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

Okay. I think we're good to go. So ladies and gentlemen, welcome to this Annual General Meeting of ASML Holding N.V. We are happy to welcome you here in our Twinscan Auditorium in Veldhoven. The meeting is a hybrid meeting. That means not all of us are present here. We also have people online who can vote during the day or ask questions on our online platform. A warm welcome also to shareholders who are watching us online. First, I would like to start by introducing the members of the ASML's Board of Management, whom you probably know, most of them. Mr. Peter Wennink; Mr. Martin van den Brink; Mr. Christophe Fouquet; Mr. Frederic Schneider-Maunoury; and Mr. Wayne Allan; and Roger Dassen. Sorry about that. He's a nice gentleman sitting to my left here. Sorry about that, Roger. And I also want to welcome the members of the Supervisory Board, Annet Aris; Birgit Conix; An Steegen; Mark Durcan; Warren East; Alexander Everke; and Jack de Kreij, all present here today. Ms. Terri Kelly is not attending this meeting due to personal reasons, but she's on via live video. I hope, Terri, up there. Your biggest and most prominent position of everybody. So don't come to the meetings, be online. I also want to welcome Jim Koonmen, who is on the in visitors part so far. But we hope that he will be voted in and appointed as a member of the management team during the day. We also have Petra Groenland from -- with us from KPMG, who is ASML's external auditor. And finally, I would like to introduce Mr. Reinier Kleipool, who is a civil law notary at De Brauw and who will act as Secretary of the meeting. And given the international nature of ASML and as ASML's corporate language is English, and with all apologies, don't speak much Dutch. We will conduct a meeting in English. There is translation into Dutch available on the headphones or the sets that you've delivered outside, at least that had offered. And there will also be a translation made. If a question is asked in Dutch into English, and then we will answer it most likely in English. As usually, a recording will be made of the meeting to help us prepare the minutes. And I'll now give the floor to our civil notary, Mr. Kleipool. He will explain the process for asking questions and also voting during the meeting. So Reinier, over to you.

Thank you, Mr. Chairman. Before we begin, I will explain the process for asking questions. During today's meetings, you, as shareholders, will 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. Please remain seated and raise your hand should you have a question. And please wait until a microphone is brought to you. 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 that you may ask. The Chairman will also determine who is best positioned to answer your question. I will now give a brief explanation of the voting process. Shareholders who are here in person can use the app on their mobile device or the voting device that you received at the registration desk. And since this is a hybrid meeting, shareholders attending virtually can vote via the online platform. Registration details for this meeting are currently being processed. Once all information is available, I will announce how many shareholders are present or represented, the percentage of issued capital that they represent and how many votes can be cast. After these announcements, the voting will be opened. Once the voting is open, you will have the opportunity to vote on all the items on the agenda up until we discuss agenda Item 11, 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 opened throughout the meeting. You can make any changes until the vote closes, so at any time before we discuss agenda Item 11. Mr. Chairman?

Thank you, Reinier. And we now move on to agenda Item 2 which is about the company's business and the financial situation and the ESG and sustainability matters. And under the agenda Item 2, Mr. Wennink and Mr. Dassen will give an overview. And I will start by giving the floor to Roger, who I forgot, I'm sorry for that again. Thanks, Roger here, with all the numbers. The floor is yours.

Thank you, Mr. Chairman. What a big welcome on many occasions. So that's much appreciated. I'm going to share with you the financials, the financials of 2023, and we're going to look a little bit to 2024. So the highlights of 2023, you see them all here. 2023 was an interesting year, I have to say, for the semiconductor industry because if you look at the semiconductor industry, it clearly was in a downturn. And if you look at the numbers, actually, the industry went backwards 8%. So the market, the total semiconductor market was in decline. And I think that's an interesting perspective because then if you look at the 30% growth of ASML, it is actually, I would say, quite exceptional. So to grow 30% in an environment, in a market that is actually -- actually in decline, I think, is quite an interesting phenomenon. And why is that? Well, first and foremost, it is because the backlog that we have built up before 2023 was pretty substantial. So for a number of years, we've not been able to execute on the demand that was out there. For a number of years, actually, the demand of customers, both in China and outside of China, that demand was actually quite a bit higher than what we could deliver. And that also meant that in the year of decline, and 2023 clearly was a year in decline, that there was still so much remaining demand out there that we could actually execute on those orders. So that's why we could grow 30% in spite of a down cycle in the industry. Quickly looking at some of the numbers that we have here. So as you see, EUR 27.6 billion, that was the total revenue of that EUR 22 billion in that system sales, and the balance is the installed base management of EUR 5.6 billion. Gross margin improvement in comparison to 2022, gross margin grew to 51.3%. Net income of EUR 7.8 billion. And the net bookings number of EUR 20 billion. And that means that if you compare that EUR 20 billion to the net system sales of EUR 22 billion, that actually means that our backlog is still very big at the beginning of the year because we only saw a decline in the backlog of EUR 2 billion. And that was primarily because the order bookings in the last quarter, in Q4 were very substantial at EUR 9.2 billion. If you look at the right-hand side, it gives you the different technologies that we have and how the market developed there. In short, EUV went up, as you see here, 30%. Deep UV went up even 60%. There was a lot of demand for immersion technology in particular, and that drove up the deep UV sales by 60%. The application business was actually a little bit in decline, which I think is logical in a market that is in decline because the applications business really is the business where we have the shortest lead line, and that means this is not a business where you build up a significant backlog. So the backlog that really made us grow in a year of decline, I think that actually primarily relates to EUV and deep UV technology and less so to applications. So that's why the application business declined as you see it here. Installed base business saw stable short decline, 2%. And all in all, we were able to return EUR 3.3 billion to shareholders, EUR 2.3 billion of that in dividends, EUR 1 billion in terms of share buyback. As you see here, the buildup of our sales number, and you see particularly that the Logic business is -- was very, very substantial. Memory grew a little bit, but the Logic business, in particular, grew very substantially from about EUR 10 billion in 2022 to nearly EUR 16 billion in '23. So that's where you really see the big uptick. And this is both for advanced logic but also for mature. There was a lot of demand also for mature. So advance driven by AI. We'll come to talk about the market later on. But artificial intelligence really drove the demand for the advanced logic material while things like electrification, EVs, et cetera, really was a very big catalyst to demand for mature. So it really was Logic that drove a lot of the demand increase in 2023. You also see that here on this slide, where we look at the different technologies, end users and the regional split. And very rapidly on the technology side, you really see that our advanced technology, which is the combination of EUV and immersion ArFi on this slide, in both years, have actually accounted for 80% or more of the total sales. So it really is those leading technologies that are driving the revenue for ASML at 80% or over that in those 2 years. In terms of end use, you see that Logic really constitute the lion's share of the sales, as I also demonstrated to you in the growth that we saw on the previous slide. And regionally, obviously, the one thing that stands out here is the increase in China. China going from 14% to 29%, and I already hinted at it in my introduction, the lion share of the explanation there is, there was a lot of demand in China in the years leading up to 2023. We could only fill only a very small portion of the demand that was out there in China. And when the rest of the industry was sort of in decline, that also meant that we were indeed able, we had a capacity to execute on the historic demand that has been there from China. So that's the reason why China is pretty substantial in our sales composition this year. The most interesting slides, right? All the numbers that we have here. And you can choose, we can go and discuss every single number, but then probably the Chairman, at some point in time, is going to interrupt me and say, we've got better things to do. So I'll just highlight the key things in here and just look at a little bit of trends here in the numbers. So if you look at the total sales, then I think it's fair to state that from 2020 to 2023, so in essence, in the 3-year growth trajectory, you actually see the company double in size, you see a healthy development of the gross margin. We got a bit of a beating after '21 as a result of inflation. So that clearly had an impact. And also particularly in the last year, in '23, you really see the company gearing up for growth. I'll come to talk about that, but we really see substantial growth also for the second half of this decade. And that means that we're preparing for that in all of our technologies. And obviously, that has a bit of a dampening impact on the gross margin, but soon that will reverse itself. You see that on the R&D front, we keep on pushing down the accelerator. We have $4 billion of R&D in this year, and that really means that for all the technologies that we have out there, we have very clear road maps ahead of us that we believe are value adding to our customers. Net earnings, net income, as you see here, I just mentioned it already, EUR 7.8 billion. We have an earnings per share of nearly EUR 20. And if you look at that trajectory, starting with the EUR 6 billion in 2019, all the way to '20 and 2023, I think that's a very healthy development for the company right there. In terms of net bookings, EUR 20 billion, and as I mentioned, nearly half of that really in Q4, a little over EUR 9 billion. If we look at cash flows, there's a couple of things to note here. On the one hand, you will see that we typically maintain pretty healthy cash levels. So you see around EUR 7 billion also at the end of 2023. So you see that particularly in the last couple of years. You see around EUR 7 billion as a healthy cash balance that we maintain, which I think, gives us a lot of resilience as a company. You also see that the cash flow in comparison to last year was a little bit less, and that has to do with the fact that we are, first off, the industry is in a recession, and as we just saw, it also means that we get less orders, less orders means less down payment. So that's one dynamic that you see there. And also, as I mentioned, we're really gearing up for growth because we really see in the second half of this decade quite some growth coming. And that means that you need to start taking in material, et cetera, et cetera, in order to be able to cater to that growth. So those are the drivers as a result of which the cash flow last year was a little bit under pressure. But again, there, you will see that, that will reverse itself in the years to come. Now finally on the balance sheet, you see equivalent developments. For instance, you do see inventory picking up, right? So inventory going from EUR 7.2 billion to EUR 8.9 billion, as you see here, and that is really related to what I just mentioned. We are both for High-NA, but also for other products, we are taking in quite some material that would allow us to experience the growth that we have been talking about before. You see us build. You actually see us build stuff when you look at our campus, but you also see it here in the numbers, right, where -- by 2019, we were looking at EUR 2 billion in 2022, we're looking at EUR 4 billion of property plans and equipment and now we're looking at EUR 5.5 billion in 2023. So that really tells you that we are building for the future, as we call it, and you saw an interesting article probably this week that also talks about the longer term growth plans for ASML and the plans that we have in terms of executing on those. So those are just some of the interesting developments that you see on the balance sheet. Quickly turning then to 2024, this year. We had a bit of a slow start, and we knew it, right? So we have been saying right from the get go, 2024 is very much a transition year. And a transition year means that we're looking at 2024 in financial terms as a year that will have like a similar top line as 2023. So we do not expect growth in 2024, we expect that to be at a similar level as we had it for 2023. But it is a transition year because we do believe that 2025 is a significant growth year, and that means that we have to prepare for that growth. And I think you just saw some of the ingredients that are necessary to do that, right? We have to build, we have to hire people, and we have to take the material in order to cater to the demand that we believe is out there by 2025. So that's the growth here. So we know it would be a slow start, and we also really see the momentum growing throughout the year. So we know that Q3 and Q4, so the second half are going to be substantially stronger and we see that based on the shipment schedule, based on the orders that we have from customers. We also really see that customers, the underlying dynamics in the customers' markets are improving. We see the utilization of our tools improving, we see that the inventory at our customers is improving. So the dynamics for the turnaround in the industry and to get out of this -- out of the downturn and go to a pickup, we see that all the ingredients are there, and we believe that in 2025, we should find ourselves in the midst of that uptick. So hence, an important ingredient for our expectation of '25 is going to be a good growth year. So with that, Q1 actually came in as we guided in terms of top line. Gross margin, a little bit better than we anticipated, primarily because of mix. We had a bit more immersion tools in there, and that's always good for the gross margin. And you see all the other numbers in there. Net bookings were quite a bit lower than we had in Q4. As I mentioned, Q4, it was huge, a record order intake of EUR 9.2 billion. So some people were a little bit disappointed at EUR 3.6 billion in Q1. But frankly, if you look at the 2 combined, you're looking at EUR 13 billion of order intake for 2 quarters, which I would claim is very, very healthy. And we also went to the exercise to say, what are the orders that we still need in order to cater to these higher levels of 2025. And I think that has -- I think that clearly demonstrates that we're indeed looking at a very healthy trajectory all the way to this growth path in 2025. And then finally, the capital return to the shareholders. I already told you in my first slide, EUR 3.3 billion was returned to shareholders, EUR 2.3 billion of that in dividend and the EUR 1 billion in terms of share buyback. As we will propose to the AGM today, a total dividend for 2023 of EUR 6.10 per ordinary share, which would lead to a final dividend payment per ordinary share of EUR 1.75, and that would, in essence, constitute a EUR 5.2 increase in comparison to the dividend that we had for 2022. So that concludes my introduction on the financials. Back to the Chairman.

Thank you very much. And I'll now pass the word over to Peter Wennink. Peter?

Thank you. First thing to adjust the lector.

I know.

It is probably not the reason why the Chairman overlooked you. And as you might have noticed that the probably single reason why the next CEO is chosen is because of height.

Only because of that.

Okay. Thank you very much. I'm standing here and then in my career, I've been involved with ASML since 1984 as the partner of Deloitte to help ASML.Public. And when I look back at those 30 years and then look at the drivers of the semiconductor industry, I could not have imagined that I would be showing you this slide because semiconductors are everywhere. And whereas the connected world, which we find so normal, the hyper connectivity, the cloud infrastructure, the edge computing, whether it's your phone or your PC or your tablet or your car, it's completely normal. And semiconductors are also a very important driver for all the issues that we have to deal with when it comes to the major societal challenges, which, of course, includes climate change and the resource scarcity. Whereas the energy transition, I think, last year, we showed you some data that 1 gigawatt of a solar takes $3,500 to $4,000 of semiconductors, Same is for wind. So semiconductors and climate change and renewable energy go hand in hand. They're basically joined to the hip. And the same is true for electrification of mobility, the innovations that we will see in agriculture with drone technology and of course, we can smarter use our limited resources and will help in the recycling. It's not only true for climate change and for the connectivity, it's also true for the social and economic shifts. We all know that without semiconductors, we would have not been able to survive COVID. It gave a big boost to working remotely. And if we think about the progress in MedTech and in health sciences, that without semiconductors, it is impossible, if you think about the sense of technology needed there. And of course, also it will be a driver, it is a driver in the geopolitical domain, and we are subject to that also because of everything I just said, it is very clear that the importance of semiconductors now becomes a geopolitical strategic issue. Not having access to semiconductors for the right type of development and technology is going to be devastating for every economy. So when we think about the application space, and we always think about -- I'm going to talk about this a bit later. When you think about artificial intelligence, I didn't mention that because artificial intelligence will cover all of it, what I just said, what is connectivity, what is the renewable energy, the climate change, the socioeconomic shifts. People think about artificial intelligence in terms of compute power. But AI is basically based on data, data and smart algorithms, to actually use that data to predict and to create this artificial intelligence solutions. Now -- and then I'll think about data. So let's focus on the right-hand side on this cube and it says 1 zettabyte. We talk about these things, just words. But if you think about this, when you buy a new phone, you want a phone with sufficient gigabyte. Well, 1,000 gigabytes is 1 terabyte and 1,000 terabytes is 1 petabyte, and 1 million terabyte is on exabyte, and 1 billion terabytes is 1 zettabyte. And we produce every year to 2025, about 175 zettabyte. Now how much is that? If you calculate the number of hours in a year, it's about 8,700 hours. With 175 zettabytes, you could produce 7,300 hours of video for 8 billion people, every person on the planet. That's 175 zettabytes. That will increase over the next 10 years with the factor of 12. So data and the collection of data and the production of data is going to be immense. And that is actually what will happen. And why will it happen? Because when we currently look at the -- how AI is applied, it is applied basically on certain, let's say, elements that we all know, whether it's a smartphone or smart watch or your PC or the cloud, and at a certain level, industrial automation, where the data is collected and artificial intelligence is actually used to make us more productive. What will happen is that every single machine or object that has the ability to collect data, which will be everywhere, think about my first slide, it's going to be connected through artificial intelligence and we'll create data, that will create a support system for knowledge intervention, for decision-making and creating value. So it's not only about compute, it's definitely also about data creation. And in order to be able to do that, we need massive amounts of semiconductors. Now as you know, Martin and I are retiring today. And people have told me over the last couple of months, you're retiring at the height of the company's history performance. I said, "No, no, no." We're not even in the middle because we keep growing because of this. And we will grow because we will need it. If we want to make sure that we can come to solutions on some of these major societal challenges, we need this. And we need the support of hard core technology, and AI will grow, perhaps not next year or the other half, there's a lot of expectation, it will take some time because, ultimately, it is -- are these applications that will drive artificial intelligence. We've created a hard core technology in the semiconductor industry, companies like NVIDIA, but then ultimately, the explosion and the exponential growth of AI will happen when we're going to develop the applications. Now, and the question is, can we do that? Do we have the power? It is one of my favorite slides. So we use it every time when we talk about the growth of the industry, and we talk to investors and to society. This is an important slide. These are the 50 biggest tech companies on the planet. They either make semiconductor equipment, already in semiconductor manufacturing, so they make design and make hardware, make phones and make PCs, or they give you software and services like Google and Amazon and Microsoft. That earning system, in 2022, we're just collecting the 2023 data, we don't have it all yet. It has an earnings power of more than $600 billion of earnings before interest and tax. Yes, we'll have the innovation power because there is so much value being created to semiconductor and applications, which will only go on to exponentially grow. This EBIT growth of this group of companies over the last 5 years has been double-digit compound annual growth rate. This is why we do believe it's going to happen. The innovation power, not only from a financial point of view but also from a technology point of view, is there. And of course, it can only be done with people [indiscernible]. So that means that the market expectations for the semiconductor industry currently around $600 billion, it's going to grow by 2030 to about $1 trillion. There are estimates that are significantly over $1 trillion. So it's needed, but you need to realize that the semiconductor industry took 50 years to build an industry that's capable of producing $600 billion worth of semiconductors. Now the next 6 to 8 years, we need to almost double that, and this is why we need to build capacity. And this is why our customers will grow because of all the issues I've just mentioned and it's why ASML will grow with that industry and with our customers and with the end drivers of the ultimate value. And we do this with people. Now we look at ASML. We grew in 2023 from 39,000 people to over 42,000 people, of which roughly half, just over half is in the Netherlands, of which 40% is non-Dutch. But every 100 people that we hire today, over 60 -- between 60 and 70 are non-Dutch. We have 123 nationalities here in Veldhoven. And you may recall my request to the Dutch government and to the politicians to maintain an investment climate that is helpful in keeping those knowledge workers here but also attracting them. I think it's critical. On top of that, we feel a very strong responsibility for sustainability, ESG, environmental, social and governance challenges, which we divided in 9 themes. On the environment is, first of all, about energy efficiency and climate action. It's our net zero gashouse emissions in our value chain by 2040. We said it last year, I'm going to repeat it again, and zero waste from operations into landfill and into incineration. And on the social part, we strongly believe that governments are an integral part of responsible societies, and we need to create an attractive workplace for all. That means we have a very diverse, inclusive, healthy, and very engaged workforce. It's critical to perform. We need to have a responsible supply chain, a value chain. It's not only on us. We are a system integrator. We are a system architect so we rely on our suppliers and our customers to actually follow us in our energy and vision and climate action goals. And that also means that we need to support and foster an innovation ecosystem. We're a system integrator, system architect. We depend on an ecosystem where innovation and creation goes to the heart and the genes of the system. And that is necessary because these socioeconomic challenges are not once in a lifetime. They're once in many lifetimes. And this is why we need that ecosystem and we need the innovation power, which we also think is a responsibility of society and also of our politicians, not only of companies. And then we need to stay a valued partner in our communities. Our people will work better when they thrive and they live in a responsible society that provides them with jobs, that they can afford a decent roof over their head, put food on the table, but also can put their kids to a good school and have access -- everyone has access to medical care and their safety, whether it's physical, digital or climate safety. We are part of the communities. We need to feel partly responsible for a responsible society. And then on governance, ESG sustainability is not a word on a PowerPoint. It has been driven down in our organization, into every layer of the organization to go after these ESG goals. It's driven down. It's real. And we need to be transparent and engaged with our stakeholders to make sure that they can follow us and that we are reliable. We say what we do and we do what we say. Now some examples on the environment, we'll go quickly through them, but while we grew and Roger said it, our operations and output to 30%, our CO2 footprint reduced with 8%, so it's a significant reduction with a significantly higher output. The energy usage per wafer went down to 40% from 2019 to 2023. And of course, we're also engaging in attracting renewable energy. A good example is our business in Taiwan. Where we'll further do that, we'll further invest in energy saving, new measures in our technology specifically with EUV. We'll upgrade our circular economy strategy to go to the next level. And also on social, in 2023, we spent EUR 15 million as commitments in the community in terms of cash, in terms of in-kind investments. We are a very engaged population. Our engagement was a very high engagement score of 80% up from 78% in 2022, a 4% attrition rate across the globe, also in areas where attrition is significantly higher than in the Netherlands, I think, is a proof of people feel connected to the company. And very important, we have 20% women in our company, which 5 years ago was around 13%. The inflow is going to be 27% of the inflow is women, up from 24% in 2022. If we say we want to be a diverse company, an inclusive company, that number needs to go up and it will go up. And of course, we will keep further increasing our efforts in this field. And on governance, we instituted the ESG Committee as a subcommittee of the Supervisory Board. And we're also recognized by several ESG rating agencies as the #1 in our industry. We'll also, when we make internal decisions on investment projects, we will start using an internal carbon price. And we will continue with intensive collaboration with our chain, our value chain, with our customers and with our suppliers to drive sustainability across the total value chain. I will organize societal conferences, responsible and sustainable conferences in the areas where we operate like in the Brainport, June 2024 here. Now small picture, a video. What we see here is our High NA EXE:5000 system built for the first time. It's been built, has been shipped in December 2023, is now under installation with one of our customers, Intel, which is public, and we're showing the first images of those systems. We can print 10- and sub-10-nanometer lines. And why is that important? People might not realize but with High NA EUV, with the -- at similar productivity, we increased the transistor density with a factor of 3. It actually means that we will have faster compute power. So when you think about high-performance compute and all the data that needs to be generated, it's going to be essential. And why do we want to think about this as a major step forward? One is a result of the evolution of lithography starting in 1984 when ASML was founded to where we are today. Now EXE, this NXE has a completely new optical architecture so we can actually keep shrinking. That optical architecture, the entire system is completely new. And it is the result of years and years of work, almost 10 years, and billions and billions of R&D money and investments whereby this system did not exist if you can define existence by being able to print the 10-nanometer line until a few weeks ago. Some people would call these risks, too big, irresponsible. If you think about this, this is the results of millions and millions of mathematical calculations that only exist in simulations. And only way you put it all together in by far the most complex machine on the planet at one moment in time, you can prove it works. We did it a couple of weeks ago. So why is it important? Because this architecture will also be a basis, the optical architecture, the machine architecture, to create the next generation if needed, for our customers want High NA. We have the ingredients. We can do that. It will also be the basis for EUV for the next decades to come. So when I look at Martin and the team, and I'm always very proud when I look at him, which he and his team made this possible. And when he leaves perhaps at the epitome of this technology development because before he leaves, he made sure that it worked. I think it's a big round of applause for Martin and the team. So that was my part of telling you something about the future of this company. And I hope I made it clear that when Martin and I leave, we leave the company, as I always say, in a state of sweet and sour. The sour part is that we leave because we love the company dearly. And the sweet part is we are where we are not only from a technology point of view but also from a succession point of view. And Martin and I am very, very pleased that we have our internal succession, Christophe, but also, Roger, we won't forget you. So that makes us extremely happy because we both feel, Martin and I, that probably one of our most important responsibility is to make sure that if anything would happen to us or we take the decision to retire, that a great team is now ready to take over. Thank you very much.

Thank you, Peter. Thank you, Roger. And we're now ready for questions. Would be anybody interested in asking a question? Yes, we will have a mic coming to you. Can we have a microphone over here?

Thank you so much. My name is [indiscernible]. I represent the Dutch Shareholders' Association, the CEB. First of all, I'd like to compliment the Board, the nonexecutives and employees of ASML with the very good results of last year. Still, backlog is significant and convincing despite the recent dip, which was well explained in public. Growth is high and steady and you are really assisting, we just heard it, assisting the world significantly in the electrification, data collection, application of AI, technology, and everything we depend on now but more so in the future. Now you are the company that shows that internal controls do matter. You did not mention them, but you really can be in control even in the most risky of projects, which, of course, the building of these machines is, that is not something which is automatic. It's really a real effort, and it requires an enormous effort and amount of dedication and wisdom by you and all the employees of ASML. So good results despite the geopolitical negatives. And we shareholders understand the dilemma of ASML, your dependency on continuity of good relations with the U.S. with [indiscernible] and other key elements in the chain of the most innovative components, crucial for the completion of those brilliant and now the DUV and now the EUV machines. So compliments for the way you navigated the company through those challenges, accepting political realities, defending the continuity of the company as well as a strong message addressed to the Dutch government with positive feedback we heard them earlier this week. So the continuity of ASML in Netherlands is important, and we shareholders are convinced that the mutual interest is recognized both in the Dutch government as well as within ASML's leadership. But we do have a few questions and requests for further clarification. The first question. In April this year, the U.S. government asked ASML to stop servicing some advanced EUV machines [indiscernible] Chinese customers. Does this latest development in any way influence the 2025 or 2030 financial targets for the installed base management? Or is it too early to tell? So that's the first question. And a follow-up, on China, there are media reports that China is applying self-aligned quadruple patterning or SAQP to DUV machines, so this is the older generation technology. But nevertheless, they are able to make the 5-nanometer grade chips without use of the EUV tools of ASML. Can you comment on this development in China and the potential financial consequences for ASML? Is China catching up faster than ASML previously assumed? The second question on ASML's High NA EUV. It's marketed as reducing the process complexity and enabling the scaling beyond the 2-nanometer. There are, however, industry experts that warn that the High NA EUV is initially too costly compared to the Low NA EUV. As such, adoption might be slow. ASML targets on the 20 NA EUV shipments in 2028 might be too optimistic. So could you please share your thoughts on the adoption and relative cost of the High NA EUV up to 2030 and compare this development with the Low NA EUV double patterning? And B, what would be a slow adoption of High NA EUV? What would it imply for ASML's revenue and gross margin? A third question, I'll keep it short. As a consequence of the decrease in contract liabilities, ASML's free cash flow was low as ASML's worked through its backlog, with the net system sales potentially below net bookings, the free cash flow will remain under pressure. Does ASML expect the backlog to recover after this year with net bookings outpacing the net system sales? In other words, will you be able to achieve a free cash flow above or at least in line with earnings? And the final question on the here and now, how far can you expand in the Eindhoven region? Does the commitment of the Dutch government suffice? Is it sufficient to realize your operational and financial plans until 2030? Or is there also a plan B? Thank you for being able to address those questions.

Thank you for the 4 questions. I think we'll pass the first 2 questions to Christophe and then, Roger, if you could take the last 2 questions.

Yes. I'll think the first one on...

The service of EUV machine, I will take that. You can take the 5-nanometer question [indiscernible]. So the service of the EUV machines, we've had that question. Clearly, this is also something which is the result of what governments discuss amongst themselves of what they find as subject to what they call national security. We're not privy to that discussion. We're not participating in that discussion. What we do, do, we provide them on their request with information on what services means in terms of -- and that's what we do. And I think on the basis of that, I think the discussion between the governments take place. I think it only affects those factories where there are certain export control restrictions. And so that in itself will not have a significant effect on the 2025 to 2030 financials because it will be a limited number. So this is something which is under negotiation and our role is to inform.

Christophe, I think if you take the -- there was in the first question also a question of the effect of quadruple, so if you could add to that.

Yes. So when it comes to how far basically, the technology can go in China, I think we have been very clear all the time that 7-nanometer was possible. We believe that 5-nanometer is also possible using multi-patterning. Now the caveat to that is when we say it's possible, the question is in which condition. So it is possible if you want to create a development vehicle because you don't really care about here, you don't really care about cost. But when you want to move such a technology to high-volume manufacturing, this is where multi-patterning is becoming very, very difficult. And also technologically, you can do it. The yield of what you're going to get, the cost of what you're going to get is going to be such that typically that doesn't fit the requirement of high-volume manufacturing. And this has been proven, I would say, by one very big customer of ASML, Intel, who has been extremely public on how they could not succeed to advance beyond 10-nanometer without EUV. They even wrote an article a few weeks ago stressing again the fact that not going to EUV was a major setback for them. So technically, you can. Economically, you can't. I think that's a bit the short answer to the question. And I think this is something we have been sharing with many people for many, many years. On your question to High NA, the second question. So first, I'd like to come back again. I'm sure Martin could chip in, but Peter mentioned the fact that we have been exposed -- been able to expose already this 10-nanometer resolution image. We even have some initial one at 8-nanometer. And this has created quite an excitement in ASML but also with our customer because this is the sign that this technology is now available, that most of the risk has been retired. A couple of days ago, we have exposed our first customer wafer in our lab here in Veldhoven. And in the next few months, we expect all customers to come to see us with [indiscernible] in order to basically check what they can do with this tool. All our EUV customers have already committed to High NA. We have double-digit booking on High NA. And all of that has been done without any of our customers having one single image at [indiscernible]. So this shows a bit the trust, but also, I would say, the opportunity that this technology can represent for that. Now you hear indeed a lot, it has a lot of articles. So some customers are extremely bullish about High NA. Some customers are more reserved. I think it's a bit of a matter of style, a bit of a matter of where those customers are also in their own business. What we know is that, again, everyone is going to look at it. Everyone is going to evaluate it. I see the real question about High NA is not if our customers are going to use it. I think Peter made a strong case on that. The only question is how much and how fast they're going to use it. They will go step by step. If you remember the EUV insertion didn't go all in. The first node was just a few EUV layers. Same will happen with High NA because this is also a bit what we can do in terms of ramping the technology for our customer. But as Moore's Law continue, we expect the demand for High NA to grow. There was still a debate, again, on how many layers, when, et cetera, et cetera. We are extremely relaxed about it. I always say it's not our goal to push customers to use High NA or low NA. Our role is really to give them both and the full flexibility basically to use either tool whenever they need so that they can optimize their process and their cost. And for us, I think we welcome the use of both systems because at the end of the day, I think it doesn't change, I would say, our results dramatically, right? But we are in a very good place today with High NA, and the next few months are going to bring more interest for sure.

And it also explains why slow adoption doesn't matter because then the alternative is double-patterning Low NA. It's more Low NA sales versus one system High NA. It's up to the customer.

So you will see cash flow and order book and contract liabilities after the expansion potential in [indiscernible].

So [indiscernible] on the free cash flow, the contract liability is good analysis but there are many moving parts to the free cash flow of this year. You referred to the contract liabilities. Actually, the fact that the contract liabilities go down is actually as a result of lower fab shipments at the end of the year. So that's an important element why the contract liabilities went down by the end of '23. If you look at the moving parts, what are they? First off, there are down payments to your point, right? So that's a clear element in there. Of course, at a certain point in time, orders are coming back. And as a result of that, down payments are coming back. That is a given. I mean, many of the analysts have already pointed out that we have a few large customers that for a node transition that everyone knows they're going to make, they haven't placed orders yet. So of course, that will come somewhere in the next couple of quarters. And with that will come the cash inflow that will be linked to the down payments there. So that's one element. So inevitably, that will come back. We never guide order intake because we also know it's extremely lumpy, right? I mean, we saw it very clearly, as you pointed out, in the past half year, 9.2 in Q4 and then 3.6 in Q1. So it's always very lumpy, hard to predict. But that it will come back in the next quarters, I mean, is a given. The second thing why the free cash flow is a bit under pressure and was under pressure in 2023 is the fact that we're ramping, right? We know '25 is going to be a big growth year. So already taking a material both for High NA, which has a very long lead time but also for some of the other products in order for us to be able to make those products and be able to sell them in the '25 time frame. So you've also seen the inventory levels going up quite significantly. So that's the other element in that analysis. And lastly, I would say, in '23, some of our customers went through pretty tough times, and they asked for extended payments in a number of cases for us, which we granted to them. So it was a combination of things as a result of which free cash flow was under pressure. But it's also clear to see, [indiscernible], that if the market really comes back in an upturn, that those dynamics will reverse. And that as a result of that, indeed, to your point, you're going to get to a situation where free cash flow is in line with earnings or as a matter of fact, as we've also seen in the past, could actually be ahead of earnings. So I think that is a realistic assumption at a certain point during the uptick. On the expansion in Veldhoven or more broadly in Brainport, as you know, we recently announced that we have the LOI with Eindhoven, so that clearly gives us the opportunity, I would say, for the longer term. So this is really something that is not going to increase. It's not related to the increase of capacity in the medium term. This really is for the last years, I would say, of this decade and then into next decade. So I think the LOI, I think, is the result of a long discussion of pursuing all the options that are there. It's also clear, and Peter referred to it, that the Dutch government has clearly recognized the circumstances that are necessary for us to grow. So I think the fact that we had a very positive reception of that in the Hague in the past couple of months, I think it was very positive to that as well. Do we have a plan B? Well, you started your questions with risk management. Of course, we have a plan B. But we are very much looking into expanding here in this region, still both what Veldhoven gives us as a growth opportunity but also what Eindhoven might give us on a go-forward basis. So that is clearly what we're very much focusing on. If for whatever reason, there was to be a slowdown in that capacity expansion, then of course, we have the plans there. What we could do short term to optimize our capacity in order to still be able to cater to the demand. But in the longer term, we definitely need additional land to expand. And I think the LOI that we signed last Monday, I think, is a really good step-up for that.

Thank you. I hope you're happy with the answers. Okay. Thank you very much. Any further question? Can we have a microphone down here, please? On my left, sorry.

[Interpreted] Thank you, Mr. Chairman. We still believe that ASML is a Dutch company listed on the Amsterdam Stock Exchange, so we expect that shareholders' meetings are to be held in the Dutch language. So having said that...

Just a comment on -- I think we should have it in touch with a [indiscernible].

[Interpreted] I am speaking on behalf of the Foundation Legal Protection of Investors, SSB. I would like to congratulate the company with the excellent performance of this past year. China, we touched upon China briefly. There's just one more thing. China sort of expected what was happening and they bought a lot. Can you still install the machines that you're no longer allowed to install at your service? Can you service these machines? And the market, well, this is a full-fledged market. But the point is that the market now depends on AI and consumers. Could you perhaps elaborate? With the models that you used, could you share more information about the future? Well, it may look wonderful, but VDM will also disclose figures and there might be hiccups. And consumers -- most semiconductors end up in consumer products. So these are 2 markets that we are incredibly dependent upon. So we would be happy to hear more about this. How about suppliers? Can they keep up with all these developments? And then finally, yes, I do have some questions -- questions have already been asked that I was intending to ask. So yes, well, that's just about it. Yes.

Thank you very much. So we'll start with China. And I think, Peter, you can answer that one?

Yes. Yes, you've asked the question whether the machines that we've sold can be installed. The answer is yes, and they can be serviced. Of course, not with those customers or the factories of those customers where export controls would prohibit the shipment. So we cannot indeed install them because we can't ship them. And there's also service in those limited number of factories cannot be serviced. But that was known and that's in our planning, it's in our financial models. So this is where we have certain restrictions. We can service them but not with U.S. content, with spare parts that come out of the U.S. that are under export control. And then you cannot service them with those parts. But that's for a limited number of systems. But we can install anything else that we have sold, we can install and we can service.

Okay. So that was the first question. The second question was that as the market depends on AI and consumers. Do we have a forecast or we have worries on the forecast that we have provided to the market, which is, if I'm not mistaken, 12% approximately?

So I'm happy to take that question, because you specifically asked for the model, so which models are you using to do that? And what we typically do, and we do that very elaborately at the Capital Markets Day, which we'll have in November of this year again, we typically look at the various end segments, and we say what do we think the end markets are going to look like, which, of course, we'll do again in November. I would say it's not just consumer, it's not just AI. Don't also underestimate things like automotive, right? I think the automotive market is very significant as well. And with electrification that we talked about, with advanced driver assistance, that will be a big market. I think Peter showed it. And I think that's been the one big development in the past couple of years is the huge diversification of end markets. So we're no longer dependent on smartphones or just PCs or whatever. There is such a wide array of applications of semiconductors as a result of which, I think our diversification, I think, has become so much stronger, and we're less dependent on individual markets and how they develop. I still agree with you. AI has enormous potential, but we still have to figure out exactly how much it is. I mean, there are people that say that AI is going to be a $400 billion business by 2027. There are others who say, well, that might be a bit of an exaggeration. And maybe it's going to be $200 billion or $300 billion by the end of this decade. We're still in the process of trying to sort that out, but we firmly believe that artificial intelligence, and we actually already see it in our numbers, that artificial intelligence is becoming meaningful. A year ago, it was nothing in our numbers. Right now, we really see, both on the memory side and on the logic side, really customers ordering equipment that is specifically dedicated to artificial intelligence. So we clearly see it take off. But I agree with you, we still have some homework to do in order to really determine how big the market is, and that is something that we would like to share with our analysts and investors in November of this year. The final question was on supply.

I think the consumer dependence, your answer, I think you answered that. And then we have the suppliers. I think the supplier is -- it's a good question. As you know, we've been public saying that we would like our production capacity to grow to 90 EUV systems per year, 600 DPV systems and 20 High NA systems. That is what our supply chain is now gearing up to. That's what they're building. I don't think we currently see any hurdles or big roadblocks of them not being able to do that. So I think it will be there. Suppliers are able to follow. In the last 10 to 15 years, our suppliers have also grown. Some of them have merged, have become bigger companies with bigger resources. And this is why although it remains a stretch, Wayne is responsible for our strategic sourcing. He knows in his day-to-day work that you have to stay on top of these things. But I don't think Wayne, there's going to be any major issue here?

No, I think suppliers are very ready. We start in years in advance before first shipment. We start with development with our suppliers. We stay very close to them on capabilities, and I think we're in good shape.

Thank you. Any further questions?

Dear members of the Board, dear members of the Supervisory Board, my name is [indiscernible], and I represent VBDO, the Dutch Association of Investors for Sustainable Development. Once again, we've read your report with full attention. Congratulations with another year of great results and achievements. We'd like to ask questions on 3 separate topics: CSRD, living wages, and lobbying. I will introduce each topic separately before asking the corresponding question. Starting with CSRD. ASML concisely describes the process of the double materiality assessment in the annual report. VBDO expects full compliance with CSRD reporting in the next year. ASML has a negative impact in its value chain on topics such as biodiversity, water, e-waste, that go beyond the impact of direct suppliers, Tier 1 and customers Tier 1. Various stakeholders consider these relevant topics for the industry in general and for your specific sector or for your sector specifically. However, as the process is described briefly in the annual report, it is unclear for VBDO, how ASML assesses and addresses those specific impacts. Three questions. To what extent does ASML have insight in those specific impacts that go beyond direct suppliers and customers? Second, does ASML expect changes in the double materiality assessment related to topics such as biodiversity, water pollution, given the impacts that go beyond its direct suppliers and customers? And as a third question, how will ASML manage those specific impacts in its value chain? Would you want me to continue with the next topic or take a moment to answer first?

I think these are 3 good questions to answer and I'll pass them to Christophe.

Yes. So first, I think I'd like to say that we conduct our double materiality assessment in full compliance with CSRD. And I think we have been stepping up significantly this year to be ready basically to meet all CSRD requirement. If you look at our ESG strategy in reporting, it is based on the outcome of the DMA. And we will disclose this process and the outcome in very much details in the annual report of 2024. The input from all stakeholders, including you, is part of this assessment. When we look at our assessment, we consider all impacts and risks across the entire value chain. That's including, of course, also the supply chain. The level of insight of our own operation is, of course, higher. And when it comes basically to upstream and downstream, we're going to rely on the subject matter expert. So we are working with a lot of people basically to get the most accurate possible information. On your second question, which I think was about how we changed the materiality assessment related to topics such as biodiversity, water and pollution, so similar to last year, we considered those topics, among many other, in our DMA. And we typically don't expect many changes year-on-year because when it comes to climate, things are not changing dramatically year-on-year. Now at the same time, we observed some changes, some smaller changes. We see, for example, that water scarcity is becoming more and more important in the Netherlands. And as a result, this could have an impact on our assessment. We are still in progress in the assessment. And again, we will publish the full outcome of that in our annual report 2024. On your last question, which I think is about how do we manage also our supply chain, we have an overall supplier sustainability program. We are very much engaged with all our suppliers in order to create also the awareness around ESG. I think Peter has said this is a very important topic for ASML. We bring this topic also to our supplier. And in the relationship we have with them through those program, we ask them to work on what we think is critical. We ask them, for example, to reduce their CO2 emission to zero by 2030, as Peter mentioned. We also require them to adhere to the latest RBA code of conduct, which is a bit of a reference today in the industry. And if we identify new material topics out of our assessment, of course, this will be also transferred through this program to all our suppliers. So this is a bit the way we are working with the supply chain on that.

Okay, thank you. I hope that was a good answer to the first question. And then you had on living wages and lobbying.

That's correct. Thank you for this first set of answers. In the updated human rights policy, ASML states that it expects suppliers and other business partners to ensure living wages for workers in the supply chain. VBDO [indiscernible] for its transparency about this expectation and encourages ASML to increase reporting on this approach. However, was unable to find a policy for ensuring living wage for workers in the supply chain, nor did we find any KPIs nor a definition of the topic. Two questions. How does ASML address the important topic of living wage? Is ASML willing to increase reporting on this topic on this approach in 2024? And the second question, will ASML include a definition of living wages and living income in the human rights policy and the code of conduct?

So Christophe, would you like to comment?

So first of all, of course, I think you know that ASML is committed to paying fair and balanced salaries and benefits. This is part of our code of conduct. We also expect our supplier and other business partners to do the same. And that, of course, include ensuring a living wage for workers in the supply chain. How we do that with our suppliers? As I mentioned before, we use the RBA code of conduct. This is today a reference, and this is also a code of conduct we ask for our supplier to basically adhere to. There is, in this code of conduct, a clear reference to minimum wage. Now on top of that, and that's very important, we are also finalizing a very extensive human rights energy assessment on the ASML supply chain to identify any potential human right impact. That includes basically living wage. In the next annual report, as part of the CSRD reporting, we will include a KPI that will be indicating the percentage of employees paid an adequate wage by country. So this will appear in the next Annual Report. To your second question, will ASML include the definition of living wage and living in [indiscernible] in the human rights policy and the code of conduct. So we are currently updating our human right policy which will also be based on the outcome of this saliency assessment. And this updated policy will include, among other more specific requirements on the process to identify and manage human rights impacts, including an adequate wage. So we started with a human right policy. We have seen it, I think this year. We are working on this assessment and this assessment will enrich basically the future of the bodies.

An adequate wage? Do you now refer to a minimum wage or living wage?

We are referring to living wage.

That is clear.

And then lobbying.

The third topic of lobbying. Thank you for previous questions -- answers. VBDO is pleased that ASML has published the revised government and external affairs report. In the report, ASML disclosed contributions to several associations and the type of involvement in some of these organizations. However, the list of memberships of ASML appears to be non-exhaustive. The report sets a good example for sector peers. VBDO encourages ASML to include a comprehensive list of its memberships of industry associations and trade organizations so that ASML can continue to lead by example. And some of these industry associations also lobby against climate change, for example. And there's plenty of other topics. So the question will ASML include an exhaustive list of its memberships of industry associations and trade organizations in the government and external affairs report.

Yes. Thanks for recognizing indeed the step that we took there to publish this. And it's good to know that you really see that as a good practice that others might follow. I have to say, by and large, it's pretty exhaustive. So we'll take another look at it, try and make it even more robust, but you should assume that what is in that report really caters to the lion's share of the contributions that we've actually made. So we'll take another look, make sure that it's even more comprehensive in 2024, but it's pretty comprehensive. The lion's share is already in there.

Okay. Do we have any further questions? Doesn't seem to be the case right now. So the data registration for this meeting has been processed. So I'll now hand the floor to Reinier Kleipool to give us the status.

Thank you, Mr. Chairman. The total number of issued ordinary shares for the record date for this general meeting amounts to 399,584,578 ordinary shares. 6,347,822 of these ordinary shares are held by the company as treasury shares. Since each ordinary share carries one vote. The number of voting rights amount to 393,236,756 votes. The count for today's meeting show that at the start of the meeting, 308,157,955 shares were present or represented at this meeting. These represent 78.36% of the issued and outstanding ordinary shares as per the record date. This means that at today's meeting, all voting items on the agenda can be adopted by means of a simple majority of vote cast, as more than 50% of the outstanding share capital is represented. I'll give the floor back to Mr. Chairman.

And I'm now open for the voting, and I'll ask the voting system or operator to switch on the voting system. I just want to say that do you have the opportunity to vote on all items at all times during the meeting, as Mr. Kleipool said earlier. And you don't need to wait for any particular item to be discussed before you cast your vote. And you can change the vote by any time. We just change to the new choice and then that is done. And now we move on to agenda Item 3A. And this is concerning the remuneration report for the Board of Management and the Supervisory Board for the financial year 2023 as prepared in accordance with the Dutch law. And the general meeting today has an advisory vote on the remuneration report. And I'll now give the floor to Mrs. Kelly. Over to you.

Yes. Thank you, Mr. Chairman. And I'm so sorry, I cannot be there with you in person but happy to provide a virtual update of our reports. Can we move to the first slide. Okay, just to summarize the '23 report. This obviously is aligned with Dutch law and EU Shareholder Rights Directive. And you may recall that we implemented a change in policy in 2022 for the Board managers. And then in '23, we made some additional changes for this Supervisory Board. And all of the topics in the report are aligned with the policy. And so one of our key objectives is to continue to look at transparency, and hopefully, you found in the report, we try our best to enhance transparency and explain the [indiscernible] in terms of some of the measures and incentives and methodology. We've also done a very extensive stakeholder outreach, and I appreciate all of the engagement, both with internal stakeholders as well as external stakeholders. This has really helped us, I think, inform both our report and also any future practice we may contemplate on our policy, both for the Board of Management and Supervisory Board. One unique element this year that you'll note in the report is we performed a societal benchmark which I think it's probably the first of its time to actually do some external comparisons in the local Dutch market and how our [indiscernible] progression changes versus the external world, so if we [indiscernible] was something that we did feel very proud of and pursuing to look at this in the future in terms of maybe future opportunity is another data point, how well our pay policies [indiscernible] external [indiscernible]. And then lastly, I wanted to just cover a couple of topics from the report. And you'll see that we've made some increases in our base salary that will [indiscernible] within our policy [indiscernible] with the market. And then lastly, the incentive measures, which is [indiscernible] significant attention to really in both the short-term incentives and the long-term incentives with the [indiscernible] drivers for ASML. So this is a key part of our work certainly at the committee. So if I go to the next slide, I'll just talk to you about the performance outcome for '23. So if you look at our short-term incentives, you'll note that we still have a high weighting on the financial measure of [ EBIT mark ], 50%. We achieved good performance. And then again, in our nonfinancial measures, it's a good mix of what our customers care about. And so these are the key areas combined with our core business segments. And lastly, the Technology Leadership Index, I think we spoke at length about how much this is a lead indicator of the performance for ASML. So in total, we achieved 128.2% of target aligned with our short-term incentives [ that ] we felt good performance. And now I'll move to the long-term performance. So again, a good mix of financial and nonfinancial measures. We achieved overall performance of 157.7% of target. I do want to take this opportunity to just draw your attention to sustainability. And you heard earlier how important this is for ASML and certainly a focus area. And so in this particular case, we achieved a 0 payout, of target, and that is a little misleading. And I think it speaks to some of the [indiscernible] trying to establish long-term 3-year incentive targets. And I think we were probably a bit more aggressive in terms of the target setting. This [indiscernible] sustainability [indiscernible] is the Dow Jones Sustainability Index. And in this case, we actually performed at #6, I believe, out of 347 companies. So this is much broader than I'd say a semiconductor ecosystem. And in this case, the performance target was 10% from a top performer. And you'll see we saw [indiscernible]. And so our committee did deliberate on this because I think we felt the performance was quite good. But in this case, we probably did a not so good job of our target setting and with no discretionary changes are not well looked upon by many of our stakeholders. So we made the decision to keep the [indiscernible] at as it was, we still ended up in a very healthy result of 157.7%. So I believe that concludes my remarks, Mr. Chairman, I'll hand it over to you.

And I will now move over to questions. Are there any questions for this agenda item?

Thank you, Chairman. Thank you Mrs. Kelly. Again, [indiscernible], the Dutch Shareholder Association. Question for Mrs. Kelly. You ended with this ROIC and I have a question on that. You wrote that ASML has reintroduced performance measure. So the cash rate of return on capital, the ROIC as metric for the long-term incentive plan, the LTI. Only recently, you stopped using the same metric, ROIC with the argument that many investments have a longer return period than the 3-year performance period of the LTI. So consequently, the ROIC performance had to be regularly adjusted for extra R&D expenses, other changes, which were unforeseen at the time of the target setting. Well, the definition of ROIC has been slightly adjusted, long-term contract liabilities are now deducted to calculate invested capital. This does not solve the earlier mentioned arguments. In fact, by adjusting it potentially makes the ROIC figure even more volatile this year to the positive, but next year, it can be negative. So why has the remuneration committee decided to reintroduce ROIC with a weight of 40%, so really high given the earlier arguments and which are still valid. Could you please respond to that?

So we had a lot of deliberation on this. And I think this is also in partnership with our CFO, Roger, that as we looked at alternatives, we contemplated using cash conversion rates, which you mentioned. But we always saw that ROIC was an important measure if we could [ bodes ] some of the variables that caused some of the challenges over the period. And so the major change that we made in the [indiscernible] that we're taking the R&D component, and fixing it according to our long-term plan. And we were very clear that if we deviate on the high side [indiscernible] to invest more in research and government, more or less, we will make investment and to make it clear as to the rationale [indiscernible]. As this was one of the major drivers that created the fluctuation. So with that changed in a couple of other micro changes we felt comfortable and certainly supported by the Board of Management and our CFO, Roger that this is still a much better measure than the other measures we looked at [indiscernible] our financial performance and Roger do you want to say, to other comments?

Should we try to repeat it, because of the connection?

Yes. Maybe for Mrs. Kelly connection is not...

Maybe Roger or maybe you can get that...

Sorry about that.

I have to repeat it. Terri gave all the good ingredients, but I know them, and that's why I can understand it. So we looked at a bunch of alternatives because as you know, in the past couple of years, we actually looked at more cash-driven metrics. But then we said, well, cash is that -- doesn't really cut it in terms of the value that the company is adding. So we do believe that ROIC with the longer-term improvement of profitability, measuring longer-term improvement in profitability, and also driving balance sheet efficiency, those are still the two things that you want to achieve. And that's why I think the Supervisory Board and the Remuneration Committee at some stage that we actually believe this is a better metric still than cash. But you're absolutely right. One of the key things that we ran into in the past couple of years was that sometimes we pushed on the accelerator harder in R&D. And actually, the Board of Management got penalized for that because by putting more money into R&D, which, of course, exactly to your point, long term, beyond the 3-year period is going to generate yield. But short term, even within the 3-year period, obviously, you would be penalized for that. And that is something that the remuneration committee said, that's unhealthy. So what we did to overcome that problem is to say, in the ROIC the actual ROIC calculation, we actually take the budgeted R&D number. So you take the budgeted R&D number as per your longer-term forecast and you fix it in there. So if you then, for whatever reason, are going to spend more on R&D, you don't get penalized on that. So that's the way it's been done. And that's, I think, [indiscernible] a way in which the problem that you rightly identified is the reason why we balance this measure, the way that got addressed. So maybe that helps in clarifying what we did.

Any other questions from shareholders? No. Does not seem to be the case. So we'll now -- well, you are obviously welcome to vote on it now, and we continue with Item 3B.

And the item 3B concerns the discussions of the annual report and the adoption of the financial statement for the financial year 2023 as prepared in accordance with Dutch Law. As you will have seen, ASML published an annual report containing financial and nonfinancial information. This year, ASML has again prepared two sets of financial statements one based on the U.S. GAAP, the accounting principles, which are generally accepted in the U.S., and one based on the international financial reporting standards that are adopted by the European Union and Dutch law. The 2023 financial statement based on IFRS and Dutch law are now submitted to you for adoption. And Mr. Groenland, who our external auditor from KPMG, as I said, presented earlier, and she will give you an update on the audit procedures.

Good afternoon, ladies and gentlemen. My name is Petra Groenland, and I'm the external auditor for ASML on behalf of KPMG. KPMG has been the external auditor since 2016. And this is the third time I'm standing in front of you. It is my privilege to address you today. As shareholders, you are important users of our reports, and we value your trust. It is in that respect that I would first like to give my reflection on the recent media coverage on KPMG related to the completed investigation into the sharing of answers of mandatory training tests, which resulted in a settlement with the PCAOB our U.S. audit regulator. I deeply regret that this conduct has happened within KPMG. This should not have happened. KPMG has performed and is performing a thorough root cause analysis, and we've been taking various measures on training, culture, behavior ethical decision-making. Individuals that have been involved and have participated in answer sharing have been sanctioned and some of them had to leave the firm. So for you as shareholders, I can imagine that it is relevant whether the audit of ASML was impacted. I can tell you that I have not been involved in exam answer sharing, which was also confirmed by the investigation. I'd now like to continue with the presentation on the '23 audit of ASML, what we're standing here for. So I'm happy to have been provided the opportunity, first of all, to elaborate on our '23 auditors' reports, our process and observations. And to start off with the end product of our work. On February 14, we issued a number of reports with respect to the IFRS financial statements and the U.S. GAAP financial statements. The IFRS financial statements is a document, of course, here for voting today. So I'll spend most time on that. For the IFRS financial statements, we audited the consolidated financial statements and the company financial statements and assessed whether those were prepared in accordance with IFRS and Dutch law. And we issued an unqualified opinion. I think that's always a difficult translation to somebody who's not outside -- or not in the audit practice in proper Dutch, it's called [Foreign Language]. So which implies that the financial statements give a true and fair view and that they have been prepared in accordance with IFRS and Dutch law. We also concluded that the report by the Board of Management and the other information included in the annual report is consistent with the financial statements and does not contain material misstatements. In addition, the report and other information contains all information required by Dutch law. As it relates to the U.S. GAAP financial statements, it's good to note that we also issued an unqualified opinion on those financial statements, but also on internal control over financial reporting, which basically means that we did not identify a material weakness in internal control. So continuing on with the key elements of our audit -- of the IFRS financial statements. In detail, they are included in the independent auditor's report that is included in the annual report on Pages 316 through 321, if you want to have a look. I'll go through the elements here clockwise. And I'd first like to indicate that an audit provides a high level of assurance, but not an absolute level of assurance, which means that we may not detect all material errors and frauds during our audit. However, materiality is very important. So we first determine materiality, the level at which we believe misstatements will reasonably influence users of the financial statements like yourselves. And for the '23 audits of ASML, we determined the materiality for the financial statements as a whole to be EUR 350 million, representing 3.7% of income before income taxes. We did report misstatements lower than that, right, in excess of EUR 17.5 million to the Audit Committee. Then moving to risk assessment. In our risk assessment, we identify and assess the risks of material misstatement in the financial statements, whether caused by error or fraud. And in line with the presumed risks of fraud laid down in our auditing standards, we identified fraud risks with respect to revenue recognition and management override of controls, of which the first revenue recognition is part of our key audit matter that I will discuss later on as part of observations. Related to the risk of management override of controls, we evaluated relevant internal controls that mitigate fraud risks. We tested high-risk journal entries and evaluated key estimates and adjustments for bias. Important to note is that our audit procedures did not reveal indications and/or a reasonable suspicion of fraud that would be considered material to our audit. Similarly, we looked at noncompliance with laws and regulations where we also evaluated various controls, and involved forensic specialists and export control specialist, an important topic, especially this year. So with respect to the misappropriation of data, by a now former ASML employee late in '22. ASML reported the incident to relevant authorities, and continue to assess this as a potential violation of certain export control regulations. As a conclusion on this topic, we did not reveal indications and/or reasonable suspicion of noncompliance that would be considered material to our audit. Then ongoing concern. We discussed an [ inspected ] management's analysis of matters that would be impacting the company's going concern. Think about the industry developments and also the export restrictions to China. But the outcome of our procedures did not give reason to perform additional procedures, so no going concern risks identified. As it relates to climate, we assessed whether there was a risk of material misstatement specific to climate for the '23 financial statements. Think about valuation of long-lived assets, going concern assumption. But we did not identify such risk to be material for the '23 financial statements. Then talk about cyber. Cyber security, always an important topic. We have obtained an understanding how ASML uses IT and the impact of IT on the financial statements, which includes 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 misstatements specific to cyber. Then on group audit, I would like to indicate that, as you are probably aware, ASML has a high level of centralization here in Veldhoven in the Netherlands, which we mirror in our audits, which means that we performed our audit mostly centrally here from the Netherlands. Then looking at specialists. For the more complex areas, we involved KPMG specialists in the areas of IT, tax, forensic evaluations and a climate subject matter experts. We communicated our audit plan and our findings to the Audit Committee as a committee of the Supervisory Board. And on a periodic basis, we discussed our audit findings with management and the Audit Committee. And there is an active engagement with the Audit Committee and our observations are taken seriously. Then we go to the next slide on our observations. As mentioned, we had one key audit matter on revenue recognition, which is consistent with prior year. So the -- in '23, our key audit matter related to identification of distinct performance obligations in certain volume purchase agreements as well as revenue cutoff. Good to note why we identified this as a key audit matter is that agreements with customers often are complex and comprise multiple elements, multiple performance obligations. And as it relates to revenue cutoff, it does matter whether a machine is recognized in '23 versus '24. So other areas that we reported on and discussed with the Audit Committee included our view on estimates. So we believe the estimates management has used in preparing the financial statements were balanced. As it relates to internal control, observations I already mentioned that we performed an audit of the effectiveness of internal control of our financial reporting in conjunction with the audit of the U.S. GAAP financial statements for which we issued an unqualified opinion. Then on the right side, I have nonfinancial information. So good to note that we've also performed procedures on the nonfinancial information that is included in ASML's annual report, and issued a limited assurance report thereon. Limited Assurance is a lower level of assurance that an audit would have provided. Export control regulations, topic that, of course, could not be ignored last year. We assess the impact of the changed export regulations on the financial statements. Possible noncompliance could result in fines and penalties, but also the potential impact on revenue recognition and the related balance sheet positions, and as we just discussed, the possibility whether systems shipped to China could be installed later on. We performed the procedures to address this risk. Lastly, on the '24 audits. I expect the audit to be largely consistent with what we've complied in '23. And that's reflective of our other plan that we've presented. There's one new element. It was already touched on is the CSRD. We've been engaged to perform a limited assurance engagements on the company's sustainability reporting in accordance with the CSRD, which is effective from [indiscernible]. This covers my presentation on '23 audits and the opinion. On behalf of KPMG, I would like to thank you for your attention, and thank you for your trust. I'm happy to take any questions.

Would there be any questions on this point for Petra or the company?

[Interpreted] My name is [ David ], of the Foundation Legal Protection of Investors. Well, you already touched upon a number of topics. Topics that we would like to know more about. But well, in our opinion, you didn't dive deep enough. First of all, cyber. The Chinese are desperate to figure out what's going on here. Well we hope that your staff doesn't include people that pass information on. But we would love to know a bit more about this. And we would like to hear from you whether everything is safe and secure? That's it. That's my first question. Now Scope 3. Well, you touched upon that briefly. Well, that seems to me.

Is this a question for us? Or is it for KPMG? For KPMG. Super. [ I was just -- to understand. ]

[Interpreted] Scope 3, this is a question for the Board of Management. This seems to us to be an impossible situation to completely comply with all the rules, and we would like to hear from you what your views are? Could you repeat that? Is this Mr. [indiscernible]? Scope 3. And slowly but surely, we're fearing next year's shareholders' meeting, whether that shareholders' meeting could be held on time because if you send forms to the Far East and they return to sender or they don't even respond. Then what? We would like to hear from you how you intend to sort this out. Those are our questions, Mr. Chairman.

And I think we'll take the first question for Petra first of 2 questions, actually, which was did you dive deep enough into cyber and are your people safe and not involved in passing on the information?

Yes, certainly. It's an important topic, cyber, very, very much so. Also in our audit, our focus, of course, is to see whether there is a risk of material misstatement for the financial statements. So we do include that as a potential risk in our assessment of IT, and as you are aware, and I also pointed out, there was an incident, indeed, end of '22 that the company also disclosed in their financial statements. That was a big scare but was not material, right? And it was not material to our audit. We did report on it as important to the reader, but that's the point. There's a lot of attention spent on cyber also within the company.

Yes. And perhaps before we go into Scope 3, I mean you asked a very important question. Is everything safe? Is all is fair. Well, everything is a lot. So it's a continuous battle between the people who are trying to get hold of information through cyber means. So we continuously are upgrading our cyber resilience activities because it's a war. And this is where we put maximum effort in making sure that we can detect and we can respond. And then when we respond, we can effectively stop any action. This is what we do. And that -- and like I said, the question I was triggered by is, is all is fair. Is everything safe? You can never say that, because it's a continuous effort which, by the way, perhaps Roger Dassen can comment on it, that we spend significant amounts of money and people in trying to safe -- to actually stay safe as much as possible.

And Scope 3?

Yes. So on Scope 3, I think 1 thing I will agree with you. It is a difficult target. I think we're all very much aware of that in ASML but we thought from the beginning, this was also a very responsible target to drive as a company. We talked a lot about our responsibility toward our society, and we believe that this is an important one. So if you look at Scope 3, I think the other element is because the target is difficult. We know this is not something that we can do alone. We're going to have to do it with our supply chain. This is an upstream part, but we're also going to have to do it with our customer. We are supply chain. I talked already about the supplier program we have implemented. We are asking also our supplier to show their own commitment to reduce their CO2 emission to 0 by 2030. In order to drive that very aggressively this year, we have even decided to track this in 1 of our long-term incentive. We're going to ask that 80% of our supplier, which are, obviously, the biggest 1 in terms of CO2 emission, show us commitments, either by doing publicly or by writing letter to go down to 0 by 2030. We want them to do that by 2026. So we are anticipating. We are working with them ahead as much as possible. So this is for the supply chain. For the customer, I see there's 2 parts. The first, the largest part of CO2 emission that our customer comes from energy consumption. I think we've talked about that in the past. One way to reduce that for us is to reduce the energy consumption per exposure. EUV. I think [ Peter ] mentioned, we have already reduced that by 40% compared to the initial baseline. We plan to go down 60% by 2025, and we have more plan moving forward after 2025 after 2030, to continue to reduce the energy consumption. And on top of that, our customers themselves, all of them are defining a very aggressive plan to switch to green energy or noncarbonic energy. Some of them are very advanced. Some of them in the U.S. are already claiming almost 100% use of renewable energy, which is, of course, important. And in Asia, where it's a bit more complex. I think we mentioned that this year, we have seen a major step down in Taiwan. I think there, our customers are themselves very aggressive in committing to the target. And we see, I would say, the same behavior in the entire world. So this is a very important matter for the industry. We have also joined semi, I would say, group of people. We've been one of the founding member in order to help together with our colleagues to really drive this target. So it's a very, very difficult target. I give you that. But I think we have to do our very best to get there, and we have to do that with our partners.

Yes. Good to indicate. I mean as part of the CSRD. There'll be further steps and further disclosures in the '24 annual report that we will be covering with limited assurance engagement next year.

And we do intend to hold the next AGM on time. Okay. Any other questions?

This is a good thing about direct interaction. We just had a discussion on cyber and cyber risk for ASML, but cyber risk has another context as well. So a question for the auditor. Many thanks for your good, maybe an excellent presentation. We really appreciate the auditor being here and providing us with your views in this case, about the audit, which is extremely important for us. So many thanks for that. In terms of cyber, an audit firm will have access in the order papers to a lot of information, which can be confidential, which can be extremely confidential in certain instances, for instance, with ASML. What are the guarantees in place within KPMG that, that information is not being exchanged. It's not being used by others and cannot be used to advise current or future competitors of ASML. So that's one question. What are the internal guarantees we have as an auditor that cyber is not fire KPMG an issue. The other is the formal synergy check this year, we need to ask the question every time at an AGM, and that is -- you referred to at the start. Many thanks for that. And you apologized for the exam fraud as we referred to it, and that you were not involved. Can you guarantee that neither any other partner within your team here in the Netherlands, in the U.S. and other -- how do you call them, the other auditors in the team of the audit of ASML were involved? Nor the independent quality control within KPMG, such that we are sure that those that actually looked at the audit, they were all qualified to do that at the moment? So that's a sanity question we raise every time. Maybe you can refer to that as well.

Question on cyber. So how we prevent information leakage from our own systems. This is, of course, an important topic that we also discuss with the company as it relates to how we share information amongst each others and what information is kept where. It's important to say that our profession is all about confidentiality and are due to the confidential about information that we obtained. So we have that embedded in our processes within KPMG.

Any other questions?

There was a second question. Thank you for that second question as well. And I fully appreciate you asking this question. Important to note on the exam answer sharing situation. You asked about the other partners on my audit. Important to note that due to the Dutch labor law and the GDPR privacy regulations, I cannot speak to the outcome of the investigation for any of my team members. I also do not have that information. But as noted at the beginning, it's important that KPMG sanctions all those individuals that were involved in improper exam answer sharing, where some of them had to leave the firm. However, I have inquired personally of the 5 partners involved on the ASML audit, which includes the OCA Bayer or the quality control partner and they confirmed that they had not received any help in doing exams or shared answers with others. So with my team on ASML, I spent significant time this year, discussing accountability, and ethics and reminding my team of the speak-up culture -- the speak-up policy in our culture. I have no concerns about the quality of our audit and my opinion on the ASML financial statements. And lastly, I just wanted to mention that the investigation has been -- was going on for a while for almost 2 years. And during the process, I've kept ASML's Audit Committee Chair and the CFO up to date regularly.

Thank you. Any further questions to the company or to Petra. Doesn't seem to be the case. So we can now move to the agenda item 3C. And the agenda item 3 concerns the explanation of ASML's compliance with the Dutch corporate governance rule. This is a nonvoting item. The -- on January '23, the revised Dutch governance code took effect. In our '23 report, we have outlined the major -- the main changes which are not major, but main changes of the revised code and also explained how we have addressed and revised our new principles and the best practice provisions of the code. As you can read in the annual report, ASML fully complies with the applicable best practice provisions of the revised code. Do you have any questions to this point? This does not seem to be the case. And then we will finalize this agenda item. And I just want to remind you again that you can vote any time but of course, also now. And then we move to agenda Item 3D. And this agenda item concerns the explanation of ASML's reserves and dividend policy. This is also an nonvoting item, ASML aims to pay an annual dividend that will grow over time to be paid out quarterly. For any further explanation, you can see the explanatory notes to the agenda. Are there any shareholders with questions to the dividend policy? Does not seem to be the case. Thank you. And we can finalize this agenda item and move on to 3E. And the next item on Item 3E is a proposal of the Board of Management to declare dividend for the financial year 2023. We made 2 interim dividend payments in '22 and one in February 2024, each EUR 1.45 per ordinary share. The Board of Management now proposes declaring a final dividend of EUR 1.75 per ordinary share. And that means that the total dividend for the financial year 2023 will be EUR 6.10 per ordinary share, which is a 5.2% increase over last year. For the sake of completion, I just want to inform you that the Supervisory Board has approved the proposal. Are there any shareholders who would like to have a say on this or comment or question? Okay. So I note there are no further questions regarding this agenda and we'll move on to the agenda item 4A. 4A is a proposal to discharge for a -- yes, is a proposal to discharge -- sorry, the members of the Board of Management and Supervisory Board from liability for the performance of their duties in the financial year 2023. These agenda items consists of 2 voting items. Item 3A is a discharge of the members of the Board of Management, 4A -- sorry 4A and 4B is a discharge of the members of the Supervisory Board. Are there any comments questions to this point? Does not seem to be the case. We can now move on to agenda item 5. Agenda Item 5 concerns the proposal to approve the maximum number of ordinary shares made available for the remuneration of the vote of management. Maximum number amounts to 170,000 ordinary shares. The final granting of shares will be made by the Supervisory Board based on the applicable remuneration policy by applying the calculation method as described in that policy. The agenda item also includes a proposal that the general management designates the Board of -- the general meeting designates the Board of Management as the body that is authorized to issue those ordinary shares subject to the approval of the Supervisory Board. The designation is requested for the period running from the date of this meeting through the AGM held in 2025. For the information regarding the shares granted conditionally to the Board of Management for the financial year '24, references made to the 2023 remuneration report. And here, we are open for questions. Any questions to this point? Does not seem to be the case. And then we can conclude this agenda item. And again, you can vote on this and other items, of course, now. So we now move -- proceed to agenda Item 6. The agenda Item 6 concerns the composition of the Board of Management and consists of the 2 nonvoting items. In accordance 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. As announced in the press release dated 30th of November 2023, and Mr. Peter Wenning and Mr. Martin van den Brink will retire as co-presidents and members of the Board of Management as per date of this general meeting that means today. At the end of the meeting, I would like to express some words of thanks to both Peter and Martin. And yes, this was an information item, so we can move over to the second item, which is 6A, unless there are any questions to this point. No. So the Supervisory Board hereby gives notice to the intended reappointment of Mr. Christophe Fouquet as a member of the Board of Management in the position of President and Chief Executive Officer. The Supervisory Board intends to reappoint Mr. Fouquet as a member of the Board of Management in the position of Chief Executive Officer in view of his extensive leadership experience and deep understanding of ASML's technology and the semiconductor industries ecosystem acquired through different roles during his 15 years tenure at ASML as well as the other -- as well as at other companies. The Supervisory Board believes that Mr. Fouquet has the right leadership qualities and culture fit for the position and is confident that he'll continue to further build on the solid basis that they have been laid in previous years. Mr. Fouquet will also act as the Chairperson of the Board of Management. Mr. Fouquet's reappointment will be effective for the day of this general meeting again today. The explanatory notes to the agenda contains the personal details of Mr. Fouquet and the main elements of this management services agreement, including his net remuneration package. So Christophe, I may now invite you to say a few words to the shareholders.

I know Peter is very proud of me right now. Thank you very much, Nils. It's an incredible honor to be selected as the next CEO of ASML. And I would like to thank ASML Supervisory Board for their trust and their support. I've been in the company for 15 years in different roles, usually connected to technology customer to our product. And since 2018, I have been part of the Board of Management of ASML. During this time, I've witnessed how critical ASML has become to the entire semiconductor ecosystem. But also our technology has fueled innovation that made their ways to application that we are now using in our life everyday. Peter and Martin have built very solid foundation. We have a team of 42,000 people that bring a huge amount of talent to ASML. And I'm very happy, together with the rest of the Board of Management, Roger, Frederic, Wayne, soon to be GM to be able to write the next chapter of ASML and to continue to build significant value for our shareholders. I can promise you that we will be doing our best to go the heritage that Peter and Martin live to us. Thank you very much.

Okay. Great. Thank you, Christophe. Any questions to shareholders.

And a question from [ DB ].

Thank you, Chairman. Of course, we'll have drinks and celebrations, but I'd like to benefit from the occasion to wish Mr. Fouquet all the best as the new CEO of ASML. We believe you are most qualified and including the last 15 years here, very well prepared to fulfill this important responsibility and indeed to ride that next chapter. So much appreciated. Furthermore, in terms of benefit, as I have the mic, we like to be the first to wholeheartedly thank the other 2 gentlemen here. Mr. Wennink and Mr. Van den Brink for their absolutely phenomenal performance. For Dutch retail investors, European retail investors, and we are with many, as you know, because the retail market is large, ASML is one of the top 3 of the investments of our members and with very good results. And as individuals, you've made the many -- very many -- very important decisions with great dedication, which we needed to develop the success. The success is not here for the sake of it. It's really developed by and under your leadership. So you served the employees, you serve the region, you serve the country, you serve them well and as shareholders extremely well. And in a considered very honest way with clear language and absent too much ego. And that's what we, as shareholders, very much appreciate. So on behalf of the Dutch Shareholder Association, European shareholders, many, many thanks and a lot and best of luck in the next endeavors for the 2 gentlemen here on the forefront as well. Thank you.

Okay. Any other question or comments. I think we will -- I will, as I said, also say a few words at the end. So we don't need to pass the microphone. I think everybody are deeply grateful to Peter and Martin. So I now conclude this agenda item and confirm that Mr. Fouquet will be reappointed per end of this meeting for a 4-year term as a member of the Board of Management and in the position of President and Chief Executive Officer. And we move to Agenda Item 6B, and the Supervisory Board hereby gives us notice of the intended appointment of Mr. Jim Koonmen as a member of the Board of Management in the position of Chief Customer Officer. In this role, Mr. Koonmen will assume primary responsibility for ASML's customer relationships. The appointment of Mr. Koonmen as member of the Board of Management underscores our ambition to continuously increase our responsiveness to customer needs and to consistently deliver high-performance products and services, also in view of the continuous increase in the size and complexity of ASML's operations and business with customers. Given that further strengthening customer trust and enhancing customer satisfaction are the key drivers in our long-term success to customers among ASML key stakeholders. The Supervisory Board has decided to position the Chief Customer Officer role in the Board of Management and the Supervisory Board is convinced that Jim is the right man to play a strong role as the voice of the customer within ASML and to drive closer collaboration and higher customer satisfaction. The appointment will be effective for the date of this general meeting again today and the explanatory notes to the agenda contain the personal details of Mr. Koonmen and the main elements in this agreement and his remuneration package. And Jim, I think it would be great if you could also say a few words to the shareholders.

Thank you, Nils. Good afternoon. My name is Jim Koonmen, and I joined ASML in 2007 when ASML acquired Brion Technologies in Santa Clara, California. From 2008 to 2015, I served as the General Manager of Brion Technologies. In 2015, I became the CEO of Cymer Light Sources, a division of ASML in San Diego. And afterwards, I led ASML's applications business from 2018 through 2023. For the past 18 months, I have been focused on a company-wide transformation project focused on driving improvements in customer trust and performance at ASML. I would very much like to thank the Supervisory Board for the opportunity to be appointed as a member of the Board of Management of ASML in the position of Chief Customer Officer, taking on the primary responsibility for ASML's customer relationships. ASML is a very unique company with healthy growth prospects for the long term. Going forward, the size and the complexity of ASML's business will continue to increase and it will require even stronger customer relationships and closer collaboration with our customers. It is an honor for me to contribute to the continued success of ASML in this role. And I would also like to say it's been the privilege of my professional life to work alongside Martin and Peter for my 17-year career at ASML. And I also look forward to the next chapter at ASML. Thank you very much.

Thank you, Jim. Great. We now move on to questions. Are there any shareholders who would have a question to this point? Doesn't seem to be the case. And so I'll now conclude this agenda item and confirm that Mr. Koonmen will be appointed per end of this meeting to a 4-year term as a member of the Board of Management in the position of Chief Customer Officer. Welcome.

Congratulations, Jim.

So now we come to the composition of the Supervisory Board. And this -- the agenda item consists of 3 voting items and 2 discussion items. And I would like to move on to Agenda item 7A. And Agenda Item 7A concerns the discussion of the updated profile of the Supervisory Board. The current profile of the Supervisory Board was adopted in 2019. The profile is evaluated by the Supervisory Board on a regular basis based on the evaluation on the profile that took place at the end of 2023. The Supervisory Board concluded that it was desirable to make certain adjustments to its profile in view of the growth of the company as well as external developments. Are there any -- anyone who would like to ask a question on the Supervisory Board profile. Doesn't seem to be the case. So I move on to 7B. And then agenda Item 7B, C & D concerns, the nominations of Mr. Annet Aris, Mr. Mark Durcan and Mr. Warren East for reappointment as members of the Supervisory Board. As announced last year, Annet Aris, Mark Durcan and Mr. Warren East will retire in accordance with the rotation schedule at this general meeting. Mr. Annet Aris, Mr. Mark Durcan and Mr. Warren East, all of the three have informed us that they would -- the Supervisory Board that they would stand for reelection if asked which we have done. And I will now move on to the agenda Item 7B. The agenda Item 7B concerned specifically the reappointment of Annet Aris as a member of the Supervisory Board. Mrs. Aris was first appointed as a member of the Supervisory Board in 2015 and has been its Vice Chair since 2021. Currently, she is a member of the Selection and Nomination Committee, the Remuneration Committee and the Technology Committee. Mrs. Aris' previous appointments were based on the enhanced recommendation rights of the Works Council and the Works Council has kindly informed us that they support the nomination for Mrs. Aris as a member of the -- for the next year. And the Supervisory Board, therefore, nominates Mrs. Annet Aris for reappointment as a member of the Supervisory Board, not only because of the recommendation made by the Works Council but also because of her extensive experience in the fields of strategy, consultancy, digital transformation and management development, and she's also a great vice chair if anybody should be interested in that. And we would like to continue to give a valuable contribution to the Board in the next year. So can we suggest that you vote in favor, so we can continue to benefit from her experience. Can we move a little bit further? Are there any questions to this item, you can find all the background notes in the paper we sent out. Yes, Mr. Stevenson, give me one second.

Thank you. My name is Stevenson, I'm representing the SSP. Yes, 3 -- all 3 candidates. Well, we'd like to ask all the questions in one go for all 3 candidates that way I don't have to keep coming back. I'd like to hear from all the candidates, what their motivation is. Why would they like to be reappointed? Why would they like to be considered for reappointment?

Sorry. Let me say a few words, yes. So I've been a Board member already for quite some time, as everyone has noticed, with, of course, a lot of passion and pleasure. We are now currently going through a period of quite a bit of change with the new Board of Management with a new chair who settled in very well. But reason that I'm here is, although I hide my gray hair is the gray hair and to kind of the give the -- to ensure the continuity and also a bit of the institutional memory in the Supervisory Board. And that's in that role and still enjoying being in the sport as much as in day 1 and I'm very, very happy to continue 1 more year.

So we wanted to go next to Warren.

Yes, I'll go next. I've worked on and off in the semiconductor industry, all of my career. And the slide that Peter presented earlier on in the meeting where he outlined the impact of semiconductors on the world, making all of our lives better and improving a lot has been a theme of my career for all that time. And ASML is a fantastic company to continue that journey with. And having been a CEO for 20-plus years in a couple of different companies, I feel I can contribute and help in particular the new management team here at ASML over the next 4 years.

And I'll go next Nils. Good afternoon, everyone. My name is Mark Durcan. I'm a long-term participant in the semiconductor industry, having worked throughout my career as first CTO and then a COO and eventually a CEO at a large customer of ASML's. I'm interested in returning to my role on the Supervisory Board because I have a deep love for this company and for the management team and for everything that's accomplished. And I feel a deep commitment to continue to help in any way that I can from a technology perspective or bring any other knowledge I can to help advance the company into the future.

Thank you. Mr. Stevenson, I hope there was good explanations, and I think we -- I can only reiterate that we highly appreciate the efforts of both Mrs. Aris and Mr. Durcan and Mr. East, great board members. Thank you. Any further questions to this point? Just as a small reminder, you can again vote on -- continue to vote at any time. The next point is the appointment of Mark Durcan as a member of the Supervisory Board. I think we now -- both provided arguments and commitment. So hopefully, you can support that and Mark is leading the technology committee and a great support for the Board. Next point. Unless the questions to Mr. Durcan, will move on to now the appointment of Mr. East. And again, here, I think we argued very well and Warren gave perfect reason why he is important and why he's committed. So I hope you can also approve this, and he definitely plays a very important role in the Supervisory Board work and fulfills, I think, all the expectations we could have of him. So any questions on Warren? It's not the case. So we conclude this item and we proceed to Item 7E. And 7E is a discussion item. And we give vacancies. So this is for information for what will happen next year, where we -- Mrs. Aris and Mrs. Conix come up for reelection in the rotation scheme. And we have the general meeting and the Works Council have the right to recommend candidates for the vacancies that will arise since Annet was appointed based on the Works Council enhanced right of recommendation. This enhanced right of recommendation will also apply to the vacancy or reappointment of Mrs. Aris. So we'll now take questions to this information point. Doesn't seem to be any questions here. So we will proceed with Item 8. So the items 8, 9 and 10 are annual recurring agenda items relating to the company's capital structure. And the -- and consist of 4 voting items in total. Agenda Item one 8A concerns the authorization for issuing ordinary shares or granting rights to subscribe for ordinary shares up to 5% of general -- up to 5%, it's for general purposes and could be in connection with the occasion of a merger or an acquisition or another strategic alliance. Agenda Item 8B concerns the authorization of the Board of Management to restrict or exclude preemption right in connection with the authorization of Item 8A. And the background for that is that you sometimes want to give a direct emission to cement the partnership one way or the other, and of course, then preemptive right by the shareholders does not really work. So we'd ask for -- ask for the authorization to allow ASML to react timely and quickly in particular circumstances that requires the issue of up to 5% shares. These authorizations will be valid for a period of 18 months, that is up to and including the 24th October 2025. And if you can approve these proposals, the existing authorities will cease to apply. Agenda Item 9 and 10 contain proposals to execute share repurchases and share cancellations. And as you've seen in the past, we aim to be flexible in executing a return of capital to our shareholders. And for this to be possible, ASML ask the general meeting to mandate further share repurchases and to approve the cancellation of shares, it would allow us to implement further share buyback programs should the company decide to do so. Share buybacks me, among other transaction formats take place on the open market through privately negotiated purchases in self-tender offers or through accelerated repurchase arrangements. We aim to be flexible in executing a return of capital to our shareholders. And for this to be possible, we ask the general meeting to mandate further share repurchases and to approve the further cancellations of shares that will allow us to -- well, to do the share buyback should we decide to do so. And I think we can -- so the authorization is proposed in 9, would allow ASML in combination with the proposal under Agenda Item 10 to repurchase a maximum 10% of the issued share capital as per the date of this meeting and then we can cancel the shares afterwards, which is general what you use -- or used to do in these cases. The share purchase authorization on the agenda Item 9A is requested for a period of 18 months starting today and ending on the 24th of October '25. If you approve this, the existing authorization that we have today, no longer apply. Detailed information regarding agenda 8, 9 and 10 can be found in the agenda and explanatory notes. Any questions under this point? Or these points? All right. So then we move on to agenda Item 11, which is any other business. As previously indicated, the opportunity to vote on the various voting items in the meeting agenda will now close. And I would like to, if you have not done it already, finalize your voting now. We'll just have a little break for a few seconds, and then you will move on. [Voting]

Anybody who is not finished voting, I don't see any hands. So we are now closing the voting and we're waiting for the results. We'll show them after we conclude on this agenda item. And then we move on to Agenda Item 11, any other business. Are there any remaining questions you'd like to ask? No. Doesn't seem so. So Mr. Kleipool, can we look at the voting results.

Yes. Let's see when the operator has the voting results already available.

It's quick counting these days.

Yes. Well, I think we need to bring together to -- the voting also from the online platform, so that may take a little bit of time.

We will wait a little bit of time.

We expected some questions -- some comments in any other business.

So here we see the voting results for the various agenda items. I'm not going to name all the results, but I'll just settle for the following percentages. For agenda Item 3A, we see 94.1% in favor and 5.9% against. For agenda Item 3B, 99.88% in favor, 0.12% against. For agenda item 3E, 99.99% in favor and less than 0.1% against. Move on to agenda item 4A, we have 96.04% in favor, and 3.96%. 4B against 94 -- 95.37% in favor and 4.73% against. For agenda Item 5, 97.48% in favor and 2.52% against. For agenda Items 7B, 97.77% in favor and 2.23% against. For agenda item 7C, 99.36% in favor and 0.64% against. 7D, 96.6% in favor and 3.4% against. Agenda item 8A, 98.49% in favor and 1.51% against. Agenda item 8B, 97.67% in favor and 2.33% against. Agenda item 9, 99.74% in favor and 0.26% against. And Agenda Item 10, 99.81% in favor and 0.19% against. So all the requisite majorities have been met for the agenda items. Mr. Chairman.

Thank you very much. So I note that all proposals submitted to this general meeting has been adopted with the required majority. And means that we're now coming to the end of this AGM. I would, however, like Peter and Martin -- invite Peter and Martin to the front of the stage. Thank you. So here at the end of the Supervisory Board meeting, I think it is my privilege and I think, a fantastic moment to once again thank Peter and Martin for many years of service to ASML. During your tenure, you have played a completely vital role in shaping this company into what it is today. And nobody has more than the 2 of you incorporated the values of the company, which are challenge, collaborate and care. And these values are not just there by accident because ASML with its very special specific nature lives from challenging, challenging what is possible and taking on the challenge of revolutionizing the way that our customers have been able to increase the number of -- or their effectiveness and the capacity of the chips that they have been producing and changed the digital industry. So technical challenges have been enormous, and you've been forced to challenge every obstacle and limitation that others saw in the world to be able to do that. And you've done that in a way where the company has really thrived and you've done it in a way where you have also been able to shape a whole industry and a whole supply chain and a company in your vision by collaborating because when ASML was young and you were starting, there was really not -- also, young and starting, there was not room for buying and dominating or doing things, everything has to be -- had to be done through collaboration. And by that, in a way, you also managed to get so many people involved in creating the technical progress that we needed and enable it all. So that it's only possible if you ensure and you take care of the people that work with you and that the people that work with you trust that you are intending the best for everybody, most of the time, almost all of the time. And by that, you created a system and an organization that really has been able to live up to customers' expectations and hopes and maybe wildest dreams in an incredible way. And you created what people call the miracle and [indiscernible]. There wouldn't be no miracle in [indiscernible] if it was not for you and the way you led the company and the values and it did just -- it's just so fitting that you stand here, both of you. You came at the same time. You leave at the same time.

You came early.

Yes. But as CEOs. You started as CEOs. And that means that it's in a way, although it was not sort of the best news I could get when I started as Chairman that you might leave at the same time, it is befitting because you've been such a team. You've been able to trust each other so much that you could share the work, but -- share the work and also own the responsibility together. And that is what great partnership is about. So thank you very much. You've done -- as I said to you earlier today, you've done one more thing, which I think is fantastic, and that is you created a company with a clear future. And you created a company where we have internal succession in place. So thank you for that. And of course, welcome to the new management team, but fantastic job. And you have, by the way, also created a bit of value to shareholders. So I think all of us in the room and all of you out there, we owe a really warm applause to Peter and Martin and the things. And having talked about pairs, I don't want you to talk at the same time. That doesn't work. So you start Peter.

Well, I think there's. Yes. I think there's little to add to what you said because, I mean, it is about our core values; challenge, collaborate and care, you explained what that means to us. These are not words on the PowerPoint. These are true values. And I think they apply and I know I speak on behalf of also Martin, that it applies to our customers, first of all. We do care a lot of our customers. We collaborate it. We challenge them a lot. We shipped them from time-to-time machines that didn't work that well. They stayed with us. They helped us to improve. We did that with our suppliers and with our partners because we cannot do this without them. They have been patient, they as, we challenged them, but they kept collaborating because we care about sharing the benefits with our partners. It's our communities. We -- as I said it in my speech, without the community support, and I think what the government did with operation [indiscernible] is very important to the future growth of the company. And of course, our shareholders, our shareholders challenge us, where we challenged our shareholders also. I said it in the earlier speech, you challenge your shareholders who stay with us when EUV was not mature, where a lot of people ask the question, will it ever work and then shareholders stayed with us. That's the challenge that we gave our shareholders and that challenge was widely accepted. So thank you very much. And then, of course, last but not least, our people. Sometimes you say, people stand on the shoulders of giants. With us, it's just the other way around. We stand on the shoulders of almost 43,000 giants, our people, and it made things possible. Some people said it's not possible and we now have a huge privilege and honor to guide them and to give them a future and a very clear direction of what needs to be done. And I'm hugely grateful for the friendship that Martin gave me in all these years. Without Martin, it would have been totally impossible. I would have been a lost soul. So having him next to me has been absolutely honor. Yes. Yes, a bit higher. Okay. Good. Yes.

I choose not to repeat what Peter says, I'd just like to second it. I'd like to make a few more remarks. A lot of people sitting here for many, many years, including shareholders, including employees, even an individual from the beginning, [indiscernible]. It has been a roller coast over the years, made many different decisions. [indiscernible] was a substantial challenge and it continues to be that towards the end of my career. And that includes large base created the high [ NA ], which is not perfectly working it in front of our customers. But we know we're close enough to the end that we have major risk reduction to assume that we will continue our commitment to our customers as [indiscernible]. Second, I'd like to make that the succession plan for the year have been through all the years. Have it has been not always consistently internally succession. And I'm obviously proud on my succession, Christophe, Jim, coming out of the product area where I believe I feel enormously proud that succession on the Board has been confirmed by the Supervisory Board to be internal. And now those gentlemen reasonably well, and I think they will do well moving forward. Success...

Yes. I'll take over from here because basically, I want to finally congratulate Christophe of his reappointment and Jim as appointment as members of the Board of Management and Annet, Mark and Warren, congratulations of the reappointment as members of the Supervisory Board. I hereby close the meeting. Thank you all very much for joining. You can return or please return your voting devices to the staff at the reception desk and would like to have your drink -- like to invite you for a drink with us in the lobby and hope you to see you again next year. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]