The Sarbanes-Oxley Act of 2002 requires the inclusion of a report regarding internal controls over financial reporting in annual reports. As a result of our focus on this issue throughout 2004, Progress Energy has achieved full compliance with the applicable requirements.

RESPONSIBILITIES OF KEY BOARD COMMITTEES

Audit and Corporate Performance Committee
The work of this committee includes reviewing the annual and quarterly financial results of the company and the various periodic reports the company files with the SEC. It is responsible for retaining the company’s external auditors, overseeing and monitoring the auditors’ activities and pre-approving all external audit and non-audit services and fees. This committee also oversees the activities of the internal audit department and the Corporate Ethics Program.

Corporate Governance Committee
The responsibilities of this committee include making recommendations on the structure, charter, practices and policies of the board, including amendments to the articles of incorporation and bylaws. This committee ensures that processes are in place for annual CEO performance appraisal, reviews of succession planning and management development. It also recommends the process for the annual assessment of board performance and criteria for board membership. In addition, it proposes nominees to the board.

Finance Committee
This committee reviews and oversees the company’s financial policies and planning and the company’s pension funds. It monitors the company’s financial position, reviews the company’s strategic investments and financing options and recommends changes in the company’s dividend policy.

Operations, Environmental, Health and Safety Issues Committee
This committee reviews the company’s load forecasts and plans for generation, transmission and distribution, fuel production and transportation, customer service, energy trading, term marketing and other company operations. The committee assesses company policies, procedures and practices relative to environmental protection and safety-related issues and advises and makes recommendations to the board regarding these matters.

Organization and Compensation Committee
This committee reviews personnel policies and procedures for consistency with governmental rules and regulations and ensures that the company attracts and retains competent, talented employees. The committee reviews all executive development and management succession plans, evaluates CEO performance and makes senior executive compensation decisions.

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