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.
-----------       -----------------------------------     ------------------

1-6047            GPU, Inc.                                 13-5516989
                  (a Pennsylvania corporation)
                  300 Madison Avenue
                  Morristown, New Jersey 07962-1911
                  Telephone (973) 401-8200

1-3141            Jersey Central Power & Light Company      21-0485010
                  (a New Jersey corporation)
                  2800 Pottsville Pike
                  Reading, Pennsylvania 19640-0001
                  Telephone (610) 929-3601

1-446             Metropolitan Edison Company               23-0870160
                  (a Pennsylvania corporation)
                  2800 Pottsville Pike
                  Reading, Pennsylvania 19640-0001
                  Telephone (610) 929-3601

1-3522            Pennsylvania Electric Company             25-0718085
                  (a Pennsylvania corporation)
                  2800 Pottsville Pike
                  Reading, Pennsylvania 19640-0001
                  Telephone (610) 929-3601


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

      The number of shares  outstanding of each of the  registrant's  classes of
voting stock, as of July 31, 2000, was as follows:

                                                                          Shares

Registrant                           Title                         Outstanding
----------                           -----                         -----------

GPU, Inc.                            Common Stock, $2.50 par value 121,285,419
Jersey Central Power & Light Company Common Stock, $10 par value    15,371,270
Metropolitan Edison Company          Common Stock, no par value        859,500
Pennsylvania Electric Company        Common Stock, $20 par value     5,290,596


<PAGE>

                       GPU, Inc. and Subsidiary Companies

                          Quarterly Report on Form 10-Q

                                  June 30, 2000

                                Table of Contents

                                                                            Page

PART I - Financial Information

      Combined Management's Discussion and Analysis
        of Financial Condition and Results of

        Operations                                                         1

      Consolidated Financial Statements:

          GPU, Inc.

            Balance Sheets                                                24
            Statements of Income                                          26
            Statements of Cash Flows                                      27

          Jersey Central Power & Light Company

            Balance Sheets                                                28
            Statements of Income                                          30
            Statements of Cash Flows                                      31

          Metropolitan Edison Company

            Balance Sheets                                                32
            Statements of Income                                          34
            Statements of Cash Flows                                      35

          Pennsylvania Electric Company

            Balance Sheets                                                36
            Statements of Income                                          38
            Statements of Cash Flows                                      39

      Combined Notes to Consolidated Financial Statements                 40

PART II - Other Information                                               62

Signatures                                                                63

      The financial statements (not examined by independent accountants) reflect
all adjustments (which consist of only normal recurring accruals),  which are in
the opinion of management, necessary for a fair statement of the results for the
interim periods presented.

      This combined  Quarterly  Report on Form 10-Q is separately  filed by GPU,
Inc.,  Jersey  Central Power & Light  Company,  Metropolitan  Edison Company and
Pennsylvania  Electric  Company.  Information  contained  herein relating to any
individual  registrant is filed by such  registrant  on its own behalf.  None of
these  registrants make any  representations  as to information  relating to the
other  registrants.  This  combined Form 10-Q  supplements  and updates the 1999
Annual  Report  on Form  10-K,  filed  by the  individual  registrants  with the
Securities and Exchange Commission and should be read in conjunction therewith.

      This Form 10-Q  contains  certain  forward-looking  statements  within the
meaning of the Private Securities Litigation Reform Act of 1995. Statements made
that are not historical  facts are  forward-looking  and,  accordingly,  involve
estimates, forecasts, risks and uncertainties that could cause actual results or
outcomes  to differ  materially  from  those  expressed  in the  forward-looking
statements.   Although  such  forward-looking  statements  have  been  based  on
reasonable assumptions,  there is no assurance that the expected results will be
achieved.  Some of the  factors  that  could  cause  actual  results  to  differ
materially include, but are not limited to: the effects of regulatory decisions;
changes in law and other  governmental  actions and  initiatives;  the impact of
deregulation and increased competition in the industry;  industry restructuring;
expected  outcomes of legal  proceedings;  the  completion of  generation  asset
divestiture;  energy prices and availability;  and  uncertainties  involved with
foreign operations including political risks and foreign currency fluctuations.

<PAGE>

GPU, Inc. and Subsidiary Companies

                COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      GPU, Inc. owns all the outstanding common stock of three domestic electric
utilities -- Jersey Central Power & Light Company (JCP&L),  Metropolitan  Edison
Company  (Met-Ed) and  Pennsylvania  Electric  Company  (Penelec).  The customer
service function, transmission and distribution operations and the operations of
the remaining non-nuclear  generating facilities of these electric utilities are
conducting  business  under  the name GPU  Energy.  JCP&L,  Met-Ed  and  Penelec
considered  together are referred to as the "GPU Energy  companies." The nuclear
generation  operations of GPU Energy are conducted by GPU Nuclear,  Inc. (GPUN).
GPU Capital, Inc. and GPU Electric, Inc. and their subsidiaries own, operate and
fund the acquisition of electric  distribution and gas  transmission  systems in
foreign  countries,  and are referred to as "GPU  Electric." GPU  International,
Inc.  and GPU  Power,  Inc.  and their  subsidiaries  develop,  own and  operate
generation  facilities in the United  States (US) and foreign  countries and are
referred to as the "GPUI Group."  Other  subsidiaries  of GPU, Inc.  include GPU
Advanced Resources, Inc. (GPU AR), which is involved in retail energy sales; GPU
Telcom    Services,     Inc.    (GPU    Telcom),    which    is    engaged    in
telecommunications-related  businesses; MYR Group Inc. (MYR), which is a utility
infrastructure  construction  services  company;  and GPU Service,  Inc. (GPUS),
which  provides  legal,  accounting,  financial  and other  services  to the GPU
companies. All of these companies considered together are referred to as "GPU."

                            GPU RESULTS OF OPERATIONS

EARNINGS PER SHARE CONTRIBUTION:

                             Three Months Ended          Six Months Ended
(on a diluted basis)              June 30,                   June 30,
                            ---------------------     ---------------
                            2000    1999  Change      2000     1999   Change
                            ----    ----  -------     ----     ----   ------
Operations:
   GPU Energy companies * $ 0.45  $ 0.79   $(0.34)    $ 1.24  $ 1.73  $(0.49)
   GPU Electric             0.27    0.10     0.17       0.56    0.39    0.17
   GPUI Group                --    (0.02)    0.02       0.03    0.02    0.01
   GPU AR                    --      --       --        0.01    0.01     --
   MYR                      0.01     --      0.01       0.01     --     0.01
   GPU, Inc. (Corporate)   (0.04)  (0.03)   (0.01)     (0.08)  (0.04)  (0.04)
                           -----   -----    -----      -----   -----   -----
     Total operations       0.69    0.84    (0.15)      1.77    2.11   (0.34)
Non-recurring items:
   GPU Energy companies      --    (0.54)    0.54        --    (0.32)   0.32
   GPU Electric            (2.43)   0.08    (2.51)     (2.43)   0.08   (2.51)
                           -----   -----    -----      -----   -----   -----
     Total                $(1.74) $ 0.38   $(2.12)    $(0.66) $ 1.87  $(2.53)
                           =====   =====    =====      =====   =====   =====

*  Includes GPU Telcom

      GPU's second  quarter 2000 net income before  non-recurring  items was $84
million, or $0.69 per share,  against income before  non-recurring items of $106
million, or $0.84 per share in the second quarter of 1999. The lower 2000 second
quarter  income  before  non-recurring  items was primarily due to the impact of
electric  utility  restructuring  in New  Jersey  and  Pennsylvania,  which  has
included  GPU's  sale of its  generation  facilities,  higher  energy  costs  in
Pennsylvania,  and lower  electric  delivery  rates  charged to customers in New
Jersey. Partially offsetting the decrease was higher GPU Electric

                                        1

<PAGE>

earnings  primarily  due to the  acquisition  of the  remaining  50% of Midlands
Electricity plc (conducting business under the name GPU Power UK) in July 1999.

      After  taking into  account  the 2000 and 1999  non-recurring  items,  GPU
recorded a net loss of $211 million,  or $1.74 per share,  in the second quarter
2000,  compared with income of $47 million, or $0.38 per share, for same quarter
in 1999.  The 2000  quarterly  results  included  a  non-recurring  loss of $295
million after-tax, or $2.43 per share, for the sale of GPU's Australian electric
transmission  company,  GPU  PowerNet.  The 1999  comparable  period  included a
non-recurring  charge of $68 million  after-tax,  or $0.54 per share,  resulting
from the New  Jersey  Board of Public  Utilities'  (NJBPU)  restructuring  order
(Summary  Order)  issued  to  JCP&L,  and a gain on the sale of the GPU Power UK
supply business of $9 million after-tax, or $0.08 per share.

      For the six months ended June 30, 2000, income before  non-recurring items
was $215 million,  or $1.77 per share,  against $269 million, or $2.11 per share
for the first half of 1999. The same factors affecting the comparable  quarterly
results also affected the year to date comparison.

      Including  non-recurring  items, GPU recorded a net loss for the first six
months of 2000 of $80  million,  or $0.66 per share,  against net income of $238
million,  or $1.87 per share,  in the first half of 1999.  The 2000 net loss was
after the non-recurring  charge of $295 million,  or $2.43 per share,  described
above. Net income for the first half of 1999 was after the  non-recurring  items
noted  above  for the  second  quarter  1999,  as well as a gain of $28  million
after-tax,  or  $0.22  per  share,  for the  portion  of the gain on the sale of
Penelec's  interest in the Homer City  Generating  Station  related to wholesale
operations.

OPERATING REVENUES:

      Operating revenues for the second quarter 2000 increased $387.7 million to
$1.3 billion,  as compared to the second  quarter 1999. For the six months ended
June 30, 2000,  operating revenues increased $495.4 million to $2.5 billion,  as
compared  to the same  period last year.  The  components  of the changes are as
follows:

                                           2000 vs. 1999 (in millions)
                                     --------------------------------------
                                     Three Months Ended    Six Months Ended
                                          June 30,             June 30,
                                     ------------------   -----------------
GPU Energy companies:
  Kilowatt-hour (KWH) revenues            $ (95.2)            $(287.8)
  Energy and restructuring-related
    Revenues (NJ)                           115.4               179.6
  Competitive transition charge
    (CTC) revenues (PA)                      (1.7)               11.6
  Obligation to refund revenues (NJ)        115.0               115.0
  GPU Telcom revenues                         0.8                 0.7
  Other revenues                             (0.5)               (1.7)
                                           ------              ------
    Total GPU Energy companies              133.8                17.4
GPU Electric                                162.1               372.7
GPUI Group                                   (1.8)                4.8
GPU AR                                       (4.5)                2.4
MYR                                          98.1                98.1
                                           ------              ------
    Total increase                        $ 387.7             $ 495.4
                                           ======              ======

                                        2

<PAGE>

GPU Energy companies

Kilowatt-hour revenues

      The  decrease  for the  three  and six  months  ended  June  30,  2000 was
primarily due to lower generation-related revenues of approximately $136 million
year to date as a result of more Pennsylvania and New Jersey customers  choosing
another  electric energy  supplier,  and lower rates charged to customers in New
Jersey resulting in a decrease in revenues of approximately  $47 million year to
date. Also  contributing to the decrease is the fact that certain JCP&L revenues
related  to  stranded   cost   recovery  are  now  included   under  energy  and
restructuring-related revenues, effective August 1, 1999.

Energy and restructuring-related revenues (JCP&L)
-------------------------------------------------

      Changes  in  energy  and  restructuring-related  revenues  do  not  affect
earnings as they are offset by  corresponding  changes in expense.  The increase
for the  three and six  months  ended  June 30,  2000 was  primarily  due to the
inclusion of revenues,  effective  August 1, 1999,  for the recovery of stranded
costs due to  restructuring  in New Jersey.  In 1999, JCP&L changed its estimate
for unbilled  revenue,  which resulted in the recording of additional  revenues,
partially offsetting the increase in the six-month period.

Competitive transition charge (CTC) revenues (Met-Ed and Penelec)
-----------------------------------------------------------------

      CTC revenues represent  Pennsylvania stranded cost recoveries permitted by
the Pennsylvania Public Utility Commission (PaPUC) in accordance with Met-Ed and
Penelec's final  Restructuring  Orders effective January 1, 1999. Changes in CTC
revenues  generally do not affect  earnings as they are offset by  corresponding
changes in expense.

Obligation to refund revenues (JCP&L)

     The  increase  for the three and six month  periods  was due to the absence
this year of a reduction  in  operating  revenues of $115 million as a result of
the NJBPU's  Summary Order issued to JCP&L in 1999.  The Summary Order  requires
JCP&L to refund customers 5% from rates in effect as of April 30, 1997.

GPU Electric

      The  increase in revenues for the three and six months ended June 30, 2000
was primarily due to the inclusion of revenues from: GPU Power UK, approximately
$325  million  year to date;  Empresa  Distribuidora  Electrica  Regional,  S.A.
(Emdersa) (acquired in March 1999),  approximately $33 million year to date; and
GPU GasNet  (acquired  in June 1999),  approximately  $21 million  year to date,
partially offset by a reduction in revenues at GPU PowerNet.

GPUI Group

      The  increase  for the six months  ended June 30,  2000 was due in part to
higher  energy and  capacity  revenues at Empresa  Guaracachi  S.A.  (EGSA) as a
result of new generating units that began operations in June 1999.

                                        3

<PAGE>

GPU AR

      The  decrease  for the three  months ended June 30, 2000 was due to GPU AR
having  fewer  customers to supply  electricity  to compared to the same quarter
last year.

MYR

      The  increase  for the three and six months ended June 30, 2000 was due to
the  inclusion of revenues  from MYR since its  acquisition  by GPU, Inc. in the
second quarter 2000.

OPERATING INCOME:

      Operating  income for the second quarter 2000 decreased $274 million to an
operating loss of $142 million,  as compared to the second quarter 1999. For the
six months ended June 30, 2000,  operating  income  decreased  $232.3 million to
$198.3 million,  as compared to the same period last year. The components of the
changes are as follows:

                                           2000 vs. 1999 (in millions)
                                     --------------------------------------
                                     Three Months Ended    Six Months Ended
                                          June 30,             June 30,
                                     ------------------   -----------------

GPU Energy companies                      $  32.6             $ (24.4)
GPU Electric                               (316.9)             (214.4)
GPUI Group                                    6.2                 4.2
GPU AR                                       (0.7)               (0.8)
MYR                                           3.9                 3.9
GPU, Inc.                                     0.9                (0.8)
                                           ------              ------
    Total decrease                        $(274.0)            $(232.3)
                                           ======              ======

GPU Energy companies

      The decrease was due to lower  revenues as discussed  above (see Operating
Revenues section for additional  information) and higher energy costs for Met-Ed
and Penelec due to the  purchase of more energy  since the sale of GPU  Energy's
generating  assets.  Partially  offsetting this decrease was lower operation and
maintenance (O&M) expenses primarily due to the sale of GPU Energy's  generating
assets in 1999, lower depreciation  expense due to the sale of generating assets
and the effect of the  impairment  write-down of the Oyster Creek (Oyster Creek)
nuclear generating station, which was also recorded in 1999.

GPU Electric

      The  decrease  for the three and six months ended June 30, 2000 was due to
the pre-tax loss of $372 million recorded in the second quarter 2000 on the sale
of GPU  PowerNet.  Partially  offsetting  the decrease,  for both  periods,  was
increased  operating  income at GPU Power UK due primarily to the acquisition of
the  remaining  50%  ownership  in 1999,  and the  inclusion  of Emdersa and GPU
GasNet.  Prior to its  purchase of the  remaining  50%,  GPU  accounted  for its
investment in GPU Power UK under the equity method and included its share of GPU
Power UK's income in other income on the Consolidated Statements of Income.

                                        4

<PAGE>

      Partially  offsetting  the  decrease  was a credit to income in the second
quarter of 2000 of $15.9  million  pre-tax  resulting  from a  reduction  in the
estimated liability of certain long-term purchase  obligations under natural gas
supply contracts of GPU Power UK. These contracts were at fixed prices in excess
of the market price of gas, and a liability  was  established  for the estimated
loss under such contracts,  however, as a result of increasing gas prices during
the second quarter of 2000, GPU Power UK was able to enter into matching forward
sale contracts for the majority of the gas purchases. In addition, in the second
quarter  2000 a pre-tax  gain of $4.5 million was realized on closed out forward
exchange  contracts  that  were  entered  into  by GPU  Electric  to lock in the
then-current  A$/US$  exchange  rate on the  projected  remittance of Australian
dollar proceeds arising from the expected sale of GPU PowerNet and GPU GasNet.

GPUI Group

      The  increase  for the three and six months ended June 30, 2000 was due to
the absence of an impairment  loss of $6.5 million  recorded in 1999 against GPU
International's investment in the Lake cogeneration project.

MYR

      The  increase  for the three and six months ended June 30, 2000 was due to
the inclusion of MYR since its  acquisition  by GPU, Inc. in the second  quarter
2000.

OTHER INCOME AND DEDUCTIONS:

      Other income and  deductions  for the second  quarter 2000  decreased $9.1
million to $33.4  million,  as compared to the second  quarter 1999. For the six
months ended June 30, 2000, other income and deductions  decreased $88.4 million
to $56.5  million,  as compared to the same period last year.  The components of
the changes are as follows:

                                           2000 vs. 1999 (in millions)
                                     --------------------------------------
                                     Three Months Ended    Six Months Ended
                                          June 30,             June 30,
                                     ------------------   -----------------

GPU Energy companies                      $  (4.1)            $ (38.6)
GPU Electric                                 (3.5)              (46.9)
GPUI Group                                   (1.9)               (3.4)
GPU AR                                        0.2                 0.3
MYR                                           0.2                 0.2
GPU, Inc.                                      --                  --
                                           ------              ------
    Total decrease                        $  (9.1)            $ (88.4)
                                           ======              ======

GPU Energy companies

      The decrease for the six months ended June 30, 2000 was  primarily  due to
the  absence  in 2000 of the  gain  of  $38.3  million  pre-tax  on the  sale of
Penelec's Homer City Station.

GPU Electric

      The decrease  for the six months ended June 30, 2000 was due  primarily to
the consolidation of GPU Power UK since the acquisition of the remaining

                                        5

<PAGE>

50% ownership in 1999.  Prior to that, the GPU Power UK investment was accounted
for under the  equity  method  and GPU's  share of GPU  Power  UK's  income  was
included in other income on the Consolidated Statements of Income.

INTEREST CHARGES AND PREFERRED DIVIDENDS:

      Interest  charges and  preferred  dividends  for the second  quarter  2000
increased  $44.1 million to $141.8  million,  as compared to the second  quarter
1999.  For the six months  ended  June  2000,  interest  charges  and  preferred
dividends  increased  $93.8 million to $284.8  million,  as compared to the same
period last year. The components of the changes are as follows:

                                           2000 vs. 1999 (in millions)
                                     --------------------------------------
                                     Three Months Ended    Six Months Ended
                                          June 30,             June 30,
                                     ------------------   -----------------

GPU Energy companies                      $  (2.9)            $ (11.7)
GPU Electric                                 41.5                98.2
GPUI Group                                    0.6                 0.9
MYR                                           2.4                 2.4
GPU, Inc.                                     2.5                 4.0
                                           ------              ------
    Total increase                        $  44.1             $  93.8
                                           ======              ======

GPU Energy companies

      The decrease for the six months ended June 30, 2000 was  primarily  due to
the following:  in 1999, Met-Ed and Penelec redeemed all their company-obligated
mandatorily  redeemable  preferred securities and cumulative preferred stock and
Penelec redeemed $600 million of first mortgage bonds (FMBs); and in 2000, JCP&L
and  Met-Ed  redeemed  $40  million  and $50  million,  respectively,  of  FMBs.
Partially  offsetting these decreases were increased interest expense associated
with Penelec's  issuance of $350 million of senior notes in 1999 and $50 million
of senior  notes in April 2000;  and the  issuance of $100 million each of trust
preferred securities by Met-Ed and Penelec, in 1999.

GPU Electric

      The  increase  for the  three  and six  months  ended  June  30,  2000 was
primarily due to higher debt levels from the 1999  acquisitions  of GPU Power UK
(the  remaining  50%),  Emdersa and GPU  GasNet,  which  resulted in  additional
interest expense of approximately $103 million year to date, partially offset by
lower interest expense at GPU PowerNet.

GPU, Inc.

      The increase for the three and six month periods was due to higher average
short-debt levels in 2000.

                           JCP&L RESULTS OF OPERATIONS

     JCP&L's earnings for the second quarter 2000 were $42.8 million compared to
a second quarter 1999 loss of $8.2 million.  Excluding a non-recurring charge of
$68 million, which resulted from the NJBPU's Summary Order for

                                        6

<PAGE>

JCP&L,  earnings  for the  quarter  ended  June 30,  1999  would have been $59.8
million.  The  decline  in  earnings  on this basis was  primarily  due to lower
revenues, resulting from lower rates charged to customers as a result of the New
Jersey  restructuring.  Partially offsetting the decrease was lower depreciation
expense due to the effect of the sale of  generating  assets and the  impairment
write-down of Oyster Creek, which was recorded in 1999.

      For the six  months  ended  June 30,  2000,  JCP&L's  earnings  were $85.9
million,  compared to $43 million  for the same  period in 1999.  Excluding  the
non-recurring  charge discussed above,  earnings for 1999 would have been $111.1
million. The decrease in earnings on this basis was due to lower revenues,  as a
result of lower rates charged to customers under New Jersey rate  restructuring.
Partially  offsetting  the  decrease was lower  depreciation  expense due to the
effect of the sale of generating assets and the impairment  write-down of Oyster
Creek, which was recorded in 1999, and a reduction in O&M expenses.

OPERATING REVENUES:

      Operating revenues for the second quarter 2000 increased $99.2 million to,
$490.2 million, as compared to the second quarter 1999. For the six months ended
June 30, 2000,  earnings increased $35 million,  to $942.9 million,  compared to
the same period last year. The components of the changes are as follows:

                                           2000 vs. 1999 (in millions)
                                     --------------------------------------
                                     Three Months Ended    Six Months Ended
                                          June 30,             June 30,
                                     ------------------   -----------------

KWH revenues                              $(131.0)            $(256.4)
Energy and restructuring-related
  revenues                                  115.4               179.6
Obligation to refund revenues
  to customers per NJBPU Order              115.0               115.0
Other revenues                               (0.2)               (3.2)
                                           ------              ------
    Increase in revenues                  $  99.2             $  35.0
                                           ======              ======

KWH revenues

      The decline for the three and six month  periods was  primarily due to the
fact that certain  revenues  related to stranded  cost recovery are now included
under energy and restructuring-related  revenues,  effective August 1, 1999. The
decrease was also due in part to lower rates charged to customers in New Jersey,
resulting in a decrease of revenues of  approximately  $47 million year to date,
and  the  effect  of New  Jersey  customers  choosing  another  electric  energy
supplier,  resulting in a decrease of revenues of approximately $54 million year
to date.

Energy and restructuring-related revenues

      The  increase  for both  periods was  primarily  due to the  inclusion  of
revenues,  effective  August 1, 1999,  for the recovery of stranded costs due to
restructuring  in New Jersey.  In the first  quarter of 1999,  JCP&L changed its
estimate for unbilled  revenue,  which  resulted in the  recording of additional
revenues during that quarter, partially offsetting the increase in the six-

                                        7

<PAGE>

month period.  Changes in energy and restructuring-related revenues do not
affect earnings as they are offset by corresponding changes in expense.

Obligation to refund revenues to customers per NJBPU Order
----------------------------------------------------------

      The increase in the three and six month periods  resulted from the NJBPU's
Summary Order for JCP&L, which obligated JCP&L to refund to customers (from 1999
revenues)  5% of April 30, 1997 rates for service  rendered  from August 1, 2002
through July 31, 2003. This occurred during the second quarter of 1999.

Other revenues

      The decrease for both periods was primarily  due to lower  revenue  taxes,
which did not have an impact on earnings.

OPERATING INCOME:

      Operating  income for the second quarter 2000  increased  $88.3 million to
$99.6  million,  as compared to the second  quarter  1999.  The increase was due
primarily to higher  revenues,  as  discussed  above.  In addition,  there was a
decrease in  depreciation  expense,  due to the effect of the sale of generating
assets and the impairment write-down of Oyster Creek in 1999.

      For the six months ended June 30, 2000,  operating  income increased $71.1
million,  to $195.5 million,  versus the same period last year. The increase was
due primarily to higher revenues,  as discussed above. In addition,  there was a
decrease in  depreciation  expense,  due to the effect of the sale of generating
assets and the impairment  write-down of Oyster Creek in 1999, and a decrease in
O&M costs.

OTHER INCOME AND DEDUCTIONS:

      Other income and  deductions  for the second  quarter 2000  decreased $5.7
million,  to a loss of $1.2 million,  versus the first quarter 1999. For the six
months  ended  June 30,  2000,  there was a  decline  of $3.2  million,  to $4.4
million, compared to the same period last year. The decrease in both periods was
the result of the discount on the  receivable  from AmerGen  Energy  Company LLC
(AmerGen) relating to Oyster Creek outage costs.

                          MET-ED RESULTS OF OPERATIONS

      Met-Ed's earnings for the second quarter 2000 were $8.7 million,  compared
to second  quarter 1999 earnings of $19.1  million.  The decline in earnings was
primarily  due to higher energy costs  resulting  from Met-Ed's need to purchase
its  energy  requirements  on the open  market,  as a result  of the sale of its
generating  assets in 1999.  Partially  offsetting these higher costs were lower
O&M and depreciation costs, mainly due to the sale of generating assets.

      For the six  months  ended June 30,  2000,  earnings  were $35.2  million,
compared  to  earnings  of $51.4  million  for the same  period  last year.  The
decrease in earnings was attributed  primarily to higher energy  purchase costs,
which were offset by  reductions  in O&M expenses  and  depreciation  costs.  In
addition,  Met-Ed  experienced a decline in revenues as a result of Pennsylvania
rate restructuring.

                                        8

<PAGE>

OPERATING REVENUES:

      Operating  revenues  of $197.8  million for the second  quarter  2000 were
essentially  the same as the second  quarter  1999.  Operating  revenues for the
six-month period ended June 30, 2000 decreased $26.3 million, to $400.9 million,
as  compared  to same  period in 1999.  The  components  of the  changes  are as
follows:

                                           2000 vs. 1999 (in millions)
                                     --------------------------------------
                                     Three Months Ended    Six Months Ended
                                          June 30,             June 30,
                                     ------------------   -----------------

KWH revenues                              $  (1.0)            $ (37.7)
CTC revenues                                  0.3                 9.7
Other revenues                                0.5                 1.7
                                           ------              ------
    Decrease in revenues                  $  (0.2)            $ (26.3)
                                           ======              ======

KWH revenues

      The  decrease  in  the  six-month   period  was  primarily  due  to  lower
generation-related  revenues  of  approximately  $39 million as a result of more
Pennsylvania customers choosing another electric energy supplier.

CTC revenues

      CTC revenues represent  Pennsylvania stranded cost recoveries permitted by
the PaPUC in  accordance  with  Met-Ed's  final  Restructuring  Order  effective
January 1, 1999.  Changes in CTC revenues  generally  do not affect  earnings as
they are offset by corresponding changes in expense.

OPERATING INCOME:

      Operating  income for the second quarter 2000 decreased $25.4 million,  to
$19.2  million,  as  compared  to the second  quarter  1999.  The  decrease  was
attributed to higher energy costs, as a result of increased energy purchases due
to the sale of Met-Ed's  generating assets. The decrease in operating income was
partially offset by a decrease in O&M expenses and depreciation expense,  mainly
due to the sale of generating assets.

      Operating  income for the six months ended June 30, 2000  decreased  $46.3
million,  to $74.5  million,  as compared to the six months ended June 30, 1999.
The decrease was attributed to lower  revenues,  as discussed  above, as well as
higher  energy  purchase  costs.  This decrease was offset by a reduction in O&M
expenses and depreciation expense.

OTHER INCOME AND DEDUCTIONS:

      Other income and  deductions  for the second  quarter 2000  increased $6.3
million,  to $8.2 million,  as compared to the second  quarter 1999. For the six
months ended June 30, 2000, other income and deductions increased $8 million, to
$11  million,  versus the same period last year.  The change in both periods was
due primarily to an increase in interest and dividend income.

                                        9

<PAGE>

INTEREST CHARGES AND PREFERRED DIVIDENDS:

      Interest  charges and  preferred  dividends  for the second  quarter  2000
decreased  $1.4  million  to $13.7  million,  versus the  second  quarter  1999.
Interest charges and preferred  dividends for the six months ended June 30, 2000
decreased $2.5 million to $27.8 million, as compared to the same period in 1999.
The  decrease  for both  periods  was  primarily  due to the  redemption  of all
Met-Ed's  company-obligated  mandatorily  redeemable  preferred  securities  and
cumulative  preferred  stock in 1999 (the redemption of preferred stock resulted
in a loss of $0.5  million);  and the  retirement  of $50 million of FMBs in the
second quarter 2000.  Partially  offsetting the decrease was increased  interest
expense  associated  with  the  issuance  of $100  million  of  trust  preferred
securities in 1999.

                          PENELEC RESULTS OF OPERATIONS

     Penelec's earnings for the second quarter 2000 were $4.5 million,  compared
to second  quarter 1999 earnings of $19.9  million.  The decline in earnings was
primarily due to higher energy costs  resulting  from Penelec's need to purchase
its energy  requirements  on the open market,  since the sale of its  generating
assets in 1999.  Partially  offsetting  the higher  energy  costs were lower O&M
expense and depreciation  costs mainly due to the sale of generating  assets. In
addition,  income tax expense was lower in the second  quarter 2000,  versus the
same quarter last year, due in part to an adjustment  made to tax expense in the
second  quarter  1999  related  to the  deregulation  of  generating  assets  in
Pennsylvania.

      For the six  months  ended June 30,  2000,  earnings  were $31.5  million,
compared to earnings of $84.6  million for the same period last year.  Excluding
the net gain of $27.8 million after-tax for the portion of the sale of Penelec's
Homer City Station related to wholesale operations,  earnings for the six months
ended June 30, 1999 would have been $56.8  million.  The decrease in earnings on
this basis was primarily due to higher energy purchase costs,  which were offset
by reductions in O&M expenses and depreciation expense. In addition, the company
experienced   a  decrease  in  revenues  as  a  result  of   Pennsylvania   rate
restructuring.

OPERATING REVENUES:

      Operating revenues for the second quarter 2000 increased $1.6 million,  to
$206.8  million,  compared to the first quarter  1999.  For the six months ended
June 30, 2000, revenues decreased $24.5 million, to $426.9 million,  compared to
the same period last year. The components of the changes are as follows:

                                           2000 vs. 1999 (in millions)
                                     --------------------------------------
                                     Three Months Ended    Six Months Ended
                                          June 30,             June 30,
                                     ------------------   -----------------

KWH revenues                              $   5.3             $ (24.4)
CTC revenues                                 (2.0)                1.9
Other revenues                               (1.7)               (2.0)
                                           ------              ------
    Increase/(Decrease) in revenues       $   1.6             $ (24.5)
                                           ======              ======



                                       10

<PAGE>

KWH revenues

      The  increase  in the  quarter  was  due to  increases  in  KWH  sales  to
residential  and  industrial  customers,   offset  by  lower  generation-related
revenues of  approximately $3 million as result of more  Pennsylvania  customers
choosing another electric energy supplier. The decrease for the six-month period
was  primarily due to lower  generation-related  revenues of  approximately  $43
million as a result of more  Pennsylvania  customers  choosing  another electric
energy  supplier.  This decrease was  partially  offset by higher sales to other
utilities.

CTC revenues

      CTC revenues represent  Pennsylvania stranded cost recoveries permitted by
the PaPUC in accordance with Penelec's  Restructuring Order effective January 1,
1999.  Changes in CTC  revenues  generally  do not affect  earnings  as they are
offset by corresponding changes in expense.

OPERATING INCOME:

      Operating  income for the second quarter 2000 decreased $30.3 million,  to
$14.7  million,  as  compared  to the second  quarter  1999.  The  decrease  was
attributed  primarily to higher energy costs, due to the purchase of more energy
as a  result  of the sale of  Penelec's  generating  assets.  The  decrease  was
partially offset by lower O&M and depreciation expenses,  mainly due to the sale
of generating assets.

      Operating  income for the six months ended June 30, 2000  decreased  $49.3
million,  to $68.3  million,  as compared to the six months ended June 30, 1999.
The decrease was attributed to lower  revenues,  as discussed  above, as well as
higher  energy  purchase  costs.  This decrease was offset by a reduction in O&M
expenses and depreciation expense.

OTHER INCOME AND DEDUCTIONS:

      Other income and  deductions  for the second  quarter 2000  decreased $3.3
million,  to $3.9 million, as compared to the second quarter 1999, due primarily
to a reduction in interest income.

      Other  income  and  deductions  for the six  months  ended  June 30,  2000
decreased $41.4 million, to $4.7 million,  versus the same period last year. The
decrease was due to the absence,  in 2000,  of a pre-tax gain of $38.3  million,
which resulted from the sale of Penelec's Homer City Station.

INTEREST CHARGES AND PREFERRED DIVIDENDS:

      Interest  charges and  preferred  dividends  for the second  quarter  2000
increased  $1.3  million,  to $11.1  million,  due  primarily  to an increase in
interest expense on notes payable and commercial paper.

      Interest  charges  and  preferred  dividends  for the  first  half of 2000
decreased $6.4 million, to $20.2 million, as compared to the first half of 1999.
The  decrease  was   primarily   due  to  the   redemption   of  all   Penelec's
company-obligated mandatorily redeemable preferred securities and cumulative

                                       11

<PAGE>

preferred  stock (the  redemption of preferred  stock resulted in a loss of $0.7
million),  and the  redemption  of $600  million  of  FMBs  in  1999.  Partially
offsetting these decreases were increased  interest expense  associated with the
issuance  of $350  million of senior  notes in 1999;  and the  issuance  of $100
million of trust preferred securities, also in 1999.

                          INVESTMENTS IN FUCOs AND EWGs

      GPU, Inc. has Securities and Exchange  Commission  (SEC)  authorization to
finance  investments in foreign utility  companies  (FUCOs) and exempt wholesale
generators  (EWGs)  up to an  aggregate  amount  equal to 100% of GPU's  average
consolidated  retained  earnings,  or approximately  $2.4 billion as of June 30,
2000.  At June 30,  2000,  GPU,  Inc.  has  remaining  authorization  to finance
approximately  $614 million of additional  investments  in FUCOs and EWGs.  GPU,
Inc.'s  investments in FUCOs and EWGs are made through GPU Electric and the GPUI
Group.

                                  GPU ELECTRIC

      GPU Electric owns electric distribution and gas transmission businesses in
England,  Australia and Argentina.  In June 2000, GPU Electric sold its electric
transmission  business in  Australia.  As a result of the sale,  GPU  recorded a
pre-tax loss in the quarter ended June 30, 2000 of $372  million,  ($295 million
after-tax,  or $2.43 per share),  including a $94 million foreign currency loss.
Through its  ownership in GPU Power UK, GPU  Electric  also has  investments  in
operating  generating  facilities  located in foreign  countries  totaling 4,216
megawatts (MW) (of which GPU Electric's equity interest  represents 1,134 MW) of
capacity. At June 30, 2000, GPU, Inc.'s aggregate investment in GPU Electric was
$569 million.  GPU, Inc. has also guaranteed up to an additional $998 million of
outstanding GPU Electric obligations.

                                   GPUI GROUP

      The GPUI  Group has  ownership  interests  in six  operating  cogeneration
plants in the US totaling  1,014 MW (of which the GPUI Group's  equity  interest
represents 496 MW) of capacity and four operating generating  facilities located
in  foreign  countries  totaling  1,229 MW (of  which  the GPUI  Group's  equity
interest represents 424 MW) of capacity. At June 30, 2000, GPU, Inc.'s aggregate
investment in the GPUI Group was $251.8  million.  GPU, Inc. has also guaranteed
up to an additional $30 million of GPUI Group obligations.

      GPU,  Inc.  has  concluded  that  continuation  of  this  business  is not
consistent  with its overall  business  strategy  and that  proposals  are being
sought for the sale of the GPUI Group's generating plants.

                                       MYR

      In April 2000, following the receipt of SEC approval,  GPU, Inc. completed
its  acquisition  of  MYR  for  approximately  $217.5  million.  For  additional
information, see Note 2, Acquisitions and Dispositions.

                                       12

<PAGE>

                         LIQUIDITY AND CAPITAL RESOURCES

Capital Expenditures and Investments

GPU Energy companies

      The GPU Energy  companies'  capital spending for the six months ended June
30, 2000 was $160 million  (JCP&L $68 million;  Met-Ed $23 million;  Penelec $30
million;  Other $39  million),  and was used  primarily  to expand  and  improve
existing  transmission  and  distribution  (T&D) facilities and for new customer
connections.  For 2000,  capital  expenditures  are estimated to be $349 million
(JCP&L  $178  million;  Met-Ed  $57  million;  Penelec  $82  million;  Other $32
million),  which  management  estimates a substantial  portion will be satisfied
through internally generated funds.

GPU Electric

      GPU Electric's capital spending for the six months ended June 30, 2000 was
$101.4  million,  and was  used  primarily  to  fund  on-going  network  capital
replacement schedules,  network improvements and new connections in GPU Power UK
and Emdersa's  facilities.  For 2000,  capital  expenditures are estimated to be
$201 million which will be satisfied through both internally generated funds and
external financings.

GPUI Group

      For 2000, the GPUI Group's capital spending is estimated to be $2 million,
which will be satisfied through internally generated funds. In addition, in 2000
the GPUI Group made an additional investment of $4 million in Ballard Generation
System, Inc., representing its final investment commitment.

Financing

GPU, Inc.

      In  January  1999,  the  GPU,  Inc.  Board  of  Directors  authorized  the
repurchase  of up to $350 million of GPU, Inc.  common  stock.  Through June 30,
2000, 7.2 million shares of common stock, or approximately 6% of the outstanding
shares,  have been repurchased under the program,  at an average price of $34.28
per share.  In  addition,  GPU,  Inc.  entered into a forward  share  repurchase
agreement with Salomon Smith Barney (SSB) on March 8, 2000.  Upon  expiration of
the agreement,  GPU, Inc. has the option to purchase  additional shares acquired
by SSB at the forward  price or net settle for cash or shares at the  difference
between the forward  price and the then market price.  As of June 30, 2000,  SSB
has  purchased 1.9 million  shares of GPU,  Inc.  common stock for $49.5 million
under the terms of this agreement.

      GPU has various credit  facilities in place, the most significant of which
are discussed below.  These credit  facilities  generally  provide GPU with bank
loans at negotiated market rates.

      GPU,  Inc. and the GPU Energy  companies  have  available  $465 million of
short-term borrowing  facilities,  which include a $250 million revolving credit
agreement  and various bank lines of credit.  In  addition,  GPU,  Inc.,  JCP&L,
Met-Ed and Penelec can issue commercial paper in amounts of up to

                                       13

<PAGE>

$100 million,  $150 million,  $75 million and $100 million,  respectively.  GPU,
Inc. has  regulatory  authority to have  outstanding  at any one time a total of
$250 million of short-term debt under these programs.  JCP&L, Met-Ed and Penelec
are limited by their charters or SEC authorization to $258 million, $150 million
and $150 million, respectively, of short-term debt outstanding at any one time.

      GPU, Inc. also has SEC approval to issue and sell up to $300 million of
unsecured debentures through 2001.

      In April 2000, GPU, Inc. completed its acquisition of MYR, which was
partially financed through the issuance of GPU, Inc. short-term debt.


GPU Energy companies

      Met-Ed and Penelec  currently  have  regulatory  approval to issue  senior
notes and preferred securities through December 31, 2000 in aggregate amounts of
$150 million and $157 million, respectively, of which up to $25 million for each
company may consist of preferred  securities.  JCP&L has regulatory  approval to
issue senior notes in the aggregate  amount of $300 million through December 31,
2000 and has filed with NJBPU to extend this authorization  through 2002. Met-Ed
and JCP&L intend to issue secured senior notes (collateralized by first mortgage
bonds (FMBs) issued to the senior note trustee) until such time as more than 80%
of the outstanding  FMBs are held by the senior note trustee.  At that time, the
FMBs will be cancelled and the  outstanding  senior notes will become  unsecured
obligations. Penelec's senior notes are unsecured.

      Current  plans call for the GPU Energy  companies  to issue  senior  notes
during  the  next  three  years  to  fund  the  redemption  of  maturing  senior
securities,  refinance  outstanding  senior securities and finance  construction
activities.  The senior note indentures prohibit (subject to certain exceptions)
the GPU Energy  companies  from  issuing  any debt which is senior to the senior
notes.

      JCP&L and Met-Ed's FMB bond indentures  include  provisions that limit the
amount of FMBs the companies  may issue.  JCP&L and Met-Ed's  interest  coverage
ratios are  currently  in excess of their FMB  indenture  restrictions.  JCP&L's
certificate  of  incorporation  includes  provisions  that  limit the  amount of
preferred  stock it may issue.  JCP&L's  preferred  dividend  coverage  ratio is
currently in excess of these charter restrictions.

      In  August  1999,  JCP&L  filed  a  petition  with  the  NJBPU  requesting
authorization  to issue  transition bonds to securitize the recovery of bondable
stranded costs  attributable to the projected net investment in the Oyster Creek
Nuclear  Generating  Station  (Oyster  Creek) at September 1, 2000. The petition
also requests that the NJBPU order provide for the  imposition and collection of
a usage-based  non-bypassable  transition bond charge (TBC) and for the transfer
of the bondable transition property relating to the TBC to another entity. JCP&L
has  amended   its   petition  to  include   securitization   of  the   up-front
decommissioning  payment  it has  agreed to make  under the  Oyster  Creek  sale
agreement. For further information, see Recent Regulatory Actions.

                                       14

<PAGE>

      In April  2000,  Penelec  issued  two  tranches  totaling  $50  million of
variable  rate senior  notes.  These senior  notes were  converted to fixed rate
obligations  through  interest  rate swap  agreements.  The $25  million  2-year
tranche and the $25 million  2.5-year  tranche were swapped into fixed  interest
rates of 7.12% and 7.185%,  respectively.  In August  2000,  Penelec  issued two
tranches totaling $68 million of fixed rate senior notes. The $33 million 5-year
tranche and $35 million  10-year  tranche have interest rates of 7.5% and 7.77%,
respectively.

      In May and June 2000,  Met-Ed  redeemed a total of $50 million of maturing
FMBs.  JCP&L  redeemed  $5 million and $16.7  million  stated  value  cumulative
preferred  stock pursuant to mandatory and optional  sinking fund  provisions in
June and July 2000, respectively.

      Based on June 30,  2000  financial  statements,  Met-Ed  and  Penelec  had
retained  earnings  available to pay common stock dividends of $20.3 million and
$25.6  million,  respectively,  net of amounts  restricted  under the companies'
respective FMB indentures.  In addition,  Met-Ed and Penelec had capital surplus
of $400 million and $285 million, respectively, which would also be available to
pay  common  dividends,  to  the  extent  authorized  by the  SEC  and as may be
permitted  under  their  respective  FMB  indentures.  Met-Ed and  Penelec  have
requested SEC approval to utilize  amounts now accounted for as capital  surplus
to declare and pay common  dividends,  from time to time  through  December  31,
2001, so long as their common equity ratios and GPU,  Inc.'s common equity ratio
are not less than 30% of total  capitalization.  At June 30,  2000,  the  common
equity  ratios of Met-Ed,  Penelec and GPU,  Inc.  were 41.3%,  39.1% and 31.4%,
respectively.

GPU Electric

      On June  30,  2000,  GPU,  Inc.  completed  the  sale of GPU  PowerNet  to
Singapore Power  International  (SPI) for A$2.1 billion  (approximately US $1.26
billion).  As part of the sales price,  SPI assumed  liability for A$230 million
(US $137.8  million) of medium term notes.  GPU,  Inc.  applied the net proceeds
from the sale as follows:  A$1,288  million (US $772  million) was used to repay
outstanding  debt;  and A$579  million (US $347  million)  was placed in a trust
(which  amount is  included  in Special  deposits  on the  Consolidated  Balance
Sheets) to provide for the repayment of the  remaining  medium term notes (A$174
million/US $104 million) and outstanding commercial paper (A$405 million/US $243
million) at  maturity.  As a result of the sale,  GPU recorded a pre-tax loss in
the quarter ended June 30, 2000 of $372 million,  ($295  million  after-tax,  or
$2.43 per share),  including a $94 million  foreign  currency loss. GPU, Inc. is
still  considering  the possible sale of GPU GasNet,  which it purchased in 1999
for approximately US $675 million.

      On June 2, 2000,  repayment of approximately  $218 million of maturing GPU
GasNet  bank debt was  extended  to  September  2, 2000.  GPU GasNet may further
extend  this  loan  to  October  2,  2000.  GPU  GasNet  is in  the  process  of
establishing  a  commercial  paper  program  and a medium  term note  program to
refinance this debt. GPU, Inc. has agreed to guarantee this loan,  under certain
conditions, if it is not repaid by August 25, 2000.

      GPU Capital has a $1 billion  364-day senior  revolving  credit  agreement
expiring in December 2000 supporting the issuance of commercial paper for its $1
billion commercial paper program established to fund GPU Electric  acquisitions.
GPU, Inc. has guaranteed GPU Capital's  obligations under this program.  At June
30, 2000, $916 million was outstanding  under the commercial  paper program,  of
which $701 million is included in long-term debt on the

                                       15

<PAGE>

Consolidated  Balance  Sheets  since it is  management's  intent to reissue this
amount of the commercial paper on a long-term basis.

      GPU Australia Holdings, Inc. has $270 million (reducing to $180 million in
November  2000)  available  under its senior  revolving  credit  facility  which
matures in November 2001.  This bank credit  facility and other GPU, Inc. credit
facilities  serve as credit  support for GPU  Australia  Holdings'  $350 million
commercial  paper  program.  GPU, Inc. has  guaranteed  GPU Australia  Holdings'
obligations under this program.  Approximately  $150 million of commercial paper
was outstanding as of June 30, 2000.

      GPU Power UK maintains a British pound 150 million  (approximately US $227
million) bilateral  revolving credit facility with six banks for working capital
purposes, which matures at various dates through June 2005. At June 30, 2000, no
borrowings were outstanding under this facility.

GPUI Group

      GPU  International,  Inc. has a revolving credit  agreement  providing for
borrowings  and/or letters of credit through  December 2000 of up to $30 million
outstanding  at any one time.  GPU,  Inc.  has  guaranteed  GPU  International's
obligations under this agreement.  At June 30, 2000, no borrowings or letters of
credit were outstanding under this facility.

                    COMPETITIVE ENVIRONMENT AND RATE MATTERS

GPU Business Plan

      The GPU Energy  companies  expect they will continue to serve customers in
markets  where there will be capped rates for varying  periods and their ability
to seek rate increases will be limited.  In addition,  inflation could adversely
affect GPU since these  increased costs may not be recoverable in an environment
where there are capped rates.  Since the GPU Energy  companies have  essentially
exited the generation business, they will have to supply energy to customers who
do not choose an  alternate  supplier  largely from  contracted  and open market
purchases. While management has identified and addressed market risks associated
with  these  purchases  through  implementation  of an  energy  risk  management
program, there can be no assurance that the GPU Energy companies will be able to
fully recover the costs to supply  electricity to customers who do not choose an
alternate supplier.

      In October 1999,  GPU initiated a program to enhance  shareholder  returns
through  planned  cost  reductions  of $100 million ($55 million in 2000 and $45
million in 2001 and beyond) by  increasing  operating  efficiency  and by making
investments  of $40  million to $50 million to improve  the  reliability  of its
domestic utility operations. As of June 30, 2000, the planned cost reductions in
2000 for GPU Energy are generally  progressing  according to plan, and GPU Power
UK is ahead of plan  with its cost  reductions.  The GPU  Energy  companies  are
targeting  reductions  of $30 million in 2000 and an  additional  $40 million in
2001 and beyond.  Cost  reductions  will be achieved by using new tools from its
enterprise  resource  planning  system  to  eliminate   significant  amounts  of
operational  overhead  expense  and by  improving  the  productivity  of all its
operations.  GPU Power UK plans cost reductions of US $25 million in 2000 and US
$5 million in 2001.  These  cost  reductions  will be  achieved  by  eliminating
activities not provided for in its new regulated rate level, which was effective
in the  Spring of 2000,  and by  realizing  productivity  benefits  from its new
systems and organization.  Furthermore,  the sale of GPU PowerNet advances GPU's
plan to raise  funds from its  current  investment  portfolio  by  reducing  its
ownership in non-core and under-performing assets.

                                       16

<PAGE>

      In March 2000, GPU, Inc.  announced its  participation  in America's Fiber
Network LLC (AFN),  of which GPU,  Inc.  anticipates  owning 25%. AFN is a high-
speed fiber optics  company  with a network of more than 7,000 route  miles,  or
140,000  fiber miles,  connecting  major  markets in the eastern US to secondary
markets  with a  growing  need  for  broadband  access.  GPU,  Inc.  anticipates
investing  approximately $40 million (of which $1.9 million has been invested as
of June 30,  2000) in AFN through GPU Telcom,  which  includes  existing and new
fiber routes and electronic equipment.

      In April 2000, GPU, Inc.  announced the formation of Telergy  Mid-Atlantic
(TMA),  a joint  venture  between  GPU Telcom and  Telergy,  Inc.  TMA  combines
established  telecommunications services and marketing expertise with utilities'
existing fiber networks and natural positioning in retail markets. TMA's initial
target markets are New Jersey and Pennsylvania,  with future expansions  planned
for contiguous  regions currently served by the network of GPU Telcom. TMA plans
to offer telecommunications  service and ultimately electricity,  marketing them
jointly to businesses,  hospitals and educational institutions, among others. As
of June 30, 2000,  GPU, Inc. has invested $20 million in Telergy,  Inc.  through
GPU Telcom.

The GPU Energy Companies' Supply Plan

      As a result of the NJBPU and the  PaPUC's  Restructuring  Orders,  the GPU
Energy companies are required to provide  generation service to customers who do
not choose an alternate supplier. (For additional information,  see the Provider
of Last Resort and Basic Generation Service Provider sections below.) Given that
the GPU Energy  companies have essentially  divested their generation  business,
there will be  increased  market  risks  associated  with  providing  generation
service  since  the  GPU  Energy   companies  will  have  to  supply  energy  to
non-shopping  customers  from  contracted and open market  purchases.  Under its
order,  JCP&L is permitted to recover  reasonably  and prudently  incurred costs
associated with providing basic generation  service.  The PaPUC's  Restructuring
Orders,  however,  generally  do not allow  Met-Ed and Penelec to recover  their
energy costs in excess of established rate caps, which are in effect for varying
periods.  While  management has implemented an energy risk  management  program,
there can be no assurance  that the GPU Energy  companies  will be able to fully
recover  the costs to  supply  electricity  to  customers  who do not  choose an
alternate supplier.

      Following the sales in 1999 of substantially all their electric generating
facilities,  the GPU Energy companies have 285 MW of capacity and related energy
remaining to meet customer needs and an additional 619 MW of nuclear  generation
from  Oyster  Creek,  the  sale  of  which  is  pending  (see  Generation  Asset
Divestiture in this section).  The GPU Energy companies also have contracts with
non-utility  generation (NUG) facilities totaling 1,610 MW (JCP&L 926 MW; Met-Ed
273 MW; Penelec 411 MW) and the GPU Energy  companies have agreements with other
utilities to provide for up to 1,700 MW (JCP&L 1,418 MW; Met-Ed 267 MW;  Penelec
15 MW) of capacity and related energy.  The GPU Energy  companies have agreed to
purchase  all of the  capacity  and  energy  from the Three Mile  Island  Unit 1
(TMI-1)  nuclear  generating  station (which they sold to AmerGen Energy Company
LLC  (AmerGen)  in  1999)  through  December  31,  2001 and  from  Oyster  Creek
(following  its sale)  through  March 31,  2003.  In  addition,  the GPU  Energy
companies  have the right to call the  capacity  of the Homer City  Station  (in
which Penelec sold its 50% interest to a subsidiary of Edison  Mission Energy in
1999) (942 MW) through May 31, 2001 and the capacity of the generating  stations
sold to  Sithe  Energies  (4,117  MW)  through  May  31,  2002.  The GPU  Energy
companies'  remaining  capacity  and  energy  needs  will  be met by  short-  to
intermediate-term  commitments  (one  month  to  three  years)  during  times of
expected  high energy price  volatility  and  reliance on spot market  purchases
during other periods.

                                       17

<PAGE>

Provider of Last Resort

      Under the PaPUC  Restructuring  Orders,  Met-Ed and Penelec customers have
been permitted to shop for their generation  supplier since January 1, 1999. The
PaPUC has approved a competitive  bid process to assign  provider of last resort
(PLR) service for 20% of Met-Ed and Penelec's  retail customers on June 1, 2000,
40% on June 1, 2001,  60% on June 1, 2002 and 80% on June 1, 2003,  to  licensed
generation  suppliers  referred to as Competitive  Default  Service  (CDS).  Any
retail customers assigned to CDS may return to Met-Ed and Penelec as the default
PLR at no  additional  charge.  Met-Ed and  Penelec may meet any  remaining  PLR
obligation  at rates not less than the lowest  rate  charged by the  winning CDS
provider, but no higher than Met-Ed and Penelec's rate cap.

      In February 2000,  GPU Energy  announced that it had not received any bids
in  response  to its offer to auction  CDS  service  for up to 20% of its retail
customers  and, as a result,  it would be increasing  its forward  purchasing of
electric power to accommodate  these  customers for whom it will now continue to
be the default supplier. At the PaPUC's direction,  Met-Ed and Penelec initiated
a collaborative  process in June 2000 with all interested  parties from the 1998
Restructuring Orders,  including the PaPUC, to address the companies' PLR risks.
Despite  Met-Ed and  Penelec's  efforts,  this  process  was  concluded  without
resolution of the issues surrounding the companies' PLR risk. Met-Ed and Penelec
are currently  considering  options that include  filing for rate relief under a
provision of the 1998  Restructuring  Orders.  The provision  permits Met-Ed and
Penelec to file a petition  request with the PaPUC  seeking PLR rates  exceeding
existing rate cap levels if no CDS bids are received at or below the  generation
rate cap. There can be no assurance as to the outcome of this matter.

      Met-Ed and Penelec  estimate  that the failed CDS bid will require them to
supply  550 MW of  electric  power  more than  they had  planned.  In  addition,
customers  requiring  approximately  600 MW of power have returned to Met-Ed and
Penelec from their  alternate  suppliers this summer.  These  additional  energy
requirements, coupled with higher than anticipated energy prices are expected to
result in GPU's Pennsylvania supply business recording a loss in 2000 of between
approximately  $0.20 to $0.25 per share. For the six months ended June 30, 2000,
the Pennsylvania  supply business has contributed  approximately $0.04 per share
to GPU's earnings.

      Met-Ed  and  Penelec  have  developed   incentive  programs  for  shopping
customers  in order to reduce  their PLR  exposure.  Met-Ed and Penelec are also
negotiating with large commercial and industrial customers to encourage shopping
on a long-term  basis and have been working with  generation  suppliers  who are
returning customers to Met-Ed and Penelec,  under PLR rates, to find alternative
power supply for these customers.  There can be no assurance that these or other
efforts to mitigate Met-Ed's and Penelec's PLR risk will be successful.

Basic Generation Service Provider

      JCP&L is required to provide  basic  generation  services  (BGS) to retail
customers  who  choose  to  remain  with  JCP&L as  generation  customers  for a
three-year period ending July 31, 2002. Thereafter,  BGS service will be bid out
at the pre-established  BGS rates.  JCP&L's BGS rates are pre-determined for the
period through July 31, 2003. The specific details of the BGS

                                       18

<PAGE>

bidding  process will be the subject of a future NJBPU  proceeding.  Any payment
received  or  required  by JCP&L  resulting  from the  bidding  process  will be
deferred for future refund or recovery.

GPU Energy Supply Market Risk

      With the divestiture of essentially all their generating  plants,  the GPU
Energy  companies  are in a net  short  position  (load in  excess  of  supply).
Consequently,  the GPU Energy  companies  must manage their purchase and sale of
installed  capacity and ancillary  services to minimize business risk associated
with  their  reliability  obligation  in the  PJM  Interconnection,  LLC  (PJM).
Supply/risk  management  transactions  will be made  based on the  objective  of
decreasing  both price and volume  uncertainty.  The GPU Energy  companies  will
enter into supply/hedging market instruments for hedging purposes only.

Market Risk - Electricity

      The GPU  Energy  companies  are  generally  at risk of rising  prices  for
electricity and electricity-related  commodities.  These risks may differ during
some months of the year. To manage these risks,  the GPU Energy companies employ
a portfolio  approach  primarily  consisting of two party forward  purchases and
options,  but  may  also  include  New  York  Mercantile  Exchange  (NYMEX)  PJM
electricity  futures and similar  instruments,  as they become widely available.
This portfolio includes  transactions of various durations ranging from one hour
to greater than one year.

      The GPU Energy companies'  electricity  market risks can be price-related,
volume-related or cost-related as follows:

-     Price-related risk refers to the price exposure  associated with having to
      purchase  amounts  of  electricity,   installed  capacity,  and  ancillary
      services for load  requirements  from the PJM interchange spot market.  To
      the extent the GPU Energy  companies  must rely on the PJM pool to satisfy
      load  requirements,  financial  exposure exists for the difference between
      the PJM energy and  installed  capacity  spot market  prices and the rates
      paid by customers.

-     Volume-related  risk refers to the uncertainty  associated with the amount
      of load the GPU Energy  companies are required to serve.  Deregulation  of
      the  electric  utility  industry  has  resulted  in the  ability  of their
      customers to purchase energy from other electric suppliers.  This customer
      shopping,  combined with weather  changes,  which affects  customer energy
      usage, can affect the GPU Energy companies' position.

-     Cost  recovery-related  risk refers to the financial risk  associated with
      the  potential  prudency  audits  of the  NJBPU  that are part of  JCP&L's
      deferred energy and capacity cost recovery  mechanism  (Market  Transition
      Charge).  Cost  recovery-related  risk also  refers to the  prudency  risk
      associated  with future NUG cost recovery under the  Restructuring  Orders
      approved by the PaPUC and the NJBPU which require continued  mitigation of
      above market NUG costs.

                                       19

<PAGE>

Market Risk - Natural Gas

      As part of their NUG cost  mitigation  program,  the GPU Energy  companies
manage the natural gas requirements of certain NUGs that produce and sell energy
to JCP&L under long-term  contracts.  Prudently  incurred costs  associated with
natural gas commodity and  transportation for these NUGs are included in JCP&L's
BGS rates and Market Transition Charge.

      The GPU Energy  companies  employ a portfolio  approach  consisting of two
party forward purchases and NYMEX natural gas futures contracts.  The GPU Energy
companies' natural gas market risks can be price-related, volume-related or cost
recovery-related as follows:

-     Price-related risk refers to the price exposure  associated with having to
      purchase volumes of natural gas for New Jersey NUG  requirements  from the
      spot market.

-     Volume-related  risk refers to the uncertainty  associated with the amount
      of natural gas required for the dispatchable NUGs.

-     Cost  recovery-related  risk refers to the financial risk  associated with
      the  potential  prudency  audits of the NJBPU that are part of JCP&L's BGS
      rates and Market Transition Charge.

Generation Asset Divestiture

      In 1999,  the GPU  Energy  companies  completed  the  sales  of TMI-1  and
substantially all their fossil-fuel and hydroelectric generating stations.

      In October  1999,  JCP&L agreed to sell Oyster  Creek to AmerGen,  a joint
venture of PECO  Energy and British  Energy,  for $10  million.  GPU expects the
transaction  to be  completed  in  August  2000.  As  part of the  terms  of the
transaction,  AmerGen will assume full  responsibility for  decommissioning  the
plant.  JCP&L will transfer $430 million of  decommissioning  trust funds and is
funding the  station's  outage cost,  including  the fuel  reload,  for the next
refueling outage scheduled for the Fall of 2000. AmerGen will repay these outage
costs  (estimated  at $88  million) to JCP&L in nine equal  annual  installments
without interest, beginning one year after the closing.

Recent Regulatory Actions

New Jersey Restructuring

      In May 1999, the NJBPU issued a Summary Order with respect to JCP&L's rate
unbundling,  stranded cost and restructuring filings. The Summary Order provides
for,  among  other  things,  customer  choice of  electric  generation  supplier
beginning August 1, 1999, rate reductions for all consumers and full recovery of
stranded  costs.  New Jersey  utilities began  accepting  customer  selection of
suppliers in October 1999.  The Summary Order did not address the sale of Oyster
Creek,  because  at the time the  Summary  Order was  issued,  it was  uncertain
whether  the plant  would be sold or  retired  early.  JCP&L is  awaiting a more
detailed order from the NJBPU.

      In  August  1999,  JCP&L  filed  a  petition  with  the  NJBPU  requesting
authorization  to issue  transition bonds to securitize the recovery of bondable
stranded costs attributable to the projected net investment in

                                       20

<PAGE>

Oyster Creek at September 1, 2000 (for  additional  information,  see  Financing
section of Liquidity and Capital Resources).

      During  1999,   the  NJBPU  issued  final   electric   restructuring   and
generation-related  securitization  orders to Public  Service  Electric  and Gas
Company (PSE&G), a non-affiliated utility. Several parties appealed these orders
on a variety of grounds,  including  the use of deferred  accounting  associated
with above  market NUG costs and the Societal  Benefit  Charge,  which  includes
recovery of nuclear decommissioning costs. In April 2000, the Appellate Division
of the New Jersey Superior Court affirmed the orders.  The Appellate  Division's
decision has been appealed to the New Jersey Supreme Court which is not expected
to issue a decision  before  January 2001.  While JCP&L's  Summary Order has not
been appealed,  JCP&L is unable to determine the impact,  if any, the appeals to
PSE&G's  orders  will  have  on  its   restructuring   order  and  petition  for
securitization or its use of deferred accounting.

Pennsylvania Restructuring

      In 1996,  Pennsylvania adopted comprehensive  legislation (Customer Choice
Act) which  provides  for the  restructuring  of that state's  electric  utility
industry.  In October  1998,  the PaPUC  issued  amended  Restructuring  Orders,
approving Settlement Agreements entered into by Met-Ed and Penelec, which, among
other things,  provide customer choice of electric generation supplier beginning
January 1, 1999, a 1-year (1999) reduction in retail  distribution rates for all
consumers and recovery of a  substantial  portion of what  otherwise  would have
become stranded costs, subject to the results of the generation divestitures.  A
final determination of stranded cost recovery will be provided for in a Phase II
proceeding, which began in early 2000.

      In 1999,  Penelec  deposited a portion of the proceeds from its generation
asset  sale  into a NUG  Trust,  which has a  balance  at June 30,  2000 of $222
million.  To the extent Penelec incurs  above-market  NUG costs in excess of the
CTC revenues  allocated  for such costs,  Penelec may withdraw  amounts from the
trust.

Federal Regulation

      In November 1997, the Federal Energy  Regulatory  Commission (FERC) issued
an order to the PJM Power Pool  which,  among  other  things,  directed  the GPU
Energy companies to implement a single-system transmission rate, effective April
1, 1998. The  implementation  of the  single-system  rate has not affected total
transmission  revenues;  however,  it has increased the pricing for transmission
service in Met-Ed and Penelec's service  territories and reduced the pricing for
transmission service in JCP&L's service territory.

      The GPU Energy  companies have requested the FERC to reconsider its ruling
requiring a single-system transmission rate. The Restructuring Orders for Met-Ed
and Penelec provide for a transmission  and  distribution  rate cap exception to
recover the increase in the  transmission  rate from Met-Ed and Penelec's retail
customers  in the event the FERC denies the request for  reconsideration  of the
single-system  transmission  rate.  The FERC's ruling may also have an effect on
JCP&L's  distribution rates. There can be no assurance as to the outcome of this
matter.

                                       21

<PAGE>

      Several  bills  have  been   introduced   in  Congress   providing  for  a
comprehensive  restructuring  of the  electric  utility  industry.  These  bills
proposed,  among other  things,  retail  choice for all utility  customers,  the
opportunity for utilities to recover their prudently  incurred stranded costs in
varying degrees,  and repeal of both the Public Utility Regulatory  Policies Act
(PURPA) and the Public Utility Holding Company Act of 1935 (PUHCA).

Pending Complaint before the FERC

     On June  30,  2000,  Allegheny  Electric  Cooperative  (AEC),  a  wholesale
customer,  filed a complaint with the FERC against Penelec claiming, among other
things,  that Penelec should not be permitted to charge AEC increased  purchased
power costs which Penelec has incurred  following  Penelec's  divestiture of its
generation plants.

     Penelec has filed an answer to the  complaint  which,  among other  things,
renews a previous offer to release AEC from its supplemental power contract with
Penelec and shop for its generation  needs.  There can be no assurance as to the
outcome of this matter.

Nonutility Generation Agreements

      Pursuant to the mandates of PURPA and state regulatory directives, the GPU
Energy companies have been required to enter into power purchase agreements with
NUGs for the purchase of energy and capacity for terms of up to 20 years.

      The NJBPU Summary Order provides  JCP&L  assurance of full recovery of its
NUG costs (including  above-market NUG costs and certain buyout costs),  whereas
the PaPUC  Restructuring  Orders  provide  Met-Ed and Penelec  assurance of full
recovery of their  above-market  NUG costs and certain NUG buyout costs. The GPU
Energy  companies have recorded,  on a present value basis, a total liability of
$3.1 billion (JCP&L $1.5 billion; Met-Ed $0.7 billion;  Penelec $0.9 billion) on
the Consolidated  Balance Sheets for  above-market NUG costs.  These amounts are
offset  by  corresponding  regulatory  assets.  The  GPU  Energy  companies  are
continuing efforts to reduce the above-market  costs of these agreements.  There
can be no assurance as to the extent to which these efforts will be successful.

                               ACCOUNTING MATTERS

      Statement of Financial  Accounting  Standards No. 71 (FAS 71), "Accounting
for the Effects of Certain Types of Regulation,"  applies to regulated utilities
that have the  ability to recover  their  costs  through  rates  established  by
regulators  and charged to customers.  In June 1997,  the  Financial  Accounting
Standards  Board's  (FASB)  Emerging  Issues  Task  Force  (EITF)  (Issue  97-4)
concluded  that  utilities  are no longer  subject to FAS 71,  for the  relevant
portion of their business, when they know details of their individual transition
plans to a competitive electric generation marketplace.  The EITF also concluded
that utilities can continue to carry previously  recorded  regulated  assets, as
well as any newly  established  regulated  assets  (including  those  related to
generation), on their balance sheets if regulators have assured a regulated cash
flow stream to recover the cost of these assets.

                                       22

<PAGE>

      On May 24,  1999,  the NJBPU  issued a  Summary  Order  regarding  JCP&L's
unbundling,   stranded  cost  and   restructuring   filings  which   essentially
deregulated the electric generation portion of JCP&L's business. Accordingly, in
the second quarter of 1999,  JCP&L  discontinued  the  application of FAS 71 and
adopted the  provisions of Statement of Financial  Accounting  Standards No. 101
(FAS 101),  "Regulated  Enterprises  -  Accounting  for the  Discontinuation  of
Application  of FASB  Statement  No. 71" and EITF Issue 97-4 with respect to its
electric generation operations. In 1998, Met-Ed and Penelec, in conjunction with
receiving their Restructuring Orders, discontinued the application of FAS 71 and
adopted the provisions of FAS 101 and EITF 97-4 for their generation operations.
The  transmission  and  distribution   portion  of  the  GPU  Energy  companies'
operations continue to be subject to the provisions of FAS 71.

      In accordance  with  Statement of Financial  Accounting  Standards No. 121
(FAS  121),  "Accounting  for  the  Impairment  of  Long-Lived  Assets  and  for
Long-Lived  Assets to Be Disposed  Of,"  impairment  tests  performed by the GPU
Energy companies on the net book values of their remaining generation facilities
determined that the net investment in Oyster Creek was impaired.  As of June 30,
2000,  this resulted in  write-downs  of $579 million to reflect  Oyster Creek's
fair  market  value.  The  total  impairment  amount  of  Oyster  Creek has been
reestablished  as a regulatory  asset since the Summary  Order  provides for its
recovery in the restructuring process.

      Statement  of  Financial   Accounting   Standards  133,   "Accounting  for
Derivative  Instruments  and  Hedging  Activities",   as  amended  by  FAS  137,
"Accounting for Derivative  Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133" and FAS 138,  "Accounting  for Certain
Derivative  Instruments  and Certain  Hedging  Activities - An Amendment of FASB
Statement No. 133" (collectively, FAS 133), establishes accounting and reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other contracts,  and for hedging  activities.  In general,  FAS 133
requires  that  companies   recognize  all   derivatives  as  either  assets  or
liabilities  on the balance sheet and measure those  instruments  at fair value.
FAS 133 (as amended)  excludes from its scope certain  contracts that qualify as
normal  purchases and sales. To qualify for this exclusion,  it must be probable
that the contract will result in physical delivery.

      GPU's use of  derivative  instruments  is  intended to manage the risks of
commodity price, interest rate and foreign currency fluctuations and may include
such transactions as electricity and natural gas forwards and futures contracts,
foreign currency swaps,  interest rate swaps and options. GPU does not intend to
hold or issue derivative  instruments for trading  purposes.  To the extent that
GPU's  energy-related  contracts  fall within the scope of FAS 133,  GPU will be
required to include them on its balance  sheet at fair value,  and recognize the
subsequent changes in fair value as either gains or losses in earnings or report
them as a component of other comprehensive income, depending upon their intended
use and designation as a hedge. GPU will adopt this statement  effective January
1,  2001 and is  currently  in the  process  of  evaluating  the  impact  of its
implementation.

                                       23

<PAGE>

<TABLE>
<CAPTION>

                       GPU, INC. AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets

                                                                    In Thousands

                                                         -----------------------------
                                                            June 30,      December 31,
                                                              2000            1999
                                                         ------------     ------------
                                                          (Unaudited)
ASSETS

Utility Plant:

<S>                                                        <C>             <C>
  Transmission, distribution and general plant             $ 9,928,129     $11,240,218
  Generation plant                                             535,514         526,228
                                                            ----------      ----------
      Utility plant in service                              10,463,643      11,766,446
  Accumulated depreciation                                  (3,962,894)     (3,929,963)
                                                            ----------      ----------
      Net utility plant in service                           6,500,749       7,836,483
  Construction work in progress                                210,101         170,317
  Other, net                                                    16,575          18,128
                                                            ----------      ----------
      Net utility plant                                      6,727,425       8,024,928
                                                            ----------      ----------

Other Property and Investments:

  Equity investments                                           215,184         207,029
  Goodwill, net                                              2,227,483       2,615,301
  Nuclear decommissioning trusts, at market (Note 1)           669,796         636,284
  Nuclear fuel disposal trust, at market                       120,609         119,293
  Other, net                                                   543,220         716,142
                                                            ----------      ----------
      Total other property and investments                   3,776,292       4,294,049
                                                            ----------      ----------

Current Assets:

  Cash and temporary cash investments                          634,439         471,548
  Marketable securities                                         28,479          26,946
  Special deposits                                             386,910          42,687
  Accounts receivable:
    Customers, net                                             541,689         445,745
    Other                                                      233,243         185,968
  Unbilled revenues                                            178,509         152,263
  Cost and estimated earnings in excess of
    billings on uncompleted contracts                           21,141             -
  Materials and supplies, at average cost or less:
    Construction and maintenance                                76,896         100,807
    Fuel                                                           459             448
  Deferred income taxes                                        260,947          72,249
  Prepayments                                                  156,234         141,352
                                                            ----------      ----------
      Total current assets                                   2,518,946       1,640,013
                                                            ----------      ----------

Deferred Debits and Other Assets:

  Regulatory assets, net (Note 1)                            4,639,953       4,716,246
  Deferred income taxes                                      2,294,588       2,528,393
  Other                                                        501,687         494,203
                                                            ----------      ----------
      Total deferred debits and other assets                 7,436,228       7,738,842
                                                            ----------      ----------



      Total Assets                                         $20,458,891     $21,697,832
                                                            ==========      ==========

</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       24

<PAGE>
<TABLE>
<CAPTION>

                       GPU, INC. AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets

                                                                    In Thousands
                                                         -----------------------------
                                                            June 30,      December 31,
                                                              2000            1999
                                                         ------------     ------------
                                                          (Unaudited)
LIABILITIES AND CAPITALIZATION

Capitalization:

<S>                                                        <C>             <C>
  Common stock                                             $   331,958     $   331,958
  Capital surplus                                            1,014,032       1,011,721
  Retained earnings                                          2,280,561       2,426,350
  Accumulated other comprehensive income/(loss) (Note 5)       (35,165)         (6,341)
                                                            ----------      ----------
      Total                                                  3,591,386       3,763,688
  Reacquired common stock, at cost                            (315,000)       (298,735)
                                                            ----------      ----------
      Total common stockholders' equity                      3,276,386       3,464,953
  Cumulative preferred stock:
    With mandatory redemption                                   51,500          73,167
    Without mandatory redemption                                12,649          12,649
  Subsidiary-obligated mandatorily redeemable
    preferred securities                                       125,000         125,000
  Trust preferred securities                                   200,000         200,000
  Long-term debt                                             4,894,739       5,631,394
                                                            ----------      ----------
      Total capitalization                                   8,560,274       9,507,163
                                                            ----------      ----------

Current Liabilities:

  Securities due within one year                               588,626         581,147
  Notes payable                                              1,297,733       1,391,071
  Bank overdraft                                               236,536         224,585
  Obligations under capital leases                              39,548          48,165
  Accounts payable                                             673,229         468,825
  Billings in excess of cost and estimated
    earnings on uncompleted contracts                           19,484             -
  Taxes accrued                                                161,981         309,509
  Interest accrued                                              68,547          76,246
  Other                                                        619,370         732,110
                                                            ----------      ----------
      Total current liabilities                              3,705,054       3,831,658
                                                            ----------      ----------

Deferred Credits and Other Liabilities:

  Deferred income taxes                                      3,528,589       3,563,078
  Unamortized investment tax credits                            57,460          61,364
  Three Mile Island Unit 2 future costs (Note 1)               504,033         496,944
  Power purchase contract loss liability (Note 1)            3,156,834       3,300,878
  Other                                                        946,647         936,747
                                                            ----------      ----------
      Total deferred credits and other liabilities           8,193,563       8,359,011
                                                            ----------      ----------


Commitments and Contingencies (Note 1)



      Total Liabilities and Capitalization                 $20,458,891     $21,697,832
                                                            ==========      ==========

</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.
                                       25
<PAGE>
<TABLE>
<CAPTION>

                       GPU, INC. AND SUBSIDIARY COMPANIES

                        Consolidated Statements of Income

                                   (Unaudited)

                                                          In Thousands
                                                     (Except Per Share Data)
                                          -----------------------------------------------
                                               Three Months               Six Months
                                              Ended June 30,            Ended June 30,
                                          ----------------------   ----------------------
                                              2000        1999         2000        1999
                                              ----        ----         ----        ----

<S>                                       <C>         <C>          <C>         <C>
Operating Revenues                        $1,280,374  $  892,700   $2,456,818  $1,961,403
                                           ---------   ---------    ---------   ---------

Operating Expenses:

  Fuel                                        22,073      72,443       41,556     168,919
  Power purchased and interchanged           471,932     266,281      883,403     512,790
  Deferred costs, net                        (33,482)    (20,226)     (66,996)        144
  Other operation and maintenance            411,884     273,227      669,431     513,351
  Loss on sale of business                   372,492         -        372,492         -
  Depreciation and amortization              134,432     125,851      264,027     243,095
  Taxes, other than income taxes              43,046      43,097       94,595      92,444
                                           ---------   ---------    ---------   ---------
     Total operating expenses              1,422,377     760,673    2,258,508   1,530,743
                                           ---------   ---------    ---------   ---------

Operating Income/(Loss)                     (142,003)    132,027      198,310     430,660
                                           ----------  ---------    ---------   ---------

Other Income and Deductions:
  Allowance for other funds used during
    construction                                 296         100          541         165
  Equity in undistributed earnings
    of affiliates, net                         2,120      23,247        5,772      76,499
  Other income, net                           31,032      19,153       50,210      68,234
                                           ---------   ---------    ---------   ---------
     Total other income and deductions        33,448      42,500       56,523     144,898
                                           ---------   ---------    ---------   ---------

Income/(Loss) Before Interest Charges

  and Preferred Dividends                   (108,555)    174,527      254,833     575,558
                                           ---------   ---------    ---------   ---------

Interest Charges and Preferred Dividends:

  Long-term debt and notes payable           134,162      86,428      267,076     167,552
  Trust preferred securities                   6,347       1,000        7,345       1,000
  Subsidiary-obligated mandatorily
    redeemable preferred securities                        7,222        5,350      14,444
  Other interest                                 399       1,733        2,469       3,298
  Allowance for borrowed funds used
    during construction                         (756)     (1,036)      (1,586)     (1,644)
  Preferred stock dividends of subsidiaries,
    inclusive of $1,268 loss on
    reacquisition (6 Mos. 1999)                1,661       2,370        4,122       6,290
                                           ---------   ---------    ---------   ---------
     Total interest charges and
       preferred dividends                   141,813      97,717      284,776     190,940
                                           ---------   ---------    ---------   ---------

Income/(Loss) Before Income Taxes

 and Minority Interest                      (250,368)     76,810      (29,943)    384,618
  Income taxes                               (40,164)     28,023       48,786     144,289
  Minority interest net income                   609       1,525        1,086       2,348
                                           ---------   ---------    ---------   ---------

Net Income/(Loss)                         $ (210,813) $   47,262   $  (79,815) $  237,981
                                           =========   =========    =========   =========


Basic -  Earnings Per Avg. Common Share   $    (1.74) $      .39   $     (.66) $     1.88
                                           =========   =========    =========   =========
      -  Avg. Common Shares Outstanding      121,199     125,701      121,284     126,670
                                           =========   =========    =========   =========

Diluted  - Earnings Per Avg. Common Share $    (1.74) $      .38   $     (.66) $     1.87
                                           =========   =========    =========   =========
         - Avg. Common Shares Outstanding    121,314     125,951      121,389     126,932
                                           =========   =========    =========   =========

Cash Dividends Paid Per Share             $     .545  $     .530   $    1.075  $    1.045
                                           =========   =========    =========   =========

</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       26

<PAGE>

                       GPU, INC. AND SUBSIDIARY COMPANIES
                      Consolidated Statements of Cash Flows

                                   (Unaudited)

                                                              In Thousands
                                                       ------------------------
                                                                Six Months
                                                              Ended June 30,
                                                       ------------------------
                                                            2000         1999
                                                            ----         ----
Operating Activities:

  Net income/(loss)                                     $ (79,815)  $  237,981
  Adjustments to reconcile income to cash provided:
    Depreciation and amortization                         277,156      256,454
    Amortization of property under capital leases           9,080       26,041
    NJBPU restructuring rate order                            -        115,000
    (Gain)/Loss on sale of business/investments           368,408      (38,339)
    Equity in undistributed earnings
      of affiliates, net of distributions received        (19,886)     (66,889)
    Deferred income taxes and investment tax
      credits, net                                         67,439     (343,327)
    Deferred costs, net                                   (66,996)         411
  Changes in working capital:
    Receivables                                          (218,469)     (92,730)
    Cost and estimated earnings in excess of
      billings on uncompleted contracts                     5,789          -
    Materials and supplies                                  2,180        3,806
    Special deposits and prepayments                       82,146     (109,353)
    Payables and accrued liabilities                       66,890      118,481
    Billings in excess of cost and estimated
      earnings on uncompleted contracts                      (327)         -
  Nonutility generation contract buyout costs              (5,660)     (40,250)
  Other, net                                              (88,654)      42,953
                                                        ---------    ---------
     Net cash provided by operating activities            399,281      110,239
                                                        ---------    ---------

Investing Activities:

  Acquisitions, net of cash acquired                     (220,242)  (1,022,368)
  Capital expenditures and investments                   (265,903)    (186,344)
  Proceeds from sale of business/investments            1,155,510      894,450
  Contributions to decommissioning trusts                 (18,646)     (19,302)
  Proceeds from nonutility generation trusts               44,809          -
  Trust fund established for repayment of debt           (346,966)         -
  Other, net                                                5,847       52,912
                                                        ---------    ---------
     Net cash provided/(required)
       by investing activities                            354,409     (280,652)
                                                        ---------    ---------

Financing Activities:

  Issuance of long-term debt                              421,169    1,614,321
  Issuance of trust preferred securities                      -        193,070
  Retirement of long-term debt                           (820,128)  (1,463,192)
  Increase in notes payable, net                           13,461      348,624
  Capital lease principal payments                         (9,784)     (23,756)
  Reacquisition of common stock                           (22,383)    (102,582)
  Dividends paid on common stock                         (130,531)    (132,534)
  Redemption of preferred stock of subsidiaries           (21,667)     (35,004)
                                                        ---------    ---------
     Net cash provided/(required)
       by financing activities                           (569,863)     398,947
                                                        ---------    ---------

Effect of exchange rate changes on cash                   (20,936)      (2,835)
                                                        ---------    ---------

Net increase in cash and temporary

  cash investments from above activities                  162,891      225,699
Cash and temporary cash investments, beginning of year    471,548       72,755
                                                        ---------    ---------
Cash and temporary cash investments, end of period     $  634,439   $  298,454
                                                        =========    =========

Supplemental Disclosure:

  Interest and preferred dividends paid                $  282,595   $  191,347
                                                        =========    =========
  Income taxes paid                                    $  150,789   $  285,016
                                                        =========    =========
  New capital lease obligations incurred               $    9,732   $   28,396
                                                        =========    =========
  Common stock dividends declared but not paid         $      -     $   66,489
                                                        =========    =========

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       27

<PAGE>
<TABLE>
<CAPTION>

               JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
                           Consolidated Balance Sheets

                                                                 In Thousands
                                                         -----------------------------
                                                           June 30,       December 31,
                                                             2000             1999
                                                        ------------     ------------
                                                         (Unaudited)

ASSETS

Utility Plant:

<S>                                                        <C>             <C>
  Transmission, distribution, and general plant            $3,135,214      $3,097,150
  Generation plant                                            510,282         504,545
                                                            ---------       ---------
      Utility plant in service                              3,645,496       3,601,695
  Accumulated depreciation                                 (1,947,437)     (1,872,422)
                                                            ---------       ---------
      Net utility plant in service                          1,698,059       1,729,273
  Construction work in progress                               106,414          80,671
  Other, net                                                   13,073          14,781
                                                            ---------       ---------
      Net utility plant                                     1,817,546       1,824,725
                                                            ---------       ---------


Other Property and Investments:

  Nuclear decommissioning trusts, at market (Note 1)          419,586         394,941
  Nuclear fuel disposal trust, at market                      120,609         119,293
  Other, net                                                    2,756           1,252
                                                            ---------       ---------
      Total other property and investments                    542,951         515,486
                                                            ---------       ---------


Current Assets:

  Cash and temporary cash investments                          53,480          68,684
  Special deposits                                              2,479           1,035
  Accounts receivable:
    Customers, net                                            160,561         164,099
    Affiliates                                                 27,053          34,992
    Other                                                      46,989          34,696
  Unbilled revenues                                            89,643          78,251
  Fuel inventory, at average cost or less                         220             240
  Deferred income taxes                                         4,439           1,652
  Prepayments                                                  69,467          23,000
                                                            ---------       ---------
      Total current assets                                    454,331         406,649
                                                            ---------       ---------


Deferred Debits and Other Assets:

  Regulatory assets, net (Note 1)                           2,727,532       2,810,854
  Deferred income taxes                                       196,617         221,668
  Other                                                        56,683          31,615
                                                            ---------       ---------
      Total deferred debits and other assets                2,980,832       3,064,137
                                                            ---------       ---------





      Total Assets                                         $5,795,660      $5,810,997
                                                            =========       =========
</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       28

<PAGE>
<TABLE>
<CAPTION>

               JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
                           Consolidated Balance Sheets

                                                                    In Thousands

                                                         -----------------------------
                                                           June 30,       December 31,
                                                             2000             1999
                                                         ------------     ------------
                                                          (Unaudited)

LIABILITIES AND CAPITALIZATION

Capitalization:

<S>                                                        <C>             <C>
  Common stock                                             $  153,713      $  153,713
  Capital surplus                                             510,769         510,769
  Retained earnings                                           711,760         720,878
  Accumulated other comprehensive income/(loss)(Note 5)             7               7
                                                            ---------       ---------
      Total common stockholder's equity                     1,376,249       1,385,367
  Cumulative preferred stock:
    With mandatory redemption                                  51,500          73,167
    Without mandatory redemption                               12,649          12,649
  Company-obligated mandatorily redeemable
    preferred securities                                      125,000         125,000
  Long-term debt                                            1,133,880       1,133,760
                                                            ---------       ---------
      Total capitalization                                  2,699,278       2,729,943
                                                            ---------       ---------


Current Liabilities:

  Securities due within one year                               10,846          50,846
  Obligations under capital leases                             39,086          48,165
  Accounts payable:
    Affiliates                                                110,665          60,527
    Other                                                     125,689          82,355
  Taxes accrued                                                84,307          13,079
  Interest accrued                                             23,815          24,523
  Other                                                        30,369          36,169
                                                            ---------       ---------
      Total current liabilities                               424,777         315,664
                                                            ---------       ---------


Deferred Credits and Other Liabilities:

  Deferred income taxes                                       574,710         570,568
  Unamortized investment tax credits                           29,205          32,114
  Nuclear fuel disposal fee                                   152,257         148,009
  Three Mile Island Unit 2 future costs (Note 1)              126,013         124,241
  Power purchase contract loss liability (Note 1)           1,525,614       1,624,769
  Other                                                       263,806         265,689
                                                            ---------       ---------
      Total deferred credits and other liabilities          2,671,605       2,765,390
                                                            ---------       ---------


Commitments and Contingencies (Note 1)


      Total Liabilities and Capitalization                 $5,795,660      $5,810,997
                                                            =========       =========


</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       29

<PAGE>
<TABLE>
<CAPTION>

                  JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
                        Consolidated Statements of Income

                                   (Unaudited)

                                                             In Thousands
                                              -------------------------------------------
                                                   Three Months             Six Months
                                                  Ended June 30,          Ended June 30,
                                               --------------------  ---------------------
                                                  2000       1999        2000       1999
                                                  ----       ----        ----       ----

<S>                                            <C>        <C>        <C>         <C>
Operating Revenues                             $ 490,150  $ 391,025  $  942,895  $ 907,914
                                                --------   --------   ---------   --------

Operating Expenses:

  Fuel                                             9,326     21,598      15,193     43,715
  Power purchased and interchanged:
    Affiliates                                    10,977     41,639      31,253     57,588
    Others                                       223,153    144,908     417,275    298,358
  Deferral costs, net                            (33,482)   (20,226)    (66,996)       144
  Other operation and maintenance                109,700    107,899     207,827    215,745
  Depreciation and amortization                   56,163     64,362     112,306    127,058
  Taxes, other than income taxes                  14,760     19,560      30,489     40,894
                                                --------   --------   ---------   --------
     Total operating expenses                    390,597    379,740     747,347    783,502
                                                --------   --------   ---------   --------

Operating Income                                  99,553     11,285     195,548    124,412
                                                --------   --------   ---------   --------

Other Income and Deductions:
  Allowance for other funds used during
    construction                                     297         69         513        123
  Other income/(expense), net                     (1,501)     4,463       3,931      7,482
                                                --------   --------   ---------   --------
     Total other income and deductions            (1,204)     4,532       4,444      7,605
                                                --------   --------   ---------   --------

Income Before Interest Charges                    98,349     15,817     199,992    132,017
                                                --------   --------   ---------   --------

Interest Charges:

  Long-term debt and notes payable                22,560     24,280      45,822     47,470
  Company-obligated mandatorily

    redeemable preferred securities                2,675      2,675       5,350      5,350
  Other interest                                     208        461         360        656
  Allowance for borrowed funds used
    during construction                             (473)      (454)       (819)      (686)
                                                --------   --------   ---------   --------
     Total interest charges                       24,970     26,962      50,713     52,790
                                                --------   --------   ---------   --------

Income/(Loss) Before Income Taxes                 73,379    (11,145)    149,279     79,227
  Income taxes                                    28,945     (5,290)     59,275     31,385
                                                --------   --------   ---------   --------

Net Income/(Loss)                                 44,434     (5,855)     90,004     47,842
  Preferred stock dividends                        1,661      2,370       4,122      4,802
                                                --------   --------   ---------   --------
Earnings/(Loss) Available for Common Stock     $  42,773  $  (8,225) $   85,882  $  43,040
                                                ========   ========   =========   ========


</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       30

<PAGE>

              JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
                      Consolidated Statements of Cash Flows

                                   (Unaudited)

                                                            In Thousands

                                                     -------------------------
                                                              Six Months
                                                            Ended June 30,
                                                      -------------------------
                                                           2000         1999
                                                           ----         ----
Operating Activities:

  Net income                                            $  90,004    $  47,842
  Adjustments to reconcile income to cash provided:
    Depreciation and amortization                         128,800      141,578
    Amortization of property under capital leases           9,080       15,237
    NJBPU restructuring rate order                            -        115,000
    Deferred income taxes and investment tax
      credits, net                                          2,690      (40,599)
    Deferred costs, net                                   (66,996)         411
  Changes in working capital:
    Receivables                                            (6,750)     (55,383)
    Materials and supplies                                 (1,151)      11,797
    Special deposits and prepayments                      (47,911)     (96,850)
    Payables and accrued liabilities                      111,921        7,058
    Due to/from affiliates                                 58,077       (4,293)
  Nonutility generation contract buyout costs                 -        (35,500)
  Other, net                                              (41,697)      33,395
                                                         --------     --------
     Net cash provided by operating activities            236,067      139,693
                                                         --------     --------

Investing Activities:

  Capital expenditures and investments                    (68,165)     (67,305)
  Contributions to decommissioning trusts                 (14,671)     (12,571)
  Other, net                                                2,299        1,860
                                                         --------     --------
     Net cash required by investing activities            (80,537)     (78,016)
                                                         --------     --------

Financing Activities:

  Retirement of long-term debt                            (40,000)         -
  Increase in notes payable, net                              -         65,456
  Redemption of preferred stock                           (21,667)      (5,000)
  Capital lease principal payments                         (9,784)     (12,366)
  Dividends paid on common stock                          (95,000)     (95,000)
  Dividends paid on preferred stock                        (4,283)      (4,708)
                                                         --------     --------
     Net cash required by financing activities           (170,734)     (51,618)
                                                         --------     --------

Net increase/(decrease) in cash and temporary

  cash investments from above activities                  (15,204)      10,059
Cash and temporary cash investments, beginning of year     68,684        1,850
                                                         --------     --------
Cash and temporary cash investments, end of period      $  53,480    $  11,909
                                                         ========     ========


Supplemental Disclosure:

  Interest and preferred dividends paid                 $  55,469    $  57,524
                                                         ========     ========
  Income taxes paid/(refunded)                          $ (22,993)   $  81,027
                                                         ========     ========
  New capital lease obligations incurred                $   9,732    $   7,098
                                                         ========     ========



The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       31

<PAGE>
<TABLE>
<CAPTION>

                  METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets

                                                                    In Thousands

                                                         -----------------------------
                                                           June 30,       December 31,
                                                             2000             1999
                                                         ------------     ------------
                                                          (Unaudited)

ASSETS

Utility Plant:

<S>                                                        <C>             <C>
  Transmission, distribution and general plant             $1,517,692      $1,500,417
  Generation plant                                             25,232          21,683
                                                            ---------       ---------
      Utility plant in service                              1,542,924       1,522,100
  Accumulated depreciation                                   (480,973)       (462,709)
                                                            ---------       ---------
      Net utility plant in service                          1,061,951       1,059,391
  Construction work in progress                                24,164          25,329
  Other, net                                                      596             643
                                                            ---------       ---------
      Net utility plant                                     1,086,711       1,085,363
                                                            ---------       ---------


Other Property and Investments:

  Nuclear decommissioning trusts, at market (Note 1)          150,941         144,261
  Other, net                                                    5,357           3,010
                                                            ---------       ---------
      Total other property and investments                    156,298         147,271
                                                            ---------       ---------


Current Assets:

  Cash and temporary cash investments                              16          10,899
  Special deposits                                                161             160
  Accounts receivable:
    Customers, net                                             64,720          60,188
    Affiliates                                                132,050          77,067
    Other                                                      53,279          46,377
  Unbilled revenues                                            31,998          28,956
  Deferred income taxes                                         2,945           2,945
  Prepayments                                                  17,047          16,715
                                                            ---------       ---------
      Total current assets                                    302,216         243,307
                                                            ---------       ---------


Deferred Debits and Other Assets:

  Regulatory assets, net (Note 1)                           1,252,164       1,232,865
  Deferred income taxes                                       728,003         738,189
  Other                                                        41,216          41,198
                                                            ---------       ---------
      Total deferred debits and other assets                2,021,383       2,012,252
                                                            ---------       ---------


      Total Assets                                         $3,566,608      $3,488,193
                                                           ==========       =========


</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       32

<PAGE>
<TABLE>
<CAPTION>

                  METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets

                                                                    In Thousands

                                                         -----------------------------
                                                           June 30,       December 31,
                                                             2000             1999
                                                         ------------     ------------
                                                          (Unaudited)

LIABILITIES AND CAPITALIZATION

Capitalization:

<S>                                                        <C>             <C>
  Common stock                                             $   66,273      $   66,273
  Capital surplus                                             400,200         400,200
  Retained earnings                                            23,741          13,581
  Accumulated other comprehensive income (Note 5)              19,222          21,363
                                                            ---------       ---------
       Total common stockholder's equity                      509,436         501,417
  Trust preferred securities                                  100,000         100,000
  Long-term debt                                              496,884         496,883
                                                            ---------       ---------
      Total capitalization                                  1,106,320       1,098,300
                                                            ---------       ---------


Current Liabilities:

  Securities due within one year                                   25          50,025
  Notes payable                                               128,600             -
  Accounts payable:
    Affiliates                                                132,645         125,179
    Other                                                      45,271          30,106
  Taxes accrued                                                13,421          35,976
  Interest accrued                                             15,348          16,738
  Other                                                        10,732          18,208
                                                            ---------       ---------
      Total current liabilities                               346,042         276,232
                                                            ---------       ---------


Deferred Credits and Other Liabilities:

  Deferred income taxes                                       997,287         993,427
  Unamortized investment tax credits                           14,586          15,010
  Three Mile Island Unit 2 future costs (Note 1)              251,924         248,381
  Nuclear fuel disposal fee                                    34,383          33,430
  Power purchase contract loss liability (Note 1)             729,727         735,833
  Other                                                        86,339          87,580
                                                            ---------       ---------
      Total deferred credits and other liabilities          2,114,246       2,113,661
                                                            ---------       ---------

Commitments and Contingencies (Note 1)

      Total Liabilities and Capitalization                 $3,566,608      $3,488,193
                                                            =========       =========

</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       33

<PAGE>
<TABLE>
<CAPTION>

                    METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES

                        Consolidated Statements of Income

                                   (Unaudited)

                                                                    In Thousands

                                               ---------------------------------------------
                                                    Three Months            Six Months
                                                   Ended June 30,         Ended June 30,
                                               --------------------   ----------------------
                                                   2000      1999         2000        1999
                                                   ----      ----         ----        ----

<S>                                            <C>        <C>         <C>          <C>
Operating Revenues                             $ 197,814  $ 198,010   $  400,870   $ 427,167
                                                --------   --------    ---------    --------

Operating Expenses:

  Fuel                                               -       23,514          -        49,143
  Power purchased and interchanged:
    Affiliates                                     1,296        -          1,348       2,208
    Others                                       111,566     46,039      204,064      86,997
  Other operation and maintenance                 38,205     54,002       66,205     105,917
  Depreciation and amortization                   15,941     19,191       31,745      38,320
  Taxes, other than income taxes                  11,593     10,641       22,976      23,707
                                                --------   --------    ---------   ---------
     Total operating expenses                    178,601    153,387      326,338     306,292
                                                --------   --------    ---------   ---------

Operating Income                                  19,213     44,623       74,532     120,875
                                                --------   --------    ---------   ---------

Other Income and Deductions:
  Allowance for other funds used during
    construction                                      (1)        31           28          42
  Other income, net                                8,249      1,903       11,020       3,036
                                                --------   --------    ---------    --------
     Total other income and deductions             8,248      1,934       11,048       3,078
                                                --------   --------    ---------    --------

Income Before Interest Charges                    27,461     46,557       85,580     123,953
                                                --------   --------    ---------    --------

Interest Charges:

  Long-term debt and notes payable                11,405     12,028       23,340      24,116
  Trust preferred securities                       1,837        694        3,675         694
  Company-obligated mandatorily
    redeemable preferred securities                  -        2,250                    4,500
  Other interest                                     560        429        1,086         851
  Allowance for borrowed funds used
    during construction                              (84)      (282)        (268)       (458)
                                                --------   --------    ---------      -------


     Total interest charges                       13,718     15,119       27,833      29,703
                                                --------   --------    ---------   ---------

Income Before Income Taxes                        13,743     31,438       57,747      94,250
  Income taxes                                     5,076     12,296       22,587      42,276
                                                --------   --------    ---------   ---------

Net Income                                         8,667     19,142       35,160      51,974
  Preferred stock dividends                          -          -            -            66
  Loss on preferred stock reacquisition              -          -            -           542
                                                --------   --------    ---------   ---------
Earnings Available for Common Stock            $   8,667  $  19,142   $   35,160  $   51,366
                                                ========   ========    =========   =========


</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       34

<PAGE>

                 METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES

                      Consolidated Statements of Cash Flows

                                   (Unaudited)

                                                              In Thousands
                                                      -------------------------
                                                              Six Months
                                                            Ended June 30,
                                                      -------------------------
                                                           2000         1999
                                                           ----         ----
Operating Activities:

  Net income                                            $  35,160    $  51,974
  Adjustments to reconcile income to cash provided:
    Depreciation and amortization                          31,616       41,302
    Amortization of property under capital leases             -          7,117
    Deferred income taxes and investment tax
      credits, net                                          8,138       18,161
  Changes in working capital:
    Receivables                                           (11,435)         269
    Materials and supplies                                    -         10,036
    Special deposits and prepayments                         (333)     (52,958)
    Payables and accrued liabilities                      (16,285)     (91,269)
    Due to/from affiliates                                (47,487)      52,592
  Nonutility generation contract buyout costs              (1,250)      (1,250)
  Other, net                                              (35,461)     (17,502)
                                                         --------     --------
     Net cash provided/(required)
      by operating activities                             (37,337)      18,472
                                                         --------     --------

Investing Activities:

  Capital expenditures and investments                    (23,191)     (32,321)
  Contributions to decommissioning trusts                  (3,955)      (1,485)
  Other, net                                                  -            (33)
                                                         --------     --------
     Net cash required by investing activities            (27,146)     (33,839)
                                                         --------     --------

Financing Activities:

  Increase/(decrease) in notes payable, net               128,600      (54,640)
  Retirement of long-term debt                            (50,000)         -
  Issuance of trust preferred securities                      -         96,535
  Redemption of preferred stock                               -        (12,598)
  Capital lease principal payments                            -         (7,160)
  Dividends paid on common stock                          (25,000)     (30,000)
  Dividends paid on preferred stock                           -            (66)
  Contribution from parent corporation                        -         30,000
                                                         --------      -------
     Net cash provided by financing activities             53,600       22,071
                                                         --------      -------

Net increase/(decrease) in cash and temporary cash

  investments from above activities                       (10,883)       6,704
Cash and temporary cash investments, beginning of year     10,899          442
                                                         --------     --------
Cash and temporary cash investments, end of period      $      16    $   7,146
                                                         ========     ========


Supplemental Disclosure:

  Interest and preferred dividends paid                 $  27,803    $  28,112
                                                         ========     ========
  Income taxes paid                                     $  45,736    $  76,187
                                                         ========     ========
  New capital lease obligations incurred                $     -      $  14,199
                                                         ========     ========

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       35
<PAGE>
<TABLE>
<CAPTION>

                 PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets

                                                                In Thousands
                                                         -----------------------------
                                                           June 30,       December 31,
                                                             2000             1999
                                                         ------------     ------------
                                                          (Unaudited)

ASSETS

Utility Plant:

<S>                                                        <C>             <C>
  Transmission, distribution and general plant             $1,756,808      $1,732,386
  Accumulated depreciation                                   (575,494)       (552,449)
                                                            ---------       ---------
      Net utility plant in service                          1,181,314       1,179,937
  Construction work in progress                                34,166          30,329
  Other, net                                                    2,906           2,704
                                                            ---------       ---------
      Net utility plant                                     1,218,386       1,212,970
                                                            ---------       ---------


Other Property and Investments:

  Nonutility generation trusts, at market                     221,892         266,700
  Nuclear decommissioning trusts, at market (Note 1)           99,269          97,082
  Other, net                                                    2,927           1,233
                                                            ---------       ---------
      Total other property and investments                    324,088         365,015
                                                            ---------       ---------


Current Assets:

  Cash and temporary cash investments                             585          32,250
  Special deposits                                                233             233
  Accounts receivable:
    Customers, net                                             72,820          69,752
    Affiliates                                                112,777          15,546
    Other                                                      31,369          24,658
  Unbilled revenues                                            31,738          30,836
  Deferred income taxes                                         7,589           7,589
  Prepayments                                                  15,706          15,484
                                                            ---------       ---------
      Total current assets                                    272,817         196,348
                                                            ---------       ---------


Deferred Debits and Other Assets:

  Regulatory assets, net (Note 1)                             660,257         672,527
  Deferred income taxes                                     1,197,133       1,225,150
  Other                                                        23,779          23,781
                                                            ---------       ---------
      Total deferred debits and other assets                1,881,169       1,921,458
                                                            ---------       ---------


      Total Assets                                         $3,696,460      $3,695,791
                                                            =========       =========
</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       36

<PAGE>
<TABLE>
<CAPTION>

                 PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets

                                                                 In Thousands
                                                         -----------------------------
                                                           June 30,       December 31,
                                                             2000             1999
                                                         ------------     ------------
                                                          (Unaudited)

LIABILITIES AND CAPITALIZATION

Capitalization:

<S>                                                        <C>             <C>
  Common stock                                             $  105,812      $  105,812
  Capital surplus                                             285,486         285,486
  Retained earnings                                            35,746          59,265
  Accumulated other comprehensive income (Note 5)               9,542          10,619
                                                            ---------       ---------
      Total common stockholder's equity                       436,586         461,182
  Trust preferred securities                                  100,000         100,000
  Long-term debt                                              474,734         424,641
                                                            ---------       ---------
      Total capitalization                                  1,011,320         985,823
                                                            ---------       ---------


Current Liabilities:

  Securities due within one year                                   13              13
  Notes payable                                               104,400          53,600
  Obligations under capital leases                                462             -
  Accounts payable:
    Affiliates                                                134,369          66,223
    Other                                                      52,494          34,845
  Taxes accrued                                                 5,986         108,005
  Interest accrued                                              8,938           6,588
  Other                                                        11,175          17,567
                                                            ---------       ---------
      Total current liabilities                               317,837         286,841
                                                            ---------       ---------


Deferred Credits and Other Liabilities:

  Deferred income taxes                                     1,230,791       1,250,490
  Unamortized investment tax credits                           13,669          14,240
  Three Mile Island Unit 2 future costs (Note 1)              126,096         124,322
  Nuclear fuel disposal fee                                    17,197          16,717
  Power Purchase contract loss liability (Note 1)             901,493         940,276
  Other                                                        78,057          77,082
                                                            ---------       ---------
      Total deferred credits and other liabilities          2,367,303       2,423,127
                                                            ---------       ---------


Commitments and Contingencies (Note 1)


      Total Liabilities and Capitalization                 $3,696,460      $3,695,791
                                                            =========       =========
</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       37

<PAGE>
<TABLE>
<CAPTION>

                    PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

                        Consolidated Statements of Income

                                   (Unaudited)

                                                                 In Thousands
                                               --------------------------------------------
                                                    Three Months            Six Months
                                                   Ended June 30,         Ended June 30,
                                               --------------------  ----------------------
                                                   2000      1999        2000        1999
                                                   ----      ----        ----        ----

<S>                                            <C>        <C>        <C>         <C>
Operating Revenues                             $ 206,789  $ 205,097  $  426,894  $  451,346
                                                --------   --------   ---------   ---------

Operating Expenses:

  Fuel                                               -       16,709         -        53,253
  Power purchased and interchanged:
    Affiliates                                       876      2,991       1,033       4,553
    Others                                       120,818     54,960     225,831      93,991
  Other operation and maintenance                 44,425     55,215      83,231     114,618
  Depreciation and amortization                   13,469     18,407      25,003      41,460
  Taxes, other than income taxes                  12,523     11,806      23,486      25,820
                                                --------   --------   ---------   ---------
     Total operating expenses                    192,111    160,088     358,584     333,695
                                                --------   --------   ---------   ---------

Operating Income                                  14,678     45,009      68,310     117,651
                                                --------   --------   ---------   ---------

Other Income and Deductions:

  Other income, net                                3,858      7,192       4,705      46,101
                                                --------   --------   ---------   ---------
     Total other income and deductions             3,858      7,192       4,705      46,101
                                                --------   --------   ---------   ---------

Income Before Interest Charges                    18,536     52,201      73,015     163,752
                                                --------   --------   ---------   ---------

Interest Charges:

  Long-term debt and notes payable                 9,124      7,369      16,401      20,797
  Trust preferred securities                       1,835        306       3,670         306
  Company-obligated mandatorily
    redeemable preferred securities                  -        2,297         -         4,594
  Other interest                                     311        132         607         539
  Allowance for borrowed funds used
    during construction                             (199)      (300)       (499)       (500)
                                                --------   --------   ---------   ---------
     Total interest charges                       11,071      9,804      20,179      25,736
                                                --------   --------   ---------   ---------

Income Before Income Taxes                         7,465     42,397      52,836     138,016
  Income taxes                                     2,926     22,452      21,355      52,581
                                                --------   --------   ---------   ---------

Net Income                                         4,539     19,945      31,481      85,435
  Preferred stock dividends                          -          -           -           154
  Loss on preferred stock reacquisition              -          -           -           726
                                                --------   --------   ---------   ---------
Earnings Available for Common Stock            $   4,539  $  19,945  $   31,481  $   84,555
                                                ========   ========   =========   =========
</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       38

<PAGE>

                PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

                      Consolidated Statements of Cash Flows

                                   (Unaudited)

                                                              In Thousands
                                                      -------------------------
                                                              Six Months
                                                            Ended June 30,
                                                      -------------------------
                                                           2000         1999
                                                           ----         ----
Operating Activities:

  Net income                                            $  31,481    $  85,435
  Adjustments to reconcile income to cash provided:
    Depreciation and amortization                          24,702       40,958
    Amortization of property under capital leases             -          3,687
    Gain on sale of investment                                -        (38,252)
    Deferred income taxes and investment tax
      credits, net                                         12,753     (290,339)
  Changes in working capital:
    Receivables                                            (9,779)      12,050
    Materials and supplies                                    -         33,195
    Special deposits and prepayments                         (222)       2,867
    Payables and accrued liabilities                      (88,410)     166,060
    Due to/from affiliates                                (29,085)       9,842
  Nonutility generation contract buyout costs              (4,410)      (3,500)
  Other, net                                              (31,879)     (50,230)
                                                         --------     --------
     Net cash required by operating activities            (94,849)     (28,227)
                                                         --------     --------

Investing Activities:

  Capital expenditures and investments                    (29,452)     (37,567)
  Proceeds from sale of investment                            -        894,450
  Proceeds from nonutility generation trusts               44,809          -
  Contributions to decommissioning trusts                     (20)      (5,246)
  Other, net                                                2,047          915
                                                         --------     --------
     Net cash provided by investing activities             17,384      852,552
                                                         --------     --------

Financing Activities:

  Issuance of long-term debt                               50,000      348,127
  Issuance of trust preferred securities                      -         96,535
  Retirement of long-term debt                                -       (600,000)
  Increase/(decrease) in notes payable, net                50,800      (86,023)
  Redemption of preferred stock                               -        (17,406)
  Capital lease principal payments                            -         (4,230)
  Dividends paid on common stock                          (55,000)    (380,000)
  Dividends paid on preferred stock                           -           (154)
                                                         --------     --------
     Net cash provided/(required)
       by financing activities                             45,800     (643,151)
                                                         --------     --------

Net increase/(decrease) in cash and temporary

  cash investments from above activities                  (31,665)     181,174
Cash and temporary cash investments, beginning of year     32,250        2,750
                                                         --------     --------
Cash and temporary cash investments, end of period      $     585    $ 183,924
                                                         ========     ========

Supplemental Disclosure:

  Interest and preferred dividends paid                 $  10,914    $  39,584
                                                         ========     ========
  Income taxes paid                                     $ 115,575    $ 127,541
                                                         ========     ========
  New capital lease obligations incurred                $     -      $   7,099
                                                         ========     ========

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       39

<PAGE>

GPU, Inc. and Subsidiary Companies

              COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      GPU, Inc. owns all the outstanding common stock of three domestic electric
utilities -- Jersey Central Power & Light Company (JCP&L),  Metropolitan  Edison
Company  (Met-Ed) and  Pennsylvania  Electric  Company  (Penelec).  The customer
service function, transmission and distribution operations and the operations of
the remaining non-nuclear  generating facilities of these electric utilities are
conducting  business  under  the name GPU  Energy.  JCP&L,  Met-Ed  and  Penelec
considered  together are referred to as the "GPU Energy  companies." The nuclear
generation  operations of GPU Energy are conducted by GPU Nuclear,  Inc. (GPUN).
GPU Capital, Inc. and GPU Electric, Inc. and their subsidiaries own, operate and
fund the acquisition of electric  distribution and gas  transmission  systems in
foreign  countries,  and are referred to as "GPU  Electric." GPU  International,
Inc.  and GPU  Power,  Inc.  and their  subsidiaries  develop,  own and  operate
generation  facilities in the United  States (US) and foreign  countries and are
referred to as the "GPUI Group."  Other  subsidiaries  of GPU, Inc.  include GPU
Advanced Resources, Inc. (GPU AR), which is involved in retail energy sales; GPU
Telcom    Services,     Inc.    (GPU    Telcom),    which    is    engaged    in
telecommunications-related  businesses; MYR Group Inc. (MYR), which is a utility
infrastructure  construction  services  company;  and GPU Service,  Inc. (GPUS),
which  provides  legal,  accounting,  financial  and other  services  to the GPU
companies. All of these companies considered together are referred to as "GPU."

      These notes should be read in conjunction  with the notes to  consolidated
financial  statements  included  in the 1999  Annual  Report on Form  10-K.  The
December  31,  1999  balance  sheet data  contained  in the  attached  financial
statements  was derived  from  audited  financial  statements.  For  disclosures
required by  accounting  principles  generally  accepted in the US, see the 1999
Annual Report on Form 10-K.

1.    COMMITMENTS AND CONTINGENCIES

              COMPETITION AND THE CHANGING REGULATORY ENVIRONMENT

Stranded Costs and Regulatory Restructuring Orders:
--------------------------------------------------

      With the current market price of electricity  being below the cost of some
utility-owned  generation  and power  purchase  commitments,  and the ability of
customers to choose their energy suppliers, certain costs, which generally would
be  recoverable  in  a  regulated  environment,  may  not  be  recoverable  in a
competitive  environment.  These  costs are  generally  referred  to as stranded
costs.

      In  1998,  the  Pennsylvania  Public  Utility  Commission  (PaPUC)  issued
Restructuring  Orders to Met-Ed and Penelec which,  among other things,  provide
for Met-Ed and  Penelec's  recovery of a substantial  portion of what  otherwise
would  have  become  stranded  costs,  and  provide  for a Phase  II  proceeding
following  the  completion  of  their  generation  divestitures  to make a final
determination  of the extent of that stranded cost  recovery.  The  Pennsylvania
Supreme Court has denied an appeal filed by one  intervenor  in the  proceeding.
GPU Energy  does not know  whether  the  intervenor  will seek  review by the US
Supreme Court.

                                       40


<PAGE>


     On January 31, 2000,  Met-Ed and Penelec  submitted Phase II Reports to the
PaPUC addressing actual net divestiture  proceeds and reconciliation of stranded
costs pursuant to the 1998  Restructuring  Orders.  The PaPUC and other parties,
which participated in the 1998 Restructuring Orders, are currently reviewing the
Reports. There can be no assurance as to the outcome of this matter.

      In May 1999, the NJBPU issued a Summary Order with respect to JCP&L's rate
unbundling,  stranded cost and restructuring filings. The Summary Order provides
for,  among  other  things,  customer  choice of  electric  generation  supplier
beginning  August 1, 1999 and full recovery of stranded costs. The Summary Order
did not  address  the  pending  sale of Oyster  Creek,  because  at the time the
Summary Order was issued,  it was  uncertain  whether the plant would be sold or
retired early. JCP&L is awaiting a final order from the NJBPU.

      During  1999,   the  NJBPU  issued  final   electric   restructuring   and
generation-related  securitization  orders to Public  Service  Electric  and Gas
Company (PSE&G), a non-affiliated utility. Several parties appealed these orders
on a variety of grounds,  including  the use of deferred  accounting  associated
with above  market NUG costs and the Societal  Benefit  Charge,  which  includes
recovery of nuclear decommissioning costs. In April 2000, the Appellate Division
of the New Jersey Superior Court affirmed the orders.  The Appellate  Division's
decision has been appealed to the New Jersey Supreme Court which is not expected
to issue a decision  before  January 2001.  While JCP&L's  Summary Order has not
been appealed,  JCP&L is unable to determine the impact,  if any, the appeals to
PSE&G's  orders  will  have  on  its   restructuring   order  and  petition  for
securitization or its use of deferred accounting.

      As a result of the NJBPU and the PaPUC  restructuring  decisions,  the GPU
Energy  companies  are required to supply  electricity  to customers  who do not
choose  an  alternate  supplier.  Given  that  the  GPU  Energy  companies  have
essentially divested their generation  business,  there will be increased market
risks associated with supplying that electricity, since the GPU Energy companies
will  have  to  supply  electricity  to  non-shopping  customers  entirely  from
contracted  and open  market  purchases.  While  JCP&L is  permitted  to recover
reasonable  and  prudently   incurred  costs  associated  with  providing  basic
generation service to non-shopping  customers,  Met-Ed and Penelec are generally
unable  to  recover  their  energy  costs in excess of  established  rate  caps.
Management has implemented an energy risk management  program,  but there can be
no assurance  that the GPU Energy  companies  will be able to fully  recover the
costs  to  supply  electricity  to  customers  who do not  choose  an  alternate
supplier.

Generation Agreements:
---------------------

      The  evolving  competitive   generation  market  has  created  uncertainty
regarding  the  forecasting  of the GPU Energy  companies'  energy supply needs,
which has  caused  the GPU  Energy  companies  to seek  shorter-term  agreements
offering  more  flexibility.  The GPU Energy  companies'  supply plan focuses on
short- to  intermediate-term  commitments  (one month to three  years)  covering
times of expected high energy price  volatility  (that is, peak demand  periods)
and reliance on spot market purchases during other periods.

                                       41

<PAGE>

      The GPU Energy  companies  have entered into  agreements  with third party
suppliers  to  purchase   capacity  and  energy.   Payments  pursuant  to  these
agreements,  which  include  firm  commitments  as well as  certain  assumptions
regarding,  among  other  things,  call/put  arrangements  and the timing of the
pending  Oyster  Creek sale,  are  estimated  to be $650  million in 2000,  $651
million in 2001,  $323 million in 2002,  $138 million in 2003 and $44 million in
2004.

      Pursuant to the mandates of the federal Public Utility Regulatory Policies
Act and state regulatory directives, the GPU Energy companies have been required
to enter into power purchase  agreements with non-utility  generators (NUGs) for
the purchase of energy and capacity, which agreements have remaining terms of up
to 20 years.  The rates under  virtually  all of the GPU Energy  companies'  NUG
agreements  are  substantially  in excess of current and  projected  prices from
alternative sources. The following table shows actual payments from 1998 through
June 30, 2000, and estimated payments thereafter through 2005:

                          Payments Under NUG Agreements

                                 (in millions)

                          Total      JCP&L      Met-Ed      Penelec

      1998                 788        403         174         211
      1999                 774        388         167         219
      2000                 741        385         141         215
      2001                 733        392         138         203
      2002                 736        394         141         201
      2003                 752        400         145         207
      2004                 767        404         150         213
      2005                 751        392         153         206

      The NJBPU Summary Order provides  JCP&L  assurance of full recovery of its
NUG costs (including  above-market NUG costs and certain buyout costs),  whereas
the PaPUC  Restructuring  Orders  provide  Met-Ed and Penelec  assurance of full
recovery of their  above-market  NUG costs and certain NUG buyout costs. The GPU
Energy  companies have recorded,  on a present value basis, a total liability of
$3.1 billion (JCP&L $1.5 billion; Met-Ed $0.7 billion;  Penelec $0.9 billion) on
the Consolidated  Balance Sheets for above-market NUG costs which is offset by a
corresponding  regulatory asset. The GPU Energy companies are continuing efforts
to reduce the above-market costs of these agreements.  There can be no assurance
as to the extent to which these efforts will be successful.

      In 1997, the NJBPU approved a Stipulation of Final Settlement which, among
other things,  provided for the recovery of costs  associated with the buyout of
the Freehold  Cogeneration power purchase agreement (Freehold buyout). The NJBPU
approved the cost recovery of up to $135 million,  over a seven-year  period, on
an interim basis subject to refund.  The NJBPU's  Summary Order provides for the
continued recovery of the Freehold buyout in the Market Transition Charge (MTC),
but has not  altered  the  interim  nature  of such  recovery,  pending  a final
decision  by the  NJBPU.  There can be no  assurance  as to the  outcome of this
matter.

                               ACCOUNTING MATTERS

      JCP&L, in 1999, and Met-Ed and Penelec in 1998, discontinued the
application of Statement of Financial Accounting Standards No. 71 (FAS 71),

                                       42


<PAGE>


"Accounting  for the Effects of Certain  Types of  Regulation,"  and adopted the
provisions of Statement of Financial  Accounting  Standards No. 101,  "Regulated
Enterprises  -  Accounting  for  the  Discontinuation  of  Application  of  FASB
Statement   No.  71,"  and  Emerging   Issues  Task  Force  (EITF)  Issue  97-4,
"Deregulation  of the Pricing of Electricity - Issues Related to the Application
of FAS 71 and FAS 101",  with respect to their electric  generation  operations.
The  transmission  and  distribution   portion  of  the  GPU  Energy  companies'
operations  continue  to be  subject  to the  provisions  of FAS 71.  Regulatory
assets, net as reflected in the June 30, 2000 and December 31, 1999 Consolidated
Balance  Sheets in accordance  with the provisions of FAS 71 and EITF Issue 97-4
were as follows:

GPU, Inc. and Subsidiary Companies

                                                       (in thousands)
                                                ----------------------------
                                                   June 30,      December 31,
                                                     2000           1999
                                                -------------    ------------
Market transition charge (MTC) / basic
  generation service                               $2,287,449    $2,359,529
Competitive transition charge (CTC)                   756,406       803,064
Reserve for generation divestiture                    530,912       536,904
Power purchase contract loss not in CTC               369,290       369,290
Income taxes recoverable through future rates, net    283,636       280,268
Costs recoverable through distribution rates          281,363       296,842
Three Mile Island Unit 2 (TMI-2)
  decommissioning costs                               100,869       100,794
Societal benefits charge                              100,643       116,941
Net divestiture proceeds recoverable through MTC       58,077        37,542
Above-market deferred NUG costs                      (196,276)     (252,348)
Other, net                                             67,584        67,420
                                                    ---------     ---------
     Total regulatory assets, net                  $4,639,953    $4,716,246
                                                    =========     =========

JCP&L

MTC / basic generation service                    $2,287,449     $2,359,529
Costs recoverable through distribution rates         281,363        296,842
Societal benefits charge                             100,643        116,941
Net divestiture proceeds recoverable through MTC      58,077         37,542
                                                   ---------       --------
     Total regulatory assets, net                 $2,727,532     $2,810,854
                                                   =========      =========

Met-Ed

CTC                                               $  583,441     $  591,316
Power purchase contract loss not in CTC              271,270        271,270
Reserve for generation divestiture                   142,179        137,037
Income taxes recoverable through future rates, net   122,955        115,713
TMI-2 decommissioning costs                           64,608         65,455
Other, net                                            67,711         52,074
                                                   ---------      ---------
     Total regulatory assets, net                 $1,252,164     $1,232,865
                                                   =========      =========

Penelec

Reserve for generation divestiture                $  388,733     $  399,867
Above-market deferred NUG costs                     (213,312)      (252,893)
CTC                                                  172,965        211,748
Income taxes recoverable through future rates, net   160,681        164,555
Power purchase contract loss not in CTC               98,020         98,020
Other, net                                            53,170         51,230
                                                   ---------      ---------
     Total regulatory assets, net                 $  660,257     $  672,527
                                                   =========      =========


                                       43


<PAGE>


      Statement  of  Financial   Accounting   Standards  133,   "Accounting  for
Derivative  Instruments  and  Hedging  Activities",   as  amended  by  FAS  137,
"Accounting for Derivative  Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133" and FAS 138,  "Accounting  for Certain
Derivative  Instruments  and Certain  Hedging  Activities - An Amendment of FASB
Statement No. 133" (collectively, FAS 133), establishes accounting and reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other contracts,  and for hedging  activities.  In general,  FAS 133
requires  that  companies   recognize  all   derivatives  as  either  assets  or
liabilities  on the balance sheet and measure those  instruments  at fair value.
FAS 133 (as amended)  excludes from its scope certain  contracts that qualify as
normal  purchases and sales. To qualify for this exclusion,  it must be probable
that the contract will result in physical delivery.

    GPU's use of  derivative  instruments  is  intended  to manage  the risks of
commodity  price,  interest  rate and  foreign  currency  fluctuations,  and may
include such  transactions  as electricity  and natural gas forwards and futures
contracts, foreign currency swaps, interest rate swaps and options. GPU does not
intend to hold or issue  derivative  instruments  for trading  purposes.  To the
extent that GPU's energy-related contracts fall within the scope of FAS 133, GPU
will be  required  to  include  them on its  balance  sheet at fair  value,  and
recognize  the  subsequent  changes in fair  value as either  gains or losses in
earnings or report them as a component of other comprehensive income,  depending
upon  their  intended  use and  designation  as a  hedge.  GPU will  adopt  this
statement on January 1, 2001 and is currently in the process of  evaluating  the
impact of its implementation.

                               NUCLEAR FACILITIES

Investments:
-----------

      In  December  1999,  the GPU Energy  companies  sold TMI-1 to AmerGen  for
approximately $100 million.  In addition,  in October 1999, JCP&L agreed to sell
Oyster Creek to AmerGen for $10 million and reimbursement of the cost (estimated
at $88 million) of the next refueling outage. JCP&L's net investment,  including
nuclear  fuel, in Oyster Creek as of June 30, 2000 and December 31, 1999 was $10
million,  reflecting the  impairment  write-down  from the pending sale.  JCP&L,
Met-Ed and Penelec jointly own TMI-2,  which was damaged during a 1979 accident,
in the  percentages  of 25%, 50% and 25%.  JCP&L's net investment in TMI-2 as of
June  30,  2000  and  December  31,  1999  was  $58  million  and  $61  million,
respectively.  JCP&L is collecting  revenues for TMI-2 on a basis which provides
for the recovery of its remaining  investment  in the plant by 2008.  Met-Ed and
Penelec's  remaining  investments  in  TMI-2  were  written  off in  1998  after
receiving the PaPUC's Restructuring Orders.

TMI-2:
-----

      As a result of the 1979 TMI-2  accident,  individual  claims  for  alleged
personal injury (including claims for punitive  damages),  which are material in
amount,   were  asserted  against  GPU,  Inc.  and  the  GPU  Energy  companies.
Approximately  2,100 of such claims were filed in the US District  Court for the
Middle  District  of  Pennsylvania.  Some of the claims also seek  recovery  for
injuries from alleged emissions of radioactivity before and after the accident.

                                       44


<PAGE>


      At the time of the TMI-2 accident,  as provided for in the  Price-Anderson
Act, the GPU Energy companies had (a) primary  financial  protection in the form
of insurance policies with groups of insurance  companies providing an aggregate
of $140 million of primary coverage,  (b) secondary financial  protection in the
form of private liability insurance under an industry  retrospective rating plan
providing  for up to an aggregate of $335 million in premium  charges under such
plan and (c) an indemnity agreement with the Nuclear Regulatory Commission (NRC)
for up to $85  million,  bringing  their  total  financial  protection  up to an
aggregate of $560 million.  Under the secondary  level, the GPU Energy companies
are subject to a  retrospective  premium charge of up to $5 million per reactor,
or a total of $15 million.

      In 1995,  the US Court of  Appeals  for the Third  Circuit  ruled that the
Price-Anderson  Act provides coverage under its primary and secondary levels for
punitive as well as compensatory damages, but that punitive damages could not be
recovered  against the  Federal  Government  under the third level of  financial
protection. In so doing, the Court of Appeals referred to the "finite fund" (the
$560  million of financial  protection  under the  Price-Anderson  Act) to which
plaintiffs must resort to get compensatory as well as punitive damages.

      The Court of  Appeals  also ruled  that the  standard  of care owed by the
defendants  to a plaintiff  was  determined  by the specific  level of radiation
which was  released  into the  environment,  as measured  at the site  boundary,
rather than as measured at the specific  site where the plaintiff was located at
the time of the accident (as the defendants proposed). The Court of Appeals also
held that each plaintiff still must demonstrate  exposure to radiation  released
during the TMI-2  accident and that such  exposure had resulted in injuries.  In
1996,  the US Supreme  Court  denied  petitions  filed by GPU,  Inc. and the GPU
Energy companies to review the Court of Appeals' rulings.

      In 1996, the District Court granted a motion for summary judgment filed by
GPU,  Inc. and the GPU Energy  companies,  and  dismissed  the ten initial "test
cases,"  which had been  selected  for a test  case  trial as well as all of the
remaining 2,100 pending claims. The Court ruled that there was no evidence which
created a genuine issue of material fact  warranting  submission of  plaintiffs'
claims to a jury.  The  plaintiffs  appealed the District  Court's ruling to the
Court of Appeals for the Third  Circuit.  In November  1999,  the Third  Circuit
affirmed the District  Court's  dismissal of the ten "test cases," but set aside
the dismissal of the additional  pending claims,  remanding them to the District
Court for further proceedings. In remanding these claims, the Third Circuit held
that the District Court had erred in extending its summary judgment  decision to
the other  plaintiffs  and imposing on these  plaintiffs  the  District  Court's
finding that radiation exposures below 10 rems were too speculative to establish
a causal  link to cancer.  The Court of Appeals  stated that the  non-test  case
plaintiffs  should be permitted to present  their own  individual  evidence that
exposure to radiation from the accident caused their cancers.  In June 2000, the
US Supreme Court denied petitions by GPU, Inc., the GPU Energy companies and the
plaintiffs.

      GPU, Inc. and the GPU Energy companies believe that any liability to which
they  might be  subject by reason of the TMI-2  accident  will not exceed  their
financial protection under the Price-Anderson Act.

                                       45


<PAGE>


                         NUCLEAR PLANT RETIREMENT COSTS

      Retirement   costs  for  nuclear   plants  include   decommissioning   the
radiological  portions of the plants and the cost of removal of  nonradiological
structures  and  materials.  The  disposal  of  spent  nuclear  fuel is  covered
separately by contracts with the US Department of Energy (DOE).

      In 1995, a consultant to GPUN performed site-specific studies of TMI-2 and
Oyster Creek (updated in 1998), that considered various  decommissioning methods
and estimated the cost of decommissioning the radiological portions and the cost
of removal  of the  nonradiological  portions  of each  plant,  using the prompt
removal/dismantlement  method.  GPUN management has reviewed the methodology and
assumptions  used in these studies,  is in agreement with them, and believes the
results are reasonable. Under NRC regulations, JCP&L is making periodic payments
to  complete  the funding for Oyster  Creek  retirement  costs by the end of the
plant's  license  term of  2009.  The  TMI-2  funding  completion  date is 2014,
consistent  with TMI-2  remaining in long-term  storage.  The NRC may require an
acceleration of the decommissioning funding for Oyster Creek if the pending sale
is not completed and the plant is retired early.  The retirement  cost estimates
under the 1995  site-specific  studies,  assuming  decommissioning  of TMI-2 and
Oyster Creek in 2014 and 2009,  respectively,  are $443 million and $601 million
for   radiological   decommissioning   and  $35  million  and  $33  million  for
non-radiological  removal  costs  (net of  $12.6  million  spent  as of June 30,
2000)(in 2000 dollars).

      Each of the GPU Energy  companies is responsible  for retirement  costs in
proportion to its respective ownership percentage. The ultimate cost of retiring
the GPU Energy  companies'  nuclear  facilities  may be different  from the cost
estimates  contained in these  site-specific  studies.  Also, the cost estimates
contained  in these  site-specific  studies are  significantly  greater than the
decommissioning funding targets established by the NRC.

      The 1995 Oyster Creek  site-specific study was updated in 1998 in response
to the  previously  announced  potential  early closure of the plant in 2000. An
early shutdown  would increase the retirement  costs shown above to $643 million
($610   million   for   radiological   decommissioning   and  $33   million  for
nonradiological  cost of removal).  Both estimates include substantial  spending
for an on-site dry storage facility for spent nuclear fuel and significant costs
for storing the fuel until the DOE complies with the Nuclear Waste Policy Act of
1982.  For  additional  information,  see OTHER  COMMITMENTS  AND  CONTINGENCIES
section.

      The  agreements  to sell  Oyster  Creek to AmerGen  provide,  among  other
things,  that upon  financial  closing,  JCP&L  will  transfer  $430  million in
decommissioning  trust funds to AmerGen,  which will  assume all  liability  for
decommissioning Oyster Creek.

     The NJBPU has granted  JCP&L annual  revenues  for Oyster Creek  retirement
costs of $22.5 million based on the 1995  site-specific  study.  In August 2000,
the  recovery  of Oyster  Creek  retirement  costs  escalates  to $34.4  million
annually if the plant is retired in 2000.

     In the event  JCP&L does not  complete  the pending  sale of Oyster  Creek,
management  believes that any  retirement  costs,  in excess of those  currently
recognized for ratemaking purposes, should be recoverable from customers.

                                       46


<PAGE>


      The estimated  liabilities for TMI-2 future retirement costs (reflected as
Three Mile Island Unit 2 future costs on the Consolidated  Balance Sheets) as of
June 30, 2000 and December 31, 1999 are $504 million (JCP&L $126 million; Met-Ed
$252 million; Penelec $126 million) and $497 million (JCP&L $124 million; Met-Ed
$249 million; Penelec $124 million),  respectively. These amounts are based upon
the 1995 site-specific study estimates (in 2000 and 1999 dollars,  respectively)
discussed  above and an estimate for  remaining  incremental  monitored  storage
costs of $27 million (JCP&L $7 million; Met-Ed $13 million;  Penelec $7 million)
as of June 30,  2000 and  December  31,  1999,  as a  result  of TMI-2  entering
long-term monitored storage in 1993.

      Offsetting the $504 million  liability as of June 30, 2000 is $182 million
(JCP&L $13 million; Met-Ed $133 million;  Penelec $36 million), which management
believes is  probable of recovery  from  customers  and  included in  Regulatory
assets,  net on the  Consolidated  Balance Sheets,  and $366 million (JCP&L $116
million; Met-Ed $151 million;  Penelec $99 million) in trust funds for TMI-2 and
included  in  Nuclear  decommissioning  trusts,  at market  on the  Consolidated
Balance Sheets.

      The NJBPU has granted JCP&L revenues for TMI-2  retirement  costs based on
the 1995 site-specific  estimates. In addition, JCP&L is recovering its share of
TMI-2  incremental  monitored  storage  costs.  The PaPUC  Restructuring  Orders
granted Met-Ed and Penelec  recovery of TMI-2  decommissioning  costs as part of
the CTC,  but also  allowed  Met-Ed and Penelec to defer as a  regulatory  asset
those amounts that are above the level provided for in the CTC.

      As of June 30, 2000, the  accident-related  portion of TMI-2  radiological
decommissioning  costs is  considered  to be $78 million  (JCP&L $19.5  million;
Met-Ed  $39  million;  Penelec  $19.5  million),  which  is  based  on the  1995
site-specific study estimates (in 2000 dollars).

      JCP&L  intends to seek  recovery  for any  increases  in TMI-2  retirement
costs,  and Met-Ed and Penelec  intend to seek recovery for any increases in the
nonaccident-related portion of such costs, but recognize that recovery cannot be
assured.

                                    INSURANCE

      GPU  has  insurance  (subject  to  retentions  and  deductibles)  for  its
operations and facilities  including coverage for property damage,  liability to
employees  and  third  parties,   and  loss  of  use  and  occupancy  (primarily
incremental  replacement  power  costs).  There  is no  assurance  that GPU will
maintain all existing  insurance  coverages.  Losses or liabilities that are not
completely  insured,  unless allowed to be recovered through  ratemaking,  could
have a material adverse effect on the financial position of GPU.

      The  decontamination  liability,  premature  decommissioning  and property
damage  insurance  coverage for Oyster Creek totals $2.75 billion.  In addition,
GPU has  purchased  property and  decontamination  insurance  coverage for TMI-2
totaling  $150 million.  In accordance  with NRC  regulations,  these  insurance
policies  generally require that proceeds first be used for stabilization of the
reactors and then to pay for  decontamination  and debris removal expenses.  Any
remaining  amounts  available under the policies may then be used for repair and
restoration  costs  and  decommissioning  costs.  Consequently,  there can be no
assurance that in the event of a nuclear

                                       47


<PAGE>


incident,  property damage insurance  proceeds would be available for the repair
and restoration of that station.

      The  Price-Anderson  Act limits  GPU's  liability  to third  parties for a
nuclear incident at Oyster Creek to approximately $9.5 billion. Coverage for the
first $200  million of such  liability  is  provided by private  insurance.  The
remaining  coverage,   or  secondary  financial   protection,   is  provided  by
retrospective  premiums  payable by all nuclear reactor owners.  Under secondary
financial  protection,  a nuclear incident at any licensed nuclear power reactor
in the country,  including Oyster Creek,  could result in an assessment of up to
$88 million per incident,  subject to an annual  maximum  payment of $10 million
per incident per reactor.  Although  TMI-2 is exempt from this  assessment,  the
plant is still covered by the provisions of the Price-Anderson  Act. In addition
to the  retrospective  premiums  payable under the  Price-Anderson  Act, the GPU
Energy companies are also subject to retrospective  premium assessments of up to
$9.5 million for insurance  policies  currently in effect  applicable to nuclear
operations and  facilities.  The GPU Energy  companies are also subject to other
retrospective  premium  assessments  related to policies applicable to TMI-1 and
Oyster Creek (GPU anticipates the sale of Oyster Creek to be completed in August
2000) prior to their sales to AmerGen.

     JCP&L has insurance coverage for incremental replacement power costs should
an accident-related  outage at Oyster Creek occur. Coverage would commence after
a 12-week  waiting  period at $2.1 million per week for 52 weeks,  decreasing to
80% of such amount for the next 110 weeks.

                              ENVIRONMENTAL MATTERS

      As a result of existing  and proposed  legislation  and  regulations,  and
ongoing legal proceedings dealing with environmental matters,  including but not
limited to acid rain,  water  quality,  ambient  air  quality,  global  warming,
electromagnetic  fields,  and storage and  disposal of  hazardous  and/or  toxic
wastes,  GPU may be required to incur substantial  additional costs to construct
new equipment,  modify or replace  existing and proposed  equipment,  remediate,
decommission  or cleanup  waste  disposal and other sites  currently or formerly
used by it, including  formerly owned  manufactured gas plants (MGP),  coal mine
refuse  piles and  generation  facilities.  In  addition,  federal and state law
provides for payment by responsible parties for damage to natural resources.

      GPU has been  formally  notified by the  Environmental  Protection  Agency
(EPA)  and state  environmental  authorities  that it is among  the  potentially
responsible  parties  (PRPs) who may be jointly and severally  liable to pay for
the costs associated with the  investigation and remediation at hazardous and/or
toxic waste sites in the following number of instances (in some cases, more than
one company is named for a given site):

                  JCP&L   MET-ED   PENELEC   GPUN     GPU, INC.   TOTAL
                  -----   ------   -------   ----     ---------   -----

                    6       4         2        1          1        11

      In  addition,  certain  of  the  GPU  companies  have  been  requested  to
participate  in the  remediation  or  supply  information  to the EPA and  state
environmental authorities on several other sites for which they have not been

                                       48


<PAGE>


formally  named  as  PRPs,   although  the  EPA  and/or  state  authorities  may
nevertheless  consider them as PRPs. Certain of the GPU companies have also been
named in  lawsuits  requesting  damages  (which  are  material  in  amount)  for
hazardous and/or toxic substances allegedly released into the environment. As of
June 30, 2000, a liability of approximately $6 million was recorded for nine PRP
sites where it is probable that a loss has been incurred and the amount could be
reasonably estimated.

      The ultimate cost of  remediation of all these and other  hazardous  waste
sites will depend upon changing  circumstances as site investigations  continue,
including  (a) the  existing  technology  required  for  site  cleanup,  (b) the
remedial  action  plan chosen and (c) the extent of site  contamination  and the
portion attributed to the GPU companies involved.

      In 1997,  the EPA filed a complaint  against GPU,  Inc. in the US District
Court for the  District of Delaware  for  enforcement  of its  Unilateral  Order
(Order)  issued against GPU, Inc. to clean up the former Dover Gas Light Company
(Dover)  manufactured gas production site (Site) in Dover,  Delaware.  Dover was
part of the  AGECO/AGECORP  group of companies  from 1929 until 1942;  GPU, Inc.
emerged  from the  AGECO/AGECORP  reorganization  proceedings  in  1946.  All of
Dover's  common stock,  which was sold in 1942 to an  unaffiliated  entity,  was
subsequently  acquired by Chesapeake Utilities Corporation  (Chesapeake),  which
merged with Dover in 1960. Chesapeake is currently performing the cleanup at the
Site.  According to the  complaint,  the EPA is seeking (1)  enforcement  of the
Order  against GPU; (2) recovery of its past response  costs;  (3) a declaratory
judgment that GPU is liable for any remaining cleanup costs of the Site; and (4)
statutory penalties for noncompliance with the Order. The EPA has stated that it
has incurred  approximately $1 million of past response costs as of December 31,
1999.  The EPA  estimates  the total Site cleanup  costs at  approximately  $4.2
million.  Consultants  to Chesapeake  have  estimated the remaining  remediation
ground  water  costs  to be  approximately  $11.3  million  to $19  million.  In
accordance  with its penalty  policy,  and in discussions  with GPU, the EPA has
demanded  penalties  calculated  at a daily  rate of  $8,800,  rather  than  the
statutory  maximum of $27,500 per day.  As of June 30,  2000,  if the  statutory
maximum were applied,  the total amount of penalties would be approximately  $39
million.  GPU believes  that it has  meritorious  defenses to the  imposition of
penalties, or that if a penalty is assessed, it should be at a lower daily rate.
Chesapeake has also sued GPU, Inc. for  contribution to the cleanup of the Dover
Site.  The US District Court for the District of Delaware has  consolidated  the
case  filed  by  Chesapeake  with the case  filed  by the EPA and  discovery  is
proceeding. There can be no assurance as to the outcome of these proceedings.

      In connection with the 1999 sale of its Seward Generation Station to Sithe
Energies,  Penelec has assumed up to $6 million of remediation  costs associated
with certain coal mine refuse piles which are the subject of an earlier  consent
decree with the  Pennsylvania  Department of Environmental  Protection.  Penelec
expects  recovery of these  remediation  costs in Phase II of its  restructuring
proceeding and has recorded a corresponding regulatory asset.

      JCP&L has entered into agreements with the NJDEP for the investigation and
remediation of 17 formerly owned MGP sites.  JCP&L has also entered into various
cost-sharing  agreements  with other utilities for most of the sites. As of June
30, 2000, JCP&L has spent approximately $38 million in connection

                                       49


<PAGE>


with the cleanup of these sites.  In  addition,  JCP&L has recorded an estimated
environmental  liability  of $54 million  relating to expected  future  costs of
these sites (as well as two other properties). This estimated liability is based
upon  ongoing site  investigations  and  remediation  efforts,  which  generally
involve  capping the sites and pumping and treatment of ground water.  Moreover,
the cost to clean up these  sites  could  be  materially  in  excess  of the $54
million  due to  significant  uncertainties,  including  changes  in  acceptable
remediation methods and technologies.

      In 1997,  the NJBPU  approved  JCP&L's  request to establish a Remediation
Adjustment Clause for the recovery of MGP remediation  costs. As a result of the
NJBPU's Summary Order, effective August 1, 1999, the recovery of these costs was
transferred  to the Societal  Benefits  Charge.  As of June 30, 2000,  JCP&L had
recorded on its  Consolidated  Balance Sheet a regulatory  asset of $46 million.
JCP&L is continuing  to pursue  reimbursement  from its  insurance  carriers for
remediation  costs already spent and for future  estimated costs. In 1994, JCP&L
filed a complaint with the Superior  Court of New Jersey against  several of its
insurance  carriers,  relative to these MGP sites,  and has settled with all but
one of those insurance carriers.

                       OTHER COMMITMENTS AND CONTINGENCIES

Class Action Litigation:
-----------------------

GPU Energy

      In July 1999, New Jersey  experienced a severe heat storm that resulted in
major power outages and temporary service interruptions,  which affected JCP&L's
service  territory.  As a result,  the NJBPU initiated an investigation into the
reliability  of the  transmission  and  distribution  systems  of all New Jersey
utilities and their response to power outages.  This investigation was completed
in April 2000, resulting in Phase I and Phase II Reports.  Both Reports contain,
among  other  things,  recommendations  as to  certain  actions  that  should be
undertaken by JCP&L,  and were adopted by NJBPU orders requiring JCP&L to act on
the recommendations and to report back on such  implementation.  JCP&L has begun
to act on these  recommendations.  The NJBPU order  adopting the Phase II Report
stated that there is not a prima facie case  demonstrating  that  overall  JCP&L
provided unsafe,  inadequate or improper service to its customers.  In addition,
two class action  lawsuits were  commenced in New Jersey  Superior Court in July
1999 against GPU, Inc. and JCP&L, seeking both compensatory and punitive damages
for alleged  losses  suffered due to service  interruptions.  The GPU defendants
originally requested the Court to stay or dismiss the litigation in deference to
the NJBPU's primary jurisdiction.  The Court denied the motion, consolidated the
two  actions,  and  certified  them as class  actions  on behalf of a class that
includes JCP&L customers as well as "all  dependents,  tenants,  employees,  and
other intended  beneficiaries  of customers who suffered damages as a result" of
the outages.  In January 2000, the Appellate Division agreed to review the trial
court's decision on primary  jurisdiction.  In June 2000, the Appellate Division
affirmed  the  trial  court's  decision   recognizing,   however,   that  future
developments in the case may require a reference of certain issues to the NJBPU.
The Appellate  Division also stated that the NJBPU's findings could be probative
but not determinative of at least some issues in the

                                       50


<PAGE>


litigation.  In  response  to GPU's  demand  for a  statement  of  damages,  the
plaintiffs have stated that they are seeking damages of $700 million, subject to
the results of pre-trial  discovery.  GPU has notified its insurance carriers of
the plaintiffs' allegations. The primary insurance carrier has stated that while
the substance of the plaintiffs'  allegations are covered under GPU's policy, it
is reserving its rights concerning coverage as circumstances  develop. There can
be no assurance as to the outcome of these matters.

GPU Electric

      As a result of the  September  1998  fire and  explosion  at the  Longford
natural gas plant in Victoria, Australia,  Victorian gas users (plaintiffs) have
brought a class action in the  Australian  Federal Court against Esso  Australia
Limited and its  affiliate  (Esso),  the owner and  operator  of the plant,  for
losses suffered due to the lack of natural gas supply and related  damages.  The
plaintiffs  claim that Esso was,  among other  things,  negligent in  designing,
maintaining  and  operating  the  Longford  plant and also assert  claims  under
Australian fair trade practices law.

      Esso has joined as third party  defendants  the State of Victoria  (State)
and various State-owned entities which operated the Victorian gas industry prior
to its privatization,  including  Transmission Pipelines Australia (TPA) and its
affiliate  Transmission  Pipelines (Assets) Australia (TPAA). GPU, Inc., through
GPU GasNet,  acquired the assets of TPA and the shares of TPAA from the State in
June 1999.  Esso asserts that the State and the gas industry  were  negligent in
that,  among  other  things,  they  failed to ensure  that the gas system  would
provide  a secure  supply  of gas to users  and also  asserts  claims  under the
Australian fair trade  practices law. In addition,  GPU GasNet and other private
entities  (Buyers)  that  purchased the Victorian gas assets from the State have
joined Esso as third party defendants.  Esso asserts that if the gas industry is
liable as alleged,  that liability has been transferred to the Buyers as part of
the State's privatization process.

      Under the acquisition agreement with the State, GPU GasNet has indemnified
TPA and the State against third party claims arising out of, among other things,
the operation of TPA's  business.  TPA and the State have commenced  proceedings
against GPU GasNet to enforce the indemnity in respect of any liability that may
flow to TPA as a result of Esso's claim.

      GPU GasNet and TPAA have filed  answers  denying  liability  to Esso,  the
State and TPA, which could be material.  GPU GasNet and TPAA have notified their
insurance  carriers of this action.  The insurers have reserved  their rights to
deny coverage. There can be no assurance as to the outcome of this matter.

Investments and Guarantees:
--------------------------

GPU, Inc.

      GPU,  Inc. has made  significant  investments  in foreign  businesses  and
facilities through its subsidiaries, GPU Electric and the GPUI Group. As of June
30, 2000,  GPU,  Inc.'s  investment  in GPU Electric and the GPUI Group was $569
million and $252  million,  respectively.  As of that date,  GPU,  Inc. has also
guaranteed an additional $998 million and $30 million (including $9

                                       51


<PAGE>


million of guarantees  related to domestic  operations) of GPU Electric and GPUI
Group outstanding  obligations,  respectively.  Although  management attempts to
mitigate  the risks of investing in certain  foreign  countries  by, among other
things,  securing political risk insurance,  GPU faces additional risks inherent
to operating in such locations, including foreign currency fluctuations.

GPU Electric

      In June 2000, GPU sold GPU PowerNet for A$2.1 billion  (US$1.26  billion).
For further  information,  see Note 2,  Acquisitions and  Dispositions.  GPU had
previously  announced  its  intention  to sell  all,  or at  least  50%,  of the
Australian  companies,  for which it paid  approximately  US $1.9  billion  (GPU
PowerNet) and US $675 million (GPU GasNet) in 1997 and 1999,  respectively.  GPU
is still considering the possible sale of GPU GasNet.

      On June 2, 2000,  repayment of approximately  $218 million of maturing GPU
GasNet  bank debt was  extended  to  September  2, 2000.  GPU GasNet may further
extend  this  loan  to  October  2,  2000.  GPU  GasNet  is in  the  process  of
establishing  a  commercial  paper  program  and a medium  term note  program to
refinance this debt. GPU, Inc. has agreed to guarantee this loan,  under certain
conditions, if it is not repaid by August 25, 2000.

      Midlands  Electricity plc (Midlands)  (conducting  business under the name
GPU Power UK) has a 40% equity  interest  in a 586 MW power  project in Pakistan
(the Uch Power  Project),  which was  originally  scheduled to begin  commercial
operation in late 1998. In June 1999,  certain Project lenders for the Uch Power
Project issued notices of default to the Project  sponsors  (including  Midlands
for,  among other things,  failure to pay  principal and interest  under various
loan  agreements.  In November 1999, the Project sponsors and lenders reached an
agreement  under which  repayment  of the  construction  loan will be  extended,
principal  and  interest  payments  deferred,  and the  sponsors  will  fund the
completion of the plant through the remaining equity  contribution  commitments.
Testing of the plant has begun, but the start of commercial  operations has been
further delayed pending the resolution of certain technical problems,  which are
being addressed.

      Uch has renegotiated several of the project agreements with the Government
of  Pakistan  and its  agencies.  In April  2000,  Uch  signed a  Memorandum  of
Understanding  with  Pakistani  authorities,  in which it  agreed,  among  other
things,   to  accept  a  reduction  in  the  power  purchase  tariff   averaging
approximately 8% over the project term. The agreement includes options to extend
the term of the  project  from 23 to 30  years.  Commercial  operations  are now
planned  to  commence  by the end of  August,  2000.  There  remains a risk that
project revenues may be delayed due to the poor economic situation in Pakistan.

      GPU's  investment  in the Uch  Power  Project  as of  June  30,  2000  was
approximately $37.1 million,  plus a guarantee letter of credit of $5.2 million,
and its share of the projected  completion  costs  represents an additional $3.9
million  commitment.  Cinergy Corp. has agreed to fund up to an aggregate of $20
million of the  required  capital  contributions  and/or  certain  future  "cash
losses,"  which  could  be  incurred  on the  Uch  Power  Project.  Cinergy  has
reimbursed GPU Electric for $4.9 million of capital  contributions  through June
30, 2000, leaving a remaining commitment of up to $15.1 million. There can be no
assurance as to the outcome of this matter.

      As part of the 1999  sale of the GPU  Power  UK  supply  business  and the
purchase of the 50% of GPU Power UK that GPU did not already own, certain

                                       52


<PAGE>


long-term purchase obligations under natural gas supply contracts were retained.
Most of these contracts, which extend to September 2005, were at fixed prices in
excess of the market  price of gas,  and a  liability  was  established  for the
estimated  loss under such  contracts.  However,  as a result of increasing  gas
prices  during the second  quarter of 2000,  GPU Power UK was able to enter into
matching forward sale contracts for the majority of the gas purchases, resulting
in a  reduction  in the  estimated  liability  and a credit  to  income of $15.9
million pre-tax. The estimated liability as of June 30, 2000 was $25 million, of
which   approximately  $19  million  was  "locked-in"  under  new  forward  sale
contracts.  GPU Power UK was still exposed to future price risk on the remaining
$6 million of liabilities as of June 30, 2000.

      In a recent English court decision  involving two  unaffiliated  utilities
(National Grid and National  Power),  the court held that  utilities  improperly
used a pension  plan  surplus in the UK  Electricity  Supply  Pension  Scheme to
eliminate  scheduled  payments in respect of early retirement costs and employer
contributions.  The Court found that,  in the case of National Grid and National
Power,  procedures had not been strictly followed,  and as such, a liability may
now exist. At a subsequent  hearing,  the Court refused to consider the validity
or  effectiveness  of  retrospective  amendments to the plan.  National Grid and
National Power have appealed the Court's decision to the House of Lords. Pending
the outcome of the Appeal,  the requirement for any payments has been stayed. If
a  similar  complaint  were to be made  against  GPU Power  UK,  GPU Power  UK's
potential  liability is  estimated  to be a maximum of British  pound 63 million
(US$96 million),  exclusive of any applicable interest charges or penalties. The
GPU Power UK  section  of the  Electricity  Supply  Pension  Scheme  remains  in
substantial  surplus and any payment to the plan that might  ultimately prove to
be necessary would be accounted for as an increase in pension assets,  and would
not have an  immediate  impact on income.  However,  any  related  penalties  or
interest  (which could be assessed,  though none are currently  proposed)  would
adversely  affect  income.  There can be no  assurance as to the outcome of this
matter.

    Emdersa's  operating  companies are subject to a number of government claims
related to Value-added tax liabilities and to Social Security taxes collected in
their electric rates, which aggregate  approximately $22 million. The claims are
generally  related to  transitional  issues  surrounding  the  privatization  of
Argentina's electricity industry. There can be no assurance as to the outcome of
these matters.

GPUI Group

    On July 9,  1999,  DIAN (the  Colombian  national  tax  authority)  issued a
"Special  Requirement"  on the  Termobarranquilla  S.A.,  Empresa  de  Servicios
Publicos  (TEBSA) 1996 income tax return,  which  challenges  the exclusion from
taxable  income of an inflation  adjustment  related to the value of assets used
for power generation (EI  Barranquilla,  a wholly owned subsidiary of GPU Power,
ABB Barranquilla,  Corporacion Electrica de la Costa Atlantica and Distral Group
have a 28.7%,  28.7%,  42.5%  and 0.1%  interest  in TEBSA,  respectively).  The
failure to give notice of this Special  Requirement to the US Export Import Bank
(EXIM  Bank) is an event of  default  under the loan  agreement.  GPU Power also
believes  that other  events of default  exist  under the loan  agreements  with
project lenders including the Overseas Private  Investments  Corporation  (OPIC)
and a commercial bank syndicate.  As a result,  certain required  certifications
have not been delivered to EXIM Bank, OPIC and the other project lenders,  which
failure is, itself, an event of default

                                       53


<PAGE>


under the loan agreements.  These issues are currently being discussed with EXIM
Bank and the other  project  lenders.  GPU Power  also  expects  that it will be
necessary to address these issues with the  Government  of Colombia,  as well as
the other partners in the TEBSA  project.  As of June 30, 2000, GPU Power has an
investment  of  approximately  $84.4  million in TEBSA and is  committed to make
additional  standby equity  contributions of $21.3 million,  which GPU, Inc. has
guaranteed.  The total  outstanding  senior  debt of the TEBSA  project  is $399
million and, in addition,  GPU  International  has guaranteed the obligations of
the  operators of the TEBSA  project,  up to a maximum of $5 million,  under the
project's operations and maintenance agreement.  There can be no assurance as to
the outcome of these matters.

GPU Telcom

      In March 2000, GPU, Inc.  announced its  participation  in America's Fiber
Network  LLC  (AFN),  of  which  GPU,  Inc.  anticipates  owning  25%.  AFN is a
high-speed  fiber optics  company with a network of more than 7,000 route miles,
or 140,000 fiber miles,  connecting major markets in the eastern US to secondary
markets  with a  growing  need  for  broadband  access.  GPU,  Inc.  anticipates
investing  approximately $40 million (of which $1.9 million has been invested as
of June 30,  2000) in AFN through GPU Telcom,  which  includes  existing and new
fiber routes and electronic equipment.

      In April 2000, GPU, Inc. announced the formation of Telergy Mid-Atlantic
(TMA), a joint venture between GPU Telcom and Telergy, Inc.  TMA combines
established telecommunication services and marketing expertise with utilities'
existing fiber networks and natural positioning in serving retail markets.
GPU, Inc. has invested $20 million in Telergy, Inc. through GPU Telcom.

Other:
-----

   JCP&L and Public  Service  Electric  & Gas  Company  (PSE&G)  each hold a 50%
undivided  ownership  interest in Yards Creek  Pumped  Storage  Facility  (Yards
Creek).  In December  1998,  JCP&L filed a petition with the New Jersey Board of
Public Utilities (NJBPU) seeking a declaratory order that PSE&G's right of first
refusal to purchase JCP&L's ownership interest at its current book value under a
1964  agreement  between the  companies  is void and  unenforceable.  Management
believes that the fair market value of JCP&L's ownership interest in Yards Creek
is substantially in excess of its June 30, 2000 book value of $22 million. There
can be no assurance as to the outcome of this matter.

      Concurrent  with  GPU's July 1999  acquisition  of the 50% of GPU Power UK
which it did not already own, GPU began to evaluate existing restructuring plans
and formulate  additional plans to reduce operating expenses and achieve ongoing
cost reductions. As of December 31, 1999, GPU had identified and approved a cost
reduction plan. At the  acquisition  date, GPU Power UK had recorded a liability
of $28.6 million  related to previous cost reduction  plans.  GPU retained $25.7
million  of  this  liability,  related  to  contractual  termination  and  other
severance  benefits for 276  employees  identified  in a 1999  business  process
reengineering  project.  GPU  identified  an additional  355  employees  (234 in
Engineering  Services,  38 in metering, 21 in Network Services and 62 from other
specific  functions)  to be  terminated  as part of the  plan  and  recorded  an
additional  liability of $39.3 million.  A net charge of $18.2 million for GPU's
50% share of these adjustments was included in expense in 1999 and the other 50%
was recorded in Goodwill as a purchase accounting adjustment.

                                       54


<PAGE>


      In 2000, a change in the investment return assumptions, due to better than
expected investment  performance,  resulted in a reduction of approximately $6.9
million to $22.6  million  in the  estimated  liability  for the  remaining  459
employees  at December 31,  1999.  Consequently,  goodwill was credited for $3.4
million (50% of the change in estimate) and $3.5 million was credited to income.
Also in 2000, $14.2 million was paid to 338 employees.  The remaining  severance
liability of $7.5 million at June 30, 2000  reflects the above  transactions  as
well as currency  translation  adjustments  and the impact of five employees who
were retained and is included in Other current  liabilities on the  Consolidated
Balance Sheets.  Management expects the plan will be substantially  completed by
September 2000.

      GPU  AR has  entered  into  contracts  to  supply  electricity  to  retail
customers through June 2002. In connection with meeting its supply  obligations,
GPU AR has  entered  into  purchase  commitments  for energy and  capacity  with
payment  obligations  totaling  approximately $22.5 million as of June 30, 2000.
GPU, Inc. has guaranteed up to $19.1 million of these payments.

      In accordance  with the Nuclear  Waste Policy Act of 1982 (NWPA),  the GPU
Energy companies have entered into contracts with, and have been paying fees to,
the DOE for the future disposal of spent nuclear fuel in a repository or interim
storage  facility.  AmerGen has assumed all liability for disposal costs related
to spent fuel  generated  after its  purchase  of TMI-1 and has agreed to assume
this liability for Oyster Creek  following its purchase of that plant.  In 1996,
the DOE notified the GPU Energy  companies and other standard  contract  holders
that it would be unable to begin  acceptance  of spent nuclear fuel for disposal
by 1998,  as  mandated  by the  NWPA.  The DOE  requested  recommendations  from
contract  holders for  handling the delay.  The DOE's  inability to accept spent
nuclear fuel could have a material  impact on GPU's  results of  operations,  as
additional  costs may be incurred to build and maintain  interim on-site storage
at Oyster  Creek.  In June 1997, a consortium of electric  utilities,  including
GPUN, filed a license  application  with the NRC seeking  permission to build an
interim above-ground disposal facility for spent nuclear fuel in Utah. There can
be no assurance as to the outcome of these matters.

      GPU, Inc. and consolidated  affiliates have approximately 15,500 employees
worldwide,  of whom  11,500  are  employed  in the US,  3,500 are in the  United
Kingdom  (UK) and the  remaining  500 are in South  America and  Australia.  The
majority of the US workforce is employed by the GPU Energy companies (5,600) and
MYR  (5,500),  of  which  approximately  3,300  and  4,800,  respectively,   are
represented  by  unions  for  collective   bargaining   purposes.   In  the  UK,
approximately  3,100 GPU Power UK employees are  represented by unions,  and the
terms and conditions of various  bargaining  agreements  are generally  reviewed
annually,  on  April  1.  JCP&L,  Met-Ed  and  Penelec's  collective  bargaining
agreements with the  International  Brotherhood of Electrical  Workers expire on
October  31,  2002,  May 1,  2003  and May  14,  2002,  respectively.  Penelec's
collective  bargaining  agreement  with the  Utility  Workers  Union of  America
expires on June 30, 2001.

      During the normal course of the operation of its  businesses,  in addition
to the matters  described  above, GPU is from time to time involved in disputes,
claims and, in some cases,  as a defendant in litigation  in which  compensatory
and punitive damages are sought by the public, customers,  contractors,  vendors
and other suppliers of equipment and services and by employees alleging unlawful
employment practices. While management does not expect that the outcome of these
matters will have a material effect on GPU's

                                       55


<PAGE>


financial position or results of operations, there can be no assurance that this
will continue to be the case.

2.    ACQUISITIONS AND DISPOSITIONS

                           MYR Group Inc. Acquisition

      In April 2000, GPU, Inc. completed its acquisition of MYR Group Inc. (MYR)
for approximately  $217.5 million. The fair value of the assets acquired totaled
approximately  $154.7  million  and the amount of  liabilities  assumed  totaled
approximately $99.7 million.

      MYR,  a  suburban  Chicago-based   infrastructure   construction  services
company,  is the fifth  largest  specialty  contractor in the US. MYR provides a
complete range of power line and  commercial/industrial  electrical construction
services for electric utilities,  telecommunications  providers,  commercial and
industrial  facilities  and government  agencies  across the US. MYR also builds
cellular towers for the wireless communications market.

      The acquisition was partially  financed  through the issuance of GPU, Inc.
short-term  debt and was accounted for under the purchase  method of accounting.
The total  acquisition cost exceeded the estimated value of net assets by $162.5
million.  This  excess  is  considered  goodwill  and is  being  amortized  on a
straight-line basis over 40 years.

      The following is a summary of  significant  accounting  policies for MYR's
construction services business:

Revenue Recognition
-------------------
     MYR   recognizes    revenue   on    construction    contracts   using   the
percentage-of-completion  accounting method determined in each case by the ratio
of  cost  incurred  to  date  on  the  contract  (excluding  uninstalled  direct
materials) to management's  estimate of the contract's total cost. Contract cost
includes all direct  material,  subcontract  and labor costs and those  indirect
costs  related to  contract  performance,  such as  supplies,  tool  repairs and
depreciation.  MYR charges selling, general, and administrative costs, including
indirect costs  associated  with  maintaining  district  offices,  to expense as
incurred.

      Provisions for estimated  losses on uncompleted  contracts are recorded in
the period in which such losses are  determined.  Changes in estimated  revenues
and costs are  recognized  in the periods in which such  estimates  are revised.
Significant claims are included in revenue in accordance with industry practice.

      The  asset,  "Costs  and  estimated  earnings  in  excess of  billings  on
uncompleted  contracts,"  represents  revenues  recognized  in excess of amounts
billed.  The liability,  "Billings in excess of costs and estimated  earnings on
uncompleted   contracts,"  represents  amounts  billed  in  excess  of  revenues
recognized.

Classification  of Current Assets and Current  Liabilities
----------------------------------------------------------
     The length of MYR's contracts vary,  with some larger  contracts  exceeding
one year. In accordance with industry  practice,  MYR includes in current assets
and current liabilities amounts realizable and payable under contracts which may
extend beyond one year.

                                       56


<PAGE>


                          GPU PowerNet Sale

    On  June  30,  2000,   GPU,  Inc.  sold  GPU  PowerNet  to  Singapore  Power
International (SPI) for A$2.1 billion  (approximately US $1.26 billion). As part
of the sales price, SPI assumed liability for A$230 million  (US$137.8  million)
of medium term notes.  GPU  applied the net  proceeds  from the sale as follows:
A$1,288  million  (US$772  million)  was used to repay debt;  and $A579  million
(US$347 million) was placed in a trust (which is included in Special deposits on
the  Consolidated  Balance Sheets) to provide for the repayment of the remaining
medium term notes  (A$174  million/US$104  million) and  outstanding  commercial
paper (A$405  million/US$243  million) at maturity. As a result of the sale, GPU
recorded in  Operating  expenses on the  Consolidated  Statements  of Income,  a
pre-tax  loss in the quarter  ended June 30, 2000 of $372  million($295  million
after-tax, or $2.43 per share), including a $94 million foreign currency loss.

                          Pending Sale of Oyster Creek

    In 1999,  the GPU Energy  companies  sold Three Mile  Island  Unit 1 (TMI-1)
nuclear   generating   station  and   substantially  all  of  their  fossil  and
hydroelectric  generating stations. In October 1999, JCP&L agreed to sell Oyster
Creek to AmerGen Energy Company,  LLC (AmerGen),  a joint venture of PECO Energy
and British Energy,  for $10 million and reimbursement of the cost (estimated at
$88 million) of the next scheduled  refueling outage. The Oyster Creek plant was
written down to its fair market value in 1999,  consistent  with its sale price.
The  write-down  of the plant asset was deferred as a regulatory  asset  pending
separate and further review by the NJBPU.

3.  ACCOUNTING FOR DERIVATIVE INSTRUMENTS

      GPU's use of derivative  instruments  is intended  primarily to manage the
risk of interest rate,  foreign currency and commodity price  fluctuations.  GPU
does not intend to hold or issue derivative instruments for trading purposes.

Commodity Derivatives:
---------------------

      The GPU  Energy  companies  use  futures  contracts  to manage the risk of
fluctuations in the market price of electricity and natural gas. These contracts
qualify for hedge  accounting  treatment  under current  accounting  rules since
price  movements of the commodity  derivatives  are highly  correlated  with the
underlying  hedged  commodities and the transactions are designated as hedges at
inception.  Accordingly,  under the  deferral  method of  accounting,  gains and
losses related to commodity  derivatives  are recognized in Power  purchased and
interchanged  in  the   Consolidated   Statements  of  Income  when  the  hedged
transaction  closes or if the  commodity  derivative  is no longer  sufficiently
correlated.  Prior to  income or loss  recognition,  deferred  gains and  losses
relating  to these  transactions  are  recorded  in  Current  Assets or  Current
Liabilities in the Consolidated Balance Sheets.

Interest Rate Swap Agreements:
-----------------------------

      GPU Electric uses interest rate swap agreements to manage the risk of
increases in variable interest rates.  As of June 30, 2000, these agreements
covered approximately $549 million of debt, including commercial paper, and
were scheduled to expire on various dates through November 2007.  Differences

                                       57


<PAGE>


between  amounts paid and  received  under  interest  rate swaps are recorded as
adjustments to the interest  expense of the underlying  debt since the swaps are
related to specific assets, liabilities or anticipated transactions.  All of the
agreements  effectively convert variable rate debt,  including commercial paper,
to fixed rate debt.  For the quarter  ended June 30, 2000,  fixed rate  interest
expense  incurred in connection with the swap  agreements  exceeded the variable
rate  interest  expense that would have been  incurred had the swaps not been in
place by approximately $380 thousand.

     Due to the sale of GPU  PowerNet,  the amount of debt  subject to  interest
rate swaps at GPU  Electric  declined  from $1,299  million at March 31, 2000 to
$549 million at June 30, 2000.  Swap positions  associated with the retired debt
were closed out, and swap breakage  costs of $2.1 million  pre-tax were included
as part of the loss on the sale of GPU PowerNet.

      In April 2000,  Penelec  issued a total of $50  million of  variable  rate
senior notes as unsecured medium-term notes. These variable rate securities were
converted to fixed rate obligations through interest rate swap agreements.

Currency Swap Agreements:
------------------------

      GPU Electric uses currency swap  agreements to manage currency risk caused
by  fluctuations in the US dollar exchange rate related to debt issued in the US
by Avon Energy  Partners  Holdings  (Avon).  These swap  agreements  effectively
convert principal and interest payments on this US dollar debt to fixed sterling
principal and interest payments,  and expire on the maturity dates of the bonds.
Interest  expense is recorded based on the fixed  sterling  interest rate. As of
June 30, 2000, these currency swap agreements  covered British pound 561 million
(US $850  million) of debt.  Interest  expense would have been British pound 9.4
million (US $14.3  million)  as compared to British  pound 9.8 million (US $14.9
million) for the quarter  ended June 30, 2000 had these  agreements  not been in
place.

Gain on Forward Foreign Exchange Contracts:
-------------------------------------------
     In  connection  with  its  previously   announced  intention  to  sell  its
Australian  assets, GPU Electric entered into forward foreign exchange contracts
in order  to lock in the  then-current  A$/US$  exchange  rate on the  projected
remittance of Australian  dollar proceeds  arising from the expected sale of GPU
PowerNet and GPU GasNet. On May 24, 2000, GPU announced that it had declined all
bids submitted in connection with the sale process.  Consequently,  GPU Electric
closed out its forward foreign exchange positions, and recognized a pre-tax gain
of $4.5 million in the second quarter of 2000.

Indexed Swap Agreement:
----------------------

      In June 1998, Onondaga Cogeneration L.P. (Onondaga), a GPU
International, Inc. subsidiary, and Niagara Mohawk Power Corporation (NIMO)
renegotiated their existing power purchase agreement and entered into a
10-year power put indexed swap agreement.

      The power put agreement gives Onondaga the right,  but not the obligation,
to sell energy and capacity to NIMO at a proxy market price up to the  specified
contract quantity.

                                       58


<PAGE>


      Under the indexed swap  agreement,  Onondaga pays NIMO the market price of
energy and capacity and NIMO pays  Onondaga a contract  price which is fixed for
the first two years and then adjusted monthly, according to an indexing formula,
for the remaining term. As of June 30, 2000, the unamortized balance of the swap
contract  was  valued at $51.7  million,  and was  included  in Other - Deferred
Debits and Other Assets on the Consolidated  Balance Sheets.  This valuation was
derived using the discounted  estimated cash flows related to payments  expected
to be received by  Onondaga.  A  corresponding  amount was  recorded in deferred
revenue (which is included in Other - Current  Liabilities  on the  Consolidated
Balance  Sheets) and will be recognized to income over a period not to exceed 10
years.

      Concurrent with the establishment of a competitive  market for electricity
in New York (Power  Exchange)  and meeting  specific  trading  volume  criteria,
certain rights  between  Onondaga and NIMO expire under the power put agreement.
As a result, in 2000, GPU International, Inc. expects to recognize in income all
unamortized  deferred  revenue,  including that from the indexed swap agreement,
which will be largely  offset by an  impairment  of the Onondaga  facility and a
provision for out-of-market gas transportation costs.

4.    SEGMENT INFORMATION

      The  following  is  presented in  accordance  with  Statement of Financial
Accounting  Standards No. 131,  "Disclosures about Segments of an Enterprise and
Related Information."

      GPU's  reportable  segments are strategic  business units that are managed
separately due to their different operating and regulatory  environments.  GPU's
management  evaluates the  performance  of its business  units based upon income
before  extraordinary  and  non-recurring  items.  For the purpose of  providing
segment  information,  domestic  electric  utility  operations  (GPU  Energy) is
comprised of the three electric utility operating companies serving customers in
New Jersey  and  Pennsylvania,  as well as GPU  Generation,  Inc.  (sold in late
1999),  GPUN,  GPU  Telcom  and  GPUS.  For  additional   information  on  GPU's
organizational   structure  and   businesses,   see  preface  to  the  Notes  to
Consolidated Financial Statements.

                                       59


<PAGE>
<TABLE>
<CAPTION>

Business Segment Data (in thousands)
                                                                                        Income
                                                             Interest                 Before Extra-
                                            Depreciation   Charges and   Income Tax   ordinary and                     Capital
                                Operating        and        Preferred    Expense/     Non-recurring    Total         Expenditures
                                 Revenues   Amortization    Dividends   (Benefit)(a)     Items        Assets(b)     and Investments
                                 --------   ------------    ---------   ------------     -----        ---------     ---------------
For the six months ended
June 30, 2000

Domestic Segments:
  Electric Utility Operations
<S>                             <C>         <C>           <C>           <C>             <C>          <C>              <C>
      (GPU Energy)              $1,730,089  $  169,356    $  102,847    $102,722        $  151,819   $13,383,056      $  158,362
  Independ Power Prod
   (GPU International)              43,692       4,700           416          73              (446)      361,276           4,266
  Electric Retail Energy Sales
   (GPU AR)                         39,874         -             -           848             1,221        22,940               8
  Construction Services
   (MYR) (e)                        99,532       1,311         2,389       1,147               613       328,926           1,284
                                   -------      ------        ------      ------            ------     ---------          ------
     Subtotal                    1,913,187     175,367       105,652     104,790           153,207    14,096,198         163,920
                                   -------      ------        ------      ------            ------     ---------          ------


Foreign Segments:
  Electric/Gas Utility Operations: (GPU Electric)
   Electric Distribution -
       United Kingdom              325,106      52,376        91,451      29,795            49,978     4,425,427          74,937
   Electric Distribution -
       Argentina                    81,614       7,663        12,749       6,881             2,942       609,301          18,091
   Electric Transmission -
       Australia (d)                90,007      19,947        46,822     (10,921)            9,242       489,023           4,993
   Gas Transmission -
       Australia                    27,183       5,520        21,114      (6,675)            5,672       725,347           3,389
   Independ Power Prod -
       S. America (GPU Power)       21,082       3,154         2,183       2,408             4,344       244,530              73
                                   -------      ------        ------      ------            ------     ---------          ------
     Subtotal                      544,992      88,660       174,319      21,488            72,178     6,493,628         101,483
                                   -------      ------        ------      ------            ------     ---------          ------


Corporate and Eliminations          (1,361)         -          4,805         -             (10,200)     (130,935)           500
                                   -------      ------        ------      ------            ------     ---------          ------

     Consolidated Total         $2,456,818  $  264,027    $  284,776    $126,278        $  215,185   $20,458,891      $  265,903
                                ==========  ==========    ==========    ========        ==========   ===========      ==========

For the six months ended June 30, 1999
Domestic Segments:
  Electric Utility Operations
       (GPU Energy)             $1,712,716  $  206,963      $114,519     163,060        $  219,584   $13,224,051      $  138,721
  Independ Power Prod
       (GPU International)          42,197       4,649           619         182              (847)      359,374             596
  Electric Retail Energy
       Sales (GPU AR)               37,521         -             -         1,032             1,581        24,630             -
                                   -------      ------        ------      ------            ------     ---------          ------
     Subtotal                    1,792,434     211,612       115,138     164,274           220,318    13,608,055         139,317
                                   -------      ------        ------      ------            ------     ---------          ------


Foreign Segments:
  Electric/Gas Utility Operations: (GPU Electric)
   Electric Distribution -
       United Kingdom                  603         -           9,835       2,171            44,348(c)  4,687,476             -
   Electric Distribution -
       Argentina                    48,999       6,190         8,008       1,986               (72)      579,907          10,851
   Electric Transmission -
       Australia (d)                95,912      21,367        52,526       4,462             5,985     1,824,309           3,984
   Gas Transmission -
       Australia                     5,721       1,227         3,589         422              (222)      795,527           2,168
   Independ Power Prod -
       S. America (GPU Power)       17,734       2,699         1,363       2,272             3,515       238,644          30,024
                                   -------      ------        ------      ------            ------     ---------          ------
     Subtotal                      168,969      31,483        75,321      11,313            53,554     8,125,863          47,027
                                   -------      ------        ------      ------            ------     ---------          ------
 Corporate and Eliminations            -           -             481         -              (5,353)      (36,086)            -
                                   -------      ------        ------      ------            ------     ---------          ------


     Consolidated Total         $1,961,403  $  243,095    $  190,940    $175,587        $  268,519   $21,697,832      $  186,344
                                ==========  ==========    ==========    ========        ==========   ===========      ==========
</TABLE>


(a)  Represents income taxes on income before extraordinary and non-recurring
     items.
(b)  The comparative 1999 Total Assets is as of December 31, 1999.
(c)  Includes equity in net income of investee accounted for under the equity
     method of $73.5 million, for the period prior to the consolidation
     of GPU Power UK.
(d)  Represents GPU PowerNet, which was sold in June 2000.
(e)  MYR was acquired in May 2000.

                                       60


<PAGE>


5.    COMPREHENSIVE INCOME

      For the six months ended June 30, 2000 and 1999, comprehensive income is
summarized below.

                                                             (in thousands)
                                                               Six months

                                                            Ended June 30,

GPU, Inc. and Subsidiary Companies                         2000        1999
----------------------------------                         ----        ----

Net income/(loss)                                      $ (79,815)   $ 237,981
                                                        ---------    --------
Other comprehensive income/(loss), net of tax:
     Net unrealized gains/(loss) on investments           13,028       (4,758)
     Foreign currency translation                        (41,852)       8,169
                                                        --------     --------
       Total other comprehensive income/(loss)           (28,824)       3,411
                                                        --------     --------
Comprehensive income/(loss)                            $(108,639)   $ 241,392
                                                        =========    ========

JCP&L

Net income                                             $  90,004    $  47,842
                                                        --------     --------
Other comprehensive income/(loss), net of tax:
     Net unrealized gains/(loss) on investments              -            -
                                                        --------     --------
Comprehensive income                                   $  90,004    $  47,842
                                                        ========     ========

Met-Ed

Net income                                             $  35,160    $  51,974
                                                        --------     --------
Other comprehensive income/(loss), net of tax:
     Net unrealized gains/(loss) on investments           (2,141)       2,816
                                                        --------     --------
Comprehensive income                                   $  33,019    $  54,790
                                                        ========     ========

Penelec

Net income                                             $  31,481    $  85,435
                                                        --------     --------
Other comprehensive income/(loss), net of tax:
     Net unrealized gains/(loss) on investments           (1,076)       1,337
                                                        --------     --------
Comprehensive income                                   $  30,405    $  86,772
                                                        ========     ========



                                       61


<PAGE>


                                     PART II

ITEM 1 -    LEGAL PROCEEDINGS

            Information   concerning   the  current   status  of  certain  legal
            proceedings   instituted  against  GPU,  Inc.  and  the  GPU  Energy
            companies  discussed  in Part I of this report in Combined  Notes to
            Consolidated   Financial   Statements  is  incorporated   herein  by
            reference and made a part hereof.

ITEM 6 -    EXHIBITS AND REPORTS ON FORM 8-K

            (a) Exhibits

                 (4) Instruments defining the rights of security holders,
                      including indentures

                     A - First Supplemental  Indenture between Met-Ed and United
                     States Trust Company of New York, dated August 1, 2000.

                          B - First  Supplemental  Indenture between Penelec and
                     United  States Trust  Company of New York,  dated August 1,
                     2000.

                 (12) Statements   Showing   Computation   of  Ratio  of
                      Earnings to Fixed Charges and Ratio of Earnings to
                      Combined   Fixed  Charges  and   Preferred   Stock
                      Dividends Based on SEC Regulation S-K, Item 503

                     A -  JCP&L

                     B -  Met-Ed
                     C -  Penelec

                (27) Financial Data Schedules

                     A - GPU, Inc. and Subsidiary Companies

                     B -  JCP&L

                     C -  Met-Ed
                     D -  Penelec

            (b) Reports on Form 8-K

                 GPU, Inc.:
                 ---------

                 Dated June 21, 2000, under Item 5 (Other Events).
                 Dated June 30, 2000, under Item 5 (Other Events).
                 Dated August 3, 2000, under Item 5 (Other Events).

                 Jersey Central Power & Light Company:
                 ------------------------------------

                 Dated August 3, 2000, under Item 5 (Other Events).

                 Metropolitan Edison Company:
                 ---------------------------

                 Dated August 3, 2000, under Item 5 (Other Events).

                 Pennsylvania Electric Company:
                 -----------------------------

                 Dated August 3, 2000, under Item 5 (Other Events).

                                       62

<PAGE>

                                   Signatures

      Pursuant to the  requirements of the Securities  Exchange Act of 1934, the
registrants  have duly caused  this  report to be signed on their  behalf by the
undersigned thereunto duly authorized.

                                    GPU, INC.

August 4, 2000                   By:  /s/ B. L. Levy
                                     ---------------
                                      B. L. Levy, Senior Vice President and
                                      Chief Financial Officer

August 4, 2000                   By:  /s/ P. E. Maricondo
                                     -------------------
                                      P. E. Maricondo, Vice President
                                      and Comptroller
                                      (principal accounting officer)



                                      JERSEY CENTRAL POWER & LIGHT COMPANY
                                      METROPOLITAN EDISON COMPANY
                                      PENNSYLVANIA ELECTRIC COMPANY



August 4, 2000                   By:  /s/ M. J. Chesser
                                     ------------------
                                      M. J. Chesser, President and
                                      Chief Executive Officer

August 4, 2000                   By:  /s/ M. P. O'Flynn
                                     ------------------
                                      M. P. O'Flynn, Vice President- Finance
                                      and Rates & Comptroller
                                      (principal accounting officer)

                                       63