<PAGE>

  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
8, 1996, 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 National
City Bank, Kentucky, PO Box 36010, Louisville, Kentucky 40233, Attention:
Judith E. Meany.

                             Election of Directors

              WARREN W. ROSENTHAL, who has served as a director of the Company
              since 1991 and of Kentucky Utilities Company since 1976, will
  [PHOTO]     not stand for re-election at the 1996 Annual Meeting of
              Shareholders in accordance with the Board of Directors'
              retirement policy. The Company expresses its appreciation to Mr.
              Rosenthal for his substantial contribution and his years of
              dedicated service as a director.

  General. Five 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 Mira S. Ball, Carol M. Gatton, Frank
V. Ramsey, Jr., Charles L. Shearer and Lee T. Todd, Jr. as directors of the
Company, to hold office until the 1999 Annual Meeting of Shareholders of the
Company or, in the case of Mr. Gatton, until the 1998 Annual Meeting of
Shareholders, or in each case 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, 1996.

                                      -96-
<PAGE>

  The following information is given with respect to the nominees for election
as directors:

              MIRA S. BALL, 61, is Secretary-Treasurer and Chief Financial
              Officer of Ball Homes, Inc., a single-family residential
  [PHOTO]     developer and property management company. She has been a
              director of the Company and Kentucky Utilities since 1992. Ms.
              Ball beneficially owns 5,986 shares of Common Stock of the
              Company.

              CAROL M. GATTON, 63, is Chairman of Area Bancshares, Inc., a
              bank holding company in Owensboro, Kentucky. He is also involved
  [PHOTO]     in real estate ventures and automobile dealerships. Mr. Gatton
              beneficially owns 1,000 shares of Common Stock of the Company.

              FRANK V. RAMSEY, JR., 64, is President and Director of Dixon
              Bank, Dixon, Kentucky, and a farm owner and operator. He has
  [PHOTO]     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.

              CHARLES L. SHEARER, PH.D., 53, is President of Transylvania
              University, Lexington, Kentucky. He has been a director of the
  [PHOTO]     Company since 1991 and a director of Kentucky Utilities since
              1987. Dr. Shearer beneficially owns 1,389 shares of Common Stock
              of the Company which include 200 shares held solely by his wife
              and 14 shares held by his children.

              LEE T. TODD, JR., PH.D., 49, is President and Chief Executive
              Officer of DataBeam Corporation, a Kentucky-based high
  [PHOTO]     technology firm. He was elected a director of the Company and
              Kentucky Utilities in August of 1995 when the number of
              positions on the Boards was increased. Dr. Todd beneficially
              owns 500 shares of the Common Stock of the Company.

                                      -97-
<PAGE>

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

              HARRY M. HOE, 70, is President and a director of J. R. Hoe &
              Sons, Inc., Middlesboro, Kentucky, a foundry and casting
  [PHOTO]     company. He has been a director of the Company since 1991 and a
              director of Kentucky Utilities since 1979. Mr. Hoe beneficially
              owns 15,794 shares of Common Stock of the Company which include
              5,088 shares held solely by his wife. His term expires in 1998.

              MILTON W. HUDSON, 68, has been an economic consultant
              (Washington, DC) since 1991. He was Managing Director and Senior
  [PHOTO]     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 1,142 shares
              of Common Stock of the Company. His term expires in 1997.

              JOHN T. NEWTON, 65, retired in 1995 as Chairman of the Board and
              Chief Executive Officer of the Company and Kentucky Utilities, a
  [PHOTO]     position 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 1997.

              WILLIAM L. ROUSE, JR., 63, was Chairman of the Board and Chief
              Executive Officer and a director of First Security Corporation
  [PHOTO]     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 2,186
              shares of Common Stock. His term expires in 1997.

              MICHAEL R. WHITLEY, 53, was elected Chairman, President and
              Chief Executive Officer of the Company and Kentucky Utilities on
  [PHOTO]     August 1, 1995. He had been President and Chief Operating
              Officer of the Company and Kentucky Utilities since November 1,
              1994. 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. Mr. Whitley is a director of LFS Bancorp Inc. and
              its wholly owned subsidiary, Lexington Federal Savings Bank. Mr.
              Whitley has been a director of the Company and Kentucky
              Utilities since 1992. Mr. Whitley beneficially owns 24,122
              shares of the Common Stock of the Company which include 6,300
              shares held jointly with his wife and 337 shares held solely by
              his wife. His term expires in 1998.

                                       -98-
<PAGE>

  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, 1996 an aggregate of
181,707 shares of Common Stock of the Company, representing in the aggregate
 .5% 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 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 1995, the Board of Directors of the Company held 19 meetings
(including Committee meetings), and the Board of Directors of Kentucky
Utilities held 22 meetings (including Committee meetings).

  During 1995, 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. Newton, Rosenthal, Rouse,
Shearer and Whitley. Neither the Company's nor Kentucky Utilities' Executive
Committee met during 1995. 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. Hoe, Hudson and
Rouse. The Company's Audit Committee met two times in 1995 as did the 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. Ramsey, Rosenthal and
Rouse. The Company's Compensation Committee met three times in 1995 and the
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.

  The members of the Finance Committee are Messrs. Hudson, Ramsey, Rosenthal
and Shearer. The Company's Finance Committee met one time in 1995 and the
Kentucky Utilities' Finance Committee met twice in 1995. The Finance Committee
monitors and reviews financing programs and capital structure of the Company,
reviews the Company's cash position in order to establish programs for the
proper investment of amounts determined to be available for such purpose from
time to time, and reports to the Board at least annually concerning its
activities, or, when appropriate, makes recommendations which the committee
deems appropriate for action to be taken by the Board.

  The members of the Long-Range Planning Committee are Messrs. Ramsey,
Rosenthal, Rouse, Shearer and Todd. The Company's Long-Range Planning Committee
met once in 1995 as did the Kentucky Utilities Long-Range Planning Committee.
The Long-Range Planning Committee makes recommendations to the Board with
respect to the Company's future strategy.

                                     -99-
<PAGE>

  Performance Graph. The following performance graph compares the performance
for the last five years of the Company's Common Stock (or for periods prior to
December 1, 1991, Kentucky Utilities' Common Stock) to the S&P 500 Index and
the index of investor-owned electric and combination electric and natural gas
utilities reported by Edison Electric Institute (the "EEI Index"). The graph
gives total shareholder return in each case assuming $100 invested at December
31, 1990 and the reinvestment of all dividends. Following the graph is a chart
giving the same information.

                       [PERFORMANCE GRAPH APPEARS HERE]

                              Shareholder Returns
                             (Dividends Reinvested)

<TABLE>
<CAPTION>
                                                  DECEMBER 31,
                                 -----------------------------------------------
                                  1990    1991    1992    1993    1994    1995
                                 ------- ------- ------- ------- ------- -------
<S>                              <C>     <C>     <C>     <C>     <C>     <C>
KU Energy....................... $100.00 $142.00 $153.40 $166.87 $165.22 $194.85
EEI Index.......................  100.00  128.87  138.69  154.11  136.28  178.55
S&P 500 Index...................  100.00  130.47  140.41  154.56  156.60  215.45
</TABLE>

  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.

  In addition to an annual retainer, the Company and Kentucky Utilities pay
each non-employee director a $750 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 $750 fee is paid for both
meetings. Similarly,

                                      -100-
<PAGE>

if the same committee of the Boards of the Company and Kentucky Utilities meet
on the same day, only one $750 fee is paid for both meetings. Out-of-pocket
travel expenses are paid to directors for all meetings attended.

  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 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.
In 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 is broadly
defined under the Director Retirement Plans and includes any merger,
consolidation, reorganization or sale of substantially all of the assets of the
Company or Kentucky Utilities which results in less than a majority 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.

  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. 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. Because officers of the Company and Kentucky Utilities receive no
compensation for services as directors, any director who is an officer is not
eligible to participate in the plans.

                                      -101-
<PAGE>

  Executive Compensation. 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 1993 through 1995 in all
capacities, to the Chief Executive Officers and the other four most highly
compensated executive officers of the Company and Kentucky Utilities:

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                        LONG-TERM
                                                                       COMPENSATION
                                    ANNUAL COMPENSATION                  PAYOUTS
                                  -----------------------              ------------
                                                                           LTIP
                                                          OTHER ANNUAL ------------  ALL OTHER
                                                   BONUS  COMPENSATION   PAYOUTS    COMPENSATION
NAME AND PRINCIPAL POSITION       YEAR SALARY ($) ($)(3)     ($)(4)       ($)(5)       ($)(6)
---------------------------       ---- ---------- ------- ------------ ------------ ------------
<S>                               <C>  <C>        <C>     <C>          <C>          <C>
JOHN T. NEWTON;                   1995  328,616    74,811    23,959            0      232,257
 Former Chairman of the Board,    1994  462,694   149,979    13,380      158,738        7,561
 Former Chief Executive Officer,  1993  424,237   144,362    11,886            0        8,444
 & Current Director of the
 Company & Kentucky Utilities(1)
MICHAEL R. WHITLEY;               1995  318,467    73,476       116            0        4,686
 Chairman of the Board, President 1994  245,490    67,157       481       50,508        5,560
 & Chief Executive Officer &      1993  219,529    62,164     1,258            0        6,045
 Director of the Company &
 Kentucky Utilities(2)
JAMES W. TIPTON;                  1995  227,591    39,942     1,445            0        4,667
 Senior Vice President            1994  214,043    63,210     1,373       50,508        5,537
 of the Company                   1993  204,042    60,331     1,201            0        5,712
O. M. GOODLETT;                   1995  210,195    44,550         0            0        4,500
 Senior Vice President of the     1994  200,251    56,889         0       30,246        4,500
 Company & Kentucky Utilities     1993  188,724    54,257         0            0        4,497
WAYNE T. LUCAS;                   1995  194,553    42,160       711            0        4,692
 Senior Vice President            1994  159,699    33,754       523       22,658        5,522
 of Kentucky Utilities            1993  139,331    31,695       446                     5,813
JAMES M. ALLISON;                 1995  169,405    38,160         0            0        4,527
 Senior Vice President            1994  133,674    29,131         0            0        4,500
 of Kentucky Utilities            1993  110,885    24,222     5,576            0            0
</TABLE>
--------
(1) Retired as Chairman and CEO in August 1995.
(2) Assumed additional titles of Chairman and CEO on August 1, 1995, having
    been President since November 1, 1994.
(3) Bonuses are paid under the Incentive Plans. The bonus reported for Mr.
    Newton for 1995 has been prorated to reflect his retirement as of August 1,
    1995. Any bonus earned but deferred under the Executive Deferred
    Compensation Plans is included in the Table.

                                      -102-
<PAGE>

(4) Other annual compensation consists of the following items: (1) amounts for
    group term life insurance and related taxes; (2) an amount for above-market
    interest earned and paid on deferred compensation for Mr. Newton in 1995;
    and (3) an amount for taxes related to moving expenses for Mr. Allison in
    1993.
(5) Reflects payouts under the Kentucky Utilities Performance Share Plan
    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 1993 and 1995 in the
    table above. Amounts shown for 1994 reflect a payout in the form of
    restricted shares of the Company's common stock of 75% of the contingent
    grant for the Performance Cycle commencing in 1991. Such restricted stock
    will be forfeited if the officer terminates employment prior to January 1,
    2001 for any reason other than retirement, disability or death. In the
    event of a change in control, the restrictions lapse immediately.
(6) All other compensation includes: (a) above-market-rate interest earned on
    deferred compensation; (b) the employer matching contribution made to the
    officer's account in the 401(k) Employee Savings Plan; and (c) Supplemental
    Security Plan Payment of $227,757 to Mr. Newton as the benefit payable for
    the period of August 1, 1995 through July 31, 1996. Such amounts for 1995
    with respect to items (a) and (b) are shown in the following table.

<TABLE>
<CAPTION>
                                                      INTEREST ON     401(K)
     EXECUTIVE                                          DEFERRED     MATCHING
      OFFICER                                         COMPENSATION CONTRIBUTION
     ---------                                        ------------ ------------
       <S>                                            <C>          <C>
       John T. Newton................................     $N/A        $4,500
       Michael R. Whitley............................     $186        $4,500
       James W. Tipton...............................     $167        $4,500
       O. M. Goodlett................................     $N/A        $4,500
       Wayne T. Lucas................................     $192        $4,500
       James M. Allison..............................     $ 27        $4,500
</TABLE>

  Performance Shares contingently awarded under the Performance Share Plans in
1995 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>
                                      PERFORMANCE
                                       OR OTHER    ESTIMATED FUTURE PAYOUTS UNDER NON-
                                        PERIOD                    STOCK
                          NUMBER OF      UNTIL            PRICE-BASED PLANS(5)
                            UNITS     MATURATION  -------------------------------------
                              OR          OR      THRESHOLD
NAME                     OTHER RIGHTS  PAYOUT(4)     ($)      TARGET ($)    MAXIMUM ($)
----                     ------------ ----------- --------- --------------- -----------
<S>                      <C>          <C>         <C>       <C>             <C>
John T. Newton..........    1,727(1)        3        $ 0    $25,905-$38,858  $ 51,810
Michael R. Whitley......    4,075(2)        3        $ 0    $61,125-$91,688  $122,250
James W. Tipton.........    2,445(2)        3        $ 0    $36,675-$55,013  $ 73,350
O. M. Goodlett..........    2,200(3)        3        $ 0    $33,000-$49,500  $ 66,000
Wayne T. Lucas..........    2,085(3)        3        $ 0    $31,275-$46,913  $ 62,550
James M. Allison........    1,855(3)        3        $ 0    $27,825-$41,738  $ 55,650
</TABLE>
--------
(1) Constitutes Performance Shares contingently granted under the KUE
    Performance Share Plan in 1995 as adjusted on a prorated basis to reflect
    retirement as of August 1, 1995.

                                      -103-
<PAGE>

(2) Constitutes Performance Shares contingently granted under the KUE
    Performance Share Plan in 1995.
(3) Constitutes Performance Shares contingently granted under the Kentucky
    Utilities Performance Share Plan in 1995.
(4) Number of years in Performance Cycle.
(5) See description below for the scale that determines which amount would be
    applicable. Amounts are calculated based on the price of the Company's
    Common Stock on December 31, 1995.

  For the Performance Cycle commencing in 1995, payouts of contingent grants
shown in the table above will be determined by calculating the average return
on equity for the Performance Cycle of the Company or Kentucky Utilities, as
the case may be, compared to the average return on equity for the Performance
Cycle for the comparable companies. The returns will be ranked in descending
order. For the 1995-1997 Performance Cycle, the scale that determines if grants
are earned is as follows: if the Company's or Kentucky Utilities' rank, as the
case may be, is in the top two, the payout will be 100% of the contingent grant
(the Maximum shown in the table); if their rank is third or fourth, the payout
will be 75% and if their rank is fifth or sixth, the payout will be 50% (the
two figures shown as Target in the table); and if their rank is seventh or
below, no shares will be awarded (shown as the Threshold in the table) for that
Performance Cycle under the applicable Performance Share 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 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. Newton,
37 years; Mr. Whitley, 31 years; Mr. Tipton, 28 years; Mr. Goodlett, 25 years;
Mr. Lucas, 26 years; and Mr. Allison, 1 year. All of the credited years of
service were computed as of December 31, 1995 except for Mr. Newton's service
which was determined as of August 1, 1995, his date of retirement. 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 effective in 1995, no base compensation above $150,000 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, no
annual benefit derived from employer contributions may exceed $120,000.
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 1995 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,
$101,643; Mr. Tipton, $93,138; Mr. Goodlett, $84,738; Mr. Lucas, $86,998; and
Mr. Allison, $50,219. Mr. Newton's annual pension benefit under the Retirement
Plan commencing on his August 1, 1995 retirement date is $106,309.

                                       -104-
<PAGE>

<TABLE>
<CAPTION>
  FINAL
 AVERAGE                       ANNUAL BENEFIT AFTER SPECIFIED YEARS OF SERVICE(2)
  BASE                   --------------------------------------------------------------
 PAY(1)                     15       20       25       30       35       40       45
 -------                 -------- -------- -------- -------- -------- -------- --------
<S>                      <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
</TABLE>
--------
(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.

  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, disability and death benefits as well
as a change in control retirement benefit and a change in control severance
benefit. 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 for the individuals named in the Summary Compensation Table
(assuming 1995 basic salary) are as follows: Mr. Whitley, $145,164; Mr. Tipton,
$62,166; Mr. Goodlett, $62,889; Mr. Lucas, $43,376; and Mr. Allison, $63,262.
Mr. Newton's annual benefit under the Supplemental Security Plan, commencing on
his August 1, 1995 retirement, is $227,757. 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.

  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 the
change in control for reasons other than cause, death, permanent disability or
attainment of age 65; (ii) resignation within two years of the change in
control 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,
in each case of Kentucky Utilities,

                                      -105-
<PAGE>

termination of employment for any reason during the 30-day period commencing on
the first anniversary of the 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 federal excise tax liabilities. 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 for 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 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. Change in control has essentially the same meaning as
under the Director Retirement Plans described under "Directors' Compensation."

  The Performance Share Plans and Executive Deferred Compensation Plans contain
provisions relating to a change in control. Under each of these plans a change
in control has essentially the same meaning as under the Director Retirement
Plans described under "Directors' Compensation." Under the Performance Share
Plans, if a participant's employment is terminated voluntarily or involuntarily
after a change in control, such participant will have the right to an immediate
cash payment for all Performance Cycles in which the participant is currently
participating. The amount payable to a participant in the event of termination
in connection with a change in control will be determined in accordance with
the formula specified in the Performance Share Plan. In addition, after 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.

                                    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 1996. 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.

  Proposals of Shareholders. Under the rules of the Securities and Exchange
Commission, any shareholder proposal intended to be presented at the 1997
Annual Meeting of Shareholders must be received by the Company at its principal
executive offices no later than November 17, 1996 in order to be eligible to be
considered for inclusion in the Company' 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

                                      -106-