<PAGE>


                                                                Exhibit (99) - 1
                                                              Unicom Corporation
                                                     Form 10-K  File No. 1-11375

 
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 8-K

                                 CURRENT REPORT

                       Pursuant to Section 13 or 15(d) of
                      the Securities Exchange Act of 1934


Date of Report (Date of
earliest event reported):  January 31, 1997


                              Unicom Corporation
             (Exact name of registrant as specified in its charter)
 
    Illinois                     1-11375                    36-3961038
(State or other                (Commission                  (IRS Employer
jurisdiction of                File Number)                 Identification No.)
incorporation)
 
37th Floor, 10 South Dearborn Street,
Post Office Box A-3005, Chicago, Illinois                   60690-3005
(Address of principal executive offices)                    (Zip Code)


Registrant's telephone number,
including area code:                                        (312) 394-7399

<PAGE>
 
The purpose of this Current Report is to file certain financial information
regarding the Registrant (Unicom Corporation) and its subsidiaries. Such
financial information is set forth in the exhibits to this Current Report.

 
Item 5.   Other Events
-------   ------------------------------

          Exhibits
          --------

     (23) Consent of Independent Public Accountants

     (27) Financial Data Schedule of Unicom Corporation

     (99) Unicom Corporation and Subsidiary Companies - Certain Financial
              Information as of and for the Year Ended December 31, 1996:

          --Summary of Selected Consolidated Financial Data
          --Price Range and Cash Dividends Paid Per Share of Common Stock
          --1996 Consolidated Revenues and Sales
          --Management's Discussion and Analysis of Financial Condition and
              Results of Operations
          --Report of Independent Public Accountants
          --Statements of Consolidated Income
          --Consolidated Balance Sheets
          --Statements of Consolidated Capitalization
          --Statements of Consolidated Retained Earnings
          --Statements of Consolidated Cash Flows
          --Notes to Financial Statements


                                      -2-
<PAGE>
 
                                   SIGNATURE


     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.


                                       UNICOM CORPORATION
                                          (Registrant)

                                       By:    Roger F. Kovack
                                           ----------------------
                                              Roger F. Kovack
                                                Comptroller


Date: February 13, 1997


                                      -3-

<PAGE>
 
                                 EXHIBIT INDEX

EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBIT
-------                      ----------------------

 (23)     Consent of Independent Public Accountants

 (27)     Financial Data Schedule of Unicom Corporation*

 (99)     Unicom Corporation and Subsidiary Companies - Certain 
            Financial Information as of and for the Year Ended
            December 31, 1996:

          --Summary of Selected Consolidated Financial Data
          --Price Range and Cash Dividends Paid Per Share of Common Stock
          --1996 Consolidated Revenues and Sales
          --Management's Discussion and Analysis of Financial Condition
              and Results of Operations
          --Report of Independent Public Accountants
          --Statements of Consolidated Income
          --Consolidated Balance Sheets
          --Statements of Consolidated Capitalization
          --Statements of Consolidated Retained Earnings
          --Statements of Consolidated Cash Flows
          --Notes to Financial Statements

  ----------
  *Previously filed and incorporated by reference to Unicom Corporation's Form
   8-K Current Report dated January 31, 1997.
<PAGE>
 
                                                     Exhibit (23)
                                                     Unicom Corporation
                                                     Form 8-K  File No. 1-11375



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


     As independent public accountants, we hereby consent to the incorporation
by reference of our report dated January 31, 1997 on Unicom Corporation and
subsidiary companies' consolidated financial statements as of and for the year
ended December 31, 1996, included as an Exhibit to this Form 8-K Current Report
of Unicom Corporation dated January 31, 1997, into Unicom Corporation's
previously filed prospectuses dated March 18, 1994, constituting part of Form 
S-4 Registration Statement File No. 33-52109, as amended (relating to Common
Stock of Unicom Corporation), as further amended by Post-Effective Amendment 
No. 1 on Form S-8 (relating to Commonwealth Edison Company's Employee Savings
and Investment Plan) and Post-Effective Amendment No. 2 on Form S-8 (relating to
Unicom Corporation's Employee Stock Purchase Plan), Form S-8 Registration
Statement File No. 33-56991 (relating to Unicom Corporation's Long-Term
Incentive Plan), Form S-4 Registration Statement File No. 333-01003 (relating to
Common Stock of Unicom Corporation), Form S-8 Registration Statement File No.
333-04749 (relating to Unicom Corporation's 1996 Directors' Fee Plan) and Form
S-8 Registration Statement File No. 333-10613 (relating to Commonwealth Edison
Company's Employee Savings and Investment Plan).  We also consent to the
application of our report to Commonwealth Edison Company and subsidiary
companies' ratios of earnings to fixed charges and the ratios of earnings to
fixed charges and preferred and preference stock dividend requirements for each
of the twelve months ended December 31, 1996, 1995 and 1994 appearing in Exhibit
99 of this Form 8-K.


                                         ARTHUR ANDERSEN LLP



Chicago, Illinois
February 13, 1997

<PAGE>
 
                                                   Exhibit 99
                                                   Unicom Corporation
                                                   Form 8-K File No. 1-11375
 
 
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                       CONSOLIDATED FINANCIAL STATEMENTS
 
                        AS OF DECEMBER 31, 1996 AND 1995
 
 
 
 
 
 
 
<PAGE>
 
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
  Certain portions of this document contain forward looking statements with
respect to the consequences of future events, including estimates of costs
associated with certain actions and outcomes. Unforeseen events or conditions
may require changes in the factors affecting such estimates and the projected
results thereof. Consequently, actual results could differ materially from the
estimates presented. See the last paragraph under the subheading "Liquidity
and Capital Resources--Construction Program" in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for additional
information regarding certain caveats affecting forward looking statements.
Forward looking information is contained in various sections of this report,
including, without limitation, (i) Note 1 of Notes to Financial Statements in
the third and fifth paragraphs under the subheading "Depreciation and
Decommissioning Costs" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the last paragraph under the
subheading "Regulation--Nuclear Matters," with respect to the estimated costs
of decommissioning nuclear generating stations, (ii) "Management's Discussion
and Analysis of Financial Condition and Results of Operations" under the
subheading "Liquidity and Capital Resources--Construction Program," regarding
ComEd's construction program budget, (iii) the fourth paragraph under the
subheading "Results of Operations--Operation and Maintenance Expenses" under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and (iv) the last paragraph in Note 21 of Notes to Financial
Statements, regarding cleanup costs associated with MGP and other remediation
sites.
 
                                     INDEX
 
<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          -----
<S>                                                                       <C>
Definitions..............................................................     2
Summary of Selected Consolidated Financial Data..........................     3
Price Range and Cash Dividends Paid Per Share of Common Stock............     3
1996 Consolidated Revenues and Sales.....................................     3
Management's Discussion and Analysis of Financial Condition and Results
 of Operations...........................................................  4-16
Report of Independent Public Accountants.................................    17
Consolidated Financial Statements--
  Statements of Consolidated Income for the years 1996, 1995 and 1994....    18
  Consolidated Balance Sheets--December 31, 1996 and 1995................ 19-20
  Statements of Consolidated Capitalization--December 31, 1996 and 1995..    21
  Statements of Consolidated Retained Earnings for the years 1996, 1995
   and 1994..............................................................    22
  Statements of Consolidated Cash Flows for the years 1996, 1995 and
   1994..................................................................    23
  Notes to Financial Statements.......................................... 24-45
</TABLE>
 
                                       1
<PAGE>
 
                                  DEFINITIONS
 
  The following terms are used in this document with the following meanings:
 
<TABLE>
<CAPTION>
         TERM                                         MEANING
-----------------------  ------------------------------------------------------------------
<S>                      <C>
AFUDC                    Allowance for funds used during construction
AMT                      Alternative minimum tax
APB                      Accounting Principles Board
CERCLA                   Comprehensive Environmental Response, Compensation and Liability
                          Act of 1980, as amended
CFC                      Chlorofluorocarbon
Clean Air Amendments     Clean Air Act Amendments of 1990
ComEd                    Commonwealth Edison Company
Cotter                   Cotter Corporation, which is a wholly-owned subsidiary of ComEd.
DOE                      U.S. Department of Energy
ESPP                     Employee stock purchase plan
FASB                     Financial Accounting Standards Board
FERC                     Federal Energy Regulatory Commission
FERC Order               FERC Open Access Order issued in April 1996
Fuel Matters Settlement  A settlement effected in November 1993 relating to various ICC
                          fuel reconciliation proceedings involving ComEd.
ICC                      Illinois Commerce Commission
Indiana Company          Commonwealth Edison Company of Indiana, Inc., which is a wholly-
                          owned subsidiary of ComEd.
ISO                      Independent System Operator
MGP                      Manufactured gas plant
NEIL                     Nuclear Electric Insurance Limited
NML                      Nuclear Mutual Limited
NRC                      Nuclear Regulatory Commission
Rate Matters Settlement  A settlement effected in November 1993 relating to various rate
                          proceedings involving ComEd.
Rate Order               ICC rate order issued in January 1995, as subsequently modified
Remand Order             ICC rate order issued in January 1993, as subsequently modified
SEC                      Securities and Exchange Commission
SFAS                     Statement of Financial Accounting Standards
Trust                    ComEd Financing I, which is a wholly-owned subsidiary trust of
                          ComEd.
Unicom                   Unicom Corporation
Unicom Enterprises       Unicom Enterprises Inc., which is a wholly-owned subsidiary of
                          Unicom.
Unicom Thermal           Unicom Thermal Technologies Inc., which is a wholly-owned
                          subsidiary of Unicom Enterprises.
Units                    ComEd's nuclear generating units known as Byron Unit 2 and
                          Braidwood Units 1 and 2
U.S. EPA                 U.S. Environmental Protection Agency
</TABLE>
 
                                       2
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
 
<TABLE>
<CAPTION>
                                    1996    1995       1994    1993       1992
                                   ------- -------    ------- -------    -------
                                    (MILLIONS OF DOLLARS EXCEPT PER SHARE
                                                    DATA)
<S>                                <C>     <C>        <C>     <C>        <C>
Operating revenues...............  $ 6,937 $ 6,910    $ 6,278 $ 5,260    $ 6,026
Net income.......................  $   666 $   640(1) $   355 $    46(2) $   443
Earnings per common share........  $  3.09 $  2.98(1) $  1.66 $  0.22(2) $  2.08
Cash dividends declared per
 common share....................  $  1.60 $  1.60    $  1.60 $  1.60    $  2.30
Total assets (at end of year)....  $23,388 $23,250    $23,121 $24,383    $20,993
Long-term obligations at end of
 year excluding current portion:
 Long-term debt, preference stock
  and preferred securities
  subject to mandatory redemption
  requirements...................  $ 6,487 $ 7,011    $ 7,745 $ 7,861    $ 7,913
 Accrued spent nuclear fuel
  disposal fee and related
  interest.......................  $   657 $   624    $   590 $   567    $   549
 Capital lease obligations.......  $   477 $   376    $   433 $   323    $   347
 Other long-term obligations.....  $ 1,989 $ 1,826    $ 1,754 $ 1,718    $   666
</TABLE>
--------
(1) Includes an extraordinary loss related to the early redemption of long-
    term debt of $20 million or $0.09 per common share.
(2) Includes the cumulative effect of change in accounting for income taxes of
    $10 million or $0.05 per common share.
 
PRICE RANGE* AND CASH DIVIDENDS PAID PER SHARE OF COMMON STOCK
 
<TABLE>
<CAPTION>
                             1996 (BY QUARTERS)          1995 (BY QUARTERS)
                         --------------------------- ---------------------------
                         FOURTH THIRD  SECOND FIRST  FOURTH THIRD  SECOND FIRST
                         ------ ------ ------ ------ ------ ------ ------ ------
<S>                      <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>
Price range:
 High..................  28 1/2 28 1/8  29    35 3/8 33 7/8 30 1/2 27 3/4 26 1/8
 Low...................  24 7/8 22 5/8  26    27     30 1/4 26 1/4 23 5/8 23 1/4
Cash dividends paid....  40c    40c     40c   40c    40c    40c    40c    40c
</TABLE>
* As reported as NYSE Composite Transactions.
--------
 
  Unicom's common stock is traded on the New York, Chicago and Pacific stock
exchanges, with the ticker symbol UCM. At December 31, 1996, there were
approximately 161,000 holders of record of Unicom's common stock.
 
1996 CONSOLIDATED REVENUES AND SALES
 
<TABLE>
<CAPTION>
                           OPERATING  INCREASE/  KILOWATTHOUR INCREASE/
                           REVENUES   (DECREASE)    SALES     (DECREASE)           INCREASE
                          (THOUSANDS) OVER 1995   (MILLIONS)  OVER 1995  CUSTOMERS OVER 1995
                          ----------- ---------- ------------ ---------- --------- ---------
<S>                       <C>         <C>        <C>          <C>        <C>       <C>
Residential.............  $2,541,873     (3.0)%     22,310       (4.3)%  3,102,101   0.7%
Small commercial and
 industrial.............   2,113,716      1.9 %     25,131       (0.7)%    289,803   0.3%
Large commercial and
 industrial.............   1,445,708      1.4 %     23,896        0.5 %      1,550   0.7%
Public authorities......     503,004      3.3 %      7,336        2.5 %     12,142   0.9%
Electric railroads......      29,651     10.3 %        424        8.7 %          2    --
                          ----------                ------               ---------
Ultimate consumers......  $6,633,952      --        79,097       (1.1)%  3,405,598   0.7%
Sales for resale........     235,041                12,178                      44
Other revenues..........      68,031                   --                      --
                          ----------                ------               ---------
 Total..................  $6,937,024      0.4 %     91,275       (0.1)%  3,405,642   0.7%
                          ==========                ======               =========
</TABLE>
 
                                       3
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
CHANGES IN THE ELECTRIC UTILITY INDUSTRY
 
  Unicom and its predominant business, electric energy generation,
transmission and distribution, are in a period of fundamental change in the
manner in which customers obtain, and energy suppliers provide, energy
services. These changes are attributable to changes in technology, the
relaxation of regulatory barriers to utilities' respective service territories
as well as to efforts to change the manner in which electric utilities are
regulated. Federal law and regulations have been amended to provide for open
transmission system access, and various states are considering, or have
adopted, new regulatory structures to allow access by some or all customers to
energy suppliers in addition to the local utility.
 
  ComEd and other energy suppliers, energy customers and other interested
parties have been active participants in the discussions related to the
economic and technical issues associated with reform. As a result of these
efforts, legislation was introduced in Illinois during January 1997 which is
intended to provide both electric service providers and their customers with
an orderly transition to a less regulated market for electric service. Under
the legislative proposal, utilities would be granted a period in which to
offer direct access experiments that would allow them and customers to gain
experience with the effects of such access, with a requirement to provide such
access starting in 2000. Such a requirement would be phased-in to customers
over several years, starting with larger load customers. The legislation would
provide utilities with an opportunity to recover costs, which might not
otherwise be recoverable, in charges for electric service in a less regulated
market through, among other things, cost savings and a transition charge for
customers who use alternate suppliers of electric power and energy. The
legislation would provide for a leveling of certain regulatory oversight and
tax provisions among electric service providers in Illinois and would also
allow certain restructurings of utility operations in order to facilitate
their response to a competitive environment. The legislation would also
provide for annual base rate decreases of 1.5 percent, starting in 2000 and
continuing through 2004. ComEd supports the proposed legislation and believes
there is support among a number of constituencies for its provisions. Other
legislative proposals have also been introduced for consideration, which
contain different provisions with respect to timing and cost recovery. The
Governor of Illinois has formed a three-person advisory committee to advise
with respect to electric utility deregulation issues. No assurance can be
given as to when any such legislation may be adopted or in what form it may be
adopted.
 
  In response to changes in the industry, ComEd has implemented certain
customer initiatives designed to improve and strengthen customer relationships
and is undertaking an evaluation of its operations and assets, particularly
generating assets, with a view toward positioning itself for market and
industry changes. As discussed below, ComEd's actions to date have included a
five-year base rate cap, efforts to control expenditure growth through
personnel reductions, operational efficiencies and sales of generating plants.
Although ComEd's operating results and financial condition have historically
been affected by various rate proceedings, ComEd expects that these industry
changes, and ComEd's activities anticipating or responding to them, will
directly impact its operating results and financial condition over the next
several years.
 
  Electric Utility Industry. The electric utility industry has historically
consisted of vertically integrated companies which combine generation,
transmission and distribution assets; serving customers within relatively
defined service territories; and operating under extensive regulation with
respect to rates, operations and other matters. Utilities operated under a
regulatory compact with the state, with a statutory obligation to serve all of
the electricity needs within their service territory in a nondiscriminatory
manner. Historically investment and operating decisions have been made based
upon the utilities' respective assessment of those current and projected needs
of its customers. In view of this obligation, regulation has focused on
investment and operating costs, and rates have been based on a recovery of
some or all of such prudently incurred costs plus a return on invested
capital. Such rate regulation, and the ability of utilities to recover
investment and other costs through rates, has provided the basis for recording
certain costs as regulatory assets. These assets represent
 
                                       4
<PAGE>
 
costs which are allocated over future periods reflecting related regulatory
treatment, rather than expensed in the current period.
 
  As noted previously, the United States electric utility industry is in a
process of fundamental change as state legislators and regulators re-examine
their approach to regulation and its objectives and consider a transition to a
competitive or market-based system of pricing for electric energy. Although
the process and approach have varied from state to state in terms of the
elements and timing of implementation, it is evident that the question is no
longer if, but rather how and when there will be a more competitive
electricity market. The Federal Energy Policy Act of 1992, among other things,
empowered FERC to introduce a greater level of competition into the wholesale
marketplace for electric energy. In April 1996, the FERC Order was issued
requiring utilities to file open access tariffs with regard to their
transmission systems. These tariffs set forth the terms, including prices,
under which other parties and the utility's wholesale marketing function may
use the utility's transmission system. ComEd has filed an open access tariff
with the FERC. The FERC Order requires the separation of the transmission
operations and wholesale marketing functions so as to ensure that unaffiliated
third parties have access to the same information as to system availability
and other requirements. The FERC Order further requires utilities to operate
an electronic bulletin board to make transmission price and access data
available to all potential users. A key feature of the FERC Order is that it
contemplates full recovery of a utility's costs "stranded" by competition.
These costs are "stranded" or "strandable" to the extent market-based rates
would be insufficient to allow for their full recovery. To recover stranded
costs, the utility must show that it had a reasonable expectation that it
would continue to serve the customer in question under its regulatory compact.
 
  An important element of reform proposals under consideration is the ability
of other suppliers to provide energy in competition with a utility within its
service territory. This element generally has included consideration of some
future form of "retail wheeling," whereby a utility's transmission and
distribution system is made available to other energy suppliers for delivery
of their services to retail customers. In addition, some governmental
entities, such as cities, may elect to "municipalize" a utility's distribution
facilities through condemnation proceedings. Such municipalities would then be
able to purchase electric power on a wholesale basis and resell it to
customers over the newly acquired facilities. The FERC Order provides for the
recovery of a utility's investment stranded by municipalization. While
municipalization is possible under the present regulatory system, ComEd is not
required to grant alternative electric suppliers access to its distribution
system through any type of "retail wheeling."
 
  Presumably, under such a modified regulatory structure, customers will base
energy purchase decisions on a combination of factors, including price,
reliability and service. In addition to the potential effects on revenues and
marketing and sales efforts, such changes can raise the question as to whether
an affected utility's rates are based on cost-based regulation, allowing
recovery of incurred costs, or are based on something else, i.e., the
marketplace. Under generally accepted accounting principles, the latter
determination would require the write off of regulatory assets and liabilities
and would require an examination as to the recoverability in revenues of other
incurred costs, with any portion determined to be unrecoverable being subject
to write off. Various approaches have been proposed to deal with such
strandable costs, from full recovery, as provided in the FERC Order, to no
recovery, as proposed by at least some of the participants in virtually all
legislative debates on regulatory reform proposals. For additional
information, see "Regulatory Assets and Liabilities" in Note 1 of Notes to
Financial Statements.
 
  Retail wheeling and municipalization are significant issues for electric
utility companies, including ComEd, because of their potential to strand a
utility's costs. Without the development of a more fully competitive
marketplace, it is not possible to develop an estimate of strandable costs
with any degree of accuracy. Any calculation of potentially strandable costs
requires that a set of assumptions be made, including the timing of open
access (customer choice), the extent of open access allowed, potential market
prices over time, sales and load growth forecasts, operating performance over
time, allowed rates over time, cost structure over time, mitigation
opportunities and strandable cost
 
                                       5
<PAGE>
 
recoveries. The calculation of strandable costs is extremely sensitive to the
assumptions made, and the resulting estimates are potentially misleading if
removed from the context in which they were calculated. At this point in time,
ComEd does not subscribe to a certain set of assumptions or a particular
estimate. The proposed legislation described above, which ComEd supports,
would provide utilities the opportunity to recover their stranded costs, if
any. However, ComEd believes the amount of its strandable costs could be
material without allowance for recovery of costs and investments it incurred
under its regulatory compact, including its duty to serve. Most reform
proposals anticipating increased competition include some form of stranded
cost recovery. ComEd is taking steps, such as cost-control measures, improving
generating station reliability and additional depreciation, to minimize its
potential stranded investment. See Note 2 of Notes to Financial Statements for
additional information.
 
  ComEd. ComEd is responding, and is undertaking a significant planning effort
with respect to further responses, to the developments within the utility
industry. During the past several years, such efforts have focused on cost
reductions, including personnel reductions, efficiencies in purchasing and
inventory management, and an incentive compensation system keyed to cost
reduction and control. Notwithstanding these efforts, ComEd's costs remain
high in comparison to its neighboring utilities.
 
  ComEd is examining its assets, particularly generating assets, with a view
toward rationalizing their investment and operating costs against their
ability to contribute to the revenues of ComEd under various market scenarios.
Such an assessment involves the consideration of numerous factors, including
revenue contribution, operating costs, impacts on ComEd's service obligations,
purchase commitments and remaining assets, and the impact of various options.
Such options include continued operation, indefinite suspension from
operation, sale to a third party and retirement. If ComEd retired a generating
plant, particularly a nuclear plant, without regulatory or legislative
provision for continued recovery of its investment, such retirement could have
a material impact on ComEd's and Unicom's financial position and results of
operations.
 
  On April 17, 1996, ComEd announced that it had finalized agreements to sell
two of its coal-fired generating stations, representing approximately 1,600
megawatts of generating capacity. Under the agreements, State Line and Kincaid
stations would be sold for a total of $250 million, which approximates the
book value of the stations. The net proceeds, after income tax effects, would
be approximately $200 million, which would be used to retire or redeem
existing debt. Under the terms of the sales, ComEd would enter into exclusive
15-year purchased power agreements for the output of the plants. The
agreements are subject to regulatory approval, and proceedings have been
initiated to obtain those approvals. Numerous parties have intervened in the
proceedings, including various governmental and consumer groups and ComEd's
principal union. The union has also filed a lawsuit in state court alleging
that the labor provisions of the Kincaid agreement are violative of state law
and seeking to enjoin the ICC proceedings. ComEd had previously filed an
action in federal court seeking confirmation that the state law is preempted
by federal labor law, and ComEd believes that the union's allegations are
without merit. These actions have now been consolidated and are pending in
federal court. The State Line and Kincaid agreements give the purchasers the
right to terminate the agreements if a closing has not occurred prior to
December 31, 1996 for State Line and June 30, 1997 for Kincaid. Such closing
has not occurred as of January 31, 1997.
 
  With respect to its transmission assets, ComEd is participating with
approximately 20 other electric utility companies in an effort to form an ISO
for the midwest United States. Under the structure currently contemplated, the
ISO would set standard transmission rates and facilitate compliance with the
FERC Order. In addition, while individual utility companies would continue to
own their transmission lines, the ISO would oversee regional planning to avoid
transmission constraints. Creation of the ISO will be subject to further
negotiations among the parties as well as federal and state regulatory
approval.
 
  ComEd is also taking actions to strengthen its relationship with its
customers. On December 11, 1995, ComEd instituted a five-year base rate cap
for all of its customers. The base rate cap does not
 
                                       6
<PAGE>
 
affect ComEd's fuel cost or nuclear decommissioning cost recovery provisions.
See Note 2 of Notes to Financial Statements for additional information about
ComEd's base rate cap and other initiatives intended to give customers more
choice and control over the services they seek and the price they pay.
 
LIQUIDITY AND CAPITAL RESOURCES
 
                              UTILITY OPERATIONS
 
  Construction Program. ComEd and the Indiana Company have a construction
program for the year 1997, which consists principally of improvements to their
existing nuclear and other electric production, transmission and distribution
facilities. It does not include funds to add new generating capacity to
ComEd's system. The program, as currently approved by ComEd, calls for
electric plant and equipment expenditures of approximately $982 million
(excluding nuclear fuel expenditures of approximately $322 million). It is
estimated that such construction expenditures, with cost escalation computed
at 3.5% annually, will be as follows:
<TABLE>
<CAPTION>
                                                                        1997
                                                                     -----------
                                                                      (MILLIONS
                                                                     OF DOLLARS)
   <S>                                                               <C>
   Production.......................................................    $420
   Transmission and Distribution....................................     421
   General..........................................................     141
                                                                        ----
      Total.........................................................    $982
                                                                        ====
</TABLE>
 
  Such construction program includes the replacement of the steam generators
at ComEd's Braidwood Unit 1 and Byron Unit 1 nuclear generating units expected
to be placed in service prior to year-end 1998. The estimated replacement cost
is approximately $460 million, including approximately $80 million for the
cost of removal of the existing steam generators. Approximately $130 million
of this estimated cost is included in the construction expenditures shown
above. Approximately $140 million has been incurred through December 31, 1996.
In addition, ComEd has continued to monitor the degradation of the steam
generators at its Zion nuclear generating station. Recent studies indicate
that the degradation is continuing and that replacement may be required sooner
than 2005. No amount has been included in ComEd's construction budget for
replacement of these steam generators, since ComEd has not decided whether or
when to effect a replacement. Based upon its experience with the replacement
activities at Braidwood and Byron, and depending on the timing of any
replacement at Zion, ComEd believes such cost could be approximately $435
million if a decision to replace is made.
 
  ComEd's forecasts of peak load indicate a need for additional resources to
meet demand, either through generating capacity, through equivalent purchased
power or through the development of additional demand-side management
resources, in 1998 and each year thereafter. However, it believes that
adequate resources, including cost-effective demand-side management resources,
non-utility generation resources and other utility power purchases, could be
obtained in sufficient quantities to meet such forecasted needs. If ComEd
instead were to build additional capacity to meet its needs, it would need to
make additional capital expenditures during 1997.
 
  Purchase commitments for ComEd and the Indiana Company, principally related
to construction and nuclear fuel, approximated $1,018 million at December 31,
1996. In addition, ComEd's estimated commitments for the purchase of coal are
indicated in the following table.
 
<TABLE>
<CAPTION>
      CONTRACT                                          PERIOD   COMMITMENT (1)
   --------------                                      --------- --------------
   <S>                                                 <C>       <C>
   Black Butte Coal Co................................ 1997-2000      $807
   Decker Coal Co..................................... 1997-2014      $582
   Big Horn Coal Co................................... 1998           $ 22
</TABLE>
  --------
  (1) In millions of dollars, excluding transportation costs. No estimate of
      future cost escalation has been made.
 
 
                                       7
<PAGE>
 
For additional information concerning these coal contracts and ComEd's fuel
supply, see "Results of Operations" below and Notes 1 and 21 of Notes to
Financial Statements.
 
  The foregoing paragraphs in this "Construction Program" section include
forward-looking statements with respect to the future levels of capital
expenditures which are necessarily based upon assumptions regarding estimated
costs and availability of materials and services as well as contingencies.
Unforeseen events or conditions may require changes in the scope of work with
consequent changes in the timing and level of the projected expenditures. In
addition, changes in laws and regulations, or their interpretation and
enforcement, can affect the scope of certain projects, the manner in which
they are undertaken and the costs associated therewith. While ComEd gives
consideration to such factors in developing its budgets, such consideration
cannot predict the course of future events or anticipate the interaction of
multiple factors beyond management's control upon project timing and cost.
Consequently, actual results could differ materially from those described.
 
  Capital Resources. ComEd forecasts that internal sources will provide more
than three-fourths of the funds required for ComEd's construction program and
other capital requirements, including nuclear fuel expenditures, contributions
to nuclear decommissioning funds, sinking fund obligations and refinancing of
scheduled debt maturities. See Notes 7 and 9 of Notes to Financial Statements
for the summaries of the annual sinking fund requirements and scheduled
maturities for ComEd preference stock and long-term debt, respectively. The
forecast assumes the rate levels reflected in the Rate Order remain in effect.
See "Regulation," subcaption "Rate Matters" below for additional information.
 
  The type and amount of external financing will depend on financial market
conditions and the needs and capital structure of ComEd at the time of such
financing. A portion of ComEd's financing is expected to be provided through
the continued sale and leaseback of nuclear fuel through ComEd's existing
nuclear fuel lease facility. See Note 18 of Notes to Financial Statements for
more information concerning ComEd's nuclear fuel lease facility. ComEd has
approximately $906 million of unused bank lines of credit at December 31, 1996
which may be borrowed at various interest rates and which may be secured or
unsecured. The interest rate is set at the time of a borrowing and is based on
several floating rate bank indices plus a spread which is dependent upon the
credit ratings of ComEd's outstanding first mortgage bonds or on a prime
interest rate. Collateral, if required for the borrowings, would consist of
first mortgage bonds issued under and in accordance with the provisions of
ComEd's mortgage. See Note 10 of Notes to Financial Statements for information
concerning lines of credit. See the Statements of Consolidated Cash Flows for
the construction expenditures and cash flow from operating activities for the
years 1996, 1995 and 1994.
 
  During 1996, ComEd sold and leased back approximately $317 million of
nuclear fuel through its existing nuclear fuel lease facility. In addition,
ComEd issued $199 million of pollution control obligations, the proceeds of
which were used to redeem an equivalent amount of other pollution control
obligations. In January 1997, ComEd issued $150 million principal amount of
7.375% Notes due January 15, 2004, $150 million principal amount of 7.625%
Notes due January 15, 2007 and $150 million principal amount of Company-
obligated preferred securities of subsidiary trust, the proceeds of which will
be used to discharge current maturities of long-term debt and to redeem on
March 11, 1997 $200 million principal amount of First Mortgage 9 1/2% Bonds,
Series 57, due May 1, 2016. See the Statements of Consolidated Cash Flows and
Note 4 of Notes to Financial Statements for information regarding common stock
activity.
 
  As of January 31, 1997, ComEd has an effective "shelf" registration
statement with the SEC for the future sale of up to an additional $505 million
of debt securities and cumulative preference stock for general corporate
purposes of ComEd, including the discharge or refund of other outstanding
securities.
 
 
                                       8
<PAGE>
 
  ComEd's securities and other securities guaranteed by ComEd are currently
rated by three principal securities rating agencies as follows:
 
<TABLE>
<CAPTION>
                                                                STANDARD DUFF &
                                                        MOODY'S & POOR'S PHELPS
                                                        ------- -------- ------
     <S>                                                <C>     <C>      <C>
     First mortgage and secured pollution control
      bonds............................................  Baa2     BBB     BBB
     Publicly-held debentures and unsecured pollution
      control obligations..............................  Baa3     BBB-    BBB-
     Convertible preferred stock.......................  baa3     BBB-    BBB-
     Preference stock..................................  baa3     BBB-    BBB-
     ComEd-obligated mandatorily redeemable preferred
      securities of the Trust..........................  baa3     BBB-    BBB-
     Commercial paper..................................  P-2      A-2     D-2
</TABLE>
 
  In January 1997, Moody's changed the rating outlook on ComEd's securities
from "stable" to "negative" and Duff & Phelps added ComEd's securities to
"Rating Watch-Down." As of January 1997, Standard & Poor's rating outlook on
ComEd remained "stable."
 
  Capital Structure. ComEd's ratio of long-term debt to total capitalization
has decreased to 46.1% at December 31, 1996 from 49.3% at December 31, 1995.
This decrease is related primarily to the retirement of long-term debt, the
increase in current maturities of long-term debt reclassified to current
liabilities and the increase in retained earnings.
 
                            UNREGULATED OPERATIONS
 
  Unicom Enterprises is engaged, through its subsidiaries, in energy service
activities which are not subject to utility regulation by state or federal
agencies. Its principal subsidiary, Unicom Thermal, currently provides
district cooling services to office and other buildings in the city of Chicago
under a non-exclusive use agreement. District cooling involves, in essence,
the production of chilled water at a central location(s) and its circulation
to customers' buildings through a closed circuit of supply and return piping.
Such water is circulated through customers' premises primarily for air
conditioning. This process is used in lieu of self-generated cooling. As a
result of the Clean Air Amendments, the manufacture of CFCs has been
curtailed, commencing in January 1996, thereby creating an excellent marketing
opportunity for non-CFC based systems, such as Unicom Thermal's district
cooling. Unicom Thermal is involved in or considering district cooling
projects in other cities, including a project in Boston with Boston Edison
Technologies Group, Inc., a project in Windsor, Ontario, Canada with Ontario
Hydro and a project in Houston, Texas with Houston Light and Power Energy
Services Company.
 
  Construction Program. Unicom has approved capital expenditures for 1997 of
approximately $56 million for Unicom Thermal, primarily representing the
construction costs of its district cooling facilities in Chicago and its share
of construction costs in Boston and Windsor. Unicom Thermal's first two
district cooling facilities in Chicago began serving customers in May 1995 and
July 1996, respectively. Its third district cooling facility in Chicago is
scheduled to be completed in 1997. As of December 31, 1996, Unicom Thermal's
purchase commitments, principally related to construction, were approximately
$42 million.
 
  Capital Resources. Unicom expects to obtain funds to invest in its
unregulated subsidiaries principally from dividends received on its ComEd
common stock and from bank borrowings. The availability of ComEd's dividends
to Unicom is dependent on ComEd's financial performance and cash position.
Other forms of financing by ComEd to Unicom or the unregulated subsidiaries of
Unicom, such as loans or additional equity investments, none of which is
expected, would be subject to prior approval by the ICC.
 
  Unicom Enterprises has a $200 million credit facility which will expire in
1999, of which $105 million was unused as of December 31, 1996. The credit
facility can be used by Unicom Enterprises to finance investments in
unregulated businesses and projects, including Unicom Thermal, and for
 
                                       9
<PAGE>
 
general corporate purposes. The credit facility is guaranteed by Unicom and
includes certain covenants with respect to Unicom's and Unicom Enterprises'
operations. Interest rates for borrowings under the credit facility are set at
the time of a borrowing and are based on either a prime interest rate or a
floating rate bank index plus a spread which varies with the credit rating of
ComEd's outstanding first mortgage bonds. See Note 10 of Notes to Financial
Statements for additional information regarding certain covenants with respect
to Unicom's and Unicom Enterprises' operations.
 
REGULATION
 
  ComEd and the Indiana Company are subject to state and federal regulation in
the conduct of their respective businesses, including the operations of
Cotter. Such regulation includes rates, securities issuance, nuclear
operations, environmental and other matters. Particularly in the cases of
nuclear operations and environmental matters, such regulation can and does
affect operational and capital expenditures.
 
  Rate Matters. On January 9, 1995, the ICC issued its Rate Order in the
proceedings relating to ComEd's February 1994 rate increase request. The Rate
Order provided, among other things, for (i) an increase in ComEd's total
revenues of approximately $301.8 million (excluding add-on revenue taxes) or
5.2%, on an annual basis, including a $303.2 million increase in base rates,
(ii) the collection of municipal franchise costs on an individual municipality
basis through a rider, and (iii) the use of a rider, with annual review
proceedings, to pass on to ratepayers increases or decreases in estimated
costs associated with the decommissioning of ComEd's nuclear generating units.
See "Depreciation and Decommissioning" in Note 1 of Notes to Financial
Statements for additional information related to the level of decommissioning
cost collections. The ICC also determined that the Units were 100% "used and
useful" and that the previously determined reasonable costs of such Units, as
depreciated, should be included in full in ComEd's rate base. The rates
provided in the Rate Order became effective on January 14, 1995; however, they
are being collected subject to refund as a result of subsequent judicial
action. As of December 31, 1996, electric operating revenues of approximately
$651 million (excluding revenue taxes) are subject to refund. Intervenors and
ComEd have filed appeals of the Rate Order with the Illinois Appellate Court,
and oral argument was heard on January 28, 1997. See Note 2 of Notes to
Financial Statements for additional information.
 
  Nuclear Matters. Nuclear operations have been, and remain, an important
focus of ComEd--given the impact of such operations on overall operating and
maintenance expenditures and the ability of nuclear power plants to produce
electric energy at a relatively low marginal cost. ComEd operates a large
number of nuclear plants, ranging from the older Zion, Dresden and Quad Cities
stations to the more recently completed LaSalle, Byron and Braidwood stations,
and is intent upon safe, reliable and efficient operation. These plants were
constructed over a period of time in which technology, construction procedures
and regulatory initiatives and oversight have evolved, with the result that
older plants generally require greater attention and resources to meet
regulatory requirements and expectations as well as to maintain operational
reliability.
 
  On January 29, 1997, the NRC determined that ComEd's Dresden nuclear
generating station should remain on the NRC's list of plants to be monitored
closely, where it has been since being placed on that list in 1992. The NRC
also determined that ComEd's LaSalle and Zion nuclear generating stations
should be added to that list. Although in each case the NRC recognized that
ComEd had undertaken significant management changes and had accomplished a
number of performance improvements, it expressed concern with specific issues
at each station and expressed a general concern with the sustainability of
improvements as the basis for its determination. The determination does not
prevent ComEd from operating the generating units; however, it does mean that
the NRC will devote additional resources to monitoring ComEd's operating
performance and that ComEd will need to work to demonstrate to the NRC the
sustainability of improvements which it believes it has undertaken and is
continuing to implement.
 
 
                                      10
<PAGE>
 
  The NRC also took the unusual additional step of requiring ComEd to submit
information to allow the NRC to determine what actions, if any, should be
taken to assure that ComEd can safely operate its six nuclear generating
stations while sustaining performance improvement at each site. The request
also requires ComEd to submit information regarding the criteria that it has
established, or plans to establish, to measure performance and to explain
ComEd's proposed actions if the criteria are not met. The request states the
NRC staff's concerns with the "cyclical safety performance of ComEd nuclear
stations," noting the presence on the list of plants to be monitored closely
of Dresden, LaSalle and Zion stations at various times during the past ten
years. It also noted concerns regarding "ComEd's ability to establish lasting
and effective programs that result in sustained performance improvement." The
request does acknowledge the management and organizational changes implemented
by ComEd, including the "additional focus placed on management and leadership,
accountability, the problem identification and corrective action processes,
material condition improvement, work control, and radiation protection." It
also acknowledges improvements seen at Dresden and Quad Cities stations; but
indicated at the same time performance declines were observed at both LaSalle
and Zion stations. The operational problems identified by the NRC are
consistent with weaknesses identified in recent station self-assessments
initiated by ComEd; and management has undertaken to develop and implement
programs designed to address these issues. Consequently, ComEd's management
believes that it can provide sufficient information to the NRC demonstrating
ComEd's ability to operate its nuclear generating stations while sustaining
performance improvements.
 
  ComEd has devoted, and intends to continue to devote, significant resources
to the management and operations of its nuclear generating stations. Over the
past several years, it has increased and reinforced station management with
managers drawn from other utilities having experience with similar operational
and performance issues. It has also sought to identify, anticipate and address
operating and performance issues in a safe, cost-effective manner while
seeking to improve the availability and capacity factors of its nuclear
generating units. Such activities have included improvements in operating and
personnel procedures and repair and replacement of equipment and can result in
longer unit outages. In this regard, ComEd's management decided to continue
the present unit outages at its LaSalle station until the identified
performance issues have been appropriately addressed. ComEd presently expects
such outages to extend into the summer of 1997.
 
  Generating station availability and performance during a year may be issues
in fuel reconciliation proceedings in assessing the prudence of fuel and power
purchases during such year. Final ICC orders have been issued in fuel
reconciliation proceedings for years prior to 1994. In 1996, an intervenor
filed testimony in the fuel reconciliation proceeding for 1994 seeking a
refund of approximately $90 million relating to nuclear station performance.
 
  ComEd estimates that it will expend approximately $15.5 billion, excluding
any contingency allowance, for decommissioning costs primarily during the
period from 2007 through 2032. Such costs, which are estimated to aggregate
$3.9 billion in current-year (1997) dollars, are expected to be funded by
external decommissioning trusts which ComEd established in compliance with
Illinois law and into which ComEd has been making annual contributions. Future
decommissioning cost estimates may be significantly affected by the adoption
of or changes to NRC regulations as well as changes in the assumptions used in
making such estimates, including changes in technology, available alternatives
for the disposal of nuclear waste, and inflation. See Note 1 of Notes to
Financial Statements under "Depreciation and Decommissioning" for additional
information regarding decommissioning costs.
 
  Environmental Matters. ComEd is involved in administrative and legal
proceedings concerning air quality, water quality and other matters. The
outcome of these proceedings may require increases in future construction
expenditures and operating expenses and changes in operating procedures. See
Note 21 of Notes to Financial Statements for additional information regarding
certain effects of CERCLA on ComEd.
 
 
                                      11
<PAGE>
 
RESULTS OF OPERATIONS
 
  Unicom's earnings per common share were $3.09 in 1996, $2.98 in 1995 and
$1.66 in 1994. Substantially all of the results of operations for Unicom are
the results of operations for ComEd. The results of Unicom's unregulated
subsidiaries are not material to the results of Unicom and subsidiary
companies as a whole. As such, the following section discusses the results of
operations for ComEd alone.
 
  Net Income. The 1996 results reflect, among other factors, a 1% decrease in
overall operation and maintenance expenses as compared to 1995 and the
positive effects of an income tax refund related to prior years (net income
effect of $26 million or $0.12 per common share) and a reduction in real
estate taxes (net income effect of $28 million or $0.13 per common share).
Approximately half of the reduction in real estate taxes is related to the
year 1995. The real estate tax reduction results primarily from ongoing
challenges by ComEd of the methodology used by local taxing authorities to
assess the value of ComEd's nuclear generating stations. The 1996 results also
reflect a 9% reduction in the total of interest expense on debt and dividend
requirements on preferred and preference stocks compared to 1995, largely due
to the early retirement of debt at the end of 1995. In September 1996, the ICC
approved ComEd's request to increase depreciation charges on its nuclear
generating units by $30 million for the year 1996, reducing net income by $20
million or $0.09 per common share.
 
  The 1995 results reflect higher revenues, primarily as a result of higher
kilowatthour sales, and the higher rate levels, which became effective in
January 1995 under the Rate Order. The higher kilowatthour sales reflect the
unusually hot summer weather in 1995. The 1995 results were also affected by
higher operation and maintenance expenses, which reflect an after-tax charge
of $59 million or $0.27 per common share for a voluntary employee separation
offer to certain ComEd employees. ComEd also recorded an after-tax charge of
$20 million or $0.09 per common share related to the early redemption of $645
million of long-term debt.
 
  The 1994 results reflect higher revenues as a result of the favorable
comparison to 1993 in which the effects of the Rate Matters Settlement and the
Fuel Matters Settlement were recorded. The 1994 results also reflect ComEd's
increased kilowatthour sales to ultimate consumers as the result of an
improving economy and warmer weather. The effects of these items were
partially offset by higher operation and maintenance expenses, which include
an after-tax charge of $20 million or $0.09 per common share for additional
pension costs related to an early retirement offer made to certain employees
during 1994. ComEd also recorded a reduction in the carrying value of its
investments in uranium-related properties in 1994, which reduced net income by
$34 million or $0.16 per common share.
 
  Operating Revenues. ComEd's electric operating revenues reflect revenues
from sales to ultimate consumers (including residential, commercial and
industrial customers within its service territory), revenues from sales for
resale (i.e., sales to wholesale customers, principally other electric
utilities), and revenues from collections under its fuel adjustment clause
(which is intended to recover ComEd's fuel cost for generating electric energy
and the energy portion of purchased power cost in relation to the amount
included in ComEd's base rates). Operating revenues are affected by
kilowatthour sales, rates and fuel adjustment clause recoveries. Kilowatthour
sales, in turn, are affected by weather, the level of economic activity within
ComEd's service area, and off-system or wholesale sales to other utilities.
Off-system sales opportunities are affected by a number of factors, including
nuclear generating availability and performance.
 
  During 1996, electric operating revenues increased $25 million principally
reflecting increased sales for resale and increased energy cost recoveries
under ComEd's fuel adjustment clause, although kilowatthour sales to ultimate
consumers were down 1.1% from the prior year due to the cooler summer weather
compared to the exceptionally hot summer in 1995. Operating revenues
 
                                      12
<PAGE>
 
increased $632 million in 1995, as compared to 1994, primarily due to an
increase of 4.6% in kilowatthour sales to ultimate consumers attributable to
the hot summer weather as well as a rate increase that became effective in
January 1995. Operating revenues increased $1,017 million in 1994, as compared
to 1993, principally reflecting the favorable comparison to the prior year in
which the refunds associated with the Rate Matters Settlement and the Fuel
Matters Settlement were deducted from revenues, but also reflecting a 2.8%
increase in kilowatthour sales to ultimate consumers as a result of warmer
summer weather, colder winter weather and improved economic activity within
ComEd's service territory. The 1994 revenues were also affected by a decline
in the amount of energy costs recovered under the fuel adjustment clause.
Kilowatthour sales including sales for resale decreased 0.1% in 1996,
increased 7.3% in 1995 and decreased 3.0% in 1994.
 
  Fuel Costs. Changes in fuel expense for 1996, 1995 and 1994 primarily
resulted from changes in the average cost of fuel consumed, changes in the mix
of fuel sources of electric energy generated and changes in net generation of
electric energy. Fuel mix is determined primarily by system load, the costs of
fuel consumed and the availability of nuclear generating units. The cost of
fuel consumed, net generation of electric energy and fuel sources of
kilowatthour generation were as follows:
 
<TABLE>
<CAPTION>
                                                          1996    1995    1994
                                                         ------  ------  ------
   <S>                                                   <C>     <C>     <C>
   Cost of fuel consumed (per million Btu):
     Nuclear...........................................   $0.53   $0.52   $0.53
     Coal..............................................   $2.41   $2.43   $2.31
     Oil...............................................   $3.41   $3.06   $2.89
     Natural gas.......................................   $2.75   $1.85   $2.27
     Average all fuels.................................   $1.17   $1.05   $1.08
   Net generation of electric energy (millions of kilo-
    watthours).........................................  93,048  96,608  90,243
   Fuel sources of kilowatthour generation:
     Nuclear...........................................      67%     73%     71%
     Coal..............................................      30      24      25
     Oil...............................................       1     --        1
     Natural gas.......................................       2       3       3
                                                         ------  ------  ------
                                                            100%    100%    100%
                                                         ======  ======  ======
</TABLE>
 
  The decrease in nuclear generation as a percentage of total generation for
1996 compared to the prior years is primarily due to scheduled and non-
scheduled outages at certain of ComEd's nuclear generating stations.
 
  Under the Energy Policy Act of 1992, investor-owned electric utilities that
have purchased enrichment services from the DOE are being assessed amounts to
fund a portion of the cost for the decontamination and decommissioning of
uranium enrichment facilities owned and previously operated by the DOE.
ComEd's portion of such assessments is estimated to be approximately $15
million per year (to be adjusted annually for inflation) to 2007. The Act
provides that such assessments are to be treated as a cost of fuel. See Note 1
of Notes to Financial Statements under "Deferred Unrecovered Energy Costs" for
information related to the accounting for such costs.
 
  Fuel Supply. Compared to other utilities, ComEd has relatively low average
fuel costs as a result of its reliance predominantly on lower cost nuclear
generation. ComEd's coal costs, however, are high compared to those of other
utilities. ComEd's western coal contracts and its rail contracts for delivery
of the western coal provide for the purchase of certain coal at prices
substantially above currently prevailing market prices, and ComEd has
significant purchase commitments under its contracts. In addition, as of
December 31, 1996, ComEd had unrecovered fuel costs in the form of coal
reserves of approximately $364 million. In prior years, ComEd's commitments
for the purchase of coal exceeded its requirements. Rather than take all the
coal it was required to take, ComEd agreed to purchase the coal in place in
the form of coal reserves. For additional information concerning ComEd's coal
purchase commitments, fuel reconciliation proceedings and coal reserves, see
"Liquidity and Capital Resources" above and Notes 1 and 21 of Notes to
Financial Statements.
 
 
                                      13
<PAGE>
 
  Purchased Power. Amounts of purchased power are primarily affected by system
load, the availability of ComEd and the Indiana Company's generating units and
the availability and cost of power from other utilities.
 
  The number and average cost of kilowatthours purchased were as follows:
 
<TABLE>
<CAPTION>
                                                            1996   1995   1994
                                                            -----  -----  -----
   <S>                                                      <C>    <C>    <C>
   Kilowatthours (millions)................................ 6,129  2,475  2,071
   Cost per kilowatthour...................................  2.37c  2.60c  2.86c
</TABLE>
 
 
  Deferred Under or Overrecovered Energy Costs--Net. Operating expenses for
the years 1996, 1995 and 1994 include the net change in under or overrecovered
allowable energy costs under ComEd's fuel adjustment clause. See "Fuel Costs"
and "Fuel Supply" above and Note 1 of Notes to Financial Statements under
"Deferred Unrecovered Energy Costs."
 
  Operation and Maintenance Expenses. Operation and maintenance expenses
include the expenses associated with operating and maintaining ComEd's
generation, transmission and distribution assets as well as administrative
overhead and support. Given the variety of expense categories covered, there
are a number of factors which affect the level of such expenses within any
given year. Two major components of such expenses, however, are the costs
associated with operating and maintaining ComEd's fossil and nuclear
generating facilities. Generating station expenses are affected by the cost of
materials, regulatory requirements and expectations, the age of facilities as
well as cost control efforts.
 
  During the three years presented in the financial statements, the aggregate
level of operation and maintenance expenses decreased 1% in 1996 and increased
4% during 1995 and 2% during 1994. All three years include increases in the
level of generating station expenses, as discussed below. The year to year
variations reflect, in substantial part, the impact in 1995 of an early
separation program offered to ComEd's employees, which resulted in a $97
million charge related to the offered incentives. Additional factors in each
year also affected the level of operation and maintenance expenses.
 
  Operation and maintenance expenses associated with generating stations have
increased during the three year period as a result of activities associated
with the repair, replacement and improvement of generating facility equipment.
During 1996, 1995 and 1994, operation and maintenance expenses associated with
fossil generating stations increased $4 million, $3 million and $4 million,
respectively. In the same years, operation and maintenance expenses associated
with nuclear generating stations increased $88 million, $32 million and $9
million, respectively. During 1994, the increases were attributable to
scheduled maintenance and unplanned equipment repairs. In 1995, ComEd
increased the number and scope of maintenance activities associated with
generating stations. Such efforts are the result of station performance
evaluations performed to identify the sources and causes of unplanned
equipment repairs. The goal of such efforts is to design and implement cost
effective repairs and improvements to improve station availability. The
efforts begun in 1995 continued into 1996 and are expected to continue through
1998.
 
  The increase in operation and maintenance expenses associated with nuclear
generating stations has been driven by ComEd's objective to improve station
availability as well as to meet regulatory requirements and expectations.
ComEd is actively embarked upon a program to improve the quality of nuclear
operations, including safety and efficiency, which is also expected to achieve
a longer term goal of improved availability and to be positioned to take
advantage of opportunities in the wholesale market for revenue generation.
During the three years presented in the financial statements, ComEd has
increased and reinforced station management with managers drawn from other
utilities having experience with similar operating issues. It has also sought
to identify, anticipate
 
                                      14
<PAGE>
 
and address nuclear station operation and performance issues in a safe, cost-
effective manner while seeking to improve the availability and capacity
factors of its nuclear generating units. Such activities have included
improvements in operating and personnel procedures and repair and replacement
of equipment, and can result in longer unit outages. Such activities have
involved increased maintenance and repair expenses in recent years. ComEd
expects 1997 overall operation and maintenance expenses to increase by
approximately $150 million over 1996 expenses. Approximately $100 million of
this increase is related to nuclear operations and is intended to address
previously identified operational issues (including issues identified by the
NRC in connection with its determination regarding the plants to be monitored
closely) and to achieve a longer term benefit of improved capacity factors.
ComEd expects this increased level of expenses to continue through 1998.
 
  Operation and maintenance expenses associated with transmission and
distribution facilities increased $11 million in 1996 and decreased $3 million
and $18 million in 1995 and 1994, respectively. The 1996 increase reflects
higher maintenance expenses. The decreases in 1995 and 1994 reflect cost
control efforts. Costs of customer-related activities, including customer
assistance, energy sales services and uncollectible accounts, increased $17
million and $10 million in 1996 and 1995, respectively.
 
  Operation and maintenance expenses also include compensation and benefits
expenses. During the period from 1995 to 1996, ComEd undertook to reduce the
size of its workforce by offering incentives for employees to leave
voluntarily. Such incentives included both current payments and earlier
eligibility for post-retirement health care benefits, and resulted in 1995
provisions of $72 million for the payments and $25 million for the benefits
incentives and 1996 provisions of $8 million for payments and $4 million for
benefits incentives. ComEd also offered an early retirement program during
1994, which increased pension expense by approximately $34 million in that
year. During 1995 and 1996, charges related to post-retirement health care
benefits (after excluding the effects of the separation program) decreased $40
million and $12 million, respectively, primarily as a result of a plan
amendment effected in mid-1995 which required retired employee contributions
to the plan for the first time. Favorable experience also allowed the use of
lower health care cost trend rates, producing a lower charge for 1995 and
1996. During 1996, ComEd also recorded a reduction of $12 million in the
provision for pension costs in 1996 as compared to 1995. Finally, operation
and maintenance expenses reflect $38 million, $65 million and $50 million for
employee incentive compensation plan costs in 1996, 1995 and 1994,
respectively. The payments, which were made partly in cash and partly in
shares of Unicom common stock, were made under Unicom's Long-Term Incentive
Plan as the result of the achievement during the indicated years of specified
financial performance, cost containment and operating performance goals.
Operation and maintenance expenses in 1996, 1995 and 1994 include
approximately $19 million, $16 million and $20 million, respectively, for wage
increases. The effects of inflation have also increased operation and
maintenance expenses during the years and are also reflected in the increases
and decreases discussed herein.
 
  Operation and maintenance expenses associated with certain administrative
and general costs decreased $11 million in 1995 and increased $12 million in
1994. The decrease in 1995 was due to a variety of reasons including a
decrease in expenses related to insurance, injuries and damages and the
provision for vacation pay liability. The increase in 1994 is primarily due to
increased provisions for injuries and damages and obsolete materials.
 
  Depreciation. Depreciation expense increased in 1996, 1995 and 1994 as a
result of additions to plant in service and an increase in the nuclear
depreciation rate for 1996. In September 1996, the ICC approved ComEd's
additional depreciation initiative for 1996, which increased depreciation
expense by $30 million in 1996. ComEd also continues to consider the
possibility of additional
 
                                      15
<PAGE>
 
depreciation options. See "Depreciation and Decommissioning" in Note 1 of
Notes to Financial Statements and Note 2 of Notes to Financial Statements for
additional information.
 
  Interest on Debt. Changes in interest on long-term debt and notes payable
for the years 1996, 1995 and 1994 were due to changes in average interest
rates and in the amounts of long-term debt and notes payable outstanding.
Changes in interest on ComEd's long-term debt also reflected new issues of
debt, the retirement and early redemption of debt, and the retirement and
redemption of issues which were refinanced at generally lower rates of
interest. The average amounts of ComEd's long-term debt and notes payable
outstanding and average interest rates thereon were as follows:
 
<TABLE>
<CAPTION>
                                                          1996    1995    1994
                                                         ------  ------  ------
   <S>                                                   <C>     <C>     <C>
   Long-term debt outstanding:
    Average amount (millions)..........................  $6,644  $7,528  $7,934
    Average interest rate..............................    7.67%   7.78%   7.83%
   Notes payable outstanding:
    Average amount (millions)..........................  $  230  $   51  $    9
    Average interest rate..............................    5.79%   6.40%   6.48%
</TABLE>
 
  Decommissioning. The staff of the SEC has questioned certain of the current
accounting practices of the electric utility industry, including ComEd,
regarding the recognition, measurement and classification of decommissioning
costs for nuclear generating stations in financial statements of electric
utilities. In response to these questions, the FASB is reviewing the
accounting for nuclear decommissioning costs and issued an exposure draft in
February 1996 requesting written comment. If current electric utility industry
accounting practices for such decommissioning costs are changed, annual
provisions for decommissioning could increase and the estimated cost for
decommissioning could be recorded as a liability rather than as accumulated
depreciation. Unicom does not believe that such changes, if required, would
have an adverse effect on the results of operations due to ComEd's ability to
recover decommissioning costs through rates.
 
  Investments in Uranium-Related Properties. In 1994, ComEd recorded a
reduction in the carrying value of its investments in uranium-related
properties after completing a review of various alternatives and reassessing
the long-term recoverability of those investments. The effects of the
reduction reduced 1994 net income by $34 million or $0.16 per common share.
 
  Other Items. The amounts of AFUDC reflect changes in the average levels of
investment subject to AFUDC and changes in the average annual capitalization
rates as discussed in Note 1 of Notes to Financial Statements. AFUDC does not
contribute to the current cash flow of Unicom or ComEd.
 
  ComEd's ratios of earnings to fixed charges for the years 1996, 1995 and
1994 were 2.90, 2.79 and 1.99, respectively. ComEd's ratios of earnings to
fixed charges and preferred and preference stock dividend requirements for the
years 1996, 1995 and 1994 were 2.48, 2.39 and 1.73, respectively.
 
  Business corporations, in general, have been adversely affected by inflation
because amounts retained after the payment of all costs have been inadequate
to replace, at increased costs, the productive assets consumed. Electric
utilities in particular have been especially affected as a result of their
capital intensive nature and regulation which limits capital recovery and
prescribes installation or modification of facilities to comply with
increasingly stringent safety and environmental requirements. Because the
regulatory process limits the amount of depreciation expense included in
ComEd's revenue allowance to the original cost of utility plant investment,
the resulting cash flows are inadequate to provide for replacement of that
investment in future years or preserve the purchasing power of common equity
capital previously invested.
 
                                      16
<PAGE>
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To the Shareholders of Unicom Corporation:
 
  We have audited the accompanying consolidated balance sheets and statements
of consolidated capitalization of Unicom Corporation (an Illinois corporation)
and subsidiary companies as of December 31, 1996 and 1995, and the related
statements of consolidated income, retained earnings and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Unicom Corporation and
subsidiary companies as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
 
                                          Arthur Andersen LLP
 
Chicago, Illinois
January 31, 1997
 
                                      17
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                       STATEMENTS OF CONSOLIDATED INCOME
 
  The following Statements of Consolidated Income for the years 1996, 1995 and
1994 reflect the results of past operations and are not intended as any
representation as to results of operations for any future period. Future
operations will necessarily be affected by various and diverse factors and
developments, including changes in electric rates, population, business
activity, competition, taxes, environmental control, energy use, fuel supply,
cost of labor, fuel, purchased power and other matters, the nature and effect
of which cannot now be determined.
 
<TABLE>
<CAPTION>
                                               1996        1995        1994
                                            ----------  ----------  ----------
                                              (THOUSANDS EXCEPT PER SHARE
                                                         DATA)
<S>                                         <C>         <C>         <C>
Operating Revenues........................  $6,937,024  $6,910,045  $6,277,521
                                            ----------  ----------  ----------
Operating Expenses and Taxes:
  Fuel....................................  $1,157,855  $1,087,109  $1,051,793
  Purchased power.........................     145,299      64,378      59,123
  Operation and maintenance...............   2,161,847   2,175,651   2,094,655
  Depreciation............................     953,701     898,034     887,466
  Recovery of regulatory assets...........      15,272      15,272      15,453
  Taxes (except income)...................     783,575     833,297     787,796
  Income taxes............................     489,545     526,518     326,744
  Investment tax credits deferred--net....     (33,378)    (28,710)    (28,757)
                                            ----------  ----------  ----------
                                            $5,673,716  $5,571,549  $5,194,273
                                            ----------  ----------  ----------
Operating Income..........................  $1,263,308  $1,338,496  $1,083,248
                                            ----------  ----------  ----------
Other Income and (Deductions):
  Interest on long-term debt..............  $ (515,370) $ (587,583) $ (621,225)
  Interest on notes payable...............     (13,308)     (3,280)       (557)
  Allowance for funds used during con-
   struction--
    Borrowed funds........................      19,426      11,137      18,912
    Equity funds..........................      20,776      13,129      22,628
  Income taxes applicable to nonoperating
   activities.............................       7,812       5,085      27,074
  Interest and other costs for 1993 
   Settlements...........................          --          (61)    (21,464)
  Provision for dividends--
    Preferred and preference stocks of
     ComEd................................     (64,424)    (69,961)    (64,927)
    ComEd-obligated mandatorily redeemable
     preferred securities of subsidiary
     trust................................     (16,960)     (4,428)        --
  Miscellaneous--net......................     (35,160)    (43,001)    (88,755)
                                            ----------  ----------  ----------
                                            $ (597,208) $ (678,963) $ (728,314)
                                            ----------  ----------  ----------
Net Income Before Extraordinary Item......  $  666,100  $  659,533  $  354,934
Extraordinary Loss Related to Early 
 Redemption of Long-Term Debt, Less 
 Applicable Income Taxes..................         --      (20,022)        --
                                            ----------  ----------  ----------
Net Income................................  $  666,100  $  639,511  $  354,934
                                            ==========  ==========  ==========
Average Number of Common Shares Outstand-
 ing......................................     215,500     214,692     214,031
Earnings Per Common Share Before 
 Extraordinary Item ......................  $     3.09  $     3.07  $     1.66
Extraordinary Loss Related to Early
 Redemption of Long-Term Debt, Less
 Applicable Income Taxes..................         --        (0.09)        --
                                            ----------  ----------  ----------
Earnings Per Common Share.................  $     3.09  $     2.98  $     1.66
                                            ==========  ==========  ==========
Cash Dividends Declared Per Common Share..  $     1.60  $     1.60  $     1.60
</TABLE>
 
  The accompanying Notes to Financial Statements are an integral part of the
                              above statements.
 
                                      18
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                            DECEMBER 31
                                                      ------------------------
                       ASSETS                            1996         1995
                       ------                         -----------  -----------
                                                      (THOUSANDS OF DOLLARS)
<S>                                                   <C>          <C>
Utility Plant:
  Plant and equipment, at original cost (includes
   construction work in progress of $1,034 million
   and $1,105 million, respectively)................. $27,900,632  $27,052,778
  Less--Accumulated provision for depreciation.......  11,479,991   10,565,093
                                                      -----------  -----------
                                                      $16,420,641  $16,487,685
  Nuclear fuel, at amortized cost....................     805,623      734,667
                                                      -----------  -----------
                                                      $17,226,264  $17,222,352
                                                      -----------  -----------
Investments and Other Property:
  Nuclear decommissioning funds...................... $ 1,456,360  $ 1,237,527
  Subsidiary companies...............................     113,888      113,657
  Other, at cost.....................................     146,302       99,149
                                                      -----------  -----------
                                                      $ 1,716,550  $ 1,450,333
                                                      -----------  -----------
Current Assets:
  Cash............................................... $     8,727  $     3,575
  Temporary cash investments.........................      51,821       47,801
  Special deposits...................................       1,610        3,546
  Receivables--
    Customers........................................     568,155      579,848
    Taxes............................................         --        82,988
    Other............................................     109,835       83,795
    Provisions for uncollectible accounts............     (12,893)     (11,828)
  Coal and fuel oil, at average cost.................     140,362      129,176
  Materials and supplies, at average cost............     324,485      333,539
  Deferred unrecovered energy costs..................     104,651       46,028
  Deferred income taxes related to current assets and
   liabilities.......................................     120,185      107,991
  Prepayments and other..............................      35,872       45,178
                                                      -----------  -----------
                                                      $ 1,452,810  $ 1,451,637
                                                      -----------  -----------
Deferred Charges and Other Noncurrent Assets:
  Regulatory assets.................................. $ 2,434,807  $ 2,467,386
  Unrecovered energy costs...........................     444,009      588,152
  Other..............................................     113,530       70,308
                                                      -----------  -----------
                                                      $ 2,992,346  $ 3,125,846
                                                      -----------  -----------
                                                      $23,387,970  $23,250,168
                                                      ===========  ===========
</TABLE>
 
   The accompanying Notes to Financial Statements are an integral part of the
                               above statements.
 
                                       19
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31
                                                        -----------------------
            CAPITALIZATION AND LIABILITIES                 1996        1995
            ------------------------------              ----------- -----------
                                                        (THOUSANDS OF DOLLARS)
<S>                                                     <C>         <C>
Capitalization (see accompanying statements):
  Common stock equity.................................. $ 6,104,380 $ 5,769,637
  Preferred and preference stocks of ComEd--
    Without mandatory redemption requirements..........     507,342     508,034
    Subject to mandatory redemption requirements.......     217,901     261,475
  ComEd-obligated mandatorily redeemable preferred
   securities of subsidiary trust*.....................     200,000     200,000
  Long-term debt.......................................   6,069,534   6,549,335
                                                        ----------- -----------
                                                        $13,099,157 $13,288,481
                                                        ----------- -----------
Current Liabilities:
  Notes payable--
    Commercial paper................................... $   121,000 $   261,000
    Bank loans.........................................       7,750       7,150
  Current portion of long-term debt, redeemable prefer-
   ence stock and capitalized lease obligations of sub-
   sidiary companies...................................     745,665     434,563
  Accounts payable.....................................     469,815     609,224
  Accrued interest.....................................     168,750     171,523
  Accrued taxes........................................     171,104     215,388
  Dividends payable....................................     101,850     102,497
  Customer deposits....................................      51,585      44,520
  Other................................................      98,567      93,841
                                                        ----------- -----------
                                                        $ 1,936,086 $ 1,939,706
                                                        ----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
  Deferred income taxes................................ $ 4,574,342 $ 4,507,349
  Accumulated deferred investment tax credits..........     655,662     689,041
  Accrued spent nuclear fuel disposal fee and related
   interest............................................     657,449     624,191
  Obligations under capital leases of subsidiary compa-
   nies................................................     476,668     375,524
  Regulatory liabilities...............................     668,301     601,002
  Other................................................   1,320,305   1,224,874
                                                        ----------- -----------
                                                        $ 8,352,727 $ 8,021,981
                                                        ----------- -----------
Commitments and Contingent Liabilities (Note 21)
                                                        $23,387,970 $23,250,168
                                                        =========== ===========
</TABLE>
 
  *As described in Note 8 of Notes to Financial Statements, the sole asset of
ComEd Financing I, a subsidiary trust of ComEd, is $206.2 million principal
amount of ComEd's 8.48% subordinated deferrable interest notes due
September 30, 2035.
 
  The accompanying Notes to Financial Statements are an integral part of the
                               above statements.
 
                                      20
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES

                   STATEMENTS OF CONSOLIDATED CAPITALIZATION
 
<TABLE>
<CAPTION>
                                                            DECEMBER 31
                                                      -------------------------
                                                         1996          1995
                                                      -----------  ------------
                                                       (THOUSANDS OF DOLLARS)
<S>                                                   <C>           <C> 
Common Stock Equity:
  Common stock, without par value--
   Outstanding--215,954,625 shares and 215,255,998
    shares, respectively (excludes $4 million as of
    December 31, 1996 held by trustee for Unicom
    Stock Bonus Deferral Plan)......................  $ 4,929,909   $ 4,916,438
  Preference stock expense of ComEd.................       (3,526)       (3,694)
  Retained earnings.................................    1,177,997       856,893
                                                      -----------   -----------
                                                      $ 6,104,380   $ 5,769,637
                                                      -----------   -----------
Preferred and Preference Stocks of ComEd--
  Without Mandatory Redemption Requirements:
    Preference stock, cumulative, without par
     value--
     Outstanding--13,499,549 shares.................  $   504,957   $   504,957
    $1.425 convertible preferred stock, cumulative,
     without par value--
     Outstanding--75,003 shares and 96,753 shares,
      respectively..................................        2,385         3,077
    Prior preferred stock, cumulative, $100 par
     value per share-- No shares outstanding........          --            --
                                                      -----------   -----------
                                                      $   507,342   $   508,034
                                                      -----------   -----------
  Subject to Mandatory Redemption Requirements:
    Preference stock, cumulative, without par
     value--
     Outstanding--2,496,775 shares and 2,934,990
      shares, respectively..........................  $   248,589   $   292,163
    Current redemption requirements for preference
     stock included in current liabilities..........      (30,688)      (30,688)
                                                      -----------   -----------
                                                      $   217,901   $   261,475
                                                      -----------   -----------
ComEd-Obligated Mandatorily Redeemable Preferred 
 Securities of Subsidiary Trust:
  Outstanding--8,000,000............................  $   200,000   $   200,000
                                                      -----------   -----------
Long-Term Debt:
  First mortgage bonds:
    Maturing 1996 through 2001--5 1/4% to 9 3/8%....  $ 1,120,000   $ 1,270,000
    Maturing 2002 through 2011--4.20% to 8 3/8%.....    1,640,400     1,465,400
    Maturing 2012 through 2021--5.85% to 9 7/8%.....    1,391,000     1,391,000
    Maturing 2022 through 2023--7 3/4% to 8 5/8%....    1,160,000     1,160,000
                                                      -----------   -----------
                                                      $ 5,311,400   $ 5,286,400
  Sinking fund debentures, due 1999 through 2011--
   2 3/4% to 7 5/8%.................................      105,164       110,505
  Pollution control obligations, due 2004 through
   2014--4.10% to 6 7/8%............................      142,200       317,200
  Other long-term debt..............................    1,100,833     1,126,318
  Current maturities of long-term debt included in
   current liabilities..............................     (540,505)     (235,992)
  Unamortized net debt discount and premium.........      (49,558)      (55,096)
                                                      -----------   -----------
                                                      $ 6,069,534   $ 6,549,335
                                                      -----------   -----------
                                                      $13,099,157   $13,288,481
                                                      ===========   ===========
</TABLE>
 
   The accompanying Notes to Financial Statements are an integral part of the
                               above statements.
 
                                       21
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                  STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
 
<TABLE>
<CAPTION>
                                                    1996       1995       1994
                                                 ---------- ----------  --------
                                                     (THOUSANDS OF DOLLARS)
<S>                                              <C>        <C>         <C>
Balance at Beginning of Year.................... $  856,893 $  560,971  $549,152
Add--Net income.................................    666,100    639,511   354,934
                                                 ---------- ----------  --------
                                                 $1,522,993 $1,200,482  $904,086
                                                 ---------- ----------  --------
Deduct--
    Cash dividends declared on common stock..... $  344,892 $  343,619  $342,561
    Other capital stock transactions--net.......        104        (30)      554
                                                 ---------- ----------  --------
                                                 $  344,996 $  343,589  $343,115
                                                 ---------- ----------  --------
Balance at End of Year.......................... $1,177,997 $  856,893  $560,971
                                                 ========== ==========  ========
</TABLE>
 
 
 
 
 
   The accompanying Notes to Financial Statements are an integral part of the
                               above statements.
 
                                       22
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                     STATEMENTS OF CONSOLIDATED CASH FLOWS
 
<TABLE>
<CAPTION>
                                            1996         1995         1994
                                         -----------  -----------  -----------
                                               (THOUSANDS OF DOLLARS)
<S>                                      <C>          <C>          <C>
Cash Flow From Operating Activities:
 Net income............................. $   666,100  $   639,511  $   354,934
 Adjustments to reconcile net income to
  net cash provided by operating
  activities:
   Depreciation and amortization........     990,779      949,413      929,365
   Deferred income taxes and investment
    tax credits--net....................     129,770      156,817      126,281
   Extraordinary loss related to early
    redemption of long-term debt........         --        33,158          --
   Equity component of allowance for
    funds used during construction......     (20,776)     (13,129)     (22,628)
   Provisions for revenue refunds and
    related interest....................         --           --        37,548
   Revenue refunds and related interest.         --        15,135   (1,221,650)
   Recovery of regulatory assets........      15,272       15,272       15,453
   Provisions/(payments) for liability
    for early retirement and separation
    costs--net..........................     (29,888)      60,713       33,580
   Net effect on cash flows of changes
    in:
     Receivables........................      69,706     (178,665)     114,215
     Coal and fuel oil..................     (11,186)     (20,304)       2,880
     Materials and supplies.............       9,053       51,073       18,102
     Accounts payable excluding nuclear
      fuel lease principal payments and
      early retirement and separation
      costs--net........................     106,435      460,705      116,688
     Accrued interest and taxes.........     (47,057)      (2,684)      70,408
     Other changes in certain current
      assets and liabilities............      13,850       26,637      (55,843)
   Other--net...........................      67,796      138,781      134,188
                                         -----------  -----------  -----------
                                         $ 1,959,854  $ 2,332,433  $   653,521
                                         -----------  -----------  -----------
Cash Flow From Investing Activities:
 Construction expenditures.............. $  (982,274) $  (927,327) $  (739,679)
 Nuclear fuel expenditures..............    (281,833)    (289,118)    (257,264)
 Equity component of allowance for
  funds used during construction........      20,776       13,129       22,628
 Contributions to nuclear
  decommissioning funds.................    (119,281)    (132,653)    (132,550)
 Other investments and special depos-
  its...................................      (1,052)      (1,601)     622,264
                                         -----------  -----------  -----------
                                         $(1,363,664) $(1,337,570) $  (484,601)
                                         -----------  -----------  -----------
Cash Flow From Financing Activities:
 Issuance of securities--
   Long-term debt....................... $   251,902  $    62,000  $   546,289
   Preferred securities of subsidiary
    trust...............................         --       200,000          --
   Capital stock........................      17,754       25,507       86,972
 Retirement and redemption of securi-
  ties--
   Long-term debt.......................    (433,084)  (1,137,272)    (703,930)
   Capital stock........................     (44,513)     (17,935)     (23,643)
 Deposits and securities held for re-
  tirement and redemption of securi-
  ties..................................         --           106        3,191
 Premium paid on early redemption of
  long-term debt........................         --       (25,823)      (4,564)
 Cash dividends paid on common stock....    (344,553)    (343,375)    (342,322)
 Proceeds from sale/leaseback of nu-
  clear fuel............................     316,617      193,215      306,649
 Nuclear fuel lease principal payments..    (211,741)    (237,845)    (209,689)
 Increase (Decrease) in short-term
  borrowings............................    (139,400)     261,000        1,200
                                         -----------  -----------  -----------
                                         $  (587,018) $(1,020,422) $  (339,847)
                                         -----------  -----------  -----------
Increase (Decrease) in Cash and Tempo-
 rary Cash Investments.................. $     9,172  $   (25,559) $  (170,927)
Cash and Temporary Cash Investments at
 Beginning of Year......................      51,376       76,935      247,862
                                         -----------  -----------  -----------
Cash and Temporary Cash Investments at
 End of Year............................ $    60,548  $    51,376  $    76,935
                                         ===========  ===========  ===========
</TABLE>
 
   The accompanying Notes to Financial Statements are an integral part of the
                               above statements.
 
                                       23
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                         NOTES TO FINANCIAL STATEMENTS
 
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Corporate Structure and Basis of Presentation. Unicom was incorporated in
January 1994 and became the parent holding company of ComEd and Unicom
Enterprises in a corporate restructuring that became effective on September 1,
1994. ComEd, an electric utility, is the principal subsidiary of Unicom.
Unicom Enterprises is an unregulated subsidiary of Unicom and is engaged,
through subsidiaries, in energy service activities. Unicom also has one other
subsidiary that was formed to engage in unregulated activities.
 
  The consolidated financial statements include the accounts of Unicom, ComEd,
the Indiana Company, ComEd Financing I and Unicom's unregulated subsidiaries.
All significant intercompany transactions have been eliminated. ComEd's
investments in other subsidiary companies, which are not material in relation
to ComEd's financial position or results of operations, are accounted for in
accordance with the equity method of accounting.
 
  Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
  Regulation. ComEd is subject to regulation as to accounting and ratemaking
policies and practices by the ICC and FERC. ComEd's accounting policies and
the accompanying consolidated financial statements conform to generally
accepted accounting principles applicable to rate-regulated enterprises and
reflect the effects of the ratemaking process in accordance with SFAS No. 71,
Accounting for the Effects of Certain Types of Regulation. Such effects
concern mainly the time at which various items enter into the determination of
net income in order to follow the principle of matching costs and revenues.
 
                                      24
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
 
  Regulatory Assets and Liabilities. Regulatory assets are incurred costs
which have been deferred and are amortized for ratemaking and accounting
purposes. Regulatory liabilities represent amounts to be settled with
customers through future rates. Regulatory assets and liabilities reflected on
the Consolidated Balance Sheets at December 31, 1996 and 1995 were as follows:
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31
                                                           ---------------------
                                                              1996       1995
                                                           ---------- ----------
                                                               (THOUSANDS OF
                                                                 DOLLARS)
<S>                                                        <C>        <C>
Regulatory assets:
  Deferred income taxes (1)............................... $1,649,037 $1,689,832
  Deferred carrying charges (2)...........................    396,879    409,923
  Nuclear decommissioning costs--Dresden Unit 1 (3).......    174,621    138,058
  Unamortized loss on reacquired debt (4).................    148,380    160,440
  Other...................................................     65,890     69,133
                                                           ---------- ----------
                                                           $2,434,807 $2,467,386
                                                           ========== ==========
Regulatory liabilities:
  Deferred income taxes (1)............................... $  668,301 $  601,002
                                                           ========== ==========
</TABLE>
--------
(1) Recorded in compliance with SFAS No. 109.
(2) Recorded as authorized in the Remand Order. The amortization period is
    over the remaining lives of the Units.
(3) Amortized over the remaining life of Dresden station. See "Depreciation
    and Decommissioning" below for additional information.
(4) Amortized over the remaining lives of the long-term debt issued to finance
    the reacquisition. See "Loss on Reacquired Debt" below for additional
    information.
 
See "Deferred Unrecovered Energy Costs" below regarding the fuel adjustment
clause, the DOE assessment and coal reserves.
 
  If a portion of ComEd's operations was no longer subject to the provisions
of SFAS No. 71 as a result of a change in regulation or the effects of
competition, ComEd would be required to write off the related regulatory
assets and liabilities. In addition, ComEd would be required to determine any
impairment to other assets and purchase contracts and write down such assets
or contracts to their fair value.
 
  SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, which was adopted on January 1, 1996,
established accounting standards for the impairment of long-lived assets. The
SFAS also requires that regulatory assets which are no longer probable of
recovery through future revenue be charged to earnings. SFAS No. 121 did not
have an impact on ComEd's financial position or results of operations upon
adoption.
 
  Deferred Unrecovered Energy Costs. The fuel adjustment clause adopted by the
ICC provides for the recovery of changes in fossil and nuclear fuel costs and
the energy portion of purchased power costs as compared to the fuel and
purchased energy costs included in ComEd's base rates. As authorized by the
ICC, ComEd has recorded under or overrecoveries of allowable fuel and energy
costs which, under the clause, are recoverable or refundable in subsequent
months. Deferred unrecovered energy costs also include amounts to be recovered
through the fuel adjustment clause for assessments by the DOE to fund a
portion of the cost for the decontamination and decommissioning of uranium
enrichment facilities owned and previously operated by the DOE. As of December
31, 1996 and 1995, an asset related to the assessments of approximately $168
million and $179 million, respectively, was recorded, of which the current
portion of approximately $16 million and $15 million, respectively, was
included in current assets on the Consolidated Balance Sheets. As of December
31, 1996 and 1995, a corresponding liability of approximately $157 million and
$167 million, respectively, was recorded, of which approximately $16 million
and $15 million, respectively, was recorded in other current liabilities.
 
                                      25
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
 
  At December 31, 1996 and 1995, ComEd had unrecovered fuel costs in the form
of coal reserves of approximately $364 million and $448 million, respectively.
In prior years, ComEd's commitments for the purchase of coal exceeded its
requirements. Rather than take all the coal it was required to take, ComEd
agreed to purchase the coal in place in the form of coal reserves. ComEd has
been allowed to recover from its customers the costs of the coal reserves
through its fuel adjustment clause as coal is used for the generation of
electricity; however, ComEd is not earning a return on the expenditures for
coal reserves. Such fuel costs expected to be recovered within one year
amounting to approximately $73 million and $24 million at December 31, 1996
and 1995, respectively, have been included on the Consolidated Balance Sheets
in current assets as deferred unrecovered energy costs. ComEd expects to fully
recover the costs of the coal reserves by the year 2000. See Note 21 for
additional information concerning ComEd's coal commitments.
 
  Customer Receivables and Revenues. ComEd is engaged principally in the
production, purchase, transmission, distribution and sale of electricity to a
diverse base of residential, commercial, industrial and wholesale customers.
ComEd's electric service territory has an area of approximately 11,300 square
miles and an estimated population of approximately eight million as of
December 31, 1996 and 1995. It includes the city of Chicago, an area of about
225 square miles with an estimated population of approximately three million
from which ComEd derived approximately one-third of its ultimate consumer
revenues in 1996. ComEd had approximately 3.4 million electric customers at
December 31, 1996.
 
  Depreciation and Decommissioning. ComEd's depreciation is provided on the
straight-line basis by amortizing the cost of depreciable plant and equipment
over estimated composite service lives. Non-nuclear plant and equipment is
depreciated at annual rates developed for each class of plant based on their
composite service lives. Provisions for depreciation were at average annual
rates of 3.25%, 3.14% and 3.13% of average depreciable utility plant and
equipment for the years 1996, 1995 and 1994, respectively. The annual rate for
nuclear plant and equipment is 3.09% for 1996, which includes increased
depreciation charges on ComEd's nuclear generating units, approved by the ICC
in September 1996, and excludes separately collected decommissioning costs,
and 2.88% for 1995 and 1994, which excludes separately collected
decommissioning costs. See Note 2 for additional information concerning the
ICC's approval of ComEd's request to increase depreciation charges on nuclear
generating units in 1996.
 
  Nuclear plant decommissioning costs are accrued over the expected service
lives of the related nuclear generating units. The accrual is based on an
annual levelized cost of the unrecovered portion of estimated decommissioning
costs which are escalated for expected inflation to the expected time of
decommissioning and are net of expected earnings on the trust funds. See
"Decommissioning" under "Management's Discussion and Analysis of Financial
Condition and Results of Operations," subcaption "Results of Operations," for
a discussion of questions raised by the staff of the SEC and a FASB review
regarding the electric utility industry method of accounting for
decommissioning costs. Dismantling is expected to occur relatively soon after
the end of the useful life of each related generating station. The accrual for
decommissioning is based on the prompt removal method authorized by NRC
guidelines. ComEd's twelve operating units have estimated remaining service
lives ranging from 9 to 31 years. ComEd's first nuclear unit, Dresden Unit 1,
is retired and is expected to be dismantled upon the retirement of the last
unit at that station, which is consistent with the regulatory treatment for
the related decommissioning costs.
 
  Based on ComEd's most recent study, decommissioning costs, including the
cost of decontamination and dismantling, are estimated to aggregate $3.9
billion in current-year (1997) dollars excluding a contingency allowance.
ComEd estimates that it will expend approximately $15.5
 
                                      26
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
billion, excluding any contingency allowance, for decommissioning costs
primarily during the period from 2007 through 2032. Such costs are expected to
be funded by the external decommissioning trusts which ComEd established in
compliance with Illinois law and into which ComEd has been making annual
contributions. Future decommissioning cost estimates may be significantly
affected by the adoption of or changes to NRC regulations as well as changes
in the assumptions used in making such estimates, including changes in
technology, available alternatives for the disposal of nuclear waste, and
inflation.
 
  Pursuant to the Rate Order, beginning in 1995, ComEd collects
decommissioning costs from its ratepayers under a rider which allows annual
adjustments to decommissioning cost collections outside the context of a
traditional rate proceeding. The current estimated decommissioning costs
allowed under the rider exclude a contingency allowance. Contingency
allowances used in decommissioning cost estimates provide for currently
unspecifiable costs that are likely to occur after decommissioning begins and
generally range from 20% to 25% of the currently specifiable costs. Under its
most recent annual rider, filed with the ICC on February 28, 1996, ComEd has
decreased its estimated annual decommissioning cost accrual from $113.5
million to $108.8 million, primarily reflecting stronger than expected after-
tax returns on the external trust funds in 1995. The ICC issued an order
approving the rider filing on April 24, 1996.
 
  As a result of the ICC approval of the rider filing, beginning April 30,
1996, the effective date of the order, ComEd began accruing and collecting
$108.8 million annually for decommissioning costs. The assumptions used to
calculate the $108.8 million decommissioning cost accrual include: the
decommissioning cost estimate of $3.9 billion in current-year (1997) dollars,
after-tax earnings on the tax-qualified and nontax-qualified decommissioning
funds of 7.30% and 6.26%, respectively, as well as an escalation rate for
future decommissioning costs of 5.5%. The annual accrual of $108.8 million
provided over the lives of the nuclear plants, coupled with the expected fund
earnings and amounts previously recovered in rates, is expected to aggregate
approximately $15.5 billion. The annual accrual and collection amounts will be
reviewed again during the first quarter of 1997.
 
  For the twelve operating nuclear units, decommissioning costs are recorded
as portions of depreciation expense and accumulated provision for depreciation
on the Statements of Consolidated Income and the Consolidated Balance Sheets,
respectively. As of December 31, 1996, the total decommissioning costs
included in the accumulated provision for depreciation were $1,522 million.
For ComEd's retired nuclear unit, Dresden Unit 1, the total estimated
liability at December 31, 1996 in current-year (1997) dollars of $276 million
was recorded on the Consolidated Balance Sheets as a noncurrent liability and
the unrecovered portion of the liability of approximately $175 million was
recorded as a regulatory asset.
 
  Under Illinois law, decommissioning cost collections are required to be
deposited into external trusts; and, consequently, such collections do not add
to the cash flows available for general corporate purposes. The ICC has
approved ComEd's funding plan which provides for annual contributions of
current accruals and ratable contributions of past accruals over the remaining
service lives of the nuclear plants. At December 31, 1996, the past accruals
that are required to be contributed to the external trusts aggregate $169
million. The fair value of funds accumulated in the external trusts at
December 31, 1996 was approximately $1,456 million which includes pre-tax
unrealized appreciation of $230 million. The earnings on the external trusts
accumulate in the fund balance and in the accumulated provision for
depreciation.
 
  Amortization of Nuclear Fuel. The cost of nuclear fuel is amortized to fuel
expense based on the quantity of heat produced using the unit of production
method. As authorized by the ICC, provisions for spent nuclear fuel disposal
costs have been recorded at a level required to recover the fee payable on
current nuclear-generated and sold electricity and the current interest
accrual on the one-
 
                                      27
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
time fee payable to the DOE for nuclear generation prior to April 7, 1983. The
one-time fee and interest thereon have been recovered and the current fee and
current interest on the one-time fee are currently being recovered through the
fuel adjustment clause. See Note 11 for further information concerning the
disposal of spent nuclear fuel, the one-time fee and the interest accrual on
the one-time fee. Nuclear fuel expenses, including leased fuel costs and
provisions for spent nuclear fuel disposal costs, for the years 1996, 1995 and
1994 were $354 million, $391 million and $358 million, respectively.
 
  Income Taxes. Deferred income taxes are provided for income and expense
items recognized for financial accounting purposes in periods that differ from
those for income tax purposes. Income taxes deferred in prior years are
charged or credited to income as the book/tax timing differences reverse.
Prior years' deferred investment tax credits are amortized through credits to
income generally over the lives of the related property. Income tax credits
resulting from interest charges applicable to nonoperating activities,
principally construction, are classified as other income.
 
  AFUDC. In accordance with the uniform systems of accounts prescribed by
regulatory authorities, ComEd capitalizes AFUDC, compounded semiannually,
which represents the estimated cost of funds used to finance its construction
program. The equity component of AFUDC is recorded on an after-tax basis and
the borrowed funds component of AFUDC is recorded on a pre-tax basis. The
average annual capitalization rates for the years 1996, 1995 and 1994 were
9.02%, 9.52% and 9.85%, respectively. AFUDC does not contribute to the current
cash flow of Unicom or ComEd.
 
  Interest. Total interest costs incurred on debt, leases and other
obligations for the years 1996, 1995 and 1994 were $626 million, $696 million
and $730 million, respectively.
 
  Debt Discount, Premium and Expense. Discount, premium and expense on long-
term debt of ComEd are being amortized over the lives of the respective
issues.
 
  Loss on Reacquired Debt. Consistent with regulatory treatment, the net loss
from ComEd's reacquisition in connection with refinancing of first mortgage
bonds, sinking fund debentures and pollution control obligations prior to
their scheduled maturity dates is deferred and amortized over the lives of the
long-term debt issued to finance the reacquisition.
 
  Stock Option Awards/Employee Stock Purchase Plan. Unicom has elected to
adopt SFAS No. 123, "Accounting for Stock-Based Compensation", for disclosure
purposes only. Unicom accounts for its stock option awards and its employee
stock purchase plan under APB Opinion No. 25, "Accounting for Stock Issued to
Employees". See Note 5 for additional information.
 
  Reclassifications. Certain prior year amounts have been reclassified to
conform with current period presentation. These reclassifications had no
effect on net income.
 
  Statements of Consolidated Cash Flows. For purposes of the Statements of
Consolidated Cash Flows, temporary cash investments, generally investments
maturing within three months at the time of purchase, are considered to be
cash equivalents. Supplemental cash flow information for the years 1996, 1995
and 1994 was as follows:
 
<TABLE>
<CAPTION>
                                                     1996     1995     1994
                                                   -------- -------- --------
                                                     (THOUSANDS OF DOLLARS)
<S>                                                <C>      <C>      <C>
Supplemental Cash Flow Information:
 Cash paid during the year for:
   Interest (net of amount capitalized)........... $538,351 $604,932 $645,658
   Income taxes (net of refunds).................. $234,743 $367,708 $ (4,923)
Supplemental Schedule of Non-Cash Investing and
 Financing Activities:
 Capital lease obligations incurred by subsidiary
  companies....................................... $320,975 $198,577 $309,716
</TABLE>
 
                                      28
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
 
(2) RATE MATTERS
 
  On January 9, 1995, the ICC issued its Rate Order in the proceedings
relating to ComEd's February 1994 rate increase request. The Rate Order
provided, among other things, for (i) an increase in ComEd's total revenues of
approximately $301.8 million (excluding add-on revenue taxes) or 5.2%, on an
annual basis, including a $303.2 million increase in base rates, (ii) the
collection of municipal franchise costs on an individual municipality basis
through a rider, and (iii) the use of a rider, with annual review proceedings,
to pass on to ratepayers increases or decreases in estimated costs associated
with the decommissioning of ComEd's nuclear generating units. See Note 1 under
"Depreciation and Decommissioning" for additional information related to the
level of decommissioning cost collections. The ICC also determined that the
Units were 100% "used and useful" and that the previously determined
reasonable costs of such Units, as depreciated, should be included in full in
ComEd's rate base. The rates provided in the Rate Order became effective on
January 14, 1995; however, they are being collected subject to refund as a
result of subsequent judicial action. As of December 31, 1996, electric
operating revenues of approximately $651 million (excluding revenue taxes) are
subject to refund. Intervenors and ComEd have filed appeals of the Rate Order
with the Illinois Appellate Court, and oral argument was heard on January 28,
1997.
 
  On December 11, 1995, ComEd announced a series of customer initiatives as
part of its larger ongoing effort to address the need to give all customer
classes the opportunity to benefit from increased competition in the electric
utility business, while retaining the benefits (such as reliability) of
current regulation and ensuring utilities' cost recovery for commitments made
under the obligation to serve customers. The initiatives include a five-year
cap on base electric rates at current levels and various customer service and
incentive pricing programs designed to allow customers more choice and control
over the services they seek and the prices they pay. These initiatives are in
addition to previously implemented special discount contract rate programs for
new or existing industrial customers. ComEd anticipates the initiatives will
be fully implemented in 1997 and will reduce its revenues by approximately $40
million annually (including the effects of previously implemented initiatives
and before income tax effects) primarily through changes in energy
utilization. Additionally in September 1996, the ICC approved ComEd's
additional depreciation initiative for 1996. ComEd's costs increased by $30
million in 1996 (before income tax effects), through the increase in
depreciation charges on its nuclear generating units. ComEd also continues to
consider the possibility of additional depreciation options.
 
  Under ComEd's initiatives, the five-year base rate cap at current levels
became effective in December 1995 and will extend until January 1, 2001. The
rate cap does not affect ComEd's fuel cost or nuclear decommissioning cost
recovery provisions. ComEd's fuel cost variances will continue to be collected
through its fuel adjustment clause, and such collections will continue to be
subject to annual reconciliation proceedings before the ICC. Likewise, nuclear
decommissioning costs will continue to be collected as described in Note 1
under "Depreciation and Decommissioning."
 
  See "Changes in the Electric Utility Industry" under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
information regarding the legislative proposal supported by ComEd.
 
(3) AUTHORIZED SHARES AND VOTING RIGHTS OF CAPITAL STOCK
 
  At December 31, 1996, Unicom's authorized shares consisted of 400,000,000
shares of common stock. The authorized shares of ComEd preferred and
preference stocks at December 31, 1996 were: preference stock--22,806,775
shares; $1.425 convertible preferred stock--75,003 shares; and prior
 
                                      29
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
preferred stock--850,000 shares. The preference and prior preferred stocks are
issuable in series and may be issued with or without mandatory redemption
requirements. Holders of outstanding Unicom shares are entitled to one vote
for each share held on each matter submitted to a vote of such shareholders;
and holders of outstanding ComEd shares are entitled to one vote for each
share held on each matter submitted to a vote of such shareholders. All such
shares have the right to cumulate votes in elections for the directors of the
corporation which issued the shares.
 
(4) COMMON STOCK
 
  At December 31, 1996, shares of Unicom common stock were reserved for the
following purposes:
 
<TABLE>
      <S>                                                              <C>
      Long-Term Incentive Plan........................................ 3,544,609
      Employee Stock Purchase Plan....................................   703,570
      Employee Savings and Investment Plan............................   274,203
      Exchange for ComEd common stock not held by Unicom..............   110,323
      1996 Directors' Fee Plan........................................   194,888
                                                                       ---------
                                                                       4,827,593
                                                                       =========
</TABLE>
 
  Common stock increased during the years 1996, 1995 and 1994 as follows:
 
<TABLE>
<CAPTION>
                                                       1996     1995    1994
                                                      -------  ------- -------
<S>                                                   <C>      <C>     <C>
 Shares of Common Stock Issued:
   Long-Term Incentive Plan.......................... 132,579  481,751     --
   Employee Stock Purchase Plan...................... 196,513  217,080 305,205
   Employee Savings and Investment Plan.............. 339,100  217,100  85,400
   Conversion of $1.425 convertible preferred stock..     --       --  185,041
   Conversion of warrants............................     --       --   13,274
   Exchange for ComEd common stock not held by
    Unicom...........................................  25,323      --      --
   1996 Directors' Fee Plan..........................   5,112      --      --
                                                      -------  ------- -------
                                                      698,627  915,931 588,920
                                                      =======  ======= =======
<CAPTION>
                                                      (THOUSANDS OF DOLLARS)
<S>                                                   <C>      <C>     <C>
 Amount of Common Stock Issued:
   Total issued...................................... $17,733  $25,412 $14,782
   Held by trustee for Unicom Stock Bonus Deferral
    Plan.............................................  (4,300)     --      --
   Other.............................................      38       95    (386)
                                                      -------  ------- -------
                                                      $13,471  $25,507 $14,396
                                                      =======  ======= =======
</TABLE>
 
  At December 31, 1996 and 1995, 78,045 and 82,742 ComEd common stock purchase
warrants, respectively, were outstanding. The warrants entitle the holders to
convert such warrants into common stock of ComEd at a conversion rate of one
share of common stock for three warrants.
 
(5) STOCK OPTION AWARDS/EMPLOYEE STOCK PURCHASE PLAN.
 
  Unicom has a nonqualified stock option awards program under its Long-Term
Incentive Plan and an ESPP. The stock option awards program was adopted by
Unicom in July 1996 to reward valued employees responsible for, or
contributing to, the management, growth and profitability of Unicom and its
subsidiaries. As of December 31, 1996, 1,205,500 options have been granted
primarily to employees of ComEd and its subsidiaries. Of this amount, 15,500
options have been canceled and 1,190,000 are outstanding. The weighted average
exercise price for the outstanding stock options is $25.50. The stock options
granted in 1996 will expire ten years from their grant date. One-third of the
shares subject to the options vest on each of the next three anniversaries of
the option grant date. In addition, the stock options will become fully vested
immediately if the holder dies, retires, is terminated other than for cause or
qualifies for long-term disability, and will also vest in full upon a
 
                                      30
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
change in control of Unicom. As of December 31, 1996, 2,000 of the granted
stock options are exercisable and none of the stock options have been
exercised.
 
  The estimated fair market value for each of the stock options granted in
1996 was $3.74. The fair value of each stock option granted was estimated as
of the date of grant using the Black-Scholes option-pricing model. Assumptions
used to determine the estimated fair market value of the stock options include
(i) dividend yield of 6.30%, (ii) expected volatility of 20.98%, (iii) risk-
free interest rate of 6.64% and (iv) expected life of 7 years.
 
  The ESPP allows employees to purchase Unicom common stock at a 10% discount
from market value. The stock is purchased in six month intervals, April and
October of each year. Substantially all of the employees of Unicom, ComEd and
certain subsidiaries are eligible to participate in the ESPP. Unicom issued
196,512, 217,080 and 150,495 shares of common stock in 1996, 1995 and 1994,
respectively, under the ESPP at an average annual purchase price of $23.51,
$25.34 and $19.80, respectively. ComEd issued 154,710 shares of common stock
at a purchase price of $21.72 in 1994 under the ESPP.
 
  Unicom has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation". For financial reporting purposes,
Unicom has adopted APB No. 25, "Accounting for Stock Issued to Employees", and
thus no compensation cost has been recognized for the stock option awards
program or ESPP. If Unicom had recorded compensation expense for the stock
options granted and the shares of common stock issued under the ESPP in
accordance with SFAS No. 123 using the fair value based method of accounting,
the resulting effect on net income and earnings per share would have been de
minimis.
 
(6) COMED PREFERRED AND PREFERENCE STOCKS WITHOUT MANDATORY REDEMPTION
REQUIREMENTS
 
  No shares of ComEd preferred or preference stocks without mandatory
redemption requirements were issued or redeemed during 1996 or 1995. During
1994, 3,000,000 shares of ComEd preference stock without mandatory redemption
requirements were issued and no shares of ComEd preferred or preference stocks
without mandatory redemption requirements were redeemed. The series of ComEd
preference stock without mandatory redemption requirements outstanding at
December 31, 1996 are summarized as follows:
 
<TABLE>
<CAPTION>
                                                                        INVOLUNTARY
                    SHARES           AGGREGATE         REDEMPTION       LIQUIDATION
      SERIES      OUTSTANDING       STATED VALUE        PRICE(1)         PRICE(1)
      ------      -----------       ------------       ----------       -----------
                                 (THOUSANDS
                                 OF DOLLARS)
      <S>         <C>               <C>                <C>              <C>
      $1.90        4,249,549          $106,239          $ 25.25           $25.00
      $2.00        2,000,000            51,560          $ 26.04           $25.00
      $1.96        2,000,000            52,440          $ 27.11           $25.00
      $7.24          750,000            74,340          $101.00           $99.12
      $8.40          750,000            74,175          $101.00           $98.90
      $8.38          750,000            73,566          $100.16           $98.09
      $2.425       3,000,000            72,637          $ 25.00           $25.00
                  ----------          --------
                  13,499,549          $504,957
                  ==========          ========
</TABLE>
     --------
     (1) Per share plus accrued and unpaid dividends, if any.
 
  The outstanding shares of ComEd's $1.425 convertible preferred stock are
convertible at the option of the holders thereof, at any time, into common
stock of ComEd at the rate of 1.02 shares of
 
                                      31
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
common stock for each share of convertible preferred stock, subject to future
adjustment. The convertible preferred stock may be redeemed by ComEd at $42
per share, plus accrued and unpaid dividends, if any. The involuntary
liquidation price of the $1.425 convertible preferred stock is $31.80 per
share, plus accrued and unpaid dividends, if any.
 
(7) COMED PREFERENCE STOCK SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS
 
  During 1996, 1995 and 1994, no shares of ComEd preference stock subject to
mandatory redemption requirements were issued. The series of ComEd preference
stock subject to mandatory redemption requirements outstanding at December 31,
1996 are summarized as follows:
 
<TABLE>
<CAPTION>
                  SHARES     AGGREGATE
    SERIES      OUTSTANDING STATED VALUE            OPTIONAL REDEMPTION PRICE(1)
--------------  ----------- ------------ --------------------------------------------------
                             (THOUSANDS
                            OF DOLLARS)
<S>             <C>         <C>          <C>
$8.20              214,275    $ 21,428   $103 through October 31, 1997; and $101 thereafter
$8.40 Series B     330,000      32,778   $101
$8.85              262,500      26,250   $103 through July 31, 1998; and $101 thereafter
$9.25              600,000      60,000   $103 through July 31, 1999; and $101 thereafter
$9.00              390,000      38,659   Non-callable
$6.875             700,000      69,474   Non-callable
                 ---------    --------
                 2,496,775    $248,589
                 =========    ========
</TABLE>
--------
(1) Per share plus accrued and unpaid dividends, if any.
 
  The annual sinking fund requirements and sinking fund and involuntary
liquidation prices per share of the outstanding series of ComEd preference
stock subject to mandatory redemption requirements are summarized as follows:
 
<TABLE>
<CAPTION>
                                                SINKING
                        ANNUAL SINKING FUND       FUND           INVOLUNTARY
          SERIES            REQUIREMENT         PRICE(1)     LIQUIDATION PRICE(1)
      --------------    -------------------     -------      -------------------
      <S>               <C>                     <C>          <C>
      $8.20               35,715 shares          $100             $100.00
      $8.40 Series B      30,000 shares(2)       $100             $ 99.326
      $8.85               37,500 shares          $100             $100.00
      $9.25               75,000 shares          $100             $100.00
      $9.00              130,000 shares(2)       $100             $ 99.125
      $6.875                    (3)              $100             $ 99.25
</TABLE>
     --------
     (1) Per share plus accrued and unpaid dividends, if any.
     (2) ComEd has a non-cumulative option to increase the annual
         sinking fund payment on each sinking fund redemption date
         to retire an additional number of shares, not in excess of
         the sinking fund requirement, at the applicable redemption
         price.
     (3) All shares are required to be redeemed on May 1, 2000.
 
  Annual remaining sinking fund requirements through 2001 on ComEd preference
stock outstanding at December 31, 1996 will aggregate $31 million in each of
1997-99, $88 million in 2000 and $18 million in 2001. During 1996, 1995 and
1994, 438,215 shares, 178,215 shares and 177,085 shares, respectively, of
ComEd preference stock subject to mandatory redemption requirements were
reacquired to meet sinking fund requirements.
 
  Sinking fund requirements due within one year are included in current
liabilities.
 
(8) COMED-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF COMED
FINANCING I
 
  In September 1995, ComEd Financing I (Trust), a wholly-owned subsidiary
trust of ComEd, issued 8,000,000 of its 8.48% ComEd-obligated mandatorily
redeemable preferred securities. The
 
                                      32
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
sole asset of the Trust is $206.2 million principal amount of ComEd's 8.48%
subordinated deferrable interest notes due September 30, 2035. There is a full
and unconditional guarantee by ComEd of the Trust's obligations under the
securities issued by the Trust. However, ComEd's obligations are subordinate
and junior in right of payment to certain other indebtedness of ComEd. ComEd
has the right to defer payments of interest on the subordinated deferrable
interest notes by extending the interest payment period, at any time, for up
to 20 consecutive quarters. If interest payments on the subordinated
deferrable interest notes are so deferred, distributions on the preferred
securities will also be deferred. During any deferral, distributions will
continue to accrue with interest thereon. In addition, during any such
deferral, ComEd may not declare or pay any dividend or other distribution on,
or redeem or purchase, any of its capital stock.
 
  The subordinated deferrable interest notes are redeemable by ComEd, in whole
or in part, from time to time, on or after September 30, 2000, or at any time
in the event of certain income tax circumstances. If the subordinated
deferrable interest notes are redeemed, the Trust must redeem preferred
securities having an aggregate liquidation amount equal to the aggregate
principal amount of the subordinated deferrable interest notes so redeemed. In
the event of the dissolution, winding up or termination of the Trust, the
holders of the preferred securities will be entitled to receive, for each
preferred security, a liquidation amount of $25 plus accrued and unpaid
distributions thereon, including interest thereon, to the date of payment,
unless in connection with the dissolution, the subordinated deferrable
interest notes are distributed to the holders of the preferred securities.
 
(9) LONG-TERM DEBT
 
  Sinking fund requirements and scheduled maturities remaining through 2001
for ComEd's first mortgage bonds, sinking fund debentures and other long-term
debt outstanding at December 31, 1996, after deducting sinking fund debentures
reacquired for satisfaction of future sinking fund requirements, are
summarized as follows: 1997--$539 million; 1998--$497 million; 1999--$150
million; 2000--$462 million; and 2001--$108 million. Unicom Enterprises' note
payable to bank of $95 million will mature in 1998.
 
                                      33
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
 
  At December 31, 1996, ComEd's outstanding first mortgage bonds maturing
through 2001 were as follows:
 
<TABLE>
<CAPTION>
             SERIES                                          PRINCIPAL AMOUNT
      --------------------------------------------------------------------------
                                                          (THOUSANDS OF DOLLARS)
      <S>                                                 <C>
      7% due February 1, 1997............................       $  150,000
      5 3/8% due April 1, 1997...........................           50,000
      6 1/4% due October 1, 1997.........................           60,000
      6 1/4% due February 1, 1998........................           50,000
      6% due March 15, 1998..............................          130,000
      6 3/4% due July 1, 1998............................           50,000
      6 3/8% due October 1, 1998.........................           75,000
      9 3/8% due February 15, 2000.......................          125,000
      6 1/2% due April 15, 2000..........................          230,000
      6 3/8% due July 15, 2000...........................          100,000
      7 1/2% due January 1, 2001.........................          100,000
                                                                ----------
                                                                $1,120,000
                                                                ==========
</TABLE>
 
  Other long-term debt outstanding at December 31, 1996 is summarized as
follows:
 
<TABLE>
<CAPTION>
    DEBT              PRINCIPAL
  SECURITY             AMOUNT                       INTEREST RATE
------------          ----------   ---------------------------------------------
                      (THOUSANDS
                          OF
                       DOLLARS)
<S>                   <C>          <C>
Unicom--
 Loans Payable:
   Loan due           
    January 1, 2003   $    9,152   Interest rate of 8.31%
   Loan due
    January 1, 2004        9,749   Interest rate of 8.44%
                      ----------
                      $   18,901
                      ----------
ComEd--
  Notes:
   Medium Term Notes,
    Series 1N due
    various dates
    through
    April 1, 1998     $   35,500   Interest rates ranging from 9.52% to 9.65%
   Medium Term Notes, 
    Series 3N due
    various dates
    through
    October 15, 2004     296,000   Interest rates ranging from 9.00% to 9.20%
   Medium Term Notes,
    Series 4N due
    May 15, 1997          20,000   Interest rate of 8.875%
   Notes due
    February 15, 1997    150,000   Interest rate of 7.00%
   Notes due
    July 15, 1997        100,000   Interest rate of 6.50%
   Notes due
    October 15, 2005     235,000   Interest rate of 6.40%
                      ----------
                      $  836,500
                      ----------
 Long-Term
  Note Payable to
  Bank:
   Note due
    June 1, 1998      $  150,000   Prevailing interest rate of 6.08% at December 31, 1996
                      ----------
 Purchase
  Contract Obligation
   due April 30, 2005 $      432   Interest rate of 3.00%
                      ----------
Total ComEd           $  986,932
                      ----------
Unicom Enterprises--
 Note Payable to
  Bank:
   Note due
    November 22,
    1998              $   95,000   Prevailing interest rate of 6.51% at
                      ----------   December 31, 1996
                         
Total Unicom          $1,100,833
                      ==========
</TABLE>
 
  Long-term debt maturing within one year has been included in current
liabilities.
 
                                      34
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
 
  ComEd's outstanding first mortgage bonds are secured by a lien on
substantially all property and franchises, other than expressly excepted
property, owned by ComEd.
 
  ComEd recorded an extraordinary loss of $33 million in the fourth quarter of
1995 related to the early redemption of $645 million of long-term debt which
reduced net income by $20 million (after reflecting income tax effects of $13
million) or $0.09 per common share.
 
(10) LINES OF CREDIT
 
  ComEd had total bank lines of credit of $914 million and unused bank lines
of credit of $906 million at December 31, 1996. Of that amount, $906 million
(of which $175 million expires on September 29, 1997, $63 million expires in
equal quarterly installments commencing on March 31, 1997 and ending on
September 30, 1998 and $668 million expires in equal quarterly installments
commencing on December 31, 1997 and ending on September 30, 1999) may be
borrowed on secured or unsecured notes of ComEd at various interest rates. The
interest rate is set at the time of a borrowing and is based on several
floating rate bank indices plus a spread which is dependent upon the credit
rating of ComEd's outstanding first mortgage bonds or on a prime interest
rate. Amounts under the remaining lines of credit may be borrowed at
prevailing prime interest rates on unsecured notes of ComEd. Collateral, if
required for the borrowings, would consist of first mortgage bonds issued
under and in accordance with the provisions of ComEd's mortgage. ComEd is
obligated to pay commitment fees with respect to $906 million of such lines of
credit.
 
  Unicom Enterprises has a $200 million credit facility which will expire in
1999, of which $105 million was unused as of December 31, 1996. The credit
facility can be used by Unicom Enterprises to finance investments in
unregulated businesses and projects, including Unicom Thermal, and for general
corporate purposes. The credit facility is guaranteed by Unicom and includes
certain covenants with respect to Unicom's and Unicom Enterprises' operations.
Such covenants include, among other things, (i) a requirement that Unicom and
its consolidated subsidiaries maintain a tangible net worth at least $10
million over that of ComEd and its consolidated subsidiaries, (ii) a
requirement that Unicom's consolidated debt to consolidated capitalization not
exceed 0.65 to 1, (iii) restrictions on the indebtedness for borrowed money
that Unicom (excluding ComEd) and Unicom Enterprises may incur and (iv) a
requirement that Unicom own 100% of the outstanding stock of Unicom
Enterprises and at least 80% of the outstanding stock of ComEd; and provide
that Unicom may not declare or pay dividends during the continuance of an
event of default. Interest rates for borrowings under the credit facility are
set at the time of a borrowing and are based on either a prime interest rate
or a floating rate bank index plus a spread which varies with the credit
rating of ComEd's outstanding first mortgage bonds.
 
(11) DISPOSAL OF SPENT NUCLEAR FUEL
 
  Under the Nuclear Waste Policy Act of 1982, the DOE is responsible for the
selection and development of repositories for, and the disposal of, spent
nuclear fuel and high-level radioactive waste. ComEd, as required by that Act,
has signed a contract with the DOE to provide for the disposal of spent
nuclear fuel and high-level radioactive waste from ComEd's nuclear generating
stations beginning not later than January 1998. The DOE advised ComEd in
December 1996 that it anticipates it will be unable to begin acceptance of
spent nuclear fuel by January 1998. It is expected this delivery schedule will
be delayed significantly. The contract with the DOE requires ComEd to pay the
DOE a one-time fee applicable to nuclear generation through April 6, 1983 of
approximately $277 million, with interest to date of payment, and a fee
payable quarterly equal to one mill per kilowatthour of nuclear-generated and
sold electricity after April 6, 1983. As provided for under the contract,
 
                                      35
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
ComEd has elected to pay the one-time fee, with interest, just prior to the
first delivery of spent nuclear fuel to the DOE. The liability for the one-
time fee and the related interest is reflected in the Consolidated Balance
Sheets.
 
(12) FAIR VALUE OF FINANCIAL INSTRUMENTS
 
  The following methods and assumptions were used to estimate the fair value
of financial instruments either held or issued and outstanding. The disclosure
of such information does not purport to be a market valuation of Unicom and
subsidiary companies as a whole. The impact of any realized or unrealized
gains or losses related to such financial instruments on the financial
position or results of operations of Unicom and subsidiary companies is
primarily dependent on the treatment authorized under future ComEd ratemaking
proceedings.
 
  Investments. Securities included in the nuclear decommissioning funds have
been classified and accounted for as "available for sale" securities. The
estimated fair value of the nuclear decommissioning funds, as determined by
the trustee and based on published market data, as of December 31, 1996 and
1995 was as follows:
 
<TABLE>
<CAPTION>
                                DECEMBER 31, 1996                DECEMBER 31, 1995
                         -------------------------------- --------------------------------
                                    UNREALIZED                       UNREALIZED
                         COST BASIS   GAINS    FAIR VALUE COST BASIS   GAINS    FAIR VALUE
                         ---------- ---------- ---------- ---------- ---------- ----------
                                              (THOUSANDS OF DOLLARS)
<S>                      <C>        <C>        <C>        <C>        <C>        <C>
Short-term investments.. $   32,778  $     38  $   32,816 $   40,575  $    283  $   40,858
U.S. Government and
 Agency issues..........    251,994     6,885     258,879    156,745    17,636     174,381
Municipal bonds.........    331,936    17,985     349,921    496,707    34,970     531,677
Common stock............    539,392   201,304     740,696    348,866   107,280     456,146
Other...................     69,867     4,181      74,048     29,757     4,708      34,465
                         ----------  --------  ---------- ----------  --------  ----------
                         $1,225,967  $230,393  $1,456,360 $1,072,650  $164,877  $1,237,527
                         ==========  ========  ========== ==========  ========  ==========
</TABLE>
 
  At December 31, 1996 the debt securities held by the nuclear decommissioning
funds had the following maturities:
 
<TABLE>
<CAPTION>
                                                           COST BASIS FAIR VALUE
                                                           ---------- ----------
                                                               (THOUSANDS OF
                                                                 DOLLARS)
      <S>                                                  <C>        <C>
      Within 1 year.......................................  $ 32,778   $ 32,816
      1 through 5 years...................................   161,625    164,907
      5 through 10 years..................................   221,264    229,382
      Over 10 years.......................................   258,284    271,971
</TABLE>
 
  The net earnings of the nuclear decommissioning funds, which are recorded as
increases to the accumulated provision for depreciation, for the years 1996,
1995 and 1994 were as follows:
 
<TABLE>
<CAPTION>
                                                1996        1995        1994
                                             ----------  -----------  ---------
                                                  (THOUSANDS OF DOLLARS)
<S>                                          <C>         <C>          <C>
Gross proceeds from sales of securities....  $2,335,974  $ 2,598,889  $ 811,368
Less cost based on specific identification.  (2,300,038)  (2,581,714)  (811,997)
                                             ----------  -----------  ---------
Realized gains (losses) on sales of securi-
 ties......................................  $   35,936  $    17,175  $    (629)
Other realized fund earnings net of ex-
 penses....................................      33,008       46,294     38,148
                                             ----------  -----------  ---------
Total realized net earnings of the funds...  $   68,944  $    63,469  $  37,519
Unrealized gains (losses)..................      65,516      160,843    (57,948)
                                             ----------  -----------  ---------
 Total net earnings (losses) of the funds..  $  134,460  $   224,312  $ (20,429)
                                             ==========  ===========  =========
</TABLE>
 
  Current Assets. Cash, temporary cash investments and other cash investments,
which include U.S. Government Obligations and other short-term marketable
securities, and special deposits, which
 
                                      36
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
primarily includes cash deposited for the redemption, refund or discharge of
debt securities, are stated at cost, which approximates their fair value
because of the short maturity of these instruments. The securities included in
these categories have been classified as "available for sale" securities.
 
  Capitalization. The estimated fair values of ComEd preferred and preference
stocks, ComEd-obligated mandatorily redeemable preferred securities of the
Trust and long-term debt were obtained from an independent consultant. The
estimated fair values, which include the current portions of redeemable
preference stock and long-term debt but exclude accrued interest and
dividends, as of December 31, 1996 and 1995 were as follows:
 
<TABLE>
<CAPTION>
                                DECEMBER 31, 1996                DECEMBER 31, 1995
                         -------------------------------- --------------------------------
                          CARRYING  UNREALIZED             CARRYING  UNREALIZED
                           VALUE      LOSSES   FAIR VALUE   VALUE      LOSSES   FAIR VALUE
                         ---------- ---------- ---------- ---------- ---------- ----------
                                              (THOUSANDS OF DOLLARS)
<S>                      <C>        <C>        <C>        <C>        <C>        <C>
  ComEd preferred and
   preference stocks.... $  755,931  $  3,948  $  759,879 $  800,197  $ 14,769  $  814,966
  ComEd-obligated
   mandatorily
   redeemable preferred
   securities of the
   Trust................ $  200,000  $  1,000  $  201,000 $  200,000  $  6,000  $  206,000
  Long-term debt........ $6,345,533  $159,818  $6,505,351 $6,572,853  $470,175  $7,043,028
</TABLE>
 
  Long-term notes payable, which are not included in the above table, amounted
to $264 million and $212 million at December 31, 1996 and 1995, respectively.
Such notes, for which interest is paid at fixed and prevailing rates, are
included in the consolidated financial statements at cost, which approximates
their fair value.
 
  Current Liabilities. The carrying value of notes payable, which consists of
commercial paper and bank loans maturing within one year, approximates the
fair value because of the short maturity of these instruments. See
"Capitalization" above for a discussion of the fair value of the current
portion of long-term debt and redeemable preference stock.
 
  Other Noncurrent Liabilities. The carrying value of accrued spent nuclear
fuel disposal fee and related interest represents the settlement value as of
December 31, 1996 and 1995; therefore, the carrying value is equal to the fair
value.
 
(13) PENSION BENEFITS
 
  ComEd and the Indiana Company have non-contributory defined benefit pension
plans which cover all regular employees. Benefits under these plans reflect
each employee's compensation, years of service and age at retirement. During
1995, these plans were amended to more closely base retirement benefits on
final pay. Funding is based upon actuarially determined contributions that
take into account the amount deductible for income tax purposes and the
minimum contribution required under the Employee Retirement Income Security
Act of 1974, as amended. Actuarial valuations were determined as of January 1,
1996 and 1995.
 
  During 1994, the companies implemented an early retirement program for
employees eligible to retire or who would become eligible to retire after
December 31, 1993 and before April 1, 1995. A total of 679 employees accepted
the program, resulting in the recognition of approximately $34 million of
additional pension cost and an additional increase to the projected benefit
obligation of that $34 million and $41 million of unrecognized net loss. The
charge to income was approximately $20.5 million, after reflecting income tax
effects, as a result of the program.
 
                                      37
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
 
  The funded status of these plans at December 31, 1996 and 1995 was as
follows:
 
<TABLE>
<CAPTION>
                                                             DECEMBER 31
                                                       ------------------------
                                                          1996         1995
                                                       -----------  -----------
                                                       (THOUSANDS OF DOLLARS)
<S>                                                    <C>          <C>
Actuarial present value of accumulated pension plan
 benefits:
  Vested benefit obligation..........................  $(3,025,000) $(2,904,000)
  Nonvested benefit obligation.......................     (127,000)    (122,000)
                                                       -----------  -----------
  Accumulated benefit obligation.....................  $(3,152,000) $(3,026,000)
  Effect of projected future compensation levels.....     (366,000)    (352,000)
                                                       -----------  -----------
  Projected benefit obligation.......................  $(3,518,000) $(3,378,000)
Fair value of plan assets, invested primarily in U.S.
 Government, government-sponsored
 corporation and agency securities, fixed income
 funds, registered investment companies,
 equity index funds and other equity and fixed income
 funds ..............................................    3,282,000    3,059,000
                                                       -----------  -----------
Plan assets less than projected benefit obligation...  $  (236,000) $  (319,000)
Unrecognized prior service cost......................      (69,000)     (73,000)
Unrecognized transition asset........................     (130,000)    (142,000)
Unrecognized net loss................................       58,000      189,000
                                                       -----------  -----------
  Accrued pension liability..........................  $  (377,000) $  (345,000)
                                                       ===========  ===========
</TABLE>
 
  The assumed discount rate was 7.5% at December 31, 1996 and 1995, and the
assumed annual rate of increase in future compensation levels was 4.0%. These
rates were used in determining the projected benefit obligations, the
accumulated benefit obligations and the vested benefit obligations.
 
  Pension costs were determined under the rules prescribed by SFAS No. 87,
including the use of the projected unit credit actuarial cost method and the
following actuarial assumptions for the years 1996, 1995 and 1994:
 
<TABLE>
<CAPTION>
                                                               1996  1995  1994
                                                               ----- ----- -----
<S>                                                            <C>   <C>   <C>
Annual discount rate.......................................... 7.50% 8.00% 7.50%
Annual rate of increase in future compensation levels......... 4.00% 4.00% 4.00%
Annual long-term rate of return on plan assets................ 9.75% 9.75% 9.50%
</TABLE>
 
  The components of pension costs, portions of which were recorded as
components of construction costs, for the years 1996, 1995 and 1994 were as
follows:
 
<TABLE>
<CAPTION>
                            1996       1995       1994
                          ---------  ---------  ---------
                             (THOUSANDS OF DOLLARS)
<S>                       <C>        <C>        <C>
Service cost............  $  92,000  $  87,000  $  97,000
Interest cost on pro-
 jected benefit obliga-
 tion...................    246,000    225,000    213,000
Actual return on plan
 assets.................   (421,000)  (681,000)    37,000
Early retirement program
 cost...................        --         --      34,000
Net amortization and de-
 ferral.................    115,000    418,000   (302,000)
                          ---------  ---------  ---------
                          $  32,000  $  49,000  $  79,000
                          =========  =========  =========
</TABLE>
 
  In addition, an employee savings and investment plan is available to
eligible employees of ComEd and certain of its and Unicom's subsidiaries.
During the fourth quarter of 1995 (the first quarter of 1996 for bargaining
unit employees of the Indiana Company), the employee savings and investment
plan was amended. Under the plan, as amended, each participating employee may
contribute up to 20% of such employee's base pay and the participating
companies match the first 6% of such contribution equal to 100% of the first
2% of contributed base salary, 70% of the next 3% of contributed base salary
and 25% of the last 1% of contributed base salary. During 1996, 1995 and 1994,
the participating companies' contributions were $30 million, $25 million and
$23 million, respectively.
 
                                      38
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
 
(14) POSTRETIREMENT BENEFITS
 
  ComEd and the Indiana Company provide certain postretirement health care,
dental care, vision care and life insurance for retirees and their dependents
and for the surviving dependents of eligible employees and retirees. The
employees become eligible for postretirement benefits when they reach age 55
with 10 years of service. The liability for postretirement benefits is funded
through trust funds based upon actuarially determined contributions that take
into account the amount deductible for income tax purposes. The postretirement
health care plan for ComEd and the Indiana Company was amended, effective
April 1, 1995. Prior to that date, the postretirement health care plan was
fully funded by the companies. With respect to employees who retire on or
after April 1, 1995, the plan is contributory, funded jointly by the companies
and the participating employees. Actuarial valuations were determined as of
January 1, 1996 and 1995.
 
  Postretirement health care costs in 1996 and 1995 included $4 million and
$25 million, respectively, related to a voluntary separation offer for union
employees who accepted and left ComEd's employ combined with separation offers
to selected groups of non-union employees.
 
  The funded status of the plan at December 31, 1996 and 1995 was as follows:
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31
                                                         ----------------------
                                                            1996        1995
                                                         -----------  ---------
                                                             (THOUSANDS OF
                                                               DOLLARS)
<S>                                                      <C>          <C>
Actuarial present value of accumulated postretirement
 benefit obligation:
 Retirees..............................................  $  (615,000) $(551,000)
 Active fully eligible participants....................      (23,000)   (21,000)
 Other participants....................................     (439,000)  (418,000)
                                                         -----------  ---------
 Accumulated benefit obligation........................  $(1,077,000) $(990,000)
Fair value of plan assets, invested primarily in S&P
 500 common stocks, registered investment companies and
 U.S. Government, government agency, municipal and
 listed corporate
 obligations...........................................      666,000    602,000
                                                         -----------  ---------
Plan assets less than accumulated postretirement bene-
 fit obligation........................................  $  (411,000) $(388,000)
Unrecognized transition obligation.....................      370,000    392,000
Unrecognized prior service cost........................       45,000     48,000
Unrecognized net gain..................................     (271,000)  (267,000)
                                                         -----------  ---------
Accrued liability for postretirement benefits..........  $  (267,000) $(215,000)
                                                         ===========  =========
</TABLE>
 
  Different health care cost trends are used for pre-Medicare and post-
Medicare expenses. Pre-Medicare trend rates were 9.0% and 9.5%, respectively,
at December 31, 1996 and 1995, grading down in 0.5% annual increments and
leveling off at 5.0%. Post-Medicare trend rates were 7.0% and 7.5%,
respectively, at December 31, 1996 and 1995, grading down in 0.5% annual
increments to 5.0%. The assumed discount rate was 7.5% at December 31, 1996
and 1995. That rate was used to determine the accumulated benefit obligations.
The effect of a 1% increase in the health care cost trend rate for each future
year would increase the accumulated postretirement health care obligations by
approximately $158 million.
 
                                      39
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
 
  The components of postretirement health care costs, portions of which were
recorded as components of construction costs, for the years 1996, 1995 and
1994 were as follows:
 
<TABLE>
<CAPTION>
                                                     1996      1995      1994
                                                    -------  --------  --------
                                                     (THOUSANDS OF DOLLARS)
      <S>                                           <C>      <C>       <C>
      Service cost................................  $32,000  $ 31,000  $ 47,000
      Interest cost on accumulated benefit obliga-
       tion.......................................   73,000    69,000    81,000
      Actual loss (return) on plan assets.........  (90,000) (137,000)    9,000
      Amortization of transition obligation.......   22,000    23,000    29,000
      Severance plan cost.........................    4,000    25,000       --
      Other.......................................   29,000    83,000   (49,000)
                                                    -------  --------  --------
                                                    $70,000  $ 94,000  $117,000
                                                    =======  ========  ========
</TABLE>
 
  Postretirement benefit costs were determined under the rules prescribed by
SFAS No. 106, including the use of the projected unit credit actuarial cost
method. The discount rates used were 7.5%, 8.0% and 7.5%, respectively, for
1996, 1995 and 1994 and the estimated long-term rate of return of fund assets,
net of income tax effects, were 9.38%, 9.32% and 9.04%, respectively, for
1996, 1995 and 1994. Pre-Medicare health care cost trend rate was 14% for
1994, grading down in 0.5% annual increments to 5.0%. Post-Medicare health
care cost trend rate was 11.5% for 1994, grading down in 0.5% annual
increments to 5.0%. Pre-Medicare trend rates were 13.5% for the first three
months of 1995 and 10% for the remainder of the year, grading down in 0.5%
annual increments to 5.0%. Post-Medicare trend rates were 11% for the first
three months of 1995 and 8% for the remainder of the year, grading down in
0.5% annual increments to 5.0%. The effect of a 1% increase in the health care
cost trend rate for each future year would increase the aggregate of the
service and interest cost components of postretirement benefit costs by
approximately $21 million for 1996.
 
(15) SEPARATION PLAN COSTS
 
  Operation and maintenance expenses included $12 million for the year 1996
and $97 million for the year 1995 related to a voluntary separation offer for
union employees who accepted and left ComEd's employ combined with separation
plans offered to selected groups of non-union employees. These employee
separation plans reduced net income by $7 million or $0.03 per common share
for the year 1996 and $59 million or $0.27 per common share for the year 1995.
 
(16) INCOME TAXES
 
  The components of the net deferred income tax liability at December 31, 1996
and 1995 were as follows:
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31
                                                         ----------------------
                                                            1996        1995
                                                         ----------  ----------
                                                             (THOUSANDS OF
                                                               DOLLARS)
<S>                                                      <C>         <C>
Deferred income tax liabilities:
 Accelerated cost recovery and liberalized deprecia-
  tion, net of removal costs...........................  $3,514,300  $3,379,987
 Overheads capitalized.................................     261,437     252,910
 Repair allowance......................................     228,426     219,585
 Regulatory assets recoverable through future rates....   1,649,037   1,689,832
Deferred income tax assets:
 Postretirement benefits...............................    (269,180)   (235,360)
 Unbilled revenues.....................................    (136,406)   (116,274)
 Alternative minimum tax...............................     (80,159)   (145,019)
 Unamortized investment tax credits to be settled
  through future rates.................................    (430,297)   (452,210)
 Other regulatory liabilities to be settled through fu-
  ture rates...........................................    (238,004)   (148,792)
 Other--net............................................     (44,998)    (45,301)
                                                         ----------  ----------
Net deferred income tax liability......................  $4,454,156  $4,399,358
                                                         ==========  ==========
</TABLE>
 
                                      40
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
 
The $55 million increase in the net deferred income tax liability from
December 31, 1995 to December 31, 1996 is comprised of $163 million increase
of deferred income tax expense and a $108 million decrease in regulatory
assets net of regulatory liabilities pertaining to income taxes for the year.
The amount of regulatory assets included in deferred income tax liabilities
primarily relates to the equity component of AFUDC which is recorded on an
after-tax basis, the borrowed funds component of AFUDC which was previously
recorded net of tax and other temporary differences for which the related tax
effects were not previously recorded. The amount of other regulatory
liabilities included in deferred income tax assets primarily relates to
deferred income taxes provided at rates in excess of the current statutory
rate.
 
  The effects of an income tax refund related to prior years were recorded in
1996, resulting in an increase to net income of $26 million or $0.12 per
common share.
 
  The components of net income tax expense charged to continuing operations
for the years 1996, 1995 and 1994 were as follows:
 
<TABLE>
<CAPTION>
                                                    1996      1995      1994
                                                  --------  --------  --------
                                                    (THOUSANDS OF DOLLARS)
<S>                                               <C>       <C>       <C>
Operating income:
 Current income taxes...........................  $328,369  $339,989  $158,342
 Deferred income taxes..........................   161,176   186,529   168,402
 Investment tax credits deferred--net...........   (33,378)  (28,710)  (28,757)
Other (income) and deductions...................    (7,385)   (7,685)  (22,498)
                                                  --------  --------  --------
Net income taxes charged to continuing opera-
 tions..........................................  $448,782  $490,123  $275,489
                                                  ========  ========  ========
</TABLE>
 
  Provisions for current and deferred federal and state income taxes and
amortization of investment tax credits resulted in the following effective
income tax rates for the years 1996, 1995 and 1994:
 
<TABLE>
<CAPTION>
                                                  1996        1995       1994
                                               ----------  ----------  --------
                                                   (THOUSANDS OF DOLLARS)
<S>                                            <C>         <C>         <C>
Net income before extraordinary item.........  $  666,100  $  659,533  $354,934
Net income taxes charged to continuing opera-
 tions.......................................     448,782     490,123   275,489
Provision for dividends on ComEd preferred
 and preference stocks.......................      64,424      69,961    64,927
                                               ----------  ----------  --------
Pre-tax income before provision for divi-
 dends.......................................  $1,179,306  $1,219,617  $695,350
                                               ==========  ==========  ========
Effective income tax rate....................        38.1%       40.2%     39.6%
                                               ==========  ==========  ========
</TABLE>
 
  The principal differences between net income taxes charged to continuing
operations and the amounts computed at the federal statutory rate of 35% for
the years 1996, 1995 and 1994 were as follows:
 
<TABLE>
<CAPTION>
                                                     1996      1995      1994
                                                   --------  --------  --------
                                                     (THOUSANDS OF DOLLARS)
<S>                                                <C>       <C>       <C>
Federal income taxes computed at statutory rate..  $412,757  $426,866  $243,373
Equity component of AFUDC which was excluded from
 taxable income..................................    (7,272)   (4,595)   (7,920)
Amortization of investment tax credits...........   (33,378)  (28,710)  (28,810)
State income taxes, net of federal income taxes..    58,387    65,972    40,140
Differences between book and tax accounting, pri-
 marily property-related deductions..............    14,150    27,534    26,505
Other--net.......................................     4,138     3,056     2,201
                                                   --------  --------  --------
Net income taxes charged to continuing opera-
 tions...........................................  $448,782  $490,123  $275,489
                                                   ========  ========  ========
</TABLE>
 
  Current federal income tax liabilities which were recorded prior to 1995
included excess amounts of AMT over the regular federal income tax, which
amounts were also recorded as decreases to deferred federal income taxes. The
excess amounts of AMT were carried forward and portions were
 
                                      41
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
applied as credits against the post-1994 regular federal income tax
liabilities. The remaining excess amounts of AMT can be carried forward
indefinitely as credits against future years' regular federal income tax
liabilities.
 
(17) TAXES, EXCEPT INCOME TAXES
 
  Provisions for taxes, except income taxes, for the years 1996, 1995 and 1994
were as follows:
 
<TABLE>
<CAPTION>
                                                       1996     1995     1994
                                                     -------- -------- --------
                                                       (THOUSANDS OF DOLLARS)
      <S>                                            <C>      <C>      <C>
      Illinois public utility revenue............... $227,062 $229,546 $211,263
      Illinois invested capital.....................  104,663  106,830  109,373
      Municipal utility gross receipts..............  168,715  167,758  145,011
      Real estate...................................  129,770  176,454  180,221
      Municipal compensation........................   78,544   78,602   72,647
      Other--net....................................   74,821   74,107   69,281
                                                     -------- -------- --------
                                                     $783,575 $833,297 $787,796
                                                     ======== ======== ========
</TABLE>
 
  The reduction in ComEd's real estate taxes in 1996 results primarily from
ongoing challenges by ComEd of the methodology used by local taxing
authorities to assess the value of ComEd's nuclear generating stations.
Approximately half of the 1996 reduction in ComEd's real estate taxes is
related to the year 1995.
 
(18) LEASE OBLIGATIONS OF SUBSIDIARY COMPANIES
 
  Under its nuclear fuel lease arrangement, ComEd may sell and lease back
nuclear fuel from a lessor who may borrow an aggregate of $700 million,
consisting of $300 million of commercial paper or bank borrowings and $400
million of intermediate term notes, to finance the transactions. With respect
to the commercial paper/bank borrowing portion, $100 million will expire on
November 23, 1998 and $200 million will expire on November 23, 1999. With
respect to the intermediate term notes, a portion expires in November 1997,
and each November thereafter, through November 2001 and in November 2003. At
December 31, 1996, ComEd's obligation to the lessor for leased nuclear fuel
amounted to approximately $687 million. ComEd has agreed to make lease
payments which cover the amortization of the nuclear fuel used in ComEd's
reactors plus the lessor's related financing costs. ComEd has an obligation
for spent nuclear fuel disposal costs of leased nuclear fuel.
 
  Future minimum rental payments, net of executory costs, at December 31, 1996
for capital leases are estimated to aggregate $788 million, including $241
million in 1997, $195 million in 1998, $150 million in 1999, $91 million in
2000, $45 million in 2001 and $66 million in 2002-2043. The estimated interest
component of such rental payments aggregates $106 million. The estimated
portions of obligations due within one year under capital leases of
approximately $174 million and $168 million at December 31, 1996 and 1995,
respectively, are included in current liabilities.
 
  Future minimum rental payments at December 31, 1996 for operating leases are
estimated to aggregate $173 million, including $12 million in 1997, $13
million in 1998, $12 million in 1999, $10 million in 2000, $10 million in 2001
and $116 million in 2002-2024.
 
(19) JOINT PLANT OWNERSHIP
 
  ComEd has a 75% undivided ownership interest in the Quad Cities nuclear
generating station. Further, ComEd is responsible for 75% of all costs which
are charged to appropriate investment,
 
                                      42
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
operation or maintenance accounts and provides its own financing. At December
31, 1996, for its share of ownership in the station, ComEd had an investment
of $641 million in production and transmission plant in service (before
reduction of $197 million for the related accumulated provision for
depreciation) and $21 million in construction work in progress.
 
(20) INVESTMENTS IN URANIUM-RELATED PROPERTIES
 
  In 1994, ComEd recorded a reduction in the carrying value of its investments
in uranium-related properties after completing a review of various
alternatives and reassessing the long-term recoverability of those
investments. The effects of the reduction reduced 1994 net income by $34
million or $0.16 per common share.
 
(21) COMMITMENTS AND CONTINGENT LIABILITIES
 
  Purchase commitments, principally related to construction and nuclear fuel,
approximated $1,060 million at December 31, 1996, comprised of approximately
$1,018 million for ComEd and the Indiana Company and approximately $42 million
for Unicom Thermal. In addition, ComEd has substantial commitments for the
purchase of coal. ComEd's coal costs are high compared to those of other
utilities. ComEd's western coal contracts and its rail contracts for delivery
of the western coal provide for the purchase of certain coal at prices
substantially above currently prevailing market prices. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
subcaption "Liquidity and Capital Resources," for additional information
regarding ComEd's purchase commitments.
 
  ComEd is a member of NML, established to provide insurance coverage against
property damage to members' nuclear generating facilities. The members are
subject to a retrospective premium adjustment in the event losses exceed
accumulated reserve funds. Capital has been accumulated in the reserve funds
of NML to the extent that ComEd would not be liable for a retrospective
premium adjustment in the event of a single incident. However, ComEd could be
subject to a maximum assessment of approximately $53 million in any policy
year, in the event losses exceed accumulated reserve funds.
 
  ComEd also is a member of NEIL, which provides insurance coverage against
the cost of replacement power obtained during certain prolonged accidental
outages of nuclear generating units and coverage for property losses in excess
of $500 million occurring at nuclear stations. All companies insured with NEIL
are subject to retrospective premium adjustments if losses exceed accumulated
reserve funds. Capital has been accumulated in the reserve funds of NEIL to
the extent that ComEd would not be liable for a retrospective premium
adjustment in the event of a single incident under the replacement power
coverage and the property damage coverage. However, ComEd could be subject to
maximum assessments, in any policy year, of approximately $21 million and $73
million in the event losses exceed accumulated reserve funds under the
replacement power and property damage coverages, respectively.
 
  The NRC's indemnity for public liability coverage under the Price-Anderson
Act is supported by a mandatory industry-wide program under which owners of
nuclear generating facilities could be assessed in the event of nuclear
incidents. Based on the number of nuclear reactors with operating licenses,
ComEd would currently be subject to a maximum assessment of $991 million in
the event of an incident, limited to a maximum of $125 million in any calendar
year.
 
                                      43
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONTINUED
 
  In addition, ComEd participates in the American Nuclear Insurers and Mutual
Atomic Energy Liability Underwriters Master Worker Program which provides
coverage for worker tort claims filed for bodily injury caused by the nuclear
energy hazard. The coverage applies to workers whose "nuclear related
employment" began after January 1, 1988. ComEd would currently be subject to a
maximum assessment of approximately $36 million in the event losses exceed
accumulated reserve funds.
 
  During 1989 and 1991, actions were brought in federal and state courts in
Colorado against ComEd and Cotter seeking unspecified damages and injunctive
relief based on allegations that Cotter has permitted radioactive and other
hazardous material to be released from its mill into areas owned or occupied
by the plaintiffs resulting in property damage and potential adverse health
effects. In February 1994, a federal jury returned nominal dollar verdicts on
eight bellwether plaintiffs' claims in these cases, which verdicts were upheld
on appeal. The remaining claims in the 1989 actions are the subject of a
settlement agreement entered into by counsel for the plaintiffs and Cotter. If
the settlement agreement is implemented, the 1989 actions will be dismissed.
Although the remaining cases will necessarily involve the resolution of
numerous contested issues of fact and law, Unicom's and ComEd's determination
is that these actions will not have a material impact on their financial
position or results of operations.
 
  ComEd is involved in administrative and legal proceedings concerning air
quality, water quality and other matters. The outcome of these proceedings may
require increases in future construction expenditures and operating expenses
and changes in operating procedures. ComEd and its subsidiaries are or are
likely to become parties to proceedings initiated by the U.S. EPA, state
agencies and/or other responsible parties under CERCLA with respect to a
number of sites, including MGP sites, or may voluntarily undertake to
investigate and remediate sites for which they may be liable under CERCLA.
 
  ComEd generally did not operate MGPs as a corporate entity but did, however,
acquire MGP sites as part of the absorption of smaller utilities and as vacant
real estate on which ComEd facilities have been constructed. To date, ComEd
has identified 44 former MGP sites for which it may be liable for remediation.
ComEd presently estimates that its costs of former MGP site investigation and
remediation will aggregate from $25 million to $150 million in current-year
(1997) dollars. It is expected that the costs associated with investigation
and remediation of former MGP sites will be incurred over a period of
approximately 20 to 30 years. Because ComEd is not able to determine the most
probable liability for such MGP costs, in accordance with accounting
standards, a reserve of approximately $25 million has been included on the
Consolidated Balance Sheets as of December 31, 1996 and 1995, which reflects
the low end of the range of ComEd's estimate of the liability associated with
former MGP sites. In addition, as of December 31, 1996 and 1995, a reserve of
$8 million has been included on the Consolidated Balance Sheets, representing
ComEd's estimate of the liability associated with cleanup costs of remediation
sites other than former MGP sites. Approximately half of this reserve relates
to anticipated cleanup costs associated with a property formerly used as a
tannery which was purchased by ComEd in 1973. Unicom and ComEd presently
estimate that ComEd's costs of investigating and remediating the former MGP
and other remediation sites pursuant to CERCLA and state environmental laws
will not have a material impact on the financial position or results of
operations of Unicom or ComEd. These cost estimates are based on currently
available information regarding the responsible parties likely to share in the
costs of responding to site contamination, the extent of contamination at
sites for which the investigation has not yet been completed and the cleanup
levels to which sites are expected to have to be remediated.
 
                                      44
<PAGE>
 
                  UNICOM CORPORATION AND SUBSIDIARY COMPANIES
 
                   NOTES TO FINANCIAL STATEMENTS--CONCLUDED
 
(22) QUARTERLY FINANCIAL INFORMATION
 
<TABLE>
<CAPTION>
                                                              AVERAGE
                                                             NUMBER OF  EARNINGS
                                                              COMMON      PER
                              OPERATING  OPERATING   NET      SHARES     COMMON
THREE MONTHS ENDED             REVENUES   INCOME    INCOME  OUTSTANDING  SHARE
------------------            ---------- --------- -------- ----------- --------
                                      (THOUSANDS EXCEPT PER SHARE DATA)
<S>                           <C>        <C>       <C>      <C>         <C>
March 31, 1995............... $1,578,136 $260,579  $ 88,601   214,429    $0.41
June 30, 1995................ $1,559,521 $276,584  $108,866   214,677    $0.51
September 30, 1995........... $2,190,862 $582,006  $407,433   214,769    $1.90
December 31, 1995............ $1,581,526 $219,327  $ 34,611   214,889    $0.16
March 31, 1996............... $1,683,929 $297,551  $136,932   215,248    $0.64
June 30, 1996................ $1,547,916 $253,063  $100,313   215,438    $0.47
September 30, 1996........... $2,067,901 $474,895  $334,980   215,568    $1.55
December 31, 1996............ $1,637,278 $237,799  $ 93,875   215,747    $0.44
</TABLE>
 
(23) SUBSEQUENT EVENTS
 
  In January 1997, ComEd issued $150 million principal amount of 7.375% Notes
due January 15, 2004, $150 million principal amount of 7.625% Notes due
January 15, 2007 and $150 million principal amount of Company-obligated
preferred securities of subsidiary trust.
 
  On January 24, 1997, ComEd announced that it would redeem on March 11, 1997
all of its $200 million principal amount of First Mortgage 9 1/2% Bonds,
Series 57, due May 1, 2016.
 
                                      45