Financial income and expenses

Interest income decreased by EUR 96 million during 2008, mainly as a result of lower average cash balances during 2008, compared to 2007. Interest expense decreased by EUR 33 million during 2008, mainly as a result of lower interest costs on derivatives related to hedging of Philips foreign currency funding positions.

In 2008, income from the sale of securities totaled EUR 1,197 million. This included a EUR 1,082 million gain from the sale of shares in TSMC, a EUR 83 million gain on the sale of shares in LG Display, and a EUR 16 million gain on the sale of shares in D&M. These gains were offset by impairment charges amounting to EUR 1,296 million. This included EUR 599 million for NXP, EUR 596 million for LG Display, EUR 71 million for TPO and EUR 30 million for Pace Micro Technology. Other financial expense primarily consisted of a EUR 37 million loss related to the revaluation of the convertible bond received from TPV Technology, partially offset by a EUR 23 million dividend from TSMC.

In 2007, income from the sale of securities totaled EUR 2,549 million. This included a EUR 2,528 million gain from the sale of shares in TSMC and a EUR 31 million gain on the sale of shares in Nuance Communications, partially offset by a EUR 10 million loss on the sale of shares in JDS Uniphase. Impairment of securities consisted of a charge of EUR 36 million for JDS Uniphase. Other financial income included a EUR 12 million gain related to the revaluation of the convertible bond received from TPV Technology and a EUR 128 million cash dividend from TSMC.

In 2006, a EUR 77 million impairment of TPO was recorded. Other financial income totaled EUR 292 million, which included a cash dividend of EUR 223 million from TSMC, a gain of EUR 97 million upon designation of the TSMC shares received through a stock dividend as trading securities and a EUR 29 million gain as a result of increases in the fair value of the trading securities held in TSMC. Additionally, it included a partially offsetting EUR 61 million loss as a result of the fair value change in the conversion option embedded in the convertible bond received from TPV Technology.