for the Financial Year Ended December 31, 2009.
 
 The Directors submit their report and audited accounts for the year
 ended December 31, 2009
 
 1.  OUTLOOK
 
 Against the backdrop of a global financial meltdown, the Indian economy
 proved to be resilient. Nevertheless, the construction sector in India
 experienced a direct impact from the global slowdown and industry
 growth rates were impacted during the first half of 2009.This affected
 our Professional Lighting demand in the first half of the year; which
 saw negative growth rates. However your companys success in bagging a
 series of Infrastructure projects helped in reversing the trend in the
 second half of 2009. Healthcare demand remained robust through the year
 - and the share of business from Government saw a quantum increase.The
 Consumer business - both in Lighting and Consumer Lifestyle remained
 robust, with double-digit growth in Lighting led by the continued
 demand for energy efficient lamps. The growth in Consumer Lighting was
 also aided and assisted by our entry into Modular Switches and the
 growth of Consumer Luminaires with our investment and expansion of
 Light Lounges. Demand in Consumer categories in Lifestyle remained
 robust with double-digit growth in our Health & Wellbeing segments of
 Domestic Appliances and Personal Care. A conscious choice to improve
 the profitability of the TV business led to phasing out a number of
 screen sizes and thereby impacting our growth. The robust demand seen
 in the second half of 2009 across Lighting, Consumer Lifestyle and
 Healthcare has continued into the first quarter of 2010. On the cost
 base, rising inflation, the increase in commodity prices and the
 possible hardening of interest rates could have an impact on demand and
 margins. The rising rupee would ease the burden by scaling back the
 cost of imports.
 
 The Lighting and Healthcare businesses posted robust top-line growth
 and an increase in respective market share. The profitability of these
 businesses improved substantially over the previous year. Both the
 acquired companies, Alpha X-Ray Technologies (India) Private Ltd. and
 Meditronics Healthcare Private Ltd., enabled us to build a strong
 go-to-market channel and product portfolio in the Cardiovascular and
 X-Ray value spaces.  Operating margins for the Company were adversely
 impacted by the mix and integration of the acquired companies. The
 Philips Innovation Campus (PIC), Bangalore, increased its footprint by
 expanding its strength in Healthcare and adding capacity for IT/ERP
 applications. Going forward, PIC will support the group by adding
 competencies in the areas of Lighting, value space in Healthcare and
 electro-mechanical capability.
 
 2.  MERGER
 
 Your Directors are pleased to announce the merger of Alpha X-Ray
 Technologies (India) Private Limited (Alpha) and Meditronics
 Healthcare Private Limited (Meditronics) with Philips Electronics
 India Limited (PEIL) under Section 391 and 394 of the Companies Act,
 1956 effective from March 26, 2010, with the Appointed Date of April
 1,2009. Consequently the figures for the current year reflect the
 consolidated results of Alpha and Meditronics with PEIL for the nine
 months from April to December 2009 and therefore are not comparable to
 those of the previous year. The merger accounting has been done on the
 pooling of interests method as prescribed by the Institute of Chartered
 Accountant of India. The difference between the amount paid for
 acquisition and the paid up share capital of Alpha and Meditronics has
 been reflected under the head General Reserve. The merger will
 facilitate the integration and consolidation of our Healthcare business
 in India and enable us to operate more efficiently and effectively.
 
 3.  FINANCIAL PERFORMANCE
 
 2.1 RESULTS
 
 Rs. Min
 
                                         2009           2008
 
 Gross income                           32,981         31,966
 
 Operating profit                        1,688          1,900
 
 Exceptional Item (net)                    162            206
 
 Profit before tax                       1,850          2,106
 
 Fringe Benefit Tax                       (24)           (42)
 
 Provision for current tax                (694)          (769)
 
 Provision for deferred tax - 
 Release/(Charge)                           43             56
 
 Profit after tax                        1,175          1,351
 
 Transfer to General Reserve               118            136
 
 2.2 SECTORWISE SALES
 
 Rs. Min
 
                                          2009          2008
 
 Lighting                                 16,775       14,954
 
 Consumer Lifestyle                        9,070       10,244
 
 Healthcare                                4,399        3,583
 
 Innovation Campus                         2,311        2,432
 
 Others                                      101          143
 
 Total                                    32,656       31,356
 
 Sales for the year ended December 31, 2009, increased by 4%. The
 Lighting Sector, which grew by 12%, and the Healthcare Sector, which
 grew by 22%, were the strong performers of 2009. Operating profit
 during the year dropped by Rs 212 million largely due to lower sales
 and eroding margin in the Consumer Lifestyle Sector. Exceptional items
 for the year include profits of Rs 342 million from the sale of
 property, charge of Rs 175 million towards restructuring expenses of
 the Consumer Lifestyle Sector and a charge of Rs 5 million under the
 EmployeesVoluntary Retirement Scheme.
 
 2.3. FINANCE & ACCOUNTS
 
 Your Company delivered a positive cash flow from operations, through
 better realisation and working capital management. During the year, the
 Company spent Rs 1,424 million on buying back 5,883,479 equity shares,
 and Rs 729 million for acquiring Alpha X-Ray Technologies (India)
 Private Limited and Meditronics Healthcare Private Limited. All the
 above payments were made from internal accruals. The balance cash
 surplus was invested in financial instruments in accordance with
 Company policy. On January 4, 2010, the Company transferred the Data
 Centre Operation and System Application support activities to M/s T-
 Systems Information and Communication Technology India Private Limited
 at an aggregate consideration of Rs 41.9 million.
 
 4.  DIVIDEND
 
 Your Directors recommend payment of Rs 2.0 per share as dividend on the
 fully paid equity shares for the financial year ended December 31,
 2009. This will absorb Rs. I 15 million as dividend and Rs. 20 million
 as dividend tax.
 
 5.  BUSINESS PERFORMANCE
 
 The Notes to the Profit and Loss Account for the year provide segment
 results.The required disclosure is made below for the Lighting,
 Consumer Lifestyle, Innovation Campus (Software), and Healthcare
 Sectors.
 
 LIGHTING
 
 The Sector grew by 12%, the seventh consecutive year of double-digit
 growth despite a sluggish first six months due to the difficult
 economic environment and the general election.The growth was driven by
 our continued channel expansion in the Consumer segment and increased
 share acquisition in the professional segment.  Automotive and Consumer
 Luminaries businesses registered the highest ever growth.
 
 A New Product Category, MODULAR SWITCHES, was launched and met with
 success in the market place.  New products in all categories were
 introduced. Investments in channels such as rural and replacements were
 further leveraged to improve reach and sales. In the professional
 segment, the Sector got the maximum share of the 2010 Commonwealth
 Games business; (a sizeable amount of Road and Airport Lighting
 business). Inroads were also made into the Retail and LED segments.
 Manufacturing capacity in both factories at Mohali and Vadodara were
 further enhanced to serve the needs of the local and global market.
 Both factories won Cll awards for being energy-efficient units. The
 Vadodara unit also won the Cll sustainability award and the Mohali unit
 was certified as an OHSAH BSI800I Compliant Unit (Occupational Health
 and Safety assessment series).  Our industrial footprint has been
 realigned to reduce cost and improve quality.
 
 In 2010, the Sector will focus more on the B2B sector through segment
 based marketing, in line with the global strategy and will rely more on
 lighting solutions to increase its market presence. The Business
 intends to reap the benefits of the intended focus on LEDs,
 energy-saving products, new product categories viz. modular switches
 and Consumer Luminaries to grow and improve its market share.
 
 CONSUMER LIFESTYLE
 
 In 2009 the sector largely focused on strengthening market share in key
 categories such as DVDs, kitchen appliances and personal care segments,
 and on building talent, competencies and processes, to drive
 Sustainable Profitable growth through portfolio choices.
 
 The Consumer Lifestyle Sector improved its market shares in the Health
 and Wellbeing categories - our strategic focus area. These categories
 enjoyed a growth of 18% in 2009 on the back of 19% growth in Domestic
 Appliances, 37% growth in Personal Care and 13% growth in Accessories.
 In Domestic Appliances, growth was aided by strong performances in lead
 categories viz., mixer grinders, juicers and irons as well as gains
 from Modern Retail. For the second year in a row, our Intelligent Water
 Purifier won the Water Digest Award for the Best Domestic Water
 Purifier in UV.
 
 In the Audio Video Multimedia (AVM) category, we regained our market
 leadership position in DVDs after almost four years and ended the year
 with a market share of 23.9%. Our Home Theatres category grew by 13%
 while the Mainstream Audio segment declined by 25% in line with market
 developments. Under the new product category, your Company launched Blu
 Ray players and Blu Ray Home Theatre Systems in India. The TV portfolio
 was reduced by 30% to improve overall profitability and this led to an
 overall decline of 10% in 2009 for the sector
 
 Going forward, Consumer Lifestyle will be reshaping its portfolio with
 focused profitable growth plans in categories such as kitchen
 appliances, garment care, home theatres, Blu Ray players and personal
 care products.  We will leverage the rapidly growing Mobility Channel
 for our accessories products and Go-Gears. In addition, we plan to
 launch Mother and Child Care products in mid-2010.
 
 HEALTH CARE
 
 The Healthcare business operates in the Diagnostic Imaging segment,
 which includes CT, MRI, X-rays, Cardiovascular Systems, Nuclear
 Medicine, PET-CT and Ultrasound Imaging Systems. The business is also a
 significant player in patient monitoring/critical care. In 2009, the
 sector recorded a growth of 22% across all the segments, winning major
 contracts across its product range. A significant portion of the
 revenues (about 30% of the overall business) were generated from
 Government institutions during the year. The sector consolidated its
 focus on key accounts management and was able to penetrate some of the
 competitors clients.The Customer Support business complemented the key
 accounts management agenda and contributed its share towards building a
 long-term and sustainable partnership with strategic private players.
 
 The Healthcare sector witnessed heightened activity in business
 financing during the year. Customers were supported with innovative
 business funding models by health care players. Popular funding models
 being used included the on-balance sheet funding, pay per use, public
 private partnership, long-term funding support through export credit
 agencies and funding in foreign currencies. Philips Healthcare took a
 strong lead and offered customised solutions to strategic and key
 customers. During 2009, your Company successfully completed the first
 pay per use contract through PHS solutions. The Healthcare organisation
 in India is also successfully synergised with the Respironics business
 model and is in the process of establishing the sales and operations
 footprint here.
 
 INNOVATION CAMPUS (PIC)
 
 In 2009, PIC has further strengthened their competence in software
 architectures, serviceability, viewing, platform and IT Support. PIC
 also expanded their competences in the electrical and mechanical area.
 The Healthcare business successfully went through a series of audits -
 CMMI L3(sw) certification, FDA readiness and ISO 13485
 
 surveillance audit. Consumer Lifestyle also successfully went through
 CMMI L3 (sw) certification. As a part of the global initiative (SHAPE
 project), IT Application has geared up to provide second and third line
 business applications as well as maintenance support for Philips users
 across the world. The PIC team has made a major contribution to cost
 savings at the global level.
 
 The outlook for 2010 remains positive with expected growth in the
 Healthcare business and IT Applications group, including a new
 initiative taken for Lighting R&D projects in PIC.
 
 Sales (Export in Foreign Currency) amounted to Rs. 2.3 billion in 2009
 (Rs. 2.4 billion in 2008). PICs average employee strength during 2009
 was 879 Full Time Equivalents (FTE) (887 FTE in 2008). During the year
 personnel in the Healthcare and IT Application businesses were further
 increased and personnel in Consumer Lifestyle business were marginally
 reduced.
 
 6.  INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
 
 Your Company remains committed to maintaining internal controls
 designed to safeguard the efficiency of operations and security of our
 assets. Accounting records are adequate for preparation of financial
 statements and other financial information. Through our internal audit
 processes at the sectoral and corporate levels, both the adequacy and
 effectiveness of internal controls across the various businesses and
 compliance with laid-down systems and policies are regularly monitored.
 A trained internal audit team also periodically validates the major
 IT-enabled business applications for their integration, control and
 quality of functionality.The Audit Committee of the Board met
 periodically during the year to review internal control systems as well
 as financial disclosure.
 
 7.  CORPORATE SOCIAL RESPONSIBILITY
 
 Your Company is committed to sustainability and strives to help
 disadvantaged communities lead better lives by making them
 self-sustaining through our healthcare and well-being initiatives. The
 Company has been able to make significant contributions in the
 economic, environment and social areas. In 2009, your Company launched
 sustainability programmes such as project SimplyHealthy@Schools, and
 project MAMTA. Project SimplyHealth@School is a part of global
 initiative that focuses on spreading awareness on Health and
 Wellbeing through interactive sessions with over 800 school children.
 Project MAMTA takes a women-centric approach to enhancing maternal and
 child health in the urban poor population. Other units at Philips also
 initiated various sustainability programmes during the year The
 Companys Mohali Light Factory and Vadodara Light Factory initiated
 various projects with the help of non-government organisations such as
 Sparsh and Samvedna, Arogya Kiran and UTTAN which focus on rural
 and social uplift, and Bal Vikas which focuses on child development,
 education and social uplift of children in nearby villages.
 
 Philips Innovation Campus reaches out to sections of society through
 its various community-based initiatives. A dedicated team of 97
 employees called Community Involvement Team (CIT) care for, involve and
 touch the lives of many people through their activities.Their efforts
 have made a difference to the lives of 5,345 people in 2009 alone. PIC
 has participated in the flood rehabilitation program through an NGO in
 the North Karnataka region, which was severely affected by floods.
 Contributions from employees and Philips would provide about 40
 dwelling units to the affected families.
 
 8.  HUMAN RESOURCES AND INDUSTRIAL RELATIONS
 
 Employee relations were cordial during the year The Company continues
 to invest in the development of its employees through various
 developmental initiatives.
 
 As part of our people development efforts, the learning and development
 needs of employees were identified and addressed on an ongoing basis.
 In addition to ongoing development programmes, the focus was on
 identifying and developing talent through a structured talent
 development process, including development centres and leadership
 development programmes. Our presence at the premier management campuses
 has been further strengthened. Project Capability Building Recognition
 and Engagement (CARE) launched in 2008 was recognised as a global
 best practice. The initiative aims to build the capabilities and
 engagement of frontline sales and service employees. The programme will
 include specific Sales Capability Building projects, recognition by way
 of Awards and Communication programmes.
 
 Information under Section 217 (2A) of the Companies Act 1956, read with
 the Companies (Particulars of Employees) Rules, 1975, forms part of
 this report.
 
 9.  CONSERVATION OF ENERGY, FOREIGN EXCHANGE OUTGO AND TECHNOLOGY
 ABSORPTION
 
 Information pursuant to Section 217(1) (e) of the Companies Act, 1956,
 is provided in the Annexure to this report.
 
 10.  ENVIRONMENT, ENERGY, OCCUPATIONAL HEALTH & SAFETY
 
 Your Company is committed to implementing the Philips Sustainability
 Policy and is striving to continuously improve its contribution to the
 environmental, economic and social aspects of sustainability.
 
 Both the manufacturing units of your Company are actively involved in
 implementing the Philips Eco-Vision III (2006-2009) programme. Both the
 manufacturing units have established and are maintaining ISO-14001
 certified environmental management systems. During 2009 these units
 consumed 805,694 GJ of energy and 194,526 KL of water, generated 7,371
 tons of waste and emitted 260 tons of various chemical substances.
 Hundred per cent of the generated waste was recycled.
 
 Your company has also initiated several programmes to improve the
 health and safety of employees working in the manufacturing units and
 offices. The Mohali Light Factory (MLF) has obtained OHSAS 18000
 certificate for Health & Safety Management in December 2009. During
 2009, MLF bagged the Excellence in Energy Management award 2009 by
 CIl.The Vadodara Light factory (VLF) has received two awards from Cll
 viz. Commendation for Significant Achievement in sustainability and
 Excellent Energy Efficient Unit. The unit is also in the final stage of
 OHSAS 18000 certification.
 
 On energy consumption, Philips Innovation Campus (PIC) achieved a 13%
 decrease in average consumption from 13,260 Kwh / FTE / year in 2008 to
 I 1,478 Kwh / FTE / year in 2009, by optimising space utilisation and
 introducing other energy conservation measures. In line with the global
 Philips initiatives, PIC has kept pace with its commitment to a greener
 workplace.
 
 II.  DIRECTORS RESPONSIBILITY STATEMENT
 
 As required under Section 217 (2AA) of the Companies Act, 1956, your
 Directors confirm that:
 
 i) in the preparation of the annual accounts, applicable accounting
 standards have been followed;
 
 ii) the Directors have selected such accounting policies and applied
 them consistently and made judgments and estimates that are reasonable
 and prudent, so as to give a true and fair view of the state of affairs
 of the Company as on December 31, 2009 and of the profit of the Company
 for the year ended December 31,2009;
 
 iii) the Directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of this Act, to safeguard the assets of the Company and to
 prevent and detect fraud and other irregularities;
 
 iv) the Directors have prepared the annual accounts on a going concern
 basis.
 
 The Companys Internal Auditors have conducted periodic audits to
 provide reasonable assurance that established policies and procedures
 were followed. The Audit Committee constituted by the Board meets
 regularly with internal and external auditors to review internal
 control and financial reporting.
 
 12.  DIRECTORS
 
 Mr. Alexius Collette informed the board of his intention to relinquish
 his Directorship with effect from April I, 2010, following his
 retirement from the Company. Mr Cornalis J M Reuvers informed the Board
 of his intention to resign as a Director with effect from April 1,
 2010, following his transfer to a new assignment based in Amsterdam.
 The Board accepted the letters of resignation from Mr Collette and Mr
 Reuvers at the Board meeting held on March II, 2010. The Board records
 its appreciation of the valuable contributions made by Mr Collette and
 Mr. Reuvers to the Boards deliberations.
 
 At the meeting held on March I 1, 2010, the Board appointed Mr Jan
 Hendrik Gerardus Louwman as a Director in the vacancy to be caused by
 the resignation of Mr C J M Reuvers with effect from April I, 2010. The
 appointment of Mr. Louwman as a director is subject to the approval of
 the Central Government. Notice have been received from a member
 pursuant to Section 257 of the Companies Act, 1956, intimating his
 intention to move a resolution for the appointment of Mr Louwman as a
 Director of the Company. Mr Venkataramani retires by rotation at the
 ensuing Annual General Meeting. The Board recommends his
 re-appointment.
 
 13.  AUDITORS
 
 Messrs. B S R & Co. retire as auditors of the Company and, being
 eligible, offer themselves for re-appointment.  Your Directors
 recommend their re-appointment for the ensuing year
 
 14.  COST AUDITORS
 
 The Central Government has directed your Company to carry out an audit
 of the Companys cost accounts in respect of electric lamps and
 fluorescent tubes, pursuant to the provisions of Section 233B of the
 Companies Act, 1956. Accordingly, your Directors have approved the
 appointment of Messrs. M/s Nanabhoy & Company, a firm of cost
 ccountants, to conduct the audit for the year ending December 31, 2010.
 
 15.  GENERAL
 
 Your Directors acknowledge the close cooperation and support your
 Company has received during the year from employees, members, its
 parent company Koninklijke Philips Electronics N.V., its bankers and
 business partners including suppliers, co-makers and the trade.
 
                                          On behalf of the Board
 
                                                     S. M. Datta
                                                        Chairman
 Gurgaon, Haryana
 March 30, 2010