Address of Nayla Hayek, Chair of the Board of Directors of the Swatch Group, to the 2012 General Assembly of the Swatch Group Shareholders on May 16, 2012, at the Kongresshaus in Biel / Bienne (Switzerland).

The spoken word in German is valid

Dear Madam, Dear Sir,
Dear Fellow Shareholders,

I am pleased today – once again – to be able to report record results for 2011:
– Gross sales exceeding seven billion Swiss francs for the first time, with constant exchange rates, exceeding 2010’s figures by more than 21%.
– An operating profit of 1614 million Swiss francs, more than 12% higher than that of 2010.
– An operating margin of 23.9% versus 23.5%, despite unfavorable exchange rates and inflated prices of raw materials.
– A net income of 1276 million Swiss francs in 2011.
– An equity over eight billion Swiss francs for the first time.
– An equity ratio of over 82%.
– And, finally, a point I am very pleased about and which is particularly important to us, the creation of more than 2800 new jobs in 2011 alone, which brought our staff complement to slightly more than 28 000 people at the end of 2011

These extraordinary results confirm the pertinence of the strategy followed by Swatch Group since its creation in the Eighties. This is a long-term, concrete policy, a strategy for the real economy. Our results clearly, and in a very successful way, reflect the energy invested by our 28 000 employees to dream up and create the products on your wrist. They also symbolically stand for the constancy with which our Board of Directors and Management unhesitatingly follow the path that we set for ourselves 30 years ago:
– Expanding production capacities in Switzerland.
– Increasing and maintaining the number of jobs.
– Rediscovering rare crafts that are forgotten or verging on extinction.
– Making sure know-how is preserved; for example thanks also to the five Nicolas G. Hayek Watchmaking Schools in China, in the United States, in Malaysia and in Germany. A sixth school will be opened this year in Hong Kong; not to mention the 320 apprentices who completed their training with us in Switzerland in 2011.
– Demanding creativity in all fields of watchmaking – not only at the top end of watchmaking craft in the luxury segment, but also in the basic segment.
To sum up, an industrial strategy, a product-driven strategy in pursuit of our goal: Occupy Your Wrist!
Let's occupy your wrist – as you can all read on the watch you have received today.

Occupy Your Wrist! is not only the spirit that drives our company, our teams and our senior management. Occupy Your Wrist! is also the symbol of the indispensable reconquering of the world’s economy. A stabilization that requires the maintenance and development of a dense industrial base, with a large number of employees. An industrial base offering a large number of jobs whose variety, complexity and prerequisites are such that many stand a chance of finding a challenging, rewarding position. In Switzerland, of course, because it is our country and comes to mind first, but also in the rest of the world. Occupy Your People!

Twenty-eight thousand. Every day, 28 000 of us fight to maintain this course and to preserve our company culture, 28 000 fighting to defend everything that a quest for short-term profit margins might threaten or destroy. 28 000 fighting to strengthen the power of the industrial world over the global economy. A power exercised by the real economy and which must counterbalance that of the financial world that has caused such enormous difficulties, to the point of jeopardizing democratic traditions in several European countries.

In the particular case of our watchmaking industry, we must maintain and create many kinds of activities through a rich palette of trades essential to the extreme diversity of our products. Products that range from the brilliant simplicity of a Swatch New Gent watch with a movement made up of only 51 parts to the most complicated mechanical movements. From the Swatch Touch integrating, at a reasonable price, the most sophisticated touch technology developed by our company Asulab, to the most complex and innovative calibers such as our Omega Co-Axial movement or our column-wheel chronograph from Longines. Not to mention the most ambitious in terms of sophistication and watchmaking, like Breguet’s 10 Hz balance and its silicon balance-spring, or Blancpain’s movements comprising hundreds of components. The brand produces a caliber that boasts no fewer than 450 parts! And that is only to mention a small number of our extraordinary products.

Let's have a look together at the fresh and bold Swatch Touch television ad, which I consider – like the watch – particularly successful. Yet another great achievement for Swatch!

(SWATCH TOUCH TV AD)

This year too, we presented new products in Basel; these are the result of the know-how and passionate commitment of our teams. It would not be possible to present all these products to you here today but I would like to show you the Blancpain Chinese Calendar Watch by way of example. Unique – how, for the first time, a mechanical watch has been equipped with a Chinese calendar. A masterwork of horology!

(BLANCPAIN VIDEO)

What is the motor, the heart of all this? In watchmaking, when we speak of the motor or of the heart, certain complex watch parts inevitably come to mind. No, precisely not! At the heart of all this is the human being. Executives, engineers, watchmakers, workers, employees, all those who work each day to manufacture and assemble countless elements and to turn them into fascinating, attractive, amusing, extraordinary and fashionable products. Products that delight numerous clients every day in every country across the world. Occupy Your Heart!

We are not only good at developing products, we also know how to launch them successfully on our markets.

Just think of Swatch Group’s strength and its sheer global presence! We are of course present in many renowned places, for example on the Place Vendôme and on the Champs-Elysées in Paris, on the Bund in Shanghai, on Causeway Bay in Hong Kong, on Red Square in Moscow, in the Dubai Mall in Dubai, on Fifth Avenue in New York, on the Rue du Rhône in Geneva and on the Bahnhofstrasse in Basel, to mention only a few. But we are not only to be found in famous locations in big city centers. More than 900 Swatch boutiques, several hundred mono-brand or multi-brand boutiques, thousands of retail partners worldwide. This is substance. This is reality.

And our products are on your skin, on your wrist. They accompany you and add pleasure to the moment and do not merely count the passing seconds. Unique intimacy. Occupy Your Wrist!

It is this reality of our real production of real products that is our strength. We remain sound, focused on the long term, and single-minded and reliable in our growth strategy. Even the continuing weakness of the euro and of the currencies linked to the dollar which has unhealthily reinforced our national currency and resulted in a massive drop in our turnover of around 700 million Swiss francs hasn’t stopped us from having a record year. At 23.9%, we have exceeded last year’s already very high operating margin thanks to increased productivity and traditionally strict cost control – which remains one of the elements of our strategy to which we are most firmly committed. This very good result was achieved despite the highly unfavorable exchange rate development and the high increase in the price of important raw materials for our sector of activity such as gold or diamonds. This all follows from the fundamental principles of our company policy:
– renouncing short-term price increases and instead concentrating on increasing market share;
– intensifying marketing activities, in all price segments and for all our brands.
– and lastly making industrial investments, amounting to about 580 million Swiss Francs in 2011. Here, I would like to mention our project for the new Swatch and Omega buildings, which will adorn the city of Biel in a few years time. The environmental and sustainability aspects will be fully accounted for in this construction project. A magnificent project for the watch industry’s town, the town in which today's General Assembly is being held.

We are very well-equipped to take on the future. Swatch Group will continue to invest intelligently in its distribution network worldwide and energetically in its production capacity in Switzerland, in all segments, and despite the fact that the Swiss franc is over-valued compared to the rest of the world’s currencies. Of course, when we are breaking all records, it becomes increasingly difficult to surpass ourselves. But we are taking on the challenge confidently and we will maintain this course with conviction.

The Swatch Group Board of Directors proposes to the General Assembly a dividend up by 15% compared to the previous year. This is in line with the record results achieved in 2011 and shows our confidence in the prospects for the activities to be continued in 2012. Indeed, we also expect continued growth in 2012.

My warm thanks go to my colleagues at the Board of Directors, to our Executive Management Board and our Extended Group Management Board, to all our colleagues in Switzerland and all over the world, for their support of our strategic directions and for their commitment to making them a reality. And of course my thanks also go to you all, dear Fellow Shareholders, who have been so numerous in joining us here today in Biel. Without you all, this success story would not be possible. Many thanks for your trust and your ongoing support.