Other non-current financial assets

The changes during 2009 are as follows:

Reclassifications

Reclassifications mainly relate to the transfer to Other current assets of a convertible bond issued by TPV Technology Ltd (EUR 162 million) and the transfer from Investments in equity-accounted investees of several minority-owned equity interests (EUR 28 million).

The transfer from Investments in equity-accounted investees relates to our interest in Prime Technology Ventures III (Prime) and various other smaller equity interests. As Philips is no longer able to exercise significant influence with respect to these entities, the book value was transferred from Investments in equity-accounted investees to Other non-current financial assets effective January 1, 2009.

Investments in available-for-sale financial assets

The Company’s investments in available-for-sale financial assets consist of investments in common stock of companies in various industries and in the bond within the convertible bond issued by CBAY.

Main investments in available-for-sale financial assets consist of:

During 2009, Philips reduced its shareholding portfolio of available-for-sale financial assets by selling its entire interest in LG Display and Pace Micro Technology (Pace).

On March 11, 2009, Philips sold all shares of common stock in LG Display to financial institutions in a capital market transaction. This transaction represented 13.2% of LG Display’s issued share capital. The transaction resulted in a gain of EUR 69 million, reported under Financial income and expenses.

On April 17, 2009, Philips sold all shares of common stock in Pace Micro Technology (Pace) to financial institutions in a capital market transaction. The transaction resulted in a gain of EUR 48 million, reported under Financial income and expenses.

The Company holds 19.8% of the common shares in NXP, representing an amount of EUR 207 million. The interest in NXP resulted from the sale of a majority stake in the Semiconductors division in September 2006. The Company’s stake in NXP is considered a non-core activity that is available-for-sale. Although the ultimate method of disposal and the precise market for non-listed shares are not clear, the disposal could be effected, for example, by way of a private transaction to strategic buyers or other financial parties, or via a public offering. The Company does not have any definitive plans to dispose of this interest.

NXP is a privately-held company that is not quoted in an active market. NXP is carried at cost because the fair value cannot be reliably determined. The variability in the range of reasonable fair value estimates is significant and the probabilities of the various estimates within the range of reasonable inputs are not sufficiently reliable to determine a fair value. This is mainly due to the limited visibility to the financial projections for NXP, the impact that restructuring initiatives and differing potential capital structure could have in relation to the future financial performance of the company combined with the volatile nature of the semiconductor industry.

Triggered by the deteriorating economic environment of the semiconductor industry in general and the financial performance of NXP specifically, Philips performed impairment reviews on the carrying value of the investment in NXP in 2008 and 2009. At the end of the first quarter of 2009, impairment charges were recognized in the amount of EUR 48 million (2008: EUR 599 million), which were reported in Financial income and expenses.

If there is objective evidence that an impairment loss has been incurred for an unquoted equity investment carried at cost, the amount of the impairment loss is measured as the difference between the carrying amount of the investment and the present value of the estimated discounted future cash flows.

The discounted future cash flows have been estimated using various valuation techniques including multiplier calculations (‘EBITDA multiples’), calculations based on the share price performance of a peer group of listed (semiconductor) companies and discounted cash-flow models based on unobservable inputs. The latter methodology involved estimates of revenues, expenses, capital spending and other costs, as well as a discount rate calculated from the risk profile of the semiconductor industry. Taking into account certain market considerations and the range of estimated fair values, management determined that the best estimate of future cash flows for the NXP investment as per the end of the first quarter of 2009 was EUR 207 million. However, the resulting estimated discounted cash flow amount used for impairment purposes represents an estimate; the actual cash flows of this interest could materially differ from that estimate. Based on the impairment reviews performed subsequent to the first quarter we concluded that no further impairment was necessary.

Loans and receivables

Loans and receivables mainly relate to restricted liquid assets.