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Building a New Electric World

>

business

and sustainabledevelopment

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Schneider Electric set new performance records in 2006with a 17.6% increase in reported revenue and anoperating margin of 14.6%.These results confirm thatwe are on the right track. On the ground, this strategy isreflected in the global deployment of a lineup that hasbeen enhanced with new activities and services. Many of these stem from our powerful R&D, in which we investclose to 5% of consolidated revenue annually. Backed byour new 2 company program and buoyed by a favorableeconomic environment, our performance directlybenefits our customers, employees, shareholders andhost communities.

Record performancein 2006

Consolidatedrevenue(in billion)

Operating profit(in million and as a %of revenue)

Profit attributableto equity holdersof the parent(in million)

02 03 04 05 06 02 03 04 05 06

1,04011.5% 1,007

11.5%

1,28612.4%

1,56513.4%

2,00114.6%

422 433

824

994

1,309

Jean-PascalTricoire,Chairman of theManagementBoard and CEO

2,001million

1,309million

02 03 04 05 06

9.18.8

10.3

11.7

13.7

13.7billion

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18%of total revenue

27%of total revenue

8%of total revenue

47%of total revenue

Improving energy efficiencyTo manage energy costs and environmental impact,consumers, businesses and communities are looking for waysto consume less and make their facilities more energyefficient. Recommendations and solutions to enhance energyefficiency, which entails using less energy to get the sameresult (or the same amount to get a better result), will play anincreasingly important role in balancing supply and demandand in preserving the environment.

Developing automation everywhereHarnessing the powerful combination of automation and theInternet, building management and home automationsolutions open new horizons in energy savings. Already, theseinnovations have cut consumption by up to 30% at somecompanies. Smart metering and reliable supply systems helpmanufacturers reduce their energy bills by optimizingconsumption and limiting machine downtime.

Meeting demand whilemanaging impact

Energy efficiency: 1 billion inrevenue for Schneider Electric in 2006,with a growth target of 50% by 2008.

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Right next door, around the world

5

Asia-Pacific

23,000 employees

North America

26,000 employees

Rest of the world

7,500 employees

Europe

48,500 employees

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>Devisingsolutionsfor all needs

At Schneider Electric, we are committed to leveraging all our skills to enhancecustomers performance and satisfaction. All our customers, be they water orenergy suppliers, infrastructure managers, manufacturers, distributors,contractors, Original Equipment Manufacturers (OEMs), building operators orend users, have specific electricity and automation management needs. Ourhigh performance, innovative solutions provide a comprehensive response totheir requirements.

n 1worldwide in electricaldistribution and global

no. 2 in installationsystems and control.

n1worldwide in industrialcontrol and global no. 3

in automation.

n 1worldwide in criticalpower and cooling

services.

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Electrical distributionMaking electricity available, reliable and effectiveBecause customers have a wide variety of electricity needs,Schneider Electric offers integrated solutions to transform

electricity and distribute it intelligently, to provide a reliable,uninterrupted power supply, and to give electrical wiringVoice, Data, Image (VDI) network capabilities.

Automation & controlControlling and monitoring equipment and buildings andprotecting people and assetsSchneider Electric offers a broad array of intelligent,networked automation architectures and supervision systemsfor all types of infrastructure. With devices that can detectcolors or shapes, turn machines on and off, regulate abuildings temperature and more, our solutions make itpossible to manage a plant, building or home in the mosteffective way possible. Our lineup also includes customsensors for specific applications.

Critical power and cooling servicesEnsuring a reliable, uninterrupted power supplyFor an increasing number of sensitive applications, such as inhospitals and data centers, the slightest disturbance,overvoltage or variation in amperage can have devastatingconsequences. Critical power and cooling solutions providean effective response for customers who need a reliable,uninterrupted power supply. Following the acquisition ofUS-based APC, we are now the world leader in critical powerand cooling services.

Comprehensive, high-performance,cost-effective solutions

Energy efficiency means guaranteeing performance and comfort while taking environmental issues intoaccount.With our products, systems and services, customers can produce the sameamount or more while consuming less,with savings of 10% to 30%.

>

Servicesadded intelligenceeverywhereSchneider Electric supportscustomers throughout their facilitieslifecycle to optimize performance,save energy, control costs andmanage risk. We are constantlybuilding on our extensive range ofservices, which include training,installed base maintenance andupgrading, extension andoptimization projects andengineering, audits and consulting.

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2006revenue bybusiness

Electric distribution

Automation & control

Critical power & coolingservices

32%

63%5%

2006revenueby market

Energy and Infrastructure

Industry

Buildings

Residential

16%

37%

32%

15%

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Les enjeux du nouveau monde lectrique Performance, scurit, fiabilit, conomie 8_9

3 Buildings 4 Residential

> Key sectors: office buildings,shopping centers and stadiums;service, commercial and industrialbuildings.Our mission: supply and distributeelectricity; control and managelighting, ventilation, elevators andaccess; harness electricalnetworks for data exchange;enable remote multi-sitemanagement; guarantee energyefficiency and uninterrupted powersupply.

> Key sectors: The marketvaries widely, with an emphasison housing developments,apartment buildings or singlefamily homes depending on theregion.Our mission: leverage localexpertise and brands to delivereasy-to-install solutions forelectrical distribution and homeautomation that comply withlocal standards and habits.

ability in four core markets9http://www.markets.schneider-electric.com

8_9

3

4

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Aligninggrowth andresponsibility

As part of the new 2 company program for 2005-2008, Schneider Electric hasreaffirmed its ambition to be a great company to do business with, a greatplace to work, a great world partner and a great investment. Because new 2brings new energy to our drive towards profitable growth, puts efficiency intoeverything we do and cultivates our team members enthusiasm, it is afantastic growth lever for our Company and our customers.

31 %of revenue generatedin emerging markets

in 2006.

42 %of revenue generatedby new activities.

7.01/10Planet & SocietyBarometer

performance in 2006.

0

>

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Speeding up innovationInnovation at Schneider Electric is primarily devoted tomaking products, systems and services safe, easy to installand use and futureproofall with a clear focus on customerexpectations. In both high-tech countries and emergingmarkets, our worldclass research centers forge partnershipsto meet their specific needs with university and privatelaboratories, as well as with industry leaders such asMicrosoft, IBM, Tata Elxsi, Toshiba and Fuji Electric.

Adding new activities to our portfolioThe new activities that complement our core businessesaccount for 42% of revenue and offer excellent growthprospects. These activities have given us an unparalleledlineup in four key areas: critical power and cooling services,installation systems and control, custom sensors and buildingautomation.

Becoming more efficient and competitiveOur expansion into fast-growth regions has increased thepercentage of revenue from emerging markets to 31% from18% in 2001, thanks to our new leadership positions inChina, India, Southeast Asia, Africa, Latin America and theMiddle East. We are re-balancing our manufacturing andlogistics base, globalizing our resources and deploying anoperating excellence program to become more efficient andcompetitive over the long term.

Acting responsibly At Schneider Electric, growth goes hand in hand withsustainable development. Not only can our solutionscontribute to customer performance, but they can also saveenergy and help bring electricity to the 1.6 billion who do nothave access to electric power. We take a very active approachto improving our corporate social responsibility performanceand track our progress regularly through our Planet & SocietyBarometer.http://www.barometer.schneider-electric.com

Better, faster, further

R&Din figures Around 5% of revenue devoted to

R&D 6,500 R&D team members Nearly 50 product development

centers in 25 countries

Critical power& cooling servicesAPC: a structuring

acquisition

In 2006, Schneider Electric made a majorstrategic move into critical power andcooling services by launching a friendly bidfor US-based American Power Conversion(APC). The transaction, finalized on February14, 2007, has made us the world leader inthis promising $7 billion market, which is atthe heart of electrical distribution.

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Commitmentto all ourstakeholders

Total customer satisfaction is our prime objective. We are also committed toprotecting the environment and acting responsibly towards our employees, thecommunity and our shareholders. Our unwavering focus on business, social andenvironmental performance, based on both ethics and value creation, translatesinto specific targets and tangible results.

30 %Target increase in thepercentage of verysatisfied customersby 2008.

90.6 %Percentage ofmanufacturing andlogistics sitescertified ISO 14001at end-2006.

84 %Percentage of sites thatprovided support for205 associationsaround the world in2006.

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The right service in the right placeOur customers have access to call centers, online diagnosticsand support services, a global e-catalog, downloadablesoftware, and online information and training. In each country,we offer training to meet the specific needs of our different

customer profiles, including electricians, engineering anddesign firms, contractors, operators and maintenancetechnicians. Our goal is to help them be as effective aspossible every day, in every way.

Specialists talking to specialistsDedicated organizations and services have been created tomeet customers specific expectations. CustomerInternational Support, for example, offers OEMs spare partsdelivery worldwide and after-sales service at user sites.

A similar unit ensures global strategic accounts that they willget the same quality service at every location around theworld.

Target for end-2008:992 RoHS-compliant product ranges representing 80% of revenue.>

Environment

exceeding requirementsSchneider Electric has gone beyond therequirements of the European Restrictionof Hazardous Substances (RoHS)Directive since it took effect in 2006.Not only have we brought all productsdirectly concerned into complianceworldwide, but we have also committedto eliminating 6 hazardous substancesfrom our low voltage lineup by end-2008.www.rohs.schneider-electric.com

Leveraging all our skills toimprove customers performance

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Employees: promoting talent, health anddiversitySchneider Electric is committed to developing its local andinternational teams, because their skills make the difference.Diversity is a source of creativity that expresses itself throughmultidisciplinary, multicultural teams. We encourage mobilityand give teams a stake in collective performance through

profit-linked incentive plans, employee share ownership andother programs. This motivating policy helps us attract andlock-in the best people in all of our host countries. Lastly,concerning our major priority of occupational health andsafety, a worldwide program deployed in 2006 led to a 38%reduction in the lost time injury rate.

Community: helping out at homeSchneider Electric encourages solidarity with hostcommunities in the 106 countries where it operates. We work

side by side with our employees to provide emergencyassistance to victims of natural disasters and to help themrebuild. In the regions devastated by the December 2004tsunami, for example, we helped restore the power and waternetworks and supported the construction of schools andorphanages. Around the world, we also pursue ongoingprograms to provide youth opportunities through educationand training. In France, we have welcomed more than 4,000young people on work-study contracts, while in Turkey, wehave provided financial support to allow 50 young women to

continue their studies.

Ringing in the newschool yearin Indonesia and ThailandMore than 800 Indonesian children startedthe 2006 school year in four new schools,

leaving their temporary tent schoolsbehind. These establishments, built orexpanded in partnership with IndonesiasMinistry of Education and Cultural Affairsand the Nurani Dunia association, werepart of a Schneider Electric-sponsoredreconstruction program. In Thailand, BaanHin Lad, a three-storey school with 18classrooms, was rebuilt to house thelargest number of schoolchildren possible(646 in all) in partnership with World VisionFoundation of Thailand.

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Schneider Electric SA 43-45, boulevard Franklin-RooseveltF-92505 Rueil-Malmaison Cedex (France)Phone: +33 (0) 1 41 29 70 00

Fax: +33 (0) 1 41 29 71 00http://www.schneider-electric.com

Incorporated in France with issued capitalof 1,931,467,624Listed on the Euronext Paris MarketRegistered in Nanterre,RCS 542 048 574Siret n: 542 048 574 01775

April 2007 M K T E D B 2 0 0 7 E N

30 582

Concept: Schneider Electric Communication Department - Design: - Photo credits: Agence Image in Production, Agence VU, FredChristophorides, Getty images/National Geographic Christophe Wilhelm, Groupe Manitoba, Franois Mori, Ludovic Muller, Ambroise Tezenas- Illustrations: ArtPresse - English text: ICC