Robin Jansen - Head-Investor Relations François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director

Ian Douglas-Pennant - UBS Ltd. (Broker) Andreas Willi - JPMorgan Securities Plc Max R. Yates - Credit Suisse Securities (Europe) Ltd. Ben E. Uglow - Morgan Stanley & Co. International Plc James A. Moore - Redburn (Europe) Ltd. Andrew Carter - RBC Europe Ltd. (Broker) Gaël De Bray - Deutsche Bank Philip Scholte - Kempen & Co. NV (Broker) Alok Katre - Societe Generale Global Solution Centre Pvt Ltd. Jonathan Mounsey - Exane Ltd.

Welcome to the Royal Philips Second Quarter 2016 Results Conference Call on Monday, the 25th of July 2016. During the introduction hosted by Mr. Frans van Houten, CEO, and Mr. Abhijit Bhattacharya, CFO, all participants will be in a listen-only mode. After the introduction, there will be an opportunity to ask questions. Please note that this call will be recorded and is available by webcast on the website of Royal Philips. I'll now hand the conference over to Mr. Robin Jansen, Head of Investor Relations. Please go ahead, sir. Robin Jansen - Head-Investor Relations: Thank you and good morning, ladies and gentlemen. Welcome to Philips' second quarter fiscal year 2016 results conference call. I'm here with Frans van Houten, CEO, and Abhijit Bhattacharya, CFO. Pim Preesman, who, as we announced earlier this morning, will take over the responsibilities for IR from September 1 onwards, is also joining us today. In a moment, Frans will take you through our strategic and financial highlights for the period. Abhijit will then provide more details on financial performance. After that, we will be happy to take your questions. Our press release and the related information slide deck were published at 7:00 AM CET this morning. Both documents are now available for download from our Investor Relations website. A full transcript of this conference call will be made available by tomorrow on our Investor Relations website. Before I turn over the call to Frans, I would like to remind you of three things. First, Philips Lighting was listed and started trading on Euronext in Amsterdam under the symbol LIGHT on May 27. Philips initially retains a 71.2% stake and, therefore, continues to consolidate Philips Lighting's results. We encourage, if you haven't already, to review Philips Lighting second quarter and semi-annual earning materials, which were published on Friday, July 22. During this call, we will therefore focus our commentary as much as possible on the performance of our HealthTech businesses. Second: following the decision in 2014 to combine our Lumileds and Automotive Lighting businesses into a stand-alone company and to explore strategic options to attract capital from third-party investors, the profit and loss of these combined businesses is reported under discontinued operations, and the net assets for that business in the balance sheet on the line assets held for sale. The cash flow of the combined Lumileds/Automotive business is reported on the cash flow from discontinued operations. Finally, when we refer to adjusted EBITA on this call, this represents EBITA excluding restructuring costs, acquisition-related charges and auto charges and gains above €20 million. With that, I would like to hand over the call to Frans. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Yeah. Thanks, Robin. The second quarter of 2016 was a quarter that marked several important events. Of course, the important milestone for Royal Philips was the successful separation of Philips Lighting. But, sadly also, several political events are happening with potentially significant consequences throughout the world. And I have to say that volatility has gone up with unsure outcomes. As we said, we completed the separation process at the end of May with the successful listing of Philips Lighting on the Euronext Amsterdam Stock Exchange. I want to congratulate the entire Philips Lighting team on the successful offering and listing. And as Robin already mentioned, Royal Philips currently retains a majority ownership stake in Philips Lighting, and we aim to fully sell down over the next several years. We can now fully focus on capturing the exciting opportunities in the health technology space, allowing Philips Lighting to do the same in the growing market for energy-efficient lighting. Britain's decision to leave the European Union has increased volatility in the short term and uncertainty in the long term. And while not a choice that Philips would have favored, it's a new reality. We remain hopeful that the trade and other commercial arrangement that are negotiated with the UK over the next several years will maintain the close partnership that we have with a very important market for Europe broadly and Philips specifically. To that end, I want to make it entirely clear that we remain 100% committed to our entire ecosystem in the United Kingdom and, most notably, our customers and employees. With that, let me now focus on our second quarter results. On today's call, I will focus my remarks on our opportunities in the HealthTech market and, therefore, we'll review the performance of the businesses in our three key segments, Personal Health, Diagnosis & Treatment and Connected Care & Health Informatics. This quarter, we again delivered a solid set of results with operational improvements across the operating segments and 5% comparable sales growth in our HealthTech portfolio. This level of sales growth performance underscores the compelling opportunity for Royal Philips as a company focused on helping consumers to become healthier and our B2B customers to deliver better clinical and financial outcomes through an integrated approach to healthcare delivery across the health continuum. This includes, among other things, capturing key opportunities in Population Health Management, improved enterprise wide solutions for health systems and accountable care organizations, and coordinated care delivery across the health continuum. Adjusted EBITA improved by 90 basis points to 9.3% of sales driven by improvements in all operating segment and within HealthTech, most notably, in the Personal Health business. Our transformation program Accelerate! continues to drive top line growth and deliver savings that, on an annualized basis, more than compensate for inflation, price erosion and our ongoing investments in quality and new business areas like health informatics, wearable patient monitoring solutions, Population Health Management and digital pathology that all offer great long-term growth and margin potential. Order intake dynamics remain quite uneven and, as a result, currency comparable equipment order intake fell by 1% in the quarter. But I want to stress that the somewhat disappointing level of orders in the second quarter, in our view, does not reflect the commercial activity that we see in our opportunity funnel and, based on this, we expect good order intake growth in the second half of this year. Our Personal Health businesses grew by 9% on a comparable sales basis, with high-single digit growth in our mature and growth geographies driven by double-digit growth in Central and Eastern Europe and Middle East and Turkey, and Western Europe. Adjusted EBITA improved by 18% to €234 million. And our margin improved by 170 basis points to 14.1%, including some small non-recurring items that contributed 80 basis points to the margin. This quarter's performance clearly reflects the strength of the Philips brand and, specifically the Personal Health franchise, for consumers around the world as well as the positive impact of our operational improvement programs. One of the strong performers in the Personal Health segment is our Sleep & Respiratory Care business. This business grew high-single digit driven by mid-teens growth in sleep as a result of the rollout of the DreamStation portfolio, which is also driving increased customer satisfaction and market share gains. We build on this momentum in the second quarter with the successful launch of our cloud-based Patient Adherence Management Service, which is the first of its kind connected health technology for sleep and respiratory conditions, allowing patients to stay connected to their care teams throughout the course of the therapy. It enables the access to data, clinical management workflow, informatics and intelligence for providers, payers and patients within a single cloud-based platform. We are helping to increase therapy compliance rates among patients and to improve the experience of new patients attempting to adapt to the therapy. In the Personal Care businesses, we introduced a revolutionary new product concept named OneBlade. OneBlade is a hybrid styler that trims, shaves and creates clean lines. It was specifically designed for millennials, many of whom prefer to have beards or other types of facial hair. OneBlade leverages our capabilities as the world's leading electric male grooming brand and it's stepping into the growing market trend of male facial hair styling. OneBlade was already successfully launched in France, the UK, Germany, and North America, and has elicited a positive response from both consumers and retailers, and the first sign of an in-market performance are exceeding our initial expectations. As we continue to support these promising product launches in the coming quarters, we expect advertising and promotion to go up compared to historic levels. In the Oral Healthcare businesses, we introduced the Philips Sonicare FlexCare Platinum Connected toothbrush, our latest innovation that uses smart sensor technology to help consumers optimize their brushing routine. This advanced connected toothbrush synchronizes via the Philips Sonicare app via Bluetooth to track brushing habits in real-time and provide a personalized 3D mouth map to help consumers identify the areas of the mouth missed in their current brushing routine. As the data is stored in the cloud, patients can also choose to share their data and stay connected with their dental professionals, leading to improved brushing compliance between visits. Switching to the Diagnosis & Treatment businesses, we posted comparable sales growth of 1%, driven by low-single digit growth in Image-Guided Therapy and Ultrasound. Order intake in Diagnosis & Treatment was down mid-single digit, largely driven by phasing in regions like North America, Japan, Germany and the Nordics. Adjusted EBITA improved by 20 basis points to 8.2% as operational leverage and ongoing cost savings were able to more than offset the ongoing investments in quality mainly related to Cleveland. CT production and shipments from Cleveland have been back on track for some time now. However, as we continue to work hard on further augmenting the overall quality standards across our facilities and among our supplier base, we continue to see elevated levels of quality and regulatory spend in the second half of 2016 and first half of 2017. These costs remain in line with prior expectations and, therefore, we continue to expect the Cleveland-related business to contribute improvements of around €100 million to adjusted EBITA in 2016 and around €75 million in 2017. Philips Volcano is really performing well, demonstrating again this quarter both the benefits of the acquisition and the success of the integration. In the second quarter, we delivered another strong quarter of double-digit comparable sales growth and continued operational improvements driven by growth across the smart catheter product portfolio, synergies with the Image-Guided Therapy Systems business and expansion into new geographies. Last month, we further strengthened our digital pathology business by acquiring PathXL. With this complementary acquisition, we can build on our digital pathology solutions offering and leverage PathXL's capabilities in the fast-growing image analysis and tissue pathology software field. We will be an even more attractive partner for global medical institutions as they transition to digitize pathology workflows by solving needs in computational pathology education, workflow solutions and image analytics. In the Connected Care & Health Informatics businesses, comparable sales grew by 6%, driven by high-single digit growth in Patient Care & Monitoring Solutions and mid-single digit growth in Healthcare Informatics. This strong growth as well as cost savings enabled the adjusted EBITA to improve by 110 basis points to 7.6%. In line with our long term strategy of building multi-year strategic partnerships that allow health systems to expand access to quality care and manage cost better, we signed a $36 million agreement with the Medical University of South Carolina Health, with a focus on integrated patient monitoring solutions. Our ability to provide more cost effective ways to monitor, diagnose and treat patients, offering the most advanced technology, while improving the patient experience was actually key to our selection out of a competitive field of bidders. In Europe, we signed a €19 million agreement with the Heart Hospital in Tampere, Finland to collaborate on a center of excellence for cardiac care. Under this strategic partnership, we will install, integrate and manage cardiac angiography imaging, cardiac ultrasound imaging, clinical informatics and patient monitoring solutions, as well as providing maintenance, training, consulting services, all under a unified payment structure. Our outlook for 2016 remains unchanged. We expect modest comparable sales growth and continued progress on our operational performance improvements that will drive further earnings improvements in the second half of the year. At the same time, we are concerned about the increased risk due to volatility in a number of markets and the potential impact that this may have on Philips' businesses and performance. And with that, I will hand over the call to Abhijit to discuss our financial performance and the market dynamics in more detail. Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director: Thank you, Frans, and good morning to all of you. Before delving into the Q2 financial performance and market dynamics, I would like to take this opportunity to thank Robin, who has decided to leave Philips after three years as our primary point of contact with the investor community. I know that many of you would agree that he has been instrumental in optimizing our investor relations program. He's been a key member of the Philips finance leadership team, especially as we executed on the separation of Philips Lighting. We will miss his valuable contribution and wish him all the best for the future. Pim Preesman, who joined Philips 13 years ago and who many of you will know from his time in IR from 2009 to 2012, will become Head of Investor Relations effective September 1. Apart from his time in IR, Pim has performed many key roles within Philips' global finance function, and is currently Head of Finance for Brazil. Please join me in welcoming him back to Investor Relations. I know that he looks forward to engaging with all of you going forward. Let me now provide you with more granular information on our Q2 results. In Q2 2016, we delivered 5% comparable growth in our HealthTech portfolio. Including the 1% drop in Philips Lighting's comparable sales, overall sales increased by 3% on a comparable basis. Geographically, comparable sales growth in the second quarter was driven by 4% growth in Western Europe and 6% in the growth geographies, which was partly offset by stable comparable sales in North America and the other mature geographies. Sales of our HealthTech portfolio in the growth geographies grew by 9%, and the mature geographies delivered 2% growth. Comparable sales growth for our HealthTech portfolio in the mature markets was driven by mid-single digit growth in Western Europe, low-single digit growth in North America, and stable comparable sales in the other mature geographies. Personal Health and Connected Care & Health Informatics businesses recorded high-single digit comparable sales growth in mature geographies, while our Diagnosis & Treatment business saw low-single digit comparable sales decline. In the growth geographies, comparable sales growth for our HealthTech businesses was driven by double-digit growth in countries like Poland, Indonesia, Argentina, and others. China delivered mid-single digit comparable sales growth in HealthTech. Let's have a look at our order intake now. On a currency comparable basis, equipment order intake declined 1% in the quarter, resulting in 4% currency comparable order intake growth on a 12-month rolling basis. I say this as we have signaled often earlier about the unevenness of the order intake trajectory, as low-single digit growth in our Connected Care & Health Informatics businesses was offset by a mid-single digit decline in the Diagnosis & Treatment businesses in the second quarter. Geographically, we reported a high-single digit growth in comparable orders in our growth geographies driven by double-digit growth in regions like China, Russia, and Africa. In Western Europe, order intake grew low-single digit, while North America posted high-single digit decline, mainly reflecting the lumpy nature of the order intake. Looking at the strong commercial activity we have seen in the first half of the year and the related order funnel, we remain confident that we will see good order intake in the second half, offsetting the slow start of the year. Let me remind you that in our HealthTech portfolio, approximately 30% of sales are related to the order book in the next quarter. Let me now switch to the EBITA development in the quarter. Slide 24 of the presentation material that we posted on our website this morning provides an overview of the main drivers of adjusted EBITA when compared to the same period last year. As you see on the slide, the adjusted EBITA margin of 9.3% in the quarter was 90 basis points higher than in Q2 of last year. This margin increase was driven by a margin improvement of 170 basis points in the Personal Health businesses, 110 basis points in Connected Care & Health Informatics businesses, and 20 basis points in the Diagnosis & Treatment businesses and, finally, 180 basis points delivered by Philips Lighting who delivered an overall strong performance and remains on track to return to positive comparable sales growth in the course of 2016, which is the first time since the fourth quarter of 2013. Our underlying operational performance, excluding FX effects and the €12 million positive contribution from Cleveland, contributed 80 basis points to the EBITA margin in the second quarter as our Accelerate! program continues to improve operational performance and drive efficiencies. More specifically, in the fifth bar, you see a net contribution of €34 million from our overhead and End2End productivity programs, as year-on-year increment of cost savings of €97 million were partially offset by higher non-manufacturing cost as a result of investments in emerging business areas and investments in selling expenses in the quarter. Our Design for Excellence or DfX program, which is aimed at improving value, delivered €86 million of additional bill of material savings year-on-year, and around top of the normal run rate of procurement savings of €98 million. Based on the cumulative savings achieved in the first half and the outlook for the second half of the year, we remain on track to achieve the cost savings target for the year that we have set for all three programs. In addition to the operational improvement of 80 basis points, the improvement in the adjusted margin was supported by 20 basis points coming from the positive financial contribution of Cleveland, which was partially offset by negative impact from currency translation effects of 10 basis points. In the second quarter, the income tax expense was €48 million, which was similar to the second quarter of last year, but €27 million lower than in the first quarter of 2016. Due to the sequence of activities related to the separation of Lighting, the tax line in Q1 included tax expenses related to the separation, whereas in Q2, it included tax benefits related to the separation that largely offset each other. For 2016, we expect the effective tax rate to be around 30%. Net financial expenses were €25 million higher in the quarter, which was mainly due to an interest reversal related to our release of long-term provisions in 2015. Net income from discontinued operations was €151 million higher than in Q2 2015, which is mainly due to the €144 million we were awarded in the Funai arbitration case in the quarter. The return on invested capital, which is calculated on a five-quarter MAT basis, was 7.1%. Excluding the total one-off charge of €345 million related to the pension liability de-risking in the U.S. and the UK in Q4 2015, the ROIC was 10.1%, which is about 1-percentage point above our WACC. Inventory, as a percentage of sales, decreased by 180 basis points to 15.2% year-on-year. Excluding currency translation effects, inventories as a percentage of sales were done 90 basis points year-on-year driven by all operational segments. Free cash flow for the quarter amounted to an inflow of €127 million compared to an outflow of €30 million in the same period last year. By the end of the fourth quarter, we completed 91% of our three-year €1.5 billion share buyback program, which we started in October 2013. Let me now provide you with some healthcare market perspectives from the U.S., Western Europe, and China. In the U.S., we expect to see flat-to-low single digit growth in the healthcare market in 2016 following a strong 2015. We expect acute care providers to continue to make operational process changes to avoid penalties for hospital readmission, the first step in the gradual movement from reimbursement for episodes of care to payment for management of health of populations. These changes are expected to result in fewer patient admissions in the hospital. And those remaining will be the ones that have more acute conditions to be dealt with. The uncertainty of impact of these changes will likely continue to cause some delay in the capital spending of hospitals and, therefore, capital spending for hospitals is expected to be flat in 2016. The European healthcare market, coming off a slight growth in 2015, is expected to see flat to low-single digit growth in 2016. We continue to see an uptick across Europe in multi-year solution-oriented deals, although cuts to public spending budgets have offset this growth driver. In China, headwinds related to government's anticorruption measures, centralized tendering and price erosion continued the overall slowdown across healthcare markets in 2015. We expect this to stabilize in 2016 and grow modestly, bolstered by the need for more capacity and replacement of aging equipment. Overall, we estimate the global healthcare market growth to be in the low-to-mid single digit range for 2016. Let me briefly summarize our financial performance in the second quarter before opening line for question. Our HealthTech portfolio delivered strong 5% comparable sales growth and our improvement programs continued to drive operational performance across the segments. Following the successful IPO of Philips Lighting in May, we expect separation costs in the second half of the year to be in the range of €65 million to €85 million and represent the majority of what we expect to report in legacy items in the second half. In the HealthTech Other segment, we continue to expect to incur approximately €50 million of restructuring cost and other incidental items, which will be slightly offset by cost savings in 2016. As a result, we continue to expect a net cost of €80 million to €100 million at EBITA level in 2016. On Lumileds, as you know, Lumileds performance has been under pressure for a couple of quarters, which is inherent to the cyclical nature of the industry. We continue to expect the performance to improve in the second half of this year based on the good order book for Lumileds and measures we've taken in the beginning of the year to improve cost productivity. These measures typically take about six months to take an effect. At the same time, we continue to engage with parties that have expressed interest in the combined Lumileds and Automotive business, and we'll provide more detail on this process when appropriate. For the full year 2016, as Frans mentioned, our outlook remains unchanged as we continue to expect earnings improvements in the second half of the year. But we are concerned about the increased risk due to volatility in a number of markets. With that, let me now open the lines for your questions, which Frans and I will be happy to answer. Thank you.

Thank you, sir. The first question comes from UBS. Please state your name and withdraw your question. Thank you. Ian Douglas-Pennant - UBS Ltd. (Broker): (30:06-30:12) outlook statement, please, and the qualifying commentary there. And why did you not lower the guidance based off what you're seeing politically or is it fair to say that if it wasn't for the macroeconomic uncertainty that you would have upgraded guidance today? And can you put any quantification on how far ahead of your expectations you are in that case? Thanks. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Hi. Ian. This is Frans. I'm afraid the first half of your question dropped away a bit. Would you mind repeating it quickly, please? Ian Douglas-Pennant - UBS Ltd. (Broker): Yeah. Sure. So, in summary, just on your guidance, why did you not lower the guidance? Is it fair to say that if not for the macroeconomic uncertainty, you would've raised your guidance today, given what you've been seeing in the margins? François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Interesting. Let's say, we gave guidance in the beginning of the year or rather we called it the outlook. We said we would end the year around 11% adjusted EBITA and have modest growth. We maintain that outlook. I think it's fair to say that many analysts were doubtful about that outlook. I can tell you that we believe that in the first half of the year, we feel that we are on track to deliver on that outlook. It is true that we still have a lot to do in the second half of the year. We always said we are back-end loaded when it comes to improvement. We are confident that we can deliver that, but when we look outside to the world, a lot of stuff is happening and that concerns us. We need to manage those risks as best we can. Today, those risks are not having a direct negative effect at this time, so we continue to be a case of self-help mostly. We are happy with the 5% growth in our HealthTech portfolio in the second quarter. We see sizable profit expansion in the second quarter that leads us to stay committed to reaching this around 11% outlook. Ian Douglas-Pennant - UBS Ltd. (Broker): Okay. So, it's fair to say that the risk of that guidance is now to the downside. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Yeah. Look, we still have a lot to do. We are confident in our own abilities, and let's first work to achieve our guidance before we even dream about a different guidance. Ian Douglas-Pennant - UBS Ltd. (Broker): Okay. Fine. But given the uncertainty that you're seeing today, the risk is to the downside with your guidance. Would you agree with that statement? François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Given the fact that that is external risk, yes, you're right. External risk has increased. Ian Douglas-Pennant - UBS Ltd. (Broker): Okay. That's my one question. I'll jump back in the queue. Thank you. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Okay. Thanks

Our next question comes from Andreas Willi from JPMorgan. Please go ahead. Your line is open. Andreas Willi - JPMorgan Securities Plc: Yeah. Good morning, everybody. My question is also related to the guidance and the implied second half margin improvement year-on-year. So, if we use the 11%, you would need about 250 bps improvement in H2. You did 80 bps in H1. The Cleveland guidance gives you another 70 bps in the second half. So the 100 bps gap is this a specific division you see that weighted to in terms of your plan if you get to 11% or is this a more broad-based improvement that you see coming to support the 11%? Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director: Hi, Andreas. This is Abhijit. You're right. Cleveland is one factor, but also, if you look at the phasing of our cost savings, including our DfX savings, that is also second half loaded. Like Frans mentioned, we expect stronger growth and, with that, operational leverage in the second half to also drive improvement. And last but not the least, in terms of our royalty income, we have a higher weightage in the second half compared to the first half and also an improvement year-on-year in the second half. So, these are a few things that hopefully will get us across the line and closer to the around 11% that we've talked about. Andreas Willi - JPMorgan Securities Plc: And the follow-up question on Lumileds/Auto, are you still committed to agreeing a transaction in the second half of this year? You didn't specifically mention that in your speech earlier. And on the Automotive side, given how good the peer results are, I'm still a bit surprised that doesn't offset some of the LED weakness there. Are you losing market share on the Auto side? François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Yeah, hi, Andreas. We remain absolutely committed to trying to do a deal on Lumileds/Automotive in the second half of the year. We are in dialog with various parties. We are also optimistic about the results development of Lumileds, having visibility on the design-ins of the various components with customers. And so we believe also that the dip in performance is largely behind us. Andreas Willi - JPMorgan Securities Plc: Thank you very much. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: You're welcome.

Our next question comes from Max Yates from Credit Suisse. Please go ahead. Your line is open. Max R. Yates - Credit Suisse Securities (Europe) Ltd.: Hi. Thank you. Just my first question would be on healthcare orders and specifically in North America. What is it that you're seeing that gives you a lot of confidence in the second half? Is it that signing a couple of orders slipped into the next quarter? Is it just broader conversations with customers? If you could give us a little bit more of a feeling as to why you are confident in the second half picking up and, particularly in North America, where you said it was a timing issue. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Yeah. We did indeed see a couple of orders slip from Q2 to Q3 that all together had a significant impact on orders. Which, frankly speaking, we had strong order intake in 2015, then first half 2016 was a bit soft and therefore a bit disappointing. But we know, of course, all the orders that we are working on, some slipped into Q3. And we talk about good order intake expectations for the second half year and that includes North America. Max R. Yates - Credit Suisse Securities (Europe) Ltd.: Okay. Just my second question would be on the legacy items. And when I look at the first half impacts from those, it's around minus €50 million on an EBITA. And I'd just like to try and understand how you think about those legacy item costs running into the second half of this year. Is a sort of minus €25 million per quarter run rate what we should expect or will those likely come down in the second half of the year? Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director: Yeah, Max, on a run rate basis, you will see that coming down. So it would probably come down to roughly half of that in the coming two quarters. Max R. Yates - Credit Suisse Securities (Europe) Ltd.: Okay. Half of that per quarter or half of that combined for the second... Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director: Yeah. Yeah, half of that per quarter. So on an adjusted basis, it will be between €12 million and €13 million per quarter in the next two quarters. Max R. Yates - Credit Suisse Securities (Europe) Ltd.: Okay. That's very helpful. Thank you very much.

We will now take our next question from Ben Uglow from Morgan Stanley. Please go ahead. Your line is open. Ben E. Uglow - Morgan Stanley & Co. International Plc: Hello. Yes. Good morning, everyone. A couple of questions, I guess, relating again to the issue, the North American orders. Frans, can you tell us – the double-digit decline in North American orders, is the Diagnosis & Treatment division in line with that? And in terms of these deferrals or push-outs, what I'm trying to understand is, are these large, specific contracts, i.e., if we had signed those contracts in 2Q, would we be close to a zero growth in North American orders? So, I guess, what I'm asking for is how big are these one-off impacts in that North American minus 10% number? The second question is on understanding the margins in Connected Care. The division, as I understand it, is basically majority patient monitoring and then minority Healthcare Informatics. It's an 8% margin right now, which I would've thought, relative to peers even in 2Q, is an extremely low number. Can you give us a sense over the remainder of the year if you are expecting Connected Care to show a significant upward trajectory with similar seasonality to what we've normally seen in Diagnosis & Treatment? Is that part of the big recovery as well that you expect in the second half? François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Hi, Ben. Frans here. Yeah. So, let's take North America a bit in perspective. If I would take you to visualize a rolling 12-month order intake curve, then actually North America shows a healthy 10% level. So, in that sense, we are not concerned about our ability to compete in North America. Structurally, we believe our market share is okay. We actually saw the Q1 report on market shares, which arguably look back at that time and that was healthy. As said, Q2 was impacted by push-outs that were quite sizeable; multiple deals, not one big deal actually, but multiple deals. And we believe that we will get back into positive territory in the second half, in the third quarter, and that also this 12-month rolling OIT is something that we can maintain on a healthy level. Then, your question on margins in Connected Care & Health Informatics, you're right that the largest business group in there is Patient Care & Monitoring Solutions, which has a very healthy EBITA margin. The second piece is Health Informatics, which is rapidly transforming itself from a hardware-orientated business towards a software business. I must say that the leadership that Jeroen Tas is doing there really helps it because, frankly speaking, two years ago, that Healthcare Informatics business was in negative territory. It has been turned around successfully. It is now showing high-single digit results. But, as a software business, it will further improve to healthy high-teens margin over the next quarters. And then the third piece that you need to know is that we are making sizable investments within this cluster or this segment. For example, in HealthSuite digital platform, in the medical wearable sensors. And to keep in mind, I'm talking about tens and tens of millions of euros. So, three pieces, Patient Care/Monitoring Solutions, a well performing business with strong profitability, with an increasing growth profile, a Healthcare Informatics business that is rapidly recovering and moving towards a double-digit profitability territory, and then these big investments that pull it down. You saw a good improvement from Q1 to Q2. We expect a further improvement into the second half year, and then, of course, a further improvement next year. Ben E. Uglow - Morgan Stanley & Co. International Plc: Okay. Just one follow-up, Frans. On the issue of the lumpiness of orders, and I completely take on board the fact that on a rolling 12-month basis, it's been 10%, but what I'm perplexed by is why the orders each quarter are significantly more lumpy than what we see at the two main peers. Is there any natural reason why Philips, your imaging business, should be showing a more stop-start growth trajectory than the two main peers? François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Well, we specifically talk about equipment order intake. I believe some of our competitors talk about sum of equipment and service order intake, which of course has a dampening effect on the peaks and troughs of orders. Nevertheless, yeah, I think this lumpiness is something that we need to live with. You guys are now zooming in on North America and rightly so. But I may point out that our China performance was lumpy last year and is now strongly in positive territory, even ahead of what some of our competitors were reporting. So, we also see strengths there. Across the world, I see good health. So, I already talked about China. I see Europe, with a strong resilience in orders. So, altogether, I think we're on a good path of both growth and profit improvement. And we believe that the order book and the order intake supports the growth ambition that we have been talking about and also been demonstrating in Q1 and in Q2. Ben E. Uglow - Morgan Stanley & Co. International Plc: That's great. Thank you very much. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: All right.

Our next question comes from James Moore from Redburn. Please go ahead. Your line is open. James A. Moore - Redburn (Europe) Ltd.: Yes, Good morning, everyone; Frans, Abhijit, Robin. I wonder if I could start with the Diagnosis & Treatment business and, a little bit, the medium term outlook, if I might. You have talked about some of the positive potential in CT given your work at Cleveland, China, Israel, and in IGT from Volcano. But I wondered if you could help us understand the MRI piece, which I believe is lower margin certainly below those of your peers. Could you talk to us a little bit about how you think that business could develop in the next couple of years? And secondly, I wondered if we could touch on Personal Health. The growth there, 9%, very good. You talked about products now for a while. You've kept the growth rate very high, Dream Space (45:53), OneBlade, Platinum, but could you help us understand the growth outlook into the second half and into next year? Do you see a point where we compare unfavorably against some of this good (46:04) growth or do you think it can continue? And you mentioned advertising and promotion impacts inside that. And could you perhaps expand as to whether you're talking about a meaningful margin impact there? François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Okay. Let me give it a try, okay? So our MR business is performing very well in Europe, in Asia with market shares well in the 20%s. In North America, we are a bit lower. We are working very hard to fix that. That comes also with some investments. We also have new product introductions in the MR space. We are one of the two leaders in MR in the world, and we believe that we can structurally improve profitability of MR in the coming era. We have also tightened a bit how we manage pricing for MR. We believe that in some geographies we were a bit too low for the value that we have to offer to our customers, so we also expect that therefore equipment margins can gradually improve. If I move to Personal Health, we believe that Q2 had an exceptional high growth. Nevertheless, we are committed to mid-to-high single digit growth in Personal Health. We believe that that is sustainable. We see that in multiple of the business groups. For example, Sleep & Respiratory Care performed very well; lots of innovation going on there with our cloud-based connected sleep solutions. We are outpacing competition there. In oral care, the market is expanding. We are performing very well against competition. People are switching from manual to electrical brushing. We have great franchise in brush heads, so we believe that the high growth can continue there. Then in Personal Care, we just launched the OneBlade. OneBlade is kind of a hybrid shaving concept between electric and wet shaving. That launch goes hand in hand with significant advertising and promotion commitment. We think that that's a great investment. I can quantify that a bit for you. We think that the impact on Personal Health in Q3 could be around 50 basis points, for Personal Health that is. So, it's an overseeable amount and, with the growth, we can quickly find compensation for that in the next quarters as we see the traction of this product. Does it answer your question, James? James A. Moore - Redburn (Europe) Ltd.: Yeah. It does. Thank you very much, Frans. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Okay. Thank you.

Our next question comes from Andrew Carter from RBC. Please go ahead. Your line is open. Andrew Carter - RBC Europe Ltd. (Broker): Good morning, all. Thank you very much for taking the question. The first one, I just wanted to go back to, again, for which I apologize. It's D&T North America and I just wanted to pick up on, I think you said that the sales growth in quarter, I think you said it was down high-single digit. And I wondered if you could just help us understand that a little bit. I think you've explained what's going on in orders quite well, but it does also sound as though the sales performance in North America in the quarter was quite weak. And I guess, if I take into account sort of the idea that the service side of the business should have been, I would've thought, reasonably stable if not growing. It does seem to suggest that the equipment was down quite a long way. And then, the other one, I just wanted to ask perhaps going on from what James asked was just on Domestic Appliances. And it does seem as though we've had a nice acceleration in the quarter there. And I was wondering if there's anything in there that might relate to a prior year comparison or the one-off in anyway. And I wonder if you could just talk a little bit about what's driving it and what the sustainability is. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Sure, Andrew. Let's first talk about D&T North America. In fact, your comment on comparability is applicable for D&T more so actually than for Personal Health. The year-on-year decline is close to 8%. And you may recall that Q2 2015 was a very good quarter thanks to the recovery of the resumption of production and sales of Cleveland, where we started to deliver against the backlog and that resulted in a sales spike in that quarter. Now, that doesn't justify of course not growing it this year. So, don't get me wrong. But the comparison was certainly not easy. We've also seen that in Image-Guided Therapy, some customer acceptance slip also into Q3, which made revenue recognition a bit more difficult. So, altogether, we believe that Q3 we will see a resumption of the business growth. Then on DA, you talked about DA, but do you mean Personal Health or specifically Domestic Appliances? Andrew Carter - RBC Europe Ltd. (Broker): I meant Domestic Appliances specifically, because I guess if I look back over the last four quarters or so the growth rate in Domestic Appliances, I think, has been a little bit lower. And so I was just quite interested in the acceleration that we're seeing. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Okay. That's very perceptive. As you know, Personal has several business groups; many of them have these very strong high profitability franchises. Domestic Appliances is a bit different in the sense that it is a bit more generic. We saw a nice recovery through a new leadership in Domestic Appliances that has enhanced the new product introductions and managing that business. Also, we saw finally the turnaround of coffee coming through, and altogether that has resulted, off the top of my head, in a mid-single digit kind of growth rate for DA, a little bit better even being signaled that therefore DA starts to perform more in growth terms as the other businesses. Of course, that also has a nice fall-through to the bottom line thanks to operational leverage. Andrew Carter - RBC Europe Ltd. (Broker): Thank you. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: You're welcome.

Our next question comes from Gaël De Bray from Deutsche Bank. Please go ahead. Your line is open. Gaël De Bray - Deutsche Bank: Yes. Thank you. Good morning, everyone. Looking at the bridge, the price component was higher than in prior quarters. It was about 0.3% higher at 2.4%, and I find it a bit surprising given the slower growth seen in the LED lamps business this quarter. So, do you see some higher price pressure in some parts of healthcare now? So, that's question number one. And the second question is on – perhaps is a bit M&A related. At the latest CMD, you indicated that there was a €37 billion addressable market for adjacent businesses for the Connected Care division. So, could you elaborate perhaps on what you consider are the most attractive sub-segments within these adjacent businesses? Thank you. Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director: Hi, Gaël. This is Abhijit. On the price erosion, it's basically LED and the LED growth was not particularly weak. It was a 25% growth year-on-year on a much bigger volume. So, it's not that we are seeing higher price erosion in HealthTech, so that should not be a concern at this point. We've always guided for 2% to 3% price erosion. We are at the lower end of that range. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Okay. Then I'll take your M&A question. Let's first talk a bit about Connected Care & Health Informatics, all right? What we do there is basically patient monitoring and patient care both in the hospital, as well as in an ambulatory fashion after discharge and into the home. So, we envisage that we support patient care along the journey from hospitalization back into the home with full recovery. Now, we have a market-leading position in patient monitoring in the hospital, which we are extending with wearable sensors, so that we can also keep tracking the patients wherever they are. So that is one area where we are investing. We have chosen to do that mostly through organic investments, hence the investment discussion that we had earlier in the call that we are investing money in developing those sensors. Then, secondly, we see strong opportunities in what we call Population Health Management. This is about analytics on the one hand and care coordination, supporting doctors, nurses both in the hospital enterprise but also with primary care and ambulances to collaborate together in the cloud. The acquisition last week of Wellcentive is a nice example to boost our analytics capabilities of data mining to enable Population Health Management. Wellcentive is a software-as-a-service platform company, and their software is being used extensively by health systems in North America to identify patient populations that are in need for care. Now, then the interesting thing is that we can immediately cross-sell that to our own solutions. So, we expect a synergistic play between Wellcentive and our device business and services business. That's the second area of investment. And then third is in Health Informatics. We are strong in imaging informatics. We see opportunities to extend that. We are expanding into pathology as you know. The acquisition of PathXL is a nice example of a company that is very strong in image interpretation, thereby assisting the diagnosis of, for example, cancer patient. Both Wellcentive and PathXL, at this time, are examples of relatively modest acquisitions. The acquisition that we did last year, Volcano, is performing very well. That will be an example of a somewhat higher value acquisition. So that, let's say, gives you a bit of color around our interest to expand and strengthen our position in Connected Care & Health Informatics. Gaël De Bray - Deutsche Bank: Okay. Thank you very much. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: You're welcome.

Our next question comes from Philip Scholte from Kempen. Please go ahead. Your line is open. Philip Scholte - Kempen & Co. NV (Broker): Yes. Good morning, everybody. I had a question about the growth you mentioned about actually two areas where I was expecting a bit higher growth, as both in the Image-Guided Therapy segment and within Connected Care in the Population Health Management, which you say was actually in line with. So, can you comment a little bit about why those numbers are a bit low at least compared to my estimates? François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Yeah. In IGT, which is a combination of our systems business and the acquisition of Volcano, we saw a mixed picture. Volcano showed very strong growth for the second quarter in a row and is delivering on its acquisition business case. Quite pleased with the performance there. On the systems side, sales indeed was quite a bit lower, and we saw that being caused by some slippages into Q3. I would like to bring to your recollection that in the first quarter, we actually saw a 10% growth. Now, these larger installations of hospital operating rooms are a bit lumpy, so we had strong sales recognition in Q1, weak sales recognition in Q2, and we expect stronger sales recognition in Q3, all right? That has to do when the customers actually accept and sign off on the installation. Then, on population health, today, this is really still a very small activity compared to the rest of our businesses, and I would not read too much in the commentary on Population Health Management. We are still building that asset and we expect over the coming 24 months to gradually come to a very solid and healthy profile. Philip Scholte - Kempen & Co. NV (Broker): Right. Can I have a quick follow up on Lumileds, which you used to report separately on the Lumileds/Automotive business combined. Why did you stop that and are you willing to share the EBITA of that business as previously reported as the way you used to report that? Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director: We still show it separately. We don't provide all the lines because earlier it was deconsolidated from Lighting, as a result of which it helped to understand the Lighting results better. Now with Lighting being a separate company which is reporting all its lines, we've just simplified that layout. You've seen that, overall, from a – we show that as a separate line in the discontinued operations. So you see there is an improvement compared to last year, but that's largely because of lower tax. And as we mentioned earlier, we expect from Q3 onwards the overall results to actually start beating last year again. Philip Scholte - Kempen & Co. NV (Broker): Sure. But you're not willing to share the adjusted EBITA number? Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director: No. Right now, with part of discontinued operations, we don't need to give that level of detail anymore. Philip Scholte - Kempen & Co. NV (Broker): Okay. Thank you. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: You're welcome. Next, please.

Our next question comes from Alok Katre from Société Générale. Please go ahead. Your line is open. Alok Katre - Societe Generale Global Solution Centre Pvt Ltd.: Hi. Alok Katre from SocGen, and thanks for taking my questions. I have a follow-up firstly on the question around Connected Care and the margin improvement that's seen in the second half of the year. If I understood correctly, is it just related to the improvement in the growth that you were expecting in Patient Care & Monitoring and the Informatics business or is it got to do just in the second half of this year with some phasing of costs and revenues? Is it just the phasing or is it a part of the leverage from the growth as well? So that was the follow-up. And then the question that I have from my side is just on Diagnosis & Treatment. And I can appreciate the margins were up 20 basis points year-on-year, but if you strip out the €12 million improvement that you show in Cleveland within the bridge, then the underlying profits were slightly lower year-on-year. So, I just trying to gauge whether there's something else that's going on in that business. Is it the FX? Is it some other investments, et cetera? And then just within the same breath, working capital at that division was up 60 basis points year-on-year, whereas it declined everywhere else. So just wondered what's driving that and how we should read into this. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Sure. Sure. I think all are quite easily to be explained. Many of these healthcare businesses are having a reasonably high fixed cost component and are dependent on its seasonality in revenue. And the second half of the year is always much stronger than the first half. So, we expect margin expansion in the second half year. And that applies to Connected Care/Health Informatics where the patient monitoring business always is strong in the second half year. That should give us more growth and margin expansion. But also in D&T, we talked about earlier in the call that sales were a bit slow in D&T, and that you immediately see backed by then a negative operational leverage in that business. And we had some push-outs which explain the higher working capital, all right? Because if an installation is being delivered but not yet revenue recognized, it ends up in working capital. So that whole story hangs together. And as we then get to sales recognition in the third quarter of some of these work in progress orders, we will see the trend reverse with an above-average margin expansion and, of course, a commensurate reduction of working capital. Does that answer your questions? Alok Katre - Societe Generale Global Solution Centre Pvt Ltd.: Yeah, kind of. Just on Connected Care, usually that – sorry – in Diagnosis & Treatment, usually that used to be the division with the sizeable FX headwind. So was there none at all or nothing sizeable in Q2 and is that... Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director: No, nothing sizeable in Q2, no. Alok Katre - Societe Generale Global Solution Centre Pvt Ltd.: Okay. And do we expect at the current rates that there will be anything in the second half which we should keep in mind? Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director: No, negligible. In the second half, we expect it to be negligible. And on the working capital, also part of it is due to the intercompany payments. If you take that out, we also have quite a good improvement in working capital also for Diagnosis & Treatment. So we see that coming across the board. Alok Katre - Societe Generale Global Solution Centre Pvt Ltd.: Okay. Thanks.

Our next question comes from Jonathan Mounsey from Exane. Please go ahead. Your line is open. Jonathan Mounsey - Exane Ltd.: Yes. Good morning. Thanks for taking the call. So, just going back to D&T and, well, particularly in North America and the weak progress on orders in Q2. Obviously, you're saying you're very confident in a second half pick-up. Can we assume from that that as recently as July, we've booked the orders that slipped from the second quarter into the third quarter? François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: I'm not going to dissect the quarter for you. That goes a bit far. Let us just stay with the confidence that we've spoken about before. Jonathan Mounsey - Exane Ltd.: Okay. And just one follow-up then. On the M&A pipeline, obviously, you've done a deal quite recently. As we go into the second half, can we expect much of the proceeds from Lighting to be spent imminently or, basically, how does the pipeline look? François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: Well, thanks for raising that. It gives me an opportunity to maybe a bit broader talk about our capital allocation policy, right? We've always said that we will use some of the proceeds for debt reduction. We had just paid down the Volcano bridge loan. We are planning to retire some of the more expensive debt. We will still do a little bit on pension liability reduction. We are finishing off the share buyback program in the second half year. We aim at dividend stability. And then, finally, yes, we will consider disciplined but more active approach to M&A. So, with the two examples in Q2, I can't promise you that we do that every quarter. We will have our eyes and ears wide open about our selective possibilities, but I would not jump to the conclusion that we are now on a spending spree. Jonathan Mounsey - Exane Ltd.: Thank you. And let me just one final follow-up. If I look at the bridge that was given in the Capital Markets Day presentation from last year, the aim to get to 11% adjusted EBIT margins by end of 2016, I think the biggest positive component, the 2% operational improvement, if we look at where you're tracking year-to-date, I think it's probably a little less than 1%. Can we really expect in the final half of the year to make all of that gap up? It feels as if, I think it was already mentioned the risk is to the downside now. Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director: Yeah. I think we'll be just be repeating ourselves. I think Andreas asked that question in the beginning. And as I clarified that the Cleveland opportunity is an improvement over last year. As I mentioned, most of our cost saving, because we have for our enabling functions a plan to get to benchmark levels by the end of this year, so we will get some cost savings there. We, of course, are banking on stronger growth in the second half as we've mentioned right to the call, which gets us better operating leverage and the fact that royalty income gives us a bit of a tailwind in the second half, plus the way we have managed forex, I think, gives us some – gives us good visibility to come around the 11% as we spoke about. Jonathan Mounsey - Exane Ltd.: Okay. Thank you.

We will now take our last question from Ian Douglas-Pennant from UBS. Please go ahead. Ian Douglas-Pennant - UBS Ltd. (Broker): Oh, yeah. Thanks very much for taking my follow-up question. As you can imagine, most of them have been asked. I've just got a couple of boring ones left. Firstly, on the tax rate, just a semantic, you announced it's going to be about 30%. I have in my notes from the past that it's going to be low 30%. So, can I just confirm that is an improvement? Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director: Yeah. That is. Ian Douglas-Pennant - UBS Ltd. (Broker): That is improvement? Okay. Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director: Yeah. Ian Douglas-Pennant - UBS Ltd. (Broker): Good news. Thank you. And then the other one is on restructuring. Obviously, this cost was much lower than what you're guiding for the full year divided by four if you see what I'm saying. Are we going to expect a lot of the charges to accumulate in Q4 as they have done in prior years? And if so, why is that trend happening like that? Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director: Yeah. Sorry. Are you done? Ian Douglas-Pennant - UBS Ltd. (Broker): Yeah. That was the end of my question. Yeah. Thank you. Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director: Yeah. Q3 and Q4, so Q2 was a bit lower because a couple of Lighting restructurings which were planned in Q2 slipped to Q3. So, you will see, let's say, the lower restructuring in Q2 getting compensated by a higher amount in Q3. And then you will see some in Q4 as we, let's say, put into effect some of the new productivity programs that we will kick-start in the second half of the year to drive our margins up in the coming years. So, that's something we are working on, and once we start implementation of that, you will some more restructuring charges coming in. Ian Douglas-Pennant - UBS Ltd. (Broker): Okay, great. And in terms of the tax rate going forward, are there further monetization programs that you've got going on or however the correct way to phrase it, should we expect the tax rate to come down further in the future? Abhijit Bhattacharya - Chief Financial Officer, Executive Vice President & Director: No, I think around the 30% is a fair number to go by. Could go up a tad, but it will be in and around 30%. Ian Douglas-Pennant - UBS Ltd. (Broker): Okay. Thank you. François A. van Houten - President, Chief Executive Officer & Chairman of the Board of Management and Executive Committee: All right. I think that concludes our call. And I appreciate everybody's questions and we will continue to work hard on achieving our aims for business results. Thank you very, very much, and have a great summer period.

This concludes the Royal Philips' second quarter 2016 results conference call on Monday, the 25th of July 2016. Thank you for participating. You may now disconnect.