<PAGE>




                                  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 June 30, 2000
                                       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) 287-2644

   1-1232          THE CINCINNATI GAS & ELECTRIC COMPANY          31-0240030
                            (An Ohio Corporation)
                           139 East Fourth Street
                           Cincinnati, Ohio 45202
                               (513) 287-2644

   1-3543                     PSI ENERGY, INC.                    35-0594457
                          (An Indiana Corporation)
                           1000 East Main Street
                         Plainfield, Indiana 46168
                              (513) 287-2644

   2-7793        THE UNION LIGHT, HEAT AND POWER COMPANY          31-0473080
                         (A Kentucky Corporation)
                          139 East Fourth Street
                          Cincinnati, Ohio 45202
                             (513) 287-2644

                --------------------------------------------


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
    ---     ---


                --------------------------------------------



<PAGE>



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 specified in
General Instruction H(2) of Form 10-Q.

               ---------------------------------------------

As of July 31, 2000, shares of Common Stock outstanding for each registrant were
as listed:

Registrant                                     Description              Shares

---------------------------------------  ---------------------------  ----------

Cinergy Corp.                             Par value $.01 per share    58,923,399

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
------                                                                   -------
                          PART I FINANCIAL INFORMATION

  1     Financial Statements ................................................  4
         Cinergy Corp........................................................  4
           Consolidated Statements of Income.................................  5
           Consolidated Balance Sheets.......................................  6
           Consolidated Statements of Changes in Common Stock Equity.........  8
           Consolidated Statements of Cash Flows............................. 10

         The Cincinnati Gas & Electric Company .............................. 11
           Consolidated Statements of Income and Comprehensive Income........ 12
           Consolidated Balance Sheets ...................................... 13
           Consolidated Statements of Cash Flows............................. 15

         PSI Energy, Inc..................................................... 16
           Consolidated Statements of Income and Comprehensive Income........ 17
           Consolidated Balance Sheets ...................................... 18
           Consolidated Statements of Cash Flows ............................ 20

         The Union Light, Heat and Power Company ............................ 21
           Statements of Income and Comprehensive Income..................... 22
           Balance Sheets.................................................... 23
           Statements of Cash Flows.......................................... 25

        Notes to Financial Statements........................................ 26

        Cautionary Statements Regarding Forward-Looking Information.......... 40

  2     Management's Discussion and Analysis of Financial Condition and
           Results of Operations ............................................ 42
         Introduction........................................................ 42
         Liquidity........................................................... 42
         Capital Resources................................................... 43
         2000 Quarterly Results of Operations - Historical................... 46
         2000 Year to Date Results of Operations - Historical................ 50
         2000 Results of Operations - Future................................. 55

  3     Quantitative and Qualitative Disclosures About Market Risk .......... 60

                            PART II OTHER INFORMATION

  1     Legal Proceedings.................................................... 61

  6     Exhibits and Reports on Form 8-K..................................... 62

        Signatures .......................................................... 63









<PAGE>


                                  CINERGY CORP.
                            AND SUBSIDIARY COMPANIES


<PAGE>

<TABLE>
<CAPTION>


                                                      CINERGY CORP.
                                            CONSOLIDATED STATEMENTS OF INCOME
<S>                                                       <C>                <C>             <C>                <C>

                                                                   Quarter Ended                        Year To Date
                                                                       June 30                            June 30
                                                               2000              1999              2000            1999
--------------------------------------------------------- --------------- -- --------------- --------------- -- ------------
                                                                   (dollars in thousands, except per share amounts)
                                                                                      (unaudited)

Operating Revenues

   Electric                                                 $1,250,353        $  942,093       $  2,317,050      $1,910,625
   Gas                                                         491,627           328,667            990,355         749,975
   Other                                                        27,534             4,639             45,186          17,078
                                                          --------------- -- --------------- --------------- -- -------------
Total Operating Revenues                                     1,769,514         1,275,399          3,352,591       2,677,678

--------------------------------------------------------- --------------- -- --------------- --------------- -- -------------

Operating Expenses

   Fuel and purchased and exchanged power                      700,552           451,066          1,201,330         884,235
   Gas purchased                                               449,806           293,513            855,951         627,915
   Operation and maintenance                                   290,080           236,432            535,503         480,980
   Depreciation and amortization                                93,311            88,201            183,446         174,678
   Taxes other than income taxes                                68,458            69,077            134,589         138,611
                                                          --------------- -- --------------- --------------- -- -------------
Total Operating Expenses                                     1,602,207         1,138,289          2,910,819       2,306,419

--------------------------------------------------------- --------------- -- --------------- --------------- -- -------------

Operating Income                                               167,307           137,110            441,772         371,259

--------------------------------------------------------- --------------- -- --------------- --------------- -- -------------

Equity in Earnings of Unconsolidated

   Subsidiaries                                                  4,333            13,022              6,175          57,704
Miscellaneous - Net                                              2,617               192                114         (11,694)
Interest                                                        53,113            60,781            104,543         121,553

--------------------------------------------------------- --------------- -- --------------- --------------- -- -------------

Income Before Taxes                                            121,144            89,543            343,518         295,716

--------------------------------------------------------- --------------- -- --------------- --------------- -- -------------

Income Taxes                                                    44,754            29,120            127,326         106,684
Preferred Dividend Requirements

   of Subsidiaries                                               1,275             1,365              2,638           2,729
                                                          =============== == =============== =============== == =============
Net Income                                                 $    75,115       $    59,058       $    213,554      $  186,303

--------------------------------------------------------- --------------- -- --------------- --------------- -- -------------


Average Common Shares Outstanding                              158,923           158,877            158,923         158,812

--------------------------------------------------------- --------------- -- --------------- --------------- -- -------------

Earnings Per Common Share

   Net Income                                              $       0.47      $        0.37     $         1.34   $        1.17

--------------------------------------------------------- --------------- -- --------------- --------------- -- -------------

Earnings Per Common Share-Assuming Dilution

   Net income                                              $       0.47      $        0.37     $         1.34   $        1.17

--------------------------------------------------------- --------------- -- --------------- --------------- -- -------------

Dividends Declared Per Common Share                        $       0.45      $        0.45     $         0.90   $        0.90

--------------------------------------------------------- --------------- -- --------------- --------------- -- -------------

<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 BALANCE SHEETS
<S>                                                                      <C>                       <C>

ASSETS

                                                                                 June 30                 December 31
                                                                                   2000                      1999
                                                                               (unaudited)

------------------------------------------------------------------------ ------------------------- -------------------------
                                                                                       (dollars in thousands)

Current Assets

   Cash and cash equivalents                                                $     102,274            $       81,919
   Restricted deposits                                                             15,961                       628
   Notes receivable                                                                 5,062                       481
   Accounts receivable less accumulated provision for
      doubtful accounts of $25,906 at June 30, 2000,
      and $26,811 at December 31, 1999                                            897,562                   706,068
   Materials, supplies, and fuel - at average cost                                178,520                   205,749
   Prepayments and other                                                          184,450                    77,701
   Energy risk management current assets                                          589,163                   131,145
                                                                         ------------------------- -------------------------
                Total Current Assets                                            1,972,992                 1,203,691

------------------------------------------------------------------------ ------------------------- -------------------------

Utility Plant - Original Cost

   In service

     Electric                                                                   9,543,587                 9,414,744
     Gas                                                                          842,541                   824,427
     Common                                                                       190,388                   189,124
                                                                         ------------------------- -------------------------
        Total                                                                  10,576,516                10,428,295
   Accumulated depreciation                                                     4,413,587                 4,259,877
                                                                         ------------------------- -------------------------
        Total                                                                   6,162,929                 6,168,418
   Construction work in progress                                                  317,293                   249,054
                                                                         ------------------------- -------------------------
                Total Utility Plant                                             6,480,222                 6,417,472

------------------------------------------------------------------------ ------------------------- -------------------------

Other Assets

   Regulatory assets                                                            1,005,820                 1,055,012
   Investments in unconsolidated subsidiaries                                     473,292                   358,853
   Energy risk management non-current assets                                       85,782                    26,624
   Other                                                                          653,055                   555,296
                                                                         ------------------------- -------------------------
                Total Other Assets                                              2,217,949                 1,995,785

------------------------------------------------------------------------ ------------------------- -------------------------

Total Assets                                                                 $ 10,671,163              $  9,616,948
                                                                         ========================= =========================

------------------------------------------------------------------------ ------------------------- -------------------------

<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 BALANCE SHEETS
<S>                                                                       <C>                        <C>



LIABILITIES AND SHAREHOLDERS' EQUITY

                                                                                   June 30                 December 31
                                                                                    2000                       1999
                                                                                 (unaudited)

------------------------------------------------------------------------- -------------------------- -------------------------
                                                                                        (dollars in thousands)

Current Liabilities

   Accounts payable                                                             $   872,912                $   734,937
   Accrued taxes                                                                    224,462                    219,266
   Accrued interest                                                                  51,688                     49,354
   Long-term debt due within one year                                                32,475                     31,000
   Notes payable and other short-term obligations                                   746,778                    550,194
   Energy risk management current liabilities                                       572,937                    126,682
   Other                                                                            142,689                     76,774
                                                                          -------------------------- -------------------------
               Total Current Liabilities                                          2,643,941                  1,788,207

------------------------------------------------------------------------- -------------------------- -------------------------

Non-Current Liabilities

   Long-term debt                                                                 3,058,406                  2,989,242
   Deferred income taxes                                                          1,171,137                  1,174,818
   Unamortized investment tax credits                                               142,821                    147,550
   Accrued pension and other postretirement
     benefit costs                                                                  385,898                    355,917
   Energy risk management non-current liabilities                                   153,930                    132,041
   Other                                                                            289,128                    282,855
                                                                          -------------------------- -------------------------
               Total Non-Current Liabilities                                      5,201,320                  5,082,423

------------------------------------------------------------------------- -------------------------- -------------------------

Total Liabilities                                                                 7,845,261                  6,870,630

------------------------------------------------------------------------- -------------------------- -------------------------

Cumulative Preferred Stock of Subsidiaries

   Not subject to mandatory redemption                                               81,354                     92,597

------------------------------------------------------------------------- -------------------------- -------------------------

Common Stock Equity
   Common Stock - $0.01 par value;
     authorized shares  -  600,000,000;  outstanding shares -
     158,923,399 at June 30, 2000 and December 31, 1999                               1,589                      1,589
   Paid-in capital                                                                1,612,572                  1,597,554
   Retained earnings                                                              1,135,703                  1,064,319
   Accumulated other comprehensive income (loss)                                     (5,316)                    (9,741)
                                                                          -------------------------- -------------------------
               Total Common Stock Equity                                          2,744,548                  2,653,721

------------------------------------------------------------------------- -------------------------- -------------------------

Commitments and Contingencies (Note 4)

Total Liabilities and Shareholders' Equity                                      $10,671,163                 $9,616,948
                                                                          ========================== =========================


------------------------------------------------------------------------- -------------------------- -------------------------

<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
<S>                                                           <C>         <C>           <C>            <C>              <C>

                                                                                                        Accumulated
                                                                                                           Other           Total
                                                                Common    Paid-in       Retained       Comprehensive    Common Stock
                                                                Stock     Capital       Earnings       Income/(Loss)       Equity

------------------------------------------------------------------------------------------------------------------------------------
                                                                                        (dollars in thousands)
                                                                                                (unaudited)

Quarter Ended June 30, 2000

Balance at April 1, 2000                                         $1,589     $1,604,096    $1,131,695   $  (10,512)      $2,726,868
Comprehensive income:
   Net income                                                                                 75,115                        75,115
  Other comprehensive income, net of tax effect of $(507)
     Foreign currency translation adjustment                                                                6,014            6,014
     Unrealized gains (losses) on grantor and rabbi trusts                                                   (818)            (818)
   Total comprehensive income                                                                                               80,311
Treasury shares reissued                                                         5,546                                       5,546
Dividends on common stock (see page 5 for per share amounts)                                 (71,114)                      (71,114)
Other                                                                            2,930             7                         2,937


Ending balance at June 30, 2000                                  $1,589     $1,612,572    $1,135,703   $   (5,316)      $2,744,548
                                                              ======================================================================

------------------------------------------------------------------------------------------------------------------------------------

Quarter Ended June 30, 1999

Balance at April 1, 1999                                         $1,588     $1,598,884    $1,001,034   $   (9,273)      $2,592,233
Comprehensive income:
  Net income                                                                                  59,058                        59,058
  Other comprehensive income (loss), net of tax effect of $1,330
     Foreign currency translation adjustment                                                               (1,581)          (1,581)
     Unrealized gain on grantor trust                                                                         495              495
                                                                                                                        ------------
   Total comprehensive income                                                                                               57,972
Issuance of 106,267 shares of common stock-net                        1          2,299                                       2,300
Treasury shares reissued                                                         1,425                                       1,425
Dividends on common stock (see page 5 for per share amounts)                                 (71,492)                      (71,492)
Other                                                                                             (2)                           (2)
                                                              ----------------------------------------------------------------------

Ending balance at June 30, 1999                                  $1,589     $1,602,608   $   988,598   $  (10,359)      $ 2,582,436
                                                              ======================================================================

------------------------------------------------------------------------------------------------------------------------------------

<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
                                                             (Continued)
<S>                                                              <C>         <C>           <C>          <C>             <C>
                                                                                                         Accumulated
                                                                                                            Other          Total
                                                                   Common    Paid-in       Retained     Comprehensive   Common Stock
                                                                   Stock     Capital       Earnings     Income/(Loss)      Equity
------------------------------------------------------------------------------------------------------------------------------------
                                                                                           (dollars in thousands)
                                                                                                 (unaudited)


Six Months Ended June 30, 2000


Balance at January 1, 2000                                         $1,589    $1,597,554    $1,064,319   $  (9,741)       $2,653,721
Comprehensive income:
   Net income                                                                                 213,554                       213,554
  Other comprehensive income, net of tax effect of $27
     Foreign currency translation adjustment                                                                4,286             4,286
     Unrealized gains on grantor and rabbi trusts                                                             139               139
                                                                                                                        ------------
   Total comprehensive income                                                                                               217,979
Treasury shares reissued                                                         12,088                                      12,088
Dividends on common stock (see page 5 for per share amounts)                                 (142,191)                     (142,191)
Other                                                                             2,930            21                         2,951
                                                                 -------------------------------------------------------------------
Ending balance at June 30, 2000                                    $1,589    $1,612,572    $1,135,703   $  (5,316)       $2,744,548
-----------------------------------------------------------------===================================================================

------------------------------------------------------------------------------------------------------------------------------------


Six Months Ended June 30, 1999

Balance at January 1, 1999                                         $1,587    $1,595,237    $  945,214   $    (807)       $2,541,231
Comprehensive income:
  Net income                                                                                  186,303                       186,303
  Other comprehensive income (loss), net of tax effect of $3,092
     Foreign currency translation adjustment                                                              (10,032)          (10,032)
     Unrealized gain on grantor trust                                                                         480               480
                                                                                                                         -----------
   Total comprehensive income                                                                                               176,751
Issuance of 221,635 shares of common stock-net                          2         4,277                                       4,279
Treasury shares purchased                                                          (233)                                       (233)
Treasury shares reissued                                                          3,327                                       3,327
Dividends on common stock (see page 5 for per share amounts)                                 (142,914)                     (142,914)
Other                                                                                              (5)                           (5)
                                                                 -------------------------------------------------------------------

Ending balance at June 30, 1999                                    $1,589    $1,602,608    $  988,598   $ (10,359)       $2,582,436
                                                                 ===================================================================

------------------------------------------------------------------------------------------------------------------------------------

<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
<S>  <C> <C>   <C>                                                            <C>                      <C>
                                                                                            Year to Date
                                                                                               June 30

                                                                                     2000                    1999
----------------------------------------------------------------------------- --------------------- -- -------------------
                                                                                       (dollars in thousands)

                                                                                             (unaudited)

Operating Activities

   Net income                                                                         $213,554              $186,303
   Items providing or (using) cash currently:
     Depreciation and amortization                                                     183,446               174,678
     Deferred income taxes and investment tax credits-net                                9,625                20,900
     Unrealized (gain) loss from energy risk management activities                     (49,032)              (20,000)
     Equity in earnings of unconsolidated subsidiaries                                  (6,175)              (45,687)
     Allowance for equity funds used during construction                                (3,100)               (1,279)
     Regulatory assets-net                                                              18,511                14,925
     Changes in current assets and current liabilities:
         Restricted deposits                                                           (15,333)                2,247
         Accounts and notes receivable, net of reserves on receivables sold           (197,566)              179,251
         Materials, supplies, and fuel                                                  27,229                 5,324
         Accounts payable                                                              137,975              (152,402)
         Accrued taxes and interest                                                      7,530               (25,136)
     Other items-net                                                                   (99,238)              (25,319)
                                                                              --------------------- -- -------------------

               Net cash provided by operating activities                               227,426               313,805
----------------------------------------------------------------------------- --------------------- -- -------------------

Financing Activities

   Change in short-term debt                                                           196,584               (66,516)
   Issuance of long-term debt                                                          123,189               522,097
   Redemption of long-term debt                                                        (55,720)             (455,657)
   Retirement of preferred stock of subsidiaries                                       (10,951)                  (29)
   Issuance of common stock                                                                  -                 4,279
   Dividends on common stock                                                          (142,191)             (142,914)
                                                                              --------------------- -- -------------------

               Net cash provided by (used in) financing activities                     110,911              (138,740)
----------------------------------------------------------------------------- --------------------- -- -------------------

Investing Activities

   Construction expenditures (less allowance for equity funds used during
     construction)                                                                    (215,519)             (174,705)
   Investments in unconsolidated subsidiaries                                         (102,463)              (23,455)
                                                                              --------------------- -- -------------------

               Net cash used in investing activities                                  (317,982)             (198,160)
----------------------------------------------------------------------------- --------------------- -- -------------------

Net increase (decrease) in cash and cash equivalents                                    20,355               (23,095)

Cash and cash equivalents at beginning of period                                        81,919               100,154
                                                                              --------------------- -- -------------------

Cash and cash equivalents at end of period                                           $ 102,274             $  77,059
                                                                              ===================== == ===================

----------------------------------------------------------------------------- --------------------- -- -------------------

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


<PAGE>



                      THE CINCINNATI GAS & ELECTRIC COMPANY
                            AND SUBSIDIARY COMPANIES


<PAGE>

<TABLE>
<CAPTION>

                                            THE CINCINNATI GAS & ELECTRIC COMPANY
                                 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<S>                                                        <C>                <C>             <C>                 <C>

                                                                      Quarter Ended                       Year to Date
                                                                        June 30                             June 30
                                                                2000              1999            2000                 1999
---------------------------------------------------------- --------------- -- --------------- --------------- --- --------------
                                                                                 (dollars in thousands)
                                                                                      (unaudited)

Operating Revenues
   Electric                                                       $646,973         $ 477,037      $1,184,991        $  958,623
   Gas                                                              59,598            53,548         238,060           217,345
                                                           ---------------- --- ------------- ---------------- --- -------------
Total Operating Revenues                                           706,571           530,585       1,423,051         1,175,968

---------------------------------------------------------- ---------------- --- ------------- ---------------- --- -------------

Operating Expenses
   Fuel and purchased and exchanged power                          339,176           216,255         579,528           415,126
   Gas purchased                                                    24,246            20,428         113,862            99,306
   Operation and maintenance                                       123,038           100,221         228,085           208,377
   Depreciation and amortization                                    52,805            50,726         103,798           101,296
   Taxes other than income taxes                                    53,891            54,869         103,822           108,983
                                                           ---------------- --- ------------- ---------------- --- -------------
Total Operating Expenses                                           593,156           442,499       1,129,095           933,088

---------------------------------------------------------- ---------------- --- ------------- ---------------- --- -------------

Operating Income                                                   113,415            88,086         293,956           242,880

---------------------------------------------------------- ---------------- --- ------------- ---------------- --- -------------

Miscellaneous - Net                                                    962               637         (1,011)              (624)
Interest                                                            23,724            24,571          49,473            48,978

---------------------------------------------------------- ---------------- --- ------------- ---------------- --- -------------

Income Before Taxes                                                 90,653            64,152         243,472           193,278

---------------------------------------------------------- ---------------- --- ------------- ---------------- --- -------------

Income Taxes                                                        34,772            25,230          91,627            74,119
                                                           ---------------- --- ------------- ---------------- --- -------------

Net Income                                                        $ 55,881         $  38,922       $ 151,845        $  119,159

Preferred Dividend Requirement                                         212               214             425               428
                                                           ---------------- --- ------------- ---------------- --- -------------

Net Income Applicable to Common Stock                             $ 55,669         $  38,708       $ 151,420        $  118,731

Other Comprehensive Income (Loss), Net of Tax                            -                 -                -                -
                                                           ---------------- --- ------------- ---------------- --- -------------

Comprehensive Income                                              $ 55,669         $  38,708       $ 151,420        $  118,731
                                                           ================ === ============= ================ === =============


---------------------------------------------------------- ---------------- --- -------------- ---------------- --- ------------


<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
                           CONSOLIDATED BALANCE SHEETS
<S>                                                                         <C>                  <C>
ASSETS
                                                                                  June 30            December 31
                                                                                   2000                 1999
                                                                                (unaudited)

--------------------------------------------------------------------------- -------------------- --------------------
                                                                                   (dollars in thousands)

Current Assets

  Cash and cash equivalents                                                    $                     $     9,554
                                                                                     14,937

  Restricted deposits                                                                   110                  132
  Notes receivable from affiliated companies                                         41,772                    -
  Accounts receivable less accumulated provision for
    doubtful accounts of $16,836 at June 30, 2000,
    and $16,740 at December 31, 1999                                                254,595              279,591
  Accounts receivable from affiliated companies                                       6,534               12,718
  Materials, supplies, and fuel - at average cost                                    98,268               98,999
  Prepayments and other                                                              86,145               35,527
  Energy risk management current assets                                             291,424               63,926
                                                                            -------------------- --------------------
                Total Current Assets                                                793,785              500,447

--------------------------------------------------------------------------- -------------------- --------------------

Utility Plant - Original Cost

  In service

    Electric                                                                      4,932,286            4,875,633
    Gas                                                                             842,541              824,427
    Common                                                                          190,388              189,124
                                                                            -------------------- --------------------
        Total                                                                     5,965,215            5,889,184
  Accumulated depreciation                                                        2,365,909            2,279,587
                                                                            -------------------- --------------------
        Total                                                                     3,599,306            3,609,597
  Construction work in progress                                                     184,959              153,229
                                                                            -------------------- --------------------
                 Total Utility Plant                                              3,784,265            3,762,826

--------------------------------------------------------------------------- -------------------- --------------------

Other Assets

  Regulatory assets                                                                 516,720              536,224
  Energy risk management non-current assets                                          32,657                7,368
  Other                                                                             133,019              109,753
                                                                            -------------------- --------------------
                 Total Other Assets                                                 682,396              653,345

--------------------------------------------------------------------------- -------------------- --------------------

Total Assets                                                                     $5,260,446           $4,916,618
                                                                            ==================== ====================

--------------------------------------------------------------------------- -------------------- --------------------

<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
                           CONSOLIDATED BALANCE SHEETS
<S>                                                                         <C>                  <C>

LIABILITIES AND SHAREHOLDER'S EQUITY
                                                                                  June 30            December 31
                                                                                   2000                 1999
                                                                               (unaudited)
--------------------------------------------------------------------------- -------------------- --------------------
                                                                                   (dollars in thousands)

Current Liabilities

   Accounts payable                                                           $   343,530          $   253,115
   Accounts payable to affiliated companies                                        30,001               65,256
   Accrued taxes                                                                  145,632              136,118
   Accrued interest                                                                17,900               17,375
   Notes payable and other short-term obligations                                 263,730              234,702
   Notes payable to affiliated companies                                            8,929               60,360
   Energy risk management current liabilities                                     281,973               60,478
   Other                                                                           30,411               25,468
                                                                            -------------------- --------------------
          Total Current Liabilities                                             1,122,106              852,872

--------------------------------------------------------------------------- -------------------- --------------------

Non-Current Liabilities

   Long-term debt                                                               1,206,089            1,205,916
   Deferred income taxes                                                          730,984              720,168
   Unamortized investment tax credits                                             101,585              104,655
   Accrued pension and other postretirement
     benefit costs                                                                159,699              154,718
   Energy risk management non-current liabilities                                  60,657               57,644
   Other                                                                          155,409              140,794
                                                                            -------------------- --------------------
              Total Non-Current Liabilities                                     2,414,423            2,383,895

--------------------------------------------------------------------------- -------------------- --------------------

Total Liabilities                                                               3,536,529            3,236,767

--------------------------------------------------------------------------- -------------------- --------------------

Cumulative Preferred Stock

   Not subject to mandatory redemption                                             20,496               20,686

--------------------------------------------------------------------------- -------------------- --------------------

Common Stock Equity
   Common Stock-$8.50 par value;
     Authorized shares-120,000,000; outstanding shares-89,663,086 at June
     30, 2000 and December 31, 1999                                               762,136              762,136
   Paid-in capital                                                                562,881              562,851
   Retained earnings                                                              379,370              335,144
   Accumulated other comprehensive income (loss)                                     (966)                (966)
                                                                            -------------------- --------------------
                Total Common Stock Equity                                       1,703,421            1,659,165

--------------------------------------------------------------------------- -------------------- --------------------

Commitments and Contingencies (Note 4)

Total Liabilities and Shareholder's Equity                                     $5,260,446           $4,916,618
                                                                            ==================== ====================

--------------------------------------------------------------------------- -------------------- --------------------

<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
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
<S>                                                                        <C>    <C>        <C>            <C>
                                                                                             Year to Date
                                                                                               June 30
                                                                                   2000                       1999
------------------------------------------------------------------------------------------------------------------------------
                                                                                        (dollars in thousands)

                                                                                             (unaudited)

Operating Activities

   Net income                                                                     $  151,845                $ 119,159
   Items providing or (using) cash currently:
     Depreciation and amortization                                                   103,798                  101,296
     Deferred income taxes and investment tax credits-net                              8,378                    2,660
     Unrealized (gain) loss from energy risk management activities                   (28,280)                 (10,000)
     Allowance for equity funds used during construction                              (2,646)                  (1,284)
     Regulatory assets-net                                                             8,085                    6,276
     Changes in current assets and current liabilities:
         Accounts and notes receivable, net of reserves on receivables sold          (11,302)                 142,297
         Materials, supplies, and fuel                                                   731                   10,290
         Accounts payable                                                             55,160                  (64,597)
         Accrued taxes and interest                                                   10,039                  (28,310)
     Other items-net                                                                 (53,128)                 (12,447)
                                                                           ---------------------------------------------------

               Net cash provided by operating activities                             242,680                  265,340
------------------------------------------------------------------------------------------------------------------------------

Financing Activities

   Change in short-term debt                                                         (22,403)                  69,436
   Redemption of long-term debt                                                            -                 (110,000)
   Retirement of preferred stock                                                        (160)                     (26)
   Dividends on preferred stock                                                         (425)                    (428)
   Dividends on common stock                                                        (107,200)                (142,900)
                                                                           ---------------------------------------------------

               Net cash used in financing activities                                (130,188)                (183,918)
------------------------------------------------------------------------------------------------------------------------------

Investing Activities

   Construction expenditures (less allowance for equity funds used during
     construction)                                                                  (107,109)                 (87,741)
                                                                           ---------------------------------------------------

               Net cash used in investing activities                                (107,109)                 (87,741)
------------------------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents                                   5,383                   (6,319)

Cash and cash equivalents at beginning of period                                       9,554                   26,989
                                                                           ---------------------------------------------------

Cash and cash equivalents at end of period                                       $    14,937                $  20,670
                                                                           ===================================================

------------------------------------------------------------------------------------------------------------------------------

<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>





                                PSI ENERGY, INC.
                             AND SUBSIDIARY COMPANY


<PAGE>


<TABLE>
<CAPTION>

                                                       PSI ENERGY, INC.
                                  CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<S>                                                     <C>         <C>       <C>             <C>       <C>        <C>
                                                                    Quarter Ended                       Year to Date
                                                                       June 30                            June 30
                                                              2000                1999            2000                1999
------------------------------------------------------- ------------------ -- --------------- ---------------- --- --------------
                                                                                (dollars in thousands)
                                                                                     (unaudited)

Operating Revenues

   Electric                                                     $619,760          $463,486          $1,153,512         $945,951

------------------------------------------------------- ------------------ -- --------------- ---------------- ---- -------------

Operating Expenses

   Fuel and purchased and exchanged power                        397,807           237,157             669,236          472,084
   Operation and maintenance                                     124,138           117,240             235,213          230,480
   Depreciation and amortization                                  35,001            34,121              69,961           67,864
   Taxes other than income taxes                                  13,800            14,269              28,409           28,757
                                                        ------------------ -- --------------- ---------------- ---- -------------
Total Operating Expenses                                         570,746           402,787           1,002,819          799,185

------------------------------------------------------- ------------------ -- --------------- ---------------- ---- -------------

Operating Income                                                  49,014            60,699             150,693          146,766

------------------------------------------------------- ------------------ -- --------------- ---------------- ---- -------------

Miscellaneous - Net                                                1,342               375                 483              698
Interest                                                          19,769            20,496              39,853           41,860

------------------------------------------------------- ------------------ -- --------------- ---------------- ---- -------------

Income Before Taxes                                               30,587            40,578             111,323          105,604

------------------------------------------------------- ------------------ -- --------------- ---------------- ---- -------------

Income Taxes                                                      11,671            14,998              42,194           40,183
                                                        ------------------ -- --------------- ---------------- ---- -------------

Net Income                                                      $ 18,916          $ 25,580            $ 69,129         $ 65,421

Preferred Dividend Requirement                                     1,063             1,151               2,213            2,301
                                                        ------------------ -- --------------- ---------------- ---- -------------

Net Income Applicable to Common Stock                           $ 17,853          $ 24,429            $ 66,916         $ 63,120

Other Comprehensive Income (Loss), Net of Tax                       (597)              495                  35              480
                                                        ------------------ -- --------------- ---------------- ---- -------------

Comprehensive Income                                            $ 17,256          $ 24,924            $ 66,951         $ 63,600
                                                        ================== == =============== ================ ==== =============


------------------------------------------------------- ------------------ -- --------------- ---------------- ---- ------------


<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.
                           CONSOLIDATED BALANCE SHEETS
<S>                                                                         <C>                  <C>
ASSETS

                                                                                 June 30            December 31
                                                                                  2000                 1999
                                                                               (unaudited)
--------------------------------------------------------------------------- -------------------- --------------------
                                                                                    (dollars in thousands)
Current Assets

   Cash and cash equivalents                                                     $    4,076        $       8,842
   Restricted deposits                                                                  155                    -
   Notes receivable                                                                     581                  481
   Notes receivable from affiliated companies                                         8,929               60,360
   Accounts receivable less accumulated provision for doubtful accounts
     of $9,069 at June 30, 2000, and $9,934  at December 31, 1999                   264,276              253,022
   Accounts receivable from affiliated companies                                      6,745               42,715
   Materials, supplies, and fuel - at average cost                                   76,707              103,490
   Prepayments and other                                                             76,691               36,173
   Energy risk management current assets                                            291,423               63,927
                                                                            -------------------- --------------------
                  Total Current Assets                                              729,583              569,010

--------------------------------------------------------------------------- -------------------- --------------------

Electric Utility Plant-Original Cost

    In service                                                                    4,611,301            4,539,111
   Accumulated depreciation                                                       2,047,678            1,980,290
                                                                            -------------------- --------------------
       Total                                                                      2,563,623            2,558,821
   Construction work in progress                                                    132,334               95,825
                                                                            -------------------- --------------------
                  Total Electric Utility Plant                                    2,695,957            2,654,646

--------------------------------------------------------------------------- -------------------- --------------------

Other Assets

   Regulatory assets                                                                489,100              518,788
   Energy risk management non-current assets                                         32,657                7,368
   Other                                                                             96,556               85,024
                                                                            -------------------- --------------------
                  Total Other Assets                                                618,313              611,180

--------------------------------------------------------------------------- -------------------- --------------------

Total Assets                                                                     $4,043,853           $3,834,836
                                                                            ==================== ====================

--------------------------------------------------------------------------- -------------------- --------------------

<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.
                           CONSOLIDATED BALANCE SHEETS
<S>                                                                         <C>                  <C>
LIABILITIES AND SHAREHOLDER'S EQUITY

                                                                                  June 30            December 31
                                                                                   2000                 1999
                                                                                (unaudited)

--------------------------------------------------------------------------- -------------------- --------------------
                                                                                     (dollars in thousands)

Current Liabilities

   Accounts payable                                                            $    274,580          $   241,072
   Accounts payable to affiliated companies                                          22,749                6,762
   Accrued taxes                                                                     67,267               93,056
   Accrued interest                                                                  28,835               26,989
   Notes payable and other short-term obligations                                   132,858              232,597
   Notes payable to affiliated companies                                             48,038                6,707
   Long-term debt due within one year                                                31,871               31,000
   Energy risk management current liabilities                                       281,973               60,478
   Other                                                                              2,623                1,986
                                                                            -------------------- --------------------
                 Total Current Liabilities                                          890,794              700,647

--------------------------------------------------------------------------- -------------------- --------------------

Non-Current Liabilities

   Long-term debt                                                                 1,211,427            1,211,552
   Deferred income taxes                                                            466,096              460,748
   Unamortized investment tax credits                                                41,236               42,895
   Accrued pension and other postretirement benefit costs                           137,537              129,103
   Energy risk management non-current liabilities                                    65,854               57,645
   Other                                                                             83,223              104,638
                                                                            -------------------- --------------------
                 Total Non-Current Liabilities                                    2,005,373            2,006,581

--------------------------------------------------------------------------- -------------------- --------------------

Total Liabilities                                                                 2,896,167            2,707,228

--------------------------------------------------------------------------- -------------------- --------------------

Cumulative Preferred Stock

   Not subject to mandatory redemption                                               60,858               71,911

--------------------------------------------------------------------------- -------------------- --------------------

Common Stock Equity

   Common Stock-without par value;  $.01 stated value;
     authorized shares-60,000,000; outstanding shares-53,913,701 at June
     30, 2000 and December 31, 1999                                                     539                  539
   Paid-in capital                                                                  411,459              411,198
   Retained earnings                                                                673,404              642,569
   Accumulated other comprehensive income (loss)                                      1,426                1,391
                                                                            -------------------- --------------------
                 Total Common Stock Equity                                        1,086,828            1,055,697

--------------------------------------------------------------------------- -------------------- --------------------

Commitments and Contingencies (Note 4)

Total Liabilities and Shareholder's Equity                                       $4,043,853           $3,834,836
                                                                            ==================== ====================

--------------------------------------------------------------------------- -------------------- --------------------

<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.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<S>                                                                        <C>            <C>             <C>
                                                                                          Year to Date
                                                                                             June 30
                                                                                 2000                      1999
-------------------------------------------------------------------------------------------------------------------------
                                                                                     (dollars in thousands)

                                                                                           (unaudited)

Operating Activities

   Net income                                                                    $  69,129                $  65,421
   Items providing or (using) cash currently:
     Depreciation and amortization                                                  69,961                   67,864
     Deferred income taxes and investment tax credits-net                            5,517                    6,578
     Unrealized (gain) loss from energy risk management activities                 (23,081)                 (10,000)
     Allowance for equity funds used during construction                              (454)                       5
     Regulatory assets-net                                                          10,426                    8,649
     Changes in current assets and current liabilities:
         Restricted deposits                                                          (155)                   2,247
         Accounts and notes receivable, net of reserves on receivables sold         75,266                   98,478
         Materials, supplies, and fuel                                              26,783                   (9,838)
         Accounts payable                                                           49,495                  (74,698)
         Accrued taxes and interest                                                (23,943)                  15,510
     Other items-net                                                               (45,554)                   3,600
                                                                           ----------------------------------------------

               Net cash provided by operating activities                           213,390                  173,816
-------------------------------------------------------------------------------------------------------------------------

Financing Activities

   Issuance of long-term debt                                                       53,075                  323,593
   Change in short-term debt                                                       (58,408)                 (74,641)
   Redemption of long-term debt                                                    (55,276)                (336,213)
   Retirement of preferred stock                                                   (10,791)                      (3)
   Dividends on preferred stock                                                     (2,295)                  (2,301)
   Dividends on common stock                                                       (36,000)                       -
                                                                           ----------------------------------------------

               Net cash used in financing activities                              (109,695)                 (89,565)
-------------------------------------------------------------------------------------------------------------------------

Investing Activities

   Construction expenditures (less allowance for equity funds used during
     construction)                                                                (108,461)                 (83,797)
                                                                           ----------------------------------------------

               Net cash used in investing activities                              (108,461)                 (83,797)
-------------------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents                                (4,766)                     454

Cash and cash equivalents at beginning of period                                     8,842                   18,788
                                                                           ----------------------------------------------

Cash and cash equivalents at end of period                                       $   4,076                $  19,242
                                                                           ==============================================

-------------------------------------------------------------------------------------------------------------------------

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

<PAGE>

                     THE UNION LIGHT, HEAT AND POWER COMPANY

<PAGE>
<TABLE>
<CAPTION>

                                          THE UNION LIGHT, HEAT AND POWER COMPANY
                                       STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<S>                                                        <C>        <C>     <C>             <C>       <C>       <C>
                                                                      Quarter Ended                     Year to Date
                                                                         June 30                           June 30
                                                                2000              1999            2000              1999
---------------------------------------------------------- --------------- -- --------------- --------------- --- ------------
                                                                                (dollars in thousands)
                                                                                     (unaudited)

Operating Revenues

   Electric                                                      $55,080           $48,581           $104,368        $ 97,740
   Gas                                                            11,060             9,084             44,547          42,084
                                                           --------------- -- --------------- --------------- --- ------------
   Total Operating Revenues                                       66,140            57,665            148,915         139,824

---------------------------------------------------------- --------------- -- --------------- --------------- --- ------------

Operating Expenses

   Purchased and exchanged power                                  39,929            36,842             75,140          73,590
   Gas purchased                                                   4,988             3,561             22,982          20,883
   Operation and maintenance                                       9,466             8,685             18,694          18,875
   Depreciation and amortization                                   3,922             3,506              7,658           7,077
   Taxes other than income taxes                                   1,025             1,027              2,123           2,110
                                                           --------------- -- --------------- --------------- --- ------------
   Total Operating Expenses                                       59,330            53,621            126,597         122,535

---------------------------------------------------------- --------------- -- --------------- --------------- --- ------------

Operating Income                                                   6,810             4,044             22,318          17,289

---------------------------------------------------------- --------------- -- --------------- --------------- --- ------------

Miscellaneous - Net                                                 (439)             (299)             (630)            (689)
Interest                                                           1,573             1,432              3,144           2,995

---------------------------------------------------------- --------------- -- --------------- --------------- --- ------------

Income Before Taxes                                                4,798             2,313             18,544          13,605

---------------------------------------------------------- --------------- -- --------------- --------------- --- ------------

Income Taxes                                                       2,021               894              7,621           5,643
                                                           --------------- -- --------------- --------------- --- ------------

Net Income Applicable to Common Stock                            $ 2,777           $ 1,419           $ 10,923         $ 7,962

Other Comprehensive Income (Loss), Net of Tax                          -                 -                -                 -
                                                           --------------- -- --------------- --------------- --- ------------

Comprehensive Income                                             $ 2,777           $ 1,419           $ 10,923         $ 7,962
                                                           =============== == =============== =============== === ============

---------------------------------------------------------- --------------- -- --------------- --------------- --- ------------


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


<PAGE>


<TABLE>
<CAPTION>

                     THE UNION LIGHT, HEAT AND POWER COMPANY
                                 BALANCE SHEETS
<S>                                                                               <C>              <C>
ASSETS
                                                                                      June 30        December 31
                                                                                       2000              1999
                                                                                    (unaudited)
--------------------------------------------------------------------------------- ---------------- -----------------
                                                                                       (dollars in thousands)

Current Assets

   Cash and cash equivalents                                                       $    4,668       $    3,641
   Accounts receivable less accumulated provision for
     doubtful accounts of $1,415 at June 30, 2000, and $1,513 at
     December 31, 1999                                                                 10,554           17,786
   Accounts receivable from affiliated companies                                          276              775
   Materials, supplies, and fuel - at average cost                                      5,157            7,654
   Prepayments and other                                                                  548              219
                                                                                  ---------------- -----------------
                Total Current Assets                                                   21,203           30,075

--------------------------------------------------------------------------------- ---------------- -----------------

Utility Plant - Original Cost

   In service

     Electric                                                                         226,330          222,035
     Gas                                                                              179,157          173,011
     Common                                                                            42,546           42,351
                                                                                  ---------------- -----------------
           Total                                                                      448,033          437,397
   Accumulated depreciation                                                           162,224          154,607
                                                                                  ---------------- -----------------
           Total                                                                      285,809          282,790
   Construction work in progress                                                       15,890           13,761
                                                                                  ---------------- -----------------
                Total Utility Plant                                                   301,699          296,551

--------------------------------------------------------------------------------- ---------------- -----------------

Other Assets

   Regulatory assets                                                                   10,335           10,639
   Other                                                                                5,345            5,000
                                                                                  ---------------- -----------------
                Total Other Assets                                                     15,680           15,639

--------------------------------------------------------------------------------- ---------------- -----------------

Total Assets                                                                         $338,582         $342,265
                                                                                  ================ =================

--------------------------------------------------------------------------------- ---------------- -----------------


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


<PAGE>

<TABLE>
<CAPTION>

                                         THE UNION LIGHT, HEAT AND POWER COMPANY
                                                      BALANCE SHEETS

<S>                                                                                      <C>              <C>
LIABILITIES AND SHAREHOLDER'S EQUITY

                                                                                             June 30        December 31
                                                                                              2000              1999
                                                                                           (unaudited)
---------------------------------------------------------------------------------------- ---------------- -----------------
                                                                                              (dollars in thousands)

Current Liabilities

   Accounts payable                                                                         $   4,846        $   8,487
   Accounts payable to affiliated companies                                                    22,001           20,122
   Accrued taxes                                                                                5,053              739
   Accrued interest                                                                             1,278            1,298
   Notes payable to affiliated companies                                                       21,523           37,752
   Other                                                                                        6,179            4,062
                                                                                         ---------------- -----------------
                   Total Current Liabilities                                                   60,880           72,460

---------------------------------------------------------------------------------------- ---------------- -----------------

Non-Current Liabilities

   Long-term debt                                                                              74,573           74,557
   Deferred income taxes                                                                       21,987           23,000
   Unamortized investment tax credits                                                           3,822            3,961
   Accrued pension and other postretirement benefit costs                                      12,770           12,333
   Amounts due to customers - income taxes                                                     11,896           11,308
   Other                                                                                       14,656           12,596
                                                                                         ---------------- -----------------
                   Total Non-Current Liabilities                                              139,704          137,755

---------------------------------------------------------------------------------------- ---------------- -----------------

Total Liabilities                                                                             200,584          210,215

---------------------------------------------------------------------------------------- ---------------- -----------------

Common Stock Equity

   Common Stock-$15.00 par value; authorized shares-1,000,000; outstanding
     shares-585,333 at June 30, 2000 and December 31, 1999                                      8,780            8,780
   Paid-in capital                                                                             20,141           20,142
   Retained earnings                                                                          109,077          103,128
                                                                                         ---------------- -----------------
                   Total Common Stock Equity                                                  137,998          132,050

---------------------------------------------------------------------------------------- ---------------- -----------------

Commitments and Contingencies (Note 4)

Total Liabilities and Shareholder's Equity                                                   $338,582         $342,265
                                                                                         ================ =================

---------------------------------------------------------------------------------------- ---------------- -----------------


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


<PAGE>


<TABLE>
<CAPTION>

                                         THE UNION LIGHT, HEAT AND POWER COMPANY
                                                  STATEMENTS OF CASH FLOWS
<S>                             <C>                                             <C>    <C>      <C>      <C>         <C>
                                                                                                Year to Date
                                                                                                  June 30
                                                                                       2000                     1999
------------------------------------------------------------------------------- ------------------- ---- -------------------
                                                                                            (dollars in thousands)
                                                                                                 (unaudited)

Operating Activities
 Net income                                                                            $10,923                       $ 7,962
 Items providing or (using) cash currently:
   Depreciation and amortization                                                         7,658                         7,077
   Deferred income taxes and investment tax credits - net                                 (565)                       (1,339)
   Allowance for equity funds used during construction                                     (28)                          (48)
   Regulatory assets - net                                                                 203                            69
   Changes in current assets and current liabilities:
     Accounts and notes receivable, net of reserves on receivables sold                  7,298                         7,801
     Materials, supplies, and fuel                                                       2,497                         2,114
     Accounts payable                                                                   (1,762)                        2,978
     Accrued taxes and interest                                                          4,294                           (36
                 Other items - net                                                       4,474                         3,244
                                                                                ------------------- ---- -------------------



                                Net cash provided by operating activities               34,992                        29,822
------------------------------------------------------------------------------- ------------------- ---- -------------------

Financing Activities
  Change in short-term debt                                                            (16,229)                      (11,347)
  Dividends on common stock                                                             (4,975)                       (4,975)


                                Net cash used in financing activities                  (21,204)                      (16,322)
------------------------------------------------------------------------------- ------------------- ---- -------------------

Investing Activities
  Construction expenditures (less allowance for equity funds
     used during construction)                                                         (12,761)                      (12,717)
                                                                                ------------------- ---- -------------------


                                Net cash used in investing activities                  (12,761)                      (12,717)
------------------------------------------------------------------------------- ------------------- ---- -------------------



Net increase in cash and cash equivalents                                                1,027                           783

Cash and cash equivalents at beginning of period                                         3,641                         3,244
                                                                                ------------------- ---- -------------------
Cash and cash equivalents at end of period                                             $ 4,668                       $ 4,027
                                                                                =================== ==== ===================

------------------------------------------------------------------------------- ------------------- ---- -------------------


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





<PAGE>



NOTES TO FINANCIAL STATEMENTS

1.   Summary of Significant Accounting Policies

(a)  Presentation  These Financial  Statements  reflect all  adjustments  (which
include  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 1999 Form 10-K of the registrants.

Certain  amounts in the 1999  Financial  Statements  have been  reclassified  to
conform to the 2000 presentation.

(b) Energy Marketing and Trading We market and trade  electricity,  natural gas,
and other  energy-related  products.  We designate  transactions  as physical or
trading  at the time they are  originated.  Physical  refers to our  intent  and
projected  ability to fulfill  obligations from  company-owned  assets.  We sell
generation  to  third  parties  when  it is not  required  to meet  native  load
requirements  (end-use  customers  within  our  operating  companies'  franchise
service territory).  We account for physical  transactions on a settlement basis
and trading  transactions using the mark-to-market  method of accounting.  Under
the mark-to-market method of accounting,  trading transactions are shown at fair
value in our  Consolidated  Balance  Sheets as Energy risk  management  assets -
current and  non-current,  and Energy risk management  liabilities - current and
non-current.  We reflect changes in fair value resulting in unrealized gains and
losses in Fuel and purchased and exchanged  power and Gas  purchased.  We record
the revenues and costs for all  transactions in our  Consolidated  Statements of
Income when the  contracts  are  settled.  We  recognize  revenues in  Operating
revenues;  costs are recorded in Fuel and purchased and exchanged  power and Gas
purchased.

Although  we  intend to  settle  physical  sales  contracts  with  company-owned
generation,  there are times when we have to settle these  contracts  with power
purchased on the open trading  markets.  The cost of these purchases could be in
excess of the  associated  revenues.  We recognize  the gains or losses on these
transactions as the power is delivered. Open market purchases may occur for some
of the following reasons:

     o    generating station outages;
     o    least-cost alternative;
     o    native load requirements; and
     o    extreme weather.

We value  contracts  in the trading  portfolio  using  end-of-the-period  market
prices, utilizing the following factors (as applicable):

     o    closing  exchange  prices (that is,  closing  prices for  standardized
          electricity  products traded on an organized  exchange such as the New
          York Mercantile Exchange);
     o    broker-dealer and over-the-counter price quotations; and
     o    model pricing (which  considers  time value and historical  volatility
          factors of electricity  pricing underlying any options and contractual
          commitments).

We anticipate that some of these  obligations,  even though  considered  trading
contracts, will ultimately be settled using company-owned  generation.  The cost
of this  generation  is  usually  below the  market  price at which the  trading
portfolio has been valued.

Earnings  volatility may occur from period to period due to the risks associated
with marketing and trading  electricity,  natural gas, and other  energy-related
products.

(c) Financial Derivatives We use derivative financial instruments to manage: (1)
funding  costs;  (2)  exposures  to  fluctuations  in  interest  rates;  and (3)
exposures to foreign currency exchange rates.  These financial  instruments must
be designated as a hedge (for example, an offset of foreign exchange or interest
rate risks) at the  inception  of the contract and must be effective at reducing
the risk associated with the underlying instrument.  An underlying instrument is
one that gives rise to the  derivative  financial  instrument,  for  example,  a
foreign currency denominated contract. Accordingly, changes in the market values
of instruments designated as hedges must be highly correlated with changes in
the market values of the underlying instrument.

From time to time,  we may  utilize  foreign  exchange  forward  contracts  (for
example,  a  contract  obligating  one party to buy,  and the  other to sell,  a
specified quantity of a foreign currency for a fixed price at a future date) and
currency swaps (for example,  a contract whereby two parties exchange  principal
and interest cash flows denominated in different currencies) to hedge certain of
our net investments in foreign  operations.  Accordingly,  any translation gains
and losses are recorded in Accumulated other comprehensive  income (loss), which
is a component of Common stock equity.  Aggregate  translation losses related to
these  instruments are reflected net in Current  liabilities in our Consolidated
Balance Sheets. At June 30, 2000, no such instruments were held.

We also use  interest  rate  swaps (an  agreement  by two  parties  to  exchange
fixed-interest  rate cash flows for  floating-interest  rate cash flows). We use
the accrual method to account for these interest rate swaps. Accordingly,  gains
and losses are calculated based on the difference between the fixed-rate and the
floating-rate interest amounts, using agreed upon principal amounts. These gains
and  losses  are  recognized  in our  Consolidated  Statements  of  Income  as a
component of Interest over the life of the agreement.

(d)  Accounting  Changes  During  the  second  quarter  of 1998,  the  Financial
Accounting  Standards  Board (FASB)  issued  Statement  of Financial  Accounting
Standards No. 133, Accounting for Derivative  Instruments and Hedging Activities
(Statement  133).  This  standard   requires   companies  to  record  derivative
instruments  as assets or  liabilities,  measured at fair value.  Changes in the
derivative's fair value must be recognized currently in earnings unless specific
hedge accounting criteria are met. Hedges are transactions  entered into for the
purpose of reducing  exposure to one or more types of business  risk.  Gains and
losses on derivatives  that qualify as hedges can offset related  results on the
hedged item in the income statement.

In June 1999, the FASB issued  Statement of Financial  Accounting  Standards No.
137, Accounting for Derivative  Instruments and Hedging  Activities-Deferral  of
the Effective  Date of FASB  Statement  No.133  (Statement  137).  Statement 137
deferred the effective date of Statement 133 by one year. As a result, Statement
133 will be effective for fiscal years beginning after June 15, 2000.

Statement of Financial  Accounting  Standards  No. 138,  Accounting  for Certain
Derivative  Instruments  and Certain  Hedging  Activities - an Amendment of FASB
Statement  No.  133  (Statement  138) was  issued in June  2000.  Statement  138
addresses  implementation  issues and reflects  decisions of the FASB  regarding
recommendations of the FASB-sponsored Derivatives Implementation Group.

We expect to reflect  the  adoption of  Statement  133 in  financial  statements
issued  beginning  in  the  first  quarter  of  2001.  In  preparation  for  our
implementation of this new standard,  we have formed a cross-functional  project
team. The project team is identifying and analyzing all contracts which could be
subject  to  the  new  standard,  developing  required  documentation,  defining
relevant  processes  and  information  systems  needs,  and  promoting  internal
awareness of the requirements and potential  effects of the new standard.  While
we continue to analyze and follow the development of implementation  guidelines,
at this  time we are  unable  to  predict  whether  the  implementation  of this
accounting  standard will be material to our results of operations and financial
position.  However,  the adoption of Statement 133 could increase the likelihood
of volatility in earnings and other comprehensive income.

2.   Change in Preferred Stock of Subsidiaries

The following  represents the changes during the year in preferred  stock of The
Cincinnati Gas & Electric Company (CG&E) and PSI Energy, Inc. (PSI):

--------------------------------------------------------------------------------


                                           Shares
Registrant     Quarter     Series         Redeemed              Par Value
----------     -------     -------     -----------------    ------------------

CG&E           First       43/4%             800             $      80,000
               Second      43/4%           1,100                   110,000

PSI            First       31/2%             600             $      60,000
               Second      31/2%           1,184                   118,400
                           6.875%        105,150                10,515,000
                           4.32%          14,380                   359,500

--------------------------------------------------------------------------------

3.   Long-Term Debt

On February 15, 2000,  PSI retired  $150,000  principal  amount of its Series YY
First Mortgage Bonds.

On May 16, 2000, PSI issued $44,025,000 of Indiana Development Finance Authority
Environmental  Refunding  Revenue  Bonds  Series  2000A,  due  May 1,  2035  and
$10,000,000 of Indiana  Development  Finance Authority  Environmental  Refunding
Revenue Bonds Series 2000B, due April 1, 2022. The initial interest rates on the
Series  2000A and Series  2000B  bonds were 4.65% and 4.70%,  respectively.  The
rates reset every 35 days.

The  proceeds  from  these  issuances  were used to pay a portion of the cost of
refunding the $29,795,000  principal amount  outstanding of PSI's First Mortgage
Bonds,  Series YY, the  $14,250,000  principal  amount  outstanding of its First
Mortgage Bonds,  Series UU, and the $10,000,000  principal amount outstanding of
its First Mortgage Bonds,  Series TT, each at a redemption  price of 102% of the
principal amount thereof, plus accrued interest.

4.   Commitments and Contingencies

(a)  Ozone Transport Rulemaking

     (i) NOX SIP Call Ozone transport refers to the alleged wind-blown  movement
of  ozone or  ozone-causing  materials  across  city and  state  boundaries.  As
discussed  in  the  1999  Form  10-K,  in  October   1998,   the  United  States
Environmental  Protection  Agency (EPA) finalized its ozone transport rule, also
known as the NOX SIP Call. (A SIP is a state's implementation plan for achieving
emissions  reductions to address air quality  concerns.) It applied to 22 states
in the eastern half of the United States  (U.S.),  including the three states in
which our electric utilities  operate,  and also proposes a model nitrogen oxide
(NOX) emission  allowance  trading  program.  If implemented by the states,  the
trading program would allow us to buy NOX emission  allowances from, or sell NOX
emission allowances to, other companies as necessary. This rule recommended that
states reduce NOX emissions  primarily from  industrial and utility sources to a
certain level by May 2003. The EPA gave the affected  states until September 30,
1999, to  incorporate  NOX  reductions  and, in the  discretion of the state,  a
trading program into their SIPs. The EPA proposed to implement a federal plan to
accomplish the equivalent NOX reductions by May 2003, if states failed to revise
their SIPs.  The EPA must  approve all SIPs.  Ohio,  Indiana,  a number of other
states,  and various industry groups (some of which we are a member) filed legal
challenges to the NOX SIP Call in late 1998. On May 25, 1999,  the U.S.  Circuit
Court of Appeals  for the  District of  Columbia  (Court of  Appeals)  granted a
request for a deferral of the rule and  indefinitely  suspended the September 30
filing deadline, pending further review by the Court of Appeals.

In March 2000,  the Court of Appeals  substantially  upheld the EPA's  rule.  On
April 11,  2000,  the EPA asked the Court of Appeals to remove its May 25, 1999,
suspension  of the rule and also  directed the states to submit SIP revisions by
September 1, 2000. On April 17, 2000,  various states and industry  groups (some
of which we are a  member)  filed a  request  with the  Court of  Appeals  for a
rehearing of the NOX SIP Call decisions. On April 24, 2000, the same group filed
a request with the Court of Appeals to require  rulemaking  and a comment period
to determine a new  compliance  date.  The states also filed a request to obtain
more time to file their SIPs. On June 23, 2000, the Court of Appeals denied both
requests and  directed  the states to submit their SIP  revisions by October 30,
2000.  The states and other groups have appealed the Court of Appeals  ruling to
the U.S.  Supreme Court (Supreme  Court).  Pending  determination of whether the
Supreme Court will hear the appeal,  the states will have to begin  adopting new
regulations  requiring  implementation  of the  requirements of the October 1998
ozone transport rulemaking this year.

We estimate the capital  expenditures  for  compliance  with the NOX SIP Call at
$500  million to $700 million (in 1999  dollars) to meet the May 2003  deadline.
This estimate depends on several factors, including:

     o    final  determination  regarding  both the timing and strictness of the
          final NOX  reductions  required  by the SIPs  adopted by the states in
          which we operate;
     o    utilization of our generating units;
     o    availability of adequate  supplies of materials and labor to construct
          the necessary control equipment; and
     o    whether a viable market will exist to buy and sell NOX allowances.

     (ii) Section 126  Petitions As discussed in the 1999 Form 10-K, in February
1998,  the  northeast  states filed  petitions  seeking the EPA's  assistance in
reducing ozone in the eastern U.S. under Section 126 of the Clean Air Act (CAA).
The EPA believes that Section 126 petitions  allow a state to claim that another
state is  contributing  to its air  quality  problem  and  request  that the EPA
require the upwind state to reduce its emissions.
In December  1999,  the EPA granted four Section 126  petitions  relating to NOX
emissions.  This ruling affects all of our Ohio and Kentucky facilities, as well
as some of our Indiana  facilities,  and requires us to reduce our NOX emissions
to a certain  level by May 2003.  The EPA's  action  granting  the  Section  126
petitions has been appealed to the Court of Appeals.  In April 2000, the parties
to the appeal filed a proposed  scheduling order,  which if approved,  would set
oral  arguments in late 2000,  with a court  decision  expected in the spring of
2001.  We currently  cannot  predict the outcome of this  proceeding.  We do not
anticipate  that any  Section 126 rulings  will have any  significant  financial
impact in addition to that of the NOX SIP Call.

     (iii) State Ozone Plans As discussed in the 1999 Form 10-K, on November 15,
1999,  the  State of  Indiana  and the  Commonwealth  of  Kentucky  (along  with
Jefferson County, Kentucky) jointly filed an amendment to their SIPs on how they
intend to bring the greater Louisville area,  including Floyd and Clark Counties
in Indiana, into attainment with the one-hour ozone standard. The SIP amendments
call for,  among other  things,  statewide  NOX  reductions  from  utilities  in
Indiana,  Kentucky,  and surrounding states. These rules are less stringent than
the EPA's NOX SIP Call.  The states of Indiana and  Kentucky  have  committed to
adopt utility NOX reduction rules by December 2000, which would require controls
be installed  by May 2003.  We do not  anticipate  that the state NOX rules will
have any significant financial impact in addition to that of the NOX SIP Call.

(b) New Source  Review (NSR) As  discussed in the 1999 Form 10-K,  the CAA's NSR
provisions require that a company obtain a  pre-construction  permit if it plans
to build a new  stationary  source  of  pollution  or make a major  change to an
existing facility unless the changes are exempt. In July 1998, the EPA requested
comments  on  proposed  revisions  to  the  NSR  rules  that  would  change  NSR
applicability by eliminating exemptions contained in the current regulation.  We
believe that if these changes are finalized,  it will be significantly harder to
maintain our facilities without triggering the NSR permit requirements.

Since July 1999,  CG&E and PSI have  received  requests from the EPA (Region 5),
under  Section  114 of the CAA,  seeking  documents  and  information  regarding
capital and maintenance  expenditures at several of their respective  generating
stations. These activities are part of an industry-wide  investigation assessing
compliance  with  the  NSR  and  the New  Source  Performance  Standards  (NSPS,
emissions  standards that apply to new and changed units) of the CAA at electric
generating stations.

On September 15, 1999,  and on November 3, 1999,  the  attorneys  general of the
states  of New York and  Connecticut,  respectively,  issued  letters  notifying
Cinergy (Cinergy Corp. and all of its regulated and non-regulated  subsidiaries)
and CG&E of their intent to sue under the citizens  suit  provisions of the CAA.
New  York and  Connecticut  allege  violations  of the CAA by  constructing  and
continuing to operate a major change to CG&E's W.C. Beckjord Station  (Beckjord)
without obtaining the required NSR pre-construction permits.

On November 3, 1999,  the EPA sued a number of holding  companies  and  electric
utilities,  including  Cinergy,  CG&E, and PSI, in various U.S. District Courts.
The Cinergy,  CG&E,  and PSI suit alleges  violations  of the CAA at some of our
generating  stations relating to NSR and NSPS  requirements.  The suit seeks (1)
injunctive  relief to require  installation of pollution  control  technology on
each of the  generating  units at Beckjord and PSI's Cayuga  Generating  Station
(Cayuga),  and (2) civil  penalties in amounts of up to $27,500 per day for each
violation.

On March 1, 2000, the EPA filed an amended complaint against Cinergy,  CG&E, and
PSI. The amended complaint added the alleged  violations of the NSR requirements
of the CAA  contained  in the  notice  of  violation  (NOV)  filed by the EPA on
November 3, 1999.  It also added claims for relief  alleging  violations  of (1)
nonattainment  NSR,  (2)  Indiana  and Ohio  SIPs,  and (3)  particulate  matter
emission  limits (as  discussed in Note 4(d) on page 33). The amended  complaint
seeks (1)  injunctive  relief  to  require  installation  of  pollution  control
technology on each of the generating units at Beckjord, Cayuga, and PSI's Wabash
River and Gallagher Generating  Stations,  and such other measures as necessary,
and (2) civil  penalties in amounts of up to $27,500 per day for each violation.
We believe the allegations  contained in the amended complaint are without merit
and plan to  defend  the suit  vigorously  in  court.  At this  time,  it is not
possible to determine the likelihood  that the EPA will prevail on its claims or
whether  resolution of this matter will have a material  effect on our financial
condition.  In addition,  we cannot predict  whether any additional  allegations
will be added to this proceeding.

On March 1, 2000, the EPA also filed an amended complaint alleging violations of
the CAA relating to NSR, Prevention of Significant Deterioration (PSD), and Ohio
SIP requirements regarding Conesville Station, which is operated by the Columbus
Southern  Power  Company  (CSP) and  jointly-owned  by CSP, The Dayton Power and
Light Company (DP&L),  and CG&E. The EPA is seeking  injunctive relief and civil
penalties  of up  to  $27,500  per  day  for  each  violation.  We  believe  the
allegations in the amended  complaint are without merit. At this time, it is not
possible to determine the likelihood  that the EPA will prevail on its claims or
whether  resolution of this matter will have a material  effect on our financial
condition.

On June 28, 2000,  the EPA issued an NOV to Cinergy,  CG&E,  and PSI for alleged
violations  of NSR, PSD, and SIP  requirements  at CG&E's Miami Fort Station and
PSI's Gibson Station. In addition,  Cinergy and CG&E have been informed by DP&L,
the operator of J.M.  Stuart  Station  (Stuart),  that on June 30, 2000, the EPA
issued an NOV for alleged  violations of NSR, PSD, and SIP  requirements at this
station.  CG&E owns 39% of Stuart. The NOVs indicated that the EPA may (1) issue
an order requiring  compliance with the  requirements of the SIP, or (2) bring a
civil action seeking  injunctive relief and civil penalties of up to $27,500 per
day for each  violation.  At this time,  it is not  possible  to  determine  the
likelihood that the EPA will prevail on its claims or whether resolution of this
matter will have a material effect on our financial condition.

(c)  Manufactured Gas Plant (MGP) Sites

     (i) General As discussed in the 1999 Form 10-K, prior to the 1950s, gas was
produced at MGP sites through a process that involved the heating of coal and/or
oil. The gas produced  from this process was sold for  residential,  commercial,
and industrial uses.

     (ii)  PSI Coal tar  residues,  related  hydrocarbons,  and  various  metals
associated  with MGP sites  have  been  found at  former  MGP sites in  Indiana,
including at least 21 sites which PSI or its predecessors  previously owned. PSI
acquired four of the sites from Northern Indiana Public Service Company (NIPSCO)
in 1931.  At the same  time,  PSI sold  NIPSCO  the sites  located in Goshen and
Warsaw,  Indiana.  In 1945, PSI sold 19 of these sites (including the four sites
it acquired  from NIPSCO) to the  predecessor  of the Indiana Gas Company,  Inc.
(IGC). IGC later sold the site located in Rochester, Indiana, to NIPSCO.

IGC (in 1994) and NIPSCO (in 1995) both made claims  against  PSI.  The basis of
these claims was that PSI is a Potentially Responsible Party with respect to the
21 MGP sites under the Comprehensive  Environmental  Response,  Compensation and
Liability  Act  (CERCLA).  The claims  further  asserted  that PSI is  therefore
legally responsible for the costs of investigating and remediating the sites. In
August 1997,  NIPSCO filed suit against PSI in federal court  claiming  recovery
(pursuant  to CERCLA) of NIPSCO's  past and future  costs of  investigating  and
remediating MGP-related contamination at the Goshen MGP site.

In November 1998,  NIPSCO,  IGC, and PSI entered into a Site  Participation  and
Cost Sharing  Agreement.  The agreement  allocated CERCLA liability for past and
future  costs at seven MGP sites in  Indiana  among  the three  companies.  As a
result of the agreement, NIPSCO's lawsuit against PSI was dismissed. The parties
have  assigned  lead  responsibility  for  managing  further  investigation  and
remediation  activities  at each of the  sites  to one of the  parties.  Similar
agreements were reached between IGC and PSI that allocate CERCLA liability at 14
MGP sites with which  NIPSCO was not  involved.  These  agreements  conclude all
CERCLA and similar claims between the three companies  related to MGP sites. The
parties  continue to investigate and remediate the sites,  as appropriate  under
the  agreements and applicable  laws.  The Indiana  Department of  Environmental
Management (IDEM) oversees investigation and cleanup of some of the sites.

PSI notified its insurance carriers of the claims related to MGP sites raised by
IGC,  NIPSCO,  and the IDEM. In April 1998,  PSI filed suit in Hendricks  County
Circuit Court in the State of Indiana  against its general  liability  insurance
carriers.  Among other matters,  PSI requested a declaratory judgment that would
obligate its insurance carriers to (1) defend MGP claims against PSI, or (2) pay
PSI's  costs of  defense  and  compensate  PSI for its  costs of  investigating,
preventing,  mitigating,  and  remediating  damage to property and paying claims
related to MGP sites.  The case was moved to the Hendricks County Superior Court
1 on a request for a change of judge.  The Hendricks County Superior Court 1 has
set the case for trial  beginning  in May 2001.  It ordered  the parties to meet
certain  deadlines for  discovery  proceedings  based upon this trial date.  PSI
cannot predict the outcome of this litigation.  Recently,  PSI has been involved
in settlement  discussions with some of the insurance  carriers.  At the present
time, PSI cannot predict either the progress or outcome of these discussions.

PSI has accrued costs for the sites related to investigation,  remediation,  and
groundwater  monitoring for the work performed to date. The estimated  costs for
such  remedial  activities  are accrued  when the costs are  probable and can be
reasonably  estimated.  PSI does not  believe it can  provide an estimate of the
reasonably  possible  total  remediation  costs for any site  before a  remedial
investigation/feasibility study has been completed. To the extent remediation is
necessary,  the  timing  of the  remediation  activities  impacts  the  cost  of
remediation.  Therefore, PSI currently cannot determine the total costs that may
be incurred in connection  with the remediation of all sites, to the extent that
remediation is required. According to current information, these future costs at
the 21 Indiana MGP sites are not material to our financial  condition or results
of operations. As further investigation and remediation activities are performed
at these sites,  the potential  liability for the 21 MGP sites could be material
to our financial position or results of operations.

     (iii) CG&E CG&E and its utility  subsidiaries  are aware of potential sites
where MGP activities have occurred at some time in the past. None of these sites
is known to present a risk to the environment. CG&E and its utility subsidiaries
have begun  preliminary  site  assessments to obtain  information  about some of
these MGP sites.

(d) Other As  discussed in the 1999 Form 10-K,  on November  30,  1999,  the EPA
filed an NOV and a Finding of Violation  (FOV) against Cinergy and CG&E alleging
that emissions of particulate  matter at Beckjord  exceeded the allowable limit.
The NOV indicated that the EPA may (1) issue an administrative penalty order, or
(2) file a civil action seeking  injunctive  relief and civil penalties of up to
$27,500 per day for each violation.  The allegations  contained in this NOV were
incorporated  within the March 1, 2000, amended complaint,  as discussed in Note
4(b) on page 30. On June 22,  2000,  the EPA  issued an NOV and an FOV  alleging
additional  particulate  emission  violations  at  Beckjord  and  offered  us an
opportunity to meet and discuss the  allegations  and corrective  measures.  The
NOV/FOV indicated that the EPA may (1) issue an administrative compliance order,
(2) issue an  administrative  penalty  order,  or (3) bring a civil or  criminal
action. We are currently unable to determine whether resolution of these matters
will have a material effect on our financial condition.


<PAGE>



5.   Financial Information by Business Segment

As discussed in the 1999 Form 10-K,  during 1998, we adopted the requirements of
Statement of Financial  Accounting Standards No. 131, Disclosures about Segments
of an Enterprise and Related Information (Statement 131). Statement 131 requires
disclosures about reportable  operating segments in annual and interim condensed
financial statements.

The Energy Commodities  Business Unit  (Commodities)  operates and maintains our
domestic electric  generating  plants and some of our  jointly-owned  plants. It
also  conducts the following  activities:  (1)  wholesale  energy  marketing and
trading, (2) energy risk management,  (3) financial  restructuring services, and
(4) proprietary arbitrage  activities.  Commodities earns revenues from external
customers  from  its  marketing,   trading,  and  risk  management   activities.
Commodities earns  intersegment  revenues from the sale of electric power to the
Energy Delivery Business Unit (Delivery).

Delivery plans,  constructs,  operates,  and maintains our operating  companies'
transmission  and  distribution  systems and provides gas and electric energy to
consumers. Delivery earns revenues from customers other than consumers primarily
by  transmitting  electric  power  through  our  transmission  system.  Delivery
currently  receives all of its electricity  from Commodities at a transfer price
based upon current regulatory ratemaking methodology.

The Cinergy Investments  Business Unit (Cinergy  Investments)  primarily manages
the development,  marketing,  and sales of our  non-regulated  retail energy and
energy-related  products and  services.  This is  accomplished  through  various
subsidiaries and joint ventures.  Cinergy  Investments earns all of its revenues
from the  sale of such  products  and  services  to  ultimate  consumers.  These
products and services include the following:

     o    energy management and consulting services to commercial customers that
          operate retail  facilities  (for example,  finding more efficient ways
          for a customer to use energy);

     o    utility operations/services to other utilities (for example, providing
          underground locating and construction services for other utilities);

     o    building,   operating,   and  maintaining   combined  heat  and  power
          facilities; and

     o    building and maintaining  fiber optic  telecommunication  networks for
          businesses, municipalities, telecommunications carriers, and schools.

The  International  Business  Unit  (International)   directs  and  manages  our
international  business  holdings,   which  include  wholly-  and  jointly-owned
companies  in eleven  countries.  In  addition,  International  also directs our
renewable energy investing activities (for example,  wind farms) both inside and
outside the U.S.  International earns (1) revenues, and (2) equity earnings from
unconsolidated companies primarily from energy-related businesses.


<PAGE>


<TABLE>
<CAPTION>

Financial results by business unit for the quarters ended June 30, 2000, and
1999, are as follows:

-----------------------------------------------------------------------------------------------------------------------------------
Business Units

-----------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>          <C>       <C>          <C>           <C>         <C>         <C>              <C>

                                                                      2000
                         -----------------------------------------------------------------------------------------------------------
                                             Cinergy Business Units
                         ------------------------------------------------------------
                                                                                                     Reconciling
                                                  Cinergy                               All Other   Eliminations
                         Commodities  Delivery  Investments  International    Total       (1)            (2)        Consolidated
                         -----------  --------  -----------  -------------  ---------  ----------  --------------   -------------
                                                                 (in thousands)

Operating revenues -
  External customers      $983,745     $745,268   $ 20,453     $ 20,048    $1,769,514   $    -     $         -       $1,769,514
  Intersegment revenues    445,875            -          -                    445,875        -        (445,875)               -
Segment profit (loss)       57,154(3)    23,451     (3,536)      (1,954        75,115        -               -           75,115

------------------------------------------------------------------------------------------------------------------------------------

                                                                      1999
                         -----------------------------------------------------------------------------------------------------------
                                             Cinergy Business Units
                         ------------------------------------------------------------
                                                                                                     Reconciling
                                                  Cinergy                               All Other   Eliminations
                         Commodities  Delivery  Investments  International    Total       (1)           (2)         Consolidated
                         -----------  --------  -----------  -------------  ---------  ----------   -------------   -------------
                                                                 (in thousands)

Operating revenues -
  External customers      $542,002     $707,193   $10,884      $15,320     $1,275,399   $    -     $         -       $1,275,399
  Intersegment revenues    423,777            -         -            -        423,777        -        (423,777)               -
Segment profit (loss)       28,676       27,010    (2,965)       5,171(4)      57,892    1,166               -           59,058
<FN>
(1) The All Other category represents  miscellaneous  corporate items, which are not allocated to business units for purposes of
    segment profit measurement.
(2) The Reconciling  Eliminations  category eliminates the intersegment  revenues of Commodities.
(3) The increase in 2000, as compared to 1999, is primarily due to improvements in gross margins.
(4) Includes the earnings from our 50% ownership interest in Midlands Electricity plc, which was sold in the third quarter of 1999.
</FN>
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

       Financial results by business unit for the six months ended June 30, 2000, and 1999, are as follows:

------------------------------------------------------------------------------------------------------------------------------------
Business Units
------------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>          <C>         <C>          <C>            <C>        <C>          <C>             <C>

                                                                      2000
                         -----------------------------------------------------------------------------------------------------------
                                             Cinergy Business Units
                         --------------------------------------------------------------

                                                                                                      Reconciling
                                                    Cinergy                               All Other   Eliminations
                         Commodities   Delivery   Investments  International    Total       (1)           (2)         Consolidated
                         -----------  ----------  -----------  -------------  ---------  ----------   -------------   -------------
                                                                  (in thousands)

Operating revenues -
  External customers     $1,674,537   $1,605,154    $39,002      $ 33,898    $3,352,591   $      -    $           -     $3,352,591
  Intersegment revenues     899,595            -          -             -       899,595          -         (899,595)             -
Segment profit (loss)       137,953(3)    81,210     (3,591)       (2,018)      213,554          -                -        213,554

-------------------------------------------- ---------------------------------------------------------------------------------------

                                                                      1999
                          ----------------------------------------------------------------------------------------------------------
                                             Cinergy Business Units
                          -------------------------------------------------------------
                                                                                                      Reconciling
                                                    Cinergy                               All Other   Eliminations
                         Commodities   Delivery   Investments  International    Total       (1)           (2)         Consolidated
                         -----------  ----------  -----------  -------------  ---------  ----------   -------------   -------------
                                                                  (in thousands)

Operating revenues -
  External customers     $1,045,640   $1,575,560    $28,284      $ 28,194     $2,677,678  $      -    $           -     $2,677,678
  Intersegment revenues     880,314            -          -             -        880,314         -         (880,314)             -
Segment profit (loss)        79,078       89,627     (4,914)       20,866 (4)    184,657     1,646                -        186,303
<FN>
(1) The All Other category represents  miscellaneous corporate items, which are not allocated to business units for purposes of
    segment profit measurement.
(2) The Reconciling  Eliminations category eliminates the intersegment revenues of Commodities.
(3) The increase in 2000, as compared to 1999, is primarily due to improvements in gross margins.
(4) Includes the earnings from our 50% ownership interest in  Midlands Electricity plc, which was sold in the third quarter of 1999.
</FN>
</TABLE>




<PAGE>

<TABLE>
<CAPTION>


Total segment assets at June 30, 2000, and December 31, 1999, are as follows:
<S>                                       <C>           <C>           <C>          <C>         <C>        <C>          <C>

                                          ------------------------------------------------------------------------------------------
                                                                 Cinergy Business Units
                                          -------------------------------------------------------------
                                                                        Cinergy                            All Other
                                          Commodities    Delivery     Investments  International  Total      (1)       Consolidated
                                          -----------   -----------   -----------  -------------  -----   ----------   ------------
                                                                                   (in thousands)

Total segment assets at June 30, 2000     $ 5,887,973   $4,105,469    $152,619     $ 476,497   $10,622,558  $48,605    $10,671,163
Total segment assets at December 31, 1999   5,041,578    4,058,164     129,935       339,905     9,569,582   47,366      9,616,948
<FN>
(1) The All Other category represents  miscellaneous  corporate items, which are not allocated to business units for purposes of
    segment profit measurement.
</FN>
</TABLE>




<PAGE>



6.   Earnings Per Common Share

A reconciliation of earnings per common share (EPS) to earnings per common share
assuming dilution (diluted EPS) is presented below:

--------------------------------------------------------------------------------

                                                 Income       Shares        EPS
                                                 -------      -------      -----
                                                         (in thousands,
                                                    except per share amounts)

Quarter ended June 30, 2000
Earnings per common share:
   Net income                                    $75,115      158,923      $0.47

Effect of dilutive securities:
   Common stock options                                           318
   Contingently issuable common stock                             293
                                                 ---------------------
EPS-assuming dilution:
   Net income plus assumed conversions           $75,115      159,534      $0.47

Quarter ended June 30, 1999
Earnings per common share:
   Net income                                    $59,058      158,877      $0.37

Effect of dilutive securities:
   Common stock options                                           418
   Contingently issuable common stock                              26
                                                 ---------------------
EPS-assuming dilution:
   Net income plus assumed conversions           $59,058      159,321      $0.37

--------------------------------------------------------------------------------

Options to purchase  shares of common stock are excluded from the calculation of
diluted EPS when the  exercise  prices of these  options  are  greater  than the
average  market price of the common shares  during the period.  For the quarters
ended June 30, 2000, and 1999,  approximately  2 million and 1.7 million shares,
respectively, were excluded from the diluted EPS calculation.

The Employee  Stock  Purchase and Savings Plan is also excluded from the diluted
EPS  calculation,  because the purchase price is greater than the average market
price during this period.  This plan allows all full-time,  regular employees to
purchase shares of common stock pursuant to a stock option  feature.  A detailed
description of this plan is available in the 1999 Form 10-K.

7.   Ohio Deregulation

As discussed in the 1999 Form 10-K, on July 6, 1999,  Ohio Governor  Robert Taft
signed  Amended  Substitute  Senate  Bill No. 3 (Electric  Restructuring  Bill),
beginning the transition to electric  deregulation  and customer  choice for the
state of Ohio. The Electric  Restructuring  Bill creates a competitive  electric
retail service market beginning January 1, 2001. The legislation  provides for a
market  development  period that begins  January 1, 2001, and ends no later than
December 31, 2005. Ohio electric utilities have an opportunity to recover Public
Utilities Commission of Ohio (PUCO)-approved  transition costs during the market
development  period.  The legislation  also freezes retail electric rates during
the market development period, at the rates in effect on October 4, 1999, except
for a five-percent  reduction in the generation  component of residential  rates
and other potential adjustments.  Furthermore, the legislation contemplates that
twenty percent of the current electric retail customers will switch suppliers no
later than December 31, 2003.

The Electric  Restructuring Bill required each utility supplying retail electric
service in Ohio to file a comprehensive  proposed  transition plan with the PUCO
addressing  specific  requirements  of the  legislation.  CG&E filed its plan on
December  28, 1999.  The PUCO is required to issue a  transition  order no later
than October 31, 2000.  On March 27, 2000,  the PUCO staff issued a Staff Report
on  CG&E's  plan,  identifying  exceptions  and  offering   recommendations  for
Commission action.

On May 8, 2000,  CG&E  reached a  stipulated  agreement  with the PUCO staff and
various  other  interested  parties  with  respect to its  proposal to implement
electric  customer choice in Ohio beginning  January 1, 2001. The major features
of this agreement include:

     o    Residential customer rates will be frozen through December 31, 2005;

     o    Residential  customers  will receive a  five-percent  reduction in the
          generation portion of their electric rates, effective January 1, 2001;

     o    CG&E has  agreed to  provide  $4  million  over the next five years in
          support  of energy  efficiency  and  weatherization  services  for low
          income customers;

     o    The  creation of a Regulatory  Transition  Charge  (RTC),  designed to
          recover CG&E's  regulatory  assets and other  transition  costs over a
          ten-year period;

     o    Authority  for CG&E to transfer its  generation  assets to a separate,
          non-regulated  corporate  subsidiary to provide  flexibility to manage
          its generation asset portfolio in a manner that enhances opportunities
          in a competitive marketplace;

     o    Authority for CG&E to apply the proceeds of  transition  cost recovery
          to   costs   incurred   during   the   transition   period   including
          implementation costs and purchased power costs that may be incurred by
          CG&E to maintain an operating  reserve  margin  sufficient  to provide
          reliable service to its customers;

     o    CG&E will provide standard offer default supplier service (i.e.,  CG&E
          will be the  supplier  of last  resort,  so that no  customer  will be
          without an electric supplier); and
     o    CG&E has agreed to provide shopping credits to switching customers.

CG&E expects to receive an order on the proposed  settlement prior to the end of
the third quarter of 2000.

CG&E expects to discontinue the application of Statement of Financial Accounting
Standards No. 71,  Accounting  for the Effects of Certain  Types of  Regulation,
with respect to its generating assets coincident with the regulatory approval of
the settlement.  To the extent the generating  assets are financially  impaired,
CG&E will be required to recognize a loss under  generally  accepted  accounting
principles.


<PAGE>



Cautionary Statements Regarding Forward-Looking Information

"Item 2. Management's Discussion and Analysis of Financial Condition and Results
of  Operations"  (MD&A)  discusses  various  matters that may make  management's
corporate vision of the future more clear for you. Certain of management's goals
and aspirations are outlined and specific  projections may be made.  These goals
and  projections  are  considered  forward-looking  statements  and are based on
management's beliefs and assumptions.

Forward-looking statements involve risks and uncertainties that may cause actual
results to be  materially  different  from the results  predicted.  Factors that
could cause actual results to differ are often  presented  with  forward-looking
statements.  In addition,  other  factors  could cause actual  results to differ
materially from those indicated in any forward-looking statement. These include:

     o    Factors affecting operations, such as:

          (1)  unusual weather conditions;

          (2)  catastrophic weather-related damage;

          (3)  unscheduled generation outages;

          (4)  unusual maintenance or repairs;

          (5)  unanticipated  changes in fossil fuel costs, gas supply costs, or
               availability  constraints;  (6) environmental  incidents; and (7)
               electric transmission or gas pipeline system constraints.

     o    Legislative and regulatory  initiatives regarding  deregulation of the
          industry,  including Ohio's comprehensive deregulation legislation and
          the outcome of The Cincinnati Gas & Electric Company's (CG&E) Proposed
          Stipulation and Settlement in its Transition Plan proceeding,  as well
          as potential deregulation legislation to be passed in Indiana in 2001,
          and potential national deregulation  legislation being contemplated by
          the United States (U.S.) Congress.

     o    The  timing  and  extent of the  entry of  additional  competition  in
          electric  or  gas  markets  and  the  effects  of  continued  industry
          consolidation  through  the  pursuit  of  mergers,  acquisitions,  and
          strategic alliances.

     o    Regulatory  factors such as changes in the policies or procedures that
          set rates,  changes in our ability to recover  investments  made under
          traditional regulation through rates, and changes to the frequency and
          timing of rate increases.

     o    Financial or regulatory  accounting  principles or policies imposed by
          governing bodies.

     o    Political, legal, and economic conditions and developments in the U.S.
          and the  foreign  countries  in which we have a  presence.  This would
          include inflation rates and monetary fluctuations.

     o    Changing  market  conditions  and other  factors  related to  physical
          energy and financial  trading  activities.  These would include price,
          basis, credit, liquidity, volatility, capacity, transmission, currency
          exchange rates, interest rates, and warranty risks.

     o    The performance of projects undertaken by our non-regulated businesses
          and the success of efforts to invest in and develop new opportunities.

     o    Availability of, or cost of, capital.

     o    Employee  workforce  factors,  including  changes  in key  executives,
          collective  bargaining  agreements  with  union  employees,  and  work
          stoppages.

     o    Legal and  regulatory  delays  and  other  obstacles  associated  with
          mergers, acquisitions, and investments in joint ventures.

     o    Costs   and   effects   of  legal  and   administrative   proceedings,
          settlements, investigations, and claims. Examples can be found in Note
          4 of the  "Notes  to  Financial  Statements"  in  "Part  1.  Financial
          Information" beginning on page 29.

     o    Changes  in  international,   federal,  state,  or  local  legislative
          requirements,   such  as   changes  in  tax  laws,   tax  rates,   and
          environmental laws and regulations.

Unless  we  otherwise  have  a  duty  to do  so,  the  Securities  and  Exchange
Commission's (SEC) rules do not require forward-looking statements to be revised
or  updated  (whether  as a result of  changes  in actual  results,  changes  in
assumptions,  or other factors  affecting the statements).  Our  forward-looking
statements  reflect our best beliefs as of the time they are made and may not be
updated for subsequent developments.


<PAGE>





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

INTRODUCTION

In MD&A, we explain  liquidity,  capital  resources,  and results of operations.
Specifically, we discuss the following:

     o    factors affecting current and future operations;
     o    why revenues and expenses changed from period to period; and
     o    how the above items affect our overall financial condition.

LIQUIDITY

In the "Liquidity" section, we discuss  environmental issues and other investing
activities as they relate to our current and future cash needs.  In the "Capital
Resources"  section beginning on page 43, we discuss how we intend to meet these
capital requirements.

Environmental Issues

In the "Environmental  Issues" section, we discuss ozone transport  rulemakings,
new source review, and manufactured gas plant sites as they relate to us and our
operating companies.

Ozone Transport  Rulemakings,  New Source Review,  Manufactured Gas Plant Sites,
and Other

See Notes 4(a),  (b),  (c),  and (d),  respectively,  of the "Notes to Financial
Statements" in "Part I. Financial Information" on pages 29 through 33.

Other Investing Activities

As discussed in the 1999 Form 10-K, our ability to invest in growth initiatives,
such as Exempt Wholesale  Generators (EWG) and Foreign Utility Companies (FUCO),
is limited by certain legal and  regulatory  requirements,  including the Public
Utility Holding Company Act of 1935, as amended (PUHCA).  In late 1999,  Cinergy
(Cinergy Corp. and all of its regulated and non-regulated  subsidiaries) filed a
request with the SEC under the PUHCA for  additional  authority  to, among other
things,  increase the amount we can invest in EWGs and FUCOs.  On June 23, 2000,
the  SEC  issued  an  order  granting  Cinergy  approximately  $676  million  in
additional  authority  under the PUHCA to invest in EWGs and  FUCOs.  This order
supplements our existing  authority under PUHCA,  based on a prior SEC order, to
make  such  investments,  which had been  capped  at an amount  equal to 100% of
Cinergy's average consolidated retained earnings for the preceding four calendar
quarters (approximately $1.055 billion). As of June 30, 2000, we had invested or
committed  to invest  approximately  $722  million of the  approximately  $1.731
billion available.


<PAGE>



CAPITAL RESOURCES

Debt

As discussed in the 1999 Form 10-K,  Cinergy Corp.  filed a request with the SEC
under the PUHCA for  authority to increase its financing  capacity.  On June 23,
2000,  the SEC issued an order  under the PUHCA  authorizing  Cinergy  Corp.  to
increase  its total  capitalization  at December  31, 1999  (excluding  retained
earnings  and  accumulated  other  comprehensive  income)  by an  additional  $5
billion, through issuance of any combination of equity and debt securities. This
increased  authorization  is  subject to certain  conditions,  including,  among
others,  that common  equity  comprises at least 30% of  Cinergy's  consolidated
capital  structure and that Cinergy  maintains an investment grade rating on its
senior debt obligations. This increased authority is intended to provide Cinergy
flexibility to respond quickly and efficiently to the Company's  financing needs
and available conditions in capital markets.

Short-term Debt In connection with the current SEC authorization,  Cinergy Corp.
has  established  lines of credit.  As of June 30, 2000,  Cinergy Corp. had $372
million remaining unused and available on its established lines.

Our operating  companies  have  regulatory  authority to borrow up to a total of
$853  million in  short-term  debt ($453  million for CG&E and its  subsidiaries
including $50 million for The Union Light,  Heat and Power Company (ULH&P),  and
$400 million for PSI Energy,  Inc.  (PSI)).  In connection  with this authority,
CG&E and PSI have  established  lines of credit,  of which, $41 million and $164
million, respectively, remained unused and available at June 30, 2000.

Also, our  non-regulated  subsidiaries  have established  lines of credit. As on
June 30, 2000, $2.4 million was unused and available on these established lines.
Our non-regulated subsidiaries have the availability of funds from Cinergy Corp.
if the need arises.

A portion of each  company's  committed  lines is used to provide credit support
for  commercial  paper  (discussed  below)  and other  uncommitted  lines.  When
committed lines are reserved for commercial  paper or other  uncommitted  lines,
they are not available for additional borrowings.

Commercial  Paper The  commercial  paper  (debt  instruments  exchanged  between
companies) program is limited to a maximum outstanding  principal amount of $400
million for Cinergy  Corp. As of June 30, 2000,  Cinergy  Corp.  had issued $216
million in commercial paper.

CG&E and PSI also have the  capacity to issue  commercial  paper,  which must be
supported by available  committed lines of the respective  company.  The maximum
outstanding  principal  amount  for  CG&E  is $200  million  and for PSI is $100
million. At June 30, 2000, neither CG&E nor PSI had issued any commercial paper.

Variable Rate  Pollution  Control  Notes CG&E and PSI have issued  variable rate
pollution  control notes (tax-exempt notes obtained to finance equipment or land
development for pollution control purposes).  Because the holders of these notes
have the right to redeem their notes on any business  day, they are reflected in
Notes  payable and other  short-term  obligations  in the  Consolidated  Balance
Sheets  for  Cinergy  on page 7, for CG&E on page 14, and for PSI on page 19. At
June 30, 2000,  CG&E and PSI had $184 million and $82.6  million,  respectively,
outstanding in pollution control notes.

Money Pool Our operating companies and their subsidiaries participate in a money
pool arrangement to better manage cash and working capital  requirements.  Under
this arrangement,  our operating  companies and their  subsidiaries with surplus
short-term funds provide  short-term loans to each other.  This surplus cash may
be from internal or external sources.  The amounts  outstanding under this money
pool  arrangement are shown as Notes  receivable  from  affiliated  companies or
Notes payable to affiliated  companies on the  Consolidated  Balance  Sheets for
CG&E on pages 13 through 14, PSI on pages 18 through 19, and the Balance  Sheets
for ULH&P on pages 23 through 24.

Long-term Debt Under the PUHCA  authorization  mentioned  above,  we are able to
issue and sell long-term debt at the parent  holding  company level.  As of June
30, 2000, Cinergy Corp. has $400 million of long-term debt outstanding.

Currently,  our  operating  companies  have the following  types of  outstanding
long-term  debt:  First Mortgage  Bonds and other Secured Notes,  and Senior and
Junior  Unsecured Debt.  Under our existing  authority,  the remaining  unissued
debt, as of June 30, 2000, is reflected in the following table:

--------------------------------------------------------------------------------
            Authorizing Agency                     CG&E        PSI        ULH&P
--------------------------------------------------------------------------------
                                                          (in millions)

Applicable State Utility Commission
(Secured or Unsecured Debt)                        $200       $346         $30

--------------------------------------------------------------------------------

We may, at any time,  request  additional  long-term  debt  authorization.  This
request is subject to regulatory approval, which may or may not be granted.

As of June 30, 2000,  through shelf  registrations  filed with the SEC under the
Securities Act of 1933, we could issue the following amounts of debt securities:

--------------------------------------------------------------------------------
                                                   CG&E        PSI        ULH&P
--------------------------------------------------------------------------------
                                                          (in millions)

First Mortgage Bonds and Other Secured Notes       $300       $265         $20
Senior or Junior Unsecured Debt                      50        400          30

--------------------------------------------------------------------------------

For  information  regarding  recent  issuances and redemptions of long-term debt
securities,  see  Note 3 of the  "Notes  to  Financial  Statements"  in "Part I.
Financial Information" on page 28.


<PAGE>




Securities Ratings

On June 1, 2000,  Fitch IBCA,  Inc. and Duff & Phelps Credit Rating Co.  merged,
and are now known as Fitch,  thus they  combined  their ratings of Cinergy Corp.
and its affiliates.  As of July 31, 2000, the major credit rating agencies rated
our securities as follows:

--------------------------------------------------------------------------------

                                Fitch(1)       Moody's (2)          S&P (3)
                             ---------------  ---------------   ----------------


Cinergy Corp.
    Corporate Credit            BBB+            Baa2               BBB+
    Commercial Paper            F-2             P-2                A-2


CG&E
    Secured Debt                A-              A3                 A-
    Senior Unsecured Debt       BBB+            Baa1               BBB+
    Junior Unsecured Debt       BBB             Baa2               BBB
    Preferred Stock             BBB             baa1               BBB
    Commercial Paper            F-2             P-2                Not Rated


PSI
   Secured Debt                 A-              A3                 A-
   Senior Unsecured Debt        BBB+            Baa1               BBB+
   Junior Unsecured Debt        BBB             Baa1               BBB
   Preferred Stock              BBB             baa1               BBB
   Commercial Paper             F-2             P-2                Not Rated


ULH&P
   Secured Debt                 A-               A3                A-
   Unsecured Debt               Not Rated        Baa1              BBB+

--------------------------------------------------------------------------------

     (1)  Fitch (Fitch)
     (2)  Moody's Investors Service (Moody's)
     (3)  Standard & Poor's Ratings Services (S&P)

--------------------------------------------------------------------------------

These  securities  ratings  may be revised or  withdrawn  at any time,  and each
rating should be evaluated independently of any other rating.

Guarantees

We are subject to a SEC order under the PUHCA,  which limits the amounts Cinergy
Corp. can have outstanding under guarantees (promises to pay by one party in the
event of  default by another  party) at any one time to $2  billion.  This is an
increase  from the previous $1 billion  guarantee  level as a result of the June
23, 2000 order  received  from the SEC. As of June 30, 2000, we had $685 million
outstanding under the guarantees issued.


<PAGE>



2000 RESULTS OF OPERATIONS

SUMMARY OF RESULTS

Electric  and gas  margins  and net income for  Cinergy,  CG&E,  and PSI for the
quarters ended June 30, 2000, and 1999, were as follows:

--------------------------------------------------------------------------------

                            Cinergy (1)           CG&E               PSI
                      -------------------- ------------------- -----------------
                         2000      1999      2000      1999     2000      1999
                      -------------------- ------------------- -----------------
                                             (in thousands)

Electric gross margin $549,801  $491,027  $307,797  $260,782  $221,953  $226,329
Gas gross margin        41,821    35,154    35,352    33,120         -         -
Net income              75,115    59,058    55,881    38,922    18,916    25,580

(1)  The results of Cinergy also include amounts related to non-registrants.

--------------------------------------------------------------------------------

Our diluted  earnings per share for the second quarter of 2000 increased to $.47
per share from $.37 per share for the same period of 1999.

Earnings of our regulated operations,  including the supply business,  increased
$.13 per share in the second  quarter of 2000,  when compared to the same period
of 1999.  The  improved  results  are  attributable  to growth in margins of the
company's regulated businesses and an increase in electricity trading volumes of
about 55 percent for the second  quarter and the first six months over the prior
year. Partially offsetting this increase was a decrease of $.03 per share in the
contribution  to  earnings  of our  non-regulated  investment  activities.  This
decrease  primarily  reflects the loss of earnings from the  company's  share in
Midlands Electricity plc, which was sold in the third quarter of 1999.

The  explanations  below follow the line items on the  Statements  of Income for
Cinergy, CG&E, and PSI, which begin on page 5. However, only the line items that
varied significantly from prior periods are discussed.

ELECTRIC OPERATING REVENUES

--------------------------------------------------------------------------------
              Cinergy (1)                 CG&E                    PSI
--------------------------------  ----------------------  ----------------------
           2000   1999  % Change   2000  1999  % Change    2000   1999  % Change
--------------------------------  ----------------------  ----------------------
                                        (in millions)

Retail   $  651   $623     4      $360   $345      4       $291   $278      5
Wholesale   555    285    95       282    126    124        321    174     84
Other        44     34    29         5      6    (17)         8     11    (27)
           --------------------- ----------------------    ---------------------
 Total   $1,250   $942    33      $647   $477     36       $620   $463     34

(1)  The results of Cinergy also include amounts related to non-registrants.

--------------------------------------------------------------------------------

Electric operating revenues for Cinergy, CG&E, and PSI increased for the quarter
ended June 30, 2000,  as compared to 1999,  mainly due to an increase in volumes
and the average price per  kilowatt-hour  (kWh)  realized on non-firm  wholesale
transactions related to energy marketing and trading activity. Non-firm power is
power without a guaranteed  commitment for physical delivery.  In addition,  the
growth  in  retail  revenues  reflects  increased  volumes  due to growth in the
average number of residential and commercial customers. Other electric operating
revenues increased for Cinergy due to growth in the non-regulated activities.

GAS OPERATING REVENUES

--------------------------------------------------------------------------------

                       Cinergy (1)                          CG&E
             --------------------------------  ---------------------------------
                2000      1999     % Change       2000      1999     % Change
             --------------------------------  ---------------------------------
                                       (in millions)

Non-regulated    $432        $275      57          $  -   $     -         -
Retail             48          42      14            48        42        14
Transportation     11          11       -            11        11         -
Other               1           1       -             1         1         -
             ----------------------            ----------------------
   Total         $492        $329      50           $60   $    54        11

(1)  The results of Cinergy also include amounts related to non-registrants.

--------------------------------------------------------------------------------

Gas operating revenues for Cinergy increased in the second quarter of 2000, when
compared to the same period last year.  This increase is primarily the result of
a higher price realized per thousand cubic feet (mcf) sold by Cinergy  Marketing
& Trading, LLC (Marketing & Trading).

CG&E's retail  revenues  increased  primarily due to a higher price realized per
mcf sold. Also,  contributing to the increase in retail revenues were higher mcf
sales,  reflecting  a return to more normal  weather  when  compared to the same
period in 1999.

OTHER REVENUES

Other operating revenues for Cinergy increased $23 million in the second quarter
of 2000,  when  compared to the same period in 1999,  primarily  due to revenues
from the marketing of energy-related services.

OPERATING EXPENSES
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------

<S> <C>                 <C>       <C>        <C>         <C>           <C>     <C>         <C>          <C>      <C>

                                  Cinergy (1)                          CG&E                              PSI
                        -------------------------------- --------------------------------- --------------------------------
                           2000      1999    % Change       2000      1999     % Change       2000      1999     % Change
                        -------------------------------- --------------------------------- --------------------------------
                                                                  (in millions)
    Fuel                 $   206    $  186       11          $ 87       $ 76       14          $113       $104        9
    Purchased and

      exchanged power        495       265       87           252        140       80           285        133      114
    Gas purchased            450       294       53            24         20       20             -          -        -
    Operation                230       172       34            94         70       34            94         82       15
    Maintenance               60        64       (6)           29         30       (3)           30         35      (14)
    Depreciation and
      amortization            93        88        6            53         51        4            35         34        3
    Taxes other than

       income taxes           68        69       (1)           54         55       (2)           14         14        -
                        ---------------------          ------------------------          ------------------------
      Total               $1,602    $1,138       41          $593       $442       34          $571       $402       42
<FN>
(1)   The results of Cinergy also include amounts related to non-registrants.
</FN>


--------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>


Fuel

Fuel represents the cost of coal,  natural gas, and oil that is used to generate
electricity.  The  following  table details the changes to fuel expense from the
quarter ended June 30, 1999, to the quarter ended June 30, 2000:

--------------------------------------------------------------------------------

                                       Cinergy (1)     CG&E         PSI
                                       --------------------------------------
                                                  (in millions)

   Fuel expense - June 30, 1999            $186          $76        $104

   Increase (Decrease) due to changes
   in:

   Price of fuel                             (8)          (5)         (3)
   Deferred fuel cost                        21           11          10
   kWh generation                             7            5           2
                                       --------------------------------------
   Fuel expense - June 30, 2000            $206          $87        $113


  (1) The results of Cinergy also include amounts related to non-registrants.

--------------------------------------------------------------------------------

Purchased and Exchanged Power

Purchased and exchanged power expense  increased for Cinergy,  CG&E, and PSI for
the second  quarter of 2000 compared to last year,  primarily due to an increase
in  purchases  of non-firm  wholesale  power as a result of an increase in sales
volume in the energy marketing and trading operations.

Gas Purchased

Gas purchased  expense  increased for Cinergy and CG&E for the second quarter of
2000,  when compared to the same period last year,  primarily due to an increase
in the average cost per mcf of gas purchased.

CG&E's Gas purchased  expense also increased due to higher mcf volumes purchased
during the second quarter of 2000, as compared to the same period of 1999.

Operation

Cinergy's,  CG&E's, and PSI's Operation expenses increased for the quarter ended
June 30,  2000,  as compared to the same period last year,  primarily  due to an
increase in expenses  associated with the marketing of  energy-related  services
and expenses related to the limited early retirement plan (LERP).  For a further
discussion of the LERP, see the "Corporate Center Restructuring" section on page
58.

Maintenance

Cinergy's and PSI's  Maintenance  expenses  decreased for the quarter ended June
30, 2000, as compared to the same period last year,  primarily due to activities
associated  with  planned  production  outages and other  repairs  performed  at
certain facilities during 1999.


<PAGE>


Depreciation and Amortization

Cinergy's  Depreciation and  amortization  costs increased for the quarter ended
June 30,  2000,  as  compared to the same  period  last year,  primarily  due to
additions to depreciable plant.

EQUITY IN EARNINGS OF UNCONSOLIDATED SUBSIDIARIES

Cinergy's Equity in earnings of unconsolidated subsidiaries decreased $9 million
(67%) for the second  quarter of 2000,  when  compared  to the same  period last
year. This decrease is primarily due to the loss in earnings  resulting from our
50% ownership interest in Midlands  Electricity plc, which was sold in the third
quarter of 1999.

INTEREST

Cinergy's  Interest expense decreased $8 million (13%) for the second quarter of
2000, when compared to the same period last year. This decrease is primarily due
to a  reduction  in  short-term  borrowings  as a result of the sale of Midlands
Electricity  plc.  This  decrease was slightly  offset by an increase in average
short-term interest rates.


<PAGE>



2000 RESULTS OF OPERATIONS

SUMMARY OF RESULTS

Electric and gas margins and net income for Cinergy,  CG&E,  and PSI for the six
months ended June 30, 2000, and 1999, were as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------

<S>                        <C>             <C>           <C>         <C>    <C>         <C>         <C>   <C>

                                   Cinergy (1)                       CG&E                           PSI
                           ----------------------------- -----------------------------  -----------------------------
                                2000          1999            2000          1999             2000          1999
                           ----------------------------- -----------------------------  -----------------------------
                                                                (in thousands)

   Electric gross margin      $1,115,720   $1,026,390         $605,463      $543,497         $484,276     $473,867
   Gas gross margin              134,404      122,060          124,198       118,039                -            -
   Net income                    213,554      186,303          151,845       119,159           69,129       65,421
<FN>
  (1)  The results of Cinergy also include amounts related to non-registrants.
</FN>


---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Our  diluted  earnings  per  share  for the six  months  ending  June 30,  2000,
increased to $1.34 per share from $1.17 per share for the same period of 1999.

Earnings of our regulated operations,  including the supply business,  increased
$.34 per share for the six months  ending June 30,  2000,  when  compared to the
same period in 1999. The improved  results are attributable to growth in margins
of the company's  regulated  businesses and an increase in  electricity  trading
volumes of about 55 percent for the second quarter and the first six months over
the prior year.  Partially  offsetting  this increase was a decrease of $.17 per
share  in  the  contribution  to  earnings  of  our   non-regulated   investment
activities.  This  decrease  primarily  reflects  the loss of earnings  from the
company's share in Midlands Electricity plc, which was sold in the third quarter
of 1999.

The  explanations  below follow the line items on the  Statements  of Income for
Cinergy, CG&E, and PSI, which begin on page 5. However, only the line items that
varied significantly from prior periods are discussed.

ELECTRIC OPERATING REVENUES
<TABLE>
<CAPTION>
<S>        <C>           <C>      <C>         <C>          <C>      <C>         <C>          <C>      <C>

-------------------------------------------------------------------------------------------------------------------

                     Cinergy (1)                           CG&E                               PSI
           ---------------------------------  --------------------------------  --------------------------------
              2000       1999     % Change       2000      1999     % Change       2000      1999     % Change
           ---------------------------------  --------------------------------  --------------------------------
                                                       (in millions)

Retail        $1,301     $1,300        -         $  712      $703        1        $   589      $596       (1)
Wholesale        939        551       70            463       247       87            548       331       66
Other             77         60       28             10         9       11             17        19      (11)
           -----------------------            ----------------------            ----------------------
  Total       $2,317     $1,911       21         $1,185      $959       24         $1,154      $946       22
<FN>
   (1)   The results of Cinergy also include amounts related to non-registrants.
</FN>


-------------------------------------------------------------------------------------------------------------------
</TABLE>
Electric  operating  revenues for Cinergy,  CG&E,  and PSI increased for the six
months  ended June 30, 2000,  as compared to 1999,  mainly due to an increase in
volumes  and  the  average   price  per  kWh  realized  on  non-firm   wholesale
transactions  related to energy marketing and trading  activity.  Other electric
revenues  increased  for  Cinergy  due to  growth  in  sales of  energy  related
services.

GAS OPERATING REVENUES

--------------------------------------------------------------------------------

                        Cinergy (1)                          CG&E
              --------------------------------  --------------------------------
                 2000      1999     % Change       2000      1999     % Change
              --------------------------------  --------------------------------
                                          (in millions)

Non-regulated     $753     $533        41       $     -   $     -         -
Retail             201      184         9           201       184         9
Transportation      33       30        10            33        30        10
Other                3        3         -             4         3        33
              ----------------------            ----------------------
   Total          $990     $750        32          $238      $217        10

(1)  The results of Cinergy also include amounts related to non-registrants.

--------------------------------------------------------------------------------

Gas operating  revenues for Cinergy  increased in the six months ending June 30,
2000, when compared to the same period last year. This increase is primarily the
result of a higher price realized per mcf sold by Marketing & Trading.

CG&E's retail  revenues  increased  primarily due to a higher price realized per
mcf  sold.  Transportation  revenues  increased  due to the  continued  trend of
full-service   customers   (customers   who   purchase   gas  and   utilize  the
transportation  services of CG&E)  purchasing  gas directly  from  suppliers and
using transportation services provided by CG&E.

OTHER REVENUES

Other  operating  revenues for Cinergy  increased $28 million for the six months
ending June 30, 2000, when compared to the same period in 1999, primarily due to
revenues from the marketing of energy-related services.

 OPERATING EXPENSES
<TABLE>
<CAPTION>
<S>                     <C>         <C>      <C>          <C>         <C>      <C>         <C>          <C>      <C>

--------------------------------------------------------------------------------------------------------------------

                                  Cinergy (1)                          CG&E                              PSI
                        -------------------------------- --------------------------------- --------------------------------
                           2000      1999    % Change       2000      1999     % Change       2000      1999     % Change
                        -------------------------------- --------------------------------- --------------------------------
                                                                  (in millions)
    Fuel                 $   392    $  384        2       $   169       $162        4        $  212       $211        -
    Purchased and

      exchanged power        809       500       62           411        253       62           458        261       75
    Gas purchased            856       628       36           114         99       15             -          -        -
    Operation                424       366       16           174        154       13           178        170        5
    Maintenance              112       115       (3)           54         55       (2)           57         60       (5)
    Depreciation and

      amortization           183       175        5           104        101        3            70         68        3
    Taxes other than

       income taxes          135       139       (3)          104        109       (5)           28         29       (3)
                        ---------------------          ------------------------          ------------------------
      Total               $2,911    $2,307       26        $1,130       $933       21        $1,003       $799       26

<FN>
(1)   The results of Cinergy also include amounts related to non-registrants.
</FN>
</TABLE>

--------------------------------------------------------------------------------



<PAGE>


Fuel

Fuel represents the cost of coal,  natural gas, and oil that is used to generate
electricity.  The  following  table details the changes to fuel expense from the
six months ending June 30, 1999, to the six months ending June 30, 2000:

--------------------------------------------------------------------------------

                                       Cinergy (1)     CG&E         PSI
                                       --------------------------------------
                                  (in millions)

   Fuel expense - June 30, 1999            $384         $162        $211

   Increase (Decrease) due to changes
   in:

   Price of fuel                            (10)          (7)         (3)
   Deferred fuel cost                        (1)           7          (8)
   kWh generation                            19            7          12
                                       --------------------------------------
   Fuel expense - June 30, 2000            $392         $169        $212


(1)  The results of Cinergy also include amounts related to non-registrants.

--------------------------------------------------------------------------------

Purchased and Exchanged Power

Purchased and exchanged power expense  increased for Cinergy,  CG&E, and PSI for
the six months  ending June 30, 2000,  compared to last year.  This increase was
primarily  due to an increase in  purchases  of  non-firm  wholesale  power as a
result of an  increase  in sales  volume in the  energy  marketing  and  trading
operations.

Gas Purchased

Gas purchased  expense  increased for Cinergy and CG&E for the six months ending
June 30, 2000,  when compared to the same period last year,  primarily due to an
increase in the average cost per mcf of gas purchased.

Operation

Cinergy's,  CG&E's,  and PSI's Operation  expenses  increased for the six months
ended June 30, 2000, as compared to the same period last year,  primarily due to
an increase in expenses associated with the marketing of energy-related services
and expenses related to the LERP. For a further  discussion of the LERP, see the
"Corporate Center Restructuring" section on page 58.

Maintenance

Cinergy's and PSI's Maintenance expenses decreased for the six months ended June
30, 2000, as compared to the same period last year,  primarily due to activities
associated  with  planned  production  outages and other  repairs  performed  at
certain facilities during 1999.

Depreciation and Amortization

Cinergy's  Depreciation  and  amortization  costs  increased  for the six months
ending June 30, 2000, as compared to the same period last year, primarily due to
additions to depreciable plant.

EQUITY IN EARNINGS OF UNCONSOLIDATED SUBSIDIARIES

Cinergy's  Equity in  earnings  of  unconsolidated  subsidiaries  decreased  $52
million (89%) for the six months ending June 30, 2000, when compared to the same
period  last  year.  This  decrease  is  primarily  due to the loss in  earnings
resulting from our 50% ownership interest in Midlands Electricity plc, which was
sold in the third quarter of 1999.

INTEREST

Cinergy's Interest expense decreased $17 million (14%) for the six months ending
June 30,  2000,  when  compared to the same period last year.  This  decrease is
primarily due to a reduction in short-term borrowings as a result of the sale of
Midlands  Electricity  plc. This decrease was slightly  offset by an increase in
average short-term interest rates.


<PAGE>


ULH&P

The Results of  Operations  discussion  for ULH&P is presented  only for the six
months ended June 30, 2000, in accordance with General Instruction H(2)(a).

Electric  and gas margins and net income for ULH&P for the six months ended June
30, 2000, and 1999, were as follows:

--------------------------------------------------------------------------------

                                               ULH&P

                                   ------------------------------
                                        2000           1999
                                   ------------------------------
                                          (in thousands)

   Electric gross margin              $29,228        $24,150
   Gas gross margin                    21,565         21,201
   Net income                          10,923          7,962

--------------------------------------------------------------------------------

Electric operating revenues for the six months ended June 30, 2000,  compared to
last year,  increased  mainly due to higher retail kWh sales  resulting  from an
increase  in kWh usage and growth in the  number of  commercial  and  industrial
customers.  This  increase  in kWh volume  caused a  corresponding  increase  in
Purchased and exchanged power expense.

The increase in Gas  operating  revenues for the six months ended June 30, 2000,
compared to last year,  was mainly due to a higher  price  received per mcf sold
and an increase  in the number of  residential  and  commercial  customers.  Gas
purchased  expense  increased  due to an increase in the average cost per mcf of
gas purchased.

The increase in Depreciation and amortization costs for the six months ended
June 30, 2000,  as compared to the same period last year,  was  primarily due to
additions to depreciable plant.

Interest  expense  increased for the six months ended June 30, 2000, as compared
to the same period last year,  primarily due to increased  borrowings  from CG&E
and PSI.


<PAGE>



FUTURE EXPECTATIONS/TRENDS

In the  "Future  Expectations/Trends"  section,  we  discuss  electric  industry
developments,  market  risk  sensitive  instruments  and  positions,  accounting
changes,  the corporate center  restructuring,  and the shareholder rights plan.
Each of these  discussions  will address the current status and potential future
impact on our results of operations and financial condition.

ELECTRIC INDUSTRY

Wholesale Market Developments

Supply-side  Actions As discussed in the 1999 Form 10-K,  on September 30, 1999,
one of our non-regulated  subsidiaries formed a partnership (each party having a
50% ownership)  with Duke Energy North America LLC, in an effort to increase the
available  generating  capacity  for  use  during  peak  demand  periods.   This
partnership  is  to  jointly  construct  and  own  three  wholesale   generating
facilities.  On March 9, 2000, the Indiana Utility Regulatory  Commission (IURC)
issued  an order  (Cause  No.  41569),  requiring  us to  immediately  cease all
construction  activities at the site located near Cadiz,  (Henry County) Indiana
(a planned peaking plant with a total capacity of 132 megawatts (MW)). In making
this decision the IURC found that it needs additional information related to the
project  before  issuing a final  decision.  The IURC requested the Henry County
Planning  Commission and/or the Henry County  Commissioners to supply additional
information,  which was provided in June 2000. The issues raised by Henry County
were air quality, water supply, noise control,  landscaping,  plant abandonment,
and emergency services training. On July 14, 2000, Cinergy filed its response to
the  information  provided by Henry County,  indicating how it would address the
concerns of Henry  County.  Cinergy  anticipates  that  further  hearings on the
matter will be held in the fall of 2000. At this time,  Cinergy cannot currently
predict the outcome of this matter.

The remaining  facilities (with total capacity of approximately 1,268 MW) became
fully operational in June 2000. We are supplementing this additional  capability
with block power purchases for the summer of 2000 peak period.

Retail Market Developments

Federal The Clinton  Administration  has  introduced  a bill--the  Comprehensive
Electricity  Competition Act--that would grant all retail electric customers the
right to choose  their  electricity  supplier  beginning  January 1,  2003.  The
legislation  would allow a state  regulatory  authority to opt out of the retail
competition system if the authority conducted a public proceeding and determined
that the electric  customers of that state would be better  served by a monopoly
system or an  alternative  retail  competition  plan. A "compromise  bipartisan"
deregulation bill introduced on May 26, 1999, by Representatives  Largent (R-OK)
and Markey  (D-MA)  includes  similar  mandates and opt out  provisions  with an
effective date of January 1, 2002.

After attempting for several months to reach consensus on comprehensive electric
restructuring  legislation,  the U.S. Senate on June 30, 2000,  approved S.2071,
the Electric Reliability 2000 Act. S.2071 would authorize the establishment of a
North American Electric Reliability Organization and not legislate on additional
issues  surrounding the  restructuring of the electricity  industry.  It remains
uncertain  whether federal retail customer choice  legislation will be passed by
this Congress.

Ohio As discussed in the 1999 Form 10-K,  during 1999, Ohio Governor Robert Taft
signed into law a bill creating a competitive  electric  retail  service  market
beginning  January 1, 2001. As required by the bill,  CG&E filed its  transition
plan on December 28, 1999.

On May 8, 2000,  CG&E reached a stipulated  agreement with the Public  Utilities
Commission  of Ohio staff and various other  interested  parties with respect to
its proposal to implement  electric customer choice in Ohio beginning January 1,
2001. The major features of this agreement include:

     o    Residential customer rates will be frozen through December 31, 2005;

     o    Residential  customers  will receive a  five-percent  reduction in the
          generation portion of their electric rates, effective January 1, 2001;

     o    CG&E has  agreed to  provide  $4  million  over the next five years in
          support  of energy  efficiency  and  weatherization  services  for low
          income customers;

     o    The  creation of a Regulatory  Transition  Charge  (RTC),  designed to
          recover CG&E's  regulatory  assets and other  transition  costs over a
          ten-year period;

     o    Authority  for CG&E to transfer its  generation  assets to a separate,
          non-regulated  corporate  subsidiary to provide  flexibility to manage
          its generation asset portfolio in a manner that enhances opportunities
          in a competitive marketplace;

     o    Authority for CG&E to apply the proceeds of  transition  cost recovery
          to   costs   incurred   during   the   transition   period   including
          implementation costs and purchased power costs that may be incurred by
          CG&E to maintain an operating  reserve  margin  sufficient  to provide
          reliable service to its customers;

     o    CG&E will provide standard offer default supplier service (i.e.,  CG&E
          will be the  supplier  of last  resort,  so that no  customer  will be
          without an electric supplier); and

     o    CG&E has agreed to provide shopping credits to switching customers.

CG&E expects the settlement to be approved prior to the end of the third quarter
of 2000.

For additional information, see Note 7 of the "Notes to Financial Statements" in
"Part I. Financial Information" on page 38.

Midwest ISO

As part of the effort to create a competitive  wholesale power marketplace,  the
Federal  Energy  Regulatory  Commission  (FERC)  approved  the  formation of the
Midwest  Independent  Transmission  System Operator,  Inc.  (Midwest ISO) during
1998.  The Midwest ISO will  oversee the  combined  transmission  systems of its
members.  The  organization  is expected to begin  operations in late 2001. This
effort will help to  facilitate  a reliable  and  efficient  market for electric
power and create open  transmission  access  consistent with FERC policies.  The
Midwest ISO currently includes 16 members with over 52,000 miles of transmission
lines in 12 states and an  aggregate  investment  of  approximately  $8 billion.
Formal   agreements   have  been  signed  to  merge  the  Midwest  ISO  and  the
Mid-Continent  Area Power Pool.  Several  conditions of these agreements must be
met before the merger can be consummated.

Significant Rate Developments

Purchased  Power  Tracker On May 28,  1999,  PSI filed a petition  with the IURC
seeking approval of a purchased power tracking mechanism (tracker). This request
is designed to provide for the  recovery of costs  related to purchases of power
necessary  to meet  native  load  requirements  to the extent such costs are not
sought through the existing fuel adjustment  clause.  The tracker is intended to
apply to a limited number of purchases made for the purpose of ensuring adequate
power  reserves to meet peak retail  native load  requirements,  which in recent
years have  coincided with periods of extreme price  volatility.  As proposed by
PSI, the tracker would only apply to capacity  purchases  which are presented to
the  IURC  for  review  and  approved  by  the  IURC  as  reasonable  under  the
circumstances.  On May 31, 2000, the IURC approved the tracker for the summer of
2000. As requested in the order,  PSI filed its actual  purchase  agreements for
the summer of 2000 with the IURC. When the summer of 2000 is concluded, the IURC
will (1) review PSI's purchases and rule on the associated requests for recovery
of costs,  and (2) will  determine  whether it is  appropriate  to continue  the
tracking mechanism for future periods.

MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS

Energy Commodities Sensitivity

We market and trade electricity, natural gas, and other energy-related products.
We use  over-the-counter  forward and option contracts for the purchase and sale
of electricity and also trade exchange-traded futures contracts.  See Notes 1(b)
and  1(c)  of  the  "Notes  to  Financial  Statements"  in  "Part  I.  Financial
Information"  on pages 26 through 27, for our  accounting  policies  for certain
derivative instruments.  For additional  information,  see "Item 7. Management's
Discussion and Analysis of Financial  Condition and Results of Operations" pages
61  through  64,  of our 1999 Form  10-K.  Our  market  risks  have not  changed
materially from the market risks reported in the 1999 Form 10-K.

Exchange Rate Sensitivity

From  time to time,  we may  utilize  foreign  exchange  forward  contracts  and
currency swaps to hedge certain of our net  investments  in foreign  operations.
See Notes  1(b) and 1(c) of the  "Notes  to  Financial  Statements"  in "Part I.
Financial  Information" on pages 26 through 27, for our accounting  policies for
certain derivative instruments.

Interest Rate Sensitivity

Our net  exposure  to  changes  in  interest  rates  primarily  consist  of debt
instruments with floating  interest rates that are benchmarked to various market
indices.  To manage the exposure to  fluctuations in interest rates and to lower
funding  costs,  we evaluate the use of, and have entered  into,  interest  rate
swaps.  See Notes 1(b) and 1(c) of the "Notes to Financial  Statements" in "Part
I. Financial  Information"  on pages 26 through 27, for our accounting  policies
for certain derivative instruments. Our market risks have not changed materially
from the market risks reported in the 1999 Form 10-K.

ACCOUNTING CHANGES

During the second  quarter of 1998,  the Financial  Accounting  Standards  Board
(FASB) issued Statement of Financial  Accounting  Standards No. 133,  Accounting
for Derivative Instruments and Hedging Activities (Statement 133). This standard
requires  companies to record  derivative  instruments as assets or liabilities,
measured  at  fair  value.  Changes  in the  derivative's  fair  value  must  be
recognized  currently in earnings unless specific hedge accounting  criteria are
met. Hedges are transactions  entered into for the purpose of reducing  exposure
to one or more types of  business  risk.  Gains and losses on  derivatives  that
qualify as hedges can offset  related  results on the hedged  item in the income
statement.

In June 1999, the FASB issued  Statement of Financial  Accounting  Standards No.
137, Accounting for Derivative  Instruments and Hedging  Activities-Deferral  of
the Effective  Date of FASB  Statement  No.133  (Statement  137).  Statement 137
deferred the effective date of Statement 133 by one year. As a result, Statement
133 will be effective for fiscal years beginning after June 15, 2000.

Statement of Financial  Accounting  Standards  No. 138,  Accounting  for Certain
Derivative  Instruments  and Certain  Hedging  Activities - an Amendment of FASB
Statement  No.  133  (Statement  138) was  issued in June  2000.  Statement  138
addresses  implementation  issues and reflects  decisions of the FASB  regarding
recommendations of the FASB sponsored Derivatives Implementation Group.

We expect to reflect  the  adoption of  Statement  133 in  financial  statements
issued  beginning  in  the  first  quarter  of  2001.  In  preparation  for  our
implementation of this new standard,  we have formed a cross-functional  project
team. The project team is identifying and analyzing all contracts which could be
subject  to  the  new  standard,  developing  required  documentation,  defining
relevant  processes  and  information  systems  needs,  and  promoting  internal
awareness of the requirements and potential  effects of the new standard.  While
we continue to analyze and follow the development of implementation  guidelines,
at this  time we are  unable  to  predict  whether  the  implementation  of this
accounting  standard will be material to our results of operations and financial
position.  However,  the adoption of Statement 133 could increase  volatility in
earnings and other comprehensive income.

CORPORATE CENTER RESTRUCTURING

On March 10, 2000, we announced a plan to reorganize  our corporate  center that
will  eliminate   approximately  240  jobs.  Cinergy  offered  a  limited  early
retirement plan (LERP) in connection with this reorganization.  In June 2000, we
recorded a one-time  expense of  approximately  $11 million relating to benefits
provided to LERP participants.

SHAREHOLDER RIGHTS PLAN

On July 19, 2000,  Cinergy  Corp.'s  board of directors  approved a  Shareholder
Rights Plan (the Plan) that will take effect after approval by the SEC under the
PUHCA.  We  filed an  application  with  the SEC on July  28,  2000,  requesting
approval of the Plan.

Under the Plan, each shareholder  would receive a right to purchase from Cinergy
Corp. one share of common stock at a price of $100.  Initially,  the Rights will
not be represented by separate  certificates  and will not trade separately from
Cinergy shares of common stock.  The rights would separate from the common stock
ten days after either of the following occurred:

     o    the public  announcement  of an  acquisition of ten percent or more of
          the company's common stock, or

     o    the commencement of a tender offer or exchange offer by which a person
          or group  would  acquire  ten  percent or more of the common  stock of
          Cinergy Corp.

The Rights become  exercisable  if one of these events occurs and the rights are
no longer redeemable by the board of directors. If the rights become exercisable
after  someone has acquired ten percent or more of the  company's  common stock,
holders  of the  rights  will have the right to  purchase  the  common  stock of
Cinergy Corp. at a 50% discount.  However, any rights held by the acquirer would
not be exercisable.

In addition,  if the rights become  exercisable  and Cinergy Corp.  engages in a
merger or consolidation in which it is not the surviving corporation or in which
all or part of its common  stock is changed or  exchanged,  or if 50% or more of
the  company's  assets are sold,  each holder of a right would have the right to
acquire common stock of the acquirer at a 50% discount.

The rights will be  distributed to holders of record at the close of business on
the tenth business day following  announcement by Cinergy Corp. of approval from
the SEC under the PUHCA.  The board of directors  may direct  Cinergy  Corp.  to
redeem the rights at $.01 per right at any time  before the tenth day  following
the acquisition of ten percent or more of Cinergy Corp.'s common stock.


<PAGE>



                ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES

                                ABOUT MARKET RISK

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" in "Part I.  Financial  Information"  on page 57, and
Notes 1(b) and 1(c) of the "Notes to Financial Statements" in "Part I. Financial
Information" on pages 26 through 27.


<PAGE>



                           PART II. OTHER INFORMATION

                            ITEM 1. LEGAL PROCEEDINGS

New Source Review, Manufactured Gas Plant Sites, and Other

See  Notes  4(b),  (c),  and  (d),  respectively,  of the  "Notes  to  Financial
Statements" in "Part I. Financial Information" on pages 30 through 33.

M Metals Superfund Site

On July 6, 2000,  the EPA identified  PSI and the  Indianapolis  Power and Light
Company (IPL) as  potentially  responsible  parties for the release of hazardous
substances  at the M Metals  Superfund  Site  (Site)  located  in  Indianapolis,
Indiana. The EPA advised that it had taken response actions relating to the Site
and had incurred  costs of  approximately  $500  thousand.  The EPA has demanded
reimbursement  of the costs incurred  related to the Site and has encouraged PSI
and IPL to work out an  allocation  between  themselves  for the  payment of the
costs.  However,  PSI and IPL will be held jointly and severally  liable for the
costs. PSI is considering how to respond to the demand.


<PAGE>


                    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  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  identified  with a tilde (~) are not filed herewith,  however,  a
     copy will be provided to the Securities and Exchange Commission pursuant to
     ss.229.601(b).
<TABLE>
<CAPTION>
<S>  <C>           <C>                <C>                                                <C>

       Exhibit
     Designation   Registrant                  Nature of Exhibit                          Filed as Exhibit to:
     -----------   ----------                  -----------------                          --------------------


                                      #Loan agreement between PSI and the Indiana
                     Cinergy          Development Finance Authority dated as of
         4a          PSI              May 1, 2000.                                       PSI June 30, 2000 Form 10-Q.

                                     ~Trust Indenture between the Indiana
                     Cinergy          Development Finance Authority and Fifth
         4b          PSI              Third Bank, as Trustee, dated May 1, 2000.


     Financial Data
        Schedule

                     Cinergy
                     CG&E
                     PSI              Financial Data Schedules (included in
         27          ULH&P            electronic submission only)


<FN>
(b)  No reports on Form 8-K were filed during the quarter.
</FN>
</TABLE>



<PAGE>



                                   SIGNATURES

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:  August 11, 2000                            /s/  Bernard F.Roberts
                                         ---------------------------------------
                                                       Bernard F. Roberts
                                                    Duly Authorized Officer
                                                             and
                                                    Chief Accounting Officer