SCHEDULE 14A INFORMATION

                Proxy Statement Pursuant to Section 14(a) of the
                        Securities Exchange Act of 1934
                                (Amendment No. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [  ]

Check the appropriate box:

[ ]     Preliminary Proxy Statement
[ ]     Confidential, for Use of the Commission Only (as permitted by
        Rule 14a-6(e)(2))
[X]     Definitive Proxy Statement
[ ]     Definitive Additional Materials
[ ]     Soliciting Material Pursuant to (s)240.14a-12

                     Penn Engineering & Manufacturing Corp.
--------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)


--------------------------------------------------------------------------------
     (Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X]     No fee required.
[ ]     Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

        1)     Title of each class of securities to which transaction applies:

               -------------------------------------------------------
        2)     Aggregate number of securities to which transaction applies:

               -------------------------------------------------------
        3)     Per unit price or other underlying value of transaction computed
               pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
               the filing fee is calculated and state how it was determined):

               -------------------------------------------------------
        4)     Proposed maximum aggregate value of transaction:

               -------------------------------------------------------
        5)     Total fee paid:

               -------------------------------------------------------

[ ]     Fee paid previously with preliminary materials.

[ ]     Check box if any part of the fee is offset as provided by the Exchange
        Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
        was paid previously. Identify the previous filing by registration
        statement number, or the Form or Schedule and the date of its filing.

        1)     Amount Previously Paid:

               -------------------------------------------------------
        2)     Form, Schedule or Registration Statement No.:

               -------------------------------------------------------
        3)     Filing Party:

               -------------------------------------------------------
        4)     Date Filed:

               -------------------------------------------------------

<PAGE>



                     PENN ENGINEERING & MANUFACTURING CORP.

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                     TO BE HELD ON THURSDAY, APRIL 26, 2001

TO THE STOCKHOLDERS OF PENN ENGINEERING & MANUFACTURING CORP.:

     The Annual Meeting of Stockholders of Penn Engineering & Manufacturing
Corp. (hereinafter called the "Company") will be held on Thursday, April 26,
2001, at 2:00 p.m., local time, at the offices of the Company, Building 3, 5190
Old Easton Road, Danboro, Pennsylvania 18916, for the following purposes:

          1. To elect three Class A Directors of the Company to hold office
     until the Annual Meeting of Stockholders to be held in 2004 and until their
     successors are duly elected;

          2. To consider and vote upon a proposal to elect Ernst & Young LLP as
     auditors for the Company for its 2001 fiscal year;

          3. To consider and vote upon a proposal to amend the Company's
     Certificate of Incorporation to increase the number of authorized shares of
     Common Stock from 20,000,000 shares to 50,000,000 shares and the number of
     authorized shares of Class A Common Stock from 3,000,000 shares to
     10,000,000 shares; and

          4. To transact such other business as may properly come before the
     Annual Meeting and any adjournment, postponement, or continuation thereof.

     The Board of Directors has fixed the close of business on March 9, 2001 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting.

     A copy of the Company's Annual Report for the year ended December 31, 2000
is being mailed to the stockholders together with this Notice.

     If you do not expect to attend the Annual Meeting in person, please fill
in, sign, date, and return the enclosed form of proxy in the enclosed envelope
to First Union National Bank.

                                            By Order of the Board of Directors,


                                            Kenneth A. Swanstrom
                                            Chairman of the Board
Date:  March 26, 2001


<PAGE>


                     PENN ENGINEERING & MANUFACTURING CORP.

                           ---------------------------

                                 PROXY STATEMENT

                           ---------------------------


     This Proxy Statement and the form of proxy enclosed herewith, which are
first being mailed to stockholders on or about March 26, 2001, are furnished in
connection with the solicitation by the Board of Directors of Penn Engineering &
Manufacturing Corp. (the "Company") of proxies to be voted at the Annual Meeting
of Stockholders (the "Annual Meeting") to be held on Thursday, April 26, 2001,
at 2:00 p.m., local time, and at any adjournment, postponement, or continuation
thereof, at the offices of the Company, Building 3, 5190 Old Easton Road,
Danboro, Pennsylvania 18916. The Company's principal executive offices are
located at 5190 Old Easton Road, Danboro, Pennsylvania 18916.

     Shares represented by proxies in the accompanying form, if properly signed
and returned, will be voted in accordance with the specifications made thereon
by the stockholders. Any proxy not specifying to the contrary will be voted for
the election of the nominees for Class A Director named below, in favor of the
election of Ernst & Young LLP as auditors of the Company for its 2001 fiscal
year, and in favor of the proposal to amend the Company's Certificate of
Incorporation (the "Amendment") to increase the number of authorized shares of
Common Stock from 20,000,000 shares to 50,000,000 shares and the number of
authorized shares of Class A Common Stock from 3,000,000 shares to 10,000,000
shares. A stockholder who signs and returns a proxy in the accompanying form may
revoke it at any time before it is voted by giving written notice of revocation
or a duly executed proxy bearing a later date to the Secretary of the Company or
by attending the Annual Meeting and voting in person.

     The cost of solicitation of proxies in the accompanying form will be borne
by the Company, including expenses in connection with preparing and mailing this
Proxy Statement. Such solicitation will be made by mail and may also be made on
behalf of the Company by the Company's regular officers and employees, none of
whom will receive special compensation for such services. The Company, upon
request therefor, will reimburse brokers, nominees, fiduciaries, and custodians,
and persons holding shares in their names or in the names of nominees for their
reasonable expenses in sending proxies and proxy material to beneficial owners.

     The Company has two classes of common stock: Common Stock, par value $.01
per share ("Common Stock"), and Class A Common Stock, par value $.01 per share
("Class A Common Stock"). Holders of record of both classes of common stock at
the close of business on March 9, 2001 will be entitled to notice of the Annual
Meeting, but only holders of Class A Common Stock of record at the close of
business on March 9, 2001 will be entitled to vote at the Annual Meeting. As of
March 9, 2001, the Company had outstanding 1,675,082 shares of Class A Common
Stock, each of which is entitled to one vote. Cumulative voting rights do not
exist with respect to the election of directors. The holders of Common Stock
will have no voting rights at the Annual Meeting. For purposes of the Annual
Meeting, a quorum means a majority of the outstanding shares of Class A Common
Stock represented in person or by proxy at the Annual Meeting.

     As of March 9, 2001, certain stockholders, listed in the table herein under
"Beneficial Ownership of Common Stock and Class A Common Stock," beneficially
owned in the aggregate 893,620 shares, or approximately 53.3%, of the Company's
outstanding Class A Common Stock. Such stockholders have advised the Company
that they will vote their shares for the election of Martin Bidart, Maurice D.
Oaks, and Charles R. Smith as Class A Directors, for the election of Ernst &
Young LLP as the Company's auditors for its 2001 fiscal year, and for the
Amendment. Accordingly, Messrs. Bidart, Oaks, and Smith will be elected as Class
A Directors, Ernst & Young LLP will be elected as auditors for the Company for
its 2001 fiscal year, and the Amendment will be adopted, regardless of the votes
of the Company's stockholders other than those listed in such table.

<PAGE>

                    BENEFICIAL OWNERSHIP OF COMMON STOCK AND
                              CLASS A COMMON STOCK

     The following table sets forth, as of March 9, 2001, the amount and
percentage of the Company's outstanding Common Stock and Class A Common Stock
beneficially owned by (i) each person who is known by the Company to own
beneficially more than 5% of its outstanding Common Stock or Class A Common
Stock, (ii) each director and nominee for director, (iii) each executive officer
named in the Summary Compensation Table, and (iv) all executive officers and
directors of the Company as a group.

<TABLE>
<CAPTION>


                                                                                    NUMBER OF
                                                                  TITLE OF            SHARES        PERCENT
                                                                  CLASS OF         BENEFICIALLY       OF
NAME OF INDIVIDUAL OR IDENTITY OF GROUP                         CAPITAL STOCK        OWNED(1)        CLASS
---------------------------------------                         -------------      ------------     -------
<S>                                                            <C>                 <C>               <C>

5% HOLDERS:

Kenneth A. Swanstrom
P.O. Box 1000
Danboro, PA 18916

  Individually (2)                                             Common                569,323          8.2%
                                                               Class A Common        243,941         14.6%

  Trust under the Will of Gladys Swanstrom (2)                 Common                 91,425          1.3%
                                                               Class A Common         62,975          3.8%

  Trusts under the Will of Klas A. Swanstrom (3)               Common                197,916          2.9%
                                                               Class A Common         98,472          5.9%
Daryl L. Swanstrom
P.O. Box 2309
Peachtree City, GA 30269

  Individually (4)                                             Common                 93,918          1.4%
                                                               Class A Common        297,875         17.8%

  Trust under Item Fourth of the Will of                       Common                 52,720             *
    Lawrence W. Swanstrom (5)                                  Class A Common         54,240          3.2%

  Trust under Item Fifth of the Will of                        Common                216,649          3.1%
    Lawrence W. Swanstrom (5)                                  Class A Common         23,367          1.4%


Thomas M. Hyndman, Jr. (6)
c/o Duane Morris
4200 One Liberty Place
Philadelphia, PA 19103-7396

  Individually                                                 Common                  3,985             *
                                                               Class A Common            570             *

  Trust under the Will of Gladys Swanstrom (3)                 Common                 91,425          1.3%
                                                               Class A Common         62,975          3.8%

  Trusts under the Will of Klas A. Swanstrom (3)               Common                197,916          2.9%
                                                               Class A Common         98,472          5.9%

  Trust under Item Fourth of the Will of                       Common                 52,720          1.0%
    Lawrence W. Swanstrom (5)                                  Class A Common         54,240          3.2%


  Trust under Item Fifth of the Will of                        Common                216,649          3.1%
    Lawrence W. Swanstrom (5)                                  Class A Common         23,367          1.4%


  Trust under Deed of Klas A. Swanstrom dated 1/12/73 (7)      Common                 95,750          1.4%
                                                               Class A Common         57,750          3.4%

                                       2

<PAGE>


                                                                                    NUMBER OF
                                                                  TITLE OF            SHARES        PERCENT
                                                                  CLASS OF         BENEFICIALLY       OF
NAME OF INDIVIDUAL OR IDENTITY OF GROUP                         CAPITAL STOCK        OWNED(1)        CLASS
---------------------------------------                         -------------      ------------     -------

PNC Bank, National Association (8)
398 North Main Street
Doylestown, PA 18901

  Trusts under the Will of Klas A. Swanstrom (3)               Common                197,916          2.9%
                                                               Class A Common         98,472          5.9%

  Trust under Deed of Klas A. Swanstrom dated 1/12/73 (7)      Common                 95,750          1.4%
                                                               Class A Common         57,750          3.4%

  Trust under Deed of Klas A. Swanstrom dated 9/26/66 (8)      Common                 61,250            *
                                                               Class A Common         38,500          2.3%

  Trust under Deed of Gladys Swanstrom dated 9/26/66 (8)       Common                 26,250            *
                                                               Class A Common         16,500          1.0%

Bank of America Corporation (9)
110 North Tryon Street
Charlotte, NC 28255

  Trust under Item Fourth of the Will of                       Common                 52,720            *
    Lawrence W. Swanstrom (5)                                  Class A Common         54,240          3.2%

  Trust under Item Fifth of the Will of                        Common                216,649          3.1%
    Lawrence W. Swanstrom (5)                                  Class A Common         23,367          1.4%

Royce & Associates, Inc. (10)                                  Common                548,950          7.9%
1414 Avenue of the Americas                                    Class A Common        180,850         10.8%
New York, NY 10019

Private Capital Management, Inc. (10)                          Common              1,486,855         21.4%
3003 Tamiami Trail North                                       Class A Common             --           --
3rd Floor
Naples, FL 34109

T. Rowe Price Associates, Inc. (10)                            Common                100,000          1.4%
100 East Pratt Street                                          Class A Common         89,100          5.3%
Baltimore, MD 21202

DIRECTORS (11):

Martin Bidart (12)                                             Common                 26,623            *
                                                               Class A Common            100            *

Willard S. Boothby, Jr. (13)                                   Common                  3,075            *
                                                               Class A Common            400            *

Lewis W. Hull (14)                                             Common                  8,875            *
                                                               Class A Common          2,000            *

Maurice D. Oaks (13)                                           Common                  2,375            *
                                                               Class A Common             --           --

Mark W. Simon (15)                                             Common                 27,465            *
                                                               Class A Common            100            *

Charles R. Smith (13)                                          Common                  1,875            *
                                                               Class A Common             --           --

                                       3

<PAGE>

                                                                                    NUMBER OF
                                                                  TITLE OF            SHARES        PERCENT
                                                                  CLASS OF         BENEFICIALLY       OF
NAME OF INDIVIDUAL OR IDENTITY OF GROUP                         CAPITAL STOCK        OWNED(1)        CLASS
---------------------------------------                         -------------      ------------     -------

EXECUTIVE OFFICERS (16):

Raymond L. Bievenour (17)                                      Common                 26,398            *
                                                               Class A Common            100            *

Francis P. Wilson (18)                                         Common                 16,446            *
                                                               Class A Common             --           --

All Executive Officers and Directors as a Group                Common              1,589,648         22.3%
(15 persons) (19)                                              Class A Common        897,240         53.6%

--------------
* Less than 1%.

</TABLE>

(1)  Under the rules of the Securities and Exchange Commission (the
     "Commission"), a person is deemed to be the beneficial owner of securities
     if such person has, or shares, "voting power" which includes the power to
     vote, or to direct the voting of, such securities or "investment power"
     which includes the power to dispose, or to direct the disposition, of such
     securities. Under these rules, more than one person may be deemed the
     beneficial owner of the same securities. The information set forth in the
     above table includes all shares of Common Stock and Class A Common Stock of
     the Company over which the above-named persons individually or together
     share voting power or investment power.

(2)  Under the rules of the Commission, the maximum beneficial ownership of the
     Company's outstanding Class A Common Stock which Kenneth A. Swanstrom could
     be deemed to have is 24.2%. Of these shares, Mr. Swanstrom has sole voting
     and dispositive power with respect to 569,323 shares of Common Stock and
     243,941 shares of Class A Common Stock, of which totals 11,301 shares of
     Common Stock and 3,767 shares of Class A Common Stock are owned by Mr.
     Swanstrom's wife. Mr. Swanstrom disclaims beneficial ownership of the
     shares owned by his wife. Mr. Swanstrom has shared voting and dispositive
     power with respect to 91,425 shares of Common Stock and 62,975 shares of
     Class A Common Stock held by the Trust under the Will of Gladys Swanstrom
     and 197,916 shares of Common Stock and 98,472 shares of Class A Common
     Stock held by the Trusts under the Will of Klas A. Swanstrom. This total
     also includes currently exercisable stock options to purchase 37,500 shares
     of Common Stock.

(3)  The Trustees are Kenneth A. Swanstrom and Thomas M. Hyndman, Jr. PNC Bank,
     National Association ("PNC") is a co-trustee of these trusts, except for
     the Trust under the Will of Gladys Swanstrom.

(4)  Under the rules of the Commission, the maximum beneficial ownership of the
     Company's outstanding Class A Common Stock which Daryl L. Swanstrom could
     be deemed to have is 22.4%. Of this total, Mrs. Swanstrom has sole voting
     and dispositive power with respect to 93,918 shares of Common Stock and
     297,875 shares of Class A Common Stock and shared voting and dispositive
     power with respect to 52,720 shares of Common Stock and 54,240 shares of
     Class A Common Stock held by the Trust under Item Fourth of the Will of
     Lawrence W. Swanstrom and 216,649 shares of Common Stock and 23,367 shares
     of Class A Common Stock held by the Trust under Item Fifth of the Will of
     Lawrence W. Swanstrom. Pursuant to an agreement between Mrs. Swanstrom and
     the Company, which expires December 31, 2006, Mrs. Swanstrom has agreed not
     to sell or otherwise transfer or dispose of any shares of the Company's
     Class A Common Stock owned by her or that she may acquire without first
     offering to sell such shares to the Company. The purchase price upon
     exercise of the Company's option to purchase such shares is the higher of
     the market price of such shares on the day prior to the day such shares are
     offered to the Company or the price offered by a third party for such
     shares. These shares include currently exercisable stock options to
     purchase 1,875 shares of Common Stock.

(5)  The Trustees are Daryl L. Swanstrom, Thomas M. Hyndman, Jr., and Bank of
     America Corporation.

(6)  Under the rules of the Commission, the maximum beneficial ownership of the
     Company's outstanding Class A Common Stock which Thomas M. Hyndman, Jr.
     could be deemed to have is 17.8%. Of these shares, Mr. Hyndman has sole
     voting and dispositive power with respect to 2,110 shares of Common Stock
     and 570 shares of Class A Common Stock, of which totals 400 shares of
     Common Stock are owned by Mr. Hyndman's wife. Mr. Hyndman disclaims
     beneficial ownership of the shares owned by his wife. Mr. Hyndman has
     shared voting and dispositive power with respect to the 52,720 shares of
     Common Stock and 54,240 shares of Class A Common Stock held by

                                       4
<PAGE>

     the Trust under Item Fourth of the Will of Lawrence W. Swanstrom, 216,649
     shares of Common Stock and 23,367 shares of Class A Common Stock held by
     the Trust under Item Fifth of the Will of Lawrence W. Swanstrom, 91,425
     shares of Common Stock and 62,975 shares of Class A Common Stock held by
     the Trust under the Will of Gladys Swanstrom, 95,750 shares of Common Stock
     and 57,750 shares of Class A Common Stock held by the Trust under the Deed
     of Klas A. Swanstrom dated 1/12/73, and 197,916 shares of Common Stock and
     98,472 shares of Class A Common Stock held by the Trusts under the Will of
     Klas A. Swanstrom. These shares include currently exercisable stock options
     to purchase 1,875 shares of Common Stock.

(7)  The Trustees are Thomas M. Hyndman, Jr., and PNC.

(8)  Under the rules of the Commission, the maximum beneficial ownership of the
     Company's outstanding Class A Common Stock which PNC could be deemed to
     have is 12.6%. Of these shares, 197,916 shares of Common Stock, and 98,472
     shares of Class A Common Stock are held by the Trusts under the Will of
     Klas A. Swanstrom, 95,750 shares of Common Stock and 57,750 shares of Class
     A Common Stock are held by the Trust under the Deed of Klas A. Swanstrom
     dated 1/12/73, 61,250 shares of Common Stock and 38,500 shares of Class A
     Common Stock are held by the Trust under Deed of Klas A. Swanstrom dated
     9/26/66, 26,250 shares of Common Stock and 16,500 shares of Class A Common
     Stock are held by the Trust under Deed of Gladys Swanstrom dated 9/26/66,
     with voting power shared with Stephen D. Teaford.

(9)  Under the rules of the Commission, the maximum beneficial ownership of the
     Company's outstanding Class A Common Stock which Bank of America
     Corporation could be deemed to have is 4.6%. Of these shares, Bank of
     America Corporation has shared voting and dispositive power with respect to
     the 52,720 shares of Common Stock and 54,240 shares of Class A Common Stock
     held by the Trust under Item Fourth of the Will of Lawrence W. Swanstrom
     and 216,649 shares of Common Stock and 23,367 shares of Class A Common
     Stock held by the Trust under Item Fifth of the Will of Lawrence W.
     Swanstrom.

(10) As reported by these persons as of December 31, 2000 in a filing made with
     the Commission.

(11) Excludes directors listed under "5% Holders."

(12) Of these shares, 400 shares of Common Stock and 100 shares of Class A
     Common Stock are owned by Mr. Bidart's wife. Mr. Bidart disclaims
     beneficial ownership of the 400 shares of Common Stock and the 100 shares
     of Class A Common Stock owned by his wife. These shares include currently
     exercisable stock options to purchase 25,000 shares of Common Stock.

(13) These shares include currently exercisable stock options to purchase 625
     shares of Common Stock.

(14) Of these shares, 3,000 shares of Common Stock and 1,000 shares of Class A
     Common Stock are owned by Mr. Hull's wife. Mr. Hull disclaims beneficial
     ownership of the shares owned by his wife. These shares include currently
     exercisable stock options to purchase 1,875 shares of Common Stock.

(15) Of these shares, 120 shares of Common Stock are owned by Mr. Simon's
     daughter. Mr. Simon disclaims beneficial ownership of the shares owned by
     his daughter. These shares include currently exercisable stock options to
     purchase 25,000 shares of Common Stock.

(16) Excludes executive officers listed under "5% Holders" and executive
     officers listed under "Directors."

(17) These shares include currently exercisable stock options to purchase 25,000
     shares of Common Stock.

(18) These shares include currently exercisable stock options to purchase 15,000
     shares of Common Stock.

(19) These shares include currently exercisable stock options to purchase an
     aggregate of 203,750 shares of Common Stock.

                                       5

<PAGE>

                              ELECTION OF DIRECTORS

     At the Annual Meeting, three Class A Directors will be elected to serve
until the 2004 Annual Meeting of Stockholders and the election of their
successors. The Class B Directors and the Class C Directors will continue in
office for the remainder of their respective terms shown below. Under the
Company's By-laws, the number of directors constituting the entire Board of
Directors is determined by the Board of Directors, but such number may not be
less than three nor more than twelve. The Board of Directors has currently fixed
the number of members of the Board of Directors at nine.

     Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the election of the three nominees for Class A Director
listed below, each of whom is currently a director of the Company. If any
nominee becomes unavailable for any reason, it is intended that votes will be
cast for a substitute nominee designated by the Board of Directors. The Board of
Directors believes that the nominees named will be able to serve if elected. Any
vacancy on the Board of Directors for any reason may be filled by the
affirmative vote of 80% of the directors then in office. The three nominees for
Class A Director receiving the highest number of votes cast at the Annual
Meeting will be elected. Shares held by brokers or nominees as to which the
broker or nominee does not have discretionary voting power, i.e., broker
non-votes, will be treated as not present and not entitled to vote with respect
to the election of directors. Abstentions and broker non-votes on the election
of the directors will have no effect since they will not represent votes cast at
the Annual Meeting for the purpose of electing directors.

     Certain information with respect to each nominee for Class A Director, and
each Class B Director and Class C Director continuing in office following the
Annual Meeting, is as follows:

<TABLE>
<CAPTION>

                                           NOMINEES FOR CLASS A DIRECTOR

                                                 PRINCIPAL OCCUPATION         DIRECTOR
NAME                                   AGE        FOR PAST FIVE YEARS           SINCE         TERM EXPIRES
----                                   ---       --------------------         --------        ------------
<S>                                    <C>  <C>                                 <C>               <C>
Martin Bidart.......................   64   President and Chief Operating       1998              2004*
                                              Officer of the Company since
                                              August 1998; Vice President -
                                              Manufacturing of the Company
                                              from August 1990 to July 1998

Maurice D. Oaks (1) (2).............   67   Retired, Former Vice President      1994              2004*
                                              of Worldwide Operations Planning
                                              of Bristol-Myers Squibb
Charles R. Smith (2) (3)............   56   Professor and Chairman of           1997              2004*
                                              the Mechanical Engineering
                                              Department of Lehigh
                                              University

-------------------
* If elected at the Annual Meeting


                                           DIRECTORS CONTINUING IN OFFICE

                                                 PRINCIPAL OCCUPATION         DIRECTOR
NAME                                   AGE        FOR PAST FIVE YEARS           SINCE         TERM EXPIRES
----                                   ---       --------------------         --------        ------------

CLASS B DIRECTORS

Kenneth A. Swanstrom................   61   Chairman of the Board and           1970              2002
                                              Chief Executive Officer of
                                              the Company

Lewis W. Hull (1) (4)...............   84   Chairman, Hull Corporation,         1974              2002
                                              manufacturer of injection
                                              molding equipment

                                       6

<PAGE>


                                                 PRINCIPAL OCCUPATION         DIRECTOR
NAME                                   AGE        FOR PAST FIVE YEARS           SINCE         TERM EXPIRES
----                                   ---       --------------------         --------        ------------

Mark W. Simon.......................   62   Senior Vice President,              1983              2002
                                              Chief Financial Officer, and
                                              Corporate Secretary of the
                                              Company

CLASS C DIRECTORS

Willard S. Boothby, Jr. (2) (3) (5).   79   Retired, Former Managing            1984              2003
                                              Director, PaineWebber
                                              Incorporated, brokerage
                                              services

Thomas M. Hyndman, Jr. (1)..........   76   Of Counsel, Duane Morris,           1974              2003
                                              Attorneys and Counsel to the
                                              Company

Daryl L. Swanstrom (3) (6)..........   54   President, Spyraflo, Inc.,          1987              2003
                                              manufacturer of miniature
                                              self-aligning sleeve
                                              bearings and linear slides
</TABLE>

-------------------
(1)  Member of the Audit Committee. The Audit Committee is appointed annually by
     the Board of Directors to recommend the selection of independent auditors,
     review the scope and results of the audit, review the adequacy of the
     Company's accounting, financial, and operating controls, and supervise
     investigations. During 2000, the Audit Committee held three meetings. See
     "Report of the Audit Committee."

(2)  Member of the Compensation Committee. The Compensation Committee is
     appointed annually by the Board of Directors to recommend to the Board of
     Directors remuneration for senior management, adoption of compensation
     plans in which officers are eligible to participate, and related matters.
     The Compensation Committee also administers the Company's 1996 Equity
     Incentive Plan, the Company's 1996 Employee Stock Purchase Plan, the
     Company's 1998 Stock Option Plan for Non-Employee Directors, and the
     Company's 1999 Employee Stock Option Plan. During 2000, the Compensation
     Committee held ten meetings.

(3)  Member of the Nominating Committee. The Nominating Committee is appointed
     annually by the Board of Directors to recommend to the Board of Directors
     nominees for election as directors of the Company. During 2000, the
     Nominating Committee held two meetings.

(4)  Mr. Hull is also a director of Willow Grove Bank.

(5)  Mr. Boothby is also a director of The Glenmede Fund, Inc.

(6)  Mrs. Swanstrom is the widow of Kenneth A. Swanstrom's brother, Lawrence W.
     Swanstrom.

     During 2000, the Company's Board of Directors held ten meetings. None of
the directors attended fewer than 75% of the aggregate of the total number of
meetings of the Board of Directors plus the total number of meetings of all
committees of the Board of Directors on which such director served during 2000.

                                       7

<PAGE>

                             EXECUTIVE COMPENSATION

     The following table sets forth certain information with respect to
compensation paid or accrued by the Company in each of the last three years to
the Company's Chief Executive Officer and the four other most highly compensated
executive officers.

<TABLE>
<CAPTION>

                                              SUMMARY COMPENSATION TABLE
                                                                                   LONG-TERM
                                                                                 COMPENSATION
                                                                                 ------------
                                                                                    AWARDS
                                                                                  ----------
                                                       ANNUAL COMPENSATION        SECURITIES
                                                       -------------------        UNDERLYING        ALL OTHER
NAME AND PRINCIPAL POSITION                         YEAR     SALARY       BONUS     OPTIONS      COMPENSATION (1)
---------------------------                         ----     ------       -----   ----------     ---------------

<S>                                                 <C>     <C>         <C>          <C>             <C>
Kenneth A. Swanstrom, Chairman and                  2000    $409,813    $251,728     20,000          $19,000
  Chief Executive Officer.......................... 1999     395,000     176,150     15,000           18,925
                                                    1998     321,000     150,518     15,000           18,425

Martin Bidart, President and                        2000     269,750     128,873     17,500           19,000
  Chief Operating Officer.......................... 1999     260,000      90,181     10,000           18,225
                                                    1998     175,792      64,112     10,000           16,500

Mark W. Simon, Senior Vice President,               2000     217,675     104,090     15,000           19,000
  Chief Financial Officer, and Corporate Secretary. 1999     210,000      72,839     10,000           18,925
                                                    1998     191,500      69,841     10,000           18,425

Raymond L. Bievenour, Vice President -              2000     188,625      77,324     10,000           17,000
  Corporate Business Development................... 1999     182,000      54,109     10,000           16,000
                                                    1998     161,375      50,446     10,000           16,000

Francis P. Wilson, Vice President and               2000     184,675      75,624     10,000           17,000
  President - PEM Fastening Systems................ 1999     178,000      52,919     10,000           16,000
                                                    1998     153,667      48,037     10,000           16,000
</TABLE>

-------------------
(1)  Includes Company contributions for 2000 of $17,000 to the Company's
     Profit-Sharing Plan for each named executive officer. The amounts set forth
     were expended during the Company's 2000 fiscal year for financial reporting
     purposes under the Company's Profit-Sharing Plan, which covers
     substantially all of its United States eligible employees, including
     officers, whose length of employment qualified them to participate. The
     Company's contribution to the Profit-Sharing Plan for each year is
     allocated among the participants in proportion to their compensation for
     that year. Also included in these amounts are directors fees of $2,000 paid
     to each of Mr. Swanstrom, Mr. Bidart, and Mr. Simon for Board of Directors'
     meetings attended during 2000.

     The following table sets forth information with respect to options granted
to the persons named in the Summary Compensation Table above during the fiscal
year ended December 31, 2000.

<TABLE>
<CAPTION>


                                                  OPTION GRANTS IN LAST FISCAL YEAR

                                                                       INDIVIDUAL GRANTS
                              ----------------------------------------------------------------------------------------------

                              NUMBER OF SECURITIES   % OF TOTAL OPTIONS
                               UNDERLYING OPTIONS   GRANTED TO EMPLOYEES      EXERCISE OR     EXPIRATION       GRANT DATE
NAME                               GRANTED(1)          IN FISCAL YEAR      BASE PRICE ($/SH)     DATE       PRESENT VALUE(2)
----                          --------------------  --------------------   -----------------  ----------    ----------------

<S>                                 <C>                    <C>                 <C>             <C>              <C>
Kenneth A. Swanstrom.......         20,000                 9.31%               $36.125         12/6/10          $235,000

Martin Bidart..............         17,500                 8.15                 36.125         12/6/10           205,625

Mark W. Simon..............         15,000                 6.98                 36.125         12/6/10           176,250

Raymond L. Bievenour.......         10,000                 4.65                 36.125         12/6/10           117,500

Francis P. Wilson.........          10,000                 4.65                 36.125         12/6/10           117,500

</TABLE>
--------------------
(1)  All shares underlying options are shares of Common Stock. Each option
     becomes exercisable in increments of 25% of the shares underlying such
     options commencing on the first, second, third, and fourth anniversaries of
     the date of the option grant.

                                       8

<PAGE>

(2)  The Black-Scholes model, a widely used and accepted formula for valuing
     traded stock options, was used to determine the grant date present value of
     the stock options. The Black-Scholes value used in this table is the same
     value used to report the expense associated with stock options in the
     Company's audited financial statements in accordance with FAS 123. The
     following assumptions were used to calculate the Black-Scholes value: an
     expected life of six years, 30% stock price volatility, 5.35% risk-free
     rate of return, annual dividend yield of 2.00%, and an exercise price equal
     to stock price on the date of grant. The Company has used the historical
     annual dividend yield and stock price volatility rate as assumptions for
     the Black-Scholes model. These are not projections, and therefore there is
     no guarantee that these assumptions will be the actual annual dividend
     yield or stock price volatility rate over the next six years. There is no
     gain to executives, however, if the per share market price of the Company's
     Common Stock does not increase or declines.

     The following table sets forth information with respect to options held at
December 31, 2000 by the persons named in the Summary Compensation Table above.

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                      AND FISCAL YEAR-END OPTION VALUES(1)

                             NUMBER OF SECURITIES         VALUE OF UNEXERCISED
                            UNDERLYING UNEXERCISED        IN-THE-MONEY OPTIONS
                              OPTIONS AT FY-END               AT FY-END(2)
                          --------------------------  --------------------------
NAME                      EXERCISABLE  UNEXERCISABLE  EXERCISABLE  UNEXERCISABLE
----                      -----------  -------------  -----------  -------------
Kenneth A. Swanstrom....    37,500        42,500        $497,812      $246,562
Martin Bidart...........    25,000        32,500         331,875       164,375
Mark W. Simon...........    25,000        30,000         331,875       164,375

Raymond L. Bievenour....    25,000        25,000         331,875       164,375
Francis P. Wilson.......    15,000        25,000         163,125       164,375

-------------------
(1)  No options were exercised by the named executive officers during the year
     ended December 31, 2000.

(2)  Represents the difference between the aggregate exercise price and the
     aggregate market value of the Company's Common Stock as of December 31,
     2000.


     The following table is representative of the annual benefits payable under
the Company's qualified retirement plans to an employee currently age 65 whose
annual compensation remained unchanged during the last five years of employment
and whose benefits will be paid for the remainder of the employee's life.


                                     PENSION PLAN TABLE
                                                   YEARS OF SERVICE
                                     -------------------------------------------
ANNUAL COMPENSATION                     10          20          30          40
-------------------                     --          --          --          --
$150,000..........................   $18,420     $36,840     $55,260     $73,680
 160,000..........................    19,670      39,340      59,010      78,680
 175,000..........................    20,920      41,840      62,760      83,680
 200,000..........................    20,920      41,840      62,760      83,680
 300,000..........................    20,920      41,840      62,760      83,680
 400,000..........................    20,920      41,840      62,760      83,680
 500,000..........................    20,920      41,840      62,760      83,680
 600,000..........................    20,920      41,840      62,760      83,680
 700,000..........................    20,920      41,840      62,760      83,680

     Credited full years of service of the five officers listed in the Summary
Compensation Table are as follows: Kenneth A. Swanstrom, 40 years; Martin
Bidart, 10 years; Mark W. Simon, 24 years; Raymond L. Bievenour, 10 years; and
Francis P. Wilson, 4 years. The covered compensation under the Pension Plan
Table is that amount shown in the salary and bonus columns of the Summary
Compensation Table. The amounts shown in the Pension Plan Table do not reflect
any deduction for social security or other offset amounts. Benefits are subject
to maxi-

                                       9

<PAGE>

mum limitations under the Internal Revenue Code of 1986, as amended. The
foregoing Pension Plan Table may be used for all five officers, except for
Kenneth A. Swanstrom, who is entitled to a higher benefit due to plan provisions
protecting prior accrued benefits. Mr. Swanstrom's projected annual benefit at
age 65, after 44 years of service, is $108,854.


REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

     The Company's executive compensation policies are intended to focus the
executive's attention and efforts on the attainment of Company goals, reward the
executive for the successful attainment of those goals, provide a total
compensation package that is competitive with the market for similar experience
and expertise, and create a feeling of shared destiny between the executives,
all other employees, and the Company's stockholders.

     The compensation paid to the Company's executive officers, including its
Chief Executive Officer and the four other highest paid officers (the "Named
Executive Officers") consisted of a base salary, an annual bonus determined in
accordance with the provisions of a formal incentive plan (the "Management
Incentive Plan") originally adopted for the year 1992 and amended thereafter
from time to time, and non-qualified stock options as part of the 1996 Equity
Incentive Plan and the 1999 Employee Stock Option Plan. These plans cover
substantially all employees and officers of the Company, including the Named
Executive Officers. The executive officers also are participants in the
Company's Profit Sharing Plan, its Pension Plan, and its various fringe benefit
programs.

     The annual salaries of the Named Executive Officers for fiscal year 2000
were determined in the month of December 1999. In determining the annual salary
for each of the executive officers of the Company, including the Named Executive
Officers, the Compensation Committee sought to establish salaries that were fair
and competitive with those paid by comparable organizations and that fairly
reward the executive officers for their performance and the Company's
performance. In determining the annual salary of each of the Named Executive
Officers, other than the Chief Executive Officer, the evaluation of their
performance by the Chief Executive Officer is considered, and each position is
measured against the knowledge and problem-solving ability required to fulfill
the assigned duties and responsibilities of such position and the officer's
impact upon the operations and profitability of the Company.

     The same considerations were taken into account in establishing the Chief
Executive Officer's salary for 2000, except that the Committee did not have the
recommendation of the Chief Executive Officer.

     The salary increase approved by the Board of Directors in December 1999 was
3.8% for each Named Executive Officer.

     Payments to the Named Executive Officers under the Management Incentive
Plan are determined by five factors, which combined are used to determine the
amount of the annual bonus. The first and second factors, each with a weighting
factor of 25%, compared the Company's 2000 consolidated net income with its 1999
consolidated net income and the 2000 Business Plan consolidated net income. The
third and fourth factors, each with a weighting factor of 10%, compared the
Company's 2000 consolidated net sales with its 1999 consolidated net sales and
the 2000 Business Plan consolidated net sales. The fifth factor, with a
weighting factor of 30%, compared the Company's 2000 return on equity with its
1999 return on equity. The target bonus for the Chief Executive Officer is 45%
of base salary. The target bonus for the Chief Operating Officer and the Chief
Financial Officer is 35% of their respective base salaries. The other executive
officers have a target of 30% of their respective base salaries. The
relationship of the Company's 2000 actual results to the prior year or the 2000
Business Plan targets can cause the annual bonus to range from zero to 150% of
the targeted amount. The consideration of earnings before interest and taxes is
the most significant factor in determining the annual bonuses paid to all other
salaried and hourly workers under the employee incentive plan. Consolidated net
income is the most significant factor in determining the annual bonuses paid to
the executive officers. These two measures of earnings extend a common thread in
the standard of measure for both executive officers' and other employees' annual
bonuses.

     The fastener operations and the motor operations achieved 139.4% and
149.8%, respectively, of their overall targets established by the Board of
Directors for 2000, and, therefore, the bonuses under the incentive plans were
139.4% and 149.8%, respectively, of the targeted awards for all participants.

     The bonus paid to the Chief Executive Officer for the year 2000 was
determined in accordance with the current provisions of the Management Incentive
Plan and reflects, in the opinion of the Committee, appropriate rewards for the
Company's current performance. The portion of the Chief Executive Officer's
bonus compared to his 2000 target bonus for each factor was as follows: the
Company's 2000 consolidated net income compared to 1999 consolidated net income
was 160.7% of target; the Company's 2000 consolidated net income compared to

                                       10

<PAGE>

the 2000 Business Plan consolidated net income was 139.4% of target; the
Company's 2000 consolidated net sales compared to 1999 consolidated net sales
was 133.6% of target; the Company's 2000 consolidated net sales compared to 1999
Business Plan net sales was 115.3% of target, and the Company's 2000 return on
equity compared to 1999 return on equity was 143.8% of target. Therefore, the
bonus paid to the Chief Executive Officer for 2000 was $251,728. This bonus was
136.5% of the target amount.

     In determining the 2000 grants of stock options under the 1996 Equity
Incentive Plan and the 1999 Employee Stock Option Plan, the Compensation
Committee took into account the various factors (described above) considered in
determining the annual salaries of the Named Executive Officers, as well as the
recommendations of an independent consultant which assisted in the creation of
the plans. In 2000, the Chief Executive Officer, the Chief Operating Officer,
and the Chief Financial Officer were granted non-qualified options to purchase
20,000 shares, 17,500 shares, and 15,000 shares, respectively, of the Company's
non-voting Common Stock. Each of the other Named Executive Officers was granted
non-qualified options to purchase 10,000 shares of the Company's non-voting
Common Stock.

     The Committee did not consider the deductibility for federal tax purposes
of the compensation paid to the Chief Executive Officer and the Named Executive
Officers under the provisions of Section 162(m) given their current compensation
levels. The Committee intends to take necessary steps to conform the Company's
policies with respect to the executive compensation in order to comply with the
provisions of Section 162(m) if and at such time as the deductibility thereof
becomes affected by such provisions.

                                     Submitted by
                                     the Compensation Committee
                                     of the Board of Directors:

                                     Maurice D. Oaks, Chairman
                                     Willard S. Boothby, Jr.
                                     Charles R. Smith
January 31, 2001

                                       11
<PAGE>

PERFORMANCE GRAPH

     The following performance graph compares the cumulative total stockholder
return on the Company's Common Stock with the S&P 600(R) SmallCap Index and the
following combined Standard & Poor's line-of-business indices (the "S&P
Indices"): Electronics-Semiconductor Companies; Electronics-Instrumentation
Companies; Office Equipment Companies; and Communications Equipment
Manufacturers. The S&P Indices consist of companies that are representative of
the lines of business that generate the major portion of the Company's revenues.


                  [TOTAL SHAREHOLDER RETURNS -- GRAPH OMITTED]


<TABLE>
<CAPTION>
                                                 BASE                          INDEXED RETURNS
                                                PERIOD                          YEARS ENDING
COMPANY NAME/INDEX                              DEC 95      DEC 96     DEC 97      DEC 98        DEC 99      DEC 00
-------------------------------------------------------------------------------------------------------------------
<S>                                              <C>        <C>        <C>        <C>           <C>          <C>
Penn Engineering & Manufacturing
  Corp.--PNN/PNNA............................    100         86.21     102.79      97.72        103.18       159.88
S&P 600(R)SmallCap Index.....................    100        121.32     152.36     150.37        169.02       188.96
S&P Indices..................................    100        133.40     169.07     255.82        403.95       290.31

</TABLE>
---------------
(1)  The comparisons of total return on investment (change in year-end stock
     price plus reinvested dividends) for each of the periods assumes that $100
     was invested on December 31, 1995 in each of the Company's Common Stock,
     the S&P 600(R) SmallCap Index, and the S&P Indices with the investment
     weighted on the basis of market capitalization.

DIRECTOR COMPENSATION

     In 2000, the Company's non-employee directors each received an annual
retainer of $15,000, plus a fee of $1,000 for each meeting attended in person,
$500 for each meeting attended by teleconference, and reimbursement for travel
expenses. Employees who are directors of the Company each received a fee of $500
for each meeting attended in person and $250 for each meeting attended by
teleconference in 2000. Members of the Audit Committee, the Compensation
Committee, and the Nominating Committee each received a fee of $750 for each
meeting attended in person, $375 for each meeting attended by teleconference in
2000, plus reimbursement for travel expenses. For 2001, the fees for meetings
are expected to remain the same as the amounts paid in 2000, the Company's
non-employee directors are each entitled to receive an annual retainer of
$25,000, and the Chairman of each committee is entitled to an additional annual
retainer of $2,000.

                                       12

<PAGE>

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires that the Company's officers and directors, and persons who own more
than 10% of either class of the Company's common stock, file reports of
ownership and changes in ownership with the Commission. Based solely on the
Company's review of the copies of such reports received by it, or written
representations from certain reporting persons, the Company believes that,
during the period January 1, 2000 through December 31, 2000, all filing
requirements applicable to these persons were complied with.

                              ELECTION OF AUDITORS

     Ernst & Young LLP served as the Company's auditors for the Company's year
ended December 31, 2000. Unless instructed to the contrary, it is intended that
votes will be cast pursuant to the proxies for the election of Ernst & Young LLP
as auditors for the Company for its 2001 fiscal year. The Company has been
advised by such firm that none of its members or any of its associates has any
direct financial interest or material indirect financial interest in the Company
or its subsidiaries. Election of Ernst & Young LLP will require the affirmative
vote of the holders of a majority of the shares of Class A Common Stock
represented in person or by proxy at the Annual Meeting.

     A representative of Ernst & Young LLP will attend the Annual Meeting. This
representative will have the opportunity to make a statement, if such
representative desires to do so, and will be available to respond to any
appropriate questions presented by the stockholders at the Annual Meeting.


AUDIT FEES

     Ernst & Young's fees for the December 31, 2000 annual audit, including fees
for quarterly reviews of the financial statements included in the Company's
quarterly reports on Form 10-Q, were $250,000. Fees for other audit-related
services were $50,000 and related to audits of the Company's pension plans.


FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

     The Company did not engage Ernst & Young LLP to provide advice to the
Company regarding financial information systems design and implementation during
the year ended December 31, 2000.


ALL OTHER FEES

     Fees billed to the Company by Ernst & Young LLP during the year ended
December 31, 2000 for all other non-audit services rendered to the Company,
including tax-related services, totaled $395,000.

                                       13

<PAGE>

                          REPORT OF THE AUDIT COMMITTEE

     The Audit Committee of the Board of Directors reviews the financial
reporting process, the system of internal controls, the audit process, and the
process for monitoring compliance with laws and regulations. Each member of the
Audit Committee satisfies the definition of independent director as established
in the New York Stock Exchange Listing Standards as well as the financial
literacy requirements thereof. The Board adopted a written Charter for the Audit
Committee on July 26, 2000, which is attached to this proxy statement as
Appendix A.

     The Audit Committee has reviewed the Company's audited consolidated
financial statements and discussed such statements with management. The Audit
Committee has discussed with Ernst & Young LLP matters such as the quality (in
addition to acceptability), clarity, consistency, and completeness of the
Company's financial reporting, as required to be discussed by Statement of
Auditing Standards No. 61 (Communication with Audit Committees, as amended).

     The Audit Committee received from Ernst & Young LLP the written disclosures
required by Independence Standards Board Standard No. 1. The Audit Committee
discussed with them their independence from the Company and considered the
compatibility of the non-audit services with Ernst & Young LLP's independence.

     On the basis of these reviews and discussions, the Audit Committee
recommended to the Board of Directors that the Company's audited consolidated
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000, and be filed with the Commission.

     This report of the Audit Committee shall not be deemed proxy solicitation
material and shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933, as amended, or the Exchange Act, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.

                                  Submitted by
                                  the Audit Committee of the Board of Directors:

                                  Thomas M. Hyndman, Jr., Chairman
                                  Maurice D. Oaks
                                  Lewis W. Hull
January 31, 2001

                                       14

<PAGE>

          PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION

DESCRIPTION OF THE AMENDMENT AND STOCK DIVIDEND

     At the Annual Meeting, holders of the Class A Common Stock will be asked to
consider and vote upon an amendment to the first paragraph of Article IV of the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 20,000,000 shares to 50,000,000 shares and to
increase the number of authorized shares of Class A Common Stock from 3,000,000
shares to 10,000,000 shares. The Amendment reads in its entirety as follows:

          "The total number of shares of stock which the Corporation shall have
     the authority to issue is 60,000,000 shares consisting of (i) 50,000,000
     shares of Common Stock (the "Common Stock"), par value $.01 per share, and
     (ii) 10,000,000 shares of Class A Common Stock (the "Class A Common
     Stock"), par value $.01 per share. For purposes of Article IX of this
     Certificate of Incorporation, the term "Common Stock" as used in Article IX
     shall be deemed to refer to the Class A Common Stock."

     As of March 9, 2001, 6,934,306 shares of Common Stock and 1,675,082 shares
of Class A Common Stock were outstanding, leaving 13,066,398 shares of Common
Stock and 1,324,918 shares of Class A Common Stock available for issuance.

     If the Amendment is approved by the stockholders of the Company, the Board
of Directors intends to prepare and file a Certificate of Amendment to the
Certificate of Incorporation of the Company in accordance with the Amendment,
which will become effective immediately upon acceptance of the filing by the
Secretary of State of Delaware. The Board of Directors would then have the power
without soliciting stockholder approval to issue the additional authorized
shares, except to the extent that such approval may be required by law, and such
shares may be issued for such consideration, cash or otherwise, at such times
and in such amounts as the Board of Directors in its discretion may determine,
without further action by the stockholders. The future issuance by the Company
of shares of Common Stock or Class A Common Stock may dilute the equity
ownership position of current holders of Common Stock and Class A Common Stock.

     The Board of Directors has approved, promptly after the Certificate of
Amendment has been filed, the distribution as a dividend of one share of Common
Stock for each share of Common Stock outstanding on April 11, 2001 and one share
of Class A Common Stock for each share of Class A Common Stock outstanding on
April 11, 2001 (the "Stock Dividend"). The Stock Dividend will essentially be a
two-for-one stock split in the form of a 100% stock dividend. The date of
distribution of the Common Stock and the Class A Common Stock under the Stock
Dividend is expected to be May 1, 2001. Stockholder approval of the Stock
Dividend is not required by Delaware law and is not being solicited by this
Proxy Statement. The Company has no current plans to issue additional shares of
Common Stock or Class A Common Stock other than pursuant to the Stock Dividend
and shares reserved under its employee benefit plans.

     The Amendment was unanimously approved by the Company's Board of Directors
on January 31, 2001. The Board of Directors has given due consideration to the
Amendment and has determined that the adoption of the Amendment is in the best
interests of the Company and its stockholders.


VOTE REQUIRED

     Approval of the Amendment will require the affirmative vote of the holders
of a majority of the shares of Class A Common Stock of the Company outstanding
and entitled to vote. Abstentions and broker non-votes are considered shares of
stock outstanding and entitled to vote and are counted in determining the number
of votes necessary for a majority. An abstention or broker non-vote will
therefore have the practical effect of voting against approval of the Amendment
because it represents one fewer vote for approval of the Amendment.

     THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF CLASS A
COMMON STOCK VOTE "FOR" THE AMENDMENT.


                                  ANNUAL REPORT

     A copy of the Company's Annual Report for its fiscal year ended December
31, 2000 is being mailed to the Company's stockholders with this Proxy
Statement.

                                       15

<PAGE>

                              STOCKHOLDER PROPOSALS

     Any stockholder who, in accordance with and subject to the provisions of
Rule 14a-8 of the proxy rules of the Commission, wishes to submit a proposal for
inclusion in the Company's proxy statement for its 2002 Annual Meeting of
Stockholders must deliver such proposal in writing to the Company's Secretary at
the Company's principal executive offices at 5190 Old Easton Road, Danboro,
Pennsylvania 18916, not later than November 26, 2001.

     Pursuant to Section 6 of the Company's By-laws, if a stockholder wishes to
present at the Company's 2002 Annual Meeting of Stockholders (i) a proposal
relating to nominations for and election of directors or (ii) a proposal
relating to a matter other than nominations for and election of directors,
otherwise than pursuant to Rule 14a-8 of the proxy rules of the Commission, the
stockholder must comply with the provisions relating to stockholder proposals
set forth in the Company's By-laws, which are summarized below.

     Written notice of any such proposal containing the information required
under the Company's By-laws, as described herein, must be delivered in person,
by first class United States mail postage prepaid or by reputable overnight
delivery service to the Company's Secretary at the Company's principal executive
offices at 5190 Old Easton Road, Danboro, Pennsylvania 18916 during the period
commencing on November 26, 2001 and ending on December 26, 2001.

     A written proposal of nomination for a director must set forth (a) the name
and address of the stockholder who intends to make the nomination (the
"Nominating Stockholder"), (b) the name, age, business address, and, if known,
residence address of each person so proposed, (c) the principal occupation or
employment of each person so proposed for the past five years, (d) the
qualifications of the person so proposed, (e) the number of shares of capital
stock of the Company beneficially owned within the meaning of the Commission's
Rule 13d-3 by each person so proposed and the earliest date of acquisition of
any such capital stock, (f) a description of any arrangement or understanding
between each person so proposed and the Nominating Stockholder with respect to
such person's proposal for nomination and election as a director and actions to
be proposed or taken by such person as a director, (g) the written consent of
each person so proposed to serve as a director if nominated and elected as a
director, and (h) such other information regarding each such person as would be
required under the proxy solicitation rules of the Commission if proxies were to
be solicited for the election as a director of each person so proposed.

     Only candidates nominated by stockholders for election as a member of the
Company's Board of Directors in accordance with the By-law provisions summarized
herein will be eligible to be considered for election as a member of the
Company's Board of Directors at such meeting of stockholders, and any candidate
proposed by a stockholder not nominated in accordance with such provisions will
not be considered or acted upon for election as a director at such meeting of
stockholders.

     A written proposal relating to a matter other than a nomination for
election as a director must set forth information regarding the matter
equivalent to the information that would be required under the proxy
solicitation rules of the Commission if proxies were solicited for stockholder
consideration of the matter at a meeting of stockholders.

     Only stockholder proposals submitted in accordance with the By-law
provisions summarized above will be eligible for presentation at the 2002 Annual
Meeting of Stockholders, and any matter not submitted to the Company's Board of
Directors in accordance with such provisions will not be considered or acted
upon at the 2002 Annual Meeting of Stockholders.

                                  OTHER MATTERS

     The Board of Directors does not know of any matters to be presented for
consideration at the Annual Meeting other than the matters described in the
Notice of Annual Meeting, but if other matters are properly presented, it is the
intention of the persons named in the accompanying proxy to vote on such matters
in accordance with their judgment.

                                    By Order of the Board of Directors,



                                    Kenneth A. Swanstrom
                                    Chairman of the Board



March 26, 2001

                                       16


                                                                      APPENDIX A















                                AUDIT COMMITTEE CHARTER





<PAGE>


                                   APPENDIX A
                                 AUDIT COMMITTEE
                                     CHARTER
1.0  ORGANIZATION

     There shall be a Committee of the Board of Directors known as the Audit
Committee. The Committee shall be comprised of a minimum of three (3) Directors
who are independent of the management of the Company and are free of any
relationship that, in the opinion of the Board of Directors, would interfere
with their exercise of independent judgment as a Committee member and further,
who are independent as defined by the New York Stock Exchange.
Each member of the Committee shall be financially literate, as such
qualification is determined by the Board of Directors in its business judgement,
or must become financially literate within a reasonable period of time after his
or her appointment to the Committee. At least one member of the Committee must
have accounting or related financial management expertise, as the Board of
Directors interprets such qualifications in its business judgement.


2.0  TERM

     The Committee Chairman and the Committee members are established at the
Reorganization Meeting of the Board of Directors held following the Annual
Meeting of Stockholders. The Committee Chairman and Committee members are
appointed to a three (3) year term.


3.0  INDEPENDENCE REQUIREMENT OF MEMBERS

     The following guidelines are to be observed in the selection or appointment
of a Committee member:

     o    A Director who is an employee of the Company or any of its affiliates
          may not serve on the Audit committee until three (3) years following
          the termination of his or her employment.

     o    A Director (i) who is a partner, controlling shareholder, or executive
          of an organization that has a business relationship the Company, or
          (ii) who had a direct business relationship with the Company (e.g., a
          consultant) may serve on the Committee only if in the Company's Board
          of Directors determines that the relationship does not interfere with
          the Director's exercise of independent judgement.

     o    A Director who is employed as an executive officer of another
          corporation in which any of the Company's executives serve on that
          corporation's compensation committee may not serve on the Committee.

     o    A Director who is an immediate family member of an individual who is
          an executive officer of the Company or any of its affiliates cannot
          serve on the Committee until three (3) years following the termination
          of such employment relationship.


4.0  STATEMENT OF POLICY

     The Committee shall provide assistance to the Company's Directors in
fulfilling their responsibility to the Company's stockholders relating to
corporate accounting, reporting practices of the Company, and the quality and
integrity of the financial reports of the company. In so doing, it is the
responsibility of the Committee to maintain free and open means of communication
between the Directors, the Committee, the independent auditors, and the
financial management of the Company.


5.0  RESPONSIBILITIES

     In carrying out its responsibilities, the policies and procedures of the
Committee should remain flexible, in order to best react to changing conditions
and to permit the Committee to modify the Company's accounting and reporting
practices from time to time so that they are in accordance with all SEC and
governmental requirements and are of the highest quality. In carrying out these
responsibilities, the Committee shall:

     o    Review and recommend to the Directors the independent auditors to be
          selected to audit the financial statements of the Company and its
          divisions and subsidiaries. The Board of Directors has the ultimate
          authority to select, evaluate, and where appropriate, replace the
          independent auditors and to nominate the outside auditors to be
          proposed for stockholder approval in the Company's Proxy Statement.

     o    Ensure that the independent auditors submit, on a periodic basis, to
          the Committee, a formal written statement delineating all
          relationships between the independent auditors and the Company. The
          Committee is

                                      A-1

<PAGE>

          responsible for actively engaging in a dialogue with the independent
          auditors with respect to any disclosed relationships or services that
          might impact the objectivity and independence of the independent
          auditors and for recommending that the Board of Directors take
          appropriate action in response to the outside auditors report to
          satisfy itself of the independence of the independent auditors.

     o    Meet with the independent auditors and financial management of the
          Company to review the scope and the audit procedures to be utilized,
          and at the conclusion thereof, review such audit, including any
          comments or recommendations of the independent auditors. The Company's
          independent auditors are ultimately accountable to the Committee and
          to the Board of Directors.

     o    Review and approve the independent auditor's fees for the annual audit
          and forthcoming year's audit work.

     o    Review with the independent auditors and the Company's financial and
          accounting personnel, the adequacy and effectiveness of the accounting
          and financial controls of the Company, and elicit any recommendations
          for the improvement of such internal control procedures or particular
          areas where new, or more detailed, controls or procedures are
          desirable. Particular emphasis should be given to the adequacy of such
          internal controls to expose any payments, transactions, or procedures
          that might be deemed illegal or otherwise improper. Furthermore, the
          Committee periodically should review the Company's Policy Manual to
          determine its adherence to the Code of Conduct.

     o    Review the internal audit function of the Company including the
          independence and authority of its reporting obligations, the proposed
          audit plans for the coming year, and the coordination of such plans
          with the independent auditors.

     o    Review the financial statements contained in the draft of the Annual
          Report to stockholders with management and the independent auditors
          and establish that the independent auditors are satisfied with the
          disclosure and content of the financial statements to be presented to
          the stockholders. Any changes in accounting principles must be brought
          to the attention of the Committee by the Company's financial staff
          and/or its independent auditors.

     o    Discuss with the independent auditors, judgements about the quality,
          not just the acceptability, of the Company's accounting principles.
          These discussions with the independent auditors should also be held on
          a quarterly basis, prior to the filing of the Form 10-Q, or if
          applicable, prior to the public announcement of interim information.
          If such discussions and communications are not made prior to the
          public announcement or filing, they should be made as soon as
          practicable in the circumstances.

     o    Provide sufficient opportunity for the Company's financial staff and
          independent auditors to meet with the members of the Committee without
          members of management present. Among the items to be discussed at
          those meetings are the independent auditors' evaluation of the
          Company's financial, accounting, and auditing personnel, and the
          cooperation that the independent auditors received during the course
          of the audit.

     o    Review accounting and financial personnel resources and review
          succession planning of those departments within the Company.

     o    Investigate any matter brought to its attention within the scope of
          its duties, with the power to retain outside counsel for this purpose
          if, in its judgment, that is appropriate.

     o    Request that the Chairman provide a Written Affirmation to the New
          York Stock Exchange regarding the independence of the Audit Committee
          on an annual basis, or at any other time when the composition of the
          Audit Committee changes.

     o    Submit the Minutes of all meetings to, and/or review the matters
          discussed at each Committee meeting with, the Board of Directors.


6.0  REPORT

     The Committee is required to issue a report to be included in the Company's
proxy statement. In that report, the Committee must state whether the Committee
has: (i) reviewed and discussed the financial statements with the management,
(ii) discussed with the independent auditors the matters required to be
discussed by SAS No. 61 and SAS No. 90, and (iii) received certain disclosures
from the auditors regarding the auditors' independence as required by the
Independence Standards Board Standard No. 1, and discussed with the auditors the
auditors' independence.

     The Committee report must also include a statement by the Committee
whether, based on such review and discussions, the Committee recommends to the
Board of Directors that the financial statements be included in the Company's
Annual Report on Form 10-K for the most recent fiscal year for filing with the
Securities and Exchange Commission.

                                      A-2

<PAGE>


                     PENN ENGINEERING & MANUFACTURING CORP.
            ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 26, 2001

          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
                                 OF THE COMPANY

     The undersigned hereby constitutes and appoints Kenneth A. Swanstrom and
Thomas M. Hyndman, Jr., and each or either of them, proxies of the undersigned,
with full power of substitution, to vote all of the shares of Penn Engineering &
Manufacturing Corp. (the "Company") which the undersigned may be entitled to
vote at the Annual Meeting of Stockholders of the Company to be held at the
offices of the Company, Building 3, 5190 Old Easton Road, Danboro, Pennsylvania
18916, on Thursday, April 26, 2001, at 2:00 p.m., and at any adjournment,
postponement, or continuation thereof, as follows:

                  (CONTINUED AND TO BE SIGNED ON REVERSE SIDE)


                                                    PLEASE MARK YOUR   |-----|
                                                    VOTES LIKE THIS IN |  X  |
                                                    BLUE OR BLACK INK  |-----|


                                                                  WITHHOLD
1. ELECTION OF CLASS A DIRECTORS                       FOR        AUTHORITY
   Nominees:                                         |-----|      |-----|
                                                     |     |      |     |
   Martin Bidart                                     |-----|      |-----|
   Maurice D. Oaks
   Charles R. Smith

INSTRUCTION: TO WITHHOLD AUTHORITY FOR A NOMINEE, WRITE THE NAME OF THE
NOMINEE(S) IN THE SPACE PROVIDED:

-------------------------------------------------------

2. Approval of Auditors                              FOR     AGAINST   ABSTAIN
   Proposal to elect Ernst & Young                 |-----|   |-----|   |-----|
   LLP as the Company's auditors                   |     |   |     |   |     |
   for 2001                                        |-----|   |-----|   |-----|


<PAGE>

                      SHARES HELD

MARK IF YOU PLAN TO ATTEND THE ANNUAL MEETING      |-----|
                                                   |     |
                                                   |-----|



3. Approval of the Amendment to                      FOR     AGAINST   ABSTAIN
   the Company's Certificate of                    |-----|   |-----|   |-----|
   Incorporation to increase authorized            |     |   |     |   |     |
   shares of Common Stock and Class A              |-----|   |-----|   |-----|
   Common Stock of the Company

4. IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
   OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY
   ADJOURNMENT, POSTPONEMENT, OR CONTINUATION THEREOF.

                THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
                MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER.
                IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
                NOMINEES FOR CLASS A DIRECTOR SET FORTH IN PROPOSAL 1 AND
                FOR PROPOSALS 2 AND 3.


                ---------------------------------------------------------
                              Signature of Stockholder



                ---------------------------------------------------------
                              Signature of Stockholder


                Date:______________________________________________, 2001



                NOTE: Please sign your name exactly as it appears hereon.
                If stock is registered in more than one name, each joint
                owner must sign.  When signing as attorney, executor,
                administrator, guardian, or corporate officer, please give
                your full title as such.


PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE.