As Ñled with the Securities and Exchange Commission on March 27, UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549

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1 As Ñled with the Securities and Exchange Commission on March 27, UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC (Mark One) FORM 20-F n REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Ñscal year ended: December 31, 2000 OR n TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from Commission Ñle number: to E.ON AG (Exact name of Registrant as speciñed in its charter) E.ON CORP. (Translation of Registrant's name into English) Federal Republic of Germany (Jurisdiction of Incorporation or Organization) Bennigsenplatz 1, D D usseldorf, GERMANY (Address of Principal Executive OÇces) Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered American Depositary Shares representing Ordinary Shares with no par value New York Stock Exchange Ordinary Shares with no par value New York Stock Exchange* Securities registered or to be registered pursuant to Section 12(g) of the Act: None (Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None (Title of Class) Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report. As of December 31, 2000, 748,032,896 outstanding Ordinary Shares with no par value. Indicate by check mark whether the registrant (1) has Ñled all reports required to be Ñled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to Ñle such reports), and (2) has been subject to such Ñling requirements for the past 90 days. Yes No n Indicate by check mark which Ñnancial statement item the registrant has elected to follow. Item 17 n Item 18 * Not for trading, but only in connection with the registration of American Depositary Shares.

2 As used in this annual report, ""E.ON,'' the ""Company,'' the ""E.ON Group'' or the ""Group'' refers to E.ON AG and its consolidated subsidiaries. ""VEBA'' or the ""VEBA Group'' refers to VEBA AG and its consolidated subsidiaries prior to its merger with VIAG AG and the name change from VEBA AG to E.ON AG. ""VIAG'' or the ""VIAG Group'' refers to VIAG AG and its consolidated subsidiaries prior to its merger with VEBA. ""PreussenElektra'' refers to PreussenElektra AG and its consolidated subsidiaries and ""Bayernwerk'' refers to Bayernwerk AG and its consolidated subsidiaries, which merged to form E.ON's electricity division consisting of E.ON Energie AG and its consolidated subsidiaries (""E.ON Energie''). ""VEBA Oel'' refers to VEBA Oel AG and its consolidated subsidiaries, which collectively comprise E.ON's oil division. ""Degussa-H uls'' refers to Degussa-H uls AG and its consolidated subsidiaries and ""SKW Trostberg'' refers to SKW Trostberg AG and its consolidated subsidiaries, which merged to form E.ON's chemicals division consisting of Degussa AG and its consolidated subsidiaries (""Degussa''). ""Real Estate'' refers to Viterra AG and its consolidated subsidiaries (""Viterra''), which collectively comprise E.ON's real estate division. ""E.ON Telecom'' refers to E.ON Telecom GmbH and its consolidated subsidiaries and ""VIAG Telecom'' refers to VIAG Telecom Beteiligungs GmbH and its consolidated subsidiaries, which collectively comprise E.ON's telecommunications division. ""Distribution/Logistics'' or ""D/L'' refers to Stinnes AG (""Stinnes'') and Kl ockner & Co AG (""Kl ockner'') and their respective consolidated subsidiaries, which collectively comprise E.ON's distribution/logistics division. ""Aluminum'' refers to VAW aluminium AG and its consolidated subsidiaries (""VAW''), which collectively comprise E.ON's aluminum division. ""MEMC'' refers to MEMC Electronic Materials, Inc. and its consolidated subsidiaries, which collectively comprise E.ON's silicon wafers division. Unless otherwise indicated, all amounts in this annual report are expressed in German marks (""marks'' or ""DM''), European Union euros (""euros'' or ""EUR'' or ""4'') or United States dollars (""U.S. dollars'' or ""dollars'' or ""$''). Beginning in 1999, the reporting currency is the euro. Amounts formerly stated in marks have been translated into euro using the Ñxed rate of DM per For additional details regarding the euro, see ""Item 5. Operating and Financial Review and Prospects Ì European Monetary Union (EMU).'' E.ON's 1998 restated euro Ñnancial information depicts the same trends as would have been presented if E.ON had continued to present its Ñnancial information in German marks. E.ON's consolidated Ñnancial information will, however, not be comparable to the euro Ñnancial information of other companies that previously reported their Ñnancial information in a currency other than German marks. Amounts stated in dollars, unless otherwise indicated, have been translated from euros at an assumed rate solely for convenience and should not be construed as representations that the euro amounts actually represent such dollar amounts or could be converted into dollars at the rate indicated. Unless otherwise stated, such dollar amounts have been translated from euros at the noon buying rate in New York City for cable transfers in foreign currencies as certiñed for customs purposes by the Federal Reserve Bank of New York (the ""Noon Buying Rate'') on December 29, 2000, which was $ per Such rate may diåer from the actual rates used in the preparation of the consolidated Ñnancial statements of E.ON as of December 31, 2000 and 1999, and for each of the years in the three-year period ended December 31, 2000, included in Item 18 of this annual report (the ""Consolidated Financial Statements''), which are expressed in euros, and, accordingly, dollar amounts appearing in this annual report may diåer from the actual dollar amounts that were translated into euros in the preparation of such Ñnancial statements. For information regarding recent rates of exchange between marks and dollars, see ""Item 3. Key Information Ì Exchange Rates.''

3 Beginning in 2000, E.ON prepared its Ñnancial statements in accordance with generally accepted accounting principles in the United States (""U.S. GAAP''). Formerly, the Company prepared its Ñnancial statements to this annual report in accordance with generally accepted accounting principles in Germany (""German GAAP'') as prescribed by the German Commercial Code (Handelsgesetzbuch, the ""Commercial Code'') and the German Stock Corporation Act (Aktiengesetz, the ""Stock Corporation Act''). In connection with the change to U.S. GAAP, E.ON's Ñnancial statements for the Ñscal years 1999 and 1998 have been restated according to U.S. GAAP. See Note 1 of the Notes to Consolidated Financial Statements. Sales and internal operating proñt presented in this annual report for each of E.ON's divisions are based on the consolidated accounts of the E.ON Group as shown in Note 32 (Segment Information) of the Notes to Consolidated Financial Statements under the captions ""External sales'' and ""Internal operating proñt.'' ""Internal operating proñt'' is the measure pursuant to which the Group evaluates the performance of its segments and allocates resources to them. Internal operating proñt, which includes income from equity interests, is equivalent to income before income tax, adjusted to (1) exclude material, non-operating income and expenses that are non-recurring or infrequent in nature and (2) deduct foreign exploration and production income taxes. These adjustments primarily include net book gains resulting from large divestitures as well as restructuring expenses. This annual report contains certain forward-looking statements and information relating to the E.ON Group that are based on beliefs of its management as well as assumptions made by and information currently available to E.ON. When used in this document, the words ""anticipate,'' ""believe,'' ""estimate,'' ""expect,'' ""intend,'' ""plan'' and ""project'' and similar expressions, as they relate to the E.ON Group or its management, are intended to identify forward-looking statements. Such statements reöect the current views of E.ON with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of the E.ON Group to be materially diåerent from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products by other companies, lack of acceptance of new products or services by the Group's targeted customers, changes in business strategy and various other factors, both referenced and not referenced in this annual report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this annual report as anticipated, believed, estimated, expected, intended, planned or projected. E.ON does not intend, and does not assume any obligation, to update these forwardlooking statements.

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5 TABLE OF CONTENTS PART I Item 1. Identity of Directors, Senior Management and AdvisersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 Item 2. OÅer Statistics and Expected TimetableÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 Item 3. Key InformationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 SELECTED FINANCIAL DATA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 DIVIDENDS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 EXCHANGE RATES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 RISK FACTORS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 Item 4. Information on the Company ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7 HISTORY AND DEVELOPMENT OF THE COMPANY ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7 VEBA-VIAG MERGER ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 OTHER SIGNIFICANT EVENTSÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10 CAPITAL EXPENDITURES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10 BUSINESS OVERVIEW ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11 INTRODUCTION ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11 GROUP STRATEGY ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14 ELECTRICITY ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14 OIL ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37 CHEMICALS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 46 REAL ESTATE ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 63 TELECOMMUNICATIONS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 65 DISTRIBUTION/LOGISTICS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 67 ALUMINUM ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 70 SILICON WAFERS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 71 OPERATING ENVIRONMENT ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 72 GERMAN ECONOMIC BACKGROUND ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 72 EUROPEAN UNION ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 73 RISK MANAGEMENT ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 74 ENVIRONMENTAL MATTERS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 74 ORGANIZATIONAL STRUCTUREÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 75 PROPERTY, PLANTS AND EQUIPMENT ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 75 GENERAL ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 75 PRODUCTION FACILITIES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 75 OTHER FACILITIES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 77 Item 5. Operating and Financial Review and Prospects ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 78 OVERVIEW ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 78 STOCK INCENTIVE PLANS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 79 REPURCHASE OF SHARES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 80 ACQUISITIONS AND DISPOSITIONS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 80 RESEARCH AND DEVELOPMENT ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 82 EXCHANGE RATE EXPOSURE AND CURRENCY RISK MANAGEMENT ÏÏÏÏ 86 EUROPEAN MONETARY UNION (EMU) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 86 INFLATION ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 87 RESULTS OF OPERATIONS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 87 BUSINESS SEGMENT INFORMATION ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 88 i

6 YEAR ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 89 YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 95 LIQUIDITY AND CAPITAL RESOURCESÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 101 Item 6. Directors, Senior Management and Employees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 104 Item 7. Major Shareholders and Related Party Transactions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 112 Item 8. Financial Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 113 CONSOLIDATED FINANCIAL STATEMENTS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 113 LEGAL PROCEEDINGSÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 113 DIVIDEND POLICY ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 114 SIGNIFICANT CHANGES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 114 Item 9. The OÅer and Listing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 114 Item 10. Additional Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 118 MEMORANDUM AND ARTICLES OF ASSOCIATION ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 118 MATERIAL CONTRACTS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 123 EXCHANGE CONTROLS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 123 TAXATION ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 123 DOCUMENTS ON DISPLAY ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 127 Item 11. Quantitative and Qualitative Disclosures about Market-RiskÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 128 Item 12. Description of Securities other than Equity Securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 131 PART II Item 13. Defaults, Arrearages and Delinquencies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 131 Item 14. Material ModiÑcations to the Rights of Security Holders and Use of Proceeds ÏÏÏÏÏÏÏÏÏÏ 131 Item 15. Reserved ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 131 Item 16. Reserved ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 131 PART III Item 17. Financial Statements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 131 Item 18. Financial Statements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 132 Item 19. Exhibits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 132 ii

7 PART I Item 1. Identity of Directors, Senior Management and Advisers. Not applicable. Item 2. OÅer Statistics and Expected Timetable. Not applicable. Item 3. Key Information. SELECTED FINANCIAL DATA The selected Ñnancial data presented below in accordance with U.S. GAAP as of and for each of the years in the Ñve-year period ended December 31, 2000, have been excerpted from or are derived from the Consolidated Financial Statements of E.ON as of and for the period ended December 31, 2000 and of VEBA as of and for the periods ended December 31, 1999, 1998, 1997 and On June 16, 2000, E.ON completed the acquisition of VIAG. For convenience reasons, June 30, 2000 has been chosen as the acquisition date. The results of operations of VIAG are included in E.ON's Ñnancial data from July 1 to December 31, The selected Ñnancial data set forth below should be read in conjunction with, and are qualiñed in their entirety by reference to, the Consolidated Financial Statements and the Notes to the Consolidated Financial Statements. Year Ended December 31, 2000(1) (2) 1997(2) 1996(2) (in millions, except share amounts) Statement of Income Data: Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $77, , , , , ,112 Sales excluding electricity and petroleum taxes(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏ 69,516 74,048 46,572 39,045 38,892 34,816 Earnings from companies accounted for under the equity method ÏÏÏÏÏ Income before income taxes ÏÏÏÏÏÏÏ 6,150 6,551 4,400 2,385 2,625 2,231 Income before minority interests(4) 3,792 4,039 3,123 1,161 1,558 1,361 Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,352 3,570 2,991 1,174 1,471 1,259 Basic earnings per share ÏÏÏÏÏÏÏÏÏÏÏ Diluted earnings per share ÏÏÏÏÏÏÏÏÏ Balance Sheet Data: Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 99, ,215 56,219 45,552 43,389 38,274 Long-term Ñnancial liabilities ÏÏÏÏÏÏ 6,694 7,130 3,630 2,339 1,997 1,600 Stockholders' equity(5) ÏÏÏÏÏÏÏÏÏÏÏ 26,317 28,033 15,813 13,855 13,473 11,255 Number of shares ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 763,298, ,797, ,797, ,203, ,801,270 (1) Amounts in this column are unaudited and have been translated solely for the convenience of the reader at an exchange rate of $ , the Noon Buying Rate on December 29, (2) The consolidated Ñnancial statements as of December 31, 1998, 1997 and 1996 and for the years then ended, have been prepared in marks and were translated into euros at the oçcial Ñxed exchange rate. (3) German law requires the seller of petroleum products and, as of April 1, 1999, electricity to collect petroleum taxes and electricity taxes, respectively, and remit such amounts to tax authorities. (4) Before minority interest of positive 4469 million for 2000 as compared with positive 4132 million, negative 413 million and positive 487 million and 4102 million for 1999, 1998, 1997 and 1996, respectively. (5) After minority interest. 1

8 DIVIDENDS The following table sets forth the annual dividends paid per ordinary unit bearer share of E.ON AG (each, an ""Ordinary Share'') in euros, and the dollar equivalent, for each of the years indicated. Historically, both VEBA AG and VIAG AG declared and paid dividends in marks. For convenience, historical data regarding VEBA AG is translated from marks into euros at the Ñxed rate of The table does not reöect the related tax credits available to German taxpayers who receive dividend payments. Owners of Ordinary Shares who are United States residents should be aware that they will be subject to German withholding tax on dividends received. See ""Item 10. Additional Information Ì Taxation.'' Dividends Paid per Ordinary Share of DM 5 Year Ended December 31, 5 Each(1) $(2) 1996 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1) In 1999 and 2000: dividends paid per Ordinary Share with no par value. (2) Translated into dollars at the Noon Buying Rate on the dividend payment date, which typically occurred during the second quarter of the following year, except for the 2000 amount, which has been translated at the Noon Buying Rate on December 29, (3) The dividend amount for the year ended December 31, 2000 is the amount proposed by E.ON's Supervisory Board and Board of Management and has not yet been approved by its stockholders. Prior to the payment of the dividends, a resolution approving such amount must be passed by E.ON's stockholders at the annual general meeting to be held on May 18, See also ""Item 8. Financial Information Ì Dividend Policy.'' EXCHANGE RATES Until December 31, 1998, the mark took part in the European Monetary System (""EMS'') exchange rate mechanism. Within the EMS, exchange rates could Öuctuate within permitted margins, Ñxed by central bank intervention. Against currencies outside the EMS, the mark had, in theory, free Öoating exchange rates, although central banks sometimes tried to conñne short-term exchange rate Öuctuations by intervening in foreign exchange markets. As of December 31, 1998, the mark has a Ñxed value relative to the euro of , and therefore no longer trades on currency markets as an independent currency. For more information, see ""Item 5. Operating and Financial Review and Prospects Ì European Monetary Union (EMU).'' Fluctuations in the exchange rate between the euro and the dollar will aåect the dollar equivalent of the euro price of the Ordinary Shares traded on the German stock exchanges and, as a result, will aåect the price of the Company's American Depositary Receipts (""ADRs'') traded in the United States. Such Öuctuations will also aåect the dollar amounts received by holders of ADRs on the conversion into dollars of cash dividends paid in euros on the Ordinary Shares represented by the ADRs. The following table sets forth, for the periods and dates indicated, the average, high, low and/or periodend Noon Buying Rates for euros expressed in $ per For convenience, historical data is translated from marks into euro at the Ñxed rate of DM per euro. 2

9 (Year or Month) Average(1) High Low Period-End 1996 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ August ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ September ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ October ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ November ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ DecemberÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ JanuaryÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ FebruaryÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1) The average of the Noon Buying Rates for the relevant period, calculated using the average of the Noon Buying Rates on the last business day of each month during the period. On March 12, 2001, the Noon Buying Rate was $ per RISK FACTORS On May 1, 1998, the German Control and Transparency in Business Act (Gesetz zur Kontrolle und Transparenz im Unternehmensbereich, or KonTraG), came into eåect. The provisions of KonTraG include the requirement that the board of management of a German stock corporation establish a risk management system to identify material risks to the corporation at an early stage. As part of their audit, the auditors of a stock corporation whose shares are listed on an oçcial market assess whether the system meets the requirements of KonTraG. The audit requirement has been applicable to all Ñscal years beginning after December 31, 1998, although the former VEBA underwent this audit voluntarily already in Ñscal year Even prior to the requirements introduced by KonTraG, the Company believes it had an eåective risk management system which integrates risk management in its Group-wide business procedures. The system includes controlling processes, Group-wide guidelines, data processing systems and regular reports to the Board of Management and Supervisory Board. In 1998, a Group-wide project was launched to analyze, aggregate and document existing risks and control systems at the Group level. The reliability of the risk management system is checked regularly by the internal audit and controlling departments of the Company's business divisions and of the parent company as well as by the Company's independent auditors. The documentation and evaluation of the Company's risk management system is annually updated across the Group in the following steps: Standardized documentation of risks and control systems; Evaluation of risks according to the degree of severity and the probability of occurrence, and assessment of the eåectiveness of existing control systems; and Analysis of the results and structured disclosure in a risk report. 3

10 The following discussion groups risks according to the categories of external, operational and Ñnancial risks, as used by the Company in its risk management system. External The liberalization of the electricity industry in the EU has resulted in Ñerce price competition in Germany that has depressed the Company's proñt margins and may negatively aåect the Company's results of operations. In the wake of liberalization of the electricity market in the EU, including the implementation of new energy laws in Germany in 1998, competition in the electricity market in Europe has intensiñed, causing electricity prices to drop accordingly, and in some market segments signiñcantly. For more information about the eåects of lower electricity prices on the Company's results of operations, see ""Item 5. Operating and Financial Review and Prospects Ì Results of Operations.'' Several factors have contributed to the drop in electricity prices in Germany, including: signiñcant power plant overcapacity in Germany and Europe; relatively high and increasing price transparency; the emergence of new competitors and suppliers due to the introduction of competition across all electricity customer segments without a transition period; and the creation of European electricity exchanges. In addition, some groups of electricity users (for example, municipalities) have entered into cooperative arrangements in Germany for the purpose of purchasing electricity at more favorable prices, thereby increasing price competition. Although the Company is continuing with its cost-saving measures in its electricity operations, deregulation is expected to sustain the depression of electricity prices in Germany, and the Company does not believe it will be able to regain its former very high proñt margins in this sector. Outside Germany, the geographic markets in which the Company operates are also engaged in deregulation to some extent and similar eåects could be felt in those electricity markets with comparable adverse aåects on the Company's proñt margins. The Company faces strong competition in the electricity markets in Germany and abroad. Prior to the liberalization of the electricity market in Germany, German utilities by contract operated in separate geographic areas. These contracts consisted of demarcation agreements, by which the utilities agreed to mark oå their supply areas from one another. In addition, the utilities would acquire concession agreements with communities for the use of the communities' public roads for laying supply lines while excluding other companies. Both the demarcation and concession agreements were protected by special cartel law protections, with the result that local and regional monopolies were permitted to exist for the transmission, distribution and supply of electricity. Due to the abolition of the special cartel law protections, utilities such as the Company have lost the privilege of their traditional geographic monopolies. In addition, under Germany's new energy laws, the operators of electricity grids are obligated to provide non-discriminatory access to third parties. The result of these changes has been the creation of a new and Ñercely competitive industry environment in Germany, with a growing number of utilities marketing electricity to regional and local distribution companies as well as to industrial and residential customers outside their traditional supply areas. In addition, the private power industry in Germany was formerly characterized by numerous strong competitors. Due to liberalization, signiñcant consolidation is occurring in the German electricity market as its approximately 1,000 electricity companies seek to cut costs, increase eçciency and adjust to new and changing market structures. As a result, the private power industry has been characterized by increased competition for asset purchases and development opportunities. The liberalization of the electricity market in Germany has also led to new market structures with new market participants. For example, electricity traders without assets are becoming increasingly active in the market as competitors, and the market for electricity has become more liquid. The introduction of competition across all electricity customer segments has made it easier for new competitors and suppliers to establish themselves because new market positions for the individual customer segments are being deñned. Consequently, both German and foreign companies have established aggressive electricity sales and trading operations in Germany. Although the Company intends to compete vigorously against these new competitors and other electricity companies, increased competition could 4

11 negatively aåect the Company's sales and proñt margins in the energy sector, which could materially and adversely aåect the Company's Ñnancial condition and results of operations. Changes in laws and regulations which aåect the Company's operations could materially and adversely aåect the Company's Ñnancial condition and results of operations. In each of its operations, the Company must comply with a number of laws and government regulations. For more information on laws and regulations in each of the Company's core business operations, see the description of the businesses contained in ""Item 4. Information on the Company Ì Business Overview.'' From time to time, changes in these laws and regulations may be introduced which may negatively aåect the Company's business, Ñnancial condition and results of operations. For example, the Company's nuclear power plants are among its cheapest source of power, and, along with hydroelectric and lignite-based power plants, are used primarily to cover the Company's base load power requirements. In June 2000, E.ON, together with the other German operators of nuclear power stations, reached agreement with the German federal government to phase out the generation of nuclear power in Germany, which E.ON expects to take eåect upon amendment of Germany's nuclear energy laws. For more information about the planned phase-out of nuclear power stations, see ""Item 4. Information on the Company Ì Business Overview Ì Electricity.'' Further, the parties also agreed that the reprocessing of spent fuel elements will be allowed until at least July 2005, during which time the plant operators will build storage facilities on the premises of the nuclear plants. The construction costs of these storage facilities are expected to be signiñcant. The description of the Company's operations in ""Item 4. Information on the Company Ì Business Overview'' also contains information regarding other recent or proposed changes in law or regulations which could negatively aåect the Company's operations. The Company is unable to predict the eåect of future developments in laws and regulations on its operations and future earnings. Cyclicality and other eåects on sales in the chemicals industry have in the past and may in the future result in reduced revenues or operating margins. The chemicals industry is generally subject to sales cyclicality. This includes periods of low prices during periods of excess capacity which may negatively impact operating margins and may result in operating losses in the chemicals division. Moreover, the chemicals industry is susceptible to cycles in the world economy and to speciñc country events which may result in lower sales volumes or prices for the Company's chemicals business during speciñc periods. Although the Company is reducing its exposure to cyclicality in the chemicals business by focusing on the less cyclical Ñeld of specialty chemicals, and takes measures to anticipate and plan for cyclicality and other eåects on sales of chemicals, it can provide no assurances that it will not experience future production overcapacities, downward pressure on prices or other factors which could have adverse eåects on the operating results of its chemicals business. Substantial portions of the Company's oil reserves are in politically and economically unstable countries, exposing the Company's reserves and oil operations to signiñcant risks. As with most international oil companies, substantial portions of the Company's oil reserves are located in countries outside the EU and North America, some of which can be considered politically and economically less stable than EU countries. These reserves and the related operations may be subject to political risks, including increases in taxes and royalties, the establishment of production and export limits, the renegotiation of contracts, the nationalization of assets, changes in local government regimes and policies, as well as changes in business customs and practices, payment delays, currency exchange restrictions and losses and impairment of operations by actions of insurgent groups. Although it is impossible to predict the likelihood of such occurrences or their eåect on the Company's operations, the occurrence of any one of these events could have a material adverse eåect on the Company's oil operations. Operational The Company's core energy and chemicals businesses operate technologically complex production facilities. Operational failures or extended production downtimes could negatively impact the Company's Ñnancial condition and results of operations. The Company's businesses are also subject to risks in the ordinary 5

12 course of business such as the loss of personnel or customers, and losses due to bad debts. The Company believes it has appropriate risk control measures in eåect to counteract and address these types of risks. The following are additional operational risks the Company faces: The Company must take Ñnancial and other risks in its oil and gas exploration and production activities, which could materially and adversely aåect its Ñnancial condition and results of operations. Oil and gas exploration and production require high levels of investment and entail particular economic risks and opportunities. These activities are highly regulated and are subject to intervention by governments throughout the world in matters such as the award of exploration and production licenses, the imposition of speciñc drilling and other obligations, environmental protection measures, control over the development and abandonment of Ñelds and installations, and restrictions on production. In many countries the government uses a production sharing regime where a state company owns the licenses and private companies agree to perform the exploration and production work in exchange for a share of the proñts. Since the Company needs to invest heavily to undertake these activities and does not earn proñts if the project is not successful, all but the largest oil companies generally use joint venture structures to share the Ñnancial risks involved. In addition, the Company uses a number of other planning and tracking measures to control its costs in the area of exploration and production. Although the Company believes its internal measures to control the risks involved with its oil and gas exploration and production are adequate, many aspects of oil and gas exploration and production are beyond the Company's control. If the Company is unable to complete successfully its plans to acquire and dispose of operations, the Company's future earnings and share price could be materially and adversely aåected. The Company's business strategy involves acquiring operations in its core business areas of energy and chemicals and disposing of other, non-core assets as opportunities arise. This strategy depends in part of the Company's ability to identify and acquire companies that enhance its business on acceptable terms. There can be no assurances that the Company will be able to achieve the beneñts it expects from a particular acquisition or investment. For example, the Company may fail to retain key employees, may be unable to successfully integrate new businesses with its existing businesses, or may spend more on the acquisition and integration of new operations than anticipated. The Company must complete certain dispositions in connection with the VEBA-VIAG merger, as described in ""Item 4. Information on the Company Ì History and Development of the Company Ì VEBA- VIAG Merger.'' E.ON has not yet completed all of these dispositions, and therefore has had to transfer one of its shareholdings to an EU Commission-appointed trustee. E.ON expects to successfully complete the divestiture of all shareholdings required by the EU Commission for approval of the VEBA-VIAG merger, but cannot be certain when these disposals will be completed. E.ON therefore cannot be certain that the EU will not take further action against it because the Company has not yet complied with all of the EU's conditions to merger approval. In addition, the Company's strategy is to dispose of certain non-core assets as strategic opportunities arise. The Company cannot be certain that it will be able to dispose of assets at the most favorable time and price. The Company's future earnings, Ñnancial condition and share price may suåer if it is unable to complete its planned dispositions as well as favorable acquisitions successfully. The Company could be subject to environmental liability associated with its operations that could materially and adversely aåect its business. In case of environmental damages caused by an electric power generation facility, the owner of the facility is subject under German law to liability provisions that guarantee comprehensive compensation to all injured parties. In addition, there has been some relaxation in the evidence required under the German Environmental Liability Law (Umwelthaftungsgesetz) to establish and quantify environmental claims. If claims were to be asserted against the Company in relation to environmental damages and plaintiås were successful in proving their claims, such claims could result in material losses to the Company. In case of a nuclear accident, the owner of the reactor, the factory or the nuclear materials storage facility is subject to liability provisions that guarantee comprehensive compensation to all injured parties. Under German nuclear power regulations, the owner is strictly liable, and the geographical scope of its liability is not 6

13 limited to Germany. The Company takes extensive safety and risk management measures in the operation of its nuclear power operations, and has mandatory insurance with respect to its nuclear operations as described in ""Item 4. Information on the Company Ì Business Overview Ì Electricity.'' However, any claims against the Company arising in the case of a nuclear power accident could exceed the coverage of such insurance, and cause material losses to the Company. Although environmental laws and regulations have an increasing impact on the Company's activities in almost all the countries in which it operates, it is impossible to predict accurately the eåect of future developments in such laws and regulations on the Company's future earnings and operations. Some risk of environmental costs and liabilities is inherent in particular operations and products of the Company, as it is with other companies engaged in similar businesses, and there can be no assurance that material costs and liabilities will not be incurred. Financial During the normal course of its business the Company is exposed to interest rate, commodity price and currency risks. These risks are hedged on a Group-wide basis. For more information about these risks and the Company's hedging policies and instruments, see ""Item 5. Operating and Financial Review and Prospects Ì Exchange Rate Exposure and Currency Risk Management'' and ""Item 11. Quantitative and Qualitative Disclosures about Market Risks.'' The Company believes that due to strict guidelines, the counterparty risk of Ñnancial transactions is insigniñcant. Item 4. Information on the Company. HISTORY AND DEVELOPMENT OF THE COMPANY E.ON AG is a stock corporation organized under the laws of the Federal Republic of Germany. It is entered in the Commercial Register of the local court of D usseldorf, Germany, under HRB E.ON's registered oçce is located at Bennigsenplatz 1, D D usseldorf, Germany, telephone For U.S. federal securities law purposes, E.ON's agent in the United States is Morgan Guaranty Trust Company of New York, 60 Wall Street (36th Öoor), New York, NY The State of Prussia established E.ON in 1929 when it consolidated state-owned coal mining and energy interests (hence the original name VEBA, ""Vereinigte Elektrizit ats- und Bergwerks-Aktiengesellschaft''). Ownership of E.ON was transferred from the dissolved Prussian state to the Federal Republic of Germany. E.ON was partially privatized in 1965, leaving the German government with a 40.2 percent share. After several subsequent oåerings, privatization was completed in 1987 when the German government oåered its remaining 25.5 percent share to the public. During and since the privatization process, E.ON AG evolved into a management holding company, providing strategic leadership and resource allocation for the entire Group. On June 16, 2000, VIAG AG was merged into VEBA AG, and VEBA AG was subsequently renamed E.ON AG. From companies initially assembled for historic reasons while under government control, E.ON's management has focused on optimizing its businesses by divesting non-proñtable or non-core lines of business, acquiring companies to strengthen market positions, and entering complementary Ñelds with signiñcant growth opportunities. During the years 1997 through 2000, the Company achieved the following milestones: Successful integration of the old Degussa AG and H uls AG. VEBA-VIAG merger. Merger of PreussenElektra and Bayernwerk. Restructuring of the Group's activities in electricity, chemicals, distribution/logistics and real estate. 7

14 VEBA-VIAG MERGER On June 16, 2000, VEBA AG merged with VIAG AG, one of the largest industrial groups in Germany. The merger of VEBA and VIAG created the third largest industrial group in Germany, based on market capitalization at year-end 2000, with sales of billion in Ñscal Through the merger, E.ON intends to create a clearly-focused company with leading market positions in its core businesses of energy and specialty chemicals. E.ON anticipates realizing annual cost synergies following the merger of approximately 4800 million. These annual cost savings are expected to take eåect in stages as E.ON combines and consolidates the operations of VEBA and VIAG, but are expected to be realized in full by About two-thirds of the costs savings are expected to come from lower materials costs, while one-third is expected from lower personnel costs. Most of the cost savings are expected to be realized in the energy operations, with approximately 4100 million generated by the chemicals operations and at the management level. E.ON anticipates transaction costs associated with the merger to be approximately 4475 million. E.ON cannot be certain that all of the cost savings it anticipates realizing as a result of the merger can be achieved. A number of factors could prevent the realization of some of these synergies, or add to the expenses relating to the merger. These include, among other things, costs related to any delay in complying with EU conditions, the combined Company's inability to integrate its businesses eåectively and as planned, higher costs related to achieving the anticipated synergies and requirements for restructuring and reorganization measures materially in excess of those already planned. In order to eåectuate the merger, VEBA and VIAG submitted an application to the Merger Task Force of the European Commission on December 14, These merger control proceedings by the EU Commission included the control proceedings in accordance with the provisions of the Treaty for the Establishment of the European Coal and Steel Community relating to parts of the steel trade. The EU Commission examined the planned merger and, with its notiñcation of June 13, 2000, declared it to be compatible with the common market. Approval, however, is conditioned on compliance with the following undertakings made by VEBA and VIAG to the EU Commission: Electricity VEAG/LAUBAG. VEBA and VIAG agreed to sell their shareholdings in VEAG Vereinigte Energiewerke Aktiengesellschaft (""Veag''), a utility primarily active in the eastern part of Germany, and in LAUBAG Lausitzer Braunkohle Aktiengesellschaft (""Laubag''), a large lignite producer in eastern Germany and the main supplier to Veag, to a competitor who is not açliated with E.ON or RWE AG (""RWE'') and has suçcient Ñnancial resources and experience to compete actively with E.ON. The purchaser must be deemed acceptable by the EU Commission, and the transfer of the Company's shareholding in Veag is also subject to approval by the successor to the German privatization agency (Bundesanstalt f ur vereinigungsbedingte Sonderaufgaben). VEBA and VIAG further agreed to sell their lignite mining rights to the purchaser of the Veag and Laubag holdings. The EU Commission granted the Company a speciñed time period to Ñnd a buyer for its Veag and Laubag shareholdings. It is also a condition of the approval of the VEBA-VIAG merger that RWE, E.ON's largest competitor in Germany, also divest of its holdings in Veag and Laubag and its lignite mining rights. RWE and the utility VEW Aktiengesellschaft (""VEW''), in connection with their own merger in 2000, agreed to this and other divestments in a similar undertaking to the German Federal Cartel OÇce (Bundeskartellamt). To assist Veag's transition from an açliate of E.ON to an independent competitor, VEBA and VIAG agreed to purchase from Veag a certain minimum amount of electricity at market rates during the period ending on December 31, The minimum purchase amount will decline over time and will be subject to certain upward and downward adjustments. It is also a condition of the approval of the VEBA-VIAG merger that RWE complies with the minimum purchase requirement as well. 8

15 Bewag, VEW and HEW. VEBA and VIAG agreed to sell their shareholdings in the utilities Bewag Berliner Kraft und Licht Aktiengesellschaft (""Bewag''), VEW and Hamburgische Electricit ats-werke AG (""HEW'') to a competitor or competitors who are not açliated with E.ON or (in the case of Bewag and HEW) RWE and have suçcient Ñnancial resources and experience to compete actively in the German electricity market. The purchaser or purchasers must be approved by the EU Commission. The EU Commission granted the Company a speciñed time period to Ñnd a buyer or buyers for these shareholdings. Rhenag. VEBA held an indirect participation in Rhenag Rheinische Energie Aktiengesellschaft (""Rhenag''), a subsidiary of RWE. The Company has agreed to terminate its cooperation with RWE in the Rhenag venture during a speciñed period. Waiver of Network Transfer Fees. Germany has been divided into two zones with respect to trading of electricity, and transfer of electricity between those two zones is generally subject to a transfer charge, subject to netting. Because E.ON and RWE are the largest participants in the German electricity market, the EU Commission expressed the view that the two companies would unduly beneñt from the netting of deliveries across the zones, to the detriment of their competitors. The Company has therefore agreed to waive transfer charges for cross-zone deliveries of electricity. Additional Interconnector Capacity Germany/Denmark. The Company has agreed to provide additional interconnector capacity on the border between Germany and Denmark. This interconnector has often reached its maximum capacity, primarily because of relatively high demand for import of electricity from Scandinavian countries, where electricity prices are generally lower than in Germany. Chemicals In the chemicals division, E.ON agreed to divest two of its prussic acid lines, cyanuric chloride and sodium dicyanamide (NDC). The EU Commission granted the Company a speciñed time period to Ñnd a buyer or buyers for these shareholdings. E.ON has not yet fully complied with all of its undertakings to the EU Commission to divest certain shareholdings. Although E.ON reached an agreement to sell its Bewag holdings to HEW in August 2000, as of mid-march 2001 E.ON had not yet completed the sale because of an objection by another Bewag shareholder. As a consequence, in mid-march 2001 E.ON transferred its 49 percent stake in Bewag to an EU Commission-appointed trustee pending resolution of the matter. For more information, see ""Ì Business Overview Ì Electricity.'' For further details about the status of required divestments and other commitments made with respect to the Company's electricity operations, see ""Ì Business Overview Ì Electricity.'' For details about the Company's chemicals divestments, see ""Ì Business Overview Ì Chemicals.'' E.ON expects to fully comply with all undertakings given to the EU Commission in connection with the VEBA- VIAG merger. Pursuant to the requirements of the U.S. Hart Scott Rodino Antitrust Improvements Act, the companies reported the merger to the U.S. Federal Trade Commission and the U.S. Department of Justice on November 30, The merger of VEBA and VIAG was legally implemented by merging VIAG AG into VEBA AG, with VEBA AG continuing as the surviving entity. The newly-merged company then received the new name E.ON AG. In addition to the regulatory approvals and undertakings described above, the following steps were taken in connection with the VEBA-VIAG merger: In September 1999, the Boards of Management of each company agreed on the principles of a merger. In October 1999, VEBA AG purchased a 10 percent shareholding in VIAG AG from the German state of Bavaria. VEBA paid billion, or 423 per share, for this shareholding. The share block acquired by VEBA was cancelled prior to the merger share exchange. 9