NOTE 12. EQUITY

Our Management Board has the power to issue ordinary shares and (financing) preference shares insofar as the Management Board has been authorized to do so by the Annual General Meeting of Shareholders (AGM). The Management Board requires the approval of the Supervisory Board for such an issue. The authorization by the AGM can only be granted for a certain period. In the case that the AGM has not authorized the Management Board to issue shares, the AGM shall have the power to issue shares.

Common shares, preferred and financing preferred shares

Following the amendment of the articles of association on August 3, 2018, the authorized capital of the Company amounts to 82,500,000 common shares of €0.04 par value, 88,500 preferred shares of €40 par value and 6,000 financing preferred shares of €40 par value.

The AGM of May 28, 2018, approved the cancellation of 6.0 million treasury shares. This became effective as per August 1, 2018.

As per December 31, 2018, 56,297,394 common shares with a nominal value of €0.04 each were issued and fully paid up, of which 6,978,496 common shares are held by us in treasury. All shares have one vote per €0.04 par value. Treasury shares held by the Company cannot be voted on. Of our 49,318,898 outstanding common shares at December 31, 2018, 49,022,494 are registered with our transfer agent in the Netherlands, ABN AMRO Bank N.V., and 296,404 are registered with our transfer agent in the United States, Citibank, NA, New York.

Financing preferred shares are designed to allow ASMI to finance equity with an instrument paying a preferred dividend, linked to EURIBOR loans and government loans, without the dilutive effects of issuing additional common shares.

Preferred and financing preferred shares are issued in registered form only and are subject to transfer restrictions. Essentially, a preferred or financing preferred shareholder must obtain the approval of the Company's Supervisory Board to transfer shares. If approval is denied, the Supervisory Board will provide a list of acceptable prospective buyers who are willing to purchase the shares at a cash price to be fixed by consent of the Supervisory Board and seller within two months after the approval is denied. If the transfer is approved, the shareholder must complete the transfer within three months, at which time the approval expires.

Preferred shares are entitled to a cumulative preferred dividend based on the amount paid up on such shares. Financing preferred shares are entitled to a cumulative dividend based on the par value and share premium paid on such shares.

As per December 31, 2018 no preferred shares are issued.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

On May 28, 2018, the AGM authorized the Company, for an 18-month period, to be calculated from the date of the AGM, to repurchase its own shares up to two times 10% of the issued capital, at a price at least equal to the shares’ nominal value and at most a price equal to 110% of the shares' average closing price according to the listing on the Euronext Amsterdam stock exchange during the five trading days preceding the purchase date. For the years preceding the AGM 2018, a one-time 10% repurchase mandate was provided by the AGM. The exception of the additional 10% repurchase mandate was due to the sales of the ASMPT shares as announced on April 24, 2018, and November 2, 2018 and the subsequent share buy-back programs.

As part of these resolutions the Company noted that it was possible that it would temporarily hold in excess of 10% of its own capital if the full repurchase authority as mentioned above would be utilized by the Company. The Company noted that, at the Annual General Meeting in 2019, it would propose to withdraw any and all treasury shares, including the common shares to be repurchased, save for such number of treasury shares as may be necessary to fund ongoing share and option programs for employees and board members which shall in any case represent less than 10% of the issued capital.

On October 26, 2016, ASMI announced a share buyback program to purchase up to an amount of €50 million of its own shares within the 2016-2017 time frame. On March 2, 2017, ASMI announced an increase in the 2016-2017 share buyback program to €100 million. This program started on December 13, 2016 and was completed on August 31, 2017.

The following table provides a summary of shares repurchased by ASMI under this program:

Period		Total number of shares purchased		Average price paid per share (EUR)		Cumulative number of shares purchased
Share buyback program 2016-2017:
December, 2016		153,022		€42.30		153,022
January, 2017		143,498		€43.46		296,520
February, 2017		157,326		€47.56		453,846
March, 2017		330,000		€49.47		783,846
April, 2017		260,658		€51.73		1,044,504
May, 2017		258,400		€55.15		1,302,904
June, 2017		254,000		€53.07		1,556,904
July, 2017		182,000		€52.24		1,738,904
August, 2017		258,618		€49.35		1,997,522
Total		1,997,522		€50.06

On September 22, 2017, ASMI announced a share buyback program to purchase up to an amount of €250 million of its own shares within the 2017-2018 time frame. The program ended on March 29, 2018.

The following table provides a summary of shares repurchased by ASMI under this program:

Period		Total number of shares purchased		Average price paid per share (EUR)		Cumulative number of shares purchased
Share buyback program 2017-2018:
September, 2017		240,237		€52.81		240,237
October, 2017		823,362		€55.69		1,063,599
November, 2017		714,716		€60.75		1,778,315
December, 2017		863,338		€56.83		2,641,653
January, 2018		703,383		€59.23		3,345,036
February, 2018		885,173		€56.21		4,230,209
March, 2018		123,083		€61.43		4,353,292
Total		4,353,292		€57.43

On June 5, 2018, ASMI announced a share buyback program to purchase up to an amount of €250 million of its own shares within the 2018 time frame. The 2018 program started on June 6, 2018, and ended on October 11, 2018.

The following table provides a summary of shares repurchased by ASMI under this program:

Period		Total number of shares purchased		Average price paid per share (EUR)		Cumulative number of shares purchased
Share buyback program 2018:
June, 2018		812,515		€51.77		812,515
July, 2018		1,086,008		€47.59		1,898,523
August, 2018		1,234,202		€46.51		3,132,725
September, 2018		1,388,126		€43.46		4,520,851
October, 2018		923,037		€41.74		5,443,888
Total		5,443,888		€45.92

The following table provides the change in number of treasury shares and outstanding shares:

Number of shares		treasury shares		outstanding shares
Balance at beginning of year		6,157,241		56,140,153
Purchase common shares		7,242,734		(7,242,734)
Exercise stock options out of treasury shares		(258,688)		258,688
Vesting restricted shares out of treasury shares		(162,791)		162,791
Cancellation treasury shares		(6,000,000)		–
Balance at end of year		6,978,496		49,318,898

ASMI intends to use part of the shares for commitments under the employee share-based compensation schemes and the option program for the management board.

The share buyback programs were executed by intermediaries through on-exchange purchases or through off-exchange trades. ASMI updated the markets on the progress of the share buyback programs on a weekly basis.

The repurchase programs are part of ASMI's commitment to use excess cash for the benefit of its shareholders.

TREASURY SHARES

On December 31, 2018, we had 49,318,898 outstanding common shares excluding 6,978,496 treasury shares. This compared to 56,140,153 outstanding common shares and 6,157,241 treasury shares at year-end 2017. Besides the cancellation of 6 million treasury shares in August 2018, the change in the number of treasury shares in 2018 was the result of approximately 7.2 million repurchased shares and approximately 421,000 treasury shares that were used as part of share based payments.

		2017		2018
As per January 1:
Issued shares		63,797,394		62,297,394
Treasury shares		3,981,551		6,157,241
Outstanding shares		59,815,843		56,140,153
Changes during the year:
Cancellation of treasury shares		1,500,000		6,000,000
Share buybacks		4,420,946		7,242,734
Treasury shares used for share based performance programs		745,256		421,479
As per December 31:
Issued shares		62,297,394		56,297,394
Treasury shares		6,157,241		6,978,496
Outstanding shares		56,140,153		49,318,898

RETAINED EARNINGS

Distributions to common shareholders are limited to the extent the total amount of shareholders’ equity exceeds the amounts of nominal paid-in share capital (exclusive any share premium) and any reserves to be formed pursuant to law or the Company’s Articles of Association. The amounts are derived from the Company financial statements of ASMI.

ASMI aims to pay a sustainable annual dividend. The Supervisory Board, upon proposal of the Management Board, will annually assess the amount of dividend that will be proposed to the AGM. The decision that a dividend be proposed to the AGM will be subject to the availability of distributable profits as well as retained earnings and may be affected by our potential future funding requirements. Accordingly, dividend payments may fluctuate and could decline or be omitted in any year.

In 2018, we paid a dividend of €0.80 per common share. We will propose to the forthcoming 2019 AGM to declare a dividend of €1.00 per share.

Results on dilution of investments in associates are accounted for directly in equity. For 2018 and 2017, these dilution results were €489 and €606 respectively.

OTHER RESERVES

The changes in the amount of other reserves are as follows:

		Proportionate share in other comprehensive income investments in associates 1		Remeasurement on net defined benefit		Translation reserve		Total other reserves
Balance January 1, 2017		(2,476)		–		231,964		229,488
Proportionate share in other comprehensive income investments in associates		(2,580)		–		–		(2,580)
Remeasurement on net defined benefit		–		(264)		3		(261)
Foreign currency translation effect on translation of foreign operations		–		–		(172,893)		(172,893)
Balance December 31, 2017		(5,056)		(264)		59,074		53,754
Proportionate share other comprehensive income investments in associates		(1,161)		–		–		(1,161)
Remeasurement on net defined benefit		–		254		(12)		242
Foreign currency translation effect on translation of foreign operations		–		–		46,772		46,772
Balance December 31, 2018		(6,217)		(10)		105,834		99,607

1. Proportionate share in other comprehensive income investments in associates, remeasurement on net defined benefit and translation reserve, items may be subsequently reclassified to profit or loss.