Gates Industrial
Annual Report 2023

Plain-text annual report

Gates Industrial Corporation plc Annual Report and Financial Statements December 30, 2023 Registered Number 10980824 Registered Office: 1 Bartholomew Lane, London EC2N 2AX United Kingdom Forward-looking Statements This Annual Report for the fiscal year ended December 30, 2023 (this “annual report” or “report”) contains forward-looking statements that reflect our current views with respect to, among other things, our operations and financial performance. Forward- looking statements include all statements that are not historical facts. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “predicts,” “intends,” “trends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. You should not place undue reliance on these forward-looking statements. Although such statements are based on management’s current estimates and expectations and/or currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain and are subject to risks and uncertainties that could cause our actual results to differ materially from what may be inferred from such statements. Factors that could cause or contribute to such differences include those described under the “IV. Principal Risks and Uncertainties” section of the Strategic Report. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements included in this annual report and in our other periodic filings. Gates Industrial Corporation plc undertakes no obligation to update or supplement any forward-looking statements as a result of new information, future events or otherwise, except as required by law. Financial Statement Presentation ABOUT THIS ANNUAL REPORT Gates Industrial Corporation plc is a public limited company that was incorporated in the United Kingdom under the Companies Act 2006 on September 25, 2017 and is registered in England and Wales. It is listed on the New York Stock Exchange. Certain monetary amounts, percentages and other figures included elsewhere in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables or charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them. All amounts in this annual report are expressed in United States of America (“U.S.”) dollars, unless indicated otherwise. Certain Definitions As used in this annual report, unless otherwise noted or the context requires otherwise: • • • “Gates”, the “Group”, “Company”, “we”, “us” and “our” refer to Gates Industrial Corporation plc and its consolidated subsidiaries; “Fiscal 2023” refers to the fiscal year ended December 30, 2023, “Fiscal 2022” refers to the fiscal year ended December 31, 2022; and “Blackstone” or “our Sponsor” refer to investment funds affiliated with The Blackstone Group Inc., which together own approximately 36.4% of our outstanding ordinary shares as of December 30, 2023; and • “Board” refers to the board of directors of Gates Industrial Corporation plc. i TABLE OF CONTENTS Strategic Report Directors’ Report Statement of Directors’ Responsibilities Directors’ Remuneration Report Independent Auditor’s Report to the Members of Gates Industrial Corporation plc Gates Industrial Corporation plc Consolidated Financial Statements Consolidated Statements of Profit or Loss Consolidated Statements of Comprehensive Income Consolidated Balance Sheets Consolidated Statements of Change in Equity Consolidated Cash Flow Statement Notes to the Consolidated Financial Statements Parent Company Financial Statements Parent Company Balance Sheet Parent Company Statement of Changes in Equity Notes to the Parent Company Financial Statements 1 46 52 53 74 85 85 86 87 89 90 91 153 153 154 155 ii The directors present their Strategic Report for the year ended December 30, 2023. This report is comprised of the following sections: Gates Industrial Corporation plc STRATEGIC REPORT I. II. Strategy and Outlook Business Overview III. Section 172 Statement IV. Principal Risks and Uncertainties V. Non-Financial and Sustainability Information Statement VI. Business Trends VII. Key Performance Indicators VIII. Business Performance IX. Liquidity and Capital Resources X. Financial Risk Management Objectives and Policies XI. Employees XII. Environmental Matters This Strategic Report has been prepared for the Group for the year ended December 30, 2023 consistent with the basis of preparation of the accompanying consolidated financial statements. I. Strategy and Outlook We are a global manufacturer of innovative, highly engineered power transmission and fluid power solutions. We offer a broad portfolio of products to diverse replacement channel customers, and to original equipment manufacturers (“first-fit”) as specified components, with the majority of our revenue coming from replacement channels. Our products are used in applications across numerous end markets, including: automotive replacement and first-fit; diversified industrial; industrial off-highway; industrial on- highway; and personal mobility. Our net sales have historically been, and remain, highly correlated with industrial activity and utilization, and not with any single end market given the diversification of our business and high exposure to replacement markets. We sell our products globally under the Gates brand, which is recognized by distributors, equipment manufacturers, installers and end users as a premium brand for quality and technological innovation; this reputation has been built over more than 110 years since Gates’ founding in 1911. Within the diverse end markets we serve, our highly engineered products are often critical components in applications for which the cost of downtime is high relative to the cost of our products, resulting in the willingness of end users to pay a premium for superior performance and availability. These applications subject our products to normal wear and tear, resulting in natural, and often preventative, replacement cycles that drive high-margin, recurring revenue. Our product portfolio represents one of the broadest ranges of power transmission and fluid power products in the markets we serve, and we maintain long-standing relationships with a diversified group of well-known customers throughout the world. As a leading designer, manufacturer and marketer of highly engineered, mission-critical products, we have become an industry leader across most of our end markets and the regions in which we operate. Gates’ business is well-balanced and diversified across products, channels and geographies, as highlighted in the following charts showing breakdowns of our Fiscal 2023 net sales of $3,559.3 million. 1 Business Model Premier Recognized Brand We offer our products and services under the widely-recognized Gates brand across our broad end markets and geographies. Since 1911, Gates has been recognized by many distributors, installers, equipment manufacturers and end users as a premier name for power transmission and fluid power products, services and solutions. We are known for our premium quality, reliability, customer service, global footprint, leading technology and breadth of product offerings. In our replacement businesses, we experience strong pull-through demand from end users who specifically request Gates-branded products from our channel partners. We believe that we are a partner of choice when major customers are developing new platforms or upgrading existing ones. Global Presence Our commercial and manufacturing footprint is global. Our in-region/for-region operating strategy, with over 100 sales, research and development (“R&D”), factory and distribution center locations around the world, places us close to our customers, provides diversification from regional cyclicality, and positions us to capitalize on growth opportunities in every region. Our products are sold in more than 130 countries with approximately 51% of Fiscal 2023 net sales originating from outside of North America, and approximately 34% of our Fiscal 2023 net sales originating from emerging markets. Leading Market Positions The breadth of our catalog, our market position in many product categories and our share of available content with key customers put us in what we believe is a leading market position in most channels, regions and end markets in which we operate. With $2,181.9 million of Fiscal 2023 net sales in Power Transmission and $1,377.4 million of Fiscal 2023 net sales in Fluid Power, we believe we are among the top global players in power transmission belts, hydraulic hose and couplings, engine system metals and hoses, and oil and gas drilling hose, based on competitive research and internal models of market size and share. These leading market positions combined with our strong brand serve as platforms from which we can extend our solution coverage in underpenetrated segments and generate sales growth in excess of our end markets. 2 Channel Breadth and Relationships We have a longstanding, global presence in replacement channels that accounted for approximately 64% of our total Fiscal 2023 sales. We maintain a broad portfolio of highly engineered components that wear over time, resulting in natural replacement cycles that provide opportunities for higher-margin, recurring revenue. Our regional commercial teams have established a broad distribution network with over 100,000 distributor locations, across a variety of end market-focused channels. Our distributors range from large corporations with numerous locations to small, individually-owned companies with a single location. Our channel partners provide global coverage and stock inventory of our products in close proximity to end users. They are able to generate demand for our products, as well as offer customer service and product knowledge to end users in their local language. Many of them also have the capability to configure or assemble our products to meet diverse end-user requirements where a suitable off-the-shelf solution is not available. We also have a demonstrated track record of building our presence in replacement channels in emerging markets. These extensive distribution networks give us the ability to access a broad base of end users and to reinforce the Gates brand. We believe that this established channel represents both breadth and depth of distribution, enabling access to a significant addressable market and rapid launches of new products to end users. Product and Catalog Coverage of Application-Critical Components Our power transmission and fluid power product portfolios in the first-fit and replacement markets are some of the broadest in our industry. We believe our product breadth simplifies our customers’ purchasing decisions and creates loyalty to us. In the automotive replacement markets, product coverage of the light vehicles in a region (the “car parc”) is essential for the success of our distributors and installers. Within our core synchronous and Micro-V® belt product lines, our products can be used across 98% of the North American, European and Chinese car parcs, while our synchronous belt products can be used across over 90% of these markets. These car parcs comprise over 70% of the global car parc of over 1.6 billion vehicles. We are particularly focused on expanding our catalog coverage in the more-fragmented car parcs in emerging markets. For our industrial markets, we also believe we maintain an industry-leading portfolio of catalogs containing both general purpose and application-specific products for a variety of end markets. We continuously invest in updating our product and catalog coverage to remain at the forefront of our industry and provide end users with convenient access to our comprehensive product portfolio. Our highly engineered power transmission and fluid power products are often critical to the functioning of the equipment, process or system of which they are components, creating a dynamic where the cost of downtime or potential equipment damage is high relative to the cost of our products. Consequently, our products are typically replaced at regular intervals for preventative maintenance, resulting in high-margin, recurring revenue streams. Our catalog coverage, combined with the mission-critical nature of our products, makes us a valued partner to our customers. History of Successful Innovation We have a long history of successful innovation, from commercializing the V-belt to pioneering the use of certain synthetic elastomers in serpentine belts. The interplay between materials science and product and process innovation differentiates Gates, enabling us to provide valuable product features to our customers, while ensuring that these products can be made efficiently and with high levels of quality. We believe that our materials science expertise forms the foundation of our innovation capabilities. Our products must withstand extreme temperature, pressure and load conditions, resist wear, maintain flexibility, avoid corrosion and fulfill other critical application requirements, all of which can only be met using the latest advancements in materials science, in combination with product and process technologies. For example, we believe our carbon fiber technologies are best-in-class and continue to support our leadership position in several industrial power transmission product categories. Our innovation capabilities play a key role in enabling our growth initiatives. We are developing products utilizing new technologies that we believe will, among other things, provide additional market access for our Chain-to-Belt and other initiatives, as well as enable us to capitalize on electrification trends in our end markets. Consistent with our overall focus on the environment, a significant focus of our product innovation is on sustainability and improving the efficiency of our customers’ applications, primarily through reduced weight, improved energy consumption, and/or reduced maintenance and lubrication requirements. We are also developing advanced materials that do not rely on chlorinated compounds, products that use less material to provide the same or better performance and efficiency, and manufacturing processes that result in less scrap and energy consumption. In addition, our innovation activities include ongoing programs to develop Internet of Things solutions and other digital tools to improve the overall value proposition we deliver to our customers. 3 We hold a substantial patent portfolio and employ a large number of engineers globally who are dedicated to materials science, product design and process engineering, and application development. Many of these engineers work closely with our customers to design and develop application-specific solutions that not only solve immediate customer needs, but also feed into our broader innovation development efforts. Our R&D group works closely with our product line management team to ensure that our product and technology development roadmaps are closely tied to our growth initiatives. Operating Excellence Driving Continuous Improvement The Gates Operating System philosophy is our overarching business system that drives a culture of continuous improvement and consistent application of best practices across all functions of the organization. Within the Gates Operating System, the operations-focused Gates Production System (“GPS”) has been deployed throughout our manufacturing facilities to optimize our production efficiency and reduce our environmental footprint. We have made significant improvements in factory productivity which have reduced production costs and freed up manufacturing capacity. We have also implemented highly effective sourcing programs that leverage the latest e-auction tools and programs to insource selected components. Our innovation and Value Analysis/Value Engineering (“VA/VE”) capabilities allow us to optimize select product designs for cost and performance to meet broader market requirements and improve profitability. The Gates Program Management System has also been deployed to improve how we manage customer programs, new product development and advanced technology projects. Strong Margins and Cash Flows from Operating Activities Our operating model is designed to generate strong profit margins and cash flows from operating activities. Our strong margins are supported by our premier brand, superior product attributes, high service levels, operational scale and efficiency and our relationships with our customers. We have initiated a footprint and cost optimization program focused on improving the efficiency and flexibility of our manufacturing operations and supporting functions. We also have ongoing initiatives to drive productivity in our plants and expand the scope of central procurement, as well as to improve inventory turns through lean manufacturing techniques and common product designs. Our capital expenditures have been strategically deployed to fund innovation and organic growth opportunities. We expect our continued focus on operational excellence and cost discipline to improve profit margins and working capital performance. Proven Management Team We have an experienced leadership team comprised of high-caliber individuals, each with long tenures at premier industrial companies. Our executive leadership team is led by Chief Executive Officer, Ivo Jurek, who previously served as President of Eaton’s Electrical business in Asia Pacific, and Chief Financial Officer, Brooks Mallard, who previously served as CFO of Henniges and Jeld- Wen. The leadership team has transformed the organization from a regional to a global product-line based model, while investing in new talent across all functions of the organization and developing a culture of continuous improvement, innovation and growth. Our Growth Strategies Our growth strategies are aimed at penetrating the significant markets addressable by our products by leveraging our iconic brand, product portfolio, customer relationships and other competitive strengths. We believe that these initiatives and the investments we have made in the business, in combination with anticipated strong secular tailwinds in our diverse end-markets, support our ability to take share, achieve above-market growth and expand margins. 4 Further Penetrate Industrial Power Transmission Applications Through our Chain to Belt, Belt to Belt and Precision Motion Control & Conveyance initiatives, we are targeting specific opportunities within our existing industrial end markets and product portfolio to further penetrate industrial power transmission applications, particularly those currently driven by competing technologies, including roller chain, direct drive systems, gearboxes and steel cable. Chain and steel cable currently drive most industrial drive systems. This presents a significant and attractive opportunity for us to grow by leveraging our brand and distribution channel presence, and the fundamental value proposition of belt-drive systems. Industrial belt-drive systems often compare favorably to other types of industrial drive systems in terms of their quiet, low maintenance and efficient operation, as well as being relatively light-weight. Materials science-based advances in our product portfolio provide us with opportunities to displace competing drive systems in larger, high-torque applications that belt drives have historically been unable to address. We are also able to utilize our application engineering capabilities to complement our product strength by assisting end users in optimal drive system design. Extend Product Line in Fluid Power Gates’ products typically compete in the premium segment of the market, where customers value quality, portfolio breadth and design capability. Customers in this segment use our products in numerous, demanding applications with a wide range of performance requirements. For example, there can be different product performance requirements for different hydraulic circuits within the same piece of construction equipment. Through materials science-based innovation, VA/VE and process engineering we will continue to broaden our portfolio of fit-for-purpose fluid power products, optimizing their performance for different customer applications. This ongoing investment should substantially increase the size of our addressable market and enable us to capture even more of the premium segment. Capitalize on Vehicle Electrification Gates has extensive experience in power transmission drives and thermal management solutions across a wide variety of automotive, light commercial and heavy-duty vehicle platforms. As propulsion technologies shift from internal combustion to hybridization and full electrification, we believe Gates is well-positioned to participate in both first-fit and replacement market applications. We believe that the overall available dollar content per vehicle for Gates’ product portfolio will increase as propulsion shifts towards electrified platforms due to the significant thermal management requirements of batteries, inverters/chargers and electric motor drive systems. We are actively participating on first-fit manufacturer platforms and developing differentiated thermal management technologies. We will continue to build out our aftermarket catalog coverage for electric vehicles. Accelerate Growth in Mobility and Recreation Applications The markets for personal mobility and recreation applications, including bicycles, scooters, motorcycles, power sports equipment (such as ATVs, side-by-sides and snowmobiles), as well as fitness equipment (such as stationary cardio and weight training equipment), are experiencing strong growth. Gates’ power transmission solutions provide attractive benefits in these applications, including lubrication-free, quiet and safe operation, reduced weight, energy-efficiency and reliability. These applications are also experiencing a shift towards electrification with eBikes, eScooters and eMotorcycles becoming popular options for commuting and recreation. The value propositions for belt drives, including improved efficiency and reduced weight, noise and maintenance, are particularly relevant to these applications. We intend to continue to increase our share of these growing markets by leveraging our strong value proposition and global footprint. Drive Technical Innovation in Our Markets We continue to invest in advanced development programs and our core R&D capabilities to ensure that we remain at the forefront of innovation and product performance in our markets. We have established global centers of excellence that specialize in different functional areas of R&D with special emphasis on materials science, advanced modeling techniques, product design, process engineering and commercialization. We utilize long-standing relationships with our blue-chip customers to design products that meet or exceed their anticipated future performance requirements. Our commitment to continue to invest in these relationships, and our R&D capabilities strengthen our position to serve our core replacement markets with highly innovative and differentiated products to further increase the strength of our brand. 5 Continue to Grow and Invest in Emerging Markets We have a long-standing presence in key emerging markets and a track record of driving growth from the early stages of a market’s development. We have successfully entered these markets by focusing on establishing our brand, including through first-fit partnerships, while building our channels to serve the replacement base. We continue to see strong opportunity for growth in emerging markets due to a number of factors, such as increases in industrial production, mechanization, urbanization, infrastructure development and vehicle ownership. To capitalize on these trends, we plan to continue to increase our catalog coverage, develop regionally appropriate product portfolios, expand our channel coverage and optimize regional manufacturing capacity. Pursue Strategic Acquisitions We intend to continue to strategically pursue and execute acquisitions to accelerate our growth strategies and we accordingly regularly evaluate potential acquisition opportunities. Our markets are highly fragmented, providing numerous inorganic opportunities for us to expand our reach and capabilities. We plan to maintain a disciplined approach to acquisitions and target strategic opportunities where we can realize synergies by leveraging our brand, channel presence, operating culture, global reach and other core competencies. Outlook Our investments in materials science, innovation, targeted incremental capacity and our unwavering commitment to service our customers, positioned the Company to grow by winning new business while managing demand during challenging times. We continue to monitor the macroeconomic environment, geopolitical conditions, and industry trends that may impact our business. While we may experience a certain level of inventory de-stocking from certain of our customers and slower demand in the first half of 2024 as a result of the current economic environment, we are optimistic to see a rebound of demand later in the year and the continued normalization of the operating environment in 2024. With a stronger balance sheet, we have capital allocation optionality as we continue to evaluate opportunities to supplement our growth and return capital to shareholders. Although we anticipate challenges ahead, we believe our business is on a strong footing and the investments we have made provide a foundation for substantial opportunity moving forward. 6 Our History II. Business Overview In 1911, Charles Gates, Sr. purchased the Colorado Tire and Leather Company, a manufacturer of steel-studded bands of leather that attached to tires to extend their mileage. In 1917, the Company commercialized the V-belt, which used rubber and woven threading instead of rope belts, which were more commonly used at that time. In 1963, we built the first of many international facilities in Erembodegem, Belgium, followed by Jacarei, Brazil, in 1973. In 1986, we acquired the Uniroyal Power Transmission Company, which included a controlling interest in a joint venture that laid the groundwork for Gates’ growth in the Asia-Pacific region. In 1996, Gates was acquired by a publicly held conglomerate based in the United Kingdom (“U.K.”), Tomkins plc, which was itself acquired in 2009 by Onex Partners and the Canada Pension Plan Investment Board, who proceeded to divest certain of Tomkins plc’s businesses under a new parent entity, Pinafore Holdings B.V. Gates was acquired by Blackstone in July 2014 and in 2015 established a new executive leadership team with Ivo Jurek as Chief Executive Officer. In January 2018, Gates completed an initial public offering (“IPO”), listing on the New York Stock Exchange (“NYSE”). Our Solutions We operate our business on a product-line basis through our two operating segments - Power Transmission and Fluid Power. See Note 4 to our audited consolidated financial statements included elsewhere in this report for additional information. We sell our products under the Gates brand in all of the geographies and end markets we serve, as well as under select customer brands in certain markets. Our Power Transmission segment includes elastomer drive belts and related components used to efficiently transfer power in a broad range of applications. Power transmission products represented approximately 61% of our total net sales for Fiscal 2023. Our Fluid Power segment includes hoses, tubing and fittings designed to convey hydraulic fluid at high pressures in both mobile and stationary applications, and other high-pressure and fluid transfer hoses. Our fluid power products represented approximately 39% of our net sales for Fiscal 2023. Our power transmission and fluid power products are often critical to the functioning of the equipment, process or system in which they are components, such that the cost of downtime or potential equipment damage is high relative to the cost of our products. Our products are therefore replaced not only as a result of normal wear and tear, but also pre-emptively as part of ongoing, normal maintenance to the broader system. We have a broad portfolio of both power transmission and fluid power products in the end markets we serve. We have a long history of focusing on customer engagement and training, driving product innovation and providing best-in-class order fulfillment services. Power Transmission. Our power transmission solutions transfer power, convey materials and provide motion control. They are used in applications in which belts, chains, cables, geared transmissions or direct drives transfer power from an engine motor or other source of mechanical power to another part or system. Our belts are made of highly engineered polymer formulations, fabrics or textiles (made from a variety of polymer or natural fibers) and embedded cords for reinforcement (which may be made from polymers such as polyesters or aramids, fiberglass or high performance carbon fibers). Many of these materials are proprietary to Gates. Within our Power Transmission segment, we offer solutions across the following key application platforms: • Stationary drives: fixed drive systems such as those used in a factory driving a machine or pump, on a grain elevator driving the lift auger or in a distribution center driving automated equipment such as conveyor lines or robotic picking machines; • Mobile drives: drives on a piece of mobile machinery such as the threshing and separation drives on a combine harvester; • • Engine systems: synchronous drives and related components for cam shaft drives, auxiliary drives and asynchronous accessory drives for air conditioning (“A/C”) compressors, power steering, alternators and starter/generator systems; and Personal mobility: drives on motorcycles, scooters, bicycles, both traditional and electric, as well as on snowmobiles and other power sports vehicles that are used to transfer power between the power source and the drive wheel(s) or track. Customers choose power transmission solutions based on a number of factors, including application requirements such as load, speed, gear ratio, temperature, operating environment, ease of maintenance, noise, efficiency and reliability, as well as the support 7 they receive from their suppliers, including application-specific engineering services. Belt-based drive systems have many advantages over other alternatives, as they are typically clean, low-maintenance, lubrication-free, quiet with low-vibration, lightweight, compact, energy-efficient, durable and reliable. Belt-based power transmission drives typically consist of either a synchronous belt (such as a timing belt) or an asynchronous belt (such as a V-belt, continuously-variable transmission (“CVT”) belt or Micro-V® belt) and related components (sprockets, pulleys, mechanical water pumps, tensioners or other accessories). In addition, we also manufacture metal drive components and assemble certain product kits for the automotive replacement channel. Asynchronous Belts. Asynchronous belts are our highest-volume products and are used in a broad range of applications. We were a pioneer in the design and manufacturing of V-belts, which draw their name from the shape of their profile. We also manufacture “ribbed” V-belts, which are belts with lengthwise V-shaped grooves, which we market under the Micro-V® name. This design results in a thinner belt for the same drive surface, making it more flexible and offering improved efficiency. In industrial end markets, asynchronous belts have a wide variety of applications, including use in pump drives, manufacturing lines, HVAC systems, industrial, truck, bus and marine engines, forestry and mining equipment and many other applications. CVT systems often found in scooters, power sports vehicles and other applications use a specialized V-belt known as a CVT belt. In automotive applications, our asynchronous belts perform functions that include transferring power from the crankshaft to accessory drive components such as the alternator, A/C compressor, power steering system, water pump and, in some vehicles, a belt/starter generator system used in start/stop accessory drive systems to improve fuel economy. Recently, Gates introduced a new Micro-V® platform for engine accessory drive systems. The combination of newly developed material compounds and product design utilizes less material, reduces belt weight and results in lower bending stiffness. These improvements enable tighter pulley configurations and reduced drive bending losses as compared to previous belt technologies; lower losses result in benefits such as reduced energy consumption, CO2 emissions and heat generation. Synchronous Belts. Synchronous belts, also known as timing belts, are non-slipping mechanical drive belts. They have molded teeth and run over matching toothed pulleys or sprockets. Synchronous belts experience no slippage and are often used to transfer high levels of power or to control motion for indexing or timing purposes, as well as for linear positioning and positive drive conveying. They are typically used instead of chains or gears and we believe they have a number of advantages over these alternatives, including less noise, no need for lubrication, improved durability and performance and a more compact design. Examples of industrial applications include use in HVAC systems, food processing and bottling plants, mining and agricultural equipment, automated warehouse systems and robotics. Our synchronous belts are also utilized in personal mobility vehicles, including both traditional and electric motorcycles, bicycles and scooters, applications in which clean, quiet performance is often valued. In automotive applications, our synchronous belts are used to synchronize the rotation of the engine crankshaft with the camshaft in a valve train system, as well as in electric power steering, parking brake and accessory drive systems which are present in internal-combustion, hybrid and electric vehicles. In recent years, Gates also launched the PowerGrip® GT®4, a high-torque synchronous belt for industrial applications. This new belt leverages Gates’ materials science and process engineering capabilities, to provide a belt construction that replaces chloroprene- based elastomers with an advanced ethylene elastomer formulation that is more environmentally friendly. It has the highest power- carrying capacity in its segment, a wider operating temperature range and increased chemical resistance, allowing for narrower drives and a broad range of applications to be served with both first-fit and replacement channel customers. In recent years, Gates launched the Carbon Drive CDC® synchronous belt designed for commuter bicycle applications and in Fiscal 2022 Gates launched the Carbon Drive Moto X5 synchronous belt designed specifically for mid-motor, sit-down electric scooters and motorcycles typically found in commuting applications in the rapidly evolving Asian market. In Fiscal 2022, Gates launched an updated version of Gates Design Power, an award-wining new digital toolkit consisting of six modules, including four all-new applications and substantially upgraded versions of well-known Gates digital tools, Design IQ™ and Design Flex Pro™. Among the all-new programs is the industry-first Mobility Drive Analysis tool aimed at making it easier for engineers from bicycle, scooter, motorcycle, and power sports Original Equipment Manufacturers (“OEM”) to design Gates’ clean, quiet, durable and low-maintenance Carbon Drive belt systems into their next-generation vehicles to further accelerating conversion from chain and other technologies. In Fiscal 2023, Gates announced the launch of the mobile version of Gates Design Power, putting advanced digital design tools to support the engineering of belt drive systems on customers’ mobile devices. Additionally, Gates expanded its G-Force product portfolio by introducing the G-Force Workhorse CVT belt for specialty and recreation vehicles. The G-Force Workhorse belt offers more longevity and increased compatibility for end users relative to its predecessor. 8 Metal Drive Components. We source, manufacture and sell tensioners, idlers, pulleys, sprockets and other components used in belt drive systems. These products are designed and engineered to work efficiently with our belts. Tensioners are devices that maintain a constant tension in the belt drive system, thereby ensuring proper function and preventing loss of power or system failure. Tensioners typically employ a spring-loaded arm and a damping mechanism to help control tension in a belt drive system. Idlers, which sometimes also perform as tensioners, are used to take up extra belt length. Gates’ pulleys and sprockets are precisely engineered for positive press fit, designed to optimize the performance and durable working service life of the belt drive system. Kits. Our kits for the automotive replacement channel include all of the parts needed by an automotive service shop to perform a replacement of one of our products. Kits are created for specific vehicle makes and models and typically include belts, tensioners and idlers, and will sometimes also include water pumps, which are often replaced simultaneously with a timing belt due to the relatively high labor component in the total cost of a typical replacement. Our kits are convenient for service technicians as they eliminate the need for more complicated product sourcing. On a comparable quantity basis, kits typically sell at a premium to a loose belt and the individual related components. Our power transmission products are used in a broad range of applications in end markets including: automotive replacement and first-fit, diversified industrial, industrial off-highway, industrial on-highway, energy and resources, and personal mobility. The majority of our Fiscal 2023 net sales came from replacement channels, which provide high-margin, recurring revenue streams and are driven by attractive market trends. The bulk of our power transmission replacement business resides in developed regions, in which a large, aging installed base of equipment follows a natural maintenance cycle and is served by well-established distribution channels. For example, a combine harvester can have over 25 high-performance belts that are typically replaced at regular intervals, depending on wear and tear, with end users having access to replacement parts through a large network of distributors. Similarly, in the mature automotive aftermarkets such as North America and Europe, maintenance intervals are well defined, and miles (or kilometers) driven per vehicle and the average vehicle age have generally been increasing, leading to more wear and tear on vehicles. A smaller portion of our power transmission replacement business is generated in emerging markets, which generally have a smaller base of installed equipment and relatively nascent distribution channels. As they continue to develop, these replacement channels in emerging markets represent a significant long-term opportunity for growth. In addition to our power transmission replacement business, we also serve a wide variety of well-known first-fit customers across all of our end markets. Fluid Power. Our fluid power solutions are used in applications in which hoses and rigid tubing assemblies either transfer power hydraulically or convey fluids, gases or granular materials from one location to another. Within our Fluid Power segment, we offer solutions across the following key application platforms: • Stationary hydraulics: applications within stationary machinery, such as an injection molding machine or a manufacturing press; • Mobile hydraulics: applications used to power various implements in mobile equipment used in construction, agriculture, mining and other heavy industries; • Vehicle systems: applications in thermal management, emissions reduction, turbocharger, air intake and other systems for electric, hybrid and internal combustion passenger and commercial vehicles; and • Other industrial: applications in which hoses are used to convey fluids, gases or granular material across several industries such as food and beverage, other process industries, and oil and gas drilling and refining. Customers choose fluid power solutions based on a number of factors, including application-specific product performance parameters such as pressure and temperature ratings, corrosion and leak resistance, weight, flexibility, abrasion resistance and cleanliness, as well as compliance with standards and product availability. Attributes associated with the supplier, including brand, global footprint and reputation for reliability, quality and service, are also considered. Hydraulics. Our hydraulics product line is comprised of hoses, couplings, tubing and fittings, offered either as standalone products or completed assemblies. Our hydraulic products are key components of hydraulic systems in both stationary and mobile equipment applications across end-markets such as construction, agricultural and forestry equipment, as well as in a wide range of manufacturing applications. We provide a full selection of hose sizes and construction types for use in a wide variety of operating requirements and conditions. Hydraulic hoses are made of elastomers reinforced with steel wire or a textile-based yarn, and typically operate at very high pressures, often in extreme environmental conditions. These products are designed for applications that require high levels of quality and durability. 9 Our hydraulic couplings, fittings and tubing are engineered to match the product performance of our hydraulic hoses. The high- pressure nature of hydraulic systems requires that these products have high levels of performance similar to those found in our hydraulic hoses. The ultimate performance of a hydraulic assembly, in which our products function as part of a hydraulic circuit, depends not only on how well the components are made, but also on how well they complement each other. Our hydraulic fittings are manufactured in a wide assortment of sizes and configurations to ensure we meet the wide range of installation requirements in these systems. We also provide Gates-engineered and third-party crimping systems to ensure a proper interface is obtained between our hoses and these metal components to create high-quality, robust hydraulic assemblies. In recent years, Gates introduced a new premium product family consisting of hydraulic hoses that are lighter weight and more flexible. Made with a high-performance reinforcement and robust, abrasion-resistant cover, the MXT line of hydraulic hose is comprised of universally applicable, high-performance products that meet the needs of a wide range of applications. Subsequently, we launched the MXG line of hydraulic hose, a flexible, light-weight solution with increased durability and temperature performance, designed to replace conventional spiral hoses typically used in the most demanding applications. We also launched a smart e-crimper, which is a machine used to attach fittings to hydraulic hoses. In addition to convenient, web-enabled access to training content and product crimp specs, this new crimper can be used with Gates’ intuitive mobile eCrimp app. In Fiscal 2022, we launched the ProV hose family in Europe, which is an addition to our Pro Series product portfolio that leverages technologies developed and first launched in our MXT and MXG product lines. Thermal and Emissions Management. Our thermal and emissions management and related products perform a variety of fluid conveyance, emissions reduction and efficiency improvement functions in electric, hybrid and internal combustion passenger and commercial vehicles. In electric applications, Gates offers hose and electric water pump solutions for the thermal management system regulating the battery, inverter, motor(s) and passenger compartment. In internal combustion applications, Gates primarily provides thermal management hose and water pumps for engine cooling, selective catalytic reduction hoses that are part of systems that reduce harmful emissions from diesel engines and hoses for functions that improve air intake and engine efficiency. In Fiscal 2021, we launched a new line of ThermalPro electric water pumps for OEM and aftermarket applications, broadening Gates presence in hybrid and battery electric vehicle as well as other thermal management applications like data center cooling. Industrial Hose. Our industrial hoses are used to transfer a wide range of substances - chemicals, food, beverages, petroleum, fuels, bulk materials, water, steam and air - to meet the requirements of a diverse range of applications, including manufacturing, mining, oil and gas drilling, marine, agriculture, industrial cleaning and construction. Our application engineering teams work with customers to assist them in selecting the appropriate hose solution to safely meet their operational needs. We leverage our materials science expertise to design hoses that perform at varying pressures and levels of resistance to chemicals, oil, abrasion, ozone, flame and both hot and cold temperatures. For performance in extreme environments, many of our industrial hoses feature both crush- resistant and flexible designs. Gates industrial hoses are highly engineered to meet or exceed a multitude of industry standards and certifications, and are offered in a range of diameters, lengths and colors to allow customers to differentiate the hoses in applications. We also offer a wide range of couplings to provide complete assembly solutions. Our fluid power products are used in numerous applications in end markets including automotive replacement and first-fit; diversified industrial; industrial off-highway; industrial on-highway; energy and resources; and personal mobility. The largest portion of our Fiscal 2023 fluid power revenue came from replacement markets. Within these replacement markets, the majority of our revenue came from industrial applications. Our Diverse End Markets Our products play essential roles in a diverse range of applications across a wide variety of end markets including the following: automotive replacement and first-fit end markets; diversified industrial applications from automated manufacturing and logistics systems to everyday consumer applications such as printers, power washers, automatic doors and vacuum cleaners; industrial off-highway applications such as agriculture and construction; industrial on-highway commercial vehicles such as heavy-duty trucks and buses; energy and resources markets such as oil, gas and mining; and personal mobility such as scooters, motorcycles, bicycles, all-terrain vehicles (ATVs) and snowmobiles. • • • • • • 10 Our net sales have historically been, and remain, highly correlated with industrial activity and utilization, and not with any single end market given the diversification of our business and high exposure to replacement markets. Key indicators include industrial production, industrial sales and manufacturer shipments. Our products are sold in over 130 countries across our four commercial regions: (1) the Americas; (2) Europe, Middle East & Africa (“EMEA”); (3) Greater China; and (4) East Asia & India. We have a long-standing presence in each of these regions. Our Channels We sell our power transmission and fluid power products both as replacement components and as specified components on original equipment to customers worldwide. During Fiscal 2023, approximately 64% of our net sales were generated from replacement channels and 36% from first-fit channels globally. Our mix of replacement channel sales to first-fit sales varies by region based on our market strategy and the maturity of the equipment fleet and channel. For example, in emerging markets such as China and India, replacement channels are developing. We believe that enhancing our brand visibility, including through our first-fit presence in these emerging markets will allow us to better develop the replacement channels as they mature over time. By contrast, in North America and EMEA, where there are long-established replacement markets, approximately 67% and 70% of our Fiscal 2023 net sales, respectively, were derived from these higher-margin replacement channels. Replacement. The majority of our sales are generated from customers in replacement channels, who primarily serve a large base of end users with installed equipment that follows a natural maintenance cycle. Our ability to help replacement channel partners maximize revenue is an important part of our value proposition. These customers miss sales opportunities if a required product cannot be obtained quickly, either from a short-lead time order or on-hand inventory. In addition to our products, we offer digital tools and other content to distributors, installers and end users of equipment containing our products. We also assist with customer training on product installation and early identification of wear-and-tear on components, which helps drive sales for our channel customers while mitigating the risk of equipment failure for end users. First-Fit. We work closely with our first-fit customers (also referred to as OEMs) by providing application engineering expertise to assist them with equipment design and selecting the right products to optimize performance. Close interactions between our research and development (“R&D”) organization and customer technical teams provide input into our innovation and product development processes. We selectively participate in first-fit projects, focusing on opportunities where we are able to differentiate with technology and innovative solutions. Customers We maintain long-standing relationships with many customers, who range from regional or local distributors to large, global multinational distributors and OEMs. No single customer accounted for more than 10% of our Fiscal 2023 net sales. We continually strive to enhance how we engage with our markets and customers, including through our increasing use of technology, data and analytics. Our commercial teams in each region work extensively with our customers to ensure that their feedback is relayed to our production teams to feed our cycle of constant innovation, quality and process improvement, all while seeking to maximize our value proposition to our customers. We engage and partner with many customers early in the product lifecycle to identify and leverage opportunities for collaboration. We also rely on both informal conversations with customer representatives and formal surveys, business reviews and customer scorecards to gather opinions, suggestions and ideas of our customers on our products, people and services. Although executive management generally handles direct interaction with customers as part of the authority delegated to it by the Board, regular operational updates are made to the Board covering topics arising from our customers’ feedback such as quality, product innovation, reliability of supply and value. Sales and Marketing and Distribution Organization Our sales and distribution operations are structured to serve our customers efficiently across the globe. We have field representatives who possess local knowledge of customers and their product and application requirements, as well as established distribution networks in each region, giving us the capability to usually meet our customers’ product availability needs on short lead times. 11 Manufacturing Our commercial capabilities are complemented by our “in-region, for region” manufacturing footprint, which generally allows us to manufacture products in close proximity to our customers around the world. This model also yields advantages in supply resiliency, avoidance of long logistics routes and associated greenhouse gas (“GHG”) emissions and foreign exchange/tariff costs. We have power transmission and fluid power operations in each commercial region and typically manufacture products for both first-fit customers and replacement customers in the same factory, which provides for sharing of raw material inputs, improved factory loading and demand leveling, as well as optimization of capital expenditures. We operate manufacturing facilities and service centers as well as several major technical centers giving us a presence in 30 countries throughout the world. Our in-country deployment of manufacturing and technical resources gives us the capability to meet customer needs rapidly and satisfy regional variations in product preference, while our scale allows us to service global customers on a world-wide basis. Competition We operate in competitive markets and industries that are very fragmented. Consequently, we have many competitors across our various markets and product offerings. These competitors and the degree of competition vary by product line, geography, end market and channel. Although each of our markets and product offerings has many competitors, no single competitor competes with us across all of our products, solutions, channels and end markets. Our global presence and the importance of product availability make it difficult for smaller, regional and low-cost country manufacturers to penetrate our markets. We generally differentiate ourselves on the basis of product performance and quality, innovation, breadth of portfolio, customer support and training, service level, fill rates and product availability. Research, Development and Intellectual Property Advanced R&D is performed primarily at certain R&D centers in the U.S. and Western Europe. These teams focus on developing advanced materials, product constructions and manufacturing processes in support of new and improved products. We also have commercialization and field application engineering teams in all of our regions that are located close to customers in support of their businesses. As of December 30, 2023, we held more than 2,100 patents and patent applications and 3,500 trademarks in various jurisdictions, and have elected to protect a variety of technologies and processes as trade secrets. While no individual patent or group of patents, taken alone, is considered critical to our business, collectively our patents and trademarks provide meaningful protection for our products and technical innovations. Materials and Suppliers We use a wide variety of materials, resulting in a highly diversified mix of inputs, which are sourced from a variety of suppliers around the world. Generally, we seek to obtain materials in the regions where our products are manufactured to minimize lead times, as well as transportation and other costs. We continually seek to manage commodity and raw material costs using various strategies, including working with our customers and suppliers on pricing and costs, exploring material substitution opportunities, combining purchase requirements across regions and changing or qualifying new suppliers when appropriate. In addition, our focus on materials science and product and process innovation allow us to partially offset long-term inflation and demand-driven variable cost increases by reducing scrap, energy consumption, materials, and other inputs. We actively engage with our suppliers through regular interaction, industry events, workshops and trainings, building strong relationships to develop mutually beneficial and lasting partnerships. The Board recognizes that relationships with suppliers are important to our long-term success and considers the insights from regular supplier feedback and review, as communicated by executive management to the Board as part of regular operational updates. Key areas on which we engage include production planning, innovation, product development, supply chain flexibility, health and safety, ethics and compliance, and sustainability. We maintain policies governing our interaction with our suppliers to ensure adherence to human rights principles and to foster high ethical standards in our business relationships, including policies and guidelines on anti-corruption, anti-boycott, global antitrust and fair competition, conflict of interest, and human rights. The Board, through its committees, oversees and reviews material legal and regulatory policies. As far as possible, we hold our suppliers to the same high standards of business ethics that we have in place for our own employees. 12 Environmental Details of applicable environmental regulations and metrics can be found under “Environment” in the Directors’ Report. Employees Details of our employees can be found under section XI of this Strategic Report. Code of Ethics We maintain a Code of Business Conduct and Ethics that applies to all of our directors, officers, and employees, which is posted on our website. Our Code of Business Conduct and Ethics is a “code of ethics,” as defined in Item 406(b) of Regulation S-K as promulgated by the Securities and Exchange Commission (“SEC”). Details of how we train our employees and monitor compliance with our code of ethics can be found under section XI of the Strategic Report. Where You Can Find More Information We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the internet at the SEC’s website at http://www.sec.gov. Our SEC filings are also available on our website, free of charge, at http://investors.gates.com as soon as reasonably practicable after they are filed with or furnished to the SEC. We maintain an internet site at http://www.gates.com. We use our website as a channel of distribution of company information. The information we post through this channel may be deemed material. Accordingly, investors should monitor this channel, in addition to following our press releases, SEC filings and public conference calls, and webcasts. In addition, you may automatically receive email alerts and other information about Gates when you enroll your email address by visiting the “Investor Resources—Email Alerts” section of our website at investors.gates.com/investor-resources. Our website and the information contained on or connected to that site are not incorporated into this report. 13 III. Section 172 Statement Section 172(1) of the Companies Act 2006 (“section 172”) requires our directors to act in the way they consider, in good faith, would most likely promote the success of the Company for the benefit of our shareholders. As part of the Board’s decision-making process, the directors consider the potential impact of decisions on relevant stakeholders whilst also having regard to a number of broader factors, including the impact of the Company’s operations on the community and environment, responsible business practices and the likely consequences of decisions in the long term. Engaging with stakeholders such as employees, customers and suppliers takes a variety of forms, from day-to-day business interactions to specific outreach initiatives. As authority for the day-to-day management of the Company is delegated by the Board to executive management, subject to defined limits and monitoring by the Board, most of this engagement takes places at an operational level. As part of their regular Board meetings, our directors consider the Company’s activities and receive information relevant to stakeholder interests based on the outcomes of engagement activities. Key decisions are made after due consideration of this information, which the Board uses to assess the impact on each stakeholder group. Through working collaboratively with management and considering feedback from our stakeholders, the Board believes that Gates is well positioned to make informed decisions that promote the success of the Company. Engagement with key stakeholders The success of our business is dependent on the support of all of our stakeholders. Building positive relationships with stakeholders that share our values is important to us, and essential for working together towards shared goals that deliver sustainable long-term success. We engage regularly with our stakeholders at various levels, depending on the particular issue. Our Board has established a governance framework through which operational decision-making authority is delegated to the executive director and the management team. Management pursues our corporate strategies by making decisions with a long-term view and with high standards of conduct, in line with Company policies. This approach necessarily involves a high degree of delegation to management of communication with stakeholders. In addition to the direct engagement activities of members of the Board with stakeholders, the Board is also advised of stakeholder views through reports and presentations made to the Board by executive management covering strategy, performance and decisions taken at the management level. Examples include regular Compensation Committee reviews related to senior employee remuneration, reviews of ethics and whistleblower matters, legal and regulatory updates, budget reviews, operational updates, sustainability program updates, enterprise risk reports, and sponsor-appointed director representation at Board meetings. This reporting provides the Board with assurance that proper consideration is given to stakeholder interests in operational decision-making. 14 Details of our key stakeholders and how we engage with them are set out below: Stakeholder group Key issues How we engage with our stakeholders Shareholders As of December 30, 2023, our Sponsor held approximately 36.4% of the voting power of our ordinary shares. We also have a mix of individual and institutional shareholders whose views are valued. • • • • Performance and return on investment Executive compensation Sustainability Corporate governance The Company values shareholder engagement and is committed to maintaining open communications with existing and potential shareholders. As of December 30, 2023, our Sponsor owned a substantial portion of our ordinary shares and under the terms of our shareholder agreement, has the right to designate nominees to our Board representing 33% of the total voting power to enable direct participation in decision-making. At this time, one of the Company’s directors is a designee of the Sponsor. The Company ensures that the interests of the Board are aligned with our shareholders through executive management’s engagement efforts, investor representation on our Board, and a requirement that a portion of director compensation is share-based (except for any Sponsor designated director, who does not receive compensation from the Company for serving on the Board). Throughout the year, we engage with individual and institutional shareholders on topics including company strategy and performance, corporate governance, compensation practices and sustainability. During Fiscal 2023, in addition to quarterly earnings calls, our senior management team participated in eight investor conferences, including two marketed secondary offerings. These engagements typically included our Chief Executive Officer and executive director, Mr. Jurek, as well as our Chief Financial Officer and our Vice President of Investor Relations. In addition to our engagement with shareholders throughout the year, in Fall 2023 we initiated contact with shareholder governance teams representing our top 20 shareholders (other than our Sponsor) in anticipation of our Annual General Meeting (“AGM”), resulting in meetings held with eight shareholders representing approximately 31% of our ordinary shares as of September 30, 2023 (excluding shares held by our Sponsor). This engagement included senior leaders of our human resources, investor relations, and corporate secretary departments and one of our directors. The input from these engagements is reported back to the Board and informs our decision-making and we intend to continue this outreach going forward. We welcome investor interaction and feedback and also regularly engage with our shareholders through our active investor relations program. Each year the Board receives a report after the AGM giving a breakdown of the votes and feedback on its voting decisions to inform it on any issues arising. At the most recent AGM, all resolutions were passed. For the voting results, please refer to the section entitled “Consideration of Shareholder Views” of the Directors’ Remuneration Report included elsewhere in this report. Any shareholder or other interested party may also communicate with our directors, individually or as a group, by addressing such communications to the Corporate Secretary of the Company, 1144 Fifteenth Street, Denver, Colorado 80202, who forwards such communications to the appropriate party unless the communications are of a personal nature or not related to the duties and responsibilities of the Board. Sustainability is important to our Board and to our shareholders. Each year, we issue a Sustainability Report, available on our website, which provides shareholders and the broader community with details on our sustainability goals and achievements. Such reports are not incorporated by reference into this report. In April 2023, our Board of Directors approved a share repurchase program allowing for up to $250 million in authorized share repurchases of our ordinary shares, exclusive of commissions, through December 30, 2023. This program was being used to create additional capital allocation flexibility to provide value to shareholders. During Fiscal 2023, this program was utilized in full through the repurchase, and subsequent cancellation of 21,934,634 ordinary shares at an aggregate cost of $250 million. 15 Stakeholder group Key issues How we engage with our stakeholders Employees Globally, we have approximately 14,700 full time employees. Each of these employees is a vital element in our success. Customers We have thousands of customers in many countries. They range from sole proprietors to large multinational conglomerates. Suppliers As a large international business, with manufacturing and distribution facilities around the globe, we have many complex supply chains. • • • • • • • • • • Health and safety Development and training Diversity and inclusion Information on our engagement with employees can be found in section XI of this Strategic Report. Gates encourages employees to speak up when they have concerns, and provides resources to do so through internal channels or on an anonymous and confidential basis through a hotline and website managed by an outside, independent service provider. Reports from the independent service provider are received by the Company’s Chief Legal Officer and Legal Compliance Team, investigated if appropriate and reported to the Audit Committee, in accordance with the Company’s documented policies. Information on our engagement with customers can be found in section II of this Strategic Report. Information on our engagement with suppliers can be found in section II of this Strategic Report. Quality Product innovation Reliability of supply Value Communication and production planning Building relationships Innovation 16 Stakeholder group Key issues How we engage with our stakeholders Communities & environment Supporting the communities in which we operate, and respecting our environment are central to Gates’ values as a company • • • Sustainability Leading community improvement Community support Information on our engagement with our communities and environment can be found in section XI of the Strategic Report and under “Environment” in the Directors’ Report. Sustainability is important to our Board and to our shareholders. Each year, we issue a Sustainability Report, available on our website, which provides shareholders and other stakeholders with details on our sustainability goals and achievements. The contents of our Sustainability Reports do not form a part of this report. The Board, including through its committees, exercises oversight of environmental, social and governance (“ESG”) strategies, practices, and policies, including those related to human capital management and the Company’s reporting on such matters. The Nominating and Governance Committee assists the Board by overseeing and evaluating risks and responsibilities related to the Company’s ESG and sustainability programs, as the Nominating and Governance Committee deems appropriate or as directed by the Board or its Audit Committee. The Sustainability Management Committee was formed in 2022 and is comprised of cross-functional senior leaders. This group meets regularly to discuss strategic priorities, progress against our goals and commitments and emerging sustainability topics. Representatives from the Sustainability Management Committee regularly discuss ESG and sustainability matters, strategies, and progress towards goals with the Nominating and Governance Committee. The work of the Sustainability Management Committee also supports the Audit Committee of the Board on financial and regulatory-related disclosures and risk management. Our Board is committed to integrating these principles into the Company’s long-term strategic vision. Principal decisions The principal decisions taken by the Board during 2023 included capital allocation strategy and budget approval, employee compensation setting, and key employee changes. We describe below some of these decisions in more detail, including their impacts on our key stakeholders. Capital allocation decisions The Board considered the benefits to shareholders of various uses of capital such as funding organic growth projects, paying down debt, share repurchases, and strategic acquisitions. On April 28, 2023, the Board approved a share repurchase program for up to $250 million in authorized ordinary share repurchases. On May 17, 2023, the Company, certain selling shareholders affiliated with our Sponsor and the representatives of several underwriters entered into an underwriting agreement pursuant to which the selling shareholders agreed to sell to the underwriters 22,500,000 ordinary shares of the Company at a price of $11.3975 per ordinary share (the “2023 Offering”). The selling shareholders also granted the underwriters an option to purchase up to 3,375,000 additional ordinary shares of the Company; this option was exercised in full on May 18, 2023. The Company did not receive any proceeds from the sale of ordinary shares in the 2023 Offering, which closed on May 23, 2023; however, in connection with the 2023 Offering, the Company repurchased 21,934,634 ordinary shares through Citigroup from the same selling shareholders at a price of $11.3975 per ordinary share for an aggregate consideration of approximately $250.0 million (the “2023 Repurchase”), plus costs paid directly related to the transaction of $1.7 million. This repurchase was funded by cash on hand and a borrowing of $100.0 million under Gates’ asset-backed revolving credit facility. All shares repurchased pursuant to the 2023 Repurchase have been cancelled. Following the 2023 Offering and the 2023 Repurchase, shareholders affiliated with our Sponsor no longer beneficially own a majority of our outstanding ordinary shares and therefore we are no longer considered a “controlled company” within the meaning of the NYSE corporate governance standards. 17 Cybersecurity risk management Some of the Board’s most important decisions during 2023 related to continued support of the Company’s cyber security measures, which included enhanced governance and further investments in corporate information technology systems and processes. To ensure proper oversight of cybersecurity risks, the Board amended the charter for its Audit Committee to formally include required reports from management regarding any significant cybersecurity incident in order to support the committee’s responsibility to oversee the Company’s information technology security and data privacy programs. During the year, the Audit Committee and the Board received regular updates from the Company’s senior management team to assess cybersecurity and other information technology risks and incidents facing the Company and the measures the Company took to mitigate such risks and incidents. This included close oversight of a malware incident that temporarily disrupted our normal business operations in February 2023. The Board and its Audit Committee continue to support the Company’s cybersecurity efforts and receive regular updates on the Company’s cybersecurity risk assessments, threats, incident response, recent and anticipated enhancements, testing, and monitoring. The Board believes this oversight is critical to protecting shareholder value. Key Employee Changes During 2023, our Board oversaw the promotion of Thomas Pitstick. Mr. Pitstick was promoted to Chief Strategy Officer of the Company in April 2023 and was responsible for leading the Company’s global marketing, strategy, and personal mobility business as well as the East Asia & India (“EA&I”) region. Since April 2023, Mr. Pitstick was further promoted to President, APAC and Global Strategy, maintaining his previous responsibilities as well as adding the responsibility of strategic leadership for the Company’s Greater China region. The Board considered the leadership of two of our regions representing a significant portion of the Company’s revenues; global marketing and strategy; and the Company’s personal mobility business, a growing end-market, to be important to the Company’s overall success. As a result, the Board provided oversight of and approved the decision to promote Mr. Pitstick. Mr. Pitstick has served in leadership roles of increasing responsibility at the Company since 2016, including Chief Marketing Officer and Senior Vice President of Product Line Management, as well as Senior Vice President of Innovation. Prior to joining the Company he held leadership roles at various industrial and technology companies. Mr. Pitstick has extensive experience in strategic planning, innovation, business development, global marketing, and product line management. In August 2023, our Board supported the Company’s selection of Francis “Del” Misenheimer as President of our Americas region. The President of Americas role became vacant in April 2023. Our Americas region has historically been our largest region from a revenue perspective, making its performance important to the performance of the Company as a whole. As a result, management underwent an extensive search of potential candidates overseen by the Board. Members of our Board were involved in interviewing candidates and, after careful deliberation and discussions with management, selected Mr. Misenheimer as the Company’s new President of our Americas region. Mr. Meisenheimer is responsible for the development and execution of the strategic objectives of the Americas region. Prior to joining the Company, Mr. Misenheimer held President and various other leadership roles at Honeywell Building Solutions, Eaton Corporation, and Cooper Industries. Mr. Misenheimer was selected to this important role due to his extensive experience operationalizing strategies across diverse markets and business environments to build organizational capability, growth, and profitability. 18 More information on the Board’s consideration of the section 172 factors The table below provides a summary of where to find further information on how the Board has had regard to each of the section 172 factors: Factor Consequence of any decision in the long term Annual Report section I. Strategy and Outlook Topic Our Growth Strategies III. Section 172 Statement Principal decisions Interests of employees XI. Employees Employees Fostering business relationships with suppliers, customers and others I. Strategy and Outlook Channel Breadth and Relationships Drive Technical Innovation in Our Markets II. Business Overview Customers Impact of operations on the community and the environment XI. Employees Directors’ Report Materials and Suppliers Community involvement Environment Maintaining a reputation for high standards of business conduct II. Business Overview Materials and Suppliers XI. Employees Code of Ethics Human rights issues Acting fairly between members III. Section 172 Statement Engagement with key stakeholders 19 IV. Principal Risks and Uncertainties Our Board exercises direct oversight of strategic risks to the Company. The Audit Committee reviews guidelines and policies governing the process by which management assesses and manages the Company’s exposure to risk, including the Company’s major financial risk exposures and the steps management takes to monitor and control such exposures. The Compensation Committee oversees risks relating to the Company’s compensation policies and practices. The Nominating and Governance Committee assists the Board by overseeing risks related to the Company’s ESG and sustainability programs. Each committee charged with risk oversight reports to the Board on those matters. Additionally, with respect to cybersecurity risk oversight, our Board and Audit Committee receive updates from our information technology team to assess the primary cybersecurity risks facing the Company and the measures the Company is taking to mitigate such risks. In addition to such updates, our Board and our Audit Committee receive updates from management as to changes to the Company’s cybersecurity risk profile or significant newly identified risks. The risk factors noted in this section and other factors noted throughout this annual report, describe the principal risks and uncertainties that could cause our actual results to differ materially from those contained in any forward-looking statement and should be considered carefully in evaluating our company and our business. In the ordinary course of our business, we face various strategic, operating, compliance and financial risks. These risks could have a material impact on our business, financial condition and results of operations. We have implemented our Enterprise Risk Management ("ERM") process to identify and address significant risks. Our ERM process is a company-wide initiative that is designed with the intent of prioritizing risks and allocating appropriate resources to address such risks. Management has identified and prioritized critical risks based on the severity and likelihood of each risk and assigned risk owners to address each major identified risk area and lead action plans to monitor and mitigate risks, where possible. Our Board provides oversight of the ERM process and regularly reviews identified critical risks. The Audit Committee of our Board also reviews major financial risk exposures and the steps management has taken to monitor and control them. Our goal is to proactively manage risks in a structured approach and in conjunction with the strategic planning process, with the intent to preserve and enhance shareholder value. However, these and other risks and uncertainties could cause our results to vary materially from recent results or from our anticipated future results. The risk factors and uncertainties described below, together with information incorporated by reference or otherwise included elsewhere in this annual report, should be carefully considered. Although the risks are organized by headings, and each risk is discussed separately, many are interrelated. Additional risks and uncertainties of which we are currently unaware or that we currently believe to be immaterial may also adversely affect our business. For reference to the full list of the Company’s risks, see "Risk Factors," beginning on page 14 of the Company’s U.S. Annual Report on Form 10-K for the year ended December 30, 2023. Risks Related to Economic and Market Conditions We are subject to economic, political and other risks associated with international operations that could adversely affect our business and our strategy to capitalize on our global reach. A substantial portion of our operations are conducted and located outside the U.S. For Fiscal 2023, approximately 63% of our net sales originated from outside of the U.S. We have manufacturing, sales and service facilities spanning five continents and sell to customers in over 130 countries. Moreover, a significant amount of our manufacturing functions and sources of our raw materials and components are from emerging markets such as China, India and Eastern Europe. Accordingly, our business and results of operations, as well as the business and results of operations of our vendors and customers, are subject to risks associated with doing business internationally, including: • changing economic conditions in the global and regional end markets we serve, which could impact the level of demand for our products, as a substantial portion of our revenues are derived from customers in cyclical industries that typically are adversely affected by downward economic cycles; • macroeconomic factors beyond the Company’s control, such as the current volatility around material and logistics availability, inflation, supply chain and labor challenges; 20 • • • • • • • • political, social or economic instability, civil unrest, terrorist attacks, conflicts or war (such as the ongoing conflicts in Eastern Europe and the Middle East), public health crises (including pandemics), natural disasters (including as a result of climate change), widespread cybersecurity incidents, and other catastrophic events may disrupt economic activities (including demand for and production and distribution of our products) and our workforce in affected countries or globally; imposition of additional sanctions, tariffs or other trade restrictions or embargoes, as well as import and export licensing and control requirements; volatility of global financial markets, including interest rate fluctuations and hyperinflation or deflation in the countries in which we operate; exchange rate fluctuations, as well as currency restructurings, the imposition of currency restrictions, and limitations on repatriation of earnings, that could affect our ability to realize a profit or our ability to readily access global cash balances; partial or total expropriation of the Company’s assets by local, state or national governments; compliance with or effect of complying with complex and changing laws, regulations and policies of foreign governments, including differing and, in some cases, more stringent labor, sustainability (such as environmental, social, and governance (“ESG”) related) and HSE regulations as well as limitations on our ability to enforce our legal rights and remedies; differing local product preferences and product requirements; and difficulties involved in staffing and managing widespread operations, including challenges in enforcing corporate policies, which may be different than the normal business practices of local cultures. The likelihood of such occurrences and their potential effect on us vary from country to country and are unpredictable. Certain regions, including Latin America, Asia, Eastern Europe, the Middle East and Africa, are generally more economically and politically volatile than the U.S. and as a result, our operations in these regions could be subject to more significant fluctuations in sales and operating income. Further, our industry has been impacted by the ongoing uncertainty surrounding tariffs and international trade relations, particularly with China, and it is difficult for us to predict the impact future trade measures will have on our business and operations in the future. Because a significant percentage of our operating income in recent years has come from these regions, adverse fluctuations in the operating results in these regions could have a disproportionate impact on our results of operations in future periods. While we have adopted certain operational and financial measures to reduce the risks associated with doing business internationally, any one of the risks listed above may impact us or require us to modify our business practices beyond what we can anticipate and could have a material adverse effect on our financial condition and results of operations. We may be unable to obtain raw materials or other manufacturing inputs at favorable prices in sufficient quantities, or at the time we require them. We purchase our energy, steel, aluminum, rubber-based materials, chemicals, polymers and other key manufacturing inputs from outside sources. We do not traditionally have long-term pricing contracts with raw material suppliers. The costs of these raw materials have been volatile historically and are influenced by factors that are outside of our control. In recent years, the prices and availability of energy, metal alloys, polymers and certain other of our raw materials have fluctuated significantly, exacerbated by the current inflationary environment and global disruptions such as the Russia-Ukraine conflict. If we are unable to pass increases in the costs of our raw materials on to our customers or we experience a lag in our ability to pass increases to our customers, or we are otherwise unable to offset these cost increases, our operating margins and results of operations may be materially adversely affected. Additionally, our businesses compete globally for key production inputs. The availability of qualified suppliers and of key inputs may be disrupted by market disturbances or any number of geopolitical factors, including political unrest and significant weather events. Such disruptions may require additional capital or operating expenditure by us or force reductions in our production volumes. In the event of an industry-wide general shortage of certain raw materials or key inputs, or a shortage or discontinuation of certain raw materials or key inputs from one or more of our suppliers, we may not be able to arrange for alternative sources of certain raw materials or key inputs. Any such shortage may materially adversely affect our competitive position versus companies that are able to better or more cheaply source such raw materials or key inputs. 21 We may experience adverse changes in our relationships with, or the financial condition, performance, purchasing patterns or inventory levels of, key channel partners. Certain of our businesses sell a significant amount of their products to key channel partners, including distributors, which have valuable relationships with end users. Some of these channel partners may also sell our competitors’ products, and if they favor competing products for any reason they may fail to market our products effectively. Adverse changes in our relationships with these channel partners, or adverse developments in their financial condition, performance or purchasing patterns, could adversely affect our business, financial condition and results of operations. The levels of inventory maintained by our distributors and other channel partners, and changes in those levels, such as de-stocking, can also significantly impact our results of operations in any given period. For example, customer stocking patterns in recent years have fluctuated due to changes in demand resulting from the COVID-19 pandemic and trade relations, which has impacted our results of operations. In addition, the consolidation of channel partners and customers in certain of our end markets could adversely impact our profitability. Risks Related to Our Business and Industry We are dependent on the continued operation of our manufacturing facilities, supply chains, distribution systems and information technology systems, and a major disruption or closure, including as a result of a catastrophic event, could have a material adverse effect on our business If any of our manufacturing facilities, supply chains, distribution systems or technology systems were to experience a catastrophic loss or ongoing closure or disruption due to adverse weather or natural disasters (including as a result of climate change), labor unrest, public health crises such as pandemics, terrorist attacks or armed conflicts, cyberattacks, power loss, telecommunications failure, significant mechanical failure of our equipment or other catastrophic event or government responses thereto, it could adversely affect our employees, data centers or critical business of information technology systems, our ability to produce and distribute our products or conduct normal business operations, and our reputation and, ultimately, result in a potential loss of customers and sales or significantly increased operating costs, including large repair and replacement expenses. These risks could be exacerbated to the extent our disaster recovery plans do not adequately address the event. For example, the COVID-19 pandemic had adverse effects on our business, operating results, cash flows and/or financial condition, including due to the impact of: disruptions in service within our operations, among our key suppliers and supply chains, or other third parties; facility closures or disruptions; challenges in product delivery; and changes and challenges to our workforce, particularly in China. The third-party insurance coverage that we maintain will vary from time to time in both type and amount depending on cost, availability and our decisions regarding risk retention, and may be unavailable or insufficient to protect us against losses. Additionally, we have in the past and may in the future make investments in new or existing manufacturing facilities that could lead to disruption or closure, or to consolidate manufacturing facilities to adapt our production capacity to changing market conditions. The costs of such disruptions or closures may have a material adverse effect on our business, financial condition and results of operations. We may not be able to accurately forecast demand or meet significant increases in demand for our products. Certain of our businesses operate with short lead times, and we order raw materials and supplies and plan production based on discussions with our customers and internal forecasts of demand. If we are unable to accurately forecast demand for our products, in terms of both volume and specific products, or react appropriately to abrupt changes in demand, we may experience delayed product shipments and customer dissatisfaction. If demand increases significantly from current levels, both we and our suppliers may have difficulty meeting such demand, particularly if such demand increases occur rapidly. Additionally, we may carry excess inventory if demand for our products decreases below projected levels. Failure to accurately forecast demand or meet significant increases in demand could have a material adverse impact on our business, financial condition and operating results. 22 We have taken, and continue to take, cost-reduction and other restructuring actions that may expose us to additional risk and we may not be able to maintain the level of cost reductions that we have achieved. We have been implementing cost reduction and restructuring actions in all of our businesses and have discontinued product lines, consolidated or relocated manufacturing operations and reduced our employee population in some locations. The impact of these cost-reduction and restructuring actions on our sales and profitability may be influenced by many factors and we may not be able to maintain the level of cost savings that we have achieved. In connection with the implementation and maintenance of our cost reduction and restructuring measures, we may face delays in anticipated workforce reductions, a decline in employee morale and a potential inability to meet operational targets due to an inability to retain or recruit key employees. Our revenue growth may be dependent on market acceptance of new product introductions and product innovations. The markets in which we operate are subject to technological change. Our long-term operating results depend upon our ability to continually develop, introduce, and market new and innovative products, to modify existing products, to respond to technological change, and to customize certain products to meet customer requirements and evolving sustainability and industry standards. The development of new product introductions and product innovations may require significant investment by us. There are numerous risks inherent in this process, including the risks that we will be unable to anticipate the direction of technological change or that we will be unable to develop and market new products and applications in a timely fashion to satisfy customer demands. For example, the increased adoption of electric vehicles may result in application requirements that are not supported by our current technologies. If we are unable to adapt to these changes, our business and results of operations may be adversely affected. Pricing pressures from our customers may materially adversely affect our business. We generate strong margins by selling premium products at premium prices. Accordingly, our margins could suffer if our customers are no longer willing to pay a premium for our product and service offerings. We continue to face pricing pressure from our customers in the automotive first-fit end market as well as other end markets. Virtually all vehicle manufacturers seek price reductions in both the initial bidding process and during the term of the award. If we are not able to offset price reductions through improved operating efficiencies, reduced expenditures, or new product introductions, those price reductions may have a material adverse effect on our results of operations. Risks Related to Cybersecurity and Information Systems Cyber-security vulnerabilities, threats and more sophisticated and targeted computer crimes could pose a risk to our systems, networks, products, solutions, services and data. Increased global cyber security vulnerabilities, threats, computer viruses and more sophisticated and targeted cyber-related attacks (such as the recent increasing use of “ransomware” and phishing attacks), as well as cyber-security failures resulting from human error, catastrophic events (such as fires, floods, hurricanes and tornadoes), and technological errors, pose a risk to our systems (including third-party systems utilized by us), products and data as well as potentially to our employees’, customers', partners', suppliers' and third-party service providers' systems and data. An attack on our systems or those of certain of our vendors could result in security breaches, theft, lost or corrupted data, misappropriation of sensitive, confidential or personal data or information, loss of trade secrets and commercially valuable information, production downtimes and operational disruptions. We defend against attempted cyber-attacks in the normal course of our business. For example, in February 2023, we experienced a malware attack that temporarily disrupted our normal business operations, including some disruption to sales, and resulted in additional costs of $5.2 million in Fiscal 2023. We attempt to mitigate these risks by employing a number of measures, including employee training, monitoring and testing, and maintenance of protective systems and contingency plans, but we remain potentially vulnerable to additional known or unknown threats. There is no assurance the financial or operational impact from such threats will not be material. Risks Related to Legal and Regulatory Matters Existing or new laws and regulations, including but not limited to those relating to HSE and sustainability matters, may prohibit, burden, restrict or make significantly more costly the sale of our products. Our operations, products and properties are subject to extensive foreign, federal, state, local and provincial laws and regulations relating to HSE and sustainability matters around the world. HSE and sustainability laws vary by jurisdiction but generally govern air 23 emissions, wastewater discharges, material handling and transportation, waste management and disposal, product stewardship, toxicity and hazardous substances, and workplace health and safety, as well as the investigation and clean-up of contaminated sites. Failure to comply with such laws and regulations could have significant consequences on our business and operations, including the imposition of substantial fines and sanctions for violations, injunctive relief (including requirements that we limit or cease operations at affected facilities), and negative publicity. HSE and sustainability related laws and regulations have become increasingly stringent and new laws and regulations or stricter interpretation or enforcement of existing laws and regulations could adversely affect our business, financial condition and results of our operations and product demand. This includes increasing legal requirements and global efforts to control emissions of carbon dioxide, methane, fluorinated and other GHGs in an effort to minimize the effect on climate change, which have the potential to influence the price of the energy and raw materials we purchase. For example, the enactment of the EU’s Carbon Border Adjustment Mechanism could increase the cost of materials we need for production in the EU or reduce the demand for our products manufactured for the EU market. GHG regulations and carbon taxes could also impact oil and gas production, a key demand driver of our industrial end markets, and reduce demand for our products by driving down the use of fossil fuels. The evolution of laws to restrict specific chemical substances in our products or impose labeling and other requirements, such as the EU’s Registration, Evaluation, Authorization, and Restriction of Chemical Substances (“REACH”) Regulation, and rising global concerns around microplastics, extended producer responsibility, plastic packaging or hazardous chemicals such as per-and polyfluoroalkyl substances (“PFAS”) could result in significant costs to us or limit our access to certain markets. We have incurred, and will continue to incur, both operating and capital costs to comply with HSE, sustainability related and other laws and regulations, including costs associated with the investigation and clean-up of some of our current and former properties and offsite disposal locations. As the present and former operator of industrial properties that use and generate hazardous materials, we could be subject to additional liability for environmental contamination in the future, regardless of whether we caused such contamination. Additionally, most U.S. states have passed laws that regulate or limit the use of aftermarket products in certain types of repair work. These laws include requirements relating to consumer disclosure, owner’s consent regarding the use of aftermarket products in the repair process, and the requirement to have aftermarket products certified by an independent testing organization. Additional legislation of this kind may be introduced in the future. If additional laws prohibiting or restricting the use of aftermarket products are passed, it could have an adverse impact on our aftermarket products business. Certain organizations test the quality and safety of vehicle replacement products. If these organizations decide not to test a particular vehicle product, or in the event that such organizations decide that a particular vehicle product does not meet applicable quality or safety standards, we may incur additional costs to meet such standards or experience a decrease in sales of such products, including as a result of a decision to discontinue sales of such product or insurance companies deciding to discontinue authorization of repairs using such product. Such events could adversely affect our business. We are also subject to new and proposed rules and regulations of a number of governmental and self-regulatory bodies and organizations, such as the SEC, the NYSE, the EU, and the U.K. government, that require increased public disclosure of data related to sustainability issues and mandate additional requirements for sustainability related marketing claims. In addition, customers, investors, employees and other stakeholders are increasingly focused on sustainability matters and related disclosures and marketing claims. These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention to comply with or meet those regulations and expectations. For example, we expect measuring and reporting information and metrics in compliance with the EU’s recently enacted Corporate Sustainability Reporting Directive to be costly, difficult and time consuming. Our sustainability initiatives and goals could be difficult and expensive to implement, and we could be criticized for or subject to litigation related to the accuracy, adequacy, consistency or completeness of our sustainability disclosures and marketing claims or the scope or nature of our initiatives or goals or revisions thereto. Further, statements about our sustainability initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future. If our sustainability related data, claims, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our sustainability goals on a timely basis, or at all, our reputation and financial results could be adversely affected and we could be exposed to litigation. 24 We are subject to anti-corruption laws in various jurisdictions, as well as other laws governing our international operations. If we fail to comply with these laws we could be subject to civil or criminal penalties, other remedial measures, and legal expenses. Our operations are subject to one or more anti-corruption laws in various jurisdictions, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.K. Bribery Act of 2010, and other anti-corruption laws that generally prohibit employees and intermediaries from making improper payments for the purpose of obtaining or retaining business or gaining some other business advantage. We operate in a number of jurisdictions that pose a high risk of potential anti-corruption violations, and we participate in joint ventures and relationships with third parties whose actions could potentially subject us to liability under anti- corruption laws. We are subject to other laws and regulations governing our operations, including regulations administered by the U.S. Department of Commerce’s Bureau of Industry and Security, the U.S. Department of Treasury’s Office of Foreign Assets Control, and various non-U.S. government entities, including applicable export control regulations, economic sanctions on countries and persons, customs requirements, currency exchange regulations, and transfer pricing regulations (collectively, “Trade Control Laws”). We are also subject to U.K. corporate criminal laws governing the failure to prevent the facilitation of tax evasion pursuant to the Criminal Finances Act 2017 (“Criminal Finances Act”). We have instituted policies, procedures and ongoing training of employees with regard to business ethics, designed to ensure that we and our employees comply with anti-corruption laws, Trade Control Laws and the Criminal Finances Act. However, there is no assurance that our efforts have been and will be effective in ensuring that we will comply with all applicable anti-corruption laws or other legal requirements. If we are subject to an investigation of a potential violation or are found not in compliance with anti- corruption laws, Trade Control Laws or the Criminal Finances Act, we may incur legal expenses and experience reputational harm, and could be subject to criminal and civil penalties and sanctions that could have a material adverse impact on our business, financial condition, and results of operations. Risks Related to Human Capital Management If we lose our senior management or key personnel, our business may be materially and adversely affected. The success of our business is largely dependent on our senior management team, as well as on our ability to attract and retain other qualified key personnel. In addition, there continues to be significant demand in our industry for skilled workers. It cannot be assured that we will be able to retain all our current senior management personnel and attract and retain other necessary personnel, including skilled workers, necessary for the development of our business. Further, in the event we do lose key personnel, the success of our business may depend on whether we have appropriate succession plans in place and can implement such plans to identify and integrate new personnel. The loss of the services of senior management and other key personnel or the failure to attract additional personnel and implement succession plans as required could have a material adverse effect on our business, financial condition and results of operations. Risks Related to Tax Matters Changes in our effective tax rate or additional tax liabilities could adversely impact our net income. We are subject to income taxes as well as non-income based taxes in the U.K., the U.S. and various other jurisdictions in which we operate. The laws and regulations in these jurisdictions are inherently complex and the Company and its subsidiaries will be obliged to make judgments and interpretations about the application of these laws and regulations to the Company and its subsidiaries and their operations and businesses, including those related to any restructuring of intercompany operations, holdings or financings; the valuation of intercompany services; cross-border payments between affiliated companies; and the related effects on income tax, value added tax (“VAT”) and transfer tax. Further, our tax liabilities could be adversely affected by numerous other factors, including income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred income tax assets and liabilities, and changes in tax laws and regulations. We are regularly under audit by taxing authorities in certain of the jurisdictions in which we operate. Although we believe our tax estimates are reasonable, including our estimates of reserves for unrecognized tax benefits related to the implementation of our European corporate center in 2019, any changes in our judgments and interpretation of tax laws or any material differences as a result of the audits could result in unfavorable tax adjustments that have an adverse effect on our overall tax liability. 25 Risks Related to Our Indebtedness Our substantial leverage could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy, or our industry or our ability to pay our debts, and could divert our cash flow from operations to debt payments. As of December 30, 2023, the total principal amount of our debt was $2,471.9 million. Subject to the limits contained in the credit agreements that govern our senior secured credit facilities, the indenture that governs our notes and the applicable agreements governing our other debt instruments, we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our high level of debt could increase. Specifically, our high level of debt could have important consequences, including the following: • making it more difficult for us to satisfy our obligations with respect to our debt; • • • • • • • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements; requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes; increasing our vulnerability to general adverse economic and industry conditions; exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest; limiting our flexibility in planning for and reacting to changes in the industry in which we compete; placing us at a disadvantage compared to other, less leveraged competitors; and increasing our cost of borrowing. If we incur substantial additional debt, from time to time, the risks related to our high level of debt could increase. We are a holding company, and our consolidated assets are owned by, and our business is conducted through, our subsidiaries. Earnings from these subsidiaries are our primary source of funds for debt payments and operating expenses. If our subsidiaries are restricted from making distributions, our ability to meet our debt service obligations or otherwise fund our operations may be impaired. Moreover, there may be restrictions on payments by subsidiaries to their parent companies under applicable laws, including laws that require companies to maintain minimum amounts of capital and to make payments to shareholders only from profits. As a result, although a subsidiary of ours may have cash, we may not be able to obtain that cash to satisfy our obligation to service our outstanding debt or fund our operations. 26 V. Non-Financial and Sustainability Information Statement In this section we provide climate-related disclosures as required under the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 and to comply with sections 414CA and 414CB of the Companies Act 2006. Governance Board Oversight of Climate-Related Risks and Opportunities Our Board, including through its committees, plays an important role in overseeing our strategy, risk management, and sustainability initiatives. The full board directly oversees our strategic risks, and has delegated to its Nominating and Governance Committee the responsibility to review and monitor risks and responsibilities related to our ESG and sustainability programs, as the Nominating and Governance Committee, the Board, or the Audit Committee deems appropriate. This includes oversight of our efforts to assess climate-related risks. The Nominating and Governance Committee regularly meets with and receives reports from leaders from our Sustainability Management Committee on our ESG and sustainability matters, including climate risk planning. The Nominating and Governance Committee provides a report to the Board following each committee meeting. During 2023, the leaders from our Sustainability Management Committee met with the Nominating and Governance Committee twice. Management’s Role in Assessing and Managing Climate-Related Risks Our Sustainability Management Committee is led by our Sustainability Director and is made up of cross-functional senior leaders across our organization, including members from each of our regions and within our operations, environmental, supply chain, legal, risk management, human resources and other functions. This group meets regularly to discuss strategic priorities, progress against goals and commitments, and emerging sustainability topics, including the Company’s climate risk planning. The Sustainability Management Committee also helps our Enterprise Risk Committee consider the Company’s exposure to certain climate-related risks. Our Sustainability Director sits within our Global Strategy department to ensure that the Company’s sustainability efforts align with our overall business strategy. Accordingly, our Global Strategy department is responsible for managing climate-related risks, as may be appropriate, and our climate-related risks assessment process described below. Risk Management Risk Management Process and identification, assessment and management of climate-related risks We maintain a robust ERM program, which we continue to improve. This process includes a risk assessment to identify key enterprise risks, maintaining a risk register to monitor mitigation actions in response to key risks, on-going dialogue and collaboration among management to identify emerging risks, quarterly review of mitigation actions, and periodic reports to the Audit Committee and the Board. This risk assessment process typically occurs every other year. The ERM process is directed by our Enterprise Risk Committee, led by the Chief Financial Officer, Chief Legal Officer, Chief Accounting Officer, Chief Information Officer, and Vice President of Global Internal Audit, in coordination with senior functional leaders across our company. Certain climate-related risks have been considered in our ERM program such as relevant current and emerging regulations and market shifts towards lower emissions vehicles. As a result, our legal, compliance and operational teams routinely monitor and prepare for policies and developments concerning ESG and climate-related laws and regulations and new reporting and financial disclosure requirements; including, but not limited to, the SEC’s Enhancement and Standardization of Climate-Related Disclosures for Investors, the EU’s Corporate Sustainability Reporting Directive (CSRD), and the Carbon Border Adjustment Mechanism (CBAM). In addition, our engineers and product teams have developed and continue to develop new technologies and products to meet shifting market demand, and opportunities for more efficient drive systems, resulting in reduced environmental and thermal emissions. Representative applications include electric water pumps and cooling systems for lower emissions vehicles (EV/HEV), belt and sprocket drive systems for personal mobility products, and a range of industrial belt drive systems used at the OEM and replacement levels. The drive system products allow for customers to transition from heavier chain systems to lower maintenance belt drives that do not require any petrochemical grease or oil lubrication, and include our Carbon Drive family of belts specifically designed for electric scooters and motorcycles as well as our GT-Line and Twin Power line products for the industrial chain-to-belt consumer base. Our water pump and cooling systems enhance the heat regulation needed for the long-term operation of electric battery technologies, and include a range of ThermalPro. 27 In addition to our ERM process and in preparation of these climate-related disclosures, we conducted our first climate focused risk assessment in early 2024 to further understand climate risks affecting our company’s industry and footprint. To conduct this analysis, we engaged a third-party consultant to conduct this preliminary iteration of a quantitative scenario analysis and to assist in evaluating our potential exposure to climate-related physical and transition risks. We considered two time horizons in our analysis: medium-term (2030) and long-term (2050), over which we evaluated potential impacts of climate-related physical and transition risks on our assets and operations. We expect to utilize the results of this assessment to support the further integration of climate risks into our broader ERM framework, which is designed to identify and monitor mitigation actions related to our most important enterprise risks. Strategy Climate-related risks– Physical Risks Our quantitative physical risk scenario analysis was designed to identify which climate-related hazards may potentially pose the greatest risk to our company over time, based on our industry and geographic footprint. This analysis evaluated over 90 of our facilities globally. The analysis was performed using the latest suite of climate datasets aligned with the Intergovernmental Panel on Climate Change’s (IPCC) Sixth Assessment Report (AR6), the Shared Socioeconomic Pathway (SSP) scenarios, and did not factor in our existing mitigation measures. The analysis evaluated the following eight physical hazards across three climate scenarios: • Extreme heat • Coastal flooding • Drought • Water stress • Riverine flooding • Extreme rainfall flooding (pluvial flooding) • Wildfire • Cyclones (hurricanes) These hazards were assessed across three climate scenarios: SSP1-RCP2.6 (below 2°C), SSP2-RCP4.5 (2°C-4°C) and SSP5- RCP8.5 (above 4°C) for the medium-term (2030) and long-term (2050). These scenarios were selected as they provide a range of possible climate futures that can help inform the various potential impacts to our company. A low warming scenario (SSP1-RCP2.6) provides insight into the most extreme potential transition risks and a high warming scenario (SSP5-RCP8.5) provides insight into the most extreme potential physical impacts from climate change. This assists us to consider how the greatest potential impacts could affect our business and determine the appropriate risk mitigation strategies, if any. The underlying dataset for the assessment of these hazards is developed using output from climate models. Climate models use scenarios to project future climate conditions by integrating assumptions about future socioeconomic development, emissions pathways, and greenhouse gas mitigation strategies into their simulations. The latest suite of scenarios, in alignment with the IPCC AR6 report, are Shared Socioeconomic Pathway (SSP) scenarios. These scenarios currently represent reputable scenarios that are widely used and becoming more commonly understood. Climate models are complex and uncertain, serving to provide a general indication of possible future outcomes but they are not a forecast for the future. SSP scenarios provide five different narratives of potential future socioeconomic development and emissions pathways, influencing both mitigation and adaptation measures. They depict a potential spectrum of possibilities, from sustainable development with aggressive greenhouse gas (GHG) mitigation efforts to scenarios of heavy fossil fuel dependency with limited mitigation and reactive adaptation strategies. These narratives are combined with Representative Concentration Pathways (RCPs), which specify future levels of GHG concentrations in the atmosphere. We leveraged three of the five SSP scenarios in our physical climate risk scenario analysis. SSP1-RCP2.6 represents an optimistic scenario with aggressive mitigation efforts, low population growth, and widespread adoption of clean and efficient technologies. SSP2-RCP4.5 represents a middle-of-the-road scenario with moderate mitigation efforts where challenges to adaptation and mitigation are intermediate, with moderate population growth and economic development. SSP5-RCP8.5 represents a pessimistic scenario with limited mitigation efforts, high emissions, and heavy reliance on fossil fuels. 28 The scenario analysis findings for 2030 and 2050 provided insights into potential impacts from each hazard at the sites included in the analysis. These results were then converted into damage factors (risk scores) which represent the intensity of the potential damage on the asset using hazard-specific damage functions tailored to each location, time frame, and scenario. Risk scores are based on a scale to determine elevated risk exposure. Asset vulnerability to various hazards was considered through the inclusion of subjective vulnerability factors, determined based on our internal subject matter expertise drawn from past experiences. The physical climate risk scenario analysis identified water stress and extreme heat as our highest risk areas in both timelines and in a high or very high warming scenario. While we do not view the potential financial impact of these risks to be material to our business, we take them seriously and work to minimize their impact on our employees and operations. Water stress occurs when demand for water exceeds the available water, or the quality of water available makes it inappropriate for use. Water stress impacts water availability for users upstream and downstream. For manufacturers, like us, stressed water systems could result in increased input, treatment, and manufacturing costs. This initial climate scenario analysis indicates that water stress in a high or very high warming scenario could have potential global impacts, with our highest potential impacts in the Middle East, North America, and Southern Europe. For this reason, we monitor our water usage and have site-based water initiatives aimed at achieving reductions in our water use. This includes infrastructure projects for certain of our sites located in regions with limited water, such as water recycling. We also have wastewater management plans at our manufacturing facilities and conduct audits of our water inputs and outputs. Extreme heat can affect worker productivity, especially in manufacturing settings, potentially resulting in health impacts due to heat exposure. For this reason, we have focused on strategies to mitigate the effects of heat exposure in our manufacturing facilities that are currently subject to extreme heat events. We employ various risk mitigation measures to address high temperatures to reduce the effects of extreme heat on employees and manufacturing equipment, such as: plant idling as needed; cooling towers; job rotation strategies; providing hydrating beverages and snacks; and providing cooling bandanas. Additionally, we have established several internal occupational health centers to support employees during times of heat stress. Our initial climate scenario analysis indicated that our manufacturing and distribution sites in India, Mexico, Turkey, and the U.S. may experience the highest risk exposure to extreme heat by 2030 and 2050. The physical climate risk scenario analysis also identified areas of lower risk for us due to the localized nature of the risk, but with potentially significant financial exposure. These areas include pluvial flooding, wildfire and cyclones in the geographies where some of our facilities are located. For example, climate scenario analysis indicates that our potential exposure to wildfire is primarily limited to certain of our facilities in Mexico. In addition, the analysis shows our exposure to pluvial flooding primarily relates to our operations in China and parts of the United States. Last, the analysis indicates that future cyclone exposure, while potentially financially impactful, is uncertain and currently primarily limited to our office facilities in the southern United States and one of our distribution sites in Mexico. These types of extreme weather events can damage buildings and infrastructure and potentially our facilities and inventory. They can also affect employee health and safety and cause shipping delays. We manage extreme weather event risks through a variety of methods, including emergency preparedness and response plans at certain of our facilities which are specific to those facilities’ potential exposures and designed to outline our response, mitigation, and remediation plan for potential dangers and impacts. To support this, we have a public addressing system to communicate information about impacts from natural disasters and climate impacts to personnel as needed. We also have protocols in place to inform customers of impacts to orders. Our global manufacturing footprint also provides alternative production locations and distribution methods, which support our resilience against extreme weather events. Climate-related risks and opportunities – Transition Risks We performed a preliminary assessment of key climate-related risks associated with a transition to a low-carbon economy. In this assessment, we leveraged company-specific and product-specific data and climate and socioeconomic modeling and datasets from the Network for Greening the Financial System (“NGFS”). The assessment analyzed Gates potential exposure to transition risks for each of the seven NGFS scenarios – Current Policies, Low Demand, Net-Zero 2050, Below 2C, Delayed Transition, Nationally Determined Contributions, and Fragmented World — with a focus on the Current Policies, Below 2C, and Net-Zero 2050 scenarios. As part of this assessment, we completed a risk screening exercise that considered potential transition risks across categories of • market; • technology; • policy and legal; and 29 • reputation. Of these categories, market and policy and legal related risks were found to be the most relevant to our operations. As a result, we focused on these two transition risks in this initial climate-specific assessment. Policy and Legal Risks – Carbon pricing If carbon pricing schemes are increasingly implemented across jurisdictions in which we or our suppliers operate, we could be subject to higher costs related to goods and operations. A price on carbon can be a policy mechanism to disincentivize carbon intensive activities. Since our products and production processes rely on hydrocarbon fuels and their derivatives, we could face significant cost increases related our direct operations and value chain if a carbon price is implemented in countries in which we operate and/or source. To quantify the impact of our greenhouse gas emissions, we examined our estimated Scope 1, Scope 2, and Scope 3 emissions and utilized NGFS’ carbon price assumptions for each of the seven NGFS scenarios. This analysis provides a quantification of the financial impact of a carbon tax on our energy-use emissions. According to the carbon pricing assumptions embedded in each of the scenarios, the global average price on emissions is expected to increase in all scenarios, with the largest increases associated with the highest ambition scenarios. In the Net Zero 2050 scenario, for example, the global average price on emissions rises to $120/tonne as soon as 2025, and to nearly $600/tonne by 2050. The results of the analysis show these costs are expected to be most impactful to Gates direct operations and its supply chain under the Net Zero 2050 scenario. The degree to which the costs could affect our company in the future will depend on the scope and stringency of applicable regulations as well as the degree to which costs are passed on to us from our suppliers, and from us to our customers, through pricing. To address this risk, we continue to monitor our emissions and periodically revisit and reassess our reduction targets. We also work collaboratively with suppliers and other value chain partners to reduce Scope 3 emissions and product footprints. We are focused on the efficiency of downstream transportation and logistics routes to reduce emissions associated with our supply chain. Market Risk – Cost of energy and raw materials Gates conducted an analysis to understand how climate change may impact supply chain and procurement costs. The analysis leveraged the Company’s 2023 procurement data by country and product and the latest NGFS datasets to estimate how a change in key commodity prices may impact supply chain costs over each of the seven NGFS scenarios. NGFS assumptions for coal, oil, natural gas, and industrial gas prices were used to gauge how raw material costs could increase as the economy decarbonizes. The following assumptions were made in the analysis: – Raw material inputs remain constant for each manufacturing process over the time horizons studied. – Other fixed and variable costs were assumed to remain constant. The initial results of this analysis show that raw material costs could significantly impact us in the coming decades by increasing the cost of manufacturing and procurement of energy intensive raw materials we use to produce our products. Similar to carbon pricing, this potentially impacts us to the largest degree under the Net Zero 2050 scenario as compared to the other scenarios analyzed and the degree to which these costs could affect Gates in the future will depend on a variety of factors, including the degree to which price increases are passed on to Gates from its suppliers and from Gates to its customers. Market Risks and Opportunities – Technology To identify technology related risks, we utilized our ERM program which has identified potential market shifts towards lower emissions vehicles as a potential risk for our company. In addition, a shift in demand towards cleaner, lightweight, more compact, and more efficient technologies requires product innovation, new manufacturing techniques, and a new set of raw materials. We receive requests from customers, especially those operating in Europe, for products with a lower carbon footprint to support efforts in reducing their own supply chain emissions. This shift could require investments in product research and development and manufacturing equipment as well as in sourcing clean energy or carbon offsets which could increase operating and production costs to keep up with market demand and competitors. Additionally, if our current suppliers are unable to meet these evolving requirements, we may need to change suppliers, which could result in increased costs or decreased supply availability. 30 This risk is also an opportunity for us because it opens new markets, including in alternative transportation and new technologies. We are investing and growing in end markets with positive secular and sustainability trends, namely the electrification of transportation and micro-mobility. Engineers employ Eco-Innovation™ principles to focus on process improvements and innovations to minimize carbon footprint: beginning with material selection in the design process, through product manufacturing, transportation and customer use. Our Eco-Innovation™ System is defined by innovation in materials science, process engineering, product engineering, and customer experience with consideration and improvement to one or more stages of the product lifecycle. We are developing new technologies and products to meet shifting market demand and opportunities such as belt drive systems that allow customers to transition from chain systems. Belt drive systems can help users reduce operating costs and realize GHG emissions savings over the lifetime of the belt drive system. We recognize and support the transition and adoption of more sustainable personal and micro-mobility transportation modes through our Carbon Drive family of belts, such as PolyChain, Moto X5, and Moto X7. These are belt constructions that are specifically designed for electric scooters and motorcycles. We have commercialized and marketed industrial chain-to-belt solutions to customers who recognize the benefits of little to no maintenance, and of no initial or recurring grease or oil application to the system. We continue to invest in research and development and production of novel technology to support the benefits of reduced environmental emissions of clean transportation and to support the increased energy efficiency from the transition from chain to belt on industrial equipment. Moreover, we will continue to monitor market risks and develop strategies to identify opportunities and mitigate risk related to rising costs and maintain strong partnerships with suppliers, as we continue to expand into new technologies and markets. Resilience We have strategic and operational processes already in place that can be adjusted to address changing dynamics affecting our business, and we believe we have appropriate measures in place to support climate resiliency. Moreover, as part of our business strategy and through our Eco-Innovation™ product development process, we have several initiatives and actions underway to improve the energy efficiency, circularity, performance and overall sustainability of our operations and product lines, all of which reduce our exposure to climate-related physical and transition risks. Leveraging scenario analysis allows us to consider possible futures and potential areas for future resiliency investments. Physical risks Our exposure to climate-related physical risks varies by geography and the specific design and function elements of each asset. A description of our efforts to mitigate the effects of physical risks that could pose the highest risk to our company are described under “Climate-related risks– Physical Risks” above. Moreover, we continue to monitor climate-related events across our locations and assess appropriate risk management strategies to mitigate impacts of these risks. Transition risks We strive to reduce our operational impact on the climate, including using cleaner sources of energy where possible. This in turn reduces our exposure to potential carbon pricing schemes as well as better prepares us to meet emerging demands from customers seeking products with lower carbon footprints. We use low carbon fuels and renewable electricity, including on-site solar generation and biomass fueled boilers, to reduce emissions from our operations. We support the transition to a low carbon future and continue to invest in the development of products that are designed for longevity, energy efficiency and the minimization of GHG emissions, while meeting the expectations of our customers and stakeholders. Our teams embrace innovation and opportunities to meet emerging market demands through materials science and with more advanced technologies, including those that contribute to more sustainable transportation. Additionally, we have begun to address the carbon footprint of products and value chains we serve through the implementation of limited life-cycle assessments (LCAs). We use these LCAs to calculate the potential carbon footprint of a growing selection of our products. By understanding how our customers’ products are used, we can better provide a reduced carbon footprint in addition to high levels of performance and durability. Metrics & Targets Reducing emissions from our operations is a priority that helps us reduce our exposure to potential future carbon pricing schemes and related regulatory risk. Achieving operational emissions reduction in turn reduces the carbon footprint of our customers, which aids in satisfying the increasing demand for lower supply chain emissions. We have established targets to reduce Scope 1 and Scope 2 GHG emissions by 15% by 2025 from a 2019 baseline, and to reduce energy consumption 20% by 2025 from a 2019 31 baseline. These targets are aspirational and are subject to change in the event of significant changes to our business, methodologies, and improved data collection efforts. Our Scope 1 and Scope 2 greenhouse gas emissions and energy consumption are disclosed in “Environment” section in the Directors’ Report included elsewhere in this report. As we continue to gain a deeper understanding of our climate-related risks, we plan to assess and refine our climate-related targets to appropriately monitor and manage relevant risks. We aim to achieve these targets through energy efficiency measures, use of low carbon fuels and renewable electricity, compressed air audits and leak repairs, robust operating and maintenance standards and updating process control systems. Additionally, 30% of our manufacturing locations have achieved ISO 50001 certifications for energy management. GHG emissions To track towards our GHG emissions reduction target, we measure and monitor our Scope 1 and 2 GHG emissions. • Scope 1 GHG emissions (Mmt CO2e) • Scope 2 GHG emissions (Mmt CO2e) Direct and indirect GHG emissions are qualified as either owned or under Gates operational control. Where actual data was not available, estimates were used. Estimated emissions from the combustion of fuels are based on fuel consumption data and corresponding emissions factors from the International Energy Agency; the United Nations IPCC, AR5; and the U.S. Environmental Protection Agency. Energy To monitor and track progress against our energy consumption reduction target, we measure and monitor total energy consumption and renewable energy consumption. Total energy consumption is the sum of all fuels and biomass consumption, plus purchased power and steam. • Total energy consumption (GJ) • Total energy consumption intensity (GWh/annual net sales) Next Steps We will continue to analyze our physical and transition risks in increasing detail. As our understanding deepens, we expect to integrate climate risk assessments into our global ERM program as appropriate. In addition, we intend to continue to advance our climate-risk analyses by further customizing our analyses and assumptions to better inform our risk mitigation strategies and potential opportunities. 32 Business Trends VI. Business Trends Our net sales have historically been, and remain, highly correlated with industrial activity and utilization and not with any single end market given the diversification of our business and high exposure to replacement channels. This diversification limits our exposure to trends in any given end market. In addition, a majority of our sales are generated from customers in replacement channels, who serve primarily a large base of installed equipment that follows a natural maintenance cycle that is somewhat less susceptible to various trends that affect our end markets. Such trends include infrastructure investment and construction activity, agricultural production and related commodity prices, commercial and passenger vehicle production, miles driven and fleet age, evolving regulatory requirements related to emissions and fuel economy and oil and gas prices and production. Key indicators of our performance include industrial production, industrial sales and manufacturer shipments. During Fiscal 2023, sales into replacement channels accounted for approximately 64% of our total net sales. Our replacement sales cover a very broad range of applications and industries and, accordingly, are highly correlated with industrial activity and utilization and not a single end market. Replacement products are principally sold through distribution partners that may carry a very broad line of products or may specialize in products associated with a smaller set of end market applications. During Fiscal 2023, sales into first-fit channels accounted for approximately 36% of our total net sales. First-fit sales are to a variety of industrial and automotive customers. Our industrial first-fit customers cover a diverse range of industries and applications and many of our largest first-fit customers manufacture construction and agricultural equipment. Our operations are supported largely by local supply chains. Where necessary, we have taken steps to qualify additional suppliers to ensure we are able to maintain continuity of supply. Although we have not experienced any significant operational disruptions to date, we have incurred meaningful operational inefficiencies. During Fiscal 2023, previous challenges related to supply chains, logistics, and inflation continued to ease, which improved our productivity and expanded our profitability. We continue to make progress on improving our inventory position and turnover to meet our customer demands. Global conflicts, such as the conflict between Russia and Ukraine and the sanctions and counter-sanctions imposed in response to it, created increased economic uncertainty and operational complexity both in Europe, Middle East and Africa (“EMEA”) and globally. During 2022, our operations in China were further impacted by the COVID-19 pandemic and related government actions, resulting in a modest loss of production, sales and profitability as well as decreased customer demand and labor availability. Although these conditions improved in 2023, we may experience future production or distribution disruptions associated with public health crises where individual locations are temporarily closed or productivity is reduced by government mandates or as a result of supply chain or labor disruptions, which could place further constraints on our ability to produce or deliver our products and meet customer demand or increase our costs. We may also continue to experience periods of inconsistency in customer demand. We continue to monitor the macroeconomic environment, geopolitical conditions, and industry trends that may impact our business. While we may experience a certain level of inventory de-stocking from certain of our customers and slower demand in the first half of 2024 as a result of the current economic environment, we are optimistic to see a rebound of demand later in the year and the continued normalization of the operating environment in 2024. 33 VII. Key Performance Indicators We assess the financial performance of our businesses using a variety of measures. We believe that certain of these measures are particularly important and they are considered to be “key performance indicators”. As Gates is a public company listed on the New York Stock Exchange (“NYSE”) in the U.S., the Directors and management review the alternate performance measures adjusted from financials prepared under accounting principles generally accepted in the United States of America (“U.S. GAAP”). In this section, we present the equivalent of each of the key performance indicators as prepared in accordance with United Kingdom adopted international accounting standards (“IFRS”), and show how they are calculated if they cannot be derived directly from the consolidated financial statements. We present a reconciliation of each alternate performance measure to the most directly comparable measure defined under IFRS. We do not regard these alternate performance measures as a substitute for, or superior to, the equivalent measures defined under IFRS. The key performance indicators described below may not be directly comparable with similarly-titled measures used by other companies. For reference to key performance indicators adjusted from financials prepared under U.S. GAAP, see "Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 32 of the Company’s U.S. Annual Report on Form 10-K for the year ended December 30, 2023. EBITDA and Adjusted EBITDA “EBITDA” is a non-IFRS measure that represents net income or loss from continuing operations for the period before the impact of income taxes, net interest and other expenses, depreciation and amortization. EBITDA is widely used by securities analysts, investors and other interested parties to evaluate the profitability of companies. EBITDA eliminates potential differences in performance caused by variations in capital structures (affecting net finance costs), tax positions (such as the availability of net operating losses against which to relieve taxable profits), the cost and age of tangible assets (affecting relative depreciation expense) and the extent to which intangible assets are identifiable (affecting relative amortization expense). Management uses “Adjusted EBITDA” as its key profitability measure. This is a non-IFRS measure that represents EBITDA before certain items that are considered to hinder comparison of the performance of our businesses on a period-over-period basis or with other businesses. We use Adjusted EBITDA as our measure of segment profitability to assess the performance of our businesses, and it is used for total Gates as well because we believe it is important to consider our profitability on a basis that is consistent with that of our operating segments, as well as that of certain of our peer companies. We believe that Adjusted EBITDA should, therefore, be made available to securities analysts, investors and other interested parties to assist in their assessment of the performance of our businesses. During the periods presented, the items excluded from EBITDA in computing Adjusted EBITDA primarily included: • • • • • • non-cash charges in relation to share-based compensation; transaction-related expenses incurred in relation to major corporate transactions, including the acquisition of businesses, and equity and debt transactions; asset impairments; restructuring expenses, including severance-related expenses; credit loss related to a customer bankruptcy; and cybersecurity incident expenses. Differences exist among our businesses and from period to period in the extent to which their respective employees receive share-based compensation or a charge for such compensation is recognized. We therefore exclude from Adjusted EBITDA the non- cash charges in relation to share-based compensation in order to assess the relative performance of our businesses. We exclude costs associated with major corporate transactions because we do not believe that they relate to our performance. Other items are excluded from Adjusted EBITDA because they are individually or collectively significant items that are not considered to be representative of the underlying performance of our businesses. During the periods presented, we excluded restructuring expenses and severance-related expenses that reflect specific, strategic actions taken by management to shutdown, downsize, or otherwise fundamentally reorganize areas of Gates’ business. 34 Adjusted EBITDA excludes items that can have a significant effect on our profit or loss and should, therefore, be used in conjunction with, not as substitutes for, profit or loss for the period. Management compensates for these limitations by separately monitoring net income from continuing operations for the period. The following table reconciles Adjusted EBITDA to profit from continuing operations, the most directly comparable IFRS measure: (dollars in millions) Adjusted EBITDA Depreciation and amortization Share-based compensation expense Transaction-related expense (1) Asset impairments Restructuring expenses Inventory impairments and adjustments (included in cost of sales) Severance expenses (included in cost of sales) Severance expenses (included in Finance and administration expenses) Credit loss related to customer bankruptcy (included in Finance and administrative expenses) (2) Cybersecurity incident expenses (3) Other operating expenses Operating Profit from continuing operations Interest expense Interest income Other (expenses) income Profit before taxes from continuing operations Income tax expense Profit for the year from continuing operations For the year ended December 30, 2023 December 31, 2022 $ 770.2 $ (243.3) (27.4) (2.2) (0.1) (11.5) (0.1) (0.4) (1.0) (11.4) (5.2) (0.2) 467.4 (214.0) 14.5 (26.0) 241.9 (15.7) 226.2 $ $ 705.9 (242.5) (44.3) (2.1) (1.1) (9.5) (1.5) (0.8) (0.5) — — (0.2) 403.4 (164.8) 3.6 2.1 244.3 (19.3) 225.0 (1) Transaction-related expenses relate primarily to advisory fees and other costs recognized in respect of major corporate transactions, including the acquisition of businesses, and equity and debt transactions. (2) On January 31, 2023, one of our customers filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. In connection with the bankruptcy proceedings, we evaluated our potential risk and exposure relating to our outstanding pre-petition accounts receivable balance from the customer and recorded a $11.4 million pre-tax charge during Fiscal 2023 to reflect our estimated recovery. We continue to monitor the circumstances surrounding the bankruptcy in determining whether adjustments to this recovery estimate are necessary. (3) On February 11, 2023, Gates determined that it was the target of a malware attack. Cybersecurity incident expenses include legal, consulting, and other costs incurred as a direct result of this incident, some of which may be partially offset by insurance recoveries. 35 Adjusted EBITDA Margin Adjusted EBITDA margin is a non-IFRS measure that represents Adjusted EBITDA expressed as a percentage of net sales. We use Adjusted EBITDA margin to measure the success of our businesses in managing our cost base and improving profitability. (dollars in millions) Net sales (1) Adjusted EBITDA Adjusted EBITDA margin For the year ended December 30, 2023 3,559.3 770.2 21.6 % $ $ December 31, 2022 3,554.2 705.9 $ $ 19.9 % (1) “Net sales” is the same as “Revenue” in the consolidated financial statements prepared under IFRS Core growth reconciliations Core revenue growth is a non-IFRS measure which represents net sales for the period excluding the impacts of movements in average currency exchange rates and the first-year impacts of acquisitions and disposals, when applicable. We present core growth because it allows for a meaningful comparison of year-over-year performance without the volatility caused by foreign currency gains or losses or the incomparability that would be caused by impacts of acquisitions or disposals. Management believes that this measure is therefore useful for securities analysts, investors and other interested parties to assist in their assessment of the operating performance of our businesses. The closest IFRS measure is net sales. (dollars in millions) Net sales for the year ended December 30, 2023 Impact on net sales of movements in currency rates Core revenue for the year ended December 30, 2023 Year ended December 30, 2023 Power Transmission Fluid Power Total $ 2,181.9 $ 1,377.4 $ 3,559.3 18.9 2,200.8 (10.0) 1,367.4 8.9 3,568.2 Net sales for the year ended December 31, 2022 2,173.7 1,380.5 3,554.2 Increase (decrease) in net sales on a core basis (core revenue) $ 27.1 $ (13.1) $ 14.0 Core revenue growth (decline) 1.2 % (0.9) % 0.4 % (dollars in millions) Net sales for the year ended December 31, 2022 Impact on net sales of movements in currency rates Core revenue for the year ended December 31, 2022 Year ended December 31, 2022 Power Transmission Fluid Power Total $ 2,173.7 $ 1,380.5 $ 3,554.2 149.2 2,322.9 35.9 1,416.4 185.1 3,739.3 Net sales for the year ended January 1, 2022 2,216.3 1,258.1 3,474.4 Increase in net sales on a core basis (core revenue) $ 106.6 $ 158.3 $ 264.9 Core revenue growth 4.8 % 12.6 % 7.6 % 36 Results for the year ended December 30, 2023 compared to the results for the year ended December 31, 2022 VIII. Business Performance Summary Gates Performance (dollars in millions) Revenue Cost of sales Gross profit Selling and distribution costs Finance and administrative expenses Research and development costs Transaction-related expenses Asset impairments Other operating expenses Operating profit from continuing operations Interest expense Interest income Other (expenses) income Profit before tax from continuing operations Income tax expense Profit for the year from continuing operations Adjusted EBITDA Adjusted EBITDA margin Net sales For the year ended December 30, 2023 3,559.3 (2,192.8) 1,366.5 (283.1) (559.7) (53.8) (2.2) (0.1) (0.2) 467.4 (214.0) 14.5 (26.0) 241.9 (15.7) 226.2 770.2 21.6 % $ $ $ $ $ $ December 31, 2022 3,554.2 (2,280.2) 1,274.0 (291.4) (519.2) (56.6) (2.1) — (1.3) 403.4 (164.8) 3.6 2.1 244.3 (19.3) 225.0 705.9 19.9 % Net sales during Fiscal 2023 were $3,559.3 million, compared to $3,554.2 million during the prior year, an increase of 0.1%, or $5.1 million, driven primarily by a $200.4 million benefit from pricing, partially offset by the impact of lower volumes. In addition, our net sales for Fiscal 2023 were adversely impacted by movements in average currency exchange rates of $8.9 million compared to the prior year, principally due to the strengthening of the U.S. dollar against a number of currencies, in particular the Chinese Renminbi, Turkish Lira, Canadian Dollar, Japanese Yen and Indian Rupee, partially offset by the weakening of the U.S. dollar against the Mexican Peso and the Euro. As such, core sales increased by $14.0 million, or 0.4%, during Fiscal 2023 compared to the prior year. The overall core sales improvements were primarily driven by increases in sales to customers in our automotive channels, with automotive replacement sales up by 6.1% and automotive first fit sales up by 7.5%. The majority of this growth was focused in EMEA, Greater China and South America, where automotive sales grew by 15.4%, 6.9% and 15.4%, respectively, during Fiscal 2023 compared to the prior year. Total sales to industrial end markets decreased by 3.2% during Fiscal 2023 compared to the prior period, particularly driven by a decrease in sales in the diversified industrial and personal mobility end markets of 7.1% and 24.6%, respectively, in comparing to the prior period. Particularly, the diversified industrial end market experienced sales declines of 12.4%, 3.5% and 12.8%, respectively, in EMEA, North America and Greater China during Fiscal 2023 compared to the prior year. Personal mobility experienced sales declines of 28.5% and 28.8%, respectively, in North America and EMEA during Fiscal 2023 compared to the prior year. 37 Cost of sales Cost of sales for Fiscal 2023 was $2,192.8 million, compared to $2,280.2 million for the prior year, a decrease of 3.8%, or $87.4 million. This decrease was primarily attributable to lower volumes, favorable movements in average currency exchange rates and improved inbound freight costs totaling $154.2 million, partially offset by lower absorption of fixed costs and higher inflation related costs. Gross profit As a result of the factors described above, gross profit for Fiscal 2023 was $1,366.5 million, compared to $1,274.0 million for the prior year period, an increase of 7.3% or $92.5 million. Our gross profit margin increased by 260 basis points to 38.4% for Fiscal 2023. Operating profit Operating profit for Fiscal 2023 was $467.4 million, compared to $403.4 million for the prior year period, an increase of 15.9% or $64.0 million. In addition to the increase in gross profits, as described above, the change in operating profit by lower share-based compensation costs of $16.9 million largely due to the March 2022 vesting of certain pre-IPO options recognized in the prior year, partially offset by an increase in labor and benefits expense of $38.4 million. Interest expense (dollars in millions) Debt: Dollar Term Loan Euro Term Loan Dollar Senior Notes Other Loans Interest on lease liabilities Total interest expense for financial liabilities classified at amortized cost Amortization of finance costs and net fair value adjustment (Gain) loss arising on interest rate swaps and interest rates caps as designated hedging instruments in cash flow hedges Other interest expense For the year ended December 30, 2023 December 31, 2022 $ 152.0 $ — 35.5 1.8 6.4 195.7 47.4 (30.1) 1.0 $ 214.0 $ 65.7 16.4 35.4 1.0 5.5 124.0 27.0 12.3 1.5 164.8 Details of our long-term debt are presented in Note 22 to the consolidated financial statements included elsewhere in this report. Interest on debt for Fiscal 2023 increased by $71.7 million when compared to the prior year primarily due to higher interest rates on the Dollar Term Loans. In addition, interest expense on other loans increased by $0.8 million during Fiscal 2023 due to higher interest rates and higher borrowing amounts under the asset-backed revolver. The increase of interest expense on Dollar Term Loans was partially offset by the gain arising on interest rate swaps designated as cash flow hedging instruments. Amortization of finance costs and net fair value adjustment increased by $20.4 million during Fiscal 2023 when compared to the prior year, primarily due to the non-recurring net fair value loss of $30.5 million related to the amendments to the Dollar Term Loans in October 2023. 38 Other (expenses) income (dollars in millions) For the year ended December 30, 2023 December 31, 2022 Interest income on bank deposits $ 14.5 $ Total interest income for financial instruments classified at amortized cost Foreign currency (loss) gain on net debt (1) and hedging instruments Net interest expense on defined benefit pension obligations Foreign currency loss on hyperinflation remeasurement Other Total other (expense) income 14.5 (4.2) (3.6) (10.4) (7.8) (26.0) $ (11.5) $ 3.6 3.6 10.2 (1.4) (2.4) (4.3) 2.1 5.7 (1) “Net debt” is a non-IFRS measure representing the principal amount of our debt less the carrying amount of cash and cash equivalents Other expenses for Fiscal 2023 were $11.5 million, compared to an income of $5.7 million in the prior year. The economies of Türkiye and Argentina are both designated as highly inflationary economies under IFRS. During Fiscal 2023, the foreign currency remeasurement loss related to translation adjustments for entities that operate in highly inflationary economies increased by $8.0 million compared to the prior year period. Additionally, this change was also driven by the impact of net movements in foreign currency exchange rates on net debt and hedging instruments and higher interest costs on post-retirement obligations based on the most recent actuarial valuations, partially offset by increased interest income on our bank deposits. Income tax expense (benefit) For Fiscal 2023, we had an income tax expense of $15.7 million on pre-tax income of $241.9 million, which resulted in an effective tax rate of 6.5% compared to an income tax expense of $19.3 million on pre-tax income of $244.3 million, which resulted in an effective tax rate of 7.9% for Fiscal 2022. The effective tax rate for Fiscal 2023 was driven primarily by tax benefits related to $13.3 million of manufacturing incentives, $12.3 million of unrecognized tax benefits primarily due to audit settlement, $9.9 million of company-owned life insurance deductions, $8.8 million of change in unrecognized deferred tax assets, and $4.4 million of state tax provision (net of federal benefit); offset by tax expense related to $7.4 million of tax on international operations, $1.7 million of currency exchange rate movements and $1.0 million of net other expense. The effective tax rate for Fiscal 2022 was driven primarily by tax benefits of $26.4 million for unrecognized tax benefits due to lapsed statute of limitations, and $15.3 million for the partial recognition of unrecognized deferred tax assets for U.S. foreign tax credits. In addition, we had net $7.6 million of tax expense primarily on earnings from international operations. In December 2021, the OECD published its Pillar Two model rules, which generally provide for a minimum effective tax rate of 15%. In December 2022, the E.U. Commission adopted a Directive to implement Pillar Two in the E.U., containing detailed rules for top up tax in respect of certain low taxed entities. In July 2022, the U.K. released draft legislation to implement the OECD agreed Pillar Two model rules in the U.K., which is expected to apply for accounting periods beginning on or after December 31, 2023. All sets of proposals are subject to exemptions and exclusions, and are generally intended to apply only to entities that are members of a consolidated group with an annual revenue of at least €750 million. However, while the detail of the proposals is subject to change and the impact on the Company will need to be determined by reference to the final rules, we do not currently anticipate a material impact. Adjusted EBITDA Adjusted EBITDA for Fiscal 2023 was $770.2 million, compared to $705.9 million in the prior year, an increase of 9.1% or $64.3 million. The Adjusted EBITDA margin was 21.6% for Fiscal 2023, a 170 basis point increase from the prior year. The increase in Adjusted EBITDA was driven primarily by the increase in gross profit of $92.5 million, as described above, partially offset by higher labor and benefit expenses. 39 For a reconciliation of Adjusted EBITDA to profit from continuing operations for each of the periods presented and the calculation of the Adjusted EBITDA margin, see the section entitled “VII. Key Performance Indicators” of this Strategic Report. Analysis by Operating Segment Power Transmission (61.4% of Gates’ net sales for the year ended December 30, 2023) (dollars in millions) Net sales Adjusted EBITDA Adjusted EBITDA margin For the year ended December 30, 2023 December 31, 2022 Period over period change $ $ 2,181.9 469.6 $ $ 2,173.7 418.1 21.5 % 19.2 % 0.4% 12.3% Net sales in Power Transmission for Fiscal 2023 increased by 0.4%, or $8.2 million, driven primarily by a $116.3 million benefit from pricing, partially offset by the impact of lower volumes. In addition, Power Transmission net sales were adversely impacted by movements in average currency exchange rates of $18.9 million. As such, core sales increased by 1.2%, or 27.1 million, compared to the prior year. Power Transmission’s overall core sales to automotive customers grew by 8.1% during Fiscal 2023, compared to the prior year period. Automotive growth during Fiscal 2023 was focused in EMEA, South America and Greater China, which experienced core sales growth of 15.4%, 16.6% and 6.3%, respectively, compared to the prior year period. The overall growth in power transmission core sales was partially offset by a 7.6% decline of sales in the industrial channel during Fiscal 2023, compared to the prior year. The decline within the industrial channel was focused in EMEA and North America, with core sales declines of 17.9% and 8.4%, respectively, compared to the prior year period. Personal mobility and diversified industrial experienced declines of 26.9% and 7.8%. respectively, compared to the prior year period, primarily in North America and EMEA. Power Transmission Adjusted EBITDA for Fiscal 2023 increased by 12.3% or $51.5 million compared to the prior year, driven primarily by the benefit from pricing, partially offset by lower volumes and higher inflation-related costs. As a result, the Adjusted EBITDA margin for Fiscal 2023 was 21.5%, a 230 basis point increase from the prior year. Fluid Power (38.6% of Gates’ net sales for the year ended December 30, 2023) (dollars in millions) Net sales Adjusted EBITDA Adjusted EBITDA margin For the year ended December 30, 2023 1,377.4 300.6 21.8 % $ $ December 31, 2022 1,380.5 287.8 20.8 % $ $ Period over period change (0.2%) 4.4% Net sales in Fluid Power for Fiscal 2023 decreased by 0.2%, or $3.1 million, compared to the prior year, driven primarily by the impact of lower volumes, mostly offset by an $84.1 million benefit from pricing. In addition, Fluid Power net sales were favorably impacted by movements in average currency exchange rates of $10.0 million. As such, core sales decreased by 0.9%, or $13.1 million compared to the prior year. Fluid Power’s core sales decline in Fiscal 2023 was driven by decreased sales to both industrial and automotive customers. Sales to industrial channels decreased by 1.0%, and automotive channels declined by 0.2%, respectively, compared to the prior year period. The decline of industrial sales were primarily in North America, South America and Greater China, which had declines of 1.3%, 18.5% and 13.2%, respectively, compared to the prior year period. The agriculture and diversified industrial end markets, which drove most of the industrial sales, had declines of 11.9% and 5.7%, respectively. These declines were partially offset by an increase in sales to the energy end market of 7.5%. Fluid Power Adjusted EBITDA for Fiscal 2023 increased by 4.4%, or $12.8 million compared to the prior year period, driven primarily by pricing, partially offset by lower volumes and increased labor and benefits cost. As a result, the Adjusted EBITDA margin was 21.8%, a 100 basis point increase from the prior year. 40 Treasury Responsibilities and Philosophy IX. Liquidity and Capital Resources Our primary liquidity and capital resource needs are for working capital, debt service requirements, capital expenditures, share repurchases, facility expansions and acquisitions. We expect to finance our future cash requirements with cash on hand, cash flows from operations and, where necessary, borrowings under our revolving credit facilities. We have historically relied on our cash flow from operations and various debt and equity financings for liquidity. From time to time, we enter into currency derivative contracts to manage currency transaction exposures. Similarly, from time to time, we may enter into interest rate derivatives to maintain the desired mix of floating and fixed rate debt. As market conditions warrant, we and/or our Sponsor may from time to time seek to repurchase securities that we have issued or loans that we have borrowed in privately negotiated or open market transactions, by tender offer or otherwise. Subject to any applicable limitations contained in the agreements governing our indebtedness, any such purchases may be funded by existing cash or by incurring new secured or unsecured debt, including borrowings under our credit facilities. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material. Any such purchases may relate to a substantial amount of a particular tranche of debt, with a corresponding reduction, where relevant, in the trading liquidity of that debt. In addition, any such purchases made at prices below the “adjusted issue price” (as defined for U.S. federal income tax purposes) may result in taxable cancellation of indebtedness income to us, which may be material, and result in related adverse tax consequences to us. It is our policy to retain sufficient liquidity throughout the capital expenditure cycle to maintain our financial flexibility. We do not have any meaningful debt maturities until 2026; however, we regularly evaluate market conditions, our liquidity profile, and various financing alternatives for opportunities to enhance our capital structure, and may refinance all or a portion of our indebtedness on or before maturity. We do not anticipate any material long-term deterioration in our overall liquidity position in the foreseeable future, and believe that we have adequate liquidity and capital resources for the next twelve months. Cash Flow Year ended December 30, 2023 compared to the year ended December 31, 2022 Cash provided by operating activities was $537.7 million during Fiscal 2023 compared to cash provided by operating activities of $293.0 million during the prior year period, driven primarily by an improvement of $208.6 million in trade working capital movement, combined with improved operating performance in Fiscal 2023 and a decrease of $7.3 million in taxes paid. These increases in operating cash flows are partially offset by an increase of $36.4 million cash paid for interest in the current year period. Net cash used in investing activities during Fiscal 2023 was $81.8 million, compared to $90.7 million in the prior year period. The decrease of cash used in investing activities was primarily driven by decreased capital expenditures of $15.6 million in Fiscal 2023 compared to the prior year period, partially offset by a $6.0 million increase in net cash paid under company-owned life insurance policies. Net cash used in financing activities was $313.9 million during Fiscal 2023, compared to $280.6 million in the prior year period. Fiscal 2023 outflows were primarily related to the $251.7 million paid to acquire shares under a share repurchase program through an intermediary from Blackstone as further described in Note 29 to the consolidated financial statements included elsewhere in this report, as compared to $175.9 million paid to acquire shares under a share repurchase program in Fiscal 2022. The increase of cash outflows for share repurchases compared to the prior year period was partially offset by decreased debt issuance costs paid of $22.0 million in Fiscal 2023, $12.3 million lower debt repayments net of borrowings, and $10.5 million in lower dividends paid to non-controlling interest shareholders in Fiscal 2023. 41 Borrowing Headroom As of December 30, 2023, our asset-backed revolving credit facility had a borrowing base of $250.0 million, being the maximum amount we can draw down based on the current value of the secured assets. As of December 30, 2023, there were letters of credit outstanding against the facility amounting to $29.7 million. We also have a secured revolving credit facility that provides for multi-currency revolving loans up to an aggregate principal amount of $250.0 million, with no amounts drawn as of December 30, 2023. As of December 30, 2023, our total committed borrowing headroom was $470.3 million, in addition to cash and cash equivalents balances of $720.6 million. Cash Balances As of December 30, 2023, our total cash and cash equivalents were $720.6 million, compared to $578.4 million as of December 31, 2022. Restricted cash was $3.4 million as of December 30, 2023, compared to $3.0 million as of December 31, 2022, including $0.5 million as of December 30, 2023 and $0.6 million as of December 31, 2022, which was held in escrow for insurance purposes. Cash held in our non-wholly owned Asian subsidiaries was $182.4 million and $161.3 million as of December 30, 2023 and December 31, 2022, respectively. Capital Structure Details of the issued share capital, together with details of the movements in Gates Industrial Corporation plc’s issued share capital during the year are shown in Note 7 to the accompanying parent company financial statements. The Company has one class of ordinary shares which carry no right to fixed income. Each share carries the right to one vote at general meetings of the Company. There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association and prevailing legislation, including any securities laws applicable to holders of the Company’s shares. The Board is not aware of any agreements between holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights. No person has any special rights of control over the Company’s share capital and all issued shares are fully paid. Under its Articles of Association, the Board has authority to issue 3,000,000,000 ordinary shares. Given the Board’s existing authority to issue shares shall expire on 7 October 2024, new authorities are being recommended by the Board for approval by the Company’s shareholders at the 2024 AGM. X. Financial Risk Management Objectives and Policies Our market risk includes the potential loss arising from adverse changes in foreign currency exchange rates, interest rates, commodity prices, and the credit risk of our customers and third-party depository institutions that hold our cash and short-term deposits. From time to time, we use derivative financial instruments, principally foreign currency swaps, forward foreign currency contracts, interest rate caps (options) and interest rate swaps, to reduce our exposure to foreign currency risk and interest rate risk. We do not hold or issue derivatives for speculative purposes and monitor closely the credit quality of the institutions with which we transact. Our objective in managing these risks is to reduce fluctuations in earnings and cash flows associated with changes in foreign currency exchange rates and interest rate movements. On a regular basis, we monitor third-party depository institutions that hold our cash and short-term investments and we diversify these assets among counterparties to minimize exposure to any one of these entities. We also monitor the creditworthiness of our customers and suppliers to mitigate any adverse impact. See Note 23 to our audited consolidated financial statements included elsewhere in this report for further information of the Company’s financial risk management. 42 XI. Employees As of December 30, 2023, we employed approximately 14,700 full time employees worldwide. Approximately 6,800 of our employees are located in North America, 4,300 in EMEA and U.K., 2,800 in Greater China and East Asia & India, and 800 in South America. Approximately 68% of our work force consists of production employees, while approximately 24% of our global workforce was female and 76% male. Of approximately 1,200 managerial employees, 19% were female, and 40% of our executive officers were female. Some of our employees are members of labor unions, and over many years we have been able to maintain successful relationships with the unions and employment organizations. To date, employee relations have been flexible and constructive as we continue to pursue lean manufacturing improvements in our plants. Gates employs agency contractors, temporary employees and contract employees as a relatively small percentage of our workforce. The number of associates in these categories typically varies with demand on our factories and distribution centers. Gates employs a small number of part-time associates across the globe. Health and safety We care about our employees and we believe that our commercial success is linked to a safe and healthy workforce. We are therefore committed to responsible business practices through the establishment, implementation, and maintenance of the Gates Global HSE Standards Manual. We strive for zero injuries and an incident-free workplace and have achieved significant progress towards this goal through targeted risk reduction activities, improved case management, increased accountability to corrective action identification and closure, and more effective safety observation programs. Total rewards Our compensation philosophy is to offer a compensation program that enables us to attract, motivate, reward and retain high- caliber employees who are capable of creating and sustaining value for our shareholders over the long-term and to design compensation and benefit programs that provide a fair and competitive compensation opportunity in order to appropriately reward employees for their contributions to our success. Globally, we offer the opportunity to earn short-term and long-term incentive awards to eligible employees, including manufacturing incentive programs to many of our production employees. Employee development and training Gates is committed to developing and unlocking the potential of our people and we make significant investments in training and professional development. Our learning and development framework supports the development of leadership and professional skills in three ways: on-the-job, learning from others, and participating in formal training programs. Some of the specific global and regional development experiences we offer include: a global mentoring program that promotes a diverse and inclusive culture and knowledge transfer opportunities between our mentors and mentees; a six-tiered leadership development program beginning with a program for those who aspire to be leaders, to first-time managers and continues through a career journey up to a program that supports our senior executives in their roles; structured development and succession planning process that identifies key talent and develops our employees to continue working toward their career goals; and early career programs designed to develop talent in different areas of the business, such as engineering and commercial. For our production employees, we provide skills-based training and certification opportunities. Community involvement Gates recognizes that success as a business enterprise is affected by the vitality of the communities in which our people work and live, and of the nonprofit organizations that serve the needs and interests of these communities. The Gates Industrial Corporation Foundation (an independent charitable organization funded by the Company) plays an important role in our philanthropy program and actively supports civic, community, arts, cultural, health and welfare initiatives, as well as education programs and scholarships. In the U.S., we have a dollar-for-dollar matching program for qualifying charitable contributions made by our employees. Matching donations are made by the Gates Industrial Corporation Foundation, which also donates to selected charities on behalf of the Company. Outside of the U.S., Gates and our employees provide support to many local charities and projects in a variety of countries in which we operate. 43 Human rights issues and ethical conduct The Company is committed to high ethical standards and conducting its business in compliance with the principles laid out in the U.K. Modern Slavery Act and applicable human rights, labor and employment, discrimination, health and safety, and immigration laws of the countries in which we operate. The Company does not condone or use child labor, forced labor or human trafficking in any of its operations and endeavors to engage with other companies that embrace similar values and respect for human rights. The Company maintains various policies which adhere to human rights principles and foster high ethical standards in its business, including policies and guidelines on anti-corruption, anti-boycott, global antitrust and fair competition, conflict of interest, and human rights. Our employees receive training on these policies and have access to them at each of our facilities. Through the communication, promotion and administration of these policies, the Company expects all employees to uphold the highest levels of honesty, integrity and ethical standards, to act in full compliance with all applicable laws in the performance of their roles and the conduct of our business and operations and to avoid actual or apparent conflicts of interest between their personal and professional affairs. This includes striving to maintain a professional, safe and discrimination-free work environment and hiring, evaluating and promoting employees on the basis of their ability, achievements, experience and performance. Ethnic, sexual, racial, religious or any other type of harassment is unacceptable at any of our locations. The Company is committed to equal opportunity in recruiting, hiring, developing, promoting and compensating employees without regard to age, race, color, gender, sexual orientation, gender identity or expression, transgender status, religion, national origin, ancestry, citizenship, disability, protected veteran status, marital status, genetic information, pregnancy, childbirth or related medical conditions, or any other basis protected by federal, state or local law. The Company prohibits employees from making or offering to make gifts, payments or other inducements to certain recipients if the gifts, payments or inducements are made to corruptly influence the decision or action of any government employee, official, candidate or political party, or to gain an inappropriate advantage in business. The Company prohibits any director, officer, employee and any third party working on behalf of the company from engaging in the facilitation or acts leading to tax evasion. To encourage reporting of violations of company policies, including unethical behavior and discrimination, the Company maintains a whistleblower hotline through which employees may call or write anonymously to report concerns. Neither the Company, the Audit Committee nor any other director or agent of the Company will discharge, demote, suspend, threaten, harass or in any other manner discriminate or retaliate, directly or indirectly, against any person who, in good faith, makes a report. The compliance office thoroughly investigates each allegation and inappropriate conduct or behavior is subject to disciplinary action, up to and including termination. Results of each investigation and action taken are reported to the audit committee of our board of directors on a quarterly basis. Diversity, equity and inclusion The Gates management team is committed to creating and sustaining an inclusive workplace that understands and values individual differences across demographics, experiences and perspectives. We strive to foster an environment where every employee has an equal opportunity to be heard, can contribute their thoughts, and be recognized for their individual efforts. We want to ensure that collaborative and respectful business practices in a performance-based, supportive environment enable every employee to realize their career ambitions. To that end, we have a Diversity, Equity & Inclusion (“DE&I”) Steering Committee, consisting of executive leadership, which works with our DE&I Council, consisting of highly talented and collaborative non-executive team members, to foster a culture of belonging that embraces our workforce's unique backgrounds, talents, and viewpoints. In 2022, the DE&I Council formalized three main committees to drive our multi-year DE&I strategy and deliver awareness and best practices: Communications, Culture & Branding; Diversity Recruitment; and Career & Leadership Development. The DE&I Council also launched three Business Resource Groups in North America (Pan-Asian American, LGBTQ+, and Veterans & Families) to continue creating an environment that encourages relationship building and accepts each of our employees' individual attributes and experiences. Additionally, the DE&I Council also created a 2023 calendar of North America diversity events, refreshed our DE&I website, updated our global mentoring program, and established relationships with minority-serving institutions for future engagement. Our leadership team conducted roundtables to determine plans to expand our DE&I initiatives outside of North America for 2024. Our ongoing efforts aim to drive awareness on the importance of DE&I and engage employees across our communities through a variety of partnerships and outreach to identify opportunities for meaningful connection and support of local efforts. 44 Additionally, the charter for the Nominating and Governance Committee of our Board requires that such committee review and make recommendations regarding the composition and size of the Board to ensure the Board has the requisite expertise and its membership consists of persons with sufficiently diverse and independent backgrounds. Employee gender diversity The following table sets forth the number of male and female directors, senior managers and other employees of the Company as of December 30, 2023 and December 31, 2022. (in ones) Directors Senior Managers Employees of the Company As of December 30, 2023 As of December 31, 2022 Male Female Male Female 6 42 11,131 11,179 3 13 3,540 3,556 5 51 11,311 11,367 3 13 3,653 3,669 Refer to “Environment” in the Directors’ Report. XII. Environmental Matters The Strategic Report was approved by our board of directors and was signed on its behalf on May 2, 2024 by: Ivo Jurek Director and Chief Executive Officer Company registered number: 10980824 45 Gates Industrial Corporation plc DIRECTORS’ REPORT The directors present their annual report on the affairs of the Group, together with the financial statements and auditor’s report for the year ended December 30, 2023. Please see Note 2 to the accompanying consolidated financial statements and Note 2 to the parent company financial statements, respectively, for further details relating to the basis of preparation of those financial statements. As permitted by section 414C(11) of the Companies Act 2006, the directors have elected to set out in the Strategic Report information that is required by Schedule 7 to the Accounting Regulations to be contained in the Directors’ Report. The information in respect of which they have done so is identified within this report. Board of directors The following table presents certain information as of May 2, 2024 with respect to our board of directors (the “Board”) who held office during the period and up to the date of signing of the financial statements: Name Ivo Jurek Neil P. Simpkins James W. Ireland, III Stephanie K. Mains Wilson S. Neely Molly P. Zhang (also known as Peifang Zhang) Alicia L. Tillman Fredrik J. Eliasson Seth A. Meisel Dividends Appointed September 25, 2017 November 20, 2017 November 7, 2018 February 28, 2019 April 1, 2020 July 1, 2020 April 27, 2021 October 24, 2022 January 1, 2023 The Company did not pay dividends during the period from incorporation to December 30, 2023. The Board currently has no plans to pay dividends on the Company’s ordinary shares. Future dividends, if any, and the timing of declaration of any such dividends, will be at the sole discretion of the Board and will depend on, among other things, our results of operations, cash requirements and surplus, financial condition, contractual restrictions and other factors that our Board may deem relevant, as well as our ability to pay dividends in compliance with the Companies Act 2006. Going concern The directors have, at the time of approving the financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. Refer to Note 2 to the accompanying consolidated financial statements for going concern assessment. Political donations No political donations were made by the Company during 2023 or 2022. Use of financial instruments Information on the Company’s risk management process and the policies for mitigating certain types of risk are set out in section X of the Strategic Report. Information about the use of financial instruments by the Company is set out in Note 23 to the accompanying consolidated financial statements. 46 Significant events since year end Other than the February 2024 Offering as described in detail in the “Acquisition of company shares” section below, the Company is not aware of any other events or transactions that occurred subsequent to the balance sheet date but prior to May 2, 2024 that would require recognition or disclosure in its consolidated financial statements. Future developments Section I of the Strategic Report sets out the Company’s strategy and outlook. The directors do not anticipate any significant changes in the foreseeable future. Research and development Details of the activities of the Company in the field of research and development are set out in section II of the Strategic Report. Branches Gates Industrial Corporation plc is incorporated in the U.K., with its corporate functions located in Denver, Colorado in the U.S., and has no branches. Acquisition of company shares On April 28, 2023, the Company’s Board of Directors approved another share repurchase program for up to $250 million in authorized share repurchases. On May 17, 2023, the Company, certain selling shareholders affiliated with Blackstone and the representatives of the several underwriters entered into an underwriting agreement pursuant to which the selling shareholders agreed to sell to the underwriters 22,500,000 ordinary shares of the Company at a price of $11.3975 per ordinary share (the “2023 Offering”). The selling shareholders also granted the underwriters an option to purchase up to 3,375,000 additional ordinary shares of the Company; this option was exercised in full on May 18, 2023. The Company did not receive any proceeds from the sale of ordinary shares in the 2023 Offering, which closed on May 23, 2023. In connection with the 2023 Offering, the Company repurchased 21,934,634 ordinary shares through Citigroup from the same selling shareholders at a price of $11.3975 per ordinary share for an aggregate consideration of approximately $250.0 million (the “2023 Repurchase”), plus costs paid directly related to the transaction of $1.7 million. This repurchase was funded by cash on hand and a borrowing of $100.0 million under Gates’ asset-backed revolving credit facility. All shares repurchased pursuant to the 2023 Repurchase have been cancelled. Following the 2023 Offering and the 2023 Repurchase, shareholders affiliated with Blackstone no longer beneficially own a majority of our outstanding ordinary shares and therefore we are no longer considered a “controlled company” within the meaning of the NYSE corporate governance standards. On February 7, 2024, the Company’s Board approved another share repurchase program for up to $100 million in authorized share repurchases. On February 12, 2024, the Company, certain selling shareholders affiliated with Blackstone, and the representatives of the several underwriters entered into an underwriting agreement pursuant to which the selling shareholders agreed to sell to the underwriters 17,500,000 ordinary shares of the Company at a price of $12.045 per ordinary share (the “February 2024 Offering”). The selling shareholders also granted the underwriters an option to purchase up to 2,625,000 additional ordinary shares of the Company; this option was exercised in full on February 16, 2024. The Company did not receive any proceeds from the sale of ordinary shares in the February 2024 Offering, which closed on February 16, 2024. In connection with the February 2024 Offering, the Company repurchased 4,151,100 ordinary shares through Citigroup from the same selling shareholders at a price of $12.045 per ordinary share for an aggregate consideration of approximately $50.0 million (the “2024 Repurchase”), plus costs paid directly related to the transaction of $0.3 million. This repurchase was funded by cash on hand. All shares repurchased pursuant to the 2024 Repurchase have been cancelled. Information relating to the compensation plans under which equity securities of the Company are authorized for issuance is set out under the Directors’ Remuneration Report and is incorporated herein by reference. Disabled Persons The Company gives consideration to applications for vacancies from disabled persons when particular job requirements are within their capabilities. The Company also endeavors to provide equal opportunity in the training, promotion and career development of disabled persons. In the event of staff becoming disabled, every effort will be made to ensure that their employment with the Company continues and that appropriate training is arranged. 47 Employee engagement Information relating to employee engagement is incorporated herein by reference to section X of the Strategic Report. Business relationships Information relating to our business relationships is incorporated herein by reference to the Section 172 Statement in the Strategic Report. Qualifying indemnity provisions Each director is covered by appropriate directors’ liability insurance, and the Company has deeds of indemnity with its executive officers and directors (together with the directors of certain associated companies) which, among other things, indemnify the individual against certain liabilities that may arise by reason of his or her status or service as a director or officer and advance expenses incurred as a result of certain proceedings. These agreements are intended to provide indemnification rights to the fullest extent permitted under applicable law and under our governing documents. Environment Gates is committed to conducting our business with respect for the environment and the communities in which we operate, as summarized below. Additional details can be found in our annual Sustainability Report, which is posted on our website. Our climate- related disclosures in compliance with the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 and sections 414CA and 414CB of the Companies Act 2006 are set out in section V of the Strategic Report. Eco-driven innovation With materials science advancements, design expertise and advanced processing technologies, Gates continually aims to engineer products that meet and exceed the growing needs and diverse challenges of our customers. By considering the concept of circular economy as a key driver of innovation, we are able to increase the use of recycled and renewable materials in combination with enhanced resource efficiency during manufacturing. This produces significant differentiators between Gates and our competitors. Eco-innovation™ at Gates aims to reduce the negative impacts on the environment and extend the useful life of our products, realizing sustainable benefits while delivering the highest level of performance to our customers. This results in products that: • • • • Reduce energy consumption in product applications (many of our products reduce energy losses during use, lowering the overall carbon footprint). Optimize material efficiency and maximize logistics and distribution efficiency (by reducing material consumption and weight, we actively contribute to our customers’ desire to meet tightening environmental and fuel economy regulations; reduced material consumption also equates to reduced waste-to-landfill at end-of-life; lighter products that require less material allow for increased packing and shipping density). Utilize renewable materials (as appropriate, Gates engineers seek to utilize renewable materials during design and manufacturing). Reduce or eliminate harmful materials and chemicals of concern (by reducing or eliminating such materials and chemicals from our product lineup, we help minimize negative impacts to human health and the environment wherever possible, facilitating recycling and the circular economy). Our global materials database tracks the use of chemicals across our operations. It allows us to identify the use of specific materials and chemicals of concern and make substitutions as appropriate. Energy conservation Reducing energy consumption is a key aspect of our environmental sustainability program. We work to improve the energy efficiency of our operations through initiatives to optimize energy consumption, avoid GHG emissions and reduce costs. Gates continues to establish partnerships with energy providers and local governments that make use of renewable energy sources. 13 of our facilities are certified to ISO 50001 for energy management. All global locations set their own energy reduction targets aligning to our corporate goals and report their energy performance and efficiency metrics in common units. Many site-based projects - such as the installation of energy-efficient equipment - allow our 48 capital investments to better facilitate reaching our site-based targets. Additional initiatives include an efficiency motor replacement program, LED and natural lighting projects, use of biomass boilers and solar panels, shift and equipment-use planning, and shutdown programs to conserve electricity when operations or machinery are not in use. Water conservation Water conservation is a crucial component of our sustainability philosophy. Some of Gates’ global locations operate in water- stressed regions that are susceptible to drought or arid environmental conditions. Therefore, our approach emphasizes reducing water withdrawal and reusing or recycling water. All Gates sites monitor, report and have site-based water initiatives aimed at achieving our goal of reducing water consumption year over year and to better use water in an efficient manner so as to help conserve this valuable resource. The majority of our water supply comes from third-party sources, and originates from surface water. However, some of our global sites do rely on well water. Wastewater is also a closely monitored aspect of our water management approach. All sites monitor, treat and comply with all wastewater regulatory requirements and are required to have a wastewater management plan which includes an annual review and audits documenting all water entering and leaving the facility. These audits include an annual gap assessment, mapping process and environmental impact evaluation. Our team continues to find innovative ways to reduce water withdrawal and improve water recycling in a collaborative effort to reduce Gates' water consumption year-over-year. These innovations include recycling water at certain of Gates facilities, water consumption monitoring programs, and using closed-loop water heating and cooling systems in the majority of our facilities. Waste and recycling Gates continues to identify opportunities and develop solutions to address the waste produced at our sites across the world, and we work to divert waste from landfills where possible. All of our manufacturing and distribution facilities are driven to uphold Gates’ high-quality standards and reduce scrap to help reduce our waste footprint. Environmental regulations under which we operate Our operations, products and properties are subject to extensive U.S. and foreign federal, state, local, and provincial laws and regulations relating to environmental, health and safety protection, including laws and regulations governing air emissions, wastewater discharges, material handling and transportation, waste management and disposal, product stewardship, toxicity and hazardous substances, and workplace health and safety, as well as the investigation and clean-up of contaminated sites. Under certain environmental laws, the obligation to investigate and remediate contamination at a facility may be imposed on current and former owners, lessees or operators or on persons who may have sent waste to that facility for disposal. We are currently performing environmental investigations and/or remediation at a number of former and current facilities in the United States and are incurring costs in relation to a few offsite waste disposal sites. 49 Streamlined energy and carbon reporting Our Scope 1 and Scope 2 greenhouse gas emissions and energy consumption estimates for 2023 and 2022, based on the parameters below, are as follows: Metric tons of CO2 equivalent Scope 1 - direct emissions from onsite fuel combustion Scope 2 - indirect emissions from the generation of purchased energy Total Scope 1 and Scope 2 emissions Scope 1 - biogenic - direct emissions derived from biogenic sources Millions of kWh For the year ended December 30, 2023 For the year ended December 31, 2022 UK and offshore Global (excluding UK and offshore) UK and offshore Global (excluding UK and offshore) 7,213 2,048 9,261 120,032 7,725 121,244 148,513 268,545 2,315 10,040 160,685 281,929 — 19,896 — 21,121 Energy consumption used to calculate emissions 46.0 923.3 49.2 977.6 Metric tons of CO2 equivalent per million dollars of net sales Scope 1 - direct emissions from onsite fuel combustion Scope 2 - indirect emissions from the generation of purchased energy 62.3 17.7 34.9 43.1 67.6 20.3 35.2 46.7 Reporting period - The reporting period used for this information is January 1, 2022 to December 31, 2022, and December 31, 2022 to December 30, 2023. Boundary summary - All manufacturing facilities Gates owns or operationally controls were included, except as noted in the exclusions below. Data methodology and Emissions Factors - Gates adheres to the World Resources Institute/World Business Council for Sustainable Development Greenhouse Gas Protocol: A corporate accounting and reporting standard, revised edition (WRI/WBCSD GHG Protocol), to calculate GHG emissions. We are in the process of obtaining reasonable assurance on the Total Scope 1 and Total Scope 2 emissions data from ERMCVS, an independent third-party assurance provider, in accordance with International Standard on Assurance Engagements ISAE 3000 (Revised) ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’ issued by the International Auditing and Standards Board. Invoices and measurements were collected for relevant energy and emission sources, material to each site which may include electricity, natural gas, steam, hot water, diesel fuel, liquid petroleum gas, gasoline, light fuel oil, wood biomass and rice husk. Monthly data is captured in a dedicated software platform and external third- party invoice collection service and is checked for accuracy and timeliness monthly per Gates internal standards. Where actual data was not available, estimates were used. For example, in cases where data is not available for a full 12-month period, available data is used to extrapolate and estimate the values for missing data. We continue to improve our data collection efforts and methodologies. In 2022, Scope 1 emission factors used were primarily from the UK Department for Environment, Food & Rural Affairs (“DEFRA”). In an effort to better align with international standards for 2023 and 2022 data, Scope 1 emission factors used are primarily from the Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report (AR5). In addition, we made progress in data completeness and accuracy, which we applied to the prior year data. Accordingly, the numbers reflected above are different than those that were previously reported. Scope 1 emission factors used are primarily from the IPCC AR5. Residual emission factors for biomass combustion are sourced from the U.S. EPA’s Greenhouse Gas Emissions Factors Hub and include emissions from methane (CH4) and nitrous oxide (N2O). Location-based Scope 2 emissions factors for the U.S. are from the US EPA’s eGRID Power Profiler tool and non-US sites are primarily from the International Energy Agency (IEA (2022), GHG Emissions from Energy), adjusted where more recent country or region-specific governmental factors are published. Emissions are converted to carbon dioxide-equivalents (CO2e) using Global Warming Potentials from the United Nations IPCC AR5 Report. Market-based emissions are not included because we do not have emission factors from all our energy providers. Gates will continue to track our emissions and refine our process with an aim to reach our goal to reduce our total GHG emissions by 15% by 2025, based on a 2019 baseline. 50 Materiality threshold - Materiality for Gates is set at 5% of total emissions with all facilities estimated to contribute >1% of total emissions included. Exclusions - • Most commercial and sales offices, whose impacts are anticipated to be below the materiality threshold; and • Scope 3 indirect emissions. Energy efficiency actions - We continue to implement initiatives to curb energy consumption including installing energy recovery, energy-efficient equipment, converting to natural or LED lighting, and increasing renewable energy usage. Disclosure of information to auditors In accordance with section 418 of the Companies Act 2006, each Director in office at the date the Directors’ Report is approved confirms that: • • so far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and he/she has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006. Independent auditors Deloitte LLP have indicated their willingness to continue in office, and a resolution that they be re-appointed will be proposed at the annual general meeting. Approved by the board of directors and signed on its behalf by Ivo Jurek Director and Chief Executive Officer May 2, 2024 1 Bartholomew Lane London EC2N 2AX United Kingdom 51 Gates Industrial Corporation plc STATEMENT OF DIRECTORS’ RESPONSIBILITIES The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the group financial statements in accordance with United Kingdom adopted international accounting standards (“IFRS”). The directors have chosen to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (“United Kingdom Accounting Standards and applicable law”), including FRS 101 “Reduced Disclosure Framework”. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing the parent company financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgments and accounting estimates that are reasonable and prudent; • • state whether applicable U.K. Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. In preparing the consolidated financial statements, the directors are required to: • • • properly select and apply accounting policies; present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; provide additional disclosures when compliance with the specific requirements of the financial reporting framework are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company’s financial position and financial performance; and • make an assessment of the Company’s ability to continue as a going concern. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 52 Gates Industrial Corporation plc (the “Company” or “Gates” or “us”) DIRECTORS’ REMUNERATION REPORT ANNUAL STATEMENT OF THE CHAIR OF THE COMPENSATION COMMITTEE Dear Shareholders: I am pleased to present the Company’s remuneration report for the financial year ended December 30, 2023 (“Fiscal 2023”). This remuneration report is divided into two sections: 1. 2. this annual statement (the “Annual Statement”) from the Chair of the Compensation Committee; and the annual report on remuneration for Fiscal 2023 setting out Director compensation and detailing the link between Company performance and compensation for the period specified therein. The annual report on remuneration, together with the Annual Statement (the “Annual Report on Remuneration”), is subject to a non-binding advisory vote of the shareholders at the annual general meeting to be held on Thursday, June 20, 2024 (the “AGM”). In January 2018, the Company successfully completed an initial public offering (the “IPO”) on the New York Stock Exchange (“NYSE”). As a NYSE listed company, the Company prepared its proxy statement for the AGM in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). In this proxy statement on Schedule 14A, which was filed with the SEC on or about April 26, 2024, and can be found on the Company’s investor website at investors.gates.com, you will find the Company’s compensation discussion and analysis (“CD&A”) setting forth its overall philosophy regarding compensation of its executive officers, which should be read in conjunction with this Directors’ Remuneration Report. In addition to the rules and regulations of the SEC, as a U.K. public limited company, the Company is also subject to the Companies Act and the regulations promulgated thereunder. Accordingly, the Company has produced this Directors’ Remuneration Report. The Company’s business and affairs are managed under the direction of its Board of Directors (the “Board”), which currently consists of nine directors, including Mr. Jurek (its Chief Executive Officer and sole “Executive Director”). The Company’s non- employee directors, including its Chair, are referred to as “Non-Executive Directors.” The Company is party to a shareholders’ agreement with certain affiliates of Blackstone Inc. (its “Sponsor”). This agreement grants the Sponsor the right to designate nominees to the Company’s Board subject to the maintenance of certain ownership requirements in the Company. During Fiscal 2023, the Sponsor had two director appointees (Mr. Simpkins and Mr. Meisel). Mr. Simpkins and Mr. Meisel are Non-Executive Directors and are referred to herein as the “Sponsor-affiliated Directors.” As of January 30, 2024, Mr. Simpkins ceased to be a Sponsor-affiliated Director. At the Company’s annual general meeting held on June 9, 2022, its shareholders approved the current directors’ remuneration policy (the “Directors’ Remuneration Policy”), which applies to the material elements of the compensation package for its executive officers, including its Executive Director, and its Non-Executive Directors. Under the Directors’ Remuneration Policy, any Sponsor- affiliated Director receives no compensation for serving on the Board. The Directors’ Remuneration Policy will be in effect until a new policy is submitted for approval at the annual general meeting to be held in 2025, unless an earlier amendment by shareholders is required. To simplify this Directors’ Remuneration Report, the Company has elected not to repeat its Directors’ Remuneration Policy in this Report, which is available in Appendix A to the Company’s 2022 proxy statement on Schedule 14A filed with the SEC on April 28, 2022 and available at www.sec.gov and on its website at http://investors.gates.com. The Board has a compensation committee (the “Compensation Committee”) that oversees risks relating to the Company’s compensation policies and practices. The Compensation Committee provides assistance to the Board for oversight of the compensation packages of directors and executive officers, including the Company’s Executive Director. The Compensation Committee is currently comprised of Mr. Neil P. Simpkins (Chair), Mr. Fredrik Eliasson and Mr. Wilson S. Neely. The Compensation Committee annually reviews the performance of the executive officers and the compensation for the directors and executive officers and, with input and guidance from an independent compensation consultant, approves or recommends to the full Board any changes to their compensation packages in light of such review. The Company is a leading global manufacturer of application-specific fluid power and power transmission solutions. The Company is driven to push the boundaries of materials science to engineer products that continually exceed expectations. To achieve its objectives, the Company aims to be the destination of choice for the best talent. The Company’s philosophy is to offer a 53 remuneration program that will enable it to attract, motivate, reward and retain high-caliber executives who are capable of creating and sustaining value for its customers and shareholders and achieving the Company’s business goals over the long term. In addition, the Company’s remuneration program is designed to provide a fair and competitive compensation opportunity that appropriately rewards executives for their contributions to its success. The Company also believes that a significant portion of each executive’s compensation should be “at risk” and tied to overall Company and individual performance. The Company produced stable revenue in Fiscal 2023 while encountering weaker than expected industrial demand in China and in the global Personal Mobility end markets. The automotive replacement and first fit markets were key growth drivers. Margins increased compared to 2022 supported by a moderation in inflation rates coupled with commercial actions, stabilization in the underlying operating environment and contribution from certain of the company’s enterprise initiatives. Below is the Company’s Annual Report on Remuneration for Fiscal 2023, which sets out the compensation for its directors, including its Executive Director, aligns with the Company’s previously approved directors’ remuneration policy, and supports its pay- for-performance philosophy. For Fiscal 2023, the Board made three noteworthy compensation award decisions. First, in February 2023, the Compensation Committee recommended, and the Board approved, changes to the Executive Director’s annual incentive compensation granted pursuant to the Company’s Global Bonus Policy (the “Annual Plan”). For 2023, the Executive Director’s Annual Plan opportunity was capped at 200% of his target opportunity, and the maximum funding for each performance measure increased from 150% of the target funding for such measure to 200% of the target funding for such measure. In addition, the range for the performance metrics under the Annual Plan was expanded from 95% (for threshold) and 105% (for maximum) to 90% (for threshold attainment) and 110% (for maximum attainment). The Compensation Committee approved these design changes to address feedback from shareholders and proxy advisory firms, and to further align with market trends. Second, in October 2023, the Board approved modest increases to the annual compensation package for its Non-Executive Directors, effective in Fiscal 2024 and adjusted the Company’s stock ownership guideline for the Non-Executive, non-Sponsor- affiliated Directors from 4x the annual cash retainer to 5x the annual cash retainer for such directors. The Board typically reviews the Non-Executive Director compensation package every two years, taking into account the recommendations of its independent compensation consultant based on a competitive pay study of the Company’s peer group and the broader market. The independent compensation consultant recommended (i) an annual compensation package of $245,000, consisting of $100,000 as an annual cash retainer (payable in quarterly installments in arrears) and $145,000 in value of time-based restricted stock units (“RSUs”) (payable annually and which vest in full on the first anniversary of the grant date), which represents an increase in the value of the RSUs by $10,000 from the prior fiscal year, and (ii) an additional annual cash retainer of $25,000 for the chairperson of the Audit Committee and $15,000 for each of the chairpersons of the Compensation Committee and the Company’s nominating and governance committee (“Nominating and Governance Committee”). The Board believes this compensation package and stock ownership guideline better reflects the median of the peer group and aligns Non-Executive Director compensation with the long-term interests of our shareholders. Lastly, in February 2024, the Compensation Committee approved an aggregate funding of 152% of the short-term incentive opportunity for eligible employees under the Annual Plan for Fiscal 2023. Accordingly, the Compensation Committee awarded the Executive Director 152% of his annual short term incentive opportunity for Fiscal 2023. Thank you for your continued interest in Gates. Neil P. Simpkins Chair of the Compensation Committee April 26, 2024 54 THE DIRECTORS’ RENUMERATION REPORT For the financial year ended December 30, 2023 (“Fiscal 2023”) In accordance with the U.K. Large and Medium-sized Companies & Groups (Accounts & Reports) (Amendment) Regulations 2013 (the “Regulations”), this Directors’ Remuneration Report includes disclosure of certain amounts paid to directors for “qualifying services.” This disclosure is presented for (i) Fiscal 2023, and (ii) for the financial year ended December 31, 2022 (“Fiscal 2022”). The following directors served during Fiscal 2023: Executive Director • Mr. Ivo Jurek Non-Executive Directors • Mr. Fredrik Eliasson • Mr. James W. Ireland, III • Ms. Stephanie K. Mains • Mr. Wilson S. Neely • Ms. Alicia L. Tillman • Dr. Molly P. Zhang Non-Executive Directors; Sponsor-affiliated Directors • Mr. Neil P. Simpkins (as of January 30, 2024, Mr. Simpkins was no longer a Sponsor-affiliated Director) • Seth A. Meisel 55 REMUNERATION FOR EACH DIRECTOR Executive Director Single Figure Total Renumeration Table for Executive Director (Audited) This table reflects compensation earned by the Company’s Executive Director during Fiscal 2023 and during Fiscal 2022, which includes base salary, annual cash bonus, long-term equity incentives and certain employee benefits. Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) Salary ($)(1) All Other Benefits ($)(2) Total Fixed ($) Stock Awards ($)(3) Option Awards ($)(4) Annual Bonus ($)(5) Total Variable ($) Total ($) $1,134,129 $267,927 $ — $1,402,056 $5,574,223 $ 125,532 $2,603,530 $8,303,285 $9,705,341 Name Ivo Jurek Year 2023 2022 $1,090,834 $255,667 $ — $1,346,501 $2,441,702 $ 263,851 $951,125 $3,656,678 $5,003,179 (1) The amounts reported in the “Salary” column consist of base salary earned during each financial year. (2) The amounts reported in the “All Other Benefits” column reflect the sum of: (1) the amounts contributed by Gates to the Gates MatchMaker 401(k) Plan and the Supplemental Retirement Plan*; and (2) the cost of all other executive benefits, as shown in the table below: Name I. Jurek ....................... Company Contributions to Gates MatchMaker 401(k)(a) 19,800 Company Contributions to Gates Executive Supplemental Retirement Plan(b) 105,315 18,300 170,673 Year 2023 2022 Other Benefits(c) 142,812 66,694 Total 267,928 255,667 (a) Company Contributions to Gates MatchMaker 401(k) Plan. Gates makes matching contributions of 100% on up to 3% of eligible earnings deferred by all eligible participants, including the Executive Director, in accordance with the Gates MatchMaker 401(k) Plan. Gates also makes a non-elective contribution to all eligible participants, including the Executive Director, in an amount equal to 3% of eligible earnings, subject to the limitations of the Internal Revenue Code of 1986, as amended from time to time (the “Code”). (b) Company Contributions to the Supplemental Retirement Plan. Gates makes a Retirement Contribution of 6% of eligible compensation on behalf of all eligible participants, including the Executive Director, under the Supplemental Retirement Plan for eligible compensation that exceeds Section 401(a)(17) of the Code. (c) Other Benefits. Represents the aggregate incremental costs of certain additional limited benefits used by the Executive Director, which are a parking subsidy, tax preparation services, executive physical and limited personal use of an airplane leased by the Company pursuant to a fractional lease program. For the airplane, the aggregate incremental cost was calculated based on the variable operating costs to the Company for personal usage, which includes fees per flight hour, fuel charges and any additional usage or service fees. Mr. Jurek was accompanied by family members, but there was no aggregate incremental cost associated with these additional passengers. Because the airplane is used primarily for business travel, this methodology excludes costs that do not change based on usage, such as the annual lease fee. The amount reported in this column also includes the full value of the premiums paid by Gates with respect to the enhanced life, AD&D and long-term disability insurance benefits provided to the Executive Director. (3) During 2023, 299,461 time-based vesting restricted stock units (“RSUs”) and 112,472 performance-based vesting RSUs (“PRSUs”) vested. The market value of the shares awarded at vesting was $5,574,223, representing an aggregate appreciation in value of $7,078 since these awards were granted. Please see also the “2023 Grants of Plan-Based Awards” section below. 56 (4) During 2023, 80,469 and 49,650 time-based stock options (“Options”) awarded in 2020 and 2021, respectively, vested. The closing per share price on the day prior to the vesting date was $14.16 and $14.12, respectively, compared to the exercise price payable by the Executive Director of $12.60 and $15.00, respectively. In addition, 265,486 and 13,003 premium-priced Options awarded in 2019 and 2021, respectively, vested during 2023. The closing per share price on the day prior to the vesting date was $14.00 for the 2019 awards, and $14.12 for the 2021 awards, compared to an exercise price payable by the Executive Director of $19.00 for the 2019 awards, and $16.50 for the 2021 awards. (5) The amount reported in the “Annual Bonus” column consist of amounts earned under the Annual Plan. For a summary of the details of the performance measures used and their relative weighting, the performance targets set at the beginning of the performance period and details of actual performance relative to the targets set and measured over the relevant reporting period, and the resulting level of reward, please see the “2023 Grants of Plan-Based Awards” section below. * The Supplemental Retirement Plan is a funded, nonqualified plan administered by the Company that provides its executives, including its Executive and Non-Executive Directors, with the ability to contribute portions of their compensation towards retirement on a tax-deferred basis. The Company makes a retirement contribution of 6% of eligible compensation on behalf of eligible employee participants, including its Executive Director, for eligible compensation that exceeds the limits in Section 401(a)(17) of the Code. The Company does not make contributions to this Plan for Non-Executive Directors participants. 2023 Grants of Plan-Based Awards Executive Director 2023 Long-Term Incentive. In February 2023, the Board approved annual long-term incentive awards (the “2023 LTI”) under the 2018 Omnibus Incentive Plan to incentivize long-term business performance as well as to promote retention. The 2023 LTI for the Executive Director is comprised of 50% RSUs and 50% PRSUs. The RSUs will vest in substantially equal annual installments on the first three anniversaries of the grant date, subject to the Executive Director’s continued employment through the vesting date. The PRSUs provide that 75% of the award will vest if the Company achieves a certain level of average annual Adjusted Return on Invested Capital (“Adjusted ROIC”) and the remaining 25% will vest if the Company achieves certain Relative Total Shareholder Return (“Relative TSR”) goals. Performance for the Adjusted ROIC and Relative TSR goals are each measured over a three year performance period based on the pre-established scale. The Compensation Committee selected Adjusted ROIC as a metric to drive focus on making sound investments and efficient use of working capital. The Compensation Committee selected Relative TSR as a metric to align a significant portion of pay delivery directly with shareholder value creation. It also aligns the interests and experience of executive officers with those of the Company and its shareholders and filters out macroeconomic and other factors that are not within management’s control. Performance Measure Adjusted ROIC (75%) .... Relative TSR (25%) ....... Description 75% of PRSU value is calculated as the three-year average of the annual: (Adjusted EBITDA - depreciation and amortization) x (1 - 25% tax rate) divided by the five quarter average of (total assets - non-restricted cash - accounts payable - goodwill and other intangible assets that arose from the acquisition of Gates by Blackstone in 2014). The financial measures used to determine Adjusted ROIC are calculated in accordance with U.S. GAAP as presented in the Company’s financial statements, except (i) Adjusted EBITDA is defined in the same manner as described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Measures” of the Company’s 2023 U.S. Annual Report, (ii) actual results and/or performance targets may be adjusted to exclude the impact of acquisitions and divestitures completed during the performance period, (iii) the depreciation and amortization deduction excludes the amortization of intangible assets arising from the acquisition of Gates by Blackstone in 2014 and (iv) total assets excludes both income tax and deferred tax assets. 25% of PRSU value is based on the Company’s three-year relative TSR ranking against companies in the S&P 400 Capital Goods Industry Index (the “Relative TSR Peer Group”). TSR is measured by stock price change and dividends over the performance period as a percentage of the beginning stock price. The beginning and ending stock prices are based on the prior 20-day trading averages. In the event absolute TSR performance is negative, payout of Relative TSR is capped at the target level. The total number of PRSUs that vest at the end of the three-year performance period will range from a payout of 0% to a maximum of 200% as determined by measuring actual performance over the performance period for Adjusted ROIC and Relative TSR against the performance goals based on a pre-established scale. Payout for achievement between the performance levels will be determined based on a straight-line interpolation of the applicable payout range rounded to the nearest whole percentile for Relative 57 TSR and rounded to the nearest tenth of a percentage for Adjusted ROIC. Goals for the Adjusted ROIC performance measure will be disclosed at the end of the three-year performance period. Payout of the Relative TSR measure is capped at the target level if absolute TSR performance is negative, and requires the following threshold, target and maximum performance levels over the three-year performance period: Relative TSR Percentile Rank Potential Payout Percentage 75th Percentile or above (Maximum) 50th Percentile (Target)(1) 25th Percentile (Threshold) Below 25th Percentile 200% 100% 50% - (1) Payout is capped at the target level if absolute TSR performance is negative. Payouts are subject to the Executive Director’s continued employment through the end of the applicable performance period and are paid out after the certification of the performance results by the Compensation Committee. The Compensation Committee chose Adjusted ROIC and Relative TSR performance goals at target that are, in the Compensation Committee’s view, challenging but achievable. 2021-2023 PRSUs. For the PRSUs vested and payable in 2023 (granted in 2021 for a three-year performance period from 2021-2023 (the “2021-2023 Performance Period”)), the weighting and level of achievement of the two metrics of Adjusted ROIC and Relative TSR as well as the aggregate payout were as follows: Metric Adjusted ROIC Relative TSR Weight 50% 50% Payout 136% 0% Adjusted ROIC. The PRSU payout level for Adjusted ROIC was based on the three-year average performance during the 2021-2023 Performance Period. The annual threshold, target, and maximum goals for this metric as well as the achievement and payout for this metric were as follows: Performance Period 2021-2023 Adjusted ROIC Payout Threshold (50% funding) Target (100% funding) Maximum (200% Funding) Annual Achievement 2021 2022 2023 3-Year Average Annual Achievement Metric Weighting 15.0 % 20.0 % 25.0 % 22.4 % 20.0 % 23.0 % 21.8 % 136.0 % 50.0 % (*) Performance between goals was interpolated on a straight-line basis, rounded to the nearest whole percentage. Relative TSR. The PRSU payout level of Relative TSR was based on the Company’s’ three-year total shareholder return ranking versus the Relative TSR Peer Group with a cap at the target level if absolute TSR performance is negative. The threshold, target and maximum performance levels as well the Company’s achievement were as follows: Performance Period Twenty-day average stock price prior to December 31, 2020 and December 29, 2023 Relative TSR Payout Threshold (50% funding) Target (100% funding) Maximum (200% Funding) Achievement Metric Weighting 25th percentile (12% TSR) 50th percentile (39% TSR) 75th percentile  (95% TSR) 14th percentile (-4% TSR) 0% 50.0% Executive Director Award. Based on the Company’s performance over the 2021-2023 Performance Period as described above, the numbers of ordinary shares underlying PRSUs granted in 2021 vested as follows for the Executive Director: Name I. Jurek Target Award (#) 165,400 Total Earned Award (#) 112,472 58 2023 Short-Term Incentive. The Company provides a short-term annual incentive opportunity under the Gates Global Bonus Policy (the “Annual Plan”) to reward certain employees, including the Executive Director, for achieving specific performance goals that would advance the Company’s profitability and drive key business results, and to recognize individuals based on their contributions to those results. Payouts under the Annual Plan were based on a combination of the achievement of the Company’s financial performance goals in 2023 (the “Gates Financial Performance Factor”), which fund the Annual Plan, and the Executive Director’s performance during the fiscal year against his individual performance goals (the “Individual Performance Factor”). New for Fiscal 2023, the maximum total bonus opportunity for the Executive Director was capped at 200% of his target incentive bonus opportunity. Gates Financial Performance Factor. The Gates Financial Performance Factor sets the funding level for the Annual Plan. The Compensation Committee, after an evaluation of possible financial performance measures, determined to continue using Adjusted EBITDA, Free Cash Flow and Revenue as the financial performance measures for 2023. The Compensation Committee determined that these financial performance measures would be critical indicators of the Company’s performance for 2023 and, when combined, would contribute to sustainable growth. The Annual Plan financial performance measures and weightings for 2023 are described below. Performance Measure Adjusted EBITDA (50%) Free Cash Flow (30%) Revenue (20%) Definitions Adjusted EBITDA under the Annual Plan is defined in substantially the same manner as described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Measures” of the Company’s 2023 U.S. Annual Report Calculated as Adjusted EBITDA (as defined for purposes of the Annual Plan as described immediately above), less capital expenditures, plus or minus the change in working capital versus prior year. Revenue under the Annual Plan is defined as actual revenue as reflected in the Company’s U.S. GAAP financial statements, excluding the impacts of acquisitions made during the fiscal year. (*) At the time of setting these performance measures, the Compensation Committee determined that the performance measures and payout calculations may exclude the translation impact of foreign exchange gains and losses if excessive in nature, and the Compensation Committee may exclude from the targets and/or the calculation of the performance measures impacts of any non- recurring or unusual item. No such exclusions were made in 2023. The weighted achievement factor for each of the financial performance measures is determined by multiplying the weight attributed to each performance measure by the applicable achievement factor for each measure. For each of the performance measures, the achievement factor is determined by calculating the payout percentage against the target goal based on a pre-established scale. Funding attainment with respect to each of these performance measures can range from 0% of the target incentive to 200% of the target incentive as follows: • • • • 0% funding for performance below the threshold requirement; 50% of target incentive for achieving 90% of the target performance requirement (threshold); 100% of target incentive for achieving 100% of the target performance requirement (target); and 200% of target incentive for achieving 110% or above of the target performance requirement (maximum). 59 Payouts for performance between points are interpolated on a straight-line mathematical basis and rounded to the nearest whole number. The following table outlines the calculation of the 2023 Total Bonus Pool based on the Company’s attainment of the 2023 Gates Financial Performance Factor measures, each of which were approved by the Compensation Committee with no adjustments to the previously approved performance measures described above. (dollars in millions) Measure Adjusted EBITDA ................ Weighting 50 Free Cash Flow .................... Revenue* .............................. Total ..................................... 30 20 $ $ $ 2023 Attainment Funding Threshold Target 642.1 $ 713.4 $ Maximum $ 784.7 $ 585.6 $ 650.7 $ 715.8 $ 747.0 709.6 3,355.3 $ 3,559.0 $ 3,737.3 $ 3,570.2 % $ 105 % $ 109 % $ 100 % $ 20.8 16.2 6.0 $ 43.0 % 147 % 191 % 106 % 152 % (*) Revenue threshold and maximum are narrower than 90% and 110% to align with the associated Adjusted EBITDA levels. Individual Performance Factor. At the end of the performance period, the Compensation Committee considered both the Company’s attainment of the 2023 Gates Financial Performance Factor measures as described above and the Executive Director’s individual performance based on achievement against the performance criteria listed below to determine the appropriate attainment percentage for the Executive Director. • • • • • • Financial Goals: Achieving the Company’s annual financial plan, as well as the annual financial plan for the executive’s region or function. This included goals related to the Company’s 2023 sales, adjusted EBITDA and free cash flow. Operational Goals: Achieving targets related to workplace safety, product quality and delivery, freight costs, productivity and inventory management. Geographic Growth Goals: Focusing on growth opportunities to drive richer margins and mix. Key Initiatives: Executing on key company initiatives set forth in the Company’s strategic plan, including those related to the industrial, mobility, and automotive end markets, 80/20 portfolio optimization, innovation, and digital assets. Doing Business the Right Way: ◦ ◦ Adhering to the Company’s compliance programs and policies, including completion of all required certifications such as those related to workplace health and safety; international laws and regulations; and information technology security. Achieving environmental, sustainability and governance goals related to natural resource consumption, eco-innovation solutions for customers, diversity, equity and inclusion programs, and compliance with reporting requirements as well as defining and executing on other environmental, sustainability and governance targets. Building Our People: Focusing on the attraction, development and engagement of our workforce through annual development plans, development opportunities, succession planning, and diversity, equity and inclusion initiatives and processes. After reviewing the factors listed above and considering the size and complexity of the Company’s business as well as external variables such as macro-economic conditions, the Compensation Committee determined that the Executive Director had met or exceeded his 2023 goals. Payout. The actual amount paid to the Executive Director under the Annual Plan was calculated by multiplying his base salary in effect on December 30, 2023 by (i) his Annual Plan target bonus opportunity (which is reflected as a percentage of base salary), (ii) the final Gates Financial Performance Factor, and (iii) the Individual Performance Factor. The following table illustrates the calculation of the annual cash incentive awards payable to the Executive Director under the Annual Plan based on 2023 financial performance and individual performance. 60 Name Base Salary ($) Target Annual Plan Opportunity (% of Base Salary) Target Annual Plan Opportunity ($) Gates Financial Performance Factor (%) Individual Performance Factor (%) 2023 Actual Payout ($) Ivo Jurek ......................... $ 1,141,899 150 % $ 1,712,849 152 100 $ 2,603,530 2023 Grants of Plan-Based Awards Table (Audited) The following table summarizes all grants of plan-based awards to the Company’s Executive Director in Fiscal 2023 and Fiscal 2022. Estimated Future Payouts under non-equity incentive plan awards ($) Estimated Future Payouts under Equity Incentive Plan Awards (#) Award Type Grant Date Threshold Target Max Threshold Target Max All other option awards: number of securities underlying options (#) All other stock awards: number of shares of stock units (#) Exercise or base price of option awards ($/sh) Grant date face value of stock and option awards ($)(4) Grant date fair value of stock and option awards ($) Annual Plan(1) PRSU(2) RSU(3) Annual Plan(1) PRSU(2) RSU(3) RSU(3) — 171,285 1,712,849 3,425,698 3/1/2023 3/1/2023 23,773 190,181 380,362 5,366,908 3,021,974 190,181 2,683,454 2,683,454 — 164,697 1,646,970 3,293,940 2/25/2022 2/25/2022 7/27/2022 20,465 163,721 327,442 163,721 560,000 5,160,486 2,821,321 2,580,243 2,580,243 6,703,200 6,703,200 (1) Represents the cash-based award opportunity range under the Annual Plan for 2023 and 2022. For purposes of this table and threshold level disclosure, the Company assumed that the lowest weighted of the three performance measures achieved the threshold level of attainment (in other words, 10% of the target award was earned) and the Individual Performance Factor was set at 100%. The calculation uses the Executive Director’s base salary as of December 30, 2023 and December 31, 2022. Please refer to the “Single Figure Total Remuneration Table for Executive Directors” for the actual cash based award earned by the Executive Director under the Annual Plan for 2023 and 2022. (2) Represents the threshold, target and maximum payout shares of the PRSUs granted under the 2018 Omnibus Incentive Plan in 2023 and 2022. Threshold payout of shares is calculated assuming a threshold attainment of 50% for the Relative TSR measure for the PRSUs granted in 2023 and 2022. The number of shares ultimately issued, which could be greater or less than target, will be based on achieving specific performance conditions. The grant date fair value of the PRSUs for the March 1, 2023 and February 25, 2022 awards were calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation (“Topic 718”) based on target, the probable outcome of the performance conditions. (3) Represents RSUs granted under the 2018 Omnibus Incentive Plan. The grant date fair value of the RSUs was the closing price on the date of grant. (4) Face value is calculated based on the closing share price on the date of the grant ($14.11 for grants in March 2023) and, in the case of the PRSUs, on the maximum future share payout. 61 Outstanding Equity Awards at December 30, 2023 (Audited) The following table provides information regarding outstanding equity awards held by the Executive Director as of December 30, 2023. Option Awards * Stock Awards Number of securities underlying unexercised options (#) exercisable Number of securities underlying unexercised options (#) unexercisable Option Exercise Price ($) Option Expiration Date Number of shares or units of stock that have not vested (#)(1) Market value of shares or units of stock that have not vested ($)(2) Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)(6) Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($)(7) Grant Date Awards without performance measures 1,017,239 — $ 6.56 5/18/2025 135,496 252,122 530,972 241,406 99,299 26,005 — $ 7.87 5/2/2027 — $ 16.46 2/22/2029 265,488 $ 19.00 2/22/2029 80,469 $ 12.60 2/21/2030 49,651 $ 15.00 2/26/2031 13,004 $ 16.50 2/26/2031 5/18/2015 5/2/2017 2/22/2019 2/22/2019 2/21/2020 2/26/2021 2/26/2021 2/26/2021 2/25/2022 7/27/2022 3/1/2023 Tier I(1) Tier I(1) Options(3) Options(4) Options(5) Options(3) Options(5) RSU RSU RSU RSU Awards with performance measures 5/18/2015 Tier II 5/18/2015 Tier IV 5/2/2017 5/2/2017 2/25/2022 3/1/2023 Tier II Tier IV PRSU PRSU 1,017,239 1,017,239 135,496 135,496 — $ 6.56 5/18/2025 — $ 9.84 5/18/2025 — $ 7.87 5/2/2027 — $ 11.80 5/2/2027 27,567 109,148 373,334 190,181 $ $ $ $ 369,949 1,464,766 5,010,142 2,552,229 143,255 166,408 $ $ 1,922,482 2,233,195 (*) The Company has a number of awards issued under the 2014 Omaha Topco Ltd. Stock Incentive Plan, which was assumed by the Company and renamed the Gates Industrial Corporation plc Stock Incentive Plan in connection with the initial public offering in January 2018. No new awards have been granted under this plan since 2017. The Executive Director was awarded options pursuant to the 2014 Incentive Plan. The options were split equally into four tiers, each with specific vesting conditions. Tier I options vested evenly over 5 years from the grant date, subject to the participant’s continuing to provide service to the Company on the vesting date. The vesting of Tier II, III and IV options were subject to performance conditions that were required to be achieved on or prior to July 3, 2022. The performance conditions included Blackstone’s achievement of specified investment returns at the time of a defined liquidity event, and required the participant’s continued provision of service to the Company on the vesting date. In March 2022, a liquidity event (as defined in the grant agreements) occurred following the sale by Blackstone of a certain portion of their interest in Gates, resulting in the vesting of the Tier II and IV options for all eligible participants. The specified investment returns required for Tier III awards to vest were not met on or before the end of the performance period, resulting the expiration of the Tier III awards in 2022. All outstanding Tier I, II and IV options expire ten years after the date of grant. (1) RSUs vest in substantially equal annual installments on each of the first, second and third anniversaries of the grant date. (2) Reflects the aggregate market value of the unvested RSUs, based on a price of $13.42 per ordinary share, which was the share price of the Company’s ordinary shares on December 29, 2023, the last trading day of the fiscal year. (3) Represents Options granted under the 2018 Omnibus Incentive Plan. These options vested in substantially equal annual installments on the first three anniversaries of the grant date. 62 (4) Represents premium-priced Options granted to the Executive Director under the 2018 Omnibus Incentive Plan. These premium- priced Options vest on the third, fourth and fifth anniversary of the grant date. (5) Represents premium-priced Options granted to the Executive Director under the 2018 Omnibus Incentive Plan. These premium- priced Options vested in substantially equal annual installments on the first three anniversaries of the grant date. (6) The PRSUs vest on the date the Compensation Committee certifies the achievement of the performance measures following the three-year performance period, with 75% subject to attainment of certain levels of Adjusted ROIC and 25% subject to attainment of Relative TSR. The amounts shown in this column represent payout shares of the outstanding PRSUs assuming the target level of attainment of 100% for the Adjusted ROIC measure and the threshold level of attainment of 50% for the Relative TSR measure. The number of shares ultimately issued, which could be zero or greater than the number presented above, will be based on achieving specific performance conditions. Please refer to “Elements of Compensation — Long-Term Incentive” in the proxy statement. (7) Represents the aggregate market value of the threshold payout shares of the unvested PRSUs, based on a price of $13.42 per ordinary share, which was the share price of the Company’s ordinary shares on December 29, 2023, the last trading day of the fiscal year. 2023 Option Exercises and Stock Vested for the Executive Director (Audited) The table below sets forth certain information concerning each exercise of options and stock vesting events for the Company’s Executive Director during Fiscal 2023. Name Option Awards Stock Awards Shares Acquired on Exercise (#) Value Realized on Exercise ($) Shares or Units Acquired on Vesting (#) Value Realized on Vesting ($)(1) I. Jurek ..................................................................................... — $ — 411,933 $ 5,574,223 (1) Based on the closing share price of the Company’s ordinary shares on the trading day prior to the vesting date. Single Figure Total Remuneration Table for Non-Executive Directors (Audited) The following table provides the compensation earned in Fiscal 2023 and Fiscal 2022 by the Company’s Non-Executive Directors who served during Fiscal 2023. Name F. Eliasson(3)(4) .................................................................................... J. Ireland ............................................................................................. S. Mains(5)(6) ............................................................................... W. Neely(7) ................................................................................ A. Tillman .......................................................................................... M. Zhang(6) ................................................................................ (Fixed) Fees Paid or Receivable ($)(1) (Variable) Stock Awards ($)(2) Total ($) $ $ $ $ $ $ $ $ $ $ $ $ 125,000 $ 128,002 $ 18,956 $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 115,000 $ 101,841 $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ — $ 111,986 $ 168,541 $ 131,328 $ 131,328 $ 131,328 $ 131,328 $ 91,346 $ 91,346 $ 131,328 $ 131,328 $ 253,002 18,956 211,986 231,328 211,986 231,328 226,986 233,169 211,986 191,346 211,986 231,328 Year 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 (1) Represents director fees earned during the period. Directors who served on the Board for a portion of the financial year received a pro-rated amount of the annual cash retainer, which was $100,000 in 2022 and $100,000 in 2023. 63 (2) Represents the value of the stock awards that vested during the period, which is based on the closing share price of the Company’s ordinary shares on the trading day prior to the vesting date. This value for the current period represents an aggregate depreciation in value of $36,014 since these awards were granted. (3) Mr. Eliasson was appointed to the Board effective October 24, 2022 and the amounts reported represent his pro-rated director fees for 2022. (4) Represents the annual cash retainer of $100,000 plus an additional $25,000 for Mr. Eliasson’s service as Chair of the Audit Committee. (5) Ms. Mains elected to defer $100,000 of the fees earned in cash in 2023, pursuant to the Supplemental Retirement Plan. (6) Ms. Mains and Dr. Zhang elected to defer all 7,931 shares that vested in 2023, respectively, pursuant to the Supplemental Retirement Plan. (7) The 2023 amount represents the annual cash retainer of $100,000 plus an additional $15,000 for Mr. Neely’s service as Chair of the Nominating and Governance Committee. Mr. Neely became Chair of the Nominating and Governance Committee effective October 26, 2022, and the 2022 amount represents the annual cash retainer of $100,000 plus an additional $1,841 for Mr. Neely’s service as Chair of the Nominating and Governance Committee in 2022 that was paid in 2023. Outstanding Equity Awards for certain Non-Executive Directors at December 30, 2023 (Audited) The following table provides information regarding outstanding equity awards held by the Non-Executive Directors as of December 30, 2023. Mr. Simpkins and Mr. Meisel did not hold any outstanding equity awards as of December 30, 2023. Option Awards Number of securities underlying unexercised options (#) exercisable Option Exercise Price ($) Option Expiration Date Number of shares or units of stock that have not vested (#)(1) Market value of shares or units of stock that have not vested ($)(2) 9,567 $ 9,567 $ 9,567 $ 9,567 $ 9,567 $ 9,567 $ 128,389 128,389 128,389 128,389 128,389 128,389 Name Grant Date F. Eliasson .............................. 3/1/2023 J. Ireland ................................. 3/1/2023 S. Mains .................................. 3/1/2023 W. Neely ................................. 3/1/2023 A. Tillman .............................. 3/1/2023 M. Zhang ................................ 3/1/2023 (1) Represents unvested time-based RSUs that vest on the first anniversary of the grant date. (2) Reflects the aggregate market value of the unvested RSUs, based on a price of $13.42 per ordinary share, which was the share price of the Company’s ordinary shares on December 29, 2023, the last trading day of the fiscal year. 64 2023 Option Exercises and Stock Vested for certain Non-Executive Directors (Audited) The table below sets forth certain information concerning each exercise of options and stock vesting events for the Non-Executive Directors during Fiscal 2023. Name F. Eliasson ....................................................................... J. Ireland .......................................................................... S. Mains(2) ................................................................. W. Neely .......................................................................... A. Tillman ........................................................................ M. Zhang(3) ............................................................... Option Awards Stock Awards Shares Acquired on Exercise (#) Value Realized on Exercise ($) Shares or Units Acquired on Vesting (#) Value Realized on Vesting ($)(1) — — — — — — $ $ $ $ $ $ — — — — — — 11,563 $ 7,931 $ — $ 7,931 $ 7,931 $ — $ 128,002 111,986 — 111,986 111,986 — (1) Based on the closing share price of the Company’s ordinary shares on the trading day prior to the vesting date. (2) Ms. Mains elected to defer all 7,931 shares that vested, pursuant to the Supplemental Retirement Plan. (3) Dr. Zhang elected to defer all 7,931 shares that vested, pursuant to the Supplemental Retirement Plan. Director Pension Scheme No director who served during the year ended December 30, 2023 has any prospective entitlement to a defined benefit pension or a cash balance benefit arrangement (as defined in s.152, Finance Act 2004). Scheme interests awarded during Fiscal 2023 (Audited) Please refer to the following sub-headings in the “Notes to future policy table” section of the Directors’ Remuneration Policy (available in Appendix A to the Company’s 2022 proxy statement on Schedule 14A filed with the SEC on April 28, 2022 and available at www.sec.gov and on its website at http://investors.gates.com) for a description of the scheme interests granted to the Executive Director: (i) “Annual Plan”; (ii) “Discretionary Bonuses”; and (iii) “Long-Term Incentive”. In addition, please refer to the following sub-headings of this Directors’ Remuneration Report: (i) 2023 Grants of Plan-Based Awards; and (ii) 2023 Grants of Plan- Based Awards Table. For Fiscal 2023, the annual compensation package for the Non-Executive Directors (excluding the Sponsor-affiliated Directors) consists partly of $135,000 in value of RSUs (payable annually and rounded down to the nearest whole share). RSUs vest in full on the first anniversary of the grant date. Please refer to the section entitled “2023 Option Exercises and Stock Vested for certain Non- Executive Directors” for further information. Payments to Past Directors and Payments for Loss of Office (Audited) There were no payments made to past directors and no payments to directors for loss of office during Fiscal 2023. Director Shareholdings and Share Ownership Guidelines (Audited) The Company has adopted executive stock ownership guidelines for its Executive Director. As of December 30, 2023, the Executive Director was expected to own ordinary shares in the Company with a market value equal to at least six times his base salary. This target has been met. If the Executive Director falls below the threshold, he will be required to retain 50% of stock acquired through the exercise or vesting of equity awards made by the Company. The Company has adopted share ownership guidelines for its Non-Executive, non-Sponsor affiliated Directors in order to better align its eligible directors’ financial interests with those of its shareholders. Each of the Non-Executive, non-Sponsor affiliated Directors is expected to own shares with a market value equal to five times his or her annual cash retainer, which represents an increase from the prior year. As of December 30, 2023, Mr. Ireland, Ms. Mains, Mr. Neely, and Dr. Zhang held shares in excess of this target. Given their recent appointments to the Board, the other Non-Executive, non-Sponsor affiliated directors have not yet met 65 this goal. Any such director who does not meet the threshold is required to retain 50% of shares acquired through the exercise or vesting of equity awards made by the Company. The table below sets out the number of vested shares held by the Executive Director and each Non-Executive Director as of December 30, 2023. Name of Director Executive Director Number of shares held in Company as of December 30, 2023 (#) I. Jurek .................................................................................................................................................................... 605,596 Non-Executive Directors F. Eliasson .............................................................................................................................................................. J. Ireland ................................................................................................................................................................. S. Mains(1) ............................................................................................................................................................... W. Neely ................................................................................................................................................................. A. Tillman .............................................................................................................................................................. M. Zhang(2) ............................................................................................................................................................. Non-Executive Director; Sponsor-affiliated Director N. Simpkins ............................................................................................................................................................ S. Meisel ................................................................................................................................................................. 61,552 38,687 32,383 37,097 15,061 28,928 — — (1) Includes 16,264 ordinary shares that are vested but deferred pursuant to the Supplemental Retirement Plan. (2) Represents 28,928 ordinary shares that are vested but deferred pursuant to the Supplemental Retirement Plan. Please also refer to the “Outstanding Equity Awards at December 30, 2023” and “Outstanding Equity Awards for certain Non- Executive Directors at December 30, 2023” sections above for information regarding outstanding equity awards held by the Executive Director and Non-Executive Directors as of December 30, 2023. Performance table and graph Executive Director Remuneration Total remuneration ................................................................................................................. $ Annual bonus as a percentage of maximum(1) Equity awards vested as a percentage of maximum(2) ........................................................................ ............................................................ 2023 2022 9,705,341 $ 5,003,179 76 % 79 % 39 % 67 % (1) The amount earned by the Executive Director under the Annual Plan equated to 152% attainment of the target performance. The Annual Plan has a maximum level of attainment of 200%; thus, for purposes of this calculation, this assumes a “maximum” level of performance of a 200% payout. (2) The equity awards that could have vested in the year were options, time-based restricted stock units, and performance-based restricted stock units. The 2022 equity awards vested as a percentage of maximum has been revised from the prior year presentation of 36%. 66 Performance Graph The below graph shows the value, as of December 30, 2023, of $100 invested in Gates Industrial Corporation plc on December 29, 2018, compared with the value of $100 invested in each of the S&P Midcap 400 Capital Goods Industry Group index and the Russell 2500 index. The S&P Midcap 400 Capital Goods Industry Group index was selected as it is used by the Company as part of the long-term incentive program (one of the performance measures for PRSUs). The performance graph is based on historical results and is not intended to suggest future performance. Total shareholder return Source: S&P Capital IQ 67 Percentage Change in Compensation of Executive Director Compared with Employees The following table shows the percentage change in salary, all other benefits and annual bonus awards for the Directors and, as described further in note (1) to the table, the corporate employees (excluding the Executive Director) located in the Denver corporate office and the Denver area customer solutions center. ........................................... Employees(1) Executive Directors(2) I. Jurek ................................................... Non-Executive Directors(3) F. Eliasson .............................................. J. Ireland ................................................. S. Mains ................................................. W. Neely ................................................ A. Tillman .............................................. M. Zhang ................................................ Percentage change from 2022 to 2023 Percentage change from 2021 to 2022 Salary/Fees % 5 % 4 % — % — % — % 5 % — % — % All Other Benefits % (2) % Annual Bonus % 195 % 5 % 174 % — % — % — % — % — % — % — % — % — % — % — % — % Salary/Fees % 5 % 4 % n/a — % — % — % — % — % All Other Benefits % 9 % Annual Bonus % (58) % 17 % (54) % n/a — % — % — % — % — % n/a — % — % — % — % — % (1) Due to the complexity of the Company’s global operations with employees in multiple countries with different currencies, costs of living and work cultures, the Company selected its corporate employees based in its Denver corporate office and its Denver area customer solutions center as the comparator group for the above table. This group of employees is considered an appropriate comparator, as they are compensated in accordance with U.S. customs and standards and participate in similar annual award and benefit programs as the Executive Director who is also based in Denver, Colorado. The percentage changes for salary, all other benefits and annual bonus for the corporate employees were determined by dividing the total annual salary in effect at the end of the year, all other benefits and annual bonus compensated during the year by the total number of corporate employees at the end of each financial year. All other benefits included, but were not limited to: gym reimbursements, tax services reimbursements, and parking reimbursements. (2) Percentage changes for the Executive Director were calculated based on the Single Figure Total Remuneration Table for Executive Director. (3) Mr. Eliasson was appointed to the Board effective on October 24, 2022 and received a cash retainer on a pro-rated basis. Mr. Neely was appointed to Chair of the Nominating and Governance Committee on October 26, 2022 and received a committee chair cash retainer on a pro-rated basis. Percentage changes for Non-Executive Directors have been calculated based on the fees paid in cash reflected in the Single Figure Total Remuneration Table for Non-Executive Directors, except for Mr. Eliasson and Mr. Neely, whose 2022 cash retainers were assumed to be on a full-year basis for the purpose of this table to ensure a like-for-like comparison. 68 Executive Director (CEO) Pay Ratio The following table sets forth the ratio of the Executive Director’s total compensation to the median, 25th and 75th percentile of total compensation of his full-time equivalent U.K.-based employees for Fiscal 2023, 2022, 2021, and 2020. The Executive Director (CEO) single figure used in the calculation of the ratios below reflects the single figure total remuneration (as disclosed in the Single Figure Total Remuneration Table for the Executive Director table above). Financial Year Method 25th percentile pay ratio Median pay ratio 75th percentage pay ratio 2023 ........................................................................................ 2022 ........................................................................................ 2021 ........................................................................................ 2020 ........................................................................................ C C C C 252 to 1 112 to 1 133 to 1 77 to 1 199 to 1 92 to 1 87 to 1 61 to 1 195 to 1 91 to 1 85 to 1 60 to 1 The changes in the above pay ratios are attributable primarily to the change in the remuneration of the CEO, the reasons for which are set out under the Single Figure Total Remuneration Table for the Executive Director table above. The calculation methodology used reflects Option C as defined under the relevant regulations. To determine the employees at the three quartiles for 2023, the Company reviewed and analyzed salary data for its permanent employees as of December 30, 2023. Given the variance in pay elements by employee, the Company opted for Method C and selected the annual base salary to identify the best equivalents for the U.K. employees, as base salary represents the single largest component of pay for the majority of employees across the business. The Company then excluded employees whose start dates were after Fiscal 2023 began, as they were not paid for the full year. Once the employees were identified, the Company included benefits and all other relevant compensation elements and converted to U.S. dollars using the Fiscal 2023 average exchange rate in order to provide a like comparison to that of the Executive Director. Each employee’s pay and benefits were calculated using each employee’s aggregated remuneration, consistent with the Executive Director’s aggregated remuneration. The Company did not make any adjustments or omit any components of pay. The 2023, 2022, 2021, and 2020 salary and total remuneration for the 25th, 50th and 75th percentile of U.K. employees are as follows: Financial Year 2023 ............................................................. Salary ............................................ (dollars) 25th percentile 34,708 Total remuneration ....................... 2022 ............................................................. Salary ............................................ Total remuneration ....................... 2021 ............................................................. Salary ............................................ Total remuneration ....................... 2020 ............................................................. Salary ............................................ Total remuneration ....................... 38,454 42,747 44,704 33,613 39,923 36,707 39,226 Median 45,954 48,776 51,493 54,645 56,592 61,410 46,876 49,929 75th percentile 46,929 49,788 51,756 54,864 56,567 62,708 47,184 50,959 As of December 31, 2023, the Company’s U.K. workforce is made up of approximately 670 employees, as compared to approximately 6,989 employees in North America and approximately 14,929 employees globally. The Executive Director works in North America and his compensation is benchmarked against companies in an industry peer group that are listed on the New York Stock Exchange or NASDAQ, as described under Role of the Peer Group below. With this perspective, the Company believes the median pay ratio for Fiscal 2023 is consistent with the pay, reward and progression policies for the Company’s U.K. employees taken as a whole. 69 Relative Importance of Spend on Pay The table below sets out the remuneration the Company paid to its employees and distributions made to its shareholders in Fiscal 2023 and Fiscal 2022. (dollars in millions) Employee remuneration ............................................................................................................. $ Dividends .................................................................................................................................... $ Share buyback ............................................................................................................................ $ ($) ($) 843.1 $ — $ 250.0 $ 823.0 — 174.7 2023 financial year 2022 financial year Statement of Implementation of Remuneration Policy in 2024 For the fiscal year ending December 28, 2024 (“Fiscal 2024”), the Compensation Committee intends to provide remuneration in accordance with the proposed Directors’ Remuneration Policy, as described below. Executive Director 2024 Long-Term Incentive. In February 2024, the Compensation Committee recommended, and the Board approved, a new award (the “2024 LTI”) for Fiscal 2024 under the 2018 Omnibus Incentive Plan for the Company’s Executive Director. The 2024 LTI is comprised of 50% RSUs and 50% PRSUs. The RSUs will vest in equal annual installments on the first three anniversaries of the grant date, subject to the Executive Director’s continued employment through the vesting date. The PRSUs will vest upon completion of the three-year performance period and will be paid out after certification of results by the Compensation Committee. For 2024 PRSUs, the Board determined that the PRSUs shall provide that 75% of the award will vest if the Company achieves a certain level of Adjusted ROIC and the remaining 25% of the PRSUs will vest if the Company achieves certain Relative TSR goals, in each case, measured over a three-year performance period. The total number of PRSUs that vest at the end of the performance period will range from 0% to 200% of the target as determined by measuring actual performance over the performance period for Adjusted ROIC and Relative TSR against the performance goals based on a pre-established scale. The target total grant date value for the Executive Director’s award was approximately $5,700,361 under the 2024 LTI. The award was made based upon the Executive Director’s 2024 LTI target which was determined as a percentage of his 2024 base salary. The number of target PRSUs was calculated on the date of grant, March 4, 2024, based on that day’s closing price of Gates ordinary shares on the New York Stock Exchange. The performance period applicable to the PRSUs began on December 31, 2023 and will end on January 2, 2027. The performance results will be measured against the specified three-year average of annual Adjusted ROIC and Relative TSR through the period. The target levels for the Adjusted ROIC measure of performance-based compensation have been omitted from the directors’ remuneration report as such targets are considered commercially sensitive. The target levels will be disclosed in the directors’ remuneration report after the completion of the applicable performance period. 2024 Annual Incentive. In February 2024, the Compensation Committee determined that for the annual bonus scheme for Fiscal 2024, Adjusted EBITDA (50%), Free Cash Flow (30%) and Revenue (20%) should be used as the financial performance measures (“Performance Measures”) with a maximum individual payout opportunity equal to 200% of target. The Compensation Committee determined that these Performance Measures are critical indicators of the Company’s performance for 2024 and, when combined, contribute to sustainable growth. The Compensation Committee set the minimum achievement threshold at 90% of the Performance Measures to achieve a 50% payout of the annual bonus and the target at 110% to achieve a 200% payout of the annual bonus; provided that threshold and maximum for Revenue are narrower than 90% and 110% to align with the associated Adjusted EBITDA levels. If achievement with respect to any Performance Measure falls between the threshold and target, or between the target and maximum, earned award amounts for that particular Performance Factor will be interpolated on a straight-line mathematical basis (and rounded to the nearest whole number). The Executive Director’s target bonus in 2024 is $1,781,363. 2024 Salary. In February 2024, the Compensation Committee increased the Executive Director’s base salary by 4%, to $1,187,575. For additional information on the Company’s Long-Term Incentive, Annual Incentive and Base Salary, please see Elements of Compensation in the proxy statement. 70 Non-Executive Directors 2024 Remuneration. The compensation program for the other Non-Executive Directors will remain the same in 2024 as it was in 2023, with an increase in the value of the annual equity award by $10,000 from the prior two fiscal years in order to better reflect the market. In October 2023, the Board approved an annual total compensation package of $245,000 for these Non-Executive Directors in 2023, which was allocated with approximately 41% as a cash retainer and 59% as an equity grant of RSUs vesting in one year. On March 4, 2024, the Board approved the 2024 annual equity grants for the Non-Executive Directors. The number of RSUs was calculated on that date, based on the closing price of Gates ordinary shares on the New York Stock Exchange. In addition, in 2023, the Board approved an increase to the annual cash retainers (payable in quarterly installments in arrears) for each of the chairs of the Compensation Committee and the Nominating and Governance Committee from $10,000 to $15,000. In February 2024, in lieu of an annual cash retainer for the chair of the Board, the Board approved an annual equity award for the Board chair of restricted stock or restricted stock units equal to $130,000 with one-year cliff vesting, where any fractional ordinary shares is rounded down. Prior to 2024, the Board chair was a Sponsor-affiliated director and thus did not receive this additional annual compensation. Consideration by the Directors of Matters Relating to Directors’ Compensation The Compensation Committee provides assistance to the Board for oversight of the compensation program for the Executive Director. The Board has historically taken into account multiple factors, such as considering the responsibilities, performance, contributions and experience of the Executive Director and his compensation in relation to other employees and other roles. The Compensation Committee annually reviews the Executive Director’s performance, base salary, annual incentive target opportunity and outstanding long-term incentive awards and approves, or recommends to the Board for approval, any changes to the Executive Director’s compensation package in light of such review. The Executive Director does not participate in deliberations regarding his own compensation. The Compensation Committee held five meetings during 2023. Pay recommendations for the Company’s executive officers, including the Executive Director, are typically made by the Compensation Committee in February after the Company reports its fourth quarter and year-end financial results for the preceding fiscal year (the “February meeting”). This timing allows the Compensation Committee to have a complete financial performance picture prior to making compensation decisions. Compensation decisions with respect to prior year performance, as well as annual equity awards and target performance levels under the incentive plans for the current year, are typically made at this February meeting. Annual equity awards to the Company’s executive officers, including the Executive Director, are recommended by the Compensation Committee at this meeting and reviewed by the Board and, if approved by the Board, are dated on the date of such Board approval. An exception to this process is granted to executives who are promoted or hired from outside the Company during the year. These executives may receive compensation changes or equity grants effective or dated, as applicable, as of the date of their promotion, hiring date, or other Board approval date. Compensation Consultant. The Compensation Committee retains an independent compensation consultant (the “Consultant”) to support the oversight and management of the Company’s executive compensation program. The Consultant has not provided the Company with services other than as described herein. The Compensation Committee retains sole authority to hire or terminate the Consultant, approve its compensation, determine the nature and scope of services, and evaluate performance. The Company selected Aon plc as the Consultant prior to its 2018 IPO and reviews the Consultant’s independence and engagement annually. A representative of the Consultant attends Compensation Committee meetings, as requested, and communicates with the Compensation Committee Chair between meetings. The Compensation Committee makes all final decisions. The Consultant’s specific roles include, but are not limited to: • • • • • advising the Compensation Committee on executive compensation trends and regulatory developments; providing a total compensation study for executives, compared against the companies in the peer group and other market data, and recommendations for executive pay; working with the Compensation Committee to develop an appropriate peer group of comparable companies to serve as a reference point in executive compensation decision-making; providing advice to the Compensation Committee on governance best practices, as well as any other areas of concern or risk; providing advice to the Compensation Committee on executive compensation benefit programs; 71 • • • • • • serving as a resource to the Compensation Committee Chair for meeting agendas and supporting materials in advance of each meeting; reviewing and commenting on proxy disclosure items, including the compensation discussion and analysis; reviewing and commenting on the Compensation Committee’s annual compensation risk assessment; advising the Compensation Committee on management’s pay recommendations and determining Chief Executive Officer pay; reviewing and commenting on comprehensive tally sheets for the executive officer that encompass two years of all elements of their compensation as well as potential wealth accumulation and retention values; and from time to time, reviewing and providing compensation recommendations for non-employee directors. The Company paid approximately $305,000 in aggregate to the Consultant and its affiliates for its work during Fiscal 2023. The Company did not pay any other fees to the Consultant or its affiliates. The Compensation Committee has assessed the independence of the Consultant as required by SEC and NYSE rules. The Compensation Committee reviewed its relationship with the Consultant and considered all relevant factors, including those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Exchange Act. Based on this review, the Compensation Committee concluded that the Consultant is independent and there are no conflicts of interest raised by the work performed by the Consultant. Role of the Peer Group. The Compensation Committee, with the help of the Consultant, conducts an annual review and evaluation of executive and director compensation in comparison to an industry peer group. In establishing the industry peer group, the Compensation Committee targets approximately 15 to 20 companies based on the following selection criteria: • • • • • publicly-traded companies within similar industries as Gates; peer companies used by the potential peer companies (peers of peers); peer companies used by proxy advisory firm Institutional Shareholder Services Inc. in 2022; companies with annual revenues of approximately 0.4x to 3x Gates’ annual revenues; and companies with market capitalization and enterprise values within a reasonable ranges of Gates’ values. For Fiscal 2023 compensation decisions, the Compensation Committee selected the same companies used for Fiscal 2022 compensation decisions, with (1) the removal of one peer company due to the merger of two peer companies (Regal Beloit Corporation and Rexnord Corporation) into Regal Rexnord Corporation, which was retained in our peer group and (2) the replacement of one peer company, Colfax Corporation, which split into two companies (ESAB Corporation and Enovis Corporation) with ESAB Corporation included in the peer group. The full list of Fiscal 2023 peers is shown below. 1. AMETEK, Inc. 2. Crane Holdings, Co. 3. Donaldson Company, Inc. 4. Dover Corporation 5. 6. ESAB Corporation Flowserve Corporation 7. Graco Inc. 8. 9. IDEX Corporation Ingersoll Rand Inc. 13. Regal Beloit Corporation 14. SPX Corporation 15. The Timken Company 10. Lincoln Electric Holdings, Inc. 16. Xylem Inc. 11. Nordson Corporation 12. Pentair plc At the time of the Compensation Committee’s approval, the average and median trailing twelve month revenues of the selected peers, at $3.8 billion and $3.5 billion, respectively, were consistent with the Company’s annual revenues. The Compensation Committee uses competitive compensation data from the annual total compensation study of peer companies as a reference point to inform its decisions about overall compensation opportunities and specific compensation elements. Additionally, the Compensation Committee uses multiple reference points when establishing targeted compensation levels. The Compensation Committee does not benchmark specific compensation elements or total compensation to any specific percentile relative to the peer companies or the broader U.S. market. Instead, the Compensation Committee applies judgment and discretion in establishing targeted pay levels, taking 72 into account not only competitive market data, but also factors such as Company, business and individual performance, scope of responsibility, critical needs and skill sets, leadership potential and succession planning. For Fiscal 2024, the Compensation Committee, in consultation with the Consultant, reviewed the composition of the peer group and, using the same selection criteria, maintained the same peer group as used for Fiscal 2023 compensation decisions, with the addition of Franklin Electric Co., Inc. Consideration of Shareholder Views At the 2023 AGM, the shareholders approved the Company’s annual remuneration report (as required under the Companies Act) and the compensation of its named executive officers, which includes the Executive Director (on an advisory basis, pursuant to applicable SEC regulations). The voting results were as follows: Resolution: To approve, on an advisory basis, named executive officer compensation: Votes For (#) 195,620,245 % of Total 70.86% Votes Against (#) 75,598,869 % of Total 27.38% Votes Abstain (#) 4,856,972 % of Total 1.76% Resolution: To approve, on an advisory basis, the Company’s directors’ remuneration report in accordance with the requirements of the Companies Act. Votes For (#) 200,754,693 % of Total 72.72% Votes Against (#) 75,285,586 % of Total 27.27% Votes Abstain (#) 35,807 % of Total 0.01% In light of the voting results on these resolutions and based on the Company’s compensation philosophy and objectives, the Compensation Committee is maintaining its overall compensation program for the Executive Director and the Non-Executive Directors, with certain modifications as described in the Company’s compensation discussion and analysis in the proxy statement. The Directors’ Remuneration Report was approved by the Board and authorized for issue on April 26, 2024. It was signed on its behalf by: Ivo Jurek Director and Chief Executive Officer 73 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GATES INDUSTRIAL CORPORATION PLC Report on the audit of the financial statements 1. Opinion In our opinion:     the financial statements of Gates Industrial Corporation plc (the ‘parent company’) and its subsidiaries (the ‘group’) give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 December 2023 and of the group’s profit for the year then ended; the group financial statements have been properly prepared in accordance with United Kingdom adopted international accounting standards; the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements which comprise:       the consolidated statement of profit or loss; the consolidated statement of comprehensive income; the consolidated and parent company balance sheets; the consolidated and parent company statements of changes in equity; the consolidated cash flow statement; and the related notes 1 to 32 in the consolidated financial statements and the related notes 1 to 10 in the parent company financial statements. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and United Kingdom adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice). 2. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. 74 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 3. Summary of our audit approach Key audit matters The key audit matter that we identified in the current year was:  Goodwill and Other Intangible Assets Within this report, key audit matters are identified as follows: Newly identified Increased level of risk Similar level of risk Decreased level of risk Materiality Scoping The materiality that we used for the group financial statements was $20 million which was determined on the basis of Adjusted EBITDA, amended to include share- based compensation and restructuring costs. The scope of our audit focused on the US component, which was subject to a full scope audit, together with other non-significant components which were subject to either audits of specified account balances or specified audit procedures and which were selected in order to provide a scope that was a sufficient basis for our audit opinion; together, these components accounted for 76.2% of group revenue and 84.9% of Adjusted EBITDA, amended to include share-based compensation and restructuring costs. Significant changes in our approach The first-time adoption of IFRS has been removed as a key audit matter in the current year. Apart from this change, our approach is consistent with the prior year. 4. Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of accounting included:     evaluating the group’s debt instruments and finance facility agreements to gain an understanding of their key terms, including the nature of the debt and facilities, their repayment terms and, where applicable, covenants; testing the clerical accuracy of the model used by management to prepare the forecasts and testing that the terms of the debt instruments and facilities have been modelled in line with the debt and facility agreements; assessing the historical accuracy of forecasts prepared by management as it relates to cash flows; assessing the forecast trading performance and cash flows over the going concern period and the assumptions therein; 75   testing the calculations of the amount of headroom in the forecasts (cash and covenants) ; and assessing the appropriateness of the going concern disclosures in the financial statements. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group’s and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. 5. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 5.1. Goodwill and Other Intangible Assets Key audit matter description The group’s evaluation of goodwill for impairment involves the comparison of the recoverable amount of each cash generating unit, or groups of cash generating units, to which goodwill is allocated to their carrying values. The group determined the recoverable amount of its cash generating units using a value in use approach. Similarly, the group’s evaluation of its brands and trade names intangible asset involves the comparison of the recoverable amount of the brands and trade names intangible asset to its carrying value. The group determined the recoverable amount of the brands and trade names intangible asset using a value in use approach, which incorporated a relief from royalty valuation methodology. The determination of the value in use for both the goodwill and brands and trade names intangible asset impairment analyses required management to make significant estimates and assumptions. The goodwill balance was $2,038.7 million as of 30 December 2023 (2022: $1,981.1 million), of which $700.2 million and $1,338.5 million were allocated to the Fluid Power and Power Transmission cash generating units, respectively (2022: $665.9 million and $1,315.2 million respectively). The values in use of the Fluid Power and Power Transmission cash generating units exceeded their carrying values as of the measurement date and, therefore, no goodwill impairments were recognised. The brands and trade names intangible asset balance was $513.4 million as of 30 December 2023 (2022: $513.4 million). The value in use of the brands and trade names intangible asset exceeded its carrying value as of the measurement date and, therefore, no impairment was recognised. Given the significant estimates and assumptions management makes to estimate the value in use of goodwill and the brands and trade names intangible asset for its impairment analyses, performing audit procedures to evaluate the reasonableness of management’s forecasts of future sales and the discount rates used in the 76 impairment tests required a high degree of auditor judgement and an increased extent of effort, including the need to involve our valuation specialists. Details of the accounting policies in relation to goodwill and other intangible assets are set out in notes 2J and 2K respectively. Further information in relation to the year end balances is set out in notes 16 and 17 respectively. How the scope of our audit responded to the key audit matter Our audit procedures related to the forecasts of sales growth rates and the discount rate used by management to estimate the value in use of goodwill and the brands included the following, among others:  We tested the effectiveness of controls over management’s goodwill and brands and trade names intangible asset impairment evaluations, including those over the determination of the value in use of goodwill and the brands and trade names intangible asset, and controls related to management’s review of the assumptions described above;  We evaluated management’s ability to accurately forecast sales by comparing actual results to management’s historical forecasts to determine if the difference between historical forecast and actual results would have a material impact on the goodwill and brands and trade names intangible asset impairment analyses;  We evaluated the reasonableness of management’s revenue forecasts by comparing to: o Macroeconomic data on projected growth o o Forecast information included in group press releases as well as in Internal communications to management and the Board of Directors analyst and industry reports for the group.  With the assistance of our valuation specialists, we evaluated the reasonableness of management’s revenue forecasts by comparing to historical and projected financial information of peer companies and other industry participants from external market sources; and  With the assistance of our valuation specialists, we evaluated the reasonableness of the discount rate by: o Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation.  Developing a range of independent estimates and comparing those to the discount rate selected by management.  We assessed the appropriateness of the related disclosures. Key observations Based on the audit procedures performed, we are satisfied that the value in use of the goodwill and brand name and intangible asset balances are in excess of their respective carrying amounts. We concluded that the disclosures made in relation to critical accounting estimates and judgements in respect of goodwill and intangibles are appropriate. 77 6. Our application of materiality 6.1. Materiality We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Materiality Basis for determining materiality Rationale for the benchmark applied Group financial statements Parent company financial statements $20 million (2022: $20 million) $18 million (2022: $18 million) 2.8% (2022: 3.1%) of Adjusted EBITDA, amended as explained below. Adjusted EBITDA is calculated as operating income from continuing operations before certain items, as set out on page 105. Adjusted EBITDA is reconciled to net income from continuing operations before taxes in note 5D to the consolidated financial statements on page 105. In setting our materiality with reference to Adjusted EBITDA, we also included in that measure the impact of share-based compensation and restructuring expenses, as we consider these to be a recurring part of the group’s total costs. Profit related measures are the most relevant to the users of the financial statements. We considered Adjusted EBITDA, amended for the impact of share- based compensation and restructuring expenses, since this is broadly representative of the underlying performance of the business. In establishing parent company materiality, we used net assets as the key input as the company acts as an investment holding company rather than a profit-oriented trading company. However, we have capped parent company materiality at 90% (2022: 90%) of group materiality. A net assets benchmark was considered appropriate in determining materiality given that the parent company’s primary function is to hold the investments in the company’s subsidiaries. 78 Adjusted EBITDA $720m Adjusted EBITDA Group materiality Group materiality $20m Component materiality range excluding parent company $5m to $11m Audit Committee reporting threshold $1.00m 6.2. Performance materiality We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Performance materiality Basis and rationale for determining performance materiality Group financial statements Parent company financial statements 70% (2022: 70%) of group materiality 70% (2022: 70%) of parent company materiality In determining performance materiality, we considered the following factors: a. our evaluation of the group’s control environment; b. our past audit experience of the group, in which we identified a low number of c. corrected and uncorrected misstatements in the prior period audit; there have not been significant changes in the nature of the group’s operations which affect our ability to forecast misstatements; and d. there has not been a significant turnover in key accounting personnel or significant changes in IT systems that are relevant to the preparation of the financial statements. 6.3. Error reporting threshold We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of $1 million (2022: $1 million), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements. 7. An overview of the scope of our audit 7.1. Identification and scoping of components Our group audit was scoped by obtaining an understanding of the group and its environment, including group- wide controls on an entity level basis and assessing the components against the risk of material misstatement at the group level. We have also considered the quantum of the financial statement balances and total contribution to the group. In performing our assessment, we have considered the geographical spread of the group and any risks presented within each region. 79 Based on that assessment we focused our scope on the US component, which was subject to a full scope audit, together with certain other components which were subject to audits of specified account balances and specified audit procedures; together, these accounted for 76.2% of group revenue (2022: 73.3%) and 84.9% of Adjusted EBITDA including share-based compensation and restructuring expenses (2022: 78.0%). Our audit work and specified procedures at these entities was executed at levels of materiality applicable to each individual entity which were lower than group materiality and, except for the parent company, ranged between $5.0 million and $11.2 million (2022: $5.0 million to $11.2 million). At the parent entity level, we also tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were no significant risks of material misstatement of the aggregated financial information of the remaining components not subject to a full scope audit or audit of specified balances. 24% 32% Revenue 15% 27% Adjusted EBITDA 44% Full audit scope 58% Full audit scope Specified audit procedures Specified audit procedures Review at group level Review at group level 7.2. Our consideration of the control environment Our audit strategy is to rely on controls over certain processes within a number of business cycles. As part of our controls testing, we obtained an understanding of the group’s processes and tested controls through a combination of tests of inquiry, observation, inspection and re-performance. Given the importance of information technology (’IT’) to the recording of financial information and transactions, we have tested General IT controls in conjunction with our IT specialists, relating to certain of the group’s IT systems, where relevant to our audit work. We have been able to place IT controls reliance across these systems to support the audit of a number of business cycles. 7.3. Our consideration of climate-related risks The directors consider that societal responses to sustainability issues, including those related to climate change, could adversely affect the group’s business and performance, including indirectly through impacts on their customers, as set out in the Principal Risks and Uncertainties section of the Strategic Report. In preparing the consolidated financial statements, management considered the impact of climate change and concluded that this does not have a material impact on the financial reporting judgements and estimates, consistent with the assessment that climate change is an emerging risk – refer to note 4. This is consistent with our evaluation of the climate related risks facing the group. In addition, we have performed our own qualitative risk assessment of the potential impact of climate change on the group’s account balances and classes of transaction and did not identify any reasonably possible risks of material misstatement. 80 With the assistance of climate-related specialists, our procedures consisted solely of considering whether the references to climate change that are included in the other information are materially inconsistent with the consolidated financial statements, or our knowledge obtained in the course of the audit. 7.4. Working with other auditors The engagement partner and other senior members of the team visited the US component pre year-end, as part of our planning activities, and post year-end, during the audit fieldwork. We held internal fraud and planning calls with component teams and specialists. The purpose of these communications was to deliberate and pinpoint risks, discuss developments within the group that were relevant to components and changes in auditing standards relevant to the 2023 audit that affect component teams. We updated our knowledge of business and developments across the different components. We sent clear instructions to component teams, to set out the planned audit approach for the group. This included follow up confirmation of receipt and follow up planning calls to discuss the content thereof. Throughout the substantive phase of our audit, we held regular calls with component teams, to provide continued direction and supervision. We performed and reviewed component work papers remotely for the significant component and for a selection of the non-significant material components. During the conclusion phase, we reviewed component team reporting deliverables, held discussions regarding key items highlighted by the component auditors or identified through our reviews and assessed the impact of their reporting on our conclusions. 8. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 9. Responsibilities of directors As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such 81 internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’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 directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. 10. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) 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 financial statements. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. 11. Extent to which the audit was considered capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. 11.1. Identifying and assessing potential risks related to irregularities In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non- compliance with laws and regulations, we considered the following:   the nature of the industry and sector, control environment and business performance including the design of the group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets; results of our enquiries of management, internal audit, and the Audit Committee about their own identification and assessment of the risks of irregularities, including those that are specific to the group’s sector;  any matters we identified having obtained and reviewed the group’s documentation of their policies and procedures relating to: o identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance; o detecting and responding to the risks of fraud and whether they have knowledge of any actual, o suspected or alleged fraud; the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;  the matters discussed among the audit engagement team including significant component audit teams and relevant internal specialists, including tax, valuation and IT specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud. 82 As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override. We also obtained an understanding of the legal and regulatory frameworks that the group operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act, pensions legislation and tax legislation. In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the group’s ability to operate or to avoid a material penalty. These included US Foreign Corrupt Practices Act and the UK Bribery Act. 11.2. Audit response to risks identified As a result of performing the above, we did not identify any key audit matters related to the potential risk of fraud or non-compliance with laws and regulations. Our procedures to respond to risks identified included the following:  reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;  enquiring of management, the audit committee and in-house legal counsel concerning actual and potential litigation and claims;  performing analytical procedures to identify any unusual or unexpected relationships that may    indicate risks of material misstatement due to fraud; reading minutes of meetings of those charged with governance and reviewing internal audit reports; reviewing the periodic reports issued by in-house legal counsel to the Audit Committee concerning actual litigation and claims; and in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. Report on other legal and regulatory requirements 12. Opinions on other matters prescribed by the Companies Act 2006 In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: 83   the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report. 13. Matters on which we are required to report by exception 13.1. Adequacy of explanations received and accounting records Under the Companies Act 2006 we are required to report to you if, in our opinion:  we have not received all the information and explanations we require for our audit; or  adequate accounting records have not been kept by the parent company, or returns adequate for our  audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns. We have nothing to report in respect of these matters. 13.2. Directors’ remuneration Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not been made or the part of the directors’ remuneration report to be audited is not in agreement with the accounting records and returns. We have nothing to report in respect of these matters. 14. Use of our report This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Joanna Waring FCA (Senior statutory auditor) For and on behalf of Deloitte LLP Statutory Auditor Birmingham, United Kingdom 2 May 2024 84 CONSOLIDATED STATEMENT OF PROFIT OR LOSS (dollars in millions, except per share amounts) Continuing operations Revenue Cost of sales Gross profit Selling and distribution costs Finance and administrative expenses Research and development costs Transaction-related expenses Asset impairments Other operating expenses Operating profit from continuing operations Interest expense Interest income Other (expenses) income Profit before tax from continuing operations Income tax expense Profit for the year from continuing operations Discontinued operations Loss for the year from discontinued operations Profit for the year Attributable to: Owners of the parent Non-controlling interests Earnings per share Basic Earnings per share from continuing operations Earnings per share from discontinued operations Earnings per share Diluted Earnings per share from continuing operations Earnings per share from discontinued operations Earnings per share 85 Notes Year ended December 30, 2023 Year ended December 31, 2022 4 8 9 10 10 11 12 12 12 12 3,559.3 (2,192.8) 1,366.5 (283.1) (559.7) (53.8) (2.2) (0.1) (0.2) 467.4 (214.0) 14.5 (26.0) 241.9 (15.7) 226.2 3,554.2 (2,280.2) 1,274.0 (291.4) (519.2) (56.6) (2.1) — (1.3) 403.4 (164.8) 3.6 2.1 244.3 (19.3) 225.0 (0.6) 225.6 (0.4) 224.6 201.8 23.8 225.6 0.74 — 0.74 0.73 — 0.73 $ 0.26 — $ 0.26 $ 0.26 — $ 0.26 203.3 21.3 224.6 0.72 — 0.72 0.71 — 0.71 Year ended December 30, 2023 $ 225.6 $ Year ended December 31, 2022 224.6 126.2 (159.8) (21.6) 4.8 9.2 (24.1) 89.7 (7.8) (7.8) 81.9 307.5 $ 298.1 $ (0.6) 297.5 10.0 307.5 $ 46.4 8.9 (99.7) (28.0) (28.0) (127.7) 96.9 117.2 (0.4) 116.8 (19.9) 96.9 $ $ $ CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (dollars in millions) Profit for the year Other comprehensive income (loss) Items that may be reclassified subsequently to profit or loss: Foreign currency translation: — Net translation gain (loss) on foreign operations, net of tax expense, respectively, of $(4.3) and $(2.5) — (Loss) gain on net investment hedges, net of tax benefit, respectively, of $3.3 and $7.9 Cash flow hedges (Interest rate derivatives): — Gain arising in the period, net of tax expense, respectively, of $(1.1) and $(14.9) — Reclassification to net income, net of tax benefit (expense), respectively, of $6.0 and $(3.5) Items that will not be reclassified subsequently to profit or loss (net of tax): Post-retirement benefits: — Remeasurement of net defined benefit liabilities, net of tax benefit, respectively, of $3.1 and $9.5 Notes 21 21 21 25 Other comprehensive income (loss) Total comprehensive income for the year Comprehensive income (loss) attributable to shareholders: — Income arising from continuing operations — Loss arising from discontinued operations Total comprehensive income (loss) attributable to non-controlling interests Total comprehensive income for the year 86 CONSOLIDATED BALANCE SHEET (dollars in millions) Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Taxes receivable Total current assets Property, plant and equipment Goodwill Intangible assets Pension surplus Right-of-use assets Taxes receivable Deferred tax assets Other non-current assets Total non-current assets Total assets Current liabilities Interest-bearing loans and borrowings Trade and other payables Current tax liabilities Lease liabilities Total current liabilities Interest-bearing loans and borrowings Post-retirement benefit obligations Lease liabilities Taxes payable Deferred tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Net Assets Equity Share capital Share premium account Other reserves Retained earnings Equity attributable to owners of the company Non-controlling interests Total equity 87 Notes As of December 30, 2023 As of December 31, 2022 13 14 15 16 17 25 20 24 13 22 19 20 22 25 20 24 19 29 29 29 29 18 $ $ $ 720.6 $ 979.6 681.4 30.4 2,412.0 627.2 2,038.7 1,430.3 8.8 127.8 18.5 642.2 22.9 4,916.4 7,328.4 $ 36.6 $ 674.5 36.6 24.6 772.3 2,410.0 90.0 125.3 79.4 126.3 116.6 2,947.6 3,719.9 3,608.5 $ $ 2.6 42.5 821.7 2,417.6 3,284.4 324.1 3,608.5 $ $ 578.4 1,007.3 684.9 13.0 2,283.6 634.0 1,981.1 1,534.4 10.6 135.2 15.1 612.7 32.5 4,955.6 7,239.2 36.5 660.0 23.5 26.2 746.2 2,383.0 82.4 129.4 79.5 203.4 83.3 2,961.0 3,707.2 3,532.0 2.8 23.8 715.0 2,456.8 3,198.4 333.6 3,532.0 The financial statements of Gates Industrial Corporation plc (registered number 10980824) were approved by the board of directors and authorized for issue on May 2, 2024. They were signed on its behalf by: __________________ Ivo Jurek Director and Chief Executive Officer 88 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Note s Share capital $ 2.9 $ Share premium account Translation and hedging reserve Merger reserve 7.9 $ (850.6) $ 1,622.0 $ 2,420.1 $ Retained earnings Total Non- shareholders’ controlling equity interests 3,202.3 $ 382.0 $ 3,584.3 Total equity (dollars in millions) As of January 1, 2022 Profit for the year Other comprehensive loss Total comprehensive (loss) income Other changes in equity: —Issuance of shares —Shares withheld for employee taxes —Repurchase and cancellation of shares —Share-based compensation —Deferred tax on share- based payment transactions —Dividends paid to non- controlling interests As of December 31, 2022 Profit for the year Other comprehensive income (loss) Total comprehensive income Other changes in equity: —Issuance of shares —Shares withheld for employee taxes —Repurchase and cancellation of shares —Share-based compensation —Deferred tax on share- based payment transactions —Dividends paid to non- controlling interests As of December 30, 2023 — — — — — — — (56.4) (56.4) 29 — 15.9 29 — 29 26 (0.1) — — — 2.8 — — — 29 — 29 26 (0.2) — — — $ 2.6 $ — — — — — — — — — 29 — 18.7 — — — — — — — — — — — — — — — — — — 203.3 203.3 21.3 224.6 (30.1) (86.5) (41.2) (127.7) 173.2 116.8 (19.9) 96.9 — 15.9 (1.4) (1.4) (175.8) (175.9) 43.5 43.5 — — — 0.1 15.9 (1.4) (175.9) 43.6 — (2.8) (2.8) 0.1 (2.7) — — — — — — — — — (11.0) 95.7 (13.8) 81.9 190.8 297.5 10.0 307.5 — 18.7 (3.3) (3.3) (253.5) (253.7) 26.3 26.3 — — — 0.2 18.7 (3.3) (253.7) 26.5 0.5 — 0.5 — 0.5 — (19.7) 3,284.4 $ 324.1 $ 3,608.5 (19.7) — 23.8 — — (907.0) 1,622.0 — 2,456.8 — 3,198.4 201.8 (28.7) 333.6 (28.7) 3,532.0 23.8 225.6 201.8 — — — — 106.7 106.7 42.5 $ (800.3) $ 1,622.0 $ 2,417.6 $ 89 CONSOLIDATED CASH FLOW STATEMENT (dollars in millions) Cash flows from operating activities Profit for the year Adjustments to reconcile profit for the year to net cash generated by operations: Notes Year ended December 30, 2023 Year ended December 31, 2022 $ 225.6 $ 224.6 Interest income Interest expense Income tax expense Depreciation and amortization Foreign exchange and other non-cash financing expenses Share-based payment expense Decrease in post-employment benefit obligations, net Asset impairments Other operating expenses Changes in operating assets and liabilities: —accounts receivable —inventories —accounts payable —prepaid expenses and other assets —tax payable —other liabilities Cash generated by operations Interest income received Interest paid Income taxes paid Net cash provided by operating activities Cash flows from investing activities Purchases of property, plant and equipment Purchases of intangible assets Cash paid under corporate-owned life insurance policies Cash received under corporate-owned life insurance policies Proceeds from the sale of property, plant and equipment Other investing activities Net cash used in investing activities Cash flows from financing activities Issuance of shares Buy-back of shares Proceeds from long-term debt Payments of long-term debt Debt issuance costs paid Dividends paid to non-controlling interests Cash payments for principal portion of leases Cash payments for interest portion of leases Other financing activities Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period 10 9 26 25 10 29 29 22 22 22 18 (17.5) 214.0 15.7 243.3 4.3 27.4 (3.2) 0.1 5.3 45.6 19.1 (17.8) 32.2 2.1 (10.4) 785.8 17.5 (155.1) (110.5) 537.7 (61.2) (10.2) (18.2) 6.6 1.2 — (81.8) 18.7 (251.7) 100.0 (119.6) (1.3) (18.2) (27.4) (6.3) (8.1) (313.9) 0.2 142.2 578.4 720.6 $ (3.6) 164.8 19.3 242.5 35.1 44.3 (16.0) 2.6 6.6 (129.3) (16.5) (15.9) 76.2 (1.2) (107.6) 525.9 3.6 (118.7) (117.8) 293.0 (77.6) (9.4) (11.6) 6.0 2.1 (0.2) (90.7) 15.9 (175.9) 645.0 (676.9) (23.3) (28.7) (28.5) (5.4) (2.8) (280.6) (1.5) (79.8) 658.2 578.4 $ 90 Gates Industrial Corporation plc Notes to the Consolidated Financial Statements 1. General information Gates Industrial Corporation plc (the “Parent Company”) is a public company limited by shares incorporated in the United Kingdom under the Companies Act and is registered in England and Wales. The registered office is located at 1 Bartholomew Lane, London EC2N 2AX, United Kingdom. In these consolidated financial statements and related notes, all references to “Gates”, the “Company”, “Group”, “we”, “us”, “our” refer, unless the context requires otherwise, to the Parent Company and its subsidiaries. Gates manufactures a wide range of power transmission and fluid power products and components for a large variety of industrial and automotive applications, both in the aftermarket and first-fit channels, throughout the world. Gates is comprised of two operating segments: Power Transmission and Fluid Power. 2. Principal Accounting Policies A. Basis of preparation The consolidated financial statements and related notes have been prepared in accordance with United Kingdom adopted international accounting standards (“IFRS”). The consolidated financial statements have been prepared on an historical cost basis, except for post-retirement benefit obligations, which are valued on the basis required by IAS 19 “Employee Benefits”, and certain financial instruments and equity investments, which have been measured at fair value at the end of each reporting period. The consolidated financial statements are presented in U.S. dollars unless otherwise indicated and are rounded to the nearest $0.1 million. B. Accounting periods The Group prepares its annual consolidated financial statements as of the Saturday nearest December 31. Accordingly, the consolidated balance sheets are presented as of December 30, 2023 and December 31, 2022, and the related consolidated statements of operations, comprehensive income, cash flows, and shareholders’ equity are presented for the years ended December 30, 2023 (“Fiscal 2023”) and December 31, 2022 (“Fiscal 2022”). C. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company has the power over the investee, is exposed, or has rights, to variable returns from its involvement with the investee, and has the ability to use its power to affect the Company’s returns. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of these elements of control. When the Company has less than a majority of the voting or similar rights of an investee, the Company considers all relevant facts and circumstances in assessing whether it has power over an investee, including contractual arrangements with the other vote holders of the investee, rights arising from other contractual arrangements and the Company’s voting rights and potential voting rights. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. The results of subsidiaries acquired or disposed of during the year are included in profit or loss from the date the Company gains control until the date when the Company ceases to control the subsidiary. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are eliminated on consolidation. Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Those interests of non-controlling shareholders that are present ownership interests entitling their holders to a proportionate share of net assets upon liquidation may initially be measured at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement is made on an acquisition-by-acquisition basis. Other non-controlling interests are initially 91 measured at fair value. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non- controlling interests. Total comprehensive income of the subsidiaries is attributed to the owners of the Company and to the non- controlling interests even if this results in the non-controlling interests having a deficit balance. Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for within equity. In such circumstances, the carrying amounts of equity attributable to the shareholders of the Company and to non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non- controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the shareholders of the Company. If the Company loses control of a subsidiary, it derecognizes the assets, liabilities, non-controlling interest and related equity components of the former subsidiary and measures any investment retained in the former subsidiary at its fair value at the date when control is lost. Any gain or loss is recognized in profit or loss. D. Going Concern The Group’s business activities, together with factors likely to affect its future development, performance and position are set out in the Strategic Report. The Strategic Report also describes the financial position of the Company, its cash-flows, liquidity position and borrowing facilities, the Group’s objectives and policies for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its exposure to credit risk and liquidity risk. Refer to Section IX: Liquidity and Capital Resources of the Strategic Report herein for a detailed summary of the Company’s borrowing headroom and Note 23: Financial Instruments and Risk Management to the Consolidated Financial Statements herein for details on the maturity profile of the Company’s financial liabilities. The directors have, at the time of approving the financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. Accordingly, the directors continue to adopt the going concern basis of accounting in preparing the financial statements. E. Associates An associate is an entity over which the Group, either directly or indirectly, is in a position to exercise significant influence by participating in, but not controlling or jointly controlling, the financial and operating policies of the entity. Associates are accounted for using the equity method whereby the investments in associates are carried in the balance sheet at cost as adjusted for changes in the Company’s share of the net assets of the associate, less any recognized impairment. Comprehensive income or losses recognized by the Company or its subsidiaries on transactions with an associate are eliminated to the extent of the Company’s interest in the associate concerned. Losses of an associate in excess of the Company’s interest in the entity are not recognized, except to the extent that the Group has incurred obligations on behalf of the entity. F. Foreign currency translation Transactions denominated in currencies other than the entity’s functional currency are translated into the entity’s functional currency at the exchange rate prevailing on the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate prevailing on the reporting date. Exchange differences arising from changes in exchange rates are recognized in profit or loss. On consolidation, the results of operations of entities whose functional currency is other than the U.S. dollar are translated into U.S. dollars at the weighted average exchange rate for the period and their assets and liabilities are translated into U.S. dollars at the exchange rate prevailing on the balance sheet date. Currency translation differences are recognized within other comprehensive income (“OCI”) as a separate component of accumulated OCI. In the event that a foreign operation is sold, or substantially liquidated, the cumulative currency translation differences that are attributable to the operation are reclassified to net income. In the statement of cash flows, the cash flows of operations whose functional currency is other than the U.S. dollar are translated into U.S. dollars at the weighted average exchange rate for the period. 92 For certain subsidiaries operates in hyper-inflationary environment, the subsidiaries' financial statements are first restated by applying a general price index of the country in which it reports, in accordance with the requirements of IAS 29 - Hyperinflation (“IAS 29”). The restated financial statements are then translated at closing rates on the balance sheet date. G. Revenue Gates derives its revenue primarily from the sale of a wide range of power transmission and fluid power products and components for a large variety of industrial and automotive applications, both in the aftermarket and first-fit channels, throughout the world. Revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In order to achieve this, we use the five step model outlined in IFRS 15: Revenue from Contracts with Customers. Specifically, we (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) we satisfy a performance obligation. In the substantial majority of our agreements with customers, we consider accepted customer purchase orders, which in some cases are governed by master sales agreements, to represent the contracts with our customers. Revenue from the sale of goods under these contracts is measured at the invoiced amount, net of estimated returns, early settlement discounts and rebates. Taxes collected from customers relating to product sales and remitted to government authorities are excluded from revenues. Where a customer has the right to return goods, future returns are estimated based on historical returns profiles. Settlement discounts that may apply to unpaid invoices are estimated based on the settlement histories of the relevant customers. Our transaction prices often include variable consideration, usually in the form of discounts and rebates that may apply to issued invoices. The reduction in the transaction price for variable consideration requires that we make estimations of the expected total qualifying sales to the relevant customers. These estimates, including an analysis for potential constraint on variable consideration, take into account factors such as the nature of the rebate program, historical information and expectations of customer and consumer behavior. Overall, the transaction price is reduced to reflect our estimate of the consideration that is not probable of significant reversal. We allocate the transaction price to each distinct performance obligation based on their relative standalone selling price. The product price as specified on the accepted purchase order is considered to be the standalone selling price. In substantially all of our contracts with customers, our performance obligations are satisfied at a point in time, rather than over a period of time, when control of the product is transferred to the customer. This occurs typically at shipment. In determining whether control has transferred and the customer is consequently able to control the use of the product for their own benefit, we consider if there is a present right to payment, legal title and physical possession has been transferred, whether the risks and rewards of ownership have transferred to the customer, and if acceptance of the asset by the customer is more than perfunctory. H. Restructuring expenses Restructuring expenses are incurred in major projects undertaken to rationalize and improve our cost competitiveness. A restructuring provision is recognized when the Company has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity. A liability for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognizes any related restructuring costs. I. Business combinations A business combination is a transaction or other event in which the Company obtains control of one or more businesses. Business combinations are accounted for using the acquisition method. Goodwill arising in a business combination is measured as the excess of the aggregate of the consideration transferred, the amount of any non-controlling interest in the acquired business and, in a business combination achieved in stages, the fair value at the acquisition date of the Company’s previously held equity interest in the acquired business, over the identifiable assets and liabilities of the acquired business at the acquisition date. If the identifiable assets and liabilities of the acquired business exceed the aggregate of the consideration transferred, the amount of any non-controlling interest in the acquired business and the fair value at the acquisition date of any previously held equity interest, that excess is recognized as a gain in profit or loss. 93 Consideration transferred in a business combination is measured at the aggregate of the fair values of the assets given, liabilities incurred or assumed and equity instruments issued by the Group in exchange for control over the acquired business. Acquisition- related costs are recognized in profit or loss as incurred. Any non-controlling interests in the acquired business are measured either at fair value or at the non-controlling interest’s proportionate share of the identifiable assets and liabilities of the acquired business. Identifiable assets and liabilities of the acquired business are measured at their fair value at the acquisition date, except for the following that are measured in accordance with the relevant accounting policy: – – – – pensions and other post-employment benefit arrangements; liabilities or equity instruments related to the replacement of share-based incentives awarded to employees of the acquired business; deferred tax assets and liabilities of the acquired business; assets or disposal groups classified as held for sale. When the consideration transferred by the Group in a business combination includes a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Other contingent consideration is remeasured to fair value at subsequent reporting dates with changes in fair value recognized in profit or loss. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts where appropriate. Those provisional amounts are adjusted during the measurement period, or additional assets or liabilities recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized at that date. The measurement period is the period from the date of acquisition to the date the Company obtains complete information about facts and circumstances that existed as of the acquisition date and is subject to a maximum period of one year. When a business combination is achieved in stages, the Company’s previously held interests in the acquired business are remeasured to their fair value when the Company obtains control of the acquired business and the resulting gain or loss, if any, is recognized in profit or loss. J. Goodwill Goodwill arising in a business combination is recognized as an intangible asset and is allocated to the cash generated unit (‘CGU’) or group of CGUs that are expected to benefit from the synergies of the acquisition. Where a number of CGUs or groups of CGUs are acquired in a business combination, the goodwill attributable to each of them is determined by allocating the purchase consideration in proportion to their respective business enterprise values and comparing the allocated purchase consideration with the fair value of the identifiable assets and liabilities of the CGU or group of CGUs. Goodwill is not amortized but is tested at least annually for impairment and carried at cost less any recognized impairment. Impairment is determined by assessing the recoverable amount of the CGU to which goodwill relates. Where the recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognized in profit and loss. An impairment loss recognized for goodwill is not reversed in a subsequent period. On disposal of a CGU, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. 94 K. Other intangible assets Other intangible assets are stated at cost less accumulated amortization and any recognized impairment losses. (i) Assets acquired in business combinations An acquired intangible asset with a finite useful life is amortized on a straight-line basis so as to charge its cost, which represents its fair value at the date of acquisition, to net income over the Company’s expectation of its useful life, as follows: Customer relationships Technology 15 to 17 years 5 to 7 years Acquired brands and trade names are considered to have an indefinite useful life and are not amortized but are tested at least annually for impairment and are carried at cost less any recognized impairment. (ii) Product development costs All research expenditure is charged to profit or loss in the period in which it is incurred. Development expenditure is charged to profit or loss in the period in which it is incurred unless it relates to the development of a new or significantly improved product, it is incurred after the technical feasibility of the product has been proven, and customer orders have been received that are expected to provide income sufficient to cover the further development expenditure that will be incurred prior to the product going into full production. Capitalized development expenditure is amortized on a straight-line basis such that it is charged to profit or loss over the expected life of the resulting product. (iii) Computer software Computer software that is not integral to an item of property, plant and equipment is recognized separately as an intangible asset. Computer software is amortized on a straight-line basis over its estimated useful life, which ranges from 2 to 6 years. L. Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any recognized impairment losses. Major improvements are capitalized. Expenditures for repairs and maintenance that do not extend the useful life of the asset for more than one accounting period are expensed as incurred. Freehold land and assets under construction are not depreciated. The carrying values of property, plant and equipment are reviewed annually for indicators of impairment, or if events or changes in circumstances indicate that the carrying value may not be recoverable. Depreciation of property, plant and equipment, other than freehold land and assets under construction, is generally provided on a straight-line basis so as to charge the depreciable amount to profit or loss over the useful life of the asset as follows: Buildings and improvements Leasehold improvements Plant, equipment and vehicles 30 to 40 years Shorter of lease term or useful life 2 to 20 years An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds or costs and the carrying amount of the item) is included in the consolidated statement of profit or loss in the period that the item is derecognized. M. Leases Gates has a large number of leases covering a wide variety of tangible assets that are used in our operations across the world. The value of our global leases is concentrated in a relatively small number of real estate leases, which accounted for approximately 93% of the lease liability under non-cancellable leases as of December 30, 2023. The remaining leases are predominantly comprised of equipment and vehicle leases. 95 The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low- value assets. Right-of-use assets are measured at cost at the commencement date of the lease (i.e., the date the underlying asset is available for use), less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets. Gates recognizes lease liabilities representing obligations to make lease payments and right-of-use assets representing the right to use the underlying assets. In determining the impact of renewal options on the lease term, we consider various economic factors, including real estate strategies, the nature, length and underlying terms of the agreement, as well as the uncertainty of the condition of leased equipment at the end of the lease term. Certain payments under our lease agreements, such as property taxes and utility costs, are excluded from the measurement of our right-of-use assets and lease liabilities and are recognized instead as variable payments in the period in which the obligation for those payments is incurred. Variable lease payments that do not depend on an index or a rate are recognized as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs. A number of our leases, particularly real estate leases, include base rent escalation clauses. The majority of these are based on the change in a local consumer price or similar inflation index. The carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. Gates does not have any significant leases containing residual value guarantees, restrictions or covenants. Additionally, as of December 30, 2023, there were no significant new leases that have not yet commenced. The discount rate used to calculate the present value of the future minimum lease payments is the rate implicit in the lease, when readily available. As most of our leases do not have a readily determinable implicit rate, we discount the future minimum lease payments using an incremental borrowing rate which represents the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. We determine this rate at a country or lower level and take into account factors including currency, country risk premium, industry risk and adjustments for collateralized debt. Appropriate yield curves are used to derive different debt tenors to approximate the applicable lease term. The discount rate is reassessed when there is a remeasurement of the lease liability that is not resulting from a change in an index or rate, which happens predominantly when there is a contract modification and that modification does not result in a separate contract. The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease term. N. Impairment of non-current assets Goodwill, other intangible assets and property, plant and equipment are tested for impairment whenever events or circumstances indicate that their carrying amounts might be impaired. Additionally, goodwill, other intangible assets considered to have an indefinite useful life and any capitalized development expenditure relating to a product that is not yet in full production are subject to an annual impairment test. An asset is impaired to the extent that its carrying amount exceeds its recoverable amount, which represents the higher of the asset’s value in use and its fair value less costs to sell. An asset’s value in use represents the present value of the future cash flows expected to be derived from the continued use of the asset. Fair value less costs to sell is the amount obtainable from the sale of the asset in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal. Where it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount is determined for the CGU to which the asset belongs. An asset’s CGU is the smallest group of assets that includes the asset and generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Goodwill does not generate cash flows independently of other assets and is, therefore, tested for impairment at the level of the CGU or group of CGUs to which it is allocated. 96 Where appropriate, impairment of long-lived assets other than goodwill is recognized before goodwill is tested for impairment. When goodwill is tested for impairment and the carrying amount of the CGU or group of CGUs to which the goodwill has been allocated exceeds its recoverable amount, the impairment is allocated first to reduce the carrying amount of the goodwill and then to the other long-lived assets belonging to the CGU or group of CGUs pro-rata on the basis of their carrying amounts. Impairments are recognized in profit or loss. Impairments recognized in previous periods for long-lived assets other than goodwill are reversed if there has been a change in the estimates used to determine the asset’s recoverable amount, but only to the extent that the carrying amount of the asset does not exceed its carrying amount had no impairment been recognized in previous periods. Impairments recognized in respect of goodwill are not reversed. O. Inventories Inventories are stated at the lower of cost and net realizable value, with due allowance for any excess, obsolete or slow-moving items. Cost represents the expenditure incurred in bringing inventories to their existing location and condition, which may include the cost of raw materials, direct labor costs, other direct costs and related production overheads. Cost is determined on a first in, first out basis. Net realizable value is the estimated selling price less costs to complete and sell. P. Financial instruments (i) Trade receivables Trade accounts receivable represent the amount of sales of goods to customers, net of discounts and rebates, for which payment has not been received, less an allowance for expected credit losses. Our businesses develop their expected loss estimates based either on the aging profile of outstanding receivables or by applying an experience factor (either a percentage of sales or a percentage of open receivables). These methodologies are based primarily on historical trends and experience, but credit controllers also regularly assess individual customer accounts to identify any potential increases or decreases in the level of expected credit loss needed to be applied to each customer based on current circumstances and future expectations. Movements in our allowance for expected credit losses during the periods presented are analyzed in Note 13. (ii) Cash and cash equivalents Cash and cash equivalents comprise cash in hand, deposits available on demand and other short-term, highly-liquid investments with a maturity on acquisition of three months or less, and bank overdrafts. Bank overdrafts are presented as current liabilities to the extent that there is no right of offset with cash balances. (iii) Restricted cash Restricted cash, which is included in the prepaid expenses and other assets line in the consolidated balance sheet, includes cash given as collateral under letters of credit for insurance and regulatory purposes. Restricted cash as of December 30, 2023 was $3.4 million, compared to $3.0 million as of December 31, 2022. (iv) Trade payables Trade payables represent the amount of invoices received from suppliers for purchases of goods and services for which payment has not been made. (v) Bank and other loans Bank and other loans are initially measured at fair value, net of directly attributable transaction costs, if any, and are subsequently measured at amortized cost using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of the financial instrument. At each reporting date, amortized cost is therefore determined as the value of estimated future cash flows discounted at the effective interest rate. (vi) Derivative financial instruments From time to time, the Group uses derivative financial instruments, principally foreign currency swaps, forward foreign currency contracts and interest rate swaps, to reduce its exposure to exchange rate and interest rate movements. The Group does not hold or issue derivatives for speculative purposes. 97 Derivative financial instruments are recognized as assets and liabilities measured at their fair values at the balance sheet date. Changes in their fair values are recognized in profit or loss and this is likely to cause volatility in situations where the carrying value of the hedged item is not normally adjusted to reflect fair value changes arising from the hedged risk or is so adjusted but that adjustment is not recognized in profit or loss. Provided the conditions specified by IFRS 9 ‘Financial Instruments’ are met, hedge accounting may be used to mitigate this volatility. The Group does not generally apply hedge accounting to its ‘transactional’ foreign currency hedging relationships, such as hedges of forecast or committed transactions. It does, however, apply hedge accounting to its ‘translational’ foreign currency hedging relationships and to hedges of its interest rate exposures where it is permissible to do so under IFRS 9. When hedge accounting is used, the relevant hedging relationships are classified as a fair value hedge, a cash flow hedge or, in the case of a hedge of the Group’s net investment in a foreign operation, a net investment hedge. Each hedging instrument is designated in a 1:1 hedge ratio against an equivalent notional amount of hedged item. Should an insufficient amount of hedged item be available the hedging instrument will be dedesignated or proportionally designated as appropriate. To the extent that the critical terms of the derivative are closely aligned with that of the hedged item, the entity applies a qualitative approach to establish the economic relationship between the hedging instrument and the hedged item. To the extent that there are more significant mismatches either at the inception of the hedging relationship or during the life of the hedge, the entity will apply quantitative methods such as regression testing and management judgments to assess effectiveness of the hedging relationship. Where the hedging relationship is classified as a fair value hedge, the carrying amount of the hedged asset or liability is adjusted by the change in its fair value attributable to the hedged risk and the resulting gain or loss is recognized in profit or loss where, to the extent that the hedge is effective, it offsets the change in the fair value of the hedging instrument. Where the hedging relationship is classified as a cash flow hedge or as a net investment hedge, to the extent the hedge is effective, the change in the fair value of the hedging instrument attributable to the hedged risk is recognized in OCI rather than in profit or loss. When the hedged item in a cash flow hedge is recognized in the financial statements, the accumulated gain or loss recognized in OCI is either transferred to profit or loss or, if the hedged item results in a non-financial asset, is recognized as an adjustment to the asset’s initial carrying amount. In the event that a foreign operation that is designated as a hedged item in a net investment hedge is sold, the accumulated currency translation gain or loss on the hedging instrument that is recognized in OCI is transferred to profit or loss and included in the gain or loss on disposal of the foreign operation. A derivative with a positive fair value is recognized as a financial asset whereas a derivative with a negative fair value is recognized as a financial liability. Derivatives are not offset in the financial statements unless the Group has both a legally enforceable right and intention to offset. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not due to be realized or settled within 12 months. Other derivatives are presented as current assets or current liabilities. (vii) Embedded derivatives An embedded derivative is a component of a hybrid contract that also includes a non-derivative host such that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. A derivative embedded in a non-derivative hybrid contract is separated from the host contract when its risks and characteristics are not closely related to those of the host contract and the hybrid contract is not measured at fair value with changes in fair value recognized in profit or loss. An embedded derivative that is separated from its host contract is presented as a separate asset or liability measured at fair value with changes in fair value recognized in profit or loss and is classed as a current or non-current asset or liability based on the cash flows of the hybrid contract. (viii) Fair Value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of IFRS 16, and measurements that have some similarities to fair value but are not fair value, such as net realizable value in IAS 2 or value in use in IAS 36. Financial assets and liabilities that are held at fair value, or for which fair values are presented in these financial statements, 98 have been categorized into one of three levels to reflect the degree to which observable inputs are used in determining the fair values. Where a change in the determination of the fair value of a financial asset or liability results in a transfer between the levels of the fair value hierarchy, the Group recognizes that transfer at the end of the reporting period. Q. Post-employment benefits Post-employment benefits comprise pension benefits provided to employees throughout the world and other benefits, mainly healthcare, provided to certain employees in North America. For defined contribution plans, the cost of providing the benefits represents the Group’s contributions to the plans and is recognized in profit or loss in the period in which the contributions fall due. For defined benefit plans, the cost of providing the benefits is determined based on actuarial valuations of each of the plans that are carried out annually at the Group’s balance sheet date by independent, qualified actuaries. Plan assets are measured at their fair value at the balance sheet date. Benefit obligations are measured on an actuarial basis using the projected unit credit method. The cost of defined benefit plans recognized in profit or loss comprises the net total of the current service cost, the past service cost, gains or losses from settlements and the net interest cost or income. The current service cost represents the increase in the present value of the plan liabilities expected to arise from employee service in the current period. The past service cost is the change in the benefit obligation in respect of employee service in prior periods and which results from a plan amendment or curtailment. The past service cost may be either positive or negative and is recognized in profit or loss at the earlier of the date on which the plan amendment or curtailment occurs or the date on which the Group recognizes related restructuring costs or termination benefits. Gains or losses on settlements are recognized in the period in which they occur. Net interest represents the net change in the defined benefit obligation and in the plan assets as a result of the passage of time and is calculated by applying a discount rate to the net defined benefit liability or asset at the beginning of the period. The discount rate used for this purpose is determined at the balance sheet date by reference to market yields on high-quality corporate bonds, where available, or on government bonds. Net interest is recognized within Other (expenses) income. Remeasurements, which are recognized in OCI in the period in which they occur, include actuarial gains and losses, differences between the actual return on plan assets and interest income on plan assets and changes in the asset ceiling (excluding any changes related to the passage of time). Remeasurements are not subsequently recycled through profit or loss. The defined benefit liability or asset recognized in the balance sheet comprises the net total for each plan of the present value of the benefit obligation, minus the fair value of the plan assets at the balance sheet date. Where a plan is in surplus, the asset recognized is limited to the present value of any amounts that the Group expects to recover by way of refunds or a reduction in future contributions. The net total for all plans in surplus is classified as a non-current asset. The net total for all plans in deficit is classified as a non- current liability. R. Share-based incentives Share-based incentives are provided to employees under the Group’s share option, bonus and other share award schemes. All share- award plans are equity settled, except for certain awards issued in the form of stock appreciation rights (“SARs”) to employees in China, where local regulations necessitate a cash-settled award. These awards are therefore accounted for as liabilities rather than equity. The Group recognizes a compensation expense in respect of these schemes that is based on the fair value of the awards, which, where appropriate, is measured using either the Black-Scholes option-pricing formula or a Monte Carlo valuation model. Fair value is determined at the grant date and reflects market performance conditions and all non-vesting conditions. This fair value is not subsequently remeasured unless the conditions on which the award was granted are modified. If an award is modified, an additional compensation expense is recognized if and to the extent that the fair value of the modified award is higher than the fair value of the existing award both measured at the modification date. Generally, the compensation expense is recognized on a straight-line basis over the vesting period. Adjustments are made to reduce the compensation expense to reflect expected and actual forfeitures during the vesting period due to failure to satisfy a service condition or a non-market performance condition. 99 In the event of a cancellation, whether by the Group or by a participating employee, or settlement of an award by the Group, the compensation expense that would have been recognized over the remainder of the vesting period is recognized immediately in profit or loss. Any payment made to the employee on cancellation or settlement is accounted for as the repurchase of an equity interest, except if the payment exceeds the market-based value of the award measured on the settlement date when the excess is recognized as an additional compensation expense. S. Provisions A provision is a liability of uncertain timing or amount and is generally recognized when the Group has a present obligation as a result of a past event, it is probable that payment will be made to settle the obligation and the payment can be estimated reliably. Provision is made for warranty claims when the relevant products are sold, based on historical experience of the nature, frequency and average cost of warranty claims. Provision is made for the cost of product recalls if management considers it probable that it will be necessary to recall a specific product and the amount can be reasonably estimated. Provision is made for restructuring costs when a detailed formal plan for the restructuring has been determined and the plan has been communicated to the parties that may be affected by it. Gains from the expected disposal of assets are not taken into account in measuring restructuring provisions and provisions are not made for future operating losses. Provision is made for claims for compensation for injuries sustained by the Group’s employees while at work. The provision represents management’s best estimate of the liability for claims made but not yet fully settled and for incidents which have occurred but have not yet been reported to the Group. The Group’s liability for claims made but not yet fully settled is calculated on an actuarial basis by a third party administrator. Historical data trends are used to estimate the liability for unreported incidents. T. Taxation Current tax is the amount of tax payable or recoverable in respect of the taxable profit or loss for the period. Taxable profit differs from accounting profit because it excludes items of income or expense that are recognized in the period for accounting purposes but are either not taxable or deductible for tax purposes or are taxable or deductible in other periods. Current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date. The Group recognizes provisions in respect of uncertain tax provisions whereby additional current tax may become payable in future periods following the audit by the tax authorities of previously-filed tax returns. Uncertain tax provisions are based upon management’s assessment of the likely outcome of issues associated with assumed permanent differences, interest that may be applied to temporary differences, and the possible disallowance of tax credits and penalties. Uncertain tax provisions are reviewed regularly and are adjusted to reflect events such as the expiry of limitation periods for assessing tax, administrative guidance given by the tax authorities and court decisions. Deferred tax is tax expected to be payable or recoverable on differences between the carrying amount of an asset or a liability and its tax base used in the computation of taxable profit. Deferred tax is accounted for using the liability method, whereby deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available in the foreseeable future against which the deductible temporary differences may be utilized. Deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill or from the initial recognition of other assets and liabilities in a transaction other than a business combination that affects neither accounting profit nor taxable profit. Deferred tax is provided on temporary differences arising on investments in foreign subsidiaries and associates, except to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is not probable that the temporary difference will reverse in the foreseeable future. Deferred tax is calculated using the tax rates that are expected to apply in the period in which the liability is settled or the asset is realized, based on tax rates that have been enacted or substantively enacted at the end of the reporting period. Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the amounts and management intends to settle on a net basis. Deferred tax assets and deferred tax liabilities are offset where there is a legally enforceable right to 100 offset current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity. Current and deferred tax is recognized in profit or loss unless it relates to an item that is recognized in the same or a different period outside profit or loss, in which case it too is recognized outside profit or loss, either in OCI or directly in equity. U. Accounting pronouncements not yet adopted Except for the following accounting standards below, we have determined that there are no additional standards and interpretations issued by the IASB which would be material to our financial statements, for the current reporting period. Recently-issued accounting pronouncements that may be relevant to the Group, but have not yet been adopted are outlined below. Standard IAS 1 (amendments)(1) IFRS 7 and IAS 7 (amendments)(1) Title Amendments to IAS 1 - Non-current Liabilities with Covenants Amendment to IFRS 7 and IAS 7 - IASB amends IAS 7 and IFRS 7 to address supplier finance arrangements IFRS S1 and IFRS S2 IAS 21 (amendments)(1) IFRS S1 and IFRS S2 - IFRS Sustainability Disclosure Standards Amendments to IAS 21 - IASB amends IAS 21 to clarify when a currency is exchangeable and how to determine the exchange rate when it is not Applicable for fiscal years beginning on or after January 1, 2024 January 1, 2024 January 1, 2024 January 1, 2025 (1) The Company has evaluated the impact of applying these accounting standards on the consolidated financial statements and determined the implementation of these standards to be immaterial. V. New and amended IFRS Standards that are effective for the current year The following table summarizes the new and amended IFRS standards adopted by the Group during the current reporting period. The Group has evaluated the impact of applying these accounting standards on the consolidated financial statements and determined the implementation of these standards to be immaterial. Standard Title IAS 1 (amendments) Classification of Liabilities as Current or Non-current - Deferral of Effective Date (IAS 1 amendments) IAS 1 (amendments) Disclosure of accounting policies IAS 8 (amendments) IAS 12 (amendments) Definition of accounting estimates Temporary exception from accounting for deferred taxes arising from OECD Pillar Two model rules Applicable for fiscal years beginning on or after January 1, 2023 January 1, 2023 January 1, 2023 January 1, 2023 3. Critical Accounting Estimates & Judgments A. Background When applying the Company’s accounting policies, management must make assumptions, estimates and judgments concerning the future that affect the carrying amounts of assets and liabilities at the balance sheet date, the disclosure of contingencies that existed at the balance sheet date and the amounts of revenue and expenses recognized during the accounting period. Such assumptions, estimates and judgments are based on factors such as historical experience, the observance of trends in the industries in which the Company operates and information available from the Company’s customers and other outside sources. In applying the Company’s accounting policies, which are described in Note 2, the directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognized and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. 101 The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Critical judgements in applying the Group’s accounting policies The following are the critical judgements, apart from those involving estimations (which are presented separately below), that the directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognized in financial statements. A. Leases - Estimating the incremental borrowing rate The Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Company 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. The IBR therefore reflects what the Company ‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency). The Company estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating). Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. Climate change is a global challenge and emerging risk to businesses, people and the environment across the world. Although commitments we have made to date form part of the cash flow projections within our going concern and impairment assessments, the impact of climate change is not judged to have been a key driver in determining the outcomes of these exercises and is therefore not currently classified as a key source of estimation uncertainty. The Group will continue to review this classification as the assessment of the impacts, risk and opportunities presented by climate change and the Group’s commitments to address the challenges presented evolve over the coming years. B. Post-employment benefits The Company operates pension plans throughout the world. Pension benefits are provided by way of both defined contribution plans and defined benefit plans. The Company’s defined benefit pension plans are closed to new entrants. The Company also provides other post-employment benefits, principally health and life insurance cover, to certain of its employees in North America by way of unfunded defined benefit plans. The Company accounts for post-employment benefits in accordance with IAS 19 ‘Employee Benefits’, whereby the cost of defined benefit plans is determined based on actuarial valuations of the plans that are carried out annually at the Company’s balance sheet date. The actuarial valuations are dependent on assumptions about the future that are made by management on the advice of independent qualified actuaries. If actual experience differs from these assumptions, there could be a material change in the amounts recognized by the Company in respect of defined benefit plans in the next financial year. As of December 30, 2023, the present value of the benefit obligation was $559.7 million. The present value of the benefit obligation is calculated by discounting the benefit obligation using market yields on high-quality corporate bonds at the balance sheet date. In addition, assumptions are made in determining future salary increases, mortality and inflation rates to be used when valuing the plan’s defined benefit obligations. As of December 30, 2023, the fair value of the plan assets was $506.0 million. The plan assets consist largely of listed securities and their fair values are subject to fluctuation in response to changes in market conditions. Effects of changes in the actuarial assumptions underlying the benefit obligation, effects of changes in the discount rate applicable to the benefit obligation and effects of differences between the expected and actual return on the plan assets are classified as actuarial 102 gains and losses and are recognized in other comprehensive income. During 2023, the Company recognized a net remeasurement loss of $10.7 million. Further details of the assumptions applied and a sensitivity analysis on the principal assumptions used to determine the defined benefit liabilities of the Group’s obligations are shown in Note 25. Whilst actual movements might be different to sensitivities shown, these are a reasonably possible change that could occur. C. Taxation The Company is subject to income tax in most of the jurisdictions in which it operates. Management is required to exercise significant judgment in determining the Company’s provision for income taxes. Estimation is required of taxable profit in order to determine the Company’s current tax liability. Management’s judgment is required in relation to uncertain tax provisions whereby additional current tax may become payable in the future following the audit by the tax authorities of previously-filed tax returns. It is possible that the final outcome of these uncertain tax provisions may differ from management’s estimates. As of December 30, 2023, if all uncertain tax provisions were recognized, the net impact on the provision for income taxes which would impact the annual effective tax rate would be $52.7 million, including all competent authority offsets. Estimation is also required of temporary differences between the carrying amount of assets and liabilities and their tax base. Deferred tax liabilities are recognized for all taxable temporary differences but, where there exist deductible temporary differences, management’s judgment is required as to whether a deferred tax asset should be recognized based on the availability of future taxable profits. As of December 30, 2023, the Company recognized net deferred tax assets amounting to $642.2 million - refer to Note 24 Deferred Tax herein for a detailed summary of deferred assets and liabilities. As of December 30, 2023, deferred tax assets of $1,288.9 million were not recognized as it is more likely than not that taxable profit will not be available against which the tax losses carried forward of $1,010.6 million, capital losses carried forward of $192.6 million and U.S. foreign tax credits and other credits carried forward of $58.8 million can be realized. It is possible that the deferred tax assets actually recoverable may differ from the amounts recognized if actual taxable profits differ from management’s estimates. As of December 30, 2023, income and withholding taxes in the various tax jurisdictions in which Gates operates have not been provided on approximately $1,712.3 million of taxable temporary differences related to the investments in the Company’s subsidiaries. These temporary differences represent the estimated excess of the financial reporting over the tax basis in our investments in those subsidiaries, which are primarily the result of purchase accounting adjustments. These temporary differences are not expected to reverse in the foreseeable future but could become subject to income and withholding taxes in the various tax jurisdictions in which Gates operates if they were to reverse. The amount of unrecognized deferred income tax liability on these taxable temporary differences has not been determined because the hypothetical calculation is not practicable due to the uncertainty as to how they may reverse. However, Gates has recognized a deferred income tax liability of $21.4 million on taxable temporary differences related to undistributed earnings of the Company’s subsidiaries. 4. Segment information A. Background The segment information provided in these consolidated financial statements reflects the information that is used by the chief operating decision maker for the purposes of making decisions about allocating resources and in assessing the performance of each segment. The chief executive officer (“CEO”) of Gates serves as the chief operating decision maker. These decisions are based principally on revenue and Adjusted EBITDA (defined below). B. Operating segments and segment assets Gates manufactures a wide range of power transmission and fluid power products and components for a large variety of industrial and automotive applications, both in the aftermarket and first-fit channels, throughout the world. Our reportable segments are identified on the basis of our primary product lines, as this is the basis on which information is provided to the CEO for the purposes of allocating resources and assessing the performance of Gates’ businesses. Our operating and reporting segments are therefore Power Transmission and Fluid Power. 103 Segment asset information is not provided to the chief operating decision maker and therefore segment asset information has not been presented. Due to the nature of Gates’ operations, cash generation and profitability are viewed as the key measures rather than an asset base measure. C. Segment revenue and disaggregated revenue Sales between reporting segments and the impact of such sales on Adjusted EBITDA for each segment are not included in internal reports presented to the CEO and have therefore not been included below. (dollars in millions) Power Transmission Fluid Power Revenue For the year ended December 30, 2023 December 31, 2022 $ $ 2,181.9 $ 1,377.4 3,559.3 $ 2,173.7 1,380.5 3,554.2 Our commercial function is organized by region and therefore, in addition to reviewing revenue by our reporting segments, the CEO also reviews revenue information disaggregated by region, including between emerging and developed markets. The following table summarizes our revenue by key geographic region of origin: (dollars in millions) U.S. North America, excluding U.S. United Kingdom (“U.K.”) EMEA(1), excluding U.K. East Asia and India Greater China South America Revenue For the year ended December 30, 2023 December 31, 2022 Power Transmission Fluid Power Power Transmission Fluid Power $ 591.5 $ 724.5 $ 636.8 $ 230.1 44.4 630.5 287.1 297.3 214.3 71.4 210.5 79.7 35.4 205.6 45.1 598.3 295.5 300.3 733.3 208.8 68.9 200.0 75.4 44.4 101.0 2,181.9 $ 41.6 1,377.4 $ 92.1 2,173.7 $ 49.7 1,380.5 $ (1) Europe, Middle East and Africa (“EMEA”). The following table summarizes our revenue into emerging and developed markets: (dollars in millions) Developed Emerging Revenue D. Measure of segment profit or loss For the year ended December 30, 2023 December 31, 2022 $ $ 2,334.0 $ 1,225.3 3,559.3 $ 2,281.4 1,272.8 3,554.2 The CEO uses Adjusted EBITDA, as defined below, to measure the profitability of each segment. Adjusted EBITDA is, therefore, the measure of segment profit or loss presented in Gates’ segment disclosures. The Group believes that this alternate performance measure, which is not considered to be a substitute for or superior to consolidated financial statement statutory measures, provides stakeholders with additional helpful information on the performance of the business. “EBITDA” represents net income for the period before net interest and other (income) expenses, income taxes, depreciation and amortization. 104 Adjusted EBITDA represents EBITDA before certain items that are considered to hinder comparison of the performance of our businesses on a period-over-period basis or with other businesses. During the periods presented, the items excluded from EBITDA in computing Adjusted EBITDA primarily included: • • • • • • non-cash charges in relation to share-based compensation; transaction-related expenses incurred in relation to business combinations and major corporate transactions, including the acquisition of businesses, and equity and debt transactions; impairments of assets; restructuring expenses, including severance-related expenses; credit loss related to a customer bankruptcy; and cybersecurity incident expenses. Adjusted EBITDA by segment was as follows: (dollars in millions) Power Transmission Fluid Power Adjusted EBITDA Reconciliation of net income from continuing operations to Adjusted EBITDA: (dollars in millions) Adjusted EBITDA Depreciation and amortization Share-based compensation expense Transaction-related expense (1) Asset impairments Restructuring expenses Inventory impairments (included in cost of sales) Severance expenses (included in cost of sales) Severance expenses (included in Finance and administrative expenses) Credit loss related to customer bankruptcy (included in Finance and administrative expenses) (2) Cybersecurity incident expenses (3) Other operating income Operating Profit from continuing operations Interest expense Interest income Other (expense) income Profit before taxes from continuing operations Income tax expense Profit for the year from continuing operations $ (1) Transaction-related expenses relate primarily to advisory fees and other costs recognized in respect of major corporate transactions, including the acquisition of businesses, and equity and debt transactions. 105 For the year ended December 30, 2023 December 31, 2022 $ $ 469.6 $ 300.6 770.2 $ 418.1 287.8 705.9 For the year ended December 30, 2023 December 31, 2022 770.2 (243.3) (27.4) (2.2) (0.1) (11.5) (0.1) (0.4) (1.0) (11.4) (5.2) (0.2) 467.4 (214.0) 14.5 (26.0) 241.9 (15.7) 226.2 $ 705.9 (242.5) (44.3) (2.1) (1.1) (9.5) (1.5) (0.8) (0.5) — — (0.2) 403.4 (164.8) 3.6 2.1 244.3 (19.3) 225.0 (2) On January 31, 2023, one of our customers filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. In connection with the bankruptcy proceedings, we evaluated our potential risk and exposure relating to our outstanding pre-petition accounts receivable balance from the customer and recorded a $11.4 million pre-tax charge during Fiscal 2023 to reflect our estimated recovery. We continue to monitor the circumstances surrounding the bankruptcy in determining whether adjustments to this recovery estimate are necessary. (3) On February 11, 2023, Gates determined that it was the target of a malware attack. Cybersecurity incident expenses include legal, consulting, and other costs incurred as a direct result of this incident, some of which may be partially offset by insurance recoveries. E. Selected geographic information (dollars in millions) Property, plant and equipment, net by geographic location U.S. Rest of North America U.K. EMEA, excluding U.K. East Asia & India Greater China South America (dollars in millions) Intangible assets by geographic location U.S. Rest of North America U.K. EMEA, excluding U.K. East Asia & India Greater China South America F. Information about major customers As of December 30, 2023 As of December 31, 2022 $ $ 164.6 $ 128.6 29.4 157.1 39.0 82.0 26.5 627.2 $ 165.9 125.2 28.4 158.8 38.7 100.1 16.9 634.0 As of December 30, 2023 As of December 31, 2022 $ $ 953.8 $ 141.7 11.1 166.8 72.8 84.0 0.1 1,430.3 $ 1,014.8 146.3 12.6 179.0 83.9 97.7 0.1 1,534.4 Gates has a significant concentration of sales in the U.S., which accounted for 38.9% of Gates’ net sales by destination from continuing operations during Fiscal 2023, compared to 39.6% during Fiscal 2022. During Fiscal 2023 and Fiscal 2022, no single customer accounted for more than 10% of Gates’ net sales. Two customers of our North America businesses accounted for 12.5% and 9.6%, respectively, of our total trade accounts receivable balance as of December 30, 2023, compared to 15.3% and 8.4%, respectively, as of December 31, 2022. These concentrations are due to the extended payment terms common in the industry in which these businesses operate. 5. Restructuring and other strategic initiatives Gates continues to undertake various restructuring and other strategic initiatives to drive increased productivity in all aspects of our operations. These actions include efforts to consolidate our manufacturing and distribution footprint, scale operations to current demand levels, streamline our finance and administration back-office functions and relocate certain operations to lower cost locations. 106 Overall costs associated with our restructuring and other strategic initiatives have been recognized in the consolidated statements as set forth below. (dollars in millions) Restructuring expenses: —Severance expenses —Non-severance labor and benefit expenses —Consulting expenses —Other net restructuring expenses Restructuring expenses in asset impairments: —Impairment of fixed assets Restructuring expenses in cost of sales: —Impairment of inventory Total restructuring expenses Expenses related to other strategic initiatives: —Severance expenses included in cost of sales —Severance expenses included in Finance and administration expenses Total expenses related to other strategic initiatives For the year ended December 30, 2023 December 31, 2022 $ 3.7 $ 1.2 3.4 3.2 11.5 0.1 0.1 11.7 $ 0.4 $ 1.0 1.4 $ $ $ $ 4.9 0.5 1.8 2.3 9.5 1.1 1.5 12.1 0.8 0.5 1.3 Restructuring and other strategic initiatives during Fiscal 2023 related primarily to relocating certain production activities in China and Mexico, which included severance and other costs of $4.5 million and $3.0 million, respectively. Additionally, we incurred $0.7 million in severance and other costs related to optimizing production in Europe and $0.9 million of non-severance labor and benefit costs related to relocation and integration of certain support functions into our regional shared service center in Europe. Other restructuring costs during the period included $3.4 million for legal and consulting expenses, as well as activities associated with prior period facility closures or relocations in several countries. Restructuring and other strategic initiatives during Fiscal 2022 related primarily to our ongoing European reorganization, including $2.5 million of labor, severance, and other costs related to relocating certain production activities within Europe during Fiscal 2022, in addition to severance costs of $2.4 million during the year related to relocation and integration of certain support functions into our regional shared service center. We also incurred $3.5 million of costs during Fiscal 2022 in relation to the suspension of our operations in Russia, which included severance costs of $0.7 million, an impairment of inventories of $1.1 million (recognized in cost of sales), and an impairment of fixed and other assets of $1.1 million (recognized in asset impairments). Other restructuring costs incurred during the period related to facility relocations and other legal and consulting costs. 107 Restructuring activities As indicated above, restructuring expenses form a subset of our total expenses related to restructuring and other strategic initiatives. These expenses include the impairment of inventory, which is recognized in cost of sales. Analyzed by segment, our restructuring expenses were as follows: (dollars in millions) Power Transmission Fluid Power Continuing operations For the year ended December 30, 2023 December 31, 2022 $ $ 7.1 $ 4.7 11.8 $ 5.8 6.3 12.1 The following summarizes the provisions for restructuring expenses for the year ended December 30, 2023 and December 31, 2022, respectively: (dollars in millions) Balance as of the beginning of the period Utilized during the period Charge for the period Released during the period Foreign currency translation For the year ended December 30, 2023 December 31, 2022 $ 7.5 $ (14.1) 12.4 (0.8) 0.1 5.1 $ 6.5 (8.1) 9.6 (0.1) (0.4) 7.5 Balance as of the end of the period $ Restructuring provisions, majority of which are expected to be utilized during 2024, are included in the consolidated balance sheet within the accrued expenses and other current liabilities line. 6. Employees Employee-related costs, including directors, recognized in operating income from continuing operations during the year were as follows: (dollars in millions) Wages and salaries Social security costs Post-retirement benefits Share-based incentives Medical insurance costs Other primarily insurance-related costs Aggregate remuneration Termination benefits Total employee-related costs For the year ended December 30, 2023 December 31, 2022 $ 631.8 $ 602.4 79.3 25.9 27.4 30.3 48.6 843.3 7.0 $ 850.3 $ 81.3 24.3 44.3 28.2 42.5 823.0 6.3 829.3 108 The average number of persons employed by Gates, excluding the Company’s non-executive directors, was as follows: U.S. Rest of North America U.K. Rest of EMEA East Asia and India Greater China South America For the year ended December 30, 2023 December 31, 2022 3,723 3,266 670 3,662 1,443 1,413 752 3,660 3,316 724 3,452 1,443 1,661 708 14,929 14,964 The directors’ remuneration, analyzed under the headings required by Company Law, is set out below. (dollars in millions) Directors’ remuneration: Emoluments Amounts receivable (other than shares and share options) under long-term incentive schemes Stock options Other long-term incentive schemes The number of directors who: Are members of a money purchase pension plan Had awards receivable in the form of Parent Company shares under a long-term incentive plan (dollars in millions) Remuneration of the highest paid director: Emoluments Stock options Other long-term incentive schemes Company contributions to money purchase schemes For the year ended December 30, 2023 December 31, 2022 4.4 $ 0.1 6.3 0.1 10.9 $ 2.8 0.3 3.5 0.2 6.8 For the year ended December 30, 2023 December 31, 2022 1 7 1 9 For the year ended December 30, 2023 December 31, 2022 3.7 $ 0.1 5.6 0.1 9.5 $ 2.1 0.3 2.4 0.2 5.0 $ $ $ $ 109 7. Auditor’s remuneration The following table presents fees for professional services rendered by Deloitte LLP and affiliates (“Deloitte”) for the audit of our consolidated financial statements and other services in Fiscal 2023 and Fiscal 2022. (dollars in millions) Fees payable to the Company’s auditor and their associates for the audit of the Company’s annual accounts $ Audit of the Company’s subsidiaries pursuant to legislation Audit-related assurance services Total audit fees Taxation compliance services Taxation advice Total non-audit fees For the year ended December 30, 2023 December 31, 2022 5.8 $ 1.0 0.2 7.0 — 0.1 $ $ 0.1 $ 7.1 $ 4.8 0.9 0.2 5.9 0.1 0.5 0.6 6.5 In Fiscal 2023 and Fiscal 2022, all of Deloitte’s services and fees were pre-approved by the Audit Committee. Fees payable to Deloitte LLP and their associates for non-audit services to the Parent Company are not required to be disclosed because the consolidated financial statements are required to disclose such fees on a consolidated basis. 8. Operating profit from continuing operations Operating profit from continuing operations is stated after charging/(crediting): Inventories: – Cost of inventories recognized as an expense $ 2,016.5 $ 2,146.7 For the year ended December 30, 2023 December 31, 2022 – Write-down of inventories Employee costs (see Note 6) Amortization of other intangible assets (see Note 17) Depreciation of property, plant and equipment (including amount in restructuring expenses) (see Note 15) Loss (gain) on sale of property, plant and equipment Depreciation of right-of-use assets (see Note 20) Short-term lease expenses (see Note 20) Variable lease expenses (see Note 20) Research and development costs Net foreign exchange gain 22.1 850.3 129.8 86.7 0.5 26.8 8.2 6.1 66.0 (2.5) 13.5 829.3 128.4 87.3 (0.4) 26.8 7.2 5.9 69.4 (5.7) 110 9. Interest expense Our interest expense was as follows: (dollars in millions) Debt: Dollar Term Loan Euro Term Loan Dollar Senior Notes Other Loans Interest on lease liabilities Total interest expense for financial liabilities classified at amortized cost Amortization of finance costs and net fair value adjustment (Gain) loss arising on interest rate swaps and interest rates caps as designated hedging instruments in cash flow hedges Other interest expense For the year ended December 30, 2023 December 31, 2022 $ 152.0 $ — 35.5 1.8 6.4 195.7 47.4 (30.1) 1.0 $ 214.0 $ 65.7 16.4 35.4 1.0 5.5 124.0 27.0 12.3 1.5 164.8 Details of our long-term debt are presented in Note 22 to the consolidated financial statements included elsewhere in this report. 10. Other (expenses) income Our other (expenses) income was as follows: (dollars in millions) For the year ended December 30, 2023 December 31, 2022 Interest income on bank deposits $ 14.5 $ Total interest income for financial instruments classified at amortized cost Foreign currency (loss) gain on net debt (1) and hedging instruments Net interest expense on defined benefit pension obligations Foreign currency loss on hyperinflation remeasurement(2) Other Other (expenses) income 14.5 (4.2) (3.6) (10.4) (7.8) (26.0) (11.5) $ $ 3.6 3.6 10.2 (1.4) (2.4) (4.3) 2.1 5.7 (1) (2) "Net debt” is a non-IFRS measure representing the principal amount of our debt less the carrying amount of cash and cash equivalents. The financial statements for the subsidiaries that operated in a hyperinflationary environment have been restated for the changes in the general purchasing power of the functional currency and, as a result, are stated in terms of the measuring unit current at the end of the reporting period. The corresponding figures for previous periods have not been restated, as they were previously presented in the Group's reporting currency (i.e. USD) which is a stable currency in terms of IAS 29. We utilized consumer price index ("CPI") for both Argentina and Türkiye; the CPI at the end of the current year moved by 311% in Argentina and by 165% in Türkiye during Fiscal 2023. 111 11. Income tax expense OECD Pillar Two model rules The group is within the scope of the OECD Pillar Two model rules. The U.K. has implemented certain elements of the Pillar Two proposal with effect in relation to accounting periods commencing on or after December 31, 2023, and during 2023, the U.K. released draft legislation to (i) implement further elements of the OECD agreed Pillar Two model rules in the U.K. and (ii) make proposed amendments to the Pillar Two rules. Since the Pillar Two legislation was not effective at the reporting date, the group has no related current tax exposure. The group applies the exception to recognizing and disclosing information about deferred tax assets and liabilities related to Pillar Two incomes taxes, as provided in the amendments to IAS 12 issued in May 2023. Under the legislation, the group is liable to pay a top-up-tax for the difference between its Global Anti-Base Erosion (“GloBE”) effective tax rate per jurisdiction and the 15% minimum rate. The group is in the process of assessing its exposure to the Pillar Two legislation for when it comes into effect. Based on prior year’s financial information, this assessment indicates that several non- material jurisdictions where the group operates will be subject to top-up-tax. These non-material jurisdictions include Bahrain, British Virgin Islands, Malaysia, Isle of Man, and United Arab Emirates. Although the average effective tax rates for these jurisdictions is below 15%, the group might not be exposed to paying Pillar Two income taxes in relation to these jurisdictions. This is due to the impact of specific adjustments envisaged in the Pillar Two legislation which give rise to different effective tax rates compared to those calculated in accordance with paragraph 86 of IAS 12. Applying current forecasts to the legislation and calculating the GloBE income, the quantitative impact of the enacted or substantively enacted legislation does not appear to have a material impact on the company’s tax provision. However, even for those entities with an accounting effective tax rate above 15%, there might still be Pillar Two tax implications. The group is currently engaged with tax specialists to assist it with applying the legislation. Provision for income taxes Gates Industrial Corporation plc is domiciled in the United Kingdom. Income from continuing operations before income taxes and income tax expense are summarized below based on the geographic location of the operation to which such earnings and income taxes are attributable. (dollars in millions) U.K. U.S. Other Income from continuing operations before income taxes For the year ended December 30, 2023 December 31, 2022 $ $ 22.8 $ (88.6) 307.7 241.9 $ (11.9) 27.4 228.8 244.3 112 Income tax expense on income from continuing operations analyzed by tax jurisdiction is as follows: (dollars in millions) Current tax U.K. U.S. Other foreign Adjustments in respect of prior years Total current tax expense Deferred income tax U.K. U.S. Other foreign Adjustments in respect of prior years Total deferred income tax benefit Income tax expense Reconciliation of the applicable statutory income tax rate to the reported effective income tax rate: U.K. corporation tax rate Effect of: —State tax provision, net of Federal benefit —Provision for unrecognized income tax provisions —Company Owned Life Insurance —Manufacturing incentives(2) —Tax on international operations(1) —Change in unrecognized deferred tax assets(3) —Deferred income tax rate changes —Currency exchange rate movements —Other permanent differences Reported effective income tax rate For the year ended December 30, 2023 December 31, 2022 $ $ $ $ 0.2 $ 28.1 75.5 (7.8) 96.0 $ 8.0 $ (49.6) (47.3) 8.6 (80.3) 15.7 $ (1.7) 42.0 52.9 — 93.2 (2.6) (48.2) (23.1) — (73.9) 19.3 For the year ended December 30, 2023 December 31, 2022 23.5% 19.0% (1.8%) (5.1%) (4.1%) (5.8%) 3.6% (3.6%) 0.5% 0.7% (1.4%) 6.5% (0.2%) (10.3%) (3.3%) (4.1%) 23.3% (21.7%) (0.2%) 2.0% 3.4% 7.9% (1) (2) (3) “Tax on international operations” includes U.S. tax on foreign earnings and unremitted earnings of foreign subsidiaries, foreign deferred tax adjustments, and effects of global funding structures and differences between statutory and foreign tax rates. Fiscal 2022 includes $22.6 million expiration of U.S. foreign tax credits that were unrecognized deferred tax assets. Fiscal 2021 includes $129.9 million benefit for additional net deferred tax assets, primarily finite-lived net operating losses in Luxembourg, against which we recorded no deferred tax assets in Fiscal 2021. “Manufacturing incentives” for Fiscal 2023 totaled $13.3 million, related to incentives generated in Türkiye, Poland and the U.S. “Change in unrecognized deferred tax assets” is comprised primarily of: Expense (benefit) Luxembourg finite-lived net operating losses Luxembourg indefinite-lived net operating losses U.S. foreign tax credits Disallowed interest carryforwards For the year ended December 30, 2023 December 31, 2022 — — $ $ (14.8) (5.7) $ $ (39.9) 0.4 $ $ — (2.1) $ $ 113 In addition to the amount charged to profit or loss, the following amounts relating to tax have been recognized in other comprehensive income: (dollars in millions) Current tax related to items recognised in OCI during in the year Foreign currency translation - Net translation loss on foreign operations Current tax charged to OCI Deferred tax related to items recognised in OCI during in the year Foreign currency translation - Gain on net investment hedges Cash flow hedges (interest rate derivatives) - Loss arising in the period Cash flow hedges (interest rate derivatives) - Reclassification to net income Post-retirement benefits - Current year actuarial movements Post-retirement benefits - Reclassification of prior year actuarial movements to net income Deferred tax charged to OCI Tax to other comprehensive income 12. Earnings per share For the year ended December 30, 2023 December 31, 2022 $ $ $ $ $ $ $ $ $ (4.3) $ (4.3) $ 3.3 $ (1.1) $ 6.0 $ 2.6 $ 1.1 $ 11.9 $ 7.6 $ (2.5) (2.5) 7.9 (14.8) (3.5) 9.0 0.5 (0.9) (3.4) Basic earnings per share represents net income attributable to shareholders divided by the weighted average number of shares outstanding during the period. Diluted earnings per share considers the dilutive effect of potential shares, unless the inclusion of the potential shares would have an anti-dilutive effect. The computation of earnings per share is presented below: (dollars in millions, except share numbers and per share amounts) Net income attributable to shareholders Weighted average number of shares outstanding Dilutive effect of share-based awards Diluted weighted average number of shares outstanding For the year ended December 30, 2023 December 31, 2022 $ 201.8 $ 203.3 271,880,047 284,063,083 3,768,281 3,523,127 275,648,328 287,586,210 Number of anti-dilutive shares excluded from diluted earnings per share calculation 4,417,967 7,538,260 Basic earnings per share Diluted earnings per share 0.74 0.73 0.72 0.71 114 13. Trade and other receivables Current assets —Trade receivables —Prepayments —Derivative financial instruments —Restricted cash —VAT and Other Sales Taxes Receivable —Other receivables Non-current assets —Prepayments —Derivative financial instruments —Other receivables —Investments in associates $ $ $ As of December 30, 2023 As of December 31, 2022 768.2 $ 27.7 32.5 3.4 95.1 52.7 808.6 23.7 34.3 3.0 92.9 44.8 979.6 $ 1,007.3 0.2 $ 5.9 15.5 1.3 $ 22.9 $ 0.2 17.7 12.2 2.4 32.5 As of December 30, 2023, trade receivables amounted to $768.2 million (December 31, 2022: $808.6 million), net of an allowance of $15.7 million (December 31, 2022: $4.2 million) for doubtful debts. Before accepting a new customer, we assess their credit quality and establish a credit limit. Credit quality is assessed by using data maintained by reputable credit rating agencies, by checking of references included in credit applications and, where they are available, by reviewing the customer’s recent financial statements. Credit limits are subject to multiple levels of authorization and are reviewed on a regular basis. Although Gates has a wide variety of customers from multinational original equipment manufacturers and distributors to small family- owned businesses, the majority of our sales are generated from large companies with low credit risk. During 2021, the Company implemented a program with an unrelated third party under which we may periodically sell trade accounts receivable from one of our aftermarket customers with whom we have extended payment terms as part of a commercial agreement. The purpose of using this program is to offset the working capital impact resulting from this terms extension. All eligible accounts receivable from this customer are covered by the program, and any factoring is solely at our option. Following the factoring of a qualifying receivable, because we maintain no continuing involvement in the underlying receivable, and collectability risk is fully transferred to the unrelated third party, we account for these transactions as a sale of a financial asset and derecognize the asset. Cash received under the program is classified as operating cash inflows in the consolidated statement of cash flows. As of December 30, 2023, collection of $112.4 million of our trade accounts receivable had been accelerated under this program, compared to the accelerated collection of $108.2 million as of December 31, 2022. We incurred costs in respect of this program of $8.0 million during December 30, 2023, which are recorded under Other (expenses) income, and $4.9 million during December 31, 2022. An allowance has been made for expected lifetime credit losses with reference to past default experience and management’s assessment of credit worthiness over trade receivables. Movements in the allowance for expected credit losses of trade receivables were as follows: 115 (dollars in millions) Balance at beginning of year Current period provision for expected credit losses Utilized during the period Foreign currency translation Balance at end of year For the year ended December 31, 2022 December 31, 2022 $ $ 4.2 $ 12.6 (1.1) — 15.7 $ 5.1 0.6 (1.3) (0.2) 4.2 Trade receivables are not generally interest-bearing although interest may be charged to customers on overdue accounts. Gates is the beneficiary of a number of corporate-owned life insurance policies against which it borrows from the relevant life insurance company. As of December 30, 2023, the surrender value of the policies was $966.5 million, compared to $969.7 million as of December 31, 2022. The amount outstanding on the related loans was $958.1 million, compared to $967.9 million as of December 31, 2022. For financial reporting purposes, these amounts are offset as a legal right of offset exists and the net receivable of $8.3 million, compared to $1.8 million as of December 31, 2022, is included in other receivables. As of December 30, 2023, trade and other receivables amounting to $115.3 million (December 31, 2022: $91.1 million) were pledged as security on the Group’s asset-backed revolver. In addition, Gates’ secured debt is jointly and severally, irrevocably and fully and unconditionally guaranteed by certain of its subsidiaries and are secured by liens on substantially all of their assets, including trade and other receivables. 14. Inventories (dollars in millions) Raw materials and supplies Work in progress Finished goods Total inventories As of December 30, 2023 As of December 31, 2022 $ $ 168.2 $ 43.3 469.9 681.4 $ 195.9 42.3 446.7 684.9 As of December 30, 2023, inventories with a carrying amount of $104.0 million (December 31, 2022: $96.6 million) were pledged as security on the Group’s asset-backed revolver. 116 15. Property, plant and equipment (dollars in millions) Cost and carrying amount As of January 1, 2022 Additions Disposals Reclassifications Write-offs Foreign currency translation As of December 31, 2022 Additions Disposals Reclassifications Foreign currency translation As of December 30, 2023 Accumulated depreciation and impairment As of January 1, 2022 Charge for the year Disposals Reclassifications Non-operating impairments Foreign currency translation As of December 31, 2022 Charge for the year Disposals Reclassifications Non-operating impairments Foreign currency translation As of December 30, 2023 Net Book Value As of January 1, 2022 As of December 31, 2022 As of December 30, 2023 Land and buildings Plant, equipment and vehicles Assets under construction Total $ 326.5 $ 870.0 $ 80.6 $ 1,277.1 2.3 (2.0) 1.9 — 14.3 (10.1) 39.0 — (10.1) (32.7) 318.6 1.5 880.5 5.6 (0.5) (12.1) 5.3 7.1 104.7 14.1 61.0 (0.1) (40.9) (0.2) (0.2) 100.2 54.0 (1.4) (110.0) 11.3 77.6 (12.2) — (0.2) (43.0) 1,299.3 61.1 (14.0) — 32.5 332.0 $ 992.8 $ 54.1 $ 1,378.9 (98.1) $ (12.4) $ 1.2 $ 0.3 $ — $ 3.3 $ (512.8) $ (74.9) $ 9.2 $ (0.3) $ (0.1) $ 19.3 $ (105.7) $ (559.6) $ (11.9) $ 0.5 $ (1.6) $ (0.1) $ (2.0) $ (74.8) $ 11.6 $ 1.6 $ — $ (9.7) $ (120.8) $ (630.9) $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ (610.9) (87.3) 10.4 — (0.1) 22.6 (665.3) (86.7) 12.1 — (0.1) (11.7) (751.7) 228.4 $ 212.9 $ 211.2 $ 357.2 $ 320.9 $ 361.9 $ 80.6 $ 100.2 $ 54.1 $ 666.2 634.0 627.2 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Gates’ secured debt is jointly and severally, irrevocably and fully and unconditionally guaranteed by certain of its subsidiaries and are secured by liens on substantially all of their assets, including property, plant and equipment. 117 16. Goodwill For impairment testing goodwill acquired through business combinations with indefinite useful lives are allocated to the Power Transmission and Fluid Power CGUs, which are also operating and reportable segments. Carrying amount of goodwill allocated to each of the CGUs: (dollars in millions) Cost and carrying amount As of January 1, 2022 Foreign currency translation As of December 31, 2022 Foreign currency translation As of December 30, 2023 Power Transmission Fluid Power Total $ $ 1,388.1 $ (72.9) 1,315.2 23.3 1,338.5 $ 674.9 $ (9.0) 665.9 34.3 700.2 $ 2,063.0 (81.9) 1,981.1 57.6 2,038.7 Goodwill is tested for impairment annually and whenever there are indications that it may have suffered an impairment. Goodwill is considered impaired to the extent that its carrying amount exceeds its recoverable amount, which is the higher of the value in use and the fair value less costs to sell of the CGU or group of CGUs to which it is allocated. Impairment tests were carried out in each of the periods presented and in each case, the recoverable amount of all items of goodwill was determined based on value in use calculations. Management based the value in use calculations on cash flow forecasts derived from the most recent three-year financial plans reviewed by the Board, in which the principal assumptions were those regarding sales growth rates based on past experience adjusted for market trend, strategic initiatives to grow sales in certain product lines and end markets, as well as decisions made in selling prices and changes in direct costs. Forecasts for the future years were based on region-specific growth or decline assumptions determined by management, taking into account market trends and strategic initiatives. For Power Transmission, the growth rates for Fiscal 2024, Fiscal 2025, Fiscal 2026, Fiscal 2027 and Fiscal 2028 were (0.2)%, 9.3%, 8.0%, (5.0)% and (9.7)%, respectively. For Fluid Power, the growth rates for Fiscal 2024, Fiscal 2025, Fiscal 2026, Fiscal 2027 and Fiscal 2028 were 0.7%, 3.6%, 7.0%, (3.0)%, and (5.8)%, respectively. The terminal growth rate for both CGUs was set at 2.5%, a rate that does not exceed the expected long-term growth rates in the respective principal end markets. The 2022 impairment analysis for Power Transmission used growth rates for Fiscal 2023, Fiscal 2024, Fiscal 2025, Fiscal 2026 and Fiscal 2027 of (0.4%), 5.0%, 10.0%, (5.0%), and (7.1%) respectively. The 2022 impairment analysis for Fluid Power used growth rates for Fiscal 2023, Fiscal 2024, Fiscal 2025, Fiscal 2026 and Fiscal 2027 of 1.0%, 3.5%, 7.0%, (3.0%) and (7.2%) respectively. Management applied discount rates to the resulting cash flow projections that reflect current market assessments of the time value of money and the risks specific to the CGU or group of CGUs. In each case, the discount rate was determined using a capital asset pricing model. Pre-tax discount rates used in the impairment tests of Gates’ goodwill during Fiscal 2023 were 15.1% and 14.3% for Power Transmission and Fluid Power CGUs, respectively (Fiscal 2022: Power Transmission 12.6%, Fluid Power 12.7%). For both CGUs, the recoverable amount exceeded the carrying values and no goodwill impairments were therefore recognized during Fiscal 2023 or Fiscal 2022. For Fiscal 2023, a decline in the value in use of greater than 10% and 18% on our Power Transmission and Fluid Power CGUs, respectively, all else being equal, would result in an impairment of the goodwill allocated to those CGUs. We base our value in use estimates on assumptions we believe to be reasonable at the time but that are unpredictable and inherently uncertain. In addition, we make certain judgments and assumptions in allocating goodwill between CGUs and in allocating shared assets and liabilities to determine the carrying values for each of our CGUs tested. Changes in assumptions or circumstances could result in an additional impairment in the period in which the change occurs and in future years. Management stress tested the goodwill model, generally changing individual variables incrementally and in combination, and assessing the impact on our conclusions. Variables considered and tested are considered severe downside scenarios given our operations and market outlook. No impairments for intangible assets were recognized as a result of the sensitivity analysis as of Fiscal 2023. The directors believe that any reasonably possible change in the key assumptions on which the recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the related CGUs. 118 17. Other intangible assets (dollars in millions) Cost and carrying amount As of January 1, 2022 Additions Disposals Foreign currency translation As of December 31, 2022 Additions Disposals Foreign currency translation As of December 30, 2023 Accumulated amortization As of January 1, 2022 Amortization charge for the period Disposals Foreign currency translation As of December 31, 2022 Amortization charge for the period Disposals Foreign currency translation As of December 30, 2023 Net Book Value As of January 1, 2022 As of December 31, 2022 As of December 30, 2023 Customer relationships Technology Capitalized software Brands and trade names Total $ 2,031.7 $ 90.9 $ — — (58.0) 1,973.7 — — 29.9 — — (0.5) 90.4 — — 0.2 97.8 $ 9.6 (0.4) (1.7) 105.3 11.5 — 0.7 513.4 $ 2,733.8 — — — 513.4 — — — 9.6 (0.4) (60.2) 2,682.8 11.5 — 30.8 $ 2,003.6 $ 90.6 $ 117.5 $ 513.4 $ 2,725.1 $ (901.6) $ (89.4) $ (117.6) — 26.0 (993.2)0 . (118.2) — (16.3) (0.7) — 0.4 (89.7)0 . (0.5) — (0.1) (56.6) (10.1) 0.3 0.9 (65.5)0 . (11.1) 0.1 (0.3) — $ (1,047.6) — — — —0 . — — — (128.4) 0.3 27.3 (1,148.4) (129.8) 0.1 (16.7) $ (1,127.7) $ (90.3) $ (76.8) $ — $ (1,294.8) $ $ $ 1,130.1 $ 980.5 $ 875.9 $ 1.5 $ 0.7 $ 0.3 $ 41.2 $ 39.8 $ 40.7 $ 513.4 $ 513.4 $ 513.4 $ 1,686.2 1,534.4 1,430.3 During Fiscal 2023 and Fiscal 2022, no impairments were recognized. During Fiscal 2023, the amortization expense recognized in respect of intangible assets was $129.8 million, compared to $128.4 million for Fiscal 2022. In addition, movements in foreign currency exchange rates resulted in an increase in the net carrying value of total intangible assets of $14.1 million in Fiscal 2023, compared to a decrease of $32.9 million in Fiscal 2022. Amortization of intangible assets is primarily included under administrative expenses in the consolidated statement of profit or loss. Brands and trade names are considered to have an indefinite life, given the strength and durability of the brands and the level of marketing support. The brands are in relatively similar stable and profitable market sectors, with similar risk profiles, and their size, diversification and market shares mean that the risk of market-related factors causing a reduction in the lives of the brands is considered to be relatively low. Brands and trade names are therefore not amortized but are tested for impairment annually and whenever there are indications that they may have suffered an impairment. Except for brands and trade names, all other intangible assets included above have finite useful lives. As of December 30, 2023 and December 31, 2022, the weighted average remaining amortization period for customer relationships was 7.4 and 8.4 years, respectively. As of both December 30, 2023 and December 31, 2022, $336.8 million of intangible assets with indefinite useful lives were allocated to the Power Transmission CGU, and $176.6 million were allocated to the Fluid Power CGU. Management has assessed the recoverability of the carrying amount of the brands and trade names using the ‘relief from royalty' valuation methodology in which the key assumptions included sales growth rates and an estimated royalty rate. Management has used a hypothetical royalty rate of 2.0% per annum for Fiscal 2023 and Fiscal 2022. Sales forecasts were determined on the same basis as those used for the annual impairment testing of goodwill. 119 Management applied discount rates to the calculated royalty savings that reflect current market assessments of the time value of money and the risks specific to the CGU or group of CGUs in which those royalty savings arose. In each case, the discount rate was determined using a capital asset pricing model adjusted for a premium to reflect the higher risk specific to each region in which those royalty savings arose. The pre-tax discount rates used in Fiscal 2023 and Fiscal 2022 impairment test were 14.6% and 12.8%, respectively. All else being equal, a decline in the fair value of greater than 4.4% in the fair value of the brand and trade name intangible asset would result in an impairment. We base our fair value estimates on assumptions we believe to be reasonable at the time but that are unpredictable and inherently uncertain. Changes in assumptions or circumstances could result in an additional impairment in the period in which the change occurs and in future years. Management stress tested the model, generally changing individual variables incrementally and in combination and assessing the impact on our conclusions. Variables considered and tested are considered worst case plausible scenarios given our operations and market outlook. No impairments for intangible assets were recognized as a result of the sensitivity analysis. 18. Interests in subsidiaries and associates A. Non-100% owned Subsidiaries Several of the Group’s subsidiaries are not 100% owned by the Group. The majority of these entities are 51% owned subsidiaries operating in various Asian countries with the same minority shareholder. Although these subsidiaries (the “Unitta Subsidiaries”) represent a number of distinct legal entities established in each of the countries in which they are based, they are managed internally as a single business and are aligned in both structure and operations. For these reasons, the analysis below presents the Unitta Subsidiaries in aggregate. The Unitta Subsidiaries comprise the following legal entities: Entity name Gates Unitta Asia Trading Company Pte Ltd Gates Unitta Korea Co., Ltd. Gates Nitta Belt Company, LLC Gates Unitta Power Transmission (Suzhou) Limited Gates Unitta Power Transmission (Shanghai) Limited Gates Unitta Asia Company Gates Unitta (Thailand) Co., Ltd Gates Unitta India Company Private Limited Country of incorporation Singapore Korea USA China China Japan Thailand India The table below sets out summarized financial information for the Unitta Subsidiaries (51% owned by Gates): (dollars in millions) Current assets Non-current assets Current liabilities Non-current liabilities Net assets (dollars in millions) Revenue Profit or loss Other comprehensive loss As of December 30, 2023 As of December 31, 2022 $ 390.7 $ 210.7 (150.8) (46.7) $ 403.9 $ 378.9 238.8 (151.0) (49.9) 416.8 For the year ended December 30, 2023 December 31, 2022 $ 567.9 $ 67.3 (9.0) 568.2 66.1 (26.8) The above results all relate to continuing operations. There are no significant restrictions on the ability of the Group to access assets or settle liabilities of this or any of its non-100% owned subsidiaries. 120 An analysis of the movement in non-controlling interests relating to the Group’s individually material non-100% owned subsidiaries and, in total, for all other non-100% subsidiaries, is set out below: (dollars in millions) As of January 1, 2022 Share of profit for the year Share of other comprehensive income Share-based incentives Payment of dividends Foreign currency translation As of December 31, 2022 Share of profit for the year Share-based incentives Payment of dividends Foreign currency translation As of December 30, 2023 19. Trade and other payables (dollars in millions) Current liabilities —Trade payables —Accruals and deferred income —Provisions —Sales, payroll and other taxes payable —Derivative financial instruments —Other payables Non-current liabilities —Derivative financial instruments —Provisions —Other payables Unitta Subsidiaries (49% non-controlling interest) Other individually immaterial non- controlling interests Total non- controlling interests $ 370.7 $ 11.3 $ 20.5 1.0 0.2 (26.8) (40.9) 324.7 21.5 — (19.2) (13.2) $ 313.8 $ 0.8 (0.1) — (1.9) (1.2) 8.9 2.3 0.2 (0.5) (0.6) 10.3 $ 382.0 21.3 0.9 0.2 (28.7) (42.1) 333.6 23.8 0.2 (19.7) (13.8) 324.1 As of December 30, 2023 As of December 31, 2022 $ 457.7 $ 153.6 24.2 31.2 1.8 6.0 469.6 121.8 26.5 34.8 1.4 5.9 $ $ $ 674.5 $ 660.0 85.0 $ 11.7 19.9 116.6 $ 51.1 12.7 19.5 83.3 Trade payables are generally not interest-bearing but interest may be charged by suppliers on overdue accounts. 121 20. Leases The Company has lease contracts for various items of land, buildings, vehicles and other equipment used in its operations. Leases of land and buildings generally have lease terms between 3 and 15 years, while motor vehicles and other equipment generally have lease terms between 2 and 8 years. The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Group’s business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised. Set out below are the carrying amounts of right-of-use assets recognized and the movements during the period: Land and buildings Equipments and vehicles Other Total $ 137.7 $ 21.3 $ 0.5 $ (dollars in millions) Cost As of January 1, 2022 Additions Modifications Terminations Expirations Impairment Foreign currency translation As of December 31, 2022 Additions Modifications Terminations Expirations Foreign currency translation As of December 30, 2023 Accumulated depreciation As of January 1, 2022 Charge for year Terminations Expirations Impairment Foreign currency translation As of December 31, 2022 Charge for year Terminations Expirations Foreign currency translation As of December 30, 2023 Carrying amount As of January 1, 2022 As of December 31, 2022 As of December 30, 2023 5.0 — (0.5) (1.7) — (0.6) 23.5 $ 6.1 — — (7.3) 0.8 23.1 $ — — — — — — 0.5 $ — — — — — 159.5 26.2 6.5 (1.1) (2.5) (2.0) (4.7) 181.9 15.3 4.4 (2.6) (8.8) 2.0 0.5 $ 192.2 6.8 $ 0.2 $ 6.6 (0.3) (1.7) — (0.1) 11.3 $ 6.8 — (4.5) 0.5 14.1 $ 14.5 $ 12.2 $ 9.0 $ 0.2 — — — — 0.4 $ 0.1 — (0.3) — 0.2 $ 0.3 $ 0.1 $ 0.3 $ 26.2 26.8 (1.9) (2.5) (1.1) (0.8) 46.7 26.8 (1.6) (8.8) 1.3 64.4 133.3 135.2 127.8 21.2 6.5 (0.6) (0.8) (2.0) (4.1) $ 157.9 $ $ $ 9.2 4.4 (2.6) (1.5) 1.2 168.6 $ 19.2 $ 20.0 (1.6) (0.8) (1.1) (0.7) $ 35.0 $ 19.9 (1.6) (4.0) 0.8 50.1 $ 118.5 $ 122.9 $ 118.5 $ $ $ $ $ 122 Lease costs Depreciation expense of right-of-use assets Interest expense on lease liabilities Short-term lease expenses Variable lease expenses Total lease cost Maturity analysis of liabilities (dollars in millions) Next 12 months Year 2 Year 3 Year 4 Year 5 Year 6 and beyond Total lease payments Interest Total present value of lease liabilities 21. Derivative financial instruments For the year ended December 30, 2023 December 31, 2022 $ 26.8 $ 6.4 8.2 6.1 $ 47.5 $ 26.8 5.5 7.2 5.9 45.4 As of December 30, 2023 As of December 31, 2022 $ 30.3 $ 27.8 22.5 19.7 16.5 61.5 $ $ 178.3 $ (28.4) 149.9 $ 30.8 26.0 23.6 18.4 16.3 69.8 184.9 (29.3) 155.6 We are exposed to certain financial risks relating to our ongoing business operations. From time to time, we use derivative financial instruments, principally foreign currency swaps, forward foreign currency contracts, interest rate caps (options) and interest rate swaps, to reduce our exposure to foreign currency risk and interest rate risk. We do not hold or issue derivatives for speculative purposes and monitor closely the credit quality of the institutions with which we transact. We recognize derivative instruments as either assets or liabilities in the consolidated balance sheet. We designate certain of our currency swaps as net investment hedges and designate our interest rate caps and interest rate swaps as cash flow hedges. The gain or loss on the designated derivative instrument is recognized in OCI and reclassified into net income in the same period or periods during which the hedged transaction affects earnings. Derivative instruments that have not been designated in an effective hedging relationship are considered economic hedges, and their change in fair value is recognized in net income in each period. 123 The period end fair values of derivative financial instruments were as follows: (dollars in millions) Derivatives designated as hedging instruments: —Currency swaps —Interest rate swaps Derivatives not designated as hedging instruments: —Currency forward contracts As of December 30, 2023 Trade and other receivables Other non- current assets Trade and other payables Other non- current liabilities Net $ 8.4 $ 20.2 — $ 5.9 — $ (77.6) $ — (7.4) (69.2) 18.7 3.9 32.5 $ $ — 5.9 $ (1.8) (1.8) $ — (85.0) $ 2.1 (48.4) As of December 31, 2022 Trade and other receivables Other non- current assets Trade and other payables Other non- current liabilities Net Derivatives designated as hedging instruments: —Currency swaps —Interest rate swaps Derivatives not designated as hedging instruments: —Currency forward contracts $ $ 9.3 $ 22.8 — $ 17.7 — $ — (45.2) $ (5.9) (35.9) 34.6 2.2 34.3 $ — 17.7 $ (1.4) (1.4) $ — (51.1) $ 0.8 (0.5) (dollars in millions) As of January 1, 2022 Change in fair value recorded in OCI Reclassifications during the period As of December 31, 2022 Change in fair value recorded in OCI Reclassifications during the period Instruments designated as net investment hedges Instruments designated as cash flow hedges Net investment hedge reconciliation Cross currency swaps Euro- denominated debt Cost of hedging reserve Cash flow hedging reconciliation Cost of hedging reserve Currency basis Interest rate swaps Interest rate caps Time value of options Total $ 5.3 $ 14.2 $ (0.1) $ 20.1 $ — $ 1.8 $ 41.3 15.0 — 20.3 19.6 — (10.6) — 3.6 — — (2.2) 0.9 (1.4) 2.9 2.4 (60.3) (11.2) (51.4) (10.3) 29.6 (0.8) 0.3 (0.5) — 0.5 (0.3) (1.5) — — — (59.2) (11.5) (29.4) 12.2 32.5 15.3 As of December 30, 2023 $ 39.9 $ 3.6 $ 3.9 $ (32.1) $ — $ — $ A. Instruments designated as net investment hedges We hold cross currency swaps that have been designated as net investment hedges of certain of our European and Chinese operations. In November 2023, we executed a USD to Chinese Yuan fixed-to-fixed cross currency swap with a notional principal amount of ¥1,784.0 million with a contract term from November 30, 2023 to November 30, 2026. This has been designated as a net investment hedge of certain of our Chinese operations. In May 2023, we amended our existing cross currency swaps to transition from a floating rate based on the London Interbank Offered Rate (“LIBOR”) to a floating rate based on a term secured overnight financing rate (“Term SOFR”). During November 2022, concurrent with the refinancing transactions described in Note 22, we executed additional cross currency swaps that have been designated as net investment hedges of certain of our European operations, with the notional principal amount of €501.6 million and contract term from November 16, 2022 to November 16, 2027. During March 2022, we extended our cross currency swaps existing at that time, which originally matured in March 2022, to now mature on March 31, 2027. 124 As of December 30, 2023, the aggregated notional principal amount of the cross currency swaps was €756.1 million and ¥1,784.0 million compared to €756.1 million as of December 31, 2022. In addition, as of January 1, 2022, we had designated €147.0 million of our Euro-denominated debt as a net investment hedge of certain of our European operations. We subsequently reduced the designated amount to €25.0 million during the second quarter of 2022. On November 16, 2022, we extinguished our Euro-denominated term loan and replaced with new Dollar-denominated term loans, and as a result, the net investment hedging designated on our Euro-denominated debt no longer exists. B. Instruments designated as cash flow hedges We use interest rate swaps and interest rate caps as part of our interest rate risk management strategy to add stability to interest expense and to manage our exposure to interest rate movements. In May 2023, we amended our then-existing interest rate swaps with a notional amount of $870.0 million to transition from a LIBOR-based floating rate to a Term SOFR-based floating rate. In November 2022, we executed additional pay-fixed, receive-floating interest rate swaps to hedge the cash flow risk of interest rate on our new U.S. Dollar debt, as further discussed in Note 22. These additional interest rates swaps have a notional amount of $385.0 million, and mature on November 16, 2027. These instruments are all designated as cash flow hedges. As of both December 30, 2023 and December 31, 2022 we held pay-fixed, receive-floating interest rate swaps with an aggregate notional amount of $1,255.0 million with an average strike rate at 5.4%. The existing interest rate swaps with notional amount of $870.0 million run from June 30, 2020 through June 30, 2025, while the new interest rate swaps of $385.0 million notional amount have the contract term from November 16, 2022 to November 16, 2027. Our interest rate caps involve the receipt of variable rate payments from a counterparty if interest rates rise above the strike rate on the contract in exchange for a premium, covering the period from July 1, 2019 to June 30, 2023. During August 2022, we early terminated our interest rate caps. As of December 30, 2023 and December 31, 2022, there were no outstanding interest rate caps. C. Derivative instruments not designated as hedging instruments We do not designate our currency forward contracts, which are used primarily in respect of operational currency exposures related to payables, receivables and material procurement, or the currency swap contracts that are used to manage the currency profile of Gates’ cash as hedging instruments for the purposes of hedge accounting. As of December 30, 2023 and December 31, 2022, there were no outstanding currency swaps. As of December 30, 2023, the notional amount of outstanding currency forward contracts that are used to manage operational foreign exchange exposures was $140.8 million, compared to $150.5 million as of December 31, 2022. D. Other items The Dollar Senior Notes include certain redemption options as detailed in Note 22. The unexpired options as of December 30, 2023 are considered to be closely related to the host contract and have therefore not been required to be separated from the host contract. 125 22. Interest-bearing loans and borrowings (dollars in millions) Secured debt at amortized cost: —Dollar Term Loan Unsecured debt at amortized cost: —6.25% Dollar Senior Notes due 2026 Total principal of borrowings Unamortized finance costs and net fair value adjustment Accrued interest Total carrying value of borrowings Current Non-current As of December 30, 2023 As of December 31, 2022 $ 1,903.9 $ 1,923.4 568.0 2,471.9 (42.4) 17.1 2,446.6 36.6 2,410.0 568.0 2,491.4 (88.9) 17.0 2,419.5 36.5 2,383.0 Gate’s secured debt is jointly and severally, irrevocably and fully and unconditionally guaranteed by certain of its subsidiaries and is secured by liens on substantially all of their assets. Gates is subject to covenants, representations and warranties under certain of its debt facilities. During the periods covered by these consolidated financial statements, we were in compliance with the applicable financial covenants. Also under the agreements governing our debt facilities, our ability to engage in activities such as incurring certain additional indebtedness, making certain investments and paying certain dividends is dependent, in part, on our ability to satisfy tests based on measures determined under those agreements. The principal payments due under our financing agreements over the next five years and thereafter are as follows: (dollars in millions) Fiscal year —2024 —2025 —2026 —2027 —2028 Thereafter $ Total 19.5 19.5 587.5 1,300.5 5.8 539.1 $ 2,471.9 Debt issuances and redemptions During May 2023, we drew $100.0 million under our asset-backed revolving credit facility to partially fund the purchase of shares under our share repurchase program, as discussed further in Note 29 below. The balance on the asset-backed revolving credit facility was fully paid off during the year ended December 30, 2023. On November 16, 2022, we issued a new tranche of $575.0 million of dollar denominated term loans (the “New Dollar Term Loans”) pursuant to an amendment to the credit agreement governing our term loan facilities, using the proceeds to extinguish the entire outstanding principal balance of €563.8 million under our Euro Term Loan facility (the “Euro Term Loan”) plus €1.0 million accrued interest. The New Dollar Term Loans have substantially similar terms as the Existing Dollar Term Loans (as defined herein), bearing interest at the borrower’s option at either Term SOFR (as defined in the credit agreement) plus 3.50% margin per annum, subject to a 0.50% per annum Term SOFR floor, or at the base rate plus 2.50% per annum, subject to a 1.50% per annum base rate floor. The New Dollar Term Loans require scheduled quarterly amortization payments of 1% per annum based on the initial aggregate principal amount and mature in November 2029. Issuance discount and costs totaling approximately $23.2 million related to the issuance of the New Dollar Term Loans have been deferred and will be amortized to interest expense over the remaining term of the related borrowings using the effective interest method. The repayment of Euro Term Loan resulted in the accelerated recognition of $9.1 million deferred financing costs (recognized in interest expense). 126 During March 2022, we drew $70.0 million under our asset-backed revolving credit facility to partially fund the purchase of shares under our share repurchase program, as discussed further in Note 29 below. As of December 31, 2022, we paid down the borrowings on the asset-backed revolver and have no remaining outstanding balance. During June 2021, we made a principal debt repayment of €58.7 million ($69.5 million) against our Euro Term Loan facility. As a result of this repayment, we accelerated the recognition of $0.4 million of deferred issuance costs (recognized in interest expense). Dollar and Euro Term Loans Our secured credit facilities consist of two loans (collectively, the “Dollar Term Loans”), one of which was drawn on July 3, 2014 (the “Existing Dollar Term Loans”), and the New Dollar Term Loans drawn on November 16, 2022 as described above. These term loan facilities bear interest at a floating rate, which for U.S. dollar debt can be either a base rate as defined in the credit agreement plus an applicable margin, or at our option, Term SOFR (as applicable) plus an applicable margin. The New Dollar Term Loans mature on November 16, 2029. On February 24, 2021, we made amendments to the Existing Dollar Term Loans’ credit agreement, including extending the maturity date of the Existing Dollar Term Loans, from March 31, 2024 to March 31, 2027, reducing the floor applicable to the Existing Dollar Term Loans from 1.00% to 0.75% and modifying the applicable interest rate margin for the Existing Dollar Term Loans to include a 0.25% reduction if our consolidated total net leverage ratio (as defined in the credit agreement) is less than or equal to 3.75 times. In connection with these amendments, we paid accrued interest up to the date of the amendments of $3.7 million, in addition to fees of $8.6 million, of which $6.9 million qualified for deferral and will be amortized to interest expense over the new remaining term of the loan using the effective interest method. This transaction resulted in a debt modification and a $60.3 million net fair value gain on the amendment date. The Existing Dollar Term Loans’ interest rate is currently Adjusted Term SOFR, subject to a floor of 0.75%, plus a margin of 2.60%, and as of December 30, 2023, borrowings under this facility bore interest at a rate of 7.96% per annum. On March 1, 2023, Gates amended the Existing Dollar Term Loans’ reference rate from LIBOR to Term SOFR, with a credit spread adjustment of 0.10%. The Existing Dollar Term Loans interest rate is currently re-set on the last business day of each month based on the election of one month interest periods. The New Dollar Term Loans’ interest rate is currently at Term SOFR, subject to a floor of 0.50%, plus a margin of 3.00%, and as of December 30, 2023, borrowings under this facility bore interest at a rate of 8.36% per annum. The New Dollar Term Loans’ interest rate is currently re-set on the last business day of each month based on the election of one month interest periods. On October 10, 2023, we amended the New Dollar Term Loans’ interest rate to be, at our option, either Term SOFR, subject to a floor of 0.50%, plus a margin of 3.00% per annum, or the base rate, subject to a 1.50% per annum floor, plus 2.00% per annum. The amendment of the New Dollar Term Loan’s interest rate resulted in a debt modification and a $30.5 million net fair value loss on the amendment date. Both Dollar Term Loans are subject to quarterly amortization payments of 0.25%, based on the original principal amount less certain repayments with the balance payable on maturity. During Fiscal 2023, we made amortization payments against the Existing Dollar Term Loans and New Dollar Term Loans of $13.8 million and $5.8 million, respectively. During Fiscal 2022, we made amortization payments against the Existing Dollar Term Loans, the Euro Term Loans, and New Dollar Term Loans of $13.8 million, $5.1 million, and $1.4 million, respectively. Under the terms of the credit agreement, we are obliged to offer annually to the term loan lenders an “excess cash flow” amount as defined under the agreement, based on the preceding year’s final results. Based on our 2023 results, the leverage ratio as defined under the credit agreement was below the threshold above which payments are required, and therefore no excess cash flow payment is required to be made in 2024. During the periods presented, foreign exchange gains were recognized in respect of the Euro Term Loans as summarized in the table below. During Fiscal 2022, a portion of the facility was designated as a net investment hedge of certain of our Euro investments, a corresponding portion of the foreign exchange gain were recognized in OCI. As of December 30, 2023 and December 31, 2022, the Euro Term Loan, and the net investment hedging designation on the Euro Term Loan, no longer exist. 127 (dollars in millions) Gain recognized in statement of operations Gain recognized in OCI Total gain For the year ended December 30, 2023 December 31, 2022 $ $ — $ — — $ 45.2 10.6 55.8 The above net foreign exchange gain recognized in the Interest expense line of the consolidated statement of profit or loss have been substantially offset by net foreign exchange movements on Euro-denominated intercompany loans as part of our overall hedging strategy. A wholly-owned U.S. subsidiary of Gates Global LLC is the principal obligor under the Dollar Term Loans for U.S. federal income tax purposes and makes the payments due on this tranche of debt. As a result, interest received by lenders of this tranche of debt is U.S. source income. Unsecured Senior Notes As of December 30, 2023, we had $568.0 million of Dollar Senior Notes outstanding that were issued in November 2019. These notes are scheduled to mature on January 15, 2026 and bear interest at an annual fixed rate of 6.25% with semi-annual interest payments. As of January 15, 2024, we may redeem the Dollar Senior Notes, at our option, in whole at any time or in part from time to time, at 100% of the principal amount, plus accrued and unpaid interest to the redemption date. Upon the occurrence of a change of control or a certain qualifying asset sale, the holders of the notes will have the right to require us to make an offer to repurchase each holder's notes at a price equal to 101% (in the case of a change of control) or 100% (in the case of an asset sale) of their principal amount, plus accrued and unpaid interest. Revolving credit facility We have a secured revolving credit facility that provides for multi-currency revolving loans. On November 18, 2021, we amended the credit agreement governing this facility to, among other things, increase the size of the facility from $185.0 million to $250.0 million, extend the maturity date from January 29, 2023 to November 18, 2026 (subject to certain springing maturities related to our Unsecured Senior Notes if more than $500.0 million is outstanding 91 days prior to its maturity), and increase the letter of credit sub-facility from $20.0 million to $75.0 million. In connection with these amendments, we paid fees of $2.0 million, which have been deferred and will, together with existing deferred issuance costs related to this facility, be amortized to interest expense over the new term of the facility on a straight-line basis. As of both December 30, 2023 and December 31, 2022, there were no drawings for cash under the revolving credit facility and there were no letters of credit outstanding. Debt under the revolving credit facility bears interest at a floating rate, which can be either a base rate as defined in the credit agreement plus an applicable margin or, at our option, LIBOR, plus an applicable margin. On March 1, 2023, Gates amended the secured revolving credit facility reference rate for borrowings in dollars from LIBOR to Term SOFR. Asset-backed revolver We also have a revolving credit facility backed by certain of our assets in North America. On November 18, 2021, we amended the credit agreement governing this facility to, among other things, reduce the maximum facility size from $325.0 million to $250.0 million ($250.0 million as of December 30, 2023, compared to $214.7 million as of December 31, 2022, based on the values of the secured assets on those dates), and extended the maturity date from January 29, 2023 to November 18, 2026 (subject to certain springing maturities related to our Unsecured Senior Notes if more than $500.0 million is outstanding 91 days prior to its maturity). The facility also allows for a letter of credit sub-facility of $150.0 million within the $250.0 million maximum. In connection with these amendments, we paid fees of $1.3 million, which have been deferred and will, together with existing deferred issuance costs related to this facility, be amortized to interest expense over the new term of the facility on a straight-line basis. 128 As of both December 30, 2023 and December 31, 2022, there were no drawings for cash outstanding under the asset-backed revolver. We drew $100 million in May of 2023 and $70.0 million in March 2022 under this facility, and both balances were fully paid down during Fiscal 2023 and Fiscal 2022. There were letters of credit outstanding of $29.7 million and $25.8 million, as of December 30, 2023 and December 31, 2022, respectively. Debt under the facility bears interest at a floating rate, which can be either a base rate as defined in the credit agreement plus an applicable margin or, at our option, LIBOR, plus an applicable margin. On March 1, 2023, we amended our revolving credit facility reference rate for borrowing in dollars from LIBOR to Term SOFR. 23. Financial Instruments and Risk Management A. Classes and categories of financial instruments and their fair values The following table combines information about: • Classes of financial instruments based on their nature and characteristics • The carrying amounts of financial instruments • Fair values of financial instruments (except financial instruments when carrying amount approximates their fair value) Fair value hierarchy levels of financial assets and financial liabilities for which fair value was disclosed. Financial instruments held at fair value have been categorized into one of three levels to reflect the degree to which observable inputs are used in determining the fair values: • • • ‘Level 1’ fair value measurements are those derived without adjustment from quoted prices in active markets for identical assets or liabilities. ‘Level 2’ fair value measurements are those derived from inputs other than quoted prices included within 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’ fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). 129 a) Summary of financial assets and liabilities The table below sets out the Group’s accounting classification of each category of financial assets and liabilities and their carrying values: (dollars in millions) Financial assets Classified as amortized cost: Cash and cash equivalents Restricted cash Trade receivables1 Total Classified as fair value: Level 1: — Cash equivalents Level 2: — Cash equivalents — Derivative financial assets Total Financial liabilities Classified as amortized cost: Trade payables Accruals Interest-bearing loans and borrowings Lease obligations Total Classified as fair value: Level 2: — Derivative financial liabilities Total December 30, 2023 December 31, 2022 $ $ $ 591.6 $ 3.4 768.2 1,363.2 $ 578.4 3.0 808.6 1,390.0 76.2 $ — 52.8 38.4 $ 167.4 $ — 52.0 52.0 $ 457.7 $ 153.6 2,446.6 149.9 3,207.8 $ 469.6 121.8 2,419.5 155.6 3,166.5 $ $ $ (86.8) $ (86.8) $ (52.5) (52.5) (1) The trade receivables balance did not include amounts in relation to factoring arrangement. Derivative assets and liabilities included in Level 2 represent foreign currency exchange forward and swap contracts, and interest rate derivative contracts. Cash equivalents included in Level 1 represent treasury bills and money market funds, while Level 2 represent certificates of deposit and commercial paper. We value our foreign currency exchange derivatives using models consistent with those used by a market participant that maximize the use of market observable inputs including forward prices for currencies. We value our interest rate derivative contracts using a widely accepted discounted cash flow valuation methodology that reflects the contractual terms of each derivative, including the period to maturity. The methodology derives the fair values of the derivatives using the market standard methodology of netting the discounted future cash payments and the discounted expected receipts. The inputs used in the calculation are based on observable market-based inputs, including interest rate curves, implied volatilities and credit spreads. We incorporate credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. 130 Transfers between levels of the fair value hierarchy During the periods presented, there were no transfers between Levels 1 and 2, and Gates had no assets or liabilities measured at fair value on a recurring basis using Level 3 inputs. b) Financial instruments not held at fair value Certain financial assets and liabilities are not measured at fair value; however, items such as cash and cash equivalents, restricted cash, revolving credit facilities and bank overdrafts generally attract interest at floating rates and accordingly their carrying amounts are considered to approximate fair value. Due to their short maturities, the carrying amounts of accounts receivable and accounts payable are also considered to approximate their fair values. Our debt is held at amortized cost. The carrying amount and fair value of debt are set out below: (dollars in millions) Current Non-current As of December 30, 2023 As of December 31, 2022 Carrying amount Fair value Carrying amount Fair value $ $ 36.6 $ 2,410.0 2,446.6 $ 36.5 $ 2,444.7 2,481.2 $ 36.5 $ 2,383.0 2,419.5 $ 36.2 2,408.4 2,444.6 Debt is comprised principally of borrowings under the secured credit facilities and the unsecured senior notes. Loans under the secured credit facilities pay interest at floating rates, subject to a 0.75% and a 0.50% Term SOFR floor on the two dollar term loans as further described in Note 22. The fair values of the term loans are derived from a market price, discounted for illiquidity. The unsecured senior notes have fixed interest rates, are traded by “Qualified Institutional Buyers” and certain other eligible investors, and their fair value is derived from their quoted market price. c) Assets measured at fair value on a non-recurring basis Gates has non-recurring fair value measurements related to certain assets, including goodwill, intangible assets, and property, plant, and equipment. During Fiscal 2023, an impairment of fixed and other assets of $0.1 million was recognized. During Fiscal 2022, an impairment of fixed and other assets of $1.1 million was recognized in relation to the suspension of our operations in Russia. B. Financial risk management objectives The Group’s central treasury function is responsible for procuring the Group’s financial resources and maintaining an efficient capital structure, together with managing the Group’s liquidity, foreign exchange and interest rate exposures. All treasury operations are conducted within strict policies and guidelines that are approved by the Board. Compliance with those policies and guidelines is monitored by the regular reporting of treasury activities to the Board. A key element of the Group’s treasury philosophy is that funding, interest rate and currency decisions and the location of cash and debt balances are determined independently from each other. The Group’s borrowing requirements are met by raising funds in the most favorable markets. Management aims to retain a portion of net debt in the foreign currencies in which the net assets of the Group’s operations are denominated. Management does not hedge the proportion of foreign operations effectively funded by shareholders’ equity. An analysis of the Group’s exposure to currency risk and an analysis of the profile of net assets by currency are set out in part G of this note. C. Credit risk Our principal financial assets are cash and cash equivalents, derivatives, trade and other receivables and investments. We regularly monitor third-party depository institutions that hold our cash and short-term investments, primarily for safety of principal and secondarily for maximizing yield on those funds. We diversify our cash and short-term investments among counterparties to minimize exposure to any one of these entities. The credit risk on derivative financial instruments is limited because the counterparties are financial institutions with high credit- ratings assigned by international credit-rating agencies. 131 To mitigate the credit risk attributable to our trade receivables we perform credit verifications and monitor closely the creditworthiness of new and existing customers. The amounts presented in the balance sheet for trade receivables are net of allowances for expected credit losses. We develop expected loss estimates based either on the aging profile of outstanding receivables or by applying an experience factor (either a percentage of sales or a percentage of open receivables). These methodologies are based primarily on historical trends and experience, but credit controllers also regularly assess individual customer accounts to identify any potential increases or decreases in the level of expected credit loss needed to be applied to each customer based on current circumstances and future expectations. Two customers of our North America businesses accounted for 12.5% and 9.6%, respectively, of our total trade accounts receivable balance as of December 30, 2023, compared to 15.3% and 8.4%, respectively, as of December 31, 2022. These concentrations are due to the extended payment terms common in the industry in which these businesses operate. We have no other significant concentrations of credit risk as our exposure is spread over a large number of customers and counterparties. Management considers the Group’s maximum exposure to credit risk to be as follows: (dollars in millions) Cash and cash equivalents Derivative financial assets Trade receivables D. Capital risk December 30, 2023 December 31, 2022 $ 720.6 $ 38.4 768.2 578.4 52.0 808.6 $ 1,527.2 $ 1,439.0 Management considers that the Company’s capital equates to shareholders’ equity and manages the Company’s capital structure to maximize shareholder value whilst retaining flexibility to take advantage of opportunities that arise to grow the business. The equity attributable to the owners of the parent, comprising issued share capital, reserves and retained earnings as disclosed in the Consolidated Statement of Changes in Equity. E. Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Our debt facilities are monitored against forecast requirements and timely action is taken to put in place, renew or replace credit lines. We aim to reduce liquidity risk by diversifying our funding sources, maintaining adequate headroom under our debt facilities and by staggering the maturities of our debt. We have established long-term credit ratings of B1 Stable with Moody’s and B+ Stable with Standard & Poor’s. Credit ratings are subject to regular review by the credit rating agencies and may change in response to economic and commercial developments. As of December 30, 2023, our asset-backed revolving credit facility had a borrowing base of $250.0 million, being the maximum amount we can draw down based on the current value of the secured assets. The facility was undrawn for cash, but there were letters of credit outstanding against the facility amounting to $29.7 million. We also have a secured revolving credit facility that provides for multi-currency revolving loans up to an aggregate principal amount of $250.0 million. In total, our committed borrowing headroom was $470.3 million, in addition to cash balances of $720.6 million. The expected timing of contractual cash flows relating to the Group’s financial liabilities are as follows: 132 (dollars in millions) As of December 30, 2023 Bank overdrafts and debt: —Principal —Interest payments(1) Lease obligations Post-retirement benefits(2) Purchase obligations(3) As of December 31, 2022 Bank overdrafts and debt: —Principal —Interest payments(1) Lease obligations Post-retirement benefits(2) Purchase obligations(3) Total Within one year Within two to three years Within four to five years Thereafter Earliest period in which payments are due $ 2,471.9 $ 19.5 $ 607.0 $ 1,306.3 $ 582.2 162.8 10.3 45.4 180.4 28.8 10.3 27.3 275.6 46.2 — 14.0 92.2 31.7 — 4.1 $ 2,491.4 $ 19.5 $ 39.0 $ 1,888.0 $ 756.6 184.9 5.8 44.0 182.7 30.8 5.8 33.9 317.5 49.6 — 10.1 185.4 34.7 — — 539.1 34.0 56.1 — — 544.9 71.0 69.8 — — (1) (2) Future interest payments include payments on fixed and floating rate debt. Floating rate interest payments are estimated based on forward market interest rates and terms prevailing as of December 30, 2023 and December 31, 2022. Post-retirement benefit obligations represent our expected cash contributions to defined benefit pension and other post- retirement benefit plans in 2024 and 2023, respectively. It is not practicable to present expected cash contributions for subsequent years because they are determined annually on an actuarial basis to provide for current and future benefits in accordance with federal law and other regulations. (3) A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Maturities of the financial liabilities in all of the liquidity tables above are based on the earliest date on which the counterparty has a contractual right to require payment. Floating interest payments and payments and receipts on interest rate derivatives are estimated based on market interest rates prevailing at the balance sheet date. Amounts in respect of purchase obligations are items that we are obligated to pay in the future, but they are not required to be included on the consolidated balance sheet. F. Interest rate risk Our prevailing market risk on interest rates is the potential fluctuation in interest costs and in the fair value of long-term debt resulting from movements in interest rates. 133 We use interest rate derivatives as part of our interest rate risk management strategy to add stability to interest expense and to manage our exposure to interest rate movements. The interest rate caps are designated as cash flow hedges and involve the receipt of variable rate payments from a counterparty if interest rates rise above the strike rate on the contract in exchange for a premium. The following table summarizes the key terms of the active interest rate derivatives held by the Company: Notional principal amount (millions) Payable Interest rate Receivable Variable Fixed Variable Fixed Variable rate index As of December 30, 2023 Maturity date: —June 2025 —November 2027 As of December 31, 2022 Maturity date: —June 2025 ——November 2027 $ $ $ $ 870.0 385.0 — % — % 2.5 % 7.6 % 5.4 % 8.9 % — % — % 1 month Term SOFR 1 month Term SOFR 870.0 385.0 — % — % 2.5 % 7.6 % 4.4 % 7.8 % — % — % 1 month LIBOR 1 month Term SOFR The interest rate profile of the Company’s financial assets and liabilities, after taking into account the effect of the interest rate hedging activities, was as follows: (dollars in millions) Financial assets: Cash and cash equivalents Restricted cash Financial liabilities: Debt Lease obligations (dollars in millions) Financial assets: Cash and cash equivalents Restricted cash Financial liabilities: Debt Lease obligations G. Currency risk As of December 30, 2023 Interest-bearing Floating rate Fixed rate Non-interest bearing Total $ 364.4 $ — $ 356.2 $ — 364.4 — — (648.9) — (648.9) (284.5) $ (1,823.0) (149.9) (1,972.9) (1,972.9) $ 3.4 359.6 — — — 359.6 $ 720.6 3.4 724.0 (2,471.9) (149.9) (2,621.8) (1,897.8) As of December 31, 2022 Interest-bearing Floating rate Fixed rate Non-interest bearing Total 222.5 — 222.5 — — — 355.9 3.0 358.9 578.4 3.0 581.4 (668.4) — (668.4) (445.9) $ (1,823.0) (155.6) (1,978.6) (1,978.6) $ — — — 358.9 $ (2,491.4) (155.6) (2,647.0) (2,065.6) $ $ We have global operations and thus make investments and enter into transactions denominated in various foreign currencies. Our operating results are impacted by buying, selling and financing in currencies other than the functional currency of our operating companies. We monitor exposure to transactions denominated in currencies other than the functional currency of each country in 134 which we operate, and enter into forward contracts to mitigate that exposure as needed. We also naturally hedge foreign currency through our production in the countries in which we sell our products. In addition, we are exposed to currency risk associated with translating our non-U.S. dollar financial statements into U.S. dollars, which is our reporting currency. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. Translational foreign exchange risks arise predominantly on the potential increase in our significant euro debt when translated to U.S. dollars, as well as on the potential decreases in the value of our earnings, cash balances and other net assets denominated in euro and other currencies when translated to U.S. dollars. The currency profiles of our cash and debt are centrally managed as are decisions about the location of cash. The currency profile of cash and debt, after taking into account the effect of the currency swaps and forwards used to manage those profiles, were as follows: (dollars in millions) Cash and cash equivalents by currency: —U.S. dollar —Chinese Yuan Renminbi —Indian Rupee —Euro —Japanese Yen —Other Principal amount of debt by currency: —U.S. dollar —Euro —Chinese Yuan Renminbi As of December 30, 2023 As of December 31, 2022 $ $ $ $ 343.9 $ 105.2 27.7 41.8 37.3 $ 164.7 720.6 $ 1,385.9 $ 835.4 250.6 2,471.9 $ 244.6 115.9 17.4 32.2 29.6 138.7 578.4 1,684.9 806.5 — 2,491.4 As described in Note 22 to the audited consolidated financial statements included elsewhere in this annual report, during Fiscal 2023 we executed a USD to Chinese Yuan fixed-to-fixed cross currency swap with a notional principal amount of ¥1,784.0 million, designated as a net investment hedge of certain of our Chinese operations. During Fiscal 2022, we refinanced and replaced our Euro- denominated term loan with new U.S. Dollar term loans and executed additional cross currency swaps that have been designated as net investment hedges in the principal amount of €501.6 million, and as a result, the net investment hedging designated on our Euro- denominated debt no longer exists. As of December 30, 2023, the aggregated notional principal amount of the cross currency swaps was €756.1 million and ¥1,784.0 million compared to €756.1 million as of December 31, 2022. 135 24. Deferred tax Deferred income tax (liabilities) assets Deferred income tax (liabilities) assets recognized by the Company were as follows: (dollars in millions) At January 1, 2022 Charge to profit or loss Charge related to tax rate change Charge to other comprehensive income (Equity) Exchange differences (CTA) At December 31, 2022 Charge to profit or loss Charge to other comprehensive income Charge related to tax rate change Exchange differences At December 30, 2023 Intangibles $ (401.7) $ 108.5 $ Interest PP&E Retirement 34.5 1.2 — 7.2 (358.8) 29.9 28.4 (0.9) (11.1) (0.3) 124.6 42.7 (38.3) $ 2.8 0.1 — 0.7 (34.7) 5.6 (1.6) (4.8) (1.3) Losses 5.1 $ 605.5 $ (1.7) — 13.4 (0.3) 9.5 1.1 14.0 0.4 — 8.8 (59.2) 568.2 (16.8) (2.1) Credits Accrued Other Total 25.3 $ 11.4 — 63.3 $ 7.8 (0.6) — — 36.7 (25.7) (10.6) (0.7) 59.2 187.2 367.7 96.6 (0.5) (3.4) (51.2) 409.2 223.3 — (144.7) (154.5) — (4.2) 0.3 0.7 $ (334.7) $ 163.5 $ — 0.1 (30.3) $ 3.1 0.4 17.9 $ 578.8 $ — 29.5 — 0.2 11.2 $ 5.6 2.2 109.5 $ 9.0 28.9 515.9 Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes: (dollars in millions) Deferred tax liabilities Deferred tax assets As of December 30, 2023 $ $ $ (126.3) $ 642.2 $ 515.9 $ As of December 31, 2022 (203.4) 612.7 409.3 As of December 30, 2023, the Company had the following loss and credit carryforward amounts: • • • • Gates had net operating losses amounting to $6,450.7 million consisting primarily of $6,192.2 million in Luxembourg, and $135.2 million in the U.S. (federal and state). Operating losses of $3,210.4 million can be carried forward indefinitely consisting primarily of $3,086.7 million in Luxembourg, and $123.7 million in the U.S. and other foreign jurisdictions. The remaining losses of $3,240.3 million have expiration dates between 2024 and 2043, consisting primarily of $3,105.4 million in Luxembourg, and $134.9 million in the U.S. and other foreign jurisdictions. We recognized a related deferred income tax asset of $577.3 million after unrecognized deferred tax assets of $1,010.6 million; Gates had capital losses amounting to $771.2 million, consisting of $745.8 million in the U.K., and $25.4 million in the U.S. Capital losses of $759.6 million can be carried forward indefinitely, primarily consisting of $745.8 million in the U.K, and $11.6 million in the U.S. that expire in 2026. We recognized no related deferred income tax asset after unrecognized deferred tax assets of $192.5 million; Gates had U.S. federal foreign tax credits amounting to $63.5 million, which expire between 2024 and 2027. We recognized a related deferred income tax asset of $7.5 million after unrecognized deferred tax assets of $56.0 million; and Gates had interest expense deductions which can be carried forward amounting to $774.7 million, consisting primarily of $494.0 million in the U.S., $203.7 million in Luxembourg, and $77.0 million in other foreign jurisdictions. Interest expense deductions can be carried forward indefinitely. We recognized a related deferred tax asset of $160.2 million after unrecognized deferred tax assets of $26.3 million. 136 As of December 30, 2023, income and withholding taxes in the various tax jurisdictions in which Gates operates have not been provided on approximately $1,712.3 million of taxable temporary differences related to the investments in the Company’s subsidiaries. These temporary differences represent the estimated excess of the financial reporting over the tax basis in our investments in those subsidiaries, which are primarily the result of purchase accounting adjustments. These temporary differences are not expected to reverse in the foreseeable future, but could become subject to income and withholding taxes in the various tax jurisdictions in which Gates operates if they were to reverse. The amount of unrecognized deferred income tax liability on these taxable temporary differences has not been determined because the hypothetical calculation is not practicable due to the uncertainty as to how they may reverse. However, Gates has recognized a deferred income tax liability of $21.4 million on taxable temporary differences related to undistributed earnings of the Company’s subsidiaries. 25. Post-retirement benefits A. Background The Group operates pension plans throughout the world, covering the majority of its employees. The plans are structured in accordance with local conditions and practices in each country and include defined contribution plans and defined benefit plans. The Group provides defined contribution pension benefits in most of the countries in which it operates; in particular, the majority of the Group’s employees in the US are entitled to such benefits. During Fiscal 2023, the expense recognized by Gates in respect of defined contribution pension plans was $21.0 million, compared to $20.2 million in Fiscal 2022. The Group operates defined benefit pension plans in several countries; in particular, in the U.S. and the U.K. Generally, the pension benefits provided under these plans are based upon pensionable salary and the period of service of the individual employees. The assets of the plans are held separately from those of the Group in funds that are under the control of trustees. The extent of the powers of the trustees, in particular in respect of funding and investment strategy, varies and is dependent on local regulations and the specific rules of each defined benefit pension plan. Payments made to these plans principally comprise funding contributions which are determined in accordance with local regulations, including those negotiated with the trustees, to ensure that appropriate funding levels are maintained and funding deficits are closed over a reasonable period of time. All of the defined benefit pension plans operated by the Group are closed to new entrants. In addition to the funded defined benefit pension plans, the Group has unfunded defined benefit obligations to certain current and former employees. Gates also provides other post-employment benefits, principally health and life insurance coverage, on an unfunded basis to certain of its employees in the U.S. and Canada. These plans, which are unfunded, are defined benefit plans. B. Summary of financial effect on comprehensive income An analysis of the effect of providing post-employment benefits on the Group’s results is set out below. Year ended December 30, 2023 Defined benefit plans Recognized in profit or loss: —Current service cost —Net interest cost —Administrative costs Recognized in OCI: —Actuarial loss (gain) arising from experience adjustments —Actuarial gain arising from changes in demographic assumptions —Actuarial loss arising from changes in financial assumptions —Return on plan assets less than the discount rate —Currency loss Pensions Other post- employment benefits $ $ $ 4.0 $ 2.3 0.1 6.4 $ — 1.5 — 1.5 17.3 $ (0.5) (1.4) 15.8 (21.3) 1.5 — 0.8 — 0.3 0.6 Remeasurement of the net defined benefit liability $ 11.9 $ 137 Year ended December 31, 2022 Defined benefit plans Recognized in profit or loss: —Current service cost —Net interest cost —Administrative costs —Plan amendments Recognized in OCI: —Actuarial gain arising from experience adjustments —Actuarial gain arising from changes in demographic assumptions —Actuarial gain arising from changes in financial assumptions —Return on plan assets less than the discount rate —Currency loss (gain) Remeasurement of the net defined benefit liability C. Summary of financial effect on the balance sheet Pensions Other post- employment benefits $ $ $ $ 3.4 $ 0.2 0.1 — 3.7 $ (128.5) $ (0.4) (77.2) 258.2 4.9 57.0 $ — 1.2 — (0.4) 0.8 (7.0) — (6.8) — (0.9) (14.7) On the basis of legal advice, the directors have recognized the surplus below. The net liability recognized in the Group’s balance sheet in respect of defined benefit plans and its presentation in the balance sheet are set out below: Surpluses Deficits Net liability D. Pensions Assumptions As of December 30, 2023 As of December 31, 2022 Pensions Other benefits Total Pensions Other benefits Total $ $ 8.8 $ — $ 8.8 $ 10.6 $ — $ 10.6 (62.5) (53.7) $ (27.5) (27.5) $ (90.0) (81.2) $ (53.9) (43.3) $ (28.5) (28.5) $ (82.4) (71.8) The significant financial assumptions used in the actuarial valuations of the defined benefit pension plans were as follows: Discount rate Salary increases Increase to pensions in payment As of December 30, 2023 As of December 31, 2022 % per annum % per annum 4.694 % 3.996 % 3.316 % 5.066 % 3.539 % 3.040 % The significant demographic assumptions underlying the benefit obligations of the Group’s principal pension plans were as follows: Life Expectancy of a Male aged 65 now Life Expectancy of a Female aged 65 now Life Expectancy of a Male aged 65 in 15 years Life Expectancy of a Female aged 65 in 15 years Sensitivity analysis As of December 30, 2023 As of December 31, 2022 Years Years 20.6 24.1 23.3 25.5 21.8 24.2 23.3 25.7 The table below provides an indication of the potential impact on the defined benefit obligation as of December 30, 2023 of a reasonably possible change in each of the above assumptions: 138 Discount rate Increase to pensions in payment Salary increases Mortality rates Level of change in assumption 0.5% Decrease 0.5% Increase 0.5% Increase 1 year improvement Impact 4.7 % 1.4 % 0.1 % 2.9 % Although it is likely that any change in one of the significant assumptions will have an impact on one or more of the other assumptions, this relationship cannot be easily determined and hence the above analysis presents only the impact of such changes to each assumption in isolation. Benefit obligation Changes in the present value of the benefit obligation were as follows: At the beginning of the period Current service cost Interest cost Employees’ contributions Administrative expenses Net actuarial loss/(gain) arising from: —experience adjustment —changes in demographic assumptions —changes in financial assumptions Benefits paid Foreign currency translation At the end of the period As of December 30, 2023 As of December 31, 2022 $ 525.6 $ 4.0 25.8 0.1 0.1 17.3 (1.4) 15.8 (45.9) 18.3 $ 559.7 $ 808.8 3.4 16.0 0.1 0.1 (128.5) (0.4) (77.2) (41.1) (55.6) 525.6 The weighted average active duration of the Group’s pension plans as of December 30, 2023 is 9.9 years (December 31, 2022: 8.4 years). Plan assets Change in the fair value of plan assets were as follows: At the beginning of the period Interest income Remeasurement gain (loss): — return on plan assets (excluding amounts included in net interest expense) Employer’s contributions Employees’ contributions Benefits paid Foreign currency translation At the end of the period 139 As of December 30, 2023 $ 482.3 $ As of December 31, 2022 816.8 $ $ $ $ $ $ $ 23.5 $ 15.8 21.3 $ (258.2) 7.7 $ 0.1 $ (45.9) $ 17.0 $ 506.0 $ 9.2 0.1 (41.1) (60.3) 482.3 The fair value of plan assets by category were as follows: As of December 30, 2023 As of December 31, 2022 Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) Total Total $ — $ 37.4 $ — $ 37.4 $ — $ 106.7 $ — $ 106.7 (dollars in millions) Collective investment trusts: Equity Securities Debt Securities —Corporate bonds —Government bonds Annuities and insurance Other Real estate — — — — — 42.2 105.6 — 22.4 22.0 — — 42.2 105.6 274.0 274.0 — — — 22.4 22.0 2.4 274.0 $ 506.0 $ — — — — — 22.1 93.0 — 4.7 — — — 22.1 93.0 240.4 240.4 — — 4.7 — 15.4 15.4 $ — 226.5 $ — 15.4 240.4 $ 482.3 Cash and cash equivalents Total 2.4 2.4 $ — 229.6 $ $ The return and risk expectations for each asset class incorporate assumptions about historical return relationships, current financial market conditions and the degree of global capital market integration. The assumptions used have been derived from rigorous historical performance analysis combined with forward-looking views of the financial markets as revealed through the yield on long- term bonds. The actuaries review analyses of historical risk and the correlation of the return on asset classes and apply subjective judgment based on their knowledge of the Group’s plans. The result of this analysis is incorporated into a risk matrix from which expected long-term risk premiums for each asset class are developed. The nominal return expectations are determined by combining the asset class risk premiums with expected inflation and real risk-free rate assumptions. As a final consideration, the nominal return assumptions are blended with current market conditions to develop long- term equilibrium expectations. Gates’ desired investment objectives for pension plan assets include maintaining an adequate level of diversification to reduce interest rate and market risk, and to provide adequate liquidity to meet immediate and future benefit payment requirements. Outside the U.S., Gates’ defined benefit pension plans target a mix of growth seeking assets, comprising equities, and income generating assets, such as government and corporate bonds, that are considered by the trustees to be appropriate in the circumstances. Plan assets are rebalanced periodically to maintain target asset allocations. Certain benefit obligations outside the U.S. are matched by insurance contracts. In June 2023, the UK High Court issued a ruling in the case of Virgin Media Limited v NTL Pension Trustees II Limited and others relating to the validity of certain historical pension changes. This case may have implications for other defined benefit plans in the UK, although is subject to possible appeal in 2024. The Company is aware of this legal ruling and is assessing whether there is any potential impact upon the Company although no conclusion has been reached, therefore no quantification of any potential impact has been determined. During Fiscal 2022, the Group initiated an annuity purchase transaction, or commonly known as “buy-in”, for two of our pension schemes in the U.K., when the pension obligations for the two pension schemes deemed to be fully covered and funded by the annuities assets. After the buy-in, the fair value of the insurance policies equates to the present value of the pension obligations. Investments in equities and fixed income securities are held in pooled investment funds that are managed by investment managers on a passive (or “index-tracking”) basis. The trustees ensure that there is no significant concentration of credit risk in any one financial institution. Plan assets do not include any financial instruments issued by, any property occupied by, or other assets used by Gates. Asset ceiling As of December 30, 2023 and December 31, 2022, no effect of the asset ceiling was recognized. Expected future contributions The Group expects to make contributions of approximately $7.3 million to defined benefit pension plans during 2024. 140 E. Other post-employment benefits Assumptions There are no significant demographic actuarial assumptions used in valuing the benefit obligation arising from other post-employment benefit plans. The weighted averages of the significant financial assumptions used in the actuarial valuations of these plans were as follows: Discount rate Post Retirement Health Care Trend Rate - Initial Post Retirement Health Care Trend Rate - Ultimate As of December 30, 2023 As of December 31, 2022 % per annum % per annum 5.003 % 5.755 % 4.843 % 5.442 % 5.971 % 4.822 % The significant demographic assumptions underlying the benefit obligations of the Group’s principal pension plans were as follows: Life Expectancy of a Male aged 65 now Life Expectancy of a Female aged 65 now Life Expectancy of a Male aged 65 in 15 years Life Expectancy of a Female aged 65 in 15 years As of December 30, 2023 As of December 31, 2022 Years Years 21.3 23.4 22.7 24.7 21.2 23.4 22.6 24.7 The Group’s other post-employment benefit plans are unfunded. Accordingly, the liability recognized in the Group’s balance sheet in respect of these plans represents the present value of the benefit obligation. The sensitivity of the benefit obligation to changes in the significant assumptions used in the actuarial valuations as of December 30, 2023 may be summarized as follows: Discount rate Mortality rates Increase of one percentage point % per annum 0.5% Decrease 1 year improvement Decrease of one percentage point % per annum 3.7 % 3.3 % Although it is likely that any change in either of the significant assumptions above will have an impact on one or more of the other assumptions, this relationship cannot be easily determined and hence the above analysis presents only the impact of such changes to each assumption in isolation. Benefit obligation Changes in the present value of the benefit obligation were as follows: (dollars in millions) At the beginning of the period Interest cost Net actuarial gain arising from: —experience adjustment —changes in financial assumptions Benefits paid Plan Amendments Foreign currency translation At the end of the period As of December 30, 2023 $ 28.5 $ As of December 31, 2022 46.0 1.5 1.2 (0.5) 0.8 (3.1) — 0.3 $ 27.5 $ (7.0) (6.8) (3.3) (0.5) (1.1) 28.5 The weighted average active duration of the Group’s other post-employment benefit plans as of December 30, 2023 is 7.6 years (December 31, 2022: 7.5 years). 141 Expected future contributions The Group expects to make contributions of approximately $3.0 million to the other post-employment benefit plans during 2024. 26. Share-based compensation The Company operates a share-based incentive plan over its shares to provide incentives to Gates’ senior executives and other eligible employees. During the year ended December 30, 2023, we recognized a charge of $27.4 million compared to $44.3 million in the prior year. Awards issued under the 2014 Omaha Topco Ltd. Stock Incentive Plan (the “2014 Plan”) Gates has a number of share-based incentive awards issued under the 2014 Plan, which was assumed by the Company and renamed the Gates Industrial Corporation plc Stock Incentive Plan in connection with our initial public offering in January 2018. No new awards have been granted under this plan since 2017. The options are split equally into four tiers, each with specific vesting conditions. Tier I options vest evenly over 5 years from the grant date, subject to the participant continuing to provide service to Gates on the vesting date. Tier II, III and IV options vest on achievement of specified investment returns by our majority owners, who are various investment funds managed by affiliates of Blackstone Inc. (“Blackstone” or our “Sponsor”), at the time of a defined liquidity event, which is also subject to the participant’s continued provision of service to Gates on the vesting date. The performance conditions associated with Tiers II, III and IV must have been achieved on or prior to July 3, 2022 in order for vesting to occur. All the options expire ten years after the date of grant. During March 2022, a liquidity event (as defined in the related grant agreements) occurred following the sale by Blackstone of a certain portion of their interest in Gates, resulting in the vesting of the Tier II and IV options as the specified investment returns related to these options had been met. In connection with this vesting, a one-time share-based compensation charge of $16.1 million was recognized. On July 3, 2022, the performance period for the Tier III options expired and, as the specified investment returns were not achieved, all Tier III awards expired during Fiscal 2022. Due to Chinese regulatory restrictions on foreign stock ownership, awards granted under this plan to Chinese employees have been issued as stock appreciation rights (“SARs”). The terms of these SARs are identical to those of the options described above with the exception that no share is issued on exercise; instead, cash equivalent to the increase in the value of the shares from the date of grant to the date of exercise is paid to the employee. These awards are therefore treated as liability awards under IFRS 2 Share-based Payment and are revalued to their fair value at each period end. Changes in the awards granted under this plan are summarized in the tables below. Awards issued under the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan (the “2018 Plan”) In conjunction with the initial public offering in January 2018, Gates adopted the 2018 Plan, which is a market-based long-term incentive program that allows for the issue of a variety of equity-based and cash-based awards, including stock options, SARs and RSUs. The SARs issued under this plan take the form of options, except that no share is issued on exercise; instead, cash equivalent to the increase in the value of the shares from the date of grant to the date of exercise is paid to the employee. These awards are therefore treated as liability awards under IFRS 2 Share-based Payment and are revalued to their fair value at each period end. The SARs and the majority of the share options issued under this plan vest evenly over either three years or four years from the grant date. The remainder of the options and the premium-priced options vest evenly over a three year period, starting two years from the grant date. All options vest subject to the participant’s continued employment by Gates on the vesting date and expire ten years after the date of grant. 142 The RSUs issued under the plan consist of time-vesting RSUs and PRSUs. The time-vesting RSUs vest evenly over either one or three years from the date of grant, subject to the participant’s continued provision of service to Gates on the vesting date. The PRSUs issued prior to 2022 provide that 50% of the award will generally vest if Gates achieves a certain level of average annual adjusted return on invested capital as defined in the plan (“Adjusted ROIC”) and the remaining 50% of the PRSUs will generally vest if Gates achieves certain relative total shareholder return (“Relative TSR”) goals, in each case, measured over a three-year performance period and subject to the participant’s continued employment through the end of the performance period. The total number of PRSUs that vest at the end of the performance period will range from 0% to 200% of the target based on actual performance against a pre-established scale. For PRSUs issued in 2022 and 2023, the terms are identical, except that 75% of the award will generally vest based on the specified Adjusted ROIC achievement and the remaining 25% will generally vest based on Relative TSR goal attainment. New awards and movements in existing awards granted under this plan are summarized in the tables below. 143 Summary of movements in options outstanding Outstanding at the beginning of the period: Year ended December 30, 2023 Plan Number of options Weighted average exercise price $ —Tier I —Tier II —Tier IV —SARs —Share options —Premium-priced options Granted during the period: —SARs Forfeited during the period: —SARs —Share options Expired during the period: —Tier I —Tier II —Tier IV —SARs —Share options Exercised during the period: —Tier I —Tier II —Tier IV —Share options Outstanding at the end of the period: —Tier I —Tier II —Tier IV —SARs —Share options —Premium-priced options Exercisable at the end of the period Vested and expected to vest at the end of the period 2014 Plan 2014 Plan 2014 Plan Both plans 2018 Plan 2018 Plan 2018 Plan 2018 Plan 2014 Plan 2014 Plan 2014 Plan Both Plans 2018 Plan 2014 Plan 2018 Plan 2014 Plan 2014 Plan 2014 Plan Both plans 2018 Plan 2018 Plan 2,521,173 $ 2,689,551 $ 2,692,551 $ 683,087 $ 2,980,134 $ 835,469 $ 12,401,965 $ 58,800 $ 58,800 $ (1,668) $ (82,136) $ (83,804) $ (2,000) $ (2,000) $ (16,258) $ (4,998) $ (366,391) $ (391,647) $ (690,846) $ (691,534) $ (689,877) $ (186,087) $ (2,258,344) $ 1,828,327 $ 1,996,017 $ 1,986,416 $ 735,221 $ 2,345,520 $ 835,469 $ 9,726,970 $ 9,158,100 $ 9,726,766 $ 6.89 6.97 10.46 10.22 14.86 18.88 10.59 13.71 13.71 15.76 14.84 14.85 6.56 6.56 19.53 13.13 15.75 15.78 6.66 6.86 10.08 12.56 8.25 6.98 7.01 10.52 10.47 14.90 18.88 10.90 10.53 10.90 As of December 30, 2023, the aggregate intrinsic value of options that were exercisable was $33.8 million, and these options had a weighted average remaining contractual term of 3.0 years. As of December 30, 2023, the aggregate intrinsic value of options that were vested or expected to vest was $33.8 million, and these options had a weighted average remaining contractual term of 3.2 years. 144 As of December 30, 2023, the unrecognized compensation charge relating to the nonvested options was $0.4 million, which is expected to be recognized over a weighted-average period of 0.4 years. During Fiscal 2023, cash of $18.7 million was received in relation to the exercise of vested options, compared to $15.9 million during Fiscal 2022. The aggregate intrinsic value of options exercised during Fiscal 2023 was $5.2 million, compared to $1.0 million during Fiscal 2022. Summary of movements in RSUs and PRSUs outstanding Outstanding at the beginning of the period: —RSUs —PRSUs Granted during the period: —RSUs —PRSUs Forfeited during the period: —RSUs —PRSUs Vested during the period: —RSUs —PRSUs Outstanding at the end of the period: —RSUs —PRSUs Year ended December 30, 2023 Number of awards Weighted average grant date fair value $ 3,491,259 $ 1,076,560 $ 4,567,819 $ 1,367,462 $ 405,954 $ 1,773,416 $ (393,380) $ (421,809) $ (815,189) $ (1,433,111) $ (143,044) (1,576,155) $ 3,032,230 $ 917,661 $ 3,949,891 $ 13.72 16.53 14.38 13.79 15.88 14.27 14.23 16.05 15.17 13.53 14.56 13.62 13.78 16.77 14.47 As of December 30, 2023, the unrecognized compensation charge relating to nonvested RSUs and PRSUs was $22.3 million, which is expected to be recognized over a weighted average period of 1.6 years, subject, where relevant, to the achievement of the performance conditions described above. The total fair value of RSUs and PRSUs vested during Fiscal 2023 was $21.5 million, compared to $12.9 million during Fiscal 2022. 145 Valuation of awards granted during the period The grant date fair value of the options and SARs are measured using a Black-Scholes valuation model. RSUs are valued at the share price on the date of grant. The premium-priced options and PRSUs were valued using Monte Carlo simulations. As Gates only has volatility data for its shares for the period since its initial public offering, this volatility has, where necessary, been weighted with the debt-levered volatility of a peer group of public companies in order to determine the expected volatility over the expected option life. The expected option life represents the period of time for which the options are expected to be outstanding and is based on consideration of the contractual life of the option, option vesting period, and historical exercise patterns. The weighted average fair values and relevant assumptions were as follows: Weighted average grant date fair value: —SARs —RSUs —PRSUs Inputs to the model: —Expected volatility - SARs —Expected volatility - PRSUs —Expected option life for SARs (years) —Risk-free interest rate: SARs PRSUs 27. Provisions Accrued expenses and other liabilities consisted of the following: (dollars in millions) Warranty provisions Restructuring provisions (Note 5) Workers’ compensation Other provisions The above liabilities are presented in Gates’ balance sheet as follows: (dollars in millions) —Accrued expenses and other current liabilities —Other non-current liabilities For the year ended December 30, 2023 December 31, 2022 $ $ $ 6.57 13.79 15.88 $ $ $ 6.94 13.67 17.23 42.8 % 37.7 % 6.0 4.03 % 4.60 % 43.5 % 49.1 % 6.0 1.91 % 1.72 % As of December 30, 2023 $ As of December 31, 2022 17.6 7.5 8.0 6.1 39.2 15.9 $ 5.1 8.6 6.3 35.9 $ $ As of December 30, 2023 $ As of December 31, 2022 26.5 12.7 39.2 24.2 $ 11.7 35.9 $ $ 146 Warranty provisions Changes in warranty provisions (included in Trade and other payables and Other non-current liabilities) were as follows: (dollars in millions) Balance at the beginning of the period Charge for the period Utilized during the period Released during the period Foreign currency translation Balance at the end of the period For the year ended December 30, 2023 December 31, 2022 $ $ 17.6 $ 6.1 (7.7) — (0.1) 15.9 $ 18.7 10.8 (10.9) (0.3) (0.7) 17.6 An accrual is made for warranty claims on various products depending on specific market expectations and the type of product. These estimates are established using historical information on the nature, frequency and average cost of warranty claims. The majority of the warranty accruals are expected to be utilized during 2024, with the remainder estimated to be utilized within the next three years. An accrual is made for the cost of product recalls if management considers it probable that it will be necessary to recall a specific product and the amount can be reasonably estimated. Worker’s compensation (dollars in millions) Balance at the beginning of the period Charge for the period Utilized during the period Released during the period Balance at the end of the period For the year ended December 30, 2023 December 31, 2022 $ $ 8.0 $ 6.6 (3.0) (3.0) 8.6 $ 7.9 4.7 (2.7) (1.9) 8.0 The majority of the worker’s compensation provisions are currently expected to be utilized within the next five years. Other provisions consist primarily of environmental, legal and insurance provisions. Further information on our restructuring provision is presented in Note 5. 28. Commitments and contingencies A. Capital and other commitments As of December 30, 2023, we had entered into contractual commitments for the purchase of property, plant and equipment amounting to $8.7 million, compared to $12.1 million as of December 31, 2022, and for the purchase of non-integral computer software amounting to $1.8 million, compared to $6.6 million as of December 31, 2022. As of December 30, 2023, we had entered into contractual commitments for non-capital items such as raw materials and supplies amounting to $34.9 million, compared to $25.3 million as of December 31, 2022. B. Performance bonds, letters of credit and bank guarantees As of December 30, 2023, letters of credit were outstanding against the asset-backed revolving facility amounting to $29.7 million, compared to $25.8 million as of December 31, 2022. We had additional outstanding performance bonds, letters of credit and bank guarantees amounting to $8.4 million as of December 30, 2023, compared to $8.7 million as of December 31, 2022. 147 C. Contingencies The Company is, from time to time, party to general legal proceedings and claims, which arise in the ordinary course of business including those relating to environmental obligations, product liability, intellectual property, commercial and contractual disputes, employment matters and other business matters. When appropriate, management consults with legal counsel and other appropriate experts to assess claims. If, in management’s opinion, we have incurred a probable loss as set forth by IFRS, an estimate is made of the loss and the appropriate provision is reflected in our consolidated financial statements. Currently, there are no material amounts accrued. While it is not possible to quantify the financial impact or predict the outcome of all pending claims and litigation, management does not anticipate that the outcome of any current proceedings or known claims, either individually or in aggregate, will materially affect Gates’ financial position, results of operations or cash flows. 29. Share capital and reserves A. Authorized and issued, fully paid shares of Gates Industrial Corporation plc As of January 1, 2022 Issuance of shares Cancellation of repurchased shares As of December 31, 2022 Issuance of shares Cancellation of repurchased shares As of December 30, 2023 Shares capital and reserves Ordinary shares of $0.01 each Authorized number of shares Issued number of shares 3,000,000,000 291,282,137 — — 2,762,697 (11,465,917) 3,000,000,000 282,578,917 — — 3,615,505 (21,934,634) 3,000,000,000 264,259,788 Share capital represents the nominal value of the shares issued. The Company has one class of authorized and issued shares, with a par value of $0.01, and each share has equal voting rights. Share premium represents proceeds received in excess of the nominal value of shares issued, net of any share issue costs. Retained earnings represents all other net gains, losses, and transactions with owners not recognized elsewhere. Other reserves within equity includes translation and hedging reserve, and merger reserve. In order to provide useful information about the Group’s hedging arrangements, the translation reserve and hedging reserve are combined, which includes exchange differences on the translation of subsidiaries with a functional currency other than USD, cumulative fair value gains and losses and costs of hedging on derivatives that hedge the Company’s net investment in foreign subsidiaries, and cumulative fair value gains and losses and costs of hedging on derivatives for which cash flow hedge accounting has been applied. The merger reserve represents the differences on consolidation arising on the adoption of predecessor accounting. This comprises the difference between consideration paid and the book value of net assets acquired in the transaction. Shares repurchases In November 2021, the Company established a repurchase program allowing for up to $200 million in authorized share repurchases. On March 24, 2022, the Company, certain selling shareholders affiliated with Blackstone, and Citigroup Global Markets Inc. (“Citigroup”) entered into an underwriting agreement pursuant to which the selling shareholders agreed to sell to Citigroup 5,000,000 ordinary shares of the Company at a price of $15.14 per ordinary share (the “2022 Offering”). The selling shareholders also granted to Citigroup an option to purchase up to 750,000 additional ordinary shares of the Company; this option was exercised in full on March 25, 2022. The Company did not receive any proceeds from the sale of ordinary shares in the 2022 Offering, which closed on March 30, 2022. In connection with the 2022 Offering, the Company repurchased 8,000,000 ordinary shares through Citigroup from the same selling shareholders at a price of $15.14 per ordinary share for an aggregate consideration of $121.1 million (the “2022 Repurchase”), plus costs directly related to the transaction of $0.8 million. This repurchase was funded by cash on hand and a borrowing of $70.0 million under Gates’ asset-backed revolving credit facility. All shares repurchased pursuant to the 2022 Repurchase have been cancelled and the original share repurchase program expired on December 31, 2022. 148 On April 28, 2023, the Company’s Board of Directors approved another share repurchase program for up to $250 million in authorized share repurchases. On May 17, 2023, the Company, certain selling shareholders affiliated with Blackstone, and the representatives of the several underwriters entered into an underwriting agreement pursuant to which the selling shareholders agreed to sell to the underwriters 22,500,000 ordinary shares of the Company at a price of $11.3975 per ordinary share (the “May 2023 Offering”). The selling shareholders also granted the underwriters an option to purchase up to 3,375,000 additional ordinary shares of the Company; this option was exercised in full on May 18, 2023. The Company did not receive any proceeds from the sale of ordinary shares in the May 2023 Offering, which closed on May 23, 2023. In connection with the May 2023 Offering, the Company repurchased 21,934,634 ordinary shares through Citigroup from the same selling shareholders at a price of $11.3975 per ordinary share for an aggregate consideration of approximately $250.0 million (the “2023 Repurchase”), plus costs paid directly related to the transaction of $1.7 million. This repurchase was funded by cash on hand and a borrowing of $100.0 million under Gates’ asset-backed revolving credit facility. All shares repurchased pursuant to the 2023 Repurchase have been cancelled. Following the May 2023 Offering and the 2023 Repurchase, shareholders affiliated with Blackstone no longer beneficially own a majority of our outstanding ordinary shares and therefore we are no longer considered a “controlled company” within the meaning of the NYSE corporate governance standards. 30. Note to cash flow statement The table below details changes in liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the consolidated cash flow statement as cash from financing activities. (dollars in millions) As of January 1, 2022 Draw down of debt Repayment of debt Debt issuance costs paid New and modified leases Cash payments Foreign exchange movement Other changes As of December 31, 2022 Draw down of debt Repayment of debt Debt issuance costs paid New and modified leases Cash payments Interest expense accretion Foreign exchange movement Other changes As of December 30, 2023 Interest-bearing loans and borrowings Lease Liabilities Total $ 2,501.9 $ 150.2 $ 2,652.1 645.0 (676.9) (23.3) — — (55.8) 28.6 2,419.5 100.0 (119.6) (1.3) — — — — 47.9 — — — 34.9 (33.8) (4.1) 8.4 155.6 — — — 21.4 (33.7) 6.3 0.9 (0.6) 645.0 (676.9) (23.3) 34.9 (33.8) (59.9) 37.0 2,575.1 100.0 (119.6) (1.3) 21.4 (33.7) 6.3 0.9 47.3 $ 2,446.5 $ 149.9 $ 2,596.4 149 31. Related party transactions A. Entities affiliated with Blackstone In connection with the initial public offering of Gates, we entered into a Support and Services Agreement with Blackstone Management Partners L.L.C. (“BMP”) under which the Company and certain of its direct and indirect subsidiaries reimburse BMP for customary support services provided by Blackstone’s portfolio operations group to the Company at BMP’s direction. BMP will invoice the Company for such services based on the time spent by the relevant personnel providing such services during the applicable period and Blackstone’s allocated costs of such personnel. During the periods presented, no amounts were paid or were outstanding under this agreement. This agreement terminates on the date our Sponsor beneficially owns less than 5% of our ordinary shares and such shares have a fair market value of less than $25.0 million, or such earlier date as may be chosen by Blackstone. As described in Note 29, in March 2022, the Company repurchased 8,000,000 ordinary shares through Citigroup from certain shareholders affiliated with Blackstone for an aggregate consideration of $121.1 million, plus costs directly related to the transaction of $0.8 million. Additionally, in May 2023, the Company repurchased 21,934,634 ordinary shares through Citigroup from certain shareholders affiliated with Blackstone for an aggregate consideration of approximately $250.0 million, plus costs paid directly related to the transaction of $1.7 million. B. Equity method investees Sales to and purchases from equity method investees were as follows: (dollars in millions) Purchases For the year ended December 30, 2023 December 31, 2022 $ (18.4) $ (16.7) Amounts outstanding in respect of these transactions were payables of $0.2 million as of December 30, 2023, compared to $2.4 million as of December 31, 2022. No dividends were received from our equity method investees during the periods presented. C. Non-Gates entities controlled by non-controlling shareholders Sales to and purchases from non-Gates entities controlled by non-controlling shareholders were as follows: (dollars in millions) Sales Purchases Amounts outstanding in respect of these transactions were as follows: (dollars in millions) Receivables Payables For the year ended December 30, 2023 December 31, 2022 $ $ 44.1 $ (15.4) $ 59.0 (18.4) As of December 30, 2023 As of December 31, 2022 $ $ 3.2 $ (3.2) $ 4.7 (3.2) D. Remuneration of key management personnel The remuneration of the Directors of the Company and the executive officers of the Group, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24: “Related party disclosures”. Further information about the remuneration of individual Directors is provided in the audited part of the Directors’ Remuneration report. 150 Short-term employee benefits Post-employment benefits Other long-term benefits Share-based payments For the year ended December 30, 2023 December 31, 2022 $ $ $ $ $ 12.8 $ 0.3 — 15.3 28.4 $ 10.7 0.6 0.1 19.0 30.4 151 32. Subsequent events On February 7, 2024, the Company’s Board approved another share repurchase program for up to $100 million in authorized share repurchases. On February 12, 2024, the Company, certain selling shareholders affiliated with Blackstone, and the representatives of the several underwriters entered into an underwriting agreement pursuant to which the selling shareholders agreed to sell to the underwriters 17,500,000 ordinary shares of the Company at a price of $12.045 per ordinary share (the “February 2024 Offering”). The selling shareholders also granted the underwriters an option to purchase up to 2,625,000 additional ordinary shares of the Company; this option was exercised in full on February 16, 2024. The Company did not receive any proceeds from the sale of ordinary shares in the February 2024 Offering, which closed on February 16, 2024. In connection with the February 2024 Offering, the Company repurchased 4,151,100 ordinary shares through Citigroup from the same selling shareholders at a price of $12.045 per ordinary share for an aggregate consideration of approximately $50.0 million (the “2024 Repurchase”), plus costs paid directly related to the transaction of $0.3 million. This repurchase was funded by cash on hand. All shares repurchased pursuant to the 2024 Repurchase have been cancelled. During February 2024, we made a voluntary principal debt repayment of $100.0 million against our Existing Dollar Term Loans (as defined below). As a result of this repayment, we accelerated the recognition of $1.0 million of deferred issuance costs (recognized in interest expense). 152 (dollars in millions) Non-current assets Investments in subsidiaries Trade and other receivables Current assets Cash and cash equivalents Total assets Non-current liabilities Amounts due to subsidiaries Current liabilities Income tax liabilities Trade and other payables Total liabilities Net assets Capital and reserves Ordinary share capital Share premium Accumulated surplus Shareholders’ equity Gates Industrial Corporation plc Parent Company Balance Sheet Notes As of December 30, 2023 As of December 31, 2022 3 4 4 5 5 7 7 8 $ 2,637.2 $ 4,007.5 6,644.7 3.5 3.5 2,352.2 3,973.1 6,325.3 6.4 6.4 6,648.2 6,331.7 (334.0) (334.0) (23.7) (0.7) (358.4) $ 6,289.8 $ 2.6 42.5 6,244.7 $ 6,289.8 $ (121.9) (121.9) (11.1) (0.7) (133.7) 6,198.0 2.8 23.8 6,171.4 6,198.0 Gates Industrial Corporation plc reported a profit for the year ended December 30, 2023 of $297.6 million, compared to a profit of $169.2 million for the year ended December 31, 2022. The accompanying notes form an integral part of these financial statements. The financial statements of Gates Industrial Corporation plc (registered number 10980824) were approved by the board of directors and authorized for issue on May 2, 2024. They were signed on its behalf by: Ivo Jurek Director and Chief Executive Officer 153 Gates Industrial Corporation plc Parent Company Statement of Changes in Equity (dollars in millions) Balance as of January 1, 2022 Notes Share capital Share premium Accumulated surplus Total $ 2.9 $ 7.8 $ 6,133.7 $ 6,144.4 Shares issued on exercise of share options 7 Profit for the year attributable to equity shareholders Capital contribution to subsidiaries Repurchase of shares Credit to equity for share-based compensation, including tax benefit Balance as of December 31, 2022 Shares issued on exercise of share options 7 Profit for the year attributable to equity shareholders Capital contribution to subsidiaries Repurchase of shares Credit to equity for share-based compensation, including tax benefit Balance as of December 30, 2023 — — — — 2.8 — — — 16.0 — — — — 23.8 18.7 — — — — 169.2 43.3 16.0 169.2 43.3 (175.8) (175.9) 1.0 6,171.4 — 297.6 26.5 1.0 6,198.0 18.7 297.6 26.5 (251.7) (251.9) 7,8 (0.1) 7,8 (0.2) $ — 2.6 $ — 42.5 $ 0.9 6,244.7 $ 0.9 6,289.8 154 Gates Industrial Corporation plc Notes to the Parent Company Financial Statements 1. Background Gates Industrial Corporation plc (the “Parent Company”) is a public company limited by shares and is incorporated in the United Kingdom under the Companies Act 2006. It is registered in England and Wales and is listed on the New York Stock Exchange. The Parent Company was incorporated on September 25, 2017 and its registered office is 1 Bartholomew Lane, London, EC2N 2AX, United Kingdom. Its registered number is 10980824. In these financial statements and related notes, all references to the “Company”, “Gates”, “we”, “us”, “our” refer, unless the context requires otherwise, to the Parent Company and its subsidiaries. The nature of the operations and principal activities of Gates are set out in the Strategic Report accompanying these financial statements. The Parent Company’s principal activity is to act as a holding company. These financial statements are presented in U.S. dollars which is the currency of the primary economic environment in which the Parent Company operates. 2. Principal accounting policies A. Basis of presentation The Parent Company meets the definition of a qualifying entity under Financial Reporting Standard (“FRS”) 100 “Application of Financial Reporting Requirements” issued by the Financial Reporting Council. Accordingly, these financial statements were prepared in accordance with FRS 101 “Reduced Disclosure Framework”. As permitted by FRS 101, the Parent Company has taken advantage of the disclosure exemptions available under that standard in relation to share-based payment, financial instruments, capital management, presentation of comparative information in respect of certain assets and share capital, presentation of a cash flow statement, standards not yet effective, the requirements of paragraphs 91 - 99 of IFRS 13 “Fair Value Measurement”, the requirements of paragraphs 10(d), 10(f) and 134 -136 of IAS 1 “Presentation of Financial Statements”, impairment of assets and certain related party transactions, including compensation of key management personnel. Where relevant, equivalent disclosures have been given in the consolidated financial statements. The financial statements have been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for the goods and services. There were no critical accounting judgments that would have a significant effect on the amounts recognized in these financial statements or key sources of estimation uncertainty as of the balance sheet date that would have a significant risk of causing a material adjustment to the carrying amounts of assets or liabilities within the next financial year. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Parent Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement purposes in these financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of International Financial Reporting Standard 2 “Share-based payment.” As permitted by s408 of the Companies Act 2006, no separate profit and loss account or statement of comprehensive income is presented in respect of the Parent Company. The profit attributable to the Parent Company is disclosed in the footnote to the Parent Company’s balance sheet. There were no other gains or losses in the period in other comprehensive income. 155 B. Accounting periods The Parent Company prepares its annual financial statements as of the Saturday nearest December 31. Accordingly, the Parent Company balance sheet is presented as of December 30, 2023 and December 31, 2022 and the related statement of changes in equity is presented for the year ended December 30, 2023 and the year ended December 31, 2022. C. Going concern The Company’s business activities, together with factors likely to affect its future development, performance and position are set out in the Strategic Report. The Strategic Report also describes the financial position of the Company, its cash-flows, liquidity position and borrowing facilities, the Company’s objectives and policies for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its exposure to credit risk and liquidity risk. The Parent Company meets its day to day working capital requirements through access to funds from its subsidiaries. The Parent Company’s forecasts and projections, including those of its subsidiaries on a consolidated basis, show that it should be able to operate within the level of support available to it. The directors have a reasonable expectation that the Parent Company has adequate resources to continue in operational existence for the foreseeable future, and therefore continue to adopt the going concern basis of accounting in preparing these financial statements. D. Investments in subsidiaries Investments in subsidiaries represent interests in the Parent Company’s subsidiaries that are owned directly by it and are stated at cost less any provision for impairment. E. Share-based compensation Share-based compensation has been provided to certain of our employees under share option, bonus and other share award plans. All share-award plans are equity settled. We recognize compensation expense based on the fair value of the awards, measured using either the share price on the date of grant, a Black-Scholes option-pricing model or a Monte-Carlo valuation model, depending on the nature of the award. Fair value is determined at the date of grant and reflects market and performance conditions and all non-vesting conditions. Generally, the compensation expense for each separately vesting portion of the award is recognized on a straight-line basis over the vesting period for that portion of the award based on the Parent Company’s estimate of equity instruments that will eventually vest. Compensation expense is recognized for awards containing performance conditions only to the extent that it is probable that those performance conditions will be met. Fair value is not subsequently remeasured unless the conditions on which the award was granted are modified. Adjustments are made to reflect expected and actual forfeitures during the vesting period due to failure to satisfy service conditions or performance conditions. The impact of revisions to the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves. The fair value of the compensation given to employees of subsidiaries in the form of awards over the Parent Company’s equity instruments is recognized as a capital contribution to those subsidiaries over the vesting period. The capital contribution is reduced by any payments received from the subsidiaries in respect of these share-based payments. F. Income taxes The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. 156 The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realized based on tax laws and rates that have been enacted or substantively enacted by the balance sheet date. G. Financial instruments Financial assets and financial liabilities are recognized in the Parent Company’s balance sheet when it becomes a party to the contractual provisions of the instrument. Equity instruments issued by the Parent Company are recorded at the proceeds received net of direct issue costs. Financial assets Financial assets are initially recorded at fair value net of transaction costs. The Parent Company classifies its financial assets as loans and receivables, except for derivative financial instruments which are accounted for at fair value through profit or loss. Loans and receivables, which comprise trade receivables and other receivables which have fixed or determinable payments, are measured at amortized cost, using the effective interest method, less impairment. Trade and other receivables are short-term in nature and hence the recognition of interest would be immaterial. Cash and cash equivalents comprise cash on hand, demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Financial liabilities All the Parent Company’s financial liabilities are classified as other financial liabilities. Other financial liabilities are initially measured at fair value, net of transaction costs and are subsequently measured at amortized cost, using the effective interest method, with interest expense recognized on an effective yield basis, except where such liabilities are short-term in nature and the recognition of interest would be immaterial. Interest income and finance costs Interest income and expense are credited or charged to the profit and loss account, using the effective interest method, during the year in which they are earned or incurred. 3. Investments in subsidiaries (dollars in millions) Cost and net book value Balance at beginning of the period —Additions Balance at the end of the period As of December 30, 2023 As of December 31, 2022 $ $ 2,352.2 $ 285.0 2,637.2 $ 2,173.6 178.6 2,352.2 A complete list of the Parent Company’s direct and indirect subsidiaries is set out in Note 9. 157 4. Trade and other receivables (dollars in millions) Non-current assets Receivables due from subsidiaries Receivables due from subsidiaries As of December 30, 2023 As of December 31, 2022 4,007.5 $ 4,007.5 $ 3,973.1 3,973.1 The amounts owed by subsidiaries that are classified as non-current assets relate to loan notes that were issued in January 2018. Early in Fiscal 2022, these loan notes were refinanced on similar terms, with a maturity date of February 2026. The refinanced loans bear interest at LIBOR plus 3.75%, subject to a 1% LIBOR floor. 5. Trade and other payables (dollars in millions) Non-current liabilities Payables due to subsidiaries Current liabilities Accruals and other payables As of December 30, 2023 As of December 31, 2022 $ (334.0) $ (121.9) (0.7) $ (334.7) $ (0.7) (122.6) In May 2023, the Parent Company borrowed $155.0 million from two of its subsidiaries to fund the share repurchase transactions as discussed in Note 7. The loans pay interest at floating rates, subject to a 1.25% Term SOFR and 2.50% LIBOR rate for the two loans. In March 2022, the Parent Company borrowed $121.9 million from one of its subsidiaries to fund the share repurchase transaction as further discussed in Note 7. The loan bears interest at a fixed rate of 1.08% per annum and is set to be repaid as options are exercised and matures March 2027. 6. Share-based compensation The Parent Company operates stock-based incentive plans over its shares to provide incentives to Gates’ senior executives and other eligible employees. During Fiscal 2023, the total compensation cost for share-based arrangements recognized by the Parent Company was $0.9 million, compared with $1.0 million during the prior period. Awards issued under the 2014 Omaha Topco Ltd. Stock Incentive Plan (the “2014 Plan”) Gates has a number of awards issued under the 2014 Plan, which was assumed by the Parent Company and renamed the Gates Industrial Corporation plc Stock Incentive Plan in connection with our initial public offering in January 2018. No new awards have been granted under this plan since 2017. The options are split equally into four tiers, each with specific vesting conditions. The Parent Company’s non-executive directors were issued only Tier I options, which vest evenly over 5 years from the grant date, subject to the participant continuing to provide service to Gates on the vesting date. No Tier II, III or IV awards were issued to or are held by the Parent Company’s employees or directors in their capacity as directors. All the options granted under this plan expire ten years after the date of grant. 158 Details of options granted under this plan to the non-executive directors are set out in the table below. Summary of movements in options outstanding Outstanding at the beginning of the period Exercised during the period Outstanding at the end of the period Exercisable at the end of the period Vested and expected to vest at the end of the period For the year ended December 30, 2023 For the year ended December 31, 2022 Number of options Weighted average exercise price $ Number of options Weighted average exercise price $ 76,293 $ (76,293) $ — $ — $ — $ 6.56 6.56 — — — 76,293 $ — $ 76,293 $ 76,293 $ 76,293 $ 6.56 — 6.56 6.56 6.56 During Fiscal 2023, all options were exercised and the aggregate intrinsic value of the options exercised was $0.6 million. As of December 30, 2023, no options granted under this plan were outstanding. Awards issued under the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan (the “2018 Plan”) In conjunction with the initial public offering in January 2018, Gates adopted an equity-based compensation plan, which is a market- based long-term incentive program that allows for the issue of a variety of equity-based and cash-based awards, including stock options, performance awards and restricted stock units (“RSUs”). The RSUs issued under this plan to the Parent Company's non-executive directors vest one year from the date of grant, subject to the participant continuing to serve in their position through to the applicable vesting date. RSUs are valued at the share price on the date of grant. New awards and movements in existing awards granted under the 2018 Plan to the Parent Company's non-executive directors are summarized in the table below. Summary of movements in RSUs outstanding Outstanding at the beginning of the period Granted during the period Vested during the period Outstanding at the end of the period For the year ended December 30, 2023 For the period ended December 31, 2022 Number of awards Weighted average grant date fair value $ Number of awards Weighted average grant date fair value $ 51,128 $ 57,402 $ (51,218) $ 57,312 $ 14.64 14.11 14.64 14.11 56,009 $ 67,080 $ (71,961) $ 51,128 $ 15.60 14.91 15.63 14.64 As of December 30, 2023, the unrecognized compensation relating to nonvested RSUs was $0.1 million, which is expected to be recognized over a weighted average period of 0.2 years. The total fair value of RSUs vested during Fiscal 2023 was $0.7 million, compared to $1.1 million during Fiscal 2022. 7. Equity The Parent Company has one class of authorized and issued shares, with a par value of $0.01 and each share has equal voting rights but carries no right to fixed income. Total authorized share capital as of December 30, 2023 was 3,000,000,000 with a nominal value of $30,000,000. 159 In November 2021, the Parent Company established a repurchase program allowing for up to $200 million in authorized share repurchases. On March 24, 2022, the Parent Company, certain selling shareholders affiliated with Blackstone, and Citigroup Global Markets Inc. (“Citigroup”) entered into an underwriting agreement pursuant to which the selling shareholders agreed to sell to Citigroup 5,000,000 ordinary shares of the Company at a price of $15.14 per ordinary share (the “2022 Offering”). The selling shareholders also granted to Citigroup an option to purchase up to 750,000 additional ordinary shares of the Parent Company; this option was exercised in full on March 25, 2022. The Parent Company did not receive any proceeds from the sale of ordinary shares in the 2022 Offering, which closed on March 30, 2022. In connection with the 2022 Offering, the Parent Company repurchased 8,000,000 ordinary shares through Citigroup from the same selling shareholders at a price of $15.14 per ordinary share for an aggregate consideration of $121.1 million, plus costs directly related to the transaction of $0.8 million. This repurchase was funded by cash on hand and a borrowing of $70.0 million from the Parent Company’s wholly owned subsidiary. During Fiscal 2022, Gates repurchased a total of 11,465,917 ordinary shares at an aggregate cost of $174.7 million, and incurred an additional $1.2 million of costs related directly to these repurchases. All shares repurchased have been cancelled and the program expired on December 31, 2022. On April 28, 2023, the Parent Company’s Board of Directors approved another share repurchase program for up to $250 million in authorized share repurchases. On May 17, 2023, the Parent Company, certain selling shareholders affiliated with Blackstone and the representatives of the several underwriters entered into an underwriting agreement pursuant to which the selling shareholders agreed to sell to the underwriters 22,500,000 ordinary shares of the Parent Company at a price of $11.3975 per ordinary share (the “2023 Offering”). The selling shareholders also granted the underwriters an option to purchase up to 3,375,000 additional ordinary shares of the Parent Company; this option was exercised in full on May 18, 2023. The Parent Company did not receive any proceeds from the sale of ordinary shares in the 2023 Offering, which closed on May 23, 2023. In connection with the 2023 Offering, the Parent Company repurchased 21,934,634 ordinary shares through Citigroup from the same selling shareholders at a price of $11.3975 per ordinary share for an aggregate consideration of approximately $250.0 million (the “2023 Repurchase”), plus costs paid directly related to the transaction of $1.7 million. This repurchase was funded by cash on hand and a borrowing of $100.0 million under Gates’ asset-backed revolving credit facility. All shares repurchased pursuant to the 2023 Repurchase have been cancelled. Following the 2023 Offering and the 2023 Repurchase, shareholders affiliated with Blackstone no longer beneficially own a majority of our outstanding ordinary shares and therefore the Parent Company was no longer considered a “controlled company” within the meaning of the NYSE corporate governance standards. Movements in the Parent Company’s number of fully paid shares outstanding, share capital and share premium were as follows: (dollars in millions except share numbers) Balance as of January 1, 2022 Exercise of share options Vesting of restricted stock units Capital reduction Balance as of December 31, 2022 Exercise of share options Vesting of restricted stock units Shares repurchased and cancelled Balance as of December 30, 2023 Number of ordinary shares Ordinary share capital Share premium Total 291,282,137 $ 2.9 $ 7.8 $ 1,953,350 809,347 — — (11,465,917) (0.1) 282,578,917 2,258,344 1,357,161 (21,934,634) 264,259,788 $ 2.8 — — (0.2) 2.6 $ 16.0 — — 23.8 18.7 — — 42.5 $ 10.7 16.0 — (0.1) 26.6 18.7 — (0.2) 45.1 Share capital represents the nominal value of the shares issued. The Parent Company has one class of authorized and issued shares, with a par value of $0.01, and each share has equal voting rights. Share premium represents proceeds received in excess of the nominal value of shares issued, net of any share issue costs. Accumulated surplus represents all other net gains, losses, and transactions with owners not recognized elsewhere. 160 8. Other reserves (dollars in millions) Balance as of January 1, 2022 Profit for the year attributable to equity shareholders Capital contribution to subsidiaries Repurchase of shares Credit to equity for share-based compensation, including tax benefit Balance as of December 31, 2022 Profit for the year attributable to equity shareholders Capital contribution to subsidiaries Repurchase of shares Credit to equity for share-based compensation, including tax benefit Balance as of December 30, 2023 Accumulated surplus $ 6,133.7 169.2 43.3 (175.8) 1.0 6,171.4 297.6 26.5 (251.7) 0.9 $ 6,244.7 161 9. Listing of subsidiaries and associates The following entities are included in the consolidated financial statements of the Company as of December 30, 2023. There are no subsidiaries excluded from consolidation. All entities listed below are indirectly held, with the exception of Gates Industrial Holdco Limited. Name Gates Argentina S.A. Ownership Interest 100% Jurisdiction of Organization or Incorporation Argentina Gates Australia Pty, Limited 100% Australia Gates E&S Bahrain WLL 49% * Bahrain Nature of Business Registered Address Sales office and warehouse Cecilia Grierson 255, Floor 6 City of Buenos Aires Argentina, C1107CPE Wholesaler of industrial and automotive hose, belts and fittings 1-15 Hydrive Close Dandenong South Victoria 3175 Repair and sale of machinery, equipment and parts Flat 1, Street 1638, Building 2141, Block 116, Hidd, Bahrain Gates Distribution Centre N.V. 100% Belgium Distribution center Gates do Brasil lndustria e Commercio Ltda 100% Brazil Gates Fleximak Ltd 100% British Virgin Islands Atlas Hydraulics Inc. 100% Canada Manufacturer and distributor of Power Transmission and Fluid Power products Holding company Design, manufacture and supply of hydraulic tube and hose assemblies Korte Keppesstraat 21/51 9320 Erembodegem-Aalst Oost-Vlaanderen 1703, Florida Street - 11th Floor Sao Paolo Brazil 04565-909 c/o Intertrust BVI 171 Main Street Road Town Tortola VG1110 66 Wellington Street W., Suite 5300, Toronto, ON M5K 1E6 Gates Canada Inc. 100% Canada Power Transmission product manufacturing and distribution 4000-421 7th Avenue SW Calgary Alberta T2P4K9 Canada Gates Industrial Canada Ltd 100% Canada Corporate functions Gates Cayman Finance Ltd. 100% Cayman Islands Treasury Company 66 Wellington Street W., Suite 5300, Toronto, ON M5K 1E6 190 Elgin Avenue, George Town, Grand Cayman KY1-9005 Gates Auto Parts (Suzhou) Co., Ltd 100% China Power Transmission product manufacturing and distribution No. 155 Qian Ren Street, Weiting Town, Suzhou Industrial Park Suzhou, China Gates Fluid Power Technologies (Changzhou) Co., Ltd 100% China Gates Trading (Shanghai) Co., Ltd. 100% China Manufacturer and distributor of Power Transmission and Fluid Power products Corporate offices and distribution Gates Unitta Power Transmission (Shanghai) Limited 51% China Power Transmission product manufacturing #11 Kohler Road Changzhou JiangSu 213022 Room 2215 No.28 Jiafeng Road, Waigaoqiao Free Trade Zone, Shanghai Apartment A, 233 Huashen Road, China (Shanghai) Pilot Free Trade Zone Shanghai, China Gates Unitta Power Transmission (Suzhou) Limited 51% China Gates Winhere Automotive Pump Products (Yantai) Co. Ltd 60% China Corporate functions and Power Transmission product manufacturing and distribution No. 15 Hai Tang Street Suzhou Industrial Park Suzhou 215021 Manufacture of automotive water pumps and accessories 51 Jialingjiang Road Yantai ETDZ, 264006 Shandong Gates Hydraulics s.r.o 100% Czech Republic Manufacture and supply of couplings, hose and tube assemblies Gates France S.a.r.l. 100% France Sales/service center Detmarovicka 409/1 Karvina 733 01 12 Rue de la Briqueterie Zone Industrielle Louvres F-95380 Louvres 162 Name Gates S.A.S. Ownership Interest 100% Jurisdiction of Organization or Incorporation France Nature of Business Manufacture of belts Gates Service Center S.A.S. 100% France Distribution of belts and metal parts Gates GmbH 100% Germany Sales office and technical center Gates Holding GmbH 100% Germany Holding company Registered Address 12 Rue de la Briqueterie Zone Industrielle Louvres F-95380 Louvres 21 Boulevard Monge F-69330 Meyzieu Lyon Eisenbahnweg 50 D-52068 Aachen Kolumbusstrasse 54 Euskirchen NRW D-53881 Gates TPU Gmbh 100% Germany Gates Tube Fittings GmbH 100% Germany Gates India Private Limited 100% India Gates Unitta India Company Private Limited 51% India Manufacture of polyurethane belts Manufacture of hydraulic fittings Werner von Siemens Strasse 2 Pfungstadt , Germany 64319 Kolumbusstrasse 54 Euskirchen NRW D-53881 Manufacture and assembly of industrial and hydraulic hose and assembly Village Sarsani Lalru Ambala-Chandigarh Highway Lalru District Patiala (Punjab) 140501 Manufacture and distribution of Power Transmission products F-19, Sipcot Industrial Park Sriperumbudur Chennai 602105 PT Gates Industrial Indonesia 100% Indonesia Dormant company Tomkins Insurance Limited 100% Isle of Man Captive insurance company Gates S.r.l. 100% Italy Sales office Gates Japan KK 100% Japan Sales office Jl. T.B. Simatupang Kav 23-24, Alamanda Tower PT Karya Central Bisnis, M15, Floor 25, Indonesia Suite 2, 4th Floor Peveril Buildings Loch Promenade Douglas IM1 2BS Via Senigalia 18 I-20161 Milano 20-9, Akatsukashinmachi 3-chome Itabashi-ku Tokyo Gates Unitta Asia Company (aka Gates Unitta Asia Kabushikikaisha) 51% Japan Manufacture of belts, tensioners and associated products 4-26 Sakuragawa 4-chome Naniwa-ku Osaka 556-002 Gates Unitta Korea Co., Ltd. 51% Korea Sales office Gates Holding Luxembourg SARL 100% Luxembourg Holding company Gates Industrial Europe SARL 100% Luxembourg Holding company and European corporate center Gates Investments SARL 100% Luxembourg Holding company Gates Luxembourg SARL 100% Luxembourg Treasury company Gates Worldwide Holdings SARL 100% Luxembourg Holding company Gates Worldwide SARL 100% Luxembourg Holding company 1006-71, Doksan-dong Keumcheon-gu Seoul 16, Boulevard d’Avranches L-1160 Luxembourg 16, Boulevard d’Avranches L-1160 Luxembourg 16, Boulevard d’Avranches L-1160 Luxembourg 16, Boulevard d’Avranches L-1160 Luxembourg 16, Boulevard d’Avranches L-1160 Luxembourg 16, Boulevard d’Avranches L-1160 Luxembourg Gates Industrial & Automotive (Malaysia) SDN. BHD. 100% Malaysia Distribution center Level 19-1, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Wilayah Persekutuan, Kuala Lumpur, Malaysia 50490 163 Name Gates de Mexico Services, S. de R.L. de C.V. Ownership Interest 100% Jurisdiction of Organization or Incorporation Mexico Gates de Mexico, S. de R.L. de C.V. 100% Mexico Gates E&S Mexico, S.A. de C.V. 100% Mexico Industrias Atlas Hydraulics S de RL de CV 100% Mexico Lerma Hose Plant S.A. de C.V. 100% Mexico Servicios IAHS S de RL de CV 100% Mexico Nature of Business Manufacture and sale of hoses, connectors and other industrial and automotive products Marketing shared service center Registered Address Av. Vasco de Quiroga No. 3200, Piso 1. Centro Ciudad Santa Fe, Mexico, D.F. 01210 Mexico Av. Vasco de Quiroga No. 3200, Piso 1. Centro Ciudad Santa Fe, Mexico, D.F. 01210 Mexico Sale of oil & gas products and engineering services Carretera Reforma Dos Bocas KM 17+920, Circuito Tabasco Sur M2, L4, 5, 6,Tabasco, Mexico, Mexico Design, manufacture and supply of hydraulic tube and hose assemblies Paseo de Tamarindos 150-PB Bosques de las Lomas Cuajimalpa de Morelos México, D.F. 05120 Mexico Manufacture and sale of industrial hoses Blvd. Aeropuerto Miguel Aleman Nro. 164 Zona Industrial Lerma 50200 Mexico D.F. Design, manufacture and supply of hydraulic tube and hose assemblies Paseo de Tamarindos 150-PB Bosques de las Lomas Cuajimalpa de Morelos México, D.F. 05120 Mexico Gates Engineering & Services (Muscat) LLC 70% Oman Sale and maintenance of hose and accessory products Gates Business Services Europe sp. z o.o. 100% Poland Corporate functions Gates Polska Sp. z o.o. 100% Poland Manufacture of hose products Gates CIS LLC 100% Russian Federation Wholesale and distribution Gates Engineering & Services Co. Closed Joint Stock Company 75% Saudi Arabia Manufacture of tensioners and other Power Transmission products P.O. Box 68 Madinat Sultan Qaboos Postal Code 115 Muscat Sultanate of Oman ul. Fabryczna 6 52-007 Wroclaw ul. Jaworzynska 301 59-220 Legnica Kosmodamianskaya Nab., 52, Bld. 4, 6th Floor Moscow 115054 CR No. 2051043879 PO Box 4258, Al Khobar Kingdom of Saudi Arabia Gates Engineering & Services PTE Limited 100% Singapore Oil & Gas Engineering & Services 3A International Business Park #10-01/05 ICON@IBP, Tower A Gates Industrial Singapore PTE. LTD. 100% Singapore Holding company and corporate offices 3A International Business Park #10-01/05 ICON@IBP, Tower A Gates Rubber Company (S) Pte Limited Gates Unitta Asia Trading Company Pte Ltd 100% Singapore Distribution center 51% Singapore Marketing and sales support for other Gates entities 3A International Business Park #10-01/05 ICON@IBP, Tower A 3A International Business Park #10-01/05 ICON@IBP, Tower A Gates Industrial Africa (Pty) Ltd 100% South Africa Sales and distribution center Executive City, Cross St & Charmaine Ave, President Ridge, Randburg, South Africa 2194 Gates PT Spain, S.L. 100% Spain Manufacture of Power Transmission products Pol.Ind. les Malloles, s/n Balsareny Barcelona Gates (Thailand) Co., Ltd. 100% Thailand Corporate functions Gates Unitta (Thailand) Co., Ltd 51% Thailand Manufacture of industrial and automotive Power Transmission belts 164 64/86 Moo 4 Eastern Seaboard Industrial Estate (Rayong), Pluakdaeng, Rayong, 21140 64/86 Moo 4 Eastern Seaboard Industrial Estate (Rayong), Pluakdaeng, Rayong, 21140 Name Gates Endüstriyel Metal Kauçuk Sanayi ve Ticaret Anonim Şirketi Ownership Interest 100% Jurisdiction of Organization or Incorporation Turkey Gates Güç Aktarim Sistemleri Dagitim Sanayi Ve Ticaret Limited Şirketi 100% Turkey Nature of Business Manufacture of tensioners and other Power Transmission products Sales office and technical center Gates Hortum Sanayi ve Ticaret Limited Şirketi 100% Turkey Manufacture of Fluid Power products Registered Address Ege Serbest Bölgesi Zafer SB Mah. Yalçın Yolu No:21 35410 Gaziemir-İZMİR TURKEY Fatih Mahallesi Yakacik Cad. No. 38 Sancaktepe Istanbul Adiye Koyu Bilecik Yolu Uzeri Nul Koy Sokagi No: 51 Arfiye Sakarya Rapro Kauçuk ve Plastik Ürünleri İthalat Ihracat Mümessillik Pazarlama Ticaret Limited Şirketi Rapro Kimya Turizm Bilişim Sanayi ve Ticaret Anonim Şirketi 100% Turkey 100% Turkey Gates Engineering & Services FZCO 100% UAE Gates Fleximak Oilfield Services Est. 0% * UAE Sales of molded and branched hoses and other Fluid Power products Ankara Asfalti 26. Km Kuyucak Yolu Kumeevler No. 226 Kemalpasa O.S.B. Kemalpasa, Izmir Manufacture and sales of molded and branched hoses and other Fluid Power products Kemalpaþa OSB Mahallesi Kuyucak Yolu, Dýþ Kapý No:226 Kemalpaþa,Izmir, Izmir, Turkey Manufacture and support for oil & gas field equipment, and hose assembly MENA Headquarters Jebel Ali Free Zone (South) P.O. Box 61046 Dubai, Jebel Ali Free Zone Authority, UAE Oil & gas field services, and sale of hoses and related accessories Mussafah Industrial Area 20 P.O. Box 8543 Abu Dhabi, UAE Finco Omaha Ltd 100% UK Treasury company Gates (U.K.) Limited 100% UK Research, development, manufacture and sales of synchronous timing belts and assembly of hydraulic hose fitments. Gates Acquisitions Limited 100% UK Holding company Gates Auto Parts Holdings China Limited 100% UK Holding company Gates EMEA Holdings Limited 100% UK Holding company Gates Engineering & Services Global Limited 100% UK Holding company Gates Engineering & Services UK Holdings Limited 100% UK Holding company c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom Tinwald Downs Road Heathhall Dumfries DG1 1TS Scotland c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom Gates Engineering & Services UK Limited 100% UK Design, manufacture and assembly of rubber hose products for use in the oil & gas industry c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom Gates Finance Limited 100% UK Treasury company Gates Fluid Power Technologies Investments Ltd 100% UK Holding company c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom 165 Name Gates Holdings Limited Ownership Interest 100% Jurisdiction of Organization or Incorporation Nature of Business Registered Address UK Holding company Gates Industrial Holdco Limited 100% UK Holding company Gates Treasury (Brazilian Real) Limited 100% UK Treasury company Gates Treasury (Canadian Dollar) Company 100% UK Treasury company Gates Treasury (Dollar) Company 100% UK Treasury company Gates Treasury (Euro) Company 100% UK Treasury company Gates Treasury (TRY) Limited 100% UK Treasury company Gates UK Finance Limited 100% UK Treasury company Gates Worldwide Limited 100% UK Holding company Tomkins BP UK Holdings Limited (Registration Number 08241004) ‡ 100% UK Holding company Tomkins Engineering Limited 100% UK Holding company Tomkins Investments Limited 100% UK Holding company Tomkins Overseas Investments Limited 100% UK Holding company c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom c/o Intertrust UK 1 Bartholomew Lane, London, EC2N 2AX United Kingdom Gates International Holdings LLC 100% Colorado, U.S. Holding company 7700 East Arapahoe Rd, Suite 220 Centennial, CO 80112 Gates Nitta Belt Company, LLC 51% Colorado, U.S. Holding company CoLinx, LLC ** † 20% Delaware, U.S. Provider of e-commerce and logistics services Gates Administration Corp. 100% Delaware, U.S. Corporate functions 7700 East Arapahoe Rd Suite 220 Centennial, CO 80112 1209 Orange Street Corporation Trust Center Wilmington, DE 19801 1209 Orange Street Corporation Trust Center Wilmington, DE 19801 166 Name Gates Corporation Ownership Interest 100% Jurisdiction of Organization or Incorporation Nature of Business Registered Address Delaware, U.S. Corporate offices, and research, development, manufacture, distribution and sale of Power Transmission and Fluid Power products 1209 Orange Street Corporation Trust Center Wilmington, DE 19801 Gates E&S North America, Inc. 100% Delaware, U.S. Sale of Fluid Power products Gates Global LLC 100% Delaware, U.S. Holding company Gates Holdings 1 LLC 100% Delaware, U.S. Treasury company Gates Investments, LLC 100% Delaware, U.S. Treasury company Gates TPU, Inc. 100% Delaware, U.S. Manufacture and sale of thermoplastic polyurethane belt products Gates Winhere, LLC 60% Delaware, U.S. Manufacture and sale of water pumps Omaha Acquisition Inc. 100% Delaware, U.S. Holding company Omaha Holdings LLC 100% Delaware, U.S. Holding company Philips Holding Corporation 100% Delaware, U.S. Holding company Tomkins BP US Holding Corp. 100% Delaware, U.S. Holding company 1209 Orange Street Corporation Trust Center Wilmington, DE 19801 1209 Orange Street Corporation Trust Center Wilmington, DE 19801 1209 Orange Street Corporation Trust Center Wilmington, DE 19801 1209 Orange Street Corporation Trust Center Wilmington, DE 19801 1209 Orange Street Corporation Trust Center Wilmington, DE 19801 1209 Orange Street Corporation Trust Center Wilmington, DE 19801 1209 Orange Street Corporation Trust Center Wilmington, DE 19801 1209 Orange Street Corporation Trust Center Wilmington, DE 19801 1209 Orange Street Corporation Trust Center Wilmington, DE 19801 1209 Orange Street Corporation Trust Center Wilmington, DE 19801 Atlas Hydraulics LLC 100% Delaware, U.S. Design, manufacture and supply of hydraulic tube and hose assemblies 1209 Orange Street Corporation Trust Center Wilmington, DE 19801 * These entities are subsidiary undertakings and are consolidated by the Company on the basis that it has the right to exercise a dominant influence over the undertaking by virtue of a control contract whereby it has exercises control over it ** Associate. † CoLinx, LLC owns 100% of CoLinx Holding Company, a corporation registered in Delaware, U.S., which in turn owns 100% of CoLinx Canada Unlimited Liability Company, a company registered in Canada. ‡ These are dormant U.K. companies whose financial statements are not required to be audited 10. Subsequent events On February 7, 2024, the Board approved another share repurchase program for up to $100 million in authorized share repurchases. On February 12, 2024, the Parent Company, certain selling shareholders affiliated with Blackstone, and the representatives of the several underwriters entered into an underwriting agreement pursuant to which the selling shareholders agreed to sell to the underwriters 17,500,000 ordinary shares of the Parent Company at a price of $12.045 per ordinary share (the “February 2024 Offering”). The selling shareholders also granted the underwriters an option to purchase up to 2,625,000 additional ordinary shares of the Parent Company; this option was exercised in full on February 16, 2024. The Parent Company did not receive any proceeds from the sale of ordinary shares in the February 2024 Offering, which closed on February 16, 2024. In connection with the February 2024 Offering, the Parent Company repurchased 4,151,100 ordinary shares through Citigroup from the same selling shareholders at a price of $12.045 per ordinary share for an aggregate consideration of approximately $50.0 million (the “2024 Repurchase”), plus costs paid directly related to the transaction of $0.3 million. This repurchase was funded by cash on hand. All shares repurchased pursuant to the 2024 Repurchase have been cancelled. 167 

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