**Exhibit 99.02**

 

**LOUISVILLE GAS AND ELECTRIC COMPANYANDKENTUCKY UTILITIES COMPANYDIRECTOR AND OFFICER INFORMATION**

 

The outstanding stock ofLouisville Gas and Electric Company (“LG&E”) is divided into three classes:Common Stock, Preferred Stock (without par value), and Preferred Stock, parvalue **$**25 per share. At the closeof business on February 27, 2004, the following shares of four series of suchclasses 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   |   | 237,500 shares    |   |
| Auction Series A (stated value **$**100 per share)      |   | 500,000 shares    |   |

 

The outstanding stock ofKentucky Utilities Company (“KU”) is divided into three classes: Common Stock,without par value, Preferred Stock, without par value, and Preference Stock,without par value. As of the close of business on February 27, 2004, thefollowing shares of three series of such classes were outstanding:

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

 

All of the outstandingLG&E Common Stock and KU Common Stock is owned by LG&E Energy LLC(“LG&E Energy”). Based on information contained in a Schedule 13Goriginally filed with the Securities and Exchange Commission in October 1998,AMVESCAP PLC, a parent holding company, reported certain holdings in excess offive percent of LG&E’s Preferred Stock. AMVESCAP PLC, with offices at 1315Peachtree Street, N.W., Atlanta, Georgia 30309, and certain of its subsidiariesreported sole voting and dispositive power as to no shares and shared votingand dispositive power as to 43,000 shares of LG&E Preferred Stock, withoutpar value, **$**5.875 Series,representing 17.2% of that class of Preferred Stock. The reporting companiesindicated that they hold the shares on behalf of other persons who have theright to receive or the power to direct the receipt of dividends or theproceeds of sales of the shares. No other persons or groups are known bymanagement to be beneficial owners of more than five percent of LG&E’sPreferred Stock.

 

As of February 27, 2004, alldirectors, nominees for director and executive officers of LG&E and KU as agroup beneficially owned no shares of LG&E Preferred Stock or KU PreferredStock and less than 1% of E.ON AG shares.

 

On December 11, 2000, thenPowergen plc, a public limited company with registered offices in England and Wales(“Powergen”) completed its acquisition of LG&E Energy, the parentcorporation of LG&E and KU for cash of approximately **$**3.2 billion, or **$**24.85 per share of LG&E Energy common stock. Inconnection with such transaction, certain officers and directors of Powergenwere appointed to fill vacancies in the Board of Directors of LG&E and KUoccurring by resignation of prior directors. In January 2003, Powergen was reregistered as Powergen Limited.

 

On July 1, 2002, E.ON AG, aGerman corporation (“E.ON”), completed the acquisition of Powergen for cash ofapproximately 8.1 billion euros or 7.65 British pounds per Powergen ordinaryshare (equal to 30.60 British pounds per Powergen American Depository Share.)In connection with such transaction, certain officers or directors of E.ON andPowergen were appointed to fill vacancies in the Board of Directors of LG&Eand KU occurring by resignation of prior directors.

 

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

 

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**INFORMATION ABOUT DIRECTORS**

 

The number of members of theBoard of Directors of LG&E and KU is currently fixed at three, pursuant tothe Companies’ bylaws and resolutions adopted by the Boards of Directors.Generally, directors are elected at each year’s Annual Meeting to serve forone-year terms and to continue in office until their successors are elected andqualified.

 

Effective July 1, 2002, inconnection with the completion of the E.ON-Powergen acquisition, Sir FrederickCrawford, Dr. David K-P Li and Messrs. Nicholas P. Baldwin, SydneyGillibrand and David J. Jackson resigned as directors of LG&E andKU. Messrs. Victor A. Staffieri and Edmund A. Wallis continued asdirectors and Mr. Michael Söhlke was appointed to fill a vacancy. EffectiveJune 18, 2003, Edmund A. Wallis tendered his resignation, resulting in Boardsof two persons.  On November 3, 2003,Dr. Hans Michael Gaul was appointed to fill this vacancy and Messrs. JohnR. McCall and S. Bradford Rives were also appointed directors.  At this time, the Boards also adopted orratified actions, including an amendment to the LG&E bylaws to reduce thequorum requirement to one-third the number of directors to permit moreefficient administration of that board. Following this action, Messrs. McCall and Rives tendered theirresignations.  At their 2003 AnnualMeetings held on December 16, 2003, LG&E’s and KU’s shareholders eachapproved amendments previously recommended by the Boards which reduce therequired number of directors from nine to three and eliminated staggered termsfor directors.

 

Effective January 31, 2004,Dr. Gaul and Mr. Söhlke resigned from the Boards of LG&E and KU and Messrs.McCall and Rives were appointed to fill the vacancies created thereby.

 

The following containscertain information as of February 27, 2004 concerning the directors ofLG&E and KU:

 

# **Directors with Terms Expiring atthe 2005 Annual Meeting of Shareholders**

 

***Victor A. Staffieri*****(Age 48):**       Mr. Staffieri is Chairman, President and Chief Executive Officer ofLG&E Energy, LG&E and KU, serving from April 2001 to the present. Heserved as President and Chief Operating Officer of LG&E Energy, LG&Eand KU from February 1999 to April 2001; Chief Financial Officer of LG&EEnergy and LG&E, May 1997 to February 2000; Chief Financial Officer of KU,May 1998 to February 2000. President, Distribution Services Division ofLG&E Energy, December 1995 to May 1997; Senior Vice President, General Counseland Public Policy of LG&E Energy and LG&E from November 1992 toDecember 1993. Mr. Staffieri has been a director of LG&E Energy,LG&E and KU since April 2001 and of Powergen from April 2001 until January2004.

 

***John R. McCall *****(Age 60):**          Mr. McCall is Executive Vice President,General Counsel and Secretary of LG&E Energy and Executive Vice President,General Counsel and Corporate Secretary of LG&E and KU.  Mr. McCall has held these positions atLG&E Energy (or its predecessor) and LG&E since July 1994 and at KUsince May 1998.  Mr. McCall has been adirector of LG&E and KU since January 2004.

 

***S. Bradford Rives*****(Age 45):****             **Mr. Rives is Chief Financial Officer ofLG&E Energy, LG&E and KU, serving from September 2003 until thepresent.  He served as Senior VicePresident - Finance and Controller of LG&E Energy, LG&E and KU fromDecember 2000 until September 2003; Senior Vice President - Finance andBusiness Development of LG&E Energy and LG&E from February 1999 toDecember 2000; and Vice President - Finance and Controller of LG&E Energyand LG&E from March 1996 to February 1999. Mr. Rives has been a director of LG&E and KU since January 2004.

 

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**INFORMATION CONCERNING THE BOARD OF DIRECTORS**

 

The Boards of Directors ofLG&E and KU contain the same members. Each member is also a director of LG&E Energy, as described above.

 

During 2003, there were a total of 18 meetings or consents of theLG&E and KU Boards. All directors attended 75% or more of the total numberof meetings or consents of the Board of Directors and committees of the Boardon which they served.

 

## **Compensation of Directors**

 

Directors who are alsoofficers of E.ON, Powergen, LG&E Energy or its subsidiaries receive nocompensation in their capacities as directors of LG&E and KU.

 

## **Committees**

 

There are currently no committees of the Boards of Directors of theCompanies.  Due to the small Board sizeof three members, the Board as a whole performs the functions related to auditor nominating committees.

 

In July 2002, uponcompletion of the E.ON-Powergen acquisition, the structures of the LG&E andKU Boards were changed to recognize practical and administrative efficiencies.The LG&E and 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) certain functionsof the former Remuneration Committee under certain LG&E Energy executivecompensation plans would be performed by the Senior Vice President - CorporateExecutive Human Resources of E.ON AG, currently Dr. Stefan Vogg.

 

**Audit andAuditor Matters**

 

During 2003, the Boards maintained direct and indirect contact with theindependent auditors and LG&E’s and KU’s internal Audit Services to reviewthe following matters pertaining to LG&E and KU:  the adequacy of accounting and financial reporting procedures;the adequacy and effectiveness of internal accounting controls; the scope andresults of the annual audit and any other matters relative to the audit of theCompanies’ accounts and financial affairs that the Board, Audit Services or theindependent auditors deemed necessary. A report of the Board acting as Audit Committee is included in the“Report of 2003 Audit Committee” section of this document.  A copy of the charter applicable to theBoard acting as Audit Committee is included as Appendix A of this document.

 

The Board is responsible for approving all audit and permissiblenon-audit services to be provided by the independent auditors in accordancewith LG&E’s and KU’s Pre-Approval Policy. Under the policy, the Board annually reviews and pre-approves theservices that may be provided by the independent auditor without obtainingspecific pre-approval from the Board.  These include audit services, audit-related services, tax servicesand some permissible non-audit services, up to designated fee or budgetlevels.  New services or services exceedingthese levels will require separate pre-approval by the Board.  Under the policy, the Board may delegatepre-approval authority to one or more of its members, subject to reporting ofany decisions by such member to the Board, or may rely upon certain annual orother pre-approvals by the E.ON AG Audit Committee under its policy, subject tocertain reporting to the Board.

 

**Nominations**

 

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

 

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**REPORT REGARDING REMUNERATION**

 

Following the July 1, 2002completion of E.ON’s acquisition of Powergen, the Remuneration Committee of theBoards of Directors of 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 describes the compensation policies applicable to theCompanies’ executive officers for the last completed fiscal year.

 

Prior to 2003, Dr. Vogg, inconsultation with certain officers of E.ON AG, Powergen, LG&E Energy,LG&E and KU, including members of the Companies’ Boards of Directors(collectively, the “Compensation Group”), arrived at decisions regarding thecompensation of LG&E’s and KU’s executive officers, including the settingof base pay levels for 2003, and the administration and determination of awardsunder the E.ON Group Stock Option Program (the “E.ON SAR Plan”) and theLG&E Energy Corp. Performance Unit Plan (the “Long-Term Plan”) and of paymentsunder the Short-Term Incentive Plan (the “Short-Term Plan”) as applicable toLG&E and KU.

 

The Companies’ executivecompensation program and the target awards and opportunities for executives aredesigned to be competitive with the compensation and pay programs of comparablecompanies, including utilities, utility holding companies and companies ingeneral industry, where appropriate. The executive compensation program hasbeen developed and implemented over time through consultation with, and uponthe recommendations of, recognized executive compensation consultants. TheCompensation Group and the Board of Directors have continued access to suchconsultants as desired, and are provided with independent compensation data fortheir review.

 

Set forth below is a reportaddressing LG&E’s and KU’s compensation policies during 2003 for theirofficers, including the executive officers named in the following tables. Inmany cases, the executive officers also serve in similar capacities foraffiliates of LG&E and KU, including LG&E Energy. For each of theexecutive officers of LG&E and KU, the policies and amounts discussed beloware for all services to LG&E, KU and their affiliates, during the relevantperiod.

 

**CompensationPhilosophy**

 

During 2003, LG&E’s and KU’s executive compensation program hadthree major components: (1) base salary; (2) short-term or annual incentives;and (3) long-term incentives. The Companies developed their executivecompensation program to focus on both short-term and long-term business objectivesthat are designed to enhance overall shareholder value. The short-term andlong-term incentives were premised on the belief that the interests ofexecutives should be closely aligned with those of the Companies’ 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 the Companies’ shareholders in both the short-term andlong-term.

 

The executive compensationprogram also recognized that the Companies’ compensation practices must becompetitive not only with utilities and utility holding companies, but alsowith companies in general industry to ensure that a stable and successfulmanagement team can be recruited and retained.

 

Pursuant to this competitivemarket positioning philosophy, in establishing compensation levels for allexecutive positions for 2003, the Compensation Group reviewed competitivecompensation information for United States general industry companies withrevenue of approximately $3 billion (the “Survey Group”) and establishedtargeted total direct compensation (base salary plus short-term incentives andlong-term incentives) for each executive for 2003 to generally approach the50th percentile of the competitive range from the Survey Group.  Salaries, short-term incentives andlong-term incentives for 2003 are described below.

 

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The 2003 compensationinformation set forth in other sections of this document, particularly withrespect to the tabular information presented, reflects the considerations setforth in this report. The Base Salary, Short-Term Incentives, and Long-TermIncentives sections that follow address the compensation philosophy for 2003for all executive officers except those serving as Chief Executive Officer.(See “Chief Executive Officer Compensation”).

 

## **Base Salary**

 

The base salaries forLG&E and KU executive officers for 2003 were designed to be competitivewith the Survey Group at approximately the 50th percentile of the base salaryrange for executives in similar positions with companies in the Survey Group.Actual base salaries were determined based on a combination of market position,individual performance and experience.

 

## **Short-Term Incentives**

 

The Short-Term Plan providedfor Company Performance Awards and Individual Performance Awards, each of whichis expressed as a percentage of base salary and each of which is determinedindependent of the other. The Compensation Group established the performancegoals for the Company Performance Awards and Individual Performance Awards atthe beginning of the 2003 performance year. Payment of Company PerformanceAwards for executive officers was based on varying performance measures tied toeach officer’s responsible areas. These measures and goals included, amongothers, LG&E Energy internal operating profit targets and LG&E/KUinternal operating profit targets.  TheCompensation Group retains discretion to adjust the measures and goals asdeemed appropriate. Payment of Individual Performance Awards was based 100% onmanagement effectiveness. As stated, the awards varied within the executiveofficer group based upon the nature of each individual’s functionalresponsibilities.

 

For 2003, the CompanyPerformance Award targets for named executive officers ranged from 29% to 42%of base salary, and the Individual Performance Award targets ranged from 20% to28% of base salary. Both awards were established to be competitive with the50th percentile of such awards granted to comparable executives employed bycompanies in the Survey Group. The individual officers were eligible to receivefrom 0% to 175% of their targeted Company Performance Award amounts, dependentupon Company performance as measured by the relevant performance goals, andwere eligible to receive from 0% to 175% of their targeted IndividualPerformance Award amounts dependent upon individual performance as measured bymanagement effectiveness.

 

Using the relevant E.ON,Powergen, LG&E Energy, LG&E/KU and other subsidiaries’ performanceagainst goals in 2003 and making adjustments for certain foreign currency rateeffects, the Compensation Group determined relative annual performance againsttargets for Company Performance Awards. Based upon this determination, CompanyPerformance Awards for 2003 to the named executive officers were paid rangingfrom 119% to 159% of target and 36% to 67% of base salary. Based ondeterminations of management effectiveness, payouts for Individual PerformanceAwards to the named executive officers ranged from 150% to 165% of target and30% to 48% of base salary.

 

## **Long-Term Incentives**

 

The Compensation Groupdetermines the competitive long-term grants under the Long-Term Plan and theE.ON SAR Plan to be awarded for each executive based on the long-term awardsfor the 50th percentile of the Survey Group. The aggregate expected value ofthe awards is intended to approach the expected value of long-term incentivespayable to executives in similar positions with companies in the 50thpercentile of the Survey Group, depending upon achievement of targeted Companyperformance.

 

In 2003, the CompensationGroup granted performance units under the Long-Term Plan to executive officersand senior management and stock appreciation rights (“SAR’s”) under the E.ONSAR Plan to executive officers.

 

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Theamounts of the executive’s long-term award to be delivered in SAR’s andperformance 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 theperformance unit can range from 0% to 150% of grant. Under the E.ON SAR Plan,the amount paid to executives when they exercise their SAR’s, aftersatisfaction of vesting and performance criteria, is the difference betweenE.ON’s stock price at the time of exercise and the stock price at the time ofissuance, multiplied by the number of SAR’s exercised.  The price at issuance is the average of theXETRA closing quotations for E.ON stock during the December prior toissuance.  The future value of the 2003grants of SAR's was substantially dependent upon the changing value of E.ONshares in the marketplace.

 

No SAR’s were exercisableduring 2003 as the two year vesting requirements had not been completed.   No regular payouts of performance unitsunder the Long-Term Plan occurred during 2003 as the three-year performanceperiods had not been completed.

 

## **Other**

 

In connection with theE.ON-Powergen merger, Messrs. Staffieri and McCall entered into amendments totheir employment and severance agreements and the other named officers enteredinto new retention and severance agreements.

 

## **Chief Executive OfficerCompensation**

 

Mr. Victor A. Staffieri wasappointed Chief Executive Officer of LG&E and KU effective May 1, 2001. Mr.Staffieri’s compensation was governed by the terms of an Employment andSeverance Agreement entered into on February 25, 2000 as amended (includingupon his appointment as Chief Executive Officer) (the “2000 Agreement”). The2000 Agreement was for an initial term of two years commencing on December 11,2000, with automatic annual extensions thereafter unless the Companies or Mr.Staffieri give notice of non-renewal.

 

The 2000 Agreementestablished the minimum levels of Mr. Staffieri’s base compensation, althoughthe Chairman of E.ON AG retains discretion to increase such compensation. Inthe first quarter of 2003, the Compensation Group established Mr. Staffieri’scompensation and long-term awards using comparisons to relevant officers ofcompanies in the Survey Group, including utilities, and survey data fromvarious compensation consulting firms. Mr. Staffieri also received Company contributionsto the savings plan, similar to those of other officers and employees. Detailsof Mr. Staffieri’s 2003 compensation are set forth below.

 

***Base Salary***.      Mr. Staffieri was paid a total base salary of**$**648,902 during 2003, pursuant tothe 2000 Agreement, as amended. The Compensation Group, in determining Mr.Staffieri’s 2003 annual salary, including the minimum, considered hisindividual performance in the prior growth of LG&E Energy and thecomparative compensation data described above.

 

***Short-Term Incentives***.      Mr. Staffieri’s short-term incentive targetaward as Chief Executive Officer was 70% of his 2003 base salary. As with otherexecutive officers receiving short-term incentive awards, Mr. Staffieri waseligible to receive more or less than the targeted amount, based on Companyperformance and individual performance. His 2003 short-term incentive payoutswere based 60% on achievement of Company Performance Award targets and 40% onachievement of Individual Performance Award targets.

 

For 2003, the CompanyPerformance Award payout for Mr. Staffieri was 158% of target and 67% of his2003 base salary and the Individual Performance Award payout was 170% of targetand 48% of his 2003 base salary.  Mr.Staffieri’s Company Performance Award

 

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wasbased on LG&E Energy internal operating profit.  His Company Performance Award was calculated based upon annualCompany performance as described under the heading “Short-Term Incentives.”  In determining the Individual PerformanceAward, the Compensation Group considered Mr. Staffieri’s effectiveness inseveral areas, including the financial and operational performance of LG&EEnergy, LG&E, KU and other subsidiaries, Company growth and other measures.

 

***Long-Term Incentive Grant***.      In 2003, Mr. Staffieri received 851,681performance units for the 2003-2005 performance period under the Long-Term Planand 25,282 SAR’s under the E.ON SAR Plan. These amounts were determinedpursuant to the terms of his 2000 Agreement, as amended, with an aggregateexpected value representing approximately 175% of his base salary. The terms ofthe performance units and SAR’s for Mr. Staffieri are the same as for otherexecutive officers, as described under the heading “Long-Term Incentives.”

 

***Long-Term Incentive Payout***.       As with other executive officers, no SAR’swere exercisable by Mr. Staffieri during 2003 as the two year vestingrequirements had not been completed.  Aswith other executive officers, no regular payouts of performance units underthe Long-Term Plan occurred during 2003 as the three-year performance periodshad not been completed.

 

***Other***.     In 2003, Mr. Staffieri also received a bonusin connection with a 2002 amendment to his employment and severance agreementin the amount of $837,375, including interest.

 

Members of the Companies’ Boards of Directors

 

Victor A. Staffieri

John R. McCall

S. Bradford Rives

 

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# **EXECUTIVE COMPENSATION AND OTHER INFORMATION**

 

The following table showsthe cash compensation paid or to be paid by LG&E, KU or LG&E Energy, aswell as certain other compensation paid or accrued for those years, to theChief Executive Officer and the next four highest compensated executiveofficers of LG&E and KU who were serving as such at December 31, 2003, asrequired, in all capacities in which they served LG&E Energy or itssubsidiaries during 2001, 2002 and 2003:

 

# **SUMMARY COMPENSATION TABLE**

 
|                                    |   |                     |   |            |   |           |   |                          |   | **Long-Term  Compensation**        |   |                                                 |   |
|-----------------------------------------|--------|--------------------------|--------|-----------------|--------|----------------|--------|-------------------------------|--------|------------------------------------|--------|------------------------------------------------------|--------|
|                                    |   |                     |   |            |   |           |   |                          |   | **Awards**                         |   | **Payouts**                                          |   |   |   |
|                                    |   |                     |   |            |   |           |   | **Other  Annual  Comp.  ($)** |   | **Restricted  Stock  Awards  ($)** |   | **Securities****Underlying  Options/SAR****(#) (1)** |   | **LTIP  Payouts  ($) (2)** |   | **All Other  Compen-  Sation  ($)** |   |
|                                    |   | **Annual  Compensation** |   |            |   |           |   |                          |
| **Name and  Principal Position**        |   | **Year**                 |   | **Salary  ($)** |   | **Bonus  ($)** |   |                          |   |                               |   |                                                 |
|                                    |   |                     |   |            |   |           |   |                          |
|                                    |   |                     |   |            |   |           |   |                          |   |                               |   |                                                 |   |   |   |   |   |
| Victor A. Staffieri                     |   | 2003                     |   | 648,902         |   | 741,340        |   | 39,461                        |   | —                             |   | 25,282                                               |   | 0 |   | 902,945 | (3) |
| Chairman of the Board,                  |   | 2002                     |   | 630,001         |   | 650,101        |   | 24,282                        |   | —                             |   | 6,250                                                |   | 1,483,377 |   | 2,433,735 | (4) |
| President and Chief Executive Officer   |   | 2001                     |   | 555,769         |   | 529,330        |   | 45,704                        |   | —                             |   | 51,011                                               |   | 0 |   | 1,811,703 | (5) |
|                                    |   |                     |   |            |   |           |   |                          |   |                               |   |                                                 |   |   |   |   |   |
| John R. McCall                          |   | 2003                     |   | 389,475         |   | 313,933        |   | 198,681                       | (6)    | —                             |   | 8,671                                                |   | 0 |   | 47,529 | (3) |
| Executive Vice President,               |   | 2002                     |   | 363,975         |   | 251,543        |   | 144,756                       | (6)    | —                             |   | 3,611                                                |   | 401,580 |   | 1,390,557 | (4) |
| General Counsel and Corporate Secretary |   | 2001                     |   | 383,365         |   | 242,104        |   | 8,732                         |   | —                             |   | 14,786                                               |   | 0 |   | 463,793 | (5) |
|                                    |   |                     |   |            |   |           |   |                          |   |                               |   |                                                 |   |   |   |   |   |
| S. Bradford Rives                       |   | 2003                     |   | 305,495         |   | 243,607        |   | 6,880                         |   | —                             |   | 5,345                                                |   | 0 |   | 423,923 | (3) |
| Chief Financial Officer                 |   | 2002                     |   | 280,019         |   | 180,145        |   | 6,616                         |   | —                             |   | 2,877                                                |   | 204,450 |   | 486,491 | (4) |
|                                    |   | 2001                     |   | 235,000         |   | 131,342        |   | 6,595                         |   | —                             |   | 7,554                                                |   | 0 |   | 390,335 | (5) |
|                                    |   |                     |   |            |   |           |   |                          |   |                               |   |                                                 |   |   |   |   |   |
| Paul W. Thompson                        |   | 2003                     |   | 269,071         |   | 187,526        |   | 7,232                         |   | —                             |   | 4,792                                                |   | 0 |   | 10,151 | (3) |
| Senior Vice President -                 |   | 2002                     |   | 262,497         |   | 147,944        |   | 8,106                         |   | —                             |   | 2,604                                                |   | 290,000 |   | 440,486 | (4) |
| Energy Services                         |   | 2001                     |   | 245,193         |   | 142,650        |   | 9,970                         |   | —                             |   | 10,714                                               |   | 0 |   | 436,152 | (5) |
|                                    |   |                     |   |            |   |           |   |                          |   |                               |   |                                                 |   |   |   |   |   |
| Chris Hermann                           |   | 2003                     |   | 252,928         |   | 166,267        |   | 4,905                         |   | —                             |   | 3,378                                                |   | 0 |   | 22,463 | (3) |
| Senior Vice President                   |   | 2002                     |   | 246,748         |   | 129,505        |   | 7,892                         |   | —                             |   | 2,448                                                |   | 204,450 |   | 228,722 | (4) |
| Energy Delivery                         |   | 2001                     |   | 234,999         |   | 131,342        |   | 12,122                        |   | —                             |   | 7,554                                                |   | 0 |   | 13,996 | (5) |

 

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(1)                                  Amounts for years2003 and 2002 reflect E.ON SAR Plan grants. Amounts for year 2001 reflect options for Powergen ADS’s.

 

(2)                                  No payouts weremade under the Long-Term Plan during years 2003 or 2002 as the three-yearperformance periods had not been completed. Amounts for year 2002 reflect acceleration of open performance periodsupon the change in control event resulting from the Powergen shareholders’approval of the E.ON transaction.

 

(3)                                  Includes employer contributions to 401(k)plan, nonqualified thrift plan, employer paid life insurance premiums, vacationsell back, and retention payments in 2003 as follows: Mr. Staffieri $6,000,$32,970, $26,600, $0 and $837,375, respectively; Mr. McCall $5,775, $13,680,$20,583, $7,491 and $0,  respectively;Mr. Rives $3,229, $11,478, $1,042, $4,618 and $403,556, respectively; Mr.Thompson, $2,688, $5,384, $2,078, $0 and $0, respectively; and Mr. Hermann,$5,732, $5,886, 5,981, $4,864 and $0, respectively.  The retention payments above are discussed in the “ReportRegarding Remuneration” and  “EmploymentContracts and Termination of Employment Arrangements and Change in ControlProvisions”.

 

(4)                                  Includes retention payments in 2002 asfollows: Mr. Staffieri, $2,349,170; Mr. McCall, $1,346,416; Mr. Rives, $87,746;Mr. Thompson, $425,926; and Mr. Hermann, $211,342, respectively.

 

(5)                                  Includes retention payments in 2001 asfollows: Mr. Staffieri, $1,719,884; Mr. McCall, $423,524; Mr. Rives, $382,393;Mr. Thompson, $405,860; and Mr. Hermann, $0, respectively.

 

(6)                                  Includes financialplanning, automobile, spouse travel, dues, overseas compensation and taxpayments 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.

 

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**OPTION/SAR GRANTS TABLE**

**Option/SAR Grants in 2003 Fiscal Year**

 

The followingtable contains information at December 31, 2003, with respect to grants of E.ONAG stock appreciation rights (SAR’s) to the named executive officers:

 
|                |   | **Individual  Grants**                                                |   |                                                                          |   |                                      |   |                 |   | **Potential  Realizable Value At  Assumed Annual  Rates of Stock  Price Appreciation  For Option Term** |       |    |   |
|---------------------|--------|-----------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|-------------------------------------------|--------|----------------------|--------|---------------------------------------------------------------------------------------------------------|------------|---------|--------|
|                |   | **Number of  Securities  Underlying  Options/SARs  Granted  (#) (1)** |   | **Percent of  Total  Options/SARs  Granted to  Employees in  Fiscal Year(2)** |   | **Exercise  Or Base  Price  ($/  Share)** |   | **Expiration  Date** |   |                                                                                                    | **10%($)** |    |
|                |   |                                                                  |   |                                                                          |   |                                      |   |
|                |   |                                                                  |   |                                                                          |   |                                      |   |
|                |   |                                                                  |   |                                                                          |   |                                      |   |
|                |   |                                                                  |   |                                                                          |   |                                      |   |
| **Name**            |   |                                                                  |   |                                                                          |   | **0%($)**                                 |   | **5% ($)**           |   |                                                                                                    |
|                |   |                                                                  |   |                                                                          |   |                                      |   |                 |   |                                                                                                    |       |    |   |   |   |
| Victor A. Staffieri |   | 25,282                                                                |   | 36.1                                                                          | %      | 43.99                                     |   | 12/31/2009           |   | 0                                                                                                       |       | 452,759 |   | 1,055,121 |   |
| John R. McCall      |   | 8,671                                                                 |   | 12.4                                                                          | %      | 43.99                                     |   | 12/31/2009           |   | 0                                                                                                       |       | 155,283 |   | 361,876 |   |
| S. Bradford Rives   |   | 5,345                                                                 |   | 7.6                                                                           | %      | 43.99                                     |   | 12/31/2009           |   | 0                                                                                                       |       | 95,720  |   | 223,069 |   |
| Paul W. Thompson    |   | 4,792                                                                 |   | 6.9                                                                           | %      | 43.99                                     |   | 12/31/2009           |   | 0                                                                                                       |       | 85,817  |   | 199,990 |   |
| Chris Hermann       |   | 3,378                                                                 |   | 4.8                                                                           | %      | 43.99                                     |   | 12/31/2009           |   | 0                                                                                                       |       | 60,494  |   | 140,978 |   |

 

----

 

(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)  Represents percentagegrants to LG&E Energy, LG&E and KU employees only.

 

10

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**OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE**

**Aggregated Option/SAR Exercises in 2003 Fiscal Year**

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

 

The following table sets forth informationwith respect to the named executive officers concerning the value ofunexercised E.ON SAR’s held by them as of December 31, 2003:

 
| **Name**            |   | **Shares  Acquired  On Exercise (#)(1)** |   | **Value  Realized  ($)** |   | **Number of  Securities  Underlying  Unexercised  Options/SARs  at FY-End (#)(2)  Exercisable/Unexercisable** |   | **Value of  Unexercised  In-The-Money  Options/SARs at FY-End  ($)  Exercisable/Unexercisable** |   |
|---------------------|--------|------------------------------------------|--------|--------------------------|--------|---------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|--------|
|                |   |                                     |   |                     |   |                                                                                                          |   |                                                                                            |   |
| Victor A. Staffieri |   | 0                                        |   | 0                        |   | 0 / 31,532                                                                                                    |   | 0 / $640,924                                                                                    |   |
| John R. McCall      |   | 0                                        |   | 0                        |   | 0 / 12,282                                                                                                    |   | 0 / $242,975                                                                                    |   |
| S. Bradford Rives   |   | 0                                        |   | 0                        |   | 0 / 8,222                                                                                                     |   | 0 / $160,049                                                                                    |   |
| Paul W. Thompson    |   | 0                                        |   | 0                        |   | 0 / 7,396                                                                                                     |   | 0 / $143,880                                                                                    |   |
| Chris Hermann       |   | 0                                        |   | 0                        |   | 0 / 5,826                                                                                                     |   | 0 / $111,088                                                                                    |   |

 

----

 

(1)           Amountsshown are E.ON SAR’s.  At December 31,2003, no E.ON SAR’s were exercisable due to the two year vesting period fromtheir 2002 or 2003 grant dates.

 

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**LONG-TERM INCENTIVE PLAN AWARDS TABLE**

**Long-Term Incentive Plan Awards in 2003 Fiscal Year**

 

The following table provides informationconcerning awards of performance units made in 2003 to the named executiveofficers under the Long-Term Plan.

 
|                |   | **Number  of Shares,  Units or  Other  Rights(1)** |   | **Performance  or  Other Period  Until  Maturation  Or Payout** |   | **Estimated  Future Payouts under  Non-Stock Price Based Plans  (number of shares) (1)** |   |
|---------------------|--------|----------------------------------------------------|--------|-----------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|
|                |   |                                               |   |                                                            |
|                |   |                                               |   |                                                            |
|                |   |                                               |   |                                                            |
| **Name**            |   |                                               |   | **Threshold(#)**                                                |   | **Target(#)**                                                                            |   | **Maximum(#)** |   |
|                |   |                                               |   |                                                            |   |                                                                                     |   |   |   |   |   |
| Victor A. Staffieri |   | 851,681                                            |   | 12/31/2005                                                      |   | 425,841                                                                                  |   | 851,681 |   | 1,277,522 |   |
| John R. McCall      |   | 292,106                                            |   | 12/31/2005                                                      |   | 146,053                                                                                  |   | 292,106 |   | 438,159 |   |
| S. Bradford Rives   |   | 180,090                                            |   | 12/31/2005                                                      |   | 90,045                                                                                   |   | 180,090 |   | 270,135 |   |
| Paul W. Thompson    |   | 161,445                                            |   | 12/31/2005                                                      |   | 80,723                                                                                   |   | 161,445 |   | 242,168 |   |
| Chris Hermann       |   | 113,816                                            |   | 12/31/2005                                                      |   | 56,908                                                                                   |   | 113,816 |   | 170,724 |   |

 

----

 

(1)            Amountsshown are awards of performance units under the Long-Term Plan during 2003.

 

Each performance unitawarded under the Long-Term Plan represented the right to receive an amountpayable in cash on the date of payout. The amount of the payout is determinedby the company performance over a three year cycle. For awards made in 2003,the Long-Term Plan awards were intended to reward executives on a three-yearrolling basis dependent upon the achievement of a value-added target byLG&E Energy.

 

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**PensionPlans**

 

The following table showsthe estimated pension benefits payable to a covered participant at normalretirement age under LG&E Energy’s qualified defined benefit pension plans,as well as non-qualified supplemental pension plans that provide benefits thatwould otherwise be denied participants by reason of certain Internal RevenueCode limitations for qualified plan benefits, based on the remuneration that iscovered under the plan and years of service with LG&E Energy and its subsidiaries:

 

**2003 PENSION PLAN TABLE**

** **
|             |      | **Years of Service** |   |
|------------------|-----------|----------------------|--------|
| **Remuneration** |      | **15**               |   | **20** |   | **25** |   | **30 or more** |   |
|             |      |                 |   |   |   |   |   |   |   |
| $                | 100,000   |                 | $      | 43,348 |   | $ | 43,348 |   | $ | 43,348 |   | $ | 43,348 |   |
| $                | 200,000   |                 | $      | 107,348 |   | $ | 107,348 |   | $ | 107,348 |   | $ | 107,348 |   |
| $                | 300,000   |                 | $      | 171,348 |   | $ | 171,348 |   | $ | 171,348 |   | $ | 171,348 |   |
| $                | 400,000   |                 | $      | 235,348 |   | $ | 235,348 |   | $ | 235,348 |   | $ | 235,348 |   |
| $                | 500,000   |                 | $      | 299,348 |   | $ | 299,348 |   | $ | 299,348 |   | $ | 299,348 |   |
| $                | 600,000   |                 | $      | 363,348 |   | $ | 363,348 |   | $ | 363,348 |   | $ | 363,348 |   |
| $                | 700,000   |                 | $      | 427,348 |   | $ | 427,348 |   | $ | 427,348 |   | $ | 427,348 |   |
| $                | 800,000   |                 | $      | 491,348 |   | $ | 491,348 |   | $ | 491,348 |   | $ | 491,348 |   |
| $                | 900,000   |                 | $      | 555,348 |   | $ | 555,348 |   | $ | 555,348 |   | $ | 555,348 |   |
| $                | 1,000,000 |                 | $      | 619,348 |   | $ | 619,348 |   | $ | 619,348 |   | $ | 619,348 |   |
| $                | 1,100,000 |                 | $      | 683,348 |   | $ | 683,348 |   | $ | 683,348 |   | $ | 683,348 |   |
| $                | 1,200,000 |                 | $      | 747,348 |   | $ | 747,348 |   | $ | 747,348 |   | $ | 747,348 |   |
| $                | 1,300,000 |                 | $      | 811,348 |   | $ | 811,348 |   | $ | 811,348 |   | $ | 811,348 |   |
| $                | 1,400,000 |                 | $      | 875,348 |   | $ | 875,348 |   | $ | 875,348 |   | $ | 875,348 |   |
| $                | 1,500,000 |                 | $      | 939,348 |   | $ | 939,348 |   | $ | 939,348 |   | $ | 939,348 |   |
| $                | 1,600,000 |                 | $      | 1,003,348 |   | $ | 1,003,348 |   | $ | 1,003,348 |   | $ | 1,003,348 |   |
| $                | 1,700,000 |                 | $      | 1,067,348 |   | $ | 1,067,348 |   | $ | 1,067,348 |   | $ | 1,067,348 |   |
| $                | 1,800,000 |                 | $      | 1,131,348 |   | $ | 1,131,348 |   | $ | 1,131,348 |   | $ | 1,131,348 |   |
| $                | 1,900,000 |                 | $      | 1,195,348 |   | $ | 1,195,348 |   | $ | 1,195,348 |   | $ | 1,195,348 |   |

 

A participant’s remunerationcovered by the Retirement Income Plan (the “Retirement Income Plan”) is his orher average base salary and short-term incentive payment (as reported in theSummary Compensation Table) for the five calendar plan years during the lastten years of the participant’s career for which such average is the highest.The years of service for each named executive employed by LG&E Energy atDecember 31, 2003 was as follows:  11years for Mr. Staffieri; 9 years for Mr. McCall; 20 years for Mr. Rives; 12years for Mr. Thompson; and 33 years for Mr. Hermann. Benefits shown arecomputed as a straight life single annuity beginning at age 65.

 

Current Federal lawprohibits paying benefits under the Retirement Income Plan in excess of **$**160,000 per year. Officers of LG&EEnergy, LG&E and KU with at least one year of service with an affiliatedcompany are eligible to participate in LG&E Energy’s Supplemental ExecutiveRetirement Plan (the “Supplemental Executive Retirement Plan”), which is anunfunded supplemental plan that is not subject to the **$**160,000 limit. Presently, participants inthe Supplemental Executive Retirement Plan consist of all of the eligibleofficers of LG&E Energy, LG&E and KU. This plan provides generally forretirement benefits equal to 64% of average current earnings during the highest36 consecutive months prior to retirement, reduced by Social Security benefits,by amounts received under the Retirement Income Plan and by benefits from otheremployers. As with all other officers, Mr. Staffieri participates in theSupplemental Executive Retirement Plan described above.

 

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Estimated annual benefits tobe received under the Retirement Income Plan and the Supplemental ExecutiveRetirement Plan upon normal retirement at age 65 and after deduction of SocialSecurity benefits will be $702,523 for Mr. Staffieri; $344,984 forMr. McCall; $251,425 for Mr. Rives; $241,419 for Mr. Thompson; and$208,324 for Mr. Hermann.

 

**EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT**

**ARRANGEMENTS AND CHANGE IN CONTROL PROVISIONS**

 

In connection with theE.ON-Powergen merger, Messrs. Staffieri and McCall entered into amendments totheir employment and severance agreements. The original agreements, effective upon the LG&E Energy-Powergenmerger for two year terms, contained change in control provisions and thebenefits described below.  Pursuant tothe amended agreements, Mr. Stafferi received certain retention payments in2003, as described in the Report Regarding Renumeration and the SummaryCompensation Table.

 

Under theterms of his revised employment and severance agreement, Mr. Staffieri isentitled to additional retention payments of $800,570, plus interest, on eachof July 1, 2004 and January 1, 2005, (the two year and thirty monthanniversaries of the E.ON-Powergen merger), which will initially be creditedinto a deferred compensation account and which will then be payable in a lumpsum in cash, if Mr. Staffieri elects, upon (i) a termination of employment(other than by Mr. Staffieri without good reason), (ii) a change in controlwithin 30 months of the E.ON-Powergen merger, or (iii) the respective firstyear, second year and thirty month anniversaries of the E.ON-Powergen merger,if Mr. Staffieri is still employed.  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, Mr. Staffieri’s employment isterminated for reasons other than cause, disability or death, or for goodreason, Mr. Staffieri shall be entitled to a severance amount equal to 2.99times the sum of (1) his annual base salary and (2) his bonus or “target” awardpaid or payable.  If during the term ofhis agreement but prior to a change in control, Mr. Staffieri’s employment isterminated for reasons other than cause, disability or death, or for goodreason, Mr. Staffieri will be entitled an amount equal to his annual base salaryand target annual bonus.

 

Under theterms of his revised employment and severance agreement, if Mr. McCall is (a)employed by LG&E Energy or LG&E or any of their affiliates on July 1,2004 or (b) terminated prior to July 1, 2004 for any reason other than by theemployer for cause or by Mr. McCall without good reason; then in each case Mr.McCall is entitled to receive a lump sum cash payment equal to his annualsalary 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 for reasonsother than cause, disability or death, or for good reason, Mr. McCall shall beentitled to a severance amount equal to 2.99 times the sum of (1) his annualbase salary and (2) his bonus or “target” award paid or payable, or, if within48 months of the date of the E.ON-Powergen merger, 2.99 times the sum of (1)and (2).

 

In 2003, Mr. Rives becameentitled to receive a scheduled retention payment of $355,078, plus interest,pursuant to the terms his retention agreement entered into at the time of thePowergen-LG&E Energy merger.  During2002, in connection with the E.ON-Powergen merger, Messrs. Thompson, Rives andHermann entered into new retention agreements under which these officers willbe entitled to a payment equal to the sum of (1) his annual base salary and (2)his annual bonus or “target” award, in the event of their continued employmentthrough the second anniversary of the E.ON-Powergen merger.  Messrs. Thompson, Rives and Hermann havealso entered into change of control agreements with terms of 24 months, whichprovide that, in the event of termination of employment for reasons other thancause, disability or death, or for good reason within the 24 months following achange in control, these officers shall be entitled to a severance amount equalto 2.99 times the sum of (1) his annual base salary and (2) his bonus or“target” award paid or payable.

 

Pursuant to the employmentand other agreements described above, payments may be made to executives whichwould equal or exceed an amount which would constitute a nondeductible paymentpursuant to Section 280G of the Code, if any. Additionally, executives receivecontinuation of certain welfare benefits and payments in respect of accrued butunused vacation days and for out-placement assistance. A change in control encompassescertain merger and acquisition events, changes in board membership andacquisitions of voting securities.

 

**EQUITY COMPENSATION PLAN INFORMATION**

 

The executiveofficers of LG&E and KU do not participate in any compensation plans underwhich equity securities of LG&E, KU or any affiliate are authorized forissuance.

 

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**Report on 2003 Audit Committee Matters**

 

The Board of Directors, consisting of threemembers, performed the functions of an Audit Committee (“Audit Committee”). TheAudit Committee is governed by a charter adopted by the Board of Directors,which sets forth the responsibilities of the Audit Committee members.  The Audit Committee held one meeting during2003.

 

The financial statements of Louisville Gasand Electric Company and Subsidiary and of Kentucky Utilities Company andSubsidiary are prepared by management, which is responsible for theirobjectivity and integrity.  With respectto the financial statements for the calendar year ended December 31, 2003, theAudit Committee reviewed and discussed the audited financial statements and thequality of the financial reporting with management and the independentaccountants.  It also discussed with theindependent accountants the matters required to be discussed by Statement onAuditing Standards No. 61, *Communicationwith Audit Committees,* as amended, and received and discussed withthe independent accountants the matters in the written disclosures required byIndependence Standards Board Standard No. 1, *IndependenceDiscussions with Audit Committees*.

 

Based upon the reviews and discussionsreferred to above, the Audit Committee recommended to the Board of Directorsthe inclusion of the audited financial statements in Louisville Gas and ElectricCompany’s and Kentucky Utilities Company’s Annual Report on Form 10-K for theyear ended December 31, 2003, for filing with the Securities and ExchangeCommission.

 

The following information on independentaudit fees and services is being provided in compliance with the Securities andExchange Commission rules on auditor independence.

 

1. PricewaterhouseCoopers LLP fees for the periods ended December 31, 2002and December 31, 2003 are as follows: (Certain amounts for 2002 have been reclassified to conform to 2003presentation.)

 

|                                   |   | **LG&E** |    | **KU**   |   |
|----------------------------------------|--------|--------------|---------|----------|--------|
|                                   |   | **2003**     |    | **2002** |   | **2003** |   | **2002** |   |
| •  Audit Fees                |   |         |    |     |   |   |   |   |   |
| •  Audit Fees                     |   | $            | 128,862 |     | $      | 47,500 |   | $ | 128,862 |   | $ | 47,500 |   |
| •  Regulatory Work           |   | $            | 4,665   |     | — |   | $ | 4,665 |   | — |   |
| •  Total Audit Fees          |   | $            | 131,527 |     | $      | 47,500 |   | $ | 133,527 |   | $ | 47,500 |   |
| •  Audit Related Fees        |   |         |    |     |   |   |   |   |   |
| •  Pension Plan Audits       |   | $            | 17,200  |     | $      | 17,000 |   | $ | 9,000 |   | $ | 8,600 |   |
| •  Comfort Letter Procedures |   | $            | 51,154  |     | $      | 69,270 |   | — |   | $ | 22,220 |   |
| •  Total Audit Related Fees  |   | $            | 68,354  |     | $      | 86,270 |   | $ | 9,000 |   | $ | 30,820 |   |
| •  Tax Fees                  |   | —       |    | —   |   | — |   | — |   |
|                                   |   |         |    |     |   |   |   |   |   |
| •  All Other Fees            |   | —       |    | —   |   | — |   | — |   |

 

2.     The Audit Committee considered whether theindependent accountant’s provision of non-audit services is compatible withmaintaining the accountant’s independence.

 

3.     The Audit Committee has been advised byPricewaterhouseCoopers LLP that hours expended on the audit engagement wereentirely performed by PricewaterhouseCoopers’ personnel.

 

This report has been provided by the Board ofDirectors performing the functions of the Audit Committee.

 

Victor A. Staffieri, Chairman

John R. McCall

S. Bradford Rives

 

15

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**SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING**

 

LG&E and KU have in place procedures to assist its directors andofficers in complying with Section 16(a) of the Exchange Act of 1934, whichincludes assisting the director or officer in preparing forms for filing.  However, due to administrative errorsarising from the transition from overseas directors to US-based directors, tworeports were filed late or omitted regarding personnel changes in November 2003and January 2004.  All such errorsrelated solely to entry or exit filings for individuals who had no holdings ofor transactions in LG&E or KU securities. Except as set forth above, based upon information provided to LG&Eand KU by individual directors and officers, LG&E and KU believe thatduring the year ended December 31, 2003, all filing requirements have otherwisebeen complied with.

 

**SHAREHOLDER PROPOSALS**

 

Under LG&E’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 LG&E (a) not lessthan 90 days prior to the meeting date or (b) if the meeting date is notpublicly announced more than 100 days prior to the meeting, by the tenth dayfollowing such announcement. Under KU’s s By-laws, shareholders intending tonominate a director for election at the annual meeting must provide advance writtennotice. In general, such notice must be received by the Secretary of KU (a) notless than 60 days prior to the meeting date or (b) if the meeting date is notpublicly announced more than 70 days prior to the meeting, by the tenth dayfollowing such announcement.

 

To be proper, written notice must generally include (a) the name andaddress of the stockholder and of each nominee, (b) a representation that thestockholder is a holder of record entitled to vote at such meeting and intendsto appear in person or by proxy, (c) a description of all arrangements betweenthe stockholder and each nominee, (d) such other information regarding eachnominee as would be required to be included in a proxy statement under theSecurities and Exchange Commission rules had the nominee been nominated by theBoard and (e) the consent of the each nominee to serve if elected.  LG&E proponents must also include theclass and number of shares beneficially owned by the proponent.  Proposals not properly submitted will beconsidered untimely.

 

**SHAREHOLDER COMMUNICATIONS**

 

Shareholders can communicate with our Boardby submitting a letter or writing addressed to a director care of:  John R. McCall, Secretary, Louisville Gasand Electric Company/Kentucky Utilities Company, P.O. Box 32102, 220 West MainStreet, Louisville, KY  40232. TheSecretary may initially review communications with directors and transmit asummary to the directors, but has discretion to exclude from transmittal anycommunications that are commercial advertisements or other forms ofsolicitation 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.

 

We encourage all directors to attend our annual meeting. Two of ourthree directors were in attendance at the annual meeting in 2003.

 

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**APPENDIX A**

 

**LOUISVILLE GAS AND ELECTRIC COMPANY**

**AND**

**KENTUCKY UTILITIES COMPANY**

 

**AUDIT COMMITTEE CHARTER**

 

**MissionStatement**

 

The Audit Committee (the “Committee”) is aCommittee, respectively, of the Boards of Directors (each, separately, the“Board”) of Louisville Gas and Electric Company and of Kentucky UtilitiesCompany (each, separately, the “Company”). Its primary function is to assist the Board in fulfilling its oversightresponsibilities by reviewing the financial information provided toshareholders and others, the systems of internal controls which management andthe Board of Directors have established and the audit process. Althoughoperating as a combined Committee, actions of the Committee related to anindividual Company only are applicable to such Company only, as appropriate.

 

**Composition**

 

The Committee will be composed of at leastthree members of the Board of Directors who shall serve at the pleasure of theBoard.  In the event that the Board ofDirectors does not appoint a Committee, the functions of the Committee shall beperformed by the Board of Directors or its members.

 

Audit Committee members will be appointed bythe Board of Directors. One of the members will be designated as theCommittee’s Chairman.  The Chairman willpreside over the Committee meetings and report Committee actions to the Boardof Directors.

 

**Meetings**

 

The Committee will meet on a regular basisand will call special meetings as circumstances require.  It will meet privately with the Director ofAudit Services and the independent public accountant in separate executivesessions to discuss any matters that the Committee, the Director of AuditServices, or the independent accountant believes should be discussed privately.The Committee may ask members of management or others to attend meetings andprovide pertinent information, as necessary.

 

**Responsibilities**

 

1.               Provide an open avenue of communicationbetween the internal auditors, the independent accountant, and the Board ofDirectors.

 

2.               Review and update, where appropriate, theCommittee’s charter annually.

 

3.               Recommend to the Board of Directors on anannual basis the independent accountant to be nominated, approve thecompensation of the independent accountant, and review and approve thedischarge of the independent accountant. The independent accountant is ultimately responsible to the Board of Directorsand the Audit Committee.

 

4.               Pre-approve the audit and non-audit servicesperformed by the independent accountant as prescribed under the Sarbanes-OxleyAct of 2002, and related regulations of the Securities and Exchange Commission.

 

5.               Review and concur in the appointment,replacement, reassignment or dismissal of the Director of Audit Services.

 

6.               Require the independent accountant to submitto the Committee on a periodic basis a formal written statement regardingindependence of such independent accountant and all facts and circumstancesrelevant thereto; discuss with the independent accountant its independence;confirm and assure the independence of the Audit Services

 

17

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Departmentand the independent accountant, including a review of management consultingservices and related fees provided by the independent accountant; and recommendto the Board of Directors actions necessary to ensure independence of the AuditServices Department and the independent accountant.

 

7.               Inquire of management, the Director of AuditServices, and the independent accountant about significant risks or exposuresand assess the steps management has taken to minimize such risk to the Company.

 

8.               Approve the annual audit plan and review thethree-year plan of the internal auditing function. Review the independentaccountant’s proposed audit plan, including coordination with Audit Services’annual audit plan.

 

9.               Review with the Director of Audit Servicesand the independent accountant the coordination of audit effort to assurecompleteness of coverage, reduction of redundant efforts, and the effective useof audit resources.

 

10.   Consider with management and the independentaccountant the rationale for employing audit firms other than the principalindependent accountant.

 

11.         Consider and review with the independentaccountant and the Director of Audit Services:

 

a.               The adequacy of the Company’s internalcontrols, including computerized information system controls and security, and

 

b.              Any related significant issues identified bythe independent accountant and Audit Services, together with management’sresponses thereto.

 

 

12.         Review with management and the independentaccountant at the completion of the annual audit:

 

a.               The Company’s annual financial statements andrelated footnotes;

 

b.              The independent accountant’s audit of thefinancial statements and the report thereon;

 

c.               The independent accountant’s judgment aboutthe quality and appropriateness of the Company’s accounting principals asapplied to its financial reporting;

 

d.              Any significant changes required in theindependent accountant’s audit plan and scope;

 

e.               Any serious difficulties or disputes withmanagement encountered during the course of the audit; and

 

f.                 Other matters related to the conduct of theaudit which are to be communicated to the Committee under generally acceptedauditing standards.

 

13.         Review with management such appropriatenotices or reports as may be required to be filed on behalf of the Committeewith the regulatory authorities, exchanges or included in the Company’s proxymaterials or otherwise, pursuant to law or exchange regulations.

 

14.         Consider and review with management and theDirector of Audit Services:

 

a.               Any difficulties encountered in the course oftheir audits, including any restrictions on the scope of their work or accessto required information;

 

b.              Any significant changes required in theiraudit plan;

 

c.               Any significant audit findings andmanagement’s responses thereto;

 

d.              The Audit Services Department staffing andstaff qualifications; and

 

18

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e.               The Audit Services Department charter.

 

15.         Review with the Director of Audit Servicesthe results of the annual Code of Business Conduct questionnaire.

 

16.   Review legal and regulatory matters that mayhave a material impact on the financial statements, related Company compliancepolicies and programs, and reports received from regulators.

 

17.   Report Committee actions to the Board ofDirectors with such recommendations as the Committee may deem appropriate.

 

18.   Conduct or authorize investigations into anymatters within the Committee’s scope of responsibilities, and retainindependent counsel, accountants or others to assist it in the conduct of anyinvestigation.

 

19.   Assume such other duties and considerationsas may be delegated to the Committee by the Board of Directors, or required ofthe Committee upon the request of the Board of Directors from time to timepursuant to a duly adopted resolution of the Board of Directors.

 

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