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PSI ENERGY INC
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(Name of Registrant As Specified In Its Charter)

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PSI ENERGY, INC

1000 EAST MAIN STREET
PLAINFIELD, INDIANA 46168

[LOGO]

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 17, 1997

TO THE SHAREHOLDERS OF
PSI ENERGY, INC.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of PSI
Energy, Inc. will be held at the Cincinnati Club Building, 30 Garfield Place,
Cincinnati, Ohio, on Thursday, April 17, 1997 at 10:00 a.m., eastern daylight
saving time, for the purposes of electing seven directors and transacting such
other business as may legally come before the meeting, or any adjournment or
postponement thereof.

Only shareholders of record at the close of business on Tuesday, February
18, 1997, will be entitled to vote at the meeting, or at any adjournment or
postponement thereof.

Proxies will not be solicited for this meeting and you are requested not to
send us a proxy. Shareholders are welcome to attend the meeting in person and
cast their votes by ballot on the issues presented at the meeting.

BY ORDER OF THE BOARD OF DIRECTORS,

CHERYL M. FOLEY
VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY

Dated: March 24, 1997

PSI ENERGY, INC.

1000 EAST MAIN STREET
PLAINFIELD, INDIANA 46168
(317) 839-9611

INFORMATION STATEMENT

INTRODUCTION

This Information Statement is first being mailed on or about March 24, 1997
to the shareholders of PSI Energy, Inc., an Indiana corporation (the "Company"),
in connection with its Annual Meeting of Shareholders to be held on April 17,
1997, or any adjournment or postponement of such meeting (the "Annual Meeting").
The Annual Report to Shareholders of Cinergy Corp., a Delaware corporation
("Cinergy"), including financial statements, for the year ended December 31,
1996 accompanies the mailing of this Information Statement. The Company has
engaged Corporate Investor Communications, Inc. ("CIC") to assist with the
mailing and, accordingly, will reimburse CIC for its reasonable out-of-pocket
expenses occurred in connection therewith.

Cinergy is a registered holding company under the Public Utility Holding
Company Act of 1935, as amended, and the parent company of the Company, The
Cincinnati Gas & Electric Company ("CG&E"), Cinergy Services, Inc. ("Services"),
and Cinergy Investments, Inc. ("Investments"). The Company is an operating
utility primarily engaged in providing electric service in north central,
central, and southern Indiana. CG&E is an operating utility primarily engaged in
providing electric and gas service in the southwestern portion of Ohio and,
through its principal subsidiary, The Union Light, Heat and Power Company
("ULH&P"), in adjacent areas in Kentucky. Services provides management,
financial, administrative, engineering, legal and other services to the Company,
Cinergy, CG&E, and Investments. Cinergy conducts its foreign and non-regulated
businesses through Investments and its subsidiaries.

Cinergy is the sole shareholder of the 53,913,701 outstanding shares of the
Company's common stock. There remain outstanding 4,525,844 shares of the
Company's cumulative preferred stock as of the close of business on February 18,
1997 which also have certain voting rights as described herein.

Since Cinergy's ownership represents more than 96% of the total votes that
could be cast at the Annual Meeting, and since shareholders do not have
cumulative voting rights and Cinergy intends to vote in favor of all
director-nominees for election as directors to the Board of Directors of the
Company (the "Board"), the election of such director-nominees is assured.
Therefore, the Board considered it inappropriate to solicit proxies for the
Annual Meeting. Please be advised, therefore, that this is only an Information
Statement. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY. However, if you wish to vote your shares of cumulative preferred
stock, you may do so by attending the meeting in person and casting your vote by
a ballot which will be provided for that purpose.

VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS

Only holders of record of the Company's voting securities at the close of
business on February 18, 1997 (the "Record Date") will be entitled to vote at
the Annual Meeting. The outstanding voting securities of the Company are divided
into two classes: common stock and cumulative preferred stock. The class of
cumulative preferred stock has been further issued in six series. The shares
outstanding as of the Record Date, and the vote to which each share is entitled,
are as follows:

VOTES PER
CLASS SHARES OUTSTANDING SHARE
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Common Stock (without par value) 53,913,701 1 vote
Cumulative Preferred Stock
Par Value $100 per share 799,207 1 vote
Par Value $25 per share 3,726,637 1/4 vote

As noted above, Cinergy owns all the outstanding shares of the Company's
class of common stock.

Pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), a beneficial owner of a security is any person who directly or
indirectly has or shares voting or investment power over such security. No
person or group is known by management of the Company to be the beneficial owner
of more than 5% of the Company's class of cumulative preferred stock as of the
Record Date.

SECURITY OWNERSHIP OF MANAGEMENT

The Company's director-nominees and named executive officers (as the latter
term is defined on page 13) did not beneficially own any shares of any series of
the class of the Company's cumulative preferred stock as of December 31, 1996.
The beneficial ownership of the outstanding shares of Cinergy common stock held
by each director-nominee and named executive officer, and of units representing
shares of Cinergy common stock paid as compensation to non-employee directors,
as of December 31, 1996, is set forth in the following table.

AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER(1) OF BENEFICIAL OWNERSHIP(2) UNITS(3)
- ----------------------------------------------------------- ----------------------------- -----------

James K. Baker............................................. 18,605 shares 2,795
Michael G. Browning........................................ 23,835 shares 6,124
John A. Hillenbrand II..................................... 33,259 shares 5,737
J. Wayne Leonard........................................... 96,651 shares
John M. Mutz............................................... 57,563 shares
Jackson H. Randolph........................................ 129,893 shares
James E. Rogers............................................ 218,171 shares
Van P. Smith............................................... 22,390 shares
Larry E. Thomas............................................ 88,441 shares
All directors and executive officers as a group............ 869,508 shares
(representing 0.55% of the class)

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(1) No individual listed beneficially owned more than 0.14% of the outstanding
shares of Cinergy common stock.

(2) Includes shares which there is a right to acquire within 60 days pursuant to
the exercise of stock options in the following amounts: Mr. Baker -- 17,787;
Mr. Browning -- 17,787; Mr. Hillenbrand -- 17,787; Mr. Leonard -- 77,611;
Mr. Mutz -- 52,787; Mr. Randolph -- 50,000; Mr. Rogers -- 95,629; Mr. Smith
-- 17,787; Mr. Thomas -- 54,104; and all directors and executive officers as
a group -- 522,911.

(3) Each unit represents one share of Cinergy common stock credited to the
account of the respective directors as of December 31, 1996 under Cinergy's
Directors' Deferred Compensation Plan.

ELECTION OF DIRECTORS

In accordance with the By-Laws of the Company, the Board shall consist of
not less than one and not more than seven persons. The size of the Board is
currently fixed at seven and the Board has nominated the individuals listed
below for election as directors, all of whom are presently members of the Board
and were elected by shareholders at the 1996 annual meeting. All of the proposed
director-nominees have signified their willingness to serve, if elected.

Directors will be elected at the Annual Meeting by a plurality of the votes
cast. As previously stated, Cinergy intends to vote all of the outstanding
shares of common stock of the Company in favor of the director-nominees set
forth below and, since Cinergy's ownership of such common stock represents over
96% of the voting power of the Company, the election of such director-nominees
is assured.

Except as otherwise noted, the principal occupation or employment of each
individual set forth below has been such individual's principal occupation or
employment for the past five years. Each director-nominee, with the exception of
Messrs. Mutz, Randolph, and Rogers, is otherwise unaffiliated with Cinergy and
its subsidiaries, including the Company.

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JAMES K. BAKER
Director of the Company since 1986.
Director of Cinergy since 1994. Age 65.

Mr. Baker has served as Vice Chairman of Arvin Industries, Inc., a
worldwide supplier of automotive parts, since February 1996. He
served as Chairman of the Board of Arvin Industries from November
1986 through January 1996 and as Chief Executive Officer from 1981
until June 1993. Mr. Baker is a director of Amcast Industrial Corp.,
First Chicago NBD Corp., Geon Company, and Tokheim Corporation.
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MICHAEL G. BROWNING
Director of the Company since 1990.
Director of Cinergy since 1994. Age 50.

Mr. Browning is Chairman and President of Browning Investments,
Inc., which is engaged in real estate ventures. He also served as
President of Browning Real Estate, Inc., the general partner of
various real estate investment partnerships, through December 30,
1994.
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JOHN A. HILLENBRAND II
Director of the Company since 1985.
Director of Cinergy since 1994. Age 65.

Mr. Hillenbrand principally serves as Chairman, President and Chief
Executive Officer of Glynnadam, Inc., a personal investment holding
company. He is also Chairman of Able Body Corporation and Nambe
Mills, Inc., and Vice Chairman of Pri-Pak, Inc. Mr. Hillenbrand is a
director of Hillenbrand Industries, Inc. and National City Bank,
Indiana.
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JOHN M. MUTZ
Director of the Company since 1991;
Member -- Executive Committee.
Director of Investments since 1995. Age 61.

Mr. Mutz has served as President of the Company since October 1994;
he previously served as President of PSI Resources, Inc. from
October 1993 until October 1994. He was president of the Lilly
Endowment, Inc. in Indianapolis from 1989 to 1993. Mr. Mutz served
as lieutenant governor of the State of Indiana from 1981 to 1988.
While in office, he was president of the Indiana Senate, headed the
Department of Commerce and the Department of Employment and Training
Services, and served as Commissioner of Agriculture. Mr. Mutz is a
director of Conseco, Inc. and National City Bank, Indiana.
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JACKSON H. RANDOLPH
Director of the Company since 1994;
Member -- Executive Committee.
Director of Cinergy since 1993 and CG&E since 1983. Age 66.

Mr. Randolph has served as Chairman of the Board of the Company,
Cinergy, Investments, Services, CG&E, and ULH&P since December 1995.
He served as Chairman of the Board and Chief Executive Officer of
the Company, Cinergy, Investments, Services, and CG&E from October
1994 (and of ULH&P from January 1995) through November 1995. Mr.
Randolph was Chairman of the Board, President and Chief Executive
Officer of CG&E from May 1993 until October 1994 (and of ULH&P from
June 1993 until January 1995); previously he served as President and
Chief Executive Officer of CG&E and ULH&P. Mr. Randolph is a
director of Cincinnati Financial Corporation, PNC Bank Corp., and
PNC Bank, Ohio, N.A.
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JAMES E. ROGERS
Director of the Company since 1988;
Chairman -- Executive Committee.
Director of Cinergy since 1993 and CG&E since 1994. Age 49.

Mr. Rogers has served as Vice Chairman and Chief Executive Officer
of the Company, CG&E, Investments, and ULH&P, and Vice Chairman,
President and Chief Executive Officer of Cinergy and Services since
December 1995. He served as Vice Chairman and Chief Operating
Officer of the Company, CG&E, and Investments, and Vice Chairman,
President and Chief Operating Officer of Cinergy and Services from
October 1994 (and as Vice Chairman and Chief Operating Officer of
ULH&P from January 1995) through November 1995. Mr. Rogers served as
Chairman, President and Chief Executive Officer of the Company from
August 1990 until October 1994; he previously served as Chairman and
Chief Executive Officer. He also served as Chairman and Chief
Executive Officer of PSI Resources, Inc. from October 1993 until
October 1994; he previously served as Chairman, President and Chief
Executive Officer. Mr. Rogers is a director of Bankers Life Holding
Corporation, Duke Realty Investments, Inc., Fifth Third Bancorp, and
The Fifth Third Bank.
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VAN P. SMITH
Director of the Company since 1986.
Director of Cinergy since 1994. Age 68.

Mr. Smith is Chairman of the Board of Ontario Corporation which
manufactures precision components for semiconductor process
equipment, provides custom hardware and software products, and
operates commercial testing laboratories. He is a director of each
of the subsidiaries of Ontario Corporation, and also a director of
Lilly Industries, Inc., Meridian Insurance Group, Inc., and Meridian
Mutual Insurance Co.
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MEETINGS AND COMMITTEES OF THE BOARD

During the year ended December 31, 1996, the Board held five meetings. All
directors attended more than 75% of the aggregate number of Board and committee
meetings which they were eligible to attend. The Executive Committee is the only
standing committee of the Board.

COMPENSATION OF DIRECTORS

Directors who are not employees (the "non-employee directors") receive an
annual retainer fee of $8,000 plus a fee of $1,000 for each Board meeting
attended; however, any non-employee director of the Company who also serves as a
non-employee director of Cinergy or any of its affiliates shall neither receive
such annual retainer fee, nor any compensation for attendance at any Board
meeting that is held concurrently or consecutively with a meeting of the board
of directors of Cinergy. Each director-nominee, as a non-employee director of
the Company (Messrs. Baker, Browning, Hillenbrand, and Smith), is currently also
a non-employee director of Cinergy. Directors who are also employees of Cinergy
or any of its subsidiaries (Messrs. Mutz, Randolph, and Rogers) receive no
remuneration for their services as directors.

Under Cinergy's Directors' Deferred Compensation Plan, each non-employee
director of Cinergy or any of its subsidiaries may defer fees and have them
accrued either in cash or in units representing shares of Cinergy common stock.
If deferred in such units, the stock will be distributed to the director at the
time of retirement from the appropriate board. Amounts deferred in cash will be
paid at the same time.

Under Cinergy's Retirement Plan for Directors, non-employee directors with
five or more years of service will receive annual retirement compensation in an
amount equal to the annual Board retainer fee in effect at the time of
termination of service as a director, plus the product of the fee paid for
attendance at a Board meeting multiplied by five. Retirement compensation is
paid for as many years as the director served on the Board. This plan covers
non-employee directors serving on the boards of directors of the Company,
Cinergy, Services, or CG&E. Prior service by non-employee directors of the
Company, PSI Resources, Inc., or CG&E is credited under this plan.

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The executive compensation program of Cinergy and its subsidiaries,
including the Company, is administered by the Compensation Committee of
Cinergy's board of directors (the "Committee"). The Committee establishes the
compensation philosophy and the compensation of the chief executive officer and
the remaining executive officers of Cinergy and its subsidiaries. The Committee
also recommends and administers compensation plans for all executive officers
and key employees. The Committee is composed of Messrs. Van P. Smith (Chairman),
Michael G. Browning, George C. Juilfs, and John J. Schiff, Jr., each of whom is
an independent, "non-employee" director (of Cinergy) within the meaning of
Section 16(b) of the 1934 Act, and an "outside director" (of Cinergy) within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). Each of Messrs. Smith and Browning is also such an independent,
"non-employee", "outside director" of the Company.

COMPENSATION PHILOSOPHY

As reported in the Company's 1996 information statement, the Committee's
executive compensation philosophy emphasizes incentive compensation, both
short-term and long-term, in order to tie the interests of the executive
officers and Cinergy's shareholders. Base salary, annual cash incentives, and
long-term incentives are an integral part of the executive compensation program.

Cinergy and its subsidiaries seek to provide a total compensation program
that will attract, retain, and motivate the high quality employees needed to
provide superior service to its customers and to maximize returns to its
shareholders. Base salaries for the executive group are targeted at the median
of comparably sized utility companies based on kilowatt hours sold. Because of
the low-cost position of Cinergy and its subsidiaries, kilowatt hours sold is
considered to be a better measure than revenues for constructing a comparative
group. Base salary levels are reviewed annually, and any increases are based on
such factors as corporate financial results, each individual's performance, and
the executive's role and skills. The executive compensation program also seeks
to link executive and shareholder interests through cash-based and equity-based
incentive plans, in order to reward corporate and individual performance and
balance short-term and long-term considerations. Annual and long-term incentive
plans are structured to provide opportunities that are competitive with general
industry companies.

This philosophy results in a compensation mix for the chief executive
officer and the remaining executive officers consisting of annual and long-term
incentives accounting for at least 50% of the employee's annual compensation.

The Committee's charter supports the executive compensation philosophy and
the Committee's role in designing and implementing that philosophy. Pursuant to
the charter, the Committee:

- reviews and determines the annual base salaries, annual incentives, and
long-term incentives of the executive officers of Cinergy and its
subsidiaries, and develops an appropriate balance between short-term and
long-term incentives while focusing on long-term shareholder interests;
and

- reviews the operation of the executive compensation programs; establishes
and periodically reviews policies for the administration of these
programs; and takes steps, if appropriate, to modify such programs and to
design and implement new executive compensation programs.

Consistent with the objectives set forth in its charter, the Committee has,
since its inception, sought to simplify existing compensation programs and to
design new ones that emphasize short-term and long-term incentive opportunities,
that distinguish between short-term and long-term corporate goals, and that will
incentivize the type of behavior crucial to managing successfully in an
increasingly competitive environment.

Because of its commitment to implement an executive compensation program
that enhances the financial success of Cinergy and increases its shareholder
value, the Committee recommended in January 1996 that Cinergy's board of
directors adopt a new employee incentive compensation plan, i.e., the Cinergy
1996 Long-Term Incentive Compensation Plan (the "1996 LTIP"), subject to
approval by Cinergy's shareholders. The board of directors of Cinergy adopted,
and Cinergy's shareholders overwhelmingly approved, the 1996 LTIP at Cinergy's
annual meeting last year. In describing the 1996 LTIP in Cinergy's proxy
statement last year, the Committee stated the 1996 LTIP's objectives: "The Plan
will provide the Company, in this era of utility competition, greater
flexibility to design long-term compensation incentives

for the Company's officers and other key employees by rewarding long-term
performance.... In utilizing the Plan, a greater portion of pay for officers and
key employees is placed at risk, but ownership of stock assists in the
attraction and retention of qualified employees and provides them with
additional incentives to devote their best efforts to pursue and sustain the
Company's growth and profitability through the accomplishment of corporate
goals. The Plan is thus intended to coalesce the interests of the Company's
shareholders, customers and management to enhance the Company's value."

With the adoption and approval of the 1996 LTIP, the Committee met six times
during 1996 to design a new long-term incentive compensation program that aligns
the interests of Cinergy's executive officers with those of its shareholders.
The Committee consulted with institutional investor representatives in order to
better comprehend the importance incentive compensation, both short-term and
long-term, has from the perspective of such investors. Accordingly, it is the
Committee's understanding that from the institutional investors' standpoint,
incentive compensation programs help attract and retain talented employees
thereby providing for stability of the management team, and incentivize
appropriate behavior toward the accomplishment of long-term corporate goals. The
Committee believes that a well-planned and well-implemented executive incentive
compensation program, with meaningful and measurable targets and competitive
award opportunities, sends a strong, positive message to the financial markets.

During October 1996, the Committee adopted a new long-term incentive
compensation program consistent with the parameters set forth in the 1996 LTIP.
The new long-term incentive compensation program initially utilizes two
components: performance-based restricted stock and stock options. For the first
performance period, i.e., October 1, 1996 through December 31, 1999, executive
officers and other key employees of Cinergy and its subsidiaries are eligible to
receive grants of restricted stock subject to a performance measure, i.e.,
Cinergy's total shareholder return. At the end of the measuring period, such
grantees will only earn an award to the extent Cinergy's total shareholder
return meets or exceeds the median total shareholder return of a comparative
group consisting of the top twenty-five kWh producers in the United States. This
portion of the executive incentive compensation program is known as the "Value
Creation Plan" -- if the executive officers as a team produce value for
Cinergy's shareholders, they will be eligible to share in the value that has
been realized.

The second portion of the long-term incentive compensation program consists
of annual grants of stock options that vest every three years. The total
long-term incentive opportunity for each executive officer is allocated 75% to
the performance-based restricted stock and 25% to stock options. Effective
January 1, 1997, restricted stock and stock options were granted to the
executive officers and other key employees of Cinergy and its subsidiaries in
amounts determined to be appropriate by the Committee and, accordingly, such
grants will be discussed within the Committee's report in the Company's 1998
information statement.

ANNUAL INCENTIVE COMPENSATION

During 1996, approximately 400 key employees, including the executive
officers, were eligible to receive incentive compensation under Cinergy's Annual
Incentive Plan, and were granted cash awards to the extent that certain
pre-determined corporate and individual goals were attained. Graduated standards
for achievement were developed to encourage each employee's contribution. The
potential awards ranged from 2.5% to 90% of the annual base salary of the
participant (including deferred compensation), depending upon the achievement
levels and the participant's position. The Committee reviewed and approved both
the plan goals at the beginning of the year and the achievements at the end of
the year.

In determining the awards payable under the Annual Incentive Plan for 1996,
the Committee considered a combination of corporate and individual goals.
Achievement of the corporate goal for 1996 and achievement of individual goals
each accounted for 50% of the total possible award. The portion of the payout in
March, 1997, attributable to the corporate goal was based on 1996 achievement in
one area, i.e., earnings per share. The achievement level for the corporate goal
was at the 2.6 award level -- on a sliding scale of 1.0 to 3.0 -- for 1996.

During 1996, incentive awards for each executive officer reflected
individual achievement as well as Cinergy's attainment of its corporate goals.
Individual performance goals for each executive varied from executive to
executive; however, all related to the achievement of Cinergy's overall
strategic vision of becoming a premier general energy services company.

For each executive officer, the Committee assessed the extent to which each
person contributed toward the accomplishment of Cinergy's vision in 1996.
Although its determinations were subjective, the Committee believed that its
assessment accurately measured the performance of each executive officer. Thus,
the Committee determined that the achievement level for each executive officer's
individual goals was at the 3.0 award level -- on a sliding scale of 1.0 to 3.0
- -- for 1996. In addition, based upon the extraordinary efforts of the executive
officers during 1996, the Committee, acting within the parameters of discretion
conferred under the Annual Incentive Plan, determined that the contributions and
performance of each executive officer merited the maximized award opportunity
payable to each.

For 1997, Cinergy's Annual Incentive Plan will again use a combination of
corporate and individual goals. The corporate goal will account for 50% of the
total possible award and achievement of individual goals will account for the
remaining 50%. The corporate goal for 1997 will be based on earnings per share.
For 1997, approximately 400 key employees will participate in the plan. The
potential awards will range from 2.5% to 90% of the participant's annual base
salary, depending upon the achievement levels and the participant's position.

OTHER COMPENSATION DECISIONS

The Committee, at its discretion, can award other forms of compensation in
recognition of outstanding service to Cinergy or any of its subsidiaries.
Consistent with that philosophy, the Committee approved during 1996 special
performance awards for Messrs. Leonard and Thomas (as set forth in footnote to
the Summary Compensation Table).

LONG-TERM INCENTIVE COMPENSATION AND STOCK OPTIONS
Cinergy's Performance Shares Plan (the "Performance Shares Plan") has been a
long-term incentive plan developed to reward executive officers and other key
employees for contributing to long-term success by achieving corporate and
individual goals approved by the Committee. During 1996, the goals applicable
for use under the Performance Shares Plan were Cinergy's total shareholder
return, plus those same goals that were applicable for use during 1996 under
Cinergy's Annual Incentive Plan. The potential award opportunities under this
plan also have been established in the same manner as under the Annual Incentive
Plan, with the minimum award opportunities under the Performance Shares Plan
ranging from 13.33% to 36.66% of annual salary for the full performance cycle.
Performance cycles have consisted of overlapping four year periods. Because the
former Performance Shares Plan of the Company was merged into the Performance
Shares Plan effective as of October 24, 1994, the then existing Company
performance cycles of 1992-1995 and 1994-1997 became performance cycles under
the Performance Shares Plan. Awards earned under the 1992-1995 performance cycle
by executive officers were paid in two installments; one-half during February
1996, the dollar values of which are set forth in the Summary Compensation
Table, and the remaining portion during February 1997.

The 1996 LTIP, which was approved by Cinergy's shareholders at its annual
meeting last year, replaces the Performance Shares Plan. As part of the
transition toward implementation of the 1996 LTIP, the Performance Shares Plan
was amended effective November 1, 1996, to preclude the commencement of any new
performance cycle subsequent to January 1, 1996, and to provide that the
existing performance cycle of 1994-1997 be shortened to three years, i.e.,
1994-1996, and that the final performance cycle of 1996-1999 be shortened to one
year, i.e., 1996.

Under the 1996 LTIP, executive officers and other key employees of Cinergy
and its subsidiaries, including the Company, are eligible to receive grants from
time to time of stock-related awards of six general types: (i) options to
purchase shares of Cinergy common stock (i.e., "Options"); (ii) rights to
receive, upon exercise, the appreciation in fair market value of shares of
Cinergy common stock (i.e., "Stock Appreciation Rights" or "SARs"); (iii)
outright grants of shares of Cinergy common stock, subject to transfer
restrictions and risk of forfeiture for a specified restriction period (i.e.,
"Restricted Stock") and which may, but need not be, conditional upon the
attainment during a specified performance period of specified
Committee-determined performance criteria and objectives (i.e., "Performance
Measures"); (iv) rights to receive (a) shares of Cinergy common stock, or in
lieu of all or any portion of those shares, their fair market value (i.e.,
"Performance Shares"), or (b) a specified dollar amount or, in lieu of all or
any portion of that amount, shares of Cinergy common stock having the same fair
market value (i.e., "Performance Awards"), both conditional upon the attainment
of Performance Measures; (v) rights to receive Cinergy common stock or cash or
other property equal in value to dividends paid with respect to a specified
number of shares of common stock, and which may, but need not be, conditional
upon the attainment of Performance Measures (i.e., "Dividend Equivalents"); and
(vi) other stock-based awards which are denominated or payable in, valued in
whole or in part by reference to, or otherwise based on or related to, shares of
Cinergy common stock (i.e., "Other Stock-Based Awards"). Options meeting the
requirements of Code Section 422 and intended to be afforded the federal income
tax treatment of Code Section 422 options (i.e., "Incentive Stock Options" or
"ISOs"), as well as other Options (i.e., "Non-qualified Stock Options" or
"NSOs"), may be awarded under the 1996 LTIP. SARs granted under the 1996 LTIP
may be awarded either in tandem with Options (i.e., "Tandem SARs") or standing
alone (i.e., "Freestanding SARs").

As stated above, the Committee has adopted a long-term incentive
compensation program and granted, effective January 1, 1997, both
performance-based restricted stock and stock options to the executive officers
and other key employees of Cinergy and its subsidiaries. Such grants will be
discussed within the Committee's report in the Company's 1998 information
statement.

Cinergy's Stock Option Plan also has been a part of the long-term incentive
compensation program for executive officers and other key employees. Both
incentive and non-qualified stock options in amounts determined to be
appropriate by the Committee have been granted under the plan. Options under the
plan vest at the rate of 20% per year over a five-year period from the date of
grant and may be exercised over a ten-year term. Although the 1996 LTIP was not
intended to replace this plan, the Committee expects that future awards of stock
options to executive officers and other key employees of Cinergy and its
subsidiaries generally will be granted under the 1996 LTIP. Stock options were
not granted to any named executive officer (as defined on page 13) during 1996.

CHIEF EXECUTIVE OFFICER

Mr. Rogers' 1996 base salary was determined pursuant to his employment
agreement with Cinergy (see Employment Agreements and Severance Arrangements on
page 16). For 1996, Mr. Rogers also earned incentive compensation under the
Annual Incentive Plan in the amount of $607,518, of which 50% was based on
achievement of corporate goals and 50% was based upon the Committee's
determination of his achievement of individual goals, and its discretionary
determination to reward him in recognition of outstanding contributions and
exemplary performance.

Giving consideration to the accomplishments during 1996 leading to a total
return to Cinergy shareholders of 15.42%, an 8% increase in earnings per share
(adjusted for the effects of weather and non-comparable items), and a
market-to-book ratio of 2.04 that at year end was the highest among the twenty-
five largest electric utilities, sufficient goals were met to obtain the maximum
award available. Other significant accomplishments during 1996 included
formation of a coalition to create a multi-state transmission region operated by
an independent system operator, reorganization of Cinergy's electricity
operations into three strategic business units, acquisition of a 50% interest in
Midlands Electricity plc (headquartered in Birmingham, England), formation of a
joint venture with Trigen Energy Corporation (of White Plains, New York) to
develop cogeneration and trigeneration energy facilities throughout the United
States and Canada, participation in retail pilot projects (in Illinois, New
Hampshire, and New York), an 86% increase in megawatt sales in the wholesale
power market, continued reengineering efforts and reductions to staff without
layoffs, and efforts to propose customer choice legislation in both Indiana and
Ohio. The relative importance of these accomplishments was equal in the
determination of awards.

Mr. Rogers also earned an award during the 1992-1995 performance cycle under
the Performance Shares Plan. One-half of the award was paid during February
1996, and the remaining portion was paid during February 1997. Of the portion of
the award paid during February 1996, half was based on achievement of corporate
goals and half was based upon the Committee's determination of his achievement
of individual goals.

SUMMARY

The Committee's executive compensation philosophy is designed to provide
competitive levels of executive compensation that integrate such compensation
with corporate goals, reward superior corporate performance, recognize
individual initiative and achievement, and assist in attracting and retaining
qualified and highly motivated executive employees. In utilizing long-term,
incentive-based compensation,i.e., as available under the 1996 LTIP, a greater
portion of executive compensation is placed at risk. The Committee believes that
ownership of stock assists in the attraction and retention of qualified
executive employees, and provides them with additional incentives to devote
their best efforts to pursue and sustain corporate growth and profitability
through the accomplishment of corporate goals. The philosophy thus intends to
coalesce the interests of shareholders, customers and management to enhance
overall corporate value.

The 1993 Omnibus Budget Reconciliation Act ("OBRA") is applicable to
compensation earned during 1994 and later. Under OBRA, income tax deductions of
publicly traded companies may be limited to the extent total compensation for
certain executive officers exceeds one million dollars during any year; however,
the deduction limit does not apply to payments which qualify as "performance
based". The Committee has reviewed the final regulations issued by the Internal
Revenue Service ("IRS") and will continue to review the application of these
rules to future compensation; however, the Committee intends to continue basing
its executive compensation decisions primarily upon performance achieved, both
corporate and individual, but retains the right to make subjective decisions and
to award compensation that meets all of the requirements for excludability under
OBRA.

The tables which follow, and accompanying footnotes, reflect the decisions
covered by the above discussion.

CINERGY COMPENSATION COMMITTEE

Van P. Smith, Chairman
Michael G. Browning
George C. Juilfs
John J. Schiff, Jr.

SUMMARY COMPENSATION TABLE

The following table sets forth the compensation of the chief executive
officer and each of the additional four most highly compensated executive
officers (these five executive officers sometimes hereinafter collectively
referred to as the "named executive officers") for services to Cinergy and its
subsidiaries, including the Company, during the calendar years ended December
31, 1996, 1995, and 1994. (The data presented for 1994 includes compensation
from the Company and CG&E for the period January 1, 1994 through October 24,
1994.)

LONG-TERM COMPENSATION
-------------------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------------ PAYOUTS
--------------------------------------- -----------
(A) (E) (F) (G)
NAME OTHER RESTRICTED SECURITIES (H)
AND (C) (D) ANNUAL STOCK UNDERLYING LTIP
PRINCIPAL (B) SALARY BONUS(1) COMPENSATION AWARDS OPTIONS/SARS PAYOUTS(2)
POSITION YEAR ($) ($) ($) ($) (#) ($)
- --------------------------------- --------- --------- ----------- --------------- --------------- ------------- -----------

James E. Rogers 1996 625,000 607,518 3,697 0 0 492,847
Vice Chairman 1995 535,000 321,750 15,322 0 0 283,427
and Chief Executive 1994 433,144 265,729 64,417 0 250,000 273,720
Officer

Jackson H. Randolph 1996 535,000 321,750 10,675 0 0 180,144
Chairman of the Board 1995 535,000 321,750 11,594 0 0 0
1994 470,000 255,750 5,719 0 250,000 0

John M. Mutz 1996 376,584 150,634 2,431 0 0 137,705
President 1995 358,656 143,462 2,041 0 0 11,804
1994 342,380 136,952 3,001 0 100,000 11,436

J. Wayne Leonard 1996 317,720 190,632 53,985 0 0 135,374
Group Vice President 1995 250,008 93,753 17,385 0 0 83,974
and Chief Financial Officer 1994 211,208 79,203 32,146 0 100,000 81,132

Larry E. Thomas 1996 294,350 176,610 5,030 0 0 133,397
Group Vice President 1995 240,000 90,000 1,794 0 0 80,066
1994 209,540 78,578 29,078 0 100,000 77,345

(A)
NAME (I)
AND ALL OTHER
PRINCIPAL COMPENSATION
POSITION ($)
- --------------------------------- -------------

James E. Rogers 108,108(3)
Vice Chairman 135,676
and Chief Executive 285,393
Officer
Jackson H. Randolph 120,512(3)
Chairman of the Board 104,112
92,724
John M. Mutz 14,993(4)
President 16,530
6,097
J. Wayne Leonard 34,220(4)
Group Vice President 49,726
and Chief Financial Officer 93,555
Larry E. Thomas 36,162(4)
Group Vice President 29,464
53,945

- ------------
(1) Amounts appearing in this column reflect the Annual Incentive Plan awards
earned during the year listed and paid in the following year.

(2) Amounts appearing in this column reflect the values of the shares and cash
paid under Cinergy's Performance Shares Plan (as successor to the Company's
Performance Shares Plan). Amounts paid in 1996 were earned during the
four-year cycle from 1992 through 1995. Amounts paid in 1995 and 1994 were
earned during the four-year cycle from 1990 through 1993.

(3) Amount includes for Messrs. Rogers and Randolph, respectively: a deferred
compensation award in the amount of $50,000 pursuant to the terms of each
officer's Deferred Compensation Agreement; employer matching contributions
under the Company's and CG&E's 401(k) plans of $6,468 and $8,160;
above-market interest on amounts deferred pursuant to the Deferred
Compensation Agreements of $29,007 and $43,748; benefits under Split Dollar
Life Insurance Agreements of $16,120 and $17,979; and insurance premiums
paid with respect to executive/group-term life insurance of $6,513 and $625.

(4) Amount includes for Messrs. Mutz, Leonard, and Thomas, respectively:
insurance premiums paid with respect to executive/ group-term life insurance
of $10,160, $2,004, and $6,281; and employer matching contributions under
the Company's 401(k) plan of $4,833, $7,216, and $4,881. Also includes for
each of Messrs. Leonard and Thomas a special performance award in the amount
of $25,000.

AGGREGATED OPTION/SAR EXERCISES AND YEAR END OPTION/SAR VALUE TABLE

The following table sets forth information concerning stock options
exercised by the named executive officers during 1996, including the values
realized for such options exercised, which represent the positive spread between
the respective exercise prices and market prices on dates of exercises, and the
numbers of shares for which options were held as of December 31, 1996, including
the values for "in-the-money" options, which represent the positive spread
between the respective exercise prices of outstanding stock options and the
market price of the shares of Cinergy common stock as of December 31, 1996,
which was $33.375 per share.

(D)
NUMBER OF
SECURITIES (E)
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
YEAR END YEAR END
(B) (C) (#) ($)
SHARES ACQUIRED VALUE ------------------- ---------------------
(A) ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------------- --------------- ---------- ------------------- ---------------------

James E. Rogers........................ 143,774 2,534,846 95,629/150,000 1,004,105/1,575,000
Jackson H. Randolph.................... 50,000 431,250 50,000/150,000 525,000/1,575,000
John M. Mutz........................... 0 N/A 52,787/60,000 638,971/630,000
J. Wayne Leonard....................... 0 N/A 77,611/60,000 1,052,553/630,000
Larry E. Thomas........................ 17,003 275,482 54,104/60,000 669,810/630,000

PENSION BENEFITS

The pension benefits payable at retirement to each of the named executive
officers are provided pursuant to the terms of either CG&E's non-contributory
management pension plan (the "CG&E Pension Plan") or the Company's
non-contributory pension plan (the "PSI Pension Plan"), plus certain
supplemental plans or agreements. Mr. Randolph is covered under the terms of the
CG&E Pension Plan. Messrs. Rogers, Mutz, Leonard, and Thomas are covered under
the terms of the PSI Pension Plan.

Under the terms of the CG&E Pension Plan, the retirement income payable to a
pensioner is 1.3% of final average pay plus 0.35% of final average pay in excess
of covered compensation, times the number of years of credited service through
30 years, plus 0.1% of final average pay times the number of years of credited
service over 30 years. Final average pay is the average annual salary, based on
July 1 pay rates, during the employee's four consecutive calendar years
producing the highest such average within the last ten calendar years
immediately preceding retirement. The IRS annually establishes a dollar limit,
indexed to inflation, of the amount of pay permitted for consideration under the
terms of the plan, which for 1996 was $150,000. Covered compensation is the
average social security taxable wage base over a 35-year period. The accrued
annual benefit payable to Mr. Randolph upon his retirement under the terms of
the plan is $106,911 based upon IRS limits and credited service of 37 years.

Cinergy and Mr. Randolph have entered into an Amended and Restated
Supplemental Executive Retirement Income Agreement which in effect freezes as of
December 31, 1994, the accrual of benefits payable to Mr. Randolph under CG&E's
Supplemental Executive Retirement Plan upon his retirement, death, or
disability. Under the amended agreement, the supplemental retirement benefit of
$511,654 shall be paid to Mr. Randolph or his beneficiary in monthly
installments of $42,638 for 180 months beginning December 1, 2000.

The PSI Pension Plan covers all of its employees who meet certain minimum
age and service requirements. Compensation utilized to determine benefits under
the PSI Pension Plan includes substantially all salaries and annual incentive
compensation, including deferred compensation for Mr. Rogers, and such benefits
are determined using a final average pay formula with consideration of years of
service to a maximum of 35, age at retirement and the applicable average social
security wage base. The Company also maintains an Excess Benefit Plan which is
designed to restore pension benefits to those individuals whose benefits under
the PSI Pension Plan would otherwise exceed the limits imposed by the Code. Each
of the named executive officers, with the exception of Mr. Randolph,
participates in the Company's Excess Benefit Plan.

The following pension plan table illustrates the estimated annual benefits
payable as a straight-life annuity under both Company-sponsored plans to
participants who retire at age 62. Such benefits are not subject to any
deduction for social security or other offset amounts.

YEARS OF SERVICE
---------------------------------------------------------------------------------
COMPENSATION 5 10 15 20 25 30 35
- ----------------------------- --------- ---------- ---------- ---------- ---------- ---------- ----------

$ 300,000................... $ 23,145 $ 46,290 $ 69,435 $ 92,580 $ 115,725 $ 138,870 $ 162,015
400,000................... 31,145 62,290 93,435 124,580 155,725 186,870 218,015
500,000................... 39,145 78,290 117,435 156,580 195,725 234,870 274,015
600,000................... 47,145 94,290 141,435 188,580 235,725 282,870 330,015
700,000................... 55,145 110,290 165,435 220,580 275,725 330,870 386,015
800,000................... 63,145 126,290 189,435 252,580 315,725 378,870 442,015
900,000................... 71,145 142,290 213,435 284,580 355,725 426,870 498,015
1,000,000.................. 79,145 158,290 237,435 316,580 395,725 474,870 554,015
1,100,000.................. 87,145 174,290 261,435 348,580 435,725 522,870 610,015
1,200,000.................. 95,145 190,290 285,435 380,580 475,725 570,870 666,015
1,300,000.................. 103,145 206,290 309,435 412,580 515,725 618,870 722,015
1,400,000.................. 111,145 222,290 333,435 444,580 555,725 666,870 778,015
1,500,000.................. 119,145 238,290 357,435 476,580 595,725 714,870 834,015
1,600,000.................. 127,145 254,290 381,435 508,580 635,725 762,870 890,015

The estimated credited years of service at age 62 for each of the named
executive officers covered under the terms of the PSI Pension Plan are as
follows: Mr. Rogers, 20.22 years; Mr. Mutz, 3.39 years; Mr. Leonard, 35 years;
and Mr. Thomas, 35 years.

Messrs. Rogers and Mutz also participate in the Company's Supplemental
Retirement Plan, which is designed to provide coverage to employees, previously
designated by the Board, who will not otherwise qualify for full retirement
benefits under the PSI Pension Plan. The benefit provided by the Company's

Supplemental Retirement Plan will be an amount equal to that which a covered
employee with maximum permitted years of participation (35 years) would have
received under the PSI Pension Plan, reduced by the actual benefit provided by
such Plan and the Excess Benefit Plan, and further reduced by benefits the
covered employee will be eligible to receive from retirement plans from previous
self-employment and from previous employers. The estimated annual benefit
payable at age 62 under the Company's Supplemental Retirement Plan is $64,551 to
Mr. Rogers and $125,662 to Mr. Mutz.

Cinergy has an Executive Supplemental Life Insurance Program, which provides
key management personnel, including the named executive officers, with
additional life insurance coverage during employment, and post-retirement
deferred compensation. At the later of age 55 or retirement, the participant's
life insurance coverage under the program will be canceled. At that time, the
participant will receive the total amount of coverage in the form of deferred
compensation payable in ten equal annual installments. The annual benefit
payable, at the later of age 55 or retirement, to each of the named executive
officers is $15,000 per year over ten years.

EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS

Cinergy entered into individual employment agreements with Mr. Randolph and
Mr. Rogers (each sometimes hereinafter individually referred to as the
"Executive") effective as of October 24, 1994.

Pursuant to his employment agreement, Mr. Randolph served as Chairman and
Chief Executive Officer of Cinergy until November 30, 1995, at which time he
relinquished the position of Chief Executive Officer; he will continue to serve
as Chairman of the Board of Cinergy until November 30, 2000. Mr. Rogers served
as Vice Chairman, President and Chief Operating Officer of Cinergy until
November 30, 1995, and thereafter has served as Vice Chairman, President and
Chief Executive Officer. Mr. Rogers' agreement is for a term of three years;
however, as amended in December 1995, on each annual anniversary date it is
automatically extended for an additional year, unless either Cinergy or Mr.
Rogers gives timely notice otherwise. During the terms of their agreements,
Messrs. Randolph and Rogers will receive minimum annual base salaries of
$465,000 and $422,722, respectively, and each will be eligible to participate in
all other incentive, stock option, performance award, savings, retirement and
welfare benefit plans applicable generally to Cinergy employees and executives,
and will receive other fringe benefits.

If the Executive's employment terminates as a result of death, his
beneficiary will receive a lump sum cash amount equal to the sum of (a) the
Executive's annual base salary through the termination date to the extent not
previously paid, (b) a pro rata portion of the benefit under Cinergy's Annual
Incentive Plan calculated based upon the termination date, and (c) any
compensation previously deferred but not yet paid to the Executive (with accrued
interest or earnings thereon) and any unpaid accrued vacation pay. In addition
to these accrued amounts, if Cinergy terminates the Executive's employment
without "cause" or the Executive terminates his employment for "good reason" (as
each is defined in the employment agreements), Cinergy will pay to the Executive
(a) a lump sum cash amount equal to the present value of his annual base salary
and benefit under Cinergy's Annual Incentive Plan payable through the end of the
term of employment, at the rate and applying the same goals and factors in
effect at the time of notice of such termination, (b) the value of all benefits
to which the Executive would have been entitled had he remained in employment
until the end of the term of employment under Cinergy's Performance Shares Plan
and Executive Supplemental Life Insurance Program, (c) the value of all deferred
compensation and all executive life insurance

benefits whether or not then vested or payable, and (d) medical and welfare
benefits for the Executive and his family through the end of the term of
employment. If the Executive's employment is terminated by Cinergy for cause or
by the Executive without good reason, the Executive will receive unpaid annual
base salary accrued through the termination date and any accrued deferred
compensation.

Mr. Mutz has an employment agreement, which commenced on October 4, 1993,
pursuant to which he will serve as President, and will be nominated for election
as a director, of the Company until October 4, 1998. During the term of his
agreement, Mr. Mutz will receive a minimum annual base salary of $330,000, will
be eligible to participate in all other incentive, stock option, performance
award, savings, retirement and welfare benefit plans applicable generally to
Cinergy employees and executives, and will receive other fringe benefits. In
connection with his participation in the Company's Supplemental Retirement Plan,
Mr. Mutz's employment agreement provides that he will be vested in his benefit
at a rate of 20% per year of service beginning in 1994 without offset for other
retirement benefits, and will be guaranteed a benefit thereunder based on its
current terms even if the plan subsequently is amended to reduce benefits or is
terminated.

Cinergy has employment agreements with Messrs. Leonard and Thomas, which
commenced on October 24, 1994 and shall continue until December 31, 1997;
however, as amended in December 1995, commencing January 1, 1996, and each
January 1 thereafter, the term of each employment agreement is automatically
extended for an additional year unless either Cinergy or Messrs. Leonard or
Thomas gives timely notice otherwise. During the terms of their agreements,
Messrs. Leonard and Thomas will receive minimum annual base salaries of $250,000
and $240,000, respectively, and each will be eligible to participate in all
other incentive, stock option, performance award, savings, retirement and
welfare benefit plans applicable generally to Cinergy employees and executives,
and will receive other fringe benefits.

If the employment of Messrs. Mutz, Leonard, or Thomas (each sometimes
hereinafter individually referred to as the "officer") is terminated as a result
of death, for cause, or by the officer without good reason, the officer or the
officer's beneficiary will be paid a lump sum cash amount equal to (a) the
officer's unpaid annual base salary through the termination date, (b) a pro rata
portion of the officer's award under Cinergy's Annual Incentive Plan, (c) the
officer's vested accrued benefits under Cinergy's Performance Shares Plan (and
also including the Company's Pension Plan, Excess Benefit Plan and Supplemental
Retirement Plan in the case of Mr. Mutz), and (d) any unpaid deferred
compensation (including accrued interest or earnings) and unpaid accrued
vacation pay. If, instead, the officer's employment is terminated prior to a
change in control (as defined) without cause or by the officer for good reason,
the officer will be paid (a) a lump sum cash amount equal to the present value
of the officer's annual base salary and target annual incentive cash award
payable through the end of the term of the agreement, at the rate and applying
the same goals and factors in effect at the time of notice of such termination,
(b) the present value of all benefits to which the officer would have been
entitled had the officer remained in employment until the end of the term of the
agreement under Cinergy's Performance Shares Plan and Executive Supplemental
Life Insurance Program (and also including the Company's Pension Plan, Excess
Benefit Plan, and Supplemental Retirement Plan in the case of Mr. Mutz), (c) the
value of all deferred compensation and all executive life insurance benefits
whether or not vested or payable, and (d) continued medical and welfare benefits
through the end of the term of the agreement. Mr. Mutz's employment agreement
was amended, effective August 30, 1996, wherein, among other things, Cinergy
waived its right to challenge Mr. Mutz in the event he elects to terminate his
employment agreement for good reason.

If the employment of any such officer is terminated after a change in
control, the officer will be paid a lump sum cash payment equal to the greater
of (i) three times the sum of his annual base salary immediately prior to the
date of his termination of employment or, if higher, the date of the change in
control, plus all incentive compensation or bonus plan amounts in effect prior
to the date of his termination of employment or, if higher, prior to the change
in control, and (ii) the present value of all annual base salary, bonuses and
incentive compensation and retirement benefits that would otherwise be due under
the agreement plus deferred compensation and executive life insurance benefits.
In addition, the officer will be provided life, disability, accident and health
insurance benefits for thirty-six months, reduced to the extent comparable
benefits are received, without cost, by the officer.

DEFERRED COMPENSATION AGREEMENTS

Mr. Randolph and CG&E, and Mr. Rogers and the Company, entered into deferred
compensation agreements effective as of January 1, 1992 (the "Deferred
Compensation Agreements") pursuant to which each is credited annually with a
$50,000 base salary increase in the form of deferred compensation. Such amount
was deferred annually in each of the cases of Mr. Randolph and Mr. Rogers for
the five-year period from January 1, 1992 through December 31, 1996, and in the
case of Mr. Rogers, is deferred annually for an additional five-year period
beginning January 1, 1997 and ending December 31, 2001. The Deferred
Compensation Agreements were assumed by Cinergy effective as of October 24,
1994.

Mr. Randolph's Deferred Compensation Agreement provides that when his
employment terminates, he will receive an annual cash benefit of $179,000
payable for a 15-year period beginning January 2001.

Mr. Rogers' Deferred Compensation Agreement provides that when his
employment terminates for any reason, other than death, he will receive an
annual cash benefit over a 15-year period beginning the first January following
termination of his employment, but in no event earlier than January 2003 nor
later than January 2010. The annual cash benefit amount payable for such 15-year
period ranges from $179,000 per year if payment begins in January 2003, to
$554,400 per year if payment commences in January 2010. Comparable amounts are
payable to Mr. Rogers if he dies before commencement of payment of the 15-year
payments described above. In addition, if Mr. Rogers' employment terminates for
any reason, other than death or disability, before January 1, 2002, he will
receive a lump sum cash payment equal to the total amount deferred during the
second five-year period described above plus interest; if his employment
terminates for any reason, other than death or disability, on or after January
1, 2002, he will receive an additional annual benefit for a 15-year period
beginning the first January following termination of his employment, but in no
event earlier than January 2008 nor later than January 2010. The annual cash
benefit amount payable for such period ranges from $179,000 per year if payment
begins in January 2008, to $247,000 per year if payment begins in January 2010.
Comparable amounts are payable to Mr. Rogers in the event his employment is
terminated for disability prior to January 1, 2002 or if he dies (i) prior to
January 1, 2002 while employed or disabled, or (ii) on or after January 1, 2002
but before commencement of payment of benefits; provided, however, if Mr. Rogers
becomes disabled prior to the completion of the second award period, his
payments will be proportionately reduced in the same manner as described above
for disability during the first award period.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Schiff, Chairman of the Board of Cincinnati Financial Corporation,
serves on the Cinergy Compensation Committee and Mr. Randolph, Chairman of the
Board of Cinergy and its subsidiaries, including the Company, serves on the
board of directors of Cincinnati Financial Corporation.

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

The independent public accountants for Cinergy and its subsidiaries,
including the Company, for the year 1996 were Arthur Andersen LLP. Upon
recommendation of the Audit Committee of Cinergy's board of directors, such
board engaged on January 30, 1997, Arthur Andersen LLP as independent public
accountants for Cinergy and its subsidiaries, including the Company, for the
year 1997. Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting with the opportunity to make a statement if they desire to do
so, and will be available to respond to appropriate questions.

PROPOSALS BY SHAREHOLDERS

In order to be considered for inclusion in the Company's Information
Statement for the 1998 Annual Meeting of Shareholders, proposals from
shareholders must be received by the Secretary of the Company at 1000 East Main
Street, Plainfield, Indiana 46168 not later than November 24, 1997.

By Order of the Board of Directors,

CHERYL M. FOLEY
VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY

Dated: March 24, 1997

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