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Annual Report 2010

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Martin Gasser

CFO

Facts & Figures 2010

Sales Development (in millions of CHF, consolidated)

240

220

200

180

160

140

120

100

80

60

40

20

0 2006 2007 2008 2009 2010

Number of Employees as at December 31, 2010: Total 600

Research and Development 9 %

International Sales Revenues

Sales produced outside Switzerland accounted for 71 % of total sales revenues..

Owners/Board of Directors

R&M is wholly owned by Messrs. Hans Reichle, Martin Reichle and Peter Reichle.

The Board of Directors comprises Hans Hess (Chairman), Hans Reichle, Martin Reichle, Peter Reichle,

Hans Borner and Paul Witschi..

Sales in millions of CHF 195,8 241,7 247,0 192,1 179,6

Growth in relation to previous year 21,0 % 23,4 % 2,2 % –22,2 % –6,5 %

EBIT as a % of sales 12,5 % 13,0 % 7,0 %* 6,0 %* 0,6 %

* Includes special effects related to the R&M pension fund.EBIT over the past five years has averaged 8.0% of sales.

Development Expenses

Average development expenses over the last five years: 5 % of sales.

Innovation

19 % of total sales revenues in 2010 were achieved with products less than three years old.

Production 28 %

Sales and Marketing 36 %

Management and Administration 11 %

Purchasing and Logistics/Distribution 16 %

Contents

2 Facts and Figures 2010

4 Report from the Chairman of the Board of Directors and the CEO

6 Report from the COO

8 Report from the CSO

10 Report from the CTO

Annual topic for 2010: Reliability

Reliability is crucial if you want to succeed as a company, especially in economically difficult times.

Our employees put in a tremendous effort last year. In honor of their hard work, we have had several work

areas at R&M photographed for this annual report and included these impressions in the report.

Nicolas Zonvi, a young and talented photographer, took the photos. www.nicolaszonvi.com

Printing Information

Publisher: Reichle & De-Massari AG, Corporate Communications,

Binzstrasse 31, CHE-8620 Wetzikon

Layout: Blue Concepts GmbH, CHE-8636 Wald ZH, www.blueconcepts.ch

Printed by: pmc, CHE-8618 Oetwil

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Sustainability Takes Time – Report from the Chairman of the Board of Directors and CEO

Varying market trendsFor R&M, 2010 was a year of extraordinary accomplishments but also a year that required patience. The market trends in the cabling sector varied widely. Despite many bright spots and an upsurge in sales in the last quarter, the R&M Group had to accept a sales decrease of 6 percent. The strong Swiss franc had an especially adverse impact. In our estimation, the worst is now behind us.

We are fortunately back on the road to growth in Switzerland and Germany. Recovery on the other markets in Europe has tended to be slow. The Mid-dle East and Asia Pacific markets remain dynamic and R&M gained further ground there.

Major telecommunication companies were cautious in rolling out their FTTH projects, which caused delays. That said, the market is coming to the realiza-tion that full-coverage FO service is the next big developmental step. R&M is geared to that fact and poised as a key supplier of FTTH solutions.

Owing to the restrained market trend and substantial investments in the future, 2010 saw an operating profit of zero. That means we reached our mini-mum goal. Three other factors that put a damper on profits were losses from currency fluctuations, rising commodity prices and increased price pressure in the market.

Investing anti-cyclicallyR&M has used the last two years to make anti-cyclical sustainable invest-ments in the future. We intentionally dispensed with short-term profit optimi-zation. Our healthy financial structure as an independent family-owned com-pany allowed us to plan carefully and with an eye to the future.

The new building at headquarters in Wetzikon is a striking symbol of our corpo-rate philosophy. Opened in September 2010, the R&M Cube is considered one of the most environmentally friendly industrial buildings in Switzerland. Our partners and customers are benefiting from noticeable improved processes thanks to the SAP roll-out. This step boosts our speed, precision and flexibility.

We invested continuously in research and development once again in the year under review. A special focus was on our solutions for FTTH (Fiber To the Home) and data centers.

Hans Hess

Chairman of the Board of Directors

Martin Reichle

CEO

Sustainability Takes Time – Report from the Chairman of the Board of Directors and CEO

Our staff levels are more or less the same as last year. About 20 positions were shifted from headquarters to the sales regions to improve customer orientation.

Bright prospectsR&M has done its homework again. We have restructured and expanded our sales regions in line with current market conditions and strengthened our sales organizations. The experienced manager Ingo Kübler has joined us as Head of Global Sales (CSO).

We have made goal attainment more binding. Cooperation with customers, partners and suppliers was optimized and we are poised for the next growth spurt.

Our thanks to partners and employeesWith all our special investments, we tended to look inward this past year. The roll-out of a new ERP software and the simultaneous move into the Cube tied up company energies and put big demands on employees. We laid impor tant groundwork for the sustainable further development of our company.

At this juncture, I would like to express my sincere appreciation to customers and suppliers for the trust they have shown in R&M. A special thanks to all employees worldwide. With their tremendous dedication, they have helped us to cope effectively with the changes in the company and overcome this difficult market phase.

Building on the foundation laid in 2010, we can shift our focus outward again, to the needs of our customers. We look forward to sustained growth in 2011.

For the Board of Directors On behalf of the Management

Hans Hess, Chairman Martin Reichle, CEO

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Customers and Partners Benefiting from Sustainable Rise in Efficiency – Report from the COO

Leader in customizingWhat better service could you give customers than to comply fully with their wishes as fast as possible and on-site if possible? R&M does just that with the hub strategy we introduced in 2008. We satisfy customer wishes in the regions not only better but also more efficiently and more specifically. Our Asia Pacific Hub in Singapore is right on track. In late 2010, we opened up our own assembly operations in the Middle East Hub in Dubai. Further hubs are being planned.

For our customers, we assemble cabling solutions in our hubs tailored to local conditions and the given project in order to address customer needs even faster and more specifically. With their consistently modular design, our pro-ducts enable us to customize entire platforms. The core products come from our Swiss manufacturing facilities. Supplied parts and assembly processes are subject to Swiss values of precision and the unique quality standards of R&M.

Having globally networked the regional hubs in our supply chain, we now have additional flexibility in the markets. In short, with these hubs and our core skills of customizing and tailoring solutions to local needs, we can posi-tion ourselves as a leading supplier of customer-oriented cabling solutions.

The Project & Support Center at the Central Office will also be able to address customer needs even more efficiently in the future. At present, we are opti-mizing our engineer-to-order process and expanding the center by adding sup-ply chain functions. The Service Level Agreements to which the regions agreed will be able to be kept even more precisely in the future. There has been an acceleration in the planning, design, coordination and delivery of customer- specific solutions. For instance, we can respond to inquiries about different pro duct versions within 24 hours. And we can deliver the desired versions within a maximum of ten business days. This flexibility makes R&M unique.

Concentration on core areas of expertiseWe remain true to our tried-and-tested production philosophy even after mo-ving into a new central manufacturing facility in 2010, the R&M Cube. R&M has only a minimal vertical range of manufacturing concentrating instead on its core areas of expertise. That means we make optimum use of our resources and continuously widen our technological lead in the process.

This long-term approach only works with partners who are as flexible and motivated as we are and who operate with the same customer orientation. In our global network of suppliers, we forge close and reliable partnerships.

Customers and Partners Benefiting from Sustainable Rise in Efficiency – Report from the COO

Peter Reichle

COO

A minimal vertical range of manufacturing as well as flexible organization and procurement in foreign currencies are the factors that help us use the advan-tages of natural hedging and offset currency fluctuations.

Optimizing our processesR&M has made intensive use of the past two years to boost the efficiency of all its relevant business processes. Our biggest investments were in head-quarters. The Central Office has been operating in a strictly SAP environment since early 2010. The new operating system applies unique and standard crite-ria to structure many processes in the company. We now have our custo mers’ and partners’ jobs, orders and projects under control at all times.

The entire R&M Cube is an engine of efficiency. Goods proceed to employees virtually at the press of a button in the new production and logistics building. The modern high-bay warehouse works fully automatically with a response time of mere seconds. Since moving into the R&M Cube, the company has seen a definite acceleration in processes like delivery storage, retrieval, trans-port or shipment.

Quality control in manufacturingIncreased efficiency for our customers also means installing networks smoothly to ensure maximum long-term availability. R&M gives this assu-rance for the long term. The fully automatic assembly area is linked to the 100% inline testing operations. These capabilities ensure maximum process control.

R&M is the only supplier able to ensure this level of quality control across the globe. Our re-certification to the ISO 9001 standard in 2010 confirms our quality philosophy.

Peter Reichle, COO

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Improving Our Marketing Strengths – Report from the CSO

Eight sales regions, each with a big responsibilityR&M consistently pursued its regionalization strategy in the year under re-view. The sales regions were given additional staff and more responsibility. Their technical expertise is growing, allowing them to provide first level sup-port and exhibit competence in finding solutions for their specific markets. Competency in regional consulting is also being developed. For example, we can now provide comprehensive local support to network operators in the planning of FTTH projects.

With our decentralized sales organization, we are more flexible and able to respond and can gear our actions closely to customers. We have a better sense of the varying needs and trends in the markets. All these efforts pave the way to new growth.

Switzerland and Germany as front-runners in salesThe market organizations in Switzerland and Germany were the front-runners in 2010 in an even more difficult economic environment. Both market organi-zations recorded a comparatively strong growth of 5%. The way the markets in these two countries are being covered is exemplary. By being as close to the customer as possible, we are establishing a lasting basis of trust with our target groups. We can apply some of the methods and findings from these sales regions to other regions and multiply our successes in the process.

There is definitely new potential in East Europe and the Balkans so we for-tified this region and subdivided it into Southeast and Northeast Europe. In the West Europe (WEU) and Iberia regions, we have revamped our organiza-tion to make better use of market opportunities. Middle East & Africa (MEA) and Asian Pacific (APAC) are growing as dynamically as ever. We are on track for success in these regions and are gradually expanding our market organiza-tions there. The potential for development is enormous.

Development of lucrative market segmentsDiscovering new trends and markets! A medium-sized company like R&M must rise to this challenge every day. We constantly analyze the prospects in segments and vertical markets previously neglected.

The health care market is one example of a lucrative field with growth po-tential. Medical facilities and producers of medical equipment will network their applications, devices and information systems more in the future. They expect positive effects for patient care as well as lower operating costs and

Improving Our Marketing Strengths – Report from the CSO

Ingo Kübler

CSO

greater efficiency. The reliable cabling solutions from R&M are ideal for the health care market. We can equip clinics with entire infrastructures. That is why we are focusing more heavily on this segment.

Fiber To The Home (FTTH) is turning out to be a mega trend for the long term. Many countries are just getting started with FTTH. With trailblazing projects in the Middle East, R&M has a proven track record as a provider of optimum FTTH solutions. Individual regional network operators in Germany and the mar ket leader in Switzerland are among the customers that rely on fiber optic platforms from R&M. The main criterion is to be highly adaptable to the wid-est variety of site conditions. Planned or announced FTTH projects have been postponed in other regions due to the financial and economic crisis.

The financial industry remains a crucial market segment for us. It has under-standably cut back on investments in the past two years of crisis. But we are expecting increased demand in the near future. After all, the financial world relies more than ever on secure, high-performance data networks.

Competent partners around the globeWe cooperate as partners with committed companies in the regions. This ap-proach is a key to our market success. Our Qualified Partner Program (QPP) has been further optimized, allowing us to respond even more specifically to the needs of planners and installers. They systematically build up their skills in local training, thereby improving their competitive position. Many installers took us up on this offer again in 2010 and continue to benefit from our long-term support. With QPP, our partners ensure unique quality control in every project. Our ingenious warranty system supplements quality control to give our customers lasting security.

Fortified market positionOverall, we have further improved our position in the market. R&M is now one of the top three players in the Europe and MEA regions.

Ingo Kübler, CSO

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On the Way to the Broadband Age – Report from the CTO

New momentum for powerful innovation Research and development is a special strength of R&M and received fresh impetus in 2010 following a period of radical change. We further optimized our innovation processes. Our teams in the modern development center in the R&M Cube have been newly formed to meet specific tasks. Creativity unfolds all the faster in the Cube because lines of communication are shorter than be-fore. That means better mutual support between all the players involved in product creation, e.g. Development, Design, Product Management, Laborato-ries, Application Engineering, Testing Workshop, etc. These factors are impor-tant for bringing about a sustained increase in our powers of innovation.

With the ERP roll-out, the processes were revised and made more efficient. At the same time, we were able to optimize the quality of the data material. We also use SAP specifically as a platform for innovation management.

Stepped-up interaction between the Central Office and the regions helps to foster the corporate culture of innovation at R&M and its responsiveness to customers. Centrally controlled and global in scope, Product Management directly impacts market organizations in the regions. We also sharpened our sensitivity on where markets are heading and what customers desire. Conse-quently, we can gear our innovation management to specific goals and gene-rate specific product ideas.

Investing in solutions that are fit for the future The broad range of our FTTH and data center solutions is a clear expression of our superb corporate culture of innovation. We are present in both segments with new advances that have bright prospects for the future and that make life dramatically easier for users.

In the data center segment, we have a comprehensive range of structured cop-per and fiber optic cabling. Consistently modular designs and high-end shielding are two compelling advantages. Data center customers can plan their invest-ments efficiently. They can also scale and adapt their infrastructure at any time and use it for a new application. An investment has to be readily comprehen-sible particularly in the current phase of migration to 10 and 40/100 Gigabit Ethernet. Cabling should also exhibit special flexibility and reliability. R&M offers the most sustainable solutions for these purposes.

Operators of regional and national fiber optic networks benefit from our well-conceived FTTH solution. Along with the now complete Single Circuit Manage-ment (SCM) family, we make available a standard platform for all network levels.

On the Way to the Broadband Age – Report from the CTO

Peter Reichle

CTO

SCM radically simplifies fiber and subscriber management and cuts installation work to a minimum. At the same time, the system ensures a minimum bend-ing radius of 40 millimeters throughout, from Central Office to building entry point. These aspects are unique in the market and are paving the way to the high-power applications of the future.

Leader in connection equipment Connectivity is a core skill of R&M. We do our utmost to ensure that connec-tions become ever more safe, simple and reliable. That is why we pushed for further technological and design advances in connection equipment again this past business year.

The innovative Cat. 6A module, in particular, underscores our lead in copper cabling technology. There were sensational results from measurements taken during formal acceptance procedures for the first Cat. 6A modules installed at customers’ premises in the year under review. Even R&M has been deligh-ted time and again by the quality of signal transmission. Crosstalk between the twisted pairs is reliably prevented. We are also upping the bar for quality and reliability in the fiber optic segment. One example is the security system for the LC connector.

Helping to shape the broadband ageAs a leading player in the cabling sector, we naturally see ourselves as one of the forces actively shaping the future of the market and the technologies being used. The broadband age needs the powers of imagination and the pro blem-solving skills of as many experts as possible. That is why our experts are active in the international bodies that set the standards, particularly in IEC and CENELEC.

The best ideas and solutions with the biggest benefits for everyone should win out worldwide. With our Swiss quality thinking, we help to ensure just that. The standard-setting bodies look far into the future and form a nucleus of upcoming trends. For R&M, being a part of all this also means being able to detect trends early on and help shape them.

Peter Reichle, CTO

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Reichle & De-Massari AG

Binzstrasse 31

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Phone +41 (0)44 933 81 11

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