COMMONWEALTH EDISON CO, 10-Q, 1998-08-14

COMMONWEALTH EDISON CO
10-Q, 1998-08-14
ELECTRIC SERVICES

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<PAGE>

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

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

For the transition period from to

<TABLE>
<CAPTION>
COMMISSION
FILE REGISTRANT; STATE OF INCORPORATION; IRS EMPLOYER
NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
---------- ----------------------------------- ------------------
<C> <S> <C>
1-11375 UNICOM CORPORATION 36-3961038
(an Illinois corporation)
37th Floor, 10 South Dearborn Street
Post Office Box A-3005
Chicago, Illinois 60690-3005
312/394-7399
1-1839 COMMONWEALTH EDISON COMPANY 36-0938600
(an Illinois corporation)
37th Floor, 10 South Dearborn Street
Post Office Box 767
Chicago, Illinois 60690-0767
312/394-4321
</TABLE>

Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) have been subject to such filing
requirements for the past 90 days. Yes X No

Common Stock outstanding at July 31, 1998:
Unicom Corporation 217,012,760 shares
Commonwealth Edison Company 214,236,071 shares

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<PAGE>

UNICOM CORPORATION
AND
COMMONWEALTH EDISON COMPANY

QUARTERLY REPORTS ON FORM 10-Q
TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

This document contains the Quarterly Reports on Form 10-Q for the quarterly
period ended June 30, 1998 for each of Unicom Corporation and Commonwealth
Edison Company. Information contained herein relating to an individual
registrant is filed by such registrant on its own behalf. Accordingly, except
for its subsidiaries, Commonwealth Edison Company makes no representation as
to information relating to Unicom Corporation or to any other companies
affiliated with Unicom Corporation. In addition, several portions of these
Quarterly Reports contain forward-looking statements; and reference is made to
page 53 for the location and character of such statements.

INDEX
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Definitions.............................................................. 3
PART I. FINANCIAL INFORMATION
Unicom Corporation and Subsidiary Companies:
Financial Statements--
Report of Independent Public Accountants............................. 4
Statements of Consolidated Operations for the three months, six
months and twelve months ended June 30, 1998 and 1997............... 5
Consolidated Balance Sheets--June 30, 1998 and December 31, 1997..... 6-7
Statements of Consolidated Capitalization--June 30, 1998 and December
31, 1997............................................................ 8
Statements of Consolidated Retained Earnings (Deficit) for the three
months, six months and twelve months ended June 30, 1998 and 1997... 9
Statements of Consolidated Cash Flows for the three months, six
months and twelve months ended June 30, 1998 and 1997............... 10
Notes to Financial Statements........................................ 11-36
Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................... 37-53
Commonwealth Edison Company and Subsidiary Companies:
Financial Statements--
Report of Independent Public Accountants............................. 54
Statements of Consolidated Operations for the three months, six
months and twelve months ended June 30, 1998 and 1997............... 55
Consolidated Balance Sheets--June 30, 1998 and December 31, 1997..... 56-57
Statements of Consolidated Capitalization--June 30, 1998 and December
31, 1997............................................................ 58
Statements of Consolidated Retained Earnings (Deficit) for the three
months, six months and twelve months ended June 30, 1998 and 1997... 59
Statements of Consolidated Cash Flows for the three months, six
months and twelve months ended June 30, 1998 and 1997............... 60
Notes to Financial Statements........................................ 61-65
Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................... 66
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 67
Item 4. Submission of Matters to a Vote of Security Holders............ 68-69
Item 6. Exhibits and Reports on Form 8-K............................... 69
SIGNATURES............................................................... 70
</TABLE>

2
<PAGE>

DEFINITIONS

The following terms are used in this document with the following meanings:

<TABLE>
<CAPTION>
TERM MEANING
---------------------- -------------------------------------------------------
<C> <S>
1997 Act Illinois Electric Service Customer Choice and Rate
Relief Law of 1997
AFUDC Allowance for funds used during construction
APB Accounting Principles Board
CERCLA Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended
CFC Chlorofluorocarbon
Clean Air Amendments Clean Air Act Amendments of 1990
ComEd Commonwealth Edison Company
Cotter Cotter Corporation, a ComEd subsidiary
CTC Non-bypassable "competitive transition charge"
DOE U.S. Department of Energy
EEI Edison Electric Institute
EPRI Electric Power Research Institute
EPS Earnings per Share
ESPP Employee Stock Purchase Plan
FAC Fuel adjustment clause
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
FERC Order FERC Open Access Order No. 888 issued in April 1996
GAAP Generally Accepted Accounting Principles
ICC Illinois Commerce Commission
Indiana Company Commonwealth Edison Company of Indiana, Inc., a ComEd
subsidiary
INPO Institute of Nuclear Power Operations
ISO Independent System Operator
MGP Manufactured gas plant
NEIL Nuclear Electric Insurance Limited
NERC North American Electric Reliability Council
NML Nuclear Mutual Limited
NPL National Priorities List
NRC Nuclear Regulatory Commission
O&M Operation and maintenance
Rate Order ICC rate order issued in January 1995, as subsequently
modified
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
S&P Standard & Poor's
Trusts ComEd Financing I and ComEd Financing II, ComEd
subsidiaries
Trust Securities ComEd-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely ComEd's
subordinated debt securities
Unicom Unicom Corporation
Unicom Energy Services Unicom Energy Services Inc., a Unicom Enterprises
subsidiary
Unicom Enterprises Unicom Enterprises Inc., a Unicom subsidiary
U.S. EPA U.S. Environmental Protection Agency
UT Holdings UT Holdings Inc., a Unicom Enterprises subsidiary
</TABLE>

3
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Unicom Corporation:

We have audited the accompanying consolidated balance sheets and statements
of consolidated capitalization of Unicom Corporation (an Illinois corporation)
and subsidiary companies as of June 30, 1998 and December 31, 1997, and the
related statements of consolidated operations, retained earnings (deficit) and
cash flows for the three-month, six-month and twelve-month periods ended June
30, 1998 and 1997. 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 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 financial position of Unicom Corporation and
subsidiary companies as of June 30, 1998 and December 31, 1997, and the
results of their operations and their cash flows for the three-month, six-
month and twelve-month periods ended June 30, 1998 and 1997, in conformity
with generally accepted accounting principles.

As discussed in Note 3, effective January 1, 1997, the Company changed its
method of accounting for revenue recognition.

Arthur Andersen LLP

Chicago, Illinois
August 10, 1998

4
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED OPERATIONS

The following Statements of Consolidated Operations for the three months,
six months and twelve months ended June 30, 1998 and 1997 reflect the results
of past operations and are not intended as any representation as to results of
operations for any future period. Future operations will necessarily be
affected by various and diverse factors and developments, including changes in
electric prices, regulation, population, business activity, competition,
taxes, environmental control, energy use, fuel, cost of labor, purchased power
and other matters, the nature and effect of which cannot now be determined.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
---------------------- ---------------------- -----------------------
1998 1997 1998 1997 1998 1997
---------- ---------- ---------- ---------- ----------- ----------
(THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues...... $1,779,146 $1,686,527 $3,491,381 $3,357,339 $ 7,218,074 $7,062,813
---------- ---------- ---------- ---------- ----------- ----------
Operating Expenses and
Taxes:
Fuel................... $ 250,923 $ 308,722 $ 482,299 $ 617,790 $ 1,103,947 $1,237,114
Purchased power........ 279,359 119,333 500,089 183,640 716,503 264,440
Operation and
maintenance........... 556,572 642,360 1,125,568 1,212,606 2,352,601 2,324,266
Depreciation........... 232,581 246,771 481,483 496,631 974,320 989,231
Recovery of regulatory
assets................ -- 3,818 -- 7,636 7,636 15,272
Taxes (except income).. 185,062 188,982 392,488 390,180 803,258 796,072
Income taxes........... 60,935 31,247 112,486 96,500 332,991 390,480
Investment tax credits
deferred--net ........ (6,888) (7,897) (14,048) (15,794) (29,270) (34,840)
---------- ---------- ---------- ---------- ----------- ----------
$1,558,544 $1,533,336 $3,080,365 $2,989,189 $ 6,261,986 $5,982,035
---------- ---------- ---------- ---------- ----------- ----------
Operating Income........ $ 220,602 $ 153,191 $ 411,016 $ 368,150 $ 956,088 $1,080,778
---------- ---------- ---------- ---------- ----------- ----------
Other Income and
(Deductions):
Interest on long-term
debt.................. $ (110,640) $ (120,952) $ (223,394) $ (247,920) $ (462,863) $ (502,035)
Interest on notes
payable............... (3,207) (3,298) (9,016) (5,249) (12,900) (9,869)
Allowance for funds
used during
construction--
Borrowed funds....... 2,738 4,952 4,314 9,004 13,865 17,164
Equity funds......... 1,960 5,706 3,544 10,786 16,529 20,797
Income taxes
applicable to
nonoperating
activities............ 3,314 2,052 6,198 2,418 15,009 5,165
Provision for
dividends--
Preferred and
preference stocks of
ComEd................ (14,462) (15,485) (29,009) (31,012) (58,483) (62,450)
ComEd-obligated
mandatorily
redeemable preferred
securities of
subsidiary trusts
holding solely
ComEd's subordinated
debt securities...... (7,428) (7,428) (14,855) (14,076) (29,639) (22,556)
Loss on nuclear plant
closure............... -- -- -- -- (885,611) --
Income tax effects of
nuclear plant
closure............... -- -- -- -- 362,952 --
Miscellaneous--net..... (12,419) (13,240) (14,625) (20,886) (91,204) (26,923)
---------- ---------- ---------- ---------- ----------- ----------
$ (140,144) $ (147,693) $ (276,843) $ (296,935) $(1,132,345) $ (580,707)
---------- ---------- ---------- ---------- ----------- ----------
Net Income (Loss) Before
Extraordinary Item and
Cumulative Effect of
Change in Accounting
Principle.............. $ 80,458 $ 5,498 $ 134,173 $ 71,215 $ (176,257) $ 500,071
Extraordinary Loss, Less
Applicable Income
Taxes.................. -- -- -- -- (810,335) --
Cumulative Effect of
Change in Accounting
Principle.............. -- -- -- 196,700 -- 196,700
---------- ---------- ---------- ---------- ----------- ----------
Net Income (Loss)....... $ 80,458 $ 5,498 $ 134,173 $ 267,915 $ (986,592) $ 696,771
========== ========== ========== ========== =========== ==========
Average Number of Common
Shares Outstanding..... 216,897 216,368 216,802 216,211 216,625 215,934
Basic and Diluted
Earnings (Loss) per
Common Share:
Earnings (Loss) per
Common Share Before
Extraordinary Item
and Cumulative Effect
of Change in
Accounting Principle. $ 0.37 $ 0.03 $ 0.62 $ 0.33 $ (0.80) $ 2.32
Extraordinary Loss,
Less Applicable
Income Taxes......... -- -- -- -- (3.75) --
Cumulative Effect of
Change in Accounting
Principle............ -- -- -- 0.91 -- 0.91
---------- ---------- ---------- ---------- ----------- ----------
Earnings (Loss) per
Common Share......... $ 0.37 $ 0.03 $ 0.62 $ 1.24 $ (4.55) $ 3.23
========== ========== ========== ========== =========== ==========
Cash Dividends Declared
per Common Share....... $ 0.40 $ 0.40 $ 0.80 $ 0.80 $ 1.60 $ 1.60
</TABLE>

The accompanying Notes to Financial Statements are an integral part of the
above statements.

5
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1998 1997
------ ----------- ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Utility Plant:
Plant and equipment, at original cost (includes
construction work in progress of $1,006 million
and $1,131 million, respectively)................. $27,461,861 $27,519,365
Less--Accumulated provision for depreciation....... 14,924,147 11,645,985
----------- -----------
$12,537,714 $15,873,380
Nuclear fuel, at amortized cost.................... 920,081 906,043
----------- -----------
$13,457,795 $16,779,423
----------- -----------
Investments and Other Property:
Nuclear decommissioning funds...................... $ 2,118,263 $ 1,855,697
Subsidiary companies............................... 41,438 41,830
Other, at cost..................................... 240,821 216,243
----------- -----------
$ 2,400,522 $ 2,113,770
----------- -----------
Current Assets:
Cash............................................... $ 27,470 $ 18,519
Temporary cash investments......................... 30,772 102,702
Special deposits................................... 1,043 271
Receivables--
Customers........................................ 1,087,380 873,418
Other............................................ 61,571 132,449
Provisions for uncollectible accounts............ (17,374) (17,544)
Coal and fuel oil, at average cost................. 205,172 120,664
Materials and supplies, at average cost............ 263,944 255,338
Deferred income taxes related to current assets and
liabilities....................................... 49,429 179,553
Prepayments and other.............................. 134,104 126,088
----------- -----------
$ 1,843,511 $ 1,791,458
----------- -----------
Deferred Charges and Other Noncurrent Assets:
Regulatory assets.................................. $ 4,471,689 $ 1,685,235
Coal reserves...................................... 140,533 194,769
Other.............................................. 96,879 135,095
----------- -----------
$ 4,709,101 $ 2,015,099
----------- -----------
$22,410,929 $22,699,750
=========== ===========
</TABLE>

The accompanying Notes to Financial Statements are an integral part of the
above statements.

6
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
CAPITALIZATION AND LIABILITIES 1998 1997
------------------------------ ----------- ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Capitalization (see accompanying statements):
Common stock equity................................. $ 4,883,875 $ 4,918,687
Preferred and preference stocks of ComEd--
Without mandatory redemption requirements......... 506,829 507,053
Subject to mandatory redemption requirements...... 168,368 174,328
ComEd-obligated mandatorily redeemable preferred se-
curities of subsidiary trusts holding solely
ComEd's subordinated debt securities*.............. 350,000 350,000
Long-term debt...................................... 5,766,672 5,737,348
----------- -----------
$11,675,744 $11,687,416
----------- -----------
Current Liabilities:
Notes payable....................................... $ 489,846 $ 158,150
Current portion of long-term debt, redeemable pref-
erence stock
and capitalized lease obligations of subsidiary
companies.......................................... 330,023 775,296
Accounts payable.................................... 611,422 505,444
Accrued interest.................................... 165,693 169,559
Accrued taxes....................................... 262,651 175,758
Dividends payable................................... 107,037 107,001
Customer deposits................................... 54,383 55,214
Accrued plant closing costs......................... 110,376 135,000
Other............................................... 125,565 165,177
----------- -----------
$ 2,256,996 $ 2,246,599
----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
Deferred income taxes............................... $ 3,745,332 $ 3,850,308
Nuclear decommissioning liability for retired
plants............................................. 1,214,700 1,301,000
Accumulated deferred investment tax credits......... 580,601 602,122
Accrued spent nuclear fuel disposal fee and related
interest........................................... 710,810 692,673
Obligations under capital leases of subsidiary com-
panies............................................. 417,910 437,950
Regulatory liabilities.............................. 610,113 698,750
Other............................................... 1,198,723 1,182,932
----------- -----------
$ 8,478,189 $ 8,765,735
----------- -----------
Commitments and Contingent Liabilities (Note 22)
$22,410,929 $22,699,750
=========== ===========
</TABLE>

*As described in Note 11 of Notes to Financial Statements, the sole asset of
ComEd Financing I, a subsidiary trust of ComEd, is $206.2 million principal
amount of ComEd's 8.48% subordinated deferrable interest notes due September
30, 2035. The sole asset of ComEd Financing II, also a subsidiary trust of
ComEd, is $154.6 million principal amount of ComEd's 8.50% subordinated
deferrable interest debentures due January 15, 2027.

The accompanying Notes to Financial Statements are an integral part of the
above statements.

7
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CAPITALIZATION

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Common Stock Equity:
Common stock, without par value--
Outstanding--216,929,000 shares and 216,659,480
shares, respectively (excludes $9 million and $7
million as of June 30, 1998 and December 31,
1997, respectively, held by trustee for Unicom
Stock Bonus Deferral Plan)....................... $ 4,948,032 $ 4,943,211
Preference stock expense of ComEd.................. (3,325) (3,340)
Retained earnings (deficit)........................ (60,832) (21,184)
----------- -----------
$ 4,883,875 $ 4,918,687
----------- -----------
Preferred and Preference Stocks of ComEd:
Without Mandatory Redemption Requirements:
Preference stock, cumulative, without par value--
Outstanding--13,499,549 shares.................. $ 504,957 $ 504,957
$1.425 convertible preferred stock, cumulative,
without par value--
Outstanding--58,851 shares and 65,912 shares,
respectively................................... 1,872 2,096
Prior preferred stock, cumulative, $100 par value
per share--
No shares outstanding........................... -- --
----------- -----------
$ 506,829 $ 507,053
----------- -----------
Subject to Mandatory Redemption Requirements:
Preference stock, cumulative, without par value--
Outstanding--1,998,560 shares and 2,058,560
shares, respectively .......................... $ 199,056 $ 205,016
Current redemption requirements for preference
stock included
in current liabilities.......................... (30,688) (30,688)
----------- -----------
$ 168,368 $ 174,328
----------- -----------
ComEd-Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts Holding Solely
ComEd's Subordinated Debt Securities................ $ 350,000 $ 350,000
----------- -----------
Long-Term Debt:
First mortgage bonds:
Maturing 1998 through 2002--6.00% to 9 3/8%...... $ 880,000 $ 1,060,000
Maturing 2003 through 2012--3.70% to 8 3/8%...... 1,440,400 1,440,400
Maturing 2013 through 2022--5.85% to 9 7/8%...... 1,791,000 1,791,000
Maturing 2023--7 3/4% to 8 3/8%.................. 560,000 560,000
----------- -----------
$ 4,671,400 $ 4,851,400
Sinking fund debentures, due 1999 through 2011--2
3/4% to 7 5/8%.................................... 95,167 100,298
Pollution control obligations, due 2007 through
2014--3.45% to 5 7/8%............................. 140,700 142,200
Other long-term debt............................... 1,040,810 1,193,818
Deposit for retirement of long-term debt........... (995) --
Current maturities of long-term debt included in
current liabilities............................... (135,896) (503,909)
Unamortized net debt discount and premium.......... (44,514) (46,459)
----------- -----------
$ 5,766,672 $ 5,737,348
----------- -----------
$11,675,744 $11,687,416
=========== ===========
</TABLE>

The accompanying Notes to Financial Statements are an integral part of the
above statements.

8
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED RETAINED EARNINGS (DEFICIT)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- -------------------- ----------------------
1998 1997 1998 1997 1998 1997
-------- ---------- -------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of
Period................. $(54,207) $1,353,931 $(21,184) $1,177,997 $1,272,858 $ 921,822
Add--Net income (loss).. 80,458 5,498 134,173 267,915 (986,592) 696,771
-------- ---------- -------- ---------- ---------- ----------
$ 26,251 $1,359,429 $112,989 $1,445,912 $ 286,266 $1,618,593
-------- ---------- -------- ---------- ---------- ----------
Deduct--
Cash dividends
declared on
common stock........ $ 86,774 $ 86,564 $173,513 $ 173,048 $ 346,689 $ 345,631
Other capital stock
transactions--net... 309 7 308 6 409 104
-------- ---------- -------- ---------- ---------- ----------
$ 87,083 $ 86,571 $173,821 $ 173,054 $ 347,098 $ 345,735
-------- ---------- -------- ---------- ---------- ----------
Balance at End of Period
(Includes $292 million
of appropriated
retained earnings at
June 30, 1998)......... $(60,832) $1,272,858 $(60,832) $1,272,858 $ (60,832) $1,272,858
======== ========== ======== ========== ========== ==========
</TABLE>

The accompanying Notes to Financial Statements are an integral part of the
above statements.

9
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- -------------------- ------------------------
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Cash Flow from Operating
Activities:
Net income (loss)...... $ 80,458 $ 5,498 $ 134,173 $ 267,915 $ (986,592) $ 696,771
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation and
amortization........ 246,768 257,231 508,778 516,686 1,028,362 1,027,738
Deferred income taxes
and investment tax
credits--net........ (20,555) 11,863 6,126 3,891 (342,806) 91,268
Extraordinary loss
related to write-off
of certain net
regulatory assets... -- -- -- -- 810,335 --
Cumulative effect of
a change in
accounting
principle........... -- -- -- (196,700) -- (196,700)
Loss on nuclear plant
closure............. -- -- -- -- 885,611 --
Payments for revenue
refunds............. (10,966) -- (45,470) -- -- --
Equity component of
allowance for funds
used during
construction........ (1,960) (5,706) (3,544) (10,786) (16,529) (20,797)
Recovery of
regulatory assets... -- 3,818 -- 7,636 7,636 15,272
Provisions/(payments)
for liability for
separation costs--
net................. (389) 1,428 7,036 802 22,219 845
Net effect on cash
flows of changes in:
Receivables........ (204,705) (11,695) (143,254) 89,981 (209,152) 18,991
Coal and fuel oil.. (48,322) (7,513) (84,508) (39,788) (25,022) (13,169)
Materials and
supplies.......... (6,672) 571 (11,893) 541 29,225 18,347
Accounts payable
excluding
separation costs--
net............... 138,409 (3,412) 101,042 (44,760) 150,574 6,134
Accrued interest
and taxes......... 81,293 (32,385) 83,027 22,980 42,144 (84,506)
Other changes in
certain current
assets and
liabilities....... 34,861 63,828 53,651 100,249 247,446 225,686
Other--net........... (4,656) 45,256 44,839 129,039 86,635 173,553
--------- --------- --------- --------- ----------- -----------
$ 283,564 $ 328,782 $ 650,003 $ 847,686 $ 1,730,086 $ 1,959,433
--------- --------- --------- --------- ----------- -----------
Cash Flow from Investing
Activities:
Construction
expenditures.......... $(259,787) $(227,768) $(432,738) $(462,249) $(1,013,800) $ (901,297)
Nuclear fuel
expenditures.......... (34,418) (41,943) (94,967) (90,716) (189,625) (228,946)
Sale of generating
plants................ -- -- 177,454 -- 238,245 --
Equity component of
allowance for funds
used during
construction.......... 1,960 5,706 3,544 10,786 16,529 20,797
Contributions to
nuclear
decommissioning
funds................. -- -- (80,077) (80,181) (114,721) (116,284)
Other investments and
special deposits...... 12,657 (4,942) (4,862) (34,881) 16,772 (36,698)
--------- --------- --------- --------- ----------- -----------
$(279,588) $(268,947) $(431,646) $(657,241) $(1,046,600) $(1,262,428)
--------- --------- --------- --------- ----------- -----------
Cash Flow from Financing
Activities:
Issuance of
securities--
Long-term debt........ $ 10,000 $ 20,000 $ 35,000 $ 317,663 $ 80,000 $ 337,663
ComEd-obligated
mandatorily
redeemable preferred
securities of
subsidiary trusts
holding solely
ComEd's subordinated
debt securities...... -- -- -- 150,000 -- 150,000
Capital stock......... 2,544 3,536 6,767 9,313 13,232 20,546
Retirement and
redemption of
securities--
Long-term debt........ (8,139) (72,570) (374,648) (576,453) (534,934) (741,341)
Capital stock......... (6,092) (3,040) (6,225) (3,239) (47,096) (44,645)
Deposits and
securities held for
retirement and
redemption of
securities............ 3,069 2,102 (995) (229) (766) 746
Premium paid on early
redemption of long-
term debt............. -- -- -- (9,500) -- (9,500)
Cash dividends paid on
common stock.......... (86,738) (86,484) (173,348) (172,805) (346,480) (345,274)
Proceeds from
sale/leaseback of
nuclear fuel.......... 44,861 36,801 61,426 81,271 130,109 238,273
Nuclear fuel lease
principal payments.... (128,823) (36,305) (161,009) (85,855) (241,566) (190,627)
Increase (Decrease) in
short-term
borrowings............ 110,196 134,000 331,696 135,000 226,096 (70,650)
--------- --------- --------- --------- ----------- -----------
$ (59,122) $ (1,960) $(281,336) $(154,834) $ (721,405) $ (654,809)
--------- --------- --------- --------- ----------- -----------
Increase (Decrease) in
Cash and Temporary Cash
Investments............ $ (55,146) $ 57,875 $ (62,979) $ 35,611 $ (37,919) $ 42,196
Cash and Temporary Cash
Investments at
Beginning of Period.... 113,388 38,286 121,221 60,550 96,161 53,965
--------- --------- --------- --------- ----------- -----------
Cash and Temporary Cash
Investments at End of
Period................. $ 58,242 $ 96,161 $ 58,242 $ 96,161 $ 58,242 $ 96,161
========= ========= ========= ========= =========== ===========
</TABLE>

The accompanying Notes to Financial Statements are an integral part of the
above statements.

10
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

Corporate Structure and Basis of Presentation. Unicom is the parent holding
company of ComEd and Unicom Enterprises. ComEd, a regulated electric utility,
is the principal subsidiary of Unicom. Unicom Enterprises is an unregulated
subsidiary of Unicom and is engaged, through its subsidiaries, in energy
service activities.

The consolidated financial statements include the accounts of Unicom, ComEd,
the Indiana Company, the Trusts and Unicom's unregulated subsidiaries. All
significant intercompany transactions have been eliminated. ComEd's
investments in other subsidiary companies, which are not material in relation
to ComEd's financial position or results of operations, are accounted for in
accordance with the equity method of accounting.

Use of Estimates. The preparation of financial statements in conformity with
GAAP 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.

Regulation. ComEd is subject to regulation as to accounting and ratemaking
policies and practices by the ICC and FERC. ComEd's accounting policies and
the accompanying consolidated financial statements conform to GAAP applicable
to rate-regulated enterprises for the non-generation portion of its business,
including the effects of the ratemaking process in accordance with SFAS No.
71, Accounting for the Effects of Certain Types of Regulation. Such effects on
the non-generation portion of its business concern mainly the time at which
various items enter into the determination of operating results in order to
follow the principle of matching costs with the applicable revenues collected
from or returned to customers through future rates. See Note 2 for information
regarding the write-off of generation-related regulatory assets and
liabilities in December 1997.

ComEd's investment in generation-related net utility plant, including
construction work in progress and nuclear fuel and excluding the
decommissioning costs included in the accumulated provision for depreciation,
not subject to cost-based rate regulation, was $9.2 billion and $12.4 billion
at June 30, 1998 and December 31, 1997, respectively. See Note 2 regarding the
plant impairment recorded by ComEd in the second quarter of 1998.

11
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED

Regulatory Assets and Liabilities. Regulatory assets are incurred costs
which have been deferred and are amortized for ratemaking and accounting
purposes. Regulatory liabilities represent amounts to be settled with
customers through future rates. Regulatory assets and liabilities reflected on
the Consolidated Balance Sheets at June 30, 1998 and December 31, 1997 were as
follows:

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Regulatory assets:
Impaired production plant (1)........................ $3,020,365 $ --
Deferred income taxes (2)............................ 692,077 785,354
Nuclear decommissioning costs--Dresden Unit 1 (3).... 261,482 268,369
Nuclear decommissioning costs--Zion Units 1 and 2
(4)................................................. 448,581 579,777
Unamortized loss on reacquired debt (5).............. 49,184 51,735
---------- ----------
$4,471,689 $1,685,235
========== ==========
Regulatory liabilities:
Deferred income taxes (2)............................ $ 610,113 $ 698,750
========== ==========
</TABLE>
- --------
(1) Amortized over a transition period which is expected to end by 2006, but
may be extended to 2008 with ICC approval if certain conditions are met.
See Note 2 for additional information.
(2) Recorded in compliance with SFAS No. 109, Accounting For Income Taxes, for
non-generation related timing differences.
(3) Amortized over the period 1998 to 2011. See "Depreciation and
Decommissioning" below for additional information.
(4) Amortized over the period 1998 to 2013. See "Depreciation and
Decommissioning" below for additional information.
(5) Amortized over the remaining lives of the non-generation related long-term
debt issued to finance the reacquisition. See "Loss on Reacquired Debt"
below for additional information.

Fuel Adjustment Clause. Pursuant to an option contained in the 1997 Act,
ComEd filed a tariff on December 16, 1997 to eliminate its FAC as of January
1, 1997. The FAC provided for the recovery of changes in fossil and nuclear
fuel costs and the energy portion of purchased power costs, as compared to the
fuel and purchased energy costs included in ComEd's base rates. As authorized
by the ICC, ComEd had recorded under or overrecoveries of allowable fuel and
energy costs which, under the FAC, were recoverable or refundable in
subsequent months. See Note 2 for additional information regarding the effects
of eliminating the FAC. See Note 4 for information concerning FAC
reconciliation proceedings for the years 1994 and 1996.

Nuclear Fuel. The cost of nuclear fuel is amortized to fuel expense based on
the quantity of heat produced using the unit of production method. As
authorized by the ICC, provisions for spent nuclear fuel disposal costs have
been recorded at a level required to recover the fee payable on the current
nuclear-generated and sold electricity and the current interest accrual on the
one-time fee payable to the DOE for nuclear generation prior to April 7, 1983.
The one-time fee and interest thereon have been recovered and the current fee
and interest on the one-time fee are presently being recovered through base
rates. See Note 14 for additional information concerning the disposal of spent
nuclear fuel, one-time fee and interest accrual on the one-time fee. Nuclear
fuel expenses, including leased fuel costs and provisions for spent nuclear
fuel disposal costs, were $74 million and $63 million for the three months
ended June 30, 1998 and 1997, respectively, $141 million and $143 million for
the six months ended June 30, 1998 and 1997, respectively, and $297 million
and $318 million for the twelve months ended June 30, 1998 and 1997,
respectively.

The balance of nuclear fuel, at amortized cost, on the Consolidated Balance
Sheets includes amounts to be recovered for assessments by the DOE to fund a
portion of the cost for the decontamination and decommissioning of uranium
enrichment facilities owned and previously operated by the DOE. As of June 30,
1998 and December 31, 1997, an asset related to the assessments of

12
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED

$148 million and $156 million, respectively, was recorded. As of June 30, 1998
and December 31, 1997, a corresponding liability of $144 million was recorded,
of which $16 million was included in other current liabilities on the
Consolidated Balance Sheets for each period.

Coal Reserves. At June 30, 1998 and December 31, 1997, ComEd had coal
reserves of $243 million and $282 million, respectively. In prior years,
ComEd's commitments for the purchase of coal exceeded its requirements. Rather
than take all the coal it was required to take, ComEd agreed to purchase the
coal in place in the form of coal reserves. ComEd expects to recover from its
customers the costs of the coal reserves, as coal is used for the generation
of electricity, through base rates. Such fuel costs expected to be recovered
within one year amounting to $103 million and $87 million at June 30, 1998 and
December 31, 1997, respectively, have been included in current assets as
prepayments and other on the Consolidated Balance Sheets. ComEd expects to
recover fully the costs of the coal reserves before the year 2001. See Note 22
for additional information regarding ComEd's coal commitments.

Customer Receivables and Revenues. ComEd is engaged principally in the
production, purchase, transmission, distribution and sale of electricity to a
diverse base of residential, commercial, industrial and wholesale customers.
ComEd's electric service territory has an area of approximately 11,300 square
miles and an estimated population of approximately 8 million as of June 30,
1998. It includes the city of Chicago, an area of about 225 square miles with
an estimated population of approximately 3 million from which ComEd derived
approximately one-third of its ultimate consumer revenues in the twelve months
ended June 30, 1998. ComEd had 3.4 million electric customers at June 30,
1998.

Depreciation and Decommissioning. ComEd's depreciation is provided on the
straight-line basis by amortizing the cost of depreciable plant and equipment
over estimated composite service lives. Non-nuclear plant and equipment is
depreciated at annual rates developed for each class of plant based on their
composite service lives. Provisions for depreciation were at average annual
rates of 3.23%, 3.32% and 3.34% for the three months, six months and twelve
months ended June 30, 1998, respectively, of average depreciable utility plant
and equipment, including the effects of increased depreciation on ComEd's
nuclear generating units. Provisions for depreciation were at average annual
rates of 3.35% for the three months and 3.36% for the six months and twelve
months ended June 30, 1997 of average depreciable utility plant and equipment,
including the effects of increased depreciation on ComEd's nuclear generating
units. The annual rate for nuclear plant and equipment, excluding separately
collected decommissioning costs and increased depreciation, is 2.88%. The
increased depreciation on ComEd's nuclear generating units primarily relates
to its steam generators at Byron Unit 1, which were replaced in February 1998,
and Braidwood Unit 1, which are expected to be replaced prior to year-end
1998. ComEd recorded increased depreciation charges relating to its nuclear
generating units of $6 million, $23 million and $53 million for the three
months, six months and twelve months ended June 30, 1998, respectively, and
$15 million, $30 million and $59 million for the three months, six months and
twelve months ended June 30, 1997, respectively.

Nuclear plant decommissioning costs generally are accrued over the current
NRC license lives of the related nuclear generating units. The accrual is
based on an annual levelized cost of the unrecovered portion of estimated
decommissioning costs, which are escalated for expected inflation to the
expected time of decommissioning and are net of expected earnings on the trust
funds. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," subcaption "Results of Operations--Decommissioning,"
for a discussion of questions raised by the staff of the SEC and a FASB review
regarding the electric utility industry's method of accounting for

13
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED
decommissioning costs. Dismantling is expected to occur relatively soon after
the end of the current NRC license life of each generating station currently
operating. The accrual for decommissioning is based on the prompt removal
method authorized by NRC guidelines. ComEd's 10 operating units have remaining
current NRC license lives ranging from 7 to 29 years. ComEd's Zion Station and
its first nuclear unit, Dresden Unit 1, are retired and are expected to be
dismantled beginning in the years 2014 and 2012, respectively, which is
consistent with the regulatory treatment for the related decommissioning
costs.

Based on ComEd's most recent study approved by the ICC, decommissioning
costs, including the cost of decontamination and dismantling, are estimated to
aggregate $4.4 billion in current-year (1998) dollars, including a contingency
allowance. ComEd estimates that it will expend approximately $11.6 billion,
including a contingency allowance, for decommissioning costs primarily during
the period from 2007 through 2034. Additionally, ComEd estimates that it will
expend an aggregate of approximately $217 million in current-year (1998)
dollars during the period 2000 through 2014 to maintain Zion Station in a
secured mode until decommissioning begins. All such costs are expected to be
funded by the external decommissioning trusts, which ComEd established in
compliance with Illinois law and into which ComEd has been making annual
contributions. Future decommissioning cost estimates may be significantly
affected by the adoption of or changes to NRC regulations, as well as changes
in the assumptions used in making such estimates, including changes in
technology, available alternatives for the disposal of nuclear waste and
inflation.

Since 1995, ComEd has collected decommissioning costs from its ratepayers in
conjunction with a rider to its tariffs. The rider allows annual adjustments
to decommissioning cost collections outside the context of a traditional rate
proceeding and will continue under the 1997 Act. The current estimated
decommissioning costs include a contingency allowance, but, except at Dresden
Unit 1, exclude amounts for spent fuel storage installations, which may be
necessary to store spent fuel during the period beginning at the end of the
NRC license life of the plants to the date when the DOE accepts the spent fuel
for permanent storage. Contingency allowances used in decommissioning cost
estimates provide for currently unspecifiable costs that are likely to occur
after decommissioning begins and generally range from 20% to 25% of the
currently specifiable costs.

In February 1998, the ICC authorized a reduction in the annual
decommissioning cost accrual from $109 million to $84 million. The reduction
primarily reflects stronger than expected after-tax returns on the external
trust funds in 1996 and lower than expected escalation in low level waste
disposal costs, partially offset by the higher current-year cost estimates,
including a contingency allowance.

The approved annual decommissioning cost accrual of $84 million was
determined using the following assumptions: the decommissioning cost estimate
of $4.4 billion in current-year (1998) dollars, after-tax earnings on the tax-
qualified and nontax-qualified decommissioning funds of 7.30% and 6.26%,
respectively, and an escalation rate for future decommissioning costs of 4.1%.
The annual accrual of $84 million provided over the current NRC license lives
of the nuclear plants, coupled with the expected fund earnings and amounts
previously recovered in rates, is expected to aggregate to approximately $11.6
billion.

For the 10 operating nuclear units, decommissioning cost accruals are
recorded as portions of depreciation expense and accumulated provision for
depreciation on the Statements of Consolidated Operations and the Consolidated
Balance Sheets, respectively, as such costs are recovered through

14
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED
rates. As of June 30, 1998, the total decommissioning costs included in the
accumulated provision for depreciation were $1,749 million.

For ComEd's retired nuclear units, the total estimated liability for nuclear
decommissioning in current-year (1998) dollars is recorded as a liability. The
unrecovered portion of the liability was also recorded as a regulatory asset.
The nuclear decommissioning liability for retired plants as of June 30, 1998
is as follows:

<TABLE>
<CAPTION>
ZION
DRESDEN UNITS
UNIT 1 1 AND 2 TOTAL
-------- -------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Amounts recovered through rates and investment
fund earnings.................................... $111,018 $393,619 $ 504,637
Unrecovered portion of the liability.............. 261,482 448,581 710,063
-------- -------- ----------
Nuclear decommissioning liability for retired
plants.......................................... $372,500 $842,200 $1,214,700
======== ======== ==========
</TABLE>

The total estimated liability related to Zion Units 1 and 2, and the
unrecovered portion of that liability, decreased from December 31, 1997 to
June 30, 1998 due to the exclusion of estimated dry cask storage costs.

Under Illinois law, decommissioning cost collections are required to be
deposited into external trusts; and, consequently, such collections do not add
to the cash flows available for general corporate purposes. The ICC has
approved ComEd's funding plan, which provides for annual contributions of
current accruals and ratable contributions of past accruals over the remaining
current NRC license lives of the nuclear plants. The fair value of funds
accumulated in the external trusts at June 30, 1998 was $2,118 million, which
includes pre-tax unrealized appreciation of $544 million. The earnings on the
external trusts for operating plants accumulate in the fund balance and
accumulated provision for depreciation. Nuclear decommissioning funding as of
June 30, 1998 is as follows:

<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS)
<S> <C>
Amounts recovered through rates and investment fund
earnings for operating plants (included in the accumu-
lated provision for depreciation)...................... $1,748,544
Amounts recovered through rates and investment fund
earnings for retired plants............................ 504,637
Less past accruals not yet contributed to the trusts.... (134,918)
----------
Fair value of external trust funds..................... $2,118,263
==========
</TABLE>

Income Taxes. Deferred income taxes are provided for income and expense
items recognized for financial accounting purposes in periods that differ from
those for income tax purposes. Income taxes deferred in prior years are
charged or credited to income as the book/tax timing differences reverse.
Prior years' deferred investment tax credits are amortized through credits to
income generally over the lives of the related property. Income tax credits
resulting from interest charges applicable to nonoperating activities,
principally construction, are classified as other income.

AFUDC and Interest Capitalized. In accordance with the uniform systems of
accounts prescribed by regulatory authorities, ComEd capitalizes AFUDC,
compounded semiannually, which represents the estimated cost of funds used to
finance its construction program for the non-generation portion of its
business. The equity component of AFUDC is recorded on an after-tax basis and
the borrowed funds

15
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED
component of AFUDC is recorded on a pre-tax basis. The average annual
capitalization rates were 8.09% and 9.16% for the three months ended June 30,
1998 and 1997, respectively, 8.53% and 9.25% for the six months ended June 30,
1998 and 1997, respectively, and 9.02% and 9.26% for the twelve months ended
June 30, 1998 and 1997, respectively. ComEd discontinued SFAS No. 71
regulatory accounting practices in December 1997 for the generation portion of
its business. As a result, beginning in 1998, ComEd is capitalizing interest
costs on its generation-related construction work in progress and nuclear fuel
in process. Interest costs capitalized were $6 million for the three months
and $8 million for the six months and twelve months ended June 30, 1998. AFUDC
and interest capitalized do not contribute to the current cash flow of Unicom
or ComEd.

Interest. Total interest costs incurred on debt, leases and other
obligations were $137 million and $149 million for the three months ended June
30, 1998 and 1997, respectively, $277 million and $303 million for the six
months ended June 30, 1998 and 1997, respectively, and $572 million and $612
million for the twelve months ended June 30, 1998 and 1997, respectively.

Debt Discount, Premium and Expense. Discount, premium and expense on long-
term debt of ComEd are being amortized over the lives of the respective
issues.

Loss on Reacquired Debt. Consistent with regulatory treatment, the net loss
from ComEd's reacquisition in connection with the refinancing of first
mortgage bonds, sinking fund debentures and pollution control obligations
prior to their scheduled maturity dates is deferred and amortized over the
lives of the long-term debt issued to finance the reacquisition for non-
generation related financings. See "Regulatory Assets and Liabilities" above
and Note 2 for additional information.

Stock Option Awards/Employee Stock Purchase Plan. Unicom has elected to
adopt SFAS No. 123, Accounting for Stock-Based Compensation, for disclosure
purposes only. Unicom accounts for its stock option awards and ESPP under APB
Opinion No. 25, Accounting for Stock Issued to Employees. See Note 8 for
additional information.

Earnings per Share. Unicom has presented basic and diluted EPS on the
Statements of Consolidated Operations for the three months, six months and
twelve months ended June 30, 1998 and 1997. Basic and diluted EPS for the
periods presented are the same. The diluted average number of common shares
outstanding was 217,643,000 and 216,468,000 for the three months ended June
30, 1998 and 1997, respectively, 217,504,000 and 216,311,000 for the six
months ended June 30, 1998 and 1997, respectively, and 216,625,000 and
216,034,000 for the twelve months ended June 30, 1998 and 1997, respectively.

Energy Risk Management Contracts. In the normal course of business ComEd
utilizes contracts for the forward sale and purchase of energy to manage
effectively the utilization of its available generating capability. ComEd also
utilizes put and call option contracts and energy swap arrangements to limit
the market price risk associated with the forward commodity contracts. As
ComEd does not currently utilize financial or commodity instruments for
trading or speculative purposes, any gains or losses on forward commodity
contracts are recognized when the underlying transactions affect earnings.
Revenues and expenses associated with market price risk management contracts
are amortized over the terms of such contracts.

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded on the

16
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED
Consolidated Balance Sheets as either an asset or liability measured at its
fair value. SFAS No. 133 requires that changes in the derivative's fair value
be recognized currently in earnings, unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's gains
and losses to offset related results on the hedged item on the Statements of
Consolidated Operations, and requires Unicom and ComEd to formally document,
designate, and assess the effectiveness of transactions that receive hedge
accounting.

SFAS No. 133 is effective for fiscal years beginning after June 15, 1999.
Unicom and ComEd may also implement SFAS No. 133 as of the beginning of any
fiscal quarter after issuance, but cannot be applied retroactively. SFAS No.
133 must be applied to (i) derivative instruments and (ii) certain derivative
instruments embedded in hybrid contracts that were issued, acquired, or
substantively modified after December 31, 1997 (and, at the company's
election, before January 1, 1998).

Unicom and ComEd have not yet quantified the effects of adopting SFAS No.
133 on their financial statements and have not determined the timing or method
of their adoption of SFAS No. 133. However, adoption of SFAS No. 133 could
increase volatility in earnings and other comprehensive income.

Reclassifications. Certain prior year amounts have been reclassified to
conform with current period presentation. These reclassifications had no
effect on operating results. See Note 3 for information regarding the
restatement of 1997 interim financial statements for a change in accounting
principle.

Statements of Consolidated Cash Flows. For purposes of the Statements of
Consolidated Cash Flows, temporary cash investments, generally investments
maturing within three months at the time of purchase, are considered to be
cash equivalents. Supplemental cash flow information for the three months, six
months and twelve months ended June 30, 1998 and 1997 was as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------- ----------------- -------------------
1998 1997 1998 1997 1998 1997
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Supplemental Cash Flow
Information:
Cash paid during the
period for:
Interest (net of
amount capitalized). $98,454 $98,665 $253,335 $259,593 $505,792 $524,608
Income taxes (net of
refunds)............ $ 506 $ 48,503 $ 506 $ 55,501 $ 210,806 $ 280,960
Supplemental Schedule of
Non-Cash Investing and
Financing Activities:
Capital lease obliga-
tions incurred by
subsidiary companies.. $45,983 $ 39,376 $ 63,979 $ 85,773 $ 136,618 $ 244,261
</TABLE>

(2) ACCOUNTING EFFECTS RELATED TO THE 1997 ACT. On December 16, 1997, the
Governor of Illinois signed into law the 1997 Act, which established a phased-
process to introduce competition into the electric industry in Illinois under
a less regulated structure. The 1997 Act, as it applies to ComEd, provides
for, among other things, a 15% residential base rate reduction which commenced
on August 1, 1998, an additional 5% residential base rate reduction commencing
on May 1, 2002, and gradual customer access to other electric suppliers.
Access for commercial and industrial customers will occur over a period from
October 1999 to December 2000, and access for residential customers will occur
after May 1, 2002. The 15% residential base rate reduction, which commenced on
August 1, 1998, is expected to reduce ComEd's operating revenues by
approximately $160 million and $375 million in 1998 and 1999, respectively,
compared to 1997 rate levels. ComEd is engaged in certain pricing experiments
contemplated by the 1997 Act, which are expected to reduce ComEd's operating

17
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED
revenues by approximately $30 million and $60 million in 1998 and 1999,
respectively, compared to 1997 rate levels; however, such reductions are
expected to be offset by the effects of customer growth.

The 1997 Act also provides for the collection of a CTC from customers who
choose another electric service provider during a transition period that
extends through 2006, and can be extended through 2008 with ICC approval if
certain factors are met. The CTC will be established in accordance with a
formula defined in the 1997 Act. The CTC, which will be applied on a cents per
kilowatthour basis, considers the revenue which would have been collected from
a customer under tariffed rates, reduced by the revenue the utility will
receive for providing delivery services to the customer, the market price for
electricity and a defined mitigation factor, which represents the utility's
opportunity to develop new revenue sources and achieve cost savings.

Notwithstanding these rate reductions, and subject to certain earnings
tests, a rate freeze will generally be in effect until at least January 1,
2005. During this period, utilities may reorganize, sell or assign assets,
retire or remove plants from service, and accelerate depreciation or
amortization of assets with limited ICC regulatory review. Under the earnings
provision of the 1997 Act, if the earned return on common equity of a utility
during this period exceeds an established threshold, a portion of the excess
earnings must be refunded to customers. A utility may request a rate increase
during the rate freeze period when necessary to ensure the utility's financial
viability, but not before January 1, 2000.

Under the 1997 Act, utilities are required to continue to offer delivery
services, including the transmission and distribution of electric energy, such
that customers who select an alternative energy supplier can receive electric
energy from that supplier using existing transmission and distribution
facilities. Such services will continue to be offered under cost-based
regulated rates. The 1997 Act also requires utilities to establish or join an
ISO that will independently manage and control utility transmission systems.
Additionally, the 1997 Act includes the leveling of certain regulatory
requirements to permit operational flexibility, the leveling of certain
regulatory and tax provisions as applied to various electric suppliers and a
new, more stringent, liability standard applicable to ComEd in the event of a
major outage.

The 1997 Act also allows a portion of ComEd's future revenues to be
segregated and used to support the issuance of securities by ComEd or a
special purpose financing entity. The proceeds from such security issuances
must be used to refinance outstanding debt or equity or for certain other
limited purposes. The total amount of such securities that may be issued is
approximately $6.8 billion; approximately one-half of that amount can be
issued in the twelve-month period which commenced on August 1, 1998. On July
21, 1998, the ICC issued an order under the 1997 Act approving the issuance of
up to $3.4 billion of such securities. ComEd anticipates the issuance will
occur sometime in the fourth quarter of 1998. ComEd plans to use the proceeds
of the securities issuance to refinance its debt and equity, including using
between $750 million and $1.14 billion to repurchase shares of ComEd common
stock held by Unicom. Unicom in turn will use the funds it receives from
ComEd's share repurchase to repurchase publicly held shares of Unicom's common
stock. At current market prices, this repurchase would involve between 22
million and 33 million shares, or 10 to 15 percent of Unicom's outstanding
common stock. The Boards of Directors of Unicom and ComEd have each approved
the repurchase of up to 33 million shares of common stock. ComEd plans to use
the remaining proceeds, net of transaction costs, to redeem preference stock
and debt.

18
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED
to recover some of its costs which might otherwise be unrecoverable under
market-based rates. Nonetheless, ComEd will need to take steps to address the
portion of such costs which are not recoverable through the CTC. Such steps
may include cost control efforts, developing new sources of revenue and
potential asset dispositions.

Because the 1997 Act is expected ultimately to lead to market-based pricing
of electric generation services, ComEd discontinued SFAS No. 71 regulatory
accounting practices for the generation portion of its business in December
1997. ComEd evaluated the regulatory assets and liabilities related to the
generation portion of its business and determined that it was not probable
that such costs would be recovered through the cash flows from the regulated
portion of its business. Accordingly, the generation-related regulatory assets
and liabilities were written off in the fourth quarter of 1997, resulting in
an extraordinary charge of $810 million (after-tax), or $3.75 per common
share. These write-offs related principally to previously incurred costs
originally expected to be collected through future revenues, including income
tax benefits previously flowed through to customers, deferred carrying charges
on the Byron Unit 2 and Braidwood Units 1 and 2 nuclear generating plants,
generation-related unamortized loss on reacquired debt and other miscellaneous
generation-related costs. The regulatory asset for the unrecovered nuclear
decommissioning costs of currently retired nuclear plants was not written off,
as the 1997 Act provides for the ongoing recovery of decommissioning costs
through regulated rates. See "Regulatory Assets and Liabilities" and
"Depreciation and Decommissioning" in Note 1 for additional information.

Pursuant to an option contained in the 1997 Act, ComEd filed a tariff on
December 16, 1997 to eliminate its FAC as of January 1, 1997. Under ComEd's
regulated rates, the FAC provided for the recovery of changes in fossil and
nuclear fuel costs and the energy portion of purchased power costs, as
compared to the fuel and purchased energy costs included in ComEd's base
rates. Elimination of the FAC required ComEd to refund to customers the net
FAC charges billed during the calendar year 1997 of $25 million (after-tax),
or $0.12 per common share. These costs, as well as deferred underrecovered
energy costs of $19 million (after-tax), or $0.08 per common share, which
ComEd would have been entitled to recover if the FAC had remained in effect,
were recorded as a charge to operating results in the fourth quarter of 1997.

Additionally, elimination of the FAC and a transition to market-based
pricing for generation-related costs required ComEd to write down its
investment in uranium-related properties. Projections of the market price for
uranium indicate that the expected incremental costs of mining and milling
uranium at such properties would exceed the expected market price for uranium.
Such costs are not expected to be recoverable in a competitive market. A write
down of ComEd's investment in uranium-related properties to realizable value
resulted in a charge of $60 million (after-tax), or $0.28 per common share, in
December 1997.

The staff of the SEC issued interpretive guidance in the second quarter of
1998, regarding the application of SFAS No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, when a
regulated enterprise such as an electric utility discontinues regulatory
accounting practices for separable portions of its operations and assets.
Under SFAS No. 121, an asset is considered impaired, and should be written
down to fair value, if its future cash flows are insufficient to recover the
carrying value of the asset. The interpretive guidance concludes that for
purposes of applying SFAS No. 121, supplemental regulated cash flows, such as
a CTC, should be excluded from the cash flows of assets in a portion of the
business not subject to regulatory accounting practices. If such assets are
determined to be impaired, a regulatory asset should be established if

19
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED
such costs are recoverable through regulated cash flows. The guidance also
addresses the extent to which assets should be grouped to determine
impairment.

ComEd discontinued the application of regulatory accounting principles in
December 1997 for the generation portion of its business and performed a SFAS
No. 121 impairment analysis that concluded that future revenues, including the
collection of the CTC, expected to be recovered from electric supply services
will be sufficient to cover the costs of its generating assets. However,
reflecting the SEC's recent interpretive guidance, ComEd's revised impairment
evaluation resulted in a plant impairment of $3 billion. Because future CTC
revenues collected through regulated cash flows are expected to provide
recovery of the impaired plant assets, a regulatory asset has been recorded
for the same amount. Accordingly, the impairment, recorded in the second
quarter of 1998, had no effect on results of operations.The regulatory asset
will be amortized as it is recovered through regulated cash flows over a
transition period that ends in 2006, but may be extended to 2008 with ICC
approval if certain conditions are met. Recovery of the regulatory asset will
be realized through future regulatory revenues, including CTC revenues, and
potential gains on generation asset sales, and will vary from year to year.

(3) CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE. In the fourth
quarter of 1997, ComEd changed its accounting method for revenue recognition
to record revenues associated with service which has been provided to
customers but has not yet been billed at the end of each accounting period,
retroactive to January 1, 1997. This change in accounting method increased
operating results for the six months and twelve months ended June 30, 1997 to
reflect the one-time cumulative effect of the change for years prior to 1997
of $197 million (after-tax), or $0.91 per common share. The results per common
share for the first, second, third and fourth quarters of 1997, reflecting the
results of restatement for the effect of the change in accounting principle,
were $1.21, $0.03, $1.11 and $(6.29), respectively. If the new accounting
method had been in effect for the full twelve months ended June 30, 1997, the
pro forma unaudited net income would have been $528,287,000, or $2.45 per
common share, excluding the cumulative effect of a change in accounting
principle.

(4) RATE MATTERS. In January 1995, the ICC issued its Rate Order in the
proceedings relating to ComEd's February 1994 rate increase request. The Rate
Order provided, among other things, for an increase in ComEd's total revenues
of approximately $302 million (excluding add-on revenue taxes) on an annual
basis. Appeals related to the Rate Order have been completed without changing
the rates authorized in the Rate Order.

Final ICC orders have been issued in fuel reconciliation proceedings related
to ComEd's FAC collections for years prior to 1994 and for the year 1995. In
the fuel reconciliation proceeding for 1994, an intervenor and the ICC staff
have filed briefs proposing a refund of approximately $42 million and $34
million, respectively, relating to nuclear station performance. In the fuel
reconciliation proceeding for 1996, an intervenor has filed testimony seeking
a refund of approximately $78 million relating to nuclear station performance,
and the ICC staff also has filed testimony proposing a refund of approximately
$104 million. The 1997 Act provides that the fuel reconciliation proceedings
for 1994 and 1996 must be concluded by the end of 1998. If refunds are
required in these proceedings, the refunds could have a material adverse
effect on results of operations. The 1997 Act also provides that, because
ComEd eliminated its FAC effective January 1, 1997, the ICC shall not conduct
a fuel reconciliation proceeding for the year 1997 or any subsequent years.

See Note 2 for information regarding the 1997 Act and the elimination of
ComEd's FAC.

20
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED

(5) CLOSURE AND SALE OF PLANTS. On January 14, 1998, the Boards of Directors
of Unicom and ComEd authorized the permanent cessation of nuclear generation
operations and retirement of facilities at ComEd's 2,080 megawatt Zion nuclear
generating station. Such retirement resulted in a charge in the fourth quarter
of 1997 of $523 million (after-tax), or $2.42 per common share. The decision
to close Zion Station was a result of ComEd's ongoing analysis of the economic
value of its generating assets in light of the expected changes in the manner
in which electric energy is marketed and sold. The passage of the 1997 Act
provided a clearer basis for evaluating the costs and benefits of alternative
courses of action. In reaching the decision to cease nuclear generation
operations at Zion Station, the Boards also considered the significant
uncertainty associated with continued operation of the station due to the
degradation of the steam generators and the expected operating costs
associated with continued station operation.

ComEd's fourth quarter 1997 financial results reflect a charge of $406
million (after-tax), representing the undepreciated costs of Zion Station
(excluding the portion which will remain in use to provide voltage support),
materials and supplies inventories, and nuclear fuel inventories. In addition,
as required by GAAP, a liability for future closing costs associated with the
retirement of Zion Station, excluding severance costs, was recorded resulting
in a charge of $117 million (after-tax) in the fourth quarter of 1997. See
Note 17 for information regarding costs of voluntary employee separation
plans.

ComEd has completed the sale of two of its coal-fired generating stations,
representing 1,598 megawatts of generating capacity, and has entered into
exclusive 15-year purchased power agreements for the output of the stations.
The sale of State Line and Kincaid Stations was completed in December 1997 and
February 1998, respectively. The net proceeds of the sales, after income tax
effects and closing costs, were approximately $190 million. The proceeds were
used to retire or redeem existing debt in the first quarter of 1998.

(6) AUTHORIZED SHARES AND VOTING RIGHTS AND STOCK RIGHTS OF CAPITAL STOCK.
At June 30, 1998, Unicom's authorized shares consisted of 400,000,000 shares
of common stock. The authorized shares of ComEd preferred and preference
stocks at June 30, 1998 were: preference stock--22,308,560 shares; $1.425
convertible preferred stock--58,851 shares; and prior preferred stock--850,000
shares. The preference and prior preferred stocks are issuable in series and
may be issued with or without mandatory redemption requirements. Holders of
outstanding Unicom shares are entitled to one vote for each share held on each
matter submitted to a vote of such shareholders; and holders of outstanding
ComEd shares are entitled to one vote for each share held on each matter
submitted to a vote of such shareholders. All such shares have the right to
cumulate votes in elections for the directors of the corporation which issued
the shares.

Pursuant to a plan adopted by Unicom's Board of Directors on February 2,
1998, each share of Unicom's common stock carries the right (referred to
herein as a "Right") to purchase one-thousandth of one share of Unicom's
common stock at a purchase price of $100 per whole share of common stock,
subject to adjustment. The Rights are tradable only with Unicom's common stock
until they become exercisable. The Rights become exercisable upon the earlier
of ten days following a public announcement that a person (an "Acquiring
Person") has acquired 15% or more of Unicom's outstanding common stock or ten
business days (or such later date as may be determined by action of Unicom's
Board of Directors) following the commencement of a tender or exchange offer
which, if consummated, would result in a person or group becoming an Acquiring
Person. The Rights are subject to redemption by Unicom at a price of $0.01 per
Right, subject to certain limitations, and will

21
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED
expire on February 2, 2008. If a person or group becomes an Acquiring Person,
each holder of a Right
will thereafter have the right to receive, upon exercise, Unicom common stock
at a 50% discount from the then current market price. If Unicom is acquired in
a merger or other business combination transaction in which Unicom is not the
survivor, or 50% or more of Unicom's assets or earning power is sold or
transferred, each holder of a Right shall then have the right to receive, upon
exercise, common stock of the acquiring company at a 50% discount from the
then current market price of such common stock. Rights held by an Acquiring
Person become void upon the occurrence of such events.

See Note 2 regarding the ICC's order approving ComEd's proposed issuance of
up to $3.4 billion of securities and the planned use of the proceeds to
refinance debt and equity, as permitted under the 1997 Act.

(7) COMMON EQUITY. At June 30, 1998, shares of Unicom common stock were
reserved for the following purposes:

<TABLE>
<S> <C>
Long-Term Incentive Plan........................................ 2,973,775
Employee Stock Purchase Plan.................................... 455,055
Shareholder Rights Plan......................................... 400,000
Exchange for ComEd common stock not held by Unicom.............. 91,413
1996 Directors' Fee Plan........................................ 174,036
---------
4,094,279
=========
</TABLE>

Common stock issued for the three months, six months and twelve months ended
June 30, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------- ------------------ --------------------
1998 1997 1998 1997 1998 1997
--------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shares of Common Stock
Issued:
Long-Term Incentive
Plan.................. 29,504 -- 203,791 45,144 366,751 204,090
Employee Stock Purchase
Plan.................. 52,512 114,964 52,512 114,964 133,551 213,589
Employee Savings and
Investment Plan....... -- 71,503 -- 274,203 -- 435,803
Exchange for ComEd com-
mon stock not held by
Unicom................ 3,063 4,016 6,540 10,685 8,225 33,575
1996 Directors' Fee
Plan.................. 2,603 3,631 6,677 7,580 13,272 11,470
-------- --------- -------- -------- --------- ---------
87,682 194,114 269,520 452,576 521,799 898,527
======== ========= ======== ======== ========= =========
<CAPTION>
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Amount of Common Stock
Issued:
Total issued........... $ 2,558 $ 3,585 $ 6,756 $ 9,311 $ 13,212 $ 20,562
Held by trustee for
Unicom Stock Bonus De-
ferral Plan........... 50 (43) (1,947) (2,386) (2,036) (2,451)
Other.................. (13) (49) 12 2 20 --
-------- --------- -------- -------- --------- ---------
$ 2,595 $ 3,493 $ 4,821 $ 6,927 $ 11,196 $ 18,111
======== ========= ======== ======== ========= =========
</TABLE>

At June 30, 1998 and December 31, 1997, 76,472 and 76,868 ComEd common stock
purchase warrants, respectively, were outstanding. The warrants entitle the
holders to convert such warrants into common stock of ComEd at a conversion
rate of one share of common stock for three warrants.

Unicom's retained earnings account had a deficit balance of $61 million and
$21 million at June 30, 1998 and December 31, 1997, respectively. As of June
30, 1998 and December 31, 1997, $292 million and $331 million, respectively,
of retained earnings had been appropriated for future dividend payments.

22
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED

(8) STOCK OPTION AWARDS/EMPLOYEE STOCK PURCHASE PLAN. Unicom has a
nonqualified stock option awards program under its Long-Term Incentive Plan.
The stock option awards program was adopted by Unicom in July 1996 to reward
valued employees responsible for, or contributing to, the management, growth
and profitability of Unicom and its subsidiaries. The stock options granted
will expire ten years from their grant date. One-third of the shares subject
to the options vest on each of the first three anniversaries of the option
grant date. In addition, the stock options will become fully vested
immediately if the holder dies, retires, is terminated by the Company other
than for cause or qualifies for long-term disability and will also vest in
full upon a change in control.

Stock options transactions through June 30, 1998 are summarized as follows:

<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at the beginning of 1996............... -- $ --
Granted during the year............................ 1,205,500 25.500
Expired/cancelled during the year.................. (17,500) 25.500
---------
Outstanding as of December 31, 1996................ 1,188,000 25.500
Granted during the year............................ 1,339,350 22.313
Exercised during the year.......................... (23,423) 25.500
Expired/cancelled during the year.................. (212,549) 23.632
---------
Outstanding as of December 31, 1997................ 2,291,378 23.810
Granted during the six months ended June 30, 1998.. 260,000 33.010
Exercised during the six months ended June 30,
1998.............................................. (193,665) 24.439
Expired/cancelled during the six months ended June
30, 1998.......................................... (64,815) 23.440
---------
Outstanding as of June 30, 1998.................... 2,292,898 24.811
=========
</TABLE>

Of the stock options outstanding at June 30, 1998, 469,614 have vested with
a weighted average exercise price of $24.993. In July 1998, Unicom granted
1,109,525 additional stock options.

The fair value of each stock option is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>
STOCK OPTION GRANT DATE
-----------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Expected option life.................................. 7 years 7 years 7 years
Dividend yield........................................ 4.80% 7.20% 6.30%
Expected volatility................................... 22.85% 22.29% 20.98%
Risk-free interest rate............................... 5.63% 6.25% 6.64%
</TABLE>

The estimated fair value for each stock option granted in the six months
ended June 30, 1998 and in the years 1997 and 1996 was $6.22, $2.79 and $3.74,
respectively.

The ESPP allows employees to purchase Unicom common stock at a 10% discount
from market value. Substantially all of the employees of Unicom, ComEd and
certain subsidiaries are eligible to participate in the ESPP. Unicom issued
133,551 and 213,589 shares of common stock for the twelve months ended June
30, 1998 and 1997, respectively, under the ESPP at a weighted average annual
purchase price of $25.55 and $19.65, respectively.

23
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED

Unicom has adopted the disclosure-only provisions of SFAS No. 123. For
financial reporting purposes, Unicom has adopted APB No. 25, and thus no
compensation cost has been recognized for the stock option awards program or
ESPP. If Unicom had recorded compensation expense for the stock options
granted and the shares of common stock issued under the ESPP in accordance
with SFAS No. 123 using the fair value based method of accounting, the
additional charge to operations would have been $2 million (after-tax), or
$0.01 per common share, and $1 million (after-tax), or $0.01 per common share,
for the twelve months ended June 30, 1998 and 1997, respectively.

(9) COMED PREFERRED AND PREFERENCE STOCKS WITHOUT MANDATORY REDEMPTION
REQUIREMENTS. No shares of ComEd preferred or preference stocks without
mandatory redemption requirements were issued or redeemed during the twelve
months ended June 30, 1998 and 1997. The series of ComEd preference stock
without mandatory redemption requirements outstanding at June 30, 1998 are
summarized as follows:

<TABLE>
<CAPTION>
INVOLUNTARY
SHARES AGGREGATE REDEMPTION LIQUIDATION
SERIES OUTSTANDING STATED VALUE PRICE(1) PRICE(1)
------ ----------- ------------ ---------- -----------
(THOUSANDS
OF DOLLARS)
<S> <C> <C> <C> <C>
$1.90 4,249,549 $106,239 $ 25.25 $25.00
$2.00 2,000,000 51,560 $ 26.04 $25.00
$1.96 2,000,000 52,440 $ 27.11 $25.00
$7.24 750,000 74,340 $101.00 $99.12
$8.40 750,000 74,175 $101.00 $98.90
$8.38 750,000 73,566 $100.16 $98.09
$2.425 3,000,000 72,637 $ 25.00 $25.00
---------- --------
13,499,549 $504,957
========== ========
</TABLE>
--------
(1) Per share plus accrued and unpaid dividends, if any.

The outstanding shares of ComEd's $1.425 convertible preferred stock are
convertible at the option of the holders thereof, at any time, into common
stock of ComEd at the rate of 1.02 shares of common stock for each share of
convertible preferred stock, subject to future adjustment. The convertible
preferred stock may be redeemed by ComEd at $42 per share, plus accrued and
unpaid dividends, if any. The involuntary liquidation price of the $1.425
convertible preferred stock is $31.80 per share, plus accrued and unpaid
dividends, if any.

(10) COMED PREFERENCE STOCK SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS.
During the twelve months ended June 30, 1998 and 1997, no shares of ComEd
preference stock subject to mandatory redemption requirements were issued. The
series of ComEd preference stock subject to mandatory redemption requirements
outstanding at June 30, 1998 are summarized as follows:

<TABLE>
<CAPTION>
SHARES AGGREGATE
SERIES OUTSTANDING STATED VALUE OPTIONAL REDEMPTION PRICE(1)
- -------------- ----------- ------------ -----------------------------------------------
(THOUSANDS
OF DOLLARS)
<S> <C> <C> <C>
$8.20 178,560 $ 17,856 $101
$8.40 Series B 240,000 23,838 $101
$8.85 225,000 22,500 $103 through July 31, 1998; and $101 thereafter
$9.25 525,000 52,500 $103 through July 31, 1999; and $101 thereafter
$9.00 130,000 12,886 Non-callable
$6.875 700,000 69,476 Non-callable
--------- --------
1,998,560 $199,056
========= ========
</TABLE>
- --------
(1) Per share plus accrued and unpaid dividends, if any.

24
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED

The annual sinking fund requirements and sinking fund and involuntary
liquidation prices per share of the outstanding series of ComEd preference
stock subject to mandatory redemption requirements are summarized as follows:

<TABLE>
<CAPTION>
SINKING
ANNUAL SINKING FUND INVOLUNTARY
SERIES FUND REQUIREMENT PRICE(1) LIQUIDATION PRICE(1)
- -------------- ----------------- ------- -------------------
<S> <C> <C> <C>
$8.20 35,715 shares $100 $100.00
$8.40 Series B 30,000 shares(2) $100 $ 99.326
$8.85 37,500 shares $100 $100.00
$9.25 75,000 shares $100 $100.00
$9.00 130,000 shares $100 $ 99.125
$6.875 (3) $100 $ 99.25
</TABLE>
- --------
(1) Per share plus accrued and unpaid dividends, if any.
(2) ComEd has a non-cumulative option to increase the annual sinking fund
payment on each sinking fund redemption date to retire an additional
number of shares, not in excess of the sinking fund requirement, at the
applicable redemption price.
(3) All shares are required to be redeemed on May 1, 2000.

Annual remaining sinking fund requirements through 2002 on ComEd preference
stock outstanding at June 30, 1998 will aggregate to $28 million in 1998, $18
million in 1999, $88 million in 2000 and $18 million in each of 2001 and 2002.
During each of the twelve months ended June 30, 1998 and 1997, 468,215 and
438,215 shares, respectively, of ComEd preference stock subject to mandatory
redemption requirements were reacquired to meet sinking fund requirements plus
any optional additional sinking fund payments.

Sinking fund requirements due within one year are included in current
liabilities.

(11) COMED-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUSTS HOLDING SOLELY COMED'S SUBORDINATED DEBT SECURITIES. In
September 1995, ComEd Financing I, a wholly-owned subsidiary trust of ComEd,
issued 8,000,000 of its 8.48% ComEd-obligated mandatorily redeemable preferred
securities. The sole asset of ComEd Financing I is $206.2 million principal
amount of ComEd's 8.48% subordinated deferrable interest notes due September
30, 2035. In January 1997, ComEd Financing II, a wholly-owned subsidiary trust
of ComEd, issued 150,000 of its 8.50% ComEd-obligated mandatorily redeemable
capital securities. The sole asset of ComEd Financing II is $154.6 million
principal amount of ComEd's 8.50% subordinated deferrable interest debentures
due January 15, 2027. There is a full and unconditional guarantee by ComEd of
the Trusts' obligations under the securities issued by the Trusts. However,
ComEd's obligations are subordinate and junior in right of payment to certain
other indebtedness of ComEd. ComEd has the right to defer payments of interest
on the subordinated deferrable interest notes by extending the interest
payment period, at any time, for up to 20 consecutive quarters. Similarly,
ComEd has the right to defer payments of interest on the subordinated
deferrable interest debentures by extending the interest payment period, at
any time, for up to 10 consecutive semi-annual periods. If interest payments
on the subordinated deferrable interest notes or debentures are so deferred,
distributions on the preferred securities will also be deferred. During any
deferral, distributions will continue to accrue with interest thereon. In
addition, during any such deferral, ComEd may not declare or pay any dividend
or other distribution on, or redeem or purchase, any of its capital stock.

The subordinated deferrable interest notes are redeemable by ComEd, in whole
or in part, from time to time, on or after September 30, 2000, and with
respect to the subordinated deferrable interest debentures, on or after
January 15, 2007, or at any time in the event of certain income tax
circumstances. If the subordinated deferrable interest notes or debentures are
redeemed, the Trusts must redeem preferred securities having an aggregate
liquidation amount equal to the aggregate principal amount of the subordinated
deferrable interest notes or debentures so redeemed. In the event

25
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED
of the dissolution, winding up or termination of the Trusts, the holders of
the preferred securities will be entitled to receive, for each preferred
security, a liquidation amount of $25 for the securities of ComEd Financing I
and $1,000 for the securities of ComEd Financing II, plus accrued and unpaid
distributions thereon, including interest thereon, to the date of payment,
unless in connection with the dissolution, the subordinated deferrable
interest notes or debentures are distributed to the holders of the preferred
securities.

(12) LONG-TERM DEBT. Sinking fund requirements and scheduled maturities
remaining through 2002 for ComEd's first mortgage bonds, sinking fund
debentures and other long-term debt outstanding at June 30, 1998, after
deducting deposits made for retirement of sinking fund debentures and sinking
fund debentures reacquired for satisfaction of future sinking fund
requirements, are summarized as follows: 1998--$130 million; 1999--$150
million; 2000--$462 million; 2001--$108 million; and 2002--$305 million.
Unicom Enterprises' note payable to bank of $195 million will mature in 1999.

At June 30, 1998, ComEd's outstanding first mortgage bonds maturing through
2002 were as follows:

<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
SERIES ----------------------
(THOUSANDS OF DOLLARS)
<S> <C>
6 3/4% due July 1, 1998............................ $ 50,000
6 3/8% due October 1, 1998......................... 75,000
9 3/8% due February 15, 2000....................... 125,000
6 1/2% due April 15, 2000.......................... 230,000
6 3/8% due July 15, 2000........................... 100,000
7 1/2% due January 1, 2001......................... 100,000
7 3/8% due September 15, 2002...................... 200,000
--------
$880,000
========
</TABLE>

Other long-term debt outstanding at June 30, 1998 is summarized as follows:

<TABLE>
<CAPTION>
PRINCIPAL
DEBT SECURITY AMOUNT INTEREST RATE
- ---------------- ---------- --------------------------------------------------
(THOUSANDS
OF
DOLLARS)
<S> <C> <C>
Unicom--
Loans Payable:
Loan due Janu-
ary 1, 2003 $ 6,775 Interest rate of 8.31%
Loan due Janu-
ary 1, 2004 7,690 Interest rate of 8.44%
----------
$ 14,465
----------
ComEd--
Notes:
Medium Term
Notes, Series
3N due various
dates through
October 15,
2004 $ 296,000 Interest rates ranging from 9.00% to 9.20%
Notes due Janu-
ary 15, 2004 150,000 Interest rate of 7.375%
Notes due Octo-
ber 15, 2005 235,000 Interest rate of 6.40%
Notes due Janu-
ary 15, 2007 150,000 Interest rate of 7.625%
----------
$ 831,000
----------
Purchase Con-
tract Obliga-
tion
due April 30,
2005 $ 345 Interest rate of 3.00%
----------
Total ComEd $ 831,345
----------
Unicom Enter-
prises--
Long-Term Note
Payable to Bank
due November
15, 1999 $ 195,000 Prevailing interest rate of 6.63% at June 30, 1998
----------
Total Unicom $1,040,810
==========
</TABLE>

26
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED

Long-term debt maturing within one year has been included in current
liabilities.

ComEd's outstanding first mortgage bonds are secured by a lien on
substantially all property and franchises, other than expressly excepted
property, owned by ComEd.

See Note 2 regarding the ICC's order approving the proposed issuance of up
to $3.4 billion of securities and the planned use of the proceeds to refinance
debt and equity, as permitted under the 1997 Act.

(13) LINES OF CREDIT. ComEd had total bank lines of credit of $581 million
and unused bank lines of credit of $573 million at June 30, 1998. Of that
amount, $573 million (of which $146 million expires on September 27, 1998, $9
million expires on September 30, 1998 and $418 million expires in equal
quarterly installments commencing on September 30, 1998 and ending on
September 30, 1999) may be borrowed on secured or unsecured notes of ComEd at
various interest rates. The interest rate is set at the time of a borrowing
and is based on several floating rate bank indices plus a spread which is
dependent upon the credit rating of ComEd's outstanding first mortgage bonds
or on a prime interest rate. Amounts under the remaining lines of credit may
be borrowed at prevailing prime interest rates on unsecured notes of ComEd.
Collateral, if required for the borrowings, would consist of first mortgage
bonds issued under and in accordance with the provisions of ComEd's mortgage.
ComEd is obligated to pay commitment fees with respect to the unused portion
of such lines of credit.

Unicom Enterprises has a $200 million credit facility which will expire on
November 15, 1999, of which $5 million was unused as of June 30, 1998. The
credit facility can be used by Unicom Enterprises to finance investments in
unregulated businesses and projects, including UT Holdings and Unicom Energy
Services, and for general corporate purposes. The credit facility is
guaranteed by Unicom and includes certain covenants with respect to Unicom and
Unicom Enterprises' operations. Such covenants include, among other things,
(i) a requirement that Unicom and its consolidated subsidiaries maintain a
tangible net worth at least $10 million over that of ComEd and its
consolidated subsidiaries, (ii) a requirement that Unicom's consolidated debt
to consolidated capitalization not exceed 0.65 to 1, (iii) restrictions on the
indebtedness for borrowed money that Unicom (excluding ComEd) and Unicom
Enterprises may incur, and (iv) a requirement that Unicom own 100% of the
outstanding stock of Unicom Enterprises and at least 80% of the outstanding
stock of ComEd; and provide that Unicom may not declare or pay dividends
during the continuance of an event of default. Interest rates for borrowings
under the credit facility are set at the time of a borrowing and are based on
either a prime interest rate or a floating rate bank index plus a spread which
varies with the credit rating of ComEd's outstanding first mortgage bonds.
Unicom Enterprises is obligated to pay commitment fees with respect to the
unused portion of such lines of credit.

(14) DISPOSAL OF SPENT NUCLEAR FUEL. Under the Nuclear Waste Policy Act of
1982, the DOE is responsible for the selection and development of repositories
for, and the disposal of, spent nuclear fuel and high-level radioactive waste.
ComEd, as required by that Act, has signed a contract with the DOE to provide
for the disposal of spent nuclear fuel and high-level radioactive waste from
ComEd's nuclear generating stations. That contract provided for acceptance by
the DOE of such materials to begin in January 1998; however, that date was not
met by the DOE and is expected to be delayed significantly. The DOE's current
estimate for opening a facility to accept such waste is 2010. Extended delays
in spent nuclear fuel acceptance by the DOE would lead to ComEd's
consideration of costly storage alternatives. On July 30, 1998, ComEd filed a
complaint against the United States in the United States Court of Federal
Claims seeking to recover damages caused by the DOE's failure to honor its
contractual obligation to begin disposing of spent nuclear fuel in January
1998. See "Depreciation and Decommissioning" under Note 1 for additional
information. The contract with the DOE requires ComEd to pay the DOE a one-
time fee applicable to nuclear generation through April 6, 1983 of $277
million,

27
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED
with interest to date of payment, and a fee payable quarterly equal to one
mill per kilowatthour of nuclear-generated and sold electricity after April 6,
1983. Pursuant to the contract, ComEd elected to pay the one-time fee, with
interest, just prior to the first delivery of spent nuclear fuel to the DOE.
The liability for the one-time fee and the related interest is reflected on
the Consolidated Balance Sheets.

(15) FAIR VALUE OF FINANCIAL INSTRUMENTS. The following methods and
assumptions were used to estimate the fair value of financial instruments
either held or issued and outstanding. The disclosure of such information does
not purport to be a market valuation of Unicom and subsidiary companies as a
whole. The impact of any realized or unrealized gains or losses related to
such financial instruments on the financial position or results of operations
of Unicom and subsidiary companies is primarily dependent on the treatment
authorized under future ComEd ratemaking proceedings.

Investments. Securities included in the nuclear decommissioning funds have
been classified and accounted for as "available for sale" securities. The
estimated fair value of the nuclear decommissioning funds, as determined by
the trustee and based on published market data, as of June 30, 1998 and
December 31, 1997, were as follows:

<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
-------------------------------- --------------------------------
UNREALIZED UNREALIZED
COST BASIS GAINS FAIR VALUE COST BASIS GAINS FAIR VALUE
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Short-term
investments.......... $ 48,815 $ 30 $ 48,845 $ 33,524 $ 2 $ 33,526
U.S. Government and
Agency issues........ 193,609 17,930 211,539 170,240 15,882 186,122
Municipal bonds....... 364,236 19,554 383,790 306,104 20,598 326,702
Corporate bonds....... 250,187 5,699 255,886 231,738 4,293 236,031
Common stock.......... 710,373 496,566 1,206,939 667,657 385,851 1,053,508
Other................. 7,347 3,917 11,264 17,300 2,508 19,808
---------- -------- ---------- ---------- -------- ----------
$1,574,567 $543,696 $2,118,263 $1,426,563 $429,134 $1,855,697
========== ======== ========== ========== ======== ==========
</TABLE>

At June 30, 1998, the debt securities held by the nuclear decommissioning
funds had the following maturities:

<TABLE>
<CAPTION>
COST BASIS FAIR VALUE
---------- ----------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Within 1 year....................................... $ 61,850 $ 61,856
1 through 5 years................................... 160,947 165,208
5 through 10 years.................................. 255,951 269,731
Over 10 years....................................... 387,490 413,019
</TABLE>

The net earnings of the nuclear decommissioning funds, which are recorded as
increases to the accumulated provision for depreciation, for the three months,
six months and twelve months ended June 30, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- ---------------------- ------------------------
1998 1997 1998 1997 1998 1997
--------- --------- --------- ----------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Gross proceeds from
sales of securities.... $ 520,460 $ 551,707 $ 948,463 $ 1,122,476 $ 1,989,510 $ 2,195,786
Less cost based on spe-
cific identification... (499,050) (542,265) (893,384) (1,099,773) (1,881,911) (2,159,467)
--------- --------- --------- ----------- ----------- -----------
Realized gains on sales
of securities.......... $ 21,410 $ 9,442 $ 55,079 $ 22,703 $ 107,599 $ 36,319
Other realized fund
earnings net of
expenses............... 9,237 14,314 12,848 22,781 29,189 42,207
--------- --------- --------- ----------- ----------- -----------
Total realized net earn-
ings of the funds...... $ 30,647 $ 23,756 $ 67,927 $ 45,484 $ 136,788 $ 78,526
Unrealized gains........ 524 144,496 114,562 130,439 182,864 210,719
--------- --------- --------- ----------- ----------- -----------
Total net earnings of
the funds............. $ 31,171 $ 168,252 $ 182,489 $ 175,923 $ 319,652 $ 289,245
========= ========= ========= =========== =========== ===========
</TABLE>

28
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED

Current Assets. Cash, temporary cash investments and other cash investments,
which include U.S. Government obligations and other short-term marketable
securities, and special deposits, which primarily includes cash deposited for
the redemption, refund or discharge of debt securities, are stated at cost,
which approximates their fair value because of the short maturity of these
instruments. The securities included in these categories have been classified
as "available for sale" securities.

Capitalization. The estimated fair values of ComEd preferred and preference
stocks, ComEd-
obligated mandatorily redeemable preferred securities of subsidiary trusts
holding solely ComEd's subordinated debt securities and long-term debt were
obtained from an independent consultant. The estimated fair values, which
include the current portions of redeemable preference stock and long-term debt
but exclude accrued interest and dividends, as of June 30, 1998 and December
31, 1997 were as follows:

<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
-------------------------------- --------------------------------
CARRYING UNREALIZED CARRYING UNREALIZED FAIR
VALUE LOSSES FAIR VALUE VALUE LOSSES VALUE
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
ComEd preferred and
preference stocks.... $ 705,885 $ 14,620 $ 720,505 $ 712,069 $ 11,970 $ 724,039
ComEd-obligated
mandatorily
redeemable preferred
securities of
subsidiary trusts
holding solely
ComEd's subordinated
debt securities...... $ 350,000 $ 17,448 $ 367,448 $ 350,000 $ 21,701 $ 371,701
Long-term debt........ $5,693,753 $431,696 $6,125,449 $5,913,942 $380,890 $6,294,832
</TABLE>

Long-term notes payable, which are not included in the above table, amounted
to $210 million and $327 million at June 30, 1998 and December 31, 1997,
respectively. Such notes, for which interest is paid at fixed and prevailing
rates, are included in the consolidated financial statements at cost, which
approximates their fair value.

Current Liabilities. The carrying value of notes payable, which consists of
commercial paper and bank loans maturing within one year, approximates the
fair value because of the short maturity of these instruments. See
"Capitalization" above for a discussion of the fair value of the current
portion of long-term debt and redeemable preference stock.

Other Noncurrent Liabilities. The carrying value of accrued spent nuclear
fuel disposal fee and related interest represents the settlement value as of
June 30, 1998 and December 31, 1997; therefore, the carrying value is equal to
the fair value.

(16) PENSION AND POSTRETIREMENT BENEFITS. As of June 30, 1998, ComEd had a
qualified non-contributory defined benefit pension plan which covers all
regular employees. Benefits under this plan reflect each employee's
compensation, years of service and age at retirement. Funding is based upon
actuarially determined contributions that take into account the amount
deductible for income tax purposes and the minimum contribution required under
the Employee Retirement Income Security Act of 1974, as amended. The June 30,
1998 and December 31, 1997 pension liabilities and related data were
determined using the January 1, 1997 actuarial valuation. Additionally, ComEd
maintains a nonqualified supplemental retirement plan which covers any excess
pension benefits that would be payable to management employees under the
qualified plan but which are limited by the Internal Revenue Code. On January
19, 1998, the qualified defined benefit plan of the Indiana Company was merged
into the ComEd pension plan as a result of the sale of the Indiana Company's
State Line Station and the transfer of its remaining employees to ComEd.

ComEd and the Indiana Company provide certain postretirement medical care,
dental care, vision care and life insurance for retirees and their dependents
and for the surviving dependents of eligible

29
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED
employees and retirees. The employees become eligible for postretirement
benefits when they reach age 55 with 10 years of service. The liability for
postretirement benefits is funded through trust funds based upon actuarially
determined contributions that take into account the amount deductible for
income tax purposes. The health care plans are contributory, funded jointly by
the companies and the participating retirees. The June 30, 1998 and December
31, 1997 postretirement benefit liabilities and related data were determined
using the January 1, 1997 actuarial valuations.

Reconciliations of the beginning and ending balances of the projected
pension benefit obligation and the accumulated postretirement benefit
obligation and the funded status of these plans for the six months ended June
30, 1998 and the twelve months ended December 31, 1997 are as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, 1998 DECEMBER 31, 1997
-------------------------- --------------------------
OTHER OTHER
PENSION POSTRETIREMENT PENSION POSTRETIREMENT
BENEFITS BENEFITS BENEFITS BENEFITS
---------- -------------- ---------- --------------
(THOUSANDS OF DOLLARS)
CHANGE IN BENEFIT
OBLIGATION
- -----------------
<S> <C> <C> <C> <C>
Benefit obligation at
beginning of period.... $4,074,000 $1,084,000 $3,579,000 $1,035,000
Service cost............ 62,000 18,000 100,000 34,000
Interest cost........... 139,000 37,000 261,000 76,000
Plan participants' con-
tributions............. -- 2,000 -- 3,000
Curtailment gain........ -- -- (5,000) --
Actuarial loss (gain)... 6,000 -- 346,000 (23,000)
Benefits paid........... (109,000) (21,000) (207,000) (41,000)
---------- ---------- ---------- ----------
Benefit obligation at
end of period......... $4,172,000 $1,120,000 $4,074,000 $1,084,000
---------- ---------- ---------- ----------
<CAPTION>
CHANGE IN PLAN ASSETS
- ---------------------
<S> <C> <C> <C> <C>
Fair value of plan as-
sets at beginning of
period................. $3,706,000 $ 768,000 $3,281,000 $ 665,000
Actual return on plan
assets................. 362,000 83,000 631,000 130,000
Employer contribution... -- -- 1,000 11,000
Plan participants' con-
tributions............. -- 2,000 -- 3,000
Benefits paid........... (109,000) (21,000) (207,000) (41,000)
---------- ---------- ---------- ----------
Fair value of plan as-
sets at end of period. $3,959,000 $ 832,000 $3,706,000 $ 768,000
---------- ---------- ---------- ----------
Plan assets less than
benefit obligation..... $ (213,000) $ (288,000) $ (368,000) $ (316,000)
Unrecognized net actuar-
ial loss (gain)........ (54,000) (448,000) 132,000 (406,000)
Unrecognized prior serv-
ice cost (asset)....... (62,000) 50,000 (64,000) 52,000
Unrecognized transition
obligation (asset)..... (107,000) 334,000 (114,000) 345,000
---------- ---------- ---------- ----------
Accrued liability for
benefits.............. $ (436,000) $ (352,000) $ (414,000) $ (325,000)
========== ========== ========== ==========
</TABLE>

The fair value of pension plan assets excludes $19 million and $17 million
held in grantor trust as of June 30, 1998 and December 31, 1997, respectively,
for payment of benefits under the supplemental plan.

In accounting for the pension costs and other postretirement benefit costs
under the plans, the following weighted average actuarial assumptions were
used for the periods during 1998, 1997 and 1996:

<TABLE>
<CAPTION>
OTHER
PENSION BENEFITS POSTRETIREMENT BENEFITS
----------------- -----------------------
1998 1997 1996 1998 1997 1996
----- ----- ----- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Annual discount rate................. 7.00% 7.50% 7.50% 7.00% 7.50% 7.50%
Annual long-term rate of return on
plan assets......................... 9.50% 9.75% 9.75% 9.20% 9.40% 9.38%
Annual rate of increase in future
compensation levels................. 4.00% 4.00% 4.00% -- -- --
</TABLE>

30
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED
The components of pension and other postretirement benefit costs, portions
of which were recorded as components of construction costs, for the three
months, six months and twelve months ended June 30, 1998 and 1997 were as
follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- -------------------- --------------------
1998 1997 1998 1997 1998 1997
PENSION COSTS --------- --------- --------- --------- --------- ---------
- ------------- (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Service cost............ $ 31,000 $ 25,000 $ 62,000 $ 50,000 $ 113,000 $ 92,000
Interest cost on pro-
jected benefit obliga-
tion................... 69,000 64,000 139,000 129,000 271,000 252,000
Expected return on plan
assets................. (85,000) (78,000) (171,000) (156,000) (326,000) (299,000)
Amortization of transi-
tion asset............. (3,000) (3,000) (6,000) (6,000) (13,000) (13,000)
Amortization of prior
service cost (asset)... (1,000) (1,000) (2,000) (2,000) (4,000) (4,000)
Recognized loss......... -- -- -- -- 2,000 1,000
Curtailment gain........ -- -- -- -- (5,000) --
--------- --------- --------- --------- --------- ---------
Net periodic benefit
cost.................. $ 11,000 $ 7,000 $ 22,000 $ 15,000 $ 38,000 $ 29,000
========= ========= ========= ========= ========= =========
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- ------------------ --------------------
OTHER POSTRETIREMENT 1998 1997 1998 1997 1998 1997
BENEFIT COSTS --------- --------- -------- -------- --------- ---------
- -------------------- (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Service cost............ $ 9,000 $ 8,000 $ 18,000 $ 17,000 $ 35,000 $ 34,000
Interest cost on accumu-
lated benefit obliga-
tion................... 18,000 20,000 37,000 40,000 73,000 78,000
Expected return on plan
assets................. (17,000) (16,000) (34,000) (31,000) (64,000) (58,000)
Amortization of transi-
tion obligation........ 6,000 5,000 11,000 11,000 22,000 22,000
Amortization of prior
service cost........... 1,000 1,000 2,000 2,000 4,000 4,000
Recognized gain......... (4,000) (1,000) (9,000) (4,000) (18,000) (8,000)
Severance plan cost..... 1,000 2,000 2,000 2,000 8,000 5,000
--------- --------- -------- -------- --------- ---------
Net periodic benefit
cost.................. $ 14,000 $ 19,000 $ 27,000 $ 37,000 $ 60,000 $ 77,000
========= ========= ======== ======== ========= =========
</TABLE>

The pension curtailment gain in December 1997 represents the recognition of
prior service costs, the transition asset and the decrease in the projected
benefit obligation related to the reduction in the number of employees due to
the sale of State Line Station by the Indiana Company.

Postretirement health care costs for the twelve months ended June 30, 1998
and 1997 included $8 million and $5 million, respectively, related to
voluntary separation offers to certain employees of ComEd and the Indiana
Company.

The health care cost trend rates used to measure the expected cost of the
postretirement medical benefits are assumed to be 8.5% for pre-Medicare
recipients and 6.5% for Medicare recipients for 1998. Those rates are assumed
to decrease in 0.5% annual increments to 5% for the years 2005 and 2001,
respectively, and to remain level thereafter. Assumed health care cost trend
rates have a significant effect on the amounts reported for the health care
plans. A one percentage point change in the assumed health care cost trend
rates would have the following effects:

<TABLE>
<CAPTION>
1 PERCENTAGE 1 PERCENTAGE
POINT INCREASE POINT DECREASE
-------------- --------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Effect on total annual service and interest cost
components...................................... $ 21,000 $ (16,000)
Effect on postretirement benefit obligation...... 187,000 (151,000)
</TABLE>

31
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED
In addition, an employee savings and investment plan is available to
eligible employees of ComEd and certain of its and Unicom's subsidiaries.
Under the plan, each participating employee may contribute up to 20% of such
employee's base pay and the participating companies match the first 6% of such
contribution equal to 100% of the first 2% of contributed base salary, 70% of
the next 3% of contributed base salary and 25% of the next 1% of contributed
base salary. The participating companies' contributions were $7 million for
each of the three months ended June 30, 1998 and 1997, $15 million and $16
million for the six months ended June 30, 1998 and 1997, respectively, and $32
million and $31 million for the twelve months ended June 30, 1998 and 1997,
respectively.

(17) SEPARATION PLAN COSTS. O&M expenses included $8 million and $4 million
for the three months ended June 30, 1998 and 1997, respectively, $24 million
and $7 million for the six months ended June 30, 1998 and 1997, respectively,
and $56 million and $16 million for the twelve months ended June 30, 1998 and
1997, respectively, for costs related to voluntary separation offers to
certain employees of ComEd and the Indiana Company, as well as certain one-
time, employee-related costs. Such costs resulted in charges of $5 million
(after-tax), or $0.02 per common share, and $3 million (after-tax), or $0.01
per common share, for the three months ended June 30, 1998 and 1997,
respectively, $14 million (after-tax), or $0.07 per common share, and $4
million (after-tax), or $0.02 per common share, for the six months ended June
30, 1998 and 1997, respectively, and $34 million (after-tax), or $0.15 per
common share, and $10 million (after-tax), or $0.05 per common share, for the
twelve months ended June 30, 1998 and 1997, respectively.

(18) INCOME TAXES. The components of the net deferred income tax liability
at June 30, 1998 and December 31, 1997 were as follows:

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Deferred income tax liabilities:
Accelerated cost recovery and liberalized deprecia-
tion, net of removal costs.......................... $4,007,056 $4,062,801
Overheads capitalized................................ 119,701 131,509
Repair allowance..................................... 224,810 231,697
Regulatory assets recoverable through future rates... 692,077 785,354
Deferred income tax assets:
Postretirement benefits.............................. (324,346) (305,242)
Unamortized investment tax credits................... (197,991) (206,112)
Regulatory liabilities to be settled through future
rates............................................... (610,113) (698,750)
Nuclear plant closure................................ (65,173) (194,244)
Other--net........................................... (150,118) (136,258)
---------- ----------
Net deferred income tax liability..................... $3,695,903 $3,670,755
========== ==========
</TABLE>

The $25 million increase in the net deferred income tax liability from
December 31, 1997 to June 30, 1998 is comprised of $30 million of deferred
income tax expense reflected in operations and a $5 million decrease in
regulatory assets net of regulatory liabilities pertaining to income taxes for
the period. The amount of accelerated cost recovery and liberalized
depreciation included in deferred income tax liabilities as of June 30, 1998,
includes amounts related to the regulatory asset for impaired production
plant. The amount of regulatory assets included in deferred income tax
liabilities primarily relates to the equity component of AFUDC which is
recorded on an after-tax basis, the borrowed funds component of AFUDC which
was previously recorded net of tax and other temporary differences for which
the related tax effects were not previously recorded. The amount of other
regulatory liabilities included in deferred income tax assets primarily
relates to deferred income taxes provided at rates in excess of the current
statutory rate.

32
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED
The components of net income tax expense charged (credited) to continuing
operations for the three months, six months and twelve months ended June 30,
1998 and 1997 were as follows:

<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
ENDED SIX MONTHS ENDED ENDED
JUNE 30 JUNE 30 JUNE 30
---------------- ------------------ -------------------
1998 1997 1998 1997 1998 1997
------- ------- -------- -------- --------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Operating income:
Current income taxes... $75,359 $10,811 $132,307 $ 76,076 $ 304,888 $265,794
Deferred income taxes.. (14,424) 20,436 (19,821) 20,424 28,103 124,686
Investment tax credits
deferred--net......... (6,888) (7,897) (14,048) (15,794) (29,270) (34,840)
Other (income) and de-
ductions, primarily de-
ferred income taxes in
1997................... (3,360) (1,836) (13,556) (2,119) (419,061) (4,466)
------- ------- -------- -------- --------- --------
Net income taxes charged
(credited) to continu-
ing operations......... $50,687 $21,514 $ 84,882 $ 78,587 $(115,340) $351,174
======= ======= ======== ======== ========= ========
</TABLE>

Provisions for current and deferred federal and state income taxes and
amortization of investment tax credits resulted in the following effective
income tax rates for the three months, six months and twelve months ended June
30, 1998 and 1997:

<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
ENDED SIX MONTHS ENDED ENDED
JUNE 30 JUNE 30 JUNE 30
----------------- ------------------ -------------------
1998 1997 1998 1997 1998 1997
-------- ------- -------- -------- --------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) before extraordinary item and
cumulative effect of change in accounting princi-
ple.............................................. $ 80,458 $ 5,498 $134,173 $ 71,215 $(176,257) $500,071
Net income taxes charged to continuing operations. 50,687 21,514 84,882 78,587 (115,340) 351,174
Provision for dividends on ComEd preferred and
preference stocks................................ 14,462 15,485 29,009 31,012 58,483 62,450
-------- ------- -------- -------- --------- --------
Pre-tax income (loss) before extraordinary item,
cumulative effect and provision for dividends.... $145,607 $42,497 $248,064 $180,814 $(233,114) $913,695
======== ======= ======== ======== ========= ========
Effective income tax rate......................... 34.8% 50.6% 34.2% 43.5% 49.5% 38.4%
======== ======= ======== ======== ========= ========
</TABLE>

The principal differences between net income taxes charged (credited) to
continuing operations and the amounts computed at the federal statutory rate of
35% for the three months, six months and twelve months ended June 30, 1998 and
1997 were as follows:

<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
ENDED SIX MONTHS ENDED ENDED
JUNE 30 JUNE 30 JUNE 30
---------------- ----------------- -------------------
1998 1997 1998 1997 1998 1997
------- ------- ------- -------- --------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes
computed at statutory
rate................... $50,962 $ 1,504 $86,822 $ 76,165 $ (81,590) $332,673
Equity component of
AFUDC which was ex-
cluded from taxable
income................. (110) (1,997) (198) (3,775) (4,743) (7,279)
Amortization of
investment tax credits,
net of deferred income
taxes.................. (4,517) (7,897) (13,728) (15,794) (43,274) (34,840)
State income taxes, net
of federal income tax-
es..................... 6,817 2,804 12,655 14,451 (1,343) 48,715
Differences between book
and tax accounting,
primarily property-
related deductions..... (2,465) 27,100 (669) 7,540 15,610 11,905
------- ------- ------- -------- --------- --------
Net income taxes charged
(credited) to
continuing operations.. $50,687 $21,514 $84,882 $ 78,587 $(115,340) $351,174
======= ======= ======= ======== ========= ========
</TABLE>

The effects of an income tax refund related to prior years were recorded in
the third quarter of 1996, resulting in a positive impact of $26 million
(after-tax), or $0.12 per common share.

33
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED

(19) TAXES, EXCEPT INCOME TAXES. Provisions for taxes, except income taxes,
for the three months, six months and twelve months ended June 30, 1998 and
1997 were as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------- ----------------- -------------------
1998 1997 1998 1997 1998 1997
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Illinois public utility
revenue................ $ 44,247 $ 55,654 $101,928 $107,409 $ 222,869 $ 223,978
Illinois invested capi-
tal.................... -- 25,827 -- 52,017 47,486 104,501
Illinois electricity
distribution tax....... 24,911 -- 51,629 -- 51,629 --
Municipal utility gross
receipts............... 38,556 37,967 81,107 79,070 170,131 168,384
Real estate............. 29,589 34,112 65,080 73,280 143,308 149,272
Municipal compensation.. 24,214 17,815 44,085 36,925 85,446 78,665
Other--net.............. 23,545 17,607 48,659 41,479 82,389 71,272
--------- --------- -------- -------- --------- ---------
$ 185,062 $ 188,982 $392,488 $390,180 $ 803,258 $ 796,072
========= ========= ======== ======== ========= =========
</TABLE>

Effective January 1, 1998, the Illinois invested capital tax was repealed
and the Illinois electricity distribution tax was enacted as a replacement.
The new tax is based on the kilowatthours delivered to ultimate consumers.

(20) LEASE OBLIGATIONS OF SUBSIDIARY COMPANIES. Under its nuclear fuel lease
arrangement, ComEd may sell and lease back nuclear fuel from a lessor who may
borrow an aggregate of $700 million, consisting of $300 million of commercial
paper/bank borrowings and $400 million of intermediate term notes, to finance
the transactions. With respect to the commercial paper/bank borrowing portion,
$300 million will expire on November 23, 1999. With respect to the
intermediate term notes, $74 million expires on November 23, 1998, and an
additional portion each November 23 thereafter through November 23, 2003. At
June 30, 1998, ComEd's obligation to the lessor for leased nuclear fuel
amounted to approximately $581 million. As a result of the cessation of
nuclear generation operations at Zion Station, ComEd was required to
repurchase approximately $100 million of nuclear fuel assemblies held under
the nuclear fuel lease arrangements at Zion Station. See Note 5 for additional
information regarding the cessation of operations at Zion Station. ComEd
repurchased the required nuclear fuel assemblies in June 1998. ComEd has
agreed to make lease payments which cover the amortization of the nuclear fuel
used in ComEd's reactors plus the lessor's related financing costs. ComEd has
an obligation for spent nuclear fuel disposal costs of leased nuclear fuel.

Future minimum rental payments, including the repurchase of Zion Station
nuclear fuel assemblies discussed above and net of executory costs, at June
30, 1998 for capital leases are estimated to aggregate $670 million, including
$97 million in 1998, $181 million in 1999, $143 million in 2000, $92 million
in 2001, $65 million in 2002 and $92 million in 2003-2006. The estimated
interest component of such rental payments aggregates $91 million. The
estimated portions of obligations due within one year under capital leases of
$163 million and $241 million at June 30, 1998 and December 31, 1997,
respectively, were included in current liabilities on the Consolidated Balance
Sheets.

Future minimum rental payments at June 30, 1998 for operating leases are
estimated to aggregate $351 million, including $22 million in 1998, $41
million in 1999, $38 million in 2000, $32 million in 2001, $28 million in 2002
and $190 million in 2003-2043.

(21) JOINT PLANT OWNERSHIP. ComEd has a 75% undivided ownership interest in
the Quad Cities nuclear generating station. Further, ComEd is responsible for
75% of all costs which are charged to appropriate investment and O&M accounts,
and provides its own financing. ComEd's net plant

34
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED
investment on the Consolidated Balance Sheets does not reflect an investment
in Quad Cities Station due to the accounting impairment recorded in the second
quarter of 1998. See Note 2 for additional information.

(22) COMMITMENTS AND CONTINGENT LIABILITIES. Purchase commitments,
principally related to construction and nuclear fuel, approximated $322
million at June 30, 1998, comprised of $282 million for ComEd, $32 million for
UT Holdings and $8 million for Unicom Energy Services. In addition, ComEd has
substantial commitments for the purchase of coal. ComEd's coal costs are high
compared to those of other utilities. ComEd's western coal contracts and its
rail contracts for delivery of the western coal provide for the purchase of
certain coal at prices substantially above currently prevailing market prices.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations," subcaption "Liquidity and Capital Resources," for additional
information regarding ComEd's purchase commitments. See "Coal Reserves" under
Note 1 for additional information regarding ComEd's coal reserves.

ComEd is a member of NEIL which provides insurance coverage against property
damage and associated replacement power costs occurring at members' nuclear
generating facilities. All companies insured with NEIL are subject to
retrospective premium adjustments if losses exceed accumulated reserve funds.
Capital has been accumulated in the reserve funds such that ComEd would not be
liable for any single incident. However, ComEd could be subject to assessments
in any policy year for each of three types of coverage provided. The maximum
assessments are approximately $53 million for primary property damage, $73
million for excess property damage and $22 million for replacement power.
Prior to January 1, 1998, the primary property damage coverage described was
provided by NML, another mutual insurance company which merged into NEIL. The
merger did not affect ComEd's obligations or coverage.

The NRC's indemnity for public liability coverage under the Price-Anderson
Act is supported by a mandatory industry-wide program under which owners of
nuclear generating facilities could be assessed in the event of nuclear
incidents. Based on the number of nuclear reactors with operating licenses,
ComEd would currently be subject to a maximum assessment of $1,030 million in
the event of an incident, limited to a maximum of $130 million in any calendar
year.

In addition, ComEd participates in the American Nuclear Insurers Masters
Worker Program, which provides coverage for worker tort claims filed for
bodily injury caused by the nuclear energy hazard. This program was modified,
effective January 1, 1998, to provide coverage to all workers whose "nuclear
related employment" began on or after the commencement date of reactor
operations. ComEd will not be liable for a retrospective assessment under this
new policy. However, ComEd is still subject to a maximum retroactive
assessment of up to $36 million in the event losses incurred under the small
number of policies in the old program exceed accumulated reserves.

35
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONCLUDED
the 1991 cases. The verdict against Cotter included compensatory and punitive
damages totaling approximately $3 million (not including prejudgment interest,
which has not yet been calculated, and which Cotter anticipates may bring the
total award to under $6 million), together with medical monitoring. Cotter
intends to appeal the verdict. Although the other 1991 cases will necessarily
involve the resolution of numerous contested issues of fact and law, Unicom
and ComEd's determination is that these actions will not have a material
impact on their financial position or results of operations.

ComEd is involved in administrative and legal proceedings concerning air
quality, water quality and other matters. The outcome of these proceedings may
require increases in future construction expenditures and operating expenses
and changes in operating procedures. ComEd and its subsidiaries are or are
likely to become parties to proceedings initiated by the U.S. EPA, state
agencies and/or other responsible parties under CERCLA with respect to a
number of sites, including MGP sites, or may voluntarily undertake to
investigate and remediate sites for which they may be liable under CERCLA.

ComEd generally did not operate MGPs as a corporate entity but did, however,
acquire MGP sites as part of the absorption of smaller utilities.
Approximately half of these sites were transferred to Northern Illinois Gas
Company as part of a general conveyance in 1954. ComEd also acquired former
MGP sites as vacant real estate on which ComEd facilities have been
constructed. To date, ComEd has identified 44 former MGP sites for which it
may be liable for remediation. ComEd presently estimates that its costs of
former MGP site investigation and remediation will aggregate from $25 million
to $150 million in current-year (1998) dollars. It is expected that the costs
associated with investigation and remediation of former MGP sites will be
incurred over a period not to exceed 30 years. Because ComEd is not able to
determine the most probable liability for such MGP costs, in accordance with
accounting standards, a reserve of $25 million has been included in other
noncurrent liabilities on the Consolidated Balance Sheets as of June 30, 1998
and December 31, 1997, which reflects the low end of the range of ComEd's
estimate of the liability associated with former MGP sites. In addition, as of
June 30, 1998 and December 31, 1997, a reserve of $8 million has been included
in other noncurrent liabilities on the Consolidated Balance Sheets,
representing ComEd's estimate of the liability associated with cleanup costs
of remediation sites other than former MGP sites. Approximately half of this
reserve relates to anticipated cleanup costs associated with a property
formerly used as a tannery which was purchased by ComEd in 1973. Unicom and
ComEd presently estimate that ComEd's costs of investigating and remediating
the former MGP and other remediation sites, pursuant to CERCLA and state
environmental laws, will not have a material impact on the financial position
or results of operations of Unicom or ComEd. These cost estimates are based on
currently available information regarding the responsible parties likely to
share in the costs of responding to site contamination, the extent of
contamination at sites for which the investigation has not yet been completed
and the cleanup levels to which sites are expected to have to be remediated.

(23) SUBSEQUENT EVENTS. In July 1998, ComEd issued $225 million principal
amount of 6.95% Notes due July 15, 2018, the proceeds of which were used for
general corporate purposes, including the refinancing of existing debt. Also,
in July 1998, a subsidiary of UT Holdings issued $120 million principal amount
of senior unsecured 7.38% Notes due in July 2012, the proceeds of which will
be used to refinance existing debt.

36
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CHANGES IN THE ELECTRIC UTILITY INDUSTRY

Unicom and its predominant business, electric energy generation,
transmission and distribution, are in a period of fundamental change. These
changes are attributable to changes in technology and changes in regulation.
Federal law and regulations have been amended to provide for open transmission
system access, and various states, including Illinois, are considering, or
have adopted, new regulatory structures to allow access by some or all
customers to energy suppliers, in addition to the local utility.

Electric Utility Industry. The electric utility industry historically has
consisted of vertically integrated companies which combine generation,
transmission and distribution assets; serve customers within relatively
defined service territories; and operate under extensive regulation with
respect to rates, operations and other matters. Utilities have operated under
a regulatory compact with the state, with a statutory obligation to serve all
of the electricity needs within their service territory in a nondiscriminatory
manner. Historically, investment and operating decisions have been made based
upon the utilities' respective assessment of the current and projected needs
of their customers. In view of this obligation, regulation has focused on
investment and operating costs, and rates have been based on a recovery of
some or all of such prudently incurred costs plus a return on invested
capital. Such rate regulation, and the ability of utilities to recover
investment and other costs through rates, have provided the basis for
recording certain costs as regulatory assets. These assets represent costs
which are allocated over future periods reflecting related regulatory
treatment, rather than expensed in the current period.

The 1997 Act. On December 16, 1997, the Governor of Illinois signed into law
the 1997 Act, which established a phased-process to introduce competition into
the electric industry in Illinois under a less regulated structure. The 1997
Act, as it applies to ComEd, provides for, among other things, a 15%
residential base rate reduction which commenced on August 1, 1998, an
additional 5% residential base rate reduction commencing on May 1, 2002, and
gradual customer access to other electric suppliers. Access for commercial and
industrial customers will occur over a period from October 1999 to December
2000, and access for residential customers will occur after May 1, 2002. The
15% residential base rate reduction, which commenced on August 1, 1998, is
expected to reduce ComEd's operating revenues by approximately $160 million
and $375 million in 1998 and 1999, respectively, compared to 1997 rate levels.
ComEd is engaged in certain pricing experiments contemplated by the 1997 Act,
which are expected to reduce ComEd's operating revenues by approximately $30
million and $60 million in 1998 and 1999, respectively, compared to 1997 rate
levels; however, such reductions are expected to be offset by the effects of
customer growth.

37
<PAGE>

assign assets, retire or remove plants from service, and accelerate
depreciation or amortization of assets with limited ICC regulatory review.
Under the earnings provision of the 1997 Act, if the earned return on common
equity of a utility during this period exceeds an established threshold, a
portion of the excess earnings must be refunded to customers. A utility may
request a rate increase during the rate freeze period when necessary to ensure
the utility's financial viability, but not before January 1, 2000.

As a result of the 1997 Act, prices for the supply of electric energy are
expected to transition from cost-based, regulated rates to rates determined by
competitive market forces. The CTC allows ComEd to recover some of its costs
which might otherwise be unrecoverable under market-based rates. Nonetheless,
ComEd will need to take steps to address the portion of such costs which are
not recoverable through the CTC. Such steps may include cost control efforts,
developing new sources of revenue and potential asset dispositions. See
"Response to Regulatory Changes" below for additional information.

See Note 2 of Notes to Financial Statements for the accounting effects
related to the 1997 Act.

Federal Regulation. The Federal Energy Policy Act of 1992, among other
things, empowered the FERC to introduce a greater level of competition into
the wholesale marketplace for electric energy. Under the FERC Order, utilities
are required to file open access tariffs with regard to their transmission
systems. These tariffs set forth the terms, including prices, under which
other parties and the utility's wholesale marketing function may use the
utility's transmission system. ComEd has an approved open access tariff with
the FERC. The FERC Order requires the separation of the transmission
operations and wholesale marketing functions so as to ensure that unaffiliated
third parties have access to the same information as to system availability
and other requirements. The FERC Order further requires utilities to operate
an electronic bulletin board to make transmission price and access data
available to all potential users. A key feature of the FERC Order is that it
contemplates full recovery of a utility's

38
<PAGE>

costs "stranded" by competition. These costs are "stranded" or "strandable" to
the extent market-based rates would be insufficient to allow for their full
recovery. To recover stranded costs, the utility must show that it had a
reasonable expectation that it would continue to serve the customer in
question under its regulatory compact. In addition, some governmental
entities, such as cities, may elect to "municipalize" a utility's distribution
facilities through condemnation proceedings. Such municipalities would then be
able to purchase electric power on a wholesale basis and resell it to
customers over the newly acquired facilities. The FERC Order provides for the
recovery of a utility's investment stranded by municipalization.

Response to Regulatory Changes. Unicom has announced several business and
operational objectives designed to focus efforts in responding to the energy
market changes that are expected to develop from the 1997 Act. These
objectives contemplate that ComEd will seek additional improvements in its
transmission and distribution operations in order to meet customers'
expectations for reliable delivery and will seek to refocus its generation
activities, with a concentration on improved nuclear generation, and that
Unicom and ComEd will seek to expand their offerings of energy-related
products and services. See Unicom and ComEd's Current Report on Form 8-K dated
July 6, 1998 for more information regarding the objectives announced by
Unicom.

Under the 1997 Act, the role of electric utilities in the supply and
delivery of energy is expected to change. Utilities, such as ComEd,
traditionally have been responsible for providing both adequate supply and
reliable delivery of electricity to customers within their service areas. In
the future, ComEd will continue to be obligated to provide a reliable delivery
system; however, it will be obligated to supply electricity only to those
customers that it continues to serve under tariffs for electricity, but not
for those customers who choose to rely on the marketplace. Nonetheless, during
the transition period to a competitive supply marketplace, ComEd must provide
both an adequate supply and reliable delivery. Given the tight capacity
situation in ComEd's market, ComEd will be working to restore and maintain its
available capacity as well as working to assist in the development of a
competitive supply marketplace in Illinois.

ComEd has a large commitment to, and investment in, nuclear generating
capacity. ComEd has installed a new management team responsible for improving
nuclear operations. Such improvements will be aimed at increasing levels of
energy generation, or capacity factors, at ComEd's nuclear generating units
while simultaneously improving ComEd's record of meeting NRC requirements and
INPO performance standards. Increased capacity factors generally result in
lower unit production costs and an improved opportunity to generate and sell
electricity in a competitive marketplace. Efforts will also be made to control
capital and operating costs through increased efficiencies, such as the
reduction of downtime and expense associated with generating unit maintenance
and refueling outages. ComEd has also evaluated its generating plant
investment. This evaluation, based upon recent interpretative guidance issued
by the SEC, resulted in a conclusion that the investment had been impaired and
should be reduced. See Note 2 of Notes to Financial Statements for additional
information.

Notwithstanding these efforts, there will continue to be an ongoing analysis
of the ability of ComEd's various nuclear plants to generate and deliver
electric energy safely at competitive prices in the competitive market for
energy. Although short-term system reliability and capacity constraints are
likely to support the continued operations of ComEd's nuclear units in the
near term, expected longer term developments are likely to make decision-
making a function of economic considerations. In the absence of the short-term
reliability and capacity constraints, if a plant cannot produce power safely
at a cost below the competitive market price, it will be disposed of or
closed. Although plant impairment adjustments have reduced the carrying value
of nuclear plants and depreciation rates, reflecting shortened estimated
useful lives for certain stations, will reduce the carrying value further
during the next several years, closure of a plant could involve additional
charges associated with the write-off of its then carrying value. In January
1998, Unicom and ComEd decided to cease nuclear generating operations at
ComEd's Zion Station. The related retirement resulted in a charge in the
fourth quarter of 1997 of $523 million (after-tax), or $2.42 per common share,
reflecting both a write down of the plant's carrying value, as well as a
liability for future closing costs. A portion of Zion Station is used to
provide voltage support in the transmission system that serves ComEd's
northern region. See Note 5 of Notes to Financial Statements for additional
information.

39
<PAGE>

ComEd is also undertaking steps to offer for sale approximately 5,600
megawatts of coal-fired generating capacity, representing six generating
stations located in Northern Illinois. Such plants have an aggregate book
value of approximately $1.1 billion. As a part of such sales, ComEd expects to
enter into short-term power purchase agreements with the purchasers in order
to assure the availability of power during the period that the wholesale power
market is developing in Illinois. ComEd would retain its existing nuclear, oil
and gas-fired generating units, which represent an aggregate capacity of
approximately 13,500 megawatts, and its transmission and distribution
facilities. ComEd has completed the sale of two of its coal-fired generating
stations, representing 1,598 megawatts of generating capacity, and has entered
into exclusive 15-year purchased power agreements for the output of the
stations. The sale of State Line and Kincaid Stations was completed in
December 1997 and February 1998, respectively. The net proceeds of the sales,
after income tax effects and closing costs, were approximately $190 million.
The proceeds were used to retire or redeem existing debt in the first quarter
of 1998.

ComEd joined with eight Midwestern utilities to form a regional Midwest ISO
in January 1998. To date, four other utilities have joined the Midwest ISO.
The Midwest ISO is a key element in accommodating the restructuring of the
electric industry and will promote enhanced reliability of the transmission
system, equal access to the transmission system and increased competition. The
Midwest ISO will establish an independent body that will ultimately direct the
planning and operation of the transmission system for the utilities involved.
The Midwest ISO will have operational control over the transmission system and
will have authority to require modification in the operation of generators
connected to that system during system emergencies. ComEd will retain
ownership of its transmission lines. The formation of the Midwest ISO is
subject to FERC approval.

LIQUIDITY AND CAPITAL RESOURCES

UTILITY OPERATIONS

Construction Program. ComEd has a construction program for the year 1998,
which consists principally of improvements to its existing nuclear and other
electric production, transmission and distribution facilities. It does not
include funds to add new generating capacity to ComEd's system. The program,
as currently approved by ComEd, includes the following estimated expenditures
(excluding nuclear fuel expenditures of approximately $160 million).

<TABLE>
<CAPTION>
1998
---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Production........................................... $ 425
Transmission and Distribution........................ 415
General.............................................. 90
------
$930
======
</TABLE>

Such estimated expenditures include $95 million toward the replacement of
the steam generators at ComEd's Byron Unit 1, which were replaced in February
1998, and Braidwood Unit 1, which are expected to be replaced prior to year-
end 1998, in addition to approximately $35 million for removal costs. The
total replacement cost is estimated to be $455 million, including
approximately $80 million of removal costs. Approximately $350 million has
been incurred through June 30, 1998 and $30 million will be incurred in 1999.

ComEd's forecasts of peak load indicate a need for additional resources to
meet demand, either through generating capacity, equivalent purchased power
and/or the development of additional demand-side management resources, in 1998
and each year thereafter for the foreseeable future. However, ComEd believes
that adequate resources, including cost-effective demand-side management
resources, non-utility generation resources and other-utility power purchases,
can be obtained in sufficient quantities to meet such forecasted needs.

40
<PAGE>

Purchase commitments for ComEd, principally related to construction and
nuclear fuel, approximated $282 million at June 30, 1998. In addition, ComEd's
estimated commitments for the purchase of coal are as follows:

<TABLE>
<CAPTION>
CONTRACT PERIOD COMMITMENT(1)
-------- --------- -------------
<S> <C> <C>
Black Butte Coal Co. ............................. 1998-2000 $ 560
Decker Coal Co. .................................. 1998-2014 480
Other commitments................................. 1998-2000 66
------
$1,106
======
</TABLE>
--------
(1) In millions of dollars, excluding transportation costs. No
estimate of future cost escalation has been made.

For additional information concerning these coal contracts and ComEd's fuel
supply, see "Results of Operations," subcaption "Fuel Supply" below, and Notes
1 and 22 of Notes to Financial Statements.

Capital Resources. ComEd forecasts that internal sources will provide
approximately three-fourths of the funds required for ComEd's 1998 construction
program and other capital requirements, including nuclear fuel expenditures,
contributions to nuclear decommissioning funds, sinking fund obligations and
scheduled debt maturities. See Notes 10 and 12 of Notes to Financial Statements
for the summaries of the annual sinking fund requirements and scheduled
maturities for ComEd preference stock and long-term debt, respectively. The
forecast takes into consideration the effects of the 1997 Act, but does not
take into consideration the proposed issuance by ComEd of up to $3.4 billion of
securities to refinance debt and equity, as permitted under the 1997 Act. See
"Changes in the Electric Utility Industry," subcaption "The 1997 Act" above,
for additional information.

The type and amount of external financing will depend on financial market
conditions and the needs and capital structure of ComEd at the time of such
financing. A portion of ComEd's financing is expected to be provided through
the continued sale and leaseback of nuclear fuel through ComEd's existing
nuclear fuel lease facility. See Note 20 of Notes to Financial Statements for
additional information concerning ComEd's nuclear fuel lease facility. ComEd
has $573 million of unused bank lines of credit at June 30, 1998, which may be
borrowed at various interest rates and may be secured or unsecured. The
interest rate is set at the time of a borrowing and is based on several
floating rate bank indices plus a spread, which is dependent upon the credit
ratings of ComEd's outstanding first mortgage bonds or on a prime interest
rate. Collateral, if required for the borrowings, would consist of first
mortgage bonds issued under and in accordance with the provisions of ComEd's
mortgage. See Note 13 of Notes to Financial Statements for additional
information concerning lines of credit, including scheduled commitment
reductions. See the Statements of Consolidated Cash Flows for the construction
expenditures and cash flow from operating activities for the three months, six
months and twelve months ended June 30, 1998.

During the first six months of 1998, ComEd sold and leased back $61 million
of nuclear fuel through its existing nuclear fuel lease facility. In July 1998,
ComEd issued $225 million principal amount of 6.95% Notes due July 15, 2018,
the proceeds of which were used for general corporate purposes, including the
refinancing of existing debt. See the Statements of Consolidated Cash Flows and
Note 7 of Notes to Financial Statements for information regarding common stock
activity.

As of August 10, 1998, ComEd has an effective "shelf" registration statement
with the SEC for the future sale of up to an additional $280 million of debt
securities and cumulative preference stock for general corporate purposes of
ComEd, including the discharge or refund of other outstanding securities.

ComEd's securities and other securities guaranteed by ComEd are currently
rated by three principal securities rating agencies as follows:

<TABLE>
<CAPTION>
STANDARD DUFF &
MOODY'S & POOR'S PHELPS
------- -------- ------
<S> <C> <C> <C>
First mortgage and secured pollution control
bonds........................................... Baa2 BBB BBB
Publicly-held debentures and unsecured pollution
control obligations............................. Baa3 BBB- BBB-
Convertible preferred stock...................... baa3 BBB- BBB-
Preference stock................................. baa3 BBB- BBB-
Trust Securities................................. baa3 BBB- BBB-
Commercial paper................................. P-2 A-2 D-2
</TABLE>

41
<PAGE>

As of July 1998, Moody's rating outlook on ComEd's securities is "Stable",
Duff & Phelps has classified ComEd's securities as "Rating Watch-Down" and
S&P's rating outlook is "Positive."

See "Part II, Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters" in Unicom and ComEd's Annual Reports on Form 10-K for the
year ended December 31, 1997 for additional information regarding ComEd's
securities ratings.

See "Changes in the Electric Utility Industry," subcaption "The 1997 Act"
above, regarding the ICC's order approving ComEd's proposed issuance of up to
$3.4 billion of securities and the planned use of the proceeds to refinance
debt and equity, as permitted under the 1997 Act.

Capital Structure. ComEd's ratio of long-term debt to total capitalization
has increased slightly to 48.7% at June 30, 1998 from 48.5% at December 31,
1997. Unicom's retained earnings account had a deficit balance of $61 million
and $21 million as of June 30, 1998 and December 31, 1997, respectively. As of
June 30, 1998 and December 31, 1997, $292 million and $331 million,
respectively, of retained earnings had been appropriated for future dividend
payments. ComEd's retained earnings account had a deficit balance of $43
million and $19 million as of June 30, 1998 and December 31, 1997,
respectively. As of June 30, 1998 and December 31, 1997, $360 million and $384
million, respectively, of retained earnings had been appropriated for future
dividend payments.

Year 2000 Conversion. Unicom, including ComEd, uses various software,
systems and technology throughout its businesses that will be affected by so-
called "Year 2000 Issues." The issues concern the ability of electronic
processing equipment (including microprocessors embedded in other equipment),
which have been programmed to track only the last two digits of a date, to
recognize properly the date change to 2000 (as opposed to 1900) or to
recognize "00" as valid. A failure to correct any such processing problems
prior to January 1, 2000 could result in material operational and financial
risks if the affected systems either cease to function or produce erroneous
data. Such risks could include an inability to operate ComEd's nuclear or
fossil generating plants, disruptions in the operation of its transmission and
distribution systems and an inability to access interconnections with the
systems of neighboring utilities. Since July 1996, Unicom has been working to
identify and address Year 2000 issues. It has been reviewing all systems and
is contacting software vendors, equipment suppliers and customers as well as
neighboring utilities. To date, approximately 50% of the software applications
and 15% of the embedded systems have been analyzed for Year 2000 compliance
status. Once issues have been identified, Unicom's approach to them has been
to upgrade or remediate software, systems and technology that are not Year
2000 compliant and that are not otherwise being replaced in accordance with
Unicom's business plans. In accordance with its business plans, Unicom has
replaced certain of its financial, human resources and customer service and
billing software, and is planning to replace its payroll system in early 1999,
with new software that is Year 2000 compliant. Unicom is upgrading or
remediating certain embedded technology systems in its nuclear and fossil
electricity generation, its transmission and distribution, and its supply
management business units. Overall, Unicom estimates that implementation of
Year 2000 compliant software and systems is approximately 30% complete as of
July 31, 1998 and that such efforts will be over 50% complete by the end of
1998. The total cost of remediating or upgrading software that is not being
replaced, in accordance with business plans, is estimated to be $20 million,
and the total cost of upgrading or remediating embedded technology systems is
estimated to be approximately $20-$40 million. Such costs are expensed as
incurred. An independent consultant has been engaged to assist Unicom in the
assessment of the process being used to address the Year 2000 issue. All
Unicom systems and software are expected to be Year 2000 ready by the end of
1999.

In addition to the steps described above, Unicom is working with various
industry groups including NERC, the EPRI and EEI to coordinate electric
utility industry Year 2000 efforts with the Clinton Administration's Year 2000
Conversion Council, the DOE and Congress. The DOE has requested from NERC a
status report and coordination plan by September 1998, and a full status
report by July 1999, as to the measures that are being taken to prepare
electric power supply and delivery systems for transition into the Year 2000.

42
<PAGE>

Unicom has identified, and has started a process to develop contingency plans
to address, various worst case scenarios that could occur in the unlikely event
that various Year 2000 issues are not resolved in a timely manner. Contingency
plans are also being developed to address the impact on Unicom if Year 2000
remediation efforts of other parties, such as suppliers, surrounding utilities
and interfacing regulatory, governmental and financial institutions, are not
successful. The failure of such parties to resolve Year 2000 issues could
result in significant disruptions in Unicom's operations.

Market Risks. ComEd is exposed to market risk due to changes in interest
rates and changes in the market price for electricity. Exposure for interest
rate changes relates to its long-term debt and preferred equity obligations.
Exposure to electricity market price risk relates to forward activities taken
to manage effectively the supply of, and demand for, the electric generation
capability of ComEd's generating plants. ComEd does not currently utilize
derivative commodity or financial instruments for trading or speculative
purposes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," subcaption "Liquidity and Capital Resources--Interest
Rate Exposure" and "--Market Price Exposure," in Unicom and ComEd's Current
Reports on Form 8-K dated January 30, 1998. There has not been a material
change in ComEd's exposure to interest rate risk or market price risk since
December 31, 1997. See "Energy Risk Management Contracts" in Note 1 of Notes to
Financial Statements regarding the accounting for energy risk management
contracts.

UNREGULATED OPERATIONS

Unicom Enterprises is engaged, through subsidiaries, in energy service
activities which are not subject to utility regulation by federal or state
agencies. One of these subsidiaries, UT Holdings, provides district cooling,
heating and related services to offices and other buildings in the central
business district of the city of Chicago and in other cities in North America,
generally working with local utilities. District cooling involves, in essence,
the production of chilled water at one or more central locations and its
circulation to customers' buildings through a closed circuit of supply and
return piping. Such water is circulated through customers' premises primarily
for air conditioning. This process is used by customers in lieu of self-
generated cooling. As a result of the Clean Air Amendments, the manufacture of
CFCs has been curtailed since January 1996, thereby creating a marketing
opportunity for non-CFC based systems, such as UT Holdings' district cooling.

Unicom Energy Services, another subsidiary of Unicom Enterprises, is engaged
in providing energy services, including gas services, performance contracting,
distributed energy, active energy management systems and energy infrastructure
services. In 1997, Unicom Energy Services entered into a joint venture with
Sonat Marketing Company L.P. to market natural gas and related services to
larger gas purchasers within ComEd's service area in Northern Illinois and
other Midwestern areas. As an entry into the distributed energy market, Unicom
Energy Services also entered into an alliance with AlliedSignal Power Systems,
Inc., a subsidiary of AlliedSignal Inc., to market, install and service an
electric energy generator developed by AlliedSignal, known as a TurboGenerator,
in a 12-state region, the province of Ontario, Canada and Puerto Rico. Unicom
Energy Services entered into an exclusive national distributorship agreement
with Engage Networks, Inc. to market active energy management software and
related hardware and services. As of June 30, 1998, Unicom Energy Services had
purchase commitments of approximately $8 million.

Construction Program. Unicom has approved capital expenditures for 1998 of
approximately $92 million for UT Holdings, primarily related to an expansion of
two of its four Chicago district cooling facilities and the related
distribution piping and plants in other cities. As of June 30, 1998, UT
Holdings' purchase commitments, principally related to construction, were
approximately $32 million.

Capital Resources. Unicom expects to obtain funds to invest in its
unregulated subsidiaries principally from dividends received on its ComEd
common stock and from borrowings. The availability of ComEd's dividends to
Unicom is dependent on ComEd's financial performance and cash position,

43
<PAGE>

as well as legal restrictions on the payment of dividends by public utilities.
Other forms of financing by ComEd to Unicom or the unregulated subsidiaries of
Unicom, such as loans or additional equity investments, which are not expected,
would be subject to prior approval by the ICC.

Unicom Enterprises has a $200 million credit facility which will expire in
1999, of which $5 million was unused as of June 30, 1998. The credit facility
can be used by Unicom Enterprises to finance investments in unregulated
businesses and projects, including UT Holdings and Unicom Energy Services, and
for general corporate purposes. The credit facility is guaranteed by Unicom and
includes certain covenants with respect to Unicom and Unicom Enterprises'
operations. Interest rates for borrowings under the credit facility are set at
the time of a borrowing and are based on either a prime interest rate or a
floating rate bank index plus a spread which varies with the credit rating of
ComEd's outstanding first mortgage bonds. See Note 13 of Notes to Financial
Statements for additional information regarding certain covenants with respect
to Unicom and Unicom Enterprises' operations.

In July 1998, a subsidiary of UT Holdings issued $120 million of senior
unsecured 7.38% Notes due in July 2012, the proceeds of which will be used to
refinance existing debt. On April 1, 1998, S&P issued a rating on Unicom's
senior debt obligations of BBB-. Ratings have not been obtained from Moody's or
Duff & Phelps. See "Part II, Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters" in Unicom and ComEd's Annual Reports on Form 10-K
for the year ended December 31, 1997 for additional information regarding
securities ratings.

REGULATION

ComEd and the Indiana Company are subject to federal and state regulation in
the conduct of their respective businesses, including the operations of Cotter.
Such regulation includes rates, securities issuance, nuclear operations,
environmental and other matters. Particularly in the cases of nuclear
operations and environmental matters, such regulation can and does affect
operational and capital expenditures.

Rate Matters. In January 1995, the ICC issued its Rate Order in the
proceedings relating to ComEd's February 1994 rate increase request. The Rate
Order provided, among other things, for an increase in ComEd's total revenues
of approximately $302 million (excluding add-on revenue taxes) on an annual
basis. Appeals related to the Rate Order have been completed without changing
the rates authorized in the Rate Order. See "Changes in the Electric Utility
Industry," subcaption "The 1997 Act" above, for information regarding the
effect of the 1997 Act on rate matters. See "Nuclear Matters" below for
information regarding fuel reconciliation proceedings for the years 1994 and
1996.

Nuclear Matters. Nuclear operations have been, and remain, an important focus
of ComEd--given the impact of such operations on overall O&M expenditures and
the ability of nuclear power plants to produce electric energy at a relatively
low marginal cost. ComEd operates a large number of nuclear plants, ranging
from the older Dresden and Quad Cities Stations to the more recently completed
LaSalle, Byron and Braidwood Stations, and is intent upon safe, reliable and
efficient operation. See "Changes in the Electric Utility Industry," subcaption
"Response to Regulatory Changes" above, for information regarding ComEd's
cessation of nuclear generation operations at its Zion Station.

ComEd's LaSalle nuclear generating station is currently on the NRC's list of
plants that require increased regulatory scrutiny by the NRC. Dresden Station
had been included on the list since 1992 and LaSalle and Zion Stations were
added in January 1997. On July 29, 1998, the NRC removed Dresden Station from
the list because of improved performance at the station, and also
administratively removed Zion Station from the list because of ComEd's decision
to cease further nuclear operations at the plant. The listing of LaSalle
Station does not prevent ComEd from operating the generating units; however, it
does mean that the NRC will devote additional resources to monitoring ComEd's
operating performance and that ComEd will need to work to demonstrate to the
NRC the sustainability of

44
<PAGE>

improvements which it believes it has undertaken and is continuing to
implement. In January 1998, the NRC had noted a declining performance trend at
Quad Cities Station. In a meeting on March 3, 1998, the NRC stated that
weaknesses were observed with respect to certain operations, maintenance and
engineering activities at Quad Cities Station. On July 29, 1998, the NRC
stated that there has not been sufficient operational data to enable it to
assess Quad Cities Station performance. The NRC has indicated that it is
monitoring ComEd's ability to manage its nuclear operations in their entirety
and that the performance at any one facility will be viewed by the NRC in
context with the performance of ComEd's nuclear generating group as a whole.

In late January 1997, the NRC also took the unusual step of requiring ComEd
to submit information to allow the NRC to determine what actions, if any,
should be taken to assure that ComEd can safely operate its then six nuclear
generating stations while sustaining performance improvement at each site. The
request stated the NRC staff's concerns with the "cyclical safety performance
of ComEd nuclear stations," noting the presence on the list of plants that
require increased regulatory scrutiny by the NRC of Dresden, LaSalle and Zion
Stations at various times during the past 10 years. It also noted concerns
regarding "ComEd's ability to establish lasting and effective programs that
result in sustained performance improvement." The NRC and representatives of
ComEd's management have met, and will continue to meet periodically in the
future, to discuss the status of recovery and restart efforts and overall
performance of the ComEd nuclear program.

INPO, a nuclear power industry funded organization, also has been critical
of ComEd's nuclear operations and the progress made by ComEd at correcting
problems INPO previously identified. In the past, INPO has raised concerns
with respect to management and performance of ComEd's nuclear operations,
including accountability and the effectiveness of efforts aimed at engaging
the workforce in the improvement process. ComEd continues to address INPO's
concerns.

ComEd has devoted, and intends to continue to devote, significant resources
to the management and operations of its nuclear generating stations. Over the
past several years, it has increased and reinforced station management with
managers drawn from other utilities which have resolved similar operational
and performance issues, including the appointment of a new Chief Nuclear
Officer in late 1997. It has also sought to identify, anticipate and address
operating and performance issues in a safe, cost-effective manner while
seeking to improve the availability and capacity factors of its nuclear
generating units.

ComEd's activities with respect to its nuclear generating stations have
included improvements in operating and personnel procedures and repair and
replacement of equipment. Although performing such improvements can result in
longer unit outages, the improvements are expected to result in improved
operational performance when completed. LaSalle Units 1 and 2 were shutdown
for extensive improvement work in September 1996. On July 24, 1998, the NRC
determined that ComEd has made sufficient improvements at LaSalle Unit 1 for
the unit to resume operations. It currently is expected that LaSalle Unit 1
will restart in August 1998 and LaSalle Unit 2 is expected to restart by the
end of the first quarter of 1999. The restart of LaSalle Unit 2 requires the
resolution of material condition issues similar to those of LaSalle Unit 1.

The NERC has forecasted the possibility of electric energy shortages in the
summer of 1998 in light of continued outages at nuclear plants operated by
ComEd and other utilities in the Midwest power grid. ComEd has taken numerous
steps to support the reliability of its system during the summer of 1998. Such
steps include maximizing available on-system generating capacity during
periods of peak demand, arrangements to purchase power from other utilities,
reinforcements to the transmission systems of ComEd and neighboring utilities
to increase capacity and to provide voltage support, and working with
customers to manage the use of and demand for power. As a result of a unique
combination of heat, storms and equipment problems affecting utilities
throughout the Midwest region,

45
<PAGE>

on June 25, 1998, ComEd declared a NERC generation deficiency alert Level 3,
which is a statement that firm load loss is possible. As of August 10, 1998, a
firm load loss has not been experienced. See "Results of Operations,"
subcaption "Purchased Power" below, regarding the expected increase in
purchased power expense in 1998.

Generating station availability and performance during a year have been
issues in fuel reconciliation proceedings in assessing the prudence of fuel and
purchased power costs during such year. Final ICC orders have been issued in
fuel reconciliation proceedings related to ComEd's FAC collections for years
prior to 1994 and for the year 1995. In the fuel reconciliation proceeding for
1994, an intervenor and the ICC staff have filed briefs proposing a refund of
approximately $42 million and $34 million, respectively, relating to nuclear
station performance. In the fuel reconciliation proceeding for 1996, an
intervenor has filed testimony seeking a refund of approximately $78 million
relating to nuclear station performance, and the ICC staff also has filed
testimony proposing a refund of approximately $104 million. The 1997 Act
provides that the fuel reconciliation proceedings for 1994 and 1996 must be
concluded by the end of 1998. If refunds are required in these proceedings, the
refunds could have a material adverse effect on results of operations. The 1997
Act also provides that, because ComEd eliminated its FAC effective January 1,
1997, the ICC shall not conduct a fuel reconciliation proceeding for the year
1997 or any subsequent years.

Environmental Matters. ComEd is involved in administrative and legal
proceedings concerning air quality, water quality and other matters. The
outcome of these proceedings may require increases in future construction
expenditures and operating expenses and changes in operating procedures. See
Note 22 of Notes to Financial Statements and "Part II. Other Information, Item
1. Legal Proceedings."

RESULTS OF OPERATIONS

Unicom's basic and diluted earnings (loss) per common share were $0.37 for
the three months ended June 30, 1998, compared to $0.03 for the three months
ended June 30, 1997, $0.62 for the six months ended June 30, 1998, compared to
$1.24 for the six months ended June 30, 1997, and $(4.55) for the twelve months
ended June 30, 1998, compared to $3.23 for the twelve months ended June 30,
1997. Earnings for the three months, six months and twelve months ended June
30, 1997 have been restated for a change in accounting method for revenue
recognition. The earnings for the six months and twelve months ended June 30,
1997 also include the one-time positive impact of a change in accounting
principle of $197 million (after-tax), or $0.91 per common share. Restated
earnings per common share, excluding the one-time positive effect of the change
in accounting principle, were $0.03, $0.33 and $2.32 for the three months, six
months and twelve months ended June 30, 1997, respectively. Substantially all
of the results of operations for Unicom are the results of operations for
ComEd. The results of Unicom's unregulated subsidiaries currently are not
material to the results of

46
<PAGE>

Unicom and subsidiary companies as a whole. As such, the following section
discusses the effect of ComEd's operations on Unicom's financial results.

Net Income for the Three Months Ended June 30, 1998. The increase in ComEd's
net income in the recent three-month period reflects, among other factors,
unusually hot weather, which increased both operating revenues and energy
costs, compared to mild weather experienced in the same period in 1997. Also
contributing to the increase in net income were reduced O&M expenses, compared
to the same period in 1997.

Kilowatthour sales increased 2% for the three months ended June 30, 1998,
compared to the same period in 1997, driven largely by increased sales to
retail customers due to unusally hot weather conditions experienced during the
second quarter of 1998, as well as continued economic growth in ComEd's service
territory. Operating revenues increased 5% during the recent three-month
period, compared to the same period in 1997. See "Operating Revenues" below for
additional information.

Fuel and purchased power costs increased 24% in the second quarter of 1998,
compared to the second quarter of 1997, reflecting the effects of an
extraordinary combination of heat, storms and equipment problems experienced
throughout the Midwest in late June 1998 which resulted in unprecedented
purchased power price levels, as well as the effects of higher purchases from
other utilities. See "Purchased Power" below for additional information.

O&M expenses decreased by 14% for the second quarter of 1998, compared to the
same period in 1997, as discussed in "Operation and Maintenance Expenses"
below.

Net Income for the Six Months Ended June 30, 1998. The decrease in ComEd's
net income in the recent six-month period reflects, among other factors, the
one-time positive impact of a change in accounting principle of $197 (after-
tax), reflected in the June 30, 1997 results, and increased fuel and purchased
power costs, partially offset by increased kilowatthour sales and decreased O&M
expenses.

Kilowatthour sales increased 2% for the six months ended June 30, 1998,
compared to the same period in 1997, reflecting increased sales to retail
customers due to unusually hot weather conditions experienced during the second
quarter of 1998, as well as continued economic growth in ComEd's service
territory. Operating revenues increased 4% during the recent six-month period,
compared to the same period in 1997. See "Operating Revenues" below for
additional information.

Fuel and purchased power costs increased 23% during the six months ended June
30, 1998, compared to the same period in 1997, reflecting the effects of an
extraordinary combination of heat, storms and equipment problems experienced
throughout the Midwest in late June 1998 which resulted in unprecedented
purchased power price levels, as well as the effects of higher purchases from
other utilities. See "Purchased Power" below for additional information.

O&M expenses decreased by 8% for the six months ended June 30, 1998, compared
to the same period in 1997, as discussed in "Operation and Maintenance
Expenses" below.

In the fourth quarter of 1997, ComEd changed its accounting method for
revenue recognition to record ComEd's revenues associated with service which
has been provided to customers but has not yet been billed at the end of each
accounting period, retroactive to January 1, 1997. This change in accounting
method, included in restated six months and twelve months ended June 30, 1997
results, had a cumulative one-time positive impact for years prior to 1997 of
$197 million (after-tax), or $0.91 per common share.

Net Income (Loss) for the Twelve Months Ended June 30, 1998. The decrease in
ComEd's net income (loss) in the recent twelve-month period was primarily due
to ComEd's discontinuation of regulatory accounting practices for the
generation portion of its business and other charges recorded in response to
the enactment of the 1997 Act. The results for the twelve months ended June 30,
1998 also include the write-off for the closure of Zion Station.

47
<PAGE>

ComEd discontinued regulatory accounting practices for the generation
portion of its business in the fourth quarter of 1997 due to the expected
transition of electric generation services to market- based pricing as a
result of the 1997 Act. Accordingly, ComEd's generation-related net regulatory
assets (which represent assets and liabilities properly recorded under
regulatory accounting practices but which would not be recorded under GAAP for
non-regulated entities) were written off, resulting in an extraordinary charge
in the fourth quarter of 1997 of $810 million (after-tax), or $3.75 per common
share.

In addition, as permitted under the 1997 Act, ComEd elected to eliminate its
FAC in December 1997, which resulted in a charge in the fourth quarter of 1997
of $44 million (after-tax), or $0.20 per common share. The reduction includes
$25 million (after-tax), or $0.12 per common share, in net FAC charges billed
to its customers in 1997, which was refunded to customers as of June 30, 1998.
The reduction also includes a write-off of $19 million (after-tax), or $0.08
per common share, in underrecovered energy costs that ComEd would have been
entitled to recover if the FAC had remained in effect.

Also, the results for the twelve months ended June 30, 1998 include the
write down of ComEd's investment in uranium-related properties to reflect
costs which are not expected to be recovered in a competitive market. The
write down resulted in a charge of $60 million (after-tax), or $0.28 per
common share, in the fourth quarter of 1997.

The fourth quarter of 1997 also includes a charge of $523 million (after-
tax), or $2.42 per common share, reflecting the write-off of the unrecoverable
portion of the cost of ComEd's Zion Station plant and inventories and a
liability for future closing costs, resulting from the decision in January
1998 to cease nuclear generation operations at Zion Station.

ComEd's kilowatthour sales, including sales to wholesale customers,
increased 4% in the twelve months ended June 30, 1998, compared to the same
period last year. Operating Revenues increased 2% in the recent twelve-month
period. See "Operating Revenues" below for additional information.

Also reducing operating results for the recent twelve-month period was a 21%
increase in fuel and purchased power costs. See "Purchased Power" below for
additional information.

Operating Revenues. ComEd's electric operating revenues reflect revenues
from sales to ultimate consumers (including residential, commercial and
industrial customers within its service territory), revenues from sales for
resale (i.e., sales to wholesale customers, principally other electric
utilities), and revenues from collections under its FAC for years prior to
1997 (which were intended to recover variations in ComEd's fuel cost for
generating electric energy and the energy portion of purchased power costs in
relation to the amount included in ComEd's base rates). Operating revenues are
affected by kilowatthour sales and rate levels. Kilowatthour sales, in turn,
are affected by weather, the level of economic activity within ComEd's service
area, and off-system or wholesale sales to other utilities. Off-system sales
are affected by a number of factors, including nuclear generating availability
and performance.

Operating revenues increased $92 million in the three months ended June 30,
1998, compared to the three months ended June 30, 1997, primarily due to
increased kilowatthour sales. Kilowatthour sales to retail customers during
the recent three-month period increased 10%, compared to the same period in
1997, reflecting unusally hot weather experienced in the second quarter of
1998, as well as continued economic growth. Operating revenues increased $132
million in the six months ended June

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<PAGE>

30, 1998, compared to the six months ended June 30, 1997, primarily due to
increased kilowatthour sales. Kilowatthour sales to retail customers increased
5%, compared to the same period in 1997, reflecting unusually hot weather
experienced in the second quarter of 1998, as well as continued economic
growth. Operating revenues increased $147 million in the twelve months ended
June 30, 1998, compared to the same period in 1997, primarily due to a 4%
increase in kilowatthour sales to retail and wholesale customers.

Fuel Costs. Changes in fuel expense for the three months, six months and
twelve months ended June 30, 1998, compared to the same periods ended June 30,
1997, primarily resulted from changes in the average cost of fuel consumed,
changes in the mix of fuel sources of electric energy generated and changes in
net generation of electric energy. Fuel mix is determined primarily by system
load, the costs of fuel consumed and the availability of nuclear generating
units. The cost of fuel consumed, net generation of electric energy and fuel
sources of kilowatthour generation were as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- ------------------ --------------------
1998 1997 1998 1997 1998 1997
--------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cost of fuel consumed (per million Btu):
Nuclear..................................... $0.60 $0.60 $0.62 $0.57 $0.59 $0.55
Coal........................................ $2.46 $2.37 $2.18 $2.41 $2.17 $2.37
Oil......................................... $3.72 $4.49 $3.45 $3.86 $3.64 $3.72
Natural gas................................. $2.50 $2.37 $2.46 $2.57 $2.60 $2.59
Average all fuels........................... $1.29 $1.45 $1.27 $1.37 $1.29 $1.28
Net generation of electric energy (millions of
kilowatthours)............................... 18,163 18,761 35,491 41,080 80,271 88,813
Fuel sources of kilowatthour generation:
Nuclear..................................... 64% 52% 61% 57% 59% 61%
Coal........................................ 28 43 31 39 35 36
Oil......................................... -- -- 1 1 1 --
Natural gas................................. 8 5 7 3 5 3
--------- --------- -------- -------- --------- ---------
100% 100% 100% 100% 100% 100%
========= ========= ======== ======== ========= =========
</TABLE>

The decreases in the net generation of electric energy, for the six months
and twelve months ended June 30, 1998, compared to the same periods ended June
30, 1997, are due to the sale of State Line and Kincaid Stations and lower
nuclear plant availability. See "Regulation," subcaption "Nuclear Matters"
above, for information regarding outages at certain of ComEd's nuclear
generating stations.

Fuel Supply. Compared to other utilities, ComEd has relatively low average
fuel costs as a result of its reliance predominantly on lower cost nuclear
generation. ComEd's coal costs, however, are high compared to those of other
utilities. ComEd's western coal contracts and its rail contracts for delivery
of the western coal provide for the purchase of certain coal at prices
substantially above currently prevailing market prices, and ComEd has
significant purchase commitments under its contracts. In addition, as of June
30, 1998, ComEd had coal reserves of $243 million. In prior years, ComEd's
commitments for the purchase of coal exceeded its requirements. Rather than
take all the coal it was required to take, ComEd agreed to purchase the coal
in place in the form of coal reserves. For additional information concerning
ComEd's coal purchase commitments see "Liquidity and Capital Resources" above
and for information concerning ComEd's fuel reconciliation proceedings see
"Regulation," subcaption "Nuclear Matters" above. Also see Note 1 of Notes to
Financial Statements, under "Coal Reserves" and "Fuel Adjustment Clause,"
concerning ComEd's coal reserves and FAC, respectively.

Purchased Power. Amounts of purchased power are primarily affected by system
load, the availability of ComEd's generating units and the availability and
cost of power from other utilities. Purchased power increased $160 million,
$316 million and $452 million for the three months, six months and twelve
months ended June 30, 1998, respectively, compared to the same periods ended

49
<PAGE>

June 30, 1997. Such increases include $43 million for the three months and $75
million for the six months and twelve months ended June 30, 1998 for the
agreements entered into in connection with the sale of State Line and Kincaid
Stations in December 1997 and February 1998, respectively. The increases in
purchased power costs also reflect the effects of an extraordinary combination
of heat, storms and equipment problems experienced throughout the Midwest in
late June 1998 which resulted in unprecedented purchased power price levels.
In addition, the increases for the six months and twelve months ended June 30,
1998 reflect outages at certain of ComEd's nuclear generating stations. See
"Regulation," subcaption "Nuclear Matters" above, for information regarding
outages at certain of ComEd's nuclear generating stations.

The number and average cost of kilowatthours purchased were as follows:

<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS ENDED TWELVE MONTHS ENDED
ENDED JUNE 30 JUNE 30 JUNE 30
-------------- ------------------ --------------------
1998 1997 1998 1997 1998 1997
------ ------ -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Kilowatthours
(millions)............. 5,764 5,530 14,449 8,982 22,139 12,264
Cost per kilowatthour... 4.85c 2.16c 3.46c 2.04c 3.24c 2.16c
</TABLE>

ComEd expects purchased power costs to increase significantly in the year
1998, compared to the year 1997, due to higher costs for power purchased from
other utilities, purchase power agreements entered into in connection with the
sale of State Line and Kincaid generating stations, increased kilowatthour
sales and lower nuclear generation. The market price for electricity is
subject to price volatility associated with changes in supply and demand in
the electric supply markets. ComEd utilizes energy put and call option
contracts and energy swap arrangements to limit market price risk associated
with forward commodity contracts.

Operation and Maintenance Expenses. O&M expenses include the expenses
associated with operating and maintaining ComEd's generation, transmission and
distribution assets, as well as administrative overhead and support. Given the
variety of expense categories covered, there are a number of factors which
affect the level of such expenses within any given period. Two major
components of such expenses, however, are the costs associated with operating
and maintaining ComEd's nuclear and fossil generating facilities. Generating
station expenses are affected by the cost of materials, regulatory
requirements and expectations, the age of facilities and cost control efforts.

During the three months, six months and twelve months ended June 30, 1998,
the aggregate level of O&M expenses decreased 14%, 8% and increased less than
1%, respectively, compared to the same periods ended June 30, 1997.

O&M expenses associated with nuclear generating stations decreased $92
million, $133 million and $173 million during the three months, six months and
twelve months ended June 30, 1998, respectively, compared to the same periods
ended June 30, 1997. The decreases in the recent three-month, six-month and
twelve-month periods were primarily due to the permanent cessation of nuclear
generation operations at Zion Station and to activities associated with the
repair, replacement and improvement of nuclear generating facility equipment.
Beginning in 1995, ComEd increased the number and scope of maintenance
activities associated with its nuclear generating stations. Such efforts are
the result of station performance evaluations performed to identify the
sources and causes of unplanned equipment repairs. The goal of such efforts is
to design and implement cost effective repairs and improvements to increase
station availability. The efforts begun in 1995 are expected to continue
through 1998. See "Changes in the Electric Utility Industry," subcaption
"Response to Regulatory Changes," regarding the permanent cessation of nuclear
operations at Zion Station.

O&M expenses associated with nuclear generating stations have been driven by
ComEd's objective to improve station availability, as well as to meet
regulatory requirements and expectations. ComEd is pursuing a program to
improve the quality of nuclear operations, including safety and efficiency,
which is also expected to achieve a longer term goal of improved availability
and to be positioned to take advantage of opportunities in a more competitive
market. Over the past several years, ComEd has increased and reinforced
station management with managers drawn from other

50
<PAGE>

utilities which have resolved similar operating issues. It has also sought to
identify, anticipate and address nuclear station operation and performance
issues in a safe, cost-effective manner while seeking to improve the
availability and capacity factors of its nuclear generating units. Such
activities have included improvements in operating and personnel procedures
and repair and replacement of equipment, and can result in longer unit
outages. Such activities have involved increased maintenance and repair
expenses in recent years.

During the three months, six months and twelve months ended June 30, 1998,
O&M expenses associated with fossil generating stations increased $1 million,
$10 million and $47 million, respectively, compared to the same periods ended
June 30, 1997. The increases related to fossil generating stations for the
recent six-month and twelve-month periods are primarily due to increases in
plant refurbishment costs, partially offset by a reduction in personnel costs
and the sale of State Line and Kincaid Stations, which were sold in December
1997 and February 1998, respectively, compared to the same periods ended June
30, 1997.

O&M expenses associated with ComEd's transmission and distribution system
decreased $3 million and increased $10 million and $16 million in the three
months, six months and twelve months ended June 30, 1998, respectively,
compared to the same periods ended June 30, 1997. The increases in the recent
six-month and twelve-month periods reflect higher maintenance costs, including
costs associated with emergency storm restoration of electric service. O&M
expenses associated with customer-related activities increased $5 million, $10
million and $24 million in the three months, six months and twelve months
ended June 30, 1998, respectively, compared to the same periods ended June 30,
1997, primarily due to increased marketing initiatives and customer service
personnel costs.

O&M expenses also include employee benefits expenses. Since 1995, ComEd has
reduced the size of its workforce by offering incentives for employees to
leave the company voluntarily. Such incentives included both current payments
and earlier eligibility for post-retirement health care benefits, in addition
to certain other one-time employee-related costs, resulting in charges of $8
million and $4 million for the three months ended June 30, 1998 and 1997,
respectively, $24 million and $7 million for the six months ended June 30,
1998 and 1997, respectively, and $56 million and $16 million for the twelve
months ended June 30, 1998 and 1997, respectively.

Other employee benefits expenses, excluding the effects of employee
separation plans and certain other one-time employee-related costs, increased
$1 million and decreased $10 million and $26 million for the three months, six
months and twelve months ended June 30, 1998, respectively, compared to the
same periods ended June 30, 1997. The decreases for the recent six-month and
twelve-month periods are primarily due to a reduction in medical costs for
active and retired employees.

O&M expenses also reflect $41 million and $38 million for employee incentive
compensation plan costs for the twelve months ended June 30, 1998 and 1997,
respectively. The payments, which were made partly in cash and partly in
shares of Unicom common stock, were made under Unicom's Long-Term Incentive
Plans as the result of the achievements during the years 1997 and 1996,
respectively, of specified financial performance, operating performance and
increased shareholder value.

O&M expenses for the twelve months ended June 30, 1998 also include $25
million for the additional write-off of obsolete materials and supplies,
compared to the twelve months ended June 30, 1997. O&M expenses associated
with certain administrative and general costs decreased $4 million and
increased $4 million and $47 million for the three months, six months and
twelve months ended June 30, 1998, respectively, compared to the same periods
ended June 30, 1997. The increase in the recent twelve-month period is due to
a variety of reasons including an increase in the provision for vacation pay
liability, and costs associated with legal services and supply management. The
effects of inflation have also increased O&M expenses during the years and are
also reflected in the increases and decreases discussed herein.

Depreciation. Depreciation expense decreased for the three months, six
months and twelve months ended June 30, 1998, compared to the same periods
ended June 30, 1997. The decreases in

51
<PAGE>

the recent three-month, six-month and twelve-month periods reflect the
retirement of Zion Station, partially offset by plant additions. The decreases
in the recent six-month and twelve-month periods also reflect the sale of the
State Line and Kincaid Stations. Depreciation expense includes increased
depreciation on ComEd's nuclear generating units primarily related to its
steam generators at Byron Unit 1, which were replaced in February 1998, and
Braidwood Unit 1, which are expected to be replaced prior to year-end 1998.
This increased depreciation resulted in charges of $6 million and $15 million
for the three months ended June 30, 1998 and 1997, respectively, $23 million
and $30 million for the six months ended June 30, 1998 and 1997, respectively,
and $53 million and $59 million for the twelve months ended June 30, 1998 and
1997, respectively. Depreciation expense is expected to decline in the
remainder of 1998 and future years as a result of the reduction in depreciable
plant balances due to the $3.0 billion plant impairment; however, the
reduction will be offset by amortization of the regulatory asset related to
impaired plant and an increase in nuclear depreciation related to shortened
useful lives for certain stations. See Note 1 of Notes to Financial
Statements, under "Depreciation and Decommissioning."

Interest on Debt. Changes in interest on long-term debt and notes payable
for the three months, six months and twelve months ended June 30, 1998,
compared to the same periods ended June 30, 1997, were due to changes in
average interest rates and in the amounts of long-term debt and notes payable
outstanding. Changes in interest on ComEd's long-term debt also reflected new
issues of debt, the retirement and early redemption of debt, and the
retirement and redemption of issues which were refinanced at generally lower
rates of interest. The average amounts of ComEd's long-term debt and notes
payable outstanding and average interest rates thereon were as follows:

Decommissioning. The staff of the SEC has questioned certain of the current
accounting practices of the electric utility industry, including ComEd,
regarding the recognition, measurement and classification of decommissioning
costs for nuclear generating stations in financial statements of electric
utilities. In response to these questions, the FASB is reviewing the
accounting for nuclear decommissioning costs and issued an exposure draft in
February 1996 requesting written comment. If current electric utility industry
accounting practices for such decommissioning costs are changed, annual
provisions for decommissioning could increase and the estimated cost for the
decommissioning of operating nuclear plants after retirement could be recorded
as a liability rather than as accumulated depreciation. Decommissioning costs
of currently retired nuclear plants are recorded as a liability. Unicom and
ComEd do not believe that such changes, if required, would have an adverse
effect on the results of operations due to ComEd's ability to recover
decommissioning costs through rates.

Other Items. The amounts of AFUDC reflect changes in the average levels of
investment subject to AFUDC and changes in the average annual capitalization
rates as discussed in Note 1 of Notes to Financial Statements, under "AFUDC
and Interest Capitalized." ComEd discontinued SFAS No. 71 regulatory
accounting practices in December 1997 for the generation portion of its
business. As a result, beginning in 1998, ComEd is capitalizing interest costs
on its generation-related construction work in progress and nuclear fuel in
process. Interest costs capitalized were $6 million for the three months and
$8 million for the six months and twelve months ended June 30, 1998. AFUDC and
interest capitalized do not contribute to the current cash flow of Unicom or
ComEd.

ComEd's ratios of earnings to fixed charges for the twelve months ended June
30, 1998 and December 31, 1997 were 0.71 and 0.58, respectively. ComEd's
ratios of earnings to fixed charges and preferred and preference stock
dividend requirements for the twelve months ended June 30, 1998 and

52
<PAGE>

December 31, 1997 were 0.61 and 0.49, respectively. Earnings for the twelve
months ended June 30, 1998 and December 31, 1997 were inadequate to cover
fixed charges by approximately $170 million and $259 million, respectively,
and fixed charges and preferred and preference stock dividend requirements by
approximately $267 million and $359 million, respectively. The deficiency is
principally attributable to the earnings impact of the closure of Zion
Station.

Business corporations, in general, have been adversely affected by inflation
because amounts retained after the payment of all costs have been inadequate
to replace, at increased costs, the productive assets consumed. Electric
utilities, in particular, have been especially affected as a result of their
capital intensive nature and regulation which limits capital recovery and
prescribes installation or modification of facilities to comply with
increasingly stringent safety and environmental requirements. Because the
regulatory process limits the amount of depreciation expense included in
ComEd's revenue allowance to the original cost of utility plant investment,
the resulting cash flows are inadequate to provide for replacement of that
investment in future years or preserve the purchasing power of common equity
capital previously invested.

FORWARD-LOOKING INFORMATION. Except for historical data, the information
contained herein constitutes forward-looking statements. Forward-looking
statements are inherently uncertain and subject to risks. Such statements
should be viewed with caution. Actual results or experience could differ
materially from the forward-looking statements as a result of many factors.
Forward-looking statements in this report include, but are not limited to: (1)
statements regarding expectations of revenue reductions and collections of
future CTC revenues as a result of the 1997 Act in "Management's Discussion
and Analysis of Financial Condition and Results of Operations," subcaption
"Changes in the Electric Utility Industry--The 1997 Act," and in Note 2 of
Notes to Financial Statements, (2) statements regarding estimated capital
expenditures in "Management's Discussion and Analysis of Financial Condition
and Results of Operations," subcaptions "Liquidity and Capital Resources--
UTILITY OPERATIONS--Construction Program" and "Liquidity and Capital
Resources--UNREGULATED OPERATIONS--Construction Program," (3) statements
regarding the estimated return to service of certain nuclear generating units
and an increase in purchased power costs for 1998 in "Management's Discussion
and Analysis of Financial Condition and Results of Operations," subcaption
"Regulation--Nuclear Matters," and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," subcaption "Results of
Operations--Purchased Power," respectively, (4) statements regarding the costs
of decommissioning nuclear generating stations in "Management's Discussion and
Analysis of Financial Condition and Results of Operations," subcaption
"Regulation--Nuclear Matters," and in Note 1 of Notes to Financial Statements,
under "Depreciation and Decommissioning," (5) statements regarding cleanup
costs associated with MGPs and other remediation sites in Note 22 of Notes to
Financial Statements, and (6) statements regarding the estimated costs and
risks of Year 2000 conversion in "Management's Discussion and Analysis of
Financial Condition and Results of Operations," subcaption "Liquidity and
Capital Resources--Year 2000 Conversion." Management cannot predict the course
of future events or anticipate the interaction of multiple factors beyond
management's control and their effect on revenues, project timing and costs.
The statements regarding revenue reductions and collections of future CTC
revenues are subject to unforeseen developments in the market for electricity
in Illinois resulting from regulatory changes. The statements regarding
estimated capital expenditures, estimated return to service of nuclear
generation units, decommissioning costs, cleanup costs and Year 2000
conversion costs are subject to changes in the scope of work and manner in
which the work is performed and consequent changes in the timing and level of
the projected expenditure, and are also subject to changes in laws and
regulations or their interpretation or enforcement. The statements regarding
the estimated return to service of nuclear generating units are subject to the
concurrence of the NRC with proceeding to power operations. The statements
regarding expectations for Year 2000 readiness are subject to the risk that
Year 2000 remediation efforts of Unicom and other parties are not successful.
Unicom and ComEd make no commitment to disclose any revisions to the forward-
looking statements, or any facts, events or circumstances after the date
hereof that may bear upon forward-looking statements.

53
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Commonwealth Edison Company:

We have audited the accompanying consolidated balance sheets and statements
of consolidated capitalization of Commonwealth Edison Company (an Illinois
corporation) and subsidiary companies as of June 30, 1998 and December 31,
1997, and the related statements of consolidated operations, retained earnings
(deficit) and cash flows for the three-month, six-month and twelve-month
periods ended June 30, 1998 and 1997. 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 audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Commonwealth Edison
Company and subsidiary companies as of June 30, 1998 and December 31, 1997,
and the results of their operations and their cash flows for the three-month,
six-month and twelve-month periods ended June 30, 1998 and 1997, in conformity
with generally accepted accounting principles.

As discussed in Note 3, effective January 1, 1997, the Company changed its
method of accounting for revenue recognition.

Arthur Andersen LLP
Chicago, Illinois
August 10, 1998

54
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
---------------------- ---------------------- -----------------------
1998 1997 1998 1997 1998 1997
---------- ---------- ---------- ---------- ----------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Electric Operating
Revenues............... $1,776,972 $1,685,157 $3,486,585 $3,354,742 $ 7,204,930 $7,058,169
---------- ---------- ---------- ---------- ----------- ----------
Electric Operating
Expenses and Taxes:
Fuel................... $ 250,923 $ 308,722 $ 482,299 $ 617,790 $ 1,103,947 $1,237,114
Purchased power........ 279,359 119,333 500,089 183,640 716,503 264,440
Operation.............. 336,237 428,611 680,227 828,821 1,565,866 1,598,428
Maintenance............ 213,371 209,073 434,130 377,497 746,362 712,000
Depreciation........... 231,008 245,966 478,766 495,086 969,557 986,512
Recovery of regulatory
assets................ -- 3,818 -- 7,636 7,636 15,272
Taxes (except income).. 184,599 188,149 391,565 389,250 801,482 794,437
Income taxes--
Current--Federal..... 67,677 11,970 119,178 62,677 270,849 218,480
--State.............. 14,277 3,997 24,868 22,040 68,115 63,574
Deferred--Federal--
net................. (12,001) 15,210 (19,017) 18,523 18,571 107,296
--State--net......... (2,028) 3,381 (2,591) (1,605) 1,559 9,159
Investment tax credits
deferred--net......... (6,888) (7,897) (14,048) (15,794) (29,270) (34,840)
---------- ---------- ---------- ---------- ----------- ----------
$1,556,534 $1,530,333 $3,075,466 $2,985,561 $ 6,241,177 $5,971,872
---------- ---------- ---------- ---------- ----------- ----------
Electric Operating
Income................. $ 220,438 $ 154,824 $ 411,119 $ 369,181 $ 963,753 $1,086,297
---------- ---------- ---------- ---------- ----------- ----------
Other Income and
(Deductions):
Interest on long-term
debt.................. $ (104,892) $ (119,363) $ (217,337) $ (244,472) $ (451,395) $ (495,691)
Interest on notes
payable............... (5,897) (3,298) (9,016) (5,249) (12,900) (9,869)
Allowance for funds
used during
construction--
Borrowed funds....... 2,738 4,952 4,314 9,004 13,865 17,164
Equity funds......... 1,960 5,706 3,544 10,786 16,529 20,797
Income taxes
applicable to
nonoperating
activities............ 3,314 2,052 6,198 2,418 15,009 5,165
Provision for
dividends on company-
obligated mandatorily
redeemable preferred
securities of
subsidiary trusts
holding solely the
Company's
subordinated debt
securities............ (7,428) (7,428) (14,855) (14,076) (29,639) (22,556)
Loss on nuclear plant
closure............... -- -- -- -- (885,611) --
Income tax effect of
nuclear plant
closure............... -- -- -- -- 362,952 --
Miscellaneous--net..... (5,780) (12,378) (7,681) (21,250) (82,757) (26,935)
---------- ---------- ---------- ---------- ----------- ----------
$ (115,985) $ (129,757) $ (234,833) $ (262,839) $(1,053,947) $ (511,925)
---------- ---------- ---------- ---------- ----------- ----------
Net Income (Loss) Before
Extraordinary Item and
Cumulative Effect of
Change in Accounting
Principle.............. $ 104,453 $ 25,067 $ 176,286 $ 106,342 $ (90,194) $ 574,372
Extraordinary Loss, Less
Applicable Income
Taxes.................. -- -- -- -- (810,335) --
Cumulative Effect of
Change in Accounting
Principle.............. -- -- -- 196,700 -- 196,700
---------- ---------- ---------- ---------- ----------- ----------
Net Income (Loss)....... $ 104,453 $ 25,067 $ 176,286 $ 303,042 $ (900,529) $ 771,072
Provision for Dividends
on Preferred and
Preference Stocks...... 14,462 15,485 29,009 31,012 58,483 62,450
---------- ---------- ---------- ---------- ----------- ----------
Net Income (Loss) on
Common Stock........... $ 89,991 $ 9,582 $ 147,277 $ 272,030 $ (959,012) $ 708,622
========== ========== ========== ========== =========== ==========
</TABLE>

The accompanying Notes to Financial Statements are an integral part of the
above statements.

55
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1998 1997
------ ----------- ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Utility Plant:
Plant and equipment, at original cost (includes
construction work in progress of $1,006 million
and $1,131 million, respectively)................. $27,461,861 $27,519,365
Less--Accumulated provision for depreciation....... 14,924,147 11,645,985
----------- -----------
$12,537,714 $15,873,380
Nuclear fuel, at amortized cost.................... 920,081 906,043
----------- -----------
$13,457,795 $16,779,423
----------- -----------
Investments:
Nuclear decommissioning funds...................... $ 2,118,263 $ 1,855,697
Subsidiary companies............................... 50,160 48,605
Other investments, at cost......................... 40,778 39,002
----------- -----------
$ 2,209,201 $ 1,943,304
----------- -----------
Current Assets:
Cash............................................... $ 170 $ --
Temporary cash investments......................... 23,207 72,634
Special deposits................................... 1,043 271
Receivables--
Customers........................................ 1,085,057 873,418
Other............................................ 68,060 130,537
Provisions for uncollectible accounts............ (17,304) (17,544)
Coal and fuel oil, at average cost................. 205,172 120,664
Materials and supplies, at average cost............ 258,689 255,338
Deferred income taxes related to current assets and
liabilities....................................... 53,760 179,493
Prepayments and other.............................. 133,466 125,507
----------- -----------
$ 1,811,320 $ 1,740,318
----------- -----------
Deferred Charges and Other Noncurrent Assets:
Regulatory assets.................................. $ 4,471,689 $ 1,685,235
Coal reserves...................................... 140,533 194,769
Other.............................................. 85,996 115,354
----------- -----------
$ 4,698,218 $ 1,995,358
----------- -----------
$22,176,534 $22,458,403
=========== ===========
</TABLE>

The accompanying Notes to Financial Statements are an integral part of the
above statements.

56
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER
CAPITALIZATION AND LIABILITIES 1998 31, 1997
------------------------------ ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Capitalization (see accompanying statements):
Common stock equity.................................. $ 4,842,554 $ 4,866,438
Preferred and preference stocks without mandatory
redemption requirements............................. 506,829 507,053
Preference stock subject to mandatory redemption
requirements........................................ 168,368 174,328
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the
Company's subordinated debt securities*............. 350,000 350,000
Long-term debt....................................... 5,559,783 5,562,883
----------- -----------
$11,427,534 $11,460,702
----------- -----------
Current Liabilities:
Notes payable........................................ $ 489,846 $ 158,150
Current portion of long-term debt, redeemable
preference stock and capitalized lease obligations.. 327,448 772,831
Accounts payable..................................... 611,823 490,124
Accrued interest..................................... 164,872 167,807
Accrued taxes........................................ 299,450 198,556
Dividends payable.................................... 105,957 106,083
Customer deposits.................................... 54,383 55,214
Accrued plant closing costs.......................... 110,376 135,000
Other................................................ 123,265 164,897
----------- -----------
$ 2,287,420 $ 2,248,662
----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
Deferred income taxes................................ $ 3,735,093 $ 3,839,607
Nuclear decommissioning liability for retired plants. 1,214,700 1,301,000
Accumulated deferred investment tax credits.......... 580,601 602,122
Accrued spent nuclear fuel disposal fee and related
interest............................................ 710,810 692,673
Obligations under capital leases..................... 417,910 437,950
Regulatory liabilities............................... 610,113 698,750
Other................................................ 1,192,353 1,176,937
----------- -----------
$ 8,461,580 $ 8,749,039
----------- -----------
Commitments and Contingent Liabilities (Note 22)
$22,176,534 $22,458,403
=========== ===========
</TABLE>

The accompanying Notes to Financial Statements are an integral part of the
above statements.

57
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CAPITALIZATION

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Common Stock Equity:
Common stock, $12.50 par value per share--
Outstanding--214,235,397 shares and 214,228,077
shares, respectively............................. $ 2,677,942 $ 2,677,851
Premium on common stock and other paid-in capital.. 2,223,696 2,223,564
Capital stock and warrant expense.................. (15,789) (15,805)
Retained earnings (deficit)........................ (43,295) (19,172)
----------- -----------
$ 4,842,554 $ 4,866,438
----------- -----------
Preferred and Preference Stocks Without Mandatory
Redemption Requirements:
Preference stock, cumulative, without par value--
Outstanding--13,499,549 shares ................... $ 504,957 $ 504,957
$1.425 convertible preferred stock, cumulative,
without par value--
Outstanding--58,851 shares and 65,912 shares, re-
spectively....................................... 1,872 2,096
Prior preferred stock, cumulative, $100 par value
per share--
No shares outstanding............................. -- --
----------- -----------
$ 506,829 $ 507,053
----------- -----------
Preference Stock Subject to Mandatory Redemption Re-
quirements:
Preference stock, cumulative, without par value--
Outstanding--1,998,560 shares and 2,058,560
shares, respectively............................. $ 199,056 $ 205,016
Current redemption requirements for preference
stock included in current liabilities............. (30,688) (30,688)
----------- -----------
$ 168,368 $ 174,328
----------- -----------
Company-Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts Holding Solely the
Company's Subordinated Debt Securities.............. $ 350,000 $ 350,000
----------- -----------
Long-Term Debt:
First mortgage bonds:
Maturing 1998 through 2002--6.00% to 9 3/8%...... $ 880,000 $ 1,060,000
Maturing 2003 through 2012--3.70% to 8 3/8%...... 1,440,400 1,440,400
Maturing 2013 through 2022--5.85% to 9 7/8%...... 1,791,000 1,791,000
Maturing 2023--7 3/4% to 8 3/8%.................. 560,000 560,000
----------- -----------
$ 4,671,400 $ 4,851,400
Sinking fund debentures, due 1999 through 2011--
2 3/4% to 7 5/8%.................................. 95,167 100,298
Pollution control obligations, due 2007 through
2014--3.45% to 5 7/8%............................. 140,700 142,200
Other long-term debt............................... 831,345 1,016,889
Deposit for retirement of long-term debt........... (995) --
Current maturities of long-term debt included in
current liabilities............................... (133,320) (501,445)
Unamortized net debt discount and premium.......... (44,514) (46,459)
----------- -----------
$ 5,559,783 $ 5,562,883
----------- -----------
$11,427,534 $11,460,702
=========== ===========
</TABLE>

The accompanying Notes to Financial Statements are an integral part of the
above statements.

58
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED RETAINED EARNINGS (DEFICIT)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- -------------------- ----------------------
1998 1997 1998 1997 1998 1997
-------- ---------- -------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of
Period................. $(47,579) $1,334,714 $(19,172) $1,157,956 $1,258,599 $ 892,836
Add--Net income (loss).. 104,453 25,067 176,286 303,042 (900,529) 771,072
-------- ---------- -------- ---------- ---------- ----------
$ 56,874 $1,359,781 $157,114 $1,460,998 $ 358,070 $1,663,908
-------- ---------- -------- ---------- ---------- ----------
Deduct--
Dividends declared
on--
Common stock........ $ 85,694 $ 85,691 $171,387 $ 171,381 $ 342,769 $ 342,755
Preferred and
preference stocks.. 14,419 15,463 28,966 30,990 58,135 62,121
Other capital stock
transactions--net... 56 28 56 28 461 433
-------- ---------- -------- ---------- ---------- ----------
$100,169 $ 101,182 $200,409 $ 202,399 $ 401,365 $ 405,309
-------- ---------- -------- ---------- ---------- ----------
Balance at End of Period
(Includes $360 million
of appropriated
retained earnings at
June 30, 1998)......... $(43,295) $1,258,599 $(43,295) $1,258,599 $ (43,295) $1,258,599
======== ========== ======== ========== ========== ==========
</TABLE>

The accompanying Notes to Financial Statements are an integral part of the
above statements.

59
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- -------------------- -----------------------
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- ---------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Cash Flow from Operating
Activities:
Net income (loss)...... $ 104,453 $ 25,067 $ 176,286 $ 303,042 $(900,529) $ 771,072
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation and
amortization........ 245,342 256,426 506,061 515,140 1,023,251 1,025,019
Deferred income taxes
and investment tax
credits--net........ (20,160) 10,018 4,340 385 (344,933) 83,038
Extraordinary loss
related to write-off
of certain net
regulatory assets... -- -- -- -- 810,335 --
Cumulative effect of
a change in
accounting
principle........... -- -- -- (196,700) -- (196,700)
Loss on nuclear plant
closure............. -- -- -- -- 885,611 --
Payments for revenue
refunds............. (10,966) -- (45,470) -- -- --
Equity component of
allowance for funds
used during
construction........ (1,960) (5,706) (3,544) (10,786) (16,529) (20,797)
Recovery of
regulatory assets... -- 3,818 -- 7,636 7,636 15,272
Provisions/(payments)
for liability for
separation costs--
net................. (389) 1,428 7,036 802 22,219 845
Net effect on cash
flows of changes in:
Receivables........ (213,687) (12,911) (149,402) 90,081 (218,289) 21,105
Coal and fuel oil.. (48,322) (7,513) (84,508) (39,788) (25,022) (13,169)
Materials and
supplies.......... (2,899) 571 (6,638) 541 34,480 18,347
Accounts payable
excluding
separation costs--
net............... 138,721 (20,957) 116,763 (59,693) 154,778 (3,032)
Accrued interest
and taxes......... 89,692 (27,787) 97,959 33,605 57,889 (76,297)
Other changes in
certain current
assets and
liabilities....... 34,984 62,415 51,688 98,583 247,016 224,151
Other--net........... (480) 47,457 57,686 113,359 122,247 189,050
--------- --------- --------- --------- ---------- -----------
$ 314,329 $ 332,326 $ 728,257 $ 856,207 $1,860,160 $ 2,037,904
--------- --------- --------- --------- ---------- -----------
Cash Flow from Investing
Activities:
Construction
expenditures.......... $(249,136) $(216,138) $(420,122) $(425,844) $ (963,904) $ (857,834)
Nuclear fuel
expenditures.......... (34,418) (41,943) (94,967) (90,716) (189,625) (228,946)
Sale of generating
plants................ -- -- 177,454 -- 238,245 --
Equity component of
allowance for funds
used during
construction.......... 1,960 5,706 3,544 10,786 16,529 20,797
Contributions to
nuclear
decommissioning
funds................. -- -- (80,077) (80,181) (114,721) (116,284)
Other investments and
special deposits...... (85) (4,998) (946) (29,300) 23,651 (29,304)
--------- --------- --------- --------- ---------- -----------
$(281,679) $(257,373) $(415,114) $(615,255) $ (989,825) $(1,211,571)
--------- --------- --------- --------- ---------- -----------
Cash Flow from Financing
Activities:
Issuance of
securities--
Long-term debt........ $ -- $ -- $ -- $ 297,663 $ -- $ 297,663
Company-obligated
mandatorily
redeemable preferred
securities of
subsidiary trusts
holding solely the
Company's
subordinated debt
securities........... -- -- -- 150,000 -- 150,000
Capital stock......... 91 39 224 238 274 802
Retirement and
redemption of
securities--
Long-term debt........ (8,139) (72,571) (372,183) (574,482) (532,469) (739,370)
Capital stock......... (6,092) (3,040) (6,225) (3,239) (47,096) (44,645)
Deposits and
securities held for
retirement and
redemption of
securities............ 3,069 2,102 (995) (229) (766) 746
Premium paid on early
redemption of long-
term debt............. -- -- -- (9,500) -- (9,500)
Cash dividends paid on
capital stock......... (104,480) (105,457) (215,334) (210,913) (431,336) (427,052)
Proceeds from
sale/leaseback of
nuclear fuel.......... 44,861 36,801 61,426 81,271 130,109 238,273
Nuclear fuel lease
principal payments.... (128,823) (36,305) (161,009) (85,855) (241,566) (190,627)
Increase (Decrease) in
short-term
borrowings............ 110,196 134,000 331,696 135,000 226,096 (70,650)
--------- --------- --------- --------- ---------- -----------
$ (89,317) $ (44,431) $(362,400) $(220,046) $ (896,754) $ (794,360)
--------- --------- --------- --------- ---------- -----------
Increase (Decrease) in
Cash and Temporary Cash
Investments............ $ (56,667) $ 30,522 $ (49,257) $ 20,906 $ (26,419) $ 31,973
Cash and Temporary Cash
Investments at
Beginning of Period.... 80,044 19,274 72,634 28,890 49,796 17,823
--------- --------- --------- --------- ---------- -----------
Cash and Temporary Cash
Investments at End of
Period................. $ 23,377 $ 49,796 $ 23,377 $ 49,796 $ 23,377 $ 49,796
========= ========= ========= ========= ========== ===========
</TABLE>

The accompanying Notes to Financial Statements are an integral part of the
above statements.

60
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

See Unicom's Note 1 of Notes to Financial Statements for a discussion of
significant accounting policies, except for the following specific policies
discussed below and the subcaption "Earnings per Share" in Unicom's Note 1.

Income Taxes. ComEd is included in the consolidated federal and state income
tax returns filed by Unicom. Current and deferred income taxes of the
consolidated group are allocated to ComEd as if ComEd filed separate tax
returns. Deferred income taxes are provided for income and expense items
recognized for financial accounting purposes in periods that differ from those
for income tax purposes. Income taxes deferred in prior years are charged or
credited to income as the book/tax timing differences reverse. Prior years'
deferred investment tax credits are amortized through credits to income
generally over the lives of the related property. Income tax credits resulting
from interest charges applicable to nonoperating activities, principally
construction, are classified as other income.

Interest. Total interest costs incurred on debt, leases and other
obligations were $133 million and $147 million for the three months ended June
30, 1998 and 1997, respectively, $270 million and $299 million for the six
months ended June 30, 1998 and 1997, respectively, and $559 million and $604
million for the twelve months ended June 30, 1998 and 1997, respectively.

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------- ----------------- -------------------
1998 1997 1998 1997 1998 1997
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Supplemental Cash Flow
Information:
Cash paid during the
period for:
Interest (net of
amount capitalized). $95,583 $97,518 $246,120 $255,253 $493,127 $518,027
Income taxes (net of
refunds)............ $ 506 $ 48,503 $ 506 $ 55,501 $ 226,373 $ 285,137
Supplemental Schedule of
Non-Cash Investing and
Financing Activities:
Capital lease obliga-
tions incurred........ $ 45,983 $ 39,376 $ 63,979 $ 85,773 $ 136,618 $244,261
</TABLE>

(2) ACCOUNTING EFFECTS RELATED TO THE 1997 ACT. See Unicom's Note 2 of Notes
to Financial Statements, except for EPS information.

(3) CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE. See Unicom's Note
3 of Notes to Financial Statements, except for pro forma and EPS information.
If the new accounting method had been in effect for the full twelve months
ended June 30, 1997, the pro forma unaudited net income would have been
$540,138,000, excluding the cumulative effect of a change in accounting
principle.

(4) RATE MATTERS. See Unicom's Note 4 of Notes to Financial Statements.

(5) CLOSURE AND SALE OF PLANTS. See Unicom's Note 5 of Notes to Financial
Statements, except for EPS information.

61
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED

(6) AUTHORIZED SHARES AND VOTING RIGHTS OF CAPITAL STOCK. At June 30, 1998,
the authorized shares of capital stock were: common stock--250,000,000 shares;
preference stock--22,308,560 shares; $1.425 convertible preferred stock--
58,851 shares; and prior preferred stock--850,000 shares. The preference and
prior preferred stocks are issuable in series and may be issued with or
without mandatory redemption requirements. Holders of shares at any time
outstanding, regardless of class, are entitled to one vote for each share held
on each matter submitted to a vote at a meeting of shareholders, with the
right to cumulate votes in all elections for directors.

See Unicom's Note 2 of Notes to Financial Statements regarding the ICC's
order approving ComEd's proposed issuance of up to $3.4 billion of securities
and the planned use of the proceeds to refinance debt and equity, as permitted
under the 1997 Act.

(7) COMMON EQUITY. At June 30, 1998, shares of common stock were reserved
for the following purposes:

<TABLE>
<S> <C>
Conversion of $1.425 convertible preferred stock................... 60,028
Conversion of warrants............................................. 25,490
------
85,518
======
</TABLE>

Shares of common stock issued for the three months, six months and twelve
months ended June 30, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
SIX MONTHS
THREE MONTHS ENDED ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- ------------- --------------------
1998 1997 1998 1997 1998 1997
--------- --------- ------ ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Conversion of $1.425
convertible preferred
stock.................. 2,927 1,272 7,196 7,654 8,803 26,365
Conversion of warrants.. 40 131 124 312 174 1,271
--------- --------- ----- ----- --------- ----------
2,967 1,403 7,320 7,966 8,977 27,636
========= ========= ===== ===== ========= ==========
</TABLE>

At June 30, 1998 and December 31, 1997, 76,472 and 76,868 common stock
purchase warrants, respectively, were outstanding. The warrants entitle the
holders to convert such warrants into common stock at a conversion rate of one
share of common stock for three warrants.

ComEd's retained earnings account had a deficit balance of $43 million and
$19 million at June 30, 1998 and December 31, 1997, respectively. As of June
30, 1998 and December 31, 1997, $360 million and $384 million, respectively,
of retained earnings had been appropriated for future dividend payments.

(8) STOCK OPTION AWARDS/EMPLOYEE STOCK PURCHASE PLAN. See Unicom's Note 8 of
Notes to Financial Statements, except for EPS information.

(9) PREFERRED AND PREFERENCE STOCKS WITHOUT MANDATORY REDEMPTION
REQUIREMENTS. See Unicom's Note 9 of Notes to Financial Statements.

(10) PREFERENCE STOCK SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS. See
Unicom's Note 10 of Notes to Financial Statements.

62
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED

(11) COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUSTS HOLDING SOLELY THE COMPANY'S SUBORDINATED DEBT SECURITIES.
See Unicom's Note 11 of Notes to Financial Statements.

(12) LONG-TERM DEBT. See Unicom's Note 12 of Notes to Financial Statements.

(13) LINES OF CREDIT. See the first paragraph of Unicom's Note 13 of Notes
to Financial Statements.

(14) DISPOSAL OF SPENT NUCLEAR FUEL. See Unicom's Note 14 of Notes to
Financial Statements.

(15) FAIR VALUE OF FINANCIAL INSTRUMENTS. See Unicom's Note 15 of Notes to
Financial Statements.

(16) PENSION AND POSTRETIREMENT BENEFITS. See Unicom's Note 16 of Notes to
Financial Statements.

(17) SEPARATION PLAN COSTS. See Unicom's Note 17 of Notes to Financial
Statements, except for EPS information.

(18) INCOME TAXES. The components of the net deferred income tax liability
at June 30, 1998 and December 31, 1997 were as follows:

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Deferred income tax liabilities:
Accelerated cost recovery and liberalized deprecia-
tion, net of removal costs.......................... $3,992,741 $4,051,191
Overheads capitalized................................ 119,701 131,509
Repair allowance..................................... 224,810 231,697
Regulatory assets recoverable through future rates... 692,077 785,354
Deferred income tax assets:
Postretirement benefits.............................. (324,322) (305,220)
Unamortized investment tax credits................... (197,991) (206,112)
Regulatory liabilities to be settled through future
rates............................................... (610,113) (698,750)
Nuclear plant closure................................ (65,173) (194,244)
Other--net........................................... (150,397) (135,311)
---------- ----------
Net deferred income tax liability..................... $3,681,333 $3,660,114
========== ==========
</TABLE>

The $21 million increase in the net deferred income tax liability from
December 31, 1997 to June 30, 1998 is comprised of $26 million in deferred
income tax expenses reflected in operations and a $5 million decrease in
regulatory assets net of regulatory liabilities pertaining to income taxes for
the period. The amount of accelerated cost recovery and liberalized
depreciation included in deferred income tax liabilities as of June 30, 1998,
includes amounts related to the regulatory asset for impaired production
plant. The amount of regulatory assets included in deferred income tax
liabilities primarily relates to the equity component of AFUDC which is
recorded on an after-tax basis, the borrowed funds component of AFUDC which
was previously recorded net of tax and other temporary differences for which
the related tax effects were not previously recorded. The amount of other
regulatory liabilities included in deferred income tax assets primarily
relates to deferred income taxes provided at rates in excess of the current
statutory rate.

63
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONTINUED

The components of net income tax expense charged (credited) to continuing
operations for the three months, six months and twelve months ended June 30,
1998 and 1997 were as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- ------------------ --------------------
1998 1997 1998 1997 1998 1997
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Electric operating in-
come:
Current income taxes... $ 81,954 $ 15,967 $144,046 $ 84,717 $ 338,964 $ 282,054
Deferred income taxes.. (14,029) 18,591 (21,608) 16,918 20,130 116,455
Investment tax credits
deferred--net......... (6,888) (7,897) (14,048) (15,794) (29,270) (34,840)
Other (income) and de-
ductions, primarily de-
ferred income taxes in
1997................... (3,360) (1,836) (13,556) (2,119) (419,061) (4,466)
--------- -------- -------- -------- --------- ---------
Net income taxes charged
(credited) to continu-
ing operations......... $ 57,677 $ 24,825 $ 94,834 $ 83,722 $ (89,237) $ 359,203
========= ======== ======== ======== ========= =========
</TABLE>

<TABLE>
<CAPTION>
TWELVE MONTHS
THREE MONTHS ENDED SIX MONTHS ENDED ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- ------------------ -------------------
1998 1997 1998 1997 1998 1997
--------- --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Pre-tax book income
(loss) (thousands)..... $162,130 $49,892 $271,120 $190,064 $(179,431) $933,575
Effective income tax
rate................... 35.6% 49.8% 35.0% 44.0% 49.7% 38.5%
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
-------------------- ----------------- --------------------
1998 1997 1998 1997 1998 1997
--------- --------- ------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes
computed at statutory
rate................... $ 56,745 $ 4,092 $94,892 $ 79,402 $ (62,801) $ 339,632
Equity component of
AFUDC which was
excluded from taxable
income................. (110) (1,997) (198) (3,775) (4,743) (7,279)
Amortization of invest-
ment tax credits, net
of deferred income
taxes ................. (4,517) (7,897) (13,728) (15,794) (43,274) (34,840)
State income taxes, net
of federal income tax-
es..................... 7,529 2,804 13,663 14,451 4,242 48,709
Differences between book
and tax accounting,
primarily property-re-
lated deductions....... (1,970) 27,823 205 9,438 17,339 12,981
--------- --------- ------- -------- --------- ---------
Net income taxes charged
(credited) to continu-
ing operations......... $ 57,677 $ 24,825 $94,834 $ 83,722 $ (89,237) $ 359,203
========= ========= ======= ======== ========= =========
</TABLE>

The effects of an income tax refund related to prior years were recorded in
the third quarter of 1996, resulting in a positive impact of $26 million
(after-tax).

(19) TAXES, EXCEPT INCOME TAXES. Provisions for taxes, except income taxes,
for the three months, six months and twelve months ended June 30, 1998 and 1997
were as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
------------------- ----------------- -------------------
1998 1997 1998 1997 1998 1997
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Illinois public utility
revenue................ $ 44,247 $ 55,654 $101,928 $107,409 $ 222,869 $ 223,978
Illinois invested capi-
tal.................... -- 25,827 -- 52,017 47,486 104,501
Illinois electricity
distribution tax....... 24,911 -- 51,629 -- 51,629 --
Municipal utility gross
receipts............... 38,556 37,967 81,107 79,070 170,131 168,384
Real estate............. 29,229 33,395 64,360 72,562 141,976 148,770
Municipal compensation.. 24,214 17,815 44,085 36,925 85,446 78,665
Other--net.............. 23,442 17,491 48,456 41,267 81,945 70,139
--------- --------- -------- -------- --------- ---------
$ 184,599 $ 188,149 $391,565 $389,250 $ 801,482 $ 794,437
========= ========= ======== ======== ========= =========
</TABLE>

64
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--CONCLUDED

(20) LEASE OBLIGATIONS. See the first and second paragraphs of Unicom's Note
20 of Notes to Financial Statements.

Future minimum rental payments at June 30, 1998 for operating leases are
estimated to aggregate $321 million, including $21 million in 1998, $40
million in 1999, $37 million in 2000, $31 million in 2001, $27 million in 2002
and $165 million in 2003-2024.

(21) JOINT PLANT OWNERSHIP. See Unicom's Note 21 of Notes to Financial
Statements.

(22) COMMITMENTS AND CONTINGENT LIABILITIES. See Unicom's Note 22 of Notes
to Financial Statements.

(23) SUBSEQUENT EVENTS. See Unicom's Note 23 of Notes to Financial
Statements, expect for Notes issued by UT Holdings.

65
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CHANGES IN THE ELECTRIC UTILITY INDUSTRY. See Unicom's "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
subcaption "Changes in the Electric Utility Industry," which is incorporated
herein by this reference, except for EPS information.

LIQUIDITY AND CAPITAL RESOURCES. See Unicom's "Management's Discussion and
Analysis of Financial Condition and Results of Operations," subcaption
"Liquidity and Capital Resources--UTILITY OPERATIONS," which is incorporated
herein by this reference.

REGULATION. See Unicom's "Management's Discussion and Analysis of Financial
Condition and Results of Operations," subcaption "Regulation," which is
incorporated herein by this reference.

RESULTS OF OPERATIONS. See Unicom's "Management's Discussion and Analysis of
Financial Condition and Results of Operations," subcaption "Results of
Operations" (other than the first paragraph thereof), which is incorporated
herein by this reference, except for EPS information.

66
<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Since January 1, 1998, civil penalties were imposed on ComEd on three
occasions for violations of NRC regulations in amounts aggregating $495,000.
To ComEd's knowledge, there is one current enforcement issue outstanding and
under review by the NRC.

During 1989 and 1991, actions were brought in federal and state courts in
Colorado against ComEd and Cotter seeking unspecified damages and injunctive
relief based on allegations that Cotter has permitted radioactive and other
hazardous material to be released from its mill into areas owned or occupied
by the plaintiffs resulting in property damage and potential adverse health
effects. ComEd was dismissed as a defendant in both actions. With respect to
Cotter, in 1994 a federal jury returned nominal dollar verdicts against Cotter
on eight bellwether plaintiffs' claims in the 1989 cases, which verdicts were
upheld on appeal. The remaining claims in the 1989 actions have been settled
and dismissed. On July 15, 1998, a jury verdict was rendered in Dodge v.
Cotter (United States District Court for the District of Colorado, Civil
Action No. 91-Z-1861), a case relating to 14 of the plaintiffs in the 1991
cases. The verdict against Cotter included compensatory and punitive damages
totaling approximately $3 million (not including prejudgment interest, which
has not yet been calculated, and which Cotter anticipates may bring the total
award to under $6 million), together with medical monitoring. Cotter intends
to appeal the verdict. Although the other 1991 cases will necessarily involve
the resolution of numerous contested issues of fact and law, Unicom and
ComEd's determination is that these actions will not have a material impact on
their financial position or results of operations.

CERCLA provides for immediate response and removal actions coordinated by
the U.S. EPA to releases of hazardous substances into the environment and
authorizes the U.S. Government either to clean up sites at which hazardous
substances have created actual or potential environmental hazards or to order
persons responsible for the situation to do so. Under CERCLA, generators and
transporters of hazardous substances, as well as past and present owners and
operators of hazardous waste sites, are made strictly, jointly and severally
liable for the cleanup costs of waste at sites, most of which are listed by
the U.S. EPA on the NPL. These responsible parties can be ordered to perform a
cleanup, can be sued for costs associated with a U.S. EPA directed cleanup,
may voluntarily settle with the U.S. Government concerning their liability for
cleanup costs, or may voluntarily begin a site investigation and site
remediation prior to listing on the NPL under state oversight. Various states,
including Illinois, have enacted statutes which contain provisions
substantially similar to CERCLA. ComEd and its subsidiaries are or are likely
to become parties to proceedings initiated by the U.S. EPA, state agencies
and/or other responsible parties under CERCLA with respect to a number of
sites, including MGP sites, or may voluntarily undertake to investigate and
remediate sites for which they may be liable under CERCLA. See Note 22 of
Notes to Financial Statements for information regarding costs associated with
investigating and remediating former MGP sites.

From time to time, Unicom and its subsidiaries are, or are claimed to be, in
violation of or in default under orders, statutes, rules or regulations
relating to environmental controls and other matters, compliance plans imposed
upon or agreed to by them or permits issued by various state and federal
agencies for the construction or operation of their facilities. Unicom and
ComEd do not believe, so far as they now foresee, that such violations or
defaults will have a material adverse effect on their future business and
operating results, except for events otherwise described in Unicom and ComEd's
Annual Reports on Form 10-K for the year ended December 31, 1997 or in these
Quarterly Reports on Form 10-Q for the quarterly period ended June 30, 1998,
which could have such an effect.

67
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Unicom's annual meeting of shareholders was held on May 28, 1998. At that
meeting, each of the persons named in the table below was elected as a
director. Vote totals for each director are shown below:

<TABLE>
<CAPTION>
SHARES SHARES
NOMINEE VOTED FOR WITHHELD FROM
------- ----------- -------------
<S> <C> <C>
Edward A. Brennan..................................... 178,533,032 3,196,722
James W. Compton...................................... 178,483,240 3,246,514
Bruce DeMars.......................................... 178,579,587 3,150,167
Sue L. Gin............................................ 178,560,206 3,169,548
Donald P. Jacobs...................................... 178,485,515 3,244,239
Edgar D. Jannotta..................................... 178,607,541 3,122,213
George E. Johnson..................................... 178,416,504 3,313,250
John W. Rowe.......................................... 178,722,784 3,006,970
</TABLE>

Also at the meeting, the appointment by Unicom's Board of Directors of
Arthur Andersen LLP as auditors for the year 1998 was approved. A total of
177,725,385 shares voted to approve the appointment, 931,016 shares voted
against the appointment and 3,073,353 shares abstained.

In addition, the authorization of 7,000,000 additional shares for the Unicom
Corporation Long-Term Incentive Plan was approved at the meeting. A total of
150,974,277 shares voted to approve the additional shares, 25,995,004 shares
voted against approval of the additional shares and 4,760,473 shares
abstained.

Also, the authorization of 500,000 additional shares for the Unicom
Corporation ESPP was approved at the meeting. A total of 172,458,246 shares
voted to approve the additional shares, 4,772,517 shares voted against
approval of the additional shares and 4,498,991 shares abstained.

ComEd's annual meeting of shareholders was held on May 28, 1998. At that
meeting, each of the persons named in the table below was elected as a
director. Vote totals for each director are shown below:

<TABLE>
<CAPTION>
SHARES
NOMINEE VOTED FOR
------- -----------
<S> <C>
Edward A. Brennan................................................... 214,226,742
James W. Compton.................................................... 214,226,742
Bruce DeMars........................................................ 214,226,742
Sue L. Gin.......................................................... 214,226,742
Donald P. Jacobs.................................................... 214,226,742
Edgar D. Jannotta................................................... 214,226,742
George E. Johnson................................................... 214,226,742
John W. Rowe........................................................ 214,226,742
</TABLE>

Also at the meeting, the appointment by ComEd's Board of Directors of Arthur
Andersen LLP as auditors for the year 1998 was approved. A total of
214,226,742 shares voted to approve the appointment.

In addition, the authorization of 7,000,000 additional shares for the Unicom
Corporation Long-Term Incentive Plan was approved at the meeting. A total of
214,226,742 shares voted to approve the additional shares.

68
<PAGE>

Also, the authorization of 500,000 additional shares for the Unicom
Corporation ESPP was approved at the meeting. A total of 214,226,742 shares
voted to approve the additional shares.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ------------------------------------------------------------------
<C> <S>
(3)-3 By-Laws of Unicom Corporation, effective January 28, 1994, as
amended through May 28, 1998.
(3)-4 By-Laws of Commonwealth Edison Company, effective September 2,
1988, as amended through May 28, 1998.
(12) Statement computing Commonwealth Edison Company ratios of earnings
to fixed charges and ratios of earnings to fixed charges and
preferred and preference stock dividend requirements.
(23)-1 Consent of independent public accountants applicable to Unicom
Corporation.
(23)-2 Consent of independent public accountants applicable to
Commonwealth Edison Company.
(27)-1 Financial data schedule of Unicom Corporation.
(27)-2 Financial data schedule of Commonwealth Edison Company.
</TABLE>

(b) Reports on Form 8-K

A Current Report on Form 8-K dated April 23, 1998 was filed by Unicom and
ComEd announcing ComEd's filing with the ICC which seeks approval for ComEd
to issue up to $3.4 billion in asset-backed securities, which will be
backed by certain revenue streams of ComEd.

69
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on the 10th day of August, 1998. The
signature for each undersigned company shall be deemed to relate only to
matters having reference to such company and its subsidiaries thereof.

Unicom Corporation
Registrant

Robert E. Berdelle
By __________________________________
Robert E. Berdelle
Comptroller
(Chief accounting officer and
officer duly authorized to sign on
behalf of the registrant)

Commonwealth Edison Company
Registrant

Robert E. Berdelle
By __________________________________
Robert E. Berdelle
Comptroller
(Chief accounting officer and
officer duly authorized to sign on
behalf of the registrant)

70
<PAGE>

EXHIBIT INDEX

Exhibits filed with or incorporated by reference in Form 10-Q for the
quarterly period ended June 30, 1998:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------------------------------------------------------
<C> <S>
(3)-3 By-Laws of Unicom Corporation, effective January 28, 1994, as amended
through May 28, 1998.
(3)-4 By-Laws of Commonwealth Edison Company, effective September 2, 1988,
as amended through May 28, 1998.
(12) Statement computing Commonwealth Edison Company ratios of earnings to
fixed charges and ratios of earnings to fixed charges and preferred
and preference stock dividend requirements.
(23)-1 Consent of independent public accountants applicable to Unicom
Corporation.
(23)-2 Consent of independent public accountants applicable to Commonwealth
Edison Company.
(27)-1 Financial data schedule of Unicom Corporation.
(27)-2 Financial data schedule of Commonwealth Edison Company.
</TABLE>

<PAGE>

Exhibit (3)-3
Unicom Corporation
Form 10-Q File No. 1-11375

UNICOM CORPORATION

BY-LAWS

EFFECTIVE JANUARY 28, 1994
AS AMENDED THROUGH

MAY 28, 1998

<PAGE>

CONTENTS

Page
Number
------
<S> <C> <C>
ARTICLE I. Stock...................................... 1

ARTICLE II. Meetings of Shareholders................... 3

ARTICLE III. Board of Directors......................... 9

ARTICLE IV. Committees of the Board of Directors....... 11

ARTICLE V. Officers................................... 15

ARTICLE VI. Indemnification............................ 20

ARTICLE VII. Miscellaneous.............................. 21

ARTICLE VIII. Alteration, Amendment or Repeal of By-Laws. 22

</TABLE>
<PAGE>

UNICOM CORPORATION

BY-LAWS

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ARTICLE I.

STOCK.

SECTION 1. Each holder of fully paid stock shall be entitled to a
certificate or certificates of stock stating the number and class of shares, and
the designation of the series, if any, which such certificate represents. All
certificates of stock shall at the time of their issuance be signed either
manually or by facsimile signature by the Chairman, the President or a Vice
President and by the Secretary or an Assistant Secretary. All certificates of
stock shall be sealed with the seal of the Company or a facsimile of such seal,
shall be countersigned either manually or by facsimile signature by a Transfer
Agent and shall be authenticated by manual signature and registered by a
Registrar. The Board of Directors shall appoint one or more Transfer Agents,
none of whom shall be officers of the Company authorized to sign certificates of
stock, and one or more Registrars, each of which Registrars shall be a bank or
trust company. Certificates of stock shall not be valid until countersigned by a
Transfer Agent and authenticated and registered by a Registrar in the manner
provided by the Board of Directors.

SECTION 2. Shares of stock shall be transferable only on the books of the
Company and, except as hereinafter provided or as otherwise required by law,
shall be transferred only upon proper endorsement and surrender of the
certificates issued therefor. If an outstanding certificate of stock shall be
lost, destroyed or stolen, the holder thereof may have a new certificate upon
producing evidence satisfactory to the Board of Directors of such loss,
destruction or theft, and upon furnishing to the Company, the Transfer Agents
and the Registrars a bond of indemnity deemed sufficient by the Board of
Directors against claims under the outstanding certificate.

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SECTION 3. The certificates for each class or series of stock shall be
numbered and issued in consecutive order and a record shall be kept of the name
and address of the person to whom each certificate is issued, the number of
shares represented by the certificate and the number and date of the
certificate. All certificates exchanged or returned to the Company or the
Transfer Agent for transfer shall be canceled and filed.

SECTION 4. For the purpose of determining shareholders entitled to notice of
or to vote at any meeting of shareholders, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors may fix in advance a date as
the record date for any such determination of shareholders, such date in any
case to be not more than sixty days and, for a meeting of shareholders, not less
than ten days, or in the case of a merger, consolidation, share exchange,
dissolution or sale, lease or exchange of assets, not less than twenty days,
immediately preceding such meeting.

SECTION 5. If any subscription for stock in the Company or any installment of
such subscription shall be unpaid when due, as the Board of Directors shall have
determined the time for payment, and shall continue unpaid for twenty days after
demand for the amount due, made either in person or by written notice duly
mailed to the last address, as it appears on the records of the Company, of the
subscriber or other person by whom the subscription or installment shall be
payable, the stock or subscription upon which payment shall be so due shall,
upon the expiration of said twenty days, become and be forfeited to the Company
without further action, demand or notice, and such stock or subscription may be
sold at public sale, subject to payment of the amount due and unpaid, plus all
costs and expenses incurred by the Company in that connection, at a time and
place to be stated in a written notice to be mailed to the recorded address of
the delinquent subscriber or other person in default on the subscription at
least ten days prior to the time fixed for such sale; provided, that the excess
of proceeds of such sale realized over the amount due and unpaid on said stock
or subscription shall be paid to the delinquent subscriber of other person in
default on the subscription, or to his or her legal representative; and,
provided further, that no forfeiture of stock, or of any amounts paid upon a
subscription therefor,

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shall be declared as against the estate of any decedent before distribution
shall have been made of the estate.

The foregoing provisions for the forfeiture and sale of stock or
subscriptions shall not exclude any other remedy which may lawfully be
enforceable at any time, by forfeiture of stock or of amounts theretofore paid
or otherwise, against any person for nonpayment of a subscription or of any
installment thereof.

SECTION 6. Transfers of shares shall be made only on the books of the Company
by the registered holder thereof or by his or her legal representative, who
shall furnish proper evidence of authority to transfer, or by his or her
attorney or successor thereunto authorized by power of attorney or by documents
duly executed and filed with the Secretary or Transfer Agent of the Company, and
upon surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the Company shall be deemed the owner
thereof for all purposes as regards the Company.

SECTION 7. The Company shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and accordingly, shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of the
State of Illinois.

ARTICLE II.

MEETINGS OF SHAREHOLDERS.

SECTION 1. (a) The regular annual meeting of the shareholders of the Company
for the election of Directors and for the transaction of such other business as
may properly come before the meeting shall be held on such day in April or May
of each year as the Board of Directors may by resolution determine. Each such
regular annual meeting and each special meeting of the shareholders shall be
held at such place as may be fixed by the Board of Directors and at such hour as
the Board of Directors shall order.

(b) Only such business shall be conducted at an annual meeting of shareholders
as shall have been properly brought

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before the meeting. For business to be properly brought before the meeting, it
must be: (i) authorized by the Board of Directors and specified in the notice,
or a supplemental notice, of the meeting, (ii) otherwise be brought before the
meeting by or at the direction of the Board of Directors or (iii) otherwise
properly brought before the meeting by a shareholder of the Company who is a
shareholder of record at the time of giving of the notice provided for in this
Section, who shall be entitled to vote at such annual meeting and who complies
with the procedures set forth in this Section 1(b). For business to be properly
brought before an annual meeting by a shareholder, the shareholder must have
given timely notice thereof in proper written form to the Secretary of the
Company. To be timely, a shareholder's notice must be delivered to or mailed and
received at the principal executive offices of the Company not less than 90 days
nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting of shareholders; provided, however, that in the event
that the annual meeting is called for a date that is not within 30 days before
or after such anniversary date, notice by the shareholder in order to be timely
must be received not later than the close of business on the 10th day following
the day on which such notice of the date of the annual meeting was mailed or, if
earlier, the day on which public announcement of the date of the annual meeting
was made. In no event shall the public announcement of an adjournment or
postponement of an annual meeting commence a new time period for the giving of a
shareholder's notice as described above. To be in proper written form, a
shareholder's notice to the Secretary shall set forth in writing as to each
matter the shareholder proposes to bring before the meeting (i) a brief
description of such matter and the reasons for conducting such business at the
annual meeting, (ii) the name and address, as they appear on the Company's
books, of the shareholder proposing such business, (iii) the number of shares of
stock of the Company which are beneficially owned by the shareholder, (iv) a
description of all arrangements or understandings between such shareholder and
any other person(s) (including their names) in connection with the proposal of
such business by such shareholder and any material interest of the shareholder
in such business and (v) a representation that such shareholder intends to
appear in person or by proxy at the annual meeting to bring such business before
the meeting. Notwithstanding anything in the By-laws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section 1(b).

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The chairman of an annual meeting at which any business is proposed by a
shareholder shall have sole authority to determine, if the facts warrant, that
such business was not properly brought before the meeting in accordance with the
provisions of this Section 1(b), and, if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted. For purposes of this Section 1(b), "public
announcement" shall include disclosure in a press release issued to one or more
national financial or general news services or in a document publicly filed by
the Company with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Securities Exchange Act of 1934, as amended.

SECTION 2. Special meetings of the shareholders may be called by the
Chairman, by the Board of Directors, by a majority of the Directors individually
or by the holders of not less than one-fifth of the total outstanding shares of
capital stock of the Company.

SECTION 3. Written notice stating the place, day and hour of the meeting of
the shareholders and, in the case of a special meeting, the purpose or purposes
for which the meeting is called shall be delivered not less than ten nor more
than sixty days before the date of the meeting, or in the case of a merger,
consolidation, share exchange, dissolution or sale, lease or exchange of assets
not less than twenty nor more than sixty days before the date of the meeting,
either personally or by mail, by or at the direction of the Chairman, the
Secretary or the persons calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed to the shareholder
at the shareholder's address as it appears upon the records of the Company, with
postage thereon prepaid.

SECTION 4. At all meetings of the shareholders, a majority of the outstanding
shares of stock, entitled to vote on a matter, represented in person or by
proxy, shall constitute a quorum for consideration of such matter, but the
shareholders represented at any meeting, though less than a quorum, may adjourn
the meeting to some other day or sine die. If a quorum is present, the
affirmative vote of the majority of the shares of stock represented at the
meeting and entitled to vote on a matter shall be the act of the shareholders,
unless the vote of

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a greater number or voting by classes is required by law or the articles of
incorporation.

SECTION 5. At every meeting of the shareholders, each outstanding share of
stock shall be entitled to one vote on each matter submitted for a vote. In all
elections for Directors, every shareholder shall have the right to vote the
number of shares owned by such shareholder for as many persons as there are
Directors to be elected, or to cumulate such votes and give one candidate as
many votes as shall equal the number of Directors to be elected multiplied by
the number of such shares or to distribute such cumulative votes in any
proportion among any number of candidates. A shareholder may vote either in
person or by proxy. A shareholder may appoint a proxy to vote or otherwise act
for him or her by signing an appointment form and delivering it to the person so
appointed.

SECTION 6. Any meeting at which a quorum of shareholders is present, in
person or by proxy, may adjourn from time to time without notice, other than
announcement at such meeting, until its business is completed. At the adjourned
meeting, the Company may transact any business which might have been transacted
at the original meeting. If the adjournment is for more than thirty days, a
notice of the adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting.

SECTION 7. The Secretary of the Company shall make or cause to be made,
within twenty days after the record date for a meeting of shareholders of the
Company or ten days before such meeting, whichever is earlier, a complete list
of the shareholders entitled to vote at such meeting, arranged in alphabetical
order, with the address of and the number of shares held by each, which list,
for at least ten days prior to such meeting, shall be kept on file at the
registered office of the Company and shall be subject to inspection by any
shareholder, and to copying at such shareholder's expense, at any time during
usual business hours. Such list shall also be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting.

SECTION 8. The Chairman and the Secretary of the Company shall, when present,
act as chairman and secretary, respectively, of each meeting of the
shareholders.

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SECTION 9. At any meeting of shareholders, the chairman of the meeting may,
or upon the request of any shareholder shall, appoint one or more persons as
inspectors for such meeting, unless an inspector or inspectors shall have been
previously appointed for such meeting by the Chairman. Such inspectors shall
ascertain and report the number of shares of stock represented at the meeting,
based upon their determination of the validity and effect of proxies, count all
votes and report the results and do such other acts as are proper to conduct the
election and voting with impartiality and fairness to all the shareholders.

SECTION 10. Voting on any question or in any election may be viva voce unless
the presiding officer shall order or any shareholder shall demand that voting be
by ballot.

Section 11. Only persons who are nominated in accordance with the procedures
set forth in this Section 11 shall be eligible for election at a meeting of
shareholders as directors of the Company. Nominations of persons for election
to the Board of Directors of the Company may be made at a meeting of
shareholders (a) by or at the direction of the Board of Directors or a committee
of the Board of Directors or (b) by any shareholder of the Company who is a
shareholder of record at the time of giving of notice provided for in this
Section, who shall be entitled to vote for the election of directors at the
meeting and who complies with the procedures set forth in this Section 11. Any
nomination by a shareholder shall be made pursuant to timely notice in writing
to the Secretary of the Company. To be timely, a shareholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Company not less than 90 days nor more than 120 days prior to the anniversary
date of the immediately preceding annual meeting of shareholders; provided,
however, that in the event that the annual meeting is called for a date that is
not within 30 days before or after such anniversary date, notice by the
shareholder in order to be timely must be received not later than the close of
business on the 10th day following the day on which such notice of the date of
the annual meeting was mailed or, if earlier, the day on which public
announcement of the date of the annual meeting was made. In no event shall the
public announcement of an adjournment or postponement of an annual meeting
commence a new time period for the giving of a shareholder's notice as described
above. Such shareholder's

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notice shall set forth (a) as to each person whom the shareholder proposes to
nominate for election or re-election as a director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(including, without limitation, such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected); and
(b) as to the shareholder giving the notice (i) the name and address, as they
appear on the Company's books, of such shareholder, (ii) the number of shares of
stock of the Company which are beneficially owned by such shareholder, (iii) a
description of all arrangements or understandings between such shareholder and
each proposed nominee and any other person(s) (including their names) pursuant
to which the nomination(s) are made by such shareholder, (iv) a representation
that such shareholder intends to appear in person or by proxy at the meeting to
nominate the persons named in such shareholder's notice and (v) any other
information relating to such shareholder that is or would be required to be
disclosed pursuant to Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended. At the request of the Board of Directors, any person
nominated by the Board of Directors for election as a director shall furnish to
the Secretary of the Company that information required to be set forth in a
shareholder's notice of nomination which pertains to the nominee. The chairman
of the meeting at which a shareholder nomination is presented shall have sole
authority to determine, if the facts warrant, that a nomination was not made in
accordance with the procedures prescribed by this Section 11, and if he should
so determine, he shall so declare to the meeting and the defective nomination
shall be disregarded. Notwithstanding the foregoing provisions of this Section
11, a shareholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in this Section. For purposes
of this Section 11, "public announcement" shall include disclosure in a press
release issued to one or more national financial or general news services or in
a document publicly filed by the Company with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of
1934, as amended.

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ARTICLE III.

BOARD OF DIRECTORS.

SECTION 1. The business and affairs of the Company shall be managed by or
under the direction of the Board of Directors. The number of Directors of the
Company shall be not less than eight nor more than thirteen. The Directors
shall be elected at each annual meeting of the shareholders, but if for any
reason the election shall not be held at an annual meeting, it may be
subsequently held at any special meeting of the shareholders called for that
purpose after proper notice. The Directors so elected shall hold office until
the next annual meeting and until their respective successors, willing to serve,
shall have been elected and qualified. Directors need not be residents of the
State of Illinois or shareholders of the Company. No person shall be eligible
for nomination or renomination as a Director by the management of the Company
who, prior to the date of election, shall have attained age seventy-two. No
person who is an employe or a former employe of the Company or of a subsidiary
of the Company shall be eligible for nomination or renomination as a Director by
the management of the Company for a term commencing after such person ceases to
be such an employe; provided, however, that any Director of the Company who was
a Director of Commonwealth Edison Company, an Illinois corporation, in office on
June 15, 1989 who is or has been such an employe may be renominated as a
Director unless such person shall have attained age sixty-five on or before the
date of election of Directors.

SECTION 2. Any vacancy occurring in the Board of Directors, including a
vacancy created by an increase in the number of directors, may be filled by
election at an annual meeting or at a special meeting of shareholders called for
that purpose; provided, however, that any vacancy in the Board of Directors
arising between meetings of shareholders by reason of an increase in the number
of directors or otherwise may be filled by the vote of a majority of the
directors then in office, although less than a quorum. Any directors so elected
shall serve until the next annual meeting of shareholders.

SECTION 3. A meeting of the Board of Directors shall be held immediately, or
as soon as practicable, after the annual election of Directors in each year,
provided a quorum for such meeting can be obtained. Notice of every meeting of
the Board,

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stating the time and place at which such meeting will be held, shall be given to
each Director personally, by telephone or by other means of communication at
least one day, or by depositing the same in the mails properly addressed at
least two days before the day of such meeting. A meeting of the Board of
Directors may be called at any time by the Chairman or by any two Directors and
shall be held at such place as shall be specified in the notice for such
meeting.

SECTION 4. A majority of the number of Directors then in office, but not less
than six, shall constitute a quorum for the transaction of business at any
meeting of the Board, but a lesser number may adjourn the meeting from time to
time until a quorum is obtained, or may adjourn sine die. The act of the
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.

SECTION 5. Each member of the Board not receiving a salary from the Company
or a subsidiary of the Company shall be paid such fees as the Board of Directors
may from time to time, by resolution adopted by the affirmative vote of a
majority of the Directors then in office, and irrespective of any personal
interest of any of its members, determine. The Directors shall be paid their
reasonable expenses, if any, of attendance at each meeting of the Board of
Directors. Members of any committee of the Board of Directors may be allowed
like fees and expenses for service on or attendance at meetings of such
committee. No such payment shall preclude any Director from serving the Company
in any other capacity and receiving compensation therefor.

SECTION 6. A Director of the Company who is present at a meeting of the Board
of Directors at which action is taken on any corporate matter shall be
conclusively presumed to have assented to the action taken unless his or her
dissent shall be entered in the minutes of the meeting or unless he shall file
his or her written dissent to such action with the person acting as Secretary of
the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Company immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.

SECTION 7. At the first meeting of the Board of Directors following the
annual meeting of shareholders each year, the Board shall elect a Lead Director.
The Lead Director shall be

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elected from among the Outside Directors of the Company. For purposes hereof,
"Outside Directors" shall be those who are not and never have been employees of
the Company or any of its direct or indirect subsidiaries. The duties of the
Lead Director shall be to convene and chair meetings of the Outside Directors
and to assume other responsibilities which the Outside Directors might designate
from time to time. The Lead Director will consult with other Outside Directors
as to appropriate items for discussion at each such meeting.

ARTICLE IV.

COMMITTEES OF THE BOARD OF DIRECTORS

SECTION 1. The Board of Directors may from time to time create committees,
standing or special, each committee to consist of two or more Directors of the
Company, and the Board shall appoint Directors to serve on such committees and
confer such powers upon such committees and revoke such powers and terminate the
existence of such committees, as the Board at its pleasure may determine,
subject to the limitations set forth in Section 8.40(c) of the Illinois Business
Corporation Act of 1983, as amended from time to time.

SECTION 2. Meetings of any committee of the Board may be called at any time
by the Chairman, by any two Directors or by the chairman of the committee the
meeting of which is being called and shall be held at such place as shall be
designated in the notice of such meeting. Notice of each committee meeting
stating the time and place at which such meeting will be held shall be given to
each member of the committee personally, or by telecopy, or by depositing the
same in the mails properly addressed, at least one day before the day of such
meeting. A majority of the members of a committee shall constitute a quorum
thereof but a lesser number may adjourn the meeting from time to time until a
quorum is obtained, or may adjourn sine die. A majority vote of the members of
a committee present at a meeting at which a quorum is present shall be necessary
for committee action.

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member or members of such committee present at such meeting and not disqualified
from voting thereat, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in place of such absent or disqualified member.

SECTION 4. Every Director of the Company, or member of any committee
designated by the Board of Directors pursuant to authority conferred by these
By-Laws, shall, in the performance of his or her duties, be fully protected in
relying in good faith upon the records of the Company and upon such information,
opinions, reports or statements presented to the Company by any of the Company's
officers or employees, or committees of the Board of Directors, or by any other
person as to matters the Director or member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Company.

SECTION 5. Unless otherwise limited by the Board of Directors and subject to
the limitations set forth in the next sentence, each committee of the Board of
Directors consisting of two or more Directors may exercise the authority of the
Board. Notwithstanding any other provision of the By-Laws, no committee of the
Board of Directors shall: (1) authorize distributions; (2) approve or recommend
to shareholders any act required by law to be approved by shareholders; (3) fill
vacancies on the Board of Directors or on any of its committees; (4) elect or
remove officers or fix the compensation of any member of the committee; (5)
adopt, amend or repeal the By-Laws; (6) approve a plan of merger not requiring
shareholder approval; (7) authorize or approve reacquisition of stock, except
according to a general formula or method prescribed by the Board of Directors;
(8) authorize or approve the issuance or sale, or contract for sale, of stock or
determine the designation and relative rights, preferences, and limitations of a
series of stock, except that a committee may fix the specific terms of the
issuance or sale or contract for sale or the number of shares of stock to be
allocated to particular employees under an employee benefit plan; or (9) amend,
alter, repeal, or take action inconsistent with any resolution or action of the
Board of Directors when the resolution or action of the Board of Directors
provides by its terms that it shall not be amended, altered or repealed by
action of a committee.

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ARTICLE V.

OFFICERS.

SECTION 1. There shall be elected by the Board of Directors, at its first
meeting after the annual election of Directors in each year if practicable, the
following principal officers of the Company, namely: a Chairman, a President,
such number of Executive Vice Presidents, Senior Vice Presidents and Vice
Presidents as the Board at the time may decide upon, a Secretary, a Treasurer
and a Comptroller; and the Board may also provide for a Vice Chairman and such
other officers, and prescribe for each of them such duties, as in its judgment
may from time to time be desirable to conduct the affairs of the Company. No
officer shall be elected for a term extending beyond the first day of the month
following the month in which such officer attains the age of 65 years, on which
date such officer shall be retired. The Chairman shall be a Director of the
Company; any other officer above named may, but need not, be a Director of the
Company. Any two or more offices may be held by the same person. All officers
shall hold their respective offices until the first meeting of the Board of
Directors after the next succeeding annual election of Directors and until their
successors, willing to serve, shall have been elected, but any officer may be
removed from office by the Board of Directors whenever in its judgment the best
interests of the Company will be served thereby. Such removal, however, shall
be without prejudice to the contract rights, if any, of the person so removed.
Election of an officer shall not of itself create contract rights.

SECTION 2. The Chairman shall be the chief executive officer of the Company
and shall have general authority over all the affairs of the Company, including
the power to appoint and discharge any and all officers, agents and employes of
the Company not elected or appointed directly by the Board of Directors. The
Chairman shall, when present, preside at all meetings of the shareholders and of
the Board of Directors. The Chairman shall have authority to call special
meetings of the shareholders and meetings of the Board of Directors, and of any
committee of the Board of Directors and, when neither the Board of Directors nor
the Executive Committee is in session, to suspend the authority of any other
officer or officers of the Company, subject, however, to the pleasure of the
Board of

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Directors or of the Executive Committee at its next meeting. The Chairman, or
such other officer as the Chairman may direct, shall be responsible for all
internal audit functions, and the internal audit personnel shall report directly
to the Chairman or to such other officer.

SECTION 3. If, at any time, it is brought to the attention of any Director
that the Chairman has or may become absent or disabled and may thereby be unable
to perform the duties of Chairman for some period of time, the Lead Director
shall, as promptly as practicable upon his own initiative, or after notice from
another Director, convene a meeting (in person or by telephone conference call)
of the Outside Directors (who for purposes hereof shall consist of all Directors
who are not and have never been employees of the Company or any of its direct or
indirect subsidiaries) who shall decide whether the Chairman has become absent
or disabled. Upon such determination, the Outside Directors shall designate an
Acting Chairman, who may be the Lead Director or any other Director of the
Company, and who shall exercise the power and duties of the Chairman until the
Outside Directors shall have determined that the Chairman can resume his duties
as Chairman or until a new Chairman has been elected by the Board of Directors.
The Acting Chairman, however, shall have no authority to make changes in the
persons holding any office at the executive payroll level of the Company or to
make changes in any such person's duties or responsibilities, or compensation or
benefits, without prior approval of the Board of Directors. For purposes of
this Section, any action of the Outside Directors shall be by majority vote of
those present at a meeting of such Directors, provided that a majority of such
Directors shall constitute a quorum for such a meeting.

SECTION 4. Except insofar as the Board of Directors, the Executive Committee
or the Chairman shall have devolved responsibilities on the other principal
officers, the President shall be responsible for the general management and
direction of the affairs of the Company, subject to the control of the Board of
Directors, the Executive Committee and the Chairman. The President shall have
such other powers and duties as usually devolve upon the President of a
corporation and such further powers and duties as may be prescribed by the Board
of Directors, the Executive Committee or the chairman. The President shall
report to the Chairman.

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SECTION 5. The Executive Vice Presidents, the Senior Vice Presidents and the
Vice Presidents shall have such powers and duties as may be prescribed for them,
respectively, by the Board of Directors, the Executive committee or the
Chairman. Each of such officers shall report to the Chairman or such other
officer as the Chairman shall direct.

SECTION 6. The Secretary shall attend all meetings of the shareholders, of
the Board of Directors and of each committee of the Board of Directors, shall
keep a true and faithful record thereof in proper books and shall have the
custody and care of the corporate seal, records, minute books and stock books of
the Company and of such other books and papers as in the practical business
operations of the Company shall naturally belong in the office or custody of the
Secretary or as shall be placed in the Secretary's custody by order of the Board
of Directors or the Executive Committee. The Secretary shall keep or cause to
be kept a suitable record of the addresses of shareholders and shall, except as
may be otherwise required by statute or the by-laws, sign and issue all notices
required for meetings of shareholders, of the Board of Directors and of the
committees of the Board of Directors. Whenever requested by the requisite
number of shareholders or Directors, the Secretary shall give notice, in the
name of the shareholder or shareholders or Director or Directors making the
request, of a meeting of the shareholders or of the Board of Directors or of a
committee of the Board of Directors, as the case may be. The Secretary shall
sign all papers to which the Secretary's signature may be necessary or
appropriate, shall affix and attest the seal of the Company to all instruments
requiring the seal, shall have the authority to certify the by-laws, resolutions
of the shareholders and Board of Directors and committees of the Board of
Directors and other documents of the Company as true and correct copies thereof
and shall have such other powers and duties as are commonly incidental to the
office of Secretary and as may be prescribed by the Board of Directors, the
Executive Committee or the Chairman. The Secretary shall report to the Chairman
or such other officer as the Chairman shall direct.

-15-
<PAGE>

checks or drafts signed or authenticated in such manner as may be designated
from time to time by resolution of the Board of Directors or of the Executive
Committee. The Treasurer shall have the custody of such books and papers as in
the practical business operations of the Company shall naturally belong in the
office or custody of the Treasurer or as shall be placed in the Treasurer's
custody by order of the Board of Directors or the Executive Committee. The
Treasurer shall have such other powers and duties as are commonly incidental to
the office of Treasurer or as may be prescribed for the Treasurer by the Board
of Directors, the Executive Committee or the Chairman. Securities owned by the
Company shall be in the custody of the Treasurer or of such other officers,
agents or depositaries as may be designated by the Board of Directors or the
Executive Committee. The Treasurer may be required to give bond to the Company
for the faithful discharge of the duties of the Treasurer in such form and in
such amount and with such surety as shall be determined by the Board of
Directors. The Treasurer shall report to the Chairman or such other officer as
the Chairman shall direct.

SECTION 8. The Comptroller shall be responsible for the executive direction
of the accounting organization and shall have functional supervision over the
records of all other departments pertaining to revenues, expenses, money,
securities, properties, materials and supplies. The Comptroller shall prescribe
the form of all vouchers, accounts and accounting procedures, and reports
required by the various departments. The Comptroller shall be responsible for
the preparation and interpretation of all accounting reports and financial
statements as required and for the proper review and approval of all bills
received for payment. No bill or voucher shall be so approved unless the
charges covered by the bill or voucher shall have been previously approved
through job order, requisition or otherwise by the head of the department in
which it originated, or unless the Comptroller shall otherwise be satisfied of
its propriety and correctness. The Comptroller shall have such other powers and
duties as are commonly incidental to the office of Comptroller or as may be
prescribed for the Comptroller by the Board of Directors, the Executive
Committee or the Chairman. The Comptroller may be required to give bond to the
Company for the faithful discharge of the duties of the Comptroller in such form
and in such amount and with such surety as shall be determined by the Board of
Directors. The Comptroller shall

-16-
<PAGE>

report to the Chairman or such other officer as the Chairman shall direct.

SECTION 9. Assistant Secretaries, Assistant Treasurers and Assistant
Comptrollers, when elected or appointed, shall respectively assist the
Secretary, the Treasurer and the Comptroller in the performance of the
respective duties assigned to such principal officers, and in assisting such
principal officer, each of such assistant officers shall for such purpose have
the powers of such principal officer. In case of the absence, disability,
death, resignation or removal from office of any principal officer, such
principal officer's duties shall, except as otherwise ordered by the Board of
Directors or the Executive Committee, temporarily devolve upon such assistant
officer as shall be designated by the Chairman.

SECTION 10. At least once each year, the Chairman shall report (which may be
oral) to the Outside Directors (who for purposes hereof shall consist of all
Directors who are not and never have been employees of the Company or any of its
direct or indirect subsidiaries) on the status of a plan for succession to the
office of Chairman.

ARTICLE VI.

INDEMNIFICATION.

SECTION 1. (a) A Director of the Company shall not be personally liable to
the Company or its shareholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Company or its shareholders, (ii) for acts or omissions
not in good faith or that involve intentional misconduct or a knowing violation
of law, (iii) under Section 8.65 of the Illinois Business Corporation Act of
1983, as amended, or (iv) for any transaction from which the Director derived an
improper personal benefit. If the Illinois Business Corporation Act of 1983 is
amended to authorize corporate action further eliminating or limiting the
personal liability of Directors, then the liability of a Director of the Company
shall be eliminated or limited to the full extent permitted by the Illinois
Business Corporation Act of 1983, as so amended. Any repeal or modification of
this Section 1(a) by the shareholders of the Company shall not adversely affect
any right or protection of a

-17-
<PAGE>

Director of the Company existing at the time of such repeal or modification.

(b) Each person who is or was or had agreed to become a Director or officer of
the Company, and each person who is or was serving or who had agreed to serve at
the request of the Board of Directors or an officer of the Company as an employe
or agent of the Company or as a director, officer, employe, or agent, trustee or
fiduciary of another corporation, partnership, joint venture, trust or other
enterprise (including the heirs, executors, administrators or estate of such
person), shall be indemnified by the Company to the full extent permitted by the
Illinois Business Corporation Act of 1983 or any other applicable laws as
presently or hereafter in effect. Without limiting the generality of the
foregoing, the Company may enter into one or more agreements with any person
which provide for indemnification greater or different than that provided in
this Section 1(b). Any repeal or modification of this Section 1(b) shall not
adversely affect any right or protection existing hereunder immediately prior to
such repeal or modification.

SECTION 2. The provisions of this Article shall be deemed to be a contract
between the Company and each Director or officer who serves in any such capacity
at any time while this Article is in effect, and any repeal or modification of
this Article shall not affect any rights or obligations hereunder with respect
to any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought or threatened based in whole or in
part upon any such state of facts.

SECTION 3. The indemnification provided or permitted by this Article shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled by law or otherwise, and shall continue as to a person who has ceased
to be a Director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such person.

SECTION 4. The Company may purchase and maintain insurance on behalf of any
person who is or was a Director, officer, employee or agent of the Company, or
who is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, against any liability asserted

-18-
<PAGE>

against such person and incurred by such person in any such capacity, or arising
out of his or her status as such, whether or not the Company would have the
power to indemnify such person against such liability under the laws of the
State of Illinois.

ARTICLE VII.

MISCELLANEOUS.

SECTION 1. No bills shall be paid by the Treasurer unless reviewed and
approved by the Comptroller or by some other person or committee expressly
authorized by the Board of Directors, the Executive Committee, the Chairman or
the Comptroller to review and approve bills for payment.

SECTION 2. All checks, drafts or other orders for payment of money issued in
the name of the Company shall be signed by such officers, employees or agents of
the Company as shall from time to time be designated by the Board of Directors,
the Chairman, the chief financial officer of the Company or the Treasurer.

SECTION 3. Any and all shares of stock of any corporation owned by the
Company and any and all voting trust certificates owned by the Company calling
for or representing shares of stock of any corporation may be voted at any
meeting of the shareholders of such corporation or at any meeting of the holders
of such certificates, as the case may be, by any one of the principal officers
of the Company upon any question which may be presented at such meeting, and any
such officer may, on behalf of the Company, waive any notice required to be
given of the calling of such meeting and consent to the holding of any such
meeting without notice. Any such principal officer other than the Secretary,
acting together with the Secretary or an Assistant Secretary, shall have
authority to give to any person a written proxy, in the name of the Company and
under its corporate seal, to vote any or all shares of stock or any or all
voting trust certificates owned by the Company upon any question that may be
presented at any such meeting of shareholders or certificate holders, with full
power to waive any notice of the calling of such meeting and consent to the
holding of such meeting without notice.

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<PAGE>

SECTION 4. The fiscal year of the Company shall begin on the first day of
January and end on the last day of December in each year.

ARTICLE VIII.

ALTERATION, AMENDMENT OF REPEAL OF BY-LAWS.

These by-laws may be altered, amended or repealed by the shareholders or the
Board of Directors.

-20-

<PAGE>

Exhibit (3)-4
Commonwealth Edison Company
Form 10-Q File No. 1-1839

COMMONWEALTH EDISON COMPANY

BY-LAWS

EFFECTIVE SEPTEMBER 2, 1988

AS AMENDED THROUGH

MAY 28, 1998

<PAGE>

<TABLE>
<CAPTION>
CONTENTS

PAGE
NUMBER
------
<S> <C> <C>
ARTICLE I. Stock........................................ 1

ARTICLE II. Meetings of Stockholders..................... 2

ARTICLE III. Board of Directors........................... 4

ARTICLE IV. Committees of the Board of Directors......... 5

ARTICLE V. Officers..................................... 9

ARTICLE VI. Miscellaneous................................ 13

ARTICLE VII. Alteration, Amendment or Repeal of By-Laws... 14
</TABLE>

<PAGE>

COMMONWEALTH EDISON COMPANY

BY-LAWS

------------

ARTICLE I.

STOCK.

SECTION 1. Each holder of fully paid stock shall be entitled to a
certificate or certificates of stock stating the number and class of shares, and
the designation of the series, if any, which such certificate represents. All
certificates of stock shall at the time of their issuance be signed either
manually or by facsimile signature by the Chairman, the President or a Vice
President and by the Secretary or an Assistant Secretary. All certificates of
stock shall be sealed with the seal of the Company or a facsimile of such seal,
shall be countersigned either manually or by facsimile signature by a Transfer
Agent and shall be authenticated by manual signature and registered by a
Registrar. The Board of Directors shall appoint one or more Transfer Agents,
none of whom shall be officers of the Company authorized to sign certificates of
stock, and one or more Registrars, each of which Registrars shall be a bank or
trust company. Certificates of stock shall not be valid until countersigned by
a Transfer Agent and authenticated and registered by a Registrar in the manner
provided by the Board of Directors.

SECTION 2. Shares of stock shall be transferable only on the books of
the Company and, except as hereinafter provided or as otherwise required by law,
shall be transferred only upon proper endorsement and surrender of the
certificates issued therefor. If an outstanding certificate of stock shall be
lost, destroyed or stolen, the holder thereof may have a new certificate upon
producing evidence satisfactory to the Board of Directors of such loss,
destruction or theft, and upon furnishing to the Company, the Transfer Agents
and the Registrars a bond of indemnity deemed sufficient by the Board of
Directors against claims under the outstanding certificate.

<PAGE>

-2-

SECTION 4. For the purpose of determining stockholders entitled to
notice of or to vote at any meeting of stockholders, or stockholders entitled to
receive payment of any dividend, or in order to make a determination of
stockholders for any other proper purpose, the Board of Directors may fix in
advance a date as the record date for any such determination for stockholders,
such date in any case to be not more than sixty days and, for a meeting of
stockholders, not less than ten days, or in the case of a merger, consolidation,
share exchange, dissolution or sale, lease or exchange of assets, not less than
twenty days, immediately preceding such meeting.

SECTION 5. If any subscription for stock in the Company or any
installment of such subscription shall be unpaid when due, as the Board of
Directors shall have determined the time for payment, and shall continue unpaid
for twenty days after demand for the amount due, made either in person or by
written notice duly mailed to the last address, as it appears on the records of
the Company, of the subscriber or other person by whom the subscription or
installment shall be payable, the stock or subscription upon which payment shall
be so due shall, upon the expiration of said twenty days, become and be
forfeited to the Company without further action, demand or notice, and such
stock or subscription may be sold at public sale, subject to payment of the
amount due and unpaid, plus all costs and expenses incurred by the Company in
that connection, at a time and place to be stated in a written notice to be
mailed to the recorded address of the delinquent subscriber or other person in
default on the subscription at least ten days prior to the time fixed for such
sale; provided, that the excess of proceeds of such sale realized over the
amount due and unpaid on said stock or subscription shall be paid to the
delinquent subscriber or other person in default on the subscription, or to his
or her legal representative; and, provided further, that no forfeiture of stock,
or of any amounts paid upon a subscription therefor, shall be declared as
against the estate of any decedent before distribution shall have been made of
the estate.

ARTICLE II.

MEETINGS OF STOCKHOLDERS.

SECTION 1. The regular annual meeting of the stockholders of the
Company for the election of Directors and for the transaction of such other
business as may come before the meeting shall be held on such day in April or
May of each year as the Board of Directors may by resolution determine. Each
such regular annual meeting and each special meeting of the stockholders shall
be held at such place as may

<PAGE>
-3-

be fixed by the Board of Directors and at such hour as the Board of Directors
shall order.

SECTION 2. Special meetings of the stockholders may be called by the
Chairman, by the Board of Directors, by a majority of the Directors individually
or by the holders of not less than one-fifth of the total outstanding shares of
capital stock of the Company.

SECTION 3. Written notice stating the place, day and hour of the
meeting of the stockholders and, in the case of a special meeting, the purpose
or purposes for which the meeting is called shall be delivered not less than ten
nor more than sixty days before the date of the meeting, or in the case of a
merger, consolidation, share exchange, dissolution or sale, lease or exchange of
assets not less than twenty nor more than sixty days before the date of the
meeting, either personally or by mail, by or at the direction of the Chairman,
the Secretary or the persons calling the meeting, to each stockholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed to the stockholder
at the stockholder's address as it appears upon the records of the Company, with
postage thereon prepaid.

SECTION 4. At all meetings of the stockholders, a majority of the
outstanding shares of stock, entitled to vote on a matter, represented in person
or by proxy, shall constitute a quorum for consideration of such matter, but the
stockholders represented at any meeting, though less than a quorum, may adjourn
the meeting to some other day or sine die. If a quorum is present, the
affirmative vote of the majority of the shares of stock represented at the
meeting and entitled to vote on a matter shall be the act of the stockholders,
unless the vote of a greater number or voting by classes is required by law or
the articles of incorporation.

SECTION 5. At every meeting of the stockholders, each outstanding
share of stock shall be entitled to one vote on each matter submitted for a
vote. In all elections for Directors, every stockholder shall have the right to
vote the number of shares owned by such stockholder for as many persons as there
are Directors to be elected, or to cumulate such votes and give one candidate as
many votes as shall equal the number of Directors to be elected multiplied by
the number of such shares or to distribute such cumulative votes in any
proportion among any number of candidates. A stockholder may vote either in
person or by proxy. A stockholder may appoint a proxy to vote or otherwise act
for him or her by signing an appointment form and delivering it to the person so
appointed.

SECTION 6. The Secretary of the Company shall make, within twenty days
after the record date for a meeting of stockholders of the Company or ten days
before such meeting, whichever is earlier, a complete list of the stockholders
entitled to vote at such meeting,

<PAGE>

-4-

arranged in alphabetical order, with the address of and the number of shares
held by each, which list, for at least ten days prior to such meeting, shall be
kept on file at the registered office of the Company and shall be subject to
inspection by any stockholder, and to copying at such stockholder's expense, at
any time during usual business hours. Such list shall also be produced and kept
open at the time and place of the meeting and shall be subject to the inspection
of any stockholder during the whole time of the meeting.

SECTION 7. The Chairman and the Secretary of the Company shall, when
present, act as chairman and secretary, respectively, of each meeting of the
stockholders.

SECTION 8. At any meeting of stockholders, the chairman of the meeting
may, or upon the request of any stockholder shall, appoint one or more persons
as inspectors for such meeting, unless an inspector or inspectors shall have
been previously appointed for such meeting by the Chairman. Such inspectors
shall ascertain and report the number of shares of stock represented at the
meeting, based upon their determination of the validity and effect of proxies,
count all votes and report the results and do such other acts as are proper to
conduct the election and voting with impartiality and fairness to all the
stockholders.

ARTICLE III.

BOARD OF DIRECTORS.

No person who is an employe or a former employe of the Company or of a
subsidiary of the Company shall be eligible for nomination or renomination as a
Director by the management of the Company for a term commencing after such
person ceases to be such an employe; provided, however that any Director in
office on June 15, 1989 who is or has been such an employe may be renominated as
a Director unless such person shall have attained age sixty-five on or before
the date of election of Directors.

<PAGE>

-5-

SECTION 2. A meeting of the Board of Directors shall be held
immediately, or as soon as practicable, after the annual election of Directors
in each year, provided a quorum for such meeting can be obtained. Notice of
every meeting of the Board, stating the time and place at which such meeting
will be held, shall be given to each Director personally, by telephone or by
other means of communication at least one day, or by depositing the same in the
mails properly addressed at least two days before the day of such meeting. A
meeting of the Board of Directors may be called at any time by the Chairman or
by any two Directors and shall be held at such place as shall be specified in
the notice for such meeting.

SECTION 3. A majority of the number of Directors then in office, but
not less than six, shall constitute a quorum for the transaction of business at
any meeting of the Board, but a lesser number may adjourn the meeting from time
to time until a quorum is obtained, or may adjourn sine die. The act of the
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.

SECTION 4. Each member of the Board not receiving a salary from the
Company or a subsidiary of the Company shall be paid such fees as the Board of
Directors may from time to time, by resolution adopted by the affirmative vote
of a majority of the Directors then in office, determine.

SECTION 5. At the first meeting of the Board of Directors following
the annual meeting of shareholders each year, the Board shall elect a Lead
Director. The Lead Director shall be elected from among the Outside Directors
of the Company. For purposes hereof, "Outside Directors" shall be those who are
not and never have been employees of the Company or any of its direct or
indirect subsidiaries. The duties of the Lead Director shall be to convene and
chair meetings of the Outside Directors and to assume other responsibilities
which the Outside Directors might designate from time to time. The Lead
Director will consult with other Outside Directors as to appropriate items for
discussion at each such meeting.

ARTICLE IV.

COMMITTEES OF THE BOARD OF DIRECTORS.

SECTION 1. The Board of Directors may from time to time create
committees, standing or special, each committee to consist of two or more
Directors of the Company, and the Board shall appoint Directors to serve on such
committees and confer such powers upon such committees and revoke such powers
and terminate the existence of such committees, as the Board at its pleasure may
determine, subject to the limitations set forth in Section 8.40(c) of the
Illinois Business Corporation Act of 1983, as amended from time to time.

<PAGE>

-6-

SECTION 2. Meetings of any committee of the Board may be called at any
time by the Chairman, by any two Directors or by the chairman of the committee
the meeting of which is being called and shall be held at such place as shall be
designated in the notice of such meeting. Notice of each committee meeting
stating the time and place at which such meeting will be held shall be given to
each member of the committee personally, or by telecopy, or by depositing the
same in the mails properly addressed, at least one day before the day of such
meeting. A majority of the members of a committee shall constitute a quorum
thereof but a lesser number may adjourn the meeting from time to time until a
quorum is obtained, or may adjourn sine die. A majority vote of the members of
a committee present at a meeting at which a quorum is present shall be necessary
for committee action.

SECTION 3. The Board of Directors may from time to time designate from
among the Directors alternates to serve on one or more committees as occasion
may require. Whenever a quorum cannot be secured for any meeting of any
committee from among the regular members thereof and designated alternates, the
member or members of such committee present at such meeting and not disqualified
from voting thereat, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in place of such absent or disqualified member.

<PAGE>

-7-

Board of Directors; (8) authorize or approve the issuance or sale, or contract
for sale, of stock or determine the designation and relative rights,
preferences, and limitations of a series of stock, except that a committee may
fix the specific terms of the issuance or sale or contract for sale or the
number of shares of stock to be allocated to particular employees under an
employee benefit plan; or (9) amend, alter, repeal, or take action inconsistent
with any resolution or action of the Board of Directors when the resolution or
action of the Board of Directors provides by its terms that it shall not be
amended, altered or repealed by action of a committee.

ARTICLE V.

OFFICERS.

SECTION 1. There shall be elected by the Board of Directors, at its
first meeting after the annual election of Directors in each year if
practicable, the following principal officers of the Company, namely: a
Chairman, a President, such number of Executive Vice Presidents, Senior Vice
Presidents and Vice Presidents as the Board at the time may decide upon, a
Secretary, a Treasurer and a Comptroller; and the Board may also provide for a
Vice Chairman and such other officers, and prescribe for each of them such
duties, as in its judgment may from time to time be desirable to conduct the
affairs of the Company. No officer shall be elected for a term extending beyond
the first day of the month following the month in which such officer attains the
age of 65 years, on which date such officer shall be retired. The Chairman
shall be a Director of the Company; any other officer above named may, but need
not, be a Director of the Company. Any two or more offices may be held by the
same person, except that one person may not at the same time hold the office of
Chairman or President and the office of Secretary. All officers shall hold
their respective offices until the first meeting of the Board of Directors after
the next succeeding annual election of Directors and until their successors,
willing to serve, shall have been elected, but any officer may be removed from
office by the Board of Directors whenever in its judgment the best interests of
the Company will be served thereby. Such removal, however, shall be without
prejudice to the contract rights, if any, of the person so removed. Election of
an officer shall not of itself create contract rights.

SECTION 2. The Chairman shall be the chief executive officer of the
Company and shall have general authority over all the affairs of the Company,
including the power to appoint and discharge any and all officers, agents and
employes of the Company not elected or appointed directly by the Board of
Directors. The Chairman shall, when present, preside at all meetings of the
stockholders and of the Board of Directors. The Chairman shall have authority
to call special meetings of the stockholders and meetings of the Board of
Directors, and of any committee of the Board of Directors and, when neither the
Board of Directors nor the Executive Committee is in session, to

<PAGE>
-8-

suspend the authority of any other officer or officers of the Company, subject,
however, to the pleasure of the Board of Directors or of the Executive Committee
at its next meeting. The Chairman, or such other officer as the Chairman may
direct, shall be responsible for all internal audit functions, and internal
audit personnel shall report directly to the Chairman or to such other officer.

SECTION 3. If, at any time, it is brought to the attention of any
Director that the Chairman has or may become absent or disabled and may thereby
be unable to perform the duties of Chairman for some period of time, the Lead
Director shall, as promptly as practicable upon his own initiative, or after
notice from another Director, convene a meeting (in person or by telephone
conference call) of the Outside Directors (who for purposes hereof shall consist
of all Directors who are not and have never been employees of the Company or any
of its direct or indirect subsidiaries) who shall decide whether the Chairman
has become absent or disabled. Upon such determination the Outside Directors
shall designate an Acting Chairman, who may be the Lead Director or any other
Director of the Company, and who shall exercise the power and duties of the
Chairman until the Outside Directors shall have determined that the Chairman can
resume his duties as Chairman or until a new Chairman has been elected by the
Board of Directors. The Acting Chairman, however, shall have no authority to
make changes in the persons holding any office at the executive payroll level of
the Company or to make changes in any such person's duties or responsibilities,
or compensation or benefits, without prior approval of the Board of Directors.
For purposes of this Section, any action of the Outside Directors shall be by
majority vote of those present at a meeting of such Directors, provided that a
majority of such Directors shall constitute a quorum for such a meeting.

SECTION 4. Except insofar as the Board of Directors, the Executive
Committee or the Chairman shall have devolved responsibilities on the other
principal officers, the President shall be responsible for the general
management and direction of the affairs of the Company, subject to the control
of the Board of Directors, the Executive Committee and the Chairman. The
President shall have such other powers and duties as usually devolve upon the
President of a corporation and such further powers and duties as may be
prescribed by the Board of Directors, the Executive Committee or the Chairman.
The President shall report to the Chairman.

SECTION 5. The Executive Vice Presidents, the Senior Vice Presidents
and the Vice Presidents shall have such powers and duties as may be prescribed
for them, respectively, by the Board of Directors, the Executive Committee or
the Chairman. Each of such officers shall report to the Chairman or such other
officer as the Chairman shall direct.

<PAGE>
-9-

SECTION 6. The Secretary shall attend all meetings of the
stockholders, of the Board of Directors and of each committee of the Board of
Directors, shall keep a true and faithful record thereof in proper books and
shall have the custody and care of the corporate seal, records, minute books and
stock books of the Company and of such other books and papers as in the
practical business operations of the Company shall naturally belong in the
office or custody of the Secretary or as shall be placed in the Secretary's
custody by order of the Board of Directors or the Executive Committee. The
Secretary shall keep a suitable record of the addresses of stockholders and
shall, except as may be otherwise required by statute or the by-laws, sign and
issue all notices required for meetings of stockholders, of the Board of
Directors and of the committees of the Board of Directors. Whenever requested
by the requisite number of stockholders or Directors, the Secretary shall give
notice, in the name of the stockholder or stockholders or Director or Directors
making the request, of a meeting of the stockholders or of the Board of
Directors or of a committee of the Board of Directors, as the case may be. The
Secretary shall sign all papers to which the Secretary's signature may be
necessary or appropriate, shall affix and attest the seal of the Company to all
instruments requiring the seal, shall have the authority to certify the by-laws,
resolutions of the stockholders and Board of Directors and committees of the
Board of Directors and other documents of the Company as true and correct copies
thereof and shall have such other powers and duties as are commonly incidental
to the office of Secretary and as may be prescribed by the Board of Directors,
the Executive Committee or the Chairman. The Secretary shall report to the
Chairman or such other officer as the Chairman shall direct.

SECTION 7. The Treasurer shall have charge of and be responsible for
the collection, receipt, custody and disbursement of the funds of the Company.
The Treasurer shall deposit the Company's funds in its name in such banks, trust
companies or safe deposit vaults as the Board of Directors may direct. Such
funds shall be subject to withdrawal only upon checks or drafts signed or
authenticated in such manner as may be designated from time to time by
resolution of the Board of Directors or of the Executive Committee. The
Treasurer shall have the custody of such books and papers as in the practical
business operations of the Company shall naturally belong in the office or
custody of the Treasurer or as shall be placed in the Treasurer's custody by
order of the Board of Directors or the Executive Committee. The Treasurer shall
have such other powers and duties as are commonly incidental to the office of
Treasurer or as may be prescribed for the Treasurer by the Board of Directors,
the Executive Committee or the Chairman. Securities owned by the Company shall
be in the custody of the Treasurer or of such other officers, agents or
depositaries as may be designated by the Board of Directors or the Executive
Committee. The Treasurer may be required to give bond to the Company for the
faithful discharge of the duties of the Treasurer in such form and in such
amount and with such surety as

<PAGE>
-10-

shall be determined by the Board of Directors. The Treasurer shall report to the
Chairman or such other officer as the Chairman shall direct.

SECTION 8. The Comptroller shall be responsible for the executive
direction of the accounting organization and shall have functional supervision
over the records of all other departments pertaining to revenues, expenses,
money, securities, properties, materials and supplies. The Comptroller shall
prescribe the form of all vouchers, accounts and accounting procedures, and
reports required by the various departments. The Comptroller shall be
responsible for the preparation and interpretation of all accounting reports and
financial statements as required and for the proper review and approvalof all
bills received for payment. No bill or voucher shall be so approved unless the
charges covered by the bill or voucher shall have been previously approved
through job order, requisition or otherwise by the head of the department in
which it originated, or unless the Comptroller shall otherwise be satisfied of
its propriety and correctness. The Comptroller shall have such other powers and
duties as are commonly incidental to the office of Comptroller or as may be
prescribed for the Comptroller by the Board of Directors, the Executive
Committee or the Chairman. The Comptroller may be required to give bond to the
Company for the faithful discharge of the duties of the Comptroller in such form
and in such amount and with such surety as shall be determined by the Board of
Directors. The Comptroller shall report to the Chairman or such other officer
as the Chairman shall direct.

SECTION 10. At least once each year, the Chairman shall report (which
may be oral) to the Outside Directors (who for purposes hereof shall consist of
all Directors who are not and never have been employees of the Company or any of
its direct subsidiaries) on the status of a plan for succession to the office of
Chairman.

<PAGE>
-11-

ARTICLE VI.

MISCELLANEOUS.

SECTION 2. Any and all shares of stock of any corporation owned by the
Company and any and all voting trust certificates owned by the Company calling
for or representing shares of stock of any corporation may be voted at any
meeting of the stockholders of such corporation or at any meeting of the holders
of such certificates, as the case may be, by any one of the principal officers
of the Company upon any question which may be presented at such meeting, and any
such officer may, on behalf of the Company, waive any notice required to be
given of the calling of such meeting and consent to the holding of any such
meeting without notice. Any such principal officer other than the Secretary,
acting together with the Secretary or an Assistant Secretary, shall have
authority to give to any person a written proxy, in the name of the Company and
under its corporate seal, to vote any or all shares of stock or any or all
voting trust certificates owned by the Company upon any question that may be
presented at any such meeting of stockholders or certificate holders, with full
power to waive any notice of the calling of such meeting and consent to the
holding of such meeting without notice.

SECTION 3. The fiscal year of the Company shall begin on the first day
of January and end on the last day of December in each year.

SECTION 4. The Company shall indemnify the Directors, officers and
employes of the Company, and shall have the power to indemnify other agents of
the Company and any person acting or serving at the request of the Company as a
director, officer, employe or agent of another corporation, partnership, joint
venture, trust or other enterprise, in accordance with and to the extent
permitted by Section 8.75 of The Business Corporation Act of 1983 of the State
of Illinois, as from time to time amended and in effect. Such indemnification
shall be available to any past, present or future Director, officer or employe
of the Company, and may be available to any past, present or future agent of the
Company and any past, present or future director, officer, employe or agent of
such other corporation, partnership, joint venture, trust or other enterprise,
and shall apply to actions, suits, proceedings or claims arising out of or based
upon events occurring prior to, on or after the date of original adoption of
this by-law.

<PAGE>

-12-

ARTICLE VII.

ALTERATION, AMENDMENT OR REPEAL OF BY-LAWS.

These by-laws may be altered, amended or repealed by the stockholders or
the Board of Directors.

<PAGE>

Exhibit (12)
Commonwealth Edison Company
Form 10-Q File No. 1-1839

Commonwealth Edison Company and Subsidiary Companies Consolidated
-----------------------------------------------------------------

Computation of Ratios of Earnings to Fixed Charges
and Ratios of Earnings to Fixed Charges and
Preferred and Preference Stock Dividend Requirements
----------------------------------------------------
(Thousands of Dollars)

<TABLE>
<CAPTION>
Twelve Months Ended
---------------------------
Line June 30, December 31,
No. 1998 1997
- ---- ------------ ------------
<S> <C> <C>
1 Net income (loss) before extraordinary item and cumulative effect of
2 change in accounting principle $ (90,194) $ (160,138)
------------ ------------
3 Net provisions for income taxes and investment tax credits deferred
4 charged to-
5 Operations $ 329,824 $ 307,276
6 Other income (409,784) (405,819)
------------ ------------

7 $ (79,960) $ (98,543)
------------ ------------
8 Fixed charges-
9 Interest on debt $ 464,370 $ 487,749
10 Estimated interest component of nuclear fuel and
11 other lease payments, rentals and other interest 75,224 70,468
12 Amortization of debt discount, premium and expense 16,430 21,951
13 Company-obligated manadatorily redeemable preferred securities
14 dividend requirements of subsidiary trusts holding solely the
15 Company's subordinated debt securities 29,639 28,860
------------ ------------
16 $ 585,663 $ 609,028
------------ ------------

17 Preferred and preference stock dividend requirements-
18 Provisions for preferred and preference stock dividends $ 58,483 $ 60,486
19 Taxes on income required to meet provisions for
20 preferred and preference stock dividends 38,311 39,623
------------ ------------
21 $ 96,794 $ 100,109
------------ ------------
22 Fixed charges and preferred and preference stock
23 dividend requirements $ 682,457 $ 709,137
------------ ------------
24 Earned for fixed charges and preferred and preference stock
25 dividend requirements $ 415,509 $ 350,347
------------ ------------
26 Ratios of earnings to fixed charges (line 25 divided by line 16) 0.71 0.58
==== ====

27 Ratios of earnings to fixed charges and preferred and preference
28 stock dividend requirements (line 25 divided by line 23) 0.61 0.49
==== ====
</TABLE>

<PAGE>

Exhibit (23)-1
Unicom Corporation
Form 10-Q File No. 1-11375

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------

As independent public accountants, we hereby consent to the incorporation
by reference of our report in this Form 10-Q for the quarterly period ended June
30, 1998 (Report), into Unicom Corporation's previously filed prospectuses dated
March 18, 1994, constituting part of Form S-4 Registration Statement File No.
33-52109, as amended (relating to Common Stock of Unicom Corporation), as
further amended by Post-Effective Amendment No. 1 on Form S-8 (relating to
Commonwealth Edison Company's Employee Savings and Investment Plan) and Post-
Effective Amendment No. 2 on Form S-8 (relating to Unicom Corporation's Employee
Stock Purchase Plan); Form S-8 Registration Statement File No. 33-56991
(relating to Unicom Corporation's Long-Term Incentive Plan), Form S-4
Registration Statement File No. 333-01003 (relating to Common Stock of Unicom
Corporation), Form S-8 Registration Statement File No. 333-04749 (relating to
Unicom Corporation's 1996 Directors' Fee Plan); Form S-8 Registration Statements
File Nos. 333-10613 and 333-26779 (relating to Commonwealth Edison Company's
Employee Savings and Investment Plan) and Form S-8 Registration Statement File
No. 333-39677 (relating to the Unicom Corporation Management Deferred
Compensation Plan). We also consent to the application of our Report to
Commonwealth Edison Company and subsidiary companies' ratios of earnings to
fixed charges and ratios of earnings to fixed charges and preferred and
preference stock dividend requirements for each of the twelve months ended June
30, 1998 and December 31, 1997 appearing in this Form 10-Q.

Arthur Andersen LLP

Chicago, Illinois
August 10, 1998

<PAGE>

Exhibit (23)-2
Commonwealth Edison Company
Form 10-Q File No. 1-1839

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------

As independent public accountants, we hereby consent to the incorporation
by reference of our report in this Form 10-Q for the quarterly period ended June
30, 1998 (Report), into Commonwealth Edison Company's (the Company) previously
filed prospectuses as follows: (1) prospectus dated August 21, 1986,
constituting part of Form S-3 Registration Statement File No. 33-6879, as
amended (relating to the Company's Debt Securities and Common Stock); (2)
prospectus dated January 7, 1994, constituting part of Form S-3 Registration
Statement File No. 33-51379 (relating to the Company's Debt Securities and
Cumulative Preference Stock); (3) prospectus dated September 19, 1995,
constituting part of Amendment No. 1 to Form S-3 Registration Statement File No.
33-61343, as amended (relating to Company-Obligated Mandatory Redeemable
Preferred Securities of ComEd Financing I); (4) prospectus dated June 13, 1997
constituting part of Form S-4 Registration Statement File No. 333-28369
(relating to Company-Obligated Mandatory Redeemable Preferred Securities of
ComEd Financing II); and (5) Form S-8 Registration Statement File No. 333-33847
(relating to the Commonwealth Edison Company Excess Benefit Savings Plan. We
also consent to the application of our Report to the ratios of earnings to fixed
charges and the ratios of earnings to fixed charges and preferred and preference
stock dividend requirements for each of the twelve months June 30, 1998 and
December 31, 1997 appearing in this Form 10-Q.

Arthur Andersen LLP

Chicago, Illinois
August 10, 1998

<PAGE>

<ARTICLE> UT
<LEGEND> This schedule contains summary financial information extracted from
the Consolidated Balance Sheet and Statement of Consolidated Capitalization as
of June 30, 1998 and the related Statements of Consolidated Operations, Retained
Earnings (Deficit) and Cash Flows for the six months ended June 30, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000918040
<NAME> Unicom Corporation
<MULTIPLIER> 1,000

<F1> This item is not disclosed as a separate line item on the Consolidated
Balance Sheet.

<F2> Includes a deduction of $3,325 thousand for preference stock expense of
ComEd.

<F3> Preferred and preference stocks of ComEd.

<F4> $1,034,112 thousand of notes and long-term note to bank is included in
LONG-TERM-DEBT-NET.

<F5> Includes $350,000 thousand of ComEd-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding solely ComEd's
subordinated debt securities.

<F6> A tax benefit of $13,556 thousand related to nonoperating activities is
included in INCOME-TAX-EXPENSE.

<F7> A $29,009 thousand provision for preferred and preference stock dividends
of ComEd and a $14,855 thousand provision for preferred securities
dividends of subsidiary trusts holding solely ComEd's subordinated debt
securities are included in OTHER-INCOME-NET.

<F8> This item is not disclosed as a separate line item on the Statement of
Consolidated Operations.
</FN>

</TABLE>

<PAGE>

<ARTICLE> UT
<LEGEND> This schedule contains summary financial information extracted from
the Consolidated Balance Sheet and Statement of Consolidated Capitalization as
of June 30, 1998 and the related Statements of Consolidated Operations, Retained
Earnings (Deficit) and Cash Flows for the six months ended June 30, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000022606
<NAME> Commonwealth Edison Company
<MULTIPLIER> 1,000

<F1> This item is not disclosed as a separate line item on the Consolidated
Balance Sheet.

<F2> $827,222 thousand of notes is included in LONG-TERM-DEBT-NET.

<F3> Includes $350,000 thousand of company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding solely the Company's
subordinated debt securities.

<F4> A tax benefit of $13,556 thousand related to nonoperating activities is
included in INCOME-TAX-EXPENSE.

<F5> Includes $14,855 thousand of provision for preferred securities dividends
of subsidiary trusts holding solely the Company's subordinated debt
securities.

<F6> This item is not disclosed as a separate line item on the Statement of
Consolidated Operations.
</FN>

</TABLE>