CINERGY UNION EMPLOYEES'
401(K) PLAN
FINANCIAL STATEMENTS AND SCHEDULES
AS OF
DECEMBER 31, 1998 AND 1997
TOGETHER WITH
AUDITORS' REPORT
<PAGE>
Cinergy Union Employees'
401(k) Plan
Financial Statements and Exhibits
Page No.
(a) Financial Statements
Report of Independent Public Accountants 3
Statement of Net Assets Available for Benefits, with 4-5
Fund Information, as of December 31, 1998
Statement of Net Assets Available for Benefits, with 6
Fund Information, as of December 31, 1997
Statement of Changes in Net Assets Available for Benefits, 7-8
with Fund Information, for the Year Ended December 31, 1998
Notes to Financial Statements 9-13
Financial Statement Schedules (As Required By The Employee
Retirement Income Security Act): 14
Schedule I - Schedule of Assets Held for Investment
Purposes - December 31, 1998
Schedule II - Schedule of Reportable Transactions for
the year ended December 31, 1998 15
(b) Exhibit 23 - Consent of Independent Public Accountants
<PAGE>
Report of Independent Public Accountants
To the Plan Administrator of the
Cinergy Union Employees' 401(k) Plan:
We have audited the accompanying statements of net assets available for
benefits, with fund information, of the CINERGY UNION EMPLOYEES' 401(k) PLAN
(formerly the PSI Energy, Inc. Union Employees' 401(k) Savings Plan) as of
December 31, 1998 and 1997, and the related statement of changes in net assets
available for benefits, with fund information, for the year ended December 31,
1998. These financial statements and the schedules referred to below are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for benefits, with fund
information, of the Plan as of December 31, 1998 and 1997, and the changes in
net assets available for benefits, with fund information, for the year ended
December 31, 1998 in conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental schedules
(Schedules I and II) are presented for the purpose of additional analysis and
are not a required part of the basic financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The fund information in the statements of net assets available for
benefits and the statement of changes in net assets available for plan benefits
is presented for purposes of additional analysis rather than to present the net
assets available for plan benefits and changes in net assets available for
benefits of each fund. The supplemental schedules and fund information have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
June 24, 1999
<PAGE>
<TABLE>
<CAPTION>
Cinergy Union Employees' 401(k) Plan
Statement of Net Assets Available for Benefits, with Fund Information
As of December 31, 1998
(Page 1 of 2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Participant Directed
Fidelity Fidelity
Fidelity Fidelity U.S. Low Fidelity
Fidelity Equity- Asset Bond Priced Diversified Freedom Fidelity
Magellan Income Manager Index Stock International Income Freedom
Fund Fund Fund Fund Fund Fund Fund 2000 Fund
ASSETS
Investments, at fair value:
Shares of registered
investment companies
$20,834,043 $12,994,357 $ - $843,597 $751,137 $382,234 $141,272 $245,123
Common stock - - - - - - - -
Participant loans - - - - - - - -
Total investments 20,834,043 12,994,357 - 843,597 751,137 382,234 141,272 245,123
Receivables:
Employer's contribution - - - - - - - -
Total receivables - - - - - - - -
Net assets available for
benefits $20,834,043 $12,994,357 $ - $843,597 $751,137 $382,234 141,272 $245,123
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cinergy Union Employees' 401(k) Plan
Statement of Net Assets Available for Benefits, with Fund Information (continued)
As of December 31, 1998
(Page 2 of 2)
Non-
Participant
Participant Directed Directed
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity
Fidelity Fidelity Fidelity Retirement
Freedom Freedom Freedom Money Cinergy Cinergy
2010 2020 2030 Market Common Participant Common
Fund Fund Fund Fund Stock Fund Loan Fund Stock Fund Total
ASSETS
Investments, at fair value:
Shares of registered
investment companies $831,334 $108,379 $130,274 $5,220,732 $ - $ - $ - $42,482,482
Common stock - - - - 13,320,985 - 17,670,925 30,991,910
Participant loans - - - - - 2,802,643 - 2,802,643
Total investments 831,334 108,379 130,274 5,220,732 13,320,985 2,802,643 17,670,925 76,277,035
Receivables:
Employer's contribution - - - - - - 820,135 820,135
Total receivables - - - - - - 820,135 820,135
Net assets available for
benefits $831,334 $108,379 $130,274 $5,220,732 $13,320,985 $2,802,643 $18,491,060 $77,097,170
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cinergy Union Employees' 401(k) Plan
Statement of Net Assets Available for Benefits, with Fund Information
As of December 31, 1997
Participant Directed
<S> <C> <C> <C> <C> <C> <C> <C>
Fidelity
Fidelity Fidelity Fidelity Retirement
Fidelity Equity- Asset Fidelity Fidelity Diversified Money
Magellan Income Manager U.S. Bond Low-Priced International Market
Fund Fund Fund Index Fund Stock Fund Fund Fund
ASSETS
Investments, at fair value:
Shares of registered
investment companies $13,562,482 $8,262,065 $3,364,616 $550,494 $375,042 $205,951 $4,774,242
Common stock - - - - - - -
Participant loans - - - - - - -
Total investments 13,562,482 8,262,065 3,364,616 550,494 375,042 205,951 4,774,242
Receivables:
Employer's contribution - - - - - - -
Participants' contributions 71,400 42,024 17,923 3,953 5,001 2,141 22,832
Total receivables 71,400 42,024 17,923 3,953 5,001 2,141 22,832
Net assets available for
benefits $13,633,882 $8,304,089 $3,382,539 $554,447 $380,043 $208,092 $4,797,074
</TABLE>
<TABLE>
<CAPTION>
Cinergy Union Employees' 401(k) Plan
Statement of Net Assets Available for Benefits, with Fund Information (continued)
As of December 31, 1997
Non-
Participant
Participant Directed Directed
<S> <C> <C> <C> <C>
Cinergy Cinergy
Common Participant Common
Stock Fund Loan Fund Stock Fund Total
ASSETS
Investments, at fair value:
Shares of registered
investment companies $ - $ - $ - $31,094,892
Common stock 14,534,109 - 17,147,871 31,681,980
Participant loans - 2,490,292 - 2,490,292
Total investments 14,534,109 2,490,292 17,147,871 65,267,164
Receivables:
Employer's contribution - - 62,736 62,736
Participants' contributions 213,208 - - 378,482
Total receivables 213,208 - 62,736 441,218
Net assets available for
benefits $14,747,317 $2,490,292 $17,210,607 $65,708,382
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cinergy Union Employees' 401(k) Plan
Statement of Changes in Net Assets Available for Benefits, with Fund Information
For the Year Ended December 31, 1998
(Page 1 of 2)
Participant Directed
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity
Fidelity Fidelity Low- Fidelity Fidelity
Equity- Fidelity U.S. Bond Priced Diversified Freedom Fidelity
Magellan Income Asset Index Stock International Income Freedom
Fund Fund Manager Fund Fund Fund Fund 2000 Fund
Additions to net assets:
Investment income:
Net appreciation
(depreciation) in
fair value of
investments $ 4,079,527 $ 405,771 $ 246,257 $ 12,629 $(69,401) $ 12,217 $ 3,676 $ 7,667
Interest - - - - - - - -
Dividends 923,866 671,099 26,266 42,670 61,013 14,422 3,099 9,861
5,003,393 1,076,870 272,523 55,299 (8,388) 26,639 6,775 17,528
Contributions:
Participants' 2,065,214 1,489,721 118,201 114,475 178,355 74,126 1,167 24,969
Employer's - - - - - - - -
Rollovers 1,667 - - - - - 1,667 -
2,066,881 1,489,721 118,201 114,475 178,355 74,126 2,834 24,969
Total additions 7,070,274 2,566,591 390,724 169,774 169,967 100,765 9,609 42,497
Deductions from net assets:
Benefits paid to
participants 136,297 203,374 14,772 1,465 3,357 1,348 - -
Total deductions 136,297 203,374 14,772 1,465 3,357 1,348 - -
Net increase/(decrease)
prior to transfers 6,933,977 2,363,217 375,952 168,309 166,610 99,417 9,609 42,497
Interfund transfers 204,658 2,346,406 (3,758,491) 120,869 243,845 78,625 131,663 202,626
Interplan transfers 61,526 (19,355) - (28) (39,361) (3,900) - -
Net increase (decrease) 7,200,161 4,690,268 (3,382,539) 289,150 371,094 174,142 141,272 245,123
Net assets available for
benefits:
Beginning of year 13,633,882 8,304,089 3,382,539 554,447 380,043 208,092 - -
End of year $20,834,043 $12,994,357 $ - $843,597 $751,137 $382,234 $141,272 $245,123
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cinergy Union Employees' 401(k) Plan
Statement of Changes in Net Assets Available for Benefits, with Fund Information (continued)
For the Year Ended December 31, 1998
(Page 2 of 2)
Non-
Participant
Participant Directed Directed
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity
Retirement
Fidelity Fidelity Fidelity Money Cinergy Cinergy
Freedom Freedom Freedom Market Common Participant Common
2010 Fund 2020 Fund 2030 Fund Fund Stock Fund Loan Fund Stock Fund Total
Additions to net assets:
Investment income:
Net appreciation
(depreciation) in fair
value of investments $ 29,210 $ 6,343 $ 11,690 $ - $(1,674,959) $ - $(1,446,346) $ 1,624,281
Interest - - - - - 237,426 - 237,426
Dividends 32,807 3,073 4,133 245,149 711,475 - 817,107 3,566,040
62,017 9,416 15,823 245,149 (963,484) 237,426 (629,239) 5,427,747
Contributions:
Participants' 47,020 16,866 9,940 622,938 432,813 - - 5,195,805
Employer's - - - - - - 2,468,036 2,468,036
Rollovers - - - - 2,222 - - 5,556
47,020 16,866 9,940 622,938 435,035 - 2,468,036 7,669,397
Total additions 109,037 26,282 25,763 868,087 (528,449) 237,426 1,838,797 13,097,144
Deductions from net assets:
Benefits paid to
participants - - - 391,806 600,051 79,809 321,127 1,753,406
Total deductions - - - 391,806 600,051 79,809 321,127 1,753,406
Net increase/(decrease)
prior to transfers 109,037 26,282 25,763 476,281 (1,128,500) 157,617 1,517,670 11,343,738
Interfund transfers 722,297 82,097 104,511 (52,526) (546,296) 119,716 - -
Interplan transfers - - - (97) 248,464 35,018 (237,217) 45,050
Net increase (decrease) 831,334 108,379 130,274 423,658 (1,426,332) 312,351 1,280,453 11,388,788
Net assets available for
benefits:
Beginning of year - - - 4,797,074 14,747,317 2,490,292 17,210,607 65,708,382
End of year $831,334 $108,379 $130,274 $5,220,732 $13,320,985 $2,802,643 $18,491,060 $77,097,170
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
Cinergy Union Employees'
401(k) Plan
Notes to Financial Statements
(1) Plan Description-
(a) General--The Cinergy Union Employees' 401(k) Plan (the Plan) is a
defined contribution plan covering union employees of Cinergy Corp.'s
subsidiaries (collectively "the Company") represented by the
International Brotherhood of Electrical Workers, Local 1593. The Plan
is administered by the Cinergy Benefits Committee and trusteed by the
Fidelity Management Trust Company. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974
(ERISA). The administrative expenses of the Plan are paid by the
Company. Reference should be made to the Plan document for a more
complete description of the Plan's provisions.
Effective January 1, 1998, the Plan's name was changed from the PSI
Energy, Inc. Union Employees' 401(k) Savings Plan to the Cinergy Union
Employees' 401(k) Plan.
(b) Contributions--Under the Plan, participants may contribute up to 15%
of annual pretax compensation, as defined in the Plan. In addition, a
participant may make optional contributions to the Plan which, when
combined with salary deferrals, may not exceed 15% of base pay. Salary
deferrals and optional contributions are subject to certain
limitations. The salary deferrals and optional contributions are
invested by the trustee, as directed by each participant, in one or
more investment funds, including the Cinergy Common Stock Fund.
The Company matches 60% of the first 5% of base pay, contributed by
each participant. An additional incentive match of up to 40% of the
first 5% of base pay that a participant contributes may be contributed
at the discretion of the Company's board of directors. For those
employees who do not contribute to the Plan, the Company contributes
an incentive match assuming the employee contributed 1% of base pay.
All employer contributions are invested by the trustee in the Cinergy
Common Stock Fund. The employer contributions must remain in the
Cinergy Common Stock Fund until the participant reaches age 50 and are
shown in the accompanying financial statements as "Non-Participant
Directed" funds until the employee elects to transfer the funds to
another investment option.
Participants are immediately vested in all contributions and earnings
thereon.
(c) Payment of Benefits--Participants are generally eligible to receive
distributions of assets from the Plan upon termination of employment
(including retirement), death, or disability. Distributions are paid
in a lump sum for vested benefits of $3,500 or less. Distributions are
paid in a lump sum or up to ten annual installments (at the election
of the participant) for vested benefits greater than $3,500. Active
participants are also eligible to apply to the Plan administrator for
"hardship withdrawals from their salary deferral account in accordance
with Plan provisions.
(d) Participant Loans--Subject to certain limitations, participants may
apply for loans from their salary deferral account balances. Such
loans are reflected in the Participant Loan Fund in the accompanying
financial statements. Interest on the loans is set at the prime rate
plus1/2% at the time of borrowing and are secured by the balance in
the participant's account. Loans are to be repaid within 54 months
through regular payroll deductions.
(2) Significant Accounting Policies-
(a) Basis of Accounting--The financial statements of the Plan are prepared
under the accrual method of accounting.
(b) Investment Valuation and Income Recognition--Investments are stated at
fair value. Shares of registered investment companies are valued at
quoted redemption prices which represent the net asset value of shares
held by the Plan at year-end. Cinergy common stock is valued at its
quoted market price. Participant loans are valued at cost, which
approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date.
Transfers of assets between the Plan and the Cinergy Employees' 401(k)
Plan occur as a result of changes in employee status between the union
classification and the exempt and non-exempt classifications. Such
transfers are reflected as interplan transfers on the statement of
changes in net assets available for benefits.
A participant may elect or change investment funds and/or the
contribution allocation percentages among funds at any time.
The following investments exceed 5% of total net assets available for
benefits at December 31, 1998 and 1997:
1998 1997
Fidelity Magellan Fund $20,834,043 $13,562,482
Fidelity Equity-Income Fund 12,994,357 8,262,065
Fidelity Asset Manager Fund - * 3,364,616
Fidelity Retirement Money Market Fund 5,220,732 4,774,242
Cinergy Common Stock 30,991,910 31,681,980
* represents less than 5% of total net assets
(c) Use of Estimates--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(d) Payments of Benefits-- Benefits are recorded when paid.
(3) Investment Options-
Upon enrollment or re-enrollment, participants direct that their
contributions, including any rollover contributions (i.e., non-Company
match contributions), be invested in one or more of the following
investment options:
* Fidelity Magellan Fund
The Fidelity Magellan Fund invests mainly in equity securities of
domestic and foreign issuers that offer potential for growth with the
principal purpose of seeking maximum appreciation in value.
* Fidelity Equity-Income Fund
The Fidelity Equity-Income Fund invests mainly in income producing
equity securities with the principal purpose of earning reasonable
income while considering the potential for capital appreciation.
* Fidelity U.S. Bond Index Fund
The Fidelity U.S. Bond Index Fund invests in securities that include
obligations of the U.S. Treasury, U.S. Agencies, corporations,
mortgage-backed obligations, and U.S. dollar-denominated obligations
of foreign governments with the principal purpose of seeking current
income consistent with the preservation of capital.
* Fidelity Diversified International Fund
The Fidelity Diversified International Fund invests primarily in
stocks of foreign issuers with the principal purpose of seeking out
stocks that are undervalued compared to industry norms in their
countries.
* Fidelity Low-Priced Stock Fund
The Fidelity Low-Priced Stock Fund invests primarily in the stocks of
companies that the fund manager considers undervalued or out of favor
with other investors and that could offer the possibility for
significant growth with the principal purpose of seeking out stocks of
smaller companies with per share prices of $35 or less.
* Fidelity Freedom Income Fund
The Fidelity Income Fund's goal is to seek high current income and, as
a secondary objective, capital appreciation through a combination of
investing in equity, fixed-income and money market funds managed by
Fidelity Investments.
* Fidelity Freedom 2000, 2010, 2020, and 2030 Funds
Each of the Fidelity Freedom 2000, 2010, 2020 and 2030 Funds seek high
total return. Each fund seeks to achieve this goal by investing in a
combination of equity, fixed-income and money market funds managed by
Fidelity Investments. These funds are targeted to investors expected
to retire near the date specified in the fund name.
* Fidelity Retirement Money Market Fund
The Fidelity Retirement Money Market Fund invests in high quality
money market instruments including certificates of deposit, commercial
paper, short-term corporate and U.S. Government obligations and
bankers' acceptances issued by major banks. The purpose of the Fund is
to seek high money market yields while maintaining preservation of
capital.
* Cinergy Common Stock Fund
The Cinergy Common Stock Fund invests in common stock of Cinergy Corp.
Previously, participants could direct their contributions to the Fidelity
Asset Manager Fund. During 1998, the Plan administrator eliminated this
fund as an investment option. Participants invested in this fund were able
to redirect their investment elections to any one or more of the above
investment options.
(4) Federal Income Tax Status-
The Internal Revenue Service has determined and informed the Plan by letter
dated November 14, 1995, that the Plan and related trust are designed in
accordance with applicable sections of the Internal Revenue Code (IRC). The
Plan has been amended since receiving the determination letter. However,
the Plan administrator and the Plan's legal counsel believe the Plan is
designed and is being operated in compliance with the applicable provisions
of the IRC.
(5) Plan Termination-
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA.
(6) Related Party Transactions-
Certain Plan investments are shares of mutual funds managed by Fidelity
Investments. Fidelity Investments is the Trustee as defined by the Plan and
therefore, these transactions qualify as party-in-interest transactions.
The Cinergy Corp. Common Stock Fund holds common stock of the plan
administrator as defined by the Plan and therefore, these transactions
qualify as party-in-interest transactions. Finally, the Participant Loan
Fund hold loans from participants in the Plan and therefore, these
transactions qualify as party-in-interest transactions.
<PAGE>
<TABLE>
<CAPTION>
Schedule I
Cinergy Union Employees'
401(k) Plan
EIN: 35-0594457
Plan Number: 101
Item 27a--Schedule of Assets Held for Investment Purposes
December 31, 1998
<S> <C> <C> <C>
Description of Investment, Including
Identity of Issuer, Borrower, Maturity Date, Rate of Interest,
Lessor, or Similar Party Collateral and Par or Maturity Value Cost Value
* Cinergy Corp. Common Stock $23,137,898 $30,991,910
* Fidelity Investments Magellan Fund 14,466,557 20,834,043
* Fidelity Investments Equity Income Fund 10,590,651 12,994,357
* Fidelity Investments U.S. Bond Index Fund 824,145 843,597
* Fidelity Investments Low-Priced Stock Fund 825,419 751,137
* Fidelity Investments Diversified International Stock Fund 376,146 382,234
* Fidelity Investments Freedom Income Fund 137,595 141,272
* Fidelity Investments Freedom 2000 Fund 237,453 245,123
* Fidelity Investments Freedom 2010 Fund 801,922 831,334
* Fidelity Investments Freedom 2020 Fund 101,905 108,379
* Fidelity Investments Freedom 2030 Fund 117,814 130,274
* Fidelity Investments Retirement Money Market Fund 5,220,732 5,220,732
* Various plan participants Participant loans (interest rates ranging
Total assets held for investment from 5.25-9%) 2,802,643 2,802,643
purposes
$59,640,880 $76,277,035
* Denotes a party-in-interest
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule II
Cinergy Union Employees'
401(k) Plan
EIN: 35-0594457
Plan Number: 101
Item 27d - Schedule of Reportable Transactions
For the Year Ended December 31, 1998
<S> <C> <C> <C> <C> <C> <C>
Expenses
Identity of Incurred
Party Identity of Purchase Sales With Cost of
Involved Securities Price (A) Price (A) Transaction Assets Net Gain
Cinergy Cinergy $5,002,421 $2,571,186 $ - $1,889,514 $681,672
Corp. Common
Stock Fund
Fidelity Fidelity 4,678,962 1,486,928 - 1,227,613 259,315
Investments Magellan
Fund
Fidelity Fidelity 6,089,978 1,763,457 - 1,542,687 220,770
Investments Equity-Income
Fund
Fidelity Fidelity Asset 219,045 3,829,918 - 3,169,679 660,239
Investments Manager Fund
Fidelity Fidelity 1,977,032 1,530,542 - 1,530,542 -
Investments Retirement
Money Market
Fund
<FN>
(A) The current value of all assets acquired or disposed of, at the time of the
acquisition or disposition, is equal to the purchase price or selling
price, respectively.
</FN>
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Committee has duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
CINERGY UNION EMPLOYEES'
401(K) PLAN
By/s/RICHARD L. BOND
Richard L. Bond
Plan Administrator
June 28, 1999
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated June 24, 1999 included in the
Annual Report on Form 11-K for the year ended December 31, 1998 of the Cinergy
Union Employees' 401(k) Plan, into Cinergy Corp.'s previously filed Registration
Statement File No. 33-56067.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
June 24, 1999
