Press release

Swatch Group: Comments on media articles published today regarding the employment conflict with two former employees and their allegations about tax evasion

Biel/Bienne, August 13, 2004 - The Swatch Group Ltd. is aware that Messrs. Joe Ede and M. Phanthala filed a complaint with the US Department of Labor alleging discriminatory employment practices under the Sarbanes-Oxley act.
The two persons have been working for the Swatch Group as regional controllers (not Senior Executives) in the Far East, one located in Hong Kong, and one in Singapore. Both persons have been employed by The Swatch Group Management Services SA, Switzerland. They have never been employed in the USA.
The Swatch Group is of the opinion that it is not falling under the jurisdiction of the Sarbanes-Oxley act as its shares are not listed at a US stock exchange. Nevertheless, the Swatch Group takes the allegations very seriously and the Top Management ordered and started an internal investigation as soon as it was informed of the complaint.
The actual case reported by the Wall Street Journal and the Financial Times concerns a pure employment dispute between the Company and former employees, of whom one at least wishes to receive higher separation compensation than agreed in his contract. The case has been submitted to the US Department of Labor when Swatch Group refused to find a settlement, as proposed by the lawyer of the two employees. According to the first results of our investigation, it is confirmed that Swatch Group did not violate laws. It is the strict policy of Swatch Group to vigorously respect all national and international laws, including tax laws.
Nevertheless, it is normal practice for every company to structure the business in a way to pay all due taxes without exception but not more than required by the law, and always within the rules given by existing laws and regulations.
Transfer price policy is a very complex matter. It is not only depending on enormous currency fluctuation but also on the different VAT’s, the cost situation, the distribution structure, etc. None of the Swatch Group companies is calculating transfer prices just for tax purposes, but with a view to harmonize the international price structure for the consumer, to avoid the very harmful parallel market which is causing great damage and much more cost than taxes.

Contact: Béatrice Howald, Head of PR/Press, Swatch Group
+41 32 343 68 33, Fax +41 32 343 69 22

For financial analysts: Edgar Geiser, Thomas Dürr Swatch Group
+41 32 343 68 11, Fax +41 32 343 69 16