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    The Accounting Firm Deloitte Touche Tohmatsu delivered its January 25, 1995 audit report to the Board of Directors of Schneider S.A.

    The accounting firm Deloitte Touche Tohmatsu presented its January 25, 1995 audit report to the Board of Directors of Schneider S.A. This audit was requested in response to the accusations against Groupe Schneider and its Chairman.

    On June 1, 1994 the Belgian Public Prosecutor made the following accusations :

    1 . The Groupe benefited, under suspicious conditions, at the expense of its Belgian affiliates, Cofibel and Cofimines, from cash derived from these affiliates in amounts exceeding 500 million FF (3 billion Belgian francs).

    2. The Groupe retained dividends of approximately 300 million FF (1.8 billion Belgian francs) paid by the non consolidated offshore companies and properly due to Cofimines and Cofibel.

    3. The Groupe did not disclose the existence and thus under estimated the value of the non consolidated offshore companies, making the take-over bids of Cofibel and Cofimines questionnable.

    Despite the difficulties encountered in performing this audit -in particular the seizure of documents by the Belgian judicial authorities, the period under review (13 years), and the death of the principal actors- Deloitte Touche Tohmatsu came to the following conclusions :

    1. The purchase by Cofimines and Cofibel from the Groupe of shares of Arbed in 1990 and Merlin Gerin convertible debt in 1992 was for a total cost of 500 million FF (3 billion Belgian francs). Upon sale, these operations later generated a profit for Cofimines and Cofibel of 40 million FF, and a slightly positive economic profit (after deduction for the financing costs of these transactions).

    Other financial transactions between Schneider and its affiliates Cofibel and Cofimines during the period 1988 - 1993 generated a profit of 167 million French francs (1 billion Belgium francs) and an economic profit of approximately 60 million French Francs (360 million Belgium francs) for Cofibel and Cofimines.

    2.  Between 1981 and 1994, Groupe Schneider, excluding Cofibel and Cofimines, did not benefit from any funds coming from the non consolidated offshore companies. However, the audit revealed to the Groupe withdrawals from these companies amounting to 39 million FF (237 million Belgian francs). This situation is currently under further investigation.

    All monies received by the non-consolidated offshore companies (1994 million Belgian francs, 332 FF) between 1981 and 1994 were either transferred to Cofibel and Cofimines, used to refloat certain Belgian affiliates of Cofibel and Cofimines or were retained as a reserve against future risks and liabilities. The exceptions were :

    - 23 million FF (139 million Belgian francs), paid between 1989 and 1992 to third parties (companies controlled by Mr. Foti), on the order of Mr. Verdoot, Chief Executive Officer of Cofibel and Cofimines and responsible for the management of these companies and all their affiliates.

    - 16 million FF (98 million Belgian francs) directly withdrawn by Mr. Verdoot between 1981 and 1993 without any apparent justification.

    3. The declarations made by Mr. Pineau-Valencienne stating that the valuation of the non consolidated offshore companies had no significant impact on the consolidated balance sheet of Cofibel and Cofimines are today confirmed.

    The circumstances which led the Belgian judicial authorities to commence a legal inquiry against Groupe Schneider's Chairman are the following :

    In 1981, the Groupe Empain-Schneider was a conglomerate with a very complex capital structure emcompassing disparate activities, most of which were operating at a loss.

    The Group has since divested its non-strategic businesses, focusing its efforts on the electrical industry, at the same time simplifying its capital and legal structures.

    In Belgium, the same restructuring process was conducted.

    In 1981, before the arrival of Mr. Pineau-Valencienne, Groupe Schneider had interests in more than 100 companies in Belgium, mainly inherited from the ex­Groupe Empain. These interests included some non consolidated offshore companies, created with other Belgian companies, in order to preserve their mining interests following the independence of Congo in 1961.

    By 1992, Groupe Schneider only counted two Belgium companies in its portfolio, Cofibel and Cofimines. The last stage of the restructurating process was the launch in 1992 of a take-over bid on these two companies.

    It was during these take-over bids and in reaction to the proceedings taken by certain minority shareholders to obtain a higher price offer, that the Belgian judicial authorities opened a legal inquiry into the management of the Belgian affiliates. An agreement was subsequently reached with all the minority shareholders and their complaint was withdrawn. Nevertheless, the Belgian judicial authorities pursued the inquiry.

    The Board of Directors of Schneider S.A., having reviewed the audit report, states that it corroborates in all points with Mr. Pineau-Valenclenne's statements. The Board wishes to clarify the record by publishing these conclusions

    Press Contact:
    Schneider Electric
    Véronique Moine
    Tel. +33 (0)1 41 29 70 76
    Fax +33 (0)1 41 29 71 95