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

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

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<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 September 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 October 31, 1999:
Unicom Corporation 217,516,983 shares
Commonwealth Edison Company 213,973,242 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 September 30, 1999

This document contains the amended Quarterly Reports on Form 10-Q/A for the
quarterly period ended September 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 61-62 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, nine
months and twelve months ended September 30, 1999 and 1998.......... 5
Consolidated Balance Sheets--September 30, 1999 and December 31,
1998................................................................ 6-7
Statements of Consolidated Capitalization--September 30, 1999 and De-
cember 31, 1998..................................................... 8
Statements of Consolidated Retained Earnings/(Deficit) for the three
months, nine months and twelve months ended September 30, 1999 and
1998................................................................ 9
Statements of Consolidated Cash Flows for the three months, nine
months and twelve months ended September 30, 1999 and 1998.......... 10
Notes to Financial Statements........................................ 11-40
Management's Discussion and Analysis of Financial Condition and Results
of
Operations............................................................ 41-62
Commonwealth Edison Company and Subsidiary Companies:
Financial Statements--
Report of Independent Public Accountants............................. 63
Statements of Consolidated Operations for the three months, nine
months and twelve months ended September 30, 1999 and 1998.......... 64
Consolidated Balance Sheets--September 30, 1999 and December 31,
1998................................................................ 65-66
Statements of Consolidated Capitalization--September 30, 1999 and De-
cember 31, 1998..................................................... 67
Statements of Consolidated Retained Earnings/(Deficit) for the three
months, nine months and twelve months ended September 30, 1999 and
1998................................................................ 68
Statements of Consolidated Cash Flows for the three months, nine
months and twelve months ended September 30, 1999 and 1998.......... 69
Notes to Financial Statements........................................ 70-75
Management's Discussion and Analysis of Financial Condition and Results
of
Operations............................................................ 76
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 77
Item 6. Exhibits and Reports on Form 8-K............................... 78-79
SIGNATURES............................................................... 80
</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, as amended
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
Merger Agreement Agreement and Plan of Exchange and Merger, dated
September 22, 1999, among PECO, Unicom and Newco
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
PECO PECO Energy Company, a Pennsylvania company
RES Retail Electric Supplier
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 September 30, 1999 and December 31, 1998, and
the related statements of consolidated operations, retained earnings/(deficit)
and cash flows for the three-month, nine-month and twelve-month periods ended
September 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 September 30, 1999 and December 31, 1998, and the
results of their operations and their cash flows for the three-month, nine-
month and twelve-month periods ended September 30, 1999 and 1998, in
conformity with accounting principles generally accepted in the United States.

Arthur Andersen LLP

Chicago, Illinois
November 12, 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,
nine months and twelve months ended September 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 Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
---------------------- ---------------------- -----------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- -----------
(Thousands Except Per Share Data)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues...... $2,084,454 $2,095,699 $5,307,972 $5,539,742 $6,871,640 $ 7,179,643
---------- ---------- ---------- ---------- ---------- -----------
Operating Expenses and
Taxes:
Fuel................... $ 302,181 $ 340,317 $ 796,654 $ 804,483 $1,049,699 $ 1,062,539
Purchased power........ 249,375 193,637 419,358 646,388 520,987 751,325
Operation and
maintenance........... 581,937 568,815 1,787,435 1,703,409 2,369,062 2,353,968
Depreciation and
amortization.......... 202,109 232,461 700,388 713,944 929,731 963,524
Taxes (except income).. 144,791 179,385 407,286 571,873 535,247 757,692
Income taxes........... 181,654 187,787 305,265 303,878 354,131 339,241
Investment tax credits
deferred--net ........ (7,021) (6,889) (21,063) (20,937) (27,856) (28,588)
---------- ---------- ---------- ---------- ---------- -----------
$1,655,026 $1,695,513 $4,395,323 $4,723,038 $5,731,001 $ 6,199,701
---------- ---------- ---------- ---------- ---------- -----------
Operating Income........ $ 429,428 $ 400,186 $ 912,649 $ 816,704 $1,140,639 $ 979,942
---------- ---------- ---------- ---------- ---------- -----------
Other Income and
(Deductions):
Interest on long-term
debt, net of interest
capitalized........... $ (134,622) $ (111,535) $ (413,132) $ (334,929) $ (522,526) $ (454,260)
Interest on notes
payable............... (5,282) (6,170) (13,003) (15,186) (17,377) (15,817)
Allowance for funds
used during
construction.......... 6,581 4,467 15,982 12,325 20,121 24,217
Income taxes
applicable to
nonoperating
activities............ 2,080 1,671 (1,169) 18,946 (17,418) 31,151
Provisions for
dividends and
redemption premiums--
Preferred and
preference stocks of
ComEd............... (1,830) (14,053) (20,170) (43,062) (33,991) (57,635)
ComEd-obligated
mandatorily
redeemable preferred
securities of
subsidiary trusts
holding solely
ComEd's subordinated
debt securities..... (7,428) (7,428) (22,283) (22,283) (29,710) (29,710)
Loss on nuclear plant
closure............... -- -- -- -- -- (885,611)
Income tax effects of
nuclear plant
closure............... -- -- -- -- -- 362,952
Miscellaneous--net..... (9,175) (2,316) 37,492 (33,520) 67,816 (106,960)
---------- ---------- ---------- ---------- ---------- -----------
$ (149,676) $ (135,364) $ (416,283) $ (417,709) $ (533,085) $(1,131,673)
---------- ---------- ---------- ---------- ---------- -----------
Net Income/(Loss) before
Extraordinary Items.... $ 279,752 $ 264,822 $ 496,366 $ 398,995 $ 607,554 $ (151,731)
Extraordinary Losses,
less Applicable Income
Taxes.................. -- -- (27,579) -- (27,579) (810,335)
---------- ---------- ---------- ---------- ---------- -----------
Net Income/(Loss)....... $ 279,752 $ 264,822 $ 468,787 $ 398,995 $ 579,975 $ (962,066)
========== ========== ========== ========== ========== ===========
Earnings/(loss) per
common share before
extraordinary items--
Basic.................. $ 1.29 $ 1.22 $ 2.29 $ 1.84 $ 2.80 $ (0.69)
Diluted................ $ 1.28 $ 1.22 $ 2.28 $ 1.83 $ 2.79 $ (0.69)
Extraordinary losses,
less applicable income
taxes (basic and
diluted)............... -- -- (0.13) -- (0.13) (3.75)
Earnings/(loss) per
common share--
Basic.................. $ 1.29 $ 1.22 $ 2.16 $ 1.84 $ 2.67 $ (4.44)
Diluted................ $ 1.28 $ 1.22 $ 2.15 $ 1.83 $ 2.66 $ (4.44)
Cash Dividends Declared
per Common Share....... $ 0.40 $ 0.40 $ 1.20 $ 1.20 $ 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>
September 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 $959 million and
$858 million, respectively)....................... $28,501,029 $27,801,246
Less--Accumulated provision for depreciation....... 15,749,560 15,234,320
----------- -----------
$12,751,469 $12,566,926
Nuclear fuel, at amortized cost.................... 864,229 874,979
----------- -----------
$13,615,698 $13,441,905
----------- -----------
Investments and Other Property:
Nuclear decommissioning funds...................... $ 2,340,005 $ 2,267,317
Subsidiary companies............................... 42,908 41,150
Other, at cost..................................... 310,030 275,794
----------- -----------
$ 2,692,943 $ 2,584,261
----------- -----------
Current Assets:
Cash............................................... $ 43,300 $ 28,893
Temporary cash investments......................... 38,229 26,935
Cash held for redemption of securities............. 606,822 3,062,816
Special deposits................................... 382 271
Receivables--
Customers........................................ 1,307,554 1,369,701
Forward share repurchase contract................ 678,016 --
Other............................................ 148,933 136,701
Provisions for uncollectible accounts............ (62,718) (48,645)
Coal and fuel oil, at average cost................. 131,272 135,415
Materials and supplies, at average cost............ 242,342 232,246
Deferred income taxes related to current assets and
liabilities....................................... 30,872 24,339
Prepayments and other.............................. 37,976 20,301
----------- -----------
$ 3,202,980 $ 4,988,973
----------- -----------
Deferred Charges and Other Noncurrent Assets:
Regulatory assets.................................. $ 4,473,652 $ 4,578,427
Other.............................................. 113,031 96,907
----------- -----------
$ 4,586,683 $ 4,675,334
----------- -----------
$24,098,304 $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>
September
30, December 31,
CAPITALIZATION AND LIABILITIES 1999 1998
------------------------------ ----------- ------------
(Thousands of Dollars)
<S> <C> <C>
Capitalization (see accompanying statements):
Common stock equity................................. $ 5,296,088 $ 5,099,444
Preferred and preference stocks of ComEd--
Without mandatory redemption requirements......... 1,829 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...................................... 7,195,732 7,792,502
----------- -----------
$12,843,649 $13,385,909
----------- -----------
Current Liabilities:
Notes payable....................................... $ 448,750 $ 292,963
Current portion of long-term debt, redeemable
preference stock and capitalized lease obligations
of subsidiary companies............................ 1,292,606 2,314,443
Accounts payable.................................... 499,405 604,936
Accrued interest.................................... 131,174 180,674
Accrued taxes....................................... 274,210 134,976
Dividends payable................................... 90,859 105,133
Customer deposits................................... 62,211 56,954
Accrued plant closing costs......................... 15,198 78,430
Other............................................... 137,476 155,262
----------- -----------
$ 2,951,889 $ 3,923,771
----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
Deferred income taxes............................... $ 3,719,866 $ 3,805,460
Nuclear decommissioning liability for retired
plants............................................. 1,266,900 1,215,400
Accumulated deferred investment tax credits......... 535,089 562,285
Accrued spent nuclear fuel disposal fee and related
interest........................................... 753,926 728,413
Obligations under capital leases of subsidiary com-
panies............................................. 213,736 333,653
Regulatory liabilities.............................. 599,739 595,005
Other............................................... 1,213,510 1,140,577
----------- -----------
$ 8,302,766 $ 8,380,793
----------- -----------
Commitments and Contingent Liabilities (Note 21)
$24,098,304 $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>
September
30, December 31,
1999 1998
----------- ------------
(Thousands of Dollars)
<S> <C> <C>
Common Stock Equity:
Common stock, without par value--
Outstanding--217,443,205 shares and 217,094,560
shares, respectively.............................. $ 4,958,853 $ 4,966,630
Preference stock expense of ComEd................... (72) (3,199)
Retained earnings................................... 347,402 142,813
Treasury stock--264,406 shares and 178,982 shares,
respectively....................................... (10,095) (6,800)
----------- -----------
$ 5,296,088 $ 5,099,444
----------- -----------
Preferred and Preference Stocks of ComEd--
Without Mandatory Redemption Requirements:
Preference stock, cumulative, without par value--
Outstanding--No shares and 13,499,549 shares,
respectively.................................... $ -- $ 504,957
Current redemption requirements for preference
stock included in current liabilities............ -- (432,320)
$1.425 convertible preferred stock, cumulative,
without par value--
Outstanding--57,526 shares and 58,211 shares,
respectively.................................... 1,829 1,851
Prior preferred stock, cumulative, $100 par value
per share-- No shares outstanding................ -- --
----------- -----------
$ 1,829 $ 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%...... $ 672,245 $ 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%....... 1,609,443 1,981,000
----------- -----------
$ 3,587,088 $ 4,546,400
Transitional trust notes, due 2000 through 2008--
5.29% to 5.74%..................................... 3,162,955 3,400,000
Sinking fund debentures, due 1999 through 2011--2
3/4% to 7 5/8%..................................... 31,383 94,159
Pollution control obligations, due 2007 through
2014--3.75% to 5 7/8%.............................. 139,200 140,700
Other long-term debt................................ 1,390,738 1,259,204
Current maturities of long-term debt included in
current liabilities................................ (1,064,841) (1,585,281)
Unamortized net debt discount and premium........... (50,791) (62,680)
----------- -----------
$ 7,195,732 $ 7,792,502
----------- -----------
$12,843,649 $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)

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 Nine Months Ended Twelve Months Ended
September 30 September 30 September 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)...... $ 279,752 $ 264,822 $ 468,787 $ 398,995 $ 579,975 $ (962,066)
Adjustments to
reconcile net
income/(loss) to net
cash provided by
operating activities:
Depreciation and
amortization........ 210,648 246,815 742,432 755,593 976,815 1,018,754
Deferred income taxes
and investment tax
credits--net........ (10,983) (10,773) (109,303) (4,647) (35,026) (348,512)
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........ (2,439) -- (22,297) (45,470) 306 --
Equity component of
allowance for funds
used during
construction........ (2,243) (1,814) (5,999) (5,358) (7,600) (12,570)
Provisions/(payments)
for liability for
separation costs--
net................. (1,746) (9,853) (11,544) (2,817) 1,029 (11,779)
Net effect on cash
flows of changes in:
Receivables........ 15,208 (292,026) 48,085 (435,280) 13,931 (509,733)
Coal and fuel oil.. 14,753 52,848 4,143 (31,660) 21,052 (7,878)
Materials and
supplies.......... (2,829) 13,452 (10,096) 1,559 8,150 42,996
Accounts payable
excluding nuclear
fuel lease
principal payments
and separation
costs--net........ 10,016 (124,957) (92,907) (23,915) 26,894 67,779
Accrued interest
and taxes......... 3,198 100,645 107,785 183,672 (123,605) 42,009
Other changes in
certain current
assets and
liabilities....... 37,883 29,731 89,881 83,382 152,030 188,004
Other--net........... (10,811) 31,410 111,496 76,249 58,954 104,423
--------- --------- ----------- --------- ----------- -----------
$ 540,407 $ 300,300 $ 1,320,463 $ 950,303 $ 1,672,905 $ 1,307,373
--------- --------- ----------- --------- ----------- -----------
Cash Flow from Investing
Activities:
Construction
expenditures.......... $(271,921) $(202,930) $ (752,614) $(635,668) $(1,042,735) $ (983,117)
Nuclear fuel
expenditures.......... (90,926) (28,616) (204,873) (123,583) (247,458) (151,686)
Sales of generating
plants................ -- -- -- 177,454 -- 238,245
Equity component of
allowance for funds
used during
construction.......... 2,243 1,814 5,999 5,358 7,600 12,570
Contributions to
nuclear
decommissioning
funds................. -- -- (39,426) (80,077) (96,120) (114,721)
Other investments and
special deposits...... (26,644) $ (6,001) (39,345) (10,863) (47,603) 10,083
--------- --------- ----------- --------- ----------- -----------
$(387,248) $(235,733) $(1,030,259) $(667,379) $(1,426,316) $ (988,626)
--------- --------- ----------- --------- ----------- -----------
Cash Flow from Financing
Activities:
Issuance of
securities--
Transitional trust
notes................ $ -- $ -- $ -- $ -- $ 3,382,629 $ --
Other long-term debt.. 98,025 347,068 161,155 382,068 161,357 387,068
Capital stock......... 3,763 4,141 8,175 10,908 13,912 17,246
Retirement and
redemption of
securities--
Transitional trust
notes................ (97,045) -- (237,045) -- (237,045) --
Other long-term debt.. (28,017) (151,008) (1,089,027) (525,656) (1,179,228) (585,660)
Capital stock......... (75,034) (24,270) (639,298) (30,495) (649,669) (34,066)
Deposits and
securities held for
retirement and
redemption of
securities............ -- 995 -- -- -- --
Prepayment of forward
share repurchase
contract.............. -- -- (662,113) -- (662,113) --
Cash dividends paid on
common stock.......... (86,915) (86,763) (260,585) (260,111) (347,428) (346,678)
Proceeds from
sale/leaseback of
nuclear fuel.......... -- 39,612 -- 101,038 -- 146,768
Nuclear fuel lease
principal payments.... (55,610) (43,321) (157,546) (204,330) (208,820) (246,681)
Increase/(decrease) in
short-term
borrowings............ 36,900 (81,200) 155,787 250,496 40,104 365,896
--------- --------- ----------- --------- ----------- -----------
$(203,933) $ 5,254 $(2,720,497) $(276,082) $ 313,699 $ (296,107)
--------- --------- ----------- --------- ----------- -----------
Change in Net Cash
Balance................ $ (50,774) $ 69,821 $(2,430,293) $ 6,842 $ 560,288 $ 22,640
Cash, Temporary Cash
Investments and Cash
Held for Redemption of
Securities:
Balance at Beginning
of Period........... 739,125 58,242 3,118,644 121,221 128,063 105,423
--------- --------- ----------- --------- ----------- -----------
Balance at End of
Period.............. $ 688,351 $ 128,063 $ 688,351 $ 128,063 $ 688,351 $ 128,063
========= ========= =========== ========= =========== ===========
</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 has been based on estimates since July 1998 than in
previous periods.

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 3 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, not subject to
cost-based rate regulation, including construction work in progress and
nuclear fuel, and excluding the decommissioning costs included in the
accumulated provision for depreciation was $9.2 billion as of September 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 September 30, 1999 and December 31, 1998
were as follows:

<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Thousands of Dollars)
<S> <C> <C>
Regulatory assets:
Impaired production plant.......................... $2,856,254 $2,955,154
Deferred income taxes (1).......................... 678,583 680,356
Nuclear decommissioning costs--Dresden Unit 1...... 206,803 255,031
Nuclear decommissioning costs--Zion Units 1 and 2.. 514,052 443,130
Coal reserves...................................... 178,038 197,975
Unamortized loss on reacquired debt (2)............ 39,922 46,781
---------- ----------
$4,473,652 $4,578,427
========== ==========
Regulatory liabilities:
Deferred income taxes (1).......................... $ 599,739 $ 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 3 for
additional information regarding amortization of regulatory assets with
respect to limits on ComEd's earnings due to statutory sharing provisions. 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.

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

12
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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

<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
-------------------- ------------------ --------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Average annual
depreciation rates..... 2.65% 2.74% 2.65% 3.12% 2.67% 3.18%
</TABLE>

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. 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
2011, 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 $588 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.

13
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

amounts for alternative 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. In February 1998, the ICC authorized a reduction
in the annual decommissioning cost accrual from $109 million to $84 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 proposed 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
September 30, 1999, the total decommissioning costs included in the
accumulated provision for depreciation were $1,938 million.

For ComEd's retired nuclear units, the total estimated liability for nuclear
decommissioning in current-year (1999) dollars is recorded as a noncurrent
liability. The unrecovered portion of the liability is recorded as a
regulatory asset. The nuclear decommissioning liability for retired plants as
of September 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.................................... $118,497 $427,548 $ 546,045
Unrecovered portion of the liability.............. 206,803 514,052 720,855
-------- -------- ----------
Nuclear decommissioning liability for retired
plants.......................................... $325,300 $941,600 $1,266,900
======== ======== ==========
</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 September 30,

14
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

1999 was $2,340 million, which includes pre-tax unrealized appreciation of
$573 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 September 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)...................... $1,937,533
Amounts recovered through rates and investment fund
earnings for retired plants............................ 546,045
Less past accruals not yet contributed to the trusts.... 143,573
----------
Fair value of external trust funds..................... $2,340,005
==========
</TABLE>

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
September 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, nine months and twelve months ended September 30, 1999. ComEd
had approximately 3.5 million electric customers at September 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 receivable from customers. Accounts receivable from customers as of
September 30, 1999 and December 31, 1998 include $211 million and $331
million, respectively, in estimated unbilled revenue 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 expenses by $25
million for the nine months ended September 30, 1999 and $35 million for the
twelve months ended September 30, 1999, compared to normally expected levels.
Receivables from customers as of September 30, 1999 and December 31, 1998 also
include $311 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 3 and 18 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 $107 million and $92 million for the three months
ended September 30, 1999 and 1998, respectively, $288 million and $233 million
for the nine months ended September 30, 1999 and 1998, respectively, and $372
million and $301 million for the twelve months ended September 30, 1999 and
1998, respectively.

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 7.87% and 8.18% for the three months
ended September 30, 1999 and 1998, respectively, 7.85% and 8.41% for the nine
months ended September 30, 1999 and 1998, respectively, and 7.92% and 8.76%
for the twelve months ended September 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 $4 million and $6 million for the three
months ended September 30, 1999 and 1998, respectively, $16 million and $14
million for the nine months ended September 30, 1999 and 1998, respectively,
and $31 million and $14 million for the twelve months ended September 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 $160 million and $135 million for the three months ended
September 30, 1999 and 1998, respectively, $484 million and $412 million for
the nine months ended September 30, 1999 and 1998, respectively, and $611
million and $557 million for the twelve months ended September 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 3 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, nine months and
twelve months ended September 30, 1999 and 1998. The number of average
outstanding common shares used to compute basic and diluted EPS for the three
months, nine months and twelve months ended September 30, 1999 and 1998 were
as follows:

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 September 30, 1999, the cash
held for redemption of securities reported on the Consolidated Balance Sheets
includes $536 million in unused cash proceeds from the issuance of the
transitional trust notes and $71 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 3 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,
nine months and twelve months ended September 30, 1999 and 1998 was as
follows:

<TABLE>
<CAPTION>
Three Months Twelve Months
Ended Nine Months Ended Ended
September 30 September 30 September 30
---------------- ----------------- -----------------
1999 1998 1999 1998 1999 1998
-------- ------- -------- -------- -------- --------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Supplemental Cash Flow
Information:
Cash paid during the
period for:
Interest (net of
amount capitalized).. $158,363 $98,722 $485,881 $352,057 $572,934 $451,027
Income taxes (net of
refunds)............. $140,915 $23,040 $225,022 $ 23,546 $484,873 $206,663
Supplemental Schedule of
Non-Cash Investing and
Financing Activities:
Capital lease
obligations incurred
by subsidiary
companies.............. $ 189 $40,954 $ 1,625 $104,933 $ 3,062 $152,812
</TABLE>

(2) Merger Agreement. On September 22, 1999, Unicom and PECO, along with a
wholly-owned subsidiary of PECO, Newco, entered into a definitive Merger
Agreement providing for a merger of equals. The Merger Agreement has been
unanimously approved by Unicom and PECO's Boards of Directors. The merger is
conditioned, among other things, upon the approvals of the shareholders of
both companies and is subject to approval by various regulatory bodies.

(3) 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.

As a result of the 1997 Act 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
provides for, among other things, gradual customer access to other electric
suppliers or a power purchase option which allows the purchase of electric
energy from ComEd at market based prices, and the collection of a CTC from
customers who choose to purchase electric energy from a RES or elect the power
purchase option during a transition period that extends through 2006.
Effective October 1, 1999, the CTC was established in accordance with a
formula defined in the

18
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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.

Access for non-residential customers will occur over a period from October
1999 to December 31, 2000, and access for residential customers will occur
after May 1, 2002. On October 1, 1999, more than 41,000 non-residential
customers became eligible to choose their electric supplier or elect the
purchase power option. As of November 1, 1999, over 2,250 non-residential
customers, representing approximately five percent of ComEd's 1998 retail
kilowatthour sales, elected to receive their electric energy from a RES or
chose the purchase power option. As a result of the collection of CTC's from
customers who choose to receive their electric energy from a RES or elect the
purchase power option, ComEd does not expect these elections to have a
material effect on its results of operations in the near term.

Utilities are required to continue to offer delivery services, including the
transmission and distribution of electric energy, such that customers who
select a RES can receive electric energy from that supplier using existing
transmission and distribution facilities. Such services will continue to be
offered under cost-based, regulated rates. The ICC issued orders in August and
September approving, with modifications, ComEd's delivery service tariffs.

The 1997 Act also provides for a 15% residential base rate reduction which
became effective August 1, 1998 and an additional 5% residential base rate
reduction in October 2001.

Notwithstanding the 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, 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.

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

19
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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. 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, were, as required, used to
redeem $1,021 million of long-term debt and $607 million of preference stock
in 1999 and reduce $500 million of ComEd's outstanding short-term debt. During
the first nine months of 1999, ComEd recorded an extraordinary loss related to
the early redemptions of such long-term debt, 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
such preference stock. The preference stock premiums were included in the
provision for dividends for preference stocks of ComEd on the Statements of
Consolidated Operations. In addition, Unicom has announced plans to repurchase
approximately $750 million of Unicom common stock using the proceeds it will
receive from ComEd's repurchase of its common stock held by Unicom. The
remaining proceeds from the issuance of the transitional trust notes 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.

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.

(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 estimated future closing costs
associated with the retirement of Zion Station, excluding severance costs,
resulting in a charge of $117 million (after-tax). ComEd has

20
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

recorded reductions to the expected liability for future closing costs of $14
million (after-tax), or $0.07 per common share (diluted), and $15 million
(after-tax), or $0.07 per common share (diluted), during the first nine months
of 1999 and in the year 1998, respectively, to reflect employees being
reassigned or removed from the payroll sooner than anticipated, and lower
support costs and use of contractors. See Note 16 for information regarding
costs of voluntary employee separation plans.

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

On March 22, 1999, ComEd entered into an Asset Sale Agreement providing for
the sale of substantially all of its fossil generating assets to EME for a
cash purchase price of $4.813 billion. The fossil generating 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, and FERC issued its approval on November
8, 1999.

Just prior to the consummation of the fossil plant sale, ComEd expects to
transfer these assets to an affiliate, 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, including
the merger with PECO. 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 substantially recover
certain regulatory assets and as a result, the sale is not expected to have a
significant impact on net income in 1999. See Note 1, under "Regulatory Assets
and Liabilities," 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.

21
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

(5) Authorized Shares, Voting Rights and Stock Rights of Capital Stock. At
September 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 September 30, 1999 were: preference stock--7,510,451 shares; $1.425
convertible preferred stock--57,526 shares; and prior preferred stock--850,000
shares. The preference and prior preferred stocks are issuable in series and
may be issued with or without mandatory redemption requirements. Holders of
outstanding Unicom shares are entitled to one vote for each share held on each
matter submitted to a vote of such shareholders; and holders of outstanding
ComEd shares are entitled to one vote for each share held on each matter
submitted to a vote of such shareholders. All such shares have the right to
cumulate votes in elections for the directors of the corporation which issued
the shares.

Pursuant to a plan adopted by 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 plan was amended on September 22, 1999 to render
the Rights inapplicable to the transactions contemplated by the Merger
Agreement. 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

22
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
arrangement has been recorded as a receivable on the Consolidated Balance
Sheets and has been adjusted at the end of each reporting period to reflect
the aggregate market value of the shares deliverable under the arrangement.
Consequently, the arrangement has increased earnings volatility in 1999. An
unrealized loss of $18 million (after-tax), or $0.08 per common share
(diluted), for the three months ended September 30, 1999 and net unrealized
gains of $16 million (after-tax), or $0.07 per common share (diluted), for the
nine and twelve months ended September 30, 1999 have been recorded related to
the arrangement.

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

<TABLE>
<S> <C>
Long-Term Incentive Plan........................................ 2,295,078
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........................................ 163,893
---------
3,315,668
=========
</TABLE>

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

As of September 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 September 30, 1999 and December 31, 1998, 75,791 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.

23
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

As of September 30, 1999 and December 31, 1998, $702 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. Options granted before July 22, 1998
also vest in full upon a change in control, while options granted on or after
July 22, 1998 vest in full if the option holder is terminated within 24 months
after a change of control.

Stock option transactions through September 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 nine months ended September 30,
1999.............................................. 1,781,050 35.750
Exercised during the nine months ended September
30, 1999.......................................... (264,916) 24.192
Expired/cancelled during the nine months ended Sep-
tember 30, 1999................................... (127,048) 33.408
---------
Outstanding as of September 30, 1999............... 4,531,979 31.598
=========
</TABLE>

Of the stock options outstanding at September 30, 1999, 1,667,025 had vested
with a weighted average exercise price of $27.

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
1999, 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 their subsidiaries are eligible to participate in the ESPP. Unicom
issued 86,884 and 133,551 shares of common stock during the twelve months
ended September 30, 1999 and 1998, respectively, under the ESPP at a weighted
average annual purchase price of $34.34 and $25.55, respectively.

24
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

Unicom has adopted the disclosure-only provisions of SFAS No. 123. For
financial reporting purposes, Unicom has adopted APB No. 25, and thus no
compensation cost has been recognized for the stock option awards program or
ESPP. If Unicom had recorded compensation expense for the stock options
granted and the shares of common stock issued under the ESPP in accordance
with SFAS No. 123 using the fair value based method of accounting, the
additional charge to operations would have been $4 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 September 30, 1999 and
1998, respectively.

(8) ComEd Preferred and Preference Stocks Without Mandatory Redemption
Requirements. During the twelve months ended September 30, 1999, 13,499,549
shares of preferred or preference stock without mandatory redemption
requirements were redeemed and no shares were issued. No shares of ComEd
preferred or preference stocks without mandatory redemption requirements were
issued or redeemed during the twelve months ended September 30, 1998. ComEd
redeemed $73 million of preference stock without mandatory redemption
requirements on August 1, 1999. Accordingly, all series other than Series
$1.425 have been redeemed.

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 September 30, 1999 and 1998, no shares of ComEd
preference stock subject to mandatory redemption requirements were issued.
During the twelve months ended September 30, 1999 and 1998, 1,056,060 and
338,215 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 1999. There were 700,000 shares of Series
$6.875 preference stock outstanding at September 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

25
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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
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........................... $ 187,922
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
----------
$3,162,955
==========
</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
have been used, as required, to redeem debt and equity. During the first nine
months of 1999, ComEd redeemed or reacquired $1,021 million of long-term debt.

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 September 30, 1999, after
deducting deposits made for the retirement of sinking fund debentures, are
summarized as follows: 1999--$237 million; 2000--$727 million; 2001--$346
million; 2002--$645 million; and 2003--$445 million. Unicom Enterprises' note
payable to bank of $185 million will mature in 1999.

26
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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

<TABLE>
<CAPTION>
Series Principal Amount
------ ----------------------
(Thousands of Dollars)
<S> <C>
9 3/8% due February 15, 2000....................... $ 42,245
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
--------
$672,245
========
</TABLE>

Other long-term debt outstanding at September 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%
Loan due January 15, 2009 6,025 Interest rate of 8.30%
----------
$ 17,915
----------
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 $ 185,000 Prevailing interest rate of 6.37% at September 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 $ 316,522
----------
Total Unicom $1,390,738
==========
</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.

27
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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.

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 has a bank line of credit of $500 million, all
of which was unused at September 30, 1999. The line of credit expires on
January 31, 2000. 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 and facility fees
with respect to the line of credit.

Unicom Enterprises has a $200 million credit facility which has been
extended to December 17, 1999, of which $15 million was unused as of September
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 entered into 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

28
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

one-time fee and the related interest is reflected on the Consolidated Balance
Sheets. The 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.

(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 September 30, 1999 and
December 31, 1998 was as follows:

<TABLE>
<CAPTION>
September 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.. $ 51,582 $ 101 $ 51,683 $ 40,907 $ 42 $ 40,949
U.S. Government and
Agency issues.......... 246,613 3,430 250,043 197,240 20,213 217,453
Municipal bonds......... 392,883 1,096 393,979 416,121 24,124 440,245
Corporate bonds......... 200,538 (3,072) 197,466 241,111 8,790 249,901
Common stock............ 762,246 568,151 1,330,397 740,956 565,630 1,306,586
Other................... 112,978 3,459 116,437 11,345 838 12,183
---------- -------- ---------- ---------- -------- ----------
$1,766,840 $573,165 $2,340,005 $1,647,680 $619,637 $2,267,317
========== ======== ========== ========== ======== ==========
</TABLE>

At September 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................................... $ 50,418 $ 50,874
1 through 5 years............................... 267,931 270,322
5 through 10 years.............................. 249,139 251,628
Over 10 years................................... 385,658 381,688
</TABLE>

29
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

The net earnings of the nuclear decommissioning funds, which are recorded in
the accumulated provision for depreciation, for the three months, nine months
and twelve months ended September 30, 1999 and 1998 were as follows:

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 September 30, 1999 and December 31, 1998 were as follows:

<TABLE>
<CAPTION>
September 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...... $ 71,304 $ 208 71,512 $ 678,156 $ 11,500 $ 689,656
ComEd-obligated
mandatorily redeemable
preferred securities of
subsidiary trusts
holding solely ComEd's
subordinated debt
securities............. $ 350,000 $ (1,234) $ 348,766 $ 350,000 $ 20,678 $ 370,678
Transitional trust
notes.................. $3,162,955 $(116,799) $3,046,156 $3,382,821 $ 67,168 $3,449,989
Long-term debt.......... $4,896,727 $ 126,586 $5,023,313 $5,911,757 $451,240 $6,362,997
</TABLE>

Long-term notes payable, which are not included in the above table, amounted
to $214 million and $100 million as of September 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

30
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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
September 30, 1999 and December 31, 1998; therefore, the carrying value is
equal to the fair value.

(15) Pension and Postretirement Benefits. As of September 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 September 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 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 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. Generally, the employees become eligible for postretirement benefits
if they retire no earlier than 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 September
30, 1999 and December 31, 1998 postretirement benefit liabilities and related
data were determined using the January 1, 1998 actuarial valuations.

31
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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 nine months ended
September 30, 1999 and the twelve months ended December 31, 1998 were as
follows:

<TABLE>
<CAPTION>
Nine Months Ended Twelve Months Ended
September 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............ 94,000 31,000 115,000 38,000
Interest cost........... 213,000 62,000 273,000 78,000
Plan participants' con-
tributions............. -- 3,000 -- 3,000
Actuarial loss.......... 11,000 -- 166,000 38,000
Benefits paid........... (181,000) (37,000) (237,000) (47,000)
---------- ---------- ---------- ----------
Benefit obligation at
end of period......... $4,464,000 $1,308,000 $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................. 128,000 26,000 535,000 122,000
Employer contribution... 2,000 -- 11,000 20,000
Plan participants' con-
tributions............. -- 3,000 -- 3,000
Benefits paid........... (181,000) (37,000) (237,000) (47,000)
---------- ---------- ---------- ----------
Fair value of plan
assets at end of
period................ $3,964,000 $ 857,000 $4,015,000 $ 865,000
---------- ---------- ---------- ----------
Plan assets less than
benefit obligation..... $ (500,000) $ (451,000) $ (312,000) $ (384,000)
Unrecognized net actuar-
ial loss/(gain)........ 188,000 (319,000) 37,000 (358,000)
Unrecognized prior serv-
ice cost/(asset)....... (57,000) 45,000 (60,000) 48,000
Unrecognized transition
obligation/(asset)..... (92,000) 306,000 (101,000) 323,000
---------- ---------- ---------- ----------
Accrued liability for
benefits.............. $ (461,000) $ (419,000) $ (436,000) $ (371,000)
========== ========== ========== ==========
</TABLE>

The assumed discount rate used to determine the benefit obligation as of
September 30, 1999 and December 31, 1998 was 6.75%. The fair value of pension
plan assets excludes $22 million and $21 million held in grantor trust as of
September 30, 1999 and December 31, 1998, respectively, for the payment of
benefits under the supplemental plan.

32
<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, nine months and twelve months ended September 30, 1999 and 1998 were
as follows:

<CAPTION>
Other Postretirement
Benefit Costs
- --------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost............ $ 10,000 $ 9,000 $ 31,000 $ 27,000 $ 42,000 $ 36,000
Interest cost on accumu-
lated benefit
obligation............. 21,000 19,000 62,000 56,000 84,000 75,000
Expected return on plan
assets................. (19,000) (18,000) (56,000) (52,000) (73,000) (68,000)
Amortization of transi-
tion obligation........ 6,000 6,000 17,000 17,000 22,000 22,000
Amortization of prior
service cost........... 1,000 1,000 3,000 3,000 4,000 4,000
Recognized gain......... (3,000) (5,000) (9,000) (14,000) (9,000) (17,000)
Severance plan cost..... -- -- 1,000 2,000 5,000 4,000
--------- --------- --------- --------- --------- ---------
Net periodic benefit
cost.................. $16,000 $ 12,000 $ 49,000 $ 39,000 $ 75,000 $ 56,000
========= ========= ========= ========= ========= =========
</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>

33
<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 $9 million for
each of the three months ended September 30, 1999 and 1998, $24 million for
each of the nine months ended September 30, 1999 and 1998, and $32 million and
$33 million for the twelve months ended September 30, 1999 and 1998,
respectively.

(16) Separation Plan Costs. O&M expenses included $2 million and $9 million
for the three months ended September 30, 1999 and 1998, respectively, $7
million and $33 million for the nine months ended September 30, 1999 and 1998,
respectively, and $23 million and $38 million for the twelve months ended
September 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 $1
million (after-tax), or $0.01 per common share (diluted), and $6 million
(after-tax), or $0.03 per common share (diluted), for the three months ended
September 30, 1999 and 1998, respectively, $4 million (after-tax), or $0.02
per common share (diluted), and $20 million (after-tax), or $0.09 per common
share (diluted), for the nine months ended September 30, 1999 and 1998,
respectively, and $14 million (after-tax), or $0.06 per common share
(diluted), and $23 million (after-tax), or $0.11 per common share (diluted),
for the twelve months ended September 30, 1999 and 1998, respectively.

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

<TABLE>
<CAPTION>
September 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........................ $3,992,558 $4,028,351
Overheads capitalized.............................. 136,193 140,922
Repair allowance................................... 225,100 233,861
Regulatory assets recoverable through future rates. 678,583 680,356
Deferred income tax assets:
Postretirement benefits............................ (360,450) (331,651)
Unamortized investment tax credits................. (181,467) (191,135)
Regulatory liabilities to be settled through future
rates............................................. (599,739) (595,005)
Nuclear plant closure.............................. (13,238) (38,354)
Other--net......................................... (188,546) (146,224)
---------- ----------
Net deferred income tax liability................... $3,688,994 $3,781,121
========== ==========
</TABLE>

The $92 million decrease in the net deferred income tax liability from
December 31, 1998 to September 30, 1999 is comprised of an $86 million credit
to net deferred income tax expense and a $6 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.

34
<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, nine months and twelve months ended September
30, 1999 and 1998 were as follows:

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, nine months and twelve months ended
September 30, 1999 and 1998:

35
<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, nine months and twelve months ended September 30,
1999 and 1998 were as follows:

<TABLE>
<CAPTION>
Twelve
Three Months Ended Nine Months Ended Months Ended
September 30 September 30 September 30
-------------------- ------------------ -------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- -------- ---------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes
computed at statutory
rate................... $159,045 $160,417 $280,975 $247,246 $345,100 $ (73,199)
Equity component of
AFUDC which was
excluded from taxable
income................. (126) (102) (336) (300) (426) (2,824)
Amortization of
investment tax credits,
net of deferred income
taxes.................. (5,907) (4,517) (17,525) (18,246) (24,782) (40,221)
State income taxes, net
of federal income
taxes.................. 21,958 21,040 37,394 33,693 44,566 (3,510)
Unrealized loss/(gain)
on forward share
repurchase contract.... 6,130 -- (5,566) -- (5,566) --
Earnings on nontax-
qualified
decommissioning fund... (951) -- (3,719) -- (3,719) --
Differences between book
and tax accounting,
primarily property-
related deductions..... (7,319) 2,622 (4,973) 1,968 (10,719) 4,710
--------- --------- -------- -------- -------- ---------
Net income taxes
charged/(credited) to
continuing operations.. $ 172,830 $179,460 $286,250 $264,361 $344,454 $(115,044)
========= ========= ======== ======== ======== =========
</TABLE>

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

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 net reduction in operating revenues and taxes, except
income taxes, due to the change in presentation for such taxes was
approximately $30 million, $160 million and $226 million for the three months,
nine months and twelve months ended September 30, 1999, respectively, compared
to the same periods in 1998. This change in the presentation for such taxes
did not have an effect on results of operations.

36
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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

(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. ComEd does not currently intend to renew the commercial
paper/bank borrowing portion. 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 September 30, 1999, ComEd's
obligation to the lessor for leased nuclear fuel amounted to approximately
$329 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 September 30, 1999, future minimum rental payments, net of executory
costs, for capital leases are estimated to aggregate to $406 million,
including $105 million in 1999, $113 million in 2000, $104 million in 2001,
$51 million in 2002, $24 million in 2003 and $9 million in 2004-2006. The
estimated interest component of such rental payments aggregates $40 million.
The estimated portions of obligations due within one year under capital leases
of $158 million and $195 million at September 30, 1999 and December 31, 1998,
respectively, were included in current liabilities on the Consolidated Balance
Sheets.

Future minimum rental payments at September 30, 1999 for operating leases
are estimated to aggregate to $415 million, including $10 million in 1999, $41
million in 2000, $33 million in 2001, $33 million in 2002, $30 million in 2003
and $268 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 $14 million at September 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 $511
million at September 30, 1999, comprised of $468 million for ComEd, $38
million for UT Holdings and $5 million for Unicom Energy Services. In
addition, ComEd has substantial commitments for the purchase of coal. Upon
completion of the transactions contemplated in the Asset Sale Agreement with
EME, 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

37
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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.

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.

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.

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 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. Oral argument was heard in the Tenth
Circuit Court of Appeals on September 23, 1999. A decision is expected before
the end of the year. A case involving the next group of plaintiffs is set for
trial in federal district court in Denver on October 2, 2000. 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.

38
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

were affected, all service was restored on the same date. The class action
complaints have been consolidated and seek to recover damages for personal
injuries and property damage, as well as economic loss for these events.
Further, ComEd initiated expedited claim settlements for those with primarily
food spoilage claims. Conditional class certification has been approved by the
Court for the sole purpose of exploring settlement talks. The lawsuits are
pending in the Circuit Court of Cook County where the next status hearing is
scheduled for November 15, 1999. ComEd's management believes adequate reserves
have been established in connection with these cases.

Following the above-referenced series of service interruptions, the ICC
opened a three-phase investigation of the design and reliability of ComEd's
transmission and distribution system. At the conclusion of each phase of the
investigation, the ICC will issue a report that will include specific
recommendations for ComEd and a timetable for executing the recommendations.
The final phase of the investigation is expected to conclude in early 2001.

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 September 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. In addition, as of
September 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 1997. The
alleged deficiencies, including interest and penalties, totaled approximately
$51 million as of September 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 accumulate on the alleged tax
deficiencies.

39
<PAGE>

UNICOM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Concluded

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 established an Energy Reliability
and Capacity Account, into which ComEd deposited $25 million following the
effectiveness of the settlement agreement and ComEd has conditionally agreed
to deposit 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 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.

40
<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 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.

As a result of the 1997 Act 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
provides for, among other things, gradual customer access to other electric

41
<PAGE>

suppliers or a power purchase option which allows the purchase of electric
energy from ComEd at market based prices, and the collection of a CTC from
customers who choose to purchase electric energy from a RES or elect the power
purchase option during a transition period that extends through 2006.
Effective October 1, 1999, the CTC was 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.

The 1997 Act 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.

The 1997 Act also provides for a 15% residential base rate reduction which
became effective August 1, 1998 and an additional 5% residential base rate
reduction in October 2001. 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 further reduce
ComEd's operating revenues by approximately $210 million in 1999, compared to
1998 rate levels.

42
<PAGE>

return. The potential for earnings sharing or increased amortization of
regulatory assets could limit earnings in future periods.

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. In December 1998, ComEd initiated the issuance of
$3.4 billion of transitional trust notes through its SPEs, ComEd Funding and
ComEd Funding Trust. See "Liquidity and Capital Resources," subcaption
"UTILITY OPERATIONS--Capital Resources" below, and Notes 3 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 3 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.

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<PAGE>

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 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
$352 million of additional capital expenditures for 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 design a regional Midwest
ISO in January 1998. These utilities have agreed to place their transmission
systems under the control of the Midwest ISO as soon as it achieves
operational status in 2001. 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 foster increased competition. The Midwest ISO will control the
transmission system and will have authority to require modification in the
operation of generators connected to that system during system emergencies.
ComEd, like other utilities, 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 the absence of an ISO-related power exchange, ComEd has also agreed to
cooperate with APX in the creation of the first electronic energy 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 has made a $3
million venture capital investment in APX in order to help finance its
expansion in Midwest. But neither ComEd nor Unicom will 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 in the fourth quarter of
1999.

Merger Agreement. On September 22, 1999, Unicom and PECO, along with a
wholly-owned subsidiary of PECO, Newco, entered into a definitive Merger
Agreement providing for a merger of equals. The Merger Agreement has been
unanimously approved by Unicom and PECO's Boards of Directors. The merger is
conditioned, among other things, upon the approvals of the shareholders of
both companies and is subject to approval by various regulatory bodies.

44
<PAGE>

Under the Merger Agreement, PECO and ComEd will become the principal utility
subsidiaries of Newco. This result will be achieved by a mandatory exchange of
the outstanding common stock of PECO for common stock of Newco or cash,
subject to proration, and a merger of Unicom with and into Newco wherein
holders of Unicom common stock will have the opportunity to elect to receive
for each Unicom share either 0.95 Newco common share or $42.75 in cash,
subject to proration; the cash election is limited to 17,543,859 Unicom shares
or $750 million. Each shareholder of PECO will have the opportunity to elect
to receive for each PECO share either one Newco common share or $45.00 in
cash, subject to proration; the cash election is limited to 16,666,666 PECO
shares or $750 million. The merger transaction will be accounted for as a
purchase of Unicom by PECO.

The merger transaction requires Unicom to purchase approximately 26.1
million shares of Unicom common stock prior to the closing of that
transaction. Unicom expects to meet this requirement through a currently
existing prepaid forward purchase arrangement for the purchase of 20.1 million
shares and the purchase of approximately six million additional shares from
available funds. Unicom anticipates that the $750 million cash consideration
to be paid to its shareholders in the merger transaction will be provided from
available funds, including funds resulting from the fossil plant sale.

The Merger Agreement and an amendment to Unicom's stock rights plan were
filed on September 29, 1999 by Unicom with the SEC as exhibits to a Form 8-K,
and reference to that filing is made for more detailed information.

Fossil Plant Sale. On March 22, 1999, ComEd entered into an Asset Sale
Agreement providing for the sale of substantially all of its fossil generating
assets 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, and FERC issued its approval
on November 8, 1999.

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

45
<PAGE>

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....................... 560 527 529 1,616
General............................................. 109 83 80 272
------ ---- ---- ------
$1,089 $874 $842 $2,805
====== ==== ==== ======
</TABLE>

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

In response to several outages in the summer of 1999, ComEd conducted an
extensive evaluation of the reliability of its transmission and distribution
systems. The 1999 construction program above includes an increase of $45
million in capital expenditures for improvements to ComEd's transmission and
distribution systems identified as a result of the evaluation. The $45 million
increase is in addition to the $307 million increase in capital expenditures
previously planned to be spent on these systems during 1999 through 2001. ComEd
is currently evaluating its construction program for the years 2000 through
2002. The final results of this planning process cannot be determined at this
time, but could result in an increase to the above construction expenditures
for 2000 and 2001.

ComEd's forecasts of peak load for its traditional service territory indicate
a need for additional resources to meet demand, 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. 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, can be obtained in
sufficient quantities to meet such forecasted needs. See "Unregulated
Operations," subcaption "Construction Program" below, for additional
information.

Purchase commitments for ComEd, principally related to construction and
nuclear fuel, approximated $468 million at September 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 $256
Decker Coal Co. .................................. 1999-2012 436
Other commitments................................. 1999 8
----
$700
====
</TABLE>
--------
(1) In millions of dollars, excluding transportation costs. No
estimate of future cost escalation has been made.

46
<PAGE>

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, were, as required, used to redeem $1,021 million of long-
term debt and $607 million of preference stock in 1999 and reduce $500 million
of ComEd's outstanding short-term debt. During the first nine months of 1999,
ComEd recorded an extraordinary loss related to the early redemptions of such
long-term debt, 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 such preference stock. As more fully
described below, Unicom has announced plans to repurchase approximately $750
million of Unicom common stock using the proceeds it will receive from ComEd's
repurchase of its common stock held by Unicom. The remaining proceeds from the
issuance of the transitional trust notes 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.

See Notes 3 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.

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<PAGE>

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. ComEd has $500 million of unused bank lines of credit at September
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,
nine months and twelve months ended September 30, 1999. Cash flows from
operating activities increased temporarily for the three, nine and twelve
months ended September 30, 1999, compared to the same periods ended September
30, 1998, as a result of a decrease in net customer receivables due to the
collection of delayed billings related to the transition to a new customer
information and billing system in July 1998. See Note 1 of Notes to Financial
Statements, under "Customer Receivables and Revenues", for additional
information.

As of November 15, 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..... Baa1 BBB+ BBB+
Publicly-held debentures and unsecured pollution con-
trol obligations...................................... Baa2 BBB BBB
Convertible preferred stock............................ baa3 BBB- BBB-
Preference stock....................................... Baa2 BBB- BBB-
Trust Securities....................................... baa3 BBB- BBB-
Commercial paper....................................... P-2 A-2 D-2
</TABLE>

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>

On September 15, 1999, Moody's upgraded the long-term securities of ComEd.
S&P raised its ratings for ComEd in June 1999. In July 1999, Duff & Phelps
upgraded ComEd's ratings for secured and unsecured debt, and announced that
ComEd's securities remain on "Rating Watch-Up."

On September 23, 1999 in response to the announced Unicom and PECO Merger
Agreement, Moody's and Duff & Phelps confirmed their ratings, and S&P placed
ComEd on credit watch with positive implications.

Capital Structure. ComEd's ratio of long-term debt to total capitalization
has decreased to 55.6% at September 30, 1999 from 58.0% at December 31, 1998.
As of September 30, 1999 and December 31, 1998, $702 million and $494 million,
respectively, of retained earnings had been appropriated for Unicom's future
dividend payments. As of September 30, 1999 and December 31, 1998, $827
million and $580 million, respectively, of retained earnings had been
appropriated for ComEd's future dividend payments.

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<PAGE>

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

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 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

49
<PAGE>

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.

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 final status
report and a letter of assurance that the electric systems of North America
are ready to operate into the Year 2000 and beyond.

Additionally, Unicom participated in two industry-wide NERC readiness drills
that provided an opportunity to test personnel and processes in advance of the
roll-over. The first drill conducted on April 9, 1999 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 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. The second drill, that involved approximately 338 people and
was conducted at various times between September 7-9, 1999, was comprised of
three phases and tested the team's ability to respond in certain conditions.
The phases of the drill included varying load conditions on the ComEd
transmission and distribution system, a partial loss of voice and data
communications and a full rehearsal of the transition to the Year 2000. The
drill also tested the team's internal and external communications processes.
The results were used to refine the plans and processes the team has already
assembled for the roll-over to 2000. The drill did not affect normal electric
operations and was seamless to customers and employees that were not a part of
the drill.

In addition to completing the drill, Unicom successfully transitioned
through an important Year 2000 date without incident with the change from
9/8/99 to 9/9/99. Other key Year 2000 dates that Unicom has completed without
Year 2000 problems are 1/1/99, 4/9/99 (99th day of 1999) and 8/21/99 (Global
Positioning System roll-over).

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 has an outreach program in place for communicating Year 2000 project
information to residential and business customers and this activity will
continue for the remainder of 1999.

As of October 31, 1999, approximately $36 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.

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<PAGE>

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. Unicom used an
approach in its contingency planning process that has been recognized by NERC
and NEI. 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 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.

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 September 30, 1999, was approximately $(35) 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

51
<PAGE>

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 an exclusive distributor for the Parallon 75(TM)
TurboGenerator system, which was developed by AlliedSignal to provide
customers with on-site electricity production. Unicom Energy Services'
exclusive territory for distributing the Parallon 75(TM) system encompasses 12
Midwest states, Ontario, Canada and Puerto Rico.

Unicom Power Holdings, another subsidiary of Unicom Enterprises, is
developing certain generation and cogeneration projects.

Unicom Energy Inc. and Unicom Gas Services, LLC, also subsidiaries of Unicom
Enterprises, are currently engaged in providing retail gas services to
commercial and industrial customers in the Midwest region. Unicom Energy Inc.
provides retail electric services as an unregulated retail energy supplier.

On August 30, 1999, UMS Acquisition Corp., a subsidiary of Unicom
Enterprises, acquired all of the capital stock of KHB Inc., MMSD, Inc. and
MMCD, Inc. These three companies, which conduct 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 final price did not have a material impact on
Unicom's cash flows related to investing activities.

Construction Program. Unicom has approved capital expenditures for 1999 of
approximately $40 million for UT Holdings, primarily related to an expansion
of its Chicago district cooling facilities and the related distribution piping
and plants in other cities. As of September 30, 1999, UT Holdings' purchase
commitments, principally related to construction, were approximately $38
million.

Unicom has approved capital expenditures for 1999 of approximately $47
million for Unicom Energy Services. As of September 30, 1999, Unicom Energy
Services had purchase commitments of approximately $5 million.

Unicom Power Holdings intends to purchase and install up to 600 megawatts of
additional combustion turbine generators prior to the summer of 2000. Such
generators have a fast-start generating capability and would be used to assist
in meeting peak demand for electricity. Unicom Power Holdings expects to spend
approximately $165 million to purchase such generators, and it will incur
significant additional costs for related equipment and to site and install
such generators. Unicom Power Holdings is evaluating the amount of such
additional costs.

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.

52
<PAGE>

On November 5, 1999, Duff & Phelps assigned an initial implied senior
unsecured debt rating of BBB- to Unicom, and placed the rating on "Rating
Watch-Up." S&P's current corporate credit rating for Unicom is BBB. On
September 23, 1999, in response to the announced Unicom and PECO merger
agreement, S&P placed Unicom on credit watch with positive implications, and
Moody's confirmed the first-time issuer rating of Baa3 it had assigned to
Unicom on September 15, 1999.

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.

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.

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<PAGE>

The NRC and representatives of ComEd's management have met, and will
continue to meet periodically as part of the NRC's normal oversight process,
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 alternative 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 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, nine months and twelve months ended September 30, 1999 and 1998 were
as follows:

<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
-------------------- ----------------- -------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings/(Loss) per
Common Share............... $1.29 $1.22 $2.16 $1.84 $2.67 $(4.44)
===== ===== ===== ===== ===== ======
Diluted Earnings/(Loss)
per Common Share........... $1.28 $1.22 $2.15 $1.83 $2.66 $(4.44)
===== ===== ===== ===== ===== ======
</TABLE>

54
<PAGE>

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 September 30, 1999. The increase in
ComEd's net income in the recent three-month period reflects, among other
factors, increased energy sales, lower regulatory asset amortization charges,
lower-than-expected closing costs for Zion nuclear station and outstanding
nuclear performance.

Kilowatthour sales increased 11% for the third 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 42% increase in
kilowatthour sales to other utilities, which represented a $22 million (after-
tax), or $0.10 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 increased 3% in the third quarter of 1999,
compared to the same period in 1998, reflecting increased kilowatthour sales.
See "Fuel Costs" and "Purchased Power" below for additional information.

O&M expenses decreased 1% for the third quarter of 1999, compared to the
third quarter of 1998, as discussed in "Operation and Maintenance Expenses"
below.

Earnings for the third quarter of 1999 were positively impacted by lower
regulatory asset amortization expense of $19 million (after-tax), or $0.09 per
common share. A reduction in the estimated liability for closing costs related
to the Zion Station also increased earnings by $8 million (after-tax), or
$0.04 per common share. Partially offsetting the increases to earnings was an
unrealized loss of $18 million (after-tax), or $0.08 per common share, related
to a forward share repurchase arrangement.

Net Income for the Nine Months Ended September 30, 1999. The increase in
ComEd's net income in the recent nine-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.

Kilowatthour sales increased 10% for the nine months ended September 30,
1999, compared to the same period in 1998, which included a 57% increase in
kilowatthour sales to other utilities, representing a $71 million (after-tax),
or $0.33 per common share, increase in earnings during the nine months ended
September 30, 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 16% during the nine months ended
September 30, 1999, compared to the same period in 1998, reflecting the
effects of improvement of ComEd's nuclear fleet. See "Fuel Costs" and
"Purchased Power" below for additional information.

O&M expenses increased 3% for the nine months ended September 30, 1999,
compared to the same period in 1998, as discussed in "Operation and
Maintenance Expenses" below.

Earnings for the nine months ended September 30, 1999 were also positively
impacted by a net unrealized gain of $16 million (after-tax), or $0.07 per
common share, recorded related to a forward share repurchase arrangement. A
reduction in the estimated liability for closing costs related to the

55
<PAGE>

Zion Station also increased earnings by $14 million (after-tax), or $0.07 per
common share. 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 1999.

Net Income for the Twelve Months Ended September 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 and a reduction in the
estimated liability for Zion Station closing costs. The twelve months ended
September 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
September 30, 1998 also included a write-off in connection with the closure of
Zion Station.

ComEd's kilowatthour sales increased 9% for the twelve months ended
September 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 13% for the twelve months ended
September 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 September 30, 1999 also included a 4% reduction in
depreciation and amortization expense, see "Depreciation, Amortization and
Decommissioning" below, and a $20 million (after-tax), or $0.09 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 September 30, 1999 reflected gains on the
sales of certain assets of $20 million (after-tax), or $0.09 per common share,
consisting principally of surplus inventory of emission allowances. In
addition, operating results increased for the recent period due to a net
unrealized gain of $16 million (after-tax), or $0.07 per common share,
recorded during 1999 related to the forward share repurchase arrangement.

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 during 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 September 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
September 30, 1998 of $44 million (after-tax), or $0.20 per common share.

56
<PAGE>

The twelve months ended September 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. See Note 1
of Notes to Financial Statements, under "Use of Estimates" and "Customer
Receivables and Revenues", for additional information.

Operating revenues decreased $26 million in the three months ended September
30, 1999, compared to the three months ended September 30, 1998, due in part
to the approximately $46 million impact of the 15% residential base rate
reduction that took effect August 1, 1998. Kilowatthour sales increased 11%,
primarily due to sales to other utilities. Operating revenues decreased
approximately $257 million in the nine months ended September 30, 1999,
compared to the nine months ended September 30, 1998, primarily due to the
approximately $226 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 $332 million in the twelve months ended September 30, 1999,
compared to the same period in 1998, primarily due to the approximately $318
million impact of the 15% residential base rate reduction that took effect
August 1, 1998. Kilowatthour sales increased 9%, compared to the same period
last year, primarily due to sales to other utilities. In addition, due to a
change in presentation for certain state and municipal taxes, operating
revenues reflected a net reduction of approximately $30 million, $160 million
and $226 million for the three months, nine months and twelve months ended
September 30, 1999, respectively, compared to the same periods in 1998.

Fuel Costs. Changes in fuel expense for the three months, nine months and
twelve months ended September 30, 1999, compared to the same periods ended
September 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:

57
<PAGE>

The increases in net generation of electric energy and nuclear generation
for the periods ended September 30, 1999, compared to the prior periods, are
primarily due to significant improvement in ComEd's nuclear fleet. The overall
nuclear capacity factor was 97% for the third quarter of 1999, compared to 77%
for the third 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 increased $56 million for
the three months ended September 30, 1999, compared to the same period ended
September 30, 1998. The increase in purchased power is primarily due to the
record-breaking heat wave which occurred in July 1999 when ComEd set a new
peak energy demand. Purchased power decreased $227 million and $230 million
for the nine and twelve months ended September 30, 1999, respectively,
compared to the same period ended September 30, 1998, 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:

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 twelve months ended September 30, 1999, the
aggregate level of O&M expenses decreased 1%, compared to the same periods
ended September 30, 1998. O&M expenses for the nine months ended
September 30, 1999 increased 3%, compared to the same period last year.

58
<PAGE>

O&M expenses associated with nuclear generating stations decreased $18
million, $37 million and $45 million during the three months, nine months and
twelve months ended September 30, 1999, respectively, compared to the same
periods ended September 30, 1998. The decreases in the recent 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, nine months and twelve months ended September 30,
1999, O&M expenses associated with fossil generating stations decreased $2
million, $14 million and $8 million, respectively, compared to the same
periods ended September 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 September 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 $22 million, $58 million and $74 million during the three months,
nine months and twelve months ended September 30, 1999, respectively,
compared to the same periods last year. The increases in the recent three-
month, nine-month and twelve-month periods reflect higher maintenance costs,
which include an increase in tree trimming expenses and the costs associated
with ComEd's extensive evaluation of the reliability of its transmission and
distribution system following outages which occurred during the summer of
1999. The increase also reflects restoration and other outage-related costs
associated with the summer heat wave. O&M expenses associated with customer-
related activities increased $9 million, $27 million and $31 million for the
three months, nine months and twelve months ended September 30, 1999,
respectively, compared to the same periods ended September 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 $2 million
and $9 million for the three months ended September 30, 1999 and 1998,
respectively, $7 million and $33 million for the nine months ended September
30, 1999 and 1998, respectively, and $23 million and $38 million for the
twelve months ended September 30, 1999 and 1998, respectively.

Other employee benefits expenses, excluding the effects of employee
separation plans and certain other employee-related costs decreased
$11 million and increased $22 million and $26 million for the three months,
nine months and twelve months ended September 30, 1999, respectively, compared
to the same periods ended September 30, 1998. The decrease for the recent
three-month period was primarily due to lower accruals for incentive
compensation. The increases in the recent nine-month and twelve-month periods
were primarily due to higher medical costs for active and retired employees
and accruals for incentive compensation.

O&M expenses included a $25 million charge for the nine months and twelve
months ended September 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 September 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
September 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 $2 million and decreased $13 million and $53 million for the three
months, nine months and twelve months ended

59
<PAGE>

September 30, 1999, respectively, compared to the same periods ended September
30, 1998. The decrease in the recent nine-month and twelve-month periods was
due to reductions in nuclear insurance, partially offset by increased charges
for uncollectible accounts of $25 million and $35 million in the nine months
and twelve months ended September 30, 1999, respectively, 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. ComEd initiated aggressive
credit action during the third quarter of 1999 in an effort to identify and
resolve outstanding billing and collection issues and to reduce its
outstanding aged accounts receivable. Such efforts included customer outreach
programs and other direct customer contact programs. The outcome of these
efforts cannot currently be determined, but could result in increased
provisions for uncollectible accounts in future periods. 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 decreased $31 million, $14 million and $35 million
for the three months, nine months and twelve months ended September 30, 1999,
respectively, compared to the same periods ended September 30, 1998. The
decrease in the recent three-month period was primarily due to no additional
regulatory asset amortization expense being recorded due to lower than
previously estimated annual recovery of such cost through regulated cash
flows. The decrease in the recent nine-month period was due to the retirement
of steam generators at Braidwood Station in early 1998, which increased
depreciation expense for the 1998 period. The decrease in the recent twelve-
month period was primarily due to the retirement of Zion Station in December
1997 as well as increased depreciation in 1998 related to the replacement of
steam generators. 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 asset
removal costs including those related to nuclear decommissioning. 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, nine months and twelve months ended September 30, 1999,
compared to the same periods ended September 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 3 and 6 of Notes to Financial Statements for
information regarding the redemptions and repurchases of debt and equity. The
average amounts of ComEd's long-term debt and notes payable outstanding and
average interest rates thereon were as follows:

60
<PAGE>

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 $4 million and $6 million for the three months ended September 30,
1999 and 1998, $16 million and $14 million for the nine months ended September
30, 1999 and 1998, respectively, and $31 million and $14 million for the
twelve months ended September 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
September 30, 1999 and December 31, 1998 were 2.56 and 2.59, respectively.
ComEd's ratios of earnings to fixed charges and preferred and preference stock
dividend requirements for the twelve months ended September 30, 1999 and
December 31, 1998 were 2.36 and 2.24, 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 Notes 1 and 3
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 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

61
<PAGE>

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, (8) statements regarding estimates of claims
resulting from the summer of 1999 outages set forth in Note 21 of Notes to
Financial Statements and (9) statements regarding the Merger Agreement in Note
2 of Notes to Financial Statements and in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" subcaption "Changes
in the Electric Utility Industry--Merger Agreement." 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 resulting from the
summer of 1999 outages are subject to the risk that the actual amount of
losses suffered by customers and restoration costs may exceed the estimated
amounts. The statements regarding the Merger Agreement and the associated
repurchase of shares are subject to the risk of a significant delay in the
expected completion of, and unexpected consequences resulting from, the
transactions contemplated by the Merger Agreement, including the inability to
close the transaction, and to changes in the number of shares of outstanding
common stock of Unicom and PECO for unforeseen reasons. 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.

62
<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 September 30, 1999 and December
31, 1998, and the related statements of consolidated operations, retained
earnings/(deficit) and cash flows for the three-month, nine-month and twelve-
month periods ended September 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 September 30, 1999 and December 31,
1998, and the results of their operations and their cash flows for the three-
month, nine-month and twelve-month periods ended September 30, 1999 and 1998,
in conformity with accounting principles generally accepted in the United
States.

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

63
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED OPERATIONS

Other Income and
(Deductions):
Interest on long-term
debt, net of interest
capitalized........... $ (130,663) $ (107,356) $ (400,821) $ (324,693) $ (506,732) $ (441,178)
Interest on notes
payable............... (5,282) (6,170) (13,003) (15,186) (17,377) (15,817)
Allowance for funds
used during
construction.......... 6,581 4,467 15,982 12,325 20,121 24,217
Income taxes
applicable to
nonoperating
activities............ 2,080 1,671 (1,169) 18,946 (17,418) 31,151
Provision for
dividends on company-
obligated mandatorily
redeemable preferred
securities of
subsidiary trusts
holding solely the
Company's
subordinated debt
securities............ (7,428) (7,428) (22,283) (22,283) (29,710) (29,710)
Loss on nuclear plant
closure............... -- -- -- -- -- (885,611)
Income tax effect of
nuclear plant
closure............... -- -- -- -- -- 362,952
Miscellaneous--net..... (14,016) (26) 29,935 (24,286) 60,893 (96,071)
---------- ---------- ---------- ---------- ---------- -----------
$ (148,728) $ (114,842) $ (391,359) $ (355,177) $ (490,223) $(1,050,067)
---------- ---------- ---------- ---------- ---------- -----------
Net Income/(Loss) before
Extraordinary Items.... $ 287,049 $ 286,071 $ 539,014 $ 462,357 $ 670,862 $ (65,071)
Extraordinary Losses,
less Applicable Income
Taxes.................. -- -- (27,579) -- (27,579) (810,335)
---------- ---------- ---------- ---------- ---------- -----------
Net Income/(Loss)....... $ 287,049 $ 286,071 $ 511,435 $ 462,357 $ 643,283 $ (875,406)
Provision for Dividends
on Preferred and
Preference Stocks...... 1,830 14,053 20,170 43,062 33,991 57,635
---------- ---------- ---------- ---------- ---------- -----------
Net Income/(Loss) on
Common Stock........... $ 285,219 $ 272,018 $ 491,265 $ 419,295 $ 609,292 $ (933,041)
========== ========== ========== ========== ========== ===========
</TABLE>

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

64
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
September 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 $959 million and
$858 million, respectively)...................... $28,501,029 $27,801,246
Less--Accumulated provision for depreciation...... 15,749,560 15,234,320
----------- -----------
$12,751,469 $12,566,926
Nuclear fuel, at amortized cost................... 864,229 874,979
----------- -----------
$13,615,698 $13,441,905
----------- -----------
Investments:
Nuclear decommissioning funds..................... $ 2,340,005 $ 2,267,317
Subsidiary companies.............................. 69,032 48,636
Other investments, at cost........................ 45,800 57,031
----------- -----------
$ 2,454,837 $ 2,372,984
----------- -----------
Current Assets:
Cash.............................................. $ 10,043 $ 219
Temporary cash investments........................ 28,130 26,935
Cash held to redemption of securities............. 606,822 3,062,816
Special deposits.................................. 382 271
Receivables--
Customers....................................... 1,285,420 1,364,760
Forward share repurchase contract............... 678,016 --
Other........................................... 148,349 155,492
Provisions for uncollectible accounts........... (61,355) (48,008)
Coal and fuel oil, at average cost................ 130,662 134,965
Materials and supplies, at average cost........... 241,952 229,532
Deferred income taxes related to current assets
and liabilities.................................. 24,892 26,486
Prepayments and other............................. 33,555 18,387
----------- -----------
$ 3,126,868 $ 4,971,855
----------- -----------
Deferred Charges and Other Noncurrent Assets:
Regulatory assets................................. $ 4,473,652 $ 4,578,427
Other............................................. 91,123 85,406
----------- -----------
$ 4,564,775 $ 4,663,833
----------- -----------
$23,762,178 $25,450,577
=========== ===========
</TABLE>

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

65
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
September 30, December 31,
CAPITALIZATION AND LIABILITIES 1999 1998
------------------------------ ------------- ------------
(Thousands of Dollars)
<S> <C> <C>
Capitalization (see accompanying statements):
Common stock equity.................................. $ 5,270,861 $ 5,055,854
Preferred and preference stocks without mandatory
redemption requirements............................. 18,820 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....................................... 7,049,748 7,677,219
----------- -----------
$12,689,429 $13,244,027
----------- -----------
Current Liabilities:
Notes payable........................................ $ 448,750 $ 276,356
Current portion of long-term debt, redeemable
preference stock and capitalized lease obligations.. 1,104,153 2,226,868
Accounts payable..................................... 486,158 605,712
Accrued interest..................................... 127,414 178,238
Accrued taxes........................................ 325,896 165,466
Dividends payable.................................... 89,469 104,022
Customer deposits.................................... 62,211 56,954
Accrued plant closing costs.......................... 15,198 78,430
Other................................................ 130,326 149,304
----------- -----------
$ 2,789,575 $ 3,841,350
----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
Deferred income taxes................................ $ 3,688,501 $ 3,787,978
Nuclear decommissioning liability for retired plants. 1,266,900 1,215,400
Accumulated deferred investment tax credits.......... 535,089 562,285
Accrued spent nuclear fuel disposal fee and related
interest............................................ 753,926 728,413
Obligations under capital leases..................... 213,725 333,653
Regulatory liabilities............................... 599,739 595,005
Other................................................ 1,225,294 1,142,466
----------- -----------
$ 8,283,174 $ 8,365,200
----------- -----------
Commitments and Contingent Liabilities (Note 21)
$23,762,178 $25,450,577
=========== ===========
</TABLE>

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

66
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CAPITALIZATION

<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------- -----------
(Thousands of Dollars)
<S> <C> <C>
Common Stock Equity:
Common stock, $12.50 par value per share--
Outstanding--213,972,524 shares and 214,057,171
shares, respectively............................. $ 2,677,979 $ 2,677,969
Premium on common stock and other paid-in capital.. 2,207,264 2,223,706
Capital stock and warrant expense.................. (12,537) (15,664)
Retained earnings.................................. 408,520 176,643
Treasury stock--264,406 shares and 178,982 shares,
respectively...................................... (10,365) (6,800)
----------- -----------
$ 5,270,861 $ 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--No shares and 13,499,549 shares,
respectively .................................... -- 504,957
Current redemption requirements for preference
stock included in current liabilities............. -- (432,320)
$1.425 convertible preferred stock, cumulative,
without par value--
Outstanding--57,526 shares and 58,211 shares, re-
spectively....................................... 1,829 1,851
Prior preferred stock, cumulative, $100 par value
per share--
No shares outstanding............................. -- --
----------- -----------
$ 18,820 $ 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%..... $ 672,245 $ 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%...... 1,609,443 1,981,000
----------- -----------
$ 3,587,088 $ 4,546,400
Transitional trust notes, due 2000 through 2008--
5.29% to 5.74%.................................... 3,162,955 3,400,000
Sinking fund debentures, due 1999 through 2011--
2 3/4% to 7 5/8%.................................. 31,383 94,159
Pollution control obligations, due 2007 through
2014--3.75% to 5 7/8%............................. 139,200 140,700
Other long-term debt............................... 1,056,300 1,056,346
Current maturities of long-term debt included in
current liabilities............................... (876,387) (1,497,706)
Unamortized net debt discount and premium.......... (50,791) (62,680)
----------- -----------
$ 7,049,748 $ 7,677,219
----------- -----------
$12,689,429 $13,244,027
=========== ===========
</TABLE>

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

67
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED RETAINED EARNINGS/(DEFICIT)

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

68
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CASH FLOWS

<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 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)...... $ 287,049 $ 286,071 $ 511,435 $ 462,357 $ 643,283 $ (875,406)
Adjustments to
reconcile net
income/(loss) to net
cash provided by
operating activities:
Depreciation and
amortization........ 208,597 245,362 737,501 751,423 970,440 1,013,281
Deferred income taxes
and investment tax
credits--net........ (11,861) (13,348) (115,059) (9,008) (43,256) (352,101)
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........ (2,439) - (22,297) (45,470) 306 -
Equity component of
allowance for funds
used during
construction........ (2,243) (1,814) (5,999) (5,358) (7,600) (12,570)
Provisions/(payments)
for liability for
separation costs--
net................. (1,746) (9,853) (11,544) (2,817) 1,029 (11,779)
Net effect on cash
flows of changes in:
Receivables........ 44,240 (281,151) 83,927 (430,553) 28,647 (510,533)
Coal and fuel oil.. 15,078 53,064 4,303 (31,444) 21,446 (7,662)
Materials and
supplies.......... (2,439) 14,324 (12,420) 7,686 2,413 49,123
Accounts payable
excluding nuclear
fuel lease
principal payments
and separation
costs--net........ 1,137 (131,869) (106,930) (15,106) 20,158 63,103
Accrued interest
and taxes......... 7,952 107,217 127,657 205,176 (118,229) 57,864
Other changes in
certain current
assets and
liabilities....... 36,964 31,780 91,196 83,468 148,914 189,403
Other--net........... 23,989 42,824 150,440 100,510 117,393 141,890
--------- --------- ----------- ---------- ----------- ----------
$ 604,278 $ 342,607 $ 1,432,210 $1,070,864 $ 1,784,944 $1,440,559
--------- --------- ----------- ---------- ----------- ----------
Cash Flow from Investing
Activities:
Construction
expenditures.......... $(262,946) $(198,155) $ (736,654) $ (618,277) $(1,021,602) $ (949,613)
Nuclear fuel
expenditures.......... (90,926) (28,616) (204,873) (123,583) (247,458) (151,686)
Sales of generating
plants................ - - - 177,454 - 238,245
Equity component of
allowance for funds
used during
construction.......... 2,243 1,814 5,999 5,358 7,600 12,570
Contributions to
nuclear
decommissioning
funds................. - - (39,426) (80,077) (96,120) (114,721)
Other investments and
special deposits...... (15,885) 658 (18,353) (288) (19,239) 19,618
--------- --------- ----------- ---------- ----------- ----------
$(367,514) $(224,299) $ (993,307) $ (639,413) $(1,376,819) $ (945,587)
--------- --------- ----------- ---------- ----------- ----------
Cash Flow from Financing
Activities:
Issuance of
securities--
Transitional trust
notes................ $ - $ - $ - $ - $ 3,382,629 $ -
Other long-term debt.. - 222,068 - 222,068 - 222,068
Capital stock......... 6 20 21 244 17,029 244
Retirement and
redemption of
securities--
Transitional trust
notes................ (97,045) - (237,045) - (237,045) -
Other long-term debt.. (1,017) (51,009) (1,059,452) (423,192) (1,134,452) (483,195)
Capital stock......... (75,034) (24,270) (639,298) (30,495) (649,669) (34,066)
Deposits and
securities held for
retirement and
redemption of
securities............ - 995 - - - -
Prepayment of forward
share repurchase
contract.............. - - (662,113) - (662,113) -
Cash dividends paid on
capital stock......... (99,246) (110,729) (300,839) (326,063) (404,644) (430,615)
Proceeds from
sale/leaseback of
nuclear fuel.......... - 39,612 - 101,038 - 146,768
Nuclear fuel lease
principal payments.... (55,610) (43,321) (157,546) (204,330) (208,820) (246,681)
Increase/(decrease) in
short-term
borrowings............ 36,900 (81,200) 172,394 250,496 40,104 365,896
--------- --------- ----------- ---------- ----------- ----------
$(291,046) $ (47,834) $(2,883,878) $ (410,234) $ 143,019 $ (459,581)
--------- --------- ----------- ---------- ----------- ----------
Change in Net Cash
Balance................ $ (54,282) $ 70,474 $(2,444,975) $ 21,217 $ 551,144 $ 35,391
Cash, Temporary Cash
Investments and Cash
Held for Redemption of
Securities:
Balance at Beginning
of Period............. 699,277 23,377 3,089,970 72,634 93,851 58,460
--------- --------- ----------- ---------- ----------- ----------
Balance at End of
Period................ $ 644,995 $ 93,851 $ 644,995 $ 93,851 $ 644,995 $ 93,851
========= ========= =========== ========== =========== ==========
</TABLE>

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

69
<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 $155 million and $133 million for the three months ended
September 30, 1999 and 1998, respectively, $470 million and $404 million for
the nine months ended September 30, 1999 and 1998, respectively, and $593
million and $545 million for the twelve months ended September 30, 1999 and
1998, respectively.

<TABLE>
<CAPTION>
Three Months
Ended September Nine Months Ended Twelve Months Ended
30 September 30 September 30
---------------- ----------------- -------------------
1999 1998 1999 1998 1999 1998
-------- ------- -------- -------- --------- ---------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Supplemental Cash Flow
Information:
Cash paid during the
period for:
Interest (net of
amount capitalized). $156,159 $96,567 $479,015 $342,687 $561,107 $439,112
Income taxes (net of
refunds)............ $140,913 $23,040 $225,020 $ 23,546 $ 514,684 $ 222,230
Supplemental Schedule of
Non-Cash Investing and
Financing Activities:
Capital lease obliga-
tions incurred........ $ 189 $40,954 $ 1,625 $104,933 $ 3,062 $ 152,812
</TABLE>

(2) Merger Agreement. See Unicom's Note 2 of Notes to Financial Statements.

(3) Accounting Effects Related to the 1997 Act. See Unicom's Note 3 of Notes
to Financial Statements, except for EPS information.

(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 September 30,
1999, the authorized shares of capital stock were: common stock--250,000,000
shares; preference stock--7,510,451 shares; $1.425 convertible preferred
stock--57,526 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.

70
<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 has been adjusted at the end of each reporting
period to reflect the aggregate market value of the shares deliverable under
the arrangement. Consequently, the arrangement has increased earnings
volatility in 1999. An unrealized loss of $18 million (after-tax) for the
three months ended and net unrealized gains of $16 million (after-tax) for the
nine and twelve months ended September 30, 1999 have been recorded related to
the arrangement.

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

<TABLE>
<S> <C>
Conversion of $1.425 convertible preferred stock................... 58,676
Conversion of warrants............................................. 25,263
------
83,939
======
</TABLE>

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

As of September 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 September 30, 1999 and December 31, 1998, 75,791 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.

71
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

As of September 30, 1999 and December 31, 1998, $827 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 September 30, 1999 and December 31, 1998 were as follows:

<TABLE>
<CAPTION>
September 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................. $ 71,304 $ 208 $ 71,512 $ 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 $ (1,234) $ 348,766 $ 350,000 $ 20,678 $ 370,678
Transitional trust
notes.................. $3,162,955 $(116,799) $3,046,156 $3,382,821 $ 67,168 $3,449,989
Long-term debt.......... $4,776,727 $ 125,838 $4,902,565 $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.

72
<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 September 30, 1999 and December 31, 1998 were as follows:

<TABLE>
<CAPTION>
September 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........................ $3,960,161 $4,007,681
Overheads capitalized.............................. 136,193 140,922
Repair allowance................................... 225,100 233,861
Regulatory assets recoverable through future rates. 678,583 680,356
Deferred income tax assets:
Postretirement benefits............................ (360,356) (331,566)
Unamortized investment tax credits................. (181,467) (191,135)
Regulatory liabilities to be settled through future
rates............................................. (599,739) (595,005)
Nuclear plant closure.............................. (13,238) (38,354)
Other--net......................................... (181,628) (145,268)
---------- ----------
Net deferred income tax liability................... $3,663,609 $3,761,492
========== ==========
</TABLE>

The $98 million decrease in the net deferred income tax liability from
December 31, 1998 to September 30, 1999 is comprised of an $91 million credit
to net deferred income tax expense and a $7 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, nine months and twelve months ended September
30, 1999 and 1998 were as follows:

73
<PAGE>

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

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

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

74
<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 $30 million, $160 million and $226 million for
the three months, nine months and twelve months ended September 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 September 30, 1999 for operating leases
are estimated to aggregate to $381 million, including $9 million in 1999, $38
million in 2000, $31 million in 2001, $31 million in 2002, $28 million in 2003
and $244 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.

75
<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.

76
<PAGE>

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Two pending enforcement issues have been resolved. The first issue was
resolved on July 20, 1999 with ComEd receiving a Severity Level III violation
with no civil penalty. The second issue was resolved on November 3, 1999, with
ComEd receiving a Severity Level II violation, with a proposed civil penalty
of $110,000. ComEd does not plan to contest the penalty. To ComEd's knowledge,
there are no enforcement issues pending or under review by the NRC.

In August 1999, three class action lawsuits were filed against ComEd related
to a series of service interruptions during the summer of 1999. The combined
effect of these events resulted in over 100,000 customers losing service. On
August 12, 1999, service was interrupted to ComEd customers on the near north
and near west side of the City's central business district. While major
commercial customers were affected, all service was restored on the same date.
The class action complaints have been consolidated and seek to recover damages
for personal injuries and property damage, as well as economic loss for these
events. Further, ComEd initiated expedited claim settlements for those with
primarily food spoilage claims. Conditional class certification has been
approved by the Court for the sole purpose of exploring settlement talks. The
lawsuits are pending in the Circuit Court of Cook County where the next status
hearing is scheduled for November 15, 1999. ComEd's management believes
adequate reserves have been established in connection with these cases.

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,

77
<PAGE>

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 September 30,
1999, which could have such an effect.

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>

Documents indicated by a plus sign (+) identify management contracts or
compensatory plans or arrangements.

(b) Reports on Form 8-K

A Current Report on Form 8-K dated July 1, 1999 was filed by Unicom and
ComEd announcing that the Company's second quarter earning is expected to
meet or exceed analyst earning expectations. The Company further indicated
its expected earnings goals for year 1999 and 2000.

A Current Report on Form 8-K dated July 1, 1999 was filed by Unicom and
ComEd announcing Unicom Destinations and Directions 1999, the new strategic
road map for the Company's business operations.

78
<PAGE>

A Current Report on Form 8-K dated September 15, 1999 was filed by Unicom
and ComEd announcing a five-point plan to improve the reliability of its
transmission and distribution system over the next two years.

A Current Report on Form 8-K dated September 23, 1999 was filed by Unicom
and ComEd announcing a plan of merger between Unicom Corporation and PECO
Energy Company.

A Current Report on Form 8-K dated September 27, 1999 was filed by Unicom
and ComEd disclosing the presentation material used in an investor meeting
relating to the merger announcement.

A Current Report on Form 8-K dated September 29, 1999 was filed by Unicom
and ComEd announcing the Merger Agreement and the Amendment to the Rights
Agreement.

79
<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 15th day of November, 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
September 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
September 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