Annual Report 2020 ’ASML ANNUAL2 REPORT 2020 01 Contents 2020 at a glance Leadership and governance 5 Interview with our CEO 105 Corporate governance 7 2020 Highlights 118 Message from the Chair of our Supervisory Board 8 Business as (un)usual 119 Supervisory Board report 134 Remuneration report Who we are and what we do 10 Our company Consolidated Financial Statements 14 Our products and services 147 Report of Independent Registered Public Accounting Firm 17 Our markets 149 Consolidated Statements of Operations 18 Semiconductor industry trends and opportunities 150 Consolidated Statements of Comprehensive Income 22 How we create value 151 Consolidated Balance Sheets 24 Our strategy 152 Consolidated Statements of Shareholders’ Equity 153 Consolidated Statements of Cash Flows What we achieved in 2020 154 Notes to the Consolidated Financial Statements 27 Technology and innovation ecosystem 39 Our people Non-financial statements 53 Our supply chain 200 Assurance Report of the Independent Auditor 59 Circular economy 202 About the non-financial information 65 Climate and energy 204 Non-financial indicators 219 Materiality: assessing our impact CFO financial review 222 Stakeholder engagement 74 Financial performance 80 Financing policy 225 Other appendices 82 Tax policy 248 Definitions 84 Long-term growth opportunities 256 Exhibit index How we manage risk 86 How we manage risk 91 Risk factors 99 Responsible business A definition or explanation of abbreviations, technical terms and other terms used throughout this Annual Report can be found in the chapter Definitions. In some cases numbers have been rounded for readers’ convenience. This report comprises regulated information within the meaning of articles 1:1 and 5:25c of the Dutch Financial Markets Supervision Act (Wet op het Financieel Toezicht). In this report the name ‘ASML’ is sometimes used for convenience in contexts where reference is made to ASML Holding N.V. and/or any of its subsidiaries, as the context may require. © 2021, ASML Holding N.V. All Rights Reserved. ASML ANNUAL REPORT 2020 2 Special note regarding forward-looking expected development of High-NA and its benefits, statements including the expected timing for development of future In addition to historical information, this Annual Report generation EUV systems, expected growth in EUV revenue contains statements relating to our future business and / or the expected benefits of the indirect interest in Carl Zeiss results. These statements include certain projections, SMT GmbH and the acquisition of Berliner Glas, expected business trends and other matters that are "forward- EUV margins and margin improvement in our systems and looking" within the meaning of the Private Securities service via cost reduction and value delivery, expected Litigation Reform Act of 1995. You can generally identify productivity and benefits of our tools, systems, and these statements by the use of words like "may", "will", projects, EUV productivity targets and goals, potential "could", "should", "project", "believe", "anticipate", future innovations and system performance, expected "expect", "plan", "estimate", "forecast", "potential", shipments of our tools and systems, including demand for "intend", "continue" and variations of these words or and timing of shipments, statements with respect to DUV comparable words. They appear in a number of places and EUV competitiveness, the development of EUV throughout this Annual Report and include statements with technology and EUV industrialization, expected respect to our expected trends and outlook, strategies, productivity upgrade releases, enabling high-volume corporate priorities, expected semiconductor industry production of next generation chips and expected designs trends and 2024 market opportunities and roadmap, of such chips and their benefits, and revenue recognition, expected trends in markets served by our customers, predicted growth in wafer production, sustainability targets, expected market growth and drivers of such trends and goals and strategies, shrink being a key driver supporting growth, expected financial results, including expected innovation and providing long-term industry growth, sales, EUV revenue, service revenue, expected trends in lithography enabling affordable shrink and delivering value working capital, gross margin, capital expenditures to customers, sustainability strategy, goals and targets, including expected capital expenditures, R&D and SG&A including circular procurement goals, targeted greenhouse expenses, cash conversion cycle, target and expected gas emission and waste reduction and recycling initiatives effective annualized tax rate, sales targets and outlook for and investments, repair center expansion and targets, our 2021 and other statements under "-Trend Information", expectation of the continuation of Moore’s Law and that annual revenue opportunity and potential and growth EUV will continue to enable Moore’s Law and drive long- outlook for 2025, expected growth in 2021, expected term value for ASML well beyond the current decade, tax continued growth in free cash flow generation, investments strategy, capital allocation policy, dividend policy, our in the future and cash returned to shareholders, our expectation to continue to return cash to our shareholders Strengths, Weaknesses, Opportunities and Threats through share buybacks and dividends including our (SWOT), expected demand for upgrades, semiconductor proposed dividend for 2020 and statements relating to our industry dynamics and industry opportunities, expected share buyback program for 2020-2022, and statements trends in customer demand and demand for particular with respect to the expected impact of accounting systems and upgrades and expected trends in end standards. markets, including Memory, Logic and Foundry, including the continuation of investment by Logic customers in These forward-looking statements are not historical facts, ramping new nodes and stronger lithography demand from but rather are based on current expectations, estimates, memory customers, expected benefits of High-NA and assumptions and projections about the business and our planned target to start shipment of High-NA systems and future financial results and readers should not place undue high-volume production of systems using High-NA by reliance on them. Forward-looking statements do not 2025, 2024 market opportunities for semiconductor guarantee future performance, and actual results may differ industry end markets, expected innovation drivers, materially from projected results as a result of certain risks, expected drivers of long-term stakeholder value, expected and uncertainties. These risks and uncertainties include, trends in DUV systems revenue, expected DUV sales and without limitation, those described under How we manage the expectation that DUV will continue to drive value for our risk - Risk factors. These forward-looking statements are customers and be used in production in most layers of made only as of the date of this Annual Report. We do not their chips, expected benefits of Holistic Lithography and undertake to update or revise the forward-looking expected installed based management revenues, our statements, whether as a result of new information, future supply chain strategies and goals, customer, partner and events or otherwise. industry roadmaps, ASML’s applications business, ASML ANNUAL REPORT 2020 3 2020 at a glance ASML ANNUAL REPORT 2020 4 Interview with our CEO Peter Wennink, Chief Executive Officer How do you look back on 2020? What were the main factors behind ASML’s strong It was a year that affected us all due to the global performance in such a challenging year? COVID-19 pandemic. The impact has been widely felt The global economic consequences of COVID-19 had a across societies and families, as well as in the ASML limited impact on ASML' results. Declining consumer community. But it was also a year that brought new spending on smartphones and automotive was offset by learnings. For me personally, for instance, if you'd asked increasing investments in 'working-from-home' electronics, me 12 months ago if I could lead a company of over datacenters and the communications network 28,000 people of which over 80% were at home, I would infrastructure needed to support an economy where data is have said: “Are you out of your mind? Of course that won't an important driver of economic value and productivity. work!" But this is what happened in 2020 – and it has worked. We even managed to close the acquisition of ASML does not produce these electronic devices or the Berliner Glas Group, and welcomed around 1,600 new software and digital services that run over them, but our colleagues into ASML. systems are essential to manufacture the semiconductors that power this ecosystem. ASML and other While recognizing fully the severity of the pandemic, I also semiconductor equipment peers are an integral part of this see 2020 as a year that underlined the importance of our global electronic ecosystem of many dozens of companies work at ASML. Around the world people were abruptly that generates $400 billion worth of annual taxable profit. It confined to their homes and forced to work from their is the strong performance of our entire ecosystem that study, kitchen or bedroom. What was remarkable is that powered the demand for our products and services this despite this widespread working from home, few year, and enabled us to deliver record results. companies experienced productivity loss. What