Ladies and Gentlemen,

During the 2005/06 financial year, the Supervisory Board performed its duties in accordance with the requirements of the law and of the company’s articles of incorporation, monitoring the work of the Executive Board on an ongoing basis and assisting it in an advisory capacity. We were provided by the Executive Board with regular, prompt and comprehensive information about major events and developments at the company and were involved at an early stage in all decisions of significance.

The Supervisory Board met on ten occasions during the period under report. The Audit Committee held three meetings and the Personnel Committee met twice during the year under report. In view of current developments, we established committees to deal with the capital increase and the employee share programme, each of which met on one occasion.

The Executive Board informed us on a regular basis of the business performance of MVV Energie AG and its principal shareholdings. The Executive Board also provided us with information concerning the course of business in the individual segments, and on the development of the net asset, financial and earnings position. We were also briefed on the company’s risk situation and its risk management, as well as on its financial, investment, personnel and strategic planning. At our meetings, we questioned the Executive Board in detail as to all major business transactions and then discussed these at suitable length. In the case of all decisions and actions requiring its consent, the Supervisory Board inspected the draft resolutions, which in some cases were prepared by its committees, and was involved in the resultant decision. In addition to the presentations and documents pertaining to the meetings, we were also provided with quarterly reports and further oral and written reports concerning events of significance and the resolutions thereby required.

Main topics of discussion

At the beginning of the year under report, the details of the capital increase successfully executed in November 2005 were discussed by the full Supervisory Board. The preparations for the 2006 Annual General Meeting were also of significance in view of the pending elections to the Supervisory Board. One further important focus of our deliberations related to the strategy of MVV Energie CZ s.r.o. and to discussing opportunities in terms of acquiring further shareholdings in the Czech Republic and Slovakia. In March 2006, we approved the sale of MAnet GmbH.

Starting in mid-2006, the Supervisory Board dealt in detail with the planning and preparations for the shared service companies. We are convinced that the pooling of comparable services across the companies will provide a solid foundation for achieving internal efficiency enhancements. It was important to us in this respect that the interests of the employees should be safeguarded to the greatest possible extent. In view of the importance we attach to employee participation in the company, we supported the employee share programme introduced in September 2006. In September 2006, the Supervisory Board also discussed the 2006/07 business plan and the medium-term planning for the group of companies in great depth and dealt in detail with risk management and risk analysis. Furthermore, we also addressed the implementation of the German Corporate Governance Code. Further information about corporate governance at the MVV Energie Group, as well as the Statement of Compliance adopted in December 2006, can be in the Corporate Governance section of this Annual Report and have also been made available on an ongoing basis at the company’s homepage at www.mvv-investor.de.

Composition of Supervisory and Executive Boards

The composition of the Supervisory Board changed during the year under report as a result of the election of employee representatives held in January 2006 and the election of shareholder representatives at the Annual General Meeting in March 2006. The following members departed from the Supervisory Board in the 2005/06 financial year: Peter Dinges, Rosi Haus, Helfried Krope, Egon Laux, Dr. Rolf Neuhaus, Dr. Sven-Joachim Otto, Konrad Schlichter, Rolf Schmidt, Bernd Sendzik and Christa Spohni. We should like to thank the departing members of the Supervisory Board for their constructive participation in the work of our body.

Gerhard Widder (Chairman) and Christian Specht retain their appointments as shareholder representatives. The following individuals were re-elected to the Supervisory Board: Manfred Lösch (Deputy Chairman), Werner Ehret, Dr. Manfred Fuchs, Reinhold Götz, Dr. Karl Heidenreich, Prof. Dr. Egon Jüttner, Klaus Lindner, Dr. Frank Mentrup and Sabine Schlorke. The following individuals were elected to the Supervisory Board for the first time: Johannes Böttcher, Holger Buchholz, Dr. Rudolf Friedrich, Michael Homann, Prof. Dr. Norbert Loos, Manuel Mertes, Barbara Neumann, Wolfgang Raufelder and Uwe Spatz.

There were no changes in the composition of the Executive Board during the year under report.

Events after the balance sheet date

In two extraordinary meetings held at the beginning of the new 2006 /07 financial year, the Supervisory Board held in-depth discussions concerning the company’s management. Karl-Heinz Trautmann, responsible for the sales, trading and environmental energy divisions, retired at his own request from his position on the Executive Board of MVV Energie AG as of 15 October 2006. The Supervisory Board assented to his request that his contract, which ran until the end of September 2008, be prematurely terminated. Karl-Heinz Trautmann had been a member of the Executive Board of MVV Energie AG since October 2003. We should like to thank him for his contribution towards the successful development of the company in the past years. Irrespective of the board resolutions, responsibility for sales will in future be assumed by the department of the CEO, Dr. Rudolf Schulten, and that for the environmental energy and trading divisions by the technology, networks and energy-related services board division, for which Dr. Werner Dub is responsible.

There was speculation in the press in October 2006 as to the future structure of the MVV Energie Group. At this time, the Supervisory Board was only at the beginning of its discussion and decision-making process. It will address and pass resolution on this topic without any preconceptions or predetermined results during the 2006/07 financial year.

Approval of the annual financial statements

The auditing company Ernst & Young AG, Wirtschaftsprüfungsgesellschaft, Steuerberatungsgesellschaft, Mannheim, audited the consolidated financial statements and group management report of the MVV Energie Group for the 2005/06 financial year pursuant to the resolution passed by the 2006 Annual General Meeting and the subsequent mandate by the Supervisory Board. The consolidated financial statements and the group management report, both of which were compiled in accordance with International Financial Reporting Standards (IFRS), were granted an unqualified audit opinion. The annual financial statements of MVV Energie AG compiled in line with the German Commercial Code (HGB) and the accompanying management report for the 2005/06 financial year were also audited by the auditor and granted an unqualified audit opinion.

The consolidated financial statements and group management report of the MVV Energie Group, the annual financial statements and management report of MVV Energie AG, the proposal made by the Executive Board in respect of the appropriation of earnings and the audit reports of the auditor were all submitted to the Supervisory Board in good time for its respective meeting. These documents were carefully inspected by the Audit Committee and the Supervisory Board and were discussed in detail in the presence of the auditor. The Supervisory Board raised no objections and concurred with the findings of the audit. At our meeting on 14 December 2006, we approved the consolidated financial statements and group management report of the MVV Energie Group and the annual financial statements and management report of MVV Energie AG. The annual financial statements are thus adopted. We endorse the proposal made by the Executive Board in respect of the appropriation of earnings.

The Executive Board further compiled a report for the 2005/06 financial year on the company’s relationships with closely related companies (dependent company report). This report demonstrates that MVV Energie AG received commensurate compensation for and was not disadvantaged by the legal transactions with affiliated companies outlined therein. The dependent company report was audited by the auditor, who granted the following audit opinion:

“Following the audit and assessment carried out by us in accordance with our professional obligations, we confirm:

• that the factual disclosures made in the report are accurate
• that the compensation of the company in the transactions listed in the report was not incommensurate based on the circumstances known at the time of such transaction being executed.”

We were provided in good time with copies of the dependent company report and of the audit report compiled by the auditor. Following its own review, the Supervisory Board concurred with the assessment made by the auditor and thus approved this report.

Moreover, Ernst & Young AG, Wirtschaftsprüfungsgesellschaft, Steuerberatungsgesellschaft, Mannheim, also audited the early warning risk identification system in place at MVV Energie AG and was of the opinion that this system was suited to fulfil its legal obligations.

The Supervisory Board would like to thank the Executive Board, the management teams at the shareholdings, as well as all employees and employee representatives, for their great dedication and successful work during the 2005/06 financial year. All of these groups have demonstrated a high degree of commitment, courage to accept change and the ability to work together constructively and responsibly, even in difficult situations. Thanks to all of their efforts, the MVV Energie Group is well prepared to address the challenges facing the energy industry.

Mannheim, December 2006

Supervisory Board

Gerhard Widder

Chairman