UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended JUNE 30, 2001
                                                 -------------

Commission       Registrant's Name, State of Incorporation,      IRS Employer
File Number           Address and Telephone Number            Identification No.
-----------           ----------------------------            ------------------

333-90553               MIDAMERICAN FUNDING, LLC                  47-0819200
                   (AN IOWA LIMITED LIABILITY COMPANY)
                        666 GRAND AVE. PO BOX 657
                         DES MOINES, IOWA 50303
                              515-242-4300

Securities registered pursuant to Section 12(b) of the Act:  None



Securities registered pursuant to Section 12(g) of the Act:  None



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

All of the member's  equity of MidAmerican  Funding,  LLC is held by MidAmerican
Energy Holdings Company as of July 31, 2001.


<PAGE>



                            MIDAMERICAN FUNDING, LLC

                                    FORM 10-Q

                                TABLE OF CONTENTS



                     PART I. FINANCIAL INFORMATION                    PAGE NO.

ITEM 1.  Financial Statements

         Independent Accountants' Report..............................     3
         Consolidated Statements of Income............................     4
         Consolidated Balance Sheets..................................     5
         Consolidated Statements of Cash Flows........................     6
         Notes to Consolidated Financial Statements...................     7

ITEM 2.  Management's Discussion and Analysis of
           Financial Condition and Results of Operations..............    13

                           PART II. OTHER INFORMATION

ITEM 1.  Legal Proceedings ...........................................    26

ITEM 6.  Exhibits and Reports on Form 8-K.............................    28

Signatures............................................................    29

                                      -2-
<PAGE>




INDEPENDENT ACCOUNTANTS' REPORT


Board of Managers and Member
MidAmerican Funding, LLC
Des Moines, Iowa

We have reviewed the  accompanying  consolidated  balance  sheet of  MidAmerican
Funding, LLC and subsidiaries (the Company) as of June 30, 2001, and the related
consolidated  statements of income for the  three-month  and  six-month  periods
ended June 30, 2001 and 2000,  and the related  consolidated  statements of cash
flows for the six-month  periods ended June 30, 2001 and 2000.  These  financial
statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America,  the
objective  of which is the  expression  of an opinion  regarding  the  financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to such consolidated  financial  statements for them to be in conformity
with accounting principles generally accepted in the United States of America.

We have  previously  audited,  in accordance with auditing  standards  generally
accepted in the United  States of America,  the  consolidated  balance sheet and
statement of capitalization of MidAmerican  Funding,  LLC and subsidiaries as of
December  31,  2000,  and  the  related   consolidated   statements  of  income,
comprehensive income,  retained earnings, and cash flows for the year then ended
(not presented  herein);  and in our report dated January 18, 2001, we expressed
an  unqualified  opinion  on those  consolidated  financial  statements.  In our
opinion,  the information  set forth in the  accompanying  consolidated  balance
sheet as of December 31, 2000 is fairly  stated,  in all material  respects,  in
relation to the consolidated balance sheet from which it has been derived.


DELOITTE & TOUCHE LLP

Des Moines, Iowa
July 20, 2001

                                      -3-

<PAGE>
                            MIDAMERICAN FUNDING, LLC
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                      THREE MONTHS                   SIX MONTHS
                                                     ENDED JUNE 30,                ENDED JUNE 30,
                                               --------------------------    --------------------------
                                                  2001           2000           2001           2000
                                               -----------    -----------    -----------    -----------

<S>                                            <C>            <C>            <C>            <C>
OPERATING REVENUES
Regulated electric .........................   $   305,800    $   281,973    $   600,190    $   560,436
Regulated gas ..............................        87,297         98,153        454,155        278,055
Nonregulated ...............................       207,284         90,007        435,593        154,196
                                               -----------    -----------    -----------    -----------
                                                   600,381        470,133      1,489,938        992,687
                                               -----------    -----------    -----------    -----------
OPERATING EXPENSES
Regulated:
  Cost of fuel, energy and capacity ........        60,406         56,451        126,206        113,811
  Cost of gas sold .........................        52,735         61,055        345,185        172,552
  Other operating expenses .................       104,201         97,375        200,653        193,895
  Maintenance ..............................        31,156         29,938         58,946         54,677
  Depreciation and amortization ............        50,645         49,140        101,455         93,483
  Property and other taxes .................        18,543         19,110         35,817         38,409
                                               -----------    -----------    -----------    -----------
                                                   317,686        313,069        868,262        666,827
                                               -----------    -----------    -----------    -----------
Nonregulated:
  Cost of sales ............................       198,792         83,861        418,268        139,512
  Other ....................................        15,229         15,541         30,309         33,023
                                               -----------    -----------    -----------    -----------
                                                   214,021         99,402        448,577        172,535
                                               -----------    -----------    -----------    -----------
  Total operating expenses .................       531,707        412,471      1,316,839        839,362
                                               -----------    -----------    -----------    -----------

OPERATING INCOME ...........................        68,674         57,662        173,099        153,325
                                               -----------    -----------    -----------    -----------

NON-OPERATING INCOME
Interest income ............................         6,176          3,810         12,213          7,626
Dividend income ............................           685          1,075          1,423          2,188
Marketable securities gains and losses, net            962         (2,665)        (1,276)        (1,329)
Other, net .................................           647          6,546         (3,135)         6,004
                                               -----------    -----------    -----------    -----------
                                                     8,470          8,766          9,225         14,489
                                               -----------    -----------    -----------    -----------
FIXED CHARGES
Interest on long-term debt .................        28,104         25,985         55,415         53,233
Other interest expense .....................         2,585          4,432          3,768          7,406
Preferred dividends of subsidiaries ........         3,263          3,295          6,558          6,529
Allowance for borrowed funds ...............          (261)          (374)          (753)          (753)
                                               -----------    -----------    -----------    -----------
                                                    33,691         33,338         64,988         66,415
                                               -----------    -----------    -----------    -----------

INCOME BEFORE INCOME TAXES .................        43,453         33,090        117,336        101,399
INCOME TAXES ...............................        21,699         16,839         56,270         48,559
                                               -----------    -----------    -----------    -----------
NET INCOME .................................   $    21,754    $    16,251    $    61,066    $    52,840
                                               ===========    ===========    ===========    ===========
</TABLE>

        The accompanying notes are a n integral part of these statements.

                                      -4-
<PAGE>


                            MIDAMERICAN FUNDING, LLC
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                                  AS OF
                                                                         -------------------------
                                                                           JUNE 30,   DECEMBER 31,
                                                                             2001         2000
                                                                         -----------  ------------
                                                                         (UNAUDITED)

<S>                                                                       <C>           <C>
ASSETS
UTILITY PLANT
Electric ..............................................................   $4,521,507    $4,471,839
Gas ...................................................................      842,534       831,203
                                                                          ----------    ----------
                                                                           5,364,041     5,303,042
Less accumulated depreciation and amortization ........................    2,775,637     2,680,420
                                                                          ----------    ----------
                                                                           2,588,404     2,622,622
Construction work in progress .........................................       41,909        38,584
                                                                          ----------    ----------
                                                                           2,630,313     2,661,206
                                                                          ----------    ----------
POWER PURCHASE CONTRACT ...............................................       78,428        82,231
                                                                          ----------    ----------
CURRENT ASSETS
Cash and cash equivalents .............................................       13,778        10,018
Marketable securities, trading ........................................       44,270            --
Receivables ...........................................................      280,563       527,078
Inventories ...........................................................       43,809        69,130
Prepaid taxes .........................................................       23,956        22,889
Other .................................................................       11,257        14,218
                                                                          ----------    ----------
                                                                             417,633       643,333
                                                                          ----------    ----------

INVESTMENTS AND NONREGULATED PROPERTY, NET ............................      543,612       502,167
EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED, NET ................    1,296,352     1,313,558
OTHER ASSETS ..........................................................      290,810       290,226
                                                                          ----------    ----------
TOTAL ASSETS ..........................................................   $5,257,148    $5,492,721
                                                                          ==========    ==========

CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Member's equity .......................................................   $1,944,488    $1,874,787
MidAmerican Energy preferred securities, not subject to
  mandatory redemption ................................................       31,759        31,759
Preferred securities, subject to mandatory redemption:
  MidAmerican Energy preferred securities .............................       36,680        50,000
  MidAmerican Energy-obligated preferred securities of subsidiary trust
    holding solely MidAmerican Energy junior subordinated debentures ..      100,000       100,000
Long-term debt (excluding current portion) ............................    1,545,336     1,345,703
                                                                          ----------    ----------
                                                                           3,658,263     3,402,249
                                                                          ----------    ----------
CURRENT LIABILITIES
Notes payable .........................................................       40,500        81,600
Current portion of long-term debt .....................................      124,646       324,933
Current portion of power purchase contract ............................       16,554        16,554
Accounts payable ......................................................      175,546       405,887
Taxes accrued .........................................................       90,017       131,378
Interest accrued ......................................................       26,435        27,955
Other .................................................................       35,343        37,853
                                                                          ----------    ----------
                                                                             509,041     1,026,160
                                                                          ----------    ----------
OTHER LIABILITIES
Power purchase contract ...............................................       35,728        35,728
Deferred income taxes .................................................      591,844       591,667
Investment tax credit .................................................       63,751        66,209
Other .................................................................      398,521       370,708
                                                                          ----------    ----------
                                                                           1,089,844     1,064,312
                                                                          ----------    ----------
TOTAL CAPITALIZATION AND LIABILITIES ..................................   $5,257,148    $5,492,721
                                                                          ==========    ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -5-
<PAGE>


                            MIDAMERICAN FUNDING, LLC
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                    SIX MONTHS
                                                                  ENDED JUNE 30,
                                                             ----------------------
                                                                2001         2000
                                                             ---------    ---------

<S>                                                          <C>          <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...............................................   $  61,066    $  52,840
Adjustments to reconcile net income to net cash provided:
  Depreciation and amortization ..........................     119,443      112,568
  Deferred income taxes and investment tax credit, net ...      (8,136)        (566)
  Amortization of other assets and liabilities ...........      23,622       10,435
  Gain on sale of securities, assets and other investments      (1,367)      (4,761)
  Net change in accrued customer rate credits ............      13,190       (6,988)
  Cash inflows of accounts receivable securitization .....          --       12,877
  Impact of changes in working capital ...................       5,266        2,780
  Other ..................................................       5,765       (6,512)
                                                             ---------    ---------
    Net cash provided ....................................     218,849      172,673
                                                             ---------    ---------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures ........................     (74,247)     (80,780)
Quad Cities Generating Station decommissioning
  trust fund .............................................      (4,150)      (4,152)
Nonregulated capital expenditures ........................      (1,836)        (686)
Purchase of assets and long-term investments .............      (2,218)      (2,808)
Purchase of available-for-sale securities ................          --      (13,477)
Proceeds from sale of available-for-sale securities ......          --       24,067
Proceeds from sale of assets and other investments .......         194       23,562
Notes receivable from affiliate ..........................     (74,014)     (39,436)
Other investing activities, net ..........................      (2,261)        (317)
                                                             ---------    ---------
  Net cash used ..........................................    (158,532)     (94,027)
                                                             ---------    ---------

NET CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt, net of issuance costs ........     198,150           --
Retirement of long-term debt, including reacquisition cost    (200,287)    (110,784)
Reacquisition of preferred securities ....................     (13,320)          --
Net increase (decrease) in notes payable .................     (41,100)      30,711
                                                             ---------    ---------
  Net cash used ..........................................     (56,557)     (80,073)
                                                             ---------    ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .....       3,760       (1,427)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .........      10,018        6,235
                                                             ---------    ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...............   $  13,778    $   4,808
                                                             =========    =========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized ................   $  57,513    $  61,248
                                                             =========    =========
Income taxes paid ........................................   $  96,588    $  82,054
                                                             =========    =========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -6-
<PAGE>


                            MIDAMERICAN FUNDING, LLC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A.  GENERAL:

     The consolidated financial statements included herein have been prepared by
MidAmerican Funding,  LLC, without audit,  pursuant to the rules and regulations
of the Securities and Exchange  Commission.  Certain information and disclosures
normally included in financial  statements prepared in accordance with generally
accepted  accounting  principles have been condensed or omitted pursuant to such
rules and regulations.  In the opinion of MidAmerican  Funding, all adjustments,
consisting of normal recurring adjustments, have been made to present fairly the
financial position,  the results of operations and the changes in cash flows for
the periods  presented.  Prior year  amounts have been  reclassified  to a basis
consistent  with the current year  presentation.  All  significant  intercompany
transactions have been eliminated.  Although  MidAmerican  Funding believes that
the disclosures  are adequate to make the information  presented not misleading,
it is suggested that these financial  statements be read in conjunction with the
consolidated  financial statements and the notes thereto included in MidAmerican
Funding's latest Annual Report on Form 10-K.

     MidAmerican  Funding is an Iowa limited  liability company with MidAmerican
Energy Holdings Company as its sole member. MidAmerican Funding's direct, wholly
owned  subsidiary is MHC Inc. MHC,  MidAmerican  Funding and MidAmerican  Energy
Holdings  are exempt  public  utility  holding  companies  headquartered  in Des
Moines, Iowa. MHC's principal subsidiary is MidAmerican Energy Company, a public
utility with electric and natural gas  operations.  Other  direct,  wholly owned
subsidiaries of MHC include MidAmerican Capital Company,  Midwest Capital Group,
Inc., MidAmerican Services Company and MEC Construction Services Co.

B.  ENVIRONMENTAL MATTERS:

     (1) MANUFACTURED GAS PLANT FACILITIES -

     The  United   States   Environmental   Protection   Agency  and  the  state
environmental  agencies have determined that  contaminated  wastes  remaining at
decommissioned manufactured gas plant facilities may pose a threat to the public
health or the environment if such contaminants are in sufficient  quantities and
at such concentrations as to warrant remedial action.

     MidAmerican  Energy has evaluated or is evaluating 27 properties that were,
at one time, sites of gas manufacturing  plants in which it may be a potentially
responsible  party.  The purpose of these  evaluations  is to determine  whether
waste materials are present,  whether the materials  constitute an environmental
or health  risk,  and  whether  MidAmerican  Energy has any  responsibility  for
remedial action. MidAmerican Energy is currently conducting field investigations
at  eighteen  sites and has  conducted  interim  removal  actions  at six of the
eighteen sites. In addition, MidAmerican Energy has completed investigations and
removals at four sites.  MidAmerican Energy is continuing to evaluate several of
the sites to  determine  the  future  liability,  if any,  for  conducting  site
investigations or other site activity.

     MidAmerican Energy estimates the range of possible costs for investigation,
remediation  and monitoring for the sites  discussed  above to be $22 million to
$68 million.  MidAmerican Energy's estimate of the probable cost for these sites
as of June 30, 2001 was $24  million.  The  estimate  consists of $2 million for
investigation   costs,  $8  million  for  remediation  costs,  $12  million  for
groundwater  treatment  and  monitoring  costs and $2 million  for  closure  and
administrative  costs.  This  estimate  has been  recorded as a liability  and a
regulatory  asset for future  recovery.  MidAmerican  Energy projects that these
amounts will be paid or incurred over the next 10 years.

                                      -7-

<PAGE>

     The  estimate  of  probable  remediation  costs  is  established  on a site
specific  basis.  The costs are  accumulated in a three-step  process.  First, a
determination  is made as to  whether  MidAmerican  Energy has  potential  legal
liability  for  the  site  and  whether  information  exists  to  indicate  that
contaminated  wastes  remain  at the site.  If so,  the  costs of  performing  a
preliminary  investigation and the costs of removing known contaminated soil are
accrued.  As the  investigation  is performed and if it is  determined  remedial
action  is  required,  the  best  estimate  of  remedial  costs is  accrued.  If
necessary, the estimate is revised when a consent order is issued. The estimated
recorded  liabilities for these properties  include  incremental direct costs of
the  remediation  effort,  costs  for  future  monitoring  at sites and costs of
compensation  to  employees  for  time  expected  to be  spent  directly  on the
remediation effort. The estimated recorded  liabilities for these properties are
based upon preliminary  data. Thus, actual costs could vary  significantly  from
the  estimates.  The  estimate  could  change  materially  based  on  facts  and
circumstances  derived from site  investigations,  changes in required  remedial
action and changes in technology  relating to remedial  alternatives.  Insurance
recoveries have been received for some of the sites under  investigation.  Those
recoveries are intended to be used principally for accelerated  remediation,  as
specified  by the  Iowa  Utilities  Board,  and  are  recorded  as a  regulatory
liability.

     The  Illinois  Commerce  Commission  has approved the use of a tariff rider
which  permits  recovery of the actual costs of  litigation,  investigation  and
remediation  relating  to  former  manufactured  gas  plant  sites.  MidAmerican
Energy's  present  rates  in  Iowa  provide  for  a  fixed  annual  recovery  of
manufactured gas plant costs.  MidAmerican  Energy intends to pursue recovery of
the  remediation  costs  from  other  potentially  responsible  parties  and its
insurance carriers.

     Although the timing of potential  incurred costs and recovery of such costs
in rates may affect the results of operations in individual periods,  management
believes  that the  outcome of these  issues  will not have a  material  adverse
effect on MidAmerican Energy's financial position or results of operations.

     (2) CLEAN AIR ACT -

     On July 18, 1997, the Environmental  Protection Agency adopted revisions to
the National Ambient Air Quality Standards for ozone and a new standard for fine
particulate  matter.  Based  on  data  to  be  obtained  from  monitors  located
throughout each state, the Environmental  Protection Agency will determine which
states have areas that do not meet the air quality  standards (i.e.,  areas that
are  classified  as  nonattainment).  If  a  state  has  area(s)  classified  as
nonattainment  area(s),  the state is required to submit a State  Implementation
Plan specifying how it will reach  attainment of the standards  through emission
reductions or other means.  In August 1998,  the Iowa  Environmental  Protection
Commission  adopted by reference the National Ambient Air Quality  Standards for
ozone and fine particulate matter.

     In May 1999,  the  United  States  Court of  Appeals  for the  District  of
Columbia  Circuit  remanded  the  standards  adopted  in July  1997  back to the
Environmental  Protection Agency indicating the Environmental  Protection Agency
had not expressed  sufficient  justification  for the basis of establishing  the
standards and ruling that the  Environmental  Protection Agency has exceeded its
constitutionally-delegated authority in setting the standards. The Environmental
Protection Agency's appeal of the court's ruling to the full panel of the United
States District Court of Appeals for the District of Columbia was denied. In May
2000, the United States  Supreme Court granted  certiorari to review the appeals
court decision.

     On February 27, 2001,  the Supreme Court,  in Whitman v. American  Trucking
Associations,  upheld the standards,  ruling that the  Environmental  Protection
Agency did not exceed its constitutional delegation of authority in establishing
the standards in 1997. The court ruled that the Clean Air Act's  requirement for
the Environmental  Protection  Agency to establish  National Ambient Air Quality

                                      -8-

<PAGE>


Standards at a level "requisite" to protect public health,  or "sufficient,  but
not more than necessary",  is within the constitutional scope of discretion that
Congress can delegate to a federal  agency.  The court also explicitly held that
cost cannot be taken into account when setting the standards. The court remanded
the issue of  implementation of the ozone standard.  However,  the Environmental
Protection Agency is moving forward with analyzing  existing  monitored data and
determining attainment status.

     The impact of the new standards on MidAmerican Energy is currently unknown.
MidAmerican  Energy's fossil fuel generating stations may be subject to emission
reductions  if the stations are located in  nonattainment  areas.  As part of an
overall state plan to achieve  attainment of the standards,  MidAmerican  Energy
could be required to install  control  equipment  on its fossil fuel  generating
stations or decrease the number of hours during  which these  stations  operate.
The degree to which  MidAmerican  Energy  may be  required  to  install  control
equipment or decrease  operating  hours under a  nonattainment  scenario will be
determined  by  the  state's   assessment  of  MidAmerican   Energy's   relative
contribution,  along with other emission sources,  to the nonattainment  status.
The  installation  of  control  equipment  would  result in  increased  costs to
MidAmerican  Energy. A decrease in the number of hours during which the affected
stations operate would decrease the revenues of MidAmerican Energy.

C. RATE MATTERS:

     In 1997,  pursuant to a rate  proceeding  before the Iowa Utilities  Board,
MidAmerican  Energy,  the Office of Consumer  Advocate and other parties entered
into a pricing plan settlement agreement establishing  MidAmerican Energy's Iowa
retail electric rates. That settlement agreement expired on December 31, 2000.

     On March 14,  2001,  the Office of the Consumer  Advocate  filed a petition
with  the  Iowa  Utilities  Board  to  reduce  Iowa  retail  electric  rates  by
approximately  $77  million  annually.  On June  11,  2001,  MidAmerican  Energy
responded to that petition by filing a request with the Iowa Utilities  Board to
increase  MidAmerican  Energy's  Iowa  retail  electric  rates  by  $51  million
annually. On July 12, 2001,  MidAmerican Energy, the Office of Consumer Advocate
and other parties  jointly filed a settlement  agreement with the Iowa Utilities
Board that,  if approved,  will freeze the rates in effect on December 31, 2000,
through December 31, 2005, and, with  modifications,  will reinstate the revenue
sharing  provisions  of the 1997 pricing plan  settlement  agreement.  Under the
proposed settlement agreement, 50% of revenues associated with returns on equity
between 12% and 14%,  and 83.33% of revenues  associated  with returns on equity
above 14%, in each year would be deferred as a  regulatory  liability to be used
to offset a portion of the cost of future generating plant investments.

     Under an Illinois restructuring law enacted in 1997, a sharing mechanism is
in place for MidAmerican  Energy's Illinois regulated retail electric operations
whereby  earnings  above a computed  threshold  will be shared  equally  between
customers and  shareholders.  A two-year average return on common equity greater
than a two-year  average  benchmark will trigger an equal sharing of earnings on
the excess.  MidAmerican  Energy's  computed level of return on common equity is
based on a rolling  two-year  average of the 30-year  Treasury Bond rates plus a
premium of 5.50% for 1998 and 1999 and a premium of 8.5% for 2000 through  2004.
The two-year  average above which sharing must occur for 2000 was 12.83%.  Using
the same 30-year  Treasury Bond average,  the computed  level of return would be
14.33% for 2001 through 2004. The law allows  MidAmerican Energy to mitigate the
sharing  of  earnings  above  the  threshold  return on  common  equity  through
accelerated recovery of regulatory assets.

                                      -9-
<PAGE>

D. ACCOUNTING FOR THE EFFECTS OF CERTAIN TYPES OF REGULATION

     MidAmerican  Energy's  utility  operations are subject to the regulation of
the Iowa Utilities Board,  the Illinois  Commerce  Commission,  the South Dakota
Public  Utilities  Commission,  and the Federal  Energy  Regulatory  Commission.
MidAmerican  Energy'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.

     A possible  consequence  of  deregulation  in the utility  industry is that
Statement  of  Financial  Accounting  Standards  No.  71 (SFAS 71) may no longer
apply.  SFAS 71  sets  forth  accounting  principles  for  operations  that  are
regulated and meet the stated  criteria.  For operations that meet the criteria,
SFAS 71 allows, among other things, the deferral of expense or income that would
otherwise be recognized  when  incurred.  With the  exception of the  generation
operations serving the Illinois jurisdiction,  MidAmerican Energy's electric and
gas  utility  operations  currently  meet  the  criteria  of  SFAS  71,  but its
applicability is periodically reexamined.  If portions of its utility operations
no longer meet the criteria of SFAS 71,  MidAmerican Energy could be required to
write off the related  regulatory  assets and liabilities from its balance sheet
and thus,  a material  adjustment  to earnings in that  period  could  result if
regulatory  assets are not recovered in  transition  provisions of any resulting
legislation.

E. DERIVATIVE FINANCIAL INSTRUMENTS:

     In  January  2001,   MidAmerican  Energy  adopted  Statement  of  Financial
Accounting  Standards (SFAS) Nos. 133 and 138,  pertaining to the accounting for
derivative instruments and hedging activities. These pronouncements require that
derivative  instruments  be  recorded  at fair  value on the  balance  sheet and
changes  in fair value  recognized  in income.  To the  extent  that  derivative
instruments are used for hedging  purposes,  and are highly effective as hedges,
hedge accounting is permitted, as discussed below, which mitigates the impact on
earnings of changes in the fair value of the derivatives.

     MidAmerican  Energy uses a variety of derivative  financial  instruments to
hedge the effect of price  changes on cash flows from expected  future  physical
transactions (cash flow hedges) and the fair value of physical purchase and sale
commitments  (fair value hedges) and to minimize price  volatility for regulated
gas  purchases.  The objective of  MidAmerican  Energy's  hedging  program is to
minimize the impact of changing  prices for natural gas and  electricity  on its
cash  flows.  Instruments  used for gas  hedging  transactions  include  futures
contracts, swaps and options. Instruments used for electric hedging transactions
include  forward  contracts and options.  Small volumes of derivative  financial
instruments  are  traded  from  time to  time to  profit  from  price  arbitrage
opportunities.

     Unrealized gains and losses on cash flow hedges of future  transactions are
recorded in other comprehensive income. Only hedges that are highly effective in
offsetting  the risk of  variability  in future cash flows are  accounted for in
this  manner.  Future  transactions  include  purchases  of gas  for  resale  to
regulated  and  nonregulated  customers,  purchases  of  gas  for  storage,  and
purchases and sales of wholesale  electric  energy.  When the associated  hedged
future transaction occurs or if a hedging relationship is no longer appropriate,
the unrealized gains and losses are reversed from other comprehensive income and
recognized  in net income.  Realized  gains on cash flow hedges are  recorded in
Cost of Gas Sold, Nonregulated Cost of Sales, Regulated Cost of Fuel, Energy and
Capacity or Nonregulated  Operating  Revenues,  depending upon the nature of the
physical transaction being hedged.

     For the six months  ended June 30, 2001,  net gains of $6,000,  $16,000 and
$353,000, representing the ineffectiveness of cash flow hedges, are reflected in
Nonregulated  Operating  Revenues,  Cost of Gas Sold and Regulated Cost of Fuel,
Energy and Capacity,  respectively.  During the twelve months

                                      -10-
<PAGE>

beginning July 1, 2001, it is anticipated  that all of the net unrealized  gains
(losses)  on  cash  flow  hedges   presently   recorded  as  accumulated   other
comprehensive income will be realized and recorded in earnings.

     Unrealized  gains and losses on fair value hedges are  recognized in income
as either Nonregulated  Operating Revenues,  Nonregulated Cost of Sales, or Cost
of Gas Sold  depending  upon the nature of the item being  hedged.  Purchase and
sales  commitments  hedged by fair value hedges are recorded at fair value, with
the changes in values also recognized in income and substantially offsetting the
impact of the hedges on earnings.  For the six months ended June 30, 2001, a net
pre-tax loss of $10,000,  representing the ineffectiveness of fair value hedges,
is included in Nonregulated Operating Revenues.

     Unrealized  gains and losses on derivatives  held for trading  purposes are
recognized in income each reporting period as Nonregulated Operating Revenues.

     As of June 30, 2001, the following instruments were held as hedges:

                                    Notional    Unit of        Fair Value
                                     Amount     Measure     Asset (Liability)
                                     ------     -------     -----------------

Natural Gas Futures - Net Short    4,930,000     MMBtu        $9,904,550
Natural Gas Swaps                    418,916     MMBtu        (4,465,108)
Natural Gas Options - Long           950,000     MMBtu        (1,676,334)
Natural Gas Options - Short          950,000     MMBtu             1,011
Electricity Forward
   Contracts - Net Short             305,600       MWh           588,056

     A $1/MMBtu  increase  in the price of natural gas would  increase  the fair
value of the natural  gas  instruments  by $5.3  million.  A $5/MWh  increase in
electricity  would decrease the fair value of the electricity  forward contracts
by $1.5 million.

     On  January  1,  2001,  as  permitted  by  FAS  133,   MidAmerican  Funding
re-characterized  its  portfolio of  preferred  stock  investments  as "trading"
securities.  Accordingly,  any  changes  in  value in the  portfolio,  or in the
derivatives  used to hedge  their  exposure to changes in  interest  rates,  are
recorded in net income. This change in classification resulted in a pre-tax loss
of $2.4 million.

F. SEGMENT INFORMATION:

     MidAmerican  Funding  has  two  reportable  operating  segments:  regulated
electric and regulated  gas,  referred to as the electric and gas segments.  The
electric  segment  derives  most of its revenue  from retail  sales of regulated
electricity  to  residential,  commercial,  and  industrial  customers  and from
wholesale  sales to  other  utilities,  municipalities  and  marketers.  The gas
segment  derives  most of its  revenue  from  retail  sales  of  natural  gas to
residential,  commercial,  and industrial  customers and also earns  significant
revenues by transporting gas owned by others through its  distribution  systems.
Pricing for most electric and gas sales are established separately by regulatory
agencies;  therefore,  management  also reviews each segment  separately to make
decisions  regarding  allocation  of resources  and in  evaluating  performance.
Common operating costs,  interest income,  interest expense,  income tax expense
and equity in the net income or loss of investees are allocated to each segment.

                                      -11-

<PAGE>

     The  following  table  provides   MidAmerican  Funding  information  on  an
operating segment basis (in thousands):

                                     Three Months             Six Months
                                    Ended June 30,          Ended June 30,
                                 --------------------    ----------------------
                                   2001        2000         2001         2000
                                 --------    --------    ----------    --------

Revenues
  Electric ...................   $305,800    $281,973    $  600,190    $560,436
  Gas ........................     87,297      98,153       454,155     278,055
  Nonregulated and other (a) .    207,284      90,007       435,593     154,196
                                 --------    --------    ----------    --------
                                 $600,381    $470,133    $1,489,938    $992,687
                                 ========    ========    ==========    ========
Net Income:
  Electric ...................   $ 35,847    $ 26,163    $   70,282    $ 53,934
  Gas ........................     (5,875)        550        12,000      15,388
  Nonregulated and other (a) .     (8,218)    (10,462)      (21,216)    (16,482)
                                 --------    --------    ----------    --------
                                 $ 21,754    $ 16,251    $   61,066    $ 52,840
                                 ========    ========    ==========    ========

(a)  "Nonregulated  and other"  consists of nonregulated  gas  operations,  CBEC
     Railway and other nonregulated activities.

G. OTHER COMPREHENSIVE INCOME:

     For the six months  ended  June 30,  2001 and 2000,  MidAmerican  Funding's
total  comprehensive  income was $69.7 million and $51.4 million,  respectively.
For the three months ended June 30, 2001 and 2000,  MidAmerican  Funding's total
comprehensive  income was $29.9  million and $17.3  million,  respectively.  The
differences  from Net Income are due to  unrealized  holding gains and losses of
marketable  securities  during the periods and,  beginning  January 1, 2001, the
effective portion of net gains and losses of derivative  instruments  classified
as cash flow hedges. Accumulated other comprehensive income, which also includes
recognition of the minimum pension  liability in the fourth quarter of 2000, was
$11.3  million and $2.7  million as of June 30,  2001,  and  December  31, 2000,
respectively.

                                      -12-
<PAGE>


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

                                  INTRODUCTION
                                  ------------

     MidAmerican  Funding,  LLC is an Iowa limited  liability  company formed in
March  1999.  The sole  member of  MidAmerican  Funding  is  MidAmerican  Energy
Holdings Company.  MidAmerican  Funding owns all of the outstanding common stock
of MHC Inc. MHC's principal  subsidiary is MidAmerican  Energy, a public utility
with electric and gas operations. Other direct, wholly owned subsidiaries of MHC
include  MidAmerican Capital Company,  Midwest Capital Group, Inc.,  MidAmerican
Services Company and MEC Construction Services Co.

FORWARD-LOOKING STATEMENTS

     From  time  to  time,  MidAmerican  Funding,  or one  of  its  subsidiaries
individually,  may make  forward-looking  statements  within the  meaning of the
federal   securities  laws  that  involve   judgments,   assumptions  and  other
uncertainties   beyond  the  control  of  MidAmerican  Funding  or  any  of  its
subsidiaries  individually.  These forward-looking statements may include, among
others,  statements  concerning  revenue and cost trends,  cost  recovery,  cost
reduction strategies and anticipated  outcomes,  pricing strategies,  changes in
the  utility  industry,  planned  capital  expenditures,   financing  needs  and
availability,  statements of MidAmerican Funding's expectations, beliefs, future
plans  and  strategies,  anticipated  events  or  trends  and  similar  comments
concerning  matters that are not historical facts. These type of forward-looking
statements are based on current  expectations  and involve a number of known and
unknown  risks and  uncertainties  that  could  cause  the  actual  results  and
performance of MidAmerican Funding to differ materially from any expected future
results or performance, expressed or implied, by the forward-looking statements.
In  connection  with  the  safe  harbor  provisions  of the  Private  Securities
Litigation  Reform Act of 1995,  MidAmerican  Funding has  identified  important
factors  that  could  cause  actual  results  to differ  materially  from  those
expectations, including weather effects on sales and revenues, fuel prices, fuel
transportation  and  other  operating  uncertainties,  acquisition  uncertainty,
uncertainties  relating to economic and political  conditions and  uncertainties
regarding  the impact of  regulations,  changes in  government  policy,  utility
industry   deregulation   and  competition.   MidAmerican   Funding  assumes  no
responsibility to update forward-looking information contained herein.

                              RESULTS OF OPERATIONS
                              ---------------------
REGULATED GROSS MARGIN

     Regulated Electric Gross Margin -

                                          Three Months           Six Months
                                          Ended June 30,       Ended June 30,
                                         ----------------      --------------
                                         2001        2000      2001      2000
                                         ----        ----      ----      ----
                                                     (In millions)
     Operating revenues................  $306        $282      $600      $560
     Cost of fuel, energy and capacity.    60          56       126       114
                                         ----        ----      ----      ----
       Electric gross margin...........  $246        $226      $474      $446
                                         ====        ====      ====      ====

     Electric  gross margin for the second quarter of 2001 increased $20 million
compared to the second quarter of 2000.

     MidAmerican  Energy's  margins on  wholesale  sales,  net of a reserve  for
revenue sharing, increased $18.9 million compared to the second quarter of 2000.
Sales volumes for wholesale sales

                                      -13-
<PAGE>

increased  38.8%.  Wholesale  sales are the sales of energy to other  utilities,
municipalities and marketers outside of MidAmerican Energy's delivery system.

     Temperatures  during the three months ended June 30, 2001, were hotter than
temperatures  in the second quarter of 2000,  resulting in increased usage and a
corresponding $6 million  increase in electric  margin.  Other usage factors not
dependent on weather  decreased  electric margin by $6.0 million compared to the
second quarter of 2000. In total, retail sales of electricity increased 1.7% for
the three months ended June 30, 2001.

     For the six months ended June 30, 2001, compared to the first six months of
2000, electric gross margin increased $28 million.

     MidAmerican  Energy's  margins on  wholesale  sales,  net of a reserve  for
revenue  sharing,  increased  $22.2 million  compared to the first six months of
2000, and related sales volumes  increased 27.5%.  Wholesale sales are the sales
of  energy  to  other  utilities,   municipalities   and  marketers  outside  of
MidAmerican  Energy's delivery system.  Additionally,  electric revenues for the
six months  ended June 30, 2001,  reflect a $3.3 million  increase in gains from
the sale of emission allowances.

     Temperatures  during the six months ended June 30, 2001,  were more extreme
than  temperatures  in the six months  ended June 30,  2000,  resulting in a $15
million  increase  in electric  margin.  Other usage  factors not  dependent  on
weather  decreased  electric  margin by $13.2 million  compared to the first six
months of 2000. In total, retail sales of electricity increased 1.8% for the six
months ended June 30, 2001.

     Regulated Gas Gross Margin -

                             Three Months          Six Months
                            Ended June 30,       Ended June 30,
                           ---------------      ---------------
                            2001     2000        2001     2000
                           ------   ------      ------   ------
                                       (In millions)
     Operating revenues.    $ 87     $ 98        $454     $278
     Cost of gas sold...      53       61         345      173
                            ----     ----        ----     ----
       Gas gross margin.    $ 34     $ 37        $109     $105
                            ====     ====        ====     ====

     Regulated gas revenues  include  purchase gas  adjustment  clauses  through
which  MidAmerican  Energy is allowed  to recover  the cost of gas sold from its
retail gas utility customers. Consequently, fluctuations in the cost of gas sold
do not affect gross margin or net income  because  revenues  reflect  comparable
fluctuations  from the  purchase  gas  adjustment  clauses.  An  increase in the
per-unit cost of gas for the six-month  period ended June 30, 2001,  compared to
the  same  period  in  2000,   increased  revenues  and  cost  of  gas  sold  by
approximately $150 million.

     Gas gross  margin  decreased  $3  million  for the  second  quarter of 2001
compared  to the  2000  quarter  due  primarily  to  conservation  by  customers
following the colder-than-normal temperature conditions in the first quarter and
high gas prices. Temperatures during the second quarter of 2001 were warmer than
temperatures  in the second  quarter  of 2000,  which  also  contributed  to the
decrease in gas margin. Total gas retail sales decreased 7.0%.

     Compared to the first six months of 2000,  gas gross  margin  increased  $4
million due primarily to temperature conditions in the first quarter of 2001.

                                      -14-

<PAGE>


REGULATED OPERATING EXPENSES

     Regulated  other operating  expenses  increased $6.8 million for the second
quarter of 2001  compared to the second  quarter of 2000.  An increase in Cooper
Nuclear  Station costs  resulted in a $3.4 million  increase to other  operating
expenses. Additionally, increases in the allowance for uncollectible accounts as
a result of the high natural gas prices and in pension and other post-employment
benefits costs accounted for $3.6 million of the increase.

     Regulated  other  operating  expenses  increased  $6.8  million for the six
months ended June 30, 2001 compared to the six-month period in 2000. An increase
in Cooper Nuclear  Station costs  resulted in an $8.1 million  increase to other
operating expenses.  Additionally,  increases in the allowance for uncollectible
accounts  as a result of the high  natural  gas prices and in pension  and other
post-employment  benefits costs accounted for $7.0 million of the increase.  The
increases were partially  offset by reductions in Quad Cities Station  operating
expenses,  health care and other benefit costs, energy efficiency program costs,
information   technology   expenses  and  assessments  from  utility  regulatory
agencies.

     Maintenance  expenses  for the three and six months  ended  June 30,  2001,
compared  to  the  2000  periods   increased  $1.2  million  and  $4.3  million,
respectively,  due  principally  to  increased  electric  and  gas  distribution
expenses.  Maintenance expense related to Quad Cities Station decreased for both
2001 periods compared to the respective 2000 periods.

     Depreciation and amortization expense increased $1.5 million for the second
quarter of 2001 and $8.0  million  for the first six months of 2001  compared to
the  respective  periods  in 2000.  The  increases  were due  principally  to an
increase in depreciation rates implemented in 2001. An increase in utility plant
also contributed to the increases.  The comparative increase for the quarter was
reduced by additional  depreciation expense in the second quarter of 2000 due to
the  reclassification of transmission plant to distribution plant in conjunction
with  the  Federal  Energy  Regulatory   Commission's   orders  on  open  access
transmission.

     Property and other taxes for the three months and six months ended June 30,
2001, decreased $0.6 million and $2.6 million,  respectively,  relative to their
comparable  periods in 2000 due  principally  to an increase in use taxes in the
second quarter of 2000.

                                      -15-

<PAGE>


NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

     Nonregulated Gross Margin -

                             Three Months         Six Months
                            Ended June 30,      Ended June 30,
                           ----------------    ----------------
                            2001      2000      2001      2000
                           ------    ------    ------    ------
                                      (In millions)
     Operating revenues.    $207       $90      $436      $154
     Cost of sales......     199        84       418       140
                            ----       ---      ----      ----
          Gross margin..    $  8       $ 6      $ 18      $ 14
                            ====       ===      ====      ====

     Nonregulated   revenues  and  cost  of  sales  consist   substantially   of
nonregulated  natural gas marketing  operations.  The  nonregulated  natural gas
marketing operations include wholesale and retail activities.  Approximately 78%
of the nonregulated natural gas revenues for the six months ended June 30, 2001,
are related to wholesale sales.

     Revenues from nonregulated  natural gas operations increased $113.5 million
to $194.3  million  for the second  quarter of 2001.  An increase in the average
price per unit sold,  reflective  of an 18% increase in the average cost of gas,
accounted for $31.4 million of the increase in revenues. Sales volumes increased
22 million  MMBtus (102%)  resulting in an $82.1  million  increase in revenues.
Cost of sales  increased  $110.9  million to $191.3 million for the three months
ended June 30, 2001,  due to the  increases in the per-unit cost of gas sold and
sales  volumes.  Gross  margin  for  the  nonregulated  natural  gas  operations
increased  $2.6  million to $3.0  million  for the second  quarter of 2001.  The
improvement  in gross  margin  reflects an increase in margin per unit and sales
volumes.

     Revenues from nonregulated  natural gas operations increased $282.0 million
to $410.7  million for the first six months of 2001.  An increase in the average
price per unit sold,  reflective  of a 69%  increase in the average cost of gas,
accounted  for  $166.0  million  of the  increase  in  revenues.  Sales  volumes
increased 35 million  MMBtus (90%)  resulting  in a $116.0  million  increase in
revenues.  Cost of sales increased  $278.6 million to $404.8 million for the six
months ended June 30,  2001,  due to the  increases in the per-unit  cost of gas
sold and sales volumes. Gross margin for the nonregulated natural gas operations
increased  $3.4  million to $5.9  million for the first six months of 2001.  The
improvement  in gross  margin  reflects an increase in margin per unit and sales
volumes.

     As of December 31, 2000,  all  non-residential  customers in Illinois  have
been allowed to select their electric power supplier. For the three months ended
June 30,  2001,  compared  to the three  months  ended  June 30,  2000,  related
revenues  increased  $3.2  million,  and related  cost of sales  increased  $3.8
million, resulting in a $0.6 million decrease in gross margin. For the six-month
period ended June 30, 2001, revenues increased $5.4 million to $6.8 million, and
related cost of sales  increased  $4.3 million to $5.4  million,  resulting in a
$1.1 million increase in gross margin.

     Nonregulated  revenues for the second  quarter of 2001 include $2.6 million
from MidAmerican Energy's market access service project compared to $4.5 million
in the second  quarter of 2000.  The pilot project  allows larger Iowa customers
that are  participating  in the project to choose their electric power supplier.
MidAmerican  Energy's revenues from project  participants  related to non-supply
services,  such as  distribution  and  transmission,  are reflected in regulated
electric  revenues.  Cost of sales related to the market access service  project
decreased  $1.5 million to $2.1 million for the second  quarter of 2001. For the
six-month  comparison,  revenues from the project  totaled $6.2 million and $8.6
million for 2001 and 2000, respectively.  The related cost of sales totaled $5.4
million and $8.3 million for 2001 and 2000, respectively.

                                      -16-
<PAGE>

     MidAmerican  Energy's  nonregulated  revenues in the second quarter of 2001
include $2.1 million of pre-tax income from an award for successful  performance
under an incentive gas procurement  program.  Similar awards of $1.0 million and
$0.9  million  were  recorded  in  the  first  and  second   quarters  of  2000,
respectively.

     The first  quarter of 2000 also  includes $4.4 million of revenues and $2.6
million of cost of sales from the security system operations sold in April 2000.

     Nonregulated Operating Expenses: Other -

     Nonregulated  other operating  expenses  decreased $2.7 million for the six
months ended June 30,  2001,  due to the 2000 period  including  $1.7 million in
costs related to the security system operations sold in April 2000. Amortization
of MidAmerican  Funding goodwill decreased $0.9 million to $17.2 million for the
first six months of 2001.

NON-OPERATING INCOME AND INTEREST EXPENSE

     Interest and Dividend Income -

     The increases in interest income for the three-month and six-month  periods
were  due   principally   to  increases  of  $2.3  million  and  $4.9   million,
respectively,  for interest income on a note  receivable  related to MidAmerican
Energy's  accounts  receivable  sold.  The increase in the note  receivable is a
result of the increased balance in receivables  sold.  Dividend income decreased
due to partial  liquidation of the preferred stock  investment  portfolio in the
past twelve months.

     Marketable Securities Gains and Losses, Net -

     Net gains on marketable  securities increased $3.6 million to a net gain of
$1.0 million for the second  quarter of 2001  compared to the second  quarter of
2000.  The  second  quarter  of  2001  reflects  realized  gains  on  marketable
securities  transactions  compared  to  losses in 2000.  Additionally,  the 2001
quarter  reflects  unrealized  gains that would have been  recorded in equity in
2000 due to the  re-characterization  of the  securities in 2001. The six months
ended June 30, 2001, was relatively unchanged from the comparable period in 2000
due to transactions in the first three months of each year. The first quarter of
2001 included a $2.4 million pre-tax loss related to the  re-characterization of
marketable  securities  to  "trading"  as  allowed  by  Statement  of  Financial
Accounting  Standards No. 133. The first quarter of 2000 reflects a $2.0 million
pre-tax gain on the sale of the remaining  shares of McLeodUSA common stock held
by MidAmerican  Funding.  The decreases were offset  partially by an increase in
net gains on marketable  securities in the first quarter of 2001 compared to the
2000 quarter.

     Other, Net -

     Other,  Net, which includes a number of non-operating  income and deduction
items,  increased  Non-Operating  Income by $0.6 million and $6.5 million in the
three  months  ended June 30, 2001 and 2000,  respectively.  Other,  Net reduced
Non-Operating  Income by $3.1  million for the  six-month  period ended June 30,
2001,  and  increased  Non-Operating  Income by $6.0  million for the  six-month
period ended June 30, 2000.

     Other,  Net  includes  a discount  on sold  accounts  receivable,  net of a
subservicer fee charged to MidAmerican Energy Funding  Corporation for servicing
the  accounts.  The  discount is designed to cover the  expenses of  MidAmerican
Energy Funding Corporation,  including subservicer fees, monthly

                                      -17-

<PAGE>

administrative  costs and  interest.  The  discount is  recorded  in Other,  Net
because it is not reflected in utility cost of service for regulatory  purposes.
The discount, net of the subservicer fee, reduced Other, Net by $3.3 million and
$2.2 million in the second quarter of 2001 and 2000,  respectively,  and by $8.8
million  and $4.4  million  for the six  months  ended  June 30,  2001 and 2000,
respectively.

     Income from  equity  investments  increased  $1.0  million  compared to the
second  quarter of 2000.  For the six months  ended June 30,  2001,  income from
equity investments increased $0.7 million compared to the same period in 2000.

     Other, Net for the first six months of 2001 reflects a $1.4 million gain on
the sale of MidAmerican  Energy rail cars,  while the  three-month and six-month
periods  ended  June  30,  2000,  include  a $4.3  million  gain on the  sale of
securities  companies and $1.3 million from the sale of commercial  property and
rail cars.

     Income related to  corporate-owned  life insurance  policies decreased $0.7
million and $1.1 million in the three months and six months ended June 30, 2001,
respectively, compared to the same periods in 2000.

     Fixed Charges -

     The  increase  in  interest  on  long-term  debt  in 2001  compared  to the
respective  periods in 2000 was due to interest on $162  million of  MidAmerican
Energy medium-term notes issued in July 2000, net of the impact of maturities in
2000 of MidAmerican Energy and MidAmerican Capital long-term debt.

     Other  interest  expense  decreased  in the 2001  periods  compared  to the
respective  periods in 2000 due  principally  to a reduction in short-term  debt
outstanding  at  MidAmerican  Energy.  Additionally,  the second quarter of 2000
includes  $0.6  million of  interest  related to a gas  supplier  refund that is
refundable to  customers.  These  decreases  were  partially  offset by interest
related to a federal income tax assessment.

                                      -18-
<PAGE>


                         LIQUIDITY AND CAPITAL RESOURCES
                         -------------------------------

     MidAmerican  Funding has  available a variety of sources of  liquidity  and
capital  resources,  both internal and external.  These resources  provide funds
required for current  operations,  construction  expenditures,  dividends,  debt
retirement and other capital requirements.

     As  reflected on the  Consolidated  Statements  of Cash Flows,  MidAmerican
Funding's net cash provided from operating  activities was $219 million and $173
million for the six months ended June 30, 2001 and 2000, respectively.

     INVESTING ACTIVITIES AND PLANS

     Utility Construction Expenditures -

     MidAmerican  Energy's  primary  need for  capital is  utility  construction
expenditures.   For  the  first  six  months  of  2001,   utility   construction
expenditures  totaled $74  million,  including  allowance  for funds used during
construction,  or capitalized  financing  costs, and Quad Cities Station nuclear
fuel purchases.  All such expenditures were met with cash generated from utility
operations, net of dividends.

     Forecasted utility construction expenditures, including allowance for funds
used during  construction are $223 million for 2001.  Capital  expenditure needs
are reviewed regularly by management and may change significantly as a result of
such reviews.  On July 10, 2001,  MidAmerican  Energy announced plans to develop
and construct two electric generating plants in Iowa, requiring an investment of
approximately  $1.5 billion.  Participation by others in a portion of the second
plant is being  discussed.  The two  plants  will  provide  approximately  1,400
megawatts  of  generating   capacity.   MidAmerican   Energy  expects  to  begin
construction  in  Spring  2002 on the  first  project,  a  540-megawatt  natural
gas-fired combined cycle unit which has an estimated cost of $340 million. It is
anticipated  that the first phase of the project  will be completed in 2003 with
the remainder being completed in 2005. MidAmerican Energy presently expects that
all utility  construction  expenditures for the next five years will be met with
the issuance of long-term debt and cash generated from utility  operations,  net
of  dividends.  The actual level of cash  generated  from utility  operations is
affected by, among other  things,  economic  conditions  in the utility  service
territory, weather and federal and state regulatory actions.

     Nuclear Decommissioning -

     Each  licensee  of a nuclear  facility  is  required  to provide  financial
assurance for the cost of  decommissioning  its licensed  nuclear  facility.  In
general,  decommissioning  of a  nuclear  facility  means to safely  remove  the
facility  from  service  and  restore  the  property  to  a  condition  allowing
unrestricted  use by the operator.  Based on  information  presently  available,
MidAmerican  Energy expects to contribute  approximately  $41 million during the
period 2001 through 2005 to external  trusts  established  for the investment of
funds for decommissioning Quad Cities Station.  Approximately 60% of the trusts'
funds are now invested in domestic  corporate debt and common equity securities.
The remainder is invested in investment grade municipal and U.S. Treasury bonds.
Funding for Quad Cities  Station is  reflected  in  depreciation  expense in the
Consolidated Statements of Income.

     Based on  information  presently  available  and assuming a September  2004
shutdown  of Cooper,  MidAmerican  Energy  expects to accrue  approximately  $55
million for Cooper  decommissioning during the period 2001 through 2004. Amounts
related to Cooper  decommissioning  are reflected in Other Operating Expenses in
the Consolidated Statements of Income.  MidAmerican Energy's obligation, if any,
for Cooper  decommissioning  will be affected by the actual plant shutdown date.
In July 1997,  the  Nebraska  Public  Power  District  filed a lawsuit in United
States District Court for the District of Nebraska

                                      -19-
<PAGE>

naming  MidAmerican  Energy  as the  defendant  and  seeking  a  declaration  of
MidAmerican  Energy's  rights and  obligations in connection with Cooper nuclear
decommissioning  funding.  Refer  to Part II,  Item 1.  Legal  Proceedings,  for
further discussion of the litigation.

     Cooper  and Quad  Cities  Station  decommissioning  costs  charged  to Iowa
customers are included in base rates, and recovery of increases in those amounts
must be sought through the normal  ratemaking  process.  Cooper  decommissioning
costs  charged  to  Illinois  customers  are  recovered  through a rate rider on
customer billings.

     Investments -

     MidAmerican Capital  re-characterized all of its marketable securities held
on  January 1, 2001,  as  "trading"  securities  in January  2001.  Accordingly,
changes  in  those   investments   are  reflected  in  working  capital  in  the
Consolidated  Statements of Cash Flows, instead of in purchases or proceeds from
available-for-sale securities.

FINANCING ACTIVITIES, PLANS AND AVAILABILITY

     Issuance of MidAmerican Funding Debt -

     On March 1, 2001,  MidAmerican Funding retired $200 million of 5.85% Senior
Secured  Notes due 2001.  On March 19,  2001,  MidAmerican  Funding  issued $200
million of 6.75% Senior Secured Notes due March 1, 2011.

     MidAmerican Energy Debt Authorizations and Credit Facilities -

     MidAmerican   Energy  currently  has  authority  from  the  Federal  Energy
Regulatory  Commission to issue  short-term debt in the form of commercial paper
and bank notes  aggregating  $500 million.  MidAmerican  Energy currently has in
place a $370.4 million revolving credit facility which supports its $250 million
commercial  paper  program  and its  variable  rate  pollution  control  revenue
obligations. In addition, MidAmerican Energy has a $5 million line of credit.

     MidAmerican Energy has on file with the Securities and Exchange  Commission
a  registration  statement  for $500  million  in  various  forms of senior  and
subordinated, unsecured long-term debt and preferred securities.

     MidAmerican  Energy has  authorization  from the Federal Energy  Regulatory
Commission  to  issue up to an  additional  $500  million  in  various  forms of
long-term  debt.  MidAmerican  Energy  will  also  need  authorization  from the
Illinois Commerce Commission prior to issuing any securities.  If 90% or more of
the proceeds  from a  securities  issuance  are used for  refinancing  purposes,
MidAmerican  Energy need only provide the Illinois  Commerce  Commission with an
"informational  statement"  prior to the  issuance  which  sets  forth the type,
amount and use of the proceeds of the securities to be issued.  If less than 90%
of the proceeds are used for refinancing,  MidAmerican must file a comprehensive
application  seeking  authorization  prior to issuance.  The  Illinois  Commerce
Commission is required to hold a hearing before issuing its authorization.

                                      -20-
<PAGE>


     Accounts Receivable Sold -

     In 1997,  MidAmerican  Energy  entered  into a revolving  agreement,  which
expires in 2002, to sell all of its right, title and interest in the majority of
its billed  accounts  receivable to MidAmerican  Energy Funding  Corporation,  a
special  purpose  entity  established  to  purchase  accounts   receivable  from
MidAmerican  Energy.  MidAmerican  Energy  Funding  Corporation  in  turn  sells
receivable  interests  to  outside  investors.  In  consideration  for the sale,
MidAmerican  Energy received cash and a subordinated  note,  bearing interest at
8%, from  MidAmerican  Energy  Funding  Corporation.  As of June 30,  2001,  the
revolving  cash  balance was $70 million  and the amount  outstanding  under the
subordinated  note was $121.8  million.  The  agreement is  structured as a true
sale, under which the creditors of MidAmerican  Energy Funding  Corporation will
be entitled to be  satisfied  out of the assets of  MidAmerican  Energy  Funding
Corporation  prior to any value  being  returned  to  MidAmerican  Energy or its
creditors.  Therefore,  the  accounts  receivable  sold  are  not  reflected  on
MidAmerican  Funding's  Consolidated Balance Sheets. As of June 30, 2001, $191.3
million of accounts receivable, net of reserves, was sold under the agreement.

     Other Financing Information -

     As of June 30,  2001,  MHC had a $4 million  line of credit to provide  for
short-term financing needs, all of which was unused.

     As of June 30, 2001,  MidAmerican  Capital had unsecured  revolving  credit
facilities  in the amount of $6 million,  under  which no debt was  outstanding.
MidAmerican  Capital has $46.7 million of long-term debt outstanding at June 30,
2001, which matures annually through 2002.

OPERATING ACTIVITIES AND OTHER MATTERS

     Legislative and Regulatory Evolution -

     In  December  1997,  the  Governor  of  Illinois  signed into law a bill to
restructure   Illinois'  electric  utility  industry  and  transition  it  to  a
competitive market. Under the law, larger non-residential  customers in Illinois
and 33% of the  remaining  non-residential  Illinois  customers  were allowed to
select their provider of electric  supply  services  beginning  October 1, 1999.
Starting  December 31, 2000,  all other  non-residential  customers were allowed
supplier  choice.  Residential  customers all receive the  opportunity to select
their electric supplier beginning May 1, 2002.

     The law also  provides  for  Illinois  earnings  above a computed  level of
return on common equity to be shared equally  between  customers and MidAmerican
Energy.  MidAmerican Energy's computed level of return on common equity is based
on a rolling  two-year average of the 30-year Treasury Bond rates plus a premium
of 5.50%  for 1998 and 1999 and a premium  of 8.5% for 2000  through  2004.  The
two-year  average above which sharing must occur for 2000 was 12.83%.  Using the
same 30-year Treasury Bond average, the computed level of return would be 14.33%
for 2001 through 2004. The law allows MidAmerican Energy to mitigate the sharing
of earnings  above the  threshold  return on common equity  through  accelerated
recovery of regulatory assets.

     In December 1999, the Federal Energy Regulatory Commission issued Order No.
2000 establishing among other things minimum  characteristics  and functions for
regional transmission organizations.  Public utilities that were not a member of
an independent  system operator at the time of the order were required to submit
a plan by which its  transmission  facilities would be transferred to a regional
transmission   organization   on  a  schedule  that  would  allow  the  regional
transmission organization to commence operating by December 15, 2001. On October
16, 2000, MidAmerican Energy filed with

                                      -21-
<PAGE>


the Federal Energy Regulatory Commission a plan for MidAmerican Energy to comply
with  Order  No.  2000  by  participating  in  the  formation  of a  for  profit
independent transmission company.  MidAmerican Energy continues in its effort to
form such a company.

     Accounting Effects of Industry Restructuring -

     A possible  consequence  of  deregulation  in the utility  industry is that
Statement of Financial  Accounting Standards No. 71 may no longer apply. SFAS 71
sets forth accounting  principles for operations that are regulated and meet the
stated criteria.  For operations that meet the criteria,  SFAS 71 allows,  among
other  things,  the  deferral  of expense  or income  that  would  otherwise  be
recognized  when  incurred.  With the  exception  of the  generation  operations
serving the Illinois jurisdiction, MidAmerican Energy's electric and gas utility
operations   currently   meet  the  criteria   required  by  SFAS  71,  but  its
applicability is periodically reexamined.  If portions of its utility operations
no longer meet the criteria of SFAS 71,  MidAmerican Energy could be required to
write off the related  regulatory assets and liabilities from its balance sheet,
and thus,  a material  adjustment  to earnings in that  period  could  result if
regulatory  assets are not recovered in  transition  provisions of any resulting
legislation.  As of June 30,  2001,  MidAmerican  Funding had $223.4  million of
regulatory assets and $9.4 million of regulatory liabilities on its Consolidated
Balance Sheet.

     Energy Efficiency -

     MidAmerican  Energy's  regulatory assets as of June 30, 2001, included $9.6
million of deferred  energy  efficiency  costs.  Based on the  current  level of
recovery,  MidAmerican Energy expects to recover these costs by the end of 2001.
MidAmerican  Energy is also  allowed to recover  its ongoing  energy  efficiency
costs on a current basis.  These costs are being  collected from customers based
on  projected  annual  expenditures  of $16.4  million,  which  may be  adjusted
annually.  Amortization  of the  deferred  energy  efficiency  costs and current
expenditures  for energy  efficiency  costs will be reflected in other operating
expenses over the related periods of recovery.

     Rate Matters: Electric -

     In 1997,  pursuant to a rate  proceeding  before the Iowa Utilities  Board,
MidAmerican  Energy,  the Office of Consumer  Advocate and other parties entered
into a pricing plan settlement agreement establishing  MidAmerican Energy's Iowa
retail electric rates. That settlement agreement expired on December 31, 2000.

     On March 14,  2001,  the Office of the Consumer  Advocate  filed a petition
with  the  Iowa  Utilities  Board  to  reduce  Iowa  retail  electric  rates  by
approximately  $77  million  annually.  On June  11,  2001,  MidAmerican  Energy
responded to that petition by filing a request with the Iowa Utilities  Board to
increase  MidAmerican  Energy's  Iowa  retail  electric  rates  by  $51  million
annually. On July 12, 2001,  MidAmerican Energy, the Office of Consumer Advocate
and other parties  jointly filed a settlement  agreement with the Iowa Utilities
Board that,  if approved,  will freeze the rates in effect on December 31, 2000,
through December 31, 2005, and, with  modifications,  will reinstate the revenue
sharing  provisions  of the 1997 pricing plan  settlement  agreement.  Under the
proposed settlement agreement, 50% of revenues associated with returns on equity
between 12% and 14%,  and 83.33% of revenues  associated  with returns on equity
above 14%, in each year would be deferred as a  regulatory  liability to be used
to offset a portion of the cost of new generating plant investments.

     MidAmerican Energy has negotiated  individual  electric contracts with some
of its  commercial and  industrial  customers in Iowa.  The negotiated  electric
contracts  have  differing  terms and  conditions  as well as  prices.  The vast
majority of the contracts  expire during the period 2003 through 2005,  although

                                      -22-
<PAGE>

some large  customers  have contracts  extending to 2008.  Some of the contracts
have price renegotiation and early termination  provisions exercisable by either
party.  Prices  are set as fixed  prices;  however,  many  contracts  allow  for
potential price  adjustments  with respect to  environmental  costs,  government
imposed public purpose programs,  tax changes,  and transition costs.  While the
contract prices are fixed (except for the potential  adjustment  elements),  the
costs  MidAmerican  Energy  incurs to fulfill these  contracts  will vary. On an
aggregate  basis the annual  revenues  under  contract  are  approximately  $180
million.

     Environmental Matters -

     The U.S.  Environmental  Protection Agency, or EPA, and state environmental
agencies have determined that  contaminated  wastes remaining at  decommissioned
manufactured  gas plant facilities may pose a threat to the public health or the
environment if these contaminants are in sufficient quantities and at sufficient
concentrations as to warrant remedial action.

     MidAmerican  Energy has evaluated or is evaluating 27 properties that were,
at one time, sites of gas manufacturing  plants in which it may be a potentially
responsible  party.  The purpose of these  evaluations  is to determine  whether
waste materials are present,  whether the materials  constitute an environmental
or health  risk,  and  whether  MidAmerican  Energy has any  responsibility  for
remedial action.  MidAmerican  Energy's estimate of the probable costs for these
sites as of June 30, 2001, was $24 million. This estimate has been recorded as a
liability  and a regulatory  asset for future  recovery  through the  regulatory
process.  Refer to Note B(1) of Notes to Consolidated  Financial  Statements for
further discussion of MidAmerican Energy's  environmental  activities related to
manufactured gas plant sites and cost recovery.

     Although  the timing of potential  incurred  costs and recovery of costs in
rates may affect the results of  operations in  individual  periods,  management
believes  that the  outcome of these  issues  will not have a  material  adverse
effect on MidAmerican Energy's financial position or results of operations.

     On July 18, 1997,  the EPA adopted  revisions  to the National  Ambient Air
Quality  Standards for ozone and a new standard for fine particulate  matter. In
May 1999,  the U.S.  Court of  Appeals  for the  District  of  Columbia  Circuit
remanded the standards  adopted in July 1997 back to the EPA  indicating the EPA
had not expressed  sufficient  justification  for the basis of establishing  the
standards  and ruling that the EPA has exceeded  its  constitutionally-delegated
authority in setting the  standards.  On February 27,  2001,  the United  States
Supreme  Court  upheld  the  standards,  ruling  that the EPA did not exceed its
constitutional  delegation of authority in  establishing  the standards in 1997.
The impact of the new  standards on  MidAmerican  Energy is  currently  unknown.
MidAmerican Energy could incur increased costs and a decrease in revenues if its
generating  stations are located in nonattainment  areas.  Refer to Note B(2) of
Notes to Consolidated Financial Statements for further discussion of this issue.

     Generating Capability -

     MidAmerican  Energy is interconnected  with Iowa and neighboring  utilities
and is involved in an electric power pooling  agreement  known as  Mid-Continent
Area Power Pool.  Each MAPP  participant  is required to maintain for  emergency
purposes a net  generating  capability  reserve of at least 15% above its system
peak demand.

                                      -23-

<PAGE>


     MidAmerican  Energy  believes it has  adequate  electric  capacity  reserve
through  2004 and  continues  to manage its  generating  resources  to ensure an
adequate reserve in the future.  MidAmerican Energy has announced plans to add a
540-megawatt natural gas-fired combined cycle unit to be completed in two phases
between 2003 and 2005. An additional  900 megawatts of coal-fired  generation is
expected  to  be   operational   later  this  decade.   However,   significantly
higher-than-normal   temperatures   during  the  cooling   season   could  cause
MidAmerican  Energy's  reserve to fall  below the 15%  minimum.  If  MidAmerican
Energy fails to maintain the appropriate reserve, significant penalties could be
contractually imposed by MAPP.

     As a result of the 1997 pricing settlement  agreement's  elimination of the
energy adjustment clause in Iowa,  MidAmerican Energy is financially  exposed to
movements  in  energy  prices.  Although  MidAmerican  Energy  believes  it  has
sufficient generation under typical operating conditions for its retail electric
needs,  a loss of  adequate  generation  by  MidAmerican  Energy  requiring  the
purchase of  replacement  power at a time of high market  prices  could  subject
MidAmerican Energy to losses on its energy sales.

     MidAmerican   Energy  has  been  able  to  maintain  its  capacity  reserve
requirement  and has not been adversely  affected by seasonal high prices in the
wholesale market.

ACCOUNTING ISSUES

     In  January  2001,  MidAmerican  Funding  adopted  SFAS  Nos.  133 and 138,
pertaining to accounting  for  derivative  instruments  and hedging  activities.
These  pronouncements  require that  derivative  instruments be recorded at fair
value on the balance sheet and changes in fair value  recognized in income.  The
Financial   Accounting   Standards  Board's  Derivatives   Implementation  Group
continues  to identify  and provide  guidance on various  implementation  issues
related to SFAS  133/138 that are in varying  stages of review and  clearance by
the  Derivatives  Implementation  Group and the  FASB.  MidAmerican  Funding  is
monitoring the issues being reviewed by the Derivatives Implementation Group and
the  FASB to  determine  what,  if any,  impact  they  may  have on  MidAmerican
Funding's financial statements.

     In July 2001, the FASB issued SFAS No. 141,  "Business  Combinations",  and
SFAS No. 142, "Goodwill and Other Intangible Assets" which establish  accounting
and  reporting  for  business  combinations.  SFAS No. 141 requires all business
combinations entered into subsequent to June 30, 2001, to be accounted for using
the purchase method of accounting. SFAS No. 142 provides that goodwill and other
intangible assets with indefinite lives will not be amortized but will be tested
for impairment on an annual basis. These standards are effective for MidAmerican
Funding  beginning on January 1, 2002. The  historical  impact of not amortizing
goodwill  would have been to increase  net income for the six months  ended June
30, 2001 and 2000, by $10.1 million and $10.6  million,  respectively;  however,
MidAmerican Funding has not quantified the impact resulting from the adoption of
the other provision of these standards.

                                      -24-

<PAGE>


QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     MidAmerican  Funding is exposed to market  risk,  including  changes in the
market  price of certain  commodities  and interest  rates.  To manage the price
volatility relating to these exposures,  MidAmerican Funding enters into various
financial  derivative  instruments.   Senior  management  provides  the  overall
direction,   structure,  conduct  and  control  of  MidAmerican  Funding's  risk
management  activities,  including the use of financial derivative  instruments,
authorization  and  communication  of risk  management  policies and procedures,
strategic hedging program guidelines, appropriate market and credit risk limits,
and appropriate  systems for recording,  monitoring and reporting the results of
transactional and risk management activities.

     Refer to Note E in Notes to Consolidated  Financial  Statements for further
discussion  of  derivatives  used to hedge  price  risk.  MidAmerican  Funding's
exposure to interest rate risk did not change materially from December 31, 2000.

                                      -25-

<PAGE>


PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
--------------------------

     MidAmerican Funding and its subsidiaries have no material legal proceedings
except for the following:

Environmental Matters
---------------------

     For information on MidAmerican Energy's environmental matters, reference is
made to Note B of Notes to Consolidated Financial Statements.

Cooper Litigation
-----------------

     On July 23, 1997, the Nebraska Public Power District filed a complaint,  in
the  United  States  District  Court  for  the  District  of  Nebraska,   naming
MidAmerican Energy as the defendant and seeking declaratory judgment as to three
issues under the parties' long-term power purchase agreement for Cooper capacity
and energy.  More  specifically,  the Nebraska  Public Power  District  sought a
declaratory judgment in the following respects:

     (1)  that  MidAmerican  Energy  is  obligated  to pay 50% of all  costs and
          expenses associated with decommissioning Cooper, and that in the event
          the Nebraska  Public Power District  continues to operate Cooper after
          expiration  of  the  power  purchase   agreement   (September   2004),
          MidAmerican   Energy  is  not   entitled  to   reimbursement   of  any
          decommissioning funds it has paid to date or will pay in the future;

     (2)  that the current  method of allocating  transition  costs as a part of
          the decommissioning cost is proper under the power purchase agreement;
          and

     (3)  that the current method of investing  decommissioning  funds is proper
          under the power purchase agreement.

     MidAmerican  Energy  filed its answer  and  contingent  counterclaims.  The
contingent counterclaims filed by MidAmerican Energy are generally as follows:

     (1)  that MidAmerican Energy has no duty under the power purchase agreement
          to reimburse or pay 50% of the decommissioning costs unless conditions
          to reimbursement occur;

     (2)  that the  Nebraska  Public  Power  District  has the duty to repay all
          amounts that MidAmerican  Energy has prefunded for  decommissioning in
          the event the Nebraska Public Power District  operates the plant after
          the term of the power purchase agreement;

     (3)  that the Nebraska  Public Power  District is equitably  estopped  from
          continuing  to operate the plant after the term of the power  purchase
          agreement;

     (4)  that the Nebraska Public Power District has granted MidAmerican Energy
          an option to continue taking 50% of the power from the plant;

                                      -26-
<PAGE>

     (5)  that the term "monthly  power costs" as defined in the power  purchase
          agreement  does  not  include  costs  and  expenses   associated  with
          decommissioning the plant;

     (6)  that  MidAmerican  Energy  has  no  duty  to  pay  for  nuclear  fuel,
          operations and maintenance  projects or capital improvements that have
          useful lives after the term of the power purchase agreement;

     (7)  that transition  costs are not included in any  decommissioning  costs
          and expenses;

     (8)  that the  Nebraska  Public  Power  District  has  breached its duty to
          MidAmerican Energy in making investments of decommissioning funds;

     (9)  that  reserves in named  accounts are excessive and should be refunded
          to MidAmerican Energy; and

     (10) that the Nebraska Public Power District must credit MidAmerican Energy
          for payments by  MidAmerican  Energy for low-level  radioactive  waste
          disposal.

     On October 6, 1999,  the court rendered  summary  judgment for the Nebraska
Public Power  District on the  above-mentioned  issue  concerning  liability for
decommissioning  (issue  one in the  first  paragraph  above)  and  the  related
contingent counterclaims filed by MidAmerican Energy (issues one, two, three and
five in the second paragraph above).  The court referred all remaining issues in
the case to mediation, and cancelled the November 1999 trial date.

     MidAmerican  Energy  appealed  the  court's  summary  judgment  ruling.  On
December 12,  2000,  the United  States Court of Appeals for the Eighth  Circuit
reversed the ruling of the district court and granted summary  judgment in favor
of  MidAmerican  Energy on issues  one and five in the second  paragraph  above.
Additionally,   it  remanded  the  case  for  trial  on  all  other  claims  and
counterclaims.

     Since the remand to the  District  Court from the Eighth  Circuit  Court of
Appeals,  the Nebraska Public Power District has been granted  permission,  over
MidAmerican Energy's objections,  to amend its complaint.  The amended complaint
asserts  that  even  though  the  Eighth  Circuit  Court of  Appeals  held  that
MidAmerican  Energy  has no  liability  under the power  purchase  agreement  to
reimburse   or  pay  the  Nebraska   Public  Power   District  a  50%  share  of
decommissioning  costs unless certain  conditions occur,  MidAmerican Energy has
unconditional liability for a 50% share based on agreements other than the power
purchase agreement as originally  written.  The Nebraska Public Power District's
post-remand  contentions -- all strongly disputed by MEC -- are that MidAmerican
Energy has unconditional  liability for a 50% share of decommissioning  based on
any of the  following  alternative  theories:  (i) the parties  without  written
amendment  either  modified  the power  purchase  agreement  or made a  separate
agreement  that  imposes  unconditional  liability  on  MidAmerican  Energy  for
decommissioning  costs; (ii) absent  unconditional  liability for a 50% share of
decommissioning  costs,  MidAmerican  Energy would be unjustly  enriched;  (iii)
MidAmerican   Energy   has   unconditional   liability   for  a  50%   share  of
decommissioning  costs based on promissory estoppel; or (iv) the Nebraska Public
Power  District  is entitled to have the power  purchase  agreement  reformed to
provide that MidAmerican  Energy has unconditional  liability for a 50% share of
decommissioning  costs.  MidAmerican Energy will strongly dispute at trial these
contentions and theories put forth by the Nebraska Public Power District.  Trial
in these matters is scheduled to begin on March 4, 2002.

                                      -27-

<PAGE>


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

(A)  EXHIBITS

     None

(B)  REPORTS ON FORM 8-K

     None.

                                      -28-
<PAGE>


                                   SIGNATURES

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





                                                   MIDAMERICAN FUNDING, LLC
                                                   ------------------------

                                                         (Registrant)







Date  August 10, 2001                               /s/  Patrick J. Goodman
      ---------------                              ----------------------------
                                                         Patrick J. Goodman
                                                   Vice President and Treasurer

                                      -29-