COMMONWEALTH EDISON CO, 10-Q/A, 2000-05-12

COMMONWEALTH EDISON CO
10-Q/A, 2000-05-12
ELECTRIC SERVICES

Previous: COMMONWEALTH EDISON CO, 10-K/A, 2000-05-12

Next: COMMONWEALTH EDISON CO, 10-Q/A, 2000-05-12

<PAGE>

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

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A
Amendment No. 1

(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, 1999

[_] 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, 1999:
Unicom Corporation 217,349,702 shares
Commonwealth Edison Company 213,972,307 shares

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

Unicom Corporation
and
Commonwealth Edison Company

Amended Quarterly Reports on Form 10-Q/A
to the Securities and Exchange Commission
for the Quarterly Period Ended June 30, 1999

This document contains the amended Quarterly Reports on Form 10-Q/A for the
quarterly period ended June 30, 1999 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 pages 58-59 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, 1999 and 1998............... 5
Consolidated Balance Sheets--June 30, 1999 and December 31, 1998..... 6-7
Statements of Consolidated Capitalization--June 30, 1999 and December
31, 1998............................................................ 8
Statements of Consolidated Retained Earnings/(Deficit) for the three
months, six months and twelve months ended June 30, 1999 and 1998... 9
Statements of Consolidated Cash Flows for the three months, six
months and twelve months ended June 30, 1999 and 1998............... 10
Notes to Financial Statements........................................ 11-38
Management's Discussion and Analysis of Financial Condition and Results
of
Operations............................................................ 39-59
Commonwealth Edison Company and Subsidiary Companies:
Financial Statements--
Report of Independent Public Accountants............................. 60
Statements of Consolidated Operations for the three months, six
months and twelve months ended June 30, 1999 and 1998............... 61
Consolidated Balance Sheets--June 30, 1999 and December 31, 1998..... 62-63
Statements of Consolidated Capitalization--June 30, 1999 and December
31, 1998............................................................ 64
Statements of Consolidated Retained Earnings/(Deficit) for the three
months, six months and twelve months ended June 30, 1999 and 1998... 65
Statements of Consolidated Cash Flows for the three months, six
months and twelve months ended June 30, 1999 and 1998............... 66
Notes to Financial Statements........................................ 67-72
Management's Discussion and Analysis of Financial Condition and Results
of
Operations............................................................ 73
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 74
Item 4. Submission of Matters to a Vote of Security Holders............ 75-76
Item 6. Exhibits and Reports on Form 8-K............................... 76
SIGNATURES............................................................... 77
</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
APX Automated Power Exchange Inc., a California company
ARES Alternative Retail Electric Suppliers
CERCLA Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended
City City of Chicago
ComEd Commonwealth Edison Company, a Unicom subsidiary
ComEd Funding ComEd Funding, LLC, a ComEd subsidiary
ComEd Funding Trust ComEd Transitional Funding Trust, a ComEd Funding
subsidiary
Congress U.S. Congress
Cotter Cotter Corporation, a ComEd subsidiary
CTC Non-bypassable "competitive transition charge"
DOE U.S. Department of Energy
Edison Development Edison Development Canada Inc., a ComEd subsidiary
EEI Edison Electric Institute
EME Edison Mission Energy, an Edison International
subsidiary
EMS Energy Management System
EPRI Electric Power Research Institute
EPS Earnings/(Loss) per Common Share
ESPP Employee Stock Purchase Plan
FAC Fuel adjustment clause
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
Fossil plant ComEd's six coal-fired generating plants, an oil and
gas-fired plant, and nine peaking unit sites
GAAP Generally Accepted Accounting Principles
ICC Illinois Commerce Commission
IDR Illinois Department of Revenue
Indiana Company Commonwealth Edison Company of Indiana, Inc., a ComEd
subsidiary
INPO Institute of Nuclear Power Operations
ISO Independent System Operator
MAIN Mid-America Interconnected Network
MGP Manufactured gas plant
NEI Nuclear Energy Institute
NEIL Nuclear Electric Insurance Limited
NERC North American Electric Reliability Council
Northwind Midway Northwind Midway, LLC, a UT Holdings subsidiary
NPL National Priorities List
NRC Nuclear Regulatory Commission
O&M Operation and maintenance
SCADA Supervisory Control And Data Acquisition
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
SPEs Special purpose entities
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
Unicom Investment Unicom Investment Inc., a Unicom subsidiary
Unicom Thermal Unicom Thermal Technologies Inc., a UT Holdings
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, 1999 and December 31, 1998, 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, 1999 and 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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, 1999 and December 31, 1998, and the
results of their operations and their cash flows for the three-month, six-
month and twelve-month periods ended June 30, 1999 and 1998, in conformity
with accounting principles generally accepted in the United States.

Arthur Andersen LLP

Chicago, Illinois
August 13, 1999
(except with respect
to Note 1 as to
which the date is
May 12, 2000)

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, 1999 and 1998 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, asset
dispositions, 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
---------------------- ---------------------- -----------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- -----------
(Thousands Except Per Share Data)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues...... $1,685,714 $1,779,146 $3,223,518 $3,444,043 $6,882,885 $ 7,137,887
---------- ---------- ---------- ---------- ---------- -----------
Operating Expenses and
Taxes:
Fuel................... $ 259,639 $ 241,873 $ 494,473 $ 464,166 $1,087,835 $ 1,067,845
Purchased power........ 98,301 279,359 169,983 452,751 465,249 636,316
Operation and
maintenance........... 650,096 565,598 1,205,498 1,134,594 2,355,938 2,362,127
Depreciation and
amortization.......... 266,947 232,581 498,279 481,483 960,083 981,956
Taxes (except income).. 130,135 185,062 262,495 392,488 569,841 803,258
Income taxes........... 60,347 60,945 123,611 116,091 360,265 343,534
Investment tax credits
deferred--net ........ (7,021) (6,888) (14,042) (14,048) (27,723) (29,270)
---------- ---------- ---------- ---------- ---------- -----------
$1,458,444 $1,558,530 $2,740,297 $3,027,525 $5,771,488 $ 6,165,766
---------- ---------- ---------- ---------- ---------- -----------
Operating Income........ $ 227,270 $ 220,616 $ 483,221 $ 416,518 $1,111,397 $ 972,121
---------- ---------- ---------- ---------- ---------- -----------
Other Income and
(Deductions):
Interest on long-term
debt, net of interest
capitalized........... $ (135,952) $ (110,640) $ (278,510) $ (223,394) $ (499,439) $ (462,863)
Interest on notes
payable............... (3,769) (3,207) (7,721) (9,016) (18,264) (12,900)
Allowance for funds
used during
construction.......... 5,190 4,698 9,401 7,858 18,006 30,394
Income taxes
applicable to
nonoperating
activities............ (1,833) 3,324 (3,249) 17,275 (17,827) 34,830
Provisions for
dividends and
redemption premiums--
Preferred and
preference stocks of
ComEd............... (3,043) (14,462) (18,340) (29,009) (46,215) (58,483)
ComEd-obligated
mandatorily
redeemable preferred
securities of
subsidiary trusts
holding solely
ComEd's subordinated
debt securities..... (7,427) (7,428) (14,855) (14,855) (29,710) (29,639)
Loss on nuclear plant
closure............... -- -- -- -- -- (885,611)
Income tax effects of
nuclear plant
closure............... -- -- -- -- -- 362,952
Miscellaneous--net..... 38,956 (12,443) 46,664 (31,204) 74,674 (127,058)
---------- ---------- ---------- ---------- ---------- -----------
$ (107,878) $ (140,158) $ (266,610) $ (282,345) $ (518,775) $(1,148,378)
---------- ---------- ---------- ---------- ---------- -----------
Net Income/(Loss) before
Extraordinary Items.... $ 119,392 $ 80,458 $ 216,611 $ 134,173 $ 592,622 $ (176,257)
Extraordinary Losses,
less Applicable Income
Taxes.................. -- -- (27,576) -- (27,576) (810,335)
---------- ---------- ---------- ---------- ---------- -----------
Net Income/(Loss)....... $ 119,392 $ 80,458 $ 189,035 $ 134,173 $ 565,046 $ (986,592)
========== ========== ========== ========== ========== ===========
Earnings/(loss) per
common share before
extraordinary items--
Basic.................. $ 0.55 $ 0.37 $ 1.00 $ 0.62 $ 2.73 $ (0.80)
Diluted................ $ 0.55 $ 0.37 $ 1.00 $ 0.62 $ 2.72 $ (0.80)
Extraordinary losses,
less applicable income
taxes (basic and
diluted)............... -- -- (0.13) -- (0.13) (3.75)
Earnings/(loss) per
common share--
Basic.................. $ 0.55 $ 0.37 $ 0.87 $ 0.62 $ 2.60 $ (4.55)
Diluted................ $ 0.55 $ 0.37 $ 0.87 $ 0.62 $ 2.59 $ (4.55)
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 1999 1998
------ ----------- ------------
(Thousands of Dollars)
<S> <C> <C>
Utility Plant:
Plant and equipment, at original cost (includes
construction work in progress of $872 million and
$858 million, respectively)....................... $28,245,096 $27,801,246
Less--Accumulated provision for depreciation....... 15,662,340 15,234,320
----------- -----------
$12,582,756 $12,566,926
Nuclear fuel, at amortized cost.................... 856,379 874,979
----------- -----------
$13,439,135 $13,441,905
----------- -----------
Investments and Other Property:
Nuclear decommissioning funds...................... $ 2,450,974 $ 2,267,317
Subsidiary companies............................... 42,398 41,150
Other, at cost..................................... 269,575 275,794
----------- -----------
$ 2,762,947 $ 2,584,261
----------- -----------
Current Assets:
Cash............................................... $ 40,081 $ 28,893
Temporary cash investments......................... 27,811 26,935
Cash held for redemption of securities............. 671,233 3,062,816
Special deposits................................... 382 271
Receivables--
Customers........................................ 1,342,273 1,369,701
Forward share repurchase contract................ 695,530 --
Other............................................ 114,187 136,701
Provisions for uncollectible accounts............ (64,997) (48,645)
Coal and fuel oil, at average cost................. 146,025 135,415
Materials and supplies, at average cost............ 239,513 232,246
Deferred income taxes related to current assets and
liabilities....................................... 35,863 24,339
Prepayments and other.............................. 42,744 20,301
----------- -----------
$ 3,290,645 $ 4,988,973
----------- -----------
Deferred Charges and Other Noncurrent Assets:
Regulatory assets.................................. $ 4,432,593 $ 4,578,427
Other.............................................. 71,379 96,907
----------- -----------
$ 4,503,972 $ 4,675,334
----------- -----------
$23,996,699 $25,690,473
=========== ===========
</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 1999 1998
------------------------------ ----------- ------------
(Thousands of Dollars)
<S> <C> <C>
Capitalization (see accompanying statements):
Common stock equity................................. $ 5,101,309 $ 5,099,444
Preferred and preference stocks of ComEd--
Without mandatory redemption requirements......... 1,836 74,488
Subject to mandatory redemption requirements...... -- 69,475
ComEd-obligated mandatorily redeemable preferred se-
curities of subsidiary trusts holding solely
ComEd's subordinated debt securities*.............. 350,000 350,000
Long-term debt...................................... 7,374,057 7,792,502
----------- -----------
$12,827,202 $13,385,909
----------- -----------
Current Liabilities:
Notes payable....................................... $ 411,850 $ 292,963
Current portion of long-term debt, redeemable pref-
erence stock
and capitalized lease obligations of subsidiary
companies.......................................... 1,222,769 2,314,443
Accounts payable.................................... 491,135 604,936
Accrued interest.................................... 150,724 180,674
Accrued taxes....................................... 251,463 134,976
Dividends payable................................... 95,803 105,133
Customer deposits................................... 62,889 56,954
Accrued plant closing costs......................... 43,411 78,430
Other............................................... 136,138 155,262
----------- -----------
$ 2,866,182 $ 3,923,771
----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
Deferred income taxes............................... $ 3,731,425 $ 3,805,460
Nuclear decommissioning liability for retired
plants............................................. 1,252,100 1,215,400
Accumulated deferred investment tax credits......... 544,262 562,285
Accrued spent nuclear fuel disposal fee and related
interest........................................... 745,066 728,413
Obligations under capital leases of subsidiary com-
panies............................................. 257,611 333,653
Regulatory liabilities.............................. 587,639 595,005
Other............................................... 1,185,212 1,140,577
----------- -----------
$ 8,303,315 $ 8,380,793
----------- -----------
Commitments and Contingent Liabilities (Note 21)
$23,996,699 $25,690,473
=========== ===========
</TABLE>

*As described in Note 10 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,
1999 1998
----------- ------------
(Thousands of Dollars)
<S> <C> <C>
Common Stock Equity:
Common stock, without par value--
Outstanding--217,287,495 shares and 217,094,560
shares, respectively.............................. $ 4,955,090 $ 4,966,630
Preference stock expense of ComEd................... (429) (3,199)
Retained earnings................................... 156,743 142,813
Treasury stock--264,406 shares and 178,982,
respectively....................................... (10,095) (6,800)
----------- -----------
$ 5,101,309 $ 5,099,444
----------- -----------
Preferred and Preference Stocks of ComEd--
Without Mandatory Redemption Requirements:
Preference stock, cumulative, without par value--
Outstanding--3,000,000 shares and 13,499,549
shares, respectively............................ $ 72,638 $ 504,957
Current redemption requirements for preference
stock included in current liabilities............ (72,638) (432,320)
$1.425 convertible preferred stock, cumulative,
without par value--
Outstanding--57,725 shares and 58,211 shares,
respectively.................................... 1,836 1,851
Prior preferred stock, cumulative, $100 par value
per share--
No shares outstanding............................ -- --
----------- -----------
$ 1,836 $ 74,488
----------- -----------
Subject to Mandatory Redemption Requirements:
Preference stock, cumulative, without par value--
Outstanding--700,000 shares and 1,720,345 shares,
respectively ................................... $ 69,475 $ 171,348
Current redemption requirements for preference
stock included
in current liabilities........................... (69,475) (101,873)
----------- -----------
$ -- $ 69,475
----------- -----------
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 1999 through 2003--6 3/8% to 9 3/8%...... $ 672,242 $ 1,080,000
Maturing 2004 through 2013--4.40% to 8 3/8%....... 1,305,400 1,485,400
Maturing 2014 through 2023--5.85% to 9 7/8%....... 1,609,442 1,981,000
----------- -----------
$ 3,587,084 $ 4,546,400
Transitional trust notes, due 2000 through 2008--
5.29% to 5.74%..................................... 3,260,000 3,400,000
Sinking fund debentures, due 1999 through 2011--2
3/4% to 7 5/8%..................................... 32,418 94,159
Pollution control obligations, due 2007 through
2014--3.45% to 5 7/8%.............................. 139,200 140,700
Other long-term debt................................ 1,319,713 1,259,204
Deposit for retirement of long-term debt............ (1,021) --
Current maturities of long-term debt included in
current liabilities................................ (910,642) (1,585,281)
Unamortized net debt discount and premium........... (52,695) (62,680)
----------- -----------
$ 7,374,057 $ 7,792,502
----------- -----------
$12,827,202 $13,385,909
=========== ===========
</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
-------------------- ----------------- --------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- -------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of
Period................. $ 124,991 $ (54,207) $142,813 $(21,184) $(60,832) $1,272,858
Add--Net income/(loss).. 119,392 80,458 189,035 134,173 565,046 (986,592)
--------- --------- -------- -------- -------- ----------
$ 244,383 $ 26,251 $331,848 $112,989 $504,214 $ 286,266
--------- --------- -------- -------- -------- ----------
Deduct--
Cash dividends
declared on
common stock........ $ 86,916 $ 86,774 $173,781 $173,513 $347,429 $ 346,689
Other capital stock
transactions--net... 724 309 1,324 308 42 409
--------- --------- -------- -------- -------- ----------
$ 87,640 $ 87,083 $175,105 $173,821 $347,471 $ 347,098
--------- --------- -------- -------- -------- ----------
Balance at End of Period
(Includes $509 million
and $292 million of
appropriated retained
earnings at June 30,
1999 and 1998,
respectively).......... $ 156,743 $ (60,832) $156,743 $(60,832) $156,743 $ (60,832)
========= ========= ======== ======== ======== ==========
</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
-------------------- ---------------------- ------------------------
1999 1998 1999 1998 1999 1998
--------- --------- ----------- --------- ----------- -----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Cash Flow from Operating
Activities:
Net income/(loss)...... $ 119,392 $ 80,458 $ 189,035 $ 134,173 $ 565,046 $ (986,592)
Adjustments to
reconcile net
income/(loss) to net
cash provided by
operating activities:
Depreciation and
amortization........ 285,472 246,768 531,784 508,778 1,017,175 1,035,998
Deferred income taxes
and investment tax
credits--net........ (44,664) (20,555) (98,320) 6,126 (34,806) (342,806)
Extraordinary loss
related to write-off
of certain net
regulatory assets... -- -- -- -- -- 810,335
Loss on nuclear plant
closure............. -- -- -- -- -- 885,611
Provisions/(payments)
for revenue
refunds--net........ 2,635 (10,966) (19,858) (45,470) 2,745 --
Equity component of
allowance for funds
used during
construction........ (2,003) (1,960) (3,756) (3,544) (7,170) (16,529)
Provisions/(payments)
for liability for
separation costs--
net................. (1,018) (389) (9,798) 7,036 (7,076) 22,219
Net effect on cash
flows of changes in:
Receivables........ (147,694) (204,705) 32,877 (143,254) (293,303) (209,152)
Coal and fuel oil.. 7,533 (48,322) (10,610) (84,508) 59,147 (25,022)
Materials and
supplies.......... (3,128) (6,672) (7,267) (11,893) 24,431 29,225
Accounts payable
excluding nuclear
fuel lease
principal payments
and separation
costs--net........ 27,956 138,409 (102,923) 101,042 (108,081) 150,574
Accrued interest
and taxes......... (43,887) 81,293 104,587 83,027 (8,107) 42,144
Other changes in
certain current
assets and
liabilities....... 24,148 34,861 51,998 53,651 143,880 247,446
Other--net........... 41,668 (4,656) 122,307 44,839 82,042 86,635
--------- --------- ----------- --------- ----------- -----------
$ 266,410 $ 283,564 $ 780,056 $ 650,003 $ 1,435,923 $ 1,730,086
--------- --------- ----------- --------- ----------- -----------
Cash Flow from Investing
Activities:
Construction
expenditures.......... $(249,618) $(259,787) $ (480,693) $(432,738) $ (974,552) $(1,013,800)
Nuclear fuel
expenditures.......... (63,862) (34,418) (113,947) (94,967) (185,147) (189,625)
Sales of generating
plants................ -- -- -- 177,454 -- 238,245
Equity component of
allowance for funds
used during
construction.......... 2,003 1,960 3,756 3,544 7,170 16,529
Contributions to
nuclear
decommissioning
funds................. -- -- (39,426) (80,077) (96,120) (114,721)
Other investments and
special deposits...... (7,886) 12,657 (12,701) (4,862) (28,281) 16,772
--------- --------- ----------- --------- ----------- -----------
$(319,363) $(279,588) $ (643,011) $(431,646) $(1,276,930) $(1,046,600)
--------- --------- ----------- --------- ----------- -----------
Cash Flow from Financing
Activities:
Issuance of
securities--
Transitional trust
notes................ $ -- $ -- $ -- $ -- $ 3,382,629 $ --
Other long-term debt.. 28,130 10,000 63,130 35,000 410,400 80,000
Capital stock......... 3,588 2,544 4,412 6,767 14,290 13,232
Retirement and
redemption of
securities--
Transitional trust
notes................ (140,000) -- (140,000) -- (140,000) --
Other long-term debt.. (5,355) (8,139) (1,061,010) (374,648) (1,302,220) (534,934)
Capital stock......... (51) (6,092) (564,264) (6,225) (598,905) (47,096)
Deposits and
securities held for
retirement and
redemption of
securities............ -- 3,069 -- (995) -- (766)
Prepayment of forward
share repurchase
contract.............. -- -- (662,113) -- (662,113) --
Cash dividends paid on
common stock.......... (86,864) (86,738) (173,670) (173,348) (347,276) (346,480)
Proceeds from
sale/leaseback of
nuclear fuel.......... -- 44,861 -- 61,426 39,612 130,109
Nuclear fuel lease
principal payments.... (48,191) (128,823) (101,936) (161,009) (196,531) (241,566)
Increase/(decrease) in
short-term
borrowings............ 191,036 110,196 118,887 331,696 (77,996) 226,096
--------- --------- ----------- --------- ----------- -----------
$ (57,707) $ (59,122) $(2,516,564) $(281,336) $ 521,890 $ (721,405)
--------- --------- ----------- --------- ----------- -----------
Change in Net Cash
Balance................ $(110,660) $ (55,146) $(2,379,519) $ (62,979) $ 680,883 $ (37,919)
Cash, Temporary Cash
Investments and Cash
Held for Redemption of
Securities:
Balance at Beginning
of Period........... 849,785 113,388 3,118,644 121,221 58,242 96,161
--------- --------- ----------- --------- ----------- -----------
Balance at End of
Period.............. $ 739,125 $ 58,242 $ 739,125 $ 58,242 $ 739,125 $ 58,242
========= ========= =========== ========= =========== ===========
</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,
Indiana Company, Edison Development, the Trusts, ComEd Funding, ComEd Funding
Trust and Unicom's unregulated subsidiaries. All significant intercompany
transactions have been eliminated. Although the accounts of ComEd Funding and
ComEd Funding Trust, which are SPEs, are included in the consolidated
financial statements, as required by GAAP, ComEd Funding and ComEd Funding
Trust are legally separated from Unicom and ComEd. The assets of the SPEs are
not available to creditors of Unicom or ComEd and the transitional property
held by the SPEs are not assets of Unicom or ComEd.

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. Due to the transition to a new
customer information and billing system, a larger portion of customer revenues
and net receivables were based on estimates in the latter part of 1998 and in
the first half of 1999 than in previous years.

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 as of June 30,
1999 and December 31, 1998. See "Regulatory Assets and Liabilities" below
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, 1999 and December 31, 1998 were as
follows:

<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------- ------------
(Thousands of Dollars)
<S> <C> <C>
Regulatory assets:
Impaired production plant............................. $2,856,809 $2,955,154
Deferred income taxes (1)............................. 667,728 680,356
Nuclear decommissioning costs--Dresden Unit 1......... 202,888 255,031
Nuclear decommissioning costs--Zion Units 1 and 2..... 486,043 443,130
Coal reserves......................................... 178,038 197,975
Unamortized loss on reacquired debt (2)............... 41,087 46,781
---------- ----------
$4,432,593 $4,578,427
========== ==========
Regulatory liabilities:
Deferred income taxes (1)............................. $ 587,639 $ 595,005
========== ==========
</TABLE>
- --------
(1) Recorded in compliance with SFAS No. 109, Accounting for Income Taxes, for
non-generation related temporary differences.
(2) 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.

ComEd performed a SFAS No. 121 impairment analysis in 1998 which concluded
that future revenues, excluding the collection of the CTC expected to be
recovered from electric supply services, would be insufficient to cover the
costs of certain of its generating assets. Because future regulated cash
flows, which include the CTC, tariff revenues and gains from the disposition
of assets, are expected to provide recovery of the impaired plant assets, a
regulatory asset was recorded for the same amount. This regulatory asset is
currently being amortized as it is recovered through regulated cash flows and,
along with the coal reserves regulatory asset, is expected to be substantially
recovered at the completion of the fossil plant sale. See Note 4 for
additional information regarding the fossil plant sale.

Recovery of the regulatory asset for Dresden Unit 1 and Zion Units 1 and 2
represents unrecovered nuclear decommissioning costs, which are expected to be
recovered over the periods 1999-2011 and 1999-2013, respectively, through a
separate rate recovery rider provided for by the 1997 Act. See "Depreciation,
Amortization of Regulatory Assets and Decommissioning" below for additional
information.

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 13 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 $92 million and $65 million for the three months
ended June 30, 1999 and 1998, respectively, $180 million and $123 million for
the six months ended June 30, 1999 and 1998, respectively, and $347 million
and $261 million for the twelve months ended June 30, 1999 and 1998,
respectively.

12
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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 eight million as of June
30, 1999. It includes the City, an area of about 225 square miles with an
estimated population of approximately three million from which ComEd derived
approximately 30 percent of its ultimate consumer revenues for the three
months, six months and twelve months ended June 30, 1999. ComEd had
approximately 3.5 million electric customers at June 30, 1999.

As a result of the implementation of a new customer billing and information
system in July 1998, billing and collection delays have temporarily increased
accounts receivables from customers. Accounts receivable from customers
include $267 million and $331 million as of June 30, 1999 and December 31,
1998, respectively, for estimated unbilled revenues for service that has been
provided to customers, but for which bill issuance was delayed beyond the
normal date of issuance. ComEd has recorded increased provisions for
uncollectible accounts to recognize the estimated portion of receivables that
are not expected to be recoverable, primarily based on an aging analysis of
outstanding accounts receivable. Such provisions increased O&M expense by $25
million for the three months and six months ended June 30, 1999 and $35
million for the twelve months ended June 30, 1999, compared to normally
expected levels. Receivables from customers as of June 30, 1999 and December
31, 1998 also include $352 million and $266 million, respectively, for
estimated unbilled revenues for electric service that has been provided to
customers subsequent to the normal billing date and prior to the end of the
reporting period.

See Notes 2, 3 and 18 for additional information.

Depreciation, Amortization of Regulatory Assets and Decommissioning.
Depreciation, amortization of regulatory assets and decommissioning for the
three months, six months and twelve months ended June 30, 1999 and 1998 were
as follows:

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
------------------- ----------------- -------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- --------- ---------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Depreciation expense.... $180,587 $ 211,626 $358,025 $433,373 $ 712,708 $ 871,899
Amortization of
regulatory assets...... 65,405 -- 98,344 -- 163,555 7,636
--------- --------- -------- -------- --------- ---------
$ 245,992 $ 211,626 $456,369 $433,373 $ 876,263 $ 879,535
Decommissioning expense. 20,955 20,955 41,910 48,110 83,820 102,421
--------- --------- -------- -------- --------- ---------
$ 266,947 $ 232,581 $498,279 $481,483 $ 960,083 $ 981,956
========= ========= ======== ======== ========= =========
</TABLE>

The increases in the recent three-month and six-month periods are primarily
due to additional amortization of $33 million recorded in the second quarter
of 1999. The decrease in the recent twelve-month period is primarily due to
the retirement of Zion Station in December 1997 and the sales of State Line
and Kincaid Stations in December 1997 and February 1998, respectively, as well
as increased depreciation in 1998 related to the replacement of the steam
generators.

Provisions for depreciation, including nuclear plant, were at average annual
rates of average depreciable utility plant and equipment for the three months,
six months and twelve months ended June 30, 1999 and 1998 as follows:

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
-------------------- ------------------ --------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Average annual
depreciation rates..... 2.66% 3.23% 2.65% 3.32% 2.69% 3.34%
</TABLE>

13
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
Depreciation is provided on a straight-line basis by amortizing the cost of
depreciable plant and equipment over estimated service lives for each class of
plant. The decrease in the average depreciation rates for the periods in 1999,
compared to 1998, relates primarily to a reduction in nuclear depreciation
rates due to the partial impairment of production plant, which was recorded as
a component of accumulated depreciation, partially offset by shortened
depreciable lives for certain nuclear stations. The annual depreciation rate
for nuclear plant and equipment, excluding separately collected
decommissioning costs and depreciation related to the replacement of the steam
generators, was 2.88% for periods ending prior to July 1, 1998. The nuclear
depreciation rate applied to gross depreciable nuclear plant, beginning July
1, 1998, is 2.16% reflecting the partial impairment of production plant and
shortened depreciable lives for certain nuclear stations. See "Regulatory
Assets and Liabilities" above for additional information on the partial
impairment of production plant.

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--Depreciation,
Amortization and 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 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 ten
operating units have remaining current NRC license lives ranging from 7 to 28
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, decommissioning costs are estimated to
be $5.4 billion in current-year (1999) dollars, including a contingency
allowance. This estimate includes $515 million of non-radiological costs,
which are included in ComEd's proposed rider for recovery, as discussed below.
ComEd's decommissioning cost expenditures at the end of the units' operating
lives are estimated to total approximately $13.8 billion. These expenditures
will occur primarily during the period from 2007 through 2034. 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.

14
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
million. The reduction primarily reflected stronger than expected after-tax
returns on the external trust funds and lower than expected escalation in low-
level waste disposal costs, partially offset by the higher current-year cost
estimates, including a contingency allowance.

Under its most recent annual rider, filed with the ICC on February 26, 1999,
ComEd has proposed to increase its estimated annual decommissioning cost
accrual from $84 million to $130 million. The proposed increase primarily
reflects an increase in low-level waste disposal cost escalation, the
inclusion of $209 million in current-year (1999) dollars for safety-related
costs of maintaining Zion Station in a mothballed condition until
dismantlement begins, and the inclusion of non-radiological costs in the
decommissioning cost estimates for recovery under the rider.

The proposed annual decommissioning cost accrual of $130 million was
determined using the following assumptions: the decommissioning cost estimate
of $5.4 billion in current-year (1999) dollars, after-tax earnings on the tax-
qualified and nontax-qualified decommissioning funds of 7.49% and 6.83%,
respectively, and an escalation rate for future decommissioning costs of
4.84%. The annual accrual 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 $13.8 billion.

For the ten 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 rates. As of
June 30, 1999, the total decommissioning costs included in the accumulated
provision for depreciation were $2,010 million.

For ComEd's retired nuclear units, the total estimated liability for nuclear
decommissioning in current-year (1999) dollars is recorded as a liability. The
unrecovered portion of the liability is recorded as a regulatory asset. The
nuclear decommissioning liability for retired plants as of June 30, 1999 was
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.................................... $118,612 $444,557 $ 563,169
Unrecovered portion of the liability.............. 202,888 486,043 688,931
-------- -------- ----------
Nuclear decommissioning liability for retired
plants.......................................... $321,500 $930,600 $1,252,100
======== ======== ==========
</TABLE>

Under Illinois law, decommissioning cost collections are required to be
deposited into external trusts. 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, 1999 was $2,451 million, which includes
pre-tax unrealized appreciation of $708 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,
1999 was 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)...................... $2,010,423
Amounts recovered through rates and investment fund
earnings for retired plants............................ 563,169
Less past accruals not yet contributed to the trusts.... 122,618
----------
Fair value of external trust funds..................... $2,450,974
==========
</TABLE>

15
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
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 temporary 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 component of AFUDC is recorded on a pre-tax basis. The
average annual capitalization rates were 7.65% and 8.09% for the three months
ended June 30, 1999 and 1998, respectively, 7.83% and 8.53% for the six months
ended June 30, 1999 and 1998, respectively, and 8.00% and 9.02% for the twelve
months ended June 30, 1999 and 1998, respectively. ComEd discontinued SFAS No.
71 regulatory accounting practices in December 1997 for the generation portion
of its business, and as a result began capitalizing interest in 1998. ComEd
capitalized $6 million for each of the three-month periods ended June 30, 1999
and 1998, $12 million and $8 million for the six months ended June 30, 1999
and 1998, respectively, and $32 million and $8 million for the twelve months
ended June 30, 1999 and 1998, respectively, in interest costs on its
generation-related construction work in progress and nuclear fuel in process.
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 $157 million and $137 million for the three months ended June
30, 1999 and 1998, respectively, $324 million and $277 million for the six
months ended June 30, 1999 and 1998, respectively, and $579 million and $572
million for the twelve months ended June 30, 1999 and 1998, 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 7 for
additional information.

16
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

Average Common Shares Outstanding. Under the provisions of SFAS No. 128,
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, 1999 and 1998. The number of average outstanding
common shares used to compute basic and diluted EPS for the three months, six
months and twelve months ended June 30, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
Three Months Ended Six Months Twelve Months Ended
June 30 Ended June 30 June 30
------------------- --------------- -------------------
1999 1998 1999 1998 1999 1998
--------- --------- ------- ------- --------- ---------
(Thousands of Shares)
<S> <C> <C> <C> <C> <C> <C>
Average Number of Common
Shares Outstanding:
Average Number of Com-
mon Shares--Basic..... 217,235 216,897 217,158 216,802 217,120 216,625
Potentially Dilutive
Common Shares--Trea-
sury Method:
Stock Options........ 1,006 655 813 611 780 433
Other Convertible
Securities.......... 89 91 89 91 89 91
--------- --------- ------- ------- --------- ---------
Average Number of Com-
mon Shares--Diluted... 218,330 217,643 218,060 217,504 217,989 217,149
========= ========= ======= ======= ========= =========
</TABLE>

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, which establishes accounting and reporting
standards requiring that every derivative instrument, including certain
derivative instruments embedded in other contracts, be recorded on the
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.

The effective date of SFAS No. 133 has been delayed for one year, to fiscal
years beginning after June 15, 2000. SFAS No. 133 may be implemented prior to
June 15, 2000, but such implementation 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 January 1, 1998 or January 1, 1999
at the Company's election.

Unicom and ComEd have not yet quantified the effects on their financial
statements of adopting SFAS No. 133 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.

17
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

Cash Held for Redemption of Securities. As of June 30, 1999, the cash held
for redemption of securities reported on the Consolidated Balance Sheets
includes $607 million in unused cash proceeds from the issuance of the
transitional trust notes and $64 million of escrowed cash and pending
instrument funding charges collected from ComEd customers to be applied to the
principal and interest payment on the transitional trust notes. See Note 2 for
additional information.

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, 1999 and 1998 was as follows:

(2) Accounting Effects Related to the 1997 Act. In December 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 was amended in June 1999. The 1997
Act, as amended, provides for, among other things, a 15% residential base rate
reduction which became effective August 1, 1998, an additional 5% residential
base rate reduction in October 2001 and gradual customer access to other
electric suppliers. Access for commercial and industrial customers will occur
over a period from October 1999 to October 2000, and access for residential
customers will occur after May 1, 2002. ComEd's operating revenues were
reduced by approximately $170 million in 1998 due to the 15% residential base
rate reduction. ComEd expects that the 15% rate reduction will reduce ComEd's
operating revenues by approximately $210 million in 1999, compared to 1998
rate levels. The 1997 Act, as amended, also committed ComEd to spend at least
$2 billion through 2004 on transmission and distribution facilities outside of
the City and $250 million in environmental funding initiatives, pending the
close of the fossil plant sale.

As a result of the 1997 Act, as amended, and FERC rules, prices for the
supply of electric energy are expected to transition from cost-based,
regulated rates to rates determined by competitive market forces. Accordingly,
the 1997 Act, as amended, provides for the collection of a CTC from customers
who choose another electric service provider during a transition period that
extends through 2006. 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. 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 asset dispositions. See Note 4 for additional information.

18
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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. A utility may request a rate
increase during the rate freeze period only when necessary to ensure the
utility's financial viability, but not before January 1, 2000. Under the
earnings provision of the 1997 Act, as amended, if the earned return on common
equity of a utility during this period exceeds an established threshold, one-
half of the excess earnings must be refunded to customers. The threshold rate
of return on common equity is based on the 30-Year Treasury Bond rate, plus
5.5% in the years 1998 and 1999, and plus 8.5% in the years 2000 through 2004.
The utility's earned return on common equity and the threshold return on
common equity are each calculated on a two-year average basis. The earnings
sharing provision is applicable only to utility earnings. Increased
amortization of regulatory assets may be recorded, thereby reducing the earned
return on common equity, if earnings otherwise would have exceeded the maximum
allowable rate of return. The potential for earnings sharing or increased
amortization of regulatory assets could limit earnings in future periods.

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. On March 1, 1999, ComEd filed with the ICC its Non-
Residential Delivery Services Implementation Plan and associated tariffs for
the provision of delivery and other services related to ComEd's implementation
for retail open access, as called for by the 1997 Act. The ICC is required to
issue a final order in the third quarter of 1999.

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 SPE.
The proceeds, net of transaction costs, 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. In
December 1998, ComEd initiated the issuance of $3.4 billion of transitional
trust notes through its SPEs, ComEd Funding and ComEd Funding Trust. The
proceeds from the transitional trust notes, net of transaction costs, must be
used to redeem or repurchase debt and equity to lower ComEd's overall cost of
capital. Accordingly, in early 1999 ComEd redeemed $788 million of long-term
debt and $534 million of preference stock, and reacquired $229 million of
outstanding long-term debt through a tender offer. In addition, $500 million
of the proceeds was used to reduce ComEd's outstanding short-term debt. In the
first half of 1999, ComEd recorded an extraordinary loss related to the early
redemptions and the tender offer of the above-mentioned first mortgage bonds
and sinking fund debentures, which reduced net income on common stock by
approximately $28 million (after-tax), or $0.13 per common share (diluted).
ComEd also recorded $10 million (after-tax), or $0.04 per common share
(diluted), for premiums paid in connection with the redemption of the above-
mentioned preference stock. The preference stock premiums were included in the
provision for dividends for preference stocks of ComEd on the Statements of
Consolidated Operations. Unicom has announced plans to repurchase
approximately $750 million of Unicom common stock using the proceeds it
receives from ComEd's repurchase of its common stock held by Unicom. The
remaining proceeds will be used for the payment of fees and additional debt
and equity redemptions and repurchases. See Note 6 for additional information
regarding Unicom's share repurchase plans.

19
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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
(diluted). The fourth quarter of 1997 also reflected charges totaling $44
million (after-tax), or $0.20 per common share (diluted), as a result of
ComEd's elimination of its FAC pursuant to an option in the 1997 Act, and a
charge of $60 million (after-tax), or $0.28 per common share (diluted), for a
write down of ComEd's investment in uranium-related properties to realizable
value. Projections of the market price for uranium indicated that the expected
incremental costs of mining and milling uranium at the properties would exceed
the expected market price for uranium and such costs are not expected to be
recoverable in a competitive market.

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.

(3) Rate Matters. Three of ComEd's wholesale municipal customers filed a
complaint and request for refund with the FERC alleging that ComEd failed to
properly adjust their rates, as provided for under the terms of their electric
service contracts, to track certain refunds made to ComEd's retail customers
in the years 1992 through 1994. In the third quarter of 1998, the FERC granted
the complaint and directed that refunds be made, with interest. ComEd filed
and was granted a request for rehearing for purposes of reconsideration with
the FERC. If the order is upheld, ComEd must make refunds within 15 days of
the resolution for rehearing. ComEd's management believes an adequate reserve
has been established in connection with this case.

(4) Closure and Sale of Plants. In January 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 (diluted).

The write-off included a liability for future closing costs associated with
the retirement of Zion Station, excluding severance costs, resulting in a
charge of $117 million (after-tax). ComEd has recorded reductions to the
liability for future closing costs of $7 million (after-tax), or $0.03 per
common share (diluted), and $15 million (after-tax), or $0.07 per common share
(diluted), in the years 1999 and 1998, respectively, to reflect lower than
expected closing costs due to employees being reassigned or removed from the
payroll sooner than expected, and lower than anticipated support costs and use
of contractors. See Note 16 for information regarding costs of voluntary
employee separation plans.

ComEd completed the sale of two of its coal-fired generating stations,
representing 1,598 megawatts of generating capacity, and has exclusive 15-year
purchased power agreements for the output of the stations. The sales of State
Line and Kincaid Stations were completed in December 1997 and February 1998,
respectively. The net proceeds of the sales, after income tax effects and
closing

20
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
costs, were approximately $190 million. The proceeds were used to retire or
redeem existing debt in the first quarter of 1998.

On March 22, 1999, ComEd entered into an Asset Sale Agreement providing for
the sale of substantially all of the assets of its fossil plant to EME for a
cash purchase price of $4.813 billion. The fossil plant assets represent an
aggregate generating capacity of approximately 9,772 megawatts. Completion of
the sale is subject to certain regulatory filings and approvals and is
expected to occur during the fourth quarter of 1999. The ICC approved the
fossil plant sale on August 3, 1999. The ICC's approval is subject to
potential appeal.

Just prior to the consummation of the fossil plant sale, ComEd expects to
transfer these assets to Unicom Investment. In consideration for the
transferred assets, Unicom Investment will pay ComEd consideration totaling
$4.813 billion in the form of a Demand Note in the amount of approximately
$2.350 billion and an interest-bearing Note with a maturity of twelve years.
Unicom Investment will immediately sell the fossil plant assets to EME, in
consideration of which Unicom Investment will receive $4.813 billion in cash
from EME. Immediately after its receipt of the cash payment from EME, Unicom
Investment will pay the $2.350 billion aggregate principal due to ComEd under
the Demand Note. Unicom Investment will use the remainder of the cash received
from EME to fund other business opportunities. Of the cash received by ComEd,
$1.680 billion is expected to be used to pay the costs and taxes associated
with the fossil plant sale. The remainder of the Demand Note proceeds will be
available to ComEd to fund, among other things, transmission and distribution
projects, nuclear generation station projects, and environmental and other
initiatives.

The sale is expected to produce an after-tax gain of approximately $1.6
billion, after settling commitments associated with certain coal contracts,
recognizing employee-related costs and funding certain environmental
initiatives. The gain on the sale will be utilized to recover certain
regulatory assets and as a result, the sale is not expected to have a
significant impact on net income in 1999. See Notes 1, under "Regulatory
Assets and Liabilities," and 21 for additional information.

As part of the sale transaction, ComEd will enter into transitional power
purchase agreements with the buyer. The agreement regarding the coal-fired
units would cover a declining number of generating units over a five-year
term, subject to an option in favor of ComEd to restore some or all of the
units in later years of the agreement. The agreements regarding the oil and
gas-fired plant and the peaking units cover the entire capacity of such
generating units for a five-year term, subject to ComEd's option commencing in
year three to terminate the agreements as to some or all of the generating
units. The options will provide some flexibility to ComEd to adjust its power
purchase needs to match its obligations to its customers during the transition
period to open access for customers. Each of the agreements provides for a
monthly capacity charge, based upon the capacity of the generating units under
contract and subject to adjustment based upon the availability of those
generating units, as well as charges for delivered energy.

(5) Authorized Shares, Voting Rights and Stock Rights of Capital Stock. At
June 30, 1999, 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, 1999 were: preference stock--10,510,451 shares; $1.425 convertible
preferred stock--57,725 shares; and prior preferred stock--850,000 shares. The
preference and prior preferred stocks are issuable in series and may be issued
with or

21
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
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 the Unicom 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 the 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 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.

(6) Common Equity. In the fourth quarter of 1998, Unicom entered into a
forward purchase arrangement for the repurchase of $200 million of its common
stock. This contract, which was accounted for as an equity instrument as of
December 31, 1998, was settled on a net cash basis in February 1999, resulting
in a $16 million reduction to common stock equity on the Consolidated Balance
Sheets.

In February 1999, Unicom also entered into a prepaid forward purchase
agreement with a financial institution for the repurchase of approximately 15
million shares of Unicom common stock. This forward purchase arrangement was
amended to also include the repurchase of approximately 5.1 million shares for
a total of 20.1 million shares, subsequent to the net cash settlement of the
$200 million repurchase program, as described above. The repurchase
arrangement, as amended, provides for final settlement no later than February
2000, on either a physical (share) basis, or a net cash basis. The amount at
which the arrangement can be settled is dependent principally upon the average
market price at which the financial institution purchases such shares,
compared to the forward price per share. The share repurchases will not reduce
shares outstanding for purposes of EPS calculations or reduce common stock
equity, and resulting return on common equity calculations, until the date of
physical settlement. Unicom does not currently anticipate that settlement will
occur in 1999. The repurchase arrangement has been recorded as a receivable on
the Consolidated Balance Sheets and will be adjusted at the end of each
reporting period to reflect the aggregate market value of the shares
deliverable under the arrangement. Consequently, the arrangement could
increase earnings volatility in 1999. Unrealized gains of $20 million (after-
tax), or $0.09 per common share (diluted), for the three months ended and $33
million (after-tax), or $0.15 per common share (diluted), for the six and
twelve months ended June 30, 1999 have been recorded related to the
arrangement.

22
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

At June 30, 1999, shares of Unicom common stock were reserved for the
following purposes:

<TABLE>
<S> <C>
Long-Term Incentive Plan........................................ 2,450,049
Employee Stock Purchase Plan.................................... 368,171
Shareholder Rights Plan......................................... 400,000
Exchange for ComEd common stock not held by Unicom.............. 88,526
1996 Directors' Fee Plan........................................ 164,632
---------
3,471,378
=========
</TABLE>

Common stock issued for the three months, six months and twelve months ended
June 30, 1999 and 1998 was as follows:

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
-------------------- ----------------- --------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shares of Common Stock
Issued:
Long-Term Incentive
Plan.................. 84,402 29,504 233,215 203,791 523,726 366,751
Employee Stock Purchase
Plan.................. 45,126 52,512 45,126 52,512 86,884 133,551
Exchange for ComEd com-
mon stock not held by
Unicom................ 419 3,063 (3,330) 6,540 2,887 8,225
1996 Directors' Fee
Plan.................. 1,104 2,603 3,348 6,677 9,404 13,272
--------- -------- -------- ------- --------- ---------
131,051 87,682 278,359 269,520 622,901 521,799
========= ======== ======== ======= ========= =========
<CAPTION>
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Changes in Common Stock
Accounts:
Total shares issued.... $4,096 $ 2,558 $ 4,777 $ 6,756 $ 14,869 $ 13,212
Net cash settlement of
forward share repur-
chase contract........ -- -- (16,454) -- (16,454) --
Shares held by trustee
for Unicom Stock Bonus
Deferral Plan......... -- 50 -- (1,947) 8,722 (2,036)
Other.................. (8) (13) 137 12 (79) 20
--------- -------- -------- ------- --------- ---------
$4,088 $ 2,595 $(11,540) $ 4,821 $ 7,058 $ 11,196
========= ======== ======== ======= ========= =========
</TABLE>

As of June 30, 1999 and December 31, 1998, 264,406 and 178,982 shares,
respectively, of Unicom common stock were reacquired and held as treasury
stock at a cost of $10 million and $7 million, respectively.

At June 30, 1999 and December 31, 1998, 75,839 and 76,079, respectively, of
ComEd common stock purchase warrants 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.

As of June 30, 1999 and December 31, 1998, $509 million and $494 million,
respectively, of retained earnings had been appropriated for future dividend
payments.

(7) 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
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.

23
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

Stock option transactions through June 30, 1999 are summarized as follows:

<TABLE>
<CAPTION>
Number of Weighted Average
Options Exercise Price
--------- ----------------
<S> <C> <C>
Outstanding as of January 1, 1997.................. 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 year............................ 1,379,525 35.234
Exercised during the year.......................... (404,082) 24.244
Expired/cancelled during the year.................. (123,928) 25.715
---------
Outstanding as of December 31, 1998................ 3,142,893 28.694
Granted during the six months ended June 30, 1999.. 1,711,050 35.750
Exercised during the six months ended June 30,
1999.............................................. (110,403) 24.272
Expired/cancelled during the six months ended June
30, 1999.......................................... (56,828) 32.024
---------
Outstanding as of June 30, 1999.................... 4,686,712 31.334
=========
</TABLE>

Of the stock options outstanding at June 30, 1999, 968,444 had vested with a
weighted average exercise price of $25.220.

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
-----------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Expected option life.................................. 7 years 7 years 7 years
Dividend yield........................................ 4.50% 4.54% 7.20%
Expected volatility................................... 23.02% 21.95% 22.29%
Risk-free interest rate............................... 4.83% 5.58% 6.25%
</TABLE>

The estimated weighted average fair value for each stock option granted in
the first half of 1999 and in the years 1998 and 1997 was $6.48, $6.62 and
$2.79, respectively.

The ESPP allows employees to purchase Unicom common stock at a ten percent
discount from market value. Substantially all of the employees of Unicom,
ComEd and certain subsidiaries are eligible to participate in the ESPP. Unicom
issued 86,884 and 133,551 shares of common stock during the twelve months
ended June 30, 1999 and 1998, respectively, under the ESPP at a weighted
average annual purchase price of $34.34 and $25.55, respectively.

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 $3 million (after-tax), or
$0.02 per common share (diluted), and $2 million (after-tax), or $0.01 per
common share (diluted), for the twelve months ended June 30, 1999 and 1998,
respectively.

(8) ComEd Preferred and Preference Stocks Without Mandatory Redemption
Requirements. During the twelve months ended June 30, 1999, 10,499,549 shares
of preferred or preference stock without mandatory redemption requirements
were redeemed and no shares were issued. No shares of

24
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
ComEd preferred or preference stocks without mandatory redemption requirements
were issued or redeemed during the twelve months ended June 30, 1998. There
were 3,000,000 shares of Series $2.425 preference stock outstanding at June
30, 1999, at an aggregate stated value of $73 million with a redemption price
and involuntary liquidation price of $25 per share, plus accrued and unpaid
dividends, if any. ComEd plans to redeem the 3,000,000 shares outstanding on
August 1, 1999. The $73 million is included in current liabilities.

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.

(9) ComEd Preference Stock Subject to Mandatory Redemption Requirements.
During the twelve months ended June 30, 1999 and 1998, no shares of ComEd
preference stock subject to mandatory redemption requirements were issued.
During the twelve months ended June 30, 1999 and 1998, 1,298,560 and 468,215
shares, respectively, of ComEd preference stock subject to mandatory
redemption requirements were reacquired to meet sinking fund requirements or
were part of the early redemption in January 1999. There were 700,000 shares
of Series $6.875 preference stock outstanding at June 30, 1999, at an
aggregate stated value of $69 million. This series is non-callable and is
required to be redeemed on May 1, 2000. The sinking fund price is $100 and the
involuntary liquidation price is $99.25 per share, plus accrued and unpaid
dividends, if any. The $69 million is included in current liabilities.

(10) 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 ten 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

25
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
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 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.

(11) Long-Term Debt. ComEd initiated the issuance of $3.4 billion of
transitional trust notes through its SPEs, ComEd Funding and ComEd Funding
Trust, in the fourth quarter of 1998. The current amount outstanding is as
follows:

<TABLE>
<CAPTION>
Series Principal Amount
------------------------ ----------------------
(Thousands of Dollars)
<S> <C>
5.38% due March 25, 2000........................... $ 284,967
5.29% due June 25, 2001............................ 425,033
5.34% due March 25, 2002........................... 258,861
5.39% due June 25, 2003............................ 421,139
5.44% due March 25, 2005........................... 598,511
5.63% due June 25, 2007............................ 761,489
5.74% due December 25, 2008........................ 510,000
----------
$3,260,000
==========
</TABLE>

For accounting purposes, the liabilities of ComEd Funding Trust for the
transitional trust notes are reflected as long-term debt on the Consolidated
Balance Sheets of Unicom and ComEd.

The proceeds, net of transaction costs, from the transitional trust notes
must be used to redeem debt and equity. During the first quarter of 1999,
ComEd redeemed or reacquired $959 million of first mortgage bonds and $58
million of sinking fund debentures.

Sinking fund requirements and scheduled maturities remaining through 2003
for ComEd's first mortgage bonds, transitional trust notes, sinking fund
debentures and other long-term debt outstanding at June 30, 1999, after
deducting deposits made for the retirement of sinking fund debentures, are
summarized as follows: 1999--$334 million; 2000--$727 million; 2001--$346
million; 2002--$645 million; and 2003--$445 million. Unicom Enterprises' note
payable to bank of $120 million will mature in 1999.

At June 30, 1999, ComEd's outstanding first mortgage bonds maturing through
2003 were as follows:

<TABLE>
<CAPTION>
Principal Amount
Series ----------------------
(Thousands of Dollars)
<S> <C>
9 3/8% due February 15, 2000....................... $ 42,242
6 1/2% due April 15, 2000.......................... 230,000
6 3/8% due July 15, 2000........................... 100,000
7 3/8% due September 15, 2002...................... 200,000
6 5/8% due July 15, 2003........................... 100,000
--------
$672,242
========
</TABLE>

26
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

Other long-term debt outstanding at June 30, 1999 is summarized as follows:

<TABLE>
<CAPTION>
Principal
Debt Security Amount Interest Rate
- ----------------------------------------- ---------- --------------------------------------------------
(Thousands
of
Dollars)
<S> <C> <C>
Unicom--
Loans Payable:
Loan due January 1, 2003 $ 5,519 Interest rate of 8.31%
Loan due January 1, 2004 6,371 Interest rate of 8.44%
----------
$ 11,890
----------
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 January 15, 2004 150,000 Interest rate of 7.375%
Notes due October 15, 2005 235,000 Interest rate of 6.40%
Notes due January 15, 2007 150,000 Interest rate of 7.625%
Notes due July 15, 2018 225,000 Interest rate of 6.95%
----------
$1,056,000
----------
Purchase Contract Obligation
due April 30, 2005 $ 301 Interest rate of 3.00%
----------
Total ComEd $1,056,301
----------
Unicom Enterprises--
Notes:
Long-Term Note Payable to Bank
due November 15, 1999 $ 120,000 Prevailing interest rate of 5.87% at June 30, 1999
Unicom Thermal Guaranteed Senior Note
due May 30, 2012 120,000 Interest rate of 7.38%
Northwind Midway Guaranteed Senior Notes
due June 30, 2023 11,522 Interest rate of 7.68%
----------
Total Unicom Enterprises $ 251,522
----------
Total Unicom $1,319,713
==========
</TABLE>

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.

In July 1998, Unicom Thermal issued a $120 million 7.38% unsecured
guaranteed senior Note due May 2012, the proceeds of which were used to
refinance existing debt. The Note is guaranteed by Unicom and includes certain
covenants with respect to Unicom and Unicom Thermal's 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
greater than 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 Thermal may incur, and (iv) a requirement that Unicom own,
directly or indirectly, 51% of the outstanding stock of Unicom Thermal and at
least 80% of the outstanding stock of ComEd.

27
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

In June 1999, Northwind Midway issued $12 million of 7.68% guaranteed senior
Notes due June 2023, the proceeds of which will be used primarily to finance
certain project construction costs. The Notes are guaranteed by Unicom and
include certain covenants with respect to Unicom and Northwind Midway's
operations. Such covenants include, among other things, a requirement that
Unicom and its consolidated subsidiaries own no less than 65% of the voting
membership interest of Northwind Midway.

(12) Lines of Credit. ComEd had total bank lines of credit of $1 billion,
all of which were unused at June 30, 1999. Of that amount, $500 million
expires on October 7, 1999 and $500 million expires on October 8, 2003. 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. 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 $80 million was unused as of June 30, 1999. 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.

(13) 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. 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, 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 has 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. That
contract also 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. This extended delay in spent nuclear fuel
acceptance by the DOE has led to ComEd's consideration of additional dry
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.

28
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

(14) 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, 1999 and
December 31, 1998 was as follows:

<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
-------------------------------- --------------------------------
Unrealized
Gains/ Unrealized
Cost Basis (Losses) Fair Value Cost Basis Gains Fair Value
---------- ---------- ---------- ---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Short-term investments.. $ 63,385 $ 28 $ 63,413 $ 40,907 $ 42 $ 40,949
U.S. Government and
Agency issues.......... 211,793 5,695 217,488 197,240 20,213 217,453
Municipal bonds......... 402,171 6,680 408,851 416,121 24,124 440,245
Corporate bonds......... 203,075 (3,032) 200,043 241,111 8,790 249,901
Common stock............ 754,373 691,776 1,446,149 740,956 565,630 1,306,586
Other................... 107,802 7,228 115,030 11,345 838 12,183
---------- -------- ---------- ---------- -------- ----------
$1,742,599 $708,375 $2,450,974 $1,647,680 $619,637 $2,267,317
========== ======== ========== ========== ======== ==========
</TABLE>

At June 30, 1999, 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....................................... $ 66,946 $ 67,263
1 through 5 years................................... 245,205 248,675
5 through 10 years.................................. 253,774 257,150
Over 10 years....................................... 406,731 408,039
</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, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
------------------- ----------------- ---------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Gross proceeds from
sales of securities.... $ 457,175 $ 520,460 $842,863 $948,463 $1,689,884 $1,989,510
Less cost based on spe-
cific identification... 436,159 499,050 818,185 893,384 1,652,894 1,881,911
--------- --------- -------- -------- ---------- ----------
Realized gains on sales
of securities.......... $ 21,016 $ 21,410 $ 24,678 $ 55,079 $ 36,990 $ 107,599
Other realized fund
earnings, net of
expenses............... 20,242 9,237 30,816 12,848 58,342 29,189
--------- --------- -------- -------- ---------- ----------
Total realized net earn-
ings of the funds...... $ 41,258 $ 30,647 $ 55,494 $ 67,927 $ 95,332 $ 136,788
Unrealized gains........ 38,460 524 88,738 114,562 164,679 182,864
--------- --------- -------- -------- ---------- ----------
Total net earnings of
the funds............. $ 79,718 $ 31,171 $144,232 $182,489 $ 260,011 $ 319,652
========= ========= ======== ======== ========== ==========
</TABLE>

29
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

Current Assets. Cash, temporary cash investments, cash held for redemption
of securities 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,
transitional trust notes 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, 1999 and December 31, 1998 were as follows:

<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
-------------------------------- --------------------------------
Unrealized
Carrying Losses/ Carrying Unrealized Fair
Value (Gains) Fair Value Value Losses Value
---------- ---------- ---------- ---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
ComEd preferred and
preference stocks...... $ 143,949 $ 3,127 $ 147,076 $ 678,156 $ 11,500 $ 689,656
ComEd-obligated
mandatorily redeemable
preferred securities of
subsidiary trusts
holding solely ComEd's
subordinated debt
securities............. $ 350,000 $ 10,975 $ 360,975 $ 350,000 $ 20,678 $ 370,678
Transitional trust
notes.................. $3,245,118 $(84,814) $3,160,304 $3,382,821 $ 67,168 $3,449,989
Long-term debt.......... $4,896,889 $215,301 $5,112,190 $5,911,757 $451,240 $6,362,997
</TABLE>

Long-term notes payable, which are not included in the above table, amounted
to $143 million and $100 million as of June 30, 1999 and December 31, 1998,
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, 1999 and December 31, 1998; therefore, the carrying value is equal to
the fair value.

(15) Pension and Postretirement Benefits. As of June 30, 1999, ComEd had a
qualified non-contributory defined benefit pension plan which covers all
regular employees of ComEd and certain of Unicom's subsidiaries. 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, 1999 and December 31, 1998 pension
liabilities and related data were determined using the January 1, 1998
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

30
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
qualified plan but which are limited by the Internal Revenue Code. In 1998,
Indiana Company's qualified defined benefit pension plan was merged into
ComEd's pension plan as a result of the sale of Indiana Company's State Line
Station and the transfer of its remaining employees to ComEd.

ComEd, Indiana Company and certain of Unicom's subsidiaries provide certain
postretirement medical, dental and vision care, and life insurance for
retirees and their dependents and for the surviving dependents of eligible
employees and retirees. The employees become eligible for postretirement
benefits when they reach age 55 with ten 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, 1999 and December
31, 1998 postretirement benefit liabilities and related data were determined
using the January 1, 1998 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, 1999 and the twelve months ended December 31, 1998 were as follows:

<TABLE>
<CAPTION>
Six Months Ended Twelve Months Ended
June 30, 1999 December 31, 1998
-------------------------- --------------------------
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.... $4,327,000 $1,249,000 $4,010,000 $1,139,000
Service cost............ 63,000 21,000 115,000 38,000
Interest cost........... 142,000 41,000 273,000 78,000
Plan participants' con-
tributions............. -- 2,000 -- 3,000
Actuarial loss.......... 4,000 2,000 166,000 38,000
Benefits paid........... (118,000) (26,000) (237,000) (47,000)
---------- ---------- ---------- ----------
Benefit obligation at
end of period......... $4,418,000 $1,289,000 $4,327,000 $1,249,000
---------- ---------- ---------- ----------
<CAPTION>
Change in plan assets
- ---------------------
<S> <C> <C> <C> <C>
Fair value of plan as-
sets at beginning of
period................. $4,015,000 $ 865,000 $3,706,000 $ 767,000
Actual return on plan
assets................. 228,000 50,000 535,000 122,000
Employer contribution... -- -- 11,000 20,000
Plan participants' con-
tributions............. -- 2,000 -- 3,000
Benefits paid........... (118,000) (26,000) (237,000) (47,000)
---------- ---------- ---------- ----------
Fair value of plan as-
sets at end of period. $4,125,000 $ 891,000 $4,015,000 $ 865,000
---------- ---------- ---------- ----------
Plan assets less than
benefit obligation..... $ (293,000) $ (398,000) $ (312,000) $ (384,000)
Unrecognized net actuar-
ial loss/(gain)........ (7,000) (363,000) 37,000 (358,000)
Unrecognized prior serv-
ice cost/(asset)....... (58,000) 46,000 (60,000) 48,000
Unrecognized transition
obligation/(asset)..... (95,000) 312,000 (101,000) 323,000
---------- ---------- ---------- ----------
Accrued liability for
benefits.............. $ (453,000) $ (403,000) $ (436,000) $ (371,000)
========== ========== ========== ==========
</TABLE>

The assumed discount rate used to determine the benefit obligation as of
June 30, 1999 and December 31, 1998 was 6.75%. The fair value of pension plan
assets excludes $23 million and $21 million held in grantor trust as of June
30, 1999 and December 31, 1998, respectively, for the payment of benefits
under the supplemental plan.

31
<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, 1999 and 1998 were as
follows:

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
-------------------- -------------------- --------------------
1999 1998 1999 1998 1999 1998
Pension Benefit Costs --------- --------- --------- --------- --------- ---------
- --------------------- (Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Service cost............ $ 32,000 $ 31,000 $ 63,000 $ 62,000 $ 116,000 $ 113,000
Interest cost on pro-
jected benefit obliga-
tion................... 71,000 69,000 142,000 139,000 276,000 271,000
Expected return on plan
assets................. (91,000) (85,000) (181,000) (171,000) (352,000) (326,000)
Amortization of transi-
tion asset............. (3,000) (3,000) (6,000) (6,000) (12,000) (13,000)
Amortization of prior
service asset.......... (1,000) (1,000) (2,000) (2,000) (4,000) (4,000)
Recognized loss......... 1,000 -- 2,000 -- 4,000 2,000
Curtailment gain........ -- -- -- -- -- (5,000)
--------- --------- --------- --------- --------- ---------
Net periodic benefit
cost.................. $ 9,000 $ 11,000 $ 18,000 $ 22,000 $ 28,000 $ 38,000
========= ========= ========= ========= ========= =========
Other Postretirement
Benefit Costs
- --------------------
Service cost............ $ 11,000 $ 9,000 $ 21,000 $ 18,000 $ 41,000 $ 35,000
Interest cost on accumu-
lated benefit
obligation............. 20,000 18,000 41,000 37,000 82,000 73,000
Expected return on plan
assets................. (18,000) (17,000) (37,000) (34,000) (72,000) (64,000)
Amortization of transi-
tion obligation........ 5,000 6,000 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......... (3,000) (4,000) (6,000) (9,000) (11,000) (18,000)
Severance plan cost..... 1,000 1,000 1,000 2,000 5,000 8,000
--------- --------- --------- --------- --------- ---------
Net periodic benefit
cost.................. $ 17,000 $ 14,000 $ 33,000 $ 27,000 $ 71,000 $ 60,000
========= ========= ========= ========= ========= =========
</TABLE>

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 1999, 1998 and 1997:

<TABLE>
<CAPTION>
Other
Pension Benefits Postretirement Benefits
----------------- -----------------------
1999 1998 1997 1999 1998 1997
----- ----- ----- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Annual discount rate................. 6.75% 7.00% 7.50% 6.75% 7.00% 7.50%
Annual long-term rate of return on
plan assets......................... 9.25% 9.50% 9.75% 8.97% 9.20% 9.40%
Annual rate of increase in future
compensation levels................. 4.00% 4.00% 4.00% -- -- --
</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
Indiana Company's sale of State Line Station.

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. The health care cost trend
rates, used to measure the expected cost of postretirement dental and vision
benefits, are a level 3.5% and 2.0% per year, respectively. 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...................................... $ 27,000 $ (21,000)
Effect on postretirement benefit obligation...... 232,000 (182,000)
</TABLE>

32
<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 $8 million and $7
million for the three months ended June 30, 1999 and 1998, respectively, $15
million for each of the six months ended June 30, 1999 and 1998 and $32
million for each of the twelve months ended June 30, 1999 and 1998.

(16) Separation Plan Costs. O&M expenses included $5 million and $8 million
for the three months ended June 30, 1999 and 1998, respectively, $5 million
and $24 million for the six months ended June 30, 1999 and 1998, respectively,
and $30 million and $56 million for the twelve months ended June 30, 1999 and
1998, respectively, for costs related to voluntary separation offers to
certain employees of ComEd and Indiana Company, as well as certain other
employee-related costs. Such costs resulted in charges of $3 million (after-
tax), or $0.01 per common share (diluted), and $5 million (after-tax), or
$0.02 per common share (diluted), for the three months ended June 30, 1999 and
1998, respectively, $3 million (after-tax), or $0.01 per common share
(diluted), and $14 million (after-tax), or $0.07 per common share (diluted),
for the six months ended June 30, 1999 and 1998, respectively, and $18 million
(after-tax), or $0.08 per common share (diluted), and $34 million (after-tax),
or $0.16 per common share (diluted), for the twelve months ended June 30, 1999
and 1998, respectively.

(17) Income Taxes. The components of the net deferred income tax liability
at June 30, 1999 and December 31, 1998 were as follows:

<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------- ------------
(Thousands of Dollars)
<S> <C> <C>
Deferred income tax liabilities:
Accelerated cost recovery and liberalized deprecia-
tion, net of removal costs.......................... $3,989,225 $4,028,351
Overheads capitalized................................ 137,850 140,922
Repair allowance..................................... 228,020 233,861
Regulatory assets recoverable through future rates... 667,728 680,356
Deferred income tax assets:
Postretirement benefits.............................. (351,370) (331,651)
Unamortized investment tax credits................... (184,732) (191,135)
Regulatory liabilities to be settled through future
rates............................................... (587,639) (595,005)
Nuclear plant closure................................ (24,400) (38,354)
Other--net........................................... (179,120) (146,224)
---------- ----------
Net deferred income tax liability..................... $3,695,562 $3,781,121
========== ==========
</TABLE>

The $86 million decrease in the net deferred income tax liability from
December 31, 1998 to June 30, 1999 is comprised of an $81 million credit to
net deferred income tax expense 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 for both periods 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.

33
<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,
1999 and 1998 were as follows:

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
-------------------- ------------------ ---------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- --------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Operating income:
Current income taxes... $ 103,501 $ 75,369 $212,379 $135,912 $ 379,078 $ 315,431
Deferred income taxes.. (43,154) (14,424) (88,768) (19,821) (18,813) 28,103
Investment tax credits
deferred--net......... (7,021) (6,888) (14,042) (14,048) (27,723) (29,270)
Other (income) and
deductions:
Current income taxes... (899) (4,166) 1,769 (57,232) 9,147 (62,134)
Deferred income taxes.. 5,243 796 6,080 47,543 17,993 (337,473)
Investment tax credits. (2,153) -- (3,981) (7,472) (8,616) (29,997)
--------- --------- -------- -------- --------- ----------
Net income taxes
charged/(credited) to
continuing operations.. $ 55,517 $ 50,687 $113,437 $ 84,882 $ 351,066 $ (115,340)
========= ========= ======== ======== ========= ==========
</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, 1999 and 1998:

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
-------------------- ------------------ ---------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- --------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Net income/(loss) before extraordi-
nary items........................ $ 119,462 $ 80,458 $216,611 $134,173 $ 592,622 $ (176,257)
Net income taxes charged/(credited)
to continuing operations.......... 55,517 50,687 113,437 84,882 351,066 (115,340)
Provision for dividends on ComEd
preferred and preference stocks... 3,043 14,462 18,340 29,009 46,215 58,483
--------- --------- -------- -------- --------- ----------
Pre-tax income/(loss) before
extraordinary items and provision
for dividends..................... $ 178,022 $ 145,607 $348,388 $248,064 $ 989,903 $ (233,114)
========= ========= ======== ======== ========= ==========
Effective income tax rate.......... 31.2% 34.8% 32.6% 34.2% 35.5% 49.5%
========= ========= ======== ======== ========= ==========
</TABLE>

34
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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, 1999
and 1998 were as follows:

<TABLE>
<CAPTION>
Twelve
Three Months Ended Six Months Ended Months Ended
June 30 June 30 June 30
-------------------- ----------------- -------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- ------- -------- ---------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes
computed at statutory
rate................... $ 62,308 $ 50,962 $121,936 $86,822 $346,466 $ (81,590)
Equity component of
AFUDC which was ex-
cluded from taxable
income................. (112) (110) (210) (198) (401) (4,743)
Amortization of
investment tax credits,
net of deferred income
taxes.................. (5,907) (4,517) (11,618) (13,728) (23,395) (43,274)
State income taxes, net
of federal income tax-
es..................... 7,527 6,817 15,436 12,655 43,641 (1,343)
Unrealized gain on for-
ward share repurchase
contract............... (6,891) -- (11,696) -- (11,696) --
Earnings on nontax-
qualified
decommissioning fund... (2,768) -- (2,768) -- (2,768) --
Differences between book
and tax accounting,
primarily property-
related deductions..... 1,360 (2,465) 2,357 (669) (781) 15,610
--------- --------- -------- ------- -------- ---------
Net income taxes
charged/(credited) to
continuing operations.. $ 55,517 $ 50,687 $113,437 $84,882 $351,066 $(115,340)
========= ========= ======== ======= ======== =========
</TABLE>

(18) Taxes, Except Income Taxes. Provisions for taxes, except income taxes,
for the three months, six months and twelve months ended June 30, 1999 and
1998 were as follows:

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
------------------- ----------------- -------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- --------- ---------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Illinois public utility
revenue................ $ 402 $ 44,247 $ 1,897 $101,928 $ 26,449 $ 222,869
Illinois invested capi-
tal.................... -- -- -- -- -- 47,486
Illinois electricity
distribution tax....... 26,336 24,911 54,672 51,629 113,069 51,629
Municipal utility gross
receipts............... 26,164 38,556 50,587 81,107 121,981 170,131
Real estate............. 29,839 29,589 63,233 65,080 124,172 143,308
Municipal compensation.. 18,494 24,214 36,801 44,085 70,426 85,446
Energy assistance and
renewable energy
charge................. 8,776 8,709 17,445 16,273 33,909 16,273
Other--net.............. 20,124 14,836 37,860 32,386 79,835 66,116
--------- --------- -------- -------- --------- ---------
$ 130,135 $ 185,062 $262,495 $392,488 $ 569,841 $ 803,258
========= ========= ======== ======== ========= =========
</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.

Effective August 1, 1998, as provided for by the 1997 Act, the Illinois
electricity excise tax, replacing the Illinois public utility revenue tax, and
certain municipal utility taxes are recorded as liabilities. Previously,
similar taxes were presented on the Statements of Consolidated Operations as
revenue and expense. The reduction in operating revenues and taxes, except
income taxes, due to the change in presentation for such taxes was
approximately $50 million, $118 million and $213 million for the three months,
six months and twelve months ended June 30, 1999, respectively. This change in
the presentation for such taxes did not have an effect on results of
operations.

See Note 21 for additional information regarding Illinois invested capital
taxes.

35
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

(19) 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 $627 million, consisting of $300 million of commercial
paper/bank borrowings and $327 million of intermediate term notes, to finance
the transactions. The commercial paper/bank borrowing portion will expire on
November 23, 1999. With respect to the intermediate term notes, $60 million
expires on November 23, 1999, and an additional portion each November 23
thereafter through November 23, 2003. At June 30, 1999, ComEd's obligation to
the lessor for leased nuclear fuel amounted to approximately $428 million.
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.

As of June 30, 1999, future minimum rental payments, net of executory costs,
for capital leases are estimated to aggregate to $471 million, including $106
million in 1999, $161 million in 2000, $102 million in 2001, $53 million in
2002, $28 million in 2003 and $21 million in 2004-2006. The estimated interest
component of such rental payments aggregates $48 million. The estimated
portions of obligations due within one year under capital leases of $170
million and $195 million at June 30, 1999 and December 31, 1998, respectively,
were included in current liabilities on the Consolidated Balance Sheets.

Future minimum rental payments at June 30, 1999 for operating leases are
estimated to aggregate to $302 million, including $21 million in 1999, $40
million in 2000, $32 million in 2001, $27 million in 2002, $23 million in 2003
and $159 million in 2004-2043.

(20) 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 investment, including
construction work in progress, in Quad Cities Station on the Consolidated
Balance Sheets was $12 million at June 30, 1999, after reflecting the
accounting impairment recorded in the second quarter of 1998. See Note 1,
under "Regulatory Assets and Liabilities," for additional information.

(21) Commitments and Contingent Liabilities. Purchase commitments,
principally related to construction and nuclear fuel, approximated $459
million at June 30, 1999, comprised of $403 million for ComEd, $50 million for
UT Holdings and $6 million for Unicom Energy Services. In addition, ComEd has
substantial commitments for the purchase of coal. Upon completion of the Asset
Sale Agreement, ComEd expects to enter into arrangements to assign or settle a
substantial portion of the coal purchase commitments. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
subcaption "Liquidity and Capital Resources--UTILITY OPERATIONS--Construction
Program," for additional information regarding ComEd's purchase commitments.

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.

36
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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 $1,145 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 Master
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.

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. 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 and in favor of the
plaintiff, after an amended judgement was issued March 11, 1999, totaled
approximately $6 million, including compensatory and punitive damages,
interest, and medical monitoring. The matter is currently on appeal. 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 (1999) 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, 1999
and December 31, 1998, which reflects the low end of the range of ComEd's
estimate of the liability associated with former MGP sites.

37
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Concluded
In addition, as of June 30, 1999 and December 31, 1998, 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.
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. ComEd is currently re-evaluating its
environmental remediation strategies. The final results of this re-evaluation
cannot be determined at this time, but could result in an increase to the
estimated liability.

The IDR has issued Notices of Tax Liability to ComEd alleging deficiencies
in Illinois invested capital tax payments for the years 1988 through 1996. The
alleged deficiencies, including interest and penalties, totaled approximately
$47 million as of June 30, 1999. ComEd has protested the notices, and the
matter is currently pending before the IDR's Office of Administrative
Hearings. Interest will continue to accrue on the alleged tax deficiencies.

On March 22, 1999, ComEd reached a settlement agreement with the City to end
the arbitration proceeding between ComEd and the City regarding the January 1,
1992 franchise agreement and a supplemental agreement between them. Under the
terms of the settlement agreement, the pending arbitration is to be dismissed
with prejudice and the City is to release ComEd from all claims the City may
have under the supplemental agreement. The settlement agreement was approved
by the City Council on May 12, 1999.

As part of the settlement agreement, ComEd and the City have agreed to a
revised combination of ongoing work under the franchise agreement and new
initiatives that will result in defined transmission and distribution
expenditures by ComEd to improve electric service in the City. The settlement
agreement provides that ComEd will be subject to liquidated damages if the
projects are not completed by various dates, unless it is prevented from doing
so by events beyond its reasonable control. ComEd's current construction
budget considers these projects, and therefore, no changes to that budget are
expected. In addition, ComEd and the City have agreed to establish an Energy
Reliability and Capacity Account, into which ComEd would deposit $25 million
following the effectiveness of the settlement agreement and up to $25 million
at the end of each of the years 2000, 2001 and 2002, to help ensure an
adequate and reliable electric supply for the City.

The 1997 Act, as amended, also committed ComEd to spend at least $2 billion
through 2004 on transmission and distribution facilities outside of the City
and $250 million in environmental funding initiatives, pending the close of
the fossil plant sale.

(22) Subsequent Events. At the end of July 1999, during a period of
unusually high temperatures, there were power outages of varying durations
affecting approximately 107,000 of ComEd's customers. ComEd announced shortly
after the restoration of service that it would reimburse customers whose power
had been off for four or more hours for actual losses that they suffered as a
result of the extended outages. Such losses are expected to primarily include
costs associated with replacing spoiled food, medicine and other heat
sensitive perishables. ComEd does not intend to pay claims for consequential
damages related to the outages. ComEd is currently in the process of
evaluating submitted claims. A preliminary estimate of such losses and other
restoration costs, including labor and repair costs, totals $15-$20 million.

On August 12, 1999, there were power outages in the downtown business area
in the City affecting approximately 3,000 customers, which resulted from
failed equipment at a ComEd substation. All service was restored by that
evening. These outages were unrelated to those discussed above. ComEd is
currently evaluating the costs associated with these outages.

38
<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 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.

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 FERC Order No. 888,
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. A companion FERC rule, Order No. 889, 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 FERC Order No. 888 is that it contemplates full recovery of a
utility's 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.

The 1997 Act. In December 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
was amended in June 1999. The 1997 Act, as amended, provides for, among other
things, a 15% residential base rate reduction which became effective August 1,
1998, an additional 5% residential base rate reduction in October 2001 and
gradual customer access to other electric suppliers. Access for commercial and
industrial customers will occur over a period from October 1999 to October
2000, and access for residential customers will occur after May 1, 2002.

39
<PAGE>

ComEd's operating revenues were reduced by approximately $170 million in 1998
due to the 15% residential base rate reduction. ComEd expects that the 15%
rate reduction will reduce ComEd's operating revenues by approximately $210
million in 1999, compared to 1998 rate levels. The 1997 Act, as amended, also
committed ComEd to spend at least $2 billion through 2004 on transmission and
distribution facilities outside of the City and $250 million in environmental
funding initiatives, pending the close of the fossil plant sale.

As a result of the 1997 Act, as amended, and FERC rules, prices for the
supply of electric energy are expected to change from cost-based, regulated
rates to rates determined by competitive market forces. Accordingly, the 1997
Act, as amended, provides for the collection of a CTC from customers who
choose another electric service provider during a transition period that
extends through 2006. 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. 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 asset dispositions. See "Response to Regulatory Changes" and "
Fossil Plant Sale" below for additional information.

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. On March 1, 1999, ComEd filed with the ICC its Non-
Residential Delivery Services Implementation Plan and associated tariffs for
the provision of delivery and other services related to ComEd's implementation
for retail open access, as called for by the 1997 Act. The ICC is required to
issue a final order in the third quarter of 1999.

40
<PAGE>

notes through its SPEs, ComEd Funding and ComEd Funding Trust. See "Liquidity
and Capital Resources," subcaption "UTILITY OPERATIONS--Capital Resources"
below, and Notes 2 and 6 of Notes to Financial Statements, for additional
information regarding the redemptions and repurchases of debt and equity.

See Notes 1, under "Regulatory Assets and Liabilities," and 2 of Notes to
Financial Statements for the accounting effects related to the 1997 Act.

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. Among other
things, these strategic objectives call for a focus on operations to: (i)
provide a reliable supply of electricity as the competitive marketplace
evolves, (ii) become a top quartile operator of competitive nuclear plants,
(iii) consummate the fossil plant sale by the end of 1999, (iv) deliver
competitive earnings while restructuring the balance sheet to reflect the
realities of the marketplace, (v) expand the offering of energy-related
products and services, and (vi) transform the corporate culture of Unicom. See
Unicom and ComEd's Current Report on Form 8-K dated July 1, 1999 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, ComEd 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 of electricity. 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 significant commitment to, and investment in, nuclear generating
capacity. ComEd has installed a management team responsible for improving
nuclear operations. Such improvements are 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 are also being made to
control capital and operating costs through increased efficiencies, such as
the reduction of downtime and expenses associated with generating unit
maintenance and refueling outages.

ComEd also evaluated the recoverability of its generating plant investment
in 1998 as a result of the 1997 Act. See Note 1 of Notes to Financial
Statements, under "Regulatory Assets and Liabilities," for additional
information. Notwithstanding these efforts, there continues 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 operation 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 short-term
reliability and capacity constraints, if a generating plant

41
<PAGE>

cannot produce power safely at a cost below the competitive market price, it
will be disposed of or closed. 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. However, closure of a plant could
involve additional charges associated with the write-off of its then-current
carrying value. In January 1998, Unicom and ComEd announced its decision to
permanently cease nuclear generating operations at ComEd's Zion Station. The
related retirement resulted in a charge in 1997 of $523 million (after-tax),
or $2.42 per common share (diluted), reflecting both a write down of the
plant's carrying value and 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 4 of Notes to Financial
Statements for additional information.

In response to customer expectations and more stringent reliability
standards provided for by the 1997 Act, ComEd's Board of Directors approved a
$307 million increase in capital expenditures on its transmission and
distribution systems over the next three years. See "Liquidity and Capital
Resources," subcaption "UTILITY OPERATIONS--Construction Program" below, for
additional information regarding capital spending for the transmission and
distribution systems.

ComEd joined with other Midwestern utilities to form a regional Midwest ISO
in January 1998. Presently, a number of these utilities, including ComEd, have
agreed to place their transmission systems under the control of 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 has established an independent body that will
ultimately direct the planning and operation of the transmission system for
the utilities involved. The Midwest ISO will direct the control of 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 was approved by the FERC in September 1998, subject to certain
conditions. In December 1998, the Midwest ISO members elected a Board of
Directors, which announced the appointment of the Midwest ISO's first
President and Chief Executive Officer in July 1999.

ComEd has also agreed to cooperate with APX in the creation of the first
electronic power exchange in Illinois. Initial products may include hourly,
daily and weekly electricity delivered to and from interconnection points on
ComEd's transmission system, and a standard system of credit and trading
interfaces. Unicom plans to make a $3 million venture capital investment in
APX, but it will not receive any voting rights. The power exchange will be
independently owned and managed by APX and will allow wholesale and retail
market participants to trade electricity anonymously through an internet-based
computerized system. ComEd will be treated like any other market participant
and plans to be an active participant when the power exchange opens in
Illinois early in the fourth quarter of 1999.

Fossil Plant Sale. On March 22, 1999, ComEd entered into an Asset Sale
Agreement providing for the sale of substantially all of the assets of its
fossil plant to EME for a cash purchase price of $4.813 billion. The fossil
plant assets represent an aggregate generating capacity of approximately 9,772
megawatts. Completion of the sale is subject to certain regulatory filings and
approvals and is expected to occur during the fourth quarter of 1999. The ICC
approved the fossil plant sale on August 3, 1999. The ICC's approval is
subject to potential appeal.

42
<PAGE>

Unicom Investment will pay the $2.350 billion aggregate principal due to ComEd
under the Demand Note. Unicom Investment will use the remainder of the cash
received from EME to fund other business opportunities. Of the cash received
by ComEd, $1.680 billion is expected to be used to pay the costs and taxes
associated with the fossil plant sale. The remainder of the Demand Note
proceeds will be available to ComEd to fund, among other things, transmission
and distribution projects, nuclear generation station projects, and
environmental and other initiatives.

As part of the sale transaction, ComEd will enter into transitional power
purchase agreements with the buyer. The agreement regarding the coal-fired
units will cover a declining number of generating units over a five-year term,
subject to an option in favor of ComEd to restore some or all of the units in
later years of the agreement. The agreements regarding the oil and gas-fired
plant and the peaking units cover the entire capacity of such generating units
for a five-year term, subject to ComEd's option commencing in year three to
terminate the agreements as to some or all of the generating units. The
options will provide some flexibility to ComEd to adjust its power purchase
needs to match its obligations to its customers during the transition period
to open access for customers. Each of the agreements provides for a monthly
capacity charge, based upon the capacity of the generating units under
contract and subject to adjustment based upon the availability of those
generating units, as well as charges for delivered energy. Such charges will
increase ComEd's purchased power costs. However, the disposition of the fossil
generation business will reduce ComEd's O&M and fuel expenditures, and its
depreciation charges.

Liquidity and Capital Resources

UTILITY OPERATIONS

Construction Program. ComEd has a construction program for the years 1999-
2001, which consists principally of improvements to its existing nuclear and
fossil production, transmission and distribution facilities. The program, as
currently approved by ComEd, includes the following estimated expenditures
(excluding nuclear fuel expenditures of approximately $676 million).

<TABLE>
<CAPTION>
1999 2000 2001 Total
------ ---- ---- ------
(Millions of Dollars)
<S> <C> <C> <C> <C>
Nuclear............................................. $ 265 $158 $167 $ 590
Fossil.............................................. 155 106 66 327
Transmission and Distribution....................... 515 527 529 1,571
General............................................. 109 83 80 272
------ ---- ---- ------
$1,044 $874 $842 $2,760
====== ==== ==== ======
</TABLE>

The above fossil construction expenditures will not be required after the
fossil plant sale is completed.

This program includes an increase in capital expenditures on ComEd's
transmission and distribution systems of approximately $307 million over the
next three years, in addition to the estimated $1.3 billion previously planned
to be spent on these systems over the same time period. A significant portion
of such additional expenditures is intended to increase the reliability of
ComEd's distribution system by replacing certain equipment and increasing
automation to identify distribution problems faster and restore power to
customers more quickly.

43
<PAGE>

ComEd's forecasts of peak load for our traditional service territory
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 1999 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, other-utility power purchases and generation resources
from ARES, could be obtained in sufficient quantities to meet such forecasted
needs.

Purchase commitments for ComEd, principally related to construction and
nuclear fuel, approximated $403 million at June 30, 1999. In addition, ComEd's
estimated commitments for the purchase of coal were as follows:

<TABLE>
<CAPTION>
Contract Period Commitment(1)
-------- --------- -------------
<S> <C> <C>
Black Butte Coal Co. ............................. 1999-2000 $334
Decker Coal Co. .................................. 1999-2012 446
Other commitments................................. 1999 11
----
$791
====
</TABLE>
--------
(1) In millions of dollars, excluding transportation costs. No
estimate of future cost escalation has been made.

Upon completion of the Asset Sale Agreement, ComEd expects to enter into
arrangements to assign or settle a substantial portion of the coal purchase
commitments. See "Changes in the Electric Utility Industry," subcaptions "The
1997 Act" and "Fossil Plant Sale" above, for additional information.

Capital Resources. In December 1998, ComEd initiated the issuance of $3.4
billion of transitional trust notes through its SPEs, ComEd Funding and ComEd
Funding Trust. The proceeds from the transitional trust notes, net of
transaction costs, must be used to redeem or repurchase debt and equity to
lower ComEd's overall cost of capital. Accordingly, in early 1999 ComEd
redeemed $788 million of long-term debt and $534 million of preference stock,
and reacquired $229 million of outstanding long-term debt through a tender
offer. In addition, $500 million of the proceeds was used to reduce ComEd's
outstanding short-term debt. In the first half of 1999, ComEd recorded an
extraordinary loss related to the early redemptions and the tender offer of
the above-mentioned first mortgage bonds and sinking fund debentures, which
reduced net income on common stock by approximately $28 million (after-tax),
or $0.13 per common share (diluted). ComEd also recorded $10 million (after-
tax), or $0.04 per common share (diluted), for premiums paid in connection
with the redemption of the above-mentioned preference stock. As more fully
described below, Unicom has announced plans to repurchase approximately $750
million of Unicom common stock using the proceeds it receives from ComEd's
repurchase of its common stock held by Unicom. The remaining proceeds will be
used for the payment of fees and additional debt and equity redemptions and
repurchases.

In the fourth quarter of 1998, Unicom entered into a forward purchase
arrangement for the repurchase of $200 million of its common stock. This
contract, which was accounted for as an equity instrument as of December 31,
1998, was settled on a net cash basis in February 1999.

44
<PAGE>

settlement. Unicom does not currently anticipate that settlement will occur in
1999. The repurchase arrangement has been recorded as a receivable on the
Consolidated Balance Sheets and will be adjusted at the end of each reporting
period to reflect the aggregate market value of the shares deliverable under
the arrangement. Consequently, the arrangement could increase earnings
volatility in 1999.

See Notes 2 and 6 of Notes to Financial Statements for additional
information regarding the redemptions and repurchases of debt and equity.

ComEd forecasts that internal sources will provide approximately three-
fourths of the funds required for ComEd's 1999-2001 construction program and
other capital requirements, including nuclear fuel expenditures, contributions
to nuclear decommissioning funds, sinking fund obligations and scheduled debt
maturities, and excluding the effects of the fossil plant sale. See Notes 9
and 11 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, and the issuance by ComEd Funding Trust of $3.4
billion of transitional trust notes in 1998 to refinance debt and equity, as
discussed above.

See "Changes in the Electric Utility Industry," subcaption "Fossil Plant
Sale" above, for a description of ComEd's planned uses of the fossil plant
sale proceeds.

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 may be provided through the
continued sale and leaseback of nuclear fuel through ComEd's existing nuclear
fuel lease facility. During the first half of 1999, ComEd did not sell or
leaseback any nuclear fuel through its existing nuclear fuel lease facility.
See Note 19 of Notes to Financial Statements for additional information
concerning ComEd's nuclear fuel lease facility. ComEd had $1 billion of unused
bank lines of credit at June 30, 1999, which may be borrowed 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 ratings of ComEd's outstanding first mortgage bonds or on a
prime interest rate. See Note 12 of Notes to Financial Statements for
additional information concerning lines of credit. 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, 1999. Cash flows from operating activities decreased temporarily for
the twelve months ended June 30, 1999, compared to the same period ended June
30, 1998, as a result of an increase in net customer receivables due to the
transition to a new customer information and billing system in the latter part
of 1998.

As of August 13, 1999, 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 con-
trol 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>

45
<PAGE>

ComEd Funding Trust's securities are currently rated by three principal
securities rating agencies as follows:

<TABLE>
<CAPTION>
Standard Duff &
Moody's & Poor's Phelps
------- -------- ------
<S> <C> <C> <C>
Transitional trust notes.......................... Aaa AAA AAA
</TABLE>

As of August 1999, Moody's rating outlook on ComEd's securities is
"Positive" and S&P's current rating outlook on ComEd's securities is "Stable."
S&P raised its ratings for ComEd and Unicom in June 1999. In July 1999, Duff
& Phelps upgraded ComEd's ratings for secured and unsecured debt securities
and announced that ComEd's securities remain on "Rating Watch-Up."

Capital Structure. ComEd's ratio of long-term debt to total capitalization
has decreased to 57.1% at June 30, 1999 from 58.0% at December 31, 1998. As of
June 30, 1999 and December 31, 1998, $509 million and $494 million,
respectively, of retained earnings had been appropriated for Unicom's future
dividend payments. As of June 30, 1999 and December 31, 1998, $627 million and
$580 million, respectively, of retained earnings had been appropriated for
ComEd's future dividend payments.

Year 2000 Conversion. Unicom, including ComEd, uses various software
applications and embedded systems throughout its businesses that will be
affected by the so-called "Year 2000 issues." These issues may prevent an
application or system from correctly processing dates up to the year 2000 and
beyond. A failure to correct any critical Year 2000 processing problems prior
to January 1, 2000 could have material adverse operational and financial
consequences if the affected systems either cease to function or produce
erroneous data. At this time, Unicom believes the major risks associated with
the inability of systems and software to process Year 2000 data correctly are
a system failure or miscalculation causing disruption of operations, including
among other things, an inability to operate ComEd's nuclear or fossil
generating plants, disruption in the operation of its transmission and
distribution systems or an inability to access interconnections with the
systems of neighboring utilities. Such failures could materially and adversely
affect Unicom's results of operations, financial position and cash flows.

As of June 30, 1999, Unicom declared all of its systems and applications
"Year 2000 ready" in accordance with goals and criteria recommended by the
NERC. Even though Unicom has achieved Year 2000 ready status, the remainder of
1999 will be used to continue quality reviews, contingency planning efforts
and internal as well as external readiness drills; specifically, the focus of
the project has moved from "find it-fix it" activities to "increase certainty,
strengthen readiness-demonstration" activities. Key accomplishments of the
Unicom Year 2000 project included the following:

. All nuclear stations are Year 2000 ready

. All fossil stations are Year 2000 ready

. Transmission and distribution systems and computers are Year 2000 ready

. Distributed operations (LAN, WAN and related systems) are Year 2000 ready

. All office facilities are Year 2000 ready

. Mission critical products and services of supply chain are Year 2000
ready

. Completed independent verification and validation of the corporate
project

. The NRC conducted a Year 2000 readiness audit of the Braidwood Nuclear
Station and reviewed the contingency plans for nuclear operations

. Implemented "Clean Management" procedures to ensure newly renovated
applications and inventory remain Year 2000 ready

. Unicom Contingency Plan/Operating Plan is Year 2000 ready--submitted
final version of plans to MAIN

46
<PAGE>

The Unicom Year 2000 readiness program included the detailed review of more
than 15 million lines of code and 30,000 embedded systems. At the height of
the project, which began in mid-1996, more than 300 people were assigned to
the company-wide Year 2000 team representing every business segment with many
others assisting the core team. The Unicom Year 2000 team focused on three
elements that were integral to the project: business continuity, project
management and risk management. Business continuity involved the continuation
of reliable electric supply and service in a safe, cost-effective manner.
Project management involved defining and meeting the project scope, schedule
and budget. Risk management involved customer communications, contingency
planning and legal issues.

Unicom's approach to identifying and addressing noncompliant software
applications and embedded systems consisted of the following stages:
inventory, analysis, renovation, testing and deployment. The first stage was
to inventory all applications and systems. The analysis stage involved
assessing whether software applications and embedded systems were Year 2000
ready. The renovation stage involved remediating or upgrading applications and
systems to make them Year 2000 ready. The testing stage determined whether the
renovated applications and systems were Year 2000 ready. The deployment stage
occurred when the tested applications and systems were implemented. Unicom was
also engaged in contingency planning for potential Year 2000 problems.

Unicom's Year 2000 project focused on those facets of its business that are
required to deliver reliable electric service. The project encompasses the
computer systems that support core business functions, such as customer
information and billing, finance, procurement, supply and personnel, as well
as the components of metering, transmission, distribution and generation
support. The project also focuses on embedded systems, instrumentation and
control systems in facilities and plants. In accordance with business plans,
Unicom has replaced certain of its financial, human resources and payroll and
customer service and billing software with new software that is Year 2000
ready and that addresses Unicom's strategic needs as it enters a less
regulated environment.

The following table summarizes the status, as of August 13, 1999, of
Unicom's Year 2000 project. The figures set forth in the table represent the
extent to which Unicom has completed each phase of the Year 2000 project for
software applications and embedded systems.

<TABLE>
<CAPTION>
Software Embedded
Applications Systems
------------ --------
<S> <C> <C>
Inventory........................................... 100% 100%
Analysis............................................ 100% 100%
Renovation.......................................... 100% 100%
Testing............................................. 100% 100%
Deployment.......................................... 100% 100%
</TABLE>

A Year 2000 Moratorium is in effect from July 1, 1999 to March 31, 2000 and
during this time there is a company-wide freeze on configuration changes or
additions to existing information systems to ensure hardware, software and
embedded systems remain Year 2000 ready.

In addition to its internal efforts, Unicom has been working and will
continue to work with various industry groups, including NERC, 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 asked NERC to report on the integrity of the transmission system for North
America and to coordinate and assess the preparation of the electric systems
in North America for the Year 2000. NERC submitted its initial status report
and coordination plan to the DOE in September 1998 and a second report in
January 1999. On August 3, 1999, NERC presented to the DOE its second quarter
1999 status report and a letter of assurance that the electric systems of
North America are ready to operate into the Year 2000 and beyond.

47
<PAGE>

Additionally, Unicom participated in an industry-wide NERC readiness drill
on April 9, 1999. The drill simulated the partial loss of voice and data
communications and tested Unicom's ability to maintain bulk power system
operations in the event of a loss of microwave communication with partial
EMS/SCADA functionality. The drill involved approximately 68 employees
throughout the transmission and distribution, nuclear generation and fossil
generation areas. The successful completion of the drill demonstrated Unicom's
ability to continue its bulk power operations in the event this data is not
available through normal means during the Year 2000 rollover period. Unicom
will participate in the second industry-wide NERC readiness drill on September
9, 1999, which is scheduled to be a "dress rehearsal" for the Year 2000
rollover. Throughout 1999, Unicom will continue to work with the various
industry groups as appropriate.

Unicom also depends upon third parties, including customers, suppliers,
government agencies and financial institutions, to reliably deliver its
products and services. Unicom completed additional initiatives to assess the
degree to which third parties with whom it has business relationships are
addressing Year 2000 issues. These initiatives included analysis of the Year
2000 readiness programs of Unicom's critical vendors and obtaining Year 2000
warranties in certain new contracts and licenses. Unicom also has introduced
protocols for assuring that software and embedded systems remain Year 2000
ready on a continuing basis. Unicom's contingency planning addressed
mechanisms for preventing or mitigating interruption caused by its suppliers.
Unicom also has an outreach program in place for communicating Year 2000
project information to residential and business customers and this activity is
scheduled to continue for the remainder of 1999.

As of July 14, 1999, approximately $33 million has been expended for
external labor, hardware and software costs, and for the costs of Unicom
employees who are dedicated full-time to the Year 2000 project. All of such
costs are expensed as incurred. The foregoing amounts do not include the cost
of new software applications installed as a result of strategic replacement
projects described earlier. Such replacement projects were not accelerated
because of Year 2000 issues.

Unicom has existing contingency plans in place for events such as extreme
heat, storms, equipment failures and accidents. Unicom prepared its Year 2000
contingency plans based on the framework of existing emergency management
system preparation and scenario development to address the possibility that
applications and systems may not be Year 2000 ready at the end of the five
step remediation process.

Unicom developed contingency plans that identify key risks and address the
most reasonably likely worst case scenarios that could occur in the event that
various Year 2000 issues were not resolved in a timely manner. Key risks
identified in Unicom's contingency plans include: uncharacteristic load
patterns, human behavior, availability of key personnel, loss of critical
business systems, readiness of supply base, loss of EMS/SCADA functionality,
readiness of neighboring utilities, loss of critical voice and data
communications, security, constrained fuel supplies and increased risk of
generator trips/unit availability. Unicom submitted its Year 2000 contingency
plans to MAIN in June 1999. Contingency planning is an ongoing process and
will continue through the fourth quarter of 1999.

Unicom is using an approach in its contingency planning process that has
been recognized by NERC and NEI. The phases of the process include: business
impact analysis, contingency planning and testing. Unicom's business impact
analysis requires business unit personnel to evaluate the impact of mission-
critical systems failures on Unicom's core business operations, focusing on
specific failure scenarios and how they can be mitigated. The necessary
conditions for enacting the plans will be documented along with the
appropriate personnel responsible in each of the business units should a Year
2000 failure occur.

Unicom also performed activities beyond contingency planning to further
increase certainty and strengthen readiness. An independent consultant was
engaged and performed an assessment of the process used to address the Year
2000 issue.

48
<PAGE>

Based on Unicom's current status with regard to Year 2000 tasks, it believes
that its planning was adequate to secure Year 2000 readiness of its critical,
medium priority and low priority systems. Nevertheless, achieving Year 2000
readiness is subject to various risks and uncertainties, many of which are
described above. Unicom is not able to predict all the factors that could
cause actual results to differ materially from its current expectations as to
its Year 2000 readiness. However, if Unicom or third parties, with whom it has
significant business relationships, fail to achieve Year 2000 readiness with
respect to critical systems, there could be a material adverse effect on
Unicom's results of operations, financial position and cash flows.

Market Risks. ComEd is exposed to market risk due to changes in interest
rates and 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 has implemented an integrated risk
management framework to manage such risks. A corporate Risk Management
Committee defines the Company's risk tolerance and establishes appropriate
position limits, and corporate policies and procedures have been implemented
to minimize the exposure to market risk. ComEd does not currently utilize
derivative commodity or financial instruments for trading or speculative
purposes. The estimated fair value of the forward energy contracts, including
options at June 30, 1999, was approximately $85 million. The estimated fair
value is based on the estimated net settlement value of the contracts derived
from forward price curves and market quotes, discounted at a ten percent rate.
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 February 19, 1999. There has not been a material change in
ComEd's exposure to interest rate or market price risk since December 31,
1998. 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
and related services to offices and other buildings in the central business
district of the City 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.

Unicom Energy Services, another subsidiary of Unicom Enterprises, is engaged
in providing energy services, including gas services, performance contracting,
distributed energy and energy management systems. Through an alliance with
AlliedSignal Power Systems, Inc., a subsidiary of AlliedSignal Inc., Unicom
Energy Services is the exclusive distributor for the Parallon 75(TM)
TurboGenerator system, which provides customers with on-site electricity
production. The Parallon 75(TM) system was developed by AlliedSignal. Unicom
Energy Services' territory encompasses 12 Midwest states, Ontario, Canada and
Puerto Rico.

Unicom Energy Inc., also a subsidiary of Unicom Enterprises, is currently
engaged in providing retail gas services to commercial and industrial
customers in the Midwest region and is expected to provide retail electric and
gas services as an unregulated retail energy supplier as restructuring of
electricity markets occurs in the Midwest.

In July 1999, Unicom Enterprises entered into a Stock Purchase Agreement to
acquire all of the capital stock of KHB Inc., MMSD, Inc. and MMCD, Inc. These
three companies, which conduct

49
<PAGE>

business under the name "Midwest Mechanical", design, install and service
heating, ventilation and air conditioning facilities for commercial and
industrial customers in the City and the surrounding area. The closing is
expected to occur in the third quarter of 1999, and the final price will not
have a material impact on Unicom's financial position.

Construction Program. Unicom has approved capital expenditures for 1999 of
approximately $88 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, 1999, UT
Holdings' purchase commitments, principally related to construction, were
approximately $50 million.

Unicom has approved capital expenditures for 1999 of approximately $47
million for Unicom Energy Services. As of June 30, 1999, Unicom Energy
Services had purchase commitments of approximately $6 million.

Capital Resources. Unicom expects to obtain funds to invest in its
unregulated subsidiaries principally from the fossil plant sale proceeds to be
received by Unicom Investment, although it may also obtain funds 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, 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 additional loans or additional
equity investments, which are not expected, would be subject to prior approval
by the ICC.

The fossil plant sale proceeds received by Unicom Investment, after the
payment of the Demand Note to ComEd, will be used to invest in business
opportunities.

S&P's current rating on Unicom's senior debt obligations is BBB+. Ratings
have not been obtained from Moody's or Duff & Phelps.

Regulation

ComEd and 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.

50
<PAGE>

Rate Matters. See "Changes in the Electric Utility Industry," subcaption
"The 1997 Act" above, for information regarding the effect of the 1997 Act on
rate matters.

Nuclear Matters. Nuclear operations have been, and remain, an important
focus of ComEd. ComEd operates five nuclear plants--Braidwood, Byron, Dresden,
LaSalle and Quad Cities Stations, and is committed to safe, reliable and
efficient operation. See "Changes in the Electric Utility Industry,"
subcaption "Response to Regulatory Changes" above, for information regarding
ComEd's permanent cessation of nuclear generation operations at its Zion
Station.

On May 6, 1999, ComEd's LaSalle Station was officially removed from the
NRC's listing of plants that require increased regulatory scrutiny. LaSalle
Station had been on this list since January 1997. Concurrent with the LaSalle
Station action, the NRC announced the formal removal of the Quad Cities
Station from its list of plants with declining performance trends. Quad Cities
Station had been on the declining trend list since January 1998. With these
actions, all of ComEd's nuclear plants are now placed in the NRC's "routine
oversight" category. This represents the first time since 1990 that none of
ComEd's nuclear generating units are under special NRC oversight.

The NRC and representatives of ComEd's management have met, and will
continue to meet periodically in the future, to discuss the overall
performance of the ComEd nuclear program.

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 lives 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. Under its most recent annual rider, filed with
the ICC on February 26, 1999, ComEd has proposed to increase its estimated
annual decommissioning cost accrual from $84 million to $130 million. The
proposed increase primarily reflects an increase in low-level waste disposal
cost escalation, the inclusion of $209 million in current-year (1999) dollars
for safety-related costs of maintaining Zion Station in a mothballed condition
until dismantlement begins, and the inclusion of non-radiological costs in the
decommissioning cost estimates for recovery under the rider. See Note 1 of
Notes to Financial Statements, under "Depreciation, Amortization of Regulatory
Assets and Decommissioning," for additional information regarding
decommissioning costs.

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

51
<PAGE>

in future construction expenditures and operating expenses and changes in
operating procedures. See Note 21 of Notes to Financial Statements for
additional information.

Results of Operations

Unicom's basic and diluted earnings/(loss) per common share for the three
months, six months and twelve months ended June 30, 1999 and 1998 were as
follows:

<TABLE>
<CAPTION>
Six Months
Three Months Ended Ended Twelve Months Ended
June 30 June 30 June 30
------------------- ----------- --------------------
1999 1998 1999 1998 1999 1998
--------- --------- ----- ----- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings/(Loss) per
Common Share............ $0.55 $0.37 $0.87 $0.62 $2.60 $(4.55)
========= ========= ===== ===== ========= ==========
Diluted Earnings/(Loss)
per Common Share........ $0.55 $0.37 $0.87 $0.62 $2.59 $(4.55)
========= ========= ===== ===== ========= ==========
</TABLE>

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 Unicom and subsidiary companies
as a whole. As such, the following section discusses the effect of ComEd's
operations on Unicom's financial results. All EPS computations shown below
reflect the impact on Unicom's diluted EPS.

Net Income for the Three Months Ended June 30, 1999. The increase in ComEd's
net income in the recent three-month period reflects, among other factors, the
continued improvement of ComEd's nuclear fleet, which reduced energy costs.
The reduction in energy costs helped to offset the reduction in revenues due
to a 15% residential base rate reduction and increased O&M expenditures.

Kilowatthour sales increased 13% for the second quarter of 1999, compared to
the same period in 1998. Both periods benefited from warmer than normal
weather. The increase in kilowatthour sales included a 93% increase in
kilowatthour sales to other utilities, which represented a $32 million (after-
tax), or $0.15 per common share, increase in earnings helping to offset the
15% residential base rate reduction. See "Operating Revenues" below for
additional information.

Fuel and purchased power costs decreased 31% in the second quarter of 1999,
compared to the same period in 1998, reflecting increased generation output by
the nuclear fleet, which reduced purchased power requirements. See "Fuel
Costs" and "Purchased Power" below for additional information.

O&M expenses increased 12% for the second quarter of 1999, compared to the
second quarter of 1998, as discussed in "Operation and Maintenance Expenses"
below.

Earnings for the second quarter of 1999 were also positively impacted by an
unrealized gain of $20 million (after-tax), or $0.09 per common share,
recorded related to a forward share repurchase arrangement. A reduction in the
estimated liability for closing costs related to the Zion Station also
increased earnings by $7 million (after-tax), or $0.03 per common share. In
addition, ComEd recorded $6 million (after-tax), or $0.03 per common share, in
interest income earned on the temporary investment of securitization proceeds.
Partially offsetting the increases to earnings was an increase of $20 million
(after-tax), or $0.09 per common share, for additional regulatory asset
amortization expense.

Net Income for the Six Months Ended June 30, 1999. The increase in ComEd's
net income in the recent six-month period reflects, among other factors, the
continued improvement of ComEd's nuclear fleet, which reduced energy costs.
The reduction in energy costs helped to offset the reduction in revenues due
to the 15% residential base rate reduction and increased O&M expenditures.

52
<PAGE>

Kilowatthour sales increased 10% for the six months ended June 30, 1999,
compared to the same period in 1998, which included a 69% increase in
kilowatthour sales to other utilities, representing a $49 million (after-tax),
or $0.22 per common share, increase in earnings during the first half of 1999,
as well as continued economic growth in ComEd's service territory. See
"Operating Revenues" below for additional information.

Fuel and purchased power costs decreased 28% during the six months ended
June 30, 1999, compared to the same period in 1998, reflecting the effects of
the continued improvement of ComEd's nuclear fleet. See "Fuel Costs" and
"Purchased Power" below for additional information.

O&M expenses increased 4% for the six months ended June 30, 1999, compared
to the same period in 1998, as discussed in "Operation and Maintenance
Expenses" below.

Earnings for the six months ended June 30, 1999 were also positively
impacted by unrealized gains of $33 million (after-tax), or $0.15 per common
share, recorded related to a forward share repurchase arrangement. A reduction
in the estimated liability for closing costs related to the Zion Station also
increased earnings by $7 million (after-tax), or $0.03 per common share. In
addition, ComEd recorded $15 million (after-tax), or $0.07 per common share,
in interest income earned on the temporary investment of securitization
proceeds. Partially offsetting the increases to earnings was an increase of
$20 million (after-tax), or $0.09 per common share, for additional regulatory
asset amortization expense.

Also partially offsetting the increases in earnings were charges totaling
$38 million (after-tax), or $0.17 per common share, related to the early
redemption of long-term debt, sinking fund debentures and preference stock
completed in the first quarter of 1999.

Net Income for the Twelve Months Ended June 30, 1999. The increase in
ComEd's net income in the recent twelve-month period was primarily due to the
continued improvement of the nuclear fleet, which reduced energy costs. Also
increasing operating results were lower O&M expenses, lower depreciation and
amortization expense, gains from certain asset sales, increased interest
income and a reduction in the estimated liability for Zion Station closing
costs. The twelve months ended June 30, 1998 included write downs associated
with the discontinuation of regulatory accounting practices for the generation
portion of its business and other charges recorded in response to the 1997
Act. The twelve months ended June 30, 1998 also included a write-off in
connection with the closure of Zion Station.

ComEd's kilowatthour sales increased 8% for the twelve months ended June 30,
1999, compared to the same period last year, as discussed in "Operating
Revenues" below. O&M expenses decreased 1% during the same period, as
discussed in "Operation and Maintenance Expenses" below.

Fuel and purchased power costs decreased 9% for the twelve months ended June
30, 1999, compared to the same period last year, due to overall improved
performance at ComEd's nuclear stations, which helped to reduce purchased
power requirements. See "Fuel Costs" and "Purchased Power" below for
additional information.

The twelve months ended June 30, 1999 also included a 2% reduction in
depreciation and amortization expense, see "Depreciation, Amortization and
Decommissioning" below, and a $22 million (after-tax), or $0.10 per common
share, reduction in the estimated liability for closing costs related to the
Zion Station, both of which increased operating results.

Also, the twelve months ended June 30, 1999 reflected gains on the sales of
certain assets of $18 million (after-tax), or $0.08 per common share,
consisting principally of surplus inventory of emission allowances. In
addition, operating results increased for the recent period due to unrealized
gains of $33 million (after-tax), or $0.15 per common share, recorded in the
first half of 1999

53
<PAGE>

related to the forward share repurchase arrangement, and interest income of
$20 million (after-tax), or $0.09 per common share, earned on the temporary
investment of securitization proceeds.

Partially offsetting the increases in earnings were charges totaling $38
million (after-tax), or $0.17 per common share, related to the early
redemption of long-term debt, sinking fund debentures and preference stock
completed in the first quarter of 1999.

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
for the twelve months ended June 30, 1998 of $810 million (after-tax), or
$3.75 per common share.

Also, the twelve months ended June 30, 1998 operating results included 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 addition, as permitted under the 1997 Act, ComEd elected to eliminate its
FAC in December 1997, which resulted in a charge for the twelve months ended
June 30, 1998 of $44 million (after-tax), or $0.20 per common share.

The twelve months ended June 30, 1998 also included 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 permanently cease nuclear generation operations at
Zion Station.

Operating Revenues. ComEd's electric operating revenues reflect revenues
from sales to ultimate consumers (including residential, commercial and
industrial customers within its service territory) and revenues from sales for
resale (i.e., sales to wholesale customers, principally other electric
utilities). 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 decreased $98 million in the three months ended June 30,
1999, compared to the three months ended June 30, 1998, primarily due to the
approximately $90 million impact of the 15% residential base rate reduction
that took effect August 1, 1998. Kilowatthour sales increased 13%, primarily
due to sales to other utilities. Operating revenues were also reduced by
approximately $231 million in the six months ended June 30, 1999, compared to
the six months ended June 30, 1998, primarily due to the approximately $180
million impact of the 15% residential base rate reduction that took effect
August 1, 1998. Kilowatthour sales increased 10%, compared to the same period
in 1998, primarily due to sales to other utilities. Operating revenues
decreased $268 million in the twelve months ended June 30, 1999, compared to
the same period in 1998, primarily due to the approximately $350 million
impact of the 15% residential base rate reduction that took effect August 1,
1998. Kilowatthour sales increased 8%, compared to the same period last year,
primarily due to sales to other utilities. Operating revenues for the twelve
months ended June 30, 1999 were also reduced by approximately $22 million
(after-tax), or $0.10 per common share, due to various federal and state
litigation matters. In addition, operating revenues were reduced by
approximately $50 million, $118 million and $213 million for the three months,
six months and twelve months ended June 30, 1999, respectively, due to a
change in presentation for certain state and municipal taxes.

54
<PAGE>

Fuel Costs. Changes in fuel expense for the three months, six months and
twelve months ended June 30, 1999, compared to the same periods ended June 30,
1998, 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 Twelve Months Ended
June 30 Ended June 30 June 30
-------------------- -------------- --------------------
1999 1998 1999 1998 1999 1998
--------- --------- ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cost of fuel consumed (per million Btu):
Nuclear..................................... $0.49 $0.60 $0.49 $0.62 $0.49 $0.59
Coal........................................ $2.23 $2.46 $2.28 $2.18 $2.42 $2.17
Oil......................................... $3.85 $3.72 $3.47 $3.45 $3.57 $3.64
Natural gas................................. $2.35 $2.50 $2.28 $2.46 $2.29 $2.60
Average all fuels........................... $0.99 $1.29 $0.98 $1.27 $1.07 $1.29
Net generation of electric energy (millions of
kilowatthours)............................... 24,531 18,163 47,692 35,491 95,503 80,271
Fuel sources of kilowatthour generation:
Nuclear..................................... 72% 64% 73% 61% 70% 59%
Coal........................................ 24 28 24 31 27 35
Oil......................................... -- -- -- 1 -- 1
Natural gas................................. 4 8 3 7 3 5
--------- --------- ------ ------ --------- ---------
100% 100% 100% 100% 100% 100%
========= ========= ====== ====== ========= =========
</TABLE>

The increases in net generation of electric energy and nuclear generation
for the periods ended June 30, 1999, compared to the prior periods, are
primarily due to significant improvement in ComEd's nuclear fleet. The overall
nuclear capacity factor was 86% for the second quarter of 1999, compared to
57% for the second quarter of 1998. See "Regulation," subcaption "Nuclear
Matters" above, for information regarding 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. For additional
information concerning ComEd's coal purchase commitments see "Liquidity and
Capital Resources," subcaption "UTILITY OPERATIONS--Construction Program,"
above and Note 21 of Notes to Financial Statements.

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 decreased $181 million,
$283 million and $171 million for the three months, six months and twelve
months ended June 30, 1999, respectively, compared to the same periods ended
June 30, 1998. The decrease in purchased power is primarily due to increased
output from ComEd's nuclear fleet, which reduced purchased power requirements.
See "Regulation," subcaption "Nuclear Matters" above, for information
regarding ComEd's nuclear generating stations.

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

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
--------------------- ------------------ --------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Kilowatthours
(millions)............. 2,040 5,764 3,993 14,449 10,248 22,139
Cost per kilowatthour... 4.82c 4.85c 4.26c 3.46c 4.54c 3.24c
</TABLE>

55
<PAGE>

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. See
"Liquidity and Capital Resources," subcaption "UTILITY OPERATIONS--Market
Risks" above, for additional information.

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 and six months ended June 30, 1999, the aggregate
level of O&M expenses increased 12% and 4%, respectively, compared to the same
periods ended June 30, 1998. O&M expenses for the twelve months ended June 30,
1999 decreased 1%, compared to the same period last year.

O&M expenses associated with nuclear generating stations decreased $13
million, $19 million and $59 million during the three months, six months and
twelve months ended June 30, 1999, respectively, compared to the same periods
ended June 30, 1998. The decreases in the recent three-month, six-month and
twelve-month periods were due to shorter refueling outages and fewer forced
outages. The nuclear O&M decrease in the recent twelve-month period was also
due to the permanent cessation of nuclear generation operations at Zion
Station in December 1997. See "Changes in the Electric Utility Industry,"
subcaption "Response to Regulatory Changes" above, regarding the permanent
cessation of nuclear operations at Zion Station.

During the three months, six months and twelve months ended June 30, 1999,
O&M expenses associated with fossil generating stations decreased $11 million,
$17 million and $37 million, respectively, compared to the same periods ended
June 30, 1998. The decreases in the recent periods for the fossil generating
stations were primarily due to reductions in general plant maintenance costs.
Also, the twelve months ended June 30, 1999 fossil O&M expenses were lower due
to the sales of State Line and Kincaid Stations in December 1997 and February
1998, respectively.

O&M expenses associated with ComEd's transmission and distribution system
increased $25 million, $36 million and $58 million during the three months,
six months and twelve months ended June 30, 1999, respectively, compared to
the same periods last year. The increases in the recent three-month and six-
month periods reflect higher maintenance costs, which include an increase in
tree trimming expenses partially offset by a reduction in emergency storm
restoration costs. The increase in the recent twelve-month period reflects
higher maintenance costs, including emergency storm restoration of electric
service and tree trimming. O&M expenses associated with customer-related
activities increased $13 million, $19 million and $23 million for the three
months, six months and twelve months ended June 30, 1999, respectively,
compared to the same periods ended June 30, 1998, primarily due to the
implementation of a new customer information and billing system.

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 postretirement health care benefits, in addition
to certain other employee-related costs, resulting in charges of $5 million
and $8 million for the three months ended June 30, 1999 and 1998,
respectively, $5 million and $24 million for the six months ended June 30,
1999 and 1998, respectively, and $30 million and $56 million for the twelve
months ended June 30, 1999 and 1998, respectively.

56
<PAGE>

Other employee benefits expenses, excluding the effects of employee
separation plans and certain other employee-related costs, increased $31
million, $33 million and $69 million for the three months, six months and
twelve months ended June 30, 1999, respectively, compared to the same periods
ended June 30, 1998. The increases for the recent periods were primarily due
to accruals for incentive compensation.

O&M expenses included a $25 million charge for the six months and twelve
months ended June 30, 1999 as a result of a settlement agreement with the City
during the first quarter of 1999. O&M expenses for the twelve months ended
June 30, 1999 also reflect a reduction of $34 million in certain nuclear
maintenance costs due to technological improvements, compared to the same
period last year. In addition, O&M expenses for the twelve months ended June
30, 1998 included $25 million for the additional write-off of obsolete
materials and supplies.

O&M expenses associated with certain administrative and general costs
increased $27 million, and decreased $10 million and $21 million for the three
months, six months and twelve months ended June 30, 1999, respectively,
compared to the same periods ended June 30, 1998. The increase in the recent
three-month period was principally due to increased charges for uncollectible
accounts resulting from billing and collection delays experienced following
the ongoing implementation of a new customer information system and the
temporary suspension of credit activities in the last half of 1998 and early
1999. The decreases in the recent six-month and twelve-month periods were due
to a variety of reasons, including reductions in nuclear insurance and safety
costs partially offset by additional charges for uncollectible accounts of $25
million and $35 million in the six-months and twelve months ended June 30,
1999, respectively. 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, Amortization and Decommissioning. Depreciation, amortization
and decommissioning expense increased $34 million and $16 million for the
three months and six months ended June 30, 1999, respectively, compared to the
same periods ended June 30, 1998. The twelve months ended June 30, 1999
decreased $23 million, compared to the same period last year. The increases in
the recent three-month and six-month periods were primarily due to additional
regulatory asset amortization expense of $33 million recorded in the second
quarter of 1999. The decrease in the recent twelve-month period was primarily
due to the retirement of Zion Station in December 1997 and the sales of State
Line and Kincaid Stations in December 1997 and February 1998, respectively,
partially offset by $33 million in additional regulatory asset amortization
expense. See Note 1 of Notes to Financial Statements, under "Depreciation,
Amortization of Regulatory Assets and Decommissioning," for additional
information.

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 the financial statements of electric utilities.
In response to these questions, the FASB is reviewing the accounting for
nuclear decommissioning costs. If current electric utility industry accounting
practices for such decommissioning costs are changed, annual provisions for
decommissioning could increase and the estimated costs of decommissioning
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 their results of operations due to ComEd's
ability to recover decommissioning costs through rates.

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, 1999,
compared to the same periods ended June 30, 1998, 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. See Notes 2 and 6 of Notes to Financial Statements for
information regarding the redemptions and repurchases of debt and equity.

57
<PAGE>

The average amounts of ComEd's long-term debt and notes payable outstanding
and average interest rates thereon were as follows:

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
--------------------- --------------------- ---------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Long-term debt outstand-
ing:
Average amount (mil-
lions)................ $8,128 $5,696 $8,329 $5,847 $7,167 $5,973
Average interest rate.. 6.76% 7.78% 6.77% 7.71% 7.19% 7.69%
Notes payable outstand-
ing:
Average amount (mil-
lions)................ $ 290 $ 402 $ 256 $ 308 $ 318 $ 217
Average interest rate.. 5.22% 5.88% 6.09% 5.90% 5.73% 5.95%
</TABLE>

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, and as a result, began capitalizing interest in 1998. ComEd
capitalized $6 million for each of the three months ended June 30, 1999 and
1998, $12 million and $8 million for the six months ended June 30, 1999 and
1998, respectively, and $32 million and $8 million for the twelve months ended
June 30, 1999 and 1998, respectively, in interest costs on its generation-
related construction work in progress and nuclear fuel in process. 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, 1999 and December 31, 1998 were 2.62 and 2.67, respectively. ComEd's
ratios of earnings to fixed charges and preferred and preference stock
dividend requirements for the twelve months ended June 30, 1999 and December
31, 1998 were 2.33 and 2.29, respectively.

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," and "Changes in the
Electric Utility Industry--Response to Regulatory Changes," (3) 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, Amortization of Regulatory
Assets and

58
<PAGE>

Decommissioning," (4) statements regarding cleanup costs associated with MGPs
and other remediation sites in Note 21 of Notes to Financial Statements, (5)
statements regarding the estimated fair value of forward energy contracts in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," subcaption "Liquidity and Capital Resources--UTILITY OPERATIONS--
Market Risks," (6) statements regarding the risks and uncertainties relating
to Year 2000 issues set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations," subcaption "Liquidity and
Capital Resources--UTILITY OPERATIONS--Year 2000 Conversion," including
Unicom's dependence upon the Year 2000 readiness of third parties with whom it
has significant business relationships, the estimated costs of remediating or
upgrading embedded systems and software that would not otherwise be replaced
in accordance with Unicom's business plans, and Unicom's Year 2000 contingency
planning process, (7) statements regarding the fossil plant sale in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," subcaptions "Changes in the Electric Utility Industry--Fossil
Plant Sale," "Liquidity and Capital Resources--UTILITY OPERATIONS--
Construction Program," and "Liquidity and Capital Resources--UNREGULATED
OPERATIONS--Capital Resources," and in Note 4 of Notes to Financial Statements
and (8) statements regarding estimates of claims and other restoration costs
resulting from the July 1999 outages set forth in Note 22 of Notes to
Financial Statements. 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, 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 expectations for Year
2000 readiness and Unicom's Year 2000 contingency planning process are also
subject to the risk that Year 2000 remediation efforts of Unicom and other
parties with whom it has significant business relationships are not
successful. The statements regarding the fair value of forward energy
contracts are subject to changes in generating capability and a reduction in
the demand for electricity. The statement regarding the use of proceeds from
the fossil plant sale is subject to the possibility that regulatory action
might affect the amount and use of such proceeds and the possibility that, due
to changing market conditions, Unicom and ComEd may determine that other uses
of the proceeds may be in their best interest. The statements regarding
estimates of claims and other restoration costs resulting from the July 1999
outages are subject to the risk that the actual amount of losses suffered by
customers and restoration costs may exceed the estimated amounts. 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.

59
<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, 1999 and December 31,
1998, 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, 1999 and 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our 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, 1999 and December 31, 1998,
and the results of their operations and their cash flows for the three-month,
six-month and twelve-month periods ended June 30, 1999 and 1998, in conformity
with accounting principles generally accepted in the United States.

Arthur Andersen LLP
Chicago, Illinois
August 13, 1999
(except with respect to
Note 1 as to which the
date is May 12, 2000)

60
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED OPERATIONS

Other Income and
(Deductions):
Interest on long-term
debt, net of interest
capitalized........... $ (131,599) $ (104,892) $ (270,158) $ (217,337) $ (483,424) $ (451,395)
Interest on notes
payable............... (3,769) (5,897) (7,721) (9,016) (18,264) (12,900)
Allowance for funds
used during
construction.......... 5,190 4,698 9,401 7,858 18,006 30,394
Income taxes
applicable to
nonoperating
activities............ (1,833) 3,324 (3,249) 17,275 (17,827) 34,830
Provision for
dividends on company-
obligated mandatorily
redeemable preferred
securities of
subsidiary trusts
holding solely the
Company's
subordinated debt
securities............ (7,427) (7,428) (14,855) (14,855) (29,710) (29,639)
Loss on nuclear plant
closure............... -- -- -- -- -- (885,611)
Income tax effect of
nuclear plant
closure............... -- -- -- -- -- 362,952
Miscellaneous--net..... 29,609 (5,804) 43,948 (24,260) 74,880 (118,620)
---------- ---------- ---------- ---------- ---------- -----------
$ (109,829) $ (115,999) $ (242,634) $ (240,335) $ (456,339) $(1,069,989)
---------- ---------- ---------- ---------- ---------- -----------
Net Income/(Loss) before
Extraordinary Items.... $ 129,985 $ 104,453 $ 251,962 $ 176,286 $ 669,882 $ (90,194)
Extraordinary Losses,
less Applicable Income
Taxes.................. -- -- (27,576) -- (27,576) (810,335)
---------- ---------- ---------- ---------- ---------- -----------
Net Income/(Loss)....... $ 129,985 $ 104,453 $ 224,386 $ 176,286 $ 642,306 $ (900,529)
Provision for Dividends
on Preferred and
Preference Stocks...... 3,043 14,462 18,340 29,009 46,215 58,483
---------- ---------- ---------- ---------- ---------- -----------
Net Income/(Loss) on
Common Stock........... $ 126,942 $ 89,991 $ 206,046 $ 147,277 $ 596,091 $ (959,012)
========== ========== ========== ========== ========== ===========
</TABLE>

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

61
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1999 1998
------ ----------- ------------
(Thousands of Dollars)
<S> <C> <C>
Utility Plant:
Plant and equipment, at original cost (includes
construction work in progress of $872 million and
$858 million, respectively)....................... $28,245,096 $27,801,246
Less--Accumulated provision for depreciation....... 15,662,340 15,234,320
----------- -----------
$12,582,756 $12,566,926
Nuclear fuel, at amortized cost.................... 856,379 874,979
----------- -----------
$13,439,135 $13,441,905
----------- -----------
Investments:
Nuclear decommissioning funds...................... $ 2,450,974 $ 2,267,317
Subsidiary companies............................... 51,949 48,636
Other investments, at cost......................... 44,380 57,031
----------- -----------
$ 2,547,303 $ 2,372,984
----------- -----------
Current Assets:
Cash............................................... $ 233 $ 219
Temporary cash investments......................... 27,811 26,935
Cash held to redemption of securities.............. 671,233 3,062,816
Special deposits................................... 382 271
Receivables--
Customers........................................ 1,331,922 1,364,760
Forward share repurchase contract................ 695,530 --
Other............................................ 130,929 155,492
Provisions for uncollectible accounts............ (63,711) (48,008)
Coal and fuel oil, at average cost................. 145,740 134,965
Materials and supplies, at average cost............ 239,513 229,532
Deferred income taxes related to current assets and
liabilities....................................... 29,881 26,486
Prepayments and other.............................. 39,648 18,387
----------- -----------
$ 3,249,111 $ 4,971,855
----------- -----------
Deferred Charges and Other Noncurrent Assets:
Regulatory assets.................................. $ 4,432,593 $ 4,578,427
Other.............................................. 61,123 85,406
----------- -----------
$ 4,493,716 $ 4,663,833
----------- -----------
$23,729,265 $25,450,577
=========== ===========
</TABLE>

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

62
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
June 30, December
CAPITALIZATION AND LIABILITIES 1999 31, 1998
------------------------------ ----------- -----------
(Thousands of Dollars)
<S> <C> <C>
Capitalization (see accompanying statements):
Common stock equity.................................. $ 5,073,007 $ 5,055,854
Preferred and preference stocks without mandatory
redemption requirements............................. 18,827 91,479
Preference stock subject to mandatory redemption
requirements........................................ -- 69,475
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the
Company's subordinated debt securities*............. 350,000 350,000
Long-term debt....................................... 7,233,302 7,677,219
----------- -----------
$12,675,136 $13,244,027
----------- -----------
Current Liabilities:
Notes payable........................................ $ 411,850 $ 276,356
Current portion of long-term debt, redeemable
preference stock and capitalized lease obligations.. 1,100,113 2,226,868
Accounts payable..................................... 486,767 605,712
Accrued interest..................................... 148,757 178,238
Accrued taxes........................................ 296,602 165,466
Dividends payable.................................... 94,475 104,022
Customer deposits.................................... 62,889 56,954
Accrued plant closing costs.......................... 43,411 78,430
Other................................................ 131,232 149,304
----------- -----------
$ 2,776,096 $ 3,841,350
----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
Deferred income taxes................................ $ 3,700,936 $ 3,787,978
Nuclear decommissioning liability for retired plants. 1,252,100 1,215,400
Accumulated deferred investment tax credits.......... 544,262 562,285
Accrued spent nuclear fuel disposal fee and related
interest............................................ 745,066 728,413
Obligations under capital leases..................... 257,598 333,653
Regulatory liabilities............................... 587,639 595,005
Other................................................ 1,190,432 1,142,466
----------- -----------
$ 8,278,033 $ 8,365,200
----------- -----------
Commitments and Contingent Liabilities (Note 21)
$23,729,265 $25,450,577
=========== ===========
</TABLE>

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

63
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CAPITALIZATION

<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- ------------
(Thousands of Dollars)
<S> <C> <C>
Common Stock Equity:
Common stock, $12.50 par value per share--
Outstanding--213,972,307 shares and 214,057,171
shares, respectively............................. $ 2,677,976 $ 2,677,969
Premium on common stock and other paid-in capital.. 2,207,260 2,223,706
Capital stock and warrant expense.................. (12,894) (15,664)
Retained earnings.................................. 211,003 176,643
Treasury stock--264,406 shares and 178,982 shares,
respectively...................................... (10,338) (6,800)
----------- -----------
$ 5,073,007 $ 5,055,854
----------- -----------
Preferred and Preference Stocks Without Mandatory
Redemption Requirements:
Preference stock, non-cumulative, without par val-
ue--
Outstanding--2,600 shares......................... $ 16,991 $ 16,991
Preference stock, cumulative, without par value--
Outstanding--3,000,000 shares and 13,499,549
shares, respectively ............................ 72,638 504,957
Current redemption requirements for preference
stock included in current liabilities............. (72,638) (432,320)
$1.425 convertible preferred stock, cumulative,
without par value--
Outstanding--57,725 shares and 58,211 shares, re-
spectively....................................... 1,836 1,851
Prior preferred stock, cumulative, $100 par value
per share--
No shares outstanding............................. -- --
----------- -----------
$ 18,827 $ 91,479
----------- -----------
Preference Stock Subject to Mandatory Redemption Re-
quirements:
Preference stock, cumulative, without par value--
Outstanding--700,000 shares and 1,720,345 shares,
respectively..................................... $ 69,475 $ 171,348
Current redemption requirements for preference
stock included in current liabilities............. (69,475) (101,873)
----------- -----------
$ -- $ 69,475
----------- -----------
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 1999 through 2003--6 3/8% to 9 3/8%..... $ 672,242 $ 1,080,000
Maturing 2004 through 2013--4.40% to 8 3/8%...... 1,305,400 1,485,400
Maturing 2014 through 2023--5.85% to 9 7/8%...... 1,609,442 1,981,000
----------- -----------
$ 3,587,084 $ 4,546,400
Transitional trust notes, due 2000 through 2008--
5.29% to 5.74%.................................... 3,260,000 3,400,000
Sinking fund debentures, due 1999 through 2011--
2 3/4% to 7 5/8%.................................. 32,418 94,159
Pollution control obligations, due 2007 through
2014--3.45% to 5 7/8%............................. 139,200 140,700
Other long-term debt............................... 1,056,301 1,056,346
Deposit for retirement of long-term debt........... (1,021) --
Current maturities of long-term debt included in
current liabilities............................... (787,985) (1,497,706)
Unamortized net debt discount and premium.......... (52,695) (62,680)
----------- -----------
$ 7,233,302 $ 7,677,219
----------- -----------
$12,675,136 $13,244,027
=========== ===========
</TABLE>

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

64
<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
------------------- ----------------- --------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- -------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of
Period................. $ 169,578 $ (47,579) $176,643 $(19,172) $(43,295) $1,258,599
Add--Net income/(loss).. 129,985 104,453 224,386 176,286 642,306 (900,529)
--------- --------- -------- -------- -------- ----------
$ 299,563 $ 56,874 $401,029 $157,114 $599,011 $ 358,070
--------- --------- -------- -------- -------- ----------
Deduct--
Dividends declared
on--
Common stock........ $ 85,517 $ 85,694 $171,106 $171,387 $342,495 $ 342,769
Preferred and
preference stocks.. 3,043 14,419 6,085 28,966 32,437 58,135
Preference stock
redemption premiums. -- -- 9,984 -- 9,984 --
Other capital stock
transactions--net... -- 56 2,851 56 3,092 461
--------- --------- -------- -------- -------- ----------
$ 88,560 $ 100,169 $190,026 $200,409 $388,008 $ 401,365
--------- --------- -------- -------- -------- ----------
Balance at End of Period
(Includes $627 million
and $360 million of
appropriated retained
earnings at June 30,
1999 and 1998,
respectively).......... $ 211,003 $ (43,295) $211,003 $(43,295) $211,003 $ (43,295)
========= ========= ======== ======== ======== ==========
</TABLE>

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

65
<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
-------------------- ---------------------- -----------------------
1999 1998 1999 1998 1999 1998
--------- --------- ----------- --------- ----------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Cash Flow from Operating
Activities:
Net income/(loss)...... $ 129,985 $ 104,453 $ 224,386 $ 176,286 $ 642,306 $(900,529)
Adjustments to
reconcile net
income/(loss) to net
cash provided by
operating activities:
Depreciation and
amortization........ 284,156 245,342 528,904 506,061 1,011,988 1,030,887
Deferred income taxes
and investment tax
credits--net........ (47,937) (20,160) (103,198) 4,340 (44,743) (344,933)
Extraordinary loss
related to write-off
of certain net
regulatory assets... -- -- -- -- -- 810,335
Loss on nuclear plant
closure............. -- -- -- -- -- 885,611
Provisions/(payments)
for revenue
refunds--net........ 2,635 (10,966) (19,858) (45,470) 2,745 --
Equity component of
allowance for funds
used during
construction........ (2,003) (1,960) (3,756) (3,544) (7,170) (16,529)
Provisions/(payments)
for liability for
separation costs--
net................. (1,018) (389) (9,798) 7,036 (7,076) 22,219
Net effect on cash
flows of changes in:
Receivables........ (149,642) (213,687) 39,687 (149,402) (296,744) (218,289)
Coal and fuel oil.. 7,495 (48,322) (10,775) (84,508) 59,432 (25,022)
Materials and
supplies.......... (5,841) (2,899) (9,981) (6,638) 19,176 34,480
Accounts payable
excluding nuclear
fuel lease
principal payments
and separation
costs--net........ 29,482 138,721 (108,067) 116,763 (112,850) 154,778
Accrued interest
and taxes......... (35,359) 89,692 119,705 97,959 (913) 57,889
Other changes in
certain current
assets and
liabilities....... 26,468 34,984 54,232 51,688 143,732 247,016
Other--net........... 45,482 (480) 126,451 57,686 114,388 122,247
--------- --------- ----------- --------- ----------- ----------
$ 283,903 $ 314,329 $ 827,932 $ 728,257 $ 1,524,271 $1,860,160
--------- --------- ----------- --------- ----------- ----------
Cash Flow from Investing
Activities:
Construction
expenditures.......... $(245,292) $(249,136) $ (473,708) $(420,122) $ (956,817) $ (963,904)
Nuclear fuel
expenditures.......... (63,862) (34,418) (113,947) (94,967) (185,147) (189,625)
Sales of generating
plants................ -- -- -- 177,454 -- 238,245
Equity component of
allowance for funds
used during
construction.......... 2,003 1,960 3,756 3,544 7,170 16,529
Contributions to
nuclear
decommissioning
funds................. -- -- (39,426) (80,077) (96,120) (114,721)
Other investments and
special deposits...... (2,180) (85) (2,468) (946) (2,695) 23,651
--------- --------- ----------- --------- ----------- ----------
$(309,331) $(281,679) $ (625,793) $(415,114) $(1,233,609) $ (989,825)
--------- --------- ----------- --------- ----------- ----------
Cash Flow from Financing
Activities:
Issuance of
securities--
Transitional trust
notes................ $ -- $ -- $ -- $ -- $ 3,382,629 $ --
Other long-term debt.. -- -- -- -- 222,068 --
Capital stock......... 9 91 15 224 17,043 274
Retirement and
redemption of
securities--
Transitional trust
notes................ (140,000) -- (140,000) -- (140,000) --
Other long-term debt.. (5,355) (8,139) (1,058,435) (372,183) (1,184,443) (532,469)
Capital stock......... (51) (6,092) (564,264) (6,225) (598,905) (47,096)
Deposits and
securities held for
retirement and
redemption of
securities............ -- 3,069 -- (995) -- (766)
Prepayment of forward
share repurchase
contract.............. -- -- (662,113) -- (662,113) --
Cash dividends paid on
capital stock......... (92,800) (104,480) (201,593) (215,334) (416,126) (431,336)
Proceeds from
sale/leaseback of
nuclear fuel.......... -- 44,861 -- 61,426 39,612 130,109
Nuclear fuel lease
principal payments.... (48,191) (128,823) (101,936) (161,009) (196,531) (241,566)
Increase/(decrease) in
short-term
borrowings............ 207,643 110,196 135,494 331,696 (77,996) 226,096
--------- --------- ----------- --------- ----------- ----------
$ (78,745) $ (89,317) $(2,592,832) $(362,400) $ 385,238 $ (896,754)
--------- --------- ----------- --------- ----------- ----------
Change in Net Cash
Balance................ $(104,173) $ (56,667) $(2,390,693) $ (49,257) $ 675,900 $ (26,419)
Cash, Temporary Cash
Investments and Cash
Held for Redemption of
Securities:
Balance at Beginning
of Period............. 803,450 80,044 3,089,970 72,634 23,377 49,796
--------- --------- ----------- --------- ----------- ----------
Balance at End of
Period................ $ 699,277 $ 23,377 $ 699,277 $ 23,377 $ 699,277 $ 23,377
========= ========= =========== ========= =========== ==========
</TABLE>

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

66
<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 "Average Common Shares Outstanding" 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 temporary 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 $152 million and $133 million for the three months ended June
30, 1999 and 1998, respectively, $315 million and $270 million for the six
months ended June 30, 1999 and 1998, respectively, and $562 million and $559
million for the twelve months ended June 30, 1999 and 1998, respectively.

(2) Accounting Effects Related to the 1997 Act. See Unicom's Note 2 of Notes
to Financial Statements, except for EPS information.

(3) Rate Matters. See Unicom's Note 3 of Notes to Financial Statements.

(4) Closure and Sale of Plants. See Unicom's Note 4 of Notes to Financial
Statements, except for EPS information.

(5) Authorized Shares and Voting Rights of Capital Stock. At June 30, 1999,
the authorized shares of capital stock were: common stock--250,000,000 shares;
preference stock--10,510,451 shares; $1.425 convertible preferred stock--
57,725 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.

67
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

(6) Common Equity. In the fourth quarter of 1998, ComEd entered into a
forward purchase arrangement with Unicom for the repurchase of $200 million of
ComEd common stock. This contract, which was accounted for as an equity
instrument as of December 31, 1998, was settled on a net cash basis in
February 1999 resulting in a $16 million reduction to common stock equity on
the Consolidated Balance Sheets.

In February 1999, ComEd also entered into a prepaid forward purchase
agreement with Unicom for the repurchase of approximately 15 million shares of
Unicom common stock. This forward purchase arrangement was amended to also
include the repurchase of approximately 5.1 million shares for a total of 20.1
million shares, subsequent to the net cash settlement of the $200 million
repurchase program, as described above. The repurchase arrangement, as
amended, provides for final settlement no later than February 2000, on either
a physical (share) basis, or a net cash basis. The terms of the repurchase
agreement between ComEd and Unicom are identical to the terms of Unicom's
repurchase agreement with the financial institution. The repurchase agreement
between ComEd and Unicom is expected to be settled on the same basis Unicom
settles its repurchase arrangements with the financial institution. The amount
at which the arrangement can be settled is dependent principally upon the
average market price at which Unicom common shares have been repurchased under
its repurchase agreement, compared to the forward price per share. The share
repurchases will not reduce shares outstanding or common stock equity, and
resulting return on common equity calculations, until the date of physical
settlement. ComEd does not currently anticipate that settlement will occur in
1999. The repurchase arrangement has been recorded as a receivable on the
Consolidated Balance Sheets and will be adjusted at the end of each reporting
period to reflect the aggregate market value of the shares deliverable under
the arrangement. Consequently, the arrangement could increase earnings
volatility in 1999. Unrealized gains of $20 million (after-tax) for the three
months ended and $33 million (after-tax) for the six and twelve months ended
June 30, 1999 have been recorded related to the arrangement.

At June 30, 1999, shares of common stock were reserved for the following
purposes:

<TABLE>
<S> <C>
Conversion of $1.425 convertible preferred stock................... 58,879
Conversion of warrants............................................. 25,279
------
84,158
======
</TABLE>

Shares of common stock issued for the three months, six months and twelve
months ended June 30, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
Six Months
Three Months Ended Ended Twelve Months Ended
June 30 June 30 June 30
-------------------- ---------- -------------------
1999 1998 1999 1998 1999 1998
--------- ---------- ---- ----- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Conversion of $1.425 con-
vertible preferred stock... 283 2,927 495 7,196 1,147 8,803
Conversion of warrants...... 36 40 65 124 169 174
-------- ---------- --- ----- --------- ---------
319 2,967 560 7,320 1,316 8,977
======== ========== === ===== ========= =========
</TABLE>

As of June 30, 1999 and December 31, 1998, 264,406 and 178,982 shares,
respectively, of ComEd common stock were reacquired and held as treasury stock
at a cost of $10 million and $7 million, respectively.

At June 30, 1999 and December 31, 1998, 75,839 and 76,079, respectively, of
common stock purchase warrants 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.

68
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

As of June 30, 1999 and December 31, 1998, $627 million and $580 million,
respectively, of retained earnings had been appropriated for future dividend
payments.

(7) Stock Option Awards/Employee Stock Purchase Plan. See Unicom's Note 7 of
Notes to Financial Statements, except for EPS information.

(8) Preferred and Preference Stocks Without Mandatory Redemption
Requirements. See Unicom's Note 8 of Notes to Financial Statements.

(9) Preference Stock Subject to Mandatory Redemption Requirements. See
Unicom's Note 9 of Notes to Financial Statements.

(10) Company-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trusts Holding Solely the Company's Subordinated Debt Securities.
See Unicom's Note 10 of Notes to Financial Statements.

(11) Long-Term Debt. See Unicom's Note 11 of Notes to Financial Statements,
except for the last two paragraphs regarding Unicom Thermal and Northwind
Midway's guaranteed senior Notes.

(12) Lines of Credit. See the first paragraph of Unicom's Note 12 of Notes
to Financial Statements.

(13) Disposal of Spent Nuclear Fuel. See Unicom's Note 13 of Notes to
Financial Statements.

(14) Fair Value of Financial Instruments. See Unicom's Note 14 of Notes to
Financial Statements, except for following section.

Capitalization. The estimated fair values of preferred and preference
stocks, company-obligated mandatorily redeemable preferred securities of
subsidiary trusts holding solely the Company's subordinated debt securities,
transitional trust notes 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, 1999 and December 31, 1998 were as follows:

<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
--------------------------------- --------------------------------
Unrealized
Carrying Losses/ Carrying Unrealized Fair
Value (Gains) Fair Value Value Losses Value
---------- ---------- ---------- ---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Preferred and preference
stocks................. $ 143,949 $ 3,127 $ 147,076 $ 678,156 $ 11,500 $ 689,656
Company-obligated
mandatorily redeemable
preferred securities of
subsidiary trusts
holding solely the
Company's subordinated
debt securities........ $ 350,000 $ 10,975 $ 360,975 $ 350,000 $ 20,678 $ 370,678
Transitional trust
notes.................. $3,245,118 $ (84,814) $3,160,304 $3,382,821 $ 67,168 $3,449,989
Long-term debt.......... $4,776,889 $ 211,504 $4,988,393 $5,791,757 $442,077 $6,233,834
</TABLE>

(15) Pension and Postretirement Benefits. See Unicom's Note 15 of Notes to
Financial Statements.

(16) Separation Plan Costs. See Unicom's Note 16 of Notes to Financial
Statements, except for EPS information.

69
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

(17) Income Taxes. The components of the net deferred income tax liability
at June 30, 1999 and December 31, 1998 were as follows:

<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------- ------------
(Thousands of Dollars)
<S> <C> <C>
Deferred income tax liabilities:
Accelerated cost recovery and liberalized deprecia-
tion, net of removal costs.......................... $3,964,028 $4,007,681
Overheads capitalized................................ 137,850 140,922
Repair allowance..................................... 228,020 233,861
Regulatory assets recoverable through future rates... 667,728 680,356
Deferred income tax assets:
Postretirement benefits.............................. (351,309) (331,566)
Unamortized investment tax credits................... (184,732) (191,135)
Regulatory liabilities to be settled through future
rates............................................... (587,639) (595,005)
Nuclear plant closure................................ (24,400) (38,354)
Other--net........................................... (178,491) (145,268)
---------- ----------
Net deferred income tax liability..................... $3,671,055 $3,761,492
========== ==========
</TABLE>

The $90 million decrease in the net deferred income tax liability from
December 31, 1998 to June 30, 1999 is comprised of an $85 million credit to
net deferred income tax expense 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 for both periods, 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.

The components of net income tax expense charged/(credited) to continuing
operations for the three months, six months and twelve months ended June 30,
1999 and 1998 were as follows:

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
-------------------- ------------------ --------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- --------- ---------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Electric operating in-
come:
Current income taxes... $ 109,437 $ 81,963 $225,821 $147,650 $ 415,992 $ 349,508
Deferred income taxes.. (43,973) (14,029) (91,194) (21,608) (26,289) 20,130
Investment tax credits
deferred--net......... (7,021) (6,888) (14,042) (14,048) (27,723) (29,270)
Other (income) and de-
ductions:
Current income taxes... (899) (4,165) 1,769 (57,232) 9,147 (62,134)
Deferred income taxes.. 5,242 796 6,080 47,544 17,993 (337,474)
Investment tax credits. (2,153) -- (3,981) (7,472) (8,616) (29,997)
--------- --------- -------- -------- --------- ---------
Net income taxes
charged/(credited) to
continuing operations.. $ 60,633 $ 57,677 $124,453 $ 94,834 $ 380,504 $ (89,237)
========= ========= ======== ======== ========= =========
</TABLE>

70
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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, 1999 and
1998 were as follows:

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
------------------- ------------------ --------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- --------- ---------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes
computed at statutory
rate................... $ 66,741 $ 56,745 $131,745 $ 94,892 $ 367,635 $ (62,801)
Equity component of
AFUDC which was
excluded from taxable
income................. (112) (110) (210) (198) (401) (4,743)
Amortization of
investment tax credits,
net of deferred income
taxes ................. (5,907) (4,517) (11,618) (13,728) (23,395) (43,274)
State income taxes, net
of federal income
taxes.................. 8,125 7,529 16,589 13,663 46,586 4,242
Unrealized gain on for-
ward share repurchase
contract............... (6,891) -- (11,696) -- (11,696) --
Earnings on nontax-qual-
ified decommissioning
fund................... (2,768) -- (2,768) -- (2,768) --
Differences between book
and tax accounting,
primarily property-
related deductions..... 1,445 (1,970) 2,411 205 4,543 17,339
-------- --------- -------- -------- --------- ---------
Net income taxes
charged/(credited) to
continuing operations.. $ 60,633 $ 57,677 $124,453 $ 94,834 $ 380,504 $ (89,237)
======== ========= ======== ======== ========= =========
</TABLE>

(18) Taxes, Except Income Taxes. Provisions for taxes, except income taxes,
for the three months, six months and twelve months ended June 30, 1999 and 1998
were as follows:

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
------------------- ----------------- -------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- --------- ---------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Illinois public utility
revenue................ $ 402 $ 44,247 $ 1,897 $101,928 $ 26,449 $ 222,869
Illinois invested capi-
tal.................... -- -- -- -- -- 47,486
Illinois electricity
distribution tax....... 26,336 24,911 54,672 51,629 113,069 51,629
Municipal utility gross
receipts............... 26,164 38,556 50,587 81,107 121,981 170,131
Real estate............. 29,479 29,229 62,506 64,360 122,776 141,976
Municipal compensation.. 18,494 24,214 36,801 44,085 70,426 85,446
Energy assistance and
renewable energy
charge................. 8,776 8,709 17,445 16,273 33,909 16,273
Other--net.............. 20,273 14,733 37,634 32,183 78,518 65,672
--------- --------- -------- -------- --------- ---------
$129,924 $ 184,599 $261,542 $391,565 $567,128 $ 801,482
========= ========= ======== ======== ========= =========
</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.

Effective August 1, 1998, as provided for by the 1997 Act, the Illinois
electricity excise tax, replacing the Illinois public utility revenue tax, and
certain municipal utility taxes are recorded as

71
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Concluded
liabilities. Previously, similar taxes were presented on the Statements of
Consolidated Operations as revenue and expense. The reduction in operating
revenues and taxes, except income taxes, due to the change in presentation for
such taxes was approximately $50 million, $118 million and $213 million for
the three months, six months and twelve months ended June 30, 1999,
respectively. This change in the presentation for such taxes did not have an
effect on results of operations.

See Unicom's Note 21 for additional information regarding Illinois invested
capital taxes.

(19) Lease Obligations. See the first and second paragraphs of Unicom's Note
19 of Notes to Financial Statements.

Future minimum rental payments at June 30, 1999 for operating leases are
estimated to aggregate to $269 million, including $20 million in 1999, $38
million in 2000, $30 million in 2001, $25 million in 2002, $22 million in 2003
and $134 million in 2004-2024.

(20) Joint Plant Ownership. See Unicom's Note 20 of Notes to Financial
Statements.

(21) Commitments and Contingent Liabilities. See Unicom's Note 21 of Notes
to Financial Statements.

(22) Subsequent Events. See Unicom's Note 22 of Notes to Financial
Statements.

72
<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, except for EPS information.

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.

Forward-Looking Information. See Unicom's "Management's Discussion and
Analysis of Financial Condition and Results of Operations," subcaption
"Forward-Looking Information," which is incorporated herein by this reference,
except for references to Unregulated Operations.

73
<PAGE>

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

During the first half of 1999, no civil penalties were imposed on ComEd for
violations of NRC regulations. There were two enforcement issues pending as of
the end of the second quarter of 1999. One of these two issues was
subsequently resolved on July 20, 1999, with ComEd receiving a Severity Level
III violation with no civil penalty. To ComEd's knowledge, there is currently
only one enforcement issue pending or under review by the NRC.

On April 18, 1996, a ComEd truck struck a car that had slowed or stopped to
make a turn. The truck pushed this car into oncoming traffic causing a head-on
collision with a third vehicle. The driver of this third vehicle suffered
extensive injuries resulting in numerous surgical procedures. On May 28, 1999,
after a trial in the Circuit Court of Cook County, Illinois, a jury returned a
verdict of $14 million in favor of the plaintiffs. The matter is currently on
appeal. ComEd expects that insurance coverage above ComEd's $5 million self-
insured retention will be available.

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 21 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 federal and state
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, 1998 or in these
Quarterly Reports on Form 10-Q for the quarterly period ended June 30, 1999,
which could have such an effect.

74
<PAGE>

Item 4. Submission of Matters to a Vote of Security Holders.

Unicom's annual meeting of shareholders was held on May 25, 1999. 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..................................... 176,390,405 2,809,654
Carlos H. Cantu....................................... 172,134,699 7,065,360
James W. Compton...................................... 176,441,251 2,758,808
Bruce DeMars.......................................... 176,528,732 2,671,327
Sue L. Gin............................................ 176,536,918 2,663,141
Donald P. Jacobs...................................... 176,351,077 2,848,982
Edgar D. Jannotta..................................... 174,974,160 4,225,899
Elizabeth A. Moler.................................... 176,344,371 2,855,688
John W. Rogers........................................ 174,582,515 4,617,544
John W. Rowe.......................................... 176,582,994 2,617,065
Richard L. Thomas..................................... 176,438,130 2,761,929
</TABLE>

Also at the meeting, the appointment by Unicom's Board of Directors of
Arthur Andersen LLP as auditors for the year 1999 was approved. A total of
176,282,157 shares voted to approve the appointment, 762,248 shares voted
against the appointment and 2,155,654 shares abstained.

In addition, amendments to the Unicom Corporation Long-Term Incentive Plan
were approved at the meeting. The amendments increase the number of stock
options, stock appreciation rights and performance units that can be awarded
to any one individual under the plan. A total of 150,430,048 shares voted to
approve the amendments, 25,625,591 shares voted against approval of the
amendments and 3,144,420 shares abstained.

Also, the material terms of performance-based incentives in performance unit
awards under the Unicom Corporation Long-Term Incentive Plan were approved at
the meeting. A total of 164,929,776 shares voted to approve the material
terms, 10,975,984 shares voted against approval of the material terms and
3,294,299 shares abstained.

Finally, a shareholder proposal that would have required Unicom to develop
and implement programs expanding the use of energy efficiency and renewable
energy resources was not approved at the meeting. A total of 10,478,211 shares
voted to approve the proposal, 139,765,031 shares voted against approval of
the proposal, 10,016,558 shares abstained and 18,940,259 shares were not
voted.

ComEd's annual meeting of shareholders was held on May 25, 1999. 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................................................... 213,967,856
Carlos H. Cantu..................................................... 213,967,856
James W. Compton.................................................... 213,967,856
Bruce DeMars........................................................ 213,967,856
Sue L. Gin.......................................................... 213,967,856
Donald P. Jacobs.................................................... 213,967,856
Edgar D. Jannotta................................................... 213,967,856
Elizabeth A. Moler.................................................. 213,967,856
John W. Rogers...................................................... 213,967,856
John W. Rowe........................................................ 213,967,856
Richard L. Thomas................................................... 213,967,856
</TABLE>

75
<PAGE>

Also at the meeting, the appointment by ComEd's Board of Directors of Arthur
Andersen LLP as auditors for the year 1999 was approved. A total of
213,967,856 shares voted to approve the appointment.

In addition, amendments to the Unicom Corporation Long-Term Incentive Plan
were approved at the meeting. The amendments increase the number of stock
options, stock appreciation rights and performance units that can be awarded
to any one individual under the plan. A total of 213,967,856 shares voted to
approve the amendments.

Also, the material terms of performance-based incentives in performance unit
awards under the Unicom Corporation Long-Term Incentive Plan were approved at
the meeting. A total of 213,967,856 shares voted to approve the material
terms.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- --------------------------------------------------------------
<C> <S>
(23)-1 Consent of independent public accountants applicable to Unicom
Corporation.
(23)-2 Consent of independent public accountants applicable to
Commonwealth Edison Company.
</TABLE>

(b) Reports on Form 8-K

A Current Report on Form 8-K dated May 27, 1999 was filed by Unicom and
ComEd announcing the changes made by the Illinois General Assembly to the
1997 Restructuring Law which provided a new set of benefits for consumers,
Illinois industry and the environment.

76
<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 13th day of August, 1999. 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
Vice President and 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
Vice President and Comptroller
(Chief accounting officer and
officer duly authorized to sign on
behalf of the registrant)

<PAGE>

Exhibit (23)-1
Unicom Corporation
Form 10-Q/A 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/A for the quarterly period ended
June 30, 1999, 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 Unicom Corporation's
Common Stock), 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's Management Deferred
Compensation Plan).

Arthur Andersen LLP

Chicago, Illinois
May 12, 2000

<PAGE>

Exhibit (23)-2
Commonwealth Edison Company
Form 10-Q/A 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/A for the quarterly period ended
June 30, 1999, 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 Mandatorily 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
Mandatorily 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).

Arthur Andersen LLP

Chicago, Illinois
May 12, 2000