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

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

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

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

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

Registrant	Description	Shares

Cinergy Corp.	Par value $.01 per share	178,070,206

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.*
			Condensed Consolidated Statements of Income
			Condensed Consolidated Balance Sheets
			Condensed Consolidated Statements of Changes in Common Stock Equity
			Condensed Consolidated Statements of Cash Flows

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

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

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

			Notes to Condensed 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

4			Submission of Matters to a Vote of Security Holders

6			Exhibits and Reports on Form 8-K

			Signatures

CINERGY CORP.

AND SUBSIDIARY COMPANIES

CINERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Quarter Ended September 30					Year to Date September 30
	2003		2002			2003		2002
	(dollars in thousands, except per share amounts) (unaudited)
Operating Revenues (Note 1(g)(i))
Electric	$	920,638	$	965,435		$	2,512,954	$	2,531,283
Gas	124,533		104,073			638,378		374,345
Other	46,806		49,730			142,525		89,291
Total Operating Revenues	1,091,977		1,119,238			3,293,857		2,994,919

Operating Expenses
Fuel and purchased and exchanged power (Note 1(g)(i))	329,997		302,366			840,332		761,858
Gas purchased (Note 1(g)(i))	79,582		49,283			368,896		188,725
Operation and maintenance	317,897		363,362			973,065		962,280
Depreciation	104,856		100,050			313,719		294,345
Taxes other than income taxes	55,828		64,890			200,535		201,559
Total Operating Expenses	888,160		879,951			2,696,547		2,408,767

Operating Income	203,817		239,287			597,310		586,152

Equity in Earnings of Unconsolidated Subsidiaries	4,956		3,248			11,652		7,356
Miscellaneous Income – Net	12,296		6,965			27,678		2,517
Interest Expense	73,075		62,518			192,623		180,122
Preferred Dividend Requirement of Subsidiary Trust (Note 1(g)(iii))	—		5,966			11,940		17,847

Income Before Taxes	147,994		181,016			432,077		398,056

Income Taxes	35,155		47,799			102,121		123,641
Preferred Dividend Requirements of Subsidiaries	858		859			2,574		2,575

Income Before Discontinued Operations and Cumulative Effect of Changes in Accounting Principles	111,981		132,358			327,382		271,840

Discontinued operations, net of tax (Note 8)	—		(1,790		)	8,875		(561		)
Cumulative effect of changes in accounting principles, net of tax (Note 1(g)(vii))	—		—			26,462		(10,899		)
Net Income	$	111,981	$	130,568		$	362,719	$	260,380

Average Common Shares Outstanding	177,751		167,967			175,944		166,544

Earnings Per Common Share (Note 10)
Income Before Discontinued Operations and Cumulative Effect of Changes in Accounting Principles	$	0.63	$	0.79		$	1.86	$	1.63
Discontinued operations, net of tax	—		(0.01		)	0.05		—
Cumulative effect of changes in accounting principles, net of tax	—		—			0.15		(0.06		)
Net Income	$	0.63	$	0.78		$	2.06	$	1.57

Earnings Per Common Share - Assuming Dilution (Note 10)
Income Before Discontinued Operations and Cumulative Effect of Changes in Accounting Principles	$	0.62	$	0.78		$	1.84	$	1.61
Discontinued operations, net of tax	—		(0.01		)	0.05		—
Cumulative effect of changes in accounting principles, net of tax	—		—			0.15		(0.06		)
Net Income	$	0.62	$	0.77		$	2.04	$	1.55

Dividends Declared Per Common Share	$	0.46	$	0.45		$	1.38	$	1.35

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

CINERGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

	September 30 2003		December 31 2002
	(dollars in thousands) (unaudited)

Current Assets
Cash and cash equivalents	$	486,400	$	200,112
Restricted deposits	709		3,092
Notes receivable, current	63,594		135,873
Accounts receivable less accumulated provision for doubtful accounts of $10,873 at September 30, 2003, and $16,368 at December 31, 2002	1,029,127		1,280,810
Materials, supplies, and fuel (Note 1(d))	319,632		319,454
Energy risk management current assets (Note 1(c)(i))	224,299		464,028
Prepayments and other	138,236		107,086
Total Current Assets	2,261,997		2,510,455

Property, Plant, and Equipment - at Cost
Utility plant in service (Note 12)	9,557,536		8,641,351
Construction work in progress	288,069		469,300
Total Utility Plant	9,845,605		9,110,651
Non-regulated property, plant, and equipment (Note 12)	4,326,626		4,616,754
Accumulated depreciation (Note 1(g)(vi))	5,319,500		5,157,040
Net Property, Plant, and Equipment	8,852,731		8,570,365

Other Assets
Regulatory assets	1,012,457		1,022,696
Investments in unconsolidated subsidiaries	482,978		417,188
Energy risk management non-current assets (Note 1(c)(i))	127,407		162,773
Notes receivable, non-current (Note 4)	218,347		—
Other investments	173,790		163,851
Goodwill (Note 1 (g)(v))	43,717		43,717
Other intangible assets	1,723		2,059
Other	300,825		266,659
Total Other Assets	2,361,244		2,078,943

Assets of Discontinued Operations (Note 8)	7,187		147,265

Total Assets	$	13,483,159	$	13,307,028

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

CINERGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS’ EQUITY

	September 30 2003			December 31 2002
	(dollars in thousands) (unaudited)

Current Liabilities
Accounts payable	$	947,882		$	1,318,379
Accrued taxes	228,225			258,613
Accrued interest	79,161			62,244
Notes payable and other short-term obligations (Note 5)	336,687			667,973
Long-term debt due within one year	1,113,319			176,000
Energy risk management current liabilities (Note 1(c)(i))	186,146			407,710
Other	133,677			105,026
Total Current Liabilities	3,025,097			2,995,945

Non-Current Liabilities
Long-term debt (Note 3)	4,129,946			4,011,568
Deferred income taxes	1,519,097			1,458,171
Unamortized investment tax credits	111,186			118,095
Accrued pension and other postretirement benefit costs	606,375			626,167
Energy risk management non-current liabilities (Note 1(c)(i))	117,777			143,991
Other	233,768			179,767
Total Non-Current Liabilities	6,718,149			6,537,759

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

Commitments and Contingencies (Note 7)

Total Liabilities	9,752,123			9,642,537

Preferred Trust Securities (Note 1(g)(iii))
Company obligated, mandatorily redeemable, preferred trust securities of subsidiary, holding solely debt securities of the company	—			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 - 177,899,822 at September 30, 2003, and 168,663,115 at December 31, 2002	1,779			1,687
Paid-in capital	2,170,392			1,918,136
Retained earnings	1,525,727			1,403,453
Accumulated other comprehensive income (loss)	(29,680		)	(29,800		)
Total Common Stock Equity	3,668,218			3,293,476

Total Liabilities and Shareholders’ Equity	$	13,483,159		$	13,307,028

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

CINERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY

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

Quarter Ended September 30, 2003

Balance at July 1, 2003 (176,947,118 shares)	$	1,769	$	2,135,968	$	1,495,502		$	(24,423	)	$	3,608,816
Comprehensive income:
Net income					111,981						111,981
Other comprehensive income (loss), net of tax effect of $2,532
Foreign currency translation adjustment								(8,365		)	(8,365		)
Minimum pension liability adjustment								26			26
Unrealized gain (loss) on investment trusts								32			32
Cash flow hedges (Note 1(c))								3,050			3,050
Total comprehensive income											106,724

Issuance of common stock - net (952,704 shares)	10		31,824								31,834
Dividends on common stock ($.46 per share)					(81,725		)				(81,725		)
Other (Note 2(b))			2,600		(31		)				2,569

Ending balance at September 30, 2003 (177,899,822 shares)	$	1,779	$	2,170,392	$	1,525,727		$	(29,680	)	$	3,668,218

Quarter Ended September 30, 2002

Balance at July 1, 2002 (167,486,129 shares)	$	1,675	$	1,861,689	$	1,319,881		$	(4,787	)	$	3,178,458
Comprehensive income:
Net income					130,568						130,568
Other comprehensive income (loss), net of tax effect of $12,501
Foreign currency translation adjustment								4,810			4,810
Unrealized gain (loss) on investment trusts								(3,003		)	(3,003		)
Cash flow hedges (Note 1(c))								(18,744		)	(18,744		)
Total comprehensive income											113,631

Issuance of common stock - net (781,597 shares)	8		22,888								22,896
Dividends on common stock ($.45 per share)					(75,469		)				(75,469		)
Other			4,542		8						4,550

Ending balance at September 30, 2002 (168,267,726 shares)	$	1,683	$	1,889,119	$	1,374,988		$	(21,724	)	$	3,244,066

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

CINERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY

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

Year to Date September 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					362,719						362,719
Other comprehensive income (loss), net of tax effect of $(26)
Foreign currency translation adjustment, net of reclassification adjustments of $6,134 (net of tax) (Note 8)								(2,312		)	(2,312		)
Minimum pension liability adjustment								26			26
Unrealized gain (loss) on investment trusts								2,551			2,551
Cash flow hedges (Note 1(c))								(145		)	(145		)
Total comprehensive income											362,839

Issuance of common stock - net (9,236,707 shares)	92		251,179								251,271
Dividends on common stock ($1.38 per share)					(240,402		)				(240,402		)
Other (Note 2(b))			1,077		(43		)				1,034

Ending balance at September 30, 2003 (177,899,822 shares)	$	1,779	$	2,170,392	$	1,525,727		$	(29,680	)	$	3,668,218

Year to Date September 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					260,380						260,380
Other comprehensive income (loss), net of tax effect of $7,879
Foreign currency translation adjustment								20,123			20,123
Minimum pension liability adjustment								136			136
Unrealized gain (loss) on investment trusts								(4,637		)	(4,637		)
Cash flow hedges (Note 1(c))								(20,417		)	(20,417		)
Total comprehensive income											255,585

Issuance of common stock - net (8,864,887 shares)	89		258,300								258,389
Dividends on common stock ($1.35 per share)					(222,551		)				(222,551		)
Other			11,160		24						11,184

Ending balance at September 30, 2002 (168,267,726 shares)	$	1,683	$	1,889,119	$	1,374,988		$	(21,724	)	$	3,244,066

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

CINERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year to Date September 30
	2003			2002
	(dollars in thousands) (unaudited)

Cash Flows from Continuing Operations
Operating Activities
Net income	$	362,719		$	260,380
Items providing or (using) cash currently:
Depreciation	313,719			294,345
(Income) Loss of discontinued operations, net of tax	(8,875		)	561
Cumulative effect of changes in accounting principles, net of tax	(26,462		)	10,899
Change in net position of energy risk management activities	(18,097		)	(61,838		)
Deferred income taxes and investment tax credits – net	35,828			169,377
Equity in (earnings) losses of unconsolidated subsidiaries	(11,652		)	(7,356		)
Allowance for equity funds used during construction	(7,111		)	(8,802		)
Regulatory assets deferrals	(61,846		)	(69,923		)
Regulatory assets amortization	74,686			93,163
Accrued pension and other postretirement benefit costs	(19,792		)	51,587
Deferred costs under gas recovery mechanism	(31,803		)	(2,592		)
Changes in current assets and current liabilities:
Restricted deposits	2,383			(798		)
Accounts and notes receivable	338,099			(357,370		)
Materials, supplies, and fuel	(178		)	(71,535		)
Prepayments	(29,923		)	(40,044		)
Accounts payable	(364,181		)	432,766
Accrued taxes and interest	(15,069		)	(97,625		)
Other assets	5,772			48,362
Other liabilities	58,130			11,322

Net cash provided by (used in) operating activities	596,347			654,879

Financing Activities
Change in short-term debt	(332,404		)	(417,228		)
Issuance of long-term debt	688,166			628,170
Redemption of long-term debt	(187,873		)	(115,672		)
Funds on deposit from issuance of debt securities	—			(131,600		)
Retirement of preferred stock of subsidiaries	(10		)	(3		)
Issuance of common stock	251,271			258,389
Dividends on common stock	(240,402		)	(222,551		)

Net cash provided by (used in) financing activities	178,748			(495		)

Investing Activities
Construction expenditures (less allowance for equity funds used during construction)	(508,671		)	(587,445		)
Proceeds from notes receivable	5,076			—
Acquisitions and other investments	(36,464		)	(56,439		)
Proceeds from sale of subsidiaries and equity investments	51,252			7,305

Net cash provided by (used in) investing activities	(488,807		)	(636,579		)

Net increase (decrease) in cash and cash equivalents from continuing operations	286,288			17,805

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

Cash and cash equivalents from continuing operations at end of period	$	486,400		$	105,062

Cash Flows from Discontinued Operations
Operating activities	$	(7,285	)	$	17,992
Financing activities	(13,484		)	(22,551		)
Investing activities	(202		)	(5,046		)

Net increase (decrease) in cash and cash equivalents from discontinued operations	(20,971		)	(9,605		)

Cash and cash equivalents from discontinued operations at beginning of period	20,971			23,810

Cash and cash equivalents from discontinued operations at end of period	$	—		$	14,205

Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest (net of amount capitalized)	$	182,108		$	207,659
Income taxes	$	90,281		$	30,900

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

THE CINCINNATI GAS & ELECTRIC COMPANY

AND SUBSIDIARY COMPANIES

THE CINCINNATI GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

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

Operating Revenues (Note 1(g)(i))
Electric	$	474,840	$	492,617		$	1,300,859		$	1,301,442
Gas	66,399		41,452			426,986			277,069
Total Operating Revenues	541,239		534,069			1,727,845			1,578,511

Operating Expenses
Fuel and purchased and exchanged power (Note 1(g)(i))	144,794		136,459			381,615			352,292
Gas purchased	32,223		12,594			252,074			145,033
Operation and maintenance	133,474		150,247			394,171			394,443
Depreciation	42,542		49,005			142,119			146,057
Taxes other than income taxes	44,553		50,304			154,810			149,509
Total Operating Expenses	397,586		398,609			1,324,789			1,187,334

Operating Income	143,653		135,460			403,056			391,177

Miscellaneous Income - Net	9,654		4,140			23,137			4,002
Interest Expense	29,506		23,746			84,766			68,375

Income Before Taxes	123,801		115,854			341,427			326,804

Income Taxes	44,938		44,085			125,347			124,780

Income Before Cumulative Effect of Changes in Accounting Principles	78,863		71,769			216,080			202,024

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

Net Income	$	78,863	$	71,769		$	247,018		$	202,024

Preferred Dividend Requirement	211		211			634			634

Net Income Applicable to Common Stock	$	78,652	$	71,558		$	246,384		$	201,390

Net Income	$	78,863	$	71,769		$	247,018		$	202,024

Other Comprehensive Income (Loss), Net of Tax	2,720		(17,588		)	(307		)	(19,673		)

Comprehensive Income	$	81,583	$	54,181		$	246,711		$	182,351

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

THE CINCINNATI GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

	September 30 2003		December 31 2002
	(dollars in thousands) (unaudited)

Current Assets
Cash and cash equivalents	$	99,551	$	45,336
Restricted deposits	137		3,071
Notes receivable from affiliated companies	137,144		148,823
Accounts receivable less accumulated provision for doubtful accounts of $4,096 at September 30, 2003, and $5,942 at December 31, 2002	103,345		117,269
Accounts receivable from affiliated companies	9,730		97,584
Materials, supplies, and fuel	135,035		121,881
Energy risk management current assets (Note 1(c)(i))	78,689		57,912
Prepayments and other	35,565		8,560
Total Current Assets	599,196		600,436

Property, Plant, and Equipment - at Cost
Utility plant in service (Note 12)
Electric	2,146,147		2,073,133
Gas	1,043,356		1,003,870
Common	249,382		248,938
Total Utility Plant In Service	3,438,885		3,325,941
Construction work in progress	115,161		84,249
Total Utility Plant	3,554,046		3,410,190
Non-regulated property, plant, and equipment (Note 12)	3,510,124		3,445,056
Accumulated depreciation (Note 1(g)(vi))	2,754,575		2,712,105
Net Property, Plant, and Equipment	4,309,595		4,143,141

Other Assets
Regulatory assets	594,727		604,776
Energy risk management non-current assets (Note 1(c)(i))	61,789		64,762
Other investments	1,084		1,082
Other	178,884		127,550
Total Other Assets	836,484		798,170

Total Assets	$	5,745,275	$	5,541,747

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

THE CINCINNATI GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDER’S EQUITY

	September 30 2003			December 31 2002
	(dollars in thousands) (unaudited)

Current Liabilities
Accounts payable	$	145,449		$	195,812
Accounts payable to affiliated companies	33,253			146,558
Accrued taxes	193,641			159,199
Accrued interest	32,478			22,872
Notes payable and other short-term obligations (Note 5)	112,100			112,100
Notes payable to affiliated companies (Note 5)	9,042			8,947
Long-term debt due within one year	395,500			120,000
Energy risk management current liabilities (Note 1(c)(i))	73,445			49,288
Other	28,834			37,160
Total Current Liabilities	1,023,742			851,936

Non-Current Liabilities
Long-term debt (Note 3)	1,456,716			1,569,713
Deferred income taxes	942,250			882,628
Unamortized investment tax credits	80,689			85,198
Accrued pension and other postretirement benefit costs	206,003			201,284
Energy risk management non-current liabilities (Note 1(c)(i))	43,204			31,326
Other	82,430			88,843
Total Non-Current Liabilities	2,811,292			2,858,992

Commitments and Contingencies (Note 7)

Total Liabilities	3,835,034			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 September 30, 2003, and December 31, 2002	762,136			762,136
Paid-in capital	586,292			586,292
Retained earnings	567,381			487,652
Accumulated other comprehensive income (loss)	(26,053		)	(25,746		)
Total Common Stock Equity	1,889,756			1,810,334

Total Liabilities and Shareholder’s Equity	$	5,745,275		$	5,541,747

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

THE CINCINNATI GAS & ELECTRIC COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year to Date September 30
	2003			2002
	(dollars in thousands) (unaudited)

Operating Activities
Net income	$	247,018		$	202,024
Items providing or (using) cash currently:
Depreciation	142,119			146,057
Deferred income taxes and investment tax credits - net	35,406			95,730
Cumulative effect of changes in accounting principles, net of tax	(30,938		)	—
Change in net position of energy risk management activities	(24,465		)	(19,560		)
Allowance for equity funds used during construction	(2,566		)	261
Regulatory assets deferrals	(17,984		)	(45,007		)
Regulatory assets amortization	31,411			38,024
Accrued pension and other postretirement benefit costs	4,719			5,549
Deferred costs under gas cost recovery mechanism	(31,803		)	(2,592		)
Changes in current assets and current liabilities:
Restricted deposits	2,934			(765		)
Accounts and notes receivable	157,926			(199,985		)
Materials, supplies, and fuel	(13,154		)	6,576
Prepayments	(8,040		)	(14,830		)
Accounts payable	(163,059		)	214,967
Accrued taxes and interest	44,048			(7,301		)
Other assets	(12,307		)	5,856
Other liabilities	(15,350		)	(7,506		)

Net cash provided by (used in) operating activities	345,915			417,498

Financing Activities
Change in short-term debt, including net affiliate notes	(44,374		)	(451,627		)
Issuance of long-term debt	256,198			580,570
Redemption of long-term debt	(100,000		)	(100,000		)
Funds on deposit from issuance of debt securities	—			(84,000		)
Retirement of preferred stock	—			(1		)
Dividends on preferred stock	(634		)	(634		)
Dividends on common stock	(166,655		)	(138,712		)

Net cash provided by (used in) financing activities	(55,465		)	(194,404		)

Investing Activities
Construction expenditures (less allowance for equity funds used during construction)	(236,235		)	(223,740		)
Other investments	—			98

Net cash provided by (used in) investing activities	(236,235		)	(223,642		)

Net increase (decrease) in cash and cash equivalents	54,215			(548		)

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

Cash and cash equivalents at end of period	$	99,551		$	8,526

Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest (net of amount capitalized)	$	69,321		$	68,749
Income taxes	$	38,146		$	16,121

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

PSI ENERGY, INC.

AND SUBSIDIARY COMPANY

PSI ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

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

Operating Revenues(Note 1(g)(i))
Electric	$	437,084		$	470,772		$	1,210,157		$	1,215,791

Operating Expenses
Fuel and purchased and exchanged power (Note 1(g)(i))	177,786			168,683			466,656			420,278
Operation and maintenance	113,336			128,931			348,668			386,559
Depreciation	47,695			39,826			135,351			115,954
Taxes other than income taxes	10,322			13,446			42,354			46,992
Total Operating Expenses	349,139			350,886			993,029			969,783

Operating Income	87,945			119,886			217,128			246,008

Miscellaneous Income (Expense) - Net	(2,221		)	4,434			5,348			14,155
Interest Expense	21,324			18,782			63,477			55,862

Income Before Taxes	64,400			105,538			158,999			204,301

Income Taxes	26,808			37,895			64,107			68,861

Income Before Cumulative Effect of a Change in Accounting Principle	37,592			67,643			94,892			135,440

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

Net Income	$	37,592		$	67,643		$	94,398		$	135,440

Preferred Dividend Requirement	647			648			1,940			1,941

Net Income Applicable to Common Stock	$	36,945		$	66,995		$	92,458		$	133,499

Net Income	$	37,592		$	67,643		$	94,398		$	135,440

Other Comprehensive Income (Loss), Net of Tax	(77		)	(2,716		)	2,247			(3,684		)

Comprehensive Income	$	37,515		$	64,927		$	96,645		$	131,756

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

PSI ENERGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

	September 30 2003		December 31 2002
	(dollars in thousands) (unaudited)

Current Assets
Cash and cash equivalents	$	11,452	$	2,007
Restricted deposits	571		20
Notes receivable from affiliated companies	21,108		53,755
Accounts receivable less accumulated provision for doubtful accounts of $2,068 at September 30, 2003, and $5,656 at December 31, 2002	48,295		84,819
Accounts receivable from affiliated companies	4,328		437
Materials, supplies, and fuel	122,574		137,292
Energy risk management current assets (Note 1(c)(i))	7,090		8,701
Prepayments and other	33,751		44,725
Total Current Assets	249,169		331,756

Property, Plant, and Equipment - at Cost
Utility plant in service	6,118,651		5,315,410
Construction work in progress	172,908		385,051
Total Utility Plant	6,291,559		5,700,461
Accumulated depreciation	2,436,536		2,334,157
Net Property, Plant, and Equipment (Note 12)	3,855,023		3,366,304

Other Assets
Regulatory assets	417,730		417,920
Energy risk management non-current assets (Note 1(c)(i))	8,988		16,590
Other investments	60,852		54,683
Other	46,278		35,703
Total Other Assets	533,848		524,896

Total Assets	$	4,638,040	$	4,222,956

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

PSI ENERGY, INC.
condensed consolidated balance sheets

LIABILITIES AND SHAREHOLDER’S EQUITY

	September 30 2003			December 31 2002
	(dollars in thousands) (unaudited)

Current Liabilities
Accounts payable	$	42,452		$	113,563
Accounts payable to affiliated companies	13,486			107,364
Accrued taxes	117,415			105,960
Accrued interest	26,011			23,078
Notes payable and other short-term obligations (Note 5)	—			35,000
Notes payable to affiliated companies (Note 5)	164,974			138,055
Long-term debt due within one year	1,038			56,000
Energy risk management current liabilities (Note 1(c)(i))	14,648			8,000
Other	27,936			22,335
Total Current Liabilities	407,960			609,355

Non-Current Liabilities
Long-term debt (Note 3)	1,720,330			1,315,984
Deferred income taxes	556,636			538,745
Unamortized investment tax credits	30,497			32,897
Accrued pension and other postretirement benefit costs	176,828			184,299
Energy risk management non-current liabilities (Note 1(c)(i))	3,352			17,157
Other	77,426			80,879
Total Non-Current Liabilities	2,565,069			2,169,961

Commitments and Contingencies (Note 7)

Total Liabilities	2,973,029			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 September 30, 2003, and December 31, 2002	539			539
Paid-in capital (Note 2(c))	626,931			426,931
Retained earnings	1,001,080			981,946
Accumulated other comprehensive income (loss)	(5,872		)	(8,119		)
Total Common Stock Equity	1,622,678			1,401,297

Total Liabilities and Shareholder’s Equity	$	4,638,040		$	4,222,956

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

PSI ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year to Date September 30
	2003			2002
	(dollars in thousands) (unaudited)

Operating Activities
Net income	$	94,398		$	135,440
Items providing or (using) cash currently:
Depreciation	135,351			115,954
Cumulative effect of a change in accounting principle, net of tax	494			—
Deferred income taxes and investment tax credits - net	14,370			46,376
Change in net position of energy risk management activities	(1,731		)	8,443
Allowance for equity funds used during construction	(4,545		)	(9,063		)
Regulatory assets deferrals	(43,862		)	(24,916		)
Regulatory assets amortization	43,275			55,139
Accrued pension and other postretirement benefit costs	(7,471		)	4,603
Changes in current assets and current liabilities:
Restricted deposits	(551		)	(34		)
Accounts and notes receivable	65,280			222,369
Materials, supplies, and fuel	14,718			(35,243		)
Prepayments	(154		)	(3,857		)
Accounts payable	(164,989		)	(147,681		)
Accrued taxes and interest	14,388			875
Other assets	6,980			4,881
Other liabilities	(909		)	(8,338		)

Net cash provided by (used in) operating activities	165,042			364,948

Financing Activities
Change in short-term debt, including net affiliate notes	(8,081		)	37,287
Issuance of long-term debt	431,968			47,600
Redemption of long-term debt	(459,865		)	(23,000		)
Contribution from parent	200,000			—
Funds on deposit from issuance of debt securities	—			(47,600		)
Retirement of preferred stock	(10		)	(2		)
Dividends on preferred stock	(1,940		)	(1,940		)
Dividends on common stock	(73,324		)	(83,448		)

Net cash provided by (used in) financing activities	88,748			(71,103		)

Investing Activities
Construction expenditures (less allowance for equity funds used during construction)	(241,859		)	(286,610		)
Other investments	(2,486		)	(3,098		)

Net cash provided by (used in) investing activities	(244,345		)	(289,708		)

Net increase (decrease) in cash and cash equivalents	9,445			4,137

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

Cash and cash equivalents at end of period	$	11,452		$	5,724

Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest (net of amount capitalized)	$	72,455		$	75,807
Income taxes	$	50,419		$	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 condensed consolidated financial statements.

THE UNION LIGHT, HEAT

AND POWER COMPANY

THE UNION LIGHT, HEAT AND POWER COMPANY

CONDENSED STATEMENTS OF INCOME

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

Operating Revenues
Electric	$	64,199	$	68,353	$	170,224	$	175,346
Gas	11,240		7,364		75,007		53,584
Total Operating Revenues	75,439		75,717		245,231		228,930

Operating Expenses
Electricity purchased from parent company for resale	44,546		48,445		120,805		123,091
Gas purchased	5,620		2,732		46,570		30,932
Operation and maintenance	14,689		14,819		41,068		38,199
Depreciation	4,554		4,277		13,582		13,009
Taxes other than income taxes	1,135		1,167		3,417		3,535
Total Operating Expenses	70,544		71,440		225,442		208,766

Operating Income	4,895		4,277		19,789		20,164

Miscellaneous Income (Expense) - Net	886		1,690		3,266		(2,516		)
Interest Expense	1,548		1,431		4,520		4,388

Income Before Taxes	4,233		4,536		18,535		13,260

Income Taxes	1,667		1,302		7,058		4,150

Net Income	$	2,566	$	3,234	$	11,477	$	9,110

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

THE UNION LIGHT, HEAT AND POWER COMPANY

CONDENSED BALANCE SHEETS

ASSETS

	September 30 2003		December 31 2002
	(dollars in thousands) (unaudited)

Current Assets
Cash and cash equivalents	$	5,108	$	3,926
Notes receivable from affiliated companies	4,009		13,337
Accounts receivable less accumulated provision for doubtful accounts of $163 at September 30, 2003, and $84 at December 31, 2002	417		703
Accounts receivable from affiliated companies	509		1,671
Materials, supplies, and fuel	9,774		8,182
Prepayments and other	418		316
Total Current Assets	20,235		28,135

Property, Plant, and Equipment - at Cost
Utility plant in service
Electric	271,763		258,094
Gas	228,436		215,505
Common	32,324		31,679
Total Utility Plant In Service	532,523		505,278
Construction work in progress	11,717		14,745
Total Utility Plant	544,240		520,023
Accumulated depreciation	198,059		187,876
Net Property, Plant, and Equipment (Note 12)	346,181		332,147

Other Assets
Regulatory assets	9,441		5,134
Other	19,095		16,811
Total Other Assets	28,536		21,945

Total Assets	$	394,952	$	382,227

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

THE UNION LIGHT, HEAT AND POWER COMPANY

CONDENSED BALANCE SHEETS

LIABILITIES AND SHAREHOLDER’S EQUITY

	September 30 2003			December 31 2002
	(dollars in thousands) (unaudited)

Current Liabilities
Accounts payable	$	3,775		$	8,816
Accounts payable to affiliated companies	17,291			22,297
Accrued taxes	3,877			1,487
Accrued interest	1,289			1,226
Long-term debt due within one year	20,000			20,000
Notes payable to affiliated companies (Note 5)	23,726			14,076
Other	6,146			6,368
Total Current Liabilities	76,104			74,270

Non-Current Liabilities
Long-term debt	54,676			54,653
Deferred income taxes	47,716			43,360
Unamortized investment tax credits	2,945			3,143
Accrued pension and other postretirement benefit costs	15,958			15,620
Other	15,217			14,017
Total Non-Current Liabilities	136,512			130,793

Commitments and Contingencies (Note 7)

Total Liabilities	212,616			205,063

Common Stock Equity
Common stock - $15.00 par value; authorized shares - 1,000,000; outstanding shares - 585,333 at September 30, 2003, and December 31, 2002	8,780			8,780
Paid-in capital	23,644			23,644
Retained earnings	149,972			144,800
Accumulated other comprehensive income (loss)	(60		)	(60		)
Total Common Stock Equity	182,336			177,164

Total Liabilities and Shareholder’s Equity	$	394,952		$	382,227

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

THE UNION LIGHT, HEAT AND POWER COMPANY

CONDENSED STATEMENTS OF CASH FLOWS

	Year to Date September 30
	2003			2002
	(dollars in thousands) (unaudited)

Operating Activities
Net income	$	11,477		$	9,110
Items providing or (using) cash currently:
Depreciation	13,582			13,009
Deferred income taxes and investment tax credits - net	4,157			1,395
Allowance for equity funds used during construction	(224		)	(523		)
Regulatory assets deferrals	(424		)	4,168
Regulatory assets amortization	505			(1,064		)
Accrued pension and other postretirement benefit costs	338			1,417
Deferred costs under gas cost recovery mechanism	(7,279		)	7,246
Changes in current assets and current liabilities:
Accounts and notes receivable	10,776			17,142
Materials, supplies, and fuel	(1,592		)	(1,671		)
Prepayments	(102		)	(174		)
Accounts payable	(10,047		)	(1,619		)
Accrued taxes and interest	2,453			2,194
Other assets	1,071			3,284
Other liabilities	375			(627		)

Net cash provided by (used in) operating activities	25,066			53,287

Financing Activities
Change in short-term debt, including net affiliate notes	9,650			(24,581		)
Dividends on common stock	(6,305		)	(2,675		)

Net cash provided by (used in) financing activities	3,345			(27,256		)

Investing Activities
Construction expenditures (less allowance for equity funds used during construction)	(27,229		)	(26,268		)
Other investments	—			(70		)

Net cash provided by (used in) investing activities	(27,229		)	(26,338		)

Net increase (decrease) in cash and cash equivalents	1,182			(307		)

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

Cash and cash equivalents at end of period	$	5,108		$	3,792

Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest (net of amount capitalized)	$	4,240		$	4,194
Income taxes	$	3,001		$	2,398

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

NOTES TO CONDENSED 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 Condensed 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 Condensed 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) Revenue Recognition

(i) Operating Revenues

The Cincinnati Gas & Electric Company (CG&E), PSI Energy, Inc. (PSI), and The Union Light, Heat and Power Company (ULH&P) (collectively, our operating companies) record Operating Revenues for electric and gas service when delivered to customers. Customers are billed throughout the month as both gas and electric meters are read. We recognize revenues for retail energy sales that have not yet been billed, but where gas or electricity has been consumed. This is termed “unbilled revenue” and is a widely recognized and accepted practice for utilities. In making our estimates of unbilled revenue, we use complex systems that consider various factors, including weather, in our calculation of retail customer consumption at the end of each month. Given the use of these systems and the fact that customers are billed monthly, we believe it is unlikely that materially different results will occur in future periods when revenue is subsequently billed.

The amount of unbilled revenues for Cinergy, CG&E, PSI, and ULH&P as of September 30, 2003 and 2002, were as follows:

	2003		2002
	*(in millions)*

Cinergy	$	117	$	124
CG&E and subsidiaries	60		63
PSI	57		61
ULH&P	11		11

(ii) Energy Marketing and Trading Revenues

We market and trade electricity, natural gas, coal, and other energy-related products. Many of the contracts associated with these products qualify as derivatives in accordance with Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (Statement 133). We designate derivative transactions as either 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). Generally, trading contracts are reported on a net basis and non-trading contracts are reported on a gross basis.

1. Gross Reporting

Gross reporting requires presentation of sales contracts in Operating Revenues and purchase contracts in Fuel and purchased and exchanged power expense or Gas purchased expense. Non-trading derivatives typically involve physical delivery of the underlying commodity and are therefore generally presented on a gross basis.

Derivatives are classified as non-trading only when (a) the contracts involve the purchase of gas or electricity to serve our native load requirements (end-use customers within our public utility companies’ franchise service territory), or (b) the contracts involve the sale of gas or electricity and we have the intent and projected ability to fulfill substantially all obligations from company-owned assets, which generally is limited to the sale of generation to third parties when it is not required to meet native load requirements.

Energy activities that do not principally involve derivatives (e.g., natural gas sales from storage) are presented on a gross basis.

2. Net Reporting

Net reporting requires presentation of realized and unrealized gains and losses on trading derivatives on a net basis in Operating Revenues. In 2003, we began reflecting the results of trading derivatives on a net basis 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 on a gross basis. The presentation for 2002 has been reclassified to conform to the new presentation. See (g)(i) below for further discussion.

Energy derivatives that are not classified as non-trading based on the above requirements are deemed to be trading. Trading typically involves frequent buying and selling with the objective of generating profits from differences in price.

(c) Derivatives

We account for derivatives pursuant to 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 Statements of Income 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 account for all energy trading derivatives at fair value. These derivatives are shown in our Balance Sheets as Energy risk management assets and Energy risk management liabilities. Changes in the derivative’s fair value represent unrealized gains and losses and are recognized as revenues in our Statements of Income unless specific hedge accounting criteria are met.

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). EITF 98-10 permitted non-derivative contracts to be accounted for at fair value if certain criteria were met. Effective with the adoption of EITF 02-3 on January 1, 2003, non-derivative contracts and natural gas inventory previously accounted for at fair value were required to be accounted for on an accrual basis. See (d) for further discussion.

As a response to this discontinuance of fair value accounting, in June 2003, Cinergy began designating 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 the Statements of 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, September 30, 2003, the hedges’ ineffectiveness was not material.

Non-trading derivatives involve the physical delivery of energy and are therefore typically accounted for as accrual contracts, unless the contract does not qualify for the normal purchases and sales scope exception in Statement 133.

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 value 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) Financial

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 assess the effectiveness of any such derivative used in hedging activities.

At September 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. The unrealized losses that will be reclassified as a charge to Interest Expense during the twelve-month period ending September 30, 2004 is not expected to be material.

(d) Inventory

Prior to January 1, 2003, natural gas inventory for our 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 our 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. The impacts of adopting EITF 02-3 are discussed in (g)(i).

(e) 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 all 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 September 30				Year to Date September 30
	*(in millions, except per share amounts)*
	2003		2002		2003		2002

Net income, as reported	$	112	$	131	$	363	$	260

Add: Stock-based employee compensation expense included in reported net income, net of related tax effects.	3		5		12		10

Deduct: Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects.	4		5		14		11

Pro-forma net income	$	111	$	131	$	361	$	259

EPS - as reported	$	0.63	$	0.78	$	2.06	$	1.57
EPS - pro-forma	$	0.63	$	0.78	$	2.05	$	1.56

UNION LIGHT HEAT & POWER CO 10-Q