<PAGE>

                                                                Exhibit 99.1

<TABLE>
Selected Financial Data

Laclede Gas Company

<CAPTION>
                                                                             Fiscal Years Ended September 30
(Thousands, Except Per Share Amounts)                  2002               2001            2000             1999            1998
                                                       ----               ----            ----             ----            ----
<S>                                                 <C>                <C>             <C>              <C>             <C>
Summary of Operations
Operating Revenues:
 Utility                                            $  592,097         $  923,242      $  529,250       $  473,031      $  547,229
 Other                                                   2,521             78,867          36,878           18,287          14,614
                                                    ----------         ----------      ----------       ----------      ----------
Total operating revenues                               594,618          1,002,109         566,128          491,318         561,843
                                                    ----------         ----------      ----------       ----------      ----------

Operating Expenses:
Utility:
 Natural and propane gas                               340,045            640,006         294,717          246,294         311,759
 Other operation expenses                              106,027            101,915          86,970           83,661          86,128
 Maintenance                                            17,813             19,262          18,556           19,517          18,665
 Depreciation & amortization                            24,215             26,193          24,672           21,470          25,304
 Taxes, other than income taxes                         48,342             65,062          42,788           41,660          43,773
                                                    ----------         ----------      ----------       ----------      ----------
Total utility operating expenses                       536,442            852,438         467,703          412,602         485,629
Other                                                    2,572             77,346          35,082           17,497          12,894
                                                    ----------         ----------      ----------       ----------      ----------
Total operating expenses                               539,014            929,784         502,785          430,099         498,523
                                                    ----------         ----------      ----------       ----------      ----------
Operating Income                                        55,604             72,325          63,343           61,219          63,320

Allowance for Funds Used
 During Construction                                      (149)               749             397              739             609
Other Income and Income
 Deductions - Net                                          699                668             338             (942)            674
                                                    ----------         ----------      ----------       ----------      ----------
Income Before Interest
 and Income Taxes                                       56,154             73,742          64,078           61,016          64,603
                                                    ----------         ----------      ----------       ----------      ----------
Interest Charges:
 Interest on long-term debt                             20,820             18,372          15,164           13,966          14,797
 Other interest charges                                  4,285             10,067           8,844            6,627           6,473
                                                    ----------         ----------      ----------       ----------      ----------
    Total interest charges                              25,105             28,439          24,008           20,593          21,270
                                                    ----------         ----------      ----------       ----------      ----------
Income Before Income Taxes                              31,049             45,303          40,070           40,423          43,333
Income Taxes                                            10,720             14,831          14,105           14,361          15,441
                                                    ----------         ----------      ----------       ----------      ----------
Net Income                                              20,329             30,472          25,965           26,062          27,892
Dividends on Redeemable Preferred
 Stock                                                      68                 87              93               97              97
                                                    ----------         ----------      ----------       ----------      ----------
Earnings Applicable to Common Stock                 $   20,261         $   30,385      $   25,872       $   25,965      $   27,795
                                                    ==========         ==========      ==========       ==========      ==========
</TABLE>


                                     1

<PAGE>
<PAGE>

<TABLE>
Selected Financial Data (continued)

Laclede Gas Company
<CAPTION>
                                                                            Fiscal Years Ended September 30
(Thousands, Except Per Share Amounts)                   2002              2001           2000            1999            1998
                                                        ----              ----           ----            ----            ----
<S>                                                   <C>              <C>            <C>              <C>            <C>
Dividends Declared-
 Common Stock                                         $  25,311        $  25,296      $  25,297        $  24,459      $  23,229

Utility Plant
 Gross Plant-End of Period                            $ 988,747        $ 949,775      $ 915,998        $ 872,527      $ 833,685
 Net Plant-End of Period                                594,376          569,640        545,715          517,635        490,585
 Construction Expenditures                               48,765           46,952         51,635           48,698         47,254
 Property Retirements                                     9,769           13,141          6,663            8,190          6,205
Total Assets                                          $ 985,821        $ 975,910      $ 931,740        $ 837,664      $ 777,291

Capitalization-
 End of Period
 Common Stock and Paid-In
   Capital                                            $  82,579        $ 106,590      $ 106,579        $ 106,570      $  82,460
 Retained Earnings                                      180,719          205,512        200,423          199,848        198,342
 Accumulated Other
   Comprehensive Income (Loss)                             (339)               -              -              (77)             -
 Treasury Stock                                               -          (24,017)       (24,017)         (24,017)       (24,017)
                                                     ----------       ----------     ----------       ----------     ----------
       Common stock equity                              262,959          288,085        282,985          282,324        256,785
 Redeemable Preferred Stock                               1,266            1,588          1,763            1,923          1,960
 Long-Term Debt                                         259,545          284,459        234,408          204,323        179,238
                                                     ----------       ----------     ----------       ----------     ----------
      Total capitalization                            $ 523,770        $ 574,132      $ 519,156        $ 488,570      $ 437,983
                                                     ==========       ==========     ==========       ==========     ==========
</TABLE>


                                     2

<PAGE>
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

LACLEDE GAS COMPANY

INTRODUCTION

This management's discussion analyzes the financial condition and results of
operations of Laclede Gas Company (Laclede Gas or the Utility) and its
subsidiaries, under the corporate organizational structure that was in place
during the three fiscal years ended September 30, 2002. It includes
management's view of factors that affect its business, explanations of past
financial results including changes in earnings and costs from the prior
year, and their effects on overall financial condition and liquidity.
Effective October 1, 2001, the corporation reorganized, such that Laclede
Gas and its subsidiaries became separate subsidiaries of The Laclede Group,
Inc. (Laclede Group), an exempt holding company under the Public Utility
Holding Company Act of 1935. The Consolidated Financial Statements included
in this report present the consolidated financial position, results of
operation and cash flows of Laclede Gas, as well as the consolidated
financial position, results of operation and cash flows of Laclede Gas'
former subsidiaries prior to the October 1, 2001 restructuring. Note 2 to
the Consolidated Financial Statements discusses the new holding company
structure.

Certain matters discussed in this report, excluding historical information,
include forward-looking statements. Certain words, such as "may,"
"anticipate," "believe," "estimate," "expect," "intend," "plan," "seek," and
similar words and expressions identify forward-looking statements that
involve uncertainties and risks. Future developments may not be in
accordance with our expectations or beliefs and the effect of future
developments may not be those anticipated. Among the factors that may cause
results to differ materially from those contemplated in any forward-looking
statement are:

o    weather conditions and catastrophic events;
o    economic, competitive, political and regulatory conditions;
o    legislative, regulatory and judicial mandates and decisions, some of
     which may be retroactive, including those affecting
     o   allowed rates of return
     o   incentive regulation
     o   industry and rate structures
     o   purchased gas adjustment provisions
     o   franchise renewals
     o   environmental or safety matters
     o   taxes
     o   accounting standards;
o    the results of litigation;
o    retention, ability to attract, ability to collect from and conservation
     efforts of customers;
o    capital and energy commodity market conditions including the ability to
     obtain funds for necessary capital expenditures and general operations
     and the terms and conditions imposed for obtaining sufficient gas
     supply; and
o    employee workforce issues.

Readers are urged to consider the risks, uncertainties and other factors
that could affect our business as described in this report. All
forward-looking statements made in this report rely upon the safe harbor
protections provided under the Private Securities Litigation Reform Act of
1995. We do not, by including this statement, assume any obligation to
review or revise any particular forward-looking statement in light of future
events.

The Management's Discussion and Analysis of Financial Condition and Results
of Operations should be read in conjunction with the Company's Consolidated
Financial Statements and the combined notes thereto.


RESULTS OF OPERATIONS

Earnings

Laclede Gas' earnings are generated by the sale of heating energy, which
historically have been heavily influenced by the weather. Earnings
applicable to common stock for fiscal 2002 was $20.3 million, compared with
$30.4 million for fiscal 2001, and $25.9 million for fiscal 2000.
Temperatures in the Laclede Gas service area during fiscal 2002, the fifth
warmest on record, were 15% warmer than normal and 22% warmer than fiscal
2001. Temperatures during fiscal 2001 were 10% colder than normal and 30%
colder than in fiscal 2000--which was the third warmest over the last 100
years. The $10.1 million decrease in earnings in fiscal 2002 (from 2001) was
primarily attributable to the adverse impact of (1) lower gas sales arising
from temperatures in the Utility's service area that were significantly
warmer than last year; and, (2) the Missouri Public Service Commission's
decision not to extend the Utility's Gas Supply Incentive Plan (GSIP) beyond
September 30, 2001. The GSIP produced significant benefits for customers and
shareholders during the past five years during which the program was in
effect. These factors were partially offset by (1) the benefit of the
general rate increase effective on December 1, 2001; (2) nearly $4.9 million
of pre-tax income from the Utility's Price Stabilization Program (PSP)

                                     3

<PAGE>
<PAGE>

recorded this year; and (3) higher income from off-system sales and capacity
release revenues. The PSP is discussed further in the Regulatory Matters
section below.

As a result of the colder weather experienced during fiscal 2001 (compared
with fiscal 2000), consolidated earnings, at $30.4 million, were up 17% over
fiscal 2000 earnings of $25.9 million. The $4.5 million increase in fiscal
2001 earnings versus fiscal 2000 was primarily due to the benefit of the
colder weather experienced during 2001. This benefit was partially offset by
higher expenses resulting from high wholesale natural gas prices during
fiscal 2001. These included a higher provision for uncollectible accounts
and higher carrying costs reflecting the interest and other costs incurred
by Laclede Gas from the date it purchased gas in the wholesale market to the
time it received payment from its customers. Laclede Gas does not benefit
from higher wholesale natural gas prices, which are set in a competitive
national market, but passes its actual purchased gas costs through to
customers. In addition to the increased costs related to the high wholesale
gas prices, fiscal 2001 expenses were higher, when compared with fiscal
2000, due to higher pension costs, expenses related to the formation of the
holding company, and other increased costs of doing business.

Operating Revenues

Operating revenues for fiscal year 2002 decreased $331.1 million, or 35.9%,
below fiscal 2001, reflecting both the return to a more traditional level of
wholesale gas prices and a weather-related reduction in natural gas sales.
Wholesale natural gas prices are passed on to Utility customers, subject to
prudence review, under the Purchased Gas Adjustment (PGA) Clause. The
decrease in operating revenues was primarily comprised of lower wholesale
natural gas costs of $228.2 million and lower natural gas sales levels and
other variations of $125.3 million. These factors were slightly offset by
the benefit of the Utility's general rate increase, implemented December 1,
2001, amounting to $9.2 million, and higher off-system sales, capacity
release and incentive revenues of $13.2 million.

Fiscal 2001 operating revenues increased $394.0 million, or 74.4%, above
fiscal 2000 primarily due to higher wholesale gas costs of $317.3 million
(reflecting an unprecedented rise in market prices during the fiscal 2001
winter), higher gas sales volumes and other variations amounting to $83.0
million, and the remaining effect of the Laclede Gas 1999 general rate
increase of $3.6 million. These factors were slightly offset by lower
off-system sales and incentive revenues of $9.9 million.

Other operating revenues decreased $76.3 million reflecting exclusion of
subsidiary revenues in the presentation of this year's amounts subsequent to
the October 1, 2001 restructuring. Fiscal 2001 other operating revenues
increased $42.0 million above fiscal 2000 primarily due to higher gas
marketing sales by Laclede Energy Resources, Inc.

Total therms sold and transported in 2002 were 1.06 billion compared with
1.12 billion in 2001 and 1.04 billion in 2000.

Operating Expenses

Operating expenses in fiscal 2002 decreased $316.0 million, or 37.1%, from
fiscal 2001. Natural and propane gas expense decreased $300.0 million
primarily due to decreased rates charged by suppliers and lower volumes
purchased for sendout due to the warmer weather, partially offset by higher
off-system gas expense. Other operation and maintenance expenses increased
$2.7 million, or 2.2%, primarily due to higher group insurance charges,
higher wage rates, increased insurance premiums, lower net pension credits,
and costs to remove retired utility plant. These factors were partially
offset by a lower provision for uncollectible accounts and reduced
distribution and maintenance charges. Depreciation and amortization expense
decreased $2.0 million primarily due to the effect of lower depreciation
rates instituted December 1, 2001 and negative amortization of a portion of
the depreciation reserve effective July 1, 2002, as authorized by the MoPSC
(see Note 1 related to Utility Plant, Depreciation and Amortization). These
effects were partially offset by increased depreciable property. Taxes,
other than income, decreased $16.7 million, or 25.7%, primarily due to lower
gross receipts taxes, reflecting the decreased revenues.

Operating expenses in fiscal 2001 increased $384.7 million, or 82.3%, from
fiscal 2000. Natural and propane gas expense increased $345.3 million in
fiscal 2001 from fiscal 2000 primarily due to nationwide increases in
natural gas rates charged by our suppliers and higher volumes purchased for
sendout arising from the colder weather, the effects of which were slightly
offset by lower off-system sales gas expense. Other operation and
maintenance expenses in 2001 increased $15.7 million, or 14.8%, over 2000
primarily due to increased net pension costs, a higher provision for
uncollectible accounts, increased distribution and maintenance costs, higher
wage rates, and other increases in the costs of doing business. Depreciation
and amortization expense in 2001 increased $1.5 million, or 6.2%, primarily
due to additional depreciable property. Taxes, other than income taxes,
increased $22.3 million in 2001 compared with 2000. The increase was
principally attributable to higher gross receipts taxes, reflecting
increased gas sales revenues.

Other operating expenses decreased $74.8 million reflecting exclusion of
subsidiary expenses in the presentation of this year's amounts subsequent to
the October 1, 2001 restructuring. Other operating expenses in fiscal 2001
increased $42.3 million above fiscal 2000 primarily due to higher gas
expenses associated with gas marketing sales by Laclede Energy Resources, Inc.

                                     4

<PAGE>
<PAGE>

Other Income and Income Deductions - Net

Other income and income deductions - net decreased $.9 million in fiscal
2002 (compared with fiscal 2001), and increased $.7 million in fiscal 2001
(compared with fiscal 2000). The variations for both periods primarily
reflect higher interest income recorded in fiscal 2001, partially offset by
expenses related to the holding company formation and strategic planning
initiatives also recorded in that same year.

Interest Charges

Interest expense decreased $3.3 million, or 11.7%, in fiscal 2002 (compared
with fiscal 2001) primarily due to decreased short-term interest expense
(reflecting lower rates and reduced average borrowings), partially offset by
higher interest on long-term debt resulting from the issuance of $50 million
of 6 5/8% first mortgage bonds in June 2001.

Interest expense increased $4.4 million, or 18.5%, in fiscal 2001 (compared
with fiscal 2000) primarily due to the issuance of $30 million of 7.90%
first mortgage bonds in September 2000, the issuance of $50 million of
6 5/8% first mortgage bonds in June 2001, and increased short-term interest
expense (reflecting the net effect of higher average borrowings and lower
rates).

Income Taxes

The variations in income taxes for all periods reported are primarily due to
changes in pre-tax income.

Labor Agreement

On July 30, 2000, Laclede Gas and Union representatives reached a new
four-year labor agreement replacing the prior agreement that was to expire
July 31, 2000. The new contract extends through July 31, 2004. The
settlement resulted in wage increases of 2.75% in all four years, along with
lump-sum payment provisions and other benefit improvements.


CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition, results of
operations, liquidity and capital resources is based upon our financial
statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. Generally accepted
accounting principles require that we make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. We evaluate our
estimates on an ongoing basis. We base our estimates on historical
experience and on various other assumptions that we believe are reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates.

Laclede Gas accounts for its regulated operations in accordance with
Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for
the Effects of Certain Types of Regulation." This statement sets forth the
application of accounting principles generally accepted in the United States
of America for those companies whose rates are established by or are subject
to approval by an independent third-party regulator. The provisions of SFAS
No. 71 require, among other things, that financial statements of a regulated
enterprise reflect the actions of regulators, where appropriate. These
actions may result in the recognition of revenues and expenses in time
periods that are different than non-regulated enterprises. When this occurs,
costs are deferred as assets in the balance sheet (regulatory assets) and
recorded as expenses when those amounts are reflected in rates. Also,
regulators can impose liabilities upon a regulated company for amounts
previously collected from customers and for recovery of costs that are
expected to be incurred in the future (regulatory liabilities).


REGULATORY MATTERS

At the state level, there have been several important developments during
the fiscal year affecting Laclede Gas, some of which are still pending.

On January 25, 2002, Laclede filed a request with the Missouri Public
Service Commission (MoPSC or Commission) for a general rate increase of
$36.1 million annually to recover costs related to the operation of its gas
distribution system. As part of this rate increase filing, the Utility
proposed a weather mitigation plan that would protect its customers from
weather-related fluctuations in their bills and help stabilize its annual
revenues in that regard. On October 3, 2002, the Commission approved a
settlement reached among the parties to the case. The terms of the
settlement include (1) an annual rate increase of $14 million effective on
November 9, 2002; (2) a moratorium on additional rate filings until March 1,
2004; and (3) an innovative rate design that is expected to provide the
Utility with the ability to recover its distribution costs, which are
essentially fixed, in a manner that is significantly less sensitive to
weather. The settlement also provided for, among other things, changes

                                     5

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<PAGE>

resulting in negative amortization of the depreciation reserve of $3.4
million annually effective from July 1, 2002 until the Utility's next rate
case proceeding, minor changes in depreciation rates effective January 1,
2003, and changes in the regulatory treatment of pension costs primarily
designed to stabilize such costs, effective during fiscal 2003. Also
approved was an incentive program beginning in fiscal 2003 under which the
Utility may achieve, under specific conditions, income related to management
of its gas supply commodity costs.

On March 8, 2002, Laclede Gas filed an application requesting that the MoPSC
issue an Accounting Authority Order (AAO) that would allow Laclede Gas to
defer for future recovery consideration unrecovered costs due solely to the
negative impact of the extraordinarily warm weather experienced in the
Utility's service area during the winter of 2001-2002. Laclede Gas has filed
to withdraw its application in conjunction with the 2002 rate case
settlement.

On May 18, 2001, Laclede Gas filed a request with the Missouri Public
Service Commission for a general rate increase of $39.8 million annually to
recover costs related to the operation of its distribution system. This
filing culminated in a settlement among the parties to the case, which was
approved by the Commission on November 29, 2001. The settlement provided
Laclede Gas an annual increase of about $12 million effective December 1,
2001. Additionally, effective on December 1, 2001 Laclede Gas was permitted
to charge customers $36 to cover the cost of initiating service at a
particular address. This new charge was anticipated to generate additional
revenue of approximately $3 million annually. The settlement also provided
for the continued deferral of certain costs related to the Laclede Gas pipe
replacement program as well as recovery of costs previously deferred under
that program. The cost of removing retired utility plant is treated as an
expense pursuant to this settlement, rather than being included in
depreciation rates. However, Laclede Gas will continue to pursue a reversal
of the Commission's treatment of depreciation rates in the courts as
discussed in greater detail below. As part of the settlement, Laclede Gas
agreed to implement the terms of a rulemaking promulgated by the Commission
on November 8, 2001 that relaxed the requirements for the fiscal 2002
heating season for reinstatement of certain customers who had been
disconnected for nonpayment. The settlement provides for a recovery
mechanism under which Laclede Gas will be reimbursed for any incremental
costs associated with the new rule. Finally, under the terms of the
agreement, Laclede Gas continues to be permitted to retain all income
resulting from sales made outside its traditional service area, and is
permitted to retain all income from releases of available pipeline capacity.

Laclede Gas previously appealed the MoPSC's decision in its 1999 rate case
relative to the calculation of its depreciation rates. The Circuit Court
remanded the decision to the MoPSC based on inadequate findings of fact. The
MoPSC upheld its previous order and Laclede Gas appealed this second order
to the Circuit Court. On April 29, 2002, the Court ruled that the MoPSC's
second order was lawful and reasonable. On June 7, 2002, Laclede Gas
appealed the Circuit Court's decision to the Missouri Western District Court
of Appeals. All briefs to the Court of Appeals have been submitted and oral
arguments have been scheduled for December 2002.

Under the GSIP of Laclede Gas, the Utility shared with its customers certain
gains and losses related to the acquisition and management of its gas supply
assets. In fiscal 2001, the GSIP contributed $.29 per share to consolidated
earnings. The provisions of the GSIP extended through September 30, 2001. In
September 2001, the MoPSC ruled that the GSIP should be allowed to expire.
On February 19, 2002, the MoPSC denied Laclede Gas' application for
rehearing. Laclede Gas filed a petition for judicial review of the MoPSC's
decision with the Cole County Circuit Court, together with a motion
requesting that the MoPSC's decision be stayed. The request for stay was
denied on May 13, 2002. The petition for judicial review is still pending.
However, pursuant to the 2001 rate case settlement approved by the MoPSC in
November 2001, and consistent with the 2002 rate case settlement, the MoPSC
authorized Laclede Gas to retain all income from releases of pipeline
capacity effective December 1, 2001, which previously was shared with
customers under the GSIP. Laclede Gas continues to retain all income
resulting from sales outside of its traditional service area, as previously
authorized by the MoPSC. However, Laclede Gas was not able to retain any of
the savings it obtains relative to gas supply costs or any savings it
obtains from pipeline discounts. Income related to releases of available
pipeline capacity and sales made outside its traditional service area are
volatile in nature and subject to market conditions. See Note 4 for more
information on the GSIP.

The Price Stabilization Program (PSP) authorized Laclede Gas to purchase
certain financial instruments in an effort to hedge against significant
increases in the cost of natural gas. The cost of such financial
instruments, however, like the cost of natural gas itself, increased
significantly during fiscal 2001. As a result, the MoPSC granted the request
of Laclede Gas to reduce the amount of natural gas purchases required to be
covered by such financial instruments for that heating season. In February
2001, the MoPSC approved modifications to the PSP, including a provision
that $4 million in supplemental funding be added to the PSP for the purchase
of financial instruments for the fiscal 2002 heating season. Concurrently,
Laclede Gas relinquished a claim on $4 million arising from gains realized
from the purchase and sale of such instruments during the fiscal 2001
heating season and offered to utilize a similar amount to provide for future
funding for such instruments in the event the program was allowed to
continue. The MoPSC also approved modifications to the PSP to reduce the
fiscal 2002 percentage of gas requirements to be covered by the PSP. The PSP
was allowed to expire at the end of the fiscal 2002 heating season, at which
time the Utility recorded nearly $4.9 million of pre-tax income produced
through the program.

                                     6

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On June 28, 2002, the Staff of the MoPSC filed its recommendation in a
proceeding established to review Laclede Gas' gas costs for fiscal 2001. In
its recommendation, the Staff proposed to disallow the approximately $4.9
million of pre-tax income achieved under the PSP. Laclede Gas believes that
Staff's position lacks merit and continues to vigorously oppose the
adjustment in a proceeding before the MoPSC, the hearing for which is
currently scheduled to occur in February 2003. Regulatory proceeding results
are uncertain, and to the extent that a final Commission decision sustains
Staff's recommended disallowance, the outcome of the proceeding could have a
material effect on the future financial position and results of operations
of Laclede Gas. Missouri statutes provide an opportunity for court review of
Commission decisions.

The PGA clause allows Laclede Gas to flow through to customers, subject to
prudence review, the cost of purchased gas supplies. The Utility is allowed
to file to modify, on a periodic basis, the level of gas costs in its PGA.
Previously, the Commission allowed two scheduled PGA filings each year, one
for the summer months and another for the winter period, plus one
unscheduled winter filing if certain conditions were met. The significant
fluctuations in natural gas prices during fiscal 2001 necessitated
additional unscheduled filings, which were approved by the MoPSC, to better
match customer billings with market natural gas prices. In February 2002,
the MoPSC approved Laclede Gas' proposal to revise its PGA clause to adjust
the gas cost component of its rates more frequently to recover its costs.
The new approved tariffs allow scheduled gas cost adjustments in November,
January, March and June, thereby enabling Laclede Gas to more closely
recover its costs of gas, especially during the high-volume winter months.
As part of the same ruling, the MoPSC clarified that costs, cost reductions
and carrying costs associated with the Utility's use of natural gas
financial instruments (except as provided previously under the PSP) are gas
costs recoverable through the PGA mechanism.

On March 15, 2002, the Staff of the MoPSC recommended in a proceeding to
review Laclede Gas' gas costs for fiscal 2000 to disallow the recovery of
approximately $2.6 million in gas costs. The alleged grounds were that
Laclede Gas had slightly more transportation capacity than necessary to
serve its customers. The Utility demonstrated to the Staff the
appropriateness of the then-current level of transportation capacity. On May
9, 2002, the Staff revised its recommendation to withdraw the $2.6 million
proposed disallowance.

On May 31, 2002, the Staff of the Commission filed a Motion to Investigate
Laclede Gas Company's alleged transfer of its gas supply function to Laclede
Energy Services, Inc. (LES), a subsidiary of Laclede Group, and such
action's ramifications, including whether such alleged transfer required
Commission approval or was otherwise lawful. On June 10, 2002 Laclede Gas
responded, pointing out that it had not transferred its gas supply functions
to LES but had instead delegated six employees to LES with responsibility
for performing various gas supply administrative duties, many of which had
been performed in prior years by an outside party. Laclede Gas remains
primarily responsible for the gas supply function. Laclede Gas urged the
Commission to deny Staff's Motion on this and other grounds. The Commission
concluded that a case should be established to investigate the issues raised
by the Staff. The Commission also ordered the Staff to file a status report
regarding progress of the investigation and Laclede Gas to file any
responses to the Staff's status report. Laclede Gas believes its actions
comply with applicable law and intends to vigorously defend its position.
The outcome of any regulatory proceeding is uncertain. However, Laclede Gas
does not believe that the eventual outcome of the case will have a material
effect on the financial results of Laclede Gas.

On July 29, 2002, Laclede Gas filed a proposed Catch-Up/Keep-Up Program with
the MoPSC that would permit the Company to use a portion of the savings from
its negotiated pipeline discounts to fund a low-income energy assistance
program. Pursuant to, and among revisions to the Program filed by the
Utility on September 23, 2002, the amount of discount savings that could be
used for this purpose would be limited to $6 million per year. In response
to certain objections filed by the MoPSC Staff and Missouri Office of the
Public Counsel, the Commission has suspended the tariffs implementing the
Program and scheduled a prehearing conference that occurred on October 23,
2002. Evidentiary hearings are scheduled for early December, 2002.


ACCOUNTING PRONOUNCEMENTS

In June 2001, the FASB issued SFAS No. 141, "Business Combinations," which
requires all business combinations in the scope of this Statement to be
accounted for using the purchase method. The provisions of this Statement
apply to all business combinations initiated after June 30, 2001. The FASB
also issued SFAS No. 142, "Goodwill and Other Intangible Assets," which
addresses how acquired goodwill and other intangible assets that are
acquired individually or with a group of other assets should be accounted
for in financial statements upon acquisition and after they have been
initially recognized in the financial statements. The provisions of this
Statement are required to be applied at the beginning of fiscal 2003. The
adoption of SFAS Nos. 141 and 142 did not have a material effect on the
financial position and results of operations of Laclede Gas.

The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations,"
which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and associated
asset retirement costs. It applies to legal obligations associated with the
retirement of long-lived assets that result from acquisition, construction,
development and/or the normal operation of a long-lived asset, except for
certain obligations of lessees. This Statement is effective for fiscal 2003.
The provisions of the Statement provide for rate-regulated entities that
meet the criteria for

                                     7

<PAGE>
<PAGE>

application of SFAS No. 71, such as Laclede Gas, to recognize regulatory
assets or liabilities for differences in the timing of recognition of the
period costs associated with asset retirement obligations for financial
reporting pursuant to this Statement and rate-making purposes. The effect of
the adoption of this Statement on October 1, 2002 did not have a material
effect on the financial position and results of operations of Laclede Gas.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," to consolidate accounting guidance on
various issues related to this matter. This Statement is effective for
fiscal 2003. Adoption of this Statement is not expected to have a material
effect on the financial position and results of operations of Laclede Gas.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which requires that a liability for a
cost associated with an exit or disposal activity be recognized and measured
initially at fair value only when the liability is incurred. The provisions
of this Statement are effective for exit or disposal activities that are
initiated after December 31, 2002, with early application encouraged. The
adoption of SFAS No. 146 is not expected to have a material effect on the
financial position or results of operations of Laclede Gas.

In October 2002, the Emerging Issues Task Force (EITF) reached a consensus
on Issue No. 02-3, "Issues Related to Accounting for Contracts Involved in
Energy Trading and Risk Management Activities." The consensus rescinded EITF
Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and
Risk Management Activities." The consensus precludes mark-to-market
accounting for all energy trading contracts not within the scope of SFAS No.
133, "Accounting for Derivative and Hedging Activities." The consensus to
rescind EITF 98-10 is applicable for fiscal periods beginning after December
15, 2002, except that energy trading contracts not within the scope of SFAS
No. 133 purchased after October 25, 2002, but prior to the implementation of
the consensus, are not permitted to apply mark-to-market accounting. The
EITF also reached a consensus that gains and losses on derivative
instruments within the scope of SFAS No. 133 should be shown net in the
income statement if the derivative instruments are purchased for trading
purposes. Application of these consensuses is not expected to have a
material effect on the financial position or results of operations of
Laclede Gas.


INFLATION

The accompanying consolidated financial statements reflect the historical
costs of events and transactions, regardless of the purchasing power of the
dollar at the time. Due to the capital-intensive nature of the business of
Laclede Gas, the most significant impact of inflation is on the depreciation
of utility plant. Rate regulation, to which Laclede Gas is subject, allows
recovery through its rates of only the historical cost of utility plant as
depreciation. While no plans exist to undertake replacements of plant in
service other than normal replacements and those under existing replacement
programs, Laclede Gas believes that any higher costs experienced upon
replacement of existing facilities would be recovered through the normal
regulatory process.


CREDIT RATINGS

As of September 30, 2002, credit ratings for outstanding securities for
Laclede Gas issues were as follows:

Type of Facility                       S&P         Moody's    Fitch
-------------------------------------------------------------------
Laclede Gas First Mortgage Bonds        A+           A3         A+
Laclede Gas Commercial Paper           A-1          P-2


On April 24, 2002, Standard & Poor's (S&P) downgraded the rating for Laclede
Gas' First Mortgage Bonds from AA- to A+, and also downgraded the commercial
paper rating from A-1+ to A-1. S&P cited bondholder protection parameters
that have eroded due to several successive warmer-than-normal winters and
increasing debt leverage as reasons for the downgrade. S&P ratings outlook
is currently stable.

Moody's Investors Service (Moody's) downgraded Laclede Gas' First Mortgage
Bonds from Aa3 to A1 on May 2, 2002. Moody's cited concerns regarding
Laclede's weakened credit measures due to increased earnings pressure and
near-term regulatory risk. On August 6, 2002, Moody's announced additional
downgrades, as the Laclede Gas' First Mortgage Bonds were lowered from A1 to
A3 and its commercial paper rating was lowered from P-1 to P-2. The outlook
indication from Moody's is now stable. Moody's cited Laclede Gas' declining
debt protection measures and the continuing sensitivity of its earnings and
cash flow to weather fluctuations in the absence of regulatory relief for
warmer-than-normal winters, as well as other pending regulatory matters.
Moody's indicated that it would review the potential impact of pending
regulatory decisions as they occur.

Ratings from Fitch Ratings remained unchanged from the past year. However,
on October 8, 2002, Fitch Ratings revised the rating outlook from stable to
negative, citing recent deterioration in consolidated credit measures.

                                     8

<PAGE>
<PAGE>

Despite these recent downgrades, the Company's ratings remain investment
grade, and the Company believes that it will have adequate access to the
markets to meet its capital requirements. These ratings remain subject to
review and change by the rating agencies.


LIQUIDITY AND CAPITAL RESOURCES

Cash flow from the operations of Laclede Gas, net of dividend payments, has
generally provided the principal liquidity to meet operating requirements
and to fund the majority of its construction program. Any remaining funding
requirements for construction or other needs have been provided by long-term
and short-term financing. The issuance of long-term financing is dependent
on management's evaluation of need, financial market conditions, and other
factors. Short-term financing is used to meet seasonal cash requirements
and/or to defer long-term financing until market conditions are favorable.

Short-term borrowing requirements typically peak during colder months when
Laclede Gas borrows money to cover the gap between when it purchases its
natural gas and when its customers pay for that gas. These short-term cash
requirements have traditionally been met through the sale of commercial
paper supported by lines of credit with banks.

During the fiscal year 2002 heating season, Laclede Gas had lines of credit
in place of up to $170 million. Laclede Gas sold commercial paper
aggregating to a maximum of $139.7 million at any one time during the fiscal
year, but did not borrow from the banks under the aforementioned agreements.
At this writing, Laclede Gas has aggregate lines of credit totaling $230
million. Short-term commercial paper borrowings outstanding at September 30,
2002 were $118.9 million at a weighted average interest rate of 1.9%. Based
on short-term borrowings at September 30, 2002, a change in interest rates
of 100 basis points would increase or decrease pre-tax earnings and cash
flows by approximately $1.2 million on an annual basis.

Most of Laclede Gas' lines of credit include a covenant limiting total debt,
including short-term debt, to no more than 70% of total capitalization. On
September 30, 2002, total debt was 60% of total capitalization.

On June 26, 2001, Laclede Gas issued $50 million of first mortgage bonds
with an interest rate of 6 5/8% at an overall cost of 6.968%. The bonds were
dated June 15, 2001 and mature June 15, 2016. The proceeds were used to
repay short-term debt. The bonds were rated AAA by Standard & Poor's and
Fitch Ratings and Aaa by Moody's in consideration of insurance issued by
Ambac Assurance covering the timely payment of the principal of, and
interest on, the bonds. These ratings apply only to these insured bonds, and
not to the other outstanding uninsured bonds of Laclede Gas. These bonds
were issued under Laclede Gas' shelf registration statement on Form S-3 and
MoPSC authorization obtained in 2000. Of the $350 million of securities
originally registered under this S-3, $270 million of debt securities
remained registered and unissued as of September 30, 2002. The amount,
timing and type of securities remaining to be issued under the shelf
registration will depend on cash requirements and market conditions.

At September 30, 2002, Laclede Gas had fixed-rate long-term debt, including
current portion, totaling $285 million. While these long-term debt issues
are fixed-rate, they are subject to changes in fair value as market interest
rates change. However, increases or decreases in fair value would impact
earnings and cash flows only if Laclede Gas were to reacquire any of these
issues in the open market prior to maturity.

Construction expenditures were $48.8 million in fiscal 2002 compared with
$47.0 million in fiscal 2001 and $51.6 million in fiscal 2000. Laclede Gas
expects fiscal 2003 utility construction expenditures to approximate $53
million.

Consolidated capitalization at September 30, 2002 consisted of 50.2% common
stock equity, .2% preferred stock and 49.6% long-term debt.

The ratio of earnings to fixed charges was 2.2 for 2002, 2.6 for 2001 and
2.6 for 2000.

It is management's view that the Company has adequate access to capital
markets and will have sufficient capital resources, both internal and
external, to meet anticipated capital requirements.


MARKET RISK

The management of Laclede Gas has adopted a risk management policy that
provides for the purchase of natural gas financial instruments with the goal
of managing price risk associated with purchasing natural gas on behalf of
its customers. This policy prohibits speculation. Costs and cost reductions,
including carrying costs, associated with the Utility's use of natural gas
financial instruments (except as provided for previously under the PSP) are
allowed to be passed on to the Utility's customers through the operation of
its Purchased Gas Adjustment Clause, through which the MoPSC allows the
Utility to recover gas supply costs. Accordingly, Laclede Gas does not
expect any earnings impact as a result of the use of these financial
instruments. At September 30, 2002, the Utility held approximately 15
million MmBtu of futures contracts at an average price of $3.83 per MmBtu.
Additionally, approximately

                                     9

<PAGE>
<PAGE>

12 million MmBtu of price risk mitigation was in place through the use of
option-based strategies. These positions have various expiration dates, the
longest of which extends through March 2003.


ENVIRONMENTAL MATTERS

Laclede Gas is subject to various environmental laws and regulations that,
to date, have not materially affected the Company's financial position and
results of operations. As these laws, regulations, and their interpretation
evolve, however, additional costs may be incurred.

With regard to a former manufactured gas plant site located in Shrewsbury,
Missouri, Laclede Gas and state and federal environmental regulators have
agreed upon certain actions and those actions are nearing completion.
Laclede Gas currently estimates the overall costs of these actions will be
approximately $2.3 million. As of September 30, 2002, Laclede Gas has paid
or reserved for these actions. If regulators require additional actions,
Laclede Gas will incur additional costs.

Laclede Gas enrolled a second former manufactured gas plant site into the
Missouri Voluntary Cleanup Program (VCP). The VCP provides opportunities to
minimize the scope and cost of site cleanup while maximizing possibilities
for site development. This site is located in and is presently owned by the
City of St. Louis, Missouri. The City of St. Louis has separately authorized
a developer to prepare both a Remedial Action Plan (RAP), for submission to
the VCP, and a site development plan. Laclede Gas is presently meeting with
the developer to determine what role, if any, it might play in these
efforts. Laclede Gas continues to evaluate other options as well, including,
but not limited to, the submission of its own RAP to the VCP. Laclede Gas
currently estimates that the cost of site investigations, agency oversight
and related legal and engineering consulting may be approximately $629,000.
Currently, Laclede Gas has paid or reserved for these actions. Laclede has
requested that other former site owners and operators share in these costs
and one party has agreed to participate and has reimbursed Laclede Gas to
date for $173,000. Laclede Gas anticipates additional reimbursement from
this party. Laclede Gas plans to seek proportionate reimbursement of all
costs relative to this site from other potentially responsible parties if
practicable.

Costs incurred are charged to expense or capitalized in accordance with
generally accepted accounting principles. A predetermined level of expense
is included in Laclede Gas' rates.

Laclede Gas has been advised that a third former manufactured gas plant site
previously operated but no longer owned by Laclede Gas may contain gas plant
waste that may require remediation. Laclede Gas is working to determine the
nature and extent of such waste, if any, and its responsibility, if any, for
any remediation costs.

While the scope of costs relative to the Shrewsbury site will not be
significant, the scope of costs relative to the other sites is unknown and
may be material. Laclede Gas has notified its insurers that it seeks
reimbursement of its costs at these three manufactured gas plant sites. In
response, the majority of insurers have reserved their rights. While some of
the insurers have denied coverage, Laclede Gas continues to seek
reimbursement from them. With regard to the Shrewsbury site, denials of
coverage are not expected to have any material impact on the financial
position and results of operations of Laclede Gas. With regard to the other
two sites, since the scope of costs are unknown and they may be significant,
denials of coverage may have a material impact on the financial position and
results of operations of Laclede Gas. Such costs, if incurred, have
typically been subject to recovery in rates.


                                     10

<PAGE>
<PAGE>



Independent Auditors' Report

To the Board of Directors and Shareholders of
Laclede Gas Company:

We have audited the consolidated balance sheets and statements of consolidated
capitalization of Laclede Gas Company and its subsidiaries ("the Company")
as of September 30, 2002 and 2001, and the related statements of
consolidated income, retained earnings, comprehensive income, and cash flows
for each of the three years in the period ended September 30, 2002. Our
audits also included the financial statement schedule listed in the Index at
Part IV, Item 15(a) 2. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Laclede Gas Company and its
subsidiaries as of September 30, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 2002 in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.




DELOITTE & TOUCHE LLP

St. Louis, Missouri
November 19, 2002



                                     11

<PAGE>
<PAGE>

Management Report

Management is responsible for the preparation, presentation and integrity of
the consolidated financial statements and other financial information in
this report. The statements were prepared in conformity with accounting
principles generally accepted in the United States of America and include
amounts that are based on management's best estimates and judgments. In the
opinion of management, the financial statements fairly reflect Laclede Gas'
financial position, results of operations and cash flows.

Laclede Gas maintains internal accounting systems and related administrative
controls that are designed to provide reasonable assurance, on a
cost-effective basis, that transactions are executed in accordance with
management's authorization, that consolidated financial statements are
prepared in conformity with accounting principles generally accepted in the
United States of America and that Laclede Gas' assets are properly accounted
for and safeguarded. Laclede Gas' Internal Audit Department, which has
unrestricted access to all levels of Laclede Gas management, monitors
compliance with established controls and procedures.

Deloitte & Touche LLP, Laclede Gas' independent auditors, whose report is
contained herein, are responsible for auditing Laclede Gas' financial
statements in accordance with auditing standards generally accepted in the
United States of America. Such standards include obtaining an understanding
of the internal control structure in order to design the audit of the
financial statements.

The Audit Committee of the Board of Directors, which consists of five
outside directors, meets periodically with management, the internal auditor,
and the independent auditors to review the manner in which they are
performing their responsibilities. Both the internal auditor and the
independent auditors periodically meet alone with the Audit Committee and
have access to the Audit Committee at any time.



Douglas H. Yaeger
Chairman of the Board,
President and Chief Executive Officer



Barry C. Cooper
Chief Financial Officer


                                     12

<PAGE>
<PAGE>

<TABLE>
LACLEDE GAS COMPANY
STATEMENTS OF CONSOLIDATED INCOME
<CAPTION>

(Thousands, Except Per Share Amounts)
------------------------------------                               ----------        ----------        ----------
Years Ended September 30                                              2002              2001              2000
------------------------------------                               ----------        ----------        ----------
<S>                                                                  <C>               <C>               <C>
Operating Revenues:
 Utility                                                           $  592,097        $  923,242        $  529,250
 Other                                                                  2,521            78,867            36,878
                                                                   ----------        ----------        ----------
      Total operating revenues                                        594,618         1,002,109           566,128
                                                                   ----------        ----------        ----------
Operating Expenses:
 Utility
    Natural and propane gas                                           340,045           640,006           294,717
    Other operation expenses                                          106,027           101,915            86,970
    Maintenance                                                        17,813            19,262            18,556
    Depreciation and amortization                                      24,215            26,193            24,672
    Taxes, other than income taxes                                     48,342            65,062            42,788
                                                                   ----------        ----------        ----------
      Total utility operating expenses                                536,442           852,438           467,703
 Other                                                                  2,572            77,346            35,082
                                                                   ----------        ----------        ----------
      Total operating expenses                                        539,014           929,784           502,785
                                                                   ----------        ----------        ----------
Operating Income                                                       55,604            72,325            63,343

Other Income and Income Deductions-
  Net                                                                     550             1,417               735
                                                                   ----------        ----------        ----------
Income Before Interest and
  Income Taxes                                                         56,154            73,742            64,078
                                                                   ----------        ----------        ----------
Interest Charges:
  Interest on long-term debt                                           20,820            18,372            15,164
  Other interest charges                                                4,285            10,067             8,844
                                                                   ----------        ----------        ----------
    Total interest charges                                             25,105            28,439            24,008
                                                                   ----------        ----------        ----------
Income Before Income Taxes                                             31,049            45,303            40,070
Income Taxes                                                           10,720            14,831            14,105
                                                                   ----------        ----------        ----------
Net Income                                                             20,329            30,472            25,965
Dividends on Redeemable Preferred Stock                                    68                87                93
                                                                   ----------        ----------        ----------
Earnings Applicable to Common Stock                                $   20,261        $   30,385        $   25,872
                                                                   ==========        ==========        ==========


See the accompanying notes to consolidated financial statements.
</TABLE>


                                     13

<PAGE>
<PAGE>

<TABLE>
LACLEDE GAS COMPANY
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS

<CAPTION>
(Thousands, Except Per Share Amounts)
--------------------------------------                                 ----------        ----------        ----------
Years Ended September 30                                                  2002              2001              2000
--------------------------------------                                 ----------        ----------        ----------

<S>                                                                      <C>               <C>               <C>
Balance at Beginning of Year                                             $205,512          $200,423          $199,848
Add - Net Income                                                           20,329            30,472            25,965


Deduct -
Cash Dividends Declared:
 Common stock, $1.34 per share in 2002,
   2001 and 2000                                                           25,311            25,296            25,297
 Preferred stock at required annual rates                                      68                87                93
Equity in subsidiaries dividended to Laclede Group                         19,743                 -                 -
                                                                       ----------        ----------        ----------
Balance at End of Year                                                   $180,719          $205,512          $200,423
                                                                       ==========        ==========        ==========



See the accompanying notes to consolidated financial statements.
</TABLE>




<TABLE>
LACLEDE GAS COMPANY
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME


<CAPTION>
(Thousands)
-----------------------------------------                              ----------        ----------        ----------
Years Ended September 30                                                  2002              2001              2000
-----------------------------------------                              ----------        ----------        ----------

<S>                                                                       <C>               <C>               <C>
Net Income                                                                $20,329           $30,472           $25,965
                                                                       ----------        ----------        ----------
Other Comprehensive Income (Loss):
   Minimum pension liability adjustment                                      (553)                -               125
   Income tax expense (benefit)                                              (214)                -                48
                                                                       ----------        ----------        ----------
Other Comprehensive Income (Loss)                                            (339)                -                77
                                                                       ----------        ----------        ----------
Comprehensive Income                                                      $19,990           $30,472           $26,042
                                                                       ==========        ==========        ==========



See the accompanying notes to consolidated financial statements.
</TABLE>


                                     14

<PAGE>
<PAGE>

<TABLE>
LACLEDE GAS COMPANY
CONSOLIDATED BALANCE SHEETS

<CAPTION>
(Thousands)
-------------------------------------------                                                 -----------         -----------
September 30                                                                                    2002                2001
-------------------------------------------                                                 -----------         -----------
<S>                                                                                            <C>                 <C>
Assets
  Utility Plant                                                                                $988,747            $949,775
    Less - Accumulated depreciation and amortization                                            394,371             380,135
                                                                                            -----------         -----------
                         Net utility plant                                                      594,376             569,640
                                                                                            -----------         -----------
  Other Property and Investments
    (net of accumulated depreciation and amortization,
    2002, $0; and 2001, $4,798)                                                                  27,132              32,893
                                                                                            -----------         -----------
  Current Assets:
    Cash and cash equivalents                                                                     1,317               3,223
    Accounts receivable:
      Gas customers - Billed and unbilled                                                        51,419              74,604
      Other                                                                                      13,839              13,103
      Less - Allowances for doubtful accounts                                                    (3,718)             (9,216)
    Inventories:
      Natural gas stored underground
        at LIFO cost                                                                             77,087              76,661
      Propane gas at FIFO cost                                                                   14,712              14,213
      Materials, supplies and merchandise at
        average cost                                                                              4,326               5,393
    Deferred income taxes                                                                        12,305               8,556
    Prepayments and other                                                                         2,515               3,999
                                                                                            -----------         -----------
                       Total current assets                                                     173,802             190,536
                                                                                            -----------         -----------
  Deferred Charges:
    Prepaid pension cost                                                                        114,313             110,475
    Regulatory assets                                                                            72,484              68,599
    Other                                                                                         3,714               3,767
                                                                                            -----------         -----------
                       Total deferred charges                                                   190,511             182,841
                                                                                            -----------         -----------
                       Total Assets                                                            $985,821            $975,910
                                                                                            ===========         ===========


See the accompanying notes to consolidated financial statements.
</TABLE>

                                     15
<PAGE>
<PAGE>

<TABLE>
LACLEDE GAS COMPANY
CONSOLIDATED BALANCE SHEETS (continued)
<CAPTION>
(Thousands)
------------------------------------------------------                            -----------         -----------
September 30                                                                          2002                2001
------------------------------------------------------                            -----------         -----------
<S>                                                                               <C>                 <C>
Capitalization and Liabilities
  Capitalization:
   Common stock equity                                                               $262,959            $288,085
   Redeemable preferred stock                                                           1,266               1,588
   Long-term debt                                                                     259,545             284,459
                                                                                  -----------         -----------
                 Total capitalization                                                 523,770             574,132
                                                                                  -----------         -----------
  Current Liabilities:
   Notes payable                                                                      118,870             117,050
   Accounts payable                                                                    30,838              32,087
   Advance customer billings                                                           24,832              11,679
   Current portion of long-term debt and preferred stock                               25,000                  79
   Wages and compensation accrued                                                      11,794              11,785
   Dividends payable                                                                    6,340               6,400
   Customer deposits                                                                    4,226               4,404
   Interest accrued                                                                     7,820               7,963
   Taxes accrued                                                                        9,495              14,912
   Unamortized purchased gas adjustments                                               22,976               9,026
   Other                                                                                2,417               2,311
                                                                                  -----------         -----------
                 Total current liabilities                                            264,608             217,696
                                                                                  -----------         -----------
  Deferred Credits and Other Liabilities:
   Deferred income taxes                                                              156,924             142,515
   Unamortized investment tax credits                                                   5,629               5,948
   Pension and postretirement benefit costs                                            14,658              15,847
   Other                                                                               20,232              19,772
                                                                                  -----------         -----------
       Total deferred credits and other liabilities                                   197,443             184,082
                                                                                  -----------         -----------
  Commitments and Contingencies (Note 14)

       Total Capitalization and Liabilities                                          $985,821            $975,910
                                                                                  ===========         ===========



See the accompanying notes to consolidated financial statements.
</TABLE>



                                     16

<PAGE>
<PAGE>

<TABLE>
LACLEDE GAS COMPANY
STATEMENTS OF CONSOLIDATED CAPITALIZATION

<CAPTION>
(Thousands)
------------------------------------------------------                            -----------         -----------
September 30                                                                          2002                2001
------------------------------------------------------                            -----------         -----------
<S>                                                                               <C>                 <C>
Common Stock Equity:
  Common stock, par value $1 per share and Paid-in Capital:
    Authorized - 2002 and 2001, 50,000,000 shares
    Issued - 2002, 100 shares; and 2001, 20,743,625 shares                           $ 82,579            $106,590
  Retained earnings                                                                   180,719             205,512
Accumulated other comprehensive income (loss)                                            (339)                  -
Treasury stock, at cost - 2002, no shares; and 2001,
    1,865,638 shares                                                                        -             (24,017)
                                                                                  -----------         -----------
                 Total common stock equity                                            262,959             288,085
                                                                                  -----------         -----------

Redeemable Preferred Stock:
  par value $25 per share (1,480,000 shares authorized)
  Issued and outstanding:
    5% Series B - 2002, 44,749 shares; and 2001, 60,755 shares                          1,118               1,440
    4.56% Series C - 2002 and 2001, 5,906 shares                                          148                 148
                                                                                  -----------         -----------
                 Total redeemable preferred stock                                       1,266               1,588
                                                                                  -----------         -----------
Long-Term Debt:
  First mortgage bonds:
    6-1/4% Series, due May 1, 2003                                                          -              25,000
    8-1/2% Series, due November 15, 2004                                               25,000              25,000
    8-5/8% Series, due May 15, 2006                                                    40,000              40,000
    7-1/2% Series, due November 1, 2007                                                40,000              40,000
    6-1/2% Series, due November 15, 2010                                               25,000              25,000
    6-1/2% Series, due October 15, 2012                                                25,000              25,000
    6-5/8% Series, due June 15, 2016                                                   50,000              50,000
    7% Series, due June 1, 2029                                                        25,000              25,000
    7.90% Series, due September 15, 2030                                               30,000              30,000
                                                                                  -----------         -----------
                                 Total                                                260,000             285,000
Unamortized discount, net of premium,
    on long-term debt                                                                    (455)               (541)
                                                                                  -----------         -----------
                 Total long-term debt                                                 259,545             284,459
                                                                                  -----------         -----------
                 Total                                                               $523,770            $574,132
                                                                                  ===========         ===========



Long-term debt and preferred stock amounts are exclusive of current portion.

See the accompanying notes to consolidated financial statements.
</TABLE>




                                     17

<PAGE>
<PAGE>

<TABLE>
LACLEDE GAS COMPANY
STATEMENTS OF CONSOLIDATED CASH FLOWS

<CAPTION>
(Thousands)
-----------------------------------------                      -----------         -----------        -----------
Years Ended September 30                                           2002               2001                2000
-----------------------------------------                      -----------         -----------        -----------
<S>                                                            <C>                 <C>                <C>
Operating Activities:
 Net Income                                                       $ 20,329           $ 30,472            $ 25,965
 Adjustments to reconcile net income to
   net cash provided by operating activities:
  Depreciation and amortization                                     25,001             26,425              24,875
  Deferred income taxes and investment
    tax credits                                                      6,374             (3,454)             14,295
  Other - net                                                          832             (1,745)                112
  Changes in assets and liabilities:
   Accounts receivable - net                                        15,191            (23,284)            (13,179)
   Unamortized purchased gas adjustments                            13,950             23,933             (23,863)
   Deferred purchased gas costs                                        185             (3,332)              4,028
   Accounts payable                                                 (1,955)           (13,572)             13,944
   Advance customer billings                                        13,153             (3,611)               (375)
   Taxes accrued                                                    (6,067)             2,868               6,240
   Natural gas stored underground                                     (457)            18,126             (30,675)
   Other assets and liabilities                                    (11,797)           (14,927)            (18,321)
                                                               -----------        -----------         -----------
           Net cash provided by
             operating activities                                   74,739             37,899               3,046
                                                               -----------        -----------         -----------
Investing Activities:
 Construction expenditures                                         (48,765)           (46,952)            (51,635)
 Employee benefit trusts                                            (1,342)            (3,522)               (448)
 Other investments                                                  (2,598)            (2,948)             (2,877)
                                                               -----------        -----------         -----------
           Net cash used in
             investing activities                                  (52,705)           (53,422)            (54,960)
                                                               -----------        -----------         -----------
Financing Activities:
 Issuance of first mortgage bonds                                        -             50,000              30,000
 Issuance of short-term debt - net                                   1,820             (9,950)             42,300
 Dividends paid                                                    (25,365)           (25,383)            (25,387)
 Redemption of preferred stock                                        (395)              (136)               (136)
                                                               -----------        -----------         -----------
           Net cash (used in) provided by
             financing activities                                  (23,940)            14,531              46,777
                                                               -----------        -----------         -----------
Net Decrease in Cash and
  Cash Equivalents                                                  (1,906)              (992)             (5,137)
Cash and Cash Equivalents at
  Beginning of Year                                                  3,223              4,215               9,352
                                                               -----------        -----------         -----------
Cash and Cash Equivalents at End of Year                          $  1,317           $  3,223            $  4,215
                                                               ===========        ===========         ===========
Supplemental Disclosure of Cash Paid
  (Refunded) During the Year for:
 Interest                                                         $ 22,349           $ 26,508            $ 23,631
 Income taxes                                                       11,387             12,462             (6,721)

See the accompanying notes to consolidated financial statements.
</TABLE>



                                     18

<PAGE>
<PAGE>

<TABLE>
LACLEDE GAS COMPANY
SCHEDULE OF INCOME TAXES

<CAPTION>
(Thousands)
---------------------------------------------                         -----------         -----------        -----------
Years Ended September 30                                                 2002                2001                2000
--------------------------------------------                          -----------         -----------        -----------
<S>                                                                   <C>                 <C>                <C>
Included in Statements of
 Consolidated Income:
    Federal
      Current                                                            $  3,643           $ 15,639            $    202
      Deferred                                                              5,666             (2,778)             11,987
      Investment tax credit
         adjustments - net                                                   (319)              (319)               (319)
    State and local
      Current                                                                 703              2,646                (392)
      Deferred                                                              1,027               (357)              2,627
                                                                      -----------        -----------         -----------
                                  Total                                  $ 10,720           $ 14,831            $ 14,105
                                                                      ===========        ===========         ===========




See the accompanying notes to consolidated financial statements.
</TABLE>


                                     19

<PAGE>
<PAGE>

<TABLE>
LACLEDE GAS COMPANY
SCHEDULE OF INTERIM FINANCIAL INFORMATION
(Unaudited)

<CAPTION>
(Thousands, Except Per Share Amounts)
----------------------------------                  ----------        ----------       ----------        ----------
THREE MONTHS ENDED                                   DEC. 31           MARCH 31          JUNE 30          SEPT. 30
----------------------------------                  ----------        ----------       ----------        ----------
<S>                                                 <C>               <C>              <C>               <C>
2002
TOTAL OPERATING REVENUES                             $183,818          $257,398         $ 87,968           $65,434
OPERATING INCOME (LOSS)                                17,579            43,066             (212)           (4,829)
NET INCOME (LOSS)                                       7,880            22,581           (3,379)           (6,753)



----------------------------------                  ----------        ----------       ----------        ----------
Three Months Ended                                   Dec. 31           March 31          June 30          Sept. 30
----------------------------------                  ----------        ----------       ----------        ----------
<S>                                                 <C>               <C>              <C>               <C>
2001
Total Operating Revenues                             $345,025          $442,742         $122,901           $91,441
Operating Income (Loss)                                35,747            40,972             (750)           (3,644)
Net Income (Loss)                                      18,495            20,685           (3,695)           (5,100)





See the accompanying notes to consolidated financial statements.
</TABLE>



                                     20

<PAGE>
<PAGE>

NOTES TO FINANCIAL STATEMENTS

LACLEDE GAS COMPANY

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF CONSOLIDATION - The consolidated financial statements
include the accounts of Laclede Gas Company (Laclede Gas or the Utility) and
its subsidiary companies under the corporate organizational structure that
was in place during the three years ended September 30, 2002. Effective
October 1, 2001, the corporation reorganized such that Laclede Gas and its
subsidiaries became separate subsidiaries of The Laclede Group, Inc., an
exempt holding company under the Public Utility Holding Company Act of 1935.
See Note 2 for a discussion of the holding company structure.
         The Laclede Gas Financial Statements included in this report
present the consolidated financial position, results of operations and cash
flows of Laclede Gas throughout the reported periods, as well as the
consolidated financial position, results of operations and cash flows of
Laclede Gas' former subsidiaries prior to restructuring. In conjunction with
the October 1, 2001 restructuring, Laclede Gas dividended its equity in its
subsidiaries of $19.7 million to Laclede Group. Also as of that same date,
Laclede Gas cancelled its treasury stock of $24.0 million.
         All subsidiaries were wholly owned and material intercompany
transactions between Laclede Gas and its affiliates that occurred prior to
the October 1, 2001 restructuring have been eliminated from the consolidated
financial statements of Laclede Gas.
         In compliance with generally accepted accounting principles,
transactions between Laclede Gas and its affiliates that occurred after the
October 1, 2001 restructuring, as well as intercompany balances remaining on
Laclede Gas' balance sheet on September 30, 2002, have not been eliminated
from the Laclede Gas consolidated financial statements. These amounts are
not disclosed on the face of the Laclede Gas consolidated financial
statements, since they are not material.
         Laclede Gas provides administrative and general support to
affiliates and has filed consolidated tax returns, which include affiliated
company tax obligations. All such costs, which are not material, are billed
to the appropriate affiliates and are reflected in accounts receivable on
Laclede Gas' Consolidated Balance Sheet. Laclede Gas may also, on occasion,
borrow funds from, or lend funds to, affiliated companies. At September 30,
2002, the Laclede Gas Consolidated Balance Sheet reflected a total of $5.2
million of intercompany receivables and $1.1 million intercompany payables.
         NATURE OF OPERATIONS - Laclede Gas is a public utility engaged in
the retail distribution of natural gas. Laclede Gas serves an area in
eastern Missouri, with a population of approximately 2.0 million, including
the City of St. Louis, St. Louis County, and parts of eight other counties.
As an adjunct to its gas distribution business, Laclede Gas operates
underground natural gas storage fields. Laclede Gas has also made
investments in some non-utility businesses as part of a diversification
program. Most of these activities were conducted through the wholly owned
subsidiaries that became subsidiaries of Laclede Group effective with the
October 1, 2001 restructuring.
         USE OF ESTIMATES - The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
         SYSTEM OF ACCOUNTS - The accounts of Laclede Gas are maintained in
accordance with the uniform system of accounts prescribed by the Missouri
Public Service Commission (MoPSC or Commission), which system substantially
conforms to that prescribed by the Federal Energy Regulatory Commission.
         UTILITY PLANT, DEPRECIATION AND AMORTIZATION - Utility plant is
stated at original cost. The cost of additions to utility plant includes
contracted work, direct labor and materials, allocable overheads, and an
allowance for funds used during construction. The costs of units of property
retired, replaced, or renewed are removed from utility plant and are charged
to accumulated depreciation. Maintenance and repairs of property and
replacement and renewal of items determined to be less than units of
property are charged to maintenance expenses. Effective December 1, 2001,
the MoPSC ordered the cost of removing retired utility plant to be recovered
as an expense when incurred rather than being included in depreciation
rates. Prior to December 1, 2001, the Utility's removal costs, net of
salvage, were charged to accumulated depreciation. As ordered by the MoPSC,
Laclede Gas instituted lower depreciation rates effective December 1, 2001
and began expensing all removal costs, net of salvage, as incurred. These
costs are included in the Other Operation Expenses line on the income
statement. Effective July 1, 2002, the MoPSC ordered the negative
amortization on a straight-line basis of a portion of the Utility's
depreciation reserve, amounting to $3.4 million annually, until
implementation of rates in the Utility's next rate case proceeding during
which the parties have agreed to review the depreciation issue in light of
Statement of Financial Accounting Standard (SFAS) No. 143 implementation.
         Utility plant is depreciated on a straight-line basis at rates based
on estimated service lives of the various classes of property. Annual
depreciation and amortization in 2002, 2001 and 2000 averaged approximately
2.8%, 2.9% and 2.8%, respectively, of the original cost of depreciable and
amortizable property.
         REGULATED OPERATIONS - Laclede Gas accounts for its regulated
operations in accordance with SFAS No. 71, "Accounting for the Effects of
Certain Types of Regulation." This statement sets forth the application of
accounting principles generally accepted in the United States of America for
those companies whose rates are established by or are subject to approval by
an independent third-party regulator. The provisions of SFAS No. 71 require,
among other things, that financial statements of a regulated enterprise
reflect the actions of regulators, where appropriate. These actions may
result in the recognition of revenues and expenses in time periods that are
different than non-regulated enterprises. When this occurs, costs are
deferred as assets in the balance sheet (regulatory assets) and


                                     21

<PAGE>
<PAGE>

recorded as expenses when those amounts are reflected in rates. Also,
regulators can impose liabilities upon a regulated company for amounts
previously collected from customers and for recovery of costs that are
expected to be incurred in the future (regulatory liabilities).
         The following regulatory assets and regulatory liabilities were
reflected in the Consolidated Balance Sheets as of September 30:

<TABLE>
<CAPTION>
(Thousands)                                                                       2002                    2001
-------------------------------------------                                  --------------          --------------
<S>                                                                          <C>                     <C>
Regulatory Assets:
Future income taxes due from customers                                              $50,662                 $45,240
Pension and postretirement benefit costs                                              6,167                   6,671
Purchased gas costs                                                                   2,212                   2,396
Compensated absences                                                                  6,390                   6,472
Other                                                                                 7,924                   9,133
                                                                             --------------          --------------
Total Regulatory Assets                                                             $73,355                 $69,912
                                                                             ==============          ==============
Regulatory Liabilities:
Unamortized investment tax credits                                                  $ 5,629                 $ 5,948
Unamortized purchased gas adjustments                                                22,976                   9,026
Other                                                                                   384                     304
                                                                             --------------          --------------
Total Regulatory Liabilities                                                        $28,989                 $15,278
                                                                             ==============          ==============
</TABLE>

         As authorized by the MoPSC, Laclede Gas discontinued deferring
certain costs for future recovery, as expenses associated with those
specific areas were included in approved rates effective December 27, 1999.
Previously deferred costs, of $10.5 million and $2.1 million, are being
recovered and amortized on a straight-line basis over fifteen-year and
ten-year periods, respectively, without return on investment. Approximately
$1.9 million and $.6 million has been amortized, respectively, from December
27, 1999 through September 30, 2002. The Commission also authorized
previously deferred costs of $2.8 million to be recovered and amortized on a
straight-line basis over a ten-year period, without return on investment,
effective December 1, 2001. Approximately $230,000 has been amortized
through September 30, 2002.
         GAS STORED UNDERGROUND - Inventory of Utility gas in storage is
priced on a last-in, first-out (LIFO) basis. The replacement cost of gas
stored underground for current use at September 30, 2002 exceeded the LIFO
cost by $10.0 million and at September 30, 2001 was less than the LIFO cost
by $13.5 million. The inventory carrying value is not adjusted to the lower
of cost or market prices because, pursuant to the Laclede Gas Purchased Gas
Adjustment (PGA) Clause, actual gas costs are recovered in customer rates.
         REGULATED GAS DISTRIBUTION REVENUES - Laclede Gas records revenues
from gas sales and transportation service on the accrual basis which
includes estimated amounts for gas delivered, where applicable, but not yet
billed.
         PURCHASED GAS ADJUSTMENTS AND DEFERRED ACCOUNT - The PGA Clause
allows Laclede Gas to flow through to customers, subject to prudence review,
the cost of purchased gas supplies. The Utility is allowed to file to
modify, on a periodic basis, the level of gas costs in its PGA. Previously,
the Commission allowed two scheduled PGA filings each year, one for the
summer months and another for the winter period, plus one unscheduled winter
filing if certain conditions were met. The significant fluctuations in
natural gas prices during fiscal 2001 necessitated additional unscheduled
filings, which were approved by the MoPSC, to better match customer billings
with market natural gas prices. In February 2002, the MoPSC approved Laclede
Gas' proposal to revise its PGA clause to adjust the gas cost component of
its rates more frequently to recover its costs. The new approved tariffs
allow scheduled gas cost adjustments in November, January, March and June,
thereby enabling Laclede Gas to more closely recover its costs of gas,
especially during the high-volume winter months. As part of the same ruling,
the MoPSC clarified that costs, cost reductions and carrying costs
associated with the Utility's use of natural gas financial instruments
(except as provided previously under the PSP) are gas costs recoverable
through the PGA mechanism. In order to better match customer billings with
market natural gas prices, Laclede Gas also requested, and received
approval, to implement additional special unscheduled PGA filings allowing
Laclede Gas to change rates charged to its customers in response to
significant fluctuations in market prices during fiscal years 2001 and 2000.
         The provisions of the PGA Clause also included operation of the Gas
Supply Incentive Plan (GSIP or Plan), which extended through September 30,
2001. See Note 4 for additional information on the operation of the Plan.
         Operation of the Price Stabilization Program (PSP or Program) was
also included in the provisions of the PGA Clause. Under those provisions,
the MoPSC authorized Laclede Gas to purchase financial instruments to
protect itself and its customers from unusually large winter period gas
price increases. The costs of purchasing these instruments and financial
gains derived from such activities were passed on to Laclede Gas customers
through the operation of its PGA Clause. Laclede Gas had an opportunity to
benefit from gains and cost reductions achieved under the Program. During
fiscal 2000, Laclede Gas recorded approximately $27,000 of pre-tax income
under the provisions of the Program. The cost of financial instruments for
the fiscal 2001 heating season, however, like the cost of natural gas
itself, increased significantly. As a result, the MoPSC granted a request
made by Laclede Gas to reduce the amount of natural gas purchases required
to be covered by such financial instruments for that particular heating
season. In February 2001, the MoPSC approved modifications to the program
for the fiscal 2002


                                     22

<PAGE>
<PAGE>

heating season. The modifications allowed a total of $4.0 million in
supplemental funding to be added to the program for the purchase of
financial instruments for the fiscal 2002 heating season and that the
percentage of gas requirements to be covered be reduced. Concurrently,
Laclede Gas relinquished a claim on $4.0 million arising from gains realized
from purchases and sales of financial instruments made during fiscal 2001
and offered to utilize a similar amount to provide for future funding for
such instruments in the event the program was allowed to continue. The PSP
was allowed to expire at the end of the fiscal 2002 heating season, at which
time, the Utility recorded nearly $4.9 million in pre-tax income produced
through the Program. See Note 14 for further discussion of the PSP.
         Pursuant to the provisions of the PGA Clause, the difference
between actual costs incurred and costs recovered through the application of
the PGA, amounts due to or from customers related to the operation of the
GSIP, and amounts related to the PSP are reflected as a deferred charge or
credit until fiscal year end. At that time the balance is classified as a
current asset or liability and is recovered from or credited to customers
over an annual period commencing in November. The balance in the current
account is amortized as amounts are reflected in customer billings.
         INCOME TAXES - Laclede Gas has elected, for tax purposes only,
various accelerated depreciation provisions of the Internal Revenue Code. In
addition, certain other costs are expensed currently for tax purposes while
being deferred for book purposes. The provision for current income taxes
reflects the tax treatment of these items. Laclede Gas records deferred tax
liabilities and assets measured by enacted tax rates for the net tax effect
of all temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes, and the amounts used for
income tax purposes. Changes in enacted tax rates, if any, will be reflected
by entries to regulatory asset or liability accounts for regulated
companies, and will be reflected as income or loss for non-regulated
companies.
         Laclede Gas' investment tax credits utilized prior to 1986 have
been deferred and are being amortized in accordance with regulatory
treatment over the useful life of the related property.
         CASH AND CASH EQUIVALENTS - All highly liquid debt instruments
purchased are considered to be cash equivalents. Such instruments are
carried at cost, which approximates market value.
         NEW ACCOUNTING STANDARDS - In June 2001, the Financial Accounting
Standards Board (FASB) issued SFAS No. 141, "Business Combinations," which
requires all business combinations in the scope of this Statement to be
accounted for using the purchase method. The provisions of this Statement
apply to all business combinations initiated after June 30, 2001. The FASB
also issued SFAS No.142, "Goodwill and Other Intangible Assets," which
addresses how acquired goodwill and other intangible assets that are
acquired individually or with a group of other assets should be accounted
for in financial statements upon acquisition and after they have been
initially recognized in the financial statements. The provisions of this
Statement are required to be applied at the beginning of fiscal 2003. The
adoption of SFAS Nos.141 and 142 did not have a material effect on the
financial position and results of operations of Laclede Gas.
         The FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
associated asset retirement costs. It applies to legal obligations
associated with the retirement of long-lived assets that result from
acquisition, construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. This Statement
is effective for fiscal 2003. The provisions of the statement provide for
rate-regulated entities that meet the criteria for application of SFAS No.
71, such as Laclede Gas, to recognize regulatory assets or liabilities for
differences in the timing of recognition of the period costs associated with
asset retirement obligations for financial reporting pursuant to this
Statement and rate-making purposes. The effect of the adoption of this
Statement on October 1, 2002 did not have a material effect on the financial
position and results of operations of Laclede Gas.
         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," to consolidate accounting
guidance on various issues related to this matter. This statement is
effective for fiscal 2003. Adoption of this Statement is not expected to
have a material effect on the financial position and results of operations
of Laclede Gas.
         In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which requires that a
liability for a cost associated with an exit or disposal activity be
recognized and measured initially at fair value only when the liability is
incurred. The provisions of this Statement are effective for exit or
disposal activities that are initiated after December 31, 2002, with early
application encouraged. The adoption of SFAS No. 146 is not expected to have
a material effect on the financial position or results of operations of
Laclede Gas.
         In October 2002, the Emerging Issues Task Force (EITF) reached a
consensus on Issue No. 02-3, "Issues Related to Accounting for Contracts
Involved in Energy Trading and Risk Management Activities." The consensus
rescinded EITF Issue No. 98-10, "Accounting for Contracts Involved in Energy
Trading and Risk Management Activities." The consensus precludes
mark-to-market accounting for all energy trading contracts not within the
scope of SFAS No. 133, "Accounting for Derivative and Hedging Activities."
The consensus to rescind EITF 98-10 is applicable for fiscal periods
beginning after December 15, 2002, except that energy trading contracts not
within the scope of SFAS No. 133 purchased after October 25, 2002, but prior
to the implementation of the consensus, are not permitted to apply
mark-to-market accounting. The EITF also reached a consensus that gains and
losses on derivative instruments within the scope of SFAS No. 133 should be
shown net in the income statement if the derivative instruments are
purchased for trading purposes. Application of these consensuses is not
expected to have a material effect on the financial position or results of
operations of Laclede Gas.
         RECLASSIFICATION - Certain prior-period amounts have been
reclassified to conform to current-period presentation.




                                     23

<PAGE>
<PAGE>

2.    CORPORATE RESTRUCTURING

         Effective October 1, 2001, Laclede Gas and its subsidiaries became
subsidiaries of Laclede Group, an exempt holding company under the Public
Utility Holding Company Act of 1935. Under the new structure, Laclede Gas
and its former subsidiaries operate as separate subsidiaries of Laclede
Group. The following charts illustrate the major organizational changes
resulting from this restructuring.

<TABLE>
                                             Organization Structure
                                            Prior to October 1, 2001

<CAPTION>
                                               -------------------
                                               Laclede Gas Company
                                               -------------------
                                                       |
                     --------------------------------------------------------------------
<S>                                       <C>                                <C>
                     |                                 |                                |
           ----------------------         ---------------------------        ------------------------
           Laclede Investment LLC         Laclede Development Company        Laclede Pipeline Company
           ----------------------         ---------------------------        ------------------------
                     |                                 |
       ------------------------------        ---------------------
       Laclede Energy Resources, Inc.        Laclede Venture Corp.
       ------------------------------        ---------------------
                     |
      ---------------------------------
      Laclede Gas Family Services, Inc.
      ---------------------------------


<CAPTION>
                                             Organization Structure
                                            Effective October 1, 2001

                                             -----------------------
                                             The Laclede Group, Inc.
                                             -----------------------
                                                       |
         -------------------------------------------------------------------------------------------
<S>                  <C>                                <C>                             <C>
         |                          |                                |                             |
-------------------       ----------------------        ---------------------------     ------------------------
Laclede Gas Company       Laclede Investment LLC        Laclede Development Company     Laclede Pipeline Company
-------------------       ----------------------        ---------------------------     ------------------------
                                    |                                |
                      ------------------------------       ---------------------
                      Laclede Energy Resources, Inc.       Laclede Venture Corp.
                      ------------------------------       ---------------------
                                    |
                     ---------------------------------
                     Laclede Gas Family Services, Inc.
                     ---------------------------------
</TABLE>


         Since the October 1, 2001 restructuring, stock certificates
previously representing shares of Laclede Gas common stock have represented
the same number of shares of Laclede Group common stock. All serial
preferred stock issued by Laclede Gas remains issued and outstanding as
shares of Laclede Gas serial preferred stock. The dividend rate for the
preferred stock has not changed and those dividends will continue to be paid
by Laclede Gas. All outstanding indebtedness and other obligations of
Laclede Gas prior to the restructuring remain outstanding as obligations of
Laclede Gas.


3.    PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

         Laclede Gas has non-contributory defined benefit, trusteed forms of
pension plans covering substantially all employees over the age of
twenty-one. Benefits are based on years of service and the employee's
compensation during the last three years of employment. The funding policy
of Laclede Gas is to contribute an amount not less than the minimum required
by government funding standards, nor more than the maximum deductible amount
for federal income tax purposes. Plan assets consist primarily of corporate
and U.S. government obligations and pooled equity funds. Pension credits in
2002, 2001 and 2000 amounted to $3.5 million, $5.2 million and $7.6 million,
respectively, including amounts recorded in construction.


                                     24

<PAGE>
<PAGE>

         The net periodic pension costs (credits) include the following
components:

<TABLE>
<CAPTION>
(Thousands)                                                            2002              2001               2000
--------------------------------------                             -----------        ----------         ----------
<S>                                                                <C>                <C>                <C>
Service cost - benefits earned
   during the period                                                 $   9,441          $  9,575           $  9,281
Interest cost on projected
   benefit obligation                                                   14,653            15,331             14,714
Expected return on plan assets                                         (24,749)          (25,517)           (25,649)
Amortization of transition obligation                                     (602)             (662)              (716)
Amortization of prior service cost                                       1,127             1,174              1,024
Amortization of actuarial gain                                          (3,768)           (5,544)            (6,606)
Regulatory                                                                 435               435                332
                                                                   -----------        ----------         ----------
Net pension cost (credit)                                            $  (3,463)         $ (5,208)          $ (7,620)
                                                                   ===========        ==========         ==========
</TABLE>

         Effective with the implementation of rates (from the 1999 rate
case) on December 27, 1999, the Commission authorized amounts that were
deferred pursuant to provisions in previous general rate cases, to be
included in rates without return on investment and amortized over a
fifteen-year period. Additionally, pursuant to MoPSC order, the return on
plan assets is based on the market value of plan assets and the unrecognized
net gain or loss balances subject to amortization are based upon the most
recent five-year average of the unrecognized gain or loss balance. Net gains
and losses subject to amortization are amortized over a five-year period, as
ordered by the MoPSC. Other variances in net pension costs are primarily
attributable to actuarial and investment experience.
         The following table sets forth the reconciliation of the beginning
and ending balances of the pension benefit obligation recognized in the
Consolidated Balance Sheets at September 30:

<TABLE>
<CAPTION>
(Thousands)                                                                    2002               2001
--------------------------------------------                                ----------         ----------
<S>                                                                         <C>                <C>
Benefit obligation at beginning of year                                      $ 197,773          $ 200,463
Service cost                                                                     9,441              9,575
Interest cost                                                                   14,653             15,331
Plan amendments                                                                  4,897                162
Actuarial loss                                                                  24,401              1,684
Settlements                                                                          -            (20,652)
Gross benefits paid                                                            (23,075)            (8,790)
                                                                            ----------         ----------
Benefit obligation at end of year                                            $ 228,090          $ 197,773
                                                                            ==========         ==========
</TABLE>




                                     25

<PAGE>
<PAGE>

         The following table sets forth the reconciliation of the beginning
and ending balances of the fair value of plan assets recognized in the
Consolidated Balance Sheets at September 30:

<TABLE>
<CAPTION>
(Thousands)                                                                              2002                   2001
------------------------------------------------                                    --------------         --------------
<S>                                                                                 <C>                    <C>
Fair value of plan assets at beginning of year                                            $299,437               $307,820
Actual return on plan assets                                                                (4,486)                 9,214
Employer contributions                                                                       1,354                 11,845
Settlements                                                                                      -                (20,652)
Gross benefits paid                                                                        (23,075)                (8,790)
                                                                                    --------------         --------------
Fair value of plan assets at end of year                                                  $273,230               $299,437
                                                                                    --------------         --------------

Funded status at end of year                                                              $ 45,140               $101,664
Unrecognized net actuarial (gain)/loss                                                      46,872                (10,532)
Unrecognized prior service cost                                                             18,655                 14,885
Unrecognized net transition asset                                                             (236)                  (838)
Fourth quarter contribution adjustment                                                         989                     56
                                                                                    --------------         --------------
Net amount recognized at end of year                                                      $111,420               $105,235
                                                                                    ==============         ==============

Amounts recognized in the Consolidated Balance Sheets consist of:
Prepaid pension cost                                                                      $114,313               $110,475
Accrued benefit liability                                                                   (3,456)                (5,451)
Intangible asset                                                                                10                    211
Accumulated other comprehensive income                                                         553                      -
                                                                                    --------------          -------------
Net amount recognized at end of year                                                      $111,420               $105,235
                                                                                    ==============         ==============
</TABLE>


         The pension benefit obligation and the fair value of plan assets
are based on a June 30 measurement date. The projected benefit obligation
was determined using a weighted average discount rate of 7.25% for 2002 and
7.75% for 2001, and a weighted average rate of future compensation increase
of 4.00% for 2002 and 2001. The effect of the above changes in pension
assumptions was to increase the projected benefit obligation by $16.9
million. The expected long-term rate of return on plan assets was 8.50% for
both 2002 and 2001.
         The aggregate projected benefit obligation and fair value of plan
assets for plans with benefit obligations in excess of plan assets were $5.2
million and $0, respectively, for fiscal 2002 and $54.2 million and $38.6
million, respectively, for fiscal 2001. The aggregate accumulated benefit
obligation and fair value of plan assets for plans with accumulated benefit
obligations in excess of plan assets were $5.0 million and $0 respectively,
for fiscal 2002 and $4.2 million and $0, respectively, for fiscal 2001.
         Pursuant to the provisions of the Laclede Gas pension plans,
pension obligations may be settled by lump-sum cash payments. Settlements in
2002, 2001 and 2000 resulted in pre-tax gains of approximately $0, $.6
million, and $2.2 million, respectively. In 2001 and 2000, all such lump sum
payments were recognized as settlements. Pursuant to MoPSC order in the 2001
rate case, effective for fiscal 2002, lump sum payments are recognized as
settlements only if the total of such payments exceeds 100% of the sum of
service and interest costs. No lump sum payments were recognized as
settlements in fiscal 2002.
         The cost of the defined contribution plans of Laclede Gas, which
cover substantially all employees, amounted to $2.9 million, $3.0 million,
and $2.6 million, respectively, for the years 2002, 2001 and 2000.
         Laclede Gas also provides certain life insurance benefits at
retirement. Medical insurance is available after early retirement until age
65.
         Missouri state law provides for the recovery in rates of SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions"
(OPEB), accrued costs provided that such costs are funded through an
independent, external funding mechanism. Laclede Gas established the
Voluntary Employees' Beneficiary Association (VEBA) and Rabbi trusts as its
external funding mechanisms. VEBA and Rabbi trusts assets consist primarily
of money market securities. The unrecognized transition obligation is being
amortized over 20 years. Postretirement benefit costs in 2002, 2001 and 2000
amounted to approximately $6.5 million, $6.2 million, and $6.0 million,
respectively, including amounts charged to construction.


                                     26

<PAGE>
<PAGE>

         Net periodic postretirement benefit costs consisted of the
following components:

<TABLE>
<CAPTION>
(Thousands)                                                            2002               2001               2000
--------------------------------------                             -----------        -----------        -----------
<S>                                                                <C>                <C>                <C>
Service cost - benefits earned
  during the period                                                     $2,205             $2,063             $1,973
Interest cost on accumulated
  postretirement benefit obligation                                      3,266              3,055              2,814
Expected return on plan assets                                            (853)              (704)              (574)
Amortization of transition
  obligation                                                             1,267              1,267              1,267
Amortization of prior service cost                                         365                365                365
Amortization of actuarial loss                                             227                 66                 64
Regulatory adjustment                                                       69                 69                 53
                                                                   -----------        -----------        -----------
Net postretirement benefit cost                                         $6,546             $6,181             $5,962
                                                                   ===========        ===========        ===========
</TABLE>

         The following table sets forth the reconciliation of the beginning
and ending balances of the postretirement benefit obligation at September
30:

<TABLE>
<CAPTION>
(Thousands)                                                                    2002                 2001
-------------------------------------------                                ------------         ------------
<S>                                                                        <C>                  <C>
Benefit obligation at beginning of year                                        $ 39,958             $ 37,123
Service cost                                                                      2,205                2,063
Interest cost                                                                     3,266                3,055
Plan amendments                                                                    (476)                   -
Actuarial loss                                                                    8,731                1,787
Gross benefits paid                                                              (3,657)              (4,070)
                                                                           ------------         ------------
Benefit obligation at end of year                                              $ 50,027             $ 39,958
                                                                           ============         ============
</TABLE>

         The following table sets forth the reconciliation of the beginning
and ending balances of the fair value of plan assets recognized in the
Consolidated Balance Sheets at September 30:

<TABLE>
<CAPTION>
(Thousands)                                                                         2002                 2001
------------------------------------------                                      ------------         ------------
<S>                                                                             <C>                  <C>
Fair value of plan assets at beginning of year                                      $  9,715             $  7,866
Actual return on plan assets                                                             114                  310
Employer contributions                                                                 5,909                5,609
Gross benefits paid                                                                   (3,657)              (4,070)
                                                                                ------------         ------------
Fair value of plan assets at end of year                                            $ 12,081             $  9,715
                                                                                ------------         ------------

Funded status at end of year                                                        $(37,946)            $(30,243)
Unrecognized net actuarial loss                                                       11,073                1,829
Unrecognized prior service cost                                                        1,997                2,839
Unrecognized net transition obligation                                                13,912               15,179
                                                                                ------------         ------------
Net amount recognized at end of year
  as postretirement benefit cost                                                    $(10,964)            $(10,396)
                                                                                ============         ============
</TABLE>

         The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation for 2002 was 8.00% in 2002,
and gradually decreases each successive year until it reaches 5.00% in 2005
and future years. Such rate for 2001 was 5.00% in 2001 and future years. A
one-percentage-point increase or (decrease) in the assumed health care cost
trend rate for each future year would have increased or (decreased) the
aggregate of the service and interest cost components of the


                                     27

<PAGE>
<PAGE>

2002 net periodic postretirement benefit cost by approximately $.3 million
or $(.3) million and would have increased or (decreased) the postretirement
benefit obligation by $1.6 million or $(1.5) million. The accumulated
postretirement benefit obligation was determined using a weighted average
discount rate of 7.25% for 2002 and 7.75% for 2001, and a weighted average
rate of future compensation increase of 4.00% for both 2002 and 2001. These
changes in assumptions increased the postretirement benefit obligation by
$3.1 million. The weighted average rate for the expected return on medical
plan assets was 7.75% for both 2002 and 2001 and the weighted average rate
for the expected return on life insurance plan assets was 8.50% for both
2002 and 2001.
         In the 1999 rate case settlement, the Commission authorized
previously deferred costs to be included in rates without return on
investment and amortized over a fifteen-year period, effective with the
implementation of new rates on December 27, 1999. Deferrals ceased September
30, 1999 and all OPEB costs are being charged to expense.

4.    GAS SUPPLY INCENTIVE PLAN AND OFF-SYSTEM SALES

         The provisions of the Utility's Gas Supply Incentive Plan (GSIP)
extended through September 30, 2001. In September 2001, the MoPSC ruled that
the GSIP should be allowed to expire. The Utility requested clarification
and rehearing. On February 19, 2002, the MoPSC denied Laclede Gas'
application for rehearing. Laclede Gas filed a petition for judicial review
of the MoPSC's decision with the Cole County Circuit Court, together with a
motion requesting that the MoPSC's decision be stayed. The request for stay
was denied on May 13, 2002. The petition for judicial review is still
pending. However, pursuant to the 2001 rate case settlement approved by the
MoPSC in November 2001, and consistent with the 2002 rate case settlement,
the MoPSC authorized Laclede Gas to retain all income from releases of
pipeline capacity effective December 1, 2001, which previously was shared
with customers under the GSIP. Laclede Gas continues to retain all income
resulting from sales outside of its traditional service area, as previously
authorized by the MoPSC. However, Laclede Gas does not retain any of the
savings it obtains relative to gas supply costs or any savings it obtains
from pipeline discounts. Income related to releases of pipeline capacity and
sales made outside its traditional service area are volatile in nature and
subject to market conditions.
         As modified for fiscal 2001, total pre-tax income derived from all
sharing provisions of GSIP, excluding income generated by sales outside of
the Laclede Gas service area, could not exceed $9.0 million. Of that amount,
pre-tax income derived from sharing gains and losses as measured against a
benchmark level of gas costs could not exceed $5.3 million. Under the
provisions of the Plan during fiscal 2001 and fiscal 2000, Laclede Gas and
its customers shared as follows:
o releases of pipeline capacity, of which 70% to 90% of the revenues were
  allocated to its customers and the balance to its shareholders
o savings from discounts off of maximum pipeline transportation rates, of
  which the excess over a predetermined baseline of $13 million was
  allocated 70% to its customers and the balance to its shareholders
o gains and losses as measured against a benchmark level of gas cost, of
  which 50% to 90% (depending on the change from a predetermined cost) was
  allocated to its customers and the balance to its shareholders, and
o increases or decreases in costs related to changes in the mix of pipeline
  services, of which 70% was allocated to its customers and the balance to
  its shareholders.
         GSIP and off-system sales revenues are included in the gas
distribution operating revenues line in the accompanying financial
statements. Expenses related to the GSIP and off-system sales are included
in the natural and propane gas expense line in the accompanying financial
statements. Pre-tax income of the Plan, capacity release and off-system
sales activities are set forth below.

<TABLE>
<CAPTION>
(Thousands)                                                              2002                2001               2000
------------------------------------                                 -----------         -----------        -----------
<S>                                                                  <C>                 <C>                <C>
GSIP (including Capacity Release)                                         $    -             $ 9,000             $7,166
Capacity Release (post-GSIP)                                               1,402                   -                  -
Off-System Sales                                                           3,718               1,035              2,477
                                                                     -----------         -----------        -----------
Total Pre-Tax Income                                                      $5,120             $10,035             $9,643
                                                                     ===========         ===========        ===========
</TABLE>

5.    COMMON STOCK AND PAID-IN CAPITAL
         Laclede Gas issued no shares of its common stock during fiscal 2002
or fiscal 2001.
         Paid-in capital decreased $22.2 million in 2002 primarily due to
the cancellation of 1,865,638 shares of treasury stock totaling $22.2
million by Laclede Gas. Paid-in capital increased slightly in 2001 due to
gains recorded on reacquired preferred stock.
         Total shares of common stock outstanding were 100 and 18.88 million
at September 30, 2002 and 2001, respectively.
         On March 14, 1996, Laclede Gas declared a dividend of one common
share purchase right for each outstanding share of common stock as of May 1,
1996. Each common share purchase right gave the


                                     28

<PAGE>
<PAGE>

Rightholder the right to purchase one common share for a purchase price of
$60, subject to adjustment. The rights expired on May 1, 2006, and could be
redeemed by Laclede for one cent each at any time before they became
exercisable. The rights were not exercisable or transferable apart from the
common stock, until ten days after (i) a person or group acquired or
obtained the right to acquire 20% or more of the common stock, or (ii)
commenced or announced its intention to commence a tender or exchange offer
for 20% or more of the common stock. Following the former event, a right
would entitle its holder to purchase, at the purchase price, the number of
shares equal to the purchase price divided by one-half of the market price.
Alternatively, Laclede Gas could exchange each right for one share of
Laclede Gas common stock. A total of 18.88 million rights were outstanding
at September 30, 2001. Concurrent with implementation of the holding company
structure, ownership of these rights transferred to Laclede Group.

6.    REDEEMABLE PREFERRED STOCK

         The preferred stock, which is non-voting except in certain
circumstances, may be redeemed at the option of the Laclede Gas Board of
Directors. The redemption price is equal to par of $25.00 a share.
         During 2002, 16,006 shares of 5% Series B preferred stock were
reacquired; in 2001, 5,257 shares of 5% Series B preferred stock and 601
shares of 4.56% Series C preferred stock were reacquired.
         Any default in a sinking fund payment must be cured before Laclede
Gas may pay dividends on or acquire any common stock. Sinking fund
requirements on preferred stock for the next five years subsequent to
September 30, 2002 are $0 in 2003 and 2004 and $.2 million in 2005, 2006 and
2007.

7.    LONG-TERM DEBT

         Maturities on long-term debt, including current portion, for the
five fiscal years subsequent to September 30, 2002 are as follows:

               2003          $25 million
               2004          -
               2005          $25 million
               2006          $40 million
               2007          -

         On June 26, 2001, Laclede Gas issued $50 million of first mortgage
bonds with an interest rate of 6 5/8%, at an overall cost of 6.968%. The
bonds were dated June 15, 2001 and mature June 15, 2016. The proceeds were
used to repay short-term debt. The bonds were rated AAA by Standard & Poor's
and Fitch Ratings and Aaa by Moody's in consideration of insurance issued by
Ambac Assurance covering the timely payment of the principal of, and
interest on, the bonds. These ratings apply only to these insured bonds, and
not to the other outstanding uninsured bonds of Laclede Gas. These bonds
were issued under the Laclede Gas shelf registration Statement on Form S-3
and MoPSC authorization obtained in fiscal 2000, of which $270 million
remained registered and unissued as of September 30, 2002.
         Substantially all of the utility plant of Laclede Gas is subject to
the liens of its mortgage. Its mortgage contains provisions that restrict
retained earnings from declaration or payment of cash dividends. As of
September 30, 2002 and 2001, all of the consolidated retained earnings of
Laclede Gas were free from such restrictions.

8.   NOTES PAYABLE AND CREDIT AGREEMENTS

         In September 2002, Laclede Gas renewed and increased its syndicated
line of credit to $215 million for a period of 364 days. Laclede Gas also
has supplemental 364-day lines totaling $15 million through January 2003. No
seasonal lines were used during the fiscal year 2002.
         Laclede Gas has an arrangement for the issuance of commercial paper
which is supported by the bank lines of credit. During fiscal year 2002,
short-term borrowing requirements, which peaked at $139.7 million, were met
by the sale of commercial paper. Laclede Gas had $118.9 million in
commercial paper outstanding as of September 30, 2002, at a weighted average
interest rate of 1.9%, and $117.1 million outstanding as of September 30,
2001, at a weighted average interest rate of 3.2%.


                                     29

<PAGE>
<PAGE>

9.    FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying amounts and estimated fair values of financial
instruments at September 30, 2002 and 2001 are as follows:

<TABLE>
<CAPTION>
                                                                                    Carrying                  Fair
(Thousands)                                                                          Amount                   Value
----------------------------------------------                                   --------------          --------------
<S>                                                                              <C>                     <C>
2002:
  CASH AND CASH EQUIVALENTS                                                            $  1,317                $  1,317
  SHORT-TERM DEBT                                                                       118,870                 118,870
  LONG-TERM DEBT, INCLUDING CURRENT PORTION                                             284,545                 315,178
  REDEEMABLE PREFERRED STOCK                                                              1,266                   1,266

2001:
  Cash and cash equivalents                                                            $  3,223                $  3,223
  Short-term debt                                                                       117,050                 117,050
  Long-term debt                                                                        284,459                 301,761
  Redeemable preferred stock, including current portion                                   1,667                   1,296
</TABLE>

         The carrying amounts for cash and cash equivalents and short-term
debt approximate fair value due to the short maturity of these investments.
Fair value of long-term debt and preferred stock is estimated based on
market prices for similar issues.

10.    INCOME TAXES

         Net provisions for income taxes were charged during the years ended
September 30, 2002, 2001 and 2000 as shown on the Schedule of Income Taxes.
         The effective income tax rate varied from the federal statutory
income tax rate for each year due to the following:

<TABLE>
<CAPTION>
                                                                       2002               2001                2000
--------------------------------------                              -----------        -----------         -----------
<S>                                                                 <C>                <C>                 <C>
Federal income tax statutory rate                                          35.0%              35.0%               35.0%
State and local income taxes,
   net of federal income tax benefits                                       3.6                3.3                 3.6
Certain expenses capitalized on books
   and deducted on tax return                                              (4.9)              (2.5)               (2.5)
Taxes related to prior years                                                1.4                 .3                  .2
Other items - net                                                           (.6)              (3.3)               (1.1)
                                                                    -----------        -----------         -----------
Effective income tax rate                                                  34.5%              32.8%               35.2%
                                                                    ===========        ===========         ===========
</TABLE>


                                     30

<PAGE>
<PAGE>

         The significant items comprising the net deferred tax liability
recognized in the Consolidated Balance Sheets as of September 30 are as
follows:

<TABLE>
<CAPTION>
(Thousands)                                                               2002                2001
--------------------------------------                                 -----------         -----------
<S>                                                                    <C>                 <C>
Deferred tax assets:
   Reserves not currently deductible                                      $ 14,826            $ 16,278
   Deferred gas cost                                                         9,037               5,639
   Unamortized investment tax credits                                        3,544               3,745
   Other                                                                     3,541               1,885
                                                                       -----------         -----------
     Total deferred tax assets                                              30,948              27,547
                                                                       -----------         -----------

Deferred tax liabilities:
   Relating to utility property                                            123,773             111,057
   Pension                                                                  44,380              41,942
   Other                                                                     7,413               8,507
                                                                       -----------         -----------
     Total deferred tax liabilities                                        175,566             161,506
                                                                       -----------         -----------

Net deferred tax liability                                                 144,619             133,959
Net deferred tax asset - current                                            12,305               8,556
                                                                       -----------         -----------
Net deferred tax liability - non-current                                  $156,924            $142,515
                                                                       ===========         ===========
</TABLE>

11.    OTHER INCOME AND INCOME DEDUCTIONS - NET

<TABLE>
<CAPTION>
(Thousands)                                                            2002             2001              2000
--------------------------------------                              ----------       ----------        ----------
<S>                                                                 <C>              <C>               <C>
Allowance for Funds
     Used During Construction                                            $(149)         $   749            $  397
Other Income                                                               850            2,298             1,209
Other Income Deductions                                                   (151)          (1,630)             (871)
                                                                    ----------       ----------        ----------
Other Income and
     Income Deductions - Net                                             $ 550          $ 1,417            $  735
                                                                    ==========       ==========        ==========
</TABLE>


                                     31

<PAGE>
<PAGE>

12. INFORMATION BY OPERATING SEGMENT

         The Regulated Gas Distribution segment consists of the regulated
operations of Laclede Gas. Laclede Gas is a public utility engaged in the
retail distribution of natural gas serving an area in eastern Missouri, with
a population of approximately 2.0 million, including the City of St. Louis,
St. Louis County, and parts of eight other counties. The Non-Regulated Other
segment includes merchandise sales activities, and in fiscal 2001 and 2000
(prior to restructuring) included the transportation of liquid propane, gas
marketing, the sale of insurance related products, real estate development,
the compression of natural gas, and financial investments in other
enterprises. Accounting policies are as described in Note 1. There are no
material intersegment revenues.

<TABLE>
<CAPTION>
  (Thousands)                            Regulated
                                            Gas              Non-Regulated
                                        Distribution             Other            Eliminations      Consolidated
                                       --------------      -----------------      -------------     -------------
<S>                                 <C>                 <C>                    <C>               <C>
FISCAL 2002
OPERATING REVENUES                       $ 592,097               $  2,521           $      -        $  594,618
DEPRECIATION & AMORTIZATION                 24,215                      -                  -            24,215
INTEREST CHARGES                            25,105                      -                  -            25,105
INCOME TAX EXPENSE                          10,740                    (20)                 -            10,720
NET INCOME                                  20,360                    (31)                 -            20,329
TOTAL ASSETS                               984,374                  1,447                  -           985,821
CONSTRUCTION EXPENDITURES                   48,765                      -                  -            48,765

Fiscal 2001
Operating revenues                       $ 923,242               $ 78,867           $      -        $1,002,109
Depreciation & amortization                 26,193                      -                  -            26,193
Interest charges                            28,792                      -               (353)           28,439
Income tax expense                          14,170                    661                  -            14,831
Net income                                  29,541                    931                  -            30,472
Total assets                               963,676                 29,800            (17,566)          975,910
Construction expenditures                   46,952                      -                  -            46,952

Fiscal 2000
Operating revenues                       $ 529,250               $ 36,878           $      -        $  566,128
Depreciation & amortization                 24,672                      -                  -            24,672
Interest charges                            24,326                      -               (318)           24,008
Income tax expense                          13,755                    350                  -            14,105
Net income                                  25,501                    464                  -            25,965
Total assets                               919,721                 26,901            (14,882)          931,740
Construction expenditures                   51,635                      -                  -            51,635
</TABLE>

13.    COMMITMENTS AND CONTINGENCIES

         Laclede Gas estimates fiscal year 2003 utility construction
expenditures at approximately $53 million. The lease agreement covering the
general office space of Laclede Gas extends through February 2005 with
options to renew for up to 15 additional years. The aggregate rental expense
for fiscal years 2002, 2001 and 2000 was $838,000, $830,000 and $821,000,
respectively. The annual minimum rental payment for fiscal year 2003 is
anticipated to be approximately $847,000 with a maximum annual rental
payment escalation of $8,800 per year for each year through fiscal 2005.
Laclede Gas has other relatively minor rental arrangements that provide for
minimum rental payments. At the end of fiscal 2002, Laclede Gas entered into
various operating lease agreements for the rental of vehicles and power
operated equipment. The rental costs will be $456,000 in fiscal 2003 through
2005, $262,000 in fiscal 2006, and $52,000 in fiscal 2007. Laclede Gas has
entered into various contracts, which in the aggregate require it to pay
approximately $75 million on an annual basis, at present rate levels, for
the reservation of gas supplies and pipeline transmission and storage
capacity. These costs are recovered from customers in accordance with the
PGA Clause. The contracts have various expiration dates ranging from 2003 to
2011.
         Laclede Gas is subject to various environmental laws and
regulations that, to date, have not materially affected the Company's
financial position and results of operations. As these laws, regulations,
and their interpretation evolve, however, additional costs may be incurred.


                                     32

<PAGE>
<PAGE>

         With regard to a former manufactured gas plant site located in
Shrewsbury, Missouri, Laclede Gas and state and federal environmental
regulators have agreed upon certain actions and those actions are nearing
completion. Laclede Gas currently estimates the overall costs of these
actions will be approximately $2.3 million. As of September 30, 2002,
Laclede Gas has paid or reserved for these actions. If regulators require
additional actions, Laclede Gas will incur additional costs.
         Laclede Gas enrolled a second former manufactured gas plant site
into the Missouri Voluntary Cleanup Program (VCP). The VCP provides
opportunities to minimize the scope and cost of site cleanup while
maximizing possibilities for site development. This site is located in and
is presently owned by the City of St. Louis, Missouri. The City of St. Louis
has separately authorized a developer to prepare both a Remedial Action Plan
(RAP), for submission to the VCP, and a site development plan. Laclede Gas
is presently meeting with the developer to determine what role, if any, it
might play in these efforts. Laclede Gas continues to evaluate other options
as well, including, but not limited to, the submission of its own RAP to the
VCP. Laclede Gas currently estimates that the cost of site investigations,
agency oversight and related legal and engineering consulting may be
approximately $629,000. Currently, Laclede Gas has paid or reserved for
these actions. Laclede Gas has requested that other former site owners and
operators share in these costs and one party has agreed to participate and
has reimbursed Laclede Gas to date for $173,000. Laclede Gas anticipates
additional reimbursement from this party. Laclede Gas plans to seek
proportionate reimbursement of all costs relative to this site from other
potentially responsible parties if practicable.
         Costs incurred are charged to expense or capitalized in accordance
with generally accepted accounting principles. A predetermined level of
expense is included in Laclede Gas' rates.
         Laclede Gas has been advised that a third former manufactured gas
plant site previously operated but no longer owned by Laclede Gas may
contain gas plant waste that may require remediation. Laclede Gas is working
to determine the nature and extent of such waste, if any, and its
responsibility, if any, for any remediation costs.
         While the scope of costs relative to the Shrewsbury site will not
be significant, the scope of costs relative to the other sites is unknown
and may be material. Laclede Gas has notified its insurers that it seeks
reimbursement of its costs at these three manufactured gas plant sites. In
response, the majority of insurers have reserved their rights. While some of
the insurers have denied coverage, Laclede Gas continues to seek
reimbursement from them. With regard to the Shrewsbury site, denials of
coverage are not expected to have any material impact on the financial
position and results of operations of Laclede Gas. With regard to the other
two sites, since the scope of costs are unknown and they may be significant,
denials of coverage may have a material impact on the financial position and
results of operations of Laclede Gas. Such costs, if incurred, have
typically been subject to recovery in rates.
         On June 28, 2002, the Staff of the MoPSC filed its recommendation
in a proceeding established to review Laclede Gas' gas costs for fiscal
2001. In its recommendation, the Staff proposed to disallow the
approximately $4.9 million of pre-tax income achieved under the PSP. Laclede
Gas believes that Staff's position lacks merit and continues to vigorously
oppose the adjustment in a proceeding before the MoPSC, the hearing for
which is currently scheduled to occur in February 2003. Regulatory
proceeding results are uncertain, and to the extent that a final Commission
decision sustains Staff's recommended disallowance, the proceeding's outcome
could have a material effect on the future financial position and results of
operations of Laclede Gas. Missouri statutes provide an opportunity for
court review of Commission decisions.
         In late August 2001, Laclede Gas was named a defendant in a lawsuit
in the Circuit Court of the City of St. Louis, Missouri, Ronald J. Johnson
vs. Laclede Gas Company, alleging that a class of persons residing in homes
provided natural gas by Laclede Gas through direct buried copper service
lines have, among other things, suffered diminution in property values and
annoyance and discomfort due to residing in homes served by such allegedly
corroded lines. The suit sought actual and punitive damages and an
injunction requiring the repair and/or replacement of all such lines, which
were alleged to number approximately 78,000. By letter dated September 21,
2001, its liability insurer advised Laclede Gas that the claims in the
lawsuit, as pled, failed to qualify for any coverage under its excess
general liability policy. Laclede Gas disagrees and continues to assert its
right to coverage under the policy. The gas distribution business of Laclede
Gas is regulated by the MoPSC, including as to safe and adequate service and
rate matters. Under a current program, the Commission has provided for the
monitoring and replacement of such lines. The costs of replacement,
including carrying costs, have been included in rates established by the
Commission. The MoPSC filed a Motion to Intervene and a Motion to Strike
Plaintiff's Prayer for Injunctive Relief and to Stay Matters Within the
Primary Jurisdiction of the MoPSC. The court subsequently granted the
MoPSC's request for intervention. Laclede Gas filed a Motion to Dismiss
which urged, among other things, the exclusive jurisdiction of the MoPSC as
to gas safety matters generally and the direct buried copper service
replacement program in particular. Laclede Gas filed a motion to dismiss the
lawsuit that was granted by the Court on February 22, 2002. The plaintiff
did not file an amended petition within the time granted by the Court but
filed an appeal on April 3, 2002. On May 13, 2002, the plaintiff dismissed
the appeal.
         Laclede Gas is involved in litigation, claims, and investigations
arising in the normal course of business. While the results of such
litigation cannot be predicted with certainty, management, after discussion
with counsel, believes the final outcome will not have a material adverse
effect on the consolidated financial position and results of operations
reflected in the financial statements presented herein.


                                     33

<PAGE>

14.   INTERIM FINANCIAL INFORMATION (UNAUDITED)

         In the opinion of Laclede Gas, the quarterly information presented
in the Schedule of Interim Financial Information for fiscal years 2002 and
2001 includes all adjustments, consisting of normal recurring accruals
necessary for a fair statement of the results of operations for such
periods. Variations in consolidated operations reported on a quarterly basis
primarily reflect the seasonal nature of the business of Laclede Gas.








                                     34