Report of the Supervisory Board In the year under review, the Supervisory Board thoroughly examined E.ON's situation. The E.ON AG Board of Manage- ment regularly provided us with timely and comprehensive information. We continually monitored the management of the Company and advised the Board of Management. At the Supervisory Board's three regular meetings and four extraordinary meetings in 2007, we discussed in depth all issues relevant to E.ON. Between meetings, the Board of Management provided the Supervisory Board with written reports on business transactions of key importance to E.ON. Furthermore, the Chairman of the Supervisory Board was informed on an ongoing basis about all significant business transactions as well as the development of key financial ?figures. Corporate Strategy and Planned Acquisitions and Disposals An important topic of our discussions was the package of strategic initiatives, announced in May 2007, for the further development of the E.ON Group. The package's main ele- ments were: · business management and organizational structure · growth investments · climate protection and customer orientation · earnings growth · financial strategy. The Board of Management provided us with comprehensive information about how further optimizing the way E.ON manages its businesses would enable it to seize the oppor- tunities created by the ongoing integration of Europe's ?energy markets, improve its operating performance, pursue ambitious climate-protection objectives, sustainably enhance earnings, and achieve and actively manage a significantly more efficient capital structure. The Board of Management also presented a substantial investment program to ensure that E.ON continues to grow and enhance value well into the future. Furthermore, the Board of Management informed us about the latest developments in E.ON's initial plan, which was to acquire all of Spanish energy utility Endesa, and about the agreement it subsequently reached with Enel and Acciona under which it will acquire an extensive portfolio of assets, with operations primarily in Spain, Italy, and France. Other important topics of our discussions and resolutions were the activities surrounding E.ON's entry into the Russian electricity market and the systematic expansion of its renew- ables operations. The Board of Management provided us with detailed information, in particular about the privatization of the Russian electricity market and the acquisition of OGK-4, a Russian power producer, as well as the purchase of wind-farm operators in Europe and North America. In addition, the Board of Management reported in detail about a variety of strategically relevant projects, in particular natural gas storage projects in Austria and Germany, the acquisition of gas production licenses in the Norwegian North Sea, the planned acquisition of a stake in the Siberian natu- ral gas field Yushno Russkoye, the participation in the construc?tion of the Skanled gas pipeline in Northern Europe, and the disposal of E.ON's stake in RAG. We were also informed about the planned acquisition of Statkraft's 44.6- percent stake in E.ON Sverige. Energy Policy and Regulatory Environment The Board of Management provided us with detailed infor- mation about developments in the policy and regulatory environment of the electricity and gas industries. We dealt extensively with the relevant legislative and regulatory processes and their effects on our markets and the E.ON Group. Key topics were: · the European Union's comprehensive package of energy- policy proposals · the European Union's climate policy and the develop- ment of the EU-wide emissions trading scheme ("ETS"), including Germany's national allocation plan for phase two of the ETS · the Commission's third package of internal energy ?mar- ket legislation, including the proposed unbundling of network operations · the network charge approvals processes of the German Federal Network Agency 16