Allnex Holding I Germany GmbH

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Befreiender Konzernabschluss gem. § 291 HGB
zum Geschäftsjahr vom 01.01.2020 bis zum 31.12.2020

ALLNEX (LUXEMBURG) & Cy S.C.A.

Luxemburg

Contents

Consolidated Financial Statements

A Independent auditors' report

B Primary statements

Consolidated statement of profit or loss and other comprehensive income

Consolidated statement of financial position

Consolidated statement of cash flows

Consolidated statement of changes in equity

C Notes to the consolidated financial statements

1 Reporting entity

2 Basis of preparation

2.1 Statement of compliance

2.2 Basis of measurement

2.3 Basis of accounting

2.4 Functional and presentation currency

2.5 Use of estimates and judgments

2.6 Measurement of fair values

3 Significant accounting policies

3.1 Basis of consolidation

3.2 Foreign currency

3.3 Financial instruments

3.4 Property, plant and equipment

3.5 Intangible assets and goodwill

3.6 Leases

3.7 Inventories

3.8 Impairment

3.9 Employee benefits

3.10 Provisions

3.11 Revenue

3.12 Finance income and finance costs

3.13 Income tax

3.14 New standards and interpretations issued but not yet adopted by the Group

4 Property, plant and equipment

5 Intangible assets and goodwill

6 Associates and equity accounted investees

7 Other investments

8 Deferred tax assets and liabilities

9 Inventories

10 Trade and other receivables

11 Cash and cash equivalents

12 Capital and reserves

13 Loans, borrowings and other financial liabilities

14 Employee benefits

15 Deferred income

16 Provisions

17 Trade and other payables

18 Financial instruments

19 Revenue

20 Other income/expense

21 Finance income and finance costs

22 Analysis of cost by nature

23 Income tax expense

24 Acquisitions

25 Expenses relating to leases

26 Commitments

27 Contingencies

28 Related parties

29 Group composition

30 Non-controlling interests

31 Disposal group held for sale

32 Audit fees

33 Subsequent events

REPORT OF THE REVISEUR D'ENTREPRISES AGREE

Report on the audit of the consolidated financial statements

Opinion

We have audited the consolidated financial statements of Allnex (Luxembourg) & Cy S.C.A. and its subsidiaries (the "Group"), which comprise the consolidated statement of financial position as at 31 December 2020, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

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 "réviseur d'entreprises agréé" for the audit of the consolidated financial statements » section of our report. We are also 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 financial statements, and have fulfilled our other ethical responsibilities under those ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other information

The 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 financial statements and our report of the "réviseur d'entreprises agréé" thereon.

Our opinion on the consolidated financial statements 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 financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements 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 this fact. We have nothing to report in this regard.

Responsibilities of the Manager and Those Charged with Governance for the consolidated financial statements

The Manager is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs as adopted by the European Union, and for such internal control as the Manager determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the Manager 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 Manager either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

Responsibilities of the réviseur d'entreprises agréé for the audit of the consolidated financial statements

The objectives of our audit are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a report of the "réviseur d'entreprises agréé" 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 financial statements.

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 skepticism throughout the audit. We also:

―	Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
―	Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
―	Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Managers.
―	Conclude on the appropriateness of Manager' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report of the "réviseur d'entreprises agréé" to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our report of the "réviseur d'entreprises agréé". However, future events or conditions may cause the Group to cease to continue as a going concern.
―	Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
―	Obtain sufficient appropriate audit evidence regarding the financial information of the entities and business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

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 financial statements and has been prepared in accordance with the applicable legal requirements.

Luxembourg, 18 June 2021

KPMG Luxembourg
Société coopérative
Cabinet de révision agréé

Stephan Lego-Deiber

Consolidated statement of profit or loss and other comprehensive income

(EUR in millions)	Note	For the 12 months ended, December 31, 2020	For the 12 months ended, December 31, 2019 ^*
Continuing operations
Revenue	19	1,831.2	2,035.0
Cost of sales		(1,510.0)	(1,740.8)
Gross profit		321.2	294.2
Other income	20	78.0	66.8
Selling and distribution expenses		(63.9)	(73.5)
Administrative expenses		(51.7)	(61.8)
Research and development expenses		(35.1)	(35.9)
Impairment loss on trade receivables and contract assets		(0.3)	(0.1)
Other expense	20	(83.0)	(79.9)
Operating profit / (loss)		165.2	109.8
Finance income		93.3	42.8
Finance costs		(186.0)	(110.2)
Net finance costs	21	(92.7)	(67.4)
Share of profit of equity-accounted investees net of tax	6	1.9	1.6
Profit / (loss) before tax		74.4	44.0
Income tax expense	23	(21.4)	(4.6)
Profit / (loss) from continuing operations		53.0	39.4
Profit / (loss) from discontinued operations		-	1.4
Profit / (loss) for the period		53.0	40.8
Other comprehensive income
Items that will never be reclassified to profit or loss
Remeasurements of defined benefit liability (asset) net of tax		1.9	(7.4)
		1.9	(7.4)
Items that are or may be reclassified to profit or loss
Foreign operations - foreign currency translation differences		0.5	6.3
Net investment in a foreign operation		38.8	(13.2)
		39.3	(6.9)
Other comprehensive income for the period, net of tax		41.2	(14.3)
Total comprehensive income for the period		94.2	26.5
Profit / (loss) attributable to:
Owners of the company		49.1	37.3
Non-controlling interests		3.9	3.5
Total comprehensive income attributable to:
Owners of the company		91.3	22.2
Non-controlling interests		2.9	4.3
Total comprehensive income		94.2	26.5

^* 2019 figures were restated to present the part of exchange gains/losses relating to financing activities in finance income/costs section and the part relating to operational activities in the other income/expense section - See also notes 20, 21 and 22. The notes on pages 9 to 120 are an integral part of these consolidated financial statements.

Consolidated statement of financial position

(EUR in millions)	Note	December 31, 2020	December 31, 2019
Assets
Property, plant and equipment	4	616.5	669.2
Intangible assets and goodwill	5	737.5	795.3
Trade and other receivables	10	637.9	544.7
Equity-accounted investees	6	19.8	19.6
Other investments, including derivatives	7	5.6	5.5
Deferred tax assets	8	57.1	61.7
Non-current assets		2,074.4	2,096.0
Inventories	9	284.0	338.9
Other investments, including derivatives		6.1	1.4
Current tax assets		4.2	7.4
Trade and other receivables	10	178.9	157.7
Prepayments		7.3	6.8
Cash and cash equivalents	11	206.5	138.9
Current assets		687.0	651.1
Total assets		2,761.4	2,747.1
Equity
Share capital	12	1.4	1.4
Preferred Equity Certificates (PECs)	12	52.3	51.4
Reserves	12	(21.2)	(61.5)
Retained earnings		302.6	252.7
Equity attributable to owners of the company		335.1	244.0
Non-controlling interests		26.3	26.9
Total equity		361.4	270.9
Liabilities
Loans and borrowings	13	1,584.9	1,662.2
Other financial liabilities	13	32.5	36.9
Preferred Equity Certificates (PECs)	13	2.9	2.7
Employee benefits	14	121.5	123.8
Trade and other payables	17	0.3	0.5
Deferred income/revenue	15	1.9	3.0
Provisions	16	23.5	24.6
Deferred tax liabilities	8	157.1	165.1
Non-current liabilities		1,924.6	2,018.8
Bank overdraft	11	6.8	5.7
Current tax liabilities		29.6	26.7
Loans and borrowings	13	18.3	24.9
Other financial liabilities	13	14.0	14.0
Trade and other payables	17	397.3	365.9
Deferred incom/revenue	15	0.5	0.5
Provisions	16	8.9	19.7
Current liabilities		475.4	457.4
Total liabilities		2,400.0	2,476.2
Total equity and liabilities		2,761.4	2,747.1

The notes on pages 9 to 120 are an integral part of these consolidated financial statements.

Consolidated statement of cash flows

(EUR in millions)	Note	For the 12 months ended, December 31, 2020	For the 12 months ended, December 31, 2019 ^*
Cash flows from operating activities
Profit for the period		53.0	40.8
Adjustments for:
Depreciation	4	76.9	82.6
Amortization	5	64.2	65.9
Net finance costs	21	92.7	67.4
Share of profit of equity-accounted investees, net of tax	6	(1.9)	(1.6)
Gain on sale of discontinued operation, net of tax		-	(1.4)
Income tax expense	23	21.4	4.6
Net foreign exchange gain/loss	20	0.2	8.4
Other		(7.7)	(3.5)
		298.8	263.2
Changes in:
Inventories	9	42.0	39.3
Trade and other receivables ^***	10	(31.5)	31.4
Prepayments		(0.8)	3.6
Trade and other payables	17	33.4	(38.3)
Provisions and employee benefits	14,16	(12.7)	(6.3)
Deferred income/revenue	15	(11)	(0.7)
Cash generated from operating activities		328.1	292.2
Interest paid		(70.2)	(81.9)
Income taxes paid		(20.7)	(45.5)
Net cash from operating activities		237.2	164.8
Cash flows from investing activities
Interest received		0.3	0.3
Acquisition of intangibles (excl. development expenditure)	5	(11.5)	(13.9)
Acquisition of property', plant and equipment	4	(39.0)	(69.3)
Dividends received from equity-accounted investees	6	1.4	0.8
Development expenditure	5	(5.7)	(7.5)
Net cash used in investing activities		(54.5)	(89.6)
Cash flows from financing activities
Proceeds from new borrowings	13	13.2	19.9
Proceeds/(payments) from settlement of derivatives	13	(1.8)	(2.4)
Acquisition/(capital distribution) of non-controlling interests	13	(2.2)	2.6
Repayment of borrowings	13	(34.4)	(40.9)
Payments of lease liabilities	13	(18.5)	(16.5)
Loan issued to shareholder	13,28	(68.4)	(1.1)
Dividends paid	13	(1.3)	(1.8)
Net cash used in financing activities		(113.4)	(40.2)
Net increase/(decrease) in cash and cash equivalents		69.3	35.0
Cash and cash equivalents at beginning of period ^**	11,18	133.2	97.3
Effect of movements in exchange rates on cash held		(2.8)	0.9
Cash and cash equivalents at ending of period ^**	11,18	199.7	133.2

^* 2019 figures were restated to present the part of exchange gains/losses relating to financing activities in finance income/costs section and the part relating to operational activities in the other income/expense section -See also notes 20, 21 and 22.
^** Cash and cash equivalents includes bank overdrafts that are repayable on demand and form an integral part of the Group's cash management.
^*** The change of the trade and other receivables, includes the change of the TRPP. The notes on pages 9 to 120 are an integral part of these consolidated financial statements.

Consolidated statement of changes in equity For the period ended December 31, 2020

Attributable to owners of the company

(EUR in millions)	Share capital	Translation reserve	Preferred Equity Certificates
Balance at January 1, 2019	1.4	(58.2)	51.6
Profit / (loss)	-	-	-
Net investment in a foreign operation	-	(13.2)	-
Other comprehensive income for the period	-	5.5	-
Total comprehensive income for the period	-	(7.7)	-
Transactions with owners of the company
Contributions and distributions	-	-	-
Dividends	-	-	-
Other	-	44	(0.2)
Total contributions and distributions	-	44	(0.2)
Total transactions with owners of the company	-	44	(0.2)
Balance at December 31, 2019	1.4	(615)	51.4
Profit	-	-	-
Net investment in a foreign operation	-	388	-
Other comprehensive income for the period	-	1.5	-
Total comprehensive income for the period	-	40.3	-
Transactions with owners of the company
Contributions and distributions	-	-	-
Dividends	-	-	-
Other	-	-	09
Total contributions and distributions	-	-	0.9
Total transactions with owners of the company	-	-	09
Balance at December 31, 2020	1.4	(21.2)	52.3

(EUR in millions)	Retained earnings	Total	Non-controlling interests	Total equity
Balance at January 1, 2019	227.2	222.0	22.0	244.0
Profit / (loss)	37.3	37.3	3.5	40.8
Net investment in a foreign operation	-	(132)	-	(13.2)
Other comprehensive income for the period	(7.4)	(19)	0.8	(1.1)
Total comprehensive income for the period	29.9	22.2	4.3	26.5
Transactions with owners of the company
Contributions and distributions	-	-	2.6	2.6
Dividends	-	-	(1.8)	(1.8)
Other	(4.4)	(0.2)	(0.2)	(0.4)
Total contributions and distributions	(4.4)	(0.2)	0.6	0.4
Total transactions with owners of the company	(4.4)	(0.2)	0.6	0.4
Balance at December 31, 2019	252.7	244.0	26.9	270.9
Profit	491	49.1	3.9	53.0
Net investment in a foreign operation	-	38.8	-	388
Other comprehensive income for the period	1.9	3.4	(1.0)	2.4
Total comprehensive income for the period	51.0	91.3	2.9	94.2
Transactions with owners of the company
Contributions and distributions	-	-	(2.2)	(2.2)
Dividends	-	-	(1.3)	(1.3)
Other	(1.1)	(0.2)	-	(0.2)
Total contributions and distributions	(1.1)	(02)	(3.5)	(3.7)
Total transactions with owners of the company	(1.1)	(02)	(3.5)	(3.7)
Balance at December 31, 2020	302.6	335.1	26.3	361.4

The notes on pages 9 to 120 are an integral part of these consolidated financial statements.

1 Reporting entity

Allnex (Luxembourg) & Cy S.C.A. is a partnership limited by shares (société en commandite par actions) incorporated and existing under the laws of the Grand Duchy of Luxembourg, incorporated pursuant to a notarial deed dated October 4, 2012, whose articles of association have been published in the Mémorial C, Recueil Spécial des Sociétés et Associations (the "Memorial C") dated November 13, 2012, number 2756, page 132250. The Company's registered office is at 76, Grande Rue, L-1660 Luxembourg and its RCS number is B172.052.

The consolidated financial statements comprise Allnex (Luxembourg) & Cy S.C.A. and its subsidiaries (collectively the 'Group' and individually 'Group companies'). The Group is primarily involved in Industrial Coating Resins business. The period subject to these consolidated financial statements is January 1, 2020 through December 31, 2020.

Coating Resins products serve a diverse range of end markets including adhesives, automotive, industrial coatings, coil coatings, metal protection, packaging, electronics, marine and inks. The Group uses its technology and application development expertise to create solutions that are formulated to perform specific and important functions for its customers. The Group markets its coating resins chemicals through specialized sales and technical service staff for each of its product lines. Sales are typically made directly to large customers and through distributors to smaller customers.

The allnex Coating Resins business includes the following product lines:

•	Radiation Cured Resins (Radcure resins);
•	Liquid Resins and Additives (including Waterborne Resins, Solventborne Resins, Urethane Resins, Additives and Composites);
•	Powder Coating Resins;
•	Crosslinkers.

2 Basis of preparation

2.1 Statement of compliance

The consolidated financial statements have been prepared in accordance with IFRS as adopted by the European Union on December 31, 2020.

2.2 Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following items, which are measured on an alternative basis on each reporting date. The consolidated financial statements have been prepared under the going concern assumption.

Items	Measurement bases	Included in
Derivative financial instruments	Fair value	Current assets - Other investments, including derivatives
		Current liabilities - Trade and other payables
Non-derivative financial instruments at FVTPL	Fair value	Non-current assets - Trade and other receivables
Net defined benefit (asset) liability	Fair value of plan assets less the present value of the defined benefit obligation, limited as explained in Note 14.	Non-current liabilities - Employee benefits

2.3 Basis of accounting

Going concern basis of accounting

The outbreak of the COVID-19 pandemic and the measures adopted by governments in countries worldwide to mitigate the pandemic's spread had no major impact on the Group's performance.

The Group was benefitting from its strong market and product positioning and diversified footprint with large product portfolio for many different industries and the broadest geographic manufacturing and customer footprint.

2020 operating profit was at EUR 165.2 million 50.5% above 2019. In 2020, the Group has improved the strong cash position by EUR 67.6 million from EUR 138.9 million as of December 31, 2019 to EUR 206.5 million as of December 31, 2020. This was explained by our well diversified business with volume growth in certain regions and segments, higher unit margins, and by the successful implementation of cost reduction measures and various mitigation actions.

The Group was benefitting from its diversified global network and learning from early China insights and best practices, allnex had no operational disruptions to date with temporary exceptions of the plants in China, Malaysia and New Zealand in April/May 2020, which are again operating normally. Raw materials supply remained intact for all plants, except for some challenges in Q4 due to very strong demand and logistics constraints. Capacity utilization remains high in most sites.

allnex has implemented strong safety measures to protect employees and secure operations. Support functions were working from home where possible and the plants were operating under stringent safety protocols to prevent contagion risks.

Beside the uncertainty on how the pandemic will further develop, based on the above, the Group has no doubts to continue as a going concern.

2.4 Functional and presentation currency

These consolidated financial statements are presented in EUR, which is the Group's presentation currency. The functional currency of Allnex (Luxembourg) & Cy S.C.A. is USD.

All amounts are shown in millions, unless otherwise indicated.

2.5 Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with IFRS, which requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in the following notes:

•	Note 6 - Associates and equity accounted investees: Whether the Group has significant influence over the investees;

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes:

•	Note 5 - Impairment test of intangible assets and goodwill: Key assumptions underlying recoverable amounts defined by Cash Generating Unit (CGU);
•	Note 8 - Deferred tax assets and liabilities: The Group assumes sufficient availability of future taxable profit against which deductible temporary differences and tax losses carried forward can be utilized;
•	Note 14 - Employee benefits: Measurement of defined benefit obligations are evaluated on annual basis based on key actuarial assumptions;
•	Notes 16 - Provisions: Recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources.

2.6 Measurement of fair values

A number of the Group's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

When measuring the fair value of an asset or a liability, the Group uses market observable data as much as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follow:

•	Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
•	Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);
•	Level 3: inputs for tire asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement (with Level 3 being the lowest).

The Group recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in the following note:

•	Note 18 - Financial instruments.

3 Significant accounting policies

The accounting policies set out below have been applied consistently to the period presented in these consolidated financial statements and have been applied consistently by Group entities.

The decision about relevant information is made following a 4-step process. The Group identifies information which has the potential to be relevant, assesses whether the information identified is material and requires disclosure, organize the information to be clear concisely and reviews the financial statement from a wide perspective and in aggregate in order to ensure that only relevant information is disclosed.

3.1 Basis of consolidation

(i) Business combinations

Business combinations are accounted for using the acquisition method in accordance with IFRS 3 Business Combination as at the acquisition date, which is the date on which control is transferred to the Group.

The Group measures goodwill at the acquisition date as:

•	the fair value of the consideration transferred; plus
•	the recognized amount of any Non-Controlling Interests ("NCI") in the acquiree; plus
•	if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree, over the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

Any goodwill that arises is tested annually for impairment.

When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.

Any contingent consideration receivable or payable is recognized at fair value at the acquisition date and included in the consideration transferred. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognized in profit or loss.

NCI that are present ownership interests and entitle their holders to a proportionate share of the acquiree's net assets in the event of liquidation are measured either at fair value or at the NCI's proportionate share of the recognized amounts of the acquiree's identifiable net assets, at the acquisition date. The measurement basis taken is elected on a transaction-by-transaction basis.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

(ii) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners and therefore no adjustments are made to goodwill and no gain or loss is recognized in profit or loss. Adjustments to NCI arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary, including recognized goodwill.

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Profit or loss and each component of OCI are attributed to the owners of the parent and to ordinary NCI in proportion to their ownership interests in the subsidiary.

(iii) Loss of control

When the Group loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, and any related NCI and other components of equity (amounts recognized in OCI are reclassified to profit or loss, or directly to retained earnings on the same basis as would be required if the parent had directly disposed of the related assets or liabilities). Any resulting gain or loss is recognized in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

(iv) Investments in associates and joint ventures (equity-accounted investees)

Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies of these entities. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity.

A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Investments in associates and joint ventures are accounted for using the equity method. They are recognized initially at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group's share of the profit or loss and Other Comprehensive Income ("OCI") of equity-accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases.

When the Group's share of losses exceeds its interest in an equity-accounted investee, the carrying amount of the investment, together with any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation to fund the investee's operations or has made payments on behalf of the investee.

The Group holds a long-term interest in the following equity invested entities:

•	Entis Co., Ltd, South Korea (50%)
•	Synthese Thailand Co., Ltd, Thailand (47.5%)

(v) Joint operations

A joint operation is an arrangement in which the Group has joint control whereby the Group has rights to the assets, and obligations for the liabilities, relating to an arrangement. The Group accounts for each of its assets, liabilities and transactions, including its share of those held or incurred jointly, in relation to the joint operation.

(vi) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealized income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements.

Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

3.2 Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of Group companies at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.

Foreign currency differences are generally recognized in profit or loss.

However, foreign currency differences arising from the translation of the following items are recognized in OCI:

•	An investment in equity securities designated as at FVOCI;
•	a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and
•	qualifying cash flow hedges to the extent that the hedges are effective.

All group entities do not have any major non-monetary assets and liabilities in a currency other than its functional currency.

Qualifying cash flow hedges are not applicable for this reporting period.

(ii) Foreign operations

The assets and liabilities of foreign operations are translated to EUR at exchange rates at the reporting date. The income and expenses of foreign operations are translated to EUR at year-to- date average exchange rates. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and are translated at the exchange rates at the reporting date.

Foreign currency differences are recognized in OCI and presented in the foreign currency translation reserve (translation reserve) in equity. However, if the foreign operation is a non- wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the NCI. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.

When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to NCI. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

The Group applies net investment in a foreign operation principle on its internal long-term loans between subsidiaries. The foreign exchange component resulting from a long-term intercompany loan denominated in a foreign currency is recorded in the other comprehensive income. The other comprehensive income result will be reversed at the time the intercompany loan is repaid. If a partial repayment of the intercompany loan is made, it will be reversed on a pro-rata basis.

3.3 Financial instruments

(i) General

Financial assets and liabilities are first recognized when allnex becomes a party to the contractual provisions of the instrument.

Amortized cost is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance and excluding impairment losses. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortized cost of a financial liability. When calculating the effective interest rate, allnex estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts.

(ii) Financial Assets

Trade receivables are initially measured at their transaction price, if they do not contain a significant financing component, which is the case for substantially all trade receivables. The transaction price is considered the fair value.

In May 2014, allnex entered in a Trade Receivables Purchase Program (TRPP) with a major international bank. Meanwhile, the TRPP program was extended and includes Allnex Austria, Allnex Belgium, Allnex France, Allnex Germany, Allnex Italy, Allnex Norway, Allnex Spain, Allnex USA, Allnex Australia, Allnex Netherlands and Allnex UK as participants. The program concerns EUR and USD receivables for a maximum permitted cash amount of EUR 220 million equivalent, and was extended to October 2022. The receivables within the program are derecognized. The receivables are sold to the bank on a non-recourse basis and the loss reserve is covered by a trade credit insurance. Cash generated as a result of the Trade Receivable Purchase Program (TRPP) will be reported as operating cash flow in the consolidated statement of cash flows.

Financial assets for contingent consideration receivable in a business combination are recognized at the acquisition date.

Cash and cash equivalents comprise cash balances and short-term deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value and are used by the Group in the management of its short-term commitments. For the purpose of the statement of cash flows, pledged deposits are excluded while bank overdrafts that are repayable on demand (usually with three months notice) and that form an integral part of the Group's cash management are included in cash and cash equivalents.

Other financial assets are initially measured at fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset.

A financial asset is classified as current when the cash flows expected to flow from the instrument mature within one year.

Classification

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

•	it is held within a business model whose objective is to hold financial assets to collect contractual cash flows; and
•	its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

•	it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
•	its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment's fair value in OCI. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets (see Note 18). On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Subsequent measurement

Financial assets at FVTPL are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

Financial assets at amortized cost are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

Debt investments at FVOCI are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of the part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.

Derecognition

The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. It may also, neither transfer nor retain substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in transferred financial assets that is created or retained by allnex is recognized as a separate asset or liability.

The Group has entered in a Trade Receivables Purchase Program (TRPP) with a major international bank. The receivables within the program are derecognized and the loss reserve is covered with a trade credit insurance.

Offsetting

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

(iii) Financial Liabilities

The Group's financial liabilities comprise PECs, loans and borrowings, bank overdrafts, and trade and other payables.

Classification

The Group initially recognizes debt securities issued, loans and subordinated liabilities on the date that they are originated. Financial liabilities for contingent consideration payable in a business combination are recognized at the acquisition date. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognized initially on the trade date, which is the date that allnex becomes a party to the contractual provisions of the instrument.

Financial liabilities are initially measured at fair value minus, in the case of a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the issue of the financial liability.

Subsequent measurement

Subsequently, they are measured at amortized cost, except for financial liabilities at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, are subsequently measured at fair value.

Derecognition

The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire. The Group also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

Offsetting

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

(iv) Share capital

Ordinary shares

Ordinary shares are classified as equity.

Preference share capital

Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the Company's option, and any dividends are discretionary. Discretionary dividends thereon are recognized as distributions within equity upon approval by the Company's shareholders.

Preference share capital is classified as a financial liability if it is redeemable on a specific date or at the option of the shareholders, or if dividend payments are not discretionary.

Non-discretionary dividends thereon are recognized as interest expense in profit or loss as accrued.

Preferred Equity Certificates

PECs are classified as equity if they are non-redeemable, or redeemable only at the issuer's option, and any dividends are discretionary. Discretionary dividends thereon are recognized as distributions within equity upon approval by the Company's shareholders.

PECs are classified as a financial liability if they are redeemable on a specific date or at the option of the holders, or if dividend payments are not discretionary.

Non-discretionary dividends thereon are recognized as interest expense in profit or loss as accrued.

The preferred equity certificates are initially recognized at fair value. The fair value of the yield free preferred equity certificates is calculated by discounting the future cash flows using an interest rate which is customary in the market. The difference between the par value and the fair value has been recognized as a component of equity.

(v) Derivative financial instruments

The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met.

Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss.

On initial designation of the derivative as the hedging instrument, the Group formally documents the relationship between the hedging instrument and the hedged item, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship.

The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be 'highly effective' in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80 - 125%. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss.

When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge accounting, all changes in its fair value are recognized immediately in profit or loss.

The Group does not apply hedge accounting.

3.4 Property, plant and equipment

(i) Recognition and measurement

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment loss.

If an item of property, plant and equipment consists of several components with different estimated useful lives, the individual significant components are depreciated over their individual useful lives.

Cost includes expenditure that is directly attributable to the acquisition of the asset. Subsequent expenditures are being capitalized when it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably.

Depreciation is recognized as an expense in profit and loss on a straight-line basis over the estimated useful lives of the assets. The useful lives of the assets are generally estimated to range from 20 to 33 years for buildings, 15 years for tanks, reactors and heavy equipment, 7 years for automation, regulation, measuring and small equipment and 10 years for other items.

Depreciation methods, useful lives and residual value are reviewed at the end of each reporting period and adjusted if appropriate.

When these assets are retired or disposed of, the net book value of assets are removed from the consolidated statement of financial position and the net gain or loss (difference between the net proceeds from disposal and the carrying amount of the items) is included in the profit and loss.

The cost of replacing a component of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced component is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.

Impairment losses, if any, are recognized in profit and loss and reversed in profit and loss (please refer to note 3.8 'Impairment'). Impairment is only reversed to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortization, if no impairment loss had been recognized.

Expenditures for maintenance and repairs are charged to current operating expenses. Acquisitions, additions and betterments, either to provide necessary capacity, improve the efficiency of production units, modernize or replace older facilities or to install equipment for protection of the environment, are capitalized.

3.5 Intangible assets and goodwill

(i) Goodwill

Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. For the measurement of goodwill at initial recognition, see note 3. l(i) 'Business Combination'.

Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses (please refer to note 3.8 'Impairment'). In respect of associates and joint ventures, the carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the associates and joint ventures.

(ii) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. For the Group this means development activities that are in express development or commercialization phase and qualify to above criteria.

The expenditure capitalized includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and capitalized borrowing costs. Other development expenditure is recognized in profit or loss as incurred.

Capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment losses.

Capitalized development expenditures are amortized over eight years.

(iii) Emission rights

In 2005, the European Union initiated a system whereby companies are granted certain amounts of rights to emit carbon dioxide. These rights are initially granted free of charge and can be exchanged with other companies. At this stage, the accounting for such emission rights is not clearly regulated by IFRS. The Group accounts for these rights as follows: at the time the Group receives emission rights from the governments, these are recognized at their nominal amount in the consolidated statement of financial position. Currently, the amount paid is nil and the rights are assigned free of charge. Emission rights that will be purchased from other entities will be recorded at cost in the consolidated statement of financial position. If the Group has an excess of emission rights, and the decision was made by the Executive Committee (ExCom) to sell the excess of emission rights, they will be recorded at fair value in the in the consolidated statement of financial position with an offset to the consolidated statement of profit or loss, if there is an active market for the emission right. In the current circumstances, the Group has an excess of emission rights, however the Group may decide to purchase additional emission rights for strategic purposes.

On July 15, 2019, the Group has sold 35.000 emission certificates for a total value of EUR 1.0 million.

On February 21, 2020, the Group has bought 13.917 emission certificates for a total value of EUR 0.1 million.

At the end of 2020 and 2019, the Group owned 16.856 and 551 EUA rights respectively.

(iv) Other intangible assets

Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortization and accumulated impairment losses.

(v) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

(vi) Amortization

Amortization is calculated based on the cost of the asset, less its residual value.

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. Goodwill is not amortized but tested for impairment annually.

The estimated useful lives are as follows:

• Product trademarks	20-25 years
• Development technologies	20-25 years
• In Process R&D	15-25 years
• Customer relationship	11-23 years
• Other intangible assets	3-5 years

Amortization methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.

3.6 Leases

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. As a practical expedient, the Group has elected not to separate lease and non-lease components, which is applied to all asset classes.

To assess whether a contract conveys the right to control the use of an identified asset for a period of time, the Group assesses whether, throughout the period of use, it has both of the following:

•	the right to obtain substantially all of the economic benefits from use of the identified asset
•	the right to direct the use of the identified asset

At the commencement date, a lessee (in this case the Group) recognizes a right-of-use asset and a lease liability.

The Group presents right-of-use assets in 'Property, plant and equipment' and lease liabilities in 'Other financial liabilities' in the Consolidated statement of financial position.

The Group has chosen to apply the standard for all leases, including short term leases (lease term shorter than 12 months) and low value leases, using the portfolio approach. The Group considers all leased items with a unit purchase price, when new, of less than 5,000 Euro as a low value lease.

Extension and termination options are included in a number of property and equipment leases across the Group. The majority of extension and termination options are held exercisable only by the Group and not by the respective lessor.

In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects the assessment.

For all new contracts and remeasurements the Group will review and revise the incremental borrowing rates to apply on a semi-annual basis.

Initial measurement of the right-of-use asset

At the commencement date, the Group measures the right-of-use asset at cost. The cost of the right-of-use asset comprises:

•	the amount of the initial measurement of the lease liability, being the present value of the lease payments that are unpaid. The lease payments shall be discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the lessee shall use its incremental borrowing rate.
•	any lease payments made at or before the commencement date, less any lease incentives received;
•	any initial direct costs incurred by the lessee; and
•	an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. The lessee incurs the obligation for those costs either at the commencement date or as a consequence of having used the underlying asset during a particular period.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of owned property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

Initial measurement of the lease liability

At the commencement date, the Group measures the lease liability at the present value of the lease payments that are unpaid at that date. The lease payments shall be discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the lessee shall use the lessee's incremental borrowing rate.

At the commencement date, the lease payments included in the measurement of the lease liability comprise the following payments to be settled:

•	fixed payments, less any lease incentives receivable;
•	variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
•	amounts expected to be payable by the lessee under residual value guarantees;
•	the exercise price of a purchase option if the lessee is reasonably certain to exercise that option;
•	payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Subsequent measurement of the right-of-use asset

After the commencement date, the Group measured the right-of-use asset applying the cost model, meaning:

•	measuring the right-of-use asset at cost (see initial measurement above);
•	less any accumulated depreciation and any accumulated impairment losses;
•	adjusted for any remeasurement of the lease liability (in case of modifications in the lease payments).

Subsequent measurement of the lease liability

After the commencement date, the Group measured the lease liability as follows:

•	increasing the carrying amount to reflect interest on the lease liability (the "unwinding" of the present value of the payments);
•	reducing the carrying amount to reflect the lease payments made;
•	remeasuring the carrying amount to reflect any reassessment or lease modifications.

The lease liabillity is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee or if the Group changes its' assessment whether it will exercise a purchase, extension or termination option.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

Incremental borrowing rate

IFRS 16 defines the lessee's incremental borrowing rate as the rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment (IFRS 16.A).

The Group has decided to use a currency-based rate approach, increased by the company-specific external debt margin of 3.25%, which is an at arm's length interest rate, as confirmed by the transfer price study conducted. The currency-based rate is populated with 4 different tenors (6 months, 2 years, 5 years, 10 years) for each entities' functional currency used, based on term of the arrangement. For entities with a functional currency for which the currency rate is not readily available on the market, the banks in the specific country are asked for the borrowing rate.

The Group used the following methodology, regarding the terms of arrangement:

Term < 1 year: rate of 6 months

Term > 1 year and < 3 years: rate of 2 years

Term > 3 years and < 7 years: rate of 5 years

Term > 7 years: rate of 10 years.

Regarding the security - i.e. the nature of the underlying asset, the following assets classes were identified:

•	Land
•	Buildings

•	Equipment
•	IT equipment
•	Vehicles

Within the same asset class, the assets represent a similar risk profile. In addition, the useful life and value of to the asset is considered via the amount of funds borrowed and the terms of the arrangement, which is in line with the useful life.

The company-specific margin of 3.25% is being re-assessed on a yearly basis, unless there is a significant event precipitating a revised incremental borrowing rate.

The interest rates by currency tenor are evaluated on a semi-annual basis and adjusted accordingly.

3.7 Inventories

Inventories are measured at the lower of cost and net realizable value.

The cost of inventories is based on the first-in first-out principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Work in Progress consists of Intermediate (semi-finished) products and batches actually in progress of production at the end of the period.

Obsolete, damaged and non-marketable inventories are written down to estimated net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and estimated costs necessary to make the sale. Such write-downs are recognized in costs of sales.

3.8 Impairment

(i) Financial assets

Financial instruments

The Group recognizes loss allowances for Expected Credit Losses (ECLs) on:

•	financial assets measured at amortized cost.

Loss allowances for trade receivables (including lease receivables) and contract assets are always measured at an amount equal to lifetime ECLs.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group's historical experience and informed credit assessment, that includes forward-looking information.

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Group considers a financial asset to be in default when:

•	the debtor is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realizing security (if any is held); or
•	the financial asset is more than 90 days past due.

The Group considers this to be Baa3 or higher per Moody's or BBB-or higher per Standard & Poor's and Fitch Ratings.

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

ECLs are discounted at the incremental borrowing rate of the financial asset.

Credit-impaired financial assets

At each reporting date, the Group assesses whether financial assets carried at amortized cost are credit-impaired. A financial asset is 'credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:

•	significant financial difficulty of the debtor;
•	a breach of contract such as a default or being more than 90 days past due;
•	it is probable that the debtor will enter bankruptcy or other financial reorganization.

Presentation of allowance for ECL in the statement of financial position

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

Write-off

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For all customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group's procedures for recovery of amounts due.

(ii) Non-financial assets

In the fourth quarter of each reporting period, the Group reviews the carrying amounts of its non- financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. Goodwill is tested annually at the same time for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

3.9 Employee benefits

(i) Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which related services are rendered by employees.

(ii) Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group's net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted. The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then- net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

The discount rate is the yield at the reporting date on bonds that have a credit rating of at least AA from rating agency that have maturity dates approximating the terms of the Group's obligations and that are denominated in the currency in which the benefits are expected to be paid. In some countries there is not a sufficient deep corporate bond market. This is the case in Thailand and Indonesia where government bonds are used. As such these have a risk premium of respectively 50 and 180 BP.

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the Group if it is realizable during the life of the plan, or on settlement of the plan liabilities.

Re-measurement of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in OCI.

When the benefits of a plan are changed, or when a plan is curtailed, the portion of the changed benefit related to past service by employees, or the gain or loss on curtailment, is recognized immediately in profit or loss when the plan amendment or curtailment occurs.

The Group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs. The gain or loss on settlement is the difference between the present value of the defined benefit obligation being settled as determined on the date of settlement and the settlement price, including any plan assets transferred and any payments made directly by the Group in connection with the settlement.

(iii) Other long-term employee benefits

The Group's net obligation in respect of long-term employee benefits other than pension plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The discount rate is the yield at the reporting date on corporate bonds, that have a credit rating of at least AA from a rating agency, have maturity dates approximating the terms of the Group's obligations, and are denominated in the currency in which the benefits are expected to be paid. The calculation is performed using the projected unit credit method. Any actuarial gains and losses are recognized in profit or loss in the period in which they arise.

(iv) Termination benefits

Termination benefits are recognized as an expense when the Group is committed demonstrably, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense if the Group has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting date, then they are discounted to their present value.

(v) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

3.10 Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

(i) Restructuring

A provision for restructuring is recognized when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating losses are not provided for.

(ii) Site restauration

In accordance with the Group's environmental policies and applicable legal requirements, a provision for asset retirement obligation in respect of contaminated land, and the related expense, is recognized when the land is contaminated.

(iii) Warrants

A provision for warranties is recognized when the underlying products or services are sold, based on historical warranty data and a weighting of possible outcomes against their associated probabilities.

(iv) Onerous contracts

A provision for onerous contracts is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognizes any impairment loss on the assets associated with that contract.

3.11 Revenue

(i) Revenue recognition

In line with the requirements of IFRS 15, a five-step model is applied to determine when to recognize revenue, and at what amount. The model specifies that revenue should be recognized when an entity transfers control of goods and services to a customer at the amount to which the entity expects to be entitled.

Depending on whether certain criteria are met, revenue is recognized:

•	Over time, in a manner that depicts the entity's performance
•	At a point in time, when control of the goods or services is transferred to the customer

(ii) Sale of goods

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, trade discounts and volume rebates.

Revenue from the sales of goods is recognized at a point in time.

(iii) Royalties

Royalties from third parties are recognized in profit or loss under the line 'revenue'. Revenue from royalties is recognized over time.

3.12 Finance income and finance costs

The Group's finance income and finance cost include:

•	Interest income;
•	Interest expense;
•	The net gain or loss on the disposal of investments in debt securities measured at FVOCI;
•	The net gain or loss on financial assets at FVTPL;
•	Impairment losses (and reversals) on investments in debt securities carried at amortized cost or FVOCI;
•	The gain or loss on the remeasurement to fair value of any pre-existing interest in an acquire in a business combination;
•	The fair value gain or loss on contingent consideration classified as a financial asset/liability;
•	Hedge ineffectiveness related to the interest rate hedge is recognized in profit or loss; and
•	The reclassification of net gains and losses previously recognized in OCI on cash flow hedges of interest rate risk and foreign currency risk of borrowings.

Interest income or expense is recognized using the effective interest method.

The 'effective interest rate' is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

•	The gross carrying amount of the financial asset; or
•	The amortized cost of the financial liability.

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortized cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.

3.13 Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is not recognized for:

•	Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit nor loss;
•	Temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that they will not reverse in the foreseeable future; and
•	Taxable temporary differences arising on the initial recognition of goodwill.

The measurement of deferred taxes reflects the tax consequences that would follow the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets are recognized for income tax benefits that are expected to result in a reduced future cash tax outflow or a refund. Deferred tax liabilities are also recognized with respect of purchase accounting related items that are not expected to create a future cash tax outflow.

Despite the foregoing, deferred tax assets and liabilities are offset against each other if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the expected tax benefit will be realized. In determining the amount of current and deferred tax, the Group takes into account the impact of uncertain tax positions, whose effect it regularly tracks and accounts for, and whether additional taxes and interest may be due. The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of all relevant factors, including interpretations of tax law and prior experience.

3.14 New standards and interpretations issued but not yet adopted by the Group

A number of new standards, amendments to standards and interpretations are not yet effective for the year ended December 31, 2020, and have not been applied in preparing these consolidated financial statements. The amendments are not expected to have a material impact on the Group's consolidated financial statements.

Amendments to IAS 1 Presentation of Financial statements: Classification of Liabilities as Current or Non-current, issued on January 23, 2020, clarify a criterion in IAS 1 for classifying a liability as non-current: the requirement for an entity to have the right to defer settlement of the liability for at least 12 months after the reporting period.

On July 15, 2020, the IASB issued Classification of Liabilities as Current or Non-current - Deferral of Effective Date (Amendment to IAS 1) deferring the effective date of the January 2020 amendments to IAS 1 by one year to annual reporting periods beginning on or after January 1, 2023. The amendments have not yet been endorsed by the EU.

Amendments to IFRS 3 Business Combinations; IAS 16 Property, plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets as well as Annual improvements, issued on May 14, 2020, include several narrow-scope amendments which are changes that clarify the wording or correct minor consequences, oversights or conflicts between requirements in the Standards. The amendments are effective for annual periods beginning on or after January 1, 2022. These amendments have not yet been endorsed by the EU.

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform - Phase 2 (issued on August 27, 2020) address issues that might affect financial reporting during the reform of an interest rate benchmark, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative benchmark rate (replacement issues).

The Phase 2 amendments apply only to changes required by the interest rate benchmark reform to financial instruments and hedging relationships. The amendments apply retrospectively from January 1, 2021 with earlier application permitted. Hedging relationships previously discontinued solely because of changes resulting from the reform will be reinstated if certain conditions are met.

4 Property, plant and equipment

(i) Reconciliation of carrying amount

(EUR in millions)		Acquisition costs
	Balance as of December 31, 2019	Additions	Disposals / write-offs
PROPERTY, PLANT AND EQUIPMENT
Land, land rights and buildings	245.6	4.8	(0.4)
Machinery and technical equipment	608.8	42.0	(6.4)
Other equipment and fixtures	47.7	4.1	(1.1)
Construction in progress	45.8	(11.9)	(0.4)
Right-of-use assets	76.7	16.4	(13.5)
Total cost of property, plant and equipment	1,024.6	55.4	(21.8)

(EUR in millions)
	Transfers and reclass	Translation difference	Balance as of December 31, 2020
PROPERTY, PLANT AND EQUIPMENT
Land, land rights and buildings	0.1	(10.7)	239.4
Machinery and technical equipment	1.0	(27.4)	618.0
Other equipment and fixtures	(1.0)	(1.3)	48.3
Construction in progress	(3.1)	(1.3)	29.1
Right-of-use assets	(0.5)	(3.0)	76.1
Total cost of property, plant and equipment	(3.4)	(43.9)	1,011.0

(EUR in millions)		Depreciation
	Balance as of December 31, 2019	Additions	Disposals / write-offs
PROPERTY, PLANT AND EQUIPMENT
Land, land rights and buildings	(53.0)	(8.8)	0.3
Machinery and technical equipment	(249.5)	(45.6)	5.8
Other equipment and fixtures	(22.7)	(4.7)	0.8
Right-of-use assets	(30.2)	(17.7)	13.2
Total accumulated depreciations of property, plant and equipment	(355.4)	(76.9)	20.2

(EUR in millions)
	Transfers and reclass	Translation difference	Balance as of December 31, 2020
PROPERTY, PLANT AND EQUIPMENT
Land, land rights and buildings	-	2.7	(58.8)
Machinery and technical equipment	0.1	12.1	(277.2)
Other equipment and fixtures	0.5	0.6	(25.5)
Right-of-use assets	0.4	1.4	(33.0)
Total accumulated depreciations of property, plant and equipment	0.9	16.8	(394.5)

(EUR in millions)	Balance as of December 31, 2019	Balance as of December 31, 2020
PROPERTY, PLANT AND EQUIPMENT
Land, land rights and buildings	192.6	180.6
Machinery and technical equipment	359.3	340.8
Other equipment and fixtures	25.0	22.8
Construction in progress	45.8	29.1
Right-of-use assets	46.5	43.1
Total carrying amount of property, plant and equipment	669.2	616.5

The carrying amount of plant property and equipment as per December 31, 2020 amounts to EUR 616.5 million compared to EUR 669.2 million as per December 31, 2019. The decrease in the net value of plant, property and equipment of EUR 52.7 million is mainly explained by annual depreciation of EUR 76.9 million, a negative translation impact of EUR 27.1 million and disposals and reclasses of assets of EUR 4.1 million, partly offset by the increase in investments in owned property, plant and equipment for a total amount of EUR 39.0 million and an increase in right-of- use assets gross value of EUR 16.4 million.

The Group has capitalized borrowing costs at a capitalization rate of 5%. Per the end of 2020, the capitalized borrowing cost is EUR 9.4 million, with a remaining carrying value of EUR 5.0 million (2019: EUR 9.8 million and EUR 5.3 million respectively).

Future capital commitments are in line with the budgeted CAPEX.

(ii) Depreciation

The depreciation of property, plant & equipment is mainly reported in the section Cost of sales (approx. 81% (2019: approx. 82%) and for more remained part of depreciation charge in the sections Selling and Distribution expenses, Administrative expenses and Research and Development expenses.

(iii) Impairment loss and subsequent reversal

No impairment indicators have been identified in the course of 2020 that affect the recoverable amount of the tangible assets.

(iv) Security

Substantially all property, plant and equipment of the Group are pledged as per December 31, 2020 (Refer to note 13 'Loans and borrowings and other financial liabilities' for more info).

(v) Property, plant and equipment under construction

Property, plant and equipment under construction amount to EUR 29.1 million as per December 31, 2020 and mainly consist of new investments under machinery and equipment.

(vi) Right-of-use assets ^*

The amount of right-of-use assets capitalized per December 31, 2020 and for December 31, 2019 is presented in the table below:

(EUR in millions)	December 31, 2020	December 31, 2019
Right-of-use assets ^*	43.1	46.5

^* Included in the line item 'Property, plant and equipment' in the consolidated statement of financial position.

The Group leases land, buildings, plant equipment and furniture (hereafter "PE&F"), and vehicles. A movement schedule on the right-of-use assets is presented below:

(EUR in millions)	Right-of-Use Assets
	Balance as of December 31, 2019	Additions	Disposals / write-offs
RIGHT-OF-USE ASSETS
Land and land rights	3.9	1.6	-
Buildings	31.0	5.0	(3.8)
Machinery and equipment	29.2	6.7	(7.1)
Vehicles	12.6	3.1	(2.6)
Total	76.7	16.4	(13.5)

(EUR in millions)	Right-of-Use Assets
	Transfers and reclass	Translation difference	Balance as of December 31, 2020
RIGHT-OF-USE ASSETS
Land and land rights	-	(0.1)	5.4
Buildings	(0.5)	(1.5)	30.2
Machinery and equipment	-	(0.8)	28.0
Vehicles	-	(0.6)	125
Total	(0.5)	(3.0)	76.1

(EUR in millions)		Depreciation
	Balance as of December 31, 2019	Additions	Disposals / write-offs
RIGHT-OF-USE
ASSETS
Land and land rights	(0.4)	(0.2)	(0.0)
Buildings	(12.2)	(6.8)	3.8
Machinery and equipment	(12.2)	(7.2)	6.4
Vehicles	(5.4)	(3.5)	2.5
Total	(302)	(17.7)	12.6

(EUR in millions)
	Transfers and reclass	Translation difference	Balance as of December 31, 2020
RIGHT-OF-USE
ASSETS
Land and land rights	-	0.0	(0.6)
Buildings	0.4	1.3	(13.6)
Machinery and equipment	-	0.4	(12.6)
Vehicles	-	0.3	(6.2)
Total	0.4	2.0	(33.0)

(EUR in millions)	Balance as of December 31, 2019	Balance as of December 31, 2020
RIGHT-OF-USE ASSETS
Land and land rights	3.5	4.8
Buildings	18.7	16.6
Machinery' and equipment	17.1	15.4
Vehicles	7.2	6.3
Total	46.5	43.1

Real estate leases

The Group leases for certain locations land and buildings, including office buildings and warehouses. The leases for Land and Buildings run for a period between:

•	Land 3-100 years
•	Buildings 1-30 years

Some leases include an option to renew the lease for an additional period of the same duration after the end of the contract term. Since the adoption of the lease accounting, none of the material contracts including an extension option, have been terminated before the extension option.

Other leases

The Group leases vehicles, IT equipment and machinery, with lease terms of three to five years. In certain cases, the Group has options to purchase the assets at the end of the contract. Those options have not been included in the valuation of the related right-of-use assets.

The leases for IT equipment and other equipment are mainly categorized as leases of low value items. The Group has elected to recognize for low value leases right-of-use assets and lease liabilities as well.

The leases for Machinery and equipment and the leases for vehicles run for a period between:

•	Machinery and equipment 1-22 years
•	Vehicles 1-7 years

Sale and lease back

In 2018, the Group completed the sale of two buildings in Graz, Austria and leased the buildings back for 15 years. This sale and leaseback transaction enabled the Group to access more capital while continuing to use the offices/labs. The rent is adjusted every year to reflect increases in the local market rents for similar properties.

With the sale of the Silvertown land in the UK in September 2018, the Group has subsequently entered into a lease-back contract of the land for the period of 2.5 years.

5 Intangible assets and goodwill

(EUR in millions)
Acquisition costs	Balance as of December 31, 2019	Additions	Disposals / write-offs
INTANGIBLE ASSETS AND GOODWILL
Patents, licenses and similar rights	492.5	0.6	(0.1)
Customer relationships	465.6	-	-
Goodwill	19.2	-	-
Development expenditure	19.9	5.7	(1.3)
Other intangibles	90.0	13.9	(0.4)
Construction in progress	13.1	(3.0)	(0.1)
Total cost of intangible assets	1,100.3	17.2	(1.9)

(EUR in millions)
Acquisition costs	Transfers and reclass	Translation difference	Balance as of December 31, 2020
INTANGIBLE ASSETS AND GOODWILL
Patents, licenses and similar rights	(2.3)	(6.2)	484.5
Customer relationships	-	(7.8)	457.8
Goodwill	-	(2.5)	16.7
Development expenditure	-	(0.3)	24.0
Other intangibles	6.7	(0.7)	109.5
Construction in progress	(1.4)	-	8.6
Total cost of intangible assets	3.0	(17.5)	1,101.1

(EUR in millions)
Amortization	Balance as of December 31, 2019	Additions	Disposals / write-offs
INTANGIBLE ASSETS AND GOODWILL
Patents, licenses and similar rights	(131.0)	(23.2)	-
Customer relationships	(121.4)	(24.9)	-
Development expenditure	(5.4)	(2.9)	0.3
Other intangibles	(47.2)	(13.2)	0.4
Total accumulated amortization of intangible assets	(305.0)	(64.2)	0.7

(EUR in millions)
Amortization	Transfer and reclass	Translation difference	Balance as of December 31, 2020
INTANGIBLE ASSETS AND GOODWILL
Patents, licenses and similar rights	0.4	1.9	(151.9)
Customer relationships	-	3.0	(1433)
Development expenditure	-	0.1	(7.9)
Other intangibles	(0.9)	0.4	(60.5)
Total accumulated amortization of intangible assets	(0.5)	5.4	(363.6)

(EUR in millions)
Net book value	Balance as of December 31, 2019	Balance as of December 31, 2020
INTANGIBLE ASSETS AND GOODWILL
Patents, licenses and similar rights	361.5	332.6
Customer relationships	344.2	314.5
Goodwill	19.2	16.7
Development expenditure	14.5	16.1
Other intangibles	42.8	48.9
Construction in progress	13.1	8.6
Total carrying value of intangible assets	795.3	737.5

The Group has capitalized borrowing costs at a capitalization rate of 5%. Per the end of 2020, the capitalized borrowing cost is EUR 3.6 million, with a remaining carrying value of EUR 1.8 million (2019: EUR 1.8 million and EUR 1.0 million respectively).

Amortization

The amortization of intangible assets is reported as cost of sales.

Impairment testing for CGU's containing goodwill

For the purposes of impairment testing, goodwill has been allocated to the Group's CGUs as per October 31, 2020 as follows:

•	North America: EUR 2.4 million;
•	Rest of World: EUR 11.9 million;
•	Asia Pacific: EUR 2.5 million

This is the lowest level within the entity for which information about goodwill is available and monitored for internal management purposes.

The above goodwill can be built up as follows:

•	The PPA of the coatings business was finalized by the end of March 2014 and the PPA relating to the acquisition of Bayer Material Science's non-waterbome Radiation Curing resins business was finalized in the second quarter of 2014. Both PPAs gave rise to a goodwill of EUR 8.1 million which has already been recorded in the financial statements as of December 31, 2014. The PPA was performed by a third party based on inputs from management.
•	The PPA of the acquisition of the Brazilian company Aguia Quimica Ltda was finalized at the end of 2015 and resulted in a goodwill of EUR 5.0 million which has been allocated to the CGU Rest of World. The PPA was performed by a third party based on inputs from management.
•	The PPA of Nuplex was finalized in September 2016. The PPA gave rise to a goodwill of EUR 3.7 million that has been recorded in the financial statements as of December 31, 2016. The PPA was performed by a third party based on inputs from management.

Cash Generating Unit: North America

The recoverable amount of this Cash Generating Unit (CGU) was based on value in use, estimated using discounted cash flows.

The key assumptions used in the estimation of the recoverable amount are set out below. The values assigned to the key assumptions represented management's assessment of future trends in the relevant industries and were based on historical data from both external and internal sources.

Group	2020 (%)
• Risk-free rate	1.65
• Pre-tax discount rate	10.99
• Terminal Value Growth Rate	1.00
• Sales Growth Rate (2021 until 2025)	2.80 - 6.10

The risk-free rate was a pre-tax measure based on the rate of 30-year government bonds issued by the government in the relevant market and in the same currency as the cash flows.

The risk-free rate has been adjusted for a market (6.75%) and size risk premium (2%) to reflect both the higher risk of investing in equities generally and the systemic risk of the specific CGU.

The cash flow projections included specific estimates for 5 years and a terminal growth rate of 1% thereafter.

The terminal growth rate was determined based on management's estimate of the long-term compound annual EBITDA (Earnings Before Interest, Taxes Depreciation and Amortization) growth rate, consistent with the assumption that a market participant would make.

Budgeted EBITDA was estimated taking into account past experience, adjusted as follows:

•	Revenue growth was projected taking into account the average growth levels experienced over the past five years and the estimated sales volume and price growth for the next 5 years. It was assumed that sales would increase between 2.8% and 6.1% for the next 5 years.

The testing of the CGU North America shows no need for the recognition of impairment charges in the fiscal year 2020.

Sensitivity analysis

A sensitivity analysis was performed on the impairment test for the cash generating unit North America. The recoverable amount of the cash generating unit exceeded their carrying amount. The sensitivity analysis showed that neither a one percentage point increase in the discount rate nor a 10% reduction in the expected future cash flows or a 2% increase in WACC would have led to the recognition of an impairment loss on the goodwill.

Cash generating unit: Rest of the world

The recoverable amount of this CGU was based on value in use, estimated using discounted cash flows.

The key assumptions used in the estimation of the recoverable amount are set out below. The values assigned to the key assumptions represented management's assessment of future trends in the relevant industries and were based on historical data from both external and internal sources.

Group	2020 (%)
• Risk-free rate	(0.22)
• Pre-tax discount rate	9.21
• Terminal Value Growth Rate	1.00
• Sales Growth Rate (2021 until 2025)	2.30 - 6.90

The discount rate was a pre-tax measure based on the rate of 30-year government bonds issued by the government in the relevant market and in the same currency as the cash flows, adjusted for a market (6.75%), country and size risk premium (2%) to reflect both the higher risk of investing in equities generally, the country risk and the systemic risk of the specific CGU.

The cash flow projections included specific estimates for five years and a terminal growth rate of 1% thereafter.

The terminal growth rate was determined based on management's estimate of the long-term compound annual EBITDA growth rate, consistent with the assumption that a market participant would make.

Budgeted EBITDA was estimated taking into account past experience, adjusted as follows:

•	Revenue growth was projected taking into account the average growth levels experienced over the past five years and the estimated sales volume and price growth for the next 5 years. It was assumed that sales would yearly increase between 2.3% and 6.9% for the next 5 years.

The testing of the CGU Rest of the world shows no need for the recognition of impairment charges in the fiscal year 2020.

Sensitivity analysis

A sensitivity analysis was performed on the impairment test for the cash generating unit Rest of the world. The recoverable amount of the cash generating unit exceeded their carrying amount. The sensitivity analysis showed that neither a one percentage point increase in the discount rate nor a 10% reduction in expected future cash flows or 2% increase in the WACC would have led to the recognition of an impairment loss on the goodwill.

Cash generating unit: Asia Pacific

The recoverable amount of this CGU was based on value in use, estimated using discounted cash flows.

The key assumptions used in the estimation of the recoverable amount are set out below. The values assigned to the key assumptions represented management's assessment of future trends in the relevant industries and were based on historical data from both external and internal sources.

Group	2020 (%)
• Risk-free rate	2.47
• Pre-tax discount rate	11.51
• Terminal Value Growth Rate	1.00
• Sales Growth Rate (2021 until 2025)	4.40 - 9.21

The discount rate was a pre-tax measure based on the rate of 30-year government bonds issued by the government in the relevant market and in the same currency as the cash flows, adjusted for a market (6.75%), country and size risk premium (2%) to reflect both the higher risk of investing in equities generally, the country risk and the systemic risk of the specific CGU.

The cash flow projections included specific estimates for five years and a terminal growth rate of 1% thereafter.

The terminal growth rate was determined based on management's estimate of the long-term compound annual EBITDA growth rate, consistent with the assumption that a market participant would make.

Budgeted EBITDA was estimated taking into account past experience, adjusted as follows:

•	Revenue growth was projected taking into account the average growth levels experienced over the past five years and the estimated sales volume and price growth for the next 5 years. It was assumed that sales would yearly increase between 4.4% and 9.21% for the next 5 years.

The testing of the CGU Asia Pacific shows no need for the recognition on impairment charges in the fiscal year 2020.

Sensitivity analysis

A sensitivity analysis was performed on the impairment test for the cash generating unit Asia Pacific. The recoverable amount of the cash generating unit exceeded their carrying amount. The sensitivity analysis showed that neither a one percentage point increase in the discount rate nor a 10% reduction in expected future cash flows or 2% increase in the WACC would have led to the recognition of an impairment loss on the goodwill.

Securities

Substantially all intellectual property rights have been pledged (refer to note 13 'Loans and borrowings and other financial liabilities' for more info).

6 Associates and equity accounted investees

The following two joint venture entities in which the Group participates are accounted for under equity method:

(a) Joint venture (Entis Co., Ltd, South Korea)

(b) Joint venture (Synthese Thailand Co., Ltd)

(a) Joint venture (Entis Co., Ltd, South Korea)

Entis Co., Ltd, South Korea

Entis Co., Ltd, South Korea is principally engaged in the production of Crylcoat and Ebecryl and provides key materials that are used to make environmental-friendly paint without solvent. The company also imports and sells allnex's UV monomers and oligomers.

Entis Co., Ltd, South Korea was founded in 1987 by SK Chemicals and UCB and is not publicly listed. It was sold from UCB to Cytec and then to allnex as part of business combinations. The proportion of the voting common shares is 50% allnex and 50% SK Chemicals. The Board of Directors consists of six members, three nominated by allnex and three nominated by SK Chemicals.

In accordance with the agreement under which Entis Co., Ltd, South Korea is established, the Group and the other investor in the joint venture have agreed that they shall use their best efforts to help the JV secure adequate fundings throughout short- or long-term borrowings from third parties. Neither party is, however, obligated to guarantee new loans nor to make any other financial commitment for the JV, it being understood that to the extent no third-party financing is available despite being applied for, the parties shall contribute working capital in the form of registered capital or loans, in amounts proportionate to their interest therein.

The following table summarizes the financial information of Entis Co., Ltd, South Korea as included in its own financial statements, adjusted for fair value adjustments at acquisition and differences in accounting policies. The table also reconciles the summarized financial information to the carrying amount of the Group's interest in Entis Co., Ltd, South Korea.

In 2013, a fair value adjustment (step-down of EUR 7 million) had been recorded on Entis Co., Ltd based on applying a simplified discounted cash flow approach.

Entis Co., Ltd, South Korea is managed by joint control based on the split of the voting rights and the decision-making arrangements as per the articles of the company.

The accounts as of December 31 as per below:

Entis Co., Ltd, South Korea
(EUR in millions)
Percentage ownership interest 50%
	December 31, 2020	December 31, 2019
Non-current assets	1.9	5.5
Current assets (including cash and cash equivalents - 2020: EUR 3.4 million, 2019: EUR 4.1 million)	14.6	13.4
Non-current liabilities (including non-current financial liabilities excluding trade and other payables and provisions - 2020: EUR 0.0 million, 2019: EUR 0.0 million)	(0.3)	(1.1)
Current liabilities (including current financial liabilities excluding trade and other payables and provisions - 2020: EUR 2.9 million, 2019: EUR 2.6 million)	(4.0)	(4.4)
Net assets (100%)	12.2	13.4
Group's share of net assets (50.0%)	6.1	6.7 ^*
Goodwill	-	-
Carrying amount of interest in Entis Co., Ltd ^**	6.6	6.6
Revenue	26.7	29.6
Depreciation and amortization	(0.5)	(0.5)
Interest income/(expense)	-	-
Income tax income/(expense)	(0.4)	(0.6)
Net profit after taxes (100%)	1.4	1.6
Group's share of net profit for the full year	0.7	0.8
Dividends received by the Group	0.8	-

^* 2019 figure restated excluding the translation effect.
^** Including translation effect.

(b) Joint venture (Synthese Thailand Co., Ltd)

Synthese (Thailand) Co. Ltd

Synthese (Thailand) Co. Ltd (STC) is principally involved in the production of Polyester Powder resins which are used to make environmentally friendly paints that are solvent free. The company also markets in Thailand solvent born alkyds, polyester and amino resins that are toll produced for STC by Thai Urethane Plastic Co., Ltd (or TUP in short) whom is one of the shareholders.

STC was established in 2000 by Thai Urethane Plastic Co. Ltd, Akzo Nobel, Motochem BV and Mr. Tsukasa Akita. The company is not publicly listed. The Akzo Nobel Resins shares were sold to Nuplex Industries Ltd in 2005 and then to allnex in 2016. The current shareholding is: TUP 47.5%, allnex 47.5% and Chunghwa 5%. The Board of directors consists of 7 members: 3 from TUP (including the chairman), 3 from allnex and 1 from Chungwa.

The following table summarizes the financial information of STC Thailand as included in its own financial statements per their management account, adjusted for fair value adjustments at acquisition and differences in accounting policies. The table also reconciles the summarized financial information to the carrying amount of the Group's interest in STC Thailand.

STC is managed by joint control based on the split of the voting rights and the decision-making arrangements as per the articles of the company.

The accounts as of December 31 as per below:

Synthese (Thailand) Co., Ltd
(EUR in millions)
Percentage ownership interest 47.5%
	December 31, 2020	December 31, 2019
Non-current assets	2.2	2.7
Current assets (including cash and cash equivalents - 2020: EUR 4.9 million, 2019: EUR 3.8 million)	14.5	13.5
Non-current liabilities (including non-current financial liabilities excluding trade and other payables and provisions - 2020: EUR 0.1 million, 2019: EUR 0.1 million)	(0.1)	(0.1)
Current liabilities (including current financial liabilities excluding trade and other payables and provisions - 2020: EUR 0.2 million, 2019: EUR 0.4 million)	(4.7)	(4.0)
Net assets (100%)	11.9	12.1
Group's share of net assets (47.5%)	5.7	5.7 ^*
Goodwill	7.7	7.7
Carrying amount of interest in Synthese Co., Ltd. ^**	13.2	13.0
Revenue	17.3	23.0
Depreciation and amortization	(0.4)	(0.4)
Interest income/(expense)	-	-
Income tax income/(expense)	(0.6)	(0.4)
Net profit after taxes (100%)	2.6	1.5
Group's share of net profit for the full year	1.3	0.8
Dividends received by the Group	1.0	0.9

^* 2019 figure restated excluding the translation effect.
^** Including translation effect.

7 Other investments

Other investments are recorded at fair value and mainly include the 7% interest the Group has in Infraserv GmbH & Co. Wiesbaden KG for a total amount of EUR 5.0 million (EUR 5.0 million for 2019).

Information about the Group's exposure to credit and market risks, and fair value measurement, is included in note 18 'Financial instruments'.

8 Deferred tax assets and liabilities

Deferred tax assets and liabilities are broken down by class as follows:

	As at December 31,		As at December 31,
(EUR in millions)	Deferred tax assets	2020 Deferred tax liabilities	Deferred tax assets	2019 Deferred tax liabilities
Property, plant and equipment	2.2	(24.2)	2.0	(26.5)
Right-of-use assets	1.2	-	1.3	-
Intangible assets and step ups	46.3	(183.5)	43.5	(190.8)
Provisions for pensions	22.8	-	24.6	-
Tax loss carry-forwards and tax credits	29.0	-	35.0	-
Other	10.4	(4.2)	15.4	(7.9)
Deferred tax (assets) liabilities	111.9	(211.9)	121.8	(225.2)
Deferred tax netting	(54.8)	54.8	(60.1)	60.1
Net Deferred tax (assets) liabilities	57.1	(157.1)	61.7	(165.1)

Movement on deferred tax assets and liabilities during the year ended December 31, 2020:

(EUR in millions)	Balance at December 31, 2019	Recognized directly in equity	Acquired or stepped-up in business combination
Property, plant and equipment	(24.5)	-	-
Right-of-use assets	1.3	-	-
Intangible assets and step ups	(147.3)	-	-
Provisions for pensions	24.6	-	-
Tax loss carry-forwards and tax credits	35.0	-	-
Other	7.5	-	-
	(103.4)	-	-

(EUR in millions)	Recognized in profit or loss	Write-down of assets (net of reversal)	Recognized in OCI	Other	Balance at December 31, 2020
Property, plant and equipment	1.0	-	-	1.5	(22.0)
Right-of-use assets	(0.1)	-	-	-	1.2
Intangible assets and step ups	6.1	9.2	(5.6)	0.4	(137.2)
Provisions for pensions	(1.0)	-	(0.8)	-	22.8
Tax loss carry-forwards and tax credits	18.8	(19.9)	-	(4.9)	29.0
Other	(13.8)	12.3	-	0.2	6.2
	11.0	1.6	(6.4)	(2.8)	(100.0)

The deferred tax liability on intangible assets and step ups mainly relates to the Monarch carve out from Cytec in 2013 and the acquisition of Nuplex in 2016. Both acquisitions required the creation, for purchase accounting purposes, of technical deferred tax liabilities. These liabilities reflect the difference between the fair market values of the acquired assets and goodwill, and their underlying book values.

The column Other mainly consists of EUR translation effects in consolidation of non-EUR entities.

The Group has IFRS undistributed earnings of EUR 622.5 million (EUR 442.1 million for 2019), which, if paid out as dividends, would potentially be subject to tax in the hands of the recipient.

An assessable temporary difference of EUR 0.8 million has been recognized as a deferred tax liability. The parent entity is able to control the timing of distributions from its subsidiaries.

Tax losses

Deferred tax assets on tax losses and tax credits carried forward have been recognized in respect of the following items:

(EUR in millions)	As at December 31, 2020		As at December 31, 2019
	Total	Expiration date	Total	Expiration date
	14.1	None	17.7	None
	-	19 Years	0.1	19 Years
	0.1	18 Years	0.8	18 Years
	0.8	17 Years	0.8	17 Years
	0.5	16 Years	5.2	16 Years
	4.9	15 Years	5.0	15 Years
	3.4	14 Years	0.3	14 Years
	0.4	13 Years	-	13 Years
	-	12 Years	-	12 Years
	-	11 Years	-	11 Years
	-	10 Years	-	10 Years
	-	9 Years	-	9 Years
	-	8 Years	0.1	8 Years
	-	7 Years	-	7 Years
	-	6 Years	-	6 Years
	0.8	5 Years	2.4	5 Years
	2.2	4 Years	1.1	4 Years
	1.0	3 Years	0.4	3 Years
	0.2	2 Years	0.7	2 Years
	0.6	1 Year	0.4	1 Year
Total	29.0		35.0

The tax losses and tax credits carried forward of EUR 29.0 million (EUR 35.0 million for 2019) expire according to the above mentioned expiration date. The recoverability of losses is being continuously monitored; the year over year differential is partially attributable to on-going reassessment of available losses carried forward. Deferred tax assets have been recognized on the total amount of tax losses carried forward assessed as available for recovery in the foreseeable future, as per December 31, 2020.

The Group assumes sufficient availability of future taxable profit for the next 5 years against which deductible temporary differences and tax losses carried forward can be utilized. For entities acting as low risk distributors (LRD) with a predictable profit margin, this timeframe is extended to 10 years. Based on the recoverability analysis and related continuous monitoring, it is considered probable that sufficient taxable profit will be available to recover the carry forward losses and tax credits.

Deferred tax assets have not been recognized on tax losses as follows:

(EUR in millions)	As at December 31, 2020		As at December 31, 2019
Amounts of unrecognized deferred tax assets	Total	Expiration date	Total	Expiration date
Expire	30.0	2021-2038	12.1	2020-2037
Never expire	25.3		29.8
Total unrecognized deferred tax on tax losses	55.3		41.9

9 Inventories

Inventories consisted of the following:

Inventory
(EUR in millions)	December 31, 2020	December 31, 2019
Finished goods	187.0	227.6
Spare parts	11.4	11.5
Work in progress	14.0	21.1
Raw materials and supplies	71.6	78.7
Carrying amount of inventories	284.0	338.9

Inventories decreased by EUR 54.9 m illion compared to prior year. Following the actions to reduce inventory during the Q2 2020 period to conserve cash and align inventory levels to the lower level of demand, allnex has been unable to rebalance inventory levels to match the higher demand especially in Q4 2020, and sites were running at capacity to keep up with demand during the second half of 2020 period. The decrease in inventory also includes a negative net translation impact of EUR 12.9 million.

In 2020, inventories of EUR 1,290.0 million (2019: EUR 1,477.1 million) were recognized as an expense during the year and included in cost of sales.

Overall, write downs of inventory to net realizable value amounted to EUR 4.5 million at December 31, 2020 (EUR 12,9 million prior year) and are recognized in cost of sales. This includes EUR 0.4 million write-off resulting out of the inventory optimization project (2019: EUR 9.0 million).

Substantially all inventories of the Group are pledged (refer to note 13 'Loans and borrowings and other financial liabilities').

10 Trade and other receivables

Trade and other receivables
(EUR in millions)	December 31, 2020		December 31, 2019
Trade receivable (gross)		165.1		137.7
Allowances		-2.2		-1.7
Total trade receivables (net)		162.9		136.0
Other receivables		653.9		566.4
Total trade and other receivables		816.8		702.4

	December 31, 2020		December 31, 2019
	Current	Non-current	Current	Non-current
Trade receivable (net)	162.9	-	136.0	-
Other receivables	16.0	637.9	21.7	544.7
Total	178.9	637.9	157.7	544.7

In May 2014, allnex entered in a Trade Receivables Purchase Program (TRPP) with a major international bank. The original participants of the program are Allnex Austria, Allnex Belgium, Allnex France, Allnex Germany, Allnex Italy, Allnex Norway, Allnex Spain and Allnex USA. The program concerned only EUR and USD receivables for a maximum permitted cash amount of approximately EUR 92.6 million (or USD 100 million) equivalent. The receivables are sold to the bank on a non-recourse basis. The Group's maximum exposure to credit risk from the sale of to the receivables is limited to less than 5% default reserve.

In 2016, the Group renegotiated the terms and conditions of the TRPP program in order to reduce or entirely replace the loss reserve with a trade credit insurance and recorded the TRPP program off balance sheet under IFRS.

With the acquisition of Nuplex, the Trade Receivable Purchase Program (TRPP) was extended in November 2016 and does include. Nuplex Germany, Nuplex Netherlands, Nuplex UK, Nuplex US and Nuplex Australia. The program concerns EUR, USD, GBP, and AUD receivables for a maximum permitted cash amount of EUR 220 million equivalents as of May 2018.

As per December 31, 2020, an amount of EUR 184.2 million receivables have been sold to the bank and are recorded off balance sheet.

As per December 31, 2019, an amount of EUR 193.6 million receivables have been sold to the bank and are recorded off balance sheet.

(EUR in millions)	Open amount December 31, 2020	Thereof: not past due on the reporting date

Trade receivable (gross)	165.1	155.3
Allowances	(1.8)	(0.2)
Allowance for expected credit losses	(0.4)	(0.1)
Total trade receivables (net)	162.9	155.0

(EUR in millions)	Thereof: past due on the reporting date in the following periods
	<30 days	30-60 days	61-90 days	>90 days
Trade receivable (gross)	5.2	2.1	0.6	1.9
Allowances	0.0	0.0	0.0	(1.6)
Allowance for expected credit losses	(0.2)	(0.1)	0.0	0.0
Total trade receivables (net)	5.0	2.0	0.6	0.3

For trade receivables that do not contain a significant financing component (i.e. substantially all trade receivables), the loss allowance is measured at an amount equal to lifetime expected credit losses, allnex applies the simplified approach for the recognition of these lifetime expected credit losses that result from all possible default events over the expected life of those trade receivables, using a provision matrix that takes into account historical information on defaults adjusted for forward looking information. The provision matrix the Group is applying follows the below stepped approach:

1 Determining appropriate groupings

The Group is grouping its trade receivables based on the geographical region to which they belong. Looking at historical credit loss has shown that different loss patterns exist for its different regions: EMEA, Australia-New Zealand, Rest of Asia, North America and Latin America.

2 Determine the periods over which observed historical loss rates are appropriate

The Group does not apply any specific guideline on how far back historic data should be collected but uses judgment of credit controllers to determine the reasonable period over which historical data will be obtained. In this respect, it is important to keep in mind that the Group completed the acquisition of Nuplex Industries Ltd. in 2016. Given the transformational nature of this transaction for the combined entity, the Group did not consider 2015 or earlier loss allowance data for the determination of the lifetime expected credit losses.

3 Determining the credit losses over the selected historical period

The total credit losses captured over the relevant periods are combined and averages are calculated. Historical loss rates are then reviewed by Credit control before advancing to step 4.

4 Determine the appropriate loss rates, taking into account forward looking macro-economic factors

The historic loss rates determined in step 3 reflect the economic conditions in place during the period to which the historical credit losses relate but are not necessarily the final loss rates that should be applied. Certain macro-economic factors (economic slowdown, unemployment rates) can and will change and will require adjusting the loss rates. Significant judgment in forecasting future economic conditions will be key in this respect.

5 Calculate the expected credit losses

Apply the appropriate loss rates per region to the outstanding receivables per region and add all the expected credit losses to come to the total expected credit loss for the portfolio of the Group. For short term trade receivables, the determination of forward-looking economic scenarios at the Group is less significant given that over the credit risk exposure period a significant change in economic conditions may be unlikely, and historical loss rates might be an appropriate basis for the estimate of expected future losses.

The expected credit loss rates used are:

•	0.02% over the category current receivables (2019: 0.01%);
•	2.0% over the category aged from 1 to 30 days (2019: 1.0%);
•	5.0% over the remaining ageing categories (2019: 5.0%).

Trade receivables that are past due on the reporting date amount to EUR 8.0 million as per December 31, 2020 (EUR 19.7 million as per December 31, 2019).

Substantially all receivables of the Group are pledged (please refer to note 13 'Loans and borrowings and other financial liabilities' for more information on it).

The Group's exposure to credit and currency risks, and impairment losses for trade and other receivables are disclosed in note 18 'Financial Instruments'.

The following table shows the development of allowances on trade receivables:

Development of allowance of trade receivable
(EUR in millions)
Allowances as of January 1, 2020	1.7
Currency translation adjustments	(0.2)
Reversals	(0.3)
Additions	0.8
Reclassification	0.4
Write-off's	(0.2)
Allowances as of December 31, 2020	2.2

All income and expenses relating to allowances and write-offs of trade receivables are reported under selling and distribution expenses.

The following table shows a breakdown of receivables (net value) by currency:

Receivable breakdown by currency
(EUR in millions)	December 31, 2020	December 31, 2019
EUR	7.9	(3.9)
USD	27.9	29.1
GBP	0.8	1.3
CNY	62.0	44.9
TWD	2.0	2.0
JPY	15.4	16.7
THB	4.7	5.3
AUD	5.2	2.9
MYR	4.2	5.2
KRW	1.7	0.8
BRL	5.5	5.2
NZD	4.4	4.2
VND	7.3	8.7
IDR	6.9	7.9
Other	7.0	5.7
Total trade receivable (net value)	162.9	136.0

The other receivables amount to EUR 653.8 million as per December 31, 2020 and mainly include loans to the shareholder of EUR 633.6 million (including accrued interest of EUR 14.3 million and exchange revaluation impact of EUR 57.3 million), a VAT receivable of EUR 6.8 million and supplier rebates of EUR 1.5 million.

The other receivables amount to EUR 566.4 million as per December 31, 2019 and mainly include loans to the shareholder of EUR 539.7 million (including accrued interest of EUR 14.2 million and exchange revaluation impact of EUR 7.8 million), a VAT receivable of EUR 10.9 million and supplier rebates of EUR 2.3 million.

The credit risk exposure on the other receivables is considered to be insignificant as this includes mainly loans to shareholders and VAT receivables outstanding from several foreign jurisdictions.

The following table provides information about the exposure to credit risk and ECLs for trade receivable and contract assets for corporate customers as at December 31, 2020:

(EUR in millions)
December 31, 2020	Accounts Receivable before TRPP		Accounts Receivable after TRPP
Lowest risk	135.2	38.86%	63.4	38.40%
Low risk	22.5	6.46%	10.6	6.42%
Average risk	186.5	53.59%	88.2	53.40%
Above average risk	1.6	0.46%	0.8	0.46%
Bad debt	2.2	0.63%	2.2	1.32%
Total	348.0	100.00%	165.2	100.00%

11 Cash and cash equivalents

Cash and cash equivalents
(EUR in millions)	December 31, 2020	December 31, 2019
Bank balances	206.5	138.9
Cash and cash equivalents in the statement of financial position	206.5	138.9
Bank overdraft used for cash management purposes	(6.8)	(5.7)
Cash and cash equivalents in the statement of cash flows	199.7	133.2

The EUR 6.8 million bank overdraft in 2020 is denominated as follows: EUR 6.8 million for JPY.

The EUR 5.7 million bank overdraft in 2019 is denominated as follows: EUR 5.7 million for JPY.

Bank accounts of certain subsidiaries are pledged as security to obtain credit facilities (see note 13 'Loans and borrowings and other financial liabilities').

The following table shows a breakdown of cash and cash equivalents by currency:

Breakdown of cash and cash equivalents by currency
(EUR in millions)	December 31, 2020	December 31, 2019
In USD	61.8	63.0
In EUR	71.3	23.2
In CNY	15.6	12.4
In JPY	(1.0)	2.7
In NOK	2.7	1.5
In TWD	1.6	1.0
In GBP	6.7	0.4
In BRL	0.3	0.7
In KRW	0.7	1.5
In THB	5.4	2.0
In MYR	4.2	4.4
In MXN	1.2	0.4
In AUD	16.2	10.1
In INR	1.6	1.3
In other currencies	11.4	8.6
Total	199.7	133.2

12 Capital and reserves

(i) Capital management

The Group's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital, as well as the level of dividends to ordinary shareholders. Besides legal restrictions, no material external requirements are applicable to disclose.

The Group is funded by a mixture of equity and debt. The equity funds are all from the equity investor Advent International in form of share capital through ordinary shares and preferred equity certificates (PECs).

For the covenant test (Total first lien debt/EBITDA) for the first lien facility please refer to Note 13 loans and borrowings and other financial liabilities in part c. 'loan covenant'.

The Group reviews each year the amount available for distribution and then decides, considering available liquidity, balance sheet structure, business and cash forecast and tax impacts, for which entities distributions will be made.

(ii) Share capital

a. Ordinary shares

The Company was incorporated with an initial share capital of EUR 40,000. Effective March 8, 2013 the share capital was converted from EUR to USD and the forty thousand (40,000) existing shares have been exchanged against fifty-two thousand one hundred and thirteen (52,113) shares having a nominal value of one US Dollar (USD 1.00) each, so that the share capital of forty thousand Euro (EUR 40,000) was replaced by a share capital of fifty-two thousand one hundred and thirteen US Dollars (USD 52,113) represented by fifty-two thousand one hundred and thirteen (52,113) shares, having a nominal value of one US Dollar (USD 1.00) each.

The shares have been allocated as follows:

i.	fifty-two thousand one hundred and twelve (52,112) ordinary shares owned by AI Chem (Luxembourg) Intermediate S.à r.l and;
ii.	one (1) management share owned by Allnex Luxembourg S.à r.l (previously named Al Chem S.à r.l) as unlimited shareholder.

In a second step, the share capital was increased by an amount of one million seven hundred and forty-seven thousand eight hundred and eighty-seven US Dollars (USD 1,747,887), so as to raise it up to one million and eight hundred thousand US Dollars (USD 1,800,000), by the issue of one million seven hundred and forty-seven thousand eight hundred and eighty-seven (1.747.887) new ordinary shares each having a par value of one US Dollar (USD 1.00) and the same rights and obligations as set out in the articles of incorporation.

		Total	Number of ordinary shares
By incorporation	EUR	40,000	40,000
Capital conversion from EUR to USD March 8, 2013	USD	52,113	52,113
Share capital increase as per March 28, 2013	USD	1,747,887	1,747,887
Share capital as of December 31, 2015	USD	1,800,000	1,800,000
Share capital as of December 31, 2016	EUR	1,404,166	1,800,000
Share capital as of December 31, 2017	EUR	1,404,166	1,800,000
Share capital as of December 31, 2018	EUR	1,404,166	1,800,000
Share capital as of December 31, 2019	EUR	1,404,166	1,800,000
Share capital as of December 31, 2020	EUR	1,404,166	1,800,000
Par value of ordinary share is EUR 0.78 (USD 1.00)

The holders of ordinary shares (as defined above) may not act on behalf of the Company in any manner or capacity other than by exercising their rights as shareholders in general meetings and are only liable to the extent of their contributions to the Company.

Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company. All rights attached to the Company's shares held by the Group are suspended until those shares are reissued.

All shares rank equally with regard to the Company's residual assets and all issued shares are fully paid, with a par value of EUR 0.78 (USD 1.00).

b. Authorized capital

The company has an un-issued but authorized capital of a maximum amount of one billion Euros (EUR 1.000.000.000) to be used until May 25, 2025, in order to issue new shares or to increase the nominal value of the shares.

(i) Preferred Equity Certificates

The equity component of the preferred equity certificates amounts to EUR 52.3 million (EUR 51.4 million for 2019). Please refer to note 13 for more information on this topic.

(ii) Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations, as well as foreign exchange gains and losses arising from monetary items that in substance form part of the net investment in the foreign operation that are recognized in OCI and presented within equity in the foreign currency translation reserve. The translation reserve amounts to EUR (21.2) million as per December 31, 2020 compared to EUR (61.5) million as per December 31, 2019.

(iii) Dividends

No dividends to shareholders were declared and paid by Allnex (Luxembourg) & Cy S.C.A. to its shareholders for the period ended 2020.

13 Loans, borrowings and other financial liabilities

(i) Loans outstanding as per December 31, 2020

Loans outstanding	At the end of December 31, 2020		At the end of December 31, 2019
(EUR in millions)
	Face	Value	Face	Value
Bl	900.8	900.8	910.2	910.2
B2	410.0	410.0	454.0	454.0
B3	308.9	308.9	342.1	342.1
Other Aguia Quimica	1.8	1.8	2.4	2.4
Other Austria	0.2	0.2	0.2	0.2
Other PT Nuplex	-	-	3.6	3.6
Other Allnex Belgorod	0.7	0.7	1.3	1.3
Total external debt excluding PECs	1,622.4	1,622.4	1,713.8	1,713.8
Preferred Equity Certificates	2.9	2.9	2.7	2.7
Total external debt including PECs	1,625.3	1,625.3	1,716.5	1,716.5
Deferred bank fees		(19.1)		(26.7)
Net external debt		1,606.2		1,689.8
Other financial liabilities - lease liabilities		46.5		50.9
Total net external debt and other financial liabilities		1,652.7		1,740.7

The External debt are classified in the consolidated statement of position as follows:

Long term debt	1.584.9	1,662.2
Short term borrowings	1.3	7.2
Current maturity of long term debt	17.1	17.7
Preferred Equity Certificates	2.9	2.7
Total net external debt	1,606.2	1,689.8
Other financial liabilities non-current (lease liabilities)	32.5	36.9
Other financial liabilities current (lease liabilities)	14.0	14.0
Total net external debt and other financial liabilities	1,652.7	1,740.7

The total net external debt amounts to EUR 1,603.3 million for 2020 and EUR 1,687.1 million for 2019.

Other financial liabilities relate to lease liabilities and amount to EUR 46.5 million for 2020 and EUR 50.9 million for 2019.

The preferred equity certificates amount to EUR 2.9 million for 2020 and EUR 2.7 million for 2019.

Information about the Group's exposure to interest rate, foreign currency and liquidity risk is included in Note 18.

(ii) Terms and repayment schedule

The terms and conditions of outstanding loans are as follows:

a. General

The debt has ING as agent of the syndicated debt and funds are raised on the EUR and US debt market. The debt was split into three loans, tranch Bl in EUR borrowed by Allnex S.à r.l, tranch B2 in USD borrowed by Allnex S.a r.l, tranch B3 in USD borrowed by Allnex USA Inc. The debt has a Credit Agreement ("CA") which provides for a contractual 1% amortization per annum and excess cash payment requirement every year. The Group actively manages cash and utilizes it to repay the debt and interest payments as per the contractual terms. Cash above is utilized by the business to maintain its capital base and for strategic investments.

The CA also provides revolving credit facility ("RCF") for EUR 160.0 million to meet working capital requirements. It is used for the purpose of providing Letters of Credit ("LOC") but the Group's treasury is working on actively reducing the LOCs needed by the business. Letters of Credit are mainly used by the Group to counter-guarantee some outstanding guarantees issued by the bank of former owner Cytec prior to carve-out in 2013. Those guarantees are issued through Bank Agent (ING) utilizing the RCF line. Some Letters of Credit are also utilized for direct guarantees to certain beneficiaries such as rent, supplier payment terms, tax, etc.

The debt was refinanced in March 2017. The EUR 160 million RCF will expire in September 2021. In 2020, the RCF was partially extended to March 2023 for an amount of EUR 126.2 million.

b. Currency

All the significant outstanding third party loans are in EUR, except for the B2 and B3 loan which are in USD and some local loans in local currencies.

c. Repayment schedule

For the first lien agreement (Bl, B2, B3), installments are due at end of each quarter, calculated at 0.25% of the principal. The balance is due within three years.

d. Interest rate structure

For the Term Loan Bl denominated in EUR, 3.25% margin on top of the EURIBOR for the selected period with a floor at 0%. For the Term Loan B2/B3 denominated in USD, 3.25% margin on top of the LIBOR for the selected period with a floor at 0.75%.

(iii) Loan covenant

Four covenant ratios exist: total leverage ratio, senior secured leverage ratio, consolidated total assets and first lien leverage ratio. The latter one is only applicable for the first lien agreement. Calculation of covenants is based on the consolidated financial statements prepared in accordance with IFRS applied under the credit agreement and only tested if the RCF is drawn above 35%. During the year 2020 and subsequently, there was no breach of covenant.

(iv) Preferred Equity Certificates

During 2013, 252.396.484 preferred equity certificates were issued and fully paid with a par value of EUR 0.73 (or USD 1.00) per share.

In 2017, EUR 38.3 million of preferred equity certificates and accrued interests were repaid. The yield bearing PECs were fully repaid in 2017.

The PECs are subordinated instruments held by the shareholders with non-cash interest.

The yield free PECs are redeemable in 51 years of which 44 years are remaining and payable on redemption.

The PECs should be initially recognized at fair value. For the yield free preferred equity certificates ("YFPECs"), fair value will be less than the proceeds received (par value) because of the substantial premium. The difference between par value and fair value has been recognized as a component of equity. Please refer to note 12 for further information.

The fair value of the YFPECs has been estimated using expectations of the duration of each instrument which gives rise to the following classification between equity and liabilities:

Determination of the PECs at SCA Level
(EUR in millions)
YFPECs	Equity Effect	52.3
	Fair Value of Loan	29

In 2020, the Group has adjusted the Equity effect from PECs to reflect the initial par value of PECs as per IFRS. The adjustment was recognized to the Retained Earnings.

(v) Collateral and pledged items

Liabilities and financial obligations under the Credit Agreement are secured by collateral for the benefit of financial institutions. The liabilities and financial obligations under the notes and the guarantees are also secured by the same collateral. The collateral includes pledges over the shares or partnership interests in various subsidiaries. As such, a majority of the assets of the Group are pledged. Further, substantially all receivables of the allnex Group are either assigned and transferred for security purposes or pledged. Most of the bank accounts of allnex are pledged in favor of the financing parties. Furthermore, substantially all machinery, PPE, inventories and stock in trade of selected Group entities have been transferred as collateral.

In addition various group entities assigned or pledged their intellectual property rights as collateral. Some land owned by allnex Group has been mortgaged. Allnex S.à r.l., Allnex USA Inc., Al Chem (Luxembourg) Intermediate S.a r.l, Allnex Holding USA Inc., Allnex Holdings S.à r.l., Allnex Belgium SA/NV and Allnex New Zealand Limited signed as guarantors under the Credit Agreement on the closing date (September 13, 2016). In addition, all the subsidiaries that have joined thus far are guarantors. As such, they guarantee the due and punctual performance of obligations on the part of the borrowers and the respective other guarantors under the Credit Agreement and the due and punctual payment of the financial obligations of the borrowers as per the Credit Agreement.

The table below represents a reconciliation of movements of liabilities to cash flows arising from financing activities:

Reconciliation of movements of liabilities to cash flows arising from financing activities
2020	Liabilities
(EUR in millions)	Note Bank overdraft used for cash management purpose	Loans & borrowings ^*	Preferred Equity Certificates	Lease liabilities
Balance at January 1, 2020	5.7	1,693.6	2.7	50.9
Cash flows from financing activities
Proceeds from new borrowings	-	13.2	-	-
Proceeds/(payments) from settlement of derivatives	-	-	-	-
Transaction costs related to loans and borrowings	-	-	-	-
Payments from deferred purchase accounting	-	-	-	-
Acquisition/(capital distribution) of non-controlling interests	-	-	-	-
Repayment of borrowings	13 -	(34.4)	-	-
Repayment of preferred equity certificates	-	-	-	-
Payments of lease liabilities	-	-		(18.5)
Loan issued to shareholder	-	-	-	-
Dividends paid	-	-	-	-
Total changes from financing cash flows	-	(21.2)	-	(18.5)
Change arising from obtaining or losing control of subsidiaries or other business	-	-	-	-
Changes in other comprehensive income net of tax	-	-	-	-
The effect of changes in foreign exchange rates	(0.7)	(69.6)	-	(1.9)

Reconciliation of movements of liabilities to cash flows arising from financing activities
2020	Assets	Derivatives (assets)/liabilities
(EUR in millions)	Trade & other receivables - loans to shareholders	Interest swap and forward exchange contracts for hedging assets	Interest swap and forward exchange contracts for hedging liabilities
Balance at January 1, 2020	(539.7)	(1.4)	7.1
Cash flows from financing activities		-	-
Proceeds from new borrowings	-	-	-
Proceeds/(payments) from settlement of derivatives	-	-	(1.8)
Transaction costs related to loans and borrowings	-	-	-
Payments from deferred purchase accounting	-	-	-
Acquisition/(capital distribution) of non-controlling interests	-	-	-
Repayment of borrowings	-	-	-
Repayment of preferred equity certificates	-	-	-
Payments of lease liabilities	-	-	-
Loan issued to shareholder	(68.4)	-	-
Dividends paid	-	-	-
Total changes from financing cash flows	(68.4)	-	(18)
Change arising from obtaining or losing control of subsidiaries or other business	-	-	-
Changes in other comprehensive income net of tax	-	-	-
The effect of changes in foreign exchange rates	-	-	-

Reconciliation of movements of liabilities to cash flows arising from financing activities
2020	Equity
(EUR in millions)	Share capital/ premium	Preferred Equity Certificates	Reserves	Retained earnings	NCI
Balance at January 1, 2020	1.4	51.4	(61.5)	252.7	26.9
Cash flows from financing activities	-	-	-	-	-
Proceeds from new borrowings	-	-	-	-	-
Proceeds/(payments) from settlement of derivatives	-	-	-	-	-
Transaction costs related to loans and borrowings	-	-	-	-	-
Payments from deferred purchase accounting	-	-	-	-	-
Acquisition/(capital distribution) of non-controlling interests	-	-	-	-	(2.2)
Repayment of borrowings	-	-	-	-	-
Repayment of preferred equity certificates	-	-	-	-	-
Payments of lease liabilities	-	-	-	-	-
Loan issued to shareholder	-	-	-	-	-
Dividends paid	-	-	-	-	(1.3)
Total changes from financing cash flows	-	-	-	-	(3.5)
Change arising from obtaining or losing control of subsidiaries or other business	-	-	-	-	-
Changes in other comprehensive income net of tax	-	-	1.5	1.9	(1.0)
The effect of changes in foreign exchange rates	-	-	38.8	-	-

Reconciliation of movements of liabilities to cash flows arising from financing activities
2020		Liabilities
(EUR in millions)	Note	Bank overdraft used for cash management purpose	Loans & borrowings ^*	Preferred Equity Certificates	Lease liabilities
Changes in fair value		-	-	-	-
Other changes
Assets/Liability related
Change in bank overdraft		1.8	-	-	-
New leases		-	-	-	16.0
Capitalized borrowing costs		-	-	-	-
Bank fees amortized	21	-	6.9	-	-
Interest expense		-	66.2	-	2.7
Interest cost capitalized on preferred equity certificates (PECs)		-	-	-	-
Interest income accrued on loan to shareholder	21	-	-	-	-
Interest paid	-	-	(67.5)	-	(2.7)
Total assets-liability related other change		1.8	5.6	-	16.0
Total equity related other change		-	-	0.2	-
Balance at December 31,2020		6.8	1,608.4	2.9	46.5

Reconciliation of movements of liabilities to cash flows arising from financing activities
2020	Assets	Derivatives (assets)/liabilities
(EUR in millions)	Trade & other receivables - loans to shareholders	Interest swap and forward exchange contracts for hedging assets	Interest swap and forward exchange contracts for hedging-liabilities
Changes in fair value	-	(4.7)	10.5
Other changes
Assets/Liability related
Change in bank overdraft	-	-	-
New leases	-	-	-
Capitalized borrowing costs	-	-	-
Bank fees amortized	-	-	-
Interest expense	-	-	-
Interest cost capitalized on preferred equity certificates (PECs)	-	-	-
Interest income accrued on loan to shareholder	(25.5)	-	-
Interest paid	-	-	-
Total assets-liability related other change	(25.5)	-	-
Total equity related other change	-	-	-
Balance at December 31,2020	(633.6)	(6.1)	15.8

Reconciliation of movements of liabilities to cash flows arising from financing activities
2020	Equity
(EUR in millions)	Share capital/ premium	Preferred equity certificates	Reserves	Retained earnings	NCI
Changes in fair value	-	-	-	-	-
Other changes
Assets/Liability related
Change in bank overdraft	-	-	-	-	-
New leases	-	-	-	-	-
Capitalized borrowing costs	-	-	-	-	-
Bank fees amortized	-	-	-	-	-
Interest expense	-	-	-	-	-
Interest cost capitalized on preferred equity certificates (PECs)	-	-	-	-
Interest income accrued on loan to shareholder	-	-	-	-	-
Interest paid	-	-	-	-	-
Total assets-liability related other change	-	-	-	-	-
Total equity related other change	-	0.9	-	48.0	3.9
Balance at December 31,2020	1.4	52.3	(21.2)	302.6	26.3

^* Loans & borrowings include accrued interest on loans (2020: EUR 5.2 million and 2019: EUR 6.5 million) which are reported under Current Trade & other payables in the Consolidated statement of financial position.

Lease liabilities ^**

(EUR in millions)	As reported December 31, 2020	As reported December 31, 2019
Non-current	32.5	36.9
Current	14.0	14.0
Total lease liabilities	46.5	50.9

^** included in the line items 'Other financial liabilities' in the consolidated statement of financial position.

A movement schedule on the lease liabilities is presented below:

(EUR in millions)	Lease liability
	Balance as of January 1, 2020	Additions	Lease payment
Land and land rights	3.9	1.9	(0.3)
Buildings	23.4	5.1	(7.3)
Machinery and equipment	16.6	6.0	(7.5)
Vehicles	7.0	3.0	(3.4)
Total	50.9	16.0	(18.5)

(EUR in millions)	Lease liability
	Interest payment	Interest expense	Translation difference	Balance as of December 31, 2020
Land and land rights	(0.2)	0.2	(0.2)	5.3
Buildings	(1.2)	1.2	(0.9)	20.3
Machinery and equipment	(0.9)	0.9	(0.6)	14.5
Vehicles	(0.4)	0.4	(0.2)	6.4
Total	(2.7)	2.7	(19)	46.5

(EUR in millions)		Lease liability
	Balance as of January 1, 2019	Additions	Payment
Land and land rights	3.9	0.2	-
Buildings	27.2	2.2	(6.4)
Machinery' and equipment	13.6	9.9	(7.0)
Vehicles	5.0	4.9	(3.1)
Total	49.7	17.2	(16.5)

(EUR in millions)
	Interest payment	Interest expense	Translation difference	Balance as of December 31, 2019
Land and land rights	(0.2)	0.2	(0.2)	3.9
Buildings	(1.4)	1.4	0.4	23.4
Machinery' and equipment	(0.9)	0.9	0.1	16.6
Vehicles	(0.4)	0.4	0.2	7.0
Total	(2.9)	2.9	05	50.9

Some leases include an option to renew the lease for an additional period of the same duration after the end of the contract term. The Group assesses at lease commencement whether it is reasonably certain to exercise the extension options. It reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant change in circumstances within its control. Some leases provide for additional rent payments that are based on changes in local price indices.

The Group leases land, buildings, plant equipment and furniture (hereafter "PE&F") and vehicles.

The Group leases land and buildings for its office spaces and production plants.

The average lifetime of the lease contracts are

• Land	31 years
• Buildings	9 years
• Plant equipment and furniture	5 years
• Vehicles	5 years

Maturity table for the net undiscounted lease payments:

Maturity analysis of net undiscounted lease payments
	As reported	As reported
(EUR in millions)
	December 31, 2020	December 31, 2019
Due <1 year	15.3	16.1
Due >1 and <5 years	24.4	28.3
Due > 5 years	36.8	39.0
Total	76.5	83.4

14 Employee benefits

For details on the related employee benefit expenses, see note 22.

The Group has defined benefit and defined contribution pension plans that cover employees at allnex. Defined Benefit ("DB") plans provide defined benefits based on years of service and earnings level. The consolidated statement of financial position includes all pension assets and liabilities for plans sponsored by allnex entities.

The Group contributes to the following post-employment defined benefit plans, jubilee benefit and indemnity plans:

―	Austria (Defined Benefit Plan)
―	Austria (Termination Benefit)
―	Austria (Jubilee Benefit)
―	Austria (Individual Promise)
―	Austria (Jubilee Benefit entity 765)
―	Belgium (Cadre Pension Plan)
―	Belgium (Cadre Employee Plan)
―	Belgium (Jubilee Benefit)
―	Belgium (DC Cadre)
―	Belgium (DC Employee)
―	Belgium (DC Workers)
―	Belgium (DC Bonus Plan)
―	Germany (Supplemental Retirement Plan)
―	Germany (Deferred Compensation)
―	Germany (Individual Promise)
―	Germany (Direct Pension Promise)
―	Germany (Altersteilzeit)
―	Italy (Termination Benefit)
―	Japan (Defined Benefit Plan)
―	Thailand (Retirement Indemnity Plan)
―	Australia (Long Service Leave)
―	Indonesia (Retirement Indemnity)
―	Netherlands (Jubilee Benefit)
―	Netherlands (Disability Benefit)

Some DB Plans are closed for new hires, and typically DC plans were put in place for the new hires after closing the DB plan.

The above plans have been taken into account when calculating under IAS 19 the statement of financial position results and benefit cost for 2020.

As from January 1, 2020, the jubilee plans in Germany and pre-retirement vacation plan in Germany are no longer in scope. Any remaining liabilities for these plans will be reported outside of IAS19. As from December 31, 2020, the Bayer Pensionskasse has been treated as a Defined Contribution plan and is no longer in the IAS19 scope.

After the separation from the Bayer group the pensionskasse was classified as a multi-employer defined benefit plan. Biometric and investment risks are jointly borne by all sponsoring companies in this fund. Because the Bayer Pensionskasse does not maintain separate accounting classes for the individual sponsoring companies, an exact allocation of assets to each sponsoring company is not possible. According to IAS19 paragraph 34 and 36, a multi-employer plan is to be accounted for as a defined contribution plan when there is "no consistent and reliable basis for allocating the obligation, plan assets and cost" to the sponsoring companies. As from 31 December 2020 the Pension Plan Bayer Pensionskasse has been treated as a Defined Contribution plan based on IAS19 paragraph 34 and 36. This change has been recognized via OCI (liability gain and asset loss).

Allnex also sponsors various defined contribution retirement plans in a number of countries (most significantly the US), consisting primarily of savings, profit growth and profit-sharing plans. Contributions to the saving plans are mainly based on matching a percentage of employee contributions. Contributions to the profit growth and profit-sharing plans are generally based on the financial performance.

Total employer contributions to the Group various DC plans for 2020 amounted to EUR 9.0 million compared to EUR 9.8 million in 2019.

By Belgian law, employers are required to provide an average minimum guaranteed rate of return on the employer's contribution and employee's contributions for the defined contribution plan. The return may vary from year to year but cannot be lower than 1.75% or higher that 3.75%. Due to the minimum return, the defined contribution plans are considered as of the defined benefit type according to the IAS 19 principles.

The pension liability is calculated in local currency and the corporate exchange rate is used to convert the actuarial results from the local currency to EUR, having an impact of EUR 0.5 million in 2020.

Funding

The following table reflects the expected 2021 cash flows for DB recognized pension benefit plans:

Expected employer contributions	Pension plans
Plans	5.0

The following table reflects total benefits expected to be paid from the plans and/or our assets:

Expected benefit payments
(EUR in millions)	Pension Plans
2021	6.1
2022	7.9
2023	10.7
2024	10.5
2025	9.0
2026-2030	56.6

Movement in net defined benefit (asset) liability - split by major plan
allnex total - All plans	Defined benefit obligation
(EUR in millions)	2020	2019
Balance at January 1	211.2	195.5
Amounts recognized in profit and loss
Current service cost	4.8	4.5
Past service credit	-	0.3
Curtailment loss/(gain)	-	(2.1)
Settlement loss/(gain)	-	-
Interest cost (income)	2.0	3.1
Immediate recognition of (gains)/losses arising over the period	0.3	0.9
Total administration expenses recognized in profit and loss	-	-
	7.2	6.8
Amounts recognized in Other Comprehensive Income
Liability (gains)/losses due to changes in financial assumptions	5.6	16.4
Liability (gains)/losses due to changes in demographic assumptions	-	0.0
Experience (gains)/losses arising during the period	(14.6)	(0.9)
Exchange rate (gain)/loss	(0.3)	0.2
	(9.2)	15.7
Other
Employer contributions made during the period	-	-
Direct company benefit payments made during the period	(3.6)	(3.8)
Actual participants contributions	0.4	0.5
Internal Transfers ^(*)	-	-
Actual benefits paid from plan	(5.8)	(3.1)
Actual taxes paid	(0.2)	(0.3)
	(9.2)	(6.8)
Balance at December 31	200.0	211.2
Represented by:
Net defined benefit assets
Net defined benefit liability

Movement in net defined benefit (asset) liability - split by major plan
allnex total - All plans	Fair value of plan assets		Net defined benefit (asset) liability
(EUR in millions)	2020	2019	2020	2019
Balance at January 1	(89.2)	(831)	122.0	112.4
Amounts recognized in profit and loss
Current service cost	-	-	4.8	4.5
Past service credit	-	-	-	0.3
Curtailment loss/(gain)	-	-	-	(2.1)
Settlement loss/(gain)	-	-	-	-
Interest cost (income)	(0.8)	(1.3)	1.3	1.9
Immediate recognition of (gains)/losses arising over the period	-	-	0.3	0.9
Total administration expenses recognized in profit and loss	0.0	0.0	0.0	0.0
	(0.8)	(1.3)	6.4	5.5
Amounts recognized in Other Comprehensive Income
Liability (gains)/losses due to changes in financial assumptions	-	-	5.6	16.4
Liability (gains)/losses due to changes in demographic assumptions	-	-	-	0.0
Experience (gains)/losses arising during the period	6.5	(5.5)	(8.1)	(6.4)
Exchange rate (gain)/loss	-	-	(0.3)	0.2
	6.5	(5.5)	(2.8)	10.2
Other
Employer contributions made during the period	(2.2)	(2.5)	(2.2)	(2.5)
Direct company benefit payments made during the period	-	-	(3.6)	(3.8)
Actual participants contributions	(0.3)	(0.3)
Internal Transfers ^(*)	-	-	0.1	0.2
Actual benefits paid from plan	5.8	3.1	-	-
Actual taxes paid	0.2	0.3	-	-
	3.5	0.6	(5.6)	(6.2)
Balance at December 31	(80.0)	(89.2)	120.0	122.0
Represented by:			2020	2019
Net defined benefit assets			-	-
Net defined benefit liability			120.0	122.0
			120.0	122.0

A number of immaterial plans for the total amount in 2020 of EUR 1.5 million (2019: EUR 1.8 million) are not in scope of the calculation of the actuary.

Movement in net defined benefit (asset) liability - split by major plan
Austria - All plans	Defined benefit obligation
(EUR in millions)	2020	2019
Balance at January 1	49.7	47.2
Amounts recognized in profit and loss
Current service cost	0.6	0.6
Past service credit	-	-
Curtailment loss(gain)	-	-
Settlement loss/(gain)	-	-
Interest cost (income)	0.5	0.7
Immediate recognition of (gains)/losses arising over the period	(0.0)	0.1
Total administration expenses recognized in profit and loss	-	-
	1.1	1.4
Amounts recognized in Other Comprehensive Income	-	-
Liability (gains)/losses due to changes in financial assumptions	1.2	3.3
Liability (gains)/losses due to changes in demographic assumptions	-	-
Experience (gains)/losses arising during the period	0.4	(0.1)
Exchange rate (gain)/loss	-	-
	1.6	3.2
Other
Employer contributions made during the period	-	-
Direct company benefit payments made during the period	(0.7)	(0.4)
Actual participants contributions	-	-
Internal Transfers ^(*)	-	-
Actual benefits paid from plan	(1.6)	(1.6)
Actual taxes paid	-	-
	(2.3)	(2.0)
Balance at December 31	50.0	49.7
Represented by:
Net defined benefit assets
Net defined benefit liability

Movement in net defined benefit (asset) liability - split by major plan
Austria - All plans	Fair value of plan assets		Net defined benefit (asset) liability
(EUR in millions)	2020	2019	2020	2019
Balance at January 1	(25.4)	(25.0)	24.3	22.2
Amounts recognized in profit and loss
Current service cost	-	-	0.6	0.6
Past service credit	-	-	-	-
Curtailment loss(gain)	-	-	-	-
Settlement loss/(gain)	-	-	-	-
Interest cost (income)	(0.2)	(0.4)	0.2	0.4
Immediate recognition of (gains)/losses arising over the period	-	-	(0.0)	0.1
Total administration expenses recognized in profit and loss	-	-	-	-
	(0.2)	(0.4)	0.8	1.0
Amounts recognized in Other Comprehensive Income	-	-	-	-
Liability (gains)/losses due to changes in financial assumptions	-	-	1.2	3.3
Liability (gains)/losses due to changes in demographic assumptions	-	-	-	-
Experience (gains)/losses arising during the period	(0.2)	(1.3)	0.2	(1.4)
Exchange rate (gain)/loss	-	-	-	-
	(0.2)	(1.3)	1.4	1.9
Other
Employer contributions made during the period	(0.2)	(0.3)	(0.2)	(0.3)
Direct company benefit payments made during the period	-	-	(0.7)	(0.4)
Actual participants contributions	-	-	^(*)	^(*)
Internal Transfers ^(*)	-	-	-	-
Actual benefits paid from plan	1.6	1.6	-	-
Actual taxes paid	-	-	-	-
	1.4	1.3	(0.9)	(0.7)
Balance at December 31	(24.4)	(25.4)	25.6	24.3
Represented by:			2020	2019
Net defined benefit assets			-	-
Net defined benefit liability			25.6	24.3
			25.6	24.3

Movement in net defined benefit (asset) liability - split by major plan
Belgium - All plans	Defined benefit obligation
(EUR in millions)	2020	2019
Balance at January 1	79.7	72.0
Amounts recognized in profit and loss
Current service cost	2.2	2.0
Past service credit	-	-
Curtailment loss/(gain)	-	(0.5)
Settlement loss/(gain)	-	-
Interest cost (income)	0.6	1.0
Immediate recognition of (gains)/losses arising over the period	(0.0)	0.0
Total administration expenses recognized in profit and loss	-	-
	2.8	2.6
Amounts recognized in Other Comprehensive Income	-	-
Liability (gains)/losses due to changes in financial assumptions	2.1	4.7
Liability (gains)/losses due to changes in demographic assumptions	-	-
Experience (gains)/losses arising during the period	(0.3)	2.4
Exchange rate (gain)/loss	-	-
	1.8	7.1
Other
Employer contributions made during the period	-	-
Direct company benefit payments made during the period	(0.0)	(0.5)
Actual participants contributions	0.3	0.3
Internal Transfers ^(*)	-	-
Actual benefits paid from plan	(3.9)	(1.5)
Actual taxes paid	(0.2)	(0.3)
	(3.9)	(2.0)
Balance at December 31	80.4	79.8
Represented by:
Net defined benefit assets
Net defined benefit liability

Movement in net defined benefit (asset) liability - split by major plan
Belgium - All plans	Fair value of plan assets		Net defined benefit (asset) liability
(EUR in millions)	2020	2019	2020	2019
Balance at January 1	(54.1)	(48.3)	25.6	23.8
Amounts recognized in profit and loss
Current service cost	-	-	22	2.0
Past service credit	-	-	-	-
Curtailment loss/(gain)	-	-	-	(0.5)
Settlement loss/(gain)	-	-	-	-
Interest cost (income)	(0.4)	(0.7)	0.2	0.3
Immediate recognition of (gains)/losses arising over the period	-	-	(0.0)	0.0
Total administration expenses recognized in profit and loss	0.0	0.0	0.0	0.0
	(0.4)	(0.7)	2.4	1.9
Amounts recognized in Other Comprehensive Income	-	-	-	-
Liability (gains)/losses due to changes in financial assumptions	-	-	2.1	4.7
Liability (gains)/losses due to changes in demographic assumptions	-	-	-	-
Experience (gains)/losses arising during the period	(2.7)	(4.5)	(3.0)	(2.1)
Exchange rate (gain)/loss	-	-	-	-
	(2.7)	(4.5)	(0.9)	2.6
Other
Employer contributions made during the period	(2.0)	(2.2)	(2.0)	(2.2)
Direct company benefit payments made during the period	-	-	(0.0)	(0.5)
Actual participants contributions	(0.3)	(0.3)	^(*)	^(*)
Internal Transfers ^(*)	-	-	-	-
Actual benefits paid from plan	3.9	1.5	-	-
Actual taxes paid	0.2	0.3	-	-
	1.9	(0.7)	(2.0)	(2.7)
Balance at December 31	(55.4)	(54.1)	25.1	25.6
Represented by:			2020	2019
Net defined benefit assets			-	-
Net defined benefit liability			25.1	25.6
			25.1	25.6

Movement in net defined benefit (asset) liability - split by major plan
Germany - All plans	Defined benefit obligation
(EUR in millions)	2020	2019
Balance at January 1	70.3	66.7
Amounts recognized in profit and loss
Current service cost	1.3	1.3
Past service credit	-	-
Curtailment loss/(gain)	-	(1.6)
Settlement loss/(gain)	-	-
Interest cost (income)	0.8	1.1
Immediate recognition of (gains)/losses arising over the period	0.3	0.2
Total administration expenses recognized in profit and loss	-	-
	2.3	1.0
Amounts recognized in Other Comprehensive Income	-	-
Liability (gains)/losses due to changes in financial assumptions	2.3	7.9
Liability (gains)/losses due to changes in demographic assumptions	-	-
Experience (gains)/losses arising during the period	(14.7)	(3.4)
Exchange rate (gain)/loss	-	-
	(12.4)	4.5
Other
Employer contributions made during the period	-	-
Direct company benefit payments made during the period	(1.9)	(2.1)
Actual participants contributions	0.1	0.2
Internal Transfers ^(*)	-	-
Actual benefits paid from plan	(0.2)	-
Actual taxes paid	-	-
	(2.0)	(1.9)
Balance at December 31	58.2	70.3
Represented by:
Net defined benefit assets
Net defined benefit liability

Movement in net defined benefit (asset) liability - split by major plan
Germany - All plans	Fair value of plan assets		Net defined benefit (asset) liability
(EUR in millions)	2020	2019	2020	2019
Balance at January 1	(9.7)	(9.8)	60.6	56.9
Amounts recognized in profit and loss
Current service cost	-	-	1.3	1.3
Past service credit	-	-	-	-
Curtailment loss/(gain)	-	-	-	(1.6)
Settlement loss/(gain)	-	-	-	-
Interest cost (income)	(0.1)	(0.2)	0.7	1.0
Immediate recognition of (gains)/losses arising over the period	-	-	0.3	0.2
Total administration expenses recognized in profit and loss	-	-	-	-
	(0.1)	(0.2)	2.2	0.8
Amounts recognized in Other Comprehensive Income	-	-	-	-
Liability (gains)/losses due to changes in financial assumptions	-	-	2.3	7.9
Liability (gains)/losses due to changes in demographic assumptions	-	-	-	-
Experience (gains)/losses arising during the period	9.5	0.3	(5.2)	(3.1)
Exchange rate (gain)/loss	-	-	-	-
	9.5	0.3	(3.0)	4.8
Other
Employer contributions made during the period	-	-	-	-
Direct company benefit payments made during the period	-	-	(1.9)	(2.1)
Actual participants contributions	-	-	^(*)	^(*)
Internal Transfers ^(*)	-	-	0.1	0.2
Actual benefits paid from plan	0.2	-	-	-
Actual taxes paid	-	-	-	-
	0.2	-	(1.8)	(1.9)
Balance at December 31	(0.1)	(9.7)	58.1	60.6
Represented by:			2020	2019
Net defined benefit assets			-	-
Net defined benefit liability			58.1	60.6
			58.1	60.6

Movement in net defined benefit (asset) liability - split by major plan
Other - All plans	Defined benefit obligation
(EUR in millions)	2020	2019
Balance at January 1	11.5	9.6
Amounts recognized in profit and loss
Current service cost	0.8	0.6
Past service credit	-	0.3
Curtailment loss/(gain)	-	-
Settlement loss/(gain)	-	-
Interest cost (income)	0.2	0.2
Immediate recognition of (gains)/losses arising over the period	0.1	0.6
Total administration expenses recognized in profit and loss	-	-
	1.0	1.8
Amounts recognized in Other Comprehensive Income	-	-
Liability (gains)/losses due to changes in financial assumptions	0.1	0.5
Liability (gains)/losscs due to changes in demographic assumptions	-	0.0
Experience (gains)/losscs arising during the period	-	0.3
Exchange rate (gain)/loss	(0.3)	0.2
	(0.2)	1.0
Other
Employer contributions made during the period	-	-
Direct company benefit payments made during the period	(0.9)	(0.9)
Actual participants contributions	-	-
Internal Transfers ^(*)	-	-
Actual benefits paid from plan	-	-
Actual taxes paid	-	-
	(0.9)	(0.9)
Balance at December 31	11.3	11.5
Represented by:
Net defined benefit assets
Net defined benefit liability

Movement in net defined benefit (asset) liability - split by major plan
Other - All plans	Fair value of plan assets		Net defined benefit (asset) liability
(EUR in millions)	2020	2019	2020	2019
Balance at January 1	-	-	11.5	9.6
Amounts recognized in profit and loss
Current service cost	-	-	0.8	0.6
Past service credit	-	-	-	0.3
Curtailment loss/(gain)	-	-	-	-
Settlement loss/(gain)	-	-	-	-
Interest cost (income)	-	-	0.2	0.2
Immediate recognition of (gains)/losses arising over the period	-	-	0.1	0.6
Total administration expenses recognized in profit and loss	-	-	-	-
	-	-	1.0	1.8
Amounts recognized in Other Comprehensive Income	-	-	-	-
Liability (gains)/losses due to changes in financial assumptions	-	-	0.1	0.5
Liability (gains)/losscs due to changes in demographic assumptions	-	-	-	0.0
Experience (gains)/losscs arising during the period	(0.1)	-	(0.1)	0.3
Exchange rate (gain)/loss	-	-	(0.3)	0.2
	(0.1)	-	(0.3)	1.0
Other
Employer contributions made during the period	-	-	-	-
Direct company benefit payments made during the period	-	-	(0.9)	(0.9)
Actual participants contributions	-	-	^(*)	^(*)
Internal Transfers ^(*)	-	-	-	-
Actual benefits paid from plan	-	-	-	-
Actual taxes paid	-	-	-	-
	-	-	(0.9)	(0.9)
Balance at December 31	(0.1)	-	11.2	11.5
Represented by:			2020	2019
Net defined benefit assets			-	-
Net defined benefit liability			11.2	11.5
			112	11.5

Reconciliation of net asset (liability)

(EUR in millions)	December 31, 2020
Net asset/(liability) recognized at January 1, 2020	(123.8)
P&L (charge)/credit	(6.4)
Total recognized in OCI during the year	2.5
Effect of acquisitions	-
Internal transfers	(0.1)
Employer contributions made in the Financial Year	2.2
Direct company benefit payments made in the Financial Year	3.6
Exchange rate adjustments	0.5
Net asset/(liability) recognized at December 31, 2020	(121.5)

The net liability recognized at December 31, 2020 of EUR 121.5 million can be split as follows between the different pension plans.

Split of pension liability
(EUR in millions)	December 31, 2020
Austria Defined Benefit Plan	8.4
Austria Jubilee Benefit Plan	3.1
Austria Individual promises	0.3
Austria Termination Benefit Plan	13.8
Belgium Cadre Pension Plan	20.7
Belgium Cadre Employee Plan	2.6
Belgium Jubilee Benefit Plan	0.4
Belgium DC plans	0.3
Belgium DC Bonus Plan	1.1
Germany Supplemental Retirement Plan	38.2
Germany Jubilee Benefits	-
Germany Deferred Compensation	1.1
Germany Individual promises	0.9
Germany Pension Plan	17.6
Germany Altersteilzeit	0.3
Italy TFR	1.5
Japan Defined Benefit Plan	1.6
Thailand Retirement Indemnity Plan	1.8
Netherlands Jubilee Benefit Plan	2.6
Netherlands Disability Benefit Plan	-
Australia Long Service Leave	3.1
US Postretirement Medical Benefits	-
Indonesia Retirement Indemnity	0.6
Other	1.5
Total	121.5

Benefit costs recognized in the consolidated statement of profit or loss for the period ended December 31, 2020 can be split as follows:

Analysis of Profit and Loss Charge under IAS19R
(EUR in millions)	December 31, 2020
Current Service cost	4.8
Service Cost Component	4.8
Interest cost	2.0
Interest Income	(0.7)
Finance Cost Component	1.3
Other long term & termination benefits: losses/(gains)	0.3
Other long term & termination benefits: losses/(gains)	0.3
Net periodic benefit expense/(income)	6.4

Plan assets

The Group has 8 funded plans in scope. There is 1 funded defined benefit plan in Austria, there are 6 funded plans in Belgium and there is 1 funded defined benefit plan in Germany.

The asset allocation for our pension plans at December 31, 2020 and the target allocation for 2021, by asset category, are as follows:

Pension plans	Target allocation 2021	Percentage of plan assets at December 31, 2020
Asset category
Equity securities	31.7%	31.7%
Fixed income	31.0%	31.0%
Cash and other	37.3%	37.3%
Total	100.0%	100.0%

The investment strategy for our worldwide benefit plan assets is to maintain broadly diversified portfolios of stocks, bonds and money market instruments that, along with periodic plan contributions, provide the necessary liquidity for ongoing benefit obligations.

Our overall investment strategy is to achieve a mix of approximately 95% of investments for longterm growth and 5% for near-term benefit payments with a wide diversification of asset types, fund strategies and fund managers.

Equity securities primarily include a broadly diversified portfolio of common stocks of publicly traded companies that are primarily non-US Fixed income securities include corporate bonds, mortgage-backed securities and government bonds. Other types of investments include insurance assets and investments in hedge funds that follow several different strategies.

Defined benefit obligation

(i) Actuarial assumptions

General principles

Discount rate: Following IAS 19, the discount rate assumption should be set by reference to the yields with high quality corporate bonds (AA) in the same currency of the plans for which a liability is booked. This methodology is applied in the countries in the Eurozone and in Australia, the US and Japan. In some countries there is not a sufficient deep corporate bond market. This is the case in Thailand and Indonesia where government bonds are used.

The discount rate can be determined by reference to a "single discount rate" approach or a "full yield curve" approach. In a "single discount rate" approach the discount rate is equal to the yield that matches the duration of the liabilities. In a "full yield curve" approach the future benefit payments of the plan (prorated with the past service over the total service for active members) at a moment t are actualized with the corresponding yield at moment t. The sum of the actualized benefits paid can be replicated with one single yield from the yield curve.

The single discount rate approach is applicable in all countries, except Eurozone and Japan.

For Eurozone the full yield curve approach has been applied to set the discount rate as from year- end 2019. For Japan the full yield curve approach has been applied to set the discount rate as from year-end 2020.

The full valuations were performed by the local actuaries at December 31, 2020 based on the October 31, 2020 discount rates. Discount rates were reviewed at December 31, 2020 by the corporate actuary.

For Eurozone the discount rates at October 31, 2020 have been maintained as the rates obtained based on the above and below curve as at December 31, 2020 fall within the range of the October 31, 2020 rates.

For other zones the discount rates at December 31, 2020 have been used.

Inflation Rate: The methodology for setting the inflation rate in the Eurozone has been refined to an inflation rate set by reference to the actuary's European inflation swap curve. The refinement is considered a change in accounting estimate that generates a financial gains/loss that will run through OCI for the post-employment plans and through P&L for the other long-term and termination plans.

The actuary's inflation curve is similar to the actuary's d-tool for discount rate setting purposes in that it uses the same plan specific cashflows as the discount rate curve and produces a single equivalent rate.

In line with the discount rate we have set the inflation rate per Eurozone country but only consider the plans with inflation dependency.

The 2020 year-end inflation rate update from October 31, 2020 rates to December 31, 2020 rates for Eurozone has been performed by the corporate actuary based on the inflation rate sensitivity figures provided by the local actuaries.

Mortality Tables: Mortality tables should take into account the life expectancy of the members to the plan. In most countries the mortality tables are adjusted on a frequent basis to take into account the improved life expectancy per generation (age cohort).

Company related assumptions on turnover rates, retirement age and salary increase rates are based on the specific policy and past observations of the company where the benefit is offered. They are set on a long-term basis and should only change when there is a significant change in the statistics.

Tax rate: Tax rates applicable on the unfunded DBO in Belgium are set by the authorities. They comprise a 4.4% premium tax that has to be paid on the employer and employee contribution and a social charge of 8.86% on the employer contributions.

When comparing the assumptions used in 2020 to the assumptions of 2019, there were changes in the discount rates, as outlined in below table.

Discount rate	December 31, 2020	December 31, 2019
Austria	0.60%	0.95%
Belgium	0.40%	0.80%
Germany	0.75%	1.15%
Italy	0.40%	0.80%
Japan	0.35%	0.15%
Thailand	1.50%	1.70%
Netherlands	0.35%	0.70%
Australia	1.40%	2.30%
Indonesia	6.10%	7.10%

The remeasurement recognized in Other Comprehensive Income is outlined in the table below:

Remeasurement Recognized in Other Comprehensive Income
(EUR in millions)	December 31, 2020	December 31, 2019
Losses (gains) due to changes in financial assumptions	5.6	16.4
Losses (gains) due to changes in demographic assumptions	-	0.0
Liability experience (gains) losses arising during the year	(14.6)	(0.9)
Asset (gains) losses arising during the year	6.4	(5.5)
Total remeasurement recognized in other comprehensive income	(2.5)	10.0

The 2020 financial loss is mainly due to the overall decrease in the discount rates since 2019 closing. This has been compensated partially by a gain on the decrease in the Eurozone inflation assumption.

Impact of removing Bayer Pensionskasse:

•	DBO experience gain of EUR 14.1 million, which is the main reason for the experience gain observed in 2020. Before removal the Bayer Pensionskasse DBO experience gain was EUR 0.2 million.
•	Asset loss Bayer Pensionskasse: EUR 9.8 million. Before removal the Bayer Pensionskasse asset gain was EUR 0.5 million.

The asset loss due to treating the Bayer Pensionskasse as a DC plan is partially compensated by the asset gains reported for the funded plans in Belgium and Austria due to the good performance in 2020 of the invested money in Belgium in particular.

Duration of the liabilities

The duration of the plans per country as per December 31, 2020 can be found in the tables below:

Duration of liabilities
Implied duration (based on discount rate sensitivity analysis)	Australia Full Valuation	Austria Full Valuation	Belgium Full Valuation	Germany Full Valuation
Valuations at December 31, 2020 - DBO weighted durations	3.90	13.04	10.00	17.53
Valuations at December 31, 2019 - DBO weighted durations	3.90	13.39	10.89	17.67

Duration of liabilities Implied duration (based on discount rate sensitivity analysis)	Indonesia Full Valuation	Italy Full Valuation	Japan Full Valuation	The Netherlands Full Valuation	Thailand Full Valuation
Valuations at December 31, 2020 - DBO weighted durations	8.49	10.04	7.30	9.21	13.90
Valuations at December 31, 2019 - DBO weighted durations	7.70	10.04	7.30	9.31	13.05

Assumptions December 31, 2020

The following were the principal actuarial assumptions used at the reporting date:

Overview assumptions

	Austria	Belgium	Germany
Discount Rate	0.60%	0.40%	0.75%
Inflation Rate	N/A	1.25%	1.40%
		Before age 60: Inflation
		+ 1% merit
Salary Increase Rate	2.80%	As from age 60: Inflation	3.00%
		+ 0% merit
Pension Increase Rate	0.00%	N/A	1.40%
Social Security Increase Rate	N/A	N/A	2.50%
Mortality Table	AVOe 2018 P Ang	IA\|BE experience table	Heubeck 2018 G
Turnover Rates	TP Light	Graded 13% - 0%	Aon Standard

	Italy	Japan	Thailand
Discount Rate	0.40%	0.35%	1.50%
Inflation Rate	1.25%	N/A	N/A
Salary Increase Rate	N/A	2.50%	5.50%
Pension Increase Rate	N/A	N/A	N/A
Social Security Increase Rate	N/A	N/A	N/A
Mortality Table	ISTAT 2017	MHLW2015	TMO017
Turnover Rates	4% (up to age 55)	5.60%	Graded 15% -0%

	Netherlands	Australia	Indonesia
Discount Rate	0.35%	1.40%	6.10%
Inflation Rate	1.25%	N/A	N/A
Salary Increase Rate	Inflation + 0.25% + merit scale	3.00%	7.00%
Pension Increase Rate	N/A	N/A	N/A
Social Security Increase Rate	Inflation + 0.25%	N/A	N/A
Mortality Table	AG Prognosetafel 2018, with correction ES-P2A	Experience based white collar rates	TMI-2011
Turnover Rates	Graded 7% - 0%	Graded	Graded 10% - 1%

(ii) Sensitivity analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below:

Sensitivity analysis on DBO	In thousands of EUR
Discount rate 0.25% increase	(6,261.76)
Discount rate 0.25% decrease	6,609.23
Salary increase rate 0.25% increase	2,201.58
Salary increase rate 0.25% decrease	(2,133.58)
Mortality for life expectancy + 1 year	3,152.50

15 Deferred income

Deferred income amounts to EUR 2.4 million and EUR 3.5 million as per December 31, 2020 and December 31, 2019 respectively.

The EUR 2.4 million as per December 31, 2020 mainly relates to the funding of a production line for a single customer that is taken into profit and loss based on the lifetime of the production line.

16 Provisions

Provisions
(EUR in millions)	Note	Environmental provision	Asset Retirement Obligation	REACH provision
Balance at January 1, 2020		17.6	8.1	1.1
Additions		1.1	0.4	-
Discounting effect	21	0.4	0.8	-
Reversals		(0.1)	-	(0.7)
Payments made		(0.7)	(0.5)	-
Reclassification		-	-	(0.3)
Translation difference		(0.5)	(0.4)	(0.1)
Balance at December 31, 2020		17.8	8.4	0.0
Non-current		15.0	8.4
Current		2.8	-	-
		17.8	8.4	-

Provisions
(EUR in millions)	Restructuring	Provision for claims	Other provisions	Total
Balance at January 1, 2020	15.8	0.5	1.2	44.3
Additions	2.4	0.5	-	4.4
Discounting effect	-	-	-	1.2
Reversals	(4.3)	(0.2)	(0.2)	(5.5)
Payments made	(7.8)	(0.6)	(0.5)	(10.1)
Reclassification	-	-	(0.4)	(0.7)
Translation difference	(0.1)	(0.1)	-	(1.2)
Balance at December 31, 2020	6.0	0.1	0.1	32.4
Non-current	-	-	0.1	23.5
Current	6.0	0.1	-	8.9
	6.0	0.1	0.1	32.4

Environmental provision

The environmental provision amounts to EUR 17.8 million in 2020, compared to EUR 17.6 million in 2019 (of which EUR 2.8 million is considered as current in 2020 compared to EUR 3.5 million for 2019) and mainly relates to Belgium (EUR 11.7 million), the US (EUR 4.9 million), Australia (EUR 0.6 million), Germany (EUR 0.3 million), and Netherlands (EUR 0.3 million).

The amount accrued for environmental remediation reflects the Group's assumptions based on third party analysis and opinion about remediation requirements at the contaminated site, the nature and cost of the remedy, the outcome of discussions with regulatory agencies and other potentially responsible parties at multi-party sites and the number and financial viability of other potentially responsible parties.

The discount rate of the environmental provision was reviewed and adjusted from 3.46% to 3.25% for EUR currency provisions, from 5.17% to 4.29% for USD currency provisions, and from 4.72% to 4.18% for AUD currency provisions in alignment with the Group's incremental borrowing rate. The change in discount rate led to impact of EUR 0.4 million in the environmental provision.

Environmental remediation spending for the period ended December 31, 2020 was EUR 0.9 million.

The accrual for environmental matters at the M.I.O Schoonaarde NV site currently accrued at EUR 8.8 million is covered by a parent guarantee in favor of the public waste agency of Flanders (OVAM) until the completion of the remediation was accepted by OVAM. The parent guarantee is limited to the total remediation costs. The timing of the estimated outflow is mainly expected to occur within 30 years.

Asset retirement obligation

The total asset retirement obligation as of December 31, 2020 amounts to EUR 8.4 million compared to EUR 8.1 million per end of 2019 and the largest part relates to the US entities (EUR 5.6 million).

The Group's long-lived assets subject to asset retirement obligations are primarily related to asbestos abatement and Resource Conservation and Recovery Act (RCRA) closures at certain manufacturing and research facilities.

Because of the long-term nature of the liability, the greatest uncertainty in estimating the provision is the costs that will incur. In particular, the Group has assumed that the site will be restored using technology and materials that are currently available.

The discount rate for the ARO provision calculation has been decreased from 3.46% to 3.25% for EUR currency provisions, from 5.17% to 4.29% for USD currency provisions, and from 4.72% to 4.18% for AUD currency provisions in line with the change in the Group's incremental borrowing rate. The change in discount rate led to impact of EUR 0.8 million in the ARO provision.

There are no sites with a regulatory closure obligation for which a liability has not been estimated and recorded.

The timing of the estimated outflow is mainly expected to occur within 10 years.

REACH provision

A REACH provision of EUR 4.3 million has been recorded during the PPA exercise and is the best estimate of future costs to comply with REACH regulation for all former Cytec products that are taken over by allnex.

At December 31, 2020, REACH provision is nil. Provision was reversed in the course of 2020 as now REACH costs are capitalized and amortized over the duration of the registration in compliance with IFRS guidelines.

Restructuring

The opening balance per January 1, 2020 consisted mainly out of the restructuring provision recorded in 2019 in order to adjust the organization by pursuing both a leaner management structure and higher functional efficiencies and as well a provision recorded in 2018 as a consequence of the sale of the land of the Silvertown (UK) location.

During 2020, a total amount of EUR 7,8 million was paid out and a net amount of EUR -1.9 million was reversed to the statement of profit and loss. The remaining provision of EUR 6.0 million per December 31, 2020 concerns for employees leaving mainly in 2021. The newly recorded restructuring provision affected mainly the locations in the following countries: Austria, Belgium, China, Germany and The Netherlands.

The timing of the estimated outflow is mainly expected to occur within the next 12 months.

LTIP provision

The provision for LTIP has been reversed to the Consolidated statement of profit or loss and other comprehensive income in 2019.

Legal provisions

As per December 31, 2020, legal provision mainly includes provision for claims for EUR 0.1 million. Other legal provisions relate to smaller individual cases per country.

The timing of the estimated outflow is mainly expected to occur within the next 12 months.

17 Trade and other payables

Trade and other payables
(EUR in millions)	December 31, 2020	December 31, 2019
Trade payables current
Trade payables	294.5	272.7
Accrued expenses	98.2	89.2
Total	392.7	361.9
Other payables current
Other	-	-
VAT	4.6	4.0
Total	4.6	4.0
Payables non-current
Other accruals	0.3	0.5
Accrued wages and commissions	-	-
Total	0.3	0.5
Trade and other payables
Current	397.3	365.9
Non-current	0.3	0.5
Total	397.6	366.4

The Group's exposure to currency risk and to liquidity risk related to trade and other payables are disclosed in note 18 'Financial Instruments'.

18 Financial instruments

The Group has exposure to the following risks arising from financial instruments:

•	Credit risk
•	Liquidity risk
•	Market risk (currency risk, interest rate risk, other)

This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risk, and the Group's management of capital.

Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. Group risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

Accounting classifications and fair value

The carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy are presented in the tables below. No fair value information is included for the categories financial assets and financial liabilities not measured at fair value, as the carrying amount is a reasonable approximation of fair value.

Accounting classification and fair value		December 31, 2020
		Carrying amount
(EUR in millions)	Note	Financial assets and liabilities at Fair Value	Financial assets at amortized cost	Other financial liabilities	Total
Financial assets measured at fair value
Other investment	7	5.0	-	-	5.0
Forward exchange contracts used for hedging	18	0.6	-	-	0.6
Total		5.6	-	-	5.6
Financial assets not measured at fair value
Trade and other receivables	10	-	810.0	-	810.0
Cash and cash equivalents	11	-	206.5	-	206.5
Total		-	1,016.5	-	1,016.5
Financial liabilities measured at fair value
Interest rate swaps used for hedging	18	(7.9)	-	-	(7.9)
Forward exchange contracts used for hedging	18	(1.8)	-	-	(1.8)
Total		(9.7)	-	-	(9.7)
Financial liabilities not measured at fair value
Bank overdrafts	11	-	-	(6.8)	(6.8)
Bank loans	13	-	-	(1,622.4)	(1,622.4)
Preferred Equity Certificates	13	-	-	(2.9)	(2.9)
Other financial liabilities	13	-	-	(46.5)	(46.5)
Deferred income	15	-	-	(2.4)	(2.4)
Trade and other payables	17	-	-	(393.0)	(393.0)
Total	-	-	-	(2,074.0)	(2,074.0)
Total		(4.1)	1,016.5	(2,074.0)	(1,061.6)

Accounting classification and fair value	December 31, 2020
	Fair value
(EUR in millions)	level 1	level 2	level 3	Total
Financial assets measured at fair value
Other investment	-	5.0	-	5.0
Forward exchange contracts used for hedging	-	0.6	-	0.6
Total	-	5.6	-	5.6
Financial assets not measured at fair value
Trade and other receivables	-	-	-	-
Cash and cash equivalents	-	-	-	-
Total	-	-	-	-
Financial liabilities measured at fair value
Interest rate swaps used for hedging	-	(7.9)	-	(7.9)
Forward exchange contracts used for hedging	-	(1.8)	-	(1.8)
Total	-	(9.7)	-	(9.7)
Financial liabilities not measured at fair value
Bank overdrafts	-	-	-	-
Bank loans	-	-	-	-
Preferred Equity Certificates	-	-	-	-
Other financial liabilities	-	-	-	-
Deferred income	-	-	-	-
Trade and other payables	-	-	-	-
Total	-	-	-	-
Total	-	(4.1)	-	(4.1)

Accounting classification and fair value		December 31, 2019
		Carrying amount
(EUR in millions)	Note	Financial assets and liabilities at Fair Value	Financial assets at amortized cost	Other financial liabilities	Total
Financial assets measured at fair value
Other investment	7	5.0	-	-	5.0
Forward exchange contracts used for hedging	18	0.5	-	-	0.5
Total		5.5	-	-	5.5
Financial assets not measured at fair value
Trade and other receivables	10	-	691.5	-	691.5
Cash and cash equivalents	11	-	138.9	-	138.9
Total		-	830.4	-	830.4
Financial liabilities measured at fair value
Interest rate swaps used for hedging	18	(4.1)	-	-	(4.1)
Forward exchange contracts used for hedging	18	(1.5)	-	-	(1.5)
Total		(5.6)	-	-	(5,6)
Financial liabilities not measured at fair value
Bank overdrafts	11	-	-	(5.7)	(5.7)
Bank loans	13	-	-	(1,713.8)	(1,713.8)
Preferred Equity Certificates	13	-	-	(2.7)	(2.7)
Other financial liabilities	13	-	-	(50.9)	(50.9)
Deferred income	15	-	-	(3.5)	(3.5)
Trade and other payables	17	-	-	(362.4)	(362.4)
Total		-	-	(2,139.0)	(2,139.0)
Total		(0.1)	830.4	(2,139.0)	(1,308.7)

Accounting classification and fair value	December 31, 2019
	Fair value
(EUR in millions)	level 1	level 2	level 3	Total
Financial assets measured at fair value
Other investment	-	5.0	-	5.0
Forward exchange contracts used for hedging	-	0.5	-	0.5
Total	-	5.5	-	55
Financial assets not measured at fair value
Trade and other receivables	-	-	-	-
Cash and cash equivalents	-	-	-	-
Total	-	-	-	-
Financial liabilities measured at fair value
Interest rate swaps used for hedging	-	(4.1)	-	(4.1)
Forward exchange contracts used for hedging	-	(1.5)	-	(1.5)
Total	-	(5.6)	-	(5.6)
Financial liabilities not measured at fair value
Bank overdrafts	-	-	-	-
Bank loans	-	-	-	-
Preferred Equity Certificates	-	-	-	-
Other financial liabilities	-	-	-	-
Deferred income	-	-	-	-
Trade and other payables	-	-	-	-
Total	-	-	-	-
Total	-	(0.1)	-	(0.1)

The Group classifies financial assets and liabilities into the following categories:

•	financial assets at fair value through profit or loss (derivatives),
•	financial assets at amortized cost (loans and receivables and cash and cash equivalents),
•	financial liabilities at amortized cost (bank overdrafts & loans, other financial liabilities, trade payables and deferred income),
•	financial liabilities at fair value through profit or loss (derivatives).

Trade receivables are initially measured at their transaction price, if they do not contain a significant financing component, which is the case for substantially all trade receivables. Other financial assets are initially measured at fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset.

All recognized financial assets are subsequently measured at either amortized cost or fair value under IFRS 9 on the basis of:

•	the entity's business model for managing the financial assets and
•	the contractual cash flow characteristics of the financial asset.

A financial asset shall be measured at amortized cost if both of the following conditions are met:

•	the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and
•	the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

When the business model objective is achieved by both collecting contractual cash flows and selling financial assets, the financial asset shall be measured at fair value through other comprehensive income (OCI).

An entity may also, at initial recognition, irrevocably designate a financial asset as measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an 'accounting mismatch') that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.

The Group is accounting for interest rate swaps and forward exchange contracts at fair value through profit and loss.

In summary, the Group is measuring financial assets as following:

•

a financial asset that (i) is held within a business model whose objective is to collect the contractual cash flows and (ii) has contractual cash flows that are solely payments of principal and interest on the principal amount outstanding is measured at amortized cost (net of any write down for impairment), unless the asset is designated at fair value through profit or loss (FVTPL) under the fair value option;

•

all other financial assets are measured at FVTPL.

Financial liabilities are initially measured at fair value minus, in the case of a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the issue of the financial liability. Subsequently, they are measured at amortized cost, except for financial liabilities at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, are subsequently measured at fair value.

Valuation techniques and significant unobservable inputs

The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used.

Type	Valuation technique	Significant unobservable input	Inter-relationship between key unobservable inputs & fair value measurements
Forward exchange contract & interest rate swaps	Market comparison technique. The fair values are based on broker quotes. Similar contracts are traded in an active market and the quotes reflect the actual transactions in similar instruments.	Not Applicable	Not applicable
Other investments	The fair value of the other investments is based on the simplified discounted cash flow technique.	Not Applicable	Not Applicable

Financial instruments not measured at fair value

Type	Valuation technique	Significant unobservable input
Secured bank loans and bank overdraft	Discounted cash flow	Not applicable

Financial instruments measured at fair value

Forward exchange contracts and interest rate swaps

Market comparison technique: The fair values are based on financial institution quotes.

Similar contracts are traded in an active market and the quotes reflect the actual transactions in similar instruments.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group's receivables from customers and investment securities.

The carrying amounts of financial assets in the statements of financial position represent the Group and the Company's maximum exposures to credit risk, before taking into account any collateral held. The Group does not hold any collateral in respect of their financial assets.

The Group sells mainly to large multinationals which use allnex's products in their manufacturing process or wholesalers. More than 90% of the Group's customers have been transacting with the Group for over several years, and none of these customers' balances have been written off or are credit-impaired at the reporting date. There is no concentration of customer risk at the Company level.

The maximum exposure to credit risk for trade receivables at the reporting date by type of counterparty was as follows:

Credit risk for trade receivables by type of counterparty
(EUR in millions)
Type of counterparty	2020	2019
Automotive	32.6	28.6
Industrial Metal	29.3	25.8
Packaging Coatings & Inks	16.3	13.6
Coil & Pre-Coated Metal	14.7	12.2
Industrial Wood	13.0	10.9
Decorative	9.8	8.2
Other	47.2	36.7
Total	162.9	136.0

As the Group has affiliates in Europe, the Americas (United States including Canada and South Americas) and Asia-Pacific, customers are spread over the world.

The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was as follows:

Credit risk for trade receivables by geographic region
(EUR in millions)
Region	2020	2019
South-Europe	2.1	0.7
Rest of Europe	10.5	(0.4)
United States incl. Canada	9.3	6.9
South-America	8.3	7.9
Asia-Pacific	132.7	120.9
Total	162.9	136.0

The portfolio related to TRPP program is sold to the bank on a non-recourse basis. The Group's maximum exposure to credit risk from the sale of the receivables is limited to less than 5% default reserve. TRPP receivables are therefore not included in the above table.

(i) Trade and other receivables

The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, in their analysis management also considers the demographics of the Group's customer base and the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk.

Credit limits are set by customer based on the available data and reviewed on an annual basis in alignment with the internal credit policy. Based on the new information received and/or the payment behavior of the customer, the credit limit can be revised.

The Group performs ongoing credit evaluations of their customer's financial condition including an assessment of the impact, if any, of prevailing economic conditions.

In general, the Group does not require collateral from their customers.

The maximum exposure to credit risk for trade and other receivables can be found under note 10 'Trade and other receivables' which also includes a summary of the allowance for doubtful debt and the ageing of the trade receivables are per December 31, 2020.

Trade receivables that are past due on the reporting date, but not impaired, amount to EUR 8.0 million and EUR 19.7 million as per December 31, 2020 and December 31, 2019 respectively.

Information about the terms and conditions of the loans to the shareholder, is included in note 28 'Related parties'.

IFRS 9 also requires the Group to recognize expected credit losses on all of its trade receivables. The Group applies the simplified approach and recognizes lifetime expected losses on all trade receivables, using a provision matrix in order to calculate lifetime expected credit losses, using historical information adjusted for the forward-looking information. Impacts related to debt securities, loans, financial guarantees, and loan commitments provided to third parties, as well as cash and cash equivalents, are immaterial.

(ii) Derivatives

The Group is exposed to credit losses in the event of non-performance by counterparties on derivative instruments. The counterparties to these transactions are major financial institutions, which may be adversely affected by events in the global credit markets. However, the Group considers the risk of default to be minimal. The Group typically does not require collateral or other security to support potential credit risk.

(iii) Cash and cash equivalents

The Group held cash and cash equivalents of EUR 206.5 million and EUR 138.9 million as per December 31, 2020 and December 31, 2019 respectively. This figure represents the maximum credit exposures on these assets. The cash and cash equivalents are held with major financial institutions and as such the Group considered the risk of default as minimal.

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

Typically, the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of minimum 90 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

On top of cash on hand, the Group has a revolving credit facility of EUR 160.0 million of which EUR 0.0 million is utilized.

In addition, the Group maintains a number of loans for a total amount of EUR 1,606.2 million and EUR 1,689.8 million as per December 31, 2020 and December 31, 2019 respectively. Please refer to note 13 'Loans and borrowings and other financial liabilities' for a detail of the outstanding loans and conditions.

The Group has contractual commitments to complete long term agreements (see note 26 'Commitments') and to incur capital expenditure if needed with regard to its investments in joint venture company (see note 6 'Associates and equity accounted investees').

The following are the remaining contractual maturities of financial liabilities at the reporting date:

Contractual maturities of financial liabilities
(EUR in millions)	Carrying amount	Total
Non-derivative financial liabilities
Trade and other payables	397.6	397.6
Other financial liabilities	46.5	76.5
B1, B2, B3	1,619.7	1,788.8
Bank overdraft	6.8	6.8
Aguia Quimica	1.8	1.8
Other debts (Austria, Russia)	0.9	0.9
Total	2,073.3	2,272.4
Derivative financial instruments
Forward exchange contracts	(1.8)	(1.8)
Interest rate swap	(7.9)	(7.9)
Total	(9.7)	(9.7)

Contractual maturities of financial liabilities
(EUR in millions)	<12 months	1-2 years	2-5 years	More than 5 years
Non-derivative financial liabilities
Trade and other payables	397.3	0.3	-	-
Other financial liabilities	15.3	10.6	13.8	36.8
B1, B2, B3	78.5	78.5	1,631.8	-
Bank overdraft	6.8	-	-	-
Aguia Quimica	0.6	1.2	-	-
Other debts (Austria, Russia)	0.7	-	0.1	0.1
Total	499.2	90.6	1,645.7	36.9
Derivative financial instruments
Forward exchange contracts	(1.9)	0.1	-	-
Interest rate swap	-	(6.7)	(1.2)	-
Total	(1.9)	(6.6)	(1.2)	-

The maturity analysis shows the contractual undiscounted cash flows of the Group and the Group's financial liabilities on the basis of their earliest possible contractual maturity. The contractual maturity of the interest rate swap is computed on average of contracts maturity.

As disclosed in note 13 'Loans and borrowings and other financial liabilities', the Group has a secured bank loan, which contains several debt covenants. A breach of this covenant may require the Group to repay the loan earlier than indicated in the table above.

Market risk

Market risk is the risk that changes in the market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Group buys and sells derivatives, and also incurs financial liabilities, in order to manage market risks, according to the Treasury policies as defined by the Group.

(i) Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings, including intercompany sales, purchases and intercompany balances, which are denominated in a currency other than the respective functional currencies of Group entities. The currencies in which these transactions primarily are denominated are the Euro (EUR) and US dollar (USD).

The majority of the sales revenue is in the same currency as that of the production cost so limiting the foreign currency cash flow exposure risk. In the event of identification of significant currency exposure risk, hedging will be arranged to mitigate those risks.

Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Group, primarily EUR and USD. This provides an economic hedge without derivatives being entered into and therefore no hedges were entered in these circumstances.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Group's policy is to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

The Group uses derivative instruments to manage fluctuations in currency rates. The derivative instruments that allnex utilizes forward swaps. Financial derivatives and hedges are done centrally by Group's Treasury department.

At December 31, 2020, the Group had the following currency forward and swap contracts outstanding ("-" = selling / "+" = buying):

(EUR in thousands)
Instrument	Nominal	Ccy	Ccy pair	MTM	Maturity
FX forward	(40,000.0)	NOK	NOK/EUR	89.7	1-3 months
FX forward	(28,000.0)	NOK	NOK/EUR	60.3	3-6 months
FX forward	10,200.0	AUD	AUD/USD	(942.9)	1-3 months
FX forward	5,500.0	AUD	AUD/USD	(609.3)	3-6 months
FX forward	(32,000.0)	NOK	NOK/EUR	131.8	6-12 months
FX forward	4,200.0	AUD	AUD/EUR	(80.7)	1-3 months
FX forward	(23,000.0)	NOK	NOK/USD	71.9	1-3 months
FX forward	(14,000.0)	NOK	NOK/USD	81.8	3-6 months
FX forward	4,700.0	NZD	NZD/EUR	(103.3)	1-3 months
FX forward	4,700.0	NZD	NZD/EUR	(102.4)	3-6 months
FX forward	7,000.0	NZD	NZD/EUR	(131.0)	6-12 months
FX forward	32,400.0	CNY	CNY/EUR	(11.8)	1-3 months
FX forward	(19,000.0)	NOK	NOK/USD	98.9	6-12 months
FX forward	(33,000.0)	NOK	NOK/USD	163.9	12-36 months
FX forward	6,500.0	AUD	AUD/EUR	(121.0)	3-6 months
FX forward	19,100.0	AUD	AUD/EUR	(386.1)	6-12 months
Total FX forward				(1,790.2)
FX Swap	12,300.0	CNY	CNY/EUR	(9.1)	1-3 months
FX Swap	50,000.0	JPY	JPY/EUR	28.6	1-3 months
Total FX swap				19.5
Total				(1,770.7)

In the above table, contracts are not shown on individual basis but on a net basis. All contracts for same currencies and with same maturity are netted and shown on one net line.

All derivative contracts are measured at fair value based on banks mark-to-market and are recorded under trade and other payables. Changes in the fair value of derivatives are recorded monthly in the profit and loss statement under Other income and Other expense.

The fair value of foreign currency forward contracts recorded in the consolidated statement of financial position as of December 31, 2020 is EUR (1.8) million. The currency hedges are put in place primarily to cover foreign exchange gain and loss with cash impact for the Group.

The hedge derivatives utilized are forward derivatives. If the exposure remain at maturity of the hedge, forward contract are prolonged by swap transactions.

The following table provides an overview on the currency exposure for the next 12 months forward:

Foreign Currency exposure overview - 12 months forward Cash Flow forecast (CFF) - allnex Group
(EUR in millions)
% OF TOTAL CASH	CURR	CFF 12M Dec'20	DEBT IRS	NET CASH
27%	AUD	61.3		61.3
3%	BRL	5.7		5.7
-1%	CAD	(3.3)		(3.3)
16%	CNY	35.7		35.7
13%	EUR	30.1	(39.4)	(9.3)
3%	GBP	6.7		6.7
4%	IDR	8.6		8.6
0%	IND	0.0		0.0
3%	INR	7.3		7.3
10%	JPY	22.9		22.9
3%	KRW	6.8		6.8
0%	MXN	1.1		1.1
-1%	MYR	(2.8)		(2.8)
-11%	NOK	(25.1)		(25.1)
7%	NZD	17.1		17.1
0%	RUB	0.3		0.3
0%	SEK	(0.8)		(0.8)
-1%	SGD	(1.4)		(1.4)
-3%	THB	(6.2)		(6.2)
0%	TWD	(0.0)		(0.0)
24%	USD	54.5	(39.9)	14.6
4%	VND	9.7		9.7
100%		228.1	(79.3)	148.8

Hedging

Management has analyzed the transactional foreign currency exposure from all entities EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), capital expenditures, working capital, other balance sheet exposures, debt exposure and cash movements.

On an EBITDA level there is exposure over 20 different currencies. The most material exposures are USD ("$"), EUR, AUD, JPY, THB, NOK and RMB. The $, EUR, AUD, JPY and RMB all reflect a positive EBITDA exposure with value of currency through invoices issued more than offsetting the cost exposure in that currency. The NOK and THB have the opposite exposure with more cost in the currency than gets invoiced. In terms of other Free Cash Flow ("FCF") items, the major capital expenditure and working capital needed are in the $ or Euro zone. The majority of the debt is in EUR with also a USD tranche. The movements of FCF less debt and interest payments analyzed in foreign exchange ("FX") can be directly compared to the movement on the cash accounts. This confirms that the Group has a significant amount of the cash generated in $, the net amount in Euro received is generally at a sufficient level to cover Euro-based capital expenditures and debt repayments without a material balance leftover. The Group is long in JPY and RMB which tend to be sold to have $ to pay the expenses especially intragroup the same is the case with the RMB. With locally sourced raw materials in NOK or RMB and employment costs in the local currency, the Group has to buy NOK by selling USD or EUR and THB for USD.

At the financial position date, the entities and Treasury department monitor the foreign currency exposure for open receivables and liabilities.

Historically, the business benefited from natural hedges across the currencies and has not hedged traditional currency exposures. The hedge policy is reviewed on an ongoing basis.

The Group applies net investment in a foreign operation principle on its internal long-term loans between subsidiaries. The foreign exchange component resulting from a long-term intercompany loan denominated in a foreign currency is recorded in the other comprehensive income.

Sensitivity analysis

A reasonably possible strengthening (weakening) of the EUR, as indicated below, against the USD at December 31, 2020, would have increased (decreased) equity and EBITDA by the amounts shown below.

The analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecasted sales and purchases.

Sensitivity analysis
(EUR in millions)
	EUR positions in USD entities	USD positions in EUR entities
Assets
Loan receivable from shareholders	553.2	-
Cash	2.8	46.9
Accounts receivable	-	2.8
Liabilities
Loan	(900.8)	-
Accounts payable	(0.6)	(2.0)
Net	(345.4)	47.7
Sensitivity balance sheet			Net sensitivity impact
-10%	34.5	(4.8)	29.8 EUR weakening
10%	(34.5)	4.8	(29.8) EUR strengthening
Sensitivity net income
-10%	(34.5)	4.8	(29.8) EUR weakening
10%	34.5	(4.8)	29.8 EUR strengthening

(ii) Interest rate risk

Interest rate financial derivatives are used to manage exposure to fluctuations in interest rate on external debt.

The Group's external debt interest rate is based on a floating rate that might create volatility on interest charges. To cover that risk, the Group entered in financial derivatives with several banks.

The financial derivatives have an average maturity of 24 months. Group Treasury department will continue to ensure stability in return by hedging floating part of the debt (in thousand EUR):

(EUR in thousands)
Bank	Instrument	Nominal	Ccy	MTM	Maturity
DB	IRS DB Floor	250,000	USD	47.3	12-36 months
ING	IRS	250,000	EUR	(1,697.0)	12-36 months
ING	IRS Floor	250,000	EUR	1,398.6	12-36 months
ING	IRS	250,000	USD	(1,462.8)	12-36 months
ING	IRS Floor	250,000	USD	1,109.7	12-36 months
GS	IRS GS	250,000	EUR	(545.1)	12-36 months
GS	IRS GS Floor	250,000	EUR	1.5	12-36 months
GS	IRS GS	500,000	EUR	(3,417.4)	12-36 months
GS	IRS GS Floor	500,000	EUR	2,778.5	12-36 months
GS	IRS GS	250,000	USD	(6,065.3)	12-36 months
GS	IRS GS Floor	250,000	USD	-	12-36 months
Total				(7,852.0)

All derivative financial instruments are accounted at fair value. The effect of all derivative instruments on the consolidated statements of comprehensive income is a loss of EUR 7.9 million. Changes in the fair value of interest rate financial derivatives are recorded monthly in the profit and loss statement under Finance income and Finance costs.

Sensitivity analysis

Taking into consideration the Interest Hedge program, an increase of 100bps will increase the interests on the EUR tranch by EUR 1.8 million. A decrease will not impact the interest to be paid to the banks.

Taking into consideration the Interest Hedge program, an increase of 100bps will increase the interests on the USD tranch by USD 0.3 million. A decrease will not impact the interest to be paid to the banks.

19 Revenue

Revenue comprise revenue from sales of goods and some minor royalties from third parties.

Revenue from sales of goods and some minor royalties from third parties
(EUR in millions)	December 31, 2020	December 31, 2019
Sale of goods	1,831.4	2,035.3
Royalty income/ (expense)	(0.2)	(0.3)
Total	1,831.2	2,035.0

Net sales for the twelve months ended December 31, 2020 were EUR 1,831.2 million, a 10.0% decrease compared with the corresponding period of the prior year mainly as a result of lower net sales due to the impact from reduced volumes with the covid situation (mainly in Q2 and Q3) as well as lower selling price from reduced cost of raw materials, lower sales price passed onto customers and unfavorable FX effects.

Breakdown of revenues by region and by business lines:

Revenue by region
(EUR in millions)	December 31, 2020	December 31, 2019
North America	364.7	415.6
Latin America	67.7	76.1
Asia Pacific	659.2	696.8
Europe	739.6	846.5
Total	1,831.2	2,035.0

Revenue by business lines
(EUR in millions)	December 31, 2020	December 31, 2019
Radcure	305.9	321.9
Cross Linkers	312.4	336.4
Liquid Resins & Additives	969.6	1,079.3
Powder Coating Resins	243.3	297.4
Total	1,831.2	2,035.0

Financing component

The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money.

20 Other income/expense

Other income/expense
(EUR in millions)	December 31, 2020	December 31, 2019 ^*
Income:
Foreign exchange gain	73.3	59.5
Other write-off	0.4	0.7
Scrap sales	0.9	0.6
Reversal of REACH provision	0.7	2.4
Others	2.7	3.6
Total	78.0	66.8
Expense:
Foreign exchange loss	(73.5)	(68.0)
Servicing and administration fees and funding cost on the TRPP
program	(3.6)	(5.0)
Environmental provision increase	(1.1)	-
Project costs	(0.3)	(1.1)
Tax (non-income tax)	(0.8)	(0.8)
Legal fees	(0.1)	(0.1)
Inventory write-off	(0.1)	-
Other write-off	(0.3)	(0.7)
Others	(3.2)	(4.2)
Total	(83.0)	(79.9)
Total	(5.0)	(13.1)

^* 2019 figures were restated to present the part of exchange gains/losses relating to financing activities in finance income/costs section and the part relating to operational activities in the other income/expense section.

21 Finance income and finance costs

The main items included in the Group's net finance cost are as follows:

Net finance cost
(EUR in millions)	December 31, 2020	December 31, 2019 ^*
Interest cost capitalized on PECs	0.2	-
Exchange Gains	(66.3)	(21.5)
Exchange Losses	100.7	15.0
Gains on derivative instruments	(1.2)	(9.9)
Losses on derivative instruments	7.9	17.4
Bank fees amortized	6.9	7.3
Interest expense on bank debt	59.7	70.2
Interest expense accrued on bank debt	5.6	6.9
Interest income accrued on loan to shareholders	(25.5)	(24.0)
Other interest (received)/paid	(0.5)	(0.6)
Interest on leasing	2.7	2.9
Discounting of provisions	1.2	1.8
Interest component of net periodic benefit cost	1.3	1.9
Net finance cost	92.7	67.4

^* 2019 figures were restated to present the part of exchange gains/losses relating to financing activities in finance income/costs section and the part relating to operational activities in the other income/expense section.
The interest cost capitalized on PEC's are zero for 2019 as they were booked retroactively through retained earnings.

22 Analysis of cost by nature

The below table provides a breakdown of the cost by nature:

Cost by nature
(EUR in millions)	Note	December 31, 2020	December 31, 2019 ^*
Audit fees paid to auditors of the company	32	3.0	3.4
Depreciation and amortization expense	4,5	141.1	148.5
Other selling administrative and R&D expenses		50.6	69.2
Raw materials consumables and changes in finished goods and work in progress		1,183.0	1,402.9
Employee benefits expense		283.1	288.0
Other expense	20	83.0	79.9
Total		1,743.7	1,991.9

^* 2019 figures were restated to present the part of exchange gains/losses relating to financing activities in finance income/costs section and the part relating to operational activities in the other income/expense section.

The following table provides a breakdown of the employee benefits included in the operating costs:

Employee benefits included in operating costs
(EUR in millions)	December 31, 2020	December 31, 2019
Wages and salaries	218.1	222.0
Payroll taxes and workers compensation	46.3	46.9
Expenses related to pension plans	18.7	19.1
Total	283.1	288.0

Average number of employees (FTE)	December 31, 2020	December 31, 2019
Europe, Middle East and Africa	1,782	1,823
Asia Pacific	1,403	1,427
Americas	612	659
Total	3,797	3,909

The 3,797 employees include 69 employees working in joint controlled entities and can be categorized as follows:

―	2,154 white collars (2,218 in 2019)
―	1,643 blue collars (1,691 in 2019)

23 Income tax expense

The income tax expense at December 31, 2020 was EUR 21.4 million. The prior year comparison was EUR 4.6 million.

The tax recognized in profit and losses is as follows:

(EUR in millions)	December 31, 2020	December 31, 2019
Current income tax expense
Current year	34.4	30.8
Adjustment for prior years	(0.4)	3.0
Deferred tax expense/(benefit)
Origination and reversal of temporary differences	(7.0)	(22.5)
Effect of changes in tax rate	(4.0)	(13.8)
Write-down (net of reversals) of deferred tax assets	(1.6)	7.1
	21.4	4.6

The allnex group operates in Europe, the Americas, Asia, Australia and New Zealand. The operating companies are held either directly or indirectly by Allnex Belgium. The respective national tax rate is applied for each allnex company. In determining the amount of current and deferred tax, the Group takes into account to the impact of uncertain tax positions and whether additional taxes and interest may be due. The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of all relevant factors, including interpretations of tax law and prior experience.

For 2020 the effective tax rate (ETR) is 28.8% (2019: (10.5)%). The ETR is calculated as the fraction of current taxes divided by pre-tax book income (PTBI). It is therefore impacted by the level of current taxes as well as by expense items including interest charges and certain currency fluctuations. The ETR for 2020 was materially impacted by the IFRS accounting treatment of net unrealized foreign exchange (FX) gains/losses regarding intra-group loans. As per the allnex foreign currency accounting policy, unrealized FX gains or losses on long term intra-group loans where the transactional currency is different from the functional currency of the transacting entity are transferred out of the profit or loss statement and are instead reported as part of other comprehensive income. If these FX movements had been retained in the profit and loss statement, the ETR would not have been impacted. In the Luxembourg entity, where those currency effects arise, the unrealized FX gains (or losses) on intra-group loans are tax neutral to the extent that they are either offset by unrealized current-year FX losses (or gains) on third party liabilities, or covered by derecognized deferred tax assets.

The pre-acquisition tax liabilities inherited from Cytec are covered by a contractual indemnity from Cytec (now Solvay). Any remaining such tax liabilities will be funded by Solvay. There furthermore are indemnification rights re: an acquisition in Brazil. Conversely there is no indemnity for the Nuplex acquisition given that the shares were acquired in the public market.

(EUR in millions)	December 31, 2020	December 31, 2019
Reconciliation of effective tax rate:
Profit before tax from continuing operations	74.4	44.0
Expected income tax by use of local rates	18.2	10.9
Tax-free income	(2.6)	(6.4)
Tax effect from non-deductible expenses	5.2	2.8
Tax effect on unrealized FX reclassed to Other Comprehensive Income for IFRS consolidated financial statements	4.3	(2.6)
Adjustment of prior year taxes	(1.8)	3.8
Write-down of assets (net of reversals)	(1.6)	7.1
Change in tax rate	(4.0)	(13.8)
Foreign withholding tax and tax credits	3.5	2.5
Other	0.2	0.3
	21.4	4.6

The allnex group tax rate is a calculated average rate by jurisdiction and region (US-APAC-REST OF WORLD). The 25% rate was implemented in 2019 and is re-assessed on annual basis.

The Company files income tax returns in various jurisdictions including the US and is no longer subject to income tax examinations by tax authorities in any major tax jurisdiction for years prior to 2013.

24 Acquisitions

In the reporting period no major acquisitions occurred.

25 Expenses relating to leases

Amounts recognized in the statement of profit or loss

The statement of profit or loss shows the following amounts relating to leases:

(EUR in millions)	December 31, 2020	December 31, 2019
Depreciation charge of right-of-use assets
Land	(0.2)	(0.1)
Buildings	(6.8)	(5.6)
PE&F	(7.2)	(6.7)
Vehicles	(3.5)	(3.1)
Total	(17.7)	(15.5)
Interest expense on lease liabilities (included in finance cost)	(2.7)	(2.9)

26 Commitments

At December 31, 2020, the Group's obligations in relation to the capital expenditures amounted to EUR 1.9 million, all of which is expected to be paid in 2021.

The Group had EUR 4.8 million of outstanding letters of credit, security bonds and bank guarantees at December 31, 2020 that are issued in the ordinary course of business to support certain performance obligations and commitments. The instruments are typically renewed on an annual basis.

Liabilities and financial obligations under the Credit Agreement are secured by collateral for the benefit of Financial Institutions. The liabilities and financial obligations under the notes and the guarantees are also secured by the same collateral. The collateral includes pledges over the shares or partnership interests in various subsidiaries. Further, substantially all receivables of the allnex Group are either assigned and transferred for security purposes or pledged. Most of the bank accounts of allnex are pledged in favor of the financing parties. Furthermore, some machinery, PPE, inventories and stock in trade of selected Group entities have been transferred as collateral.

In addition, various group entities assigned or pledged their intellectual property rights as collateral. Land owned by allnex Group has been mortgaged. Allnex (Luxembourg) & Cy S.C.A., Allnex S.a r.l., Allnex USA Inc. and AI Chem (Luxembourg) Intermediate S.a r.l are guarantors under the Credit Agreement. As such, they guarantee the due and punctual performance of obligations on the part of the borrowers and the respective other guarantors under the Credit Agreement and the due and punctual payment of the financial obligations of the borrowers as per the Credit Agreement.

In addition, the Credit Agreement and the indenture governing the notes contain customary covenants that restrict, inter alia, the disposal of assets, the granting of collateral to third parties, the distribution of dividends, consolidations, acquisitions and joint ventures, the incurrence of financial liabilities and the granting of guarantees. In case of drawing on the revolving credit line above a defined level, the Credit Agreement further requires allnex to comply with a specified financial ratio in respect of total net leverage. The financial ratio is tested at the end of each financial quarter. Compliance with all financial covenants is key focus of the group's financial risk management.

27 Contingencies

The Group is subject to some lawsuits and claims incidental to the conduct of their or certain of their predecessors businesses, including lawsuits and claims relating to product liability and personal injury, including environmental, contractual and employment matters.

No self-insured and insured contingent liability was recorded, related to the Purchase Price Allocation.

Periodically, the Group enters into settlement discussions for lawsuits or claims for which the Group has meritorious defenses and for which an unfavorable outcome against them is not probable. In such instances, no loss contingency is recorded since a loss is not probable and it is the policy to expense defense costs as incurred. Typically, the Group considers these types of settlements in fairly limited circumstances usually related to the avoidance of future defense costs and/or the elimination of any risk of an unfavorable outcome. Such settlements, if any, are recorded when it is probable a liability has been incurred, typically upon entering into a settlement agreement.

While it is not feasible to predict the outcome of all pending environmental matters, lawsuits and claims, it is reasonably possible that there will be a necessity for future provisions for costs for environmental matters and for other contingent liabilities that the Group believes, will not have a material adverse effect on the consolidated financial position, but could be material to the consolidated results of operations or cash flows in any one accounting period. The Group cannot estimate any additional amount of loss or range of loss in excess of the recorded amounts. Moreover, many of these liabilities are paid over an extended period and the timing of such payments cannot be predicted with any certainty.

From time to time, the Group is also included in legal proceedings as a plaintiff involving tax, contract, patent protection, environmental and other legal matters. Gain contingencies related to these matters, if any, are recorded when they are realized.

In late 2018, the Group received a claim seeking damages arising from the alleged failure of pool coatings supplied by Allnex Resins Australia Pty Limited (Allnex Resins) in 2015. In March 2021, several weeks prior to the scheduled date for the hearing of the case, the claimant and Allnex Resins reached agreement in principle to settle the claim which has subsequently been formalized in confidential terms documents in a Deed of Settlement, which was executed on April 21, 2021. Allnex Resins has initiated legal proceedings to recover the settlement amount from its insurers and as such the final exposure remains uncertain.

Some selected management employees are eligible for a long-term incentive plan. Based on the value generated at the sale of the allnex group, potentially a pay-out will occur at that time.

28 Related parties

The ultimate shareholders of allnex are funds advised by Advent International Corporation.

(i) Parent and ultimate controlling party

Advent International Corporation charges on a quarterly basis consultancy and travel costs for services performed with respect to the Group to Allnex S.à r.l. For 2020 and 2019 these costs amounted to EUR 0.0 million and EUR 0.1 million respectively.

In 2019, the Group has entered into additional loan agreements as at August 8, 2019 with AI Chem (Luxembourg) Subco S.à r.l. for the amount of EUR 1.1 million. This loan bears interest at 4.50%. The maturity date of all these loans is September 13, 2023.

In 2020, the Group has entered into additional loan agreements as at December 7, 2020 with AI Chem (Cayman) Limited for the amount of EUR 62.3 million and as at December 14, 2020 with AI Chem (Luxembourg) Subco S.à r.l. for the amount of EUR 6.1 million. These new loans bear interest at 4.30%. The maturity date of these new loans is September 13, 2023.

Please refer to note 21 finance income and finance costs for additional information on the interest accrual recognized in the Group's 2020 and 2019 consolidated financial statements in relation to those loans.

(ii) Transactions with key management personnel

Key management is considered to be the members of the Executive Committee (known in the past as Executive Leadership Team). The Group has no transactions with key management personnel.

Key management personnel compensation comprised the following:

Key management personnel compensation
(EUR in millions)	December 31, 2020	December 31, 2019
Short term employee benefits	3.0	5.1
Post-employment benefits	0.2	0.2
Termination benefits	-	0.2

Compensation of the Group's key management personnel includes salaries, variable compensation, non-cash benefits and contributions to a post-employment plan.

(iii) Other related party transactions

The allnex Group maintains an equity-related co-investment scheme for selected members of senior management and advisors (the "Co-Investors").

All Co-Investors in AI Chem GP & Cy S.C.S. are entitled to a proportionate share in the profits of AI Chem GP & Cy S.C.S. in particular dividend payments, distributions in cash or in kind from AI Chem (Luxembourg) Subco S.à r.l. or the sale of shares in AI Chem (Luxembourg) Subco S.à r.l.

Two members of the Advisory Committee of Allnex S.à r.l. have a consultancy agreement with the Group and invoiced an amount of USD 0.3 million and USD 0.7 million for the years 2020 and 2019 respectively.

The related party transactions with the joint ventures Entis Co., Ltd, South Korea and Synthese Thailand Co., Ltd are outlined in the table below. For further information see also Note 6.

Other related party transactions
	Transaction values for the year ended		Balances outstanding as at
(EUR in millions)	December 31, 2020	December 31, 2019	December 31, 2020	December 31, 2019
Sale of goods
Joint venture Entis Co., Ltd, South Korea	3.7	2.5	1.5	0.6
Joint venture Synthese (Thailand) Co., Ltd, Thailand	0.0	-	-	-
Purchase of goods
Joint venture Entis Co., Ltd, South Korea	1.3	1.0	0.6	0.1
Joint venture Synthese (Thailand) Co., Ltd, Thailand	0.2	-	-	-
Others
Joint venture Entis Co., Ltd, South Korea
- Dividend received	0.7	0.9
Joint venture Synthese (Thailand) Co., Ltd, Thailand
- Dividend received	1.0	-

29 Group composition

All significant subsidiaries are included in the Consolidated Financial Statements.

Subsidiaries are companies that are directly or indirectly controlled by Allnex (Luxembourg) & Cy S.C.A. and are fully consolidated. The Group has no associates and one investment in equity securities which is measured at fair value.

On March 5, 2019, Masterbatch (Vietnam) Pty Ltd., Vietnam, was sold.

On July 8, 2019, Allnex Lipetsk LLC; Russia, was closed.

On September 3, 2019, Allnex Resins Germany GmbH; Germany, merged into Allnex Germany GmbH; Germany.

On December 31, 2019, Plaster Systems Ltd.; New Zealand, merged into Allnex New Zealand Limited; New Zealand.

On August 26, 2020, Allnex Asia GBS Sdn. Bhd.; Malaysia, was established to extend Global Business Services concept further to Asia Pacific.

On April 8, 2020, Allnex Resins (Jiaxing) Co. Ltd.; China, was established.

On September 1, 2020, transfer of business from Allnex UK Ltd.; UK, to Allnex Resins UK Ltd.; UK, took place.

On October 1, 2020, transfer of business from Allnex Resins Malaysia Sdn. Bhd.; Malaysia, to Allnex Malaysia Sdn. Bhd.; Malaysia, took place.

Allnex has two joint ventures: Entis Co. Ltd (South Korea) and Synthese (Thailand) Co Limited which are equity accounted for. The latter was part of the Nuplex acquisition.

The Group also has a participation in one entity (Daicel-Allnex Ltd., Japan) which is included in the consolidation under the full method.

Daicel-Allnex Ltd., Japan is principally engaged in the manufacturing and selling of ultraviolet and electron beam curable resins. Daicel-Allnex Ltd, Japan was founded in 1988 between Daicel Chemical Industries and UCB and is not publicly listed. It was sold from UCB to Cytec and then to allnex as part of business combination.

In accordance with the agreement under which Daicel-Allnex Ltd, Japan is established, the Group and the other investor in the entity have agreed that they shall use their best efforts, including the use of their own financial standing to secure adequate findings throughout short- or long-term borrowings from third parties. To the extent no third party financing is applied for, the parties shall either contribute working capital in the form of capital increases or loans or execute guarantees on behalf of the entity for third party financing in amounts proportionate to their interest therein.

The entity has been taken up in the consolidation under the full method as management believes it controls the entity based on the following facts and assumptions:

Capital participation:

•	55% of the shares are owned by allnex
•	45% of the shares are owned by Daicel
•	All decisions shall be taken by 2/3 majority of all shares unless if otherwise provided by law or by the entity agreement

Board of directors:

•	The entity will be managed by an uneven number of Board member, one more allnex (with in total 4 from allnex and 3 from Daicel)
•	All decisions shall be taken by 2/3 majority. In case of no conclusion both parties have the right to call a shareholders meeting together to reach a conclusion

Majority of the business (88% and 85% of the entity sales turnover for FY2020 and FY2019 respectively) are from (i) products sold which are sourced from allnex, and (ii) export products sold to/through allnex affiliates.

The entity relies on some business contracts from allnex (license and distribution agreement) and allnex is involved in the business and operations of the entity, e.g. frequent visits to top customers in Japan, technical team visits to customers, entity participation in allnex regional strategy meetings, etc. As these contracts provide for ordinary as well as extraordinary termination rights which are independent from the entity agreement and as the majority of the entity business depends on these agreements, in practice the entity is following allnex's guidance in commercial matters.

Continuous technical knowledge is shared by allnex with the entity in yearly technology meetings organized by allnex which reinforces the entity's dependency on allnex technology.

Based on the above, allnex concludes that it has control over the entity and has continued the consolidated reporting practice as applied in prior years.

The composition of allnex is as follows:

	December 31, 2020	December 31,2019
Consolidated subsidiaries	59	59
	Share in % as of December 31, 2020	Share in % as of December 31,2019	Consolidation Method
Name and location country
Allnex S.à r.l; Luxembourg	100	100	Full consolidation
Allnex Holdings S.à r.l; Luxembourg	100	100	Full consolidation
Allnex Belgium SA/NV; Belgium	100	100	Full consolidation
Allnex Mexico, S. de R.L. de CV; Mexico	100	100	Full consolidation
Allnex Taiwan Ltd.; Taiwan	100	100	Full consolidation
M.I.O Schoonarde NV; Belgium	100	100	Full consolidation
Allnex (Thailand) Ltd.; Thailand	95	95	Full consolidation
Allnex Quimica Brasil Ltda; Brazil	100	100	Full consolidation
Allnex Resins (Shanghai) Co. Ltd.; China	100	100	Full consolidation
Allnex Resins (Jiaxing) Co. Ltd ; China	100	-	Full consolidation
Allnex Malaysia Sdn. Bhd.; Malaysia	100	100	Full consolidation
Allnex Asia GBS Sdn. Bhd.; Malaysia	100	-	Full consolidation
Daicel-Allnex Co. Ltd.; Japan	55	55	Full consolidation
Allnex Resins Spain S.L.; Spain	100	100	Full consolidation
Allnex Italy S.R.L.; Italy	100	100	Full consolidation
AI Chem France Acquisition SAS; France	100	100	Full consolidation
Allnex France SAS; France	100	100	Full consolidation
Allnex Norway AS; Norway	100	100	Full consolidation
Allnex Holding I Germany GmbH; Germany	100	100	Full consolidation
Allnex Holding II Germany GmbH; Germany	94	94	Full consolidation
Allnex Germany GmbH; Germany	94	94	Full consolidation
Allnex USA Holding Inc.; USA	100	100	Full consolidation
Allnex USA Inc.; USA	100	100	Full consolidation
Allnex Holding Austria GmbH; Austria	100	100	Full consolidation
Allnex Austria GmbH; Austria	100	100	Full consolidation
Allnex Holding UK Ltd.; UK	100	100	Full consolidation
Allnex UK Ltd.; UK	100	100	Full consolidation
Allnex Japan Inc.; Japan	100	100	Full consolidation
Allnex Korea Co. Ltd.; South Korea	100	100	Full consolidation
Allnex Canada Inc.; Canada	100	100	Full consolidation
Allnex Australia Pty. Ltd.; Australia	100	100	Full consolidation
Allnex Latvia SIA; Latvia	100	100	Full consolidation
Infraserv GmbH & Co. Wiesbaden KG; Germany	7	7	Fair value
Entis Co. Ltd.; South Korea	50	50	Equity method
Allnex-Eternal Resins Corporation Ltd.; Hong Kong	51	51	Full consolidation
Allnex-Eternal Resins (Guangdong) Co. Ltd.; China	51	51	Full consolidation
Allnex Eternal Resins Corporation Limited, (Taiwan branch); Taiwan	51	51	Full consolidation
Allnex Resins India Private Ltd.; India	100	100	Full consolidation
Allnex New Zealand Limited; New Zealand	100	100	Full consolidation
Allnex Resins Germany GmbH; Germany	-	100	Full consolidation

	December 31, 2020	December 31, 2019
Consolidated subsidiaries	59	59
	Share in % as of December 31, 2020	Share in % as of December 31, 2019	Consolidation Method
Name and location country
Allnex Netherlands B.V.; The Netherlands	100	100	Full consolidation
Allnex Belgorod LLC; Russia	100	100	Full consolidation
Allnex Resins UK Ltd.; UK	100	100	Full consolidation
Nuplex Industries B.V.; The Netherlands	100	100	Full consolidation
Allnex Holding International B.V.; The Netherlands	100	100	Full consolidation
Allnex Industries UK Ltd.; UK	100	100	Full consolidation
Silvertown Land Holdings Ltd.; UK	100	100	Full consolidation
Asia Pacific Specialty Chemicals Ltd.; Australia	100	100	Full consolidation
Allnex Resins Australia Pty. Ltd.; Australia	100	100	Full consolidation
Allnex Resins (Changshu) Co Ltd.; China	100	100	Full consolidation
Allnex Resins (Foshan) Co., Ltd.; China	100	100	Full consolidation
Allnex Resins (China) Co., Ltd.; China	100	100	Full consolidation
PT Allnex Resins; Indonesia	80	80	Full consolidation
Allnex Resins Malaysia Sdn. Bhd.; Malaysia	100	100	Full consolidation
Plaster Systems Ltd.; New Zealand	-	100	Full consolidation
Synthese (Thailand) Co.; Thailand	47.5	47.5	Equity method
Nuplex Resins (Vietnam) Pty. Ltd.; Vietnam	100	100	Full consolidation
Allnex Singapore Pte Ltd.; Singapore	100	100	Full consolidation
Allnex Australia Holding Pty. Ltd.; Australia	100	100	Full consolidation
Allnex Management GmbH; Germany	100	100	Full consolidation
Allnex Holding GmbH; Germany	100	100	Full consolidation

30 Non-controlling interests

The following table summarizes the information relating to each of the Group's subsidiaries that has material non-controlling interests, before any intragroup eliminations.

December 31, 2020
EUR in millions	Daicel-Allnex Co.Ltd.	Allnex-Eternal Resins Corporation Ltd.	Allnex-Eternal Resins (Guangdong) Co. Ltd.	Allnex-Eternal Resins Corporation Limited, (Taiwan Branch)
NCI percentage	45%	49%	49%	49%
Non-current assets	17.5	9.2	13.9	-
Current assets	18.3	11.4	4.4	1.7
Non-current liabilities	0.1	-	0.9	-
Current liabilities	12.0	-	7.5	0.5
Net Assets	23.7	20.6	9.9	1.2
Net Assets attributable to NCI	10.7	10.1	49	0.6
Revenue	46.6	6.0	24.8	3.1
Profit	3.8	2.0	1.1	0.5
Profit allocated to NCI	1.7	1.0	0.5	0.2
Net increase (decrease) in cash & cash equivalents	(0.5)	(4.1)	3.5	0.5

December 31, 2020
EUR in millions	PT Allnex Resins	Other individually immaterial subsidiaries	Intra-group Eliminations	Total
NCI percentage	20%
Non-current assets	18.8
Current assets	13.6
Non-current liabilities	1.0
Current liabilities	7.5
Net Assets	23.9
Net Assets attributable to NCI	4.8	0.2	(4.9)	26.3
Revenue	28.3
Profit	2.2
Profit allocated to NCI	0.4		0.1	3.9
Net increase (decrease) in cash & cash equivalents	1.6	1.8

December 31, 2019
EUR in millions	Daicel-Allnex Co.Ltd.	Allnex-Eternal Resins Corporation Ltd.	Allnex-Eternal Resins (Guangdong) Co. Ltd.	Allnex-Eternal Resins Corporation Limited, (Taiwan Branch)
NCI percentage	45%	49%	49%	49%
Non-current assets	17.6	10.0	15.5	-
Current assets	18.1	14.9	0.5	1.2
Non-current liabilities	0.1	-	1.1	-
Current liabilities	11.8	-	6.3	0.5
Net Assets	23.8	24.9	8.6	0.7
Net Assets attributable to NCI	10.7	12.2	4.2	0.3
Revenue	48.3	7.4	23.6	3.2
Profit	4.0	2.8	0.5	0.3
Profit allocated to NCI	1.8	1.3	0.3	0.2
Net increase (decrease) in cash & cash equivalents	0.4	3.6	1.1	(0.2)

December 31, 2019
EUR in millions	PT Allnex Resins	Other individually immaterial subsidiaries	Intra-group Eliminations	Total
NCI percentage	20%
Non-current assets	20.1
Current assets	14.2
Non-current liabilities	0.9
Current liabilities	10.4
Net Assets	23.0
Net Assets attributable to NCI	4.6	0.4	(5.6)	26.9
Revenue	29.0
Profit	0.8
Profit allocated to NCI	0.2		(0.3)	3.5
Net increase (decrease) in cash & cash equivalents	0.4	3.0

The non-controlling part of the Cash Flow Statement and Other Comprehensive Income of these entities do not have a material impact to the overall Group Consolidated Cash Flow Statement and Other Comprehensive Income.

31 Disposal group held for sale

On January 30, 2019, an agreement was signed for the sale of Masterbatch (Vietnam) Pty. Ltd., for a net amount of EUR 0.4 million, with balances per February 28, 2019. Final completion of the transaction was March 5, 2019. Masterbatch (Vietnam) Pty. Ltd. was recorded as assets/liabilities held for sale in the Consolidated statement of financial position.

With the completion of Masterbatch (Vietnam) Pty. Ltd., the Groupe no longer has assets/liabilities held for sale in the Consolidated statement of financial position.

32 Audit fees

The below table shows the fees for audit and other services rendered to the Group by KPMG Luxembourg and other member firms of the KPMG network for the year 2020 and 2019.

Audit fees
(EUR in millions)	December 31, 2020	December 31, 2019
Audit fees	2.4	2.6
Other audit services	-	0.1
Tax services	0.6	0.7
Total	3.0	3.4

33 Subsequent events

The Group completed the subsequent events review as per June 18, 2021 (the date the statements were available to be issued) and came with no subsequent event to disclose except the following:

•	On March 5th, 2021, allnex announced the construction of a world-class production base of environmentally-friendly high-performance resins, with the aim to promote green innovation and meet the growing demands of China and the global market on high-quality coatings, resins and additives.

The new production base is located in Dushan Port Economic Development Zone, Pinghu City, Jiaxing, Zhejiang Province, covering an area of about 100,000 square meters. With an initial planned constructional investment of Euro 135 million, the new base will strictly abide by the world's environmental protection standards, built into a world-class production base of industrial-environmental-protection resin. It is expected to be completed and put into production in 2022.

•

In late 2018, the Group received a claim seeking damages arising from the alleged failure of pool coatings supplied by Allnex Resins Australia Pty Limited (Allnex Resins) in 2015. In March 2021, several weeks prior to the scheduled date for the hearing of the case, the claimant and Allnex Resins reached agreement in principle to settle the claim which has subsequently been formalized in confidential terms documents in a Deed of Settlement, which was executed on April 21, 2021. Allnex Resins has initiated legal proceedings to recover the settlement amount from its insurers and as such the final exposure remains uncertain.