**Exhibit 99.02**

 

**LOUISVILLE GAS AND ELECTRICCOMPANY**

**AND**

**KENTUCKY UTILITIES COMPANY**

**DIRECTOR AND OFFICER INFORMATION**

 

The outstanding stock of Louisville Gas and ElectricCompany (“LG&E”) is divided into three classes: Common Stock, PreferredStock (without par value), and Preferred Stock, par value **$**25per share. At the close of business on February 28, 2005, the followingshares of four series of such classes were outstanding:

 
| Common Stock,  without par value                                 |   | 21,294,223 shares |   |
|------------------------------------------------------------------|--------|-------------------|--------|
| Preferred Stock,  par value $25 per share, 5% Series             |   | 860,287 shares    |   |
| Preferred Stock,  without par value, $5.875 Series               |   | 225,000 shares    |   |
| Preferred Stock, without par value (stated value $100 per share) |   |              |   |
| Auction Rate Series A                                       |   | 500,000 shares    |   |

 

The outstanding stock of Kentucky Utilities Company (“KU”)is divided into three classes: Common Stock, without par value, PreferredStock, without par value, and Preference Stock, without par value. As of theclose of business on February 28, 2005, the following shares of threeseries of such classes were outstanding:

 
| Common Stock,  without par value                                  |   | 37,817,878 shares |   |
|-------------------------------------------------------------------|--------|-------------------|--------|
| Preferred Stock,  without par value (stated value $100 per share) |   |              |   |
| 4.75% Series                                                      |   | 200,000 shares    |   |
| 6.53% Series                                                      |   | 200,000 shares    |   |

 

All of the outstanding LG&E Common Stock and KUCommon Stock is owned by LG&E Energy LLC. (“LG&E Energy”). Based oninformation contained in a Schedule 13G originally filed with theSecurities and Exchange Commission in October 1998, AMVESCAP PLC, a parentholding company, reported certain holdings in excess of five percent ofLG&E’s Preferred Stock. AMVESCAP PLC, with offices at 1315 PeachtreeStreet, N.W., Atlanta, Georgia 30309, and certain of its subsidiaries reportedsole voting and dispositive power as to no shares and shared voting anddispositive power as to 43,000 shares of LG&E Preferred Stock, without parvalue, **$**5.875 Series, representing 17.2% ofthat class of Preferred Stock. The reporting companies indicated that they holdthe shares on behalf of other persons who have the right to receive or thepower to direct the receipt of dividends or the proceeds of sales of theshares. No other persons or groups are known by management to be beneficialowners of more than five percent of LG&E’s Preferred Stock.

 

As of February 28, 2005, all directors, nomineesfor director and executive officers of LG&E and KU as a group beneficiallyowned no shares of LG&E Preferred Stock or KU Preferred Stock and less than1% of the shares of E.ON AG, the ultimate parent of LG&E and KU.

 

On December 11, 2000, Powergen plc, a publiclimited company with registered offices in England and Wales (“Powergen”)completed its acquisition of LG&E Energy Corp., then the parent corporationof LG&E and KU. In connection with such transaction, certain officers anddirectors of Powergen were appointed to fill vacancies in the Board ofDirectors of LG&E and KU occurring by resignation of prior directors.  In January 2003, Powergen wasreregistered as Powergen Limited.

 

On July 1, 2002, E.ON AG, a German corporation (“E.ON”),completed the acquisition of Powergen.  In connection with such transaction, certainofficers or directors of E.ON and Powergen were appointed to fill vacancies inthe Board of Directors of LG&E and KU occurring by resignation of priordirectors.

 

On December 30, 2003, LG&E Energy LLC becamethe successor, by assignment and subsequent merger, to the assets andliabilities of LG&E Energy Corp.

 

1

----

 

# **INFORMATIONABOUT DIRECTORS**

 

The number of members of each of the Boards ofDirectors of LG&E and KU is currently fixed at five, pursuant to theCompanies’ bylaws and resolutions adopted by the Boards of Directors.Generally, directors are elected at each year’s Annual Meeting to serve for one-yearterms and to continue in office until their successors are elected andqualified.

 

On January 31, 2004, in connection withreorganizations in reporting relationships among E.ON, Powergen and LG&E Energyin early 2004, Messrs. John R. McCall and S. Bradford Rives were appointedto the Boards of LG&E and KU to fill the vacancies created by resignationsof Dr. Hans Michael Gaul and Mr. Michael Söhlke.  Effective January 1, 2005, the size ofthe Boards was increased to five and Messrs. Paul W. Thompson and ChrisHermann were appointed as directors.

 

The following contains certain information as of February 28,2005 concerning the directors of LG&E and KU:

 

# **Directors with Terms Expiring at the 2005 AnnualMeeting of Shareholders**

 

***VictorA. Staffieri* (Age 49):**   Mr. Staffieri is Chairman, President and Chief Executive Officer ofLG&E Energy, LG&E and KU, serving from April 2001 to the present.He served as President and Chief Operating Officer of LG&E Energy, LG&Eand KU from February 1999 to April 2001; Chief Financial Officer ofLG&E Energy and LG&E from May 1997 to February 2000; ChiefFinancial Officer of KU from May 1998 to February 2000; President,Distribution Services Division of LG&E Energy from December 1995 to May 1997;and Senior Vice President, General Counsel and Public Policy of LG&E Energyand LG&E from November 1992 to December 1993. Mr. Staffierihas been a director of LG&E Energy, LG&E and KU since April 2001and was a director of Powergen from April 2001 until January 2004.

 

***JohnR. McCall *(Age 61):               **Mr. McCall is ExecutiveVice President, General Counsel and Secretary of LG&E Energy and ExecutiveVice President, General Counsel and Corporate Secretary of LG&E andKU.  Mr. McCall has held thesepositions at LG&E Energy and LG&E since July 1994 and at KU since May 1998.  Mr. McCall has been a director of LG&EEnergy, LG&E and KU since January 2004.

 

***S. Bradford Rives*(Age 46):             **Mr. Rivesis Chief Financial Officer of LG&E Energy, LG&E and KU, serving from September 2003until the present.  He served as Senior VicePresident – Finance and Controller of LG&E Energy, LG&E and KU from December 2000until September 2003; Senior Vice President – Finance and BusinessDevelopment of LG&E Energy and LG&E from February 1999 to December 2000;and Vice President – Finance and Controller of LG&E Energy and LG&Efrom March 1996 to February 1999. Mr. Rives has been a director of LG&E Energy, LG&E and KUsince January 2004.

 

***Paul W. Thompson*(Age 48):          **Mr. Thompsonis Senior Vice President – Energy Services of LG&E Energy, LG&E and KU,serving from June 2000 until the present. He served as Senior Vice President – Energy Services of LG&E Energy fromAugust 1999 until June 2000; Vice President, Retail Electric Businessof LG&E from December 1998 to August 1999; and Group Vice President– Energy Marketing  of LG&E Energyfrom June 1998 to August 1999. Mr. Thompson has been a director of LG&E Energy, LG&E andKU since January 2005.

 

***Chris Hermann*(Age 57):                 **Mr. Hermannis Senior Vice President – Energy Delivery of LG&E Energy, LG&E and KU,serving from February 2003 until the present.  He served as Senior Vice President – DistributionOperations of LG&E Energy, LG&E and KU from December 2000 until February 2003;Vice President, Supply Chain and Operating Services of LG&E Energy and LG&Efrom December 1999 to December 2000; and Vice President, PowerGeneration and Engineering Services of  LG&E from May 1998 to December 1999.   Mr. Hermannhas been a director of LG&E Energy, LG&E and KU since January 2005.

 

2

----

 

# **INFORMATIONCONCERNING THE BOARDS OF DIRECTORS**

# ** **

The Boards of Directors of LG&E and KU contain thesame members.  Each member is also adirector of LG&E Energy, as described above.

 

During 2004, there were a total of 11 and 12 meetingsor consents of the LG&E and KU Boards, respectively. All directors attended75% or more of the total number of meetings or consents of the Boards ofDirectors and committees of the Boards on which they served.

 

## **Compensation of Directors**

 

Directors who are also officers of E.ON, LG&EEnergy or their subsidiaries receive no compensation in their capacities asdirectors of LG&E and KU.

 

## **Committees**

 

There are currently no formal committees of the Boardsof Directors of the Companies.  Due tothe small Board size of five members, each Board as a whole performs thefunctions related to audit or nominating committees.

 

In July 2002, upon completion of theE.ON-Powergen acquisition, the structures of the LG&E and KU Boards werechanged to recognize practical and administrative efficiencies. The LG&Eand KU Boards and LG&E Energy Board, respectively, adopted resolutionsproviding that (i) the functions of the former Audit Committee would beperformed by the LG&E and KU Boards as a whole and (ii) certainfunctions of the former Remuneration Committee under certain LG&E Energyexecutive compensation plans would be performed by the Senior Vice President –Corporate Executive Human Resources of E.ON AG, currently Dr. Stefan Vogg.

 

**Audit and Auditor Matters**

 

Due to the small size, each Board as a whole performsthe functions associated with an Audit Committee.  Each Board has determined that each of VictorA. Staffieri and S. Bradford Rives is an audit committee financial expert asdefined by Item 401(h) of Regulation S-K.  All members of the Boards are officers oremployees of LG&E or KU and therefore are not independent within themeaning of Item 7(d)(3)(iv) of Schedule 14A of the SecuritiesExchange Act of 1934.

 

During 2004, the Boards maintained direct and indirectcontact with the independent registered public accounting firm and with LG&E’sand KU’s internal Audit Services to review the following matters pertaining toLG&E and KU:  fees and servicesrelating to the independent auditor; the adequacy of accounting and financialreporting procedures; the adequacy and effectiveness of internal accountingcontrols; the scope and results of the annual audit and any other mattersrelative to the audit of the Companies’ accounts and financial affairs that theBoard, Audit Services or the independent registered public accounting firm deemednecessary.   A report of the Board actingas Audit Committee is included in the “Report on 2004 Audit Committee Matters” section ofthis document.  A copy of the charterapplicable to the Board acting as Audit Committee is included as Appendix A ofthis document.

 

TheBoard is responsible for approving all audit and permissible non-audit servicesto be provided by the independent registered public accounting firm inaccordance with LG&E’s and KU’s Pre-Approval Policy.   Under thepolicy, the Board annually reviews and pre-approves the services that may beprovided by the independent registered public accounting firm.   These include audit services, audit-relatedservices, tax services and some permissible non-audit services, up todesignated fee or budget levels.  Newservices or services exceeding these levels will require separate pre-approvalby the Board.  Under the policy, theBoard may delegate pre-approval authority to one or more of its members,subject to reporting of any decisions by such member to the Board or may relyupon certain annual or other pre-approvals by the E.ON Audit Committee underits policy, subject to certain reporting to the Board.

 

3

----

 

 **Nominations**

 

Due to the small size of the Boards and the fact thatLG&E Energy owns all of LG&E’s and KU’s common stock and approximately96% of LG&E’s voting stock, the Boards have determined that it isappropriate not to have a standing nominating committee, nominating committeecharter or policy regarding consideration of candidates for director, includingshareholder nominees.  The full Boards,with input from E.ON officers, select director nominees.  All members of the Boards are officers oremployees of LG&E or KU and therefore are not independent within themeaning of Item 7(d)(2)(ii)(D) of Schedule 14A of the SecuritiesExchange Act of 1934.

 

Nominations for the election of directors may be madeby the Boards, a committee thereof or by shareholders entitled to vote in theelection of directors generally. Shareholder nominations must provide timely written notice in writing tothe Companies’ Secretary in accordance with the procedures set forth in the section “ShareholderProposals and Nominations” of this document. The Boards’ chairman may void the nomination of any candidate forelection which was not made in compliance with applicable procedures.

 

4

----

 

# **COMPENSATIONREPORT**

 

Following the July 1, 2002 completion of E.ON’sacquisition of Powergen, the Remuneration Committee of the Boards of Directorsof LG&E and KU was terminated.  As stated above, the LG&E Energy,LG&E and KU Boards adopted resolutions providing that certain functions ofthe former Remuneration Committee under certain executive compensation planswould be performed by the Senior Vice President - Corporate Executive HumanResources of E.ON, currently Dr. Stefan Vogg.  This report describesthe compensation policies applicable to the Companies’ executive officers forthe last completed fiscal year.

 

With respect to 2004, Dr. Vogg, in consultationwith certain officers of E.ON AG, LG&E Energy, LG&E and KU, includingmembers of the Companies’ Boards of Directors (collectively, the “CompensationGroup”), arrived at decisions regarding the compensation of LG&E’s and KU’sexecutive officers, including the setting of base pay levels for 2004, and theadministration and determination of awards under the E.ON Group Stock OptionProgram (the “E.ON SAR Plan”) and the LG&E Energy Corp. Performance UnitPlan (the “Long-Term Plan”) and of payments under the Short-Term Incentive Plan(the “Short-Term Plan”) as applicable to LG&E and KU.

 

The Companies’ executive compensation program and thetarget awards and opportunities for executives are designed to be competitivewith the compensation and pay programs of comparable companies, includingutilities, utility holding companies and companies in general industry, whereappropriate. The executive compensation program has been developed andimplemented over time through consultation with, and upon the recommendationsof, recognized executive compensation consultants. The Compensation Group andthe Boards of Directors have continuing access to such consultants as desired,and are provided with independent compensation data for their review.

 

Set forth below is a report addressing LG&E’s andKU’s compensation policies during 2004 for their officers, including theexecutive officers named in the following tables. In many cases, the executiveofficers also serve in similar capacities for affiliates of LG&E and KU,including LG&E Energy. For each of the executive officers of LG&E andKU, the policies and amounts discussed below are for all services to LG&E,KU and their affiliates, during the relevant period.

 

**Compensation Philosophy**

 

During 2004, LG&E’s and KU’s executivecompensation program had three major components: (1) base salary; (2) short-term;and (3) long-term incentives. The Companies developed their executivecompensation program to focus on both short-term and long-term businessobjectives that are designed to enhance overall shareholder value. Theshort-term and long-term incentives were premised on the belief that theinterests of executives should be closely aligned with those of shareholders.Based on this philosophy, these two portions of each executive’s totalcompensation package were linked to the accomplishment of specific results thatwere designed to benefit shareholders in both the short-term and long-term.

 

The executive compensation program also recognizedthat compensation practices must be competitive not only with utilities andutility holding companies, but also with companies in general industry toensure that a stable and successful management team can be recruited andretained.

 

Pursuant to this competitive market positioningphilosophy, in establishing compensation levels for all executive positions for2004, the Compensation Group reviewed competitive compensation information forUnited States general industry companies with revenue of approximately $3 billion(the “Survey Group”) and established targeted total direct compensation (basesalary plus short-term incentives and long-term incentives) for each executivefor 2004 to generally approach the 50th percentile of the competitiverange from the Survey Group.  Salaries, short-term incentives andlong-term incentives for 2004 are described below.  (The utilities and utility holding companiesthat were in the Survey Group were not necessarily the same as those in the DowJones Utility Average used in a company performance graph in any proxystatement.)

 

The 2004 compensation information set forth in othersections of this document, particularly with respect to the tabular informationpresented, reflects the considerations set forth in this report. The BaseSalary, Short-Term

 

5

----

 

Incentives, and Long-Term Incentives sections that follow address thecompensation philosophy for 2004 for all executive officers except thoseserving as Chief Executive Officer.   Thecompensation of the Chief Executive Officer is discussed below under theheading “Chief Executive Officer Compensation.”

 

**Base Salary**

 

The base salaries for LG&E and KU executiveofficers for 2004 were designed to be competitive with the Survey Group atapproximately the 50th percentile of the base salary range for executives insimilar positions with companies in the Survey Group. Actual base salaries weredetermined based on a combination of market position, individual performanceand experience.

 

**Short-Term Incentives**

 

The Short-Term Plan provided for Company PerformanceAwards and Individual Performance Awards, each of which is expressed as apercentage of base salary and each of which is determined independent of theother. The Compensation Group established the performance goals for the CompanyPerformance Awards and Individual Performance Awards at the beginning of the2004 performance year. Payment of Company Performance Awards for executiveofficers was based on varying performance measures tied to each officer’sresponsible areas. These measures and goals included, among others, LG&EEnergy earnings before interest and taxes (“EBIT”) targets and LG&E/KU EBITtargets.  The Compensation Group retains discretion to adjust the measuresand goals as deemed appropriate. Payment of Individual Performance Awards wasbased 100% on management effectiveness. As stated, the awards varied within theexecutive officer group based upon the nature of each individual’s functionalresponsibilities.

 

For 2004, the Company Performance Award targets fornamed executive officers were 30% of base salary, and the IndividualPerformance Award targets were 20% of base salary. Both awards were establishedto be competitive with the 50th percentile of such awards granted to comparableexecutives employed by companies in the Survey Group. The individual officerswere eligible to receive from 0% to 175% of their targeted Company PerformanceAward amounts, dependent upon Company performance as measured by the relevantperformance goals, and were eligible to receive from 0% to 175% of theirtargeted Individual Performance Award amounts dependent upon individualperformance as measured by management effectiveness.

 

Using the relevant E.ON, LG&E Energy, LG&E/KUand other subsidiaries’ performance against goals in 2004, the CompensationGroup determined relative annual performance against targets for CompanyPerformance Awards. Based upon this determination, Company Performance Awardsfor 2004 to the named executive officers were paid ranging from 118% to 131% oftarget and 36% to 39% of base salary. Based on determinations of managementeffectiveness, payouts for Individual Performance Awards to the named executiveofficers ranged from 150% to 165% of target and 32% to 71% of base salary.

 

**Long-Term Incentives**

 

The Compensation Group determines the competitivelong-term grants under the Long-Term Plan and the E.ON SAR Plan to be awardedfor each executive based on the long-term awards for the 50th percentile of theSurvey Group. The aggregate expected value of the awards is intended toapproach the expected value of long-term incentives payable to executives insimilar positions with companies in the 50th percentile of the Survey Group,depending upon achievement of targeted Company performance.

 

In 2004, the Compensation Group granted performanceunits under the Long-Term Plan to executive officers and senior management andstock appreciation rights (“SAR’s”) under the E.ON SAR Plan to executiveofficers.  The amounts of the executive’slong-term award to be delivered in SAR’s and performance units were 25% and 75%respectively.  Under the Long-Term Plan, the future value of grants ofperformance units is dependent upon company performance against a value-addedtarget.  The ultimate value of the performance unit can range from 0% to 150%of grant. Under the E.ON SAR Plan, the amount paid to executives when theyexercise their SAR’s, after satisfaction of vesting and performance criteria,is the difference between E.ON’s stock price at the time of exercise and thestock price at the time of issuance, multiplied by the number of SAR’sexercised multiplied by the foreign exchange rate at the time of grant. The price at issuance is the average of the XETRA closing quotations for E.ONstock during the December prior to issuance.  The future value of the2004 grants

 

6

----

 

of SAR’s wassubstantially dependent upon the changing value of E.ON shares in themarketplace.

 

SAR’s are subject to two year vesting and performance requirements. No regular payouts of performance units under the Long-Term Plan occurredduring 2004 as the three-year performance periods had not been completed.

 

**Chief Executive Officer Compensation**

 

Mr. Victor A. Staffieri was appointed ChiefExecutive Officer of LG&E and KU effective May 1, 2001. Mr. Staffieri’scompensation was governed by the terms of an Employment and Severance Agreemententered into on February 25, 2000 as amended (including upon hisappointment as Chief Executive Officer) (the “2000 Agreement”). The 2000Agreement was for an initial term of two years commencing on December 11,2000, with automatic annual extensions thereafter unless E.ON or****the Companies or Mr. Staffieri give notice ofnon-renewal.  During 2004, Mr. Staffierientered into an amendment to his employment and severance agreement.

 

The 2000 Agreement established the minimum levels of Mr. Staffieri’sbase compensation, although the Chairman of E.ON retains discretion to increasesuch compensation. For 2004, the Compensation Group established Mr. Staffieri’scompensation and short-term and long-term awards using comparisons to relevantofficers of companies in the Survey Group, including utilities, and survey datafrom various compensation consulting firms. Mr. Staffieri also receivedCompany contributions to the savings plan, similar to those of other officersand employees. Details of Mr. Staffieri’s 2004 compensation are set forthbelow.

 

***Base Salary***.     Mr. Staffieri was paid a total base salary of $673,236 during 2004, pursuant to the 2000 Agreement, as amended.The Compensation Group, in determining Mr. Staffieri’s 2004 annual salary,including the minimum, considered his individual performance in the priorgrowth of LG&E Energy and the comparative compensation data describedabove.

 

***Short-Term Incentives***.     Mr. Staffieri’s short-term incentive target award as Chief ExecutiveOfficer was 70% of his 2004 base salary. As with other executive officersreceiving short-term incentive awards, Mr. Staffieri was eligible toreceive more or less than the targeted amount, based on Company performance andindividual performance. His 2004 short-term incentive payouts were based 40% onachievement of Company Performance Award targets and 60% on achievement ofIndividual Performance Award targets.

 

For 2004, the Company Performance Award payout for Mr. Staffieriwas 131% of target and 37% of his 2004 base salary and the Individual PerformanceAward payout was 170% of target and 71% of his 2004 base salary.  Mr. Staffieri’sCompany Performance Award was based on LG&E Energy EBIT.  His CompanyPerformance Award was calculated based upon annual Company performance asdescribed under the heading “Short-Term Incentives.”  In determining theIndividual Performance Award, the Compensation Group considered Mr. Staffieri’seffectiveness in several areas, including the financial and operationalperformance of LG&E Energy, LG&E, KU and other subsidiaries, Companygrowth and other measures.

 

***Long-Term Incentive Grant***.     In 2004, Mr. Staffieri received 883,619 performance units for the 2004-2006performance period under the Long-Term Plan and 24,778 SAR’s under the E.ON SARPlan. These amounts were determined pursuant to the terms of his 2000Agreement, as amended, with an aggregate expected value representingapproximately 175% of his base salary. The terms of the performance units andSAR’s for Mr. Staffieri are the same as for other executive officers, asdescribed under the heading “Long-Term Incentives.”

 

***Long-Term Incentive Payout***.      Mr. Staffieri exercised SAR’s during 2004 as indicated in the “Option/SARExercises and Year-End Value Table.”  As with other executive officers, noregular payouts of performance units under the Long-Term Plan occurred during2004 as the three-year performance periods had not been completed.

 

7

----

 

***Other***.     In 2004,Mr. Staffieri also received a retention payment in connection with a 2002amendment to his employment and severance agreement in the amount of $872,032,including interest, as indicated in the Summary Compensation Table.

 

Members of the Companies’ Boards of Directors

 

Victor A. Staffieri

John R. McCall

S. Bradford Rives

Paul W. Thompson

Chris Hermann

 

8

----

 

# **EXECUTIVECOMPENSATION AND OTHER INFORMATION**

# ** **

The following table shows the cash compensation paidor to be paid by LG&E, KU or LG&E Energy, as well as certain othercompensation paid or accrued for those years, to the Chief Executive Officerand the next four highest compensated executive officers of LG&E and KU whowere serving as such at December 31, 2004, as required, in all capacitiesin which they served LG&E, KU, LG&E Energy or its subsidiaries during2002, 2003 and 2004:

 

# **SUMMARYCOMPENSATION TABLE**

 
| ** **                       | ** ** | **Annual Compensation** | ** ** | **Long-Term Compensation**    | ** ** |
|----------------------------------|------------|-------------------------|------------|-------------------------------|------------|
| ** **                       | ** ** | ** **              | ** ** | **Awards**                    | ** ** | **Payouts** | ** ** | ** ** | ** ** |
| **Name and  Principal Position** | ** ** | ** **              | ** ** | **Other  Annual  Comp.  ($)** | ** ** | **Restricted  Stock  Awards  ($)** | ** ** | **Securities  Underlying  Options/SAR  (#)(1)** | ** ** | **LTIP  Payouts  ($)(2)** | ** ** | **All Other  CompenSation  ($)** | ** ** |
| **Year**                         | ** ** | **Salary  ($)**         | ** ** | **Bonus  ($)**                |
|                             |       |                    |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Victor A.  Staffieri             |       | 2004                    |       | 673,236                       |       | 728,159 |   | 31,572 |   | — |   | 24,778 |   | 0 |   | 941,069 | (3) |
| Chairman of the  Board,          |       | 2003                    |       | 648,902                       |       | 741,340 |   | 39,461 |   | — |   | 25,282 |   | 0 |   | 902,945 | (4) |
| President and  Chief Executive   |       | 2002                    |       | 630,001                       |       | 650,101 |   | 24,282 |   | — |   | 6,250 |   | 1,483,377 |   | 2,433,735 | (5) |
| Officer                          |       |                    |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |       |                    |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| John R. McCall                   |       | 2004                    |       | 408,949                       |       | 296,015 |   | 9,365 |   | — |   | 8,600 |   | 0 |   | 670,532 | (3) |
| Executive Vice  President,       |       | 2003                    |       | 389,475                       |       | 313,933 |   | 198,681 | (6) | — |   | 8,671 |   | 0 |   | 47,529 | (4) |
| General Counsel  and             |       | 2002                    |       | 363,975                       |       | 251,543 |   | 144,756 | (6) | — |   | 3,611 |   | 401,580 |   | 1,390,557 | (5) |
| Corporate  Secretary             |       |                    |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |       |                    |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| S. Bradford Rives                |       | 2004                    |       | 332,001                       |       | 230,355 |   | 7,293 |   | — |   | 5,586 |   | 0 |   | 517,626 | (3) |
| Chief Financial  Officer         |       | 2003                    |       | 305,495                       |       | 243,607 |   | 6,880 |   | — |   | 5,345 |   | 0 |   | 423,923 | (4) |
|                             |       | 2002                    |       | 280,019                       |       | 180,145 |   | 6,616 |   | — |   | 2,877 |   | 204,450 |   | 486,491 | (5) |
|                             |       |                    |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Paul W. Thompson                 |       | 2004                    |       | 286,258                       |       | 209,048 |   | 8,273 |   | — |   | 4,697 |   | 0 |   | 435,220 | (3) |
| Senior Vice  President -         |       | 2003                    |       | 269,071                       |       | 187,526 |   | 7,232 |   | — |   | 4,792 |   | 0 |   | 10,151 | (4) |
| Energy Services                  |       | 2002                    |       | 262,497                       |       | 147,944 |   | 8,106 |   | — |   | 2,604 |   | 290,000 |   | 440,486 | (5) |
|                             |       |                    |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Chris Hermann                    |       | 2004                    |       | 262,412                       |       | 179,732 |   | 7,891 |   | — |   | 3,311 |   | 0 |   | 416,884 | (3) |
| Senior Vice  President -         |       | 2003                    |       | 252,928                       |       | 166,267 |   | 4,905 |   | — |   | 3,378 |   | 0 |   | 22,463 | (4) |
| Energy Delivery                  |       | 2002                    |       | 246,748                       |       | 129,505 |   | 7,892 |   | — |   | 2,448 |   | 204,450 |   | 228,722 | (5) |

 

9

----

 

----

**(1)**                                  Amounts for all years reflect E.ON SAR Plan grants.

 

**(2)**                                  No regular payout were made under the Long-Term Plan weremade during years 2004, 2003 or 2002 as no three-year performance periods hadyet been completed.  Amounts for year 2002,reflect acceleration of open performance periods upon the change in controlevent resulting from the Powergen shareholders’ approval of the E.ONtransaction.

 

**(3)**                                  Includes employer contributions to 401(k) plan,nonqualified thrift plan, employer paid life insurance premiums, vacation sellback and retention payments in 2004 as follows: Mr. Staffieri $6,500, $35,937,$26,600, $0 and $872,032, respectively; Mr. McCall $6,095, $15,662, $22,050,$2,359 and $613,425,  respectively; Mr. Rives$1,571, $15,736, $1,042, $1,277 and $498,000, respectively; Mr. Thompson,$4,353, $9,861, $2,259. $0 and $418,747, respectively and Mr. Hermann, $6,228,$6,754, $6,250, $4,037 and $393,615, respectively.  Mr. McCall’s figure also includes$10,941 representing certain overseas assignment and tax equalizationamounts.  The retention payments aboveare discussed in the “Compensation Report” and “Employment Contracts and Terminationof Employment Arrangements and Change in Control Provisions”.

 

(4)                                  Includesretention payments in 2003 as follows: Mr. Staffieri, $837,375; Mr. McCall,$0; Mr. Rives, $403,556; Mr. Thompson, $0; and Mr. Hermann, $0,respectively.

 

(5)                                  Includesretention payments in 2002 as follows: Mr. Staffieri, $2,349,170; Mr. McCall,$1,346,416; Mr. Rives, $87,746; Mr. Thompson, $425,926; and Mr. Hermann,$211,342, respectively.

 

(6)                                  Includesfinancial planning, automobile, spouse travel, dues, overseas compensation andtax payments in 2003 ($1,500, $4,000, $7,202, $0, $0 and $178,445) and 2002 ($2,000,$7,586, $50,589, $240, $36,398 and $48,143) respectively.

 

10

----

 

**OPTION/SAR GRANTS TABLE**

**Option/SAR Grants in 2004 FiscalYear**

 

Thefollowing table contains information at December 31, 2004, with respect togrants of E.ON AG stock appreciation rights (SAR’s) to the named executiveofficers:

 
| ** **           | ** ** | **Individual Grants**                                             | ** ** | ** **                                                                     | ** ** | ** **                                | ** ** | ** **           | ** ** | **Potential**                                                                                | ** ** | ** ** | ** ** |
|----------------------|------------|-------------------------------------------------------------------|------------|--------------------------------------------------------------------------------|------------|-------------------------------------------|------------|----------------------|------------|----------------------------------------------------------------------------------------------|------------|------------|------------|
| **Name**             | ** ** | **Number of Securities Underlying Options/SARs Granted  (#) (1)** | ** ** | **Percent of  Total  Options/SARs  Granted to  Employees in  Fiscal Year (2)** | ** ** | **Exercise  Or Base  Price  ($/  Share)** | ** ** | **Expiration  Date** | ** ** | **Realizable Value At  Assumed Annual  Rates of Stock  Price Appreciation  For Option Term** | ** ** | **10%($)** | ** ** |
| **0%($)**            | ** ** | **5% ($)**                                                        |
| ** **           | ** ** | ** **                                                        | ** ** | ** **                                                                     | ** ** | ** **                                | ** ** | ** **           | ** ** | ** **                                                                                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| Victor A.  Staffieri |       | 24,778                                                            |       | 39.1                                                                           | %          | 61.76                                     |       | 12/31/2010           |       | 0                                                                                            |       | 622,981    |       | 1,451,812 |   |
| John R. McCall       |       | 8,600                                                             |       | 13.6                                                                           | %          | 61.76                                     |       | 12/31/2010           |       | 0                                                                                            |       | 216,226    |       | 503,898 |   |
| S. Bradford  Rives   |       | 5,586                                                             |       | 8.8                                                                            | %          | 61.76                                     |       | 12/31/2010           |       | 0                                                                                            |       | 140,446    |       | 327,299 |   |
| Paul W. Thompson     |       | 4,697                                                             |       | 7.4                                                                            | %          | 61.76                                     |       | 12/31/2010           |       | 0                                                                                            |       | 118,094    |       | 275,210 |   |
| Chris Hermann        |       | 3,311                                                             |       | 5.2                                                                            | %          | 61.76                                     |       | 12/31/2010           |       | 0                                                                                            |       | 83,247     |       | 194,001 |   |

 

----

(1)          E.ON SAR’s were awardedwith an exercise price at issuance equal to the average XETRA closingquotations for E.ON stock during the December prior to issuance.  The SAR’s are exercisable over a seven-yearperiod from their issuance date.

 

(2)          Representspercentage grants to LG&E Energy, LG&E and KU officers only.

 

11

----

 

**OPTION/SAR EXERCISES AND YEAR-ENDVALUE TABLE**

**Aggregated Option/SAR Exercisesin 2004 Fiscal Year**

**And FY-End Option/SAR Values**

 

The following table sets forth information with respect to the namedexecutive officers concerning the value of unexercised E.ON SAR’s held by themas of December 31, 2004:

 
| **Name**             | ** ** | **Shares  Acquired  On Exercise (#)(1)** | ** ** | **Value Realized  ($)** | ** ** | **Number of Securities  Underlying  Unexercised  Options/SARs  at FY-End (#)  Exercisable/Unexercisable** | ** ** | **Value of Unexercised  In-The-Money  Options/SARs at FY-End  ($)  Exercisable/Unexercisable** | ** ** |
|----------------------|------------|------------------------------------------|------------|-------------------------|------------|-----------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------|------------|
|                 |       |                                     |       |                    |       |                                                                                                      |       |                                                                                           |       |
| Victor A.  Staffieri |       | 6,250                                    |       | 51,969                  |       | 0 / 50,060                                                                                                |       | 0 / 1,913,016                                                                                  |       |
| John R. McCall       |       | 3,611                                    |       | 30,025                  |       | 0 / 17,271                                                                                                |       | 0 / 659,088                                                                                    |       |
| S. Bradford  Rives   |       | 2,877                                    |       | 23,922                  |       | 0 / 10,931                                                                                                |       | 0 / 414,603                                                                                    |       |
| Paul W. Thompson     |       | 0                                        |       | 0                       |       | 2,604 / 9,489                                                                                             |       | 107,649 / 362,612                                                                              |       |
| Chris Hermann        |       | 0                                        |       | 0                       |       | 2,448 / 6,689                                                                                             |       | 101,200 / 255,613                                                                              |       |

 

----

(1)           Amounts shown are E.ON SAR’s.

 

12

----

 

**LONG-TERM INCENTIVE PLAN AWARDSTABLE**

**Long-Term Incentive Plan Awardsin 2004 Fiscal Year**

 

The following table provides information concerning awards ofperformance units made in fiscal year 2004 to the named executive officersunder the Long-Term Plan.

 
| **Name**             | ** ** | **Number  of Shares,  Units or  Other  Rights** | ** ** | **Performance or  Other Period  Until  Maturation  Or Payout** | ** ** | **Estimated Future Payouts under  Non-Stock Price Based Plans  (number of units)** | ** ** |
|----------------------|------------|-------------------------------------------------|------------|----------------------------------------------------------------|------------|------------------------------------------------------------------------------------|------------|
| **Threshold(#)**     | ** ** | **Target(#)**                                   | ** ** | **Maximum(#)**                                                 |
| ** **           | ** ** | ** **                                      | ** ** | ** **                                                     | ** ** | ** **                                                                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| Victor A.  Staffieri |       | 883,619                                         |       | 12/31/2006                                                     |       | 441,810                                                                            |       | 883,619 |   | 1,325,429 |   |
| John R. McCall       |       | 306,712                                         |       | 12/31/2006                                                     |       | 153,356                                                                            |       | 306,712 |   | 460,068 |   |
| S. Bradford  Rives   |       | 199,200                                         |       | 12/31//2006                                                    |       | 99,600                                                                             |       | 199,200 |   | 298,800 |   |
| Paul W. Thompson     |       | 167,499                                         |       | 12/31/2006                                                     |       | 83,750                                                                             |       | 167,499 |   | 251,249 |   |
| Chris Hermann        |       | 118,084                                         |       | 12/31/2006                                                     |       | 59,042                                                                             |       | 118,084 |   | 177,126 |   |

 

Each performance unit awarded under the Long-Term Planrepresented the right to receive an amount payable in cash on the date ofpayout. The amount of the payout is determined by company performance over athree-year cycle. For awards made in 2004, the Long-Term Plan awards wereintended to reward executives on a three-year rolling basis dependent upon theachievement of a value-added target by LG&E Energy.

 

13

----

 

**Pension Plans**

 

The following table shows the estimated pensionbenefits payable to a covered participant at normal retirement age underLG&E Energy’s qualified defined benefit pension plans, as well asnon-qualified supplemental pension plans that provide benefits that wouldotherwise be denied participants by reason of certain Internal Revenue Codelimitations for qualified plan benefits, based on the remuneration that iscovered under the plan and years of service with LG&E Energy and itssubsidiaries:

 

# **2004PENSION PLAN TABLE**

 
| ** **       | ** ** | **Years of  Service** | ** ** |
|------------------|------------|-----------------------|------------|
| **Remuneration** | ** ** | **15**                | ** ** | **20** | ** ** | **25** | ** ** | **30 or more** | ** ** |
|             |       |                  |       |   |   |   |   |   |   |
| $                | 100,000    |                  | $          | 42,592 |   | $ | 42,592 |   | $ | 42,592 |   | $ | 42,592 |   |
| $                | 200,000    |                  | $          | 106,592 |   | $ | 106,592 |   | $ | 106,592 |   | $ | 106,592 |   |
| $                | 300,000    |                  | $          | 170,592 |   | $ | 170,592 |   | $ | 170,592 |   | $ | 170,592 |   |
| $                | 400,000    |                  | $          | 234,592 |   | $ | 234,592 |   | $ | 234,592 |   | $ | 234,592 |   |
| $                | 500,000    |                  | $          | 298,592 |   | $ | 298,592 |   | $ | 298,592 |   | $ | 298,592 |   |
| $                | 600,000    |                  | $          | 362,592 |   | $ | 362,592 |   | $ | 362,592 |   | $ | 362,592 |   |
| $                | 700,000    |                  | $          | 426,592 |   | $ | 426,592 |   | $ | 426,592 |   | $ | 426,592 |   |
| $                | 800,000    |                  | $          | 490,592 |   | $ | 490,592 |   | $ | 490,592 |   | $ | 490,592 |   |
| $                | 900,000    |                  | $          | 554,592 |   | $ | 554,592 |   | $ | 554,592 |   | $ | 554,592 |   |
| $                | 1,000,000  |                  | $          | 618,592 |   | $ | 618,592 |   | $ | 618,592 |   | $ | 618,592 |   |
| $                | 1,100,000  |                  | $          | 682,592 |   | $ | 682,592 |   | $ | 682,592 |   | $ | 682,592 |   |
| $                | 1,200,000  |                  | $          | 746,592 |   | $ | 746,592 |   | $ | 746,592 |   | $ | 746,592 |   |
| $                | 1,300,000  |                  | $          | 810,592 |   | $ | 810,592 |   | $ | 810,592 |   | $ | 810,592 |   |
| $                | 1,400,000  |                  | $          | 874,592 |   | $ | 874,592 |   | $ | 874,592 |   | $ | 874,592 |   |
| $                | 1,500,000  |                  | $          | 938,592 |   | $ | 938,592 |   | $ | 938,592 |   | $ | 938,592 |   |
| $                | 1,600,000  |                  | $          | 1,002,592 |   | $ | 1,002,592 |   | $ | 1,002,592 |   | $ | 1,002,592 |   |
| $                | 1,700,000  |                  | $          | 1,066,592 |   | $ | 1,066,592 |   | $ | 1,066,592 |   | $ | 1,066,592 |   |
| $                | 1,800,000  |                  | $          | 1,130,592 |   | $ | 1,130,592 |   | $ | 1,130,592 |   | $ | 1,130,592 |   |
| $                | 1,900,000  |                  | $          | 1,194,592 |   | $ | 1,194,592 |   | $ | 1,194,592 |   | $ | 1,194,592 |   |

 

A participant’s remuneration covered by the RetirementIncome Plan (the “Retirement Income Plan”) is his or her average base salaryand short-term incentive payment (as reported in the Summary CompensationTable) for the five calendar plan years during the last ten years of theparticipant’s career for which such average is the highest. The years ofservice for each named executive employed by LG&E Energy at December 31,2004 were as follows:  12 years for Mr. Staffieri;10 years for Mr. McCall; 21 years for Mr. Rives; 13 years for Mr. Thompson;and 34 years for Mr. Hermann. Benefits shown are computed as a straightlife single annuity beginning at age 65.

 

Current Federal law prohibits paying benefits underthe Retirement Income Plan in excess of **$**165,000 peryear. Officers of LG&E Energy, LG&E and KU with at least one year ofservice with any company are eligible to participate in LG&E Energy’sSupplemental Executive Retirement Plan (the “Supplemental Executive RetirementPlan”), which is an unfunded supplemental plan that is not subject to the **$**165,000 limit. Presently, participants in the SupplementalExecutive Retirement Plan consist of all of the eligible officers of LG&EEnergy, LG&E and KU. This plan provides generally for retirement benefitsequal to 64% of average current earnings during the highest 36 consecutive monthsprior to retirement, reduced by Social Security benefits, by amounts receivedunder the Retirement Income Plan and by benefits from other employers. As withall other officers, Mr. Staffieri participates in the SupplementalExecutive Retirement Plan described above.

 

14

----

 

Estimated annual benefits to be received under theRetirement Income Plan and the Supplemental Executive Retirement Plan uponnormal retirement at age 65 and after deduction of Social Security benefitswill be $803,702 for Mr. Staffieri; $375,678 for Mr. McCall; $294,765for Mr. Rives; $254,564 for Mr. Thompson; and $231,544 for Mr. Hermann.

 

**EMPLOYMENT CONTRACTS ANDTERMINATION OF EMPLOYMENT**

**ARRANGEMENTS AND CHANGE INCONTROL PROVISIONS**

 

In connection with the E.ON-Powergen merger, Messrs. Staffieriand McCall entered into amendments to their employment and severance agreements and Mr. Staffieri entered intoa further amendment in early 2004.  Theoriginal agreements, effective upon the LG&E Energy-Powergen merger for twoyear terms, contained change in control provisions and the benefits describedbelow.  Pursuant to the amendedagreements, Mr. Staffieri received certain retention payments during 2003and 2004 described in the Compensation Report and the Summary CompensationTable.

 

Under the terms of his revised employment andseverance agreement, Mr. Staffieri was entitled to additional retentionspayment of $800,570, plus interest, on each of July 1, 2004 and January 1,2005 (the two year and thirty month anniversaries of the E.ON-Powergen merger),which was initially to be credited into a deferred compensation account andwhich was then payable in a lump sum in cash.  If during the term of hisagreement, which is automatically extended for subsequent one year terms unlessterminated upon 90 days notice, and within twenty four months following achange in control, Mr. Staffieri’s employment is terminated for reasonsother than cause, disability or death, or for good reason, Mr. Staffierishall be entitled to a severance amount equal to 2.99 times the sum of (1) hisannual base salary and (2) his bonus or “target” award paid orpayable.  If during the term of his agreement but prior to a change incontrol, Mr. Staffieri’s employment is terminated for reasons other thancause, disability or death, or for good reason, Mr. Staffieri will beentitled an amount equal to two times his annual base salary and target annualbonus.

 

Under the terms of his revised employment andseverance agreement, on July 1, 2004, Mr. McCall received a lump sumcash payment equal to his annual salary plus target annual bonus.  Ifduring the term of his agreement, which is automatically extended forsubsequent one year terms unless terminated upon 90 days notice, and withintwenty four months following a change in control or within forty-eight monthsof the E.ON-Powergen merger, Mr. McCall’s employment is terminated forreasons other than cause, disability or death, or for good reason, Mr. McCallshall be entitled to a severance amount equal to 2.99 times the sum of (1) hisannual base salary and (2) his bonus or “target” award paid or payable,or, if within 48 months of the date of the E.ON-Powergen merger, 2.99 times thesum of (1) and (2).

 

During 2002, in connection with the E.ON-Powergenmerger, Messrs. Thompson, Rives and Hermann entered into new retentionagreements under which these officers were entitled to a payment equal to thesum of (1) his annual base salary and (2) his annual bonus or “target”award, in the event of their continued employment through the secondanniversary of the E.ON-Powergen merger.  During 2001, Messrs. Thompson,Rives and Hermann also entered into change of control agreements with terms of24 months, with automatic one year renewals if not terminated, which providethat, in the event of termination of employment for reasons other than cause,disability or death, or for good reason within the 24 months following a changein control, these officers shall be entitled to a severance amount equal to2.99 times the sum of (1) his annual base salary and (2) his bonus or“target” award paid or payable.

 

Pursuant to the employment and change in controlagreements, payments may be made to executives which would equal or exceed anamount which would constitute a nondeductible payment pursuant to Section 280Gof the Code, if any. Additionally, executives receive continuation of certain welfare benefits and payments in respectof accrued but unused vacation days and for out-placement assistance. A changein control encompasses certain merger and acquisition events, changes in boardmembership and acquisitions of voting securities.

 

15

----

 

# **EQUITYCOMPENSATION PLAN INFORMATION**

# ** **

The executive officers of LG&E and KU do notparticipate in any compensation plans under which equity securities ofLG&E, KU or any affiliate are authorized for issuance.

 

16

----

 

# **Reporton 2004 Audit Committee Matters**

# ** **

The Boards ofDirectors, consisting of five members, performed the functions of the AuditCommittee (“Audit Committee”). The Audit Committee is governed by a charteradopted by the Board of Directors, which sets forth the responsibilities of theAudit Committee members.  The AuditCommittee held four meetings during 2004.

 

The financial statements of Louisville Gas and Electric Company andSubsidiary and of Kentucky Utilities Company and Subsidiary are prepared bymanagement, which is responsible for their objectivity and integrity.  With respect to the financial statements forthe calendar year ended December 31, 2004, the Audit Committee reviewedand discussed the audited financial statements and the quality of the financialreporting with management and the independent registered public accounting firm.  It also discussed with the independent registeredpublic accounting firm the matters required to be discussed by Statement onAuditing Standards No. 61, *Communication with AuditCommittees,* as amended, and received and discussed with theindependent registered public accounting firm the matters in the writtendisclosures required by Independence Standards Board Standard No. 1, *Independence Discussions with Audit Committees*.

 

Based upon the reviews and discussions referred to above, the AuditCommittee recommended to the Board of Directors the inclusion of the auditedfinancial statements in Louisville Gas and Electric Company’s and KentuckyUtilities Company’s Annual Report on Form 10-K for the year ended December 31,2004, for filing with the Securities and Exchange Commission.

 

The following information on independent audit fees and services isbeing provided in compliance with the Securities and Exchange Commission rules onauditor independence.

 

1.  PricewaterhouseCoopers LLPfees for the periods ended December 31, 2004 and December 31, 2003are as follows:  (Certain amounts for 2003have been reclassified to conform to 2004 presentation.)

 
| ** **                 | ** ** | **LG&E** | ** ** | **KU**   | ** ** |
|----------------------------|------------|--------------|------------|----------|------------|
| ** **                 | ** ** | **2004**     | ** ** | **2003** | ** ** | **2004** | ** ** | **2003** | ** ** |
|                       |       |         |       |     |       |   |   |   |   |
| **Audit  Fees**            |       |         |       |     |       |   |   |   |   |
| Audit Fees                 |       | $            | 188,333    |     | $          | 128,862 |   | $ | 188,333 |   | $ | 128,862 |   |
| Internal  Controls         |       | $            | 16,667     |     | $          | — |   | $ | 16,667 |   | $ | — |   |
| Comfort Letter  Procedures |       | $            | —     |     | $          | 51,154 |   | $ | 34,360 |   | $ | — |   |
| Regulatory Work            |       | $            | —     |     | $          | 4,665 |   | $ | — |   | $ | 4,665 |   |
| Total Audit Fees           |       | $            | 205,000    |     | $          | 182,681 |   | $ | 239,360 |   | $ | 133,527 |   |
|                       |       |         |       |     |       |   |   |   |   |
| **Audit-Related Fees**     |       |         |       |     |       |   |   |   |   |
| Pension Plan  Audits       |       | $            | 36,667     |     | $          | 17,200 |   | $ | 36,667 |   | $ | 9,000 |   |
| Total Audit-Related  Fees  |       | $            | 36,667     |     | $          | 17,200 |   | $ | 36,667 |   | $ | 9,000 |   |
|                       |       |         |       |     |       |   |   |   |   |
| **Tax  Fees**              |       |         |       |     |       |   |   |   |   |
| Sales Tax  Services        |       | $            | 11,200     |     | $          | — |   | $ | 4,480 |   | $ | — |   |
| Total Tax Fees             |       | $            | 11,200     |     | $          | — |   | $ | 4,480 |   | $ | — |   |
|                       |       |         |       |     |       |   |   |   |   |
| **All  Other Fees**        |       |         |       |     |       |   |   |   |   |
| Assorted Fees              |       | $            | 405        |     | $          | — |   | $ | 405 |   | $ | — |   |
| Total All Other  Fees      |       | $            | 405        |     | $          | — |   | $ | 405 |   | $ | — |   |

 

2.               The Audit Committeeconsidered whether the independent registered public accounting firm’s provisionof non-audit services is compatible with maintaining the registered publicaccounting firm’s independence.

 

3.               The Audit Committeehas been advised by PricewaterhouseCoopers LLP that hours expended on the auditengagement were entirely performed by PricewaterhouseCoopers’ personnel.

 

This report has been provided by the Board of Directors performing thefunctions of the Audit Committee.

 

Victor A. Staffieri, Chairman

John R. McCall

S. Bradford Rives

Paul W. Thompson

Chris Hermann

 

17

----

 

**SECTION 16(A) BENEFICIALOWNERSHIP REPORTING COMPLIANCE**

 

LG&E and KU have inplace procedures to assist its directors and officers in complying with Section 16(a) ofthe Exchange Act of 1934, which includes assisting the director or officer inpreparing forms for filing.   Based uponinformation provided to LG&E and KU by individual directors and officers,LG&E and KU believe that in respect of the year ended December 31, 2004,all filing requirements have been complied with.

 

**SHAREHOLDERPROPOSALS AND NOMINATIONS**

 

Under LG&E’s By-laws,shareholders intending to nominate a director for election at the annualmeeting must provide advance written notice. In general, such notice must bereceived by the Secretary of LG&E (a) not less than 90 days priorto the meeting date or (b) if the meeting date is not publicly announcedmore than 100 days prior to the meeting, by the tenth day following suchannouncement. Under KU’s s By-laws, shareholders intending to nominate a directorfor election at the annual meeting must provide advance written notice. Ingeneral, such notice must be received by the Secretary of KU (a) not lessthan 60 days prior to the meeting date or (b) if the meeting date isnot publicly announced more than 70 days prior to the meeting, by thetenth day following such announcement.

 

To be proper, writtennotice must generally include (a) the name and address of the shareholderand of each nominee, (b) a representation that the shareholder is a holderof record entitled to vote at such meeting and intends to appear in person orby proxy, (c) a description of all arrangements between the shareholderand each nominee, (d) such other information regarding each nominee aswould be required to be included in a proxy statement under the Securities andExchange Commission rules had the nominee been nominated by the Board and (e) theconsent of the each nominee to serve if elected.  LG&E shareholder proponents must alsoinclude the class and number of shares beneficially owned by the proponent.  Proposals not properly submitted will beconsidered untimely.

 

**SHAREHOLDERCOMMUNICATIONS**

 

Shareholders cancommunicate with the Boards by submitting a letter or writing addressed to adirector care of:  John R. McCall,Secretary, Louisville Gas and Electric Company/Kentucky Utilities Company, P.O. Box32102, 220 West Main Street, Louisville, KY 40232. The Secretary may initially review communications with directorsand transmit a summary to the directors, but has discretion to exclude fromtransmittal any communications that are commercial advertisements or otherforms of solicitation or individual service or billing complaints (although allcommunications are available to the directors upon request). The Secretary willforward to the directors any communications raising substantial issues.

 

Weencourage all directors to attend our annual meeting. Two of our five now-servingdirectors were in attendance at the LG&E and KU annual meeting in 2004.

 

18

----

 

**APPENDIX A**

 

**LOUISVILLE GAS AND ELECTRICCOMPANY**

**AND**

**KENTUCKY UTILITIES COMPANY**

 

**AUDIT COMMITTEE CHARTER**

**(Revised and Approved March 24,2005)**

 

# **Mission Statement**

# ** **

The AuditCommittee (the “Committee”) is a Committee, respectively, of the Boards ofDirectors (each, separately, the “Board”) of Louisville Gas and ElectricCompany and of Kentucky Utilities Company (each, separately, the “Company”).  Its primary function is to assist the Boardin fulfilling its oversight responsibilities by reviewing the integrity andinternal controls over the Company’s financial reporting process, and othersystems of internal controls which management and the Board of Directors haveestablished; the independence and performance of the independent accountant andthe Audit Services function; and the process for monitoring compliance with theCode of Business Conduct and the Code of Ethics for the Chief Executive Officer(CEO) and Senior Financial Officers.  Although operating as a combined Committee, actions of the Committeerelated to an individual Company only are applicable to such Company only, asappropriate.

 

## **Composition**

 

The Committee will be composed of at least three members of the Boardof Directors who shall serve at the pleasure of the Board. At least one memberof the Committee shall be designated as a financial expert. In the event thatthe Board of Directors does not appoint a Committee, the functions of theCommittee shall be performed by the Board of Directors or its members.

 

Audit Committee members will be appointed by the Board of Directors.One of the members will be designated as the Committee’s Chairman.  The Chairman will preside over the Committeemeetings and report Committee actions to the Board of Directors.

 

## **Meetings**

 

The Committee will meet on a regular basis, but not less thanquarterly, and will call special meetings as circumstances require.  It will meet privately, as necessary, withthe Director of Audit Services and the independent public accountant inseparate executive sessions to discuss any matters that the Committee, theDirector of Audit Services, or the independent accountant believe should bediscussed privately. The Committee may ask members of management or others toattend meetings and provide pertinent information, as necessary.

 

19

----

 

**Responsibilities**

 

1.               Providean open avenue of communication between the internal auditors, the independentaccountant, and the Board of Directors.

 

2.               Reviewand update, where appropriate, the Committee’s charter annually.

 

3.               Recommendto the Board of Directors on an annual basis the independent accountant to benominated, approve the compensation of the independent accountant, and reviewand approve the discharge of the independent accountant.  The independent accountant is ultimatelyresponsible to the Board of Directors and the Audit Committee.

 

4.               Pre-approve theaudit and non-audit services performed by the independent accountant asprescribed under the Sarbanes-Oxley Act of 2002, and related regulations of theSecurities and Exchange Commission.

 

5.               Review and concurin the appointment, replacement, reassignment or dismissal of the Director ofAudit Services.

 

6.               Requirethe independent accountant to submit to the Committee on a periodic basis aformal written statement regarding independence of such independent accountantand all facts and circumstances relevant thereto; discuss with the independentaccountant its independence; confirm and assure the independence of the AuditServices Department and the independent accountant, including a review ofmanagement consulting services and related fees provided by the independentaccountant; and recommend to the Board of Directors actions necessary to ensureindependence of the Audit Services Department and the independent accountant.Ascertain that the lead audit partner for the independent accountant(s) servesin that capacity for no more than five years. In addition, ascertain that anypartner other than the lead or concurring partner serves no more than sevenyears at the partner level on the Company’s audit.

 

7.               Monitor the Company’spractices relative to the hiring of current or former employees of theindependent accountant.

 

8.               Inquire ofmanagement, the Director of Audit Services, and the independent accountantabout significant risks or exposures, assess the steps management has taken tominimize such risk to the Company, and periodically review compliance with suchsteps.

 

9.               Approve the annualaudit plan, ensuring provisions are made for the monitoring of the independentaccountant’s services as required by the Audit Committee Pre-Approval Policy,and review the three-year plan of the internal auditing function. Review theindependent accountant’s proposed audit plan, including coordination with AuditServices’ annual audit plan.

 

10.         Review with the Directorof Audit Services and the independent accountant the coordination of auditeffort to assure completeness of coverage, reduction of redundant efforts, andthe effective use of audit resources.

 

11.         Consider with managementand the independent accountant the rationale for employing audit firms otherthan the principal independent accountant.

 

12.         Consider and review withthe independent accountant and the Director of Audit Services:

 

**a.**               The adequacy ofthe Company’s internal controls, including computerized information systemcontrols and security;

** **

b.              Any relatedsignificant issues identified by the independent accountant and Audit Services,together with management’s responses thereto;

 

20

----

 

c.               Material writtencommunications between the independent accountant and management, such as anymanagement letter or schedule of unadjusted audit differences; and

 

d.              Significantdeficiencies and/or material weaknesses in the internal controls over financialreporting identified during the process of management’s assessment of suchinternal controls or by the independent accountant in their testing ofmanagement’s assessment to determine the proper disposition of deficienciesand/or weaknesses identified.

 

13.         Review with managementand the independent accountant at the completion of the annual audit:

 

a.               The Company’sannual financial statements and related footnotes;

 

b.              The independentaccountant’s audit of the financial statements and the report thereon;

 

c.               The independentaccountant’s judgement about the quality and appropriateness of the Company’saccounting principals as applied to its financial reporting;

 

d.              Any significantchanges required in the independent accountant’s audit plan and scope;

 

e.               Any seriousdifficulties or disputes with management encountered during the course of theaudit; and

 

f.                 Other mattersrelated to the conduct of the audit which are to be communicated to theCommittee under generally accepted auditing standards.

 

14.         Review with managementsuch appropriate notices or reports as may be required to be filed on behalf ofthe Committee with the regulatory authorities, exchanges or included in theCompany’s proxy materials or otherwise, pursuant to law or exchangeregulations. Review with management and the independent accountant the effectof any regulatory and accounting initiatives, as well as off-balance sheetstructures, if any.

 

15.         Consider and review withmanagement and the Director of Audit Services:

 

a.               Any difficultiesencountered in the course of their audits, including any restrictions on thescope of their work or access to required information;

 

b.              Any significantchanges required in their audit plan;

 

c.               Any significantaudit findings and management’s responses thereto;

 

d.              The Audit ServicesDepartment budget, staffing, and staff qualifications;

 

e.               The Audit ServicesDepartment charter; and

 

f.                 Audit Services’compliance with the Institute of Internal Auditors’ Standards for theProfessional Practice of Internal Auditing.

 

16.         Provide oversight of theCompany’s Code of Business Conduct, Code of Ethics for the CEO and SeniorFinancial Officers, and anti-fraud programs. The Committee’s oversight roleincludes:

 

a.               Periodic review,reassessment, and approval of the Company’s Code of Business Conduct and Codeof Ethics for the CEO and Senior Financial Officers;

 

b.              A review, with theDirector of Audit Services, of the results of the annual Code of BusinessConduct questionnaire;

 

21

----

 

c.               Creation,maintenance, and review of procedures for:

 

i.                                          Receipt,retention, and treatment of complaints received by the Company  regarding accounting, internal accountingcontrols, or auditing matters that may be submitted by any party internal orexternal to the organization;

 

ii.                                       Confidential,anonymous submissions by employees of concerns regarding questionableaccounting or auditing matters; and

 

iii.                                    Reviewof any complaints received for appropriate, timely follow-up and resolution bymanagement.

 

17.         Review the results of anyaudits of officers’ expense reimbursements, perquisites, and officer use ofcorporate assets by Audit Services or the independent accountant.  As considered necessary by the Committee,review policies and procedures governing these areas.

 

18.         Review legal andregulatory matters that may have a material impact on the financial statements,related Company compliance policies and programs, and reports received from regulators.

 

19.         Report Committee actionsto the Board of Directors with such recommendations as the Committee may deemappropriate.

 

20.         Conduct or authorizeinvestigations into any matters within the Committee’s scope ofresponsibilities, and retain independent counsel, accountants or others toassist it in the conduct of any investigation.

 

21.         Conduct a periodic reviewof the Committee’s effectiveness and performance.

 

22.         Assume such other dutiesand considerations as may be delegated to the Committee by the Board ofDirectors, or required of the Committee upon the request of the Board ofDirectors from time to time pursuant to a duly adopted resolution of the Boardof Directors.

 

22

----