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1924-2004 80 years of leadershipBrussels, December 4, 2003

Building a New Electric World

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Agenda

A leader in Power & Control Henri Lachmann

Our offer in Automation Alain Marbach & Control

Our business model Christian Wiest

Conclusion Henri Lachmann

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Notes

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Agenda

A leader in Power & Control Henri Lachmann

Our offer in Automation Alain Marbach & Control

Our business model Christian Wiest

Conclusion Henri Lachmann

n First I have to set the scene and tell you about Schneider Electric and this event we have organized for our customers.

n We believe that traditional fairs and exhibitions are a thing of the past. They are more of a free-for-all than a fair of competitors, where customers aren’t easily available and are constantly distracted. They are more like something where we learn about the products and people of our competitors, rather than a company in its own right.

n We intend to develop this type of event, in which we have the pleasure or the merit of being very successful.

ª More than 2,000 people will come to Brussels over 1 week, which will be entirely devoted to Schneider Electric – noting that 60% of these visitors are European, with 40% from outside Europe.

ª We will give conferences and product demonstrations and talk with people and that’s much more effective than a trade exhibition.

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Ü Automation & Control m Controlling, monitoring,

and protecting machines and equipment

Ü # 1 worldwide Ü # 2 worldwide

We market a unique lineup of products and solutions with recognized global brands and strong local brands

Ü Electrical distributionm Supplying electricity reliably

and in complete safety

We are a world leader in Power & Control

n With Schneider Electric, the world leader in power and control, we market a unique lineup of products and offer a unique lineup of solutions. We are among the very few specialists in both electrical distribution, making electrical energy more available and more reliable, and industrial automation and control: controlling, monitoring and protecting machines and equipment.

n So, we have a single business and a Chairman with no problem in allocating resources, because we devote all our resources to that single business.

n We operate in different markets: buildings (40 %), industry (30 %), infrastructure and residential.

n We believe we are in an industry of the future. In fact, the future is looking more and more electric, demand for energy and electricity will continue to grow and there will be new methods of production and generation. There will be many fresh applications and we will develop integrated networked systems. We want to build a new electricworld, where remote control will be a reality and where electrical networks will be used to carry not only electricity, but also sound, data and images. The convergence of electrical, automation and communication technologies makes us extremely confident and optimistic about our future, especially as, amongst the majors, we are the only Group able to do this with our twin specialties of electrical distribution and industrial automation.

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We are #1 or #2 in all of our businesses

Schneider Electric

Schneider Electric

Schneider Electric

Schneider Electric

Schneider Electric

Ultra Low Medium Industrial Automation terminal voltage voltage Control

Market size 15 Bn EUR 15 Bn EUR 15 Bn EUR 25 Bn EUR 5 Bn EUR

Market Legrand ABB Siemensposition

ABB Siemens Rockwell

MEW Siemens Alstom Rockwell

Market share ~8% ~25% ~10% ~17% ~10%

#1 worldwide#1 worldwide #2 worldwide#2 worldwide

#1

#2

#3

We have leadership positions in all our businesses

n So, what are the strong points that make us so confident and optimistic?

ª Firstly, the fact that we are in a single business and we are a world leader.

ª Then comes our business model – unlike our integrated and generalist competitors, we are more multi-specialists on a non-integrated model. Why? Because we have all these specialties, the most extensive offer in our industry, but, above all, our business model is extremely original: we design the products, we have the components manufactured and we assemble. We are much more assemblers than manufacturers. We enter the market through intermediaries like distributors, panel builders and integrators.

n This business model allows us to be worldwide, but also allows us to be very local, gives us an extremely low capital intensity and means we are highly flexible and very reactive. We have 150 factories worldwide because we only have assembly plants and these provide both the local characteristic and extremely economically interesting elements for our customers. Having this rather non-integrated model is a decisive element in Schneider Electric’s performance.

n Added to this is a corporate philosophy where we believe that our richness lies in diversity – there isn’t a single corporate culture in Schneider Electric , but the cultures of its constituents. From the moment we recognize that globalization is always accompanied by a reinforcement of local characteristics, we try to be both global and local – what we call “glocal” in our jargon.

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Energy & Infrastructure(17% of sales)

Industry(32% of sales)

Buildings(42% of sales)

We provide Power & Control solutions for four markets

We are committed to satisfying customer expectations with comprehensive, innovative and differentiated solutions in all applications

Residential(9% of sales)

Power & ControlPower & Control

n So, Schneider Electric is a very “glocal” company, enabled by its model and culture:

ª Worldwide presence: we can serve customers wherever they are andwherever they go.

ª Our great capacity for innovation and our profitability mean we can continue to invest a lot in innovation and research and development. This year, more than 6% of our turnover will be dedicated or invested in innovation and new products.

ª Our lineup of products and brands: with our three major brands: Telemecanique, Merlin Gerin and Square D.

ª Our teams: The financial analysts present talk a lot about goodwill; I think we are making a mistake and we should be talking about “manwill”. The Schneider Electric teams are really exceptional and achieve the best performance for the customers and the shareholders in our industry.

ª Our healthy financial situation: We enjoy good profitability, convert this profitability rapidly into cash and we have a very healthy financial report –some would even say too healthy.

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We see electrical, automation and communication technologies converging

Ü The future is looking more and more electric ...m Powered by growing demand mNew types of generation m Fresh applications m Increasingly networked systems

Ü … And we want to ‘Build a New Electric World’mWeb-enabled remote control of installations in homes, buildings,

factories and infrastructure will soon be an everyday reality m Electrical networks will be used to carry data, sound and images

n Schneider Electric has both the ambition and the means to draw the benefits of globalization and the consolidation that is taking place and will continue in this industry.

n No other major player can seize the consolidation opportunities the way Schneider Electric can. With our twin specialties of electrical distribution and industrial automation, Schneider Electric can be the driving force behind the convergence that will take place between distribution, automation and communication. Schneider Electric is the best-positioned player in this industry to perform well in the future.

n Someone once said that customers were the best salesmen – above all, they are our best ambassadors. Our customers are always completely convinced once the have decided to trust us; it’s up to us to deserve that trust.

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Agenda

A leader in Power & Control Henri Lachmann

Our offer in Automation Alain Marbach & Control

Our business model Christian Wiest

Conclusion Henri Lachmann

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«Automation is not a business, it is a technology that will invadeall Schneider Electric products»

Henri Lachmann - January 1999

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Content

Ü Telemecanique: 80 years of leadership

Ü Our Industrial Automation businessmWorld position in each product family m Targeted applicationsm Partnerships & acquisitions

Ü Our great new products presented at the Initi@tive FairmOur new platform: Unity mOur philosophy is ‘Simply Smart’: we put more intelligence in our devices

– Tesys U, motor-starter– Advantys STB, distributed input/output

Ü Our Brand philosophy for the Industrial Automation business

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Telemecanique: 80 years of leadership

Telemecanique invented the first contactor in 1924 and quickly expanded its business to become a leading specialist in industrial control and automation.

Starting in 1931, the company initiated a pioneering social policy that offered many benefits long before they were mandated by law.

Telemecanique moved outside France early in its history and built a large network of subsidiaries worldwide between 1950 and 1988.

n I’m going to give you a rapid presentation of Telemecanique,

ª 80 years of leadership, our business and our products.

n Telemecanique started in 1924 with the patent for the contactor. What’s a contactor? It’s used to start a motor. When you start a motor there is a phenomenal amount of electrical energy, with an electric arc that is highly dangerous and particularly spectacular.

n The origin of Telemecanique, from 1924 on, was the control of closing a contact to start a motor when there is a large electric arc. Finally, it is a profession very close to the profession of Merlin Gerin, who control the electric arc at the moment of overload disconnection.

n The first subsidiary was founded in Belgium in 1934.

n So we are celebrating both 80 years of Telemecanique and 70 years of Telemecanique in Belgium.

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@@

2000: TeSys D, the new generation of CB, contactors and overload relays. Quickfit technology enables tool-less, wire-free connection, reducing connection time by 50%

2001-2003: Six new IC&A ranges are launched. These networked, smart products comply with all international standards and can be used in open, collaborative architectures

1924: Creation of the Company

1925: Development of the first thermal relays, float switches and pressure gauges

1966: New techniques for digital control, weighing, measuring, speed & elevator control, diagnostic

1996: First statement for Ethernet for Schneider Electric - First web p@tent

1988: Telemecanique enters Schneider Electric with 14 500 employees, 32 affiliates, 4,100 sales offices

Telemecanique: 80 years of leadership (cont’d)

1996-1999: Introduction of Osirisphotoelectric cells, Harmony lights and pushbuttons, the Tegosolution for HMI for motor starters and ATV 08 & 58 speed drives ATV 58

Harmony

Zelio Logic

TeSys U

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We sell the complete set of components for machine automation

Push buttons, pilot lights

Emergency Stop

VariableSpeedDrives

Brushless

Photo-electric & ProximitySwitchesLimit

Switches

Pressure Switches

Wiring accessories

Enclosures

Protection Contactors

Control Boards

Stack lights

VisionGraphicPanels

(HMI)

Motor-starter

n What is interesting is to see the whole range of products that we offer.

n The mission of the Telemecanique brand is to supply the complete set of electrical components required by a machine. Some of this equipment will also be in the electrical supply unit, but essentially, our strategy consists of equipping the machine. And machines need sensors, control panels, screens for communicating with the exterior, switches, variable speed drives, etc.

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1.8 Bn EUR

0.9 Bn EUR

Industrial Automation#1 - Leadership

Industrial Automation#2 or beyond

Industrial AutomationMedium voltage

Low voltage

In Industrial Automation, we are world leader for 70% of our revenues

Ü Breakdown of Schneider Electric 2002 sales

250 M EUR Offer Creation Cost9%1.7 Bn EUR

4.6 Bn EUR

2.7Bn EUR

n Industrial automation represents 30 % of Schneider Electric’s turnover (€ 2.7 billion). We are world leader for 70 % of our revenues. This means the others are second or behind in terms of revenue, which gives us a much greater capacity to develop new offers and be more profitable for every launch.

n For a third of our revenue, we are second or farther behind and, of course, we have to make up this shortfall.

n In the world of industrial automation, our investment in creating our offer, marketing, research and development and also industrialization will come to around 9 % this year. This is rather more than simple R&D in the accounting sense, because it includes a marketing aspect.

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Our leadership... and our commitments...

Ü We are the world leader with >15%-20% market shares in ...m Electronic Human-Machine Interfacem Electromagnetic Motor Startersm Electronic AC-Inverters & Soft-Startersm Electromechanical Pushbuttonsm Limit Switchesm Ethernet enabled Automation & Control

Ü … and we are committed to coming back inm Programmable Logical ControllersmMotionm Vision & Electronic Sensors

Ü … through offering a better lineup than the world leaders

n We are the world leader – sometimes by a short head and sometimes by several lengths – in six principal businesses:

ª Electronic Human-Machine interfaces. These are screens, with or without buttons, which enable human-machine interactivity.

ª Electromagnetic motor starters (contactors and the rest) Telemecanique’shistoric business.

ª Speed variation and soft starters. We weren’t always world leader in this business – in 1996 we were ranked 7th in the world, a long way behind the lead. By R&D efforts, renewing the range very rapidly and concentrating on offers simple to implement and following our strategy to the hilt, with integrator systems and distributors, we reached the position of world leader last year.

ª In pushbuttons, we have been world leader for a long time, as well as in position switches.

ª A recent American study focusing on industrial automation in the world of Ethernet and the web also credited us with a 35 % market share. This is the result of the work we started in 1997.

n We are strongly committed to coming back in the field of programmable controllers of movement – known as “motion” – and in the field of vision and electronic sensors, where our obvious aim is to have a better lineup than the world leaders

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USANorth-AndoverRaleigh

GermanySeligenstadtLahr

JapanOsakaMie

ItalyMilano

SingaporeSingapore

China Shanghai

New ZealandNapier

KoreaSeoul

CanadaVancouver

The NetherlandsAmsterdam

SwitzerlandLyss

FrancePacyRueilAngoulemeDijonSophiaValenceBourguebusLe Vaudreuil

We have developed worldwide offer creationsites close to our customers

n In the field of industrial automation, the card of our offer creation centers is fairly specific.

ª For example, we have two R&D centers of more than 100 employees in the United States, in North-Andover and Raleigh,

ª Two R&D centers of more than 100 employees in Germany, in Seligenstadtand Lahr

ª And two centers in Japan, in Osaka and Mie.

None of our competitors can play a card like that – a card we built with a very clear strategic ambition, which means we are in contact with the most demanding customers. These are the customers who, working with our marketing teams and with our R&D teams, help us to develop new offer.

n Another important thing about this card is the already significant proportion of R&D centers that we have just for Schneider Electric’s industrial automation business in the Asia Pacific zone: Seoul, Shanghai, Singapore and New Zealand.

n I’d like to say that, this year, our sales in industrial automation in China will reach € 220 million, which is greater than combined turnover for Rockwell throughout the Asia Pacific zone.

n Furthermore, for Schneider Electric, you can add our strength in electrical distribution and our strong position in Japan, since our partnerships with Toshiba and our acquisition of Digital.

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We have set priorities for targeted applications ...

Ü We have the best lineup and lot of success in:m Automotive Body Shop, Painting & Final Assemblym Pharmaceuticalm Airport InfrastructuremCement, Coal and Mining industry in emerging countries

Ü We are committed to expanding more in:m Food & Beveragesm Tunnels & Pipelinesm Building Control

Ü We are committed to coming back in:m Automotive PowertrainsmChemical Processes

n All together, the Group has taken up an aggressive and determined position in the new market, both from the viewpoint of commercial development and offer creation. I’m not going to spell out all these procedures as what I think is important, and you’ll see this in the press kit, is that we all have a very clear definition of the applications where we want to become leaders and applications where we are going to strengthen our position.

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…and on targeted machines

Ü Small machines for the retail, industry & building marketsmWashing Machines, Cutting, Mixingm Automated utilities & retail machines m Textiles, Packagingm Technical Vehicles, Conveying

Ü Large machines for the industry & building marketsm Press, Welding mMixer, Boilerm Packaging, Printing mHVAC, Lift, Hoisting

n One point is less well known, because we often speak of the automation of the large machines of prestigious industries, like automobiles, steel and paper-making, and that concerns awareness of the extremely numerous small machines around us, in industry, retail and buildings.

n It’s a machine that wraps your fish in the supermarket, a machine that washes your car, and there are washing machines in hotels and hospitals.

n Machines are ever-more numerous and Schneider Electric’s access through intermediaries strategy enables us to be in contact with all these small machines and puts our business on very firm foundation.

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Product Department LeaderProduct Department Leader

Offer Creation Offer Creation SiteSite

Offer Creation Offer Creation SiteSite

Offer Creation Offer Creation SiteSite

Our business model is designed to accelerate growth and efficiency

To the final customerTo the final customer

Partner BrandPartner Brand

n Another thing that it is particularly important to note is that we have a business model that can be multi-brand and compatible with technical partnerships.

n This schema works just as well for what we are doing with Digital, which we have just acquired, as it does for what we are doing with Toshiba, with whom we have a joint venture in speed variation.

ª We define what we call a product department, with a leader of this department, who relies on a series of R&D centers, preferably in each of the points of the triad – one in the United States, one in Europe and one in either Japan or China. This leader is responsible for its offer policy worldwide.

ª If it is a subsidiary like Digital, it can have an internal, specific channel with a partner brand, and for industrial automation it will also, systematically, have the Telemecaniquebrand.

ª The partner brand will have specific objectives, while theTelemecaniquebrand will have objectives of integration, overall vision and overall solutions. Of course, this helps to spread our R&D costs over a larger volume of distribution and, consequently, to invest more in R&D.

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We expand the scope of our expertise trough partnerships & acquisitions

Ü Schneider Toshiba Inverter JVm Between 0.5 kW and 630 kWmNow world leader with ~15% worldwide market sharem Partnership started in 1996m JV created in 2002: 60% Schneider Electric - 40% ToshibamR&D & Manufacturing

– in USA, France, China, Japan, New-Zealand

Ü Digital Electronics - Pro-Face brandmWorld leadership in Japan for all product developmentmWorldwide market share of ~20% in graphic panelsm Two market channels

– Telemecanique brand through Schneider Electric– Pro-Face brand through Digital Electronics

n One example: for speed drives of between 0.5 and 630 kW, where we are now world leader with a 15 % market share. The speed drive partnership with Toshiba started in 1996, the joint venture was created in 2002, with R&D and manufacturing in the United States, France, China, Japan and New Zealand.

n A second example is the Japanese company, Digital Electronics, with the working brand Proface. Leadership throughout the world was given to the Osaka team, to define the Schneider offer in the field of electronic human-machine interfaces. There are two distribution channels: the Telemecanique brand through Schneider Electric, and the Proface brand through Digital Electronics. This is to increase our coverage and also to have varied access strategies to our customers.

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ATS 01

LH4

ATV 18

ATV 28

ATV 31

ATV 58

ATV 11

ATV 08

ATV 38

ATV 68

ATS 48

ATS 46

ATV 16ATV 66

ATS 23

1996 base175 M EUR

2002 base325 M EUR

20030.2-2.2kw

0.18-15kw

0.37-55kw

0.75-315kw

75-630kw

0kw 630kw

4-1,200kw

0.75-75kw

Soft starters

Speed drives

Schneider Toshiba Inverter AC Inverters & Soft-Starters

n In speed drives we have achieved our leadership through a strategy of extremely rapid renewal in the electronic field and our electronic offers are steadily growing in number.

n We started in 1996 with combined sales of € 175 million for Toshiba and Schneider Electric . At that time, we had three product ranges under the Telemecanique brand, then we gradually developed, with each broken arrow corresponding to a new range, and also added width to our ranges.

n Today, we operate with 7 range,; each well stepped with the others. These are complete ranges each time, with renewal that means we put between one and three new ranges on the market.

n We have certainly caught our competitors napping with the speed at which we have worked and that’s how we reached our position as world leader.

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Schneider Toshiba InverterATV 11/NC1 success story

Ü Launched in September 2002 to replace the ATV 08 (Telemecanique) & S7/S7E (Toshiba), the ATV 11 / NC1 is breaking growth records

Performances, size & market price adaptation attract new customers

19.000

35.000

47.000

66.000

81.000

116.000

ATV082002

ATV112003

S72002

NC12003

ATV08 + S72002

ATV11 + NC12003

Telemecanique Brand

Toshiba Brand

Total

2003/2002 +75%

n Here is an example: the product brought out a year ago, called Altivar 11, replaced the Altivar 08, and we doubled volumes.

ª Under the Toshiba brand, we also doubled quantity and there you have the total, which gives an insight into how we work. We make around 700,000 speed drives a year, which puts us far ahead of our competitors.

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Our Partners for Collaborative Automation

Ü ACT ’L Ü Anyware Ü Arc Informatique Ü Citect Ü Digit International

Ü ECT InternationalÜ MDT SoftwareÜ Mynah TechnologiesÜ Prosoft TechnologyÜ SDProget

Ü Software LogisticsÜ Spectrum Control

n We also have a partnership strategy and, when you visit the exhibition, you will see a certain number of partners companies who developed offer with us and operate with our products. It is in the Schneider Electric sales force remit to form partnerships with local companies and our products are designed for these partnerships.