About NexansCEO (date first Aplix and Electro-Banque 16 rue de Monceau, 75008 Paris appointed) /...

01

The expertise of the men and women who work in the Group is

at the very heart of Nexans’ success.

In connection with three major projects of this year (Shanghai

Transrapid, “LIPA” and Queen Mary 2), we wish to congratulate

both our customers and the Nexans teams who contributed

to these great achievements.

4,046 million euros in 2003 (at current metal prices).

17,000 employees worldwide.

74% in 2003.

About Nexans...

As the global leader in the cable industry, Nexans

brings an extensive range of solutions to the

infrastructure, industry and building markets.

With operations in 65 countries and production

facilities in 29, Nexans employs 17,000 people

worldwide. The Group’s products and services lie

at the heart of the everyday life of millions of people,

in areas as diverse as telecommunications

and energy networks, aerospace, building,

the automotive sector, railways, petrochemicals,

medical applications, etc.

In its 11 research centers all over the world, Nexans is

constantly inventing new products and new

manufacturing techniques. It adapts new technologies

to the needs of its customers and builds the world of

the future with the greatest respect for the environment.

Listed on Euronext’s Premier Marché since June 2001,

Nexans reported sales of 4 billion euros in 2003 and

saw its share price rise by 74%.

Salesof

Shareprice up

How would you sum up 2003?

In a particularly difficult economic climate, Nexans has, on

the whole, met its financial targets. The Group has been able to

maintain a balance overall while increasing market share in

many sectors. Sales, at constant copper prices and exchange

rates, dropped by only 0.8% in 2003, which is well above

the cable market average. Admittedly, our income from

operations is not yet as high as we would like, but this is mainly

due to the state of the economy rather than Nexans’

performance. The Group has responded to the problems of

overcapacity and price erosion by taking the restructuring

measures required. Our strength today lies in the fact that we are

a general-purpose cablemaker with a comprehensive line of

products and excellent geographic coverage.

How have Nexans’ shares performed?

Our performance is in line with market expectations. Our share

price rose by 74% over the year, ranking us among the top

15 performers in the SBF 120 index. This result demonstrates

our shareholders’ and the financial markets’ confidence in

Nexans and our approach to communication.

Our shareholders have been particularly loyal since

our stock market listing.

“Our performance is in line

with market expectations.

Our share price rose by 74%

over the year, ranking us

among the top 15 performers

in the SBF 120 index.“

GÉRARD HAUSER, CHAIRMAN AND

CHIEF EXECUTIVE OFFICER

02

Interview with the Chairman

“Nexans has been able to maintain a balance overall while increasing

market share in many sectors… Our strength today lies in the fact that

we are a general-purpose cablemaker with a comprehensive line of

products and excellent geographic coverage.“

What are your results by market in 2003?

We performed extremely well in everything connected with

medium- and high-voltage power cables. Conversely, in low-

voltage cables we suffered from the downturn in industrial

investment. The telecommunications market has stabilized.

We benefited from the ADSL boom and from the effects of

restructuring, particularly in the United States. The situation in

electrical wires is variable. Our wirerod business is still

performing extremely well, but our results and insufficient

critical mass in the winding wires sector are leading us to

consider selling off this business.

What about your strategic direction?

In 2003, we put in place a new organizational structure

according to country and geographic area. The main aim of

this change was to be closer to our customers to better enable

us to promote the full range of Nexans products and solutions

locally. We also turned our attention to the medium term in

creating a cross-organizational department designed to give

the Group a new marketing dimension and institute a strategic

planning process.

What are Nexans’ prospects for 2004?

Numerous contracts were signed in 2003 which means that

we can approach 2004 with greater confidence, especially

since the economic situation should improve in our core

businesses. We have set our priorities in markets that are

looking particularly buoyant in the medium term, such as

railways, aeronautics, cables for shipbuilding and safety

cables. We want to consolidate the profitability of the energy

sector through new cabling solutions and we intend to take

advantage of the recovery of the telecommunications sector to

develop our solutions for the local loop. In all areas, innovations

abound and rely on every individual’s responsiveness and sense

of initiative. We continue to pursue a rigorous financial

management policy, anticipating and taking advantage of

commercial opportunities, and this should improve our

profitability still further in 2004. In addition, we will continue to

seek targeted acquisitions. More than ever, our absolute priority

is still to consolidate and increase our attractiveness to

our shareholders, employees and customers.

03

04

The year in figuresDuring 2003, in spite of a difficult economic environment and the persistent low level ofindustrial investment, and thanks to the upturn experienced at the end of the year,Nexans has - at constant method* - managed to increase its income from operations.The Group is thus reaping the benefits of a rigorous management approach, continuingto reduce debt and increasing its operating margin, all of which puts Nexans in a favorable position to take advantage of the economic recovery expected in 2004.

SALES AT CURRENTMETAL PRICES(1)

SALES AT CONSTANTMETAL PRICES***(1)

(1) In millions of euros.* See page 39.** Based on sales at constant metal prices.*** To neutralize the effect of variations in price of non-ferrous metals and thus measure its effective sales evolution,Nexans also calculates its sales at constant copper and aluminum prices.

Sales at constant metal prices are down 4.2%.Discounting the effects of variations in exchangerates and scope of consolidation, sales are down2.7%, a reflection of the continuing low demand in2003. In this difficult period, the Group nonethe-less reaped the benefits of its cost reductionefforts, increasing its operating margin.

Energy Ele

ctrica

l wire

s Teleco

m

Distrib

ution

and ot

her

7%

2001 2002 2003 2001 2002 2003

4,7774,302

4,0464,467

4,096 3,924

SALES BREAKDOWN BY GEOGRAPHIC AREA**SALES BREAKDOWN BY ACTIVITY**

55% 24% 14%

Europe Nort

h Ameri

ca

Asia

Rest of

the w

orld

75% 17%

5% 3%

05

INCOME FROM OPERATIONS(1)

(1) In millions of euros.(2) EBITDA is defined as income from operations, excluding depreciation and amortization.(3) Net debt corresponds to financial debt, less cash and investments.* See page 39.

At constant accounting methods*, income from operations amounts to 58 million euros, up on the previous year. The reduction in fixed costs morethan compensated for the downturn in activity, resulting in an increase inoperating margin from 1.4% in 2002 to 1.5% in 2003.

NET INCOME(1)

The Group's net income is atbreakeven, taking into account 41 million euros for restructuring, an extraordinary charge of 21 millioneuros in the winding wires business,and the application of new standardsrelating to the appreciation anddepreciation of fixed assets (CRC 2002-10).

WORKING CAPITAL(1)

The action undertaken to reducecapital employed (investment, working capital needs) resulted ina 6.9% increase in cashflow inspite of the unfavorable behavior of exchange rates.

NET DEBT(1)(3)

The Group’s debt is down for thefourth year in a row. Debt fell by29 million euros in 2003 followinga disbursement of 32 million eurosassociated with the acquisition oftwo consolidated companies. The gearing ratio (debt as a proportion of shareholders’ equity)therefore stood at 2.4% at 2003year-end, reflecting the Group’sfinancial stability.

SHAREHOLDERS’ EQUITY(1)

A substantial level of shareholders’equity combined with low net debtrepresent the foundations for futurestability.

139

EBITDA(1) (2)

56

91

30

-40

1

280

201190

170

87 9371

52

23

1,096991 942

2001 2002 2003 2001 2002 2003 2001 2002 2003

2001 2002 2003 2001 2002 2003 2001 2002 2003

Number of Nexans Date of appointment Other directorships shares held and term expiration and equivalents

Gérard Hauser, 62 years old, 3,352 October 17, 2000 Member of the Board of Directors of Alstom, Faurecia,CEO (date first Aplix and Electro-Banque16 rue de Monceau, 75008 Paris appointed) / 2007 AGM*

Gianpaolo Caccini, 65 years old, 25 June 15, 2001 / 2007 AGM* Member of the Board of Directors of JM Huber Corporation Chief Operating Officer of the Saint-Gobain Group until March 31, 2004 (United States)and Senior Vice-President of Saint-Gobain Corporation (USA)Les Miroirs, 18 avenue d’Alsace, 92096 La Défense cedex

Georges Chodron de Courcel, 53 years old, 29 June 15, 2001 / 2007 AGM* Member of the Board of Directors of Bouygues Chief Operating Officer of BNP Paribas, member of the Executive Committee and Alstom, Member of the Supervisory Board of Lagardère SA3 rue d’Antin, 75002 Paris and an observer of SCOR(2)

Jacques Garaïalde, 47 years old, 10 June 15, 2001 / 2007 AGM* Member of the Board of Directors of LegrandManaging Director of KKR (Kohlberg Kravis Roberts & Co. Ltd.)Stirling Square, 7 Carlton Gardens, London SW1Y 5AD, United Kingdom

Patrick Puy, 48 years old, 61 June 15, 2001 / 2007 AGM* Senior Vice President of Hydro, Power Environment Sector of Alstom and Chairman & CEO of the Italian company Ocean S.p.AImmeuble Octant, 4 avenue André Malraux, 92309 Levallois-Perret cedex

Ervin Rosenberg, 68 years old, 110 June 15, 2001 / 2007 AGM* Chairman of Compagnie Financière Savoisienne, Member of the Board Advisor to the President of Compagnie Financière of Directors of Thomson SA, Member of the Supervisory Board Edmond de Rothschild Banque of Compagnie Financière Edmond de Rothschild Banque, 47 rue du Faubourg Saint Honoré, 75008 Paris CDC IXIS LCF Rothschild and Ifrah Finance

Jean-Louis Vinciguerra, 60 years old, 50 June 15, 2001 / 2007 AGM* Member of the Board of Directors of Orange, Wanadoo and EquantDirector of AKFED (Aga Khan Fund for Economic Development)

Jean-Marie Chevalier(3), 62 years old, 20 October 23, 2003 / 2007 AGM* Professor of Economics at the University of Paris IX-Dauphine and Director at Cambridge Energy Research Associates (CERA) Place du Maréchal de Lattre de Tassigny, 75116 Paris

Composition of the Board of Directors (1)

06

Corporate governance

* At the close of the General Shareholders’ Meeting convened to consider the financial statements for the financial year ending December 31, 2006.(1) The following information is given as of March 31, 2004.(2) Also a member of the Supervisory board of SAGEM as from April 21, 2004.(3) The appointment of Jean-Marie Chevalier as a Director, to replace Robert Mahler who resigned, was decided at the Board of Directors’ meeting of October 23, 2003. The General Shareholders’ Meeting of June 3, 2004 will be asked to ratify his appointment.

Proposal submitted to the General Shareholders’ Meeting of June 3, 2004: appointment of two new Directors

Colette Lewiner, 58 years old, Executive Vice-President of the Energy, Utilities and Chemicals GSA (Global Sector and Accounts) of Cap Gemini Ernst & YoungCœur Défense, Tour A, La Défense 4, 110 esplanade du Général de Gaulle, 92931 Paris La Défense

Yves Lyon-Caen, 54 years old, Member of the Board of Directors and Chief Operating Officer of Béri 21 (holding company of Bénéteau SA), Chairman of the Supervisory Board of Sucres & Denrées.20 rue de la Ville l’Évêque, 75008 Paris

Board of Directors and CommitteesSince its listing on the stock exchange, Nexans has adopted a

number of rules relating to corporate governance with a view to

ensuring transparency of information with respect to both its

Directors and its shareholders.

During the second half of 2003, drawing on both the Bouton Report

and the combined Viénot-Bouton Report, Nexans strengthened its

rules of best practice in corporate governance, in particular, by

adopting internal Regulations and a Directors’ Charter (see the

Chairman’s Report starting on page 108).

The Board of Directors currently has eight members. They come from

diverse backgrounds and were selected for their expertise and experience

in industry, banking or consultancy, enabling them to give informed

opinions and advice in the best interests of the Company.

None of the members in office is an employee or member of

the management team of the Company or an employee, Company

officer or member of the management team of any Group company,

with the exception of Gérard Hauser. None of them has been in office

for more than twelve years. No category of shareholder is represented

on the Board of Directors, and no director is elected by the employees.

The Board of Directors has followed the recommendations of the

Combined Viénot-Bouton Report of June 2003 and, at its March 12,

2004, meeting, based on the report issued by its Appointments &

Compensation Committee, reviewed the situation of each of its

members with regard to the criteria governing independence defined in

the Report and taken up in its Rules & Regulations. The latter specifies in

particular that, in the Group’s relations with businesses and banks in

which one or more of its directors have interests, the assessment of

their degree of independence is based on the proportion of revenues,

fixed at 10%, derived from such businesses or the proportion of business

given to partner corporate and investment banks. The aim is to

determine whether these relationships are of an importance and nature

such that they could affect the independence and freedom of judgment of

the directors concerned. Based on these criteria, the Board of

Directors considered that Gianpaolo Caccini, Jacques Garaïalde,

Jean-Louis Vinciguerra, Jean-Marie Chevalier, Patrick Puy and

Ervin Rosenberg should be considered as independent directors.

The other directors were considered by the Board of Directors as

not being independent:

Gérard Hauser, in view of his position as Chairman & CEO of

the Company and Georges Chodron de Courcel, owing to

his position within BNP Paribas which is one of the banks the Group

uses for everyday banking transactions.

Six out of eight directors are therefore independent, representing more

than half the Board members, in line with the recommendations of

the Viénot-Bouton Report.

The General Shareholders’ Meeting of June 3, 2004 will be asked

to consider an amendment to the Company’s articles of association,

to fix the term of office for directors appointed after January 1, 2004

at 4 years.

Executive managementPursuant to the French law of May 15, 2001 relating to new economic

regulations, the Nexans Board of Directors decided on June 25, 2002

not to separate the roles of Chairman of the Board and Chief Executive

Officer of the company. Nexans has an Executive Committee made up of

senior executives in charge of clearly defined areas of activity and

functions (see page 9).

Appraisal of the Board of DirectorsThe Board of Directors decided to implement, for the first time in

the autumn of 2003, an annual appraisal system to review its method of

operation, to ensure that important matters are properly reported, dealt

with and debated during meetings. The system has been implemented

on the basis of a detailed questionnaire, approved by the Board and

sent to all the directors. The questionnaire should assess the composition

of the Board, the frequency of meetings, the relevance and quality of

the information provided to it, the support provided by the Committees,

and the amount of interaction when discussing points on the agenda to

be evaluated.

Based on a summary of the responses to the questionnaire, the Board, at

its March 12, 2004 meeting, reviewed its own composition,

the organization of its work and its operation, and decided on

further action to be taken, as follows:

• a change into the annual timetable of meetings;

• additional information that the Board would like to receive, relating in

particular to the audit plan and the valuation criteria used by

stock market traders;

• the organization of an annual meeting dedicated specifically to

presenting the Group’s strategy, followed by a discussion.

Two specialized committees were set up by the Board of Directors on

July 4, 2001, who determined how they would function and what

07

Board of Directors and Committees (cont.)

their objectives would be: the Accounts Committee and

the Compensation Committee, which in 2003 became the Appointments

& Compensation Committee (see details of the composition and functioning

of these committees in the Chairman’s Report, pages 109 and 110).

Report of the activities of the Accounts Committee in 2003The Committee met twice in the 2003 financial year.

During 2003, the Accounts Committee examined the consolidated

financial statements and interviewed firms for the office of second auditor.

The progress report on the internal audit plan and the audit plan

for 2003-2004 was presented to it. Lastly, it examined the new asset

amortization and depreciation policy and the procedure for recognition

of deferred tax assets.

Report of the activities of the Appointments & Compensation Committee in 2003The Committee met four times in 2003. It gave its opinion on:

• the calculation of the fixed part of the Chairman & CEO’s

compensation,

• the guidelines for calculating the variable portion of the Chairman

and CEO’s compensation and the setting of his objectives for 2003,

• the setting up of an additional retirement plan for senior executives,

• the adoption of a new stock option plan and the beneficiaries of

the options granted,

• the proposal to co-opt a new director.

For information on the report of the activities of the Board of Directors in

2003, see the Chairman’s Report, page 108.

Directors’ interests and compensationThe Combined General Shareholders’ Meeting of June 25, 2003

decided to increase the Directors’ fees from 200,000 to

300,000 euros per annum until such time as a further decision is made,

effective from the financial year beginning January 1, 2003.

The procedure for setting and allocating Directors’ fees laid down by

the Board of Directors includes a fixed portion and a variable portion

based on Board meeting attendance and participation in committees.

Directors’ fees are allocated as follows:

• all Directors, including the Chairman, receive a fixed payment of

15,000 euros;

• all Directors, including the Chairman, receive an additional

2,000 euros for each Board meeting they attend, up to

a maximum of 10,000 euros per Director;

• the members of the Accounts Committee receive 3,000 euros per

meeting, up to a maximum of 6,000 euros per annum;

• the members of the Appointments & Compensation Committee receive

4,000 euros per annum for their services.

Directors’ fees for the 2003 financial year amounted to

232,000 euros, broken down as follows:

Georges Chodron de Courcel and Jean Louis Vinciguerra received

31,000 euros; Ervin Rosenberg and Patrick Puy received

29,000 euros; Gérard Hauser, Gianpaolo Caccini and Jacques

Garaïalde received 25,000 euros; Robert Mahler received

18,000 euros, Bertrand Durrande* 13,000 euros and Jean-Marie

Chevalier 6,000 euros. These Directors’ fees were paid to

Board members in 2004.

In addition, Patrick Puy received 110,000 euros for the 2003 financial

year in respect of his role as industrial and commercial advisor on

the project for the takeover of Alstom’s Transmission & Distribution business.

Chairman’s compensationThe Chairman and CEO’s total gross compensation in 2003, before

tax and including benefits in kind and directors’ fees, amounted to

1,223,072 euros (DADS basis).

The components of his compensation have evolved as follows:

2002 2003

Reference salary 686,000 euros 750,000 euros (1)

Variable compensation 411,600 euros 562,500 euros

Directors’ fees 20,000 euros 25,000 euros

Benefits in kind 2,378 euros 2,213.50 euros(1) The reference salary was increased to 750,000 euros, effective from March 1, 2003.

For the 2003 financial year, 60% of the variable compensation was

based on quantitative objectives (operating income, sales, working

capital requirements and cashflow). The remaining 40% was

determined on the basis of a qualitative assessment.

The Chairman and CEO benefits from the additional retirement plan set

up for the Group’s senior executives.

08

Corporate governance

* Resigned on April 4, 2003.

Executive Committee

09

Gérard HauserChairman and CEO

Yvon RaakExecutive Vice-President,Europe area

Michel LemaireExecutive Vice-President,North America/Asia area

Véronique Guillot-PelpelSenior Corporate Vice-President, Communications

François Saint-DizierSenior Corporate Vice-President, Human Resources

Frédéric VincentChief Financial Officer

Bruno ThomasExecutive Vice-President, Rest of the World area

Pascal PortevinExecutive Vice-President,Strategic Operations

The worldwide leader in the cable industry,Nexans is developing expertise in all its marketsand puts all its potential behind a responsible,sustainable development approach. Whether ineconomic, social or environmental areas, the Groupis committed to a clear, concrete and effectivecourse of action. It aims to develop lastingprofitability for its shareholders. It enhances anddevelops the skill sets of its personnel, whilepromoting social dialogue. Indeed, Nexans listens toits customers and supports them in their work byoffering environmentally-friendly products geared totheir requirements.

Economic responsibilityObjectives:■ Build long-term profitability

■ Promote innovation by anticipating requirements

■ Develop partnership links with customers

P.12

10

A SHARED, SUSTAINABLE COMMITMENT

P.16 P.18

Social responsibilityObjectives:■ Develop the skills of each employee

■ Promote social dialogue

■ Strengthen the company's reputation andattractiveness

Environmental responsibilityObjectives:■ Control environmental risks

■ Manufacture in line with international standards

■ Optimize consumption and reduce the impact on the environment

11

Economic responsibility

Ensuring long-term profitability

12

NEXANS’ SHARE PRICE (from January 1st, 2003 to March 31, 2004)

In 2003, Nexans’ share price rose by 74.18% whereas the SBF 120 index (its reference index)increased by 16.84%. This was the index’s 15th best performance in 2003.

Nexans

SBF 120

Volume of traded securities

A steady dividendConfident in its prospects and financial stability, Nexans wishes to

encourage the shareholders supporting its growth. In line with this,

at the Ordinary General Shareholders’ Meeting on June 3, 2004,

the Board of Directors will propose the payment of a 0.20 euro

dividend per share.

A stable, balanced shareholder baseWith almost two-thirds of its shareholders made up of institutional

investors (evenly distributed between French and foreign

shareholders), the Group’s shareholder base remained relatively

stable during the year. There was no change to the percentages

held by the Alcatel Group (15%) or individual shareholders (11%).

Through employee profit-sharing and corporate savings plans

offered by some of the Group’s subsidiaries, Nexans employees

collectively hold 0.94% of the share capital, ranking them among

the Group’s top twenty shareholders.

2004 KEY DATES

Ordinary General Shareholders’ Meeting June 3, 2004

Half-year results July 21, 2004

Publication ofthird-quarter sales October 18, 2004

Guaranteeing its shareholders long-termprofitability and a satisfactory return oninvestment is one of the Group’s main objectives.This depends on clear, transparent communicationof financial information.

J F M A M J J A S O N D J F M2003 2004

1,205,000

1,105,000

1,005,000

905,000

805,000

705,000

605,000

505,000

405,000

305,000

205,000

105,000

36

30

25

20

15

10

1,758,255 1,805,442

652,800556,917

1,017,722

1,760,732 2,622,907

539,491573,478

1,087,531

700,681

983,283

826,547

432,660

1,057,356

Share price in eurosVolume of traded securities

13

CONTACTRequests for information or documents may be addressed to:Investors Relations Department16 rue de Monceau - 75008 Paris, FranceTel: +33 (1) 56 69 84 56 - Fax: +33 (1) 56 69 86 40e-mail: [email protected] The Annual Report is also available on: www.nexans.com

…

OWNERSHIP STRUCTURE (estimated % of share capital holdings at March 31, 2004)

French

andfor

eign

institu

tional

shareh

olders

Individ

ual

shareh

olders

and em

ployee

s

Alcate

l

KEY SHAREHOLDER INFORMATION

2003 2002 2001

Number of shares (at December 31) 23,128,972 23,121,472 25,000,000

Net earnings per share* € 0.06 € (1.78) € 1.22

Net assets per share** € 45.01 € 46.73 € 47.63

Global dividend € 4.6 million € 4.6 million € 9.9 million

Share price highest € 27.09 € 24.3 € 30.50lowest € 10.27 € 9.5 € 13.61period end € 26.51 € 15.22 € 16.21

* Calculated from the average weighted number of shares in circulation. ** Calculated from the number of shares in circulation at December 31.

63.6% 15.0% 11.1% 9.6%

Non-ide

ntified

shareh

olders

0.7%

Sustained communication Providing regular, transparent and rigorous information is a Nexans

priority. To this end, a series of tools adapted to the needs of each

category of investor was made available in 2003:

• briefings for all market players as soon as the half-year and year-

end results are published, plus meetings with the Group’s executive

management,

• presentations and briefings for individual shareholders,

• the Lettre de l’Actionnaire (Shareholder’s Newsletter). Two issues

were published in 2003,

• some twenty individual shareholders drawn from a pool of

81 applicants visited the plant of Draveil (telecommunications

special cables) in the South of Paris,

• the corporate website: www.nexans.com, which provides access

to all Group financial information.

Treasu

ry sto

ck

Economic responsibility

Build the future, every day

14

Clearly defined strategic priorities The globalization of the

economy, mergers between

major international customers

and the ever-growing

complexity of projects are all

factors that require businesses

to develop a clear medium-

term vision. In response to

these requirements, in 2003

Nexans set up the new

Strategic Operations

Department whose primary

mission is to define the Group’s

marketing priorities. A number

of market segments that hold

particular promise, such as rail,

shipbuilding and aerospace,

oil and gas, and the overhaul

of infrastructure networks, has

been identified. The Strategic

Operations Department relies

on three different forces on

the field that help it to better

understand and serve these

markets, and meet certain

strategic challenges: Key

Account Managers (KAM)

whose mission is to look after

the Group’s biggest customers,

Global Product Managers

(GPM) responsible for

supervising and ensuring the

consistency of Nexans’ product

policy, and the Clubs, internal

discussion groups bringing

together twenty or so

employees from all countries

directly involved in a market

segment that the Group has

identified as a priority.

Effective support functions The Strategic Operations

Department is also responsible

for supervising cross-

organizational functions of

the company. The Purchasing

department, for example,

is responsible centrally for

all Nexans’ supplies. Having

a centralized purchasing

facility has enabled the Group

to better manage the effects of

drastic price increases on

the raw materials it uses.

In logistics, Nexans’ network relies

on a number of highly effective

platforms and an ambitious

program known as ASAP (As

Simple As Possible), the aim of

which is to provide optimum

service to the end customer.

This network is constantly

optimizing flows and product

transportation costs. Finally, the

The newly-formed Strategic OperationsDepartment enables Nexans to better anticipatemarket trends, direct its marketing strategy,adapt its Research & Development programs tonew requirements and free up its nationally-based sales teams.

company’s industrial policy

focuses on a few priority

objectives such as optimizing

manufacturing processes,

constantly improving quality

and sharing industrial best

practices across the Group,

particularly through the

“Program +” continuous

improvement program.

51 patents registered in 2003

15

An R&D strategy with its finger on the pulse of the market Nexans’ R&D program,

constantly geared to improving

the quality of products and

manufacturing techniques,

finding new cost-cutting

solutions and responding to

customers’ future requirements,

takes place on several different

levels. Base level research,

concerned with analyzing and

improving cable components

(sheath, conductor and

insulation), is carried out either

in partnership with international

university research laboratories

or at the Nexans Research

Center (NRC), the Group’s

international research facility in

Lyon (France).

Technological development is

the responsibility of the Group’s

ten Competence Centers,

which all have a global

mission and specialize in

certain products or key

technologies. It is their job to

transform the results of applied

research into new products

and solutions, in

close cooperation with

our customers. The programs

underway are at the cutting

edge of technological

development, in areas such as

new plastic optical fibers and

their diverse applications, HFFR

(halogen-free flame-retardant)

cables for industrial

applications (particularly safety

cables), superconductors, new

polymer compounds that

considerably improve the

performance of medium- and

high-voltage cables, heating

systems for oil pipelines, new-

generation LAN cables, etc.

Innovation is a decisive factor in Nexans’ success,allowing it to set itself apart from the competitionand anticipate the ever-increasing requirements of its customers.

Developing a sales culture

Raising sales figures whileat the same time improvingcustomer service is the bestway of ensuring thecompany’s growth. This yearNexans launched the “WIN”program, an incentivescheme open to all the Group’s sales personnel,designed to reward thosewho show personal initiativeas well as those whoexceed their sales targets.The GRASP Awards (GlobalRecognition Awards forSales Performance) are a further means ofrecognizing efforts thathave made the mostsignificant contribution toincreasing sales andimproving customer serviceduring the year.

…

47.1 million euros dedicated to R&D in 2003

16

17,000 employees in 2003, 76.4% in Europe and 23.6% outside Europe

A new organizationalstructure increasingresponsibility Our Human Resources policy

in 2003 was largely devoted

to putting in place the Group’s

new geographical

organization. Some cross-

organizational departments,

such as Purchasing and

Marketing, increased their

staff. Managers have been

selected and training courses

set up to support the job

changes that have taken place.

Since 2002, thanks to

the Organization & People

Review, it has been possible to

draw up an annual country-by-

country report of the skills

Nexans has at its disposal,

and identify any shortfalls as

well as potential successors for

all key positions in the

company.

In parallel, the first Nexans

Executive Training course took

place in 2003, bringing

together some fifteen senior

executives of different

nationalities and with different

jobs for a series of sessions

covering strategy, finance,

trade, etc. The aim of

this program is to bring to light

the company’s future

management.

More generally, far from being

Nexans demonstrates its social responsibilitythrough a proactive human resources policy,putting the emphasis on appraisal, training,recognizing performance and initiative, andmobility.

restricted to the company’s

senior executives, our staff

training program aims to

develop broader skill and

improve the performance of

all employees. Human

Resources initiates and

manages the industrial,

technical sales and sales

support training programs

set up at country level.

Recognizing personalinitiative and performance Career management and

our salary policy are based

on an objective assessment

of each individual employee’s

potential and achievements.

The principles behind the

Group’s wage practices are

the same in every country.

The key for Nexans is to

be able to attract and retain

the skills it needs.

Social responsibility

Mobilize and develop skills

17

…

Of 17,000 employees, 16% are women and 84% men

This goes hand in hand with

respect for employees’ rights

and adherence to current

labor laws. The Group’s pay

policy also includes a bonus

scheme based on individual

performance and the results

of companies within the

Group or the Group as a

whole. Generally speaking,

the Group is careful to ensure

that salary levels remain

attractive to both its existing

employees and young

graduates likely to join

the company at some point in

the future.

Consulting employeesEurope-wide The desire to involve all

personnel in the Group’s

strategy led Nexans to set up

a European works council.

Called NewCo - which stands

for Nexans European Work

Council -, the council held its

first meeting in November

2003. NewCo comprises

16 members representing

13 countries and its role is to

regularly distribute all available

information on the Group’s

progress, strategy, results,

organization, etc. The areas

covered include production,

sales, employment, investment,

production transfers and

acquisitions. The council is

required to meet at least twice

a year and the next meeting is

scheduled for June 2004.

Restructuringprogram successfullycompleted

Nexans’ 130 million eurorestructuring programstarted in 2002, whichinvolved some 1,500 people,mainly in the United States,Spain, Italy, Germany andFrance, was completed in2003. The program wasimplemented in cooperationwith unions andmanagement on the field,with concern for the fairtreatment of employees. The measures taken toadapt our productioncapacity to marketrequirements, bring downcosts and rationalize someof our activities, particularlyin the telecommunicationsand metallurgy sectors, giveNexans the competitive edgeand level of efficiency itneeds to fully benefit fromthe economic recovery.

Adapting the company’s capabilities to the requirements of the international competitive environment is about developing the skills of each individual.

18

By controlling its production processes, objectivelyassessing the impact of its activities and training its personnel, Nexans makes every effort to optimize its energy consumption, recyclethe bulk of its waste and bring to marketenvironmentally-friendly products.

A strong commitment The environment and the safety

of people and property are

core concerns for Nexans.

The Group’s policy takes a

proactive approach, as

defined in the Nexans

environmental charter entitled

“Maîtrise des risques”

(Controlling Risks) which is

signed by the Chairman.

This charter refers to

the continuous improvement of

our production facilities through

safety and environmental audits

and assessment of the risks

associated with our products

and manufacturing techniques.

Nexans’ commitment to

environmental protection is also

reflected in our staff training in

environmental best practice.

In terms of organization,

Nexans’ environmental policy

is managed by Corporate

Industrial Management, which

reports directly to the Strategic

Operations Department. The

role of Industrial Management,

defined as part of the new

organizational structure put in

place in 2003, is to oversee

industrial strategy, the

investment budget, the

engineering aspect of major

industrial projects and the

databases. The department

also manages cross-

organizational projects, in

particular product and process

development, as well as the

Group’s plant and machinery.

It ensures that the company

shows respect for and protects

the environment in each of

these areas. The environmental

guidelines and objectives

laid down by Industrial

Management apply to

the entire company worldwide,

including the Group’s

subsidiaries abroad.

A rigorous environmentalmanagement systemcompliant with the standards in force Nexans has had an internal

environmental management

system in place for

approximately ten years. Its

objective is to reduce pollution

risks and control environmental

Environmental responsibility

Control production processesand protect the environment

760,000 metric tons of copper consumed in 2003 (5% less than in 2002)

19

…

costs (consumption of energy,

raw materials and hazardous

substances, waste disposal

and recycling). Under this

system, in line with the

ISO 14001 standard, all the

Group’s facilities are checked

annually against a list of

33 environmental indicators.

A number of points relating to

waste recycling were added in

2003, and further questions

will be added in 2004, some

again covering waste recycling

and reuse, and some covering

Recycling andthorough sorting of waste

RIPS, a Nexans subsidiarybased in Calais, recycled16,420 metric tons of cablewaste collected from all the Group’s Europeanmanufacturing plants in2003. Besides, thoroughsorting of factory wastecombined with the recyclingof cables, means that themajority of waste - wood,board, ferrous materials,machine oil, batteries,special waste, etc. - isreused in some way. In2003, the Mehun plant inFrance put in place anumber of “waste points”with new containersdifferentiated according tospecific materials. The initiative wasaccompanied by a large-scale awareness campaigninternally.

The environmental guidelines and objectives laid down apply to the entire Group, including its subsidiaries abroad.

the identification of major

environmental risks

(accompanied by specific crisis

management plans), and the

storage of hazardous liquids.

Once the questionnaires

have been completed,

recommendations are sent

back to the sites in the form of

summary reports and

diagrams, giving rise to

specific action plans to

remedy the situation.

An objective external audit systemIn 2003, the Group put in

place an environmental audit

program put together by an

outside specialized company

(Sageris). From 2004, twenty-

five sites will be audited each

year and, if found to be well-

managed environmentally, will

be awarded the EHP label

denoting compliance with

the highest environmental

standards. Seven sites have

been awarded the label to

date: Chauny SCCC, Mehun-

sur-Yèvre and Lyon in France,

Neunburg, Floss and

Nuremberg in Germany, and

Cortaillod in Switzerland.

The environmental audit

program, which is the same for

all the sites audited, is also

a means of checking materials

consumption (water, solvents,

energy, packaging, etc.),

discharges into the air and

water, ground protection,

101,400 metric tons of waste in 2003 (1.6% less than in 2002), including 11,100 tons of special waste

20

the condition of storage

facilities, volume of waste and

recycling methods, as well as

the impact of our activities in

terms of noise.

In parallel to this highly

efficient system, some of the

Group’s plants are involved in

a process of ISO 14001

certification. In 2003, the

Mehun-sur-Yèvre, RIPS in Calais

(France), and Charleroi and

Opglabbeek plants in Belgium

were granted certification.

Environmentally-friendlyproducts and solutions Nexans’ R&D program also

serves the environment.

Many of our ongoing R&D

programs are concerned with

developing safer, less polluting

and more energy-efficient

products. Examples include

welded aluminum shielding for

high-voltage cables - an

improvement on the old lead

sheaths -, return conductors for

submarine cables that are

friendlier to the marine

environment, and

superconductor cables that emit

Environmental responsibility

no electromagnetic radiation.

There is also extensive research

underway into flame-

retardant/fire-resistant cables.

More generally, Nexans is

installing more underground

cables which have a lesser

visual impact on the

environment than overhead

lines, and the cables and

equipment for wind turbines

produced by the Group are

contributing indirectly to the

development of alternative,

clean sources of energy.

A responsibleattitude towastewatermanagement andtreatment

The current degradation ofgroundwater tables and the global water shortageproblem are priority issuesin any sustainabledevelopment program.Nexans is addressing theseproblems by stepping upmonitoring of the retentionof pollutant liquids instorage and operationalareas. The Group is alsoinvesting specifically inwastewater treatmentsystems, and Nexans’ plantsat Cortaillod in Switzerland,Denizli in Turkey, QuebecCity in Canada andCharleroi in Belgiumbenefited from thisinvestment in 2003.

5,100,000 m3 of water consumed in production in 2003 (7.3% less than in 2002)

21

90,000metric tons of aluminumconsumed in 2003

(same as in 2002)

8,150metric tons of solventsconsumed

981,470MWh of electricityconsumed (3.6% less than

in 2002)

MAIN IMPACT OF NEXANS’ ACTIVITIES*

* Also worthy of mention are the Group-wide efforts to eliminate transformers insulated with askarel (PCB), replace fuel oil boilers with less polluting gas boilers,and gradually phase out single-wall underground storage tanks.

Careful analysis and handling of environmental impact Although the Group’s business is not particularly

pollutant, Nexans nonetheless carefully analyzes the

environmental impact of its processes.

1.8 million euros spent on environmental measures

• Energy (natural gas) for metalcasting, and water for steam andcooling

• Electrical power for annealing andoily water for drawing lubrication

• Cooling water

• Low air emissions • Low consumption of solvents

compared with the volume of cablesmanufactured (mainly for markinginks)

• Solvents for making varnishes and energy for varnish baking

• Cooling water • Enameling varnish

Activity Resources used Action by Nexans to end 2003

Copper and aluminum metallurgy

Copper power andtelecom cables: - conductor

manufacturing (drawing andstranding)

- extrusion cablemanufacturing

Winding wires

➔ 95% of consumed water is recycled In 2003, a facility for treating the wastewater produced byrinsing the wirerod after pickling was installed on thecontinuous casting line at Chauny (a highly efficient treatmentplant of the same type had been installed at the Montreal Eastplant in Canada in 2002)

➔ Efforts to reduce the amount of copper dust released into the atmosphere

➔ Wastewater filtered, treated and recycled In 2003, the Fergus plant in Canada installed a highly efficientfiltration system that reduces lubricant consumption

➔ Recycled water All our extrusion cable manufacturing plants, which need largequantities of cooling water, have recycling facilities

➔ Treated by filter vacuum cleaners ➔ Handled specifically: small storage cabinets or fume hoods

➔ Specific and ongoing investment to reduce the release ofsolvent vapors into the airNexans invested in measures to reduce the release of solventvapors into the air in 2003, notably at Chauny (France) tocomply with new European legislation on emissions. At Vianado Castello in Portugal, a thermal oxidation system wasinstalled to burn off residues of solvents and hydrocarbonsbefore they are released into the atmosphere

➔ Low consumption ➔ A single Nexans site classified Seveso 2 (low level),

regularly monitored

The sheer number and variety of cables andcabling systems used today coupled with the diversity of customers’ applications andrequirements mean that cable manufacturers haveto have a thorough knowledge of their markets,and increase their ability to forecast and adapt.With a presence in more than 65 countries,Nexans supports its customers by providing themwith a comprehensive range of products andservices in areas as diverse as energy,telecommunications, petrochemicals, building,railway infrastructure and rolling stock, automotiveand aerospace industries, etc. The Group’s newgeographical organization brings it greaterresponsiveness and proximity to its customers, andencourages cross-countries sales in its variousspecialties, enabling it to intervene anywhere inthe world on the most complex infrastructure,building and industrial projects.

22

PROVIDING A COMPLETE OFFER, WORLDWIDE

*

* For the purposes of comparability, the figures given in this section have been calculated at constant metal prices, exchange rates and accounting methods.

23

P.24

Results by business*

P.26

Results, ”Europe area“*

P.30

Results, ”North America area“*

P.32

Results, ”Asia area“*

P.34

Results, ”Rest of the World area“*

ENERGY

TELECOM

ELECTRICAL WIRES

14% of the Group’s activities

24% of the Group’sactivities

55% of the Group’sactivities

RESULTS

Energy generated sales of2,143 million euros in 2003. The excellent performance ofhigh-voltage and umbilical cablesand the good results of energyaccessories did not fullycompensate for the persistentweakness of the low-voltagecables business, particularly forthe building market.

STRENGTHS

Nexans occupies a very strongposition in the electricalinfrastructure markets, particularlyin Europe and on the East coast ofNorth America. Thanks to itsKukdong plant in Korea, Nexans is also the world leader in cablesfor shipbuilding and supplies theworld’s biggest shipyards.

RESULTS

Telecom sales totaled 546 millioneuros in 2003. The marketremained as bad on the whole as it was in 2002, particularly inthe infrastructure sector which is still extremely depressed.Nonetheless, the action planslaunched in 2002 resulted in 2003in a marked recovery in Nexans'performance. The restructuringenabled the Group to pursue effortsto reduce indirect costs (down 21% in two years).

STRENGTHS

Historically Nexans has alwaysoccupied a strong position inEurope, particularly in cables forindustry, and also in the UnitedStates in LAN cables where theGroup enjoys an excellent image.Nexans has also been establishedfor several years in Shanghai, and is the market leader intelecommunications cables inVietnam and network cables inKorea.

RESULTS

Electrical Wires generated sales of 956 million euros. Wirerodperformed well in 2003 supportedby the growth in domestic sales,whereas winding wires suffereddue to the weak electricaltransformer and equipment marketsboth in Europe and in the UnitedStates.

STRENGTHS

Nexans is the wirerod marketleader. It has control of the basic component, copper, and has a comprehensive range ofconductors and a global presence.The Group’s metal casting plants in Europe and North America giveit a competitive edge and a guarantee of quality and control over the processing of its raw materials.

24

Results by business

OUTLOOK

Faced with the fragility of the existing energy networks in the developed countries, demonstrated in 2003 bythe large-scale blackouts in New York, Italy and Scandinavia, Nexans offers a full range of products and is developing solutions for the future such as the superconductor cable, currently being tested on Long Island.Its presence in Asia gives it access to the infrastructure and equipment markets in China, in Vietnam and incountries such as the former Soviet republics. In special cables for industry, particularly fire-resistant cables,Nexans possesses the high level of technological advance required to meet the new European standards dueto come into force in the near future. Moreover, if the promised return to world economic growth is confirmed,opportunities should again arise in the building and industry markets. Nexans, having adapted its productioncapacity to meet new demand, now enjoys a position of strength in these areas.

OUTLOOK

The extent of the Group’s offering and the quality of its R&D in high-speed transmission and connectivity, its positioning in the local loop market, and the quality of its ADSL offering combine to give Nexans a competitive edge. After a few extremely difficult years, the telecommunications sector is, on the whole,looking healthier. The deployment of ADSL, the development of CityNet (urban networks), better prospects for private local area networks (LAN) and Category 6 products taking off are all positive factors. The industrycables and data transmission markets are also set to see rapid growth, particularly in the building, industry,petrochemicals and transportation sectors.

OUTLOOK

Bare wires, the basic product of the cable industry, are used throughout the telecommunications, energy andindustry sectors. The wirerod markets, which are heavily dependent on the industrial situation, should benefitfrom the general recovery expected in 2004. Increased orders from companies within the Group that useelectrical wires from the metallurgy units to produce their own cables will be the first effect of this. In addition,equipment manufacturers in the booming and strategic automotive, rail and aerospace sectors represent astrong potential customer base. Considering the persistent difficulties encountered in the fiercely competitivewinding wires sector and the lack of critical mass of its European and North American entities, Nexans isconsidering disposal, joint venture and partnership solutions for this activity.

25

EuropeResults by geographical area

26

Standing up well indemanding timesNexans’ sales in Europetotaled 2,959 million euros in2003. The 2.7% dropcompared with 2002 isexplained by an extremelymorose economic situationoverall in the first nine monthsof the year. Sluggish capitalexpenditure in industry andindustrial buildings weighedespecially heavily on ordersfor equipment cables. In spiteof the economic climate,Nexans performed wellcompared with the

competition and largely heldonto its market share. Theinitial effects of therestructuring carried out overthe last two years are nowbeing felt, proof of Nexans’ability to adapt, in terms ofboth production capacity andmaintaining its margins.

Income from operations stoodat 32 million euros, up10.3% compared with 2002.

Varied results from one business to anotherIn Energy, the year wascharacterized by theoutstanding performance ofNexans’ high-voltageactivities where sales rose bymore than 10% comparedwith 2002. Umbilical cablesin Norway and our energyaccessories activities alsoperformed very well. On the contrary, the persistentlow volume of sales of low-voltage cables for the building market, particularlyin France, Italy and Spain,required the Group to make necessary measures inthese countries.In the Telecom sector, we areseeing some improvementafter several extremely difficult

Yvon RaakExecutive Vice-President, Europe area

“Europe is our historical foundation. We are the market leader in manycountries, even though we have alimited presence in certain regions,particularly Central Europe. The Balticcountries, on the other hand, offerconsiderable scope for development. In terms of external growth, there isstill scope for acquisitions in Europe, asborne out by the purchase of GPH inGermany last year. The new organizational structurebenefits us in a number of ways. It willmake us more dynamic in sales andstimulate our trailblazing approach, aswell as open up new growth prospectsfor the Group through the developmentof cross-countries sales”.

Accounting for 75% of total sales, Europe couldbe considered the cornerstone of the Group. The maturity of this market requires Nexans toposition itself as an innovator. Ultimately, theproportion of Nexan’s business in Europe shoulddiminish in favor of faster-growing economies inother parts of the world.

Sales of 2,959 million euros

years. The market isrecovering gradually, drivenin particular by thedeployment of ADSL. Capitalexpenditure is on the rise,particularly in new high-speed data transmissiontechnologies. Finally, thesituation in the electrical wiressector is variable: whereasthe wirerod and bare wiresactivities are holding theirown, the winding wires sectoris experiencing a sharpdownturn partly linked to the overall drop in the sale of”white goods”.

Promising market sectorsCertain market sectors arelooking particularly promising.The supply of cables to theaerospace industry benefitedfrom the commercial successof Airbus and related projectsin 2003. Rolling stockequipment and railwayinfrastructure represent anarea of strong potentialgrowth for special cables,with high-speed rail linksdeveloping rapidly. This isespecially so in Europe, withSpain, for example, planningto build 600 kilometers ofhigh-speed tracks.

Finally, aging fleets and the emergence of newrequirements are giving rise tostrong demand for cabling fornew ships. As the authorizedsupplier for Chantiers del’Atlantique, Nexans this yearfitted out the world’s largestocean liner, the Queen Mary 2,with low- and medium-voltageenergy cables, data cables,and special cables forcomfort and leisure facilitieson board.

Background

Europe suffered a

particularly depressed

economic climate in 2003.

Nexans’ performance varied

from one sector and

country to another.

Energy infrastructure

continued to generate a

steady flow of orders and

some positive signs started

to appear in the

telecommunications sector.

Geographically speaking,

Scandinavia, Germany and

Belgium stood up well,

whereas France, Italy and

Spain suffered.

27

Germany, Belgium, Denmark, Norway,Sweden, France, United Kingdom, Ireland,Portugal, Spain, Switzerland, Italy,Greece, Romania, Czech Republic, Netherlands, Finland, Austria, Poland,Bulgaria, the Baltic States, Croatia,Hungary, Serbia and Montenegro,Slovakia, Slovenia.■ settling without industrial presence

Income from operations: 32 million euros

28

Europe

A more pragmatic country-oriented structureThe introduction of the newgeographical organizationhas given the Group a moredetailed perspective ofindividual national markets.Each country is nowresponsible for its own marketand for the distribution of allthe Group’s products in thatmarket. Streamlining thedecision-making structure hasled to greater responsivenessin a climate of strongcompetition and priceerosion. Thanks to therestructuring started in 2002,Nexans has been able tocontinue reducing

overcapacity and is nowready to grasp all the opportunities for recovery in 2004. On the sales front, a smallteam manages cross-organizational initiativesbetween countries, promotescross-countries sales andensures efficient coordinationof Nexans’ sales teams. The increased proximity tocustomers at local level meansthat Nexans can takeadvantage of all opportunitiesfor growth, whether talkingabout areas of rapid growthlike Central Europe, Polandand the Baltic States, orabout entering new marketsor the booming nichemarkets.Logistical and industrialcoordination in the Europearea is carried out by small,streamlined departments,which are also responsible forcoordinating capitalexpenditure, encouraging theexchange of working methodsand promoting ongoingprograms (Program+, ASAP,transportation cost reduction,etc.).

Finally, acquisitions still offerpotential for expansion, asborne out by the acquisitionof GPH in Germany, whichhas strengthened Nexans’position in accessories for the energy infrastructure sector.

Four cross-organizationalBusiness GroupsIn view of the economicimportance of Europe inNexans’ overall activities, a few specific organizationalaspects have been retained forsome activities. Four BusinessGroups continue to control

Group-wide activities. Highvoltage cables are managedglobally to ensure that projectsand large accounts are handledwith maximum efficiency.

13,000 employees Plants in 15 countries

In the accessories sector, thefragmentation of the offeringacross several countries gaverise to the need to combineresources in a cross-organizational structure. Theorganization of the Europeanteams in the wirerod, windingwires and electrical wiressectors has also beenretained.

Developing cross-countriessalesA number of steps has beentaken to encourage cross-countries sales at Europeanlevel. Clubs dedicatedspecifically to certain marketsmeet to make customers’requirements known to thecompany, find solutions andencourage inter-countrycoordination of the salesnetworks. More generally, the objective is that every salesteam should know and beable to offer every product inthe Nexans range in theirown country. This approachhas resulted in a recentbreakthrough in France,Switzerland, Germany andSweden in the highly

specialized area of heatingcables, manufactured inNorway and for a long timelimited to a local customerbase. The appointment of Key Account Managers atGroup level has been afurther means of promotingthe full range of Nexans’products and of supplyingoriginal solutions to largeEuropean accounts.

29

DECEMBER 2003Nexans wins the biggest energy contract of theyear. As part of a 50/50 consortium with the Pirelli Group,

Nexans was awarded a contract for the production and

installation of a high-voltage submarine link between the

Spanish and Moroccan national power grids. Worth 115 million

euros, this was the biggest energy contract of 2003.

NOVEMBER 2003Madrid contract takes off. Nexans has won a contract to

supply the luggage conveying systems for Madrid airport’s two

new terminals. 2,100 kilometers of special cables, safety cables

and connections will be manufactured in Germany. Nexans won

the tender on the strength of the simplicity of installation and

adaptability of the systems proposed.

JULY 2003Kristin oilfield project in Norway. Nexans has been

awarded a contract worth 15 million euros by the Norwegian

company Statoil to supply and provide support for the

installation of electrical heating cables and protective

equipment for submarine pipelines in the Kristin oilfield in the

Norwegian Sea.

JANUARY 2003First e-service orders placed. “E-service”, the online

browsing and ordering service launched in France in late 2002,

received its first order, from Swiss customer Burkhard Electro.

Numerous orders have since been placed using this new system,

which is currently being rolled out in 33 countries.

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OUTLOOK Having reduced costs and overcapacity, Nexans is in an ideal position totake advantage of the economic recovery in Europe. The organizational structure is moreresponsive, freeing up resources at country level. While cross-countries sales favor a rapidincrease in sales, constant efforts in innovation take better into account customerrequirements. Best practice management is applied to every activity, be it production inNexans’ European plants, trade or support functions such as purchasing and logistics.

North AmericaResults by geographical area

30

Varying results in 2003In spite of the growth seen inthe second half of the year,the North American economysuffered from low capitalexpenditure in industry in2003. Nexans’ sales in theregion totaled 658 millioneuros in 2003, compared to697 million in 2002. Thisdecline was mainly due to thesharp fall in sales of electricalwires in the United States,low sales of special cablesfor industry and thedisruptions of operationslinked to the restructuring.Despite not reaching its salestargets, Nexans nonethelessfared better than all of itsNorth American competitors.Its results in most sectorsexceed the targets set,

particularly in the privatenetwork, LAN and opticalfiber sectors. The positive

effects of the restructuring carriedout in 2002 in the telecom-munications sector were felt.

Michel LemaireExecutive Vice-President, North America/Asia area

“North America represents an area of rapid growth for our activities,particularly on the East coast where we hold an extremely strong position.Stimulated by economic growth,infrastructure and building projectsseem to be on the rise, benefiting tothe energy and telecommunicationsmarkets. The massive blackout inAugust revealed weaknesses in the North American power grid. In this favorable climate, Nexans has a lot to offer; all the more sincewe have progressively reduced ourcosts and possess precisely the rightexpertise to respond to localrequirements.”

North America accounts for 17% of Nexans’ totalsales. In 2003 the region benefited from ahealthy level of business in Canada and someimprovements in the United States, the promisingtrend in private Local Area Network (LAN) cablesand a successful restructuring program.

NOVEMBER 2003Nexans to supply high-temperature superconductorcomponents. Nexans has won a contract to supply high critical

temperature superconductor components for a 12 million-dollar

matrix fault current limiter (MFCL) project launched by the US

Department of Energy.

JUNE 2003Nexans participates in International Oil & Gasconference in Houston. This year in Houston the Group

presented five product ranges: high-voltage cables and accessories,

cabling systems (LAN), network cables, low-voltage cables and

special cables. The products were promoted to more than

50,000 visitors and 2,000 exhibitors at the 2003 session.

JANUARY 2003Nexans wins €50 million contract in Arizona. Salt River

Project (SRP), one of the main power utilities on the West coast of

the United States, signed a 4-year contract with Nexans. The

contract, worth 50 million euros, covers cabling for the supply of

electricity to SRP’s customers, a combination of private homes and

commercial buildings in central Arizona.

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Sales of 658 million euros (income from operations: 15 million euros)

A strong customer baseWith a growth rate two tothree times higher thanEurope, North Americarepresents an area of rapiddevelopment for Nexans. TheGroup is the region’s fourthlargest cablemaker. NorthAmerica also favors theemergence of newtechnologies, particularly inthe telecommunications sector.Thanks to the activities ofBerk-Tek in the United States,Nexans has a key advantagein this domain. The New Yorkarea in particular is asizeable and promisingmarket for the Group. Anumber of major projects arecurrently under consideration,notably in energyinfrastructure and privateLANs.

A high added value nichemarket strategyNorth America represents awealth of opportunity incertain niche markets.Success in these marketsdepends on a thoroughknowledge of customerrequirements, and sales teamswho can respond quickly,even when it comes to prices.Nexan’s new organizationalstructure allows for that bygiving sales teams in the fieldmaximum independence andresponsibility. Notably higherexpectations can be seen inproject management andsolutions development. A lotof customers are calling onengineering firms which, onbehalf of their clients, payparticularly close attention toprices and delivery schedules.The challenge for Nexans isto control the various stages

of the logistics chain, fromorder all the way to deliveryand payment. Supportfunctions, particularly inmarketing and logistics, play a crucial role. Thedevelopment of “e-service”, aswell as the single commercialcontact, enables sales forcesto construct complex, multi-product proposals veryquickly, and meet theircustomers’ requirements.

31

Canada, USA, Mexico, Central America,Caribbean.

OUTLOOK The outlook for the next few years looksparticularly promising for North America. In the energyinfrastructure sector, the recent blackouts point to a need tooverhaul the existing networks. Nexans is currently testingsome highly promising superconductor cable solutions onLong Island. In New York, where Nexans is firmlyestablished, residential and non-residential projects appearfinally to be on the upturn after the almost total standstill thatfollowed the events of September 11, 2001. Numerousprojects are under consideration and should give rise tosome sizeable orders in 2004, particularly in energy anddata transmission cables.

Background

North America saw a return

to economic growth in March

2003. The boost to certain

public-sector projects and

the tax reductions favored

consumption.

Business is picking up in

the telecommunications sector,

particularly in private LANs.

Infrastructure and building

seem finally to be on an

upward curve, and only

winding wires are showing

disappointing results.

1,750 employees

■ settling without industrial presence

AsiaResults by geographical area

32

Nexans’ activities in Asiahave long been concentratedon the telecommunicationssector. The setting up of a jointventure in China and thecreation of Nexans Koreathrough the acquisition ofDaesung Cable in 2001 have progressively strengthenedthe Group’s presence in the region. Nexans is now ina position to offer its Asiancustomers a comprehensiverange of products andservices covering energycables, telecom networkcables, umbilicals and otherspecial cables. The acquisitionof the ultra-modern Koreancompany Kukdong in 2003,

apart from strengtheningNexans’ presence in theregion, also - most importantly -permitted Nexans to becomethe world leader in theshipbuilding market.

Korea and China, two vastlydifferent situationsThe Korean and Chineseeconomies vary widely.Korea fell victim to theeconomic crisis, compoundedby political and socialinstability. Nexans’ plants inKorea were badly affected bythis slowdown. Kukdonghowever, which exportscables for shipbuilding allover the world, should seesteady growth in the next few years.

Michel LemaireExecutive Vice-President, North America/Asia area

“Asia presents some interestingopportunities. The region’s hugeinfrastructure requirements areaccompanied by the continued growthof local consumer spending. Asia as a whole offers particularlyattractive terms for local investment.However, the economic situation variesconsiderably from country to country.Our acquisitions in Korea aredeveloping and China plays a crucialrole, with Western companies alreadypresent and competing with localbusinesses. Other countries, likeVietnam, are particularly favorable togrowth.”

Nexans’ sales in Asia increased by 63% in 2003.The year was characterized by the acquisition of the Korean company Kukdong, making Nexansthe world leader in cables for shipbuilding.

JUNE 2003Nexans involved in China’s first superconductor cableproject. Nexans is to take part in China’s first high critical

temperature superconductor cable project led by the Chinese

company Innopower Superconductor Cable Co. The project concerns

a power plant in Kunming, the capital of Yunnan province in

southern China, which is due to enter into service in spring 2004.

MARCH 2003Contract to install 219 kilometers of submarine cables inIndonesia. A contract from Hyundai Heavy Industries has

confirmed Nexans’ leadership in the submarine cables market.

Korea’s industrial giant placed an order for 219 kilometers of optical

fiber submarine cables, an ultra high-tech product destined for the

Indonesian oil company, Perushan Gas Negara.

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China on the other hand is abooming market. Salaries areparticularly competitive.Nexans owns two plants inChina, one for telecomcables and the other fortransformer cables, and iscurrently building a third tomanufacture special cablesand cables for shipbuilding,to further exploit its potentialin this field.China also represents asizeable market in terms ofenergy infrastructure, in spiteof pressure on prices andfierce local competition.Telecommunications andspecial cables are promisingmarkets, and there are fineopportunities in the railwayinfrastructure and rolling stocksectors since China plans tolay several thousandkilometers of high-speedtracks in the near future.French manufacturers are wellplaced to win both

infrastructure and rolling stockcontracts.

A promising future inVietnamIt is one of Nexans’objectives to expand inVietnam. France still enjoys aprivileged relationship withthis market of 80 millionpeople. With the politicalsystem progressively openingup to the private sector,Vietnam represents a valuablestepping stone to allbordering countries(Cambodia, Laos, Thailand,etc.). Nexans’ two Vietnamesesubsidiaries are profitablethanks to modern facilitiesand low production costs.Opportunities exist in port,airport, rail and roadinfrastructures, and energy,telecommunications andspecial cables all show stronggrowth potential.

33

China, Korea, Vietnam, Japan, India,Southeast Asia and Pacific Asia,Australia, New Zealand.

OUTLOOK Nexans’ expansion in Asia is set tocontinue and the region could account for almost 10% ofsales in three to five years. This requires that, in additionto industrial and sales capability, Asia acquires technicalsupport capability on products with high added value. Inaddition to the numerous expansion projects it isconsidering in this region, Nexans is not ruling out anyopportunity for external growth, provided the price is right.

Background

Despite the effects of the

SARS outbreak, the Asian

economy continued to grow

rapidly in 2003. Following its

entry into the WTO in 2002,

China offers huge potential

to stimulate American and

world growth.

Other countries like Vietnam

are also starting to make

their presence felt. Driven

by exports, the situation in

Korea is improving, since

the domestic market on the

whole slowed down in 2003.

1,100 employees


Results by geographical area

34

Three strategic locationsIn Brazil this year, Nexanstook over the FurukawaGroup’s Lorena-based plantspecialized in the productionof welded aluminum cables,and subsequently started upcopper telecom and LANcable activities. Nexans iscarving out a favorableposition for itself in Brazil at a time when the IMF andinvestors are looking to resumeinvestment in programs vital tothe country’s future. Nexanshas plans to move intoArgentina, Peru and Chilestarting in 2005. On the other side of theAtlantic, the Group has beenpresent in Morocco for almost

half a century. Here, on top ofits traditional cable productionactivities, it manufacturesbatteries, transformers andelectrolytic cells. As Morocco’snumber one cablemaker,Nexans is involved in theMoroccan authorities’ massive

8-year program to bringelectricity to the villages. In Turkey, where Nexans ownstwo plants, the Group ispresent in energy, specialcables - particularly for thepetrochemicals industry -, andcopper telecom cables.

Bruno ThomasExecutive Vice-President,Rest of the World area

“Latin America, Africa, the Middle Eastand Russia are all regions where theGroup occupies a position that bears norelation to its ranking as a major cableindustry player. Owing to its rapidgrowth rate and massive requirements,the Rest of the World area offersNexans huge potential for expansion. It offers considerable growth inpopulation, energy and industrialterms. If it is to achieve tangiblegrowth here, Nexans must know howto seize the opportunities that arisewhile keeping a handle on the variousrisk factors specific to each of thesecountries.”

Nexans‘ sales in the Rest of the World areatotaled 131 million euros in 2003, compared with111 million in 2002. The Group has plants in Brazil,Morocco and Turkey, and is opening up to theMiddle East and the huge markets of the formerSoviet Union.

MARCH 2003Signing of agreement for the purchase of FurukawaCabos de Energia SA in Brazil. The purchase of this company,

which makes a full range of bare and insulated aluminum cables

for power transmission and distribution, strengthens Nexans’

position in the Brazilian market. Based at Lorena between Rio de

Janeiro and São Paulo, the company employs 250 people and has

sales of approximately 50 million dollars.

SIGN

IFICAN

T EV

ENTS


Rest of the World

Partnerships in Africa and LebanonIn many countries where it does not have its ownmanufacturing facilities,Nexans has formed jointventures and partnerships.The Group has interests inLiban Câbles and its Egyptiansubsidiary, ICC, which givesit a presence in the region’stelecommunications andenergy markets. In Nigeria, Nexans holdsshares in a mixed cablefactory in Lagos and a plantnot far from Abuja. Sales inthe oil and gas markets aregrowing. Nexans is also a majority shareholder in a plant in Ghana and isdeveloping a technical andcommercial cooperativeventure with Câbleries duSénégal.

Projects in the Middle Eastand RussiaNexans’ facilities in Turkeyopen up numerousopportunities for the Group inneighboring markets. There isnaturally a market forinstrumentation cables andcables for the petrochemicalsindustry in all the countriessurrounding the Caspian Sea,including Azerbaijan,Turkmenistan and Iran.The Middle East is also apromising market and Nexans,which already exports toJordan, Egypt and Kuwait,intends to take advantage ofthe prospects offered byreconstruction in Iraq.

The Russian market moreoveris a highly attractive one.Nexans’ sales of energy andtelecom cables are up byalmost 6%, LAN and datacables 25-30%.

Background

The emerging countries

continued to see their

economies grow in 2003

despite disparities between

regions. We are seeing a

marked improvement in

the economic situation in

Argentina and Brazil,

the proactive policies of

governments and the central

banks giving rise to a fall in

inflation and renewed

investment. In spite of

persistent economic instability,

Russia continues to grow.

The Middle East and Africa

on the other hand have been

badly affected by political

wrangling and wars.

35

Latin America (including Brazil), Morocco,Egypt, Tanzania, Nigeria, Ghana, Turkey,Lebanon, South Africa, CIS, Russia, the Middle East, Pakistan.

OUTLOOK The Rest of the World, like Asia, is agrowth area for the Group. Demand to equip vastcountries like Brazil, Russia and Nigeria extends intobordering countries. The introduction of electroniccatalogues translated into local languages has facilitatedthe sales of Nexans’ products in countries as diverse asLibya, Tunisia, Iran, etc.

1,150 employees


37

2003 financial and legal information

EXTRACT FROM THE MANAGEMENT STATEMENT PRESENTED BY THE BOARD OF DIRECTORS TO THE ANNUAL SHAREHOLDERS’ MEETING 38

CONSOLIDATED FINANCIAL STATEMENTS 48

Consolidated income statement 49Consolidated balance sheet 50Consolidated statement of cash flows 52Consolidated statement of changes in shareholders’ equity 53Notes to consolidated financial statements 54Auditor’s report on consolidated financial statements 752004 outlook and other information 76

CONDENSED PARENT COMPANY FINANCIAL STATEMENTS 79

Condensed income statement 80Condensed balance sheet 81Information relating to subsidiaries and associates 82Explanatory notes (extract from notes to the parent Company financial statements) 84Auditor’s report on the parent Company financial statements 85

LEGAL INFORMATION 86

Factors relating to risks, non-recurring events, disputes 86Shareholders’ rights and obligations 95General information on the parent Company and its share capital 97Appropriation of capital and voting rights 98Auditing of the accounts 104Related parties transactions 105Special Auditors’ report on certain related parties transactions 106President’s report 108Auditors’ report 117Person responsible for the reference document and Auditors’ report on the reference document 118

CONCORDANCE TABLE 120

Extract from the management statementpresented by the Board of Directors to the Annual Shareholders’ Meeting*(for the year ended December 31, 2003)

38

The purpose of this report is to present the income and activity of the

Nexans Group and its parent Company during the year ended

December 31, 2003. It is based on the parent Company’s financial

statements and consolidated financial statements for the year ended

December 31, 2003.

1 - Operations during 2003

1.1 Nexans (Group parent Company)Nexans’ shares are traded on the Premier Marché of Euronext Paris

S.A. and are included in the SBF 120 index. Ownership of its share

capital, estimated by shareholder category, breaks down as follows:

Alcatel (15.04%), institutional investors (approximately 64%), private

investors (approximately 11%) and treasury stock (9.60%).

In addition to its role as the Group’s holding company, Nexans also

fulfils financing and centralized cash management functions for the

Group.

Nexans also plays a central role in collecting intra-Group royalty pay-

ments to cover R&D costs, which it then redistributes among subsidia-

ries based on their participation in R&D programs of value to the

Group as a whole.

1.2 Income and activity of Nexans, its subsidiariesand controlled companies

1.2.1 Income of NexansIncome from operations for the year ended December 31, 2003,

amounted to 8,232,691 euros, and was derived mainly from services

invoiced to Group subsidiaries.

Net income for the year was 7,769,866 euros (as compared to

32,318,212 euros for the previous year) and was made up mainly

of financial income of 14,525,414 euros, derived mainly from dividends

paid out by Nexans France and Nexans Participations. These dividends

were lower than in the previous year.

No corporate income tax was payable in respect of this financial year,

as in 2002. Shareholders’ equity totaled 1,129,972,703 euros, as

compared to 1,126,252,017 euros for the previous year.

1.2.2 Consolidated income of Nexans GroupSales for the year ended December 31, 2003, totaled 4,046 million

euros, as compared to 4,302 million euros in 2002.

At constant non-ferrous metal prices, sales totaled 3,924 million

euros, as compared to 4,096 million euros in 2002. At constant

non-ferrous metals prices and constant exchange rates, sales for

2003 fell by 0.8% (-2.7% on a comparable consolidation scope)

from 3,955 million euros in 2002.

Income from operations was 91 million euros and net income was 1 mil-

lion euros – evidencing the return of the Group to breakeven. These

figures include the positive effect resulting from the application of CRC

Regulation 2002-10 relating to accounting for fixed assets. On the basis

of comparable accounting methods, income from operations would

have been 58 million euros, as compared to 56 million euros in 2002.

Two major changes impacted the Group in 2003: the implementation

of a new management and organizational structure, and a change in

the accounting method used for asset valuation.

1.2.2.1 A new Group organizationTwo years after first being listed on the Paris stock exchange, Nexans

re-organized its management structure half way through the year to

help it meet current market challenges more effectively. The objective

of this new organization is to boost sales and streamline operations.

It replaces the previous product line based matrix organization with a

more reactive country based organization which is closer to the

Group’s customers and markets. Individual countries are divided up

into the following regions, with each region being responsible for the

coordination and supervision of its own operations:

- Europe,

- North America and Asia,

- Rest of the World.

A Strategic Operations Department has also been created. As well as

providing operational support to the regions (R&D, manufacturing,

purchasing, IT), this department supervises the strategy and marketing

teams that analyze business and market trends. Individual country

performance as well as the performance of the region to which they

belong continue to be monitored by market and by business meaning

that the Group’s financial reporting remains the same.

Management statement

* Free translation from the original French version.

39

1.2.2.2 Change in accounting methodNexans decided to implement CRC Regulation 2002-10 relating to

accounting for fixed assets (component approach and impairment

tests) with effect from January 1st, 2003, in advance of the required

date. The effect of the change has been to lengthen the depreciation

period for industrial equipment, in line with its useful economic life.

The depreciation periods used previously were those applied in the

Alcatel Group and did not accurately reflect the operational life of

Nexans’ assets which belong to a sector with a slower pace of

technological change compared to that of its former parent company.

Impairment tests were also carried out throughout the Group, to evaluate

fair value based on business plans (using discounted future cash-

flows for each cash-generating unit).

The regulation has been applied using a methodology drawn up in col-

laboration with the Auditors and presented to the Corporate Accounting

and Auditing Division of the Autorité des Marchés Financiers (Financial

Markets Authority). This methodology details the depreciation periods

appropriate for each fixed asset component, resulting in an increase of

the average useful life of the Group’s industrial equipment.

This change in accounting method has been recorded in the opening

shareholders’ equity balance at January 1st, 2003.

Overall the component approach has resulted in an increase of 257 mil-

lion euros in the net value of fixed assets while the impairment tests

resulted in depreciation of 238 million euros, giving a net impact on

shareholders’ equity of 19 million euros before deferred taxation

and 10 million euros after deferred taxation as a result of this change

in accounting method.

The positive impact of the change in accounting method on income

from operations was 33 million euros and was 32 million euros on

net income.

The results presented below – by activity and by geographical area –

are reported both before and after the impact of the change in account-

ing method.

1.2.2.3 Application of IFRS (International Financial Reporting Standards)Pursuant to European regulation No.1606/2002, the consolidated

financial statements of Nexans Group for the year ended December 31,

2005, will be presented in accordance with the International Financial

Reporting Standards which will be in force as of December 31, 2005,

with comparative financial statements for the financial year 2004 being

prepared in accordance with the same standards.

To publish this comparative information, Nexans will have to prepare

an opening balance sheet as of January 1st, 2004, which is the starting

date for applying IFRS and at which date the impact of the transition

will be calculated and recorded directly in shareholders’ equity.

In view of these changes, Nexans Group put in place a project

team at the beginning of 2003 to manage the conversion to IFRS,

for the purposes of identifying the main differences in accounting

methods, studying elections to be decided by the Group’s manage-

ment, evaluating the impact of the differences, drawing up the open-

ing balance sheet as of January 1, 2004 in accordance with the

standards which will be applicable in 2005, and identifying the

changes that will have to be made to the group’s IT systems. This

analysis will only be completed once the IASB has published the

final standards and they have been approved by the European

Union.

• Details of the project and progress made

Due to the uniform nature of the Group’s activities and to ensure that

accounting practices are standardized throughout the Group, the IFRS

conversion project is being managed by a central team which is

coordinating the project for the whole Group.

The first “diagnostic” phase of the project aims to identify and measure

the differences between the new standards and the practices currently

used within the Group. This phase will be followed by an implementa-

tion phase in 2004 involving processes, training and IT systems, which

will rely largely on a new information system put in place by the consoli-

dation department, to be operational by the end of 2004.

The project team’s analysis is presented to the Auditors for approval at

regular intervals as the project advances.

It should be noted that Nexans uses the preferential methods recommended

by French accounting regulations which are very similar to IFRS standards.

In particular, the implementation by the Group of CRC Regulation 2002-

10 relating to fixed assets (see paragraph 1.2.2.2 above) in 2003

means that it is already fully compliant with IAS 16 and IAS 36.

• Main differences identified to date

Certain important standards and interpretations that will be in force

as of December 31, 2005, have not yet been published in their

final form by the IASB. These include, in particular, standards relat-

ing to Business Combinations (ED 3), Disposing of Non-current

Assets and Reporting of Discontinued Operations (ED 4), and

Macro Hedging (IAS 39 – supplement). In addition, the standards

listed above as well as certain others already published by the IASB,

have not yet been approved by the European Union, for example,

the standards relating to financial instruments (IAS 32 and 39), to

the First Time Adoption of IFRS (IFRS 1), to Share-Based Payments

* Additional information provided by the Company for the Annual report which is not included in the Management statement: based on the consolidated finan-cial statements as of December 31, 2003, the Company estimates that the elimination of actuarial gains and losses (and part of the prior service costs relatedto pension regime amendments) would have an impact on shareholders’ equity of approximately 100 million euros and that the re-statement of assigned recei-vables in accordance with IAS 39, would increase Group debt by 109 million euros.

40

(IFRS 2) and all the standards revised pursuant to the project

“Improvements”.

As it is expected that certain of these standards will be revised and that

new standards may be published, the Group is not in a position to iden-

tify and evaluate the full impact of the transition to IFRS 1.

Finally, IFRS 1, relating to the First Time Adoption of IFRS as an account-

ing regime contains specific provisions for the transition to IFRS and

allows certain elections to be made that are currently being examined

by the Group; elimination of actuarial gains and losses arising from pen-

sion commitments and accumulated translation reserves.

Nonetheless, at the current stage of the project, the Group has already

identified certain differences between the valuation and presentation

methods defined by IFRS standards (based on standards and examples

published at the end of 2003) and the accounting principles and

methods currently used within the Group:

- Presentation of the financial statements: the presentation of the consol-

idated income statement will need to be amended significantly, in

particular by eliminating non-operating revenue and by taking into

account depreciation on goodwill arising on acquisitions in the

calculation of operating income. The presentation of the balance

sheet will need to be revised to separate short-term and long-term

elements.

- Employee benefits (pensions, retirement benefits, etc.): in view of the

difficulty in practice of re-calculating all these benefits as if the Group

had applied IAS 19 since the plans were introduced, IFRS 1 (First

Time Adoption) allows certain elements which are currently spread

over time to be recorded as part of shareholders’ equity in accor-

dance with IAS 19 (actuarial gains and losses and part of the prior

service costs related to pension regimes amendments in existence at

January 1st, 2004).

- Sales of receivables: should in principle be restated pursuant to

IAS 39, which would result in an increase in the Group’s financial

debt and in trade receivables.

- Intangible assets: R&D expenses incurred by the Group which are

currently recorded as expenses as they are incurred will have to be

recorded in compliance with the criteria laid down by IAS 38.

- Stocks: the LIFO (last in first out) method will be discontinued, in

accordance with IAS 2, for the valuation of stocks of copper and

other non-ferrous metals.

- Financial instruments: the hedging transactions undertaken to limit the

Group’s exposure to fluctuations in currency rates and non-ferrous metals

prices will have to be recorded in accordance with IAS 32 and 39.

1.2.3 Income of Nexans, its subsidiaries and controlled companies

1.2.3.1 Business by businessENERGYEnergy division sales amounted to 2,143 million euros at constant

non-ferrous metal prices (stable compared with 2002 and down 3.3%

on a comparable consolidation scope). At constant exchange rates

and on a comparable consolidation scope, the decline was only 1%,

demonstrating Nexans’ ability to maintain its position in the energy

sector despite the sharp deterioration in the economic context.

In the field of land-based infrastructures, Nexans reaped the benefits

of buoyant demand in Europe, especially in France at the end of the

year, and in Canada, where investments continued for modernizing,

improving and extending low and medium voltage networks. By

contrast, demand in the United States slowed down significantly.

Business was strong for high voltage cables, driven by the growth in

orders for land-based energy networks and also by the completion of

major contracts. Similarly sales of umbilical cables remained high and

projects were completed under satisfactory conditions.

Low voltage cables for the building sector experienced a very difficult

year. Sales fell by around 4% – mainly due to a shrinking European

market for industrial cables and a steep decline in prices, especially

in France. Better market conditions in northern Europe and Canada

partially offset these very negative developments. Overall, low voltage

cables for building recorded an operating loss in 2003.

In the industrial applications cable market, business was sustained by

a further delivery of cables for the tracks for the magnetic levitation

train in Shanghai and by higher sales of cables for shipbuilding

markets in Asia. In all other segments, demand linked to industrial

investments remained weak, affected by the economic recession in

Germany and in France and a slow down in investments in oil-related

sectors. On the other hand, the strength of the German high-end auto-

motive market continued to boost sales of cable harnesses. Income

from Energy operations amounted to 65 million euros at December 31,

2003 (or 78.3 million euros after taking into account the change in

accounting method), a 7% decline compared with 2002. This decline

reflects the steep deterioration in the profitability of cables for the build-

ing sector, which was only partially offset by the strong performance

from cables for energy networks.

TELECOMSales at constant non-ferrous metal prices in the Telecom business

totaled 546 million euros in 2003 (a decline of 5.5% compared with

2002, and an increase of 1.3% at constant exchange rates). The

market environment remained challenging in 2003, but Nexans was

able to maintain its sales level and realize many of the anticipated


41

benefits of the restructuring measures begun in early 2002 – these

measures have achieved a 21% reduction in indirect costs over two

years.

Business in public network cables was down 4% for the year. The

decline is due mainly to the absence of major export projects and to

limited and highly competitive domestic markets, leading to a signifi-

cant erosion of profit margins. Growth in investments in long-distance

copper cables for rail networks and steady demand for accessories for

ADSL lines partially offset this decline.

In the US private network segment, where the market remained stable

overall in volume terms, the striking improvement in performance

reflects the full impact of the restructuring measures carried out in

2002, strong growth in higher value-added cables and sales initia-

tives targeted at new customers. These initiatives, combined with a

marked improvement in productivity, resulted in a significant improve-

ment in profitability.

In cables for industry, demand is currently driven mainly by the growth

in high-speed internet access and therefore in ADSL cables, both in

Europe and in China, where sales growth was strong. Business in the

aeronautic sector was maintained at a satisfactory level, as were sales

in the oil, gas and seismic research sectors.

Income from operations made an impressive recovery, rising from a

loss of 35 million euros in 2002 to a loss of 7 million euros in 2003,

at constant accounting method (and nearly at breakeven after taking

into account the change in accounting method). This improvement is

mainly due to cost-cutting measures. Income from operations remains

negative, however, due to some slackness in the copper infrastructure

business.

ELECTRICAL WIRESSales in the Electrical Wires business in 2003 totaled 956 million

euros at constant non-ferrous metal prices, a decline of 10.3%

compared with 2002, or of 7% at constant exchange rates. This decline

mainly reflects weak demand in the United States.

This activity was hit by the continued downturn in the winding wires

sector. The European market declined by a further 5%, with the light-

ing, motors and transformer segments being most affected.

Nonetheless, Nexans registered good results in self-bonding wires.

In North America, after a drop of 15% in 2001, and of 7% in 2002,

sales fell by a further 5% in 2003, impacting wires for transformers in

particular. These market problems were compounded by the negative

impact of the reorganization of industrial activities following the closure

of the Mexico (Missouri) site.

In the wirerod sector, external sales of Nexans declined, especially in

North America. Nonetheless, high production levels in Group factories,

driven by intra-group sales and by efforts to improve industrial

efficiency – stemming partly from investments made in 1999/2000 –

meant that profitability was maintained at a satisfactory level.

In the bare wire segment, the market decline continued, especially for

special alloy wires (catenaries, etc.), resulting in a reduction in sales

of more than 8% compared with 2002.

Income from operations for this business recorded a loss of 3.1 million

euros based on the previous accounting methods (and a profit of 10 mil-

lion euros after taking into account the change in accounting method).

This weak performance was mainly attributable to the winding wires

activity, for which a number of options (including potential disposal)

are currently being considered.

DISTRIBUTIONSales in Distribution totaled 279 million euros at constant non-ferrous

metal prices (a decline of 11.6% compared with 2002, or of 5.5%

on a comparable consolidation scope and at constant exchange

rates), with income from operations of 13 million euros (unchanged

from 2002 on a comparable consolidation scope). This performance

reflects the ongoing implementation of cost-cutting measures.

1.2.3.2 By geographical areaEUROPESales in Europe in 2003 totaled 2,959 million euros at constant non-

ferrous metal prices, down 3.7% compared with 2002. This region

faces major challenges: income from operations is lower here than in

any other region, while the market environment is more difficult than

elsewhere.

In Telecom cables, despite continuing operating losses, the restruc-

turing measures undertaken in France and Spain yielded a significant

improvement in profitability, especially in cables for equipment sup-

pliers and telecom operators (driven by the growth of ADSL) and in

cables for private networks.

Energy remains the major contributor with an operating margin of

2.7%, despite significant losses in low voltage cables for building,

which suffered from a severe drop in prices in France. The extremely

difficult situation in France both in cables for the building market and

for industry, led to the launch, in December 2003, of a program to

cut production capacity, affecting mainly the Lyon and Lens plants as

well as the sales and administrative structures of Nexans France.

In the electrical wires sector, wirerods recorded satisfactory profits,

reflecting their effective positioning in the marketplace. The winding

wires business was hit by a decline in demand for value-added prod-

ucts and as a result its profitability declined significantly, especially in

France.

42

NORTH AMERICAIn North America, Nexans recorded sales of 658 million euros at

constant non-ferrous metal prices in 2003, a decrease of 16% (or

of 6% at constant exchange rates) compared with 2002.

In the Telecom sector, in a stable market environment, Nexans

reaped the benefits of its restructuring measures and of its strategic

repositioning in higher value-added products (category 6), as well

as capturing market share in the fiber cables sector. A major

marketing drive was undertaken in cables for aerospace and ship-

building and this brought a significant increase in orders booked.

In the energy cables sector, sales were sustained by strong demand

in Canada, which offset a fall in demand in the US, due partly to

lower investments and also the negative impact of the drop in the

US dollar, making products manufactured in Canadian plants less

competitive.

In the Electrical Wires sector, despite a significant decrease in

volumes mainly due to the cessation of activity of certain customers

in the United States, the wirerod business maintained satisfactory

profitability. This was not the case with the winding wires business

which against a background of declining volumes, especially in pro-

ducts for transformers and the automotive sector, had to contend with

a sharp decline in prices and with exceptional expenses caused by

the closure of a site. The combination of these factors resulted in a

substantial operating loss.

ASIASales recorded by local subsidiaries in Asia increased from 125 mil-

lion euros in 2002 to 175 million euros in 2003. Nexans Group

made sales of around 245 million euros in this region in 2003.

The strong increase in sales reflects the acquisition of the South Korean

company Kukdong in April 2003, placing Nexans among the world

leaders in cables for shipbuilding. The acquisition is part of the group’s

strategy of developing an industrial presence in this part of the world,

which is seeing steady growth.

Sales in China progressed strongly, driven by sales of locally produced

ADSL cables.

REST OF THE WORLDThis region is relatively small in terms of sales made by local opera-

tions, which totaled 131 million euros at constant non-ferrous metal

prices in 2003, compared with 113 million euros in 2002. The

increase reflects a change in the scope of consolidation, following the

acquisition of Furukawa’s energy cable activities in Brazil, in March

2003.

This region offers potential for significant sales growth in markets such

as the former Soviet republics.

2 - Progress made and difficulties encountered

Progress was made in the development and implementation of major

projects launched in previous years.

Measures to reduce costs and improve industrial performance were

continued in 2003 with the roll-out of the “Program+” performance

improvement program.

This process has been implemented across 16 more sites, bringing the

total number participating to 40. Given the challenging economic

environment in Nexans’ markets in 2003, initiatives were mainly focused

on improving customer service and reducing over-consumption of

materials.

32 “P+ Developers” have been trained to take charge of managing

the program in the plants and as a result, the Program+ system is progres-

sively becoming an integral part of the day-to-day management of the

plants.

Through the above-mentioned improvements in manufacturing process-

es and the efforts made to reduce the Group’s debt, a major project

launched in 2002 was continued in 2003. This project is designed

to ensure more efficient stock management, significantly reducing both

average inventories and the seasonal effect that substantially raises

inventory levels up until the end of the summer. Due to economic factors,

there was no improvement in average inventories as a percentage of

sales in 2003 (14.6% in 2003, after 14.2% in 2002 and 14.7% in

2001). However, the drive to reduce the difference between the

highest and lowest points was very successful (10.4% in 2003, com-

pared with 15% in 2002 and 30% in 2001). These measures have

been extended to all the Group’s companies and will allow Nexans

to attain even greater reductions in 2004.

In the IT area, 2003 was a year of consolidation, both as regards the

deployment of SAP – where the emphasis was on deriving optimum

operational benefit from past investments – and in limiting expenditure

in a challenging economic environment. The exception was Spain,

where the IT system for distribution activities was upgraded in order to

improve contacts with France, especially with production plants where

SAP has already been implemented. The overall result was a signif-

icant reduction in IT expenditure at Group level, which currently repre-

sents 1.5% of sales.

Germany launched its SAP project which is scheduled to go into opera-

tion in the first half of 2004.

A global assessment of the Group’s systems was carried out by the

Audit and IT departments, with the dual goal of defining priorities for

future changes made necessary either for technical reasons or due to

applications, and of improving operational security.

Nexans migrated most of its production units to a new WAN network

managed by AT&T, with the benefits of improved communications,


43

transfer security and cost savings, and also allowing Nexans to leave

the previous Alcatel Alcanet network. The remaining plants will be

connected in 2004.

During 2003, Nexans continued deploying its electronic interface on

the Internet network (www.nexans.com/e-service). Nexans e-service

provides its customers with the largest cable library available online.

The roll-out will be continued throughout Europe in 2004 as a support

tool for exports. Furthermore, Nexans is a member of the Voltimum

installer portal, which is now operational in six major European coun-

tries.

The difficulties encountered by Nexans were related to economic

trends and the decline in industrial investments. Whilst demand for

telecom cables remained at the inadequate levels experienced in the

previous year, Nexans also had to contend with a sharp deterioration

in its markets, especially in cables for industrial buildings, special

cables for industry and winding wires. These difficulties were especial-

ly severe in France and in the US. The result was a significant decline in

capacity usage in the Group’s plants. In response, as part of the

exceptional restructuring program announced early in 2002 costing a

total of 130 million euros, the Group also launched a plan to reduce

its production capacity in France in the fourth quarter of 2003 costing

approximately 20 million euros. In the United States, the closure of the

Mexico (Missouri) winding wire plant was completed in June 2003

and part of this plant’s capacity was transferred to the plants in

Lagrange (USA) and Simcoe (Canada).

3 - Research and Development

Nexans’ R&D program is designed to maintain and improve its posi-

tion in the market, via new products, higher quality and more efficient

production processes.

In 2003, R&D programs amounted to 47.1 million euros or approxi-

mately 1.2% of sales, more or less unchanged from 48 million euros

in 2002.

Nexans’ specialist R&D capability (approximately 450 personnel

using high-performance equipment) was dedicated to long-term projects

(comprehension of mechanisms, development of innovative insulation

and sheathing materials) as well as to short and medium-term R&D pro-

jects, such as the design and testing of new products and systems and

lower costs for existing products. 51 patents were registered for differ-

ent areas of activity within Nexans, reflecting the quality of its special-

ist teams.

One of the highlights of 2003 was the progress made by Nexans

Research Centre (NRC) in Lyon, which groups together approximately

thirty international researchers and postgraduates. It is now fully opera-

tional and its teams have already obtained important results in several

areas of activity, including energy and telecom cables, and winding

wires. NRC’s research focuses mainly on polymeric materials and their

application – by way of example, the center has developed a process

for producing Plastic Optical Fibers (attenuation < 40 dB/km and

bandwidth > 300 MHz/km).

Ten competence centers are responsible for developing Nexans’ techno-

logies. Their outstanding quality is reflected in the many contracts they

are awarded for producing industrial prototypes, including a super-

conductor cable (138 kV/ 2,400 A, 620 m long) and its extremities

for Long Island Power Authority in the United States and an overhead

cable (230 kV, 1,600 m long) made with an aluminum-alumina com-

posite (sourced from 3M).

In order to remain competitive, Nexans must take into consideration

and anticipate technological advances in developing its own products

and manufacturing processes. Demand for products that consume less

energy, that are lighter and more compact as well as for cheaper

products and solutions, make it vital to design innovative manufacturing

processes, to use new materials and to develop new wires and cables.

Most of the markets in which Nexans operates make increasing use of

high-tech products. Nexans carries out all the research necessary to

acquire the technologies being demanded by the market.

4 - Outlook

Sales in Energy should remain stable in 2004. Cables for the infrastruc-

ture market should perform well, particularly due to a highly satisfactory

level of orders for land-based high voltage cables and umbilical cables.

The Brazilian operation has restructured its sales organization and should

see positive growth in its business. The electricity supply breakdowns in

the eastern United States, Scandinavia and Italy have highlighted the

need to improve network maintenance. This should mean new contracts

for Nexans, especially for high voltage cables. Economic growth looks

set to be firmer than in 2003, and the resumption of industrial invest-

ments should benefit all Nexans’ production activities. Cables for the

OEM segment should see some growth, especially in the areas of safe-

ty cables, in the automotive industry and in continued growth in the ship-

building industry – boosted in particular by the full impact of the consoli-

dation of Kukdong, which serves the dynamic shipbuilding industry in

South Korea, Japan and China. The economic upturn should also bene-

fit low voltage cables for industry and building. However, the price factor

is likely to remain critical in this area.

In the Telecom sector, market conditions will probably remain difficult,

although the trend noted by Nexans in the fourth quarter of 2003 – a

slight upturn in business levels – will probably continue. In public network

cables, a redeployed export sales force and a significant drop in inven-

tories at telecom operators in 2003 should lead to increased sales in

44

2004. Furthermore, Nexans will probably benefit from the ADSL market,

which will continue to grow in Europe and Asia. However, developing

a significant volume of export sales for copper infrastructure cables

remains a key challenge for 2004.

In cables for private networks, Nexans benefits from the restructuring of

its industrial and sales structure, offering improved service and innovative

products. The commercial initiatives successfully launched in 2003

should open up new markets with significant potential. The positive trend

in the economic environment in the United States should result in new

investments in the data transmission field and should encourage demand

for high-performance cables. In this context the lower breakeven point

will significantly improve profitability.

In the Electrical Wires sector, the good resistance to the crisis shown in

the wirerod market in 2003 should continue in 2004. This will offset its

performance in the winding wire and bare wire markets, which remain

difficult. Nexans does not expect any improvement in this segment, at

least in the first half. However, the restructuring measures carried out in

2003 will take full effect in 2004 and will help to improve profitability

in this sector. In addition, the possible sale of the winding wires business

could help to improve operational profitability (sales and capital

employed) in the Electrical Wires business. Given these conditions, sales

should see a slight increase in an improving economic environment.

Savings generated by industrial restructuring should have a positive effect

on net income in the second half of 2004.

In an economic context of weak growth, Nexans’ goal for 2004 is to

improve its operating margin and record a net profit excluding excep-

tional items. Given its position as a global player in the cable industry,

with a balanced portfolio of products and a broad-based geographical

coverage, its good financial situation and its restructured industrial capa-

bility, Nexans is well equipped to weather the current economic difficul-

ties and to see dynamic growth as soon as the economic situation

improves. Capital expenditure of approximately 80 to 90 million euros

and restructuring costs of approximately 30 million euros will help

Nexans continue to improve its financial situation.

5 - Significant events occurring since the end of the financial year

No significant events have occurred since the end of the financial year.

6 - Significant acquisitions during the financial year

In 2003, Nexans took indirect control of Kukdong, in South Korea,

and of Furukawa Cabos de Energia in Brazil.

At the end of financial year 2003, Nexans owned 99.99% of

Nexans Participations and 99.99% of Nexans France.

7 - Proposed allocation of income

The Ordinary Annual Shareholders’ Meeting will be invited to approve

the allocation of net income for the financial year, totaling

7,769,865 euros, as follows:

• Retained earnings from previous year 83,767,894 euros• Income for the current accounting period 7,769,865 euros• Allocation to the legal reserve 750 eurosTotal distributable income 91,537,009 euros

Appropriation of income• 0.20 euros per share, i.e. distribution of

dividends totaling a maximum of 4,708,969 euros• Maximum additional tax due

on the distribution (“précompte”) 1,934,120 euros• Minimum retained earnings

after distribution 84,893,920 eurosTotal 91,537,009 euros

The Ordinary Annual Shareholders’ Meeting will be invited to approve

the distribution of a dividend of 0.20 euro per share, together with a

tax credit of 0.10 euros for those shareholders entitled to benefit there-

from, increasing the gross amount of the dividend per share to

0.30 euros. The maximum total amount of dividends payable is

4,708,969 euros based on the maximum number of shares making

up the share capital on the date of the Ordinary Annual Shareholders’

Meeting convened to approve the distribution of the dividend being

23,544,847*. If the number of shares making up the share capital

at the date of the Shareholders’ Meeting is less than 23,544,847,

then the amounts corresponding to dividends not paid (based on the

number of shares effectively making up the share capital at this date),

as well as the amount of additional tax not due on such undistributed

dividends, if any, shall be allocated to retained earnings.

The dividend will be paid in the week after the Ordinary Annual

Shareholders’ Meeting has approved the financial statements for the

financial year ended December 31, 2003. If Nexans still holds trea-

* on the basis of 23,544,847 shares, representing the maximum total number of shares whichcan be in existence on the day of the Ordinary Annual Shareholders’ Meeting convened to voteon the distribution of the dividend, taking into account the options to subscribe to new shares whi-ch may have been exercised by this date.


45

sury stock at the time of payment of the dividend, the amount corres-

ponding to dividends not paid on these shares as well as the amount

of additional tax not due on such undistributed dividends, if any, shall

be allocated to retained earnings.

The dividends and the corresponding tax credits paid out over the past

three years were as follows:

Net dividend Tax credit Gross dividend2000 0.80 euro 0.40 euro 1.20 euro2001 0.43 euro 0.215 euro 0.645 euro2002 0.20 euro 0.10 euro 0.30 euro

8 - Net income over the past five years

In accordance with Article 148 of the Decree of March 23, 1967, a

table detailing the company’s financial results for the previous five

financial years is appended to this report.

9 - Non tax-deductible expenses

No non tax-deductible expenses, as defined in Article 39 of the

French Tax Code, were incurred during the financial year 2003.

10 - Board of Directors

10.1 Term of office and role of members of the board of Directors

The Board of Directors comprises eight members, following the resigna-

tions of Bertrand Durrande and Robert Mahler and the appointment of

Jean-Marie Chevalier in 2003.

Gérard Hauser has been Chairman of Nexans since October 17,

2000. He sits on the Board of Directors of Alstom, Faurecia, Aplix and

Electro-Banque.

Gianpaolo Caccini, Director, is Chief Operating Officer of Saint-

Gobain group. He is a member of the Board of Directors of JM Huber

Corporation (United States) and Director of Saint-Gobain Corporation

(United States).

Georges Chodron de Courcel, Director, is Chief Operating Officer

and a member of the Executive Committee of BNP Paribas. He is a

Director of Bouygues and Alstom, a member of the Supervisory Board

of Lagardère SA and an observer of SCOR.

Jacques Garaïalde, Director, is the Managing Director of KKR

(Kohlberg Kravis Roberts & Co. Ltd.), with responsibility for this group’s

expansion in France. He is also a Director of Legrand.

Patrick Puy, Director, is Senior Vice-President of Hydro, Power

Environment Sector of Alstom, and Chairman and CEO of the Italian

company Ocean S.p.A.

Ervin Rosenberg, Director, is Advisor to the Chairman of Compagnie

Financière Edmond de Rothschild Banque and Chairman of

Compagnie Financière Savoisienne, sits on the Board of Directors of

Thomson SA, and is a member of the Supervisory Boards of

Compagnie Financière Edmond de Rothschild Banque, CDC IXIS LCF

Rothschild and Ifrah Finance.

Jean-Louis Vinciguerra, Director, is Director of AKFED (Aga Khan Fund

for Economic Development). He is also a Director of Orange,

Wanadoo and Equant.

Jean-Marie Chevalier, Director, is Professor of Economics at Université

de Paris IX Dauphine and a Director of Cambridge Energy Research

Associates (CERA), a US-based energy strategy consultancy, of which

he runs the Paris office.

10.2 Directors’ interests and compensation for the financial year

In 2003, the gross remuneration paid to the Chairman, before tax

and including benefits and Directors’ fees, was 1,223,072 euros.

Members of the Board of Directors were paid Directors’ fees in respect

of their duties on the Board of Directors, the Accounts Committee and

the Compensation Committee. Georges Chodron de Courcel and

Jean Louis Vinciguerra were each paid 31,000 euros; Ervin

Rosenberg and Patrick Puy were each paid 29,000 euros; Gérard

Hauser, Gianpaolo Caccini and Jacques Garaïalde were each paid

25,000 euros; Robert Mahler was paid 18,000 euros, Bertrand

Durrande was paid 13,000 euros and Jean-Marie Chevalier was

paid 6,000 euros in Directors’ Fees for 2003. These fees were paid

in 2004. In addition, Patrick Puy was paid 110,000 euros in conside-

ration of industrial and commercial consultancy services provided in

connection with the potential acquisition of Alstom’s Transmission &

Distribution business.

46

11 - Information on share ownership andvoting rights

To the company’s knowledge, the following shareholders held more

than 5% of the company’s capital or voting rights on December 31,

2003:

% of share % of votingcapital rights

Shareholders December 31, 2003 December 31, 2003Alcatel 15.04% 28.22%*Tweedy Browne (USA) 9.20% 8.76%Brandes (USA) 5.21% 4.96%

Treasury stock 9.60% 0%

* by virtue, in particular, of the ownership of 3,374,888 shares carryingdouble voting rights. However, the use of these voting rights in a GeneralShareholder’s Meeting is limited by the articles of association to 16%, on theconditions described below.

Employees held 0.94% of the share capital (92% of this total via an

employee mutual fund) on December 31, 2003.

Pursuant to Article L. 233-8 of the Code de Commerce, the Company

notified its shareholders, by a Notice published in the Bulletin des

Annonces Légales Obligatoires on October 27, 2003, of a change

in the total number of voting rights with effect from October 17, 2003.

This followed the attribution of double voting rights to several share-

holders of registered shares which had been held for more than three

years, in accordance with Article 21 of the company’s articles of

association. At December 31, 2003, there were 3,374,936 shares

with double voting rights and the total number of voting rights was

24,282,709.

Shareholders were reminded in the notice that “in accordance with the

provisions of the articles of association, no shareholder, whether on his

own behalf or as a proxy for another shareholder, may exercise more

than 8% of the voting rights attached to the shares of all shareholders

present or represented at Shareholders’ meetings, or 16% of the voting

rights attached to the shares of all shareholders present or represented

in the case of double voting rights, when voting on resolutions at

Shareholders’ meetings”.

At December 31, 2003, the share capital represented a total of

23,128,972 euros. This total includes stock options exercised in the

month of December 2003, as confirmed by decision of the Board of

Directors on January 30, 2004, when the Board also confirmed

options exercised in January 2004, bringing the total share capital to

23,138,472 euros divided into 23,138,472 shares with a nominal

value of 1 euro each on January 30, 2004.

12 - Share buyback program

Following the first share buyback program authorized by the

Combined General Shareholders’ Meeting held on April 2, 2001

and decided by the Board of Directors on September 26, 2001,

Nexans held 6,774 of its own shares on December 31, 2003.

Pursuant to the authorization granted by the Combined General

Shareholders’ Meeting held on June 25, 2002, and the information

notice No.06-692 registered with the COB, Nexans launched an-

other share buyback program, for a maximum of 10% of its issued

share capital, in accordance with Article L. 225-209 of the Code de

Commerce following a decision by the Board of Directors on

June 25, 2002. In 2002 Nexans consequently purchased

1,909,736 shares at an average unit price of 12.88 euros for a total

value of 24.6 million euros. In 2003, under the same program,

Nexans purchased 304,689 shares at an average unit price of

11.30 euros, for a total value of approximately 3.5 million euros.

On December 31, 2003, the company held 2,221,199 of its own

shares, including those acquired during the initial buyback program,

representing 9.60% of its issued share capital.

13 - Report on use made of authorizations toincrease share capital

Pursuant to the authorization granted by the Combined General

Shareholders’ Meeting on June 25, 2002, the Board of Directors

decided on April 4, 2003, to grant 644,500 stock options confer-

ring the right to subscribe for new shares in the company at a unit price

of 11.62 euros, to be issued by way of increasing the share capital

of the company and in order to give management and employees a

stake in improving the Group’s profitability, and recognizing the part

they play, directly and indirectly, in the Group’s performance.

On December 31, 2003, 1,156,500 stock options to subscribe to

Nexans’ shares, representing 5% of the share capital, had not been

exercised. Each option gives the right to subscribe to one Nexans

share.


47

14 - Management by Nexans of the socialand environmental consequences of its activity

14.1 Environmental consequences of business activity*

14.1.1 Nexans’ policy on environmental issuesThe environment and the safety of property and employees are of

primary importance to Nexans. The Group’s policy is outlined in its

Risk Management Charter, signed by the Group’s Chairman. This

charter covers the ongoing improvement of production sites, by means

of environmental audits, as well as the assessment of risks relating to

products and manufacturing processes.

Within the Group’s organization, the Group’s environmental policy is

the responsibility of the Industrial Department, which reports directly to

the Strategic Operations Department. The Industrial Department super-

vises industrial strategy, investment budgets, the management of major

industrial projects and databases. This department also manages

Group-wide projects and in particular the development of products

and processes and the Group’s plant and equipment. In each of these

areas, it ensures that conservation and environmental protection require-

ments are fully complied with. The rules and targets fixed by the

Industrial Department apply to Group operations worldwide, including

international subsidiaries.

On December 31, 2003, provisions for environmental risks stood at

6,061,000 euros.

Nexans estimates that environment-related investments for 2003 were

approximately 1.8 million euros. These figures do not include the cost

of accessories aimed at protecting the environment and linked to

industrial investments for which Nexans Group has no separate figures

for 2003.

14.2 Social aspects Nexans holding company employs only the eight members of the

Executive Committee, only seven of whom are employees. All are

high-level executives who organize their working schedule as they see

fit and are not subject to any fixed working hours. Their remuneration

is therefore not based on hourly rates.

Nexans Group has a decentralized management system both in

France and abroad. Each entity determines and organizes, in accor-

dance with applicable laws and regulations in force and the condi-

tions specific to its business activity, its working hours, training, salary

levels, etc., subject to the control of the Group’s management.

This explains why the Group does not currently have any consolidated

data at Nexans Group level.

CHANGES IN NUMBER OF EMPLOYEESConsolidated Group2001 18,000 employees2002 17,139 employees2003 17,068 employees

(women: 16% of total; men: 84% of total)

These changes take into account the integration of 596 employees in

Brazil and South Korea in 2003, following the acquisition of

Furukawa Cabos de Energia and Kukdong respectively, along with

staff reductions of 667, mainly in France and the United States.

The Board of Directors

* This section provides extracts from the management statement. Additional information on this subject can be found on pages 18 to 21.

Consolidated financial statements

48

Consolidated income statement 49

Consolidated balance sheet 50

Consolidated statement of cash flows 52

Consolidated statement of changes in shareholders’ equity 53

Notes to consolidated financial statements 54

Note 1 Summary of accounting policies 54

Note 2 Changes in the scope of consolidation 57

Note 3 Information by business sector and by geographical area 57

Note 4 Net financial income (loss) 60

Note 5 Other revenue (expense) 60

Note 6 Income tax 60

Note 7 Earnings per share 61

Note 8 Goodwill on consolidated subsidiaries 62

Note 9 Property, plant and equipment 62

Note 10 Other investments and miscellaneous, net 63

Note 11 Inventories and work in progress 63

Note 12 Trade receivables and related accounts 64

Note 13 Other accounts receivable 64

Note 14 Marketable securities 64

Note 15 Shareholders’ equity 64

Note 16 Minority interests 65

Note 17 Pensions and retirement benefits 65

Note 18 Accrued contract costs and other reserves 67

Note 19 Financial debts 68

Note 20 Customers’ deposits and advances 69

Note 21 Other payables 69

Note 22 Off-balance sheet commitments 69

Note 23 Market-related exposures 70

Note 24 Payroll and staff 71

Note 25 Related party transactions 72

Note 26 Contingencies 72

Note 27 Main consolidated companies 73

Note 28 Post-closing events 74

Auditors’ report on the consolidated financial statements 75

2004 outlook and other information 76


Consolidated financial statements2003/2002/2001

49

Consolidated income statement

at December 31, in millions of euros Notes 2003 2002 2001

Net sales (3) 4,046 4,302 4,777

Metal price effect (123) (206) (310)

Net sales at constant metal price (3) 3,924 4,096 4,467

Cost of sales (3,383) (3,571) (3,833)

Gross profit 541 525 634

Administrative and selling expenses (402) (421) (445)R&d costs (47) (48) (50)

Income from operations (3) 91 56 139

Financial income (loss) (4) (31) (31) (33)Restructuring costs (18) (41) (90) (36)Other revenues (expenses) (5) (2) 23 3

Income before taxes 18 (43) 73

Income tax (6) 8 10 (28)Share in net income of equity affiliates (1) – –

Consolidated income before amortization of goodwill 25 (33) 45

Amortization and depreciation of goodwill (14) (2) (2)Minority interests (10) (5) (13)

Net income (Group share) 1 (40) 30

Earnings per share (in euros) (7) 0.06 (1.78) 1.22Diluted earnings per share (in euros) (7) 0.06 (1.74) 1.22


50

Consolidated balance sheet ASSETat December 31, in millions of euros Notes 2003 2002 2001

Goodwill, net (8) 23 39 38Other intangible assets, net 4 7 6

Intangible assets, net 27 45 44

Property, plant and equipment (9) 2,843 2,870 2,918Amortization and depreciation (9) (2,059) (2,071) (1,997)

Property, plant and equipment, net 784 799 921

Share in net assets of equity affiliates 3 4 10Other investments and miscellaneous, net (10) 65 63 65

Investments and other non-current assets 68 67 75

TOTAL NON-CURRENT ASSETS, NET 879 911 1,040

Inventories and work in progress, net (11) 556 628 637

Trade receivables and related accounts, net (12) 744 761 861Other accounts receivable, net (13) 170 133 133

Accounts receivable, net 914 894 994

Marketable securities, net (14) 102 33 87Cash, net 1 135 190

Cash and cash equivalents 104 167 277

TOTAL CURRENT ASSETS 1,574 1,689 1,908

TOTAL ASSETS 2,453 2,600 2,948

51

LIABILITIES AND EQUITYat December 31, in millions of euros Notes 2003 2002 2001

Capital stock(EUR 1 nominal value; 23,128,972 shares issued at December 31, 2003) 23 23 25Additional paid-in capital 1,014 1,014 1,044Retained earnings (40) (7) (23)Cumulative translation adjustments (28) 26 53Net income 1 (40) 30Treasury stock (28) (25) (33)

SHAREHOLDERS’ EQUITY (15) 942 991 1,096

MINORITY INTERESTS (16) 103 88 104

Accrued pension and retirement obligations (17) 260 253 257Accrued contract costs and other reserves (18) 120 143 157

TOTAL RESERVES FOR LIABILITIES AND CHARGES 380 396 414

TOTAL FINANCIAL DEBT (19) 126 219 348

Customers’ deposits and advances (20) 51 37 48Trade payables and related accounts 463 485 530Other payables (21) 387 384 408

TOTAL OTHER PAYABLES 901 905 986TOTAL LIABILITIES AND EQUITY 2,453 2,600 2,948


52

Consolidated statement of cash flows

in millions of euros 2003 2002 2001

Net income 1 (40) 30Minority interests 10 6 13Depreciation and amortization 113 148 143Changes in reserves for pension obligations, net 3 (3) (2)Changes in other reserves and deferred taxes (36) (1) (11)Net (gain) loss on disposal of non-current assets 2 (23) (3)Share in net income of equity affiliates (net of dividends received) 1 – –Other non-cash items – – –

Cash flow provided by operations 93 87 170

Decrease (increase) in accounts receivable 17 112 204Decrease (increase) in inventories 69 1 82Increase (decrease) in accounts payable and accrued expenses (15) (60) (163)Changes in reserves on current assets (including accrued contract costs) (24) (14) 3

Net change in current assets and liabilities 47 39 126

Net cash provided (used) by operating activities 140 126 296

Proceeds from disposal of fixed assets 15 12 8Capital expenditure (67) (96) (203)Decrease (increase) in loans (3) (1) (17)Cash expenditures for acquisition of consolidated companies, net of cash acquired, and for acquisition of unconsolidated companies* (35) (64) (53)Cash proceeds from sale of previously consolidated companies,net of cash sold, and from sale of unconsolidated companies – 41 –

Net cash provided (used) by investing activities (90) (108) (265)

Net cash flow after investment 50 18 31

Proceeds from issuance of shares – 1 2Dividends paid (8) (15) (24)

Net cash provided (used) by financing activities (8) (15) (22)

Net effect of currency translation differences (13) 16 (4)

Net increase (decrease) in net debt/cash 29 20 5

Net (debt)/cash at beginning of year (52) (71) (76)

Net (debt)/cash at end of year (23) (52) (71)

*Including Treasury Stock: EUR 3 million in 2003, EUR 25 million in 2002 and EUR 33 million in 2001.

53

Consolidated statement of changes in shareholders’ equity

Notes Number Capital Additional Cumulative Net Treasury Share-of shares stock paid-in capital translation income stock holder’s

outstanding & retained adjustments equity in millions of euros earnings

December 31, 2001after appropriation 23,009,969 25 1,041 53 – (33) 1,086

Net change in treasury stock (8) (1,916 ,510) (25) (25)Cancellation oftreasury stock (8) (2) (31) 33 –Capital increase 111,503 1 1Other (4) (4)Net change in translation adjustments (27) (27)Net income (40) (40)

December 31, 2002before appropriation 21,204,962 23 1,007 26 (40) (25) 991

Appropriation of net income (8) (44) 40 (4)

December 31, 2002after appropriation 21,204,962 23 963 26 – (25) 987

Change in accounting method (CRC 2002-10) (1-a) 10 10Net change in treasury stock (8) (304,689) (3) (3)Cancellation of treasury stock (8)

Capital increase 7,500OtherNet change in translation adjustments (53) (53)Net income 1 1

December 31, 2003before appropriation 20,907,773 23 973 (27) 1 (28) 941

Notes to consolidated financial statements

54


NOTE 1 Summary of accounting policies

The Nexans Group, which was created in in the fourth quarterof 2000, essentially groups together the former Alcatel energycable, electrical wires, and distribution activities, as well as thecopper telecommunication cable activities for both private andpublic networks and related accessories.The consolidated financial statements of Nexans and its subsi-diaries (the “Group”) comply with the accounting principles appli-

cable in France, and in particular with the accounting principlesadopted by the “Comité de la Réglementation Comptable”:• CRC 99-02, as of January 1st, 1999;• CRC 00-06 (regulation on liabilities and equity), as of January 1st,2002;• CRC 02-10 on assets, as of January 1st, 2003 (see (a)Change in accounting method).They comply with the essential accounting principles describedhereafter:

b) Consolidation methods Companies over which the Group has exclusive control are ful-ly consolidated. Other companies over which the Group has asignificant influence (“equity affiliates”) are accounted for underthe equity method. Significant influence is generally assumedwhen the Group interest is over 20%. The consolidated financialstatements are prepared on the basis of year-end (or interim)financial statements at December 31st. All significant intra-grouptransactions are eliminated.

c) Translation of financial statements denominatedin foreign currenciesExcluding Turkey, the balance sheets of foreign consolidated subsi-diaries are translated into euros at the year-end rate of exchange,and their income statements and cash flow statements are translatedat the average annual rate of exchange. The resulting translationadjustments are included in shareholders’ equity under “Cumulativetranslation adjustments”.

a) Change in accounting methodNexans decided to implement CRC Regulation 2002-10 relating to accounting for fixed assets (component approach and impairmenttests) with effect from January 1st, 2003, in advance of the required date. The effect of the change has been to lengthen the depre-ciation period for industrial equipment, in line with their useful economic life. The depreciation periods used previously were thoseapplied in the Alcatel Group and did not accurately reflect the operational life of Nexans’ assets which belong to a sector with a slowerpace of technological change compared to that of its former parent company. Impairment tests were also carried out throughout theGroup, to evaluate fair value based on business plans (using discounted future cashflows for each cash-generating unit). The impact of this change of method on the balance sheet, as at January 1st, 2003, is presented in the table below:

31.12.02 published Component Depreciation Deferred 01.01.03(before change) approach (“impairment”) taxation

Assets

Intangible assets(including goodwill) 45 (6) 39Property, plant and equipment 799 257 (232) 824Other assets 1,756 1,756

TOTAL ASSETS 2,600 257 (238) 2,619

Liabilities and equity

Shareholders’ equity (Group share) 991 249 (228) (11) 1,001Minority interests 88 8 (10) 86Deferred tax liabilities 70 11 81Other liabilities 1,451 1,451

TOTAL LIABILITIES AND EQUITY 2,600 257 (238) 2,619

55

Turkey is considered as a hyperinflationary country. As a result, thefinancial statements of Nexans Turkey (Nexans Turkiye IletisimEndustri ve Ticaret AS) are prepared using the euro as the workingcurrency. Nexans Turkey’s financial statements have been restated inaccordance with IAS 29.

d) Translation of foreign currency transactionsForeign currency transactions are translated at the rate ofexchange applicable at the transaction date. At year-end, foreigncurrency receivables and payables are translated at the rate ofexchange prevailing at that date. The resulting exchange gainsand losses are recorded in the income statement.

e) Research and development expensesThese are recorded as expenses for the year in which they areincurred, except for the following two categories:• Recoverable amounts under the terms of contracts with custo-

mers are recorded as work in progress on long-term contracts.• Software development costs are recorded as intangible

assets, provided they comply with all the following criteria:- the project is clearly defined, and costs are separately iden-tified and reliably measured;- the technical feasibility of the software is demonstrated;- the software will be sold or used in-house;- a potential market exists for the software, or its usefulness, incase of internal use, is demonstrated; - adequate resources required for completion of the projectare available.They are then amortized as follows (making sure that the cumu-lative amortization amounts at each closing date are at leastequal to the cumulative amounts using the straight-line amorti-zation method):- in case of internal use, over their probable service lifetime;- in case of external use, according to prospects for sale, rentalor other forms of distribution.

f) GoodwillGoodwill is amortized using the straight-line depreciationmethod. Amortization periods are determined independently foreach transaction and never exceed 20 years.

g) Tangible and intangible assetsTangible and intangible assets (excluding goodwill) are valuedat historical cost for the Group. As part of its early applicationof regulation CRC 2002-10, the Group has adopted the com-ponent approach for amortization of assets with effect from

January 1st, 2003. From this date onward, depreciation is gene-rally calculated over the following expected useful lifetime:

Industrial buildings, plant and equipment:

• Buildings for industrial use 20 years• Infrastructure and fixtures 10-20 years• Equipment and machinery

- Heavy mechanical components 30 years- Medium mechanical components 20 years- Light mechanical components 10 years- Electrical and electronic components 10 years

• Small equipment and tools 3 years

Buildings for administrative and commercial use 20-40 years

Depreciation expense is determined primarily using the straight-line method. Fixed assets acquired through capital lease arran-gements or long-term rental arrangements that transfer substan-tially all of the benefits and risks of ownership to the Group, arecapitalized.

h) Impairment tests of assets As part of the early application of regulation CRC 2002-10 witheffect from January 1st, 2003 and the new accounting methodfor fixed assets applied by the Group, impairment tests of assetsfor each cash generating unit have been implemented through-out the Group. As recommended in CRC regulations, these testshave been performed in accordance with the provisions of IAS36:• Cash Generating Units (CGU) chosen: product lines within

each legal entity;• Discount rate corresponding to the expected rate of return of

the market for a similar investment;• Five-year business plans;• Terminal value beyond five years, calculated on zero growth

basis.On each balance sheet date, the Group reviews all assets tolook for any indication that their value may be significantlyimpaired. When events or changes in the market environmentindicate a risk of impairment of intangible or tangible assets, theseassets are subjected to an impairment test with the aim of adjus-ting their carrying amount to the higher of their market value ortheir value in use by means of a depreciation. Value in use is cal-culated on the basis of future operational cash flow representingthe management’s best assessment of the economic conditionsthat will prevail during the remainder of the asset’s useful life.

56


i) Unconsolidated investmentsInvestments in unconsolidated companies are stated at which-ever is the lower of historical cost (excluding revaluations) andfair value (market value for investments in listed companies) andassessed investment by investment, based on their value in usefor the Group.

j) Long-term contracts Sales and revenue on long-term contracts are recognized on apercentage-of-completion basis. Provisions are established tocover all foreseeable losses at completion. Work in progress onlong-term contracts include only those expenses not yet taken intoaccount in the calculation of the revenue at completion. They arestated at production cost, excluding administrative and sellingexpenses and interest expense.

k) Inventories and work in progressInventories and work in progress are valued at whichever is thelower of production cost (including indirect production costswhere applicable) and net realizable value. Production cost isprimarily calculated on a weighted-average price basis. The pur-chase cost of copper in the inventories is valued according tothe LIFO method (last in – first out) in order to better representeconomic reality given variations in the price of copper.

l) Treasury stockTreasury stock acquired as part of the share buyback programauthorized by the Annual Shareholders’ Meetings of Nexans isdeducted from group shareholders’ equity, in accordance withNotice 2002.D of the “Comité d’urgence du Conseil Nationalde la Comptabilité”.

m) Cash and cash equivalentsCash and cash equivalents comprise receivables from the dis-posal of assets reaching maturity in less than three months andwhich are liquid and transferable, as well as cash on hand andmarketable securities. These items are valued at whichever is thelower of cost and market value.

n) Pension and retirement obligationsIn accordance with the laws and practices of each country whereNexans is present, the Group participates in employee benefitplans by offering early retirement benefits and gratuity. The Group applies the preferential method laid down in regulationCRC 99-02 by accounting for pension commitments through areserve booked in the liabilities of its consolidated balance sheet.

For defined contribution pension plans and multi-employer plans,expenses correspond to contributions made. Throughout theGroup, from January 1st, 1999, pension plans offering definedbenefits have been provisioned as follows:• using the Projected Unit Credit actuarial method (with projected

final salary);• actuarial gains and losses are not immediately accounted for

in income; the portion in excess of 10% of the present valueof the defined benefit obligation or 10% of the fair value ofthe plan assets is recognized and amortized over the expectedaverage remaining working lives of the employees partici-pating in the plan.

Furthermore, the financial component of the annual employee benefitcost (interest cost after deduction of expected return on plan assets)is entered under financial income (Note 4).

o) Reserves for restructuringReserves for restructuring costs are fully integrated in the financialyear if restructuring programs have been decided and announcedbefore the statement of account is issued. Such costs primarilyrelate to severance payments, early retirement, costs for noticeperiods not worked, retraining costs of terminated employees,closed facilities and write-off of fixed assets, inventories and otherassets.As of January 1st, 2002, the depreciation of assets recorded aspart of restructuring plans is deducted from the correspondingassets. The resulting income effect is included under “Restructuringcosts”.

p) Deferred taxesDeferred income tax is computed under the liability method forall timing differences arising between accounting value andtax value of assets and liabilities, as well as for tax losses avai-lable for carry-forward. However, deferred income tax assetsare recorded in the consolidated balance sheet if it seems reason-ably probable from the business plan of the company concerned,that the tax benefit will be realized (Note 6.c).Deferred taxes are valued on the basis of the tax rate appli-cable at year end. The impact of changes in the tax rate arerecorded in the year in which these changes take effect. Provisions are made for taxes on proposed dividends to be distri-buted by subsidiaries. No provision is made for taxes payableon undistributed retained earnings.

57

q) Financial instrumentsThe Group uses financial instruments to manage and reduce itsexposure to fluctuations in interest rates, foreign currency exchangerates and metal prices. Gains and losses on hedging contractsare accounted for in the same period as the item being hedged;otherwise, changes in the fair value of these instruments arerecognized in net profit or loss of the period in which they arise(Note 23).

r) Key performance indicators

• Net salesNet sales (at current metals prices) represent sales of goods andservices issued from the main activities of the Group net of valueadded taxes (VAT).• Sales at constant metals pricesTo neutralize the effect of fluctuations in the purchase price ofnon-ferrous metals and thus measure the underlying trend in itsbusiness, the Group also presents the sales figure based on aconstant price for copper and aluminum. These reference priceshave been fixed at 1,500 euros per metric ton for copper and1,200 euros per metric ton of aluminum.The effects of variations in the purchase price of metals are passedon in the selling price. • Income from operations (measures operating performance)Income from operations includes research and developmentexpenses (Note 1.e), pension costs (Note 1.n) and employee profitsharing. Income from operations is calculated before financial income(loss), restructuring costs, gains and losses on disposal of assets andextraordinary depreciation, in line with the practices of many of thegroup’s competitors.• EBITDA (measures ability to generate operating cashflows)EBITDA is defined as income from operations excluding depre-ciation and amortization.

NOTE 2 Changes in the scope ofconsolidation

During the year 2003, Nexans has made the following acquisitions:• 50.29% of the South Korean company Kukdong Electric Wire

Co. Ltd, specialized in cables for shipbuilding. This companywas fully consolidated as of April 1st, 2003, the date at whichNexans Group took operational control of the company. Its contri-bution (over 9 months) to Group net sales in 2003 amounted to52 million euros.

• 100% of the Brazilian company Furukawa Cabos de Energia(renamed Nexans Cabos de Energia SA, then merged intoNexans Brazil SA in December 2003), a manufacturer of aluminum cables for transport networks and power distribution.This company was fully consolidated as of April 1st, 2003. Its contribution (over 9 months) to Group net sales in 2003 was27 million euros.

Changes in the scope of consolidation for 2002 were as fol-lows:• Daesung Vietnam Power Cable Company (Davipco, 59.05%

controlled by the Group) was fully consolidated as of January 1st,2002, at which date the Nexans Group took operationalcontrol of the company. Prior to this, it was consolidated onan equity basis.

• on June 19th, 2002 Nexans took control of the German groupPetri, a specialist in medium and low voltage accessories forpower cable networks, especially in Germany and in theCzech Republic. Petri (renamed GPH GmbH) and its Czechand German subsidiaries were fully consolidated as of July 1st,2002.

• Nexans also sold the Swiss company Agro AG, which wasdeconsolidated on June 1st, 2002.

NOTE 3 Information by business sector andby geographical area

a) Information by business sectorThe tables below relate to the following business sectors:• Electrical Wires – comprising wirerods, electrical wires and

winding wires;• Energy – including equipment cables, power cables for net-

works (low, medium, high voltage and related accessories)and special cables;

• Telecom – which groups together cables for private tele-communications networks, special cables for electronicapplications, junction components for telecommunicationnetwork cables, copper cables for public telecommunicationnetworks, and optical fiber cables for public networks;

• Distribution – made up of retail activities for distribution to instal-lers of electrical equipment in Switzerland and Norway;

• Other – mainly comprising head office profits and costs notallocated to other activities and eliminations between sectorsin trade receivables.


Data relating to the business sectors follows the same accounting policies used for the company’s consolidated financial statements, as described in the notes to the financial statements. The performance of each business sector is measured based on income from operations.

58

Electrical Energy Telecom Distribution Other Total 2003 in millions of euros Wires Group

Net sales at current metal prices 1,029 2,189 549 279 – 4,046Net sales at constant metal prices 956 2,143 546 279 – 3,924Income from operations 10 78 (1) 13 (9) 91Depreciation and amortization* 16 52 22 4 5 99EBITDA** 26 130 21 17 (4) 190Capital expenditure 12 40 10 1 4 67Property, plant and equipment, net 134 431 164 33 22 784Inventories and work in progress, net 134 331 62 34 (5) 556Trade receivables and related accounts, net 145 525 120 32 (78) 744Total assets from operations, net 413 1,287 346 99 (61) 2,084Staff (number of employees) 2,275 9,540 3,711 719 823 17,068


Net sales at current metal prices 1,179 2,226 585 312 – 4,302Net sales at constant metal prices 1,066 2,141 577 312 – 4,096Net sales at constant metal prices and 2003 exchange rates 1,029 2,089 539 298 – 3,955Income from operations 12 71 (35) 16 (8) 56Depreciation and amortization* 32 69 33 5 7 146EBITDA** 44 140 (2) 20 (1) 201Capital expenditure 17 51 11 7 10 96Property, plant and equipment, net 186 401 161 40 11 799Inventories and work in progress, net 178 346 69 37 (2) 628Trade receivables and related accounts, net 130 496 142 41 (48) 761Total assets from operations, net 494 1,244 372 118 (40) 2,188Staff (number of employees) 2,448 9,262 3,840 736 853 17,139


Net sales at current metal prices 1,256 2,327 854 340 – 4,777Net sales at constant metal prices 1,102 2,189 836 340 – 4,467Net sales at constant metal prices and 2003 exchange rates 1,034 2,146 782 340 – 4,302Income from operations 15 80 30 17 (3) 139Depreciation and amortization* 32 67 34 4 4 141EBITDA** 47 147 64 21 1 280Capital expenditure 41 101 40 6 14 202Property, plant and equipment, net 214 414 222 44 27 921Inventories and work in progress, net 162 334 101 44 (4) 637Trade receivables and related accounts, net 142 504 164 56 (5) 861Total assets from operations, net 518 1,252 487 144 18 2,419Staff (number of employees) 2,625 9,266 4,372 831 906 18,000

* Property, plant and equipment excluding goodwill amortization. ** See Note 1 (r).


59

b) Information by geographical area (by subsidiary location)

c) Sales at current metals prices by geographical market

France Germany Other North Asia Rest of Total2003 in millions of euros Europe America World Group

Net sales at current metal prices 1,188 574 1,253 715 185 131 4,046Net sales at constant metal prices 1,153 564 1,242 658 175 132 3,924Income from operations (8) 14 48 22 12 3 91Property, plant and equipment, net 191 134 244 118 57 40 784Total assets from operations, net 577 318 719 244 118 108 2,084Staff (number of employees) 4,648 3,003 5,387 1,756 1,106 1,168 17,068


Net sales at current metal prices 1,324 582 1,293 850 135 118 4,302Net sales at constant metal prices 1,245 560 1,268 784 125 113 4,095Net sales at constant metal prices and 2003 exchange rates 1,245 560 1,235 697 107 111 3,955Income from operations (26) 20 36 19 4 3 56Property, plant and equipment, net 196 140 252 124 50 37 799Total assets from operations, net 650 325 760 268 94 91 2,188Staff (number of employees) 4,935 3,027 5,508 1,872 902 895 17,139


Net sales at current metal prices 1,472 644 1,508 914 116 123 4,777Net sales at constant metal prices 1,336 597 1,457 845 117 115 4,467Net sales at constant metal prices and 2003 exchange rates 1,336 597 1,453 712 96 108 4,302Income from operations 24 25 63 5 10 12 139Property, plant and equipment, net 207 146 271 193 59 45 921Total assets from operations, net 664 334 822 379 115 105 2,419Staff (number of employees) 5,281 3,105 5,901 1,940 851 922 18,000

France Germany Other North Asia Rest of Totalin millions of euros Europe America World Group

2003 586 500 1,690 744 242 284 4,0462002 627 555 1,750 864 204 302 4,3022001 760 597 1,977 931 179 333 4,777


60

NOTE 4 Net financial income (loss)


Net interest (expense) income (10) (12) (22)Dividends 1 2 4Reserves – (2) (2)Net exchange gain (loss) (2) – 2Financial component ofthe pension costs (16) (15) (10)Other financial items (net) (4) (4) (5)

Net financial income (loss) (31) (31) (33)

NOTE 5 Other revenue (expense)


Net capital gains ondisposal of fixed assets 6 5 3Net capital gains on disposal of consolidated investments* – 18 –Exceptional depreciation** (8) – –

Total (2) 23 3

* Including, in 2002, capital gain of 14 million euros on the disposal ofAgro AG. ** Exceptional depreciation for the winding wires business in 2003.

In 2003, the Group decided to consider disposal of its windingwires business. Negotiations currently under way with potentialpurchasers indicate that the sale would generate a capital loss of21 million euros, which would be recorded in the December 31st,2003 financial statements as exceptional depreciation of 8 mil-lion euros on fixed assets and 13 million euros on goodwill (seeNote 8). However, the final price agreed on and the resultingimpact on income may vary according to the outcome of thenegotiations.

NOTE 6 Income tax

a) Analysis of income tax charge


Current income tax charge (23) (18) (18)Deferred income tax (charge) credit, net* 30 28 (10)

Income tax charge 7 10 (28)

* Including 35 million euros of deferred tax assets based on business plans(mainly in France and Germany).

b) Effective income tax rateThe effective income tax rate is as follows:


Income before taxes and amortization of goodwill 18 (43) 73

Tax rate applicable in France (in %) 35.43 35.43 36.43

Expected tax (6) 15 (27)

Impact of:- Difference in tax rates offoreign countries 6 1 6

- Change in unrecognized deferred income tax assets 4 (8) (10)

- Tax credits 3 1 3- Other permanent differences – 1 –

Actual income tax charge 7 10 (28)

Effective tax rate (%) 41.4 23.4 38.6

Expected tax is calculated by applying the parent company’s taxrate to consolidated income before tax and amortization ofgoodwill.

c) Deferred tax balances on the consolidatedbalance sheet

Deferred tax assets (liabilities) are booked as follows:


Other accounts receivable- current assets 61 41 28- non-current assets 42 21 9

Total* 103 62 37

Other payables- current liabilities (15) (16) (7)- non-current liabilities** (76) (54) (71)

Total* (91) (70) (78)

Net deferred tax (liabilities) assets 12 (8) (41)

* See Notes 13 and 21.** As part of the legal reorganization in the United States, Alcatel and Nexanspermanently adopted tax regime “338 (H) (10)” in August 2001.Consequently, the taxable value of the assets of some Nexans US subsidiarieswas revised. In accordance with Group accounting policies, this change resultedin a deferred tax liability of 35 million euros being booked in the financial statements as of December 31st, 2001. As this deferred tax liability was a directconsequence of the constitution of the Group, it was allocated to goodwill (seeNote 8).

61

Tax assets and liabilities are split as follows:

Assets Liabilities Net

Gross Write- Netin millions of euros down

Tax losses carried forward 373 (312) 61 – 61Temporarydifferences 80 (38) 42 (91) (49)

Total 453 (350) 103 (91) 12

Deferred tax assets on temporary differences relate primarily tonon-tax deductible reserves.Deferred tax assets on losses carried forward are recognized incompanies whose business plan indicates that they will generatetaxable income in the future. Deferred tax assets that were notrecognized because recovery was deemed uncertain, were350 million euros, 388 million euros and 378 million euros atDecember 31st, 2003, 2002 and 2001 respectively. Thesedeferred tax assets include part of the tax losses carried forward,mentioned in Note 6.e.

d) Tax consolidationUnder the French tax-pooling regime, some French companiescan offset taxable income when calculating the whole tax chargefor which only the parent tax pooling company remains liable.The adoption of this agreement as of January 1st, 2002, whichconcerns the French companies included in the scope of conso-

lidation, generated a tax saving of 2 million euros in 2003 (8million euros in 2002).Other tax consolidation rules in effect in some foreign countriesgenerated no significant savings in 2003.

e) Tax losses carried forwardTax losses carried forward and not yet utilized represented apotential tax saving of 373 million euros at December 31st,

2003 (389 million euros at December 31st, 2002 and 347 mil-lion euros at December 31, 2001), including 253 million eurosrelating to the German subsidiaries and 52 million euros relatingto the French subsidiaries. Business plans drawn up in 2003 ledto the recognition of a deferred tax asset totaling 35 millioneuros in respect of tax losses carried forward, including 10 mil-lion euros for the German subsidiaries and 20 million euros forthe French subsidiaries. In these two countries, tax losses can becarried forward indefinitely. Tax losses carried forward expire asfollows:


Year N+1 9 25 15Year N+2 5 3 24Year N+3 13 8 2Year N+4 31 16 7Year N+5 and thereafter 315 337 299

Total 373 389 347


Net income 1 (40) 30

Average number of shares 20,956,605 22,730,995 24,546,203Average number of stock options 1,016,958 537,833 88,583Average number of diluted shares 21,973,563 23,268,828 24,634,786

Net earnings per share (in euros) 0.06 (1.78) 1.22

Diluted earnings per share (in euros) 0.06 (1.74) 1.22

NOTE 7 Earnings per share

At December 31st, 2003, the capital stock consisted of 23,128,972 shares. Following a share buyback program for a maximum 10%of capital stock (see Note 15.b), the weighted average number of outstanding shares for the financial year amounts to 20,956,605and the number of outstanding shares at December 31st, 2002 amounts to 20,907,773. Net earnings per share are calculated on thebasis of the weighted average number of shares issued after deduction of the weighted average number of shares owned by consoli-dated subsidiaries. Diluted earnings per share take into account the dilutive effect of stock options (Note 15.c). The following table presentsa reconciliation of net earnings per share and diluted earnings per share:

62


NOTE 8 Goodwill on consolidated subsidiaries


Date of Gross Depreciation Net Net Netacquisition value

Nexans Magnet Wire USA Inc* (*) 12 (12) – 14 18Nexans USA Inc* (*) 6 (1) 5 7 8Nexans Energy USA Inc* (*) 6 (6) – 6 8Nexans Kang Hua 2000 3 – 3 4 4GPH GmbH (Petri) 2002 8 (1) 7 8 –Kukdong Electric Wire Co. Ltd 2003 6 – 6 – –Nexans Brazil (after absorption of Nexans Cabos de Energia) 2003 1 – 1 – –

TOTAL 42 (20) 22 39 38

* See Note 6.c.

The early application of the provisions of regulation CRC 2002-10 with effect from January 1st, 2003, resulted in a depreciation ofgoodwill on consolidated subsidiaries of 6 million euros, booked against the opening shareholders’ equity balance for 2003. In addi-tion, depreciation of 13 million euros was recorded in the income statement (converted at the average exchange rate for 2003) relat-ing to goodwill on Nexans Magnet Wire, United States, as part of an adjustment to realizable value (see Note 5).

NOTE 9 Property, plant and equipment

a) Change in property, plant and equipment, gross

in millions of euros Gross value

Land Buildings Plant Other Total equipment and tools

December 31st, 2001 60 633 1,867 358 2,918

Acquisitions 2 9 35 50 96

Disposals (2) (5) (36) (12) (55)

Changes in the scope of consolidation (1) 3 8 (14) (4)

Other movements – 6 (3) (88) (85)

December 31st, 2002 59 646 1,871 294 2,870

Acquisitions – 4 24 39 67

Disposals (2) (10) (35) (13) (60)

Changes in the scope of consolidation 15 12 40 (2) 65

Other movements (4) (25) (39) (31) (99)

December 31st, 2003 68 627 1,861 287 2,843

Property, plant and equipment acquired under finance leases and long-term rental arrangements account for less than 5% of total property,plant and equipment.

63

b) Change in accumulated depreciation of property, plant and equipment

in millions of euros Accumulated depreciation

Land Buildings Plant Other Total equipment and tools

December 31st, 2001 8 400 1,388 201 1,997

Depreciation charge – 23 101 20 144Write-offs* – (4) (33) (12) (49)Changes in the scope of consolidation – (3) (2) (1) (6)Other movements – 19 (37) 3 (15)

December 31st, 2002 8 435 1,417 211 2,071

Change of accounting method:- Component approach – – (257) – (257)- Impairment – 60 166 6 232Depreciation charge – 17 65 15 97Exceptional depreciation – – 8 – 8Write-offs* – (5) (26) (12) (43)Changes in the scope of consolidation – (11) (19) (1) (31)Other movements – (7) (5) 2 (10)

December 31st, 2003 8 489 1,341 221 2,059

*Accumulated depreciation of disposed fixed assets.

The early application of regulation CRC 2002-10 with effect from January 1st, 2003, had the following effects on fixed assets:• the component approach resulted in an increase of 257 million euros in the net value of fixed assets, which was recorded in the

opening shareholders’ equity balance for the 2003 financial year;• impairment tests reduced the net value of fixed assets by 232 million euros, which was recorded in the net situation of the Group

at January 1st, 2003. This depreciation was calculated following the principles outlined in notes 1(a) and 1(h) and using a discountrate of 9.5%, with the exception of Turkey where an average rate of 12.95% was applied.

NOTE 10 Other investments and miscellaneous, net

in millions of euros 2003 2002 2001Gross value Provision Net value Net value Net value

Investments in unconsolidated subsidiaries 32 (9) 23 22 23Loans to unconsolidated subsidiaries 42 (8) 34 34 29Other investments 11 (2) 9 7 13

Total 85 (19) 66 63 65

NOTE 11 Inventories and work in progress


Raw materials and goods 169 189 170Industrial work in progress 112 100 119Work in progress on long-term contracts 12 25 7Finished products 315 374 404

Gross value 608 688 700

Valuation allowance (52) (60) (63)

Net value 556 628 637


64

NOTE 12 Trade receivables and related accounts


Receivables on long-term contracts 57 75 72Other trade receivables 738 740 840



Net value 744 761 861

NOTE 13 Other accounts receivables


Advances and progress payments 2 4 4Prepaid taxes 27 30 39Deferred tax assets* 103 62 37Prepaid expenses 7 5 10Advances made to employees 3 3 2Other accounts 29 30 42



Net value 170 133 133

* See Note 6(c).

NOTE 14 Marketable securities

Marketable securities consist primarily of investments in commer-cial paper, bonds and other transferable securities. The marketvalue of these securities is equal to their net book value on thebalance sheet.

NOTE 15 Shareholders’ equity

a) Appropriation of net incomeAt the Ordinary Annual Shareholders’ Meeting, the payment of a dividend of 0.20 euros per share, with a tax credit of 0.10 eurosper share for those shareholders entitled to benefit therefrom, or a gross dividend of 0.30 euros per share, will be proposed.The aggregate amount of dividends payable will be4,625,794.40 euros based on capital stock comprising23,128,972 shares at December 31st, 2003.If Nexans still holds treasury stock at the time of the dividend payment,the amount corresponding to unpaid dividends on these shares

will be allocated to retained earnings, and to the amount of addi-tional tax not due on such undistributed dividends. However, thetotal amount of dividends payable could increase as a result ofstock options exercised before the dividend payment date.The Ordinary Annual Shareholders’ Meeting held on June 5th,2003, which considered the company’s financial statements forthe year ending December 31st, 2002, authorized the paymentof a dividend of 0.20 euros per share without tax credit, paidstarting June 11th, 2003.The Ordinary Annual Shareholders’ Meeting held on June 25th,2002, which considered the company’s financial statements forthe year ending December 31st, 2001, authorized the paymentof a dividend of 0.43 euros per share without tax credit, paidstarting July 4th, 2002.

b) Treasury stockShares acquired at December 31st, 2001 in an amount of 33 mil-lion euros were deducted from the capital stock and additionalpaid-in capital. These shares were cancelled by the decision of theBoard of Directors on February 12th, 2002. Pursuant to the firstshare buyback program authorized by the Ordinary AnnualShareholders’ Meeting held on April 2nd, 2001, and decided bythe Board of Directors on September 26th, 2001, Nexans held6,774 of its own shares.In accordance with the authorization of the Ordinary AnnualShareholders’ Meeting held on June 25th, 2002 and the Noticeregistered by the COB under No.06-692, Nexans launched anew share buyback program pursuant to clause L.225-209 ofthe Code de Commerce, following the decision of the Board ofDirectors on June 25th, 2002. • during 2002 Nexans purchased 1,909,736 shares at an

average price of 12.88 euros per share for a total of 24.6 mil-lion euros. 1,500,000 of these shares were acquired fromAlcatel, thereby reducing its stake in Nexans to 15.04%;

• during 2003, Nexans purchased 304,689 shares at anaverage price of 11.3 euros per share for a total of 3.5 mil-lion euros.

At December 31st, 2003, Nexans held 2,221,199 of its ownshares for a total acquisition cost of 28.3 million euros. Theseshares were deducted from shareholders’ equity at the closingdate.

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NOTE 16 Minority interests

in millions of euros

December 31st, 2001 104

Minority interests in 2002 income 5Dividends paid (5)Changes in the scope of consolidation* (8)Other changes (translation adjustment, etc.) (8)


Change in accounting methods (see Note 1) (2)Minority interests in 2003 income 10Dividends paid (4)Changes in the scope of consolidation** 24Other changes (translation adjustment, etc.) (13)


* In 2002, acquisition of minority interests in Nexans Magnet Wire Inc (USA),Nexans Portugal and Nexans Morocco, and full integration of Davipco(Vietnam).** In 2003, acquisition of Kukdong Electric Wire Co. Ltd (shareholding50.29%) and acquisition of minority interests in Nexans Morocco.

NOTE 17 Pensions and retirement benefits

The Group sponsors various defined benefit pension plans. In France,all of its employees have opted to benefit from the retirementbonus scheme in addition to the national defined contributionpension plan. In other countries, pension schemes are subject tolocal regulations, and to the business and the historical practicesof the relevant subsidiary.From January 1st, 1999, pension plans offering defined benefitshave been calculated in accordance with the accounting principledescribed in Note 1.n.For pension plans offering defined benefits, which required actu-arial calculations, actuaries made their estimates on a country-by-country basis and, for specific assumptions (turnover of staff,salary increases), company by company. Assumptions for 2003,2002 and 2001 are as follows:

2003 2002 2001

Discount rate 3.5% - 7% 3.75% - 7% 5 - 7%Future salary increases 1 - 4.75% 1 - 5% 2 - 5%Expected long-term return on plan assets 4.5% - 8% 4.5% - 8% 5 - 8%Average expected remaining working life 15-25 years 15-25 years 15-27 yearsAmortization period of transition obligation 15 years 15 years 15 years

c) Stock optionsAt December 31st, 2003, there were 1,156,500 stock options reserved for employees, each giving the right to subscribe to oneshare, i.e. 5.0% of the capital stock. These options were granted as follows:

Board Meeting Number of options Exercise price Exercise periodcreating the plan (euros)

November 16th, 2001 512,000 17.45 From November 15th, 2002 (vested 25% by year) to November 15th, 2009

January 18th, 2002 2,000 16.70 From January 17th, 2003 (vested 25% by year) to January 17th, 2010

March 13th, 2002 8,000 19.94 From March 12th, 2003 (vested 25% by year) to March 12th, 2010

April 4th, 2003 634,500 11.62 From April 3rd, 2004 (vested 25% by year) to April 3rd, 2011

Total 1,156,500

66



CHANGE IN BENEFIT OBLIGATION

Benefit obligation at beginning of year 757 741 721

Service cost 18 19 17Interest cost 35 38 37Contributions of plan’s participants 3 3 3Amendments – 3 (4)Acquisitions – 6 6Disposals – (1) –Curtailments and settlements (2) (1) (4)Effect of staff reductions (4) (2) –Actuarial (gains)/losses (4) (5) 3Benefits paid (45) (43) (46)Other (translation adjustments) (30) (1) 8

Benefit obligation at end of year 728 757 741

CHANGE IN PLAN ASSETS

Fair value of plan’s assets at beginning of year 385 427 469

Actual return on plan assets 9 (41) (41)Employers’ contribution 11 16 10Contributions of plan’s participants 3 3 3Acquisitions – 2 4Disposals – – –Curtailments and settlements – – (4)Benefits paid (23) (21) (24)Other (translation adjustments) (23) (1) 10

Fair value of plan assets at end of year 362 385 427

FUNDED STATUS

Benefit obligations net of plan asset 366 372 314

Unrecognized actuarial gains/(losses) (85) (93) (32)Unrecognized transition obligation (3) (3) (3)Unrecognized prior service cost (18) (23) (22)

Net amount recognized, reserve/(prepaid asset) 260 253 257

EMPLOYEE RETIREMENT OBLIGATION COSTS FOR THE PERIOD

Service cost (18) (19) (17)Interest cost (36) (38) (37)Expected return on plan assets 20 23 28Amortization of transition obligation – – (1)Amortization of prior service cost (2) (2) (2)Amortization of actuarial gains/(losses) (3) (1) –Effect of curtailments and settlements – – –Effect of staff reductions 4 2 –

Net cost for the period (35) (35) (29)

The pension funds are mostly invested in public and private bonds (about 53%) and in equity interests (about 29%).

67

NOTE 18 Accrued contract costs and other reserves

a) Analysis by nature


Accrued contract costs 48 65 77Reserves for restructuring 40 41 38Other reserves 32 37 42

Total 120 143 157

Changes in these reserves are as follows:

TOTAL Accrued Reserves for Other Income effectcontract restructuring reserves (net of incurred expenses)

in millions of euros costs

31/12/01 157 77 38 42 Operational Financial Extraordinary

Increases 115 23 90 2 (25) – (90)Write-backs (used reserves) (105) (12) (88) (5)Write-backs (unused reserves) (29) (25) – (4) 29 – –Change in accounting method – – – –Change in consolidation scope 1 – – 1Others 4 2 1 1

31/12/02 143 65 41 37 4 – (90)

Increases 68 23 42 3 (26) – (42)Write-backs (used reserves) (58) (15) (40) (3)Write-backs (unused reserves) (31) (25) (1) (5) 30 – 1Change in accounting method – – – –Change in consolidation scope 3 – – 3Others (5) – (2) (3)

31/12/03 120 48 40 32 4 – (41)

Accrued contract costs relate primarily to reserves established in keeping with accounting standards as part of the Group’s contractualresponsibilities, and, in particular, warranties, contract losses and penalties relating to commercial contracts.Provisions are released when the risks and obligations no longer exist or, if they have been settled for a lower amount than estimatedbased on the information available at the previous closing period (including reserves for expired warranties).


68

b) Analysis of restructuring costs


Reserves at the beginning of the year 41 38 57

Expenses of the period (38) (56) (39)Depreciations andwrite-offs of assets (2) (32) (12)New plans and adjustments to prior estimates 41 90 36Translation adjustments and other movements (2) 1 (4)

Reserves at the end of the year 40 41 38

Provisions for restructuring at December 31st, 2003 mainly concernthe planned capacity reduction at Nexans France, decided at theend of 2003, which will cost around 20 million euros. Restructuring costs incurred during 2003 relate mainly to theimplementation of plans for which provisions were set aside atthe end of the previous year.The restructuring costs incurred during 2002 relate mainly to thereorganization of distribution activities in Norway and severancecosts, notably in Spain (Telecom), France (Telecom and Energy),Belgium (Telecom and Energy) and Italy (Energy).Provisions for restructuring at December 31st, 2002 mainly concernthe restructuring plan for the Fumay factory in France (LAN cablesand Datacom), the closure of the Mexico (Missouri), factory in theUnited States (winding wires) and the ongoing reorganization inGermany (winding wires and special cables). Consequently, asset depreciations and write-offs amounted to32 million euros.Restructuring costs incurred during 2001 stem primarily from con-tinued downsizing in Germany, in particular on the Hanover,Moenchengladbach and Nuremberg sites, and from the reor-ganization of Distribution activities in Norway, as well as sev-erance costs in Data cable activities in the United States andEnergy activities in Italy.Provisions for restructuring booked in 2001 relate mainly toElectrical wires activities in France and Germany, Distributionactivities in Norway, Data cable activities in the United Statesand Energy activities in Italy.

NOTE 19 Financial debts

a) Analysis by nature

in millions of euros 2003 2002

Short-term borrowings and bank overdrafts 125 218Finance lease obligations – –Accrued interest 1 1

Total 126 219

A breakdown of financial debts by date of maturity is presentedin the off-balance sheet commitments table (Note 22).

b) Short-term debtAnalysis by currency and interest rate

Weighted average rate (%) In millions of euros

2003 2002 2003 2002

Euro 2.77 3.66 95 182US dollar 1.17 3.32 8 9Other 11.98 9.93 16 19

Total 3.95 4.23 119 210

All the Group’s short-term debt is at a variable rate based on themonetary indices (Euribor or Libor).

c) Long-term debtAnalysis by currency and interest rate

Weighted average rate (%) In millions of euros

2003 2002 2003 2002

Euro 4.16 3.99 7 8Deutsche mark – – – –US dollar – – – –Other – 5.91 – 1

Total 4.16 4.13 7 9

The Group’s long-term debt is at fixed interest rates.

69

d) Other informationAt December 31st, 2003, Nexans and its subsidiaries hadunused confirmed credit lines amounting to 505 million euros,including 475 million euros in respect of a syndicated loanagreement concluded in January 2003 (comprising one short-term tranche of 190 million euros and one five-year tranche of285 million euros). Additionally, Nexans also has a bilateralcredit line for a total of 30 million euros. These short- and medium-term bilateral loan contracts and thesyndicated loan agreement are subject to the traditional obliga-tions (negative pledge, pari passu, cross default). They are alsosubject to commitments in terms of financial ratios (net debt/EBIT-DA < 2.5, and net debt/shareholders’ equity including minorityinterests < 0.7). At December 31st, 2003, as well as at the timeof preparing this present report, these ratios were well within thespecified limits. If these commitments are not respected, unused credit lines couldbe withdrawn within 0 to 30 days, depending on their nature,and the current credit line could be terminated.

NOTE 20 Customers’ deposits and advances


Advance payments received onlong term contracts 24 19 24Other deposit advances received from customers 27 18 24

Total customers’ deposits and advances 51 37 48

NOTE 21 Other payables


Accrued payables and others 107 129 146Social payables 132 134 124Accrued taxes 52 46 54Deferred tax liabilities* 91 70 78Dividends to be paid – – –Grants 5 5 6

Total 387 384 408

* See Note 6.c.

NOTE 22 Off-balance sheet commitments

a) Comparative information


Guarantees given on contracts 290 313 257Discounted notes receivable with recourse – 1 3Sales of receivables without recourse* 109 93 118Mortgages and secured borrowings** 20 24 26Commitments to buy or sell forward raw materials or goods 66 76 57Guarantees and securities given (excl. contracts) – – –Commitments to purchase fixed assets 1 3 10Other commitments 9 25 8

Total 495 534 479

*The transferee bank bears the risk of insolvency on the receivables sold,whilst the technical risk and the risk of commercial dispute remains with thetransferor.**Secured borrowings given as loan guarantees.

Guarantees given on contracts relate to performance bonds issuedto clients by financial institutions, and bank guarantees given tosecure advance payments received from clients. In the event that itseems likely that Nexans will be liable for such guarantees due tooccurrences such as delay in delivery or litigation on the underlyingcontracts, the estimated risk is provisioned (see Note 18 “Accruedcontract costs and other reserves”). Guarantees given on contractsrelate mainly to High Voltage activities, especially in the field ofumbilical cables.

70

b) Schedule of maturity for contractual obligations and off-balance sheet commitments• Contractual obligations

Total Due payments by maturity

in millions of euros 2003 Less than 1 year 1 to 5 years Over 5 years

Long-term debt 7 – 7 –Finance leases 1 – – 1Operating leases 44 13 28 3Commitments to buy or sell forward raw materials or goods 66 66 – –Commitments to purchase fixed assets 1 1 – –Other long-term obligations – – – –

Total 119 80 35 4

• Other commitments

Total Commitments by maturity

in millions of euros 2003 Less than 1 year 1 to 5 years Over 5 years

Credit lines (received) 505 220 285 –Guarantees given on contracts 290 177 88 25Discounted notes receivable with recourse – – – –Sales of receivables without recourse* 109 109 – –Mortgages and secured borrowings** 20 4 6 10Other commitments 9 8 – 1

* The transferee bank bears the risk of insolvency on the receivables sold, whilst the technical risk and the risk of commercial dispute remains with the transferor.** Secured borrowings given as loan guarantees.

To the knowledge of the Management, this presentation does not omit any significant off-balance sheet commitments, according to theaccounting standards in force.

NOTE 23 Market-related exposures

The Group has centralized treasury management to manage, in particular foreign exchange risk and interest rate risk.

a) Currency riskFinancial instruments held at December 31st, 2003 are hedges for exchange risks arising from payables or receivables, either commer-cial or financial. At December 31st, 2003, off-balance sheet financial instruments held to manage currency risks were as follows:

in millions of euros Buy / lend Sell / borrow

Principal amount Fair value Principal amount Fair value

Forward exchange contracts 39 -2 -143 12Short-term exchange rate swaps 153 -3 -94 2


71

Earliest/latest maturity dates for off-balance sheet financial instruments are:

Maturity date

Earliest Latest

Forward exchange contracts January 2nd, 2004 February 21st, 2006Short-term exchange rate swaps January 2nd, 2004 December 15th, 2004

Principal amounts represent the face value of financial instruments. Principal amounts expressed in foreign currency are translated into eurosat the year-end rate of exchange. Fair value is estimated based on interest rates and exchange rates prevailing at December 31st, 2003.

b) Metal price risk

The Group subscribed to futures contracts on the London Metal Exchange in order to reduce its exposure to market fluctuations on itscopper and aluminum positions.At December 31st, 2003, 2002 and 2001, the copper and aluminum net positions on futures contracts were as follows:

2003 2002 2001

Tons Millions of Tons Millions of Tons Millions ofeuros euros euros

Open position (long) at purchase cost 38,915 66 47,901 76 29,425 49At market value 38,915 69 47,901 70 29,425 48

Profit/(loss) 3 (6) (1)

These profits (losses) are offset by losses (profits) on firm positions, resulting in a net profit of 0.3 million euros at December 31st, 2003(net loss of 3 million euros at December 31st, 2002, and net profit of 1 million euros at December 31st, 2001).

NOTE 24 Payroll and staff

in millions of euros and number of staff 2003 2002 2001

Wages and salaries (including social security/pension costs) 799 822 852of which remuneration of executive officers of the Group 3.9 3.4 3.0Employee profit sharing – – 1Staff of consolidated companies at year end 17,068 17,139 18,000


72

NOTE 25 Related party transactions

Related party transactions mainly comprise transactions withequity affiliates and non-consolidated subsidiaries. The mainitems affected are as follows:

a) Income statement


Net sales 4 4Cost of sales (51) (32)Interest expenses – –Interest income 1 1

b) Balance sheet


Trade receivables and related accounts 3 –Other accounts receivable – –Trade payables and related accounts 8 8Other payables – –

NOTE 26 Contingencies

Certain claims arise in the ordinary course of business that theGroup considers will not give rise to significant costs, given itspolicy for making provisions, availability of insurance cover, theprobability of judgment being entered against Nexans and theamount of the claims. However, five specific claims should be mentioned, for whicheither it has been decided not to make any provisions or inrespect of which the information available does not allow anyreasonable evaluation of whether or not they will have a financialimpact on the group to be made or of the amounts involved.Nevertheless there is a risk that these claims may have an impacton the accounts in the future.

a) Corvettes - South AfricaNexans supplied cables for four corvettes for the South Africannavy. Part of the supplies was sub-contracted to a South Africanmanufacturer. After installation of the cables on the first two corvettes, it wasfound that the cables supplied by the sub-contractor were non-

compliant. All the cables already installed had to be removedand re-installed. Nexans has supplied replacement cables, butthe allocation of the costs incurred, in particular the removal andre-installation costs being claimed by the customer (approximately18 million euros), amongst Nexans, its client, the insurers and thesub-contractor, has not yet been determined. In addition to themanufacturing costs of the replacement cables, Nexans hasalready incurred costs of 5 million euros in relation to this matter.

b) Competition Authorities• The proceedings initiated in Norway several years ago

against Nexans Norway, relating to an alleged price-fixingagreement between distribution companies, has beenresolved without any significant impact on Nexans’ results.

• In France, Nexans received notification of a complaint from theReporter of the “Conseil de la Concurrence” (French competitionauthority) relating to an alleged agreement between Nexansand a certification company aimed at eliminating an importer of120 ohms cables from the French market. The facts relate to1994 and 1995. A preliminary decision was made by theConseil de la Concurrence on September 9th, 1998, in whichthey rejected CAE’s request for an interlocutory judgment.

• Also in France, the “Direction Nationale des Enquêtes”(national investigation agency) of the “Direction Générale dela Concurrence, de la Consommation et de la Répression desFraudes” (Department of competition, consumer affairs andfraud repression), has started an investigation into contractsawarded by EDF for the supply of high voltage cables.

• In Germany, the “Bundeskartellamt” (German competition authority)has started an investigation into practices in the cable industry.

The amounts involved in the first of these matters currently ongo-ing (120 ohm cable market) are apparently not significant andthe claim will in any case be vigorously defended by Nexans. No official notification of a complaint has been received for thetwo other matters, and in such cases, Nexans has not made anyprovision for these cases.However, in view of the very limited information available withrespect to the last two matters, Nexans is unable to predict withany certainty how they may evolve or what their impact may beon Nexans’ operations or income. Although it is not yet possible to ascertain the impact of theseclaims, Nexans currently does not consider that their outcomewill have a significant impact on its consolidated financial posi-tion. However, this cannot be guaranteed.The Group is not aware of any other extraordinary facts or claimsthat could significantly affect its financial situation or its income.

73

NOTE 27 Main consolidated companies

Principal Percentage of Percentage of Consolidation Companies by country activities control interest method*

France

Nexans** Holding 100% 100% Consolidating

Nexans Participations Holding 100% 100%Nexans France Energy and Telecom 100% 100%Nexans Interface Telecom 100% 100%Eurocable Energy 100% 100%G.I.R.M. Copper Trading 97.54% 97.54%Société Lensoise de Cuivre Electrical wires 100% 100%Société de Coulée Continue du Cuivre Electrical wires 100% 100%Nexans Wires Electrical wires 100% 100%RIPS Energy 100% 100%Tréfileries Laminoirs de la Méditerranée Electrical wires 100% 100%Alsafil Electrical wires 100% 100%

Belgium

Nexans Benelux Energy 100% 100%Nexans Harnesses Energy 100% 100%Nexans Cabling Solutions NV Telecom 100% 100%Euromold NV Energy 50.10% 50.10%Opticable SA NV Telecom 75.00% 75.00%

Germany

Nexans Deutschland AG Holding 100% 100%Nexans Deutschland Industries AG & Co KG Energy and Telecom 100% 100%Lacroix & Kress GmbH Electrical wires 100% 99.65%Kabelmetal Electro GmbH Energy 99.50% 99.50%Nexans Superconductors GmbH Energy 100% 99.65%Metrofunkkabel Union GmbH Distribution 100% 99.65%Nexans Auto Electric GmbH Energy 100% 99.65%GPH GmbH Energy 100% 99.65%

North Europe

Nexans Nederland BV Energy 100% 100%Nexans Norway A/S Energy and Telecom 100% 100%Nexans Distribusjon A/S Distribution 100% 100%Nexans Suisse SA Energy and Telecom 100% 100%Electro-Materiel SA Energy 100% 100%Hi Wire Ltd Electrical wires 100% 100%Tri Wire Ltd Electrical wires 100% 100%Kelverdeck Ltd Energy 100% 100%Nexans UK Ltd Energy and Telecom 100% 100%Nexans Ireland Ltd Energy 100% 100%Nexans IKO Sweden AB Energy and Telecom 100% 100%Nexans Jydsk Denmark Energy and Telecom 100% 100%Axjo Kabel AG Energy 100% 100%Matema AB Energy 100% 100%Norcable A/S Energy 50% 50% Equity basis

* The companies are fully consolidated except if specified.** Companies listed on a stock exchange.

74


Principal Percentage of Percentage of Consolidation Companies by country activities control interest method*

South Europe

Nexans Italia SpA Energy and Telecom 99.99% 99.99%Nexans Wires Italia SpA Electrical wires 100% 100%Nexans Portugal Fios Esmaltados Electrical wires 100% 100%Nexans Iberia SL Telecom 100% 100%Nexans Hellas SA** Energy and Telecom 71.75% 71.75%Nexans Turkiye Iletisim Endustri ve Ticaret AS Energy and Telecom 100% 100%

Americas

Nexans Canada Inc Energy and Telecom 100% 100%Nexans Brasil S/A Energy 99.92% 99.92%Nexans USA Inc Holding 100% 100%Nexans Magnet Wire USA Inc Electrical wires 100% 100%Nexans Energy USA Inc Energy 100% 100%Nexans Inc Telecom 100% 100%

Africa

Nexans Maroc** Energy 64.03% 64.03%Tanzania Daesung Cable Co Energy 51% 26.30% Equity basis

Asia

Nexans (Shanghai) Electrical Materials Co Ltd Telecom 100% 100%Nexans Tianjin Magnet Wires & Cables Co Ltd Electrical wires 60% 60%Shanghai Nexans Kang Hua Cable Co Ltd Telecom 70% 70%Nexans Korea Ltd** Energy and Telecom 51.58% 51.58%Kukdong Electric Wire Co. Ltd** Energy and Telecom 50.29% 50.29%Daeyoung Cable Energy and Telecom 51.58% 51.58%Daesung Vietnam Power Cable Co Energy 59.05% 30.46%Vina Daesung Cable Co Telecom 54.80% 28.26%Nanning Huasun Cables Ltd Co Telecom 36% 18.57% Equity basis

* The companies are fully consolidated except if specified.** Companies listed on a stock exchange.

NOTE 28 Post-closing events

None

75

Statutory Auditors’ Reporton the consolidated financial statements for the year ended December 31, 2003

To the Shareholders,

In compliance with the assignment entrusted to us by your shareholders’ meetings, we have audited the accompanying consolidatedfinancial statements of Nexans for the year ended December 31, 2003. The consolidated financial statements have been drawn up by theBoard of Directors. Our role is to express an opinion on these financial statements based on our audit.

Opinion on the consolidated financial statementsWe conducted our audit in accordance with the professional standards applicable in France; those standards require that we planand perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significant estimates made by the management, aswell as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.In our opinion, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and results ofthe consolidated group of companies in accordance with the accounting rules and principles applicable in France. Without callinginto question our above expressed opinion, we draw attention to the matter discussed in Note 1.a) to the financial statements relatingto the change in accounting methods that occurred during the year, and that results from the first application, from January 1st, 2003by anticipation, of the “Règlement CRC 2002-10” on fixed assets.

Justification of our assessmentsIn accordance with the requirements of article L. 225-235 of the French Commercial Code (Code de commerce) relating to the justificationof our assessments, which came into effect for the first time this year, we bring to your attention the following matters:

Change in accounting methodsAs mentioned in the first part of this report, Note 1.a) to the financial statements details the change in accounting methods that occurredduring the year, and that results from the first application, from January 1st, 2003 by anticipation, of the “Règlement CRC 2002-10”on fixed assets. Our works consisted in verifying the reasonableness of this change in accounting methods and of the presentationmade thereof.

Financial estimatesYour company recognizes deferred tax assets in its consolidated financial statements on the basis of business plans, as described inNotes 1.p) and 6 to the financial statements. Our works consisted in assessing the data and hypotheses on which those estimates weremade, in reviewing the calculation made by the company, in comparing the accounting estimates of the former years with thecorresponding actual results, in verifying the consistency of those estimates with those retained in accordance with the first application,from January 1st, 2003 of the “Règlement CRC N° 2002-10”, and in reviewing the acceptance process by management of thoseestimates. In the field of our opinion, we verified the reasonable assessment of those estimates. Our assessments on these matters weremade in the context of the performance of our audit of the consolidated financial statements taken as a whole and therefore contributedto the development of the unqualified audit opinion expressed in the first part of this report.

Specific verificationIn accordance with professional standards applicable in France, we have also verified the information given in the group managementreport. We have no matters to report with regard to its fair presentation and conformity with the consolidated financial statements.

Neuilly-sur-Seine and Paris, March 18, 2004

The Statutory Auditors

RSM Salustro Barbier Frinault et AutresReydel Alain Gouverneyre

Benoît Lebrun

This is a free translation into English of the Statutory Auditors’ report on the consolidated financial statements issued in the French languageand is provided solely for the convenience of English speaking readers. The Statutory Auditors’ report on the consolidated financialstatements includes information specifically required by French law in all audit reports, whether qualified or not, and this is presented belowthe opinion on the consolidated financial statements. This information includes an explanatory paragraph discussing the Auditors’assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an auditopinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account captionsor on information taken outside of the consolidated financial statements. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standardsapplicable in France.

Consolidated sales

At current metal prices At constant metal prices At constant metal pricesand exchange rates and current exchange rate and exchange rates

1st quarter 1st quarter 1st quarter 1st quarter 1st quarter 1st quarterin millions of euros 2003 2004 2003 2004 2003 2004

Energy 503 559 491 515 477 515Telecom 134 130 133 126 126 126Electrical wires 267 333 248 241 244 241Distribution & other 74 69 73 69 67 69

TOTAL 978 1,091 945 951 914 951

At constant non-ferrous metal prices and exchange rates(**), first quarter sales totaled 951 million euros, up from 914 million euros for thefirst quarter of 2003, representing growth of 3.9% (+1.3% at constant perimeter).The strong growth of sales in North America and Asia, coupled with the sales reported by the recently acquired Kukdong and Furukawacompanies in South Korea and Brazil, respectively, managed to offset weak markets in Europe, especially France.A business-by-business analysis shows continued growth in energy as other businesses remained stable.The quarter was marked by a sharp rise in the price of non-ferrous metals, especially copper, for which the average price jumped 37%compared with the first quarter of 2003 (and 25% compared with the fourth quarter of 2003). The resulting adverse impact on the group’sdebt is evaluated to be approximately 70 million euros. It also affects the operating profits of the building business cables activity, for which ittakes longer to pass on the rising costs of raw materials in the sales prices. However, active management of pricing, combined with ametals hedging policy limit the negative impact on margins.

(*) Unaudited information.

(**) To neutralize the effect of variations in the purchase price of non-ferrous metals and thus measure its effective sales evolution, Nexans also calculates its salesusing a constant price for copper and aluminum.

Consolidated sales by business sector (at constant metal prices and exchange rates)

in millions of euros 1st quarter 1st quarter2003 2004

Energy (main activities)

Infrastructure 184 200Building 170 178Industry 106 128

Telecom

Infrastructure 49 45Private local area networks (LAN) 45 48Industry 32 33

Electrical wires

Wirerod 126 127Bare Wires 29 28Winding wires 90 86

76

2004 outlook and other information INFORMATION ON CONSOLIDATED NET SALES OF THE 2004 FIRST QUARTER*


77

CONSOLIDATED INCOME STATEMENT FOR THE 2003, 2002 AND 2001 PERIODS PRESENTED UNDER THE FRENCH INTERMEDIATE BALANCE FORMAT


Net sales 4,046 4,302 4,777

Gross current earnings 195 209 293

Net amortization charges and increase in reserves (104) (153) (154)

Income from operations 91 56 139

Financial income (31) (31) (33)

Current income before taxes 60 25 106

Restructuring costs (41) (90) (36)Other revenues (expenses) (2) 23 3

Non-recurring income (43) (67) (33)

Income tax 8 10 (28)Amortization of goodwill (14) (2) (2)Minority interests (10) (5) (13)

Net income (Group share) 1 (40) 30

Consolidated sales by geographic area

At current metal prices At constant metal prices At constant metal pricesand exchange rates and current exchange rate and exchange rates

1st quarter 1st quarter 1st quarter 1st quarter 1st quarter 1st quarterin millions of euros 2003 2004 2003 2004 2003 2004

Europe 752 786 737 710 722 710North America 174 219 160 161 148 161Asia 30 52 27 47 23 47Rest of the world 22 34 21 33 21 33

TOTAL 978 1,091 945 951 914 951

Outlook and objectives for 2004

In 2004, Nexans aims at a 3% increase in sales (at constant exchange rates). It expects an increased operating margin, and generationof cash will remain an important objective.Restructuring costs should be brought to a level of 25 to 30 million euros, and 80 to 90 million euros should be dedicated to capitalexpenditure.The Group continues to be interested in targeted acquisitions in order to strengthen its activities’ portfolio and it focuses on a few growthvectors to build long-term profitability. Nexans aims at consolidating and increasing its attractiveness to its customers, shareholders andits employees.

78

IMPACT OF THE CHANGES IN ACCOUNTING METHODS (CRC 2002-10)

Impact on the 2003 income statement as presented in the consolidated statements, by geographic area

2003

Proforma before Impact of PublishedCRC 2002-10 the changes

Net sales 4,046 — 4,046

Income from operations (1) 58 33 91

Europe 32 22 54North America 15 7 22Asia 10 2 12Rest of the world 1 2 3

Income before taxes (15) 33 18

Income tax 9 (1) 8

Net income (Group share) (31) 32 1

(1) Impact of the amortization charges on tangible fixed assets.

Impact on shareholders’ equity as at January 1st, 2003 and on income from operations, by business sector

Impact on shareholders’ equity Impact on 2003 Incomeas at January 1st, 2003 from operations

Component Depreciationapproach (Impairment)

Electrical wires 64 (92) 13Energy 137 (108) 13Telecom 53 (37) 6Distribution & Other 3 (1) 1

TOTAL 257 (238) 33


79

Condensed parent Company financial statements

Condensed income statement 80

Condensed balance sheet 81

Information relating to subsidiaries and associates 82

Explanatory notes (extract from notes to the parent Company financial statements) 84

Auditor’s report on the parent Company financial statements 85

Condensed income statement

80


in thousands of euros at December 31 2003 2002 2001Operating revenues 9,140 5,046 6,756Operating expenses (15,779) (12,792) (11,165)

Operating income (6,639) (7,746) (4,409)

Revenues from investments in subsidiaries and associates 13,414 38,588 63,089Other financial revenues 111,694 90,792 78,732Financial expenses (110,582) (89,331) (77,014)

Financial income 14,526 40,049 64,807

Non-recurring income – 15 –

Income tax (117) – (293)

Net income 7,770 32,318 60,105

81

Condensed balance sheetin thousands of euros 2003 2002 2001

ASSETS

Financial assets 1,180,875 1,132,446 1,167,539Accounts receivable and other current assets 10,936 9,733 7,709Cash 209,164 281,449 399,835

TOTAL ASSETS 1,400,975 1,423,628 1,575,083

LIABILITIES AND EQUITY

Capital stock 23,129 23,121 25,000Additional paid-in capital 1,099,074 1,070,813 1,051,807Net income 7,770 32,318 60,105Reserves for liabilities and charges – – –Financial debt 254,939 284,132 428,164Payables and other current liabilities 16,063 13,244 10,007

TOTAL LIABILITIES AND EQUITY 1,400,975 1,423,628 1,575,083

Information relating to subsidiaries and associates

82

Capital Shareholders’ equity Percentage of Book value of stock other than capital stock, ownership (%) securities held

at December 31, 2003including net income

in thousands of euros Gross value Net value

A - Detailed information relating to subsidiaries and associates with book value in excess of 1% of Nexans’ capital stock

1 - Subsidiaries (more than 50% of capital stock held by Nexans)

France

Nexans France 160,000 (50,406) 99.99 237,400 237,400Nexans Participations 233,975 667,483 99.99 848,000 848,000

Foreign subsidiaries None

2 - Direct associates (10% to 50% of capital stock held by Nexans)

France None

Foreign associates None

B - Information relating to other subsidiaries and direct associates

1 - French subsidiaries None

2 - French associates None

3 - Foreign associates None


83

Outstanding Guarantees Net sales for Net income (loss) Dividends received loans and given by last financial year for last financial during the financial advances Nexans year year

226 – 843,850 (64,636) –67,030 – – (91,687) 13,414

84

PRINCIPLES AND SUMMARY OF ACCOUNTING POLICIES

The Balance Sheet and the Income Statement as of December 31,2003 have been prepared in accordance with the principlesand valuation methods applicable in France and in compliancewith the assumption of going concern, consistency of accountingpolicies from one period to the next, cut-off of the differentaccounting periods.

The Company has implemented regulation CRC 00-06(regulation on liabilities) with effect from January 1st, 2002.

As a general rule, accounting entries are booked in compliancewith the historical cost method.

Investments in shares in subsidiaries and affiliates,and other financial fixed assets investments

The gross value of investments is stated at their acquisition cost(excluding incidental expenses) or at their assignment value.A provision is booked whenever the carrying value at thebalance sheet date is lower than the historical cost.

The carrying value is determined on the basis of the value in use,resulting from a multi-criteria valuation which may take intoaccount the revalued net assets as well as yield.

Treasury stocks bought as part of a share buyback program, asauthorized by the General Shareholders’ Meeting, are reportedin “Other financial assets”, as far as there is no intention of usespecified by the Board of Directors.

TAX INFORMATION

At the end of 2001, Nexans signed a tax-pooling agreementwith its French subsidiaries in which it owns directly or indirectlymore than 95%. This agreement, which became effective onJanuary 1st, 2002, was signed pursuant to the option made byNexans to adopt a French group tax-pooling regime in accor-dance with article 223 A and subsequent articles of the French“Code Général des Impôts”. The option is renewable every fiveyears, the current period expiring December 31, 2006. Forevery taxation period, the contribution of each subsidiary to thecorporate income tax payable on the consolidated net incomeof the tax-pooling group, corresponds to the corporate incometax and other contributions which each subsidiary would havebeen liable to pay if it had been taxed separately.As part of the tax-pooling agreement, in respect of whichNexans SA is liable to pay the global tax charge, a tax losscarry-forward was generated for the 2003 financial year, whichrepresents an unrecognized tax asset of 75.4 million euros.

Explanatory notes(extract from notes to the parent Company financial statements)


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Statutory Auditors’ Reporton the parent Company financial statements for the year ended December 31, 2003


In compliance with the assignment entrusted to us by your shareholders’ meetings, we hereby report to you, for the year endedDecember 31, 2003, on:• the audit of the accompanying financial statements of Nexans, S.A.;• the specific verifications and information required by law.These financial statements have been drawn up by the Board of Directors. Our role is to express an opinion on these financial statementsbased on our audit.

Opinion on the financial statements

We conducted our audit in accordance with professional standards applicable in France. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating theoverall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, thefinancial statements give a true and fair view of the Company’s financial position and its assets and liabilities, as of December 31,2003, and of the results of its operations for the year then ended in accordance with the accounting rules and principles applicablein France.

Justification of our assessments

In accordance with the requirements of article L.225-235 of the French Commercial Code (Code de commerce) relating to thejustification of our assessments, which came into effect for the first time this year, we bring to your attention the following matters:

Financial estimatesYour company records an impairment of the investments it holds when their net book value, which is estimated on the basis of theirvalue in use, is lower than their gross value, as described in note 2.1 to the financial statements. Our works consisted in assessing thedata and hypotheses on which those estimates were made, in reviewing the calculation made by the company, in verifying theconsistency of those estimates with those retained in the consolidated financial statements in accordance with the first application, fromJanuary 1st, 2003 of the “Règlement CRC N° 2002-10”, and in reviewing the acceptance process by management of those estimates.In the field of our opinion, we verified the reasonable assessment of those estimates. Our assessments on these matters were made inthe context of the performance of our audit of the financial statements taken as a whole and therefore contributed to the developmentof the unqualified audit opinion expressed in the first part of this report.

Specific verifications and information

We have also performed the specific verifications required by law in accordance with professional standards applicable in France.We have no matters to report regarding the fair presentation and the conformity with the financial statements of the information givenin the Management Report of the Board of Directors, and in the documents addressed to the shareholders with respect to the financialposition and the financial statements.In accordance with the law, we verified that the Management Report contains the appropriate disclosures as to the identity of theshareholders holding interests and voting rights.




Benoît Lebrun

This is a free translation into English of the Statutory Auditors’ report issued in the French language and is provided solely for theconvenience of English speaking readers. The Statutory Auditors’ report includes information specifically required by French law in allaudit reports, whether qualified or not, and this is presented below the opinion on the financial statements. This information includesan explanatory paragraph discussing the Auditors’ assessments of certain significant accounting and auditing matters. Theseassessments were considered for the purpose of issuing an audit opinion on the financial statements taken as a whole and not toprovide separate assurance on individual account captions or on information taken outside of the financial statements. This report, together with the Statutory Auditors’ report addressing financial and accounting information in the President’s report oninternal control, should be read in conjunction with, and construed in accordance with, French law and professional auditing standardsapplicable in France.

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Risk identification and management

In addition to regular business reviews of the divisions and sub-sidiaries by the head office and monthly reporting by divisionmanagers, Nexans has implemented certain proceduresdesigned to identify and manage risks. The role of the Internal Audit Department is to identify, analyzeand evaluate risks and to check that internal procedures arebeing implemented and are reliable. Accordingly, the Internal Audit Department undertakes audits toverify that the measures that have been implemented are effec-tive and adapted to potential risks. A global risk review was launched in 2001, which was con-ducted jointly by the Internal Audit Department and a firm of con-sultants. The review was aimed at identifying risks and areas ofrisk and evaluating their impact on the financial position of theNexans group and its income. Risks were identified through inter-views with Executive Committee members, the managers of corpo-rate functions, product line managers and country managers. Risks were evaluated according to the frequency with which theyare likely to occur and the gravity of the consequences whichmay result from the occurrence of the risk. The level of risk wasevaluated and graded before and after application of existinginternal procedures. A Disclosure Committee was set up in October 2003. Its membersare the Chief Financial Officer, the two managers of the Manage-ment Control and Consolidation Department, the General Counseland the manager of corporate/stock market law, the Internal AuditDirector, the Risk Manager and two risk area controllers. The Committee’s purpose is to identify information that the Com-pany must disclose to shareholders and the market. Its remit covers: • identification and evaluation of any significant non-financial

information,• producing a questionnaire to be addressed to subsidiaries to

identify the risks; evaluating the methods in place for passinginformation up to head office,

• compiling significant information,• identifying and defining matters that warrant the intervention of

the Internal Audit team to assess and if necessary improve the

reliability of the procedures in place and the information provided.

The highest risk levels identified amongst those risks identified asbeing specific to the activity of Nexans or the Nexans Group,were the following:

Risks relating to Nexans’ business

Risks linked to the seasonal nature of Nexans’ business Nexans’ activities are subject to seasonal fluctuations. Conse-quently, income generated during the first six months of the yearis generally lower than in the second half of the year. Historically,this difference can largely be explained by the following factors: • A large number of Nexans’ products are linked to the con-

struction of outdoor infrastructure. Orders relating to theseproducts therefore tend to be placed when climatic conditionsare more favorable and in particular in the second and thirdquarters of the year.

• Customers generally place major orders for delivery during thefourth quarter, at the end of the annual budget period, for pub-lic projects in particular.

• Nexans’ working capital requirements increase significantlyduring the first quarter of each year due to the increase instocks needed to carry out orders already placed or expectedduring the second and third quarters. This increase in workingcapital requirements during the first and second quarters gen-erally leads to an increase in debt levels and thus financialexpenses. During the third and fourth quarters, a decrease inNexans’ working capital requirements and debt levels is gen-erally observed.

Factors relating to risks, non-recurring events, disputes

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Risks relating to commercial operations

Contract conditions, risks of defects The nature of Nexans’ business exposes it to claims for productliability and claims for damage to property or third partiesallegedly caused by its products. Nexans gives performanceguarantees for its products which may be for a considerableperiod of time. Furthermore, the guarantees given to Nexans pur-suant to contracts for supply of the materials and componentsused in its products may be less extensive than the guaranteeNexans gives to its customers, for example, in the optical fibersector. Six to seven percent of Nexans’ sales is derived from contractsfor the supply and installation of cables as part of turnkey infra-structure projects. These contracts relate primarily to land-basedand submarine HV cables. Individual contracts often have a highvalue and contain penalty and liability clauses in the eventNexans is unable to comply with the delivery schedule or withquality requirements (for example, technical defects requiringintervention after installation due to product non-conformity result-ing from production anomalies). The amount of penaltiesinvolved, the size of claims for damages or the financial impacton the project due to delays, if these clauses are invoked, couldhave a significant negative impact on Nexans’ financial situationand income. The Group has put in place a stringent product quality controlsystem to limit these risks. A large number of Nexans’ units areISO 9001 or 9002 certified as appropriate. Overall quality isa driving force behind the continuous improvement plan that ispart of the Corporate Program + initiative. Methodologies usedin Program + are strictly aligned on ISO 9000-2000 certifica-tion criteria. Every month, units monitor a set of indicators thatevaluate the progress being made in terms of quality and cus-tomer satisfaction. Customer satisfaction surveys are also beingintroduced. In addition, large contracts are subjected to a sys-tematic risk evaluation procedure. Efforts are also being made to educate sales teams about risksinherent in sales contracts and in the negotiation of contract con-ditions, with the involvement of the Group’s legal department. Furthermore, Nexans currently holds liability insurance that it con-siders to be in line with sector standards, but cannot guaranteesuch insurance offers sufficient coverage for claims madeagainst the Group. Nexans’ activities are spread across a variety of core business-es (energy, telecommunications, electrical wires), and it has cus-tomers of many different types (distributors, industrial operators, etc.)

in a wide range of countries. This diversity acts as a safeguardfor the Group as a whole. No customer accounts for more than3% of consolidated sales, the Group’s largest customers beingSonepar (distribution), E.ON in Germany and Electrabel in Belgium(both energy operators). Nonetheless, our current low operating income linked to partic-ularly difficult market conditions makes Nexans more vulnerableto the potential loss of a customer, particularly in niche marketssuch as shipbuilding and aerospace which are more concen-trated. Historically, the level of bad debt has been stable; the risk is ana-lyzed on a customer-by-customer basis and a statistical analysisof accounts receivable is made for small amounts and updatedquarterly. The sales contracts of certain Nexans Group subsidiaries, bothin France and abroad, are covered by a short-term credit riskinsurance policy with Coface.

Risks linked to supplies Copper, aluminum and plastic are the main raw materials usedby Nexans. Therefore price variations and the availability ofproducts have a direct effect on the Group’s business. Nexanshas so far always been able to obtain adequate supplies at rea-sonable prices. A global copper shortage or interruptions tosupplies could have an adverse effect notwithstanding thatNexans, to reduce the risk, has broadened its sources of supplyas far as possible. The situation is in some ways similar for PVC.The inability to source raw materials at reasonable prices couldtherefore adversely affect Nexans’ business and income. The Group’s policy is always to have at least two suppliers forany raw material or component used in manufacturing. Thereare nonetheless a few cases of sole supply, particularly in thematerials used to make high voltage cables.

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Risks relating to the competitive environment ofNexans The cable industry remains relatively fragmented both regionallyand internationally, and the cable, wire and cabling system mar-kets are highly competitive. The number and size of Nexans’competitors vary depending on the markets, the geographicalarea and the product line. Consequently, the Group faces sev-eral competitors for each product line. Furthermore, for certainproduct lines and in certain regional markets, Nexans’ maincompetitors may have a stronger position or have access togreater know-how or resources than Nexans. In recent years, cablemakers have had to contend with a globalcrisis in the telecommunications markets and the steady increasein trade of certain types of cable with low added value betweencountries in a particular region. A number of market playershave launched restructuring programs to reduce excess produc-tion capacity. Apart from these corrective measures, however,there have been no radical changes to the structure of the indus-try and it remains relatively fragmented both regionally andglobally. As a certain number of products (cables, wires or accessories)must comply with industry specifications and are interchange-able with the products of its main competitors, both nationallyand internationally, Nexans faces stiff competition on most mar-kets in terms of delivery time, service, and increasingly stringentspecifications for its products. The principal competitive factors in the cable industry are thequality of customer relations, product availability, geographicalcoverage and the range of products offered, the specific char-acteristics of each product, as well as the ability to regularly gen-erate cost reductions (competitive prices). Against this background, Nexans must constantly invest andimprove its performance in order to retain any competitiveadvantages it may have in certain markets. Furthermore, Nexanscontinues its efforts in R&D, logistics and marketing in order todifferentiate itself from the competition. In view of the context, Nexans also implemented a significant130 million-euro restructuring plan in 2002 and 2003, andplans to spend some 30 million euros a year on restructuring inthe future.

Risk relating to interest rate, exchange rateand metal price fluctuations

Access to funding and the management of risks relating toexchange and interest rates are managed centrally by a depart-ment at head office (the Central Treasury) for all subsidiaries incountries where this is allowed by the local legislation. A cen-tralized cash management system which pools subsidiaries’ cashmaximizes cash use as subsidiaries’ credit balances in the maincurrencies are transferred to the parent Company’s central cashpooling account. The key subsidiaries that do not have access to the centralizedcash management system are located in Turkey, Morocco, China,South Korea and Brazil. These subsidiaries, which have theirown banking relations, are nevertheless required to comply withthe Group’s risk management procedures relating to exchangerates, interest rates and the purchase of raw materials. The Financing Department, which is part of the Financial andAdministrative Department, manages access to funds, as well asexchange rate and interest rate risk. The Group’s policy for man-aging risk associated with non-ferrous metals is managed by a specialized department which reports to the Chief FinancialOfficer. This policy is applied by those subsidiaries that purchaseraw materials.

Access to funds In 2003, access to funds was mainly guaranteed by drawings ona syndicated credit line and by the issue of commercial paper onthe French market. The syndicated loan covers an amount of 475 mil-lion euros in two tranches: one short-term tranche for 190 millioneuros and one five-year tranche for 285 million euros. In addition,Nexans has another bilateral credit line for 30 million euros. Consequently, the Group has access to 505 million euros in fundingvia these confirmed credit lines.

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Both its bilateral, short-term and medium-term credit contractsand the syndicated credit lines are subject to several covenants(negative pledge, pari passu, and cross default), and to finan-cial covenants (consolidated net debt/EBITDA < 2.5 consoli-dated net debt/total shareholders’ equity including minority inter-ests < 0.7). As of December 31, 2003 as well as at the dateof drafting of this report, these ratios are complied with. If these covenants were not complied with, the undrawn lineswould become unavailable and any loan authorizations givenwould be revoked, either immediately or after 30 days depend-ing on the nature of the covenant. Outstanding debt on commercial paper was 65 million euros atDecember 31, 2003. The balance of gross debt amounted to 84 million euros includ-ing 7 million euros of medium-term debt. On February 4, 2003, Standard and Poors downgraded therating for Nexans’ short-term and long-term issues from BBB/A2to BBB-/A3 outlook stable. At the same level of indebtedness,

the downgrading will increase the Group’s financial expenses.The commitment fees and the margin applicable to the 475 mil-lion-euro syndicated loan vary depending on the Group’s long-term rating. The lower rating has increased average commitmentfees by 7 base points and average margins by 15 base points.Nexans has remained on the commercial paper market and itsoutstanding debt has remained steady at between 65 and 162 mil-lion euros. Standard and Poors gave Nexans an “outlook negative” ratingon July 30, 2003 and maintained this rating after the Group pub-lished its provisional results on February 2, 2004. This led to aslight increase in the cost of our credit lines. On December 18,2003, Nexans put in place a 120 million-euro receivablesassignment program involving four of the Group’s French sub-sidiaries (Nexans France, Nexans Wires, Société de CouléeContinue de Cuivre and Société Lensoise du Cuivre). The aim ofthis program is to provide more diversified access to sources offunding at a better price than via the syndicated loan.

At February 28, 2004, in millions of euros

Characteristics of Amount drawn Fixed or Amount of Maturity of Interestthe securities issued as of variable rate facilities facilities hedgingor of the loans February 28, 2004 availabletaken out

Bank overdrafts 4 Variable rate 90 Day to day noCommercial paper 190 Variable rate 500 1 month to 1 year noShort term borrowings 0 Variable rate 0 1 month to 1 year noConfirmed limits 0 Variable rate 220 1 year noConfirmed limits 0 Variable rate 310 5 years noMedium term loans 7 Fixed rate 7 3 to 5 years no

Risk management

Management of interest rate risk Nexans monitors interest rates closely so that it can put in placeappropriate hedging instruments if necessary. Debts falling due within one year account for more than 96% ofthe Group’s total debt; they are at variable interest rates andbased on the key monetary indexes (EONIA, EURIBOR andLIBOR). At December 31, 2003, Nexans did not have any inter-est-rate hedging instruments.

At December 31, 2003, in millions of euros

Day to day 1 to Beyondto 1 year 5 years

Financial liabilities 119 7 0Financial assets 104 0 0Net position before hedging 22 0 0Hedging 0 0 0Net position after hedging 22 7 0

The pricing of all the short-term debt of the Group is based onmonetary short term indexes (EURIBOR or LIBOR).

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The interest on medium and long term debt is fixed. As of January 30, 2004, the net debt position of Nexans thatwas to be renewed within a year amounted to 203 million euros. On January 30, there were 336 days remaining until the end ofthe Company’s financial year. If interest were to vary by 1% andthe debt level remain the same until the end of the year, the dif-ference in interest relating to the said debt would amount to1,894,666 euros.

Exchange rate risk Nexans hedges the exchange rate risk on its anticipated con-tractual business and on certain budgeted items. The resultingforeign exchange operations can keep certain positions open.Where this is the case, these positions are limited in terms of theamounts and periods involved. At the end of the financial year,Nexans had no significant unhedged exchange rate positions. The exchange rate risk is calculated at the level of the Group’soperational subsidiaries. The treasurers of those subsidiaries thatare part of the centralized cost management system hedge risksvia forward currency transactions with Central Treasury and vialocal banks for other subsidiaries. The Central Treasury issues a monthly report relating to all sub-sidiaries with foreign exchange risks, indicating their open netposition in each currency. The management of the Groupreceives monthly reports on the Group’s position from the Cen-tral Treasury, which collates the information received from thesubsidiaries.

Foreign exchange risk on Nexans Central Treasury

in thousands of euros USD NOK Other

Assets 106,434 109,831 9,403Liabilities 140,156 7,572 94,351Net position before hedging -33,722 102,259 -84,948Hedges 33,722 -102,259 84,948Net position after hedging 0 0 0

It is Group policy to systematically hedge the foreign exchangerisk arising from firm commercial flows (purchases and sales) andfinancial flows. Identification and analysis of the risk are under-taken at subsidiary level and controlled by Central Treasurythrough a monthly reporting of all subsidiaries that incur this typeof risk. The above chart shows that all the risks identified by sub-sidiaries are hedged through forward foreign exchange con-tracts thereby eliminating the foreign exchange risk on firm flows.However, the foreign exchange risk arising from bids is not

hedged, and this could generate a cost for the Group if theexchange rate changes between the time the bid is submittedand the time it is accepted by the customer.

Risks linked to metal prices Although copper and aluminum prices are very volatile, Nexansconsiders that its gross operating margin is not significantly exposedto these prices, due to the dual effect of passing on variations in non-ferrous metal prices to customers and the provision of forward coveron the London Metal Exchange (LME). Nexans’ margins arenonetheless exposed to variations in the price of copper in someproduct lines, such as copper cables for cabling systems and prod-ucts in the General Market sector. In these markets, any increasesare generally passed on to the customer in the selling price, but witha time lag which puts a certain amount of pressure on the margins.The keen competition in these markets can also affect the timescalewithin which the increase is passed on. It should also be noted thatas with foreign exchange risk, the risk of fluctuation in the price ofcopper and other metals is not hedged in the case of bids. Fluctuations in the price of copper and aluminum neverthelesshave a significant impact in terms of financing requirements, asan increase in the price of copper leads to an increase in work-ing capital requirements. Prices have varied substantially over thepast five years, and these changes have had a significant impacton the Group’s net debt level and financial expenses. Finally,despite its stringent selection criteria for choosing the partners itworks with on the LME, and the prudential rules to which partnersare subject, Nexans may be exposed to counterparty risk in thecontext of hedging contracts concluded on the LME.

Analysis of sensitivity for 2004

Impact of an increase of 50 base points in interest rates on theGroup’s financial expenses for the year. Hypothetical rate of refinancing (3 month variable): Euro: 3.60% US dollar: 2.90% Hypothetical average debt: 150 million euros 50 million US dollarsImpact of a difference of 50 basis points on the Group’s financialexpenses: 750,000 euros 250,000 US dollars

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Impact of an increase of 100 US dollars in the price of copperon the Group’s financial expenses on an annual basis. Nexans’ hedging policy limits the impact of outstanding cus-tomer accounts receivable. Hypotheses: Average price of copper in 2002: 1,784 euros per metric ton Copper content of customer accounts receivable on the Group’sbalance sheet: 150,000 metric tons Cost of financing in euros: 3.5% per year Impact on financial expenses: 525,000 euros

Risks linked to environmental regulations Nexans is subject to numerous laws and regulations governingthe environment in each of the countries where it operates, inparticular in the European Union, the United States and Canada.These laws and regulations impose increasingly strict standardson the protection of the environment, in particular in relation toatmospheric pollution; disposal of wastewater; the emission, useand processing of toxic materials or waste; methods of wastedisposal; as well as site clean-up and treatment. These standardsexpose Nexans to the possibility of claims being made againstit, and to significant costs (e.g. claims made on current or pastactivities or linked to disposed assets). The Group has at its own initiative set up an internal Environ-mental Management System, that has now been operational forseveral years. Pursuant to this system, an environmental audit of the Group’sindustrial facilities is carried out, ideally leading to the EHP labelbeing awarded, denoting compliance with the highest environ-mental standards. In 2003, the Group put in place an environ-mental audit program carried out by a specialized company(Sageris). Fifteen sites were audited in 2003 and 25 will beaudited in 2004. Of the 15 sites audited in 2003, four were awarded the EHPlabel - Chauny SCCC and Mehun-sur-Yèvre in France, Neun-burg and Floss in Germany - bringing the total number of siteshaving attained the label to seven. The sites that did not reach the level required were given recommendations on how to achieve it and took the necessarycorrective action. In parallel, several sites (Mehun-sur-Yèvre and RIPS Calais inFrance, Charleroi and Opglabbeek in Belgium) were awardedISO 14001 certification in 2003. Nexans is cleaning up certain sites it currently operates as wellas sites formerly operated by Nexans that have been sold.

In France, the government department responsible for the environ-ment has published a national directory of potentially pollutedsites and launched a program to examine and clean up thesesites. Five Nexans sites (Jeumont, Lens, Draveil, Marseille andChauny) are, to varying degrees, concerned by this programand are currently being investigated or cleaned up. Also in connection with this program, the Group has taken stepsto clean up its Marseille site after pollution by cadmium resultingfrom railway catenary manufacture. In August 2003, pollutioncaused by a leak from a storage tank was discovered at the Simcoe plant in Canada. This could possibly lead to a fine ofan amount not significant to the consolidated financial state-ments. In the United States, Nexans is subject to several federaland state environmental laws, which make certain categories ofpersons as defined by law liable for the full amount of cleanupcosts relating to environmental pollution, notwithstanding that nofault may have been committed or that the relevant operationscomply with applicable regulations. Nexans has often been cited,together with others, as potentially being liable for pollution pur-suant to the 1980 Comprehensive Environmental Response,Compensation and Liability Act. Nexans has been joined to theseproceedings although the pollution referred to is associated withwaste dumps and did not arise on its manufacturing or produc-tion sites. The potential liability of Nexans in relation to these proceedingshas not adversely affected its financial position or income in thepast. However, it cannot be guaranteed that there will be nonegative effects in the future. In general, Nexans faces several claims related to environmen-tal issues in the normal course of business. Based on the amountsclaimed, the status of proceedings and its evaluation of the risksinvolved, the Group considers that the risk that these claims willsignificantly affect its financial position or income is small.

The main claims relate to the following:• A dispute in Duisburg, Germany, brought by the purchasers of a

site and a city council relating to soil and ground water conta-mination. The soil contamination is long-standing and Nexans’full liability has not been established. Nevertheless, Nexanshas recorded provisions to cover any responsibility it mayhave for pollution costs.

• Other claims have been brought by authorities following one-off incidents. For example, in 2002 Nexans was involved ina soil contamination clean-up operation authorized by thelocal authorities in Sweden, following an oil leak. Clean-upcosts are estimated at 0.2 million euros,

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• There are also certain asset disposal cases which could involveenvironmental costs, for example, the cost of cleaning up theBonnefamille site (RIPS) for which a provision of 0.134 millioneuros has been made.

Nexans applies the following rules when recognizing environ-mental charges and commitments. A charge against income isrecognized if the information and documents available indicatethat such a charge is probable, significant and quantifiable. Ifthe foregoing conditions are not satisfied but a charge againstincome capable of having a significant financial impact remainspossible, this possibility will be recorded as a note in the finan-cial statements. If a charge seems highly unlikely, no provisions will be madeand no reference will be made thereto. At December 31, 2003, the total amount of provisions record-ed for environmental risks was 6 million euros. These provisionsinclude the above cases and the cost of current or plannedclean-up operations of soil after the use of products such as sol-vents or oil. Nexans estimates clean-up costs relating to environment claimson a case-by-case basis and as accurately as possible, basedon the available information. For the sites that have been inves-tigated by the French environmental department, in the absenceof reliable estimates, Nexans considers that the proportion of thecleanup costs for which provision has not been made should notexceed 3 million euros over 3 years. Nexans cannot guarantee that future events, in particularchanges in legislation, the passing of new laws or the develop-ment or discovery of new facts or conditions, will not lead toextra costs capable of having an adverse effect on its business,financial position or income.

Nexans’ position on asbestos

The manufacture of Nexans products does not involve any con-tact with asbestos. In the past (particularly to comply with French army specifications),asbestos was used to a limited extent to improve the insulation ofcertain kinds of cables to be used for military purposes. It was alsoused in the manufacture of ovens at two sites in France, but thisactivity was discontinued several decades ago. The ovens them-selves are still used at a few plants for the production of windingwires. The risk of being exposed to asbestos currently only arisesin connection with the maintenance of these few ovens.

Today, in France, to the Group’s knowledge, only one first hear-ing judgment has been awarded against a French subsidiary ofthe Group, based on current case law. This judgment relates toan activity that was discontinued more than 20 years beforeNexans inherited it as part of the reorganization of the Alcatelgroup. In this case, there are 18 people on professional sickleave with an invalidity coefficient equal to or less than 10% andapproximately 250 employees under medical surveillance. Furthermore, since 2002 there has been one claim (still ongoing)relating to indirect exposure to asbestos not linked to manufac-turing, and one claim made by seven employees of TLM for pro-fessional sick leave related to asbestos. Outside of France, thereare 100 people in Italy who have not been in direct contact withasbestos who have requested early retirement, and in Norway,declarations have been made to the Norwegian health insur-ance in respect of 78 people over the last twenty years. No other case to date has been brought to the attention of themanagement of the Nexans Group. In view of the informationavailable and the risk analysis that has been made, Nexans hasmade a provision in its December 31, 2003 accounts, relatingmainly to the removal of asbestos in the ovens, in accordancewith applicable accounting procedures. Nevertheless, the man-agement does not consider that this risk could have a significantimpact on its financial position or income.

Insurance against risks

Nexans has put in place a Group insurance plan. The mainkinds of global coverage effective as of January 1, 2004 arethe following:• direct damages and operating losses,• general civil operating liability and product liability,• transportation,• contractor’s all risks insurance for land-based projects,• aeronautic and space civil liability,• short-term credit risk: to guarantee certain international and

domestic customers’ accounts receivable,• civil liability of Board Members.

The limits on these policies are based on a historical analysis ofthe Company and on the advice of its brokers, and generallyexceed the maximum amount of insured claims experienced bythe Group in the past.Nexans has no captive insurance or reinsurance subsidiary. The

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Nexans Group relies on the expertise of a global network ofinsurance brokers to assist it in the control and management ofthe risks to which it is exposed in the countries where it operates. In addition, its main industrial sites are visited annually by anindependent specialist organization which makes recommenda-tions on prevention and safety.

Applicable law and regulations

To the knowledge of the Company, there are no laws or regu-lations specific to the cable industry as compared to industry ingeneral. The different sites of course comply with any nationallaws and regulations in force, relating in particular to air, waterand soil emissions, which vary according to the country wherethe sites are located.

Disputes

There are a certain number of disputes arising from the normalcourse of business that the Management feels will not result in a significant cost for the Group, given its provisioning policy, theavailability of insurance cover, the probability of judgment beingentered against Nexans and the amount of the claims. There aredisputes which should be specifically mentioned for which no provisions have been made, either because it has beendecided this is not necessary or because the information avail-able does not allow any evaluation of the possibility of claimsactually being made or the amounts involved, to be made.However, the possibility of these disputes one day having a sig-nificant impact on the financial statements cannot be ruled out.

Corvettes - South AfricaNexans supplied cables for corvettes for the South African navy.A South African manufacturer was subcontracted to supply partof the cables. After installation of the cables on the first two corvettes, it wasfound that the cables supplied by the subcontractor were non-compliant. All the cables already installed were removed andreplaced. Nexans supplied the replacement cables, but the allo-cation of loss, in particular the removal and re-installation costsclaimed by the customer (amounting to approximately 18 millioneuros) amongst Nexans, its customer, the insurers and the sub-contractor, has not yet been determined. In addition to the man-

ufacturing cost of the replacement cables, Nexans has alreadyrecorded expenses related to this matter amounting to 5 millioneuros.

Competition AuthoritiesThe proceedings initiated in Norway several years ago againstNexans Norway relating to an alleged price-fixing agreementbetween distribution companies, has been resolved without sig-nificant impact on Nexans’ income.In France, Nexans France received notification of a complaintfrom the Conseil de la Concurrence (the French competitionauthority) relating to an alleged agreement between NexansFrance and a certification company aimed at eliminating animporter of 120-ohm cables from the French market. The factsrelate to 1994 and 1995. A preliminary decision was made bythe Conseil de la Concurrence on September 9, 1998, in whichthe importer’s request for an interlocutory judgment was rejected.Also in France, the Direction Nationale des Enquêtes (nationalinvestigation agency) of the Direction Générale de la Concur-rence, de la Consommation et de la Répression des Fraudes(department of competition, consumer affairs and repression offraud) has started an investigation into contracts awarded byEDF for the supply of high-voltage cables. In Germany, the Bun-deskartellamt (German competition authority) has started aninvestigation into practices in the cable industry.The amounts involved in the first of these matters (120 ohmscable market) are apparently not significant and the claim willbe vigourously defended by Nexans. No official notification ofa complaint has been received for the two other matters and noprovision has been recorded by the Group. However, in view ofthe very limited information available relating to these matters,Nexans is unable to predict how they may evolve or what theirimpact may be on Nexans’ income or operations.Although it is not yet possible to ascertain the impact of theseclaims, Nexans currently does not consider that they will have asignificant impact on its consolidated financial position. However,it is unable to guarantee this.The Group is not aware of any other extraordinary facts orclaims that could significantly affect its assets or its financial posi-tion, or the operations or income of Nexans or the Group.

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Main investments

The efforts made in 2003 to reduce capital spending resulted in asubstantial decrease in the Group’s capital investments whichamounted to 69 million euros, representing a reduction of 17 mil-lion euros compared to the previous financial year. In view of thedifficult environment affecting the majority of Nexans’ core busi-nesses, capital expenditure in 2003 was confined to initiativesdesigned to maintain and improve productivity. It was concentratedmainly on the Energy division (40 million euros), the Telecom divi-sion (11 million euros) and the Electrical Wires division (9 millioneuros), mainly as a result of the redeployment of production capacityfollowing the closure of the Mexico plant (Missouri, United States).After two years of high capital investment in 2000 and 2001, theGroup’s objective for the 2002 and 2003 financial years was tokeep capital investment significantly below the level of deprecia-tion, which was 99 million euros in 2003.

Relations with Alcatel

Prior to Nexans being listed on the stock exchange in June 2001,Nexans and its subsidiaries formed part of the Alcatel group. In preparation for the stock market listing, various agreementswere entered into by Alcatel and Nexans to cover a transitionalperiod until the Nexans group became fully independent. Out ofthe agreements previously described in the Offering Circular, thefollowing are still in force:• Alcatel continues to supply Nexans with optical fiber pursuant

to a framework agreement. The agreement no longer bindsNexans to any firm purchase commitments but simply providesfor the purchase of optical fiber in the quantities it requires andat market prices.

• In Brazil, Nexans is the owner of certain industrial equipmentdedicated to copper public network cables, and sub-contractedthe manufacture and marketing of these cables to AlcatelBrazil, under its supervision. Nexans has gradually taken overthe industrial activity formerly managed by Alcatel but stillshares resources and expenses common to both companies.This agreement came into force on December 1, 2000, foran initial 2-year period and is renewable by tacit agreementyearly until 2005, unless terminated by Nexans should itdecide to transfer its business to another site.

• In Germany, Nexans leases Alcatel equipment used in thearmoring of overhead OPGW cables. Nexans considers thatthe business covered by these industrial and commercial agree-

ments is not significant in the context of its overall business.• Intellectual property rights: following the creation of the Nexans

Group, Alcatel granted Nexans a non-exclusive and royalty-free license, with a right to sub-license, pursuant to an agree-ment dated December 1, 2000, to use Alcatel patents relatedto the business activity of Alcatel, but which are also necessaryfor the operation of Nexans’ business. Alcatel also granted toNexans, pursuant to the same agreement, a non-exclusive androyalty-free license, with no right to grant sub-licenses, to useAlcatel patents relating to single mode optical fiber cablesexclusively for products and manufacturing processes alreadyused by Nexans prior to January 1, 2001. Use is also limitedto certain designated sites falling within the scope of Nexans’business but also related to the business of Alcatel (including,inter alia, the single mode optical fiber cable activities).

Nexans has granted similar rights to Alcatel under Nexanspatents. Neither party gives any warranties on the validity orscope of the rights it grants, nor is either party required to defendits patents in the event of any third party infringement. Thisagreement remains in force for the life of the rights covered bythis agreement.In the process of the creation of the Nexans Group, Nexans andsome of its subsidiaries in Germany, Spain and Canada spunoff and sold to Alcatel some of their business and assets fallingwithin the scope of Alcatel’s business. In France and the UnitedStates, it was Alcatel and some of its subsidiaries that spun offsome of their business and assets falling within the scope ofNexans’ business and sold them to Nexans. Alcatel and Nexansthen agreed to indemnify each other against any liabilities of asubsidiary of the other party, arising in relation to an activity thatis no longer part of the business of such subsidiary. Some ofthese obligations have now expired, whilst others will remain inforce until 2006. To the best of the Company’s knowledge, nosale has taken place since this date. Alcatel’s 15% stake inNexans’ share capital does not give Alcatel any control overNexans, in the absence of any specific agreement and in viewof the limitation on voting rights at shareholders’ meetings con-tained in the articles of association of Nexans.

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Shareholders’ meetings

Shareholders’ Meetings are convened and vote in accordancewith the conditions laid down by law. When the required quo-rum is present, the Annual Shareholders’ Meeting represents allthe shareholders. Its decisions are binding on everyone, includ-ing absent or dissenting shareholders. All shareholders may participate in Meetings either personally,via a representative, or by letter subject to providing proof ofidentity and of ownership of its shares either by registration ofthe shares or by filing an immobilization certificate for bearershares at the location stated in the convocation five days beforethe date of the Meeting. This 5-day period may be reduced bydecision of the Board of Directors. All shareholders may also, if the Board of Directors so decideswhen the Meeting is convened, vote at the Annual Shareholders’Meeting using any remote transmission methods (Internet) inaccordance with the conditions and methods provided for bylaw.

Form and registration of shares,identification of shareholders and statutorythresholds

Shares are registered until they are fully paid up. Fully paid upshares may be registered or bearer at the option of the share-holder, subject to the provisions of paragraph 2) below. In addi-tion to the legal obligation of a shareholder to inform theCompany when its holdings exceed certain fractions of theCompany’s share capital, shareholders are subject to the fol-lowing requirements: 1) a shareholder owning a number of shares in the Company

equal to or greater than 2% of the share capital or voting rightsmust notify the Company of the total number of shares held,within a period of fifteen days from the time the threshold iscrossed, by registered letter with return receipt. A further notifi-cation must be sent, in accordance with the conditions hereof,each time that a multiple of 2% is reached.

2) a shareholder owning a number of shares in the Companyequal to or greater than 2% of the share capital or votingrights, must request the registration of its shares no later than

five trading days after the threshold has been crossed. Theobligation to register applies to all shares already held as wellas the shares held which exceed this threshold. A copy of therequest sent by letter or fax to the Company within fifteen daysfrom the time the threshold has been crossed, shall be deemedto be notification of the crossing of the statutory threshold. Thisrequest must be sent, in accordance with the conditions here-of, each time a 2% threshold is crossed up to 50%.

To determine the thresholds fixed in paragraphs 1) and 2)above, any shares held indirectly and any shares considered asbeing shares held pursuant to articles L. 233-7 and following ofthe Commercial Code, shall be taken into account.In each notification or report filed as referred to above, the per-son making the notification or sending the report must certify thatall shares held or indirectly considered as being held accordingto the previous paragraph, have been included, as well as theacquisition date. In the event of non-compliance with paragraphs 1) and 2)above, subject to applicable law, the shareholder shall lose thevoting rights corresponding to any shares which exceed thethresholds and which should have been declared.Any shareholder whose holding in the share capital falls belowone of the thresholds provided for in paragraphs 1) and 2)above, must also notify the Company within a fifteen-day timeperiod and in the same manner as described above. The existence of ownership of shares will be represented by abook entry in the share accounts maintained by Nexans or byan authorized intermediary, in the name of the shareholder. Transfer of shares registered in an account will be made by trans-fer from account to account. All account entries, payments andtransfers shall be made in accordance with applicable law. Unless exempted by the laws and regulations in force, theCompany may require that the signatures on the declarations,transaction or payment orders be certified in accordance withthe law and regulations in force. The Company may, in accordance with legal and regulatoryprovisions in force, require that information be communicated toit by any accredited intermediary or organism, relating to itsshareholders or to holders of securities which confer immediateor future voting rights, including their identity, the number ofshares they hold and an indication, where appropriate, of anyrestrictions on the shares or securities held.

Shareholders’ rights and obligations

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The provisions of the articles of association relating to sharehold-ers’ obligations in the event they cross the thresholds were adopt-ed by the Combined General Shareholders’ Meeting of October17, 2000, and have been in force since June 15, 2001.

Voting rights

Subject to applicable law and these articles of association, everymember of the Meeting shall have a number of votes equal to thenumber of shares that he possesses or represents. The voting right isexercised by the holder of the beneficial right in shares at allOrdinary, Extraordinary or Special General Shareholders’ Meetings.

Double voting rights

A double voting right is attributed to all registered, fully paid upshares which have been registered in the name of the sameholder for at least three years.This provision of the articles of association, approved by theCombined General Shareholders’ Meeting of October 17,2000, came into force on October 17, 2003, as indicated inthe paragraph entitled “Number of voting rights” on page 98.In addition, in the event of an increase in capital by incorpora-tion of retained earnings, profits or other reserves, a double vot-ing right is attributed to the new free registered shares createdand granted to a shareholder, proportional to the number ofshares held by the shareholder which carry a double voting right.The double voting right shall automatically cease in respect of allshares which are converted to bearer or which are transferred.However, the period stated above will not be interrupted and theright will not be lost in the event of transfers from one registered share-holder to another registered shareholder by inheritance, whether onintestacy or by will, the sharing of an estate between spouses or adonation inter vivos to a spouse or relatives eligible to inherit.

Limitations on voting rights

Regardless of the number of shares it possesses directly and/orindirectly, a shareholder may not when voting on resolutions atshareholders’ meetings, exercise more than 8% of the votingrights of all shareholders present or represented at Shareholders’Meetings. If a shareholder also possesses double votes either onits own behalf or as a representative, the stated limit may beexceeded taking into account only the additional voting rights upto the limit of 16% of the votes attached to the shares present orrepresented at Shareholders’ Meetings.

Shares which are held indirectly and those which are assimilat-ed as being shares held pursuant to articles L. 233-7 and sub-sequent articles of the Commercial Code shall be taken intoaccount when determining this limitation. The limitation determined in the above paragraph shall becomeautomatically null and void as soon as an individual or a legalentity holds at least 66.66% of the total number of shares in theCompany, whether individually or together with one or moreindividuals or legal entities, as a result of a takeover bid by wayof purchase or exchange of shares for all the Company’s shares.The Board of Directors shall recognize the invalidation of the lim-itation when the results of the takeover procedure are published.The foregoing restriction does not affect the Chairman of theShareholders’ Meeting when voting pursuant to proxies receivedin accordance with the legal obligations contained in article L.225-106 of the Commercial Code.

Appropriation of income

The difference between revenue and expenses for the financialyear, after provisions, constitutes the profit or loss for the finan-cial year as recorded in the profit and loss account. Five percentof the profit, reduced as the case may be by previous losses,shall be paid to a legal reserve. This payment is no longermandatory once the legal reserve reaches one tenth of the sharecapital. It shall be resumed if, for any reason whatsoever, thereserve falls below this fraction. The appropriation of the dis-tributable profit, which consists of the profit for the financial yearreduced by previous losses and the payment referred to above,increased by any profits carried forward, shall be decided uponby the Annual Shareholders’ Meeting who on the recommenda-tion of the Board of Directors may retain it in whole or in part,allocate it to general or special reserve funds or distribute it tothe shareholders as a dividend. In addition, the Annual Shareholders’ Meeting may decide to dis-tribute amounts taken from the discretionary reserves either to cre-ate or supplement a dividend or as an extraordinary distribution.In this case, the decision shall indicate specifically the reservesfrom which the payments are made. However, dividends will bepaid in priority from the distributable profit for the financial year. The Ordinary General Shareholders’ Meeting may grant eachshareholder the option of choosing between the payment of thedividend or the provision of interim dividend in cash or in sharesfor all or a proportion of the dividend distributed.The Annual Shareholders’ Meeting or the Board of Directors, inthe case of interim dividends, shall determine the date on whichthe dividend is to be paid.

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Company profile

Name and registered office:Nexans16 rue de Monceau - 75008 Paris - France

Legal form and governing laws

A French corporation subject to all the laws governing businesscorporations in France, specifically the provisions of theCommercial Code and decree No.67-236 of March 23, 1967.

Trade Register number

The company is listed in the Paris Trade Register under number393 525 852. Its APE code is 741 J.

Corporate documents

Documents and information on the Company may be reviewed atthe Company’s registered office located at 16 rue de Monceau -75008 Paris - France.

Incorporation and expiration dates

The Company was incorporated on January 5, 1994 under thename of Atalec, for a period of 99 years which will expire onJanuary 7, 2093.

Corporate purpose (summary of article 2of the articles of association)

The Company’s objects in all countries are: design, manufacture,operation and sale of any and all equipment, machines and soft-ware for domestic, industrial, civilian, military or other applica-tions in the field of energy, telecommunications, information tech-nology, electronics, the space industry, nuclear power,metallurgy and in general any and all means of production ormeans of power transmission or communications (cables, batter-ies and other components), as well as all activities relating tooperations and services which are incidental to the aboveobjects. The acquisition of shareholdings in other companies ofany form, in associations, in groups in France or abroad,regardless of their purpose and activity as well as, in general,any and all industrial, commercial, financial, tangible or intan-gible transactions related, either directly or indirectly, in whole orin part, to any objects of the Company indicated in the articlesof association or to any similar or related objects.

Financial year

The financial year begins on January 1 and ends on December 31.

General information on the parent Companyand its share capital

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Share capital

At December 31, 2003, the share capital was 23,128,972 euros,representing 23,128,972 shares with a nominal value of 1 euroeach. This amount is a result of the exercice of stock options during2003, as confirmed by the Board of Directors, which, together withother options exercised in 2004, increased the share capital to23,138,472 euros at January 30, 2004. Between that date andMarch 31, 2004, 14,000 new shares were created further to theexercice of 14,000 stock options.

Number of voting rights

The provision of the articles of association on double voting rightsdescribed on page 96 (notice published in the Bulletin desAnnonces Légales Obligatoires dated October 27, 2003) cameinto force on October 17, 2003. The number of shares carryinga double voting right totaled 3,374,936 on December 31, 2003and 3,374,920 on March 31, 2004. Based on the Company’streasury stock of 2,221,199 shares which does not carry votingrights (see “Buyback of Nexans shares” on page 103) and theexistence of shares carrying double voting rights, the total numberof voting rights on December 31, 2003 was 24,282,709. Further to the exercice of stock options since this date, the totalnumber of voting rights on March 31, 2004 was 24,306,193.

Appropriation of capital and voting rights

Changes in Nexans’ share capital since incorporation

Number of Nominal Nominal Total Total shares value of amount of capital amount of number of

Date Operation issued/cancelled shares increase/reduction share capital shares

January 5, 1994 Incorporation (in francs) 2,500 100 250,000 250,000 2,500October 17, 2000 Share capital increase (in francs) - 105 12,500 262,500 2,500October 17, 2000 Conversion of capital (in euros) - 16 - 40,000 2,500October 17, 2000 Division of nominal

share value (in euros) - 1 - 40,000 40,000October 17, 2000 Share capital increase* (in euros) 24,960,000 1 24,960,000 25,000,000 25,000,000February 12, 2002 Capital reduction (in euros) 1,990,031 1 1,990,031 23,009,969 23,009,969April 17, 2002 Capital increase reserved for

employees (in euros) 111,503 1 111,503 23,121,472 23,121,472January 30, 2004** Share capital increase further to

the exercice of stock options (in euros) 17,000 1 17,000 23,138,472 23,138,472

* With a premium on issuance of 1,044,039,360 euros.** Date of last confirmation by the Board of Directors of stock options exercised to date. Between February 1, 2004 and March 31, 2004, 14,000 new

shares were created as a result of the exercice of 14,000 stock options.

Shareholding structure

The information given below is to the best of the Company’s knowledge based on the TPI (identifiable bearer shares) at December 31,2003. It appears that the shareholding structure is similar to that of March 2003.

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The main shareholders on December 31, 2003, are:- Alcatel 15.0%- Individual shareholders and employees 11.1%- Treasury stock 9.6%- Institutional investors (France) 31.7%- Institutional investors (US) 21.8%- Institutional investors (UK) 8.8%- Other Institutional investors 1.3%- Non-identified 0.7%

Nexans estimates the total number of shareholders to be between70,000 and 100,000. On December 31, 2003, the Board members held 0.013% ofthe Company’s share capital and voting rights while employeeshareholders accounted for 0.9% (92% of which via an employeemutual fund, or “FCPE”).

Breakdown of share capital and voting rights (estimated at March 31, 2004)

CAPITAL VOTING RIGHTS (1)

Number of Percentage Number of Percentageshares voting rights

Alcatel (3) 3,476,388 15% 6,851,276 28.2% (2)

Tweedy Browne (investment fund) (3) (4) 2,127,000 9.2% 2,127,000 8.8%Brandes (investment fund) (3) (4) 1,205,000 5.2% 1,205,000 5%Other institutional investors (4) 11,382,352 49.2% 11,382,352 46.8%Employees 224,773 1% 224,773 0.9%Other individual investors (4) 2,342,459 10.1% 2,342,491 9.6%Treasury stock 2,221,199 9.6% – –Non-identified shareholders 173,301 0.7% 173,301 0.7%

Total (5) 23,152,472 100% 24,306,193 100%

(1) All registered shares that have been registered in the name of the same holder for at least three years carry a double voting right. A shareholder’s voting rightsare limited to 8% (in the case of single voting rights) or 16% (in the case of double voting rights) of the votes attached to shares present or represented whenvoting on resolutions at an Annual Shareholders’ Meeting (see page 96).

(2) Taking into account the possession of 3,374,888 shares carrying a double voting right, but with statutory limitation of 16% on the exercise of such voting rightsat Annual Shareholders’ meetings as described above.

(3) Figures established on the basis of declarations on the crossing of thresholds made to the CMF.(4) Figures estimated on the basis of the TPI (identifiable bearer shares) on December 31, 2003.(5) This total takes into account the creation of 14,000 new shares between February 1, 2004 and March 31, 2004, further to the exercise of 14,000 stock options.

To the best of the Company’s knowledge, the following thresholdswere exceeded during the 2003 financial year:• Following the attribution of a double voting right to the

3,374,888 shares registered for at least 3 years, out of its totalshareholding of 3,476,388 shares, Alcatel exceeded the thresh-old of 20% of the Company’s voting rights on October17, 2003. Notification of the crossing of the threshold waspublished by the AMF (French financial markets authority) onMarch 11, 2004, accompanied by a declaration of intent pur-suant to Article L. 233-7 of the Commercial Code.

• Following the sale of Nexans shares by various companies ofthe Société Générale in the course of its Group trading activ-ities, Société Générale fell below the threshold of 5% of the

Company’s voting rights on August 8, 2003 and it held, eitherdirectly or indirectly, 3.66% of the share capital and 4.049%of the voting rights. Notification of the crossing of the thresh-old was published by the AMF (French financial marketsauthority) on August 18, 2003. Société Générale went aboveand below the 5% threshold several times during the monthsof May, June and July 2003.

To the knowledge of the Company, no shareholders other thanthose mentioned in the above table, hold more than 5% of theshare capital or voting rights and no registered shareholders havepledged their shares. Nexans is not aware of the existence of anyshareholders’ agreements or concerted action between share-holders.

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Changes in the shareholding structure over the past three years

Estimated, as of May 1st, 2002 Estimated, Estimated, (1st Annual report published) as of March 15, 2003 as of March 31, 2004

Shareholding structure Number of % of % of Number of % of % of Number of % of % of shares share voting shares share voting shares share voting

capital rights capital rights capital rights

Alcatel 5,000,484 21.6 21.6 3,476,388 15 16.6 3,476,388 15 28.2Other institutional investors 14,228,220 61.5 61.5 14,923,885 64.6 71.4 14,714,352 63.6 60.6Employees 111,503 0.5 0.5 171,255 0.7 0.8 224,773 1 0.9Board members 1,960 NS NS 3,139 NS NS 3,657 NS NSOther individual investors 2,610,778 11.3 11.3 2,325,606 10 11.1 2,338,802 10.1 9.6Treasury stock 0 – – 2,221,199 9.6 – 2,221,199 9.6 –Non-dentified 1,168,527 5.1 5.1 – – – 173,301 0.7 0.7

Existing authorizations given to the Board of Directors to issue securities representing, or not representing, the share capital of the Company and use already made

The table below shows the dates, terms and limits on the authorizations given by the Annual Shareholders’ Meeting to the Board ofDirectors to allow it, at its initiative, to issue securities representing, or not representing, the share capital of the Company. The Boardof Directors may proceed with authorized issuances in all circumstances on the dates and on the conditions it determines, subjecthowever to the conditions laid down by the Shareholders’ meeting, and may delegate the exercice of these powers to the Chairmanas permitted by law.

Date authorization was granted Maximum nominal amount Expiry date of Useand form of authorized issues in euros (1) authorization

SECURITIES REPRESENTING THE SHARE CAPITAL

June 5, 2003Issue with preferential 25,000,000 euros provided August 4, 2005 Nonesubscription rights: that the maximum amount of• Shares, bonds and/or any debt securities issued by

marketable securities giving immediate or the Company giving access tofuture access to the Company’s shares the share capital may not

exceed 500,000,000 euros• Capitalization of reserves,

profits or premiums (2)

June 5, 2003Share issue by the exercice of 900,000 euros April 2, 2006 Nonestock options granted to certains employees or Board members

April 2, 2001Share issue reserved to 750,000 euros April 2, 2006 111,503 shares issued onmembers of the Group savings Plan April 17, 2002 representing

a total nominal amount of 111,503 euros

SECURITIES NOT REPRESENTING THE SHARE CAPITAL

April 2, 2001Debt securities issue 1,000,000,000 euros April 2, 2006 None(1) The maximum nominal amount of share capital increases that can be carried out corresponds to the maximum number of shares that can be issued given that

the Company’s nominal share value is 1 euro.(2) In the case of capitalization of premiums, reserves or profits, the maximum nominal amount of share capital increases that can be carried out is in addition

to the 25 million euros, though this amount may not exceed the total amount that can be capitalized.

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Authorizations to be given to the Board of Directors to issue securities giving immediate orfuture access to the Company’s share capital, submitted to the Annual Shareholders’ Meetingof June 3, 2004

The Annual Shareholders’ Meeting of June 5, 2003 did not give the Board of Directors a general authorization to increase share capitalby the issue, without preferential subscription rights, of shares, bonds and/or marketable securities giving immediate or future access tothe Company’s equity. Accordingly, the Board of Directors proposes to submit a number of individual resolutions to the Annual Shareholders’Meeting of June 3, 2004, to authorize the Board of Directors to issue securities, with or without preferential subscription rights, givingimmediate or future access to the share capital (the authorizations to increase the share capital will cancel the general authorization given bythe shareholders’ meeting in 2003).The Board of Directors proposes to the Annual Shareholders’ Meeting to limit the period of validity of these separate authorizations to theperiod ending with the holding of the Annual Shareholders’ meeting convened to consider the financial statements for the year endingDecember 31, 2004.The table below sets forth the conditions and limits on the authorizations to be submitted to the Annual Shareholders’ Meeting of June 3,2004 to allow the Board of Directors to issue securities at its sole initiative giving immediate or future access to the Company’s share cap-ital. The Annual Shareholders’ Meeting will be asked to authorize the Board of Directors to proceed with the authorized issuances in allcircumstances on the dates and on the conditions determined by the Board subject however to the conditions fixed by the Shareholders’meeting, and may delegate the exercice of these powers to the Chairman as permitted by law.

Form of issues to be authorized (1) Maximum nominal amount in euros (2)

with preferential subscription rights: • Shares (R8) 15,000,000 euros (3)

With elimination of preferential subscription rights: Individual and global ceiling for R9 and R10 • Convertible bonds (R9) Shares: 10,000,000 euros (3)

• Other debt securities giving access to Company share capital (R10) Debt: 250,000,000 euros Issue of shares by capitalization of premiums, reserves, profits and other (R11) 15,000,000 eurosIssue of shares reserved to members of Group savings plan (R12) 500,000 euros

(1) The letter R followed by a number in brackets denotes the number of the Resolution submitted to the Annual Shareholders’ Meeting of June 3, 2004.(2) The maximum nominal amount of capital increases that can be carried out corresponds to the maximum number of shares that could be issued given that the

Company’s nominal share value is 1 euro.(3) The maximum total nominal amount of capital increases that can be carried out subject to preferential voting rights or with elimination of preferential voting

rights, pursuant to resolutions 8 and 10, shall not in the aggregate exceed 15 million euros.

Employee profit-sharing and share-ownership

Certain Group subsidiaries have put in place employee profit-sharing plans. In France, Nexans has created an employee Group SavingsPlan allowing employees to invest in Nexans’ shares through a mutual fund composed of shares in the company.

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Stock options

The Board of Directors decided on april 4, 2003, to grant 644,500 stock options to 83 employees, pursuant to the authorizationgiven by the Combined General Shareholders’ meeting on June 25, 2002. The stock options give the holders the right to subscribeto new shares in the Company created by way of increase in the share capital of the Company, at an exercice price of 11.62 euros.The grant of stock options is intended to allow the employees and managers who play an active role, whether directly or indirectly,in the generation of income, to share in the increase of profitability of the Group.On March 31, 2004, 1,133,000 Nexans stock options, representing 4.9% of the share capital, existed. Each option, if exercised,grants the right to subscribe to one Nexans share.

Stock option policy

Following a review by the Compensation & Appointments Committee, the Board of Directors has decided on a policy of grantingstock options annually, generally in the autumn. The total amount granted would be 1 to 2% of the share capital (approximately400,000 shares in 2004 and approximately 250,000 shares in subsequent years). Stock options will be made available in one yearto the members of the Executive Committee and other high-ranking executives, and in the following year to a broader group includinghigh potential junior executives.

Breakdown (by holder category) of stock options granted during the financial year

Grant date Number of stock Number of Price Expiry stock option option holders options granted(1) (in euros) date

Board members(Gérard Hauser) April 4, 2003 1 50,000 11.62 April 3, 2011Group’s employees10 biggest stock option holders April 4, 2003 12 (2) 204,000 11.62 April 3, 2011

(1) A quarter of the total number of stock options granted vests in the option holder at the end of each successive 12-month period from the grant date; optionsmay only be exercised on or after April 4, 2004.

(2) Options distributed equally between the employees concerned.

Breakdown (by subscriber category) of shares subscribed during the year following the exercise of stock options

Number of subscribers Number of shares subscribed Price

Board members 0 - -Group employeesTen largest subscribers following 17.45 euros exercise of options 5 7,500 (plan of November 16, 2001)

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Record of stock options granted

Plan No1 Plan No2

Date of Combined General Shareholders’ Meeting of April 2, 2001 Combined GeneralGeneral Shareholders’ Meeting Shareholders’ Meeting of

June 25, 2002

Date of Board of Directors meeting or grant November 16, 2001 January 18, 2002 March 13, 2002 April 4, 2003

Total number of shares which can be subscribed including the following: 531,500 5,000 8,000 644,500

- Board members stock optionsholders (Gérard Hauser) 55,000 – – 50,000

- ten largest employee, manager ordirector stock option holders 181,000 5,000 8,000 204,000

Starting date of exercise November 16, 2002 January 18, 2003 March 13, 2003 April 4, 2004

Expiry date November 15, 2009 January 17, 2010 March 12, 2010 April 3, 2011

Exercise price 17.45 euros 16.70 euros 19.94 euros 11.62 euros

Conditions of exercise Quarter of the total number of options, annually Quarter of the total number of

options, annually

Total number of shares subcribed atMarch 31, 2004 29,500 0 1,500 –

Total number of options cancelled atMarch 31, 2004 12,000 3,000 0 10,000

Total number of options remaining atMarch 31, 2004 490,000 2,000 6,500 634,500

Buyback of Nexans shares

Subsequent to its initial share buyback program authorized by the Combined General Shareholders’ Meeting of April 2, 2001, anddecided by the Board of Directors on September 26, 2001, Nexans still held 6,774 of its own shares on March 31, 2004.In accordance with the authorization granted by the Combined General Shareholders’ Meeting on June 25, 2002, and the Notice registered with the Commission des Opérations de Bourse under Number 02-692, Nexans launched another share buyback program,pursuant to a decision of the Board of Directors taken on June 25, 2002, representing a maximum of 10% of its share capital, in accor-dance with Article L. 225-209 of the Commercial Code. In 2002, Nexans consequently acquired 1,909,736 shares at an averageprice of 12.88 euros per share for a total value of 24.6 million euros, including 1,500,000 shares acquired on October 30, 2002,from Alcatel (in this respect, the obligation on Nexans to retain these shares referred to on page 105, expired on October 30, 2003).In 2003, under the same program, Nexans also acquired 304,689 shares at an average price of 11.30 euros per share for a totalvalue of approximately 3.5 million euros.Nexans has not used the authorization to acquire its own shares given to it by the Combined Shareholders’ meeting on June 5, 2003,which was registered with the Commision des Opérations de Bourse on May, 16, 2003, under N° 03-441.On March 31, 2004, the Company held a total of 2,221,199 of its own shares, representing 9.6% of share capital. During theAnnual Shareholders’ Meeting on June 3, 2004, the shareholders will be asked to authorize the Company to implement a share buy-back program and to reduce its share capital through the cancellation of the shares purchased.

Auditors

• RSM Salustro Reydel part of the RSM International network8 avenue Delcassé, 75008 Paris, France, represented byBenoît Lebrun.Date of first appointment and current appointment: OrdinaryGeneral Shareholders’ Meeting of June 5, 2003Current term expires after the Shareholders’ Meeting convened toconsider the accounts for the financial year ended December 31,2008.

• Barbier Frinault et Autres part of the Ernst & Young network41 rue Ybry, 92576 Neuilly-sur-Seine Cedex, France, repre-sented by Alain GouverneyreDate of first appointment: Ordinary General Shareholders’Meeting of February 21, 2000Date of current appointment: Ordinary General Shareholders’Meeting of May 9, 2000.Current term expires after the Shareholders’ Meeting convened toconsider the accounts for the financial year ended December 31,2005.

Deputy Auditors

• François Chevreux 8 avenue Delcassé, 75008 Paris, FranceDate of first appointment and current appointment: CombinedGeneral Shareholders’ Meeting of June 5, 2003Current term expires after the Shareholders’ Meeting convened toconsider the accounts for the financial year ended December 31,2008

• Pascal Macioce41 rue Ybry, 92576 Neuilly-sur-Seine Cedex, FranceDate of first appointment: Ordinary General Shareholders’Meeting of February 21, 2000Date of current appointment: Ordinary General Shareholders’Meeting of May 9, 2000.Current term expires after the Shareholders’ Meeting convened toconsider the accounts for the financial year ended December 31,2005.

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Statutory Auditors of Nexans

Fees paid by Nexans to the Auditors

RSM International Network Ernst & Young Network

in thousand of euros % in thousand of euros %

2003 2002 2003 2002 2003 2002(1)

2003 2002(1)

Auditing Auditing of the accounts 604 96% 1,193 1,536 85% 94%Secondary audit missions 25 4% 206 104 15% 6%

Sub-total 629 100% 1,399 1,640 100% 100%

Other missions Legal, tax, employmentInformation systemsInternal auditOther

Sub-total 0 0% 0 0 0% 0%

TOTAL 629 100% 1,399 1,640 100% 100%

(1) Total fees paid to the BFA and Ernst & Young Audit networks in 2002 published in the 2002 reference document.

N/

A

N/

A

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Nexans has not granted its directors any loans or guarantees.Four agreements falling within the scope of Article 225-38 of theFrench Code de Commerce were concluded or remained in forcein 2003 between Nexans and one of its directors or companieswith common directors or Board members, or with companieshaving a shareholding in Nexans carrying more than 10% of thevoting rights.

These agreements are as follows:

a) Prior agreements remaining in force in 2003

• The acquisition of a block of 1,500,000 shares from Alcatel,which holds more than 10% of the voting rights in Nexans.Nexans agreed not to sell these shares on the market for oneyear from the acquisition date. This agreement obtained theprior consent of the Board of Directors on October 30, 2002and was approved by the Annual Shareholders’ Meeting ofJune 5, 2003.

• The “General Relations Agreement” concluded with allNexans Group subsidiaries, authorized by the Board ofDirectors meeting held on March 14, 2001 and approved bythe Annual Shareholders’ Meeting of June 25, 2002, relatingto the agreement entered into between Nexans and NexansDeutschland AG, as Gérard Hauser was a director of bothcompanies until June 25, 2003.

The General Relations Agreements govern the sharing of R&Dresources, the exchange of the results and know-how generatedfrom research programs, as well as the provision of administrativeservices by Nexans to its subsidiaries, particularly for centralized

functions, such as cash central treasury, insurance, purchasing,communications and other specialist services. Pursuant to theGeneral Relations Agreements, each company pays a percentageof its sales, which varies according to the business sector, andNexans, makes a contribution to the cost of their R&D programs.In respect of administrative services, Nexans receives a fee basedon a percentage of sales.

• The “Underwriting Agreement” authorized by the Board ofDirectors on June 12, 2001 and approved by the AnnualShareholders’ Meeting of June 25, 2002, entered into withAlcatel, which holds more than 10% of the voting rights.

When Nexans was floated on the Paris Stock Exchange,Alcatel, Nexans, Goldman Sachs International, SociétéGénérale and other members of the underwriting syndicatesigned this agreement for the purposes of underwriting the place-ment of Nexans shares.

Pursuant to this agreement, Alcatel undertook to sell its shares inNexans, and the bank syndicate agreed to place and under-write the placement of Nexans shares in return for a fee paid byAlcatel and based on certain representations and warranties giv-en by Alcatel and Nexans.

b) Agreement entered into in 2003

The agreement entered into with Patrick Puy, a director, which wasgranted prior authorization by the Board of Directors on June 5,2003, provided that Mr Puy would act as industrial and commer-cial advisor on the project for the possible acquisistion of Alstom’sTransmission & Distribution business.

Related parties’ transactions

Special Report ofthe Statutory Auditors*on Certain Related Parties Transactions, year ended December 31, 2003

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In our capacity as Statutory Auditors of your Company, we are required to report on certain contractual agreements with certain relatedparties.In accordance with Article L.225-40 of French Commercial Code (Code de Commerce), we have been advised of certain contractu-al agreements which were authorized by your Board of Directors.We are not required to ascertain whether any other contractual agreements exist but to inform you, on the basis of the information provid-ed to us, of the terms and conditions of agreements indicated to us. It is not our role to comment as to whether they are beneficial orappropriate. It is your responsibility, under the terms of Article 92 of the March 23, 1967 Decree, to evaluate the benefits resulting fromthese agreements prior to their approval.We conducted our work in accordance with French professional standards. These standards require that we perform the necessary proce-dures to verify that the information provided to us is consistent with the documentation from which it has been extracted.

With Mr. Patrick Puy, Director of your Company

Terms and objectOn June 30, 2003, the Board of directors of your company authorized the contracting of an agreement that entrusts an industrial andmarketing assignment for the plan of potential take-over of the Transmission and Distribution business of Alstom.ConditionsYour company concluded this agreement with one of the Directors, Mr. Patrick Puy, on June 11, 2003. For that assignment, your companypaid a fee of 110,000 euros during the year 2003.

Furthermore, in accordance with the March 23, 1967 Decree, we have been advised that the following agreements, approved inprior years, remained effective in the year ended December 31, 2003.

With Nexans Deutschland, A.G.

Terms and objectThe Board of Directors of your company approved the conclusion of an agreement, called “General Relations Agreement”, withNexans Deutschland. This agreement governs the sharing of research and development facilities, the sharing of the income issuingfrom research programs, and the administrative services rendered by Nexans to its subsidiaries.ConditionsUnder the terms of these agreements, Nexans Deutschland shall pay a percentage of its sales, varying according to the business sectorinvolved, and Nexans shall contribute to the cost of the research and development programs. For administrative services, Nexans shallbe paid a percentage of the company’s sales. Under this agreement, Nexans received a payment of 11,412,000 euros and paid5,832,000 euros for fiscal year 2003.

*Free translation from the original French report.

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With the company Alcatel, S.A., shareholder of your company

Terms and objectYour Board of Directors authorized the conclusion of an underwriting agreement with Alcatel.ConditionsUnder the term of this agreement, Alcatel undertook, with the context of an Initial Public Offering, to sell its shares in Nexans while thebank syndicate undertook to place and guarantee the placing of the Nexans shares on the basis of certain representations and guarantees given by Alcatel and Nexans, and in return for a fee paid by Alcatel. This “lock-up” clause was valid for a period of270 days, and some representations from Nexans to the bank syndicate are unlimited in time.Terms, object and conditionsYour Board of Directors authorized on October 30, 2002 to purchase 1,500,000 of its own shares outright from Alcatel, with thecommitment to keep the corresponding shares for a period of one year as from their purchase. This authorization was turned intoaccount the same day.




Benoît Lebrun

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In accordance with Article L. 225-37, last paragraph of the Code de Commerce, transposed from Article 117 of the Loi de SécuritéFinancière (French financial security act) of August 1, 2003, Gérard Hauser, Chairman and Chief Executive Officer of Nexans, issuesthis report on “the manner in which the work of the Board is prepared and organized, as well as the internal control procedures putin place by the Company” as well as “any limitations the Board of Directors places on the powers of the CEO.”

1 - Preparation and organization of the work of the Board of Directors

1.1 Organization of the work of the Board of Directors

The Board of Directors met nine times in 2003 and more than two-thirds of its members were present at each meeting. The membersare notified by the Chairman at least one week before the meeting.Several days before the meeting, the directors are provided with a file covering each point on the agenda.The Board of Directors is kept informed of both the Company’s and the Group’s business development, financial situation and cashposition, drawns the parent company and consolidated financial statements, as well as the management projections, and reviews thebudget. It decides on matters affecting the strategy and running of the Company.All these matters were addressed by the Board during the 2003 financial year.Presentations are made to the Board of Directors on a regular basis by divisional, area or product line managers; such presentationshelp to familiarize the directors with Nexans’ core businesses and give them a clearer picture of the internal workings of the company.As an example, in the first half of 2003, the Energy division gave a detailed presentation of the General Market activity, followed bya site visit.The Board was also consulted throughout 2003 on various external growth projects and was kept constantly informed of the progressof these projects; emergency meetings were called for the Board to take a position on a given matter or provide the Managementwith guidance.The Board adopted a new stock option plan and determined the guidelines for calculating the variable portion of the Chairman andCEO’s compensation for 2003, on the recommendation of the Appointments & Compensation Committee. Finally, it put in place orformalized a certain number of corporate governance guidelines, and adopted the Rules & Regulations of the Board pursuant to theBouton and Viénot-Bouton reports.

1.2 Corporate governance: Rules & Regulations of the Board of Directors and Director’s Charter

During the second half of 2003, drawing on both the Bouton Report and the combined Viénot-Bouton Report, Nexans strengthened the rulesof best practice in corporate governance already in force within the Group. In particular:• The Board of Directors adopted its Rules & Regulations and a Director’s Charter, the terms of which it approved on July 21, 2003.• The Board broadened the remit of the Compensation Committee, now the Appointments & Compensation Committee.• It put in place a procedure for the assessment by the Board of Directors of itself and the Chairman.

The Rules & Regulations and the Director’s Charter are given to each new member of the Board when they take office.The Rules & Regulations sets force the areas of competence of the Board of Directors, its modus operandi and ethical principles.

* Free translation from the original French report.

Chairman’s Report*In accordance with Article L. 225-37, last paragraph of the “Code de Commerce”, year ended December 31, 2003

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In accordance with the Bouton Report, the Rules & Regulations determine which investments or significant restructuring plans such asmergers, acquisitions, disposals or proposed financing or projects, will require the prior approval of the Board of Directors, based ontheir nature and the amounts involved. They have also strengthened the role and competence of the existing Committees and definedthe criteria of independence for directors.The Director’s Charter sets out the rights and obligations of Board members, and reiterates the provisions of the articles of associationaccording to which each director must hold at least ten shares in the Company, it lays down the rules requiring directors to refrainfrom trading in Company shares during sensitive periods leading up to the publication of the accounts.

1.3 Appraisal of the Board of Directors

The Board of Directors decided to implement, for the first time in autumn 2003, an annual appraisal system of its modus operandi, to check that important matters are properly reported, dealt with and discussed during meetings. The system has been implementedon the basis of a detailed questionnaire, approved by the Board and sent to all directors. The questionnaire is a means of assessing,among other things, the relevance of the Board’s composition, the frequency of meetings, the relevance and quality of the informationprovided to it, the support provided by the Committees, and the amount of interaction when discussing points on the agenda.

1.4 Committees formed by the Board of Directors

The Accounts Committee

Composition and missions of the Accounts CommitteeThe Accounts Committee is composed of three members – Georges Chodron de Courcel, Ervin Rosenberg and Jean-Louis Vinciguerra –,all chosen for their financial and accounting expertise.

The missions of the Accounts Committee are to:• examine the draft accounts to be submitted to the Board, with a view to checking the methods used to prepare them and making

sure that the accounting principles and methods used are both relevant and constant,• examine the scope of consolidation of the companies in the Group,• ensure that it is made aware of the internal procedures for identifying off-balance sheet commitments and risks, and check that such

procedures are sufficient to guarantee the reliability of the information resulting from them,• monitor sensitive issues,• examine the work of Internal Audit, give its opinion and review the main conclusions of the missions completed,• conduct the Auditors selection process and give its opinion to the Board of Directors on their appointment or replacement,• define the rules for using the Auditor networks for missions other than auditing, in accordance with the applicable regulations,• carry out any specific investigations it deems necessary, after having informed the Chairman and CEO, if appropriate contacting

key executive managers, and report back to the Board.

In the course of its work, the Accounts Committee may request to meet with the Statutory Auditors, the Chief Financial Officer, theSenior Corporate Vice-President, Finance and Cash Management, the Senior Corporate Vice-President, Management Control andConsolidation, the Internal Audit Director and the Director of Nexans’ non-ferrous metals activities. The General Management does notnecessarily participate in such meetings.

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The Appointments & Compensation Committee

Composition and missions of the Appointments & Compensation CommitteeIn 2003, the Appointments & Compensation Committee was composed of two members – Patrick Puy and Ervin Rosenberg. In 2004,a third member – Gianpaolo Caccini – was appointed by the Board of Directors.

The Appointments & Compensation Committee:• examines and makes suggestions regarding the assessment of directors’ independence, prior to a final decision being made by the

Board of Directors,• proposes to the Board new directors and Board members to be co-opted or proposed at the Annual Shareholders’ Meeting, as well

as a procedure for selecting and evaluating potential Board members prior to contacting them, as well as planning for appointmentof directors in the future,

• proposes to the Board the criteria for determining the fixed and variable portions of Board members’ compensation; it ensures thatthese guidelines are consistent with the annual performance appraisal of Board members, the Company’s medium-term strategy andmarket practices,

• evaluates the Company’s policy governing compensation and benefits of all kinds granted to key executive managers who are notBoard members,

• defines the Company’s policy relating to stock option or share purchase plans (frequency, people concerned, envelope) which itproposes to the Board of Directors, and gives the Board its opinion on plan proposals drawn up by the Management.

1.5 Restrictions which may be placed on the powers of the CEO

Apart from the transactions or decisions that require the prior approval of the Board of Directors as defined in the Rules & Regulations,the Board of Directors has placed no restrictions on the powers of the Chairman and CEO, nor are his powers subject to any statutoryrestrictions.

2 - Internal control procedures

2.1 Nexans’ internal control objectives

In the absence of any French regulations, Nexans has chosen to adopt the definition proposed by IFACI dated October 23, 2003,which defines internal control as follows:“Internal control procedures are the guidelines, directives and practices in place within an organization, the purpose of which is to:• make sure that its activities and the conduct of its members:

- comply with applicable laws, regulations, standards and internal rules,- are in line with the values, guidelines and objectives laid down by the corporate bodies and their members, in particular in termsof risk management policy,

• check that the organization’s internal and external communications represent fairly the situation and activity of the organization.Internal control procedures, however well conceived and applied, offer reasonable assurance but cannot provide an absolute guarantee.”The internal control procedures implemented by the management of Nexans, cover the scope of the companies that make up theGroup, are intended to provide reasonable assurance that an element of control is exerted over the subsidiaries and that operationsare, in line with objectives, effectively carried out and optimized, that financial information is reliable and that relevant laws and reg-ulations are complied with.

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Nexans takes a pragmatic approach to internal control. Its internal control procedures take into account the specific aspects ofits business and are geared to managing the potential risks associated with its activities that it has identified.All the procedures in force within the Nexans Group, whether or not they relate to financial information, have been establishedcentrally at holding company level. They are then implemented in each country and entity, and periodic reports are sent to thefunctional department in charge, which retains overall control.

2.2 Organization and description of the internal control procedures in place

2.2.1 Parties involved and structures in place: organization of the Group Since July 1, 2003, the Nexans Group has been organized as follows:

The countries are responsible for income from operations. Their performance continues to be monitored by market and by product,through a defined financial reporting procedure. The countries are grouped into areas – Europe, North America & Asia and Rest of the World – which are responsible for managing,coordinating and supervising their own operations. Each area is managed by a commercial development team, an industrial and logistics support team and a financial control team. The country and area managers are responsible for ensuring that the guidelines and directives issued at Group level are implementedand complied subject to applicable regulations. The corporate-level functional departments are also involved in internal control.

The Strategic Operations Department, which is responsible for the strategic development of the entire Group, comprises:

• The Marketing Department whose mission is to:

- familiarize itself with Nexans’ various markets, businesses and products,- define Nexans’ position in each of its market segments,- formulate product and market strategies in collaboration with the countries and areas,- establish development priorities and plans,- establish Nexans’ strategic plan.

To achieve this it relies on a central marketing team and product managers in the countries. It also relies on the existing financial report-ing system.

• The Development and Economic Intelligence Department whose mission is to:

- monitor competition,- identify opportunities for external growth for the Group.

• The Industrial Management Department manages the area and country level Industrial Management Departments, which are responsible for the performance of Nexan’s man-ufacturing plants.

• The Technical Management Department manages all the Group’s research and development effort, in particular through its Competence Centers and the Research Center.

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• The Information Systems Department Conscious of the importance of information systems as a factor in Nexans’ competitiveness, a Steering Committee has been formedwithin the Information Systems Department to assist the Executive Committee when deciding on budgetary priorities and Group strategy.

• The Purchasing Department whose mission is to define and control the implementation of procedures for the purchase of goods and services within the Group witha view to rationalizing cost, quality, time, technology, etc.

The Group is managed by the Executive Committee which has seven members in addition to the Chairman and Chief ExecutiveOfficer. They are:

- the three Executive Vice-Presidents in charge of the areas,- the Senior Corporate Vice-President, Strategic Operations, - the Chief Financial Officer, - the Senior Corporate Vice-President, Human Resources,- the Senior Corporate Vice-President, Communications.

The last four people are in charge of the Group’s four functional departments, which are the Strategic Operations Department, the Financial and Administrative Department, the Human Resources Department and the Corporate Communications Department. The role of the Executive Committee is to define and manage Group strategy, allocate the necessary resources to implement it, set objectives for the entities that make up the Group and monitor the achievement of such objectives.

Finally, the Board of Directors is involved in internal control, notably via the Committees, as described above.

2.2.2 Parties and structures dedicated to internal control

a) The Accounts Committee As a result of the powers it has been granted by the Board of Directors and the Rules & Regulations, as mentioned above, the AccountsCommittee plays a crucial role in implementing internal control processes, exercising such control and monitoring the procedures inplace.

b) The Internal Audit Department The Internal Audit Department was created on January 1, 2002 following a decision made by the Chairman of the Group. Althoughin organizational terms it comes under the Financial and Administrative Department, it effectively reports directly to the Chairman. Its work is approved and controlled by the Accounts Committee. The missions of the Internal Audit Department, defined in an Audit Charter, cover financial and administrative as well as operationalmatters. Its missions are to:

- identify, analyze and measure risks,- make sure that an internal control mechanism is in place and is functioning, and ensure that internal control procedures are com-plied with,

- carry out financial audits, - carry out operational audits in liaison with the departments concerned, suggest corrective action and methods of implementation, - identify and promote best practice.

Accordingly, the Internal Audit Department undertakes audits to verify that the measures that have been implemented are effective and adapted to potential risks. A risk “roadmap” was launched in 2002, which was conducted jointly by the Internal Audit Department and a firm of consultants. The aim was to identify risks and areas of risk and evaluate their impact on the financial position of the Nexans Group and its income.

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Risks were identified through interviews with Executive Committee members, the managers of corporate functions, product line managersand country managers. Risks were evaluated according to the frequency with which they are likely to occur and the gravity of the consequences which mayresult from the occurrence of the risk. The level of risk was evaluated and graded before and after application of existing internal pro-cedures. An audit plan has been drawn up on the basis of the risk roadmap. This covers a broad spectrum, including:

- Cash management and exchange rate risks - Non-ferrous metal hedging risk - Purchasing process - Inventories process - Sales process - Projects (particularly capital expenditure and restructuring) - Legal, insurance, safety/security and environment - Information systems - Human Resources

The Audit Plan is reviewed and updated annually by the Accounts Committee. At the end of each audit carried out, a report is drawn up by the Internal Audit Department, containing certain recommendations whichit diligently follows up. These reports are sent to the Chairman and CEO, the Chief Financial Officer, the appropriate member(s) ofthe Executive Committee and the audited entities. In addition, an annual report of the work carried out by the Internal Audit Departmentis submitted to the Accounts Committee and the Executive Committee.

c) The Risk Manager The role of the Risk Manager was originally to manage Group insurance matters. In December 2003, the role of the Risk Managerwas broadened to encompass risk management in general. His missions are now to: • propose a strategy for managing operational, commercial, industrial and financial risks by seeking the optimum balance between

insurance cover, prevention and other measures and the acceptance of certain risks,• buy insurance providing optimum cover at the best possible price,• implement and manage the global insurance program,• manage the network of brokers and other consultants,• set up and coordinate a network of internal insurance specialists within each unit in the Nexans Group,• propose and monitor the introduction of measures other than insurance for risk prevention and management. The scope of the areas covered calls for close cooperation with the functional departments at corporate level and the management atarea level, to define and put in place financially viable solutions in line with the directives laid down at Group level. The Risk Manager also works closely with the Internal Audit Department.

d) The Disclosure Committee This Committee, set up in October 2003, is composed of the Chief Financial Officer, the two managers of the Management Controland Consolidation Department, the General Counsel and the manager of corporate/stock market law, the Internal Audit Director, theRisk Manager and two risk area controllers. The Committee’s objective is to identify information that the Company must disclose to its shareholders and the market. Its remit covers: • identification and evaluation of any significant non-financial information,• producing a questionnaire aimed at subsidiaries to identify the risks; evaluating the methods in place for passing information back

up the parent Company,• compiling significant information,

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• identifying and defining matters that should be investigated by the internal audit team to assess and if necessary improving the relia-bility of the procedures in place and the information provided.

2.2.3 Specific aspects of internal control procedures relating to financial and accounting information

(a) Main players and links between them The Corporate Financial and Administrative Department, which includes eight functional departments:

- The Management Control and Consolidation Department - The Finance and Cash Management Department - The Internal Audit Department - The Legal Department - The Tax Department - The Investor Relations Department - The Mergers and Acquisitions Department - The Non-Ferrous Metals Department

As well as the Risk Manager. All these departments report to the Chief Financial Officer. In addition, the Financial Departments in each country report to both the Country Manager and the Corporate Financial andAdministrative Department. This system ensures coordinated and consistent processing of financial information.

(b) Key points concerning the procedures relating to financial and accounting information Financial and accounting information is generated in consolidated form as follows:

1 – Preparation of financial and accounting information Information is obtained from the accounting systems of the legal entities whose accounts are maintained according to local accountingprinciples and then restated in accordance with the accounting principles used by Nexans (French GAAP) to prepare the consolidatedfinancial statements. The breakdown by sector and product line is based on the legal entities’ financial statements. These accounts are prepared accordingto standard accounting principles defined in numerous procedures. In particular, to ensure consistency of information, each line of theoperating statement for the entity and for its product lines is precisely defined in the accounting manual used by all the entities in theGroup.

2 - The processIn the last quarter of each year a budget is drawn up by the entities in each product line. The budget is discussed by the local andarea management and presented to the Group’s General Management for final approval, after which it is broken down by month. Each month, the entities prepare a report broken down by product line, the results of which are analyzed by the management in thebusiness review. The figures are compared with the budget and with the previous year’s results. The consolidated results by area andby product line are analyzed by the Group’s General Management at an area meeting. The consolidated financial statements are drawning up each quarter. A special procedure (called closing meetings) applies to year-end accounts. During the closing meetings, the Country managers present their latest income projections, and the main orientationsfor the closing statement are determined. Off-balance sheet commitments are reviewed by the Consolidation Department based on information provided by the subsidiaries andby the Finance and Treasury Department, the Non-Ferrous Metals Department and the Legal Department.

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3 - The procedures Forty-six procedures relating to financial and accounting information, and more generally corresponding to the areas of competencefalling within the area of competence of the Financial and Administrative Department, are currently in force within the Nexans Group. In addition to accounting and financial rules, these procedures deal with sensitive issues or identified risk factors specific to Nexans’business that could have an impact on its assets or income. This is the case, for example, with the management of risks associatedwith exchange rates, interest rates and fluctuation of non-ferrous metal prices that is controlled by the Finance and Treasury Departmentand the Non-Ferrous Metals Department, who report regularly to the corporate Financial and Administrative Department. Checks are carried out by the Auditors and the Internal Audit Department to make sure that internal control procedures are workingproperly and that they are complied with.

(c) Rules specific to the management of risks linked to non-ferrous metals In view of the importance of non-ferrous metals (copper, aluminum) to Nexans’ business and the risks associated with price fluctuations,Nexans has put in place a special procedure for managing non-ferrous metals and created a dedicated Non-Ferrous MetalsDepartment, which reports to the Financial Department, to supervise the implementation of these procedures. The basic rules are as follows: • the principle is the systematic hedging of metal prices and their structure as soon as the risk arises, • this principle is applied by each legal entity for which position limits are set. These limits are reviewed regularly according to the

development of each entity’s business. It is part of the Internal Audit’s task to ensure that the limits are complied with, • this principle is reflected in the consolidated financial statements by the recording of unexpired commitments, • each company issues a daily report of its positions in metric tons and in value after going to market and a monthly report of its com-

mitments and results on metals in its end of month accounts. Hedging is managed centrally by experienced teams used to trading on the European and North American markets. Trading on these markets is carried out through first-rate brokers whose financial stability is regularly checked to minimize counterpartyrisks.

(d) Centralized cash management Nexans has put in place a centralized system for managing cashflow, covering: • international cash pooling,• centralized bank commitments,• centralized foreign exchange risk management.

2.2.4 Details of other internal control procedures

There are approximately sixty additional internal control procedures covering areas such as: • human resources • communications • purchasing • information systems • quality • intellectual property • insurance • legal

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• The industry and the environment: A charter has been drawn up relating to management of risks which covers the protection of property, accident prevention and humansafety, and environmental safety. The aims of this charter are to:

- identify and quantify the risks to which Nexans is exposed,- define the priorities, and recommend prevention and control measures to reduce the frequency and magnitude of such risks,- organize insurance arrangements accordingly,- organize crisis management plans.

The implementation of the above is managed by the Industrial Management Department in liaison with the Financial and AdministrativeDepartment, the Risk Manager and the Legal Department, with extensive interaction between the corporate departments and designatedpeople at various levels of the organization. A reporting and monitoring system exists for environmental matters which relies mainly on a questionnaire sent annually to the countryindustrial managers/plant managers, and which is supplemented by audits carried out by a firm of consultants. • The Group also has a code of conduct called the “Nexans Business Ethics and Conduct” which lists a number of principles andrules of best practice to be observed.

March 12, 2004

Gérard Hauser Chairman and Chief Executive Officer

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Internal Control Report*Statutory Auditors’ report, prepared in accordance with the last paragraph of article L.225-235 of the FrenchCommercial Code (Code de Commerce), on the report prepared by the Chairman of the Board of Directors ofNexans, S.A. Company, describing the internal control procedures relating to the preparation and processingof financial and accounting information.


In our capacity as Statutory Auditors of Nexans, S.A. Company, and in accordance with the last paragraph of article L.225-235 ofthe French Commercial Code (Code de Commerce), we hereby present our report on the report prepared by the Chairman of yourcompany in accordance with article L.225-37 of the French Commercial Code (Code de Commerce) for the year ended December31, 2003.Under the responsibility of the Board of Directors, it is for management to determine and implement appropriate and effective internalcontrol procedures. It is for the Chairman to give an account, in his report, of the conditions in which the tasks of the Board of Directorsare prepared and organized and the internal control procedures in place within the company.It is our responsibility to report to you our observations on the information and assertions set out in the Chairman’s report on the internalcontrol procedures relating to the preparation and processing of financial and accounting information.In accordance with the professional guidelines applicable in France we have obtained an understanding of the objectives and generalorganization of internal control, as well as the internal control procedures relating to the preparation and processing of financial andaccounting information, as set out in the Chairman’s report. On the basis of the procedures we have performed, we have no matters to report in connection with the description of the internalcontrol procedures relating to the preparation and processing of financial and accounting information, contained in the Chairman ofthe Board of Directors’ report, prepared in accordance with article L.225-37 of the French Commercial Code (Code de Commerce).




Benoît Lebrun

*Free translation from the original French report

Person responsible for the reference document

Auditors’ Report on the informationpresented in the Reference Document(“Document de Référence”)

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In our capacity as Statutory Auditors of Nexans, S.A. and in compliance with the French Stock Exchange Regulation Body (COB)Regulation n° 98-01, we have verified, in accordance with French professional standards, the information in respect of the financialposition and historic financial statements included in the accompanying Reference Document (Document de Référence).This Reference Document is the responsibility of the Chairman of the Board of Directors of Nexans. Our responsibility is to issue anopinion on the fairness of the information contained therein with respect to the financial position and financial statements.

We conducted our review in accordance with French professional standards. This review consisted in assessing the fairness of theinformation on the financial position and financial statements and to verify their consistency with the audited accounts. We alsoreviewed other financial information contained in the Reference Document in order to identify any significant inconsistency withinformation in respect of the financial position and financial statements and to bring to your attention any obvious misstatements wenoted based on our general understanding of the company gained through our audit. The forecasts provided in the Document are theapplication of the expectations and intentions of Management’s strategy.The prospective information is based on management’s expectations and intentions and not on properly prepared projections onindividual components of the prospective information.Barbier Frinault & Autres and Ernst & Young Audit issued an unqualified opinion on the annual and consolidated accounts for the yearended December 31, 2001 drawn up by the Board of Directors, in accordance with French professional standards.Barbier Frinault & Autres and Ernst & Young Audit issued an unqualified opinion on the annual and consolidated accounts for the yearended December 31, 2002 drawn up by the Board of Directors, in accordance with French professional standards. In their reporton individual statements for the fiscal year 2002, without calling into question their opinion, Barbier Frinault & Autres and Ernst & YoungAudit have drawn the attention of the shareholders to Note 2 to the financial statements that discloses the change in accounting methodcorresponding to the first application, from January 1st, 2002, of the “Règlement CRC 2000-06” on liabilities. In their report onconsolidated statements for the fiscal year 2002, without calling into question their opinion, Barbier Frinault & Autres and Ernst & YoungAudit have drawn the attention of the shareholders on Note 1.a) to the financial statements that discloses the change in accountingmethod corresponding to the first application, from January 1st, 2002, of the “Règlement CRC 2000-06” on liabilities.

Paris, April 28, 2004

“ To my knowledge, the information provided in this reference document is true and gives all elements necessary for investors to evaluate the assets, the business, the financial situation, the revenue and the outlook of the Company. No information has been omit-ted which is likely to affect the reliability of this reference document. ”

The Chairman of the Board,Gérard Hauser

Legal information

This is a free translation into English of the Statutory Auditors’ Report on the reference document issued in the French language and is provided solely for

the convenience of English speaking readers. The Statutory Auditors’ reports on financial statements and consolidated financial statements, referred to

in this report, include information specifically required by French law in all audit reports, whether qualified or not, and this is presented after the Opinion

on the financial statements. This information includes explanatory paragraphs discussing the Auditors’ assessments of certain significant accounting and

auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the annual and consolidated financial

statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the annual and

consolidated financial statements.

This report should be read in conjunction with, and construed in accordance with French law and professional auditing standards applicable in France.

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We issued an unqualified opinion on the annual and consolidated accounts for the year ended December 31, 2003, drawn up by theBoard of Directors, in accordance with French professional standards. In accordance with the requirements of article L. 225-235 ofFrench Commercial Code (Code de Commerce), introduced by the Financial Security Act of August 1st, 2003, and which came intoeffect for the first time this year, we reported on the justification of our assessments in our report on the annual and consolidated accounts.

Annual accountsJustification of our assessmentsFinancial estimatesYour company records an impairment of the investments it holds when their net book value, which is estimated on the basis of theirvalue in use, is lower than their gross value, as described in note 2.1 to the financial statements.Our works consisted in assessing the data and hypotheses on which those estimates were made, in reviewing the calculation madeby the company, in verifying the consistency of those estimates with those retained in the consolidated financial statements inaccordance with the first application, from January 1st, 2003 of the “Règlement CRC N° 2002-10”, and in reviewing the acceptanceprocess by management of those estimates.In the field of our opinion, we verified the reasonable assessment of those estimates.

Consolidated accountsCommentsWithout calling into question our opinion, we draw attention to the matter discussed in Note 1.a) to the financial statements relating tothe change in accounting methods that occurred during the year, and that results from the first application, from January 1st, 2003 byanticipation, of the “Règlement CRC 2002-10” on fixed assets.

Justification of our assessmentsChange in accounting methodsAs mentioned in our comments, Note 1.a) to the financial statements details the change in accounting methods that occurred during theyear, and that results from the first application, from January 1st, 2003 by anticipation, of the “Règlement CRC 2002-10” on fixed assets.Our works consisted in verifying the reasonableness of this change in accounting methods and of the presentation made thereof.Financial estimatesYour company recognizes deferred tax assets in its consolidated financial statements on the basis of business plans, as described inNotes 1.p) and 6 to the financial statements.Our works consisted in assessing the data and hypotheses on which those estimates were made, in reviewing the calculation madeby the company, in comparing the accounting estimates of the former years with the corresponding actual results, in verifying theconsistency of those estimates with those retained in accordance with the first application, from January 1st, 2003 of the “RèglementCRC N° 2002-10”, and in reviewing the acceptance process by management of those estimates.In the field of our opinion, we verified the reasonable assessment of those estimates.The assessments were made in the context of our audit of the financial statements, taken as a whole, and therefore contributed to theformation of the unqualified opinion expressed in our reports on annual and consolidated accounts.

We have nothing to report with respect to the fairness of the information on the financial position and financial statements containedin the Reference Document (Document de Référence).

Neuilly-sur-Seine and Paris, April 28, 2004



Benoît Lebrun

Additional information

The Reference Document includes at page 117 the report of the Statutory Auditors drawn up in accordance with article 225 – 235 of the Commercial Code, onthe President of the Board of Directors’ report, which describes the internal procedures for compiling and presenting accounting and financial information.

Concordance table

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Legal information

INFORMATION Corresponding pages in the reference document

Person responsible for the reference document and auditors Declaration by the person responsible for the reference document 118 Declaration by the auditors 118, 119 Information policy 13

General information Issuer Applicable law and regulations 93 Share capital Specific information 46, 95, 96, 98 Authorized but unissued share capital 100, 101 Potential share capital 47, 102, 103 Changes in Nexans’ share capital since the incorporation of the Company 98 Market for Nexans shares Table showing the evolution of the share price and volumes traded 12 Dividends 12,13, 45, 65

Share capital and voting rights Current breakdown of share capital and voting rights 13, 99 Changes in shareholders 100 Shareholders agreements 99

Information on the Group’s business Structure of the Group (relations between the parent Company and the subsidiaries, information on subsidiaries) 73, 74, 82, 83 Key figures 4, 5 Information by sector (by activity and by geographical area) 1 to 35, 38 to 47, 57, 58, 59 Market information and market position of the Company 1 to 35, 38 to 47, 88 Investment policy 94

Analysis of risks to which the Group is exposed Risk factors Market risks (cash, interest rates, exchange rates, investment portfolio) 88, 89, 90, 91 Specific risks linked to the nature of Nexans’ business (including reliance on suppliers, customers, subcontractors, contracts, production processes, etc.) 86, 87, 88, 94 Legal risks (law and regulations, concessions, patents, licenses, material litigation, non-recurring events, etc.) 92, 93, 94 Industrial and environmental risks 91, 92 Insurance 92, 93

Assets, financial position and income Consolidated financial statements and notes 49 to 74 Off-balance sheet commitments 69, 70 Auditors’ fees 104 Regulated ratios (banks, insurance, brokers) 68 to 71, 89 to 91 Parent Company financial statements and notes 80 to 84 Consolidated income for first quarter of 2004 76

Corporate governance Members and method of operation of Board of Directors 6, 7, 8, 45, 46, 108 to 116 Members and method of operation of committees 7, 8, 108 to 116 Board members (remuneration and benefits in kind, options granted and exercised) 8, 46, 102, 103 Top ten employees not members of the Board (options granted and exercised) 102 Related parties’ transactions 105

Recent trends and outlook for the future Recent trends 24 to 35, 42 to 44, 76Outlook 24 to 35, 42 to 44, 77

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Pursuant to the COB regulation N° 98-01, the “Autorité des marchés financiers” (AMF) has registered this reference document on April 28, 2004 under No.R.04-064. It cannot be used for a financial transaction, unless completed by a transaction note approved by the AMF.

This reference document has been prepared by the issuer and the signatories thereof assume all responsability therefor. This registration, which has been given after consideration of

the relevance and clarity of the information provided on the company, does not signify that the accounting and financial information has been certified.*

* Free translation from the original French version of the COB certificate.

About NexansCEO (date first Aplix and Electro-Banque 16 rue de Monceau, 75008 Paris appointed) /...

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