of the MVV Energie Group for the 2003/2004 Financial Year

Principles and methods

The consolidated financial statements of the MVV Energie Group based on International Financial Reporting Standards (IFRS) have been compiled in line with the standards of the International Accounting Standards Board (IASB) applicable as of 30 September 2004.

The compilation of consolidated financial statements based on IFRS exempts MVV Energie AG from the obligation to compile consolidated financial statements based on the accounting principles of German commercial law, given that the requirements of Section 292a (2) of the German Commercial Code (HGB) have been fulfilled.The assessment of these criteria has been based on the interpretation of the German Standardisation Committee in German Accounting Standard No. 1 (DRS 1).

The annual financial statements of those companies proportionately or fully consolidated in the consolidated financial statements of the MVV Energie Group have been based on uniform accounting and valuation principles.

In addition to the balance sheet, income statement and the statement of changes in equity pursuant to IAS 1, the annual financial statements encompass a cash flow statement pursuant to IAS 7 and segmental reporting pursuant to IAS 14, as well as the notes to the annual financial statements.

To improve the presentation of the net asset and financial position of the company, the part-payments made by customers in the context of their annual consumption invoices have been deducted from trade receivables for the first time. Corresponding adjustments have been made to the figures for the previous year. The sums thereby deducted amounted to Euro 236,781 thousand as of 30 September 2004 and to Euro 220,671 thousand as of 30 September 2003.

Since the beginning of the financial year, the sales relating to the proprietary electricity trading business have been reported on a net basis in order to enhance their transparency. This means that only the gross margin resulting from the total proprietary energy trading transactions has been reported - as sales, if positive, and as cost of materials, if negative. For reasons of comparison, the figures for the previous year have been adjusted accordingly.The deductions to sales and cost of materials resulting from the aforementioned net reporting procedure amounted to Euro 142,562 thousand as of 30 September 2004 and to Euro 247,710 thousand as of 30 September 2003. This amendment of reporting procedures has no impact on earnings.

A further amendment of reporting procedures in the balance sheet and the income statement relates to the treatment of income subsidies for construction and house connection expenses. The income subsidies previously reported as liabilities have been deducted from the tangible fixed assets in the consolidated financial statements as of 30 September 2004 (c.f. Note 2). This results in a reduction of Euro 184,417 thousand in the net items reported under technical equipment and machinery. The equivalent net items for the previous year have been reduced by Euro 182,832 thousand. In the income statement, we have made a corresponding adjustment to the release of income subsidies, which was previously reported under sales. Accordingly, the income subsidies thereby released reduce the volume of depreciation of the underlying assets. The release of income subsidies amounted to Euro 9,358 thousand in the past year and to Euro 9,289 thousand in the previous year. The reduction of sales and equal reduction in the volume of depreciation means that this amendment of reporting procedures has no impact on earnings.