Stockholders' equity

Common shares

In 2008, the Company's issued share capital was reduced by 170,414,994 shares, which were acquired pursuant to the EUR 5 billion share repurchase program. As of December 31, 2008, the issued share capital consists of 972,411,769 common shares, each share having a par value of EUR 0.20, which shares have been paid-in in full.

Preference shares

The ‘Stichting Preferente Aandelen Philips’ has been granted the right to acquire preference shares in the Company. Such right has not been exercised. As a means to protect the Company and its stakeholders against an unsolicited attempt to acquire (de facto) control of the Company, the General Meeting of Shareholders in 1989 adopted amendments to the Company’s articles of association that allow the Board of Management and the Supervisory Board to issue (rights to acquire) preference shares to a third party. As of December 31, 2008, no preference shares have been issued.

Option rights/restricted shares

The Company has granted stock options on its common shares and rights to receive common shares in future (see note (33) Share-based compensation).

Treasury shares

In connection with the Company's share repurchase programs, shares which have been repurchased and are held in treasury for (i) delivery upon exercise of options and convertible personnel debentures and under restricted share programs and employee share purchase programs and (ii) capital reduction purposes, are accounted for as a reduction of stockholders’ equity. Treasury shares are recorded at cost, representing the market price on the acquisition date. When issued, shares are removed from treasury stock on a FIFO basis.

Any difference between the cost and the cash received at the time treasury shares are issued, is recorded in capital in excess of par value, except in the situation in which the cash received is lower than cost, and capital in excess of par has been depleted.

In order to reduce potential dilution effects, the following transactions took place:

In order to reduce capital stock, the following transactions took place in 2007 and 2008:

Net income (loss) and proposed distribution to shareholders

The net loss of 2008 will be accounted for in retained earnings. A distribution from retained earnings of EUR 0.70 per common share will be proposed to the 2009 Annual General Meeting of Shareholders.

Limitations on the distribution of stockholders' equity

Pursuant to Dutch law certain limitations exist relating to the distribution of stockholders' equity amounting to EUR 1,296 million (2007: EUR 2,915 million).