8 Annual Shareholders

Transcription

1 8 Annual Shareholders Meeting 1. Report of the board of directors to the Combined Annual and Extraordinary Shareholders Meeting Ordinary Meeting Extraordinary Meeting Report of the Vice-chairman independent lead director of the board of directors (for the period January-December 2015) Exhibits to the board of directors report : internal regulations of the board and charter of the Vice Chairman Lead Independent Director Internal regulations of the board of directors of Schneider Electric SE Charter of the Vice-Chairman independent lead director Special report from statutory auditors Statutory Auditors special report on regulated agreements Statutory auditors report on the authorization to make grants of free shares, existing or to be issued, subject to performance conditions, as the case may be Statutory auditors report on the authorization to grant options to subscribe for or to purchase shares Statutory auditors report on the issuance of shares or securities giving access to capital reserved for members of the Company Savings Plan Statutory Auditors report on the issuance of shares or securities giving access to capital reserved for a category of benefi ciaries Draft resolutions Ordinary Meeting Extraordinary Meeting Ordinary Meeting REGISTRATION DOCUMENT SCHNEIDER ELECTRIC 291

2 8 REPORT ANNUAL SHAREHOLDERS MEETING OF THE BOARD OF DIRECTORS TO THE COMBINED ANNUAL AND EXTRAORDINARY SHAREHOLDERS MEETING > 1. Report of the board of directors to the Combined Annual and Extraordinary Shareholders Meeting 1.1 Ordinary Meeting Approval of the parent company financial statements First Resolution We ask you to approve the transactions and fi nancial statements for the year 2015, as presented, which show a net loss of EUR52.6 million. This loss is a result of the policy implemented by your company since 2013 to strengthen the company s equity from its whollyowned subsidiary Schneider Electric Industries SAS. In effect, your company, which has EUR10 billion in equity, opts to leave at the level of Schneider Electric Industries SAS, which owns all of the entities which form the Group, any dividends and fi nancial income that the latter receives from its own subsidiaries in order to allow it to have an appropriate level of equity. Approval of the consolidated financial statements Second Resolution We request that you approve the transactions and consolidated fi nancial statements for the year 2015, as presented, which show net income for the Group of EUR1, 407 million and an adjusted net income from non-recurring items (asset impairment, restructuring costs, gains and losses linked to business disposals ) of EUR2,119 million. Distribution: appropriation of income, withholding on share premiums and setting of a coupon of EUR2 per share - Third Resolution We recommend offsetting the loss from the fi nancial year and the losses carried forward on issue premiums associated with the contribution of Legrand shares. We also recommend a distribution of EUR2 per EUR4 par nominal value share, which represents a distribution rate 53.2% of the Group s net adjusted income. It will be paid on May 9, 2016 on 588,734,472 shares with dividend rights on January 1, 2015 that made up the capital on December 31, No dividend will be paid on shares held in treasury by the company on the payment date. This distribution which amounts to EUR1,177,468,944 shall be drawn from issue premiums relating to the transfer of Legrand shares. The distribution will be paid on May 9, 2016, according to the following schedule: Coupon ex-date Thursday, May 05, 2016 Record date Friday, May 06, 2016 Coupon payment date Monday, May 09, 2016 For individual shareholders resident for tax purposes in France, the distribution of EUR2 per share constitutes contribution repayment. On this basis, it cannot be imposed for income tax, in application of Article of the French Tax Code, because all earnings and reserves other than the legal reserve have otherwise been allocated. Shareholders are invited to consult their usual advisors for any further precision regarding the applicable tax regime. Dividends paid by Schneider Electric SA in respect of the three most recent fi nancial years are as follows: EUR Net dividend paid per share in EUR Agreements regulated by articles L and L Fourth Resolution We ask you to take note of the statutory auditor s report on regulated agreements and obligations prepared in accordance with Article R of the French Commercial Code regarding the implementation during the fi nancial year of agreements and obligations already approved by the Annual Shareholders Meeting. These agreements and obligations mainly concern the compensation of the Lead Director and the status of Jean-Pascal Tricoire and Emmanuel Babeau REGISTRATION DOCUMENT SCHNEIDER ELECTRIC

3 ANNUAL SHAREHOLDERS MEETING REPORT OF THE BOARD OF DIRECTORS TO THE COMBINED ANNUAL AND EXTRAORDINARY SHAREHOLDERS MEETING Consultation of shareholders on individual Group compensation of corporate officers Fifth and Sixth Resolutions In accordance with the recommendations of the AFEP/MEDEF corporate governance guidelines, you are asked to give a favorable opinion on the compensation elements due or awarded to your company s corporate offi cers for the 2015 FY. These elements are presented in the tables below, and are further detailed in Section 3.7 of the registration document. By the Fifth Resolution you are asked to give a favorable opinion on the elements of Mr. Jean-Pascal Tricoire s 2015 compensation and by the Sixth Resolution on those of Mr. Emmanuel Babeau. You are reminded that at its meeting held on February 18, 2015, the board of directors decided to remove the right to a defi ned benefi t pension scheme (Article 39) for corporate executive offi cers, and leave them to deal personally with building up their additional pension. For this purpose, the board of directors authorized complementary payments (see below) whose amount set by the board leads to reducing by half (52%) the gross value of what the persons concerned would have received from the supplementary pension scheme that has been eliminated. Moreover, the decisions of the board of directors result in a reversal of provisions of EUR17 million in the 2015 FY accounts and represent, at long term, savings then estimated at EUR18 million in compulsory levies for the supplementary pensions of the two corporate executive offi cers, supposing that they both retire on reaching the age of 62. > IMPACT OF THE DECISIONS OF THE BOARD OF DIRECTORS CONCERNING RETIREMENT: AN IMMEDIATE GAIN OF EUR11.1 MILLION 17.2 m Reversal of accrual 2015 > PROJECTED IMPACT FOR THE COMPANY ON THE REMOVAL OF THE SUPPLEMENTARY PENSION SCHEMES FOR MR. TRICOIRE AND MR. BABEAU Change decided in February 2015 has resulted, on a non recurring basis, in a gain for the company through a reversal of provision and, on a recurring basis, in savings for the company equal to the difference between cost of annual accrual and complementary payments M - 0.8M - 0.8M - 0.8M - 0.8M Pension accrual* 11.1M Reversal of persion provision of exceptional paymets** Complementary payments*** * Supplementary pensions (article 39) provision ** Reversal of accrual net of exceptional components paid by the company, including full IFRS2 charge of free shares and 2015 social charges *** Annual fi xed and target variable complementary payments and social charges 11,1 m Immediate gain m Exceptional payments* * Exceptional payments in cash and through allocation of shares, including social charges REGISTRATION DOCUMENT SCHNEIDER ELECTRIC 293

4 8 REPORT ANNUAL SHAREHOLDERS MEETING OF THE BOARD OF DIRECTORS TO THE COMBINED ANNUAL AND EXTRAORDINARY SHAREHOLDERS MEETING We draw your attention to the fact that total compensation and payments to Mr. Jean-Pascal Tricoire and Mr. Emmanuel Babeau for the year 2015 include exceptional, non-recurrent elements. The annual recurrent remuneration and payments for retirement are detailed in tables below. > ANNUAL FIXED AND VARIABLE COMPENSATION PLUS LONG-TERM INCENTIVES FOR MR. TRICOIRE (IN THOUSANDS OF EUROS) FOR THE YEARS 2013 TO 2016 > ANNUAL FIXED AND VARIABLE COMPENSATION PLUS LONG-TERM INCENTIVES FOR MR. BABEAU (IN THOUSANDS OF EUROS) FOR THE YEARS 2013 TO ,184 1, ,546 1, ** 2,339 3,170 3,567 2,476 Fixed part Variable part Long term incentives* 1,443 1,500 1,213 1,235 * On the basis of an IFRS 2 valuation estimate of performance shares. ** Based on a target compensation ** > COMPLEMENTARY PAYMENTS (FIXED AND VARIABLE PARTS) FOR RETIREMENT FOR MR. BABEAU (IN THOUSANDS OF EUROS) FOR THE YEARS 2015 AND 2016 Long term incentives* Variable part Fixed part * On the basis of an IFRS share valuation estimate of performance shares. ** Based on a target compensation > COMPLEMENTARY PAYMENTS (FIXED AND VARIABLE PARTS) FOR RETIREMENT TO MR. TRICOIRE (IN THOUSANDS OF EUROS) FOR THE YEARS 2015 AND Fixed part Variable part 2016* * Based on a target compensation * Fixed part Variable part * Based on a target compensation REGISTRATION DOCUMENT SCHNEIDER ELECTRIC

5 ANNUAL SHAREHOLDERS MEETING REPORT OF THE BOARD OF DIRECTORS TO THE COMBINED ANNUAL AND EXTRAORDINARY SHAREHOLDERS MEETING Mr. Jean Pascal Tricoire, Chairman and CEO I Elements of compensation due or awarded for the past FY Amounts submitted to the vote Description 1) Fixed portion 950,000 Gross annual fi xed compensation of 950,000 from January 1, 2015 to December 31, 2015 set by the board of directors on February 18, This compensation remains unchanged since ) Variable portion 1,213,182 The target variable portion amounts to 130% of fi xed compensation. The variable portion may vary from 0 to 260% depending on achievement of objectives. In 2014 the target variable portion amounted to 120%, with a possible variation from 0 to 240%. Explanations on the executive offi cers compensation policy and evolution of this compensation are set forth on page 151. As a result, it has been increased to strengthen : Mr. Tricoire s position in relation to compensations for CEOs of CAC40 companies, as well as the market for CEOs of international companies (US and European) in the Group s activity sector defi ned by a panel; the variability of Mr. Tricoire s total compensation in relation to the company s performance. 3) Complementary payments Exceptional payment Annual complementary fi xed portion 2,150,000 and 650,000 for 11,700 free shares according to IFRS valuation 1,500,000 for 27,300 free shares according to IFRS valuation 182,000 At the Board meeting held on February 16, 2016, variable portions for 2015 paid in March 2016 were set at 127.7% of the fi xed portion which represents an achievement rate of 98.23% on a base 100. This calculation is broken down as follows: 1) In connection with Group criteria (75%), the variable portion amounted to 93.7% of the fi xed portion, i.e. an achievement rate of 96.1% on a base 100; Group criteria included: A Group economic criteria component. These criteria are based on organic sales growth (15%), adjusted EBITA (15%) and cash generation targets (15%); A component comprising criteria that are (i) in line with the Schneider is O n company program (25%), evaluated amongst other things through customer satisfaction objectives (5%), services development (10%), development and succession plan of key talent (10%) as well as (ii) corporate social and environmental responsibility assessed through trends in the Planet & Society barometer (5%); 2) With respect to individual objectives (25%), which are specifi c objectives and, wherever possible, quantifi ed, the board set the variable portion at 34 %, i.e. an achievement rate of 104.6% on a base 100. Complementary payments intended to take account of the fact that, following the decision of the board of directors on February 18, 2015 to remove the benefi t from Article 39 defi ned benefi t pension scheme for corporate executive offi cers, Mr. Tricoire is personally responsible to build up his additional pension. To determine this authorized complementary remuneration, the board of directors relied on the work of an independent expert, namely the fi rm TOWERS WATSON. Besides, the Board of Directors also ensured that this payment was in line with shareholders interests. Accordingly, as regards: i) The exceptional component, which constitutes a one-off lump sum payment to build up a pension, it provided that payment be made half in cash and half in the form of company shares subject to acquisition/holding periods of fi ve years. 11,700 free shares were granted under the French plan to Mr. Tricoire in his capacity as Chairman and CEO of Schneider Electric SE 27,300 free shares were granted under the International plan to Mr. Tricoire in his capacity as Schneider Asia Pacifi c CEO. This payment in share allows to correlate one-off lump sum to the company s long-term development through the evolution of its share price and to create a retention element. ii) The annual complementary component, it provided a split it into a fi xed part and a variable part dependent on performance criteria. This variable part is aligned in terms of rate (target rate of 130% of the fi xed complementary part and variable part varying from 0 to 260%) and criteria of the annual variable part (see above) REGISTRATION DOCUMENT SCHNEIDER ELECTRIC 295

6 8 REPORT ANNUAL SHAREHOLDERS MEETING OF THE BOARD OF DIRECTORS TO THE COMBINED ANNUAL AND EXTRAORDINARY SHAREHOLDERS MEETING Annual complementary variable portion 4) Performance shares Amounts submitted to the vote Description All these complementary payments are intended to enable Mr. Tricoire to build up his pension. He formally agreed to redirect these complementary payments, net of taxes, to investment vehicles devoted to fi nancing his additional pension. The decision of the Board of Directors to remove the benefi ts of the two corporate executive offi cers supplementary pensions has notably resulted in a provision reversal of EUR 17 million in the 2015 accounts for corporate offi cers. It will generate substantial savings for the company, and in turn for its shareholders, linked i) to the fact that the level of complementary payments set by the board of directors leads to reducing by half (52%) the gross value of what Mr. Tricoire would have received from the supplementary pension scheme that has been canceled and ii) savings then estimated at EUR18 million in compulsory levies for the supplementary pensions of the two corporate executive offi cers, supposing that they both retire on reaching the age of ,420 At the meeting held on February 16, 2016 the annual complementary variable portion for 2015 paid in March 2016 was set by the Board of Directors at 127.7% of the annual complementary fi xed portion, i.e. an achievement rate of 98.23% on a base 100. The calculation was broken down in the same way as that of the variableportion presented in 2) above. 1,093,680 for 18,000 performance shares according to IFRS valuation 2,473,380 for 42,000 performance shares according to IFRS valuation These 18,000 performance shares were granted under the French plan to Mr. Tricoire in his capacity as Chairman and CEO of Schneider Electric SE These 42,000 performance shares were granted under the International plan to Mr. Tricoire in his capacity as Schneider Electric Asia Pacifi c CEO. 100% of these performance shares are subject to performance criteria: 70% of the shares are contingent on the level of achievement of an adjusted EBITA operating margin objective at constant scope (scope of consolidation on December 31, 2014) on 2015 and 2016 FY as follows: 0% if the level is 13%, 100% if the level is 14%, with a linear progression between the two points; 15% of the shares are conditional on achieving results on ROCE in line with the objective to return, within two years, to a ROCE level comparable to the ROCE level prior to the acquisition of Invensys. ROCE is defi ned as the ratio between adjusted EBITA after tax and the average capital employed; 15% of the shares are contingent on the progress of the Planet & Society b arometer index at the end of 2016 as follows: 0% if the index is lower than or equal to 4, 100% if the index is higher than or equal to 5, with a linear progression between the two points. 25% of the shares vested are subject to a holding requirement until such time as Mr. Tricoire ceases his duties. Furthermore, in the event of vested shares being sold, Mr. Tricoire is required to reinvest 10% of the price of sale in Schneider Electric shares (net of taxes and contributions). These obligations are suspended insofar as Mr. Tricoire holds Schneider Electric shares with a value representing three times his annual fi xed compensation. The percentage of capital represented by Mr. Tricoire s share allocation is 0.01%. Date of authorization by the Annual Shareholders Meeting: April 25, 2013 Resolution number: Sixteenth Date of the award decision by the board of directors: March 27, ) Attendance fees 0 Mr. Tricoire has waived his attendance fees. 6) Other benefi ts 1,404 This concerns the employer matching contribution paid to subscribers to the capital increase reserved for employees. Date of approval by the board: February 18, ,535 Mr. Tricoire has benefi ted from the profi t sharing Date of approval by the Board: February 18, REGISTRATION DOCUMENT SCHNEIDER ELECTRIC

7 ANNUAL SHAREHOLDERS MEETING REPORT OF THE BOARD OF DIRECTORS TO THE COMBINED ANNUAL AND EXTRAORDINARY SHAREHOLDERS MEETING II Other elements of compensation, which were or are subject to the approval of the Annual Shareholders Meeting pursuant to regulated agreements Amounts submitted to the vote Description Termination benefi ts Non-compete compensation Supplementary pension scheme Supplementary Life & Disability scheme 0 Mr. Tricoire is entitled to involuntary termination benefi ts in case of change of control or strategy and taking into account the non-compete compensation described below, capped at twice the arithmetical average of his annual fi xed and variable remuneration (i.e. inclusive of compensation and complementary payments) paid over the last three years and authorized by the Board of Directors. (See Section 3-7 of the 2015 Registration Document). Board decision of June 18-19, Date of approval by the Annual Shareholders Meeting: May 6, 2014 (Fifth Resolution) 0 Mr. Tricoire may receive non-compete compensation for a period of one year capped at 6/10th of his averag e gross compensation i.e. including annual complementary payments fi xed and target variable over the last 12 months of service). (See Section 3-7 of the 2015 Registration Document). Board decisions of 2009, 2012, and June 18-19, Dates of approval by the Annual Shareholders Meeting: 2009, 2012 and May 6, By decision of the board of directors meeting of February 18, 2015, Mr. Tricoire has lost the benefi ts of the fi xed benefi t pension scheme of 1995 and 2012 for French executives (Article 39), as well as those from the Article 83 from which he previously benefi tted. See Section 3-7 of the 2015 registration document. Board decision of February 18, 2015 Date of approval by the Annual Shareholders Meeting: April 21, 2015 (Fifth Resolution) 0 Mr. Tricoire benefi ts from rights to (i) a life-time annuity to the benefi t of his surviving spouse in the event of his decease before retirement or if he leaves the company after the age of 55 without taking up any other employment. This life-time annuity shall be equal to 60% of 25% of the average compensation paid (i.e. including annual complementary payments) over the three years preceding the date of his decease, less any theoretical income that may have been obtained under insurance conditions as a result of complementary payments already made (see above) (ii) a disablement pension, revertible to the surviving spouse, in cases of disablement leading to the cessation of any professional activity as from the date of his retirement, equal to 25% of the average compensation paid (i.e. including annual complementary payments) over the three years prior to his disablement, minus 1.25% per missing quarter required for obtaining a full-rate pension and less the theoretical income that may have been obtained through insurance schemes at the time of disablement resulting from any complementary payments already made. See Section 3-7 of the 2015 registration document. Board decision of February 18, Date of approval by the Annual Shareholders Meeting: April 21, 2015 (Fifth Resolution) Moreover, in addition to the benefi ts of the collective providence scheme applicable to Schneider Electric SE and Schneider Electric Industries SAS employees covering risks of illness, disablement and decease, Mr. Tricoire also benefi ts from the complementary cover granted to French executives in the Group against risks of illness, incapacity, disablement and decease. Providence compensation and complementary cover are subject to performance conditions. Board decisions of 2009, 2012, and June 18-19, 2013 and February 18, Dates of approval by the Annual Shareholders Meeting: 2009, 2012, 2013 and April 21, 2015 (Fifth Resolution) REGISTRATION DOCUMENT SCHNEIDER ELECTRIC 297

8 8 REPORT ANNUAL SHAREHOLDERS MEETING OF THE BOARD OF DIRECTORS TO THE COMBINED ANNUAL AND EXTRAORDINARY SHAREHOLDERS MEETING Mr. Emmanuel BABEAU, Deputy CEO Mr. Emmanuel BABEAU, Deputy CEO I Elements of compensation due or awarded for the past FY Amounts submitted to the vote Description 1) Fixed portion 550,000 Gross annual fi xed remuneration of 550,000 from January 1, 2015 to December 31, 2015 set by the Board of Directors on February 18, This compensation remains unchanged since ) Annual variable portion 3) Complementary payments Exceptional fi xed payment Annual complementary fi xed portion 542,208 The target variable portion amounts to 100% of fi xed compensation. The variable portion may vary from 0 to 200% depending on achievement of objectives. In 2014 the target variable portion amounted to 100%. The board of directors of February 16, 2016 set the variable portion 2015 paid in March 2016 to 99 % of the fi xed portion, i.e. an achievement rate of 99% on a base 100. This calculation was broken down as follows: 870,000 and 130,000 for 2,325 free shares according to IFRS valuation 300,000 for 5,425 free shares according to IFRS valuation ) In connection with Group criteria (75%), the variable portion amounted to 77.3 % of the fi xed portion, i.e. an achievement rate of 103% on a base 100; Group criteria included: a Group economic criteria component. These criteria are based on organic sales growth (15%), adjusted EBITA (15%) and cash generation targets (15%); a component comprising criteria that are (i) in line with the Schneider is O n company program (25%), evaluated amongst other things through customer satisfaction objectives (5%), services development (10%), the succession plan of key talents (10%) development and succession plan of key talents (10%) as well as (ii) corporate social responsibility assessed through trends in the Planet & Society barometer (5%); 2) With respect to individual objectives (25%), which are specifi c objectives and, wherever possible, quantifi ed, the board set the variable portion at 21.25%, i.e. an achievement rate of 85% on a base 100. Complementary payments intended to take account of the fact that, following the decision of the Board of Directors on February 18, 2015 to remove the benefi t from Article 39 defi ned benefi t pension scheme for corporate executive offi cers, Mr. Babeau is personally responsible to build up his additional pension. To determine this authorized complementary remuneration, the board of directors relied on the work of an independent expert, namely the fi rm TOWERS WATSON. Besides, the Board of Directors also ensured that this payment was in line with shareholders interests. Accordingly, as regards: i) The exceptional component, which constitutes a one-off lump sum payment to build up a pension, it provided that payment be made half in cash and half in the form of company shares subject to acquisition/holding periods of fi ve years. These 2,325 free shares were granted under the French plan to Mr. Babeau in his capacity as Deputy CEO of Schneider Electric SE. These 5,425 free shares were granted to under the International plan to Mr. Babeau in his capacity as CEO of Invensys This payment in share allows to correlate one-off lump sum to the company s long-term development through the evolution of its share price and to create a retention element. ii) The annual complementary component, it provided a split it into a fi xed part and a variable part dependent on performance criteria. This variable part is aligned in terms of rate (target rate of 100% of the fi xed complementary part and variable part varying from 0 to 200%) and criteria of the annual variable part (see above). All these complementary payments are intended to enable Mr. Babeau to build up his pension. He formally agreed to redirect these complementary payments, net of taxes, to investment vehicles devoted to fi nancing his additional pension. The decision of the Board of Directors to remove the benefi ts of the two corporate executive offi cers supplementary pensions has notably resulted in a provision reversal of EUR 17 million in the 2015 accounts for corporate offi cers. It will generate substantial savings for the company, and in turn for its shareholders, linked i) to the fact that the level of complementary payments set by the board of directors leads to reducing by half (52%) the gross value of what Mr. Babeau would have received from the supplementary pension scheme that has been canceled and ii) savings then estimated at EUR18 million in compulsory levies for the supplementary pensions of the two corporate executive offi cers, supposing that they both retire on reaching the age of REGISTRATION DOCUMENT SCHNEIDER ELECTRIC

9 ANNUAL SHAREHOLDERS MEETING REPORT OF THE BOARD OF DIRECTORS TO THE COMBINED ANNUAL AND EXTRAORDINARY SHAREHOLDERS MEETING Annual complementary variable portion 4) Performance shares 5) Attendance fees At the meeting held on February 16, 2016 the annual complementary variable portion for 2015 paid in March 2016 was set by the Board of Directors at 99% of the annual complementary fi xed portion, i.e. an achievement rate of 99% on a base 100. This calculation was broken down in the same way as that of the variable portion presented in 2) above. 473,928 for 7,800 performance shares according to IFRS valuation 1,071,798 for 18,200 performance shares according to IFRS valuation N/A These 7,800 performance shares were granted under the French plan to Mr. Babeau in his capacity as Deputy CEO of Schneider Electric SE. These 18,200 performance shares were granted to under the International plan to Mr. Babeau in his capacity as CEO of Invensys. 100% of these performance shares are subject to performance criteria: 70% of the shares are contingent on the level of achievement of an adjusted EBITA operating margin objective at constant scope (scope of consolidation on December 31, 2014) on 2015 and 2016 FY as follows: 0% if the level is 13%, 100% if the level is 14%, with a linear progression between the two points; 15% of the shares are conditioned on achieving results on ROCE in line with the objective to return, within two years, to a ROCE level comparable to the ROCE level prior to the acquisition of Invensys. ROCE is defi ned as the ratio between adjusted EBITA after tax and the average capital employed; 15% of the shares are contingent on the progress of the Planet & Society b arometer index at the end of 2016 as follows: 0% if the index is lower than or equal to 4, 100% if the index is higher than or equal to 5, with a linear progression between the two points. 15% of the shares vested are subject to a holding requirement until such time as Mr. Babeau ceases his duties. Furthermore, in the event of vested shares being sold, Mr. Babeau is required to reinvest 10% of the price of sale in Schneider Electric shares (net of taxes and contributions). These obligations are suspended insofar as Mr. Babeau holds Schneider Electric shares with a value representing twice his annual fi xed compensation. The percentage of capital represented by Mr. Babeau s share allocation is 0.004%. Date of authorization by the Annual Shareholders Meeting: April 25, Resolution number: Sixteenth. Date of the award decision by the board of directors: March 27, ) Other benefi ts 1,404 Mr. Babeau received the employer matching contribution paid to subscribers to the capital increase reserved for employees. Board authorization: February 18, ,535 Mr. Babeau benefi ted from the incentive plan, profi t- sharing. Board authorization: February 18, ,881 Mr. Babeau benefi ted from a company car. Board authorization: February 18, REGISTRATION DOCUMENT SCHNEIDER ELECTRIC 299

10 8 REPORT ANNUAL SHAREHOLDERS MEETING OF THE BOARD OF DIRECTORS TO THE COMBINED ANNUAL AND EXTRAORDINARY SHAREHOLDERS MEETING II Other elements of compensation, which were or are subject to the approval of the Annual Shareholders Meeting pursuant to regulated agreements Amounts submitted to the vote Description Termination benefi ts 0 Non-compete compensation Supplementary pension scheme Supplementary providence scheme Mr. Babeau is entitled to involuntary termination benefi ts in case of change of control or strategy and taking into account the non-compete compensation described below, amounting to twice the arithmetical average of his annual fi xed and variable portions (i.e. inclusive of compensation and complementary payments) paid over the last three years and authorized by the Board of Directors. (See Section 3-7 of the 2015 registration document). Board decision of June 18-19, 2013 and February 18, Date of approval by the Annual Shareholders Meeting: May 6, 2014 and April 21, 2015 (Sixth Resolution). 0 Mr. Babeau may receive non-compete compensation for a period of one year capped at 6/10th of his average gross compensation (monthly average of total gross compensation, i.e. including annual complementary payments fi xed and target variable over the last 12 months of service). (See Section 3-7 of the 2015 registration document). Board decisions of June 18-19, Dates of approval by the Annual Shareholders Meeting: May 6, 2014 and April 21, Mr. Babeau has lost the benefi ts of the fi xed benefi t pension scheme of 1995 and 2012 for French executives (Article 39), as well as those from Article 83 from which he previously benefi ted for French executives of the Group, due to giving up his employment contract with Schneider Electric Industries SAS, on February 18, See Section 3-7 of the 2015 registration document. Application of the board s February 18, 2015 decision relating to the cancelation of the benefi t from an Article 39 supplementary pension scheme for corporate executive offi cers. 0 Mr. Babeau benefi ts from rights to (i) a life-time annuity to the benefi t of his surviving spouse in the event of his decease before retirement or if he leaves the company after the age of 55 without taking up any other employment. This life-time annuity shall be equal to 60% of 25% of the average compensation paid (i.e. including annual complementary payments) over the three years preceding the date of his decease, less any theoretical income that may have been obtained under insurance conditions as a result of complementary payments already made (see above) ii) a disablement pension, revertible to the surviving spouse, in cases of disablement leading to the cessation of any professional activity as from the date of his retirement, equal to 25% of the average compensation paid i.e. including annual complementary payments) over the three years prior to his disablement, minus 1.25% per missing quarter required for obtaining a full-rate pension and less the theoretical income that may have been obtained through insurance schemes at the time of disablement resulting from any complementary payments already made. See Section 3-7 of the 2015 registration document. Board decision of February 18, Date of approval by the Annual Shareholders Meeting: April 21, 2015 (Sixth Resolution) Moreover, in addition to the benefi ts of the collective providence scheme applicable to Schneider Electric SE and Schneider Electric Industries SAS employees covering risks of illness, disablement and decease, Mr. Babeau also benefi ts from the complementary cover granted to French executives in the Group against risks of illness, incapacity, disablement and decease. Providence compensation and complementary cover are subject to performance conditions. Board decisions of 2009, 2012, 2013 and February 18, Dates of approval by the Annual Shareholders Meeting: 2009, 2012, 2013 and April 21, 2015 (Sixth Resolution) REGISTRATION DOCUMENT SCHNEIDER ELECTRIC

11 ANNUAL SHAREHOLDERS MEETING REPORT OF THE BOARD OF DIRECTORS TO THE COMBINED ANNUAL AND EXTRAORDINARY SHAREHOLDERS MEETING Composition of the board of directors Seventh to Twelfth Resolutions Your board of directors, at its meeting on February 16, 2016, noted the decisions of Messrs. Noël Forgeard, Henri Lachmann and Richard Thoman not to renew their terms of offi ce approaching expiry at the closing of the 2016 Generale Assembly. It also noted the resignations of Mr. Jeong Kim at the close of 2016 Shareholders meeting and of Ms. Lone Fønss Schrøder. Your board of directors was keen to highlight all the recognition that the company owes these individuals who have supported the Group through different step of it s strong development. It paid tribute in particular to Mr. Henri Lachmann who was its Chairman and Chairman of the supervisory board. Your board of directors decided, at the recommendation of its Governance and Remunerations Committee, to propose the following appointments and re-elections of directors for your approval: the appointment of Ms. Cécile Cabanis and Mr. Fred Kindle; and the re-election of Messrs. Léo Apotheker, Xavier Fontanet, Antoine Gosset-Grainville and Willy Kissling. These recommendations are part of your Board s Policy of Regeneration : the aims of which are as follows: to increase its internationalization while maintaining a certain geographical balance; to increase the female quota with a view to achieving female representation of over 40% by 2017; to bring new skills on board, which also rejuvenate its composition; to achieve a tighter format. Ms. Cabanis, Chief fi nancial offi cer and member of the Executive Committee of Danone, was appointed by your board of directors as a non-voting member on October 28, She will bring to the board her excellent understanding of fi nancial matters, her knowledge of marketing technologies and her experience, gained both in France and abroad, within a major multinational group. Ms. Cabanis, aged 44 and of French nationality, graduated from Agro Paris Grignon, started her career in 1995 at L Oréal in South Africa, where she occupied the positions of Logistics Manager and Management Control Manager, before moving to France where she worked as an Internal Auditor. In 2000, she became Deputy Director of the France Télécom Group s Mergers and Acquisitions Department. In 2004, she joined Danone as Corporate Finance Director. In 2005, she was appointed Business Development Director at Danone, and in 2008 became Financial Director for Fresh Dairy Products in the Western Europe region. In September 2010, Cécile Cabanis was appointed Financial Director for Fresh Dairy Produce. Since January 2015, she has been Chief fi nancial offi cer and a member of the Executive Committee of Danone Ms. Cabanis is also Director of Danone Russia, Danone Industria, Danone CIS Holdings BV, Danone Djurdjura and the Danone pour l Ecosystème Fund. Ms. Cabanis will be an independent director. She holds 1,000 Schneider Electric SE shares. Mr. Kindle, aged 56 and a citizen of Liechtenstein, is an independent consultant and Director for companies. He was CEO of the ABB Group from 2004 to He brings to the board his wealth of knowledge of the Group s activities and markets, his international experience and his strong operational and fi nancial expertise. He graduated from the Swiss Federal Institute of Technology (ETH) in Zurich and holds an MBA from Northwestern University, Evanston, USA. Fred Kindle started his career in Liechtenstein and after at joining McKinsey & Company in New York and Zurich. He then joined the Swiss group Sulzer. He was Chief Executive Offi cer of Sulzer Industries before being appointed CEO of Sulzer AG in In 2004, he joined the ABB group of which he was CEO from 2005 to He then became a partner at Clayton, Dubilier & Rice LLP, a private equity fund based in London and New York. He will bring to the Board his deep knowledge in the group s Business Activities, his International experience and strong operational and fi nancial expertise. He is currently Vice-President of Zurich Insurance Group Ltd (Switzerland) and Chairman of the board of directors of VZ Holding AG. He is a former Director of Rexel. Fred Kindle will be an independent director. He holds 40,000 Schneider Electric SE shares. Mrs. Cabanis and Mr. Kindle will be appointed to the audit and risk committee. The biographies of Messrs. Léo Apotheker, Xavier Fontanet, Antoine Gosset-Grainville and Willy Kissling can be found on pages 130. We would like to highlight that they are appointed as independent directors according to the defi nition provided in the Corporate Governance Code of listed AFEP/MEDEF companies, with the exception of Mr. Kissling since he has been on the Board for over 12 years. If you approve these proposals, the board of directors will be 38.5% female, 45% of non-french origin and 74% independent directors. Indeed, your board of directors considers that in addition to Mr. Jean- Pascal Tricoire and Ms. Magali Herbaut, who represents employee shareholders, Mr. Willy Kissling and Mr. de La Martinière do not have the status of independent director. Furthermore, under the AFEP/MEDEF guidelines, they have lost that status due to their long years of service on the Board. The other board members are or will be independent directors. Review of attendance fees Thirteenth Resolution In the Thirteenth Resolution, your Board recommends increasing the budget of attendance fees allocated to members of the board, which was fi xed in 2013 by the Annual Shareholders Meeting, from EUR1,300,000 to EUR1,500,000. This review is made with a view to taking into account the directors increasing workload. On this subject, the board held nine meetings in 2015 lasting 6 hours on average (3 hours 50 minutes in 2013). The work of the committees has also increased. However, the members of the Board are all members of at least one committee, and a third of them are members of two committees. Moreover, in addition to the preparatory work for every board and committee meeting, the members of the board are expected to attend training/information days and meetings with management, which totaled four days in Furthermore, your board of directors also considers that a revaluation of the attendance fees allocated to directors is important in order to attract the best international skills. In this respect, the median compensation of S&P 500 US companies non executive directors is 255,000 US dollars in We remind you that, in 2014, eight companies in the CAC40 reported an overall attendance fee package in excess of EUR1.3 million. Re-appointment of statutory auditors Fourteenth Resolution to Seventeenth Resolution The board of directors, at the recommendation of the Audit & Risks Committee, proposes re-electing as statutory auditors for the company the fi rms Ernst & Young et Autres and Mazars, as well as re-electing the alternate auditors, whose terms of offi ce are due to expire at the Annual Shareholders Meeting to approve the 2015 annual accounts REGISTRATION DOCUMENT SCHNEIDER ELECTRIC 301 8

12 8 REPORT ANNUAL SHAREHOLDERS MEETING OF THE BOARD OF DIRECTORS TO THE COMBINED ANNUAL AND EXTRAORDINARY SHAREHOLDERS MEETING It has come to the Board s attention that in addition to the fact that the signatory partners of each of the two fi rms will have been reappointed respectively in 2015 and 2016, assuring a renewal to the approach to audits: in application of the new European standards on statutory auditing, the fi rm Ernst & Young et Autres may not be re-elected beyond 2022 and the fi rm Mazars beyond 2028; an invitation to tender would mean signifi cant workload for the Group s teams, while, given the rules regarding incompatibilities, an invitation to tender of this kind in 2015 only offered a few alternatives; that an invitation to tender in 2022 should attract more applications because the new rules regarding statutory auditing focus mainly on identifying new players. Accordingly, your board of directors considered that it was in the Company s best interests to re-elect the statutory auditors, particularly as they have an excellent understanding of the Group and are perfectly equipped to ensure good audit coverage, which are important factors to take into account in the current climate. Your board of directors therefore requests that you appoint, for a term of six years, which will expire at the Annual Shareholders Meeting to approve the 2021 annual accounts, the company Ernst & Young et Autres and the fi rm Mazars as statutory auditors and the company Auditex and Mr. Thierry Blanchetier as alternate auditors. Share buybacks Eighteenth Resolution We request that you renew the authorization given to the company by the Annual Shareholders Meeting of April 21, 2015, to buy back its shares by any appropriate method, including through the use of derivatives, pursuant to the provisions of Article L of the French Commercial Code. The company buyback programs may have various objectives: to reduce capital stock, cover stock purchase option plans or other share allocations to employees or corporate offi cers, fulfi ll obligations related to convertible bonds, and engage in external acquisitions and market making as part of a liquidity contract. Shares bought back may be canceled under the authorization (Twentysecond Resolution) adopted by the 2015 Annual Shareholders Meeting. We remind you that in February 2016, Schneider Electric, which in 2015 had announced its intention to buy back its own shares in an amount of EUR1 to 1.5 billion over the period , stated that the Group had targeted a cumulative buyback amount of around EUR1.5 billion for the These buybacks are part of a policy to neutralize the dilution resulting from capital increases linked to the acquisition of Invensys or reserved to employees, or resulting from performance action plans and the exercise of options. As part of the authorization granted at the Annual Shareholders Meeting on April 21, 2015, Schneider Electric proceeded in 2015 and early 2016 to buy back million shares, for a total sum of EUR700 million. Further information on your Company s share buyback programs can be found on page 278. You are asked to authorize the company to buy back shares representing a maximum of 10% of the issued capital as of the date of the Meeting (for reference purposes, based on the issued capital on December 31, 2015: 58,757,304 shares). The maximum purchase price is set at EUR90. We remind you that this authorization may not be used during public offer periods. 1.2 Extraordinary Meeting Authorization to the board of directors to allocate free shares (issued or to be issued) to officers and employees of the company or of companies affiliated therewith, subject to performance conditions, as applicable, within the limit of 2% of the share capital, with waiver by shareholders of their subscription rights - Nineteenth Resolution Background to the authorization: The authorization to allocate free/performance shares was granted by the Combined Annual and Extraordinary Shareholders Meeting of April 25, 2013 for a period of 38 months. It expires on June 24, In This authorization allowed for the free allocation, to date, of a total of 5.9 million shares, representing 1 % of the share capital at December 31, Detailed information on the plans for free/ performance shares allocated to date under this authorization can be found on page 284 below. Given the importance of this deferred compensation mechanism (see p. 155 ), you are requested to renew this authorization. Structure of the authorization: (i) Dilution the total amount of shares allocated may not represent more than 2% of the capital over three years, subject to potential adjustments which may be applied in the event of a transaction involving the c ompany s share capital; the annual number of shares granted to the c ompany s senior corporate offi cers (the CEO and the Deputy CEO ) pursuant to this authorization may not exceed [0.03]% of the capital per year. (ii) Characteristics beneficiaries: shares may be allocated to senior corporate offi cers, members of the Executive Committee, key managers of the Group in all countries, and to high-potential employees or to those whose performance is deemed remarkable; vesting/holding period: under long-term incentive plans, the vesting period may be no shorter than three years. It may be accompanied, or not, by a holding period; under annual long-term incentive plans, all shares allocated to senior corporate offi cers of the c ompany and to members of the Executive Committee will be subject to performance conditions. For other benefi ciaries, the performance criteria will be on at least REGISTRATION DOCUMENT SCHNEIDER ELECTRIC

13 ANNUAL SHAREHOLDERS MEETING REPORT OF THE BOARD OF DIRECTORS TO THE COMBINED ANNUAL AND EXTRAORDINARY SHAREHOLDERS MEETING 70% of the shares granted. Due to the performance conditions, all or part of the performance shares may be canceled. For instance, 22% of shares subject to performance criteria of the 2014 long-term incentive plan were canceled due to the failure to meet these conditions (see below). History of plans a) for the annual plan in March 2014: The criteria were: for 70% of the shares allocated under performance criteria, an average level for 2014 and 2015 of adjusted EBITA operating margin, at constant scope, as follows: 0% if the level is 13%, 100% if the level is 14%, with a linear progression between the two points. This bracket, defi ned in March 2014, identical to the one for the 2013 annual plan, was selected to take into account the economic environment at the time and more particularly the risk of a continued slowdown in Western Europe and the signifi cant impact of exchange rates from new economies; for 15% of the shares allocated under performance criteria, an average level for 2014 and 2015 of ROCE, as follows: 0% if the ROCE is 11%, 100% if the ROCE is 11.5%, with a linear progression between the two points. The 2013 proforma ROCE (calculated mainly to take into account the acquisition of Invensys) was 10.9% and the bracket refl ects the Group s objective to gradually improve the ROCE in a climate of volatile exchange rates, affecting the base of capital employed; for 15% of the shares granted subject to performance criteria, an objective of increasing the Planet & Society barometer as follows: 0% if the index at the end of 2015 is 8/10, 100% if the index is 9/10, with a linear progression between the two points, where the level of the Planet & Society barometer was 7.5 /10 at the end of 2013 and the objective of Connect was to bring it to 8/10 at the end of The achievement rate of these objectives was 78% with: an average EBITA operating margin adjusted to constant scope for the 2014 and 2015 fi scal years of 13.9%, i.e., an achievement rate of 90%; an average level of ROCE for 2014 and 2015 of 10.9%, i.e., an achievement rate of 0%; a score of 9.69/10 for the Planet & Society barometer, i.e., an achievement rate of 100%. b) for the annual plan in March 2015 The criteria are: for 70% of the shares allocated under performance criteria, an average level for 2015 and 2016 of adjusted EBITA operating margin, at constant scope, as follows: 0% if the level is 13%, 100% if the level is 14%, with a linear progression between the two points. This bracket, defi ned in March 2015, was selected to take into account the global growth prospects at the time, and more particularly the impacts of a slowdown in China, the fall in oil prices, and the volatility of currencies; for 15% of shares allocated under performance conditions, an average level of ROCE in line with the objective of returning, over two years, to a ROCE level comparable to that prior the acquisition of Invensys. The 2013 proforma ROCE (calculated mainly to take into account the acquisition of Invensys) was 10.9% and the bracket refl ects the Group s objective to gradually improve the ROCE in a climate of volatile exchange rates, affecting the base of capital employed; for 15% of the shares granted subject to performance criteria, an objective of increasing the Planet & Society barometer, which measures the progress of the Group with regard to environmental sustainability and social responsibility across 14 indicators (see page 104 ) as follows: 0% if the index at end 2016 is 5/10, 100% if the index is 6/10, with a linear progression between the two points, being specifi ed that the level of the new Planet & society barometer was 3/10 on january 1, New performance criteria On the report of the Human Resources & CSR and Governance & Compensation Committees, the Board of Directors decided to review the performance conditions in order to bring them more in line with shareholders long term interests. Accordingly, it established that from 2016 long-term incentive plan which, as for every year, would be implemented at the end of March: the performance conditions would be assessed over a period of three years instead of two years; Besides the criteria based on Adjusted EBITA operating margin and achievement level of the Planet & Society barometer, two new criteria will be used: A rate of cash generation and level in the Total Shareholder Return or TSR compared to that of a group of competitors. These two new criteria have been introduced by the Board with a view to promoting a long-term development. Rate of cash conversion, which is a ratio of free cash fl ow and net income potentially adjusted for exceptional components. It is a key indicator of a company s capacity to effectively use its capital employed in the long-term in order to generate free cash fl ow which the company can use to strengthen its balance sheet, its external development and its dividends to shareholders. TSR, which represents global return for the shareholder on his investment in Schneider Electric taking into account share performance and paid out dividends, assuming they are reinvested in Schneider Electric shares, Weighting of each of these criteria is as follows: 40% for the adjusted EBITA operating margin, 25% for the rate of cash conversion, 15% for TSR and 20% for the Planet & Society barometer. Their calculation method will be: Adjusted EBITA margin, an average on a three-year period of the achievement rates of annual Adjusted EBITA margin vs. targeted Adjusted EBITA margin rate set, for each year, by the board of directors of Schneider Electric which will be in line with the objectives usually communicated at the beginning of the year to investors. The rate of cash conversion, an average level set over a three-year period. For the 2016 Long Term Incentive Plan, the objective is 100%. This objective is in line with the long term objective announced to the market. It has been set taking into account the high cash conversion level of 2015 (113% cash generation). If the rate of cash conversion is between: 100% and 80%, the achievement rate will be distributed on a linear basis down to 0%; 100% and 120%, i.e. an achievement rate above target, the achievement rate of the criterion will increase on a linear basis up to 150%. This achievement rate will, on the one hand, enable achievement of 100% of the rate of cash conversion criterion over the period and, on the other hand, can offset non-achievement of the Adjusted EBITA target or 2015 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC 303 8