PEG GmbH

PennLux Holdings S.à r.l.

Luxemburg

Konzernabschluss zum Geschäftsjahr vom 01.01.2020 bis zum 31.12.2020

AUDITED CONSOLIDATED ANNUAL ACCOUNTS AND AUDIT REPORT as at December 31, 2020

Table of contents

Consolidated management report

Report of the "Réviseur d'entreprise agréé"

Consolidated balance sheet

Consolidated profit and loss account

Notes to the consolidated annual accounts

CONSOLIDATED MANAGEMENT REPORT For the period ended December 31, 2020

Important events that have arisen during the financial period

On May 13,2020, the Board of Managers decided to pay an interim dividend for a total amount of USD 11,000,000.- to its shareholders.

On September 10, 2020, the Board of Managers decided to pay an interim dividend for a total amount of USD 23,000,000.- to its shareholders.

On December 18, 2020, the Board of Managers decided to pay an interim dividend for a total amount of USD 28,000,000.- to its shareholders.

Since it first appeared in China's Hubei province in late 2019, coronavirus (hereinafter "COVID-19") has spread across many countries around the world. Since the end of March 2020, as a result of unprecedented lockdown measures taken by the governments around the world, the epidemic has had a considerable impact on economic activity, notably by severely disrupting many global supply chains. In addition, with the threat of a global recession looming large, governments and central banks are preparing a range of fiscal and monetary stimulus packages to counter the economic effects of the virus.

From the view of the Board of Managers of the Company, consistent with many others in the same industry, COVID-19 is considered to be a non-adjusting subsequent event and as a result, no adjustment is made in the annual accounts. However, the Board of Directors of the Company does not underestimate the seriousness of the issue and the inevitable effect it will have on the global economy and many businesses across the world. In line with most experts, the Board of Directors of the Company believes that the impact of the virus outbreak will be material on the general economy and some central banks have already started to act by reducing interest rates and taking other measures. Undoubtedly, this will have implications for the underlying investments.

Important events that have arisen since the closing of the financial period

The Group made no voluntary payments to the PEG GmbH term loan in 2022. The Group made voluntary payments to the PEG GmbH term loan on January 30, 2023, February 28, 2023 and March 30, 2023 of $2.2, $2.2 and $3.9 million, respectively.

On May 9, 2022 the Group borrowed $12.3 million from its Revolving Credit Facility. During 2022 the Group made repayments totaling $11.8 million. There were no borrowings or repayments in 2023.

On April 28, 2023, the Group amended and restated the Credit Agreement whereby the PEG GmbH term and Revolving Credit Facility were paid off in full and a new Multicurrency Revolving Credit Facility was established under Penn Engineering Fastening Technologies (Europe) Ltd ("PEFT"). Under the new agreement, PEFT borrowed $192.9 million on April 28, 2023. In 2023, PEG made repayments totaling $78.7 million. The Multicurrency Revolving Credit Facility has a borrowing capacity of $367,500,000.

On April 28, 2023, PEFT and PEG GmbH ("PEG") entered into an intercompany loan agreement where PEFT has loaned PEG Euro 174.4 million. In 2023, PEG made repayments totaling Euro 27.4 million.

On May 31, 2023 the Group acquired the shares of Barth-Galvanik GmbH, a German based company that provides metal surface finishing, for Euro 26 million.

On January 5, 2024, the Group acquired shares of Sherex Fastening Solutions UK Ltd., Sherex Fastening Solutions Poland and Sherex Taiwan, Co (collectively, "Sherex"). Sherex provides blind rivet nuts and associated fastening solutions. Total purchase consideration is $48.1 million, which includes a note payable to the sellers of $9.9 million and an earn out of $8.3 million.

The Russo-Ukrainian conflict does not impose a direct major impact to the Group. Historically the Group has had minimal direct sales to Russia and none to Ukraine. Our products (i.e. fasteners) are consumed by our end customers in manufacturing outside of Russia / Ukraine. We are unable to quantify any indirect exposure of final OEM products being sold into the Russia / Ukraine market however we believe the exposure to be minimal to the overall company. The Group does not purchase any raw materials directly from Russia and to our knowledge we are not aware of any indirect supply risk. The Group's fastener products are manufactured primarily using ferrous metals consisting of carbon steel and stainless steel. Our cost base also reflects elements for labor, freight, energy and sourcing certain finished goods and components directly from vendors.

If the Company is unable to mitigate inflationary increases through various customer pricing actions and cost reduction initiatives, its profitability may be adversely affected.

The Russo-Ukrainian conflict does not impose a direct major impact to the Group. Historically the Group has had minimal direct sales to Russia and none to Ukraine. Our products (i.e. fasteners) are consumed by our end customers in manufacturing outside of Russia / Ukraine. We are unable to quantify any indirect exposure of final OEM products being sold into the Russia / Ukraine market however we believe the exposure to be minimal to the overall company. The Group does not purchase any raw materials directly from Russia and to our knowledge we are not aware of any indirect supply risk. The Group's fastener products are manufactured primarily using ferrous metals consisting of carbon steel and stainless steel. Our cost base also reflects elements for labor, freight, energy and sourcing certain finished goods and components directly from vendors.

If the Company is unable to mitigate inflationary increases through various customer pricing actions and cost reduction initiatives, its profitability may be adversely affected.

Foreseeable development of the Group

The Group will continue to manage its operations as a producer of quality fasteners. The European division's focus is the design and manufacturing of precision fastening solutions for many applications from automotive and automotive electronics to datacom and industrial. The China based facilities produce technologically superior fastening products for datacenter, data communications, automotive electronics, and electric vehicles end markets.

Company and business activity

The Group operates through its main subsidiaries of PROFIL Holding GmbH ("PROFIL") Penn Engineering Technologies (Europe) Ltd ("PEFT"), Penn Engineering LLC ("Singapore Branch"), PEM Shanghai Co., Ltd ("Shanghai"), PEM (China) Co., Ltd ("PEM China"), PEM (Jingjiang) Co., Ltd. ("Jingjiang"), PennEngineering Automotive Fasteners (Kunshan) Co., Ltd ("China Auto"), and PennEngineering HK Limited ('Hong Kong").

PROFIL includes two manufacturing companies located in Germany and several technical sales focused (acquisition of new business, project work, technical support) subsidiaries located throughout Europe and are represented by two Managing Directors. Since February 2016 PROFIL is represented by three Managing Directors: technical, commercial and a COO.

PEFT includes manufacturing and marketing facilities in Ireland and is represented by a Managing Director.

The Singapore Branch includes a distribution facility and is represented by a Managing Director. Shanghai includes a distribution facility and is represented by a Managing Director.

China includes manufacturing and marketing facilities in Kunshan and Jingjiang, China and is represented by a Managing Director.

China Auto includes manufacturing and marketing facilities in Kunshan, China and is represented by a Managing Director.

Hong Kong includes a distribution facility and is represented by a Managing Director.

The Company's principal activities include the design and manufacture of industrial fasteners (punched nuts, riveted nuts and bolts) that represent approximately 94% of aggregate turnover; with the remainder of aggregate turnover being special tools and machines which separate them and apply them to customer products.

The principal market for the Group are Asia and Europe and its main customer base is the automotive industry and its suppliers representing approximately 44% of aggregate turnover. Approximately 21% of turnover is through a network of distributors.

Market developments

The Group achieved new customer wins in 2020 despite negative sales growth resulting from a decline in the global markets due to the impact of the COVID-19 pandemic. The Group was adversely affected by lockdowns, plant shutdowns, labor shortages, and supply chain disruptions during 2020 caused by the worldwide outbreak of COVID-19. PROFIL has maintained a strong niche position in EU luxury vehicles despite plant closures. China Auto sales have increased due to new wins in mechanically attached fastener product lines. Despite negative sales growth, PEFT had strong wins from direct selling to offset the automotive downturn, and Asian non-auto group demand is driven by consumer electronics and Datacom and Telecom infrastructure growth and experienced year over year growth.

Research and development activities

The Group has its own research and development departments within the operations of its subsidiaries. In 2020, the Group engaged in normal research and development activity to support its customer base including developing new products, product improvement, fastening optimizations, and research in die cast materials and composites. The associated costs are normal to the Group's operations and did not have a material impact to the financial results.

Environmental protection

The manufacturing subsidiaries currently have quality standards in place including ISO 9001 and ISO 14001; and are subject to regular certified environmental audits.

Employees

All employees are regularly trained as part of the Group's internal audit program. The wide range of training courses for employees are provided and documented by both internal resources and external service providers. PEFT also provides for a successful employee education assistance program. As of December 31, 2020 approximately 2,092 members of staff were employed.

Activity and operating result

The Group's turnover for the period amounted to $366 million resulting in a loss of $10 million. The net result includes approximately $71 million for amortization expense associated with goodwill and intangible assets. EBITDA for the period totaled $112 million.

Approximately 27% of total turnover is shipped within Europe. The German market accounts for approximately 14% of total turnover. Shipments within Asia are approximately 59% of total turnover with the Chinese market accounting for 50% of total turnover. Exports to North America represent less than 10% of total turnover.

Production

Our business remains focused on increasing operational efficiencies in our manufacturing departments, while still maintaining solid control of our inventory levels. Sales growth in our automotive products has resulted in strong collaboration between engineering and production departments, to meet customer expectations for both quality and delivery requirements. The primary production processes include cold forming/ heading, and screw machining. Secondary processes including plating, inspection and packing are done internally; heat treating operations are outsourced when necessary.

During 2020 there were no disruptions to production as a result of technical difficulties, accidents or industrial action. Quality assurance systems such as ISO 9001, ISO 14001, ISO/TS 16949 and OHSAS 18001 are in place and are regularly audited by third parties.

COVID-19 forced the Group to limit production intermittently during Q1 and Q2 of 2020, predominantly in the Chinese based manufacturing facilities due to lockdowns and availability of workforce due to government imposed stay at home policies.

Procurement

The most important procurement goods are raw materials (steel), tool components (processing technology), supplies and surface treatment services. Long-term procurement essentially concerns steel (planning time of 3-6 months) and tool components (delivery times of up to 3 months). The long planning time for raw materials is necessary in order to ensure the supply. Furthermore, the procurement of goods and services is spread over multiple suppliers in order to avoid supply bottlenecks. As expected, steel prices rose moderately in the 2020 financial year and lead times extended to as much as double normal delivery times. The goods are stored in warehouses and are not exposed to environmental influences.

Assets and financial situation

The total assets of the consolidated balance sheet as at December 31, 2020 stand at approximately $558 million. Intangible assets and goodwill comprise approximately $217 million of total assets and are being amortized over their expected useful lives ranging from seven (7) to eighteen (18) years. Tangible fixed assets totaled $119 million and are being depreciated over their estimated useful lives ranging from three (3) to forty (40) years. Other assets consist of cash, trade receivables and inventories totaling $34 million, $84 million and $48 million, respectively. The liabilities include $241 million in debt owed to credit institutions, $33 million in trade payables, $38 million provision in deferred taxes, $23 million in provisions for income taxes, pensions, guarantees and personnel related expenses, and $116 million owed to affiliated undertakings. There is no minority interest in the Group.

Objectives and policy in terms of risk management

As part of its business, the Group is exposed to various risks that are intrinsically linked to its corporate activities. The Company is included in the US group's risk management. The managers of the Group counter these risks with an extensive risk management system that serves as an integral component of business processes, which aims to quickly identify potential risks in connection with operating activities, monitor them and limit them with suitable control measures. The quality monitoring system, the planning system (budgeting and strategic planning), and the internal reporting system (monthly detailed reports on current economic situation and its progress towards budgeted targets) are key components of the risk management system. The managers regularly monitor the risks and uncertainties of the business.

a) Operating risk: The Group aims to minimize significant disruptions or extended production downtimes through extensive preventive maintenance programs, the ability to extend production times, stocks of important spare parts and increased inventories. If any losses do occur, the Group has an appropriate level of insurance against normal risks including fire, flood and business interruption. In order to manage quality-related risks that arise during production, the Group places great importance on quality assurance throughout the value chain. Through preventive quality planning in research and development, intensive tests all along the process chain and constant contact with suppliers, the Group reduces quality related risks to a minimum. The Group's management system provides a framework to ensure that operational policies and procedures are communicated, understood and adhered to.

b) Market risk: The Group is exposed to market risks in connection with both procurement and sales. Potential risks on the procurement side include both price and availability of steel. These risks are minimized by entering into long-term supply contracts; engaging multiple suppliers; and continuously updating supplier lists. Where deemed appropriate, material price surcharges are negotiated with customers. The Group maintains its competitive position by actively managing its operational risk. It also provides a high level of service to its customers and maintains a good relationship with its suppliers and partners.

c) Personnel risk: The Group places great emphasis on ongoing assessment of competent staff. The managers consider succession planning issues on a regular basis.

d) Legal risk: The Group faces liability risks as part of its business. Risks can arise from potential claims for damages in connection with product liability or from the violation of legal regulations. Beside our high standards of quality and safety which help to avoid losses, insurance policies help limit the potential consequences if losses do occur. There were no major legal disputes as at the reporting date.

e) Financial risk: The Group categorized liquidity, market price and default risks as the most significant financial risks that arise primarily from normal business operations. The Group practices suitable debtor management in order to minimize default risk by limiting the amounts and terms of commercial transactions, and performing extensive credit checks before entering into new business relationships. Where appropriate customer receivables are secured through commercial credit insurance. The Group aims to minimize foreign currency exchange risk and does not speculate on currency exchange rate movements. A large proportion of trade is made in Euro's and the Group does not hedge foreign currency exchange risk. The Group mitigates financial risks through: financial monitoring, continuous forecasting and planning, with particular emphasis on cash-flow management and delivering a cost effective service to customers while maintaining an acceptable return to shareholders.

f) Overall risk: The Group was not exposed to any existential risks in the 2020 financial year. Likewise, the Group is currently unaware of any risks that might jeopardize its continued existence, or significantly impair its assets or financial position. Particular focus must be placed on the economic developments and their impact on the automotive industry, as the Group serves as a supplier to this industry and generates more than 44% of its turnover there.

Forecast Report

The Group reported turnover of approximately $480 million, and $504 million in 2021 and 2022, respectively. For 2023, the Group expects turnover of approximately $454 million. For 2023, base turnover, denominated in local currency, is expected to increase approximately 4 percent compared to 2022 at €197 million or approximately $ 182 million at an expected exchange rate of $ 1.0 to €1.08 compared to average rate for 2022 of $1.00 to €1.05. For 2023, the Asian manufacturing and distribution centers are expected to generate approximately $275 million in turnover compared $314 million in 2022.

Base turnover is expected to be maintained by stable business with existing customers, product mix, and development of American markets. Increase in Asian markets is based on higher growth in the region. Based on full year turnover expectations and stable steel prices, the Group expects growth in operating income, but incur a net loss due to amortization charges associated with goodwill and intangible assets. Besides the general economic and entrepreneurial risks, the market continues to exercise pricing pressures within the automotive industry which may limit the positive development of turnover growth. On the basis of the 2023 forecast, the Group does not expect any of its payment obligations to be at risk.

The Group incurred $14.9, and $23.7 million in investments during 2021 and 2022, respectively. The Group has planned for approximately $45.1 million in investments in 2023.

Acquisition by the Group of its own shares

During the financial period, the Group or its subsidiaries have not acquired any of its own shares.

Audit report

To the Shareholders of

PennLux Holdings S.à r.l.

Report on the audit of the consolidated annual accounts

Our opinion

In our opinion, the accompanying consolidated annual accounts give a true and fair view of the consolidated financial position of PennLux Holdings S.à r.l. (the "Company") and its subsidiaries (the "Group") as at 31 December 2020, and of the consolidated results of its operations for the year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the consolidated annual accounts.

What we have audited

The Group's consolidated annual accounts comprise:

Basis for opinion

We conducted our audit in accordance with the Law of 23 July 2016 on the audit profession (Law of 23 July 2016) and with International Standards on Auditing (ISAs) as adopted for Luxembourg by the "Commission de Surveillance du Secteur Financier" (CSSF). Our responsibilities under the Law of 23 July 2016 and ISAs as adopted for Luxembourg by the CSSF are further described in the "Responsibilities of the "Réviseur d'entreprises agréé" for the audit of the consolidated annual accounts" section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants, including International Independence Standards, issued by the International Ethics Standards Board for Accountants (IESBA Code) as adopted for Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit of the consolidated annual accounts. We have fulfilled our other ethical responsibilities under those ethical requirements.

Other information

The Board of Managers is responsible for the other information. The other information comprises the information stated in the consolidated management report but does not include the consolidated annual accounts and our audit report thereon.

Our opinion on the consolidated annual accounts does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated annual accounts, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated annual accounts or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Managers for the consolidated annual accounts

The Board of Managers is responsible for the preparation and fair presentation of the consolidated annual accounts in accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the consolidated annual accounts, and for such internal control as the Board of Managers determines is necessary to enable the preparation of consolidated annual accounts that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated annual accounts, the Board of Managers is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Managers either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Responsibilities of the "Réviseur d'entreprises agréé" for the audit of the consolidated annual accounts

The objectives of our audit are to obtain reasonable assurance about whether the consolidated annual accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an audit report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated annual accounts.

As part of an audit in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Report on other legal and regulatory requirements

The consolidated management report is consistent with the consolidated annual accounts and has been prepared in accordance with applicable legal requirements.

Consolidated balance sheet as at 31 December 2020

The accompanying notes form an integral part of these consolidated annual accounts.

Consolidated profit and loss account for the period from January 1, 2020 to December 31, 2020

The accompanying notes form an integral part of these consolidated annual accounts.

Notes to the consolidated annual accounts as at December 31, 2020

1. General information

1.1. Parent company

PennLux Holdings (hereafter « the Company ») was incorporated on July 16, 2014, for an unlimited period. The Company is also a wholly owned subsidiary of Penn Engineering & Manufacturing Corp., a US Company ("the Parent").

The Parent is the largest group of undertakings for which consolidated financial statements are prepared and in which the Company and its subsidiaries are included. Consolidated financial statements of the Parent are available at the registered office: 5190 Old Easton Rd, Danboro, PA 18916 (USA).

The Company's registered office is located 4, rue Jean-Pierre Brasseur, L-1258 Luxembourg and is registered with the Luxembourg Trade and Companies Register under the number B. 188831.

The Company's financial year begins on January 1 and ends on December 31 of each year.

The purpose of the Company is the acquisition of participations, in Luxembourg or abroad, in any companies or enterprises in any form whatsoever and the management of such participations. The Company may in particular acquire by subscription, purchase and exchange or in any other manner any stock, shares and other participation securities, bonds, debentures, certificates of deposit and other debt instruments and more generally, any securities and financial instruments issued by any public or private entity. It may participate in the creation, development, management and control of any company or enterprise. It may further invest in the acquisition and management of a portfolio of patents or other intellectual property rights of any nature or origin.

The Company may borrow in any form, except by way of public offer. It may issue, by way of private placement only, notes, bonds and any kind of debt and equity securities. The Company may lend funds including, without limitation, the proceeds of any borrowings, to its subsidiaries, affiliated companies and any other companies. The Company may also give guarantees and pledge, transfer, encumber or otherwise create and grant security over all or some of its assets to guarantee its own obligations and those of any other company, and, generally, for its own benefit and that of any other company or person. For the avoidance of doubt, the Company may not carry out any regulated activities of the financial sector without having obtained the required authorization.

The Company may use any techniques and instruments to efficiently manage its investments and to protect itself against credit risks, currency exchange exposure, interest rate risks and other risks.

The Company may carry out any commercial, financial or industrial operations and any transactions with respect to real estate or movable property which, directly or indirectly, favour or relate to its corporate object.

1.2. Description of business

The Company and its subsidiaries (hereafter « the Group »), is a manufacturer of fastener products. The Group's fastener products are used principally by the general electronics, automotive industry for body structure and closures. Typical applications for the Group's fastener products include personal computers, computer cabinetry, power supplies, instrumentation, telecommunications equipment, and certain automobile components, such as air bags, sun roofs, and windshield wipers. The Group also manufactures and sells manual and automated presses for fastener installation and small screw insertion systems. The Group has operations in Germany, Ireland, Singapore, China and Hong-Kong.

2. Basis of preparation and consolidation policies

2.1 Principles of consolidation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Luxembourg ("Luxembourg GAAP") and in accordance with the laws and regulation in force in the Grand Duchy of Luxembourg. The consolidated accounts of the Group include the annual accounts of the Company and of its subsidiaries as well as the present accompanying notes.

Internal share ownership has been eliminated using the acquisition cost method. All inter-company balances and intercompany transactions have been eliminated in the consolidation.

Assets, liabilities, off-balance-sheet items and income and expenses of consolidated companies have been added to the corresponding items of the Company.

The annual accounts of the consolidated companies have been adjusted in order to harmonize them with the accounting policies of the Group. The annual accounts of all Group entities included in the scope of consolidation are expressed in their local currency.

Intra-group balances and income and expenses resulting from transactions between consolidated companies have been eliminated.

2.2 Scope of consolidation

Full consolidation is applied to the following companies:

3. Summary of significant Group accounting policies

3.1 Transactions denominated in foreign currencies

The Group maintains its accounting records in USD and the consolidated accounts are expressed in this currency.

Formation expenses, intangible assets, tangible assets and financial assets expressed in currencies other than the reporting currency are translated into the reporting currency at the exchange rate prevailing on the transaction date. At the balance sheet date, these assets remain translated at the historic exchange rates.

Cash at bank is translated at the exchange rate effective at the balance sheet date. Exchange losses and gains are recorded in the profit and loss account of the year/period.

Other assets and liabilities expressed in currencies other than the reporting currency are translated into the reporting currency at the exchange rate prevailing on the transaction date and are valued at the lower of their value translated at the historic exchange rates and their value translated at the exchange rates prevailing on the balance sheet date.

The closing rate applied is as follows:

The financial statements of entities in foreign currencies should be translated into the reporting currency of the Company based on the nature of the account as follows:

The differences in translation are recognized in equity, under the caption "Currency translation reserve" (refer note 4.6).

3.2 Intangible fixed assets

Differences on first consolidation ("Goodwill" / "Badwill")

All differences arising between the acquisition price of the shares in the companies included in the consolidation and their respective adjusted net book value at the date of the acquisition have been initially included in the intangible assets as Goodwill (representing excess of consideration paid over adjusted net assets value of subsidiary acquired) or in equity in case of negative difference ("Badwill"), if consideration paid is lower than adjusted net assets value.

Goodwill is amortized over a period of 7 years, due to actual useful life.

Other intangible assets

Intangible assets are initially valued at acquisition price or production cost. The cost of intangible assets acquired through a combination of these is their fair value on the date of acquisition.

Intangible assets are subsequently valued at cost less accumulated amortization and any impairment value adjustment (non-reversable).

If the expectation of the benefits generated by the assets is lower than the net book value, a depreciation is charged for its realizable value. This provision, which can be reverted, is to be applied on a straight-line basis over the useful life of the corresponding assets, which in this period is 18 years, except for the goodwill being amortized over a period of 7 years.

The intangible assets with a definite working life systematically amortize according to the estimated working life of the goods and their residual value. The applied methods and periods of amortization are revised at each year-end and adjusted according to the market where necessary. The existence of impairment indicators is evaluated at least at each year-end and in these cases the recoverable amount is estimated by performing the necessary valuation corrections.

Internally developed intangible assets are generally expensed when incurred, while intangible assets acquired from others are capitalized. Non-material intangible assets acquired from others are expensed as incurred. Costs attributable to the development of computer software are capitalized as incurred during the application development stage and amortized over the useful economic life of the asset. The costs incurred during the preliminary planning and evaluation phase are expensed as incurred.

3.3 Tangible fixed assets

Tangible fixed assets are stated at historical cost less accumulated depreciation, less recognized impairment loss (refer note 4.3.).

Depreciation on tangible fixed assets is calculated using the straight-line method over the estimated useful lives of the assets according to plan as follows:

3.4 Financial fixed assets

The financial assets, except for those included in the scope of consolidation, are recorded at their acquisition price. The acquisition price includes charges and expenses in connection with the financial asset during the financial year of its acquisition. For any diminution in value which is considered, in the opinion of the board of managers, to be durable in nature, a value adjustment is made on the basis on the basis of a valuation of each individual asset at the end of each financial year.

Loans and claims held as fixed assets

Loans and claims held as fixed assets include debt instruments with fixed maturities and fixed or determinable payments traded on active markets which the Group has the positive intention and the ability to hold to maturity.

Upon initial recognition in the balance sheet, they are recognized at fair value, which, unless there is evidence to the contrary, is the transaction price, which is equivalent to the fair value of the consideration paid plus directly attributable transaction costs.

3.5 Impairment in respect of fixed assets

Impairment of intangible assets, property, plant and equipment and other fixed assets is recognized if the estimated future revenue generated by the fixed asset is expected to be permanently lower than the historical cost, net of depreciation. The amount of impairment is calculated as the difference between the estimated future revenue generated and the historical cost, net of depreciation and recorded as an expense.

Value adjustments are deducted directly from the related assets and are reversed through profit and loss account if the reasons for which they were made have ceased to apply.

3.6 Stocks

Stocks of raw material are stated at the lower of acquisition costs on the basis of weighted average price or the FIFO method.

Stocks of finished goods and work in progress are valued at the lower of production costs including the acquisition price of the raw materials and consumables, the costs directly attributable to the product in question and a proportion of the costs indirectly attributable to the product in question, and market value. Where the Group considers that inventories have suffered a durable decline in value an additional write down is recorded to reflect this impairment.

3.7 Debtors

Debtors are valued at their nominal value. If a debtor is considered unlikely to be able to pay the debt, a value adjustment is made.

3.8 Cash at bank and in hand

Cash and deposits are valued at their nominal value.

3.9 Provisions

Provisions for liabilities and charges are intended to cover losses or debts the nature of which is clearly defined and which, at the date of the balance sheet, are either likely to be incurred or certain to be incurred but uncertain as to their amount or as to the date on which they will arise.

Provisions to cover foreseeable liabilities and charges are determined at the end of each year. Provisions set up in previous years are reviewed regularly and may be written back to the profit and loss account.

3.10 Creditors

Non-subordinated debts are valued at reimbursement value. Accrued interests relating to any debt are added to the related debts.

3.11 Prepayments and accrued income

Prepayments and accrued income include expenditure incurred during the financial year but relating to a subsequent financial year.

Amounts of prepayments are mainly composed of financing costs related to the financing of the acquisition of Profil Holding GmbH. These costs are amortized over the period of the loan (see note 4.8).

3.12 Accruals and deferred income

Accruals and deferred income include income received during the financial year but relating to a subsequent financial year.

3.13 Net turnover

The net turnover includes the amounts derived from the sale of products and the provision of services falling within the ordinary activities of the Company and its subsidiaries, after deduction of sales rebates and of value added tax and other taxes linked directly to the turnover.

3.14 Taxation

Income tax

Income tax expense or income include the portion of expense or income for current tax as well as deferred tax expense. Current taxes include taxes of consolidated subsidiaries for the year calculated in accordance with local regulations, as well as adjustments to the prior year tax.

The current income tax charge is determined on the basis of the tax laws and tax rates in force in each country in which the Group operates during the period in which the income is generated.

Deferred tax expense relates to the recognition and derecognition of deferred tax liabilities. Deferred tax liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of assets and liabilities and their respective tax bases.

Deferred tax liabilities are recognized for all taxable temporary differences other than:

Deferred tax assets are not recognized. Deferred tax liabilities are measured using the liability method, at the tax rate which is expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been or will have been enacted by the balance sheet date of that period. They are not discounted.

Current and deferred taxes are recognized as tax income or expenses in the profit and loss statement.

4. Notes relating to the balance sheet

4.1 Intangible fixed assets

The breakdown of "Intangible fixed assets" is as follows:

4.2 Tangible fixed assets

The breakdown of "tangible fixed assets" is as follows:

4.3 Financial fixed assets

The breakdown of "Financial fixed assets" is as follows:

Main financial fixed assets are related to amounts owed by affiliated undertakings but which are out of the consolidation scope: Penn Engineering USA (Danboro), Profil North America and US Auto.

4.4 Stocks

Stocks as at December 31, 2020 are composed of (amounts in USD):

Stocks as at December 31, 2019 are composed of (amounts in USD):

4.5 Debtors

As at December 31, 2020, debtors are composed of:

4.6 Capital and reserves

Subscribed capital

As at December 31, 2020, the subscribed capital is fixed at USD 3,141,591.50 represented by 4,548 Class A shares without designation of a nominal value and 515 Class B shares without designation of a nominal value.

Share premium and similar premiums

As at December 31, 2020, the share premium is fixed at USD 373,006,400.

Changes in equity during the financial period are summarized in table below:

On May 13, 2020, the Board of Managers decided to pay an interim dividend for a total amount of USD 11,000,000.- to its shareholders.

On September 10, 2020, the Board of Managers decided to pay an interim dividend for a total amount of USD 23,000,000.- to its shareholders.

On December 18, 2020, the Board of Managers decided to pay an interim dividend for a total amount of USD 28,000,000.- to its shareholders.

As the profit in the consolidated financial statements differs from the profit in the statutory financial statements, interim dividends paid by the Company are presented as negative consolidated reserves.

4.7 Provisions

The breakdown of "Provisions" is as follows:

4.8 Creditors

As at December 31, 2020, maturity and nature of creditors are as follows:

On August 29, 2014, simultaneously with the acquisition of Profil as mentioned in Note 2.2, the Group entered into senior secured credit facilities consisting of TEUR 261.300 aggregate principal amount of Euro denominated Term Loans. These Euro denominated Term Loans are only one component of the senior credit facilities contracted by the Parent and controlling party.

The Term Loans mature on August 29, 2021, with interest payable quarterly. The Term Loans amortize in equal quarterly installments in an amount equal to 1% of the original principal amount with the remainder due at maturity.

The Senior Credit Facilities contain a covenant to maintain a total net leverage ratio if the Parent and controlling party borrowings under a multi-currency Revolving Credit Facility (other component of Senior Credit Facilities contracted by the Parent) exceed 25% of the aggregate amount available. The total net leverage ratio can not exceed a range from 5,5:1 to 4,5:1 through December 31, 2015 and 4,00:1 , thereafter. The Senior Credit Facilities also includes customary negative and affirmative covenants including, among others, limitations on the ability to : (i) incur additional debt; (ii) create liens; (iii) make certain investments, loans and advances; (iv) sell assets; (v) pay dividends or make distributions or other restricted payments; (vi) engage in mergers or consolidations; or (vii) change the nature of the business.

Beginning with the year ending December 31,2015, the Term Loans are subject to mandatory prepayments as follows: if the Parent's Total Net Leverage Ratio on a consolidated basis as of the end of any fiscal year is (i) greater than 3,5 to 1,00, 50% of annual Excess Cash Flow, (ii) less than or equal to 3,5 to 1,00, but greater than 2,75 to 1,00, 25% of annual Excess Cash Flow, or (iii) equal to or less than 2,75 to 1,00,0% of annual Excess Cash Flow, in each case minus any voluntary prepayments of the Term Loans made during such fiscal year.

As of December 31, 2019, the outstanding Term Loans denominated in EUR are set at an interest rate of 4,5%.

On June 19, 2018, the company PEG GmbH entered in a new loan agreement for a total value of EUR 140.000.000 with an interest rate of 1%. The Loan mature on June 27, 2024.

5. Notes relating to the profit and loss account

5.1. Net turnover

The Group's turnover and profit before taxation were derived from its principal activity. The group recognizes income on product sales upon transfer of the property, which normally coincides with the delivery or shipment of goods.

The turnover was broken by geographical market as follows:

5.2. Other external expenses

The breakdown of "other external expenses" is as follows:

5.3. Audit fees

The total fees accrued by the Company and paid to the audit firm are presented as follows:

The audit fees to be billed by PwC Luxembourg for 2020 amount to USD 110,000 and the remaining amount pertains to audits of other PwC networks.

5.4. Other interest and similar income

The breakdown of "Other interest and similar income" is as follows:

5.5. Other interest and similar expenses

The breakdown of "Other interest and similar expenses" is as follows:

5.6. Tax on profit or loss

The tax of the Group for the financial period is broken down as follows:

6. Staff

The average headcount by professional category is as follows:

7. Emoluments granted to the members of the management and supervisory bodies

The Company did not grant any emolument to any member of those bodies.

8. Off-balance sheet commitments

Under the Senior Credit Facilities, all obligations of Group subsidiaries, which are also Borrower's are guaranteed on a several basis by each existing and subsequently acquired or organized material. The debt is secured by a lien on substantially all the assets of the subsidiaries subject to certain limitations.

The financial commitments of the Group are as follows:

9. Subsequent events

The Group made voluntary payments to the PEG GmbH term loan on January 29, 2021, February 25, 2021, March 30, 2021, and April 29, 2021 in the amounts of $6.1, $1.2, $2.4, and $3.6 million, respectively. There were no voluntary payments made in 2022.

On May 9, 2022 the Group borrowed $12.3 million from its Revolving Credit Facility. During 2022 the Group made repayments totaling $11.8 million.

On April 28, 2023, the Group amended and restated the Credit Agreement whereby the PEG GmbH term and Revolving Credit Facility were paid off in full and a new Multicurrency Revolving Credit Facility was established under Penn Engineering Fastening Technologies (Europe) Ltd ("PEFT"). Under the new agreement, PEFT borrowed $192.9 million on April 28, 2023. In 2023, PEG made repayments totaling $78.7 million. The Multicurrency Revolving Credit Facility has a borrowing capacity of $367,500,000.

On April 28, 2023, PEFT and PEG GmbH ("PEG") entered into an intercompany loan agreement where PEFT has loaned PEG Euro 174.4 million. In 2023, PEG made repayments totaling Euro 27.4 million.

On May 31, 2023 the Group acquired the shares of Barth-Galvanik GmbH, a German based company that provides metal surface finishing, for Euro 26 million.

On January 5, 2024, the Group acquired shares of Sherex Fastening Solutions UK Ltd., Sherex Fastening Solutions Poland and Sherex Taiwan, Co (collectively, "Sherex"). Sherex provides blind rivet nuts and associated fastening solutions. Total purchase consideration is $48.1 million, which includes a note payable to the sellers of $9.9 million and an earn out of $8.3 million.

The Russo-Ukrainian conflict does not impose a direct major impact to the Group. Historically the Group has had minimal direct sales to Russia and none to Ukraine. Our products (i.e. fasteners) are consumed by our end customers in manufacturing outside of Russia / Ukraine. We are unable to quantify any indirect exposure of final OEM products being sold into the Russia / Ukraine market however we believe the exposure to be minimal to the overall company. The Group does not purchase any raw materials directly from Russia and to our knowledge we are not aware of any indirect supply risk. The Group's fastener products are manufactured primarily using ferrous metals consisting of carbon steel and stainless steel. Our cost base also reflects elements for labor, freight, energy and sourcing certain finished goods and components directly from vendors.

If the Company is unable to mitigate inflationary increases through various customer pricing actions and cost reduction initiatives, its profitability may be adversely affected.

10. Related parties

The transactions with related parties that occurred during the period are related to financing activities with other entities belonging to the Parent and controlling party.

All transaction with related parties have been conducted under normal market conditions.

11. Supplemental disclosures in accordance with section 264b of the HGB

The companies, PROFIL Verbindungstechnik GmbH & Co KG, STABO Verbindungstechnik GmbH & Co KG, PROFIL Holding GmbH, PROFIL Verbindungstechnik Service GmbH and PEG GmbH are exempted from the obligation to comply with the supplementary accounting, audit and publication requirements applicable to certain companies in accordance with section 264b or 264 Abs. 3 of the HGB.