<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTION I 1(a)
AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE
REDUCED DISCLOSURE FORMAT
For the transition period from _________ to ___________
Commission file number 333-60907
COMED FUNDING, LLC
(Exact name of Registrant as specified in its charter)
Delaware 36-423-9488
- --------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10 South Dearborn St., Chicago, Illinois 60603
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number: (312) 394-7937
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _______
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
The aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant as of
March 29, 1999 was $0.
<PAGE>
COMED FUNDING, LLC
FORM 10-K
For the Fiscal Year Ended December 31, 1998
This document contains the Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 for ComEd Funding,
LLC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Definitions 2
Annual Report on Form 10-K for ComEd Funding, LLC:
Part I
Item 1. Business 4
ComEd Funding 4
Trust 4
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of
Security Holders 5
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 6
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis
of Financial Condition And Results of
Operations 8
Item 7A.Quantitative and Qualitative Disclosures
About Market Risk 8
Item 8. Financial Statements and Supplementary
Data 8
Item 9. Changes in and Disagreements with
Accountants on Accounting And
Financial Disclosure 9
Part III
Item 10. Directors and Executive Officers of
the Registrant 9
Item 11. Executive Compensation 9
Item 12. Security Ownership of Certain Beneficial
Owners and Management 9
Item 13. Certain Relationships and Related
Transactions 9
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 10
</TABLE>
1
<PAGE>
DEFINITIONS
The following terms are used in this report with the
following meanings:
<TABLE>
<CAPTION>
Term Meaning
- -------------- ------------------------------------------
<S> <C>
Administrator/
Servicer ComEd
Beneficiary Ruth Ann M. Gillis and David R.
Trustees Zahakaylo
ComEd Funding ComEd Funding, LLC is a special purpose
Delaware limited liability corporation
whose sole member is ComEd
ComEd Commonwealth Edison Company, a subsidiary
of Unicom
Delaware Trustee First Union Trust Company, National
Association, acting not in its individual
capacity but solely as trustee under the
Trust Agreement
DTC The Depository Trust Company
Funding Law The Illinois Electric Utility Transitional
Funding Law of 1997
ICC Illinois Commerce Commission
IFC Instrument Funding Charges
Notes Indenture Indenture dated as of December 16, 1998
between the Trust and the Indenture
Trustee
Indenture Harris Trust and Savings Bank, an Illinois
Trustee banking corporation
Intangible Intangible transition property created
Transition pursuant to the Funding Order
Property
Notes Transitional Funding Trust Notes
Servicer Responsible for Servicing, Managing and
Receiving IFC Payments for a Servicing Fee
Funding Order Illinois Commerce Commission order, dated
July 21, 1998, issued pursuant to the
Funding Law, which provides, among other
things, for the creation of Intangible
Transition Property
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Term Meaning
- --------------- -----------------------------------------
<S> <C>
Trust ComEd Transitional Funding
Trust, a Delaware business trust, whose
sole owner is ComEd Funding
Registration The Registration Statement of ComEd
Statement Funding and the Trust on Form S-3 (No.
333-60907) filed with the SEC on
December 4, 1998, as amended
Unicom Unicom Corporation
</TABLE>
3
<PAGE>
ANNUAL REPORT ON FORM 10-K FOR COMED FUNDING, LLC
PART 1
Item 1. Business.
ComEd Funding
ComEd Funding is a special purpose Delaware limited
liability company, whose sole member is ComEd. ComEd
Funding was organized on July 21, 1998 for the exclusive
purposes of (a) initially owning the Intangible Transition
Property, created by the Funding Order issued by the ICC,
(b) assigning all of its right, title and interest in the
Intangible Transition Property and the Servicing Agreement
to the Trust, (c) entering into the Servicing Agreement with
ComEd, as servicer in respect of the Intangible Transition
Property, and (d) engaging in only those other activities
that are incidental thereto and necessary. Although ComEd
owns all the equity securities of ComEd Funding, the limited
liability company agreement and other organizational
documents require ComEd Funding to operate in a manner such
that it should not be consolidated in the bankruptcy estate
of ComEd in the event ComEd becomes subject to such a
proceeding. The executive offices of ComEd Funding are
located at Ten South Dearborn Street, 37th Floor, Chicago,
Illinois 60603, and its phone number is (312) 394-7937.
Trust
The Trust was formed as a statutory business trust under
the laws of the State of Delaware in accordance with the
Trust Agreement executed by the Beneficiary Trustees and as
the Delaware Trustee. The Trust is a subsidiary of ComEd
Funding. Pursuant to the terms of the Trust Agreement, the
Trust was created for the specific purpose of acquiring and
owning the Intangible Transition Property and other Note
Collateral, issuing and registering the Notes, pledging its
interest in the Intangible Transition Property and other
Note Collateral pursuant to the terms of the Notes
Indenture, making payments on the Notes, distributing
amounts released to the Trust and performing other
activities that are necessary, suitable or convenient to
accomplish these purposes. The Trust Agreement does not
permit the Trust to engage in any activities not directly
related to the Notes financing.
The assets of the Trust consist of the Intangible
Transition Property, the other Note Collateral, and money
distributed by ComEd Funding to the Delaware Trustee on
behalf of the Trust to fund the Trust's capital subaccount.
See "Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters," subcaption "Use of Proceeds,"
for a description of the Notes issued by the Trust.
4
<PAGE>
The only material business conducted by the Trust has been
the acquisition of Intangible Transition Property and the
issuance on December 16, 1998 of $3.4 billion of Notes,
Series 1998, Class A-1 through Class A-7, with scheduled
maturities ranging from 16 months to 10 years and final
maturities ranging from 3 years to 12 years. The specific
interest rate and maturity of each class of the Notes is
specified in Note 3 of Notes to Financial Statements.
The Trust has no employees. It has entered into a
Servicing Agreement with ComEd pursuant to which ComEd is
required to service the Intangible Transition Property on
behalf of the Trust. In addition, the Trust has entered into
an Administration Agreement with ComEd pursuant to which
ComEd performs administrative and operational duties for the
Trust.
Item 2. Properties.
ComEd Funding and the Trust have no physical
property. The Trust's primary asset is the Intangible
Transition Property, which is described more fully below.
Pursuant to the Funding Law of 1997, the ICC issued
a Funding Order in favor of ComEd Funding at the request of
ComEd which provides, among other things, for the creation
of Intangible Transition Property and the vesting thereof in
ComEd Funding. The Intangible Transition Property created
by the Funding Order, among other things, represents the
right to impose and receive certain IFC's from all consumers
in ComEd's service territory regardless of their electric
supplier, in an aggregate amount sufficient to repay in full
the Notes, fund a required overcollateralization account and
pay all related costs and fees. The IFC's are nonbypassable,
usage-based, per kilowatt hour charges to be imposed on
designated consumers of electricity. In accordance with the
Intangible Transition Property Sale Agreement between ComEd
Funding and the Trust, ComEd Funding has assigned its rights
in the Intangible Transition Property, the servicing
agreement and certain other assets to the Trust.
Accordingly, the Trust is entitled to collect IFC's until it
has received amounts sufficient to retire all outstanding
series of Notes, fund a required overcollateralization
account and pay all related costs and fees. As of December
31, 1998, the Trust had received approximately $5.4 million
from the collection of IFC's.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
Omitted pursuant to Instruction I of Form 10-K.
5
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
(a) Sales of Unregistered Securities. There is no
established public trading market for the common equity
securities of ComEd Funding or the Trust. All of ComEd
Funding's common equity is owned by ComEd. All of the
Trust's common equity is owned by ComEd Funding. ComEd
has made capital contributions to ComEd Funding which
in turn used such proceeds to make capital
contributions to the Trust. Such capital contributions
have aggregated to approximately $17 million as of
December 31, 1998. Such equity "purchases" were exempt
from registration under the Securities Act of 1933, as
amended, pursuant to Section 4 (2) thereof. ComEd
Funding and the Trust have made no other sales of
equity securities.
(b Dividends. The Note Indenture prohibits the Trust
from making any payments, distributions or dividends to
any holder of beneficial interests in the Trust in
respect of such beneficial interest for any calendar
month unless no event of default has occurred and is
continuing thereunder and any such distributions do not
cause the book value of the remaining equity in the
Trust to decline below 0.50 percent ($17,000,000 at
December 31, 1998) of the initial principal amount of
all series of Notes then issued and outstanding. As of
December 31, 1998, the Trust has not made any
distributions.
(c) Use of Proceeds. The Registration Statement,
registering $4 billion in an aggregate principal amount
of Notes, was filed with the Securities and Exchange
Commission on December 3, 1998 and declared effective
on December 4, 1998. Notes in the aggregate principal
amount of $3.4 billion were sold on December 11, 1998.
In connection with the offering of the Notes, Goldman,
Sachs & Co., Merrill Lynch & Co. and Salomon Smith
Barney acted as the managing underwriters.
6
<PAGE>
The amount of each class of Notes sold and the
respective sale prices to the public
are shown below.
<TABLE>
<CAPTION>
Principal
Amount Sale Price
Registered to Public
----------- ------------
<S> <C> <C>
Class A-1 Note $424,967,313 $424,867,573
Class A-2 Note 425,032,687 424,940,965
Class A-3 Note 258,860,915 258,799,436
Class A-4 Note 421,139,085 420,923,293
Class A-5 Note 598,510,714 598,106,001
Class A-6 Note 761,489,286 761,119,507
Class A-7 Note 510,000,000 509,852,610
------------ ------------
$3,400,000,000 $3,398,609,385
============= =============
</TABLE>
The Trust received proceeds, net of underwriting
discounts and commissions, of $3,382,629,426 from the
sale of the Notes. Such proceeds were used to pay
ComEd for the assigned Intangible Transition Property
from ComEd.
From December 4, 1998 (the effective date of the
Registration Statement) through December 31, 1998, the
amount of expenses incurred for the account of the
Trust in connection with the issuance and distribution
of the Notes totaled $17.4 million in underwriting
discounts and commissions and $5.9 million for other
expenses, and for a total of $23.3 million of expenses.
The Trust believes that these are reasonable estimates
of the respective expenses incurred during this period
in connection with the offer and sale of the Notes. No
expenses were paid either directly or indirectly to
directors, officers, or affiliates of the Trust during
this period.
(d) Noteholders. As of March 29, 1999, the sole holder of
the Notes was Cede & Co. as nominee of the DTC. Records
provided by the DTC indicate that as of December 31, 1998,
there were approximately 222 beneficial holders of the
Notes. The Notes are not registered on any national
securities exchange and are not traded on any established
trading market.
Item 6. Selected Financial Data.
Omitted pursuant to Instruction I of Form 10-K.
7
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following is an analysis of the consolidated
results of operations of ComEd Funding and the Trust in
an abbreviated format pursuant to Instruction I of Form
10-K.
As discussed above under "Item 1. Business", ComEd
Funding is a newly organized entity established in July
1998 for limited purposes. As discussed under "Item 5.
Market for Registrant's Common Equity and Related
Stockholder Matters", on December 16, 1998, the Trust
issued Notes in order to purchase the Intangible
Transition Property, which is classified as a
receivable on the financial statements included under
"Item 8. Financial Statements and Supplementary Data".
As the Trust is restricted by its organizational
documents from engaging in activities other than those
described in Item 1. "Business", income statement
effects were limited primarily to income generated from
the Intangible Transition Property, interest expense on
the Notes and incidental investment interest income.
In 1998, income generated from the Intangible
Transition Property receivable was approximately $7.8
million. The Trust also accrued approximately $7.8
million in interest expense related to the Notes.
ComEd Funding and the Trust do not expect any material
adverse impact on their financial position or results
of operations as a result of any Year 2000 computer
issues.
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk.
The table below provides the fair value and average
interest rates for the Trust's Notes.
<TABLE>
<CAPTION>
Expected Maturity Date Fair
------------------------------ Value
There- as of
1999 2000 2001 2002 2003 after Total 12/31/98
---- ---- ---- ---- ---- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Notes
(millions) $330 $350 $340 $340 $340 $1,700 $3,400 $3,450
Average
Interest
Rate 5.4% 5.3% 5.3% 5.4% 5.4% 5.6%
</TABLE>
Item 8. Financial Statements and Supplementary Data.
ComEd Funding is a pass-through entity with no assets
(other than its equity interest in the Trust) or
liabilities. It does not have and will not have any
income
8
<PAGE>
or losses other than such income or losses reported by
the Trust. Expenses of the trustees of the Trust are
payable by the Trust pursuant to the terms of a Fee and
Indemnity Agreement. For the foregoing reasons,
consolidated financial statements of ComEd Funding are
being provided instead of separate financial statements
for ComEd Funding and the Trust.
The consolidated financial statements and related
financial information required to be filed hereunder
are indexed on page F-1 of this report (appearing after
Item 14 of this report) and are incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Omitted pursuant to Instruction I of Form 10-K.
Item 11. Executive Compensation.
Omitted pursuant to Instruction I of Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Omitted pursuant to Instruction I of Form 10-K.
Item 13. Certain Relationships and Related Transactions.
Omitted pursuant to Instruction I of Form 10-K.
9
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.
(a) The following documents are filed as part of this
report:
1. Financial Statements:
Report of Independent Public Accountants
Statement of Consolidated Operations and Changes in
Member's Equity
Consolidated Balance Sheet
Statement of Consolidated Cash Flows
Notes to Consolidated Financial Statements
(b) None
2. Financial Statement Schedule
None
3. Exhibits
See index to Exhibits which appears following the
signature page to this report.
10
<PAGE>
DEFINITIONS
The following terms are used in this document with the
following meanings:
<TABLE>
<CAPTION>
Term Meaning
- --------------- ------------------------------------------
<S> <C>
Administrator/
Servicer ComEd
Beneficiary Ruth Ann M. Gillis and David R.
Trustees Zahakaylo
ComEd Funding ComEd Funding, LLC is a special purpose
Delaware limited liability corporation
whose sole member is ComEd
ComEd Commonwealth Edison Company, a subsidiary
of Unicom
Delaware Trustee First Union Trust Company, National
Association, acting not in its individual
capacity but solely as trustee under the
Trust Agreement
Funding Law The Illinois Electric Utility Transitional
Funding Law of 1997
ICC Illinois Commerce Commission
IFC Instrument Funding Charges
Notes Indenture Indenture dated as of December 16, 1998
between the Trust and the Indenture
Trustee
Indenture Harris Trust and Savings Bank, an Illinois
Trustee banking corporation
Intangible Intangible transition property created
Transition pursuant to the Funding Order
Property
Notes Transitional Funding Trust Notes
Servicer Responsible for Servicing, Managing and
Receiving IFC Payments for a Servicing Fee
Funding Order Illinois Commerce Commission order, dated
July 21, 1998, issued pursuant to the
Funding Law, which provides, among other
things, for the creation of Intangible
Transition Property
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
Term Meaning
- ------------- -----------------------------------------
<S> <C>
Trust ComEd Transitional Funding
Trust, a Delaware business trust, whose
sole owner is ComEd Funding
Unicom Unicom Corporation
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management of ComEd Funding, LLC:
We have audited the accompanying consolidated balance sheet
of ComEd Funding, LLC and subsidiary trust as of
December 31, 1998, and the related consolidated statements
of operations and changes in member's equity and cash flows
for the period July 21, 1998 (date of inception) through
December 31, 1998. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of ComEd Funding,LLC and subsidiary trust as of
December 31, 1998, and the results of their operations and
their cash flows for the period July 21, 1998 (date of
inception) through December 31, 1998, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
March 29, 1999
F-3
<PAGE>
COMED FUNDING, LLC AND SUBSIDIARY TRUST
STATEMENT OF CONSOLIDATED OPERATIONS AND CHANGES IN MEMBER'S
EQUITY
FROM INCEPTION (JULY 21, 1998) TO DECEMBER 31, 1998
(THOUSANDS OF DOLLARS)
<TABLE>
<S> <C>
Operating Revenues:
Interest income from intangible transition
property receivable $ 7,774
Other interest income 43
-----------
Total operating revenues $ 7,817
-----------
Operating Expenses:
Interest expense $ 7,774
Amortization of note discounts
and issuance costs 275
------------
Total operating expenses $ 8,049
------------
Net (Loss) $ (232)
Member's Equity at Inception (July
21, 1998) -
Contributed Capital 40,223
------------
Member's Equity at December 31, 1998 $ 39,991
============
</TABLE>
The accompanying Notes to Financial Statements are an
integral part of the above statements.
F-4
<PAGE>
COMED FUNDING, LLC AND SUBSIDIARY TRUST
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ASSETS
---------------
<S> <C>
Current Asset:
Cash and temporary cash investments $ 5,406
Intangible transition propety receivable 332,484
--------------
Current asset $ 337,890
--------------
Other Assets and Deferred Charges:
Restricted cash $ 17,016
Intangible transition property receivable 3,070,000
Unamortized debt issuance costs 5,771
-------------
Noncurrent assets $ 3,092,787
-------------
Total Assets $ 3,430,677
==============
<CAPTION>
LIABILITIES AND MEMBER'S EQUITY
--------------------------------
<S> <C>
Current Liabilities:
Current portion of long-term debt $ 330,000
Accrued interest 7,774
Accounts payable 74
--------------
Current liabilities $ 337,848
-------------
Noncurrent Liabilities:
Long-term debt:
Transitional trust notes $ 3,070,000
Less: Discount on notes (17,178)
--------------
Long-term debt-net $ 3,052,822
Other 16
--------------
Total noncurrent liabilities $ 3,052,838
--------------
Member's equity:
Contributed capaital 40,223
Retained earnings (deficit) (232)
--------------
Total member's equity $ 39,991
--------------
Total Liabilities and Member's
Equity $ 3,430,677
==============
</TABLE>
The accompanying Notes to Financial Statements are an
integral part of the above statements.
F-5
<PAGE>
COMED FUNDING, LLC AND SUBSIDARY TRUST
STATEMENT OF CONSOLIDATED CASH FLOWS
FROM INCEPTION (JULY 21,1998) TO DECEMBER 31, 1998
(THOUSANDS OF DOLLARS)
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (232)
Adjustment for non cash items:
Amortization of note discount and issuance costs 275
Changes in working capital:
Receivables (2,485)
Accrued interst payable 7,774
Accounts payable 74
Other 16
-------
Net Cash Provided by Operating Activities $ 5,422
--------
Cash Flows from Financing Activities:
Proceeds from issuance of notes payable $ 3,382,629
Equity contribution from member 17,000
---------
Cash Flows Provided by Financing Activities $ 3,399,629
---------
Cash Flows from Investing Activities:
Purchase of note receivable $ (3,382,629)
Restricted funds (17,016)
-----------
Net Cash Used by Investing Activities $ (3,399,645)
-----------
Net increase in cash and temporary cash
investments $ 5,406
Cash and temporary cash investments,
beginning of period -
Cash and temporary cash investments,
end of year -----------
$ 5,406
===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part
of the above statements.
F-6
<PAGE>
COMED FUNDING, LLC AND SUBSIDIARY TRUST
FOR THE YEAR ENDED DECEMBER 31, 1998
Notes to Consolidated Financial Statements
--------------------------------------------
1.Basis of Presentation
- --------------------------
The consolidated financial statements include the accounts
of ComEd Funding and the Trust. ComEd, a provider of
electric services, is the sole member of ComEd Funding and
is a subsidiary of Unicom Corporation. All significant
intercompany transactions have been eliminated. ComEd
Funding was organized on July 21, 1998 for the exclusive
purposes of (a) initially owning the Intangible Transition
Property established by the Funding Order, (b) assigning all
of its right, title and interest in the Intangible
Transition Property and the Serving Agreement to the Trust,
(c) entering into the Servicing Agreement with ComEd, as the
servicer, in respect of the Intangible Transition Property,
and (d) engaging in only those other activities that are
incidental and necessary to the foregoing matters.
The Trust was formed as a statutory business trust under the
laws of the State of Delaware in accordance with the Trust
Agreement executed by the Beneficiary Trustees and the
Delaware Trustee. The Trust is a wholly owned subsidiary of
ComEd Funding. Pursuant to the terms of the Trust
Agreement, the Trust was created for the specific purpose of
acquiring and owning the Intangible Transition Property and
other Note Collateral, issuing and registering the Notes,
pledging its interest in the Intangible Transition Property
and other Note Collateral pursuant to the terms of the Notes
Indenture, making payments on the Notes, distributing
amounts released to the Trust and performing other
activities that are necessary, suitable or convenient to
accomplish these purposes. The Trust Agreement does not
permit the Trust to engage in any activities not directly
related to the Notes financing.
ComEd Funding and the Trust are structured and are to be
operated in a manner such that even in the event of
bankruptcy proceedings against ComEd, the assets of ComEd
Funding and the Trust will not be consolidated into the
bankruptcy estate of ComEd.
Pursuant to the Funding Law of 1997, the ICC issued on July
21, 1998 a Funding Order in favor of ComEd Funding at the
request of ComEd which provides, among other things, for the
creation of Intangible Transition Property and the vesting
thereof in ComEd Funding. The Intangible Transition
Property created by the Funding Order, among other things,
represents the right to impose and receive certain IFC's
from all customers in ComEd's service territory regardless
of their electric supplier, in an aggregate amount
sufficient to repay in full the Notes, fund a required
overcollateralization account and pay all related costs and
fees. The IFC's are nonbypassable, usage-based, per kilowatt
hour charges to be imposed on designated consumers of
electricity.
F-7
<PAGE>
2. Summary of Accounting Policies
- ------------------------------------
Cash and Temporary Cash Investments
Cash and Temporary Cash Investments (stated at cost, which
approximate market) include working funds and short-term
investments with original maturities of three months or
less.
Restricted Cash
The Notes Indenture requires the Trust to maintain funds
equal to approximately 0.50% of the Notes in an account with
the Indenture Trustee. These funds are to be held in
reserve, used only in the event that collections of the
IFC's charge provide insufficient funds to make scheduled
payments on the Notes and to pay other expenses of the
Trust.
Income Taxes
As a limited liability company, the member intends for ComEd
Funding to be treated as a partnership for tax purposes. The
member of ComEd Funding intends for the Trust, ComEd Funding
and ComEd to be treated as a single entity for tax purposes.
Income and losses are passed through to the member of ComEd
Funding and, accordingly, no provision for income taxes has
been recorded.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions. These estimates and
assumptions affect the reported amount of revenues,
expenses, assets and liabilities and the disclosure of
contingencies. Actual results could differ from estimates.
3. Long-Term Debt
- --------------------
In December 1997, the Trust issued $3.4 billion of Notes.
The Notes consist of seven classes and have scheduled
maturities ranging from 16 months to 10 years and bear
interest at rates ranging from 5.29% to 5.74%. The Notes
are secured solely by the Intangible Transition Property
(see Note 1) and certain other assets of the Trust, and the
holders of the Notes do not have any recourse to any assets
or revenues of ComEd or Unicom Corporation.
Principal and interest payments on the Notes are due
quarterly beginning June 1999 and will be paid from funds
deposited daily with the Indenture Trustee for the Notes by
ComEd as servicer of the Intangible Transition Property.
The debt service requirements include an
overcollateralization amount, which will be retained for the
benefit of the holders of the Notes. Any amounts not
required for debt service will be returned to
F-8
<PAGE>
ComEd Funding. Scheduled maturities and interest rates for
the Notes at December 31, 1998, are as follows:
<TABLE>
<CAPTION>
Amount
Scheduled Interest (Thousands
Class Maturity Date Rate of Dollars)
- ------- --------------- -------- ----------
<C> <S> <C> <C>
A-1 March 25, 2000 5.38% $ 424,967
A-2 June 25, 2001 5.29% 425,033
A-3 March 25, 2002 5.34% 258,861
A-4 June 25, 2003 5.39% 421,139
A-5 March 25, 2005 5.44% 598,511
A-6 June 25, 2007 5.63% 761,489
A-7 December 5, 2008 5.74% 510,000
------------
$3,400,000
Less: Current Maturities (330,000)
Less: Unamortized Discount (17,178)
------------
Total Long-Term Debt-Net $3,052,822
============
</TABLE>
Scheduled maturities through 2003 for the Notes outstanding
at December 31, 1998 are as follows: 1999 - $330 million,
2000 - $350 million, 2001 - $340 million, 2002 - $340
million, 2003 - $340 million and $1,700 million thereafter.
The estimated fair value of the Trust's Notes at
December 31, 1998 was as follows:
<TABLE>
<CAPTION>
Carrying Unrealized Fair
Value Losses Value
---------- ---------- ------------
(Thousands of Dollars)
<S> <C> <C>
$3,382,821 $67,168 $3,449,989
</TABLE>
4. Significant Agreements and Related Party Transactions
- ----------------------------------------------------------
Under the Transition Property Servicing Agreement, ComEd, is
the servicer. The servicer will be paid a quarterly
servicing fee of $750,000 in consideration for billing and
collecting the IFC's on behalf of the Trust, calculating the
reconciliation and true-up adjustments and performing
related services. Such servicing fees shall be paid to the
servicer from IFC collections. The Trust accrued a total of
$63,000 in servicing fees in 1998. Under an Administration
Agreement, ComEd, the Administrator, is required to provide
certain administrative services on behalf of the Trust, for
a quarterly fee of $135,000. The Trust accrued a total of
$11,000 in administrative fees in 1998. ComEd is also
entitled to receive as compensation any interest earnings on
the IFC's tariff collections, and any late payment charges
collected from ComEd's customers prior to remittance to the
Trust. Under the Indenture Trust Agreement, Harris Bank and
Trust
F-9
<PAGE>
Company, the Indenture Trustee, is responsible for
authenticating and delivering the Notes to the investors.
First Union Trust Company, the Delaware Trustee, is
responsible for the maintenance of all records that are
necessary to form and maintain the existence of the Trust.
All fees and expenses of the Indenture Trustee and the
Delaware Trustee will be paid by the Trust.
F-10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Chicago and state of
Illinois on the 31st day of March, 1999.
COMED FUNDING, LLC
By /s/ Ruth Ann M. Gillis
-----------------------------
Ruth Ann M. Gillis
Manager
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on
the 31st day of March, 1999
Signature Title
----------------------- -----------------------------------
/s/ Ruth Ann M. Gillis Manager (Principal Executive
- ------------------------- Executive Officer)
Ruth Ann M. Gillis
/s/ Patricia L. Kampling Manager
- --------------------------
Patricia L. Kampling
/s/ John C. Bukovski Manager
- -------------------------
John C. Bukovski
/s/ Andrew L. Stidd Manager
- --------------------------
Andrew L. Stidd
/s/ Kevin P. Burns Manager
- ---------------------------
Kevin P. Burns
/s/ David R. Zahakaylo Principal Financial and
- --------------------------- Accounting Manager
David R. Zahakaylo
[Signature page to ComEd Funding, LLC Annual Report on Form 10-K]
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- -------- ----------------------------------------------
<C> <S>
*3.1 Amended and Restated Certificate of Formation of
the Registrant
*3.2 Amended and Restated Limited Liability Company
Agreement of the Registrant
*4.1 Trust Agreement
*4.2 Form of Transitional Funding Trust Notes
**4.3 Indenture, dated as of December 16, 1998, between
ComEd Transitional Funding Trust, as Note Issuer,
and Harris Trust and Savings Bank, as Indenture
Trustee
**10.1 Intangible Transition Property Sale Agreement dated
as of December 16, 1998 between ComEd Funding, LLC,
a Delaware limited liability company, and ComEd
Transitional Funding Trust, a Delaware business
trust.
**10.2 Agreement Relating to Grant of Intangible
Transition Property, dated as of December 16, 1998,
between Commonwealth Edison Company, an Illinois
corporation, and ComEd Funding, LLC, a Delaware
limited liability company
**10.3 Intangible Transition Property Servicing
Agreement, dated as of December 16, 1998, between
ComEd Funding, LLC, a Delaware limited liability
company, and Commonwealth Edison Company, an
Illinois corporation
**10.4 Administration Agreement, dated as of
December 16, 1998, among Commonwealth Edison
Company, an Illinois corporation, and ComEd
Funding, LLC, a Delaware limited liability company,
and ComEd Transitional Funding Trust, a Delaware
business trust
**10.5 Remediation Agreement, dated as of
December 16, 1998, by Commonwealth Edison Company,
an Illinois corporation, and Harris Trust and
Savings Bank, an Illinois corporation, not in its
individual capacity but solely in its capacity as
Trustee.
23.1 Consent of Arthur Andersen, LLP
27.1 Financial Data Schedule
*99.1 Application for Transitional Funding Order
*99.2 Transitional Funding Order
*99.3 Internal Revenue Service Private Letter Ruling
pertaining to the Notes
</TABLE>
- -------------------------------
* Incorporated by reference to Exhibit of the same number
contained in the Registrant's Registration Statement on
From S-3, File No. 333-60907.
**Incorporated by reference to Exhibit of the same number
contained in the Registrant's Current Report on Form 8-K
filed with the Commission on January 5, 1999.
<PAGE>
Exhibit (23)
ComEd Funding,LLC
Form 10-K File No. 333-60907
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-------------------------------------------
As independent public accountants, we hereby consent to
the incorporation of our report dated March 29, 1999,
included in this Form 10-K, into ComEd Funding,LLC's
previously filed prospectus dated December 31, 1998,
constituting part of Form S-3 Registration Statement File No.
333-60907 (relating to Transitional Funding Trust Notes of
ComEd Transitional Funding Trust).
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 31, 1999
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 AND RELATED STATEMENTS OF
CONSOLIDATED OPERATIONS AND CHANGES IN MEMBER'S EQUITY, AND CASH FLOWS FOR SIX
MONTHS ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001066903
<NAME> COMED FUNDING LLC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-21-1998
<PERIOD-END> DEC-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 337,890
<TOTAL-DEFERRED-CHARGES> 5,771
<OTHER-ASSETS> 3,087,016
<TOTAL-ASSETS> 3,430,677
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 40,223
<RETAINED-EARNINGS> (232)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 39,991
0
0
<LONG-TERM-DEBT-NET> 3,052,822
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 330,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 7,864
<TOT-CAPITALIZATION-AND-LIAB> 3,430,677
<GROSS-OPERATING-REVENUE> 7,817
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 275
<TOTAL-OPERATING-EXPENSES> 275
<OPERATING-INCOME-LOSS> 7,542
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 7,542
<TOTAL-INTEREST-EXPENSE> 7,774
<NET-INCOME> (232)
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 7,774
<CASH-FLOW-OPERATIONS> 5,422
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
