Schneider Electric S.A. - MRRS Decision

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications - relief from prospectus requirements grantedin respect of trades in units of an employee savings fund madepursuant to a leveraged offering by French issuer, providedthat all sales of such units pursuant to the leveraged offeringbe made through a registrant - relief from registration andprospectus requirements upon the redemption of such units forshares of the issuer - relief from the registration and prospectusrequirements granted in respect of first trade of such shareswhere such trade is made through the facilities of a stock exchangeoutside of Canada - relief granted to the manager of the Fundfrom the adviser registration requirement.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 53 and 74(1).

Applicable Ontario Regulations

Regulation made under the Securities Act, R.R.O.1990, Reg. 1015 as am.

Applicable Rules

OSC Rule 45-503 - Trades to Employees, Executivesand Consultants.

Multilateral Instrument 45-102 - Resale of Securities.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

ONTARIO, BRITISH COLUMBIA,ALBERTA,

SASKATCHEWAN, MANITOBA, QUÉBEC,NOVA SCOTIA,

NEW BRUNSWICK AND NEWFOUNDLANDAND LABRADOR

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

SCHNEIDER ELECTRIC S.A.

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker")in each of Ontario, British Columbia, Alberta, Saskatchewan,Manitoba, Québec, Nova Scotia, New Brunswick and Newfoundlandand Labrador (collectively, the "Jurisdictions")has received an application from Schneider Electric S.A. (the"Filer") for a decision under the securitieslegislation (the "Legislation") of the Jurisdictionsthat:

(i) the prospectus requirements containedin the Legislation shall not apply to certain trades in units("Units") of the Schneider International2003 FCPE (the "Fund") made pursuant to theEmployee Share Offering (as defined below) to or with QualifyingEmployees (as defined below) resident in the Jurisdictionswho elect to participate in the Employee Share Offering (the"Canadian Participants");

(ii) the registration requirements containedin the Legislation shall not apply to trades in Units of theFund made pursuant to the Employee Share Offering to or withCanadian Participants not resident in Ontario or Manitoba;

(iii) the registration and prospectus requirementsshall not apply to the trades of ordinary shares of the Filer(the "Shares") by the Fund to Canadian Participantsupon the redemption of Units by Canadian Participants, norto the issuance of units of a successor fonds communs de placementd'enterprise (an "FCPE") to holders of Units uponthe transfer of the assets of the Fund to the FCPE at theend of the Lock-Up Period (as defined below);

(iv) the registration and prospectus requirementsshall not apply to trades of Shares by the successor FCPEto Canadian Participants upon the redemption by Canadian Participantsof units in the successor FCPE;

(v) the registration and prospectus requirementsshall not apply to the first trade in any Shares acquiredby Canadian Participants under the Employee Share Offeringwhere such trade is made through the facilities of a stockexchange outside of Canada; and

(iv) the manager of the Fund, AXA GestionIntéressement (the "Manager") is exemptfrom the requirements contained in the Legislation to be registeredas an adviser (the "Adviser Registration Requirements")to the extent that its activities in relation to the EmployeeShare Offering require compliance with the Adviser RegistrationRequirements.

AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Commission des valeurs mobilières du Québecis the principal regulator for this application;

AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions or in Québec Commission Notice 14-101;

AND WHEREAS the Filer has representedto the Decision Makers that:

1. The Filer is a corporation formed underthe laws of France. It is not and has no intention of becominga reporting issuer (or equivalent) under the Legislation.The Shares are listed on Euronext Paris.

2. The Filer carries on business in Canadathrough its affiliates, Schneider Canada Inc. and INDE Electronics,Inc. (the "Canadian Affiliates" and, togetherwith the Filer and other affiliates of the Filer, the "SchneiderGroup"). The Canadian Affiliates are direct or indirectcontrolled subsidiaries of the Filer and are not, and haveno intention of becoming, reporting issuers under the Legislation.

3. The Filer has established a worldwide stockpurchase plan for employees of the Schneider Group (the "EmployeeShare Offering").

4. Only persons who have been employees ofa member of the Schneider Group for a minimum of three monthsprior to the close of the subscription/revocation period forthe Employee Share Offering (the "Qualifying Employees")will be invited to participate in the Employee Share Offering.

5. The Fund is an FCPE, a collective employeeshareholding vehicle of a type commonly used in France forthe conservation or custodianship of shares held by employeeinvestors. The Fund was established for the purpose of implementingthe Employee Share Offering. The Fund is not and has no intentionof becoming a reporting issuer. Only Qualifying Employeeswill be allowed to hold Units of the Fund in an amount proportionateto their respective investments in the Fund.

6. Under French law, all Units acquired inthe Employee Share Offering will be subject to a hold periodof approximately five years (the "Lock-Up Period"),subject to certain exceptions prescribed by French law (suchas a release on death or termination of employment). At theend of the Lock-Up Period, a Canadian Participant may redeemUnits in the Fund according to the Redemption Formula (describedbelow), to be settled by delivery of the number of Sharesequal to such amount or the cash equivalent.

7. In the event of an early unwind resultingfrom the Canadian Participant satisfying one of the exceptionsto the Lock-Up Period, a Canadian Participant may redeem Unitsfrom the Fund using the Redemption Formula (described below),but using the market value of the Shares at the time of unwindto measure the increase, if any, from the Reference Price(described below).

8. Under the Employee Share Offering, CanadianParticipants will purchase Units in the Fund, which will subscribefor Shares on behalf of the Canadian Participants using theEmployee Contribution (as described below) and certain financingmade available by a major European bank, Credit Agricole Indosuez("CAI"), at a purchase price that is equalto the average of the opening price of the Shares on 20 tradingdays prior to the date the price is set (the "ReferencePrice"), less a 15% discount (the "SubscriptionPrice").

9. Canadian Participants in the Employee ShareOffering enjoy the benefit of a 15% discount in the ReferencePrice. The Canadian Participants effectively receive a shareappreciation entitlement in the increase in value, if any,of the Shares financed by the CAI Contribution (as describedbelow).

10. Participation in the Employee Share Offeringrepresents an opportunity for Qualifying Employees potentiallyto obtain significantly higher gains than would be availablethrough participation in a traditional share purchase plan,by virtue of the Qualifying Employee's indirect participationin a financing arrangement involving a swap agreement (the"Swap Agreement") between the Fund and CAI.In economic terms, the Swap Agreement effectively involvesthe following exchange of payments: for each Share which maybe purchased by the Canadian Participant's contribution (the"Employee Contribution") under the EmployeeShare Offering at the Subscription Price, CAI will lend tothe Fund (on behalf of the Canadian Participant) an amountsufficient to enable the Fund (on behalf of the Canadian Participant)to purchase an additional four Shares (the "CAI Contribution")at the Subscription Price.

11. Under the terms of the Swap Agreement,at the end of the Lock-Up Period (the "SettlementDate"), a Canadian Participant may redeem his orher Units in consideration for a payment (to be settled incash or Shares) from the Fund of one of the following amounts:

(i) if the average closing price of theShares for each trading day during a period of approximatelysix months, ending one month prior to the end of the Lock-UpPeriod (the "Final Price") is greater thanthe Reference Price, a Canadian Participant will receive,(A) 100% of his or her Employee Contribution in euros, and(B) an amount equal to approximately 47% of the increase,if any, in the value of the Shares (the "AppreciationAmount") determined as the difference between theFinal Price of the Shares and the Reference Price.

(ii) if, at the end of the Lock-Up Period,the Final Price of the Shares is between the Reference Priceand the Subscription Price, a Canadian Participant willreceive 100% of his or her Employee Contribution in euros.

(iii) if, at the end of the Lock-Up Period,the Final Price of the Shares is lower than the ReferencePrice, a Canadian Participant will receive at least 85%of his or her Employee Contribution in euros. (collectively,the "Redemption Formula")

12. Under no circumstances will a CanadianParticipant be entitled to receive less than 85% of his orher Employee Contribution at the end of the Lock-Up Period,nor be liable for any other amounts.

13. For purposes of determining the numberof Shares a Canadian Participant will receive, such Shareswill be valued on the basis of a 5 trading day average ofthe opening and closing prices of the Shares prior to theend of the Lock-Up Period.

14. If a Canadian Participant fails to makean election to redeem his or her Units, an amount in cashor Shares equal to the amount calculated under paragraph 11will be transferred to a successor FCPE. Units will be issuedto the applicable Canadian Participants in recognition ofthe assets transferred to the new FCPE. The Canadian Participantsmay redeem the new units for cash or Shares whenever theywish;

15. Under French law, an FCPE is a limitedliability entity. The risk statement provided to CanadianParticipants will confirm that, under no circumstances, willa Canadian Participant be liable to any of the Fund, CAI orthe Filer for any amounts in excess of his or her EmployeeContribution under the Employee Share Offering.

16. During the term of the Swap Agreement,dividends paid on the Shares held in the Fund will be reinvestedby the Fund in Shares. At the end of the Lock-Up Period theShares acquired through such reinvestment will be liquidatedand the proceeds paid to CAI by the Fund as partial considerationfor the obligations assumed by CAI under the Swap Agreement.

17. For Canadian federal income tax purposes,the Canadian Participants in the Fund will be deemed to receiveall dividends paid on the Shares financed by either the EmployeeContribution or the CAI Contribution, at the time such dividendsare paid to the Fund, notwithstanding the actual non-receiptof the dividends by the Canadian Participants by virtue ofthe terms of the Swap Agreement. Consequently, Canadian Participantswill be required to fund the tax liabilities associated withthe dividends from their own resources.

18. The declaration of dividends on the Sharesremains at the sole discretion of the board of directors ofthe Filer. The Filer has not made any commitment to CAI inrespect of dividends.

19. To respond to the fact that, at the timeof the initial investment decision relating to participationin the Employee Share Offering, Canadian Participants willbe unable to quantify their potential income tax liabilityresulting from such participation, the Filer will indemnifyeach Canadian Participant for all tax costs to the CanadianParticipants associated with the payment of dividends in excessof a specified amount of euros per Share during the Lock-UpPeriod such that, in all cases, a Canadian Participant will,at the time of the original investment decision, be able toquantify, with certainty, his or her maximum tax liabilityin connection with dividends received by the Fund on his orher behalf under the Employee Share Offering.

20. At the time the Canadian Participant'sobligations under the Swap Agreement are settled, the CanadianParticipant will realize a capital gain (or capital loss)by virtue of having participated in the Swap Agreement tothe extent that amounts received by the Fund, on behalf ofthe Canadian Participant, from CAI exceed (or are less than)amounts paid by the Fund, on behalf of the Canadian Participant,to CAI. Capital losses (gains) realized by a Canadian Participantunder the Swap Agreement may be offset against (reduced by)any capital gains (losses) realized by the Canadian Participanton a disposition of the Shares, in accordance with the rulesand conditions under the Income Tax Act (Canada) orcomparable provincial legislation (as applicable).

21. The Manager is a portfolio managementcompany governed by the laws of France. The Manager is registeredwith the French Commission des Opérations de Bourse(the "COB") to manage French investment funds,employee plans and other investment products, and complieswith the rules of the COB. The Manager is not and has no intentionof becoming a reporting issuer under the Legislation.

22. The Manager may, for the Fund's account,acquire, sell or exchange all securities in the portfolioof the Fund. The Fund's portfolio will consist of Shares andthe Swap Agreement, and may include cash equivalents whichthe Fund may hold pending investments in Shares and for purposesof Unit redemptions. The Manager's portfolio management activitiesin connection with the Employee Share Offering and the Fundare limited to purchasing Shares from the Filer, selling suchShares as necessary in order to fund redemption requests,and such activities as may be necessary to give effect tothe Swap Agreement.

23. The Manager is also responsible for preparingaccounting documents and publishing periodic informationaldocuments as provided by the rules of the FCPE. The Manager'sactivities in no way affect the underlying value of the Shares.

24. Shares issued in the Employee Share Offeringwill be deposited in the Fund through BNP-Paribas ServiceSecurities (the "Depositary"), a large Frenchcommercial bank subject to French banking legislation.

25. Under French law, the Depositary mustbe selected by the Manager from among a limited number ofcompanies identified on a list by the French Minister of theEconomy, and its appointment must be approved by the COB.The Depositary carries out orders to purchase, trade and sellsecurities in the portfolio and takes all necessary actionto allow the Fund to exercise the rights relating to the securitiesheld in its portfolio.

26. Canadian Participants will not be inducedto participate in the Employee Share Offering by expectationof employment or continued employment.

27. The total amount invested by a CanadianParticipant through the Employee Share Offering, includingany CAI Contribution, cannot exceed 25% of his or her estimatedgross annual compensation for 2003, although a lower limitmay be established by the Canadian Affiliates.

28. None of the Filer, the Manager, the CanadianAffiliates or any of their employees, agents or representativeswill provide investment advice to the Qualifying Employeeswith respect to an investment in the Units.

29. The Filer will retain a securities dealerregistered as a broker/investment dealer under the Legislationof Ontario and Manitoba (the "Registrant")to provide advisory services to Canadian Participants residentin Ontario or Manitoba and to make a determination, in accordancewith industry practices, as to whether an investment in theEmployee Share Offering is suitable for each such CanadianParticipant based on his or her particular financial circumstances.The Registrant will establish accounts for, and will receivethe initial account statements from the Fund on behalf of,such Canadian Participants.

30. The Units of the Fund will be issued bythe Fund to Canadian Participants resident in Ontario or Manitobasolely through the Registrant.

31. The Units will be evidenced by accountstatements issued by the Fund.

32. The Canadian Participants will receivean information package in the French or English language,as applicable, which will include a summary of the terms ofthe Employee Share Offering and a tax notice containing adescription of Canadian income tax consequences of subscribingto and holding the Units and redeeming Units at the end ofthe Lock-Up Period. The information package will also includea risk statement which will describe certain risks associatedwith an investment in Units pursuant to the Employee SharePlan.

33. Upon request, Canadian Participants mayreceive copies of the French Document de Référencefiled with the COB in respect of the Shares and a copy ofthe relevant Fund's rules (which are analogous to companyby-laws). The Canadian Participants will also receive uponrequest copies of the continuous disclosure materials relatingto the Filer furnished to Schneider Electric shareholdersgenerally.

34. The Filer will provide contractual rightsof action to Canadian Participants if the offering documentsprovided to the Canadian Participants contain a material misrepresentationin respect of the Employee Share Offering.

35. There are approximately 1,064 QualifyingEmployees resident in Canada, in the provinces of Québec(139), Ontario (673), British Columbia (109), Alberta (107),Saskatchewan (8), Nova Scotia (8), Newfoundland and Labrador(1), New Brunswick (8) and Manitoba (11), who represent inthe aggregate less than 3% of the number of Qualifying Employeesworldwide.

36. As of the date hereof and after givingeffect to the Employee Share Offering, Canadian residentsdo not and will not beneficially own (which term, for thepurposes of this paragraph, is deemed to include all Sharesheld by the Fund on behalf of Canadian Participants) morethan 10% of the Shares and do not and will not represent innumber more than 10% of the total number of holders of theShares as shown on the books of the Filer.

AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each Decision Maker(collectively, the "Decision");

AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers underthe Legislation is that:

(a) the prospectus requirements shall notapply to trades in Units of the Fund to or with the CanadianParticipants made pursuant to the Employee Share Offering,provided that the first trade in such Units acquired by CanadianParticipants pursuant to this Decision, in a Jurisdiction,shall be deemed a distribution or a primary distribution tothe public under the Legislation of such Jurisdiction;

(b) the registration requirements shall notapply to trades in Units of the Fund made pursuant to theEmployee Share Offering to or with Canadian Participants notresident in Ontario and Manitoba;

(c) the registration and prospectus requirementsshall not apply to:

(i) trades of Shares by the Fund to theCanadian Participants upon the redemption of Units by CanadianParticipants pursuant to the Employee Share Offering;

(ii) the issuance of units of a successorFCPE to holders of Units upon the transfer of the assetsof the Fund to the successor FCPE; and

(iii) trades of Shares by the successorFCPE to the Canadian Participants upon the redemption byCanadian Participants of units of the successor FCPE,

provided that the first trade in any suchShares or Units acquired by a Canadian Participant pursuantto this Decision, in a Jurisdiction, shall be deemed a distributionor a primary distribution to the public under the Legislationof such Jurisdiction;

(d) the registration and prospectus requirementsshall not apply to the first trade in any Shares acquiredby a Canadian Participant under the Employee Share Offeringprovided that such trade is:

(i) made through a person or company who/whichis appropriately licensed to carry on business as a broker/dealer(or the equivalent) under the applicable securities legislationin the foreign jurisdiction where the trade is executed;and

(ii) executed through the facilities ofa stock exchange outside of Canada; and

(e) the Manager shall be exempt from the adviserregistration requirements, where applicable, in order to carryout the activities described in paragraphs 22 and 23 hereof.

August 6, 2003.

"Josée Deslauriers"