EXHIBIT 99.03

<PAGE>
  instructions have been received (i.e., a ''broker non-vote''), will be counted
  to  determine  the  presence  of  a  quorum  but will not be present for other
  purposes  and  will  not  be the equivalent of a ''no'' vote on a proposition.
  Shares represented by a proxy with instructions to abstain on a matter will be
  counted in determining whether a quorum is in attendance. An abstention is not
  the equivalent of a ''no'' vote on a proposition.

     Shareholders  may  vote  either  in person or by duly authorized proxy. The
  giving  of a proxy will not prevent a shareholder from voting in person at the
  meeting.  A  proxy  may  be  revoked by a shareholder at any time prior to the
  voting  thereof by giving written notice to the Secretary of the Company prior
  to  such  voting.  All  shares  entitled  to vote and represented by effective
  proxies  on  the  enclosed form, received by the Company, will be voted at the
  meeting  (or  any  adjourned  session thereof) in accordance with the terms of
  such proxies.

     Each Participant in the Company's Automatic Dividend Reinvestment and Stock
  Purchase  Plan (the ''Reinvestment Plan''), Kentucky Utilities' Employee Stock
  Ownership  Plan (the ''ESOP'') or the Kentucky Utilities Employee Savings Plan
  (the  ''Savings Plan'') will receive a form of proxy by which such Participant
  may  direct  the  agent or trustee under such Plans as to the manner of voting
  shares  credited  to the Participant's accounts under such Plans. Shareholders
  of  record who are participants in the Reinvestment Plan will receive only one
  form  of  proxy  for their certificated shares and those shares which they may
  have acquired through reinvested dividends. A Participant of any of such Plans
  wishing  to  vote  in  person  at  the  meeting  may obtain a proxy for shares
  credited  to his account under such Plans by making a written request therefor
  by  April 23, 1998, as follows: for the Reinvestment Plan, to George S. Brooks
  II,  Secretary  of the Company, at the address stated on page 1; for the ESOP,
  to  Banc  One  Kentucky,  PO Box 32500, Louisville, Kentucky 40232, Attention:
  Barbara  J. Steele, Trust Investment Division; and for the Savings Plan, to CG
  Trust  Company,  c/o Cigna Retirement and Investment Services, Routing Code M-
  122,   350  Church  Street,  Hartford,  Connecticut  06103,  Attention:  Bruce
  Beckmann.


                                  ELECTION OF DIRECTORS

     General

     In  light  of  the pending Merger, which will result in the Company merging
  into  LG&E Energy, the Board of Directors has elected to temporarily waive its
  retirement  policy with respect to two directors. Mr. Harry M. Hoe, who was to
  have  retired from the Board in 1998, will stand for reelection. Mr. Milton W.
  Hudson,  who  had  planned  to retire from the Board in 1998, will continue to
  serve. It is anticipated that Mr. Hoe and Mr. Hudson will each resign from the
  Board  of  Directors  at  the earlier of the consummation of the Merger or the
  1999 Annual Meeting of Shareholders.

    Three  directors  are  to  be  elected  at  the meeting. Barring unforeseen
  circumstances and in the absence of contrary directions, the proxies solicited
  herewith  will  be voted for the election of Carol M. Gatton, Harry M. Hoe and
  Michael  R.  Whitley,  as directors of the Company. Except as noted above, the
  nominees will hold office until the 2001 Annual Meeting of Shareholders of the
  Company  or until their respective successors shall have been duly elected and
  qualified.  The proxies may also be voted for a substitute nominee or nominees
  in  the event any one or more of said persons shall be unable to serve for any
  reason  or  be  withdrawn  from nomination, an occurrence not now anticipated.
  Except  as  otherwise  indicated, each nominee has been engaged in his present
  principal  occupation  for  at  least  the  past  five  years. All information
  regarding share ownership is as of January 31, 1998.

                                      -96-
<PAGE>
<PAGE>
     The  following  information  is  given  with  respect  to  the nominees for
  election as directors:

    LOGO

              Carol  M. Gatton, 65, is Chairman of Area Bancshares, Inc., a bank
              holding  company  in  Owensboro,  Kentucky. He is also involved in
              real  estate  ventures  and  automobile  dealerships.  Mr.  Gatton
              beneficially owns 1,000 shares of Common Stock of the Company.



    LOGO

              Harry M. Hoe, 72, is President and a director of J. R. Hoe & Sons,
              Inc., Middlesboro, Kentucky, a foundry and casting company. He has
              been  a  director  of  the  Company  since  1991 and a director of
              Kentucky  Utilities  since  1979. Mr. Hoe beneficially owns 17,623
              shares  of Common Stock of the Company, which include 5,677 shares
              held solely by his wife.



    LOGO

              Michael  R.  Whitley,  55,  has been Chairman, President and Chief
              Executive  Officer  of  the  Company  and Kentucky Utilities since
              August  1,  1995.  He was President and Chief Operating Officer of
              the Company and Kentucky Utilities from November 1, 1994 to August
              1,  1995.  He was Executive Vice President of these companies from
              August  1,  1994  to  November 1, 1994. Before this period, he had
              been  a  Senior  Vice  President  of the Company since 1988 and of
              Kentucky  Utilities  since  1987. Mr. Whitley was Secretary of the
              Company  from  1988 until 1992 and of Kentucky Utilities from 1978
              until  1992. He is a director of PNC Bank Kentucky, Inc., a wholly
              owned  subsidiary  of  PNC Bank Corp., Inc. Mr. Whitley has been a
              director  of  the  Company  and  Kentucky Utilities since 1992. He
              beneficially  owns  34,748  shares of Common Stock of the Company,
              which  include  6,300  shares  held  jointly with his wife and 964
              shares held solely by his wife.


     Information with respect to those directors whose terms are not expiring is
  as follows:


    LOGO

              Mira  S.  Ball,  63,  is  Secretary-Treasurer  and Chief Financial
              Officer of Ball Homes, Inc., a single-family residential developer
              and  property  management  company. She has been a director of the
              Company  and  Kentucky Utilities since 1992. Ms. Ball beneficially
              owns 6,123 shares of Common Stock of the Company. Her term expires
              in 1999.

                                      -97-
<PAGE>
<PAGE>
    LOGO

              Milton W. Hudson, 70, has been an economic consultant (Washington,
              DC)  since  1991.  He  was  Managing  Director and Senior Economic
              Advisor  of Morgan Guaranty Trust Company of New York from January
              1990  until his retirement in June 1991. He has been a director of
              the  Company since 1991 and a director of Kentucky Utilities since
              1990. Mr. Hudson beneficially owns 1,274 shares of Common Stock of
              the Company. His term expires in 2000.


    LOGO

              John  T.  Newton, 67, retired in 1995 as Chairman of the Board and
              Chief  Executive  Officer  of  the Company and Kentucky Utilities,
              positions  he  had  held since 1987. He had also been President of
              these companies from 1987 to November 1, 1994. Mr. Newton has been
              a  director  of  the Company since 1988 and a director of Kentucky
              Utilities since 1974. He beneficially owns 32,653 shares of Common
              Stock of the Company, which include 7,668 shares held jointly with
              his  wife  and  5,000  shares  held  solely  by his wife. His term
              expires in 2000.


    LOGO

              Frank V. Ramsey, Jr., 66, is President and Director of Dixon Bank,
              Dixon,  Kentucky,  and  a  farm  owner and operator. He has been a
              director  of  the  Company  since  1991 and a director of Kentucky
              Utilities since 1986. Mr. Ramsey beneficially owns 1,400 shares of
              Common Stock of the Company. His term expires in 1999.


    LOGO

              William  L.  Rouse,  Jr.,  65, was Chairman of the Board and Chief
              Executive  Officer and a director of First Security Corporation of
              Kentucky, a multi-bank holding company, prior to his retirement in
              1992.  Mr.  Rouse  is  a director of Ashland, Incorporated. He has
              been  a  director  of  the  Company  since  1991 and a director of
              Kentucky  Utilities  since 1989. Mr. Rouse beneficially owns 1,000
              shares  of  Common  Stock of the Company. In addition, Mr. Rouse's
              account  under  the Directors Deferred Compensation Plan described
              below has the equivalent of 7,004 shares of Common Stock. His term
              expires in 2000.


    LOGO

              Charles  L.  Shearer,  Ph.D.,  55,  is  President  of Transylvania
              University,  Lexington,  Kentucky.  He  has been a director of the
              Company  since  1991  and  a  director of Kentucky Utilities since
              1987.  Dr.  Shearer beneficially owns 1,527 shares of Common Stock
              of  the  Company, which include 200 shares held solely by his wife
              and 16 shares held by his children. His term expires in 1999.

                                      -98-
<PAGE>
<PAGE>
    LOGO

              Lee  T.  Todd,  Jr.,  Ph.D.,  51, is President and Chief Executive
              Officer of DataBeam Corporation, a Kentucky-based, high-technology
              firm.  He  was  elected  a  director  of  the Company and Kentucky
              Utilities in 1995. Dr. Todd beneficially owns 500 shares of Common
              Stock of the Company. His term expires in 1999.


  Voting  Securities  Beneficially  Owned  by  Directors, Nominees and Executive
  Officers

     The  directors, nominees and executive officers of the Company and Kentucky
  Utilities  owned  beneficially  at  January  31,  1998 an aggregate of 219,869
  shares  of  Common Stock of the Company, representing in the aggregate 0.6% of
  such stock.


  Meetings and Committees of the Board of Directors

     All  members  of  the Company's Board of Directors are currently members of
  Kentucky  Utilities' Board of Directors. The Board of Directors of the Company
  and  the  Board  of  Directors of Kentucky Utilities have each established the
  following  six  committees:  the Executive Committee, the Audit Committee, the
  Compensation   Committee,  the  Finance  Committee,  the  Long-Range  Planning
  Committee  and  the  Nominating  and Corporate Governance Committee. Committee
  members  are the same for committees of the Company and committees of Kentucky
  Utilities.

     During  1997,  the  Board  of  Directors  of  the  Company held 20 meetings
  (including  Committee  meetings),  and  the  Board  of  Directors  of Kentucky
  Utilities held 21 meetings (including Committee meetings).

     During  1997,  each  current  director attended 100% of the meetings of the
  Company's  and Kentucky Utilities' Board of Directors and applicable Committee
  meetings.

     The  members  of  the  Executive  Committee are Messrs. Hoe, Ramsey, Rouse,
  Shearer  and  Whitley. Neither the Company's nor Kentucky Utilities' Executive
  Committee  met  during 1997. The Executive Committee has the full power of the
  Board between meetings of the Board, except as provided by law.

     The  members  of  the Audit Committee are Ms. Ball and Messrs. Gatton, Hoe,
  Shearer  and Todd. The Company's Audit Committee met two times in 1997, as did
  Kentucky  Utilities'  Audit Committee. The Audit Committee selects and engages
  (and  may  discharge)  the  Company's  independent  auditors;  approves  or
  disapproves each professional service or type of service to be provided by the
  auditors;  meets  with  the  auditors  regarding  the scope and results of the
  annual  audit and of internal accounting procedures and practices; reviews any
  recommendations  which  may be made by the independent auditors; and generally
  exercises  supervision  over  all  matters relating to audit functions, making
  periodic reports to the Board.

     The  members  of  the  Compensation  Committee  are Messrs. Gatton, Hudson,
  Ramsey,  and  Rouse.  The  Company's  Compensation Committee met four times in
  1997,  and  Kentucky  Utilities'  Compensation  Committee  met five times. The
  Compensation  Committee reviews compensation for all officers, directors' fees
  and  fees  paid  to  directors for membership on the various committees of the
  Board;  makes  recommendations  to the Board at least annually with respect to
  appropriate  levels  of compensation and fees; and administers certain benefit
  plans.

                                      -99-
<PAGE>
<PAGE>
    Equity Ownership Guidelines

     Effective  January 1, 1998, under the Company's Equity Ownership Guidelines
  adopted  by the Board of Directors of the Company, directors and executives of
  the  Company  and Kentucky Utilities are encouraged to make a minimum personal
  investment in Company Common Stock. The minimum guidelines may be satisfied in
  various   ways  including  through  plans  maintained  by  the  Company  or  a
  subsidiary. A director's or executive's compliance with the guidelines will be
  taken  into  account  by the Compensation Committee in the grant or payment of
  awards  to the director or executive under incentive or other plans maintained
  by  the  Company. The Board of Directors of the Company may amend or terminate
  the Equity Ownership Guidelines at any time or from time to time.

   Directors' Compensation

     Each  director  of  the  Company  is  also  a  director  of  its  principal
  subsidiary,  Kentucky  Utilities.  Each director who is not an employee of the
  Company  or  Kentucky  Utilities  is  paid an annual retainer of $20,000. This
  retainer  is  reduced by any retainer paid from a Company subsidiary. Kentucky
  Utilities pays non-employee directors an annual retainer of $15,000. Thus, the
  net annual Company retainer paid to such directors is $5,000 but the aggregate
  paid  for  serving on both Boards is $20,000. An additional annual retainer of
  $1,200  is  paid  to  each  non-employee  director  who  is a chairperson of a
  committee   of  either  Board.  However,  if  a  non-employee  director  is  a
  chairperson of the same Board committee of the Company and Kentucky Utilities,
  only one such additional annual retainer is paid.

    In  addition  to an annual retainer, the Company and Kentucky Utilities pay
  each  non-employee  director  a  $1,000  fee  for each meeting of a Board or a
  particular  committee attended; provided that if the Boards of the Company and
  Kentucky  Utilities meet on the same day, only one $1,000 fee is paid for both
  meetings.  Similarly,  if  the same committee of the Boards of the Company and
  Kentucky Utilities meets on the same day, only one $1,000 fee is paid for both
  meetings. Out-of-pocket travel expenses are paid to directors for all meetings
  attended.

     The Compensation Committees have recommended that the total compensation to
  Directors  for  service  on the Board of the Company and Kentucky Utilities be
  revised,  effective  March  1,  1998,  to  be as follows: the annual retainer,
  $28,000  (of  which  $21,000  would  relate to Kentucky Utilities as described
  above);  the committee chairperson fee, $2,000; the Board meeting fee, $1,100;
  and  the  committee  meeting  fee,  unchanged.  The Boards may not act on such
  proposal or may modify the proposal upon adoption.

     All  eligible  directors of the Company and Kentucky Utilities are entitled
  to  participate  in  the Director Retirement Retainer Programs (the ''Director
  Retirement  Plans'')  of the Company and Kentucky Utilities. Directors who are
  not,  and  have  not  previously  been,  an officer of Kentucky Utilities, the
  Company, or their affiliated companies (''outside directors'') are eligible to
  participate.  An  outside  director  who  is  65 years of age or older and has
  completed  at  least five consecutive years of service on the Company's and/or
  Kentucky  Utilities'  Board  will  receive, upon termination of service from a
  Board  for  any reason other than death, an annual retirement benefit equal to
  the  annual  retainer  paid  to  such  Board's  directors in effect as of such
  termination,  payable  monthly  over  a period of years equal to the number of
  full  years  such director served on the Board, but not in excess of 10 years.
  Such  payments  cease,  however, if the director dies before all such payments
  are made. The annual retainer in effect upon the director's termination from a
  Board  will  generally be calculated as described in the first paragraph under
  this caption (excluding the additional annual retainer for chairpersons). In

                                      -100-

<PAGE>
<PAGE>
  the  event  of  a  change in control of the Company or Kentucky Utilities, any
  person  then  receiving  a retirement benefit would be paid, within 30 days of
  the  change  in  control,  a  lump-sum payment equal to the discounted present
  value of all then unpaid installments of the director's retirement benefit. In
  the  event of a change in control, each outside director in office immediately
  prior  to  such  change  in control will be eligible to receive an accelerated
  retirement  benefit  if  the  director terminates service from a Board for any
  reason  other  than  death  within  three  years  of the date of the change in
  control.  Such  accelerated  retirement  benefit  would  be paid in a lump sum
  within  30  days  of  such  termination  and  would be equal to the discounted
  present  value  of  the  retirement  benefit  which  such  director would have
  received  if the director had retired from the Board at age 70 (or for certain
  directors,  72)  and lived to collect the full benefit otherwise payable under
  the  applicable  Director  Retirement Plan. Such benefit would be based on the
  higher  of  the  annual  retainer in effect immediately prior to the change in
  control or immediately prior to such director's termination of service. Change
  in  control  has  the meaning set out under ''Change In Control Arrangements''
  below.  The consummation of the Merger will constitute a ''change in control''
  under the Director Retirement Plans.

     Directors  may elect to have all or a specified portion of their directors'
  fees  deferred  under the Director Deferred Compensation Plans (the ''Director
  Deferred  Compensation  Plans'')  of  the Company and Kentucky Utilities, such
  elections  to  be  made  in  accordance  with  and subject to the terms of the
  Director  Deferred  Compensation Plans. Amounts deferred will be maintained in
  unfunded  accounts  for each participant, which, based on a choice made by the
  director,  either: (1) bear interest at a floating rate based upon the average
  prime  rate  charged  by banks as reported in the Federal Reserve Bulletin; or
  ( 2 )    experience  appreciation  (depreciation)  and  earnings  based  on  a
  hypothetical  investment in the Company's Common Stock. Amounts deferred under
  the  Director Deferred Compensation Plans will be paid to the participant upon
  termination  as  a  director for any reason other than death based on a choice
  made  by the Director as permitted by the Director Deferred Compensation Plans
  in  a  single  payment  or,  with  interest, quarterly over a period of not to
  exceed  40 calendar quarters, or, with interest, annually over a period of not
  to  exceed  10  years.  In  the event of a participant's death, payment of any
  remaining  balance  of  credited amounts will be made in a single payment to a
  designated beneficiary. In certain cases, directors may receive a distribution
  of  deferred  amounts  in  the event of substantial financial hardship. In the
  event  of  a  change  in  control  of  the  Company or Kentucky Utilities, any
  director  who terminated prior to the change in control whose deferred amounts
  have  not  been  distributed  would  receive,  within 15 days of the change in
  control,  a  lump  sum payment of the undistributed amounts. In the event of a
  change  in control, each director who terminates thereafter within three years
  of  the  date  of  the  change  in control would be paid, within 15 days after
  termination,  a  lump  sum  payment  of  the  director's deferred amounts. The
  consummation  of the Merger will also constitute a ''change in control'' under
  the Director Deferred Compensation Plans.

     The  Compensation  Committees  have recommended a proposal to eliminate the
  Director  Retirement  Plans  for  current  and  future  directors.  Under this
  proposal,  current  participating  directors  would  be entitled to a lump sum
  benefit  based  on  the  present  value  of the Director's retirement benefits
  calculated  as  if  a  ''change in control'' had occurred and the Director had
  terminated  service  immediately  thereafter.  Such  lump  sum amount would be
  credited  to  the  Director  Deferred  Compensation  Plans in the hypothetical
  Company  Common  Stock  account (except for certain retiring directors who may
  make  the  election  described in the preceding paragraph). The Boards may not
  act on such proposal or may modify the proposal upon adoption.

                                      -101-
<PAGE>
<PAGE>
  Executive Compensation

     General.  The  following  table  contains  information  with respect to the
  compensation  paid by (or earned from) the Company and Kentucky Utilities, for
  all services rendered during 1995 through 1997 in all capacities, to the Chief
  Executive  Officer  and  the  other  four  most  highly  compensated executive
  officers of the Company and Kentucky Utilities:

                                SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>
                                                  Annual Compensation         Long-Term
                                                               Other Annual  Compensation   All Other
                                              Salary    Bonus  Compensation   Payouts    Compensation
<S>                                             <C>      <C>       <C>          <C>           <C>
     Name and Principal Position        Year    ($)    ($)(1)    ($)(2)       ($)(3)        ($)(4)
     Michael R. Whitley;                1997  444,427  186,173    2,477       50,967         4,750
       Chairman of the Board, President 1996  387,737   99,741    2,164       79,798         6,242
       & Chief Executive Officer &      1995  318,467   73,476      116            0         4,686
       Director of the Company &
       Kentucky Utilities

     O. M. Goodlett;                    1997  239,153   69,828    1,738        58,406        4,750
       Senior Vice President of the     1996  231,840   51,994        0        52,560        5,181
       Company & Kentucky Utilities     1995  210,195   44,550        0             0        4,500

     James W. Tipton;                   1997  237,340   83,166    2,854        64,829        4,750
       Senior Vice President            1996  230,750   38,304    2,004        77,882        5,670
       of the Company                   1995  227,591   39,942    1,445             0        4,667

     Wayne T. Lucas;                    1997  215,792   69,555    1,271        29,576        4,750
       Senior Vice President            1996  208,137   49,043      749        33,124        6,361
       of Kentucky Utilities            1995  194,553   42,160      711             0        4,692

     Robert M. Hewett;                  1997  183,727   45,033    1,768        29,576        4,750
       Senior Vice President            1996  164,681   32,052      363        33,124        4,500
       of Kentucky Utilities            1995  157,396   28,054       15             0        4,500
</TABLE>


     (1)   Bonuses  are  paid  under  the Incentive Plans. Any bonus earned but
      deferred under the Executive Deferred Compensation Plans is included in
      the Table.

     (2)   Other annual compensation consists of amounts for group term life
      insurance and related taxes  and above-market-rate interest earned on
      deferred compensation during 1997 and paid in 1997.

     (3)   Reflects  payouts  under  the  Performance  Share  Plans  described
      under  "Report of Compensation  Committee on Executive Compensation"
      above. Performance goals were not met, and  thus no payouts were made for
      the Performance Cycle that relates to 1995 in the table above.  Amounts
      shown for 1996 and 1997 reflect a payout, in the form of restricted shares
      of  the Company's Common Stock, of a percentage of the contingent grant
      for the applicable Performance  Cycle  as  follows:  1996,  100%;  1997,
      100%  for  the  Kentucky  Utilities Performance  Share  Plan and 75% for
      the KUE Performance Share Plan. Such restricted stock was  subject  to
      forfeiture if the officer terminated employment prior to January 2, 2003
      (for  amounts  shown  for  1996)  and January 2, 2000 (for amounts shown
      for 1997) for any reason  other  than  retirement, disability or death.
      In the event of a change in control, however, the restrictions lapse
      immediately. The execution of the Merger

                                     -102-
<PAGE>
<PAGE>

     Agreement  constituted a "change in control" for this purpose and all
     restrictions on these  shares lapsed in 1997.



     (4)   All  other  compensation  for  1995  and  1996 includes: (a) above-
     market-rate interest earned  on  deferred  compensation; and (b) the
     employer matching contribution made to the officer's  account  in the
     401(k) Employee Savings Plan. Such amounts for 1997 relate only to employer
     matching contributions to 401(k) Employee Savings Plan.


        Long-Term  Incentive  Awards.  Performance Shares contingently awarded
     under the Long-Term Incentive  Plan  in  1997  are reported in the
     Long-Term Incentive Plan awards table below. A description  of  how  awards
     are  determined  is  presented  under  "Report of Compensation Committee
     on  Executive  Compensation."  A  description  of  the scale by which
     performance targets are set follows the table.


                    LONG-TERM INCENTIVE PLAN-AWARDS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>

                                Number of     Performance of
                                  Shares,      Other Period
                                 Units or         Until               Estimated Future Payouts Under
                                Other Rights    Maturation            Non-Stock Price-Based Plans(2)
<S>                                <C>              <C>            <C>            <C>               <C>
       Name                        (#)          or Payout(1)   Threshold($)      Target ($)      Maximum ($)
       Michael R. Whitley         6,835               3             0         214,619-268,274      321,929
       James W. Tipton . .        2,350               3             0           73,790-92,238      110,685
       O.M. Goodlett . . .        2,270               3             0           71,278-89,098      106,917
       Wayne T. Lucas             2,030               3             0           63,742-79,678       95,613
       Robert M. Hewett  .        1,075               3             0           33,755-42,194       50,633

     (1)Number of years in Performance Cycle.

     (2)See  description  below  for  the scale that determines which amount may be applicable.
        Amounts  are  calculated  based on the price of the Company's Common Stock on December 31,
        1997.
</TABLE>

        For  the  Performance  Cycle commencing in 1997, payouts of contingent
     grants shown in the table  above  will  be  determined by calculating the
     average total shareholder return of the Company for the Performance Cycle
     and comparing it to the average total shareholder return of the EEI Index
     for the Performance Cycle, with adjustment to payouts in certain cases
     based on the  Company's  average total shareholder return relative to the
     S&P 500 Index. For the 1997-1999  Performance  Cycle,  the  scale  that
     determines if contingent grants are earned is as follows: if the Company's
     average total shareholder return is at or above 75th percentile of the EEI
     Index, 100% of the contingent grant will be earned (the second figure shown
     as Target in  the  table);  if it is at the 50th percentile level, 60% will
     be earned (the first figure shown  as  Target  in  the table); and if the
     average is between the 50th and 75th percentile levels,  the  earned
     grants  will  be  between  60%  and  100%  determined  by straight line
     interpolation.  If  the  average is below the 50th percentile, no shares
     contingently granted will  be  earned  (shown  as  the  Threshold  in  the
     table) for that Performance Cycle. Any performance shares earned under the
     foregoing scale will be increased by 20% if the Company's average total
     shareholder return for the Performance Cycle is at or above the 75th
     percentile of  the  S&P 500 Index for the Performance Cycle (the Maximum
     shown in the table) and reduced by 20% if the average is below the 25th
     percentile.

        Retirement Plan. Each of the officers of the Company and Kentucky
     Utilities is entitled to participate  in  the  Kentucky Utilities employee
     retirement plans described below. Executive officers, like other employees,
     are
                                         -103-

<PAGE>
<PAGE>
     eligible  to  participate  in  Kentucky  Utilities' Retirement Plan, and
     all eligible persons whose  compensation  is  reported  in  the  Summary
     Compensation Table participated in the Retirement  Plan.  Contributions to
     the Retirement Plan are determined actuarially and cannot be  readily
     calculated  as  applied  to  any  individual  participant or small group
     of participants.  Generally,  compensation  for Retirement Plan purposes
     means base compensation while  a participant, excluding overtime pay,
     commissions, performance incentive compensation or  other  extraordinary
     compensation.  The compensation for Retirement Plan purposes of the
     individuals  named  in  the  foregoing  table  is substantially equivalent
     to the base salary reported  in  the  Summary  Compensation  Table.  The
     credited  years  of  service under the Retirement  Plan  for  such  persons
     were as follows: Mr. Whitley, 33 years; Mr. Tipton, 30 years; Mr. Goodlett,
     27 years; Mr. Lucas, 28 years; and Mr. Hewett, 29 years. All of the
     credited  years  of  service  were computed as of December 31, 1997.
     Retirement Plan benefits depend upon length of service, age at retirement
     and amount of compensation (determined in accordance with the Retirement
     Plan).

        Although  higher  amounts  are determined under the Retirement Plan and
     shown in the table below,  in  most  cases,  pension  benefits under the
     Retirement Plan or compensation used to measure  such  benefits will be
     reduced  to comply with maximum limitations imposed by the Internal Revenue
     Code. Under such limitations, no base compensation above $150,000 ($160,000
     effective for compensation in 1997) may be used to calculate a benefit,
     except in the case of certain executive officers to preserve benefits
     accrued under previously applicable rules. In addition,  in 1997 no annual
     benefit derived from employer contributions may exceed $125,000.  Assuming
     retirement at age 65, a Retirement Plan participant would be eligible at
     retirement for  a  maximum annual pension benefit (without taking into
     account the Internal Revenue Code limitations referred to above) set forth
     in the following table. However, assuming retirement at  age 65, assuming
     1997 base compensation and taking into account the Internal Revenue Code
     limitations,  the annual pension benefit under the Retirement Plan for the
     executive officers named  in  the  Summary  Compensation  Table  would be
     as follows: Mr. Whitley, $103,607; Mr. Tipton, $95,146; Mr. Goodlett,
     $90,493; Mr. Lucas, $93,011; and Mr. Hewett, $93,246.
<TABLE>
<CAPTION>

                                                 Annual Benefit After Specified Years of Service(2)


     Final Average Base Pay(1)                   15        20       25        30       35       40         45
<S>    <C>                                  <C>       <C>      <C>       <C>       <C>      <C>       <C>
       $150,000                             $ 29,999  $ 39,999 $ 49,999  $ 59,999  $ 69,998 $ 79,998  $ 89,998
       $200,000                             $ 39,999  $ 53,332 $ 66,665  $ 79,998  $ 93,331 $106,664  $119,997
       $250,000                             $ 49,999  $ 66,665 $ 83,331  $ 99,998  $116,664 $133,330  $149,996
       $300,000                             $ 59,999  $ 79,998 $ 99,998  $119,997  $139,997 $159,996  $179,996
       $350,000                             $ 69,998  $ 93,331 $116,664  $139,997  $163,329 $186,662  $209,995
       $400,000                             $ 79,998  $106,664 $133,330  $159,996  $186,662 $213,328  $239,994
       $450,000                             $ 89,998  $119,997 $149,996  $179,996  $209,995 $239,994  $269,993
       $500,000                             $ 99,998  $133,330 $166,663  $199,995  $233,328 $266,660  $299,993
       $550,000                             $109,997  $146,663 $183,329  $219,995  $256,660 $293,326  $329,992
       $600,000                             $119,997  $159,996 $199,995  $239,994  $279,993 $319,992  $359,991


     (1)   "Final average base pay" generally means the average annual compensation during the 60
        consecutive months of highest pay during the period of employment.

     (2)   Annual  benefits  shown  are  on  a  straight life annuity basis. Amounts shown are not
        subject  to  any  deduction for Social Security benefits or other offset amounts. Benefits
        may be reduced by Internal Revenue Code limitations described above.
</TABLE>


        Supplemental  Security Plan. Executive officers and certain other
     employees of the Company and  Kentucky  Utilities  are  eligible  to
     be  members  in Kentucky Utilities' Supplemental Security Plan which
     provides retirement,

                                         -104-
<PAGE>
<PAGE>
     disability  and death benefits as well as a change in control retirement
     benefit and a change in  control  severance  benefit.  Change in control
     has the meaning set out under "Change in Control  Arrangements"  below.
     As  to  executive  officers,  upon  retirement at age 65, an eligible
     member  will  receive  15  annual  payments  of  an  amount  equal  to 75%
     of basic compensation,  offset  by benefits payable from any defined
     benefit plan of the Company or an affiliate  (such  as Kentucky Utilities'
     Retirement Plan) and Social Security benefits. Basic compensation  is  the
     annualized base monthly salary of the member, exclusive of performance
     incentive  compensation  or  other  extraordinary  compensation,  in effect
     at termination of employment  by retirement, disability or death. Upon
     termination of employment by death of an eligible  executive  officer prior
     to age 65, the member's beneficiary will receive an annual benefit equal to
     50% of basic compensation until the later of the date such member would
     have attained  age  65  or  completion  of  15  annual payments. Upon
     termination of employment by disability  prior to age 65, the member will
     receive the "retirement benefit" if the member lives  to  retirement  age
     and  remains disabled or the "death benefit" if the member dies prior  to
     retirement  age  and  is disabled at death. Benefits will be paid from the
     general funds  of  the  employer. The estimated annual benefits from
     Kentucky Utilities' Supplemental Security Plan that would be payable upon
     retirement at normal retirement age (age 65) for the individuals  named  in
     the  Summary  Compensation  Table  (assuming 1997 base salary) are as
     follows:  Mr.  Whitley,  $216,937;  Mr.  Tipton,  $68,654;  Mr. Goodlett,
     $68,279; Mr. Lucas, $47,761;  and Mr. Hewett, $30,273. To assist in
     providing funds to pay such benefits when they become  payable,  insurance
     is  purchased  on  the  lives of the members of the Supplemental Security
     Plan.

        Change In Control Arrangements. Under the Supplemental Security Plan,
     members are entitled to  change  in  control  severance  benefits  in the
     following circumstances: (i) involuntary termination  of  the  individual's
     employment within two years following a change in control     (or,  if
     later, prior to the consummation of the change in control transaction or
     its earlier abandonment)  for  reasons  other  than  cause  (as  defined
     in the plan), death or permanent disability;  (ii) resignation within two
     years of a change in control (or, if later, prior to the  consummation  of
     the change in control transaction or its earlier abandonment) for good
     reason  (as  defined  in  the  plan);  and (iii) in respect of the Chairman
     of the Board, the President,  the  Chief Financial Officer (or, if such
     positions are filled by less than three persons,  the  Executive  Vice
     President),  the  Senior  Vice  Presidents  and the Corporate Secretary,
     in  each  case  of  Kentucky  Utilities, termination of employment for any
     reason during  the 30-day period commencing on the first anniversary of the
     consummation of a change in  control.  In  such  circumstances,  the
     employee will be entitled to a change in control severance  payment  equal
     to a certain percentage (300% in the case of executive officers of the
     Company  or  Kentucky Utilities) of the sum of (i) the employee's basic
     compensation and (ii)  the  employee's  target  annual  performance
     incentive  compensation. In addition, the employee  will  be  entitled
     to  continuation of certain employee welfare benefits for up to three
     years  following  termination  of  employment,  subject  to  an  offset
     for comparable  benefits.  Under  the  Supplemental  Security  Plan,  the
     employee  is  entitled  to receive additional  payments,  if  necessary,
     to  reimburse  the  employee  for  certain  excise tax liabilities  payable
     under  federal,  state  or local law as a result of the payment and any
     other  compensation being contingent on a change in control. The
     Supplemental Security Plan's change  in  control  retirement  benefit
     provides that, upon termination of employment, other than  for cause (as
     defined in the Supplemental Security Plan) following a change in control,
     an  eligible  member  will  receive  a  lump-sum  amount  equal  to  the
     present value of the retirement  benefit  (described in the preceding
     paragraph and assuming the member is then 65 but prorated if the member
     then has less than 15 years of service, including an assumed three
     additional  years  of  service  in  the  case  of  executive officers);
     provided that, if the termination  is  more  than two years from the
     change in control, the calculation of years of service  will  not include
     the assumed additional three years and the compensation upon which the
     benefit  is  calculated will be the actual compensation in effect at
     termination (rather than the compensation in effect at the change in
     control which, if higher, would be used if

                                      -105-
<PAGE>
<PAGE>
     termination  occurred  within  two  years  of  the  change in control).
     The change in control severance  benefits  and change in control retirement
     benefits are effective for a minimum of five years, which is automatically
     extended from year to year unless Kentucky Utilities gives notice that it
     does not wish to extend the period of effectiveness.  The Incentive  Plans,
     Performance Share Plans, Executive Deferred Compensation Plans and
     Long-Term  Incentive  Plan  contain  provisions  relating  to  a change in
     control. Under the Performance  Share Plans and Long-Term Incentive Plan,
     or the awards granted thereunder, if a participant's  employment  is
     terminated  voluntarily  or  involuntarily  after  a change in control,
     such  participant  will have the right to an immediate payment in shares of
     Company Common  Stock for all Performance Cycles in which the participant
     is currently participating. The amount payable to a participant in the
     event of termination following a change in control will  be  determined
     in accordance with the formula specified in the plans. In addition, the
     restriction  on  any  restricted  shares  then held by the participant
     under these plans will lapse on the occurrence of a change in control,
     whether or not the participant is terminated.  Under  the  Executive
     Deferred Compensation Plans, all amounts held under such plans will be
     paid  to  the  participant  after  a  change  in  control,  whether or not
     the participant is terminated.  Such  payments  were  made to  participants
     following  execution of the Merger Agreement,  which  constituted a change
     in control. Under the Incentive Plans, after a change in  control,  whether
     or  not  a  participant  is  terminated,  a  participant,  including a
     participant  who  had  terminated  prior  to  the  change in control by
     reason of retirement, disability  or  death,  will  have  a right to an
     immediate cash payment based on actual base salary  earned  prior to the
     change in control and on the assumption that established targets for the
     year had been met.

        For  purposes  of all the executive and director plans, "change in
     control" includes any  merger,  consolidation,  reorganization  or  sale
     of  substantially all of the assets of the Company  or  Kentucky  Utilities
     which  results  in less than 60% of the voting power of the resulting
     entity  being owned by the holders of the Common Stock of the Company prior
     to the transaction;  a  change  in the majority of the Board of Directors
     of the Company or Kentucky Utilities  over  a  two-year  period  which  is
     not  approved by two-thirds of the incumbent directors;  and  the
     acquisition by any person or group of persons of beneficial ownership of
     10%  or  more  of the Common Stock of the Company or Kentucky Utilities.
     The execution of the Merger  Agreement  constituted,  and  the consummation
     of the Merger will also constitute, a "change  in  control"  under  all
     of  the  executive and director plans, or awards granted thereunder,
     described  above,  other than the Incentive Plans, the Director Retirement
     Plans and  the Director Deferred Compensation Plans under which only the
     consummation of the Merger will constitute a "change in control".

        Employment Agreement. In connection with the Merger Agreement, the
     Company entered into an Employment  Agreement  with Mr. Whitley which will
     become effective only upon consummation of the  Merger.  The  Employment
     Agreement will have an initial term of five years commencing at the
     effective date of the Merger with automatic renewal for additional one-year
     terms at the end  of  the initial term or any renewal term unless Mr.
     Whitley or LG&E Energy (as successor to  the Company) gives at least 3
     months prior notice of an intention not to renew. Under the Employment
     Agreement  Mr. Whitley will serve as Vice Chairman, President and Chief
     Operating Officer  of  LG&E  Energy and Vice Chairman and Chief Operating
     Officer of Louisville Gas and Electric  Company  and  Kentucky  Utilities.
     Under the Employment Agreement, Mr. Whitley will receive  an  annual  base
     salary of not less than $575,000 and will participate in the annual bonus
     plan and long-term incentive plan of LG&E Energy, with an annual bonus
     target award of not  less  than 55% of his base salary and long-term
     incentive grants with a present value of not  less  than  70%  of  his
     base  salary,  to  be delivered 60% in the form of performance units/shares
     and 40% in the form of non-qualified stock options. He is also entitled to
     life insurance

                                         -106-
<PAGE>
<PAGE>
     coverage  in  an amount of not less than $2,000,000 and certain other
     welfare, retirement and fringe  benefits  similar  to  other  LG&E  Energy
     executive officers and benefits currently offered  by the Company. If LG&E
     Energy terminates Mr. Whitley's employment without cause (as defined  in
     the  Employment  Agreement) or if Mr. Whitley terminates his employment for
     good reason  (which, as defined in the Employment Agreement includes for
     any reason during the 30-day  period  commencing  on the first anniversary
     of the effective date of the Merger), Mr. Whitley will receive, in addition
     to all compensation earned through the date of termination and  coverage
     and  benefits  under all benefit and incentive compensation plans, a
     severance payment  equal  to  the  discounted present value of his base
     salary and target bonus for the greater of (i) two years, or (ii) the
     remainder of the employment term then in effect (the "Continuation
     Period"). In addition, in such event Mr. Whitley will receive his
     outstanding target  bonus award, pro-rated through the date of his
     termination. Further, he will continue to  receive welfare benefits during
     the Continuation Period and all stock options will become exercisable and
     all restricted stock and other equity awards will vest. In addition, any
     long term  incentive  awards  (other  than  stock  options) will be cashed
     out at the discounted present  value of the target payout pro-rated for Mr.
     Whitley's actual period of service plus     the  Continuation  Period.
     Payments to Mr. Whitley upon termination after a change in control under
     the Employment Agreement will be grossed up for any applicable excise
     taxes.


                                                 GENERAL

       Independent Public Accountants

        The  Audit  Committee  of  the  Board  has  selected  the  firm  of
     Arthur Andersen LLP as independent  public  accountants  to  examine  the
     financial  statements  of the Company and Kentucky  Utilities  for  1998.
     The firm has served as the independent public accountants for the  Company
     and  Kentucky  Utilities  for  many  years. Representatives of the firm are
     not expected to be present at the annual meeting.

        If  the Merger is consummated prior to the end of 1998, it may be deemed
     desirable at that time  for  the  current  auditors  of LG&E Energy Corp.
     or another auditing firm to audit the annual  financial  statements  for
     all affiliated corporations for 1998, in which case Arthur Andersen LLP
     would no longer serve.


     Proposals of Shareholders

        Under  the  rules  of  the  Securities  and  Exchange Commission, any
     shareholder proposal intended  to  be presented at the 1999 Annual Meeting
     of Shareholders must be received by the Company  at  its  principal
     executive offices no later than November 18, 1998 in order to be eligible
     to  be  considered  for inclusion in the Company's proxy materials relating
     to that meeting. A shareholder submitting a proposal or nominating a person
     to serve as director must comply  with  procedures  set forth in the
     Company's By-laws. In general, the By-laws provide that  for  business to
     be considered at an annual meeting of shareholders, a shareholder must give
     timely and proper notice of the matter to the Secretary of the Company. The
     notice must specify  in  reasonable  detail  the  business  desired  to be
     brought before the meeting and contain  other  information  required by the
     By-laws. Nominations for director may be made by shareholders  only  if
     the  shareholder  has  given  timely and proper notice thereof to the
     Secretary  of  the  Company.  The  notice  must  contain  the  name  of the
     person or persons nominated,  certain  information  about the nominee and
     other information required by the By-laws.  Shareholder  proposals  or
     nominations must be received no fewer than 60 days prior to the  meeting
     (or,  if the date of the meeting has not been made public, within 10 days
     after the publication of the date of the meeting).

                                      -107-