middle class income pool in growth geographies will almost double until 2015

• Our sectors will benefit strongly from the rise of the middle class in growth geographies :

• Increasingly affordable healthcare which will drive demand

• Building of new and better housing and other infrastructure increasing demand for lighting

• Increasing demand for a higher quality, and healthier lifestyle

Source: Internal analysis* CAGR: Compound Annual Growth Rate

+17%CAGR*

Sustainability as a driver for growth

Success of EcoVision4Our Green Product sales represented around 30%

of sales in 2009, 3 years ahead of our 2012 target. And we have completed our 2012 goal of cumulative EUR 1 billion of Green Investment in 2010.

Launch of our EcoVision5 program A clear example of how we continue to drive

business growth through Sustainability is the launch of our EcoVision5 program in 2010.

Targets for the period 2010 – 2015• To bring care to 500 million people• To improve the energy efficiency of our overall

portfolio by 50%• To double the amount of recycled materials in

our products as well as to double the collection and recycling of Philips products

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A sustainable strategy for Turkey

The market

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Characteristics:• 76 m people with large young population • Increasing awareness• Developing fast GDP growth / in 2010: 7,1%

• High growth potential, Expected to become the 3rd largest European economy by 2050 (Goldman Sachs)• Diverse public and private market

• Upcoming PPP, PFI, BOT models• Centralization and e-tendering• Privatisation – investments

Competition:• Almost everybody• Large number of local players

Turkey the 17th largest economy in the world

Annual GDP growth:

2003 - 2007 6.4% annual average2008 0.7% 2009 4.7%

2010 forecast 7.1%.

Testing global trends in Turkey – Aging and Health

The age structure of Turkey is relatively younger compared to others, an increase of the elderly population in “absolute numbers” is noticeable though:

Population over age 65 will be: 4.8 million in 2010

7.9 million in 2025

17 million in 2050 (Source TURKSTAT)

Health Indicators:Life expectancy at birth: M/F 71 / 75 Turkey

Healthy life expectancy at birth M/F: 61 / 63

Life expectancy at birth M/F 76 / 82 EU Average

Healthy life expectancy at birth M/F: 61 / 62

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Total expenditure on health 6.7% of GDP (2009) vs. NL 9.9% (2008)

Turkey’s demand for electricity grows

at a rate of 8% per year.

Current energy import: 60%

2010-15 70%

2020 80%

Since 1923, every 10 years Turkey’s temperature has increased by 0.20C* Source ENO Climate

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Testing global trends in Turkey – Energy & Climate

• Increased consumer empowerment, growing of middle and upper income segments

• Doubled R&D expenditures in the past decade *Source Worldbank.org

• Construction industry may achieve a growth of >20% in 2010 with a regional focus *SourceHürriyet Daily

• Strong governmental and private vision and commitment to health sector modernization *Source Worldbank.org

All in line with the Philips Market Stategy, which helps to reach a strong growth for us in Turkey.

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Testing global trends in Turkey – Increased consumer empowerment & key growth area’s

Philips in Turkey

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Founded in 1930 Headquartered in Istanbul. Regional offices in Ankara, İzmir, Adana

Employees300 people in sales and service outlets all over Turkey

Leading market positions- LED lighting, energy saving lamps, ambient solutions- Medical Imaging (Cardiology, PETCT, MR)- Fruit-Juicer , Irons, MP3 player and docking stations, high-end TV, shavers, hair-care

Brand Image in Turkey- 7th position (brand equity index Turkey)- Long term commitment- Reliable, innovative, outstanding quality

Philips Index for Health and Well-beingA global initiative - 31000 people across 23 countries

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Philips is a pioneer in developing and bringing to market

innovations that shape our healthcare, our lifestyle, and who

we are as a society. Doing so means we need to understand

the mega-trends in society.

These include:

• What is the state of our health and well-being?

• What aspects of health and well-being are most important, and how satisfied are people

with each of these aspects of our lives?

• What role does technology play in helping society maintain better health and well-being?

• How does people vary in terms of their attitudes and behaviors toward health and

well-being?

• If we were to assign a particular index as an overall measure of health and well-being,

what would it be and would it vary among different sub-groups of people

• 1000 interviews in 12 cities conducted between Aug- Sept 2010

• Turkey’s total index score is 46%

• The majority of Turkish people (66%) rate their health and well-being as very good or good.

• 65% of Turkish people experience some level of stress

• The economy is top of the reasons Turkish people are feeling stress(76%).

• Healthcare costs are ranked as the third reason (66%).

• 15% of the Turkish people are sleep deprived

• Technological equipment being update, improved and state-of-art technology is effective in Turkish people’s hospital preference (89%)

• 78% of Turkish people believe that Lighting can have a significant effect on their sense of health and wellbeing

• Cancer, heart and vascular diseases and contagious diseases should receive more attention from the government.

• Spending time with family and children (37%), spending time with friends (31%) and relaxing at home (30%) are the most popular ways to improve the feeling of well-being of Turkish people

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Philips Index for Health and Well-beingSome first results

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A granular approach

Brand image

Hi-end / SophisticatedSpecifications

Low-end & economical solutionsPrice focused

Local insightSegmentation

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Specific market requirements

Local insight

Product specifications Price setting

LogisticsVisibility

Brand image

The LED Bridge between Europe & Asia

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Thank you very much for this opportunity