Half-Year 2004 Earnings July 29, 2004 Building a New Electric World

2 Automation & Control Controlling, monitoring and protecting machines and equipment  30% of sales - No. 2 worldwide Electrical Distribution Supplying electricity reliably and in complete safety  70% of sales - No.1 worldwide We are a world leader in Power & Control Breakdown of estimated 2004 core business sales Low Voltage No.1 worldwide Industrial Control No.1 worldwide Medium Voltage No.2 Ultra Terminal No.2 PLCs No.3

3 Optimizing safety, comfort, productivity, availability, operating costs and communication Our solutions, products and services serve the needs of 4 markets 31% of sales 17% of sales 41% of sales 11% of sales Residential Single and multi-family dwellings Buildings Offices, Retail outlets, Factories, Hotels, Hospitals, etc. Industry Food & Beverage, Automotive, Pharmaceuticals, Electronics, etc. Energy & Infrastructure Water treatment, Telecommunications, Data centers, Airports, Tunnels, etc.

4 Our comprehensive, differentiated lineup offers a solution to every customer need Low VoltageMedium Voltage Industrial Control PLCs Secured Power Building Automation Services Ultra Terminal

5 International HQ: Barcelona 6% of sales 5,000 employees North America HQ: Chicago 21% of sales 16,500 employees Breakdown of estimated 2004 sales and number of employees Growth platforms Building Automation (TAC), Secured Power (MGE UPS) 9% of sales 5,000 employees Asia-Pacific HQ: Hong Kong 16% of sales 14,000 employees Europe HQ: Paris 48% of sales 42,500 employees We have developed forefront positions in the global marketplace  €10 billion in sales  83,000 employees worldwide

6  A world leader in Power & Control  A premium portfolio of products and brands & high investment in Research and Development  A business model based on flexibility and the ability to form partnerships  A balanced worldwide presence and forefront positions in emerging markets  Skilled and committed teams & young management  Strong operating performance and very solid financials Schneider Electric is fully leveraging the worldwide economic recovery and the high potential of its accessible markets Our strengths are unique in the industry

Highlights Strategy and Outlook Review of Operations First-Half 2004 Financial Results

8  Sharp rebound in North America and Western Europe +5% supported by our growth plans  Remarkable performance in emerging countries +21%  Strong organic growth +9%  Significant contribution from acquisitions (€556 million)  TAC - Building Automation  MGE UPS Systems - Secured Power  Clipsal - Ultra Terminal, Asia-Pacific Record growth in sales: +18% First-half 2004 highlights Growth in half-year 2004 sales: +18%

9 High-quality acquisitions in high-potential businesses... Targeted segments  Human-Machine Interface  Building automation & security  Ultra Terminal  Secured power  Sensors for repetitive machines Companies acquired  Digital Electronics  TAC Andover Controls  Clipsal  MGE UPS Systems  Kavlico Growth +22% +10% +8% +5% +7% +14% First-half 2004 highlights Andover Controls and Kavlico acquired in first-half 2004 Ü First-half 2004 organic growth in orders Ü Ü

10 …enabling us to enlarge our accessible markets We have enlarged our accessible markets by 50% thanks to our acquisitions First-half 2004 highlights Accessible markets (€bn) Automation specialties Ultra Terminal Asia-Pacific Secured power (UPS) Building Automation & Security June 2004Dec. 2001

11  Record sales growth +18%  Sustained improvement in gross margin  In line with our NEW2004 target  Driven by our productivity plans  Still limited impact of higher raw materials prices  Less unfavorable but still significant currency effects (-0.6 pts)  Clear improvement in operating margin +1.1 pt Growth in half-year 2004 operating income: +30% Strong growth in operating income: +30% First-half 2004 highlights

12 1H 2004YOY € m% of sales Change  Sales4,984+18%  Operating income % +30%  Net income before3306.6% +23% goodwill amortization  Operating cash flow % +19% An excellent first-half 2004 First-half 2004 highlights At constant exchange rates, first-half 2004 operating margin would have reached 12.1%

Highlights Strategy and Outlook Review of Operations First-Half 2004 Financial Results

14 Review of operations As part of our NEW2004 program Strong growth in earnings thanks to our “Growth & Efficiency” plans  Focus on organic growth  Ability to seize market opportunities  Mobilization on targeted businesses Ultra Terminal, Automation, Services  High R&D investment  Assertive expansion in new growth platforms driven by high- quality acquisitions  Systematic deployment of productivity plans

15 Q1Q2Q3Q4Q1Q2Q3Q4 Q1Q (Quarterly sales change compared to the same quarter last year) A winning focus on organic growth Review of operations

16 Sustained sales growth in all our operating divisions 1H 2004 % Change (€ m)OrganicCurrent Europe2, %+4.3% North America1, %-3.7% Asia-Pacific %+37.7% Rest of the world %+19.7% Growth Platforms418n/a n/a Total4, %+17.7% Review of operations

17 Review of operations  Recovery of our markets in North America and Western Europe  Growth potential in emerging countries  Need for environmental and energy management  Customer needs linked to their globalization and their outsourcing  Growth plans targeted by market segments and distribution channels  Sustained expansion and forefront positions  Dedicated energy efficiency and water treatment solutions  Added-value services: diagnosis, maintenance, performance of installations An ability to seize market growth opportunities

18 Review of operations Our dedicated growth plans in North America Organic sales growth - North America Powerpact H MCCB Motorpact MV Motor controller  Major Metro Initiative  Deploy in largest metropolitan areas dedicated sales resources & customer support for offices, schools, infrastructures (water, metro)  Small Project Express Program  Gain market share in small electrical & control projects with local stock, quick quotations & expert advice  Critical Power Competence Center - data centers & targeted OEMs  Meet growing needs with dedicated teams and systems based on our PowerLogic & Transparent Ready offers

19  Industry development plan  Numerous launches of innovative products  Development of applications centers dedicated to OEMs: elevators, hoisting, packaging, refuse handling  Residential growth plan  Launch of dedicated ranges in Ultra Terminal  Success of growth initiatives with orders up +10% Review of operations Our dedicated growth plans in Western Europe Organic sales growth - Europe Prisma + Merlin Gerin switchboard Launch of our dedicated Ultra Terminal, Building Security, VDI solutions AVT31 VVD

20 Remarkable growth in all emerging countries led by forefront positions Review of operations Greater China +32% India +40% South America +21% Eastern Europe +24% Japan/Korea +22% Other Asia/Pacific +10% Africa/Middle East +19% % of total sales Production units Employees 27% 75 21,900 20% 59 15, % +46% First-half 2004 organic growth in sales

21 Review of operations Sustainable development: we are part of the solution  We help to significantly reduce our customers’ energy consumption  Remote energy monitoring: to control electrical installations -10%  Variable speed drives: to monitor high-energy use applications -30% The Aleo (Air Liquide Energy Optimization) program: reduce compressor motor power consumption by adjusting operation to compressed air flows  Transparent Ready: to optimize Buildings energy management -20%  Public lighting management-40% Merlin Gerin’s innovative Lubio solution adapts light intensity to local conditions and needs  We have dedicated solutions for water treatment Savings

22 Review of operations Our power management solutions  A fast-growing worldwide market  Energy costs are a major expense in running a business  Power system uptime is becoming more critical for companies  Schneider Electric PowerLogic® systems are the global leader in power management & control solutions  Innovative, web-enabled systems and services to give insight into all facility operations  Proven return on investment with savings through reduced utility costs and optimized equipment utilization  Reference: Mercedes-Benz USA uses PowerLogic® systems  Have the necessary information to diagnose power problems and increase production time  Selected Schneider Electric offering for its superior ability to perform power quality and disturbance monitoring functions PowerLogic : control the cost, quality and reliability of our electric power

23 Review of operations Our dedicated solutions for water treatment  A high growth worldwide in the coming years  All countries have to improve water management  Increasing environmental care leads to stronger regulations  As a preferred supplier to the world leaders, Schneider Electric offers guaranteed water quality and uninterrupted supply  Close relationships are established with world leaders Veolia and Suez, our key strategic accounts  We propose systems to monitor electricity consumption & services to optimize operations  Reference: Kranji Newater in Singapore  Provides high purity water to Singapore inhabitants and industries from effluent water (reverse osmosis technology)  Selected Schneider Electric for its wide offering ensuring electricity availability together with the control of pumps and processes

24 Mobilization on targeted businesses: Ultra Terminal Review of operations  We are leveraging the offering of our Clipsal and Lexel acquisitions  To offer our customers a complete set of products  To grow geographically and penetrate new countries  We are leveraging Clipsal and Lexel distribution channels to push the rest of our offering  We are reaching a +14% growth in wiring devices and home control orders  We are increasing our positions in Residential, a more local, less cyclical market

25 Review of operations Mobilization on targeted businesses: Services  A strong development in services: 7% of business today, with orders growing +12%  Our two strengths: our wide installed base & our legitimacy with customers  A dual track strategy Ê Leverage installed base support services Through our electrical maintenance & operations contract for two plants in Mexico, General Motors benefits from cost savings, reduced scrap and improved process Ë Expand energy and industrial performance services Through our solution based on the Ordinal MES software and the Telemecanique Unity platform, cattle food maker Unicopa increases productivity, improves and secures production processes, while complying with traceability regulations

26 Review of operations Mobilization on targeted businesses: Automation Simply Smart  Focus our development in PLCs  Target selected segments with an applications-driven offering  Invest in programming environment: Unity platform launch  Accelerate growth in small and distributed PLCs (Low End Control)  …while embedding more automation in distributed products  Differentiate in Human Machine Interface, drives, sensors, motor starters  Leverage technological competitiveness in Japan  …and developing supervisory software solutions  MES solutions: first customers with Ordinal software  Digital solutions for automation and production engineering: partnership with Dassault System in Dextus

27 Review of operations More than 5% of sales invested in Research and Development  Leverage on strong R&D centers close to very demanding markets: Japan, China, United States, France  Leverage the potential of emerging and competitive countries  Grow our R&D centers in Bangalore (India), Shanghai (China) and Monterrey (Mexico)  Leverage technological know-how in Japan  Consolidate our French power protection and control R&D sites in a single and worldwide center based in Grenoble USA Japan China Nordic France Mexico India Germany

28 Review of operations Systematic deployment of our productivity plans as part of NEW2004  Purchasing  Target of 5% productivity gain met in first-half 2004  Setting up of international sourcing teams in Shanghai, Bangalore and Eastern Europe  Lean Manufacturing  Deployment in 108 plants at the end of June 2004  Direct labor cost average savings in line with our targets  Globalizing and outsourcing of IT  Outsourcing plan in Europe and installation of shared management applications worldwide  Partner selected, contract signing scheduled for year-end  Optimizing support functions  Overhead reduction plans underway in France: full impact of savings excepted in 2005  Launch of a plan to adjust headcount in corporate functions, R&D and marketing: reduction in staff to be effective in 2005

29 Review of operations Extensive deployment of Six Sigma program 197 BB 844 GB Jan-02Jun-02Jan-03Jun-03Jan-04Jun-04 BB GB Objectif BB Objectif GB Number of Black Belt & Green Belt trained or in training

Highlights Strategy and Outlook Review of Operations First-Half 2004 Financial Results

31 First-half 2004 financial results First-half 2004 financial highlights  Record growth in sales of +18%  Strong organic growth: +9%  Significant contribution from acquisitions: €556 million  Clear improvement in operating margin of +1.1pt  Still significant unfavorable currency effects: -0.6 pts  Strong industrial productivity gains: €78 million  Stepped up marketing investments in growing countries  Solid margins of recent acquisitions  Strong growth in earnings  Operating income: +30%  Net income before goodwill amortization: +23%  Free cash flow of more than 5% of sales thanks to disciplined control over capital employed

32 (€ m) 4,984 4,236 Organic Currency effects Acquisitions/ divestitures Average €/$ rate: 1.23 (1.10 in 1H 2003) 1H H 2004 Record sales growth First-half 2004 financial results  %Change+8.6%-4.0%+13.1%+17.7%

33 (€ m) 1H 20041H 2003%Change Sales4,9844,236+18% Gross margin 2,1301,776 as a % of sales42.7%41.9%+0.8 pt Operating income % as a % of sales 11.5% 10.4%+1.1 pt Financial expense, net(28)(21) Income from continuing operations % as a % of sales10.9% 9.9%+1.0 pt First-half 2004 financial results Simplified income statement (part 1)

34 Actual Target Gross margin = sales less cost of sales (including manufacturing base costs) Improvement in gross margin in line with the target (% of sales) Excluding currency effects, gross margin of 43.0% First-half 2004 financial results

35 1H H 2003 Volume & price Net industrial productivity Perimeter Currency effects Base costs Strong growth in operating income First-half 2004 financial results %Change+26.9%-11.6%+14.5%+29.8% Change excluding currency and perimeter effects (€ m)

36 (% of sales) Operating margin by geographic division 1H H 2004 First-half 2004 financial results 10.4% excl. currency effects 12.4% excl. currency effects

37 (€ m) 1H H 2003%Change Income from continuing operations % Exceptional items(38)(31) Income taxes(160)(106) Other (minority interests, affiliates)(15)(13) Net income before goodwill % Amortization of goodwill(104)(79) Net income after goodwill % First-half 2004 financial results Simplified income statement (part 2)

38 Strong growth in earnings per share (in €) 1H 20041H 2003 % Chg EPS before goodwill amortization % EPS after goodwill amortization % Average number of shares (millions) First-half 2004 financial results After having bought back 1.8 million shares in first-half 2004, the Group intends to continue buying back shares and cancel them

39 1H 20041H 2003 Net cash provided by operations Capital expenditure - net(123)(129) Change in working capital requirement(151)(98) Free cash flow (before dividends) (€ m) First-half 2004 financial results Solid financials June 30, 2004Dec. 31, 2003 Shareholders’ equity7,6267,734 Net debt/(cash)485(399) Debt rating (Standard & Poor's)AA

40 (€ m and % of sales) Free cash flow ( before dividends) % of sales 2.3% 5.4% 5.5% Actual Free cash flow: operating cash flow - net capital expenditure - change in working capital First-half 2004 financial results High free cash flow

41 Free cash flow (from operations) 269 Remunerate shareholders (dividends 244 (i), share buybacks 96) 340 (Main elements of cash flow statement in € m) Make acquisitions (including MGE UPS and Kavlico) 805 Change in net cash 883 (i) excluding the equalization tax to be paid in July 2004 First-half 2004 financial results Solid financial resources to foster growth and remunerate our shareholders

Highlights Strategy and Outlook Review of Operations First-Half 2004 Financial Results

43 We have an aggressive growth strategy combining innovation and differentiation Our strategy Expand our geographic coverage Broaden and differentiate our lineup Deepen our positions in the Residential market and in Services Innovate and develop new growth platforms

44 Our growth strategy  Broaden & differentiate our lineup  Industry: reinforce our presence  Buildings, Energy & Infrastructure: enhance our coverage through micro segmentation  Residential: acquire positions as strong as in the Buildings market  Geographic coverage in Ultra Terminal (e.g. Clipsal)  Dedicated lineups (e.g. Duoline range)  Expand our geographic coverage by investing in fast-growing countries  China, Eastern Europe, India, Brazil  Develop new growth platforms  Building automation & security  Secured power  Energy management  Specific segments in automation Our strategy

45 Our selection criteria for acquisitions  Sector’s attractiveness  Long-term growth prospects and profitability  Potential for related services  Strategic fit with our businesses  Consistent business model and market access channels  Ability to integrate and synergies with our operations  Target’s quality  Well-established market position or specific technology  Good level of profitability  Ability to create value: return on capital employed covers cost of capital within a maximum of three years Our strategy

46 Outlook for 2004  We are significantly outperforming our end markets in emerging countries and our growth action plans amplify the rebound of our business in mature countries  Thanks to our excellent fundamentals, we are confident in our strong ability to grow and create value for our shareholders  In light of current market conditions and based on an exchange rate of $1.25/€, we revise upwards our outlook for 2004:  Sales growth > +15%  Increase in operating income > +25% i.e. +1 point in operating margin Outlook for 2004

Building a New Electric World