UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q

(Mark One)
(X)   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 1998

                                        OR

( )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from               to

Commission        Registrant, State of Incorporation,         I.R.S. Employer
File Number          Address, and Telephone Number           Identification No.

  1-11377                      CINERGY CORP.                     31-1385023
                         (A Delaware Corporation)
                          139 East Fourth Street
                          Cincinnati, Ohio 45202
                              (513) 381-2000

  1-1232           THE CINCINNATI GAS & ELECTRIC COMPANY          31-0240030
                          (An Ohio Corporation)
                         139 East Fourth Street
                         Cincinnati, Ohio 45202
                            (513) 381-2000

  1-3543                     PSI ENERGY, INC.                    35-0594457
                         (An Indiana Corporation)
                          1000 East Main Street
                        Plainfield, Indiana 46168
                             (317) 839-9611

 2-7793          THE UNION LIGHT, HEAT AND POWER COMPANY         31-0473080
                        (A Kentucky Corporation)
                         139 East Fourth Street
                         Cincinnati, Ohio 45202
                             (513) 381-2000

Indicate  by check mark  whether  the  registrants  (1) have  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
registrants  were required to file such  reports),  and (2) have been subject to
such filing requirements for the past 90 days. Yes X No

This combined Form 10-Q is separately filed by Cinergy Corp., The Cincinnati Gas
& Electric  Company,  PSI  Energy,  Inc.,  and The Union  Light,  Heat and Power
Company.  Information  contained herein relating to any individual registrant is
filed  by  such  registrant  on  its  own  behalf.   Each  registrant  makes  no
representation as to information relating to the other registrants.

The Union  Light,  Heat and Power  Company  meets  the  conditions  set forth in
General  Instruction  H(1)(a) and (b) of Form 10-Q and is  therefore  filing its
company specific information with the reduced disclosure format.

As of April 30, 1998,  shares of Common Stock  outstanding  for each  registrant
were as listed:

                              Company                                   Shares
Cinergy Corp., par value $.01 per share                              157,764,020
The Cincinnati Gas & Electric Company, par value $8.50 per share      89,663,086
PSI Energy, Inc., without par value, stated value $.01 per share      53,913,701
The Union Light, Heat and Power Company, par value $15.00 per share      585,333




<PAGE>



                                TABLE OF CONTENTS


 Item                                                               Page
Number                                                             Number

       Glossary of Terms . . . . . . . . . . . . . . . . . . .        3

                         PART I.  FINANCIAL INFORMATION

  1    Financial Statements
       Cinergy Corp.
         Consolidated Balance Sheets . . . . . . . . . . . . .        6
         Consolidated Statements of Income . . . . . . . . . .        8
         Consolidated Statements of Changes in Common
           Stock Equity. . . . . . . . . . . . . . . . . . . .        9
         Consolidated Statements of Cash Flows . . . . . . . .       11
         Results of Operations . . . . . . . . . . . . . . . .       12
       The Cincinnati Gas & Electric Company
         Consolidated Balance Sheets . . . . . . . . . . . . .       20
         Consolidated Statements of Income and Comprehensive
           Income. . . . . . . . . . . . . . . . . . . . . . .       22
         Consolidated Statements of Cash Flows . . . . . . . .       23
         Results of Operations . . . . . . . . . . . . . . . .       24
       PSI Energy, Inc.
         Consolidated Balance Sheets . . . . . . . . . . . . .       28
         Consolidated Statements of Income and Comprehensive
           Income. . . . . . . . . . . . . . . . . . . . . . .       30
         Consolidated Statements of Cash Flows . . . . . . . .       31
         Results of Operations . . . . . . . . . . . . . . . .       32
       The Union Light, Heat and Power Company
         Balance Sheets. . . . . . . . . . . . . . . . . . . .       35
         Statements of Income. . . . . . . . . . . . . . . . .       37
         Statements of Cash Flows. . . . . . . . . . . . . . .       38
         Results of Operations . . . . . . . . . . . . . . . .       39
       Notes to Financial Statements . . . . . . . . . . . . .       41
  2    Management's Discussion and Analysis of Financial
         Condition and Results of Operations . . . . . . . . .       46
  3    Quantitative and Qualitative Disclosures About
         Market Risk . . . . . . . . . . . . . . . . . . . . .       49

                           PART II. OTHER INFORMATION

  1    Legal Proceedings . . . . . . . . . . . . . . . . . . .       49
  4    Submission of Matters to a Vote of Security Holders . .       49
  6    Exhibits and Reports on Form 8-K. . . . . . . . . . . .       50
       Signature . . . . . . . . . . . . . . . . . . . . . . .       52


<PAGE>



                                GLOSSARY OF TERMS

The following  abbreviations  or acronyms used in the text of this combined Form
10-Q are defined below:

    TERM                                   DEFINITION

1997 Form         Combined 1997 Annual Report on Form 10-K filed separately by
  10-K              Cinergy, CG&E, PSI, and ULH&P

Avon Energy       Avon Energy Partners Holdings, an Unlimited Liability
                    Company and its wholly-owned subsidiary Avon Energy
                    Partners PLC, a Limited Liability Company

CERCLA            Comprehensive Environmental Response, Compensation and
                    Liability Act

CFC               National Rural Utilities Cooperative Finance Corporation

CG&E              The Cincinnati Gas & Electric Company (a subsidiary of
                    Cinergy)

Cinergy or        Cinergy Corp.
  Company

Cinergy UK        Cinergy UK, Inc., formerly M.E. Holdings, Inc., (a
                    subsidiary of Cinergy Investments, Inc.) which holds
                    Cinergy's 50% investment in Avon Energy

Committed Lines   Unsecured lines of credit

December 1996     A PUCO order issued in December 1996 on CG&E's gas rate
  Order             proceeding

December 1996     An Indiana Utility Regulatory Commission order issued in
  DSM Order         December 1996 on PSI's DSM proceeding

DSM               Demand-side management

Enertech          Enertech Associates, Inc., formerly named Power
                    International, Inc. (a subsidiary of Cinergy
                    Investments, Inc.)

EPA               United States Environmental Protection Agency

EPS               Earnings per share

February 1995     An Indiana Utility Regulatory Commission order issued in
  Order             February 1995

HB 443            Customer choice bill introduced by the House Chairman of
                    the Tourism, Development and Energy Committee in Kentucky

HJR               House Joint Resolution, which calls for an executive task
                    force to study electricity restructuring in Kentucky

kwh               Kilowatt-hour


<PAGE>



GLOSSARY OF TERMS (Continued)

    TERM                                   DEFINITION

IDEM              Indiana Department of Environmental Management

IGC               Indiana Gas Company, Inc., formerly Indiana Gas and Water
                    Company, Inc.

Investments       Cinergy Investments, Inc. (a subsidiary of Cinergy)

IRS               Internal Revenue Service

Mcf               Thousand cubic feet

MGP               Manufactured gas plant

Midlands          Midlands Electricity plc

NIPSCO            Northern Indiana Public Service Company

PSI               PSI Energy, Inc. (a subsidiary of Cinergy)

PUCO              Public Utilities Commission of Ohio

RUS               Rural Utilities Service

September 1996    An Indiana Utility  Regulatory  Commission  order issued in 
  Order             September 1996 on PSI's retail rate proceeding

Statement 130     Statement of Financial Accounting Standards No. 130,
                    Reporting Comprehensive Income

ULH&P             The Union Light, Heat and Power Company (a wholly-owned
                    subsidiary of CG&E)

Uncommitted       Short-term borrowings with various banks arranged on an
  Lines             "as offered" basis

WVPA              Wabash Valley Power Association, Inc.

Zimmer            CG&E's William H. Zimmer Generating Station



<PAGE>

                                 CINERGY CORP.
                            AND SUBSIDIARY COMPANIES


<PAGE>





                                  CINERGY CORP.
                           CONSOLIDATED BALANCE SHEETS

ASSETS
                                                       March 31    December 31
                                                         1998         1997
                                                     (unaudited)
                                                       (dollars in thousands)

Utility Plant - Original Cost
  In service
    Electric                                          $9,014,797   $8,981,182
    Gas                                                  753,311      746,903
    Common                                               186,631      186,078
                                                      ----------   ----------
                                                       9,954,739    9,914,163
  Accumulated depreciation                             3,860,682    3,800,322
                                                      ----------   ----------
                                                       6,094,057    6,113,841

  Construction work in progress                          194,042      183,262
                                                      ----------   ----------
      Total utility plant                              6,288,099    6,297,103

Current Assets
  Cash and temporary cash investments                     58,731       53,310
  Restricted deposits                                      2,348        2,319
  Accounts receivable less accumulated provision for
    doubtful accounts of $10,349 at March 31, 1998,
    and $10,382 at December 31, 1997                     519,396      413,626
  Materials, supplies, and fuel - at average cost
    Fuel for use in electric production                   68,292       57,916
    Gas stored for current use                            12,232       29,174
    Other materials and supplies                          77,972       76,066
  Prepayments and other                                   47,291       38,171
                                                      ----------   ----------
                                                         786,262      670,582

Other Assets
  Regulatory assets
    Amounts due from customers - income taxes            383,314      374,456
    Post-in-service carrying costs and deferred
      operating expenses                                 176,531      178,504
    Coal contract buyout costs                           117,964      122,485
    Deferred demand-side management costs                101,958      109,596
    Deferred merger costs                                 89,015       90,346
    Phase-in deferred return and depreciation             85,960       89,689
    Unamortized costs of reacquiring debt                 65,941       66,242
    Other                                                 46,592       45,533
  Investments in unconsolidated subsidiaries             580,269      537,720
  Other                                                  274,092      275,897
                                                      ----------   ----------
                                                       1,921,636    1,890,468

                                                      $8,995,997   $8,858,153

The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.




<PAGE>





                                  CINERGY CORP.


CAPITALIZATION AND LIABILITIES

                                                       March 31    December 31
                                                         1998         1997
                                                      (unaudited)
                                                       (dollars in thousands)

Common Stock Equity
  Common stock - $.01 par value;  authorized  
    shares - 600,000,000;  outstanding
    shares - 157,764,020 at March 31, 1998, 
    and 157,744,658 at December 31, 1997              $    1,578 $      1,577
  Paid-in capital                                      1,574,080    1,573,064
  Retained earnings                                    1,002,495      967,420
  Accumulated other comprehensive income                  (3,279)      (2,861)
                                                      ----------   ----------
      Total common stock equity                        2,574,874    2,539,200

Cumulative Preferred Stock of Subsidiaries
  Not subject to mandatory redemption                     92,752      177,989

Long-term Debt                                         2,032,156    2,150,902
                                                      ----------   ----------
      Total capitalization                             4,699,782    4,868,091

Current Liabilities
  Long-term debt due within one year                     145,000       85,000
  Notes payable and other short-term obligations       1,222,795    1,114,028
  Accounts payable                                       558,021      488,716
  Accrued taxes                                          218,251      187,033
  Accrued interest                                        40,342       46,622
  Other                                                   98,740       79,193
                                                      ----------   ----------
                                                       2,283,149    2,000,592

Other Liabilities
  Deferred income taxes                                1,233,505    1,248,543
  Unamortized investment tax credits                     163,850      166,262
  Accrued pension and other postretirement
    benefit costs                                        307,373      297,142
  Other                                                  308,338      277,523
                                                      ----------   ----------
                                                       2,013,066    1,989,470

                                                      $8,995,997   $8,858,153

<PAGE>
<TABLE>
<CAPTION>


                                  CINERGY CORP.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (unaudited)
<S>                                                 <C>          <C>            <C>             <C>  
                                                         Quarter Ended              Twelve Months Ended
                                                            March 31                      March 31
                                                       1998          1997          1998            1997
                                                           (in thousands, except per share amounts)
Operating Revenues
  Electric                                          $1,158,724   $  817,914     $4,202,508      $2,901,780
  Gas                                                  173,061      212,266        451,940         487,145
                                                    ----------   ----------     ----------      ----------
                                                     1,331,785    1,030,180      4,654,448       3,388,925
Operating Expenses
  Fuel used in electric production                     180,519      175,746        698,208         697,544
  Gas purchased                                         96,611      123,968        238,801         279,859
  Purchased and exchanged power                        471,885      160,592      1,530,651         291,809
  Other operation                                      163,028      163,412        637,561         615,712
  Maintenance                                           39,066       45,854        169,683         196,120
  Depreciation                                          73,305       71,556        290,826         284,124
  Amortization of phase-in deferrals                     5,539        3,371         15,651          13,569
  Amortization of post-in-service
    deferred operating expenses - net                    1,091        1,091          4,362             425
  Income taxes                                          70,791       63,919        255,809         208,205
  Taxes other than income taxes                         69,649       68,372        266,301         260,450
                                                    ----------   ----------     ----------      ----------
                                                     1,171,484      877,881      4,107,853       2,847,817

Operating Income                                       160,301      152,299        546,595         541,108

Other Income and Expenses - Net
  Allowance for equity funds used
    during construction                                     21          191            (72)          1,065
  Post-in-service carrying costs                          -            -              -                880
  Phase-in deferred return                               1,811        2,002          7,817           8,281
  Equity in earnings of unconsolidated subsidiaries     11,854       26,500         45,746          51,930
  Income taxes                                          13,342          791         48,488          17,109
  Other - net                                          (19,031)      (2,627)       (47,906)        (35,415)
                                                    ----------   ----------     ----------      ----------
                                                         7,997       26,857         54,073          43,850

Income Before Interest and Other Charges               168,298      179,156        600,668         584,958

Interest and Other Charges
  Interest on long-term debt                            43,758       49,275        176,255         190,757
  Other interest                                        17,994       13,867         64,074          42,165
  Allowance for borrowed funds
    used during construction                            (1,947)      (1,342)        (6,005)         (6,387)
  Preferred dividend requirements of subsidiaries        2,422        3,239         11,752          19,650
                                                    ----------   ----------     ----------      ----------
                                                        62,227       65,039        246,076         246,185

Net Income Before Extraordinary Item                $  106,071   $  114,117     $  354,592      $  338,773
Extraordinary Item - Equity Share of
  Windfall Profits Tax (Less
  Applicable Income Taxes of $0)                          -            -          (109,400)           -
                                                    ----------   ----------     ----------      ----------
Net Income                                          $  106,071   $  114,117     $  245,192      $  338,773

Average Common Shares Outstanding                      157,764      157,679        157,706         157,679

Earnings Per Common Share (Note 9)
  Net income before extraordinary item                    $.67         $.72          $2.24           $2.02
  Net income                                              $.67         $.72          $1.55           $2.02

Earnings Per Common Share - Assuming Dilution (Note 9)
  Net income before extraordinary item                    $.67         $.72          $2.23           $2.01
  Net income                                              $.67         $.72          $1.54           $2.01

Dividends Declared Per Common Share                       $.45         $.45          $1.80           $1.76
<FN>

The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial
statements.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>




                                                  CINERGY CORP.
                            CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
                                             (dollars in thousands)
                                                   (unaudited)
<S>                                <C>          <C>             <C>             <C>                <C>                <C>
                                                                                 Accumulated
                                                                                   Other              Total              Total
                                    Common        Paid-in        Retained       Comprehensive      Comprehensive      Common Stock
                                    Stock         Capital        Earnings          Income             Income             Equity

Quarter Ended March 31, 1998

Balance January 1, 1998            $1,577       $1,573,064      $  967,420        $(2,861)                             $2,539,200
Comprehensive income
  Net income                                                       106,071                           $106,071             106,071
  Other comprehensive income,
      net of tax
    Foreign currency translation
      adjustment                                                                                         (367)               (367)
    Minimum pension liability
      adjustment                                                                                          (51)                (51)
                                                                                                     --------
  Other comprehensive income
    total                                                                            (418)               (418)
                                                                                                     --------
Comprehensive income total                                                                           $105,653
Issuance of 19,362 shares of
  common stock - net                    1              289                                                                    290
Treasury shares purchased              (1)          (1,430)                                                                (1,431)
Treasury shares reissued                1            2,149                                                                  2,150
Dividends on common stock (see
  page 8 for per share amounts)                                    (70,994)                                               (70,994)
Other                                                    8              (2)                                                     6
                                   ------       ----------      ----------        -------                              ----------

Balance March 31, 1998             $1,578       $1,574,080      $1,002,495        $(3,279)                             $2,574,874

Quarter Ended March 31, 1997

Balance at January 1, 1997         $1,577       $1,590,735      $  993,526        $(1,384)                             $2,584,454
Comprehensive income
  Net income                                                       114,117                           $114,117             114,117
  Other comprehensive income,
      net of tax
    Foreign currency translation
      adjustment                                                                                       (1,035)             (1,035)
                                                                                                     --------
  Other comprehensive income
    total                                                                          (1,035)             (1,035)
                                                                                                     --------
Comprehensive income total                                                                           $113,082
                                                                                                     ========
Treasury shares purchased              (7)         (31,947)                                                               (31,954)
Treasury shares reissued                7           21,134                                                                 21,141
Dividends on common stock (see
  page 8 for per share amounts)                                    (71,000)                                               (71,000)
Other                                                   12                                                                     12
                                   ------       ----------      ----------        -------                              ----------

Balance March 31, 1997             $1,577       $1,579,934      $1,036,643        $(2,419)                             $2,615,735
</TABLE>

<PAGE>

<TABLE>
<CAPTION>


                                  CINERGY CORP.
      CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY (CONTINUED)
                             (dollars in thousands)
                                   (unaudited) 
<S>                                <C>          <C>             <C>             <C>                <C>                <C>
                                                                                 Accumulated
                                                                                   Other              Total              Total
                                    Common        Paid-in        Retained       Comprehensive      Comprehensive      Common Stock
                                    Stock         Capital        Earnings          Income             Income             Equity

Twelve Months Ended March 31, 1998

Balance April 1, 1997              $1,577       $1,579,934      $1,036,643        $(2,419)                             $2,615,735
Comprehensive income
  Net income                                                       245,192                           $245,192             245,192
  Other comprehensive income,
      net of tax
    Foreign currency translation
      adjustment                                                                                          273                 273
    Minimum pension liability
      adjustment                                                                                       (1,133)             (1,133)
                                                                                                     --------
  Other comprehensive income
    total                                                                            (860)               (860)
                                                                                                     --------
Comprehensive income total                                                                           $244,332
Issuance of 84,891 shares of
  common stock - net                    1            2,355                                                                  2,356
Treasury shares purchased              (5)         (15,682)                                                               (15,687)
Treasury shares reissued                5            7,744                                                                  7,749
Dividends on common stock (see
  page 8 for per share amounts)                                   (283,860)                                              (283,860)
Other                                                 (271)          4,520                                                  4,249
                                   ------       ----------      ----------        -------                              ----------

Balance March 31, 1998             $1,578       $1,574,080      $1,002,495        $(3,279)                             $2,574,874

Twelve Months Ended March 31, 1997

Balance at April 1, 1996           $1,577       $1,595,435      $  993,632        $(1,074)                             $2,589,570
Comprehensive income
  Net income                                                       338,773                           $338,773             338,773
  Other comprehensive income,
      net of tax
    Foreign currency translation
      adjustment                                                                                       (1,166)             (1,166)
    Minimum pension liability
      adjustment                                                                                         (179)               (179)
                                                                                                     --------
  Other comprehensive income
    total                                                                          (1,345)             (1,345)
                                                                                                     --------
Comprehensive income total                                                                           $337,428
                                                                                                     ========
Treasury shares purchased             (10)         (40,717)                                                               (40,727)
Treasury shares reissued               10           25,548                                                                 25,558
Costs of reacquisition of
  preferred stock of subsidiary                                    (18,391)                                               (18,391)
Dividends on common stock (see
  page 8 for per share amounts)                                   (277,559)                                              (277,559)
Other                                                 (332)            188                                                   (144)
                                   ------       ----------      ----------        -------                              ----------

Balance March 31, 1997             $1,577       $1,579,934      $1,036,643        $(2,419)                             $2,615,735
<FN>

The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                           CINERGY CORP.
                                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                            (unaudited)
<S>                                                         <C>            <C>            <C>            <C>   
                                                                  Year to Date              Twelve Months Ended
                                                                    March 31                      March 31
                                                              1998           1997           1998           1997
                                                                                (in thousands)

Operating Activities
  Net income                                                $106,071       $114,117       $245,192       $338,773
  Items providing or (using) cash:
    Depreciation                                              73,305         71,556        290,826        284,124
    Deferred income taxes and investment tax
      credits - net                                          (12,955)        (6,889)        61,572         24,045
    Equity in earnings of unconsolidated subsidiaries        (11,854)       (26,500)       (20,593)       (51,930)
    Extraordinary item - equity share of windfall
      profits tax                                               -              -           109,400           -
    Allowance for equity funds used during
      construction                                               (21)          (191)            72         (1,065)
    Regulatory assets - net                                   20,915         21,599         70,626         41,922
    Changes in current assets and current
      liabilities
        Restricted deposits                                      (29)            (2)          (625)          (336)
        Accounts receivable, net of reserves on
          receivables sold                                  (106,525)        (8,498)      (315,184)       (19,527)
        Materials, supplies, and fuel                          4,660         30,699         (4,222)        45,535
        Accounts payable                                      69,305        (60,734)       313,335        (36,128)
        Litigation settlement                                   -              -              -           (80,000)
        Accrued taxes and interest                            24,938         52,412        (48,888)        29,121
    Other items - net                                         25,596        (21,239)        79,010         68,573
                                                            --------       --------       --------       --------
          Net cash provided by operating activities          193,406        166,330        780,521        643,107

Financing Activities
  Issuance of common stock                                       290           -             2,356           -
  Issuance of long-term debt                                  98,901           -           198,963        150,217
  Retirement of preferred stock of subsidiaries              (85,229)           (25)      (101,473)      (212,507)
  Redemption of long-term debt                              (160,291)       (61,880)      (434,723)      (148,774)
  Change in short-term debt                                  108,767         26,560        274,018        668,477
  Dividends on common stock                                  (70,802)       (71,000)      (283,668)      (277,559)
                                                            --------       --------       --------       --------
          Net cash (used in) or provided by
            financing activities                            (108,364)      (106,345)      (344,527)       179,854

Investing Activities
  Construction expenditures (less allowance
    for equity funds used during construction)               (66,348)       (58,909)      (335,494)      (332,162)
  Deferred demand-side management costs                       (3,615)        (5,109)       (18,373)       (39,718)
  Investments in unconsolidated subsidiaries                  (9,658)          -           (38,690)      (503,349)
                                                            --------       --------       --------       --------
          Net cash used in investing activities              (79,621)       (64,018)      (392,557)      (875,229)

Net increase (decrease) in cash and
   temporary cash investments                                  5,421         (4,033)        43,437        (52,268)

Cash and temporary cash investments at
   beginning of period                                        53,310         19,327         15,294         67,562
                                                            --------       --------       --------       --------

Cash and temporary cash investments at
   end of period                                            $ 58,731       $ 15,294       $ 58,731       $ 15,294
<FN>

The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial
statements.
</FN>
</TABLE>

<PAGE>

                                  CINERGY CORP.

Below is  information  concerning  the  consolidated  results of operations  for
Cinergy for the quarter and twelve months ended March 31, 1998. For  information
concerning the results of operations for each of the other  registrants  for the
same  quarter,  see the  discussion  under the heading  "Results of  Operations"
following the financial statements of each such registrant.

           RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998

Kwh Sales

Increased activity in Cinergy's power marketing and trading operations,  for the
quarter ended March 31, 1998, led to higher  non-firm power sales for resale and
significantly contributed to the increase in total kwh sales of 72%, as compared
to the same period of 1997. An increase in retail sales,  which reflects  higher
industrial  sales and an increased  average number of residential and commercial
customers, was partially offset by a decline in residential sales as a result of
milder weather during the first quarter of 1998 as compared to the first quarter
of 1997.  Increased  industrial sales primarily  reflected growth in the primary
metals sector.

Mcf Sales and Transportation

Mcf gas sales and transportation volumes for the first quarter of 1998 decreased
7.3%,  as  compared  to the same  period  in  1997.  Decreased  residential  and
commercial  sales,  reflecting  the milder  weather  during the first quarter of
1998,  were slightly  offset by an increase in the average  number of customers.
Higher gas  transportation  volumes  reflect the  continued  trend of  customers
purchasing gas directly from suppliers,  using transportation  services provided
by CG&E.

Operating Revenues

Electric Operating Revenues

Electric operating revenues for the quarter ended March 31, 1998, increased $341
million (42%),  as compared to the same period last year,  primarily as a result
of the increased kwh sales as previously discussed. The operation of CG&E's fuel
adjustment  clauses,  reflecting a higher  average cost of fuel used in electric
production, also contributed to the increase.

An analysis of electric operating revenues is shown below:

                                                              Quarter
                                                          Ended March 31
                                                           (in millions)

Electric operating revenues - March 31, 1997                   $818
Increase (Decrease) due to change in:
  Price per kwh
    Retail                                                       15
    Sales for resale
      Firm power obligations                                     (1)
      Non-firm power transactions                               (26)
  Total change in price per kwh                                 (12)

  Kwh sales
    Retail                                                        7
    Sales for resale
      Non-firm power transactions                               343
  Total change in kwh sales                                     350

  Other                                                           3

Electric operating revenues - March 31, 1998                 $1 159

Gas Operating Revenues

The  increasing  trend of  industrial  customers  purchasing  gas directly  from
producers  and utilizing  CG&E  facilities to transport the gas continues to put
downward  pressure  on  gas  operating   revenues.   (See  the  "Mcf  Sales  and
Transportation"  section.)  Since  providing  transportation  services  does not
necessitate  recovery  of the  cost  of  gas  purchased,  the  revenue  per  Mcf
transported  is less  than the  revenue  per Mcf  sold.  As a  result,  a higher
relative  volume  of gas  transported  to gas sold  translates  into  lower  gas
operating revenues.

Gas operating revenues decreased $39 million (18%) in the first quarter of 1998,
when  compared  to the same  period last year.  The  decrease  in gas  operating
revenues is primarily attributable to lower residential and commercial sales due
to the milder  weather  during the first  quarter of 1998.  An  increase  in the
relative  volume of gas transported to gas sold, as previously  discussed,  also
contributed to the decrease.

Operating Expenses

Fuel Used in Electric Production

Electric  fuel costs  increased $5 million (3%) for the quarter  ended March 31,
1998, as compared to the same period last year.

An analysis of these fuel costs is shown below:

                                                 Quarter
                                              Ended March 31
                                              (in millions)

Fuel expense - March 31, 1997 $176 
Increase (Decrease) due to change in:
  Price of fuel                                      (6)
  Deferred fuel cost                                  9
  Kwh generation                                      2
                                                   ----

Fuel expense - March 31, 1998                      $181

Gas Purchased

Gas purchased for the quarter ended March 31, 1998, decreased $27 million (22%),
when compared to the same period last year,  reflecting a lower average cost per
Mcf purchased and a decline in the volumes of gas purchased primarily due to the
milder weather during the first quarter of 1998.

Purchased and Exchanged Power

Purchased and exchanged power increased $311 million for the quarter ended March
31,  1998,  when  compared to the same period  last year,  primarily  reflecting
increased  purchases  of  non-firm  power  for  resale  to others as a result of
increased activity in Cinergy's power marketing and trading operations.

Maintenance

For the three  months  ended March 31,  1998,  maintenance  costs  decreased  $7
million  (15%),  when  compared to the three months  ended March 31, 1997.  This
decrease is partially due to a decline in maintenance activities associated with
postponed outages at certain of CG&E's electric production facilities. Decreased
maintenance costs, associated with CG&E's electric distribution facilities, also
contributed to the lower level of expenses for the current quarter.

Amortization of Phase-in Deferrals

Amortization of phase-in deferrals  reflects the PUCO-ordered  phase-in plan for
Zimmer.

Other Income and Expenses - Net

Equity in Earnings of Unconsolidated Subsidiaries

The $15 million  decrease in equity in earnings of  unconsolidated  subsidiaries
for the first three months of 1998,  as compared to the same period of 1997,  is
primarily attributable to the decrease in earnings of Midlands,  which is due to
milder weather  conditions and a penalty  imposed on each electric  distribution
company  due to the delay in  opening  up the  electricity  supply  business  to
competition.

Other - net

The change in other - net of $16  million for the three  months  ended March 31,
1998, from the same period of 1997, is primarily due to a litigation  settlement
(see  Note 6 of the  "Notes  to  Financial  Statements"  in "Part  I.  Financial
Information"),  an increase in expenses  related to Cinergy Global Power,  Inc.,
which was acquired in September  1997,  and an adjustment  recorded in the first
quarter of 1997 related to a 1996 sale of a foreign subsidiary.

Interest and Other Charges

Interest on Long-term Debt

Interest on  long-term  debt  decreased $6 million  (11%) for the quarter  ended
March 31, 1998,  as compared to the same period last year,  primarily due to the
net redemption of  approximately  $250 million of long-term debt by CG&E and PSI
during the period from February 1997 through March 1998.

Other Interest

Other  interest  increased $4 million  (30%) for the first  quarter of 1998,  as
compared  to the same  period  last  year,  primarily  due to  higher  levels of
short-term  borrowings,  the  recognition  of a full  quarter of interest on the
currency swap program, which was initiated in mid-February 1997, and an increase
in  short-term  interest  rates  during  1998 over 1997.  The  remainder  of the
increase is attributable to interest resulting from an IRS audit of the 1989 and
1990 tax years.

        RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED MARCH 31, 1998

Kwh Sales

Increased  activity in Cinergy's power  marketing and trading  operations led to
higher  non-firm  power sales for resale and  significantly  contributed  to the
increase in total kwh sales of 86% for the twelve  months  ended March 31, 1998,
as  compared to the same period for 1997.  An  increase in retail  sales,  which
reflects  higher  industrial  sales and an  increase  in the  average  number of
residential  and  commercial  customers,  was  partially  offset by a decline in
residential  sales as a result of the milder weather  experienced for the twelve
months ended March 31, 1998, as compared to the same period last year. Increased
industrial sales primarily reflected growth in the primary metals sector.

Mcf Sales and Transportation

Mcf gas sales for the twelve months ended March 31, 1998,  decreased  9.5% while
transportation  volumes increased 12.4%, as compared to the same period in 1997.
The  decrease in Mcf sales is due,  in part,  to the milder  weather  during the
twelve month period ended March 31, 1998, and was partially  offset by increases
in the average number of customers.  Higher gas  transportation  volumes reflect
the continued trend of customers  purchasing gas directly from suppliers,  using
transportation services provided by CG&E.

Operating Revenues

Electric Operating Revenues

Increased kwh sales, as previously  discussed,  the effects of PSI's retail rate
increases  approved in the September 1996 Order,  as amended in August 1997, and
the December 1996 DSM Order significantly  contributed to the $1.3 billion (45%)
increase in electric  operating  revenues for the twelve  months ended March 31,
1998,  when  compared  to the same  period  of 1997.  Also  contributing  to the
increase  was the return of  approximately  $5 million to  customers  in 1996 in
accordance  with an order issued by the IURC in February 1995. The February 1995
Order required all retail  operating income above a certain rate of return to be
refunded  to  customers.  The  operation  of PSI's and  CG&E's  fuel  adjustment
clauses,  reflecting a lower  average cost of fuel used in electric  production,
partially offset these increases.

An analysis of electric operating revenues is shown below:

                                                    Twelve Months
                                                   Ended March 31
                                                    (in millions)

Electric operating revenues - March 31, 1997            $2 902
Increase (Decrease) due to change in:
  Price per kwh
    Retail                                                  22
    Sales for resale
      Firm power obligations                               (13)
      Non-firm power transactions                           31
  Total change in price per kwh                             40

  Kwh sales
    Retail                                                  20
    Sales for resale
      Firm power obligations                                14
      Non-firm power transactions                        1 220
                                                        ------
  Total change in kwh sales                              1 254

  Other                                                      7

Electric operating revenues - March 31, 1998            $4 203

Gas Operating Revenues

For a discussion  of the continued  trend of downward  pressure on gas operating
revenues from increased  transportation  services, refer to the discussion under
the caption "Gas  Operating  Revenues" for Cinergy in "Results of Operations for
the Quarter Ended March 31, 1998."

Gas  operating  revenues  decreased $35 million (7%) for the twelve months ended
March 31, 1998,  when  compared to the same period last year.  This  decrease is
primarily attributable to the decline in Mcf sales due to the milder weather. An
increase in the relative  volume of gas  transported  to gas sold, as previously
discussed, also contributed to the decrease.

Operating Expenses

Fuel Used in Electric Production

Electric fuel costs for the twelve months ended March 31, 1998,  were relatively
constant, as compared to the same period last year.

An analysis of these fuel costs is shown below:

                                              Twelve Months
                                              Ended March 31
                                              (in millions)

Fuel expense - March 31, 1997                      $698 
Increase (Decrease) due to change in:
  Price of fuel                                       6
  Deferred fuel cost                                (37)
  Kwh generation                                     31
                                                   ----

Fuel expense - March 31, 1998                      $698

Gas Purchased

Gas purchased for the twelve months ended March 31, 1998,  decreased $41 million
(15%) when compared to the same period last year. This decrease reflects a lower
average cost per Mcf of gas purchased and a decline in the volumes  purchased as
previously discussed.

Purchased and Exchanged Power

Purchased and exchanged power increased $1.2 billion for the twelve months ended
March  31,  1998,  when  compared  to the same  period of last  year,  primarily
reflecting  increased  purchases  of  non-firm  power for  resale to others as a
result  of  increased   activity  in  Cinergy's   power  marketing  and  trading
operations.

Maintenance

Maintenance  costs decreased $26 million (13%) for the twelve months ended March
31, 1998,  as compared to the same period last year,  partially due to a decline
in maintenance activities associated with postponed outages at certain of CG&E's
and  PSI's  electric  production   facilities.   Decreased   maintenance  costs,
associated with electric distribution facilities,  also contributed to the lower
level of expenses for the current twelve month period.

Amortization of Phase-in Deferrals

Amortization of phase-in deferrals  reflects the PUCO-ordered  phase-in plan for
Zimmer.

Amortization of Post-in-Service Deferred Operating Expenses - Net

Amortization of  post-in-service  deferred operating expenses - net reflects the
amortization and related recovery in rates of various deferrals of depreciation,
operation and maintenance expenses (exclusive of fuel costs), and property taxes
on certain  generating  units and other utility plant from the  in-service  date
until the related plant was reflected in retail rates.

Other Income and Expenses - Net

Equity in Earnings of Unconsolidated Subsidiaries

The  $6  million  (12%)  decrease  in  equity  in  earnings  of   unconsolidated
subsidiaries for the twelve months ended March 31, 1998, as compared to the same
period of 1997,  is  primarily  attributable  to the  decrease  in  earnings  of
Midlands,  which is due to milder weather  conditions  and a penalty  imposed on
each  electric  distribution  company  due  to  the  delay  in  opening  up  the
electricity supply business to competition.

Other - net

The change in other - net of $12 million for the twelve  months  ended March 31,
1998,  as compared to the same period last year is primarily due to a litigation
settlement  (see  Note 6 of the  "Notes  to  Financial  Statements"  in "Part I.
Financial  Information"),  a gain in 1996  related to the sale of  certain  CG&E
assets, and expenses incurred relative to non-regulated entities.  These amounts
are partially offset by charges in 1996 associated with the December 1996 Order.

Interest and Other Charges

Interest on Long-term Debt

Interest on long-term  debt  decreased  $15 million  (8%) for the twelve  months
ended  March 31,  1998,  from the same period of 1997  primarily  due to the net
redemption of  approximately  $170 million of long-term  debt by CG&E,  PSI, and
ULH&P during the period from May 1996 through March 1998.

Other Interest

Other interest increased $22 million (52%) for the twelve months ended March 31,
1998,  as  compared  to the same  period  last year,  primarily  reflecting  the
recognition  of a full twelve  months of interest on the currency  swap program,
which was initiated in  mid-February  1997,  an increase in short-term  interest
rates  during 1998 over 1997,  higher  levels of  short-term  borrowing,  a full
twelve  months  of  interest  on the  borrowings  used to fund the  purchase  of
Midlands,  and increased borrowings to fund CG&E's and PSI's redemption of first
mortgage bonds and PSI's redemption of preferred stock.

Preferred Dividend Requirements of Subsidiaries

The decrease in preferred  dividend  requirements  of subsidiaries of $8 million
(40%) for the twelve  months ended March 31, 1998,  from the same period of 1997
is primarily  attributable to the September 1996 reacquisition and retirement of
approximately 90% of the outstanding preferred stock of CG&E. Additionally,  PSI
redeemed all  outstanding  shares of its 7.15%  Cumulative  Preferred  Stock and
7.44% Series Cumulative Preferred Stock on September 1, 1997, and March 1, 1998,
respectively.

<PAGE>

                              THE CINCINNATI GAS &
                                ELECTRIC COMPANY
                            AND SUBSIDIARY COMPANIES

<PAGE>

<TABLE>
<CAPTION>


                      THE CINCINNATI GAS & ELECTRIC COMPANY
                           CONSOLIDATED BALANCE SHEETS


ASSETS
                                                        March 31   December 31
                                                          1998        1997
                                                       (unaudited)
                                                       (dollars in thousands)
<S>                                                    <C>          <C> 
Utility Plant - Original Cost
  In service
    Electric                                           $4,716,835   $4,700,631
    Gas                                                   753,311      746,903
    Common                                                186,631      186,078
                                                       ----------   ----------
                                                        5,656,777    5,633,612
  Accumulated depreciation                              2,047,211    2,008,005
                                                       ----------   ----------
                                                        3,609,566    3,625,607
  Construction work in progress                           126,145      118,133
                                                       ----------   ----------
        Total utility plant                             3,735,711    3,743,740

Current Assets
  Cash and temporary cash investments                       5,384        2,349
  Restricted deposits                                       1,173        1,173
  Notes receivable from affiliated companies               14,235       27,193
  Accounts receivable less accumulated provision
    for doubtful accounts of $9,816 at March 31, 1998,
    and $9,199 at December 31, 1997                       223,784      193,549
  Accounts receivable from affiliated companies            17,523       35,507
  Materials, supplies, and fuel - at average cost
    Fuel for use in electric production                    31,647       29,682
    Gas stored for current use                             12,232       29,174
    Other materials and supplies                           50,015       49,111
  Prepayments and other                                    39,982       31,827
                                                       ----------   ----------
                                                          395,975      399,565

Other Assets
  Regulatory assets
    Amounts due from customers - income taxes             358,286      350,515
    Post-in-service carrying costs and deferred
      operating expenses                                  132,967      134,672
    Deferred merger costs                                  16,323       16,557
    Deferred demand-side management costs                  39,058       38,318
    Phase-in deferred return and depreciation              85,960       89,689
    Unamortized costs of reacquiring debt                  36,912       36,575
    Other                                                   4,704        1,439
  Other                                                    92,642      103,368
                                                       ----------   ----------
                                                          766,852      771,133

                                                       $4,898,538   $4,914,438

<FN>
The  accompanying  notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.
</FN>
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                      THE CINCINNATI GAS & ELECTRIC COMPANY


CAPITALIZATION AND LIABILITIES
                                                              March 31   December 31
                                                                1998        1997
                                                             (unaudited)
                                                              (dollars in thousands)
<S>                                                         <C>          <C>  
Common Stock Equity
  Common stock - $8.50 par value;
    authorized shares - 120,000,000;
    outstanding shares - 89,663,086 at March 31, 1998,
    and December 31, 1997                                   $  762,136   $  762,136
  Paid-in capital                                              534,654      534,649
  Retained earnings                                            342,929      314,553
  Accumulated other comprehensive income                          (905)        (750)
                                                            ----------   ----------
      Total common stock equity                              1,638,814    1,610,588

Cumulative Preferred Stock
  Not subject to mandatory redemption                           20,779       20,793

Long-term Debt                                               1,105,476    1,324,432
                                                            ----------   ----------
      Total capitalization                                   2,765,069    2,955,813

Current Liabilities
  Long-term debt due within one year                            60,000        -
  Notes payable and other short-term obligations               327,000      289,000
  Notes payable to affiliated companies                         23,410       12,253
  Accounts payable                                             277,923      249,538
  Accounts payable to affiliated companies                      34,407       10,821
  Accrued taxes                                                144,572      149,129
  Accrued interest                                              25,548       25,430
  Other                                                         27,947       29,950
                                                            ----------   ----------
                                                               920,807      766,121

Other Liabilities
  Deferred income taxes                                        814,080      794,396
  Unamortized investment tax credits                           115,420      116,966
  Accrued pension and other postretirement benefit costs       154,208      180,566
  Other                                                        128,954      100,576
                                                            ----------   ----------
                                                             1,212,662    1,192,504

                                                            $4,898,538   $4,914,438

</TABLE>

<PAGE>

<TABLE>
<CAPTION>


                      THE CINCINNATI GAS & ELECTRIC COMPANY
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                   (unaudited)

                                                                     Quarter Ended
                                                                        March 31
                                                                   1998         1997
                                                                     (in thousands)
<S>                                                             <C>          <C>  
Operating Revenues
  Electric
    Non-affiliated companies                                    $574,841     $395,625
    Affiliated companies                                          18,464        6,075
  Gas
    Non-affiliated companies                                     173,060      212,266
    Affiliated companies                                             402            1
                                                                --------     --------
                                                                 766,767      613,967
Operating Expenses
  Fuel used in electric production                                88,063       70,239
  Gas purchased                                                   96,588      123,968
  Purchased and exchanged power
    Non-affiliated companies                                     229,494       70,862
    Affiliated companies                                           7,614        1,572
  Other operation                                                 81,647       79,275
  Maintenance                                                     19,758       27,336
  Depreciation                                                    41,298       40,404
  Amortization of phase-in deferrals                               5,539        3,371
  Amortization of post-in-service deferred operating expenses        823          823
  Income taxes                                                    44,613       43,800
  Taxes other than income taxes                                   54,683       53,514
                                                                --------     --------
                                                                 670,120      515,164

Operating Income                                                  96,647       98,803

Other Income and Expenses - Net
  Allowance for equity funds used during
    construction                                                      10          119
  Phase-in deferred return                                         1,811        2,002
  Income taxes                                                     3,828        3,006
  Other - net                                                     (4,315)      (4,775)
                                                                --------     --------
                                                                   1,334          352

Income Before Interest                                            97,981       99,155

Interest
  Interest on long-term debt                                      26,052       30,045
  Other interest                                                   2,101        1,696
  Allowance for borrowed funds used during construction           (1,364)        (909)
                                                                --------     --------
                                                                  26,789       30,832

Net Income                                                      $ 71,192     $ 68,323

Preferred Dividend Requirement                                       215          219
                                                                --------     --------
Net Income Applicable to Common Stock                           $ 70,977     $ 68,104
Other Comprehensive Income, Net of Tax                              (155)        -  _
                                                                --------     --------
Comprehensive Income                                            $ 70,822     $ 68,104

<FN>
The  accompanying  notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.
</FN>
</TABLE>

<PAGE>

                      THE CINCINNATI GAS & ELECTRIC COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

                                                              Year to Date
                                                                March 31
                                                           1998          1997
                                                             (in thousands)

Operating Activities
  Net income                                             $ 71,192       $68,323
  Items providing or (using) cash:
    Depreciation                                           41,298        40,404
    Deferred income taxes and investment tax
      credits - net                                           (27)        2,929
    Allowance for equity funds used during
      construction                                            (10)         (119)
    Regulatory assets - net                                11,214         9,787
    Changes in current assets and current
      liabilities
        Accounts and notes receivable, net of
          reserves on receivables sold                        391       (44,863)
        Materials, supplies, and fuel                      14,073        27,887
        Accounts payable                                   51,971       (18,922)
        Accrued taxes and interest                         (4,439)       (8,207)
    Other items - net                                       9,753       (13,945)
          Net cash provided by operating activities       195,416        63,274

Financing Activities
  Retirement of preferred stock                                (9)          (24)
  Redemption of long-term debt                           (160,291)      (16,180)
  Change in short-term debt                                49,157        25,982
  Dividends on preferred stock                               (215)         (219)
  Dividends on common stock                               (42,600)      (42,600)
                                                         --------       -------
          Net cash used in financing activities          (153,958)      (33,041)

Investing Activities
  Construction expenditures (less allowance
    for equity funds used during construction)            (36,483)      (31,021)
  Deferred demand-side management costs                    (1,940)       (1,968)
                                                         --------       -------
          Net cash used in investing activities           (38,423)      (32,989)

Net increase (decrease) in cash and
  temporary cash investments                                3,035        (2,756)

Cash and temporary cash investments at
  beginning of period                                       2,349         5,120
                                                         --------       -------

Cash and temporary cash investments at
  end of period                                          $  5,384       $ 2,364

The  accompanying  notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.

<PAGE>

                      THE CINCINNATI GAS & ELECTRIC COMPANY
           RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998

Kwh Sales

Increased  activity in Cinergy's power  marketing and trading  operations led to
higher  non-firm  power sales for resale and  significantly  contributed  to the
increase in total kwh sales of 80% for the first quarter of 1998, as compared to
the same period of 1997.  Milder  weather  during the first  quarter of 1998, as
compared to the same period last year,  resulted in  decreased  residential  and
commercial sales. These decreases were partially offset by increased  industrial
sales,  reflecting,  in part, growth in the primary metals sector. Nonsystem kwh
sales (and  related  revenues  and  expenses)  resulting  from  Cinergy's  power
marketing  and trading  operations  are allocated  50%/50%  between CG&E and PSI
pursuant to the operating agreements filed with the companies' regulators.

Mcf Sales and Transportation

Mcf gas sales and transportation volumes for the first quarter of 1998 decreased
7.3%,  as  compared  to the same  period  in  1997.  Decreased  residential  and
commercial  sales,  reflecting  the milder  weather  during the first quarter of
1998,  were slightly  offset by an increase in the average  number of customers.
Higher gas  transportation  volumes  reflect the  continued  trend of  customers
purchasing gas directly from suppliers,  using transportation  services provided
by CG&E.

Operating Revenues

Electric Operating Revenues

Electric  operating  revenues increased $191 million (48%) for the quarter ended
March 31, 1998,  from the  comparable  period of 1997.  This increase  primarily
reflects the increased kwh sales as previously discussed.  The operation of fuel
adjustment  clauses  reflecting  a higher  average cost of fuel used in electric
production also contributed to the increase.

An analysis of electric operating revenues is shown below:

                                                       Quarter
                                                    Ended March 31
                                                     (in millions)

Electric operating revenues - March 31, 1997             $402
Increase (Decrease) due to change in:
  Price per kwh
    Retail                                                 21
    Sales for resale
      Non-firm power transactions                           5
  Total change in price per kwh                            26

  Kwh sales
    Retail                                                 (2)
    Sales for resale
      Firm power obligations                               (1)
      Non-firm power transactions                         167
  Total change in kwh sales                               164

  Other                                                     1
                                                         ----
Electric operating revenues - March 31, 1998             $593

Gas Operating Revenues

The  increasing  trend of  industrial  customers  purchasing  gas directly  from
producers  and utilizing  CG&E  facilities to transport the gas continues to put
downward  pressure  on  gas  operating   revenues.   (See  the  "Mcf  Sales  and
Transportation"  section.)  Since  providing  transportation  services  does not
necessitate  recovery  of the  cost  of  gas  purchased,  the  revenue  per  Mcf
transported  is less  than the  revenue  per Mcf  sold.  As a  result,  a higher
relative  volume  of gas  transported  to gas sold  translates  into  lower  gas
operating revenues.

Gas operating revenues decreased $39 million (18%) in the first quarter of 1998,
when  compared  to the same  period last year.  The  decrease  in gas  operating
revenues is primarily attributable to lower residential and commercial sales due
to the milder  weather  during the first  quarter of 1998.  An  increase  in the
relative  volume of gas transported to gas sold, as previously  discussed,  also
contributed to the decrease.

Operating Expenses

Fuel Used in Electric Production

Electric fuel costs  increased $18 million (25%) for the quarter ended March 31,
1998, as compared to the same period last year.

An analysis of these fuel costs is shown below:

                                                    Quarter
                                                 Ended March 31
                                                  (in millions)

Fuel expense - March 31, 1997                         $70 
Increase (Decrease) due to change in:
  Price of fuel                                        (1)
  Deferred fuel cost                                   21
  Kwh generation                                       (2)
                                                      ---

Fuel expense - March 31, 1998                         $88

Gas Purchased

Gas purchased for the quarter ended March 31, 1998, decreased $27 million (22%),
when compared to the same period last year,  reflecting a lower average cost per
Mcf purchased and a decline in the volumes of gas purchased primarily due to the
milder weather during the first quarter of 1998.

Purchased and Exchanged Power

Purchased  and exchanged  power for the quarter ended March 31, 1998,  increased
$165 million over the comparable period of 1997,  reflecting increased purchases
of  non-firm  power for resale to others as a result of  increased  activity  in
Cinergy's power marketing and trading operations.

Maintenance

The $8 million  (28%)  decrease in  maintenance  costs for the first  quarter of
1998,  as compared to the same period of 1997,  is partially due to a decline in
maintenance  activities  associated with postponed  outages at certain  electric
production  facilities.  Decreased  maintenance costs,  associated with electric
distribution facilities, also contributed to the lower level of expenses for the
current quarter.

Amortization of Phase-in Deferrals

Amortization of phase-in deferrals  reflects the PUCO-ordered  phase-in plan for
Zimmer.

Interest

Interest on Long-term Debt

Interest on long-term  debt  decreased  approximately  $4 million  (13%) for the
quarter ended March 31, 1998, as compared to the same period of 1997,  primarily
due to the net  redemption  of $350 million of long-term  debt during the period
from March 1997 through March 1998.

<PAGE>

                                PSI ENERGY, INC.
                            AND SUBSIDIARY COMPANIES

<PAGE>

<TABLE>
<CAPTION>
                                PSI ENERGY, INC.
                           CONSOLIDATED BALANCE SHEETS


ASSETS
                                                           March 31    December 31
                                                             1998         1997
                                                         (unaudited)
                                                           (dollars in thousands)
<S>                                                       <C>          <C> 
Electric Utility Plant - Original Cost
  In service                                              $4,297,962   $4,280,551
  Accumulated depreciation                                 1,813,471    1,792,317
                                                          ----------   ----------
                                                           2,484,491    2,488,234
  Construction work in progress                               67,897       65,129
                                                          ----------   ----------
      Total electric utility plant                         2,552,388    2,553,363

Current Assets
  Cash and temporary cash investments                         25,816       18,169
  Restricted deposits                                          1,175        1,146
  Notes receivable                                                92          110
  Notes receivable from affiliated companies                  37,461       21,998
  Accounts receivable less accumulated provision
    for doubtful accounts of $527 at March 31, 1998,
    and $1,183 at December 31, 1997                          257,843      197,898
  Accounts receivable from affiliated companies                6,018        6,384
  Materials, supplies, and fuel - at average cost
    Fuel                                                      36,645       28,234
    Other materials and supplies                              27,957       26,955
  Prepayments and other                                        5,177        4,438
                                                          ----------   ----------
                                                             398,184      305,332

Other Assets
  Regulatory assets
    Amounts due from customers - income taxes                 24,805       23,941
    Post-in-service carrying costs and deferred
      operating expenses                                      43,564       43,832
    Coal contract buyout costs                               117,964      122,485
    Deferred merger costs                                     72,692       73,789
    Deferred demand-side management costs                     62,900       71,278
    Unamortized costs of reacquiring debt                     29,029       29,667
    Other                                                     41,888       44,094
  Other                                                      145,058      138,650
                                                          ----------   ----------
                                                             537,900      547,736

                                                          $3,488,472   $3,406,431

<FN>
The accompanying  notes as they relate to PSI Energy,  Inc. are an integral part
of these consolidated financial statements.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                PSI ENERGY, INC.


CAPITALIZATION AND LIABILITIES
                                                                   March 31   December 31
                                                                     1998         1997
                                                                  (unaudited)
                                                                   (dollars in thousands)
<S>                                                              <C>          <C>   
Common Stock Equity
  Common stock - without  par value;  $.01  stated  value; 
    authorized  shares - 60,000,000; outstanding shares
    - 53,913,701 at March 31, 1998, and December 31, 1997        $      539   $      539
  Paid-in capital                                                   400,895      400,893
  Retained earnings                                                 650,064      637,814
  Accumulated other comprehensive income                               (642)      (1,586)
                                                                 ----------   ----------
      Total common stock equity                                   1,050,856    1,037,660

Cumulative Preferred Stock
  Not subject to mandatory redemption                                71,973      157,196

Long-term Debt                                                      926,680      826,470
                                                                 ----------   ----------
      Total capitalization                                        2,049,509    2,021,326

Current Liabilities
  Long-term debt due within one year                                 85,000       85,000
  Notes payable and other short-term obligations                    215,495      190,600
  Notes payable to affiliated companies                                  21       16,435
  Accounts payable                                                  249,681      212,833
  Accounts payable to affiliated companies                           38,077       41,326
  Accrued taxes                                                     101,326       69,304
  Accrued interest                                                   15,414       21,369
  Other                                                               2,527        2,560
                                                                 ----------   ----------
                                                                    707,541      639,427

Other Liabilities
  Deferred income taxes                                             411,992      403,535
  Unamortized investment tax credits                                 48,430       49,296
  Accrued pension and other postretirement benefit costs            106,374      116,576
  Other                                                             164,626      176,271
                                                                 ----------   ----------
                                                                    731,422      745,678

                                                                 $3,488,472   $3,406,431

</TABLE>

<PAGE>

                                PSI ENERGY, INC.
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                   (unaudited)


                                                            Quarter Ended
                                                               March 31
                                                          1998         1997
                                                            (in thousands)


Operating Revenues
  Non-affiliated companies                              $583,884     $422,289
  Affiliated companies                                     8,241        1,566
                                                        --------     --------
                                                         592,125      423,855

Operating Expenses
  Fuel                                                    92,456      105,507
  Purchased and exchanged power
    Non-affiliated companies                             242,390       89,730
    Affiliated companies                                  17,900        6,069
  Other operation                                         82,377       83,709
  Maintenance                                             19,308       18,518
  Depreciation                                            32,007       31,152
  Amortization of post-in-service
    deferred operating expenses - net                        268          268
  Income taxes                                            26,261       20,225
  Taxes other than income taxes                           14,967       14,857
                                                        --------     --------
                                                         527,934      370,035

Operating Income                                          64,191       53,820

Other Income and Expenses - Net
  Allowance for equity funds used during
    construction                                              11           72
  Income taxes                                               282         (603)
  Other - net                                              1,799        3,263
                                                        --------     --------
                                                           2,092        2,732

Income Before Interest                                    66,283       56,552

Interest
  Interest on long-term debt                              17,706       19,230
  Other interest                                           5,775        4,457
  Allowance for borrowed funds used during
    construction                                            (583)        (433)
                                                        --------     --------
                                                          22,898       23,254

Net Income                                              $ 43,385     $ 33,298

Preferred Dividend Requirement                             2,208        3,020
                                                        --------     --------
Net Income Applicable to Common Stock                   $ 41,177     $ 30,278
Other Comprehensive Income, Net of Tax                       944         -
                                                        --------     -----
Comprehensive Income                                    $ 42,121     $ 30,278



The accompanying  notes as they relate to PSI Energy,  Inc. are an integral part
of these consolidated financial statements.

<PAGE>

                                PSI ENERGY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

                                                          Year to Date
                                                            March 31
                                                        1998        1997
                                                         (in thousands)

Operating Activities
  Net income                                           $43,385     $33,298
  Items providing or (using) cash:
    Depreciation                                        32,007      31,152
    Deferred income taxes and investment tax
      credits - net                                       (473)     (9,820)
    Allowance for equity funds used during
      construction                                         (11)        (72)
    Regulatory assets - net                              9,701      11,812
    Changes in current assets and current
      liabilities
        Restricted deposits                                (29)         (1)
        Accounts and notes receivable, net of
          reserves on receivables sold                 (75,463)    (51,892)
        Materials, supplies, and fuel                   (9,413)      2,812
        Accounts payable                                33,599     (19,821)
        Accrued taxes and interest                      26,067      39,197
    Other items - net                                  (14,271)       (104)
          Net cash provided by operating activities     45,099      36,561

Financing Activities
  Issuance of long-term debt                            98,901        -
  Retirement of preferred stock                        (85,220)         (1)
  Redemption of long-term debt                            -        (45,700)
  Change in short-term debt                              8,481      65,205
  Dividends on preferred stock                          (2,736)     (3,020)
  Dividends on common stock                            (28,400)    (28,400)
                                                       -------     -------
          Net cash used in financing activities         (8,974)    (11,916)

Investing Activities
  Construction expenditures (less allowance
    for equity funds used during construction)         (26,803)    (22,040)
  Deferred demand-side management costs                 (1,675)     (3,141)
          Net cash used in investing activities        (28,478)    (25,181)

Net increase (decrease) in cash and temporary
  cash investments                                       7,647        (536)

Cash and temporary cash investments at
  beginning of period                                   18,169       2,911
                                                       -------     -------

Cash and temporary cash investments at
  end of period                                        $25,816     $ 2,375

The accompanying  notes as they relate to PSI Energy,  Inc. are an integral part
of these consolidated financial statements.

<PAGE>

                                PSI ENERGY, INC.
           RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998

Kwh Sales

Increased  activity in Cinergy's power  marketing and trading  operations led to
higher  non-firm  power sales for resale and  significantly  contributed  to the
increase in total kwh sales of 67% for the first quarter of 1998, as compared to
the same  period  last  year.  An  increase  in  retail  sales  reflects  higher
industrial sales and a higher average number of customers in all retail customer
classes. These increases were partially offset by a decline in residential sales
as a result of milder  weather  during the first quarter of 1998, as compared to
the first quarter of 1997.  The increased  industrial  sales  primarily  reflect
growth in the primary metals sector.  Nonsystem kwh sales (and related  revenues
and expenses)  resulting from Cinergy's power  marketing and trading  operations
are allocated 50%/50% between CG&E and PSI pursuant to the operating  agreements
filed with the companies' regulators.


Operating Revenues

Operating  revenues increased $168 million (40%) for the quarter ended March 31,
1998,  when  compared to the same period last year,  primarily  reflecting,  the
increased kwh sales as previously discussed.  This increase was partially offset
by the operation of fuel adjustment  clauses  reflecting a lower average cost of
fuel used in electric production.

An analysis of operating revenues is shown below:

                                                  Quarter
                                               Ended March 31
                                               (in millions)

Operating revenues - March 31, 1997                 $424 
Increase (Decrease) due to change in:
  Price per kwh
    Retail                                            (5)
    Sales for resale
      Firm power obligations                          (1)
      Non-firm power transactions                    (15)
  Total change in price per kwh                      (21)

  Kwh sales
    Retail                                             8
    Sales for resale
      Firm power obligations                           1
      Non-firm power transactions                    177
  Total change in kwh sales                          186

  Other                                                3

Operating revenues - March 31, 1998                 $592

Operating Expenses

Fuel

Electric  fuel costs  decreased $13 million (12%) for the first quarter of 1998,
as compared to the same period last year.

An analysis of fuel costs is shown below:

                                                    Quarter
                                                Ended March 31
                                                 (in millions)

Fuel expense - March 31, 1997                       $105 
Increase (Decrease) due to change in:
  Price of fuel                                       (5)
  Deferred fuel cost                                 (12)
  Kwh generation                                       4
                                                    ----
Fuel expense - March 31, 1998                       $ 92

Purchased and Exchanged Power

For the quarter ended March 31, 1998,  purchased and exchanged  power  increased
$164  million,  as  compared  to the same period  last year,  due  primarily  to
increased  purchases  of  non-firm  power  for  resale  to others as a result of
increased activity in Cinergy's power marketing and trading operations.

Interest

Interest on Long-term Debt

The  decrease  in interest on  long-term  debt of $2 million  (8%) for the first
quarter of 1998,  as compared to the first  quarter of 1997, is primarily due to
the  recognition  of interest  income on interest rate swap  activity.  This was
partially  offset by increased  interest  expense related to the net issuance of
approximately  $100 million of long-term  debt from  February 1997 through March
1998.

Other Interest

The increase of $1 million  (30%) in other  interest for the quarter ended March
31, 1998,  as compared to the same period of 1997, is  attributable  to interest
resulting from an IRS audit of the 1989 and 1990 tax years.

<PAGE>

                              THE UNION LIGHT, HEAT
                                AND POWER COMPANY

<PAGE>

                     THE UNION LIGHT, HEAT AND POWER COMPANY
                                 BALANCE SHEETS


ASSETS
                                                           March 31 December 31
                                                             1998      1997
                                                         (unaudited)
                                                          (dollars in thousands)

Utility Plant - Original Cost
  In service
    Electric                                                $205,839   $204,111
    Gas                                                      157,517    155,167
    Common                                                    19,069     19,073
                                                            --------   --------
                                                             382,425    378,351
  Accumulated depreciation                                   136,032    133,213
                                                            --------   --------
                                                             246,393    245,138

  Construction work in progress                               15,795     14,346
                                                            --------   --------
      Total utility plant                                    262,188    259,484

Current Assets
  Cash and temporary cash investments                              4        546
  Accounts receivable less accumulated
    provision for doubtful accounts of
    $1,101 at March 31, 1998, and $996 at
    December 31, 1997                                          7,547      7,308
  Accounts receivable from affiliated
    companies                                                    276        446
  Materials, supplies, and fuel - at average
    cost
      Gas stored for current use                               2,181      5,401
      Other materials and supplies                               802        693
 Prepayments and other                                           243        385
                                                            --------   --------
      Total current assets                                    11,053     14,779

Other Assets
  Regulatory assets
    Deferred merger costs                                      5,213      5,213
    Unamortized costs of reacquiring debt                      3,544      3,590
    Other                                                      2,303      2,262
  Other                                                        5,830      6,262
                                                            --------   --------
                                                              16,890     17,327

                                                            $290,131   $291,590

The accompanying notes as they relate to The Union Light, Heat and Power Company
are an integral part of these financial statements.

<PAGE>

                     THE UNION LIGHT, HEAT AND POWER COMPANY





CAPITALIZATION AND LIABILITIES
                                                           March 31 December 31
                                                             1998       1997
                                                          (unaudited)
                                                          (dollars in thousands)

Common Stock Equity
  Common stock - $15.00 par value;
    authorized shares - 1,000,000;
    outstanding shares - 585,333 at March 31, 1998,
    and December 31, 1997                                   $  8,780   $  8,780
  Paid-in capital                                             18,683     18,683
  Retained earnings                                          101,219     95,450
                                                            --------   --------
      Total common stock equity                              128,682    122,913

Long-term Debt                                                34,684     44,671
                                                            --------   --------
      Total capitalization                                   163,366    167,584

Current Liabilities
  Long-term debt due within one year                          10,000       -
  Notes payable to affiliated companies                       21,457     23,487
  Accounts payable                                             8,695     11,097
  Accounts payable to affiliated companies                    16,363     19,712
  Accrued taxes                                                5,714      6,332
  Accrued interest                                               904      1,286
  Other                                                        4,223      4,364
                                                            --------   --------
                                                              67,356     66,278

Other Liabilities
  Deferred income taxes                                       27,096     26,211
  Unamortized investment tax credits                           4,447      4,516
  Accrued pension and other postretirement benefit costs      12,213     14,044
  Income taxes refundable through rates                        6,964      6,566
  Other                                                        8,689      6,391
                                                            --------   --------
                                                              59,409     57,728

                                                            $290,131   $291,590




<PAGE>





                     THE UNION LIGHT, HEAT AND POWER COMPANY
                              STATEMENTS OF INCOME
                                   (unaudited)


                                                            Quarter Ended
                                                               March 31
                                                           1998        1997
                                                            (in thousands)

Operating Revenues
  Electric
    Non-affiliated companies                             $ 46,999    $ 48,580
  Gas
    Non-affiliated companies                               28,375      33,963
    Affiliated companies                                      105         121
                                                         --------    --------
                                                           75,479      82,664

Operating Expenses
  Electricity purchased from parent company for resale     34,090      35,129
  Gas purchased                                            16,353      20,449
  Other operation                                           8,135       8,534
  Maintenance                                               1,295       1,563
  Depreciation                                              3,232       3,070
  Income taxes                                              4,217       4,742
  Taxes other than income taxes                             1,005       1,099
                                                         --------    --------
                                                           68,327      74,586

Operating Income                                            7,152       8,078

Other Income and Expenses - Net
  Allowance for equity funds used during
    construction                                              (14)         (4)
  Income taxes                                                228          92
  Other - net                                                (482)       (447)
                                                         --------    --------
                                                             (268)       (359)

Income Before Interest                                      6,884       7,719

Interest
  Interest on long-term debt                                  883         881
  Other interest                                              351         301
  Allowance for borrowed funds used during
    construction                                             (119)        (30)
                                                         --------    --------
                                                            1,115       1,152

Net Income                                               $  5,769    $  6,567

The accompanying notes as they relate to The Union Light, Heat and Power Company
are an integral part of these financial statements.

<PAGE>

                     THE UNION LIGHT, HEAT AND POWER COMPANY
                            STATEMENTS OF CASH FLOWS
                                   (unaudited)


                                                       Year to Date
                                                         March 31
                                                     1998        1997
                                                      (in thousands)

Operating Activities
  Net income                                       $ 5,769     $ 6,567
  Items providing or (using) cash:
    Depreciation                                     3,232       3,070
    Deferred income taxes and investment tax
      credits - net                                    462        (338)
    Allowance for equity funds used during
      construction                                      14           4
    Regulatory assets                                  (41)         (9)
    Changes in current assets and current
      liabilities
        Accounts and notes receivable, net of
          reserves on receivables sold                 240       6,016
        Materials, supplies, and fuel                3,111       3,727
        Accounts payable                            (5,751)    (10,139)
        Accrued taxes and interest                  (1,000)      5,871
    Other items - net                                1,627       1,810
                                                   -------     -------
          Net cash provided by operating
            activities                               7,663      16,579

Financing Activities
  Change in short-term debt                         (2,030)    (11,723)
          Net cash used in financing activities     (2,030)    (11,723)

Investing Activities
  Construction expenditures (less allowance
    for equity funds used during construction)      (6,175)     (3,986)
          Net cash used in investing activities     (6,175)     (3,986)

Net increase (decrease) in cash and temporary
  cash investments                                    (542)        870

Cash and temporary cash investments at
  beginning of period                                  546       1,197
                                                   -------     -------

Cash and temporary cash investments at
  end of period                                    $     4     $ 2,067

The accompanying notes as they relate to The Union Light, Heat and Power Company
are an integral part of these financial statements.

<PAGE>

                     THE UNION LIGHT, HEAT AND POWER COMPANY
           RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998

Kwh Sales

Kwh  sales  for the  quarter  ended  March  31,  1998,  decreased  1.9% from the
comparable  period of 1997.  The milder weather in the first quarter of 1998, as
compared  to the same period  last year,  resulted  in a decline in  residential
sales.  This decrease was partially  offset by an increase in industrial  sales,
primarily reflecting growth in the primary metals sector, and an increase in the
average number of customers in all major retail customer classes.

Mcf Sales and Transportation

For the first quarter of 1998, Mcf gas sales volumes decreased 12.3%,  while Mcf
transportation  volumes  increased  17.9%,  when  compared to the same period in
1997.  Decreased  residential and commercial sales reflecting the milder weather
during the first  quarter of 1998 were  slightly  offset by an  increase  in the
average  number of  customers.  The higher level of gas  transportation  volumes
reflects  the  continued  trend  of  customers   purchasing  gas  directly  from
suppliers, using transportation services provided by ULH&P.

Operating Revenues

Electric Operating Revenues

Electric  operating  revenues  decreased $2 million  (3%) for the quarter  ended
March 31, 1998,  from the  comparable  period of 1997.  This decrease  primarily
reflects the  previously  discussed  decline in kwh sales and a reduction in the
cost of electricity purchased from CG&E.

Gas Operating Revenues

The  increasing  trend of  industrial  customers  purchasing  gas directly  from
producers and utilizing  ULH&P  facilities to transport the gas continues to put
downward  pressure  on  gas  operating   revenues.   (See  the  "Mcf  Sales  and
Transportation"  section.)  Since  providing  transportation  services  does not
necessitate  recovery  of the  cost  of  gas  purchased,  the  revenue  per  Mcf
transported  is less  than the  revenue  per Mcf  sold.  As a  result,  a higher
relative  volume  of gas  transported  to gas sold  translates  into  lower  gas
operating revenues.

Gas  operating  revenues  decreased $6 million (16%) for the quarter ended March
31,  1998,  as  compared to the same  period of last year.  The  decrease in gas
operating revenues is primarily attributable to lower residential and commercial
sales due to the milder weather during the first quarter of 1998. An increase in
the relative  volume of gas  transported  to gas sold, as previously  discussed,
also contributed to the decrease.

Operating Expenses

Electricity Purchased from Parent Company for Resale

Electricity  purchased decreased $1 million (3%) for the quarter ended March 31,
1998,  as  compared to the same period last year.  This  decrease  reflects  the
aforementioned  lower volumes  purchased from CG&E and the reduction in the cost
of electricity purchased from CG&E.

Gas Purchased

Gas purchased for the quarter  decreased $4 million (20%) from the first quarter
of last year, reflecting a lower average cost per Mcf purchased and a decline in
the volumes of gas purchased.

Maintenance

The $.3 million  (17%)  decrease in  maintenance  costs for the first quarter of
1998,  as compared to the same period of 1997,  is primarily  attributable  to a
decline  in  maintenance   activities   associated  with  electric  distribution
facilities due to the milder weather in the first quarter of 1998.

Depreciation

Depreciation  expense increased $.2 million (5%) for the quarter ended March 31,
1998, over the comparable period of last year. This increase  primarily reflects
additions to gas and electric utility plant.

Taxes Other Than Income Taxes

The $.1 million  (9%)  decrease  in taxes other than income  taxes for the first
quarter of 1998,  as compared to the same period of 1997,  is primarily due to a
reduction in property taxes.

Interest

Other Interest

Other interest  charges  increased $.1 million (17%) for the quarter ended March
31, 1998,  as compared to the same period of 1997,  primarily due to payments to
the Kentucky State Treasurer  resulting from a sales tax audit and  underpayment
of tax year 1996 income taxes.

Allowance for Borrowed Funds Used During Construction

The increase in allowance  for borrowed  funds used during  construction  of $.1
million is primarily due to an increase in construction  expenditures subject to
allowance  during the  quarter  ended  March 31,  1998,  as compared to the same
period of 1997.

<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

Cinergy, CG&E, PSI, and ULH&P

1.       These Financial  Statements reflect all adjustments (which include only
         normal,   recurring  adjustments)  necessary  in  the  opinion  of  the
         registrants  for a fair  presentation  of the  interim  results.  These
         statements should be read in conjunction with the Financial  Statements
         and the notes  thereto  included in the combined  1997 Form 10-K of the
         registrants. Certain amounts in the 1997 Financial Statements have been
         reclassified to conform to the 1998 presentation.

Cinergy and  CG&E 

2.   On April 7, 1998, CG&E issued and sold $100 million principal amount of its
     6.40%  Debentures  due April 1, 2008.  Proceeds  from the sale were used to
     repay short-term indebtedness incurred in connection with CG&E's March 1998
     redemptions of $100 million principal amount of its First Mortgage Bonds, 8
     1/2% Series due 2022 and $60 million principal of its First Mortgage Bonds,
     7 3/8% Series due 2001.

3.   On May 1, 1998,  CG&E redeemed the entire $50 million  principal  amount of
     its 7 3/8% Series First Mortgage Bonds due 1999, at the regular  redemption
     price of 100.00%.  This redemption  effectively  eliminates the maintenance
     and  replacement  fund  provisions of CG&E's First Mortgage Bond indenture,
     which  provisions  required CG&E to make cash payments,  deposit bonds,  or
     pledge  unfunded  property  additions  to the trustee each year based on an
     amount related to net revenues.

Cinergy, CG&E, and ULH&P

4.   On April 30, 1998,  ULH&P issued and sold $20 million  principal  amount of
     its 6.50%  Debentures due April 30, 2008.  Proceeds from the sale were used
     by ULH&P to repay short-term  indebtedness  incurred in connection with the
     redemption, on April 24, 1998, of $10 million principal amount of its First
     Mortgage Bonds, 8% Series due 2003, and in connection with its construction
     program. The redemption of said First Mortgage Bonds effectively eliminates
     the maintenance  and replacement  fund provisions of ULH&P's First Mortgage
     Bond  indenture,  which  provisions  required  ULH&P to make cash payments,
     deposit bonds,  or pledge unfunded  property  additions to the trustee each
     year based on an amount related to net revenues.

Cinergy, CG&E, and PSI

5.   Cinergy'spower  marketing and trading function  actively markets and trades
     over-the-counter  forward and option contracts for the purchase and sale of
     electricity.  The  majority of these  contracts  are  settled via  physical
     delivery of electricity or netted out in accordance  with industry  trading
     standards.  Option  premiums are deferred and included in the  Consolidated
     Balance  Sheets  and  amortized  to  "Operating  Revenues  -  Electric"  or
     "Purchased and exchanged  power" in the  Consolidated  Statements of Income
     over the term of the  option  contract.  Cinergy  values its  portfolio  of
     over-the-counter  forward and option contracts using the aggregate lower of
     cost or market method.  To the extent there are net aggregate losses in the
     portfolio,  Cinergy reserves for such losses. Net gains are recognized when
     realized.  Due to the  lack  of  liquidity  and  the  volatility  currently
     experienced in the power markets,  significant  assumptions must be made by
     the Company  when  estimating  current  market  values for  purposes of the
     aggregate  lower of cost or  market  comparison.  It is  possible  that the
     actual  gains and losses from the  Company's  power  marketing  and trading
     activities could differ  substantially  from the gains and losses estimated
     currently.

     Cinergy and its subsidiaries use derivative financial  instruments to hedge
     exposures to foreign  currency  exchange  rates,  lower funding costs,  and
     manage  exposures to fluctuations in interest  rates.  Instruments  used as
     hedges must be  designated  as a hedge at the inception of the contract and
     must be effective at reducing the risk  associated  with the exposure being
     hedged.   Accordingly,   changes  in  market  values  of  designated  hedge
     instruments must be highly  correlated with changes in market values of the
     underlying  hedged items at inception of the hedge and over the life of the
     hedge contract.

     Cinergy  utilizes a currency swap to hedge its pound  sterling  denominated
     net investment in Avon Energy. Accordingly, any translation gains or losses
     related to the  principal  exchange on the  currency  swap are  recorded in
     accumulated other  comprehensive  income,  which is a separate component of
     common stock equity.  Aggregate translation losses related to the principal
     exchange of the  currency  swap are  reflected  in "Current  Liabilities  -
     Other" in the Consolidated Balance Sheets.

     Interest  rate  swaps  are   accounted   for  under  the  accrual   method.
     Accordingly,  gains and losses based on any interest  differential  between
     fixed-rate and floating-rate  interest  amounts,  calculated on agreed upon
     notional principal amounts,  are recognized in the Consolidated  Statements
     of Income as a component of interest  expense as realized  over the life of
     the agreement.

Cinergy, CG&E, and PSI

6.   As  discussed in the 1997 Form 10-K,  in October  1995, a suit was filed in
     the  Federal  District  Court for the  Southern  District  of Ohio by three
     former  employees  of  Enertech  naming as  defendants  Enertech,  Cinergy,
     Investments,  CG&E,  PSI,  James E. Rogers,  and William J.  Grealis.  (Mr.
     Rogers and/or Mr.  Grealis are officers  and/or  directors of the foregoing
     companies.)  The lawsuit,  which stemmed from the termination of employment
     of the three former  employees,  alleged that they entered into  employment
     contracts  with  Enertech  based  on  the  opportunity  to  participate  in
     potential profits from future investments in energy projects in central and
     eastern Europe.  The suit alleged causes of action based upon,  among other
     theories,  breach  of  contract  related  to  the  events  surrounding  the
     termination of their employment and fraud and misrepresentation  related to
     the level of  financial  support  for  future  projects.  The suit  alleged
     compensatory  damages of $154 million based upon assumed  future success of
     potential  future  investments  and  punitive  damages of three  times that
     amount.

     In April  1998,  the parties  reached a  comprehensive  settlement  and all
     claims were dismissed by the Court.  The obligations of the Company arising
     out of the  settlement  are not material to its financial  condition or its
     results of operations.

Cinergy and PSI

7.   As discussed in the 1997 Form 10-K, PSI and IGC submitted a proposed agreed
     order to the IDEM in 1997 related to the Shelbyville MGP site. On April 15,
     1998,  the IDEM signed the proposed  agreed  order,  which will result in a
     determination by the IDEM of whether the activities  previously  undertaken
     at the site are  sufficient  to  adequately  protect  human  health and the
     environment.   Based  upon  environmental  investigations  and  remediation
     completed  to  date,  PSI  believes  that  any  further  investigation  and
     remediation  required  for the  Shelbyville  site will not have a  material
     adverse effect on its financial condition or results of operations.

     In August 1997, NIPSCO filed suit against PSI in the United States District
     Court for the Northern District of Indiana, South Bend Division,  claiming,
     pursuant to the CERCLA, recovery from PSI of NIPSCO's past and future costs
     of  investigating  and remediating MGP related  contamination at the Goshen
     MGP  site.  Recently,   NIPSCO  increased  its  estimate  of  the  cost  of
     remediating the Goshen site from $2.7 million to about $3.0 million.

As   also discussed in the 1997 Form 10-K,  PSI previously  placed its insurance
     carriers on notice of IGC's,  NIPSCO's and the IDEM's claims related to MGP
     sites.  In April 1998,  PSI filed suit in Hendricks  County  Circuit  Court
     against its general  liability  insurance  carriers,  seeking,  among other
     matters,  a declaratory  judgment that its insurance carriers are obligated
     to defend  MGP claims  against  PSI or pay PSI's  costs of  defense  and to
     indemnify PSI for its costs of  investigating,  preventing,  mitigating and
     remediating damage to property and paying claims associated with MGP sites.
     PSI cannot predict the outcome of this litigation.

Cinergy, CG&E, PSI, and ULH&P

8.   Effective  with the first  quarter of 1998,  Cinergy  and its  subsidiaries
     adopted  Statement 130.  Statement 130 establishes  standards for reporting
     and  displaying  comprehensive  income and its  components in a full set of
     general-purpose  financial  statements.  Comprehensive income is defined as
     the  change  in  equity  of a  business  enterprise  during a  period  from
     transactions and other events and circumstances from nonowner sources.

Cinergy

9.   Presented  below is a  reconciliation  of earnings  per common share (basic
     EPS) and earnings per common share assuming dilution (diluted EPS).

<TABLE>
<CAPTION>

<S>                                           <C>          <C>             <C>    
                                                Income        Shares       Earnings
                                              (Numerator)  (Denominator)   Per Share
                                             (In thousands, except per share amounts)
   Quarter ended March 31, 1998 
   Earnings per common share:
        Net income                             $106,071        157,764       $.67

     Effect of dilutive securities:
        Common stock options                                       787
        Contingently issuable common stock                         123

     EPS--assuming dilution:
        Net income item plus assumed
          conversions                          $106,071        158,674       $.67

     Quarter ended March 31, 1997 
     Earnings per common share:
        Net income                             $114,117        157,679       $.72

     Effect of dilutive securities:
        Common stock options                                       983
        Contingently issuable common stock                         204

     EPS--assuming dilution:
        Net income plus assumed conversions    $114,117        158,866       $.72
</TABLE>

          Options to purchase shares of common stock that were excluded from the
          calculation of  EPS--assuming  dilution because the exercise prices of
          these options were greater than the average market price of the common
          shares during the period are summarized below:

                          Quarter                       Average
                           Ended                        Exercise
                          March 31        Shares         Price

                            1998          914,800        $37.61
                            1997           10,400         34.50

          Presented  below is a  reconciliation  of  earnings  per common  share
          (basic EPS) and earnings per common share assuming  dilution  (diluted
          EPS).

<TABLE>
<CAPTION>
<S>                                            <C>         <C>             <C>  
                                                Income        Shares       Earnings
                                              (Numerator)  (Denominator)   Per Share
                                             (In thousands, except per share amounts)
   Twelve months ended March 31, 1998 
   Earnings per common share:
        Net income before extraordinary item   $354,592        157,706       $2.24

     Effect of dilutive securities:
        Common stock options                                       886
        Contingently issuable common stock                         184

     EPS--assuming dilution:
        Net income before extraordinary
         item plus assumed conversions         $354,592        158,776       $2.23

     Twelve months ended March 31, 1997
     Net income                                $338,773
     Less:  costs of reacquisition of
            preferred stock of subsidiary        18,391

     Earnings per common share:
        Net income applicable to common
          stock                                 320,382        157,679       $2.02

     Effect of dilutive securities:
        Common stock options                                       913
        Contingently issuable common stock                         287

     EPS--assuming dilution:
        Net income applicable to common
         stock plus assumed conversions        $320,382        158,879       $2.01
</TABLE>

          Options to purchase shares of common stock that were excluded from the
          calculation of  EPS--assuming  dilution because the exercise prices of
          these options were greater than the average market price of the common
          shares during the period are summarized below:

                        Twelve Months                   Average
                           Ended                        Exercise
                          March 31        Shares        Price

                            1998          925,200       $37.58
                            1997          375,700        33.53

          The  after-tax  impact  of the  extraordinary  item - equity  share of
          windfall  profits tax in the twelve  months ended March 31, 1998,  was
          $.69 for both basic and diluted earnings per share.

Cinergy and PSI

10.  In February  1989,  PSI and WVPA  entered  into a  settlement  agreement to
     resolve all claims  related to Marble Hill, a nuclear  project  canceled in
     1984.  Implementation  of the settlement  was  contingent  upon a number of
     events,   including  the  conclusion  of  WVPA's   bankruptcy   proceeding,
     negotiation  of certain terms and  conditions  with WVPA,  the RUS, and the
     CFC, and certain  regulatory  approvals.  In December  1996,  following the
     resolution of issues associated with WVPA's bankruptcy proceeding,  PSI, on
     behalf of itself and its  officers,  paid $80  million on behalf of WVPA to
     the RUS and the CFC. The $80 million obligation, net of insurance proceeds,
     other credits,  and applicable income tax effects, was charged to income in
     1988. In January 1997, an order dismissing the WVPA litigation  against PSI
     and its officers with  prejudice was entered by the United States  District
     Court for the Southern District of Indiana.  Negotiations  among PSI, WVPA,
     the RUS,  and the CFC  continue  regarding  certain  additional  terms  and
     conditions  of the  settlement  agreement.  Based on the current  status of
     negotiations,  the Company believes it has adequately reserved for any loss
     that would be material to its financial condition or results of operations.
     However,  the  Company  cannot  currently  predict  the  outcome  of  these
     negotiations.  Depending  on the form of the  final  negotiated  terms  and
     conditions and the form of any regulatory  approvals,  the Company could be
     required to recognize additional losses of up to $90 million for accounting
     purposes. The recognition of this loss is not expected to have an immediate
     impact on Cinergy's cash flow. The Company believes that negotiations could
     be concluded and the final terms and conditions determined during 1998.

<PAGE>

            ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

FINANCIAL CONDITION

Recent Developments

Cinergy, CG&E, and PSI
Air Toxics As discussed in the 1997 Form 10-K, the EPA was to announce, by April
15,  1998,  its  conclusions  regarding  the  need  for  additional  air  toxics
regulations.  In April 1998, the EPA announced that it would make its regulatory
determination  on the need for additional air toxics  regulation by November 15,
1998. If more air toxics  regulations  are issued,  the compliance cost could be
significant.  Cinergy  cannot  predict  the  outcome  or  effects  of the  EPA's
determination.

Cinergy, CG&E and ULH&P
Competitive  Pressures - State  Developments As discussed in the 1997 Form 10-K,
competition  legislation was to be introduced into the Ohio  legislature  during
1998. This legislation was introduced into the Ohio legislature  during 1998 and
it is uncertain whether this legislation will be passed in Ohio in 1998.

As also discussed in the 1997 Form 10-K, HB 443 was introduced into the Kentucky
General  Assembly in January  1998.  HB 443 was not brought to a vote during the
1998 legislative  session,  rather,  HJR 95, which calls for the formation of an
executive  task force  comprised of members from the  governor's  office and the
General Assembly to further study electricity  restructuring,  was passed by the
General  Assembly.  HJR 95  was  signed  by  the  governor  during  April  1998.
Kentucky's General Assembly does not reconvene until the year 2000.

Market Risk Sensitive Instruments and Positions

Cinergy, CG&E, and PSI
Energy Commodities  Sensitivity The Company markets and trades  over-the-counter
forward and option contracts for the purchase and sale of electricity.  See Note
5 of the "Notes to Financial Statements" in "Part I. Financial  Information" for
the  Company's  accounting  policies  for certain  derivative  instruments.  The
Company's  market  risks  have not  changed  materially  from the  market  risks
reported in the 1997 Form 10-K.

Cinergy
Exchange Rate Sensitivity Cinergy utilizes a currency swap to hedge the exchange
rate exposure  related to its pound sterling  denominated net investment in Avon
Energy. See Note 5 of the "Notes to Financial  Statements" in "Part I. Financial
Information"   for  Cinergy's   accounting   policies  for  certain   derivative
instruments.  Cinergy's market risks have not changed materially from the market
risks reported in the 1997 Form 10-K.

Cinergy, CG&E, PSI, and ULH&P
Interest  Rate  Sensitivity  The  Company's  net exposure to changes in interest
rates primarily  consists of short-term debt instruments with floating  interest
rates that are benchmarked to U.S.  short-term  money market indices.  To manage
the Company's  exposure to  fluctuations  in interest rates and to lower funding
costs,  the  Company  constantly  evaluates  the use of, and has  entered  into,
interest rate swaps. See Note 5 of the "Notes to Financial  Statements" in "Part
I.  Financial  Information"  for the Company's  accounting  policies for certain
derivative  instruments.  The Company's market risks have not changed materially
from the market risks reported in the 1997 Form 10-K.

Accounting Issues

Cinergy,  CG&E, PSI, and ULH&P 
New  Accounting  Standards See Note 8 of the "Notes to Financial  Statements" in
"Part I. Financial Information."

Other Commitments

Cinergy, CG&E, and PSI
Enertech See Note 6 of the "Notes to Financial Statements" in "Part I. Financial
Information."

Cinergy, CG&E, and PSI
MGP  Sites  See  Note 7 of the  "Notes  to  Financial  Statements"  in  "Part I.
Financial Information."

Cinergy and PSI
WVPA See Note 10 of the "Notes to Financial  Statements"  in "Part I.  Financial
Information."

CAPITAL RESOURCES AND REQUIREMENTS

Cinergy, CG&E, and ULH&P
Long-term Debt  For information regarding recent issuances and redemptions of
long-term debt securities, see Notes 2, 3, and 4 of the "Notes to Financial
Statements" in "Part I.  Financial Information."

Cinergy, CG&E, PSI, and ULH&P
Short-term  Debt  Obligations  representing  notes payable and other  short-term
obligations (excluding notes payable to affiliated companies) at March 31, 1998,
were as follows:

Cinergy

                                  Established
                                     Lines         Outstanding
                                          (in millions)
Cinergy
  Committed lines
    Acquisition line                $  350          $  350
    Revolving line                     400              91
  Commercial paper                      -              183
Utility subsidiaries
  Committed lines                      300              88
  Uncommitted lines                    360             211
  Pollution control notes              244             244
Cinergy UK, Inc.                       115              56
                                    ------          ------

Total                               $1 769          $1 223

CG&E

                                  Established
                                     Lines         Outstanding
                                          (in millions)

Committed lines                      $100             $ 30
Uncommitted lines                     190              113
Pollution control notes               184              184
                                     ----             ----

Total                                $474             $327

PSI
                                  Established
                                     Lines         Outstanding
                                          (in millions)
Committed lines                      $200             $ 58
Uncommitted lines                     170               98
Pollution control notes                60               60
                                     ----             ----

Total                                $430             $216

Cinergy, CG&E, and PSI
Cinergy's  committed lines are comprised of an acquisition  line and a revolving
line. The established revolving line (as shown in the above table) also provides
credit support for Cinergy's  commercial paper program.  Such program is limited
to a maximum outstanding  principal amount of $200 million.  The majority of the
proceeds  from the  commercial  paper sales were used to reduce the  acquisition
line to the year-end level of $350 million.  CG&E and PSI also have the capacity
to issue  commercial  paper that must be supported by committed lines (unsecured
lines  of  credit)  of the  respective  company.  Neither  CG&E  nor PSI  issued
commercial paper in first quarter of 1998.

Cinergy,  CG&E, PSI, and ULH&P  
Cinergy's  utility  subsidiaries  had regulatory  authority to borrow up to $853
million ($453 million for CG&E and its  subsidiaries,  including $50 million for
ULH&P,  and $400 million for PSI) as of March 31, 1998. In connection  with this
authority, committed lines, as well as, uncommitted lines (short-term borrowings
with various banks on an "as offered" basis) have been arranged. The established
committed lines (as shown in the above table) include $100 million designated as
backup for certain of the  uncommitted  lines at March 31,  1998.  Further,  the
committed lines are maintained by commitment fees.

RESULTS OF OPERATIONS

Cinergy, CG&E, PSI, and ULH&P
Reference is made to "Item 1.  Financial Statements" in "Part I.  Financial
Information."

       ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Cinergy, CG&E, PSI, and ULH&P
Reference  is made to the "Market  Risk  Sensitive  Instruments  and  Positions"
section in "Item 2. Management's  Discussion and Analysis of Financial Condition
and Results of Operations."


                           PART II. OTHER INFORMATION

                            ITEM 1. LEGAL PROCEEDINGS

Cinergy, CG&E, and PSI
See  Notes 6, 7,  and 10 of the  "Notes  to  Financial  Statements"  in "Part I.
Financial Information."


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

Cinergy
(a) The annual  meeting of  shareholders  of Cinergy was held April 22, 1998, in
    Cincinnati, Ohio.

(c) At the meeting,  five Class I directors were elected to the board of Cinergy
    to serve three-year terms, expiring in 2001, as set forth below:

                                Votes             Votes
Class I                          For             Withheld

Neil A. Armstrong            132,494,599        2,094,057
James K. Baker               132,545,127        2,043,529
Cheryl M. Foley              132,482,049        2,106,607
John A. Hillenbrand II       132,546,546        2,042,110
George C. Juilfs             132,649,550        1,939,106

CG&E 
(a)  In lieu of the annual  meeting of  shareholders  of CG&E, a resolution  was
     duly  adopted via  unanimous  written  consent of CG&E's sole  shareholder,
     effective April 21, 1998.

(b)-(c)    The  following  members of the Board of  Directors  were  elected via
           unanimous written consent of the sole shareholder of CG&E, in lieu of
           its annual meeting, for one-year terms expiring in 1999:

                           Jackson H. Randolph
                           James E. Rogers
                           E. Renae Conley

PSI
(a)  The annual meeting of shareholders  of PSI was held in Cincinnati,  Ohio on
     April 22, 1998.

(b)  Proxies were not  solicited for the annual  meeting,  at which the Board of
     Directors was re-elected in its entirety (see (c) below).

(c)  The following members of the Board of Directors were unanimously re-elected
     at the annual meeting for one-year terms expiring in 1999:

                          James K. Baker
                          Michael G. Browning
                          John A. Hillenbrand II
                          John M. Mutz
                          Jackson H. Randolph
                          James E. Rogers
                          Van P. Smith

ULH&P
Omitted pursuant to Instruction H(2)(b).

                    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

 Exhibits  identified  with a pound  sign (#) are being  filed  herewith  by the
      registrant identified in the exhibit discussion below and are incorporated
      herein by reference with respect to any other designated registrant.
      Exhibits not so identified are filed herewith:

         Exhibit
       Designation                        Nature of Exhibit                

  Cinergy

           3-a             By-laws of Cinergy, as amended on April 22, 1998.

  Cinergy and CG&E

           4-a           #Fourth  Supplemental  Indenture  between  CG&E and The
                         Fifth Third Bank,  dated as of April 1, 1998.  (Exhibit
                         to CG&E's March 31, 1998, Form 10-Q in File No.
                         1-1232.)

Cinergy, CG&E, and ULH&P

         4-b             #Second  Supplemental  Indenture  between ULH&P and The
                         Fifth Third Bank, dated as of April 30, 1998.  (Exhibit
                         to ULH&P's March 31, 1998, Form 10-Q in File No.
                         2-7793.)

  Cinergy, CG&E, PSI, and ULH&P

           27              Financial Data Schedules (included in
                           electronic submission only).

  Cinergy, CG&E, PSI, and ULH&P

  (b) No reports on Form 8-K were filed during the quarter.

<PAGE>

                                   SIGNATURES

Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted pursuant to such rules and regulations,  although
Cinergy,  CG&E, PSI, and ULH&P believe that the disclosures are adequate to make
the information presented not misleading.  In the opinion of Cinergy, CG&E, PSI,
and ULH&P,  these statements reflect all adjustments (which include only normal,
recurring  adjustments)  necessary to reflect the results of operations  for the
respective periods.  The unaudited statements are subject to such adjustments as
the annual audit by independent public accountants may disclose to be necessary.

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrants  have duly  caused this report to be signed by an
officer  and the chief  accounting  officer on their  behalf by the  undersigned
thereunto duly authorized.

                                                    CINERGY CORP.
                                        THE CINCINNATI GAS & ELECTRIC COMPANY
                                                  PSI ENERGY, INC.
                                       THE UNION LIGHT, HEAT AND POWER COMPANY
                                                     Registrants







Date:  May 15, 1998                              /s/ John P. Steffen        
                                        --------------------------------------
                                                   John P. Steffen
                                               Duly Authorized Officer
                                                         and
                                               Chief Accounting Officer