sig-2021-12-31-en

1 Performance highlights

2 CEO message

3 Creating value

4 Corporate performance

5 Three-year overview

8 Supervisory Board report

6 Board of Management

7 Supervisory Board

9 Remuneration report

10 Corporate governance

11 Investor relations

12 Risk factors and risk management

13 Statement of the Board of Management

14 Consolidated financial statements

15 Signify N.V. financial statements

127

16 Sustainability statements

135

17 Combined independent auditor’s report

163

18 Reconciliation of non-IFRS financial measures

176

19 Definitions and abbreviations

180

20 Forward-looking statements and other information

184

European single electronic reporting format (ESEF) and PDF version

This copy of the Annual Report is the PDF/printed version of the Annual Report 2021 of

Signify N.V. This version has been prepared for ease of use, and does not contain ESEF

information as specified in the Regulatory Technical Standards on ESEF (Delegated

Regulation (EU) 2019/815). The official ESEF reporting package is available on our

website at https://www.signify.com/static/2021/signify-annual-report-2021.zip.

Forward-looking statements and risks & uncertainties

Please refer to chapter 20, Forward-looking statements and other information, of this

Annual Report, for more information about forward looking statements, market and industry

information, fair value information, IFRS basis of presentation, use of non-IFRS financial

measures and statutory financial statements.

Signify Annual Report 2021

We are Signify

Signify Annual Report 2021

1Performance highlights

1.1Financial performance

2020

2021

Comparable sales growth

(12.7)%

3.8%

Nominal sales growth

4.1%

5.5%

Adjusted EBITA margin

10.7%

11.6%

Net income *

335

407

Free cash flow *

817

614

Net cash provided by operating

activities *

891

704

•In EUR million

Divisions

Digital

Solutions

Digital

Products

Conventional

Products

Sales *

3,524

2,452

861

Comparable sales growth

3.4%

8.8%

(6.9)%

Nominal sales growth

8.3%

7.2%

(8.7)%

EBITA margin

9.0%

13.2%

18.4%

Adjusted EBITA margin

11.3%

13.8%

18.7%

•In EUR million

This chapter contains certain non-IFRS financial measures and ratios, such as comparable sales growth,

EBITA, Adjusted EBITA and free cash flow, and related ratios, which are not recognized measures of financial

performance or liquidity under IFRS. These measures are further discussed in chapter 4, Corporate

performance, of this Annual Report. For a reconciliation of these non-IFRS financial measures to the most

directly comparable IFRS financial measures, see chapter 18, Reconciliation of non-IFRS financial measures, of

this Annual Report.

Signify Annual Report 2021

1.2Sustainability performance

Brighter Lives highlights

2020

2021

Brighter lives revenues

25% - 27%**

Women in leadership

23%

25%

Safety at work (TRC rate)

0.22

0.17

Supplier Sustainability Performance

99%

98%

Lives lit since 2017 (in million)

6.0

7.2

Better World highlights

2020

2021

Carbon reduction over value chain

against Paris Agreement

On track**

Circular revenues

21% - 25%**

Climate actions revenues

61% - 64%**

Carbon neutral operations

100%

Total waste to landfill***

<1%

* New Brighter Lives, Better World 2025 sustainability KPIs reported for the first time in 2021

** 2021 results/assessments are based on current level of availability and accuracy of data

*** Zero waste to landfill definition was updated in 2021; refer to chapter 19, Definitions and abbreviations, of this Annual Report.

Signify Annual Report 2021

2CEO message

2021 – Strengthening Signify's growth

profile in a challenging external

environment

“I am very proud of our team's rigorous execution of our strategy amid the

considerable external challenges presented in 2021. We safeguarded the health and

well-being of our employees and minimized supply chain disruptions to our customers

while further improving our financial profile. We continued to strengthen our growth

profile and remain on course to double our positive impact on the environment and

society.” – Eric Rondolat, Signify CEO

2021 presented us with extraordinary

challenges brought on by the ongoing impact

of the COVID-19 pandemic, namely high levels

of disruption to global supply chains. We

navigated these challenges well and

successfully minimized the impact on our

customers. The continued health crisis

sharpened our focus on the welfare of our

employees and in 2021 we went to

considerable lengths to protect their physical

and mental health, and ensure their well-

being. I take great pride that amid these

challenges, we continued to make progress

on our journey to double our positive impact

on the environment and society.

We are encouraged by the high demand for

connected lighting and for our growth

platforms. They accounted for one quarter of

our business in 2021. While global supply chain

issues impeded our ability to meet the high

demand, most notably in Q3, our sales

returned to growth on a comparable basis. By

swiftly taking multiple mitigating actions and

simultaneously managing our prices to offset

the structural part of inflation, we further

improved our profitability and ensured

continued investment in our digital initiatives.

And once again, we generated a solid free

cash flow. All of these demonstrate that the

fundamentals of our business are stronger

than ever, driven by the ever-growing need

for energy-efficient and digital lighting

technologies.

Our strategic focus

Our teams have rigorously executed our

strategy while adapting to the continuing

COVID-19 pandemic and its subsequent

supply chain disruptions. Our strategic

direction has been reinforced around our 5

Frontiers, which focuses on being even more

customer centric, delivering differentiated

offers, driving growth for sustainability,

digitalizing and transforming for the future,

and being a great place to work.

In 2021, we further adapted our company

structure by moving to a leaner central

organization. At the same time, we achieved

cost saving measures while increasing our

focus on innovation and sustainability. Overall

performance improved despite the troubled

external environment:

•Comparable sales growth was 3.8%, driven

by our digital divisions

•Our connected lighting sales represented

20% of total sales by the end of the year,

increasing our total connected light points

to 96 million globally

•Our adjusted EBITA margin improved by 90

basis points to 11.6%

•Free cash flow amounted to EUR 614

million, representing 8.9% of sales

Signify Annual Report 2021

Our acquisitions

In 2021, we strengthened our business with

two acquisitions. In the summer we

announced the acquisition of Telensa

Holdings Limited (Telensa), a UK-based

expert in wireless monitoring and control

systems for smart cities. The acquisition

supports our strategic priority to grow in

professional systems and services and

broadens the group of customers we can

serve. Telensa adds a narrow-band and

TALQ-compliant solution to our feature-rich,

open and secured systems. Together, we can

help towns and cities around the globe reap

the benefits of connected lighting in a cost-

efficient way by utilizing the unlicensed radio

space, bringing them into a smart city central

management system.

And just before the end of the year we

announced our intended acquisition of

Fluence for USD 272 million, to strengthen

our Agriculture lighting growth platform in

North America. This acquisition enables us to

capture the full potential of the US market for

bio-based and non-bio-based crops, building

on our strong existing European footprint. We

expect the global market for agricultural

lighting to grow by more than 20% per year

to EUR 1.6 billion in 2024.

Our financial performance

In 2021, our business continued to recover

from the initial impact of the COVID-19

pandemic. Strong demand for connected

lighting, paired with a solid performance of

our growth platforms, underpinned this

recovery. And while global component

shortages and logistics challenges affected

our ability to meet the high demand, we still

managed to record comparable sales growth

of 3.8%. The mitigating actions we took, in

combination with disciplined price

management to offset inflation, enabled us to

improve the Adjusted EBITA margin for the

eighth consecutive year. And we once again

generated a solid free cash flow of EUR 614

million.

Further cost optimizations, including in our

head office, have reduced our adjusted

indirect costs to 29.6% of sales. At the same

time, the rigorous execution of our strategy

and continued investments in our digital

initiatives further improved our

competitiveness in a rapidly moving lighting

industry.

Our commitment to innovation

In 2021, we invested 4.1% of our sales in R&D,

focusing on three pillars: innovating in lighting

technology, bringing the Internet of Things

(IoT) into lighting, and innovating in our

growth areas.

In lighting technology, we launched the Philips

Ultra Efficient LED lamp, which is 60% more

energy-efficient than other LED lamps, and

the Philips TrueForce LED highbay, a universal

HID replacement lamp that enables fast and

hassle-free conversion to LED for our B2B

customers.

In consumer IoT, we upgraded the Philips Hue

experience with a deep Spotify integration

and a more intuitive app with enhanced

functionality. For professional customers, we

added new capabilities to our Interact Pro

system, enabling gateway-less commissioning

of Interact Ready luminaires, sensors and

switches. Together, these contributed to

boosting the installed base of connected light

points by 19 million to 96 million.

In our Growth areas, our efforts to

standardize UV-C safety requirements

around the globe were rewarded with DEKRA

certification for our UV-C desk lamp, a first in

our industry. We further extended our 3D

printing capabilities to design unique, one-of-

a-kind luminaires to customers’

specifications. Our fast, secure LiFi

connectivity solution was deployed for the

first time in commercial aircraft, and at the

World Forum in The Hague, where privacy and

security are top priorities. And finally, we

launched BrightSites, a new industry-leading

innovation that can create a high-speed

wireless communication backhaul network

using our luminaires.

I am extremely proud that our teams’ efforts

in innovation continue to be recognized. We

improved our position in the European Patent

Office’s World Top 100 Most innovative

Companies to 21st, ranked 36th on the IP

GREEN100, and our long legacy in design

received 40 world-class awards, including 12

iF and 11 Red Dot awards.

Our commitment to sustainability

It is integral to our Five Frontiers strategy

that our growth must not be at the expense

of the earth, but to its benefit. Our strategy

identifies five domains for innovative and

sustainable growth: contributing to climate

action, contributing to a circular economy,

increasing food availability, enhancing safety

and security, and improving health and well-

being.

Our ambitious sustainability program, Brighter

Lives, Better World 2025, builds on our 2020

achievement of carbon neutrality in our

operations. Through this program, we will

amplify our positive impact by enabling our

customers and suppliers to become more

sustainable. I am proud to say for all our

commitments we are on track to double our

positive impact on the environment and

society by the end of 2025.

This year, we accelerated our actions to

combat climate change and I would like to

mention a few highlights. We launched our

Green Switch program in Europe and our

Brighten America program in the US to

connect the dots between climate action and

economic growth. We announced our most

energy-efficient commercial light bulb ever,

and we are on track to deliver against our

ambitious goal of doubling the pace of the

Paris Agreement’s 1.5ᵒ scenario. In 2021, we

were at the top of the DJSI World Index for

the fifth consecutive year and ranked in the

top 1% of our industry according to

Sustainalytics.

Signify Annual Report 2021

"The progress we are making on embedding digital

technologies in our offerings and operations will

enable us to enhance our leadership in a

continuously moving industry."

Our commitment to our customers

Our strategy places the customer at the

center of our organization. To fulfil this

promise, we have continued to build the

strong digital and excellence capabilities that

improve customer experience and business

processes. Our progress was rewarded with

multiple awards at the annual European

Customer Centricity Awards 2021, most

notably the gold medal for statistics

modelling.

We have further strengthened our quality

standards and started a competency

development program within our design and

manufacturing environment to improve quality

and customer satisfaction.

As part of our continued journey towards

organizational excellence, we used the

European Foundation of Quality Management

(EFQM) model to assess another ten markets

and businesses. 20% of all assessed entities

achieved a score of more than 500 points,

demonstrating an indisputable track record

of success in turning strategy into action and

their commitment to performance excellence,

which brings them closer to being “Best in

class” organizations.

While structural improvements are tangible,

we have not been able to deliver to our

customers at the expected levels given the

overall disruption in the global supply chain.

Indeed, 2021 was a disruptive year for our

supply chain, which was hit by a global

transportation crisis, a heavily volatile raw

materials market, and global components

scarcity. All our teams, in every geography,

anticipated and adapted to the changing

environments with a single priority: minimizing

disruption to our customers.

Our digitalization journey

The supply chain disruptions also emphasized

even more the importance of our ongoing

digitalization journey. Improving end-to-end

visibility within the full value chain will help us

respond even faster to customer demand and

changing market environments, as our

customers have a growing interest in

engaging with us through digital channels.

In 2021, digital sales via our B2C channels

increased by 53.6%. We have pivoted to an

Agile delivery model with strong market focus

to further accelerate and strengthen our

customer interfaces. Our teams continue to

have daily interaction with our customers,

learn, and further develop new features for

our digital channels.

We made solid progress in digitalizing

operations this year. In Digital Supply chain,

we have improved Demand, Supply and

Inventory Optimization processes, increasing

our service levels. In Digital Manufacturing,

we have digitalized, standardized and

automated much of our product handling and

inventory management, increasing visibility

and productivity in our warehouses.

To ensure synergies in our strategy and

delivery model, we consolidated our global

Digital organization to merge the three pillars

of our digital transformation - Digital, Data

and IT- under a single leader. We will continue

to strengthen the digital organization with

strategic leadership hires.

Our commitment to being a great place

to work

In 2021, the physical and mental health, safety

and well-being of our employees and their

families remained a priority. To help provide

our employees with a safe working

environment, we started installing UV-C

disinfection devices in 138 projects in our

offices and buildings.

A diverse workforce and an inclusive work

environment are essential to a thriving,

innovative business. This year we will publish

our first annual Diversity, equity and inclusion

(DE&I) report. And as part of our Brighter

Lives, Better World 2025 program, we

increased our ambitions on diversity, equity

and inclusion, committing ourselves to double

the percentage of women in leadership

positions to 34% by the end of 2025. We

further aim to achieve 40-60% gender

balance targets for the management and

professional levels of our organization by

2025.

As an employer, we take pride and

encouragement from the external

Signify Annual Report 2021

recognition we receive. Most recently,

Equileap recognized us as one of the ten

leading companies in the Netherlands on

workplace equality and placed us second in

gender equality in the supply chain. And

earlier in 2021, we received employer

recognition in Brazil, China, India, the

Netherlands and Singapore.

We continue to build our learning culture and

develop our employees, prioritizing digital and

commercial excellence. This year, our

customers and employees improved their

skills during multiple virtual sessions.

Our robust succession plans for leadership

roles have resulted in greater diversity in our

candidate pool, with 36% of succession

candidates being women. In 2021, over 80%

of our leadership positions were staffed

internally, confirming the success of our

efforts to build a strong internal succession

pipeline.

This year, keeping people and teams

connected has been both important and

challenging. Our quarterly employee survey

has thus proven particularly insightful.

Employee NPS showed a continued

improvement, from 25 in 2020 to 30 in 2021,

with 80-85% participation levels throughout

the year.

Our thanks

On behalf of our Board of Management and

our entire leadership team, I want to thank

our employees, who continue to show

tremendous dedication, creativity and

resilience and each day fulfil our purpose to

unlock the extraordinary potential of light for

brighter lives and a better world.

I also thank our customers for their trust and

loyalty, especially during these challenging

times. This continues to motivate us to do our

best every day.

And finally, I thank our shareholders for their

continued confidence in us and in the

execution of our strategy. Our 5 Frontiers

strategy, with sustainability and innovation at

its heart, will help us to continue to lead our

industry to higher levels of energy-efficient

lighting innovations and new standards in

connectivity.

Our fundamentals have never been stronger

and will continue to strengthen our position

as the world leader in lighting, achieve

multidimensional growth, and create value for

all our stakeholders.

Eric Rondolat

CEO Signify

Signify Annual Report 2021

3Creating

long-term value

3.1Our strategy

Who we are

Signify, headquartered in Eindhoven, the

Netherlands, is the world market leader with

recognized expertise in the development,

manufacture and sale of innovative, energy-

efficient lighting products, systems and

services. With over 36,800 employees, a

presence in 74 countries and our sales

covering a global market, our purpose is to

unlock the extraordinary potential of light for

brighter lives and a better world.

We have pioneered many key breakthroughs

in lighting over the past 130 years and have

been a driving force behind several leading

technological innovations. Signify continues

to innovate in LED lighting and is leading the

industry’s expansion to lighting systems in

both the professional and consumer markets.

Our position as industry leader in connected

lighting, makes Signify the lighting company

for the Internet of Things (IoT).

Strategic context

Our world is facing the combined challenges

of climate change, resource scarcity, supply

disruptions, demographic transformation and

increasing urbanization. These mega trends

are affecting the way we operate. Our

industry is transforming, shaped by new

technologies, mergers and acquisitions,

shifting buying habits and new competition.

We are seeing a shift to more digitally savvy

and sustainably informed, who want to be

served faster, better and differently.

Digitalization is increasing, driving the demand

for smarter technology and online services.

Every year, Signify performs a Strategic

Review Process, combined with a sound

Sustainability Materiality Assessment (more

can be found in Chapter 16 of this report).

These processes involve a large number of

internal and external stakeholders and help

us identify future trends, understanding

stakeholders’ perspectives at a global and

local level. This helps us to better manage the

risks and opportunities that could impact our

ability to create value in the long term.

As a result of our annual review, in 2021, we

furthered our focus on delivering on our 5

Frontiers strategy and on progressing on the

commitments of our new Brighter Lives,

Better World 2025 sustainability program that

we launched in 2020.

Signify Annual Report 2021

Sustainability focus and UN SDGs

Doubling objectives

Climate action

Double the pace we achieve

the 1.5°C scenario of the Paris

Agreement

Better World

Circular economy

Double our Circular revenues

to 32%

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Food availability

Safety & security

Health & well-being

Double our Brighter lives

revenues to 32%

Brighter Lives

Great place to work

Double our percentage of

women in leadership to 34%

Signify Annual Report 2021

Partnering on logistics to save costs, improve

illumination, and boost productivity

Working with DHL Supply Chain, we embedded digital lighting technologies to help co-create the

warehouse lighting of the future.

Customer challenge

We evaluated potential logistics partners to

outsource our warehousing operations in the

US. We also wanted to work on a warehouse

design which would showcase the latest

connected lighting technologies. We decided

to partner with DHL Supply Chain because we

share many of the same corporate values and a

vision on digitalization and sustainability. From

the outset, it was clear that our partnership

had the potential to go beyond a single

warehouse to bring value to other similar

facilities.

Solution

We first replaced the old fluorescent-tube

lighting with LED high bay luminaires, which

consume only about half of the energy. We co-

created a smart warehouse lighting system

where all the luminaires are wirelessly

monitored, managed and controlled by Interact

Industry, bringing additional benefits in terms

of shopfloor usage optimization, workers'

safety, and productivity improvements.

We offered DHL Supply Chain the latest and

most transformative industrial lighting

technology and related services, putting it all

to work as part of a pilot program at a DHL

Supply Chain site in Lockbourne, Ohio.

“We are shooting for a million-

kilowatt hours savings in this system

on an annual basis. Right now, that's

exactly where we're tracking today."

Marty Reibold

General Manager Technology, DHL

Supply Chain

Following this initial success, DHL Supply Chain

plans to use the advanced capabilities of

Interact Industry's connected infrastructure to

drive several key initiatives. We're already

working together to expand on the success of

the pilot at other DHL Supply Chain sites.

Interact Industry

Interact Industry is a cloud-based connected

lighting system that supports new operational

efficiencies and centralizes lighting

management. The capabilities of Interact

Industry go far beyond illumination. For

example, the scene management capabilities

are ideal for managing different lighting needs

in different parts of a facility. DHL Supply Chain

created 75 zones each with unique lighting

characteristics managed centrally by Interact

Industry. This improved productivity and

employee satisfaction and well-being at the

Lockbourne site.

Interact Industry - DHL Supply Chain - US

Signify Annual Report 2021

Philips Hue + Spotify

Feel the music with deep integration

of Spotify and Philips Hue

Seamless pairing of lights and music offers an immersive home entertainment experience like no other.

Challenge

Since the advent of smart home lighting, music

lovers have matched their Philips Hue lights with

music to recreate the magic of live

entertainment in their own homes. Apps offered

this service by accessing the microphone on

users’ devices to sense and respond to the

music.

This meant that the lights would always respond

to the music instead of working in sync. And

simply taking a voice call could disrupt the

experience, since the lights would respond to

background noise picked up by the microphone.

As Philips Hue wants to provide its Hue users the

best possible smart home lighting experience, it

set out to find a more sophisticated way to

match light and music.

Solution

Spotify and Signify brought together their

world-leading expertise in music streaming and

smart lighting to create a solution that

seamlessly unites light and audio, without using

the microphone. Philips Hue users can simply

pair their Spotify account directly within the

Philips Hue app.

Once paired, a new, jointly-developed algorithm

analyzes the metadata of each song in real time,

translating digital music into digital lighting.

Lights flash, dim and change color according to

the song’s beat, mood, genre and tempo. Users

can set their personal preferences on how lights

respond, including setting their own color

palettes, within the Philips Hue app.

And since the system bypasses the microphone,

people can use their phone to do other things at

the same time.

Philips Hue + Spotify value proposition

The world’s leading audio streaming subscription

service meets the world’s leading smart home

lighting platform.

Philips Hue + Spotify is a unique deep music and

lighting integration that makes the world’s best

loved light and music apps work together in

perfect harmony.

When Spotify and Philips Hue are connected,

Philips Hue can match its lights to any song on

Spotify, so people can hear, see and feel the

music like never before.

Signify Annual Report 2021

3.2Our impact

Our commitments and 2021 achievements

Despite a particularly disrupted external environment, tainted by an ongoing global pandemic and global supply chain challenges, Signify made significant achievements on all its strategic frontiers in

2021. The table below shows that we are on the right path to fulfill our purpose to unlock the extraordinary potential of light for brighter lives and a better world.

Our 5 strategic frontiers

Description

Our targets

Our achievements

1.Build a customer-centric organization

We are building a more customer-focused,

more localized operating model and driving

improved process excellence.

•Steadily increase customer Net Promoter

Score (NPS)

•Customer NPS: 44 (2020: 41)

2.Deliver differentiated lighting offers

We are developing and delivering

differentiated lighting products through

multiple distinctive brands.

•Grow tiered offering sales

•4.1% of sales invested in R&D and 19,600

patent rights

•Comparative sales growth of 3.8%

3.Drive growth for sustainability

We are addressing global challenges by

focusing on growth areas for sustainability:

Climate action, Circular economy, Food

availability, Safety & security, Health & well-

being.

By the end of 2025:

•Double the pace we achieve the 1.5°C

scenario of the Paris Agreement

•Double our Circular revenues to 32%

•Double our Brighter lives revenues to 32%

•On track to deliver against our ambitious

goal of doubling the pace of the Paris

Agreement’s 1.5ᵒC scenario

•21% - 25% Circular revenues

•25% - 27% Brighter lives revenues

4.Digitalize and transform for the future

We are improving our digital front and back-

ends and increasing our data analytics

capabilities to better serve our customers.

• Increase our (B2B/B2C) online sales

•Direct online sales at 13.4% of revenues

(2020: 12%)1

5.Be a great place to work

We are investing in our people, creating a

diverse and inclusive workplace, deepening

our digital and commercial competencies.

•Double the % of women in leadership to

34% by the end of 2025

•Increase digital and commercial excellence

capabilities

•25% women in leadership position

•Employee NPS: 30 (2020: 25)

•69% of active learners

1 2020 data has been updated to include Cooper Lighting

Signify Annual Report 2021

Raising the bar on energy-efficient LED

lighting

Breakthrough Philips Ultra Efficient LED bulbs use 60% less energy and last generations.

Challenge

All lighting products in the European Union carry

an energy rating from A-G. Consumers pay

attention to this, with 79% agreeing that a

product’s energy label influences their

purchase decision.1

In September 2021, the EU introduced a new,

more stringent system of energy labelling that

would reserve the highest A label for a new

generation of lighting products with an

efficiency of at least 210 lm/W.

Solution

Signify’s R&D team rose to the challenge with a

game-changing new product that was

developed, manufactured, and ready to hit the

shelves on the day the new standard was

introduced.

The Philips Ultra Efficient light bulb is the first

lighting product in Europe to proudly carry the

EU’s highest A-rating in energy efficiency.

This straightforward replacement for a regular

conventional or LED bulb makes use of a

multitude of patented individual technology

breakthroughs to deliver beautiful, crystal-

clear light that requires 60% less energy than

standard LEDs.

Since the lights consume just a fraction of the

electricity, consumers can take direct action

to mitigate climate change, while also saving

money on their electricity bill.

What’s more, the bulb lasts much longer,

meaning less waste and lower replacement

costs.

Philips Ultra Efficient light bulbs

The Philips LED A-class bulb is the first in a new

range of Ultra Efficient products that use a

new technology to cut carbon emissions,

reduce material waste, and lower energy

usage.

The bulbs are available in 40W and 60W

equivalents and in warm and cool white light.

Like all consumer products from Signify, the

bulbs are wrapped in zero-plastic packaging.

Philips LED lights carry the EyeComfort mark,

indicating that they meet our strict criteria for

visual comfort.

1About the energy label and ecodesign: https://ec.europa.eu/info/energy-climate-change-environment/standards-tools-and-

labels/products-labelling-rules-and-requirements/energy-label-and-ecodesign/about_en

Philips Ultra-Efficient LED

Signify Annual Report 2021

3D printing - El Dorado International Airport - Bogota - Colombia

Sustainability takes flight at one of the

largest airports in South America

3D printed luminaires and LED retrofit help El Dorado airport become a benchmark for sustainability.

Customer challenge

Serving Colombia’s capital, Bogotá, El Dorado

International Airport is one of South America’s

main travel hubs. As part of its strategy to

combat climate change, Colombia’s

International Airport Operator (OPAIN) wanted

to find innovative lighting solutions that would

reduce the airport’s carbon footprint while

improving the visual comfort of passengers and

employees.

One initiative involved the retrofitting of interior

luminaires to ensure lighting had a more positive

impact on the environment. As terminals are

24/7 transit points, it was a priority to enhance

visual comfort for passengers and workspace

visibility for airport staff.

Solution

In a first phase, Signify provided El Dorado

airport with nearly 9.000 3D-printed

downlights. 3D-printed luminaires can be made

to the customer’s precise specifications, have a

75% lower carbon footprint than a

conventionally-made metal fixture, and can be

reused or recycled, supporting a circular

economy.

OPAIN also retrofitted more than 14,000

luminaires to LEDs, helping to reduce the

airport’s electricity consumption by 51%. With

68% of the airport’s emissions, excluding air

traffic, coming from electricity consumption,

this significantly reduces its carbon footprint.

Outdoors, Signify installed Digistreet luminaires,

which have been integrated with Interact City,

our connected lighting system.

Interact’s lighting management dashboard

enables the airport operators to adapt lighting

levels quickly and easily. They can remotely

monitor, manage and control each light point

individually, from any location. This extra

visibility means that preventative maintenance

and resolution of faults can be dealt with

quickly, reducing maintenance costs,

improving the passenger experience, and

minimizing disruption to operations.

“Our goal is to be a benchmark in

energy efficiency and sustainable

operations in Colombia and Latin

America. For this reason, we’re

excited to have installed the latest

innovation in lighting with 3D printed

downlights and to be the regional

pioneer when it comes to remote

management of the lighting

infrastructure.”

Mauricio Vélez

OPAIN's Infrastructure Manager

3D-printed downlights

Our 3D-printed luminaries are built with

sustainability in mind. The base material is a

polycarbonate that is strong, high-quality and

100% recyclable. Each order can be custom

designed and tailored to the client’s needs,

saving time, energy, waste in manufacturing,

packaging, and transportation. The process

illustrates that more complex and innovative

designs can be aligned with the needs of a

circular economy.

Signify Annual Report 2021

Extending play time beyond sunset at

schools in India

Solar-powered flood lights illuminate playgrounds after dark and help girls feel safer playing sports.

Customer challenge

Sport and play are important for any child,

improving physical health, self-esteem, and

connection. But in rural India, a lack of

adequate lighting in playgrounds often means

that playtime ends when the sun goes down.

Girls, in particular, are hesitant to practice

sports after sunset as a lack of adequate

lighting makes them feel unsafe.

Government schools in the northern Indian

state of Uttar Pradesh wanted to improve

playground lighting to extend sports time

beyond daytime breaks, positively impacting

the lives of local children.

Solution

Working with our NGO partner in India, the SRF

Foundation, Signify India donated high mast

poles with solar-powered flood lights to

illuminate five badminton courts and

playgrounds in rural government schools in

Uttar Pradesh. So far, some 1,285 children have

benefited from the project.

As a direct outcome, student’s daily practice

time has been extended and their sports skills

have improved.

The number of players now qualifying for

district and state-level badminton

competitions has increased significantly.

Schools are reporting higher enrollment

numbers and lower drop out numbers, which in

part can be attributed to other children who

are not enrolled in the school coming to play in

the lit-up playground. Girls at the schools now

feel safer and can participate and improve their

skills under the new lights. Parents say they

also feel more confident sending their children

to sports practice and are more satisfied with

their children’s development.

Solar-powered flood lights

The solar-powered flood lights were

specifically designed to support the needs of

the government schools in India. The flood

lights are connected to a battery, which can

fully charge in seven hours of direct sunlight

(depending on weather conditions) and which

then provides three hours of lighting.

Additionally, the flood lights are not connected

to the electricity grid, making the installation as

easy as attaching the flood lights to the mast

poles, digging a hole for each of the mast poles

and installing the flood lights, before powering

them up by connecting to the solar panels

installed on the roof of the school. This

provides the government schools with a very

straightforward solution that harnesses the

power of the sun to extend practice time

beyond sunset, and one that can be replicated

easily in and beyond India.

Solar-powered flood lights - Govt. Middle School - Rasoolpur Dasna - Dadri Block - UP - India

Signify Annual Report 2021

3.3Our value created

Through our company purpose and strategy, we aim to address global challenges and our stakeholders’ expectations, while contributing to the achievement of the UN SDGs. Our approach is to

optimize long-term value through financial, environmental and social resources. Our activities impact our customers, employees, investors and society at large. By expressing these impacts in

monetary terms, stakeholders can consider the indirect economic, social, and environmental impacts of our business more effectively. For a detailed explanation of our value creation model,

indicators and trend analysis, please refer to our Methodology for calculating societal impact on our Sustainability downloads webpage: https://www.signify.com/global/sustainability/download.

Signify Annual Report 2021

Philips GreenPower LED horticulture - Kalera - US

Lighting that feeds the farms of the future

Horticulture lighting from Signify helps Kalera grow fresh, local produce, all year round.

Customer challenge

Global population trends indicate that the world

will feel an increasing pressure on vital

resources like food and water. On top of that,

consumers are increasingly concerned about

the origins, farming methods, and nutritional

profile of their food. To address these

concerns, farmers must increasingly look to

innovation and technology to change the way

they plan and cultivate their crops. Establishing

local growing facilities situated closer to urban

areas to reduce the pressure on resources has

been a long-time dream of many.

Innovative produce company Kalera is one of

the first to address these issues head on, and

on a large scale. Kalera’s futuristic indoor

vertical farms grow clean, fresh, high-quality

leafy greens with reduced environmental

impact. The farms are not dependent on the

outdoor climate, can operate anywhere -

reducing how far our food needs to travel

before arriving on our plates, and limiting

associated costs and emissions - and can

function without the need for pesticides or

fertilizers. To take farming indoors, Kalera

sought a technology partner able to provide a

wide range of solutions and enable them to

scale in support of their ambitious growth plans.

Solution

In 2018, Kalera opened its first facility, the

3,000 square foot HyCube Growing Center, at

the Orlando World Center Marriott, equipped

with our Philips-branded horticultural lighting.

Since then, Kalera has announced an additional

seven locations in the US, from Houston, Texas

to Honolulu, Hawaii, all powered by Philips

GreenPower LED production modules. The

new facilities are expected to collectively

produce more than 70 million heads of lettuce

per year.

Key to the success of the project is a deeply

collaborative approach between Signify and

Kalera team members. Precision control over

the plants’ lighting conditions creates the

perfect growing conditions for each plant and

has even been shown to optimize the

nutritional profile of the resulting crop. Thanks

to this innovative approach, Kalera’s yields are

300 – 400 times that of traditional farms.

Philips GreenPower LEDs

For professional growers, Signify offers the

Philips GreenPower LED range, which includes

different toplighting and interlighting

luminaires, flowering lamps, and production

modules. The production module is an energy-

efficient solution designed specifically for

year-round indoor crop cultivation and is

dimmable and color controllable when

combined with Philips GrowWise Control

Systems. Connecting the two technologies

enables growers like Kalera to develop, test

and apply their own custom light recipes.

These custom light recipes can be designed to

steer specific plant characteristics, such as

compactness, color intensity, branch

development, and/or flowering, and ultimately

deliver a better and more predictable yield and

improved crop quality.

Signify Annual Report 2021

Pure air peace of mind in Taiwan's

restaurants

Customers and staff enjoy extra protection with Philips UV-C disinfection in dining areas and kitchens.

Customer challenge

When Taiwan’s COVID-19 lockdowns lifted in

August, restaurants re-opened their doors.

But for popular restaurant group TTFB,

operator of restaurant chains including Thai

Town Cuisine, Very Thai Restaurant and Shann

Rice Bar, it was certainly not a case of business

as usual.

Customers were wary of removing their masks

indoors and socializing in proximity to other

diners. TTFB was eager to find a solution that

would provide a high level of protection for its

customers and staff and help people recapture

the joy of evenings out.

Solution

In the first phase, Signify equipped 34 of TTFB’s

restaurants with UV-C disinfection technology.

We installed two to three Philips UV-C

disinfection upper air wall-mounted units in the

dining areas of each restaurant, as well as

three Philips UV-C disinfection battens with

sensors in each of the kitchens. We also

installed eight Philips UV-C disinfection upper

air ceiling-mounted units in TTFB’s head offices

in New Taipei.

To ensure the restaurants could continue to

serve their customers during regular hours,

the installation work took place after the

restaurants closed their doors, usually around

midnight.

TTFB’s management has been very satisfied

with the result and in 2022 began extending

the solution to another 46 restaurants, with a

potential to equip all of its 132 restaurants,

setting a new standard as one of Taiwan’s

leading restaurant chains.

"We have chosen Signify with its

innovative UV-C disinfection solution

to increase the safety for our

customers and staff.”

David Huang

Construction Director, TTFB

Restaurant Group

Philips UV-C disinfection

UV-C disinfection lighting has been in use for

more than 40 years. It can play a crucial role in

limiting the spread of viruses and bacteria by

disinfecting the air, surfaces and objects.

Philips UV-C disinfection upper air luminaires

distribute UV-C rays at device level and above.

Their high position, in combination with the

shielding and optics that are embedded in the

luminaires’ design, allow the units to quietly and

discreetly disinfect the air while customers

dine below. Philips UV-C disinfection battens

provide homogenous disinfection over a

specific area, making them ideal for inactivating

viruses and germs on kitchen surfaces.

This combination of UV-C disinfection solutions

offers restaurant owners peace of mind in a

world that’s adjusting to a new normal.

UV-C disinfection lighting - TTFB restaurant - New Taipei - Taiwan

Signify Annual Report 2021

3.4Our contribution

Through our company’s strategy and sustainability programs, we directly contribute to our six priority UN SDGs. This section shows how our 2021 activities supported the achievement of these UN

SDGs. For UN SDGs target reporting, please refer to the Sustainability Supplements of this Annual Report.

Better World

SDG 7: Affordable and clean

energy

SDG 12: Responsible

production and consumption

SDG 13: Climate action

We deliver energy-efficient solutions through our

Climate action lighting portfolio. Our operations run

entirely on renewable electricity, and we contribute to

the transition to more sustainable electricity grids.

2021 contribution:

•61% - 64% Climate action revenues

•100% renewable electricity in our operations

We aim to protect value and minimize waste by

developing Circular lighting, sustainable packaging,

and good waste management practices. We commit to

eliminate plastic in our consumer packaging by the end

of 2022.

2021 contribution:

•21% - 25% Circular revenues

•Sending 0 waste to landfill, and 89% recycling rate

•EUR 0.2 million societal costs decreased through

eliminating plastic in our consumer packaging *

We drive climate action by being carbon neutral in our

operations and reducing CO2 emissions over our value

chain. We have set approved science based targets

(1.5°C scenario) and we will achieve the goals laid out

in the Paris Agreement 1.5°C pathway for 2031 by the

end of 2025.

2021 contribution:

•EUR 0.5 million costs to society from our own

environmental footprint *

•On track to deliver against our goal of doubling the

pace of the Paris Agreement’s 1.5ᵒC scenario

•EUR 55 million value created to society through the

conservation of biodiversity *

Brighter Lives

SDG3: Health and well-being

SDG 8: Decent work and

economic growth

SDG 11: Sustainable cities and

communities

Sustainable cities and

communities

We contribute to improving health and well-being by

creating light that increases food availability and light

that enables people to see, feel and function better.

2021 contribution:

•25% - 27% Brighter lives revenues

•Employee NPS of 30

•More than 100,000 LED lamps and 500 UV-C

disinfection products donated to health centers

We foster decent work and economic growth by

creating a fair and inclusive workplace and

development opportunities for our employees and

suppliers. We provide training and access to finance to

lighting entrepreneurs in developing countries.

2021 contribution:

•0.17 TRC rate and EUR 1.7 million costs to society

from injuries & illnesses at work *

•98% supplier sustainability performance

•EUR 458 million value to society through total

shareholder returns, tax, and interest payments and

EUR 1.1 million through employee’s salaries & wages

and learning & development *

We enable smart and secure roads and urban areas

and enable safe and sustainable workplaces, while

accelerating the renovation rate of buildings. Through

the Signify Foundation, we provide access to off-grid

communities.

2021 contribution:

•1.2 million lives lit, adding up to 7.2 million lives lit

since 2017

•25% - 27% Brighter lives revenues

•5 humanitarian projects executed

* For more details, please refer to our Methodology for calculating societal impact on our Sustainability downloads webpage: https://www.signify.com/global/sustainability/downloads.

Signify Annual Report 2021

Philips SportStar and ArenaVision LEDs + Interact Sports - Genting Snow Park - China

Setting the gold standard in sports lighting

with Philips LEDs and Interact Sports

Signify combined Philips-branded LED sports lighting with Interact Sports to illuminate the world's

largest winter sports event.

Customer challenge

In 2015, China won the bid to host the world’s

largest winter sports event in the winter of

2022. To successfully host the event, the

nation needed to upgrade existing venues and

even build some new arenas. This also involved

installing high-quality lighting to ensure athletes

would have the best visibility as they strive for

eternal honor, while spectators and TV viewers

wouldn’t miss any of the action. Each venue

posed its own challenges, including steep rocky

hills, long-distance signal transmission, and ice

surfaces that reflect lights. Additionally,

operators wanted the ability and flexibility to

manage the lighting in different areas from a

single dashboard.

Solution

Signify equipped major outdoor and indoor

venues with LEDs from the Philips SportStar and

ArenaVision series and controlled by Interact

Sports. This includes the venues for biathlon,

ski jumping, freestyle skiing and snowboarding,

speed skating, short-track skating, and ice

hockey. At Genting Snow Park, where freestyle

skiing and snowboarding will take place, we

ensured we would meet the high-speed

dynamic lighting control needs at night to

perfectly capture all the moves of the athletes.

At Capital Indoor Stadium, the lighting fixtures

have the same level of high-speed refresh rate

as the stage lighting, making the ice look at its

best and enhancing the viewing experience. At

Wukesong Sports Centre, China's first that

can host basketball and ice hockey events, our

lights meet the latest broadcasting standards

for the best TV viewing experience. We also

equipped the event’s main arena with our

Interact Sports connected lighting system,

ensuring the best lighting effects, and

optimizing fan, broadcasting and viewer

experience during the diverse events hosted

there. Interact Sport’s unique scene-

management capabilities also allow technicians

to create an exciting viewing experience for

spectators, extending their excitement

before, during and after events.

Philips SportStar and ArenaVision

LED floodlights from the Philips SportStar and

ArenaVision series are tailor-made for the

specific requirements of sports venues. They

provide high power and high color rendering

features, which, in combination with a variety

of light distribution solutions, can achieve the

highest level of color reproduction and flicker

control. This helps athletes to better engage

in their sports and enhances their

performance. It also meets the stringent

requirements of international television

broadcasters, supporting flicker-free super

slow-motion replay, and allowing TV viewers

around the globe to have an immersive athletic

viewing experience.

Signify Annual Report 2021

Preserving the Town of Pepperell's energy

and night sky

Connected LEDs with a low color temperature improve the Dark Sky-friendly community's energy

consumption.

Customer challenge

A growing number of cities and communities

around the globe are looking for ways to

reduce their impact on the environment

through lighting. Like many towns, Pepperell,

Massachusetts, was still using high-pressure

sodium lighting throughout the town. The Town

of Pepperell began looking for a solution that

could help reduce its energy consumption,

while keeping its citizens safe after sunset.

While most people are familiar with air and

water pollution, light can also be a pollutant. As

a Dark Sky-friendly community, Pepperell was

looking for lighting that minimizes light

pollution, reducing effects known as ‘glare’,

‘skyglow’ and ‘trespass’. Typical LED fixtures

provide cooler color temperatures (CCTs),

which can contribute more to skyglow

compared to warmer CCTs. As a result, warmer

CCTs are necessary for Dark Sky compliance.

Solution

Cooper Lighting provided a solution that met

all of Pepperell’s desires, replacing all of the

town’s 409 high-pressure sodium light fixtures

with LED light fixtures from the Streetworks

Archeon Series. These Archeon LED luminaires

reduce the town's total system wattage by

over 80%; with greater than USD 80,000 in

estimated maintenance savings and more than

USD 800,000 in total savings estimated over a

10-year period.1 And because the LED light

fixtures of the Streetworks Archeon Series can

deliver a lower color

temperature than other LED light fixtures, they

reduce glare, skyglow and light trespass. This

makes them perfect for the City of Pepperell

to achieve its Dark Sky-friendly goals.

“Pepperell is strongly committed to

climate change issues and considered

converting to LEDs as an opportunity

to reduce energy consumption. We

have also declared ourselves a Dark

Sky-friendly community and strive to

eliminate unneeded nighttime lighting.

This conversion reduces nighttime

lighting and glare without

compromising the public safety

benefits of street lighting.”

Andrew MacLean

Town Administrator, Town of

Pepperell

Streetworks Archeon Series

The Streetworks Archeon Series delivers all

the performance benefits of the latest LED

platforms and technologies with a modern yet

familiar cobrahead form factor. With a U0

uplight rating and a CCT offering of 2200K –

6000K, the Archeon series is designed to meet

any Dark Sky specification, positively impacting

both humans and wildlife.

1 Assumptions: 10-hour daily run rate, 0.2223 KWH average rate

Cooper Lighting Streetworks Archeon Series - Pepperell, Massachusetts - US

Signify Annual Report 2021

4 Corporate

performance

Key figures in millions of EUR unless otherwise stated

2020

2021

Sales

6,502

6,860

Comparable sales growth 1

(12.7)%

3.8%

Gross margin

2,499

2,671

as a % of sales

38.4%

38.9%

Income from operations

416

514

Financial income and expenses

(54)

(24)

Income tax expense

(27)

(83)

Net income

335

407

Adjusted gross margin 1

2,556

2,702

Adjusted indirect costs 1

(1,982)

(2,032)

Adjusted EBITA 1

695

795

as a % of sales

10.7%

11.6%

Restructuring, acquisition and incidental items 1

(159)

EBITA 1

536

636

Basic earnings per share in EUR

2.58

3.18

Dividend per share in EUR 2

1.40

1.45

Shareholders’ equity

2,196

2,459

Net debt 1

1,275

1,156

Working capital 1

313

250

Net cash provided by operating activities

891

704

Free cash flow 1

817

614

as a % of sales

12.6%

8.9%

1For a reconciliation to the most directly comparable IFRS financial measure, see chapter 18, Reconciliation of non-IFRS

financial measures, of this Annual Report.

22021 Dividend subject to approval by the 2022 Annual General Meeting of Shareholders.

4.1Financial

performance

4.1.1 Company performance

During 2021, the COVID-19 pandemic

continued to have an impact on the

macroeconomic environment and society. In

the first half of the year, vaccination rollouts

led to an easing of lockdowns in many parts of

the world, though throughout the second half

of the year restrictions were reinstated as

new variants caused a resurgence of the virus

in many regions.

In addition, component and container

shortages, together with other logistics

challenges, impacted Signify’s ability to

deliver. As underlying demand remained

healthy, this resulted in part of the orders

being delayed. To cope with these supply

challenges, we utilized the spot market for

both components and containers, we

redesigned our products to include more

readily available components, and we qualified

new component suppliers.

An additional consequence of the global

supply disruption was the resurgence of

significant inflation. In light of these rising

input costs, we moved to pass on cost

inflation to our customers, thereby limiting

the impact on the bottom line.

In this context, we reported sales of EUR

6,860 million, delivered a comparable sales

growth of 3.8%, improved our Adjusted EBITA

margin by 90 basis points to 11.6%, increased

net income from EUR 335 million in 2020 to

EUR 407 million, and delivered net cash from

operating activities of EUR 704 million.

Despite the challenging macro environment,

we reported a sales increase of 5.5% on a

nominal basis. Adjusted for (2.0)% currency

effects, and 3.6% consolidation and other

changes, comparable sales increased by

3.8%. The growth was mainly driven by strong

consumer and professional demand for

connected products and growth platforms.

LED-based sales represented 83% of total

sales (2020: 80%).

Our gross margin was EUR 2,671 million in 2021

compared to EUR 2,499 million in 2020. The

adjusted gross margin increased to EUR 2,702

million from EUR 2,556 million in 2020. As a

percentage of sales, the adjusted gross

margin increased by 10 basis points to 39.4%,

which includes a negative currency effect of

20 basis points. Price increases, positive sales

mix and the carryover of bill of material

savings in the first half of the year more than

compensated for higher input and logistics

costs.

Indirect costs increased to EUR 2,168 million,

an increase of EUR 80 million over 2020.

Adjusted indirect costs increased by EUR 50

million to EUR 2,032. As a percentage of

sales, adjusted indirect costs decreased by

90 basis points to 29.6%, driven by operating

leverage and structural cost savings.

R&D expenses were EUR 286 million,

compared to EUR 307 million in 2020.

Adjusted for restructuring and acquisition

related charges, R&D expenses declined by

EUR 3 million to EUR 284 million. As a

percentage of sales, adjusted R&D expenses

decreased from 4.4% in 2020 to 4.1% in 2021.

Signify Annual Report 2021

EBITA and Adjusted EBITA both increased by

EUR 100 million to EUR 636 million and EUR 795

million, respectively. The Adjusted EBITA

margin improved by 90 basis points to 11.6%,

including a negative currency effect of 20

basis points. This improvement was the

combined result of the higher gross margin

and operating leverage.

Income from operations increased from EUR

416 million in 2020 to EUR 514 million in 2021.

This included EUR 86 million of restructuring

expenses (mostly related to the restructuring

of the central organization), EUR 50 million of

acquisition-related charges and EUR 22

million of incidental items. These are non-

recurring items in nature related to, among

other items, separation costs, transformation

initiatives, real-estate gains, environmental

provisions for inactive sites and the effect of

changes in discount rates on long-term

provisions.

Net income was EUR 407 million compared to

EUR 335 million in 2020, as higher income

from operations and lower net financial

expenses were only partly offset by a higher

income tax expense (2020 included higher

non-cash tax benefits from the revaluation of

deferred tax assets).

Compared to 2020, working capital

decreased by EUR 63 million to EUR 250

million, driven by higher payables and lower

other working capital items, which more than

offset higher inventories, and receivables.

The high level of inventories was the result of

longer order lead times and increased safety

stock levels. As a percentage of sales,

working capital improved by 120 basis points

to 3.6%. When including pro-forma last

twelve-month sales for Cooper Lighting,

working capital as a percentage of sales

improved by 110 basis points.

Net cash from operating activities decreased

by EUR 187 million to EUR 704 million, as 2021

working capital was impacted by continued

supply chain constraints, while 2020

benefited from both a release of working

capital due to sales decline and the

implementation of structural working capital

improvements. Net capital expenditures

increased to EUR 91 million, resulting in a free

cash flow of EUR 614 million or 8.9% of sales.

Shareholders’ equity increased to EUR 2,459

million, reflecting the net income and

currency translation results, offset by the

dividend payment and share repurchases.

Net debt was EUR 1,156 million at year-end

2021, a reduction of EUR 119 million compared

to year-end 2020. This reduction was mainly

driven by a solid free cash flow generation,

partly offset by dividend payments. Gross

debt decreased, primarily driven by the

repayment of EUR 350 million, as committed.

As at December 31, 2021, Signify had a post-

employment liability of EUR 363 million,

compared to EUR 390 million at December 31,

2020. The decrease is mostly driven by the

payment of benefits and the yearly actuarial

remeasurement.

Signify employed 36,824 full-time equivalents

(FTEs) at year-end 2021, compared with

37,926 at year-end 2020.

4.1.2 Performance by Division

Performance Digital Solutions

About Digital Solutions

Signify is the world leader in the professional

lighting market for such products as LED and

systems and services, with strong positions

across key geographies. Professional

products, systems and services are used in

multiple market segments, including offices,

commercial buildings, shops, hospitality

venues, industry, agriculture and outdoor

environments, including smart cities. The

products in professional lighting have

historically experienced a rapid shift from

conventional to LED lighting and have been

integrated into broader connected eco-

systems.

Acquisitions

In 2021, Signify completed the acquisition of

Telensa Holdings Limited (Telensa), an expert

in wireless monitoring and control systems for

smart cities. The acquisition adds a narrow-

band and TALQ-compliant solution to its

feature-rich, open and secured systems.

In December, Signify also announced that it

had signed a definitive agreement to buy

Fluence, a leader in horticultural lighting in

North America, from ams OSRAM. The

acquisition is expected to close in the first

half of 2022, subject to regulatory approvals

and other conditions.

Key figures Digital Solutions

in millions of EUR unless otherwise stated

2020

2021

Sales

3,252

3,524

Nominal sales growth

22.8%

8.3%

Comparable sales growth 1

(14.4)%

3.4%

Income from operations

(or EBIT)

119

205

EBITA 1

230

318

Adjusted EBITA 1

330

397

as a % of sales

10.2%

11.3%

Free cash flow 1, 2

436

364

Number of employees

(in FTEs)

14,657

15,006

1For a reconciliation to the most directly comparable IFRS

financial measure, see chapter 18, Reconciliation of Non-

IFRS Financial Measures, of this Annual Report.

2Excluding non-allocated free cash flow items (e.g. tax,

interest).

Strategic priorities

Digital Solutions focuses on strengthening its

global professional lighting leadership

position by further innovating in LED

products, winning in connected lighting and

unlocking the potential in businesses such as

agriculture, solar, disinfection lighting and 3D

printing. At the same time, Digital Solutions

leverages its scale to reduce the cost of

production. The successful integration of

Cooper Lighting remains a strategic priority,

for which the integration and synergy delivery

are ahead of plan.

2021 Business highlights

•Improved occupant experience at

Honeywell's Charlotte HQ: integrating our

lighting systems & software with

Honeywell's Healthy Buildings and

Honeywell Employee App. Sensors deliver

Signify Annual Report 2021

insights on people estimates, temperature,

humidity and noise. The offer improves

employee well-being and productivity in the

office.

•Provided safe & secure connectivity to

guests of World Forum The Hague: world-

first installation of Signify's Trulifi in a

congress center. Guests can enjoy the

benefits of safe, secure, reliable and high-

speed connectivity via light rather than

radio waves.

•Helped growers in the Nordics to boost

crop yields with horti LEDs: Philips

GreenPower LED & GrowWise control

systems provide growers with control over

the light spectrum and light levels, which

helps to steer crop quality and boost

yields, and also helps to predict growth

levels and optimize production to match

seasonal demand.

•Expanded UV-C offering for professionals

with new devices: introducing different

device sizes to cater to usage in different

spaces and for multiple customer needs,

including the Philips UV-C disinfection floor

standing air unit, Philips UV-C disinfection

Active Air, the second generation of the

Philips air disinfection unit, and UV-C

solutions for HVAC.

•Provided restaurants with an additional

layer of protection with Philips UV-C:

equipping 36 restaurants under the TTFB

chain in Taiwan with Philips UV-C

disinfection devices, providing diners and

staff with an additional layer of protection

against viruses and germs. Disinfection

devices in the dining area disinfect the air

during opening hours, while UV-C

disinfection battens disinfect surfaces in

the kitchen areas in the afternoon and

early morning.

2021 Financial performance

Sales were EUR 3,524 million, a nominal

increase of 8.3%, partly impacted by the fact

that 2020 only included 10 months of Cooper

Lighting sales. Comparable sales growth was

up by 3.4%, as the professional segment

improved across most markets.

Income from operations was EUR 205 million.

Adjusted EBITA amounted to EUR 397 million,

adjusting for restructuring charges of EUR 19

million, acquisition-related charges of EUR 49

million, mainly related to Cooper Lighting and

Telensa, and incidental items of EUR 11 million.

The Adjusted EBITA margin improved by 110

basis points to 11.3%, mainly from operating

leverage and adjusted indirect cost savings.

Free cash flow amounted to EUR 364 million.

Market developments

Signify is the world leader in the professional

lighting market, a large, growing and resilient

market. Signify is well-positioned to benefit

from powerful global trends, such as the shift

to connected lighting, growing demand for

food security, and climate action.

The transition to connected lighting is

occurring rapidly. Potential savings for

customers based on total cost of ownership

are significant. Signify’s Interact platform is

designed to handle data collected from a

growing number of connected light points,

sensor devices and systems, and is tailored to

specific subsegments.

In order to further tap into this market

development, in 2021 we expanded our

portfolio in the 'Road & Street' segment

through the acquisition of Telensa. Signify

connects all luminaires within its portfolio and

those of third parties via its two market

leading Internet of Things (IoT) and

connected systems brands: Interact and

Telensa. Energy-efficient LED street lighting

is further enhanced with connected lighting

for accurate on, off and dimming of light

levels to reduce energy costs, while keeping

lights on when and where needed, ensuring

safety for citizens. In addition, connected

lighting enables remote monitoring and fault

detection, optimizing operations and reducing

the need for physical scouting across large

geographies. The same infrastructure is able

to support deep data insights into urban,

traffic and parking data. Municipalities

improve the planning of their cities, evaluate

the impact and increase comfort and service

levels for drivers, citizens and visitors.

Including Telensa, Signify has connected over

5.2 million light points with 2,700 projects in

almost 60 countries.

In 2021, Signify's installed base of connected

light points increased by 19 million to a total

of 96 million across all segments, both

professional and consumer. This increase

includes Telensa's connected light points.

Only 5% of the installed lighting base is

connected, showing that the connected

lighting market continues to offer significant

growth potential for Signify.

The agricultural lighting market is also

expected to grow, driven by increased food

needs from population growth, increased

customer preference for biological food

grown closer to home, and increased focus

on resource efficiency. Signify is well-

positioned to capture growth from this

growing market, as it is a world leader with a

long heritage, unmatched know-how, and

unique IP positions in light recipes for

horticultural lighting.

2022 and beyond

Digital Solutions executes its strategy built

around growth for sustainability through

attractive growth platforms such as

connected lighting, agriculture lighting, solar

lighting, 3D printed luminaires, disinfection

lighting and human-centric lighting. It

maintains a strong financial profile with

unmatched global scale and is well-positioned

to capture growth from the upcoming

stimulus programs in Europe and the US.

Performance Digital Products

About Digital Products

Digital Products sells a wide variety of LED

lamps, namely spots, bulbs and tubes, and

functional LED luminaires to the consumer

and professional channels. In addition, it sells

LED electronic components, consisting of

LED drivers and LED modules, to OEMs for

professional luminaire applications in the

retail, office, industry and outdoor segments.

The division develops and sells connected

lighting systems and luminaires. It is the global

market leader in connected home systems

and a top-three player in selected home

luminaires markets. For the development of

its offering, Digital Products builds on the

company's strong in-house R&D capabilities

and knowledge in LED, IoT and lighting

applications, complemented by extensive

qualitative and quantitative end-user

research.

Based on research performed internally, the

company believes that Digital Products held

the number one position in sales in the global

LED lamps and electronics market in 2021.

Signify Annual Report 2021

Philips Hue, introduced in 2012, is the market

leader in connected lighting for consumers.

The system enables users to personalize their

lighting to suit their preferences and needs,

whether it is ambiance creation or

entertainment. Users can control lights

wirelessly through Philips Hue apps, third-

party apps and smart devices, with their voice

or with remote control switches. The Philips

Hue offering is continuously expanding.

Recent examples of new innovations include

the launch of the Philips Hue Play gradient

light tube, the Philips Hue gradient Signe floor

and table lamps, the Philips Hue ambiance

lightstrip and the new immersive music

experience via a deep integration of lighting

and music with Spotify and Philips Hue.

WiZ Connected further extends the

accessibility of consumer-connected lighting,

as it provides consumers with a Wi-Fi based

connected lighting ecosystem.

Signify's combined consumer connected

lighting offer enables them to connect via Wi-

Fi, Bluetooth or the Philips Hue bridge.

Key figures Digital Products

in millions of EUR unless otherwise stated

2020

2021

Sales

2,288

2,452

Nominal sales growth

(5.1%)

7.2%

Comparable sales growth 1

(8.3%)

8.8%

Income from operations

(or EBIT)

269

316

EBITA 1

277

323

Adjusted EBITA 1

295

339

as a % of sales

12.9%

13.8%

Free cash flow 1, 2

406

383

Number of employees

(in FTEs)

14,628

14,643

1For a reconciliation to the most directly comparable IFRS

financial measure, see chapter 18, Reconciliation of Non-

IFRS Financial Measures, of this Annual Report.

2Excluding non-allocated free cash flow items (e.g. tax,

interest).

Strategic priorities

Digital Products' strategy is focused on

capturing growth from the transition to

integrated luminaires, driven by sustainability-

led socket-base conversion and on IoT-

technology for consumer-connected lighting,

while strengthening its financial profile

through growth, innovation and the

integration of Klite.

2021 Business highlights

•Expanded the Philips Hue range and

launched new future-ready Philips Hue app

4.0: including new outdoor lights to further

personalize gardens and porches, a new

wall switch module that makes existing light

switches smart, and a redesigned Philips

Hue dimmer switch. The new Philips Hue

app 4.0 improves the app's performance,

delivering an intuitive and enhanced user

experience with easier automations, a new

Philips Hue scene gallery and more.

•Launched the Philips UV-C disinfection air

cleaner: the system uses UV-C light to

inactivate airborne microorganisms easily

and effectively, making air disinfection

easier than ever before and enabling

people to remain in the same room.

•Launched the Philips Ultra Efficient LED:

the Philips Ultra Efficient LED is our most

energy-efficient Philips LED bulb and

reduces electricity consumption by 60%

versus standard Philips LEDs. It is the first

LED that meets the highest level in the new

European labelling and design standard.

•Launched Philips TrueForce LED highbay:

the first universal HID replacement product

in the market. It provides installers with a

fast, easy and hassle-free installation and

offers energy savings of up to 65%.

2021 Financial performance

Sales were EUR 2,452 million, a nominal sales

increase of 7.2%. Comparable sales increased

by 8.8%, driven by strong demand for

connected home lighting and improved

professional sales, despite supply chain

constraints and component shortages.

Income from operations increased by EUR 47

million to EUR 316 million. Adjusted EBITA

increased by 14.9% to EUR 339 million. The

Adjusted EBITA margin improved by 90 basis

points to 13.8%, as the division managed to

offset higher cost of goods sold and

continued investments in future growth with a

positive impact from operating leverage, sales

mix and price increases. Free cash flow

decreased by EUR 23 million to EUR 383

million.

Market developments

There is a transition from traditional LED

lamps to increased quality of light and more

sustainable LED lamps, such as the Philips

Ultra Efficient LED bulb, functional LED

luminaires and connected solutions, as

anticipated in the company’s strategy. This

trend is driven by an increasingly compelling

proposition of both integrated LED luminaires

and connected solutions in particular, while

the replacement cycle of lamp sockets is cut

due to the longer lifetime of LEDs. In addition,

consumers and professional customers pay

attention to the energy efficiency of the

lighting products in their purchase decision.

The company expects these trends to

continue for the foreseeable future. This

provides a solid growth path with the ambition

to drive market share gains, raising the

energy efficiency bar through innovation and

leadership in functional luminaires and

connected lighting. While Signify expects that

the LED lamps market will decline in the next

few years, the company is well-positioned to

continue to grow market share in this market,

building on its strong position in lighting

distribution. The LED electronics market is

expected to grow, particularly driven by the

shift to connected lighting and the

LEDification of (industrial) specialty segments.

The consumer connected system markets are

expected to continue to grow on the back of

the increasing global penetration of the smart

home.

2022 and beyond

In 2022, Digital Products aims to drive market

share growth in LED Lamps through

differentiation with a multi-brand offer of A-

brands, B-brands and Private Label sales. The

division also plans to grow sales of LED

Luminaires by innovating and expanding its

product portfolio and by leveraging its LED

R&D and distribution strength. It aims to

further accelerate growth in its Consumer

Connected business with a two-system

offering of Philips Hue and WiZ and by

continuing to innovate in relevant consumer

benefits, such as ambiance, well-being and

security. Digital Products will drive growth in

LED electronics through the transition to

smart lighting, leveraging its innovation

leadership in connected components and

through dedicated offers for specialty

segments. At the same time, the division aims

to improve total profitability and its cash

profile by continuing to increase insourcing to

Klite, the China-based manufacturing

company in which Signify acquired a 51% stake

in 2019.

Signify Annual Report 2021

Performance Conventional Products

About Conventional Products

Signify is the global market leader in the

conventional lighting business. Conventional

Products comprises the company’s

conventional lamps and lamp electronics

businesses. It produces and sells lamps,

based on a wide variety of non-LED based

technologies. This includes HID, TL, compact

fluorescent, halogen, incandescent, as well as

electronic components (electronic ballasts

and drivers) and specialty lighting.

Conventional lamps are used in a wide variety

of residential and professional applications

and are bought by consumers, electrical

installers and professional end-users through

a wide range of channels. Lamp electronics

are mainly sold to luminaire manufacturers

directly and as replacement products to

electrical wholesalers. Finally, Conventional

Products sells digital projection lamps and

drivers to the OEM market and the

replacement market.

Key figures Conventional Products

in millions of EUR unless otherwise stated

2020

2021

Sales

943

861

Nominal sales growth

(18.7)%

(8.7)%

Comparable sales growth 1

(16.5)%

(6.9)%

Income from operations

(or EBIT)

149

158

EBITA 1

149

158

Adjusted EBITA 1

170

161

as a % of sales

18.0%

18.7%

Free cash flow 1, 2

188

136

Number of employees

(in FTEs)

8,051

6,837

1For a reconciliation to the most directly comparable IFRS

financial measure, see chapter 18, Reconciliation of Non-

IFRS Financial Measures, of this Annual Report.

2Excluding non-allocated free cash flow items (e.g. tax,

interest).

Strategic priorities

Conventional Products enables Signify to

reach customers thanks to its long and

strong commercial synergies and brand

coverage. While the overall conventional

market continues to decline, Conventional

Products’ focus is on winning market share in

key segments and markets to remain market

leader. This position supports the company's

drive to lead the transition to connected LED

products. The division continues to

proactively manage its manufacturing

footprint and reduce operational costs to

optimize free cash flow.

2021 Business highlights

On top of LEDification, energy efficiency and

legislation to ban certain conventional

technologies remain important factors in the

decline of the conventional market.

Conventional Products maintains a

legislation-compliant portfolio and invests in

remaining opportunities such as UV-C

disinfection lighting and conventional

horticulture lighting.

The division is strengthening its leadership

position by continuously gaining market share,

increasing customer and employee Net

Promoter Scores, and delivering cash.

As part of its strategy, it is proactively

managing its manufacturing footprint. Signify

operated nine manufacturing plants for

conventional lamps at the end of 2021

compared with 11 at the end of 2020.

2021 Financial performance

Sales were EUR 861 million, a nominal decline

of 8.7% versus 2020. On a comparable basis,

sales declined by 6.9%. A lower rate of

decline compared with 2020, mainly as a

result of the market recovery and traction

across most of its segments.

Income from operations increased to EUR 158

million, helped by lower restructuring

expenses. Adjusted EBITA declined by 5.0% to

EUR 161 million while Adjusted EBITA margin

improved by 70 basis points to 18.7%, mostly

driven by indirect cost savings. The Division

generated a robust free cash flow of EUR 136

million.

Market developments

Signify estimates that the conventional

lighting market declined at a faster pace than

its Conventional Products business in 2021

and thus continued to gain market share.

The conventional lamps market is expected to

continue to decline in the coming years due

to the ongoing adoption of LED lighting

technologies and regulatory changes.

2022 and beyond

In 2022, Conventional Products will continue

to execute its strategy and optimize free cash

flow by leveraging its cost advantage, scale,

global footprint and lean manufacturing

capabilities, while responding to customer

demand for conventional products.

Performance Other

'Other' represents amounts not allocated to

the operating segments and includes certain

costs related to central R&D activities to

drive innovation, and to group-enabling

functions. 'Other' reported income from

operations of EUR (165) million and EBITA of

EUR (164) million. This includes restructuring

costs of EUR 58 million, which were mostly

related to the restructuring of the central

organization and a negative impact from

incidental items of EUR 4 million. Adjusted

EBITA was EUR (102) million in 2021, versus

EUR (100) million in 2020. The number of FTEs

was 339 at the end of 2021, versus 589 at the

end of 2020, mainly as a result of the

restructuring of the central organization.

Signify Annual Report 2021

4.1.3Performance by

geographic cluster

In 2021, many markets rebounded as demand

for connected home lighting remained strong

and the professional segment improved. At

the same time, supply chain constraints and

component shortages impacted Signify's

ability to meet demand.

In Europe, sales increased by 3.1% to EUR

2,130 million, a comparable sales growth of

3.4%, as most markets returned to growth.

In Americas, sales were EUR 2,581 million, a

nominal sales growth of 5.9%. The nominal

sales growth mainly contains a positive impact

from Cooper Lighting, as 2020 included only

10 months of sales. Adjusting for these

effects, together with a negative currency

translation effect, comparable sales growth

was 1.4%, driven by most markets and Cooper

Lighting. In the Rest of the World, sales

increased by 6.6% to EUR 1,606 million, an

increase of 7.9% on a comparable basis,

particularly driven by a strong performance in

China, India and Australia.

Sales by geography in millions of EUR unless otherwise stated

2020 2

2021 2

Change

CSG

Europe

2,066

2,130

3.1%

3.4%

Americas 1

2,437

2,581

5.9%

1.4%

Rest of the world

1,507

1,606

6.6%

7.9%

Global businesses 1, 3

492

543

10.3%

6.3%

Total

6,502

6,860

5.5%

3.8%

1Americas includes Cooper Lighting From March 1, 2020, and Global businesses includes Klite.

2Effective Q1 2021, WiZ Connected is included in Market Groups Europe, Americas and Rest of the world (was previously part

of Global businesses). Prior year amounts were adjusted to conform to current year presentation.

3Sales growth of Global businesses includes the impact of the acquisition of Telensa in July 2021.

Signify Annual Report 2021

4.2Sustainability

performance

Brighter Lives performance

In 2021, our workforce decreased slightly

compared to 2020 to 36,824 FTEs (2020:

37,926 FTEs), with 25% of leadership roles

held by women. Our employee Net Promoter

Score (NPS) improved, with a yearly average

score of 30 (2020: 25). Meanwhile, between

25% and 27% of our revenues came from

products, systems and services contributing

to Food availability, Safety & security or Health

& well-being. Our safety performance

indicator (TRC rate) was 0.17 per 100 FTEs

(0.22 in 2020). We achieved a supplier

performance rate of 98% (2020: 99%), and

since 2017 we have lit the lives of 7.2 million

people through the Signify Foundation.

Better World performance

We are on track to deliver against our

ambitious goal of doubling the pace of the

Paris Agreement’s 1.5ᵒ scenario. In 2021, our

Climate action revenues ranged from 61% to

64%. In line with our ambition to contribute to

a more circular economy, 21% to 25% of our

revenues came from our circular portfolio. At

the same time, we remained carbon neutral in

our operations, sourced 100% renewable

electricity and sent zero waste to landfill,

while integrating our acquisitions of Cooper

Lighting and Klite in these commitments.

Through our global presence, we drive

sustainability across 18 markets.

Sustainable performance per market

FTEs

Manufacturing

sites

% Women in

leadership 1

Operational

CO2 (kt)

Safety TRC

rate

2020

2021

2020

2021

2020

2021

2020

2021

2020

2021

Europe

11,418

11,139

22%

23%

101

112

0.23

0.15

Benelux

3,163

2,810

22%

23%

0.31

0.25

Eastern Europe

5,975

6,232

50%

—

0.11

0.09

DACH (Germany, Austria, and Switzerland)

388

355

—

20%

100%

France

556

353

—

2.76

Iberia

622

641

—

0.47

Italy, Israel, and Greece

146

150

—

Nordics

241

245

50%

—

UK & Ireland

327

352

—

n.a.

Americas

10,220

10,456

20%

24%

0.27

Canada

749

695

—

0.16

Latin America

5,915

6,911

—

0.17

0.15

United States of America

3,555

2,849

25%

27%

0.62

0.6

Rest of the world

16,288

15,229

30%

32%

104

0.17

0.11

ASEAN 2

357

326

—

17%

20%

Indonesia

166

164

—

n.a.

Greater China

11,766

10,823

55%

50%

0.16

0.11

India

2,983

2,929

—

0.8

0.04

Far East

—

n.a.

Middle East, Turkey, Africa & Pakistan 2

784

753

—

0.3

Pacific

158

154

n.a.

Except for FTE, 2020 data excludes Cooper Lighting and Klite.

1 2021 Women in leadership data excludes Klite.

2 In 2020, Pakistan was incorrectly reported under ASEAN. The number has been revised in this table.

Signify Annual Report 2021

4.3Proposed

distribution to

shareholders

Pursuant to Article 10 of the Articles of

Association of Signify N.V., a dividend will first

be declared on preference shares out of net

income. The remainder of the net income,

after reservations made with the approval of

the Supervisory Board, shall be available for

distribution to holders of ordinary shares

subject to shareholder approval after year-

end. As of December 31, 2021, the issued

share capital consists only of ordinary shares;

no preference shares have been issued.

Under Article 10 of the Articles of Association

of Signify N.V., the Board of Management can

determine what portion of the net income

shall be retained by way of reserve, subject to

the approval of the Supervisory Board.

Signify proposes to declare a cash dividend of

EUR 1.45 per share for 2021. The dividend

proposal will be subject to approval at the

Annual General Meeting of Shareholders

(AGM) to be held on May 17, 2022.

The balance sheet presented in this report,

as part of the company financial statements

for the period ended December 31, 2021, is

before appropriation of the result for the

financial year 2021.

4.4Outlook

As Signify continues to proactively navigate

through the gradually improving component

and logistics environment, it provides the

following outlook for 2022:

•Comparable sales growth in the range of

3-6%

•Continued Adjusted EBITA margin

improvement of up to 50 basis points

•Free cash flow in excess of 8% of sales

4.5Competitive

landscape

The lighting market is a fragmented market

across technologies, products and

geographies. Companies active in the market

include traditional lighting companies as well

as companies, mainly based in Asia, that

entered the market with the advent of LED

technology. The introduction of connected

lighting brought new competitors to the

market.

While Signify is active in 74 countries,

competition in the market for lamps tends to

be more global while competition in the

market for luminaires is more regional in

nature. The market for conventional lighting is

declining and competitor focus is on managing

this decline. The market for LED lighting

continues to grow and sees competition

around product offerings, customer use

cases, pricing and innovation.

Signify Annual Report 2021

5Three-year overview

Three-year financial summary in millions of EUR unless otherwise stated

2019

2020

2021

Income statement

Sales

6,247

6,502

6,860

Comparable sales growth 1

(4.6)%

(12.7)%

3.8%

Nominal sales growth

(1.8)%

4.1%

5.5%

Sales of LED-based products (as % of sales)

78%

80%

83%

Gross margin

2,307

2,499

2,671

as a % of sales

36.9%

38.4%

38.9%

Income from operations (or EBIT)

401

416

514

Net income (loss)

267

335

407

Adjusted EBITA 1

648

695

795

as a % of sales

10.4%

10.7%

11.6%

EBITA 1

500

536

636

Net income (loss) attributable to shareholders

262

325

397

Earnings per share in EUR

2.08

2.58

3.18

Dividend per share in EUR 2

1.35

1.40

1.45

Balance sheet

Total assets

6,715

7,710

8,256

Shareholders' equity

2,181

2,196

2,459

Net debt 1

618

1,275

1,156

Working capital 1

388

313

250

Investments and cash flow

Cash flow from operating activities

599

891

704

Net capital expenditure

(70)

(75)

(91)

Free cash flow 1

529

817

614

1For a reconciliation to the most directly comparable IFRS financial measure, see chapter 18, Reconciliation of Non-IFRS

Financial Measures, of this Annual Report.

22021 Dividend subject to approval by the 2022 Annual General Meeting of Shareholders.

Three-year sustainability summary

2019

2020

2021

Sustainable innovation, as a % of adjusted research &

development spend

84%

85%

93%

Brighter lives revenues, as a % of total sales

16%

25% - 27% **

Women in leadership, as a % of total leadership roles

17%

23%

25%

Employee Net Promoter Score

Total recordable cases, per 100 FTEs

0.32

0.22

0.17

Lost workday injuries, per 100 FTEs

0.19

0.17

0.12

Fatalities

Initial and continual supplier conformance audits,

number of audits

Suppliers audits, performance rate, in %

99%

98%

Lives lit, cumulative since 2017 (in million)

3.8

7.2

Cumulative carbon reduction over value chain, in million

tonnes CO2

On track **

Climate action revenues, as a % of total sales

58%

61% - 64% **

Operational gross carbon footprint, in kilotonnes CO2-

equivalent

363

260

290

Carbon neutral, as % of total operations

83%

100%

Operational CO2 intensity, in tonnes CO2 per million

euro sales per year

Operational energy consumption, in terajoules

3,885

3,728

3,630

Operational energy intensity, in terajoules per million

euro sales

0.62

0.72

0.53

Renewable electricity, as a % of total electricity usage

94%

100%

Circular revenues, as a % of total sales

16%

21% - 25% **

Total waste to landfill, in scope of commitment ***

<1%

ISO 14001 certification, as a % of all reporting

organizations

77%

82%

83%

ISO 45001 certification, as a % of all reporting

organizations

64%

72%

60%

* New Brighter Lives, Better World 2025 sustainability KPIs reported for the first time in 2021.

** 2021 results/assessments are based on current level of availability and accuracy of data.

*** Zero waste to landfill definition was updated in 2021; refer to chapter 19, Definitions and abbreviations, of this Annual

Report.

Signify Annual Report 2021

Governance

Signify Annual Report 2021

6Board of Management

Signify N.V. is managed by a Board of Management

entrusted with the management of the company.

The Board of Management is responsible for the

deployment of the company’s strategy and the achievement

of the operational and financial objectives of the company,

and is chaired by the Chief Executive Officer. The Board of Management

is accountable for its actions and decisions to the Supervisory Board

and is answerable to shareholders of the company at the Annual

General Meeting of Shareholders. The Rules of Procedure of the Board

of Management are published on the company’s website.

Corporate governance

A full description of the company’s corporate governance

structure is published in chapter 10, Corporate

governance, of this Annual Report.

Signify Annual Report 2021

7Supervisory Board

The Supervisory Board supervises the

policies, management and general affairs

of Signify. It also provides advice to the

Board of Management. The Supervisory

Board, in the two-tier corporate structure

under Dutch law, is a separate body that is

independent of the Board of Management.

The Rules of Procedure of the Supervisory

Board are published on the company’s

website. For details on the activities of the

Supervisory Board in 2021 see chapter 8,

Supervisory Board report, and chapter 9,

Remuneration report, of this Annual

Report.

Arthur van der Poel

Born 1948,

Dutch

Gerard van de Aast

Born 1957,

Dutch

Eelco Blok

Born 1957,

Dutch

Chair

Vice-Chair

Committee(s) B,C

Chair of the Corporate Governance and

Nomination & Selection Committee

Member of the Supervisory Board since

2016; second term expires in 2024

Committee(s) A,B

Chair of the Remuneration Committee

Member of the Supervisory Board since

2017; second term expires in 2025

Committee(s) A,D

Member of the Supervisory Board since

2018; first term expires in 2022

Former member of the Board of

Management of Koninklijke Philips N.V.

Former Chair of the Boards of Management

of Imtech and VolkerWessels. Currently

Chair of the Supervisory Board of

Nederlandse Spoorwegen (Dutch Railways)

and member of the Supervisory Boards of

KPN and Witteveen+Bos.

Former Chief Executive Officer of KPN.

Currently advisor of privately-held

investment company Reggeborgh, member

of the Supervisory Boards of

VolkerWessels and Fairphone and non-

executive Director of Telstra and of the

OTE Group.

A Member of the Audit Committee

B Member of the Remuneration Committee

C Member of the Corporate Governance and Nomination & Selection Committee

D Member of the Digital Committee

Signify Annual Report 2021

Supervisory Board

Pamela Knapp

Born 1958,

German

Rita Lane

Born 1962,

American

Frank Lubnau

Born 1969,

German

Committee(s) A,B

Chair of the Audit Committee

Member of the Supervisory Board since

2020; first term expires 2024

Committee(s) C,D

Member of the Supervisory Board since

2016; second term expires in 2024

Committee(s) C,D

Chair of the Digital Committee

Member of the Supervisory Board since

2020; first term expires 2024

Former CFO of Siemens' Power

Transmission and Distribution Division,

former CFO of GfK SE. Currently member of

the Supervisory Boards of LANXESS and

Compagnie de Saint-Gobain.

Former Vice President of Operations at

Apple Inc. Currently member of the Board

of Directors of Sanmina Corporation,

L3Harris Technologies and Amphenol

Corporation.

Former Chief Digital Officer for Industrial

Technology at Robert Bosch and Chief

Technical Officer at Siemens' Customer

Services Division. Currently Head of

Intelligent Platforms at Capgemini Germany.

A Member of the Audit Committee

B Member of the Remuneration Committee

C Member of the Corporate Governance and Nomination & Selection Committee

D Member of the Digital Committee

Signify Annual Report 2021

8Supervisory Board

report

Letter from the

Chair

I am pleased to present our Supervisory

Board report for 2021.

The year 2021 continued to be impacted by

the COVID-19 pandemic and subsequently by

supply chain disruptions and component

shortages. As a Supervisory Board, we closely

followed these developments. We appreciate

how the company's leadership addressed the

challenges posed by the current external

environment. In financial terms, even in this

challenging environment the company was

able to achieve a solid financial performance

in 2021. At the same time, the company

progressed on its ambitious sustainability

commitments under its second five-year

sustainability program, Brighter Lives, Better

World 2025.

As a Supervisory Board, we are actively

involved in the strategic direction of the

company which is centered around

5 Frontiers to build a customer-centric

organization, deliver differentiating lighting

offers, drive growth for sustainability,

digitalize and transform for the future, and be

a great place to work. We are satisfied with

the progress made in 2021 towards delivering

on the company's strategy.

Arthur van der Poel

Chair of the Supervisory Board

8.1Introduction

This report provides information on how the

Supervisory Board and its committees fulfilled

their duties in 2021.

In 2021, the composition of our Supervisory

Board remained unchanged. In May 2021, the

Annual General Meeting of Shareholders re-

appointed Gerard van de Aast. The

Supervisory Board currently consists of six

independent members.

In 2021, the Supervisory Board had four

committees that cover key areas in greater

detail: an Audit Committee, a Corporate

Governance and Nomination & Selection

Committee, a Remuneration Committee, and a

Digital Committee. The charters of each of

the committees are published on the

company’s website.

8.2Key discussion

topics and

meetings in

2021

Meetings and information

The Supervisory Board held eight meetings in

2021 and had additional calls on ad hoc

topics, such as on the announced intended

acquisition of the US-based company

Fluence. While we were able to organize in-

person meetings three times, in view of

COVID-19, most meetings were held via video

conference. We learned that working and

meeting remotely can be done well, even for

Signify Annual Report 2021

longer periods of time. At the same time, we

realized the benefits of meeting in person, so

we hope that this will again be possible more

often in 2022.

The Supervisory Board and committee

meetings were well attended, with an

attendance rate of 100% of each Supervisory

Board member, except for one committee

meeting by one of its members.

Each of the Supervisory Board committees

regularly convened and reported back on

their activities to the full Supervisory Board.

In addition, the Chair of the Supervisory

Board and the CEO are in regular contact on

a variety of matters. Our members also

individually interacted with members of the

Board of Management and with senior

management outside the formal Supervisory

Board meetings. From time to time,

Supervisory Board members wanted to be

informed on, or discuss, a specific topic. This

was then followed-up by a member of the

Board of Management or senior management.

There were no apparent conflicts of interest

of material significance in 2021, which would

have called for one of the members not to

participate in the decision-making.

In 2021, the Supervisory Board discussed a

range of topics, including:

•COVID-19 and supply chain disruptions

The COVID-19 pandemic continued to have

an impact in 2021, and became part of the

standing agenda. Throughout 2021, the

Supervisory Board was kept updated on

developments around COVID-19, focusing

on health & security, procurement, supply

chain and manufacturing. The Supervisory

Supervisory Board and Committee Attendance Record

Supervisory

Board physical

meetings

Supervisory

Board calls

Audit

Committee

Nomination &

Selection

Committee

Remuneration

Committee

Digital

Committee

Arthur van der Poel

3 / 3

5 / 5

7 / 7

3 / 3

Gerard van de Aast

3 / 3

5 / 5

7 / 7

Eelco Blok

3 / 3*

5 / 5

3 / 4

Pamela Knapp

3 / 3

5 / 5

7 / 7

Rita Lane

3 / 3*

5 / 5

3 / 3

4 / 4

Frank Lubnau

3 / 3

5 / 5

3 / 3

4 / 4

*Mr. Blok and Ms. Lane attended one of the physical meetings via video conference.

Board discussed the latest developments,

the current and expected impact, as well

as the company's response plans. These

topics are expected to remain on the

Supervisory Board’s agenda in 2022.

•Strategy, objectives and innovation

On an ongoing basis, we had discussions on

the company's 5 Frontiers strategy and the

commitments of its Brighter Lives, Better

World 2025 sustainability program.

In September 2021, we had our annual

Strategy Review, a session dedicated to

the company’s strategy towards long-term

value creation. As part of this session, we

discussed key enterprise risks, reviewed

the market developments and trends and

their strategic implications, and discussed

growth opportunities and the competitive

landscape. We looked at the company’s

progress on strategic initiatives and

sustainability goals, as well as the

company’s strategy for the mid-term and

strategic initiatives for 2022. This session

was complemented by deep dives on

growth, capital allocation and the US

market. For each of these deep dives, one

of the Supervisory Board members had

been engaged in the preparation of the

discussion.

The Strategy Review was followed by a

Strategic Plan discussion in December in

which management presented the

2022-2024 strategic plan, including

financial objectives. We also discussed and

approved the company’s financial targets

for 2022 within the context of its 2022

operating plan.

In addition, management updated us on a

quarterly basis on the progress made on

the company's strategic initiatives for 2021.

Throughout the year, we also discussed

the market trends, risks and opportunities

as well as the strategy, as part of the

market and division updates. We have

reviewed, challenged, and advised the

Board of Management on the company’s

implementation of its strategic plan and

strategic priorities throughout the year.

As part of the December meeting, we

discussed the company's innovation

strategy, and the company’s innovation

department gave demonstrations of recent

and future technologies being developed.

The COVID-19 restrictions did not allow for

an in-person meeting of the Supervisory

Board in December with on-the-ground

demonstrations at the High Tech Campus in

Eindhoven. This was replaced by live videos

from, and discussions with, the teams in

the Netherlands, China and the United

States, showing technologies developed in

each of the regions.

•Sustainability

In September 2020, the company launched

its second five-year sustainability program:

Brighter Lives, Better World 2025, with a

first reporting year in 2021.

Throughout the year, we were updated on

the company’s progress on the

commitments under this program and the

company's strategic initiatives for 2021 to

drive growth for sustainability. We also had

a dedicated sustainability update, as part

of which we reviewed the 2021 materiality

assessment that is discussed in more detail

in chapter 16, Sustainability statements,

sub-section 16.1.1, of this Annual Report.

Signify Annual Report 2021

More information on sustainability is also

provided in chapter 16, Sustainability

statements, of this Annual Report.

•Business performance

Each quarter, we discussed the company’s

business performance in detail. These

discussions included updates on the

company’s financial performance on key

financial metrics and factors impacting

performance and forecasts, both on a

global and on a division and market basis.

As part hereof, we discussed the

(continued) impact of COVID-19, cost

increases of raw materials, components

and logistics challenges and focus points

for the upcoming periods.

•Financial reporting

We discussed the quarterly results and the

(semi-) annual financial statements for

2021, including related reports from the

internal and external auditors and non-

financial information, and related press

releases.

•Digitalization

One of the elements of the company's

5 Frontiers strategy is to digitalize and

transform for the future. In 2020, the

company launched a multiyear digital

roadmap with prioritized initiatives based

on market trends and customer needs. In

view of the importance of digitalization for

the company, the Supervisory Board

established a Digital Committee from its

midst as of January 1, 2021. See also sub-

section 8.3.4, Digital Committee.

•Organizational structure

The Supervisory Board reviewed the

organizational changes aimed at optimizing

costs and enhancing competitiveness by

making its central organizational leaner,

and as such to adapt to the long-term

impact of the COVID-19 pandemic.

•Risk management and internal controls

We discussed the company’s risk

management and internal controls,

including any significant changes and

improvements thereto. As part of the

annual Strategy Review session in

September, we discussed the key

enterprise risks identified, and how the

company addresses these. In a dedicated

session, we discussed the company’s IT and

cybersecurity risk assessment together

with the strategy and initiatives to address

these risks. For more information on risk

management and the company’s business

control framework, see chapter 12, Risk

factors and risk management, of this

Annual Report.

•M&A

In July 2021, the company announced the

acquisition of Telensa, a UK-based expert

in wireless monitoring and control systems

for smart cities. In December 2021, the

company also announced the intended

acquisition of the US-based Fluence to

strengthen the company's global

agriculture lighting growth platform and to

extent its position in the North American

horticultural lighting market. We discussed

these transactions in detail with

management. As part of our standing

agenda, we also discussed other pending

and potential acquisitions and divestments,

and some additional calls were held to

discuss M&A opportunities.

The Supervisory Board also discussed the

performance and integration of Cooper

Lighting, the acquisition of which was

completed in March 2020.

•Investor relations

From time to time, the investor relations

department updated us on feedback from

and interactions with investors and

analysts, developments in the company’s

share price and analyst recommendations,

as well as updates in the shareholder base.

•Capital allocation

We reviewed the capital allocation policy of

the company. In this context we also

discussed expectations related to cash

generation, dividend distributions,

investments in innovation and M&A, share

repurchases to cover obligations arising

from Signify’s long-term incentive and

other employee share plans, deleverage as

well as implications for credit ratings.

•Culture

As per the feedback of last year's

Supervisory Board performance evaluation,

in 2021 we introduced a session dedicated

to the company's culture: the company's

purpose, its values, sustainability and

diversity, equity & inclusion, and how it is

embedded and fostered in the company's

strategy and organization.

•Talent management

The company’s human resources

department presented its annual update on

talent management, succession planning of

employees who are in key positions,

organizational design, employee NPS,

gender and age diversity and focus areas

for the coming period.

8.3Key activities

of the

Supervisory

Board

committees in

2021

8.3.1 Audit Committee

Our Audit Committee assists the Supervisory

Board in fulfilling its oversight responsibilities

for, amongst other matters, the quality and

integrity of the company’s financial

statements, the internal business controls

and risk management systems, the internal

and external audit as well as monitoring

compliance.

Pamela Knapp (Chair), Gerard van de Aast and

Eelco Blok are the members of this

Committee.

The Audit Committee met five times in 2021,

upon the conclusion of each quarter and

additionally in December. In addition, a

combined meeting of the Supervisory Board

and the Audit Committee took place in

February to review and approve the

company's annual report. The Committee also

had additional calls on ad hoc topics. The

Audit Committee reported its findings to the

full Supervisory Board after every meeting.

The CEO, CFO, Group Controller, Chief

Accountant, Head of Internal Audit, Chief

Legal Officer/General Secretary and external

auditor (Ernst & Young Accountants LLP)

generally attend Audit Committee meetings.

Signify Annual Report 2021

At the end of each meeting, the Committee

holds a private session separately with the

external auditor, without members of

management being present. The Head of

Internal Audit is invited to this private session

from time to time. The Committee Chair also

has regular contact with the CFO, the Head

of Internal Audit and the external auditor

outside of Committee meetings.

In 2021, the Audit Committee received well

prepared information from management and

the external auditor on a variety of topics

related to the company’s financials, reporting

policies, controls, practices, and compliance.

As part of its standing agenda, the Audit

Committee discussed the company’s periodic

financial statements and related press

releases. With the Head of Internal Audit and

the Board of Management, the Committee

reviews the internal audits executed in the

quarter, their assessment, the areas for

improvement and positive developments, and

management thereof as well as attention

points identified through internal audits, and

progress and effectiveness of associated

mitigation actions. On a quarterly basis, the

Committee also reviews the enterprise risk

management self-assessments, together with

the risk management framework and external

risk trend. With the Chief Legal Officer/

General Secretary and the Board of

Management, the Committee discussed

developments in larger legal cases together

with any related provisions as well as pending

material investigations together with actions

taken. With the Head of Tax and the Board of

Management the Committee discussed

current tax matters, including the valuation of

deferred tax assets and liabilities for

uncertain tax positions. The Head of

Compliance presented the company's annual

integrity report over the past year, and key

observations were discussed with the

Committee. As part hereof, attention was

paid to fraud-related risks.

The Audit Committee reviewed the internal

audit plan and programs for each quarter. It

also reviewed the internal audit charter,

yearly audit plan, as well as the functioning,

budget, staffing, independence and

organizational structure of the internal audit

function. The Committee also discussed the

company’s business control framework and

any significant changes and improvements

thereto; this framework sets the standard for

risk management and business controls in the

company. The Committee reviewed the

effectiveness of internal control over

financial reporting. The Audit Committee also

reviewed its own charter.

In 2021, the Audit Committee also dedicated

time to the following matters:

•Deep dives on selected topics

Deep dives on a selection of topics were

presented by management and discussed

with the Audit Committee, including on the

company's insurance policy, hedging policy

and payment terms.

•Annual impairment test

The Committee discussed the annual

impairment test, which showed no

impairment. As the risk that goodwill is

impaired decreased following the increase

in headroom, the external auditor indicated

that it no longer regards the valuation of

goodwill as a key audit matter.

•EU Taxonomy

As of 2021, the company will report under

the new EU taxonomy reporting framework.

The Committee discussed the purpose, the

status and the reporting requirements of

the EU taxonomy as well as how the

company addresses it. For more

information, see chapter 16, Sustainability

statements, section 16.5, in this Annual

Report.

•External quality assessment

As per internal audit standards, an external

quality assessment of the internal audit

function must be performed at least every

five years. In 2021, an external firm

performed a full external assessment, with

a positive review result.

•Interaction with external auditor

Each quarter, the company's external

auditor Ernst & Young Accountants LLP

shared with the Board of Management and

the Audit Committee its observations

relevant for their 2021 annual audit of the

financial statements. In its reports, the

external auditor focused on specific areas

and developments. These included the key

audit matters, which are described in more

detail in the combined independent

auditor's report, which is included in

chapter 17 of this Annual Report. The

external auditor also shared its

observations and considerations on

management judgement and estimates

applied in the preparation of the financial

statements. The external auditor discussed

their observations during the quarterly

Audit Committee meetings.

The discussions with the external auditors

also covered matters related to

accounting policies, financial risks, and

compliance with accounting standards, as

well as compliance with (financial) legal

requirements and relevant legal

proceedings and related provisions. Other

areas of Audit Committee review included

the proposed external audit scope,

approach, fees and the independence of

the external auditor. The Committee also

reviewed the professional fitness and good

standing of the external auditor and its

engagement partners. For information on

the fees of Ernst & Young Accountants

LLP, refer to note B, Audit fees, in chapter

15, Company financial statements, of this

Annual Report.

8.3.2Corporate Governance

and Nomination &

Selection Committee

The Corporate Governance and Nomination &

Selection Committee assists the Supervisory

Board by preparing the selection criteria and

appointment procedure for members of the

Board of Management and the Supervisory

Board, periodically assessing the succession

planning for the individual members of these

boards and arranging interviews of potential

candidates. The Committee also supervises

the policy on the selection and appointment

of certain other key management positions.

The Committee is charged with reviewing the

company’s corporate governance (for more

information on corporate governance refer

to chapter 10, Corporate governance, of this

Annual Report). The performance evaluation

of the Board of Management and the

Supervisory Board is led by the Committee.

Signify Annual Report 2021

Arthur van der Poel (Chair), Rita Lane and

Frank Lubnau are the members of this

Committee.

The Committee met seven times in 2021 and

reported its findings to the full Supervisory

Board after each meeting. The CEO and Chief

Legal Officer/General Secretary generally

attend the Committee’s meetings. The

Committee Chair has regular contact with the

CEO and the Chief Legal Officer/General

Secretary. Various topics are often prepared

among the Committee members ahead of a

Committee meeting, resulting in efficient

decision-making during the meetings.

As part of its standing agenda, the Committee

discussed changes in key personnel positions,

succession planning and the functioning of

key personnel as well as the Supervisory

Board’s performance evaluation procedures.

In addition, the Committee discussed

developments in the Dutch corporate

governance landscape and the company’s

corporate governance structure. It also

discussed the Committee’s own charter.

In 2021, the Committee specifically dedicated

time to the following matters:

•Composition Supervisory Board

In 2021, the Committee prepared and led

an assessment and selection process that

resulted in the proposal by the Supervisory

Board to appoint Bram Schot as

Supervisory Board member at the Annual

General Meeting of Shareholders (AGM) to

be held on May 17, 2022. The Supervisory

Board recommends Bram Schot in view of

his managerial experience and extensive

technology knowledge, which he combines

with a strong understanding of the

importance of a customer-centric

approach, which we think will provide us

with valuable insights. In each selection

process, the Committee takes account of

the desired board profile, including its

diversity policy and expertise and

experience as well as the desired board

size.

Eelco Blok will reach the end of his four-

year term at the AGM 2022, and will then

step down as a member of the Supervisory

Board at his own request.

•Board size and profile, including diversity

We believe that it is of strategic

importance that our Board of Management

and Supervisory Board are composed in

line with Dutch and international corporate

governance best practices and that they

have the expertise needed for a good

understanding of current affairs and

longer-term risks and opportunities

related to the company’s business, taking

into account our objectives that promote

diversity at board level. Our boards’ profile

and the Supervisory Board skills and

expertise matrix reflect the areas that the

Committee and Supervisory Board regard

to be most relevant to address the

transition in the lighting industry and the

execution of the company's 5 Frontiers

strategy. In 2021, the Committee reviewed

the matrix categories and the profile (both

updated in 2020), and concluded that

these currently do not require a further

amendment. In 2021, the skills and

expertise matrix was complemented with

the publication of expanded biographies of

the Supervisory Board members on the

company's website.

Supervisory Board skills and expertise matrix

Fields in which the members of the Supervisory Board have a particular skill or expertise

Skill/experience item

Arthur

van

der Poel

Gerard

van de

Aast

Eelco

Blok

Pamela

Knapp

Rita

Lane

Frank

Lubnau

CEO role

Industrial experience

Finance, expert level

Sustainability

Projects/infrastructure

Business transformation

Digital business

processes

IT, cybersecurity

Technology/innovation

Diversity elements:

Gender, age, nationality

Male

Dutch

Male

Dutch

Male

Dutch

Female

German

Female

American

Male

German

The composition of the Supervisory Board

was also addressed in the annual

performance evaluation (see also below).

The Supervisory Board observed that its

current size is good, and that the board is

balanced, has a good skills base and strong

diversity of gender, background and ideas.

Both the Board of Management and the

Supervisory Board comprise of two-third

men and one-third women, in line with the

company’s diversity objectives that at least

30% are men and at least 30% are women

on the board. For more details on the

profile including diversity of the Board of

Management and Supervisory Board,

please refer to chapter 10, Corporate

governance, of this Annual Report. For

more information on diversity and inclusion

in the company, please refer to chapter 16,

Sustainability statements, section 16.3, of

this Annual Report.

The Supervisory Board currently regards

its size and composition to be adequate to

perform its duties. The Committee will

continue to periodically assess its size and

composition, including the desired

diversity, and initiate searches where

indicated.

•ESG committee

We noted the suggestion from some

stakeholders to companies in general to

consider establishing an ESG committee

from among their supervisory boards to

support progress on sustainability.

Sustainability has been an integral part of

Signify's strategy for many years. The full

Supervisory Board is engaged in the

strategy, including sustainability. The

Signify Annual Report 2021

company also publishes extensive

sustainability statements. In view of this, we

see no need to establish an ESG committee

from among the Supervisory Board.

8.3.3Remuneration

Committee

The Remuneration Committee assists the

Supervisory Board by, amongst other

matters, reviewing and preparing

remuneration policies for the Board of

Management and Supervisory Board,

remuneration proposals for individual

members of the Board of Management and

other key management positions, as well as

proposals for targets relevant to the variable

compensation of members of the Board of

Management and the review of their

performance.

Gerard van de Aast (Chair), Pamela Knapp and

Arthur van der Poel are the members of this

Committee. Currently, no member of the

Remuneration Committee is a member of the

executive management board of another

listed company.

In performing its duties and responsibilities,

the Remuneration Committee is assisted by

an external consultant and an in-house

remuneration expert.

The Remuneration Committee met three

times in 2021 and reported its findings to the

full Supervisory Board after each meeting.

The CEO, the Chief HR Officer, the Chief

Legal Officer/General Secretary and the

Head of Rewards generally attend the

Committee’s meetings. The committee also

consulted with the CEO, the Board of

Management and certain other key

management employees. Following those

consultations, the Committee prepared

decisions and advised the Supervisory Board.

As part of the standing agenda, the

Remuneration Committee discussed, among

other matters, the interim and final

performance results on variable

remuneration components for the previous

periods, target setting for variable

remuneration for the upcoming periods,

benchmark studies results and base salary

levels for the Board of Management, as well

as disclosure in the remuneration report.

No changes were proposed to the

remuneration policy for the Board of

Management nor for the Supervisory Board

in 2021. The Committee reflected on the AGM

advisory vote on the 2020 remuneration

report, also in comparison with the vote on

the prior year's report and changes in the

remuneration report made since. The

Committee Chair engaged with key

stakeholders, such as shareholders,

shareholder representative groups and the

Dutch Central Works Council, to obtain

feedback on executive remuneration in

general and attention points for the 2021

remuneration report, and reported the

findings back to the Committee and the

Supervisory Board.

Please also refer to chapter 9, Remuneration

Report, of this Annual Report, for further

information on the remuneration policies for

the Board of Management and the

Supervisory Board and how these were

implemented in 2021.

8.3.4Digital Committee

In view of the importance of digitalization, the

Supervisory Board established the Digital

Committee as of January 1, 2021.

The Digital Committee assists the Supervisory

Board by, amongst other matters, reviewing

the company’s digital strategy and roadmap,

digital objectives and performance and the

governance for deciding on digital

prioritization.

Frank Lubnau (Chair), Eelco Blok and Rita

Lane are the members of this Committee.

The Digital Committee met four times in 2021

and reported its findings to the full

Supervisory Board after each meeting. The

Committee also had additional working

sessions and deep dives on particular

transformation topics and projects. The CFO,

the Chief Digital and Information Officer

(CDIO) and the Chief Legal Officer/General

Secretary generally attend the Committee

meetings. The Committee Chair has regular

contact with the CFO and the CDIO.

In early 2021, the company's management

further strengthened its digital foundation

and governance, and established a digital

steering committee with participation from

key business and technology stakeholders.

The company also appointed a Chief Digital

and Information Officer (CDIO) to its

leadership team, to drive the company's

digital aspiration to lead the lighting industry

by building and maintaining a sustainable

competitive advantage through a superior

digital experience and data insights.

The Digital Committee was closely engaged in

the company's strategy to further strengthen

its digitalization initiatives. In the first

meetings, the Committee had in depth

discussions on the key components of the

company's digital aspiration. It reviewed and

advised on the company's digital strategy,

roadmap and priorities, to support the

company's overall strategy. Once the

foundation of the Committee's activities was

laid, the Committee discussed with

management the highlights and priorities on a

quarterly basis.

8.4Performance

evaluation

We evaluated the performance of the Board

of Management and of the Supervisory Board

and its committees in 2021.

The Board of Management also performed a

self-evaluation of its functioning and the

functioning of its individual members. The

members of the Board of Management shared

their views on their team and personal

targets performance in a dialogue with the

Chair and Chair of the Remuneration

Committee, which were discussed in the

Supervisory Board.

The objective of our Supervisory Board self-

evaluation is to gain better insight into the

functioning of the Supervisory Board, to

identify strengths that we want to keep and

to identify matters that the Supervisory

Board or the company can improve. Building

on feedback provided in 2020, together with

relevant developments in 2021, we prepared

Signify Annual Report 2021

an updated questionnaire. The questionnaire

addressed, among other matters, the focus

of discussions during our meetings, the depth

and quality of discussions on key topics, the

functioning of the committees, the

relationship between the Board of

Management and the Supervisory Board, the

views on the Supervisory Board as a team and

how it conducted itself, learnings from 2021,

as well as the desired focus in the future.

The questionnaire was completed by

members of the Supervisory Board and the

Board of Management as well as the Chief

Legal Officer/General Secretary to the

boards. Following an evaluation of the

questionnaire by the Corporate Governance

and Nomination & Selection Committee,

observations were discussed in a plenary

session with the Supervisory Board only.

Hereafter, one-on-one discussions took

place between the Chair and the individual

Supervisory Board members, and with the

Vice Chair on the functioning of the Chair.

The responses to the questionnaire were

shared with all respondents together with a

proposal for follow-ups.

The self-evaluation has once again provided

valuable insights on how the Supervisory

Board operates as a team and where the

Supervisory Board and the company can

improve. In 2021, the Supervisory Board

experienced that it operated as a critical and

constructive team. The Supervisory Board

meetings were found to be well prepared,

and the discussions open and to the point.

The evaluation brought practical insights, for

example how valuable the Supervisory Board

members find it to meet in person and to

meet with senior management around the

board meetings, which will thus be continued

when the COVID-19 situation permits. In

addition, the evaluation identified topics for

further discussions, such as on the company's

operating environment and competition.

8.5Financial

statements

2021 and

dividend

Signify’s Consolidated and Company financial

statements for 2021, as prepared by the

Board of Management, have been audited by

Ernst & Young Accountants LLP as

independent external auditor appointed by

the General Meeting of Shareholders. Its

report has been included in the Combined

independent auditor’s report. We have

approved these financial statements.

We recommend to the General Meeting of

Shareholders to adopt the financial

statements for 2021. We likewise recommend

to shareholders that they adopt the proposal

by the Board of Management to declare a

cash dividend of EUR 1.45 per ordinary share

from the 2021 net income.

8.6Appreciation

The year 2021 proved to be another year full

of challenges caused by the ongoing

COVID-19 pandemic and subsequent supply

disruptions. We would like to thank the Board

of Management and all Signify employees for

their continued commitment and great work

throughout the year, which resulted in a solid

performance.

February 22, 2022

Supervisory Board

Arthur van der Poel

Gerard van de Aast

Eelco Blok

Pamela Knapp

Rita Lane

Frank Lubnau

Signify Annual Report 2021

9Remuneration

report

9.1Letter from the Remuneration

Committee Chair

On behalf of the Supervisory Board, I am pleased to present the 2021 remuneration report. This

report includes a detailed explanation of the current remuneration policies for the Board of

Management and the Supervisory Board. The effectuation of these policies in 2021 is discussed

in parts 9.2 and 9.3 of this remuneration report.

This was another challenging year with the continued impact of COVID-19 and the overall supply

chain and component availability issues. We are very proud of how the company performed in

2021, and the resilience that was exhibited. The company responded quickly as conditions

changed in the supply chain and COVID-19 resulted in ongoing uncertainty around the world,

while employees continued to focus well to deliver for our stakeholders. Over the course of

2021 we continued our engagement with key stakeholders, such as shareholders, shareholder

representative groups and the Dutch Central Works Council, to understand their views on

remuneration in general and to solicit feedback on the remuneration report of Signify. These

interactions were very productive, leading to a good dialogue and valuable feedback,

particularly on the strong link that exists between Signify's ESG metrics and remuneration for

the Board of Management via the company's long-term incentive plan.

Signify's performance in 2021

Signify had a solid performance in 2021 given the volatility of the year. Our industry continued to

be challenged with supply chain issues and with uncertain and inconsistent recovery in many

markets. However, Signify was able to capitalize well on demand and provide customers with

solutions to solve their particular business needs. In addition, the company was able to minimize

supply chain disruptions to our customers. As a result, the company experienced an increase in

comparable sales growth. Moreover, profitability as a percentage of sales improved and free

cash flow performance was again very solid. Relative to the targets set at the beginning of 2021,

the results on the key financial measures and the achievement against individual targets

resulted in an above target outcome on the annual incentive for the Board of Management.

Signify continues to lead the way in sustainability with the Brighter Lives, Better World 2025

program. Signify continues to strongly perform on the ambitious targets set in the sustainability

programs, such as circular economy via circular revenues, and climate action via the company's

intent to double the pace of achieving the 1.5°C scenario of the Paris Agreement (1.5°C pathway

over our value chain to reach the 2031 ambition in 2025, or 6 years early). This positive financial

and non-financial performance in free cash flow, relative total shareholder return and

sustainability is also reflected in the over achievement of the conditions for vesting of the 2019

Signify Annual Report 2021

long-term incentive plan. Maintaining this ambitious drive beyond carbon neutrality, which was

achieved in 2020, the company continues to lead the way both in sustainability overall as well as

in the direct link with the remuneration of the Board of Management.

TSR peer group

There continues to be much change in our industry. During 2021, Cree sold its LED products

business unit becoming a pure-play semiconductor company in the process. As a result, we have

reviewed their inclusion in the TSR peer group and determined that it is best to replace Cree.

The current TSR performance peer companies and potential replacement competitor

companies were analyzed in terms of underlying parameters such as risk, size, value/growth,

etc. to determine an appropriate replacement for Cree. As a result, per January 1, 2022, Cree

was replaced by MLS Co Ltd., a direct competitor of Signify in LED lighting.

Stakeholder engagement

Signify’s 2021 Annual General Meeting of Shareholders was held on May 18, 2021.

The changes we introduced to the remuneration report have been welcomed and well received

and the 2020 remuneration report was supported by shareholders.

To further understand stakeholder feedback on the Signify Remuneration Report 2020, as well

as views on executive remuneration in general, we engaged with stakeholders, such as

shareholders, shareholder representative groups and the Dutch Central Works Council, prior to

the creation of the Remuneration Report for 2021.

We experienced those conversations as very constructive and they have led to improvements in

our Remuneration Report. Two key points came from those interactions:

i) the degree of discretion that the Remuneration Committee may take in determining

remuneration over 2021, and;

ii) the link between ESG metrics and remuneration overall.

With respect to the first item, the outcomes on both the annual incentive plan and the long-

term incentive plan reflect the actual performance despite the continued challenges presented

over 2021. No discretion was applied on those outcomes, nor were targets adjusted during

2021. The link between ESG metrics and remuneration overall was a key component of all

stakeholder conversations. Signify was identified as being a leader in their approach to

sustainability, the degree of reporting on these metrics and the related link to the long-term

incentive plan. We are pleased with this feedback and continue to evolve the 2021 report in

direct response to this feedback. We trust that stakeholders will experience these changes

positively and appreciate the spirit of transparency and continuous improvement which drives

them.

Gerard van de Aast

Chair of the Remuneration Committee

Signify Annual Report 2021

9.2Remuneration Board of Management

Introduction

Signify has a balanced compensation policy for its employees, from our CEO and

other members of the Board of Management to all employees worldwide. Our policy

aims to stimulate sustainable short- and long-term value creation. Therefore, the

performance measures used in the variable compensation components are linked to

quantitative financial, non-financial and sustainability targets. The remuneration

policy also serves a communication purpose as it clearly stipulates and supports a

common approach to deliver on the company’s strategy.

Signify’s value creation model:

The value created by Signify goes beyond financial performance alone. Our approach is to

optimize long-term value through financial, environmental and social resources. Our focus on

environment and societal implications of doing business is evidenced in our Brighter Lives,

Better World 2025 program. This program links to our long-term incentive plan and ensures

that the interests of the organization, society at large and our impact on the environment in

which we live are key elements in how Signify delivers long-term value creation to

stakeholders. Our activities and our way of doing business impact customers, employees,

investors and society at large. Signify expresses these impacts in monetary terms in chapter 3,

Creating long-term value, section 3.3, of this Annual Report.

The current remuneration policy for the Board of Management and for the Supervisory Board

was adopted by the Annual General Meeting of Shareholders (AGM) in 2020. The effectuation of

these policies in 2021 is discussed in parts 9.2 and 9.3 of this remuneration report.

The report included in this chapter constitutes the remuneration report within the meaning of

Section 2:135b of the Dutch Civil Code.

The following principles apply for the remuneration policy of the Board of Management:

•Signify’s remuneration policy aims to attract, reward and retain qualified leaders to pursue

the company’s purpose and long-term strategic objectives, whilst taking the interest of all

company’s stakeholders into account.

•Remuneration levels are to be competitive and in line with the market practice of comparable

companies and support a pay-for-performance philosophy with a proportion of remuneration

at risk.

•During the policy design and review process, stakeholder feedback and legal provisions,

including the Dutch Corporate Governance Code, are taken into consideration.

Remuneration components

The compensation package for the members of the Board of Management consists of the

following fixed and variable components:

•base salary

•annual cash incentive

•long-term equity-based incentive

•pensions and other benefits

The combination of a member’s base salary, annual cash incentive and long-term equity-based

incentive, together referred to as the “total direct compensation”, is targeted around the

median level of a representative labor market peer group and benchmarked on a regular basis.

This peer group consists of 50% Dutch headquartered cross-industry companies that are

included in the AEX or AMX, and 50% European sector specific companies.

As of January 2020, the labor market peer group consists of the following 14 companies:

Labor Market Peer Group

Aalberts

DSM

Prysmian Group

AkzoNobel

KPN

Rexel

ASML

Legrand

Rheinmetall Group

BAM

Nexans

Siemens Gamesa

Boskalis

OSRAM

The Supervisory Board reviews the peer group on a regular basis and may adjust to ensure that

the companies in the group remain relevant peers. Signify joined the AEX on March 22, 2021.

This has not led to a change in the labor market peer group since Signify as a company has not

changed significantly.

Signify Annual Report 2021

Summary of Remuneration

Total direct compensation

Base salary

•The Supervisory Board determines the base salary and may, at its

discretion, apply an increase.

•The base salary may not be adjusted with a higher percentage than a

collective labor agreement (CLA) increase agreed for the CLA population

in the Netherlands.

Base salary as follows:

E.H.E. Rondolat

F.J. van Engelen Sousa

M.L. Mariani

€ 919,737

€ 601,800

Annual cash incentive

CEO:

On-target: 80%

Maximum: 160% of base salary

Other BoM members:

On-target: 60%

Maximum: 120% of base salary

Measures:

• Comparable sales growth (30%)

• Adjusted EBITA (30%)

• Free cash flow (20%)

• Team/individual (20%)

80% is related to financial performance measures and focuses on the

realization of strategic business objectives.

20% is related to team and individual performance measures.

Actual pay-out:

E.H.E. Rondolat

F.J. van Engelen Sousa

M.L. Mariani

In % of target:

111.4%

Long-term equity

based incentive

CEO:

Annual on-target grant value:

100% of base salary

Other BoM members:

Annual on-target grant value:

80% of base salary

2021 grant:

E.H.E. Rondolat

F.J. van Engelen Sousa

M.L. Mariani

21,312 PSUs

11,156 PSUs

Key features:

•Granted in performance share units (PSUs) only.

•Conditionally granted annually.

•Vesting of performance shares conditional upon achievement of

performance conditions measured over a period of three financial years.

•Performance measured using four performance measures equally

weighted:

i) relative total shareholder return (25%), ii) free cash flow (25%), iii)

return on capital employed (25%) and iv) sustainability (25%). This applies

to grants from 2020.

•For the LTI grant made in 2019, the previous performance conditions

continue to apply:

i) relative total shareholder return (40%), ii) free cash flow (40%) and

iii) sustainability (20%).

•Pay-out per performance measure can vary between 0% and 200%.

•In case of external hires, a restricted share units (RSUs) based sign-on

award can be offered.

• Conditional on continued employment.

• Holding requirement (part 9.2.8 of this remuneration report):

CEO: 300% of base salary

Other BoM members: 200% of base salary

• Additional requirement to comply with holding requirements under

the Dutch corporate governance code (total 5 years from grant date)

Policy Summary

Application in 2021 Summary

Signify Annual Report 2021

Other compensation

Pension benefit

•Collective defined contribution plan up to the maximum pensionable salary

(2021: EUR 112,189).

•Gross pension allowance of 25% of the base salary exceeding the

maximum pensionable salary.

•Members of the Board of Management can, on a voluntary basis, choose to

participate in a net pension arrangement by investing the net (after tax)

amount.

•Temporary gross transition allowance for a maximum period of eight years,

offsetting historical plan changes.

E.H.E. Rondolat

F.J. van Engelen Sousa

M.L. Mariani

Accumulated annual pension as of

Dec 31, 2021:

€ 42,188

€ 2,677

€ 2,824

Additional benefits

Additional benefits, such as expense and relocation allowances, medical

insurance, accident insurance and company car arrangements.

Car allowance gross per annum (or lease car):

Entertainment expense allowance net per annum:

Representation allowance net per annum:

Relocation allowances:

CEO:

€ 36,960

€ 23,920

€ 6,800

F.J. van Engelen Sousa (per

contractual agreement received

upon family relocation):

One-off net housing allowance:

One-off net relocation allowance:

Allowance international school (net):

Other BoM members:

€ 31,560

€ 6,000

€ 142,000

€ 5,000

€ 12,500

Policy Summary

Application in 2021 Summary

Signify Annual Report 2021

The table below reflects the total remuneration as well as the remuneration costs of each of the members of the Board of Management in 2021.

Remuneration and remuneration costs of individual members of the Board of Management in EUR

Base

compensation/

salary 1

Annual incentive 2

Performance

shares costs 3

Restricted share

rights costs 4

Pension

allowances

Pension scheme

costs

Other

compensation 5

Termination

benefits 6

Total

remuneration

costs

2021

E.H.E. Rondolat

919,737

819,670

1,156,993

—

266,639

29,403

37,590

—

3,230,032

F.J. van Engelen Sousa

601,800

402,243

115,445

162,072

122,403

29,403

41,434

—

1,474,800

M.L. Mariani

601,800

402,243

528,117

—

122,403

29,403

45,261

—

1,729,227

2,123,337

1,624,156

1,800,555

162,072

511,445

88,209

124,285

—

6,434,059

2020

E.H.E. Rondolat

850,368

628,307

1,411,630

—

293,352

24,378

37,300

—

3,245,335

F.J. van Engelen Sousa 7

321,818

150,114

29,750

65,439

12,060

20,572

—

599,753

M.L. Mariani 8

337,476

184,687

601,473

—

70,717

14,070

17,068

—

1,225,491

C.L. van Schooten 9

555,522

307,841

971,615

—

184,820

24,378

33,445

589,057

2,666,678

S.L.A. Rougeot 10

95,000

(185,279)

—

19,162

4,271

6,623

—

(60,223)

2,160,184

1,270,949

2,799,439

29,750

633,490

79,157

115,008

589,057

7,677,034

1Base compensation/salary for 2020 includes 20% COVID-19 reduction in base salary in Q2 2020.

2The annual incentive is related to the performance in the year reported which is paid out in the subsequent year.

3Costs of performance shares are based on accounting standards (IFRS) and do not reflect the value of the shares at the vesting/release date. Comparatives for 2020 were revised as performance shares costs for C.L. van Schooten were EUR 242.363 higher

than disclosed in 2020. The performance shares costs for M.L. Mariani also include the costs for shares awarded when she was not yet a member of the Board of Management.

4Costs of restricted shares rights are based on accounting standards (IFRS) and do not reflect the value of the shares at the vesting/release date and concerns the sign-on grant of EUR 300,000 for F.J. van Engelen Sousa.

5The stated amounts mainly concern (part of) allowances to members of the Board of Management that can be considered as remuneration. In a situation where such a part of an allowance can be considered as (indirect) remuneration (for example, private use

of the company car or car allowance), then such part is both valued and accounted for here. The method employed by the fiscal authorities in the Netherlands is the starting point for the value stated. Net allowances are not included.

6As the company elected not to renew the services contract of C.L. van Schooten after the end of term in May 2021, as per his services contract, he received a lump sum payment of one time the annual base compensation/salary (gross amount of EUR 589,057)

in June 2021. An additional tax levy, pursuant to Article 32bb of the Dutch wage tax act, will be payable by the company over the total remuneration of C.L. van Schooten. The estimate was revised to EUR 2,405,224 (2020 estimate: EUR 543,883). The calculation

of the tax levy due by the company includes the taxable value of the long-term equity-based incentive. That taxable value depends on the final number of shares that will be delivered to C.L. van Schooten in 2022 and 2023 (pending final achievement of

performance conditions) and the company’s share price upon delivery of the shares (these equity rights were granted in 2019 and 2020).

7Hired per June 15, 2020, and appointed member of the Board of Management on October 27, 2020 EGM. Remuneration costs present the entire period functioning as CFO as of June 15, 2020.

8Appointed member of the Board of Management in May 20, 2020 AGM. Remuneration costs present the period functioning as member of the Board of Management as of May 20, 2020.

9Relinquished his position on the Board of Management per January 1, 2021

10Stepped down as member of the Board of Management per March 1, 2020.

All remuneration was paid in accordance with the remuneration policy.

Signify Annual Report 2021

9.2.1Mix of remuneration elements

To support the remuneration objectives, the policy includes significant variable components in

the form of an annual (cash) incentive and a long-term equity-based incentive of performance

shares. As a result, a significant proportion of pay is 'at risk' through variable incentives. The

chart below shows the relative on-target value of fixed versus variable compensation.

The table below shows the actual remuneration mix in 2021.

Fixed 1

Variable 2

Proportion fixed/

variable

E.H.E. Rondolat

1,253,369

3,077,644

29%/71%

F.J. van Engelen Sousa 3

795,040

402,243

66%/34%

M.L. Mariani 3

798,867

402,243

67%/33%

1Base compensation/salary, pension allowances, pension scheme costs, other allowances as reported in the table

'Remuneration and remuneration costs of individual members of the Board of Management' under 9.2.

2Annual incentive realized as reported in the table 'Remuneration and remuneration costs of individual members of the Board

of Management' under 9.2 and Long-term incentive value at vesting date in 2021 as reported in the table 'Performance

shares 2018 - 2021' under 9.2.5.

3The variable remuneration for F.J. van Engelen Sousa and M.L. Mariani does not yet include an LTI vesting value as Board of

Management member and therefore the mix fixed/variable differs from the mix for the other Board of Management member.

Scenario analyses are prepared regularly to estimate future pay-out levels as input to

determine the IFRS costs and any hedging strategy that might be employed. Furthermore,

estimated future remuneration levels are assessed against the potential achievement of

strategic objectives. Based on the scenario analyses performed, the Supervisory Board has

concluded that the policy supports the pay-for-performance philosophy.

9.2.2Base salary

The base salary compensates for the individual's experience, skills, duties, responsibilities and

the contribution of the individual within Signify. The Supervisory Board determines the base

salary and may adjust the base salary, for example following the results of benchmark studies

and to ensure alignment between members of the Board of Management. Absent any

adjustment of the base salary, it follows the (collective and merit) increase as agreed for the

CLA population in the Netherlands. The Supervisory Board regularly reviews the total direct

compensation (including base salaries).

The annual compensation of the members of the Board of Management was reviewed in 2021 in

line with the regular remuneration review. The Remuneration Committee considered the input of

the Board of Management members in setting their pay levels.

For 2021, the Supervisory Board decided to align the annual base salaries of F.J. van Engelen

Sousa and M.L. Mariani in view of her extended scope of responsibilities as a board member. As a

result, M.L. Mariani’s base salary has been adjusted to EUR 590,000 as per January 1, 2021. The

Supervisory Board also decided to increase the base salary levels for all members of the Board

of Management by 2%, in line with the budgets (collective and merit increase) allocated for the

CLA population in the Netherlands.

New base salaries Board of Management in 2021 in EUR

January 1, 2021

(+ 2%)

E.H.E. Rondolat

919,737

F.J. van Engelen Sousa

601,800

M.L. Mariani

601,800

9.2.3Variable remuneration

The variable remuneration of the members of the Board of Management consists of an annual

cash incentive and a long-term equity-based incentive.

The design of the incentives aims to achieve a balance between short-term objectives, long-

term value creation and sustainable performance. Variable pay is based on both financial and

non-financial performance measures. In selecting performance measures, their respective

weights and targets for a performance period, the following is considered:

Signify Annual Report 2021

•Performance measures are selected based on relevance to the company’s strategy.

•The company's strategy determines the targets and intervals for the performance measures.

•Targets are set ambitiously yet realistically, taking the company’s risk appetite into account.

•Alignment with stakeholders’ interests and expectations is essential.

The Supervisory Board determines the target for each of the performance measures of the

annual cash incentive and the long-term equity-based incentive. The target definition for these

variable remuneration components includes target intervals and correlating pay-out schemes,

being defined in incremental steps in performance and respective pay-out. In addition, a

minimum threshold for the achievement of financial performance measures applies, below which

there will be no pay-out. Following the end of the relevant performance period, the Supervisory

Board will assess the actual performance relative to the targets set. On that basis, the

Supervisory Board will, at its discretion, determine the achievement per performance measure

and target.

9.2.4Annual cash incentive

Members of the Board of Management are eligible for an annual cash incentive. The annual

incentive is designed to reward the achievement of annual financial and operational objectives

and personal performance. The purpose is to ensure alignment with the company’s annual

business plan setting the strategic priorities for that year, which in turn contribute to the

company’s long-term objectives.

The Supervisory Board can annually select two or three financial performance measures from

the following list, and determine the weighting per performance measure: growth (such as

comparable sales growth), profit (such as adjusted EBITA or net income), cash flow (such as

average working capital or free cash flow) and investment return (such as return on capital

employed).

The possibility to annually select financial performance measures from the above list gives the

Supervisory Board a certain level of flexibility to ensure continuous alignment of the

performance measures with the company’s strategy and financial objectives for the mid-term.

The financial performance measures used in the annual incentive to track performance over

2021 were comparable sales growth (measured as a percentage of sales), Adjusted EBITA

(measured as a percentage of sales) and free cash flow (measured as a percentage of sales).

These measures were determined by the Supervisory Board to reflect the best alignment with

the company's strategy and financial objectives for the mid-term focusing on profitable growth.

The financial targets for 2021 were set within the context of the medium-term objectives of the

company at the beginning of the year and did not change over the course of 2021. Pay-out

between the financial targets is linear.

The team/individual performance measures are recommended by the CEO and discussed and

ultimately approved by the Supervisory Board. For 2021, these measures included Brighter

Lives, Better World 2021 targets, employee and customer Net Promoter Scores, operational

efficiency, sales growth for new growth engines, digital roadmap impact and implementation of

the reorganization of the central functions.

Performance achievements 2021

Performance against financial targets are reviewed on a quarterly basis. The assessment of

performance under the annual incentive plan is concluded by the Supervisory Board.

For 2021, the company performed well given the considerable external challenges it faced

during the year. Although the company returned to growth, comparable sales growth was below

the target level of performance resulting in an achievement of 80%. Adjusted EBITA was above

the target level of performance that was set at the beginning of 2021, reflecting improved

profitability, and as such results in an achievement of 160%. The company also performed well

on free cash flow with a result above target level of performance resulting in an achievement of

107.1%. The Supervisory Board did not apply any discretion to the outcomes of the financial

measures, nor were any changes made to the original targets set for the year 2021.

Finally, the Supervisory Board assessed the achievement of the Board of Management relative

to each of their individual goals and their collective team goals. The Supervisory Board was very

pleased with the overall implementation during 2021 of the program to create a leaner central

organization. In doing so, the Board of Management achieved cost-saving measures while

increasing focus on innovation and sustainability. Progress towards the Brighter Lives, Better

World 2025 program remains very strong, with 3 out of 4 of the metrics on track or above the

expected trajectory to double Signify's impact. Carbon footprint reduction, circular revenues,

and Brighter Lives revenues were on track or above the expected trajectory to achieve the

ambitions of the 2025 program.Women in leadership positions was off track relative to the

ambition for the year, although the Supervisory Board was pleased that it has continued to

improve in 2021, reflecting an 8% increase since 2019. Lastly, there has been very good

progress on the delivery of the digital roadmap specifically related to customer interfaces and

experience, as well as process automation.

From a customer perspective, the Supervisory Board was very pleased with the continued

progress in the customer Net Promoter Score from 41 in 2020 to 44 in 2021, notwithstanding

the ongoing supply chain and COVID-19 related challenges. Despite this improvement, it

remained slightly below our ambition of a customer Net Promoter Score of 45. From a great

place to work perspective, despite a dip early in the year due to the impact of creating a leaner

central organization, the employee Net Promoter Score recovered very well to end 2021 at an

all-time high of 32 and above the goal of 30 versus 29 at the end of 2020.

Signify Annual Report 2021

The company experienced high demand for connected lighting and performed solidly in the

growth platforms. Connected lighting sales grew by 21% and growth platforms grew by 19%.

Despite this positive trajectory, performance across the growth platforms was overall behind

expectations. Due to significant supply chain disruptions in 2021, which included global

component shortages and logistics challenges, the company was impacted on its ability to meet

the high demand. As a result, operational efficiencies in the form of savings and service levels

were also behind expectations.

The Supervisory Board reviewed the team and individual objectives and achievements as

described above and assessed performance for 2021 as strong. As a result, the Supervisory

Board has determined that the realized performance on this measure was 90%.

The summarized outcomes realized on all measures are as follows:

Performance measures

Weighting

Realized

Realized %

Multiple

achieved

Comparable sales growth

30%

3.8%

80.0%

24.0%

Adjusted EBITA

30%

11.6%

160.0%

48.0%

Free cash flow

20%

8.9%

107.1%

21.4%

Team and individual performance

measures

20%

90.0%

18.0%

Multiple achieved

111.4%

The multiple achieved results in the following payout for each Board of Management member:

Annual incentive realization 2021 in EUR

Annual

base

on-target

% of

annual

base

Multiple

achieved

Realized

annual

incentive

(in EUR)

E.H.E. Rondolat

919,737

80%

111.4%

819,670

F.J. van Engelen Sousa

601,800

60%

111.4%

402,243

M.L. Mariani

601,800

60%

111.4%

402,243

9.2.5Long-term equity-based incentive

Members of the Board of Management are eligible for a long-term equity-based incentive under

the Signify Long-term Incentive Plan (LTI Plan). The objective of the long-term incentive is to

link pay with long-term sustainable value creation. In addition to the Board of Management,

another approximately 700 employees globally are eligible for participation in a similar long-term

incentive plan.

The main characteristics of the long-term incentive plan for the Board of Management are as

follows:

•The long-term incentive is granted in performance shares only and granted annually.

•The vesting of performance shares is conditional upon the achievement of performance

conditions measured over a period of three financial years and continued Signify employment.

•Performance is measured using four performance measures in 2021: relative total

shareholder return (25%), free cash flow (25%), return on capital employed (25%) and

sustainability (25%).

•Pay-out per performance measure can vary between 0% and 200%.

Signify Annual Report 2021

Relative TSR

The vesting of 25% (40% for 2019 grant) of the shares granted is subject to a TSR condition.

Relative total shareholder return (TSR) measures the share price growth plus dividends paid

over the three-year performance period. Performance is expressed as a percentage. This

percentage is compared to the TSR performance of companies included in the peer group

specifically compiled for this purpose. The TSR performance is determined for each company in

the peer group and the performances are ranked from top to bottom. Signify’s position in the

ranking, together with the pay-out curve, determines the pay-out level,

In 2021, the peer group consisted of the following companies:

TSR Peer Group

ABB

Johnson Controls

Acuity Brands

Legrand

Cree

Panasonic

Eaton Corporation

Signify

Fagerhult

Schneider Electric

Hitachi

Toshiba

Honeywell Int.

Zumtobel Group

Hubbel

The peer group is reviewed on a regular basis to ensure that the companies in the group remain

relevant peers. In case a peer needs to be replaced due to a corporate event (merger,

acquisition, and so on) the Supervisory Board will ensure that the adjusted peer group remains

aligned with the strategic objectives, the geographical spread and the business characteristics

of Signify. As explained in the letter of the Remuneration Committee Chair under 9.1, per

January 1, 2022 Cree was replaced by MLS Co Ltd. This means that:

•For the LTI 2020 grant (vesting in 2023) and the LTI 2021 grant (vesting in 2024), TSR will be

calculated on a “synthetic combination”, i.e. Cree until January 1, 2022 and MLS as of January

1, 2022.

•As of the LTI 2022 grant (vesting in 2025 and thereafter), MLS will replace Cree in the TSR

peer group.

Performance-incentive zone for TSR in % of grant value (2020 and 2021 grant)

Ranking

Payout

100

125

150

175

200

Performance-incentive zone for TSR in % of grant value (2019 grant)

Ranking

Payout

100

120

140

160

180

200

Free cash flow

The vesting of another 25% (40% for 2019 grant) of the annual long-term incentive grant is

linked to performance measured by a free cash flow target over the three-year performance

period. The targets and intervals around these measures are determined by the Supervisory

Board, based on the company’s strategic, multi-year plan.

Sustainability

The vesting of 25% (20% for 2019 grant) of the annual long-term incentive grant is dependent

on how well Signify performs against the targets set with respect to the sustainability condition.

The targets and intervals around these measures are determined by the Supervisory Board,

based on the company’s strategic, multi-year plan. As targets set are usually both qualitative

and quantitative, set ambitiously and adjusted regularly, the assessment of the performance is

at the discretion of the Supervisory Board. The assessment will use tracked performance as

input.

Return on capital employed

The vesting of the remaining 25% (not applicable for 2019 grant) of the annual long-term

incentive grant is linked to performance measured by a return on capital employed target over

the three-year performance period. The targets and intervals around these measures are

determined by the Supervisory Board, based on the company’s strategic, multi-year plan.

In 2021, performance shares were granted to the members of the Board of Management. These

grants are governed by the Signify long-term incentive plan. The grant is made on the basis of

the average closing share price of the three months preceding the date of grant. In this way,

the Signify granting policy ensures mitigation of share price volatility.

Signify Annual Report 2021

The following tables provide an overview of the Signify shares awarded and held by the Board of Management in 2021.

Performance shares 2018-2021

Grant date

Number of performance

shares originally granted

Value at grant date

(in EUR)

End of vesting period

Number of performance

shares vested in 2021

Value at vesting date

in 2021 (in EUR)

E.H.E. Rondolat

2018

28,103

850,000

2021

47,214

2,257,974

2019

35,148

871,000

2022

n.a.

2020

45,932

901,703

2023

n.a.

2021

21,312

919,737

2024

n.a.

F.J. van Engelen Sousa

2020

2023

n.a.

2021

11,156

481,440

2024

n.a.

M.L. Mariani 3

2020

23,228

456,000

2023

n.a.

2021

11,156

481,440

2024

n.a.

Number of Signify unvested performance shares (holdings) in number of shares

January 1,

2021

Awarded

2021

Awarded dividend shares

2021

Realized

2021

December 31,

2021

Vesting

date 1

E.H.E. Rondolat

28,103

—

2,183

47,214

—

03 05 2021

35,148

—

35,148

02 05 2022

45,932

—

45,932

01 05 2023

—

21,312

—

21,312

01 05 2024

F.J. van Engelen Sousa 2

—

01 05 2023

—

11,156

—

11,156

01 05 2024

M.L. Mariani 3

23,228

—

23,228

01 05 2023

—

11,156

—

11,156

01 05 2024

Performance shares (holdings)

132,411

43,624

2,183

47,214

147,932

1Under the long-term incentive plan terms, the vesting date is on the first business day after the publication of Signify’s first quarter results in the third anniversary year of the grant date. The dates for 2023 and beyond in this table are for illustrative purposes

only.

2F.J. van Engelen Sousa did not participate in the long-term incentive plan in 2020; he received a EUR 300,000 sign-on grant under the restricted share rights plan in that year.

3Only the shares granted as member of the Board of Management are included.

The three-year performance period for the 2018 performance share grant ended on December

31, 2020. The shares under this grant vested on May 3, 2021 with a vesting percentage of 168%.

At December 31, 2021, the members of the Board of Management held no options on Signify

shares.

9.2.6Realization of the 2019 grant

The three-year performance period for the 2019 performance share grant ended on December

31, 2021. The shares under this grant vest on May 2, 2022.

The pay-out results are as follows:

Relative TSR (40% weighting)

The TSR achieved by Signify during the performance period was 116.6%. This positioned Signify

as the 5th ranked company in the peer group shown in the following table, resulting in an

achievement of 160%.

Signify Annual Report 2021

January 1, 2019 – December 31, 2021

Rank

Company

TSR Performance

Cree (Wolfspeed)

174.9%

Schneider Electric

168.8%

Johnson Controls

146.7%

Eaton Corporation

142.2%

Signify

116.6%

Hitachi

114.3%

Hubbell

96.6%

Legrand

87.5%

ABB

78.2%

Acuity Brands

69.6%

Honeywell

57.3%

Toshiba

49.8%

Panasonic

23.3%

Zumtobel Group

12.6%

Fagerhult

2.0%

Free cash flow (40% weighting)

The LTI Plan free cash flow pay-out and targets set at the beginning of the performance period

were as follows:

Pay-out

As % of sales

Below threshold

< 7.0%

Threshold

40%

7.0%

Target

100%

7.7%

Maximum

200%

8.4%

Over the three-year performance period, an amount of EUR 1,754 million free cash was

generated (excluding pension de-risking and IFRS 16), representing 8.9% of sales. In light

thereof, the Supervisory Board determined the LTI Plan free cash flow achievement as 200%.

Sustainability (20% weighting)

The sustainability objectives for 2021 were based on the intent to double Signify's impact in the

areas of climate action, the circular economy, brighter lives revenues and women in leadership

positions by 2025. In all areas, significant progress has been made relative to the trajectory to

deliver on the ambitions by 2025. Signify is on track to deliver against the ambitious goal of

doubling the pace of the Paris Agreement's 1.5ᵒC scenario. Women in leadership positions has

increased by 8% from 2019, but falls slightly slightly behind the trajectory to double the

percentage of women in leadership positions by 2025. Circular and brighter lives revenues have

exceeded the ambition set for 2021 with an increase in contributions from circular products,

systems or services and an increase in revenues coming from lighting innovations that increase

food availability, safety and security, or health and well-being. Based on the following LTI Plan

sustainability measures and results over the performance period, the Supervisory Board

determined the LTI Plan sustainability achievement as 183%.

Status 1

Result 2021 2

Better World

Climate action

Carbon footprint reduction

On Track

Steady decrease of

emissions (scope 1, 2

and 3)

Circular economy

Circular revenues

On Track

21% - 25%

Brighter Lives

Food availability

Safety & security

Health & well-being

Brighter lives revenues

On Track

25% - 27%

Great place to work

Women in leadership

positions

Off Track

25%

1 Status versus Brighter Lives, Better World 2025 doubling target

2 Data and data ranges are based on current level of data availability and accuracy.

In view of the above, the following performance achievement and vesting levels have been

determined by the Supervisory Board in respect of the 2019 grant of performance shares. The

Supervisory Board did not apply any discretion in the determination of the performance

outcomes nor were targets adjusted during the plan period.

Achievement

Weighting

Vesting level

TSR

160%

40%

64.0%

Free cash flow

200%

40%

80.0%

Sustainability

183%

20%

36.6%

Total

180.6%

Signify Annual Report 2021

9.2.7 Share ownership guidelines and holding requirement

Under the Signify share ownership guidelines, members of the Board of Management must hold a

certain value in shares in the company. These guidelines are designed to further align the

interest of the members of the Board of Management (and certain other leaders within Signify)

with the interests of its shareholders. For the CEO, the value in Signify shares to be held is

300% of base salary and for the other members of the Board of Management it is 200% of base

salary. The guidelines require that all after-tax shares be retained until the required level is met.

In addition, members of the Board of Management shall comply with holding requirements under

the Dutch corporate governance code. This effectively means that members of the Board of

Management shall hold all after-tax shares received under the long-term incentive plan for a

period of at least five years from the date of grant.

Signify Shares held by Board members in number of shares

December 31,

2020

Holdings as

% of base 1

December 31,

2021

Holdings as

% of base 1

E.H.E. Rondolat

167,772

648.4%

195,038

877.9%

F.J. van Engelen Sousa

10,000

68.8%

M.L. Mariani

7,009

42.9%

18,591

127.9%

1As per BoM and LT Share Ownership Guidelines, to determine the value of shares on a specific date, the shares held are

multiplied by the average of the closing prices of the shares on Euronext Amsterdam in the two months prior to that date

(2021: EUR 41.40 and 2020: EUR 34.85).

Once the requirements under the Signify share ownership guidelines and under the Dutch

corporate governance code are met, shares may be sold, subject to insider trading rules.

9.2.8 Pensions and other benefits

The design of the pension plan for the members of the Board of Management is the same as for

all other Signify employees in the Netherlands which is referred to as a collective defined-

contribution plan, based on career average salary.

The following pension arrangement is in place for the members of the Board of Management:

•The flex pension plan in the Netherlands, which is a collective defined-contribution plan with

a fixed contribution of 30.3% up to the maximum pensionable salary of EUR 112,189 (2021).

•Members of the Board of Management pay a member contribution of 2% up to the maximum

pensionable salary of EUR 112,189 (2021).

•The flex pension plan has a target retirement age of 68 (in 2021) and a target accrual rate of

1.85%.

•The members of the Board of Management receive a gross pension allowance equal to 25%

of the base compensation exceeding EUR 112,189 and can choose to participate in a net

pension arrangement by investing the net (after-tax) amount. The net pension arrangement

is in line with all other Signify employees in the Netherlands whose pensionable salary

exceeds the cap. Participation in this net pension arrangement is voluntary.

•A temporary gross transition allowance, for a maximum period of eight years (first five years

in full; year 6: 75%; year 7: 50%, year 8: 25%). The temporary gross transition allowance only

applies to members of the Board of Management who were employed before January 1, 2015,

and participated in the former executive pension plan, before the change to the flex pension

plan per January 1, 2015, with the capping of pension accruals and increase of pensionable

age in line with the retirement age for state pension (AOW). The level of the allowance is

based on the age and salary of the Board Member on December 31, 2014. As such this only

applies to E.H.E. Rondolat.

The table below gives an overview of the accumulated annual pension entitlements and the

pension costs of the individual members of the Board of Management.

Accumulated annual pension entitlements and pension-related costs in EUR

Age at

December 31,

2021

Accumulated

annual

pension as of

December 31,

2020 1

Total

pension-

costs 2020 2

Accumulated

annual

pension as of

December 31,

20211

Total

pension-

costs 2021 2

E.H.E. Rondolat

40,393

317,730

42,188

296,042

F.J. van Engelen

Sousa

882

77,499

2,677

151,806

M.L. Mariani

1,029

84,787

2,824

151,806

Pension costs

480,016

599,654

1Total of entitlements under applicable pension scheme in Signify, including - if applicable - transferred pension entitlements

under pension scheme(s) of previous employer(s).

2Cost include paid pension allowances as well as pension premium paid by employer to collective defined-contribution plan.

When pension rights are granted to members of the Board of Management, necessary payments

(if insured) and all necessary provisions are made in accordance with the applicable accounting

principles. In 2021, no (additional) pension benefits were granted to former members of the

Board of Management.

Members of the Board of Management are also entitled to other benefits, such as expense and

relocation allowances, medical insurance, accident insurance and company car arrangements.

In the case of F.J. van Engelen Sousa, to facilitate relocation to the Netherlands, upon

relocation of his family in 2021 the remainder of the housing allowance, EUR 142,000 net (in

Signify Annual Report 2021

2020: EUR 35,000 net), and the remainder of the relocation allowance, EUR 5,000 net (in 2020:

EUR 12,000 net), was paid. In addition, an allowance for the international school costs of EUR

12,500 net was paid in 2021.

9.2.9 Change of the remuneration and company performance

For the purpose of reflecting company performance, free cash flow generation and share price

have been selected as the most relevant measures. The table below reflects the annual change

of remuneration of the members of the Board of Management, the employee average

remuneration, free cash flow and Signify's closing share price at year-end. The information is

provided over the full financial years since the company's IPO in May 2016.

Remuneration and company performance development in EUR unless otherwise stated

2017

2018

2019

2020

2021

E.H.E. Rondolat 1

3,048,621

2,564,306

2,822,104

3,245,335

3,230,032

Change in %

(16)%

10%

15%

(0.5)%

F.J. van Engelen Sousa 1

599,753

1,474,800

Change in %

146%

M.L. Mariani 1

1,225,491

1,729,227

Change in %

41%

Employees 2

64,550

61,264

60,601

51,780

51,337

Change in %

(5)%

(1)%

(15)%

(1)%

Free cash flow (in millions of EUR)

403

306

529

817

614

Change in %

(24)%

73%

54%

(25%)

Closing share price on last

business day December

30.6

20.47

27.86

34.53

40.78

Change in %

(33)%

36%

24%

18%

1Remuneration is based on total compensation costs as reported in the table 'Remuneration and remuneration costs of

individual members of the Board of Management' under section 9.2. For F.J. van Engelen Sousa and M.L. Mariani 2020 does

not represent a full year.

2Employee average remuneration based on total employee benefit expenses and total employees in FTEs (third party workers

excluded) as disclosed in note 5, Employee benefit expenses.

The company performance shows a positive trajectory in the outcomes of the selected

measures. Free cash flow has improved over the five year period from 2017 to 2021, while the

Signify share price has steadily increased. The total remuneration of the Board of Management

has developed in line with the company performance. Total remuneration for the CEO has

remained steady since 2020. As the other members of the Board of Management were new to

the Board in 2020, their remuneration comparison reflects a partial year in 2020. Annual

incentive increased from 2020 driven by achievements on incentive plan metrics as detailed in

sub-section 9.2.4. The performance on the long-term incentive conditions is very positive as

detailed in sub-section 9.2.7, which influences ongoing grants. The development of the Signify

share price has increased 18% since 2020. While free cash flow remained very solid in 2021, it

declined compared to 2020. The total remuneration of the CEO reflects a decline in the pension

transition allowance as detailed in sub-section 9.2.9 and an increase in annual incentive

outcomes as detailed in sub-section 9.2.4.

Employee pay remains generally steady from 2020. Since 2018, a greater proportion of our

employee population has shifted from Western Europe to South East Asia, Asia, and Latin

America. In 2021, the proportion of our employee population in the regions was steady with a

slight decrease in China and a slight increase in Latin America. The impact on average employee

pay was a 1% decrease versus 2020.

9.2.10 Signify's internal pay ratio

The remuneration design for the members of the Board of Management is an integral part of the

overall pay structure within the company. Signify uses the Hay system to evaluate and grade the

various positions within its organization. This means that the company uses a standardized

method for determining the appropriate benefits for each of the respective job levels within the

company. Using the Hay grading system also ensures that the remuneration of the members of

the Board of Management is aligned with and is relative to the remuneration of Signify

employees holding other positions within the company. The remuneration of senior staff within

Signify is based on the same components as the remuneration of the members of the Board of

Management.

The Corporate Governance Code requires reporting on the pay ratio. Signify’s pay ratio reflects

the average total compensation of the total global employee workforce, relative to the total

remuneration package of the CEO. This has resulted in the following outcome:

Fiscal year

CEO total

remuneration 1

Average total

compensation employees 2

Resulting pay

ratio

2021

3,230,032

51,337

2020

3,245,335

51,780

2019

2,822,104

60,601

2018

2,564,306

61,264

2017

3,048,621

64,550

1Remuneration is based on total compensation costs as reported in the table 'Remuneration and remuneration costs of

individual members of the Board of Management' under section 9.2.

Signify Annual Report 2021

2Employee average remuneration based on total employee benefit expenses and total employees in FTEs (third party workers

excluded) as disclosed in note 5, Employee benefit expenses.

In light of transparency and clarity, Signify applies a methodology to calculate the internal pay

ratio that is IFRS-driven (i.e. linked to Signify’s notes to the Consolidated financial statements).

The trend in employee pay reflects the change in employee geographic spread. Since 2018,

a greater proportion of our employee population has shifted from Western Europe to South

East Asia, Asia, and Latin America. The acquisitions of Cooper Lighting and Klite resulted in an

increase in the employee population from 2019 to 2020 and the majority of that increase was in

Latin America, India and China. In addition, Signify has been increasing the employee

population in India due to growth in R&D software and IT. As a result, average employee pay

has been trending down reflective of this significant shift in employee geographic spread. This

impacted significantly the pay ratio from 2019 to 2020.

The CEO pay ratio has remained steady from 2020 to 2021. This is aligned to the employee pay

trend from 2020 to 2021 and results in a consistent pay ratio in 2021. Signify believes that the

pay ratio over the past years aligns with Signify’s profile, considering the company’s industry,

workforce profile and changing geographic spread.

9.2.11 Claw back and change of control

The annual cash incentive and the long-term incentive of the members of the Board of

Management are subject to adjustment and claw back provisions. Pursuant hereto, the company

can (a) revise an incentive prior to payment if unaltered payment would be unreasonable and

unfair, (b) recover an incentive if it was granted on the basis of incorrect information on the

fulfillment of the incentive goals or the conditions for payment of the incentive, and (c) recoup

incentives in the circumstances set forth in the services contract with the member of the Board

of Management concerned.

In the event of a change of control of the company, the Supervisory Board can, at its sole

discretion, decide to accelerate the vesting of any unvested awards under the long-term

incentive, subject to the achievement of the performance conditions up to the date of the

completion of the change of control.

No variable remuneration was clawed-back In 2021.

9.2.12 Additional arrangements

Unless relevant law provides otherwise, the members of the Board of Management and of the

Supervisory Board shall be reimbursed by the company for various costs and expenses, such as

reasonable costs of defending claims, as formalized in the Articles of Association. Under certain

circumstances, described in the Articles of Association, such as an action or failure to act by a

member of the Board of Management or a member of the Supervisory Board that can be

characterized as intentional (‘opzettelijk’), intentionally reckless (‘bewust roekeloos’) or

seriously culpable (‘ernstig verwijtbaar’), there will be no entitlement to this reimbursement. The

company has also provided liability insurance (D&O - Directors & Officers) for the persons

concerned.

9.2.13 Contractual arrangements

Members of the Board of Management are engaged by a service contract (‘overeenkomst van

opdracht’) with a maximum of four years ending on the date of the Annual General Meeting of

Shareholders in the fourth calendar year after the appointment. Members of the Board of

Management are appointed for a maximum period of four years, subject to re-appointment by

the General Meeting of Shareholders. Termination of the services contract is subject to a

notice period of six months for either party. The terms and conditions of these service

agreements have been aligned with the relevant Dutch Corporate Governance Code provisions.

9.2.14 Severance arrangements

Contractual severance arrangements of members of the Board of Management comply with the

Dutch Corporate Governance Code and provide for compensation for the loss of income

resulting from a termination of employment and are capped at one time the annual base salary.

No severance is payable in case the agreement is terminated early at the initiative of the Board

of Management member.

The Board of Management member shall not be entitled to a severance payment if the contract

is terminated for urgent cause ('dringende reden'). For the definition of urgent cause

('dringende reden'), reference is made to section 7:678 of the Dutch Civil Code and further.

9.2.15 Loans

The company does not grant loans to members of the Board of Management.

Signify Annual Report 2021

9.3Remuneration Supervisory Board

The remuneration of the individual members of the Supervisory Board, as well as the additional

remuneration for its chair and the members of its committees, is determined by the General

Meeting. The remuneration of a member of the Supervisory Board consists of a fixed amount

depending on the member’s position on the board (chair/vice chair/other board members), an

additional fee for the function of chair or member of committees and allowances for travel.

The remuneration of a Supervisory Board member is not dependent on the results of the

company. Shares or rights to shares shall not be granted to a Supervisory Board member. The

company does not grant loans to members of the Supervisory Board.

The fees and allowances for travel are as follows:

Remuneration Supervisory Board in EUR

Supervisory Board fixed annual fee

Chair

110,000

Vice Chair

85,000

Member

75,000

Committee fees

Audit Committee

Chair

22,500

Member

13,000

Digital Committee

Chair

22,500

Member

13,000

Remuneration Committee

Chair

15,000

Member

10,000

Nomination Committee

Chair

15,000

Member

7,500

Allowance for travel

Intercontinental

5,000

Continental

2,500

When the activities of the Supervisory Board or other circumstances so require, the Supervisory

Board may establish an ad hoc committee formed from among its members and assign certain

tasks to such committee. In such event, the Supervisory Board may determine additional fees to

be paid to the members of the ad hoc committee. The fees will be in line with the fees for the

existing committees.

The following table reflects the total remuneration of each of the members of the Supervisory

Board.

Remuneration Supervisory Board in EUR (excluding VAT)

Membership

Committees

Other

compensation 1

Total

2021

A.P.M. van der Poel

110,000

25,000

—

135,000

G. van der Aast

85,000

28,000

—

113,000

E. Blok

75,000

26,000

—

101,000

P. Knapp

75,000

32,500

7,500

115,000

R.S. Lane

75,000

20,500

12,500

108,000

F. Lubnau

75,000

30,000

7,500

112,500

495,000

162,000

27,500

684,500

2020 2

A.P.M. van der Poel

104,500

23,750

128,250

G. van der Aast

80,750

26,600

107,350

E. Blok

71,250

19,475

90,725

P. Knapp 3

52,500

11,698

2,500

66,698

R.S. Lane

71,250

16,625

87,875

J. Lee 4

40,000

12,000

2,500

54,500

F. Lubnau 3

83,750

4,470

7,500

95,720

504,000

114,618

12,500

631,118

1The amounts mentioned under other compensation relate to the allowance for (inter-)continental travel

2Includes 20% COVID-19 reduction in Q2 2020.

3Appointment as a member of the Supervisory Board in AGM 2020. The remuneration includes the observer period.

4Stepped down as member of the Supervisory Board per July 31, 2020.

At December 31, 2021, the members of the Supervisory Board held no Signify shares, options on

Signify shares nor other Signify securities (2020: nil).

Signify Annual Report 2021

The following table reflects the annual change of remuneration of each of the members of the

Supervisory Board over the full financial years since the company's IPO in May 2016.

Supervisory Board remuneration 2017 - 2021 in EUR (excluding VAT)

2017

2018

2019

2020 2

2021

A.P.M. van der Poel

135,000

140,000

137,500

128,250

135,000

G. van der Aast

109,391

118,000

113,000

107,350

113,000

E. Blok

74,065

95,500

90,725

101,000

P. Knapp 1

66,698

115,000

R.S. Lane

128,625

121,125

121,689

87,875

108,000

F. Lubnau 1

95,720

112,500

1Appointment as a member of the Supervisory Board in AGM 2020. The remuneration includes the observer period

2includes 20% COVID-19 reduction in Q2 2020.

9.4Remuneration outlook 2022

9.4.1 Base salary

For 2022, the Supervisory Board decided to increase the base salary levels for all members of

the Board of Management by 3%, in line with the budgets (collective and merit increase)

allocated for the CLA population in the Netherlands.

in EUR

January 1, 2022

(+3%)

E.H.E. Rondolat

947,330

F.J. van Engelen Sousa

619,855

M.L. Mariani

619,855

9.4.2 Annual cash incentive

For 2022 the Supervisory Board has decided to select the same financial performance

measures and weighting as used in previous years: comparable sales growth (30%), Adjusted

EBITA (30%) and free cash flow (20%), measured as a percentage of sales.

9.4.3 Supervisory Board

No adjustments are foreseen to the remuneration of the members of the Supervisory Board.

Signify Annual Report 2021

10Corporate

governance

Introduction

Signify N.V., a public company with limited liability organized under Dutch law, is the

parent company of the Signify group.

Signify N.V. has a two-tier board structure

consisting of a Board of Management and a

Supervisory Board. The two boards are

independent of each other and are

accountable to the Annual General Meeting

of Shareholders (AGM) for the performance

of their duties.

The Board of Management and the

Supervisory Board are responsible for

maintaining an appropriate corporate

governance structure of the company.

Signify N.V.’s corporate governance

framework is based on the company’s Articles

of Association, the requirements of the Dutch

Civil Code, the Dutch Corporate Governance

Code, the Dutch Financial Markets

Supervision Act and any other applicable laws

and regulations. Additionally, the Board of

Management has implemented a code of

conduct, policies, directives and

authorization schedules throughout Signify in

order to strengthen its governance

framework.

In this chapter, the company addresses the

main elements of its corporate governance

structure, reports on how it applies the

principles and best practices of the Dutch

Corporate Governance Code and provides

the information required by the Dutch

governmental decrees on Corporate

Governance and Article 10 Takeover

Directive. Deviations from aspects of the

corporate governance structure of the

company, when deemed necessary in the

interests of the company, will be disclosed in

this chapter of the Annual Report.

In line with the Dutch Corporate Governance

Code, other parts of the Annual Report

address and explain the strategy and culture

of Signify aimed at long-term value creation.

Signify’s strategy is described in more detail

in chapter 3, Creating long-term value, of this

Annual Report. Here, we also explain our

value creation model which allows our

stakeholders to consider the economic,

social and environmental impact of our

business activities. The CEO message in

chapter 2 highlights how the company’s

strategy was executed in 2021; in this regard,

please refer to chapter 4, Corporate

performance and chapter 8, Supervisory

Board report, of this Annual Report, which

describe how the Supervisory Board is

involved in the company’s strategy as well as

other topics such as culture and diversity &

inclusion. As set out in chapter 16,

Sustainability statements, section 16.3, of this

Annual Report, Signify’s culture is centered

around its four values: Customer First, Game

Changer, Greater Together and Passion for

Results, and anchored by the integrity norms

described in our Integrity Code. An important

aspect of our culture relates to diversity &

inclusion which is discussed and explained in

the same chapter.

10.1Signify

organization

Signify’s business is organized and managed

on a functional basis by technology and end-

markets through three divisions: Division

Digital Solutions, Division Digital Products and

Division Conventional Products. The divisions

are responsible for the development of their

Signify Annual Report 2021

strategy, product portfolio and the

production and sourcing of their products.

In addition, the company’s commercial

organization is currently structured along

several geographical market clusters to

manage its global sales channels. These

market clusters are principally responsible

for driving and managing sales, managing

customer relationships and delivering the

commercial activities of the business across

the company’s markets, covering commercial

activities in almost all countries. The company

operates in many countries via its subsidiaries

and affiliated companies as well as via a

limited number of branch offices, which

primarily act under the Signify trade name.

Divisions and market clusters are supported

by centralized shared services with respect

to, among other functions, legal, finance,

human resources, business transformation,

strategy, marketing, innovation and

operations.

10.2Board of

Management

The Board of Management is entrusted with

the management of the company. The Board

of Management focuses on long-term value

creation for the company and its business,

and takes the relevant stakeholders’

interests into account.

Among other responsibilities, the Board of

Management drives the company’s

management agenda, defines and deploys the

strategic direction, identifies opportunities

and risks connected with its business

activities and strategy, pursues the

operational and financial objectives of the

company and monitors corporate social

responsibility issues relevant to the company.

In performing its duties, the Board of

Management is guided by the interests of the

company and its affiliated enterprises, taking

into consideration the interests of its

stakeholders.

The Board of Management is accountable for

its actions and decisions to the Supervisory

Board and is answerable to shareholders of

the company at the AGM.

The Chief Executive Officer and other

members of the Board of Management have

regular contact with the Chair and other

members of the Supervisory Board, attend

most parts of the Supervisory Board

meetings, and provide the Supervisory Board

with all the information it needs to fulfil its

own responsibilities.

Certain decisions of the Board of

Management require Supervisory Board

approval, including important proposals for

capital expenditures, acquisitions,

divestments, decisions concerning financial

and operational objectives and strategy to

achieve such objectives, changes to

corporate policies, as well as the annual

operating plan.

The functioning and decision-making within

the Board of Management are laid down in its

Rules of Procedure which can be found on

the company’s website.

Appointment

Members of the Board of Management are

appointed by the General Meeting of

Shareholders (the General Meeting) upon a

nomination drawn up by the Supervisory

Board, which nomination may be binding.

Members of the Board of Management are

appointed for a maximum term of four years,

it being understood that this term expires at

the end of the AGM to be held in the fourth

year after the year of their appointment. Re-

appointment is possible for consecutive

terms of four years or, if applicable, until a

later retirement date or other termination

date in the fourth year, unless the General

Meeting resolves otherwise. Members may be

suspended by the Supervisory Board and the

General Meeting, and dismissed by the latter.

Composition

The composition of the Board of Management

follows the board profile which aims for an

appropriate combination of knowledge and

experience among its members,

encompassing industrial, technology &

innovation, projects & infrastructure, digital &

marketing, financial, economic, IT, social &

sustainability aspects of international

business and society, in relation to the global

character of its business. This profile also

applies for the Supervisory Board, and can be

found on the company's website. The size of

the Board of Management may vary over time,

as considered appropriate to support its

profile.

Diversity

Signify attaches great importance to diversity

and it is its ambition to increase the diversity

of the company’s entire workforce to better

mirror its stakeholders and markets. Signify

believes that this will positively impact the

company’s business performance in all

countries in which the company does

business.

In view of the above, Signify aims for the

Board of Management to be composed of

members that bring a diversity of skills and

expertise relevant for achieving the

company’s strategic and business objectives,

different views and perspectives as well as

different backgrounds (nationality,

educational, working experience or

otherwise), and that at least 30% are men

and at least 30% are women. The Board of

Management meets this gender diversity

objective.

Remuneration

The remuneration of the individual members

of the Board of Management is determined by

the Supervisory Board based on the

remuneration policy adopted by the General

Meeting. The composition of the

remuneration of the members of the Board of

Management and the remuneration policy are

described in chapter 9, Remuneration report,

of this Annual Report.

Signify Annual Report 2021

Conflicts of interest

Members of the Board of Management shall

not participate in the discussions and

decision-making process on a subject or

transaction which they have a direct or

indirect personal conflict of interest or have

a conflict of interest within the meaning of

the Dutch Corporate Governance Code.

Relevant matters relating to conflicts of

interests, if any, must be approved by the

Supervisory Board and shall be mentioned in

the Annual Report for the financial year in

question. No conflict of interest as referred

to above occurred during 2021.

Outside positions

The acceptance by a member of the Board of

Management of a position as a member of a

supervisory board or a position of non-

executive director in a one-tier board at

another company requires the approval of

the Supervisory Board. The Supervisory

Board is required to be notified of other

important positions (to be) held by a member

of the Board of Management.

10.3Supervisory

Board

The Supervisory Board, in the two-tier board

structure under Dutch law, is a separate body

that is independent of the Board of

Management. The Supervisory Board

supervises the policies and management and

the general affairs of the company. The

Supervisory Board also provides advice to the

Board of Management. In performing its

duties, the members of the Supervisory Board

are guided by the interests of the company

and the business of the group, taking into

consideration the interests of its

stakeholders.

Appointment

The members of the Supervisory Board are

appointed by the General Meeting on the

nomination of the Supervisory Board, which

nomination may be binding. The Dutch large

company regime (structuurregime) does not

apply to Signify N.V. itself.

The Articles of Association do not provide for

a fixed or maximum term of appointment. In

line with the Dutch Corporate Governance

Code, the members of the Supervisory Board

have been appointed for a period of a

maximum of four years, it being understood

that the period of their appointment will end

at the closing of the AGM to be held in the

fourth year after appointment.

The Supervisory Board meets at least six

times a year. Meetings of the Supervisory

Board are attended by the CEO and, if

possible, by the other members of the Board

of Management and the company’s general

secretary, unless the Supervisory Board

decides otherwise and save for certain

meetings as described in the Supervisory

Board Rules of Procedure.

Composition

The composition of the Supervisory Board

follows the same board profile that applies to

the Board of Management, see 10.2 above.

The composition of the Supervisory Board

shall also be in accordance with the best

practice provisions on independence of the

Dutch Corporate Governance Code as well as

Dutch law restrictions on the overall number

of supervisory positions that a member of the

Supervisory Board may hold. Each member

shall be capable of assessing the broad

outline of the overall management of the

company.

The size of the Supervisory Board may vary

over time, as considered appropriate to

support its profile. In 2021, the Supervisory

Board consisted of six members, all members

being independent.

Diversity

The company's diversity objectives that apply

to the Board of Management, see 10.2 above,

also apply to the Supervisory Board. In line

with the company's gender diversity

objectives, the Supervisory Board currently

comprises of two-third men and one-third

women. As such, the Supervisory Board also

meets the target of Dutch legislation recently

entered into force, introducing a "grow in

quota", which should result in supervisory

boards of listed companies being composed

of at least 1/3 men and at least 1/3 women.

Remuneration

The remuneration of the individual members

of the Supervisory Board, as well as the

additional remuneration for its Chair and the

members of its committees, is determined by

the General Meeting. The composition of the

remuneration of the members of the

Supervisory Board and the remuneration

policy are described in chapter 9,

Remuneration report, of this Annual Report.

Conflicts of interest

The rules for conflict of interest applicable to

the members of the Board of Management,

see 10.2 above, also apply to the members of

the Supervisory Board. No conflict of interest

as referred to occurred during 2021.

Outside positions

The Supervisory Board member must inform

the Chair of the Supervisory Board before

accepting a position outside the company.

Dutch law provides for limitations on the

overall number of supervisory positions

(including a one-tier board) of large Dutch

companies that a member of the Supervisory

Board may hold. A person cannot be

appointed as a managing or executive

director of a large Dutch company if he or she

already holds a supervisory position at more

than two other large Dutch companies or if

he or she is the chair of the supervisory

board or one-tier board of another large

Dutch company. Also, a person cannot be

appointed as a supervisory director or non-

executive director of a large Dutch company

if he or she already holds a supervisory

position at five or more other large Dutch

companies, whereby the position of chair of

the supervisory board or one-tier board of

another large Dutch company is counted

twice.

Signify Annual Report 2021

Independence of the Supervisory

Board

The Supervisory Board is a separate

corporate body that is independent of the

Board of Management. Its independent

character is also reflected in the requirement

that members of the Supervisory Board can

be neither a member of the Board of

Management nor an employee of the

company. Each member of the Supervisory

Board meets the independence requirements

as stated in the Dutch Corporate Governance

Code.

Supervisory Board Committees

In 2021, the Supervisory Board had four

committees: The Audit Committee, the

Corporate Governance and Nomination &

Selection Committee, the Remuneration

Committee and the Digital Committee. Each

of the committees has a preparatory and/or

advisory role to the Supervisory Board. They

report their findings to the full Supervisory

Board, which is ultimately responsible for all

decision-making. Information on the work and

composition of the committees during 2021 is

set out in chapter 8, Supervisory Board

report, of this Annual Report.

Each committee has a charter describing its

role, responsibilities and functioning. These

charters are published on the company’s

website.

Audit Committee

The Audit Committee assists the Supervisory

Board in fulfilling its oversight responsibilities

for the integrity of the company’s financial

statements, the financial reporting process,

the system of internal business controls and

risk management, the internal and external

audit process, the internal and external

auditor’s qualifications, its independence and

its performance, as well as the company’s

process for monitoring compliance with laws

and regulations and its Integrity code. It

reviews the company’s annual and interim

financial statements, including non-financial

information, prior to publication and advises

the Supervisory Board on the adequacy and

appropriateness of internal control policies

and internal audit programs and their findings.

It furthermore maintains contact with and

supervises the external auditor and it

prepares the nomination of an external

auditor for appointment by the General

Meeting.

The Audit Committee meets at least once

before the publication of the quarterly and

annual accounts of the company.

Corporate Governance and

Nomination & Selection Committee

The Corporate Governance and Nomination &

Selection Committee advises the Supervisory

Board on its duties regarding the

(procedures for the) selection and

appointment of members of the Supervisory

Board and the members of the Board of

Management. The duties of the Corporate

Governance and Nomination & Selection

Committee include preparing the selection

criteria and appointment procedures for

members of the Supervisory Board and the

members of the Board of Management and

proposing the profile for the Supervisory

Board. The Committee is also involved in the

selection and appointment of the company's

leadership team, appointments of which are

subject to the Supervisory Board's approval.

It also periodically assesses the size and

composition of the Board of Management and

the Supervisory Board, and the functioning of

the individual members. The performance

evaluation of the Board of Management and

Supervisory Board is led by this Committee.

The Corporate Governance and Nomination &

Selection Committee also proposes on

appointments and re-appointments. It

supervises the policy on selection criteria and

appointment of senior executives within the

company. At least once a year, it reviews the

corporate governance of the company and

can make recommendations to the

Supervisory Board relating to the corporate

governance of the company.

The Corporate Governance and Nomination &

Selection Committee meets at least twice

every year.

Remuneration Committee

The Remuneration Committee is responsible

for preparing proposals for the Supervisory

Board on the remuneration policy for the

Board of Management and on the

remuneration of the individual members of

the Board of Management and for overseeing

the long-term incentive plans for the

company’s executives involving the company’s

shares.

The Remuneration Committee also reviews

the proposed remuneration of certain senior

executives designated by the Supervisory

Board and the remuneration of the members

of the Supervisory Board and prepares

proposals for adjustments, if necessary.

Furthermore, the Remuneration Committee

reviews and prepares proposals for the

Supervisory Board concerning the corporate

goals and objectives relevant to the annual

incentive of members of the Board of

Management, and reviews the performance

of members of the Board of Management in

light of those goals and objectives, and it

prepares proposals for the Supervisory Board

on the compensation levels of the members

of the Board of Management, based on such

review.

The Remuneration Committee prepares an

annual remuneration report, which is included

in chapter 9, Remuneration report, of this

Annual Report. The Remuneration Committee

meets at least twice per year.

Digital Committee

The Digital Committee is responsible for

reviewing the company's digital strategy,

roadmap, resourcing and any changes

thereto. It also assists the Supervisory Board

in supervising the company's policy on digital

marketing strategies, tools and operations

and reporting its findings and

recommendations to the Supervisory Board.

It reviews the company digital objectives and

performance, periodically assesses the

effectiveness and results of the digital

initiatives as well as management skills,

capabilities and training. At least once a year,

the Digital Committee will review the

governance for deciding on digital

prioritization and spending within the

company. On all topics, the Digital Committee

will report its findings and recommendations

to the Supervisory Board and prepare for any

decision-making by the Supervisory Board in

Signify Annual Report 2021

relation to any of the Committee's

responsibilities.

The Digital Committee meets at least four

times a year.

10.4General

Meeting of

Shareholders

The main powers of the General Meeting are:

•to appoint, suspend and dismiss members

of the Board of Management and of the

Supervisory Board, adopt the remuneration

policy and approve equity-based incentive

plans for members of the Board of

Management and adopt the remuneration

of the members of the Supervisory Board;

•to adopt the annual accounts, declare

dividends and to discharge the members of

the Board of Management and the

Supervisory Board from liability in respect

of the performance of their respective

duties in the previous financial year;

•to appoint the external auditor as required

by Dutch law;

•to adopt amendments to the Articles of

Association and proposals to dissolve or

liquidate the company, to issue shares or

rights to shares, to restrict or exclude

preemptive rights of shareholders and to

repurchase or cancel outstanding shares,

as well as other important matters, such as

major acquisitions or the sale of a

substantial part of the company, as

required by law.

The AGM is held within six months after the

end of each financial year in order to discuss

the annual report and decide on the adoption

of the financial statements and dividend

proposal as well as the discharge of the

members of the Board of Management and

the Supervisory Board.

The AGM is called by the Board of

Management or the Supervisory Board. The

Board of Management is entitled to

determine the record date in accordance

with Dutch law. The agenda, explanatory

notes thereto and the procedure for

attendance are published on the company’s

website. Holders of ordinary shares in the

aggregate representing at least 3% of the

total issued share capital may submit

proposals for the AGM agenda. Such

proposals must be made in writing at least 60

days before the AGM to the Board of

Management. Any written request must

comply with the procedure stipulated by the

Board of Management, which is published on

the company’s website.

Each ordinary share confers the right to cast

one vote in the General Meeting. There are

no special statutory rights attached to the

shares of the company and no restrictions on

the voting rights of the company’s shares

exist. Subject to certain exceptions provided

by Dutch law or the Articles of Association,

resolutions of the General Meeting are

passed by an absolute majority of votes cast.

A resolution to amend the Articles of

Association requires a simple majority of the

votes cast, if the resolution is adopted on a

proposal of the Board of Management.

Otherwise, such resolution requires a

majority of at least three-fourths of the

votes cast provided that majority represents

more than half of the issued share capital.

Pursuant to Dutch law, no votes may be cast

at a General Meeting in respect of shares

which are held by the company.

Share capital and repurchase

and issue of (rights to) shares

The authorized share capital of the company

amounts to EUR 6 million, divided into 300

million ordinary shares with a nominal value of

one eurocent each and 300 million

preference shares, also with a nominal value

of one eurocent each. On December 31, 2021,

the issued share capital amounted to EUR

1.28 million, divided into 128,344,238 ordinary

shares and no preference shares. All shares

are fully paid-up. The shares are in registered

form. There are currently no limitations either

under Dutch law or the company’s Articles of

Association, as to the transfer of ordinary

shares in the share capital of the company.

The Board of Management, to the extent

authorized by the General Meeting for a

specific period, may resolve to issue or

repurchase shares, subject to the approval of

the Supervisory Board. The Board of

Management may limit or exclude preemptive

rights if designated to do so by the General

Meeting.

At the AGM held on May 18, 2021, the General

Meeting resolved to authorize the Board of

Management for a period of 18 months,

effective as of May 18, 2021, to issue shares

or grant rights to acquire ordinary as well as

to restrict or exclude the preemptive rights

accruing to shareholders, in each case up to

a maximum of 10% of the issued share capital

as at May 18, 2021, and subject to approval

from the Supervisory Board. At the same

time, the Board of Management was

authorized to acquire shares in the company

up to 10% of the issued share capital as at

May 18, 2021, plus an additional 10% of the

issued capital as of that same date in

connection with the execution of share

repurchase programs for capital reduction

purposes.

Anti-takeover provisions and

change of control

The possibility of issuing preference shares in

the share capital of the company is a

defensive measure. To this end, the

foundation Stichting Continuïteit Signify has

been granted a call option by the company to

acquire preference shares. The foundation

may resolve to exercise the call option at its

sole discretion and does not require the

consent of the company to exercise the call

option. On the exercise of the call option, the

foundation is entitled to acquire, and the

company shall have the unconditional

obligation to issue, preference shares up to a

maximum corresponding with 100% of the

issued and outstanding share capital of the

company. This shall exclude the preference

shares as issued and outstanding immediately

prior to the exercise of the call option, less

one preference share, from which maximum

any preference shares already placed with

the foundation at the time of the exercise of

the call option must be deducted.

The call option can be exercised by the

foundation in order to, for example:

•prevent, slow down or otherwise

complicate an unsolicited takeover bid for

and an unsolicited acquisition of shares by

Signify Annual Report 2021

means of an acquisition at the stock

market or otherwise;

•prevent and countervail concentration of

voting rights in the General Meeting; and/

•resist unwanted influence by and pressure

from shareholders to amend the strategy

of the company.

If the foundation exercises the call option,

the company issues such number of

preference shares as for which the

foundation exercised its call option. No

preference shares had been issued as of

December 31, 2021. In addition, the

foundation has the right to file a petition with

the Enterprise Chamber of the Amsterdam

Court of Appeal to commence an inquiry

procedure within the meaning of section

2:344 Dutch Civil Code.

The foundation’s objects are to further the

interests of Signify N.V., the enterprises

maintained by the company and the

companies affiliated with the company in a

group. The foundation will act in such a way

that the interests of the company and of

those enterprises are optimally safeguarded

and that influences which could affect the

independence, continuity or identity of the

company, the enterprise maintained by the

company and the companies affiliated with

the company in a group in conflict with those

interests are deterred to the best of the

foundation’s ability.

As of December 31, 2021, the board of the

foundation was composed as follows: Jos

Streppel (chair), Sietze Hepkema and Jan

Willem Baud.

Furthermore, it should be noted that also in

the event of (an attempt at) a hostile

takeover or other attempt to obtain (de

facto) control of the company, the Board of

Management and the Supervisory Board are

authorized to exercise in the interests of

Signify all powers vested in them.

The company is not a party to any material

agreement that takes effect, alters or

terminates upon a change of control of the

company following a take-over bid as

referred to in section 5:70 of the Dutch

Financial Markets Supervision Act, other than

the credit agreement entered into with a

syndicate of financial institutions which

established term loans and a revolving credit

facility, certain bi-lateral credit agreements

that have been entered into to refinance

existing term loans, the Eurobonds issued by

the company in 2020 and the Trade Mark

License Agreement entered into with

Koninklijke Philips N.V. The credit agreement

includes a change of control provision which

allows the lenders to cancel the commitment

and declare any outstanding amounts under

the agreement, immediately due and payable

whereupon such amounts will become

immediately due and payable. The provisions

applicable to all Eurobonds issued by the

company in 2020 contain a 'Change of

Control Put Event'. This means that if the

company experienced such an event with

respect to such bonds, the company might be

required to redeem or purchase the bonds at

its principal amount, plus accrued and unpaid

interest, if any.

10.5External

auditor

Under Dutch law, the external auditor of the

company is appointed by the General

Meeting. In accordance with the Dutch

Corporate Governance Code and Regulation

(EU) 537/2014, the Supervisory Board selects

and nominates an external auditor for

appointment, upon advice by the Audit

Committee. The Supervisory Board and the

Audit Committee assess the functioning of

the external auditor, taking the observations

from the Board of Management into account.

The General Meeting re-appointed Ernst &

Young Accountants LLP as external auditor of

the company for the financial years 2020

through 2022.

The external auditor attends, in principle, all

meetings of the Audit Committee. The

findings of the external auditor, the audit

approach and the risk analysis are also

discussed at these meetings. The external

auditor attends the meeting of the

Supervisory Board at which the report of the

external auditor with respect to the audit of

the annual accounts is discussed, and at

which the annual accounts are approved.

Auditor independence

The Audit Committee evaluates at least

annually the external auditor’s independence.

The lead auditor in charge of the Signify

account is changed every five years; such

change took place as of the start of the

financial year 2021. Furthermore, Dutch law

requires the rotation of the external audit

firm after the firm has completed the

statutory audit of the company for a period of

10 consecutive years.

Prohibition on non-audit services

The Audit Committee reviews the proposed

audit scope, approach and fees as well as

services that the external auditor provides to

the company. Dutch law requires the

separation of audit and non-audit services,

meaning the company’s external auditor is not

allowed to provide prohibited non-audit

services.

10.6Dutch

Corporate

Governance

Code

The company fully endorses the underlying

principles of the Dutch Corporate

Governance Code, and is committed to

adhering to the best practices of the Code as

much as possible.

The company fully complies with the Code and

applies all its principles and best practice

provisions that are addressed to the Board of

Management or the Supervisory Board.

Signify Annual Report 2021

11Investor relations

11.1Shareholder

engagement

Signify attaches great value to maintaining an

open dialog with shareholders, investors and

equity analysts in order to promote

transparency and receive valuable feedback.

The company conducts extensive investor

outreach throughout the year, involving

investor relations and members of the Board

of Management, to ensure that issues which

matter most to shareholders can be

addressed effectively.

In 2021, Signify reached around 220 unique

investment institutions through its IR

activities and covered around 80% of its

active shareholder base.

Signify has an active investor relations

approach aimed at supporting the company’s

long-term ambitions by keeping existing and

potential shareholders well-informed about

its strategy and the latest operational and

financial developments. Signify releases its

financial results on a quarterly basis. Each

quarter, the company also organizes

conference calls for research analysts and

institutional investors to discuss these

results, which can be accessed and replayed

on Signify's Investor Relations website. In

addition, if external circumstances allow, the

company organizes an analyst dinner at least

once a year hosted by the CEO and the CFO.

The Supervisory Board receives regular

updates on the feedback from institutional

shareholders and investors as well as equity

analysts, giving them a clear understanding of

shareholders’ views and concerns.

11.2Shareholder

base

Signify has a broad base of international

shareholders, as shown in the chart below.

The information is based on an independent

shareholder identification analysis performed

in December 2021.

Geographical distribution of shares 1

1Excluding treasury shares, prime brokerage and retail

investors.

Signify Annual Report 2021

The Dutch Financial Markets Supervision Act

requires institutions and individuals holding a

(potential) capital and/or voting interest of

3% or more in Signify to disclose such to the

Netherlands Authority for the Financial

Signify shareholders

Actual interest 1

Total %

registered 2

Pictet Asset Management

3.2%

BlackRock, Inc

3.0%

3.2%

Allianz Global Investors GmbH

3.0%

Amundi Asset Management

3.0%

1The actual interest reflects the % registered interest, excluding potential interests, such as options, futures, forward-rate

agreements and other derivatives contracts.

2The total % registered includes the actual and potential interests such as options, futures, swaps, forward-rate

agreements and other derivatives contracts.

Source: AFM

11.3Annual

General

Meeting of

Shareholders

The 2022 Annual General Meeting of

Shareholders will be held on May 17, 2022.

The agenda and the explanatory notes to the

agenda will be published on the company’s

website. The record date for the 2022 Annual

General Meeting of Shareholders is April 19,

2022, after processing all settlements of that

date. People registered as shareholders in

the designated register on that date, and

who have registered for the meeting, will be

entitled to attend and vote in the meeting.

Depending on the developments around

COVID-19, Signify may decide that the AGM

will be held virtually.

Markets (AFM). The AFM processes these

disclosures in its publicly available register,

which can be found at www.afm.nl. The table

below includes the total interests of 3% or

more registered at the AFM on December 31,

2021, and the related actual interests.

11.4Capital

allocation

Capital allocation policy

Signify plans to pay an increasing annual cash

dividend per share year on year.

The company is on track to achieve a

leverage ratio of reported net debt/EBITDA

of 1x by the end of 2022. This now includes

the cash outflow from the intended Fluence

acquisition, and the 2022 cash inflow from its

operations and the continued rationalization

of the company’s real estate portfolio.

Finally, Signify will continue to invest in

organic and inorganic growth opportunities in

line with its strategic priorities.

Dividend policy

Signify plans to pay an increasing annual cash

dividend per share year on year. The payment

of dividends, if any, and the amounts and

timing thereof depend on several factors,

including future sales, profits, financial

conditions, general economic and business

conditions and prospects. Other factors that

the Board of Management may deem relevant,

as well as other legal and regulatory

requirements, may also impact the amount,

timing and payment of future dividends. These

may be beyond the control of the company.

Proposed dividend

The company proposes a dividend of EUR 1.45

per share, in cash, from the net income for

full-year 2021, in line with its dividend policy

of paying an increasing cash dividend per

share every year.

The dividend payment is subject to approval

by the Annual General Meeting of

Shareholders on May 17, 2022. Further details

will be provided in the agenda for the AGM.

Dividend in cash is, in principle, subject to 15%

Dutch dividend withholding tax, which will be

deducted from the dividend in cash paid to

shareholders.

Dividend dates

Ex-dividend date

19 May 2022

Dividend record date

20 May 2022

Dividend payment date

31 May 2022

Share repurchases for LTI

hedging

During 2021, Signify repurchased 1,700,000

shares in the open market for a total

consideration of EUR 72 million to cover

obligations arising from its long-term

incentive performance share plan and other

employee share plans. These repurchases

took place in the period from February to May

2021.

In addition, 2021 includes a cash outflow of

EUR 8 million for dividend withholding tax,

related to the company's purchase of

treasury shares for capital reduction

purposes, and an outflow of EUR 12 million

which is related to repurchases under the

company's employee share plans.

11.5Debt info

During 2021, Signify had a net reduction in its

long-term loans of EUR 354 million. This

included the committed repayment of a EUR

350 million short-term loan before the end of

2021.

As of December 31, 2021, the company had

long-term loans of EUR 280 million and USD

225 million, which are maturing in December

2024 and January 2025 respectively. In

addition, the revolving credit facility (RCF) of

EUR 500 million was extended to January

2027.

The term loans and RCF agreement include a

financial covenant, which requires that Signify

maintains a net leverage ratio of no greater

than 3.5x. The net leverage ratio may

Signify Annual Report 2021

temporarily increase to 4.0x within 12 months

of the closing of material acquisitions. The

covenant does not apply if Signify has at least

one investment grade rating. This is currently

the case, as Signify has two investment grade

ratings.

At year-end 2021, Signify had EUR 675 million

of fixed-rate notes, due in May 2024 with an

annual coupon of 2.000%, and EUR 600

million of fixed rate notes, due in May 2027

with an annual coupon of 2.375%.

More information about our debt position can

be found here.

11.6Share

performance

In 2021, Signify re-entered the AEX Index. The

Euronext Amsterdam stock exchange

selected Signify for inclusion in the AEX Index

from March 22, 2021. Signify was previously

included in the AEX Index from March 19, 2018

until March 15, 2019.

In the first part of 2021, Signify's share price

outperformed the DJ Europe (excl. UK)

Share price development in EUR

technology index, the S&P capital goods index

and the AEX index. In the second part of the

year, the share price underperformed the

aforementioned indices. This resulted in a

full-year share price increase of 18%,

compared to a 28% increase of the AEX

index, a 31% increase of the DJ Europe (excl.

UK) technology index and a 36% increase of

the S&P capital goods mid-cap index. The

market capitalization at year-end 2021 was

EUR 5.2 billion and the free-float was 97%.

11.7Financial

calendar

Financial calendar 2022

Report/Activity

Date

Q1 2022 financial report

April 29

Annual General Meeting of

Shareholders 2022

May 17

Q2 and first-half 2022

financial report

July 29

Q3 2022 financial report

October 28

Signify Annual Report 2021

12Risk factors and

risk management

Introduction

At Signify, we believe taking risks is an inherent part of entrepreneurial behavior. By

deploying a structured risk management process, it allows management to take

risks in a controlled manner. The company’s risk management and controls are

designed to provide reasonable assurance that strategic and financial business

objectives are met. This is done by integrating management control into the daily

operations, by ensuring compliance with legal requirements and by safeguarding the

integrity of the company’s financial reporting and its related disclosures. The

components of our risk management process are listed below.

12.1Establish

strong risk

management

environment

Signify’s risk management environment is

embedded in the corporate governance, the

business control framework and the Integrity

code.

Corporate governance

Corporate governance is the system by which

a company is directed and controlled. Good

corporate governance derives from, among

other things, solid internal controls and high

ethical standards.

The Board of Management is responsible for

managing the risks associated with the

company's activities and for defining the

company's risk appetite. The Board of

Management is assisted by the company's

leadership team, which participate on a

quarterly basis in audit risk and control

meetings to identify critical risks and to

review progress on the implementation of risk

responses. The Audit Committee of the

Supervisory Board provides oversight for the

system of internal business controls and risk

management. Internal audits, external audits

or management self-assessment are

reported to and discussed by the Audit

Committee on a quarterly basis. An in-depth

description of the company's corporate

governance structure can be found in

chapter 10, Corporate governance, of this

Annual Report.

Business Control Framework

The company’s Business Control Framework

(BCF) sets the standard for risk management

and business controls in the company. The

objectives of the BCF are to maintain (i)

integrated management control of the

company’s operations in order to ensure the

integrity of the financial reporting and related

disclosure, and (ii) compliance with applicable

laws and regulations. The company has

designed its BCF based on the framework

established by the Committee of Sponsoring

Organizations of the Treadway Commission

(COSO). The company regularly evaluates and

improves its BCF to align with business

dynamics and good practices.

Integrity code

Acting with integrity is the cornerstone for

the success of our business and for achieving

our purpose. It is integral to the values that

define us as a company. Acting with integrity

means making the right choices when faced

with ethical dilemmas, and holding ourselves

and each other to high standards of behavior.

The Integrity code has been adopted by the

Board of Management. It applies to all

employees of Signify N.V. and its controlled

subsidiaries. The Integrity code formulates

minimum standards of behavior. The company

has underlying policies that form an integral

part of the Integrity code.

To increase the level of awareness and to

create global engagement, the company has

established a network of Compliance Officers

in countries where the company has a

presence, on each significant site, and at

Signify Annual Report 2021

Division, Market Group and Functional level.

The activities and responsibilities of this

network are focused on providing expertise

and support on Integrity code-related

matters to managers and employees.

The Integrity code is supported by

mechanisms that ensure standardized

reporting, escalation and investigation of

concerns. These mechanisms are based on

the Integrity code Reporting Policy that urges

employees and third parties to report any

concerns they may have regarding business

conduct in relation to the Integrity code,

either through a Compliance Officer or

through the Signify Ethics line. The Signify

Ethics line enables employees and third

parties to report a concern either by

telephone or online via a web intake form. All

concerns raised are registered consistently

in a single database and are investigated in

accordance with standardized investigation

procedures. An overview of the reporting

activities for 2021 are given in chapter 16,

Sustainability statements, of this Annual

Report.

12.2Define Risk

appetite

Risk management in Signify focuses on the

following risk categories: Strategic,

Operational, Compliance and Financial risks.

The board of management has determined

the risk appetite and seeks to manage risk

within these boundaries. The risk appetite is

different for each of the risk categories:

Strategic risks

Strategic risks include economic and political

developments and the effects of actions

taken to anticipate and respond to market

circumstances. The company has a medium

strategic risk appetite and is prepared to

take some reasonable strategic risks,

balancing the need to capture return from

opportunities and manage risks.

The company’s key strategic risks are

discussed in section 12.5 and include

‘Technological change’, ‘Competition’, ‘Global

political and economic instability – COVID-19’,

‘Digitalization’, ‘Acquisitions and integration’

and 'Concentration risk'.

Operational risks

Operational risks include adverse unexpected

developments resulting from internal

processes, people and systems, or from

external events that are linked to the running

of each business. The company has a low

operational risk appetite and aims to minimize

downside risks to maintain the high quality of

its products, systems and services, reliable IT

systems and sustainability commitments.

The company’s key operational risks are

discussed in section 12.5 and include ‘Supply

disruptions’, ‘Innovation’, ‘Cyber-attacks and

security breaches’, New organizational

capabilities’, and ‘Climate change’.

Compliance risks

These risks cover unanticipated failures to

implement, or comply with, appropriate laws,

regulations, policies and procedures. The

company is, due to its global footprint,

exposed to risk of fraud and other

misconduct in violation of the integrity code

and/or applicable laws and regulations,

governmental investigation and legal

proceedings in relation thereto.

The company has a very low compliance risk

appetite and is committed to full compliance

to relevant laws, regulations and its Integrity

code.

Financial risk

The company faces financial risks outside its

control related to treasury, accounting and

reporting, pensions, and tax. Here, the risk

appetite is low. Therefore, the company aims

to minimize the impact of financial risk, and it

follows a conservative risk management

approach in these areas. Furthermore, the

company is committed to transparent and

truthful accounting and reporting to allow

users of the financial statements to take

decisions considering these risks.

12.3Risk

assessment

and control

In order to provide a comprehensive view of

the company’s business strategy and

activities, risks and opportunities are

identified in a structured way, combining

elements of top-down and bottom-up

approaches.

Strategic risk

The company leadership team identifies the

key risks, as part of the strategic review

process. In a subsequent workshop the

leadership team ranks the risks based on

impact, likelihood, risk criticality and control

effectiveness. As part of the strategic review

cycle, initiatives are defined to mitigate the

risks. Owners are assigned for each of the

strategic initiatives, and they are then

accountable for ensuring adequate risk

mitigation and for monitoring the

implementation of mitigation measures. Each

quarter the key risks are discussed during the

audit and risk committee meeting. Reported

risks and opportunities are analyzed for

potential cumulative effects and are

aggregated at Division, Market Group and

company level.

Operational risk

Risks are reported on a regular basis as part

of the business performance reviews or, for

specific topics, through dedicated risk

committees. In addition, on an annual basis

the top risks are identified by company

leadership. Relevant risks, including those

associated with business opportunities, are

Signify Annual Report 2021

prioritized in terms of potential impact and

likelihood, considering quantitative and/or

qualitative aspects, and are reviewed

together with the board of management. On a

quarterly basis, risks and controls are

reviewed with the Divisions, Market Groups

and specific Functions in the audit risk

committee.

Compliance risk

The Integrity Committee is the ultimate body

within Signify to administer the organization’s

Integrity Code Legal Compliance Program. It

does so by maintaining oversight of the

development and implementation of the

Integrity code, including the monitoring of its

effectiveness. The integrity Committee is

chaired by the Chief Legal Officer. Its

members include the Chief Executive Officer,

Chief Financial Officer, Chief HR Officer, Head

of Internal Audit and Head of Legal

Compliance.

With an annual Integrity code self-

assessment process forming part of ICS,

compliance to the Integrity code forms part

of management’s ICS monitoring process.

Management of each business unit signs off

on controls relating to compliance with the

Integrity code, with this confirmation forming

part of the annual certification statement on

Business Controls. Non-compliance issues

are highlighted and, if significant, they are

reported to the Board of Management

through the Certification Statement process.

Employees are requested to state their

commitment to the Integrity code after

having completed the e-learnings. In 2021,

employees were required to complete one or

more e-learnings on the Integrity code and

related legal compliance domains. Specific

target groups were required to participate in

recurring (virtual) classroom trainings. In

addition, each year Finance and Procurement

employees are asked to sign off on the

Financial and the Procurement Codes of

Ethics respectively. All executives are asked

to sign off on the Integrity code annually to

confirm their awareness of and compliance

with the code. Violations of the Integrity code

will result in disciplinary action, up to and

including dismissal.

Financial risk

The company has implemented a global

standard for internal controls over financial

reporting (ICS). ICS, together with the

established accounting procedures, are

designed to provide reasonable assurance

that assets are safeguarded, that the books

and records properly reflect transactions

necessary to permit preparation of financial

statements, that policies and procedures are

carried out by qualified personnel, and that

published financial statements are properly

prepared and do not contain any material

misstatements.

Internal controls are an inherent part of the

processes in our company, where the

responsibility for executing these internal

controls is with the persons that carry out

these processes. The design and

maintenance of the global standard for

internal controls is with the (global) business

process owners and the dedicated ICS team.

An ICS monitoring process exists for all

material reporting units, whereby business

process owners engaged in the key financial

processes perform self-assessments on

several key controls, document the results,

and take corrective action where necessary.

ICS supports business and functional

management in a periodic cycle of

assessment and monitoring of the control

environment.

On an annual basis, management’s

accountability for business controls is

recorded through the formal issuance of a

Certification Statement on Business Controls

and a Letter of Representation by Divisions,

reporting units and Functional management

to the Board of Management. Any

deficiencies noted in the design and

operating effectiveness of controls over

financial reporting, which were not

completely remediated, are evaluated at

year-end by the Board of Management. The

Board of Management’s statement, including

its conclusions regarding the effectiveness of

internal controls over financial reporting, can

be found in chapter 13, Statement of the

Board of Management, of this Annual Report.

The global tax strategy and policy are aligned

with our business and sustainability strategies

and are published on the company’s website.

The Board of Management, enabling

functions, Divisions and Markets are advised

on tax matters by Group tax to ensure both

the needs of the business and of tax are

balanced. The company also participates in

(inter)national groups of experts to

represent its interests. In addition, the

company has corporate requirements for the

management of the company’s legal entities

in line with tax legislation.

For further details on financial risks please

refer to note 9, Income tax, note 25, Post-

employment benefits and note 29, Financial

risk management, of this Annual Report.

12.4Changes in

2021

The process to identify the key risks for the

company was further improved in 2021. In

previous years the risk workshop and the

strategic review process were initiated

separately, and the outcomes combined mid-

way through the strategic review process. In

2021 the two processes were fully integrated

from the start.

In 2021 the integration of Cooper Lighting in

the internal control framework was

completed.

Signify Annual Report 2021

12.5Key Risks

The key risks to achieving Signify’s 2021-2023 mid-term targets, the potential impact of each risk, the mitigation strategies, and actions deployed are described in the following table. These risks

can, separately or in combination, have a material adverse effect on Signify’s business, strategy, financial condition, results from operations, cash flow, reputation, or prospects.

Risk

Risk description

Mitigation actions

Technological change

The transition to LED lighting is characterized by the increasing importance of

digital capabilities and technology, such as the adoption of connected lighting

systems which may drastically change the business environment. At present, a

relatively small part of the worldwide installed base of light points is

connected.

A cornerstone of Signify’s strategy is to focus on and invest in its connected

lighting offerings, such as its InterAct offerings for the professional market

and Hue, WiZ smart lighting offerings for the consumer market. Signify also

aims to develop new business models, in particular through value-added

service offerings.

The risk is that the extent and speed of adoption of connected lighting

systems and services does not develop as anticipated, or that Signify is unable

to successfully implement its strategy in connected lighting.

Signify is actively developing and investing in technology platforms and

software applications to bring (more advanced) connected lighting systems to

the market. Part of this strategy is to strongly focus on the interoperability of

its applications and to incorporate different connectivity technologies in its

connected lighting portfolio. thereby addressing different needs in the

market.

Additionally, Signify plays a leading role in developing the market for connected

lighting systems, in building awareness of the benefits of connected lighting,

and in forging partnerships and alliances.

Finally, in order to capture this new value opportunity, Signify’s systems and

product teams are developing innovative services around connected lighting.

Competition

The LED lighting market has attracted many new competitors (particularly from

Asia) with low-priced offerings and is at present highly competitive. This has

led to increasing commoditization of offerings as well as price pressure on LED

products. This may impact revenues and profitability, in particular, if Signify

fails to manage costs.

In the area of connected lighting, the risk is that non-lighting players with

broad technology platforms may enter and disrupt the lighting market.

To counter aggressive commoditization by Asian players, Signify`s strategy is

to create tiered offerings, including B-brand and private label. Further, the

company continuously invests in innovation, strengthens its digital (sales)

capabilities and runs cost-saving initiatives to keep its cost base competitive.

Also, Signify can make use of the Philips brand which has a strong global

reputation and brand preference to drive sales.

In general, Signify has a global sales and distribution network which would be

difficult for a competitor to replicate. This network allows the company to

quickly roll-out innovative products and services on a global scale.

Signify Annual Report 2021

Risk

Risk description

Mitigation actions

Global political

and

economic instability -

COVID-19

There continues to be significant instability in the global economy and in the

global political landscape.

Polarization and trade protectionism as well as political changes may disrupt

our operations and, ultimately, our sales. Such developments may impact

Signify significantly as it has commercial activities and operations in almost

every country.

Adverse economic conditions may result in lower customer demand. In

particular, the impact of the COVID-19 pandemic continued to have an adverse

effect on the company’s sales and results in 2021, both due to depressed

professional demand and due to unprecedented supply chain disruptions,

which impaired the company’s ability to meet existing customer demand.

Looking ahead, uncertainty and volatility remain regarding the continued

impact of (mutations of) COVID-19, and therefore the recovery of the general

lighting market to (pre-COVID) 2019 levels. This is relevant to Signify as a large

part of its business is exposed to the construction and renovation activity,

which has been impacted significantly by government lockdowns, and hence

may take longer to recover.

At the macro level, Signify actively engages in global forums focused on the

benefits of globalization. Signify is also committed to highly credible industry

organizations globally to support the stabilization of global trade.

In order to minimize the impact of instability on its business, Signify closely

follows and reviews (geo)political and economic developments and takes these

into account in both its short- and medium-term operational planning.

To mitigate potential supply chain inefficiencies and tariff impacts arising from

geopolitical tensions and trade protectionism, Signify leverages its global

(manufacturing) footprint and makes adjustments to its sourcing base when

needed.

To address the continued impact of COVID-19 uncertainty and its supply chain

disruption, actions have been launched throughout the organization to secure

the supply of components and to maximize the delivery of existing customer

orders.

Supply disruption

Signify increasingly depends on external suppliers and to a large extend, on the

production of components and LED products from Asian countries. The risk of

this higher dependency is that suppliers are not able to deliver (raw) materials,

components or services on time for Signify to meet customer demand in a

timely manner.

Next to this, the production and shipping of products and components could

be interrupted by conflicts, natural disasters, such as earthquakes, typhoons

and floods caused by climate change, or pandemic diseases.

Finally, Increasing geopolitical tensions and trade protectionism, such as local

manufacturing requirements, may disrupt the company’s operations. This may

limit the company’s ability to leverage and draw efficiencies from its global

(manufacturing) footprint.

Due to COVID-19, in 2021 the company was, and continues to be, impacted by

shortages of electronic components and logistics disruptions. Moreover, the

company continues to see a volatile market with, in some cases, sharp

increases in the costs of (raw) materials and key components, which may be

difficult to fully pass on to customers.

Signify has built a supplier risk plan in which risky suppliers are identified using

criteria that take into account the geographical location of the supplier, the

technologies and processes used. In addition, Signify is enhancing regional

supply capabilities to increase the share of components needed for

manufacturing products for a particular region are sourced regionally, as

opposed to being sourced from remote locations.

Regular risk assessments are carried out at individual plant level, including the

risks related to natural catastrophes and water scarcity. These assessments

are also performed at locations of business-critical suppliers and increasing

strategic inventories. Signify requires its sites to have robust business

continuity plans for any large-scale events which can severely impact the

business. These plans include sourcing from alternative suppliers and

increasing strategic inventories.

Cost inflation due to the shortage of components, containers or labor is offset

through a combination of cost savings and market price increases. The level

of pricing moves is benchmarked versus key competitors.

Signify Annual Report 2021

Risk

Risk description

Mitigation actions

Innovation

The high speed of innovation and the increasing importance of digital

technology in the general lighting industry requires Signify to continuously

spend considerable resources on developing new products and solutions. It

also requires developing different capabilities and competences to

commercialize its innovations successfully. In particular, this is important in a

fast-changing market in which the company must continuously address the

needs of local customers to introduce locally relevant new products and

solutions ahead of competition.

Failure to bring new products and solutions to the markets in a timely fashion

and commercialize its innovations successfully would lead to the expected

benefits of these investments may not outweigh the costs to the company, and

would hence be detrimental to both the top and bottom line of the company.

Signify invests significantly in its R&D activities. It has dedicated R&D activities

to support its divisions in developing and realizing near-term innovation

roadmaps, and to develop longer-term innovations with a focus on areas such

as connected lighting systems, software and digital applications.

Signify adapted its business structure to enable a stronger customer focus

and enhanced specialization to further increase execution speed. Finally,

dedicated go-to-market channels and tailored marketing approaches are in

place with the aim to successfully introduce new offerings commercially.

The return on innovation investments is reviewed on a quarterly basis,

including speed to market, efficiency of investment and sales development

versus plan.

Cyber-attacks

and

security breaches

As Signify becomes more digitalized, more devices and systems are connected

online. This increases cyber security risk across enterprise IT, Operational

Technology (OT) and our products and solutions that are delivered with

Internet of Things (IoT) capabilities and accompanying (cloud-based) software

applications.

Should a successful cyber-attack materialize, the processes, services and

systems that allow the organization to continue to operate could be impacted

resulting in operational disruption. Further, a cyber-attack could cause a data

breach where sensitive, protected, personal or confidential data held by

Signify is leaked or stolen.

Signify develops its products and software applications and secures the

ecosystem in conformity to security standards and best practices (ISA/

IEC62443, ISO2700x, NIST).

Cyber risk is reviewed by the Board of Management and by the Supervisory

Board on a periodic basis. A dedicated cyber security team scans external

developments, identifies inherent risks, and proposes plans to limit residual

risk as much as possible. The Security Board aligns on the level of acceptable

residual risk. Each year mandatory security and data protection & privacy

awareness trainings are conducted.

Security measures are in place to detect attackers and to minimize the risk of

them causing damage to systems and gaining access to critical data, systems

and services. Business continuity plans are in place in the event of non-

availability of IT systems and Manufacturing sites. These business continuity

plans are tested periodically.

Signify Annual Report 2021

Risk

Risk description

Mitigation actions

Digitalization

It is a strategic priority of Signify to digitalize its go-to-market approach, its

processes, and its offers. As such, digitalization is a key opportunity to provide

higher customer service levels, more attractive customer offers, and to

continue optimizing productivity through more efficient workflows.

Failure to keep up with ongoing digitalization and adapt to new technologies

will lead to a gradual loss of both market share and earnings.

Signify has established a Digitalization roadmap for customer interfaces,

processes and offers. IT architecture, employee re-skilling and data

governance have been identified as key enablers.

Progress against the established roadmap is closely followed-up by the Digital

Committee, a sub-committee from the Supervisory Board, and by the Digital

Board, staffed by high level company executives.

Several key programs have been initiated under the digitalization umbrella, and

the company's investment in digitalization has been increased significantly.

Digital and IT, previously two separate functions within the company, have

been brought under the leadership of a new Chief Digital and Information

Officer, responsible for improved alignment and acceleration of the

digitalization journey.

New organizational

capabilities

Signify needs to build the capabilities and culture required to transform its

business and deliver on its strategy, including the ambition to grow its

connected lighting business and grow in new areas such as agricultural, solar,

UV-C lighting and 3D printing.

New capabilities are particularly relevant in the areas of digital, software

development, marketing and consultative selling. Next to this, bringing

advanced connected lighting offerings to the market requires highly

specialized (technical) personnel.

Failure to successfully develop these new and different capabilities may have a

significant impact on the company achieving its long-term strategic goals.

Signify invests in the professional development of its employees through

learning initiatives as well as through dedicated talent management programs

which identify top talents early in their career. In addition, actions were

launched to upscale commercial skills and capabilities in cooperation with

learning@signify Academy. Next, talent acquisition programs are in place to

attract new employees with a specific focus on those (technical) areas where

the company sees capability needs that cannot be developed internally.

Finally, through M&A projects of various size, new capabilities are brought to

the company, with retention programs being part of the due diligence and

acquisition approval process.

Acquisitions

and

integrations

Selected acquisitions have been, and are, an important part of Signify’s

strategy. These acquisitions are focused on growing the business,

strengthening its supply chain or acquiring complementary technologies or

new capabilities.

Acquisitions always entail integration risk which in turn could result in (cost)

synergies, strategic advantages and economies of scale, being delayed or not

fully realized.

Signify stresses the importance of any potential acquiree matching its business

model and strategic direction. In the due diligence process it makes sure to

involve the right people from the organization, considering all vital aspects of

the business.

Immediately after any acquisition, a multidisciplinary team with members from

both organizations is put together to ensure a smooth integration of the new

business, both from a top line synergy, a cost synergy, and a cultural

integration point of view.

Signify Annual Report 2021

Risk

Risk description

Mitigation actions

Climate change

The impact of climate change generates opportunities and challenges for

Signify’s existing and future lighting products and solutions portfolio. And, with

a global footprint, Signify’s manufacturing sites and supply chain are exposed

to risks related to climate change. In line with that, Signify is seeing continued

and increased attention to climate change from all sectors of society. This

attention has led to additional regulations designed to reduce greenhouse gas

(GHG) emissions and the adoption of more energy-efficient products and

solutions.

As lighting represents a significant portion of global electricity consumption,

the lighting industry will need to adapt to changing environmental regulations.

The inability to meet customer expectations related to the energy efficiency

potential of the company’s LED lighting products and solutions could adversely

affect the company’s reputation and brand. Additionally, understanding the

risks posed by climate change, and how to improve business resilience through

climate change mitigation and adaptation accordingly, is imperative to secure

the company’s longer term success.

As part of its Brighter Lives, Better World 2025 sustainability program, Signify

is taking measures to manage climate risks and adapt its businesses.

Since 2020, Signify is carbon neutral in its operations and sources 100%

renewable electricity. Sustainability is an integral part of Signify's 5 Frontiers

strategy. Its pillar Growth for sustainability aims to address global challenges

by focusing on sustainable growth areas, based on low-carbon technological

innovation: Climate action, Circular economy, Food availability, Safety &

security, and Health & well-being. As a result, Signify's product portfolio is

well-positioned to anticipate risks and opportunities related to climate

change.

Following the recommendations and guidance of the Task Force on Climate-

Related Financial Disclosures, Signify conducts ongoing climate risk

assessments in line with the four core elements of governance, strategy, risk

management, and metrics and targets (for details, please refer to the

Sustainability Supplements to the Annual Report, available on our Sustainability

downloads webpage: https://www.signify.com/global/sustainability/

downloads).

At the end of 2021, Signify was on track to achieve its ambitious Brighter Lives,

Better World 2025 commitments (for details, please refer to the chapter 16,

Sustainability statements, of this Annual Report).

Concentration risk

Signify's overall risk profile changed with the acquisition of US-based Cooper

Lighting in 2020.

As a result, Signify is more exposed to developments in the professional

lighting market and in particular developments in the North American market.

Therefore, going forward, any developments are expected to have a bigger

impact on the company’s results, operations and prospects, and, in particular

regarding to potential negative impacts of those developments, it may have a

reduced ability to offset negative impacts through its other business activities

and markets in which it is active.

The increased importance of the US is recognized and taken into consideration

in the annual strategic planning process and risk assessment. Resources are

allocated in line with both the size of the business and the future growth

potential.

Not only are we focused on getting the right talent to drive the success of the

US business, but also the Divisions and Functions are expected to spend a

disproportionate amount of time and energy on ensuring a successful US

business.

Finally, in order to address both the importance of the US business and the

higher risk of global disruption, dedicated support plans have been and are

being worked out for the US.

Signify Annual Report 2021

13Statement of the

Board of Management

The Board of Management has prepared this

Annual Report in accordance with

International Financial Reporting Standards

(IFRS) as endorsed by the European Union

(EU), the statutory provisions of Part 9, Book

2 of the Dutch Civil Code and additional Dutch

disclosure requirements for annual reports.

To the best of our knowledge:

•The Consolidated financial statements and

Signify N.V. financial statements included in

this Annual Report give a true and fair view

of the assets, liabilities, financial position

and profit or loss of Signify N.V. and its

consolidated undertakings;

•Based on the current state of affairs, it is

justified that the financial reporting has

been prepared on a going concern basis;

•The management report included in this

Annual Report gives a true and fair view

concerning the position on the balance

sheet date and the development and

performance of the business of Signify N.V.

and the undertakings included in the

consolidation taken as a whole during the

financial year;

•The management report included in this

Annual Report describes the principal risks

and uncertainties that the company faces,

and those that are relevant to the

expectation of the company’s continuity

for the period of twelve months after the

date of publication of this Annual Report.

The Board of Management is responsible for

the establishment and adequate functioning

of a system of governance, risk management

and internal controls in the company. It

reports on and is accountable for internal risk

management and control systems to the

Supervisory Board and its Audit Committee.

The company has implemented a risk

management and internal control system

designed to provide reasonable assurance

that strategic objectives are met by creating

focus, integrating management control over

the company’s operations, ensuring

compliance with applicable laws and

regulations and by safeguarding its assets

and the reliability of its financial reporting and

its disclosures.

The company has designed its internal control

system based on the Internal Control-

Integrated Framework (2013) established by

the Committee of Sponsoring Organizations

of the Treadway Commission (COSO).

The company’s risk management approach is

embedded in its periodic business planning

and review cycle and forms an integral part of

business management. On the basis of risk

assessments, management determines the

risks and appropriate responses related to

the achievement of business objectives and

critical business processes. Risk factors and

the risk management approach are described

in more detail in chapter 12, Risk factors and

risk management, of this Annual Report. Audit

results, relevant investigative activities as

well as significant changes and improvements

in the company’s risk management and

internal control system are discussed with

the Audit Committee and the Supervisory

Board.

With respect to financial reporting, a

structured self-assessment and monitoring

process is used company-wide to assess,

document, review and monitor compliance

with internal control over financial reporting.

Internal representations received from

management, regular management reviews,

reviews of the design and effectiveness of

internal controls and reviews in company and

Division, Market and Function Audit

Committees, are integral parts of the

company’s risk management approach.

On the basis of the above, we confirm that:

•The management report provides sufficient

insights into failings, if any, in the

effectiveness of the internal risk

management and control systems; and

•The internal risk management and control

systems provide a reasonable level of

assurance that the financial reporting and

tax included in this Annual Report does not

contain any errors of material importance.

It should be noted that the above does not

imply that these systems and procedures

provide certainty as to the realization of

operational and financial business objectives,

nor can they prevent all misstatements,

inaccuracies, errors, fraud and non-

compliance with rules and regulations.

February 22, 2022

Board of Management

Eric Rondolat

Javier van Engelen

Maria Letizia Mariani

Signify Annual Report 2021

Corporate statements

Signify Annual Report 2021

Table of contents

14.2 Consolidated statement of comprehensive income

14 Consolidated financial statements

14.1 Consolidated statement of income

14.3 ` Consolidated statement of financial position

14.4 Consolidated statement of cash flows

14.5 Consolidated statement of changes in equity

14.6 Notes to the Consolidated financial statements

1 Basis of preparation

2 Significant accounting policies

3 Information by segment and main country

101

4 Income from operations

102

5 Employee benefit expenses

102

6 Depreciation, amortization and impairment

103

7 Other business income and expenses

103

8 Financial income and expenses

103

9 Income taxes

104

10 Earnings per share

107

11 Acquisitions and divestments

107

12 Interests in entities

107

13 Property, plant and equipment

16 Objectives, policies and processes for managing capital

112

17 Inventories

112

18 Trade and other receivables

112

19 Trade and other payables

25 Post-employment benefits

117

26 Related party transactions

119

27 Share-based compensation

119

28 Information on remuneration

121

29 Financial risk management

122

30 Events after the balance sheet date

125

15 Signify N.V. financial statements

127

15.1 Statement of income

128

15.2 Statement of financial position before appropriation of results

129

15.3 Statement of changes in equity

130

15.4 Notes to the Company financial statements

131

A Statement of income

C Financial assets

D Shareholders’ equity

G Contingent liabilities not appearing in the balance sheet

133

H Events after the balance sheet date

133

16 Sustainability statements

135

16.1 Approach to sustainability reporting

135

16.2 Sustainable Innovation

140

16.3 Brighter Lives

141

16.4 Better World

154

16.5 EU Taxonomy

162

17 Combined independent auditor’s report

163

18 Reconciliation of non-IFRS financial measures

176

19 Definitions and abbreviations

180

20 Forward-looking statements and other information

184

Signify Annual Report 2021

14Consolidated

financial

statements

Introduction

The audited Consolidated financial statements including the notes thereon have been prepared

in accordance with International Financial Reporting Standards (IFRS) as endorsed by the

European Union (EU) and with the statutory provisions of Part 9, Book 2 of the Dutch Civil Code.

All standards and interpretations issued by the International Accounting Standards Board (IASB)

and the IFRS Interpretations Committee effective 2021 have been endorsed by the EU;

consequently, the accounting policies applied by Signify also comply with IFRS as issued by the

IASB.

The following chapters of this Annual Report:

•3, Creating value

•4, Corporate performance

•6, Board of Management

•7, Supervisory Board

•8, Supervisory Board report, sub-section 8.3.2 Corporate Governance and Nomination &

Selection Committee

•10, Corporate governance

•11, Investor Relations, section 11.2, Shareholder base

•12, Risk factors and risk management

•13, Statement of the Board of Management

•16, Sustainability statements

•18, Reconciliation of non-IFRS financial measures

•19, Definitions and abbreviations

•20, Forward-looking statements and other information

form the management report within the meaning of section 2:391 of the Dutch Civil Code.

For ‘Additional information’ within the meaning of section 2:392 of the Dutch Civil Code, please

refer to sections 4.3, Proposed distribution to shareholders, 10.1, Signify organization and

chapter 17, Combined independent auditor’s report, of this Annual Report.

Ernst & Young Accountants LLP has issued an independent auditor’s report on the Consolidated

financial statements and the Company financial statements, in accordance with Dutch law,

including the Dutch standards on auditing, of Signify N.V., which is set out in chapter 17,

Combined independent auditor’s report, of this Annual Report.

Signify Annual Report 2021

14.1Consolidated

statement of

income

Note

2020

2021

Sales

6,502

6,860

Cost of sales

(4,004)

(4,189)

Gross margin

2,499

2,671

Selling, general and administrative expenses

(1,781)

(1,882)

Research and development expenses

(307)

(286)

Impairment of goodwill

—

Other business income

Consolidated statement of income

Other business expenses

(7)

(8)

in millions of EUR unless otherwise stated

Income from operations

416

514

For the years ended December 31

Financial income

Financial expenses

(72)

(57)

Results from investments in associates

—

Income before taxes

362

490

Income tax expense

(27)

(83)

Net income

335

407

Attribution of net income for the period:

Net income (loss) attributable to shareholders of Signify N.V.

325

397

Net income (loss) attributable to non-controlling interests

Earnings per common share attributable to shareholders

Weighted average number of ordinary shares outstanding used for calculation (in thousands):

• Basic

126,223

124,967

• Diluted

129,692

128,646

Net income attributable to shareholders per ordinary share in EUR:

• Basic

2.58

3.18

• Diluted

2.51

3.09

The accompanying notes are an integral part of these consolidated financial statements.

Signify Annual Report 2021

14.2Consolidated

statement of

comprehensive

income

2020

2021

Net income

335

407

Pensions and other post-employment plans:

• Remeasurements

• Income tax effect on remeasurements

(1)

(4)

Total of items that will not be reclassified to the Income statement

Consolidated statement of

Currency translation differences:

comprehensive income in millions of EUR

• Net current period change, before tax

(395)

291

For the years ended December 31

• Income tax effect

—

Net investment hedge:

• Net current period change, before tax

(22)

• Income tax effect

—

Cash flow hedges:

• Net current period change, before tax

(26)

• Income tax effect

(7)

Total of items that are or may be reclassified to the Income statement

(328)

249

Other comprehensive income

(318)

265

Total comprehensive income

671

Total comprehensive income attributable to:

• Shareholders of Signify N.V.

650

• Non-controlling interests

The accompanying notes are an integral part of these consolidated financial statements.

Signify Annual Report 2021

14.3Consolidated

statement of

financial

position

Note

2020

2021

Non-current assets

Property, plant and equipment

3, 13

708

724

Goodwill

3, 15

2,251

2,464

Intangible assets, other than goodwill

3, 15

775

730

Investments in associates

Financial assets

Deferred tax assets

473

481

Consolidated statement of

Other assets

financial position in millions of EUR

Total non-current assets

4,334

4,536

As at December 31

Current assets

Inventories

885

1,410

Other assets

171

192

Derivative financial assets

104

Income tax receivable

Trade and other receivables

1,140

1,183

Cash and cash equivalents

1,033

851

Assets classified as held for sale

Total current assets

3,376

3,720

Total assets

7,710

8,256

Signify Annual Report 2021

14.3Consolidated

statement of

financial

position

(continued)

2020

2021

Equity

Shareholders’ equity

2,196

2,459

Non-controlling interests

124

138

Total equity

2,321

2,597

Non-current liabilities

Debt

2,221

1,931

Post-employment benefits

390

363

Provisions

224

215

Deferred tax liabilities

Income tax payable

108

118

Other liabilities

159

182

Total non-current liabilities

3,123

2,835

Current liabilities

Debt, including bank overdrafts

Derivative financial liabilities

Income tax payable

Trade and other payables

1,731

2,334

Provisions

172

140

Other liabilities

213

Liabilities from assets classified as held for sale

—

Total current liabilities

2,266

2,824

Total liabilities and total equity

7,710

8,256

The accompanying notes are an integral part of these consolidated financial statements.

Signify Annual Report 2021

14.4Consolidated

statement of

cash flows

Note

2020

2021

Cash flows from operating activities

Net income

335

407

Adjustments to reconcile net income to net cash provided by operating activities:

606

580

• Depreciation, amortization and impairment of non-financial assets

332

312

• Impairment (reversal) of goodwill, other non-current financial assets and investments in

associates

—

• Net gain on sale of assets

(1)

(13)

Consolidated statement of

• Net interest expense on debt, borrowings and other liabilities

cash flows in millions of EUR

• Income tax expense

For the years ended December 31

• Additions to (releases of) provisions

152

133

• Additions to (releases of) post-employment benefits

• Other items

Decrease (increase) in working capital:

239

(2)

• Decrease (increase) in trade and other receivables

211

• Decrease (increase) in inventories

(458)

• Increase (decrease) in trade and other payables

(50)

479

• Increase (decrease) in other current assets and liabilities

(24)

Increase (decrease) in other non-current assets and liabilities

Utilizations of provisions

(162)

(187)

Utilizations of post-employment benefits

(35)

(34)

Net interest and financing costs paid

(33)

(27)

Income taxes paid

(73)

(59)

Net cash provided by (used for) operating activities

891

704

Cash flows from investing activities

Net capital expenditures:

(75)

(91)

• Additions of intangible assets

(32)

(34)

• Capital expenditures on property, plant and equipment

(67)

(84)

• Proceeds from disposal of property, plant and equipment

Net proceeds from (cash used for) derivatives and other financial assets

(4)

Purchases of businesses, net of cash acquired

(1,303)

(30)

Proceeds from sale of businesses, net of cash disposed of

—

Net cash provided by (used for) investing activities

(1,379)

(91)

Signify Annual Report 2021

14.4Consolidated

statement of

cash flows

(continued)

Note

2020

2021

Cash flows from financing activities

Dividend paid

(17)

(354)

Proceeds from issuance of debt

3,744

633

Repayment of debt

(2,932)

(1,064)

Purchase of treasury shares

(38)

(92)

Net cash provided by (used for) financing activities

757

(876)

Net cash flows

269

(263)

Effect of changes in exchange rates on cash and cash equivalents and bank overdrafts

(80)

Cash and cash equivalents and bank overdrafts at the beginning of the period

840

1,030

Cash and cash equivalents and bank overdrafts at the end of the period

1,030

847

The accompanying notes are an integral part of these consolidated financial statements.

Signify Annual Report 2021

14.5Consolidated

statement of

changes in

equity

capital

premium

Retained

earnings

Currency

translation

differences

Cash

flow

hedges

Treasury

Total

share-

holders'

equity

Non-

controlling

interests

Equity

Balance as at January 1, 2020

2,195

(7)

(68)

2,181

142

2,324

Net Income

—

325

—

325

335

Other comprehensive income (loss)

—

(343)

—

(309)

(9)

(318)

Total comprehensive income (loss)

—

336

(343)

—

Consolidated statement of changes in

Movement in non-controlling interests

—

equity in millions of EUR

Dividend distributed

—

(20)

Purchase of treasury shares

—

(38)

—

(38)

Delivery of treasury shares

—

(30)

(2)

—

Share-based compensation plans

—

Income tax share-based compensation

plans

—

Balance as at December 31, 2020

2,201

387

(337)

(74)

2,196

124

2,321

Balance as at January 1, 2021

2,201

387

(337)

(74)

2,196

124

2,321

Net Income

—

397

—

397

407

Other comprehensive income (loss)

—

257

(20)

—

253

265

Total comprehensive income (loss)

—

413

257

(20)

—

650

671

Movement in non-controlling interests

—

Dividend distributed

—

(343)

—

(343)

(8)

(351)

Purchase of treasury shares

—

(83)

(77)

—

(77)

Delivery of treasury shares

—

(60)

—

Share-based compensation plans

—

Income tax share-based compensation

plans

—

Balance as at December 31, 2021

2,174

491

(80)

(2)

(126)

2,459

138

2,597

The accompanying notes are an integral part of these consolidated financial statements.

Signify Annual Report 2021

14.6Notes to the Consolidated financial

statements

In millions of EUR unless otherwise stated

1Basis of preparation

Signify N.V. is a public company with limited liability incorporated under the laws of the

Netherlands and listed on Euronext Amsterdam under the symbol ‘LIGHT’.

As used herein, the term Signify is used for Signify N.V. (‘the Company’) and its subsidiaries within

the meaning of Section 2:24b of the Dutch Civil Code.

Basis of preparation

The Consolidated financial statements have been prepared in accordance with the International

Financial Reporting Standards (IFRS) as endorsed by the European Union (EU) and with the

statutory provisions of Part 9, Book 2 of the Dutch Civil Code. The Consolidated financial

statements are prepared by the Board of Management of the Company and authorized for issue

on February 22, 2022, and will be submitted for adoption to the Annual General Meeting of

Shareholders on May 17, 2022. The Consolidated financial statements have been prepared on a

going concern basis.

Basis of measurement

The Consolidated financial statements have been prepared on a historical cost basis, except for

certain financial instruments, including derivatives (measured at fair value), assets held for sale

(measured at the lower of carrying amount and its fair value less costs to sell), and defined-

benefit pension plans (plan assets are measured at fair value).

Functional and presentational currency

The Consolidated financial statements are presented in euros (EUR), which is the functional and

presentation currency of Signify N.V. All amounts are presented in EUR million and have been

rounded to the nearest EUR million, unless otherwise stated. Due to rounding, amounts may not

add up to totals provided.

Critical accounting judgments and key sources of estimation uncertainty

The preparation of the Consolidated financial statements requires management to make

judgments, estimates and assumptions that affect the application of accounting policies and the

reported amounts of assets, liabilities, income and expenses. These estimates inherently contain

a degree of uncertainty. Actual results may differ from these estimates.

These estimates and judgments are evaluated on an ongoing basis and are based on historical

experience, current and expected future outcomes, third-party evaluations and various other

assumptions that are considered reasonable under the circumstances. The results of these

estimates form the basis for making judgments about the carrying values of assets and liabilities,

as well as identifying and assessing the accounting treatment with respect to commitments and

Signify Annual Report 2021

contingencies. Signify revises material estimates if changes occur in the circumstances or there

is new information or experience on which an estimate was or can be based.

The areas where the most significant judgments and estimates are made are goodwill, deferred

tax asset recoverability, revenue recognition, impairments, provisions, employee benefit

obligations, inventory valuation and obsolescence provision, estimation of loss allowance for

expected credit losses, leases, fair value of derivatives, other financial instruments and assets

and liabilities in business combinations. For further discussion on these significant judgments and

estimates, reference is made to the respective accounting policies and notes within these

Consolidated financial statements that relate to the above topics.

Climate-related matters

The impact of climate change generates opportunities as well as challenges for Signify’s existing

and future lighting products and solutions portfolio. Sustainability is an integral part of Signify's 5

Frontiers strategy. Its strategic pillar, Growth for Sustainability, aims to address global

challenges by focusing on sustainable growth areas, based on low-carbon technological

innovation: Climate action, Circular economy, Food availability, Safety & security, and Health &

well-being. As a result, Signify's product portfolio is well-positioned to anticipate risks and

opportunities related to climate change.

Digital Solutions and Digital Products

Digital Solutions and Digital Products benefit from the phasing out of conventional lighting and

the move to more energy efficient LED and connected lighting. Stimulus packages, such as the

EU Green Deal and US stimulus package, are pushing for the use of more sustainable

technologies. This creates a multi-year opportunity for Signify, as its product portfolio is well-

positioned to capture growth from this drive for sustainability.

Conventional Products

The conventional market is expected to continue to decline in the coming years due to the

ongoing adoption of LED lighting technologies and legislation banning certain technologies. The

Division maintains a legislation-compliant portfolio and invests in remaining opportunities such as

UV-C light sources and conventional horticulture lighting. The Division is successfully executing

its last company standing strategy, strengthening its leadership position, increasing customer

and employee Net Promoter Scores and being cash-contributing.

Developments on climate-related matters for the Division were considered in preparing the

consolidated financial statements. Specifically, the key assumptions used in the annual goodwill

impairment test for Conventional Products have taken into account external market

assumptions, including potential phase out of products due to market conditions and legislation

likely to be ratified. In the 2021 annual goodwill test, the estimated recoverable amount of

Conventional Products exceeded its carrying value, therefore no impairment loss was

recognized. For further details, refer to Note 15, Intangible assets.

Impact of supply chain disruptions

During the year, component and container shortages as well as other logistics challenges

impacted the global supply chain. As demand remained healthy, this resulted in a part of the

orders being delayed. As a result, these challenges affected Signify's sales and inventory levels.

Signify believes that these unprecedented supply chain issues are transitory and is confident in

its ability to convert demand into sales growth as the situation stabilizes.

The increased inventory levels did not lead to a material change in the value allowance for

inventory. The impact of supply chain disruptions and its recovery has been taken into account

as part of the assumptions in the annual goodwill impairment test. For further details, refer to

note 15, intangible assets.

Impact of the COVID-19 pandemic

The COVID-19 pandemic has created an unprecedented situation globally. From the outset,

Signify has taken considerable action focused on the health and safety of its employees, on

customer engagement, on supply chain continuity, on free cash flow generation, and operating

expenses optimization.

Signify continues to closely monitor the development of the COVID-19 pandemic by analyzing the

risks the pandemic poses for its market position, its financial results, its financial position and its

cash flows. Signify implements mitigating actions promptly.

Further information and considerations regarding areas of significant judgments and estimates

have been included below.

Liquidity and risk management

Signify continues to place a great deal of focus on actions to preserve liquidity. These measures

included, among others, ongoing savings in selling expenses, travel costs, procurement costs

and continued rigorous management of working capital. During 2021, Signify also implemented

actions to make its central organization leaner and to improve its performance culture.

Goodwill

The annual impairment test performed in the fourth quarter did not result in an impairment loss

being recognized. The key assumptions of the goodwill impairment test include sales growth

rates, EBITA and the rates used for discounting the projected cash flows. All key assumptions

were updated to reflect management’s current best estimates, including the recovery of the

global lighting market from the COVID-19 pandemic and supply chain disruptions. For further

details, refer to note 15, Intangible assets.

Signify Annual Report 2021

Intangible assets, other than goodwill

Signify monitors changes in the economic environment which could indicate that the carrying

amount of the asset may not be recoverable, and performs an impairment test when an

impairment trigger is identified. No material impairment was identified based on procedures

performed.

Inventories

Signify’s inventories are stated at the lower of cost or net realizable value. In determining the

appropriate level of value allowance, inventory health in certain businesses and markets due to

COVID-19 were considered. In addition, current and potential excess inventory levels were

analyzed, incorporating revised expectations of future demand for these items. Compared to

the allowance as of December 31, 2020, no material change in the value allowance for inventory

was identified as a result of these procedures.

Trade receivables

According to its accounting policy, Signify calculates the lifetime expected credit loss for Trade

receivables utilizing a matrix model per country, where recoverability data and default

probability per country are used as future-looking elements which address COVID-19 impact.

Because the collection of Trade receivables was strong in 2021, Signify's expected credit loss

allowance as of December 31, 2021, did not change materially when compared to the allowance

as of December 31, 2020. Furthermore, the allowance for individually impaired receivables did

not change materially compared to the allowance as of December 31, 2020.

Post-employment benefits

COVID-19 impacted underlying assumptions of post-employment liabilities such as the interest

rates and investment performance. Signify performed an updated quantification of the net

defined benefit liability as at December 31, 2021, based on the most recent assumptions. Details

of the underlying assumptions used can be found in note 25, Post-employment benefits.

Government support

In response to COVID-19, many governments provided support through incentives, changed tax

policies aimed at deferring tax filings and payments, and/or tax relief measures. Apart from

applied payment deferrals on other taxes/levies, the impact of government support received is

not significant.

Deferred taxes

In the context of COVID-19, Signify has also assessed whether it is still probable that deferred

tax assets recognized on the balance sheet will be realized. No derecognition as a result of this

assessment was recorded.

Changes in accounting policy

New and amended standards adopted

Signify has applied the following amendments for the first time to its annual reporting period

commencing January 1, 2021:

•Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 - Interest Rate Benchmark Reform -

Phase 2

•Amendment to IFRS 16 - COVID-19 Related Rent Concessions beyond 30 June 2021

•Amendment to IAS 16 - Proceeds before intended use of property, plant and equipment

Signify changed its accounting policies in accordance with the amendments listed above. The

changes did not have any significant impact on the amounts recognized in the prior period and

current period.

New and amended standards not yet adopted

Several new standards or amendments to existing standards have been published that are

mandatory for reporting periods commencing on or after January 1, 2022. With the exception of

the amendment to IAS 16 Property, Plant and Equipment, these standards have not been

adopted early by Signify. The new standards or amendments are not expected to have a material

impact on Signify in the current or future reporting periods and on foreseeable future

transactions.

Signify Annual Report 2021

2Significant accounting policies

General

The accounting policies set out below have been consistently applied by Signify to all periods

presented in these consolidated financial statements.

Basis of consolidation

The Consolidated financial statements comprise the financial statements of Signify N.V. and all

subsidiaries it controls (i.e. when it is exposed or has rights to variable returns from its

involvement with the investee and has the ability to affect those returns through its power over

the investee). The existence and effect of potential voting rights are considered when assessing

whether the Company controls another entity. Subsidiaries are fully consolidated from the date

that control commences until the date that control ceases. All intercompany balances and

transactions have been eliminated in the Consolidated financial statements.

Business combinations

Business combinations are accounted for using the acquisition method. Under the acquisition

method, the identifiable assets acquired, liabilities assumed and any non-controlling interest in

the acquiree are recognized at the acquisition date, which is the date on which control is

transferred to Signify. Signify measures goodwill at the acquisition date as:

•the fair value of the consideration transferred; plus

•the recognized amount of any non-controlling interest in the acquiree; plus

•if the business combination is achieved in stages, the fair value of the existing equity interest

in the acquiree; less

•the net recognized amount (generally fair value) of the identifiable assets acquired and

liabilities assumed.

Costs related to the acquisition, other than those associated with the issue of debt or equity

securities, are expensed as incurred. Non-controlling interests are measured at their

proportionate share of the acquiree’s identifiable net assets at the date of acquisition.

Investments in associates

Signify’s investments in associates are accounted for using the equity method and are initially

recognized at cost. Investments in associates are those entities in which Signify has significant

influence, but no control or joint control, over the financial and operating policies.

Foreign currency translation

Items included in the financial statements of each of the Signify entities are measured using the

currency of the primary economic environment in which the entity operates ('the functional

currency').

Foreign currency transactions are translated into the functional currency using the exchange

rates prevailing at the dates of the transactions or valuation when items are re-measured.

Foreign exchange gains and losses resulting from the settlement of such transactions and from

the translation at year-end exchange rates of monetary assets and liabilities denominated in

foreign currencies are recognized in the Consolidated statement of income, except when

deferred in Other comprehensive income as qualifying cash flow hedges. The exchange

differences are presented as part of Cost of sales, except for tax items and Financial income

and expense, which are recognized in the same line item as they relate to.

Upon consolidation, the assets and liabilities of non-euro entities, including goodwill and fair

value adjustments at the time of the acquisition, are translated into euros at the year-end rates

of exchange. The items of the statement of income of foreign activities, excluding foreign

operations in hyperinflationary economies, are translated at the rates which are approximating

the rates at the dates of transactions. The resulting translation differences of the net

investments in foreign operations are recognized in other comprehensive income.

Revenue recognition

Sale of goods

Revenue from the sale of goods is recognized at the point in time when the customer obtains

control over the goods. For standard sale of products, control generally passes to the

customer when the product is delivered and accepted, depending on the delivery conditions and

incoterms. For products for which a right to return exists during a defined period, revenue is

recognized by considering the historical pattern of actual returns. Return policies are typically

based on customary return arrangements in local markets.

Sale of services

Signify accounts for cloud-enabled services, extended warranties and lifecycle services as

separate performance obligations. Control over these services is transferred over time and

revenue is recognized, in most cases, on a straight-line basis over the duration of the service

period.

Transaction price

The transaction price is the amount of consideration to which Signify expects to be entitled to in

exchange for transferring promised goods or services to a customer. The transaction price

excludes amounts collected on behalf of third parties, such as sales taxes.

For contracts with multiple performance obligations, the total consideration of the contract is

allocated to all distinct performance obligations in the contract based on their stand-alone

selling prices. Stand-alone selling prices are determined based on other stand-alone sales

transactions that are directly observable, when possible. However, observable prices are not

Signify Annual Report 2021

available for all performance obligations. If no direct observable prices are available, the stand-

alone selling price is normally based on the expected cost plus a margin approach.

The transaction price may be variable due to discounts, rebates or similar arrangements.

Revenue is only recognized for the part of the consideration for which it is highly probable that a

significant reversal in the amount of cumulative revenue recognized will not occur. Judgment is

required in determining the probability and level of discounts and rebates that will be granted.

The estimate is updated throughout the term of the contract.

Signify does not adjust the transaction price for the effects of significant financing component

if, at contract inception, it is expected that the period between customer payment and the

transfer of goods or services is one year or less. This applies to most sales transactions.

Other

Payments made to customers for distinct goods or services are excluded from revenue

recognized and recorded as part of Selling, general and administrative expenses.

Signify may incur costs for obtaining a contract, including payments made to agents that depend

on winning the contract. Signify applies the practical expedient from IFRS 15, allowing the

incremental costs of obtaining a contract to be expensed if the associated amortization period

is 12 months or less. As a result, no amounts of contract costs are recognized in the balance

sheet.

Contract assets and liabilities

Contract assets mostly comprise of unbilled positions, where Signify has, partially or in full,

satisfied performance obligations but not yet billed the customer. These are recorded under

either Other current assets or Other non-current assets. The contract assets are transferred

to receivables when the rights become unconditional, which is mostly when the customer is

billed.

Contract liabilities consist of deferred income and payments received in advance and are

recorded under Other current liabilities and Other non-current liabilities. Deferred income

includes balances related to extended warranty, life-cycle services as well as other services

such as cloud-enabled services. Advances from customers mostly comprises payments received

in advance for projects, for which Signify still needs to satisfy (part of) the performance

obligations.

Income and expenses

Signify applies accrual accounting. This means that expenses are recognized when incurred and

Income is recognized when earned, irrespective of the actual cash flows.

Consideration received from customers for shipping and handling is recognized as Sales.

Shipping and handling expenses related to sales to third parties are generally recorded as

Selling, general and administrative expenses. When shipping and handling are distinct

performance obligations, then the related expenses are recorded as Cost of sales.

Advertising and promotion costs and costs related to the brand license fee are included in

Selling, general and administrative expenses.

Inventories

Inventories are stated at the lower of cost and net realizable value. The cost of inventories

comprises all costs of purchase, costs of conversion and other costs incurred in bringing the

inventories to their present location and condition. The costs of conversion of inventories

include direct labor and fixed and variable production overheads, considering the stage of

completion and the normal capacity of production facilities. Costs of idle facility and abnormal

waste are expensed. The cost of inventories is determined using the first-in, first-out (FIFO)

method. Due to price erosion and technological developments, inventory valuation requires

forward looking estimates on future sales levels, future price erosion and related expected

gross margin percentages. On each reporting date, management performs an analysis of net

realizable values and determines the lower of cost and net realizable value to measure its

inventories. The write-down is included in Cost of sales.

Financial instruments

Recognition

A financial asset or liability is recognized when Signify becomes party to a contract that is a

financial instrument. Regular way purchases and sales of financial instruments are accounted for

at the trade date. Initial measurement of financial assets and liabilities is at fair value. Dividend

income is recognized when declared.

Classification and measurement

The classification and subsequent measurement of financial assets depends on Signify’s

business model for managing the financial assets and the contractual terms of the cash flows

and solely payments of principal and interest (SPPI) test. Signify performs the analysis

instrument by instrument, utilizing contract details, business model and objective of the

instrument in order to classify financial asset or liability into one of the following categories:

•Financial assets at amortized cost as the business model for these instruments is hold-to-

collect contractual cash flows. These are mainly Trade and Other Receivables, which are

subsequently measured at amortized cost using the effective interest method, less loss

allowance and net of discounts given or agreed if the offset requirements are met.

Signify Annual Report 2021

•Financial assets at fair value via profit and loss (FVPL), as the business model for these

instruments is held for trading. Derivatives and other financial assets at fair value are Included

in this category.

•Financial assets at fair value through other comprehensive income (FVOCI) with no

subsequent reclassification of fair value gains and losses to profit or loss following the

derecognition of the investment as the business model for these instruments is hold-to-

collect contractual cash flows and sell. Minor equity investments are included in this category.

•Financial liabilities are all classified as subsequently measured at amortized cost, except for

financial liabilities at fair value via profit and loss. Examples are derivatives, contingent

consideration in a business acquisition, to which IFRS 3 applies. Such contingent consideration

shall subsequently be measured at fair value with changes recognized in profit or loss.

Netting of financial assets and liabilities

Signify presents financial assets and financial liabilities on a gross basis as separate line items in

the Consolidated statement of financial position, unless the offset criteria are met.

The offsetting criteria are met if Signify has a legal right to offset financial assets with financial

liabilities and if Signify intends either to settle on a net basis or to realize the asset and settle

the liability simultaneously. To meet the requirement, the right of set-off should be available

today and not contingent on a future event and it should be legally enforceable for all

counterparties in a normal course of business, as well as in the event of default, insolvency or

bankruptcy.

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar

financial assets) is primarily derecognized when:

•The rights to receive cash flows from the asset have expired

•Signify has transferred its rights to receive cash flows from the asset or has assumed an

obligation to pay the received cash flows in full without material delay to a third party under a

‘pass-through’ arrangement; and either (a) Signify has transferred substantially all the risks

and rewards of the asset, or (b) Signify has neither transferred nor retained substantially all

the risks and rewards of the asset, but has transferred control of the asset.

When Signify has neither transferred nor retained substantially all of the risks and rewards of

the asset, nor transferred control of the asset, Signify continues to recognize the transferred

asset to the extent of its continuing involvement. In that case, Signify also recognizes an

associated liability. The transferred asset and the associated liability are measured on a basis

that reflects the rights and obligations that Signify has retained.

Impairment of trade receivables and contract assets

Signify estimates lifetime expected loss allowance for all Trade receivables and Contract assets

via calculating the expected credit losses. Trade receivables and contract assets are grouped

based on shared credit risk characteristics and the days past due whereby the lifetime expected

credit loss on the Trade receivables is recognized based on a matrix model calculated per

country, which utilizes historical recoverability data and default probability per country.

As soon as individual trade accounts receivable can no longer be collected in a normal course of

business and are expected to result in a loss, they are designated as doubtful trade accounts

receivable and valued at the expected collectible amounts. They are written off when they are

deemed to be uncollectable because of bankruptcy or other form of receivership at the

debtors. Any previously recognized expected loss is offset against the carrying amount of such

trade receivable and the difference is taken as a loss accounted for within Selling, general and

administrative expenses.

Impairment of other financial assets

Signify assesses on a forward-looking basis the expected credit loss associated with its debt

instruments carried at amortized cost. Signify determines impairment amount based on the

three stages of credit risk deterioration. The criteria to pass on to the next stage of the credit

deterioration Is established for individual financial assets or group of financial assets with similar

characteristics, considering credit risk profile of the counterparty, historical default data and

macroeconomic factors.

Derivatives and hedge accounting

At inception of the hedge relationship, Signify documents the economic relationship between

hedging instruments and hedged items including whether changes in the cash flows of the

hedging instruments are expected to offset changes in the cash flows of hedged items. Signify

documents its risk management objective and strategy for undertaking its hedge transactions.

For foreign currency forwards, Signify designates the spot component of the change in fair

value in cash flow hedge relationships. The spot component is determined with reference to the

relevant spot market exchange rates. The differential between the contracted forward rate and

the spot market exchange rate is defined as forward points. It is discounted, where material.

Changes in the fair value related to forward points are continuously recognized in the statement

of profit or loss.

Signify hedges its investments in certain subsidiaries by entering derivatives which mitigate the

foreign currency translation risk arising from the subsidiaries net assets. Such hedge is

accounted for as a net investment hedge. Signify designates full instrument in the hedge

relationship. The result of hedging of the translation risk, using net investment hedges is

recognized in the Currency translation differences within equity, as can be seen in the

Consolidated statement of comprehensive income as long as the hedge is effective.

Signify Annual Report 2021

Signify measures all derivative financial instruments at fair value derived from market prices of

the instruments or calculated as the present value of the estimated future cash flows based on

observable interest yield curves, basis spread and foreign exchange rates. These calculations

are tested for reasonableness by comparing the outcome of the internal valuation with the

valuation received from the counterparty.

Signify monitors that the economic relationship between the hedged item and hedging

instrument and hedge ratio is the same as the one Signify uses for the risk management

purposes. A prospective effectiveness test is performed to prove that the hedge is effective.

For the prospective effectiveness test Signify utilizes the dollar offset method.

If the hedge ratio for risk management purposes is no longer optimal due to the different timing

or amount of the underlying transaction, but the risk management objective remains unchanged

and the hedge continues to qualify for hedge accounting, Signify performs re-balancing of the

hedge relationship by adjusting either the volume of the hedging instrument or the volume of

the hedged item, so that the hedge ratio aligns with the ratio used for the risk management

purposes. Gains and losses that were accumulated in equity related to an ineffective portion of

hedge, Signify records immediately in the Consolidated statement of income when such

ineffectiveness occurs.

The derivatives related to transactions are, for hedge accounting purposes, split into hedges of

on-balance-sheet accounts receivable/payable and forecasted sales and purchases. Gains or

losses arising from changes in fair value of derivatives are recognized within the Cost of sales in

the Consolidated statement of income, except for derivatives that are effective and qualify for

cash flow hedge accounting which are recorded in Other comprehensive income until the

Consolidated statement of income is affected by the variability in cash flows of the designated

hedged item. Changes in the fair value of hedges related to intercompany loans and deposits are

recognized within Financial income and expenses in the Consolidated statement of income.

The derivatives used by Signify can be subject to master netting and set-off agreements with

financial counterparties. In case of certain termination events, under the terms of these Master

Agreements, Signify can terminate the outstanding transactions and aggregate their positive

and negative values to arrive at a single net termination sum (or close-out amount). This

contractual right is, amongst others, subject to the following:

•The right may be limited by local law if the counterparty is subject to bankruptcy proceedings.

•The right applies on a bilateral basis.

Income taxes

Income tax comprises current and deferred tax. Income tax is recognized in the Consolidated

statement of income except to the extent that it relates to items recognized directly within

equity or in Other comprehensive income. Current tax is the expected tax payable on the

taxable income for the year, using tax rates enacted or substantially-enacted at the reporting

date, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities are recognized, using the balance sheet method, for the

expected tax consequences of temporary differences between the carrying amounts of assets

and liabilities and the amounts used for taxation purposes. Deferred tax is not recognized for

the following temporary differences: the initial recognition of goodwill, the initial recognition of

assets and liabilities in a transaction that is not a business combination and that affects neither

accounting nor taxable profit, and differences relating to investments in subsidiaries to the

extent that they probably will not reverse in the foreseeable future.

Deferred tax is measured at the tax rates that are expected to be applied to temporary

differences when they reverse, based on the laws that have been enacted or substantially

enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset

current tax liabilities and assets, and they relate to income taxes levied by the same tax

authority on the same taxable entity or on different tax entities, but they intend to settle

current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized

simultaneously.

Deferred tax liabilities for withholding taxes are recognized for subsidiaries in situations where

the income is to be paid out as dividend in the foreseeable future and for undistributed earnings

of unconsolidated companies to the extent that these withholding taxes are not expected to be

refundable or deductible.

Changes in tax rates are reflected in the period when the change has been enacted or

substantially enacted by the reporting date.

Deferred tax assets

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary

differences, to the extent that it is probable that future taxable profits will be available against

which they can be utilized. The evaluation of the recoverability of deferred tax assets requires

judgment about the future taxable profitability of the legal entity holding the tax loss carry

forward. The ultimate realization of deferred tax assets is dependent upon the generation of

future taxable income in the countries where the deferred tax assets originated and during the

periods when the deferred tax assets become deductible. Management considers the

scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning

strategies in making this assessment. A lack of future taxable profits or taxable profits below the

level of current estimates, may cause deferred tax assets to be impaired.

Signify Annual Report 2021

The ultimate tax effects of transactions may be uncertain for a considerable period of time,

requiring management to estimate the related current and deferred tax treatments. In

assessing the uncertainty, Signify considers whether it is probable that a taxation authority will

accept or revise the uncertain tax treatment. Income tax payable include liabilities for uncertain

tax positions which are recognized when it is probable that tax will be due. To the extent

uncertain tax positions relate to deferred tax assets these are offset against each other. Actual

tax assessments in relation to these uncertain tax positions may significantly deviate from

estimates.

In determining the amount of current and deferred income tax, Signify takes into account the

impact of uncertain tax positions and whether additional taxes and interest may be due. This

assessment relies on estimates and assumptions and may involve a series of judgments about

future events. New information may become available that causes Signify to change its judgment

regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact the

income tax expense in the period that such a determination is made.

Provisions

Provisions are recognized if, as a result of a past event, Signify has a present legal or

constructive obligation, it is probable that an outflow of economic benefits will be required to

settle the obligation and a reliable estimate can be made of the amount of the obligation.

Provisions are measured at the present value of the expenditures expected to be required to

settle the obligation using a pre-tax discount rate that reflects current market assessments of

time value of money. The increase in the provision due to passage of time is recognized as

interest expense. Significant judgment is required in determining the amount and probability of

resources outflow and discount rates used to calculate the present value of this outflow. A

liability is recognized if timing and amount of the settlement can be reliably estimated.

The accounting and presentation for some of Signify’s provisions is as follows:

•Restructuring related provisions - The provision for restructuring relates to the estimated

costs of programs that are planned and controlled by management that materially change the

scope of our business or the manner in which it is conducted. A provision is recognized when

Signify has a detailed formal plan for the restructuring and has raised a valid expectation that

Signify will carry out the restructuring by starting to implement the plan, or by announcing the

plan's main features to those affected by it.

•Environmental provisions - Measurement of liabilities associated with environmental

obligations is based on current legal and constructive requirements. Liabilities and expected

insurance recoveries, if any, are recorded separately. The carrying amount of environmental

provisions is regularly reviewed and adjusted for new facts and changes in law.

•Product warranty - A provision for product warranty is made at the time of revenue

recognition and reflects the estimated costs of replacement and free-of-charge services

that will be incurred by Signify with respect to the products. The provision is based on

historical warranty data and a weighing of possible outcomes against their associated

probabilities.

•Litigation provisions – In relation to legal claim provisions and settlements, the relevant

balances are transferred to Other liabilities at the point the amount and timing of cash flows

are no longer uncertain. Settlements which are agreed for amounts in excess of existing

provisions are reflected as payables.

•Onerous contract provisions - Provisions are recognized for a contract if it is onerous. The

present obligation under the contract is measured and recognized as a provision. An onerous

contract is a contract under which the unavoidable costs of meeting the obligations under

the contract exceed the economic benefits expected to be received under it.

Guarantees

When the potential cash outflow is possible or remote and the risk covered by a guarantee is

not a financial risk, Signify applies off-balance sheet treatment to such guarantees. For

example, environmental remediation and legal proceedings. When the expectation of the cash

outflow becomes probable such guarantees become provisions, see guidance above.

When guarantees are covering credit risk or any other financial risk they are accounted for as

financial assets and liabilities.

Leases

Signify entered into contracts that conveys the right to use the identified asset and as such

Signify accounted for these contracts as a lessee.

Right-of-use assets

Signify recognizes right-of-use assets at the commencement date of the lease (i.e., the date

the underlying asset is available for use). Right-of-use assets are initially measured at cost, less

any accumulated depreciation and impairment losses, and adjusted for any remeasurement of

lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities

recognized, initial direct costs incurred, and lease payments made at or before the

commencement date less any lease incentives received. Unless Signify is reasonably certain to

obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use

assets are depreciated on a straight-line basis over the shorter of its estimated useful life and

the lease term. Right-of-use assets are subject to impairment.

Lease liabilities

At the commencement date of the lease, Signify recognizes lease liabilities measured at the

present value of lease payments to be made over the lease term. The lease payments include

(in-substance) fixed payments (less any lease incentives), variable lease payments that depend

on an index or a rate, and amounts expected to be paid under residual value guarantees. The

lease payments also include the exercise price of a purchase option reasonably certain to be

Signify Annual Report 2021

exercised by Signify and payments of penalties for terminating a lease, if the lease term reflects

Signify exercising the option to terminate. In calculating the present value of lease payments,

Signify uses the incremental borrowing rate at the lease commencement date if the interest

rate implicit in the lease is not readily determinable. After the commencement date, the amount

of lease liabilities is increased to reflect the accretion of interest and reduced for the lease

payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a

modification, a change in the lease term, a change in the in-substance fixed lease payments or a

change in the assessment to purchase the underlying asset.

Short-term leases and leases of low-value assets

Signify applies the short-term lease recognition exemption to its short-term leases for real

estate (i.e., those leases that have a lease term of 12 months or less from the commencement

date and do not contain a purchase option). It also applies the lease of low-value assets

recognition exemption to leases of office equipment that are considered of low value. Lease

payments on short-term leases and leases of low-value assets are recognized as expense on a

straight-line basis over the lease term.

Significant judgment in determining the lease term of contracts with renewal options

Signify determines the lease term as the non-cancellable term of the lease, together with any

periods covered by an option to extend the lease if it is reasonably certain to be exercised, or

any periods covered by an option to terminate the lease, if it is reasonably certain not to be

exercised. When determining the lease term, Signify considers all relevant facts and

circumstances that create an economic incentive to exercise an extension option, or not to

exercise a termination option. These circumstances include Signify’s strategic plans, the

industrial footprint of Signify and divisions and the importance of the site to Signify’s operations.

Goodwill

The measurement of goodwill at initial recognition is described under accounting policy,

Business combinations, above. Goodwill is subsequently measured at cost, less accumulated

impairment losses. In respect of investments in associates, the carrying amount of goodwill is

included in the carrying amount of the investment, and an impairment loss on such investment is

allocated to the investment as a whole.

Intangible assets other than goodwill

The fair value of other intangible assets, mainly customer relations, brand names and technology

based intangibles acquired through business combinations is determined using a valuation

technique that estimates the fair value of an asset based on market participants' expectations

of the cash flows associated with that asset over its remaining useful life. Acquired finite-lived

intangible assets are amortized using the straight-line method over their estimated useful life.

The useful lives are evaluated annually. Intangible assets are initially capitalized at cost, with the

exception of intangible assets acquired as part of a business combination that are capitalized at

their acquisition-date fair value.

Expenditure on development activities, whereby research findings are applied to a plan or design

for the production of new or substantially improved products and processes, is capitalized as an

intangible asset if the product or process is technically and commercially feasible, cost can be

reliably measured, Signify has sufficient resources and the intention to complete development.

The development expenditure capitalized comprises all directly attributable costs (including the

cost of materials and direct labor). Other development expenditures and expenditures on

research activities are recognized in the Consolidated statement of income. Capitalized

development expenditure is stated at cost less accumulated amortization and impairment

losses. Amortization of capitalized development expenditure is charged to the Consolidated

statement of income on a straight- line basis over the estimated useful lives of the intangible

assets in Research and development expenses.

Amortization of other intangible assets is reported in Selling, general and administrative

expenses for brand names and customer relationships and in Cost of sales for technology-

based and other intangible assets.

The expected useful lives in years of intangible assets excluding goodwill are as follows:

Product development

from 1 to 5

Software

from 1 to 10

Technology

from 1 to 20

Customer relations

from 2 to 20

Brand names

from 2 to 20

Other

from 2 to 10

Impairment of goodwill and intangible assets not yet ready for use

Goodwill and intangible assets not yet ready for use are not amortized but tested for impairment

annually and whenever impairment indicators require impairment testing. Signify performed and

completed annual impairment tests in the last quarter of the financial year. Judgment is required

when analyzing impairments triggers and tests of goodwill and intangible assets not yet ready for

use. These analyses are based on the estimation of the recoverable amount. The review for

impairment is carried out at the level where cash flows occur that are independent of other

cash flows.

An impairment loss is recognized in the Consolidated statement of income whenever and to the

extent that the carrying amount of a cash-generating unit exceeds the unit’s recoverable

amount, which is the greater of its value in use and fair value less costs of disposal. Value in use

Signify Annual Report 2021

or fair value less costs of disposal is measured as the present value of future cash flows

expected to be generated by the asset via its use or sale with deduction of costs directly

associated with its use or sale.

Impairment of non-financial assets other than goodwill, intangible assets not

yet ready for use, inventories and deferred tax assets

Non-financial assets other than goodwill, intangible assets not yet ready for use, inventories and

deferred tax assets are reviewed for impairment whenever events or changes in circumstances

indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets

to be held and used is assessed by a comparison of the carrying amount of an asset with the

greater of its value in use and fair value less costs of disposal. Value in use is measured as the

present value of future cash flows expected to be generated by the asset. If the carrying

amount of an asset is deemed not recoverable, an impairment charge is recognized in the

amount by which the carrying amount of the asset exceeds the recoverable amount. The review

for impairment is carried out at the level where cash flows occur that are independent of other

cash flows.

Impairment losses recognized in prior periods are assessed at each reporting date for any

indications that the loss has decreased or no longer exists. An impairment loss is reversed if and

to the extent there has been a change in the estimates used to determine the recoverable

amount. The loss is reversed only to the extent that the asset’s carrying amount does not

exceed the carrying amount that would have been determined, net of depreciation or

amortization, if no impairment loss had been recognized. Reversals of impairment are recognized

in the Consolidated income statement.

Pension and other employee benefits

Defined-benefit plans

Signify’s retirement benefit obligation is calculated by an independent actuary, using the

projected unit credit method. This calculation is performed separately for each plan by

estimating the amount of the benefit that employees have earned in relation to their past

services. The measurement date for all defined benefit plans is December 31. For plans with a

relatively low defined-benefit obligation, Signify may decide to calculate the defined-benefit

obligation with a lower frequency. The liability recognized in the Consolidated statement of

financial position is the present value of these benefits at the end of the reporting period

(defined-benefit obligation) less the fair value of plan assets. The defined-benefit obligation is

determined by discounting the estimated future cash flows using a discount yield curve of high-

quality corporate bonds with durations matching the terms of the benefits.

The increase in the defined-benefit obligation due to the passage of time and the expected

return on plan assets, using the same interest rate as for the defined-benefit obligation, are

included in the pension costs. Interest on the net defined-benefit obligation is recognized in

Financing income and expenses in the Consolidated income statement.

Past-service costs are recognized immediately in the Personnel costs in the Consolidated

income statement. Actuarial gains and losses arising from experience adjustments and changes

in actuarial assumptions are charged or credited to equity via other comprehensive income in

the period in which they arise.

When a plan is changed, settled or when a plan is curtailed, the resulting change in the defined-

benefit obligation that relates to past-service or the gain or loss on curtailment is recognized

immediately in the statement of income. Signify recognizes gains and losses on the settlement of

a defined-benefit plan when the settlement occurs.

Signify presents all net defined-benefit post-employment obligations on one line within non-

current liabilities on the Statement of financial position.

Defined-contribution plans

Contributions to defined-contribution plans are recognized in the Consolidated income

statement in Personnel expenses as incurred.

Termination benefits

Termination benefits are payable when employment is terminated by Signify before the normal

retirement date, or whenever an employee accepts voluntary redundancy in exchange for these

benefits. Signify recognizes termination benefits when they are demonstrably committed to a

termination and when they have a detailed formal plan to terminate the employment of current

employees without possibility of withdrawal. In the case of an offer made to encourage voluntary

redundancy, the termination benefits are measured based on the number of employees

expected to accept the offer.

Other employee benefits

Signify’s net obligation in respect of long-term employee benefits is the amount of future

benefit that employees have earned in return for their service in the current and prior periods,

such as jubilee entitlements. That benefit is discounted to determine its present value.

Remeasurements are recognized in the Consolidated statement of income in the period in which

they arise.

Short-term employee benefit obligations are measured on an undiscounted basis. Signify

recognizes a liability and an expense for bonuses and incentives based on a formula that takes

into consideration the profit attributable to Signify’s shareholders after certain adjustments.

Signify Annual Report 2021

Cash and cash equivalents

Cash and cash equivalents include all cash balances and short-term highly liquid investments

with an original maturity of three months or less that are readily convertible into known amounts

of cash. Bank overdrafts form an integral part of Signify’s cash management and often fluctuate

from being positive to overdrawn and are included as a component of cash and cash equivalents

for the purpose of the statement of cash flows.

Assets held for sale

Non-current assets (disposal groups comprising assets and liabilities) that are expected to be

recovered primarily through sale rather than through continuing use are classified as held for

sale. Non-current assets held for sale are carried at the lower of carrying amount or fair value

less cost to sell. Comparatives in the balance sheet are not changed when a non-current asset

is classified as held-for-sale.

Hyperinflationary economies

When the economy of a country in which Signify operates is deemed hyperinflationary and the

functional currency of a Signify entity is the currency of that hyperinflationary economy, the

financial statements of such entity are adjusted so that they are stated in terms of the

measuring unit current at the end of the reporting period. This involves restatement of income

and expenses to reflect changes in the general price index from the start of the reporting

period and restatement of non-monetary items in the balance sheet, such as property, plant

and equipment and inventory to reflect current purchasing power as at the period end using a

general price index from the date when they were first recognized. Comparative amounts are

not adjusted. Any differences arising were recorded in equity on adoption.

Equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance

of shares are recognized as a deduction from equity. Dividends are recognized as a liability in the

period in which they are declared. The income tax consequences of dividends are recognized

when a liability to pay the dividend is recognized.

Treasury shares that are reacquired are recognized at cost, representing the market price on

the acquisition date, and deducted from equity until the shares are cancelled or reissued. When

reissued, shares are removed from treasury shares on a first-in, first-out (FIFO) basis. When

treasury shares are delivered under Signify’s share plans, the difference between the market

price of the shares delivered and the cost is recorded in retained earnings, the market price is

recorded in share premium. Upon cancellation, treasury shares are deducted from the share

capital at their nominal value of EUR 0.01 per share and retained earnings for the difference.

Costs including dividend withholding tax in connection with Signify’s purchase of treasury shares

for capital reduction purposes are recorded in retained earnings.

Property, plant and equipment

Property, plant and equipment are measured at cost less accumulated depreciation and

accumulated impairment losses. The useful lives and residual values are evaluated annually. The

costs of property, plant and equipment comprise of all directly attributable costs (including the

cost of materials and direct labor). Government grants for assets are deducted from the cost of

the related asset.

Depreciation of property, plant and equipment, other than freehold land, is calculated using the

straight-line method taking into account the residual values and estimated useful lives and is

primarily included in Cost of sales. Freehold land is not depreciated. Gains and losses on the sale

of property, plant and equipment are included in Other business income. Costs related to repair

and maintenance activities are expensed in the period in which they are incurred unless leading

to an extension of the original lifetime of capacity.

The expected useful lives in years of property, plant and equipment are as follows:

Building

from 5 to 50

Machinery and installations

from 3 to 20

Other equipment

from 1 to 10

Right-of-use assets

from 2 to 20

Share-based compensation expenses

The cost of equity-settled transactions is determined by the fair value at the grant date using an

appropriate valuation model.

The grant-date fair value of equity-settled share-based payment awards granted to employees

is recognized as personnel expense, with a corresponding increase in equity, over the vesting

period of the award. The cumulative expense recognized for equity-settled transactions at each

reporting date reflects the extent to which the vesting period has expired and Signify’s best

estimate of the number of equity instruments that will ultimately vest. The expense or credit in

the statement of profit or loss for a period represents the movement in cumulative expense

recognized as at the beginning and end of that period.

Service and non-market performance conditions are not considered when determining the

grant date fair value of awards, but the likelihood of the conditions being met is assessed as part

of Signify’s best estimate of the number of equity instruments that will ultimately vest. Market

performance conditions are reflected within the grant date fair value.

No expense is recognized for awards that do not ultimately vest because non-market

performance and/or service conditions have not been met. Where awards include a market or

non-vesting condition, the transactions are treated as vested irrespective of whether the

100

Signify Annual Report 2021

market or non-vesting condition is satisfied, provided that all other performance and/or service

conditions are satisfied.

Consolidated statement of cash flows

The Consolidated statement of cash flows is prepared using the indirect method. Cash flows

from derivative instruments that are accounted for as cash flow hedges are classified in the

same category as the cash flows from the hedged items. Cash flows from other derivative

instruments are classified consistent with the nature of the instrument. Cash flows in foreign

currencies have been translated into euros using the exchange rate at the date of the cash

flow.

Earnings per share

Signify presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic

EPS is calculated by dividing the Net income (loss) attributable to shareholders of Signify N.V. by

the weighted average number of ordinary shares outstanding during the period, adjusted for

own shares held. Diluted EPS is determined by adjusting the Net income (loss) attributable to

shareholders and the weighted average number of ordinary shares outstanding during the

period, adjusted for own shares held, for the effects of all dilutive potential ordinary shares,

which comprises of restricted shares, conditional shares and performance shares granted to

employees.

Government grants

Grants from the government are recognized at their fair value where there is a reasonable

assurance that the grant will be received, and Signify will comply with all attached conditions.

Government grants relating to costs are deferred and recognized in the Consolidated

statement of income over the period necessary to match them with the costs that they are

intended to compensate.

3Information by segment and main country

Operating segments are components of Signify’s business activities about which separate

financial information is available that is evaluated regularly by the chief operating decision maker

(the Board of Management of Signify). The operating segments are Digital Solutions, Digital

Products and Conventional Products. The segments are organized based on the nature of the

products and services. ‘Other’ represents amounts not allocated to the operating segments

and includes certain costs related to central R&D activities to drive innovation as well as group

enabling functions.

The following is an overview of Signify revenues and results by segment:

Digital

Solutions 5

Digital

Products

Conventional

Products

Other 4

Inter-

segment

elimination

Signify

2021

Sales to external customers

3,524

2,452

861

6,860

Sales including

intersegment

3,527

2,673

868

(230)

6,860

Depreciation and

amortization 1

(79)

(28)

(18)

(65)

(190)

EBITA 2

318

323

158

(164)

636

EBITA as a % of sales

9.0%

13.2%

18.4%

9.3%

Amortization 3

(122)

Income from operations

205

316

158

(165)

514

Financial income and

expenses

(24)

Results from investments in

associates

—

Income before taxes

490

2020

Sales to external customers

3,252

2,288

943

6,502

Sales including

intersegment

3,255

2,455

949

(178)

6,502

Depreciation and

amortization 1

(81)

(30)

(71)

(211)

EBITA 2

230

277

149

(120)

536

EBITA as a % of sales

7.1%

12.1%

15.8%

8.2%

Amortization 3

(120)

Income from operations

119

269

149

(122)

416

Financial income and

expenses

(54)

Results from investments in

associates

—

Income before taxes

362

1Excluding amortization and impairments of acquisition-related intangible assets and goodwill.

2Income from operations excluding amortization and impairments of acquisition-related intangible assets and goodwill

(“EBITA”).

3Amortization and impairments of acquisition-related intangible assets and goodwill.

4Considering the nature of Other, EBITA as a % of sales for Other is not meaningful.

5Includes Cooper Lighting from March, 2020.

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Signify Annual Report 2021

Sales between the segments mainly relate to the supply of goods. The pricing of such

transactions is determined on an ‘arm’s length basis’.

Signify has no external customer that represents 10% or more of total sales.

Sales, tangible and intangible assets by main countries:

Sales

Tangible and intangible

assets 1

2020 2

2021

2020 2

2021

Netherlands

517

547

466

555

United States

2,021

2,136

2,261

2,311

China

556

567

291

329

Germany

395

382

India

235

263

France

239

255

Saudi Arabia

140

122

137

136

Other countries

2,398

2,588

522

526

Total countries

6,502

6,860

3,734

3,917

1Includes goodwill.

2Includes Cooper Lighting from March, 2020.

Disaggregated revenue information

Total sales consist primarily of the sales of goods to customers (2021: 96%, 2020: 96%).

Remaining sales include revenue from services, and sales- and usage-based royalties. The

amount of revenue recognized for the year ended December 31, 2021 from performance

obligations satisfied (or partially satisfied) in previous periods amounts to EUR 47 million (2020:

EUR 55 million).

Sales by market:

2020 2

2021 2

Europe

2,066

2,130

Americas 1

2,437

2,581

Rest of the world

1,507

1,606

Global businesses

492

543

Total

6,502

6,860

1Includes Cooper Lighting from March, 2020.

2Effective Q1 2021, WiZ Connected is included in Market Groups Europe, Americas and Rest of the world (was previously part

of Global businesses). Prior year amounts were adjusted to conform to the current year presentation.

4Income from operations

Note

2020

2021

Sales

6,502

6,860

Cost of materials used

(2,816)

(2,916)

Employee benefit expenses

(1,723)

(1,798)

Depreciation and amortization

(332)

(312)

Shipping and handling

(283)

(371)

Advertising and promotion

(135)

(136)

Lease related expenses

(29)

(36)

Other operational costs

(773)

(788)

Other business income, net

Income from operations

416

514

Other operational costs contain items which are dissimilar in nature and individually insignificant

in amount to disclose separately. These costs contain, among others, expenses for outsourcing

services, mainly in IT and HR, third-party workers, utilities and repair and maintenance for fixed

assets.

5Employee benefit expenses

Personnel expenses by nature as included in the Consolidated statement of income:

Note

2020

2021

Salaries and wages

(1,080)

(1,111)

Social securities

(166)

(194)

Defined contribution plans

(73)

(74)

Cost of termination plans

(61)

(68)

Temporary personnel

(82)

(101)

Share-based compensation

(35)

(31)

Other

(225)

(218)

Total

(1,723)

(1,798)

Other personnel expenses mainly relate to travel expenses, incentives and other personnel

related costs.

102

Signify Annual Report 2021

The average number of full-time equivalent (FTE) employees is summarized as follows:

In FTEs

2020

2021

Employees

31,692

33,056

Third party workers

4,050

4,698

Total 1

35,743

37,754

12,339 FTEs work in the Netherlands (2020: 2,512); the remaining FTEs work abroad.

6Depreciation, amortization and impairment

Note

2020

2021

Property, plant and equipment

(191)

(165)

Internal-use software

(6)

(10)

Other intangible assets

(120)

(122)

Development costs

(14)

Total

(332)

(312)

7Other business income and expenses

2020

2021

Result on disposal of businesses:

• Income

—

• Expense

(1)

—

Result on disposal of fixed assets:

• Income

• Expense

(1)

—

Result on other remaining businesses:

• Income

• Expense

(5)

(8)

Other business income and expenses

Total other business income

Total other business expense

(7)

(8)

In 2021, the result on disposal of fixed assets includes a EUR 10 million income related to a sale of

real estate in Conventional Products, in India.

The net result on other remaining businesses includes a EUR 3 million expense (2020: EUR 3

million income) from the movements in the indemnification positions with Koninklijke Philips N.V.

originating from the separation.

8Financial income and expenses

Note

2020

2021

Interest income

Change in fair value of financial assets at fair

value through profit or loss

Other financial income

—

Financial income

Interest expense

(39)

(33)

Interest on the net defined-benefit obligation

(8)

(6)

Interest expense on lease liability

(7)

Change in fair value of financial assets at fair

value through profit or loss

(3)

(2)

Net foreign exchange gains (losses)

(2)

Impairment loss of financial assets

—

Other financial expenses

(14)

(7)

Financial expenses

(72)

(57)

Financial income and expenses

(54)

(24)

103

Signify Annual Report 2021

9Income taxes

The components of income tax expense were as follows:

2020

2021

Current tax expense

(142)

(78)

Prior year benefit (expense)

Current tax expense

(139)

(76)

2020

2021

Origination and reversal of tax losses, tax credits and

temporary differences

121

(28)

Change in tax losses, tax credits and temporary differences

recognized

(16)

Tax rate changes

Prior year benefit (expense)

(4)

(3)

Deferred tax benefit (expense)

112

(7)

Signify’s operations are subject to income taxes in various jurisdictions. The statutory income tax

rates vary from 9% to 35%, which results in a difference between the weighted average

statutory income tax rate and the Netherlands’ statutory income tax rate of 25% (2020: 25%). A

reconciliation of the weighted average statutory income tax rate to the effective income tax

rate is as follows:

2020

2021

Income before taxes

362

490

Weighted average statutory income tax rate

(27)

(7)%

(110)

(22)%

Non-deductible expenses

(15)

(4)%

(14)

(3)%

Tax incentives and exempt income

136

38%

Deferred tax expense related to (de)recognition of

deferred tax assets - net

(16)

(4)%

Changes in the liability for uncertain tax positions

(111)

(31)%

(4)

(1)%

Prior year tax expense

(1)

—%

(1)

—%

Changes in tax rates

Other

(4)

(1)%

(7)

(1)%

Income tax expense recognized in Consolidated

statements of income

(27)

(8)%

(83)

(17)%

The weighted average statutory income tax rate increased by 15% in 2021 compared to 2020, as

a consequence of a significant change in the geographic mix of income before tax mainly due to

one-off transactions in relation to business integration in 2020.

The effective tax rate was 17% in 2021 (2020: 8%), which is lower than the statutory income tax

rate of 25% in the Netherlands. The difference is primarily due to the recognition of deferred

tax assets as a result of Signify's determination that sufficient positive evidence exists to

support a probable estimation that these deferred tax assets are realizable, one-off non-cash

tax benefits from a business integration, offset by an increase of our liabilities for uncertain tax

positions.

The line item "Changes in tax rates" includes a non-cash tax benefit of EUR 7 million related to

the revaluation of the deferred tax assets following the planned statutory tax rate increase in

the Netherlands. The effects of tax rate changes are included in the reported tax balances

based on the information available per reporting date.

The increase in effective income tax rate in 2021 of 9% compared to 2020 is mainly due to lower

non-cash benefits from the revaluation of deferred tax assets and business integration. For

2020, the impact of business integration is included in the "Tax incentives and exempt income"

line offset by "changes in the liability for uncertain tax positions" and "changes in tax rates". In

addition, for 2020 the line item "Changes in tax rates" includes a non-cash tax benefit of EUR 32

million related to the revaluation of the deferred tax assets following the cancellation of the

planned statutory tax rate decrease in the Netherlands.

104

Signify Annual Report 2021

Recognized deferred tax assets and liabilities

In millions of EUR

Assets

Liabilities

Net

2021

Intangible assets

252

(83)

169

Property, plant and equipment

(44)

(32)

Inventories

(1)

Other receivables and assets

(9)

Provisions for pensions and other post-retirement

—

Provisions for termination benefits

—

Other provisions

—

Other liabilities

(19)

Deferred tax assets on tax attributes 1

—

Total allocations

609

(155)

454

Set-off of deferred tax

(128)

128

—

Net deferred tax assets

481

(27)

454

2020

Intangible assets

296

(108)

188

Property, plant and equipment

(44)

(23)

Inventories

Other receivables and assets

(6)

Provisions for pensions and other post-retirement

—

Provisions for termination benefits

—

Other provisions

—

Other liabilities

(29)

Deferred tax assets on tax attributes 1

—

Total allocations

639

(187)

452

Set-off of deferred tax

(166)

166

—

Net deferred tax assets

473

(22)

452

1Tax loss carryforwards (including tax credit carryforwards).

The net deferred tax assets of EUR 454 million (2020: EUR 452 million) consists of deferred tax

assets of EUR 481 million (2020: EUR 473 million) in countries with a net deferred tax asset

position and deferred tax liabilities of EUR 27 million (2020: EUR 22 million) in countries with a net

deferred tax liability position. An amount of EUR 125 million of deferred tax assets relates to

several tax jurisdictions in which Signify has suffered a loss in the current or preceding period.

Management’s projections support the assumption that it is probable that the results of future

operations will generate enough taxable income to utilize these deferred tax assets.

Movement in deferred tax balances during 2021 and 2020 were as follows:

In millions of EUR

Balance

as at

January 1

Recognized

in income

Other

Balance

as at

December 31

2021

Intangible assets

188

(12)

(7)

169

Property, plant and equipment

(23)

(14)

(32)

Inventories

Other receivables

(16)

(1)

Provisions:

• pensions and other post-retirement

benefits

(7)

(1)

• termination benefits

(2)

(1)

• other provisions

Other liabilities

Tax loss carryforwards (including tax credit

carryforwards)

Net deferred tax assets

452

(7)

454

2020

Intangible assets

144

188

Property, plant and equipment

(29)

—

(23)

Inventories

—

(3)

Other receivables

(8)

(3)

Provisions:

• pensions and other post-retirement

benefits

(3)

(4)

• termination benefits

(1)

• other provisions

(1)

(2)

Other liabilities

(1)

Tax loss carryforwards (including tax credit

carryforwards)

(32)

(3)

Net deferred tax assets

356

112

(16)

452

105

Signify Annual Report 2021

The column “Other” includes foreign currency translation differences, acquisitions, the impact

of the remeasurement of the deferred tax balances relating to Pensions and other post-

retirement benefits. For 2020, the column "recognized in income statement" in the table above

includes the impact of changes in the organizational structure.

At December 31, 2021, the temporary differences associated with investments, including

potential income tax consequences on dividends for which no deferred tax liabilities are

recognized, aggregate to EUR 271 million (2020: EUR 271 million).

At December 31, 2021, net operating loss carryforwards expire as follows:

Expiry year operating loss carryforwards

Total

2022

2023

2024

2025

2026

After 2026

but not

unlimited

Unlimited

636

585

Unrecognized tax losses and tax credits

At December 31, 2021, the amount of operating loss and tax credit carryforwards for which no

deferred tax assets have been recognized in the balance sheet was EUR 464 million (2020: EUR

541 million).

Out of EUR 464 million, an amount of EUR 438 million should not be limited in time, EUR 1 million

will expire by 2022, EUR 4 million will expire by 2023, EUR 1 million will expire by 2024, EUR 4

million will expire by 2025, EUR 7 million will expire by 2026 and EUR 9 million expires after 2026,

but carryforward is limited in time.

Unrecognized deductible temporary differences

At December 31, 2021, the amount of deductible temporary differences for which no deferred

tax asset has been recognized in the balance sheet is EUR 106 million (2020: EUR 106 million).

Classification of the income tax payable and receivable is as follows:

In millions of EUR

2020

2021

Income tax receivable under other current assets

Income tax receivable under other non-current assets

Income tax payable under current liabilities

(20)

(16)

Income tax payable under non-current liabilities

(108)

(118)

Tax risks

Signify is exposed to tax uncertainties for which, if deemed probable, a liability is recognized in

the income tax payable under non-current liabilities, and when tax uncertainties relate to

deferred tax assets, these are offset against each other. These uncertainties include, among

others, the following:

Transfer pricing uncertainties

Signify has issued transfer pricing directives, which are in accordance with international

guidelines, such as those of the Organization of Economic Co-operation and Development

(OECD). As transfer pricing has a cross-border effect, potential adjustments by local tax

authorities on implemented transfer pricing procedures in a country may have an impact on

results in another country. In order to reduce the transfer pricing uncertainties, monitoring

procedures are carried out by Group Tax and Internal Audit to safeguard the correct

implementation of the transfer pricing directives.

Tax uncertainties on general and specific service agreements and licensing

agreements

Due to the centralization of certain activities in a limited number of countries (such as research

and development, IT, group functions and head office), costs are also centralized.

Consequently, these costs and/or revenues must be allocated to the beneficiaries, i.e. the

various Signify entities. This could lead to discussions with local tax authorities if they do not

accept these charges. For that purpose, service contracts such as intra-group service

agreements and licensing agreements are signed with Signify group entities. Tax authorities

review these intra-group service and licensing agreements and may reject the implemented

intra-group charges.

Tax uncertainties due to permanent establishments

Signify may encounter tax uncertainties, due to permanent establishments in countries where

new operations are started or business models are altered. This is because when operations in a

country involve a foreign Signify organization, there is a risk that tax claims will arise in the

former country as well as in the latter country.

When Signify has cross-border operations, there is a risk that tax claims will arise in all relevant

countries.

Assessing the amount of tax liabilities for these tax uncertainties is highly judgmental and the

timing of possible outflows, if any, is uncertain. Signify has considered the merits of its filing

position in its overall evaluation of potential tax liabilities and believes it has adequate tax

liabilities recorded in its consolidated financial statements for exposures on these matters.

Based on its evaluation of the potential tax liabilities and the merits of Signify's filing positions, it

is unlikely that potential tax exposures over the amounts currently recorded as liabilities in its

106

Signify Annual Report 2021

consolidated financial statements will be material to its financial condition or future results of

operations.

With regard to the uncertainties, an income tax payable is recognized when it is probable that

additional taxes will be due. In addition, related to similar uncertainties, an indemnification liability

to Koninklijke Philips N.V. of EUR 52 million (2020: EUR 51 million) and an indemnification

receivable of EUR 10 million (2020: EUR 13 million) is recorded. The total net indemnification

liability increased in 2021 by EUR 4 million mainly due to settlements and expirations. Tax

uncertainties also include exposures with a risk assessment which are deemed lower than

probable, but possible. The best estimate of the maximum amount in connection with these

uncertainties is EUR 121 million. Signify believes that in connection with these uncertainties it is

probable that no additional taxes will be due. Therefore, no income tax payable is recognized.

10Earnings per share

2020

2021

Net income attributable to shareholders of Signify N.V.

325

397

Weighted average number of ordinary shares outstanding

(after deduction of treasury shares) during the year

126,223,168

124,966,505

Plus incremental shares assumed from conversions of:

• Performance shares

2,669,282

2,828,996

• Conditional shares

676,799

710,721

• Restricted shares

122,254

139,716

Diluted weighted average number of ordinary shares

outstanding (after deduction of treasury shares) during the

year

129,691,502

128,645,938

in EUR

• Basic

2.58

3.18

• Diluted

2.51

3.09

11Acquisitions and divestments

On July 1, 2021, Signify completed the acquisition of 100% interest in Telensa Holdings Limited, a

UK-based expert in wireless monitoring and control systems for smart cities. The acquisition

involved a total consideration of EUR 31 million resulting in EUR 17 million goodwill and EUR 13

million intangible assets. Telensa Holdings Limited is consolidated within Digital Solutions. The

acquisition is considered not material to the consolidated financial statements.

On December 20, 2021, Signify announced that it had entered into a definitive agreement with

ams OSRAM to acquire Austin, Texas-based Fluence for USD 272 million (EUR 242 million) on a

cash and debt-free basis. This acquisition will strengthen Signify’s global Agriculture lighting

growth platform and extend its position in the North American horticultural lighting market. It

will operate as an entity within Signify’s agricultural lighting business in Division Digital Solutions.

Fluence employs more than 200 people. The acquisition is expected to close in the first half of

2022, subject to regulatory approvals and other conditions and has therefore not yet been

accounted for in accordance with IFRS 3.

There were no divestments in Signify in 2021.

12Interests in entities

Interests in subsidiaries

The Consolidated financial statements comprise the assets and liabilities of approximately 150

legal entities. Set out below is a list of material subsidiaries, in alphabetical order, representing

more than 5% of either the consolidated company sales, income from operations or net income

(before any intra-company eliminations). All the entities are 100% owned.

Legal entity name

Principal country of business

Cooper Lighting Netherlands B.V.

Netherlands

Cooper Lighting, LLC

United States of America

Signify (China) Investment Co., Ltd.

China

Signify Belgium N.V.

Belgium

Signify GmbH

Germany

Signify Holding B.V.

Netherlands

Signify Poland Sp. z.o.o.

Poland

Signify Netherlands B.V.

Netherlands

Signify North America Corporation

United States of America

WiZ Connected Lighting Co. Limited

Hong Kong

Signify does not have subsidiaries that have non-controlling interests that are material for its

Consolidated financial statements.

Investments in associates

Signify has investments in several associates, none of them are regarded as individually material.

In aggregate, the carrying amount, share of profit and other comprehensive income of the

associates are shown in the Consolidated statement of financial position, Consolidated

statement of income and Consolidated statement of comprehensive income.

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Signify Annual Report 2021

13Property, plant and equipment

Book value as at January 1, 2020

432

123

644

Of which right-of-use assets

205

—

222

Change in book value:

Capital expenditure

Of which right-of-use assets

—

Assets available for use

(44)

—

Acquisitions

107

202

Of which right-of-use assets

Additions

135

299

Sales and disposals

(5)

(1)

—

(6)

Divestments and transfers to

assets classified as held for sale

(9)

—

(10)

Of which right-of-use assets

—

Depreciation

(88)

(43)

(45)

—

(176)

Of which right-of-use assets

(57)

(10)

(67)

Impairment

(6)

(1)

—

(14)

Of which right-of-use assets

(2)

—

(2)

Translation differences and other

movements

(11)

(9)

(14)

(30)

Of which right-of-use assets

—

Total changes

(2)

Balance as at December 31, 2020

Cost

941

1,284

437

2,713

Accumulated depreciation /

impairment

(494)

(1,137)

(374)

—

(2,005)

Book value

447

147

708

Of which right-of-use assets

192

—

207

Land and

buildings

Machinery

and

installations

Other

equipment

Prepayments

and

construction

in progress

Total

Book value as at January 1, 2021

447

147

708

Of which right-of-use assets

192

—

207

Change in book value:

Capital expenditure

160

Of which right-of-use assets

—

Assets available for use

(72)

—

Acquisitions

—

Of which right-of-use assets

—

Additions

(2)

162

Sales and disposals

(12)

(1)

—

(14)

Of which right-of-use assets

(4)

—

(4)

Divestments and transfers to

assets classified as held for sale

(6)

—

(6)

Of which right-of-use assets

—

Depreciation

(81)

(40)

(37)

—

(158)

Of which right-of-use assets

(54)

—

(8)

—

(63)

Impairment

(6)

(3)

(1)

(2)

(12)

Of which right-of-use assets

(4)

—

(4)

Reversal of impairment

—

Of which right-of-use assets

—

Translation differences and other

movements

Of which right-of-use assets

—

Total changes

(5)

(2)

Balance as at December 31, 2021

Cost

985

1,195

458

2,686

Accumulated depreciation /

impairment

(535)

(1,027)

(399)

—

(1,962)

Book value

450

167

724

Of which right-of-use assets

212

—

229

Land and

buildings

Machinery

and

installations

Other

equipment

Prepayments

and

construction

in progress

Total

The impairment losses were mainly driven by reduction of real estate footprint in the

Netherlands.

108

Signify Annual Report 2021

Additions of right-of-use assets primarily include new and renewed lease contracts.

14Leases

The carrying amounts, depreciation and additions to right-of-use assets recognized are

disclosed in note 13, Property, plant and equipment. The movements of the related Lease liability

are disclosed in note 23, Debt.

The following are the amounts recognized in profit or loss and cash flow:

Note

2020

2021

Interest expense on lease liability

(7)

Total cash outflow for leases

4, 8, 23

(120)

(119)

109

Signify Annual Report 2021

15Intangible assets

Goodwill

Customer

relationships

Technology

based

Brand names

Product

development

Software

Other

Total

Balance as at January 1, 2020

Cost

2,651

1,212

375

343

163

4,791

Accumulated amortization / impairment

(708)

(970)

(293)

(267)

(136)

(25)

(7)

(2,405)

Book value

1,943

242

2,386

Change in book value:

Additions

—

Amortization

—

(77)

(26)

(17)

(13)

(6)

(1)

(139)

Acquisitions

515

335

103

—

1,024

Impairment

—

(1)

—

(1)

Translation differences and other movements

(206)

(48)

(3)

(17)

(1)

—

(275)

Total changes

308

210

(2)

(1)

640

Balance as at December 31, 2020

Cost

2,921

1,419

388

410

145

5,350

Accumulated depreciation / impairment

(670)

(967)

(264)

(119)

(35)

(5)

(2,324)

Book value

2,251

452

124

146

3,026

Change in book value:

Additions

—

Amortization

—

(77)

(27)

(18)

(14)

(10)

(1)

(146)

Acquisitions

—

Impairment

—

(1)

—

(1)

Translation differences and other movements

185

—

235

Total changes

213

(37)

(20)

(4)

167

Balance as at December 31, 2021

Cost

3,167

1,522

413

440

163

5,790

Accumulated amortization / impairment

(703)

(1,107)

(308)

(298)

(129)

(45)

(6)

(2,597)

Book value

2,464

415

105

142

3,193

110

Signify Annual Report 2021

Goodwill

During the year ended December 31, 2021, a translation difference of EUR 185 million was mainly

due to the change in the USD/EUR rate which impacted the goodwill denominated in USD.

For impairment testing, goodwill is allocated to cash-generating units, which represent the

lowest level at which the goodwill is monitored internally for management purposes. The cash-

generating units correspond to the operating segments.

Goodwill allocated to the cash-generating unit Digital Solutions is considered to be significant in

comparison to the total book value of goodwill of Signify at December 31, 2020, and December

31, 2021. The goodwill allocated to each of the cash-generating units as of December 31, 2020,

and December 31, 2021, is presented below.

2020

2021

Digital Solutions

1,902

2,089

Digital Products

296

315

Conventional Products

Book value

2,251

2,464

The basis of the recoverable amount used of the cash-generating units is the value in use. In the

annual impairment test performed in the fourth quarter of 2021, the estimated recoverable

amount of the cash-generating units tested exceeded the carrying value of the units.

Therefore, no impairment loss was recognized.

Key assumptions used in the impairment tests for the units were sales growth rates, EBITA and

the rates used for discounting the projected cash flows. These cash flow projections cover an

initial period with specific estimates from 2022 to 2024. Projections were extrapolated with

declining growth rates for a period of five years, after which a terminal value was calculated. The

sales growth rates and EBITA used to estimate cash flows are based on past performance,

external market growth assumptions, taking into account current market conditions, and

industry long-term growth averages.

For Digital Solutions, EBITA is expected to increase over the projection period as a result of

volume growth, cost efficiencies, and recovery from the COVID-19 pandemic and supply chain

disruptions. Cash flow projections for 2021 and 2020 were based on the key assumptions

included in the table below:

Key assumptions in %

Compound sales growth rate 1

Initial forecast

period 2

Extra polation

period

Used to

calculate

terminal value

Pre-tax

discount rates

Digital Solutions 2021

12.2

2.6

0.3

11.0

Digital Solutions 2020

9.7

3.6

0.3

11.2

1Compound sales growth rate is the annualized steady growth rate over the forecast period.

2The CAGR% for the initial forecast period in the 2020 goodwill test is presented as if Cooper Lighting would have been part

of Signify in 2019 for comparability purposes.

The impairment test of Q4 2021 assumes the electronic components shortage will resolve over

the course of 2022, and a recovery of the global lighting market to its pre-COVID-19 projected

level by 2024. In addition, Signify performed a sensitivity analysis and noted that a reasonably

possible change in key assumptions will not result in an impairment.

Other intangible assets

The additions for 2021 contain internally generated assets of EUR 21 million for product

development and EUR 11 million for software. In 2021, acquired other intangible assets are

Customer relationships of EUR 5 million, Technology based of EUR 4 million, Brand names of EUR

2 million, and other intangible assets EUR 1 million which all relate to Telensa Holdings Limited.

The capitalized product development costs and software, for which amortization has not yet

commenced, amounted to EUR 27 million as of December 31, 2021 (December 31, 2020: EUR 22

million).

As of December 31, 2021, the carrying amount of the customer relationships originating from the

Genlyte acquisition in 2007 was EUR 37 million (USD 42 million) with a remaining amortization

period of 1.1 years (2020: EUR 66 million, USD 81 million; 2.1 years). The carrying amount of the

customer relationships originating from the Cooper Lighting acquisition in 2021 was EUR 288

million (USD 326 million) with a remaining amortization period of 18.8 years (2020: EUR 286

million, USD 352 million; 19.8 years).

111

Signify Annual Report 2021

16Objectives, policies and processes for managing capital

Signify generated solid cash flows from operating activities in 2021. Signify remains focused on

maintaining a robust capital structure and is committed to an investment grade rating. Signify

prioritizes deleveraging with free cash flow expected to drive down Signify’s net leverage ratio

from around 1.4 at December 31, 2021 (December 31, 2020: 1.7) to around 1x net debt/EBITDA by

the end of 2022. Signify manages free cash flow performance by continuous structural working

capital initiatives and gradual costs optimization, including post-merger integration costs

related to previous acquisitions.

Signify is subject to certain debt covenants, for details refer to note 23, Debt.

Free cash flows for the year ended December 31, 2021 and comparative information are

presented below:

2020

2021

Cash flows from operating activities

891

704

Cash flows from investing activities

(1,379)

(91)

Cash flows before financing activities

(488)

613

Cash flows from operating activities

891

704

Net capital expenditures:

• Additions of intangible assets

(32)

(34)

• Capital expenditures on property, plant and equipment

(67)

(84)

• Proceeds from disposal of property, plant and equipment

Free cash flows

817

614

Working capital position as at December 31, 2021 and comparative information are presented

below:

2020

2021

Inventories

885

1,410

Trade and other receivables

1,140

1,183

Trade and other payables

(1,731)

(2,334)

Other working capital items

(8)

Working capital

313

250

17Inventories

2020

2021

Raw materials and components

314

508

Finished goods

571

901

Total

885

1,410

The write-down of inventories to net realizable value amounted to EUR 23 million for the year

ended December 31, 2021 (2020: EUR 28 million).

18Trade and other receivables

2020

2021

Trade receivables

1,102

1,137

Other receivables

Total receivables, net of value allowance

1,140

1,183

The aging of Trade receivables, representing current and overdue, net of loss allowance, was as

follows:

2020

2021

Current

1,050

1,064

Overdue 1-30 days

Overdue 31-180 days

Overdue >180 days

—

Trade receivables, net

1,102

1,137

The changes in loss allowance for accounts receivable are as follows:

2020

2021

Balance as at January 1

(103)

(94)

Additions charged to expense

(3)

—

Utilizations

Translation differences and other movements

(5)

Balance as at December 31

(94)

(76)

As per December 31, 2021, the loss allowance for accounts receivable included allowances for

individually impaired receivables of EUR 69 million (2020: EUR 83 million).

112

Signify Annual Report 2021

19Trade and other payables

2020

2021

Payables to suppliers

1,089

1,611

Amounts payable to employees

226

233

Customer rebates

187

209

Marketing and sales related

Materials and fixed assets related

Other payables

115

124

Trade and other payables

1,731

2,334

Other payables include multiple individually insignificant items, among others communication and

IT-related accruals, consultancy costs payable and other payables.

20Other assets

In millions of EUR

2020

2021

Prepayments

Contract assets

Other assets

146

155

Total

231

259

From which current

171

192

From which non-current

Other assets mainly include indirect taxes receivable or recoverable and indemnification

balances resulting from the separation from Koninklijke Philips N.V and past business

combination transactions.

Indemnification receivable of EUR 10 million (2020: EUR 13 million) included in Other assets, mainly

relates to the indemnification for tax liabilities arising from the separation from Koninklijke Philips

N.V.

21Other liabilities

2020

2021

Contract liability

162

200

Other tax liabilities

Other liabilities

131

110

Total

372

395

From which current

213

From which non-current

159

182

Out of the total amount of EUR 162 million recognized in contract liabilities at the end of 2020

(2019: EUR 137 million), EUR 53 million has been recognized as revenue for the year ended

December 31, 2021 (2020: EUR 40 million). The non-current portion of contract liabilities is

recognized over time over the duration of the contract, generally beyond 1 and up to 15 years.

Other liabilities mainly relate to separation from Koninklijke Philips N.V. In 2016, as part of the

agreement in relation to the separation from Koninklijke Philips N.V., indemnities and guarantees

were provided by major subsidiaries of Signify to Koninklijke Philips N.V. Conversely, certain

major subsidiaries of Koninklijke Philips N.V. have provided guarantees to Signify. Indemnification

payable of EUR 52 million (2020: EUR 51 million) mainly relates to uncertain tax positions

indemnified in the separation from Koninklijke Philips N.V.

22Equity

Share capital

The Company has an authorized share capital of EUR 6 million, divided into 300,000,000 ordinary

shares with a nominal value of EUR 0.01 per share and 300,000,000 preference shares with a

nominal value of EUR 0.01 per share.

On December 31, 2021, the issued and fully paid share capital consisted of 128,344,238 ordinary

shares with a nominal value of EUR 0.01 per share (2020: 128,344,238).

As a defense measure, Stichting Continuïteit Signify, a foundation organized under the laws of

the Netherlands, has been granted the right to acquire preference shares in the Company. As of

December 31, 2021, this right had not been exercised therefore no preference shares have

been issued.

113

Signify Annual Report 2021

Dividend distribution

A proposal will be submitted to the 2022 Annual General meeting of Shareholders to pay a

dividend of EUR 1.45 per ordinary share, in cash, from the 2021 net income.

In June 2021, the Company settled an extraordinary dividend of EUR 1.35 per ordinary share,

representing a total value of EUR 169 million including costs. In addition, the Company also

settled the regular dividend of EUR 1.40 per ordinary share, representing a total value of EUR 175

million including costs.

Treasury shares

The following table shows the movements in the outstanding number of shares over the last two

years:

Number of shares

2020

2021

Balance as at January 1

125,938,631

125,581,371

Purchase of treasury shares

(1,333,418)

(1,937,489)

Delivery of treasury shares

976,158

1,258,122

Balance as at December 31

125,581,371

124,902,004

The following table shows the share transactions to cover obligations arising from share-based

compensation plans (for further details refer to note 27, Share-based compensation):

2020

2021

Shares acquired

1,333,418

1,937,489

Average market price

EUR 28.21

EUR 43.08

Amount paid

EUR 38 million

EUR 83 million

Shares delivered

976,158

1,258,122

Average price (FIFO)

EUR 32.66

EUR 25.38

Cost of delivered shares

EUR 32 million

Total shares in treasury at year-end

2,762,867

3,442,234

Total cost

EUR 74 million

EUR 126 million

Legal reserves

As at December 31, 2021, legal reserves related to unrealized losses in currency translation of

EUR 80 million, unrealized losses related to cash flow hedges of EUR 2 million, the ‘affiliated

companies’ reserve of EUR 143 million, capitalized development costs reserve of EUR 53 million,

revaluation reserve of EUR 14 million and other reserves of EUR 3 million.

The item ‘affiliated companies’ reserve relates to the ‘wettelijke reserve deelnemingen’, which is

required by Dutch law. This reserve relates to any legal or economic restrictions on the ability of

affiliated companies to transfer funds to the parent company in the form of dividends.

As at December 31, 2020, legal reserves related to unrealized losses in currency translation of

EUR 337 million, unrealized gains related to cash flow hedges of EUR 17 million, the ‘affiliated

companies’ reserve of EUR 126 million, capitalized development costs reserve of EUR 28 million

and other reserves of EUR 3 million.

Limitations in the distribution of shareholders’ equity

As at December 31, 2021, pursuant to Dutch law, certain limitations existed relating to the

distribution of shareholders’ equity of EUR 214 million. Such limitations relate to ordinary shares

of EUR 1 million, legal reserves required by Dutch law of EUR 210 million and other reserves of

EUR 3 million. The unrealized losses related to currency translation differences of EUR 80 million

and cash flow hedges of EUR 2 million which although qualifying as legal reserves, reduce the

distributable amount by their nature.

The total distributable reserves as at December 31, 2021, amounted to EUR 2,245 million (2020:

EUR 2,021 million).

As at December 31, 2020, the limitations in distributable reserves were EUR 176 million related to

ordinary shares of EUR 1 million, legal reserves required by Dutch law of EUR 154 million, other

reserves of EUR 3 million and unrealized gains related to cash flow hedges of EUR 17 million. The

unrealized losses related to currency translation differences of EUR 337 million, which although

qualifying as a legal reserve, reduce the distributable amount by their nature.

23Debt

2020

2021

Term loan (EUR)

389

280

Term loan (USD)

406

199

Eurobonds

1,262

1,265

Lease liabilities

233

249

Other debt

Subtotal

2,305

2,003

Bank overdrafts

Gross debt

2,307

2,007

Cash and cash equivalents

(1,033)

(851)

Net debt (cash)

1,275

1,156

Total equity

2,321

2,597

Net debt and total equity

3,595

3,753

Net debt divided by net debt and total equity (in %)

35%

31%

Total equity divided by net debt and total equity (in %)

65%

69%

114

Signify Annual Report 2021

Movements of debt were as follows:

Term loans

Eurobonds

Bridge loan

Lease

liabilities

Other debt

Bank

overdrafts

Total

Balance as at January 1, 2020

1,186

—

252

1,465

Acquisitions

—

Financing cash flows:

• New borrowings

1,194

1,270

1,261

—

3,744

• Repayment

(1,544)

—

(1,291)

(80)

(17)

—

(2,932)

Translation difference

(39)

—

(9)

—

(18)

Other movements 1

(2)

(8)

—

(7)

(4)

Balance as at December 31, 2020

795

1,262

—

233

2,307

Balance as at January 1, 2021

795

1,262

—

233

2,307

Acquisitions

—

Financing cash flows:

• New borrowings

630

—

633

• Repayment

(984)

—

(72)

(8)

—

(1,064)

Translation difference

—

Other movements 1

—

Balance as at December 31, 2021

479

1,265

—

249

2,007

1Other movements include additions of leases which are non-cash transactions.

Term loan structure and a revolving credit facility

During 2021, Signify had a net reduction in its long-term loans of EUR 354 million. As of

December 31, 2021, the Company had outstanding long-term loans amounting to EUR 280 million

maturing in November 2024 and USD 225 million maturing in January 2025. In addition, the

revolving credit facility (RCF) of EUR 500 million was extended to January 2027.

The EUR term loan bears interest at a variable rate based on the relevant applicable EURIBOR

plus a fixed margin of 0.15%. The USD term loan bears interest at a variable rate based on the

relevant applicable USD LIBOR with zero floor plus a margin. As of December 31, 2021, the margin

on the USD term loan was 0.75% and is subject to change, depending on the public credit rating

of Signify assigned by rating agencies.

The term loans and RCF agreement include a financial covenant providing that Signify maintains a

net leverage ratio of no greater than 3.5x. The net leverage ratio may temporarily increase to

4.0x within 12 months of the closing of material acquisitions. The covenant does not apply if

Signify has at least one investment grade rating, which is currently the case, as Signify has two

investment grade ratings.

Eurobonds

As of December 31, 2021, Signify had outstanding EUR 675 million of fixed rate notes due in May

2024 with an annual coupon of 2.000% and EUR 600 million of fixed rate notes due in May 2027

with an annual coupon of 2.375%.

115

Signify Annual Report 2021

24Provisions

Restructuring-

provisions

Environmental

Provisions

Product

warranty

Other

provisions

Total

Balance as at January 1,

2020

110

136

365

Acquisitions

Additions

182

Utilizations

(52)

(10)

(61)

(42)

(165)

Releases

(13)

(1)

—

(14)

(28)

Changes in discount rate

—

Accretion

—

Translation differences and

other movements

(1)

(3)

(6)

(10)

(21)

Balance as at December 31,

2020

109

133

396

Short-term

172

Long-term

224

Balance as at January 1,

2021

109

133

396

Additions

169

Utilizations

(88)

(22)

(40)

(189)

Reclassifications

—

Releases

(17)

(2)

(1)

(13)

(33)

Changes in discount rate

—

(4)

(3)

Accretion

—

Translation differences and

other movements

Balance as at December 31,

2021

129

355

Short-term

140

Long-term

215

Restructuring

Additions to restructuring provisions during the year ended December 31, 2021 were mainly

related to the restructuring of the central organization. As at December 31, 2021, the provision

relates primarily to the restructuring of the central organization and programs in Division

Conventional Products and is mainly in Belgium and the Netherlands. Signify expects the

provision will be utilized mainly within next year.

Environmental provision

Signify is exposed to environment risks, mainly because it has been in the business of

manufacturing products for more than a century. During that period, Signify has opened,

discontinued and acquired many manufacturing plants and sites. Some of these plants and sites

have been used for industrial purposes for decades and as such, there is a latent risk that these

premises may have environmental conditions that require corrective actions as a result of such

use. The environmental provisions include accrued costs recorded with respect to

environmental remediation in various countries. Provisions for environmental remediation can

change significantly due to the emergence of additional information regarding the extent or

nature of the contamination, the need to utilize alternative technologies, actions by regulatory

authorities as well as changes in judgments and discount rates. The environmental provision is

expected to be utilized mainly within the next five years.

Product warranty

Manufacturing of Signify’s products involves complex processes and defects might occur. In

addition, it is possible that some of Signify’s products may not perform as expected (for

example, in terms of estimated life span and projected energy savings). These defects or

shortfalls may cause Signify to incur significant warranty, support and replacement costs. The

provision for product warranty reflects the estimated costs of replacement and free-of-charge

services that will be incurred by Signify with respect to products sold. Signify expects the

provision will be mainly utilized within the next two years.

Other

Signify and certain of its group companies are involved in legal proceedings relating to such

matters as product liability and claims for property damage and personal injury, alleged to have

been caused by failure or malfunction of its products as well as commercial transactions, and

intellectual property infringements (among others). The outcome of asserted claims and

proceedings, or the impact of any claims that may be asserted in the future, cannot be

predicted with certainty. Signify makes provisions if payments with respect to such matters are

probable and the amount can be estimated reliably. Furthermore, other provisions mainly

comprise of provisions for self-insurance, decommissioning and provision for employee jubilee

funds. Other provisions are expected to be utilized mainly within the next five years.

116

Signify Annual Report 2021

25 Post-employment benefits

Post-employment benefits covered in this note relate to defined-benefit pension and other

post-retirement benefit plans, including defined-benefit retiree medical plans. The benefits

provided by these plans are based on employees’ years of service and compensation levels.

Employee post-employment defined-benefit plans have been established in several countries in

accordance with the legal requirements, customs and local practice.

Net defined-benefit liabilities per country

2020

2021

Obligation

Plan

assets

Net

Liability

Obligation

Plan

assets

Net

Liability

Germany

227

(15)

212

208

(15)

193

Unites States

579

(485)

563

(475)

Other countries

153

(69)

133

(51)

Total countries

959

(569)

390

904

(541)

363

United States

The defined-benefit Hourly & Salaried Pension Plan in the US covers certain hourly workers and

salaried workers hired before January 1, 2005 and has a net liability of EUR 14 million. The plan is

closed for new entrants and since 2016 no further benefit accruals are taking place. Employees

only accrue benefits in a defined-contribution plan. Signify pays the administration cost and

contributions to cover the funding deficit of the Hourly & Salaried Pension Plan. The plan assets

are governed by an Investment Committee. Signify also has an unfunded pension plan in place for

higher salaried employees with a net liability of EUR 20 million and a post-retirement welfare plan

with a net liability of EUR 54 million.

Signify reviewed the funding level of the Hourly & Salaried Pension Plan and decided that it would

not make a contribution in 2021 and neither expects to make a contribution in 2022. Signify

expects cash outflows of EUR 8 million in 2022 for the unfunded plans.

For the funding of the deficit of the US Hourly & Salaried Pension Plan, Signify adheres to the

minimum funding requirements of the US Pension Protection Act.

Germany

For employees with a salary above a certain salary threshold, there is a funded defined-benefit

pension plan which has a deficit of EUR 8 million. This plan has been closed for new entrants

since January 1, 2018. Since 2016, Signify no longer makes any contributions to this plan but

funds the liabilities when these are paid out to retirees. New employees accrue pension benefits

through a defined-contribution plan. For other closed defined-benefit plans, Signify had an

unfunded liability of EUR 184 million as at December 31, 2021. Signify expects cash outflows of

EUR 17 million in 2022 for the pension plans.

Cash outflows for the defined-benefit plans in countries other than the USA and Germany are

expected to total EUR 10 million in 2022.

Risks related to defined-benefit plans

The defined-benefit plans expose Signify to various demographic and economic risks, such as

longevity, investment, currency and interest rate risks and, in some cases, inflation risk. The

latter plays a role in the assumed wage increase and in some smaller plans where indexation is

mandatory.

The larger plans are governed by either independent boards, committees or trustees who have

a legal obligation to evenly balance the interests of all stakeholders and operate under the local

regulatory frameworks. These boards and trustees are responsible for and have full discretion

over the investment strategy of the plan assets, in general they manage pension fund risks by

diversifying the investments of plan assets and by (partially) matching interest rate risk of

liabilities.

Signify has an active de-risking strategy in which it constantly looks for opportunities to reduce

the risks associated with its defined-benefit plans.

117

Signify Annual Report 2021

Movements of net defined-benefit liability

2020

2021

Obligation

Plan assets

Net Liability

Obligation

Plan assets

Net Liability

Balance as at January 1

1,027

(590)

437

959

(569)

390

Service cost

—

(Negative) past service cost

—

Admin expenses paid

—

Settlements 1

—

(20)

(1)

Recognized in employee benefit expenses

(8)

Interest (cost) / income

(16)

(12)

Included in Statements of Income

(15)

Actuarial gains / (losses)

—

• Demographic assumptions

(6)

—

(6)

—

• Financial assumptions

(59)

(5)

(35)

—

(35)

• Experience adjustment

(1)

—

(1)

(4)

Exchange rate differences

(76)

(25)

(41)

Included in Statements of comprehensive income

(29)

(8)

(37)

(26)

(9)

Employee contributions

(2)

—

(1)

—

Employer contributions

—

(4)

—

(6)

Benefits paid

—

• Benefits paid directly by employer

(31)

—

(31)

(28)

—

(28)

• Benefits paid from plan assets

(50)

—

(53)

—

Reclassifications

—

(2)

—

(2)

New consolidations

—

Other

(74)

(30)

(82)

(36)

Balance as at December 31

959

(569)

390

904

(541)

363

1Mainly related to a settlement of the plan liabilities of the Indian provident fund in which Signify participated. These were settled with the national provident fund and the net impact was a reduction in net liability of EUR 1 million.

118

Signify Annual Report 2021

Plan assets allocation

The asset allocation in Signify’s pension plans at December 31 was as follows:

In millions of EUR

2020

2021

Debt securities

408

419

Equity securities

Other

Total assets

569

541

The assets in 2021 contained 12% unquoted assets. Plan assets in 2021 do not include property

occupied by or financial instruments issued by Signify.

Some 88% of the total plan assets of the Signify pension plan are in the US and are invested in a

well-diversified portfolio. The interest rate sensitivity of the fixed income portfolio of the US

qualified pension plan is closely aligned to that of the plan’s pension liabilities. The remaining 12%

of the total plan assets is mainly the market value of insured pension benefits.

Assumptions

The mortality tables used for Signify’s major schemes are:

•US: Base table PRI-2012 White Collar mortality table, projected forward with future mortality

improvements according to Scale MP-2021.

•Germany: Richttafeln 2018 G K. Heubeck.

The weighted averages of the assumptions used to calculate the defined-benefit obligation as

of December 31, 2021 were as follows:

In %

2020

2021

Discount rate

1.9

2.3

Pension cost increases

0.4

Healthcare cost increases

0.4

0.5

Wage increases

0.4

The average duration of the defined-benefit obligation of the defined-benefit plans is 9.3 years.

For the defined-benefit plans in the US and Germany, the average duration is respectively 9.1

years and 8.9 years. The average discount rates for the plans in these countries are

respectively 2.6% and 0.8%. The pension cost increase rate assumption for the German

defined-benefit plans is 1.75%.

Sensitivity analysis

The table below illustrates the approximate impact on the defined-benefit obligation if Signify

were to change key assumptions. The defined-benefit obligation was recalculated using a

change of 1% in the respective assumptions which overall is considered a reasonably possible

change. The impact on the defined-benefit obligation of changes in discount rate is for funded

plans normally accompanied by offsetting movements in plan assets, especially when using

matching strategies.

2020

2021

Increase

Discount rate (1% movement)

(88)

(80)

Wage change (1% movement)

Pension indexation change (1% movement)

Longevity (see explanation)

Healthcare cost change (1% movement)

Decrease

Discount rate (1% movement)

102

Wage change (1% movement)

(6)

(9)

Pension indexation change (1% movement)

(20)

(21)

Longevity also impacts the post-employment defined-benefit obligation. In the above sensitivity

table, the impact on the defined-benefit obligation of a further 10% decrease in the assumed

rates of mortality for Signify’s major schemes is illustrated. A 10% decrease in assumed mortality

rates equals improvement of life expectancy by six months to a year.

26Related party transactions

Signify considers the Board of Management and the Supervisory Board to be key management

personnel as defined in IAS 24 ‘Related parties’. For remuneration details of Key Management,

see note 28, Information on remuneration.

27Share-based compensation

The total share-based compensation costs for the period ended December 31, 2021 amounted

to EUR 31 million (period ended December 31, 2020: EUR 35 million)

Long-term Incentive Plan

Under the Signify Long-term Incentive Plan (LTI Plan), which is equity settled, eligible employees

are granted both conditional shares and performance shares. Conditional shares have a three-

year cliff vesting period and will vest if a grantee is still employed with Signify at the vesting date.

119

Signify Annual Report 2021

Vesting of performance shares is conditional on the achievement of performance conditions

measured over a period of three years. The performance condition measurement is based on

three measures for the 2019 LTI Plan and four measures for the 2020 and 2021 LTI Plans. For

details refer to the following table:

Relative share of performance shares

per LTI plan (in %)

Types of performance shares

LTI 2019

LTI 2020

LTI 2021

Total shareholder return

Free cash flow

Sustainability

Return on Capital Employed

Total

100

For the Board of Management and certain members of senior management, the LTI Plan consists

of performance shares only. Shares are conditionally granted annually.

In addition to shares awarded under the Signify LTI Plan, Signify may in individual cases, such as in

the hiring process of members of (senior-) management, also grant restricted shares.

Restricted shares have either three-year cliff vesting period or vest gradually over the vesting

period of one, two or three years.

Under the terms of the employee stock purchase plan (ESPP), employees are eligible to

purchase a limited number of Signify shares at discounted prices through payroll withholdings.

Performance shares

The fair value of shares granted with the market performance condition of relative TSR is

measured based on Monte Carlo simulation. The closing share price at grant date is adjusted for

the present value of expected dividends during the vesting period, as participants are not

compensated for Signify dividend payouts. Monte Carlo simulation takes into account market

conditions expected to impact relative Total Shareholders’ Return performance in relation to

selected peers and the following weighted-average assumptions:

Assumptions used in Monte-Carlo simulation for valuation in %

2021

Risk-free interest rate

(0.7)%

Expected share price volatility

39%

The assumptions were used for these calculations only and do not necessarily represent an

indication of Signify management’s expectation of future developments for other purposes.

Historic volatility was measured over the same timeframe as the simulation period (weighted

average 2.6 years).

The amount calculated as an expense for TSR shares is not adjusted for actual performance.

FCF, Sustainability, and ROCE related measurements are non-market performance conditions.

Fair value of shares granted under FCF, Sustainability, and ROCE objective conditions equals the

closing share price on the grant date, adjusted for the present value of expected dividends

during the vesting period.

The amount calculated as an expense for shares granted with a non-market performance

condition is adjusted for actual performance.

A summary of Signify performance shares movements and outstanding balance as of December

31, 2021 and 2020, is presented below.

Signify performance shares

2020

2021

EUR-denominated

Weighted

average

grant-date

fair value

Weighted

average

grant-date

fair value

Balance as at January 1

1,899,991

27.12

3,380,119

20.14

Granted

1,110,226

15.96

579,559

50.20

Vested

(672,036)

34.96

(954,446)

21.18

Forfeited

(162,444)

30.34

(177,453)

22.88

Performance adjustment

1,204,381

22.62

257,992

17.85

Balance as at December 31

3,380,119

20.14

3,085,771

24.51

The performance adjustment originates from updates in the number of shares which are

expected to vest in relation to the mentioned non-market performance conditions.

On December 31, 2021, estimated unrecognized costs related to non-vested performance

shares amounted to EUR 25 million. These costs are expected to be recognized over a

weighted-average period of 1.9 years.

Conditional shares

Fair value of conditional shares is determined by subtracting the present value of expected

dividends from the closing share price on the grant date as participants are not compensated

for Signify dividend payouts.

120

Signify Annual Report 2021

A summary of Signify conditional shares movements and outstanding balance as of December 31,

2021 and 2020, is presented below.

Signify conditional shares

2020

2021

EUR-denominated

Weighted

average

grant-date

fair value

Weighted

average

grant-date

fair value

Balance as at January 1

800,643

24.05

900,831

19.21

Granted

416,350

15.99

224,345

46.65

Vested

(253,290)

28.87

(224,180)

21.60

Forfeited

(62,872)

20.29

(89,332)

20.92

Balance as at December 31

900,831

19.21

811,664

25.96

On December 31, 2021, estimated unrecognized costs related to non-vested conditional shares

amounted to EUR 8 million. These costs are expected to be recognized over a weighted-average

period of 2.0 years.

Restricted shares

Fair value of restricted shares is determined by subtracting the present value of expected

dividends from the closing share price on the grant date as participants are not compensated

for Signify dividend payouts.

In 2021, Signify granted 34,414 restricted shares with weighted average grant date fair value of

EUR 43.05.

On December 31, 2021, estimated unrecognized costs related to non-vested restricted shares

amounted to EUR 1 million. These costs are expected to be recognized over a weighted-average

period of 1.1 years.

28Information on remuneration

In 2021, the total remuneration costs relating to the members of Key Management amounted to

EUR 7,118,559 (2020: EUR 8,308,152).

Remuneration of the Board of Management

In 2021, the total remuneration costs relating to the members of the Board of Management

amounted to EUR 6,434,059 (2020: EUR 7,677,034).

Remuneration costs of Key Management - the Board of Management

2020

2021

Salary/Base compensation 1

2,160,184

2,123,337

Annual Incentive 2

1,270,949

1,624,156

Long Term Equity-based Incentive 3

2,829,189

1,962,627

Pension allowances

633,490

511,445

Pension scheme costs

79,157

88,209

Other compensation 4

115,008

124,285

Termination benefits 5

589,057

—

Total costs

7,677,034

6,434,059

12020 includes a 20% COVID-19 reduction in base salary in Q2.

2Related to the performance in the year reported which are paid out in the subsequent year.

3Costs of performance shares and restricted shares (2020: Signify sign-on of EUR 300,000 F.J. van Engelen Sousa) are based

on accounting standards (IFRS) and do not reflect the value of the shares at the vesting/release date. Comparatives for

2020 were revised as performance shares costs for C.L. van Schooten were EUR 242,363 higher than disclosed in 2020. The

performance shares costs for M.L. Mariani also include the costs for shares awarded when she was not yet a member of the

Board of Management.

4 Mainly concern (part of) allowances to members of the Board of Management that can be considered as remuneration. In a

situation where such a part of an allowance can be considered as (indirect) remuneration (for example, private use of the

company car), then such part is both valued and accounted for here. The method employed by the fiscal authorities in the

Netherlands is the starting point for the value stated. Net allowances are not included.

5 As the company elected not to renew the services contract for C.L. van Schooten after the end of term in May 2021, as per

his services contract, he received a lump sum payment of one time the annual base compensation/salary (gross amount of

EUR 589,057) in June 2021. An additional tax levy, pursuant to Article 32bb of the Dutch wage tax act, will be payable by the

company over the total remuneration of C.L. van Schooten. The estimate was revised to EUR 2,405,224 (2020 estimate: EUR

543,883). The calculation of the tax levy due by the company includes the taxable value of the long-term equity-based

incentive. That taxable value depends on the final number of shares that will be delivered to C.L. van Schooten in 2022 and

2023 (pending final achievement of performance conditions) and the company’s share price upon delivery of the shares

(these equity rights were granted in 2019 and 2020).

For further information on remuneration costs, see chapter 9, Remuneration report, of this

Annual Report.

Remuneration of the Supervisory Board

The remuneration of the members of the Supervisory Board amounted to EUR 684,500 (2020:

EUR 631,118).

Remuneration of Key Management - the Supervisory Board in EUR

2020 1

2021

Membership

504,000

495,000

Committees

114,618

162,000

Other compensation 2

12,500

27,500

Total costs

631,118

684,500

1Includes a 20% COVID-19 reduction in Q2 2020.

2Relate to the allowance for (inter-)continental travel.

121

Signify Annual Report 2021

29Financial risk management

Signify is exposed to several types of financial risks, as they arise in the normal course of business: interest rate risk, liquidity risk, currency risk, commodity price risk, credit risk and country risk.

This note comprises the disclosures on Signify's financial risk management objectives, policies and procedures to monitor and manage these risks.

The summary of all financial assets and liabilities, including their classification and measurement and fair value hierarchy is presented below:

Carried at

Gross amount

recognized on the

balance sheet

Amounts not offset

on the balance

sheet, but are

subject to master

netting

arrangements

Net amount

Fair value

hierarchy level

Estimated fair

value 1

Balance as at December 31, 2020

Non-current financial assets 1

amortised cost

—

Unquoted equity shares

fair value (FVOCI)

—

Trade and other receivables 1

amortised cost

1,140

—

1,140

Derivative financial assets designated as hedging instruments

fair value (FVTPL)

122

(41)

122

Derivative financial assets not designated as hedging instruments

fair value (FVTPL)

—

Cash and cash equivalents

1,033

—

1,033

Debt (Eurobonds)

amortised cost

(1,262)

—

(1,262)

(1,378)

Debt (excluding Eurobonds) 1

amortised cost

(1,046)

—

(1,046)

Derivative financial liabilities designated as hedging instruments

fair value (FVTPL)

(45)

(4)

(45)

Trade and other payables 1

amortised cost

(1,727)

—

(1,727)

Contingent considerations

fair value (FVTPL)

(4)

—

(4)

Balance as at December 31, 2021

Non-current financial assets 1

amortised cost

—

Unquoted equity shares

fair value (FVOCI)

—

Trade and other receivables 1

amortised cost

1,183

—

1,183

Derivative financial assets designated as hedging instruments

fair value (FVTPL)

(30)

Derivative financial assets not designated as hedging instruments

fair value (FVTPL)

—

Cash and cash equivalents

851

—

851

Debt (Eurobonds)

amortised cost

(1,265)

—

(1,265)

(1,355)

Debt (excluding Eurobonds) 1

amortised cost

(743)

—

(743)

Derivative financial liabilities designated as hedging instruments

fair value (FVTPL)

(45)

(14)

(45)

Trade and other payables 1

amortised cost

(2,332)

—

(2,332)

Contingent considerations

fair value (FVTPL)

(2)

—

(2)

1In view of the nature, maturity or the magnitude of the amounts, Signify considers that the fair value of non-current financial assets, trade and other receivables, debt (excluding Eurobonds), trade and other payables are not materially different from their

carrying value.

122

Signify Annual Report 2021

The estimated fair value of financial instruments has been determined by Signify using available

market information and appropriate valuation methods. The estimates presented are not

necessarily indicative of the amounts that will ultimately be realized by Signify upon maturity or

disposal. The use of market assumptions and/or estimation methods may have a material effect

on the estimated fair value amounts.

The following hierarchy is applied to classify the financial assets and liabilities:

Level 1

Instruments included in Level 1 are comprised primarily of listed Eurobonds classified as financial

liabilities at amortized cost. The fair value of financial instruments traded in active markets is

based on quoted market prices at the balance sheet date. A market is regarded as active if

quoted prices are readily and regularly available from an exchange, dealer, broker, industry

group, pricing service, or regulatory agency, and those prices represent actual and regularly

occurring market transactions on an arm’s length basis.

Level 2

The fair value of financial instruments that are not traded in an active market (for example, over-

the-counter derivatives) are determined by using valuation techniques. These valuation

techniques maximize the use of observable market data where it is available and rely as little as

possible on entity specific estimates. If all significant inputs required to fair value an instrument

are based on observable market data, the instrument is included in Level 2.

The fair value of derivatives is calculated as the present value of the estimated future cash flows

based on observable interest yield curves, basis spread and foreign exchange rates. Please

refer to note 2, Significant accounting policies, for further details.

Level 3

If one or more of the significant inputs are not based on observable market data, the instrument

is included in Level 3.

Interest rate risk

Interest rate risk is the risk of the fair value or future cash flows of a financial instrument

fluctuating because of changes in the market interest rates. Financial instruments included in

the debt position create an inherent interest rate risk. Failure to effectively hedge this risk

could negatively impact financial results.

Signify monitors interest rate coverage, short-term and long-term interest rate developments

and has the flexibility to opt for different short-term interest periods for the variable debt

instruments at roll-over dates and/or could enter into derivative financial instruments to fix

interest rates for a certain period of time. As of December 31, 2021, Signify had a ratio of fixed-

rate debt to total outstanding debt of approximately 75% (2020: 65%).

A sensitivity analysis conducted in January 2022 shows that if interest rates were to increase

instantaneously by 1% from their level of December 31, 2021, with all other variables held

constant, the annualized net interest expense would decrease by EUR 6 million. This impact was

based on the outstanding net floating debt position as of December 31, 2021.

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated

with financial liabilities. Details on the COVID-19 impact are disclosed in note 1, Basis of

preparation.

Liquidity risk for Signify is monitored through the Treasury Risk Committee which tracks the

development of the actual cash flow position and uses input from a number of sources in order

to forecast the overall liquidity position.

The table below analyzes Signify's financial liabilities into relevant maturity groupings based on

their contractual maturities. The amounts disclosed in the table are the contractual

undiscounted cash flows. Balances due within 12 months equal their carrying balances as the

impact of discounting is not significant. Interest on Long-term debt is based on floating rate

adjustments according to market expectations.

Payments due by period

Total

Less than

1 year

Between

1 and 5

years

Over

5 years

Debt, including bank overdrafts

1,759

1,150

594

Interest on debt

120

Trade and other payables

2,334

—

Lease liability

249

155

Derivative liabilities

—

Off-balance sheet commitments

125

—

Purchase obligations

102

—

Contractual cash obligations

4,733

2,574

1,527

632

Revolving credit facility (RCF)

500

—

Signify invests surplus cash primarily in money market deposits with investment graded financial

institutions, and with maturities up to three months, to ensure sufficient liquidity is available to

meet liabilities when due.

123

Signify Annual Report 2021

Signify has various sources to mitigate liquidity risk. Signify pools cash from subsidiaries to the

extent legally and economically feasible; cash not pooled remains available for operational or

investment needs. The table below shows details of cash and cash equivalents and bank

overdrafts as of the reporting date:

2020

2021

Cash at banks and in hand

315

403

Short-term deposits

700

432

Other cash equivalents

Cash and cash equivalents

1,033

851

Bank overdrafts

(3)

(4)

Cash and cash equivalents and bank overdrafts

1,030

847

Signify has a EUR 500 million revolving credit facility that can be used for general purposes. As of

December 31, 2021, Signify did not have any amounts drawn under this facility.

Currency risk

Currency risk is the risk that reported financial performance, or the fair value or future cash

flows of a financial instrument, will fluctuate because of changes in foreign exchange rates.

Signify operates in many countries and currencies and therefore currency fluctuations may

inevitably impact its financial results. Signify is exposed to currency risk in the following areas:

•Transaction exposures related to anticipated sales and purchases and on-balance-sheet

receivables/payables resulting from such transactions.

•Financing exposure arising from foreign currency intercompany and external debt and

deposits.

•Translation exposure of net income in foreign entities.

•Translation exposure of foreign currency denominated equity invested in consolidated

companies.

•Translation exposure to equity interests in non-functional-currency investments in associates

and financial assets at fair value.

It is Signify’s policy to reduce the volatility caused by foreign currency movements on its net

earnings by hedging the anticipated net exposure of foreign currencies resulting from foreign

currency sales and purchases. In general, net anticipated exposures are hedged during a period

of 15 months in layers of 20% up to a hedge ratio of 80%, using derivatives.

Signify’s policy requires significant committed foreign currency exposures to be fully hedged,

generally using forwards. However, not every foreign currency can or shall be hedged as there

may be regulatory barriers or prohibitive hedging cost preventing Signify from effectively and/or

efficiently hedging its currency exposures. As a result, hedging activities cannot and will not

eliminate all currency risks for anticipated and committed transaction exposures.

The following table outlines the estimated nominal value in millions of EUR for transaction

exposures and related hedges for Signify’s most significant currency exposures:

Receivables / Sales

Payables / Purchases

Exposure

Hedges

Exposure

Hedges

Balance as at December 31

Exposure currency

CNY

(12)

(1,117)

784

USD

1,251

(837)

(177)

175

GBP

123

(78)

—

EUR 1

(59)

(12)

CAD

110

(73)

—

SEK

(44)

—

CHF

(42)

—

AUD

(35)

—

NOK

(32)

—

SGD

(23)

—

NZD

(16)

—

RON

(16)

—

CZK

(15)

—

PLN

(67)

(133)

Others

(46)

(19)

Total 2021

2,024

(1,394)

(1,458)

1,085

Total 2020

1,866

(1,177)

(1,471)

920

1 EUR exposures in non EUR denominated functional currencies.

As of December 31, 2021, a loss of EUR 3 million was deferred in equity as a result of these

hedges (2020: gain of EUR 22 million). The result deferred in equity will be released to earnings

mostly during 2022 at the time when the related hedged transaction affects the Consolidated

statement of income. During 2021, EUR nil million (2020: EUR nil million) was recorded within cost

of goods sold in the Consolidated statement of income as a result of ineffectiveness on certain

anticipated cash flow hedges.

The total net fair value of hedges related to transaction exposure as of December 31, 2021, was

an unrealized asset of EUR 2 million (2020: asset EUR 23 million). An instantaneous 10% increase

in the value of the euro against all currencies, with all other variables held constant, would lead

to an increase of EUR 29 million in the value of the derivatives. This increase includes a gain of

EUR 4 million that would impact the income statement, which would largely offset the opposite

revaluation effect on the underlying accounts receivable and payable, and the remaining gain of

124

Signify Annual Report 2021

EUR 25 million would be recognized in equity to the extent that the cash flow hedges were

effective.

Foreign exchange exposure also arises from intercompany loans and deposits. Where Signify

enters into such arrangements the financing is generally provided in the functional currency of

the subsidiary. The currency of Signify’s external funding and liquid assets is matched with the

required financing of subsidiaries either directly through external foreign currency loans and

deposits or synthetically by using foreign exchange derivatives. In certain cases, where Signify

subsidiaries may also have external foreign currency debt or liquid assets, these exposures are

also hedged using foreign exchange derivatives. The fair value of these hedges as of December

31, 2021 was an unrealized asset of EUR 8 million (2020: asset of EUR 2 million). An instantaneous

10% increase in the value of euro against all currencies, with all other variables held constant,

would lead to a decrease of EUR 21 million in the value of the derivatives.

As of December 31, 2021, Signify continued to hedge part of its investment in one of its foreign

subsidiaries which includes Cooper Lighting by entering into foreign currency forward contracts

of nominal amount of USD 150 million. This hedge mitigates foreign currency translation risk

arising from the net assets of the subsidiary. This hedge was fully effective, as such there was

no ineffectiveness recognized in profit and loss in 2021. As at 31 December 2021, the market

value of these forward contracts was an asset of EUR 4 million. A 10% increase in the value of

the EUR against USD would lead to an increase of EUR 12 million in the fair value of derivatives

that end up in the Currency translation differences within Equity.

Commodity price risk

Commodity price risk is the risk that the fair value or future cash flows of a financial instrument

will fluctuate because of changes in commodity prices.

Signify is a purchaser of certain base metals, precious metals and energy. Signify could hedge

certain commodity price risks using derivative instruments to minimize significant, unanticipated

earnings fluctuations caused by commodity price volatility. As of December 31, 2021, Signify had

EUR 17 million of commodity derivatives recognized in the Statement of financial position (2020:

EUR nil million).

Change of the commodity price by 10% will lead to the commodity derivatives value change of

EUR 7 million (2020: EUR 5 million).

Credit risk

Credit risk represents the loss that would be recognized at the reporting date, if counterparties

failed completely to perform their payment obligations as contracted. Credit risk is present

within Signify trade and other receivables and contract assets. To have better insights into the

credit exposures, Signify performs ongoing evaluations of the financial and non-financial

condition of its customers and adjusts credit limits when appropriate. In instances where the

creditworthiness of a customer is determined not to be sufficient to grant the credit limit

required, there are a number of mitigation tools that can be utilized to close the gap, including

reducing payment terms, cash on delivery, prepayments and pledges on assets.

Signify invests available cash and cash equivalents and enters into financial derivative

instruments with various financial institutions and is exposed to credit risk with these

counterparties. Signify does not enter into any financial derivative instruments to protect

against default by financial institutions.

Where possible, Signify requires all financial institutions to complete legally enforceable netting

agreements under an International Swap Dealers Association master agreement or otherwise

prior to trading, and whenever possible, to have a solid credit rating from generally accepted

rating agencies. Signify also regularly monitors the development of the credit risk of its financial

counterparties.

Signify minimizes this risk by limiting the deposits made with any single bank and by making

deposits, the majority of which is with banks that have strong credit ratings.

Maximum credit risk exposure for Signify equals carrying amounts of all financial assets

recognized in the Statement of financial position plus off-balance sheet guarantees provided.

Country risk

Country risk is the risk that political, legal, or economic developments in a single country could

adversely impact our performance. The country risk per country is defined as the sum of the

equity of all subsidiaries and associated companies in country cross-border transactions, such

as intercompany loans, accounts receivable from third parties and intercompany accounts

receivable.

As of December 31, 2021, Signify had country risk exposure of EUR 2.6 billion in the United

States, EUR 1.1 billion in the Netherlands, EUR 566 million in China including Hong Kong and EUR

508 million in Belgium. Countries where the risk exceeds EUR 200 million but was less than EUR

500 million are Poland (EUR 491 million) and Saudi Arabia (EUR 206 million). Countries where the

risk exceeded EUR 50 million but was less than EUR 200 million are Spain, Mexico, France,

Canada, India, Australia and the United Kingdom. The degree of risk of a country is taken into

account when new investments are considered. Signify does not, however, use financial

derivative instruments to hedge country risk, except for the net investment hedge as described

in the currency risk.

125

Signify Annual Report 2021

30Events after the balance sheet date

On February 9, 2022, Signify announced that it had entered into a definitive agreement with

Australian based Gerard Lighting Group to acquire their Pierlite business. The acquisition will

strengthen Signify’s position in the Australian and New Zealand lighting markets and provide us

with growth opportunities - including those that exist between Pierlite’s luminaire portfolios and

Signify’s connected lighting solutions. The acquisition is expected to close in the second

quarter, subject to customary closing conditions.

No other subsequent events occurred that are material to Signify.

126

Signify Annual Report 2021

15Signify N.V.

financial

statements

Introduction

Statutory financial statements

The sections Consolidated financial statements and Signify N.V. financial statements contain the

statutory financial statements of Signify N.V. (the ‘Company’).

A description of the activities of the Company, its subsidiaries and Company structure are

included in the Consolidated financial statements. The corporate seat of the Company is in

Eindhoven, the Netherlands, and its registered office is at High Tech Campus 48, 5656 AE

Eindhoven, the Netherlands. Signify N.V. is registered in the Commercial Register of the

Chamber of Commerce under number 65220692.

A list of all Signify N.V. subsidiaries and affiliated companies, prepared in accordance with the

relevant legal requirements (Dutch Civil Code, Book 2, Sections 379 and 414), forms part of the

notes to the statutory financial statements and is deposited at the Chamber of Commerce in

Eindhoven, the Netherlands.

Accounting policies applied

The financial statements of the Company included in this section are prepared in accordance

with Part 9 of Book 2 of the Dutch Civil Code. Section 362 (8), Book 2, Dutch Civil Code, allows

companies that apply the International Financial Reporting Standards (IFRS) as endorsed by the

European Union, in their consolidated financial statements to use the same measurement

principles in their company financial statements. The Company has prepared these Company

financial statements using this provision.

The accounting policies are described in chapter 14, Consolidated financial statements, note 2,

Significant accounting policies, of this Annual Report and are deemed incorporated and

repeated herein by reference. Investments in subsidiaries in the Company financial statements

are accounted for using the equity method.

The Statement of financial position included in these Company financial statements has been

prepared before the appropriation of result.

127

Signify Annual Report 2021

15.1Statement of

income

Note

2020

2021

Other income

—

Financial income 1

Financial expenses

(44)

(38)

Statement of income in millions of EUR

For the years ended December 31

Share in results of subsidiaries

360

430

Net income

325

397

1 In 2020, Financial income was presented as part of the line-item Financial expenses.

128

Signify Annual Report 2021

15.2Statement of

financial

position

before

appropriation

of results

Note

2020

2021

Non-current assets

Financial assets

4,151

4,221

Total non-current assets

4,151

4,221

Current assets

Amounts due from subsidiaries

137

Total current assets

137

Total assets

4,289

4,225

Shareholders’ equity

Statement of financial position before

appropriation of results in millions of EUR

As at December 31

Share Capital

Share premium

2,201

2,174

Legal reserve: currency translation differences

(337)

(80)

Legal reserve: cash flow hedges

(2)

Legal reserve: other

157

213

Other reserve: treasury shares

(74)

(126)

Other reserve: retained earnings

(95)

(119)

Net income

325

397

Total shareholders' equity

2,196

2,459

Non-current liabilities

Debt

2,056

1,743

Provisions

—

Total non-current liabilities

2,056

1,745

Current liabilities

Provisions

Other liabilities

—

Trade and other payables

Total current liabilities

Total liabilities and shareholders' equity

4,289

4,225

129

Signify Annual Report 2021

15.3Statement of

changes in

equity

Legal reserves

Other reserves

capital

premium

Currency

translation

differences

Cash flow

hedges

Other

Treasury

Retained

earnings

Net

income

Total

share-

holders'

equity

Balance as at January 1, 2020

2,195

(7)

181

(68)

(390)

262

2,181

Appropriation of prior year result

—

262

(262)

—

Statement of changes in equity

in millions of EUR

Net income

—

325

Net current period change

—

(343)

—

(309)

Legal reserves reclassifications

—

(24)

—

Purchase of Treasury shares

—

(38)

—

(38)

Delivery of Treasury shares

—

(30)

—

(2)

—

Share-based compensation plans

—

Income tax share-based

compensation plans

—

Balance as at December 31, 2020

2,201

(337)

157

(74)

(95)

325

2,196

Balance as at January 1, 2021

2,201

(337)

157

(74)

(95)

325

2,196

Appropriation of prior year result

—

325

(325)

—

Net income

—

397

Net current period change

—

257

(20)

—

253

Legal reserves reclassifications

—

(56)

—

Dividend distributed

—

(343)

—

(343)

Purchase of Treasury shares

—

(83)

—

(77)

Delivery of Treasury shares

—

(60)

—

Share-based compensation plans

—

Income tax share-based

compensation plans

—

Balance as at December 31, 2021

2,174

(80)

(2)

213

(126)

(119)

397

2,459

130

Signify Annual Report 2021

15.4Notes to the Company financial

statements

In millions of EUR unless otherwise stated

AStatement of income

Other income consists of remuneration costs of the directors of the Company and the

Supervisory Board which were mostly recharged to the subsidiaries of the Company.

Financial income of EUR 5 million (2020: EUR 9 million) relates mainly to interest income on a loan

of USD 500 million to one of its subsidiaries. Financial expenses of EUR 38 million (2020: 44

million) relates mainly to interest paid on Debt and related amortization of expenses.

Share in results of subsidiaries represents the share of the Company in the results of its

affiliated companies.

BAudit fees

A summary of Audit fees from Ernst & Young Accountants LLP is shown below.

2020

2021

Audit fees 1

6.8

6.4

•consolidated financial statements

4.4

4.0

•statutory financial statements

2.4

Audit-related fees

0.5

0.4

•sustainability assurance

0.3

•other

0.2

0.1

Total 2

7.3

6.8

1The audit fees included in 2021 represent the fees in relation to the audit of the 2021 financial statements.

2Fees charged by the Dutch organization of EY were EUR 3.2 million (2020: 3.3 million).

CFinancial assets

The Company has one directly-owned subsidiary, Signify Holding B.V. This investment is

presented as a financial asset in the Statement of financial position using the equity method.

Goodwill paid upon acquisition of investments in subsidiaries is included in the net equity value of

the investment and is not shown separately on the face of the Statement of financial position.

In 2020, the Company entered into an uncommitted revolving credit facility agreement of USD

500 million with one of its subsidiaries. The available credit facility amounted to EUR 442 million

as at December 31, 2021, (2020: EUR 407 million) and bears interest at LIBOR plus a margin of

0.875% per annum. The translation differences upon revaluation to EUR for this inter-company

loan are partly hedged and partly mitigated by the revaluation impact of the USD debt. For

further details refer to note E, Debt.

The translation differences in 2021 of EUR 293 million (2020: negative translation of EUR 391

million) related primarily to the impact of translating US dollar-denominated investments into

euros.

The following table shows the movements in Financial assets.

Investments

Loans

Total

Balance as at January 1, 2020

2,375

—

2,375

Capital contributions / additions

1,300

454

1,754

Share in results of subsidiaries

360

—

360

Translation differences

(343)

(47)

(391)

Other movements

—

Balance as at December 31, 2020

3,745

407

4,151

Dividends received

(632)

—

(632)

Share in results of subsidiaries

430

—

430

Translation differences

257

293

Other movements

(21)

—

(21)

Balance as at December 31, 2021

3,779

442

4,221

131

Signify Annual Report 2021

DShareholders’ equity

Share capital

The Company has an authorized share capital of EUR 6 million, divided into 300,000,000 ordinary

shares with a nominal value of EUR 0.01 per share and 300,000,000 preference shares with a

nominal value of EUR 0.01 per share.

On December 31, 2021, the issued and fully paid share capital consisted of 128,344,238 ordinary

shares with a nominal value of EUR 0.01 per share (2020: 128,344,238).

As a defense measure, Stichting Continuïteit Signify, a foundation organized under the laws of

the Netherlands, has been granted the right to acquire preference shares in the Company. As at

December 31, 2021, this right had not been exercised therefore no preference shares have

been issued.

Dividend distribution

A proposal will be submitted to the 2022 Annual General meeting of Shareholders to pay a

dividend of EUR 1.45 per ordinary share, in cash, from the 2021 net income.

In June 2021, the Company settled an extraordinary dividend of EUR 1.35 per ordinary share,

representing a total value of EUR 169 million including costs. In addition, the Company also

settled the regular dividend of EUR 1.40 per ordinary share, representing a total value of EUR 175

million including costs.

Treasury shares

The following table shows the movements in the outstanding number of shares over the last two

years:

Number of shares

2020

2021

Balance as at January 1

125,938,631

125,581,371

Purchase of treasury shares

(1,333,418)

(1,937,489)

Delivery of treasury shares

976,158

1,258,122

Balance as at December 31

125,581,371

124,902,004

The following table shows the share transactions to cover obligations arising from share-based

compensation plans (for further details refer to chapter 14, Consolidated financial statements,

note 27, Share-based compensation, of this Annual Report).

2020

2021

Shares acquired

1,333,418

1,937,489

Average market price

EUR 28.21

EUR 43.08

Amount paid

EUR 38 million

EUR 83 million

Shares delivered

976,158

1,258,122

Average price (FIFO)

EUR 32.66

EUR 25.38

Cost of delivered shares

EUR 32 million

Total shares in treasury at year-end

2,762,867

3,442,234

Total cost

EUR 74 million

EUR 126 million

Legal reserves

As at December 31, 2021, legal reserves related to unrealized losses in currency translation of

EUR 80 million, unrealized losses related to cash flow hedges of EUR 2 million and included in

other, the ‘affiliated companies’ reserve of EUR 143 million, capitalized development costs

reserve of EUR 53 million, revaluation reserve of EUR 14 million and other reserves of EUR 3

million.

The item ‘affiliated companies’ reserve relates to the ‘wettelijke reserve deelnemingen’, which is

required by Dutch law. This reserve relates to any legal or economic restrictions on the ability of

affiliated companies to transfer funds to the parent company in the form of dividends.

As at December 31, 2020, legal reserves related to unrealized losses in currency translation of

EUR 337 million, unrealized gains related to cash flow hedges of EUR 17 million and included in

other, the ‘affiliated companies’ reserve of EUR 126 million, capitalized development costs

reserve of EUR 28 million and other reserves of EUR 3 million.

Limitations in the distribution of shareholders’ equity

As at December 31, 2021, pursuant to Dutch law, certain limitations existed relating to the

distribution of shareholders’ equity of EUR 214 million. Such limitations relate to ordinary shares

of EUR 1 million, legal reserves required by Dutch law of EUR 210 million and other reserves of

EUR 3 million. The unrealized losses related to currency translation differences of EUR 80 million

and cash flow hedges of EUR 2 million which although qualifying as legal reserves, reduce the

distributable amount by their nature.

The total distributable reserves as at December 31, 2021, amounted to EUR 2,245 million (2020:

EUR 2,021 million).

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Signify Annual Report 2021

As at December 31, 2020, pursuant to Dutch law, certain limitations existed relating to the

distribution of shareholders’ equity of EUR 176 million. Such limitations relate to ordinary shares

of EUR 1 million, legal reserves required by Dutch law of EUR 154 million, other reserves of EUR 3

million and unrealized gains related to cash flow hedges of EUR 17 million. The unrealized losses

related to currency translation of EUR 337 million, which although qualifying as a legal reserve,

reduce the distributable amount by their nature.

EDebt

Term loan structure and a revolving credit facility

During 2021, Signify had a net reduction in its long-term loans of EUR 354 million. As of

December 31, 2021, the Company had outstanding long-term loans amounting to EUR 280 million

maturing in November 2024 and USD 225 million maturing in January 2025. In addition, the

revolving credit facility (RCF) of EUR 500 million was extended to January 2027.

The EUR term loan bears interest at a variable rate based on the relevant applicable EURIBOR

plus a fixed margin of 0.15%. The USD term loan bears interest at a variable rate based on the

relevant applicable USD LIBOR with zero floor plus a margin. As at December 31, 2021, the margin

on the USD term loan was 0.75% and is subject to change, depending on the public credit rating

of Signify assigned by rating agencies.

The term loans and RCF agreement include a financial covenant providing that Signify maintains a

net leverage ratio of no greater than 3.5x. The net leverage ratio may temporarily increase to

4.0x within 12 months of the closing of material acquisitions. The covenant does not apply if

Signify has at least one investment grade rating, which is currently the case, as Signify has two

investment grade ratings. As at December 31, 2021, the value of the loans amounted to EUR 479

million (2020: EUR 794 million).

Eurobonds

As of December 31, 2021, Signify had outstanding EUR 675 million of fixed rate notes due in May

2024 with an annual coupon of 2.000% and EUR 600 million of fixed rate notes due in May 2027

with an annual coupon of 2.375%. As at December 31, 2021, the value of the Eurobonds

amounted to EUR 1,265 million (2020: EUR 1,262 million).

For the movements in debt refer to the table below.

Term loans

Eurobonds

Bridge

Loan

Total

Balance as at January 1, 2020

—

New borrowings

1,194

1,270

1,261

3,725

Repayments

(350)

—

(1,291)

(1,641)

Translation differences

(47)

—

(18)

Other movements

(2)

(8)

—

(11)

Balance as at December 31, 2020

794

1,262

—

2,056

New borrowings

630

—

630

Repayments

(984)

—

(984)

Translation differences

—

Other movements

—

Balance as at December 31, 2021

479

1,265

—

1,743

FEmployees

The number of persons employed by the Company at year-end 2021 was three (2020: four); all

were employed in the Netherlands. For the remuneration of past and present members of both

the Board of Management and the Supervisory Board, refer to chapter 14, Consolidated financial

statements, note 28, Information on remuneration, of this Annual Report, which is deemed

incorporated and repeated herein by reference.

GContingent liabilities not appearing in the balance sheet

General guarantees as referred to in Section 403, Book 2, of the Dutch Civil Code, have been

given by the Company on behalf of other group companies in the Netherlands. The liabilities of

these companies to third parties amounted to EUR 756 million as at December 31, 2021, (2020:

EUR 508 million).

There have been no other general guarantees or credit guarantees given on behalf of

unconsolidated companies and third-parties.

For corporate income tax purposes, the Company is the parent of a fiscal unity that contains the

most significant Dutch wholly-owned group companies. The Company is therefore jointly and

severally liable for the corporate income tax liabilities of the tax unity.

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Signify Annual Report 2021

HEvents after the balance sheet date

For the disclosure of events after the balance sheet date, reference is made in chapter 14,

Consolidated financial statements, note 30, Events after the balance sheet date, of this Annual

Report, which is deemed incorporated and repeated herein by reference.

On February 22, 2022, the Board of Management authorized the statutory financial statements

for issue. The statutory financial statements as presented in this report are subject to the

adoption by the Annual General Meeting of Shareholders, to be held on May 17, 2022.

February 22, 2022

Board of Management

Eric Rondolat

Javier van Engelen

Maria Letizia Mariani

Supervisory Board

Arthur van der Poel

Gerard van de Aast

Eelco Blok

Pamela Knapp

Rita Lane

Frank Lubnau

134

Signify Annual Report 2021

16Sustainability

statements

16.1Approach to

sustainability

reporting

Our sustainability program Brighter Lives,

Better World 2025 is not a standalone

program. It is embedded in our purpose and

integral to our strategy and the way we do

business. And we believe we have an

important role to play in helping achieve the

United Nations Sustainable Development

Goals (SDGs). They have been our strategic

compass in creating our Brighter Lives,

Better World 2025 program and

commitments. We report our contribution to

six SDGs: 3 - Good health and well-being; 7 -

Affordable and clean energy; 8 - Decent work

and economic growth; 11 - Sustainable cities

and communities; 12 - Responsible

consumption and production; and 13 - Climate

action. Through our activities, we contribute

to the achievement of these SDGs.

We create value within the financial,

environmental and social domains, and we

have made our approach towards long-term

value creation transparent by preparing this

Annual Report with key elements of the Value

Reporting Foundation's Integrated Reporting

framework and reporting in accordance with

the GRI Sustainability Reporting Standards.

Signify is subject to E.U. Regulation (EU)

2020/852 (so called EU Taxonomy) and

disclosures can be found in section 16.5 of

this chapter.

At the core of our reporting approach is the

value creation model. This model shows how

our business activities depend on various

financial, environmental, and social resources

that are converted to outputs. Our activities

and their outputs lead to outcomes in terms

of the impact made on our stakeholders and

society at large. Since 2017, Signify

communicates its impacts in monetary terms,

enabling more effective and efficient decision

making and giving a holistic view on our most

prominent risks and opportunities. It also

provides further transparency to our

stakeholders on company performance. By

publishing the results of our analysis and

being transparent on the methodology, we

strive to contribute to developing a global

standard for impact analysis.

Our external auditor Ernst & Young

Accountants LLP (EY) has provided

reasonable (highest level) assurance on our

sustainability performance and sustainability

statements in this Annual Report. To read the

combined assurance statement, including

detailed scope of assurance, please refer to

chapter 17, Combined independent auditor’s

report, of this Annual Report.

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Signify Annual Report 2021

16.1.1Definition of Signify’s

strategic focus: our

materiality assessment

Our approach

Our materiality assessment is the first step

towards defining our strategy. By identifying

future trends and understanding

stakeholders’ perspectives at a global and

local level, we are better able to manage the

risks and opportunities that could impact our

ability to create value in the long term.

We define materiality along two axes. The

vertical axis captures the importance of each

topic for external and internal stakeholders.

The horizontal axis captures both our

company’s significant impacts on the

economy, the environment, and society, and

the impact of externalities on our business.

Assessing both aspects enables us to

prioritize and focus on the most relevant

issues in terms of our efforts as well as

reporting progress in this Annual Report. Our

materiality assessment was conducted using

the GRI Standards’ principles for defining

report content while integrating the concept

of double materiality.

As a first step in our materiality assessment,

we use different sources of information to

identify possible material topics. This includes

external sources (media and trends analysis,

on-going stakeholder engagement insights)

as well as internal input. For the first time in

2021, we integrated the top risks and

opportunities identified during Signify's annual

risk workshop. We translated top risks into

material topics to offer a complete overview

of our financial and non-financial risks and

opportunities and improve the link between

sustainability, risk management, and strategy.

By the end of this first phase, we can list all

material topics for Signify (17 topics in 2021).

To prioritize these topics, Signify organizes

dedicated stakeholder engagement activities.

In 2021, this consisted of an online survey

reaching out to 550 internal and external

stakeholders (response rate of 22%) and

internal strategic discussions. At the end of

this process, we are able to identify the most

material topics Signify should be reported on.

Overview stakeholder engagement activities (non-exhaustive)

Stakeholder group

Stakeholder engagement processes

Exemplary topics discussed

Customers

Business development, lean value chain projects, consumer panels,

Net Promoter Scores, social media, customer surveys, key account

management, sustainability exchanges with customers

Growth for sustainability & innovation

Satisfaction rates

ESG-performance

Employees

Regular meetings, quarterly team surveys, bi-annual employee

development process, quarterly update webinars and sustainability

engagement campaigns

Strategic alignment sessions

Training & Development

Diversity, equity and inclusion

Investors and analysts

Virtual roadshows, (ESG) investor conferences, investor webcasts,

investor relations website, investors' perception study

Strategic alignment sessions

ESG-performance

Suppliers

Supplier development and quality activities including topical

training sessions, industry working groups such as EPRM and RBA,

and the commodity management, supplier quality and procurement

engineering functions

Sustainability performance

Peer-learning

Governments, municipalities

Annual innovation experience, research projects, policy and

legislative developments, business development, GreenSwitch and

Brighten America programs

Sustainable cities

Energy efficiency

Sustainable innovation

Civil society organizations

Partnerships with NGOs, cross-sector (multi-stakeholder),

projects, supplier sustainability stakeholder day, our social

investment program, the Signify Foundation

Social impact of light

Sustainable operations

Growth for sustainability

Stakeholder engagement

On-going discussions

We engage with stakeholders considered

most relevant to our company including

customers, employees, suppliers, investors

and analysts, municipalities and governments,

and civil society organizations. These

stakeholders are most likely to be impacted

by our activities and have the most influence

on achieving our commitments. Capturing

perspectives from multiple stakeholder

groups enables us to gain broader insights

into value creation and contributes to the

definition of our future strategy and plans.

In 2021, part of Signify's strategic stakeholder

engagements focused on the ambition levels,

interrelations and alignment of global and

regional 2030 and 2050 climate goals with

the economic recovery programs of the

world's major economies. We participated in

136

Signify Annual Report 2021

the three international climate conferences

(London Climate Action Week, Climate Week

NYC and COP26 in Glasgow). During each of

these conferences, we issued a call for action

highlighting the multiple benefits of switching

to connected LED lighting and the increase of

infrastructure renovation rates to 3% per

year.

Throughout the year, we were deeply

involved in the European Green Deal and

Recovery process, with all of our markets

messaging and exploring support and

opportunities in the National Recovery &

Resilience Plans (NRRP’s). We have launched a

dedicated “Green Switch” program, while

mainly through our partnerships with the

Corporate Leaders Group Europe, the

European Alliance to Save Energy and the

World Economic Forum, we were involved in

the concurrent policy developments that led

to the creation of the “Fit for 55” package.

The goal of this initiative is for the EU to

reduce GHG emissions by at least 55% by

2030. Through NEMA and the Business

Council for Sustainable Energy, we

contributed to the “Build Back Better”

economic recovery planning in the USA

leading to the encouraging approval of the

American Infrastructure and Jobs Act in

November 2021.

In 2021, we continued to hold memberships

and be active in many organizations, including

the Carbon Disclosure Project (CDP), the

World Economic Forum (WEF), the

Responsible Business Alliance (RBA), and The

Climate Group.

Materiality assessment engagement

For the dedicated stakeholder engagement

related to our 2021 materiality assessment,

we defined stakeholder representatives from

each of the six identified groups: customers,

employees, investors and analysts, suppliers,

governments and municipalities and civil

society organizations. Representatives have

been selected based on expertise,

constituency and geography. The broad

range of stakeholders minimizes bias and

creates a diverse insight.

Stakeholders' expectations and inputs are

captured at all phases of our materiality

assessment. Through different engagement

channels, we inform our stakeholders about

our activities, the measures taken and the

results.

2021 materiality assessment:

conclusions

In 2021, as an outcome of the assessment, we

confirm that Climate action and Human rights

are our two most material topics. Business

ethics and Safety at work remain very

important and Signify has robust processes in

place. Social impact of light, Circular

economy, Digitalization, and Geopolitical

instability are important for Signify and are

positioned on the right-hand side of the

matrix. Biodiversity and Water are both in the

lower quadrant of this matrix and are our two

least material topics. The result of the

materiality assessment has been reviewed by

the Leadership Team and the Supervisory

Board.

The details of our 2021 materiality

assessment, as well as the definition of each

material topic can be found in the

Sustainability Supplements to the Annual

Materiality matrix

Report, available on our Sustainability

downloads webpage: https://

www.signify.com/global/sustainability/

downloads.

137

Signify Annual Report 2021

Signify material topics – The table showcases the link between our sustainability program, our contribution to the SDGs, and our material topics and their boundaries.

Priority SDG

Material topic

Our contribution

Boundary

Social

Talent & Development

16.3.1 Talent & Development

Own operations

Diversity & Inclusion

16.3.2 Diversity, equity and inclusion

Own operations

Human rights

16.3.3 Human rights

Own operations; Supply chain

Safety at work

16.3.4 Safety at work

Own operations

Social impact of light

16.3.5 Social impact of light

Use phase

Environment

Climate action

16.4.1 Climate action

Own operations; Supply chain; Use phase

Biodiversity

16.4.6 Biodiversity

Own operations; Use phase

Circular economy

16.4.2 Circular economy

Own operations; Supply chain; Use phase

Responsible packaging

16.4.3 Responsible packaging

Use phase

Water usage

16.4.5 Water usage

Own operations

Hazardous substances

16.4.4 Hazardous substances

Own operations; Use phase

Governance

Innovation

CEO Letter

16.2 Sustainable innovation

Own operations; Supply chain; Use phase

Cybersecurity

16.3.6 Cybersecurity

Own operations; Use phase

Business Ethics

16.3.2 Human rights

16.3.5 Business ethics

11.4 Capital allocation

11.6 Share performance

Own operations; Use phase

Digitalization

2 CEO message

12.5 Key risks

Own operations

Operational excellence

4 Corporate Performance

12.5 Key risks

Own operations

Geopolitical instability

12.5 Key risks

Own operations

In the sections that follow, we explain how we manage social and environmental material topics in our operations, supply chain and products.

138

Signify Annual Report 2021

16.1.2Sustainability

governance

In 2021, the Sustainability and the

Environment, Health & Safety functions

headed respectively by Maurice Loosschilder

and Johan de Fraye consist of global, regional

and local sustainability professionals and fell

under the responsibility of the Board of

Management member and Chief Strategy &

Sustainability Officer, Maria Letizia Mariani.

Progress is reviewed on a quarterly basis by

the Board of Management and the Leadership

Team. During these meetings, progress on

strategic programs is reviewed and

corrective actions are taken when necessary.

Progress is also reviewed with the

Supervisory Board on an annual basis. In

addition, the results of our sustainability

programs are communicated on a quarterly

basis to Signify employees and on our website

to external stakeholders.

Sustainability programs are embedded in the

Signify organization and ways of working.

Examples of departments that implement

sustainability programs include sales,

innovation, manufacturing, sourcing, and

logistics. Targets on sustainability are set at a

corporate, division and market levels.

16.1.3 Program targets

Our sustainability commitments are grouped

under our sustainability program Brighter

Lives, Better World 2025, launched in

September 2020. Targets for this program

are set for a five-year period, until the end of

2025, and the baseline year for our doubling

commitments is 2019.

Program 2025 targets

Doubling objectives

Continue and strengthen

Better World

Double the pace we achieve the 1.5°C

scenario of the Paris Agreement

Carbon neutral operations

& 100% renewable electricity

Increase Climate action

revenues to 72%

Double our Circular revenues to 32%

Zero waste to landfill and sustainable

packaging

Brighter Lives

Double our Brighter lives revenues to

32%

10 million lives lit through our Signify

Foundation

Double our % of women in leadership

to 34%

Safe & healthy workplace with a TRC

rate less than 0.30

Supplier sustainability performance of

95%

Minimum performance rate of 90%

Approved Science-Based Targets - 1.5 degrees scenario

Baseline

Target 2030

Carbon emissions from scope 1 and scope 2

2015

70% reduction

Carbon emissions from scope 3 (use of product)

2015

30% reduction

Changes in targets, policies, definitions or

scope are specified annually and 2021 is the

first reporting year.

Additionally, to ensure our efforts are in line

with the targets of the Paris Agreement, we

have set Science-Based Targets in relation to

our emissions.

16.1.4 Reporting standards

This report has been prepared in accordance

with the GRI Standards: Comprehensive

option. We also used additional company

disclosures. An overview of the information

on data definitions, measurements and any

uncertainties inherent to measurements can

be found in the Sustainability Supplements to

the Annual Report, available on our

Sustainability downloads webpage: https://

www.signify.com/global/sustainability/

downloads. These supplements also include

more information on our 2021 materiality

assessment, a GRI Content Index, our Task

Force on Climate-related Financial

Disclosures (TCFD) reporting and to the E.U.

Directive on non-financial information. In

2021, Signify re-committed to the United

Nations Global Compact to advance 10

universal principles in the areas of human

rights, labor, the environment, and anti-

corruption efforts. This report also serves as

our annual Communication on Progress (COP)

towards abiding by these principles.

New Signify ventures and acquisitions are

included in environmental and social

disclosures to the extent that the integration

process of these ventures has been finalized.

The normative integration period is two years.

Divestitures completed before December 31

of the book-year are excluded from

environmental and social reporting. For our

Brighter Lives, Better World 2025 doubling

commitments, we use best estimates for 2019

as a base, including for Cooper Lighting and

Klite. These acquisitions are included in our

2021 data but excluded from the reported

2019 and 2020 comparative figures.

139

Signify Annual Report 2021

16.2Sustainable

Innovation

Innovation is an important pillar of Signify's

purpose: to unlock the extraordinary

potential of light for brighter lives and a

better world. Our sustainable products and

systems must demonstrate proven

measurable benefits in one or more of the

eight sustainable focal areas (SFAs)

compared to the relevant, regularly updated

benchmark.

We have five Better World SFAs:

•Energy & solar - increasing energy

efficiency of products, systems and

services, and solar systems and solutions

•Circularity – optimally preserving value and

avoiding waste via serviceable luminaires,

circular components, intelligent assets,

and circular services

•Packaging - reducing packaging weight and

volume, increasing recycled content in

packaging of professional products and

eliminating the use of plastics in packaging

of consumer products

•Substances - eliminating harmful

substances

•Weight & materials - reducing product

weight, selecting recycled and/or

renewable materials, and increasing

commonalities

And three Brighter Lives SFAs:

•Safety & security - providing light that

improves the safety of people in traffic,

cities and houses and increases protection

against cybercrime

•Health & well-being - supporting health,

well-being, and performance of humans

through unlocking the visual, biological,

and emotional benefits of light

•Food availability - providing light that

enables the production of more and

better-quality food, while optimizing the

use of land, water and energy and avoiding

pesticides

Our sustainable innovations continue to

transform the lighting industry. In 2021, we

invested EUR 266 million in sustainable

innovation which represents 92.9% of Signify

R&D expenses (85.1% in 2020).

We believe that sustainable innovation will

help create a more future-proof and

purposeful portfolio of products, systems

and services.

16.3Brighter Lives

With the United Nations´ Sustainable

Development Goals as our strategic compass,

in 2020 we launched our new Brighter Lives,

Better World 2025 sustainability program

with even more ambitious goals. We are

providing solutions that address some of the

most important challenges of our time for

brighter lives and a better world.

By the end of 2025, we will double our impact

on society, creating brighter lives for all

(versus baseline 2019). We will do this by

doubling our Brighter lives revenues which

benefit society by increasing food availability,

security & safety and health & well-being.

Additionally, we commit to double the

percentage of women in leadership by the

end of 2025. We will also strengthen our

commitments to employee safety, sustainable

supply chain and lives lit through the work of

the Signify Foundation.

Mark van Bijsterveld,

Chief HR Officer, Signify

“While we continue our

transformation journey, the

digitalization of our industry, the

impact of the global pandemic and

new trends in the labor market

continued to shape our environment

in 2021. Creating a great place to

work, where people belong, have an

impact, and take pride in the

company we build together, remains

at the heart of our people vision.

Our people priorities for 2021 were

focused on creating a more diverse

workforce and inclusive, equitable

work environment, accelerating the

reskilling of our workforce for

Digital excellence, strengthening

our Performance culture, and

ensuring our competitiveness

through creating a leaner corporate

center.

In July 2021, as part of our DE&I

journey, we signed the UN Women’s

Empowerment Principles, a global

initiative to promote and strengthen

women in companies. We focused on

attracting and hiring new, diverse

talent. We continued to strengthen

our learning culture with a

dedication to develop all our

employees. We also have increased

our efforts to become a truly digital

company by reshaping our digital

organization while advancing on our

strategic initiatives to digitize our

customer interfaces, internal

processes and products & services.

Our people and their digital

capabilities are essential enablers,

which we have invested in to deliver

on our digital ambition.

Given the long-term impact of the

COVID-19 pandemic on the lighting

industry, we have taken a proactive

approach to adjust our cost base

and improve our competitiveness

through delayering our commercial

organization and creating a leaner

corporate center.

I am proud to be part of this

fantastic team; together we have

shown that also in difficult times our

values guide us to create brighter

lives and a better world."

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Signify Annual Report 2021

16.3.1Talent and Development

Employment

The total number of Signify employees

(including Cooper Lighting and Klite) was

36,824 at the end of 2021, compared to

37,926 at year-end 2020. The data provided

in sections 16.3.1 and 16.3.2 excludes

employees from Klite, which has not been

integrated in our human resources system.

Employees in FTEs

2019

2020

2021

Signify total

32,005

37,926

36,824

Approximately 31% of our employees were

employed by one of our three divisions,

focusing on research & product

development. 19% were employed in one of

our clusters, focusing on sales & marketing.

42% of our employees were in operations,

focusing on manufacturing, supply chain,

quality and procurement. The remaining 9%

worked in corporate functions. In line with

the ongoing external workforce changes and

digital transformation, we expect that the

nature of the current workforce will continue

to evolve.

In 2021, the total employee turnover was 54%

(2020: 32%), with the vast majority related to

turnover in factory and distribution staff in

Mexico. The increase in turnover year-on-

year was driven by stronger seasonal

adjustments in production and labor volumes

due to the logistical challenges this year, and

is also reflecting the increasing labor market

competitiveness we faced in 2021. Plans are

Employee turnover breakdown in 2021 in %

Staff (majority

in factory)

Professional

Mid-Level

Professional

Senior-Level

Professional

Leadership

of which voluntary

61%

of which involuntary

57%

Talent Management

With close to 37,000 talented and engaged

employees all over the world, it is our people

who are central to the effective execution of

our strategy. We believe that we will maintain

our position as the market leader in lighting

by being a talent-builder, developing and

growing people from within. We want our

employees to have a challenging and

rewarding work experience. One where they

can grow and make an impact, where they

gain new experiences and develop

themselves.

Our approach to talent is to continuously

build and develop employees’ functional and

leadership skills, whilst attracting new,

diverse talent where critical capabilities are

needed to strengthen our talent pool and

achieve our strategic objectives.

In 2021, we welcomed 14,135 external talents

to help bring our business vision to life, most

of whom were employed in manufacturing

functions. In line with our people philosophy

to promote talent from within the

organization, 85% of our senior management

and leadership roles were filled internally

executed to ensure our competitiveness in a

highly dynamic labor market and to reduce

factory turnover.

A robust global employer brand

In 2021, we continued to build on our

refreshed Employer Value Proposition (EVP):

Shine Brighter at Signify – together we unlock

the extraordinary potential of light for

brighter lives and a better world. The

sustainability proposition is aligned with our

Brighter Lives, Better World 2025

sustainability commitments, focusing more on

continuous learning as well as DE&I.

In 2021, notable achievements include various

certifications and awards in many countries,

for example: Certification as Top Employer in

the Netherlands, China, Brazil (Top

Employer® Institute), Great Place to work

(The Great Place to Work® Institute) in

Singapore and India where we were also

recognized as one of India’s 100 Best

Workplaces for Women and we made it to

Mogul's list of Top 100 workplaces with the

best D&I initiatives.

We directed our recruitment marketing

campaigns on the most critical segments, to

drive our transformation and growth and build

talent pipelines. In 2021, we focused on

reaching diverse technology, marketing, and

sales candidates with relevant messaging

customized per region and reflecting our EVP.

As part of our global talent acquisition

strategy, we continue to attract talent from

proven high-quality sources. In 2021, the main

sources of hire were:

•Internal - Over the last few years we have

filled approximately 30% of our vacancies

internally.

•Employee referral – 24% of total external

hires came from employee referrals.

•Sourcing – Our recruiters focus on

proactively building talent pipelines and

identifying talent, supported by

recruitment marketing campaigns to

increase awareness and drive conversion

for-hard-to-fill roles.

•Signify careers website - Via our content

strategy on social media "Humanizing our

employer brand", employees shared why

Signify is a great place to work, in alignment

with our values and EVP and enabled us to

outperform competition. We were

nominated by LinkedIn as a finalist at the

2021 LinkedIn Best Employer Brand Award

in the Netherlands.

The Signify global career website can be

found at www.careers.signify.com.

Employee engagement & well-being

Employee engagement and well-being are key

to our competitive performance and integral

to our people vision: creating a workplace

where people belong, have impact and take

pride in the company we build together.

Engaged employees are emotionally

committed to our company. They help us to

meet our business goals and sustainability

commitments, whilst contributing to a

dynamic, high-performance workplace.

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Signify Annual Report 2021

In 2020 and 2021, the effects of lockdowns

on mental health and well-being became

clear. A stronger focus was brought in the

learner domain for these essential topics. We

also established a number of grassroots

initiatives to create awareness on these

topics:

•Meet2Grow sessions, organized by the

learning team, with topics focused on

resilience, emotional intelligence, and

stress management.

•Healthy Breaks sessions, as short virtual

energizing moments to connect colleagues

on topics such as music and food.

•Virtual Coffee corners around the globe,

as informal meetings for our leaders and

employees to stay connected while

working from home.

Because sustainability is central to our

company strategy, we have engaged our

employees on the topic of sustainability since

2019. We do this with quarterly employee

engagement themes and challenges that help

employees reflect on and connect personal

values with Signify’s business practices.

The Signify Team Survey poses questions in

line with our company purpose and values,

and it has proven to be a positive driver of

employee engagement to increase team

effectiveness. As a result, we have continued

to run the Team survey every quarter to

monitor employee engagement and take

corrective actions when needed.

Through the Signify Team Survey, in 2021 91%

of our employees said that we truly put our

Customer First (2020: 88%); 87% of our

employees acknowledged that we are

Greater Together (2020: 89%); 85% of our

employees felt that we are considered a

Game Changer (2020: 90%) and 87% of our

employees agreed that we have Passion for

Results (2020: 81%). We noted that we need

to continue improving in the areas of

effectiveness and recognition. Initiatives to

address our improvement points are driven at

a team level via our Team dialogues, and we

continue to track progress on these

questions during our Quarterly Performance

Reviews.

To measure employee satisfaction, the Net

Promoter Score (NPS) methodology is used

as part of our Team survey. Employees are

asked to rank how likely it is that they would

recommend our company as a great place to

work. In 2021, the Team survey had an

average employee response rate of 84%, the

highest level since we began running the

survey (2020: 83%). At the end of 2021, we

recorded an NPS score of 32 (Q4) and an

average annual NPS score of 30 across the

Signify population (2020: 25). Despite all the

challenges we faced in 2021, our employee

engagement score remained high and we

continue to prioritize employee health and

safety. Our eNPS score is in the top 25% of

companies making up the ETS eNPS

benchmark.

Learning & development

Learning continued to be a competitive

advantage at Signify and plays an important

role in attracting and retaining talent. Our

personalized learning environments

flourished as remote working became the

new standard for many colleagues and

customers around the globe. Empowering our

employees and customers to upskill anytime,

anywhere was a key focus in 2021.

A wide range of learning offerings supported

the new challenges that our employees and

customers had to overcome: How to stay

connected with colleagues and customers?

How to prepare for the (hybrid) future, where

customer experiences are entirely digital and

supported by technology?

People connected virtually on our

knowledge-exchange platforms to consume

or to share their knowledge with colleagues

and customers. The learning experience

platform Learning@Signify reached an active

learner rate of 69% in Q4 2021. Additionally,

we successfully launched a new customer

learning platform and the Lighting Academy

on LinkedIn reached over 12,000 followers.

In 2021, the average number of hours spent

on training and development per FTE was 34

hours. Based on our value creation

methodology, Signify has created EUR 4.03

million in value for our society through its

employees’ learning and development

programs.

Live virtual connections as a substitute

for formal classrooms

As a result of travel restrictions, people

actively came together in virtual classrooms

to practice new skill sets and listen to

industry experts. In 2021, offering more

online learning possibilities contributed to

reduce emissions from air travel in 2021.

In our S-Talks training, over 6,000 customers

and employees came together to be upskilled

on System knowledge. During the year, we

reached the 10,000 certificates milestone for

the Let’s Get Systemized program, launched

in 2019. For example, the Dynalite training

that used to be done face-to-face was wholly

migrated to a Live Virtual Classroom that was

upskilled via innovative virtual assessments

and newly designed knowledge tests.

Another essential capability building training

focused on Product Security, where Signify

was awarded the IEC62443-4-1 security

certification for its connected lighting

development process by DEKRA. Product

Management and Service Bootcamps were

organized to grow the value-creation and

selling capability.

Upskill for greater customer impact

In 2021, an innovative sales training program

was developed and deployed for customer-

facing roles in the organization. The Impact

program focuses on how to stay relevant for

our customers in today's reality, where

everything is available online. It introduces a

consultative and innovative approach to

selling, with a greater emphasis on

relationship building and trust. The program

covers a range of fundamental skills, such as

how to optimize the use of social media to

connect more widely in the customer

organization, how to build trust in the new

virtual reality, and how to grow opportunities

for sustainable growth. In total, 28 global

training cohorts got involved in this 24-week

training program in 2021.

Upskill for digitalization

How do we lead the digital transition and

transform our business models for the

future? In 2021, we continued to invest in

digital reskilling designed around critical

digital competencies such as: Robotic

Process Automation (RPA), Data & Analytics

(AI / Machine Learning / Data Analytics),

Cloud Computing, Information & Cyber

security, AGILE (SAFe & SCRUM),

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Signify Annual Report 2021

eCommerce, critical thinking, adaptability and

collaboration.

We launched a six-month Digital Leadership

Learning and provided a complete array of

exclusively developed, hand-picked self-

learning courses covering different technical

and behavioral skills to understand our digital

aspirations and acquire conceptual

awareness. In addition to self-paced learning

modules, the journey had several interactive

learning experiences covering:

•Master classes: Orchestrated by our

Subject Matter Experts, with drop-in clinic

dialogues

•Exploration of Outside-In dialogues:

Sharing best practices with external

executives and/or our internal teams in

fire-chats

•Lunch and learn sessions: Peer dialogues

to reflect and exchange ideas

Leadership development

Linked to the people pillar of our 5 Frontiers

strategy – be a great place to work - we

continued to ensure that our leadership

development experiences are aligned to this

and to our talent philosophy. In 2021, given

the necessity to adjust to the travel

limitations due to the COVID-19 pandemic, we

continued to deliver on-site and virtual

leadership programs in various parts of the

world.

In 2021, we introduced the new iEDGE

program to strengthen the leadership skills of

our new people leaders. This ensured that

our early talents and people leaders

continued to get support in their roles for

Signify to build a pipeline of future-ready

leaders who can further take the company

down paths of excellence and sustainable

growth. We completed 2 EDGE I leadership

programs and 3 iEDGE programs in 2021.

As we move into 2022, we will continue to

improve the leadership offerings ensuring our

leaders are equipped to lead, develop and

inspire our people.

16.3.2Diversity, equity &

inclusion

At Signify, we believe that a diverse

workforce and an inclusive work environment

are essential to a thriving innovative business

and long-term value creation. We are an

equal opportunity employer committed to

diversity, equity and inclusion in the

workplace. This means we celebrate and

foster an environment in which all ideas,

perspectives, experiences and styles are

highly valued and where all individuals are

treated fairly with equal access to

opportunities and resources. Diverse

representation in our workforce is critical for

our long-term success as a company. It

enables us to understand, connect and

communicate with our customers, end-users

and stakeholders while helping us to attract

and retain people who want to be part of our

purpose to create brighter lives and a better

world. Our diversity, equity and inclusion

(DE&I) strategy reinforces our Greater

Together value, enabling us to make better

decisions, boost innovation, create growth,

and strengthen our culture.

In 2021, we signed the United Nations (UN)

Women Empowerment Principles, which

underpins our commitment to double the

percentage of women in leadership in our

business to 34% by the end of 2025, and is

another step towards ensuring equal

opportunities, fairness, and impartiality for all.

We also participated in the UN Global

Compact Target Gender Equality Program,

which helps us assess our practices from an

equity and inclusion perspective and learn

from peers to deepen implementation of

Women Empowerment Principles.

We continued to reinforce our existing “2+1”

approach i.e., global focus on two specific

diversity dimensions of gender and

generation with space for markets, divisions

and functions to locally implement important

and relevant initiatives. Some recent

examples include DE&I Speaker Series and

Courageous Conversations in the US, which

fostered understanding on key concepts of

DE&I. We also facilitated gender inclusion

workshops in Market India to tackle

unconscious biases based on gender and

develop more inclusive leadership. Market

France conducted a webinar session on

disability inclusion to raise further awareness

and understanding. Market UK&I facilitated a

session to show their support and connection

with the LGBTQ+ community. Market Benelux

organized a session on mental well-being to

support mental health inclusivity.

In 2021, our DE&I champions' network grew to

around 160 members, who continue to drive

actions locally and share best practices. Our

DE&I Board, created in 2019, continued to

structure and advance our strategy and

roadmap. In 2021, we designed and deployed

a new e-learning program on DE&I awareness

to build a common language and

understanding across the organization. At the

end of the year, the global completion rate

was 91%.

Globally, we recognize the need for a more

diverse representation in the areas of gender

and age, and we continually monitor related

data to support our aim of reaching greater

diversity representation in our organization.

Over the past three years we have maintained

the representation from different

generations in our workforce. We plan to

further improve our generational diversity in

the future by increasing the inflow of early-

career talents.

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Signify Annual Report 2021

Gender diversity in % New hire diversity in % Employee per age category in %

Staff

Professional

Mid-level

professional

Senior-level

professional

Leadership

Men

Women

Staff

Professional

Mid-level

professional

Senior-level

professional

Leadership

Men

Women

Under 30

30 - 50

Over 50

In 2021, 40% of Signify employees were

women and 25% of leadership roles (positions

graded H22+ on the Hay grading scale)

across the company were held by women. We

are on track to achieving our 2025 targets of

34% women in leadership positions.

Additionally, in 2021, 51% of our new hires

were women (2020: 49%). From a

generational perspective, 18% of employees

were 30 years old or under (2020: 15%). We

have the ambition to attract and retain more

early-career talents to build a sustainable

talent pipeline. As a company, we are

naturally diverse operating in 74 countries

with more than 90 nationalities represented

in our workforce. Globally, we recognize that

we need a more diverse workforce, especially

in management and executive positions.

Therefore, over the last two years we have

intensified on increasing the representation

of women and early-career talents in our

company. We are committed to improving

diversity at all levels, attracting candidates

from more diverse pipelines and driving

development and internal mobility to increase

representation across our company.

We believe in the importance of being

intentional and accountable to advance DE&I

and create brighter lives and a better world.

In 2022, we will publish the first dedicated

company report on DE&I, which will give

further visibility to our stakeholders on how

we approach and drive our DE&I agenda.

Equal remuneration

Signify’s commitment to equity and inclusion

includes a policy for equal pay for equal, or

substantially similar, work. Signify establishes

formal pay policies and practices that govern

hiring, benefit entitlements, annual merit, and

promotional guidelines to ensure equity.

Furthermore, Signify performs regular

reviews which are designed to ensure

compliance with our policy of equal pay for

equal work and all local legal requirements in

the countries in which we operate. Our

regular review process includes a

comprehensive statistical analysis of pay to

employees across the world. Any statistically-

significant variance within any employee

group is promptly addressed.

16.3.3 Human rights

Our approach

Respecting human rights is a central

foundation of the way we work. Our

commitment to respecting and promoting

human rights extends beyond our own

operations, across our wider sphere of

influence, including our supply chain. To that

end, we integrate human rights

considerations into our policies, processes,

and practices.

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Signify Annual Report 2021

Our Human Rights policy is based on the

International Bill of Human Rights, the United

Nations Global Compact Ten Principles, and

the International Labour Organization’s

declaration on Fundamental Principles and

Rights at work. Signify carries out continuous

research and stakeholder engagement

activities to identify the most salient ethical

and social principles that govern our

relationship with stakeholders worldwide.

The table on the right shows, in random

order, the salient issues identified and the

stakeholders they affect, as well as

references to the sub-sections of this report

that contain the progress that Signify made in

addressing these issues.

Human rights risk assessment

Compliance to the Human Rights policy is

governed through our Integrity code

processes, combined with dedicated steps

that help ensure adherence.

In 2021, employees were requested to

complete e-learnings that helped interpret

our Integrity Code. Dedicated communication

campaigns urged everyone to speak-up and

report concerns of possible violations. In

those campaigns, the availability of our Ethics

hotline was also highlighted. This initiative is

an integrated and ongoing activity we have

embedded in our business and business

principles, which we redeploy on a regular

basis and share with our new employees as

part of their on-boarding program.

Based on a country risk assessment, multiple

manufacturing locations were considered to

have an increased likelihood of policy

Salient human rights issues

Rights holders covered in our programs

Reference to our disclosures

(3rd party)

employees

Direct

suppliers

Indirect

suppliers

Freedom of association and collective bargaining

•

16.3.5: Business ethics

16.3.3: Human Rights

Safe & healthy workplace

•

16.3.4: Safety at work

16.3.3: Human rights

Working hours

•

16.3.5: Business ethics

16.3.3: Human Rights

Equal employment opportunities and respect

•

16.3.2: Diversity, equity and inclusion

16.3.3: Human rights

16.3.5: Business ethics

Recognition and reward

•

16.3.2: Diversity, equity and inclusion

16.3.3: Human rights

16.3.5: Business ethics

Forced and child labor

•

16.3.3: Human rights

Employee development

•

16.3.1: Talent & Development

16.3.5: Business ethics

violations. Since 2017, these locations are

requested to periodically fill in a dedicated

self-assessment on human rights. In 2021, we

identified in the sites of our newly-acquired

operations some practices that are not yet

aligned with our policy. We have put a plan in

place to align these practices with our policy.

Living wages

Recognition and rewards have been identified

as an important engagement driver for our

employees and direct suppliers. By ensuring

good working conditions, Signify not only aims

to provide a fair, safe, and respectful work

environment, but also an inspiring place to

work and grow. Fair remuneration is

considered a precondition for our employees

to flourish. Signify provides total minimum

requirements and is in line with the industry

practices in the markets in which we operate.

In addition, we are committed to providing

our employees with a living wage, ensuring

that their everyday needs are met. The

guiding principles of our pay policy include

providing competitive remuneration relative

to all labor markets, ensuring equity, and

providing a living wage to our employees.

As such, to ensure compliance against our

guiding principles, Signify launched its Living

Wages program in 2017. Every two years,

Signify performs an analysis of salaries and

benefits for employees globally with respect

to a living wage, covering the necessary living

costs. We compare our wages to the

WageIndicator Foundation database.

In 2021, Signify enhanced its analysis by

looking at 43 different regions around the

world rather than on an overall country basis

for a select number of countries, as was done

in previous years. The results show that

company standards exceed the living wage

standards in all regions examined except two.

We will create a plan to address this delta for

each of the two regions in 2022.

Fair compensation in terms of wages,

overtime and benefits for our suppliers'

employees in risk countries is part of our

sustainable supply chain program. Through

our active engagement, 98% of our risk

suppliers met our requirements. In 2020, we

started to collect relevant data among our

suppliers, and we continued to do this in

2021.

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Signify Annual Report 2021

Social responsibility in our supply

chain

We have a direct business relationship with

more than 3,000 product and component

suppliers. Responsible procurement

practices and management of our supply

chain require a structured and innovative

approach due to the wide variety of

stakeholders.

Signify has developed programs over the

years to prevent human rights violations in its

supply chain. These programs cover the

assessment and development of supplier

sustainability performance (audits and

training) and responsible minerals sourcing.

As part of our Brighter Lives, Better World

2025 sustainability program, we are

strengthening our commitment towards a

more sustainable supply chain by increasing

our supplier sustainability performance rate

annual target to 95% until the end of 2025.

Through our efforts, we foster decent work

and economic growth by improving the safety

& well-being of suppliers and directly

contribute to SDG 8: Decent work and

economic growth,

Supplier sustainability performance

The core of our supplier sustainability

performance program is the Supplier

Sustainability Declaration (SSD). This

declaration forms an integral part of our

supplier contracts and can be found on our

website: https://www.signify.com/global/

contact/suppliers/sustainability/our-

programs/supplier-sustainability-

management.

The SSD is derived from the Responsible

Business Alliance (RBA) Code of Conduct and

sets out the standards and behaviors we

require from our suppliers and their suppliers.

It covers labor, health & safety, environment,

ethics and management systems. We monitor

supplier compliance with the SSD through a

system of regular audits. In the RBA Code of

Conduct and in our SSD, special attention is

given to the prevention of human slavery as

referred to in the United Kingdom (UK)

Modern Slavery Act Disclosures and the

California Transparency in Supply Chains Act.

The formal statement on these legislations

can be found on our website.

Our audit program consists of full audits

performed in a three-year cycle by an

independent audit firm for selected suppliers

in risk countries. In 2021, we continued the

integration of our new acquisitions’ suppliers

in the program and we aim to finalize it in

2022.

If non-conformances are identified, we

require the supplier to develop and execute a

corrective action plan. We support our

suppliers to correct the non-conformances,

for instance by providing training or sharing

best practices. We monitor the execution of

the corrective action plans until the supplier

is compliant with our requirements. In case of

delays, the supplier is classified as non-

compliant in our Tritium program and we apply

a stratified approach for consequence

management. Tritium is a program that helps

us develop a strong supply chain with best-

in-class suppliers and is based on selection

and rewards criteria against our strategic

priorities. We work with each supplier to

resolve non-conformances within ninety days,

where possible.

The table below shows the summary of our

2021 audit program.

Summary of 2021 audit program (three-year cycle, third-party audit)

Greater

China

Rest of

the World

Americas

Europe

Total

Total no. of risk suppliers

192

265

Total no. of audits

Initial audits

Continued conformance audits

Workers employed at sites audited

28,756

6,317

4,256

39,329

In 2021 we added 25 new suppliers to our

program.

Total new suppliers in 2021 audit program

Greater

China

Rest of

the world

Americas

Europe

Total

New suppliers (onboarding)

The supplier sustainability performance rate

represents the percentage of risk suppliers

that have an audit score of at least 90 out of

100 points. Despite COVID-19, we were able

to fully execute our program at suppliers'

facilities with limited need for remote

auditing. In 2021, while we continued

integrating our new acquisitions' suppliers,

we surpassed our target of 95% by achieving

a supplier sustainability performance rate of

98% (2020: 99%).

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Signify Annual Report 2021

The table below shows the supplier

sustainability performance and indicates the

conformance level in the audits before

suppliers have taken corrective actions.

The category 'Occupational safety'

decreased its compliance rate from 60-80%

in 2020 to 40-60% in 2021.

The category 'Energy consumption and

Greenhouse gas emission' increased to

60-80% in 2021 from 40-60% in 2020.

Summary of 2021 audit findings before suppliers have taken corrective actions, supplier compliance rate per category of SSD including top-10 non-conformances coverage of the Supplier

Sustainability Declaration.

Labor

Health & Safety

Environment

Ethics

General

Freely chosen employment

60-80%

Occupational safety

40-60%

Environmental permits and

reporting

60-80%

Business integrity

80-100%

RBA code

80-100%

Child labor prohibition/

Young worker management

80-100%

Emergency preparedness

40-60%

Pollution prevention and

resource reduction

80-100%

No improper advantage

80-100%

Working hours

40-60%

Occupational injury and illness

60-80%

Hazardous substances

60-80%

Disclosure of information

80-100%

Wages and benefits

40-60%

Industrial hygiene

60-80%

Solid waste

80-100%

Protection of intellectual

property

80-100%

Human treatment

80-100%

Physically demanding work

80-100%

Air emissions

80-100%

Fair business, advertising and

competition

80-100%

Non-discrimination

80-100%

Machine safeguarding

80-100%

Product content restrictions

80-100%

Protection of identity

80-100%

Freedom of association

80-100%

Food sanitation and housing

60-80%

Water management

80-100%

Responsible sourcing of minerals

80-100%

Health and Safety information

communication

80-100%

Energy consumption and

greenhouse gas emission

60-80%

Privacy

80-100%

Non-retaliation

80-100%

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Signify Annual Report 2021

Supplier training and developments

Since 2017, we have put in place on-site

trainings for our suppliers. These trainings

are tailored towards the non-conformances

that were found during the audit. By doing so,

we train supplier staff on the topics that are

most important for them to improve on. In

2021, we performed on-site trainings at 67

supplier sites, with a total of 351 attendees.

We also organize training sessions on the RBA

Code of Conduct and SSD. To address critical

and emerging issues, we provide in-depth

capability building programs for our suppliers

on specific topics. In 2021, we focused these

extra trainings on carbon emissions and

reduction activities, related to the CDP

Supply Chain program, and initiated a new

Science-Based Targets (SBTs) program to

help our suppliers implement SBTs and drive

greenhouse gas (GHG) emission reductions in

our supply chain.

In 2021, we organized five training sessions

which were attended by 198 suppliers, with a

total of 381 attendees.

Reducing water and air

pollution levels in China

To contribute to the reduction of the

environmental pollution in China, Signify

worked with the Chinese Institute of

Public & Environmental Affairs (IPE),

leveraging their work to engage with our

suppliers. For instance, to help suppliers

better understand environmental issues,

we organized three IPE training sessions in

2021 as a part of our overall RBA training

program. Periodically, IPE publishes a list

of Chinese factories associated with

concerning environmental pollution levels.

Signify engages with any suppliers on the

IPE list to resolve environmental non-

conformances. From 2015 to the end of

2021, there were 57 direct suppliers

flagged on the IPE’s list. In 2021, this

number was reduced to 10 (2020: 9), and

47 suppliers have taken action to

remediate and their violation records

were removed from the IPE website.

Signify also requested direct suppliers to

engage their own direct suppliers that

appear on the IPE’s list to resolve non-

conformances.

Responsible mineral sourcing

Our commitment to sustainable development

extends to issues further down the supply

chain, to prevent human rights abuses and

financing of conflicts in the extractive sector.

Global supply chains in the lighting industry

are long and complex, typically with more

than seven tiers between the finished

product and the source of raw materials used

for manufacturing. However, we believe that

through strong multi-stakeholder

partnerships we can make a difference.

As part of the Signify Conflict Minerals

program, we implement measures in our

supply chain to ensure that our products are

not directly or indirectly funding atrocities in

the Democratic Republic of Congo (DRC). We

support and follow the OECD Due Diligence

Guidance for Responsible Supply Chains of

Minerals from Conflict-Affected and High-

Risk Areas. The full description of our due

diligence process and Signify’s position on

Conflict Minerals are available on our website:

https://www.signify.com/global/contact/

suppliers/sustainability/our-programs/

conflict-minerals.

Since 2016, we are a member of the European

Partnership for Responsible Minerals (EPRM),

a public-private partnership initiative. The

EPRM provides a platform for cooperation

between European governments, companies

and civil society to address the issues

occurring in the mining of minerals and to

enable responsible sourcing from high risk

and conflict regions.

We are also an active member of the

Responsible Mineral Initiative (RMI) which runs

the audit program to verify the smelters’

conflict-free status and to identify sources

of 3TG and cobalt in our supply chain. We use

the tools and programs developed by the RMI,

especially the Conflict Minerals Reporting

Template (CMRT), the Cobalt Reporting

Template (CRT) and the Responsible Minerals

Assurance Process (RMAP). Each year, we

invite our main suppliers, based on purchasing

spend and metal usage, to fill in the latest

version of the CMRT and/or CRT. We carefully

review the information received via the CMRT

and CRT from each supplier against our

requirements and we check our upstream

smelters against the RMI smelters list. The

smelters identified through this process are

included in the Signify smelter list published in

our Signify Conflict Minerals Declaration (see

link above).

In 2021, we identified 324 3TG smelters, of

which 83% are conformant or in the

compliance process with RMI audits, 15% are

not yet included in the process and 2% are

non-conformant (8 cases). We also identified

7 smelters for cobalt, of which one is non-

conformant. Follow-up actions are planned

with the involved suppliers for 2022. At the

end 2021, the suppliers of Cooper Lighting

and Kite were not yet fully integrated in this

program.

More can be found on our website: https://

www.signify.com/global/contact/suppliers/

sustainability/our-programs/responsible-

minerals.

The results of the Reasonable Country of

Origin Inquiry (RCOI) for conflict minerals can

be found in the table below. The information

for the RCOI is provided by RMI.

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Signify Annual Report 2021

Results of the RCOI (Reasonable Country of Origin Inquiry)

Gold

Tantalum

Tin

Tungsten

Total

Smelters known to source from the

covered countries (CC)

Smelters known to source from conflict

affected or high-risk areas (CAHRA)

Smelters known to process only

recycled or scrap materials

Smelters known to source from outside

the CC/ CAHRA’s

105

219

Cobalt is present in our battery supply chain

only for emergency lighting and remote

controls. To enhance transparency in the

cobalt supply chain, in 2018 we co-founded

the Fair Cobalt Alliance (FCA) with Fairphone,

Huayou and Impact Facility. This multi-

stakeholder action platform offers actors

across the cobalt supply chain a pre-

competitive environment for collaboration to

help strengthen and professionalize DRC’s

artisanal cobalt mining sector and contribute

to local economic development at large. The

2021 focus was on preparing for a solar

project that will deliver clean-technology-

based lighting systems to schools, communal

spaces and institutions, empowering

communities to be safer, more active, and

economically productive after sunset. For

more on the FCA program: https://

www.faircobaltalliance.org/

16.3.4 Safety at work

Health & Safety performance

The health and safety of our employees is a

top priority. We commit to provide a safe

working environment for our employees and

we contribute to the achievement of SDG 8:

Decent work and economic growth,

The total recordable cases (TRC) rate is the

central lagging indicator through which we

measure our overall safety performance.

Targets for this indicator are set and

managed at a company-wide level, and for the

individual divisions and manufacturing sites

and distribution centers.

As part of our Brighter Lives, Better World

2025 program, we will continue to strengthen

our programs to maintain a safe and healthy

workplace. We strengthened our commitment

with a TRC target of 0.30 by the end of 2025,

with the ambition for all individual sites to

reach it.

In 2021, we strengthened employee behaviors

in non-routine situations. With the STAR

(Stop-Think-Act-Reflect) campaign and risk

awareness trainings, we have enforced

engagement and accountability of employees

to stop (Andon) and speak-up when facing

non-standard or hazardous situations at

work. STAR was the theme of our Safety

Week 2021.

In 2021, we continued to improve equipment

safety, warehousing safety, behavioral safety

and drive progress for leading indicators

related to first aid cases, near-misses, unsafe

conditions and at-risk behaviors. Our injury

prevention framework, launched in 2015,

continued its integration into the operational

Lean framework and Signify management

system. All our industrial sites have now

adopted the key elements of this framework

and dedicated integration programs are

executed for our recently acquired sites of

Cooper Lighting and Klite. In 2021, we

continued our efforts to further reduce injury

and illness rates by improving daily standards

to prevent injuries. We increased our injury

prevention requirements in the upgrades of

Signify’s Lean program.

At the end of 2021, we recorded 58 TRC

cases in 2021 (2020: 52) and we had no

fatality incident. The TRC rate decreased to

0.17 per 100 FTEs, compared to 0.22 in 2020.

This is a 23% improvement compared to

2020.

In 2021, 57% of our industrial units had no

recordable injuries. There are 10 industrial

sites that have had no recordable injuries

over the last 3 years, while 11 sites had

achieved more than 500 days injury-free

(excluding acquisitions integrated in 2021).

Recordable cases

2019

2020

2021

Total recordable

case rate

0.32

0.22

0.17

Lost workday

cases rate

0.19

0.17

0.12

Fatalities

Management system

In 2021, we added two new sites to the scope

of our multi-site management compliance

system with ISO 45001. Part of our

manufacturing sites continued to be certified

locally and at the end of 2021, 60% of our

reporting manufacturing sites were ISO

45001 certified. The remaining manufacturing

sites have procedures in place which assure

compliance with local regulations and Signify

policies.

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16.3.5 Business ethics

Signify's Integrity code

Our Integrity code serves as our code of

conduct. This code embodies our

commitment to always act with integrity, both

in our internal and external interactions. The

code sets the standard for business conduct

of our employees and for the company itself

and also gives more information on how to

speak up or raise concerns. Translations of

our Integrity code are available in 26

languages. For a description of Integrity code

processes and policies, please refer to

chapter 12, Risk factors and risk

management, section 12.1, of this Annual

Report.

In 2021, we focused on increasing awareness

of our Integrity reporting channels. We

launched a company-wide campaign via

various videos and through the company’s

portal and one of the company's global

webcasts. In addition, we used infographics

detailing the steps of our investigation

process and actively engaged in

conversations through posts and polls on our

social networking tool. We continued our

company-wide Speak up campaign to raise

awareness on the importance to speak up

when employees encounter integrity

concerns. Employees were requested to

complete a mandatory e-learning, and by the

end of 2021 the completion rate was 92% of

the targeted employees.

In 2021, 195 Integrity code concerns were

captured via the Signify Ethics line and

through our network of compliance officers,

a 10% increase compared to 2020. The

number of concerns raised were in line with

expectations building on the trends we

identified the previous year. Details per

category are shown in the table on the next

page. In 2021, we also saw an increase in the

number of people using the ‘Ask a question’

functionality in our reporting tool. This

functionality was introduced some years ago

with the intention to lower the bar for people

to approach the Compliance department. We

will continue to promote this functionality in

the coming period.

Most commonly reported concerns

Treatment of employees

The category Treatment of employees

represents 46% of the total cases reported

(48% in 2020). Within this category, the

largest subcategory is Equal, fair & respectful

treatment. This made up to 66% of the

concerns related to Treatment of employees

in 2021 (70% in 2020). This category, for

example, relates to concerns about verbal

abuse, (sexual) harassment, favoritism and

matters of discrimination in the workplace.

This is a further decrease compared to the

percentages in previous years, and may be

partly due to a continuation of a high number

of employees working from home or remotely

in 2021.

Business integrity

The second most reported type of concern

relates to Business integrity. The number of

complaints reported in this segment

represents 29% of the total cases reported

(33% in 2020).

In 2021, we saw a further increase in

reported cases relating to Security, including

IT. This category represents 15% of the total

cases reported in 2021 (13% in 2020) and

relates, for instance, to concerns about

unauthorized use of the company’s assets,

theft, cyber security or other IT-related

concerns. This increase builds on the trend of

previous years and Signify continues to

actively increase awareness of security and

(cyber)crime among its employees.

Substantiated concerns

At the start 2021, 46 cases were open. During

2021 a total number of 195 cases were

reported. As per December 2021, 29 cases

were open. That means that during 2021, we

Breakdown of alleged violations Integrity code

2019

2020

2021

Health & Safety

—

Treatment of employees

114

• Equal, fair and respectful treatment

• Employee development

• Employee privacy

—

• Employee relations

• Remuneration

• Right to organize/Collective bargaining

—

• Working hours

• HR other

Legal

Business integrity

Security, including IT

Other

—

Total

197

178

195

closed 212 cases. Of these 212 cases, 81

were found to be substantiated, which

represents 38% of the closed cases.

Substantiated cases are followed up with

corrective actions, where possible. Such

corrective actions can include additional

measures, such as training, strengthening of

internal controls, creation of additional

policies or other measures that aim to

promote or enhance a culture of business

compliance. Corrective actions can also take

the form of disciplinary action. In 2021, Signify

applied disciplinary actions ranging from

training, coaching to verbal and written

warnings and to termination of employment,

depending on the severity of the matter.

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Signify Annual Report 2021

Responsible tax policy

Our tax principles are based on the

recognition that tax is an integral element of

our overall corporate social responsibility as

well as commitment to the United Nations

Sustainable Developments Goals. The UN and

other global organizations have emphasized

the importance of fair contributions and are

asking for more transparency on tax.

Responsible Tax is an important topic for

Signify to report on. For us, acting with

integrity means paying the right amount of

tax, in the right place, at the right time. Being

a responsible taxpayer is aligned with our

purpose, business strategy and Integrity

Code. Our Tax Principles set the standard for

our conduct, by which individual employees,

the company and its subsidiaries must abide.

The tax principles ensure compliance with

local and international tax laws and

internationally accepted standards of good

corporate governance such as various OECD

Guidelines. We are committed to providing

timely, regular, and reliable information on

Signify’s tax position, including the Group

effective tax rate, our corporate income tax

contributions, and our main tax exposures

(see chapter 14, Consolidated financial

statements, note 9, of this Annual Report).

Signify has a Tax Control Framework in place,

which provides awareness and assurance of

adherence to up-to-date tax policies. Risks

are managed and monitored through a tool

for collecting details on a quarterly basis of

all our corporate income tax exposures and

provisions. In 2021, Signify implemented a

web-based tool for supporting and central

monitoring of the filing of all corporate

income tax returns worldwide. We monitor

and seek to minimize the number of open tax

years. Our Board of Management approves

our tax strategy and reviews the tax control

framework and our key tax positions. External

auditors regularly review our tax controls and

our key tax positions as part of the audit of

our financial results. The responsibility for tax

management ultimately rests at the executive

Board of Management with the CFO.

Signify complies with internationally-accepted

tax standards (such as OECD guidelines) as

well as more local initiatives. In accordance

with these international standards, Signify

prepares its Country-by-Country report for

its entire Group and provides it to the Dutch

Tax Authorities. In 2021, we also implemented

unified internal standards of reporting under

Mandatory Disclosure Rules (DAC6 Directive).

Signify’s transfer pricing model is driven by

the activities undertaken and the value

created in each part of our business, and is in

accordance with the OECD transfer pricing

guideline. As a local initiative, we seek to build

open and constructive relationships with tax

authorities and participate in cooperative

compliance programs or related schemes, for

example in the Netherlands.

More information can be found in our Global

Tax Principles: https://

www.assets.signify.com/is/content/

PhilipsLighting/Assets/signify/global/ir/

signify-tax-principles.pdf.

Product quality

Signify is strongly committed to responsible

product stewardship. The Signify quality

management system is ISO 9001:2015

certified, covering all business activities.

When it comes to quality, we believe

prevention of defects is better than cure.

This is reflected in our structured approach

towards the selection and qualification of

suppliers, manufacturing, installation and

delivery of our products and services. In line

with mandatory legislation all over the world,

Signify is committed to placing only safe

products on the market. In the event

products have been brought to market that

do not meet the essential safety

requirements, Signify takes a systematic

approach and appropriate actions, which may

include a product recall, especially in case the

health and safety of individuals are of

concern. Signify has a robust process in place

to ensure impacted constituents are

informed. In 2021, no product safety issues

were found that resulted in a material fine or

penalty.

16.3.6 Cybersecurity

Digitalization is one of our strategic frontiers

and our connected lighting offer is expanding.

We are focusing on improving our digital front

and back-ends and increasing our data

analytics capabilities to better serve our

customers. In this context, it has been more

important than ever to ensure that access to

network, IT systems and data is assured at all

times. Signify has a dedicated Corporate

Security department which focuses on

Information, Product and Operational

security, and follows the three lines of

defense model. We have a cybersecurity team

that provides Threat Intelligence, Guidance

and Assurance services. Our threat

intelligence team has a defined process for

gathering, analyzing, and distributing

actionable intelligence on potential threats to

Signify, and proactively alerts stakeholders.

Our Guidance team is responsible to provide

security guidance through the development

of Policies, Standards and Process Guidelines,

and establish an Enterprise Security

Architecture to keep the digital identities,

data and environment secure. Our Assurance

team performs assessments to validate

implementation of standards to assess

residual risks and gaps. Our security

operation reporting center is responsible for

detection, mitigation and resolution of

cybersecurity-related incidents, enabling

action to be taken in a timely manner.

Technical security measures are implemented

to support the “defense in depth” principle,

starting from the collection of information to

infrastructure controls.

In 2021, we have created a process to extend

the reach of our cybersecurity services

directly to business and IT stakeholders.

Additionally, our employees were asked to

complete a mandatory training on security.

Our cybersecurity requirements also apply to

our partners and suppliers as part of security

schedules and contracts signed as they need

to comply with the same standards we set for

ourselves. Our cybersecurity processes and

measures are based on ISO 27001

(Information security) and ISO 62443

(Product Security) certifications, as well as

other related best practices (such as the

National Institute of Standards and

Technology (NIST), and the Center of Internet

Security (CIS)).

The threats of phishing and ransomware as

well as the insider threat continue to be a

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Signify Annual Report 2021

challenge. We are constantly trying to evolve

and improve our cybersecurity guidance,

alerting, monitoring and incident response

mechanisms to manage these threats without

causing disruptions to Signify businesses. All

cybersecurity activities are reported to and

monitored by the Security Board, chaired by

our Chief Executive Officer, Eric Rondolat.

Other members of the Security Board are the

Chief Financial Officer, the Chief Security

Officer, and the Heads of Internal Audit, Legal

and Human Resources. The Board of

Management and the Supervisory Board are

informed regularly.

16.3.7 Social impact of light

Brighter lives revenues

We are driving change to create brighter

futures. With our lighting innovations, we

support the health and well-being of people,

sustainable food production for a growing

global population, and a safer and more

secure society. We commit to double our

Brighter lives revenues to 32% by the end of

2025, which means our revenues coming from

lighting innovations that increase food

availability, safety and security, or health and

well-being. At the end of 2021, our Brighter

lives revenues were between 25% and 27%.

Through our actions, we directly contribute

to the achievement of SDG 3: Good health

and well-being.

Health & well-being

Light is essential for life, equally important as

food, water and air. Light allows us to see and

to experience the world around us. It affects

us visually, biologically and emotionally,

supporting comfort, well-being and

performance. Scientific evidence shows that

light has a powerful impact on our emotions

and important physiological and biological

processes in our body. Circadian lighting in an

office environment for instance makes an

office more liveable and up to 12% more

productive.

In 2021, we continued to focus on quality of

light in our LED portfolio meeting the

EyeComfort criteria which measures factors

that can impact the comfort of your eyes

(such as flicker or glare). We upgraded the

majority of our LED lamps and Hue and WiZ

portfolio. We continued to expand our

NatureConnect, lighting inspired by Nature.

We also focused on Office and Healthcare

applications, contributing to employees',

patients' and staff's health and well-being.

NatureConnect brings the benefits of natural

light indoors. Based on combined results of

end-user surveys at different customer sites,

80% of the office workers confirmed that the

lighting feels like daylight. "I really feel like I'm

outside" is the most common reaction from

customers.

The continuing coronavirus pandemic shows

that health and well-being are top priorities,

and lighting can offer reliable disinfection

through several UV-C applications. In 2021,

our portfolio of new innovative solutions

based on our UV-C offering was further

extended to help fight the virus.

The risk of contracting and spreading viruses

and bacteria increases in busy and public

areas, such as offices, stores, schools,

museums and public transport. In laboratory

testing, our UV-C light sources inactivated

99% of the SARS-CoV-2 on a surface with an

exposure time of 6 seconds.

Food availability

To meet the needs of a growing population,

we need to consume resources more

efficiently. The global food demand will rise by

70% by 2050, while 80% of arable land

globally is already currently farmed. Many of

the vegetables we consume are not

produced locally and are transported over

long distances. Approximately one-third of

the world’s available food is either spoiled or

thrown away before it ever reaches a plate.

Overall, the world's current food production

and distribution systems contribute to 30% of

all greenhouse gas emissions. To answer

these challenges, significant changes to our

food systems are needed to ensure enough

safe, healthy, accessible and affordable food

for all in the (near) future.

Horticulture LED technologies can provide an

answer by realizing extremely efficient

farming with high yields, efficient use of space

and enabling local production, at least a 90%

reduction in water use, and avoiding pollution

by pesticides. With the right light spectrum

and growth recipe, our lighting innovations

give better control over climate and crops,

and help to achieve high quality and yield at

the right time. Our technology applies also to

aquaculture, animal centric lighting and water

and air purification.

Safety & Security

For the past 10 years, lighting has gone

through a significant technological

transformation, opening new possibilities in

using light. With increasing urbanization,

street crime and traffic accidents are a real

challenge. Interact-connected LED systems

and management software improve city

services and can help to reduce street crime

and night-time traffic accidents, while

reducing energy costs. Our connected LED

systems also have applications for outdoor

homes, enhancing feeling of safety and

security.

Today, more than 50 billion devices are

connected to the Internet, most of them

wirelessly. This is placing wireless

communication under increasing pressure,

and the radio spectrum is becoming

congested. In addition, there are areas where

radio frequency wireless communication is

not permitted or the best fit. Trulifi by Signify

offers a range of LiFi systems, providing a

two-way wireless communication that is

reliable, secure, and fast. Next to this, Trulifi

is immune to any electromagnetic

interference from, for example, industrial

processes.

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Signify Annual Report 2021

Access to light

Global economic recovery continues to

gather pace, yet many countries and

communities are still facing tremendous

challenges. In 2021, the Signify Foundation’s

social impact focus has been on building

recovery and resilience for underserved

communities by enabling access to light and

livelihood development. Lighting interventions

designed in collaboration with local groups

and aid agencies have made a positive impact

on communities, providing better access to

health care, essential services, sports, and

productivity.

In its fourth year of operations, the Signify

Foundation remains committed to enabling

access to the benefits of sustainable lighting

for underserved communities. To fulfill this

mission, the Foundation partners with actors

across the entire value chain that play a key

role in the delivery of clean technology-based

lighting systems to homes, communal spaces

and institutions, empowering communities to

be safer, active, and economically productive

after sunset. Its work contributes to the UN’s

Sustainable Development Goals (SDGs), in

particular to SDG 5: Gender equality, SDG 7:

Affordable and clean energy, SDG 8: Decent

work and economic growth, and SDG 11:

Sustainable cities and communities.

Projects supported by the combined

resources of Signify and Signify Foundation

have lit 7.2 million lives in communities around

the globe and supported 11,784 lighting

entrepreneurs (baseline 2017).

The Lighting lives program aims to create

long-lasting impact through investing in

communities and developing market

ecosystems, where lighting can be bought

and traded. This aim drives the Foundation

towards innovative finance models, such as

recoverable grants to help social enterprises

overcome their barriers to grow and scale.

Signify entities around the globe actively work

alongside the Foundation and its partners to

light up underprivileged public service

institutions like hospitals, schools and sport

facilities. In 2021, the Foundation partnered

with the Signify South Africa office and

Earthrise Trust for a Lighting Lives project to

improve the lives of Franshoek and Naledi

village communities. Solar lights installed in

and around the community centers, farms,

and soccer fields allow residents to safely

socialize, mobilize, and take part in sports at

night, as well as increasing their farming

productivity.

Through its Lighting entrepreneurs programs,

the Signify Foundation supports local

capacity building, with the focus on business

and technical skills, to develop sustainable

communities and livelihoods. Its support

focuses on empowering people who currently

lack access to formal employment,

particularly youth and women, and who are

motivated to start their own clean energy

businesses.

Within this scope, a women-led last-mile

distribution program, ‘Bright Dada’, kicked off

in 2021. Through the program, women

entrepreneurs receive business skills training

and will start to distribute energy-efficient

lighting to remote households in Uganda and

Kenya. The program is designed to tackle the

gaps in income generation opportunities and

access to good quality lighting in rural parts

of East Africa.

Increasing safety and security for vulnerable

communities facing natural and man-made

disasters remains a priority for the Signify

Foundation. This is addressed through the

Humanitarian Lighting program. Lighting is a

central element in improving security,

reducing the incidence of gender-based

violence outside the home, improving

sanitation and hygiene, and contributing to

people’s overall sense of dignity.

During 2020 and 2021, the Foundation

donated 11,000 portable solar lamps for

distribution to vulnerable groups in locations

throughout Syria, including internally

displaced people, people living with a

disability, and the elderly. This intervention

has a particular focus on women and

adolescent girls and aims to integrate lighting

into the United Nations Population Fund

(UNFPA)’s humanitarian response.

Through the Foundation and Signify’s

continued focus on these areas, we are on

track in our efforts to reach our target of

lighting 10 million lives by the end of 2025.

To learn more about the Foundation, please

see the Signify Foundation’s Annual Report.

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Signify Annual Report 2021

16.4Better World

In 2021, we celebrated one year of being

carbon neutral in our operations and using

100% renewable electricity. With the United

Nations Sustainable Development Goals (UN

SDGs) as our strategic compass, we set even

more ambitious goals through our Brighter

Lives, Better World 2025 sustainability

program, to provide solutions that address

some of the most important challenges of our

time - for a better world.

In line with our commitment to Climate action

(SDG13) and Affordable and clean energy

(SDG7), we are going beyond carbon

neutrality and aim at doubling the pace of the

Paris Agreement's 1.5°C scenario to reduce

greenhouse gas (GHG) emissions over our full

value chain by the end of 2025. We will do so

by increasing the energy efficiency of our

portfolio, to reduce emissions of our

customers and by driving carbon reduction at

our suppliers. Also, we aim at doubling our

revenues from circular products, systems and

services by the end of 2025, contributing

directly to responsible consumption and

production (SDG 12).

All our environmental policies and our

management framework are based on the

international ISO 14001 standard. In 2021,

83% of our manufacturing sites were

certified to ISO 14001.

16.4.1 Climate action

Climate leadership

At Signify, we acknowledge the findings of the

Intergovernmental Panel on Climate Change

(IPCC) and believe we have an important role

to play in the transformation towards a low-

carbon economy, with deep decarbonization

across our value chain. Signify is one of the

first 28 companies committing to verified

Science-Based Targets in line with the Paris

Agreement's 1.5°C pathway, to cut GHG

emissions in our operations as well as in our

value chain. We commit to reduce 70% of

absolute scope 1 and 2 GHG emissions and

30% of absolute scope 3 GHG emissions by

2030 (baseline 2015).

In 2021, Signify was again recognized in CDP's

Climate A list for our leadership in

environmental performance. We continued to

partner with the Climate Group’s EV100

Initiative to operate a lease fleet of hybrid

and fully electric vehicles (EVs) by 2030. We

remain engaged in the AndersReizen Dutch

Business Sustainable Mobility Pledge to

further improve the sustainability

performance of our business travel.

Through our partnership with the RE100

Initiative, we shifted to 100% renewable

electricity use in 2020. As an active member

of Clean Cargo and the WBCSD Transforming

Heavy Transport project, we engage in cross-

industry collaboration and strive to lower the

carbon footprint of our freight transport. We

renewed our partnership with Maersk, one of

our key partners in ocean freight, and

supported them in launching new vessels that

operate on zero-carbon fuels. This will help

us to scale zero carbon solutions in our

supply chain and logistics operations. Our

continuous pledge to the World Green

Building Council’s Net Zero Carbon Buildings

commitment facilitates improvement in

energy efficiency as well as reduction in

electricity consumption in our non-industrial

buildings.

In 2021, we continued our efforts to align with

the Task Force on Climate-related Financial

Disclosures (TCFD) recommendations and we

established an internal cross-department

task force to further assess our climate-

related risks and opportunities and

strengthen our climate risk mitigation and

adaptation strategy.

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Signify Annual Report 2021

Double the pace of the Paris

Agreement

In our Brighter Lives, Better World 2025

sustainability program, we go beyond carbon

neutrality and commit to doubling the pace of

the Paris Agreement's 1.5°C scenario to

decarbonize our entire value chain. This

means we aim to achieve the emission

reduction goals laid out in the Paris

Agreement's 1.5°C pathway for 2031 by 2025,

six years early.

By the end of 2025, we will reduce our scope

1, 2, and 3 emissions by 35% compared to our

2019 baseline year.

Doubling the pace of the Paris Agreement

In 2021, we are on track to deliver against our

ambitious goal of doubling the pace of the

Paris Agreement’s 1.5ᵒ scenario.

Reporting emissions across the value chain is

still a niche practice where Signify is taking

the lead. We are working on improving the

accuracy of the data used, and have the

ambition to include additional Scope 3 data in

next year's report.

As shown in the graph on the right, the large

majority of our value-chain emissions lies in

the product use phase.

Carbon neutral in our operations

Since September 2020, we run carbon

neutral operations around the globe, which

means GHG emissions from our manufacturing

facilities (scope 1 and 2), non-industrial

locations (scope 1 and 2), upstream and

downstream logistics activities (scope 3), and

business travel (scope 3) are all carbon

neutral. We continue sourcing 100%

renewable electricity in our global operations,

contributing to the green energy transition.

Over the last decade, Signify reduced its

operational footprint by more than 70% and

has been driving hundreds of initiatives to

reduce emissions in factories, offices,

logistics and business travel.

In 2021, total gross CO2 emissions were 290

kilotonnes, a 12% increase year-on-year. This

increase can be explained by the integration

of Cooper Lighting and Klite into our

sustainability commitments. Our operational

emission intensity in tonnes of CO2e per

million-euro sales was 42 in 2021 (2020: 40).

As a manufacturing company, we still have

residual emissions, such as emissions from

the use of natural gas in glass ovens. To fulfil

our carbon neutral commitment, we invest in

certified carbon offsetting projects.

Operational carbon footprint in kilotonnes

2019

2020

2021

Gross

363

260

290

Offset

299

260

290

Net

In 2021, we continued to partner with South

Pole for carbon offsetting projects that are

aligned with our purpose. Among others, we

initiated off-grid renewable energy

generation with solar panels in India. We

continued supporting reforestation and

forest conservation in Uruguay and Zimbabwe

and continued to engage in increasing the

availability of renewable electricity through

wind farms in India. Our partnership with

South Pole enabled us to offset 100% of our

residue emissions, resulting in carbon

neutrality across our operations.

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Signify Annual Report 2021

Signify operational carbon footprint in

kilotonnes

2019

2020

2021

Scope 1

168

161

149

Scope 2 (market

based)

Scope 3 logistics

160

124

Of which

• Air transport

• Road transport

• Ocean transport

Scope 3 business

travel

Total footprint

363

260

290

Scope 2 (location

based)

181

160

186

Operational carbon footprint in kilotonnes

Logistics

Business travel

Non-industrial operations

Manufacturing

In 2021, manufacturing accounted for 53% of

our operational carbon footprint and

amounted to 152 kilotonnes. This is a slight

decrease of 3% compared to 2020 despite

our acquisitions' integration. In 2021, we

continued to lead operational changes and

efficiency improvements, for instance

through the optimization of heating systems.

Non-industrial operations

In 2021, CO2 emissions from non-industrial

operations (offices, warehouses)

represented 2% of our total operational

carbon footprint. In 2021, our emissions from

non-industrial operations increased by 2

kilotonnes compared to 2020.

Logistics

In 2021, 43% of our total CO2 emissions in our

operations were attributed to logistics, and

our total emissions from logistics increased

by 36% compared to 2020. This is a result of

the gradual business recovery from the

COVID-19 impact and the integration of

Cooper Lighting Solutions and Klite into our

sustainability commitments.

Business travel

In 2021, our CO2 emissions related to business

travel accounted for 2% of our operational

carbon footprint. While the total emissions

from logistics kept the same level compared

to 2020, we lowered emissions from air travel

by 33%.

Energy use in operations

Our total energy usage in 2021 amounted to

3,630 terajoules. Our operational energy

intensity in terajoules per million-euro sales

was 0.53 in 2021. This is 26% more efficient

than 2020 (0.72) and is due to operational

optimization, reduced heating requirements

and energy efficiency improvements in our

factories.

Electricity

In 2021, we procured 100% of our electricity

from renewable sources. This achievement

directly contributes to SDG 7: Clean and

affordable energy. All electricity consumed by

our operations worldwide was sourced from

renewable sources or matched with Energy

Attribute Certificates (EACs). Approximately

11% of our renewable electricity was

contracted via our energy providers, 51% was

sourced through the procurement of

renewable energy certificates, and 38% came

from our participation in two Power Purchase

Agreements (PPA) in the US and Poland. Our

PPAs contribute to the transition to more

sustainable electricity grids and reinforce our

long-term commitment to using renewable

electricity. In 2020 we signed the first pan-

European PPA, which will power our European

operations with green electricity from 2023

onward.

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Signify Annual Report 2021

Enabling carbon reduction for our

customers

Phasing out energy-inefficient conventional

lighting and switching to energy-efficient

LEDs, introducing solar lighting, and further

enhancing energy saving with smart

connected lighting has significant

environmental benefits. As mentioned

previously, the majority of our value-chain

emissions lies in the product use phase.

Helping our customers to reduce emissions

through energy efficiency is a vital aspect of

our innovation process.

At the end of 2020, 84.1% of our revenues

came from sustainable products, systems and

services, overachieving our 2020 target of

80%. In 2021, with our new Brighter Lives,

Better World 2025 sustainability program, we

reviewed our definition and we committed to

grow our Climate action revenues to 72% by

the end of 2025.

The energy efficiency criteria to qualify for

Climate action revenues became significantly

more stringent. Depending on the lumen

output, products must have a luminous

efficacy of 85 lm/W to 110 lm/W, which is 20%

to 65% higher compared with the previous

threshold for Sustainable revenues. Climate

action revenues are measured as a

percentage of the total revenues per

product family and tracked for each Division.

At the end of 2021, between 61% and 64% of

our revenues contributed to climate action.

By delivering cleaner and more energy-

efficient solutions, we are proud to

contribute to the achievement of SDG 7:

Affordable and clean energy.

Philips LED's A-class bulbs

In 2021, Signify launched its most energy-

efficient lamp, while maintaining the same

high quality of LED lighting for its

consumer. The A-class bulb enables 60%

energy reduction compared to standard

Philips LED bulbs and has a longer

lifespan (50,000 hrs). It provides

customers with a smart investment for

the planet, saving money and reducing

waste. Thanks to this technological

breakthrough, the new products are the

first in a range of new Philips LED A-class

bulbs meeting the highest level in the

new EU energy labeling legislation.

Enabling carbon reduction at our

suppliers

In 2021, we continued to engage our

suppliers to reduce their carbon footprint.

Our approach is to proactively initiate,

develop and support carbon emission-

reduction activities at suppliers through our

partnership with the CDP Supply Chain

program. In 2021, we invited 698 (2020: 711)

of our strategic suppliers to the program, of

which 71% submitted the 2021 CDP

questionnaire.

This represents 89% of project-related

spend (2020: 91% of the spend). In 2021, 269

strategic suppliers reported emission-

reduction activities, overachieving our target

of 200 strategic suppliers annually reporting

emission reduction activities. 216 of our

strategic suppliers disclosed their annual

scope 1 (direct) and 2 (indirect) emissions.

In total, our suppliers undertook more than

260 initiatives in 2021 leading to almost 39

million metric tons of CO2 emissions saved

(2020: 32 million metric tons).

Setting Science-Based

Targets in China

Signify was one of the first CDP Supply

Chain members to start engaging

Chinese suppliers on the importance to

set Science-Based Targets (SBTs) to

reduce carbon emissions. We nominated

four of our high-impact China-based

suppliers, of which two have now formally

signed the Science-Based Targets

Initiative (SBTi) commitment letter.

In a dedicated webinar to our suppliers,

we explained how science-based target

setting plays an important role in

suppliers' evaluation. Once suppliers have

formally committed to the SBTi, an

emission calculation tool was provided to

them to help the establishment of

accurate emission rates.

Our collaboration with CDP was key to

support our suppliers and monitor their

progress and progress reports were

shared at management level, to initiate

actions where needed.

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Signify Annual Report 2021

CDP reporters per region and topics reported

Greater China

Rest of the World

Europe

Americas

Total

2020

2021

2020

2021

2020

2021

2020

2021

2020

2021

Scope 1

78%

65%

72%

68%

72%

67%

72%

60%

74%

65%

Scope 2

49%

35%

47%

46%

45%

48%

50%

45%

48%

42%

Scope 1 & 2

51%

37%

48%

47%

49%

51%

44%

50%

43%

Have a reduction target

54%

55%

38%

52%

41%

43%

35%

34%

44%

47%

Have on-going reduction activities

70%

63%

47%

61%

55%

51%

46%

39%

57%

54%

Climate change opportunities

54%

65%

55%

68%

60%

67%

54%

53%

56%

63%

Climate change risks

49%

57%

36%

45%

39%

46%

42%

43%

49%

Integrated climate change in

business strategy

69%

73%

66%

71%

75%

80%

62%

59%

69%

71%

Integrated climate change in risk

management

17%

21%

28%

38%

31%

38%

34%

26%

30%

Total amount of reporters

193

190

152

136

104

116

513

498

16.4.2 Circular economy

Our commitment

In 2021, humanity was using 1.7 times the

resources our planet can sustain. At Signify,

we identified five strategic areas where we

will grow our business while furthering our

contribution to a better and more sustainable

world. These five growth areas are defined

based on the major trends facing society, and

on the United Nations Sustainable

Development Goals. One of these growth

areas is Circular economy. As the world

continues to overuse its precious, limited

resources, scarce materials will become more

challenging to source. We need to do better,

and we believe that the transition to a

circular economy is instrumental.

With circular lighting solutions we can

preserve value and avoid waste. That is why,

as part of our Brighter Lives, Better World

2025 sustainability program, we have the

ambition to double our revenues from circular

products, systems, and services to 32% by

the end of 2025. Additionally, we are

committed to more sustainable packaging,

removing plastics from all our consumer

packaging in 2022, and to sending zero waste

to landfill.

Our actions cover the entire life cycle of a

product (from production, use and re-use to

waste management) and directly contribute

to the achievement of SDG 12: Responsible

consumption and production.

Circular lighting portfolio

In our efforts to transition to a circular

economy, we extended our circular lighting

portfolio in 2021. Via well-established

sustainable design rules, Signify continuously

lowers the weight of new product designs,

resulting in less material use and costs for

our product portfolio. The sustainable design

rules are also optimized for circularity,

resulting in products that can be upgraded,

serviced, reused, refurbished, or recycled.

Our circular innovations cover four

categories: Serviceable luminaires, Circular

components, Intelligent systems, and Circular

services.

Serviceable luminaires are fixtures that are

upgradable, serviceable, connectable,

energy-efficient, reusable, and recyclable. In

2021, we upgraded our LuxSpace Accent

luminaires to PerfectAccent luminaires

designed for a circular economy. These

luminaires can easily be serviced, since all

components can be replaced without tools,

enabling maintenance or upgrading to meet

the emerging needs of customers. Instead of

replacing the whole luminaire, modules can be

exchanged preserving value and avoiding

waste. A perfect example of serviceable

luminaires is that of our 3D printed luminaires,

designed in a modular way and easily

upgradable.

Circular components are exchangeable and

have recyclable parts, such as drivers,

controls, and LED boards.

Intelligent systems monitor serviceable

luminaires and enable preventive

maintenance. Signify connected systems tell

us exactly when and where to perform

maintenance cutting down on waste, costs,

downtime, and manpower.

Circular services aim at prolonging lifetimes

and provide customers with our innovative

circular services, combining lighting design,

installation and maintenance in a single

contract.

We closely monitor and report the progress

of the circular portfolio contribution and at

158

Signify Annual Report 2021

the end of 2021, between 21% and 25% of

our revenues came from circular products,

systems or services.

Our efforts also address supply chain

improvements, such as remote serviceability

(connected lighting) and end-of-life services.

By minimizing material waste and reducing the

environmental impact, we create an

ecosystem that extends the life of our

lighting products and provides a better future

for the next generation.

Zero Waste to landfill

In 2020 we reached our zero waste to landfill

commitment and the highest ever recycling

rate. As part of our Brighter Lives, Better

World 2025 sustainability program, we will

continue our efforts and to keep sending

zero manufacturing waste to landfill. In 2021,

our major focus has been on including our

recent acquisitions in our commitment and to

drive continuous improvements and process

optimization across the globe. At the end of

the year, Signify was sending zero waste to

landfill according to its commitment and only

three sites from our new acquisitions were

still transitioning to reach this status.

We improved our practices regarding waste

segregation, waste awareness trainings and

sharing best practices across other regions.

In 2021, Signify registered 1.96 kilotonnes of

hazardous waste (2020: 1.58 kilotonnes), of

which 47.5% was recycled. The increase of

hazardous waste year-on-year is due to the

inclusion of our new acquisitions in our

commitments. We will continue our efforts to

reduce our hazardous waste by 5% annually.

Our recycling programs address waste arising

from manufacturing activities, such as glass

or canteen waste, as well as from suppliers,

such as packaging materials. 89% of total

waste was recycled in 2021 and we continued

to recycle 100% of our metal and glass waste.

Manufacturing waste in kilotonnes

2019

2020

2021

Recycled

32.7 (90%)

30 (91%)

38.7 (89%)

Incinerated

2.2 (6%)

1.9 (6%)

3.8 (9%)

Landfilled

1.5 (4%)

0.9 (3%)

0.9 (2%)

In scope of commitment

0.7 (2%)

0 (0%)

0.4 (0.88%)

Total waste

36.4

32.8

43.8

Recycling rate per waste category

2019

2020

2021

Canteen waste

58%

43%

66%

Chemical Waste

29%

36%

Electrical and Electronic Waste

90%

99%

100%

Glass (line rejects)

100%

Metal scrap

100%

Paper/cardboard

99%

Plastic waste

84%

79%

81%

16.4.3 Responsible packaging

Signify pursues a reduction of the

environmental impact of its packaging by

shifting to responsible materials and by

looking into smarter transportation ways. Our

packaging policy encourages packaging

designers, the purchasing community and

Total manufacturing waste consists of waste

that is delivered for recycling, incineration or

landfill. For more details on our commitment

scope, please refer to our Sustainability

Supplements to the Annual Report.

suppliers to minimize the environmental

impact of packaging materials in all phases of

the life cycle. This means reducing the

amount of packaging used, selecting

packaging materials with a high recycled

content, and/or selecting virgin packaging

materials with a minimal environmental impact

from responsible sources. Our packaging

policy requires the use of 80% recycled

paper, and up to 50% of recycled content

when plastic is used.

In 2019, we started our plastic-free

consumer packaging program, committing to

phase out all plastic packaging material by the

end of 2021. Since 2020, all new LED lamps

packaging in Europe shifted from blister to

paper boxes. In 2021, we continued our

journey by replacing remaining plastic

applications, such as plastic bags, protective

films, plastic caps, cable binder, tape and

stickers. By the end of the year, our

consumer packaging was plastic-free in most

of our markets.

In 2021, Signify removed 2,500 tonnes of

plastic from its consumer product packaging.

Based on our methodology for calculating

societal impact, we decreased our societal

cost by EUR 0.23 million through eliminating

plastic from our packaging in 2021.

Our new packaging is now smaller, reducing

carbon emissions from transport and the

materials we use by 6,000 tonnes per year –

equivalent to the amount of CO2 that 270,000

fully grown trees can absorb in a year.

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Signify Annual Report 2021

16.4.4 Hazardous substances

Product substances

Through sustainable design rules, all new

product developments meet stringent

sustainability criteria before their market

launch. All our products and systems

delivered to countries requiring the CE

marking are compliant with the RoHS

Directive (2011/65/ EU) and REACH (EC

1907/2006) Regulation. We require all our

suppliers to communicate all substances in

their components and to comply with the

stipulations that we have listed in our

Regulated Substance List (RSL), which in

many cases goes beyond legislation. In 2021,

we continued to engage with our suppliers,

further rolling out the publicly available

BOMcheck tool, in which components and

substances can be registered.

Chemical substances in production

processes

We prioritize the safe management of

chemicals to ensure that we minimize the

risks of the use of these substances related

to the environment, society and our

employees in their daily work. If there are

threats of harm to human safety or the

environment, we proactively search for

effective alternatives. We have a robust

approach to identify and manage regulated

and hazardous substances in our production

processes.

We ensure compliance through continuous

monitoring of chemical usage in

manufacturing sites and have been actively

phasing out several hazardous substances.

Emissions from mercury

The target to achieve emissions As Low As

Reasonably Achievable (ALARA) was met

already in 2015 and we continue to closely

monitor usage, emissions and exposure and

drive further improvement where possible.

For instance, since 2012 the emissions from

mercury drastically decreased by changing

our production processes and replacing liquid

mercury with solid-state mercury.

Additionally, with the transition from

conventional lighting to LED lighting, (solid-

state) mercury will further decrease in the

coming years.

In 2021, emissions from mercury and mercury

compounds totalled 0 kilogram.

Emissions from mercury in kilograms

2019

2020

2021

Mercury and

mercury

compounds

1.2

0.01

Emissions from volatile organic

compounds (VOCs) in lacquering

processes

For years, Signify has been focusing on

improving its operations relating to the

coating of products to reduce the use of

targeted VOCs. In 2021, we continued the

shift from chemical painting to water-based

paint and powder coating process. As a

result, emissions of toluene decreased by

97%. Due to the progressive replacement of

coil ballasts with electronic ballasts and the

closure of production lines, styrene emissions

have been eliminated since 2020.

Emissions of VOCs in lacquering processes

in tonnes

2019

2020

2021

Lead and lead

compounds

Styrene

233

Toluene

Xylene

728

767

822

category 2

substances

1,027

804

824

16.4.5 Water

Signify recognizes the growing importance of

water usage in our everyday activities. As we

continue to expand our portfolio of LED

products, systems, and services, the water

intensity of our operations continues to

decrease. Despite this, some of our

manufacturing facilities are located in areas

with water stress, such as Saudi Arabia,

Mexico and parts of the United States, and

may face water scarcity risks. To analyze and

quantify our exposure to water risk, we

utilized the open-source Water Risk

Monetizer tool by Ecolab, Trucost, and

Microsoft. The results show that 23% of our

global water consumption is located in

regions classified as having high-water

scarcity.

While some of our facilities have reuse and

recycling measures in place, we continued to

implement and identify new and more efficient

water saving measures as well as continuing

our transition to technology and business

models which have a lower dependency on

water. We aim to reduce our water usage by

5% annually.

Total water intake in 2021 was 1,432,000 m3,

47% higher than 2020 (971,000 m3). This

increase was mainly due to the inclusion of

our new acquisitions in our 2021 reporting.

47% of our water intake is used for domestic

purposes.

Water intake in thousands of m3

2019

2020

2021

Total water

944

971

1,432

Based on our methodology for calculating

societal impact, we caused EUR 3.17 million in

costs to society through our water usage.

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Signify Annual Report 2021

16.4.6 Biodiversity

We acknowledge that it is our responsibility

to identify our negative and positive impacts

and to take action for biodiversity

conservation.

Poor quality lighting can increase light

pollution and sky glow and as a consequence

can negatively impact biodiversity. To ensure

that animals, such as bats, are not disturbed

by artificial lighting during night-time

activities, Signify designed a new light

spectrum. The light recipe helps in

maintaining a balanced ecosystem by

displaying minimal attraction for insects,

enabling bats to behave the same way as if it

was full darkness and preventing lit roads

from acting as borders or obstacles to be

crossed at night.

In 2021, Signify assessed the location of its

manufacturing sites to identify potential

presence in key biodiversity areas or

protected areas using the Integrated

Biodiversity Assessment Tool (IBAT). Key

biodiversity areas are sites contributing

significantly to the global persistence of

biodiversity. Protected areas are classified

according to their management objectives,

and examples of protected areas are strict

nature reserve, wilderness area, or

protected landscape (source: International

Union for Conservation of Nature). Signify

uses a total of 179 hectares of land for its

manufacturing activities. None of Signify

manufacturing sites are located in a

protected area, and one is located in a key

biodiversity area.

In 2021, we continued to contribute to

conserving and restoring forests, and

safeguarding biodiversity in different regions

through our carbon offsetting projects and

partnership with South Pole. For example, our

project in Zimbabwe ensures that 785,000

hectares of forest and wildlife on the

southern shores of Zimbabwe’s Lake Kariba

are now protected. Our landscape

reforestation project in Uruguay restored

more than 4,500 hectares of forest. Based

on our methodology for calculating societal

impact, we created EUR 55 million for society

through conserving and restoring forest in

2021.

16.4.7 Environmental incidents

In 2021, Signify experienced no significant

environmental incidents.

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Signify Annual Report 2021

16.5EU Taxonomy

reporting

The European Commission has established

the EU Taxonomy as an important enabler to

scale up sustainable investments and make

the EU carbon neutral by 2050. At Signify, we

want to be a catalyst for change, and are

committed to doubling our positive impact on

the environment and society. We

continuously seek opportunities to increase

transparency and showcase our leadership.

The EU Taxonomy reporting

framework

To define what is ‘sustainable’, the European

Commission has developed a catalog of

economic activities, each with criteria to

determine if they substantially contribute

towards a sustainable economy – known as

the EU Taxonomy. Companies across diverse

sectors, supply chains, and asset classes

must use this classification system to assess

if their business activities are sustainable

according to the Taxonomy. In June 2021, the

Commission formally adopted the Climate

Delegated Act, establishing the criteria

defining which activities substantially

contribute to the first two, out of six,

environmental objectives of the Taxonomy

regulation, namely climate change mitigation

and climate change adaptation. The remaining

four have been planned to be added in 2022.

Reporting requirements

For its financial year 2021, Signify shall

disclose eligibility on the first two

environmental objectives (climate change

mitigation and climate change adaptation);

this means, the proportion of Taxonomy-

eligible and Taxonomy non-eligible economic

activities in its total sales, capital and

operational expenditure.

The next step will be to ensure that Signify

meets the technical screening criteria

associated with each Taxonomy-eligible

activity, the ‘do no significant harm’ (DNSH)

criteria and the minimum social safeguards.

As the EU requirements for reporting on

Taxonomy-aligned activities come into force

in January 2023, we will disclose this in our

2022 Annual Report.

2021 disclosure requirements

Sales 1

CapEx 2

OpEx 3

Taxonomy-

eligible

45%

51%

44%

Taxonomy-non-

eligible

55%

49%

56%

Total (EUR

million)

6,860

213

456

1Refer to chapter 14, Consolidated financial statements,

note 3, of this Annual Report

2Refer to chapter 14, Consolidated financial statements,

notes 13 and 15, of this Annual Report

3No reference applicable

As reported in section 16.4, in 2021, Signify

Climate action revenues were between 61%

and 64% (midrange of 62.5% used in this

section). The difference with the EU

Taxonomy-eligible sales percentage (45%) is

explained by excluding sales from those

products manufactured by external suppliers.

51% of our CapEx were Taxonomy-eligible

and are investments enabling manufacturing

of Climate action products. 44% of our OpEx

were Taxonomy-eligible and mainly relate to

R&D in developing Climate action products.

Signify 2021 assessment

Taxonomy-eligible activities

The currently available definitions as included

in the Taxonomy are broadly formulated

which leads to companies having to interpret

how this applies to its business activities and

the impact thereof on eligibility. To our

knowledge and understanding, we applied

judgment, interpretations and assumptions

based on currently available information.

Future guidance could result in more

accurate definitions and other decision-

making in meeting reporting obligations,

which could impact our future Taxonomy

reporting.

Signify assessed its main economic activities

and believe these are materially represented

under the following NACE codes:

•C27.40 Manufacture of electric lighting

equipment

•F43.21 Electrical installation

•G46.47 Wholesale of furniture, carpets and

lighting equipment

•N77.40 Leasing of intellectual property and

similar products, except copyrighted

works

This assessment is subject to certain

management judgements and interpretations

of the Taxonomy regulation. Signify

determines sales from self-manufactured

products part of C27.40. Sales from products

manufactured by external suppliers, part of

G46.47. We concluded that our activities

captured under C.27.40 and F43.21 are

Taxonomy-eligible. Signify’s activities

captured under C27.40 are manufacturing

activities of indoor and outdoor lighting

products and systems. Signify’s activities

captured under F43.21 are installation of

lighting equipment.

Taxonomy-eligible sales

Signify defines Taxonomy-eligible sales as

sales from products in its portfolio using its

Climate action revenues definition (see

section 16.4.1 of this chapter), excluding

sales from those products manufactured by

external suppliers.

Taxonomy-eligible capital expenditure

(CapEx) and operating expenditure

(OpEx)

Signify has defined each economic activity at

Business Unit (BU) level. Signify used the

percentage of Taxonomy-eligible sales per

BU and multiplied this to the total BU CapEx

to approximate the Taxonomy-eligible CapEx.

The same approach is used to approximate

Taxonomy-eligible OpEx. Signify defines

CapEx under the Taxonomy as investments in

tangible and intangible assets, including

right-of-use assets and assets resulting from

business combinations (excluding goodwill).

Signify’s defines OpEx under the Taxonomy as

directly incurred, non-capitalized costs

relating to research and development,

building renovations, short-term leases and

the repair and maintenance of property,

plant and equipment and other fixed asset

costs. As these costs are not separately

disclosed in the Annual Report a reference

cannot be made. A full reconciliation was

made to the total reported sales, CapEx and

OpEx information to avoid double counting in

the allocation of the numerators.

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17 Combined

independent

auditor’s report

On the 2021 financial statements and sustainability information

To: the general meeting of shareholders and Supervisory Board of Signify N.V.

Our opinions

We have audited the financial statements

2021 of Signify N.V. (hereafter: the Company)

based in Eindhoven,

the Netherlands. The financial statements

comprise the consolidated and company

financial statements.

In our opinion:

•The accompanying consolidated financial

statements give a true and fair view of the

financial position of Signify N.V. as at

December 31, 2021 and of its result and its

cash flows for 2021 in accordance with

International Financial Reporting Standards

as adopted by the European Union (EU-

IFRS) and with Part 9 of Book 2 of the

Dutch Civil Code

•The accompanying company financial

statements give a true and fair view of the

financial position of Signify N.V. as at

December 31, 2021 and of its result for

2021 in accordance with Part 9 of Book 2

of the Dutch Civil Code

We have audited the sustainability information

in the annual report for the year 2021 of

Signify N.V. based in Eindhoven, the

Netherlands (hereafter: the annual report).

The scope is described in the section Our

Scope of our report. An audit is aimed at

obtaining a reasonable level of assurance.

In our opinion, the sustainability information

presents, in all material respects, a reliable

and adequate view of:

•The policy and business operations with

regard to sustainability

•The thereto related events and

achievements for the year 2021

in accordance with the Sustainability

Reporting Standards (option Comprehensive)

of the Global Reporting Initiative (GRI

Standards) and the applied supplemental

reporting criteria as disclosed in chapter 16,

Sustainability statements, section 16.1, of this

Annual Report 2021, of Signify N.V.

Basis for our

opinions

We conducted our audit of the financial

statements and our audit of the sustainability

information in accordance with Dutch law,

including the Dutch Standards on Auditing and

the Dutch Standard 3810N “Assurance

engagements relating to sustainability

reports” respectively, which is a specified

Dutch Standard that is based on the

International Standard on Assurance

Engagements (ISAE) 3000, “Assurance

Engagements Other Than Audits or Reviews

of Historical Financial Information”. Our

responsibilities under those standards are

further described in the section Our

responsibilities of our report.

We believe the audit evidence we have

obtained is sufficient and appropriate to

provide a basis for our opinions.

Our independence

We are independent of Signify N.V.

in accordance with the EU Regulation on

specific requirements regarding statutory

audit of public-interest entities, the “Wet

toezicht accountantsorganisaties”

(Wta, Audit firms supervision act), the

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Signify Annual Report 2021

“Verordening inzake de onafhankelijkheid van

accountants bij assurance-opdrachten” (ViO,

Code of Ethics for Professional Accountants,

a regulation with respect to independence)

and other relevant independence regulations

in the Netherlands. Furthermore, we have

complied with the “Verordening gedrags- en

beroepsregels accountants (VGBA, Dutch

Code of Ethics)”.

Our scope

Our engagements scope

The consolidated financial statements

comprise:

•the consolidated statement of financial

position as at December 31, 2021

•the following statements for 2021: the

consolidated statement of income,

comprehensive income, cash flows and

changes in equity

•the notes comprising a summary of the

significant accounting policies and other

explanatory information

The company financial statements comprise:

•the company balance sheet as at

December 31, 2021

•the company profit and loss account for

2021

•the notes comprising a summary of the

accounting policies and other explanatory

information

The sustainability information is included in

chapter 3, Creating long-term value, sections

3.2 and 3.3, chapter 4, Corporate

performance, section 4.2, and chapter 16,

Sustainability statements, sections 16.1 to

16.4 of this Annual Report.

Limitations to the scope of our

audit engagement on the

sustainability information

The sustainability information includes

prospective information, such as goals,

strategy, plans, forecasts, expectations and

estimates. Inherent to prospective

information, the actual future results are

uncertain. We do not provide any assurance

on the assumptions and achievability of

prospective information in the sustainability

information.

With regards to the Company’s sustainability

information, the 2019 baseline is based on

Signify’s best estimates available at the time

of establishing the Brighter Lives, Better

World 2025 doubling commitments.

Furthermore, we understand Signify is

working on further improvements on both

availability and accuracy of the data used in

its sustainability reporting. Therefore,

neither the 2019 baseline assumptions, nor

the ‘Double the pace of the Paris Agreement’

are included in the scope of our audit

engagement of the sustainability information.

We refer to chapter 16, Sustainability

statements, sub-section 16.4.1 of this Annual

Report for more information.

Calculations to determine societal impact as

included in chapter 3, Creating long-term

value, section 3.3, of this Annual Report are

mostly based on external sources and by

using several assumptions. The assumptions

and sources used are explained in the

document ‘Methodology for societal impact

calculations’ and the ‘Supplement to the 2021

Sustainability statements’ as available on the

website of Signify N.V. We have not

performed procedures on the assumptions or

external sources, other than evaluating the

suitability and plausibility of these

assumptions and external sources used.

The references to external sources or

websites in the sustainability information are

not part of the sustainability information as

audited by us. We therefore do not provide

assurance on this information.

Our opinion is not modified in respect of

these matters.

Reporting criteria

The information in the scope of our

engagements needs to be read and

understood together with the reporting

criteria. Signify N.V. is solely responsible for

selecting and applying these reporting

criteria, taking into account applicable law

and regulations related to reporting. The

reporting criteria used for the preparation of

this Annual Report are described in the

section Our opinions, of our report.

The absence of an established practice on

which to draw, to evaluate and measure

sustainability information allows for different,

but acceptable, measurement techniques and

can affect comparability between entities and

over time.

Information in

support of our

opinions

We designed our audit procedures in the

context of both our audit of the financial

statements and our audit of the sustainability

information as a whole and in forming our

opinions thereon. The following information in

support of our opinions and any findings were

addressed in this context, and we do not

provide a separate opinion or conclusion on

these matters.

Our understanding of the

business

Signify N.V. is a global provider of lighting

solutions. The group is structured in

components and we tailored our group audit

approach accordingly. We paid specific

attention in our audit to a number of areas

driven by the operations of the group and our

risk assessment. We start by determining

materiality and identifying and assessing the

risks of material misstatement of the financial

statements and the sustainability information,

whether due to fraud or error in order to

design audit procedures responsive to those

risks and to obtain audit evidence that is

sufficient and appropriate to provide a basis

for our opinions. The risk that the financial

statements or the sustainability information is

misleading or unbalanced, or the risk of not

detecting a material misstatement resulting

from fraud is higher than for one resulting

from error, as fraud may involve collusion,

forgery, intentional omissions,

misrepresentations, or the override of

internal control.

Materiality

General

The scope of our audit procedures is

influenced by the application of materiality.

Our audit engagements aim to provide

assurance about whether the financial

statements and the sustainability information

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Signify Annual Report 2021

are free from material misstatement.

Misstatements may arise due to fraud or

errors. They are considered to be material if,

individually or in the aggregate, they could

reasonably be expected to influence the

(economic) decisions of users taken on the

basis of the financial statements and the

sustainability information. The materiality

affects the nature, timing and extent of our

assurance procedures and the evaluation of

the effect of identified misstatements on our

conclusions.

Financial statements

Materiality

€ 32 million

(2020: € 26 million)

Benchmark

applied

4% of adjusted earnings before

interest, tax and amortization

(‘adjusted EBITA’)

Explanation

Based on our professional

judgment we consider

earnings-based measures as

the most appropriate basis to

determine materiality.

Adjustments are made to

earnings before interest, taxes

and amortization for elements

which are not directly related

to the operational

performance of the company

as disclosed in chapter 18,

Reconciliation of non-IFRS

financial measures, of this

Annual Report. We changed

the benchmark applied from

adjusted profit before taxes as

applied in 2020 to adjusted

EBITA for 2021 to better align

with the company’s key

performance measures.

We have also taken into account

misstatements and/or possible

misstatements that in our opinion are material

for the users of the financial statements for

qualitative reasons.

We agreed with the Supervisory Board that

misstatements in excess of € 1.5 million, which

are identified during the audit, would be

reported to them, as well as smaller

misstatements that in our view must be

reported on qualitative grounds.

Sustainability information

Based on our professional judgment we

determined specific materiality levels for

each relevant part of the sustainability

information and for the sustainability

information as a whole. When evaluating our

materiality levels, we have taken into account

quantitative and qualitative considerations as

well as the relevance of information for both

stakeholders and the organization.

We have agreed with the Supervisory Board

that misstatements which are identified

during the audit and which in our view must be

reported on quantitative or qualitative

grounds, would be reported to them.

Scope of the group audit of the

financial statements

Signify N.V. is at the head of a group of

entities. The financial information of this

group is included in the consolidated financial

statements.

Because we are ultimately responsible for the

opinion, we are also responsible for directing,

supervising and performing the group audit.

In this respect we have determined the

nature and extent of the audit procedures to

be carried out for group entities. Decisive

were the size and/or the risk profile of the

group entities or operations. On this basis,

we selected group entities for which an audit

or review had to be carried out on the

complete set of financial information or

specific items.

Due to the COVID-19 pandemic the direction,

supervision and performance of the group

audit engagement were performed remotely.

The review of audit work papers of

component teams was facilitated by having

remote access to component teams’

electronic audit file platforms, by screen

sharing and obtaining copies of work papers

directly from the component teams. We

increased the frequency and attendance of

our interactions with component teams.

Following our assessment of the risk of

material misstatement to Signify N.V.’s

consolidated financial statements, we have

selected 2 components which required an

audit of the complete financial information

(Full Scope Components). We have selected

28 components requiring audit procedures

on specific account balances that we

considered to have the potential for the

greatest impact on the significant accounts in

the financial statements either because of

the size of these accounts or their risk profile

(Specific Scope Components). We used the

work of other EY member firms when auditing

entities outside the Netherlands. We centrally

performed audit procedures on accounting

areas which are managed centrally such as

goodwill, legal claims and treasury.

As a result of our scoping, our actual

coverage varies per account balance. In

addition, the level of detail of our audit

procedures per account balance varies

depending on our risk assessment.

Of the remaining components, we performed

risk-based analytical procedures to respond

to any potential risks of material

misstatements to the financial statements.

Accordingly, our coverage of the group’s

Revenues and Total Assets can be

summarized as follows:

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Signify Annual Report 2021

By performing the procedures mentioned

above at components of the group, together

with additional procedures at group level, we

have been able to obtain sufficient and

appropriate audit evidence about the group’s

financial information to provide an opinion

about the consolidated financial statements.

Teaming and use of specialists

We ensured that the audit teams both at

group and at component levels included the

appropriate skills and competences which are

needed for the audit of a listed client in

Signify’s industry. We included specialists in

the areas of IT audit, forensics, treasury and

income tax and have made use of our own

experts in the areas of valuations and

actuaries.

Our focus on climate risks and

the energy transition

Climate objectives will be high on the public

agenda in the next decades. Issues such as

CO2 reduction impact financial reporting, as

these issues entail risks for the business

operation, the valuation of assets ('stranded

assets') and provisions or the sustainability of

the business model and access to financial

markets of companies with a larger CO2

footprint.

As part of our audit of the financial

statements, we evaluated the extent to which

climate-related risks and the possible effects

of the energy transition are taken into

account in estimates and significant

assumptions as well as in the design of

relevant internal control measures by Signify

N.V. Furthermore, we read the management

board report and considered whether there

is any material inconsistency between the

non-financial information in chapter 16

Sustainability statements and the financial

statements.

Our focus on fraud and non-

compliance with laws and

regulations

Our responsibility

Although we are not responsible for

preventing fraud or non-compliance and we

cannot be expected to detect non-

compliance with all laws and regulations, it is

our responsibility to obtain reasonable

assurance that both the financial statements

and the sustainability information taken as a

whole, are free from material misstatement,

whether caused by fraud or error.

Our audit response related to fraud

risks

We identify and assess the risks of material

misstatements of the financial statements

and the sustainability information due to

fraud. During our audits we obtained an

understanding of the entity and its

environment and the components of the

system of internal control, including the risk

assessment process and management’s

process for responding to the risks of fraud

and monitoring the system of internal control

and how the Supervisory Board exercises

oversight, as well as the outcomes. We refer

to chapter 12, Risk factors and risk

management, of this Annual Report for

management’s (fraud) risk assessment and to

chapter 8, Supervisory Board report, section

8.2, in which the Supervisory Board reflects

on this (fraud) risk assessment.

We evaluated the design and relevant aspects

of the system of internal control and in

particular the fraud risk assessment, as well

as the code of conduct, whistle blower

procedures and incident registration. We

evaluated the design and the implementation

and, where considered appropriate, tested

the operating effectiveness, of internal

controls designed to mitigate fraud risks.

We considered available information and

made inquiries of relevant executives,

directors (including internal audit, legal,

compliance and heads of Divisions) and the

Supervisory Board. As part of our process of

identifying fraud risks, we evaluated fraud risk

Presumed risk of fraud in revenue recognition and management override of controls

Fraud risk

When identifying and assessing fraud risks we presume that there are risks of

fraud in revenue recognition and management override. We evaluated that

revenue from sales of goods recognized at a point in time in particular gives rise

to such risks.

We also considered whether the judgments and assumptions in the determination

of these revenues indicate a management bias that may represent a risk of

material misstatement due to fraud.

Our audit

approach

We performed among others the following audit procedures, directed specifically

to these fraud risks:

•We have used data analysis to identify and address high-risk journal entries

•In addition, we performed procedures to evaluate key accounting estimates

for management bias in particular relating to important judgment areas and

significant accounting estimates as disclosed in section ‘Basis of preparation’

in note 1 to the financial statements

•Furthermore, we examined the business rationale of significant transaction

with related parties or that otherwise appeared to be unusual

We further describe our audit procedures responsive to the presumed risk of

fraud in revenue recognition and management override in the description of our

key audit matter ‘Improper revenue recognition and risk of management

override’.

factors with respect to financial reporting

fraud, misappropriation of assets and bribery

and corruption in close co-operation with our

forensic specialists. We evaluated whether

these factors indicate that a risk of material

misstatement due to fraud is present. As

Signify N.V. is a global company, operating in

multiple jurisdictions, we considered the risk

of bribery and corruption.

As in all of our audits, when identifying and

assessing fraud risks, we presumed that

there are risks of fraud in revenue

recognition and risks related to management

override of controls.

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Signify Annual Report 2021

The fraud risks we identified, enquiries and

other available information did not lead to

specific indications for fraud or suspected

fraud potentially materially impacting the view

of the financial statements or the

sustainability information.

We incorporated elements of unpredictability

in our audits. We also considered the

outcome of our other audit procedures and

evaluated whether any findings were

indicative of fraud or non-compliance.

Our audit response related to risks

of non-compliance with laws and

regulations

We assessed factors related to the risks of

non-compliance with laws and regulations

that could reasonably be expected to have a

material effect on the financial statements

from our general industry experience,

through discussions with the management

board, reading minutes, inspection of internal

audit and compliance reports, and performing

substantive tests of details of classes of

transactions, account balances or

disclosures.

We also inspected lawyers’ letters and

correspondence with regulatory authorities

and remained alert to any indication of

(suspected) non-compliance throughout the

audit. Finally we obtained written

representations that all known instances of

non-compliance with laws and regulations

have been disclosed to us.

Our audit response related to going

concern

As disclosed in section ‘Basis of preparation’

in note 1 to the financial statements,

management made a specific assessment of

the company’s ability to continue as a going

concern and to continue its operations for at

least the next 12 months. We discussed and

evaluated the specific assessment with

management exercising professional

judgment and maintaining professional

skepticism.

We considered whether management’s going

concern assessment, based on our

knowledge and understanding obtained

through our audit of the financial statements

or otherwise, contains all events or

conditions that may cast significant doubt on

the company’s ability to continue as a going

concern. If we conclude that a material

uncertainty exists, we are required to draw

attention in our auditor’s report to the

related disclosures in the financial

statements or, if such disclosures are

inadequate, to modify our opinion.

Based on our procedures performed, we did

not identify significant doubts on Signify’s

ability to continue as a going concern for the

next 12 months.

Our conclusions are based on the audit

evidence obtained up to the date of our

auditor’s report. However, future events or

conditions may cause a company to cease to

continue as a going concern.

Our key audit

matters

Key audit matters are those matters that, in

our professional judgment, were of most

significance in our audit of the financial

statements and our audit of the sustainability

information. We have communicated the key

audit matters to the Supervisory Board. The

key audit matters are not a comprehensive

reflection of all matters discussed.

The following key audit matters are modified,

excluded or new compared to the key audit

matters included in our last year’s auditor’s

report:

Key audit matters for the audit of the financial statements

Key audit matter 2020

Change

Reason for change

Valuation of deferred

tax assets and liabilities

for uncertain tax

positions

Modified

The key audit matter has been changed to “Valuation of

uncertain tax positions (assets and liabilities)”. Valuation of

deferred tax assets is no longer considered a key audit

matter as the risk of not recovery decreased following the

changes in the organizational structure in 2020

Valuation of goodwill

Excluded

The risk that goodwill is impaired decreased following the

increase in headroom (difference between the

recoverable amount and its carrying amount) in the annual

impairment test

Acquisition of Cooper

Lighting

Excluded

Accounting for the acquisition (including its significant

estimations) was largely completed as part of the 2020

consolidated financial statements. In 2021 there were no

material adjustments to the preliminary accounting

assessments performed

For the audit of the sustainability information

Key audit matter 2020

Change

Reason for change

Reporting for

Sustainable Revenues

Excluded

This matter is addressed as part of our new key audit

matter "Brighter Lives, Better World 2025" program:

commitments and criteria

Estimates and

assumptions

concerning the

calculated impact of

avoided CO₂ as

presented in the value

creation model

Excluded

This matter is addressed as part of our new key audit

matter "Brighter Lives, Better World 2025" program:

commitments and criteria

Brighter Lives, Better

World 2025 program:

commitments and

criteria

New

Signify’s newly formulated Brighter Lives, Better World

2025 program identified new commitments and related

criteria as further detailed in the description of the key

audit matter

Inclusion of Cooper

Lighting and Klite in

sustainability reporting

New

In 2021, the sustainability information of both companies

acquired in previous years will be reported in the

sustainability information for the first time as further

detailed in the description of the key audit matter

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Signify Annual Report 2021

The key audit matters were addressed in

the context of our audit procedures for the

financial statements and the sustainability

information as a whole and to conclude

thereon, and we do not provide a separate

opinion on these matters.

For the audit of the financial statements we

identified the following key audit matters.

Risk

Our audit approach

Key observations

Improper revenue recognition and risk of management override

Revenue from the sale of goods is

recognized at the point in time that the

customer obtains control of the goods. For

standard sale of products, control generally

passes to the customer at the time the

product is delivered and accepted,

depending on the delivery conditions.

Management focuses on sales as a key

performance measure which could create

an incentive to recognize revenues in the

incorrect period due to the pressure

management may feel to achieve desired

results. Further reference is made in

chapter 14, Consolidated financial

statements, note 2, of this Annual Report

We assessed that improper revenue

recognition due to risk of management

override relating to material projects and

sale of goods, represents a key audit

matter.

Our audit procedures included:

•the assessment of the appropriateness

of the company’s revenue recognition

accounting policies

•obtaining an understanding of the design

of key controls in the revenue

recognition process

•the use of data-analytics to audit key risk

areas and identify exceptional or unusual

revenue streams and patterns

•detailed testing of significant sales

contracts and

•performing cut-off procedures to ensure

revenue is recognized in the correct

period

We concur with the revenue recognized in

the financial statements.

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Risk

Our audit approach

Key observations

Valuation of uncertain tax positions (assets and liabilities)

At December 31, 2021, uncertain tax

positions are recognized as part of the net

deferred tax assets of € 454 million and the

income tax payable under non-current

liabilities of € 118 million. Further reference

is made in chapter 14, Consolidated financial

statements, note 9, of this Annual Report.

The ultimate tax effects of transactions may

be uncertain for a considerable period of

time, requiring management to estimate the

related current and deferred tax

treatments, resulting in uncertain tax

positions.

The accounting for uncertain tax positions

is a focus area in our audit as the company

has extensive international operations and

is required to make judgments and

estimates. These judgments and estimates

relate to, among others, the tax risks as

disclosed in note 9, on the valuation of

deferred tax assets and liabilities for

uncertain tax positions.

Together with our tax experts we evaluated

the tax accounting in various jurisdictions

the company operates in, taking into

account the impact of the local

jurisdictions. We specifically focused on the

tax uncertainties as disclosed in chapter 14,

Consolidated financial statements, note 9,

of this Annual Report.

We evaluated and challenged the company’s

judgments and estimates of uncertain tax

positions resulting from ongoing local tax

audits and legislative developments, and

relevant historical and recent judgments.

Where possible, we compared information

provided by management to corroborative

or contradictory information. We also

assessed the adequacy of the company’s

disclosure included in note 9 in respect of

deferred tax assets and other tax liabilities

related to tax uncertainties.

We concur with the estimates and

assumptions made by management relating

to the valuation of uncertain tax positions

(assets and liabilities), and conclude the

related disclosures to be sufficient.

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Signify Annual Report 2021

For the audit of the sustainability

information, we identified the following key

audit matters:

Risk

Our audit approach

Key observations

Brighter Lives, Better World 2025 program: commitments and criteria

Signify has launched its Brighter Lives,

Better World 2025 program and committed

to continue and strengthen its sustainability

targets for 2025. As part of this program,

new targets and reporting criteria

(‘doubling objectives’) are disclosed for the

first time in the Annual Report 2021.

Further reference is made in chapter 3,

Creating long-term value, section 3.1, of

this Annual Report, in the sustainability

information.

As these commitments are disclosed for the

first time, it is important to have a clear

understanding of the suitability of the

criteria and the sufficiency of disclosures

applied.

Our procedures focused on evaluating

whether the self-developed reporting

criteria for these doubling objectives are

suitable. Our audit procedures included:

•obtaining an understanding of the

reporting processes

•evaluating and challenging management’s

judgments and estimates applied

•evaluating the appropriateness of the

reporting criteria used

•assessing if the disclosures of the

reporting criteria are sufficient for a

proper understanding by the reader

Further reference is made to the

sustainability information, as referred in

chapter 16, Sustainability statements, sub-

section 16.1.4, of this Annual Report.

We concur with management’s judgements

and estimates applied, appropriateness of

the reporting criteria used and, the

sufficiency of the disclosures in the

sustainability information relating to the

reporting criteria for the 2025

commitments.

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Risk

Our audit approach

Key observations

Inclusion of Cooper Lighting and Klite in sustainability reporting

Based on the reporting principles of Signify

the normative period is two years to include

new acquisitions in the sustainability

information.

The acquisitions of Klite (completed in 2019)

and Cooper Lighting (completed in 2020)

are included in the 2021 sustainability

information for the first time (as disclosed in

chapter 16, Sustainability statements, sub-

section 16.1.4, of this Annual Report).

Misalignment between Signify’s sustainability

reporting principles and its acquired

businesses could lead to inaccurate and

incomplete sustainability information.

Specific assurance procedures have been

performed to assess the accuracy and

completeness of the inclusion of Cooper

Lighting and Klite in the sustainability

information. Our audit procedures related

to Cooper Lighting and Klite include:

•obtaining an understanding of the

reporting processes

•validating consistency of applied

definitions

•evaluating and challenging management’s

judgments and estimates applied

•obtaining supporting evidence that the

sustainability data reconciles with

underlying records

•detailed testing of sustainability data with

source documentation

Further reference is made to the

sustainability information in chapter 16,

Sustainability statements, sub-section

16.1.4, of this Annual Report.

We concur with the inclusion of Cooper

Lighting and Klite in the sustainability

information, considering the disclosures

made in relation to the impact of the

acquisitions in chapter 16, Sustainability

statements, sub-section 16.1.4, of this

Annual Report.

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Signify Annual Report 2021

Report on other

information

included in the

annual report

The annual report contains other information

in addition to the financial statements, the

sustainability statements in chapter 16,

Sustainability statements, sections 16.1 to

16.4, of this Annual Report, and our auditor’s

report thereon. The other information

comprises:

•The report of the Board of Management

•The remuneration report

•Other information required by Part 9 of

Book 2 of the Dutch Civil Code

•Sustainability statements in section 16.5

•Corporate Governance report

Based on the following procedures

performed, we conclude that the other

information:

•Is consistent with the financial statements

and does not contain material

misstatements

•Contains the information as required by

Part 9 of Book 2 for the report of the

Board of Management and the other

information as required by Part 9 of Book 2

of the Dutch Civil Code and as required by

sections 2:135b and 2:145 sub‑section 2 of

the Dutch Civil Code for the remuneration

report.

We have read the other information. Based on

our knowledge and understanding obtained

through our audit of the financial statements

or otherwise, we have considered whether

the other information contains material

misstatements. By performing these

procedures, we comply with the

requirements of Part 9 of Book 2 and section

2:135b sub-section 7 of the Dutch Civil Code

and the Dutch Standard 720. The scope of

the procedures performed is substantially

less than the scope of those performed in

our audit of the financial statements.

Management is responsible for the

preparation of the other information,

including the report of the Board of

Management in accordance with Part 9 of

Book 2 of the Dutch Civil Code and other

information required by Part 9 of Book 2 of

the Dutch Civil Code. Management and the

Supervisory Board are responsible for

ensuring that the remuneration report is

drawn up and published in accordance with

sections 2:135b and 2:145 sub‑section 2 of

the Dutch Civil Code. In accordance with the

Dutch Corporate Governance Code, the

Supervisory Board renders account of the

implementation of the remuneration policy in

2021 in the remuneration report, as prepared

by the Remuneration Committee.

Report on other

legal and regulatory

requirements and

ESEF

Engagement

We were engaged by the Supervisory Board

as auditor of Signify N.V. (formerly: Philips

Lighting N.V.) on July 15, 2016, as of the audit

for the year 2016 and have operated as

statutory auditor ever since that date.

No prohibited non-audit services

We have not provided prohibited non-audit

services as referred to in Article 5(1) of the

EU Regulation on specific requirements

regarding statutory audit of public-interest

entities.

Other non-prohibited services

provided

Our services are only related to the audit of

the financial statements or audit related

services.

European Single Electronic

Reporting Format (ESEF)

Signify N.V. has prepared the annual report in

ESEF. The requirements for this are set out in

the Delegated Regulation (EU) 2019/815 with

regard to regulatory technical standards on

the specification of a single electronic

reporting format (hereinafter: the RTS on

ESEF).

In our opinion, the annual report, prepared in

the XHTML format, including the partially

marked-up consolidated financial statements,

as included in the reporting package by

Signify N.V., complies in all material respects

with the RTS on ESEF

Management is responsible for preparing the

annual report, including the financial

statements, in accordance with the RTS on

ESEF, whereby management combines the

various components into a single reporting

package.

Our responsibility is to obtain reasonable

assurance for our opinion whether the annual

report in this reporting package complies

with the RTS on ESEF.

Our procedures, taking into account Alert 43

of the NBA (the Netherlands Institute of

Chartered Accountants), included amongst

others:

•obtaining an understanding of the Signify

N.V.’s financial reporting process, including

the preparation of the reporting package

•obtaining the reporting package and

performing validations to determine

whether the reporting package containing

the Inline XBRL instance document and the

XBRL extension taxonomy files, has been

prepared in accordance with the technical

specifications as included in the RTS on

ESEF

•examining the information related to the

consolidated financial statements in the

reporting package to determine whether

all required mark-ups have been applied

and whether these are in accordance with

the RTS on ESEF.

Description of

responsibilities

Responsibilities of management

and the Supervisory Board

Management is responsible for the

preparation and fair presentation of the

financial statements in accordance with EU-

172

Signify Annual Report 2021

IFRS and Part 9 of Book 2 of the Dutch Civil

Code.

Management is also responsible for the

preparation of reliable and adequate

sustainability information in accordance with

the GRI Standards and the applied

supplemental reporting criteria as disclosed

in chapter 16, Sustainability statements,

section 16.1, of this Annual Report, including

the identification of the stakeholders and the

determination of material issues. The choices

made by management with respect to the

scope of the sustainability information are

included in section 16.1, Approach to

sustainability reporting, of this Annual Report.

Furthermore, management is responsible for

such internal control as management

determines is necessary to enable the

preparation of the financial statements and

the sustainability information that is free from

material misstatement, whether due to fraud

or error.

As part of the preparation of the financial

statements, management is responsible for

assessing Signify N.V.’s ability to continue as a

going concern. Based on the financial

reporting frameworks mentioned,

management should prepare the financial

statements using the going concern basis of

accounting unless management either intends

to liquidate the company or to cease

operations, or has no realistic alternative but

to do so. Management should disclose events

and circumstances that may cast significant

doubt on the Signify N.V.’s ability to continue

as a going concern in the financial

statements.

The Supervisory Board is responsible for

overseeing the Signify N.V.’s reporting

process.

Our responsibilities

Our objective is to plan and perform the audit

engagements in a manner that allows us to

obtain sufficient and appropriate audit

evidence for our opinions.

Our audits of the financial statements and the

sustainability information have been

performed with a high, but not absolute, level

of assurance, which means we may not detect

all material errors and fraud.

We apply the “Nadere voorschriften

kwaliteitssystemen” (NVKS, Regulations for

Quality management systems) and

accordingly maintain a comprehensive system

of quality control including documented

policies and procedures regarding

compliance with ethical requirements,

professional standards and other relevant

legal and regulatory requirements.

An informative summary of the work

performed as the basis of our conclusions is

included in the Annex to the combined

independent auditor’s report.

Amsterdam, the Netherlands

February 22, 2022

Ernst & Young Accountants LLP

A.E. Wijnsma

173

Signify Annual Report 2021

Annex to the

combined

independent

auditor’s report

Work performed

We have exercised professional judgment and

have maintained professional skepticism

throughout the assurance engagements, in

accordance with Dutch Standards on Auditing

and the Dutch assurance standards, ethical

requirements and independence

requirements. The ‘Information in support of

our opinions’ section in the combined

independent auditor’s report should be read

in conjunction with the information in this

annex as the basis for our opinions.

Our audit to obtain reasonable assurance

about the financial statements (consolidated

and company) included amongst others:

•Performing audit procedures responsive to

the risks identified, and obtaining audit

evidence that is sufficient and appropriate

to provide a basis for our opinion.

•Obtaining an understanding of internal

control relevant to the audit in order to

design audit procedures that are

appropriate in the circumstances, but not

for the purpose of expressing an opinion

on the effectiveness of the company’s

internal control.

•Evaluating the appropriateness of

accounting policies used and the

reasonableness of accounting estimates

and related disclosures made by

management.

•Evaluating the overall presentation,

structure and content of the financial

statements, including the disclosures and

•Evaluating whether the financial

statements represent the underlying

transactions and events in a manner that

achieves fair presentation.

Our audit to obtain reasonable assurance

about the sustainability information included

amongst others:

•Performing an analysis of the external

environment and obtaining an

understanding of relevant social themes

and issues, and the characteristics of the

company

•Evaluating the appropriateness of the

reporting criteria used, their consistent

application and related disclosures in the

sustainability information. This includes the

evaluation of the results of the

stakeholders’ dialogue and the

reasonableness of estimates made by

management

•Obtaining an understanding of the systems

and processes for collecting, reporting and

consolidating the sustainability information,

including obtaining an understanding of

internal control relevant to our audit, but

not for the purpose of expressing an

opinion on the effectiveness of the

company’s internal control

•Identifying and assessing the risks that the

sustainability information is misleading or

unbalanced, or contains material

misstatements, whether due to fraud or

errors. Designing and performing further

audit procedures responsive to those

risks, and obtaining audit evidence that is

sufficient and appropriate to provide a

basis for our opinion. These further audit

procedures consisted amongst others of:

•Interviewing management and relevant

staff at corporate and business level

responsible for the sustainability

strategy, policy and results

•Interviewing relevant staff responsible

for providing the information for,

carrying out internal control procedures

on, and consolidating the data in the

sustainability information

•Determining the nature and extent of the

audit procedures for the group

components and locations. For this, the

nature, extent and/or risk profile of

these components are decisive. Based

thereon we selected the components

and locations to visit. Visits to

production sites in USA and Belgium

aimed at, on a local level, validating

source data and to evaluate the design,

implementation and operation of

controls and validation procedures.

•Evaluating whether the assumptions

used in the calculation of the societal

impact as included in chapter 3, Create

long-term value, section 3.3, of this

Annual Report are plausible, which are

included in the Methodology for societal

impact calculations

•Evaluating the suitability and plausibility

of the external sources used in the

calculations on which the societal impact

as included in the section 3.3, of this

Annual Report is based, which are

included in the Methodology for societal

impact calculations

•Obtaining assurance information that the

sustainability information reconciles with

underlying records of the company

•Evaluating relevant internal and external

documentation, on a test basis, to

determine the reliability of the

information in the sustainability

information

•Performing an analytical review of the

data and trends in the information

submitted for consolidation at corporate

level

•Reconciling the relevant financial

information with the financial statements

•Evaluating the consistency of the

sustainability information with the

information in the annual report which is

not included in the scope of our audit

•Evaluating the overall presentation,

structure and content of the sustainability

information and

•Considering whether the sustainability

information as a whole, including the

disclosures, reflects the purpose of the

reporting criteria used.

Communication

We communicate with the Supervisory Board

regarding, among other matters, the planned

scope and timing of the audit and significant

audit findings, including any significant

findings in internal control that we identify

during our audit. In this respect we also

submit an additional report to the audit

committee in accordance with Article 11 of

the EU Regulation on specific requirements

regarding statutory audit of public-interest

entities. The information included in this

additional report is consistent with our audit

opinion in this auditor’s report.

We provide the Supervisory Board with a

statement that we have complied with

relevant ethical requirements regarding

independence, and to communicate with

them all relationships and other matters that

may reasonably be thought to bear on our

174

Signify Annual Report 2021

independence, and where applicable, related

safeguards.

From the matters communicated with the

Supervisory Board, we determine the key

audit matters: those matters that were of

most significance in the audit of the financial

statements and the audit of the sustainability

information. We describe these matters in our

auditor’s report unless law or regulation

precludes public disclosure about the matter

or when, in extremely rare circumstances, not

communicating the matter is in the public

interest.

175

Signify Annual Report 2021

18Reconciliation of

non-IFRS financial

measures

Explanation of non-IFRS financial measures

Certain parts of this Annual Report contain financial measures that are not measures of financial

performance or liquidity under IFRS. These are commonly referred to as non-IFRS financial

measures and include items such as comparable sales growth, adjusted gross margin, EBITA,

Adjusted EBITA, free cash flow and other related ratios.

Although the non-IFRS financial measures presented are not measures of financial performance

or liquidity under IFRS, the company uses these measures to monitor the underlying

performance of its business and operations. These measures have not been audited or reviewed

by the company’s external auditor. Furthermore, these measures may not be indicative of the

company’s historical operating results, nor are such measures meant to be predictive of the

company’s future results. These measures are presented in this Annual Report because the

company considers them an important supplemental measure of its performance and believes

that these and similar measures are widely used in the industry in which it operates, as a means

of evaluating a company’s operating performance and liquidity.

Comparable sales growth

The company discloses comparable sales growth as a supplemental non-IFRS financial measure,

as the company believes that the presentation of comparable sales growth is a meaningful

measure for investors to evaluate the performance of the company’s business activities over

time. The company determines comparable sales growth by deducting the percentage figures

for changes from the nominal change of sales. Interaction effects between currency

movements, changes in consolidation, regulatory changes and changes in accounting standards

(second order effects) are not taken into account. The company presents comparable sales

growth on both a Division and Market Group basis. Comparable sales growth is also used by the

company as a key financial measure to assess the operating performance of the Divisions and

Market Groups.

Sales growth composition per business in %

Comparable

growth

Currency

effects

Consolidation

and other

changes

Nominal

growth

Digital Solutions

3.4

(2.3)

7.3

8.3

Digital Products

8.8

(1.5)

(0.1)

7.2

Conventional Products

(6.9)

(1.7)

0.0

(8.7)

Signify

3.8

(2.0)

3.6

5.5

176

Signify Annual Report 2021

Sales growth composition per market in %

Comparable

growth

Currency

effects

Consolidation

and other

changes

Nominal

growth

Europe

3.4

0.0

(0.2)

3.1

Americas

1.4

(4.0)

8.5

5.9

Rest of the World

7.9

(1.5)

0.1

6.6

Global businesses

6.3

(0.6)

4.6

10.3

Signify

3.8

(2.0)

3.6

5.5

EBITA and Adjusted EBITA

The company discloses EBITA, Adjusted EBITA and Adjusted EBITA ratio as supplemental non-

IFRS financial measures, as the company believes these are meaningful measures to evaluate the

performance of the company’s business activities over time. The company understands that

these measures are used by analysts, rating agencies and investors in assessing the company’s

performance. The company presents EBITA, Adjusted EBITA and Adjusted EBITA ratio on a

Division basis. The company also believes that the presentation of EBITA, Adjusted EBITA and

Adjusted EBITA ratio provide useful information to investors on the development of the

company’s business and enhance the ability of investors to compare profitability across the

Divisions. In the case of EBITA, the company believes that it makes the underlying performance

of its businesses more transparent by factoring out the amortization and impairment of

acquisition-related intangible assets and goodwill, which arises when acquisitions are

consolidated by the company. In the case of Adjusted EBITA and Adjusted EBITA ratio, the

company believes that these measures make the underlying performance of its businesses more

transparent by factoring out restructuring costs, acquisition-related charges and other

incidental charges which are not directly related to the operational performance of a Division.

EBITA, Adjusted EBITA and Adjusted EBITA ratio are also used by the company as key financial

measures to assess the operating performance of the Divisions.

Adjusted EBITA to Income from operations (EBIT) in millions of EUR

2021

Signify

Digital

Solutions

Digital

Products

Conventional

Products

Signify

Other

Adjusted EBITA

795

397

339

161

(102)

Restructuring

(86)

(19)

(4)

(5)

(58)

Acquisition-related charges

(50)

(49)

(1)

—

Incidental items

(22)

(11)

(10)

(4)

EBITA

636

318

323

158

(164)

Amortization 1

(122)

(114)

(7)

—

(1)

Income from operations (EBIT) 2

514

205

316

158

(165)

2020

Adjusted EBITA

695

330

295

170

(100)

Restructuring

(83)

(30)

(10)

(23)

(19)

Acquisition-related charges

(63)

(62)

(1)

—

Incidental items

(13)

(8)

(6)

(1)

EBITA

536

230

277

149

(120)

Amortization 1

(120)

(111)

(8)

—

(1)

Income from operations (EBIT) 2

416

119

269

149

(122)

1Amortization and impairments of acquisition-related intangible assets and goodwill.

2For a reconciliation to income before taxes, refer to note 3, Information by segment and main country, in chapter 14,

Consolidated financial statements, of this Annual Report.

Adjusted gross margin

The company discloses adjusted gross margin as a supplemental non-IFRS financial measure. The

company believes it is a meaningful measure to evaluate the company’s gross margin on a

comparable basis over time. The measure factors out restructuring costs, acquisition-related

charges and other incidental charges attributable to cost of sales which are not directly related

to the operational performance of the company. Adjusted gross margin is also used by the

company as a key financial measure to assess the operating performance of the company.

Adjusted indirect costs: adjusted SG&A costs and adjusted R&D costs

The company discloses adjusted SG&A costs and adjusted R&D costs as supplemental non-IFRS

financial measure. The company believes they are meaningful measures to evaluate the

company’s SG&A costs and R&D costs on a comparable basis over time. The measures factors

out restructuring costs, acquisition-related charges and other incidental charges attributable

to SG&A and R&D costs which are not directly related to the operational performance of the

company. Adjusted SG&A costs and adjusted R&D costs are also used by the company as key

financial measures to assess the operating performance of the company.

177

Signify Annual Report 2021

Income from operations to Adjusted EBITA in millions of EUR

2021

Reported

Restruc-

turing

Acquisition

charges

Incidental

items 1

Adjusted

Sales

6,860

—

6,860

Cost of sales

(4,189)

(4,157)

Gross margin

2,671

2,702

Selling, general and administrative

expenses

(1,882)

(1,748)

Research and development

expenses

(286)

—

(284)

Indirect costs

(2,168)

(2,032)

Impairment of goodwill

—

Other business income

—

(2)

(11)

Other business expenses

(8)

—

(5)

Income from operations

514

673

Amortization

(122)

—

(122)

Income from operations excluding

amortization (EBITA)

636

795

2020

Reporte

Restruct

uring

Acquisitio

n related

charges

Incidenta

l items

Adjuste

Sales

6,502

—

6,502

Cost of sales

(4,004)

(4)

(3,946)

Gross margin

2,499

(4)

2,556

Selling, general and administrative

expenses

(1,781)

(1,695)

Research and development

expenses

(307)

—

(287)

Indirect costs

(2,088)

(1,982)

Impairment of goodwill

—

Other business income

—

(2)

Other business expenses

(7)

—

(7)

Income from operations

416

575

Amortization 1

(120)

—

(120)

Income from operations excluding

amortization (EBITA)

536

695

1Incidental items are non-recurring by nature and relate to separation, transformation, net real estate gains, environmental

provision for inactive sites and the effect of changes in discount rates on long-term provisions..

Free cash flow

The company discloses free cash flow as a supplemental non-IFRS financial measure, as the

company believes it is a meaningful measure to evaluate the performance of the company’s

business activities over time. The company understands that free cash flow is broadly used by

analysts, rating agencies and investors in assessing the company’s performance. The company

also believes that the presentation of free cash flow provides useful information to investors

regarding the cash generated by the company’s operating activities after deducting cash

outflows for additions of intangible assets, capital expenditures on property, plant and

equipment and proceeds from disposal of property, plant and equipment. Therefore, the

measure gives an indication of the long-term cash generating ability of the company’s business.

In addition, because free cash flow is not impacted by purchases of businesses, it is less volatile

than the total of cash flows from operating and investing activities. Free cash flow is also used

by the company as a key financial measure to assess the operating performance of the

company.

Composition of cash flows in millions of EUR

2020

2021

Cash flows from operating activities

891

704

Cash flows from investing activities

(1,379)

(91)

Cash flows before financing activities

(488)

613

Cash flows from operating activities

891

704

Net capital expenditures:

• Additions of intangible assets

(32)

(34)

• Capital expenditures on property, plant and equipment

(67)

(84)

• Proceeds from disposal of property, plant and equipment

Free cash flows

817

614

Free cash flows in millions of EUR

2020

2021

Digital Solutions 1

436

364

Digital Products 1

406

383

Conventional Products 1

188

136

Other

(213)

(270)

Signify total

817

614

1.Excluding non-allocated free cash flow items (e.g. tax, interest).

178

Signify Annual Report 2021

Net debt

The net debt position as a percentage of the sum of the company’s equity (shareholders’ equity

and non-controlling interests) and net debt are presented to express the financial strength of

the company. The company understands that this measure is used by analysts, rating agencies

and investors in assessing the company’s performance.

Composition of net debt to total equity in millions of EUR unless otherwise stated

2020

2021

Short-term debt

Long-term debt

2,221

1,931

Gross debt

2,307

2,007

Cash and cash equivalents

(1,033)

(851)

Net debt

1,275

1,156

Shareholders' equity

2,196

2,459

Non-controlling interests

124

138

Total equity

2,321

2,597

Net debt and total equity

3,595

3,753

Net debt divided by net debt and total equity (in %)

35%

31%

Total equity divided by net debt and total equity (in %)

65%

69%

Working capital

The company discloses working capital as a supplemental non-IFRS financial measure, as the

company believes it is a meaningful measure to evaluate the company’s ability to maintain a solid

balance between growth, profitability and liquidity. Working capital is broadly analyzed and

reviewed by analysts and investors in assessing the company’s performance. This measure

serves as a metric for how efficiently a company is operating and how financially stable it is in the

short term. It is an important measure of a company’s ability to pay off short-term expenses or

debts.

Working capital to total assets in millions of EUR

2020

2021

Working capital

313

250

Eliminate liabilities comprised in WoCa:

• Trade and other payables

1,731

2,334

• Derivative financial liabilities

• Other current liabilities

213

Include assets not comprised in WoCa:

• Non-current assets

4,334

4,536

• Income tax receivable

• Cash and cash equivalents

1,033

851

• Assets classified as held for sale

Total assets

7,710

8,256

179

Signify Annual Report 2021

19Definitions and

abbreviations

Acquisition-related charges

Costs that are directly triggered by the

acquisition of a company, such as transaction

costs, purchase accounting related costs and

integration-related expenses.

Adjusted EBITA

EBITA excluding restructuring costs,

acquisition-related charges and other

incidental charges.

Adjusted EBITA margin

Adjusted EBITA divided by sales to third

parties (excluding intersegment).

Adjusted gross margin

Gross margin, excluding restructuring costs,

acquisition-related charges and other

incidental items attributable to cost of sales.

Adjusted indirect costs

Indirect costs, excluding restructuring costs,

acquisition-related charges and other

incidental items attributable to indirect costs.

Adjusted research and development (R&D)

expenses

Research and development expenses,

excluding restructuring costs, acquisition-

related charges and other incidental items

attributable to research and development

expenses.

Adjusted selling, general and administrative

(SG&A) expenses

Selling, general and administrative expenses,

excluding restructuring costs, acquisition-

related charges and other incidental items

attributable to selling, general and

administrative expenses.

Ballasts

Lamp control gear inserted between the

supply and one or more discharge lamps,

which, by means of inductance, capacitance

or a combination of inductance and

capacitance, serves mainly to limit the

current of the lamp(s) to the required value.

Brighter lives revenues

Revenues measured as a percentage of total

revenues coming from all products, systems

and services contributing to Food availability,

Safety & security or Health & well-being.

Capital employed

The sum of equity and net debt (excluding

pension liabilities).

Carbon footprint

Carbon footprint is expressed in CO2-

equivalent or carbon dioxide equivalent,

which is a quantity that describes, for a given

mixture and amount of greenhouse gas, the

amount of CO2 that would have the same

global warming potential (GWP), when

measured over a specific timescale (generally

100 years). Signify measures its carbon

footprint over its value chain (scope 1, 2 and

3) which include emissions from industrial

sites, non-industrial sites, business travel,

logistics, purchased goods and services,

capital goods, fuel-and-energy-related

activities, employee commuting, waste

generated in operations, end of life

treatment of sold products, and use of sold

products. Our carbon neutrality commitment

covers Signify operations, meaning scope 1, 2

and part of scope 3 for Business travel and

logistics. Signify net operational carbon

footprint = Signify gross operational carbon

footprint - Amount of carbon offset through

our carbon offsetting programs.

180

Signify Annual Report 2021

Circular revenues

Revenues measured as a percentage of total

revenues coming from products, systems and

services designed to preserve value and avoid

waste categorized as Serviceable luminaires

(incl. 3D-printing), Circular components,

Intelligent systems or Circular services.

Climate action revenues

Revenues measured as a percentage of total

revenues coming from energy efficient and

solar products, systems and services which

helps to save energy and reduce carbon

footprint with the following criteria: Products

which meet strict luminous efficacy

thresholds (between 80 and 110 lm/W

depending on lumen output) to reduce

energy consumption; Systems and Managed

Services which enable further energy savings

(up to 80% total) by optimizing the lighting

use; Solar solutions as these are powered by

renewable energy; or Electronic control

gears which optimize the energy and light

performance of the light source.

Compact fluorescent light (CFL)

CFLs usually combine a fluorescent light with

an incandescent fixture.

Comparable sales growth

The period-on-period growth in sales

excluding the effects of currency movements

and changes in consolidation and other

changes.

Conventional lamps

Non-LED based light-emitting light sources,

including incandescent lamps, halogen lamps,

fluorescent lamps and high intensity

discharge lamps.

Conventional luminaires

Light fixtures with a conventional socket

(e.g., a screw socket for a conventional lamp

or LED lamp).

EBIT

Income from operations.

EBITA

Income from operations excluding

amortization and impairment of acquisition-

related intangible assets and goodwill.

EBITDA

Income from operations excluding

depreciation, amortization and impairment of

non-financial assets.

Effects of changes in consolidation and other

changes

In the event a business is acquired (or

divested), the impact of the consolidation (or

de-consolidation) on the company’s figures

are included (or excluded) in the comparable

figures. Other changes include regulatory

changes and changes originating from new

accounting standards.

Effects of currency movements

Calculated by translating the foreign

currency financials of the previous period and

the current period into euros at the same

average exchange rates.

Electronics

Units that regulate the current going through

a light source.

Employees

Employees of Signify at period end expressed

on a full-time equivalent (FTE) basis.

Employee Net Promoter Score (NPS)

The Net Promoter Score methodology is used

to measure employee engagement.

Employees are asked to rank how likely it is

that they would recommend our company as a

great place to work. The scoring for this

answer is based on a 0 to 10 scale. Those who

respond with a score of 9 to 10 are called

Promoters. Those who respond with a score

of 0 to 6 are labeled Detractors. Responses

of 7 and 8 are labeled Passives. The NPS is

calculated by subtracting the percentage of

employees who are Detractors from the

percentage of employees who are

Promoters.

Fluorescent lamp

A lamp which produces light with an electric

current conducted through an inert gas

producing ultraviolet light that is invisible to

the human eye.

Free cash flow

Net cash provided by operating activities

minus net capital expenditures. For Digital

Solutions, Digital Products and Conventional

Products, free cash flow excludes items not

allocated to the operating segments, such as

interest paid (or received) and income taxes

paid.

Global Reporting Initiative (GRI)

The Global Reporting Initiative is a network-

based organization that pioneered the

world’s most widely used sustainability

reporting framework. GRI is committed to the

framework’s continuous improvement and

application worldwide. GRI’s core goals

include the mainstreaming of disclosure on

environmental, social and governance

performance.

Gross debt

The sum of short-term debt and long-term

debt.

Gross margin

Sales minus cost of sales.

Halogen lamp

A type of incandescent lamp with a capsule

that holds a special halogen gas composition

around the heated filament to increase the

efficacy of the incandescence.

High-intensity discharge lamp (HID)

A type of conventional lamp that uses

electricity arcs between two electrodes to

create an intensely bright light where

mercury, sodium, or metal halide gas act as

the conductor.

Incidental charges

Any item with an income statement impact

(loss or gain) that is deemed to be both

significant and not part of normal business

activity. Other incidental items may extend

over several quarters within the same

financial year.

Incandescent lamp

A conventional lamp that produces visible

light by heating a tungsten filament inside a

glass bulb usually filled with an inert gas.

Indirect costs

The sum of Selling, general and administrative

and Research and development expenses.

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International Standardization Organization

(ISO)

The International Standardization

Organization is the world’s largest developer

and publisher of International Standards. ISO

is a network of the national standards

institutes of more than 160 countries, one

member per country, with a Central

Secretariat in Geneva, Switzerland, that

coordinates the system. ISO is a non-

governmental organization that forms a

bridge between the public and private

sectors.

LED

Light-emitting diode.

LED-based sales

Sales provided by products, systems and

services based on LED lighting technologies.

LED drivers

Lighting electronics that convert input power

into a current which remains constant despite

fluctuations in voltage.

LED lamp

A solid-state semiconductor device that

converts electrical energy directly into light.

LED luminaires

Light fixtures where LED modules are

integrated into the luminaire as light source

and cannot be separated from the luminaire

by the user.

LED modules

Light generating units around which

luminaires are built for the purpose of

emitting distributed patterns of light.

Light-as-a-service contract

Contracts enabling an integrated solution for

customers where customers pay for the

provision of light to their premises, while the

company plans and builds the lighting

infrastructure and ensures its performance

until the end of the contract.

Lighting services

Services offered to customers building on a

lighting system and enabled by data.

Lighting systems

The combination of luminaires, controls and

software. The automation and related

controls of lighting within a room, building or

outdoor facilities for end-users.

Luminaire

Electrical devices that produce, control and

distribute light. Also called light fixtures. They

consist of one or more light sources, lamps or

sockets that connect the lamps to the

electrical power (as well as drivers in some

luminaires), and the mechanical components

required to support or attach the housing.

Net capital expenditures

Additions of intangible assets, capital

expenditures on property, plant and

equipment and proceeds from disposal of

property, plant and equipment, and intangible

assets.

Net debt

Short-term debt, long-term debt minus cash

and cash equivalents.

Net leverage ratio (term loan facility

agreement of 2020)

The ratio of consolidated reported net debt

to consolidated reported EBITDA for the

purpose of calculating the financial covenant

for the term loan and revolving credit facility

agreed in 2020 (if applicable). The financial

covenant shall remain suspended so long as

Signify has either a public or private

investment grade credit rating.

Non-governmental organization (NGO)

A non-governmental organization is any non-

profit, voluntary citizens’ group which is

organized at a local, national or international

level.

OEM

Original equipment manufacturer.

R&D expenses

Research and development expenses.

Renewable electricity

Percentage of total electricity usage from

renewable sources.

Responsible Business Alliance (RBA)

The Responsible Business Alliance (RBA,

formerly known as Electronic Industry

Citizenship Coalition) was established in 2004

to promote a common code of conduct for

the electronics and information and

communications technology (ICT) industry.

The RBA now includes more than 100 global

companies and their suppliers.

Restructuring costs

The estimated costs of initiated

reorganizations which have been approved by

the company, and which generally involve the

realignment of certain parts of the

organization. Restructuring costs include

costs for employee termination benefits for

affected employees and other costs directly

attributable to the restructuring, such as

impairment of assets which will no longer be

in use.

Return on capital employed

Income from operations adjusted for tax at

the effective tax rate, divided by the year-

on-year average capital employed.

SG&A expenses

Selling, general and administrative expenses.

Signify

Signify N.V. (the “Company”) and its

subsidiaries, within the meaning of Section

2:24b of the Dutch Civil Code.

Supplier sustainability performance

The supplier sustainability performance rate

represents the percentage of risk suppliers

with an audit score of at least 90 out of 100

points.

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Sustainable innovation

All research & development activities

contributing to lighting technologies

considered for sustainable products, systems

or services. This means all products, systems,

or services that demonstrate a measurable

positive impact in one or more of the

sustainable focal areas: Energy & solar,

Circularity, Packaging, Substances, Weight &

materials, Safety & security, Health & well-

being or Food availability. Sustainable

innovation spend is the total spending of all

R&D projects contributing to sustainable

innovation.

Switch

Wall-mounted devices designed to (i) change

the electric connections among its terminals

or (ii) engage with the pins of a plug and

having terminals for the connection of cables

or cords (i.e., socket contacts).

Total Recordable Case rate

Number of injuries and illnesses sustained at

work that result in medical treatment,

restricted work, lost work-days, or fatality,

divided by 100 FTEs.

Weighted average statutory income tax rate

The aggregation of the result before tax

multiplied by the applicable statutory tax rate

without adjustment for losses, divided by the

company result before tax.

Women in leadership

Percentage of women in relation to the total

population in compensation grades H22 and

above. It includes employees with or without

a defined end date, international assignees

and members of the Board of Management.

Working capital

The sum of Inventories, Trade and other

receivables, Other current assets, Derivative

financial assets minus the sum of Trade and

other payables, Derivative financial liabilities

and Other current liabilities (excluding

dividend related payables).

Zero waste to landfill

It refers to manufacturing sites diverting their

manufacturing waste to recycling or

incineration, instead of to landfill. To

determine waste to landfill in scope of our

commitment we exclude the following

categories: chemical waste, hazardous waste,

one-time waste and regulated waste. To

achieve “zero (manufacturing) waste to

landfill”, the amount of non-hazardous

manufacturing waste being disposed directly

to landfill should be <1% of total waste.

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20Forward-looking

statements and

other information

Forward-looking statements and

risks & uncertainties

This document contains forward-looking

statements that reflect the intentions, beliefs

or current expectations and projections of

Signify N.V. together with its subsidiaries,

including statements regarding strategy,

estimates of sales growth and future

operational results.

By their nature, these statements involve

risks and uncertainties facing Signify and a

number of important factors could cause

actual results or outcomes to differ materially

from those expressed in any forward-looking

statement as a result of risks and

uncertainties. Such risks, uncertainties and

other important factors include but are not

limited to: fundamental shifts in the industry,

the adoption of lighting systems and services,

adverse economic and political

developments, competition in the general

lighting market, integration risks relating to

acquisitions, successful implementation of

business transformation programs, failure to

drive operation excellence and ensure

effective supply change management,

pension liabilities and costs, exposure to

international tax laws. Please see chapter 12,

Risk factors and risk management, of this

Annual Report for discussion of material risks,

uncertainties and other important factors

which may have a material adverse effect on

the business, results of operations, financial

condition and prospects of Signify. Such risks,

uncertainties and other important factors

should be read in conjunction with the

information included in the Annual Report.

Additional risks currently not known to Signify

or that Signify has not considered material as

of the date of this document could also prove

to be important and may have a material

adverse effect on the business, results of

operations, financial condition and prospects

of Signify or could cause the forward-looking

events discussed in this document. Signify

undertakes no duty to and will not necessarily

update any of the forward-looking

statements in light of new information or

future events, except to the extent required

by applicable law.

Market and industry information

All references to market share, market data,

industry statistics and industry forecasts in

this document consist of estimates compiled

by industry professionals, competitors,

organizations or analysts, of publicly available

information or of Signify own assessment of

its sales and markets. Rankings are based on

sales unless otherwise stated.

Non-IFRS financial measures

Certain parts of this document contain non-

IFRS financial measures and ratios, such as

comparable sales growth, adjusted gross

margin, EBITA, Adjusted EBITA, and free cash

flow, and other related ratios, which are not

recognized measures of financial

performance or liquidity under IFRS. The non-

IFRS financial measures presented are

measures used by management to monitor

the underlying performance of the Signify

business and operations and, accordingly,

they have not been audited or reviewed. Not

all companies calculate non-IFRS financial

measures in the same manner or on a

consistent basis and these measures and

ratios may not be comparable to measures

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used by other companies under the same or

similar names. A reconciliation of these non-

IFRS financial measures to the most directly

comparable IFRS financial measures is

contained in this document. For further

information on non-IFRS financial measures,

see chapter 18, Reconciliation of non-IFRS

financial measures, of this Annual Report.

Fair value information

In presenting Signify’s financial position, fair

values are used for the measurement of

various items in accordance with the

applicable accounting standards. These fair

values are based on market prices, where

available, and are obtained from sources that

are deemed to be reliable. Readers are

cautioned that these values are subject to

changes over time and are only valid on the

balance sheet date. When quoted prices or

observable market values do not exist, fair

values are estimated using valuation models,

which we believe are appropriate for their

purpose. They require management to make

significant assumptions with respect to

future developments which are inherently

uncertain and may therefore deviate from

actual developments. Critical assumptions

used are disclosed in the financial

statements. In certain cases, independent

valuations are obtained to support

management’s determination of fair values.

IFRS basis of presentation

The financial information included in this

document is based on International Financial

Reporting Standards (IFRS) as endorsed by

the European Union (EU), as explained in

significant accounting policies, unless

otherwise indicated.

Statutory financial statements

Chapter 14, Consolidated financial

statements and chapter 15, Signify N.V.

financial statements, of this Annual Report,

contain the statutory financial statements of

Signify N.V.

Regulated information

This document contains regulated information

within the meaning of the Dutch Financial

Markets Supervision Act.

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