The Supervisory Board has 20 members and, in accordance with the German Codetermination Act, is composed of an equal number of shareholder and employee representatives. The shareholder representatives are elected by the shareholders at the Annual Shareholders Meeting. The employee representatives are elected by the employees. In the event of a tie vote on the Supervisory Board, another vote is held; if there is still a tie, the Chairperson casts the tie-breaking vote. As a general rule, Supervisory Board members should not be older than 70.

 

In order to ensure that the Supervisory Board’s advice and oversight functions are conducted on an independent basis, no more than two former members of the Board of Management may be members of the Supervisory Board. Supervisory Board members may not hold a corporate office or perform advisory services for the Company’s key competitors. Supervisory Board members are required to disclose to the Supervisory Board any conflicts of interest, particularly if a conflict arises from their advising, or holding a corporate office with, one of E.ON’s customers, suppliers, creditors, or other business partners. The Supervisory Board is required to report any conflicts of interest to the Annual Shareholders Meeting and to describe how the conflicts have been dealt with. Any material conflict of interest of a non-temporary nature should result in the termination of a member’s appointment to the Supervisory Board. There were no conflicts of interest involving members of the Supervisory Board in 2007. Any consulting or other service agreements between the Company and a Supervisory Board member require the Supervisory Board’s consent. No such agreements existed in 2007.

 

The Supervisory Board oversees the Company’s management and advises the Board of Management. It deals with the Company’s business development, medium-term plan, and the further development of corporate strategy. It discusses the Company’s quarterly Interim Reports and, taking into consideration the Independent Auditor’s Report and the Audit Committee’s preliminary report, approves the Financial Statements of E.ON AG and the Consolidated Financial Statements. It also appoints and removes the members of the Board of Management. Together with the Board of Management, it ensures that the Company has a long-term succession plan in place. Transactions or measures taken by the Board of Management that materially affect the Company’s assets, finances, or earnings require the Supervisory Board’s prior approval. The policies and procedures of E.ON AG’s Supervisory Board include a list of transactions and measures that require prior Supervisory Board approval. The list is not exhaustive.

 

Pursuant to its policies and procedures, the Supervisory Board has formed the following committees:

 

The committee required by Section 27, Paragraph 3 of the Codetermination Act consists of two shareholder representative members and two employee representative members. This committee is responsible for recommending to the Supervisory Board potential candidates for the Board of Management if the first vote does not yield the necessary two-thirds majority of votes of Supervisory Board members.

 

The Executive Committee consists of the four members of the above-named committee. It prepares meetings of the Supervisory Board and advises the Board of Management on matters of general policy relating to the Company’s strategic development. In urgent cases (in other words, if waiting for the Supervisory Board’s prior approval would materially prejudice the Company), the Executive Committee acts on the full Supervisory Board’s behalf. In particular, the Executive Committee prepares the Supervisory Board’s personnel decisions and is responsible for the conclusion, alteration, and termination of the employment contracts of Board of Management members. It also deals with corporate governance matters and reports to the Supervisory Board at least once a year on the status and effectiveness of, and possible ways of improving, the Company’s corporate governance.

 

The Audit Committee consists of four members who have special knowledge in the field of accounting and/or business administration. Pursuant to the Code’s mandates, the Chairperson has extensive knowledge and experience in applying accounting principles and/or in international business control processes.

 

The Audit Committee deals primarily with issues relating to the Company’s accounting, compliance, and risk management; the legally mandated independence of the Company’s Independent Auditor; the establishment of auditing priorities; and agreements on the Independent Auditor’s fees. The Audit Committee also prepares the Supervisory Board’s decision on the approval of the Financial Statements of E.ON AG and of the Consolidated Financial Statements. It also examines the Company’s quarterly Interim Reports and discusses the audit review of the Interim Reports with the Independent Auditor.

 

The Finance and Investment Committee consists of four members. It advises the Board of Management on all issues of corporate finance and investment planning. It decides on behalf of the Supervisory Board on the approval of the acquisition and disposition of companies, equity interests, and parts of companies, as well as on financial measures whose value exceeds 1 percent of the equity listed in the most recent Consolidated Balance Sheet. If the value of any such transactions or activities exceeds 2.5 percent of the equity listed in the most recent Consolidated Balance Sheet, the Finance and Investment Committee prepares the Supervisory Board’s decision on such matters.

 

The Nomination Committee consists of three shareholder representative members. Its Chairperson is the Chairperson of the Supervisory Board. Its task is to recommend to the Supervisory Board suitable candidates for election to the Supervisory Board by the Annual Shareholders Meeting.