UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2003

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

For the transition period from to

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

1-11377	CINERGY CORP. (A Delaware Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 421-9500	31-1385023

1-1232	THE CINCINNATI GAS & ELECTRIC COMPANY (An Ohio Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 421-9500	31-0240030

1-3543	PSI ENERGY, INC. (An Indiana Corporation) 1000 East Main Street Plainfield, Indiana 46168 (513) 421-9500	35-0594457

2-7793	THE UNION LIGHT, HEAT AND POWER COMPANY (A Kentucky Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 421-9500	31-0473080

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ý No o

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

The Union Light, Heat and Power Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its company specific information with the reduced disclosure format specified in General Instruction H(2) of Form 10-Q.

As of July 31, 2003, shares of common stock outstanding for each registrant were as listed:

Registrant	Description	Shares

Cinergy Corp.	Par value $.01 per share	177,496,253

The Cincinnati Gas & Electric Company	Par value $8.50 per share	89,663,086

PSI Energy, Inc.	Without par value, stated value $.01 per share	53,913,701

The Union Light, Heat and Power Company	Par value $15.00 per share	585,333

TABLE OF CONTENTS

Item Number
	PART I FINANCIAL INFORMATION

1	Financial Statements
	*Cinergy Corp.*
	Consolidated Statements of Income
	Consolidated Balance Sheets
	Consolidated Statements of Changes in Common Stock Equity
	Consolidated Statements of Cash Flows

	*The Cincinnati Gas & Electric Company*
	Consolidated Statements of Income and Comprehensive Income
	Consolidated Balance Sheets
	Consolidated Statements of Cash Flows

	*PSI Energy, Inc.*
	Consolidated Statements of Income and Comprehensive Income
	Consolidated Balance Sheets
	Consolidated Statements of Cash Flows

	*The Union Light, Heat and Power Company*
	Statements of Income
	Balance Sheets
	Statements of Cash Flows

	Notes to Financial Statements

	Cautionary Statements Regarding Forward-Looking Information

2	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Introduction
	Organization
	Liquidity and Capital Resources
	2003 Quarterly Results of Operations - Historical
	2003 Year to Date Results of Operations - Historical
	Results of Operations - Future

3	Quantitative and Qualitative Disclosures About Market Risk

4	Controls and Procedures

	PART II OTHER INFORMATION

1	Legal Proceedings

6	Exhibits and Reports on Form 8-K

	Signatures

CINERGY CORP.

AND SUBSIDIARY COMPANIES

CINERGY CORP.

CONSOLIDATED STATEMENTS OF INCOME

	Quarter Ended June 30					Year to Date June 30
	2003		2002			2003		2002
	(in thousands, except per share amounts)
	(unaudited)
Operating Revenues (Note 1(g)(i))
Electric	$	769,258	$	804,463		$	1,592,316	$	1,565,848
Gas	114,932		80,208			513,845		270,272
Other	49,733		22,624			95,719		39,561
Total Operating Revenues	933,923		907,295			2,201,880		1,875,681

Operating Expenses
Fuel and purchased and exchanged power (Note 1(g)(i))	240,470		241,686			510,335		459,492
Gas purchased (Note 1(g)(i))	53,319		29,562			289,314		139,442
Operation and maintenance	330,006		338,306			655,168		598,918
Depreciation	105,228		97,979			208,863		194,295
Taxes other than income taxes	66,958		64,247			144,707		136,669
Total Operating Expenses	795,981		771,780			1,808,387		1,528,816

Operating Income	137,942		135,515			393,493		346,865

Equity in Earnings (Losses) of Unconsolidated Subsidiaries	6,104		(581		)	6,696		4,108
Miscellaneous – Net	7,767		(3,063		)	15,382		(4,448		)
Interest Expense	60,394		58,431			119,548		117,604
Preferred Dividend Requirement of Subsidiary Trust	5,970		5,968			11,940		11,881

Income Before Taxes	85,449		67,472			284,083		217,040

Income Taxes	8,983		21,298			66,966		75,842
Preferred Dividend Requirements of Subsidiaries	858		858			1,716		1,716

Income Before Discontinued Operations and Cumulative Effect of Changes in Accounting Principles	75,608		45,316			215,401		139,482

Discontinued operations, net of tax (Note 7)	9,045		(333		)	8,875		1,229
Cumulative effect of changes in accounting principles, net of tax (Note 1(g)(vii))	—		—			26,462		(10,899		)
Net Income	$	84,653	$	44,983		$	250,738	$	129,812

Average Common Shares Outstanding	176,645		167,330			175,025		165,821

Earnings Per Common Share (Note 9)
Income Before Discontinued Operations and Cumulative Effect of Changes in Accounting Principles	$	0.42	$	0.27		$	1.23	$	0.84
Discontinued operations, net of tax	0.05		—			0.05		0.01
Cumulative effect of changes in accounting principles, net of tax	—		—			0.15		(0.06		)
Net Income	$	0.47	$	0.27		$	1.43	$	0.79

Earnings Per Common Share - Assuming Dilution (Note 9)
Income Before Discontinued Operations and Cumulative Effect of Changes in Accounting Principles	$	0.42	$	0.26		$	1.22	$	0.83
Discontinued operations, net of tax	0.05		—			0.05		0.01
Cumulative effect of changes in accounting principles, net of tax	—		—			0.15		(0.06		)
Net Income	$	0.47	$	0.26		$	1.42	$	0.78

Dividends Declared Per Common Share	$	0.46	$	0.45		$	0.92	$	0.90

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

CINERGY CORP.

CONSOLIDATED BALANCE SHEETS

ASSETS

	June 30 2003		December 31 2002
	(in thousands)
	(unaudited)

Current Assets
Cash and cash equivalents	$	249,016	$	200,112
Restricted deposits	3,609		3,092
Notes receivable	78,112		135,873
Accounts receivable less accumulated provision for doubtful accounts of $11,447 at June 30, 2003, and $16,368 at December 31, 2002	1,163,652		1,280,810
Materials, supplies, and fuel (Note 1(c))	321,247		319,454
Energy risk management current assets (Note 1(b)(i))	401,054		464,028
Prepayments and other	121,168		107,086
Total Current Assets	2,337,858		2,510,455

Property, Plant, and Equipment - at Cost
Utility plant in service (Note 11)	9,374,785		8,641,351
Construction work in progress	349,212		469,300
Total Utility Plant	9,723,997		9,110,651
Non-regulated property, plant, and equipment (Note 11)	4,310,498		4,616,754
Accumulated depreciation (Note 1(g)(iii))	5,246,376		5,157,040
Net Property, Plant, and Equipment	8,788,119		8,570,365

Other Assets
Regulatory assets	1,015,024		1,022,696
Investments in unconsolidated subsidiaries	453,906		417,188
Energy risk management non-current assets (Note 1(b)(i))	151,159		162,773
Other investments	173,203		163,851
Goodwill	43,717		43,717
Other intangible assets	1,777		2,059
Other	316,408		266,659
Total Other Assets	2,155,194		2,078,943

Assets of Discontinued Operations (Note 7)	7,187		147,265

Total Assets	$	13,288,358	$	13,307,028

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

CINERGY CORP.

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS’ EQUITY

	June 30 2003			December 31 2002
	(in thousands)
	(unaudited)

Current Liabilities
Accounts payable	$	1,102,251		$	1,318,379
Accrued taxes	191,864			258,613
Accrued interest	69,767			62,244
Notes payable and other short-term obligations (Note 4)	409,269			667,973
Long-term debt due within one year (Note 3)	387,038			176,000
Energy risk management current liabilities (Note 1(b)(i))	384,885			407,710
Other	130,165			105,026
Total Current Liabilities	2,675,239			2,995,945

Non-Current Liabilities
Long-term debt (Note 3)	3,977,446			4,011,568
Deferred income taxes	1,508,123			1,458,171
Unamortized investment tax credits	113,489			118,095
Accrued pension and other postretirement benefit costs	660,922			626,167
Energy risk management non-current liabilities (Note 1(b)(i))	156,946			143,991
Other	206,466			179,767
Total Non-Current Liabilities	6,623,392			6,537,759

Liabilities of Discontinued Operations (Note 7)	8,877			108,833

Total Liabilities	9,307,508			9,642,537

Preferred Trust Securities (Note 1(g)(vi))
Company obligated, mandatorily redeemable, preferred trust securities of subsidiary, holding solely debt securities of the company	309,216			308,187

Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption	62,818			62,828

Common Stock Equity (Note 2)
Common stock -$.01 par value; authorized shares -600,000,000; outstanding shares -176,947,118 at June 30, 2003, and 168,663,115 at December 31, 2002	1,769			1,687
Paid-in capital	2,135,968			1,918,136
Retained earnings	1,495,502			1,403,453
Accumulated other comprehensive income (loss)	(24,423		)	(29,800		)
Total Common Stock Equity	3,608,816			3,293,476

Commitments and Contingencies (Note 6)

Total Liabilities and Shareholders’ Equity	$	13,288,358		$	13,307,028

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

CINERGY CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY

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

Quarter Ended June 30, 2003

Balance at April 1, 2003 (175,876,919 shares)	$	1,759	$	2,116,222		$	1,491,861		$	(29,013	)	$	3,580,829
Comprehensive income:
Net income						84,653						84,653
Other comprehensive income (loss), net of tax effect of ($2,284)
Foreign currency translation adjustment, net of reclassification adjustments of $6,134 (net of tax) (Note 7)									3,963			3,963
Unrealized gain (loss) on investment trusts									3,370			3,370
Cash flow hedges (Note 1(b))									(2,743		)	(2,743		)
Total comprehensive income												89,243

Issuance of common stock - net (1,070,199 shares)	10		25,459									25,469
Dividends on common stock ($.46 per share)						(80,992		)				(80,992		)
Other (Note 2(b))			(5,713		)	(20		)				(5,733		)

Ending balance at June 30, 2003 (176,947,118 shares)	$	1,769	$	2,135,968		$	1,495,502		$	(24,423	)	$	3,608,816

Quarter Ended June 30, 2002

Balance at April 1, 2002 (166,826,096 shares)	$	1,669	$	1,839,338		$	1,350,090		$	(19,188	)	$	3,171,909
Comprehensive income:
Net income						44,983						44,983
Other comprehensive income (loss), net of tax effect of ($7,772)
Foreign currency translation adjustment									16,897			16,897
Unrealized gain (loss) on investment trusts									(583		)	(583		)
Cash flow hedges (Note 1(b))									(1,913		)	(1,913		)
Total comprehensive income												59,384

Issuance of common stock - net (660,033 shares)	6		19,518									19,524
Dividends on common stock ($.45 per share)						(75,200		)				(75,200		)
Other			2,833			8						2,841

Ending balance at June 30, 2002 (167,486,129 shares)	$	1,675	$	1,861,689		$	1,319,881		$	(4,787	)	$	3,178,458

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

CINERGY CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY

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

Year to Date June 30, 2003

Balance at January 1, 2003 (168,663,115 shares)	$	1,687	$	1,918,136		$	1,403,453		$	(29,800	)	$	3,293,476
Comprehensive income:
Net income						250,738						250,738
Other comprehensive income (loss), net of tax effect of ($2,558)
Foreign currency translation adjustment, net of reclassification adjustments of $6,134 (net of tax) (Note 7)									6,054			6,054
Unrealized gain (loss) on investment trusts									2,518			2,518
Cash flow hedges (Note 1(b))									(3,195		)	(3,195		)
Total comprehensive income												256,115

Issuance of common stock - net (8,284,003 shares)	82		219,355									219,437
Dividends on common stock ($.92 per share)						(158,677		)				(158,677		)
Other (Note 2(b))			(1,523		)	(12		)				(1,535		)

Ending balance at June 30, 2003 (176,947,118 shares)	$	1,769	$	2,135,968		$	1,495,502		$	(24,423	)	$	3,608,816

Year to Date June 30, 2002

Balance at January 1, 2002 (159,402,839 shares)	$	1,594	$	1,619,659		$	1,337,135		$	(16,929	)	$	2,941,459
Comprehensive income:
Net income						129,812						129,812
Other comprehensive income (loss), net of tax effect of ($6,688)
Foreign currency translation adjustment									15,313			15,313
Unrealized gain (loss) on investment trusts									(1,634		)	(1,634		)
Minimum pension liability adjustment									136			136
Cash flow hedges (Note 1(b))									(1,673		)	(1,673		)
Total comprehensive income												141,954

Issuance of common stock - net (8,083,290 shares)	81		235,412									235,493
Dividends on common stock ($.90 per share)						(147,082		)				(147,082		)
Other			6,618			16						6,634

Ending balance at June 30, 2002 (167,486,129 shares)	$	1,675	$	1,861,689		$	1,319,881		$	(4,787	)	$	3,178,458

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

CINERGY CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year to Date June 30
	2003			2002
	(in thousands)
	(unaudited)

Operating Activities
Net income	$	250,738		$	129,812
Items providing or (using) cash currently:
Depreciation	208,863			194,295
Loss (Gain) on disposal of discontinued operations, net of tax	(8,878		)	—
Cumulative effect of changes in accounting principles, net of tax	(26,462		)	10,899
Change in net position of energy risk management activities	12,421			(54,030		)
Deferred income taxes and investment tax credits - net	24,315			20,779
Equity in (earnings) losses of unconsolidated subsidiaries	(6,696		)	(4,108		)
Allowance for equity funds used during construction	(6,191		)	(7,167		)
Regulatory assets deferrals	(40,084		)	(43,403		)
Regulatory assets amortization	52,273			53,288
Accrued pension and other postretirement benefit costs	34,755			41,223
Deferred costs under gas recovery mechanism	(36,422		)	(1,073		)
Changes in current assets and current liabilities:
Restricted deposits	(517		)	(765		)
Accounts and notes receivable	178,214			(296,104		)
Materials, supplies, and fuel	(1,793		)	(45,907		)
Prepayments	(7,074		)	(9,174		)
Accounts payable	(216,128		)	317,942
Accrued taxes and interest	(59,226		)	19,380
Other assets	(2,388		)	26,868
Other liabilities	54,061			17,105

Net cash provided by (used in) operating activities	403,781			369,860

Financing Activities
Change in short-term debt	(258,704		)	(35,337		)
Issuance of long-term debt	291,198			—
Redemption of long-term debt	(141,759		)	(20,292		)
Retirement of preferred stock of subsidiaries	(10		)	(2		)
Issuance of common stock	219,437			235,493
Dividends on common stock	(158,677		)	(147,082		)

Net cash provided by (used in) financing activities	(48,515		)	32,780

Investing Activities
Construction expenditures (less allowance for equity funds used during construction)	(334,522		)	(395,407		)
Acquisitions and other investments	(23,092		)	(17,186		)
Proceeds from disposal of subsidiaries	51,252			—

Net cash provided by (used in) investing activities	(306,362		)	(412,593		)

Net increase (decrease) in cash and cash equivalents	48,904			(9,953		)

Cash and cash equivalents at beginning of period	200,112			87,257

Cash and cash equivalents at end of period	$	249,016		$	77,304

Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest (net of amount capitalized)	$	117,496		$	119,766
Income taxes	$	96,696		$	32,083

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

THE CINCINNATI GAS & ELECTRIC COMPANY

AND SUBSIDIARY COMPANIES

THE CINCINNATI GAS & ELECTRIC COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

	Quarter Ended June 30						Year to Date June 30
	2003			2002			2003			2002
	(in thousands)
	(unaudited)

Operating Revenues (Note 1(g)(i))
Electric	$	397,455		$	409,709		$	826,019		$	806,807
Gas	85,311			56,008			360,587			235,617
Total Operating Revenues	482,766			465,717			1,186,606			1,042,424

Operating Expenses
Fuel and purchased and exchanged power (Note 1(g)(i))	106,267			108,585			236,821			215,833
Gas purchased	48,086			24,471			219,851			132,439
Operation and maintenance	125,937			138,341			260,697			244,196
Depreciation	50,313			48,892			99,577			97,052
Taxes other than income taxes	49,739			45,719			110,257			99,205
Total Operating Expenses	380,342			366,008			927,203			788,725

Operating Income	102,424			99,709			259,403			253,699

Miscellaneous - Net	6,899			4,563			13,483			1,880
Interest Expense	29,419			21,774			55,260			44,629

Income Before Taxes	79,904			82,498			217,626			210,950

Income Taxes	28,985			29,828			80,409			80,695

Income Before Cumulative Effect of Changes in Accounting Principles	50,919			52,670			137,217			130,255

Cumulative effect of changes in accounting principles, net of tax (Note 1(g)(vii))	—			—			30,938			—

Net Income	$	50,919		$	52,670		$	168,155		$	130,255

Preferred Dividend Requirement	212			212			423			423

Net Income Applicable to Common Stock	$	50,707		$	52,458		$	167,732		$	129,832

Net Income	$	50,919		$	52,670		$	168,155		$	130,255

Other Comprehensive Income (Loss), Net of Tax Effect	(2,721		)	(1,913		)	(3,027		)	(2,085		)

Comprehensive Income	$	48,198		$	50,757		$	165,128		$	128,170

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

THE CINCINNATI GAS & ELECTRIC COMPANY

CONSOLIDATED BALANCE SHEETS

ASSETS

	June 30 2003		December 31 2002
	(in thousands)
	(unaudited)

Current Assets
Cash and cash equivalents	$	63,192	$	45,336
Restricted deposits	3,037		3,071
Notes receivable from affiliated companies	201,634		148,823
Accounts receivable less accumulated provision for doubtful accounts of $3,714 at June 30, 2003, and $5,942 at December 31, 2002	97,460		117,269
Accounts receivable from affiliated companies	23,692		97,584
Materials, supplies, and fuel	118,277		121,881
Energy risk management current assets (Note 1(b)(i))	67,755		57,912
Prepayments and other	27,840		8,560
Total Current Assets	602,887		600,436

Property, Plant, and Equipment - at Cost
Utility plant in service (Note 11)
Electric	2,120,288		2,073,133
Gas	1,028,589		1,003,870
Common	248,956		248,938
Total Utility Plant In Service	3,397,833		3,325,941
Construction work in progress	98,322		84,249
Total Utility Plant	3,496,155		3,410,190
Non-regulated property, plant, and equipment (Note 11)	3,488,169		3,445,056
Accumulated depreciation (Note 1(g)(iii))	2,722,956		2,712,105
Net Property, Plant, and Equipment	4,261,368		4,143,141

Other Assets
Regulatory assets	602,092		604,776
Energy risk management non-current assets (Note 1(b)(i))	63,452		64,762
Other investments	1,079		1,082
Other	186,848		127,550
Total Other Assets	853,471		798,170

Total Assets	$	5,717,726	$	5,541,747

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

THE CINCINNATI GAS & ELECTRIC COMPANY

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDER’S EQUITY

	June 30 2003			December 31 2002
	(in thousands)
	(unaudited)

Current Liabilities
Accounts payable	$	165,721		$	195,812
Accounts payable to affiliated companies	37,738			146,558
Accrued taxes	162,940			159,199
Accrued interest	29,057			22,872
Notes payable and other short-term obligations (Note 4)	112,100			112,100
Notes payable to affiliated companies (Note 4)	8,258			8,947
Long-term debt due within one year (Note 3)	130,000			120,000
Energy risk management current liabilities (Note 1(b)(i))	78,963			49,288
Other	37,451			37,160
Total Current Liabilities	762,228			851,936

Non-Current Liabilities
Long-term debt (Note 3)	1,721,865			1,569,713
Deferred income taxes	919,289			882,628
Unamortized investment tax credits	82,192			85,198
Accrued pension and other postretirement benefit costs	208,160			201,284
Energy risk management non-current liabilities (Note 1(b)(i))	54,041			31,326
Other	84,609			88,843
Total Non-Current Liabilities	3,070,156			2,858,992

Total Liabilities	3,832,384			3,710,928

Cumulative Preferred Stock
Not subject to mandatory redemption	20,485			20,485

Common Stock Equity
Common stock - $8.50 par value; authorized shares - 120,000,000; outstanding shares - 89,663,086 at June 30, 2003, and December 31, 2002	762,136			762,136
Paid-in capital	586,292			586,292
Retained earnings	545,202			487,652
Accumulated other comprehensive income (loss)	(28,773		)	(25,746		)
Total Common Stock Equity	1,864,857			1,810,334

Commitments and Contingencies (Note 6)

Total Liabilities and Shareholder’s Equity	$	5,717,726		$	5,541,747

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

THE CINCINNATI GAS & ELECTRIC COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year to Date June 30
	2003			2002
	(in thousands)
	(unaudited)

Operating Activities
Net income	$	168,155		$	130,255
Items providing or (using) cash currently:
Depreciation	99,577			97,052
Deferred income taxes and investment tax credits - net	12,144			21,393
Cumulative effect of changes in accounting principles, net of tax	(30,938		)	—
Change in net position of energy risk management activities	1,161			(5,840		)
Allowance for equity funds used during construction	(1,841		)	480
Regulatory assets deferrals	(12,725		)	(28,195		)
Regulatory assets amortization	19,654			17,951
Accrued pension and other postretirement benefit costs	6,876			5,323
Deferred costs under gas cost recovery mechanism	(36,422		)	(1,073		)
Changes in current assets and current liabilities:
Restricted deposits	34			(764		)
Accounts and notes receivable	131,511			(219,100		)
Materials, supplies, and fuel	3,604			24,512
Prepayments	(7,962		)	(4,318		)
Accounts payable	(138,911		)	244,575
Accrued taxes and interest	9,926			23,804
Other assets	(4,388		)	9,326
Other liabilities	(5,635		)	4,032

Net cash provided by (used in) operating activities	213,820			319,413

Financing Activities
Change in short-term debt, including net affiliate notes	(91,310		)	(65,629		)
Issuance of long-term debt	256,198			—
Redemption of long-term debt	(100,000		)	—
Dividends on preferred stock	—			(349		)
Dividends on common stock	(110,182		)	(91,653		)

Net cash provided by (used in) financing activities	(45,294		)	(157,631		)

Investing Activities
Construction expenditures (less allowance for equity funds used during construction)	(150,672		)	(161,394		)
Other investments	2			(1		)

Net cash provided by (used in) investing activities	(150,670		)	(161,395		)

Net increase (decrease) in cash and cash equivalents	17,856			387

Cash and cash equivalents at beginning of period	45,336			9,074

Cash and cash equivalents at end of period	$	63,192		$	9,461

Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest (net of amount capitalized)	$	30,010		$	40,504
Income taxes	$	37,155		$	15,495

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

PSI ENERGY, INC.

AND SUBSIDIARY COMPANY

PSI ENERGY, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

	Quarter Ended June 30					Year to Date June 30
	2003		2002			2003			2002
	(in thousands)
	(unaudited)

Operating Revenues (Note 1(g)(i))
Electric	$	361,385	$	378,618		$	773,073		$	745,019

Operating Expenses
Fuel and purchased and exchanged power (Note 1(g)(i))	121,998		128,546			288,870			251,595
Operation and maintenance	122,947		142,549			235,332			257,628
Depreciation	44,944		38,380			87,656			76,128
Taxes other than income taxes	16,150		17,149			32,032			33,546
Total Operating Expenses	306,039		326,624			643,890			618,897

Operating Income	55,346		51,994			129,183			126,122

Miscellaneous - Net	5,411		4,370			7,569			9,721
Interest Expense	22,038		17,789			42,153			37,080

Income Before Taxes	38,719		38,575			94,599			98,763

Income Taxes	15,640		8,861			37,299			30,966

Income Before Cumulative Effect of a Change in Accounting Principle	23,079		29,714			57,300			67,797

Cumulative effect of a change in accounting principle, net of tax (Note 1(g)(vii))	—		—			(494		)	—

Net Income	$	23,079	$	29,714		$	56,806		$	67,797

Preferred Dividend Requirement	646		646			1,293			1,293

Net Income Applicable to Common Stock	$	22,433	$	29,068		$	55,513		$	66,504

Net Income	$	23,079	$	29,714		$	56,806		$	67,797

Other Comprehensive Income (Loss), Net of Tax Effect	2,954		(471		)	2,324			(968		)

Comprehensive Income	$	26,033	$	29,243		$	59,130		$	66,829

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

PSI ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS

	June 30 2003		December 31 2002
	(in thousands)
	(unaudited)

Current Assets
Cash and cash equivalents	$	906	$	2,007
Restricted deposits	571		20
Notes receivable from affiliated companies	34,365		53,755
Accounts receivable less accumulated provision for doubtful accounts of $1,935 at June 30, 2003, and $5,656 at December 31, 2002	74,828		84,819
Accounts receivable from affiliated companies	1,617		437
Materials, supplies, and fuel	143,287		137,292
Energy risk management current assets (Note 1(b)(i))	7,325		8,701
Prepayments and other	36,433		44,725
Total Current Assets	299,332		331,756

Property, Plant, and Equipment - at Cost
Utility plant in service	5,976,952		5,315,410
Construction work in progress	250,890		385,051
Total Utility Plant	6,227,842		5,700,461
Accumulated depreciation	2,402,932		2,334,157
Net Property, Plant, and Equipment (Note 11)	3,824,910		3,366,304

Other Assets
Regulatory assets	412,932		417,920
Energy risk management non-current assets (Note 1(b)(i))	10,789		16,590
Other investments	59,559		54,683
Other	43,144		35,703
Total Other Assets	526,424		524,896

Total Assets	$	4,650,666	$	4,222,956

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

PSI ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDER’S EQUITY

	June 30 2003			December 31 2002
	(in thousands)
	(unaudited)

Current Liabilities
Accounts payable	$	50,590		$	113,563
Accounts payable to affiliated companies	34,017			107,364
Accrued taxes	98,565			105,960
Accrued interest	30,964			23,078
Notes payable and other short-term obligations (Note 4)	—			35,000
Notes payable to affiliated companies (Note 4)	236,588			138,055
Long-term debt due within one year (Note 3)	257,038			56,000
Energy risk management current liabilities (Note 1(b)(i))	7,048			8,000
Other	22,654			22,335
Total Current Liabilities	737,464			609,355

Non-Current Liabilities
Long-term debt (Note 3)	1,499,254			1,315,984
Deferred income taxes	540,580			538,745
Unamortized investment tax credits	31,297			32,897
Accrued pension and other postretirement benefit costs	191,779			184,299
Energy risk management non-current liabilities (Note 1(b)(i))	15,354			17,157
Other	81,811			80,879
Total Non-Current Liabilities	2,360,075			2,169,961

Total Liabilities	3,097,539			2,779,316

Cumulative Preferred Stock
Not subject to mandatory redemption	42,333			42,343

Common Stock Equity
Common stock - without par value; $.01 stated value; authorized shares - 60,000,000; outstanding shares - 53,913,701 at June 30, 2003, and December 31, 2002	539			539
Paid-in capital (Note 2(c))	526,931			426,931
Retained earnings	989,119			981,946
Accumulated other comprehensive income (loss)	(5,795		)	(8,119		)
Total Common Stock Equity	1,510,794			1,401,297

Commitments and Contingencies (Note 6)

Total Liabilities and Shareholder’s Equity	$	4,650,666		$	4,222,956

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

PSI ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year to Date June 30
	2003			2002
	(in thousands)
	(unaudited)

Operating Activities
Net income	$	56,806		$	67,797
Items providing or (using) cash currently:
Depreciation	87,656			76,128
Cumulative effect of a change in accounting principle, net of tax	494			—
Deferred income taxes and investment tax credits - net	(937		)	(8,881		)
Change in net position of energy risk management activities	635			603
Allowance for equity funds used during construction	(4,350		)	(7,647		)
Regulatory assets deferrals	(27,359		)	(15,208		)
Regulatory assets amortization	32,619			35,337
Accrued pension and other postretirement benefit costs	7,480			9,923
Changes in current assets and current liabilities:
Restricted deposits	(551		)	(2		)
Accounts and notes receivable	28,201			120,198
Materials, supplies, and fuel	(5,995		)	(36,653		)
Prepayments	(406		)	(4,589		)
Accounts payable	(136,320		)	(66,185		)
Accrued taxes and interest	491			36,566
Other assets	6,344			(7,655		)
Other liabilities	(1,755		)	5,862

Net cash provided by (used in) operating activities	43,053			205,594

Financing Activities
Change in short-term debt, including net affiliate notes	63,533			77,806
Issuance of long-term debt	35,000			—
Redemption of long-term debt	(27,896		)	(23,000		)
Contribution from parent	100,000			—
Retirement of preferred stock	(10		)	(2		)
Dividends on preferred stock	(1,293		)	(1,293		)
Dividends on common stock	(48,340		)	(55,138		)

Net cash provided by (used in) financing activities	120,994			(1,627		)

Investing Activities
Construction expenditures (less allowance for equity funds used during construction)	(164,082		)	(201,852		)
Other investments	(1,066		)	(2,337		)

Net cash provided by (used in) investing activities	(165,148		)	(204,189		)

Net increase (decrease) in cash and cash equivalents	(1,101		)	(222		)

Cash and cash equivalents at beginning of period	2,007			1,587

Cash and cash equivalents at end of period	$	906		$	1,365

Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest (net of amount capitalized)	$	20,465		$	43,131
Income taxes	$	55,919		$	13,590

Non-cash financing and investing activities:
Issuance of promissory notes to affiliated company for acquisition of assets	$	375,969		$	—

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

THE UNION LIGHT, HEAT AND POWER COMPANY

STATEMENTS OF INCOME

	Quarter Ended June 30					Year to Date June 30
	2003			2002		2003		2002
	(in thousands)
	(unaudited)

Operating Revenues
Electric	$	51,096		$	54,139	$	106,025	$	104,975
Gas	14,383			11,016		63,767		46,220
Total Operating Revenues	65,479			65,155		169,792		151,195

Operating Expenses
Electricity purchased from parent company for resale	37,136			37,808		76,259		74,646
Gas purchased	9,450			5,311		40,950		28,200
Operation and maintenance	13,794			13,928		26,379		23,380
Depreciation	4,583			4,512		9,028		8,732
Taxes other than income taxes	1,121			1,167		2,282		2,368
Total Operating Expenses	66,084			62,726		154,898		137,326

Operating Income (Loss)	(605		)	2,429		14,894		13,869

Miscellaneous - Net	901			1,959		2,380		(2,188		)
Interest Expense	1,470			1,452		2,972		2,957

Income (Loss) Before Taxes	(1,174		)	2,936		14,302		8,724

Income Taxes	(679		)	944		5,391		2,848

Net Income (Loss)	$	(495	)	$	1,992	$	8,911	$	5,876

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

THE UNION LIGHT, HEAT AND POWER COMPANY

BALANCE SHEETS

ASSETS

	June 30 2003		December 31 2002
	(in thousands)
	(unaudited)

Current Assets
Cash and cash equivalents	$	3,935	$	3,926
Notes receivable from affiliated companies	6,438		13,337
Accounts receivable less accumulated provision for doubtful accounts of $111 at June 30, 2003, and $84 at December 31, 2002	729		703
Accounts receivable from affiliated companies	170		1,671
Materials, supplies, and fuel	6,633		8,182
Prepayments and other	558		316
Total Current Assets	18,463		28,135

Property, Plant, and Equipment - at Cost
Utility plant in service (Note 11)
Electric	267,672		258,094
Gas	224,400		215,505
Common	31,898		31,679
Total Utility Plant In Service	523,970		505,278
Construction work in progress	11,615		14,745
Total Utility Plant	535,585		520,023
Accumulated depreciation	195,590		187,876
Net Property, Plant, and Equipment	339,995		332,147

Other Assets
Regulatory assets	9,561		5,134
Other	20,774		16,811
Total Other Assets	30,335		21,945

Total Assets	$	388,793	$	382,227

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

THE UNION LIGHT, HEAT AND POWER COMPANY

BALANCE SHEETS

LIABILITIES AND SHAREHOLDER’S EQUITY

	June 30 2003			December 31 2002
	(in thousands)
	(unaudited)

Current Liabilities
Accounts payable	$	4,048		$	8,816
Accounts payable to affiliated companies	19,420			22,297
Accrued taxes	810			1,487
Accrued interest	1,305			1,226
Long-term debt due within one year	20,000			20,000
Notes payable to affiliated companies (Note 4)	20,952			14,076
Other	5,810			6,368
Total Current Liabilities	72,345			74,270

Non-Current Liabilities
Long-term debt	54,669			54,653
Deferred income taxes	48,230			43,360
Unamortized investment tax credits	3,011			3,143
Accrued pension and other postretirement benefit costs	16,213			15,620
Other	14,556			14,017
Total Non-Current Liabilities	136,679			130,793

Total Liabilities	209,024			205,063

Common Stock Equity
Common stock - $15.00 par value; authorized shares - 1,000,000; outstanding shares - 585,333 at June 30, 2003, and December 31, 2002	8,780			8,780
Paid-in capital	23,644			23,644
Retained earnings	147,405			144,800
Accumulated other comprehensive income (loss)	(60		)	(60		)
Total Common Stock Equity	179,769			177,164

Commitments and Contingencies (Note 6)

Total Liabilities and Shareholder’s Equity	$	388,793		$	382,227

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

THE UNION LIGHT, HEAT AND POWER COMPANY

STATEMENTS OF CASH FLOWS

	Year to Date June 30
	2003			2002
	(in thousands)
	(unaudited)

Operating Activities
Net income	$	8,911		$	5,876
Items providing or (using) cash currently:
Depreciation	9,028			8,732
Deferred income taxes and investment tax credits - net	4,737			(132		)
Allowance for equity funds used during construction	(287		)	(259		)
Regulatory assets deferrals	(197		)	4,435
Regulatory assets amortization	209			(1,077		)
Accrued pension and other postretirement benefit costs	593			1,048
Deferred costs under gas cost recovery mechanism	(8,375		)	4,109
Changes in current assets and current liabilities:
Accounts and notes receivable	8,374			14,063
Materials, supplies, and fuel	1,549			3,760
Prepayments	(242		)	(332		)
Accounts payable	(7,645		)	3,799
Accrued taxes and interest	(598		)	2,784
Other assets	598			714
Other liabilities	(630		)	621

Net cash provided by (used in) operating activities	16,025			48,141

Financing Activities
Change in short-term debt, including net affiliate notes	6,876			(32,024		)
Dividends on common stock	(6,305		)	(2,675		)

Net cash provided by (used in) financing activities	571			(34,699		)

Investing Activities
Construction expenditures (less allowance for equity funds used during construction)	(16,587		)	(15,260		)
Other investments	—			(20		)

Net cash provided by (used in) investing activities	(16,587		)	(15,280		)

Net increase (decrease) in cash and cash equivalents	9			(1,838		)

Cash and cash equivalents at beginning of period	3,926			4,099

Cash and cash equivalents at end of period	$	3,935		$	2,261

Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest (net of amount capitalized)	$	1,437		$	2,170
Income taxes	$	3,001		$	2,386

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

NOTES TO FINANCIAL STATEMENTS

In this report Cinergy (which includes Cinergy Corp. and all of our regulated and non-regulated subsidiaries) is, at times, referred to in the first person as “we”, “our”, or “us”.

1. Summary of Significant Accounting Policies

(a) Presentation

Our Financial Statements reflect all adjustments (which include normal, recurring adjustments) necessary in the opinion of the registrants for a fair presentation of the interim results. These results are not necessarily indicative of results for a full year. These statements should be read in conjunction with the Financial Statements and the notes thereto included in the registrants’ combined Form 10-K for the year ended December 31, 2002 and Form 8-K filed on June 10, 2003 (together, the 2002 10-K). Certain amounts in the 2002 Financial Statements have been reclassified to conform to the 2003 presentation.

Management makes estimates and assumptions when preparing financial statements under generally accepted accounting principles (GAAP). Actual results could differ, as these estimates and assumptions involve judgment.

(b) Derivatives

We use derivatives to manage exposures to commodity price risk and fluctuations in interest rates.

We account for derivatives under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (Statement 133), which requires all derivatives, subject to certain exemptions, to be accounted for at fair value. Changes in the derivative’s fair value must be recognized currently in earnings unless specific hedge accounting criteria are met. Gains and losses on derivatives that qualify as hedges can (a) offset related fair value changes on the hedged item in the income statement for fair value hedges; or (b) be recorded in other comprehensive income for cash flow hedges. To qualify for hedge accounting, derivatives must be designated as a hedge (for example, an offset of interest rate risks) and must be effective at reducing the risk associated with the hedged item. Accordingly, changes in the fair values or cash flows of instruments designated as hedges must be highly correlated with changes in the fair values or cash flows of the related hedged items.

(i) Energy Marketing and Trading

We market and trade electricity, natural gas, coal, and other energy-related products. We designate derivative transactions as trading or non-trading at the time they are originated in accordance with Emerging Issues Task Force (EITF) Issue 02-3, Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities (EITF 02-3). Derivatives are classified as non-trading only when we have the intent and projected ability to fulfill substantially all obligations from company-owned assets. Such classification is generally limited to the sale of generation to third

parties when it is not required to meet native load requirements (end-use customers within our public utility companies’ franchise service territory). All other energy derivatives (excluding electric and gas purchase contracts for use in serving our native load requirements) are classified as trading. Gas trading is comprised of transactions for which gas is physically delivered to a customer (physical gas trading), as well as transactions that are financial in nature for which delivery rarely occurs (financial gas trading). Since our gas marketing and trading operations own no gas production and have limited transmission ownership, their gas transactions are considered trading whether physical or financial. Certain gas and coal contracts do not meet the definition of a derivative and, therefore, are not required to be classified as trading or non-trading.

In 2003, we began reflecting realized and unrealized gains and losses on trading derivatives on a net basis in Operating Revenues pursuant to the requirements of EITF 02-3, regardless of whether the transactions were settled physically. Prior to 2003, the realized results for trading contracts that were physical in nature were presented as either (a) Operating Revenues, if sales contracts or (b) Fuel and purchased and exchanged power expense or Gas purchased expense, if purchase contracts. The presentation for 2002 has been reclassified to conform to the new presentation. Non-trading derivatives, as well as energy marketing contracts that are not derivatives, are presented on a gross basis in Operating Revenues or Fuel and purchased and exchanged power expense. (For more information see (g)(i)).

We account for nearly all non-trading derivatives and non-derivative energy contracts on the accrual basis of accounting (accrual contracts). Non-trading derivatives are accounted for as accrual only if the contract qualifies for the normal purchases and sales scope exception in Statement 133. Trading derivatives are accounted for at fair value with changes in fair value, which represent unrealized gains and losses, included as revenues in our Statements of Income. These derivatives are shown in our Balance Sheets as Energy risk management assets and Energy risk management liabilities. In October 2002, the EITF reached a consensus in EITF 02-3 to rescind EITF Issue 98-10, Accounting for Contracts Involved in Energy Trading and Risk Management Activities (EITF 98-10). This decision required that non-derivative contracts and natural gas inventory previously accounted for at fair value be accounted for on an accrual basis, beginning January 1, 2003. In June 2003, we began applying fair value hedge accounting to certain quantities of natural gas inventory. See (c) for further discussion.

Although we intend to settle accrual contracts with company-owned assets, occasionally we settle these contracts with purchases on the open trading markets. The cost of these purchases could be in excess of the associated revenues. We recognize the gains or losses on these transactions as delivery occurs. Open market purchases may occur for the following reasons:

• generating station outages;

• least-cost alternative;

• native load requirements; and

• extreme weather.

We anticipate that some of the electricity obligations, even though considered trading derivatives, will ultimately be settled using company-owned generation. The variable cost

of this generation is typically below the market price at which the trading portfolio has been valued. The potential for earnings volatility from period to period is increased due to the risks associated with marketing and trading electricity, natural gas, and other energy-related products.

We value trading derivatives using end-of-the-period fair values, utilizing the following factors (as applicable):

• closing exchange prices (that is, closing prices for standardized electricity and natural gas products traded on an organized exchange, such as the New York Mercantile Exchange);

• broker-dealer and over-the-counter price quotations; and

• model pricing (which considers time value and historical volatility factors of electricity and natural gas).

(ii) Interest Rate Risk

We use interest rate swaps (an agreement by two parties to exchange fixed-interest rate cash flows for floating-interest rate cash flows) and treasury locks (an agreement that fixes the yield or price on a specific treasury security for a specific period, which we sometimes use in connection with the issuance of fixed rate debt). We account for such derivatives at fair value, and we assess the effectiveness of any interest rate swaps and/or treasury locks used in hedging activities.

At June 30, 2003, the ineffectiveness of instruments that we have classified as fair value or cash flow hedges of debt instruments was not material. Reclassification of unrealized gains or losses on cash flow hedges of debt instruments from Accumulated other comprehensive income (loss) occurs as interest is accrued on the debt instrument. We currently estimate that on an after-tax basis, $5 million of unrealized losses will be reclassified as a charge to Interest Expense during the twelve-month period ending June 30, 2004.

(c) Inventory

Prior to January 1, 2003, natural gas inventory for our North American gas trading operation, was accounted for at fair value. All other inventory was accounted for at the lower of cost or market, cost being determined through the weighted average method. Effective January 1, 2003, accounting for the North American gas trading operation’s inventory was adjusted to the lower of cost or market method with a cumulative effect adjustment, as required by EITF 02-3. See (g)(i) below for additional discussion of the impacts of adopting EITF 02-3.

In June 2003, in accordance with the provisions of Statement 133, Cinergy designated specific derivatives as fair value hedges for certain volumes of our natural gas inventory. Under this accounting election, changes in the fair value of both the derivative as well as the hedged item (the specified inventory) are included in income. We assess the effectiveness of the derivatives in offsetting the change in fair value of the inventory on a quarterly basis. For the three months ended, June 30, 2003, the hedges’ ineffectiveness was not material.

(d) Stock-Based Compensation

Effective January 1, 2003, Cinergy adopted prospectively the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, as amended by Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, for all employee awards granted or modified after January 1, 2003. Prior to 2003, we accounted for our stock-based compensation plans using the intrinsic value method under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. The following table illustrates the effect on our Net Income and Earnings Per Common Share (EPS) if the fair value based method had been applied to all outstanding and unvested awards in each period.

		Quarter Ended June 30				Year to Date June 30
		(in millions, except per share amounts)

		2003		2002		2003		2002

Net income, as reported		$	85	$	45	$	251	$	130

Add:	Stock-based employee compensation expense included in reported net income, net of related tax effects.	6		2		9		5

Deduct:	Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects.	6		3		10		6

Pro-forma net income		$	85	$	44	$	250	$	129

EPS - as reported		$	0.47	$	0.27	$	1.43	$	0.79
EPS - pro-forma		$	0.47	$	0.27	$	1.42	$	0.78

EPS assuming dilution - as reported		$	0.47	$	0.26	$	1.42	$	0.78
EPS assuming dilution - pro-forma

UNION LIGHT HEAT & POWER CO 10-Q