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FINAL TRANSCRIPT

Apr. 14. 2008 / 4:00AM, PHG - Q1 2008 Royal Philips Electronics Earnings Conference Call

And second of all in basically the Corporate Reconciliation division, especially in Innovation and Emerging businesses you're talking about increasing investments in the corporate R&D cluster. And I was wondering why that would be case given the substantial losses that this division has reported historically?

Pierre-Jean Sivignon - Royal Philips Electronics - CFO

Sorry Didier, I got the first one, could you just repeat the second one? The line was not too good on the second, could you just repeat the second question?

Didier Scemama - ABN Amro - Analyst

Sure, apologies about that. I'm saying I think in the press release you mention some increased R&D investments or increased investments in the corporate R&D cluster and I was wondering why you wanted to invest more in corporate R&D?

Pierre-Jean Sivignon - Royal Philips Electronics - CFO

Okay, understood. Okay to your question on DAP, Didier, I think the best way to answer you is to say that if you exclude Connected Display, the growth was about 3%. It's hard for me to zoom on the ex-DAP portfolio, but let me give you a bit more color. We had a very strong performer, a good performer and, I would say, an average performer. And since you really corner me on the DAP portfolio, I would say we had a double-digit performer, and I'm talking growth here, a double-digit performer which was again Appliances, continuing to do extremely well. We had a very robust performer, and that would be Shaving and Beauty, and we had an okay performer which was Health and Wellness. So this is to give you the flavor on the ex-DAP portfolio.

In terms of margin I think that they were at level or above, maybe with one caveat which was on Health and Wellness where there was a notch down. The rest of the portfolio was at level or above last year. So I think you have pretty much the elements on the DAP part of the portfolio Didier, okay?

On the Innovation and Imaging what we are saying in there, of course, visually you have the feeling that the costs are going up, but the reality of it is that there we are absolutely focusing R&D on our incubators. We have basically three incubators; one incubator which is Healthcare; one incubator which is Lifestyle; and one incubator which is Technology. And the money we are spending there is completely focused on this incubator as well as on particular project which are feeding growth, in particular special projects which are relevant for the emerging markets.

So the EUR40 million for the next three quarter guidance is not in reality an increase of that spending. It looks like it is the case visually because of, I would say, elements related to the non-research part of the portfolio, in particular one business which is still in there which is still losing a little bit of money and which we have to sell this year. We still have in Corporate Investment one business which is still bleeding and which we need to address.

Operator Thank you. Your next question comes from Mr. Olubunmi Asaolu from Lehman Brothers. Please go ahead sir.

Olubunmi Asaolu - Lehman Brothers - Analyst

Hi, good morning. I have a quick question on the rest of your Consumer Lifestyle business, particularly the CD business outside North America. It was good to see what you did this quarter in terms of the transfer to Funai. I was just wondering whether you would be prepared to do something similar to the TV business in other regions outside the US, or will you just stick to restructuring them going forward?

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