UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the Quarterly period ended June 30, 2003

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
               For the Transition period from ........ to ........

Commission        Registrant; State of Incorporation;         IRS Employer
File Number       Address; and Telephone Number            Identification No.
  2-95569                          CILCORP Inc.                37-1169387
                           (An Illinois Corporation)
                              300 Liberty Street
                           Peoria, Illinois  61602
                                (309) 677-5230

  1-2732                 CENTRAL ILLINOIS LIGHT COMPANY        37-0211050
                            (An Illinois Corporation)
                               300 Liberty Street
                             Peoria, Illinois  61602
                                 (309) 677-5230

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  (or for such  shorter  period  that the
Registrants  were required to file such  reports),  and (2) have been subject to
such filing requirements for the past 90 days. Yes [X]. No [ ].

Indicate  by check mark  whether  the  registrants  are  accelerated  filers (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [ ]. No [X].

Indicate the number of shares  outstanding  of each of the  issuer's  respective
classes of common stock, as of the latest practicable date:


CILCORP Inc.      Common stock, no par value,
                  shares outstanding and privately
                  held by Ameren Corporation
                  at August 14, 2003                                       1,000

CENTRAL ILLINOIS LIGHT COMPANY
                  Common stock, no par value,
                  shares outstanding and privately
                  held by CILCORP Inc. at August 14, 2003             13,563,871

                         OMISSION OF CERTAIN INFORMATION

CILCORP Inc. meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q as a wholly-owned subsidiary of Ameren Corporation and is
therefore filing this Form 10-Q with the reduced disclosure format allowed under
that General Instruction.


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                 CILCORP INC. AND CENTRAL ILLINOIS LIGHT COMPANY
                  FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2003
                                TABLE OF CONTENTS


                                                                      Page No.
<S>       <C>                                                          <C>
PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements (Unaudited)

           CILCORP INC.

             Consolidated Balance Sheets                                3-4

             Consolidated Statements of Operations and
             Comprehensive Income                                       5-6

             Consolidated Statements of Cash Flows                      7-8

           CENTRAL ILLINOIS LIGHT COMPANY

             Consolidated Balance Sheets                                9-10

             Consolidated Statements of Income and
             Comprehensive Income                                        11

             Consolidated Statements of Cash Flows                     12-13

           Notes to Consolidated Financial Statements
           CILCORP Inc. and Central Illinois Light Company             14-29

Item 2.    Management's Discussion and Analysis of Financial
             Condition and Results of Operations
             CILCORP Inc. and Central Illinois Light Company           30-45

Item 3.    Quantitative and Qualitative Disclosures about
             Market Risk                                               45-47

Item 4.    Controls and Procedures                                       48

Forward-Looking Statements                                             48-49

PART II.   OTHER INFORMATION

Item 1.    Legal Proceedings                                             50

Item 4.    Submission of Matters To a Vote of Security Holders           51

Item 5.    Other Information                                             51

Item 6.    Exhibits and Reports on Form 8-K                            51-52

Signatures                                                               53

This Form 10-Q  contains  "forward-looking  statements"  within  the  meaning of
Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking
statements  should be read with the cautionary  statements and important factors
included  in  this  Form  10-Q at Part I,  under  the  heading  "Forward-Looking
Statements". Forward-looking statements are all statements other than statements
of historical fact, including those statements that are identified by the use of
the words "anticipates," "estimates," "expects," "intends," "plans," "predicts,"
"projects," and similar expressions.

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                                       2
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                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

                          CILCORP INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                                 (In thousands)
                                   (Unaudited)
                                                             Successor          Predecessor
                                                              June 30,          December 31,
                                                                2003               2002
<S><C>                                                   <C>                    <C>
ASSETS

 Current Assets:
 Cash and cash equivalents                                $   30,566      |      $   31,821
 Receivables, less allowance for                                          |
   uncollectible accounts of $2,808 and $1,989                53,514      |          52,982
 Receivables, miscellaneous                                    5,175      |           7,932
 Accrued unbilled revenue                                     26,781      |          37,256
 Fuel, at average cost                                        71,315      |          16,459
 Materials and supplies, at average cost                      19,830      |          17,691
 Gas in underground storage, at average cost                  21,078      |          27,209
 Prepayments and other                                        14,430      |          23,748
                                                          ----------      |      ----------
   Total Current Assets                                      242,689      |         215,098
                                                          ----------      |      ----------
 Investments and Other Property:                                          |
 Investment in leveraged leases                              131,186      |         132,874
 Other investments                                            13,471      |          17,850
                                                          ----------      |      ----------
   Total Investments and Other Property                      144,657      |         150,724
                                                          ----------      |      ----------
 Property, Plant and Equipment:                                           |
 Utility plant, at original cost                                          |
   Electric                                                  991,502      |         739,779
   Gas                                                       186,319      |         245,944
                                                          ----------      |      ----------
                                                           1,177,821      |         985,723
 Less - accumulated provision for depreciation                30,174      |         175,972
                                                          ----------      |      ----------
                                                           1,147,647      |         809,751
 Construction work in progress                                38,795      |         104,571
 Other, net of depreciation                                       --      |              22
                                                          ----------      |      ----------
   Total Property, Plant and Equipment, net                1,186,442      |         914,344
                                                          ----------      |      ----------
 Other Assets:                                                            |
 Goodwill, and other intangibles                                          |
   net of accumulated amortization                                        |
   of $208 and $33,753                                       618,289      |         580,748
 Regulatory assets                                            14,574      |           7,732
 Other assets                                                  5,674      |          32,398
                                                          ----------      |      ----------
   Total Other Assets                                        638,537      |         620,878
                                                          ----------      |      ----------
   Total Assets                                           $2,212,325      |      $1,901,044
                                                          ==========      |      ==========

See Notes to Consolidated Financial Statements.

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                          CILCORP INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                                 (In thousands)
                                   (Unaudited)
                                                          Successor              Predecessor
                                                           June 30,              December 31,
                                                             2003                   2002
LIABILITIES AND STOCKHOLDER'S EQUITY
<S><C>                                                   <C>                    <C>
Current Liabilities:
Current maturities of long-term debt                      $  101,400      |      $   26,750
Short-term debt                                                   --      |          10,000
Intercompany notes payable                                   110,600      |              --
Accounts payable                                              83,363      |          76,332
Accrued taxes                                                  3,774      |           8,105
Accrued interest                                              13,721      |          18,712
Other                                                         21,977      |          21,427
                                                          ----------      |      ----------
  Total Current Liabilities                                  334,835      |         161,326
                                                          ----------      |      ----------
Long-term debt                                               716,253      |         791,028
                                                          ----------      |      ----------
Deferred Credits and Other Liabilities:                                   |
Deferred income taxes                                        300,511      |         189,977
Regulatory liability of regulated subsidiary                  17,999      |          19,230
Deferred investment tax credit                                12,164      |          12,958
Pension liabilities                                          131,570      |         106,797
Postretirement health care liabilities                       124,533      |          61,513
Other                                                         42,481      |          22,536
                                                          ----------      |      ----------
  Total Deferred Credits and Other Liabilities               629,258      |         413,011
                                                          ----------      |      ----------
Preferred stock of subsidiary not subject to                              |
  mandatory redemption                                        19,120      |          19,120
Preferred stock of subsidiary subject to                                  |
  mandatory redemption                                        22,000      |          22,000
                                                          ----------      |      ----------
Total Preferred Stock of Subsidiary                           41,120      |          41,120
                                                          ----------      |      ----------
Stockholder's Equity:                                                     |
Common stock, no par value; authorized 10,000                             |
  outstanding 1,000                                               --      |              --
Additional paid-in capital                                   489,500      |         519,433
Retained earnings                                              2,721      |          34,688
Accumulated other comprehensive income (loss)                 (1,362)     |         (59,562)
                                                          ----------      |      ----------
  Total Stockholder's Equity                                 490,859      |         494,559
                                                          ----------      |      ----------
  Total Liabilities and Stockholder's Equity              $2,212,325      |      $1,901,044
                                                          ==========      |      ==========

See Notes to Consolidated Financial Statements.

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                          CILCORP INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations
                            and Comprehensive Income
                                 (In thousands)
                                   (Unaudited)

                                                      Successor                       Predecessor
                                               ---------------------         -------------------------------------
                                               Three          Five                          Three          Six
                                               Months         Months                        Months         Months
                                               Ended          Ended                         Ended          Ended
                                              June 30,       June 30,        January       June 30,       June 30,
                                                2003           2003            2003         2002           2002
<S><C>                                       <C>            <C>             <C>           <C>            <C>
Operating Revenues:
CILCO Electric                                $ 89,405       $148,671  |     $ 35,305      $ 94,656       $178,769
CILCO Gas                                       42,297        111,440  |       44,270        38,181        118,199
CILCO Other                                     34,667         55,771  |       11,975        28,437         50,187
CILCORP Other                                   21,077         51,708  |       12,373        11,720         29,721
                                              --------       --------  |     --------      --------       --------
   Total operating revenues                    187,446        367,590  |      103,923       172,994        376,876
                                              --------       --------  |     --------      --------       --------
Operating expenses:                                                    |
Fuel and purchased power                        65,216        109,070  |       24,702        57,774        111,234
Gas                                             46,658        126,424  |       42,410        32,259         98,150
Other operations and                                                   |
   maintenance                                  35,374         54,792  |       12,965        36,203         69,002
Depreciation and                                                       |
   amortization                                 20,771         34,769  |        5,941        18,036         36,047
Taxes, other than income                                               |
   taxes                                         9,017         17,332  |        4,299         9,241         21,001
                                              --------       --------  |     --------      --------       --------
   Total operating expenses                    177,036        342,387  |       90,317       153,513        335,434
                                              --------       --------  |     --------      --------       --------
Operating income                                10,410         25,203  |       13,606        19,481         41,442
                                              --------       --------  |     --------      --------       --------
Other income and                                                       |
  (deductions):                                                        |
Allowance for equity funds                                             |
  used during construction                          18             30  |            5            --             --
Miscellaneous income                               101            194  |           46            52            352
Miscellaneous expense                             (618)          (908) |         (154)         (658)        (1,375)
Income taxes                                       647          1,046  |          206           662          1,349
                                              --------       --------  |     --------      --------       --------
   Total other income and                                              |
     (deductions)                                  148            362  |          103            56            326
                                              --------       --------  |     --------      --------       --------
Interest charges and                                                   |
  preferred dividends:                                                 |
Interest expense                                12,535         22,339  |        5,203        16,588         32,854
Allowance for borrowed funds                                           |
  used during construction                        (776)        (1,234) |         (187)         (409)          (647)
Preferred stock dividends                                              |
  of subsidiary                                    539            899  |          180           539          1,079
                                              --------       --------  |     --------      --------       --------
   Total                                        12,298         22,004  |        5,196        16,718         33,286
                                              --------       --------  |     --------      --------       --------

                                       5
<PAGE>


Income (loss) from
   continuing operations
   before income taxes                          (1,740)         3,561  |        8,513         2,819          8,482
Income taxes                                    (1,384)           840  |        3,128           699          2,347
                                              --------       --------  |     --------      --------       --------
Net income (loss) from                                                 |
  continuing operations                                                |
  before cumulative                                                    |
  effect of change in                                                  |
  accounting principle                            (356)         2,721  |        5,385         2,120          6,135
Loss from operations of                                                |
   discontinued businesses,                                            |
   net of tax of $(3) and                                              |
   $(8)                                             --             --  |           --            (3)           (12)
Cumulative effect of change                                            |
   in accounting principle,                                            |
   net of income taxes                              --             --  |        3,818            --             --
                                              --------       --------  |     --------      --------       --------
Net income (loss)                             $   (356)      $  2,721  |     $  9,203      $  2,117       $  6,123
                                                                       |
Other comprehensive income                                             |
   (loss)                                          (50)        (1,362) |          350          (440)         5,024
                                              --------       --------  |     --------      --------       --------
Comprehensive income (loss)                   $   (406)      $  1,359  |     $  9,553      $  1,677       $ 11,147
                                              ========       ========  |     ========      ========       ========

See Notes to Consolidated Financial Statements.

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                          CILCORP INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                 (In thousands)
                                   (Unaudited)


                                                           Successor                    Predecessor
                                                         -------------         ------------------------------
                                                          Five Months                            Six Months
                                                             Ended             January            Ended
                                                         June 30, 2003           2003           June 30, 2002
<S><C>                                                    <C>                 <C>               <C>
Cash flows from operating:
Net income                                                 $   2,721    |      $  9,203          $  6,135
Adjustments to reconcile net income to net                              |
  cash provided by operating activities:                                |
  Cumulative effect of change in                                        |
    accounting principle                                          --    |        (3,818)               --
  Depreciation and amortization                               34,769    |         5,941            36,047
  Allowance for funds used during                                       |
    construction                                              (1,265)   |          (192)             (647)
  Non-cash leveraged lease and                                          |
    affordable housing income                                 (2,143)   |          (297)           (2,060)
  Cash receipts in excess of debt service                               |
    on leases                                                  2,518    |         1,410             3,402
  Deferred income taxes, net                                  (3,781)   |        (6,824)            6,820
  Deferred investment tax credits, net                          (662)   |          (132)             (798)
Changes in assets and liabilities:                                      |
  Accounts receivable and                                               |
    unbilled revenue                                          37,355    |       (24,901)            8,722
  Inventories                                                 (5,805)   |        10,740            12,960
  Accounts payable                                           (36,970)   |        15,168           (10,749)
  Accrued taxes                                               (3,511)   |        11,073            (1,494)
  Assets, other                                               (8,653)   |        11,709            (2,171)
  Liabilities, other                                           4,116    |         2,722            (5,124)
                                                           ---------    |      --------          --------
  Net cash provided by operating                                        |
    activities from continuing                                          |
    operations                                                18,689    |        31,802            51,043
                                                           ---------    |      --------          --------
  Net cash used in                                                      |
    operating activities of                                             |
    discontinued operations                                       --    |            --                (7)
                                                           ---------    |      --------          --------
  Net cash provided by operating                                        |
    activities                                                18,689    |        31,802            51,036
                                                           ---------    |      --------          --------
Cash flows from investing:                                              |
Construction expenditures                                    (38,354)   |       (15,906)          (63,051)
Allowance for funds used during                                         |
  construction                                                 1,265    |           192               647
Other                                                          4,458    |          (305)             (786)
                                                           ---------    |      --------          --------
Net cash used in investing activities                        (32,631)   |       (16,019)          (63,190)
                                                           ---------    |      --------          --------
                                                                        |
                                       7
<PAGE>


Cash flows from financing:                                              |
  Redemptions:                                                          |
    Short-term debt                                               --    |       (10,000)          (27,000)
    Long-term debt                                          (103,696)   |            --           100,000
                                                                        |
  Issuances:                                                            |
    Intercompany notes payable                               110,600    |            --                --
                                                           ---------    |      --------          --------
Net cash provided by (used in)                                          |
  financing activities                                         6,904    |       (10,000)           73,000
                                                                        |
Net change in cash and                                                  |
  cash equivalents                                            (7,038)   |         5,783            60,846
Cash and cash equivalents                                               |
  at beginning of period                                      37,604    |        31,821            18,182
                                                           ---------    |      --------          --------
Cash and cash equivalents at                                            |
  end of period                                            $  30,566    |      $ 37,604          $ 79,028
                                                           =========    |      ========          ========
                                                                        |
Cash paid during the period for:                                        |
                                                                        |
   Interest                                                $   8,539    |      $  5,413          $ 36,490
                                                                        |
   Income taxes                                            $   9,428    |      $     --          $     88

See Notes to Consolidated Financial Statements.

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                         CENTRAL ILLINOIS LIGHT COMPANY
                           Consolidated Balance Sheets
                                 (In thousands)
                                   (Unaudited)

                                                    June 30,   December 31,
ASSETS                                                2003        2002
<S><C>                                           <C>          <C>
Utility Plant, At Original Cost:
  Electric                                        $1,470,196   $1,349,153
  Gas                                                469,678      469,831
                                                  ----------   ----------
                                                   1,939,874    1,818,984
  Less - accumulated provision for depreciation    1,025,292    1,033,095
                                                  ----------   ----------
                                                     914,582      785,889
Construction work in progress                         38,794      104,571
                                                  ----------   ----------
    Total Utility Plant                              953,376      890,460
                                                  ----------   ----------
Other Property and Investments:
Cash surrender value of corporate-owned life
  insurance (net of related policy loans of
  $73,987 and $69,634)                                 3,901        4,268
Other                                                    892          892
                                                  ----------   ----------
    Total Other Property and Investments               4,793        5,160
                                                  ----------   ----------
Current Assets:
Cash and temporary cash investments                    7,728       22,256
Receivables, less allowance for
  uncollectible accounts of $2,802 and $1,989         47,557       47,179
Receivables, miscellaneous                             5,131        7,136
Accrued unbilled revenue                              23,669       32,162
Fuel, at average cost                                 17,743       16,459
Materials and supplies, at average cost               17,338       16,411
Gas in underground storage, at average cost           21,078       27,209
Prepaid taxes                                          3,628          886
Other                                                  8,001       23,679
                                                  ----------   ----------
    Total Current Assets                             151,873      193,377
                                                  ----------   ----------
Deferred Debits:
Regulatory assets                                     14,574        7,732
Unamortized debt expense                               1,049        1,581
Prepaid pension cost                                   7,250        7,250
Other                                                  3,209        3,441
                                                  ----------   ----------
    Total Deferred Debits                             26,082       20,004
                                                  ----------   ----------
Total Assets                                      $1,136,124   $1,109,001
                                                  ==========   ==========

See Notes to Consolidated Financial Statements


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                                       9

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<CAPTION>


                         CENTRAL ILLINOIS LIGHT COMPANY
                           Consolidated Balance Sheets
                                 (In thousands)
                                   (Unaudited)

                                                     June 30,    December 31,
CAPITALIZATION AND LIABILITIES                         2003          2002
<S><C>                                           <C>            <C>
Capitalization:
Common Stockholder's Equity:
  Common stock, no par value; authorized
    20,000,000 shares; outstanding
    13,563,871 shares                             $   185,661    $   185,661
  Additional paid-in capital                           52,000         52,000
  Retained earnings                                   131,069        113,775
  Accumulated other comprehensive income (loss)       (29,734)       (28,722)
                                                  -----------    -----------
    Total Common Stockholder's Equity                 338,996        322,714

Preferred stock not subject to mandatory
  redemption                                           19,120         19,120
Preferred stock subject to mandatory
  redemption                                           22,000         22,000
Long-term debt                                        141,231        316,028
                                                  -----------    -----------
    Total Capitalization                              521,347        679,862
                                                  -----------    -----------
Current Liabilities:
Current maturities of long-term debt                  101,400         26,750
Short-term debt                                          --           10,000
Intercompany notes payable                             98,900           --
Accounts payable                                       71,769         67,950
Accrued taxes                                           4,504         17,607
Accrued interest                                        4,760          9,437
Other                                                  21,977         21,427
                                                  -----------    -----------
    Total Current Liabilities                         303,310        153,171
                                                  -----------    -----------
Deferred Liabilities and Credits:
Accumulated deferred income taxes                     106,663         95,389
Regulatory liability                                   17,999         19,230
Investment tax credits                                 12,164         12,958
Pension liabilities                                    93,420         85,056
Postretirement health care liability                   50,575         41,333
Other                                                  30,646         22,002
                                                  -----------    -----------
    Total Deferred Liabilities and Credits            311,467        275,968
                                                  -----------    -----------
Total Capitalization and Liabilities              $ 1,136,124    $ 1,109,001
                                                  ===========    ===========

See Notes to Consolidated Financial Statements.
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                                       10
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<CAPTION>

                         CENTRAL ILLINOIS LIGHT COMPANY
                        Consolidated Statements of Income
                            and Comprehensive Income
                                 (In thousands)
                                   (Unaudited)

                                                                  Three Months Ended         Six Months Ended
                                                                      June 30,                   June 30,
                                                             2003            2002          2003           2002
<S>                                                       <C>             <C>           <C>            <C>
Operating revenues:
Electric                                                   $ 89,405        $ 94,656      $183,976       $178,769
Gas                                                          42,297          38,181       155,710        118,199
                                                           --------        --------      --------       --------
      Total operating revenues                              131,702         132,837       339,686        296,968
                                                           --------        --------      --------       --------
Operating expenses:
Fuel                                                         19,742          24,295        45,398         46,325
Gas                                                          26,809          22,364       107,021         71,972
Purchased power                                              13,633          12,517        25,976         24,047
Other operations and maintenance                             37,851          35,417        72,687         66,863
Depreciation and amortization                                18,584          17,681        36,710         35,345
Income taxes                                                  1,202           2,143         8,961          7,655
Other taxes                                                   8,926           9,168        21,516         20,908
                                                           --------        --------      --------       --------
      Total operating expenses                              126,747         123,585       318,269        273,115
                                                           --------        --------      --------       --------
Operating income                                              4,955           9,252        21,417         23,853
                                                           --------        --------      --------       --------
Other income and deductions:
Cost of equity funds capitalized                                 18              --            35             --
Corporate-owned life insurance, net                            (384)           (325)         (755)          (667)
Other, net                                                    2,573           4,584         3,215          5,388
                                                           --------        --------      --------       --------
      Total other income and
        deductions                                            2,207           4,259         2,495          4,721
                                                           --------        --------      --------       --------
Interest expenses:
Interest on long-term debt                                    3,532           4,387         8,331          8,754
Cost of borrowed funds capitalized                             (776)           (409)       (1,421)          (647)
Other                                                           687             979         1,203          2,029
                                                           --------        --------      --------       --------
      Total interest expense                                  3,443           4,957         8,113         10,136
                                                           --------        --------      --------       --------
Net income before preferred dividends                         3,719           8,554        15,799         18,438
Dividends on preferred stock                                    539             539         1,079          1,079
                                                           --------        --------      --------       --------
Income available for common stock
  before cumulative effect of
  change in accounting principle                              3,180           8,015        14,720         17,359
Cumulative effect of change in
  accounting principle, net of
  income taxes                                                   --              --        24,080             --
                                                           --------        --------      --------       --------
Income available for common stock                          $  3,180        $  8,015      $ 38,800       $ 17,359

Other comprehensive income (loss)                               (50)           (440)       (1,012)         5,024
                                                           --------        --------      --------       --------
Comprehensive income                                       $  3,130        $  7,575      $ 37,788       $ 22,383
                                                           ========        ========      ========       ========

See Notes to Consolidated Financial Statements.
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                                       11

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<TABLE>
<CAPTION>
                         CENTRAL ILLINOIS LIGHT COMPANY
                      Consolidated Statements of Cash Flows
                                 (In thousands)
                                   (Unaudited)


                                                                                              Six Months Ended
                                                                                                  June 30,
                                                                                         2003               2002


<S>                                                                                <C>                   <C>
Cash flows from operating:
Net income                                                                          $  38,800             $ 17,359

Adjustments to reconcile net income to net cash provided by operating
  activities:
Cumulative effect of change in accounting principle                                   (24,080)                  --
Depreciation and amortization                                                          36,710               35,345
Allowance for funds used during construction                                           (1,457)                (647)
Deferred income taxes, net                                                              9,872                7,611
Deferred investment tax credits, net                                                     (794)                (798)
Changes in assets and liabilities:
Receivables, net                                                                        1,627               (1,771)
Inventories                                                                             3,920               12,590
Unbilled revenue                                                                        8,493               10,667
Accounts payable                                                                        3,819              (23,293)
Accrued taxes and interest                                                            (33,614)               5,666
Assets, other                                                                           7,845               (2,845)
Liabilities, other                                                                     20,611               (2,505)
                                                                                    ---------             --------
Net cash provided by operating activities                                              71,752               57,379
                                                                                    ---------             --------
Cash flows from investing:
Construction expenditures                                                             (54,259)             (63,051)
Allowance for funds used during construction                                            1,457                  647
Other                                                                                    (522)              (1,451)
                                                                                    ---------             --------
Net cash used in investing activities                                                 (53,324)             (63,855)
                                                                                    ---------             --------
Cash flows from financing:
Dividends on common stock                                                             (21,506)             (28,000)
Redemptions:
  Short-term debt                                                                     (10,000)              (7,000)
  Long-term debt                                                                     (100,350)                  --
Issuances:
  Intercompany notes payable                                                           98,900                   --
  Long-term debt                                                                           --              100,000
                                                                                    ---------             --------
Net cash (used in) provided by financing activities                                   (32,956)              65,000
                                                                                    ---------             --------
                                       12

<PAGE>


Net change in cash and
  cash equivalents
                                                                                      (14,528)              58,524
Cash and cash equivalents at
  beginning of period                                                                  22,256               12,454
                                                                                    ---------             --------
Cash and cash equivalents at
  end of period                                                                     $   7,728             $ 70,978
                                                                                    =========             ========

Cash paid during the periods:

   Interest                                                                         $  13,957             $ 14,909

   Income taxes, net                                                                $  10,696             $  1,167

See Notes to Consolidated Financial Statements.
</TABLE>

                                       13
<PAGE>




                 CILCORP INC. AND CENTRAL ILLINOIS LIGHT COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1. Summary of Significant Accounting Policies

General

The consolidated  financial statements include the accounts of CILCORP Inc. (the
Holding  Company);  Central Illinois Light Company (CILCO or  AmerenCILCO);  QST
Enterprises  Inc. (QST) and its  subsidiaries,  QST Energy Inc. (QST Energy) and
CILCORP   Infraservices   Inc.  (CILCORP   Infraservices),   which  operates  as
AmerenCILCO Infraservices;  and CILCORP Inc.'s other subsidiaries (collectively,
CILCORP  or  the  Company)  after   elimination   of  significant   intercompany
transactions.  In the fourth  quarter  of 1998,  the  operations  of QST and its
subsidiaries  (excluding ESE Land  Corporation and CILCORP  Infraservices)  were
discontinued and,  therefore,  are being reported as discontinued  operations in
the financial  statements  through  December 2002.  Prior year amounts have been
reclassified on a basis consistent with the 2003 presentation.

CILCO, the Holding Company's  principal business  subsidiary,  is engaged in the
generation, transmission, distribution and sale of electric energy in an area of
approximately 3,700 square miles in central and east-central  Illinois,  and the
purchase,  distribution,  transportation  and sale of natural  gas in an area of
approximately  4,500 square miles in central and  east-central  Illinois.  Other
Holding Company first-tier  subsidiaries are CILCORP Investment  Management Inc.
(CIM),  which manages the Company's  investment  portfolio and CILCORP  Ventures
Inc. (CVI),  which pursues investment  opportunities in energy-related  products
and services.

The Holding Company is a wholly-owned subsidiary of Ameren Corporation (Ameren).
Ameren is a public utility  holding  company  registered with the Securities and
Exchange  Commission  (SEC) under the Public Utility Holding Company Act of 1935
(PUHCA) and is headquartered in St. Louis, Missouri. Ameren's principal business
is the  generation,  transmission  and  distribution  of  electricity,  and  the
distribution  of  natural  gas,  to  residential,   commercial,  industrial  and
wholesale users in the central United States.  Ameren's principal  subsidiaries,
including Central Illinois Light Company, are as follows:

o    Union  Electric   Company,   which  operates  a   rate-regulated   electric
     generation,  transmission and distribution  business,  and a rate-regulated
     natural gas distribution business in Missouri and Illinois as AmerenUE.
o    Central  Illinois Public Service  Company,  which operates a rate-regulated
     electric and natural gas transmission and distribution business in Illinois
     as AmerenCIPS.
o    Central  Illinois  Light  Company,  a  subsidiary  of CILCORP  Inc.,  which
     operates  a  rate-regulated  transmission  and  distribution  business,  an
     electric generation business, and a rate-regulated natural gas distribution
     business in Illinois as  AmerenCILCO.  Ameren  completed its acquisition of
     CILCORP on January 31, 2003. See Acquisition for further information.

                                       14
<PAGE>


o    AmerenEnergy  Resources Company (Resources Company),  which consists of non
     rate-regulated  electric  operations.   Subsidiaries  include  AmerenEnergy
     Generating  Company  (Generating  Company),  which  operates  Ameren's  non
     rate-regulated  electric generation in Missouri and Illinois,  AmerenEnergy
     Marketing  Company  (Marketing  Company),  which  markets power for periods
     primarily over one year,  AmerenEnergy  Fuels and Services  Company,  which
     procures  fuel and  manages  the  related  risks  for  Ameren's  affiliated
     companies,  and  AmerenEnergy  Medina  Valley  Cogen (No.  4),  LLC,  which
     indirectly  owns a 40 megawatt,  gas-fired  electric  generation  plant. On
     February 4, 2003,  Ameren  completed the  acquisition  of AES Medina Valley
     Cogen (No. 4), LLC and renamed it AmerenEnergy Medina Valley Cogen (No. 4),
     LLC.
o    AmerenEnergy,  Inc.  (AmerenEnergy),  which serves as a power marketing and
     risk management agent for Ameren  affiliated  companies for transactions of
     primarily less than one year.
o    Electric  Energy,  Inc.  (EEI),  which  operates  electric  generation  and
     transmission facilities in Illinois. Ameren has a 60% ownership interest in
     EEI, 40% owned by AmerenUE and 20% owned by Resources Company.
o    Ameren Services  Company (Ameren  Services),  which provides shared support
     services to Ameren and its  subsidiaries,  including  CILCORP.  Charges are
     based upon the actual costs incurred by Ameren  Services as required by the
     PUHCA.

Throughout this document,  CILCORP or the Company refers to CILCORP Inc. and its
subsidiaries  on a consolidated  basis.  CILCO refers to Central  Illinois Light
Company.

The  accounting  policies of CILCORP  conform to generally  accepted  accounting
principles in the United States (GAAP).  CILCORP's financial  statements reflect
all adjustments (which include normal,  recurring adjustments) necessary, in the
Company's opinion, for a fair presentation of interim results.  These statements
should  be read in  conjunction  with the  financial  statements  and the  notes
thereto included in CILCORP and CILCO's 2002 Annual Report on Form 10-K.

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.


Acquisition

On January 31, 2003,  Ameren completed its acquisition of all of the outstanding
common stock of CILCORP Inc. from The AES Corporation (AES). CILCORP Inc. is the
parent company of Central  Illinois Light Company which operated as CILCO.  With
the  acquisition,  CILCO  became an indirect  Ameren  subsidiary,  but remains a
separate  utility company,  operating as AmerenCILCO.  The results of operations
for CILCORP (including its subsidiaries) were included in Ameren's  consolidated
financial statements effective with the acquisition date.

Ameren  acquired  CILCORP to complement  its existing  Illinois gas and electric
operations.  The purchase included CILCO's  rate-regulated  electric and natural
gas business in Illinois serving  approximately  200,000 and 205,000  customers,
respectively,  of which approximately  150,000 are combination  electric and gas
customers.   CILCO's  service   territory  is  contiguous  to  Ameren's  service
territory.  CILCO  also  has a non  rate-regulated  electric  and gas  marketing


                                       15

<PAGE>

business  principally  focused in the Chicago,  Illinois  region.  Finally,  the
purchase included CILCO's  approximately  1,200 megawatts of largely  coal-fired
generating  capacity,  most of which is expected to become non rate-regulated in
2003.

The  total  purchase  price  was  approximately  $1.4  billion,   including  the
assumption of CILCORP debt and preferred stock of approximately $859 million.


Financial Statement Presentation

The acquisition was accounted for using the purchase method of accounting. Under
this method,  the purchase  price was  allocated to the fair market value of the
assets  acquired and the  liabilities  assumed of CILCORP.  The excess  purchase
price over the fair value of the assets acquired and the liabilities assumed was
allocated  to goodwill at CILCORP  Inc. As a result,  CILCORP  Inc. has recorded
purchase accounting fair value adjustments to electric plant in service, pension
and  other  postretirement  liabilities,  long-term  debt,  emission  allowances
(included in Fuel,  at average cost on the  consolidated  balance  sheet),  coal
contracts, and other balance sheet items. Ameren is in the process of completing
a third party  valuation of acquired  property and plant and intangible  assets.
Therefore,  the  allocation of the purchase  price to the acquired net assets is
subject to refinement. The excess of the purchase price over tangible net assets
acquired  has been  allocated  preliminarily  to  goodwill in the amount of $603
million at CILCORP.

The purchase accounting entries are reflected on CILCORP's financial  statements
as of the  acquisition  date.  As permitted by rules of the SEC, the Company did
not "push down" the effects of purchase  accounting to the financial  statements
of  any  of  Holding  Company's  subsidiaries,   including  CILCO.  Accordingly,
CILCORP's   post-acquisition   financial  statements  reflect  a  new  basis  of
accounting,  and separate financial statements are presented for pre-acquisition
(predecessor) and  post-acquisition  (successor)  periods,  separated by a heavy
black line. CILCO's financial statements are presented on their historical basis
of accounting for all periods presented.


Accounting Changes and Other Matters


Statement of Financial  Accounting  Standards  (SFAS) No. 143 - "Accounting  for
Asset Retirement Obligations"

The Company  adopted the provisions of SFAS 143 effective  January 1, 2003. SFAS
143  provides  the  accounting  requirements  for asset  retirement  obligations
associated with tangible, long-lived assets. SFAS 143 requires CILCORP to record
the estimated fair value of legal obligations  associated with the retirement of
tangible  long-lived  assets in the period in which the liabilities are incurred
and to  capitalize  a  corresponding  amount  as part of the  book  value of the
related  long-lived  asset.  In subsequent  periods,  the Company is required to
adjust asset  retirement  obligations  based on changes in estimated fair value.
Corresponding  increases in asset book values are depreciated over the remaining
useful life of the related asset. Uncertainties as to the probability, timing or
amount of cash flows associated with an asset retirement  obligation  affect the
Company's estimate of fair value.

Upon adoption of this standard, CILCO recognized asset retirement obligations of
approximately  $5.6 million related  primarily to retirement costs for ash ponds
at the Duck Creek power  plant,  and a net increase in net property and plant of
approximately $45.6 million due to elimination of non-legal

                                       16

<PAGE>


obligation  costs of removal  for non  rate-regulated  assets  from  accumulated
depreciation.  As a result,  CILCO recognized a net after-tax gain upon adoption
of $24.1 million.

Upon adoption of this standard  effective  January 1, 2003,  CILCORP  recognized
asset retirement obligations of approximately $5.6 million related to retirement
costs for ash ponds at the Duck Creek  power  plant,  and a net  increase in net
property  and  plant  of  approximately  $11.9  million  due to  elimination  of
non-legal  obligation  costs  of  removal  for non  rate-regulated  assets  from
accumulated  depreciation.  As a result,  predecessor  CILCORP  recognized a net
after-tax gain upon adoption of $3.8 million.  Similar to the treatment  applied
by Ameren in the acquisition of CILCORP, AES recorded purchase accounting at the
CILCORP level following its 1999 acquisition of CILCORP, but did not "push down"
the purchase accounting to any of the Holding Company's subsidiaries,  including
CILCO.  Accordingly,  accumulated  depreciation,  including the embedded cost of
removal liabilities,  was reset to zero in purchase accounting for CILCORP while
CILCO  continued  to  carry  property,  plant  and  equipment  and  the  related
accumulated  depreciation  on a  historical  basis.  As a result,  the gain upon
adoption of SFAS 143 recognized by CILCO exceeded the gain recognized by CILCORP
as the cost of removal liabilities reversed by CILCORP upon adoption of SFAS 143
included only those liabilities recorded since the 1999 AES acquisition.

In addition to those  obligations  that were identified and valued,  the Company
determined  that certain  other asset  retirement  obligations  exist.  However,
management is unable to estimate the fair value of those obligations because the
probability,   timing  or  cash  flows   associated  with  the  obligations  are
indeterminable.  Management  does  not  believe  that  these  obligations,  when
incurred,  will have a material adverse impact on CILCORP's  financial position,
results of operations or liquidity.

SFAS  143  required  a  change  in  the  depreciation  methodology  the  Company
historically utilized for non-regulated  operations.  Historically,  the Company
included an estimated cost of  dismantling  and removing plant from service upon
retirement in the basis upon which depreciation rates were determined.  SFAS 143
required the Company to exclude costs of dismantling and removal upon retirement
from the  depreciation  rates  applied  to non  rate-regulated  plant  balances.
Further,  the  Company  was  required  to  remove  accumulated   provisions  for
dismantling  and removal costs from  accumulated  depreciation,  where they were
embedded,  and reflect such adjustment as a gain upon adoption of this standard,
to the extent such  dismantling and removal  activities are not considered legal
asset  retirement  obligations as defined by SFAS 143. At CILCO, the elimination
of cost of removal in excess of anticipated  salvage  proceeds from  accumulated
depreciation resulted in a gain, as noted above, of $24.1 million, net of taxes,
for a change in accounting principle.  As noted above, the gain for CILCORP on a
consolidated  basis was only  $3.8  million,  net of taxes,  due to the reset of
accumulated  depreciation  at the time of AES'  acquisition  of CILCORP in 1999.
Beginning in January 2003, depreciation rates for non rate-regulated assets were
reduced to reflect the discontinuation of the accrual of dismantling and removal
costs. In addition, non rate-regulated asset removal costs will prospectively be
expensed as incurred.  As a result, the impact of this change in accounting will
result in a decrease in  depreciation  expense and an increase in operations and
maintenance expense, the net impact of which is indeterminable, but not expected
to be material.

Like the methodology  employed by the Company's non  rate-regulated  operations,
the  depreciation   methodology  historically  utilized  by  the  rate-regulated
operations has included an estimated cost of dismantling and removing plant from
service upon  retirement.  Because  these  estimated  costs of removal have been
included in the cost of service upon which  CILCO's  present  utility  rates are
based,  and with  the  expectation  that  this  practice  will  continue  in the

                                       17

<PAGE>

jurisdictions  in which CILCO  operates,  adoption of SFAS 143 did not result in
any change in the  depreciation  accounting  practices of CILCO's rate regulated
operations.  CILCO's  estimated  future  removal costs  embedded in  accumulated
depreciation  related to rate-regulated  plant assets were approximately  $145.1
million at June 30, 2003. As a result of the reset of  accumulated  depreciation
upon Ameren's acquisition of CILCORP, estimated future removal costs embedded in
accumulated  depreciation at CILCORP  consolidated are only $4.2 million at June
30, 2003.


Emerging Issues Task Force (EITF) Issue No. 02-3 and EITF Issue No. 98-10

In the quarters  ended  September 30, 2002 and December 31, 2002, we adopted the
provisions of EITF 02-3, "Issues Involved in Accounting for Derivative Contracts
Held for Trading  Purposes  and  Contracts  Involved in Energy  Trading and Risk
Management  Activities," that require revenues and costs associated with certain
energy contracts to be shown on a net basis in the income statement. The Company
had no contracts requiring restatement.

In October  2002,  the EITF  reached a  consensus  to rescind  EITF  98-10.  The
effective  date for the full  rescission  of EITF 98-10 was for  fiscal  periods
beginning after December 15, 2002, with early adoption  permitted.  In addition,
the EITF reached a consensus in October 2002 that all SFAS No. 133  ("Accounting
for  Derivative   Instruments  and  Hedging   Activities")  trading  derivatives
(subsequent  to the  rescission of EITF 98-10) should be shown net in the income
statement,  whether or not physically  settled.  This  consensus  applies to all
energy and non-energy related trading  derivatives that meet the definition of a
derivative  pursuant to SFAS 133. The Company  adopted and applied this guidance
to 2002 and 2001, which had no impact on previously reported revenues or costs.


SFAS No.  148 -  "Accounting  for  Stock-Based  Compensation  -  Transition  and
Disclosures"

In  December  2002,  the FASB  issued  SFAS 148.  SFAS 148 amends  SFAS No. 123,
"Accounting for  Stock-Based  Compensation"  (SFAS 123), to provide  alternative
methods of transition for an entity that  voluntarily  changes to the fair value
based method of accounting for stock-based employee compensation. It also amends
the disclosure  provisions to require  disclosure  about the effects on reported
net  income  of  an  entity's   accounting  policy  decisions  with  respect  to
stock-based employee compensation.

Employees of the Company  previously  participated  in the AES Stock Option Plan
that provided for grants of stock options to eligible participants. As permitted
under SFAS 123, the Company  applies APB Opinion No. 25,  "Accounting  for Stock
Issued to Employees" in accounting  for this plan. As the exercise  price of all
stock  options were equal to their fair market value at the time the options are
granted,  the Company did not recognize any compensation  expense related to the
plan using the  intrinsic  value based  method.  Had  compensation  expense been
recognized  using the fair value  based  method  under SFAS 123,  the  Company's
consolidated  earnings under the predecessor  basis would have decreased by $2.7
million,  $1.4 million,  and $.3 million in 2002, 2001, and 2000,  respectively.
Effective  January 1,  2003,  the  Company  adopted  the fair value  recognition
provisions of SFAS 123 by using the  prospective  method of adoption  under SFAS
148.  Because no stock options have been granted since January 1, 2003, SFAS 148
did not  have  any  effect  on the  Company's  financial  position,  results  of
operations or liquidity in the first six months of 2003.

                                       18
<PAGE>


SFAS No. 149 - "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities"

In  April  2003,  the FASB  issued  SFAS  149.  SFAS 149  clarifies  under  what
circumstances a contract with initial net investment meets the characteristic of
a derivative as discussed in SFAS 133,  "Accounting  for Derivative  Instruments
and  Hedging  Activities."  SFAS  149 is  effective  for  hedging  relationships
designated  and  contracts  entered into or modified  after June 30,  2003.  The
Company does not expect SFAS 149 to have any impact on its  financial  position,
results of operations or liquidity in the third quarter of 2003.


SFAS  No.  150  -   "Accounting   for   Certain   Financial   Instruments   with
Characteristics of Both Liabilities and Equity"

In May 2003,  the FASB issued  SFAS 150 that  established  standards  for how an
issuer   classifies   and   measures   certain   financial    instruments   with
characteristics  of both  liabilities  and equity.  SFAS 150 requires  financial
instruments  that  were  issued  in the  form of  shares  with an  unconditional
obligation,  where the issuer must redeem the  instrument  by  transferring  its
assets on a specified date, be classified as liabilities.  Accordingly, SFAS 150
requires issuers to classify  mandatorily  redeemable  financial  instruments as
liabilities. SFAS 150 also requires such financial instruments to be measured at
fair value and a cumulative  effect adjustment to be recognized in the statement
of income for any difference between the carrying amount and fair value.

SFAS 150 will be effective  in the third  quarter of 2003.  AmerenCILCO  has $22
million  of  preferred  stock  subject  to  mandatory  redemption  that  will be
classified  as long-term  debt in the third quarter of 2003.  Effective  July 1,
2003, this preferred stock is redeemable at par at any time and therefore, there
is no difference between book value and fair value.


FASB Interpretation No. (FIN) 46 - "Consolidation of Variable Interest Entities,
an  Interpretation of Accounting  Research  Bulletin (ARB) No. 51,  Consolidated
Financial Statements"

The  FASB  issued  FIN 46 in  January  2003.  FIN 46  provides  guidance  on the
identification  of, and financial  reporting for, entities over which control is
achieved  through  means other than voting  rights;  such  entities are known as
variable-interest entities (VIEs). FIN 46 will determine the following:

     o    Whether  consolidation  is required under the  "controlling  financial
          interest" model of ARB 51, or other existing authoritative guidance;
     o    Or, alternatively,  whether the  variable-interest  model under FIN 46
          should be used to account for existing and new entities.

The initial  application of FIN 46 depends on the date that the VIE was created.
For public  entities,  FIN 46 is  effective  no later than the  beginning of the
first interim  period that starts after June 15, 2003. At this time, the Company
is  assessing  the  impact  of FIN  46 on its  financial  position,  results  of
operations, or liquidity upon adoption in the third quarter of 2003.


                                       19

<PAGE>


NOTE 2. Contingencies

On May 11, 2001, CILCO and Enron Power  Marketing,  Inc. (EPMI), a subsidiary of
Enron Corp. (Enron),  entered into a new Master Agreement for electric purchases
and sales, which covered energy transactions scheduled for deliveries during the
period of  2001-2003.  On November 28, 200l,  EPMI  demanded that CILCO post $28
million in collateral based on mark-to-market exposure of open transactions.  On
November 30, 2001, CILCO notified EPMI that events of default had occurred under
the Master  Agreement and pursuant to the  termination  provisions of the Master
Agreement declared the Master Agreement  terminated effective December 20, 2001.
Due to contractual  provisions and EPMI's and Enron's  actions,  management does
not believe that it is probable that CILCO will be required to pay any amount to
Enron or its affiliates and has therefore  recorded no liability for undelivered
electric  purchases.  Enron and EPMI filed  Chapter 11  bankruptcy  petitions on
December 2, 2001, in the U. S. Bankruptcy Court for the Southern District of New
York.  Thereafter,  CILCO  purchased  replacement  power  to  serve  its  retail
customers,   which  had  previously   been  partially   supported  by  the  EPMI
transactions.  While the ultimate outcome is unpredictable,  management does not
believe  that  EPMI's  defaults  under the  Master  Agreement,  its  filing  for
bankruptcy protection,  CILCO's termination of the Master Agreement,  or CILCO's
purchase  of  replacement  electricity  will have a material  adverse  effect on
CILCORP's or CILCO's financial position, cash flows or results of operations.

On December 10, 2002,  EPMI filed a complaint  against  AES,  Constellation  New
Energy,  Inc.,  f/k/a  AES New  Energy  Inc.  and  CILCO  in the  United  States
Bankruptcy  Court for the Southern  District of New York. With respect to CILCO,
EPMI alleges that it is owed $31.2  million  under the Master  Agreement.  CILCO
disputes  that it owes any  amount to EPMI  based on the clear  language  of the
Master Agreement, Section 553 of the Bankruptcy Code and EPMI's misconduct prior
to  entering  the  Master  Agreement  and  continuing  through  the  date of its
bankruptcy  filing.  AES  has  agreed  to  undertake  CILCO's  defense  in  this
proceeding  and  intends to  vigorously  contest  these  claims.  Due to CILCO's
contractual and other defenses to EPMI's claims,  as well as certain  provisions
related to the sale of CILCO to Ameren,  management does not believe the results
of this  litigation will have a material  adverse effect on CILCORP's  financial
position,  cash flows or results of  operation.  EPMI's claim  against  CILCO is
currently in court ordered mediation.

On May 4, 2001,  CILCO and Enron  subsidiary  Enron North  America  Corp.  (ENA)
entered into a natural gas transaction for daily deliveries not to exceed 10,000
MMBtu  per day  during  calendar  year  2002.  CILCO  received  no  natural  gas
deliveries  pursuant to this transaction in 2002. On October 24, 2001, CILCO and
ENA entered into a short-term  natural gas transaction giving CILCO the right to
call upon ENA for the  delivery  of 10,000  MMBtu per day during the period from
November 1, 2001, through March 31, 2002. Since late November 2001, ENA has been
unable to  deliver  natural  gas when  called  upon by CILCO.  ENA's  failure to
deliver natural gas is an event of default under the Master Firm Sales Agreement
governing the October  transaction.  On December 2, 2001, ENA filed a Chapter 11
bankruptcy  petition in the U. S. Bankruptcy Court for the Southern  District of
New  York.  To the  extent  that it has  been  necessary,  CILCO  has  purchased
replacement natural gas. Because these  transactions:  (i) were part of a larger
and more  diversified  natural  gas supply  portfolio  subject to  inclusion  in
CILCO's  Purchased Gas Adjustment (PGA), (ii) concluded in accordance with their
terms and conditions,  and (iii) do not form the basis of any claim made by ENA,
EPMI, or Enron in their bankruptcy proceedings or in any other forum, management
does  not  believe  ENA's  failure  to  supply  natural  gas or  its  subsequent
bankruptcy  filing will have a material  adverse  effect on CILCORP's or CILCO's
financial position, cash flows or results of operations.

                                       20
<PAGE>

NOTE 3. Rate and Regulatory Matters

Gas Rate Case

In November 2002,  CILCO filed a request with the Illinois  Commerce  Commission
(ICC) to increase  annual  rates for natural  gas service by  approximately  $14
million.  The ICC Staff has recommended the annual increase to be $9 million. In
addition, other parties have proposed a lower increase.  Hearings were completed
in June 2003.  In  August,  the  Administrative  Law Judge in the CILCO gas rate
proceeding  recommended  to the ICC the adoption of a Proposed Order to increase
annual rates for natural gas service by $10 million at CILCO.  The ICC has until
October 2003 to render a decision in this gas case.  Any rate change is expected
to be effective November 2003.


Standard Market Design Notice of Proposed Rulemaking (NOPR)

On July 31, 2002,  the Federal  Energy  Regulatory  Commission  (FERC)  issued a
Standard  Market  Design NOPR.  The NOPR proposes a number of changes to the way
the current  wholesale  transmission  service and energy  markets are  operated.
Specifically,  the NOPR calls for all jurisdictional  transmission facilities to
be placed under the control of an independent  transmission provider (similar to
a Regional Transmission Organization (RTO)), proposes a new transmission service
tariff that provides a single form of transmission  service for all users of the
transmission  system  including  bundled  retail load, and proposes a new energy
market and congestion management system that uses locational marginal pricing as
its basis.

Although issuance of the final rule is uncertain and the implementation schedule
is unknown,  the Midwest  Independent  System  Operator  (Midwest ISO), of which
CILCO is a member,  is already in the process of  implementing  a market  design
similar to the proposed market design in the NOPR. In July 2003, the Midwest ISO
filed with the FERC a revised Open Access  Transmission  Tariff (OATT) codifying
the terms and  conditions  under which it will  implement the new market design.
The Midwest ISO has  targeted  March 2004 as the start date for  implementation.
The Company is in the process of reviewing  the Midwest  ISO's market design and
the potential impact of the market design on the cost and reliability of service
to retail customers. At this time, the Company is unable to predict the ultimate
impact the new market design will have on its future financial position, results
of operations or liquidity.


NOTE 4. Accounting for Price Risk Management Activities

Gains/losses  on  derivatives  that  hedge  non  rate-regulated  activities  are
reflected in operating results when the hedged transaction affects earnings. The
net gain reflected in operating  results from derivative  financial  instruments
for non rate-regulated  activities for the quarter ended June 30, 2003, was $0.2
million for natural gas  (included  in Gas  operating  expenses).  There were no
outstanding  derivative financial instruments for electricity during the quarter
ended June 30, 2003. The previously  recorded  gain/loss  associated  with these
settled derivative  financial  instruments was removed from Other  Comprehensive
Income (OCI) when hedged  transactions  affected  earnings.  All open derivative
positions hedging anticipated  transactions are then  marked-to-market  with the
change in fair value being recorded in OCI. The net effect of these  adjustments
was $0 for the quarter  ended June 30,  2003.  A purchase  accounting  entry was
recorded at CILCORP in the amount of $1.7  million  during the first  quarter of
2003 to eliminate the balance in OCI that existed at the  acquisition  date. The
after-tax  balance in OCI associated  with these open  derivative  positions and
unrealized gains/losses on settled


                                       21
<PAGE>

positions which related to hedged anticipated transactions at June 30, 2003, was
a loss of $1.4  million at  CILCORP  and a gain of $0.3  million  at CILCO.  The
corresponding  asset is reflected on the balance sheet in Prepayments and Other.
The portion of OCI for open  positions  reflects  hedges of natural gas sales of
4,020,000  MMBtu for  commitments  through  November  2004.  Approximately  $1.4
million of OCI related to derivative financial instruments at CILCORP as of June
30, 2003, is expected to be recognized as a decrease to operating  earnings over
the next twelve months based on market prices as of June 30, 2003. Approximately
$0.3 million of OCI at CILCO related to derivative  financial  instruments as of
June 30, 2003, is expected to be recognized as an increase to operating earnings
over the next twelve  months  based on market  prices as of June 30,  2003.  The
actual amount  recognized in earnings will be based on the market  conditions at
the time the derivatives are settled.

During  the  second  quarter  of 2003,  there  were no  outstanding  derivatives
relating to the Company's rate-regulated gas business.


                                       22
<PAGE>
<TABLE>
<CAPTION>


NOTE 5. Other Comprehensive Income

2003 Rollforward of Accumulated Other Comprehensive Income - CILCORP

                                            Pension      SFAS 133    Total
                                                    (In thousands)
<S><C>                                     <C>         <C>         <C>
Predecessor
Accumulated other comprehensive income
  (loss) - December 31, 2002 balance        $(60,866)   $  1,304    $(59,562)

Other comprehensive income - January 2003       --           350         350
                                            --------    --------    --------
Accumulated other comprehensive income
  (loss) - January 31, 2003 balance         $(60,866)   $  1,654    $(59,212)
                                            ========    ========    ========
--------------------------------------------------------------------------------

Successor
Accumulated other comprehensive income
  (loss) - January 31, 2003 balance         $   --      $   --      $   --

Other comprehensive income -
  Two months ended March 31, 2003               --        (1,312)     (1,312)
                                            --------    --------    --------
Accumulated other comprehensive income
  (loss) - March 31, 2003                   $   --      $ (1,312)   $ (1,312)


Other comprehensive income -
  Three months ended June 30, 2003              --           (50)        (50)
                                            --------    --------    --------
Accumulated other comprehensive income
  (loss) - June 30, 2003                    $   --      $ (1,362)   $ (1,362)
                                            ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>


2002 Rollforward of Accumulated Other Comprehensive Income - CILCORP

                                            Pension      SFAS 133    Total
                                                    (In thousands)
<S><C>                                     <C>         <C>         <C>
Predecessor
Accumulated other comprehensive
  loss - December 31, 2001 balance          $ (9,333)   $ (4,693)   $(14,026)

Other comprehensive income -
  Three months ended March 31, 2002             --         5,464       5,464
                                            --------    --------    --------
Accumulated other comprehensive income
  (loss) - March 31, 2002 balance           $ (9,333)   $    771    $ (8,562)


Other comprehensive income -
  Three months ended June 30, 2002              --          (440)       (440)
                                            --------    --------    --------
Accumulated other comprehensive income
  (loss) - June 30, 2002 balance            $ (9,333)   $    331    $ (9,002)
                                            ========    ========    ========
</TABLE>

                                       23
<PAGE>
<TABLE>
<CAPTION>

2003 Rollforward of Accumulated Other Comprehensive Income - CILCO

                                            Pension      SFAS 133    Total
                                                    (In thousands)
<S><C>                                  <C>         <C>         <C>
Accumulated other comprehensive income
  (loss) - December 31, 2002 balance     $(30,026)   $  1,304    $(28,722)

Other comprehensive income -
  Three months ended March 31, 2003          --          (962)       (962)
                                         --------    --------    --------
Accumulated other comprehensive income
  (loss) - March 31, 2003 balance        $(30,026)   $    342    $(29,684)


Other comprehensive income -
  Three months ended June 30, 2003           --           (50)        (50)
                                         --------    --------    --------
Accumulated other comprehensive income
  (loss) - June 30, 2003 balance         $(30,026)   $    292    $(29,734)
                                         ========    ========    ========

</TABLE>
<TABLE>
<CAPTION>

2002 Rollforward of Accumulated Other Comprehensive Income - CILCO

<S><C>                                  <C>         <C>         <C>
Accumulated other comprehensive
  loss - December 31, 2001 balance       $ (1,112)   $ (4,693)   $ (5,805)

Other comprehensive income -
  three months ended March 31, 2002          --         5,464       5,464
                                         --------    --------    --------
Accumulated other comprehensive income
  (loss) - March 31, 2002 balance        $ (1,112)   $    771    $   (341)


Other comprehensive income -
  Three months ended June 30, 2002           --          (440)       (440)
                                         --------    --------    --------
Accumulated other comprehensive income
  (loss) - June 30, 2002 balance         $ (1,112)   $    331    $   (781)
                                         ========    ========    ========
</TABLE>

                                       24
<PAGE>


NOTE 6. Debt Financings

On February 10, 2003,  AmerenCILCO  repaid $25.4  million first  mortgage  bonds
6.82%  Series  which  matured  on that  date.  In April  2003,  three  series of
AmerenCILCO's  first  mortgage  bonds were  redeemed,  prior to maturity.  These
included AmerenCILCO's $65 million principal amount 8.20% Series due January 15,
2022, at a redemption  price of 103.29% and two 7.8% Series totaling $10 million
principal amount due February 9, 2023, at a redemption price of 103.90%.


NOTE 7. Miscellaneous
<TABLE>
<CAPTION>

The following table  summarizes  CILCORP's  miscellaneous  income and expense by
component.

                                                           Successor                       Predecessor
                                                     --------------------        --------------------------------
                                                      Three         Five                       Three      Six
                                                      Months        Months                     Months     Months
                                                      Ended         Ended                      Ended      Ended
                                                     June 30,      June 30,       January     June 30,   June 30,
                                                      2003           2003           2003        2002       2002
                                                                       (In thousands)
<S><C>                                              <C>           <C>            <C>         <C>        <C>
Miscellaneous income:
  Interest and dividend income                       $  101        $ 194   |      $  46       $  52      $   352
                                                     ------        -----   |      -----       -----      -------
Total miscellaneous income                           $  101        $ 194   |      $  46       $  52      $   352
                                                     ======        =====   |      =====       =====      =======
                                                                           |
Miscellaneous expense:                                                     |
  Corporate-owned life                                                     |
    insurance                                        $ (384)       $(627)  |      $(128)      $(325)     $  (667)
  Donations                                            (100)        (130)  |         (5)       (196)        (421)
  Other                                                (134)        (151)  |        (21)       (137)        (287)
                                                     ------        -----   |      -----       -----      -------
Total miscellaneous expense                          $ (618)       $(908)  |      $(154)      $(658)     $(1,375)
                                                     ======        =====   |      =====       =====      =======

</TABLE>

NOTE 8. Related Party Transactions

CILCORP has  transactions  in the normal  course of business with Ameren and its
other  subsidiaries.  The  transactions  are  primarily  comprised  of  gas  and
electricity purchases and sales, as well as other services received or rendered.

Under a non-derivative,  executory tolling agreement and gas sales and transport
agreements,  CILCORP sells and transports gas to, and purchases  steam,  chilled
water and electricity from AmerenEnergy Medina Valley Cogen (No. 4), LLC. During
the first six months of 2003,  CILCORP  purchased  $15.5  million  and sold $9.7
million  under these  agreements.  As of June 30,  2003,  CILCORP  had  recorded
Accounts  Payable of $1.7 million and  Receivables  of $1.3 million,  related to
these  transactions.  The current  receivable  was recorded in Accrued  Unbilled
Revenue on the CILCORP Balance Sheet.

CILCO also has a power purchase agreement with AmerenCIPS for 100 MW of capacity
and firm energy for the months of January and June through September
2003.  CILCO  purchased  $1.3  million  and $1.6  million  of power  under  this
agreement  in  January  2003 and June 2003,  respectively.  CILCO also had power

                                       25


<PAGE>

purchases ($1.2 million) and sales ($.1 million)  transactions with AmerenEnergy
in the first five months of 2003. At June 30, 2003,  CILCO  recorded a liability
of $.6 million,  included in Accounts  Payable on the balance sheet  relative to
these transactions.

Costs of  support  services  provided  by Ameren  affiliates,  including  wages,
employee benefits and professional services, are based on actual costs incurred.
For the three months ended June 30, 2003,  support  services  provided by Ameren
included in Other  Operations  and  Maintenance  totaled  $1.1  million and $1.2
million for the six months ended June 30, 2003.

Ameren affiliates also provided  insurance coverage that the Company recorded in
Prepayments and Other on the balance sheet.  These services totaled $1.0 million
for the six month period ended June 30, 2003.  Approximately $.6 million of this
amount has been amortized and included in Other Operations and Maintenance as of
June 30, 2003.

In addition, the Holding Company paid Ameren $14.3 million for transaction costs
associated with the acquisition. These costs are included in Goodwill.

As  of  June  30,  2003,  intercompany   receivables  included  in  Receivables,
Miscellaneous  were  approximately $.2 million at CILCO and CILCORP.  As of June
30,  2003,   intercompany   payables   included  in  Accounts   Payable  totaled
approximately $.6 million at CILCO and $.7 million at CILCORP.

Additionally,  CILCORP had Accounts  Payable of $.6 million related to a deposit
received from  AmerenEnergy  Medina Valley Cogen (No. 4), LLC for future work to
be performed by a Holding Company subsidiary.

Subject to the receipt of regulatory  approval,  which is being  pursued,  CILCO
will  participate  in  Ameren's  utility  money  pool  arrangement.  Under  this
arrangement,  CILCO  will  have  access  to up to  $772  million  of  additional
committed  liquidity,  subject to reduction  based on use by other utility money
pool  participants,  but  increased to the extent other pool  participants  have
surplus cash balances,  which may be used to fund pool needs. CILCORP may access
up to $600 million of committed credit facilities at Ameren subject to reduction
based  on use by its  affiliates  and  subject  to a $250  million  intercompany
borrowing restriction pursuant to CILCORP's financing authority under the PUHCA.


                                       26

<PAGE>


NOTE 9. Statements of Segments of Business

The Company has five  reportable  segments:  CILCO  Electric,  CILCO Gas,  CILCO
Other,  CILCORP Other and  Discontinued  Operations.  The CILCO Electric segment
contains the rate-regulated  portions of the utility's  electric  business.  The
CILCO Gas segment  contains the  rate-regulated  portions of the  utility's  gas
business.  The CILCO Other segment contains the non  rate-regulated  portions of
the utility's business. The CILCORP Other segment includes the activities of the
Holding  Company,  its leasing and investing  subsidiaries,  CILCORP  Investment
Management   Inc.  and  CILCORP   Ventures  Inc.,  and  QST   Enterprises   Inc.
subsidiaries,  ESE Land Corporation and CILCORP  Infraservices  Inc. The CILCORP
Other  segment  also  includes  the  effects of purchase  accounting  fair value
adjustments,  the elimination of all  intercompany  transactions,  and long-term
debt  outstanding  at  the  Holding  Company.  Amortization  of  these  purchase
accounting   fair  value   adjustments   relates   primarily   to  pension   and
postretirement liabilities, coal contract liabilities,  long-term debt, electric
plant in service and emission  allowance  assets.  The  Discontinued  Operations
segment includes activities related to certain discontinued  subsidiaries of QST
Enterprises  Inc.  through December 2002. All operations had ceased at QST prior
to the first  quarter of 2003 and no  further  gains or losses  associated  with
these discontinued operations will be presented in future periods. The Company's
reportable  segments are strategic business units managed  separately  primarily
due to the rate-regulated or non rate-regulated nature of the businesses, or due
to the type of business activity involved.

<TABLE>
<CAPTION>

                          CILCORP Inc. and Subsidiaries
                       Statements of Segments of Business

Three Months Ended June 30, 2003 (Successor)

                                    CILCO           CILCO         CILCO           CILCORP
                                    Electric        Gas           Other            Other           Total
                                                              (In thousands)
<S><C>                           <C>             <C>            <C>            <C>               <C>
Operating revenues                $ 89,405        $ 42,297       $34,667        $  21,077         $187,446
Operating expenses                  80,745          44,800        31,237           20,254          177,036
                                  --------        --------       -------        ---------         --------
Operating income
  (loss)                             8,660          (2,503)        3,430              823           10,410
Other income and
  (deductions)                          18              --           120               10              148
Interest charges
  and preferred
  dividends                         (2,385)         (1,058)         (539)          (8,316)         (12,298)
                                  --------        --------       -------        ---------         --------
Income (loss) before
  income taxes                       6,293          (3,561)        3,011           (7,483)          (1,740)
Income taxes                         2,579          (1,377)        1,361           (3,947)          (1,384)
                                  --------        --------       -------        ---------         --------
Net income (loss)                 $  3,714        $ (2,184)      $ 1,650        $  (3,536)        $   (356)
                                  ========        ========       =======        =========         ========

</TABLE>

                                       27
<PAGE>
<TABLE>
<CAPTION>


                          CILCORP Inc. and Subsidiaries
                       Statements of Segments of Business

Three Months Ended June 30, 2002 (Predecessor)

                                    CILCO         CILCO         CILCO        CILCORP       Discont.
                                    Electric      Gas           Other         Other         Oper.         Total
                                                             (In thousands)
<S><C>                           <C>           <C>            <C>           <C>           <C>          <C>
Operating revenues                $ 94,656      $ 38,181       $28,437       $ 11,720      $   --       $172,994
Operating expenses                  81,937        39,505        21,444         10,627          --        153,513
                                  --------      --------       -------       --------      ------       --------
Operating income
  (loss)                            12,719        (1,324)        6,993          1,093          --         19,481
Other income and
  (deductions)                          --            --            40             16          --             56
Interest charges
  and preferred
  dividends                         (3,498)       (1,459)         (539)       (11,222)         --        (16,718)
                                  --------      --------       -------       --------      ------       --------
Income (loss) from
  continuing
  operations before
  income taxes                       9,221        (2,783)        6,494        (10,113)         --          2,819
Income taxes                         3,204        (1,061)        2,774         (4,218)         --            699
                                  --------      --------       -------       --------      ------       --------
Net income (loss)
  from continuing
  operations                         6,017        (1,722)        3,720         (5,895)         --          2,120
Effect of
  discontinued
  operations                            --            --            --             --          (3)            (3)
                                  --------      --------       -------       --------      ------       --------
Net income (loss)                 $  6,017      $ (1,722)      $ 3,720       $ (5,895)     $   (3)      $  2,117
                                  ========      ========       =======       ========      ======       ========

</TABLE>

<TABLE>
<CAPTION>

Five Months Ended June 30, 2003 (Successor)

                                    CILCO           CILCO          CILCO          CILCORP
                                    Electric        Gas            Other           Other            Total
                                                                (In thousands)
<S><C>                           <C>             <C>            <C>            <C>               <C>
Operating revenues                $148,671        $111,440       $55,771        $  51,708         $367,590
Operating expenses                 135,752         107,674        52,229           46,732          342,387
                                  --------        --------       -------        ---------         --------
Operating income                    12,919           3,766         3,542            4,976           25,203
Other income and
  (deductions)                          30              --           310               22              362
Interest charges
  and preferred
  dividends                         (4,544)         (1,835)         (899)         (14,726)         (22,004)
                                  --------        --------       -------        ---------         --------
Income (loss) before
  income taxes                       8,405           1,931         2,953           (9,728)           3,561
Income taxes                         3,514             783         1,406           (4,863)             840
                                  --------        --------       -------        ---------         --------
Net income (loss)                 $  4,891        $  1,148       $ 1,547        $  (4,865)        $  2,721
                                  ========        ========       =======        =========         ========
</TABLE>

                                       28
<PAGE>
<TABLE>
<CAPTION>


                          CILCORP Inc. and Subsidiaries
                       Statements of Segments of Business

January 2003 (Predecessor)

                                    CILCO           CILCO         CILCO           CILCORP
                                    Electric        Gas           Other            Other            Total
                                                               (In thousands)
<S><C>                           <C>             <C>            <C>            <C>               <C>
Operating revenues                $ 35,305        $ 44,270       $11,975        $  12,373         $103,923
Operating expenses                  28,739          37,143        12,107           12,328           90,317
                                  --------        --------       -------        ---------         --------
Operating income
  (loss)                             6,566           7,127          (132)              45           13,606
Other income and
  (deductions)                           5              --            93                5              103
Interest charges
  and preferred
  dividends                         (1,294)           (440)         (180)          (3,282)          (5,196)
                                  --------        --------       -------        ---------         --------
Income (loss) before
  income taxes                       5,277           6,687          (219)          (3,232)           8,513
Income taxes                         2,029           2,635           (53)          (1,483)           3,128
                                  --------        --------       -------        ---------         --------
Net income (loss)
  before cumulative
  effect of change
  in accounting
  principle                       $  3,248        $  4,052       $  (166)       $  (1,749)        $  5,385
                                  ========        ========       =======        =========         ========
</TABLE>
<TABLE>
<CAPTION>

Six Months Ended June 30, 2002 (Predecessor)

                                   CILCO          CILCO         CILCO         CILCORP       Discont.
                                   Electric       Gas           Other          Other         Oper.        Total
                                                            (In thousands)
<S><C>                           <C>           <C>            <C>           <C>           <C>          <C>
Operating revenues                $178,769      $118,199       $50,187       $ 29,721      $   --       $376,876
Operating expenses                 157,632       107,828        42,392         27,582          --        335,434
                                  --------      --------       -------       --------      ------       --------
Operating income                    21,137        10,371         7,795          2,139          --         41,442
Other income and
  (deductions)                          --            --            20            306          --            326
Interest charges
  and preferred
  dividends                         (7,192)       (2,944)       (1,079)       (22,071)         --        (33,286)
                                  --------      --------       -------       --------      ------       --------
Income (loss) from
  continuing
  operations before
  income taxes                      13,945         7,427         6,736        (19,626)         --          8,482
Income taxes                         4,675         2,980         3,094         (8,402)         --          2,347
                                  --------      --------       -------       --------      ------       --------
Net income (loss)
  from continuing
  operations                         9,270         4,447         3,642        (11,224)         --          6,135
Effect of discont.
  operations                            --            --            --             --         (12)           (12)
                                  --------      --------       -------       --------      ------       --------
Net income (loss)                 $  9,270      $  4,447       $ 3,642       $(11,224)     $  (12)      $  6,123
                                  ========      ========       =======       ========      ======       ========
</TABLE>

                                       29
<PAGE>


Item 2. Management's  Discussion and Analysis of
        Financial Condition and Results of Operations.

OVERVIEW

The consolidated  financial statements include the accounts of CILCORP Inc. (the
Holding  Company);  Central Illinois Light Company (CILCO or  AmerenCILCO);  QST
Enterprises  Inc. (QST) and its  subsidiaries,  QST Energy Inc. (QST Energy) and
CILCORP  Infraservices  Inc. (CILCORP  Infraservices),  operating as AmerenCILCO
Infraservices;  and CILCORP Inc.'s other subsidiaries (collectively,  CILCORP or
the Company) after elimination of significant intercompany transactions.  In the
fourth quarter of 1998, the  operations of QST and its  subsidiaries  (excluding
ESE  Land  Corporation  and  CILCORP   Infraservices)   were  discontinued  and,
therefore,  are being  reported  as  discontinued  operations  in the  financial
statements through December 2002. Prior year amounts have been reclassified on a
basis consistent with the 2003 presentation.

CILCO, the Holding Company's  principal business  subsidiary,  is engaged in the
generation, transmission, distribution and sale of electric energy in an area of
approximately 3,700 square miles in central and east-central  Illinois,  and the
purchase,  distribution,  transportation  and sale of natural  gas in an area of
approximately  4,500 square miles in central and  east-central  Illinois.  Other
Holding Company first-tier  subsidiaries are CILCORP Investment  Management Inc.
(CIM),  which manages the Company's  investment  portfolio and CILCORP  Ventures
Inc. (CVI),  which pursued investment  opportunities in energy-related  products
and services.

The Holding Company is a wholly-owned subsidiary of Ameren Corporation (Ameren).
Ameren is a public utility  holding  company  registered with the Securities and
Exchange  Commission  (SEC) under the Public Utility Holding Company Act of 1935
(PUHCA) and is headquartered in St. Louis, Missouri. Ameren's principal business
is the  generation,  transmission  and  distribution  of  electricity,  and  the
distribution  of  natural  gas,  to  residential,   commercial,  industrial  and
wholesale users in the central United States.  Ameren's principal  subsidiaries,
including Central Illinois Light Company, are as follows:

o    Union  Electric   Company,   which  operates  a   rate-regulated   electric
     generation,  transmission and distribution  business,  and a rate-regulated
     natural gas distribution business in Missouri and Illinois as AmerenUE.
o    Central  Illinois Public Service  Company,  which operates a rate-regulated
     electric and natural gas transmission and distribution business in Illinois
     as AmerenCIPS.
o    Central  Illinois  Light  Company,  a  subsidiary  of CILCORP  Inc.,  which
     operates  a  rate-regulated  transmission  and  distribution  business,  an
     electric generation business, and a rate-regulated natural gas distribution
     business in Illinois as  AmerenCILCO.  Ameren  completed its acquisition of
     CILCORP on January 31, 2003. See Acquisition for further information.
o    AmerenEnergy  Resources Company (Resources Company),  which consists of non
     rate-regulated  electric  operations.   Subsidiaries  include  AmerenEnergy
     Generating  Company  (Generating   Company)  which  operates  Ameren's  non
     rate-regulated  electric generation in Missouri and Illinois,  AmerenEnergy
     Marketing  Company  (Marketing  Company),  which  markets power for periods
     primarily over one year,  AmerenEnergy  Fuels and Services  Company,  which
     procures  fuel and  manages  the  related  risks  for  Ameren's  affiliated
     companies,  and  AmerenEnergy  Medina  Valley  Cogen (No.  4),  LLC,  which
     indirectly  owns a 40 megawatt,  gas-fired  electric  generation  plant. On
     February 4, 2003,  Ameren  completed the  acquisition  of AES Medina Valley


                                       30

<PAGE>

     Cogen (No. 4), LLC and renamed it AmerenEnergy Medina Valley Cogen (No. 4),
     LLC.
o    AmerenEnergy,  Inc.  (AmerenEnergy)  which serves as a power  marketing and
     risk management agent for Ameren  affiliated  companies for transactions of
     primarily less than one year.
o    Electric  Energy,  Inc.  (EEI),  which  operates  electric  generation  and
     transmission facilities in Illinois. Ameren has a 60% ownership interest in
     EEI, 40% owned by AmerenUE and 20% owned by Resources Company.
o    Ameren Services  Company (Ameren  Services),  which provides shared support
     services to Ameren and its  subsidiaries,  including  CILCORP.  Charges are
     based upon the actual costs incurred by Ameren  Services as required by the
     PUHCA.

The following discussion and analysis should be read in conjunction with:

o    The  financial  statements  and related  notes  included in this  Quarterly
     Report on Form 10-Q.
o    The  financial  statements  and related  notes  included in  CILCORP's  and
     CILCO's Quarterly Report on Form 10-Q for the period ended March 31, 2003.
o    Management's Discussion and Analysis of Financial Conditions and Results of
     Operations  in  CILCORP's  andCILCO's  Annual  Report  on Form 10-K for the
     period ended December 31, 2002.
o    The audited financial statements and related notes in CILCORP's and CILCO's
     Annual Report on Form 10-K for the period ended December 31, 2002.

Throughout this document,  CILCORP or the Company refers to CILCORP Inc. and its
subsidiaries  on a consolidated  basis.  CILCO refers to Central  Illinois Light
Company.  All  tabular  dollar  amounts  are  in  thousands,   unless  otherwise
indicated.


Acquisition

On January 31, 2003,  Ameren completed its acquisition of all of the outstanding
common stock of CILCORP  Inc.  from AES.  CILCORP Inc. is the parent  company of
Central  Illinois Light Company which operated as CILCO.  With the  acquisition,
CILCO  became an Ameren  subsidiary,  but  remains a separate  utility  company,
operating as  AmerenCILCO.  The results of  operations  for CILCORP Inc. and its
subsidiaries   (CILCORP)  were  included  in  Ameren's  consolidated   financial
statements effective with the acquisition date.

Ameren  acquired  CILCORP to complement  its existing  Illinois gas and electric
operations.  The purchase included CILCO's  rate-regulated  electric and natural
gas business in Illinois serving  approximately  200,000 and 205,000  customers,
respectively,  of which approximately  150,000 are combination  electric and gas
customers.   CILCO's  service   territory  is  contiguous  to  Ameren's  service
territory.  CILCO  also  has a non  rate-regulated  electric  and gas  marketing
business  principally  focused in the Chicago,  Illinois  region.  Finally,  the
purchase included CILCO's  approximately  1,200 megawatts of largely  coal-fired
generating  capacity,  most of which is expected to become non rate-regulated in
2003.

The total  purchase  price was  approximately  $1.4  billion  and  included  the
assumption of CILCORP debt and preferred  stock of  approximately  $859 million.
The acquisition was accounted for using the purchase method of accounting. Under
this method,  the purchase  price was  allocated to the fair market value of the
assets acquired and the liabilities  assumed. The excess purchase price over the
fair value of the assets acquired and the  liabilities  assumed was allocated to
goodwill  at CILCORP  Inc.  As a result,  CILCORP  Inc.  has  recorded

                                       31

<PAGE>

purchase accounting fair value adjustments to electric plant in service, pension
and other postretirement liabilities,  long-term debt, emission allowances, coal
contracts, and other balance sheet items. Ameren is in the process of completing
a third party  valuation of acquired  property and plant and intangible  assets.
Therefore,  the  allocation of the purchase  price to the acquired net assets is
subject to refinement. The excess of the purchase price over tangible net assets
acquired  has been  allocated  preliminarily  to  goodwill in the amount of $603
million at CILCORP.

The amortization of these purchase  accounting fair value adjustments  increased
earnings by  approximately  $1.7 million,  net of tax, in the second  quarter of
2003 and $4.5 million, net of tax, in the first six months of 2003. Amortization
of  adjustments  that  increased  net income  primarily  related to pension  and
postretirement liabilities ($2.6 million, net of tax - second quarter 2003, $5.2
million, net of tax - six months ended June 30, 2003), coal contract liabilities
($.9 million,  net of tax - second quarter 2003, $1.7 million,  net of tax - six
months ended June 30, 2003),  long-term debt ($1.5 million,  net of tax - second
quarter  2003,  $2.0  million,  net of tax - six months ended June 30, 2003) and
severance  ($.7 million net of tax - second quarter 2003,  $1.2 million,  net of
tax - six  months  ended  June  30,  2003).  Amortization  of  adjustments  that
decreased  net income  primarily  related  to  electric  plant in service  ($1.3
million, net of tax - second quarter 2003, $2.4 million, net of tax - six months
ended June 30,  2003),  emission  allowance  assets ($.9  million,  net of tax -
second quarter 2003, $1.4 million, net of tax - six months ended June 30, 2003),
and purchased  power ($1.8  million,  net of tax - second quarter and six months
ended June 30, 2003).

The purchase accounting entries are reflected on CILCORP's financial  statements
as of the purchase  date.  As permitted by rules of the SEC, the Company did not
"push down" the effects of purchase  accounting to the  financial  statements of
any of Holding Company's subsidiaries,  including CILCO. Accordingly,  CILCORP's
post-acquisition  financial  statements  reflect a new basis of accounting,  and
separate financial  statements are presented for  pre-acquisition  (predecessor)
and  post-acquisition  (successor)  periods,  separated  by a heavy  black line.
CILCO's  financial  statements  are  presented  on  their  historical  basis  of
accounting for all periods presented.  For discussion  throughout this document,
the 2003  pre-acquisition  and  post-acquisition  periods have been combined for
comparison in total to other periods  presented for categories and segments that
were substantially unaffected by the acquisition and the related pre-acquisition
and post-acquisition accounting events.

The results of operations and financial  position of the Company are impacted by
many factors,  including both controllable and uncontrollable factors.  Weather,
economic  conditions  and  the  actions  of key  customers  or  competitors  can
significantly  impact the  demand  for the  Company's  services.  The  Company's
results are also impacted by seasonal  fluctuations caused by winter heating and
summer  cooling  demand.  With a substantial  portion of the Company's  revenues
directly subject to regulation by various state and federal agencies,  decisions
by regulators can have a material  impact on the price that the Company  charges
for its services.  The Company principally utilizes coal, natural gas and oil in
its operations. The prices for these commodities can fluctuate significantly due
to the world economic and political environment,  weather, production levels and
many other factors. The Company does not have a fuel cost recovery mechanism for
its electric utility business,  but does have a gas cost recovery  mechanism for
its gas distribution utility business. In addition, the Company's electric rates
are  largely  set  through  2006.  Fluctuations  in  interest  rates  impact the
Company's  cost of borrowings,  and pension and  post-retirement  benefits.  The
Company employs various risk management strategies in order to try to reduce its
exposure to  commodity  risks and other  risks  inherent  in its  business.  The
reliability of the

                                       32

<PAGE>

Company's power plants, and transmission and distribution systems, and the level
of operating and  administrative  costs, and capital  investment are key factors
that  the  Company  seeks  to  control  in  order to  optimize  its  results  of
operations, cash flows and financial position.

The financial  condition and operating  results of the Company primarily reflect
the operations of its subsidiary  CILCO.  The CILCORP Other segment includes the
activities of the Holding Company  itself,  its investment  subsidiary,  CILCORP
Investment  Management  Inc.  (CIM),  CILCORP  Ventures  Inc.  (CVI),  ESE  Land
Corporation,   and  CILCORP   Infraservices   Inc.,   which   provides   utility
infrastructure  operation and  maintenance  services.  The CILCORP Other segment
also includes the effects of purchase  accounting fair value adjustments and the
elimination of all  intercompany  transactions.  Amortization  of these purchase
accounting   fair  value   adjustments   relates   primarily   to  pension   and
postretirement liabilities, coal contract liabilities,  long-term debt, electric
plant in service and emission  allowance assets.  The results of QST Enterprises
Inc.  (QST) and its  subsidiaries  (excluding ESE Land  Corporation  and CILCORP
Infraservices Inc.) have been reported as discontinued  operations through 2002.
All  operations  had  ceased at QST prior to the  first  quarter  of 2003 and no
further gains or losses  associated with these  discontinued  operations will be
presented in future periods.


RESULTS OF OPERATIONS

Earnings Summary

The Company's net loss was $.4 million in the second quarter of 2003 compared to
net income of $2.1  million in the second  quarter of 2002.  The  Company's  net
income increased $5.8 million to $11.9 million for the six months ended June 30,
2003,  compared to earnings  of $6.1  million in the same period last year.  Net
income in the first six months of 2003 included a net cumulative  effect gain of
$3.8  million  associated  with the  adoption in January  2003 of  Statement  of
Financial  Accounting  Standards  No.  143,  "Accounting  for  Asset  Retirement
Obligations" (SFAS 143). The net gain resulted  principally from the elimination
of  non-legal  obligation  costs of removal for non  rate-regulated  assets from
accumulated depreciation. See Note 1. Summary of Significant Accounting Policies
to the Consolidated  Financial Statements under Item 1 of Part I of this report.
Excluding the  cumulative  effect of change in accounting  principle  related to
SFAS 143,  the  Company's  net income  increased  $2.0  million in the first six
months of 2003 compared to the prior year period.

CILCO's income available for common stock decreased $4.8 million to $3.2 million
in the second  quarter of 2003 from $8.0 million in the second  quarter of 2002.
CILCO's  income  available  for common stock  increased  $21.4  million to $38.8
million for the six months  ended June 30,  2003,  compared to earnings of $17.4
million for the same period last year. In the first six months of 2003,  CILCO's
income  included a net cumulative  effect gain of $24.1 million  associated with
the adoption of SFAS 143. The net gain resulted principally from the elimination
of  non-legal  obligation  costs of removal for non  rate-regulated  assets from
accumulated  depreciation.   Excluding  this  cumulative  effect  of  change  in
accounting  principle  related to SFAS 143,  CILCO's income available for common
stock in the first six months of 2003 was $14.7  million  or a decrease  of $2.6
million compared to the prior year period.

The  decrease  in CILCO's net income in the second  quarter of 2003,  versus the
second  quarter  of 2002,  was due  primarily  to lower  electric  margin due to
unfavorable  weather  conditions in our service  territory ($.9 million,  net of
tax),  increased  employee  benefit costs ($2.6 million,  net of tax) related to
plan  performance and increasing  health care costs,  severance costs associated


                                       33
<PAGE>


with the acquisition by Ameren ($.5 million, net of tax) and higher depreciation
expenses ($.5 million, net of tax). The decrease in net income for the first six
months of 2003 was  principally  due to increased  employee  benefit costs ($5.2
million,  net of tax), severance costs associated with the acquisition by Ameren
($1.1 million,  net of tax) and higher depreciation expense ($.8 million, net of
tax). Partially offsetting these items that decreased net income, were favorable
weather  conditions in the first  quarter,  which  resulted in greater  electric
gross margin ($2.6 million,  net of tax) and gas gross margin ($1.4 million, net
of tax).

The  amortization of purchase  accounting fair value  adjustments at the Holding
Company increased the Company's net income by $1.7 million in the second quarter
and $4.4  million  for the first six months of 2003,  compared to the prior year
period.  These  adjustments  partially  offset the $4.8 million decrease for the
quarter and more than offset the $2.6 million  decrease for the first six months
of 2003 in net income from CILCO,  discussed above. The amortization of the fair
value  adjustments  that  increased  income  related  primarily  to pension  and
postretirement liabilities, coal contract liabilities, severance liabilities and
long-term  debt.  Amortization  of fair value  adjustments for electric plant in
service,  purchased  power and emission  allowances  increased  expenses in 2003
compared to 2002. Purchase  accounting  adjustments in 2002 related to AES' 1999
acquisition  of the Company.  The following  table  summarizes the impact on net
income of the amortization of these purchase  accounting fair value  adjustments
during 2003 and 2002:
<TABLE>
<CAPTION>


                                                          Three Months Ended           Six Months Ended
                                                               June 30,                    June 30,
Income Statement Line Item                                  2003          2002          2003         2002
                                                                         (In thousands)
                                                                          (Unaudited)
<S>                                                    <C>             <C>           <C>            <C>
Other operations and maintenance                        $ 5,455         $  463        $10,514        $  925
Interest expense                                          2,562             --          3,346            --
Fuel and purchased power                                 (3,053)            --         (2,495)           --
CILCORP other revenue                                        68             --             68            --
Depreciation and amortization                            (2,185)          (355)        (3,977)         (710)
Income taxes                                             (1,129)           (43)        (2,958)          (85)
                                                        -------         ------        -------        ------
Impact on net income                                    $ 1,718         $   65        $ 4,498        $  130
                                                        =======         ======        =======        ======


</TABLE>



                                       34
<PAGE>
<TABLE>
<CAPTION>


CILCO Electric Operations

The  following  table  summarizes  electric  operating  revenue and  expenses by
component.

                                                          Three Months Ended              Six Months Ended
                                                               June 30,                       June 30,
Components of Electric Income                                2003         2002              2003        2002
                                                                        (In thousands)
                                                                         (Unaudited)
<S><C>                                                     <C>           <C>           <C>             <C>
Revenue:
     Electric retail                                        $86,175       $92,196       $175,739        $174,306
     Sales for resale                                         3,230         2,460          8,237           4,463
                                                            -------       -------       --------        --------
        Total revenue                                        89,405        94,656        183,976         178,769
                                                            -------       -------       --------        --------
Cost of sales:
     Fuel                                                    19,742        24,295         45,398          46,325
     Purchased power                                         13,633        12,517         25,976          24,047
     Revenue taxes                                            4,219         4,521          9,350           9,423
                                                            -------       -------       --------        --------
        Total cost of sales                                  37,594        41,333         80,724          79,795
                                                            -------       -------       --------        --------
Gross margin                                                 51,811        53,323        103,252          98,974
                                                            -------       -------       --------        --------
Operating expenses:
     Operation and maintenance expenses                      27,750        26,202         53,177          48,779
     Depreciation and amortization                           12,855        12,074         25,254          24,141
     Other taxes                                              2,546         2,328          5,336           4,917
                                                            -------       -------       --------        --------
        Total operating expenses                             43,151        40,604         83,767          77,837
                                                            -------       -------       --------        --------
Other income and (deductions):
   Allowance for equity funds used
    during construction                                          18            --             35              --
                                                            -------       -------       --------         -------
        Total                                                    18            --             35              --
                                                            -------       -------       --------         -------
Interest charges:
     Interest on long-term debt                               2,643         3,194          6,343           6,364
     Cost of borrowed funds capitalized                        (776)         (409)        (1,421)           (647)
     Other interest                                             518           713            916           1,475
                                                            -------       -------       --------         -------
        Total                                                 2,385         3,498          5,838           7,192
                                                            -------       -------       --------         -------
Income before taxes                                           6,293         9,221         13,682          13,945
     Income taxes                                             2,579         3,204          5,543           4,675
                                                            -------       -------       --------         -------
Net income before cumulative effect of
  change in accounting principle                            $ 3,714       $ 6,017       $  8,139         $ 9,270
                                                            =======       =======       ========         =======

</TABLE>

Electric gross margin  decreased $1.5 million (3%) for the quarter and increased
$4.3 million  (4%) for the six months ended June 30, 2003,  compared to the same
periods in 2002. Retail  kilowatt-hour  (kWh) sales decreased 7% for the quarter
and remained constant for the six months ended June 30, 2003, compared to the


                                       35
<PAGE>

same periods in 2002.  Residential  sales volumes  decreased 14% for the quarter
and 3% for the six months ended June 30,  2003,  compared to the same periods in
2002. Commercial sales volumes decreased 1% for the quarter and increased 1% for
the six months ended June 30, 2003.  Heating  degree days were 20% higher in the
first  quarter  of 2003 and  cooling  degree  days were 52% lower in the  second
quarter of 2003 compared to the same periods in 2002.  Industrial  sales volumes
decreased 6% for the quarter, largely due to customers switching to an affiliate
for supply, and increased 2% for the six months ended June 30, 2003, compared to
the same periods in 2002.

Sales for resale  increased  $.8 million  (31%) for the quarter and $3.8 million
(85%) for the six months  ended June 30,  2003,  compared to the same periods in
2002.  The increase for the six months ended June 30, 2003, was primarily due to
greater sales in January 2003, as a result of higher wholesale prices. Sales for
resale  vary  based  on  the  energy  requirements  of  native  load  customers,
neighboring  utilities and power marketers,  CILCO's available capacity for bulk
power sales, and the price of power available for sale.

Electric  operation and maintenance  expense increased $1.5 million (6%) for the
quarter and $4.4 million  (9%) for the six months ended June 30, 2003,  compared
to the same periods in 2002.  The increase was mainly due to increased  employee
benefit costs,  including pension and postretirement  health care benefits ($2.8
million  for the  quarter  and $5.7  million  for the six months  ended June 30,
2003).  At  the  Holding  Company  (included  in  the  CILCORP  Other  segment),
approximately  $3.2 million and $5.4  million of pre-tax  income was recorded in
the quarter and six months ended June 30, 2003, respectively, as amortization of
a purchase  accounting fair value adjustment  related to the electric portion of
the pension and postretirement health care benefit liabilities.

Interest  charges  decreased $1.1 million (32%) for the quarter and $1.4 million
(19%) for the six months  ended June 30,  2003,  compared to the same periods in
2002. The decrease was primarily due to increased  capitalized  interest related
to NOx reduction  projects at the power plants and  redemption of $75 million of
higher cost  long-term  debt that was replaced with lower cost  borrowings  from
Ameren.

Income taxes  increased for the six months ended June 30, 2003,  due to a higher
effective tax rate primarily due to an increase in depreciation differences.

                                       36

<PAGE>
<TABLE>
<CAPTION>


CILCO Gas Operations

The following table summarizes gas operating revenue and expenses by component.


                                                             Three Months Ended            Six Months Ended
                                                                  June 30,                       June 30,
Components of Gas Income                                     2003         2002              2003        2002
                                                                           (In thousands)
                                                                            (Unaudited)
<S><C>                                                     <C>            <C>           <C>            <C>
Revenue:
     Sale of gas                                            $40,939        $36,751       $152,608       $115,043
     Transportation services                                  1,358          1,430          3,102          3,156
                                                            -------        -------       --------       --------
        Total revenue                                        42,297         38,181        155,710        118,199
                                                            -------        -------       --------       --------
Cost of sales:
     Gas                                                     26,809         22,364        107,021         71,972
     Revenue taxes                                            1,562          1,812          5,535          5,432
                                                            -------        -------       --------       --------
        Total cost of sales                                  28,371         24,176        112,556         77,404
                                                            -------        -------       --------       --------
Gross margin                                                 13,926         14,005         43,154         40,795
                                                            -------        -------       --------       --------
Operating expenses:
     Operation and maintenance expenses                      10,101          9,215         19,510         18,084
     Depreciation and amortization                            5,729          5,607         11,456         11,204
Other taxes                                                     599            507          1,295          1,136
                                                            -------        -------       --------       --------
        Total operating expenses                             16,429         15,329         32,261         30,424
                                                            -------        -------       --------       --------
Interest charges:
     Interest on long-term debt                                 889          1,193          1,988          2,390
     Other interest                                             169            266            287            554
                                                            -------        -------       --------       --------
        Total                                                 1,058          1,459          2,275          2,944

Income (loss) before taxes                                   (3,561)        (2,783)         8,618          7,427
     Income taxes                                            (1,377)        (1,061)         3,418          2,980
                                                            -------        -------       --------       --------
Net income (loss) before cumulative
  effect of change in accounting
  principle                                                 $(2,184)       $(1,722)      $  5,200       $  4,447
                                                            =======        =======       ========       ========
</TABLE>

Gas gross margin  decreased  approximately  $.1 million (1%) for the quarter and
increased  approximately  $2.4  million  (6%) for the six months  ended June 30,
2003,  compared to the same periods in 2002.  Residential  and commercial  sales
volumes decreased 10% and 6%,  respectively,  for the quarter, and increased 10%
and 11%,  respectively,  for the six months ended June 30, 2003.  Heating degree
days were 15% lower for the quarter and 13% higher for the six months ended June
30, 2003, compared to the same periods in 2002.

The cost of gas  increased  $4.4  million  (20%) for the quarter and $35 million
(49%) for the six months  ended June 30,  2003,  compared to the same periods in
2002,  primarily  due to higher  natural  gas  prices.  These  costs were passed
through to customers via the Purchased Gas Adjustment (PGA).


                                       37
<PAGE>

Gas  operation  and  maintenance  expense  increased  $.9 million  (10%) for the
quarter,  and $1.4 million (8%) for the six months ended June 30, 2003, compared
to the same period in 2002.  The  increases for the quarter and six months ended
June 30, 2003, were primarily due to increased employee benefit costs, including
pension and postretirement  health care benefits ($1.5 million and $3.0 million,
respectively).  At the Holding Company  (included in the CILCORP Other segment),
approximately  $1.6  million and $3.2  million of pre-tax  income was  recorded,
respectively,  in the second quarter and for the six months ended June 30, 2003,
as amortization of a purchase  accounting fair value  adjustment  related to the
gas portion of the pension and postretirement health care benefit liabilities.

Interest  charges  decreased  $.4 million  (27%) for the quarter and $.7 million
(23%) for the six months  ended June 30,  2003,  compared to the same periods in
2002.  The decrease was primarily due to the redemption of $75 million of higher
cost long-term debt that was replaced with lower cost borrowings from Ameren.

The  decrease in income tax  expense  for the second  quarter of 2003 was due to
lower pre-tax income.

The increase in income tax expense for the six months  ended June 30, 2003,  was
primarily due to higher pre-tax income.



                                       38
<PAGE>
<TABLE>
<CAPTION>
CILCO Other

The following table summarizes CILCO Other's income and deductions.

Components of CILCO Other                                 Three Months Ended               Six Months Ended
  Income                                                     June 30,                         June 30,
                                                           2003      2002                  2003        2002
                                                                          (In thousands)
                                                                           (Unaudited)

<S><C>                                                    <C>            <C>            <C>            <C>
Revenue                                                    $ 34,667       $ 28,437       $ 67,746       $ 50,187
Expense                                                     (29,162)       (20,968)       (60,352)       (41,011)
                                                           --------       --------       --------       --------
Gross margin                                                  5,505          7,469          7,394          9,176
                                                           --------       --------       --------       --------
Operating expenses                                            2,075            476          3,984          1,381
                                                           --------       --------       --------       --------
Other income and (deductions):
  Miscellaneous income                                           91             36            213             46
  Miscellaneous expense                                        (618)          (658)        (1,062)        (1,375)
  Income taxes                                                  647            662          1,252          1,349
                                                           --------       --------       --------       --------
Total other income and (deductions)                             120             40            403             20
                                                           --------       --------       --------       --------
Preferred stock dividends                                       539            539          1,079          1,079
                                                           --------       --------       --------       --------
Income before taxes                                           3,011          6,494          2,734          6,736
  Income taxes                                                1,361          2,774          1,353          3,094
                                                           --------       --------       --------       --------
Net income before cumulative effect
  of change in accounting principle                        $  1,650       $  3,720       $  1,381       $  3,642
                                                           ========       ========       ========       ========
</TABLE>

CILCO Other's gross margin decreased $2.0 million (26%) for the quarter and $1.8
million  (19%) for the six months  ended  June 30,  2003,  compared  to the same
periods  in 2002.  The  decrease  is due to a higher  margin per MWh sold to non
rate-regulated  electric  customers  in  Illinois  outside  of  CILCO's  service
territory  during 2002.  These sales are typically  backed with power  purchases
arranged in  approximately  the same time period.  The increased  margin per MWh
sold was the result of terminating  an existing power purchase  contract in 2002
(See  Note 2 -  Contingencies  for a  discussion  of  the  Enron  Contract)  and
replacing  the  supply  at a lower  cost.  These  sales of  electricity  were to
customers  eligible to choose their energy  supplier under the Electric  Service
Customer Choice and Rate Relief Law of 1997 (the Illinois Law).

Operating  expenses  increased $1.6 million for the quarter and $2.6 million for
the six months ended June 30, 2003,  primarily due to severance costs associated
with the acquisition by Ameren.

                                       39
<PAGE>


CILCORP Other

The following  table  summarizes  CILCORP  Other's  revenue and expenses for the
three and six  months  ended June 30,  2003 and 2002.  CILCORP  Other's  results
include income earned and expenses  incurred at the Holding  Company,  CIM, CVI,
ESE Land  Corporation and CILCORP  Infraservices  Inc. The CILCORP Other segment
also includes the effects of purchase  accounting fair value adjustments and the
elimination of all  intercompany  transactions.  Amortization  of these purchase
accounting   fair  value   adjustments   relates   primarily   to  pension   and
postretirement liabilities, coal contract liabilities,  long-term debt, electric
plant in service and emission allowance assets.

<TABLE>
<CAPTION>

Components of CILCORP Other                                Three Months Ended              Six Months Ended
Net Loss                                                        June 30,                       June 30,
                                                             2003      2002                  2003       2002
                                                                             (In thousands)
                                                                              (Unaudited)
<S><C>                                                     <C>           <C>           <C>             <C>
Revenue:
Leveraged lease revenue                                     $ 1,099       $  1,290      $  2,240        $  2,616
Gas marketing revenue                                        19,397         10,004        61,509          26,317
Other revenue                                                   581            426           332             788
                                                            -------       --------      --------        --------
   Total revenue                                             21,077         11,720        64,081          29,721
                                                            -------       --------      --------        --------
Operating Expenses:
Gas                                                          19,849          9,895        61,813          26,178
Fuel and purchased power                                      3,053             --         2,495              --
Other operations                                             (4,858)           355        (9,295)            660
Depreciation and amortization                                 2,187            355         4,000             702
Taxes, other than income taxes                                   23             22            47              42
                                                            -------       --------      --------        --------
     Total operating expenses                                20,254         10,627        59,060          27,582
                                                            -------       --------      --------        --------
Other income and (deductions):
  Miscellaneous income                                           10             16            27             306
                                                            -------       --------      --------        --------
  Total other income and (deductions)                            10             16            27             306
                                                            -------       --------      --------        --------
Interest charges:
  Interest expense                                            8,316         11,222        18,008          22,071
                                                            -------       --------      --------        --------
  Total interest charges                                      8,316         11,222        18,008          22,071
                                                            -------       --------      --------        --------
Loss before income taxes                                     (7,483)       (10,113)      (12,960)        (19,626)
  Income taxes                                               (3,947)        (4,218)       (6,346)         (8,402)
                                                            -------       --------      --------        --------
Net loss before cumulative effect of
  change in accounting principle                            $(3,536)      $ (5,895)     $ (6,614)       $(11,224)
                                                            =======       ========      ========        ========

</TABLE>

Leveraged  lease revenue  decreased $.2 million (15%) for the three months ended
and $.4 million  (14%) for the six months ended June 30,  2003,  compared to the
same periods in 2002,  due primarily to a reduction in the residual value of one
of the leveraged leases in 2002.

Gas marketing  revenue and cost of gas  increased  $9.4 million and $10 million,
respectively,  in the second  quarter of 2003  compared  to the same  quarter in
2002.  Gas marketing  revenue and cost of gas increased  $35.2 million and $35.6
million,  respectively,  in the six months ended June 30, 2003,  compared to the

                                       40

<PAGE>

same period in 2002. The increases were mainly due to higher natural gas prices.

Other  revenue  decreased  $.5  million in the six months  ended June 30,  2003,
compared to the same period in 2002,  mainly due to the expiration of a services
contract in 2002.

Fuel  and  purchased   power   represents  $3.1  million  and  $2.5  million  of
amortization of purchase accounting fair value adjustments in the second quarter
and six  months  ended  June 30,  2003,  respectively.  Coal and other  contract
liabilities  and emission  credits at the power plants were fair valued  through
purchase accounting.

Other operations expenses represent $4.9 million of income in the second quarter
and $9.3  million  of income  for the six months  ended  June 30,  2003,  at the
Holding Company due primarily to purchase  accounting fair value  adjustments to
the pension and  postretirement  benefit  liabilities  of $4.4  million and $8.6
million, for the three and six month periods ended June 30, 2003,  respectively.
CILCORP consolidated pension and postretirement  benefit expenses are lower than
CILCO's expenses due to the fair value adjustment to these liabilities.

Depreciation  and  amortization  increased $1.8 million and $3.3 million for the
three and six months  ended June 30,  2003,  respectively,  compared to the same
periods in 2002, due primarily to purchase accounting adjustments increasing the
fair market value of the Duck Creek and Edwards  power plants ($2.2  million and
$4.0  million).  The increase in value is being  depreciated  over the estimated
remaining lives of the power plants.

Interest  expense  decreased  $2.9 million (26%) in the second  quarter and $4.1
million  (18%) in the six  months  ended  June 30,  2003,  compared  to the same
periods  in 2002,  primarily  as a result of a  purchase  accounting  fair value
adjustment to the CILCORP  long-term  debt. The fair value increase in long-term
debt is being  amortized as a reduction in interest  expense over the  remaining
life of the debt ($2.6  million for the second  quarter and $3.3 million for the
six months ended June 30, 2003).

The income tax benefit  decreased  for the second  quarter and six months  ended
June 30, 2003,  compared to the same periods in 2002, due to a lower loss before
income taxes.

                                       41

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

Operating

CILCORP's net cash flows provided by operating  activities totaled $47.1 million
for the first six months of 2003,  compared to $51.0 million for the same period
in 2002.  Cash  provided  from  operations  decreased in 2003,  primarily due to
timing of payments on accounts  payable and accrued taxes,  partially  offset by
the timing of receipts on accounts receivable.

CILCO's net cash flows  provided by operating  activities  totaled $71.8 million
for the first six months of 2003,  compared to $57.4 million for the same period
in 2002.  Cash  provided  from  operations  increased in 2003,  primarily due to
timing of payments on accounts payable and other liabilities.

The tariff-based  gross margin of CILCO (the  rate-regulated  utility  operating
company) continues to be the principal source of cash from operating activities.
CILCO's diversified retail customer mix of primarily rate-regulated residential,
commercial  and  industrial  classes  and a  commodity  mix of gas and  electric
service provide a reasonably predictable source of cash flows.


Investing

CILCORP's net cash used in investing  activities was $48.7 million for the first
six  months of 2003,  compared  to $63.2  million  for the same  period in 2002.
CILCO's net cash used in investing  activities  was $53.3  million for the first
six months of 2003,  compared to $63.9  million for the same period in 2002.  In
the first six months of 2003, construction expenditures were $54.3 million (2002
- $63.1  million),  consisting  primarily  of  nitrogen  oxide  (NOx)  reduction
equipment expenditures at the Edwards and Duck Creek power plants,  replacements
and  improvements to the existing  electric  transmission  and  distribution and
natural gas distribution systems. Capital expenditures relating to the Company's
rate-regulated  and non  rate-regulated  operations  are expected to approximate
$100 million in 2003.

CILCORP and CILCO's  capital  expenditure  program is subject to periodic review
and  revision,  and actual  capital  expenditures  may vary  because of numerous
factors.  These  factors  include,  but are not limited to,  changes in business
conditions,  changes  in  environmental  regulations,  changes  in  load  growth
estimates,  increasing  costs of labor,  equipment  and  materials,  and cost of
capital.


Financing

CILCORP's  cash flows provided by financing  activities  totaled $.3 million for
the first six months of 2003,  compared to $73.0  million for the same period in
2002. CILCO's cash flows used in financing  activities totaled $33.0 million for
the first six months of 2003,  compared  to cash  flows  provided  by  financing
activities of $65.0 million for the same period in 2002. The principal financing
activities  for the  first  six  months  of 2003  included  the  redemptions  of
long-term and short-term  debt,  offset by issuances of short-term  debt.  CILCO
also paid common  dividends of $21.5 million to CILCORP,  but no dividends  were
paid by CILCORP.  The first six months of 2002  included  the  issuances of $100
million of long-term debt at CILCO, redemption of short-term debt and
payment of $28.0 million of common dividends from CILCO to CILCORP. CILCORP paid
no dividends in the first six months of 2002.


                                       42

<PAGE>


CILCO and  CILCORP  have  PUHCA  authority  to have up to an  aggregate  of $250
million each of short-term unsecured debt instruments outstanding at any time.


Short-Term Debt and Liquidity

At June 30, 2003,  CILCO had committed  credit  facilities,  expiring at various
dates during 2003 and 2004,  totaling $59 million,  all of which were unused and
available.  At June 30, 2003,  Ameren and its  subsidiaries had committed credit
facilities,  expiring at various  dates  between  2003 and 2005,  totaling  $772
million,  excluding  separate credit facilities of CILCO of $59 million,  EEI of
$41 million and AmerenUE's  nuclear fuel lease  facilities of $120 million.  The
$772 million of committed  credit  facilities  were  available for use by two of
Ameren's  rate-regulated  subsidiaries,  AmerenUE  and  AmerenCIPS,  and  Ameren
Services  Company  through  Ameren's  utility money pool  arrangement,  and $600
million of this  amount may be used by Ameren  Corporation,  and most of its non
rate-regulated  subsidiaries  including,  but not limited to, Resources Company,
Generating Company,  Marketing Company,  AmerenEnergy Fuels and Services Company
and   AmerenEnergy   through  Ameren's   non-regulated   subsidiary  money  pool
arrangement.  CILCORP  and CILCO may also  access  up to $600  million  of these
facilities  through  direct  borrowings  from  Ameren  Corporation,  subject  to
reduction  by  use  by  other  Ameren  subsidiaries  and  applicable   borrowing
limitations.  These committed credit  facilities are used to support  commercial
paper  programs  under which $177 million was  outstanding  at June 30, 2003. At
June 30,  2003,  $595  million was unused and  available  under these  committed
credit facilities.

In July 2003,  Ameren entered into two new credit agreements for $470 million in
revolving credit facilities to be used for general corporate purposes, including
the support of Ameren's  and  AmerenUE's  commercial  paper  programs.  The $470
million in new  facilities  includes a $235  million  364-day  revolving  credit
facility and a $235 million  three-year  revolving  credit  facility.  These new
credit  facilities  replaced  Ameren's  existing $270 million 364-day  revolving
credit facility,  which matured in July 2003, and a $200 million facility, which
would  have  matured  in  December  2003.  The  new  credit  facilities  contain
provisions  which  require  Ameren to meet minimum  Employee  Retirement  Income
Security Act (ERISA) funding requirements for its pension plan. The prior credit
facilities included more restrictive  provisions related to the funded status of
Ameren's pension plan, which are not present in the new facilities. In addition,
in July 2003,  Ameren  entered  into an  amendment  of an existing  $130 million
multi-year credit facility that similarly modified the ERISA-related  provisions
in this facility.  As a result,  all of Ameren's  facilities  require it to meet
minimum ERISA funding  requirements,  but do not otherwise limit the underfunded
status of its pension plan.  At July 31, 2003,  all of such  borrowing  capacity
under these facilities was available.

Subject to the receipt of regulatory  approval,  which is being  pursued,  CILCO
will  participate  in  Ameren's  utility  money  pool  arrangement.  Under  this
arrangement,  CILCO  will  have  access  to up to  $772  million  of  additional
committed  liquidity,  subject to reduction  based on use by other utility money
pool  participants,  but  increased to the extent other pool  participants  have
surplus cash balances,  which may be used to fund pool needs. CILCORP may access
up to $600 million of committed credit facilities at Ameren subject to reduction
based  on use by its  affiliates  and  subject  to a $250  million  intercompany
borrowing restriction pursuant to CILCORP's financing authority under the PUHCA.

CILCORP and CILCO rely on access to short-term and long-term  capital markets as
a  significant  source of funding  for capital  requirements  not  satisfied  by
operating  cash  flows.  The  inability  to raise  capital on  favorable  terms,

                                       43
<PAGE>

particularly  during  times  of  uncertainty  in  the  capital  markets,   could
negatively  impact  CILCORP  and  CILCO's  ability  to  maintain  and  grow  the
businesses. Based on current credit ratings, CILCORP and CILCO believe that they
will continue to have access to the capital markets.  However, events beyond the
Company's  control may create  uncertainty in the capital  markets such that the
cost of capital  would  increase or the  ability to access the  capital  markets
would be adversely affected.

Financial Agreement Provisions and Covenants

CILCORP's and CILCO's  financial  agreements  include customary default or cross
default  provisions  that could impact the continued  availability  of credit or
result  in the  acceleration  of  repayment.  The  majority  of  Ameren  and its
subsidiaries'  committed credit facilities  require the borrower to represent in
connection with any borrowing under the facility that no material adverse change
has occurred since certain dates.  The financing  arrangements of Ameren and its
subsidiaries do not contain credit rating triggers, except for three funded bank
term loans at CILCO totaling $105 million at June 30, 2003.

At June 30, 2003, Ameren and its subsidiaries, including CILCORP and CILCO, were
in compliance with their financial agreement provisions and covenants.


Debt Issuances and Redemptions

On February 10, 2003,  CILCO repaid $25.4  million  first  mortgage  bonds 6.82%
Series which matured on that date. In April 2003,  three series of CILCO's first
mortgage  bonds were  redeemed  prior to maturity.  These  included  CILCO's $65
million  principal  amount 8.20%  series due January 15,  2022,  at a redemption
price of 103.29% and two 7.8% series totaling $10 million  principal  amount due
February 9, 2023, at a redemption price of 103.90%.


Off-Balance Sheet Arrangements

At  June  30,  2003,  neither  CILCORP,  nor  any of its  subsidiaries,  had any
off-balance  sheet financing  arrangements,  other than operating leases entered
into in the ordinary course of business.


                                       44
<PAGE>


OUTLOOK

The Company believes there will be challenges to earnings in 2003 and beyond due
to industry-wide trends and company-specific issues. The following are expected
to put pressure on earnings in 2003 and beyond:

o    Weak economic conditions, which impact native load demand,
o    Power  prices in the  Midwest  will  impact  the cost of power the  Company
     purchases  in the  interchange  markets.  Although  long-term  power prices
     continue to be generally soft,  short-term  power prices have  strengthened
     significantly  from the  prior  year in the  first  six  months of 2003 due
     primarily to higher prices for natural gas,
o    Fixed electric rates in CILCO's service territory,
o    The adverse effects of rising employee  benefit costs and higher  insurance
     costs, and
o    An assumed return to more normal weather patterns.

CILCO is pursuing a gas rate increase of approximately  $14 million in Illinois,
which it expects to be ruled upon by the Illinois  Commerce  Commission (ICC) by
the end of  2003.  Ameren  is also  considering  additional  actions,  including
modifications to active employee  benefits,  staffing  reductions,  accelerating
synergy  opportunities  related  to  CILCORP's  acquisition  by Ameren and other
initiatives.

In the ordinary course of business,  the Company and Ameren evaluate  strategies
to enhance their financial position,  results of operations and liquidity. These
strategies may include potential acquisitions,  divestitures,  and opportunities
to reduce costs or increase revenues,  and other strategic  initiatives in order
to increase  shareholder  value. The Company is unable to predict which, if any,
of these  initiatives will be executed,  as well as the impact these initiatives
may have on our future financial position, results of operations or liquidity.


REGULATORY MATTERS

See Note 3. Rate and Regulatory Matters to our Consolidated Financial Statements
under Item 1 of Part I of this report for information.


Impact of Future Accounting Pronouncements

See Note 1. Summary of Significant Accounting Policies to the Consolidated
Financial Statements under Item 1 of Part I of this report.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Market  risk  represents  the risk of changes in value of a physical  asset or a
financial  instrument,  derivative or non-derivative,  caused by fluctuations in
market  variables  (e.g.,  interest rates,  etc.).  The following  discussion of
CILCORP's risk management activities includes "forward-looking"  statements that
involve risks and  uncertainties.  Actual results could differ  materially  from
those  projected in the  "forward-looking"  statements.  CILCORP  handles market
risks in accordance with established  policies,  which may include entering into
various derivative transactions.  In the normal course of business, CILCORP also
faces  risks  that are  either  non-financial  or  non-


                                       45
<PAGE>


quantifiable.  Such risks principally  include  business,  legal and operational
risks and are not represented in the following discussion.

CILCORP's  risk  management  objective is to optimize  its  physical  generating
assets within prudent risk parameters and to maintain a highly hedged  portfolio
of gas and electric purchases and sales outside of its service territory.


Fair Value of Contracts

The  Company  is  exposed  to  non-trading  risks  through  its  daily  business
activities.  These  non-trading  activities  may include the market or commodity
price risk  related to CILCO's  retail  tariff  activity and the  Company's  non
rate-regulated commodity marketing activities.

The majority of the Company's electricity sales during 2003 were to CILCO retail
customers in Illinois under tariffs  regulated by the ICC. Gas costs,  prudently
incurred in connection  with sales to customers  under tariffs  regulated by the
ICC, are recovered  through the Company's  Purchased Gas Adjustment  (PGA).  The
Company is exposed to  electricity  price risk since the  Company  mainly  sells
electricity  to  customers  at fixed  prices.  To limit  this  risk,  sufficient
purchased  power has been placed under contract to limit the Company's  exposure
to market risk at any given time. When this supply is added to CILCO  generation
capacity,  a reserve  margin in excess of 16%  results,  based on a peak load of
1,270 MW during the 2002 summer cooling season. Since CILCO supplies over 90% of
its native load with its  generation  capacity,  generation can be adjusted on a
real-time basis to match actual load at any given time.  CILCO is subject to the
risk that generation  becomes  unavailable due to forced outages.  The Company's
historical unplanned outage rate is 5.4%. In the event that CILCO generation and
purchased  supply is insufficient to meet load  requirements,  CILCO may have to
purchase power from the market at prevailing market rates.

The market risk inherent in the Company's non  rate-regulated  activities is the
potential  loss  arising  from  adverse  changes  in  natural  gas and  electric
commodity  prices  relative to the physical  and  financial  positions  that the
Company  maintains.  The prices of natural  gas and  electricity  are subject to
fluctuations resulting from changes in supply and demand. The Company is engaged
in non rate-regulated electric retail and natural gas sales throughout Illinois,
including wholesale power purchases and sales to utilize its electric generating
capability.  At June 30, 2003, these non rate-regulated  activities had net open
market price risk  positions of  approximately  700,000 MWh of  electricity  and
28,000  Mcf of  natural  gas.  A market  price  sensitivity  of 10%  applied  to
positions  open in the next twelve  months is not material to the  Company.  See
Note 4 for a  discussion  of the  Company's  use of  financial  derivatives  for
hedging purposes.  Due to the high correlation  between the changes in the value
of the  financial  instrument  positions  held by the  Company and the change in
price of the  underlying  commodity,  the net effect on the Company's net income
resulting  from  the  change  in value of  these  financial  instruments  is not
expected to be material.

                                       46

<PAGE>


The following table summarizes the favorable  (unfavorable)  changes in the fair
value of all the  Company's  derivatives  marked to  market  during  the  second
quarter of 2003:

                                                                 (In thousands)
Fair value of contracts at beginning of period, net                  $ 621
  Contracts which were realized or otherwise settled
    during the period                                                 (253)
  Changes in fair values attributable to changes in
    valuation techniques and assumptions                                --
  Fair value of new contracts entered during
    the period                                                          --
  Other changes in fair value                                          154
                                                                     -----
Fair value of contracts outstanding at end of period, net            $ 522
                                                                     =====

Maturities of all derivative  contracts as of June 30, 2003,  were less than one
year and were all with  investment-grade  counterparties.  Fair  values  are all
determined based on actively quoted prices.


Interest Rate Risk

The Company is exposed to interest  rate risk as a result of changes in interest
rates on borrowings  under secured bank loans which have interest rates that are
indexed  to  short-term  market  interest  rates,  and  refinancing  risk in the
commercial  paper  markets.  CILCORP  manages  its  interest  rate  exposure  by
controlling the amount of these instruments held within its total capitalization
portfolio and by monitoring the effects of market changes in interest rates.

Utilizing the Company's  debt  outstanding  at June 30, 2003, if interest  rates
increased  by 1%, the  Company's  annual  interest  expense  would  increase  by
approximately  $2.2 million and net income would decrease by approximately  $1.3
million.  The model  does not  consider  the  effects  of the  reduced  level of
potential overall economic activity that would exist in such an environment.  In
the event of a significant  change in interest  rates,  management  would likely
take actions to further mitigate our exposure to this market risk. However,  due
to the  uncertainty  of the  specific  actions  that  would be taken  and  their
possible  effects,  the sensitivity  analysis assumes no change in our financial
structure.


Credit Risk

As of June 30, 2003,  the Company had  approximately  $131  million  invested in
seven  leveraged  leases.  The Company  analyzes each  counterparty's  financial
condition  prior to entering  into  sales,  forwards,  swaps,  futures or option
contracts  and monitors  counterparty  exposure  associated  with our  leveraged
leases. The Company also establishes credit limits for these  counterparties and
monitors  the  appropriateness  of these  limits on an ongoing  basis  through a
credit risk management program which involves daily exposure reporting to senior
management, master trading and netting agreements, and credit support management
such as letters of credit and parental guarantees.


                                       47

<PAGE>


Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

As of June 30, 2003,  the principal  executive  officer and principal  financial
officer of CILCORP and CILCO have evaluated the  effectiveness of the design and
operation of  CILCORP's  and CILCO's  disclosure  controls  and  procedures  (as
defined in Rule 13a-15(e) and 15d-15(e) of the Securities  Exchange Act of 1934,
as amended (Exchange Act)). Based upon that evaluation,  the principal executive
officer and principal financial officer of CILCORP and CILCO have concluded that
such disclosure controls and procedures are effective in timely alerting them to
any  material   information  relating  to  CILCORP's  and  CILCO's  consolidated
subsidiaries  required to be included in CILCORP's and CILCO's  reports filed or
submitted with the SEC under the Exchange Act.

(b) Changes in Internal Control Over Financial Reporting

There has been no significant  change in CILCORP's and CILCO's  internal control
over financial  reporting that occurred during CILCORP's and CILCO's most recent
fiscal  quarter  that  has  materially  affected,  or is  reasonably  likely  to
materially   affect  CILCORP's  and  CILCO's  internal  control  over  financial
reporting.


FORWARD-LOOKING STATEMENTS

Statements  made in this  report  which  are not based on  historical  facts are
"forward-looking"  and, accordingly,  involve risks and uncertainties that could
cause actual results to differ  materially from those  discussed.  Although such
"forward-looking"  statements  have  been  made in good  faith  and are based on
reasonable assumptions,  there is no assurance that the expected results will be
achieved.  These statements include (without limitation) statements as to future
expectations,  beliefs, plans, strategies,  objectives,  events,  conditions and
financial  performance.  In connection with the "safe harbor"  provisions of the
Private  Securities  Litigation  Reform Act of 1995,  CILCORP is providing  this
cautionary  statement  to identify  important  factors  that could cause  actual
results to differ materially from those anticipated.  The following factors,  in
addition  to  those  discussed  elsewhere  in  this  report  and  in  subsequent
securities  filings,  could cause results to differ  materially  from management
expectations as suggested by such "forward-looking" statements:

     o    changes in laws and other governmental actions, including monetary and
          fiscal  policies;
     o    the  impact  on  CILCORP  of  current   regulations   related  to  the
          opportunity for customers to choose  alternative  energy  suppliers in
          Illinois;
     o    the effects of increased competition in the future due to, among other
          things,  deregulation of certain aspects of CILCORP's business at both
          the state and federal levels;
     o    the effects of participation in a FERC-approved  Regional Transmission
          Organization,   including  activities   associated  with  the  Midwest
          Independent System Operator, Inc.;
     o    availability  and future market prices for fuel for the  production of
          electricity,   such  as  coal  and  natural  gas,   purchased   power,
          electricity  and natural gas for  distribution,  including  the use of
          financial and  derivative  instruments,  the  volatility of changes in
          market prices and the ability to recover increased costs;
     o    average rates for electricity in the Midwest;
     o    business and economic conditions;
     o    the  impact  of  the  adoption  of  new  accounting  standards  on the
          application of appropriate technical accounting rules and guidance;


                                       48
<PAGE>


     o    interest rates and the  availability  of capital;
     o    actions of rating agencies and the effects of such actions;
     o    weather conditions;
     o    the  effects of  strategic  initiatives,  including  acquisitions  and
          divestitures;
     o    the impact of  current  environmental  regulations  on  utilities  and
          generating   companies  and  the   expectation   that  more  stringent
          requirements  will be introduced  over time,  which could  potentially
          have a negative financial effect;
     o    future wages and employee benefit costs,  including changes in returns
          of benefit plan assets;
     o    disruptions  of the capital  markets or other events making  CILCORP's
          access to necessary capital more difficult or costly;
     o    competition from other generating facilities, including new facilities
          that may be developed in the future;
     o    difficulties in integrating CILCO with Ameren's other businesses;
     o    changes in the coal  markets,  environmental  laws or  regulations  or
          other factors adversely  impacting  synergy  assumptions in connection
          with Ameren's acquisition of CILCORP;
     o    cost  and  availability  of  transmission   capacity  for  the  energy
          generated by CILCO's generating  facilities or required to satisfy its
          energy sales; and
     o    legal and administrative proceedings.

Given  these  uncertainties,  undue  reliance  should  not be  placed  on  these
forward-looking  statements.  Except  to the  extent  required  by  the  federal
securities laws,  neither CILCORP nor CILCO undertakes an obligation to publicly
update or revise  any  forward-looking  statements,  whether  as a result of new
information, future events or otherwise.


                                       49
<PAGE>


                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Reference  is  made  to  Note  7  under  Item  8.   "Financial   Statements  and
Supplementary Data" in Part II of the Company's 2002 Annual Report on Form 10-K,
to Note 14 to the Notes to Consolidated  Financial Statements in the 2002 Annual
Report  to  Shareholders  of  CILCORP's  parent,  Ameren  Corporation,  which is
incorporated by reference into Item 8. "Financial  Statements and  Supplementary
Data" in Part II of Ameren's 2002 Annual Report on Form 10-K, as amended by Form
10-K/A, and to Item 1. "Legal  Proceedings" in Part II of Ameren's Form 10-Q for
the  quarterly  period  ended March 31, 2003,  for a  discussion  of a number of
lawsuits that name CILCORP  affiliates,  Union  Electric  Company,  operating as
AmerenUE, and Central Illinois Public Service Company,  operating as AmerenCIPS,
its parent, Ameren, and Central Illinois Light Company, operating as AmerenCILCO
(referred to as the Ameren  companies),  along with  numerous  other  parties as
defendants that have been filed by plaintiffs claiming varying degrees of injury
from asbestos exposure. Since the filing of Ameren's Form 10-Q for the quarterly
period ended March 31, 2003, eleven additional  lawsuits have been filed against
the Ameren companies. These lawsuits, like the previous cases, were mostly filed
in the Circuit  Court of Madison  County in Illinois,  involve a large number of
total  defendants and seek unspecified  damages in excess of $50,000,  which, if
proved,  typically  would be shared among the named  defendants.  Also since the
filing of Ameren's Form 10-Q for the quarterly  period ended March 31, 2003, the
Ameren companies have settled one case. To date, a total of 164 asbestos-related
lawsuits have been filed against the Ameren companies,  of which 84 are pending,
17 have  been  settled  and 63 have  been  dismissed.  Of  these  164  lawsuits,
AmerenCILCO  has been  specifically  named as a  defendant  in 13 (mostly in the
Circuit Courts of Madison,  Cook and Peoria  Counties in Illinois),  of which 11
are pending,  one has been  settled and one has been  dismissed.  No  additional
lawsuits  have been filed against  AmerenCILCO  since the Company filed its 2002
Annual Report on Form 10-K. The Company  believes that the final  disposition of
these  proceedings  will not have a  material  adverse  effect on its  financial
position, results of operations or liquidity.

Note  2.   Contingencies  and  Note  3.  Rate  and  Regulatory  Matters  to  the
Consolidated  Financial  Statements of CILCORP Inc. and Central  Illinois  Light
Company under Item 1 of Part I of this report contain additional  information on
legal and  administrative  proceedings which are incorporated by reference under
this item.


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<PAGE>


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

At  AmerenCILCO's  annual  meeting of  stockholders  held on May 20,  2003,  the
election of directors was presented to the meeting for a vote and the results of
such voting are as follows:

                                                                       Non-Voted
                 Name                        For            Withheld    Brokers
           ------------------              ---------        --------   ---------

           Paul A. Agathen                13,780,513         1,458         0
           Warner L. Baxter               13,780,513         1,458         0
           Scott A. Cisel                 13,780,513         1,458         0
           Richard A. Liddy               13,780,363         1,608         0
           Richard A. Lumpkin             13,780,413         1,558         0
           Paul L. Miller, Jr.            13,780,413         1,558         0
           Charles W. Mueller             13,780,513         1,458         0
           Douglas R. Oberhelman          13,780,363         1,608         0
           Gary L. Rainwater              13,780,513         1,458         0
           Harvey Saligman                13,780,413         1,558         0
           Thomas R. Voss                 13,780,513         1,458         0

Item 5. Other Information.

AmerenCILCO is a member of Mid-America  Interconnected  Network (MAIN), which is
one of the regional electric reliability councils organized for coordinating the
planning  and  operation  of the  nation's  bulk power  supply.  In  response to
withdrawal notices filed by Commonwealth Edison and Illinois Power, also members
of MAIN, AmerenCILCO, along with its affiliates,  AmerenUE and AmerenCIPS, which
are also members,  provided formal written notice to the MAIN Board of Directors
on June 23, 2003,  of their intent to withdraw  from MAIN  effective  January 1,
2005. AmerenCILCO and its affiliates intend to join another Regional Reliability
Organization (RRO) prior to their withdrawal from MAIN becoming effective. Until
their  withdrawal is effective,  AmerenCILCO and its affiliates will continue to
honor all of their  obligations  as  members  of MAIN.  If  AmerenCILCO  and its
affiliates do not join another RRO, they may withdraw  their notice of intent to
withdraw from MAIN.

Any  stockholder  proposal  intended  for  inclusion  in the proxy  material for
AmerenCILCO's  2004  annual  meeting of  stockholders  must be received by it by
December 26, 2003. In addition,  under AmerenCILCO's  By-Laws,  stockholders who
intend to submit a  proposal  in person at an annual  meeting,  or who intend to
nominate a director at a meeting, must provide advance written notice along with
other  prescribed  information.  In  general,  such  notice  must be received by
AmerenCILCO's  Secretary not later than 60 nor earlier than 90 days prior to the
anniversary  of the preceding  year's annual  meeting.  For  AmerenCILCO's  2004
annual  meeting of  stockholders,  written  notice of any in-person  stockholder
proposal or director  nomination must be received not later than March 21, 2004,
or  earlier  than  February  20,  2004.  AmerenCILCO's  2004  annual  meeting of
stockholders is scheduled to be held on April 27, 2004.


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

(a)     Exhibits filed herewith.

     3.1  By-Laws of CILCORP Inc. as amended effective May 20, 2003.

     3.2  By-Laws of Central Illinois Light Company as amended effective May 20,
          2003.



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<PAGE>

     31.1 Rule 13a-14(a)/15d-14(a)  Certification of Principal Executive Officer
          of CILCORP Inc.  (required by Section 302 of the Sarbanes-Oxley Act of
          2002).

     31.2 Rule 13a-14(a)/15d-14(a)  Certification of Principal Financial Officer
          of CILCORP Inc.  (required by Section 302 of the Sarbanes-Oxley Act of
          2002).

     31.3 Rule 13a-14(a)/15d-14(a)  Certification of Principal Executive Officer
          of Central  Illinois  Light  Company  (required  by Section 302 of the
          Sarbanes-Oxley Act of 2002).

     31.4 Rule 13a-14(a)/15d-14(a)  Certification of Principal Financial Officer
          of Central  Illinois  Light  Company  (required  by Section 302 of the
          Sarbanes-Oxley Act of 2002).

     32.1 Section 1350  Certification of Principal  Executive Officer of CILCORP
          Inc. (required by Section 906 of the Sarbanes-Oxley Act of 2002).

     32.2 Section 1350  Certification of Principal  Financial Officer of CILCORP
          Inc. (required by Section 906 of the Sarbanes-Oxley Act of 2002).

     32.3 Section 1350  Certification of Principal  Executive Officer of Central
          Illinois Light Company (required by Section 906 of the  Sarbanes-Oxley
          Act of 2002).

     32.4 Section 1350  Certification of Principal  Financial Officer of Central
          Illinois Light Company (required by Section 906 of the  Sarbanes-Oxley
          Act of 2002).

(b)  Reports on Form 8-K.  CILCORP Inc. and Central Illinois Light Company filed
     the following report on Form 8-K during the quarterly period ended June 30,
     2003:

                                       Items             Financial
     Date of Report                   Reported        Statements Filed
     --------------                   ---------       ----------------
     April 22, 2003 amendment
       to report on Form 8-K dated
       March 14, 2003                    4, 7              None


Note:Reports of Ameren  Corporation on Forms 8-K, 10-Q and 10-K are on file with
     the SEC under File Number 1-14756.

     Reports of Union  Electric  Company on Forms 8-K, 10-Q and 10-K are on file
     with the SEC under File Number 1-2967.

     Reports of Ameren Energy Generating Company on Forms 8-K, 10-Q and 10-K are
     on file with the SEC under File Number 333-56594.

     Reports of Central  Illinois  Public Service Company on Forms 8-K, 10-Q and
     10-K are on file with the SEC under File Number 1-3672.


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<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                           CILCORP INC.
                                           (Registrant)


August 14, 2003                            By   /s/Martin J. Lyons
                                              ------------------------------
                                                   Martin J. Lyons
                                              Vice President and Controller
                                             (Principal Accounting Officer)




Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                           CENTRAL ILLINOIS LIGHT COMPANY
                                           (Registrant)




August 14, 2003                            By   /s/Martin J. Lyons
                                              ------------------------------
                                                   Martin J. Lyons
                                              Vice President and Controller
                                             (Principal Accounting Officer)





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