Swatch : Annual Report 2021 - Complete version

ANNUAL REPORT

2021

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CONTENTS

MESSAGE FROM THE CHAIR	2
OPERATIONAL ORGANIZATION	4
ORGANIZATION AND DISTRIBUTION IN THE WORLD	5
ORGANS OF SWATCH GROUP	6
BOARD OF DIRECTORS	6
EXECUTIVE GROUP MANAGEMENT BOARD	8
EXTENDED GROUP MANAGEMENT BOARD	9
DEVELOPMENT OF SWATCH GROUP	10
ART & PHILANTHROPY	11
BIG BRANDS	21
WATCHES AND JEWELRY	22
RETAILING AND PRESENCE	86
PRODUCTION AND ELECTRONIC SYSTEMS	93
SWISS TIMING, CORPORATE, BELENOS	111
SWATCH GROUP IN THE WORLD	123
SUSTAINABILITY	149
CORPORATE GOVERNANCE	153
FINANCIAL STATEMENTS 2021	167
CONSOLIDATED FINANCIAL STATEMENTS	168
FINANCIAL STATEMENTS OF THE SWATCH GROUP LTD	214
COMPENSATION REPORT 2021	231

Swatch Group's Annual Report and Compensation Report are published in French, German and English.

Pages 1 to 148 are originally published in French and pages 149 to 230,

as well as the Compensation Report, in German. These original versions are binding.

© The Swatch Group Ltd, 2022

SWATCH GROUP / ANNUAL REPORT / 2021  CONTENTS

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MESSAGE

FROM THE CHAIR

LADIES AND GENTLEMEN,

DEAR SHAREHOLDERS,

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www.swatchgroup.com

Like watches, fondue, chocolate, the Matterhorn or the Rütli meadow, Jass is a Swiss national monument. It is part of our DNA; it's in our genes. It is one of the cornerstones of our identity. It is a tradition common to all regions of the country. It is a very popular, positive, social and friendly game. In our beautiful country, almost everyone plays Jass. It is played with family, friends, even strangers… When we play, we laugh, we exchange, we get angry and we share, while eating and drinking. A little or a lot, it depends. This game allows you to change your mind, to escape, to relax. It is played everywhere: restau- rants, trains, boats, at home. Jass is unifying, inclusive. It is just like Swatch Group and its more than 31 000 employees around the world.

For the past two years however, we have been deprived of the pleasurable company of a card game, and of many other pleasures for that matter. Because we had to play at home, "home-Jass", remote obenabe or undenufe, with electronic cards, in front of a screen or an application. We've had it now. Enough is enough! We need to reconnect with this spirit, this sense of community. In short, we need to find each other again.

Jass isn't merely a card game. It requires strategy and teamwork. It owes nothing to chance and neither does the management of an industrial group like Swatch Group. All the more so because it is not enough to simply shuffle the cards and name the trump suit. Every move must be considered.

Just like you, we have had to negotiate our way through this pandemic. But we have been able to demonstrate our resilience, while at the same time further improving our operations. We have committed ourselves with even more strength and energy. And above all, with passion. As a result, Swatch Group is even stronger and more solid than it was two years ago. This is a source of great pride for us.

As a group with over 100 production sites in Switzerland and countless boutiques around the world, you can easily understand that the home office, among other things, presented us with quite a challenge.

Nevertheless, the Group achieved net sales of 7313 million in 2021, an increase of 30.7%. The operating result amounted to CHF 1021 million, compared with CHF 52 million in the previous year. A stratospheric increase. It's like announcing 200 for all four Jacks. Net profit reached CHF 774 million, compared to a net loss of CHF 53 million in the previous year. And our liquidity is in the best possible shape, without any booster in particular but with strong cards in our hand. We had a very solid operating cash flow of CHF 1298 million, compared with CHF 819 million in the previous year. Free cash flow stands at CHF 1033 million, compared with CHF 675 million a year earlier. As a result, at the end of December 2021, Swatch Group had net liquidity of CHF 2558 million, compared to CHF 1700 million a year earlier. And this figure has increased further since then.

We owe this success to our employees, the Management Boards and the Board of Directors. I would like to take this opportunity to thank them all for their outstanding support and unwavering commitment throughout 2021. Our heartfelt appreciation also goes to you, dear share- holders, and to our customers around the world, for your constant support. On the basis of these encouraging fig- ures, the Board of Directors will propose a dividend of CHF 5.50 per bearer share and CHF 1.10 per registered share to the Annual General Meeting on 24 May 2022. This represents an increase of almost 60% compared to 2020.

As you know, Swatch Group takes its social and environmental responsibilities very seriously. In order to provide you with a better understanding of all our initiatives and activities in this area, we are publishing a very detailed and in-depth report on this subject, based on international standards. We invite you to take a look at this very impressive report and wish you a fascinating read.

Our research and development activities were never subject to lockdowns last year. Our teams did not play cards but continued to innovate, to push boundaries and to discover new ways forward, new products and new technologies. In the end, thanks to its creativity, the Group filed over 200 new patents.

This capacity for innovation enabled our brands, such as Harry Winston, Blancpain, Longines and many others, to launch magnificent products throughout the year.

Breguet celebrated the 220th anniversary of the tour- billon, one of the greatest watch complications of all time. Omega was the Official Timekeeper at the Olympic Games in Tokyo. It also attracted enormous attention with the new Seamaster 300M Co-Axial Master Chronometer dedicated to James Bond. Following its successful launch in China and the USA, Tissot's T-Touch Connect Solar was introduced in other markets as well, notably Japan. It was also equipped with additional new functions, such as the possibility of viewing live results from NBA games or cycling races, of which Tissot is a partner. Swatch successfully launched new models featuring its patented bioplas- tic and bioceramic materials.

2022 will also prove to be very rich in new products. The Group's brands in all price segments continued to arouse surprise and explore new territories. This is the very reason Swatch Group expects double-digit sales growth in local currencies. In any case, we hold all the right cards. And always the best ones, regardless of the trump suit.

Ladies and gentlemen, dear shareholders, I would like to thank you too for the trust you place in our company. I look forward to seeing you again soon. In the meantime, I wish you unforgettable games of Jass.

Nayla Hayek

Chair of the Swatch Group Board of Directors

SWATCH GROUP / ANNUAL REPORT / 2021  MESSAGE FROM THE CHAIR

SWATCH GROUP / ANNUAL REPORT / 2021  MESSAGE FROM THE CHAIR

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OPERATIONAL

ORGANIZATION

as at December 31, 2021

SWATCH GROUP BRANDS AND COMPANIES

						ELECTRONIC
WATCHES		RETAILING		PRODUCTION		SYSTEMS		CORPORATE
Prestige and		Tourbillon		Watches	EM Microelectronic	Swatch Group
Luxury Range				ETA	Renata	Research and
Breguet		Hour Passion		Meco	Development
Harry Winston				CHH Microtechnique	Micro Crystal	Asulab
Blancpain				Nivarox-FAR	Moebius
Glashütte Original				Comadur	Swiss Timing and	CDNP
Jaquet Droz				Rubattel et
Léon Hatot				Weyermann	ST Sportservice	ICB Ingénieurs
Omega				MOM Le Prélet­			Conseils en Brevets
High Range				Universo			Swatch Group
			Manufacture Ruedin
Longines				Lascor			Quality Management
Rado				Simon Et Membrez			Swatch Group Services
Union Glashütte				Novi
Middle Range				The Swatch Group			European
			Assembly				Distribution Center
Tissot				Jewelry			Swatch Group
Balmain							Logistics
Certina				Dress Your Body (DYB)			Swatch Group
Mido								Information
Hamilton								Technologies
Calvin Klein							Swatch Group
Basic Range								Corporate
							Customer Service
Swatch							Swatch Group Gems
Flik Flak							Real Estate
								Development

Swatch Group

Immeubles

Belenos Clean Power

www.swatchgroup.com

ORGANIZATION AND DISTRIBUTION

IN THE WORLD

as at December 31, 2021

SWATCH GROUP SUBSIDIARIES

EUROPE

AMERICAS

OCEANIA

FAR EAST

MIDDLE EAST

AFRICA

Austria

Canada

Australia

China

United

South Africa

Belgium

Mexico

Hong Kong

Arab Emirates

France

USA,

India

Germany

Caribbean and

Japan

Greece

Latin America

Macau

Italy

Malaysia

Luxemburg

Singapore

The Netherlands

South Korea

Nordic Countries

Taiwan

(Denmark,

Thailand

Finland,

Norway,

Sweden)

Poland

Russia

Spain

Switzerland

Turkey

United Kingdom

and Ireland

In countries where Swatch Group has no actual distribution subsidiary, the company is represented­ by local distributors.

SWATCH GROUP / ANNUAL REPORT / 2021  OPERATIONAL ORGANIZATION

SWATCH GROUP / ANNUAL REPORT / 2021  ORGANIZATION AND DISTRIBUTION IN THE WORLD

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BOARD OF

DIRECTORS

as at March 1, 2022

NAYLA HAYEK

Chair of the Board of Directors

Company Secretary	Auditors	Administrative Headquarters	Registered Offices
Jennifer Meyer-Kluge	PricewaterhouseCoopers	Seevorstadt 6	Faubourg de l'Hôpital 3
	St. Jakob-Strasse 25	CH-2501 Biel / Bienne	CH-2000 Neuchâtel
	CH - 4052 Basel	Phone: [phone]
		Fax: [phone]
		E-mail: www.swatchgroup.com/contactus
		Internet: www.swatchgroup.com

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www.swatchgroup.com

ERNST TANNER

DANIELA AESCHLIMANN

NICK HAYEK

Vice-Chairman

PROF. DR. H.C. CLAUDE NICOLLIER

DR. JEAN-PIERRE ROTH

The function descriptions and responsibilities of the Board of Directors members at December 31, 2021 are outlined in the Corporate Governance chapter

on pages 157 and 158 of the present Annual Report.

SWATCH GROUP / ANNUAL REPORT / 2021  ORGANS OF SWATCH GROUP

SWATCH GROUP / ANNUAL REPORT / 2021  ORGANS OF SWATCH GROUP