UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549FORM 10-K

# |X| ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended
December 31, 2002OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition
period from ________ to ________

Commission File
Number 1-2385

THE DAYTON POWER AND LIGHT COMPANY(Exact name of registrant as specified in its charter)

|OHIO(State or other jurisdiction ofincorporation or organization) | 31-0258470(I.R.S. Employer Identification No.)
|----------------------------------------------------------------- | ----------------------------------------------

|1065 Woodman Drive, Dayton, Ohio(Address of principal executive offices) | 45432(Zip Code)
|------------------------------------------------------------------------ | ---------------

Registrants
telephone number, including area code: 937-224-6000

Securities
registered pursuant to Section 12(b) of the Act:  NONE

Securities
registered pursuant to Section 12(g) of the Act:  NONE

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 this Form 10-K. ____

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.

YES
|X|     NO  |_|

Indicate  by check mark whether
the registrant is an accelerated filer (as defined in Exchange Act  Rule 126-2).

YES
|X|     NO  |_|

Number of shares of registrants
common stock outstanding as of December 31, 2002, all of which were held by DPL  Inc.,
was 41,172,173.

1

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THE DAYTON POWER AND LIGHT COMPANY

Index to Annual Report on Form 10-KFiscal Year Ended December 31, 2002

|        | Page No 
|------- | --------
|        | Part I  
|       
|Item 1  |         
|Item 2  |         
|Item 3  |         
|Item 4  |         
|       
|        | Part II 
|       
|Item 5  |         
|Item 6  |         
|Item 7  |         
|Item 7A |         
|Item 8  |         
|Item 9  |         
|       
|        | Part III
|       
|Item 10 |         
|Item 11 |         
|Item 12 |         
|Item 13 |         
|Item 14 |         
|       
|        | Part IV 
|       
|Item 15 |         
|       
|        | Other   
|       
|        |         
|        |         

2

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## PART I

|Item 1  Business
|-----------------
|                 

# THE
COMPANY

The Dayton Power and
Light Company (DP&L or the Company) is a public
utility incorporated under the laws of Ohio in 1911. The Company sells
electricity to residential, commercial, industrial, and governmental customers
in a 6,000 square mile area of West Central Ohio. Electricity for the
Companys 24 county service area is generated at eight power plants and is
distributed to more than 500,000 retail customers. Principal industries served
include automotive, food processing, paper, technology, and defense. The
Companys sales reflect the general economic conditions and seasonal
weather patterns of the area.

The Company employed
1,464 persons as of December 31, 2002, of which 1,217 were full-time
employees and 247 were part-time employees.

All of the outstanding
shares of common stock of the Company are held by DPL Inc. (DPL),
which became the Companys corporate parent, effective
April 21, 1986.

The Companys
principal executive and business office is located at 1065 Woodman Drive,
Dayton, Ohio 45432  telephone (937) 224-6000.

# COMPETITION

In October 1999,
legislation became effective in Ohio that gave electric utility customers a
choice of energy providers as of January 1, 2001. Under the legislation,
electric generation, aggregation, power marketing, and power brokerage services
supplied to retail customers in Ohio is deemed to be competitive and is not
subject to supervision and regulation by the Public Utilities Commission of Ohio
(PUCO). As required by the legislation, the Company filed its
transition plan at the PUCO on December 20, 1999. The Company received PUCO
approval of its plan on September 21, 2000.

The transition plan provides for a
three-year transition period, which began on January 1, 2001 and ends  on December 31,
2003. The plan also provides for a 5% residential rate reduction  on the generation
component of the rates, which reduced annual revenue by  approximately $14 million; rate
certainty for the three year period for  customers that continue to purchase power from
the Company; guaranteed rates for  a six-year period for transmission and delivery
services; and recovery of  transition costs of approximately $600 million. Under the
plan, the Company has  the organizational and financial flexibility to continue its
growth initiatives.

3

---

On October 28, 2002,
DP&L filed with the PUCO requesting an extension of its market development
period from December 31, 2003 to December 31, 2005. If approved by the PUCO, the
extension of the market development period will continue DP&Ls current
rate structure and provide its retail customers with rate stability. It is
unknown when the PUCO will rule on this request.

On September 30, 1996,
the Federal Energy Regulatory Commission (FERC) conditionally
accepted the Companys market-based sales tariff, which allowed the Company
to sell wholesale generation supply at prices that reflect current market
prices. On September 27, 2002, DP&L filed an updated market power analysis
with the FERC in support of its authority to sell power at market-based rates.

The Company competes with
privately and municipally owned electric utilities and rural electric
cooperatives, and other alternate fuel suppliers on the basis of price and
service. The Company purchases generation capacity from DPL Energy, LLC, a
wholly owned subsidiary of DPL.

Like other utilities and
energy marketers, the Company from time to time may have electric generating
capacity available for sale on the wholesale market. The Company competes with
other generators to sell electricity provided by such capacity. The ability of
the Company to sell this electricity will depend on how the Companys
price, terms and conditions compare to those of other suppliers. In addition,
from time to time, the Company makes power purchases from other suppliers.

The Company provides
transmission and wholesale electric service to twelve municipal customers
which distribute electricity within their corporate limits. In addition to these
municipal customers, the Company maintains an interconnection agreement with one
municipality that has the capability to generate a portion of its energy
requirements. Sales to municipalities represented 1.2% of total electricity
sales in 2002.

The municipal agreements
provide, among other things, for the sale of firm power by the Company to the
municipalities on specified terms. However, the parties disagree in their
interpretation of this portion of the agreement and the Company filed suit
against the eleven municipalities on December 28, 1998. The dispute was
subsequently settled in 1999. In December 1999, the Company filed a second suit
against the municipalities to claim the municipalities initial failure to
pay for certain services rendered under the contract. The municipalities filed a
complaint at the FERC claiming violation of a mediation clause. On November 4,
2002, the FERC issued an order in the case that was favorable to DP&L, and
is not expected to result in a material impact on DP&Ls financial
position.

The FERC issued a final
rule on December 20, 1999 specifying the minimum characteristics and functions
for Regional Transmission Organizations (RTO). The rule required
that all public utilities that own, operate or control interstate transmission
lines file a proposal to join an RTO by October 15, 2000 or file a description
of efforts taken to participate in an RTO, reasons for not participating in an
RTO, any obstacles to participation in an RTO, and any plans for further work
towards participation. The Company filed with the FERC on October 16, 2000 to
join the Alliance RTO. On December 19, 2001, the FERC issued an order rejecting
the Alliance RTO as a stand-alone RTO. However, on April 24, 2002, the FERC
approved the Alliance RTO companies proposal to form an independent
transmission company that will operate under the umbrella of an existing RTO. As
of December 31, 2002, the Company had invested approximately $8 million in its
efforts to join the Alliance RTO. The FERC recognized in its order that
substantial losses were incurred to establish the Alliance RTO and that it would
consider proposals for rate recovery of prudently incurred costs.

4

---

On May 28, 2002, the
Company filed a notice with the FERC stating its intention to join the PJM
Interconnection, L.L.C. (PJM), an organization responsible for the
operation and control of the bulk electric power system throughout major
portions of five Mid-Atlantic states and the District of Columbia. On July 31,
2002, the FERC granted the Company conditional approval to join PJM. On
September 30, 2002, the Company signed an implementation agreement with PJM with
the expectation that the Company will be fully integrated into the PJM market by
May 1, 2003. On December 11, 2002, the Company executed the PJM West
Transmission Owners Agreement and along with the other new PJM companies,
jointly submitted the PJM Open Access Transmission Tariff (OATT)
filing. This filing adopts a transitional rate design that will maintain revenue
and cost neutrality while eliminating all seams within the newly expanded PJM.

On September 12, 2002,
the Ohio Consumers Counsel, Industrial Energy Users-Ohio and American
Municipal Power-Ohio, Inc. filed a complaint with the PUCO alleging that the
Company had failed to join and transfer operational control to a FERC approved
RTO. The Company filed a motion to dismiss the complaint on October 24, 2002.
While the Company intends to vigorously defend this case, the impact of the
complaint cannot be determined at this time.

On July 31, 2002, the
FERC issued a Standard Market Design Notice of Proposed Rulemaking (SMD
NOPR). The SMD NOPR establishes a set of rules to standardize wholesale
electric market design to create wholesale competition and efficient
transmission systems. The impact of this rulemaking on the Company cannot be
determined at this time.

On July 22, 1998, the
PUCO approved the implementation of Minimum Electric Service and Safety
Standards for all of Ohios investor-owned electric utilities. This order
details minimum standards of performance for a variety of service related
functions effective July 1, 1999. On December 21, 1999, the PUCO issued
additional rules proposed by the PUCO staff, which were designed to guide the
electric utility companies as they prepare to enter into deregulation. These
rules include certification of providers of competitive retail electric
services, minimum competitive retail electric service standards, monitoring the
electric utility market, and establishing procedures for alternative dispute
resolution. There were also rules issued to amend existing rules for
noncompetitive electric service and safety standards and electric companies
long-term forecast reporting. The Company submitted comments on the proposed
rules on January 31, 2000. The rules were finalized by the PUCO in June 2000 and
did not have a material impact on the Companys financial position.

5

---

On March 21, 2002, the
PUCO staff proposed modifications to the Minimum Electric Service and Safety
Standards, which establish performance standards for various service related
functions of investor-owned electric utilities. The proposed modifications
impact billing, collections, allocation of customer payments, meter reading, and
distribution circuit performance. The Company submitted comments and reply
comments on the proposed rules, and filed an application for rehearing on
October 26, 2002. The PUCO issued the final rules on September 26, 2002, but has
granted applications for rehearing to provide more time for rule review. The
cost to the Company of compliance with these rules is unknown at this time.

# CONSTRUCTION
PROGRAM

Construction additions
are expected to approximate $109 million in 2003, and were $129 million 2002 and
$164 million in 2001. The capital program includes environmental compliance,
which is expected to approximate $39 million in 2003, and was $69 and $58
million in 2002 and 2001, respectively.

Construction plans are
subject to continuing review and are expected to be revised in light of changes
in financial and economic conditions, load forecasts, legislative and regulatory
developments and changing environmental standards, among other factors. The
Companys ability to complete its capital projects and the reliability of
future service will be affected by its financial condition, the availability of
external funds at reasonable cost and adequate and timely rate recovery. The
Company expects to finance its construction program in 2003 with internal funds.

See ENVIRONMENTAL
CONSIDERATIONS for a description of environmental control projects and
regulatory proceedings, which may change the level of future construction
additions. The potential impact of these events on the Companys operations
cannot be estimated at this time.

# ELECTRIC
OPERATIONS AND FUEL SUPPLY

The Companys
present winter generating capability is 3,371,000 KW. Of this capability,
2,843,000 KW (approximately 84%) is derived from coal-fired steam
generating stations and the balance consists of combustion turbine and
diesel-powered peaking units. Approximately 87% (2,472,000 KW) of the
existing steam generating capability is provided by certain units owned as
tenants in common with The Cincinnati Gas & Electric Company
(CG&E) or with CG&E and Columbus Southern Power Company
(CSP). Each company owns a specified undivided share of each of
these units, is entitled to its share of capacity and energy output, and has a
capital and operating cost responsibility proportionate to its ownership share.

6

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The remaining steam
generating capability (371,000 KW) is derived from a generating station
owned solely by the Company. The Companys all-time net peak load was
3,130,000 KW, occurring in 1999. The present summer generating capability
is 3,269,000 KW.

|                              |  |  |  | MW Rating | 
|----------------------------- |  |  |  | --------- | 
|
|Coal Units                    |  |  |  |           | 
|                             
|Hutchings                     |  |  |  | W         | 
|Killen                        |  |  |  | C         | 
|Stuart                        |  |  |  | C         | 
|Conesville-Unit 4             |  |  |  | C         | 
|Beckjord-Unit 6               |  |  |  | C         | 
|Miami Fort-Units 7 & 8        |  |  |  | C         | 
|East Bend-Unit 2              |  |  |  | C         | 
|Zimmer                        |  |  |  | C         | 
|                             
|Combustion Turbines or Diesel |  | 
|                             
|Hutchings                     |  |  |  | W         | 
|Yankee Street                 |  |  |  | W         | 
|Monument                      |  |  |  | W         | 
|Tait                          |  |  |  | W         | 
|Sidney                        |  |  |  | W         | 
|Tait Gas Turbines 1-3         |  |  |  | W         | 
|Killen                        |  |  |  | C         | 
|Stuart                        |  |  |  | C         | 

*W = Wholly-OwnedC = Commonly Owned

In order to transmit
energy to their respective systems from their commonly owned generating units,
the companies have constructed and own, as tenants in common, 847 circuit
miles of 345,000-volt transmission lines. The Company has several
interconnections with other companies for the purchase, sale and interchange of
electricity. In July 2001, the Company completed a 40.2-mile long, 345,000-volt
circuit between CG&Es Foster Substation and DP&Ls Bath
Substation. The circuit is jointly owned by DP&L and CG&E.

The Company generated
over 97% of its electric output from coal-fired units in 2002. The remainder was
from oil or natural gas-fired units, which were used to meet peak demands.

The Company has
contracted approximately 95% of its total coal requirements for 2003 with the
balance to be obtained by spot market purchases. The prices to be paid by the
Company under its long-term coal contracts are subject to adjustment in
accordance with various indices. Each contract has features that will limit
price escalations in any given year.

7

---

The average fuel cost per
kilowatt-hour (kWh) generated of fuel burned for electric generation
(coal, gas and oil) for the year was 1.26¢ in 2002, 1.31¢ in 2001, and
1.18¢ in 2000. With the onset of competition in January 2001, the Electric
Fuel Component became part of the Standard Offer Generation Rate. See RATE
REGULATION AND GOVERNMENT LEGISLATION and ENVIRONMENTAL CONSIDERATIONS.

# GAS
OPERATIONS AND GAS SUPPLY

In October 2000, the
Company completed the sale of its natural gas retail distribution assets and
certain liabilities for $468 million in cash. The transaction resulted in a
pre-tax gain of $183 million ($121 million net of taxes). Proceeds from the sale
were used to finance DPLs regional generation expansion and reduce
outstanding short-term debt.

# RATE
REGULATION AND GOVERNMENT LEGISLATION

The Companys sales
to retail customers are subject to rate regulation by the PUCO and various
municipalities. The Companys wholesale electric rates to municipal
corporations and other distributors of electric energy are subject to regulation
by the FERC under the Federal Power Act.

Ohio law establishes the
process for determining rates charged by public utilities. Regulation of rates
encompasses the timing of applications, the effective date of rate increases,
the cost basis upon which the rates are based and other related matters. Ohio
law also establishes the Office of the Ohio Consumers Counsel (the
OCC), which has the authority to represent residential consumers in
state and federal judicial and administrative rate proceedings.

Ohio legislation extends
the jurisdiction of the PUCO to the records and accounts of certain public
utility holding company systems, including DPL. The legislation extends the
PUCOs supervisory powers to a holding company systems general
condition and capitalization, among other matters, to the extent that they
relate to the costs associated with the provision of public utility service.

Based on existing
regulatory authorization, regulatory assets on the Consolidated Balance Sheet
include:

|                                                     | At December 31, | 
|---------------------------------------------------- | --------------- | 
|
|Regulatory transition costs (a)                      |                 | 
|Income taxes recoverable through future revenues (b) |                 | 
|Other costs (b)                                      |                 | 
|                                                     |                 | 
|Total                                                |                 | 
|                                                     |                 | 

8

---

| | (a) As
discussed in the COMPETITION section, the Company received PUCO approval of  its
transition plan for the deregulation of its generation business.  Accordingly, the
Company discontinued the use of its regulatory accounting model  for its generation
operations. As a result, a $63.7 million before tax benefits  ($41.4 million net of
taxes) reduction of generation-related regulatory assets  was recorded in the third
quarter of 2000 as an extraordinary item and other  generation-related regulatory assets
were reclassified to the Regulatory  transition costs asset.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) Certain
deferred costs remain authorized for recovery by regulators. These  relate primarily to
the Companys electric transmission and distribution  operations and are being
amortized over the recovery period of the assets  involved.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Under the legislation
passed in 1999, the percentage of income payment plan (PIPP) for
eligible low-income households was converted to a universal service fund in
2001. The universal service program is administered by the Ohio Department of
Development and provides for full recovery of arrearages for qualifying low
income customers. As part of the Companys Electric Transition Plan, the
Company was granted authority to recover PIPP arrearages remaining as of
December 31, 2000 as part of a transition charge.

In 2000, the PUCO amended
the rules for Long-Term Forecast Reports for all investor-owned electric
transmission and distribution companies in Ohio. Under these rules, each
transmission and/or distribution company must annually file a Long-Term Electric
Forecast Report, which presents 10-year energy and demand transmission and
distribution forecasts. The reports also must contain information on the
companys existing and planned transmission and distribution systems, as
well as a substantiation of the need for any system upgrades or additions. The
Company filed a combined 2000/2001 Long-Term Electric Forecast Report under
these amended rules in March 2001.

The PUCO is composed of
five commissioners appointed to staggered five-year terms. The current
Commission is composed of the following members:

|Name                      | Beginning of Term |               | End of Term |           
|------------------------- | ----------------- | ------------- | ----------- | ----------
|Judith A. Jones           |                   | April 2002    |             | April 2007
|Clarence D. Rogers        |                   | February 2001 |             | April 2006
|Rhonda H. Fergus          |                   | April 2000    |             | April 2005
|Chairman Alan R. Schriber |                   | April 1999    |             | April 2004
|Donald L. Mason           |                   | April 1998    |             | April 2003

See COMPETITION for more
detail regarding the impact of legislation passed in October 1999.

9

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# ENVIRONMENTAL
CONSIDERATIONS

The operations of the
Company, including the commonly owned facilities operated by the Company,
CG&E and CSP, are subject to federal, state, and local regulation as to air
and water quality, disposal of solid waste and other environmental matters,
including the location, construction and initial operation of new electric
generating facilities and most electric transmission lines. The possibility
exists that current environmental regulations could be revised which could
change the level of estimated construction expenditures. See CONSTRUCTION
PROGRAM.

## Air Quality

The Clean Air Act
Amendments of 1990 (the CAA) have limited sulfur dioxide and
nitrogen oxide emissions nationwide. The CAA restricts emissions in two phases.
Phase I compliance requirements became effective on January 1, 1995
and Phase II requirements became effective on January 1, 2000.

The Companys
environmental compliance plan (ECP) was approved by the PUCO on
May 6, 1993 and, on November 9, 1995, the PUCO approved the continued
appropriateness of the ECP. Phase I requirements were met by switching to
lower sulfur coal at several commonly owned electric generating facilities and
increasing existing scrubber removal efficiency. Total capital expenditures to
comply with Phase I of the CAA were approximately $5.5 million.
Phase II requirements are being met primarily by switching to lower sulfur
coal at all non-scrubbed coal-fired electric generating units.

In November 1999, the
United States Environmental Protection Agency (USEPA) filed civil
complaints and Notices of Violations (NOVs) against operators and
owners of certain generation facilities for alleged violations of the CAA.
Generation units operated by partners CG&E (Beckjord 6) and CSP (Conesville
4) and co-owned by the Company were referenced in these actions. Numerous
northeast states have filed complaints or have indicated that they will be
joining the USEPAs action against CG&E and CSP. The Company was not
identified in the NOVs, civil complaints or state actions. In December 2000,
CG&E announced that it had reached an Agreement in Principle with the USEPA
and other plaintiffs in an effort to settle the claims. Discussions on the final
terms of the settlement are ongoing. Therefore, it is not possible to determine
the outcome of these claims or the impact, if any, on the Company. In June 2000,
the USEPA issued a NOV to DP&L-operated J.M. Stuart Station (co-owned by the
Company, CG&E, and CSP) for alleged violations of the CAA. The NOV contained
allegations consistent with NOVs and complaints that the USEPA had previously
brought against numerous other coal-fired utilities in the Midwest. The Company
will vigorously challenge the NOV. At this time, it is not possible to determine
the outcome of these claims or the impact, if any, on the Company.

11

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On November 22, 2002, the
USEPA announced its final rule package on New Source Review reform and its
proposed rule on the definition of routine maintenance, repair and
replacement. On December 31, 2002, the final and proposed rules were
published in the Federal Register. Several northeast states have brought
lawsuits challenging the final rule in the United States Court of Appeals for
the District of Columbia. While the Company will conduct an extensive review of
the published rules, it does not expect the rule changes to have a material
effect on the Companys financial position, earnings, or cash flow.

In September 1998, the
USEPA issued a final rule requiring states to modify their State Implementation
Plans (SIPs) under the CAA. The modified SIPs are likely to result
in further nitrogen oxide (NOx) reduction requirements placed on
coal-fired generating units by 2004. In order to meet these NOx requirements,
the Companys total capital expenditures are estimated to be approximately
$175 million, of which $136 million has been spent to-date. Industry groups
and others appealed the rules in United States District Court. The requirement
for states to submit revised implementation plans has been stayed until the
outcome of the litigation. In March 2000, the United States District Court
upheld the rule. Industry groups and others have appealed this decision. As a
result of the litigation, the Court extended the compliance date of the rule an
additional year, until May 31, 2004. In March 2001, the United States Supreme
Court refused to hear further appeals of the SIP rules. In December 1999, the
USEPA issued final rules granting various CAA Section 126 petitions filed by
northeast states. The Companys facilities were identified, among many
others, in the rulemaking. In January 2002, the USEPA announced that reductions
required under the CAA Section 126 rulemaking will be extended until May 31,
2004 to be consistent with the NOx SIP rule. The Companys current NOx
reduction strategy and associated expenditures to meet the SIP call should
satisfy the rulemaking reduction requirements.

On July 18, 2002, the
Ohio Environmental Protection Agency (Ohio EPA) adopted rules that
will constitute Ohios SIP for NOx reductions. The state rules are
substantially similar to the reductions required under the federal CAA Section
126 rulemaking and federal NOx SIP rule. The USEPA has conditionally approved
Ohios NOx SIP. On January 16, 2003, the USEPAs final approval of
Ohios NOx SIP appeared in the Federal Register. The Companys current
NOx reduction strategy and associated expenditures to meet the federal reduction
requirements should satisfy the state SIP reduction requirements.

On December 14, 2000, the
USEPA issued a determination that coal- and oil-fired electric generation units
should be regulated for emissions of mercury and hazardous air pollutants. The
USEPA will issue proposed rules by December 2003 and final rules by December
2004. The impact of the regulatory determination cannot be determined at this
time.

In March 2002, the United
States Court of Appeals for the District of Columbia upheld the USEPAs
National Ambient Air Quality Standards for ozone and fine particles. The USEPA
is conducting a rulemaking regarding these standards. The impact of these
standards and rules can not be determined at this time.

12

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In April 2002, the USEPA
issued proposed rules governing existing facilities that have cooling water
intake structures. Final rules are anticipated in February 2004. The impact of
the final rules cannot be determined at this time.

On July 29, 2002, the
Bush Administration offered proposed legislation known as the Clear
Skies initiative. The proposal calls for emissions reductions for sulfur
dioxide, nitrogen oxides, and mercury commencing between 2008 and 2010. Senator
Jeffords also offered a competing multi-pollutant proposal calling for
reductions in sulfur dioxide, nitrogen oxides, mercury, and carbon dioxide
emissions with earlier implementation dates. Neither proposal was passed in
2002. Several competing proposed bills revising the air pollution laws have
emerged in the 108th session of Congress. The impact of the potential
legislation, if passed, cannot be determined at this time.

## Land Use

The Company and numerous
other parties have been notified by the USEPA or the Ohio Environmental
Protection Agency (Ohio EPA) that it considers them Potentially
Responsible Parties (PRPs) for clean-up at three superfund
sites in Ohio: the North Sanitary (a.k.a. Valleycrest) Landfill in Dayton,
Montgomery County, Ohio; the Tremont City Landfill in Springfield, Ohio; and the
South Dayton Dump landfill site in Dayton, Ohio.

The Company and numerous
other parties received notification from the Ohio EPA on July 27, 1994 that
it considers them PRPs for clean up of hazardous substances at the North
Sanitary Landfill site in Dayton, Ohio. The Company has not joined the PRP group
formed for the site because the available information does not demonstrate that
the Company contributed hazadous substances to the site. The Ohio EPA has not
provided an estimated cost for this site. In October 2000, the PRP group brought
an action against the Company and numerous other parties alleging that the
Company and the others are PRPs that should be liable for a portion of
clean-up costs at the site. While the Company does not believe it disposed of
any hazardous waste at this site, it has entered into an Agreement in Principle
with the PRP group to settle any alleged liability for an immaterial amount. The
final resolution is not expected to have a material effect on the Companys
financial position, earnings, or cash flow.

The Company and numerous
other parties received notification from the USEPA in January 2002 for the
Tremont City site. The available information does not demonstrate that the
Company contributed any hazardous substances to the site. The Company will
vigorously challenge this action. The final resolution is not expected to have a
material effect on the Companys financial position, earnings, or cash
flow.

13

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In September 2002, the
Company and other parties received a special notice that the USEPA considers
them to be PRPs for the clean up of hazardous substances at the South
Dayton Dump landfill site in Dayton, Ohio. The USEPA seeks recovery of past
costs and funding for a Remedial Investigation and Feasibility Study. The USEPA
has not provided an estimated clean-up cost for this site. The information
available does not demonstrate that the Company contributed hazardous substances
to the site. The Company will challenge this action. The final resolution is not
expected to have a material effect on the Companys financial position,
earnings, or cash flow.

13

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# The
Dayton Power and Light CompanyOPERATING STATISTICS
ELECTRIC OPERATIONS

|                                    | Years Ended December 31
|----------------------------------- | -----------------------
|
|Electric Sales (millions of kWh)    |                        
|Residential                         |                        
|Commercial                          |                        
|Industrial                          |                        
|Other retail                        |                        
|                                    |                        
|Total Retail                        |                        
|Wholesale                           |                        
|                                    |                        
|                                   
|Total                               |                        
|                                    |                        
|                                   
|Electric Revenues (thousands)       |                        
|Residential                         |                        
|Commercial                          |                        
|Industrial                          |                        
|Other retail                        |                        
|                                    |                        
|Total Retail                        |                        
|Wholesale                           |                        
|                                    |                        
|                                   
|Total                               |                        
|                                    |                        
|                                   
|Electric Customers at End of Period |                        
|Residential                         |                        
|Commercial                          |                        
|Industrial                          |                        
|Other                               |                        
|                                    |                        
|                                   
|Total                               |                        
|                                    |                        

NOTE: See Note 13 to Consolidated Financial Statements for additional information.

14

---

# The
Dayton Power and Light CompanyOPERATING
STATISTICSGAS OPERATIONS

|                               | Years Ended December 31
|------------------------------ | -----------------------
|
|Gas Sales (thousands of MCF)   |                        
|Residential                    |                        
|Commercial                     |                        
|Industrial                     |                        
|Public authorities             |                        
|Transportation gas delivered   |                        
|                               |                        
|                              
|Total                          |                        
|                               |                        
|                              
|Gas Revenues (thousands)       |                        
|Residential                    |                        
|Commercial                     |                        
|Industrial                     |                        
|Public authorities             |                        
|Other                          |                        
|                               |                        
|                              
|Total                          |                        
|                               |                        
|                              
|Gas Customers at End of Period |                        
|Residential                    |                        
|Commercial                     |                        
|Industrial                     |                        
|Public authorities             |                        
|                               |                        
|                              
|Total                          |                        
|                               |                        

|NOTE:
|-----
|1)   

|2) |  | See
Note 13 to Consolidated Financial Statements for additional information.
|-- |  | ----------------------------------------------------------------------------

15

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|Item 2  Properties
|-------------------
|                   

## Electric

Information relating to
the Companys electric properties is contained in Item 1  BUSINESS,
THE COMPANY, CONSTRUCTION PROGRAM, ELECTRIC OPERATIONS AND FUEL SUPPLY, and Item
8  Notes 4 and 11 of Notes to Consolidated Financial Statements.

## Gas

Information relating to
the Companys gas properties is contained in Item 1  GAS OPERATIONS
AND GAS SUPPLY and Note 3 of Notes to Consolidated Financial Statements.

Substantially all
property and plant of the Company is subject to the lien of the Mortgage
securing the Companys First Mortgage Bonds.

|Item 3  Legal Proceedings
|--------------------------
|                          

Information relating to
legal proceedings involving the Company is contained in Item 1  BUSINESS,
THE COMPANY, COMPETITION, ELECTRIC OPERATIONS AND FUEL SUPPLY, RATE REGULATION
AND GOVERNMENT LEGISLATION, ENVIRONMENTAL CONSIDERATIONS and Item 8 
Note 4 of Notes to Consolidated Financial Statements.

|Item 4  Submission of Matters to a Vote of Security Holders
|------------------------------------------------------------
|                                                            

None.

16

---

## PART II

|Item 5  Market for Registrants Common Equity and Related Stockholder Matters
|------------------------------------------------------------------------------
|                                                                              

The Companys common stock is held solely by DPL Inc. and as a result is not listed for trading on any stock exchange.

The information required
by this item of Form 10-K is set forth in Item 8  Selected Quarterly
Information and the Financial and Statistical Summary.

As long as any Preferred
Stock is outstanding, the Companys Amended Articles of Incorporation
contain provisions restricting the payment of cash dividends on any of its
Common Stock if, after giving effect to such dividend, the aggregate of all such
dividends distributed subsequent to December 31, 1946 exceeds the net
income of the Company available for dividends on its Common Stock subsequent to
December 31, 1946, plus $1,200,000. As of year-end, all earnings
reinvested in the business of the Company were available for Common Stock
dividends.

|Item 6  Selected Financial Data
|--------------------------------
|                                

The information required
by this item of Form 10-K is set forth in Item 8  Financial and
Statistical Summary.

17

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|Item 7  Managements
Discussion and Analysis of Financial Condition and Results of Operations
|----------------------------------------------------------------------------------------------
|                                                                                              

## Overview

The Dayton Power and
Light Company (DP&L or the Company) reported
earnings on common stock of $242.6 million, an increase of 3% over earnings on
common stock of $234.4 million in 2001. The earnings improvement was primarily
attributable to higher retail residential and commercial revenues, and lower
fuel and purchased power costs, partially offset by lower wholesale revenues.

Results for 2001 included
$6.0 million after tax, reflecting the adoption of the new accounting standard
for derivatives in the first quarter, and charges associated with a voluntary
early retirement program completed in June 2001 and a non-union workforce
reduction program completed in November 2001.

Several events affected
the Companys results in 2000 as it prepared for the deregulation of the
energy markets. In the first quarter, the Company expensed $4.2 million before
tax benefits to realign its compensation programs more fully with
shareholders interest. In the third quarter, the Company received an order
from the Public Utilities Commission of Ohio (PUCO) approving its
deregulation transition plan (Transition Plan), which resulted in an
extraordinary charge of $63.7 million before tax benefits for the elimination of
regulatory accounting for the generation business. In the fourth quarter, the
Company completed the sale of its natural gas retail distribution operations and
reported a pre-tax gain on the sale of $182.5 million. Each of these events
affected 2000 financial results as outlined below:

|$ in millions                                                   | 2002 |  | 2001 |       | 2000 |  
|--------------------------------------------------------------- | ---- |  | ---- | ----- | ---- | -
|                                                               
|Earnings on Common Stock                                        |      |  | $    | 242.6 |      | $
|Voluntary early retirement                                      |      |  |      |      |      |  
|Non-union reduction                                             |      |  |      |      |      |  
|Accounting change                                               |      |  |      |      |      |  
|Compensation program                                            |      |  |      |      |      |  
|Deregulation order                                              |      |  |      |      |      |  
|Gas operations - gain on sale                                   |      |  |      |      |      |  
|                                                                |      |  |      |       |      |  
|Earnings on Common Stock before unusual and extraordinary items |      |  | $    | 242.6 |      | $

18

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## Income Statement Highlights

|$ in millions            | 2002 |  | 2001 |         | 2000
|------------------------ | ---- |  | ---- | ------- | ----
|                        
|Electric:                |      |  |      |         |     
|Revenues                 |      |  | $    | 1,175.8 |     
|Fuel                     |      |  |      | 208.6   |     
|Purchased power          |      |  |      | 106.9   |     
|                         |      |  |      |         |     
|Net revenues             |      |  |      | 860.3   |     
|                        
|Gas Utility: (a)         |      | 
|Revenues                 |      |  |      |        |     
|Gas purchased for resale |      |  |      |        |     
|                         |      |  |      |         |     
|Net revenues             |      |  |      |        |     

|(a) |  | The
Company  completed the sale of its natural gas retail distribution assets and certain
liabilities in October 2000.
|--- |  | ----------------------------------------------------------------------------------------------------------------------

The increase in net electric
  revenues in 2002 compared to 2001 was primarily the result of higher retail
  residential and commercial revenues of $37.6 million or 5% resulting primarily
  from warmer than normal summer weather in the current year. The increase in
  retail revenues was partially offset by decreased wholesale revenues of $47.1
  million or 24% primarily as a result of lower wholesale electric commodity prices.
  Cooling degree days were 1,272 for the current year compared to 900 in the prior
  year. Fuel costs decreased $11.5 million or 6% in 2002 compared to 2001 as a
  result of the higher availability in 2002 of coal plants that use lower-cost
  fuel. Purchased power costs decreased $22.9 million or 21% as a result of lower
  purchased power volumes. In 2001, net electric revenues increased $14.3 million
  or 2% over 2000 levels primarily as a result of additional peaking generation
  capacity sales and increased wholesale revenues. Wholesale revenues from existing
  generation increased as a result of higher sales volume and commodity prices.
  Growth in residential and commercial sales of 2% was offset by declines in industrial
  sales of 6%, reflecting economic conditions and mild weather, which reduced
  overall retail sales by 1%. Fuel costs for existing generation increased from
  2000 levels as a result of higher spot-market prices for coal, and greater fuel
  usage and power purchases resulting from increased wholesale sales.

The decline in net gas
revenues resulted from the sale of the natural gas retail distribution assets
and certain liabilities, which was completed in October 2000.

Operation and maintenance
expense decreased $12.7 million or 8% in 2002 compared to 2001 primarily as a
result of lower planned outage costs, lower ash disposal costs, and cost
containment efforts. Operation and maintenance expense decreased $26.8 million
or 14% in 2001 compared to 2000 primarily as a result of the sale of the natural
gas retail distribution operations, lower employee benefit and insurance costs,
and general cost containment efforts. These decreases were partially offset by
charges for a voluntary early retirement program and a non-union workforce
reduction program, totaling $10.7 million before tax benefits. Year to year
variances in power plant maintenance costs result from the timing and extent of
planned maintenance outages and coal ash removal activities, which can increase
or decrease annual maintenance costs by as much as $10 million. Year to year
variances in insurance and claims costs result primarily from adjustments to
actuarially-determined reserve requirements for risks insured through a captive
insurance company wholly-owned by DPL Inc. (DPL).

19

---

Depreciation and
amortization expense decreased $14.3 million or 11% in 2001 compared to 2000
primarily as a result of depreciation rate changes for certain generation units
in 2001 and the sale of the natural gas retail distribution assets.

Beginning January 1,
2001, regulatory transition cost assets of $144.8 million are being amortized
over a three-year period based on transition revenues. As a result, amortization
expense increased by $30.6 million in 2001 for transition revenues recognized
during the year.

General taxes increased
$10.7 million or 11% in 2002 compared to 2001 primarily as a result of the
impact of the Ohio kWh excise tax that was first implemented in May 2001 and
higher property taxes, partially offset by the elimination of the Ohio Public
Utility Excise Tax at the end of 2001. General taxes decreased $29.7 million or
23% in 2001 compared to 2000 primarily as a result of changes in tax laws
associated with the Transition Plan and the sale of the natural gas retail
distribution assets.

Other income (deductions)
  decreased $14.5 million or 58%in 2002 compared to 2001 primarily as a result
  of income of $7.3 million recognized in the current year for the business interruption
  insurance policy related to deregulation (see Issues and Financial Risks 
  Other Matters), as compared to income of $29.0 million recognized for such policy
  in the prior year. This decrease was partially offset by decreased strategic
  consulting fees of $4.5 million and a $3.6 million decrease in benefit costs.
  Other income (deductions) decreased $145.9 million or 85% in 2001 compared to
  2000 as a result of the pre-tax $182.5 million gain that was recognized in 2000
  for the sale of the natural gas retail distribution operations, partially offset
  by the 2001 recognition of a receivable for insurance claims as previously discussed,
  and costs associated with certain compensation programs in 2000.

Interest expense
decreased 13% in 2002 compared to 2001 and14% in 2001 compared to 2000 primarily
as a result of higher capitalized interest and lower short-term debt levels.

Pursuant to deregulation
legislation enacted in Ohio and the Order issued in September 2000 by the PUCO,
the Company discontinued the use of its regulatory accounting model for its
generation operations. As a result, a $63.7 million before tax benefits ($41.4
million net of taxes) reduction of generation-related regulatory assets was
recorded in the third quarter of 2000 as an extraordinary item in accordance
with the Financial Accounting Standard Boards (FASB) Statement
of Financial Accounting Standards No. 101, Regulated
Enterprises-Accounting for the Discontinuation of Application of FASB Statement
No. 71. (See Note 4 to the Consolidated Financial Statements.)

20

---

The cumulative effect of
an accounting change reflects the Companys adoption of FASB Statement No.
133, Accounting for Derivative Instruments and Hedging Activities,
as amended (SFAS No. 133). SFAS No. 133 requires that all
derivatives be recognized as either assets or liabilities in the consolidated
balance sheet and be measured at fair value, and changes in the fair value be
recorded in earnings, unless they are designated as hedges of an underlying
transaction.

## Construction Program and Financing

Construction additions
are expected to approximate $109 million in 2003, and were $129 million in 2002
and $164 million in 2001. The capital program includes environmental compliance,
which is expected to approximate $39 million in 2003, and was $69 and $58
million in 2002 and 2001, respectively.

The Companys
scheduled maturities of long-term debt, including capital lease obligations,
over the next three years are $1.1 million each year. The Company expects to
finance its construction program and debt maturities in 2003 and 2004 with
internal funds.

During 2001, investing
cash flows included a cash payment of $90.9 million for income taxes associated
with the tax gain on the sale of the natural gas retail distribution operations
that occurred in October 2000.

DPL and the Company have
$50.0 and $105.0 million, respectively, available through 364 day revolving
credit agreements with a consortium of banks. These facilities provide an
appropriate amount of credit support for the Companys business
requirements over the next year. Facility fees are approximately $0.2 million
per year. The primary purpose of the revolving credit facilities is to provide
back-up liquidity for DPLs and the Companys commercial paper
programs. DPL and the Company had no outstanding borrowings under these credit
agreements at December 31, 2002 and 2001.

The Company has $65.0
million available in short-term informal lines of credit. The commitment fees
are not material. The Company had no outstanding borrowings under these informal
lines and no outstanding commercial paper balances at December 31, 2002 and
2001.

Issuance of additional
amounts of first mortgage bonds by the Company is limited by provisions of its
mortgage. The amounts and timing of future financings will depend upon market
and other conditions, rate increases, levels of sales and construction plans.
The Company currently has sufficient capacity to issue first mortgage bonds to
satisfy its requirements in connection with the financing of its construction
and refinancing programs during the five-year period 2003-2007.

21

---

At year-end 2002, the
Companys senior secured debt credit ratings were as follows:

|                          | 
|------------------------- | 
|Standard & Poors Corp.   | 
|Moodys Investors Service | 
|Fitch                     | 

These ratings, which were
received in the third quarter of 2002 as a result of annual credit reviews, are
lower than prior ratings and remain investment grade. The rating agencies cited
pressure from reduced wholesale energy prices and concerns regarding the impact
of the global economic downturn on the liquidity of DPLs financial asset
portfolio as the reason for their actions.

22

---

## Market Risk

The Companys
financial results are impacted by changes in electricity, coal, and gas
commodity prices as well as the impact on retail sales volume of weather and
economic conditions in the sales area. Six percent of the Companys 2002
revenues were from spot energy sales in the wholesale market contributing $19
million in net electric revenues. This compares to net electric revenues from
spot wholesale energy of $26 million in 2001. This decrease in net wholesale
electric revenues resulted primarily from lower wholesale electricity prices in
2002. Spot wholesale energy sales in 2002 and 2001 averaged $22.14 and $29.22
per megawatt hour, respectively. Retail electric sales in 2002 were favorably
impacted by above normal weather. Across the year, heating and cooling degree
days were 3% above normal, adding approximately $32 million in revenue. This
favorable weather impact was partially offset by sluggish demand from industrial
customers due to current economic conditions. Fuel and purchased power costs
represented 43% of total operating costs in 2002. The Company has contracted for
approximately 95% of its coal needs for 2003. Purchased power costs depend upon
the timing and extent of planned and unplanned outages of the Companys
generating capacity. The Company has not contracted for its planned purchased
power needs for 2003 at this time. A 2% change in overall fuel and purchased
power costs would result in a $3.5 million change in net income.

The carrying value of the
Companys debt was $667.0 million at December 31, 2002, consisting of the
Companys first mortgage bonds and guaranteed air quality development
obligations. The fair value of this debt was $690.2 million, based on current
market prices or discounted cash flows using current rates for similar issues
with similar terms and remaining maturities. The following table presents the
principal cash repayments and related weighted average interest rates by
maturity date for long-term, fixed-rate debt at December 31, 2002.

|           | Long-term Debt
|---------- | --------------
|
|          
|2003       |               
|2004       |               
|2005       |               
|2006       |               
|2007       |               
|Thereafter |               
|           |               
|Total      |               
|          
|Fair Value |               

Because the long-term
debt is at a fixed rate, the primary market risk to the Company would be
short-term interest rate risk. At December 31, 2002, the Company had no
short-term debt outstanding, and therefore, no exposure to short-term interest
rate risk.

23

---

## Critical Accounting Policies

The accounting policies
described below are viewed by management as critical because their application
is the most relevant and material to the Companys results of
operations and financial position and these policies require the use of material
judgments and estimates.

Long-lived Assets: The
Company accounts for its long-lived assets at depreciated historical cost. A
long-lived asset (asset group) is tested for impairment whenever events or
changes in circumstances indicate that its carrying amount may not be
recoverable. The Company would recognize an impairment loss only if the carrying
amount of a long-lived asset is not recoverable from its undiscounted cash
flows. Management judgement is involved in both deciding if testing for
recoverability is necessary and in estimating undiscounted cash flows.

Regulatory Assets: The
Company capitalizes incurred costs as deferred regulatory assets when there is a
probable expectation that the costs incurred will be recovered in future
revenues as a result of the regulatory process. See Note 4 to the consolidated
financial statements for further discussion of regulatory matters. The Company
applied judgment in the use of this principle when it concluded, as of December
31, 2000, that as a result of deregulation $63.7 million of generation related
regulatory assets were no longer probable of recovery, and wrote off these
assets as an extraordinary charge. These estimates are based on expected usage
by customer class over the designated recovery period. At December 31, 2002,
$49.3 million of generation related regulatory assets remain on the balance
sheet to be recovered over the remaining transition period ending December 31,
2003 unless extended.

Unbilled Revenues: The
Company records revenue for retail and other energy sales under the accrual
method. For retail customers, revenues are recognized when the services are
provided on the basis of periodic cycle meter readings and include an estimated
accrual for the value of electricity provided from the meter reading date to the
end of the reporting period. These estimates are based on the volume of energy
delivered, historical usage and growth by customer class, and the impact of
weather variations on usage patterns. Unbilled revenues recognized at December
31, 2002 totaled $56.9 million.

Pension and post
retirement benefits: The Company accounts for its pension and post retirement
benefit obligations in accordance with the provisions of Statement of Financial
Accounting Standards No. 87, Employers Accounting for Pensions
and No. 106 Employers Accounting for Post Retirement Benefits Other
than Pensions. These standards require the use of assumptions, such as the
long-term rate of return on assets, in determining the obligations, annual cost,
and funding requirements of the plans. In 2003, the Company lowered its
long-term rate of return assumptions by 25 basis points to reflect the impact of
recent trends on its long-term view. This reduction will result in an increase
in pension costs of $0.7 million.

24

---

Also, on December 31, 2002,
  the Company lowered its assumed discount rate for pension and postretirement
  benefits by 50 basis points to reflect current interest rate conditions. Changes
  in the rate of return assumption, the discount rate, and other components used
  in the determination of pension or post retirement benefit costs are estimated
  to result in an overall increase of $5.0 million in pension costs in 2003 compared
  to 2002. Going forward, differences in the actual return on pension plan assets
  and assumed return or changes in the discount rate will impact the timing of
  contributions to the pension plan, if any, and the determination of whether
  or not a minimum liability should be recorded. Because the Company does not
  provide postretirement healthcare benefits to employees that retired after 1986,
  the Companys exposure to changes in healthcare costs is limited. A one
  percentage point change in the assumed healthcare trend rate would affect postretirement
  benefit costs by $0.1 million

## Issues and Financial Risks

This report contains
certain forward-looking statements regarding plans and expectations for the
future. Investors are cautioned that actual outcomes and results may vary
materially from those projected due to various factors beyond the Companys
control, including abnormal weather, unusual maintenance or repair requirements,
changes in fuel costs, increased competition, regulatory changes and decisions,
changes in accounting rules, and adverse economic conditions.

Electric Restructuring Legislation

In October 1999,
legislation became effective in Ohio that gave electric utility customers a
choice of energy providers starting January 1, 2001. Under the legislation,
electric generation, aggregation, power marketing and power brokerage services
supplied to retail customers in Ohio are deemed to be competitive and are not
subject to supervision and regulation by the PUCO. As required by the
legislation, the Company filed its transition plan at the PUCO on December 20,
1999. The Company received PUCO approval of its plan on September 21, 2000.

The transition plan provides for a
three-year transition period, which began on January 1, 2001 and ends on December 31,
2003. The plan also provides for a 5% residential rate reduction on the generation
component of the rates, which reduced annual revenue by approximately $14 million; rate
certainty for the three year period for customers that continue to purchase power from the
Company; guaranteed rates for a six-year period for transmission and delivery services;
and recovery of transition costs of approximately $600 million. Under the plan, DPL has
the organizational and financial flexibility to continue its growth
initiatives.

On October 28, 2002,
DP&L filed with the PUCO requesting an extension of its market development
period from December 31, 2003 to December 31, 2005. If approved by the PUCO, the
extension of the market development period will continue DP&Ls current
rate structure and provide its retail customers with rate stability. It is
unknown when the PUCO will rule on this request.

25

---

The Federal Energy
Regulatory Commission (FERC) issued a final rule on December 20,
1999 specifying the minimum characteristics and functions for Regional
Transmission Organizations (RTO). The rule required that all public
utilities that own, operate, or control interstate transmission lines file a
proposal to join an RTO by October 15, 2000 or file a description of efforts
taken to participate in an RTO, reasons for not participating in an RTO, any
obstacles to participation in an RTO, and any plans for further work toward
participation. The Company filed with the FERC on October 16, 2000 to join the
Alliance RTO. On December 19, 2001, the FERC issued an order rejecting the
Alliance RTO as a stand-alone RTO. However, on April 24, 2002, the FERC approved
the Alliance RTO companies proposal to form an independent transmission
company that will operate under the umbrella of an existing RTO. As of December
31, 2002, the Company had invested approximately $8 million in its efforts to
join the Alliance RTO. The FERC recognized in its order that substantial losses
were incurred to establish the Alliance RTO and that it would consider proposals
for rate recovery of prudently incurred costs.

On May 28, 2002, the
Company filed a notice with the FERC stating its intention to join the PJM
Interconnection, L.L.C. (PJM), an organization responsible for the
operation and control of the bulk electric power system throughout major
portions of five Mid-Atlantic states and the District of Columbia. On July 31,
2002, the FERC granted the Company conditional approval to join PJM. On
September 30, 2002, the Company signed an implementation agreement with PJM with
the expectation that the Company will be fully integrated into the PJM market by
May 1, 2003. On December 11, 2002, the Company executed the PJM West
Transmission Owners Agreement and along with the other new PJM companies,
jointly submitted the PJM Open Access Transmission Tariff (OATT)
filing. This filing adopts a transitional rate design that will maintain revenue
neutrality and mitigate cost shifts while eliminating all seams within the new
expanded PJM.

On September 12, 2002,
the Ohio Consumers Counsel, Industrial Energy Users-Ohio and American
Municipal Power-Ohio, Inc. filed a complaint with the PUCO alleging that the
Company had failed to join and transfer operational control to a FERC approved
RTO. The Company filed a motion to dismiss the complaint on October 24, 2002.
While the Company intends to vigorously defend this case, the impact of the
complaint cannot be determined at this time.

On July 31, 2002, the
FERC issued a Standard Market Design Notice of Proposed Rulemaking (SMD
NOPR). The SMD NOPR establishes a set of rules to standardize wholesale
electric market design to create wholesale competition and efficient
transmission systems. The impact of this rulemaking on the Company cannot be
determined at this time.

26

---

On July 22, 1998, the
PUCO approved the implementation of Minimum Electric Service and Safety
Standards for all of Ohios investor-owned electric utilities. This order
details minimum standards of performance for a variety of service-related
functions, effective July 1, 1999. On December 21, 1999, the PUCO issued
additional rules proposed by the PUCO staff, which were designed to guide the
electric utility companies as they prepare to enter into deregulation. These
rules include certification of providers of competitive retail electric
services, minimum competitive retail electric service standards, monitoring the
electric utility market, and establishing procedures for alternative dispute
resolution. There were also rules issued to amend existing rules for
noncompetitive electric service and safety standards and electric companies
long-term forecast reporting. The Company submitted comments on the proposed
rules on January 31, 2000. The rules were finalized by the PUCO in June 2000 and
did not have a material impact on the Companys financial position.

On March 21, 2002, the
PUCO staff proposed modifications to the Minimum Electric Service and Safety
Standards, which establish performance standards for various service related
functions of investor-owned electric utilities. The proposed modifications
impact billing, collections, allocation of customer payments, meter reading, and
distribution circuit performance. The Company submitted comments and reply
comments on the proposed rules, and filed an application for rehearing on
October 26, 2002. The PUCO issued the final rules on September 26, 2002, but has
granted applications for rehearing to provide more time for rule review. The
cost to the Company of compliance with these rules is unknown at this time.

On October 10, 2002, the
PUCO initiated a proceeding to review the financial condition of major public
utilities in Ohio. The purpose of this review is to ensure that any adverse
financial consequences of parent or affiliated companies unregulated operations
do not impact the financial integrity of the regulated public utility. The PUCO
is not requesting any financial information from the utilities at this time. The
Company filed comments on November 11, 2002, and reply comments on November 22,
2002. The impact of this review cannot be determined at this time.

Sale of Gas Operations

In October 2000, the
Company completed the sale of its natural gas retail distribution assets and
certain liabilities for $468 million in cash. The transaction resulted in a
pre-tax gain of $183 million ($121 million net of tax), which is reflected in
Other income (deductions) on the Consolidated Statement of Results
of Operations. Proceeds from the sale were used to finance DPLs regional
generation expansion and reduce outstanding short-term debt.

27

---

Environmental

In November 1999, the
United States Environmental Protection Agency (USEPA) filed civil
complaints and Notices of Violations (NOVs) against operators and
owners of certain generation facilities for alleged violations of the CAA.
Generation units operated by partners CG&E (Beckjord 6) and CSP (Conesville
4) and co-owned by the Company were referenced in these actions. Numerous
northeast states have filed complaints or have indicated that they will be
joining the USEPAs action against the partners. The Company was not
identified in the NOVs, civil complaints or state actions. In December 2000,
CG&E announced that it had reached an Agreement in Principle with the USEPA
and other plaintiffs in an effort to settle the claims. Discussions on the final
terms of the settlement are ongoing. Therefore, it is not possible to determine
the outcome of these claims or the impact, if any, on the Company. In June 2000,
the USEPA issued a NOV to DP&L-operated J.M. Stuart Station (co-owned by the
Company, CG&E, and CSP) for alleged violations of the CAA. The NOV contained
allegations consistent with NOVs and complaints that the USEPA had recently
brought against numerous other coal-fired utilities in the Midwest. The Company
will vigorously challenge the NOV. At this time, it is not possible to determine
the outcome of these claims or the impact, if any, on the Company.

On November 22, 2002, the
USEPA announced its final rule package on New Source Review reform and its
proposed rule on the definition of routine maintenance, repair and
replacement. On December 31, 2002, the final and proposed rules were
published in the Federal Register. Several northeast states have brought
lawsuits challenging the final rule in the United States Court of Appeals for
the District of Columbia. While the Company will conduct an extensive review of
the published rules, it does not expect the rule changes to have a material
effect on the Companys financial position, earnings, or cash flow.

In September 1998, the
USEPA issued a final rule requiring states to modify their State Implementation
Plans (SIPs) under the CAA. The modified SIPs are likely to result
in further nitrogen oxide (NOx) reduction requirements placed on
coal-fired generating units by 2004. In order to meet these NOx requirements,
the Companys capital expenditures are estimated to total approximately
$175 million, of which $136 million has been spent to-date. Industry groups
and others appealed the rules in United States District Court. The requirement
for states to submit revised implementation plans has been stayed until the
outcome of the litigation. In March 2000, the United States District Court
upheld the rule. Industry groups and others have appealed this decision. As a
result of the litigation, the Court extended the compliance date of the rule an
additional year, until May 31, 2004. In March 2001, the United States Supreme
Court refused to hear further appeals of the SIP rules. In December 1999, the
USEPA issued final rules granting various CAA Section 126 petitions filed by
northeast states. The Companys facilities were identified, among many
others, in the rulemaking. In January 2002, the USEPA announced that reductions
required under the CAA Section 126 rulemaking will be extended until May 31,
2004 to be consistent with the NOx SIP rule. The Companys current NOx
reduction strategy and associated expenditures to meet the SIP call should
satisfy the rulemaking reduction requirements.

28

---

On July 18, 2002, the
Ohio Environmental Protection Agency (Ohio EPA) adopted rules that
will constitute Ohios SIP for NOx reductions. The state rules are
substantially similar to the reductions required under the federal CAA Section
126 rulemaking and federal NOx SIP rule. The USEPA has conditionally approved
Ohios NOx SIP. The Companys current NOx reduction strategy and
associated expenditures to meet the federal reduction requirements should
satisfy the state SIP reduction requirements.

On December 14, 2000, the
USEPA issued a determination that coal- and oil-fired electric generating units
should be regulated for emissions of mercury and hazardous air pollutants. The
USEPA will issue proposed rules by December 2003 and final rules by December
2004. The impact of the regulatory determination cannot be determined at this
time.

In March 2002, the United
States Court of Appeals for the District of Columbia upheld the USEPAs
National Ambient Air Quality Standards for ozone and fine particles. The USEPA
is conducting a rulemaking regarding these standards. The impact of these
standards and rules can not be determined at this time.

In April 2002, the USEPA
issued proposed rules governing existing facilities that have cooling water
intake structures. Final rules are anticipated in August 2003. The impact of the
final rules cannot be determined at this time.

On July 29, 2002, the
Bush Administration offered proposed legislation known as the Clear
Skies initiative. The proposal calls for emissions reductions for sulfur
dioxide, nitrogen oxides, and mercury commencing between 2008 and 2010. Senator
Jeffords also offered a competing multi-pollutant proposal calling for
reductions in sulfur dioxide, nitrogen oxides, mercury, and carbon dioxide
emissions with earlier implementation dates. Neither proposal was passed in
2002. The impact of the potential legislation, if passed, cannot be determined
at this time.

The Company and numerous
other parties have been notified by the USEPA or the Ohio EPA that it considers
them Potentially Responsible Parties (PRPs) for clean-up at
three superfund sites in Ohio: the North Sanitary (a.k.a. Valleycrest) Landfill
in Dayton, Montgomery County, Ohio; the Tremont City Landfill in Springfield,
Ohio; and the South Dayton Dump landfill site in Dayton, Ohio.

The Company and numerous
other parties received notification from the Ohio EPA on July 27, 1994 that
it considers them PRPs for clean-up of hazardous substances at the North
Sanitary Landfill site in Dayton, Ohio. The Company has not joined the PRP group
formed for the site because the available information does not demonstrate that
the Company contributed hazardous substances to the site. The Ohio EPA has not
provided an estimated cost for this site. In October 2000, the PRP group brought
an action against the Company and numerous other parties alleging that the
Company and the others are PRPs that should be liable for a portion of
clean-up costs at the site. While the Company does not believe it disposed of
any hazardous waste at this site, it has entered into an Agreement in Principle
with the PRP group to settle any alleged liability for an immaterial amount. The
final resolution is not expected to have a material effect on the Companys
financial position, earnings, or cash flow. The Company and numerous other
parties received notification from the USEPA in January 2002 for the Tremont
City site. The available information does not demonstrate that the Company
contributed any hazardous substances to the site. The Company will vigorously
challenge this action. The final resolution is not expected to have a material
effect on the Companys financial position, earnings, or cash flow.

29

---

The Company and numerous
  other parties received notification from the USEPA in January 2002 for the Tremont
  City site. The available information does not demonstrate that the Company contributed
  any hazardous substances to the site. The Company will virgorously challenge
  this action. The final resolution is not expected to have a material effect
  on the Companys financial position, earnings, or cash flow.

In September 2002, the
  Company and other parties received a special notice that the USEPA considers
  them to be PRPs for the clean up of hazardous substances at the South
  Dayton Dump landfill site in Dayton, Ohio. The USEPA seeks recovery of past
  costs and funding for a Remedial Investigation and Feasibility Study. The USEPA
  has not provided an estimated clean-up cost for this site. The information available
  does not demonstrate that the Company contributed hazardous substances to the
  site. The Company will challenge this action. The final resolution is not expected
  to have a material effect on the Companys financial position, earnings,
  or cash flow.

30

---

Other Matters

A wholly-owned captive
subsidiary of DPL provides insurance coverage solely to DPL including, among
other coverages, business interruption and specific risk coverage with respect
to environmental law and electric deregulation. Insurance Claims and
Costs on DPLs Consolidated Balance Sheet as of December 31, 2002 and
2001 includes insurance reserves of approximately $76 and $87 million,
respectively, for this coverage based on actuarial methods and loss experience
data. Such reserves are determined, in the aggregate, based on a reasonable
estimation of probable insured events occurring. There is uncertainty associated
with the loss estimates, and actual results could differ from the estimates.
Modification of these loss estimates based on experience and changed
circumstances are reflected in the period in which the estimate is reevaluated.
As the outcome of electric deregulation becomes known during the three-year
regulatory transition period ending December 31, 2003, policy payments from the
captive subsidiary to DP&L, receivables for insurance claims for DP&L,
or the release of the appropriate reserves will occur and be reflected in
income. As of December 31, 2002, a $36 million receivable has been recognized by
DP&L for insurance claims under its business interruption policy. Of this
amount, $7.3 and $29.0 million was reported as other income in 2002 and 2001,
respectively.

In June 2001, the FASB
issued Statement of Financial Accounting Standards No. 143 Accounting for
Asset Retirement Obligations (SFAS No. 143) which is effective
for the Company as of January 1, 2003. SFAS No. 143 requires legal obligations
associated with the retirement of long-lived assets to be recognized at their
fair value at the time that the obligations are incurred. The Companys
legal asset retirement obligations are composed of river structures and ash
disposal facilities. Upon initial recognition of a liability, that cost should
be capitalized as part of the related long-lived asset and allocated to expense
over the useful life of the asset. Application of the new rules is estimated to
result in an increase in net property, plant and equipment of approximately $1
million and recognition of an asset retirement obligation of approximately $4
million. SFAS No. 143 also requires that components of previously recorded
depreciation accruals that relate to the cost of removal of assets upon
retirement, whether legal asset retirement obligations or not, must be removed
from a companys accumulated depreciation reserve. It is estimated that
this elimination of cost of removal will reduce the accumulated depreciation
reserve in the range of $30  $35 million. The total cumulative effect of
adoption of SFAS 143 will increase net income and shareholders equity by
approximately $27  $32 million. Beginning in January 2003, depreciation
rates will be reduced to reflect the discontinuation of the cost of removal
accrual for applicable non-regulated assets. The estimated impact is an increase
of pre-tax income of $2 million. In addition, costs incurred for the removal of
retired assets will be charged to operation and maintenance expense rather than
to the accumulated depreciation reserve. The impact of this change will vary
based on the extent of generating property removal activity.

31

---

Beginning January 1,
2003, the Company has changed its accounting for stock options to the fair value
method set forth in Statement of Financial Accounting Standard No. 123,
Accounting for Stock-Based Compensation (SFAS No. 123).
This standard requires the recognition of compensation expense for stock based
awards to be based on the fair value on the date of grant rather than the
intrinsic value as was used by the Company prior to January 1, 2003. The Company
will adopt SFAS No. 123 on a prospective basis for all grants issued after
January 1, 2003. The effect of this new standard will depend on the timing,
amount and terms of future stock option awards, if any.

|Item 7A  Quantitative and Qualitative Disclosures about Market Risk
|--------------------------------------------------------------------
|                                                                    

Information relating to
Market Risk is contained in Item 7  Managements Discussion and
Analysis.

32

---

|Item 8  Financial Statements and Supplementary Data
|----------------------------------------------------
|                                                    

|                                                                                                          | 
|--------------------------------------------------------------------------------------------------------- | 
|Index to Consolidated Financial Statements                                                                | 
|                                                                                                         
|Consolidated Statement of Results of Operations for the three years in the period ended December 31, 2002 | 
|                                                                                                         
|Consolidated Statement of Cash Flows for the three years in the period ended December 31, 2002            | 
|                                                                                                         
|Consolidated Balance Sheet as of December 31, 2002 and 2001                                               | 
|                                                                                                         
|                                                                                                         
|Consolidated Statement of Shareholders Equity for the three years in the period ended December 31, 2002  | 
|                                                                                                         
|Notes to Consolidated Financial Statements                                                                | 
|                                                                                                         
|Report of Independent Accountants                                                                         | 
|                                                                                                         
|Index to Supplemental Information                                                                         | 
|                                                                                                         
|Selected Quarterly Information                                                                            | 
|                                                                                                         
|Financial and Statistical Summary                                                                         | 
|                                                                                                         
|Index to Financial Statement Schedule                                                                     | 
|                                                                                                         
|Schedule II  Valuation and qualifying accounts                                                           | 

The information required
to be submitted in Schedules I, III, IV and V is omitted as not applicable
or not required under rules of Regulation S-X.

33

---

# The
Dayton Power and Light Company

# CONSOLIDATED
STATEMENT OF RESULTS OF OPERATIONS

|                                                                                          
|------------------------------------------------------------------------------------------
|
|
|
|Revenues                                                                                  
|Electric                                                                                  
|Gas (Note 3)                                                                              
|                                                                                          
|Total revenues                                                                            
|                                                                                          
|                                                                                          
|Expenses                                                                                  
|Fuel                                                                                      
|Purchased power                                                                           
|Gas purchased for resale (Note 3)                                                         
|Operation and maintenance                                                                 
|Depreciation and amortization                                                             
|Amortization of regulatory assets, net (Note 4)                                           
|General taxes                                                                             
|                                                                                          
|Total expenses                                                                            
|                                                                                          
|                                                                                          
|Operating Income                                                                          
|                                                                                          
|Other income (deductions) (Note 3)                                                        
|Interest expense                                                                          
|                                                                                          
|                                                                                          
|Income before income taxes, extraordinary item, and Cumulative Effect of Accounting Change
|                                                                                          
|Income taxes                                                                              
|                                                                                          
|                                                                                          
|Income Before Extraordinary Item and Cumulative Effect of Accounting Change               
|                                                                                          
|Extraordinary item, net of tax                                                            
|Cumulative effect of accounting change, net of tax                                        
|                                                                                          
|                                                                                          
|Net Income                                                                                
|                                                                                          
|Preferred dividends                                                                       
|                                                                                          
|                                                                                          
|Earnings on Common Stock                                                                  
|                                                                                          

See Notes to Consolidated Financial Statements.

34

---

# The
Dayton Power and Light Company

# CONSOLIDATED
STATEMENT OF CASH FLOWS

|                                                                              
|------------------------------------------------------------------------------
|
|
|
|Operating Activities                                                          
|Net income                                                                    
|Adjustments:                                                                  
|Depreciation and amortization                                                 
|Amortization of regulatory assets, net                                        
|Deferred income taxes                                                         
|Gain on sale of natural gas retail distribution operations                    
|Noncash extraordinary item, net of tax                                        
|Changes in working capital:                                                   
|Accounts receivable                                                           
|Accounts payable                                                              
|Net intercompany receivables from parent                                      
|Accrued taxes payable                                                         
|Inventories                                                                   
|Other                                                                         
|                                                                              
|Net cash provided by operating activities                                     
|                                                                              
|                                                                              
|Investing
Activities                                                          
|Capital
expenditures                                                          
|Proceeds from sale of natural gas retail distribution operations, net (Note 3)
|                                                                              
|Net cash provided by (used for) investing activities                          
|                                                                              
|                                                                              
|Financing
Activities                                                          
|Dividends paid on common stock                                                
|Retirement of short-term debt, net                                            
|Retirement of long-term debt                                                  
|Dividends paid on preferred stock                                             
|                                                                              
|Net cash used for financing activities                                        
|                                                                              
|                                                                              
|Cash and temporary
cash investments                                          
|Net change                                                                    
|Balance at beginning of period                                                
|                                                                              
|Balance at end of period                                                      
|                                                                              
|Cash paid during the period for:                                              
|Interest                                                                      
|Income taxes                                                                  

See Notes to Consolidated Financial Statements.

35

---

# The
Dayton Power and Light Company

# CONSOLIDATED
BALANCE SHEETS

|                                                                                              
|----------------------------------------------------------------------------------------------
|
|
|
|Assets                                                                                        
|                                                                                              
|Property                                                                                      
|Property                                                                                      
|Accumulated depreciation and amortization                                                     
|                                                                                              
|                                                                                              
|Net property                                                                                  
|                                                                                              
|                                                                                              
|Current Assets                                                                                
|Cash and temporary cash investments                                                           
|Accounts receivable, less provision for uncollectible accounts of $10.9 and $12.4 respectively
|Inventories, at average cost                                                                  
|Prepaid taxes                                                                                 
|Other                                                                                         
|                                                                                              
|                                                                                              
|Total current assets                                                                          
|                                                                                              
|                                                                                              
|Other Assets                                                                                  
|Income taxes recoverable through future revenues                                              
|Other regulatory assets                                                                       
|Trust assets                                                                                  
|Other assets                                                                                  
|                                                                                              
|                                                                                              
|Total other assets                                                                            
|                                                                                              
|                                                                                              
|Total Assets                                                                                  
|                                                                                              

See Notes to Consolidated Financial Statements.

36

---

# The
Dayton Power and Light Company

CONSOLIDATED BALANCE SHEETS(continued)

|                                      
|--------------------------------------
|
|
|
|Capitalization and Liabilities        
|                                      
|Capitalization                        
|Common shareholders equity           
|Common stock                          
|Other paid-in capital                 
|Accumulated other comprehensive income
|Earnings reinvested in the business   
|                                      
|                                      
|Total common shareholders equity     
|                                      
|Preferred stock                       
|Long-term debt                        
|                                      
|                                      
|Total capitalization                  
|                                      
|                                      
|Current Liabilities                   
|Accounts payable                      
|Accrued taxes                         
|Accrued interest                      
|Other                                 
|                                      
|                                      
|Total current liabilities             
|                                      
|                                      
|Deferred Credits And Other            
|Deferred taxes                        
|Unamortized investment tax credit     
|Trust obligations                     
|Other                                 
|                                      
|                                      
|Total deferred credits and other      
|                                      
|                                      
|Total Capitalization and Liabilities  
|                                      

See Notes to Consolidated Financial Statements.

37

---

# The
Dayton Power and Light Company

# CONSOLIDATED
STATEMENT OF SHAREHOLDERS EQUITY

|                                                                      | Common Stock (a) |  | AccumulatedOther | EarningsReinvested | 
|--------------------------------------------------------------------- | ---------------- |  | ---------------- | ------------------ | 
|
|                                                                     
|2000:                                                                 |                  |  |                  |                    | 
|Beginning balance                                                     |                  |  |                  | 41,172,173         | 
|Comprehensive income:                                                 |                 
|Net income                                                            |                  |  |                  |                    | 
|Unrealized gains, net of reclassification adjustments, after tax (b)  |                  |  |                  |                    | 
|Total comprehensive income                                            |                  |  |                  |                    | 
|Common stock dividends                                                |                  |  |                  |                    | 
|Preferred stock dividends                                             |                  |  |                  |                    | 
|Other                                                                 |                  |  |                  |                    | 
|                                                                      |                 
|                                                                     
|Ending balance                                                        |                  |  |                  | 41,172,173         | 
|                                                                     
|2001:                                                                 |                 
|Comprehensive income:                                                 |                  | 
|Net income                                                            |                  |  |                  |                    | 
|Unrealized losses, net of reclassification adjustments, after tax (b) |                  |  |                  |                    | 
|Total comprehensive income                                            |                  |  |                  |                    | 
|Common stock dividends                                                |                  |  |                  |                    | 
|Preferred stock dividends                                             |                  |  |                  |                    | 
|Parent company capital contribution                                   |                  |  |                  |                    | 
|Other                                                                 |                  |  |                  |                    | 
|                                                                      |                 
|                                                                     
|Ending balance                                                        |                  |  |                  | 41,172,173         | 
|                                                                     
|2002:                                                                 |                 
|Comprehensive income:                                                 |                  | 
|Net income                                                            |                  |  |                  |                    | 
|Unrealized losses, net of reclassification adjustments, after tax (b) |                  |  |                  |                    | 
|Total comprehensive income                                            |                  |  |                  |                    | 
|Common stock dividends                                                |                  |  |                  |                    | 
|Preferred stock dividends                                             |                  |  |                  |                    | 
|Parent company capital contribution                                   |                  | 
|Other                                                                 |                  |  |                  |                    | 
|                                                                      |                 
|                                                                     
|Ending balance                                                        |                  |  |                  | 41,172,173         | 
|                                                                      |                 

|(a) |  | 50,000,000
shares authorized.
|--- |  | -----------------------------

|(b) |  | Net
of taxes of $12.8, $(8.0) and $(10.9) million in 2000, 2001 and 2002, respectively.
|--- |  | ---------------------------------------------------------------------------------------

See Notes to Consolidated Financial Statements.

38

---

# The
Dayton Power and Light Company

# NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

## 1. Summary of Significant Accounting Policies

The Dayton Power and Light Company
(DP&L or the Company) is a wholly-owned subsidiary of DPL Inc.
(DPL). The accounts of the Company and its wholly-owned subsidiaries are
included in the accompanying consolidated financial statements. These statements are
presented in accordance with accounting principles generally accepted in the United
States, which require management to make estimates and assumptions related to future
events. Reclassifications have been made in certain prior years amounts to conform
to the current reporting presentation. The consolidated financial statements principally
reflect the results of operations and financial condition of the Company. DPL and its
other wholly-owned subsidiaries provide certain administrative services to the Company.
These costs were $5.4 million in 2002, $5.7 million in 2001, and $6.1 million in 2000. The
primary service provided by the subsidiaries is insurance. The cost of service is either
specifically identified with the Company or allocated based upon the relationships of
payroll, revenue and/or property. Management considers the cost of service as reasonable
and what would have been incurred on a stand-alone basis.

## Revenues and Fuel

For periods prior to
January 1, 2001, revenues include amounts charged to customers through fuel and
gas recovery clauses, which were adjusted periodically for changes in such
costs. Related costs that were recoverable or refundable in future periods were
deferred along with the related income tax effects. As of February 2000, the
Companys Electric Fuel Component (EFC) was fixed at 1.30¢
per kilowatt-hour through the end of the year and the deferral of
over/under-recovered fuel costs was no longer permitted. All remaining deferred
fuel balances were amortized to expense in 2000. All gas deferred amounts were
included in the sale of the natural gas retail distribution operations (see Note
3). Beginning January 1, 2001, the EFC rate of 1.30¢ became part of the
base generation rate. Also included in revenues are amounts charged to customers
through a surcharge for recovery of arrearages from certain eligible low-income
households.

The Company records
revenue for services provided but not yet billed to more closely match revenues
with expenses. Accounts receivable on the Consolidated Balance Sheet includes
unbilled revenue of $56.9 million in 2002 and $55.4 million in 2001.

39

---

## Property, Maintenance and Depreciation

Property is shown at its
original cost. Cost includes direct labor and material and allocable overhead
costs.

For substantially all of
the depreciable property, when a unit of property is retired, the original cost
of that property plus the cost of removal less any salvage value is charged to
accumulated depreciation.

Depreciation expense is
calculated using the straight-line method, which depreciates the cost of
property over its estimated useful life, at an average rate of 3.2% for 2002 and
2001, and 3.5% for 2000.

Property is tested for
impairment whenever events or changes in circumstances indicate that its
carrying amount may not be recoverable. The Company would recognize an
impairment loss only if the carrying amount of a long-lived asset is not
recoverable from its undiscounted cash flows.

The Company capitalizes
certain interest costs associated with the construction of property. Capitalized
interest totaled $8.7 million, $4.7 million, and $2.4 million in 2002, 2001, and
2000, respectively.

The Company leases office
equipment and office space under operating leases with varying terms. Future
rental payments under these operating leases at December 31, 2002 are not
material.

## Repairs and Maintenance

Costs associated with all
planned major work and maintenance activities, primarily power plant outages,
are recognized at the time the work is performed. These costs are either
capitalized or expensed based on Company defined criteria. Outage costs include
labor, materials and supplies and outside services required to maintain the
Companys equipment and facilities.

40

---

## Stock-Based Compensation Cost

The Company followed
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25) and related interpretations in accounting
for DPL stock options granted to the Companys employees during the
three-year period 2002, 2001, and 2000. If the Company had used a fair-value
method of accounting for stock-based compensation cost, earnings on common stock
would have been reported as follows:

|                                                                                                                             | Years Ended December 31,
|---------------------------------------------------------------------------------------------------------------------------- | ------------------------
|
|                                                                                                                            
|Earnings on common stock, as reported                                                                                        |                         
|Add: Total stock-based employee compensation expense determined under APB 25, net of related tax effects                     |                         
|Deduct: Total stock-based employee compensation expense determined under fair-value based method, net of related tax effects |                         
|                                                                                                                             |                         
|Proforma earnings on common stock                                                                                            |                         
|                                                                                                                             |                         

The Company has elected
to apply the provisions of the Financial Accounting Standard Board
(FASB) Statement of Financial Accounting Standard No. 123,
Accounting for Stock-Based Compensation on a prospective basis for
stock options granted on or after January 1, 2003. The impact of this change in
accounting method will depend on the timing and amount of future stock options
grants, if any.

## Income Taxes

Deferred income taxes are
provided for all temporary differences between the financial statement basis and
the tax basis of assets and liabilities using the enacted tax rate. For
rate-regulated business units, additional deferred income taxes and offsetting
regulatory assets or liabilities are recorded to recognize that the income taxes
will be recoverable/refundable through future revenues. Investment tax credits
previously deferred are being amortized over the lives of the related
properties.

## Consolidated Statement of Cash Flows

The temporary cash
investments consist of liquid investments with an original maturity of three
months or less.

## Financial Derivatives

The Company adopted
FASB Statement of Financial Accounting Standards No. 133, Accounting
for Derivative Instruments and Hedging activity, as amended (SFAS
No. 133) as of January 1, 2001. SFAS No. 133 requires that all derivatives
be recognized as either assets or liabilities in the consolidated balance sheet
and be measured at fair value, and changes in the fair value be recorded in
earnings, unless they are designated as a cash flow hedge of a forecasted
transaction. As a result of adopting this accounting standard, the Company
recorded a cumulative effect of accounting change of $1.0 million in income net
of tax.

41

---

The Company uses forward
and option purchase contracts as a hedge against the risk of changes in cash
flows associated with expected electricity purchases. These purchases are
required to meet full load requirements during times of peak demand or during
planned and unplanned generation facility outages. The Company also holds
forward sales contracts that hedge against the risk of changes in cash flows
associated with power sales during periods of projected generation facility
availability. Prior to July 1, 2001, the Company recorded the fair value of all
these contracts as Other assets or Other liabilities on
the Consolidated Balance Sheet with an offset to Accumulated other
comprehensive income, which is recognized as earnings in the month of
physical receipt or delivery of power. In June 2001, the FASB concluded that
electric utilities could apply the normal purchases and sales exception for
option-type contracts and forward contracts in electricity subject to specific
criteria for the power buyers and sellers. Accordingly, the Company began to
apply the normal purchase and sales exception as defined in SFAS No. 133 as of
July 1, 2001 and currently accounts for these contracts upon settlement. This
change did not have a material impact on the Companys financial position
or results of operations.

The Company also holds
emission allowance options through 2004 that are classified as derivatives not
subject to hedge accounting. The fair value of these contracts is reflected as
Other assets or Other liabilities on the Consolidated
Balance Sheet and changes in fair value are recorded as Other income
(deductions) on the Consolidated Statement of Results of Operations. The
impact on net income was immaterial during 2002 and 2001.

## 2. Recent Accounting Standard

In June 2001, the FASB
issued Statement of Financial Accounting Standards No. 143 Accounting for
Asset Retirement Obligations (SFAS No. 143) which is effective
for the Company as of January 1, 2003. SFAS No. 143 requires legal obligations
associated with the retirement of long-lived assets to be recognized at their
fair value at the time that the obligations are incurred. The Companys
legal asset retirement obligations are composed of river structures and ash
disposal facilities. Upon initial recognition of a liability, that cost should
be capitalized as part of the related long-lived asset and allocated to expense
over the useful life of the asset. Application of the new rules is estimated to
result in an increase in net property, plant and equipment of approximately $1
million and recognition of an asset retirement obligation of approximately $4
million. SFAS No. 143 also requires that components of previously recorded
depreciation accruals that relate to the cost of removal of assets upon
retirement, whether legal asset retirement obligations or not, must be removed
from a companys accumulated depreciation reserve. It is estimated that
this elimination of cost of removal will reduce the accumulated depreciation
reserve in the range of $30  $35 million. The total cumulative effect of
adoption of SFAS 143 will increase net income and shareholders equity by
approximately $27  $32 million. Beginning in January 2003, depreciation
rates will be reduced to reflect the discontinuation of the cost of removal
accrual for applicable non-regulated assets. The estimated impact is an increase
of pre-tax income of $2 million. In addition, costs incurred for the removal of
retired assets will be charged to operation and maintenance expense rather than
to the accumulated depreciation reserve. The impact of this change will vary
based on the extent of generating property removal activity.

42

---

## 3. Sale of the Gas Business

In October 2000, the
Company completed the sale of its natural gas retail distribution assets and
certain liabilities for $468 million in cash. The transaction resulted in a
pre-tax gain of $183 million ($121 million net of taxes), which is reflected in
Other income (deductions) on the Consolidated Statement of Results
of Operations. Proceeds from the sale were used to finance DPLs regional
generation expansion and reduce outstanding short-term debt.

## 4. Regulatory Matters

The Company applies the
provisions FASB Statement of Financial Accounting Standards No. 71,
Accounting for the Effects of Certain Types of Regulation
(SFAS No. 71) to its regulated operations. This accounting standard
provides for the deferral of costs authorized for future recovery by regulators.
Based on existing regulatory authorization, regulatory assets on the
Consolidated Balance Sheet include:

|                                                     | At December 31, | 
|---------------------------------------------------- | --------------- | 
|
|
|Regulatory transition costs (a)                      |                 | 
|Income taxes recoverable through future revenues (b) |                 | 
|Other costs (b)                                      |                 | 
|                                                     |                 | 
|Total                                                |                 | 
|                                                     |                 | 

(a) During 1999,
legislation was enacted in Ohio, which restructures the states electric
utility industry (the Legislation). Beginning in 2001, electric
generation, aggregation, power marketing and power brokerage services applied to
Ohio retail customers are not subject to regulation by the Public Utilities
Commission of Ohio (PUCO). As required by the Legislation, the
Company filed its transition plan (the Plan) at the PUCO in 1999,
which included an application for the Company to receive transition revenues to
recover regulatory assets and other potentially stranded costs. Final PUCO
approval of the Plan was received in September 2000.

43

---

The Plan, which began in
January 2001, provides for a three-year transition period (the Transition
Period) ending December 31, 2003. As a result of the PUCO final approval
of the transition plan and tariff schedules, the application of SFAS No. 71 was
discontinued for generation-related assets. Transmission and distribution
services, which continue to be regulated based on PUCO-approved cost based
rates, continue to apply SFAS No. 71. The Plan, as approved, provides for the
recovery of a portion of the Companys transition costs, including
generation-related regulatory assets, during the Transition Period. Based on the
Companys assessment of recoveries of regulatory assets during the
Transition Period, a $63.7 million before tax benefits ($41.4 million net of
taxes) reduction of generation-related regulatory assets was recorded in the
third quarter of 2000 as an extraordinary item in accordance with FASB Statement
of Accounting Standards No. 101, Regulated Enterprises-Accounting for the
Discontinuation of Application of FASB Statement No. 71 and other
generation-related regulatory assets were reclassified to the Regulatory
transition costs asset.

(b) Certain deferred
costs remain authorized for recovery by regulators. These relate primarily to
the Companys electric transmission and distribution operations and are
being amortized over the recovery period of the assets involved.

## 5. Income Taxes

|                                          | For the years ended December 31,
|----------------------------------------- | --------------------------------
|
|                                         
|Computation of tax expense                |                                 
|                                         
|Federal income tax (a)                    |                                 
|                                         
|Increases (decreases) in tax from        |                                 
|Depreciation                              |                                 
|Investment tax credit amortized           |                                 
|Other, net                                |                                 
|                                          |                                 
|                                         
|Total tax expense                         |                                 
|                                          |                                 
|                                         
|Components of Tax Expense                 |                                 
|                                         
|Taxes currently payable                   |                                 
|Deferred taxes                           |                                 
|Regulatory assets                         |                                 
|Liberalized depreciation and amortization |                                 
|Fuel and gas costs                        |                                 
|Other                                     |                                 
|Deferred investment tax credit, net       |                                 
|                                          |                                 
|                                         
|Total tax expense                         |                                 
|                                          |                                 

(a) The statutory rate of 35% was applied to pre-tax income.

44

---

## Components of Deferred Tax Assets and Liabilities

|                            | At December 31, | 
|--------------------------- | --------------- | 
|
|
|Non-current Liabilities     |                 | 
|                           
|Depreciation/property basis |                 | 
|Income taxes recoverable    |                 | 
|Regulatory assets           |                 | 
|Investment tax credit       |                 | 
|Other                       |                 | 
|                            |                 | 
|                           
|Net non-current liability   |                 | 
|                            |                 | 
|                           
|Net Current Asset           |                 | 
|                            |                 | 

45

---

## 6. Pensions and Postretirement Benefits

## Pensions

Substantially all Company
employees participate in pension plans paid for by the Company. Employee
benefits are based on their years of service, age, compensation and year of
retirement. The plans are funded in amounts actuarially determined to provide
for these benefits.

The following tables set
forth the plans obligations, assets and amounts recorded in Other
assets on the Consolidated Balance Sheet at December 31:

|$ in millions                                         | 2002 |  | 2001 |      
|----------------------------------------------------- | ---- |  | ---- | -----
|
|Change in Projected Benefit Obligation                |      |  |      |      
|Benefit obligation, January 1                         |      |  | $    | 271.2
|Service cost                                          |      |  |      | 3.7  
|Interest cost                                         |      |  |      | 19.2 
|Amendments                                            |      |  |      |     
|Special termination benefit (a)                       |      |  |      |     
|Actuarial loss                                        |      |  |      | (8.6 
|Benefits paid                                         |      |  |      | (18.6
|                                                      |      |  |      |      
|Benefit obligation, December 31                       |      |  |      | 266.9
|                                                      |      |  |      |      
|                                                     
|Change in Plan Assets                                 |      |  |      |      
|Fair value of plan assets, January 1                  |      |  |      | 281.3
|Actual return on plan assets                          |      |  |      | 5.9  
|Benefits paid                                         |      |  |      | (18.6
|                                                      |      |  |      |      
|Fair value of plan assets, December 31                |      |  |      | 268.6
|                                                      |      |  |      |      
|                                                     
|Plan assets in excess of projected benefit obligation |      |  |      | 1.7  
|Unrecognized actuarial loss                           |      |  |      | 61.4 
|Unamortized prior service cost                        |      |  |      | 15.7 
|                                                      |      |  |      |      
|Net pension assets                                    |      |  | $    | 78.8 
|                                                      |      |  |      |      

Assumptions used in
determining the projected benefit obligation were as follows:

|                               |  | 2002 |  | 2001 |   | 2000 |     
|------------------------------ |  | ---- |  | ---- | - | ---- | ----
|                               | 
|Discount rate for obligations  |  |      |  | 6.75 | % |      | 7.25
|Expected return on plan assets |  |      |  | 8.75 | % |      | 9.00
|Average salary increases       |  |      |  | 4.00 | % |      | 4.00

46

---

The following table sets
forth the components of pension expense (portions of which were capitalized):

|$ in millions                                                         |  | 2002 |   | 2001  |   | 2000 |      
|--------------------------------------------------------------------- |  | ---- | - | ----- | - | ---- | -----
|                                                                     
|Expense for Year                                                      |  |      |   |       |   |      |      
|Service cost                                                          |  |      | $ | 3.7   |   | $    | 4.3  
|Interest cost                                                         |  |      |   | 19.2  |   |      | 17.3 
|Expected return on plan assets                                        |  |      |   | (32.2 | ) |      | (32.9
|Amortization of unrecognized:                                         |  |     
|Actuarial (gain) loss                                                 |  |      |   | 0.4   |   |      | (6.6 
|Prior service cost                                                    |  |      |   | 2.9   |   |      | 3.5  
|Transition obligation                                                 |  |      |   |      |   |      |     
|                                                                      |  |      |   |       |   |     
|Net pension benefit                                                   |  |      |   | (6.0  | ) |      | (14.4
|Special termination benefit (a)                                       |  |      |   |      |   |      | 5.3  
|Curtailment (a)                                                       |  |      |   |      |   |      | 1.4  
|                                                                      |  |      |   |       |   |     
|Net pension benefit after special termination benefit and curtailment |  |      | $ | (6.0  | ) | $    | (7.7 
|                                                                      |  |      |   |       |   |     

|(a) |  | The special termination benefit was recognized as a result of 63 employees
who participated in a voluntary early retirement program and retired as
of July 1, 2001.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | The curtailment in 2001 was recognized as a result of a non-union workforce
reduction program that was completed in November 2001. The curtailment
in 2000 was recognized as a result of the completion of the sale of the
natural gas retail distribution assets and certain liabilities in October 2000
(see Note 3).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## Postretirement Benefits

Qualified employees who
retired prior to 1987 and their dependents are eligible for health care and life
insurance benefits. The Company has funded the union-eligible health benefit
using a Voluntary Employee Beneficiary Association Trust.

The following tables set
forth the accumulated postretirement benefit obligation (APBO),
assets and funded status amounts recorded in Other deferred credits
on the Consolidated Balance Sheet at December 31:

|$ in millions                   | 2002 |  | 2001 |     
|------------------------------- | ---- |  | ---- | ----
|
|Change in APBO                  |      |  |      |     
|Benefit obligation, January 1   |      |  | $    | 33.0
|Interest cost                   |      |  |      | 2.4 
|Actuarial loss                  |      |  |      | 3.5 
|Benefits paid                   |      |  |      | (3.2
|                                |      |  |      |     
|Benefit obligation, December 31 |      |  |      | 35.7
|                                |      |  |      |     

47

---

|$ in millions                            | 2002 |  | 2001 |     
|---------------------------------------- | ---- |  | ---- | ----
|
|Change in Plan Assets                    |      | 
|Fair value of plan assets, January 1     |      |  |      | 10.9
|Actual return on plan assets             |      |  |      | 0.8 
|Company contributions                    |      |  |      | 2.2 
|Benefits paid                            |      |  |      | (3.2
|                                         |      |  |      |     
|Fair value of plan assets, December 31   |      |  |      | 10.7
|                                         |      |  |      |     
|                                        
|APBO in excess of plan assets            |      |  |      | 25.0
|Unamortized transition obligation        |      |  |      | (0.9
|Actuarial gain                           |      |  |      | 13.0
|                                         |      |  |      |     
|Accrued postretirement benefit liability |      |  | $    | 37.1
|                                         |      |  |      |     

Assumptions used in
determining the projected benefit obligation were as follows:

|                               |  | 2002 |  | 2001 |   | 2000 |     
|------------------------------ |  | ---- |  | ---- | - | ---- | ----
|                               | 
|Discount rate for obligations  |  |      |  | 6.75 | % |      | 7.25
|Expected return on plan assets |  |      |  | 6.75 | % |      | 7.00

The assumed health care
cost trend rate used in measuring the accumulated postretirement benefit
obligation was 8.8% and 7.0% for 2002 and 2001, respectively, and decreases to
5.0% by 2007. A one percentage point change in the assumed health care trend
rate would affect the service and interest cost by $0.1 million. A one
percentage point increase in the assumed health care trend rate would increase
the postretirement benefit obligation by $2.0 million; and a one percentage
point decrease would decrease the benefit obligation by $1.8 million.

The following table sets
forth the components of postretirement benefit expense:

|$ in millions                                 |  | 2002 |   | 2001 |   | 2000 |     
|--------------------------------------------- |  | ---- | - | ---- | - | ---- | ----
|                                             
|Expense for Year                              |  |      |   |      |   |      |     
|Interest cost                                 |  |      | $ | 2.4  |   | $    | 2.2 
|Expected return on plan assets                |  |      |   | (0.7 | ) |      | (0.7
|Amortization of unrecognized:                 | 
|Actuarial loss                                |  |      |   | (1.2 | ) |      | (1.6
|Transition obligation                         |  |      |   | 2.9  |   |      | 2.9 
|                                              |  |      |   |      |   |     
|Postretirement benefit cost                   |  |      |   | 3.4  |   |      | 2.8 
|Curtailment (a)                               |  |      |   |     |   |      |    
|                                              |  |      |   |      |   |     
|Postretirement benefit cost after curtailment |  |      | $ | 3.4  |   | $    | 2.8 
|                                              |  |      |   |      |   |     

|(a) |  | The curtailment was recognized as a result of the completion of the sale of
the natural gas retail distribution assets and certain liabilities in
October 2000 (see Note 3).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

48

---

## 7. Preferred Stock

$25 par value, 4,000,000
shares authorized, no shares outstanding; and $100 par value,
4,000,000 shares authorized, 228,508 shares without mandatory
redemption provisions outstanding.

|Series | Rate | CurrentRedemptionPrice | CurrentSharesOutstanding | Par ValueAt December 31, 2002 and 2001($ in millions)
|------ | ---- | ---------------------- | ------------------------ | -----------------------------------------------------
|      
|A      |      |                        |                          | 3.75                                                 
|B      |      |                        |                          | 3.75                                                 
|C      |      |                        |                          | 3.90                                                 
|       |      |                        |                          |                                                      
|      
|Total  |      |                        |                          |                                                      
|       |      |                        |                          |                                                      

The shares may be
redeemed at the option of the Company at the per share prices indicated, plus
cumulative accrued dividends. In August 2000, the Company announced that it
would redeem the outstanding shares in conjunction with its corporate separation
plan required by the Ohio deregulation legislation. Current market conditions
and regulatory requirements regarding legal separation of the electric
operations do not justify a redemption at this time. Over the remainder of the
deregulation transition period, the Company will continue to evaluate whether
redemption of the preferred stock is warranted.

## 8. Long-term Debt

|                                                          | At December 31, | 
|--------------------------------------------------------- | --------------- | 
|
|
|First mortgage bonds maturing 2024-2026  8.01% (a)        |                 | 
|Pollution control series maturing through 2027  6.43% (a) |                 | 
|                                                          |                 | 
|                                                          |                 | 
|                                                         
|Guarantee of Air Quality Development Obligations          |                 | 
|6.10% Series Due 2030                                     |                 | 
|Obligation for capital lease                              |                 | 
|Unamortized debt discount and premium (net)               |                 | 
|                                                          |                 | 
|Total                                                     |                 | 
|                                                          |                 | 

(a) Weighted average interest rate for 2002 and 2001.

49

---

The amounts of maturities
and mandatory redemptions for first mortgage bonds, notes, and the capital lease
are $1.1 million per year in 2003 through 2007. Substantially all property of
the Company is subject to the mortgage lien securing the first mortgage bonds.

## 9. Notes Payable and Compensating Balances

DPL and the Company have
$50.0 and $105.0 million, respectively, available through revolving credit
agreements with a consortium of banks. The DPL facility contains three financial
covenants including maximum debt to total capitalization, minimum EBIT to
interest coverage and minimum tangible net worth. The Companys facility
contains two financial covenants including maximum debt to total capitalization,
and minimum EBIT to interest coverage. Each of these covenants is currently met.
Facility fees are approximately $0.2 million per year. The primary purpose of
the revolving credit facilities is to provide back-up liquidity for DPL and the
Companys commercial paper programs. At December 31, 2002 and 2001,
DPL and the Company had no outstanding borrowings under these credit
agreements.

The Company has $65.0 million
  available in short-term informal lines of credit. The commitment fees are immaterial.
  Borrowings at December 31, 2002 and 2001 were zero.

The Company had no
outstanding commercial paper balances at December 31, 2002 and 2001.

## 10. Employee Stock Plans

In 2000, DPLs Board
of Directors adopted and its shareholders approved the DPL Inc. Stock Option
Plan. On February 1, 2000, options were granted at an exercise price of $21.00,
which was above the market price of $19.06 per share on that date. The exercise
price of options granted after that date approximated the market price of the
stock on the date of grant. Options granted in 2000 and 2001 represent
three-year awards, vest five years from the grant date, and expire ten years
from the grant date. Options granted in 2002 vest in three years and expire ten
years from the grant date. At December 31, 2002, there were 624,500 options
available for grant.

50

---

Summarized stock option
activity was as follows:

|                                          |  | 2002 |   | 2001      |   | 2000 |          
|----------------------------------------- |  | ---- | - | --------- | - | ---- | ---------
|                                         
|Options granted at beginning of year      |  |      |   | 7,232,500 |   |      | 7,610,000
|Granted                                   |  |      |   | 900,000   |   |      | 127,500  
|Exercised                                 |  |      |   |          |   |      |         
|Forfeited                                 |  |      |   | (773,000  | ) |      | (505,000 
|                                          |  |      |   |           |   |     
|Outstanding at year-end                   |  |      |   | 7,359,500 |   |      | 7,232,500
|Exercisable at year-end                   |  |      |   |          |   |      |         
|                                         
|Weighted average option prices per share: |  |      |   |           |   |      |          
|At beginning of year                      |  |      | $ | 21.99     |   | $    | 22.10    
|Granted                                   |  |      |   | 14.95     |   |      | 27.17    
|Exercised                                 |  |      |   |          |   |      |         
|Forfeited                                 |  |      |   | 21.80     |   |      | 24.97    
|Outstanding at year-end                   |  |      |   | 20.90     |   |      | 21.99    
|Exercisable at year-end                   |  |      | $ |          |   | $    |         

The weighted-average fair
value of options granted was $2.56, $3.47, and $3.65 per share in 2002, 2001,
and 2000, respectively. The fair values of options were estimated as of the date
of grant using a Black-Scholes option pricing model utilizing the following
assumptions:

|                        |  | 2002 |  | 2001 |   | 2000 |     
|----------------------- |  | ---- |  | ---- | - | ---- | ----
|                       
|Volatility              |  |      |  | 24.0 | % |      | 18.5
|Expected life (years)   |  |      |  | 8.0  |   |      | 5.1 
|Dividend yield rate     |  |      |  | 4.3  | % |      | 3.6 
|Risk-free interest rate |  |      |  | 3.4  | % |      | 4.5 

51

---

The following table
reflects information about stock options outstanding at December 31, 2002:

|              | Options Outstanding | Options Exercisable | 
|------------- | ------------------- | ------------------- | 
|
|              |                    
|$14.95-$21.00 |                     |                     | 
|$21.01-$29.63 |                     |                     | 

## 11. Ownership of Facilities

The Company and other
Ohio utilities have undivided ownership interests in seven electric generating
facilities and numerous transmission facilities. Certain expenses, primarily
fuel costs for the generating units, are allocable to the owners based on their
energy usage. The remaining expenses, as well as investments in fuel inventory,
plant materials and operating supplies, and capital additions, are allocated to
the owners in accordance with their respective ownership interests. As of
December 31, 2002, the Company had $142.1 million of construction in
progress at such facilities. The Companys share of the operating cost of
such facilities is included in the Consolidated Statement of Results of
Operations, and its share of the investment in the facilities is included in the
Consolidated Balance Sheet.

The following table
presents the Companys undivided ownership interest in such facilities at
December 31, 2002:

|                                      | Company Share | CompanyInvestment
|------------------------------------- | ------------- | -----------------
|
|                                     
|Production Units:                     |               |                  
|Beckjord Unit 6                       |               |                  
|Conesville Unit 4                     |               |                  
|East Bend Station                     |               |                  
|Killen Station                        |               |                  
|Miami Fort Units 7 & 8                |               |                  
|Stuart Station                        |               |                  
|Zimmer Station                        |               |                  
|                                     
|Transmission (at varying percentages) |               |                  

52

---

## 12. Fair Value of Financial Instruments

|                                     | At December 31, | 
|------------------------------------ | --------------- | 
|
|
|                                    
|Assets                               |                 | 
|Available-for-sale equity securities |                 | 
|                                    
|Held-to-maturity securities:         |                
|Debt securities (a)                  |                 | 
|                                     |                 | 
|Total                                |                 | 
|                                    
|Liabilities (b)                      |                 | 
|Debt                                 |                 | 

(a) Maturities range from 2003 to 2010.(b) Includes current maturities.

Gross realized gains and
(losses) were $0.3 and $(2.8) million in 2002, $0.9 and $(6.2) million in 2001,
and $0.1 and $(0.5) million in 2000, respectively.

53

---

## 13. Business Segment Reporting

The Company provides
electric services to over 500,000 retail customers in West Central Ohio. The
Company also sold and distributed natural gas until October 31, 2000, at which
time the Company completed the sale of its natural gas retail distribution
assets and certain liabilities (see Note 3).

In prior years, the
Company had two reportable operating segments: Electric and Natural Gas. As a
result of the sale of the natural gas retail distribution operations, the
Electric segment is the remaining reportable operating segment. Assets and
related costs associated with the Companys transmission and distribution
and base load and peaking generation operations are managed and evaluated as a
single operating segment.

|$ in millions                                                                              |  | 2002 |   | 2001    |   | 2000 |        
|------------------------------------------------------------------------------------------ |  | ---- | - | ------- | - | ---- | -------
|                                                                                          
|Net revenues:                                                                              |  |      |   |         |   |      |        
|Electric                                                                                   |  |      | $ | 860.3   |   | $    | 838.3  
|Natural Gas                                                                                |  |      |   |        |   |      |       
|                                                                                           |  |      |   |         |   |     
|Total                                                                                      |  |      | $ | 860.3   |   | $    | 838.3  
|                                                                                           |  |      |   |         |   |     
|                                                                                          
|Operating income:                                                                          |  |      |   |         |   |      |        
|Electric                                                                                   |  |      | $ | 444.6   |   | $    | 415.1  
|Natural Gas                                                                                |  |      |   |        |   |      |       
|Other (a)                                                                                  |  |      |   | (8.3    | ) |      | (2.7   
|                                                                                           |  |      |   |         |   |     
|Total operating income                                                                     |  |      |   | 436.3   |   |      | 412.4  
|Other income (deductions)                                                                  |  |      |   | 10.3    |   |      | 24.8   
|Interest expense                                                                           |  |      |   | (53.5   | ) |      | (61.5  
|                                                                                           |  |      |   |         |   |     
|Income before income taxes, extraordinary item, and cumulative effect of accounting change |  |      | $ | 393.1   |   | $    | 375.7  
|                                                                                           |  |      |   |         |   |     
|                                                                                          
|Depreciation and amortization:                                                             |  |      |   |         |   |      |        
|Electric                                                                                   |  |      | $ | 114.9   |   | $    | 116.0  
|Natural Gas                                                                                |  |      |   |        |   |      |       
|Total                                                                                      |  |      | $ | 114.9   |   | $    | 116.0  
|                                                                                           |  |      |   |         |   |     
|                                                                                          
|Expenditures - construction additions:                                                     |  |      |   |         |   |      |        
|Electric                                                                                   |  |      | $ | 129.4   |   | $    | 164.4  
|Natural Gas                                                                                |  |      |   |        |   |      |       
|                                                                                           |  |      |   |         |   |     
|Total                                                                                      |  |      | $ | 129.4   |   | $    | 164.4  
|                                                                                           |  |      |   |         |   |     
|                                                                                          
|Assets                                                                                     |  |      |   |         |   |      |        
|Electric                                                                                   |  |      | $ | 2,507.1 |   | $    | 2,546.6
|Natural Gas                                                                                |  |      |   |        |   |      |       
|Unallocated corporate assets                                                               |  |      |   | 152.5   |   |      | 174.3  
|                                                                                           |  |      |   |         |   |     
|Total assets                                                                               |  |      | $ | 2,659.6 |   | $    | 2,720.9
|                                                                                           |  |      |   |         |   |     

(a) Includes unallocated corporate items.

54

---

# SELECTED
QUARTERLY INFORMATION (Unaudited)

|                                                                                           | March 31, |  | June 30, |       | September 30, |   | December 31, | 
|------------------------------------------------------------------------------------------ | --------- |  | -------- | ----- | ------------- | - | ------------ | 
|
|                                                                                          
|Electric revenues                                                                          |           |  | $        | 272.2 |               | $ | 294.7        | 
|Operating income                                                                           |           |  |          | 87.3  |               |   | 112.9        | 
|Income before income taxes, extraordinary item, and cumulative effect of accounting change |           |  |          | 83.6  |               |   | 94.5         | 
|Income before extraordinary item and cumulative effect of accounting change                |           |  |          | 52.6  |               |   | 56.5         | 
|Net income                                                                                 |           |  |          | 52.6  |               |   | 57.5         | 
|Earnings on common stock                                                                   |           |  |          | 52.4  |               |   | 57.3         | 
|Cash dividends paid                                                                        |           |  |          |      |               |   | 8.1          | 

55

---

# FINANCIAL
AND STATISTICAL SUMMARY (Unaudited)

|                                    | 2002 |  | 2001 |         | 2000 |  | 1999    |  | 1998 |        
|----------------------------------- | ---- |  | ---- | ------- | ---- |  | ------- |  | ---- | -------
|                                   
|For the years ended December 31,    |      |  |      |         |      |  |         |  |      |        
|                                   
|Electric revenues (millions)        |      |  | $    | 1,175.8 |      |  | 1,188.2 |  |      | 1,110.1
|Gas revenues (millions)             |      |  | $    |        |      |  |        |  |      | 183.8  
|Earnings on common stock (millions) |      |  | $    | 242.6   |      |  | 234.4   |  |      | 297.9  
|                                   
|Cash dividends paid (millions)      |      |  | $    | 204.5   |      |  | 82.4    |  |      | 606.4  
|                                   
|Electric sales (millions of kWh)   |      | 
|Residential                         |      |  |      | 5,302   |      |  | 4,909   |  |      | 4,816  
|Commercial                          |      |  |      | 3,710   |      |  | 3,618   |  |      | 3,539  
|Industrial                          |      |  |      | 4,472   |      |  | 4,568   |  |      | 4,851  
|Other retail                        |      |  |      | 1,405   |      |  | 1,369   |  |      | 1,371  
|                                    |      |  |      |         |      |  |         |  |      |        
|Total retail                        |      |  |      | 14,889  |      |  | 14,464  |  |      | 14,577 
|Wholesale                           |      |  |      | 4,358   |      |  | 3,591   |  |      | 2,946  
|                                    |      |  |      |         |      |  |         |  |      |        
|Total                               |      |  |      | 19,247  |      |  | 18,055  |  |      | 17,523 
|                                   
|Gas sales (thousands of MCF) (a)   |      | 
|Residential                         |      |  |      |        |      |  |        |  |      | 18,538 
|Commercial                          |      |  |      |        |      |  |        |  |      | 5,838  
|Industrial                          |      |  |      |        |      |  |        |  |      | 2,034  
|Other                               |      |  |      |        |      |  |        |  |      | 776    
|Transported gas                     |      |  |      |        |      |  |        |  |      | 16,105 
|                                    |      |  |      |         |      | 
|                                   
|Total                               |      |  |      |        |      |  |        |  |      | 43,291 
|                                   
|At December 31,                     |     
|                                   
|Total assets (millions)             |      |  | $    | 2,659.6 |      |  | 2,720.9 |  |      | 2,721.5
|Long-term debt (millions)           |      |  | $    | 665.5   |      |  | 666.6   |  |      | 666.5  
|                                   
|First mortgage bond ratings        |      | 
|Standards & Poors Corporation      |      |  |      | BBB     |      |  | BBB+    |  |      | BBB+   
|Moodys Investors Service           |      |  |      | A2      |      |  | A2      |  |      | A2     
|                                   
|Number of Preferred Shareholders    |      |  |      | 426     |      |  | 476     |  |      | 471    

|(a) |  | The
Company completed the sale of its natural gas retail distribution assets and  certain liabilities
in October 31, 2000.
|--- |  | --------------------------------------------------------------------------------------------------------------------------

56

---

# Report
of Independent Accountants

To the Board of Directors and Shareholder of The Dayton Power and Light Company

In our opinion, the
consolidated financial statements listed in the accompanying index present
fairly, in all material respects, the financial position of The Dayton Power and
Light Company and its subsidiaries at December 31, 2002 and 2001, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2002, in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Companys management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Dayton, Ohio
January 27, 2003

57

---

|Item 9  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|---------------------------------------------------------------------------------------------
|                                                                                             

| | None.
| | -----

## PART III

|Item 10  Directors and Executive Officers of the Registrant
|------------------------------------------------------------
|                                                            

## Directors of the Registrant

The Board is presently
  authorized to consist of ten directors and one advisory director. These directors
  are also directors of DPL Inc., the holding company of the Company.

The following information
regarding the directors and nominees is based on information furnished by them:

|                                                                                                                                                             | DirectorSince |     
|------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------- | ----
|                                                                                                                                                            
|THOMAS J. DANIS, Age 53                                                                                                                                      |               | 1989
|Chairman and Chief Executive Officer, The Danis Companies, Dayton, Ohio, construction, real estate and environmental services.                               |              
|                                                                                                                                                            
|JAMES F. DICKE, II, Age 57                                                                                                                                   |               | 1990
|President, Crown Equipment Corporation, New Bremen, Ohio, international manufacturer and distributor of electric lift trucks and material handling products. |              
|Director: Gulf States Paper Co.                                                                                                                              |              
|Trustee: Trinity University, Culver Educational Foundation                                                                                                   |              
|Commissioner: Smithsonian American Art Museum                                                                                                                |              
|                                                                                                                                                            
|PETER H. FORSTER, Age 60                                                                                                                                     |               | 1979
|Chairman, DPL Inc. and The Dayton Power and Light Company.                                                                                                   |              
|Chairman: Miami Valley Research Foundation.                                                                                                                  |              
|Director: Amcast Industrial Corp.                                                                                                                            |              
|Trustee: F. M. Tait Foundation.                                                                                                                              |              
|                                                                                                                                                            
|ERNIE GREEN, Age 64                                                                                                                                          |               | 1991
|President and Chief Executive Officer, Ernie Green Industries, Dayton, Ohio, automotive components manufacturer.                                             |              
|Director: Pitney Bowes Inc., Eaton Corp.                                                                                                                     |              
|                                                                                                                                                             |              

58

---

|                                                                                                                                                                                                                                                                                                 | DirectorSince |     
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------- | ----
|                                                                                                                                                                                                                                                                                                
|JANE G. HALEY, Age 72                                                                                                                                                                                                                                                                            |               | 1978
|President and Chief Executive Officer, Gosiger, Inc., Dayton, Ohio, national importer and distributor of machine tools.                                                                                                                                                                          |              
|Director: The Ultra-Met Company, Urbana, Ohio, ONA America, Dayton, Ohio.                                                                                                                                                                                                                        |              
|Trustee: University of Dayton, Chaminade-Julienne High School, Dayton, Ohio.                                                                                                                                                                                                                     |              
|Member: Dayton Development Coalition, Area Progress Council.                                                                                                                                                                                                                                     |              
|                                                                                                                                                                                                                                                                                                
|W AUGUST HILLENBRAND, Age 62                                                                                                                                                                                                                                                                     |               | 1992
|Chief Executive Officer, Hillenbrand Capital Partners, Retired President and Chief Executive Officer, Hillenbrand Industries, Batesville, Indiana, a diversified public holding company that manufactures caskets, hospital furniture, hospital supplies and provides funeral planning services. |              
|Director: Hillenbrand Industries, Pella Corporation.                                                                                                                                                                                                                                             |              
|Trustee: Batesville Girl Scouts.                                                                                                                                                                                                                                                                 |              
|Trustee Emeritus: Denison University.                                                                                                                                                                                                                                                            |              
|                                                                                                                                                                                                                                                                                                
|STEPHEN F. KOZIAR, Age 58                                                                                                                                                                                                                                                                        |               | 2002
|President and Chief Executive Officer, DPL Inc. and The Dayton Power and Light Company.                                                                                                                                                                                                          |              
|Board Member: The Miami Valley Council of Boy Scouts of America, Ohio Electric Utility Institute and The Dayton Power and Light Company Foundation.                                                                                                                                              |              

59

---

|                                                                                                                                                                                                                             | Director
      Since |     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | ----
|                                                                                                                                                                                                                            
|SCOTT
      M. STUART, Age 43                                                                                                                                                                                                |                      | 2000
|Member,
        KKR & Co. LLC, New York City, investment company.                                                                                                                                                            |                     
|Director:
        Borden, Inc., The Boyds Collection, Ltd.                                                                                                                                                                   |                     
|                                                                                                                                                                                                                            
|WALLACE
      CREEK, Age 63 (Nominee)                                                                                                                                                                                        |                     
|Senior
        Vice President, Collins & Aikman Corporation, Detroit, Michigan, cockpit
        modules and automotive components manufacturers.                                                                             |                     
|Director:
        Columbus McKinnon Corporation, Quantom Technologies, Inc.                                                                                                                                                  |                     
|                                                                                                                                                                                                                            
|MICHAEL
      W. GREBE, Age 61 (Nominee)                                                                                                                                                                                     |                     
|President
        and Chief Executive Officer, The Lynde and Harry Bradley Foundation, Milwaukee,
        Wisconsin, grant-making institution.                                                                               |                     
|Director:
        Oshkosh Truck Corporation, Milwaukee Brewers Baseball Club.                                                                                                                                                |                     
|                                                                                                                                                                                                                            
|Advisory Director:                                                                                                                                                                                                          
|                                                                                                                                                                                                                            
|GEORGE
      R. ROBERTS, Age 59                                                                                                                                                                                              |                      | 2000
|Partner,
        Kohlberg Kavis Roberts & Co. L.P. and Managing Member of KKR &
        Co. LLC, New York City, investment company.                                                                                          |                     
|Director:
        Borden, Inc., The Boyds Collection, Ltd., KinderCare Learning Center,
        Inc., KSL Recreation Group, Inc., Owens-Illinois, Inc., PRIMEDIA, Inc.,
        Safeway Inc., Willis Group Holdings Limited. |                     
|Trustee:
        Claremont McKenna College, Culver Military Academy.                                                                                                                                                         |                     
|Member:
        San Francisco Symphony, San Francisco Ballet, Fine Arts Museum.                                                                                                                                              |                     
|                                                                                                                                                                                                                            

60

---

|Name                  |  | Age |  | Business Experience,Last Five Years(Positions with RegistrantUnless Otherwise Indicated)      |  | Dates              | 
|--------------------- |  | --- |  | --------------------------------------------------------------------------------------------- |  | ------------------ | 
|Allen M. Hill*        |  | 57  |  | President and Chief Executive Officer, DPL Inc. and the Company                               |  | 1/01/97 - 1/01/03  | 
|                      |  |     |  | President and Chief Executive Officer, the Company                                            |  | 4/06/92 - 1/01/03  | 
|                     
|Stephen F. Koziar, Jr |  | 58  |  | President and Chief Executive Officer, DPL Inc. and the Company                               |  | 1/01/03 - 1/01/03  | 
|                      |  |     |  | Executive Vice President and Chief Operating Officer, DPL Inc. and the Company                |  | 8/28/02 - 1/01/03  | 
|                      |  |     |  | Group Vice President and Secretary, DPL Inc. and the Company                                  |  | 1/31/95 - 8/28/02  | 
|                     
|Elizabeth M. McCarthy |  | 43  |  | Group Vice President and Chief Financial Officer, DPL Inc. and the Company                    |  | 9/26/00 - 1/01/03  | 
|                      |  |     |  | Vice President and Chief Accounting Officer, DPL Inc. and the Company                         |  | 4/01/00 - 9/26/00  | 
|                      |  |     |  | Partner, PricewaterhouseCoopers LLP, New York, NY                                             |  | 7/01/94 - 3/31/00  | 
|                     
|Arthur G. Meyer       |  | 52  |  | Vice President, Legal and Corporate Affairs and Corporate Secretary, DPL Inc. and the Company |  | 10/4/02 - 1/01/03  | 
|                      |  |     |  | Vice President, Legal and Corporate Affairs, the Company                                      |  | 11/21/97 - 10/4/02 | 
|                     
|H. Ted Santo*         |  | 52  |  | Group Vice President, the Company                                                             |  | 12/08/92 - 1/01/03 | 
|                     
|Patricia K. Swanke    |  | 43  |  | Vice President, Operations, the Company                                                       |  | 9/29/99 - 1/01/03  | 
|                      |  |     |  | Managing Director, the Company                                                                |  | 9/08/96 - 9/29/99  | 
|                     
|W. Steven Wolff       |  | 49  |  | Vice President, Power Production, DPL Inc. and the Company                                    |  | 8/28/02 - 1/01/03  | 
|                      |  |     |  | Director, Power Production, the Company                                                       |  | 1/07/02 - 8/28/02  | 
|                      |  |     |  | Manager, Power Plant  OHH   Killen, the Company                                             |  | 8/01/01 - 1/07/02  | 

* Retired effective January 1, 2003

61

---

|Item 11  Executive Compensation
|--------------------------------
|                                

## COMPENSATION OF DIRECTORS

Directors of the Company
who are not employees received an annual award of 1,500 common share units for
services as a director. The annual share unit award replaced cash director fees
effective July 1, 2000. Previously, directors received $12,000 annually plus
meeting attendance and committee fees.

Non-employee directors
were eligible to receive grants of stock options under the DPL Inc. Stock Option
Plan. Each non-employee director, except Mr. Forster, was granted an option to
purchase 50,000 shares on February 1, 2000 at an above market exercise price of
$21.00 per share. The closing price on February 1, 2000 was $19.06 per share.
These options represent a three-year block grant, are currently exercisable and
expire on February 1, 2010.

With the expiration of the Director Stock
Option Plan, beginning in 2003, Director Compensation will consist of a Retainer of $55,000, Board Meeting
fees of $5,000 per meeting, Committee Chair Retainer of $10,000, Committee Meeting Fees of $4,000 per meeting
and a Special Meeting fee of $3,000 per meeting.

DPL Inc. maintains a
Deferred Compensation Plan for non-employee directors in which payment of
directors fees may be deferred. Under the standard deferred income program
directors are entitled to receive a lump sum payment or payments in installments
over a period up to 20 years. Effective January 31, 2000, the supplementary
deferred income program was terminated for current directors and the value of
each directors supplementary account transferred to his or her standard
deferral account. All current directors have designated their standard deferral
account be invested in DPL Inc. common share units.

Mr. Forster, who retired
as Chief Executive Officer of DPL Inc. effective December 31, 1996, entered into
a three year agreement with DPL Inc. and the Company pursuant to which he serves
as Chairman of the Board of DPL Inc. and the Company and provides advisory and
strategic planning services. The term of the agreement is automatically extended
each December 31 for an additional year unless either party gives advance notice
of nonrenewal. For these services, Mr. Forster receives an annual fee of
$650,000 (as well as such bonuses, if any, as may be determined by the
Compensation and Management Review Committee in its discretion) and is eligible
to receive grants of stock options under the DPL Inc. Stock Option Plan. As
Chairman, Mr. Forster is responsible for the long-term strategic planning
of the Company, the oversight of financial assets, and the evaluation and
recommendations relating to the merger, acquisition and disposition of utility
assets. Mr. Forster participates in an incentive program for individuals
managing financial assets.

62

---

## EXECUTIVE OFFICER COMPENSATION

## Summary Compensation Table

Set forth below is
certain information concerning the compensation of the Chief Executive Officer
and each of the other four most highly compensated executive officers of DPL
Inc. and the Company, for the last three fiscal years, for services rendered in
all capacities.

|                                | Annual
      Compensation |      | Long
      Term Compensation |  
|------------------------------- | ------------------------- | ---- | ---------------------------- | -
|
|Allen
      M. Hill (5)         |                           | 2002 |                              | $
|President
      and Chief       |                           | 2001 |                              |  
|Executive
      Officer         |                           | 2000 |                              |  
|                               
|Stephen
      F. Koziar, Jr (6) |                           | 2002 |                              | $
|President
      and Chief       |                           | 2001 |                              |  
|Executive
      Officer, elect  |                           | 2000 |                              |  
|                               
|Peter
      H. Forster (7)      |                           | 2002 |                              | $
|Chairman                        |                           | 2001 |                              |  
|                                |                           | 2000 |                              |  
|                               
|Elizabeth
      M. McCarthy (8) |                           | 2002 |                              | $
|Group
      Vice President and  |                           | 2001 |                              |  
|Chief
      Financial Officer   |                           | 2000 |                              |  
|                               
|H.
      Ted Santo (9)          |                           | 2002 |                              | $
|                                |                           | 2001 |                              |  
|                                |                           | 2000 |                              |  

|(1) |  | Amounts in this column represent awards made under the Management Incentive
Compensation Program (MICP). Awards are based on achievement of
specific predetermined operating and management goals in the year indicated and
paid in the year earned or in the following year.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Amounts in this column for 2002 represent a three-year block grant of stock options to
the named executive under the DPL Inc. Stock Option Plan in lieu of awards under
the Management Stock Incentive Plan (MSIP). Each executive, except Ms. McCarthy, was
granted a number of option shares equal to three times the executives
earned Restricted Share Units (RSUs) held in the Master Trust under
the MSIP. See Option Grants in Last Fiscal Year.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Amounts shown for 2000 include the dollar value of a one-time contingent award
of RSUs approved by the Compensation Committee in 1999 which could be earned
only if the closing price of DPL Inc. common shares on the NYSE Consolidated
Transactions Tape achieved $26 per share between June 1999 and July 1, 2001.
These RSUs were earned in 2000 and settled in cash.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Amounts
in this column also represent annualized incentives earned by the named  executive
officer under a long-term incentive program for individuals managing  all financial
assets of DPL Inc. For 2000, incentives were earned based on  annual performance and
include $100,000 for Mr. Hill, $1.232 million for Mr.  Forster and $100,000 for Mr.
Koziar. In 2001, no incentives were awarded under  this program. In 2002, Mr. Forster was
awarded $840,000 based on financial asset  performance in 2001.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

63

---

|(4) |  | Amounts
in this column represent employer matching contributions on behalf of each named
executive, except Mr. Forster, under  the Company Employee Savings Plan made to the DPL Inc. Employee Stock
Ownership Plan.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Mr. Hill retired from the Company effective January 1, 2003 after 33 years of
service and from the Board of Directors. We offer our sincere appreciation to
Mr. Hill and wish him well in his future endeavors.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) |  | Mr. Koziar
      has an employment agreement with DPL Inc. which provides for annual base
      salary of not less than $600,000, participation in the MICP, Stock Option
      Plan, other incentive programs and fringe benefits for executives. The agreement
      continues to December 31, 2005 unless earlier terminated as provided in
      the agreement and provides for salary continuation under certain circumstances.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Annual
      compensation shown for Mr. Forster for 1999, 2000 and 2001 was paid pursuant
      to an agreement with DPL Inc. and the Company. All other compensation shown
      for 2001 represents the dollar value of the annual award of 1,500 shares
      to each non-employee director in lieu of directors fees, and for 2000 represents
      directors fees of $26,700 and the dollar value of the annual award of 1,500
      shares to each non-employee director in lieu of directors fees and for 1999
      represents directors fees of $37,000 and an award of 2,700 shares under
      the Directors Stock Plan. Participation in the Director compensation
      program by Mr. Forster was terminated during the year 2000.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | Ms.
McCarthy joined DPL Inc. in March 2000.  Ms. McCarthy has an employment agreement with
DPL Inc.  which provides for annual base salary as determined by the Compensation
Committee, participation in the  MICP, a stock option grant, $100,000 signing bonus
subject to forfeiture and severance benefits.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) |  | Mr.
Santo retired from the Company effective January 1, 2003 after 27 years of service.  We
offer our  sincere appreciation to Mr. Santo and wish him well in his future endeavors.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## Option Grants in Last Fiscal Year

The following table sets
forth information concerning individual grants of stock options made to the
named executive officers during the fiscal year ended December 31, 2002.

|                            | Individual
      Grants | 
|--------------------------- | ----------------------- | 
|
|Stephen
      F. Koziar, Jr |                         | 
|Peter
      H. Forster      |                         | 

|(1) |  | Options granted pursuant to the DPL Inc. Stock Option Plan on September 24,
2002. These options vest in three cumulative installments of 33 1/3% on December
31, 2002, 2003, and 2004, and become exercisable on January 1, 2005.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | The grant date present value was determined using the Black-Scholes pricing
model. Significant assumptions used in the model were: expected volatility
24.0%, risk-free rate of return 3.44%, dividend yield 4.28% and time of exercise
8 years.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

64

---

## Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

The following table sets
forth information concerning each exercise of stock options during fiscal 2002
by each of the named executive officers and the fiscal year-end value of
unexercised options.

|Name                        | SharesAcquiredOnExercise(#) | ValueRealized($) |  | Number of Securities Underlying Unexercised Options at FiscalYear-End(Number) |  | Value of Unexercised In-the-Money Options at FiscalYear-End($)(1) |  
|--------------------------- | --------------------------- | ---------------- |  | ----------------------------------------------------------------------------- |  | ----------------------------------------------------------------- | -
|
|Allen
      M. Hill         |                             |                  |  |                                                                              |  |                                                                   | 
|Stephen
      F. Koziar, Jr |                             |                  |  |                                                                              |  |                                                                   | 
|Peter
      H. Forster      |                             |                  |  |                                                                              |  |                                                                   | 
|Elizabeth
      M. McCarthy |                             |                  |  |                                                                              |  |                                                                   | 
|H.
      Ted Santo          |                             |                  |  |                                                                              |  |                                                                   | 

|(1) |  | Unexercised
options were in-the-money if the fair market value of the underlying shares exceeded the
exercise price of the option at December 31, 2002.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

# Equity
Compensation Plan Information

|                                                           | Number of securities to be issued upon exercise of outstanding options, warrants and rights |  | Weighted-average exercise price of outstanding options, warrants and rights |           | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|---------------------------------------------------------- | ------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- | --------- | -------------------------------------------------------------------------------------------------------------------------------------------
|
|Equity compensation plans approved by security holders:    |                                                                                             |  |                                                                             |           |                                                                                                                                            
|                                                          
|DPL Inc. Stock Option Plan                                 |                                                                                             |  |                                                                             | 7,359,500 |                                                                                                                                            
|                                                          
|Equity compensation plans not approved by security holders |                                                                                            
|                                                          
|Directors Deferred Stock Compensation Plan                |                                                                                             |  |                                                                             | 232,205   |                                                                                                                                            
|                                                          
|Management Incentive Stock Plan                            |                                                                                             |  |                                                                             | 2,123,998 |                                                                                                                                            
|                                                          
|Total                                                      |                                                                                             |  |                                                                             |           |                                                                                                                                            

|(1) |  | The Directors Deferred Stock Compensation Plan (the Directors
Stock Plan) provided for the annual award of DPL Inc. common shares to
non-employee directors for services as a director. All shares awarded under the
Directors Stock Plan are transferred to the Master Trust. There was no
stated maximum number of shares that may have been awarded under the
Directors Stock Plan.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | The Management Stock Incentive Plan (the MSIP) provided for the
award of Restricted Share Units (RSUs) to executives. Earning of
RSUs was dependent on the performance of DPL Inc. over a three-year performance
period. For each RSU which was earned and vests, a participant received the
equivalent of one DPL Inc. common share plus dividend equivalents from the date
of award. All payouts of vested RSUs under the MSIP are deferred until
retirement and are made in DPL Inc. common shares. The Stock Option Plan
replaced the MSIP and no additional awards have been made under the MSIP.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

65

---

## Change in Control Agreements

DPL Inc. has in place
agreements with each of Mr. Koziar and Ms. McCarthy providing for the payment of
benefits upon the consummation of a change in control of DPL Inc. or the
Company (generally, defined as the acquisition of 50% or more of the voting
securities (15% or more without board approval) or certain mergers or other
business combinations). The agreements require the individuals to remain with
DPL Inc. throughout the period during which any change of control transaction is
pending in order to help put in place the best plan for the shareholders. The
principal benefits under each agreement include payment of the following:
(i) 300% of the sum of the individuals annual base salary at the rate
in effect on the date of the change in control plus the average amount paid to
the individual under the MICP for the three preceding years; (ii) all awarded or
earned but unpaid RSUs; and (iii) continuing medical, life, and disability
insurance. In addition, upon termination of the individuals employment
under specified circumstances during the pendency of a change of control, the
individual is entitled to receive the individuals full base salary and
accrued benefits through the date of termination and the individuals award
for the current period under the MICP (or for a completed period if no award for
that period has yet been determined) fixed at an amount equal to his average
annual award paid for the preceding three years. In the event any payments under
these agreements are subject to an excise tax under the Internal Revenue Code of
1986, the payments will be adjusted so that the total payments received on an
after-tax basis will equal the amount the individual would have received without
imposition of the excise tax. The agreements are effective for one year but are
automatically renewed each year unless DPL Inc. or the participant notifies
the other one year in advance of its or his or her intent not to renew.
DPL Inc. is obligated at the time of a change of control to fund its
obligations under the agreements and under the Directors and
Officers Compensation Plans by transferring required payments to a grantor
trust (the (Master Trust). Mr. Forsters agreement with DPL
Inc. and the Company contains similar benefits provisions.

66

---

## Pension Plans

The following table sets
forth the estimated total annual benefits payable under the Company retirement
income plan and the supplemental executive retirement plan to executive officers
at normal retirement date (age 65) based upon years of accredited service and
final average annual compensation (including base and incentive compensation)
for the three highest years during the last ten:

|Final Average | Total Annual Retirement Benefits forYears of Accredited Service at Age 65
|------------- | -------------------------------------------------------------------------
|
|              | $  200,000                                                               
|              | 400,000                                                                  
|              | 600,000                                                                  
|              | 800,000                                                                  
|              | 1,000,000                                                                
|              | 1,200,000                                                                
|              | 1,400,000                                                                

The years of accredited
  service for the named executive officers are Mr. Hill  33 yrs.; Mr. Koziar
   33 yrs.; Ms. McCarthy  20 yrs; and Mr. Santo  27 years. Benefits
  are computed on a straight-life annuity basis, are subject to deduction for
  Social Security benefits and may be reduced by benefits payable under retirement
  plans of other employers. Mr. Forster ceased to accrue benefits under the retirement
  plans effective upon his retirement as an employee of DPL Inc. and the Company.

Benefits paid by the supplemental
  plan was modified in 2000 for the named executive officers other than Ms. McCarthy
  and the benefits enumerated above reduced by 21%. The present value of these individuals
  accrued benefit under the supplemental plan, determined by DPL Inc.s actuary
  was segregated and benefits thereafter are determined on the basis of selected asset
  performance.

|Item 12  Security Ownership of Certain Beneficial Owners and Management
|------------------------------------------------------------------------
|                                                                        

The Companys stock
is actually owned by DPL Inc.

|Item 13  Certain Relationships and Related Transactions
|--------------------------------------------------------
|                                                        

| | None.
| | -----

67

---

|Item 14  Controls and Procedures
|---------------------------------
|                                 

Within 90 days prior to
the filing date of this report, the Company carried out an evaluation, under the
supervision and with the participation of the Companys management,
including the Companys Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Companys
disclosure controls and procedures. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Companys
disclosure controls and procedures are effective to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commissions rules and forms.

There were no significant
changes in the Companys internal controls or in other factors that could
significantly affect internal controls subsequent to the date of their
evaluation.

## PART IV

|Item 15  Exhibits, Financial Statement Schedule and Reports on Form 8-K
|------------------------------------------------------------------------
|                                                                        

| | (a) |  | Documents
filed as part of the Form 10-K
| | --- |  | ----------------------------------------

1. Financial Statements

See Item 8 - Index to Consolidated Financial Statements.

2. Financial Statement Schedule

See Item 8 - Index to Financial Statement Schedule

68

---

3. Exhibits

The exhibits filed as a
part of this Annual Report on Form 10-K are:

|     |  |                                                                                                                                                                                    |  | Incorporated Herein by Reference as Filed With                                             
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------
|2(a) |  | Copy of the Agreement of Merger among DPL Inc., Holding Sub Inc. and the Company dated January 6, 1986                                                                             |  | Exhibit A to the 1986 Proxy Statement (File No. 1-2385)                                    
|    
|2(b) |  | Copy of Asset Purchase Agreement, dated December 14, 1999 between The Dayton Power and
Light Company, Indiana Energy, Inc., and Number-3CHK, Inc                                   |  | Exhibit 2 to Report on Form 10-Q for the quarter ended September 30, 2000 (File No.
1-2385)
|    
|3(a) |  | Regulations and By-Laws of the Company                                                                                                                                             |  | Exhibit 2(e) to Registration Statement No. 2-68136 to Form S-16                            
|    
|3(b) |  | Copy of Amended Articles of Incorporation of the Company dated January 3, 1991                                                                                                     |  | Exhibit 3(b) to Report on Form 10-K for the year ended December 31, 1991 (File No. 1-2385) 
|    
|4(a) |  | Copy of Composite Indenture dated as of October 1, 1935, between the Company and The Bank
of New York, Trustee with all amendments through the Twenty-Ninth Supplemental Indenture |  | Exhibit 4(a) to Report on Form 10-K for the year ended December 31, 1985 (File No. 1-2385) 
|    
|4(b) |  | Copy of the Thirtieth Supplemental Indenture dated as of March 1, 1982, between the
Company and The Bank of New York, Trustee                                                      |  | Exhibit 4(h) to Registration Statement No. 33-53906                                        
|    
|4(c) |  | Copy of the Thirty-First Supplemental Indenture dated as of November 1, 1982, between the
Company and The Bank of New York, Trustee                                                |  | Exhibit 4(h) to Registration Statement No. 33-56162                                        
|    
|4(d) |  | Copy of the Thirty-Second Supplemental Indenture dated as of November 1, 1982, between the
Company and The Bank of New York, Trustee                                               |  | Exhibit 4(i) to Registration Statement No. 33-56162                                        
|    
|4(e) |  | Copy of the Thirty-Third Supplemental Indenture dated as of December 1, 1985, between the
Company and The Bank of New York, Trustee                                                |  | Exhibit 4(e) to Report on Form 10-K for the year ended December 31, 1985 (File No. 1-2385) 

69

---

|4(f)    |  | Copy of the Thirty-Fourth Supplemental Indenture dated as of April 1, 1986, between the Company and The Bank of New York, Trustee                                                     |  | Exhibit 4 to Report on Form 10-Q for the quarter ended June 30, 1986 (File No. 1-2385)     
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------
|       
|4(g)    |  | Copy of the Thirty-Fifth Supplemental Indenture dated as of December 1, 1986, between the
Company and The Bank of New York, Trustee                                                   |  | Exhibit 4(h) to Report on Form 10-K for the year ended December 31, 1986 (File No. 1-9052) 
|       
|4(h)    |  | Copy of the Thirty-Sixth Supplemental Indenture dated as of August 15, 1992, between the
Company and The Bank of New York, Trustee                                                    |  | Exhibit 4(i) to Registration Statement No. 33-53906                                        
|       
|4(i)    |  | Copy of the Thirty-Seventh Supplemental Indenture dated as of November 15, 1992, between
the Company and The Bank of New York, Trustee                                                |  | Exhibit 4(j) to Registration Statement No. 33-56162                                        
|       
|4(j)    |  | Copy of the Thirty-Eighth Supplemental Indenture dated as of November 15, 1992, between
the Company and The Bank of New York, Trustee                                                 |  | Exhibit 4(k) to Registration Statement No. 33-56162                                        
|       
|4(k)    |  | Copy of the Thirty-Ninth Supplemental Indenture dated as of January 15, 1993, between the
Company and The Bank of New York, Trustee                                                   |  | Exhibit 4(k) to Registration Statement No. 33-57928                                        
|       
|4(l)    |  | Copy of the Fortieth Supplemental Indenture dated as of February 15, 1993, between the
Company and The Bank of New York, Trustee                                                      |  | Exhibit 4(m) to Report on Form 10-K for the year ended December 31, 1992 (File No. 1-2385) 
|       
|4(m)    |  | Copy of the Forty-First Supplemental Indenture dated as of February 1, 1999, between the
Company and The Bank of New York, Trustee                                                    |  | Exhibit 4(m) to Report on Form 10-K for the year ended December 31, 1998 (File No. 1-2385) 
|       
|4(n)    |  | Copy of the Revolving Credit Agreement dated as December 18, 2002, between the Company,
Keybank National Association (as agent), Bank One, NA (as agent), and the banks named
therein |  | Filed herewith as Exhibit 4(n)                                                             
|       
|10(a) * |  | Copy of Directors Deferred Stock Compensation Plan amended December 31, 2000                                                                                                         |  | Exhibit 10(a) to Report on Form 10-K for the year ended December 31, 2000 (File No.
1-2385)

70

---

|10(b) *                                     |  | Copy of Directors Deferred Compensation Plan amended December 31, 2000                                       |  | Exhibit 10(b) to Report on Form 10-K for the year ended December 31, 2000 (File No.
1-2385)
|------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------
|                                           
|10(c) *                                     |  | Copy of Management Stock Incentive Plan amended December 31, 2000                                             |  | Exhibit 10(c) to Report on Form 10-K for the year ended December 31, 2000 (File No.
1-2385)
|                                           
|10(d) *                                     |  | Copy of Key Employees Deferred Compensation Plan amended December 31, 2000                                    |  | Exhibit 10(d) to Report on Form 10-K for the year ended December 31, 2000 (File No.
1-2385)
|                                           
|10(e) *                                     |  | Form of Change of Control Agreement with Certain Executive Officers                                           |  | Exhibit 10(e) to Report on Form 10-K for the year ended December 31, 2000 (File No.
1-2385)
|                                           
|10(f) *                                     |  | Copy of Stock Option Plan                                                                                     |  | Exhibit 10(f) to Report on Form 10-K for the year ended December 31, 2000 (File No.
1-2385)
|                                           
|10(g)*                                      |  | Consulting contract dated as of December 31, 1996 between DPL Inc. and Peter H. Forster                       |  | Filed herewith as Exhibit 10(g)                                                            
|                                           
|10(h)*                                      |  | Employment agreement dated as of March 21, 2000 between DPL Inc. and Elizabeth M. McCarthy                    |  | Filed herewith as Exhibit 10(h)                                                            
|                                           
|10(i)*                                      |  | Employment agreement dated as of October 17, 2002 between DPL Inc. and Stephen F. Koziar                      |  | Filed herewith as Exhibit 10(i)                                                            
|                                           
|18                                          |  | Copy of preferability letter relating to change in accounting for unbilled revenues from
Price Waterhouse LLP |  | Exhibit 18 to Report on Form 10-K for the year ended December 31, 1988 (File No. 1-2385)   
|                                           
|21                                          |  | Copy of List of Subsidiaries of the Company                                                                   |  | Filed herewith as Exhibit 21                                                               
|                                           
|* Management contract or compensatory plan.

| | (b) |  | Reports
on Form 8-K
| | --- |  | -------------------

| | None.
| | -----

71

---

# 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.

|                  |  | THE DAYTON POWER AND LIGHT COMPANYRegistrant                                                        
|----------------- |  | ----------------------------------------------------------------------------------------------------
|February 19, 2003 |  | /s/ Elizabeth M. McCarthy                                                                           
|                  |  |                                                                                                     
|                  |  | Elizabeth M. McCarthy
Group Vice President and Chief Financial Officer (principal financial officer)

|                  |  |                                                                                      
|----------------- |  | -------------------------------------------------------------------------------------
|February 19, 2003 |  | /s/ Stephen F. Koziar                                                                
|                  |  |                                                                                      
|                  |  | Stephen F. Koziar
President and Chief Executive Officer (principal executive officer)

72

---

Pursuant to the
requirements of the Securities Exchange 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.

|/s/ T. J. Danis
(T. J. Danis)            |  | Director                                                                       |  | February 19, 2003
|---------------------------------------- |  | ------------------------------------------------------------------------------ |  | -----------------
|                                        
|                                        
|/s/ J. F. Dicke, II
(J. F. Dicke, II)    |  | Director                                                                       |  | February 19, 2003
|                                        
|                                        
|/s/ P. H. Forster
(P. H. Forster)        |  | Director and Chairman                                                          |  | February 19, 2003
|                                        
|                                        
|/s/ E. Green
(E. Green)                  |  | Director                                                                       |  | February 19, 2003
|                                        
|                                        
|(J. G. Haley)                            |  | Director                                                                       |  | February 19, 2003
|                                        
|                                        
|/s/ W. A. Hillenbrand
(W A. Hillenbrand) |  | Director                                                                       |  | February 19, 2003
|                                        
|                                        
|(D. R. Holmes)                           |  | Director                                                                       |  | February 19, 2003
|                                        
|                                        
|/s/ S. F. Koziar
(S. F. Koziar)          |  | Director, President and Chief Executive Officer                                |  | February 19, 2003
|                                        
|                                        
|/s/ B. R. Roberts
(B. R. Roberts)        |  | Director                                                                       |  | February 19, 2003
|                                        
|                                        
|(G. R. Roberts)                          |  | Director                                                                       |  | February 19, 2003
|                                        
|                                        
|/s/ S. M. Stuart
(S. M. Stuart)          |  | Director                                                                       |  | February 19, 2003
|                                        
|                                        
|/s/ E. M. McCarthy
(E. M. McCarthy)      |  | Group Vice President and Chief Financial Officer (principal financial officer) |  | February 19, 2003

73

---

# CERTIFICATIONS

I, Elizabeth M. McCarthy, certify
that:

| | 1. |  | I
have reviewed this annual report on Form 10-K of The Dayton Power and Light  Company;
| | -- |  | ---------------------------------------------------------------------------------------

| | 2. |  | Based
on my knowledge,  this annual report does not contain any untrue statement of a material
fact or  omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with  respect to
the period covered by this annual report;
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. |  | Based
on my knowledge, the financial statements, and other financial information  included in
this  annual report, fairly present in all material respects the financial  condition,
results of operations and cash  flows of the registrant as of, and for, the  periods
presented in this annual report;
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. |  | The
registrants  other certifying officers and I are responsible for establishing and
maintaining  disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
and  15d-14) for the registrant and we have:
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a)
designed such disclosure controls and procedures to ensure that material  information
relating to the registrant, including its consolidated subsidiaries,  is made known to us
by others within those entities, particularly during the  period in which this annual
report is being prepared;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b)
evaluated the effectiveness of the registrants disclosure controls and  procedures as of
a date within 90 days prior to the filing date of this annual  report (the
"Evaluation Date"); and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c)
presented in this annual report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation  Date;
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. |  | The
registrants  other certifying officers and I have disclosed, based on our most
recent  evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent  function):
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) |  | all
significant deficiencies in the design or operation of internal controls  which could
adversely affect the registrants ability to record, process,  summarize and report
financial data and have identified for the  registrants auditors any material
weaknesses in internal controls; and
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) |  | any
fraud, whether or not material, that involves management or other employees  who have a
significant role in the registrants internal controls; and
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6. |  | The
registrants  other certifying officers and I have indicated in this annual report
whether or  not there were significant changes in internal controls or in other factors
that  could significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date:       |  | February 19, 2003                               
|----------- |  | ------------------------------------------------
|Signature:  |  | /s/ Elizabeth M. McCarthy                       
|Print Name: |  | Elizabeth M. McCarthy                           
|Title:      |  | Group Vice President and Chief Financial Officer

74

---

# CERTIFICATIONS

I, Stephen F. Koziar, certify that:

| | 1. |  | I
have reviewed this annual report on Form 10-K of The Dayton Power and Light  Company;
| | -- |  | ---------------------------------------------------------------------------------------

| | 2. |  | Based
on my knowledge,  this annual report does not contain any untrue statement of a material
fact or  omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with  respect to
the period covered by this annual report;
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. |  | Based
on my knowledge, the financial statements, and other financial information  included in
this  annual report, fairly present in all material respects the financial  condition,
results of operations and cash  flows of the registrant as of, and for, the  periods
presented in this annual report;
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. |  | The
registrants  other certifying officers and I are responsible for establishing and
maintaining  disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
and  15d-14) for the registrant and we have:
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a)
designed such disclosure controls and procedures to ensure that material  information
relating to the registrant, including its consolidated subsidiaries,  is made known to us
by others within those entities, particularly during the  period in which this annual
report is being prepared;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b)
evaluated the effectiveness of the registrants disclosure controls and  procedures as of
a date within 90 days prior to the filing date of this annual  report (the
"Evaluation Date"); and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c)
presented in this annual report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation  Date;
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. |  | The
registrants  other certifying officers and I have disclosed, based on our most
recent  evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent  function):
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) |  | all
significant deficiencies in the design or operation of internal controls  which could
adversely affect the registrants ability to record, process,  summarize and report
financial data and have identified for the  registrants auditors any material
weaknesses in internal controls; and
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) |  | any
fraud, whether or not material, that involves management or other employees  who have a
significant role in the registrants internal controls; and
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6. |  | The
registrants  other certifying officers and I have indicated in this annual report
whether or  not there were significant changes in internal controls or in other factors
that  could significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date:       |  | February 19, 2003                    
|----------- |  | -------------------------------------
|Signature:  |  | /s/ Stephen F. Koziar                
|Print Name: |  | Stephen F. Koziar                    
|Title:      |  | President and Chief Executive Officer

75

---

## Schedule II

The Dayton Power and Light CompanyVALUATION AND QUALIFYING ACCOUNTS

For the years ended December 31, 2002, 2001, and 2000

($ in thousands)

|                                    
|------------------------------------
|
|
|
|
|
|2002:                               
|Deducted from accounts receivable  
|                                    
|Provision for uncollectible accounts
|                                    
|2001:                               
|Deducted from accounts receivable  
|                                    
|Provision for uncollectible accounts
|                                    
|2000:                               
|Deducted from accounts receivable  
|                                    
|Provision for uncollectible accounts

(1) Amounts written off, net of recoveries of accounts previously written off.

76