UNITED STATES  SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE ACT OF 1934

For
the fiscal year ended December 31, 2003

or

[ ] TRANSITION REPORT
PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES   EXCHANGE ACT OF 1934 For the transition
period from _______to_______

|Commission |  | Registrant, State of Incorporation, |  | I.R.S. Employer                  
|---------- |  | ----------------------------------- |  | ---------------------------------
|
|
|0-33207    |  |                                     |  | GREAT PLAINS ENERGY INCORPORATED 
|           |  |                                     |  | (A Missouri Corporation)         
|           |  |                                     |  | 1201 Walnut Street               
|           |  |                                     |  | Kansas City, Missouri 64106      
|           |  |                                     |  | (816) 556-2200                   
|           |  |                                     |  | www.greatplainsenergy.com        
|
|1-707      |  |                                     |  | KANSAS CITY POWER & LIGHT COMPANY
|           |  |                                     |  | (A Missouri Corporation)         
|           |  |                                     |  | 1201 Walnut Street               
|           |  |                                     |  | Kansas City, Missouri 64106      
|           |  |                                     |  | (816) 556-2200                   
|           |  |                                     |  | www.kcpl.com                     

Each of the following classes or
series of securities registered pursuant to Section 12(b) of the Act is registered on the
New York Stock Exchange:

|Registrant                       |  | Title of each class |  |                                                    
|-------------------------------- |  | ------------------- |  | ---------------------------------------------------
|Great Plains Energy Incorporated |  |                     |  | Cumulative Preferred Stock par value $100 per share
|                                 |  |                     |  | Cumulative Preferred Stock par value $100 per share
|                                 |  |                     |  | Cumulative Preferred Stock par value $100 per share
|                                 |  |                     |  | Common Stock without par value                     

Securities registered
pursuant to Section 12(g) of the Act.  None.

---

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YesX No ___

Indicate by check mark if disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. X

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.)
Great Plains Energy Incorporated YesX No ___     Kansas City Power &
Light Company Yes___  No X

The aggregate market value of the
voting and non-voting common equity held by non-affiliates of Great Plains Energy
Incorporated (based on the closing price of its common stock on the New York Stock
Exchange on June 30, 2003, was approximately $1,998,389,779. All of the common equity of
Kansas City Power & Light Company is held by Great Plains Energy Incorporated, an
affiliate of Kansas City Power & Light Company.

On March 5, 2004, Great Plains
Energy Incorporated had 69,258,755 shares of common stock outstanding. The aggregate
market value of the common stock held by nonaffiliates of Great Plains Energy Incorporated
(based upon the closing price of its common stock on the New York Stock Exchange on March
5, 2004) was approximately $2,444,141,464. On March 5, 2004, Kansas City
Power & Light Company had one share of common stock outstanding and held by Great
Plains Energy Incorporated.

Documents Incorporated by Reference

Portions of the 2004 Proxy Statement
of Great Plains Energy Incorporated to be filed with the Securities and Exchange
Commission are incorporated by reference in Part III of this report.

---

|TABLE OF CONTENTS
|-----------------
|
|
|                 
|                 
|PART I           
|Item 1           
|Item 2           
|Item 3           
|Item 4           
|PART II          
|Item 5           
|Item 6           
|Item 7           
|                 
|Item 7A          
|Item 8           
|                 
|                 
|                 
|                 
|                 
|                 
|                 
|                 
|                 
|                 
|                 
|                 
|                 
|                 
|                 
|Item 9           
|                 
|Item 9A          
|PART III         
|Item 10          
|Item 11          
|Item 12          
|Item 13          
|Item 14          
|PART IV          
|Item 15          

2

Great Plains Energy Incorporated and
Kansas City Power & Light Company separately file this combined Annual Report on Form
10-K. Information contained herein relating to an individual registrant and its
subsidiaries is filed by such registrant on its own behalf. Each registrant makes
representations only as to information relating to itself and its subsidiaries.

This report should be read in its
entirety. No one section of the report deals with all aspects of the subject matter.

CAUTIONARY STATEMENTS
REGARDING CERTAIN FORWARD-LOOKING INFORMATIONStatements made in this report
that are not based on historical facts are forward-looking, may involve risks and
uncertainties, and are intended to be as of the date when made. In connection with the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the
registrants are providing a number of important factors that could cause actual results to
differ materially from the provided forward-looking information. These important factors
include:

|  | 
|- | 
|o | 
|o | 
|o | 
|o | 
|  | 
|  | 
|o | 
|  | 
|o | 
|  | 
|o | 
|o | 
|o | 
|  | 
|o | 
|o | 
|  | 
|o | 
|o | 
|o | 
|o | 
|o | 
|o | 
|o | 
|o | 
|  | 
|o | 

This list of factors is
not all-inclusive because it is not possible to predict all factors.

3

GLOSSARY OF TERMS

The following is a
glossary of frequently used abbreviations or acronyms that are found throughout this
report:

|Abbreviation or Acronym | Definition
|----------------------- | ----------
|
|35 Act                  |           
|ABO                     |           
|AFDC                    |           
|APB                     |           
|ARB                     |           
|ARO                     |           
|Bracknell               |           
|CenturyTel              |           
|Clean Air Act           |           
|CO2                     |           
|COLI                    |           
|Compact                 |           
|Consolidated KCP&L      |           
|Custom Energy Holdings  |           
|Digital Teleport        |           
|DOE                     |           
|DTI                     |           
|                        |           
|EBITDA                  |           
|EIRR                    |           
|ELC                     |           
|EPA                     |           
|EPS                     |           
|ERISA                   |           
|FASB                    |           
|FERC                    |           
|FIN                     |           
|GAAP                    |           
|GPES                    |           
|GPP                     |           
|                        |           
|Great Plains Energy     |           
|Holdings                |           
|HSS                     |           
|IBEW                    |           
|IEC                     |           
|                        |           
|IRS                     |           
|ISO                     |           
|KCC                     |           
|KCP&L                   |           
|                        |           
|KLT Energy Services     |           
|KLT Gas                 |           
|KLT Gas portfolio       |           

4

|Abbreviation or Acronym | Definition
|----------------------- | ----------
|
|KLT Inc.                |           
|KLT Investments         |           
|KLT Telecom             |           
|KW                      |           
|kWh                     |           
|MAC                     |           
|MACT                    |           
|Medicare Act            |           
|MISO                    |           
|MODOR                   |           
|MPSC                    |           
|MW                      |           
|MWh                     |           
|NAAQS                   |           
|NEIL                    |           
|NERC                    |           
|NOx                     |           
|NRC                     |           
|OCI                     |           
|Receivables Company     |           
|                        |           
|RSAE                    |           
|RTO                     |           
|SEC                     |           
|Securities Trust        |           
|SE Holdings             |           
|Services                |           
|SFAS                    |           
|SIP                     |           
|SOP                     |           
|SPP                     |           
|Strategic Energy        |           
|WCNOC                   |           
|Wolf Creek              |           
|Worry Free              |           
|XLCA                    |           

5

PART I

# ITEM 1. BUSINESS

GeneralGreat Plains Energy Incorporated and
Kansas City Power & Light Company are separate registrants in this combined annual
report. The terms Great Plains Energy, Company,
KCP&L and consolidated KCP&L are used throughout this
report. Great Plains Energy and the Company refer to Great Plains
Energy Incorporated and its consolidated subsidiaries, unless otherwise indicated.
KCP&L refers to Kansas City Power & Light Company, and
consolidated KCP&L refers to KCP&L and its consolidated subsidiaries.

Great Plains EnergyGreat Plains Energy, a Missouri
corporation incorporated in 2001 and headquartered in Kansas City, Missouri, is a public
utility holding company registered with and subject to the regulation of the Securities
and Exchange Commission (SEC) under the Public Utility Holding Company Act of 1935 (35
Act). Through a corporate restructuring consummated on October 1, 2001, Great Plains
Energy became the parent company and sole owner of the common stock of KCP&L. Each
outstanding share of KCP&L stock was exchanged for a share of Great Plains Energy
stock. As a result, Great Plains Energy replaced KCP&L as the listed entity on the New
York Stock Exchange with the trading symbol GXP. In connection with the reorganization,
KCP&L transferred to Great Plains Energy its interest in two wholly owned
subsidiaries, KLT Inc. and Great Plains Power Incorporated (GPP).

Great Plains Energy does not own or
operate any significant assets other than the stock of its subsidiaries. Great Plains
Energys direct subsidiaries are KCP&L, KLT Inc., GPP, Innovative Energy
Consultants Inc. (IEC), and Great Plains Energy Services Incorporated (GPES).

| | o |  | KCP&L is described below.
| | - |  | -------------------------

| | o |  | KLT Inc. is an intermediate holding company that primarily holds, directly or indirectly,
interests in Strategic Energy, L.L.C. (Strategic Energy), KLT Gas Inc. (KLT Gas), and
affordable housing limited partnerships. Strategic Energy provides retail electricity
services in several electricity markets offering retail choice. KLT Gas explores for,
develops and produces unconventional natural gas resources, including coalbed methane
properties. In February 2004, the Company disclosed its intent to exit the gas business.
Effective the first quarter of 2004, Great Plains Energy will reflect KLT Gas as
discontinued operations in its consolidated financial statements. KLT Inc. indirectly held
a majority ownership in DTI Holdings, Inc. and its subsidiaries, Digital Teleport, Inc.
and digital Teleport of Virginia, Inc. (DTI). DTI filed voluntary petitions for bankruptcy
on December 31, 2001. DTI provided telecommunications access and connectivity to secondary
and tertiary markets. See Note 9 to the consolidated financial statements for further
information regarding DTI bankruptcy activities and status.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | GPP focuses on the development of wholesale generation. Management decided during 2002 to
limit the operations of GPP to the siting and permitting process that began in 2001 for
potential new generation until market conditions improve or the Company makes further
changes in its business strategy. The siting and permitting process is currently focused
on two potential new generation sites. GPP has made no significant investments to date.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | IEC is an intermediate holding
company that holds an indirect interest in Strategic Energy.
| | - |  | -------------------------------------------------------------------------------------------

| | o |  | GPES was formed in 2003 to provide services at cost to Great Plains Energy and certain of
its subsidiaries, including consolidated KCP&L, as a service company under the 35 Act.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

Strategy
Over the first six months of 2004,
the Company is engaging in a comprehensive strategic planning process to map its view of
the future of the electric industry, and ultimately the Company, over the next five to ten
years. This inclusive process draws on the creativity and skills of employees, outside
experts and people from the community.

Customer choice, regulatory change,
and energy market conditions significantly impact Great Plains Energys business. In
response, the strategic planning process will be conducted with these goals in mind: to
improve the Companys competitive position, to anticipate and adapt to business
environment and regulatory changes, and to maintain a strong balance sheet and
investment-grade credit quality.

The strategic planning process will
seek to enhance the disciplined growth of the Company and build upon the strong foundation
of KCP&L and Strategic Energy. This platform for growth provides a balanced mix of
regulated earnings from the utility operations of KCP&L and the potential continued
growth of Strategic Energy as it expands its presence in competitive retail markets.

KCP&L will continue to enhance
its competitive generation fleet and reliable transmission and distribution networks while
maintaining its focus on customer satisfaction, operational excellence and cost control.

Strategic Energy has a growing retail
business in competitive electricity supply offering services in approximately half of the
retail choice states to help commercial and industrial customers manage their electricity
procurement needs. Strategic Energy is targeting expansion into Connecticut and Maryland
in 2004, as well as expansion into additional utility territories in Ohio and Texas. The
Company believes competitive electricity markets will continue to expand over the next
decade. While the pace of new states offering retail choice has slowed, Strategic Energy
continues to grow in states it currently provides service in and expand into additional
states that currently offer retail choice.

In February 2004, the Great Plains
Energy Board of Directors approved managements recommendation to sell the KLT Gas
portfolio and exit the gas business. The Company evaluated this business and determined
the amount of capital and the length of time required for development of reserves and
production, combined with the earnings volatility of the exploration process, are no
longer compatible with the Companys strategic vision.

Consolidated KCP&L
KCP&L, a Missouri corporation
incorporated in 1922, is an integrated electric utility company serving retail customers
in the states of Missouri and Kansas. KCP&L has one wholly owned subsidiary, Home
Service Solutions Inc. (HSS), that holds a residential services investment, Worry Free
Services, Inc. (Worry Free). Worry Free is no longer actively pursuing new customers and
management does not anticipate any significant additional capital investments in Worry
Free. In June 2003, HSS completed the disposition of its interest in R.S. Andrews
Enterprises, Inc. (RSAE).

Recent DevelopmentsFor a discussion of recent events
that have impacted Great Plains Energy and consolidated KCP&L, please refer to their
respective sections in Item 7. Managements Discussion and Analysis.

Business Segments of
Great Plains Energy and KCP&LConsolidated KCP&Ls sole
reportable business segment is KCP&L. Great Plains Energy, through its direct and
indirect subsidiaries, has three reportable business segments: KCP&L, Strategic Energy
and KLT Gas. See Item 7. Managements Discussion and Analysis, KLT Gas section for
additional information regarding the Companys first quarter 2004 decision to exit
the gas business.

7

For information regarding the
revenues, income and assets attributable to the Companys reportable business
segments, see Note 16 to the consolidated financial statements, which is incorporated by
reference. Comparative financial information and discussion regarding the Companys
and KCP&Ls reportable business segments can be found in Item 7.
Managements Discussion and Analysis.

Regulation  GeneralGreat Plains Energy and its
subsidiaries are subject to certain limitations and approval requirements as a registered
holding company system under the 35 Act, with respect to matters such as the structure of
holding company systems, transactions among affiliates, acquisitions, business
combinations, the issuance, sale and acquisition of securities, and engaging in business
activities not directly related to the utility or energy business. Consistent with the
requirements under the 35 Act, Great Plains Energy formed a service company effective
April 1, 2003. The Company is required to submit reports providing detailed information
concerning the organization, financial structure and operations of Great Plains Energy and
its subsidiaries. Several proposals regarding the 35 Act have been introduced in Congress
in the past few years; however, the prospects for legislative reform or repeal are
uncertain at this time.

Other regulatory matters affecting
KCP&L, Strategic Energy and KLT Gas are described below in the discussion on each of
these reportable business segments.

Capital Program and
FinancingFor information on the Companys
and KCP&Ls capital program and financial needs, see Item 7. Managements
Discussion and Analysis, Capital Requirements and Liquidity section and Notes 17 and 18 to
the consolidated financial statements.

# 

KCP&L
KCP&L, headquartered in Kansas
City, Missouri, engages in the generation, transmission, distribution and sale of
electricity. KCP&L serves almost 490,000 customers located in all or portions of 24
counties in western Missouri and eastern Kansas. Customers include over 430,000
residences, over 55,000 commercial firms, and almost 2,500 industrials, municipalities and
other electric utilities. KCP&Ls retail revenues averaged 87% of its total
operating revenues over the last three years. Wholesale firm power, bulk power sales and
miscellaneous electric revenues accounted for the remainder of utility revenues. KCP&L
is significantly impacted by seasonality with over one-third of its retail revenues
recorded in the third quarter. KCP&Ls total electric revenues accounted for
approximately 49%, 54% and 66% of Great Plains Energys consolidated revenues in
2003, 2002 and 2001, respectively.

RegulationKCP&L is regulated by the
Missouri Public Service Commission (MPSC) and The State Corporation Commission of the
State of Kansas (KCC) with respect to retail rates, accounting matters, standards of
service and, in certain cases, the issuance of securities, certification of facilities and
service territories. KCP&L is classified as a public utility under the Federal Power
Act and accordingly, is subject to regulation by the Federal Energy Regulatory Commission
(FERC). By virtue of its 47% ownership interest in Wolf Creek Nuclear Generating Station
(Wolf Creek), KCP&L is subject to regulation by the Nuclear Regulatory Commission
(NRC), with respect to licensing and safety-related requirements. KCP&L is also
subject to the jurisdiction of the SEC under the 35 Act, as described above.

Missouri jurisdictional retail
revenues averaged 58% of KCP&Ls total retail revenue over the last three years.
Kansas jurisdictional retail revenues averaged 42% of KCP&Ls total retail
revenue over the last three years.

See Item 7. Managements
Discussion and Analysis, Critical Accounting Policies section for additional information
concerning regulatory matters.

8

Under the FERC Order 2000, KCP&L, as an investor-owned
utility, is strongly encouraged to join a FERC approved Regional Transmission Organization
(RTO). RTOs combine transmission operations of utility businesses into regional
organizations that schedule transmission services and monitor the energy market to ensure
regional transmission reliability and non-discriminatory access. The Southwest Power Pool
(SPP) formulated and approved a strategic plan including provisions for SPP to become
compliant with FERC Order 2000. SPP filed for FERC recognition as an RTO on October 15,
2003, and received conditional approval on February 10, 2004. Some of the more significant
conditions placed on SPP for obtaining final FERC approval include implementing SPPs
proposed independent Board of Directors, placing all transmission service within the SPP
footprint under the SPP regional transmission tariff, having an Independent Market Monitor
in place, and providing SPP clear and precise authority to independently and solely
determine which transmission projects to include in the regional transmission plans.
KCP&L expects that FERCs requirement to place all transmission service within
the SPP footprint under the SPP regional transmission tariff will prove to be the most
problematic. KCP&L is directly participating in the SPP process to become FERC Order
2000 compliant and intends to continue SPP participation. However, KCP&L must obtain
state commission approvals to participate in the SPP RTO.

During the third quarter of 2002, the
FERC issued a Notice of Proposed Rulemaking to Remedy Undue Discrimination through Open
Access Transmission Service and Standard Electricity Market Design. The proposed
rulemaking is designed to establish a single non-discriminatory open access transmission
tariff with a single transmission service that is applicable to all users of the
interstate transmission grid and to standardize wholesale energy market rules. All public
utilities that own, control or operate transmission facilities in interstate commerce
would be required to turn over the operation of their transmission facilities to an RTO
that meets the definition of an independent transmission provider or contract with an
entity that meets the definition of an independent transmission provider. KCP&L filed
comments with the FERC on the proposed rulemaking in November 2002. In late April 2003,
the FERC issued a white paper titled Wholesale Power Market Platform in
response to comments received on its proposed rulemaking. In the white paper, the FERC
stated its intent in its final rule to require all public utilities to join an RTO or
Independent System Operator (ISO) and to eliminate the requirement that public utilities
create or join an independent transmission provider. The FERC also stressed that state
authorities will play a significant role in RTO and ISO formation through the formation of
Regional State Committees. The proposal also allows for phased-in implementation and
sequencing tailored to each region and for modifications to benefit customers within each
region. The FERC also indicated that divestiture is not required to achieve independent
operation of the transmission system. Companies may remain vertically integrated under an
RTO or ISO. Additionally, as proposed, each RTO or ISO would be required to have a clear
transmission cost recovery policy outlined in its tariff. The timing of a final rule is
uncertain.

CompetitionFor years the electric industry was
relatively stable, characterized by vertically integrated electric companies. During
recent years however, federal and state developments aimed at promoting competition
resulted in much industry restructuring. The industry has moved from a fully regulated
industry, comprised of integrated companies that combine generation, transmission and
distribution, to a highly fragmented industry comprised of some fully integrated,
regulated utility markets and some competitive wholesale generation markets with
continuing regulation of transmission and distribution. However, the pace of restructuring
has slowed significantly due primarily to public and governmental reactions to issues
associated with deregulation efforts in California and the collapse of its wholesale
electric energy market. While most states in the process of deregulating the generation of
electricity have continued the process, no new states have initiated the deregulation
process.

At the federal level, the FERC
remains committed to the development of wholesale generation markets. Although its
proposal for the development of RTOs to facilitate markets has been delayed, it has

9

undertaken an initiative to standardize wholesale markets in the United States. At the
state level, concerns raised, including experiences in California, have stalled new retail
competition initiatives and slowed the separation of generation from regulated
transmission and distribution assets. As changes in the retail and wholesale markets have
occurred, regulators and legislators in different jurisdictions have not coordinated these
changes. In some cases, actions by one jurisdiction may conflict with actions by another,
creating potentially incompatible obligations for public utilities. Management believes
the transition to competition will continue, although at a slow pace, particularly at the
state level. No proposed legislation authorizing retail choice has been introduced in
Missouri or Kansas for several years.

Management believes it is too early
to predict what the ultimate timing or effects of changes in the energy industry will be,
or how potentially incompatible regulatory obligations will be resolved. Restructuring
issues are complex and are continually affected by events at the federal and state levels.
However, these changes may result in fundamental alterations in the way traditional
integrated utilities conduct business. Management also believes that competition for
electric generation services has created new risks and uncertainties in the industry. The
uncertainties include future prices of generation service in the wholesale and retail
markets, supply and demand volatility, and changes in customer profiles that may impact
margins on various electric service offerings. These uncertainties create additional risk
for participants in the industry, including KCP&L, and may result in increased
volatility in operating results.

If Missouri or Kansas were to pass
legislation authorizing retail choice, KCP&L would no longer be able to apply
regulated utility accounting principles to some, or all, of its operations and may be
required to write off certain regulatory assets and liabilities. See Note 5 to the
consolidated financial statements for additional information regarding regulatory assets
and liabilities.

Power SupplyKCP&L is a member of the SPP
reliability region. As one of the ten regional members of North American Electric
Reliability Council (NERC), SPP is responsible for maintaining reliability in its area
through coordination of planning and operations. As a member of the SPP, KCP&L must
maintain a capacity margin of at least 12% of its projected peak summer demand. This net
positive supply of capacity and energy is maintained through its generation assets and
capacity, power purchase agreements and peak demand reduction programs. The capacity
margin ensures the reliability of electric energy in the SPP region in the event of
operational failure of power generating units utilized by the members of the SPP.

KCP&Ls maximum system net
hourly summer peak load of 3,610 MW occurred on August 21, 2003. The maximum winter peak
load of 2,382 MW occurred on December 18, 2000. During 2003, the winter peak load was
2,268 MW. The projected peak summer demand for 2004 is 3,469 MW.

KCP&Ls generation assets
account for 97% of its 4,186 MW of projected 2004 capacity. The remainder of
KCP&Ls capacity requirements will be met by capacity purchases net of capacity
sales. KCP&L has adequate generation assets to meet its projected capacity
requirements through 2005 and is currently evaluating various purchase and construction
options to meet capacity and energy requirements thereafter.

The majority of KCP&Ls
rates do not contain an automatic fuel adjustment clause. Consequently, to the extent the
price of coal, coal transportation, nuclear fuel, nuclear fuel processing, natural gas or
purchased power increased significantly after the expiration of the contracts described in
this section, or if KCP&Ls lower fuel cost units did not meet anticipated
availability levels, KCP&L earnings may be adversely affected until the increased cost
could be reflected in rates.

10

The principal sources of fuel for
KCP&Ls electric generation are coal and nuclear fuel. KCP&L expects to
satisfy about 99% of its 2004 fuel requirements from these sources with the remainder
provided by natural gas and oil. The actual 2003 and estimated 2004 fuel mix and delivered
cost in cents per net kWh generated are as follows:

|                      
|----------------------
|Fuel cost in cents per
|Fuel Mix              
|
|Estimated             
|Fuel                  
|
|Coal                  
|Nuclear               
|Other                 
|                      
|Total Generation      
|

During 2004, KCP&Ls
generating units, including jointly owned units, are projected to burn approximately 12.3
million tons of coal. KCP&L has entered into coal-purchase contracts with various
suppliers in Wyomings Powder River Basin, the nations principal supplier of
low-sulfur coal. These contracts, with expiration dates ranging from 2004 through 2006,
will satisfy almost all of the projected coal requirements for 2004 and 2005. The
remainder of KCP&Ls coal requirements will be fulfilled through additional
contracts or spot market purchases. KCP&L has also entered into rail transportation
contracts with various railroads for moving coal from Powder River Basin to its generating
units. These contracts, with expiration dates ranging from 2005 through 2020, will provide
transportation services for all of the coal KCP&L transports from Powder River Basin
to its generating units.

KCP&L owns 47% of Wolf Creek
Nuclear Operating Corporation (WCNOC), the operating company for Wolf Creek, its only
nuclear generating unit. Wolf Creek purchases uranium and has it processed for use as fuel
in its reactor. In the first step, uranium concentrates are chemically converted to
uranium hexafluoride, which is suitable for enrichment. During enrichment, the fissionable
isotope of uranium contained in uranium hexafluoride is concentrated by removing a large
part of the non-fissionable isotope resulting in enriched uranium hexafluoride suitable
for further processing into nuclear fuel pellets. Finally, the enriched uranium
hexafluoride is further processed into uranium dioxide powder that is pressed into ceramic
pellets, which are then encased in metal tubes and arranged into fuel assemblies in the
fabrication process.

The owners of Wolf Creek have on hand
or under contract 84% of their uranium needs and 100% of their conversion needs for 2004.
In addition, 94% of the uranium and 100% of the conversion needed for operation of Wolf
Creek through September 2009 is under contract. The balance of the 2004 uranium
requirement is expected to be purchased on the secondary (spot) market. The owners also
have under contract 100% of the uranium enrichment required to operate Wolf Creek through
March 2008. Fabrication requirements are under contract through 2024.

All uranium, uranium conversion and
uranium enrichment arrangements, as well as the fabrication agreement, have been entered
into in the ordinary course of business, and Wolf Creek ordinarily is not substantially
dependent on these agreements. However, contraction and consolidation among suppliers of
these commodities and services, coupled with recent temporary shutdowns of some production
facilities of two of the suppliers, have introduced some uncertainty as to Wolf
Creeks ability to replace, if necessary, some of these contracts. Great Plains
Energys management believes this potential problem is common to the nuclear
industry. Accordingly, in the event the affected contracts were required to be replaced,
Great Plains Energys and Wolf Creeks management believes that the industry and
government would arrive at a solution to minimize disruption of the nuclear
industrys operations, including Wolf Creeks operations.

11

Under the Nuclear
Waste Policy Act of 1982, the Department of Energy (DOE) is responsible for the permanent
disposal of spent nuclear fuel. KCP&L pays the DOE a quarterly fee of one-tenth of a
cent for each kWh of net nuclear generation delivered and sold for the future disposal of
spent nuclear fuel. These disposal costs are charged to fuel expense. In 2002, the U.S.
Senate approved Yucca Mountain, Nevada as a long-term geologic repository. The DOE is
currently in the process of preparing an application to obtain the NRC license to proceed
with construction of the repository. Management cannot predict when this site may be
available. Under current DOE policy, once a permanent site is available, the DOE will
accept spent nuclear fuel first from the owners with the oldest spent fuel. Wolf Creek has
completed an on-site storage facility that is designed to hold all spent fuel generated at
the plant through the end of its 40-year licensed life in 2025.

In January 2004, KCP&L and the
other two Wolf Creek owners filed suit against the United States in the U.S. Court of
Federal Claims seeking an unspecified amount of monetary damages resulting from the
governments failure to begin accepting spent fuel for disposal in January 1998, as
the government was required to do by the Nuclear Waste Policy Act of 1982. About sixty
other similar cases are pending before that court, six of which are scheduled to begin
trial in the first quarter of 2004. Another federal court already has determined that the
government breached its obligation to begin accepting spent fuel for disposal. The
questions now before the court are whether and to what extent the utilities are entitled
to monetary damages for that breach. KCP&L cannot predict the outcome of this case.

The Low-Level Radioactive Waste
Policy Amendments Act of 1985 mandated the development of low-level radioactive waste
disposal facilities. The states of Kansas, Nebraska, Arkansas, Louisiana and Oklahoma
formed the Central Interstate Low-Level Radioactive Waste Compact (Compact) and selected a
site in northern Nebraska to locate a disposal facility. Nebraska officials opposed the
facility and Nebraska has given notice of its withdrawal from the Compact effective in
August 2004. In June 2003, the Compact revoked Nebraskas membership in the Compact
effective July 17, 2004. As a result, Nebraskas legal rights under the Compact will
be extinguished on the effective date of either the Compacts revocation of
Nebraskas membership or Nebraskas withdrawal from the Compact. If membership
is severed by virtue of revocation by the Compact, any legal obligations Nebraska incurred
prior to revocation shall not cease until Nebraska fulfills them. The Compact has taken
the position that Nebraskas legal obligations include the obligation to be the host
state for a disposal site. Currently, the low-level waste from Wolf Creek is being
processed and disposed of in other federally approved sites. See Note 13 to the
consolidated financial statements for additional information regarding low-level waste.

At times, KCP&L purchases power
to meet its customers needs. Management believes KCP&L will be able to obtain
enough power to meet its future demands due to the coordination of planning and operations
in the SPP region; however, price and availability of power purchases may be impacted
during periods of excess demand. KCP&Ls purchased power, as a percent of MWh
requirements, totaled 6%, 5%, and 6%, in 2003, 2002 and 2001, respectively.

Environmental MattersKCP&Ls operations are
subject to regulation by federal, state and local authorities with regard to air and other
environmental matters. The generation and transmission of electricity produces and
requires disposal of certain hazardous products that are subject to these laws and
regulations. In addition to imposing continuing compliance obligations, these laws and
regulations authorize the imposition of substantial penalties for noncompliance, including
fines, injunctive relief and other sanctions. Failure to comply with these laws and
regulations could have a material adverse effect on KCP&L.

KCP&L operates in an
environmentally responsible manner and seeks to use current technology to avoid and treat
contamination. KCP&L regularly conducts environmental audits designed to ensure
compliance with governmental regulations and to detect contamination. Governmental bodies;

12

however, may impose additional or more restrictive environmental regulations that could
require substantial changes to operations or facilities at a significant cost. See Note 13
to the consolidated financial statements for additional information regarding
environmental matters.

Strategic EnergyGreat Plains Energy has invested
$32.1 million to acquire its 89% indirect interest in Strategic Energy, which provides
retail electricity services. Strategic Energy accomplishes this by entering into long-term
contracts with its customers to supply electricity. In return, Strategic Energy receives
an ongoing management fee, which is included in the contracted sales price for the
electricity. Of the states that offer retail choice, Strategic Energy operates in
California, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania and Texas.
Strategic Energy is targeting expansion into Connecticut and Maryland in 2004, as well as
expansion into additional utility territories in Ohio and Texas. Strategic Energy also
provides strategic planning and consulting services in the natural gas and electricity
markets. Strategic Energys total revenues accounted for approximately 51%, 42% and
28% of Great Plains Energys consolidated revenues in 2003, 2002 and 2001,
respectively.

At December 31, 2003, Strategic
Energy provided retail electricity services on behalf of approximately 48,000 commercial,
institutional and small manufacturing accounts. Strategic Energys diverse customer
base, totaling over 6,800 customers, includes numerous Fortune 500 companies, smaller
companies, and governmental entities. Based solely on current signed contracts and
expected usage, Strategic Energy has forecasted future MWh commitments of 16.3 million,
10.1 million and 3.1 million for the years 2004 through 2006, respectively. Strategic
Energy expects to deliver additional MWh sales in these years through growth in existing
markets by re-signing existing customers and by signing new customers as well as through
expansion into new markets. Strategic Energys projected MWh sales for 2004 based on
signed contracts and expected additional MWh sales are in the range of 19 million to 21
million MWhs.

Strategic Energys growth
objective is to continue to expand into retail choice states and continue to earn its
share of a large market opportunity. Strategic Energys continued success is
dependent on a number of factors including, but not limited to, the ability to contract
for wholesale MWhs to meet its customers needs, the ability to contract for
wholesale MWhs at prices that are competitive with the host utility territory rates and
that can be competitive with current and/or future competitors, the ability to provide
value-added customer services and the ability to attract and retain employees experienced
in providing service in retail choice states. See Note 12 to the consolidated financial
statements for information regarding a put option held by the minority interest owner of
Strategic Energy.

# 

Power SupplyTo supply its retail contracts,
Strategic Energy primarily purchases power under forward contracts in fixed quantities at
fixed prices from power suppliers based on projected customer usage. Strategic Energy does
not own any generation, transmission or distribution facilities. Strategic Energy sells
any excess retail supply of electricity back into the wholesale market. The proceeds from
the sale of excess supply of electricity are recorded as a reduction of purchased power.
Strategic Energy is subject to potential earnings volatility to the extent that actual
customer usage varies significantly from projections. The effect on earnings would be
dependent on conditions and prices in the wholesale market.

In the normal course of business,
Great Plains Energy and KLT Inc. provide financial or performance assurance to third
parties on behalf of Strategic Energy in the form of guarantees to those third parties.
Additionally, Great Plains Energy provides guarantees and indemnities supporting letters
of credit and surety bonds obtained by Strategic Energy. These agreements are entered into
primarily to support or enhance the creditworthiness otherwise attributed to Strategic
Energy on a stand-alone basis, thereby

13

facilitating the extension of sufficient credit to
accomplish Strategic Energys intended business purposes.

Strategic Energy enters into forward
contracts with multiple suppliers. At December 31, 2003, Strategic Energys five
largest suppliers under forward supply contracts represented 65% of the total future
committed purchases. Strategic Energys five largest suppliers, or their guarantors,
are rated investment grade. In the event of supplier non-delivery or default, Strategic
Energys results of operations could be affected to the extent the cost of
replacement power exceeded the combination of the contracted price with the supplier and
the amount of collateral held by Strategic Energy to mitigate its credit risk with the
supplier. Strategic Energys results of operations could also be affected, in a given
period, if it was required to make a payment upon termination of a supplier contract to
the extent that the contracted price with the supplier exceeded the market value of the
contract at the time of termination.

Credit risk represents the loss that
Strategic Energy could incur if a counterparty failed to perform under its contractual
obligations. To reduce its credit exposure, Strategic Energy enters into payment netting
agreements with certain counterparties that permit Strategic Energy to offset receivables
and payables with such counterparties. Strategic Energy further manages credit risk with
certain counterparties by entering into agreements that enable Strategic Energy to
terminate the transaction or modify collateral thresholds upon the occurrence of
credit-related events.

Based on guidelines set by its
Exposure Management Committee, Strategic Energy monitors its counterparty credit risk by
routinely evaluating the credit quality and performance of its suppliers. Among other
things, Strategic Energy monitors counterparty credit ratings, liquidity and results of
operations. As a result of these evaluations, Strategic Energy may, among other things,
establish counterparty credit limits and adjust the amount of collateral required from its
suppliers.

RegulationStrategic Energy, as a participant in
the wholesale electricity and transmission markets, is subject to FERC jurisdiction.
Additionally, Strategic Energy is subject to regulation by state regulatory agencies in
states where Strategic Energy has retail customers. Each state has a public utilities
commission that publishes rules related to retail choice. Each states rules are
distinct and may conflict. These rules do not restrict the amount Strategic Energy can
charge for its services, but can have an impact on Strategic Energys ability to
profitably serve in any jurisdiction. Strategic Energy is also subject to the jurisdiction
of the SEC under the 35 Act, as described above.

During the third quarter of 2002, the
FERC issued a Notice of Proposed Rulemaking to Remedy Undue Discrimination through Open
Access Transmission Service and Standard Electricity Market Design. The proposed
rulemaking is designed to establish a single non-discriminatory open access transmission
tariff with a single transmission service that is applicable to all users of the
interstate transmission grid and to standardize wholesale energy market rules. Strategic
Energy has evaluated the impact of the proposed rulemaking on its operations and provided
comments to the FERC that are generally supportive of the provisions of the proposal, but
suggested some changes to the proposed rule. In late April 2003, the FERC issued a white
paper titled Wholesale Power Market Platform, response to comments received on
its proposed rulemaking. In the white paper, the FERC stressed that state authorities will
play a significant role in RTO and ISO formation through the establishment of Regional
State Committees. The proposal also allows for phased-in implementation and market rules
tailored to each region. The timing of a final rule cannot be predicted at this time.

CompetitionStrategic Energy provides retail
electricity services in approximately half of the states that offer retail choice.
Strategic Energy has several competitors that operate in most or all of the same states in

14

which Strategic Energy services customers. Some of these competitors also operate in
states other than where Strategic Energy has operations. Strategic Energy also faces
competition in certain markets from regional suppliers and deregulated utility affiliates
formed by holding companies affiliated with regulated utilities to provide retail load in
their home market territories. Strategic Energys competitors vary in size from small
companies to very large corporations, some of which have significantly greater financial,
marketing, and procurement resources than Strategic Energy. Additionally, Strategic
Energy, as well as its other competitors, must compete with the host utility in order to
convince customers to switch from the host utility. The principal elements of competition
are price, service and product differentiation. Strategic Energy believes it is
competitive in all of these areas.

KLT GasKLT Gas is focused on exploring for,
developing, and producing unconventional natural gas resources, including coalbed methane
properties. In February 2004, the Great Plains Energy Board of Directors approved
managements recommendation to sell the KLT Gas portfolio and exit the gas business.
The Company evaluated this business and determined the amount of capital and the length of
time required for development of reserves and production, combined with the earnings
volatility of the exploration process, are no longer compatible with the Companys
strategic vision. See Note 7 to the consolidated financial statements and Item 7.
Managements Discussion and Analysis, KLT Gas sections for additional information.

RegulationKLT Gas activities are
regulated extensively at the federal, state and local levels, including environmental,
health and safety regulations. Regulated matters include permits for discharges of
wastewaters and other substances generated in connection with drilling operations; bonds
or other financial responsibility requirements to cover drilling contingencies and well
plugging and abandonment costs; and reports concerning operations, the spacing of wells
and unitization and pooling of properties. At various times, regulatory agencies have
imposed price controls and limitations on oil and gas production. In addition, at the
federal level, the FERC regulates interstate transportation of natural gas under the
Natural Gas Act. Other regulated matters include marketing, pricing, transportation and
valuation of royalty payments. KLT Gas is also subject to the jurisdiction of the SEC
under the 35 Act, as described above.

CompetitionKLT Gas is an independent natural gas
company that frequently competes for reserve acquisitions, exploration leases, licenses,
concessions, marketing agreements, equipment and labor against companies with financial
and other resources substantially larger than KLT Gas resources. In addition, many
of KLT Gas competitors have been operating in the same core areas for a much longer
time than KLT Gas or have established strategic long-term positions in geographic regions
in which KLT Gas operates.

# 

Great Plains Energy and
Consolidated KCP&L EmployeesAt December 31, 2003, Great Plains
Energy had 2,475 employees. Consolidated KCP&L had 1,841 employees, including 1,371
represented by three local unions of the International Brotherhood of Electrical Workers
(IBEW). KCP&L has labor agreements with Local 1613, representing clerical employees
(expires March 31, 2005), with Local 1464, representing transmission and distribution
workers (expires January 31, 2006), and with Local 412, representing power plant workers
(expires February 28, 2007).

During 2003, the number of employees
at Great Plains Energy and consolidated KCP&L, were reduced as a result of the
disposition of RSAE. At December 31, 2002, RSAE employed 590 employees. Additionally,
consolidated KCP&L transferred 394 employees to GPES on April 1, 2003.

15

|Executive Officers of Great Plains Energy and KCP&L
|---------------------------------------------------
|
|Year                                               
|Assumed                                            
|An Officer                                         
|Name                                               
|
|
|Michael J. Chesser 1                               
|                                                   
|                                                   
|                                                   
|William H. Downey 2                                
|                                                   
|                                                   
|Andrea F. Bielsker                                 
|                                                   
|                                                   
|                                                   
|                                                   
|John J. DeStefano                                  
|                                                   
|                                                   
|
|Stephen T. Easley 3                                
|                                                   
|William P. Herdegen III 4                          
|                                                   
|Jeanie S. Latz                                     
|                                                   
|                                                   
|                                                   
|Nancy J. Moore                                     
|                                                   
|Brenda Nolte 5                                     
|                                                   
|William G. Riggins                                 
|                                                   
|Richard A. Spring                                  
|                                                   
|Lori A. Wright 6                                   
|                                                   
|                                                   
|Richard M. Zomnir 7                                
|

|  | 
|- | 
|1 | 
|  | 
|  | 
|2 | 
|  | 
|  | 
|3 | 
|  | 
|  | 
|  | 
|4 | 
|  | 
|  | 
|5 | 
|6 | 
|  | 
|  | 
|7 | 
|  | 

All of the above individuals have
been officers or employees in a responsible position with the Company for the past five
years except as noted in the footnotes. The term of office of each officer

16

commences with
his or her appointment by the Board of Directors and ends at such time as the Board of
Directors may determine.

There are no family relationships
between any of the executive officers, nor any arrangement or understanding between any
executive officer and any other person involved in officer selection.

Available InformationGreat Plains Energys website is
www.greatplainsenergy.com, and KCP&Ls website is www.kcpl.com.
Information contained on the companies websites is not incorporated herein except to
the extent specifically so indicated. Both companies make available, free of charge, on or
through their websites, their annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and amendments to those reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act as soon as reasonably practicable
after the companies electronically file such material with, or furnish it to, the SEC. In
addition, the companies make available on or through their websites all other reports,
notifications and certifications filed electronically with the SEC.

# ITEM 2. PROPERTIES

KCP&L Generation
Resources
KCP&Ls generating
facilities consist of the following:

|              
|--------------
|Year          
|Unit          
|
|Existing Units
|Base Load     
|              
|              
|              
|              
|              
|              
|              
|Peak Load     
|              
|              
|              
|              
|              
|              
|              
|              
|              
|              
|
|Total         
|

|    | 
|--- | 
|(a) | 
|(b) | 
|(c) | 
|(d) | 
|    | 

KCP&L owns the Hawthorn Station
(Jackson County, Missouri), Montrose Station (Henry County, Missouri), and Northeast
Station (Jackson County, Missouri). KCP&L leases West Gardner Station

17

(Johnson County,
Kansas) and Osawatomie Station (Miami County, Kansas). KCP&L also owns 50% of the 688
MW LaCygne 1 Unit and 674 MW LaCygne 2 Unit (Linn County, Kansas); 70% of the 670 MW Iatan
Station (Platte County, Missouri); and 47% of the 1,166 MW Wolf Creek Unit (Coffey County,
Kansas).

KCP&L Transmission
and Distribution ResourcesKCP&Ls electric
transmission system interconnects with systems of other utilities for reliability and to
permit wholesale transactions with other electricity suppliers. KCP&L owns
approximately 1,700 miles of transmission lines, approximately 9,000 miles of overhead
distribution lines and approximately 3,500 miles of underground distribution lines in
Missouri and Kansas. KCP&L has all the franchises necessary to sell electricity within
the territories from which substantially all of its gross operating revenue is derived.
KCP&Ls transmission and distribution systems are continuously monitored for
adequacy to meet customer needs. Management believes the current systems are adequate to
serve its customers.

KCP&L GeneralKCP&Ls principal plants and
properties, insofar as they constitute real estate, are owned in fee simple, except for
the West Gardner and Osawatomie stations which are leased pursuant to a lease with a
special purpose entity, which has been consolidated under Financial Accounting Standards
Board (FASB) Interpretation (FIN) No. 46, Consolidation of Variable Interest
Entities. Certain other facilities are located on premises held under leases,
permits or easements. KCP&L electric transmission and distribution systems are for the
most part located over or under highways, streets, other public places or property owned
by others for which permits, grants, easements or licenses (deemed satisfactory but
without examination of underlying land titles) have been obtained.

Substantially all of the fixed
property and franchises of KCP&L, which consists principally of electric generating
stations, electric transmission and distribution lines and systems, and buildings subject
to exceptions and reservations, are subject to a General Mortgage Indenture and Deed of
Trust dated as of December 1, 1986.

KLT GasKLT Gas leases mineral rights on
properties primarily located in Colorado, Kansas and Wyoming with some leases in Nebraska
and Texas. Effective with Great Plains Energys February 2004 announcement of its
plans to exit the gas exploration and development business, KLT Gas is actively marketing
its leased mineral rights for sale.

# ITEM 3. LEGAL PROCEEDINGS

Weinstein v. KLT Telecom
Inc.Richard D. Weinstein (Weinstein)
filed suit against KLT Telecom Inc. (KLT Telecom) in September 2003 in the St. Louis
County, Missouri Circuit Court. KLT Telecom acquired a controlling interest in Holdings in
February 2001 through the purchase of approximately two-thirds of the Holdings stock held
by Weinstein. In connection with that purchase, KLT Telecom entered into a put option in
favor of Weinstein, which granted Weinstein an option to sell to KLT Telecom his remaining
shares of Holdings stock. The put option provided for an aggregate exercise price for the
remaining shares equal to their fair market value with an aggregate floor amount of $15
million, and was exercisable between September 1, 2003, and August 31, 2005. In June 2003,
the stock of Holdings was cancelled and extinguished pursuant to the joint Chapter 11 plan
confirmed by the Bankruptcy Court in the DTI bankruptcy proceedings. In September 2003,
Weinstein delivered a notice of exercise of his claimed rights under the put option. KLT
Telecom rejected the notice of exercise. KLT Telecom denied that Weinstein has any
remaining rights or claims pursuant to the put option, and denied any obligation to pay
Weinstein any amount under the put option. Subsequent to KLT Telecoms rejection of
his notice

18

of exercise, Weinstein filed suit-alleging breach of contract. Weinstein seeks
damages of at least $15 million, plus statutory interest. KLT Telecom believes it has
meritorious defenses to this lawsuit. Further information regarding the Weinstein suit and
the DTI bankruptcy proceedings is contained in Note 9 to the consolidated financial
statements, and is incorporated here by reference.

DTI Bankruptcy
ProceedingsOn December 31, 2001, DTI filed
separate voluntary petitions in the Bankruptcy Court for the Eastern District of Missouri
for reorganization under Chapter 11 of the U.S. Bankruptcy Code. These cases were
consolidated for joint procedural administration. A joint Chapter 11 plan dated March 31,
2003, was filed by DTI. The Chapter 11 plan was confirmed by the Bankruptcy Court on June
11, 2003, and became effective on June 24, 2003. Further information regarding the DTI
bankruptcy proceedings is contained in Note 9 to the consolidated financial statements,
and is incorporated here by reference.

Hawthorn No. 5 LitigationKCP&L filed suit against National
Union Fire Insurance Company of Pittsburgh, Pennsylvania (National Union) and Travelers
Indemnity Company of Illinois (Travelers) in Missouri state court on June 14, 2002, which
was removed to the U.S. District Court for the Western District of Missouri. In 1999,
there was a boiler explosion at KCP&L Hawthorn No. 5 generating unit, which was
subsequently reconstructed and returned to service. National Union and Reliance National
Insurance Company (Reliance), primary carriers, had issued a $200 million primary
insurance policy and Travelers had issued a $100 million secondary insurance policy
covering Hawthorn No. 5. A dispute arose between KCP&L and these two insurance
companies regarding the amount payable under these insurance policies for the
reconstruction of Hawthorn No. 5 and replacement power expenses and KCP&L filed suit
against the carriers. In that suit, KCP&L seeks recovery, subject to the limits of the
insurance policies, of Hawthorn No. 5 reconstruction costs and replacement power expenses,
plus damages and attorneys fees from National Union for failing to pay the full
amount of its insurance policy. KCP&Ls proof of loss in this suit is currently
approximately $285 million. To date, National Union and Reliance have collectively paid
approximately $169 million, and have subrogation rights in the litigation described in the
next paragraph. Travelers has not made any payments under its policy. Trial of this case
is scheduled to begin in January 2005.

KCP&L also filed suit on April 3,
2001, in Jackson County, Missouri Circuit Court against multiple defendants who are
alleged to have responsibility for the Hawthorn No. 5 boiler explosion. KCP&L and
National Union have entered into a subrogation allocation agreement under which recoveries
in this suit are generally allocated 55% to National Union and 45% to KCP&L. Certain
defendants have been dismissed from the suit and various defendants have settled with
KCP&L resulting in KCP&L receiving $35.8 million under the terms of the
subrogation allocation agreement. Trial of this case with the one remaining defendant
began in January 2004. On March 5, 2004, the jury reached a verdict finding
KCP&Ls damages as a result of the explosion were $452 million. Deducted from
these damages are amounts received from pre-trial settlements with other defendants and an
amount for KCP&Ls comparative fault (as determined by the jury). The remaining
damages are divided between KCP&L and its insurers pursuant to the allocation
agreement referenced above. KCP&Ls attorneys also receive a share of
KCP&Ls recoveries. After these deductions and allocations, KCP&L would
receive approximately $33 million as a result of the verdict if it is not modified by the
trial or appellate courts. The verdict is not final pending post-trial motions. The
defendant in the case may also appeal the verdict.

# ITEM 4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of 2003, no
matter was submitted to a vote of security holders through the solicitation of proxies or
otherwise for either Great Plains Energy or KCP&L.

19

# ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

# 

Great Plains Energy
Great Plains Energy common stock is
listed on the New York Stock Exchange under the symbol GXP. At December 31, 2003, Great
Plains Energys common stock was held by 16,070 shareholders of record. Information
relating to market prices and cash dividends on Great Plains Energys common stock is
set forth below:

|                        
|------------------------
|Common Stock Price Range
|2003                    
|
|Quarter                 
|
|First                   
|Second                  
|Third                   
|Fourth                  
|

Regulatory RestrictionsUnder the 35 Act, Great Plains Energy
can pay dividends only out of retained or current earnings, unless authorized to do
otherwise by the SEC. Great Plains Energys authorization under the 35 Act to issue
guarantees and other securities is conditioned upon it maintaining consolidated common
equity of not less than 30% of consolidated capitalization as of the end of each quarter.
Further, under stipulations with the MPSC and KCC, Great Plains Energy has committed to
maintain consolidated common equity of not less than 30%.

Dividend RestrictionsGreat Plains Energys Articles
of Incorporation contain certain restrictions on the payment of dividends on Great Plains
Energys common stock in the event common equity falls to 25% of total
capitalization. If preferred stock dividends are not declared and paid when scheduled,
Great Plains Energy could not declare or pay common stock dividends or purchase any common
shares. If the unpaid preferred stock dividends equal four or more full quarterly
dividends, the preferred shareholders, voting as a single class, could elect members to
the Board of Directors.

Equity Compensation PlanGreat Plains Energy has one equity
compensation plan which authorizes the issuance of Great Plains Energy common stock. Great
Plains Energys shareholders have approved the equity compensation plan. The
following table provides information, as of December 31, 2003, regarding the number of
common shares to be issued upon exercise of outstanding options, warrants and rights,
their weighted average exercise price, and the number of shares of common stock remaining
available for future issuance under the equity compensation plan. The table excludes
shares issued or issuable under Great Plains Energys defined contribution savings
plans.

20

|                             
|-----------------------------
|Number of securities         
|remaining available          
|for future issuance          
|Number of securities to      
|be issued upon exercise      
|of outstanding options,      
|warrants and rights          
|Plan Category                
|
|Equity compensation plans    
|approved by security holders 
|Equity compensation plans not
|approved by security holders 
|
|Total                        
|

|   |  
|-- | -
|(1 | )
|   |  
|(2 | )
|   |  

KCP&L
Until the October 1, 2001, holding
company reorganization, KCP&Ls common stock was listed on the New York Stock
Exchange under the symbol KLT. In the holding company reorganization, KCP&L became a
wholly owned subsidiary of Great Plains Energy, which holds the one share of issued and
outstanding KCP&L common stock.

Regulatory RestrictionsUnder the 35 Act, KCP&L can pay
dividends only out of retained or current earnings, unless authorized to do otherwise by
the SEC. KCP&Ls authorization under the 35 Act to issue short-term debt is
conditioned upon both it and Great Plains Energy maintaining consolidated common equity of
not less than 30% of consolidated capitalization as of the end of each quarter. Further,
under stipulations with the MPSC and KCC, KCP&L has committed to maintain consolidated
common equity of not less than 35%.

Dividend RestrictionsUnder the indenture relating to
KCP&Ls 8.3% Junior Subordinated Deferrable Interest Debentures, due 2037
(Debentures), which are held by KCPL Financing I, KCP&L may not declare or pay any
dividends on any shares of its capital stock if at the time (i) there is an event of
default (as defined in the Debentures indenture), (ii) KCP&L is in default with
respect to its payment of any obligations under its guarantee of preferred securities
issued by KCPL Financing I, or (iii) KCP&L has elected to defer payments of interest
on the Debentures.

Equity Compensation PlanKCP&L does not have any equity
compensation plans.

21

# ITEM 6. SELECTED
FINANCIAL DATA

|                                              
|----------------------------------------------
|Year Ended December 31                        
|
|(dollars in millions except per share amounts)
|Great Plains Energy (a)                       
|Operating revenues                            
|Income (loss) from continuing operations      
|before cumulative effect of changes           
|in accounting principles (c)                  
|Net income (loss)                             
|Basic and diluted earnings (loss) per         
|common share from continuing                  
|operations before cumulative effect           
|of changes in accounting principles           
|Basic and diluted earnings (loss) per         
|common share                                  
|Total assets at year end                      
|Total redeemable preferred stock, mandatorily 
|redeemable preferred securities and long-     
|term debt (including current maturities)      
|Cash dividends per common share               
|SEC ratio of earnings to fixed charges        
|
|
|Consolidated KCP&L (a)                        
|Operating revenues                            
|Income from continuing operations before      
|cumulative effect of changes                  
|in accounting principles (c)                  
|Net income                                    
|Total assets at year end                      
|Total redeemable preferred stock, mandatorily 
|redeemable preferred securities and long-     
|term debt (including current maturities)      
|SEC ratio of earnings to fixed charges        
|

|    | 
|--- | 
|(a) | 
|    | 
|    | 
|    | 
|(b) | 
|(c) | 
|    | 
|    | 
|    | 
|(d) | 
|    | 
|    | 

22

# ITEM 7.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Managements Discussion and
Analysis of Financial Condition and Results of Operations that follow are a combined
presentation for Great Plains Energy and consolidated KCP&L, both registrants under
this filing. The discussion and analysis by management focuses on those factors that had a
material effect on the financial condition and results of operations of the registrants
during the periods presented. It should be read in conjunction with the accompanying
consolidated financial statements and related notes.

Losses in prior periods related to
the operations of RSAE have been reclassified and are presented as discontinued operations
due to the June 2003 disposition of RSAE.

Great Plains EnergyGreat Plains Energy does not own or
operate any significant assets other than the stock of its subsidiaries. Great Plains
Energys direct subsidiaries are KCP&L, KLT Inc., GPP, IEC and GPES. Effective
October 1, 2001, Great Plains Energy became the holding company of KCP&L, GPP and KLT
Inc. In November 2002, the Company created a wholly-owned subsidiary, IEC, as an
intermediate holding company that holds an indirect interest in Strategic Energy. GPES was
formed in 2003 to provide services at cost to Great Plains Energy and certain of its
subsidiaries, including consolidated KCP&L, as a service company under the 35 Act.

Great Plains Energy
Business OverviewAs a diversified energy company,
Great Plains Energys reportable business segments include:

| | o |  | KCP&L, an integrated, regulated electric utility in the states of Missouri and Kansas,
which provides reliable, affordable electricity to retail customers;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Strategic Energy, which provides retail electricity services by entering into long-term
contracts with its customers to supply electricity, operates in several electricity
markets offering retail choice, including California, Massachusetts, Michigan, New Jersey,
New York, Ohio, Pennsylvania and Texas; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | KLT Gas, which explores for,
develops and produces unconventional natural gas resources.
| | - |  | ----------------------------------------------------------------------------------------

In February 2004, the Great Plains
Energy Board of Directors approved managements recommendation to sell the KLT Gas
portfolio and exit the gas business. The Company evaluated this business and determined
the amount of capital and the length of time required for development of reserves and
production combined with the earnings volatility of the exploration process are no longer
compatible with the Companys strategic vision.

Over the first six months of 2004,
the Company is engaging in a comprehensive strategic planning process to map its view of
the future of the electric industry, and ultimately the Company, over the next five to ten
years. This inclusive process draws on the creativity and skills of employees, outside
experts and people from the community.

The strategic planning process will
seek to enhance the disciplined growth of the Company and build upon the strong foundation
of KCP&L and Strategic Energy. This platform for growth provides a balanced mix of
regulated earnings from the utility operations of KCP&L and the potential continued
growth of Strategic Energy as it expands its presence in competitive retail markets.

23

Critical Accounting
PoliciesThe preparation of financial
statements in conformity with Generally Accepted Accounting Principles (GAAP) requires
management to make estimates and assumptions that affect reported amounts and related
disclosures. Management considers an accounting estimate to be critical if it requires
assumptions to be made that were highly uncertain at the time the estimate was made and
changes in the estimate or different estimates that could have been used could have a
material impact on the results of operations and financial condition.



PensionsThe Company incurs significant costs
in providing non-contributory defined pension benefits. The costs are measured using
actuarial valuations that are dependent upon numerous factors derived from actual plan
experience and assumptions of future plan experience.

Pension costs are impacted by actual
employee demographics (including age, compensation levels, and employment periods), the
level of contributions made to the plan, earnings on plan assets and plan amendments. In
addition, pension costs are also affected by changes in key actuarial assumptions,
including anticipated rates of return on plan assets and the discount rates used in
determining the projected benefit obligation and pension costs.

These assumptions are updated
annually in accordance with Statement of Financial Accounting Standards (SFAS) No. 87,
Employers Accounting for Pensions; however, changes in pension
obligations associated with these factors may not be immediately recognized as pension
costs on the income statement. The Company generally recognizes gains and losses by
amortizing over a five-year period the rolling five-year average of unamortized gains and
losses. The key assumptions used in developing the 2003 pension disclosures include a 6.0%
discount rate, a 9.0% expected return on plan assets and a 3.3% average compensation rate
increase. The discount rate was reduced by 0.75% and 1.25% from 2002 and 2001,
respectively, due to current market conditions, while the return on plan assets remained
constant and the compensation rate decreased 0.80% from prior years.

In selecting an assumed discount
rate, fixed income security yield rates for 30-year Treasury bonds and corporate
high-grade bond yields were considered. The assumed rate of return on plan assets was
developed based on the weighted average of the long-term returns forecast for the expected
portfolio mix of investments held by the plan.

The following table reflects the
sensitivities associated with a 0.5 percent increase or a 0.5 percent decrease in key
actuarial assumptions. Each sensitivity reflects an evaluation of the change based solely
on a change in that assumption only.

|                             
|-----------------------------
|Impact on                    
|Projected                    
|Change in                    
|Actuarial assumption         
|
|(millions)                   
|Discount rate                
|Rate of return on plan assets
|Discount rate                
|Rate of return on plan assets
|

For the year ended December 31, 2003,
the Company recorded $17.4 million of pension expense, an $11.9 million increase from the
previous year. Pension expense for 2004 is expected to approximate $21.0 million, a $3.6
million increase over 2003. The 2004 increase is primarily due to lower discount

24

rates and
the amortization of investment losses from prior years that are recognized on a rolling
five-year average basis.

The Companys pension plan
assets are primarily made up of equity and fixed income investments. The market value of
the plan assets increased $16.8 million in 2003 primarily reflecting an overall
improvement in the equity markets during the year. However, the increase was not enough to
recover from significant market declines incurred in 2001 and 2002 when plan assets lost
value of approximately $240.8 million. At plan year-end, the fair value of pension plan
assets was $341.0 million, not including a $32.0 million contribution made after the plan
year-end.

The total accumulated benefit
obligation (ABO) of the plans exceeded the fair value of plan assets requiring the Company
to record an additional minimum pension liability of $78.4 million as prescribed by SFAS
No. 87. This was offset by an intangible asset of $17.4 million to the extent of prior
service costs, with the remainder of $61.0 million charged to common equity through other
comprehensive income (OCI). Accumulated OCI, net of deferred taxes, was $37.2 million. OCI
could be restored through common equity in future periods to the extent fair value of
trust assets exceeded the ABO.

Market conditions and interest rates
significantly affect the future assets and liabilities of the plan. It is difficult to
predict future pension costs, the additional pension liability and cash funding
requirements due to volatile market conditions; however, similar charges may be required
in the future.

Regulatory MattersAs a regulated utility, KCP&L is
subject to the provisions of SFAS No. 71, Accounting for the Effects of Certain
Types of Regulation. Accordingly, KCP&L has recorded assets and liabilities on
its balance sheet resulting from the effects of the ratemaking process, which would not be
recorded under GAAP if KCP&L were not regulated. Regulatory assets represent incurred
costs that have been deferred because they are probable of future recovery in customer
rates. Regulatory liabilities generally represent probable future reductions in revenue or
refunds to customers. At December 31, 2003, KCP&Ls regulatory assets and
liabilities totaled $145.6 million and $3.8 million, respectively. KCP&Ls
continued ability to meet the criteria for application of SFAS No. 71 may be affected in
the future by competitive forces and restructuring in the electric industry. In the event
that SFAS No. 71 no longer applied to all, or a separable portion, of KCP&Ls
operations, the related regulatory assets and liabilities would be written off unless an
appropriate regulatory recovery mechanism is provided. Additionally, these factors could
result in an impairment of utility plant assets if the cost of the assets could not be
expected to be recovered in customer rates. Whether an asset has been impaired is
determined pursuant to SFAS No. 144, Accounting for the Impairment or Disposal of
Long-lived Assets. See Note 5 to the consolidated financial statements for a
discussion of regulatory assets and liabilities.

At the end of January 2002, a severe
ice storm occurred throughout large portions of the Midwest, including the greater Kansas
City metropolitan area. In 2002, the KCC approved a stipulation and agreement regarding
the treatment of the Kansas portion of the ice storm costs. Pursuant to the stipulation
and agreement, KCP&L implemented a retail rate reduction January 1, 2003, and began
calculating depreciation expense on Wolf Creek using a 60-year life instead of a 40-year
life. As a result of the stipulation and agreement, KCP&Ls 2003 retail revenues
decreased approximately $12.5 million and depreciation expense decreased approximately
$7.7 million. The reduction in depreciation expense has been recorded as a regulatory
asset. KCP&L also agreed to file a rate case by May 15, 2006.

In 2002, the MPSC approved
KCP&Ls application for an accounting authority order related to the Missouri
jurisdictional portion of the storm costs. The order allows KCP&L to defer and
amortize $20.1 million, representing the Missouri portion of the storm costs, through
January 2007. The amortization,

25

which began in September 2002, is approximately $4.6
million annually for the remainder of the amortization period.

Asset Retirement Obligations
Effective January 1, 2003, the
Company adopted SFAS No. 143, Accounting for Asset Retirement Obligations,
which provides accounting requirements for the recognition and measurement of liabilities
associated with the retirement of tangible long-lived assets. Under the standard, these
liabilities are recognized at fair value as incurred and capitalized as part of the cost
of the related long-lived asset. Accretion of the liabilities due to the passage of time
is recorded as an operating expense. Retirement obligations associated with long-lived
assets included within the scope of SFAS No. 143 are those for which a legal obligation
exists under enacted laws, statutes, written or oral contracts, including obligations
arising under the doctrine of promissory estoppel.

The adoption of SFAS No. 143 changed
the accounting for and the method used to report KCP&Ls obligation to
decommission its 47% share of Wolf Creek. The legal obligation to decommission Wolf Creek
was incurred when the plant was placed in service in 1985. The estimated liability,
recognized on KCP&Ls balance sheet at January 1, 2003, is based on a third party
nuclear decommissioning study conducted in 2002. KCP&L used a credit-adjusted risk
free discount rate of 6.42% to calculate the retirement obligation. This estimated rate is
based on the rate KCP&L could issue 30-year bonds, adjusted downward to reflect the
portion of the anticipated costs in current year dollars that had been funded at date of
adoption through a tax-qualified trust fund. The cumulative impact of prior
decommissioning accruals recorded consistent with rate orders issued by the MPSC and KCC
has been reversed and a new regulatory contra-asset for such amounts has been established.
Amounts collected through these rate orders have been deposited in a legally restricted
external trust fund. The fair market value of the trust fund was $75.0 million at December
31, 2003.

KCP&L also must recognize, where
possible to estimate, the future costs to settle other legal liabilities including the
removal of water intake structures on rivers, capping/filling of piping at levees
following steam power plant closures and capping/closure of ash landfills. Estimates for
these liabilities are based on internal engineering estimates of third party costs to
remove the assets in satisfaction of legal obligations and have been discounted using
credit adjusted risk free rates ranging from 5.25% to 7.50% depending on the anticipated
settlement date.

KLT Gas has estimated liabilities for
gas well plugging and abandonment, facility removal and surface restoration. These
estimates are based upon internal estimates of third party costs to satisfy the legal
obligations and have been discounted using credit adjusted risk free rates ranging from
6.00% to 7.25%, depending upon the anticipated settlement date.

Revisions to the estimated
liabilities of KCP&L and KLT Gas could occur due to changes in the decommissioning or
other cost estimates, extension of the nuclear operating license or changes in federal or
state regulatory requirements.

On January 1, 2003, KCP&L
recorded Asset Retirement Obligations (ARO) of $99.2 million and increased property and
equipment, net of accumulated depreciation, by $18.3 million. KCP&L is a regulated
utility subject to the provisions of SFAS No. 71 and management believes it is probable
that any differences between expenses under SFAS No. 143 and expenses recovered currently
in rates will be recoverable in future rates. As a result, the $16.3 million net
cumulative effect of the adoption of SFAS No. 143 was recorded as a regulatory asset and
therefore, had no impact on net income.

As a result of its adoption of SFAS
No. 143, KLT Gas recorded ARO of $1.2 million, increased property and equipment by $1.0
million and increased operating expense by $0.2 million for the immaterial cumulative
effect of the accounting change.

26

KCP&L has legal ARO for certain
other assets where it is not possible to estimate the time period when the obligations
will be settled. Consequently, the retirement obligations cannot be measured at this time.
For transmission easements obtained by condemnation, KCP&L must remove its
transmission lines if the line is de-energized. It is extremely difficult to obtain siting
for new transmission lines. Consequently, KCP&L does not anticipate de-energizing any
of its existing lines. KCP&L also operates, under state permits, ash landfills at
several of its power plants. While the life of the ash landfill at one plant can be
estimated and is included in the estimated liabilities above, the future life of ash
landfills at other permitted landfills cannot be estimated. KCP&L can continue to
maintain permits for these landfills after the adjacent plant is closed.

Although the liability for Wolf Creek
decommissioning costs recorded under the ARO method is expected to be substantially the
same at the end of Wolf Creeks life as the liability to be recorded pursuant to
regulatory orders the rate at which the liability increases varies under the different
methods. Because KCP&L is subject to SFAS No. 71, the difference in the recognition of
the liability will have no impact on earnings.

Prior to the adoption of SFAS No.
143, KLT Gas did not record separate asset retirement costs and liabilities, or the
associated depreciation and accretion. Under the full cost method of accounting followed
by KLT Gas, estimated dismantlement and abandonment costs, net of estimated salvage
values, were recorded to the property cost to be amortized. Under SFAS No. 143, KLT
Gas reserve for depreciation and asset retirement liabilities will increase
systematically over the asset life up to the time of settlement with corresponding charges
to expense.

It is anticipated the Companys
February 2004 decision to exit the gas business will be accomplished by the sale of KLT
Gas assets. Management expects the ARO related to the KLT Gas portfolio to be
transferred to the new owners at the time of the sale.

Asset Impairment,
including Goodwill and Other Intangible AssetsSFAS No. 144
Long-lived assets and intangible
assets subject to amortization are periodically reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be
recoverable as prescribed under SFAS No. 144.

During 2003, KLT Gas management
determined that two gas properties were impaired as development activities
indicated a decline in the estimates of future gas production. As a result of the lower
estimated production, the carrying amount of each property exceeded its estimated fair
value based upon discounted estimated future cash flows, which resulted in impairments on
the two properties. Internal and third party models were used to estimate future
production volumes, natural gas pricing, capital expenditures and operating costs. Cash
flow models were based on managements current understanding of prospect geology,
well costs and projected operating expenses. Natural gas pricing assumptions were based on
the New York Mercantile Exchange Henry Hub Natural Gas forward curve, adjusted for basis
differentials and other transportation charges. The impairments totaled $15.2 million and
were recorded as losses in (Gain) Loss on property in Great Plains Energys
consolidated statement of income and the related $5.9 million tax effects were recorded as
reductions to income taxes resulting in a $9.3 million reduction to earnings in 2003.

Additionally, in the second half of
2003, Great Plains Energy management performed a strategic review of the KLT Gas natural
gas properties (KLT Gas portfolio) and operations. At the direction of the Board of
Directors, management engaged a third party specialist to help evaluate the KLT Gas
business and provide recommendations regarding business strategy, management, staffing and
optimization of the KLT Gas portfolio. The objective of the strategic review was to
develop a course of action regarding KLT Gas operations for the Board of Directors
consideration at its February 2004 meeting. After

27

completion of the KLT Gas strategic
review, management determined it would recommend a sale of the KLT Gas portfolio and a
plan to exit the gas business at the February 2004 Board of Directors meeting.

As a result of its decision to
recommend a sale of the KLT Gas portfolio and exit the gas business, Great Plains Energy
management engaged a second third party specialist to complete a market reference
valuation analysis of the KLT Gas portfolio. As a result of the KLT Gas strategic review
and market reference valuation analysis having been conducted, an impairment test of the
entire KLT Gas portfolio was performed at December 31, 2003, in accordance with SFAS No.
144, using a probability weighting of the likelihood of potential outcomes at the February
2004 meeting. The impairment test considered 1) the scenario of sale of the entire KLT Gas
portfolio with fair value determined by a third party valuation specialist based on
estimated market prices and 2) the scenario of hold and use with fair value determined by
risk adjusted discounted cash flows. The impairment test indicated that the carrying
amount of the KLT Gas portfolio exceeded the probability-weighted fair value, which
resulted in an impairment of $39.3 million. Net of the related tax effect of $15.1
million, the impairment reduced earnings by $24.2 million.

The accounting estimates related to
asset impairments of KLT Gas are highly susceptible to change from period to period
because they require management to make assumptions about future natural gas production
volumes, natural gas pricing, capital expenditure requirements, operating costs and risk
adjusted discount rates. Further, the estimates at December 31, 2003, were impacted by
managements assessment of the probability of potential outcomes related to selling
or continuing to develop the KLT Gas portfolio. As a result of the decision in the first
quarter of 2004 to exit the gas business, the carrying amount of the KLT Gas portfolio
will be written down to its estimated realizable value in the first quarter of 2004.

SFAS No. 142Goodwill is tested for impairment at
least annually and more frequently when indicators of impairment exist as prescribed under
SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires that
if the fair value of a reporting unit is less than its carrying value including goodwill,
the implied fair value of the reporting unit goodwill must be compared with its carrying
value to determine the amount of impairment. See Note 6 to the consolidated financial
statements for information regarding the impact of adopting SFAS No. 142 on goodwill and
goodwill amortization.

Strategic Energys 2003 annual
impairment test was completed as of September 1, the annual review date, and there was no
impairment of the Strategic Energy goodwill. At December 31, 2003 and 2002, the
unamortized balance of Strategic Energy goodwill on Great Plains Energys balance
sheet was $26.1 million.

RSAEs goodwill was reviewed for
impairment as of January 1, 2002, as required under the implementation provisions of SFAS
No. 142. Based upon the results of a third party study and budgeted 2002 revenue, RSAE
recorded a $3.0 million impairment of goodwill. The impairment was reflected as a
cumulative effect to January 1, 2002, of a change in accounting principle.

Management believes that the
accounting estimates related to impairment analyses required under SFAS No. 142 are
critical accounting estimates. The estimates are highly susceptible to change from period
to period because it requires company management to make assumptions about future sales,
operating costs and discount rates over an indefinite life. Historically, actual margins
and volumes have fluctuated and, to a great extent, fluctuations are expected to continue.
The estimates of future margins are based upon internal budgets, which incorporate
estimates of customer growth, business expansion and weather trends, among other items.

28

Strategic Energy 
Energy and Energy-related Contract AccountingStrategic Energy primarily purchases
power under long-term forward physical delivery contracts to supply electricity to its
retail energy customers under full requirement sales contracts. Both the forward purchase
contracts and the full requirements sales contracts meet the accounting definition of a
derivative; however, on a majority of the forward purchase derivative contracts and all of
the full requirement sales contracts, Strategic Energy applies the normal purchase normal
sale accounting treatment. Accordingly, Strategic Energy records receivables and revenues
generated from the sales contracts as energy is delivered and consumed by the retail
customer. Likewise, a liability and purchase power expense are recorded when the energy
under long-term forward physical delivery contracts is delivered to Strategic
Energys retail customers.

An inability to sustain the normal
purchase / normal sale accounting treatment for forward purchase derivative contracts
could result in asymmetrical accounting, whereby the timing of the impact on operating
earnings would differ if normal purchase / normal sale accounting treatment was applied to
the full requirements sales contracts, but the forward purchase derivative contracts no
longer qualified for normal purchase / normal sale accounting treatment.

For forward purchase contracts that
do not meet the qualifying criteria for normal purchase / normal sale accounting
treatment, the Company elects cash flow hedge accounting, where appropriate. Under cash
flow hedge accounting, the fair value of the contract is recorded as a current or
long-term derivative asset or liability. Subsequent changes in the fair value of the
derivative assets and liabilities are recorded on a net basis in OCI and subsequently
reclassified as purchased power expense in Great Plains Energys consolidated
statement of income as the power is delivered and/or the contract settles. Additionally,
in the future OCI may have greater fluctuations than historically because of a larger
number of derivative contracts designated for cash flow hedge accounting, but these
fluctuations would not affect current period earnings or cash flows.

Changes in fair value of forward
purchase derivative contracts that do not meet the requirements for the normal purchase /
normal sale accounting treatment or cash flow hedge accounting are recorded in earnings
and as a current or long-term derivative asset or liability. The subsequent changes in the
fair value of these contracts could result in earnings volatility as the fair value of the
changes in the associated derivative assets and liabilities are recorded on a net basis in
purchased power expense in Great Plains Energys consolidated statement of income.

Derivative assets and liabilities
consist of a combination of energy and energy-related contracts. While some of these
contracts represent commodities or instruments for which prices are available from
external sources, other commodities and certain contracts are not actively traded and are
valued using modeling techniques to determine expected future market prices, contract
quantities, or both. The market prices and quantities used to determine fair value reflect
managements best estimate considering various factors. However, future market prices
and actual quantities will vary from those used in recording energy assets and liabilities
at fair value, and it is possible that such variations could be material.

Market prices for energy and
energy-related commodities vary based upon a number of factors. Changes in market prices
will affect the recorded fair value of energy contracts. Changes in the fair value of
energy contracts will affect earnings in the period of the change for contracts under fair
value accounting and OCI in the period of changed for contracts under cash flow hedge
accounting, while changes in forward market prices related to contracts under accrual
accounting will affect earnings in future periods to the extent those prices are realized.
Strategic Energy cannot predict whether, or to what extent, the factors affecting market
prices may change, but those changes could be material and could be either favorable or
unfavorable.

29

Related Party
TransactionsCustom Energy Holdings, L.L.C.
(Custom Energy Holdings) holds 100% of the direct ownership interests in Strategic Energy.
Great Plains Energy holds an 89% indirect ownership position in Strategic Energy. SE
Holdings, L.L.C. (SE Holdings) owns the remaining 11% indirect ownership position in
Strategic Energy. Richard Zomnir, President and Chief Executive Officer of Strategic
Energy and certain other employees of Strategic Energy hold direct or indirect interests
in SE Holdings. SE Holdings has a put option to sell all or part of its 11% interest in
Strategic Energy (Put Interest) to Custom Energy Holdings at any time within the 90 days
following January 31, 2004, at fair market value. On February 9, 2004, a letter
agreement was entered into setting forth a procedure for determining the fair market value
of the Put Interest (Letter Agreement). The Letter Agreement provides for SE Holdings to
exercise its put option with respect to all but one unit (0.00001% of issued and
outstanding units) of each of its respective series of ownership interest in Custom Energy
Holdings. Upon closing of such a transaction, which is anticipated for mid-April 2004,
subject to obtaining all necessary regulatory approvals, SE Holdings would continue to be
a member of Custom Energy Holdings and be represented on the Management Committee of
Custom Energy Holdings and Strategic Energy.

The Letter Agreement further provides
that Mr. Zomnir will remain with Strategic Energy through the closing of the transaction.
Upon consummation of the transaction, Mr. Zomnir will resign. An executive search is being
conducted over the next several months considering both internal and external candidates
for the position of President and Chief Executive Officer of Strategic Energy.

In November 2002, the Board of
Directors of the Company approved a merger of Environmental Lighting Concepts, Inc. (ELC)
into IEC to acquire ELCs 6% indirect interest in Strategic Energy. The merger
resulted in Great Plains Energy holding an 89% indirect interest in Strategic Energy.
Gregory J. Orman, the former Executive Vice President  Corporate Development and
Strategic Planning of the Company, was the majority shareholder of ELC and received $10.1
million in Company common stock and a note, which was paid in January 2003. See Note 12 to
the consolidated financial statements.

# Great Plains Energy
Results of Operations

|                                          
|------------------------------------------
|2003                                      
|
|(millions)                                
|Operating revenues                        
|Fuel                                      
|Purchased power - KCP&L                   
|Purchased power - Strategic Energy        
|Other operating expenses                  
|Depreciation and depletion                
|Gain (loss) on property                   
|                                          
|Operating income                          
|Income (loss) from equity investments     
|Non-operating income (expenses)           
|Interest charges                          
|Income taxes                              
|Discontinued operations                   
|Cumulative effect of a change             
|in accounting principle                   
|                                          
|Net income (loss)                         
|Preferred dividends                       
|
|Earnings (loss) available for common stock
|

30

2003 compared to 2002Great Plains Energys 2003
earnings, as detailed in the table below, increased to $143.3 million, or $2.07 per share,
from $124.5 million, or $1.99 per share, compared to 2002. The issuance of 6.9 million
shares in November 2002 diluted 2003 earnings per share by $0.23.

|                              
|------------------------------
|Earnings (Loss) Per           
|Earnings (Loss)               
|
|2003                          
|
|(millions)                    
|
|KCP&L                         
|Subsidiary operations         
|Discontinued operations       
|Cumulative effect of changes  
|in accounting principles      
|
|Consolidated KCP&L            
|Strategic Energy              
|KLT Gas                       
|Other non-regulated operations
|
|Great Plains Energy           
|

KCP&Ls earnings increased
$24.3 million in 2003 compared to 2002. Earnings in 2003 include $11.3 million related to
the partial settlements of Hawthorn No. 5 litigation. See consolidated KCP&L Results
of Operations for additional information. KCP&Ls revenue increased $45.0 million
primarily due to a significant increase in wholesale MWhs sold at higher wholesale prices
partially offset by the effect on retail revenues of the January 2003 Kansas rate
reduction. This increase combined with a decrease in interest expense more than offset
increases in purchased power expense, pension expense and power plant maintenance expense.
The amortization of the Missouri jurisdictional portion of the storm costs increased $3.1
million in 2003. In 2002, KCP&L expensed $16.5 million for the Kansas jurisdictional
portion of the storm costs.

Discontinued operations in 2003
includes a $7.1 million loss on the June 2003 disposition of HSS interest in RSAE
and continuing losses through the date of disposition of $1.6 million. Losses from RSAE in
2002 of $4.0 million have been reclassified and presented as discontinued operations.
Additionally, 2002 earnings reflect the $3.0 million cumulative effect to January 1, 2002,
of a change in accounting principle for the adoption of SFAS No. 142 and the associated
write-down of RSAE goodwill.

Strategic Energys earnings
increased $9.9 million in 2003 compared to 2002. The increase is the result of a $301.5
million increase in revenue partially offset by a $283.5 million increase in purchased
power expense primarily due to a 41% increase in MWhs sold. This increase was partially
offset by an increase in administrative and general expenses including employee related
expenses. In addition to the continued growth, Great Plains Energys ownership of
Strategic Energy was increased by 6% in the fourth quarter of 2002.

KLT Gas incurred a loss of $36.9
million in 2003. KLT Gas 2003 net loss includes after tax operating losses of $3.4
million and after tax impairments of $33.5 million. The after tax impairments consist of
charges totaling $9.3 million on two properties in response to lower revised estimates of
future gas production and a fourth quarter 2003 impairment charge of $24.2 million related
to the Companys KLT Gas strategic review and exit plan valuation analysis. See Note
7 to the consolidated financial statements for additional information regarding the KLT
Gas property impairments.

31

Other non-regulated operations
include a $28.1 million after tax gain related to the confirmation of the DTI bankruptcy.
See Note 9 to the consolidated financial statements for additional information regarding
DTI. Other non-regulated operations also included a $2.3 million decrease in earnings
primarily due to higher reductions in affordable housing limited partnerships in 2003
compared to 2002.

2002 compared to 2001Great Plains Energys 2002
earnings increased to $124.5 million, or $1.99 per share, from a loss of $25.8 million, or
$(0.42) per share, compared to the same period of 2001.

KCP&Ls increase in earnings
was the result of warmer summer 2002 weather compared to 2001, continued load growth and a
40% increase in wholesale MWh sales, which combined with other net positive impacts of the
return to service of Hawthorn No. 5 in mid-2001 to more than offset increased expenses.
The increased expenses included the January 2002 ice storm costs and increased pension
expenses.

Discontinued operations for 2002 and
2001 reflect the operations of RSAE, which was disposed of in June 2003. The 2002
cumulative effect of changes in accounting principles reflects RSAEs write-down of
goodwill due to the adoption of SFAS No. 142.

Strategic Energys earnings
increased $7.9 million; however, 2001 earnings included $15.0 million in earnings from the
sale of power purchased from one supplier under wholesale contracts that expired at the
end of 2001. The increase in 2002, excluding the effect in 2001 of these earnings from
wholesale power sales, was due to continued growth in retail electric sales resulting from
increases in customer accounts and MWhs served. This was partially offset by increased
salaries and benefits and an increase in income taxes as a result of increased sales in
states with higher income tax rates for the current year.

During 2002, KLT Gas focused on the
acquisition of additional leased acreage and the testing and development of several
unconventional natural gas properties. KLT Gas earnings in 2001 reflect the $12.0
million after tax gain on the sale of its 50% equity ownership in Patrick KLT Gas, LLC.

Other non-regulated operations
included, among other things, a $3.8 million increase in earnings primarily due to lower
reductions in affordable housing limited partnerships in 2002 compared to 2001.
Additionally, 2001 reflects $173.8 million related to both DTI operating losses incurred
in 2001 and the $140.0 million net write-off following DTIs bankruptcy filings at
the end of 2001. As a result of DTIs filing for bankruptcy protection, DTI is not
included in 2002 results of operations. See Note 9 to the consolidated financial
statements for additional information. Additionally, in 2001 prior to KLT Telecoms
purchase of a majority ownership in DTI, DTI completed a tender offer for 50.4% of its
outstanding senior discounted notes. This transaction resulted in a $15.9 million gain on
the early extinguishment of debt.

Consolidated KCP<he following discussion of
consolidated KCP&L results of operations includes KCP&L, an integrated electric
utility and HSS, an unregulated subsidiary of KCP&L. References to KCP&L, in the
discussion that follows, reflect only the operations of the integrated electric utility.

Consolidated KCP&L
Business OverviewAs an integrated, regulated electric
utility, KCP&L engages in the generation, transmission, distribution and sale of
electricity.

KCP&L has over 4,000 MW of
generating capacity. Five combustion turbine units added 385 MW of peaking capacity in
2003. KCP&L has entered into a five-year construction and synthetic operating

32

lease
transaction with a Lease Trust for the five combustion turbines. In accordance with FIN
No. 46, KCP&L consolidated the Lease Trust in the fourth quarter of 2003.

KCP&L has transmission and
distribution facilities that served almost 490,000 customers as of December 31, 2003.
KCP&L continues to experience load growth approximating the historical average of 2.0%
to 2.5% annually through increased customer usage and additional customers. Rates charged
for electricity are below the national average.

Customers of KCP&L set a record
peak demand for the consumption of electricity on August 21, 2003. The all-time one-hour
peak reached 3,610 MW when the downtown Kansas City, Missouri temperature was 105 degrees.
A growing customer base and the extreme temperature contributed to the new peak. The
previous summer peak for KCP&L of 3,374 MW was set August 28, 2000.

At the end of January 2002, a severe
ice storm occurred throughout large portions of the Midwest, including the greater Kansas
City metropolitan area. Total costs related to the January ice storm were approximately
$51.3 million of which $14.7 million were capital expenditures and therefore charged to
utility plant. KCP&L expensed a total of $16.5 million in 2002 for the Kansas
jurisdictional portion of the storm costs and deferred $20.1 million of the storm costs
applicable to Missouri.

See Item 1. Business, KCP&L
section for information regarding the FERC Order 2000 and Notice of Proposed Rulemaking to
Remedy Undue Discrimination through Open Access Transmission Service and Standard
Electricity Market Design.

KCP&L has a wholly-owned
subsidiary, HSS, that holds a residential services investment, Worry Free. Worry Free is
no longer actively pursuing new customers and management does not anticipate any
significant additional capital investments in Worry Free. In June 2003, HSS completed the
disposition of its interest in RSAE.

33

Consolidated KCP&L
Results of OperationsThe following table summarizes
consolidated KCP&Ls comparative results of operations. Consolidated KCP&L
results of operations include KCP&L, an integrated electric utility and HSS. For
comparative purposes only, 2001 is presented below excluding the results of operations for
KLT Inc. and subsidiaries and GPP, which were transferred to Great Plains Energy on
October 1, 2001. For comparison 2001 presented below should only be used in the context of
the discussion and analysis that follows.

|                                     
|-------------------------------------
|Subsidiaries                         
|For                                  
|Comparison                           
|2003                                 
|
|(millions)                           
|Operating revenues                   
|Fuel                                 
|Purchased power                      
|Other operating expenses             
|Depreciation and depletion           
|Gain (loss) on property              
|                                     
|Operating income                     
|Income (loss) from equity investments
|Non-operating income (expenses)      
|Interest charges                     
|Income taxes                         
|Discontinued operations              
|Cumulative effect of a change        
|in accounting principle              
|                                     
|Net income                           
|Preferred dividends                  
|
|Earnings available for common stock  
|

As described in Item 3. Legal
Proceedings, KCP&L filed suit against multiple defendants who are alleged to have
responsibility for the 1999 Hawthorn No. 5 boiler explosion. KCP&L and its primary
insurance company have entered into a subrogation allocation agreement under which
recoveries in this suit are generally allocated 55% to the primary insurance company and
45% to KCP&L. As of December 31, 2003, various defendants have settled with KCP&L
in this litigation, resulting in KCP&L recording $35.8 million under the terms of the
subrogation allocation agreement. The amount recorded in 2003 earnings related to the loss
of use of the plant was approximately $18.5 million ($11.3 million net of income taxes).
The effect was to increase wholesale revenues $2.7 million, decrease fuel expense $4.0
million and decrease purchased power expense $11.8 million. The remaining $17.3 million
was recorded as a recovery of capital expenditures.

Consolidated KCP&Ls income
from continuing operations increased $23.2 million in 2003 compared to 2002.
KCP&Ls revenue increased $45.0 million primarily due to a significant increase
in wholesale MWhs sold at higher wholesale prices partially offset by the effect on retail
revenues of the January 2003 Kansas rate reduction. Revenues also increased due to the
partial settlements of Hawthorn No. 5 litigation discussed above of $2.7 million. This
increase in revenues combined with a $10.4 million decrease in interest expense and $4.4
million decrease in depreciation expense more than offset increases of $7.0 million in
purchased power expense, $11.3 million in pension expense, $6.7 million in power plant
maintenance expense and $3.3 million in transmission expense. The amortization of the
Missouri jurisdictional portion of the storm costs increased $3.1 million in 2003. In
2002, KCP&L expensed $16.5 million for the Kansas jurisdictional portion of the storm
costs.

34

Consolidated KCP&Ls income
from continuing operations increased $3.1 million in 2002 compared to 2001, as a result of
warmer summer 2002 weather compared to 2001, continued load growth and a 40% increase in
wholesale MWh sales. These factors combined with other net positive impacts of the return
to service of Hawthorn No. 5 in mid-2001 to more than offset increased expenses. The
increased expenses included $18.0 million of January 2002 ice storm costs and $25.4
million in increased KCP&L administrative and general expenses primarily attributable
to increased pension expenses.

Discontinued operations in 2003
includes a $7.1 million loss on the June 2003 disposition of HSS interest in RSAE
and continuing losses through the date of disposition of $1.6 million. Losses from RSAE of
$4.0 million and $7.2 million in 2002 and 2001, respectively, have been reclassified and
are presented as discontinued operations. Additionally, 2002 earnings reflect the $3.0
million cumulative effect to January 1, 2002, of a change in accounting principle for the
adoption of SFAS No. 142 and the associated write-down of RSAE goodwill.

# Consolidated KCP&L
Sales Revenues and MWh Sales

|                           
|---------------------------
|%                          
|2003                       
|
|Retail revenues            
|Residential                
|Commercial                 
|Industrial                 
|Other retail revenues      
|                           
|Total retail               
|Wholesale revenues         
|Other revenues             
|
|KCP&L electric revenues    
|Subsidiary revenues        
|
|Consolidated KCP&L revenues
|

|                        
|------------------------
|%                       
|2003                    
|
|Retail MWh sales        
|Residential             
|Commercial              
|Industrial              
|Other retail MWh sales  
|                        
|Total retail            
|Wholesale MWh sales     
|
|KCP&L electric MWh sales
|

Retail revenues decreased $5.5
million in 2003 compared to 2002. The Kansas rate reduction effective January 1, 2003,
decreased retail revenues approximately $12.5 million in 2003. See Critical Accounting
Policies for additional information. This reduction was partially offset by continued load
growth in 2003. Load growth consists of higher usage-per-customer and the addition of new
customers. Retail revenues increased $15.5 million in 2002 compared to 2001 due to warmer
2002 summer weather and continued load growth, which included increased residential and
commercial revenues of $25.4 million mostly offset by a reduction in industrial revenues.
The reduction in industrial revenues was primarily due to a weakened economy and the loss
of $4.4 million in revenues from one of KCP&Ls major industrial customers. The
average number of residential and commercial customers

35

increased approximately 1% and 2%,
respectively, in 2003 compared to 2002. The average number of both residential and
commercial customers increased approximately 2% in 2002 compared to 2001.

Wholesale revenues increased $49.5
million in 2003 compared to 2002, which in 2003, includes $2.7 million related to the
partial settlements of Hawthorn No. 5 litigation. Wholesale revenues increased $28.7
million in 2002 compared to 2001. Bulk power sales, the major component of wholesale
sales, vary with system requirements, generating unit and purchased power availability,
fuel costs and requirements of other electric systems. These factors, combined with a more
focused sales effort, helped increase MWh sales 16% in 2003 compared to 2002 and 40% in
2002 compared to 2001. This accounted for approximately 30% of the revenue variance in
2003 compared to 2002 and 91% of the revenue variance in 2002 compared to 2001.
Approximately 70% of the revenue variance in 2003 compared to 2002 was due to average
market prices per MWh of power sold in 2003 increasing 33% to $27.27. The increase was
driven by higher natural gas prices. Wholesale revenues in 2002 also increased $1.7
million compared to 2001 due to additional capacity sales beginning in the last half of
2001. Less than 1% of revenues reflect rates that include an automatic fuel adjustment
provision.

KCP&L Fuel and
Purchased PowerThe fuel cost per MWh generated and
the purchased power cost per MWh has a significant impact on the results of operations for
KCP&L. Generation fuel mix can change the fuel cost per MWh generated substantially.
In 2003, KCP&L experienced a record coal base load capacity factor of 77%. The coal
base load fleet achieved a record level of generation of over 15 million MWhs, a 6%
increase compared to 2002. Nuclear fuel costs per MWh generated remain substantially less
than the cost of coal per MWh generated. Replacement power costs for planned Wolf Creek
outages are accrued evenly over the units operating cycle. KCP&L expects its
cost of nuclear fuel to remain fairly constant through the year 2008. Coal has a
significantly lower cost per MWh generated than natural gas and oil. KCP&Ls
procurement strategies continue to provide delivered coal costs below the regional
average. Fossil plants averaged 75% of total generation and the nuclear plant the
remainder over the last three years. The cost per MWh for purchased power is significantly
higher than the fuel cost per MWh of coal and nuclear generation. KCP&L continually
evaluates its system requirements, the availability of generating units, availability and
cost of fuel supply, availability and cost of purchased power and the requirements of
other electric systems to provide reliable power economically.

Fuel expense increased $0.6 million
in 2003 compared to 2002 primarily due to a 3% increase in MWhs generated. This increase
was partially offset by a lower average fuel cost per MWh generated due to increased coal
and less natural gas and oil in the fuel mix and a $4.0 million decrease related to the
partial settlements of Hawthorn No. 5 litigation. Fuel costs decreased $4.1 million in
2002 compared to 2001, despite a 12% increase in generation. Lower fuel cost per MWh
generated due to additional coal and less natural gas and oil in the fuel mix was the
primary reason for the decline in fuel costs. The return to service of Hawthorn No. 5, a
low cost coal-fired unit, in mid-2001 contributed to the change in generation fuel mix.
Significantly lower natural gas prices and a reduction in the cost of uranium during 2002
also contributed to the lower fuel cost.

Purchased power expense increased
$7.0 million in 2003 compared to 2002. Excluding the $11.8 million related to the partial
settlements of Hawthorn No. 5 litigation, approximately 60% of the increase in 2003 is
attributable to a 31% increase in the price per MWh driven primarily by increased natural
gas prices. MWhs purchased increased 27% in 2003 compared to 2002 due to increased
customer needs. Purchased power expenses decreased $19.0 million in 2002 compared to 2001.
Cost per MWh purchased decreased approximately 31% in 2002 compared to 2001 due to
regional energy availability, a less volatile energy market and decreased MWh purchases
during peak hours. Also contributing to the decrease was a 15% decrease in MWhs purchased
due to the increased availability of KCP&Ls generating units.

36

Consolidated KCP&L Other
Operating Expenses (including operating, maintenance and general taxes)Consolidated KCP&Ls other operating expenses increased $11.0
million in 2003 compared to 2002 primarily due to the following:

|o | amortizing an additional $3.1
million of the Missouri jurisdictional portion of the January 2002 ice storm in 2003
|- | ------------------------------------------------------------------------------------------------------------------

|o | increased pension expense of $11.3 million primarily
due to a significant decline in the
market value of plan assets
|- | --------------------------------------------------------------------------------------------------------------------

|o | increased plant maintenance expense of $6.7 million
for plant outages and
|- | -------------------------------------------------------------------------

|o | increased transmission expenses of $3.3 million primarily
due to increased usage charges
as a result of the increased wholesale MWh sales and increased MWh of purchased power
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o | lower maintenance expense in 2003 due to expensing
in 2002 the $16.5 million of the Kansas
jurisdictional portion of the January 2002 ice storm.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------

Consolidated KCP&Ls other
operating expenses increased $44.6 million in 2002 compared to 2001 primarily due to the
following:

|o | expensing the $16.5 million Kansas jurisdictional
portion of the January 2002
ice storm and amortizing $1.5 million of the Missouri jurisdictional portion of the ice storm
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o | increased administrative and general expenses:
|- | ----------------------------------------------

| | o |  | increased pension expense of $17.7
million due to a significant decline in the market value of plan assets
| | - |  | ----------------------------------------------------------------------------------------------------------

| | o |  | increased injuries and damages expenses of $3.3 million resulting from additional claims and the
settlement of outstanding
claims
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------

|o | increased general taxes of $3.2 million primarily due to
increases in property tax levy rates.
|- | ----------------------------------------------------------------------------------------------

Consolidated KCP&L
DepreciationConsolidated KCP&Ls
depreciation expense decreased $4.5 million in 2003 compared to 2002. Depreciation expense
decreased approximately $7.7 million due to the change to a 60-year life for Wolf Creek
pursuant to the 2002 KCC stipulation and agreement. See Critical Accounting Policies,
Regulatory Matters for additional information. This decrease was partially offset by
increased depreciation expense of $2.2 million related to capital additions and $1.3
million as a result of the consolidation of the Lease Trust. See Note 13 of the
consolidated financial statements for additional information regarding consolidation of
the Lease Trust.

Consolidated KCP&Ls
depreciation expense increased $7.8 million in 2002 compared to 2001 primarily due to
increased capital additions relating to Hawthorn No. 5, which was returned to service
mid-2001. Additionally, KCP&L exercised its purchase option on the previously leased
Hawthorn No. 6 unit in late 2001.

Consolidated KCP&L
Interest ChargesConsolidated KCP&Ls
interest charges decreased $10.0 million in 2003 compared to 2002. KCP&Ls
long-term debt interest expense decreased $9.3 million in 2003 compared to 2002 primarily
due to lower levels of outstanding long-term debt as a result of the repayment of $124.0
million of medium-term notes in 2003. Lower average interest rates in 2003 compared to
2002 also contributed to the decrease.

Consolidated KCP&Ls
interest charges increased $1.9 million in 2002 compared to 2001. KCP&Ls
long-term debt interest expense increased $3.0 million in 2002 compared to 2001, primarily
due to higher average levels of long-term debt outstanding. Lower average rates on
variable rate long-term debt partially offset the higher average levels of long-term debt.
The higher average levels of debt outstanding primarily reflect the issuances of long-term
debt in 2001 and the 2002 issuance of $225.0

37

million of unsecured, fixed-rate senior notes
partially offset by $227.0 million of scheduled debt repayments during 2002.

KCP&Ls short-term debt
interest expense decreased $7.7 million in 2002 compared to 2001. Average interest rates
were down more than 50% and average levels of outstanding commercial paper were down more
than 70% in 2002 compared to 2001. KCP&L had no commercial paper outstanding at
December 31, 2002.

Allowance for borrowed funds used to
finance construction decreased $8.2 million in 2002 compared to 2001 due to decreased
construction work in progress primarily due to the return to service of Hawthorn No. 5 in
mid-2001.

Wolf CreekWolf Creek, a nuclear unit, is 20% of
KCP&Ls base load generating capacity and 14% of KCP&Ls total
generating capacity, including the 2003 addition of five leased combustion turbines that
added peaking capacity. Wolf Creeks operating performance has remained strong over
the last three years, contributing an average of 24% of KCP&Ls annual MWh
generation while operating at an average capacity of 92%. Wolf Creek has the lowest fuel
cost per MWh generated of any of KCP&Ls generating units.

KCP&L accrues the incremental
operating, maintenance and replacement power costs for planned outages evenly over the
units operating cycle, normally 18 months. As actual outage expenses are incurred,
the refueling liability and related deferred tax asset are reduced. Wolf Creek returned to
service on December 2, 2003, following a scheduled 36-day refueling and maintenance outage
that was extended 10 days for a reactor head assembly inspection. The extension did not
have a material impact on KCP&Ls 2003 results of operations. The next outage is
scheduled for the spring of 2005 and is estimated to be a 28-day outage.

Wolf Creeks assets represent
approximately 32% of KCP&Ls assets and its operating expenses represent
approximately 18% of KCP&Ls operating expenses. An extended shut-down of Wolf
Creek could have a substantial adverse effect on KCP&Ls business, financial
condition and results of operations because of higher replacement power and other costs.
Although not expected, the NRC could impose an unscheduled plant shut-down, reacting to
safety concerns at the plant or other similar nuclear units.  If a long-term
shut-down occurred, the state regulatory commissions could reduce rates by excluding the
Wolf Creek investment from rate base.

There has been significant opposition
and delays to development of a low-level radioactive waste disposal facility. See Note 13
to the consolidated financial statements for additional information. An inability to
complete this project would require KCP&L to write-off its net investment in the
project, which was $7.4 million at December 31, 2003. KCP&L, and the other owners of
Wolf Creek, could also still be required to participate in development of an alternate
site.

Ownership and operation of a nuclear
generating unit exposes KCP&L to risks regarding decommissioning costs at the end of
the units life and to potential retrospective assessments and property losses in
excess of insurance coverage. These risks are more fully discussed in the related sections
of Notes 1 and 13 to the consolidated financial statements.

38

KCP&L Projected
Utility Capital ExpendituresTotal utility capital expenditures,
excluding allowance for funds used to finance construction, were $148.7 million, $132.0
million and $262.0 million in 2003, 2002 and 2001, respectively. Utility capital
expenditures projected for the next three years are as follows:

|                                        
|----------------------------------------
|2004                                    
|
|(millions)                              
|Generating facilities                   
|Nuclear fuel                            
|Distribution and transmission facilities
|General facilities                      
|
|Total                                   
|

This utility capital expenditure plan
is subject to continual review and change. General facilities in 2004 includes a $30
million expenditure to buy out the operating lease for vehicles and heavy equipment.
KCP&L is currently evaluating purchase and construction options to meet capacity and
energy requirements in 2005 and thereafter. Consequently, the table does not reflect
utility capital expenditures for new capacity.

# Strategic Energy

Strategic Energy
Business OverviewStrategic Energy provides retail
electricity services by entering into long-term contracts with its customers to supply
electricity. In return, Strategic Energy receives an ongoing management fee, which is
included in the contracted sales price for the electricity. Of the states that offer
retail choice, Strategic Energy operates in California, Massachusetts, Michigan, New
Jersey, New York, Ohio, Pennsylvania and Texas. Strategic Energy is targeting expansion
into Connecticut and Maryland in 2004, as well as expansion into additional utility
territories in Ohio and Texas. Strategic Energy also provides strategic planning and
consulting services in the natural gas and electricity markets.

Great Plains Energys indirect
ownership in Strategic Energy currently totals 89%. In the normal course of business,
Great Plains Energy and KLT Inc. provide financial or performance assurance to third
parties on behalf of Strategic Energy in the form of guarantees to those third parties.
Additionally, Great Plains Energy provides guarantees and indemnities supporting letters
of credit and surety bonds obtained by Strategic Energy. These agreements are entered into
primarily to support or enhance the creditworthiness otherwise attributed to Strategic
Energy on a stand-alone basis, thereby facilitating the extension of sufficient credit to
accomplish Strategic Energys intended business purposes.

At December 31, 2003, Strategic
Energy provided retail electricity services on behalf of approximately 48,000 commercial,
institutional and small manufacturing accounts. Strategic Energys diverse customer
base, totaling over 6,800 customers, includes numerous Fortune 500 companies, smaller
companies, and governmental entities. Based solely on current signed contracts and
expected usage, Strategic Energy has forecasted future MWh commitments of 16.3 million,
10.1 million and 3.1 million for the years 2004 through 2006, respectively. Strategic
Energy expects to deliver additional MWh sales in these years through growth in existing
markets by re-signing existing customers and by signing new customers as well as through
expansion into new markets. Strategic Energys projected MWh sales for 2004 based on
signed contracts and expected additional MWh sales are in the range of 19 million to 21
million MWhs.

Strategic Energy maintains a
commodity-price risk management strategy that uses forward physical energy purchases and
derivative instruments to minimize significant, unanticipated earnings fluctuations caused
by commodity-price volatility. As a result of supplying electricity to retail customers

39

under fixed rate contracts, Strategic Energys policy is to match customers
demand with fixed price purchases. In certain markets where Strategic Energy operates,
entering into forward fixed price contracts is cost prohibitive. Derivative instruments,
primarily swaps, are used to limit the unfavorable effect that price increases will have
on electricity purchases. These instruments effectively fix the future purchase price of
electricity, protecting Strategic Energy from price volatility.

See Item 1. Business, Strategic
Energy section for information regarding the FERC Notice of Proposed Rulemaking to Remedy
Undue Discrimination through Open Access Transmission Service and Standard Electricity
Market Design.

Strategic Energy
Supplier Concentration and Credit RiskCredit risk represents the loss that
Strategic Energy could incur if a counterparty failed to perform under its contractual
obligations. To reduce its credit exposure, Strategic Energy enters into payment netting
agreements with certain counterparties that permit Strategic Energy to offset receivables
and payables with such counterparties. Strategic Energy further manages credit risk with
certain counterparties by entering into agreements that enable Strategic Energy to
terminate the transaction or modify collateral thresholds upon the occurrence of
credit-related events.

Based on guidelines set by its
Exposure Management Committee, Strategic Energy monitors its counterparty credit risk by
routinely evaluating the credit quality and performance of its suppliers. Among other
things, Strategic Energy monitors counterparty credit ratings, liquidity and results of
operations. As a result of these evaluations, Strategic Energy may, among other things,
establish counterparty credit limits and adjust the amount of collateral required from its
suppliers.

Strategic Energy enters into forward
contracts with multiple suppliers. At December 31, 2003, Strategic Energys five
largest suppliers under forward supply contracts represented 65% of the total future
committed purchases. Strategic Energys five largest suppliers, or their guarantors,
are rated investment grade. In the event of supplier non-delivery or default, Strategic
Energys results of operations could be affected to the extent the cost of
replacement power exceeded the combination of the contracted price with the supplier and
the amount of collateral held by Strategic Energy to mitigate its credit risk with the
supplier. Strategic Energys results of operations could also be affected, in a given
period, if it was required to make a payment upon termination of a supplier contract to
the extent that the contracted price with the supplier exceeded the market value of the
contract at the time of termination.

40

The following table provides
information on Strategic Energys credit exposure, net of collateral, as of December
31, 2003. It further delineates the exposure by the credit rating of counterparties and
provides guidance on the concentration of credit risk and an indication of the maturity of
the credit risk by credit rating of the counterparties.

|                    
|--------------------
|Number Of           
|Counterparties      
|Exposure            
|Before Credit       
|Rating              
|
|(millions)          
|External rating     
|Investment Grade    
|Non-Investment Grade
|Internal rating     
|Investment Grade    
|Non-Investment Grade
|
|Total               
|

|                                                         
|---------------------------------------------------------
|Maturity Of Credit Risk Exposure Before Credit Collateral
|
|Exposure                                                 
|Less Than                                                
|Rating                                                   
|
|(millions)                                               
|External rating                                          
|Investment Grade                                         
|Non-Investment Grade                                     
|Internal rating                                          
|Investment Grade                                         
|Non-Investment Grade                                     
|
|Total                                                    
|

External ratings are determined by
using publicly available credit ratings of the counterparty. If a counterparty has
provided a guarantee by a higher rated entity, the determination has been based on the
rating of its guarantor. Internal ratings are determined by, among other things, an
analysis of the counterpartys financial statements and consideration of publicly
available credit ratings of the counterpartys parent. Investment grade
counterparties are those with a minimum senior unsecured debt Standard & Poors
rating of BBB- or a Moodys rating of Baa3. Exposure before credit collateral has
been calculated considering all netting agreements in place, netting accounts payable and
receivable exposure with net mark-to-market exposure. Exposure before credit collateral is
impacted primarily by the power supply volume under contract with a given counterparty and
the relationship between current market prices and contracted power supply prices. Credit
collateral includes the amount of cash deposits, guarantees and letters of credit received
from counterparties. Net exposure has only been calculated for those counterparties to
which Strategic Energy is exposed and excludes counterparties exposed to Strategic Energy.

At December 31, 2003, Strategic
Energy had exposure before credit collateral to non-investment grade counterparties
totaling $36.5 million of which 63% is scheduled to mature in less than two years. In
addition, Strategic Energy held collateral totaling $30.8 million limiting its net
exposure to these non-investment grade counterparties to $5.7 million at December 31,
2003.

In July 2003, Mirant filed a
voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The
bankruptcy court entered an Interim Order, which ordered Mirant to comply with

41

the terms
of its prepetition trading contracts. In accordance with the Master Power Purchase and
Sale Agreement and the ISDA Master Agreement between Strategic Energy and Mirant, the
$10.0 million collateral threshold limit in both agreements was reduced to zero upon the
bankruptcy filing. Since that time, Mirant and Strategic Energy have continued to perform
under the conditions of their agreements. The Interim Order was finalized and Mirant has
assumed its contracts with Strategic Energy.

Strategic Energy is continuing to
pursue a strategy of contracting with national and regional counterparties that have
direct supplies and assets in the region of demand. Strategic Energy is also continuing to
address counterparty issues with strict margining and collateral requirements, netting of
credit exposures against payable balances, preferences for higher credit quality
counterparties and, in some cases, replacement of lower quality counterparty contracts.

Strategic Energy Results
of OperationsThe following table summarizes
Strategic Energys comparative results of operations.

|                               
|-------------------------------
|2003                           
|
|(millions)                     
|Operating revenues             
|Purchased power                
|Other operating expenses       
|Depreciation                   
|                               
|Operating income               
|Non-operating income (expenses)
|Interest charges               
|Income taxes                   
|
|Net income                     
|

Strategic Energys net income
increased $9.9 million in 2003 compared to 2002. The increased net income is primarily due
to continued growth in retail electric sales from the expansion into new markets and
continued sales efforts in existing markets. In addition to continued growth, Great Plains
Energys ownership of Strategic Energy was increased by 6% in the fourth quarter of
2002. These increases were partially offset by increased general and administrative
expenses including employee related expenses. Also, revenues less purchased power divided
by MWh sold (gross margin per MWh) decreased to $7.34 in 2003 compared to $8.70 in 2002.
The decrease in gross margin per MWh in 2003 compared to 2002 was primarily due to the
roll-off of higher margin contracts that were obtained during periods of high market price
volatility in late 2000 and early 2001 and to a lesser extent market conditions, including
increased competition. Strategic Energy currently expects the gross margin per MWh on new
customer contracts to average $5.00 to $6.00 and the gross margin per MWh on total
customer contracts to average $6.20 to $6.50 in 2004.

Strategic Energys net income
increased $7.9 million in 2002 compared to 2001; however, 2001 net income included
earnings of $15.0 million from the sale of power purchased from one supplier under
wholesale contracts that expired at the end of 2001. The increased net income in 2002
compared to 2001 is primarily due to continued growth in retail electric sales from the
expansion into new markets and continued sales efforts in existing markets, partially
offset by increased labor and benefits as well as other general and administrative
expenses and income taxes due to increased sales in states with higher income tax rates.

42

Strategic Energy
Operating RevenuesOperating revenues from Strategic
Energy increased $301.5 million in 2003 compared to 2002 and $377.6 million in 2002
compared to 2001 as shown in the following table.

|                        
|------------------------
|%                       
|2003                    
|
|(millions)              
|Electric - Retail       
|Electric - Wholesale    
|Gas and other           
|
|Total Operating Revenues
|

At December 31, 2003, Strategic
Energy served over 6,800 customers, a 31% increase from approximately 5,200 customers at
the end of 2002. Customers at the end of 2002 increased 53% from 3,400 customers at the
end of 2001. These customers represented approximately 48,000 accounts at the end of 2003,
a 45% increase from approximately 33,000 accounts at the end of 2002. Accounts at the end
of 2002 increased 69% from approximately 19,500 accounts at the end of 2001.

Retail electric revenues increased
$303.7 million in 2003 compared to 2002 primarily due to increased retail MWh sales.
Retail MWhs sold increased approximately 41% to 16.6 million in 2003 from 11.8 million in
2002. The increase in MWh sales resulted primarily from effective sales efforts in
re-signing approximately 80% of existing customers as well as signing new customers in
markets in which Strategic Energy continued to experience favorable conditions for growth.
MWh sales in California increased 70% to 5.5 million in 2003 from 3.2 million in 2002 and
MWh sales in Texas increased 58% to 4.5 million in 2003 from 2.8 million in 2002.

Retail electric revenues increased
$446.2 million in 2002 compared to 2001 primarily due to increased retail MWh sales,
partially offset by an 8% decrease in average retail revenues per MWh. Retail MWhs sold
increased 162% to 11.8 million in 2002 from 4.5 million in 2001, primarily from continued
growth in existing markets and expansion into new markets during 2002. Growth in existing
markets came primarily from strong sales efforts in re-signing existing customers as well
as signing new customers. Expansion into new markets contributed 2.8 million in MWh sales
and approximately $166 million of retail electric revenues during 2002. Several factors
contribute to changes in the average retail revenues per MWh, including the underlying
price of the commodity, the nature and type of products offered and the mix of sales by
geographic market.

Strategic Energy
Purchased PowerStrategic Energy primarily purchases
power under long-term forward physical delivery contracts to supply electricity to its
retail energy customers based on projected usage. Strategic Energy sells any excess retail
supply of electricity back into the wholesale market. The proceeds from the sale of excess
supply of electricity are recorded as a reduction of purchased power. The amount of excess
retail supply sales that reduced purchased power was $160.4 million, $126.4 million and
$95.6 million in 2003, 2002 and 2001, respectively.

Strategic Energy utilizes derivatives
in the procurement of electricity that are economic hedges but not considered accounting
hedges. Accordingly, changes in the fair value of these derivative instruments are
recorded as a component of purchased power. The amounts were insignificant for all periods
presented.

As previously discussed, Strategic
Energy operates in several retail choice electricity markets. The cost of supplying
electricity to retail customers can vary widely by geographic market. This variability can
be affected by many factors including, among other items, geographic differences in the
cost per

43

MWh of purchased power and capacity charges due to regional purchased power
availability and requirements of other electricity providers and differences in
transmission charges. However, Strategic Energy has mitigated the effects of higher supply
costs by entering into long-term, full-requirements contracts with customers that are
priced to the customers based on the cost of the associated supply contract.

Purchased power increased $283.5
million in 2003 compared to 2002 and increased $356.4 million in 2002 compared to 2001
primarily due to the increases in electric MWh sales discussed above. Additionally,
purchased power expense as a percentage of electric revenues increased in 2002 compared to
2001 primarily due to purchases of power from one supplier during 2001 under wholesale
contracts that expired at the end of 2001.

Strategic Energy Other
Operating ExpensesStrategic Energys other
operating expenses as a percentage of operating revenues decreased to 3.9% in 2003 from
4.8% and 9.4% 2002 and 2001, respectively, due to Strategic Energys efforts in
leveraging its infrastructure and the effects of achieving economies of scale. Other
operating expenses increased $4.5 million in 2003 compared to 2002 primarily due to higher
labor and benefit costs from the addition of employees and higher other general and
administrative expenses associated with higher sales volumes, geographic market expansion,
and regulatory and market development initiatives.

Other operating expenses decreased
$1.1 million in 2002 compared to 2001 primarily due to a $15.5 million decrease in the
cost of commercial gas sales from Strategic Energys natural gas retail supply
service, which was phased out by the end of 2001. This decrease was mostly offset by
increased labor and benefit costs from the addition of employees and increasing health
care related costs, higher profit sharing and deferred compensation expense which are tied
to earnings and financial performance, and higher other general and administrative
expenses associated with higher sales volumes, geographic market expansion, and regulatory
and market development initiatives.

Strategic Energy
Non-operating Income (Expenses)Strategic Energys non-operating
income (expenses) includes non-operating income less minority interest expense and
non-operating expenses. Minority interest expense represents the share of Strategic
Energys net income not attributable to Great Plains Energys indirect ownership
interest in Strategic Energy. Non-operating income (expenses) decreased $2.3 million in
2003 compared to 2002 primarily due to a $1.7 million decrease in minority interest
expense resulting from Great Plains Energys acquisition of an additional 6% indirect
ownership interest in Strategic Energy during the fourth quarter of 2002. Non-operating
income (expenses) increased $4.0 million in 2002 compared to 2001 primarily due to a gain
of $1.4 million recognized on the sale of gas contracts during the second quarter of 2001
and an increase in minority interest expense of $2.8 million.

# KLT Gas

KLT Gas Business
Overview and Plan to Exit the Gas Exploration and Development BusinessIn February 2004, the Great Plains
Energy Board of Directors approved managements recommendation to sell the KLT Gas
portfolio and exit the gas business. The Company evaluated this business and determined
the amount of capital and the length of time required for development of reserves and
production, combined with the earnings volatility of the exploration process, are no
longer compatible with the Companys strategic vision. Management will continue to
operate the KLT Gas portfolio during the sale process, which it expects to complete during
2004. See Note 7 to the consolidated financial statements for additional information.

In addition to the first quarter 2004
write down of the KLT Gas portfolio to its estimated realizable value discussed in Note 7
to the consolidated financial statements, management expects to incur losses

44

during 2004
to operate KLT Gas while it markets the KLT Gas portfolio for sale. Management estimates
the 2004 losses to operate KLT Gas will approximate $6.0 million before taxes, which after
taxes would reduce 2004 earnings by approximately $4.0 million. The after tax losses will
be reflected as a loss from discontinued operations in Great Plains Energys
consolidated statements of income in the periods incurred. The estimated losses to operate
KLT Gas anticipate completion of a sale of the KLT Gas portfolio at December 31, 2004. The
ultimate impact to Great Plains Energys consolidated statements of income for 2004
will be different than the estimates to the extent costs to operate deviate from the
budget and/or the timing of the KLT Gas portfolio sale deviates from December 31, 2004.

Prior to the decision to exit the
business, KLT Gas focused on exploring for, developing, and producing unconventional
natural gas resources, including coalbed methane properties. KLT Gas leased
properties are primarily located in Colorado, Kansas and Wyoming with some leases in
Nebraska and Texas.

In 2003, KLT Gas completed the sale
of approximately 30,000 undeveloped acres in Kansas. KLT Gas follows the full cost
accounting method for its natural gas properties, under which the acreage sale was
accounted for as an adjustment to capitalized costs with no gain recognized in earnings.

In 2003, KLT Gas leased
additional acreage in the Rocky Mountain region. Exploration of portions of the newly
acquired acreage commenced in the third quarter of 2003. In addition, KLT Gas continued to
test a new prospect in Colorado as well as the development of a pilot project in the
Powder River Basin and two additional projects in the Rocky Mountain region.

See Note 1, Natural Gas Properties
section, to the consolidated financial statements for information regarding the effect of
SFAS No. 141, Business Combinations and SFAS No. 142 on KLT Gas
contractual mineral rights included in gas property and investments on Great Plains
Energys consolidated balance sheet.

KLT Gas Results of
OperationsThe following table summarizes KLT
Gas comparative results of operations.

|                               
|-------------------------------
|2003                           
|
|(millions)                     
|Operating revenues             
|Other operating expenses       
|Depreciation and depletion     
|Gain (loss) on property        
|                               
|Operating income (loss)        
|Income from equity investments 
|Non-operating income (expenses)
|Interest charges               
|Income taxes                   
|
|Net income (loss)              
|

KLT Gas incurred a loss of $36.9
million in 2003. KLT Gas 2003 net loss includes after tax operating losses of $3.4
million, and impairments of $54.5 million which reduced earnings by $33.5 million. The
impairments include impairment charges totaling $15.2 million, which reduced earnings by
$9.3 million, on two properties in response to lower revised estimates of future gas
production and a fourth quarter 2003 impairment charge of $39.3 million, which reduced
earnings by $24.2 million, related to the Companys KLT Gas strategic review and exit
plan valuation analysis. See Note 7 to the consolidated financial statements for
additional information regarding KLT Gas property impairments. KLT Gas

45

2001 net
income included its second quarter Patrick KLT Gas, LLC sale, which resulted in a $12.0
million after tax gain.

KLT Gas Income TaxesKLT Gas recorded tax credits related
to its investment in natural gas properties of $6.5 million and $6.0 million in 2002 and
2001, respectively. The law that allowed substantially all of these credits expired at the
end of 2002.

# Other Non Regulated
Activities

Investment in Affordable
Housing Limited Partnerships  KLT InvestmentsKLT Investments Inc.s (KLT
Investments) earnings in 2003 totaled $8.1 million (including an after tax reduction of
$6.7 million in its affordable housing investment) compared to earnings of $10.4 million
in 2002 (including an after tax reduction of $5.7 million in its affordable housing
investment) and earnings of $6.6 million in 2001 (including an after tax reduction of $8.6
million in its affordable housing investment).

On a quarterly basis, KLT Investments
compares the cost of properties accounted for by the cost method to the total of projected
residual value of the properties and remaining tax credits to be received. Estimated
residual values are based on studies performed by an independent firm. Based on the latest
comparison, KLT Investments reduced its investments in affordable housing limited
partnerships by $11.0 million, $9.0 million, and $13.5 million in 2003, 2002 and 2001,
respectively. Pretax reductions in affordable housing investments are estimated to be $7
million, $10 million, and $3 million for the years 2004 through 2006, respectively. These
projections are based on the latest information available but the ultimate amount and
timing of actual reductions could be significantly different from the above estimates. The
properties underlying the partnership investment are subject to certain risks inherent in
real estate ownership and management. Even after these estimated reductions, earnings from
the investments in affordable housing are expected to be positive for the years 2004
through 2006. KLT Investments management does not anticipate making additional
investments in affordable housing limited partnerships at this time.

KLT Investments accrued tax credits
related to its investments in affordable housing limited partnerships of $19.1 million,
$19.3 million and $19.2 million in 2003, 2002 and 2001, respectively.

Subsidiary of KLT
Telecom Files for Bankruptcy  DTIThe accounting treatment related to
DTI and its 2001 bankruptcy is complex and is addressed in greater detail in Note 9 to the
consolidated financial statements; consequently, Note 9 in its entirety is incorporated by
reference in this portion of Managements Discussion and Analysis and should be read
as a component of this discussion.

On December 31, 2001, a subsidiary of
KLT Telecom, Holdings and its subsidiaries, Digital Teleport and Digital Teleport of
Virginia, Inc., filed separate voluntary petitions in the Bankruptcy Court for the Eastern
District of Missouri for reorganization under Chapter 11 of the U.S. Bankruptcy Code,
which cases have been procedurally consolidated. Holdings and its two subsidiaries are
collectively called DTI.

In December 2002, Digital Teleport
entered into an agreement to sell substantially all of its assets (Asset Sale) to
CenturyTel Fiber Company II, LLC (CenturyTel), a nominee of CenturyTel, Inc. The Asset
Sale was approved by the Bankruptcy Court in 2003 and closed in 2003.

KLT Telecom received $19.2 million in
2003 related to the confirmation of the DTI bankruptcy. Additionally, KLT Telecom realized
approximately $21 million of cash tax benefits in 2003. Pending

46

final resolution of the
MODOR Claim and the put option of a certain minority shareholder (which are described
below), the Company recorded a net gain of $28.1 million or $0.41 per share in 2003. The
impact on net income was primarily due to the net effect of the confirmation of the DTI
bankruptcy and the resulting distribution, the reversal of a $15.8 million tax valuation
allowance and the reversal of a $5 million debtor in possession financing commitment
previously reserved.

In early 2004, KLT Telecom paid $2.5
million to certain executives of Digital Teleport for entering into employment agreements
required as a condition precedent to the Asset Sale. The amount was recorded as a
liability in 2003.

The Bankruptcy Court conducted an
evidentiary hearing regarding three priority proofs of claim by the Missouri Department of
Revenue in the aggregate amount of $2.8 million (collectively, the MODOR Claim), and ruled
substantially in favor of Digital Teleport. MODOR appealed this ruling. KLT Telecom may
receive an additional distribution from the bankruptcy estate; however, the amount and
timing of any additional distribution is dependant upon the outcome of the MODOR appeal.

KLT Telecom originally acquired a 47%
interest in DTI in 1997. On February 8, 2001, KLT Telecom acquired control of DTI by
purchasing shares from another Holdings shareholder, Weinstein, increasing its ownership
to 83.6%. In connection with this purchase, KLT Telecom granted Weinstein a put option.
The put option provided for the sale by Weinstein of his remaining shares in Holdings to
KLT Telecom during a period beginning September 1, 2003, and ending August 31, 2005. The
put option provides for an aggregate exercise price for these remaining shares equal to
their fair market value with an aggregate floor amount of $15 million. The floor amount of
the put option was fully reserved during the fourth quarter of 2001, as described in Note
9 to the consolidated financial statements. On September 2, 2003, Weinstein delivered a
notice of exercise of his claimed rights under the put option. KLT Telecom rejected the
notice of exercise. KLT Telecom denied that Weinstein has any remaining rights or claims
pursuant to the put option, and denied any obligation to pay Weinstein any amount under
the put option. Subsequent to KLT Telecoms rejection of his notice of exercise,
Weinstein filed suit alleging breach of contract. See Item 3. Legal Proceedings for
additional information.

The operating results of DTI have
been included for the period February 8, 2001 (date of acquisition) through September 30,
2001, for consolidated KCP&L and through December 31, 2001, for Great Plains Energy.
Because of DTIs bankruptcy filings, KLT Telecom no longer had control over nor could
it exert significant control over DTI. As a consequence, as of December 31, 2001, DTI was
de-consolidated and presented on the cost basis. Consequently, KLT Telecom did not include
in its financial results the ongoing results of operations, earnings or losses incurred by
DTI since December 31, 2001.

Because of the bankruptcy filings, a
$195.8 million net write-off was included in (Gain) Loss on Property in operating expenses
on Great Plains Energys 2001 Consolidated Statement of Income. A corresponding tax
benefit of $55.8 million was included in income taxes. The 2001 net impact of the
bankruptcy to income was a $140.0 million reduction. Income taxes reported in 2001 do not
reflect the entire effect of the net write-off because of the uncertainty of recognizing
future tax deductions while in the bankruptcy process.

OtherDuring 2001, KLT Energy Services
wrote off its $6.2 million cost basis investment in the common stock of Bracknell
Corporation (Bracknell) due to a decline in its share price and the bankruptcy filing of
one of Bracknells subsidiaries.

47

Great Plains Energy and
Consolidated KCP&L Significant Balance Sheet Changes

| |  |  | (December 31, 2003 compared to December 31, 2002)
| |  |  | -------------------------------------------------

| | o |  | Great Plains Energys restricted cash and supplier collateral increased $20.9 million
due to cash collateral provided to Strategic Energy from suppliers to cover portions of
credit exposure.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Great Plains Energys receivables increased $42.6 million primarily due to a $15.5
million increase in Strategic Energys receivables as a result of the growth in its
retail electricity services and a $28.6 million increase in consolidated KCP&Ls
receivables primarily due to insurance recoveries.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Great Plains Energys and consolidated KCP&Ls assets and liabilities of
discontinued operations are the result of the June 2003 disposition of RSAE. RSAEs
assets and liabilities were reclassified and presented separately as prescribed under SFAS
No. 144.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Great Plains Energys affordable housing limited partnerships decreased $16.0 million
primarily due to a reduction in the valuation of the properties held by KLT Investments,
Inc.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Great Plains Energys gas property and investments decreased $35.2 million primarily
due to KLT Gas $54.5 million impairment partially offset by $18.6 million in capital
additions as a result of efforts during 2003 to develop KLT Gas properties.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Great Plains Energys other nonutility property and investments decreased $11.2
million primarily due to the June 2003 sale of a KLT Telecom building with a December 31,
2002 book value of $2.8 million, KLT Investments 2003 sale of $8.0 million of
trading securities and KLT Energy Services sale of an investment with a December 31,
2002, book value of $3.0 million. These decreases were partially offset by a $4.6 million
increase to reflect KCP&Ls equity investment in KCPL Financing I due to the
de-consolidation of KCPL Financing I as prescribed by FIN No. 46.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Great Plains Energys and consolidated KCP&Ls regulatory assets increased
$0.5 million primarily due to a $16.3 million increase in KCP&Ls regulatory
assets due to the effect of adopting SFAS No. 143 on January 1, 2003. The increase was
partially offset by KCP&Ls current year ARO activity of $3.4 million, and $11.0
million related to the amortization of accrued tax benefits previously provided to
customers through rates.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Great Plains Energys and consolidated KCP&Ls prepaid pension costs
increased $22.3 million and $20.9 million, respectively, primarily due to contributions in
2003 of $41.2 million, of which KCP&L funded $39.3 million.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Great Plains Energys notes payable increased $65.9 million primarily due to Great
Plains Energys additional borrowings of $73.0 million on its short-term credit
facility that was primarily used to make a $100.0 million capital contribution to
KCP&L and repay notes outstanding at December 31, 2002, related to the acquisition of
an additional indirect interest in Strategic Energy. Consolidated KCP&Ls notes
payable increased primarily due to a $22.0 million inter-company loan from Great Plains
Energy to HSS. The proceeds from the loan were used to repay RSAE bank borrowings, of
which $23.6 million were included in liabilities of discontinued operations at December
31, 2002.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Great Plains Energys current maturities of long-term debt decreased $73.9 million
due to KLT Investments paying down $9.2 million of affordable housing notes offset by a
$4.8 million increase in the current portion of affordable housing notes and a $69.5
million decrease in consolidated KCP&Ls current maturities of long-term debt.
Consolidated KCP&Ls current maturities of long-term debt decreased due to
KCP&L retiring $124.0 million of medium-term notes primarily with proceeds from the
capital contribution from Great Plains Energy partially offset by a $54.5 million increase
in KCP&Ls current portion of medium-term notes.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Great Plains Energys and consolidated KCP&Ls EIRR bonds classified as
current increased $48.3 million due to the scheduled remarketing of certain KCP&L EIRR
bonds in 2004.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Great Plains Energys accrued payroll and vacations increased $7.8 million primarily
due to increased employee related expenses.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------

48

| | o |  | Great Plains Energy and consolidated KCP&Ls ARO increased $108.5 million and
$106.7 million, respectively due to adopting SFAS No. 143 on January 1, 2003.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Great Plains Energy and consolidated KCP&Ls accrued nuclear decommissioning
costs decreased $64.6 million due to KCP&L reclassifying accrued nuclear
decommissioning cost to a contra regulatory asset due to the adoption of SFAS No. 143 on
January 1, 2003, and the effects of the ratemaking process.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Great Plains Energys and consolidated KCP&Ls pension liability increased
$16.2 million and $11.2 million, respectively, due to an increase in the accumulated
benefit obligation primarily due to a reduction in the discount rate.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Great Plains Energys long-term debt increased $190.1 million primarily due to a
$194.9 million increase in consolidated KCP&Ls long-term debt. Consolidated
KCP&Ls long-term debt increased $143.8 million due to the consolidation of the
Lease Trust and $154.6 million representing the Debentures issued by KCP&L and held by
KCPL Financing I. See Note 13, Consolidated KCP&L Leases and Note 19, Mandatorily
Redeemable Preferred Securities, respectively, to the consolidated financial statements
for further information. These increases were partially offset by decreases of $54.5
million for KCP&Ls medium-term notes reclassified to current maturities and
$48.3 million for KCP&Ls EIRR bonds reclassified to current maturities.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Capital Requirements and
LiquidityGreat Plains Energy operates through
its subsidiaries and has no material assets other than the stock of its subsidiaries.
Great Plains Energys ability to make payments on its debt securities and its ability
to pay dividends is dependent on its receipt of dividends from its subsidiaries and
proceeds from the sale of its securities.

Great Plains Energys capital
requirements are principally comprised of KCP&Ls utility capital expenditures
and KCP&Ls pension benefit plan funding requirements discussed below. Additional
cash and capital requirements for the companies, including long-term debt requirements,
are discussed below.

Great Plains Energys liquid
resources at December 31, 2003, included cash flows from operations of subsidiaries,
$114.4 million of cash and cash equivalents on hand and $299.5 million of unused bank
lines of credit. The unused lines consisted of $150.0 million from KCP&Ls
short-term bank lines of credit, $27.3 million from Strategic Energys revolving
credit facility, and $122.2 million from Great Plains Energys revolving credit
facility. See the Debt Agreements section below for more information on these agreements.

KCP&Ls consolidated
statements of cash flows include KLT Inc. and GPP for all the periods prior to the October
1, 2001 formation of the holding company. The effect of the 2001 bankruptcy of DTI on the
statements of cash flows is detailed in Note 9 to the consolidated financial statements.

Cash Flows From
OperationsGreat Plains Energy and consolidated
KCP&L generated positive cash flows from operating activities for the periods
presented. The increase in cash flows from operating activities for Great Plains Energy in
2003 compared to 2002 is primarily due to a $23.5 million increase in income from
continuing operations before non-cash expenses and the changes in working capital detailed
in Note 2 to the consolidated financial statements. The individual components of working
capital vary with normal business cycles and operations. Consolidated KCP&Ls
cash flow from operations increased slightly in 2003 compared to 2002 due to a $26.2
million increase in income from continuing operations and an increase in deferred taxes
mostly offset by the changes in working capital detailed in Note 2 to the consolidated
financial statements. Also, the timing of the Wolf Creek outage affects the refueling
outage accrual, deferred income taxes and amortization of nuclear fuel. The increase for
Great Plains

49

Energy and consolidated KCP&L in 2002 compared to 2001 is due to the
changes in working capital detailed in Note 2 to the consolidated financial statements.

Investing ActivitiesGreat Plains Energys and
consolidated KCP&Ls cash used for investing activities varies with the timing of
utility capital expenditures and purchases of investments and nonutility property.
Investing activities are offset by the proceeds from the sale of properties and insurance
recoveries. Utility capital expenditures and the allowance for borrowed funds used during
construction increased $17.9 million in 2003 compared to 2002 primarily due to
transmission plant and nuclear fuel additions partially offset by 2002 capital
expenditures of $14.7 million related to the January 2002 ice storm and insurance proceeds
and partial litigation settlements from Hawthorn No. 5 received in 2003. Additionally,
Great Plains Energy received proceeds of $19.2 million as a result of the DTI bankruptcy.

Utility capital expenditures and the
allowance for borrowed funds used during construction decreased $139.1 million in 2002
compared to 2001 primarily due to KCP&Ls mid-2001 completion of the rebuild of
Hawthorn No. 5 partially offset by KCP&Ls capital expenditures of $14.7 million
as a result of the January 2002 ice storm. Cash used for purchases of investments and
nonutility property in 2002 compared to 2001 decreased primarily reflecting KLT
Telecoms 2001 investments in DTI and DTIs 2001 purchases of telecommunications
property. Proceeds from the sale of assets decreased significantly in 2002 compared to
2001 due to KLT Gas 2001 sale of its equity ownership in Patrick KLT Gas, LLC.

Financing ActivitiesThe change in Great Plains Energy and
consolidated KCP&Ls cash flows from financing activities in 2003 compared to
2002 reflects the 2003 equity infusion of $100.0 million from Great Plains Energy to
KCP&L and KCP&Ls subsequent redemption of $104.0 million of medium-term
notes. Great Plains Energy essentially funded the infusion with proceeds from its $151.8
million common stock offering in late 2002; however, prior to the infusion, Great Plains
Energy used the offering proceeds to repay short-term borrowings in late 2002 and then
re-borrowed in early 2003 to make the equity infusion into KCP&L at the time of
redemption. An additional $20.0 million of KCP&Ls medium-term notes were retired
during 2003. The increase in dividends paid by Great Plains Energy is primarily
attributable to the public offering of 6.9 million common shares in late 2002.

On November 7, 2002, Great Plains
Energy entered into an Agreement and Plan of Merger (Agreement) with ELC, the ELC
shareholders and IEC, a wholly-owned subsidiary of Great Plains Energy. The ELC
Shareholders received $15.1 million in merger consideration. As part of the merger
consideration, on November 7, 2002, Great Plains Energy issued 387,596 additional shares
of its common stock to the ELC Shareholders. The Agreement valued such shares at
approximately $8 million. The remainder of the merger consideration was in short-term
notes, which were paid in January 2003.

Great Plains Energy repaid $185.8
million of debt balances in 2002 compared to net borrowings in 2001 of $186.5 million.
Included in the Great Plains Energys amounts is the consolidated KCP&Ls
repayment of $64.2 million of debt balances in 2002 compared to net borrowings of $160.4
million in 2001. The repayments in 2002 compared to the borrowings in 2001 reflect
decreased investing activities in utility capital expenditures, nonutility property and
investments discussed above.

KCP&L expects to meet day-to-day
operating requirements including interest payments, construction requirements (excluding
new generating capacity) and dividends to Great Plains Energy with internally-generated
funds. However, it might not be able to meet these requirements with internally-generated
funds because of the effect of inflation on operating expenses, the level of MWh sales,
regulatory actions, compliance with future environmental regulations and the availability
of generating units. The

50

funds Great Plains Energy and consolidated KCP&L need to
retire maturing debt (detailed below) will be provided from operations, the issuance of
long and short-term debt and/or the issuance of equity or equity-linked instruments. In
addition, the Company may issue debt, equity and/or equity-linked instruments to finance
growth or take advantage of new opportunities.

Strategic Energy expects to meet
day-to-day operating requirements including interest payments, credit support fees,
capital expenditures and dividends to its indirect interest holders with
internally-generated funds. However, it might not be able to meet these requirements with
internally-generated funds because of the effect of inflation on operating expenses, the
level of MWh sales, commodity-price volatility and the effects of counterparty
non-performance.

Great Plains Energy filed a
registration statement in April 2002 for the issuance of an aggregate amount up to $300
million of any combination of senior debt securities, subordinated debt securities, trust
preferred securities, convertible securities, or common stock. The registration statement
became effective in November 2002 and Great Plains Energy issued $151.8 million of common
stock.

As a registered public utility
holding company, Great Plains Energy must receive authorization from the SEC under the 35
Act to issue securities. Great Plains Energy is currently authorized to issue up to $1.2
billion of debt and equity through December 31, 2005. Great Plains Energy has utilized
$500.7 million of this amount as follows: (i) $39.0 million in preferred stock issued in
connection with the October 1, 2001, reorganization; (ii) $150.0 million in a 364-day
revolving credit facility and $150 million in a three-year revolving credit facility
($102.8 million was outstanding at December 31, 2003, under the replaced $225.0 million
revolving credit facility discussed below); (iii) $159.8 million in common equity issued
in a public offering and in connection with IECs acquisition of an indirect
ownership interest in Strategic Energy and (iv) $1.9 million in restricted stock issued to
executives on October 1, 2003.

Under its current SEC authorization,
Great Plains Energy cannot issue securities other than common stock unless (i) the
security to be issued, if rated, is rated investment grade by one nationally recognized
statistical rating organization, (ii) all of its outstanding securities that are rated
(except for its preferred stock) are rated investment grade, and (iii) it has maintained
common equity as a percentage of consolidated capitalization (as reflected on its
consolidated balance sheets as of the end of each quarter) of at least 30%. Great Plains
Energy was in compliance with these conditions as of December 31, 2003.

KCP&L filed a shelf registration
statement for up to $255 million of senior and subordinated debt securities, trust
preferred securities and related guarantees in 2003 providing KCP&L flexibility to
access the capital markets.

KCP&L may issue equity and
long-term debt only with the authorization of the MPSC. KCP&Ls previous
authorization expired at the end of 2003. KCP&L has filed an application with the MPSC
for authority to issue up to $600 million of long-term debt through March 31, 2006.
KCP&L expects the MPSC to act on its application within the next few months.

Issuances of short-term debt by
KCP&L are subject to SEC authorization under the 35 Act. Under the current
authorization, KCP&L may issue and have outstanding at any one time up to $500 million
of short-term debt. Under this authorization, KCP&L cannot issue short term debt
(other than commercial paper or short-term bank facilities) unless (i) the short-term debt
to be issued, if rated, is rated investment grade by one nationally recognized statistical
rating organization, (ii) all of its outstanding securities that are rated are rated
investment grade, (iii) all of the outstanding rated securities of Great Plains Energy
(except preferred stock) are rated investment grade, and (iv) Great Plains Energy and
KCP&L have maintained common equity as a percentage of consolidated capitalization (as
reflected on

51

their consolidated balance sheets as of the end of each quarter) of at least
30%. KCP&L was in compliance with these conditions as of December 31, 2003.

In 2003, KCP&L also completed the
remarketing of its 1998 Series C EIRR bonds totaling $50.0 million. The bonds are
classified as current liabilities in the December 31, 2003, balance sheet. The remarketed
bonds were issued with a one-year maturity at a fixed interest rate of 2.25%.

KCP&L has entered into a
revolving agreement, which expires in October 2004, to sell all of its right, title and
interest in the majority of its customer accounts receivable to Receivables Company, which
in turn sells most of the receivables to outside investors. KCP&L expects the
agreement to be renewed annually. See Note 3 to the consolidated financial statements.

Debt AgreementsGreat Plains Energy syndicated a
$225.0 million, revolving credit facility with a group of banks in the first quarter of
2003. The line expires in March 2004, but may be extended for an additional year at the
Companys option. Effective March 5, 2004, Great Plains Energy replaced this
revolving credit facility with a $150.0 million 364-day revolving credit facility and a
$150.0 million three-year revolving credit facility. The new facilities have substantially
the same terms and conditions as the existing credit facility. The existing facility
contains a Material Adverse Change (MAC) clause that requires Great Plains Energy to
represent, prior to receiving funding, that no MAC has occurred. The clause does, however,
permit the Company to access the facility even in the event of a MAC in order to repay
maturing commercial paper. Available liquidity under this facility is not impacted by a
decline in credit ratings unless the downgrade occurs in the context of a merger,
consolidation or sale. A default by Great Plains Energy or any of its significant
subsidiaries of other indebtedness totaling more than $25.0 million is a default under
this bank line. Under the terms of this agreement, Great Plains Energy is required to
maintain a consolidated indebtedness to consolidated capitalization ratio not greater than
0.65 to 1.0 at all times and an interest coverage ratio greater than 2.25 to 1.0, as those
ratios are defined in the agreement. At December 31, 2003, the Company was in compliance
with these covenants.

Strategic Energy maintains a secured
revolving credit facility for up to $95 million with a group of banks. This facility is
partially guaranteed by Great Plains Energy. The facility enhances Strategic Energys
liquidity including its ability to provide credit support through letters of credit for
purchased power and regulatory requirements. The maximum amount available for loans and
letters of credit under the facility is the lesser of $95 million or the borrowing base,
as defined in the agreement. The borrowing base generally is the sum of certain Strategic
Energy accounts receivable and the amount of the Great Plains Energy guarantee which was
$40.0 million at December 31, 2003. At December 31, 2003, Strategic Energy had a minimum
fixed charge ratio, as defined in the agreement, of at least 1.05 to 1.0; however, if the
ratio drops below 1.05 to 1.0, Great Plains Energys guarantee amount is required to
be increased based on quarterly calculations. At December 31, 2003, $58.5 million in
letters of credit had been issued under the agreement, leaving $27.3 million of capacity
available for loans and additional letters of credit. The line expires in June 2004, but
may be extended for an additional year by mutual agreement of the parties. The facility
contains a MAC clause that requires Strategic Energy to represent, prior to receiving
funding, that no MAC has occurred. A default by Strategic Energy of other indebtedness, as
defined in the facility, totaling more than $5.0 million is a default under the facility.
Under the terms of this agreement, Strategic Energy is required to maintain a minimum net
worth of $30 million and a maximum debt to EBITDA ratio of 2.0 to 1.0, as those are
defined in the agreement. At December 31, 2003, Strategic Energy was in compliance with
these covenants.

KCP&Ls primary sources of
liquidity are cash flows from operations and bilateral credit lines totaling $150.0
million with seven banks (as of December 31, 2003). KCP&L uses these lines to provide
support for its issuance of commercial paper. These bank facilities are each for a 364-day
term and

52

mature at various times throughout the year. The facilities can be extended for
one year under their term out provisions. KCP&L has MAC clauses in three agreements
covering $70.0 million of available bilateral credit lines. These three facilities require
KCP&L to represent, prior to receiving funding, that no MAC has occurred. Under these
agreements, KCP&L is able to access the facilities even in the event of a MAC in order
to redeem maturing commercial paper. KCP&Ls available liquidity under these
facilities is not impacted by a decline in credit ratings unless the downgrade occurs in
the context of a merger, consolidation or sale. A default by KCP&L on other
indebtedness is a default under these bank line agreements. Under the terms of certain
bank line agreements, KCP&L is required to maintain a consolidated indebtedness to
consolidated capitalization ratio, as defined in the agreements, not greater than 0.65 to
1.0 at all times. At December 31, 2003, KCP&L was in compliance with the covenant.

Under the indenture relating to
KCP&Ls Debentures, which are held by KCPL Financing I, KCP&L may not declare
or pay any dividends on any shares of its capital stock if at the time (i) there is an
event of default (as defined in the indenture), (ii) KCP&L is in default with respect
to its payment of any obligations under its guarantee of preferred securities issued by
KCPL Financing I, or (iii) KCP&L has elected to defer payments of interest on the
Debentures.

Great Plains Energy has agreements
with KLT Investments associated with notes KLT Investments issued to acquire its
affordable housing investments. Great Plains Energy has agreed not to take certain actions
including, but not limited to, merging, dissolving or causing the dissolution of KLT
Investments, or withdrawing amounts from KLT Investments if the withdrawals would result
in KLT Investments not being in compliance with minimum net worth and cash balance
requirements. The agreements also give KLT Investments lenders the right to have KLT
Investments repurchase the notes if Great Plains Energys senior debt rating falls
below investment grade, or if Great Plains Energy ceases to own at least 80% of
KCP&Ls stock. At December 31, 2003, KLT Investments had $10.6 million in
outstanding notes, including current maturities.

Under stipulations with the MPSC and
KCC, Great Plains Energy and KCP&L maintain common equity at not less than 30% and
35%, respectively, of total capitalization. Pursuant to an SEC order, Great Plains
Energys and KCP&Ls authorization to issue securities is conditioned on
maintaining a consolidated common equity capitalization of at least 30% and complying with
other conditions described above.

PensionsThe Company maintains defined benefit
plans for substantially all of its employees and incurs significant costs in providing the
plans, with the majority incurred by KCP&L. Plans are funded at a minimum on an
actuarial basis to provide assets sufficient to meet benefits to be paid to plan
participants consistent with the funding requirements of the Employment Retirement Income
Security Act of 1974 (ERISA) and further contributions may be made when deemed financially
advantageous.

Due to sharp declines in the debt and
equity markets since the third quarter of 2000, the value of assets held in the trusts to
satisfy pension plan obligations has decreased significantly. As a result, the
Companys minimum funding requirements determined under ERISA have increased from
$1.6 million in 2002 to $9.7 million in 2003, all of which was funded by KCP&L. The
Company funded an additional $31.5 million in 2003, of which KCP&L contributed $29.6
million. The additional funding will reduce payments in future years.

The ERISA funding requirement for
2004 is $24.3 million of which $20.1 million was paid in 2003. KCP&L will be
responsible for $23.1 million, of which $18.9 million was contributed in 2003. Management
believes the Company has adequate access to capital resources through cash flows from
operations or through existing lines of credit to support the remaining required funding.

53

Participants in the plans may request
a lump-sum cash payment upon termination of their employment. A change in payment
assumptions could result in increased cash requirements from pension plan assets with the
Company being required to accelerate future funding.

Under the terms of the pension plans,
the Company reserves the right to amend or terminate the plans, and from time to time
benefits have changed. See Note 10 to the consolidated financial statements for further
discussion.

Credit RatingsAt December 31, 2003, the major
credit rating agencies rated the companies securities as follows:

|                                                                           
|---------------------------------------------------------------------------
|Moody's                                                                    
|Investors Service                                                          
|
|Great Plains Energy                                                        
|Outlook                                                                    
|Corporate Credit Rating                                                    
|Preferred Stock                                                            
|Senior Unsecured Debt                                                      
|Subordinated Debt                                                          
|                                                                           
|KCP&L                                                                      
|Outlook                                                                    
|Senior Secured Debt                                                        
|Senior Unsecured Debt                                                      
|Commercial Paper                                                           
|
|*   Indicative ratings are based on Standard and Poor's rating methodology.

The ratings reflect the November 12,
2003, Moodys Investor Service downgrade of its ratings of KCP&L securities and
corresponding change in its rating outlook from negative to stable. At the same time, the
credit ratings and rating outlook for Great Plains Energys securities were affirmed.
The ratings presented reflect the current views of these rating agencies and no assurances
can be given that these ratings will continue for any given period of time. The companies
view maintenance of strong credit ratings as being extremely important; however, and to
that end, an active and ongoing dialogue is maintained with the agencies with respect to
the companies results of operations, financial position, and future prospects.

None of the companies
outstanding debt, except for the notes associated with affordable housing investments
discussed above, is impacted by a decline in credit ratings, which would cause the
acceleration of interest and/or principal payments in the event of a ratings downgrade,
unless the downgrade occurs in the context of a merger, consolidation, or sale. However,
in the event of a downgrade the companies and/or their subsidiaries may be subject to
increased interest costs on their credit facilities. Additionally, in KCP&Ls
bond insurance policies on its Series 1993A and 1993B EIRR bonds, which aggregate $79.5
million, KCP&L has agreed to limits on its ability to issue additional mortgage bonds
based on the mortgage bonds credit ratings. See Note 18 to the consolidated
financial statements.

54

Supplemental Capital
Requirements and Liquidity InformationThe following information is provided
to summarize cash obligations and commercial commitments.

|Great Plains Energy Contractual Obligations
|-------------------------------------------
|
|Payment due by period                      
|
|(millions)                                 
|Long-term debt:                            
|Principal                                  
|Interest                                   
|Lease obligations                          
|Purchase obligations:                      
|Nuclear fuel                               
|Coal                                       
|Purchased capacity                         
|Purchased power                            
|Other                                      
|
|Total contractual obligations              
|

Long-term debt includes current
maturities. See Note 18 to the consolidated financial statements and the consolidated
KCP&L long-term debt discussion below for additional information.

See the consolidated KCP&L lease
obligation discussion below and Note 13 to the consolidated financial statements for
additional information.

Purchased power represents Strategic
Energys agreements to purchase electricity at various fixed prices to meet estimated
supply requirements. Strategic Energy has energy sales contracts not included above for
2004 and 2005 totaling $111.9 million and $37.8 million, respectively.

The Company has long-term liabilities
recorded on its consolidated balance sheet at December 31, 2003, under GAAP, that do not
have a definitive cash payout date and are not included in the table above.

|Consolidated KCP&L Contractual Obligations
|------------------------------------------
|
|Payment due by period                     
|
|(millions)                                
|Long-term debt:                           
|Principal                                 
|Interest                                  
|Lease obligations                         
|Purchase obligations:                     
|Nuclear fuel                              
|Coal                                      
|Purchased capacity                        
|Other                                     
|
|Total contractual obligations             
|

Long-term debt includes current
maturities. Long-term debt principal excludes $0.7 million discount on senior notes and
the $3.3 million fair value adjustment to the EIRR bonds related to SFAS No. 133. EIRR
bonds classified as current liabilities of $129.3 million due at various dates during the
years 2012 through 2018 are included here on their final due date. Variable rate interest
obligations are based on rates as of January 1, 2004. See Note 18 to the consolidated
financial statements for additional information.

55

Lease obligations include capital and
operating lease obligations; capital lease obligations are less than 3% of the total.
Lease obligations also include leases for railcars to serve jointly-owned generating units
where KCP&L is the managing partner. KCP&L will be reimbursed by the other owners
for about $2.0 million per year ($24.0 million total) of the amounts included in the table
above. See Note 13 to the consolidated financial statements for additional information.

Nuclear fuel represents
KCP&Ls 47% share of Wolf Creek nuclear fuel commitments including enrichment,
fabrication, uranium and conversion. Coal represents KCP&Ls share of purchase
commitments based on estimated prices to supply coal for generating plants.

KCP&L purchases capacity from
other utilities and nonutility suppliers. Purchasing capacity provides the option to
purchase energy if needed or when market prices are favorable. This can be a
cost-effective alternative to new construction. KCP&L has capacity sales agreements
not included above that total $12.5 million for 2004 and $11.8 million per year for 2005
through 2008.

Consolidated KCP&L has long-term
liabilities recorded on its consolidated balance sheet at December 31, 2003, under GAAP,
that do not have a definitive cash payout date and are not included in the table above.

Off-Balance Sheet
ArrangementsIn the normal course of business,
Great Plains Energy and certain of its subsidiaries enter into various agreements
providing financial or performance assurance to third parties on behalf of certain
subsidiaries. Such agreements include, for example, guarantees, stand-by letters of credit
and surety bonds. These agreements are entered into primarily to support or enhance the
creditworthiness otherwise attributed to a subsidiary on a stand-alone basis, thereby
facilitating the extension of sufficient credit to accomplish the subsidiaries
intended business purposes.

As a registered public utility
holding company system, Great Plains Energy must receive authorization from the SEC under
the 35 Act to issue guarantees on behalf of its subsidiaries. Under its current SEC
authorization, guarantees cannot be issued unless (i) all of its outstanding securities
that are rated (except for its preferred stock) are rated investment grade and (ii) it has
maintained common equity as a percentage of consolidated capitalization (as reflected on
its consolidated balance sheets as of the end of each quarter) of at least 30%. Great
Plains Energy was in compliance with these conditions as of December 31, 2003. Great
Plains Energy is currently authorized to issue up to $600 million for guarantees on behalf
of its subsidiaries and the nonutility subsidiaries have $300 million of authorization for
guarantees they can issue on behalf of other nonutility subsidiaries.

As prescribed in FIN No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Guarantees of Indebtedness of Others, the Company began recording a liability for
the fair value of obligations it undertakes for guarantees issued after December 31, 2002.
The interpretation does not encompass guarantees of the Companys own future
performance, such as Great Plains Energys guarantees to support Strategic Energy
power purchases and regulatory requirements. KCP&L began recording an immaterial
amount for the fair value of guarantees issued in 2003 for the residual value of vehicles
and heavy equipment under an operating lease, which terminated with the buy out of the
lease in early 2004.

56

|Other Commercial Commitments Outstanding  
|------------------------------------------
|
|Amount of commitment expiration per period
|                                          
|
|(millions)                                
|Consolidated KCP&L Guarantees             
|
|Great Plains Energy Guarantees,           
|including consolidated KCP&L              
|

Great Plains Energy and KLT Inc. have
provided $159.8 million of guarantees to support Strategic Energy power purchases and
regulatory requirements. Strategic Energys current power supply contracts end in
2010; however, 96% expire by the end of 2006. As of December 31, 2003, guarantees related
to Strategic Energy are as follows: 
     o     Great Plains Energy direct guarantees to
counterparties totaling $46.6 million and KLT Inc. direct guarantees to counterparties
totaling 
            $20.1 million, with varying expiration dates 
     o    Great Plains Energy indemnifies the issuers of surety bonds totaling $37.3 million, of
which $30.9 million expire in 2004 and $6.4 
            million expire in 2005
     o    Great Plains Energy guarantees
related to letters of credit totaling $40.0 million, all of which expire in 2004
     o    Great
Plains Energy has issued a letter of credit totaling $15.8 million.

KCP&L is contingently liable for
guaranteed energy savings under agreements with several customers. KCP&L has entered
agreements guaranteeing an aggregate value of approximately $7.8 million over the next
seven years. In most cases a subcontractor would indemnify KCP&L for any payments made
by KCP&L under these guarantees.

KCP&L has guaranteed a $7.9
million residual value for vehicles and heavy equipment under an operating lease.
KCP&L bought out the lease in early 2004.

The table above does not include the
following guarantees:

KCPL Financing I, a trust, has issued
$150.0 million of preferred securities. In connection with the issuance of the preferred
securities, KCP&L issued a preferred securities guarantee, which guarantees the
payment of any accrued and unpaid distributions, the redemption price and payments upon
dissolution, winding-up or termination of the trust, all to the extent that the trust has
funds available therefore. At December 31, 2003, there were no accrued and unpaid
distributions.

In December 2002, KCP&L obtained
bond insurance policies as a credit enhancement to its Series 1993A and 1993B EIRR bonds,
which total $79.5 million. The insurance agreement between KCP&L and the issuer of the
bond insurance policies provides for reimbursement by KCP&L for any amounts the
insurer pays under the bond insurance policies.

Environmental MattersThe Company is subject to regulation
by federal, state and local authorities with regard to air and other environmental matters
primarily through KCP&Ls operations. The generation and transmission of
electricity produces and requires disposal of certain hazardous products, which are
subject to these laws and regulations. In addition to imposing continuing compliance
obligations, these laws and regulations authorize the imposition of substantial penalties
for noncompliance, including fines, injunctive relief and other sanctions. Failure to
comply with these laws and regulations could have a material adverse effect on Great
Plains Energy and consolidated KCP&L.

KCP&L operates in an
environmentally responsible manner and seeks to use current technology to avoid and treat
contamination. KCP&L regularly conducts environmental audits designed to ensure

57

compliance with governmental regulations and to detect contamination. Governmental bodies,
however, may impose additional or more restrictive environmental regulations that could
require substantial changes to operations or facilities at a significant cost. See Note 13
to the consolidated financial statements.

ITEM 7A.  QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Great Plains Energy and consolidated
KCP&L are exposed to market risks associated with commodity price and supply, interest
rates and equity prices. Market risks are handled in accordance with established policies,
which may include entering into various derivative transactions. In the normal course of
business, Great Plains Energy and consolidated KCP&L also face risks that are either
non-financial or non-quantifiable. Such risks principally include business, legal,
operational and credit risks and are not represented in the following analysis.

Commodity RiskKCP&L and Strategic Energy engage
in the wholesale and retail marketing of electricity and accordingly, are exposed to risk
associated with the price of electricity.

KCP&Ls wholesale operations
include the physical delivery and marketing of power obtained through its generation
capacity and long, intermediate and short-term capacity/energy contracts. KCP&L
maintains a capacity margin of at least 12% of its peak summer demand. This net positive
supply of capacity and energy is maintained through its generation assets and capacity and
power purchase agreements to protect it from the potential operational failure of one of
its owned or contracted power generating units. The agreements contain penalties for
non-performance to protect KCP&L from energy price risk on the contracted energy.
KCP&L also enters into additional power purchase agreements with the objective of
obtaining the most economical energy to meet its physical delivery obligations to its
customers. KCP&L continually evaluates the need for additional risk mitigation
measures in order to minimize its financial exposure to, among other things, spikes in
wholesale power prices during periods of high demand.

KCP&Ls sales include the
sales of electricity to its retail customers and bulk power sales of electricity in the
wholesale market. KCP&L continually evaluates its system requirements, the
availability of generating units, availability and cost of fuel supply, the availability
and cost of purchased power and the requirements of other electric systems; therefore, the
impact of the hypothetical amounts that follow could be significantly reduced depending on
the system requirements and market prices at the time of the increases. During 2003,
approximately 75% of KCP&Ls net MWhs generated was coal-fired. A hypothetical
10% increase in the market price of coal could have resulted in a $1.6 million decrease in
pretax earnings for 2003. KCP&L currently has almost all of its coal requirements for
2004 and 2005 under contract. An insignificant amount of the expected delivered cost of
coal is subject to price fluctuations. In 2003, approximately 10% was subject to the
market price of coal. KCP&L has implemented price risk mitigation measures to reduce
its exposure to high natural gas prices. A hypothetical 10% increase in natural gas and
oil market prices would have resulted in a decrease of less than $1.0 million in pretax
earnings. Approximately 75% of KCP&Ls summer 2004 projected gas generation
requirements for retail and firm wholesale sales are price protected through its hedging
program, which is consistent with the percentages hedged in 2003. A hypothetical 10%
increase in the cost of purchased power could have resulted in a $5.3 million decrease in
pretax earnings for 2003.

Strategic Energy maintains a
commodity-price risk management strategy that uses forward physical energy purchases and
derivative instruments to minimize significant, unanticipated earnings fluctuations caused
by commodity-price volatility. As a result of supplying electricity to retail customers,
Strategic Energys policy is to match customers demand with fixed price
purchases. In certain markets where Strategic Energy operates, entering into forward fixed
price contracts is cost prohibitive. By

58

entering into swap contracts for a portion of its
forecasted purchases in these markets, the future purchase price of electricity is
effectively fixed under these swap contracts. The swap contracts limit the unfavorable
effect that price increases will have on electricity purchases.

KLT Gas is exposed to commodity price
risk on the natural gas it produces. Financial hedge instruments can be used to mitigate
its exposure to market price fluctuations on approximately 85% of its daily gas sales in
accordance with its risk management policy. Currently, KLT Gas is producing an
insignificant volume of gas and the price risk is minimal.

KCP&L and Strategic Energy are
not required to record energy transactions at fair value. Commitments to purchase and sell
energy and energy-related products except for derivatives that qualify as cash flow hedges
are currently carried at cost. KCP&L and Strategic Energy report the revenue and
expense associated with all energy contracts at the time the underlying physical
transaction closes consistent with industry practice and the business philosophy of
generating/purchasing and delivering physical power to customers.

Interest Rate RiskGreat Plains Energy manages interest
expense and short and long-term liquidity through a combination of fixed rate and variable
rate debt. Generally, the amount of each type of debt is managed through market issuance,
but interest rate swap and cap agreements with highly rated financial institutions may be
used to achieve the desired combination. Using outstanding balances and annualized
interest rates as of December 31, 2003, a hypothetical 10% increase in the interest rates
associated with variable rate debt would have resulted in a decrease of less than $1.0
million in pretax earnings for 2003. Additionally, interest rates impact the fair value of
long-term debt. A change in interest rates would impact the Company to the extent it
redeemed any of its outstanding long-term debt. Great Plains Energy and consolidated
KCP&L book value of long-term debt was 5% below fair value at December 31, 2003.

Equity Price RiskKCP&L maintains trust funds, as
required by the NRC, to fund certain costs of decommissioning its Wolf Creek nuclear power
plant. KCP&L does not expect Wolf Creek decommissioning to start before 2025. As of
December 31, 2003, these funds were invested primarily in domestic equity securities and
fixed income securities and are reflected at fair value on the KCP&Ls balance
sheets. The mix of securities is designed to provide returns to be used to fund
decommissioning and to compensate for inflationary increases in decommissioning costs;
however the equity securities in the trusts are exposed to price fluctuations in equity
markets, and the value of fixed rate fixed income securities are exposed to changes in
interest rates. Investment performance and asset allocation are periodically reviewed. A
hypothetical increase in interest rates resulting in a hypothetical 10% decrease in the
value of the fixed income securities would have resulted in a $3.9 million reduction in
the value of the decommissioning trust funds. A hypothetical 10% decrease in equity prices
would have resulted in a $3.3 million reduction in the fair value of the equity securities
as of December 31, 2003. KCP&Ls exposure to equity price market risk associated
with the decommissioning trust funds is in large part mitigated due to the fact that
KCP&L is currently allowed to recover its decommissioning costs in its rates.

KLT Investments has affordable
housing notes that require the greater of 15% of the outstanding note balances or the next
annual installment to be held as cash, cash equivalents or marketable securities. A
hypothetical 10% decrease in market prices of the securities held as collateral would have
resulted in a decrease of less than $1.0 million in pretax earnings for 2003.

59

# ITEM 8. CONSOLIDATED
FINANCIAL STATEMENTS

# GREAT PLAINS ENERGY
                  Consolidated Statements of Income

|Year Ended December 31                                         | 2003
|-------------------------------------------------------------- | ----
|
|(thousands, except per share amounts)                         
|Operating Revenues                                             |     
|Electric revenues - KCP&L                                      |     
|Electric revenues - Strategic Energy                           |     
|Other revenues                                                 |     
|                                                               |     
|Total                                                          |     
|
|Operating Expenses                                             |     
|Fuel                                                           |     
|Purchased power - KCP&L                                        |     
|Purchased power - Strategic Energy                             |     
|Other                                                          |     
|Maintenance                                                    |     
|Depreciation and depletion                                     |     
|General taxes                                                  |     
|(Gain) Loss on property                                        |     
|                                                               |     
|Total                                                          |     
|
|Operating income                                               |     
|Income (loss) from equity investments                          |     
|Minority interest in subsidiaries                              |     
|Non-operating income                                           |     
|Non-operating expenses                                         |     
|Interest charges                                               |     
|
|Income (loss) from continuing operations before income taxes   |     
|and cumulative effect of a change in accounting principle      |     
|Income taxes                                                   |     
|
|Income (loss) from continuing operations before cumulative     |     
|effect of a change in accounting principle                     |     
|Loss from discontinued operations, net of income               |     
|taxes (Note 8)                                                 |     
|Cumulative effect of a change in accounting principle (Note 6) |     
|
|Net income (loss)                                              |     
|Preferred stock dividend requirements                          |     
|
|Earnings (loss) available for common stock                     |     
|
|                                                               |     
|Average number of common shares outstanding                    |     
|                                                               |     
|Basic and diluted earnings (loss) per common share             |     
|Continuing operations                                          |     
|Discontinued operations                                        |     
|Cumulative effect                                              |     
|
|Basic and diluted earnings (loss) per common share             |     
|
|                                                               |     
|Cash dividends per common share                                |     
|

The accompanying Notes
to Consolidated Financial Statements are an integral part of these statements.

60

# GREAT PLAINS ENERGY
                                         Consolidated Balance Sheets

|                                                           | December 31
|---------------------------------------------------------- | -----------
|2002                                                      
|
|(thousands)                                               
|ASSETS                                                     |            
|Current Assets                                             |            
|Cash and cash equivalents                                  |            
|Restricted cash                                            |            
|Receivables                                                |            
|Fuel inventories, at average cost                          |            
|Materials and supplies, at average cost                    |            
|Deferred income taxes                                      |            
|Assets of discontinued operations                          |            
|Other                                                      |            
|                                                           |            
|Total                                                      |            
|
|Nonutility Property and Investments                        |            
|Affordable housing limited partnerships                    |            
|Gas property and investments                               |            
|Nuclear decommissioning trust fund                         |            
|Other                                                      |            
|                                                           |            
|Total                                                      |            
|
|Utility Plant, at Original Cost                            |            
|Electric                                                   |            
|Less-accumulated depreciation                              |            
|                                                           |            
|Net utility plant in service                               |            
|Construction work in progress                              |            
|Nuclear fuel, net of amortization of $113,472 and $121,951 |            
|                                                           |            
|Total                                                      |            
|
|Deferred Charges                                           |            
|Regulatory assets                                          |            
|Prepaid pension costs                                      |            
|Goodwill                                                   |            
|Other deferred charges                                     |            
|                                                           |            
|Total                                                      |            
|
|Total                                                      |            
|

The accompanying Notes
to Consolidated Financial Statements are an integral part of these statements.

61

# GREAT PLAINS ENERGY
                                         Consolidated Balance Sheets

|                                                              | December 31
|------------------------------------------------------------- | -----------
|2002                                                         
|
|(thousands)                                                  
|LIABILITIES AND CAPITALIZATION                                |            
|Current Liabilities                                           |            
|Notes payable                                                 |            
|Current maturities of long-term debt                          |            
|EIRR bonds classified as current                              |            
|Accounts payable                                              |            
|Accrued taxes                                                 |            
|Accrued interest                                              |            
|Accrued payroll and vacations                                 |            
|Accrued refueling outage costs                                |            
|Supplier collateral                                           |            
|Liabilities of discontinued operations                        |            
|Other                                                         |            
|                                                              |            
|Total                                                         |            
|
|Deferred Credits and Other Liabilities                        |            
|Deferred income taxes                                         |            
|Deferred investment tax credits                               |            
|Asset retirement obligations                                  |            
|Accrued nuclear decommissioning costs                         |            
|Pension liability                                             |            
|Other                                                         |            
|                                                              |            
|Total                                                         |            
|
|Capitalization                                                |            
|Common stock equity                                           |            
|Common stock-150,000,000 shares authorized without par value  |            
|69,259,203 and 69,196,322 shares issued, stated value         |            
|Unearned compensation                                         |            
|Capital stock premium and expense                             |            
|Retained earnings                                             |            
|Treasury stock-3,265 and 152 shares, at cost                  |            
|Accumulated other comprehensive loss                          |            
|                                                              |            
|Total                                                         |            
|Cumulative preferred stock $100 par value                     |            
|3.80% - 100,000 shares issued                                 |            
|4.50% - 100,000 shares issued                                 |            
|4.20% - 70,000 shares issued                                  |            
|4.35% - 120,000 shares issued                                 |            
|                                                              |            
|Total                                                         |            
|Company-obligated Mandatorily Redeemable Preferred Securities |            
|of a trust holding solely KCP&L Subordinated Debentures       |            
|Long-term debt (Note 18)                                      |            
|                                                              |            
|Total                                                         |            
|
|Commitments and Contingencies (Note 13)                       |            
|
|Total                                                         |            
|

The accompanying Notes
to Consolidated Financial Statements are an integral part of these statements.

62

# GREAT PLAINS ENERGY
                                   Consolidated Statements of Cash Flows

|Year Ended December 31                                       | 2003
|------------------------------------------------------------ | ----
|
|(thousands)                                                 
|Cash Flows from Operating Activities                         |     
|Net income (loss)                                            |     
|Less: Loss from discontinued operations, net of income taxes |     
|                                                             |     
|Income (loss) from continuing operations                     |     
|Adjustments to reconcile income (loss) to net cash           |     
|from operating activities:                                   |     
|Cumulative effect of a change in accounting principles       |     
|Depreciation and depletion                                   |     
|Amortization of:                                             |     
|Nuclear fuel                                                 |     
|Other                                                        |     
|Deferred income taxes (net)                                  |     
|Investment tax credit amortization                           |     
|(Income) Loss from equity investments                        |     
|(Gain) Loss on property                                      |     
|Deferred storm costs                                         |     
|Minority interest                                            |     
|Other operating activities (Note 2)                          |     
|                                                             |     
|Net cash from operating activities                           |     
|
|Cash Flows from Investing Activities                         |     
|Utility capital expenditures                                 |     
|Allowance for borrowed funds used during construction        |     
|Purchases of investments                                     |     
|Purchases of nonutility property                             |     
|Proceeds from disposition of property                        |     
|Hawthorn No. 5 partial insurance recovery                    |     
|Hawthorn No. 5 partial litigation settlements                |     
|Loan to DTI prior to majority ownership                      |     
|Other investing activities                                   |     
|                                                             |     
|Net cash from investing activities                           |     
|
|Cash Flows from Financing Activities                         |     
|Issuance of common stock                                     |     
|Issuance of long-term debt                                   |     
|Repayment of long-term debt                                  |     
|Net change in short-term borrowings                          |     
|Dividends paid                                               |     
|Other financing activities                                   |     
|                                                             |     
|Net cash from financing activities                           |     
|
|Net Change in Cash and Cash Equivalents                      |     
|Cash and Cash Equivalents from Continuing                    |     
|Operations at Beginning of Year                              |     
|                                                             |     
|Cash and Cash Equivalents from Continuing                    |     
|Operations at End of Year                                    |     
|
|
|Net Change in Cash and Cash Equivalents from                 |     
|Discontinued Operations                                      |     
|Cash and Cash Equivalents from Discontinued                  |     
|Operations at Beginning of Year                              |     
|                                                             |     
|Cash and Cash Equivalents from Discontinued                  |     
|Operations at End of Year                                    |     
|

The accompanying Notes
to Consolidated Financial Statements are an integral part of these statements.

63

# GREAT PLAINS ENERGY
          Consolidated Statements of Common Stock Equity

|                                              | 2003 | 2002 | 2001
|--------------------------------------------- | ---- | ---- | ----
|
|
|(thousands, except share data)               
|Common Stock                                  |      |      |     
|Beginning balance                             |      |      |     
|Issuance of common stock                      |      |      |     
|Issuance of restricted common stock           |      |      |     
|
|Total common stock                            |      |      |     
|
|
|Unearned Compensation                         |      |     
|Issuance of restricted common stock           |      |      |     
|Compensation expense recognized               |      |      |     
|
|Total unearned compensation                   |      |      |     
|
|
|Capital Stock Premium and Expense             |      |     
|Beginning balance                             |      |      |     
|Issuance of common stock                      |      |      |     
|Other                                         |      |      |     
|
|Total capital stock premium and expense       |      |      |     
|
|
|Retained Earnings                             |      |     
|Beginning balance                             |      |      |     
|Net income (loss)                             |      |      |     
|Dividends:                                    |      |     
|Common stock                                  |      |      |     
|Preferred stock - at required rates           |      |      |     
|Options                                       |      |      |     
|
|Total retained earnings                       |      |      |     
|
|
|Treasury Stock                                |      |     
|Beginning balance                             |      |      |     
|Treasury shares acquired                      |      |      |     
|Treasury shares reissued                      |      |      |     
|
|Total treasury stock                          |      |      |     
|
|
|Accumulated Other Comprehensive               |      |     
|Income (Loss), net of tax                     |      |     
|Beginning balance                             |      |      |     
|Gain (loss) on derivative hedging instruments |      |      |     
|Minimum pension obligation                    |      |      |     
|Reclassifications to revenues and expenses    |      |      |     
|Cumulative effect of a change in              |      |     
|accounting principles                         |      |      |     
|
|Ending balance                                |      |      |     
|
|
|
|Total Common Stock Equity                     |      |      |     
|

The accompanying Notes
to Consolidated Financial Statements are an integral part of these statements.

64

# GREAT PLAINS ENERGY
         Consolidated Statements of Comprehensive Income

|Year Ended December 31                                  | 2003
|------------------------------------------------------- | ----
|
|(thousands)                                            
|Net Income (Loss)                                       |     
|
|Other comprehensive loss:                               |     
|Gain (loss) on derivative hedging instruments           |     
|Income tax (expense) benefit                            |     
|                                                        |     
|Net gain (loss) on derivative hedging instruments       |     
|                                                        |     
|
|Change in minimum pension obligation                    |     
|Income tax benefit                                      |     
|                                                        |     
|Net change in minimum pension obligation                |     
|                                                        |     
|Reclassification to revenues and expenses, net of tax   |     
|
|Comprehensive income (loss) before cumulative effect of |     
|a change in accounting principles, net of income taxes  |     
|Cumulative effect of a change in accounting principles, |     
|net of income taxes                                     |     
|
|Comprehensive Income (Loss)                             |     
|

The accompanying Notes
to Consolidated Financial Statements are an integral part of these statements.

65

# KANSAS CITY POWER & LIGHT
COMPANY                    Consolidated Statements of Income

|Year Ended December 31                                         | 2003
|-------------------------------------------------------------- | ----
|
|(thousands)                                                   
|Operating Revenues                                             |     
|Electric revenues                                              |     
|Other revenues                                                 |     
|                                                               |     
|Total                                                          |     
|
|Operating Expenses                                             |     
|Fuel                                                           |     
|Purchased power                                                |     
|Other                                                          |     
|Maintenance                                                    |     
|Depreciation and depletion                                     |     
|General taxes                                                  |     
|Gain on property                                               |     
|                                                               |     
|Total                                                          |     
|
|Operating income                                               |     
|Income from equity investments                                 |     
|Minority interest in subsidiaries                              |     
|Non-operating income                                           |     
|Non-operating expenses                                         |     
|Interest charges                                               |     
|
|Income from continuing operations before income taxes          |     
|and cumulative effect of a change in accounting principle      |     
|Income taxes                                                   |     
|
|Income from continuing operations before cumulative            |     
|effect of a change in accounting principle                     |     
|Loss from discontinued operations, net of                      |     
|income taxes (Note 8)                                          |     
|Cumulative effect of a change in accounting principle (Note 6) |     
|
|Net income                                                     |     
|Preferred stock dividend requirements                          |     
|                                                               |     
|Earnings available for common stock                            |     
|

The disclosures
regarding KCP&L included in the accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

66

# KANSAS CITY POWER & LIGHT
COMPANY                        Consolidated Balance Sheets

|                                                           | December 31
|---------------------------------------------------------- | -----------
|2002                                                      
|
|(thousands)                                               
|ASSETS                                                     |            
|Current Assets                                             |            
|Cash and cash equivalents                                  |            
|Receivables                                                |            
|Fuel inventories, at average cost                          |            
|Materials and supplies, at average cost                    |            
|Deferred income taxes                                      |            
|Assets of discontinued operations                          |            
|Other                                                      |            
|                                                           |            
|Total                                                      |            
|
|Nonutility Property and Investments                        |            
|Nuclear decommissioning trust fund                         |            
|Other                                                      |            
|                                                           |            
|Total                                                      |            
|
|Utility Plant, at Original Cost                            |            
|Electric                                                   |            
|Less-accumulated depreciation                              |            
|                                                           |            
|Net utility plant in service                               |            
|Construction work in progress                              |            
|Nuclear fuel, net of amortization of $113,472 and $121,951 |            
|                                                           |            
|Total                                                      |            
|
|Deferred Charges                                           |            
|Regulatory assets                                          |            
|Prepaid pension costs                                      |            
|Other deferred charges                                     |            
|                                                           |            
|Total                                                      |            
|
|Total                                                      |            
|

The disclosures
regarding KCP&L included in the accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

67

# KANSAS CITY POWER & LIGHT
COMPANY                        Consolidated Balance Sheets

|                                                              | December 31
|------------------------------------------------------------- | -----------
|2002                                                         
|
|(thousands)                                                  
|LIABILITIES AND CAPITALIZATION                                |            
|Current Liabilities                                           |            
|Notes payable to Great Plains Energy                          |            
|Current maturities of long-term debt                          |            
|EIRR bonds classified as current                              |            
|Accounts payable                                              |            
|Accrued taxes                                                 |            
|Accrued interest                                              |            
|Accrued payroll and vacations                                 |            
|Accrued refueling outage costs                                |            
|Liabilities of discontinued operations                        |            
|Other                                                         |            
|                                                              |            
|Total                                                         |            
|
|Deferred Credits and Other Liabilities                        |            
|Deferred income taxes                                         |            
|Deferred investment tax credits                               |            
|Asset retirement obligations                                  |            
|Accrued nuclear decommissioning costs                         |            
|Pension liability                                             |            
|Other                                                         |            
|                                                              |            
|Total                                                         |            
|
|Capitalization                                                |            
|Common stock equity                                           |            
|Common stock-1,000 shares authorized without par value        |            
|1 share issued, stated value                                  |            
|Retained earnings                                             |            
|Accumulated other comprehensive loss                          |            
|                                                              |            
|Total                                                         |            
|Company-obligated Mandatorily Redeemable Preferred Securities |            
|of a trust holding solely KCP&L Subordinated Debentures       |            
|Long-term debt (Note 18)                                      |            
|                                                              |            
|Total                                                         |            
|
|Commitments and Contingencies (Note 13)                       |            
|
|Total                                                         |            
|

The disclosures
regarding KCP&L included in the accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

68

# KANSAS CITY POWER & LIGHT
COMPANY             Consolidated Statements of Cash Flows

|Year Ended December 31                                        | 2003
|------------------------------------------------------------- | ----
|
|(thousands)                                                  
|Cash Flows from Operating Activities                          |     
|Net income                                                    |     
|Less:  Loss from discontinued operations, net of income taxes |     
|                                                              |     
|Income from continuing operations                             |     
|Adjustments to reconcile income to net cash                   |     
|from operating activities:                                    |     
|Cumulative effect of a change in accounting principles        |     
|Depreciation and depletion                                    |     
|Amortization of:                                              |     
|Nuclear fuel                                                  |     
|Other                                                         |     
|Deferred income taxes (net)                                   |     
|Investment tax credit amortization                            |     
|Income from equity investments                                |     
|Gain on property                                              |     
|Deferred storm costs                                          |     
|Minority interest                                             |     
|Other operating activities (Note 2)                           |     
|                                                              |     
|Net cash from operating activities                            |     
|
|Cash Flows from Investing Activities                          |     
|Utility capital expenditures                                  |     
|Allowance for borrowed funds used during construction         |     
|Purchases of investments                                      |     
|Purchases of nonutility property                              |     
|Proceeds from disposition of property                         |     
|Hawthorn No. 5 partial insurance recovery                     |     
|Hawthorn No. 5 partial litigation settlements                 |     
|Loan to DTI prior to majority ownership                       |     
|Other investing activities                                    |     
|                                                              |     
|Net cash from investing activities                            |     
|
|Cash Flows from Financing Activities                          |     
|Issuance of long-term debt                                    |     
|Repayment of long-term debt                                   |     
|Net change in short-term borrowings                           |     
|Dividends paid                                                |     
|Dividends paid to Great Plains Energy                         |     
|Cash of KLT Inc. and GPP dividended to                        |     
|Great Plains Energy                                           |     
|Equity contribution from Great Plains Energy                  |     
|Other financing activities                                    |     
|                                                              |     
|Net cash from financing activities                            |     
|
|Net Change in Cash and Cash Equivalents                       |     
|Cash and Cash Equivalents from Continuing                     |     
|Operations at Beginning of Year                               |     
|                                                              |     
|Cash and Cash Equivalents from Continuing                     |     
|Operations at End of Year                                     |     
|
|
|Net Change in Cash and Cash Equivalents from                  |     
|Discontinued Operations                                       |     
|Cash and Cash Equivalents from Discontinued                   |     
|Operations at Beginning of Year                               |     
|                                                              |     
|Cash and Cash Equivalents from Discontinued                   |     
|Operations at End of Year                                     |     
|

The disclosures
regarding KCP&L included in the accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

69

# KANSAS CITY POWER & LIGHT
COMPANY            Consolidated Statements of Common Stock Equity

|                                                   | 2003 | 2002 | 2001
|-------------------------------------------------- | ---- | ---- | ----
|
|
|(thousands, except share data)                    
|Common Stock                                       |      |      |     
|Beginning balance                                  |      |      |     
|Exchange of KCP&L common stock to                  |      |     
|Great Plains Energy common stock                   |      |      |     
|Exchange of preferred stock and the associated     |      |     
|stock discount to Great Plains Energy              |      |      |     
|Issuance of new KCP&L common stock                 |      |      |     
|Equity contribution from Great Plains Energy       |      |      |     
|
|Total common stock                                 |      |      |     
|
|
|Capital Stock Premium and Expense                  |      |     
|Beginning balance                                  |      |      |     
|Transfer of capital stock premium and expense      |      |     
|to Great Plains Energy                             |      |      |     
|
|Total capital stock premium and expense            |      |      |     
|
|
|Retained Earnings                                  |      |     
|Beginning balance                                  |      |      |     
|Net income (loss)                                  |      |      |     
|Dividends:                                         |      |     
|Common stock                                       |      |      |     
|Common stock held by Great Plains Energy           |      |      |     
|Preferred stock - at required rates                |      |      |     
|Equity dividend of KLT Inc. to Great Plains Energy |      |      |     
|
|Total retained earnings                            |      |      |     
|
|
|Accumulated Other Comprehensive                    |      |     
|Income (Loss), net of tax                          |      |     
|Beginning balance                                  |      |      |     
|Gain (loss) on derivative hedging instruments      |      |      |     
|Minimum pension obligation                         |      |      |     
|Reclassifications to revenues and expenses         |      |      |     
|Equity dividend of KLT Inc. to Great Plains Energy |      |      |     
|Cumulative effect of a change in                   |      |     
|accounting principles                              |      |      |     
|
|Ending balance                                     |      |      |     
|
|
|
|Total Common Stock Equity                          |      |      |     
|

The disclosures
regarding KCP&L included in the accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

70

# KANSAS CITY POWER & LIGHT
COMPANY          Consolidated Statements of Comprehensive Income

|Year Ended December 31                                  | 2003
|------------------------------------------------------- | ----
|
|(thousands)                                            
|Net income                                              |     
|
|Other comprehensive loss:                               |     
|Gain (loss) on derivative hedging instruments           |     
|Income tax (expense) benefit                            |     
|                                                        |     
|Net gain (loss) on derivative hedging instruments       |     
|                                                        |     
|
|Change in minimum pension obligation                    |     
|Income tax benefit                                      |     
|                                                        |     
|Net change in minimum pension obligation                |     
|                                                        |     
|Reclassification to revenues and expenses, net of tax   |     
|
|Comprehensive income before cumulative effect of a      |     
|change in accounting principles, net of income taxes    |     
|Cumulative effect of a change in accounting principles, |     
|net of income taxes                                     |     
|
|Comprehensive Income                                    |     
|

The disclosures
regarding KCP&L included in the accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

71

# GREAT PLAINS ENERGY
INCORPORATED KANSAS CITY POWER &
LIGHT COMPANY Notes to Consolidated
Financial Statements

The notes to consolidated financial
statements that follow are a combined presentation for Great Plains Energy Incorporated
and Kansas City Power & Light Company, both registrants under this filing. The terms
Great Plains Energy, Company, KCP&L and
consolidated KCP&L are used throughout this report. Great Plains
Energy and the Company refer to Great Plains Energy Incorporated and its
consolidated subsidiaries, unless otherwise indicated. KCP&L refers to
Kansas City Power & Light Company, and consolidated KCP&L refers to
KCP&L and its consolidated subsidiaries.

# 1. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

OrganizationGreat Plains Energy, a Missouri
corporation incorporated in 2001, is a public utility holding company registered with and
subject to the regulation of the Securities and Exchange Commission (SEC) under the Public
Utility Holding Company Act of 1935 (35 Act). Through a corporate restructuring, which was
consummated on October 1, 2001, Great Plains Energy became the parent company and sole
owner of the common stock of KCP&L. Each outstanding share of KCP&L stock was
exchanged for a share of Great Plains Energy stock. As a result, Great Plains Energy
replaced KCP&L as the listed entity on the New York Stock Exchange with the trading
symbol GXP. In connection with the reorganization, KCP&L transferred to Great Plains
Energy its interest in two wholly-owned subsidiaries, KLT Inc. and Great Plains Power
Incorporated (GPP). Great Plains Energy does not own or operate any significant assets
other than the stock of its subsidiaries.

Great Plains Energy has five direct
subsidiaries:

| |  |  
| |  | -
| |  | o
| |  |  
| |  |  
| |  |  
| |  |  
| |  |  
| | 
| |  | o
| |  |  
| |  |  
| |  |  
| |  |  
| |  |  
| | 
| |  | o
| |  |  
| |  |  
| |  |  
| | 
| |  | o
| |  |  

72

| |  | o |  | Great Plains Energy Services Incorporated (Services) was formed in 2003 as a service company under the 35 Act to provide support | 
| |  | - |  | -------------------------------------------------------------------------------------------------------------------------------- | 
| |  |   |  | and administrative services to Great Plains Energy and certain of its subsidiaries.                                              | 

The operations of Great Plains Energy
and its subsidiaries are divided into three reportable segments: KCP&L, Strategic
Energy and KLT Gas. Great Plains Energys legal structure differs from the functional
management and financial reporting of its reportable segments. Other activities not
considered a reportable segment include the operations of HSS, GPP, Services, all KLT Inc.
operations other than Strategic Energy and KLT Gas and holding company operations.

Cash and Cash EquivalentsCash and cash equivalents consist of
highly liquid investments with original maturities of three months or less. For Great
Plains Energy this includes Strategic Energys cash held in trust of $16.1 million
and $11.4 million at December 31, 2003 and 2002, respectively.

Strategic Energy has entered into
collateral arrangements with selected electricity power suppliers that require selected
customers to remit payment to lockboxes that are held in trust and managed by a Trustee.
As part of the trust administration, the Trustee remits payment to the supplier for
electricity purchased by Strategic Energy. On a monthly basis, any remittances into the
lockboxes in excess of disbursements to the supplier are remitted back to Strategic
Energy.

Restricted CashStrategic Energy has entered into
Master Power Purchase and Sale Agreements with its power suppliers. Certain of these
agreements contain provisions whereby, to the extent Strategic Energy has a net exposure
to the purchased power supplier, collateral requirements are to be maintained. Collateral
posted in the form of cash to Strategic Energy is restricted by agreement, but would
become unrestricted in the event of a default by the purchased power supplier. Restricted
cash collateral at December 31, 2003, was $20.9 million. There were no such cash
collateral deposits at December 31, 2002.

Fair Value of Financial
InstrumentsThe following methods and assumptions
were used to estimate the fair value of each class of financial instruments for which it
is practicable to estimate that value:

Nonutility Property and
Investments Consolidated KCP&Ls investments and nonutility property
includes the nuclear decommissioning trust fund recorded at fair value. Fair value is
based on quoted market prices of the investments held by the fund. In addition to
consolidated KCP&Ls investments, Great Plains Energys investments and
nonutility property include KLT Investments affordable housing limited partnerships.
The fair value of KLT Investments affordable housing limited partnership total
portfolio, based on the discounted cash flows generated by tax credits, tax deductions and
sale of properties, approximates book value. The fair values of other various investments
are not readily determinable and the investments are therefore stated at cost.

Long-term DebtThe
incremental borrowing rate for similar debt was used to determine fair value if quoted
market prices were not available. Great Plains Energys and consolidated
KCP&Ls book value of long-term debt was 5% below fair value at December 31,
2003.

Investments in
Affordable Housing Limited PartnershipsAt December 31, 2003, KLT Investments
had $52.6 million in affordable housing limited partnerships. Approximately 65% of these
investments were recorded at cost; the equity method was used for the remainder. Tax
expense is reduced in the year tax credits are generated. The investments generate future
cash flows from tax credits and tax losses of the partnerships. The investments also
generate

73

cash flows from the sales of the properties. For most investments, tax credits
are received over ten years. KLT Investments projects tax credits to run through 2009. A
change in accounting principle relating to investments made after May 19, 1995, requires
the use of the equity method when a company owns more than 5% in a limited partnership
investment. Of the investments recorded at cost, $33.1 million exceed this 5% level but
were made before May 19, 1995. Management does not anticipate making additional
investments in affordable housing limited partnerships at this time.

On a quarterly basis, KLT Investments
compares the cost of those properties accounted for by the cost method to the total of
projected residual value of the properties and remaining tax credits to be received.
Estimated residual values are based on studies performed by an independent firm. Based on
the latest comparison, KLT Investments reduced its investments in affordable housing
limited partnerships by $11.0 million, $9.0 million, and $13.5 million in 2003, 2002 and
2001, respectively. These amounts are included in Non-operating expenses on the
consolidated statements of income. Pretax reductions in affordable housing investments are
estimated to be $7 million, $10 million and $3 million for the years 2004 through 2006,
respectively. These projections are based on the latest information available but the
ultimate amount and timing of actual reductions could be significantly different from the
above estimates. The properties underlying the partnership investment are subject to
certain risks inherent in real estate ownership and management. Even after these estimated
reductions, earnings from the investments in affordable housing are expected to be
positive for the years 2004 through 2006.

Natural Gas PropertiesThe Company does not have significant
oil and gas producing activities based on the results of the significance tests preformed
as prescribed in Statement of Financial Accounting Standards (SFAS) No. 69,
Disclosures About Oil and Gas Producing Activities. KLT Gas follows the full
cost method of accounting for its natural gas properties, substantially all of which were
undeveloped at December 31, 2003. The full cost method requires that all costs associated
with property acquisition, exploration and development activities be capitalized. Any
excess of book value over the present value (10% discount rate) of estimated future net
revenues (at year-end prices) from the natural gas reserves is expensed. All natural gas
property interests owned by KLT Gas are located in the United States.

Natural gas property and equipment
included in gas property and investments on Great Plains Energys consolidated
balance sheets totaled $9.8 million, net of $63.8 million of accumulated depreciation and
impairments, in 2003 and $45.0 million, net of $8.5 million of accumulated depreciation,
in 2002. See Note 7 for information regarding the impairment of KLT Gas assets.

In June 2001, the Financial
Accounting Standards Board (FASB) issued SFAS No. 141, Business Combinations,
which requires the purchase method of accounting for business combinations initiated after
June 30, 2001. In July 2001, the FASB also issued SFAS No. 142, Goodwill and Other
Intangible Assets, which discontinues the practice of amortizing goodwill and
indefinite lived intangible assets and initiates an annual review for impairment.
Intangible assets with a determinable useful life will continue to be amortized over that
period. The amortization provisions apply to goodwill and intangible assets acquired after
June 30, 2001. SFAS No. 141 and 142 clarify that more assets should be distinguished and
classified between tangible and intangible. KLT Gas did not change or reclassify
contractual mineral rights included in gas property and investments on Great Plains
Energys consolidated balance sheet upon adoption of these standards. KLT Gas
management believes its classification of such mineral rights under the full cost method
of accounting for natural gas properties, which is consistent with industry practice, is
appropriate. However, the accounting profession and others are engaged in industry-wide
deliberations regarding whether SFAS No. 141 and 142 require contractual mineral rights to
be classified as intangible assets. Based on the results of the deliberations, if
management determines reclassification is necessary, KLT Gas gas property and
investments would be reduced and intangible assets would increase by a like amount at
December 31,

74

2003 and 2002, respectively, representing cost incurred from the effective
date of June 30, 2001. The amounts are not significant to Great Plains Energys
consolidated balance sheets. The provisions of SFAS No. 141 and 142 impact only the
balance sheet and associated footnote disclosure, and any required reclassification would
not impact Great Plains Energys cash flows or results of operations.

Other Nonutility PropertyGreat Plains Energys and
consolidated KCP&Ls other nonutility property includes land, buildings,
vehicles, general office equipment and software and is recorded at historical cost, net of
accumulated depreciation, and has a range of depreciable lives of 3 to 50 years.

Utility PlantKCP&Ls utility plant is
stated at historical costs of construction. These costs include taxes, an allowance for
the cost of borrowed and equity funds used to finance construction and payroll-related
costs, including pensions and other fringe benefits. Replacements, improvements and
additions to units of property are capitalized. Repairs of property and replacements of
items not considered to be units of property are expensed as incurred (except as discussed
under Wolf Creek Refueling Outage Costs). When property units are retired or otherwise
disposed, the original cost, net of salvage, is charged to accumulated depreciation.
Substantially all utility plant is pledged as collateral for KCP&Ls mortgage
bonds under the General Mortgage Indenture and Deed of Trust dated December 1, 1986, as
supplemented.

The balances of utility plant in
service with a range of depreciable lives are listed in the table below:

|                            
|----------------------------
|December 31                 
|Utility Plant In Service    
|
|(millions)                  
|Production (23 - 42 years)  
|Transmission (27 - 76 years)
|Distribution (8 - 75 years) 
|General (5 - 50 years)      
|
|Total                       
|

Through December 31, 2003, KCP&L
has received $164 million in insurance recoveries related to property destroyed in the
February 17, 1999, explosion at Hawthorn No. 5. Additionally, KCP&L filed suit against
multiple defendants who are alleged to have responsibility for the explosion. In 2003,
various defendants settled with KCP&L in this litigation resulting in KCP&L
recording $17.3 million in recoveries of property destroyed. Recoveries received have been
recorded as an increase in accumulated depreciation.

As prescribed by the Federal Energy
Regulatory Commission (FERC), Allowance for Funds used During Construction (AFDC) is
charged to the cost of the plant. AFDC is included in the rates charged to customers by
KCP&L over the service life of the property. AFDC equity funds are included as a
non-cash item in non-operating income and AFDC borrowed funds are a reduction of interest
charges. The rates used to compute gross AFDC are compounded semi-annually and averaged
8.2% in 2003, 4.4% in 2002 and 6.8% in 2001.

In 2001, the American Institute of
Certified Public Accountants issued an exposure draft on a proposed Statement of Position
(SOP) Accounting for Certain Costs and Activities Related to Property, Plant, and
Equipment. The SOP is expected to be issued in 2004 and is effective for fiscal
years beginning after December 15, 2004. If issued in its present format, the SOP would
prohibit KCP&L from accruing in advance for its Wolf Creek refueling outage, which
occurs on an 18 month cycle. The next refueling outage is scheduled for the second quarter
2005. The SOP would also prohibit the capitalization of

75

almost all administrative and
general costs. The Company is currently analyzing the effect of the SOP on the
Companys results of operations.

Depreciation, Depletion
and AmortizationDepreciation of KCP&Ls
utility plant other than nuclear fuel is computed using the straight-line method over the
estimated lives of depreciable property based on rates approved by state regulatory
authorities. Annual depreciation rates average about 3%. Depreciation of nonutility
property is computed using the straight-line method. Excluding DTI and RSAE, annual
depreciation rates for 2003, 2002 and 2001 were 13.6%, 11.9% and 14.6%, respectively.

KCP&L amortizes nuclear
fuel-to-fuel expense based on the quantity of heat produced during the generation of
electricity. Regulatory assets and liabilities are amortized consistent with the recovery
period.

Prior to adoption of SFAS No. 142 on
January 1, 2002, Great Plains Energy and consolidated KCP&L amortized goodwill using
the straight-line method over a 15 and 40-year life, respectively. See Note 6 for
additional information concerning the adoption of SFAS No. 142.

Depletion, depreciation and
amortization of natural gas properties are calculated using the units of production
method. The depletion per mmBtu was $2.78 in 2003, $4.61 in 2002 and $1.35 in 2001. The
depletion per mmBtu in 2002 reflected downward revisions in reserve estimates. Unproved
gas properties are not amortized but are assessed for impairment either individually or on
an aggregated basis.

Nuclear FuelUnder the Nuclear Waste Policy Act of
1982, the Department of Energy (DOE) is responsible for the permanent disposal of spent
nuclear fuel. KCP&L pays the DOE a quarterly fee of one-tenth of a cent for each
kilowatt-hour of net nuclear generation delivered and sold for the future disposal of
spent nuclear fuel. These disposal costs are charged to fuel expense. In 2002, the U.S.
Senate approved Yucca Mountain, Nevada as a long-term geologic repository. The DOE is
currently in the process of preparing an application to obtain the NRC license to proceed
with construction of the repository. Management cannot predict when this site may be
available. Under current DOE policy, once a permanent site is available, the DOE will
accept spent nuclear fuel first from the owners with the oldest spent fuel. Wolf Creek
Generating Station (Wolf Creek) has completed an on-site storage facility that is designed
to hold all spent fuel generated at the plant through the end of its 40-year licensed life
in 2025.

Wolf Creek Refueling
Outage CostsKCP&L accrues forecasted
incremental costs to be incurred during scheduled Wolf Creek refueling outages monthly
over the units operating cycle, normally about 18 months. Estimated incremental
costs, which include operating, maintenance and replacement power expenses, are based on
budgeted outage costs and the estimated outage duration. Changes to or variances from
those estimates are recorded when known or are probable.

Nuclear Plant
Decommissioning CostsThe Missouri Public Service
Commission (MPSC) and The State Corporation Commission of the State of Kansas (KCC)
require KCP&L and the other owners of Wolf Creek to submit an updated decommissioning
cost study every three years. The most recent study was submitted to the MPSC and the KCC
on August 30, 2002, and is the basis for the decommissioning cost estimates in the
following table. Both the MPSC and the KCC have accepted the 2002 cost estimate as filed
and have approved funding schedules for this cost estimate. The MPSC-approved schedule
assumes funding through the expiration of Wolf Creeks current Nuclear Regulatory
Commission (NRC) operating license (2025).

76

The KCC-approved schedule assumes that Wolf
Creek will be granted a 20-year license extension and, thus, assumes funding through 2045.
At this time, the owners of Wolf Creek have neither sought nor received a license
extension from the NRC. The escalation rates and earnings assumptions shown in the table
below are those that were last explicitly approved by the MPSC and the KCC. The
decommissioning cost estimates are based on the immediate dismantlement method and include
the costs of decontamination, dismantlement and site restoration. KCP&L does not
expect plant decommissioning to start before 2025.

|                                                  
|--------------------------------------------------
|KCC                                               
|
|(millions)                                        
|Current cost of decommissioning (in 2002 dollars):
|Total Station                                     
|47% share                                         
|Future cost of decommissioning (in 2025 dollars): 
|Total Station                                     
|47% share                                         
|Future cost of decommissioning (in 2045 dollars): 
|Total Station                                     
|47% share                                         
|                                                  
|Annual escalation factor                          
|Annual return on trust assets (a)                 
|

|    | 
|--- | 
|(a) | 
|    | 
|    | 

KCP&L currently contributes about
$3.5 million annually to a tax-qualified trust fund to be used to decommission Wolf Creek.
These costs are charged to other operating expenses and recovered in billings to
customers. These funding levels assume a certain return on trust assets. If the actual
return on trust assets is below the anticipated level, KCP&L believes a rate increase
would be allowed ensuring full recovery of decommissioning costs over the remaining life
of the station.

The trust fund balance, including
reinvested earnings, was $75.0 million and $63.3 million at December 31, 2003 and 2002,
respectively. The related liabilities for decommissioning are included in Asset Retirement
Obligations at December 31, 2003, and Accrued Nuclear Decommissioning Costs at December
31, 2002.

The Company adopted SFAS No. 143,
Accounting for Asset Retirement Obligations on January 1, 2003. See Note 15
for discussion of Asset Retirement Obligations (ARO) including those associated with
nuclear plant decommissioning costs.

Regulatory MattersKCP&L is subject to the
provisions of SFAS No. 71, Accounting for the Effects of Certain Types of
Regulation. Pursuant to SFAS No. 71, KCP&L defers items on the balance sheet
resulting from the effects of the ratemaking process, which would not be recorded under
Generally Accepted Accounting Principles (GAAP) if KCP&L were not regulated. See Note
5 for additional information concerning regulatory matters.

Revenue RecognitionKCP&L and Strategic Energy
recognize revenues on sales of electricity when the service is provided. KLT Gas records
natural gas sales revenues based on the amount of gas sold to purchasers on its behalf.
Receivables recorded at December 31, 2003 and 2002, include $28.4 million and $27.2
million,

77

respectively, for electric services provided but not yet billed by KCP&L, and
$81.2 million and $57.3 million, respectively, for electric services provided, but not yet
billed by Strategic Energy. See Note 3 for additional information on receivables.

To supply its retail contracts,
Strategic Energy primarily purchases long-term blocks of electricity under forward
contracts in fixed quantities at fixed prices from power suppliers based on projected
usage. Strategic Energy sells any excess retail supply of electricity back into the
wholesale market. The proceeds from the sale of excess supply of electricity are recorded
as a reduction of purchased power. The amount of excess retail supply sales that reduced
purchased power was $160.4 million, $126.4 million and $95.6 million in 2003, 2002 and
2001, respectively.

Property Gains and LossesNet gains and losses from the sales
of assets, businesses, and net asset impairments are recorded in operating expenses. See
Note 9 for additional information regarding the net impairment of DTI assets.

Asset ImpairmentsLong-lived assets and intangible
assets subject to amortization are periodically reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be
recoverable as prescribed under SFAS No. 144 Accounting for the Impairment or
Disposal of Long-lived Assets. SFAS No. 144 requires that if the sum of the
undiscounted expected future cash flows from an asset to be held and used is less than the
carrying value of the asset, an asset impairment must be recognized in the financial
statements. The amount of impairment recognized is the excess of the carrying value of the
asset over its fair value. See Note 7 for information regarding the impairments of KLT Gas
assets.

Goodwill is tested for impairment at
least annually and more frequently when indicators of impairment exist as prescribed under
SFAS No. 142. SFAS No. 142 requires that if the fair value of a reporting unit is less
than its carrying value including goodwill, an impairment charge for goodwill must be
recognized in the financial statements. To measure the amount of the impairment loss to
recognize, the implied fair value of the reporting unit goodwill would be compared with
its carrying value. See Note 6 for information regarding the impact of adopting SFAS No.
142 on goodwill and goodwill amortization.

Income TaxesIn accordance with SFAS No. 109,
Accounting for Income Taxes, Great Plains Energy has provided deferred taxes
for all temporary book-tax differences using the liability method. The liability method
requires that deferred tax balances be adjusted to reflect enacted tax rates that are
anticipated to be in effect when the temporary differences reverse.

Great Plains Energy and its
subsidiaries file consolidated federal and combined and separate state income tax returns.
Income taxes for consolidated or combined subsidiaries are allocated to the subsidiaries
based on separate company computations of taxable income or loss. In accordance with 35
Act requirements, the holding company allocates its own net income tax benefits to its
direct subsidiaries based on the positive taxable income of each company in the
consolidated federal or combined state returns. KCP&L uses the separate return method
to compute its income tax provision. For the years ended December 31, 2003 and 2002, there
were no differences between the separate return method used to compute KCP&Ls
tax provision and the amount it owed to Great Plains Energy.

KCP&L has established a
regulatory asset for the additional future revenues to be collected from customers for
deferred income taxes. KCP&L records operating income tax expense based on ratemaking
principles.

78

Tax credits are recognized in the
year generated except for certain KCP&L investment tax credits that have been deferred
and amortized over the remaining service lives of the related properties.

Environmental MattersEnvironmental costs are accrued when
it is probable a liability has been incurred and the amount of the liability can be
reasonably estimated.

Stock OptionsThe Company has one equity
compensation plan, which is described more fully in Note 10. The Company adopted the fair
value recognition provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, for its stock options as of January 1, 2003. The Company has elected
to use the modified prospective method of adoption as prescribed under SFAS No. 148,
Accounting for Stock-Based Compensation-Transition and Disclosure. Under the
modified prospective method of adoption, stock option compensation cost recognized
beginning January 1, 2003, is the same as if the fair value recognition provisions of SFAS
No. 123 had been applied to all stock options granted after October 1, 1995.

The following table illustrates the
effect on net income and earnings per share (EPS) for Great Plains Energy as if the fair
value method had been applied in preparing 2002 and 2001 financial statements.

|                                                
|------------------------------------------------
|2002                                            
|
|(thousands except per share amounts)            
|Net income (loss), as reported                  
|Add: Stock-based employee compensation          
|expense included in net income as reported,     
|net of income taxes                             
|Less: Total stock-based employee compensation   
|expense determined under fair value             
|based method for all awards, net of income taxes
|                                                
|Pro forma net income (loss) as if fair          
|value method were applied                       
|                                                
|Basic and diluted earnings (loss)               
|per common share, as reported                   
|Basic and diluted earnings (loss)               
|per common share, pro forma                     
|

Basic and Diluted
Earnings (Loss) per Common Share CalculationThere was no significant dilutive
effect on Great Plains Energys earnings per share from other securities in 2003,
2002 or 2001. To determine earnings (loss) per common share, preferred stock dividend
requirements are deducted from income from continuing operations before cumulative effect
of changes in accounting principles and net income before dividing by average number of
common shares outstanding. The loss per share impact of discontinued operations, net of
income taxes, is determined by dividing the loss from discontinued operations, net of
income taxes, by the average number of common shares outstanding. The earnings (loss) per
share impact of the cumulative effect of changes in accounting principles is determined by
dividing the cumulative effect of changes in accounting principles by the average number
of common shares outstanding.

79

The following tables reconcile Great
Plains Energys basic and diluted earnings (loss) per common share calculation:

|                                                          
|----------------------------------------------------------
|
|                                                          
|(thousands except per share amounts)                      
|Income from continuing operations before cumulative effect
|Less: Preferred stock dividend requirement                
|                                                          
|Basic EPS                                                 
|Income available to common stockholders                   
|Add: effect of dilutive securities                        
|                                                          
|Diluted EPS                                               
|

|                                                          
|----------------------------------------------------------
|
|                                                          
|(thousands except per share amounts)                      
|Income from continuing operations before cumulative effect
|Less: Preferred stock dividend requirement                
|                                                          
|Basic EPS                                                 
|Income available to common stockholders                   
|Add: effect of dilutive securities                        
|                                                          
|Diluted EPS                                               
|

|                                                        
|--------------------------------------------------------
|
|                                                        
|(thousands except per share amounts)                    
|Loss from continuing operations before cumulative effect
|Less: Preferred stock dividend requirement              
|                                                        
|Basic EPS                                               
|Income available to common stockholders                 
|Add: effect of dilutive securities                      
|                                                        
|Diluted EPS                                             
|

As of December 31, 2003, there were
no anti-dilutive shares. Options to purchase 394,723 shares of common stock as of December
31, 2002 were excluded from the computation of diluted earnings per share because the
option exercise prices were greater than the average market price of the common shares at
the end of the period. Options to purchase 277,902 shares of common stock as of December
31, 2001, were excluded from the diluted earnings calculation because the Company had a
net loss from operations; therefore no potential common shares are included in the
calculation because the effect is always anti-dilutive.

80

# 2. SUPPLEMENTAL CASH
FLOW INFORMATION

|Great Plains Energy Other Operating Activities           
|---------------------------------------------------------
|
|2003                                                     
|
|Cash flows affected by changes in:                       
|Receivables                                              
|Fuel inventories                                         
|Materials and supplies                                   
|Accounts payable                                         
|Accrued taxes                                            
|Accrued interest                                         
|Wolf Creek refueling outage accrual                      
|Pension and postretirement benefit assets and obligations
|Allowance for equity funds used during construction      
|Other                                                    
|
|Total other operating activities                         
|
|Cash paid during the period:                             
|Interest                                                 
|Income taxes                                             
|

|Consolidated KCP&L Other Operating Activities            
|---------------------------------------------------------
|
|2003                                                     
|
|Cash flows affected by changes in:                       
|Receivables                                              
|Fuel inventories                                         
|Materials and supplies                                   
|Accounts payable                                         
|Accrued taxes                                            
|Accrued interest                                         
|Wolf Creek refueling outage accrual                      
|Pension and postretirement benefit assets and obligations
|Allowance for equity funds used during construction      
|Other                                                    
|
|Total other operating activities                         
|
|Cash paid during the period:                             
|Interest                                                 
|Income taxes                                             
|

KCP&L adopted SFAS No. 143 on
January 1, 2003, and recorded a liability for ARO of $99.2 million and increased property
and equipment, net of accumulated depreciation, by $18.3 million. KCP&L is a regulated
utility subject to the provisions of SFAS No. 71, and management believes it is probable
that any differences between expenses recognized under SFAS No. 143 and expenses recovered
currently in rates will be recoverable in future rates. As a result, the $16.3 million net
cumulative effect of the adoption of SFAS No. 143 was recorded as a regulatory asset and
therefore, had no impact on net income. KLT Gas also adopted SFAS No. 143 and recorded a
liability for ARO of $1.2 million, increased gas property and investments by $1.0 million
and increased operating expense by $0.2 million for the immaterial cumulative effect of
the accounting change. The adoption of SFAS No. 143 had no effect on Great Plains
Energys and consolidated KCP&Ls cash flows.

KCP&Ls Lease Trust was
consolidated in the fourth quarter of 2003, as required by FASB Interpretation (FIN) No.
46, Consolidation of Variable Interest Entities. As a result, Great Plains
Energys and consolidated KCP&Ls long-term debt increased $143.8 million.
The consolidation of the

81

Lease Trust had no effect on Great Plains Energys and
consolidated KCP&Ls cash flows. See Note 13 for additional information
concerning the consolidation of the Lease Trust.

KCP&L de-consolidated KCPL
Financing I (Securities Trust) in the fourth quarter of 2003, as required by FIN No. 46.
Great Plains Energys and consolidated KCP&Ls long-term debt increased
$154.6 million representing the 8.3% Junior Subordinated Deferrable Interest Debentures
issued by KCP&L and held by the Securities Trust. The de-consolidation of the
Securities Trust had no effect on Great Plains Energys and consolidated
KCP&Ls cash flows. See Note 19 for additional information concerning the
de-consolidation of the Securities Trust.

On June 13, 2003, HSS board of
directors approved a plan to dispose of its interest in residential services provider
RSAE. On June 30, 2003, HSS completed the disposition of its interest in RSAE. See Note 8
for additional information concerning the disposition of RSAE. The following table
summarizes Great Plains Energys and consolidated KCP&Ls loss from
discontinued operations as a result of this transaction.

|                                                
|------------------------------------------------
|Year to Date                                    
|June 30                                         
|2003                                            
|
|(thousands)                                     
|Cash repayment of supported bank line           
|Write-off of intercompany balance and investment
|Accrued transaction costs                       
|Income tax benefit                              
|                                                
|Loss on disposition                             
|Pre-disposition operating losses                
|                                                
|Discontinued operations                         
|

KLT Telecom received $19.2 million in
2003 related to the confirmation of the DTI bankruptcy. Pending final resolution of the
Missouri Department of Revenue (MODOR) Claim and the put option of a minority shareholder,
the effect of the DTI bankruptcy on the Company has been resolved. See Note 9 for
additional information concerning the DTI bankruptcy.

|                                          
|------------------------------------------
|2003                                      
|
|(thousands)                               
|Cash proceeds from bankruptcy estates     
|Cash proceeds from sale of office building
|Receivables                               
|                                          
|Total proceeds                            
|Book basis of office building sold        
|DIP financing accrual reversal            
|Accounts payable                          
|Income tax                                
|Reversal of tax valuation allowance       
|
|Gain on sale of assets                    
|

During November 2002, Great Plains
Energy indirectly acquired an additional 6% ownership in Strategic Energy through its
subsidiary IEC. The $15.1 million consideration paid for the 6% ownership consisted of
$8.0 million in Great Plains Energy common stock and promissory notes of $4.7 million
(issued by Great Plains Energy) and $2.4 million (issued by IEC). The promissory notes
were paid in January 2003. This transaction had no effect on Great Plains Energys
cash flows for the year ended December 31, 2002. See Note 12 for additional information
regarding this transaction.

82

On February 8, 2001, KLT Telecom
increased its equity ownership in DTI to a majority ownership. On December 31, 2001, DTI
filed voluntary petitions in Bankruptcy Court. As a result, DTI was consolidated and its
operations were included in KLT Telecoms results of operations from February 8,
2001, through December 31, 2001, prior to the bankruptcy filings at which time DTI was
de-consolidated. See Note 9 for additional information concerning the DTI bankruptcy.

The following table reflects a
reconciliation of DTIs effect on Great Plains Energys cash flows for the year
ended December 31, 2001, to the cash invested in DTI during 2001.

|                                            
|--------------------------------------------
|2001                                        
|
|Cash Flows from Operating Activities        
|Amounts included in net income (loss)       
|                                            
|                                            
|Depreciation                                
|Goodwill amortization                       
|Loss on property (net impairment)           
|Other operating activities                  
|Accretion of Senior Discount Notes          
|and amortization of the discount            
|Other                                       
|                                            
|DTI adjustment to operating activities      
|                                            
|Net cash from operating activities          
|Cash Flows from Investing Activities        
|Purchase of additional ownership in DTI     
|Purchase of nonutility property             
|Loans to DTI prior to consolidation         
|Other investing activities                  
|                                            
|DTI effect on cash from investing activities
|Cash Flows from Financing Activities        
|DTI effect on cash from financing activities
|                                            
|Cash flows from DTI investment              
|
|                                            
|
|Cash invested in DTI                        
|Loan to DTI Holdings                        
|Operating loans to Digital Teleport, Inc.   
|Purchase of additional ownership in DTI     
|                                            
|Cash used for DTI investment                
|

83

As described in Note 1, KCP&L
distributed, as a dividend, its ownership in KLT Inc. and GPP to Great Plains Energy on
October 1, 2001. The effect of this transaction on consolidated KCP&Ls cash
flows for the year ended December 31, 2001, is summarized in the table that follows.

|                                                          
|----------------------------------------------------------
|Effect of dividend to Great Plains Energy:                
|
|Assets                                                    
|Cash                                                      
|Equity securities                                         
|Receivables                                               
|Nonutility property and investment                        
|Goodwill                                                  
|Other assets                                              
|
|Total assets                                              
|Liabilities and Accumulated Other Comprehensive Income    
|Notes payable                                             
|Accounts payable                                          
|Accrued taxes                                             
|Accrued interest                                          
|Deferred income taxes                                     
|Deferred telecommunications revenue                       
|Other liabilities and deferred credits                    
|Long-term debt                                            
|Accumulated other comprehensive income                    
|
|Total liabilities and accumulated other                   
|comprehensive income                                      
|
|Equity dividend of KLT Inc. and GPP to Great Plains Energy
|

During the first quarter of 2001, KLT
Telecom increased its equity ownership in DTI to a majority ownership and HSS increased
its equity ownership in RSAE to a majority ownership. The effect of these transactions is
summarized in the table that follows. The initial consolidation of DTI (February 8, 2001)
and RSAE (January 1, 2001) are excluded from both Great Plains Energys and
consolidated KCP&Ls cash flows for the year December 31, 2001. See Note 9 for
information concerning the DTI bankruptcy and Note 8 for information concerning the June
2003 disposition of RSAE.

84

|                                              
|----------------------------------------------
|DTI                                           
|
|(thousands)                                   
|Cash paid to obtain majority ownership        
|Subsidiary cash                               
|                                              
|Purchase of DTI and RSAE, net of cash received
|
|Initial consolidation of subsidiaries:        
|Assets                                        
|Cash                                          
|Receivables                                   
|Other nonutility property and investments     
|Goodwill                                      
|Other assets                                  
|Eliminate equity investment                   
|                                              
|Total assets                                  
|                                              
|Liabilities                                   
|Notes payable                                 
|Accounts payable                              
|Accrued taxes                                 
|Deferred income taxes                         
|Other liabilities and deferred credits        
|Loan from KLT Telecom (a)                     
|Long-term debt                                
|                                              
|Total liabilities                             
|

|    | 
|--- | 
|(a) | 
|    | 
|    | 

# 3. RECEIVABLES

The Companys receivables are
comprised of the following:

|                                     
|-------------------------------------
|December 31                          
|2003                                 
|
|(thousands)                          
|Customer accounts receivable sold to 
|Receivables Company                  
|Consolidated KCP&L other receivables 
|                                     
|Consolidated KCP&L receivables       
|Great Plains Energy other receivables
|
|Great Plains Energy receivables      
|

KCP&L has entered into a
revolving agreement, which expires in October 2004, to sell all of its right, title and
interest in the majority of its customer accounts receivable to Kansas City Power &
Light Receivables Company (Receivables Company), which in turn sells most of the
receivables to outside investors. KCP&L expects the agreement to be renewed annually.
Accounts receivable sold under this revolving agreement totaled $87.9 million and $89.2
million at December 31, 2003 and 2002, respectively. These sales included unbilled
receivables of $28.4 million and $27.2 million at December 31, 2003 and 2002,
respectively. As a result of the sales to outside investors, Receivables Company received
$70 million in cash, which was forwarded to KCP&L as consideration for its sale. The
agreement is structured as a true sale under which the creditors of Receivables Company
are entitled to be satisfied out of the assets of Receivables Company prior to any value
being returned to KCP&L or its creditors.

85

KCP&L sells its receivables at a
fixed price based upon the expected cost of funds and charge-offs. These costs comprise
KCP&Ls loss on the sale of accounts receivable. KCP&L services the
receivables and receives an annual servicing fee of 0.25% of the outstanding principal
amount of the receivables sold and retains any late fees charged to customers.

Information regarding
KCP&Ls sale of accounts receivable is reflected in the following table.

|                                   
|-----------------------------------
|For the years ended December 31    
|
|(thousands)                        
|Gross proceeds on sale of          
|accounts receivable                
|Collections                        
|Loss on sale of accounts receivable
|Late fees                          
|

Consolidated KCP&Ls other
receivables at December 31, 2003 and 2002, consist primarily of receivables from partners
in jointly-owned electric utility plants, wholesale sales receivables, insurance
recoveries and accounts receivable held by Worry Free. Great Plains Energys other
receivables at December 31, 2003 and 2002, are primarily the accounts receivable held by
Strategic Energy including unbilled receivables held by Strategic Energy of $81.2 million
and $57.3 million at December 31, 2003 and 2002, respectively.

# 4. EQUITY METHOD
INVESTMENTS

After the acquisition of majority
ownership in RSAE (see Note 2 and Note 8 for additional information) and the equity method
investments activity discussed below, the Company has no remaining equity method
investments other than affordable housing limited partnerships held by KLT Investments.

Sale of KLT Investments
II s Ownership of Downtown Hotel GroupOn May 31, 2001, KLT Investments II
sold its 25% ownership of Kansas City Downtown Hotel Group, L.L.C. for total proceeds of
$3.8 million resulting in a $1.4 million after tax gain.

Sale of KLT Gas
PropertiesOn June 28, 2001, KLT Gas sold its
50% ownership in Patrick KLT Gas, LLC for total proceeds of $42.3 million resulting in a
$12.0 million after tax gain.

KLT Telecom Investment
in DTIIn 2001, KLT Telecom recorded a gain
on early extinguishment of debt resulting from DTIs completion of a successful
tender offer for 50.4 percent of its outstanding Senior Discount Notes prior to KLT
Telecom acquiring a majority ownership in DTI. Previously, under SFAS No. 4,
Reporting Gains and Losses from Extinguishment of Debtan amendment of APB
Opinion No. 30, all gains and losses from extinguishment of debt were required to be
aggregated and, if material, classified as an extraordinary item, net of related income
tax effect. Effective January 1, 2003, the Company adopted SFAS No. 145, Rescission
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 eliminates SFAS No. 4 and as a result, the 2001 gain on
early extinguishment of debt was restated to reflect the $25.0 million gain on early
extinguishment of debt, which is net of the losses previously recorded by DTI, but not
reflected by KLT Telecom, as income from equity method investments. KLT Telecom also
recorded $9.1 million of income tax related to the gain. See Note 9 for additional
information regarding 2001 activity in KLT Telecoms investment in DTI.

86

# 5. REGULATORY MATTERS

Regulatory Assets and
LiabilitiesAs discussed in Note 1, KCP&L is
subject to the provisions of SFAS No. 71. Accordingly, KCP&L has recorded assets and
liabilities on its balance sheet resulting from the effects of the ratemaking process,
which would not be recorded under GAAP for non-regulated entities. Regulatory assets
represent incurred costs that have been deferred because they are probable of future
recovery in customer rates. Regulatory liabilities generally represent probable future
reductions in revenue or refunds to customers. KCP&Ls continued ability to meet
the criteria for application of SFAS No. 71 may be affected in the future by competitive
forces and restructuring in the electric industry. In the event that SFAS No. 71 no longer
applied to all, or a separable portion, of KCP&Ls operations, the related
regulatory assets and liabilities would be written off unless an appropriate regulatory
recovery mechanism is provided.

|                                                 
|-------------------------------------------------
|Amortization                                     
|ending                                           
|period                                           
|
|(millions)                                       
|Taxes recoverable through future rates           
|Coal contract termination costs                  
|Decommission and decontaminate federal           
|uranium enrichment facilities                    
|Loss on reacquired debt                          
|January 2002 incremental ice storm costs         
|Change in depreciable life of Wolf Creek (Kansas)
|Cost of removal                                  
|Asset retirement obligations                     
|Other (a)                                        
|
|Total Regulatory Assets                          
|
|Regulatory Liabilities                           
|Emission allowances (b)                          
|
|Total Regulatory Liabilities                     
|

|    | 
|--- | 
|(a) | 
|    | 
|(b) | 

The Company adopted SFAS No. 143 on
January 1, 2003, and recorded liabilities for legal obligations to retire assets. In
conjunction with the adoption of SFAS No. 143, non-legal costs of removal were
reclassified for all periods presented from accumulated depreciation to a regulatory
asset. See Note 15 for discussion of asset retirement obligations. The change in the
depreciable life of Wolf Creek in 2003 was the result of the KCC stipulation and agreement
discussed below. See Note 1 for additional information.

Retail Rate MattersAt the end of January 2002, a severe
ice storm occurred throughout large portions of the Midwest, including the greater Kansas
City metropolitan area. In 2002, the KCC approved a stipulation and agreement regarding
the treatment of the $16.5 million Kansas jurisdictional portion of the ice storm costs.
Pursuant to the stipulation and agreement, KCP&L implemented a retail rate reduction
January 1, 2003, and began calculating depreciation expense on Wolf Creek using a 60-year
life instead of a 40-year life. As a result of the stipulation and agreement,
KCP&Ls retail revenues decreased approximately $12.5 million and depreciation
expense decreased approximately $7.7 million in 2003. The reduction in depreciation
expense has been recorded as a regulatory asset, as discussed above. KCP&L also agreed
to file a rate case by May 15, 2006.

87

In 2002, the MPSC approved
KCP&Ls application for an accounting authority order related to the Missouri
jurisdictional portion of the storm costs. The order allows KCP&L to defer and
amortize $20.1 million, representing the Missouri portion of the storm costs, through
January 2007. The amortization, which began in September 2002, is approximately $4.6
million annually for the remainder of the amortization period. In 2003 and 2002, the
amortization totaled $4.6 million and $1.5 million, respectively.

# 6. GOODWILL AND
INTANGIBLE PROPERTY

The Company adopted SFAS No. 142 on
January 1, 2002. Under the new standard, goodwill is no longer amortized, but rather is
tested for impairment upon adoption and at least annually thereafter. The annual test may
be performed anytime during the year, but must be performed at the same time each year.

Strategic Energys annual
impairment tests, conducted September 1, have been completed and there were no impairments
of the Strategic Energy goodwill in 2003 or 2002. Goodwill reported on Great Plains
Energys consolidated balance sheets associated with the Companys ownership in
Strategic Energy was $26.1 million at December 31, 2003 and 2002, respectively.

As a result of the transition
impairment test of RSAE goodwill in 2002, the Company recorded a $3.0 million write-down
of goodwill as a cumulative effect of a change in accounting principle. Goodwill reported
in assets of discontinued operations on Great Plains Energys and consolidated
KCP&Ls balance sheets associated with HSS ownership interest in RSAE was
$20.0 million at December 31, 2002. See Note 8 for additional information concerning the
June 2003 disposition of RSAE.

The following table adjusts the
reported 2001 Great Plains Energys and consolidated KCP&Ls income
statement information to add back goodwill amortization as if the non-amortization
provisions of SFAS No. 142 had been applied during all periods presented.

|                                                                   
|-------------------------------------------------------------------
|Great Plains                                                       
|Energy                                                             
|
|(thousands, except per share amounts)                              
|Income (loss) from continuing operations, as reported              
|Add back: Goodwill amortization                                    
|                                                                   
|Income (loss) from continuing operations, as adjusted              
|                                                                   
|Loss from discontinued operations, net of income taxes, as reported
|Add back: Goodwill amortization                                    
|                                                                   
|Loss from discontinued operations, net of income taxes, as adjusted
|                                                                   
|                                                                   
|Net income (loss), as adjusted                                     
|Preferred stock dividend requirements                              
|                                                                   
|Earnings (loss) available for common stock, as adjusted            
|
|                                                                   
|Basic and diluted loss per common share                            
|Continuing operations, as reported                                 
|Add back:  Goodwill amortization                                   
|                                                                   
|Continuing operations, as adjusted                                 
|                                                                   
|Discontinued operations, as reported                               
|Add back:  Goodwill amortization                                   
|                                                                   
|Discontinued operations, as adjusted                               
|                                                                   
|Basic and diluted loss per common share, as adjusted               
|

88

Other Intangible AssetsKCP&Ls electric utility
plant on the consolidated balance sheets included intangible computer software of $33.6
million, net of accumulated amortization of $52.5 million, in 2003 and $41.6 million, net
of accumulated amortization of $42.4 million, in 2002.

Other intangible assets on the
consolidated KCP&Ls balance sheets include intangible computer software and the
Worry Free service mark, which were fully amortized by the end of 2003 and totaled $0.5
million, net of accumulated amortization of $0.3 million, in 2002. Assets of discontinued
operations include an RSAE trademark, logo and non-compete agreement totaling $4.2 million
in 2002, net of $0.1 million of accumulated amortization.

KLT Gas gas property and
investments on the consolidated balance sheets included gross intangible drilling costs,
before impairments, of $32.0 million in 2003 and $20.8 million in 2002. The KLT Gas
assets, including intangible drilling costs, were significantly written down at the end of
2003 in aggregate at the property level. See Note 7 for additional information.

Other intangible assets on Great
Plains Energys consolidated balance sheets include other intangible computer
software of $2.7 million, net of accumulated amortization of $1.8 million, in 2003 and
$1.8 million, net of accumulated amortization of $0.6 million, in 2002.

# 7. KLT GAS PROPERTY
IMPAIRMENTS

Unproven gas properties are reviewed
for impairment under SFAS No. 144 whenever events or changes in circumstances indicate
that carrying amounts may not be recoverable. During 2003, impairments totaling $54.5
million, as described below, were recorded. These impairments were reported as losses in
(Gain) Loss on property in Great Plains Energys consolidated statement of income.
Net of the related tax effects totaling $21.0 million, these impairments reduced earnings
by $33.5 million.

During 2003, KLT Gas management
determined that two gas properties were impaired as development activities
indicated a decline in the estimates of future gas production. As a result of the lower
estimated production, the carrying amount of each property exceeded its estimated fair
value based upon discounted estimated future cash flows, which resulted in impairments on
the two properties. The impairments totaled $15.2 million, which net of the related tax
effects totaling $5.9 million, reduced earnings by $9.3 million.

Additionally, in the second half of
2003, Great Plains Energy management performed a strategic review of the KLT Gas natural
gas properties (KLT Gas portfolio) and operations. At the direction of the Board of
Directors, management engaged a third party specialist to help evaluate the KLT Gas
business and provide recommendations regarding business strategy, management, staffing and
optimization of the KLT Gas portfolio. The objective of the strategic review was to
develop a course of action regarding KLT Gas operations for the Board of Directors
consideration at its February 2004 meeting. After completion of the KLT Gas strategic
review, management determined it would recommend a sale of the KLT Gas portfolio and a
plan to exit the gas business at the February 2004 Board of Directors meeting.

As a result of its decision to
recommend a sale of the KLT Gas portfolio and exit the gas business, Great Plains Energy
management engaged a second third party specialist to complete a market reference
valuation analyses of the KLT Gas portfolio. As a result of the KLT Gas strategic review
and market reference valuation analysis having been conducted, an impairment test of the
entire KLT Gas portfolio was performed at December 31, 2003, in accordance with SFAS No.
144, using a probability weighting of the likelihood of potential outcomes at the February
2004 meeting. The impairment test considered 1) the scenario of sale of the entire KLT Gas
portfolio with fair value determined by a third party valuation specialist based on
estimated market prices and 2) the scenario of hold and use with

89

fair value determined by
risk adjusted discounted cash flows. The impairment test indicated that the carrying
amount of the KLT Gas portfolio exceeded the probability-weighted fair value, which
resulted in an impairment of $39.3 million. Net of the related tax effect of $15.1
million, the impairment reduced earnings by $24.2 million.

At its February 2004 meeting, the
Board of Directors approved managements recommendation to sell the KLT Gas portfolio
and exit the gas business. Consequently, in the first quarter of 2004, the KLT Gas
portfolio will be reported as assets held for sale and KLT Gas historical activities
will be reported as discontinued operations, in accordance with SFAS No. 144. In the first
quarter of 2004, Great Plains Energy also will write down the KLT Gas portfolio to its
estimated realizable value. Management expects this write down to total approximately $3
million, which net of the related tax effect of approximately $1 million, will reduce
earnings by approximately $2 million. The impact on earnings will be recorded as a loss
from discontinued operations in Great Plains Energys first quarter 2004 consolidated
statement of income. To the extent the actual proceeds from the sale of the KLT Gas
portfolio differ from the estimated realizable value used to determine the write down, any
difference will be reflected by Great Plains Energy on its consolidated statement of
income at the conclusion of the sale process.

8.
          DISPOSITION OF OWNERSHIP INTEREST IN R.S. ANDREWS ENTERPRISES, INC.

On June 13, 2003, HSS board of
directors approved a plan to dispose of its interest in residential services provider
RSAE. On June 30, 2003, HSS completed the disposition of its interest in RSAE. Under terms
of the agreement, HSS repaid $22 million of RSAEs outstanding debt under its bank
line of credit and forgave $4 million of inter-company debt. The financial statements
reflect RSAE as discontinued operations for all periods presented as prescribed under SFAS
No. 144. The following table summarizes the discontinued operations.

|                                                         
|---------------------------------------------------------
|2003                                                     
|
|(millions)                                               
|Revenues                                                 
|
|                                                         
|Loss from operations before income taxes                 
|Loss on disposal before income taxes                     
|                                                         
|Total loss on discontinued operations before income taxes
|Income tax benefit (a)                                   
|                                                         
|                                                         
|Loss on discontinued operations, net of income taxes     
|

|    | 
|--- | 
|(a) | 
|    | 
|    | 
|    | 

90

Assets and liabilities of the
discontinued operations were as follows:

|                                            
|--------------------------------------------
|December 31                                 
|2002                                        
|
|(millions)                                  
|Current assets                              
|Other nonutility property and investments   
|Goodwill                                    
|Other deferred charges                      
|                                            
|Total assets of discontinued operations     
|
|                                            
|Current liabilities                         
|Deferred taxes                              
|Other deferred credits and liabilities      
|Long-term debt                              
|                                            
|Total liabilities of discontinued operations
|

# 9. DTI BANKRUPTCY

On December 31, 2001, a subsidiary of
KLT Telecom, Holdings and its subsidiaries, Digital Teleport and Digital Teleport of
Virginia, Inc., filed separate voluntary petitions in the Bankruptcy Court for the Eastern
District of Missouri for reorganization under Chapter 11 of the U.S. Bankruptcy Code,
which cases have been procedurally consolidated. Holdings and its two subsidiaries are
collectively called DTI.

In December 2002, Digital Teleport
entered into an agreement to sell substantially all of its assets (Asset Sale) to
CenturyTel Fiber Company II, LLC (CenturyTel), a nominee of CenturyTel, Inc. The Asset
Sale was approved by the Bankruptcy Court in 2003 and closed in 2003.

KLT Telecom received $19.2 million in
2003 related to the confirmation of the DTI bankruptcy. Pending final resolution of the
MODOR Claim and the put option of a minority shareholder (which are described below), the
effect of the DTI bankruptcy on the Company has been resolved. During 2003, the Company
recorded a $22.1 million gain on property and a $6.0 million tax benefit resulting in a
net gain of $28.1 million or $0.41 per share in 2003. The impact on net income was
primarily due to the net effect of the confirmation of the DTI bankruptcy and the
resulting distribution, the reversal of a $15.8 million tax valuation allowance and the
reversal of a $5 million debtor in possession financing commitment previously reserved.

In early 2004, KLT Telecom paid $2.5
million to certain executives of Digital Teleport for entering into employment agreements
required as a condition precedent to the Asset Sale. The amount was recorded as a
liability in 2003.

The Bankruptcy Court conducted an
evidentiary hearing regarding three priority proofs of claim by the MODOR in the aggregate
amount of $2.8 million (collectively, the MODOR Claim), and ruled substantially in favor
of Digital Teleport. MODOR appealed this ruling. KLT Telecom may receive an additional
distribution from the bankruptcy estate; however, the amount and timing of any additional
distribution is dependent upon the outcome of the MODOR appeal.

KLT Telecom originally acquired a 47%
interest in DTI in 1997. On February 8, 2001, KLT Telecom acquired control of DTI by
purchasing shares from another Holdings shareholder, Richard D. Weinstein (Weinstein),
increasing its ownership to 83.6%. In connection with this purchase, KLT Telecom granted
Weinstein a put option. The put option provided for the sale by Weinstein of his remaining
shares in Holdings to KLT Telecom during a period beginning September 1, 2003, and ending
August 31, 2005.

91

The put option provides for an aggregate exercise price for these
remaining shares equal to their fair market value with an aggregate floor amount of $15
million. The floor amount of the put option was fully reserved during the fourth quarter
of 2001. On September 2, 2003, Weinstein delivered to KLT Telecom notice of the exercise
of his put option. KLT Telecom declined to pay Weinstein any amount under the put option
because, among other things, the stock of Holdings has been cancelled and extinguished.
Weinstein has sued KLT Telecom for allegedly breaching the put option.

Because DTI filed for bankruptcy
protection under the U.S. Bankruptcy Code, KLT Telecom no longer had control over nor
could it exert significant influence over DTI. As a consequence, as of December 31, 2001,
DTI was de-consolidated and was presented on the cost basis. Because of this
de-consolidation, KLT Telecom did not include in its financial results the ongoing results
of operations, earnings or losses incurred by DTI since December 31, 2001.

During the fourth quarter of 2001,
the following were recognized in the financial statements of the Company related to the
activities of DTI:

| |  |  
| |  | -
| |  | o
| |  | o
| |  | o
| |  |  
| |  |  
| |  |  
| |  |  
| |  |  

The net of the above items resulted
in Great Plains Energy recording in 2001 a $195.8 million loss on property and $55.8
million of related income tax benefits. The $55.8 million income tax benefits applicable
to this net write-off is net of a $15.8 million tax valuation allowance due to the
uncertainty of recognizing future tax deductions while in the bankruptcy process. The
$55.8 million income tax benefit reflects the impact of DTIs 2001 abandonment of
$104 million of its long-haul assets in addition to other expected tax deductions.
DTIs tax losses have continued to be included in Great Plains Energys
consolidated tax return. In accordance with the tax allocation agreement with DTI, cash
tax savings were shared with DTI only to the extent DTI generated taxable income to
utilize such losses.

92

The following are condensed DTI
consolidated financial statements for the year ended December 31, 2001:

|                                                 
|-------------------------------------------------
|
|
|(millions)                                       
|Telecommunications service revenues              
|Operating expenses                               
|Provision for impairment of long-lived assets (a)
|Gain on early extinguishment of debt             
|Other                                            
|Interest expense net of interest income          
|                                                 
|Loss before income tax benefit                   
|Income tax benefit                               
|
|Net loss                                         
|

|    | 
|--- | 
|(a) | 
|    | 
|    | 
|    | 
|    | 
|    | 
|    | 
|    | 

|                                         
|-----------------------------------------
|
|
|(millions)                               
|Net cash used in operating activities    
|Net cash used in investing activities    
|Cash provided by financing activities    
|
|Net decrease in cash and cash equivalents
|

|                                                              
|--------------------------------------------------------------
|
|
|
|(millions)                                                    
|Loss before income tax benefit                                
|                                                              
|Income before consolidation on February 8, 2001               
|Goodwill write-off                                            
|Reduction to KLT Telecom's negative investment in DTI         
|                                                              
|Total                                                         
|                                                              
|Net DTI write-off                                             
|DTI operational loss, excluding net write-off                 
|                                                              
|Total equal to the above                                      
|Income from equity method investment - gain on                
|early extinguishment of debt                                  
|Other                                                         
|                                                              
|Total included in loss before income taxes                    
|Income tax benefits recorded by KLT Telecom                   
|
|DTI loss included in Great Plains Energy consolidated net loss
|

93

# 10. PENSION PLANS AND
OTHER EMPLOYEE BENEFITS

Pension Plans and Other
Employee BenefitsThe Company maintains defined benefit
pension plans for substantially all employees of KCP&L, Great Plains Energy Services
and Wolf Creek Nuclear Operating Corporation (WCNOC), including officers. Benefits under
these plans reflect the employees compensation, years of service and age at
retirement. The funding policy for the pension plans is to contribute amounts sufficient
to meet the minimum funding requirements under ERISA plus additional amounts as considered
appropriate.

For defined benefit pension plans
sponsored by Great Plains Energy, pension costs and contributions to KCP&L, GPES and
Worry Free are allocated based on labor costs of plan participants. Any additional minimum
pension liability is allocated based on each plans funded status.

In addition to providing pension
benefits, the Company provides certain postretirement health care and life insurance
benefits for substantially all retired employees. The cost of postretirement health care
and life insurance benefits are accrued during an employees years of service and
recovered through rates. The Company funds the portion of net periodic postretirement
benefit costs that are tax deductible. For post retirement health care plans sponsored by
Great Plains Energy, contributions and expense are allocated to KCP&L, GPES and Worry
Free based on the number of plan participants.

On December 8, 2003, the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act) was signed
into law. The Medicare Act, among other things, provides a federal subsidy beginning in
2006 to sponsors of retiree health care benefit plans. At this time, detailed regulations
necessary to implement the Medicare Act and specific accounting guidance from the FASB
have not been issued. Therefore, in accordance with FASB Staff Position No. FAS 106-1,
Accounting and Disclosure Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003, the Company elected to defer accounting
for the effects of the Medicare Act until authoritative guidance on accounting is
available. Such guidance could require revision of prior financial statements to include
the effects of the Medicare Act. Until detailed regulations necessary to implement the
Medicare Act and specific accounting guidance are issued, the Company cannot determine the
benefit, if any, associated with the new law. The Company will continue to monitor the new
regulations and may amend the plan in order to benefit from the new legislation.

94

The pension benefits tables below
provide information relating to the funded status of all defined benefit pension plans on
an aggregate basis. The plan measurement date for the majority of plans is September 30.
In 2003, contributions were made after the measurement date to the pension and
postretirement benefit plans of $32.0 million and $4.8 million, respectively. Net periodic
benefit costs reflect total plan benefit costs prior to the effects of capitalization and
sharing with joint-owners of power plants.

|                                                     
|-----------------------------------------------------
|Pension Benefits                                     
|2003                                                 
|
|(thousands)                                          
|PBO at beginning of year                             
|Service cost                                         
|Interest cost                                        
|Contribution by participants                         
|Amendments                                           
|Actuarial loss                                       
|Benefits paid                                        
|Benefits paid by KCP&L                               
|Settlements                                          
|
|PBO at end of plan year                              
|
|Change in plan assets                                
|Fair value of plan assets at beginning of year       
|Actual return on plan assets                         
|Contributions by employer and participants           
|Benefits paid                                        
|
|Fair value of plan assets at end of plan year        
|
|Prepaid (accrued) benefit cost                       
|Funded status                                        
|Unrecognized actuarial loss                          
|Unrecognized prior service cost                      
|Unrecognized transition obligation                   
|
|Net prepaid (accrued) benefit cost                   
|
|Amounts recognized in the consolidated balance sheets
|Prepaid benefit cost                                 
|Accrued benefit cost                                 
|Minimum pension liability adjustment                 
|Intangible asset                                     
|Accumulated other comprehensive income               
|
|Net amount recognized in balance sheets              
|Contributions and changes after                      
|measurement date                                     
|
|Net amount recognized at December 31                 
|

95

|                                    
|------------------------------------
|Pension Benefits                    
|2003                                
|
|(thousands)                         
|Service cost                        
|Interest cost                       
|Expected return on plan assets      
|Amortization of prior service cost  
|Recognized net actuarial loss (gain)
|Transition obligation               
|Amendment                           
|Net settlements                     
|
|Net periodic benefit cost           
|

The accumulated benefit obligation
(ABO) for all defined benefit pension plans was $429.9 million and $375.8 million at plan
year-end for 2003 and 2002, respectively. The projected benefit obligation, accumulated
benefit obligation and the fair value of plan assets are aggregated in the table below.

|                                                   
|---------------------------------------------------
|December 31                                        
|2003                                               
|
|(thousands)                                        
|Projected benefit obligation                       
|Accumulated benefit obligation                     
|Fair value of plan assets at plan year-end         
|
|Pension plans with plan assets in excess of the ABO
|Projected benefit obligation                       
|Accumulated benefit obligation                     
|Fair value of plan assets at plan year-end         
|

Pension plan assets are managed in
accordance with prudent investor guidelines contained in the ERISA
requirements. The investment strategy supports the objective of the fund, which is to earn
the highest possible return on plan assets within a reasonable and prudent level of risk.
Investments are diversified across classes and within each class to minimize risks. The
fair value of plan assets at plan year-end 2003 was $341.0 million, not including a $32.0
million contribution made in 2003 after the plan year-end, and $324.2 million at plan
year-end 2002. The asset allocation for the Companys pension plans at the end of
2003 and 2002, and the target allocation for 2004 are reported below. The portfolio is
rebalanced when the targets are exceeded.

|                 
|-----------------
|Plan Assets at   
|Target           
|Asset Category   
|
|Equity securities
|Debt securities  
|Real estate      
|Other            
|
|Total            
|

The expected long-term rate of return
on plan assets is based on historical and projected rates of return for current and
planned asset classes in the plans investment portfolio. Assumed projected rates of
return for each asset class were selected after analyzing historical experience and future
expectations of the returns of various asset classes. Based on the target asset allocation
for each asset class, the

96

overall expected rate of return for the portfolio was developed
and adjusted for the effect of projected benefits paid from plan assets and future plan
contributions.

The following tables provide the
weighted-average assumptions used to determine benefit obligations and net costs.

|                                              
|----------------------------------------------
|Weighted average assumptions used to determine
|the benefit obligation at plan year-end       
|
|Discount rate                                 
|Rate of compensation increase                 
|

|                                              
|----------------------------------------------
|Weighted average assumptions used to determine
|net costs for years ended at December 31      
|
|Discount rate                                 
|Expected long-term return on plan assets      
|Rate of compensation increase                 
|

Primarily as a result of lower
discount rates and the prior years losses in the market value of plan assets; at
December 31, 2003, the Company had a minimum pension liability adjustment of $78.4 million
offset by an intangible asset of $17.4 million and OCI of $61.0 million ($37.2 million net
of tax). At December 31, 2002, the Companys minimum pension liability adjustment was
$63.1 million offset by an intangible asset of $19.2 million and OCI of $43.9 million
($26.8 million net of tax). Because these adjustments were non-cash, their effect has been
excluded from the Consolidated Statements of Cash Flows.

Assumed health care cost trend rates
have a significant effect on the amounts reported for the health care plans. The health
care plan requires retirees to share in the cost when premiums exceed specified amounts.
The following table provides information on the assumed health care rate trends.

|                                                  
|--------------------------------------------------
|Assumed Health Care Cost Trends at December 31    
|
|Health care cost trend rate assumed for next year 
|Rate to which the cost trend rate is assumed to   
|decline (the ultimate trend rate)                 
|Year that the rate reaches the ultimate trend rate
|

A one-percentage point change in the
medical cost trend rates, holding all other assumptions constant, would have the following
effects as of December 31, 2003:

|                                              
|----------------------------------------------
|Increase                                      
|
|(thousands)                                   
|Effect on total service and interest component
|Effect on postretirement benefit obligation   
|

Employee Savings PlansGreat Plains Energy has defined
contribution savings plans that cover substantially all employees. The Company matches
employee contributions, subject to limits. The annual cost of the plans was $4.1 million
in 2003 and 2002 and $2.9 million in 2001.

Strategic Energy Phantom
Stock PlanStrategic Energy has a phantom stock
plan that provides incentive in the form of deferred compensation based upon the award of
performance units, the value of which is related to the increase

97

in profitability of
Strategic Energy. Strategic Energys annual cost for the plan was $4.6 million in
2003, $5.9 million in 2002 and $3.4 million in 2001.

Stock OptionsThe Company has one equity
compensation plan, which has been approved by its shareholders. The equity compensation
plan is a long-term incentive plan that permits the grant of restricted stock, stock
options, limited stock appreciation rights and performance shares to officers and other
employees of the Company and its subsidiaries. The maximum number of shares of Great
Plains Energy common stock that may be issued under the plan is 3.0 million with 2.2
million shares remaining available for future issuance.

Stock Options Granted
1992  1996The exercise price of stock options
granted equaled the market price of the Companys common stock on the grant date.
One-half of all options granted vested one year after the grant date, the other half
vested two years after the grant date. An amount equal to the quarterly dividends paid on
Great Plains Energy common stock shares (dividend equivalents) accrues on the options for
the benefit of option holders. The option holders are entitled to stock for their
accumulated dividend equivalents only if the options are exercised when the market price
is above the exercise price. At December 31, 2003, the market price of Great Plains Energy
common stock was $31.82, which exceeded the grant price for all such options still
outstanding. Unexercised options expire ten years after the grant date.

Prior to the adoption of SFAS No. 123
on January 1, 2003, Great Plains Energy followed Accounting Principles Board (APB) Opinion
25, Accounting for Stock Issued to Employees and related interpretations in
accounting for these options. Great Plains Energy recognized annual compensation expense
equal to accumulated and reinvested dividends plus the impact of the change in stock price
since the grant date. Great Plains Energy recognized compensation expense of $0.1 million
in 2002 and $(0.3) million in 2001. These options were fully vested prior to the adoption
of SFAS No.123; therefore, no compensation expense was recognized in 2003.

For options outstanding at December
31, 2003, grant prices range from $20.6250 to $23.0625 and the weighted-average remaining
contractual life is 0.8 years.

Stock Options Granted
2001  2003Stock options were granted under the
plan at the fair market value of the shares on the grant date. The options vest three
years after the grant date and expire in ten years if not exercised. Exercise prices range
from $24.90 to $27.73 and the weighted-average remaining contractual life is 7.9 years.

In accordance with the provisions of
SFAS No. 123, the Company recognized an immaterial amount of compensation expense in 2003.
Under the provisions of APB Opinion 25, no compensation expense was recognized in 2002 and
2001 because the option exercise price was equal to the market price of the underlying
stock on the date of grant.

The fair value for the stock options
granted in 20012003 was estimated at the date of grant using the
Black-Scholes option-pricing model. The weighted-average assumptions used are in the
following table:

|                               
|-------------------------------
|2003                           
|
|Risk-free interest rate        
|Dividend yield                 
|Stock volatility               
|Expected option life (in years)
|

98

The option valuation model requires
the input of highly subjective assumptions, primarily stock price volatility, changes in
which can materially affect the fair value estimate.

All stock option activity for the
last three years is summarized below:

|                             
|-----------------------------
|2003                         
|Shares                       
|
|Outstanding at January 1     
|Granted                      
|Exercised                    
|Forfeited                    
|
|Outstanding at December 31   
|
|Exercisable as of December 31
|
|* weighted-average price     

Performance SharesPerformance shares granted in 2003
totaled 20,744. The issuance of performance shares is contingent upon achievement, over a
three-year period, of company performance goals as compared to a peer group of utilities.
Performance shares have a value equal to the fair market value of the shares on the grant
date with accruing dividends. In accordance with the provisions of SFAS No. 123,
compensation expense is recognized over the vesting period. The Company recognized
compensation expense of $0.4 million in 2003.

During 2003, all 144,500 performance
shares granted in 2001 were canceled. No compensation expense had been recorded related to
these performance shares.

Restricted StockRestricted shares have a value equal
to the fair market value of the shares on the grant date. Restricted stock shares granted
in 2003 totaled 120,196. There is a restriction as to transfer until December 31, 2004, on
54,436 of the restricted shares. In accordance with the provisions of SFAS No. 123,
restricted stock shares totaling 57,315 are considered 100% vested. Restricted stock
shares totaling 62,881 vest on a graded schedule over a three-year period with accruing
reinvested dividends. The Company recognized compensation expense of $1.8 million in 2003.

99

# 11. INCOME TAXES

Components of income tax expense
(benefit) were as follows:

|                                     
|-------------------------------------
|2003                                 
|
|Current income taxes:                
|Federal                              
|State                                
|                                     
|Total                                
|
|Deferred income taxes:               
|Federal                              
|State                                
|                                     
|Total                                
|
|Investment tax credit amortization   
|
|Total income tax expense             
|Less taxes on loss from discontinued 
|operations (Note 8):                 
|Current tax (benefit) expense        
|Deferred tax expense                 
|
|Income taxes on continuing operations
|

|                                     
|-------------------------------------
|2003                                 
|
|Current income taxes:                
|Federal                              
|State                                
|                                     
|Total                                
|
|Deferred income taxes:               
|Federal                              
|State                                
|                                     
|Total                                
|
|Investment tax credit amortization   
|
|Total income tax expense             
|Less taxes on loss from discontinued 
|operations (Note 8):                 
|Current tax (benefit) expense        
|Deferred tax expense                 
|
|Income taxes on continuing operations
|

100

The effective income tax rates
reflected in the financial statements and the reasons for their differences from the
statutory federal rates were as follows:

|                                      
|--------------------------------------
|2003                                  
|
|
|Federal statutory income tax rate     
|Differences between book and tax      
|depreciation not normalized           
|Amortization of investment tax credits
|Federal income tax credits            
|State income taxes                    
|Valuation allowance                   
|RSAE (b)                              
|Other                                 
|
|Effective income tax rate             
|

|                                      
|--------------------------------------
|2003                                  
|
|
|Federal statutory income tax rate     
|Differences between book and tax      
|depreciation not normalized           
|Amortization of investment tax credits
|Federal income tax credits (a)        
|State income taxes                    
|RSAE (b)                              
|Other                                 
|
|Effective income tax rate             
|

|    | 
|--- | 
|(a) | 
|    | 
|(b) | 
|    | 
|    | 

The tax effects of major temporary
differences resulting in deferred tax assets and liabilities in the balance sheets are as
follows:

|                                         
|-----------------------------------------
|Great Plains Energy                      
|December 31                              
|
|(thousands)                              
|Plant related                            
|Future income taxes                      
|Pension and postretirement benefits      
|Tax credit carryforwards                 
|Gas properties related                   
|Nuclear fuel outage                      
|AMT credit                               
|Other                                    
|
|Net deferred tax liability before        
|valuation allowance                      
|Valuation allowance (Note 9)             
|Less:  Deferred tax asset in discontinued
|operations (Note 8)                      
|
|Net deferred tax liability               
|

101

The net deferred income tax liability
consisted of the following:

|                                     
|-------------------------------------
|Great Plains Energy                  
|December 31                          
|
|(thousands)                          
|Gross deferred income tax assets     
|Gross deferred income tax liabilities
|
|Net deferred income tax liability    
|

# 12. RELATED PARTY
TRANSACTIONS AND RELATIONSHIPS

Custom Energy Holdings, L.L.C.
(Custom Energy Holdings) holds 100% of the direct ownership interests in Strategic Energy.
Great Plains Energy holds an 89% indirect ownership position in Strategic Energy. SE
Holdings, L.L.C. (SE Holdings) owns the remaining 11% indirect ownership position in
Strategic Energy. Richard Zomnir, President and Chief Executive Officer of Strategic
Energy, and certain other employees of Strategic Energy hold direct or indirect interests
in SE Holdings. SE Holdings has a put option to sell all or part of its 11% interest in
Strategic Energy (Put Interest) to Custom Energy Holdings at any time within the 90 days
following January 31, 2004, at fair market value. On February 9, 2004, a letter agreement
was entered into between SE Holdings and IEC on behalf of certain of its affiliates,
including Great Plains Energy, agreeing to a procedure for determining the fair market
value of the Put Interest (Letter Agreement). The Letter Agreement provides for SE
Holdings to exercise its put option with respect to all but one unit (0.00001% of issued
and outstanding units) of each of its respective series of ownership interest in Custom
Energy Holdings. Upon closing of such a transaction, which is anticipated for mid-April
2004, subject to obtaining all necessary regulatory approval, SE Holdings would continue
to be a member of Custom Energy Holdings and be represented on the Management Committee of
Custom Energy Holdings and Strategic Energy.

Custom Energy Holdings business
and affairs are controlled and managed by a three member Management Committee composed of
one representative designated by KLT Energy Services Inc. (KLT Energy Services), one
representative designated by IEC, and one representative designated by SE Holdings.
Certain actions (including amendment of Custom Energy Holdings operating agreement,
approval of actions in contravention of the operating agreement, approval of a dissolution
of Custom Energy Holdings, additional capital contributions and assumption of recourse
indebtedness) require the unanimous consent of all the members of Custom Energy Holdings.

Strategic Energys business and
affairs are controlled and managed by a four member Management Committee composed of two
representatives designated by KLT Energy Services, one representative designated by IEC
and one representative designated by SE Holdings. Certain actions (including amendment of
Strategic Energys operating agreement, approval of actions in contravention of the
operating agreement, approval of transactions between Strategic Energy and affiliates of
its members, approval of a dissolution of Strategic Energy, and assumption of recourse
indebtedness) require the unanimous consent of all the Management Committee members.

In November 2002, the Board of
Directors of the Company approved a merger of Environmental Lighting Concepts, Inc. (ELC)
into IEC to acquire ELCs 6% indirect interest in Strategic Energy. The merger
resulted in Great Plains Energy holding an 89% indirect interest in Strategic Energy.
Gregory J. Orman, the former Executive Vice President  Corporate Development and
Strategic Planning of the Company, was the majority shareholder of ELC and received $10.1
million in Company common stock and a note, which was paid in January 2003.

102

# 13. COMMITMENTS AND
CONTINGENCIES

# Nuclear Liability and
Insurance

Liability InsuranceThe Price-Anderson Act currently
limits the combined public liability of nuclear reactor owners to $10.9 billion for claims
that could arise from a single nuclear incident. The owners of Wolf Creek, a nuclear
generating station, (Owners) carry the maximum available commercial insurance of $0.3
billion. Secondary Financial Protection, an assessment plan mandated by the NRC, provides
insurance for the $10.6 billion balance.

Under Secondary Financial Protection,
if there were a catastrophic nuclear incident involving any of the nations licensed
reactors, the Owners would be subject to a maximum retrospective assessment per incident
of up to $95.8 million plus up to an additional 5% surcharge for a total of $100.6 million
($47.3 million, KCP&Ls 47% share). The Owners are jointly and severally liable
for these charges, payable at a rate not to exceed $10 million ($5 million,
KCP&Ls 47% share) per incident per year, excluding applicable premium taxes. The
assessment, most recently revised in 2003, is subject to an inflation adjustment based on
the Consumer Price Index and renewal of the Price-Anderson Act by Congress.

Property,
Decontamination, Premature Decommissioning and Extra Expense Insurance
The Owners also carry $2.8 billion
($1.3 billion, KCP&Ls 47% share) of property damage, decontamination and
premature decommissioning insurance for loss resulting from damage to the Wolf Creek
facilities. Nuclear Electric Insurance Limited (NEIL) provides this insurance.

In the event of an accident,
insurance proceeds must first be used for reactor stabilization and NRC mandated site
decontamination. KCP&Ls share of any remaining proceeds can be used for further
decontamination, property damage restoration and premature decommissioning costs.
Premature decommissioning coverage applies only if an accident at Wolf Creek exceeds $500
million in property damage and decontamination expenses, and only after trust funds have
been exhausted.

The Owners also carry additional
insurance from NEIL to cover costs of replacement power and other extra expenses incurred
in the event of a prolonged outage resulting from accidental property damage at Wolf
Creek.

Under all NEIL policies, KCP&L is
subject to retrospective assessments if NEIL losses, for each policy year, exceed the
accumulated funds available to the insurer under that policy. The estimated maximum amount
of retrospective assessments to KCP&L under the current policies could total about
$24.5 million.

In the event of a catastrophic loss
at Wolf Creek, the insurance coverage may not be adequate to cover property damage and
extra expenses incurred. Uninsured losses, to the extent not recovered through rates,
would be assumed by KCP&L and could have a material, adverse effect on its financial
condition, results of operations and cash flows.

Low-Level WasteThe Low-Level Radioactive Waste
Policy Amendments Act of 1985 mandated that the various states, individually or through
interstate compacts, develop alternative low-level radioactive waste disposal facilities.
The states of Kansas, Nebraska, Arkansas, Louisiana and Oklahoma formed the Central
Interstate Low-Level Radioactive Waste Compact (Compact) and selected a site in northern
Nebraska to locate a disposal facility. Wolf Creek Nuclear Operating Corporation (WCNOC)
and the owners of the other five nuclear units in the Compact provided most of the
pre-construction financing for this project. KCP&Ls net investment in the
Compact was $7.4 million at December 31, 2003 and 2002.

103

Significant opposition to the project
has been raised by Nebraska officials and residents in the area of the proposed facility
and attempts have been made through litigation and proposed legislation in Nebraska to
slow down or stop development of the facility. On December 18, 1998, the application for a
license to construct this project was denied. After the license denial, WCNOC and others
filed a lawsuit in federal court contending Nebraska officials acted in bad faith while
handling the license application. In September 2002, the U.S. District Court Judge
presiding over the Central Interstate Compact Commissions federal bad
faith lawsuit against the State of Nebraska issued his decision in the case finding
clear evidence that the State of Nebraska acted in bad faith in processing the license
application for a low-level radioactive waste disposal site in Nebraska and rendered a
judgment on behalf of the Compact in the amount of $151.4 million against the state. The
state appealed this decision to the U.S. Court of Appeals for the Eighth Circuit. On
February 18, 2004, a three-judge panel of the appellate court unanimously affirmed the
trial courts decision in its entirety. On March 2, 2004, Nebraska filed a Petition
for Rehearing En Banc with the U.S. Court of Appeals for the Eighth Circuit. Based on the
favorable outcome of the trial and appeal, in KCP&Ls opinion, there is a greater
possibility of reversing the states license denial once the decision in this case is
final.

In May 1999, the Nebraska legislature
passed a bill withdrawing Nebraska from the Compact. In August 1999, the Nebraska Governor
gave official notice of the withdrawal to the other member states effective in August
2004. In June 2003, the Compact revoked Nebraskas membership in the Compact
effective July 17, 2004. As a result, Nebraskas legal rights under the Compact will
be extinguished on the effective date of either the Compacts revocation of
Nebraskas membership or Nebraskas withdrawal from the Compact. If membership
is severed by virtue of revocation by the Compact, any legal obligations Nebraska incurred
prior to revocation shall not cease until Nebraska fulfills them. The Compact has taken
the position that Nebraskas legal obligations include the obligation to be the host
state for a disposal site. Nebraskas legal obligations, under the Compacts
position, are more extensive than would exist if Nebraskas withdrawal preceded the
revocation of its membership. On August 22, 2003, Nebraska filed a new lawsuit in U.S.
District Court in Nebraska seeking to have the Compacts action deemed void; it does
not seek damages. A procedural schedule has been set in this case to be ready for trial by
June 2004.

Environmental MattersThe Company is subject to regulation
by federal, state and local authorities with regard to air and other environmental matters
primarily through KCP&Ls operations. The generation and transmission of
electricity produces and requires disposal of certain hazardous products that are subject
to these laws and regulations. In addition to imposing continuing compliance obligations,
these laws and regulations authorize the imposition of substantial penalties for
noncompliance, including fines, injunctive relief and other sanctions. Failure to comply
with these laws and regulations could have a material adverse effect on consolidated
KCP&L and Great Plains Energy.

KCP&L operates in an
environmentally responsible manner and seeks to use current technology to avoid and treat
contamination. KCP&L regularly conducts environmental audits designed to ensure
compliance with governmental regulations and to detect contamination. Governmental bodies,
however, may impose additional or more restrictive environmental regulations that could
require substantial changes to operations or facilities at a significant cost. At December
31, 2003 and 2002, KCP&L had $1.8 million and $1.9 million, respectively, accrued for
environmental remediation expenses covering water monitoring at one site and unasserted
claims for remediation at a second site. The amounts accrued were established on an
undiscounted basis and KCP&L does not currently have an estimated time frame over
which the accrued amounts may be paid out. Expenditures to comply with environmental laws
and regulations have not been material in amount during the periods presented and are not
expected to be material in the upcoming years with the exception of the issues discussed
below.

104

Certain Air Toxic
SubstancesIn July 2000, the National Research
Council published its findings of a study under the Clean Air Act Amendments of 1990
(Clean Air Act), which stated that power plants that burn fossil fuels, particularly coal,
generate the greatest amount of mercury emissions. As a result, in December 2000, the
Environmental Protection Agency (EPA) announced it would propose Maximum Achievable
Control Technology (MACT) requirements by December 2003 to reduce mercury emissions and
issue final rules by December 2004. In December 2003, the EPA issued proposed regulations
that contained two options. Based upon preliminary testing, it does not appear that
KCP&L would incur additional expense under the MACT option. Under the cap and
trade option, KCP&L would incur additional expenses in the 2015-2016 timeframe.
However, until the EPA decides which option it will pursue and the proposed rules are
finalized, KCP&L cannot predict the likelihood or compliance costs of such
regulations. Comments on the proposed regulations are due by March 30, 2004. KCP&L
plans to submit comments supporting the MACT option.

Air Particulate MatterIn July 1997, the EPA revised ozone
and particulate matter air quality standards creating a new eight-hour ozone standard and
establishing a new standard for particulate matter less than 2.5 microns (PM-2.5) in
diameter. These standards were challenged in the U.S. Court of Appeals for the District of
Columbia (Appeals Court) that decided against the EPA. Upon further appeal, the U.S.
Supreme Court reviewed the standards and remanded the case back to the Appeals Court for
further review, including a review of whether the standards were arbitrary and capricious.
On March 26, 2002, the Appeals Court issued its decision on challenges to the 8-hour ozone
and PM-2.5 National Ambient Air Quality Standards (NAAQS). This decision denied all state,
industry and environmental groups petitions for review and thus upheld as valid the
EPAs new 8-hour ozone and PM-2.5 NAAQS. In so doing, the court held that the EPA
acted consistently with the Clean Air Act in setting the standards at the levels it chose
and the EPAs actions were reasonable and not arbitrary and capricious, and cited the
deference given the EPAs decision-making authority. The court stated that the
extensive records established for each rule supported the EPAs actions in both
rulemakings.

This decision by the Appeals Court
removed the last major hurdle to the EPAs implementation of stricter ambient air
quality standards for ozone and fine particles. The EPA has not yet issued regulations
incorporating the new standards. Until new regulations are issued, KCP&L is unable to
estimate the impact of the new standards. However, the impact on KCP&L and all other
utilities that use fossil fuels could be substantial. In addition, the EPA is conducting a
three-year study of fine particulate ambient air levels. Until this testing and review
period has been completed, KCP&L cannot determine additional compliance costs, if any,
associated with the new particulate regulations.

Nitrogen Oxide and Sulfur
DioxideThe EPA announced in 1998 regulations
implementing reductions in Nitrogen Oxide (NOx) emissions. These regulations
initially called for 22 states, including Missouri, to submit plans for controlling
NOx emissions. The regulations would have required a significant reduction in
NOx emissions from 1990 levels at KCP&Ls Missouri coal-fired plants
by the year 2003.

In December 1998, KCP&L and
several other western Missouri utilities filed suit against the EPA over the inclusion of
western Missouri in the NOx reduction program based on the 1-hour
NOx standard. On March 3, 2000, a three-judge panel of the District of Columbia
Circuit of the U.S. Court of Appeals sent the NOx rules related to Missouri
back to the EPA, stating the EPA failed to prove that fossil plants in the western part of
Missouri significantly contribute to ozone formation in downwind states. On March 5, 2001,
the U.S. Supreme Court denied certiorari, making the decision of the Court of Appeals
final.

105

In February 2002, the EPA issued
proposed Phase II NOx State Implementation Plan (SIP) Call regulations, which
specifically exclude the fossil plants in the western part of Missouri from the
NOx SIP Call. To date, the EPA has not issued its final Phase II NOxSIP Call regulation.

If fossil plants in western Missouri
are required to implement NOx reductions, KCP&L would need to incur
significant capital costs, purchase power or purchase NOx emission allowances.
Preliminary analysis of the regulations indicates that selective catalytic reduction
technology, as well as other changes, may be required for some of the KCP&L units.
Currently, KCP&L estimates that additional capital expenditures to comply with these
regulations could range from $40 million to $60 million. Operations and maintenance
expenses could also increase by more than $2.5 million per year. KCP&L continues to
refine these preliminary estimates and explore alternatives. The ultimate cost of these
regulations, if any, could be significantly different from the amounts estimated above.

In addition to the pending Phase II
NOx SIP Call regulation, in December 2003, the EPA issued proposed regulations
titled Interstate Air Quality Regulations that also would control
NOx emissions as well as sulfur dioxide emissions from coal fired power plants
and would apply to fossil plants in western Missouri. This proposed regulation will be
supplemented with another proposed regulation, which is scheduled for release in May 2004.
Compliance costs associated with these regulations, as currently proposed, would be
material, however, KCP&L cannot predict the likelihood of such regulations being
adopted.

Carbon DioxideAt a December 1997 meeting in Kyoto,
Japan, delegates from 167 nations, including the United States, agreed to a treaty (Kyoto
Protocol) that would require a seven percent reduction in United States carbon dioxide
(CO2) emissions below 1990 levels. Although the United States agreed to the
Kyoto Protocol, the treaty has not been sent to Congress for ratification. The financial
impact on KCP&L of future requirements in the reduction of CO2 emissions
cannot be determined until specific regulations are adopted.

EPA New Source ReviewThe EPA is conducting an enforcement
initiative to determine whether modifications at coal-fired plants across the United
States are subject to New Source Performance Standards (NSPS) or New Source Review (NSR)
requirements under Section 114(a) of the Clean Air Act. This initiative reviews all
expenditures at the plants to determine if they were for routine maintenance or whether
the expenditures were for substantial modifications or resulted in improved operations. If
a plant, subject to a Section 114 letter, is determined to be subject to NSPS or NSR the
plant could be required to install best available control technology (BACT) or lowest
achievable emission rate (LAER) technology. KCP&L has not received a Section 114
letter to date.

Clean Air LegislationCongress has debated numerous bills
that would make significant changes to the current federal Clean Air Act including
potential establishment of nationwide limits on power plant emissions for several specific
pollutants. These bills have the potential for a significant financial impact on KCP&L
through the installation of new pollution control equipment to achieve compliance with the
new nationwide limits. The financial consequences to KCP&L cannot be determined until
the final legislation is passed. KCP&L will continue to monitor the progress of these
bills.

Proposed Water Use
RegulationsIn February 2002, the EPA issued
proposed rules related to certain existing power producing facilities that employ cooling
water intake structures that withdraw 50 million gallons or more per day and use 25% or
more of that water for cooling purposes. The proposed rules establish national minimum
performance requirements designed to minimize adverse environmental impact. The EPA
approved

106

the proposed rules on February 16, 2004. Pursuant to the EPAs action,
KCP&L has three and one-half years to conduct demonstration studies on each of its
coal plants. The cost of each of these studies is estimated at $0.3 million to $0.5
million. The outcome of those studies will determine whether the plants are in compliance
with the new rules.

Nuclear Fuel CommitmentsAs of December 31, 2003,
KCP&Ls 47% share of Wolf Creek nuclear fuel commitments included $15.3 million
for enrichment through 2006, $55.9 million for fabrication through 2025 and $20.4 million
for uranium and conversion through 2007.

Coal ContractsKCP&Ls share of coal
purchased under existing contracts was $53.6 million in 2003, $49.5 million in 2002 and
$44.6 million in 2001. Under these coal contracts, KCP&Ls remaining share of
purchase commitments totals $131.5 million. Obligations for the years 2004 through 2006
total approximately $55.7 million, $57.0 million, and $18.8 million, respectively. The
remainder of KCP&Ls coal requirements will be fulfilled through additional
contracts or spot market purchases.

Purchased Capacity
CommitmentsKCP&L purchases capacity from
other utilities and nonutility suppliers. Purchasing capacity provides the option to
purchase energy if needed or when market prices are favorable. This can be a
cost-effective alternative to new construction. KCP&Ls capacity purchases
totaled $18.9 million, $18.5 million and $17.7 million in 2003, 2002 and 2001,
respectively. As of December 31, 2003, contracts to purchase capacity totaled $71.7
million through 2016. These commitments are approximately $19 million in 2004, $10 million
in 2005 and $4 million in each of 2006, 2007 and 2008. Capacity sales contracts to supply
other utilities and municipalities in the years 2004 through 2008 average $12 million per
year. For the next five years, net capacity contracts average less than 1% of
KCP&Ls estimated 2004 total available generating capacity.

Strategic Energy
Purchased Power Energy CommitmentsStrategic Energy has entered into
agreements to purchase electricity at various fixed prices to meet estimated supply
requirements. Commitments at December 31, 2003, under these agreements total $1,403.7
million through 2010. Commitments for the years 2004 through 2008 total $757.4 million,
$457.9 million, $132.0 million, $44.9 million, and $4.1 million, respectively. Energy
sales contracts for 2004 and 2005 total $111.9 million and $37.8 million, respectively.
See Note 17 for further discussion.

Great Plains Energy
LeasesGreat Plains Energys lease
expense was $24.1 million during 2003 and $27.4 million during 2002.
Great Plains Energys lease expense,
excluding DTI, was $30.6 million during 2001. The remaining rental commitments under
leases total $189.4 million ending in 2028. Obligations for the years 2004 through 2008
are $44.8 million, $14.0 million, $13.4 million, $11.4 million and $9.3 million,
respectively.

Consolidated KCP&L
LeasesConsolidated KCP&Ls lease
expense was $23.1 million during 2003 and $25.7 million during 2002. Consolidated
KCP&Ls lease expense, excluding DTI, was $29.6 million during 2001. The
remaining rental commitments under leases total $186.5 million ending in 2028. Obligations
for the years 2004 through 2008 are $43.9 million, $13.4 million, $12.9 million, $10.9
million and $8.9 million, respectively.

KCP&L has a transmission line
lease with another utility through September 2025 whereby, with the FERCs approval,
the rental payments can be increased by the lessor. If this occurs and KCP&L is able
to secure an alternative transmission path, KCP&L can cancel the lease. Commitments
under this lease total $1.9 million per year and $41.1 million over the
remaining life of the lease, assuming it is not canceled.

107

KCP&Ls expense for other
leases, including railcars, computer equipment, buildings, transmission line and other
items, approximated $23.6 million annually for the last three years. The remaining
rental commitments under these leases total$145.4 million through
2028. In early 2004, the operating lease for vehicles and heavy equipment was terminated
and the vehicles and equipment purchased for $29.0 million, which is included in the 2004
obligation. These amounts exclude possible termination payments under the synthetic lease
arrangement discussed below. Capital leases are not material and are included in these
amounts.

As the managing partner of three
jointly owned generating units, KCP&L has entered into leases for railcars to serve
those units. Consolidated KCP&L has reflected the entire lease commitment in the above
amounts, although about $2.0 million per year ($24.0 million total) will be
reimbursed by the other owners.

In 2001, KCP&L entered into a
synthetic lease arrangement with a Lease Trust (Lessor) to finance the purchase,
installation, assembly and construction of five combustion turbines and related property
and equipment that added 385 MWs of peaking capacity (Project). The Lease Trust is a
special-purpose entity and has an aggregate financing commitment from third-party equity
and debt participants of $176 million. In the second quarter of 2003, construction and
installation of KCP&Ls five combustion turbines was completed and the units were
placed in service. At December 31, 2003, cumulative project costs were approximately
$152.0 million. Rental payments under the lease will begin in 2004. Upon a default during
the lease period, KCP&Ls maximum obligation to the Lessor equals 100% of project
costs. KCP&Ls rental obligation, which reflects interest payments only, is
expected to be approximately $15.5 million ending in October 2006. KCP&Ls rental
obligation for the years 2004 through 2006 are approximately $3.1 million, $6.2 million
and $6.2 million, respectively. At the end of the lease term (October 2006), KCP&L may
choose to sell the project for the Lessor, guaranteeing that the Lessor receives a
residual value for the Project in an amount, which may be up to 83.21% of the project
cost. Alternatively, KCP&L may purchase the facility at an amount equal to the project
cost.

The Lease Trust, a special purpose
entity, acting as Lessor in the synthetic lease arrangement discussed above, is considered
a Variable Interest Entity under FIN No. 46. Because KCP&L has variable interests in
the Lease Trust, including among other things, a residual value guarantee provided to the
Lessor, KCP&L is the primary beneficiary of the Lease Trust. The Lease Trust was
consolidated in the fourth quarter of 2003, as required by FIN No. 46. Great Plains
Energys and consolidated KCP&Ls utility plant increased $149.3 million,
long-term debt increased $143.8 million and minority interest included in other deferred
credits and other liabilities increased $5.5 million. Additionally, in Great Plains
Energys and consolidated KCP&Ls statements of income, depreciation expense
increased and minority interest decreased $1.3 million in 2003 as a result of the
consolidation of the Lease Trust.

Other Great Plains Energy
LeasesGreat Plains Energys other
subsidiaries have entered operating leases for buildings, compressors, communications
equipment and other items. Lease expense was $1.0 million in 2003, $1.7 million in 2002
and about $1 million in 2001. Obligations average about $0.6 million per year for the
years 2004 through 2008.

Internal Revenue Service
Settlement  Corporate-Owned Life InsuranceIn November 2002, KCP&L accepted
a settlement offer related to the proposed disallowance of interest deductions on
corporate-owned life insurance (COLI) loans. The offer allowed 20% of the interest
originally deducted and taxed only 20% of the gain on surrender of the COLI policies.
KCP&L surrendered the policies in February 2003. KCP&L made cash payments of $1.3
million to the Internal Revenue Service (IRS) in 2003 to satisfy the liability associated
with the surrender. The remaining $9.9 million related to the disallowed interest will be
paid upon completion of the 1995  1999 IRS audit.

108

KCP&L paid $1.5 million to the
IRS in 2001 related to the disallowance of the 1994 COLI deduction and related interest.
KCP&L accrued for these disallowances and payments in 2000.

# 14. GUARANTEES

In the normal course of business,
Great Plains Energy and certain of its subsidiaries enter into various agreements
providing financial or performance assurance to third parties on behalf of certain
subsidiaries. Such agreements include, for example, guarantees and indemnification of
letters of credit and surety bonds. These agreements are entered into primarily to support
or enhance the creditworthiness otherwise attributed to a subsidiary on a stand-alone
basis, thereby facilitating the extension of sufficient credit to accomplish the
subsidiaries intended business purposes.

As prescribed in FIN No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Guarantees of Indebtedness of Others, the Company began recording a liability for
the fair value of the obligation it has undertaken for guarantees issued after December
31, 2002. The liability recognition requirements of FIN No. 45 are applied on a
prospective basis to guarantees issued or modified after December 31, 2002, while the
disclosure requirements are applied to all guarantees. The interpretation does not
encompass guarantees of the Companys own future performance, such as credit support
provided to its subsidiaries. As of December 31, 2003, KCP&L had an immaterial amount
recorded for the fair value of guarantees issued for the residual value of vehicles and
heavy equipment under an operating lease, which will be reversed in 2004 following the
buyout of the lease.

The following table reflects Great
Plains Energys and consolidated KCP&Ls maximum potential amount of future
payments that could be required under guarantees and describes those guarantees:

|                        
|------------------------
|Maximum                 
|Guarantor               
|
|(millions)              
|KCP&L                   
|                        
|                        
|                        
|                        
|KCP&L                   
|                        
|
|Total consolidated KCP&L
|and Great Plains Energy 
|

# 15. ASSET RETIREMENT
OBLIGATIONS

Effective January 1, 2003, the
Company adopted SFAS No. 143. SFAS No. 143 provides accounting requirements for the
recognition and measurement of liabilities associated with the retirement of tangible
long-lived assets. Under the standard, these liabilities are recognized at fair value as
incurred and capitalized as part of the cost of the related long-lived asset. Accretion of
the liabilities due to the passage of time is recorded as an operating expense. Retirement
obligations associated with long-lived assets included within the scope of SFAS No. 143
are those for which a legal obligation exists under enacted laws, statutes and written or
oral contracts, including obligations arising under the doctrine of promissory estoppel.

The adoption of SFAS No. 143 changed
the accounting for and the method used to report KCP&Ls obligation to
decommission its 47% share of Wolf Creek. The legal obligation to decommission Wolf Creek
was incurred when the plant was placed in service in 1985. The estimated liability,
recognized

109

on KCP&Ls balance sheet at January 1, 2003, is based on a third party
nuclear decommissioning study conducted in 2002. KCP&L used a credit-adjusted risk
free discount rate of 6.42% to calculate the retirement obligation. This estimated rate
was based on the rate KCP&L could issue 30-year bonds, adjusted downward to reflect
the portion of the anticipated costs in current year dollars that had been funded at date
of adoption through a tax-qualified trust fund. The cumulative impact of prior
decommissioning accruals recorded consistent with rate orders issued by the MPSC and KCC
has been reversed with an offsetting reduction of the regulatory asset established upon
adoption of SFAS No. 143, as described below. Amounts collected through these rate orders
have been deposited in a legally restricted external trust fund. The fair market value of
the trust fund was $75.0 million and $63.3 million at December 31, 2003 and 2002,
respectively.

KCP&L also must recognize, where
possible to estimate, the future costs to settle other legal liabilities including the
removal of water intake structures on rivers, capping/filling of piping at levees
following steam power plant closures and capping/closure of ash landfills. Estimates for
these liabilities are based on internal engineering estimates of third party costs to
remove the assets in satisfaction of legal obligations and have been discounted using
credit adjusted risk free rates ranging from 5.25% to 7.50% depending on the anticipated
settlement date.

KLT Gas has estimated liabilities for
gas well plugging and abandonment, facility removal and surface restoration. These
estimates are based upon internal estimates of third party costs to satisfy the legal
obligations and have been discounted using credit adjusted risk free rates ranging from
6.00% to 7.25%, depending upon the anticipated settlement date.

Revisions to the estimated
liabilities of KCP&L and KLT Gas could occur due to changes in the decommissioning or
other cost estimates, extension of the nuclear operating license or changes in federal or
state regulatory requirements.

On January 1, 2003, KCP&L
recorded an ARO of $99.2 million, reversed the decommissioning liability of $64.6 million
previously accrued and increased property and equipment, net of accumulated depreciation,
by $18.3 million. KCP&L is a regulated utility subject to the provisions of SFAS No.
71 and management believes it is probable that any differences between expenses under SFAS
No. 143 and expenses recovered currently in rates will be recoverable in future rates. As
a result, the $16.3 million net cumulative effect ($80.9 million gross cumulative effect
net of $64.6 million decommissioning liability previously accrued) of the adoption of SFAS
No. 143 was recorded as a regulatory asset and therefore, had no impact on net income.

In addition, KCP&L recognizes
removal costs for utility assets that do not have an associated legal retirement
obligation. Historically, these removal costs have been reflected as a component of
depreciation in accordance with regulatory treatment. In conjunction with the adoption of
SFAS No. 143, non-legal costs of removal were reclassified for all periods presented from
accumulated depreciation to a regulatory asset.

As a result of its adoption of SFAS
No. 143, KLT Gas recorded an ARO of $1.2 million, increased property and equipment by $1.0
million and increased operating expense by $0.2 million for the immaterial cumulative
effect of the accounting change.

KCP&L has legal ARO for certain
other assets where it is not possible to estimate the time period when the obligations
will be settled. Consequently, the retirement obligations cannot be measured at this time.
For transmission easements obtained by condemnation, KCP&L must remove its
transmission lines if the line is de-energized. It is extremely difficult to obtain siting
for new transmission lines. Consequently, KCP&L does not anticipate de-energizing any
of its existing lines. KCP&L also operates, under state permits, ash landfills at
several of its power plants. While the life of the ash

110

landfill at one plant can be
estimated and is included in the estimated liabilities above, the future life of ash
landfills at other permitted landfills cannot be estimated. KCP&L can continue to
maintain permits for these landfills after the adjacent plant is closed.

It is anticipated the Companys
February 2004 decision to exit the gas business will be accomplished by the sale of KLT
Gas assets. Management expects the ARO related to the KLT Gas portfolio to be
transferred to the new owners at the time of the sale.

The following table illustrates the
effect on ARO if the provisions of SFAS No. 143 had been applied beginning January 1,
2001. Pro forma amounts for the periods prior to the January 1, 2003, adoption were
measured using assumptions consistent with the period of adoption.

|                                               
|-----------------------------------------------
|2003                                           
|
|(millions)                                     
|Asset retirement obligation beginning of period
|Additions                                      
|Accretion                                      
|                                               
|Asset retirement obligation end of period      
|
|Great Plains Energy                            
|Asset retirement obligation beginning of period
|Additions                                      
|Accretion                                      
|                                               
|Asset retirement obligation end of period      
|

# 16. SEGMENT AND RELATED
INFORMATION

Great Plains EnergyGreat Plains Energy has three
reportable segments based on its method of internal reporting, which generally segregates
the reportable segments based on products and services, management responsibility and
regulation. The three reportable business segments are: (1) KCP&L, an integrated,
regulated electric utility, which generates, transmits and distributes electricity; (2)
Strategic Energy, which provides power supply coordination services by entering into
long-term contracts with its customers to supply electricity Strategic Energy purchases
under long-term contracts, operating in several electricity markets offering retail
choice; and (3) KLT Gas, which explores for, develops, and produces unconventional natural
gas resources, including coal bed methane properties. Other includes the
operations of HSS, GPP, Services, all KLT Inc. operations other than Strategic Energy and
KLT Gas, unallocated corporate charges and intercompany eliminations. The summary of
significant accounting policies applies to all of the reportable segments. Segment
performance is evaluated based on net income.

The following tables reflect
summarized financial information concerning Great Plains Energys reportable
segments.

|                                 
|---------------------------------
|Strategic                        
|KCP&L                            
|
|(millions)                       
|Operating revenues               
|Depreciation and depletion       
|Loss from equity investments     
|Interest charges                 
|Income taxes                     
|Loss from discontinued operations
|Net income (loss)                
|

111

|                                 
|---------------------------------
|Strategic                        
|KCP&L                            
|
|(millions)                       
|Operating revenues               
|Depreciation and depletion       
|Loss from equity investments     
|Interest charges                 
|Income taxes                     
|Loss from discontinued operations
|Cumulative effect of a change    
|in accounting principle          
|Net income (loss)                
|

|                                 
|---------------------------------
|Strategic                        
|KCP&L                            
|
|(millions)                       
|Operating revenues               
|Depreciation and depletion       
|Income from equity investments   
|Interest charges                 
|Income taxes                     
|Loss from discontinued operations
|Net income (loss)                
|

|                                      
|--------------------------------------
|Strategic                             
|KCP&L                                 
|
|(millions)                            
|Assets                                
|Capital and investment expenditures(a)
|
|2002                                  
|Assets                                
|Capital and investment expenditures(a)
|
|2001                                  
|Assets(b)                             
|Capital and investment expenditures(a)
|

|    | 
|--- | 
|(a) | 
|(b) | 
|    | 
|    | 

Consolidated KCP&LOn October 1, 2001, consolidated
KCP&L distributed, as a dividend, its ownership interest in KLT Inc. and GPP to Great
Plains Energy. As a result, those companies are direct subsidiaries of Great Plains Energy
and have not been included in consolidated KCP&Ls results of operations and
financial position since October 1, 2001.

112

The following tables reflect
summarized financial information concerning consolidated KCP&Ls reportable
segment. Other includes the operations of HSS and intercompany eliminations, which are
immaterial.

|                                 
|---------------------------------
|Consolidated                     
|KCP&L                            
|
|(millions)                       
|Operating revenues               
|Depreciation and depletion       
|Interest charges                 
|Income taxes                     
|Loss from discontinued operations
|Net income (loss)                
|

|                                 
|---------------------------------
|Consolidated                     
|KCP&L                            
|
|(millions)                       
|Operating revenues               
|Depreciation and depletion       
|Interest charges                 
|Income taxes                     
|Loss from discontinued operations
|Cumulative effect of a change    
|in accounting principle          
|Net income (loss)                
|

|                                     
|-------------------------------------
|Subsidiaries                         
|transferred to                       
|KCP&L                                
|
|(millions)                           
|Operating revenues                   
|Depreciation and depletion           
|Income (loss) from equity investments
|Interest charges                     
|Income taxes                         
|Loss from discontinued operations    
|Net income (loss)                    
|

|                                       
|---------------------------------------
|Subsidiaries                           
|transferred to                         
|KCP&L                                  
|
|(millions)                             
|Assets                                 
|Capital and investment expenditures (a)
|
|2002                                   
|Assets                                 
|Capital and investment expenditures (a)
|
|2001                                   
|Assets                                 
|Capital and investment expenditures (a)
|

|    | 
|--- | 
|(a) | 

113

# 17. SHORT-TERM
BORROWINGS AND SHORT-TERM BANK LINES OF CREDIT

Great Plains Energy syndicated a $225
million, revolving credit facility with a group of banks in the first quarter of 2003.
This facility replaced a $205 million syndicated facility and a $20 million credit
facility with a bank. The line has a 364-day term but may be extended for an additional
year at the Companys option. Available liquidity under this facility is not impacted
by a decline in credit ratings unless the downgrade occurs in the context of a merger,
consolidation or sale. A default by Great Plains Energy or any of its significant
subsidiaries of material other indebtedness totaling more than $25.0 million is a default
under this bank line. Under the terms of this agreement, Great Plains Energy is required
to maintain a consolidated indebtedness to consolidated capitalization ratio not greater
than 0.65 to 1.0 at all times and an interest coverage ratio greater than 2.25 to 1.0, as
those ratios are defined in the agreement. At December 31, 2003, the Company was in
compliance with these covenants. At December 31, 2003, Great Plains Energy had $87.0
million of outstanding borrowings under this facility with a weighted-average interest
rate of 2.12%. Great Plains Energy also issued a letter of credit for $15.8 million as
credit support for Strategic Energy. At December 31, 2002, Great Plains Energy had $14.0
million of outstanding borrowings under its $20 million credit facility, with a
weighted-average interest rate of 2.27%.

Strategic Energy maintains a secured
revolving credit facility for up to $95 million with a group of banks. This facility is
partially guaranteed by Great Plains Energy. The facility enhances Strategic Energys
liquidity including its ability to provide credit support through letters of credit for
purchased power and regulatory requirements. The maximum amount available for loans and
letters of credit under the facility is the lesser of $95 million or the borrowing base,
as defined in the agreement. The borrowing base generally is the sum of certain Strategic
Energy accounts receivable and the amount of the Great Plains Energy guarantee which was
$40.0 million at December 31, 2003. At December 31, 2003, Strategic Energy had a minimum
fixed charge ratio, as defined in the agreement, of at least 1.05 to 1.0; however, if the
ratio drops below 1.05 to 1.0, Great Plains Energys guarantee amount is required to
be increased based on quarterly calculations. At December 31, 2003, $58.5 million in
letters of credit had been issued under the agreement, leaving $27.3 million of capacity
available for loans and additional letters of credit. The line has a 364-day term that may
be extended for an additional year by Strategic Energy with mutual agreement of the
parties. A default by Strategic Energy of other indebtedness, as defined in the facility,
totaling more than $5.0 million is a default under the facility. Under the terms of this
agreement, Strategic Energy is required to maintain a minimum net worth of $30 million and
a maximum debt to EBITDA ratio of 2.0 to 1.0, as those are defined in the agreement. At
December 31, 2003, Strategic Energy was in compliance with these covenants.

Strategic Energy had a $30 million
short-term bank credit agreement that expired in March 2003. At December 31, 2002,
Strategic Energy had no short-term borrowings outstanding.

KCP&Ls short-term
borrowings consist of funds borrowed from banks or through the sale of commercial paper as
needed. As of December 31, 2003, and 2002, there was no commercial paper outstanding. A
default by KCP&L on other indebtedness is a default under these bank line agreements.
Under the terms of certain bank line agreements, KCP&L is required to maintain a
consolidated indebtedness to consolidated capitalization ratio, as defined in the
agreements, not greater than 0.65 to 1.0 at all times. At December 31, 2003, KCP&L was
in compliance with this covenant. KCP&Ls short-term bank lines of credit totaled
$150.0 million as of December 31, 2003, and $126.0 million as of December 31, 2002.

On June 30, 2003, HSS completed the
disposition of its interest in RSAE. RSAEs line of credit totaling $27 million was
cancelled. With proceeds from a note to Great Plains Energy, HSS repaid $22.1 million on
the supported bank line. At December 31, 2003, HSS notes payable to Great Plains
Energy totaled $22.0 million. See Note 8 for additional information concerning the
disposition of RSAE.

114

# 18. LONG-TERM DEBT AND
EIRR BONDS CLASSIFIED AS CURRENT LIABILITIES

|                                                                   
|-------------------------------------------------------------------
|December 31                                                        
|Year Due                                                           
|
|(thousands)                                                        
|KCP&L                                                              
|General Mortgage Bonds                                             
|7.55%* and 7.28%** Medium-Term Notes                               
|2.36%* and 2.48%** EIRR bonds                                      
|Senior Notes                                                       
|7.125%                                                             
|6.500%                                                             
|6.000%                                                             
|Unamortized discount                                               
|EIRR bonds                                                         
|2.16%* and 2.41%** Series A & B                                    
|2.25%* and 4.50%** Series C                                        
|2.16%* and 2.41%** Series D                                        
|                                                                   
|8.30% Junior Subordinated Deferred Interest Bonds                  
|                                                                   
|Other Consolidated KCP&L                                           
|1.25%* Combustion Turbine Synthetic Lease                          
|                                                                   
|Current liabilities                                                
|EIRR bonds classified as current                                   
|Current Maturities                                                 
|                                                                   
|Total consolidated KCP&L excluding current liabilities             
|                                                                   
|Other Great Plains Energy                                          
|7.84%* and 8.16%** Affordable Housing Notes                        
|Current maturities                                                 
|
|Total consolidated Great Plains Energy excluding current maturities
|

|   | 
|-- | 
|*  | 
|** | 

KCP&L General
Mortgage BondsKCP&L has issued mortgage bonds
under the General Mortgage Indenture and Deed of Trust dated December 1, 1986, as
supplemented. The Indenture creates a mortgage lien on substantially all utility plant.
Mortgage bonds secure $213.8 million and $337.8 million of medium-term notes and EIRR
bonds (see discussion below) at December 31, 2003 and 2002, respectively.

In 2003, KCP&L redeemed $124.0
million of its medium term notes, including $104.0 million called prior to maturity. The
medium term notes were paid off primarily with proceeds from a $100.0 million equity
contribution received from Great Plains Energy during the first quarter of 2003. The
average interest rate on the $104.0 million of notes called early was 7.28% and the
original maturity dates were 2005 through 2008.

In December 2002, KCP&L secured
bond insurance policies as a credit enhancement to its Series 1993A and 1993B EIRR bonds,
which aggregate $79.5 million. The insurance agreement between KCP&L and XL Capital
Assurance Inc. (XLCA), the issuer of the bond insurance policies, provides for
reimbursement by KCP&L for any amounts that XLCA pays under the bond insurance
policies. The

115

insurance policies are in effect for the term of the bonds. The insurance
agreement contains a covenant that the indebtedness to total capitalization ratio of
KCP&L and its consolidated subsidiaries will not be greater than 0.68 to 1.0.
KCP&L is also restricted from issuing additional bonds under its General Mortgage
Indenture if, after giving effect to such additional bonds, the proportion of secured debt
to total indebtedness would be more than 75%, or more than 50% if the long term rating for
such bonds by Standard & Poors or Moodys Investors Service would be at or
below A- or A3, respectively. In the event of a default under the insurance agreement,
XLCA may take any available legal or equitable action against KCP&L, including seeking
specific performance of the covenants.

The EIRR bonds are subject to
mandatory redemption within 120 to 180 days of a final determination by the IRS or a court
that, as a result of KCP&L failing to perform any of its agreements relating to the
bonds, interest paid or payable on the bonds is or was includable in the bondholders
gross income for Federal tax purposes.

KCP&L EIRR Bonds
Classified as Current LiabilitiesIn the third quarter of 2003,
KCP&L remarketed its 1998 Series C unsecured EIRR bonds totaling $50.0 million at a
fixed rate of 2.25% ending August 31, 2004. The previous 4.50% interest rate expired on
August 31, 2003. If the bonds could not be remarketed, KCP&L would be obligated to
either purchase or retire the bonds.

The 3.9% interest rate on
KCP&Ls $48.3 million secured 1993 and 1994 series EIRR bonds expires in August
2004. If the bonds could not be remarketed KCP&L would be obligated to either purchase
or retire the bonds.

A $31.0 million variable-rate,
secured EIRR bond with a final maturity in 2017 is remarketed on a weekly basis, with full
liquidity support provided by a 364-day credit facility with one bank. KCP&Ls
available liquidity under this credit line is not impacted by a decline in credit ratings
unless the downgrade occurs in the context of a merger, consolidation, or sale.

The $50.0 million Series C unsecured
EIRR bonds, the $48.3 million secured 1993 and 1994 Series EIRR bonds and the $31.0
million discussed above totaled $129.3 million and were classified as current liabilities
at December 31, 2003. The $50.0 million Series C unsecured EIRR bonds and the $31.0
million discussed previously totaled $81.0 million and were classified as current
liabilities at December 31, 2002.

KCP&L Unsecured NotesAt December 31, 2003, KCP&L had a
total of $199.8 million of unsecured EIRR bonds outstanding. The Series C EIRR bonds,
$50.0 million due 2017, have a fixed rate of 2.25% through August 31, 2004, and are
classified as current liabilities at December 31, 2003. In 2002, KCP&L remarketed its
1998 Series A, B and D EIRR bonds totaling $146.5 million to a five-year fixed interest
rate of 4.75% ending October 1, 2007. The final maturity for Series A and B bonds is 2015
and the final maturity for Series D is 2017. At the end of the fixed interest rate period,
the bonds will be subject to mandatory redemption or purchase and KCP&L anticipates
remarketing the bonds at which time a new interest rate period and mode will be
determined. KCP&L has classified the 1998 Series A, B and D EIRR bonds as long-term
debt consistent with the remaining term under the remarketing.

Simultaneously with the remarketing,
KCP&L entered into an interest rate swap for the $146.5 million based on LIBOR to
effectively create a floating interest rate obligation. The transaction is a fair value
hedge with the assumption of no ineffectiveness under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended. The fair value of the
swap is recorded on KCP&Ls balance sheet as an asset with an offset to the
respective debt balances and has no impact on earnings. Future changes in the fair market
value of the swap will be similarly recorded on the balance

116

sheet with no impact on
earnings. The fair value of the swap was a $3.3 million and $4.3 million asset at December
31, 2003 and 2002, respectively. See Note 20 for additional discussion of the interest
rate swap.

KCP&L had a total of $625.0
million of outstanding unsecured senior notes at December 31, 2003 and 2002.

In accordance with FIN No. 46, the
Company has determined that KCP&L is not the primary beneficiary of the Securities
Trust and thus, KCP&L de-consolidated the Securities Trust in the fourth quarter of
2003. De-consolidation required the consolidated financial statements of Great Plains
Energy and consolidated KCP&L to present the $4.6 million investment in the common
securities of the Securities Trust and the $154.6 million 8.3% Junior Subordinated
Deferrable Interest Debentures issued by KCP&L and held by the Securities Trust while
no longer presenting the $150.0 million of 8.3% preferred securities issued by the
Securities Trust.

The Lease Trust, a special purpose
entity, acting as Lessor in the synthetic lease arrangement discussed in Note 13, is
considered a Variable Interest Entity under FIN No. 46. The Lease Trust was consolidated
in the fourth quarter of 2003, as required by FIN No. 46. Accordingly, Great Plains
Energys and consolidated KCP&Ls long-term debt increased $143.8 million.

Other Great Plains
Energy Long-Term DebtKLT Investments affordable
housing notes are collateralized by the affordable housing investments. Most of the notes
also require the greater of 15% of the outstanding note balances or the next annual
installment to be held as cash, cash equivalents or marketable securities. The equity
securities held as collateral for these notes, included in other investments and
nonutility property on the consolidated balance sheets, were $1.5 million and $9.3 million
at December 31, 2003 and 2002, respectively.

Scheduled MaturitiesGreat Plains Energys long-term
debt maturities for the years 2004 through 2008 are $59.3 million, $253.2 million, $145.5
million, $226.1 million and $0.3 million, respectively. These amounts include consolidated
KCP&Ls long-term debt maturities for the years 2004 through 2007 of $54.5
million, $250.0 million, $143.8 million, and $225.5 million, respectively.

19.
          COMMON STOCK EQUITY, PREFERRED STOCK, REDEEMABLE PREFERRED STOCK AND MANDATORILY
          REDEEMABLE PREFERRED SECURITIES

Common Stock EquityIn 2002, Great Plains Energy filed a
registration statement for the issuance of an aggregate amount up to $300 million of any
combination of senior debt securities, subordinated debt securities, trust preferred
securities, convertible securities or common stock. During November 2002, Great Plains
Energy issued 6.9 million shares of common stock at $22 per share under this registration
with $151.8 million in gross proceeds to be used for repayment of debt at Great Plains
Energy and KCP&L and for general corporate purposes. Issuance costs of $6.1 million
are reflected in Great Plains Energys capital stock premium and expense line in the
consolidated balance sheets at December 31, 2003 and 2002.

Also during November 2002, Great
Plains Energy issued 0.4 million shares of common stock valued at $8.0 million in
conjunction with the purchase of an additional indirect ownership interest in Strategic
Energy. See Note 12 for additional information concerning this transaction.

Treasury shares are held for future
distribution upon exercise of options issued in conjunction with the Companys equity
compensation plan. Shares held by consolidated KCP&L prior to the October 1,

117

2001,
distribution of a dividend to Great Plains Energy were included in other investments and
nonutility property on consolidated KCP&Ls balance sheets.

Great Plains Energy has 3.0 million
shares of common stock registered with the SEC for a Dividend Reinvestment and Direct
Stock Purchase Plan (Plan). The Plan allows for the purchase of common shares by
reinvesting dividends or making optional cash payments. Great Plains Energy currently
purchases shares for the Plan on the open market.

Great Plains Energy has 8.3 million
shares of common stock registered with the SEC for a defined contribution savings plan.
The Company matches employee contributions, subject to limits.

Under the 35 Act, Great Plains Energy
and KCP&L can pay dividends only out of retained or current earnings, unless
authorized to do otherwise by the SEC. Under stipulations with the MPSC and KCC, Great
Plains Energy and KCP&L have committed to maintain consolidated common equity of not
less than 30% and 35%, respectively. Pursuant to SEC order, Great Plains Energys and
KCP&Ls authorization to issue securities is conditioned on maintaining a
consolidated common equity capitalization of at least 30%.

Great Plains Energys Articles
of Incorporation contain a restriction related to the payment of dividends in the event
common equity falls to 25% of total capitalization. If preferred stock dividends are not
declared and paid when scheduled, Great Plains Energy could not declare or pay common
stock dividends or purchase any common shares. If the unpaid preferred stock dividends
equal four or more full quarterly dividends, the preferred shareholders, voting as a
single class, could elect the smallest number of Directors necessary to constitute a
majority of the full Board of Directors.

Under the indenture relating to
KCP&Ls 8.3% Junior Subordinated Deferrable Interest Debentures, due 2037
(Debentures), which are held by KCPL Financing I, KCP&L may not declare or pay any
dividends on any shares of its capital stock if at the time (i) there is an event of
default (as defined in the indenture), (ii) KCP&L is in default with respect to its
payment of any obligations under its guarantee of preferred securities issued by KCPL
Financing I, or (iii) KCP&L has elected to defer payments of interest on the
Debentures.

Great Plains Energy made capital
contributions to KCP&L of $100 million and $36 million in 2003 and 2002, respectively.
These contributions were used to pay down long-term debt. At December 31, 2003,
KCP&Ls capital contributions from Great Plains Energy totaled $175.0 million
which is reflected in common stock in the consolidated KCP&L balance sheet.

Preferred StockAs of December 31, 2003, 1.6 million
shares of Cumulative No Par Preferred Stock and 11 million shares of no par Preference
Stock were authorized under Great Plains Energys Articles of Incorporation. Great
Plains Energy has the option to redeem the $39.0 million of issued Cumulative Preferred
Stock at prices approximating par or stated value.

Mandatorily Redeemable
Preferred SecuritiesIn 1997, the Securities Trust issued
$150.0 million of 8.3% preferred securities. The sole asset of the Securities Trust is the
$154.6 million principal amount of 8.3% Junior Subordinated Deferrable Interest
Debentures, due 2037, issued by KCP&L. The terms and interest payments on these
debentures correspond to the terms and dividend payments on the preferred securities.
KCP&L deducts these payments for tax purposes. KCP&L may elect to defer interest
payments on the debentures for a period up to 20 consecutive quarters, causing dividend
payments on the preferred securities to be deferred as well. In case of a deferral,
interest and dividends will continue to accrue, along with quarterly compounding interest
on the deferred amounts. KCP&L may redeem all or a portion of the

118

debentures at par at
anytime but has not elected to redeem any up to this point. If KCP&L redeems all or a
portion of the debentures, the Securities Trust must redeem an equal amount of preferred
securities at face value plus accrued and unpaid distributions. The back-up undertakings
in the aggregate provide a full and unconditional guarantee of amounts due on the
preferred securities.

KCP&L de-consolidated the
Securities Trust in the fourth quarter of 2003, as required by FIN No. 46. Great Plains
Energys and consolidated KCP&Ls other nonutility property and investments
increased $4.6 million representing the investment in the common securities of the
Securities Trust, and long-term debt increased $154.6 million representing the 8.3% Junior
Subordinated Deferrable Interest Debentures issued by KCP&L and held by the Securities
Trust. Great Plains Energys and consolidated KCP&L will no longer present the
$150.0 million of 8.3% preferred securities issued by the Securities Trust on their
respective balance sheets.

# 20. DERIVATIVE FINANCIAL
INSTRUMENTS

The Companys activities expose
it to a variety of market risks including interest rates and commodity prices. Management
has established risk management policies and strategies to reduce the potentially adverse
effects that the volatility of the markets may have on its operating results. The
Companys risk management activities, including the use of derivatives, are subject
to the management, direction and control of internal risk management committees. The
Companys interest rate risk management strategy uses derivative instruments to
adjust the Companys liability portfolio to optimize the mix of fixed and floating
rate debt within an established range. The Company maintains commodity-price risk
management strategies that use derivative instruments to minimize significant,
unanticipated earnings fluctuations caused by commodity price volatility. Derivative
instruments measured at fair value are recorded on the balance sheet as an asset or
liability. Changes in fair value are recognized currently in earnings unless specific
hedge accounting criteria are met.

Interest Rate Risk
ManagementIn 2002, KCP&L remarketed its
1998 Series A, B, and D Environmental Improvement Revenue Refunding (EIRR) bonds totaling
$146.5 million to a 5-year fixed interest rate of 4.75% ending October 1, 2007.
Simultaneously with the remarketing, KCP&L entered into an interest rate swap for the
$146.5 million based on LIBOR to effectively create a floating interest rate obligation.
The transaction is a fair value hedge with no ineffectiveness. Changes in the fair market
value of the swap are recorded on the balance sheet as an asset with an offset to the
respective debt balances with no impact on earnings. The fair value of the swap was an
asset of $3.3 million and $4.3 million at December 31, 2003, and 2002, respectively.

At December 31, 2002, KCP&L had
two interest rate swap agreements in place to effectively fix the interest rate on $30
million of floating-rate long-term debt. The swap agreements expired in June 2003.

Commodity Risk ManagementKCP&Ls risk management
policy is to use derivative hedge instruments to mitigate its exposure to market price
fluctuations on a portion of its projected gas purchases to meet generation requirements
for retail and firm wholesale sales. These hedging instruments are designated as cash flow
hedges. The fair market values of these instruments are recorded as current assets or
current liabilities. When the gas is purchased and to the extent the hedge is effective at
mitigating the impact of a change in the purchase price of gas, the amounts in other
comprehensive income (OCI) are reclassified to the consolidated income statement. To the
extent that the hedges are not effective, the ineffective portion of the changes in fair
market value is recorded currently in fuel expense.

Strategic Energy maintains a
commodity-price risk management strategy that uses forward physical energy purchases and
derivative instruments to minimize significant, unanticipated earnings fluctuations caused
by commodity-price volatility. Supplying electricity to retail customers requires

119

Strategic Energy to match customers projected demand with fixed price purchases. In
certain markets where Strategic Energy operates, entering into forward fixed price
contracts is cost prohibitive. Derivative instruments, primarily swaps, are used to limit
the unfavorable effect that price increases will have on electricity purchases,
effectively fixing the future purchase price of electricity for the applicable forecasted
usage and protecting Strategic Energy from significant price volatility. Certain forward
fixed price purchases and swap agreements are designated as cash flow hedges resulting in
changes in the hedge value being recorded as OCI. To the extent that the hedges are not
effective, the ineffective portion of the changes in fair market value is recorded
currently in purchased power. Strategic Energy also enters into economic hedges that do
not qualify as accounting hedges. The changes in the fair value of these derivative
instruments are recorded into earnings as a component of purchased power.

An option that was designated as a
cash flow hedge expired on December 31, 2001. The option allowed Strategic Energy to
purchase up to 270 MWs of power at a fixed rate of $21 per MWh. The fair market value of
this option and swap agreements designated as cash flow hedges at January 1, 2001, was
recorded as a current asset and a cumulative effect of a change in accounting principle in
comprehensive income.

In March 2003, Strategic Energy
terminated an agreement with a swap counterparty due to credit and performance concerns.
Strategic Energy received a $4.8 million fair value settlement. The swap was designated as
a cash flow hedge of a forecasted transaction and Strategic Energy management believed the
forecasted transaction would occur. Accordingly, the $4.8 million settlement was
reclassified to earnings over the remaining term of the underlying transaction, which was
completed in the fourth quarter of 2003.

KLT Gas risk management policy
is to use firm sales agreements or financial hedge instruments to mitigate its exposure to
market price fluctuations on up to 85% of its daily natural gas production. KLT Gas had no
significant production during the reported periods; therefore, no hedges were in place.

SFAS No. 149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities was generally
effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS
No. 149 did not have a material effect on the results of operations of Great Plains Energy
or consolidated KCP&L for the period ended December 31, 2003, or their financial
positions as of that date.

The amounts recorded in OCI related
to the cash flow hedges are summarized in the following tables:

|Great Plains Energy activity for 2003
|-------------------------------------
|
|Increase                             
|December 31                          
|2002                                 
|
|(millions)                           
|Current assets                       
|Other deferred charges               
|Other current liabilities            
|Deferred income taxes                
|Other deferred credits               
|
|OCI                                  
|

120

|Consolidated KCP&L activity for 2003
|------------------------------------
|
|Increase                            
|December 31                         
|2002                                
|
|(millions)                          
|Other current assets                
|Deferred income taxes               
|
|OCI                                 
|

|Great Plains Energy activity for 2002
|-------------------------------------
|
|Increase                             
|December 31                          
|2001                                 
|
|(millions)                           
|Other current assets                 
|Other current liabilities            
|Deferred income taxes                
|Other deferred credits               
|
|OCI                                  
|

|Consolidated KCP&L activity for 2002
|------------------------------------
|
|Increase                            
|December 31                         
|2001                                
|
|(millions)                          
|Other current assets                
|Other current liabilities           
|Deferred income taxes               
|
|OCI                                 
|

|Great Plains Energy activity for 2001
|-------------------------------------
|
|Cumulative                           
|Effect to                            
|January 1                            
|2001                                 
|
|(millions)                           
|Other current assets                 
|Other current liabilities            
|Deferred income taxes                
|Other deferred credits               
|
|OCI                                  
|

121

|Consolidated KCP&L activity for 2001
|------------------------------------
|
|Cumulative                          
|Effect to                           
|January 1                           
|2001                                
|
|(millions)                          
|                                    
|Other current assets                
|Other current liabilities           
|Deferred income taxes               
|Other deferred credits              
|
|OCI                                 
|

|Reclassified to earnings
|------------------------
|
|Great Plains Energy     
|2003                    
|
|(millions)              
|Gas revenues            
|Fuel expense            
|Purchased power expense 
|Minority interest       
|Income taxes            
|
|OCI                     
|

# 21. JOINTLY-OWNED
ELECTRIC UTILITY PLANTS

KCP&Ls share of
jointly-owned electric utility plants as of December 31, 2003, is as follows:

|                                
|--------------------------------
|Wolf Creek                      
|Unit                            
|
|(millions except MW amounts)    
|KCP&L's share                   
|                                
|Utility plant in service        
|Accumulated depreciation        
|Nuclear fuel, net               
|KCP&Ls accredited capacity--MWs
|

Each owner must fund its own portion
of the plants operating expenses and capital expenditures. KCP&Ls share of
direct expenses is included in the appropriate operating expense classifications in the
Great Plains Energy and consolidated KCP&L Statements of Income.

122

# 22. QUARTERLY OPERATING
RESULTS (UNAUDITED)

|Great Plains Energy                              
|-------------------------------------------------
|
|Quarter                                          
|1st                                              
|
|(millions except earnings per share amounts)     
|Operating revenue                                
|Operating income (loss)                          
|Income (loss) from continuing operations         
|Net income (loss)                                
|Basic and diluted earning (loss) per common      
|share from continuing operations                 
|Basic and diluted earning (loss) per common share
|
|2002                                             
|Operating revenue                                
|Operating income                                 
|Income (loss) from continuing operations         
|before cumulative effect                         
|Net income (loss)                                
|Basic and diluted earning (loss) per common      
|share from continuing operations before          
|cumulative effect                                
|Basic and diluted earning (loss) per common share
|

|Consolidated KCP&L                      
|----------------------------------------
|
|Quarter                                 
|1st                                     
|
|(millions)                              
|Operating revenue                       
|Operating income                        
|Income (loss) from continuing operations
|Net income                              
|
|2002                                    
|Operating revenue                       
|Operating income                        
|Income (loss) from continuing operations
|before cumulative effect                
|Net income (loss)                       
|

Great Plains Energys fourth
quarter 2003 results reflects impairments of KLT Gas properties totaling $45.5 million
which reduced earnings by $28.0 million, or $0.40 per share. See Note 7 for additional
information.

First quarter 2002 income statement
information as reported in the March 31, 2002, Form 10-Q has been restated to reflect the
cumulative effect to January 1, 2002, of a change in accounting principle for the $3.0
million RSAE goodwill write-down. All quarters presented prior to the second quarter of
2003 have also been recast to reflect RSAE as discontinued operations. See Note 8 for
additional information concerning the June 2003 disposition of RSAE. The quarterly data is
subject to seasonal fluctuations with peak periods occurring during the summer months.

123

# INDEPENDENT
AUDITORS REPORT

To the Board of Directors
and Shareholders of  Great Plains Energy Incorporated

We have audited the accompanying
consolidated balance sheets of Great Plains Energy Incorporated and subsidiaries (the
Company) as of December 31, 2003 and 2002, and the related consolidated
statements of income, comprehensive income, common stock equity and cash flows for the
years then ended. Our audits also included the 2003 and 2002 financial statement schedules
listed in the Index at Item 15. These financial statements and financial statement
schedules are the responsibility of the Companys management. Our responsibility is
to express an opinion on these financial statements and financial statement schedules
based on our audits.

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

In our opinion, such financial
statements present fairly, in all material respects, the consolidated financial position
of Great Plains Energy Incorporated and subsidiaries as of December 31, 2003 and 2002, and
the results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of America.
Also, in our opinion, such financial statement schedules, when considered in relation to
the 2003 and 2002 basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.

As discussed in Note 6 to the
consolidated financial statements, effective January 1, 2002, the Company changed its
method of accounting for intangible assets to adopt Statement of Financial Accounting
Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. As
discussed in Notes 1 and 15, respectively, to the consolidated financial statements,
effective January 1, 2003, the Company changed its method of accounting for stock-based
compensation to adopt SFAS No. 123, Accounting for Stock-Based Compensation
and changed its method of accounting for asset retirement obligations to adopt SFAS No.
143, Accounting for Asset Retirement Obligations.

/s/DELOITTE & TOUCHE
LLP

Kansas City, Missouri  March
9, 2004

124

# INDEPENDENT
AUDITORS REPORT

To the Board of Directors
of  Kansas City Power & Light Company

We have audited the accompanying
consolidated balance sheets of Kansas City Power & Light Company and subsidiaries (the
Company) as of December 31, 2003 and 2002, and the related consolidated
statements of income, comprehensive income, common stock equity and cash flows for the
years then ended. Our audit also included the 2003 and 2002 financial statement schedules
listed in the Index at Item 15. These financial statements and financial statement
schedules are the responsibility of the Companys management. Our responsibility is
to express an opinion on these financial statements and financial statement schedules
based on our audits.

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

In our opinion, such financial
statements present fairly, in all material respects, the consolidated financial position
of Kansas City Power & Light Company and subsidiaries as of December 31, 2003 and
2002, and the results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of America.
Also, in our opinion, such financial statement schedules, when considered in relation to
the 2003 and 2002 basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.

As discussed in Note 6 to the
consolidated financial statements, effective January 1, 2002, the Company changed its
method of accounting for intangible assets to adopt Statement of Financial Accounting
Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. As
discussed in Note 15 to the consolidated financial statements, effective January 1, 2003,
the Company changed its method of accounting for asset retirement obligations to adopt
SFAS No. 143, Accounting for Asset Retirement Obligations.

/s/DELOITTE & TOUCHE
LLP

Kansas City, Missouri  March
9, 2004

125

# Report of Independent
Auditors

To the Board of Directors and
Shareholders of  Great Plains Energy Incorporated:

We have audited the accompanying
consolidated statements of income, of cash flows, of common stock equity, and of
comprehensive income of Great Plains Energy Incorporated and Subsidiaries for the year
ended December 31, 2001. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial
statements based on our audit. We did not audit the consolidated financial statements of
DTI Holdings, Inc. and Subsidiaries (Debtors-in-Possession) (an 83.6 percent owned
entity), for the year ended December 31, 2001, which statements reflect total revenues of
$17.4 million and a net loss of $306.1 million for the year ended December 31, 2001. Those
statements were audited by other auditors whose report thereon has been furnished to us,
and our opinion expressed herein, insofar as it relates to the amounts included for DTI
Holdings, Inc. and Subsidiaries, is based solely on the report of the other auditors.

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

In our opinion, based on our audit
and the report of other auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash flows of
Great Plains Energy Incorporated and Subsidiaries for the year ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 20 to the
consolidated financial statements, the Company adopted SFAS No. 133 Accounting for
Derivative Instruments and Hedging Activities, as amended on January 1, 2001.

/s/PricewaterhouseCoopers
LLPPricewaterhouseCoopers
LLP

Kansas City, Missouri 
February 5, 2002, except with respect
to the reclassification of the 2001 information in Note 16 as to which the date is May 22,
2002; the 2001 transitional disclosures relating to the adoption of Statement of Financial
Accounting Standards No. 142 as described in Note 6 as to which the date is February 21,
2003; and the reclassification described in the last paragraph of Note 9 relating to the
adoption of Statement of Financial Accounting Standards No. 145, the reclassification to
the 2001 financial statements relating to the discontinued operations as described in Note
8, and the 2001 transitional disclosures relating to the adoption of Statement of
Financial Accounting Standards No. 143 as described in Note 15 as to which the date is
August 13, 2003

126

# Report of Independent
Auditors

To the Board of Directors and
Shareholder of  Kansas City Power & Light Company:

We have audited the accompanying
consolidated statements of income, of cash flows, of common stock equity, and of
comprehensive income of Kansas City Power & Light Company (a wholly-owned subsidiary
of Great Plains Energy Incorporated) and Subsidiaries for the year ended December 31,
2001. These financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements based on our
audit. We did not audit the consolidated financial statements of DTI Holdings, Inc. and
Subsidiaries (Debtors-in-Possession) (an 83.6 percent owned entity), for the year ended
December 31, 2001, which statements reflect total revenues of $17.4 million and a net loss
of $306.1 million for the year ended December 31, 2001. Those statements were audited by
other auditors whose report thereon has been furnished to us, and our opinion expressed
herein, insofar as it relates to the amounts included for DTI Holdings, Inc. and
Subsidiaries, is based solely on the report of the other auditors.

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

In our opinion, based on our audit
and the report of other auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash flows of
Kansas City Power & Light Company and Subsidiaries for the year ended December 31,
2001 in conformity with accounting principles generally accepted in the United States of
America.

As discussed in Note 20 to the
consolidated financial statements, the Company adopted SFAS No. 133 Accounting for
Derivative Instruments and Hedging Activities, as amended on January 1, 2001. As
discussed in Note 1 to the consolidated financial statements, on October 1, 2001 the
Company completed its corporate reorganization creating a holding company structure.

/s/PricewaterhouseCoopers
LLPPricewaterhouseCoopers LLP

Kansas City, Missouri 
February 5, 2002, except with respect
to the reclassification of the 2001 information in Note 16 as to which the date is May 22,
2002; the 2001 transitional disclosures relating to the adoption of Statement of Financial
Accounting Standards No. 142 as described in Note 6 as to which the date is February 21,
2003; and the reclassification described in the last paragraph of Note 9 relating to the
adoption of Statement of Financial Accounting Standards No. 145, the reclassification to
the 2001 financial statements relating to the discontinued operations as described in Note
8, and the 2001 transitional disclosures relating to the adoption of Statement of
Financial Accounting Standards No. 143 as described in Note 15 as to which the date is
August 13, 2003

127

# INDEPENDENT
AUDITORS REPORT

To the Board of Directors and
Stockholders of DTI Holdings, Inc.

We have audited the statements of
operations and stockholders equity (deficit) and cash flows of DTI Holdings, Inc.
and subsidiaries (Debtors-in-Possession) (the Company) for the year ended
December 31, 2001. These financial statements (which are not included herein) are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, such financial
statements present fairly, in all material respects, the results of operations and cash
flows of DTI Holdings, Inc. and subsidiaries for the year ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to those
financial statements, the Company has filed for reorganization under Chapter 11 of the
Federal Bankruptcy Code. The financial statements do not purport to reflect or provide for
the consequences of the bankruptcy proceedings. In particular, such financial statements
do not purport to show (a) as to assets, their realizable value on a liquidation basis or
their availability to satisfy liabilities; (b) as to prepetition liabilities, the amounts
that may be allowed for claims or contingencies, or the status and priority thereof; (c)
as to stockholder accounts, the effect of any changes that may be made in the
capitalization of the Company; or (d) as to operations, the effect of any changes that may
be made in its business.

The financial statements have been
prepared assuming that the Company will continue as a going concern. As discussed in Note
1 to those financial statements, the Companys recurring losses from operations,
negative working capital, and stockholders capital deficiency raise substantial
doubt about its ability to continue as a going concern. Managements plans concerning
these matters are also discussed in Note 1 to those financial statements. The financial
statements do not include adjustments that might result from the outcome of this
uncertainty.

As discussed in Note 3 to those
financial statements, the Company determined that the carrying value of its long-lived
assets had been impaired during the year. In accordance with Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-lived
Assets to be Disposed of, the Company recorded an impairment charge of approximately $342
million at December 31, 2001.

/s/DELOITTE & TOUCHE
LLP

St. Louis, MissouriJanuary 30, 2002

128

# ITEM 9.CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

# ITEM 9A. CONTROLS AND
PROCEDURES

Great Plains Energy and KCP&L
carried out evaluations of their disclosure controls and procedures (as defined in Rules
13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended). These
evaluations were conducted under the supervision, and with the participation, of each
companys management, including the chief executive officer and chief financial
officer of each company and the companies disclosure committee.

Based upon these evaluations, the
chief executive officer and chief financial officer of Great Plains Energy and KCP&L,
respectively, have concluded as of the end of the period covered by this report that the
disclosure controls and procedures of Great Plains Energy and KCP&L are functioning
effectively to provide reasonable assurance that the information required to be disclosed
by the respective companies in the reports that they file or submit under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within
the time periods specified in the SECs rules and forms.

There has been no change in Great
Plains Energys or KCP&Ls internal control over financial reporting that
occurred during the quarterly period ended December 31, 2003, that has materially
affected, or is reasonably likely to materially affect, those companies internal
control over financial reporting.

# PART III

# ITEM 10. DIRECTORS AND
EXECUTIVE OFFICERS OF THE REGISTRANTS

Great Plains Energy
DirectorsThe following information is
incorporated by reference from the Great Plains Energy 2004 Proxy Statement, which will be
filed with the SEC no later than March 31, 2004 (Proxy Statement):

|  | 
|- | 
|o | 
|  | 
|o | 
|  | 

KCP&L DirectorsGreat Plains Energy, as the sole
shareholder of KCP&L, elects the directors of KCP&L. The directors of KCP&L
are the same as those for Great Plains Energy, and the Board committees of Great Plains
Energy function as the Board committees of KCP&L. The eleven individuals listed below
are all of the current directors and have consented to stand for election to the Board of
Great Plains Energy. If they are elected at the annual shareholders meeting on May 4,
2004, to serve on the Great Plains Energy Board, they will also be elected to the
KCP&L Board.

| |               
| | --------------
| | David L. Bodde

| | Dr. Bodde, 61, is the Charles N. Kimball Professor of
Technology and Innovation (since 1996), an endowed university chair concerned with
creating economic value from technology at the University of Missouri-Kansas City. He also
serves on the board of The Commerce Funds. Dr. Bodde served as a member of the Audit
and Governance committees during 2003.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

129

| |                   
| | ------------------
| | Michael J. Chesser

| | Mr. Chesser, 55, is Chairman of the Board of KCP&L
and Chairman of the Board and Chief Executive Officer of Great Plains Energy (since
October 2003). Previously he served as Chief Executive Officer of United Water
(2002-2003); President and Chief Executive Officer of GPU Energy (2000-2002); and
President and Chief Executive Officer of Itron, Inc. (1997-2000). Mr. Chesser also is
currently finishing his term on the board of Itron, Inc. Mr. Chesser served as a
member of the Executive committee in 2003 after his appointment to the Board.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                  
| | -----------------
| | William H. Downey

| | Mr. Downey, 59, is President and Chief Operating Officer
of Great Plains Energy and President and Chief Executive Officer of KCP&L (since
October 2003). Mr. Downey joined the Company in 2000 as Executive Vice President of
KCP&L and President  KCP&L Delivery Division. Previously he served as
President  Unicom Energy Services (1997-1999) and Vice President - Commonwealth
Edison Company (1992-1999). Mr. Downey also serves on the board of Enterprise Financial
Services Corp.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |              
| | -------------
| | Mark A. Ernst

| | Mr. Ernst, 45, is Chairman, President and Chief Executive
Officer of H&R Block, Inc., a global provider of tax preparation, investment, mortgage
and accounting services. He was elected Chairman of the Board in 2002, Chief Executive
Officer in 2001 and President in 1999. Mr. Ernst also serves on the boards of SCS
Transportation and Knight Ridder, Inc. Mr. Ernst served on the Audit and Compensation
committees during 2003.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                         
| | ------------------------
| | Randall C. Ferguson, Jr.

| | Mr. Ferguson, 52, is Senior Vice President
Business Growth & Member Connections with the Greater Kansas City Chamber of
Commerce (since 2003) and the retired Senior Location Executive (1998-2003) for the IBM
Kansas City Region. Mr. Ferguson served on the Audit and Governance committees during
2003.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                
| | ---------------
| | William K. Hall

| | Dr. Hall, 60, is Chairman (since 2000) of Procyon
Technologies, Inc., a holding company with investments in the aerospace and defense
industries. He also served as Chief Executive Officer (2000-2003) of the company. He was
previously President and Chief Executive Officer of Falcon Building Products, Inc. (1997-1999). Mr. Hall also serves on the boards of Actuant Corporation, A. M.
Castle & Co., GenCorp and Woodhead Industries. Mr. Hall served on the
Compensation and Executive committees during 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                
| | ---------------
| | Luis A. Jimenez

| | Mr. Jimenez, 59, is Senior Vice President and Chief
Strategy Officer (since 2001) of Pitney Bowes Inc., a global provider of integrated mail
and document management solutions. He served as Vice President, Global Growth and Future
Strategy (1999-2001). Previously, he was Vice President and Practice Leader,
Telecommunications and Media, Latin America, for Arthur D. Little, Inc. (1998-1999). Mr. Jimenez served on the Governance and Executive committees during 2003.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

130

| |                  
| | -----------------
| | James A. Mitchell

| | Mr. Mitchell, 62, is the Executive Fellow-Leadership,
Center for Ethical Business Cultures (since 1999), a not-for-profit organization assisting
business leaders in creating ethical and profitable cultures. He is also the retired
Executive Vice President of Marketing and Products (1993-1999) of American Express
Company. Mr. Mitchell served on the Compensation and Governance committees during
2003.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                  
| | -----------------
| | William C. Nelson

| | Mr. Nelson, 66, is Chairman (since 2001) of
George K. Baum Asset Management, a leading provider of investment management services
to individuals, foundations and institutions. He is the retired Chairman (1990-2000) of
Bank of America Midwest. He also serves on the board of DST Systems. Mr. Nelson
served on the Audit and Compensation committees during 2003.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                 
| | ----------------
| | Linda H. Talbott

| | Dr. Talbott, 63, is President of Talbott &
Associates (since 1975), consultants in strategic planning, philanthropic management and
development to foundations, corporations, and nonprofit organizations. She is also
Chairman of the Center for Philanthropic Leadership. Dr. Talbott served as a member
of the Executive and Governance committees during 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |               
| | --------------
| | Robert H. West

| | Mr. West, 65, is the retired Chairman of the Board
(1986-1999) of Butler Manufacturing Company, a supplier of non-residential building
systems, specialty components, and construction services. He also serves on the boards of
Saint Lukes Health System, Burlington Northern Santa Fe Corporation and Commerce
Bancshares, Inc. Mr. West also is currently finishing his term on the board of Astec
Industries, Inc. Mr. West served as the Lead Director of Great Plains Energy and as a
member of the Audit, Executive and Compensation committees during 2003.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

KCP&L Audit CommitteeThe Great Plains Energy Boards
Audit Committee functions as the Audit Committee of KCP&L. The members of the Audit
Committee are Mark A. Ernst, David L. Bodde, Randall C. Ferguson, Jr., William C. Nelson
and Robert H. West. The Board identified Mark A. Ernst, William C. Nelson and Robert H.
West as audit committee financial experts, as that term is defined by the SEC
pursuant to Section 407 of the Sarbanes-Oxley Act of 2002, and determined that those
individuals are independent.

Great Plains Energy and
KCP&L Executive OfficersInformation regarding the executive
officers of Great Plains Energy and KCP&L is contained in this report in the Part I,
Item 1 section titled Executive Officers.

Great Plains Energy and
KCP&L Code of EthicsThe Company has adopted a Code of
Business Conduct and Ethics (Code), which applies to all directors, officers and employees
of Great Plains Energy, KCP&L and their subsidiaries. The Code is posted on the
investor relations page of our Internet websites at www.greatplainsenergy.com
and www.kcpl.com. A copy of the Code is available, without charge, upon written
request to Corporate Secretary, Great Plains Energy Incorporated, 1201 Walnut, Kansas
City, Missouri 64106. Great Plains Energy and KCP&L intend to satisfy the disclosure
requirements under Item 10 of Form 8-K regarding an amendment to, or a waiver from, a
provision of the Code that applies to the principal executive officer, principal financial
officer, principal accounting officer or controller of those companies by posting such
information on the investor relations page of their Internet websites.

131

Great Plains Energy
Corporate Governance Guidelines and Committee ChartersThe Board of Great Plains Energy has
adopted Corporate Governance Guidelines and Charters for its Audit, Compensation and
Governance Committees, which are posted on the investor relations page of Great Plains
Energys Internet website at www.greatplainsenergy.com. Copies of the documents are
available upon written request to Corporate Secretary, Great Plains Energy Incorporated,
1201 Walnut, Kansas City, Missouri 64106.

Section 16(a) Beneficial
Ownership Regarding ComplianceSection 16(a) of the Securities
Exchange Act of 1936, as amended, requires certain directors, executive officers and
persons who own more than 10% of Great Plains Energy common stock to file reports of
holdings and transactions in Great Plains Energy common stock with the SEC and the New
York Stock Exchange. Based upon its records, Great Plains Energy and KCP&L believe
that all required reports for fiscal year 2003 have been timely filed.

# ITEM 11. EXECUTIVE
COMPENSATION

Great Plains EnergyThe information regarding
compensation of Great Plains Energy directors and named executive officers contained in
the sections titled Corporate Governance, Executive Compensation,
Option/SAR Grants in the Last Fiscal Year, Long-Term Incentive Plans
 Awards in Last Fiscal Year, Aggregated Option/SAR Exercises in the Last
Fiscal Year and Fiscal Year-End Option/SAR Values, Great Plains Energy Pension
Plans, Great Plains Energy Severance Agreements, Employment
Arrangement With Mr. Chesser, Compensation Committee Report on Executive
Compensation, Certian Relationships and Related Transactions
and Stock Performance Graph of the Proxy Statement is
incorporated by reference.

132

# KCP&L

Summary Compensation
TableThe following table contains
compensation data for KCP&L executive officers named below, for fiscal years ended
December 31, 2003, 2002 and 2001.

|                            
|----------------------------
|                            
|
|                            
|                            
|Name and                    
|Principal Position          
|
|Bernard J. Beaudoin (4)     
|Former Chairman of          
|the Board and Chief         
|Executive Officer           
|
|Michael J. Chesser (5)      
|Chairman of the Board       
|                            
|
|William H. Downey (6)       
|President and               
|Chief Executive Officer     
|
|Andrea F. Bielsker          
|Senior Vice President-      
|Finance, Chief Financial    
|Officer and Treasurer       
|
|Stephen T. Easley           
|Vice President-             
|Generation Services         
|
|William P. Herdegen, III (7)
|Vice President-             
|Distribution Operations     
|

|    |  |                                                                                                                 
|--- |  | ----------------------------------------------------------------------------------------------------------------
|(1) |  | While the six named executive officers receive certain perquisites from the Company, such perquisites did not   
|    |  | reach in any of the reported years the threshold for reporting of the lesser of either $50,000 or ten percent of
|    |  | salary and bonus set forth in the applicable rules of the Securities and Exchange Commission.                   
|(2) |  | For 2003, amounts include:                                                                                      

| |  |   |                         
| |  | - | ------------------------
| |  | o | Restricted Stock Awards:

| |  |                                                                                                             
| |  | ------------------------------------------------------------------------------------------------------------
| |  | The dollar value of restricted stock awards is calculated by multiplying the number of shares awarded by the
| |  | closing price of the Great Plains Energy common stock on the date of the grant.                             
| |  | Beaudoin                                                                                                    

| |  |      |                                                                                                                
| |  | ---- | ---------------------------------------------------------------------------------------------------------------
| |  | (i)  | 2,879 shares vested January 1, 2004; dividends paid on restricted shares; value as of December 31, 2003 was    
| |  |      | $91,610; and                                                                                                   
| |  | (ii) | 10,200 shares vesting December 31, 2004; dividends paid on restricted shares; value as of December 31, 2003 was
| |  |      | $324,564.                                                                                                      

| |  |          |                                                                                                           
| |  | -------- | ----------------------------------------------------------------------------------------------------------
| |  | Chesser  |                                                                                                           
| |  |          | 12,135 shares vesting October 1, 2005, 12,135 shares vesting October 1, 2006 and 12,135 shares vesting    
| |  |          | October 1, 2007; dividends are reinvested with the same restrictions as the restricted stock; value as of 
| |  |          | December 31, 2003 was $1,158,407.                                                                         
| |  | Downey  
| |  | (i)      | 6,900 shares vesting December 31, 2004; dividends paid on restricted shares; value as of December 31, 2003
| |  |          | was $219,558; and                                                                                         
| |  | (ii)     | 8,825 shares vesting October 1, 2005, 8,825 shares vesting October 1, 2006 and 8,826 shares vesting       
| |  |          | October 1, 2007; dividends are reinvested with the same restrictions as the restricted stock; value as of 
| |  |          | December 31, 2003 was $842,466.                                                                           
| |  | Bielsker
| |  |          | 4,550 shares vesting December 31, 2004; dividends paid on restricted shares; value as of December 31, 2003
| |  |          | was $144,781.                                                                                             
| |  | Easley  
| |  |          | 4,650 shares vesting December 31, 2004; dividends paid on restricted shares; value as of December 31, 2003
| |  |          | was $147,963.                                                                                             

133

| |  |         
| |  | --------
| |  | Herdegen

| |  |  |                                                                                                           
| |  |  | ----------------------------------------------------------------------------------------------------------
| |  |  | 2,263 shares vesting December 31, 2004; dividends paid on restricted shares; value as of December 31, 2003
| |  |  | was $72,009.                                                                                              

|    |  |                           
|--- |  | --------------------------
|(3) |  | For 2003, amounts include:

| |  |   |                                                                                                                 
| |  | - | ----------------------------------------------------------------------------------------------------------------
| |  | o | Flex dollars under the Flexible Benefits Plan: Beaudoin - $18,330; Chesser - $1,403; Downey -$3,867;            
| |  |   | Bielsker -$12,867; Easley - $3,867; and Herdegen - $3,347                                                       
| |  | o | Deferred Flex Dollars: Beaudoin - $17,382 and Downey - $780                                                     
| |  | o | Above-market interest paid on deferred compensation: Beaudoin - $8,899; Downey - $6,075; Bielsker - $2,825; and 
| |  |   | Easley - $558.                                                                                                  
| |  | o | Great Plains Energy contribution under the Great Plains Energy Employee Savings Plus Plan: Beaudoin - $9,008;   
| |  |   | Downey -$7,042; Bielsker - $6,021; Easley - $6,012; and Herdegen - $5,250                                       
| |  | o | Contribution to Deferred Compensation Plan: Beaudoin - $7,050; Downey - $3,000; Bielsker - $600; and Easley -   
| |  |   | $                                                                                                            300
| |  | o | Other Compensation: Beaudoin - also includes a $1,895,266 lump sum retirement payment and a $998,111 additional 
| |  |   | supplemental retirement benefit.                                                                                

|    |  |                                                                   
|--- |  | ------------------------------------------------------------------
|(4) |  | Mr. Beaudoin retired in December 2003.  For 2003, amounts include:

| |  |   |                                                                                                                 
| |  | - | ----------------------------------------------------------------------------------------------------------------
| |  | o | Other Compensation:  Beaudoin - also includes a $1,895,266 lump sum retirement payment and a $998,111 additional
| |  |   | supplemental retirement benefit.                                                                                

|    |  |                                                                                                               
|--- |  | --------------------------------------------------------------------------------------------------------------
|(5) |  | Mr. Chesser joined the Company as Chairman of the Board on October 1, 2003; the Compensation committee set his
|    |  | salary at $550,000.                                                                                           
|(6) |  | Mr. Downey was appointed President and Chief Executive Officer of KCP&L effective October 1, 2003.            
|(7) |  | Mr. Herdegen joined the Company in 2001.                                                                      

# Option/SAR Grants in
Last Fiscal Year

|                        
|------------------------
|                        
|                        
|                        
|                        
|                        
|
|                        
|                        
|                        
|                        
|                        
|Name                    
|
|Bernard J. Beaudoin     
|Michael J. Chesser      
|William H. Downey       
|Andrea F. Bielsker      
|Stephen T. Easley       
|William P. Herdegen, III
|

|(1) |  | Options granted in 2003 are exercisable on or after August 5, 2006. Each
                    option is granted in tandem with a limited stock appreciation right exercisable
                    automatically in the event of a change in control. Options may be exercised with
                    cash or previously owned shares of the Companys Common Stock. Dividends
                    accrue quarterly on the options. Such accrued dividends will be paid if the
                    options are exercised and if the exercise price is equal to or above the grant
                    date.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | The grant date valuation was calculated by using the Black-Scholes model. The
                    underlying assumptions used to determine the present value of the option were as
                    follows:
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                 | 
|------------------------------------------------ | 
|Annualized Stock Volatility:                     | 
|Time of Exercise (Option Term):                  | 
|Risk Free Interest Rate:                         | 
|Exercise Price (Equal to the Fair Market Value): | 
|Average Dividend Yield:                          | 

134

# Aggregated Option/SAR
Exercises in the Last Fiscal Year and Fiscal Year-End Option/SAR Values

|                        
|------------------------
|                        
|                        
|                        
|                        
|Name                    
|
|                        
|Bernard J. Beaudoin     
|Michael J. Chesser      
|William H. Downey       
|Andrea F. Bielsker      
|Stephen T. Easley       
|William P. Herdegen, III
|

|(1) |  | Includes stock options of 20,000 shares, 13,000 shares, 6,000 shares and 6,000
               shares to Mr. Downey, Ms. Bielsker, Mr. Easley and Mr. Herdegen, respectively,
               that became exercisable February 6, 2004.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Long-Term Incentive
Plans  Awards in Last Fiscal Year

|                        
|------------------------
|                        
|                        
|                        
|                        
|Name                    
|
|                        
|Bernard J. Beaudoin     
|Michael J. Chesser      
|William H. Downey       
|Andrea F. Bielsker      
|Stephen T. Easley       
|William P. Herdegen, III
|

|(1) |  | The awards of performance shares are subject to the achievement of three-year
               total shareholder return in relation to the other Edison Electric Institute
               companies. Grantee will not be entitled to any performance shares in the event
               performance is below the 25th percentile; grantee will receive two times the
               amount of performance shares granted in the event performance is at the 100th
               percentile. Notwithstanding the foregoing, Grantee will not be entitled to any
               performance shares if total return for the three years is negative. Payment will
               be made in an amount equal to the fair market value of the number of performance
               shares earned payable in common stock.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pension PlansGreat Plains Energy has a
non-contributory pension plan (Great Plains Energy Pension Plan) providing for benefits
upon retirement, normally at age 65. In addition, a supplemental retirement benefit is
provided for selected executive officers. The following table shows examples of single
life option pension benefits (including unfunded supplemental retirement benefits) payable
upon retirement at age 65 to the named executive officers:

|                          
|--------------------------
|                          
|Average Annual Base Salary
|for Highest               
|36 Months                 
|
|150,000                   
|200,000                   
|250,000                   
|300,000                   
|350,000                   
|400,000                   
|450,000                   
|500,000                   
|550,000                   
|

Each eligible employee with 30 or
more years of credited service, or whose age and years of service add up to 85, is
entitled to a total monthly annuity equal to 50% of their average base monthly salary for
the

135

period of 36 consecutive months in which their earnings were highest. The monthly
annuity will be proportionately reduced if their years of credited service are less than
30 or if their age and years of service do not add up to 85. The compensation covered by
the Great Plains Energy Pension Plan   base monthly salary  
excludes any bonuses and other compensation. The Great Plains Energy Pension Plan provides
that pension amounts are not reduced by Social Security benefits. The estimated credited
years of service for the named executive officers in the Summary Compensation table are as
follows:

|                        
|------------------------
|                        
|Officer                 
|
|Michael J. Chesser      
|William H. Downey       
|Andrea F. Bielsker      
|Stephen T. Easley       
|William P. Herdegen, III
|

Eligibility for supplemental
retirement benefits is limited to executive officers selected by the Compensation
Committee of the Board; all the executive officers named in the Summary Compensation Table
are participants. The total retirement benefit payable at the normal retirement date is
equal to 2% of highest average earnings, as shown above, for each year of credited service
up to 30 (maximum of 60% of highest average earnings). The actual retirement benefit paid
equals the target retirement benefit less retirement benefits payable under the management
pension plan. A liability accrues each year to cover the estimated cost of future
supplemental benefits.

The Internal Revenue Code imposes
certain limitations on pensions that may be paid under tax qualified pension plans. In
addition to the supplemental retirement benefits, the amount by which pension benefits
exceed the limitations will be paid outside the qualified plan and accounted for by Great
Plains Energy as an operating expense.

Severance AgreementsGreat Plains Energy has severance
agreements (Severance Agreements) with certain KCP&L executive officers,
including the executive officers named in the Summary Compensation Table, to ensure their
continued service and dedication to and their objectivity in considering on behalf of
Great Plains Energy any transaction that would change the control of the Company. Under
the Severance Agreements, an executive officer would be entitled to receive a lump-sum
cash payment and certain insurance benefits during the three-year period after a Change in
Control (or, if later, the three-year period following the consummation of a transaction
approved by Great Plains Energys shareholders constituting a Change in Control) if
the officers employment was terminated by:

|  | 
|- | 
|o | 
|o | 
|o | 
|  | 
|  | 

A Change in Control is defined as:

|  | 
|- | 
|o | 
|  | 
|o | 

136

|  | 
|- | 
|o | 
|  | 
|  | 

Upon a Qualifying Termination, Great
Plains Energy must make a lump-sum cash payment to the executive officer of:

|  | 
|- | 
|o | 
|o | 
|o | 
|o | 
|o | 
|o | 
|  | 
|  | 
|o | 
|  | 

In addition, Great Plains Energy must
offer health, disability and life insurance plan coverage to the officer and his
dependents on the same terms and conditions that existed immediately prior to the
Qualifying Termination for two or three years, or, if earlier, until the executive officer
is covered by equivalent plan benefits. Great Plains Energy must make certain
gross-up payments regarding tax obligations relating to payments under the
Severance Agreements as well as provide reimbursement of certain expenses relating to
possible disputes that might arise.

Payments and other benefits under the
Severance Agreements are in addition to balances due under the Great Plains Energy
Long-Term Incentive Plan and Annual Incentive Plan. Upon a Change in Control (as defined
in the Great Plains Energy Long-Term Incentive Plan), all stock options granted in tandem
with limited stock appreciation rights will be automatically exercised.

Employment Arrangement
with Mr. ChesserPursuant to the terms of an
employment arrangement, Michael Chesser, Chairman of the Board of KCP&L, is entitled
to receive three times annual salary and bonus if he is terminated without cause prior to
his reaching age 63. After age 63, any benefit for termination without cause will be one
times annual salary and bonus until age 65.

Director CompensationThe directors of KCP&L receive
the following compensation for serving on the Boards of Great Plains Energy and KCP&L:

Non-employee directors received an annual
retainer of $30,000 in 2003 ($15,000 of which was used to acquire shares of Great Plains
Energy common stock through Great Plains Energys Dividend Reinvestment and Direct
Stock Purchase Plan on behalf of each non-employee member of the Board). An additional
retainer of $10,000 was paid annually to the lead director. Also, a $3,000 retainer was
paid to those non-employee directors serving as chair of a committee. Attendance fees of
$1,000 for each Board meeting and $1,000 for each committee meeting attended were also
paid in 2003. Directors may defer the receipt of all or part of the cash retainers and
meeting fees.

137

Great Plains Energy also provides
life and medical insurance coverage for each non-employee member of the Board. The total
premiums paid by Great Plains Energy for this coverage for all participating non-employee
directors in 2003 were $27,497.

Compensation Committee
Report on Executive CompensationThe Compensation Committee is
composed of five independent directors. The Compensation Committee sets the executive
compensation structure and administers the policies and plans that govern compensation for
the executive officers. Executive compensation is consistent with the Great Plains Energy
total remuneration philosophy, which provides:

| | Given
Great Plains Energys strategies in the competitive and demanding energy marketplace,
attracting and retaining talent is a top priority. Great Plains Energy is committed to
establishing total remuneration levels, which are performance-based, competitive with the
energy or utility market for jobs of similar scope to enable the organization to recruit
and retain talented personnel at all levels in a dynamic and complex marketplace. This
will be established through base salary, benefits and performance-based annual and
long-term incentives. The incentive targets will be consistent with current trends in the
energy or utility sector and the incentive measures will be appropriately tied to
shareholder and customer interests.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

KCP&L executive compensation for
2003 consisted of base salary; annual incentives; and restricted stock and stock options
granted under the Companys long-term incentive plan. The Compensation Committee has
not adopted a policy concerning the Internal Revenue Services rules on the
deductibility of compensation in excess of $1,000,000.

Base SalariesThe Compensation Committee reviews
executive officer salaries annually and makes adjustments as warranted. The Compensation
Committee compares executive compensation regularly with national compensation surveys.
Base salaries for executive officers were established for 2003 on the basis of:

|  | 
|- | 
|o | 
|o | 
|o | 
|o | 

Annual Incentive PlanUnder the Great Plains Energy Annual
Incentive Plan, KCP&L executive officers receive incentive compensation based on the
achievement of specific corporate and business unit earnings per share targets, customer
satisfaction levels, and individual performance goals. The corporate earnings per share
target is subject to an established performance threshold and maximum. Individual
performance awards are not paid if the corporate earnings per share performance fall below
the threshold level. Corporate earnings per share performance above the annual goal
results in payouts above the target level. In 2003, the corporate and business unit
earnings per share and customer satisfaction goals were exceeded and awards were earned in
the amounts set forth in the Summary Compensation Table.

Long-Term Incentive PlanThe Great Plains Energy Long-Term
Incentive Plan, approved by the shareholders, provides for grants by the Compensation
Committee of stock options, restricted stock, performance shares and other stock-based
awards. The Compensation Committee believes that equity interests in Great Plains Energy
by KCP&L executive officers more closely aligns the interests of management with

138

shareholders and has established stock ownership guidelines for executive officers based
on their level within the organization. Compliance with these guidelines is taken into
consideration in determining grants under the Long-Term Incentive Plan. Restricted stock
and stock options were granted in 2003 in the amounts set forth in the Summary
Compensation Table. The restricted stock is restricted in time and/or performance as also
set forth in the Summary Compensation Table, and the stock options are granted at an
exercise price equal to the fair market value on the date of issuance.

Chief Executive OfficerIn determining the base salary for
Bernard J. Beaudoin, the Chairman of the Board, President and Chief Executive Officer
through September 2003, the Compensation Committee considered:

|  | 
|- | 
|o | 
|o | 
|o | 
|o | 

Incentive awards to Mr. Beaudoin in
2003 under the Annual Incentive Plan and Long-Term Incentive Plan were determined in the
same manner as other executive officers. The 2003 base salary and incentive awards for
William H. Downey, President and Chief Executive Officer of KCP&L since October 2003,
were determined in the same manner as other executive officers.

| | 
| | 
| | 
| | 
| | 
| | 
| | 
| | 

# ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Great Plains EnergyThe information regarding security
ownership of the directors and executive officers of Great Plains Energy contained in the
section titled Security Ownership of Directors and Officers of the Proxy
Statement is incorporated by reference.

139

KCP&LGreat Plains Energy is the sole
shareholder of KCP&L. The following table shows beneficial ownership of Great Plains
Energys common stock by the named executive officers, directors and all directors
and executive officers of KCP&L as of February 28, 2003, (with the exception of shares
held in the Employee Savings Plus Plan, which is reported as of December 31, 2003). The
total of all shares owned by directors and executive officers represents less than 1% of
Great Plains Energys common stock.

|                                 
|---------------------------------
|                                 
|Name of Beneficial Owner         
|
|Named Executive Officers         
|Bernard J. Beaudoin              
|Michael J. Chesser               
|William H. Downey                
|Andrea F. Bielsker               
|Stephen T. Easley                
|William P. Herdegen, III         
|                                 
|Other Directors                  
|David L. Bodde                   
|Mark A. Ernst                    
|Randall C. Ferguson, Jr.         
|William K. Hall                  
|Luis A. Jimenez                  
|James A. Mitchell                
|William C. Nelson                
|Linda H. Talbott                 
|Robert H. West                   
|All KCP&L Executive Officers and 
|Directors As A Group (18 persons)
|

|    |  |                                                                       
|--- |  | ----------------------------------------------------------------------
|(1) |  | Includes restricted stock and exercisable non-qualified stock options.

| |  |   |                                                                             
| |  | - | ----------------------------------------------------------------------------
| |  | o | Restricted Stock: Beaudoin - 10,200 shares; Chesser - 36,874 shares;        
| |  |   | Downey - 33,717 shares; Bielsker - 4,550 shares;                            
| |  |   | Easley - 4,650 shares; and Herdegen, III - 2,263 shares.                    
| |  | o | Exercisable Non-Qualified Stock Options: Downey - 20,000; Bielsker - 13,000;
| |  |   | Easley - 6,000; and Herdegen, III - 6,000.                                  

|    |  |                                                                                
|--- |  | -------------------------------------------------------------------------------
|(2) |  | The nominee disclaims beneficial ownership of 1,000 shares reported and held by
|    |  | nominee's mother.                                                              
|(3) |  | The nominee disclaims beneficial ownership of 1,000 shares reported and held by
|    |  | nominee's wife.                                                                

Equity Compensation PlanThe information regarding Great
Plains Energys equity compensation plan is in Item 5, Market for the
Registrants Common Equity and Related Shareholder Matters, of this report.

140

# ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS

Great Plains EnergyThe information regarding certain
relationships and related transactions regarding Great Plains Energy contained in the
section titled Certain Relationships and Related Transactions of the Proxy
Statement is incorporated by reference.

KCP&LNone.

# ITEM 14..PRINCIPAL ACCOUNTING FEES AND SERVICES

Great Plains EnergyThe information regarding the
independent auditors of Great Plains Energy and its subsidiaries contained in the section
titled Audit Committee Report of the Proxy Statement is incorporated by
reference.

KCP<he Audit Committee of the Great
Plains Energy Board functions as the Audit Committee of KCP&L.

The following table sets forth the
aggregate fees billed by Deloitte & Touche LLP for audit services rendered in
connection with the consolidated financial statements and reports for 2003 and 2002 and
for other services rendered during 2003 and 2002 on behalf of KCP&L and its
subsidiaries, as well as all out-of-pocket costs incurred in connection with these
services:

|                  
|------------------
|Fee Category      
|
|Audit Fees        
|Audit-Related Fees
|Tax Fees          
|All Other Fees    
|
|Total Fees:       
|

Audit FeesConsists of fees billed for
professional services rendered for the audits of KCP&Ls annual consolidated
financial statements and reviews of the interim condensed consolidated financial
statements included in quarterly reports. Audit fees also include: services provided by
Deloitte & Touche LLP in connection with statutory and regulatory filings or
engagements; attest services, except those not required by statute or regulation; services
related to filings with the Securities and Exchange Commission, including comfort letters,
consents, and assistance with and review of documents filed with the Securities and
Exchange Commission; and accounting research in support of the audit. Year 2002 fees for
services rendered relating to comfort letters, consents, accounting research in support of
the audit and assistance with and review of documents filed with the SEC have been
reclassified to Audit Fees from Audit-Related Fees to be consistent with the 2003
presentation.

Audit-Related FeesConsists of fees billed for assurance
and related services that are reasonably related to the performance of the audit or review
of KCP&Ls consolidated financial statements and are not reported under
Audit Fees. These services include consultation concerning financial
accounting and reporting standards.

141

Tax FeesConsists of fees billed for tax
compliance and related support of tax returns and other tax services, including assistance
with tax audits, requests for private letter rulings, determination of the tax basis of
assets or stock, tax-related matters associated with corporate restructurings and tax
research and planning.

All Other FeesConsists of fees for all other
services other than those reported above.

Audit Committee Pre-Approval of
Audit and Permissible Non-Audit Services of Independent AuditorsThe Audit Committee
pre-approves all audit and permissible non-audit services provided by the independent
auditor to Great Plains Energy and its subsidiaries. These services may include audit
services, audit-related services, tax services and other services. The Audit Committee has
adopted for both Great Plains Energy and KCP&L, and their respective subsidiaries,
policies and procedures for the pre-approval of services provided by the independent
auditor. Under these policies and procedures, the Audit Committee may pre-approve certain
types of services, up to aggregate fee levels established by the Audit Committee. The
Audit Committee as well may specifically approve audit and permissible non-audit services
on a case-by-case basis. Any proposed service within a pre-approved type of service that
would cause the applicable fee level to be exceeded cannot be provided unless the Audit
Committee either amends the applicable fee level or specifically approves the proposed
service. Pre-approval is generally provided for up to one year, unless the Audit Committee
specifically provides for a different period. The Audit Committee receives quarterly
reports regarding the pre-approved services performed by the independent auditor. The
Chairman of the Audit Committee may between meetings pre-approve audit and non-audit
services provided by the independent auditor, and reports such pre-approval at the next
Audit Committee meeting.

# PART IV

# ITEM 15. EXHIBITS,
FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

# Financial Statements

|   |  | Page                                                                                  
|-- |  | --------------------------------------------------------------------------------------
|
|
|
|a. |  | Consolidated Statements of Income for the years ended December 31, 2003, 2002 and 2001
|   | 
|b. |  | Consolidated Balance Sheets - December 31, 2003 and 2002                              
|   | 
|c. |  | Consolidated Statements of Cash Flows - December 31, 2003, 2002 and 2001              
|   | 
|d. |  | Consolidated Statements of Common Stock Equity for the years ended December 31, 2003, 
|   |  | 2002 and 2001                                                                         
|   | 
|e. |  | Consolidated Statements of Comprehensive Income for the years ended December 31, 2003,
|   |  | 2002 and 2001                                                                         
|   | 
|f. |  | Notes to Consolidated Financial Statements                                            

142

|   |  |                                                                                                
|-- |  | -----------------------------------------------------------------------------------------------
|
|
|
|g. |  | Independent Auditors' Report - Deloitte & Touche LLP to the Board of Directors and Shareholders
|   |  | of Great Plains Energy                                                                         
|   | 
|h. |  | Report of Independent Auditors - PricewaterhouseCoopers LLP to the Board of Directors and      
|   |  | shareholders of Great Plains Energy Incorporated                                               
|   | 
|i. |  | Independent Auditors' Report - Deloitte & Touche LLP to the Board of Directors and Stockholders
|   |  | of DTI Holdings, Inc.                                                                          

|   | KCP&L |                                                                                                
|-- | ----- | -----------------------------------------------------------------------------------------------
|
|j. |       | Consolidated Statements of Income for the years ended December 31, 2003, 2002 and 2001         
|   |      
|k. |       | Consolidated Balance Sheets - December 31, 2003 and 2002                                       
|   |      
|l. |       | Consolidated Statements of Cash Flows - December 31, 2003, 2002 and 2001                       
|   |      
|m. |       | Consolidated Statements of Common Stock Equity for the years ended December 31, 2003,          
|   |       | 2002 and 2001                                                                                  
|   |      
|n. |       | Consolidated Statements of Comprehensive Income for the years ended December 31, 2003,         
|   |       | 2002 and 2001                                                                                  
|   |      
|o. |       | Notes to Consolidated Financial Statements                                                     
|   |      
|p. |       | Independent Auditors' Report - Deloitte & Touche LLP to the Board of Directors of KCP&L        
|   |      
|   |      
|q. |       | Report of Independent Auditors - PricewaterhouseCoopers LLP to the Board of Directors and      
|   |       | Shareholder of Kansas City Power & Light Company                                               
|   |      
|r. |       | Independent Auditors' Report - Deloitte & Touche LLP to the Board of Directors and Stockholders
|   |       | of DTI Holdings, Inc.                                                                          

Financial Statement
Schedules

|   | Great Plains Energy |                                                                                               
|-- | ------------------- | ----------------------------------------------------------------------------------------------
|
|a. |                     | Schedule II - Valuation and Qualifying Accounts and Reserves                                  
|   |                    
|b. |                     | Report of Independent Auditors on Financial Statement Schedule - PricewaterhouseCoopers LLP to
|   |                     | the Board of Directors of Great Plains Energy Incorporated                                    

|   | KCP&L |                                                                                               
|-- | ----- | ----------------------------------------------------------------------------------------------
|
|c. |       | Schedule II - Valuation and Qualifying Accounts and Reserves                                  
|   |      
|d. |       | Report of Independent Auditors on Financial Statement Schedule - PricewaterhouseCoopers LLP to
|   |       | the Board of Directors of Kansas City Power & Light Company                                   

143

Exhibits

|Great Plains Energy Documents
|-----------------------------
|Exhibit                      
|Number                       
|
|2.1                          
|                             
|                             
|                             
|3.1.a                        
|                             
|                             
|3.1.b                        
|                             
|                             
|4.1.a                        
|                             
|                             
|4.1.b                        
|                             
|                             
|4.1.c                        
|                             
|                             
|4.1.d                        
|                             
|                             
|10.1.a                       
|                             
|                             
|10.1.b                       
|                             
|10.1.c                       
|                             
|                             
|10.1.d                       
|                             
|                             
|10.1.e                       
|                             
|                             
|10.1.f                       
|                             
|                             
|10.1.g                       
|                             
|                             
|10.1.h                       
|                             

144

|       |  |   
|------ |  | --
|10.1.i |  | *+
|       |  |   
|       | 
|10.1.j |  | *+
|       |  |   
|       | 
|10.1.k |  | + 
|       |  |   
|       | 
|10.1.l |  | * 
|       |  |   
|       |  |   
|       |  |   
|       |  |   
|       | 
|10.1.m |  | * 
|       |  |   
|       |  |   
|       | 
|10.1.n |  | * 
|       |  |   
|       |  |   
|       |  |   
|       | 
|10.1.o |  | * 
|       |  |   
|       |  |   
|       | 
|10.1.p |  | * 
|       |  |   
|       |  |   
|       |  |   
|       |  |   
|       | 
|10.1.q |  | * 
|       |  |   
|       |  |   
|       | 
|10.1.r |  | * 
|       |  |   
|       |  |   
|       |  |   
|       |  |   

145

|        |  |  
|------- |  | -
|10.1.s  |  | *
|        |  |  
|        |  |  
|        | 
|10.1.t  |  | *
|        |  |  
|        |  |  
|        | 
|10.1.u  |  | *
|        |  |  
|        |  |  
|        | 
|10.1.v  |  | *
|        |  |  
|        | 
|10.1.w  |  | *
|        |  |  
|        | 
|10.1.x  |  | *
|        |  |  
|        |  |  
|        |  |  
|        | 
|10.1.y  |  | *
|        |  |  
|        | 
|10.1.z  |  | *
|        |  |  
|        | 
|10.1.aa |  | *
|        |  |  
|        |  |  
|        | 
|10.1.bb |  | *
|        |  |  
|        | 
|10.1.cc |  | *
|        |  |  
|        |  |  
|        | 
|10.1.dd |  |  
|        |  |  
|        | 
|12.1    |  |  

146

|       |  |  
|------ |  | -
|16.1   |  | *
|       | 
|21.1   |  |  
|       | 
|23.1.a |  |  
|       | 
|23.1.b |  |  
|       | 
|23.1.c |  |  
|       | 
|23.1.d |  |  
|       | 
|24.1   |  |  
|       | 
|31.1.a |  |  
|       | 
|31.1.b |  |  
|       | 
|32.1   |  |  

* Filed with the SEC as exhibits
to prior registration statements (except as otherwise noted) and are incorporated herein
by reference and made a part hereof. The exhibit number and file number of the documents
so filed, and incorporated herein by reference, are stated in parenthesis in the
description of such exhibit.

+ Indicates management
contract or compensatory plan or arrangement.

Copies of any of the exhibits
filed with the SEC in connection with this document may be obtained from Great Plains
Energy upon written request.

Great Plains Energy agrees to
furnish to the SEC upon request any instrument with respect to long-term debt as to which
the total amount of securities authorized does not exceed 10% of total assets of Great
Plains Energy and its subsidiaries on a consolidated basis.

|KCP&L Documents
|---------------
|Exhibit        
|Number         
|
|2.2            
|               
|               
|               
|3.2.a          
|               
|               
|3.2.b          
|               

147

|      |  |  
|----- |  | -
|4.2.a |  | *
|      |  |  
|      |  |  
|      | 
|4.2.b |  | *
|      |  |  
|      | 
|4.2.c |  | *
|      |  |  
|      | 
|4.2.d |  | *
|      |  |  
|      | 
|4.2.e |  | *
|      |  |  
|      | 
|4.2.f |  | *
|      |  |  
|      | 
|4.2.g |  | *
|      |  |  
|      | 
|4.2.h |  | *
|      |  |  
|      | 
|4.2.i |  | *
|      |  |  
|      | 
|4.2.j |  | *
|      |  |  
|      | 
|4.2.k |  | *
|      |  |  
|      | 
|4.2.l |  | *
|      |  |  
|      |  |  
|      | 
|4.2.m |  | *
|      |  |  

148

|       |  |  
|------ |  | -
|4.2.n  |  | *
|       |  |  
|       |  |  
|       |  |  
|       | 
|4.2.o  |  | *
|       |  |  
|       |  |  
|       | 
|10.2.a |  | *
|       |  |  
|       | 
|10.2.b |  | *
|       |  |  
|       | 
|10.2.c |  | *
|       |  |  
|       | 
|10.2.d |  | *
|       |  |  
|       |  |  
|       | 
|10.2.e |  | *
|       |  |  
|       | 
|10.2.f |  | *
|       |  |  
|       |  |  
|       | 
|12.2   |  |  
|       | 
|16.2   |  | *
|       | 
|23.2.a |  |  
|       | 
|23.2.b |  |  
|       | 
|23.2.c |  |  
|       | 
|23.2.d |  |  
|       | 
|24.2   |  |  
|       | 
|31.2.a |  |  

149

|       |  | 
|------ |  | 
|31.2.b |  | 
|       | 
|32.2   |  | 

* Filed with the SEC as exhibits
to prior registration statements (except as otherwise noted) and are incorporated herein
by reference and made a part hereof. The exhibit number and file number of the documents
so filed, and incorporated herein by reference, are stated in parenthesis in the
description of such exhibit.

Copies of any of the exhibits
filed with the SEC in connection with this document may be obtained from KCP&L upon
written request.

KCP&L agrees to furnish to the
SEC upon request any instrument with respect to long-term debt as to which the total
amount of securities authorized does not exceed 10% of total assets of KCP&L and its
subsidiaries on a consolidated basis.

# Reports on Form 8-K

Great Plains EnergyGreat Plains Energy furnished on
October 23, 2003, a report on Form 8-K dated October 22, 2003, furnishing a press release
regarding third quarter 2003 earnings information.

Great Plains Energy filed on November
13, 2003, a report on Form 8-K dated November 12, 2003, regarding the statement by
Moodys Investors Service announcing the downgrade of its ratings of KCP&L
securities.

Great Plains Energy filed on December
5, 2003, a report on Form 8-K dated December 5, 2003, regarding the provision of a notice
to its directors and officers pursuant to Rule 104(b)(2) of Regulation BTR with respect to
the transition and blackout periods under the Great Plains Energy Incorporated Employee
Savings Plus (ESP) Plan and the Capital Accumulation Plan.

Great Plains Energy furnished on
February 5, 2004, a report on Form 8-K dated February 4, 2004, furnishing a press release
regarding fourth quarter 2003 and full year 2003 earnings.

Great Plains Energy filed on February
11, 2004, a report on Form 8-K dated February 9, 2004, regarding a letter agreement
between SE Holdings, L.L.C. (SE Holdings), and Innovative Energy Consultants Inc. on
behalf of certain of its affiliates agreeing to a procedure for determining the fair
market value of its ownership interest in Custom Energy Holdings, L.L.C. (Custom Energy)
subject to a put option, providing for SE Holdings to exercise its put option with respect
to all but one unit of each of its respective series of ownership interest in Custom
Energy, and further providing that Richard M. Zomnir, President and Chief Executive
Officer of Strategic Energy, L.L.C, will resign such positions upon consummation of the
transaction.

KCP&LKCP&L furnished on October 23,
2003, a report on Form 8-K dated October 22, 2003, furnishing a press release regarding
third quarter 2003 earnings information.

KCP&L furnished on February 5,
2004, a report on Form 8-K dated February 4, 2004, furnishing a press release regarding
fourth quarter 2003 and full year 2003 earnings.

150

# Schedule II 
Valuation and Qualifying Accounts and Reserves

# Great Plains Energy
       Valuation and Qualifying Accounts          Years Ended December 31, 2003, 2002 and
2001

|                                    
|------------------------------------
|                                    
|                                    
|                                    
|                                    
|                                    
|Description                         
|
|                                    
|Year Ended December 31, 2003:       
|Allowance for uncollectible accounts
|Legal reserves                      
|Environmental reserves              
|Tax valuation allowance (e)         
|Discontinued operations             
|
|Year Ended December 31, 2002:       
|Allowance for uncollectible accounts
|Legal reserves                      
|Environmental reserves              
|Tax valuation allowance             
|Discontinued operations (g)         
|
|Year Ended December 31, 2001:       
|Allowance for uncollectible accounts
|Legal reserves                      
|Environmental reserves              
|Tax valuation allowance (e)         
|Discontinued operations (j)         
|

Note 1: On June 13, 2003, HSS
board of directors approved a plan to dispose of its interest in residential services
provider RSAE. On June 30, 2003, HSS completed the disposition of its interest in RSAE.
Great Plains Energys Valuation and Qualifying Accounts have been recast to reflect
RSAE as discontinued operations for the years ended December 31, 2002 and 2001.

|    | 
|--- | 
|(a) | 
|    | 
|(b) | 
|    | 
|(c) | 
|(d) | 
|(e) | 
|    | 
|    | 
|    | 
|(f) | 
|    | 
|(g) | 
|    | 
|(h) | 
|(i) | 
|    | 
|(j) | 
|    | 
|(k) | 
|    | 

151

# Kansas City Power & Light
Company       Valuation and Qualifying Accounts        Years Ended December 31, 2003,
2002 and 2001

|                                    
|------------------------------------
|                                    
|                                    
|                                    
|                                    
|                                    
|Description                         
|
|                                    
|Year Ended December 31, 2003:       
|Allowance for uncollectible accounts
|Legal reserves                      
|Environmental reserves              
|Discontinued operations             
|
|Year Ended December 31, 2002:       
|Allowance for uncollectible accounts
|Legal reserves                      
|Environmental reserves              
|Discontinued operations (f)         
|
|Year Ended December 31, 2001:       
|Allowance for uncollectible accounts
|Legal reserves                      
|Environmental reserves              
|Discontinued operations (i)         
|

Note 1: On June 13, 2003, HSS
board of directors approved a plan to dispose of its interest in residential services
provider RSAE. On June 30, 2003, HSS completed the disposition of its interest in RSAE.
KCP&Ls Valuation and Qualifying Accounts have been recast to reflect RSAE as
discontinued operations for the years ended December 31, 2002 and 2001.

|    | 
|--- | 
|(a) | 
|(b) | 
|    | 
|    | 
|(c) | 
|(d) | 
|(e) | 
|    | 
|(f) | 
|    | 
|(g) | 
|(h) | 
|    | 
|(i) | 
|    | 
|(j) | 
|    | 

152

# Report of Independent
Auditors on Financial Statement Schedule

To the Board of Directors
of  Great Plains Energy Incorporated:

Our audits of the consolidated
financial statements of Great Plains Energy Incorporated referred to in our report dated
February 5, 2002, except with respect to the reclassification of the 2001 information in
Note 16 as to which the date is May 22, 2002; the 2001 transitional disclosures relating
to the adoption of Statement of Financial Accounting Standards No. 142 as described in
Note 6 as to which the date is February 21, 2003; and the reclassification described in
the last paragraph of Note 9 relating to the adoption of Statement of Financial Accounting
Standards No. 145, the reclassification to the 2001 financial statements relating to the
discontinued operations as described in Note 8, and the 2001 transitional disclosures
relating to the adoption of Statement of Financial Accounting Standards No. 143 as
described in Note 15 as to which the date is August 13, 2003, appearing in this Form 10-K
also included an audit of the 2001 information included in the financial statement
schedule in this Form 10-K. In our opinion, the 2001 information included in this
financial statement schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated financial
statements.

/s/PricewaterhouseCoopers
LLPPricewaterhouseCoopers
LLP

Kansas City, Missouri February 5,
2002, except with respect to the reclassification to the 2001 financial statement schedule
information relating to the discontinued operations as described in Note 1 as to which the
date is August 13, 2003

153

# Report of Independent
Auditors on Financial Statement Schedule

To the Board of Directors
ofKansas City Power & Light Company:

Our audits of the consolidated
financial statements of Kansas City Power & Light Company referred to in our report
(which has an explanatory paragraph regarding the corporate reorganization which occurred
on October 1, 2001) dated February 5, 2002, except with respect to the reclassification of
the 2001 information in Note 16 as to which the date is May 22, 2002; the 2001
transitional disclosures relating to the adoption of Statement of Financial Accounting
Standards No. 142 as described in Note 6 as to which the date is February 21, 2003; and
the reclassification described in the last paragraph of Note 9 relating to the adoption of
Statement of Financial Accounting Standards No. 145, the reclassification to the 2001
financial statements relating to the discontinued operations as described in Note 8, and
the 2001 transitional disclosures relating to the adoption of Statement of Financial
Accounting Standards No. 143 as described in Note 15 as to which the date is August 13,
2003, appearing in this Form 10-K also included an audit of the 2001 information included
in the financial statement schedule in this Form 10-K. In our opinion, the 2001
information included in this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the related
consolidated financial statements.

/s/PricewaterhouseCoopers
LLPPricewaterhouseCoopers
LLP

Kansas City, Missouri February 5,
2002, except with respect to the reclassification to the 2001 financial statement schedule
information relating to the discontinued operations as described in Note 1 as to which the
date is August 13, 2003

154

# SIGNATURES

Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|                     | 
|-------------------- | 
|                     | 
|                     | 
|Date: March 10, 2004 | 
|                     | 
|                     | 
|                     | 

Pursuant to the requirements of the
Securities Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.

|Signature                 | Title |  | Date                                     
|------------------------- | ----- |  | -----------------------------------------
|                          |       |  | Chairman of the Board and Chief Executive
|/s/Michael J. Chesser     |       |  | Officer                                  
|Michael J. Chesser        |       |  | (Principal Executive Officer)            
|                          |       |  |                                          
|                          |       |  | Senior Vice President - Finance,         
|/s/Andrea F. Bielsker     |       |  | Chief Financial Officer and              
|Andrea F. Bielsker        |       |  | Treasurer                                
|                          |       |  | (Principal Financial Officer)            
|                          |       |  |                                          
|/s/Lori A. Wright         |       |  | Controller                               
|Lori A. Wright            |       |  | (Principal Accounting Officer)           
|                          |       |  |                                          
|David L. Bodde*           |       |  | Director                                 
|                          |       |  |                                          
|/s/William H. Downey      |       |  | Director                                 
|William H. Downey         |       |  |                                          
|                          |       |  |                                          
|Mark A. Ernst*            |       |  | Director                                 
|                          |       |  |                                          
|Randall C. Ferguson, Jr.* |       |  | Director                                 
|                          |       |  |                                          
|William K. Hall*          |       |  | Director                                 
|                          |       |  |                                          
|Luis A. Jimenez*          |       |  | Director                                 
|                          |       |  |                                          
|James A. Mitchell*        |       |  | Director                                 
|                          |       |  |                                          
|William C. Nelson*        |       |  | Director                                 
|                          |       |  |                                          
|Linda H. Talbott*         |       |  | Director                                 
|                          |       |  |                                          
|Robert H. West*           |       |  | Director                                 

|    | 
|--- | 
|*By | 
|    | 
|    | 

155

# SIGNATURES

Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|                     | 
|-------------------- | 
|                     | 
|                     | 
|Date: March 10, 2004 | 
|                     | 
|                     | 

Pursuant to the requirements of the
Securities Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.

|Signature                 | Title |  | Date                                     
|------------------------- | ----- |  | -----------------------------------------
|                          |       |  | President and Chief Executive Officer and
|/s/ William H. Downey     |       |  | Director                                 
|William H. Downey         |       |  | (Principal Executive Officer)            
|                          |       |  |                                          
|                          |       |  | Senior Vice President - Finance,         
|/s/Andrea F. Bielsker     |       |  | Chief Financial Officer and              
|Andrea F. Bielsker        |       |  | Treasurer                                
|                          |       |  | (Principal Financial Officer)            
|                          |       |  |                                          
|/s/Lori A. Wright         |       |  | Controller                               
|Lori A. Wright            |       |  | (Principal Accounting Officer)           
|                          |       |  |                                          
|David L. Bodde*           |       |  | Director                                 
|                          |       |  |                                          
|/s/Michael J. Chesser     |       |  | Chairman of the Board                    
|Michael J. Chesser        |       |  |                                          
|                          |       |  |                                          
|Mark A. Ernst*            |       |  | Director                                 
|                          |       |  |                                          
|Randall C. Ferguson, Jr.* |       |  | Director                                 
|                          |       |  |                                          
|William K. Hall*          |       |  | Director                                 
|                          |       |  |                                          
|Luis A. Jimenez*          |       |  | Director                                 
|                          |       |  |                                          
|James A. Mitchell*        |       |  | Director                                 
|                          |       |  |                                          
|William C. Nelson*        |       |  | Director                                 
|                          |       |  |                                          
|Linda H. Talbott*         |       |  | Director                                 
|                          |       |  |                                          
|Robert H. West*           |       |  | Director                                 

|    | 
|--- | 
|*By | 
|    | 
|    | 

156

Supplemental Information to be
Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which
Have Not Registered Securities Pursuant to Section 12 of the Act.KCP&L did not
send any annual report to security holders covering its last fiscal year, and did not send
any proxy statement, form of proxy or other proxy soliciting material to its security
holders with respect to any annual or other meeting of security holders.

157