ASML Holding N.V. (ASML) Earnings Call Transcript & Summary

Ladies and gentlemen, it's 2:00, and welcome to this Annual General Meeting of ASML Holding N.V. We're happy to welcome you in our Twinscan Auditorium in Veldhoven. Today's general meeting is a hybrid meeting. And that means that shareholders are also attending this meeting virtually and are voting and asking questions on our online platform. A warm welcome also to those shareholders who are attending the meeting virtually. First of all, I'd like to introduce, as usual, the members of ASML's Board of Management, Mr. Peter Wennink. Absolutely. And you know that we do that in English, we did it last year, we did it the year before. So please take your seat. You aren't allowed to ask questions in Dutch. No, it's a global multinational and the company language is English. And therefore, the majority of the shareholder base is international, and therefore, we conduct this meeting in English and not in Dutch. And you knew that. So Peter Wennink; Martin van den Brink; Christophe Fouquet; Frederic Schneider-Maunoury. Our Supervisory Board. My first chair, Annet Aris, Mark Durcan, Warren East, Birgit Conix, Alexander Everke, An Steegen, Mr. Rolf-Dieter Schwalb and Terri Kelly. My committee members, I want to extend a special welcome to Mr. Wayne Allan, who will be appointed as a member of the Board of Management today; and to Mr. Nils Andersen and Mr. Jack de Kreij, whose appointment as a member of the Supervisory Board is on today's agenda. We also have with us this Mrs. Petra Groenland, representing KPMG Accountants as ASML's external auditor. Finally, I'd like to introduce Mr. Reinier Kleipool, our civil law notary at De Brauw Blackstone Westbroek, who will act as a secretary of the meeting. And then it comes scripted for me with [indiscernible] given the international nature of ASML and ASML's corporate language is English. I mean we'll conduct the meeting in English. We will provide a Dutch translation of the meeting and shareholders who are here in person can also address the meeting in Dutch if they choose to do so. We will provide an English translation for questions asked in Dutch. As usual, a recording will be made of the meeting to help us prepare the minutes. I now give the floor to Mr. Kleipool, who will explain the process for asking questions and voting during the meeting.

Thank you, Mr. Chairman. Before we begin, I will explain the process for asking questions, and as stated on the ASML website, shareholders during this meeting have 2 options to ask questions. For those participating via the online platform, you can ask questions during the meeting by using the chat function on the online platform. For those here in person, microphones are available for you to ask questions. When asking questions, please state your name clearly and formulate your questions as short and concise as possible. If you are a proxy holder, please state the name of the shareholder you represent. For the proper conduct of business at the meeting, the Chairman may limit the speaking time and/or the number of questions raised. The Chairman will also determine who is best positioned to answer your questions. We'll now give a brief explanation of the voting process. Shareholders who are here in person can vote using the app on their mobile device or the voting device that you received from the registration desk. Since this is a hybrid meeting, shareholders can also vote on the online platform in real time during the meeting. ASML's terms and conditions for hybrid general meetings apply to the voting via the online platform, and these terms of conditions can be found on the website as well as an extensive manual for this hybrid meeting. Registration details for the meeting are currently being processed. And once that information is available, I will announce how many shareholders are present or represented, the percentage of the issued capital that they represent and how many votes can be cast. After those announcements, the voting will be opened. Once the voting is open, you have the opportunity to vote on all voting items in the agenda up until the discussion of agenda item 30, which is any other business. In other words, you do not have to wait for an agenda item to be discussed to submit your vote. You can change your vote by selecting another choice as long as the voting is open, and you can make any changes until the voting closes. So at any time before the discussion of agenda Item 30. And I'll give the floor back to the Chairman.

Thank you. Now we'll move to agenda point 2, an overview of the company's business, financial situation and its ESG sustainability. And I will ask Mr. Wennink and Mr. Dassen to provide an overview of the company's performance and the current state of affairs. So I give the floor to Mr. Dassen.

Thank you, Mr. Chairman, and good afternoon, everyone. It's a pleasure for me to introduce you to the 2022 numbers. I'll give you an overview there. That's where I will start. So how was 2022? How did that pass, then we will go into 2023 and the first quarter and also the expectations that we have for the full year there. And then finally, I want to give some comments on the capital allocation. By the way, the screen does not work for whatever reason. So I do not see what I'm presenting, but I'll look at that screen over there. So in terms of the 2022 highlights, as you see here, we were able to have a -- maybe we can switch the screen. Yes. So this is corporation in motion, ladies and gentlemen, very good. So we were able to report sales of EUR 21.2 billion, as you see here, which was a 14% uptick in comparison to last year. As we also see, this was driven by an essence of businesses. So this was driven by the DUV business, the EUV business and the application business, but also the installed base business that grew from, as you can see here from EUR 5 billion to EUR 5.7 billion. And the reason that the installed base business grew that rapidly was also because in the climate that we had in 2022, customers were really looking for fast ways to get access to productivity improvements. And as you know, 2022 was very much characterized by us being supply constrained, customers nonetheless wanted to have productivity enhancements. And there are, obviously, what we call the upgrade part of the installed base business was an important driver to get there. The gross margin of 50.5%, which was a bit lower than the gross margin that we recorded in 2021. A number of reasons for that. First off, obviously, last year was a year that was characterized by a lot of inflation. And we were not able to pass on all the inflation that we incurred in the supply chain and on labor costs to our customers. So that was one driver. The second driver is that, as you know, we are building quite some capacity where our expanding capacity, Peter will go into that as well. We are preparing for High-NA does have a significant impact also on our gross margin because we are already incurring costs and there is no revenue associated with that because we're really building for the future. So that has a bit of a drag on the gross margin. And then finally, we had a phenomenon last year that some of you might have picked up on a phenomenon called fast shipments, which, in essence, means that we were shipping tools to customers, but those tools have not gone through the full testing program. And as a result of that, we could not recognize the revenue on those tools, for those tools upon shipment. And that was about EUR 3 billion worth of shipments in 2022 that are not included in the EUR 21.2 billion number that you see here. So those were the main elements of the gross margin decline that we saw in comparison to 2021. So good net income of EUR 5.6 billion, more or less on par with the year before and a whopping EUR 30.7 billion in net bookings, which if you look at it is just about 2x the net system sales that we had in the year. So that system sales of 15.4% as you see and 2x that in net bookings. So last year, very much characterized by very high income of net bookings and that led to an order book by the end of last year that exceeded EUR 40 billion, again there, more than 2x the expected system sales for this year in the order book, which I believe is quite healthy. On the right-hand side, you see some qualitative comments on the key business drivers. Interesting there, all EUV customers now have placed orders for High-NA. As most of you might know, High-NA is the next technology platform that we're looking at, hopefully, shipping first module or first tool by the end of this year. So all EUV customers have now put in orders for High-NA. On DUV, you see that we've introduced a number of new models. And similarly, you can see that on the application business. We're growing fast in the application business. We've told you that we believe we're going to grow 20% year-on-year. You see that this year, we did even better at 28% growth in the metrology and inspection business. And we already touched upon the installed base business, and I'm sure you're happy to notice that we were able to pay back to shareholders an amount of EUR 7.2 billion in the combination of dividends and share buybacks. As you can see here, we were running on all cylinders also in terms of end markets. So all end markets grew, both the installed base businesses we just saw, but also the logic and the memory segment, and I think particularly the memory segment is interesting because as Peter will show you, the memory business also last year was going through a more difficult period. The memory markets were a bit in decline, high inventory levels in the system both our customers and the customers of our customers. So our customers were trying to reduce the output in that regard. Nonetheless, you see a very healthy increase in our memory business there as well. And that simply tells you that the investments in lithography are strategic investments. And even if the demand is a bit in decline for our end customers, you still see that they want to make these transitions, that they want to go to the latest technology, they are introducing EUV into DRAM for quite a number of layers. And you see that, that continues irrespective of what's going on in their end markets. Here we see another breakdown of the sales. Technology-wise, we see very much in line with what we had last year. We see EUV, the immersion business and also the other tools as part of the total sales very much in line with what we had in 2021. In terms of end use, you see the memory business actually a little bit higher than we had in the year before as a result of the technology transitions that we talked about. And geography-wise, you also see a split that is not unlike what we had in last year. If we now flip through the P&L, through the consolidated statement of operations, and it's always interesting to just take this 5-year perspective and just look at what the company did in this 5-year timeframe. And then you see that actually in 4 years, from 2018 all the way to 2022, you see that in essence, we doubled our -- we doubled more or less doubled our sales. And you see that also in some of the other drivers like the R&D costs, you also see a doubling of that amount really working on roadmaps, on technology roadmaps that should propel us into the rest of this decade. And should enable us to achieve the quite high expectations that we have in terms of revenue in the years to come. So you see on R&D, you see in SG&A also a similar development. And all of that led to a net income, as you see here of EUR 5.6 billion at 26.6% as a percentage of net sales. And again, there, as we already mentioned, a very, very high net bookings level at more than EUR 30 billion. If we can turn to the cash flow statement. If you look at the second line, that gives you the cash -- the operating cash, if you like, the net cash provided by operating activities at a very high level, also very high in 2021, but also very high in 2022 to a very large extent, also driven by the fact that we are getting significant down payments from our customers. So that's the reason why, I think, from a cash perspective and from a cash flow perspective, it was once again a very healthy year. And we were able to have the cash flow that came in, as I mentioned before, to also pay that back to our shareholders, and you see that in the approximately EUR 7.2 billion that we have there as a negative for finance activities. That's in essence, the share buyback and the dividend that we paid back. Going to the balance sheet. If you compare the balance sheets by the end of last year to the end of 2021, there's a few things that you will notice there. Well, let's start with the cash level still at a fairly high level, so over EUR 7 billion by the end of the year. You see 2 asset items going up. You see the net accounts receivable going up. Two reasons for that. First off, the last quarter of 2022 was a very active quarter in terms of shipments. I already mentioned the EUR 3 billion worth of fast shipments that we have. So they are being shipped and as a result of that also invoices are being -- were being sent for that. So that's one reason why accounts receivable was fairly high. And secondly, also, a number of down payments that were due and that's also included in this number. You all see the inventories going up. Most of the increase in inventories was finished goods, and that's again related to the fast shipments. Because those EUR 3 billion that I talked about, they still are sitting on our balance sheet as finished goods. So that's the main reason why you see inventory costs go up. On the liability side, you also see the effect of both things that I just mentioned. So if you look at the current liabilities and also the noncurrent liabilities, they went up particularly what went up there is what we call the contract liabilities and those contract liabilities also went up: a, as a result of the down payments; and b, as a result of the fast ship effect. So that's -- those are the dynamics that you see in the balance sheet. Net-net, if you look at our working capital, you will see a working capital that is very, very lean, and I think a very efficient balance sheet that we're working with. If we then move forward to the results for 2023, the Q1 results, net sales came in higher than we guided, particularly on the net system sales as it comes to the installed base management, that was a little bit lower. And that's to be explained, and Peter will do that, talking a little bit about the environment. It's pretty clear that right now, many of our customers are going through a period of slower demand. And that's where they're really gauging where are we going to spend the money. And they're really timing their upgrade business in a very precise way. And they're still holding their money in the pockets. And when they will see the market climb up, that's the point in time where we expect the installed base business to go up again. You see gross margin a little bit higher [indiscernible] net bookings were a little bit lower. But obviously, when you're looking at an order book that has 2 years of system sales in there, that is absolutely what you might expect to happen -- to see happen. Quantitatively, you see it on the left-hand, and again, Peter will give you a bit more detail on that front. The market has some mixed signals. So some customers are really going through more difficult periods, fairly high inventory levels at our customers and also our customers' customers. And the entry is trying to navigate through that, and that means that some of our customers are standing less optimistic messages in terms of their demand to demand forecast. But on the other hand, we also see a number of customers that are really picking up in terms of demand also vis-a-vis us, and particularly, we see that customers that are building nodes on the more mature side. So anything related to energy transition, a lot of automotive, a lot of Internet of Things related. Those chips are in extremely high demand. And there you see that the demand for our tools continues to be quite good and quite high. So overall, we're still in the position as we put here that demand exceed supply. So it is still imperative for us that we try to get as many systems out of the door because the demand is there, and we want to be able to give the customers what they're asking for. The backlog is a little under EUR 40 billion, but still very, very strong. And as I mentioned, our focus remains on maximizing system, system output. Final comment on the capital return to shareholders. As I already mentioned, we had around EUR 7.2 billion that we paid back to shareholders in 2022. So that was a combination of quite strong share buyback last year. But also on the dividend side, we paid EUR 2.6 billion of dividends for the -- in 2022, consisting of the final dividend in '21 plus 2 interim dividends that we paid. And as mentioned here, EUR 4.6 billion of shares that we bought back in the year. Our intention here is to declare a total dividend in respect of 2022 of EUR 5.80 per ordinary share. We already paid 3x 1.37 interim dividend, so that would lead to dividend that we are proposing to this meeting of EUR 1.69 per ordinary share, and that would constitute an increase of 5.5% in comparison to last year. So that concludes my presentation and over to Peter. We already took care of the logistics for the screen.

Thank you. Thank you, Roger. Yes. Thank you. Let's first talk about the elephant in the room, it's the cycle. I think we haven't talked about industry cycles for a long time. But we are seeing cyclicality. And that's as matter of fact, and that's driven by a couple of things that is macroeconomic issues. We are clearly seeing the aftermath of the COVID crisis in Asia, you see in China, basically lockdown last year, coming out of it. We see significant inflation hikes across the globe, leading to, of course, an impact on consumer confidence. If you want to heat your house, that's what you're going to do first instead of buying a new electronic piece of equipment. It also has an impact on interest rates. And that clearly is an environment where cyclicality just pops up. And we're actually seeing that. So when we then look at inflation, which is an important issue because it's not only the inflation as we see it coming from the newspapers, but it also affects our markets and the way that we deal with customers. Roger said, great, you have EUR 40 billion in your order backlog, that's great, but it's all contracts. So the prices in there that we have agreed when inflation we thought was going to stay low for a very long period of time. So you need to go back to your customers and you need to discuss with your customers, okay, what's fair. Because we also see inflation going up on the cost side with our suppliers where we're willing to pay a bit more, but then it needs to be transparent, it needs to be based on real cost. And that, of course, needs to be translated back into an adjustment of the price to our shareholders. And that's what we're doing. And that's how we're trying to manage the bottom line and the gross margin of the company, and Roger talked about this. So that's very specific on inflation. But they're all mixed headlines when we then look at our customers, Samsung basically cutting chip production and output. And why did they do that? Because the end markets for the reasons I just mentioned, are slow. And what customers typically now are doing as compared to 5 or 10 years ago, especially in the memory chip business, they actually are reducing their utilization, the output in order to create as fast as possible a supply-demand balance in inventories. Because, of course, when you see the market going down, the inventories go up. And what they'd like to do is to repair that as soon as possible and create this supply-demand balance. So that's what they're doing. But that's indeed, you see it across the board. You see it for memory customers. You see it for logic customers because let's be honest, chips, memory chips, but also logic chips go into consumer-related products, they actually have an impact on the products that drive the world economy. Not everything is that bad. I mean, in the industrial space, especially in the automotive space, but also in industrial robotics, in industrial IoT and Internet of Things as it relates to industrial applications, are actually pretty good. So all in all, it's a mixed picture. But generally, you could say memory and also neurologic, they're really working off inventory and they're working off overcapacity in chips because of the slump in the demand that we've seen because of the reasons I just discussed. Is that all? Is that all? We have inflation, macroeconomic concerns, higher interest rates and lack of consumer confidence. Now we also have to other areas that are of concern that geopolitics. Geopolitics, of course, we're moving into a world from, let's say, globalization to, you could argue an element of de-globalization. We are moving into an area where we had seamless supply chains, seamless ecosystems where innovation could thrive because basically, there was a lot of interconnectivity across the globe between different industries. Two, with geopolitics being what it is today, to industries where you do see elements like for instance, export controls popping up so that this de-globalizing socioeconomic parts of the world are trying to protect their own economy. That is not good for innovation. And I've said it publicly a couple of times. It will slow innovation potentially down. And of course, then we go from a low inflationary environment, driven by high innovation. So a lot of the innovation and lowering cost, then we will see a slowing of innovation and probably a more inflationary environment. That's what we have to deal with. And I think it's not short term, it's also longer term. And then know-how and IP that's particularly important. If you think about trying to protect your socioeconomic part of the world and you want to create your own competencies, people are going to focus on know-how and IP protection. That is also what we have to deal with. Now does that show? Well, it shows into the fact that growth will not be a straight line. When you talk about the chip industry, we know it's cyclical. We also know that capacity will be added in step functions these wafer fabs, these wafer factories are big investments, the most advanced. It costs EUR 20 billion a piece. Well, a couple of our customers are going to basically put up a few of those fabs, you get a big step-up in capacity, an underlying growth pattern. And of course, it needs time to actually work into that capacity, which creates a cyclicality. And this is what we see today. So it's not new. I must say we've been a bit spoiled over the last the 6, 7, 8 years where the cyclicality wasn't as pronounced as it is today. But it's for the reasons I talked about. However, one thing hasn't changed. And as chips do enable a more sustainable and a smarter world. And how you look at it, the energy transition without semiconductor technology is not going to happen. 1 megawatt of solar needs about [ 4,000, 4,500 ] of semiconductors, 1 megawatt of wind 3,500. So semiconductors are essential, not only for energy generation, when you think about the distribution of that energy, it all comes at once when the sun shines, so you need to have a system that can actually deal with the supply and the demand of these electrons, which actually means measurement tools, semiconductors. And then this go into the grid, which needs to be smart, smart semiconductors. And we talk about the automotive industry, smart mobility. The electrification will happen fast. I was in China a couple of weeks ago, and there the largest electrical vehicle manufacturer in China told me that they have a target for a number of electrical vehicles in the next 3 years, which if you want to support that in terms of semiconductors, you need 6 or 7 full-fledged logic semiconductor factories. They're not there need to be built. And it's true for a lot of things for artificial intelligence. So a lot of discussions these days on artificial intelligence about the potential downside, but also it creates a lot of upside. So altogether life sciences, energies, the energy transition, automotive, smart mobilities, artificial intelligence, chips are absolutely essential. In that particular development. And that means that when you look at the outlook, we're still very convinced that the compound annual growth rate of this industry will lead us anywhere to EUR 1 billion, EUR 1 trillion or a EUR 1.1 billion to EUR 1.2 trillion market by the end of this decade. And we'll go in a straight line? No, as I showed you before, this is going to be a bit cyclical. Big step-ups in capacity will have to be timed well with macroeconomic swings and developments. And that, of course, we all know that can be out of phase like today. Now what does that mean for ASML and our growth pattern. And I just showed you for ASML, it's a good and nice growth pattern. Roger showed you the first 5 bar charts, and I added the sixth one, which is basically the current analyst average for this year. So you also see despite all the things that I just mentioned, the elephant in the room is the cyclicality. This company is doing quite well. And you could say, no, we're kind of a white night under the current circumstances, but it is who we are. And it actually is an example of our particular -- you could argue, unique place in the industry. Is that all that we do, just grow? No. I think we also have to grow, and we have to do this by adding enough capacity. And that capacity is real, I would say, bricks and mortar. We're just building factories. I mean you're now a guest on our site here in Veldhoven. And you see the building cranes. But if you would go to our sites in the United States or in Asia, you will see similar cranes standing there because we need to build capacity. But we also need people. Now we hired last year 2022, 10,000 people because we need to support that growth. And part of the margin explanation that Roger gave you, has to do with the fact that despite the fact that we see cyclical movements, we have a very strong belief in the long-term growth trajectory of this company. So we need to add the people and we need to add to the buildings because it will take time for those people to become effective, it will take time for those buildings to be put up. I'll give you an indication, an ASML service engineer. If you put a new service engineer and work them through the ASML Academy. After one year, they're probably 40% competent on a full-fledged service engineer and after 2 years, only 70%. So it takes 3 years. So you need to hire those people, if you want to grow the business, and you want to have capable and competent people by 2026, you need to hire them today. So this is what we are seeing. And that also means that we are growing our people, almost 40,000 people by the end of 2022. And of course, we need to grow sustainably. And in the annual report, we gave you quite an extensive and comprehensive overview of our ESG strategy along the 3 lines the environment, our social responsibility and governance. There is 9 areas where the 21 defined KPIs, which are mentioned in the annual report, which we are following and monitoring on a very regular basis by a new group which is basically higher to about 1 year, 1.5 years ago. This is the new ASML ESG group, which is basically coordinating all the ESG activities throughout the company and making sure that they do not execute, but they make sure that it will be executed and will be executed by the company and by all the business sectors in the company. And a couple of examples. Of course, on the E side, on the energy side, we are completing now the energy grid on the Veldhoven Campus here, which basically means we use access heat but also we use cooling temperature to actually exchange this to make sure that it is used in the places where it is needed. And if we do that, and we will finalize this, our gas usage will reduce with 70% when this is finished and will be finished soon. But also on the society side, we've stepped up significantly our support for societal improvements in talent, in diversity and inclusion. And we are stepping up also our engagement with the communities that we live in because, yes, we grow and it puts pressure on the communities. It puts pressure on infrastructure. It puts pressure on talent, the talent pool. It puts pressure on the housing market. And all these pillars, we're going to take our responsibility and working very closely together with municipalities, governments, knowledge institutions and fellow business leaders to make sure that we can tackle those challenges. And of course, last, on governance, we take this as a very serious and important matter. Governance is about being transparent on the responsibility that you have and part of that responsibility is, for instance, in organizing in the semiconductor industry, we are one of the founders and very active contributors to the semiconductor climate consortium, which is also an area where we think that governance is about making sure that you're transparent on the responsibility that you have. So we're investing for growth. We're investing for growth because we need semiconductors for future growth to address the big societal challenges. And yes, we will put up buildings. We'll hire people. And we will make sure that semiconductors together with our customers and the entire ecosystem will play that very important role to solve some of the big societal challenges. Thank you very much.

Thank you, Peter. We'll now take questions. Shareholders who want to ask a question. Let's start at the top there.

Thank you, Chairman. This is David Tomic, we're presenting the Dutch Investors Association, VEB, also on behalf of several of our members who have given us a proxy to represent them at this meeting. First of all, several questions on the industry developments kind of in the -- what Mr. Wennink was indicating on what is happening around the world and the competitors and what progress has ASML made so far, which is pretty impressive, of course. But also the question is how sustainable will that be? So that will be several questions from our side. Now first of all, if I'm not mistaken, Mr. Wennink recently commented on China that if -- he's saying if they cannot get the machines from us, they will develop them themselves. That will take time, of course, but ultimately, they will get there. So it will be interesting to have a comment from Mr. Wennink or another Board member on how serious this is, this threat -- possible threat. And would it in any way, be in the way of the sustainable durable advantage that ASML has had up until now. So will there be any -- yes. Will it hamper your progress that has been made so far? And then second question is on a Japanese player in the industry, which is Canon, and that is said to be building a factory to manufacture nanoimprint technology. And we were wondering in what way that could be a threat to ASML and the technology that you are using right now? And then the third question and final question for now would be something another industry player is working on right now. It's Applied Materials, which are working on the so-called pattern shaping system, which would reduce customers of -- would let customers reduce the amount of time they spend on lithography? And to what do we -- with that specific machine from Applied Materials hurt in any way ASML revenue and profit potential? Those are our questions for now.

Thank you. Please wait for the answers.

Yes. I actually have 4 questions. So is the sustainable the competitive position, but it has to also do with I think the connection to the second question on China. You have to stay paranoid. That's for sure. And we actually do that. And you have to realize that this industry was built on the fact that we were able to mass produce this technology semiconductors at the lowest cost possible. And it sounds easy, but it's extremely difficult. And especially when it comes to lithography and now it's my personal interpretation to make a semiconductor, you need a lot of machines. But most of those machines are relatively in the -- a relatively easier to make machines for a very complex process. The process is extremely it's almost black magic. It's chemistry. And what we do is this patterning machine is a highly complex machine for a -- which you can argue a very simple process, you blow light through a lens and on to create a pattern. Now this created this turned out to be extremely complex and difficult to make that patterning machine. And it's for a reason why on EUV, we're the only one because it's extremely -- and it consists of technology that doesn't only reside with ASML. It resides in an ecosystem of partners and knowledge institutions and suppliers that have developed over decades, this know-how to make all the components to create this extremely complex machine. And that is something that is not easily replicated. Also, because this technology was developed in an -- you could say, an obscure part of the world called the Netherlands and Germany, it was not developed in -- partially also in Japan, but they fell behind, but not in other parts of the world. So is it sustainable for the time being? Yes. Can we be easy on it? No. We have to be paranoid. So I think that is also basically the answer to the question of China. I mean, yes, when the second largest economy of the world, is experiencing problems with access to foreign technology. They're going to do it themselves. That's logical. I think they're all -- it's -- that's what you see. Now is that easy? No, it's not easy for the reasons I just mentioned. And it's also acknowledged by Chinese customers and say, what we see in China doesn't come even close to what ASML is doing. It has to do with that complexity. It has to do with that ecosystem that's been built over almost 40 years. And there's nothing like that in China or in Korea or in the United States, that ecosystem. That all needs to be developed. It's going to take time, but it can happen, of course. So it's absolutely essential that we keep having market access to China. We need to be there, we better be there and help Chinese customers, which actually helps them to also compete on a world scale. I think Chinese customer can start with a fledgling first prototype and try to compete in the semiconductor market worldwide, not going to help them. So market access is as important to us as it is important to our Chinese customers. Now on Canon and margin is probably -- Martin can probably answer the patent shaping solution of what he thinks about that. But on nanoimprint, it's a technology that we've been looking at for almost 20 years. And we understand the technology, which is very useful for 1 layer printing. For instance, you can use it in photonics. That's where it's going to be used, which is not an area where we play. So it's a bit outside the ASML area. So we don't believe that, that is going to be a solution for mass production of advanced semiconductors. It's just a matter of cost and repeatability and basically nanoimprint when you have several layers on top of each other and you imprint this layer, which can have an effect on the layer underneath, and it's all about you talk about nanometers and microns. I mean, that where it creates a problem. But not in for instance if you want 1 layer printing in the photonics area. So that's -- we keep looking at it. We actually have looked at it quite intensely a long time ago, and we came to the conclusion that it breaks down because Moore's law is [indiscernible] of economics and it breaks down on cost in advanced semiconductor manufacturing. Martin, do you want to add anything?

And so, okay. But Peter, forget, which is essential as the nanoimprint is a very defect prone little technology, which is not comparable to use in semiconductor. So therefore, it has been cheap, and it can be reachable good resolution. And as we've made today, modern application in smart classes and next generation of augmented reality, which we consider not to play. Now on the Applied Materials part, let me say something in general. ASML makes lithography machines. We don't make mask. We don't make actions. We don't make resist. We don't make a few other things, which are all necessary to make a little work. We are today, in fact, the only tool who generates the density. Other tools are not of -- other methods cannot generate the density. So what -- we welcome in our infrastructure, which we codevelop with customers and our co-development part. We talk about mass shops. We talk with edge people to make sure the whole solution comes together. Applied is making part of that, is a machine who can select with edge will be for particular layers, will not reduce the density, will assist the imaging quality and make the imaging better, which is we welcome and will help our business also. So we see that for now more positive than negative, so to speak. And that will be my summary.

Thank you, Martin. Next question down here, [ Mr. Stephens ]?

[Interpreted] I'm [ Mr. Stephens ] at SRB. I'll be speaking Dutch because otherwise, my constituents will object. We set and did some thinking and it appears that we might head into a mild recession in the past at ASML during every kinds of recession, we usually followed by the best times ever for ASML because all kinds of new developments followed and ASML was able to benefit from those. You have a 2-year order book now. Suppose just as many developments are added as in the past. So our question is how we organize that later on because it needs to be incorporated into your current program. Next, about China. Those Chinese merchants are very clever. What if they close deals with other countries? And what if they say if you purchase those machines, we'll purchase from you and they'll be second-hand. Can you take any measures to stop that so that -- or is it that if they want something they get what they want. And we were reflecting on that as well. Next, okay, we saw that sheet with slides and the export to China. Next, the machines for energy consumption. Energy use. Do you intend to continue developing those more? What will you be doing those -- with those because you design machines and at a certain point, if you need to reduce your energy consumption, those who are 3 questions for now, Mr. Chairman.

[Interpreted] Okay. You'll be getting answers. Yes, certainly. Yes. You could say that we're in a mild recession, a cyclical downturn. I'll leave it to the macro economists to decide whether it's a macroeconomic recession. But yes, during one of those downturns, you need to continue doing what you're best at and look ahead to new trends and those new trends if we're looking at our product roadmap is replete with all kinds of new products, and we're going to instrumentalize that. What's great about cyclical industry is that, well, what goes down comes up again, and you need to be ready for the upswing. So on each product line, whether we're talking about EUV or DUV or the applications business. We have a great many of products waiting in the wings that we're working on so that when we get that upswing, we can accelerate our own business. And can you adapt to the -- can you build the latest customer requirements? Yes, absolutely. We developed our roadmap in close consultation with our customers. We don't do things that our customers say, "Oh, that's new. We never heard of that." No, we work very closely within -- as for China in second-hand, we're not too worried about that because that second-hand machine, it weighs 180 tonnes. You can't just pick it up and carry it out the door. It needs to be deinstalled and reinstalled and we're the only ones who can do that. So if something happens somewhere in the world with our machines, even if they're 30 years old, we know about it. Nobody else can manage those machines.

Energy consumption. Let me start by saying that if you consider total consumption by a machine, energy use of our machine in a factory and you compare the energy cost, the pattern wafer with an EUV machine versus a patterning from the same wafer with a double patterning to the [indiscernible] then today, we already saving energy with the current energy users. However, on top of that, we have a very condensed plan in reducing the energy use per wafer on our EUV machine. And we do that by increasing the efficiency of the source. We are continuously developing our source technology. So you have with less power, more output of the source. What we're doing is, we are driving the productivity up of the machine, that means you're spending less time on rating. You have a -- you increased cooling temperature of your water, so you're going to use free cooling. You're going to reuse the hydrogen. We're going to drive the laser off where we don't need the energy, which is a complicated story and control. All of that is if you collect that whole thing, without the first step on the fab, it just a net use in the machine will lead to a 3x or so reduction of the energy per wafer spend, little energy per wafer spent of the machinery used as a customer.

Thank you, Martin. So then there is a whole program to come down to more efficient use of energy in our machines in combination with our customers. Okay. So next question on the right-hand side.

My name is [ Jo Feldman ]. I represent the VBDO, the Dutch Association of Investors for Sustainable Development. Our members leverage a total is EUR 1,600 billion in assets under management. And once again, we have read your annual report with full attention, and we have formulated questions accordingly with our 3 engagement topic this year: biodiversity, labor conditions in the supply chain and lobbying. First of all, by the way, congratulations with the excellent results achieved this year. And also thank you for the fruitful engagement call we had earlier this month with representatives of ASML. It's much appreciated. First question is regarding biodiversity, am I well audible, by the way, Okay. Regarding biodiversity, we read in your annual report that ASML assessed the impact of diversity, and it was not considered material. However, ASML is dependent on mining for minerals and metals. It uses in its products and scientific research suggest that mining has a significant impact on biodiversity. In addition, also local plants impacted biodiversity through emissions also, for instance, of nitrogen, which is a hot topic recently in the Netherlands. Hence, we have 2 questions. How did ASML reach the conclusion that the biodiversity is not a material topic for the company. And secondly, when can we expect ASML to develop a strategy that aims to identify and act upon the biodiversity related risks and opportunities at each of the company's manufacturing plants? Mr. Kleisterlee, shall I just ask you 3 questions and then...

You can do that. And then just we know the questions. We know the answer, but do you want to give the audience, please go ahead.

Every assessment we make in -- it's not material. Okay, so he first asked questions and then the answers, okay.

Okay. So the second question is on circularity. Over the past few years, there's been an increasing interest in chemicals used in the manufacture of products and in the supply chains. The EU also announced a chemical strategy for sustainability, which works towards expanding bands on some of the most damaging chemicals such as PFAS and also the European Sustainability Reporting Standards, E2. So ESRS E2 requires company to report on the production, the use and the distribution of so-called substances of concern or a very high concern. ASML reports that it follows the most stringent or leading regulations. Questions are as follows: Does ASML use any specific methods for sustainable chemical and materials management, such as cradle-to-cradle or chemical footprint? And do ASML life cycle analysis indicators also include indicators related to chemicals and substances. And if not, when can we expect ASML to include those? Finally, on lobbying. We'd like to applaud ASML for the transparency the company provides on the company's memberships of industry and lobby associations in the government and external affairs reports. And also this report clearly outlines the lobbying objectives, the focus areas and the transparency compliance of ASML. So we are very satisfied with that. However, we were not able to determine to what extent the lobby activities of ASML are aligned with material sustainability objectives, such as the Paris Climate Agreement. So our question is as follows: is ASML willing to investigate in the coming year if the company's own lobby activities and those of the industry associations, it is a member of, are aligned with ASML's the sustainability objectives. Thank you very much.

Thank you. Peter?

Thank you. On the biodiversity, the biodiversity, we've looked at like every element that is part of the sustainability focus. And we have to conclude that the footprint, the ASML footprint is relatively small. And the biodiversity has an impact that is clear because we are of course, building structures like you see here in Veldhoven, but that's very closely coordinated within those guidelines and within those rules, and it is the footprint, the smaller footprint that we have come to the conclusion that, and it's also true for the use of those minerals. It is pretty insignificant if you look at the total spend of the company. So materiality is a very important element of our assessment. How we want design, how we define our ESG strategy and how we create our KPIs. And I think I would invite you also to further engage with our ESG team to further ask those questions on biodiversity. Biodiversity does come back in our community engagement. I mean we have a very clear activities that are focused on basically protecting biodiversity in the communities that we actually work in, but that is not so much the ASML activity. That's more the social responsibility that we feel to support those activities in the community. Now we have several examples of that. And I think also our ESG team can actually work you through those. And one of them is the local [indiscernible] that we support it. So there are several initiatives that have more to do with community engagement that actually help to strengthen the biodiversity. On circularity and the chemicals use, yes, the -- you asked the question whether there are any specific methods for our sustainable chemicals and materials management, such as cradle to cradle and the chemical footprint. Well, you have to realize also that ASML is focused in and you know this because you've read the annual report is on reuse. That is -- and particularly on the design for reuse, yes? So it's -- and by nature, again, the chemical usage in ASML operation process is relatively low. And we currently comply to every applicable safety and environmental legislation. So reuse is particularly important when you talk about materials and chemicals, and Martin talked about the reuse of hydrogen that we use in our systems. This is what you need to design into your system, and that is what we are doing. On the lobby activities. I will come to the mining materials later. On lobby activities, yes, the Paris agreement, it's not the only agreement. There are several agreements and the several initiatives which we take extremely serious. But the way that we look at ESG in our ESG responsibility is very clearly in the context of what we think is material part of our ESG strategy. And our ESG strategy around the E of the environment, but also social and also government -- governance. We have a very clear 21 key performance indicated target. And that's based on the risk assessment that we have made, and that comes back into our ESG strategy and into the KPIs. And we take into consideration not only the Paris agreement, but every initiative that is currently being launched, whether it's in Europe, whether it's in the Netherlands, where our global initiatives, we take them all into consideration, and we benchmark those against what we believe, given the activities in the company is material to the company, yes? And that means we keep doing that. Now you referred to the annual report. 180 pages of our 326-page report is on ESG. It was more than -- that's 55%. But that's only a small fraction 180 pages of what is -- of all the regulations and the agreements and what is coming out these days. And all of them are very important, but constantly means we need to review what is coming out in the context of what -- who we are and what we believe is important to the company, and which will be reflected in the ESG strategy and in the KPI. So in that sense, yes, we are taking this extremely serious. And it -- and when it is material to the company, it will be included in our strategy and in our KPIs. On the mining materials, you have to apologize me because I dropped down a couple of things, but can you repeat that question?

Yes. I think the mining materials was in the context of the biodiversity impact.

Christophe Fouquet is leading the ESG effort on the executive side in ASML. Is there anything you want to add in this aspect in this profile...

So first of all, I think I'd like to amplify Peter's invitation to spend more time with our ESG team to get really good view for what we are doing. I think Peter tried to summarize the strategy. I think you see in the annual report, there's a very large number of activities because we take the matter extremely seriously in ASML. We do a lot of work to bring our [indiscernible] the culture of our people. And to be honest, our people are very helpful also driving basically the -- our honed sensitivity around that. What I would like to add maybe on top of what Peter has said is you talked about reuse of our product, which is, of course, a way to reduce the impact on environment. What's also important to understand is that for all new products, we are developing also new method. Basically -- you mentioned basically life cycle management. We don't have that implemented on the total product because we look at some time 1,000, 10,000 parts per product. So we are not doing that yet at the product level, but we really start to do that at a part level. And every time today, we develop a new product, I would say the most sophisticated method, the stringent rules are being applied basically to make choices. So it's a journey. It's a very serious journey on our side. And I think you will find a lot of very passionate people in ASML to talk about this.

Thank you, Chris. And I can add to that, that also on the reporting side, we have spent a couple of sessions with the management and the Supervisory Board to go through all the legislation and regulation that's coming to us from Europe and/or from the Hague. And my view personally is ASML clearly is ahead of the curve there. And yesterday, in our Board meeting, we decided that we would extend our number of committees by also installing an ESG's Supervisory Board Committee to keep a close eye on the further progress and the steps that ASML will take in that respect. Other questions?

Thank you. My name is Luijckx, LIMA-UNIFORM-INDIA-JULIETTE- CHARLIE-KILO-X-RAY, in English spelled. I have seen the previous slides, and there was mention of a green section of the environment and of engaged stakeholders. I enjoy being an engaged shareholder. And last year, I had a question about precipitation, reinfiltration into the soil. Now I would like to know what stage of prepare or of planning there has been. Has already funds been admitted or has already planning been made? Or has already a time path been established for reinfiltration of rainwater from the roof of buildings because this is a very simple system and it promotes greatly our environmental profile where we can say that we do not spoil rainwater down the drain, which is also money down the drain? It's a very cost-effective system, which will pay itself back. It is quite simple. So has it already been decided to implement this in the buildings presently under construction? Has it been planned for buildings to be built or to be made ready for use here in other locations because it is something that is very easy, very low tech, low down, low down into the earth, so simple that even the Chinese will copy it tomorrow? And as far as a substance of concern, rainwater to me is only a substance of concern when I forget my umbrella in the rain. And in view of the success of ASML, financially, even when it rains, I will be singing in the rain.

Thank you. I guess, Frederic, that's a question that is going to you because we just this morning discussed our building activities and what we do, particularly if its flooding here in the area. Frederic, maybe you can say a few words to that topic.

Thank you, Gerard. So we have been triggered by your question, Luijckx. So we have a certain system today, which is working. So we are capturing the water. We are even storing it at the roof of each building to avoid to flush it with a huge volume of water immediately in the waste system. So we are doing this. We are not currently filtering the water, but we have started end of last year a study with also some specialists on some connection with the local municipality and authorities to look how we could filter the water, eventually part of it, reuse it not for process water because it will be a step too far, but we're also using water in the other -- gardening or in any kind of things. And then repeat it in the system for the municipality or the quality that is expected by them. So we have started the study to do a little better than what we need today. It did. And thank you for your remark because it is endless to work on this.

Thank you for your answer, Frederic. Any other questions at this part of the meeting?

[indiscernible] of the Dutch Investors' Association as well. I have 4 actually. First of all, maybe about the -- let's say, renegotiations about getting compensated for inflations for your customers. What is the feedback of customers? Do they accept this? And I can imagine or we can imagine that for new contracts, there will be an inflation clause or something. Is this something that is accepted as well? So maybe you could give some color on that. And then about the R&D investments. If we look at the outlook 2030, there is a scenario in which basically R&D as a percentage of sales decreased to 10%, and it was 14% in 2021. And we understand that you only give an outlook for 2030, but maybe you could give us some color on what this percentage would be beyond 2030. Is it fair, let's say, for a company like ASML, could you remain this level of 10% or keep it below 10%? Is that a fair view or is it fair to expect there are new investments required, which leads to a higher percentage of R&D over sales beyond 2030? So that's my second question. And then my third question is on the service revenues versus system sales revenues. For most hardware companies that have service revenues, you see that they have higher gross margins for ASML. If my math is -- if our math is correct, it's both about 50%. So what is the reason for this? And over the longer term, is it fair to assume that, let's say, services margins will increase and go higher than the system sales margins? And then my -- our third question is -- fourth, yes. Let's say, fourth. Okay. Fair enough. Cheating a little bit here. Okay. So fourth. Then it will be sixth. We appreciate it. Then, yes, that's about how we understand the structural tailwind of the end markets, but if you look at the first quarter results, there was, let's say, a substantial slowdown in order intake. And we just wonder what it means for, let's say, your plans to increase capacity substantially. Should we expect any impact if, let's say, demands remain slow? And maybe you could give some color on -- because we're reading the annual report about building in flexibility in this capacity, so what does it look like? And how fast can you scale back fixed costs, let's say, if demand is slower? Maybe you could give some color on that. And then finally, and this is really my final question is about Taiwan because if we are right, ASML will do its largest investments ever in Taiwan this year or at least a big investment. And at the same time, let's say that over the very long term, let's say, decades, most experts believe that the likelihood of the Chinese infiltrating Taiwan is rather big. So how -- what does ASML think about this risk? And what could it do today to mitigate this risk, if it's even possible? But anything you could comment on that will be really welcome.

Thank you. I guess apart from the last one, which is almost a geopolitical one, most of them are going to you, Roger.

Yes. I'll take a few of them and Peter is going to take 2 of them. So on the renegotiations, that's ongoing. For a number of customers, we have been able to renegotiate it. And indeed, you're absolutely right. You need to distinguish between what's happening based on old contracts, if you like, and what's happening based on new contracts. And the new contracts that we are negotiating with customers, you're absolutely right, there is a paragraph in there that if inflation exceeds a certain limit that there will be a fundamental solution on inflation. So that's in those contracts, and that will then generate the discussion exactly how to divvy up the inflation burden between customers and ourselves. So that's provided. As Peter said, it's -- a EUR 40 billion backlog by the end of the year is fantastic, but it also means that you've locked into pricing. So there legally, we couldn't then force inflation adjustment on orders that had already really been taken. So we are in discussions with customers. Some customers have already agreed and say, yes, absolutely, it's fair that we find a fair way to share that. Some others are -- we're still in discussions there. And you can appreciate, particularly if you're looking at customers that are currently looking at negative EBIT margins, as Peter was talking about, that the discussions take a little bit longer than you might have anticipated maybe a year ago. But net-net, I think the lion's share of customers is very amenable to having these conversations and believe that a fair solution needs to be found. And I said on the investor call, I said that I believe by the end of this quarter, by the end of Q2, we should be in a good position to say this is where we ended -- this is where we landed for the year. And this is the compensation that we believe we have been able to together for the year. So that's on the inflation discussions with the customers. On the service revenue and the higher gross margin, I think our gross margin has improved quite a bit over the past couple of years. And I think it's important to recognize that. And that is a combination of things. First off, our installed base business is a mixed bag of upgrades on the one hand and, let's say, normal maintenance and service business on the other hand. Traditionally, the gross margin on the upgrade business is quite nice. And I would say in many instances, exceeds the corporate gross margin. That's a little bit also the point of reference that you refer to in other industries. And that's the case for us as well. Particularly if there is a high software component in the upgrade and that we see more and more, you will see that, obviously, the gross margin is quite high. It's particularly on the regular maintenance and service, where historically, we come from a fairly low gross margin. And that is particularly the case on the EUV business. So on the EUV business, it took a while before we got the gross margins to a decent level. I think this year, we're trying to get the -- that particular service margin on EUV to 35%. That was negative 3 years ago. So that gives you the trajectory that we're on. And I'm hopeful that in the, let's say, '25 time frame that we would be able to get that to the corporate gross margin level. And then gradually, we would have had the service at gross margin, more or less get to the corporate gross margin level and then that leaves you with a more profitable upgrade business. So from that vantage point, I think indeed that a positive trajectory there can be expected. Last question I'm going to answer before I give it -- I hand it over to Peter is the slowdown in the order intake. What does it mean for capacity? I mean the slowdown down and the order intake, again, you have to look at from the vantage point of a EUR 41 billion, so 2x system sales order book, which is still phenomenal, right? And that you then might have a quarter or maybe order intake is a little bit slower, it doesn't concern me a bit, to be honest. So we're still looking at a pretty formidable order book. Also, the capacity in our building, I mean, we're not building capacity for tomorrow. We're building capacity for the long haul. We're building this capacity of 90 EUV and 600 DPV systems really for the second half of this decade. And if there is a bit of a down cycle in there, that shouldn't take you away because we all know what's going to happen. As -- if the demand comes back, as Peter always says, it comes back with a vengeance. That's exactly what you're going to see and then you're very, very happy that you had the capacity. Your point of flexibility is absolutely spot on. I mean that's clearly what you need to do, right? Because if you build this capacity, you then obviously need to be able to breathe with the market. The capacity that we're building, we always say we want to build capacity not for just in time, but for just in case, right? If the demand manifests itself, you should be able to respond to that demand. So that's how we're building. And of course, we're having good discussions. As a matter of fact, also today, we had discussions on what drivers we can further implement to make sure that we can breathe with this market and be more flexible than what we have been maybe in the past couple of years. So it's a really good point, and we're executing on that as we speak.

Yes. So I think, yes, it's the longer-term model. It's the 10%, but it's based on what we currently think that we should do, I mean, good now. Trying to predict and edges out what kind of innovations we are going to work on is a bit more difficult. We have an idea of what we're going to do. And this adds up to the 10%, but we've been here before. And I've been here now, it's my 24th year at the company, and I've had the discussion with our R&D engineers many, many times. And they always promised me that the percentage of R&D as a percentage of sales would go down. Guess what? They always stayed the same. So yes, is there a chance we go steady? Yes, it's very likely because we're a very innovative company. And we think of things that today we probably don't see on the road map, but could be there. So it's kind of a conservative number, but it's what we know today. So I would not be surprised now with even expected. It's going to be a couple of percentage points higher, just looking at the historical average.

When we invested, it all produce value that's...

I mean, yes, the R&D has always treated this very well on the top line, has paid off quite nicely.

Taiwan.

Taiwan yes, I mean, the largest investment ever, I mean, yes, there have been media reports on a number that was completely out of whack, I mean, so that was -- it's a large investment, but it's a large investment in Korea also and also in the United States. But by far, the largest investment is here in Veldhoven, yes. So -- and from a geopolitical point of view, because clearly it is right, I mean, it's kind of a geopolitical question. If it's in Taiwan or it's in China, does it matter? I mean we are in China, 20% of our backlog is there. We have grown to 2,000 people there. We have R&D activities there. We have so many industrial activities there. So we have it in Taiwan also, which is, by the way, our currently biggest customer base. So yes, it makes sense that we are there. We are close to the customer what the future will bring from a geopolitical point of view, time will tell.

Thank you, Peter. Second round for [ Mr. Stephens ]. Yes, down here?

[Interpreted] [ Stephens ] is my name. To continue on the point of China, assuming that according to American legislation -- pursuant to that legislation, what if you have to leave, then what are the implications if you -- should you have to leave China? And also with respect to Taiwan, what if something happens and what if the government says, well, we prefer you not to supply to Taiwan or produce in Taiwan, what are the implications?

[Interpreted] Well, it's not up to me to speculate on what the government will or will not say about Taiwan. Taiwan and everybody knows is 90% to 95% of all advanced computers come from Taiwan. So I'm sure they'll reflect on that -- will reflect on that should they say something about Taiwan, and then we will think about the position that Taiwan takes. And export controls. Well, export control measures that we're facing, in our view, are not focusing on our ASML leaving China. According to the information and the communications of the Dutch government, it's about advanced immersion technology for China for our business. It's a relatively small component because this is the Chinese business, mid-critical and what we call them mature systems. So it really doesn't concern us leaving China, [ Mr. Stephens ], and not even in the future. That's a matter of speculation, but I don't think so, [ Mr. Stephens ].

[Interpreted] Yes, the postponement of the orders, don't you think they are proceeding cautiously, waiting and seeing first to see what kind of new developments come up and that then they might start ordering again? So new tools, new machines, new technological developments, things we don't know about now, perhaps, but things some people may be working on.

So yes, I mean the -- I don't think -- yes, there's a certain level of delay of orders you could argue because like Roger said, I mean, the market situation is the market situation and they have 2 years of orders in the backlog. So yes, you can take a breather. So that's what they're doing. I think on the new technology, this is where we keep seeing the orders coming in. So the new technology for our customers is important for their research and development programs and we -- like we said earlier, we are very clearly connected to our customers on their road map and our road map. That's where we see no hesitation of customers to put the orders in for the most advanced new technology because they have a road map that also extends 5 to 8 years out, can go to 2030. So they have to invest in their future, and that's what they're doing.

[Interpreted] Great. And last year, there were rumors that ASML had houses. I heard that they're going to -- that they want to build a neighborhood, especially for ASML. How is that going to be paid for? How is that going to proceed? Is the municipality paying for it entirely?

If it's in any case not us. So I would like to welcome any real estate developer building a complete new area [indiscernible] just for ASML employees. But I'm not aware of it, and it's definitely not us.

[Interpreted] Okay. So you've got nothing to do with it.

No.

For this agenda point, are we through with questions? Then the data on the registration for this meeting has been processed. So we will now make several formal statements. I give the floor to [ Mr. Klaben ].

The total number of issued ordinary shares for the record date for this general meeting amounted to 403,138,228 ordinary shares and 16,542 fractional shares. 8,937,153 of these ordinary shares are held by the company's treasury shares. Since each ordinary share carries 1 vote, the number of voting rights amounts to 394,201,075 votes. The count for this meeting showed that at the start of the meeting, 310,377,171 ordinary shares were present or represented at the meeting, representing 78.74% of the issued and outstanding ordinary shares for the record. 11,585 shareholders are represented or present at this meeting. All voting items on the agenda, except for agenda Item 6A, can be adopted by a simple majority of votes cast as more than 50% of the outstanding share capital is represented. For agenda Item 6A, the proposal to amend the remuneration policy for the Supervisory Board, a majority of 75% of votes cast is required by law. I'll give the floor back to the Chairman.

I now open the voting up and ask that the voting operator switch on the voting system. As mentioned before, from now up to agenda Item 13, which is any other business, you have the opportunity to vote on all voting items on the agenda. You do not have to wait for a particular agenda item to be discussed in order to vote, and you can change your vote by selecting another choice. And you can do so until the vote closes. We now move to agenda Item 3A. This agenda item concerns the remuneration report for the Board of Management and the Supervisory Board for the financial year 2022. And the remuneration report was prepared in accordance with Dutch law. The revised EU shareholders' right directive for the general meeting has an advisory vote on the remuneration report. The general meeting is asked to vote on whether the remuneration report is clear and understandable. I'll now give the floor to Mrs. Kelly, Chair of our Remuneration Committee, to give you a brief explanation regarding this topic. Terri, the floor is yours.

Yes. Thank you, Mr. Chairman. I have a couple of slides that I'd like to share with you just to give you some of the highlights. Hopefully, you've had a chance to look at the report and we welcome your feedback because it helps us with future reports in terms of how clear we can be. So moving to the first slide. I think this is my first slide. Yes, so I don't have that in my highlight. So just a couple of comments on this. So for sure, the main emphasis in the report is related to the implementation to the Board of management policy changes we recommended last year and, obviously, implementation for the Supervisory Board, which is still reflecting the policy changes from '21. And so that we've highlighted that, and I'll talk a little bit about some of the highlights there. One of our goals, obviously, is on the transparency side and trying to provide more rationale in terms of why we've made certain decisions. And I think that's an area again for a continuous improvement. And the other big change that we made was improving the disclosure around both our short-term incentive and our long-term incentive measures. And so we're proud to share, we've got now the '23 ex-ante measures on both the short term and long term. And then on the long term, we also have put in our target goals for the future period '23 through '25. So we think this is good progress and, obviously, very important as we think about that being a major component, particularly for the Board of Management in terms of their total composition of remuneration. And then the last thing, just keeping on my toes. They always challenge me here. So just on that one last point. So the main highlights, as I mentioned, we made some policy changes last year for the Board of Management. If you recall, we did not adjust the base salary, but we focus more on the incentive opportunity for both the short term and long term and really watching the progression of that. Again, this is an area that the Committee continues to look to make sure there's really good alignment with what we're measuring, both short term and long term and alignment with, obviously, the strategy of the company and value creation. So just a couple of things I want to go first. Do we first have the short term? Can you go back? Yes. Thank you. So just a highlight on actual results. So this is for the Board of Management for 2022. These are the short-term measures that we are following again, and we think very aligned with important measures around financial performance, customer orientation and our technology leadership position. And I just want to point out something, and you heard this from Roger around the measure for the EBIT margin and the implementation of fast shipments this past year. So it was a shift in the business model, absolutely supported by the customer and certainly the right thing to do to address some of the shortages of supply in the marketplace. So that's the good news. The bad news, when you look at from an accounting perspective, we don't recognize the revenue. So that directly affects how we measure this EBIT margin and performance to target. And so we, as a Committee and with the support of the Supervisory Board, have made the decision to make an adjustment to take that into account. That still results in a total payout of 99% of targets, it's slightly below target. And we believe this is supported because we also look at this for next year. So we have implemented the same methodology into '23. If we find that our business model shifts back or we're able to recognize that revenue from an accounting perspective, we actually would be adjusting those margin targets up. So it goes both ways. So I think we feel this is the right outcome and really the only deviation that we've made from our incentive managers that we projected. So that's on the short term, and I'll take questions on that later. And then on the long term, obviously, as important, these are the measures we have through 2022, and you can see outstanding performance. So the payout there is over 180 -- 185%. And, again, I think the check for us is it aligned with the actual performance of the company and aligned with the strategy, and we feel very strongly that this is well received and well earned. And I'll just point out one last thing. As we continue to look at the incentive targets for the company, we mentioned sustainability. I think that came up as a comment before. And so going forward, as you see in '22, the measure was at 10% weighting. And given the importance of this for the company, we -- that weighting goes up to 20%, and again, very much aligned with the ESG measures that you heard earlier from Peter. So that are both the short-term and long-term incentive and the major highlights for the report.

Thank you, Terri. That's very clear, but we'll take some questions that there is in the room, [ Mr. Stephens ].

[Interpreted] My name is [ Stephens Esrabee ]. Yes. This year, same thing as 2 years ago -- same thing as 10 years ago. The rules of the game keep changing where we're playing the game. And we understand that different delivery schedule may prompt changes. But if it is at the expense or detrimental to the members of the Board of Management, then you remedy things. You increase the incentives so that they reach the same levels as last year. I would have thought Mr. Wennink, for instance, I mean, would he make less than in 2021 or 2020? Not that I think he doesn't deserve it, but I mean, I don't think it should be corrected. Wouldn't it be possible to correct it 1 year later? I mean if you determine your remuneration plan, then that will be done in accordance with certain supply conditions or how you think things should be done? And now all of a sudden, you're moving up the deliveries and the deliveries in the plant and then later on, perhaps, decreasing things. And then the machine may have gone, but will appear in the accounts a year later. And especially with the LTI, what you get is that yes, well, yes, the incentive is lower. Just to be clear, we correct both ways. We pay only once for one delivery, not twice. We do not correct after -- no, if there's a payment, we say, it was already delivered. So no, as a speaker, that's clear. But wouldn't it be better to apply the correction in the following year?

[Interpreted] No, because that would sure change in the year before. Thing is we're deviating from an existing delivery pattern in order to help the customer. And what you do not want is that you -- your incentive structure is an obstacle for doing the right thing for the customer. That is what comes. And the second thing we need to do is make sure that this is fair and that we don't pay twice for the same action. And as Terri just explained, this has been laid down in detail, and it's exactly what we put into practice.

Obviously, this is an area we watch very carefully and echo to make sure that we're not making discretionary adjustments, but they really are aligned with -- again, in this case, a business model change that will carry through into next year, and there's an upside and there could be a reversal of that. And I think that really shows the transparency. It goes both ways in terms of how we're looking at this. And so I think we take it very seriously in terms of making any adjustments in the report. And I guess we step back and look at -- if we look at the performance of these individuals in line with what they've achieved and alignment with our measures, does it make sense. And I think our conclusion from a Committee as well as the Supervisory Board, it absolutely makes sense. And these folks are fairly paid. And we talked last year about the policy and really making sure it's also sensitive to some of the local environment. So I think from both parts, I think we believe this has been well reflected in both the policy and the report.

Thank you, Terri. Other questions?

[Interpreted] Yes. But our point is that time and time again, the rules of the games are being changed during the game, and we have a problem with that.

[Interpreted] No, no, no. I think you should say that we are applying the rules of the game, but we are also making sure that if we do -- things that are different from what we had planned simply because it's better for the customer that the organization does not become a victim thereof. And it's different. It's not the same thing as changing the rules of the game. We still apply the same rules of the game, but the rules of the game have been laid down in the policy. The Committee makes sure that there is a correct interpretation and application of the policy.

[Interpreted] Mr. Chairman, I get it.

[Interpreted] So what are we talking about?

[Interpreted] So you get it, we get it. Yes. But if it is detrimental, you correct it, you adjust things...

[Interpreted] No, no, no. We also have examples that we've adjusted it downwardly. It has happened.

[Interpreted] I know it.

[Interpreted] Well, if you know it, you know how it works. Okay. Let's close this point. Well, we still have trouble with it.

VEB. Really sorry, but the same subject. Of course, it was perfectly rational to make these adjustments, and we appreciate the disclosure on this, but it's also true that this also happened, let's say, last year about the ROIC incentive under the LTI where there was an unforeseen, let's say, additional CapEx plan that was also required to meet customer demands, and you want to do that. But I think it's also fair that you want to have the incentive structure right at the start. So we do wonder when did these changes were communicated in policy during the year and how does it work? And maybe in addition to that, because this is the second time, isn't it really hard for a company like ASML to set the right targets and stick to them? What should -- is there an alternative if you thought about?

Yes, absolutely. And this is one of our challenges because we know the sensitivity of making any kind of discretionary changes. And I will distinguish between the prior changes on ROIC. And they were discretionary changes where we actually invested upfront real dollars, and we felt we were really not doing what was right for the customer. And we've got a lot of criticism to this. I differentiate that from what we're proposing here with respect to the fast shipments. It really is an accounting issue. And again, we've reflected that in the change in business model. And to your point, we weren't really clear if we knew that going in, we would have reflected that in these targets right at the onset. But it was still under discussion as we were finalizing these numbers. And only until we got the commitment from the customers and understood the impact was well beyond when these were already established. And so that's why going forward, we said, well, let's assume this could happen into next year. And so that's what we have done. But I think one of the trade-offs and you feel this, we can put easy measures in that we won't have to deviate from, but they don't really align with what's most important and strategic for the company in terms of aligning with the strategy. And so this is a bit of a -- so we still want to challenge the right measures. And you are correct, particularly actually on the long-term measures, trying to project out particularly on the financial ones. It is a problem and a challenge, but we continue to have lots of dialogue in terms of how do we continue to balance that tension.

Maybe one quick follow-up because -- when was this then communicated to the management, you got clarity from the customers and then things became clear. So this happened during the year? Or how should we...

On the incentives...

Sorry for -- that the margin target when it was adjusted essentially.

Yes. So we do not make that determination until the end of the year. So I think there was a lot of discussion about because the other consideration is these measures cascade through the entire organization. So in parallel, decisions within the discretion of the Board of Management were being made of how they handle it within their own organization. And so that part was shared with the RemCo, Committee. But as far as the finalization of what we determined to be the right answer in terms of performance to target, I think that was really by the end of the year.

And when it comes to the authority of the Board of Management, we applied this exactly the same correction to the rest of the company. So I think -- so it's not only for the Board of Management, it's just the right thing to do because we said, basically, what we were doing, we were creating fast shipments for the customers that we're screaming for those machines. This is a 4 weeks earlier shipment of the machine for the customers that they could make chips. That's what the reason why. So we don't want to punish anybody in this company for doing the right thing. So we took that decision also for the rest of the company, and it's up to, of course, the Remuneration Committee to say whether they feel that they need to pass their own judgment. But this doesn't only apply to us, it applies to everybody.

Any maybe to make a...

We couldn't agree more. So this makes perfect sense. There's no issue about that. But I'm just worried that during the year that there was -- there could have been a situation where he was rewarded for doing the wrong thing. And then the incentive structure isn't just right. And that's a big of -- a bit of a problem, I would say. So this is something we should think about.

I understand. So for sure, I think there was already a commitment. This is the right thing to do for the customer. We'll worry about the incentive. So we did not drive a misalignment with doing the right thing. And to Peter's point, and maybe this kind of highlights some of the distinction between the decisions of the RemCo versus the Board of Management. I believe you and even further and put some other concessions on some of the other factors like inflationary increases. There may have been some other delay in the supply chain. We knew that wouldn't fly if we think about adding those additional factors and hence, why we ended up at 99%. I think for the company employees, it was closer to 130%. So we were very discerning of what we felt made sense and what we could support for purposes of incentive compensation for the Board of managers.

This concludes the questioning. Let me continue with Item 3B. Agenda Item 3B concerns the discussion of the '22 annual report and the adoption of the financial statements for the financial year 2022 as prepared in accordance with Dutch law. As you all have seen, ASML published an annual report containing financial and nonfinancial information. This year, ASML has again prepared 2 sets of financial statements. One, based on U.S. GAAP accounting principles generally accepted in the U.S., and one based on the international financial reporting standards as adopted by the EU and Dutch law. The 2022 financial statements based on IFRS and Dutch law are now submitted to you for adoption. The 2022 annual report, which includes these annual accounts, is available for your inspection at the offices of ASML. It can also be found on ASML website. Ms. Groenland, our external auditor from KPMG, is here with us today and will provide us with some insight on the audit activities that KPMG performed for ASML in 2022. She will also answer your questions about your audit. I give now the floor to Ms. Groenland. Petra?

Thank you, Chairman. And good afternoon, ladies and gentlemen. My name is Petra Groenland. And on behalf of KPMG, I'm responsible for the audit of ASML's financial statements. KPMG has been the auditor of ASML as from 2016. This was our seventh year and my personal second year. I'm happy to have been provided the opportunity to elaborate on our audit and on our auditors' reports on the financial statements. You are important users of our auditors' reports. To start off with our end products of our work. On February 15, we issued a number of reports with respect to the IFRS financial statements, the U.S. GAAP financial statements and nonfinancial information. On the IFRS financial statements, we performed an audit of both the consolidated financial statements and the company financial statements as prepared in accordance with IFRS and Dutch law. We issued an unqualified opinion in proper Dutch and [indiscernible], which implies that the financial statements give a true and fair view and that they have been prepared in accordance with IFRS as adopted by the EU and Dutch law. We also concluded that the report by the Board of Management and other information in the annual report is consistent with the financial statements. In addition, we issued an unqualified audit opinion with respect to the U.S. GAAP financial statements that have been filed with the SEC in the United States. And we issued an unqualified audit opinion on the effectiveness of internal control over financial reporting, SOX, Sarbanes-Oxley. We also performed procedures on the nonfinancial information as included by ASML in its annual report with limited exceptions. We issued a limited assurance report thereon. So this is substantially lower than -- sorry, the substantially lower assurance than we give in an audit. Limited assurance means that nothing has come to our attention that causes us to believe that the nonfinancial information is not prepared in all material respects in accordance with the relevant reporting criteria. My presentation will continue to cover the key elements of our approach and our findings of the audit of the IFRS financial statements as shown here on the slide. These elements are included in more detail in our independent auditor's report as presented on Pages 281 through 286 of the ASML annual report under IFRS. I will go through the elements clockwise. But first, as an introduction of what an audit entails, it's important to realize that our objective and responsibility is to obtain sufficient and appropriate audit evidence for our opinion. And our audit of the financial statements has been performed with a high level of assurance, but not an absolute level of assurance, which means that we may not detect all material errors and fraud during our audits. First, we determine materiality. The level at which we believe misstatements will reasonably influence users of the financial statements like yourselves. Materiality is important to us in the determination of the nature, timing and extent of our audit procedures, but also in the evaluation of any identified auditing statements. For the 2022 audit of ASML, we determined materiality for the financial statements as a whole at EUR 250 million, representing 3.4% of 2022 income before income taxes. Misstatements in excess of EUR 12.5 million were reported to the Audit Committee of the Supervisory Board. After determining materiality, we then performed our risk assessments by identifying areas where the risk of material misstatements in the financial statements whether due to error or whether due to fraud is the highest. And in our independent auditors' reports, we have included further details as to how we assessed risk of error, risk of fraud, and noncompliance with laws and regulations. In line with the presumed risks laid down in the auditing standards, we identified fraud risks with respect to revenue recognition and management override of controls, of which the first, revenue recognition, is described as part of our key audit matter. Our audit procedures did not reveal indications and/or reasonable suspicions of fraud and noncompliance that were considered material to our audits. With respect to the misappropriation of data by a now former ASML employee late in 2022, which was disclosed by the company, by the way, in the notes in Note 17 of the financial statements, ASML initiated a comprehensive investigation and identified that this incident presented a potential violation of the export control violations -- regulations, sorry. On this topic, we also involved our own export control specialists. In addition, we also considered in our audits and included in our auditors' reports how we assessed risks in the areas of going concern and climate-related risks. These matters did not result in a key audit matter. As part of our procedures on going concern, we discussed an inspected management's analysis of matters that could potentially impact the company's going concern, including relevant industry developments and potential further export restrictions to China. The outcome of our procedures did not give reason to perform additional procedures. So no going concern risks were identified. As it relates to climate, we considered whether there was a risk of material misstatement specific to climate on the 2022 financial statements relative to valuation of long-lived assets and also the going concern assumption. And based on our procedures performed, we did not identify a risk of material misstatement specific to climates and, thus, no further audit response was necessary. As part of our audit, we obtained an understanding of how ASML uses IT and the impact of IT on the financial statements, including an assessment of the potential of cybersecurity incidents to have a material impact on the financial statements. We did not identify a risk of material misstatement specific to cybersecurity incidents. The company invests heavily into cybersecurity. Then moving to our scope and approach. The group has a high level of centralization of operations here in the Netherlands, which are audit approach mirrors, which means that we performed our audit mostly centrally here from the Netherlands. For more complex audit areas, we included specialists. This included specialists in the areas of IT, tax, forensic and valuations. We communicated our audit plan and our findings in writing to the Audit Committee as a committee of the Supervisory Board. And on a periodic basis, we discussed our audit findings with the Audit Committee and management. And there's an active engagement with the Audit Committee and our observations are taken seriously. Then going to the findings of our audit to the bottom left of the slide. For the 2022 audit, we identified one key audit matter. And a key audit matter is a matter that in our professional judgment is of most significance to our audits. And similar to last year, for 2022, our key audit matter relates to revenue recognition. To be precise, it was about the identification of distinct performance obligations and the allocation of the total contract considerations, but also related to revenue cut off. And the reasons why this was most significant to our audit, very clearly, net system sales amounted to EUR 15.4 billion. Agreements with customers are often complex and comprise multiple elements, multiple performance obligations that we would call it. And also, we identified a risk that revenue was not recognized in the correct accounting period, a so-called cut-off risk. In response, we have assessed whether revenue was recognized for the appropriate amount and in the right financial year. Please note the key audit matter is not a comprehensive reflection of all matters that we discussed with the Audit Committee. Other matters that we discussed with the Audit Committee and reported on included internal controls, fast shipments, income taxes and the potential violation of certain export control regulations. Our audit procedures were determined in the context of our audit of the financial statements as a whole for which we issued an unqualified audit opinion. So our observations and my observations here in respect of the key audit matter, fraud and noncompliance with laws and regulations, going concern and climate-related risks should be viewed in this context and not as separate opinions or conclusions. This covers my presentation on the 2022 audit and the audit opinion. I'm happy to take any questions. On behalf of KPMG, I'd like to thank you for your attention, and thank you for your trust. Back to you, team.

Questions? VEB up off in the room.

David Tomic on behalf of the Dutch Shareholders' Association. Two questions. One for the Board of Management, I think, and one for the auditor. To start off with a question for management is on the contract liabilities, which is an increasingly important part of your balance sheet. It's essentially that cash has already been received, but ASML has yet to perform the work for its clients and to fulfill its performance obligations. It's mainly in current liabilities, EUR 12.5 billion as the balance sheet showed. It is an important part of your balance sheet. It reduces invested capital essentially and it reduce also your net working capital position. Is this trend up -- a rising trend year-on-year? Is that something that we can expect to continue over the coming years also in light of new innovations that are coming for which you want a prepayment from the client? So any help -- any comment on that would be helpful.

Roger?

Yes. I think I already mentioned it in my introduction. The main reason why contract liabilities, both current and noncurrent, are going up, it's twofold. On the one hand, there is the down payments. Down payments is something that happens both on high-NA. And high-NA, we have been doing that for quite a while, as you know, and that's -- most of that obviously is in the noncurrent part because high-NA shipment of revenue recognition for quite a few systems, it's still quite a few years out. So that's in a noncurrent portion. But also on 0.33 EUV systems and also on a number of immersion systems, we do take down payments. And I think we have been very clear that, that has been a very deliberate strategy of the company to go there. Do I expect it to continue to go up? Not as dramatically as it has in the past couple of years because typically what happens is in the first years that you start having a down payment, of course, it becomes a net addition to your cash and as a result of that, in that addition to your net liabilities. But to the extent that you're now shipping tools that you already received down payments for, of course, there you get less cash in because to the extent you already had a down payment, of course, that will be subtracted from the cash that you're going to get upon shipment of the tool. So in a -- if we were not growing at a certain point in time, you would get to an equilibrium situation, right, where the payments that you're getting would be netted with the down payments that will be subtracted from the shipments that you do. Of course, we are still growing. So as a result of that, you will still see it go up a little bit, but not as exacerbated as we would have seen in previous years. So that's one component. The other component is the fast shipments, as I mentioned before because fast shipments, we send an invoice upon shipment. So that gets debited to the accounts receivable and the credit to that is in the contract liabilities. Also there, I would see that you're going to see that stabilizing over time. So indeed, efficient balance sheet, but I would expect a level of stabilization and not the rapid growth that you've seen there in the past couple of years.

That was the question to management. Question to the auditor?

Yes. It's also about the fast shipments that has already been alluded to several times during this meeting. It is a change in the business model. And also the auditor mentioned it briefly, I thought, if I'm correct. The question is because revenue recognition is, of course, the key audit matter -- the only key audit matter, in what way have audit procedures been different because of this change in satisfying performance obligations and the fast shipments?

Petra?

Yes, sure. Thank you for your question. With respect to fast shipments, there is a change in the business model as how it's been portrayed indeed. There are -- in each shipment on each sale, there are different terms. So it is important to consider the relevant terms for each shipment. So from that perspective, it did impact our audits, but we always look at shipments and in-call terms, as they call it, to determine the timing of the revenue recognition.

Thank you. There's a question down here.

[Interpreted] Thank you, Mr. Chairman. One question has already been answered. Now the management letter. All I want to know is whether it's longer or shorter? Are there more lines or fewer lines than last year?

[Interpreted] It's a management letter. That's why it was discussed with the management and not in the Shareholders' Meeting.

[Interpreted] No. What I'd like to know now the number of lines, more or fewer.

[Interpreted] No, that's not information for the Shareholders' Meeting. We don't have an answer and you're not going to receive an answer.

[Interpreted] Why not?

[Interpreted] Because it's internal.

[Interpreted] You don't have to tell me about the content. All I want to know is whether there were more lines or fewer lines.

We'll have them counted for you. I don't know exactly how many lines the letter contained. Were there so many lines were there so many lines in that letter? I don't know. That's the point. I didn't count the lines. Do you have any other questions about this agenda item? IT. I was just leaving through, but you don't tell us anything, you don't write anything about it. What about your IT systems? Did you test them to see whether anything might go awry? Well, I believe that's a question for management. Well, I think Peter can answer it. No.

Petra. Thank you for your question, Petra. Of course, I provided you with a lot of -- I provided a lot of text, but what matters is that we certainly do consider IT terminology, that we have obtained an understanding of the company's IT systems in our risk assessment in order to develop our audit approach. And so we did identify IT as a relevant topic in our audit, absolutely.

Yes, it was a relevant topic, but did you test to see whether it truly worked?

Controls, I think -- I'd like to give a bit of a clarification because this is also a company that's registered in the U.S. We also do an audit of internal control and we issue an opinion on internal control, and our opinion on internal control was unqualified. That means that there was no material weakness in internal controls, which includes systems.

Okay. Answers the question? Okay. If there are no further questions with respect to this item, then we move on to agenda item 3C, a Clarification of the Company's reserves and dividend policy. This agenda item concerns the explanation of ASML's reserves and dividend policy. It's a nonvoting item. ASML aims to pay an annual dividend that will grow over time to be paid out quarterly. For a further explanation, please see the explanatory notes to the agenda. Are there any shareholders in the room that have a question with respect to ASML's dividend policy? If not, we move we finalize this agenda item. I want to remind you that you can vote on anything throughout agenda item 13. We now move to agenda item 3D. The next item in the agenda is 3D, a proposal by the Board of Management to declare a dividend for the financial year 2022. ASML made interim dividend payments in August and November 2022 and in February 2023, each EUR 1.37 per ordinary share. The Board of Management now proposes declaring a final dividend of EUR 1.96 per ordinary share, which brings the total dividend for the financial year 2022, EUR 1.69 to EUR 5.80 ordinary share, which represents an increase of 5.5% compared to last year and represents 41% of the earnings per share in 2022. For the sake of completeness, I want to inform you that the Supervisory Board has approved this proposal. Because this topic has already been discussed in agenda items 2 and 3C, I refer to the explanation given earlier. Are there any questions in the room with respect to the final payout of the dividend? If not, we move on to agenda item 4A. 4A is proposed to discharge the members of the Board of Management from liability for the performance of their duties in the financial year 2022. Are there any shareholders in the room with questions relating to the discharge of management? And we'll move to 4B, to discharge the Supervisory Board, which is very welcome, from a liability for the performance of their duties in the financial year 2022. Are there any questions with respect to that agenda item? Then we conclude that as well. We move to 5, to approve the maximum number of ordinary shares made available for the remuneration of the Board of Management. The maximum number proposed amounts to 200,000 ordinary shares. The final grounding of the shares will be made by the Supervisory Board based on the applicable remuneration policy by applying the calculation method as described in that policy. Also, this agenda item includes the proposal to the general meeting to designate the Board of Management as the body that is authorized to issue these shares subject to approval of the Supervisory Board. This designation is requested for the period running from the date of this meeting through the AGM held in 2024. ASML has previously committed to informing the general meeting each year about the exact number of shares granted condition. In '23, 28,604 shares were granted conditionally to the Board of Management for the financial year 2023. The volume-weighted average share price during the last quarter of the financial year 2022 amounted to EUR [ 5.77 ]. Are there any questions with respect to this item? Then I conclude this agenda item and invite you to vote on this item voting, as I said, possible up to agenda item 13. We move on to 6, item 6A. The agenda item consists of 2 voting items. Mrs. Kelly, Chair of the Remuneration Committee, will now provide more information about the proposed remuneration policy and a proposal to amend the remuneration of the members of the Supervisory Board as well as about the rationale for proposing these changes. Terri, the floor is yours.

Yes. Thank you. Mr. Chairman. So I have a couple of slides to share on this as well. So again, last year, we focused on the Board of Management policy, and we made no changes to the Supervisory Board. The last changes were made at the 2021 AGM, and so the committee worked to look at just best practices on the policy and building of off what was submitted in '21 for approval to you. And I'll just highlight a couple of the changes. We also looked, obviously, at benchmark information in terms of the Supervisory Board, and I'll talk more about that in the next slide. But the main changes on the policy, one is -- and very consistent with what we did with the Board of Management policy, we think is kind of the framework of how we operate in kind of our philosophical. And so in the past, we would also put the specific remuneration numbers in the policy and consistent with what we did with the Board of Management, we are recommending that we continue the policy to be the framework of how we make decisions, and then the implementation of that in terms of the recommendation would follow. So the actual specific numbers now have been pulled out of the policy and will still be presented at the AGM, but it's just -- we think that practice makes more sense. We're not having to come back every time with changes to the policy. And then the second one which I appreciate, we got some good feedback from our stakeholders, was to add a clause, which is really in the case of special circumstances. And what I mean by that is if the Supervisory Board is having to spend an inordinate amount of -- more time. So we already have a pretty a clear agenda over the next several years in terms of our cadence. But in the event something extraordinary happens, and we've tried to define that as something that requires maybe 25% more commitment from the Supervisory Board. We had no flexibility in the policy to account for that and to remunerate that for the Supervisory Board. So we've added that, but we also put a cap on it that it would never exceed more than 1x of the pay of the Supervisory Board member. And again, we've not used this in the past, and so this was really just to have the flexibility. And in any event, if we were ever to consider putting this in play, we would certainly advise and submit that to you in terms of both the amount and the rationale of why we would take that on. But in the current environment, it's hard to predict what special circumstances, and this just gets a little bit more flexibility. So those are the two, I'd say, minor changes in our policy. And again, I appreciate the feedback we've already received for many of you. And then specific on the next slide, we did a deeper dive into the actual pay of our Supervisory Board and we looked at it from a number of angles. So certainly, given the 2-tier Board structure, we looked at the AEX companies and how ASML compares. And a couple of things you'll observe, just the sheer growth in size of ASML now puts us at the -- over the 77th percentile, so towards the top end, and it's hard to find peer organizations for that. So we looked from a couple of angles. We looked at AEX companies, which would be the Dutch context to kind of get a sense of how we should be looking at compensation. We also -- because our Board is an international board, we also took a look at just some of the international benchmarks. And you can imagine from that perspective, we'll see much more significant remuneration for the Supervisory Board. So we took a conservative view, and what you'll see in the actual numbers is we're proposing to align closer to the AEX number. So that was kind of the external view, but we also did contemplate looking internal to changes in overall increases within the ASML population, specifically within the local community under the CLA, just to make sure that it was fair in terms of what was being proposed in terms of increases. And so what you'll see in the numbers is it turns out to be about a 7% increase, and this is over a 2-year period. So we think this is pretty conservative in terms of what's being recommended. And again, I think we feel we've tried to look at it from all sides of fairness. And so the next slide then goes into the specifics -- sorry, I'm rambling, aren't I? So the next slide gives you -- I get queues here. So you'll see, not surprising that there's always going to be more for the Chair just because of the amount of work involved and then not -- on typical other committees, the Audit Committee does more heavy lifting. So it's very proportional you'll see in other supervisory board constructs in terms of the pay. And again, as I mentioned, this is roughly a 7% increase over, really, a 2-year period since we didn't make any adjustments in '22. And then we do allow for some extra allowances, but this is not a change. This is still consistent with what we did in '21, and so that gives it a little bit more. And I think that -- next slide? Yes. So just one last slide on the stakeholder feedback. And I really appreciated a pretty extensive outreach to over 20 stakeholders, both internal and external, to the organization. And I think that provided, as I mentioned, specific to the special circumstances, we did incorporate that feedback and put some of the boundaries I mentioned around a cap on the total amount and what would be special circumstance, and we thought that was quite, quite helpful. The overall feedback is from the shareholders and other representatives. We did not really get any guidance or lack of support for these policy changes. And then equally, we've had extensive conversation with the Works Council of ASML, and that will continue to be a conversation to discuss their concerns. And their advice is actually on the ASML website, and I know our Chairman of the Works Council is going to have an opportunity to present some of their concerns and position in respect to it, and we have also our response to that on the ASML website. So I think that concludes my update.

Thank you. Then I give the floor to Robert Wissink, the Chair of our Works Council, to explain the Works Council position regarding this remuneration proposal.

Thank you, Chairman. Dear ASML shareholders, Supervisory Board, Board. My name is Robert Wissink, and I am the Chair of ASML Works Council. Today, I'm speaking to you on behalf of the Works Council and the employees of ASML in the Netherlands regarding the remuneration of the Supervisory Board. Before I get into that, I would like to take the opportunity to personally thank Gerard Kleisterlee on behalf of the Works Council for his contribution and his openness towards the Works Council over these past years. We also would like to welcome Nils Andersen, as the new Chair on the Supervisory Board, and we look forward to our collaboration in the coming years. In addition to the advice issued by the Works Council on the proposals to adjust the Supervisory Board remuneration, I would like to bring the following to your attention on this topic. ASML employees are dedicated and ambitious, hardworking and innovative, driven to achieve ASML's vision. We are also mindful of the role we as ASML can play in our society. As world citizens, we faced many challenges including climate change, pandemics, geopolitics and societal unfairness. This is why the Works Council has a lot of energy on ESG topics. Overall, we are proud to see the steps ASML has taken in these key topics. Our road map towards zero waste, zero value chain emissions, our local community involvement and contributions, these are just some of the ways ASML is pushing forward and taking responsibility. We will continue to encourage ASML's efforts on this. However, the growing inequality across societies has a particular resonance at this moment at the Works Council. The Works Council observes but struggles on how to take concrete steps to make improvement proposals. As Works Council in the Netherlands, we have the right of advice according to the Dutch Civil Code and the remuneration of the Board of Management and Supervisory Board. We acknowledge that remuneration is a complex and sensitive topic. As a 23-member Works Council, we require time to reach consensus on our advice. In this year's request period, not sufficient time was allotted and time pressure was at hand. The Works Council will reach out to the Remuneration Committee of the Supervisory Board to structurally address this moving forward. Remuneration needs to balance fairness and compensation, one, within the company, 2, between companies, and 3, for society as a whole. As the Works Council of ASML, we strongly believe that all these 3 aspects of fairness should be explicitly considered in our remuneration policies. We are very glad with the constructive discussions with members of the Supervisory Board, Ms. Annet Aris, Ms. An Steegen, Ms. Terri Kelly. We cannot speak highly enough about the openness, knowledge and insights they have brought to the Works Council for our considerations on this topic. The position of the Works Council about having explicit criteria on the internal and societal fairness is consistent with our presentation material from last year's AGM. It was part of our response on the topic of Board of Management remuneration and will continue to be part of our considerations on remuneration moving forward. The Works Council strives for clarity and transparency around remuneration policies. In light of this extensive collaboration with Supervisory Board and the previously-published position of the Works Council, we are missing a principal point in the current proposed Supervisory Board remuneration. The proposal only looks at reference group fairness and does not take internal and societal fairness into account. We had hoped to see a first effort for societal fairness, but this was not there. Dear Supervisory Board members, Board of Management and ASML shareholders, as representatives of ASML employees, we advise you to consider in favor of explicit criteria on all 3 aspects of remuneration fairness. One, within the company, 2, between companies, and 3, for society as a whole. We acknowledge this is not easy and possibly groundbreaking. As such, the Works Council would like to see some of the innovation that has made ASML successful applied to this problem. ASML can also be an innovation leader in this area. Thank you for your attention.

Thank you, [ Robert ]. Thanks for explaining the Works Council position in a very thoughtful way. As you know, the company greatly values the relationship and the continuous dialogue with the Works Council and all the input it receives from the Works Council, and thank you for your kind words. If there are no further questions -- one question for you be...

This is David Tomic from Dutch Investors Association. Some questions regarding the remuneration on special circumstances that is being proposed right now, and you mentioned it in the presentation that you got some feedback from various stakeholders. But reading the proposal, the first thing that comes to our mind is what kind of specialty circumstances can -- do we talk about? What did you take into account before proposing this issue? What could it be? What could the special circumstance be?

I think we're only the paranoid survivor in terms of what we could contemplate. And again, we've not had to execute this in the past, and so we struggled to put very specific events. But you could imagine -- and again, this is not going to happen per se, but if there was a major geopolitical issue that just forces a whole relook and certainly oversight from the Supervisory Board in consultation. Again, so we were trying to imagine things. And again, this would be just an added meeting on the agenda or an added hour. This would be something sizable that would require a significant commitment. As I said, 25% additional time, given most of our Supervisory Board this is a part-time commitment. They have other things they're doing. So we just wanted to recognize and appreciate that contribution. But -- so that would be one scenario. But you would have to think of something very disruptive to the organization. But to be fair, we have nothing in front of us in mind. It was really just to give us the flexibility in the policy so we would not have to scramble and bring this group together to try to compensate accordingly. It's not the same.

Not happening to ASML, but think there's a hostile takeover.

Which is extremely different from a company like ASML...

Due to the Dutch population...

That's why I don't even want to bring it up because...

But that would be such an extraordinary situation. Because then it could be all hands on deck for the whole Supervisory Board.

Now -- yes. And what is it that -- should we view it like this that of exposed, for example, that you will...

Absolutely.

We'll bring this to the AGM in a binding vote? Is that your idea?

Yes. I don't -- it would not be a vote, but it would certainly -- but then again...

You would explain why you have done this...

You would explain why we do it. It probably would show up in future policy reviews in terms of support or not so probably, we'd be very transparent of why we did it, and I said, we'll be very thoughtful if we even consider or contemplate. And again, this was really just to provide flexibility, and this is just not a practice with ASML. We looked closely at other policies to look at best practices there.

Because it's not really a straightforward agenda item and most definitely not part of every Supervisory Board remuneration in the Netherlands, at least. There are some variable of companies that have kind of a variable element in it, but not as farfetched, we think, then that this proposal entails. So you kind of move away from the fixed fee and small extra allowances that are put in place, which are perfectly fine in our view. I mean, a good Supervisory Board member is paid probably too little, and not a very well-functioning member is, of course, paid too much. But this flows kind of away from the idea that as Supervisory Board member that you do that job for a fixed fee, and this kind of provide too much flexibility. And afterwards, it's very difficult for shareholders, I think, and other stakeholders to judge on how that is actually put in practice by the Supervisory Board. So we -- this flexibility is a bit too far for us, so we have to vote against this agenda item.

So registered. Thank you. But it's a provision that you see in many remuneration policies that you, in a normal circumstance, never want to use.

Yes. And to your point, we knew this would be a sensitive topic in that we specifically, when we did our outreach, asked about both support and input of how we could make it more concrete in. And that is what landed us with some of the boundaries that you see in this, and I think that input was quite helpful. And again, we've never used this in the past, but I think we just wanted to anticipate that I respect your position on that.

Thank you. If there are no further questions, we move to agenda item 6A, which concerns the proposal to amend the Remuneration Policy for the Supervisory Board. If adopted, the new remuneration policy will be affected as by the first of April 2023. As indicated, this resolution requires a 75% majority of votes cast. The proposed remuneration policy is available on ASML's website. It includes an explanation of the rationale behind the proposal. The Remuneration Committee has consulted internal and external stakeholders extensively as recorded about the proposed remuneration policy. And we'll now move on to, if there are no further questions, to the next agenda item, which is 6B. It's an agenda item that concerns the proposal to make certain changes to the Remuneration Policy payable to the members of the Supervisory Board. If adopted, the changes will be effective as by the 1st of April. The proposed changes are in line with the remuneration policy as discussed in Item 6A. We'll move on to questions. If there are no questions, then we move to the next item. And I remind you again that you can continue to vote until item 13. We proceed with the item 7. Item 7 is an agenda item concerning the composition of the Board of Management, and this is a nonvoting item. And according with Dutch law and ASML Articles of Association, the Board of Management members are appointed by the Supervisory Board, subject to the general meeting being notified. The Supervisory Board hereby gives notice of the intended appointment of Mr. Wayne Allan as a member of the Board of Management to the position of Executive Vice President and Chief Strategic Sourcing and Procurement Officer. As announced in the press release of October 19, 2022, the Supervisory Board has decided to position this role in the Board of Management because the performance of the supply chain is increasingly critical to ASML's ability to respond to customer demand. It's another scaling up, it's output capacity, and it's important for ASML's supply chain to be able to follow its pace. The appointment of Mr. Allan as members of the Board of Management will be a very important phase in our ability to successfully navigate the short-term challenges, and at the same time, continue to build strong strategic Board-to-Board relationship with its suppliers in the future. Mr. Allan's appointment will be effective for the date of this general meeting. The explanatory notes to the agenda contain the personal details of Mr. Allan and the main elements of its management services agreement, including his remuneration package. With this appointment, the number of Board of Management members will increase from 5 to 6. Wayne, may I invite you now to say a few words to our shareholders?

Yes. Thank you, Gerard. Ladies and gentlemen, my name is Wayne Allan. I joined ASML 5 years ago as the EVP of Customer Support, having previously worked for one of our customers. First, I would like to thank the Supervisory Board for the opportunity to be appointed as a member of the Board of Management of ASML and to take the responsibility of strategic sourcing and procurement. ASML is a unique company with very healthy growth prospects for the long term, but this growth also comes with challenges. One area I will particularly focus on is building further the relationships we have with our suppliers and the collaboration that we have so that our suppliers can follow us in our growth path, while addressing the long-term growth and the near-term challenges. I will be an honor to serve in this position. Thank you.

Thank you, Wayne. We'll now move to questions. Are there any shareholder questions with respect to this nomination to the Management Board of ASML? If not, and Wayne, then you are in charge. We look forward to some great results from ASML's supply chain as a contribution. Agenda item 8. The item consists of 2 voting items and 1 discussion item. As announced last year, Mr. Rolf-Dieter Schwalb and I will retire in accordance with the rotation schedule at this general meeting. We have both informed the Supervisory Board that we will not stand for reelection. In agenda Item 8A and 8B, we will nominate Mr. Nils Andersen and Mr. Jack de Kreij for appointment as members of the Supervisory Board. I first like to express a word of thanks to Rolf-Dieter. Dear Rolf-Dieter, thank you for your valuable contribution to the Supervisory Board, not only as a member of the Supervisory Board since 2015, but also as a Chair, more lately as of the Audit Committee, and as a member of the Remuneration Committee. And before that, as a Chair of the Remuneration Committee and a member of the Audit Committee, making great contribution to both committees and to the Board as a whole. We have benefited from your knowledge and experience to past 8 years of your service. And we thank you for that, and we wish you all the best for the future. I would now give the floor to Mrs. Aris, the Vice Chair of the Supervisory Board. Antoinette, the floor is yours.

Yes. Gerard, during your 8 years as a Chair, ASML developed into a true world leader, multiplying its revenue and EBIT more than threefold and its market capitalization of almost sixfold. As a Supervisory Board, we have not done the heavy lifting that was done by the employees and the management of ASML. Our role has been to set the right guardrails to guide this growth, i.e., enabling the company to take risks where needed but also to challenge when needed, to oversee the organizational growth, and most importantly, to ensure that right top team is in place. Gerard, as a Chair, you have led these processes, not only as a Chairman, but also as the Chairman of the Selection Nomination Committee and member of the Technology Committee. You did this with a lot of dedication and in your own way, setting clear priorities, challenge and encourage where needed and by paying a lot of attention to the team and the talent. You have brought profound experience to the Supervisory Board during your 8 years of service, and you have been a great source of guidance and advice to ASML. We wish you all the best for the future. I would now like to move to the agenda item 8A. Agenda item 8A concerns the appointment of Nils Andersen as member of the Supervisory Board. Upon this appointment, Mr. Andersen will become Chair of the Supervisory Board. He will also become the Chair of the Selection and the Nomination Committee. The Supervisory Board nominates Mr. Andersen for appointment as member of the Supervisory Board given his extensive international career, both in executive and nonexecutive roles. As a Supervisory Board, we are convinced that ASML and the Supervisory Board will highly benefit from Mr. Andersen's broad knowledge and leadership experience. The explanatory notes to the agenda contain the background information on Mr. Andersen. The appointment of Mr. Andersen is for a period of 4 years, starting as of today's AGM and ending at the 2027 AGM. I would like to anticipate on a question of Mr. [ Stevenson ] around the process. Mr. [ Stevenson ], we had a very, very thorough process. So we first look at the profiles we needed. We looked at the future strategic challenges of ASML, and based on that, we define the profile for the Chair. Then we have engaged a headhunter, we looked at long list, we selected a short list, we did intensive interviews and had intensive debate, and Mr. Andersen came out as the clear candidate. I hope I answered your question based on that. Mr. Andersen, please go ahead.

So thank you very much, Antoinette, and I'm humbled and honored to stand in front of you here today with the opportunity being elected for the ASML Board. ASML, as you all know, is a unique company in Europe, a leader in technology, and we have to appreciate that we stand on the shoulders of many people that have had great visions to build this technological leadership and build it into a global leader in this field. And what has attracted me to the role is, of course, is this profile and this greatness of the company. But it is also the challenges that lie ahead in a world where geopolitics, politics are playing an increasing role where continued focus on innovation will be very, very important. So I'm looking forward to the challenge, you decide to elect me to the Supervisory Board. I want to thank also the Supervisory Board, my hopefully future colleagues, for having me or considering me for this role. For those of you who have not met before, I'm Danish. I'm 64 years old. I've been CEO of global companies like Carlsberg and A.P. Moeller-Maersk, world's leading shipping company. At least that was what we thought at the time, and we still feel that we are. And I'm -- besides being, hopefully, a member of the Supervisory Board here, I'm also Chairman of Unilever, and I stepped down as Chairman of AkzoNobel last Friday to create room for this appointment. So thank you very much, and it would be an honor to serve and be a part of this team that will bring the company into its future.

Thank you, Nils. And now, we move on to any questions. Mr. [ Stevenson ], you still have one. Please go ahead.

Thank you, Ms. Aris. We do meet each other every now and again, which is why you answered my question before I asked it. Now a question to Mr. Andersen, I'd like to hear about how careful or how prudent do you think this whole process was? You just commented on the interviews, but did you also look back? And did you look at the future perspective, strategy, the expectations we have with you. How extensively were all these issues discussed? And did you talk to the accountant, to the auditor, Ms. Aris?

Yes. We took the future strategic -- strategies of ASML, but also the challenges and the kind of skills we think we would need in the Supervisory Board in addition to the very extensive in-depth industry skills, which are already in the Board, to help ASML and put the guardrails for this transition. So yes, we looked at that extensively. We did not talk to the accountant because it's the appointment of a Chair. However, Mr. Nils will certainly talk with the accountant. Any other questions?

Yes, [indiscernible]. Maybe one observation and a question because we believe it's fairly uncommon to nominate a new Supervisory Board member who also immediately takes on the role of Chairman. So what was the reason for this decision? And did you also consider to appoint existing Board members to be the Chairman of the company?

Of course, we also looked at internal possibilities. And as we very much wanted to have a European Board member also because of all the geopolitical discussions, part of the Board, of course, did not qualify for that. And then also, if we have quite a change in Board members because people reached their 8 years limit, we decided that it would be better to have an external candidate. So that's -- that was the reason for that. Ideally, we would have maybe had Mr. [ Nilsen ] joined earlier, but because he was still the Chair of AkzoNobel. It was not possible. However, informally, we onboarded him. He's been attending several of our meetings in order to make sure that he has a running start.

Okay. Really helpful. So I believe it's -- then, it's the first external candidate who becomes Chairman, right? That's...

No, Mr. Kleisterlee was an external candidate. Yes, he was onboard for 1 year already. Yes.

Okay. Fair enough.

[indiscernible], still there. So I think no more further questions. So I conclude this item and give the floor back to the Chairman.

Thank you, Antoinette. And then we move to agenda Item 8B. The item concerns the nomination for appointment of Mr. Jack de Kreij. As a member of the Supervisory Board, upon his appointment, Mr. de Kreij will become the Chair of the Audit Committee. Mr. de Kreij also become a member of the Remuneration Committee once appointed. Explanatory notes to the agenda contain the motivation for this nomination as well as background information on Mr. de Kreij. His appointment will be for a period of 4 years as of the date of this general meeting and ending at the AGM of 2027. Supervisory Board nominates Mr. de Kreij for appointment as a member of the Supervisory Board given his extensive experience at various multinational companies and his financial expertise. Supervisory Board have the opinion that Mr. de Kreij fits well with the Supervisory Board profile for this position. And we, as a Supervisory Board, are convinced that Mr. de Kreij will be a valuable contributor to ASML and the Supervisory Board given his experience, leadership capabilities, especially given the experience of finance and economics across different industries and in various countries' [ check ]. May I invite you to present yourself to the shareholders and say a few words.

Yes. Thank you, Gerard. Before saying anything I would like to apologize for my voice, which has been affected by a cold. And it might disrupt this useful, let's say, explanation about my nomination. I apologize for that. I'm excited and honored, although you might not reflect that in my voice because of the reasons I just explained. I'm excited and honored to become part of, let's say, the ASML journey which is fascinating, which is characterized by continuous innovation, sustainable long-term value creation. But also what you hear nowadays more often, the enhanced focus on what we call ESG challenges and opportunities. In that respect, it's really, let's say, a very motivating and inspiring aspect to start working together with the full Supervisory Board, the Board of Management and other ASML team members to continue this successful journey on the one hand and continue the value creation for the other shareholders, while also being very motivated to work with the Audit Committee because we all know that in such a journey, there has to be a good focus on risk management, internal controls, financial reporting, compliance, adherence to everything which we have decided as a society, which is critical. And by working together, we feel we can maintain not only the highest standards which are applicable to that, but we can also make it fit for purpose. And with that, I thank you for the opportunity offered to become appointed as member of the Supervisory Board, but also take the responsibility as Chair of the Audit Committee going forward. Thank you.

Thank you, Jack. Any questions? Mr. [ Stevenson ] missed the statements?

Thank you, Mr. Chairman. I'm Mr. [ Stevenson ] from the SRB. Our question is that we expected you would tell us, but how did you find Mr. de Kreij?

By looking for him.

Was it via...

[ Mrs. Aris ] has explained how we found my successor. We looked internally then we looked at -- we wanted to have 2 financial experts. We have one financial expert, Birgit Conix, but she's an executive, which means that if push comes to shove, our company goes first. As always, when you have an executive on your board, you can have diversity and then age, et cetera, and it's good to have executives, but there was a limitation there. So the first question was, how about your time, yes? No. Then you have to go outside. Then again, we look at our nationality profile. And again with me stepping down, I'm not being up for it -- and we come to that the appointment or -- yes, potentially. We also need to have the balance. You often make that point. You did it at the beginning of this meeting. We are a Dutch company. There needs to be a few Dutchmen and it needs to be a financial expert. Then you get a long list and you get from long list to short list. And eventually, uniformly, they favored for Jack because of his experience, well connected. He's very active in VEUO, which links us very well in everything that happens in the Netherlands corporate governance. So both from a financial and from a network perspective and a nationality perspective, he was the candidate that stood out.

About the shortlist, what about that short list? Were there 2 or 3 people on the shortlist?

There were men and women on it. But eventually, this was for us, the best choice. So as you know, the HR consultants always come with a booklet that has 10 names.

I have a question from Mr. de Kreij. We've known each other quite a while. Nonetheless, I would like to know how we felt about this process and whether did you speak with all Board members? And what else do you think that you can add to ASML? How do you expect to contribute? Have you had sufficient strategy talks? And you said some things in your statement as well. Have you spoken with the auditor yet?

Mr. de Kreij has already attended 3 Board meetings as an observer. Question in the beginning about the process. How did you experience the process?

Organized. So how is such a process happening, at least how I experienced it? First, you are contacted by an executive search firm that they want to put you on a long list and whether you are open and interested and available for structure position. The next step is, of course, but that is up to the Nomination Committee. I'm not part of that, but then I was contacted that people wanted to meet with me. So one of your questions is, did you meet people? Yes, I met all the people of the Nomination Committee and I met all the others through Teams at that point. Your specific question whether I had an interaction with the auditor during the nomination process? The answer is no. Many of the things are part of an introduction program. So first, you have the selection and nomination process where you speak with members of the Supervisory Board, where you speak with members of the, let's say, Board of Management. And once we have all alignment that this is still the best solution, we go forward, and then you start with an introduction program which is quite comprehensive. So you have meetings with many people. You have, let's say, a visit to the clean room, you meet the auditors, you have meetings with internal [ order ], et cetera, et cetera. So there is a distinction between the process where the selection and the proposal, the nomination takes place and the introduction program, which has taken already for 6 months.

Thank you, Jack. I think that answers the question. We move on. Agenda item 8C. The Supervisory Board gives notice of the vacancies that are set to arise in the Supervisory Board in 2024. Mrs. Aris, Mr. East and Mr. Durcan will retire per rotation schedule. The general meeting and the Works Council have a right to recommend candidates for the vacancies that will arise. And since Mrs. Aris was first appointed based on the Works Council enhanced right of recommendation, this enhanced right of recommendation will also apply to the vacancy or the reappointment of Mrs. Aris. We'll take questions. If not, there are no further questions regarding this agenda item. I conclude that we move to the Agenda Item 9. Proposal concerns the appointment of PricewaterhouseCoopers accountants as external auditor for the reporting year 2025. At the 2022 Annual General Meeting, KPMG accountants was appointed as external auditor for the reporting years 2023 and 2024. As described in the explanatory notes to the agenda, KPMG has been ASML's external auditor since the reporting year 2016. In anticipation of the mandatory external order rotation, the Supervisory Board, upon the recommendation of the Audit Committee, proposes to appoint PricewaterhouseCoopers Accountants as external auditor effective for the 2025 reporting year. We now move on to questions. Are there shareholders' questions with respect to the appointment of PwC? If no, I conclude that we move on. I invite you to vote on this item and on any other voting. Voting is possible up to Agenda Item 13. I move to Agenda Item 10a, an item that is on the agenda every year. It is in ASML's and its shareholders' interest to be able to react timely and quickly if particular circumstances arise that require the issuance of shares. For this reason, the Board of Management would like to have the authorization to issue shares as such circumstances do arise and to also exclude the pre-emption right in situations where it is necessary to act quickly. In the past, this agenda item has been used in relation to mergers and acquisitions, for example. The authorization will be valid for a period of 18 months, that is through 26th of October 2024. If you approve these proposals, the existing authorizations will cease to apply. Prior approval from the Supervisory Board is required if the Board of Management who wishes to use the authorization granted in this agenda item. Agenda item 10A concerns the authorization for issuing ordinary shares or granting rights to subscribe for ordinary shares up to 5% for general purposes and up to 5% in connection with or on the occasion of mergers, acquisitions and/or strategic alliances. Agenda Item 10B concerns the authorization of the Board of Management to restrict or exclude preemption rights in connection with the authorizations of Item 10A. We'll now ask for questions. This is a routine item for every year. We move to Agenda Item 11 and 12. Agenda items 11 and 12 are recurring agenda items and contain proposals to execute share repurchases and share cancellations. The current share buyback program, which started on the 11th of November 2022, was already referred to earlier. ASML aims to be flexible in executing a return of capital to its shareholders. For this to be possible, ASML asks the general meeting to mandate further share repurchases and to approve further cancellation of shares. This would allow us to implement further share repurchase programs should the company decide to do so. The authorization as proposed in Agenda Item 11 would allow us another combination with the proposal in Agenda Item 12 to repurchase a maximum of 10% of the issued share capital and then cancel these shares. As you understand, implementing share repurchase programs depends on many factors, I want to advise shareholders that there is no certainty as to the further return of capital or the timing of executing potential capital return to shareholders. There is also no certainty on the method of achieving such return. I will now address items 11 and 12 individually. Agenda item 11 concerns the proposal to authorize the Board of Management to repurchase ordinary shares up to 10% of the issued share capital. Ordinary shares can be acquired on the conditions that set out in the explanatory notes to this agenda item. This authorization is requested for a period of 18 months starting today and ending on the 26th of October 2024. If the general meeting approves this proposal, the existing authorizations will no longer apply. Are there any shareholder questions with respect to this item? If not, then we move on to 12. Agenda item 12 is a proposal to cancel any or all ordinary shares in the share capital of the company held or repurchased by the company per the authorization referred to in Agenda Item 11. To the extent that such ordinary shares are not used to cover obligations under the employee share plans, this cancellation may be executed in one or more tranches. The number of canceled ordinary shares would be determined by the Board of Management but may not exceed 10% of the issued share capital at the 26th of April 2023. I take any questions. And if there are no other questions, let me move to Agenda Item 13, any other business. As previously indicated, the opportunity to vote on the various voting items in the meeting will now close. I invite you to finalize your votes. [Voting]

Ladies and gentlemen, voting is now closed. We are waiting for the results, and we'll show them after we conclude this agenda item. We now move on to Agenda Item 13, any other business. Are there any remaining questions that anyone would like to ask, for which this is your final opportunity? Then I suggest that we look at the voting result. Mr. Kleipool?

Yes. Thank you, Chairman. May I also have voting operators to present the votes on the screen where the votes for the various agenda items have been submitted. For agenda Item 3A, approximately 289 million shares have been cast in favor and 21 million against, which results in a 93.21% votes in favor and 6.79% against. For agenda Item 3B, approximately 306 million shares have been cast in favor, representing 99.09%, and 2.8 million share have been cast against, representing 0.91% of the votes. Agenda Item 3D, 309 million shares approximately representing 99.88% of the votes and 364,680 votes against, representing 0.12% against. We move on to Agenda Item 4A. Agenda Item 4A has approximately 302 million votes in favor, which represents 98.50% in favor and 4.6 million shares against, representing 1.5% against. Item 4B has approximately 302 million shares against -- in favor, sorry, 98.5% in favor and 4.6 million shares against, representing approximately 1.5% of the votes. Agenda Item 5 has 292 million votes in favor, representing 94.32% and approximately 17.5 million votes against, representing 5.68% against. Move on to Agenda Item 6A, which has approximately 306 million votes in favor and 98.88% of the votes against our approximately 3.5 million votes, representing 1.12%. Item 6B, approximately 307 million votes in favor and 99.2% of the votes. Approximately 2.5 million votes against, representing 0.8% of the votes.. Agenda Item 8A, approximately 302 million votes in favor, representing 97.74%. Approximately 7 million votes against, representing 2.26% of the votes. Agenda Item 8B, 299 million votes approximately in favor, representing 96.69% of the votes, and approximately 10 million votes against, representing 3.31% of the votes. We move on to Agenda Item 9, which has approximately 309 million votes in favor, representing 99.87% of the votes against 397.745 votes against, representing 0.13%. Agenda Item 10A has approximately 309 million votes in favor, representing 99.6, and 1.2 million votes against, representing 0.4% of the votes. Agenda Item 10B has approximately 306 million votes in favor, representing 98.9%, and against 3.4 million representing 1.1% of the votes. We move on to the last 2 agenda items, items 11 and 12. Item 11 has approximately 307 million votes in favor, representing 99.14% of the votes and against 2.7 million votes, representing 0.86%. As a final item, Item 12, 308 million votes against, approximately representing 99.51% of the votes, and against 1.5 million, representing 0.49% of the votes, which would result in a vote in favor of all the agenda items. Mr. Chairman, back to you.

Thank you very much, and thank you very much. These are some of the highest numbers I've ever seen on the shareholder vote of an AGM meet. Dear shareholders. We have come to the end of this AGM. This also concludes my tenure as the member and Chair of the Supervisory Board. It has been a great honor and a pleasure.

All the agenda items have been adopted, sorry, for the...

That's the final determination you have to make in your AGM.

My final conclusion. I conclude that all the items have been approved. Thank you for coming. It remains a pleasure. It's been an awe and a pleasure to be part of this company during the past 8 years. It's a fantastic company. Thank you. Thanks to our shareholders for their continued support, and to my colleagues and the Board for our collaboration. And I also want to take this opportunity to express my appreciation for the hard work and dedication of the full ASML leadership and all ASML employees. Their commitment to excellence is the cornerstone of the company's success, and I'm proud to have had the opportunity to work with such a talented and motivated team. I hereby close the meeting. Thank you all for joining. You may return your voting devices to staff at the registration deck. And we would like to invite you to have a drink with us in the lobby, and hope to see you again at the next general meeting. Thank you very much. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]