Robert P. Brace
Executive Vice President
Chief Financial Officer

WE ARE PROVIDING MORE INFORMATION SOONER, AND MAKING IT EASIER TO UNDERSTAND.

Summary cash flow and balance sheet information, for example, is now included with our quarterly earnings releases and simultaneously posted to our Web site. And, we strongly support industry initiatives, legislative reforms and accounting guidelines that bring more clarity to financial reporting.

Duke Energy is providing more detailed information to investors regarding its energy marketing and risk management activities – in fact, we were among the first to provide additional disclosures consistent with those recently recommended by the energy industry’s Committee of Chief Risk Officers.

A Financial Accounting Standards Board task force recently ruled that companies could not recognize as earnings unrealized gains or losses on the future value of certain energy contracts prior to settling those contracts. That is, energy companies may no longer use “mark-to-market” accounting to recognize earnings on their income statements, except in certain limited cases. We applaud this ruling, as it removes the uncertainty inherent in applying mark-to-market accounting across the board, provides greater transparency and brings less volatility to earnings.

Another new accounting rule requires that energy companies report trading revenues on their income statements on a net basis instead of a gross basis. This change affects reported revenues, but it has no impact on the company’s profitability or cash flows. Measures such as operating income, earnings per share and return on equity have not been affected by this new ruling.

Financial reporting, in my view, should present a fair and complete picture of a company’s financial health. Our financial reports undergo rigorous management review and analysis, business by business, before they are published. During 2002, we improved this process to incorporate new requirements as a result of the Sarbanes-Oxley Act. New steps include more detailed discussions and documentation, and a corporate Disclosure Committee reviews our financial reports before they are filed with the Securities and Exchange Commission. These activities are designed to ensure that our published financial reports continue to accurately, clearly and thoroughly reflect the financial condition of Duke Energy and its businesses.