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 MARCH 31, 2000
                                                --------------

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 CORPORATION)
                     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:

                  5.85% Senior Secured Exchange Notes due 2001
                  6.339% Senior Secured Exchange Notes due 2009
                  6.927% Senior Secured Exchange Bonds due 2029
-------------------------------------------------------------------------------
                               Title of each Class

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 April 30, 2000.


<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...............    8

ITEM 2.  Management's Discussion and Analysis of
           Financial Condition and Results of Operations..........   12

                           PART II. OTHER INFORMATION

ITEM 1.  Legal Proceedings .......................................   25

ITEM 6.  Exhibits and Reports on Form 8-K.........................   26

Signatures........................................................   27

Exhibit Index.....................................................   28

                                      -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 (successor to MHC Inc.) and subsidiaries (the Company) as of March
31, 2000, and the related  consolidated  statements of income and cash flows for
the three month period  ended March 31, 2000 and for the period  January 1, 1999
to March 11,  1999 for MHC Inc.  and for the period  March 12, 1999 to March 31,
1999 for the Company.  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 of
MidAmerican  Funding,  LLC and  subsidiaries  as of December 31,  1999,  and the
related consolidated  statements of income,  comprehensive income and cash flows
for the period January 1, 1999 to March 11, 1999 for MHC Inc. and March 12, 1999
to December 31, 1999 for the Company (not presented  herein),  and in our report
dated  January  25,  2000,  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, 1999 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
April 21, 2000

                                      -3-

<PAGE>

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

                                                                      MIDAMERICAN               MHC
                                                                        FUNDING            (PREDECESSOR)
                                                           ------------------------------  -------------
                                                               THREE       MARCH 12, 1999   JAN. 1, 1999
                                                               MONTHS         THROUGH         THROUGH
                                                               ENDED          MARCH 31,      MARCH 11,
                                                           MARCH 31, 2000       1999           1999
                                                           --------------  -------------   ------------
                                                                     (UNAUDITED)
<S>                                                           <C>            <C>            <C>
OPERATING REVENUES
Regulated electric ......................................     $ 278,463      $  53,165      $ 208,963
Regulated gas ...........................................       179,902         31,214        139,564
Nonregulated ............................................        64,189          9,207         34,539
                                                              ---------      ---------      ---------
                                                                522,554         93,586        383,066
                                                              ---------      ---------      ---------
OPERATING EXPENSES
Regulated:
   Cost of fuel, energy and capacity ....................        57,360         10,557         40,232
   Cost of gas sold .....................................       111,497         16,949         79,910
   Other operating expenses .............................        96,520         24,710         93,940
   Maintenance ..........................................        24,739          6,191         18,302
   Depreciation and amortization ........................        44,343         10,273         39,417
   Property and other taxes .............................        19,299          4,393         15,758
                                                              ---------      ---------      ---------
                                                                353,758         73,073        287,559
                                                              ---------      ---------      ---------
Nonregulated:
   Cost of sales ........................................        55,651          7,926         30,188
   Other ................................................        17,482          4,218          6,421
                                                              ---------      ---------      ---------
                                                                 73,133         12,144         36,609
                                                              ---------      ---------      ---------
   Total operating expenses .............................       426,891         85,217        324,168
                                                              ---------      ---------      ---------

OPERATING INCOME ........................................        95,663          8,369         58,898
                                                              ---------      ---------      ---------
NON-OPERATING INCOME
Interest income .........................................         3,816            323          1,411
Dividend income .........................................         1,113            336          1,331
Realized gains and losses on securities, net ............         1,336            (10)        15,214
Other, net ..............................................          (542)           839        (18,133)
                                                              ---------      ---------      ---------
                                                                  5,723          1,488           (177)
                                                              ---------      ---------      ---------
FIXED CHARGES
Interest on long-term debt ..............................        27,248          6,505         14,814
Other interest expense ..................................         2,974            780          3,145
Preferred dividends of subsidiaries .....................         3,234            402          2,831
Allowance for borrowed funds ............................          (379)           (71)          (235)
                                                              ---------      ---------      ---------
                                                                 33,077          7,616         20,555
                                                              ---------      ---------      ---------
INCOME FROM CONTINUING OPERATIONS
   BEFORE INCOME TAXES ..................................        68,309          2,241         38,166
INCOME TAXES ............................................        31,720          1,336         21,377
                                                              ---------      ---------      ---------
INCOME FROM CONTINUING OPERATIONS .......................        36,589            905         16,789
INCOME FROM DISCONTINUED OPERATIONS (NET OF INCOME TAXES)            --          1,199            421
                                                              ---------      ---------      ---------
NET INCOME ..............................................     $  36,589      $   2,104      $  17,210
                                                              =========      =========      =========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -4-
<PAGE>

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

                                                                                     AS OF
                                                                            -------------------------
                                                                             MARCH 31,   DECEMBER 31,
                                                                               2000         1999
                                                                            -----------  ------------
                                                                            (UNAUDITED)

<S>                                                                         <C>          <C>
ASSETS
UTILITY PLANT
Electric ................................................................   $4,356,573   $4,209,281
Gas .....................................................................      812,896      809,112
                                                                            ----------   ----------
                                                                             5,169,469    5,018,393
Less accumulated depreciation and amortization ..........................    2,584,005    2,546,516
                                                                            ----------   ----------
                                                                             2,585,464    2,471,877
Construction work in progress ...........................................       39,024       33,739
                                                                            ----------   ----------
                                                                             2,624,488    2,505,616
                                                                            ----------   ----------
POWER PURCHASE CONTRACT .................................................       90,412           --
                                                                            ----------   ----------
CURRENT ASSETS
Cash and cash equivalents ...............................................        5,635        6,235
Receivables .............................................................      189,004      215,361
Inventories .............................................................       57,841       82,823
Prepaid taxes ...........................................................       22,889       22,889
Other ...................................................................       12,893       12,301
                                                                            ----------   ----------
                                                                               288,262      339,609
                                                                            ----------   ----------

INVESTMENTS AND NONREGULATED PROPERTY, NET ..............................      561,120      519,201
EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED, NET ..................    1,348,671    1,482,992
OTHER ASSETS ............................................................      317,196      347,935
                                                                            ----------   ----------
TOTAL ASSETS ............................................................   $5,230,149   $5,195,353
                                                                            ==========   ==========

CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Member's equity .........................................................   $1,833,733   $1,800,416
MidAmerican Energy preferred securities, not subject to
   mandatory redemption .................................................       31,759       31,759
Preferred securities, subject to mandatory redemption:
    MidAmerican Energy preferred securities .............................       50,000       50,000
    MidAmerican Energy-obligated preferred securities of subsidiary trust
       holding solely MidAmerican Energy junior subordinated debentures .      100,000      101,598
Long-term debt (excluding current portion) ..............................    1,309,484    1,508,394
                                                                            ----------   ----------
                                                                             3,324,976    3,492,167
                                                                            ----------   ----------
CURRENT LIABILITIES
Notes payable ...........................................................      200,548      204,000
Current portion of long-term debt .......................................      224,045      134,082
Current portion of power purchase contract ..............................       15,767       15,767
Accounts payable ........................................................      211,864      165,915
Taxes accrued ...........................................................      110,450      110,592
Interest accrued ........................................................       17,641       29,555
Other ...................................................................       41,847       42,392
                                                                            ----------   ----------
                                                                               822,162      702,303
                                                                            ----------   ----------
OTHER LIABILITIES
Power purchase contract .................................................       52,282       52,282
Deferred income taxes ...................................................      602,253      520,088
Investment tax credit ...................................................       70,292       71,757
Other ...................................................................      358,184      356,756
                                                                            ----------   ----------
                                                                             1,083,011    1,000,883
                                                                            ----------   ----------
TOTAL CAPITALIZATION AND LIABILITIES ....................................   $5,230,149   $5,195,353
                                                                            ==========   ==========

</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -5-
<PAGE>

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

                                                                         MIDAMERICAN                   MHC
                                                                           FUNDING                (PREDECESSOR)
                                                              ----------------------------------  -------------
                                                                  THREE         MARCH 12, 1999    JAN. 1, 1999
                                                                  MONTHS           THROUGH          THROUGH
                                                                   ENDED           MARCH 31,        MARCH 11,
                                                               MARCH 31, 2000        1999            1999
                                                               --------------   ---------------   ------------
                                                                         (UNAUDITED)

<S>                                                               <C>           <C>               <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income .................................................      $  36,589     $     2,104       $  17,210
Adjustments to reconcile net income to net cash provided:
   Income from discontinued operations .....................             --          (1,198)           (421)
   Depreciation and amortization ...........................         54,423          12,236          39,865
   Deferred income taxes and investment tax credit, net ....           (157)         (1,338)         (2,327)
   Amortization of other assets and liabilities ............          5,015           2,334          12,035
   Gain on sale of securities, assets and other investments          (1,461)              3         (15,478)
   Cash inflows (outflows) of accounts receivable
     securitization ........................................         12,877              --          10,000
   Impact of changes in working capital, net of effects
      from discontinued operations .........................         69,247          (2,797)         38,190
   Other ...................................................           (576)           (609)          4,878
                                                                  ---------     -----------       ---------
     Net cash provided by continuing operations ............        175,957          10,735         103,952
     Net cash provided by (used in) discontinued operations.             --           2,553            (429)
                                                                  ---------     -----------       ---------
     Net cash provided by operating activities .............        175,957          13,288         103,523
                                                                  ---------     -----------       ---------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures ..........................        (28,988)         (8,917)        (16,924)
Quad Cities Nuclear Power Station decommissioning
   trust fund ..............................................         (2,075)           (625)         (2,189)
Nonregulated capital expenditures ..........................           (687)         (2,957)         (6,058)
Purchase of assets and long-term investments ...............         (2,571)         (1,858)           (140)
Purchase of available-for-sale securities ..................         (7,806)         (2,713)        (12,307)
Proceeds from sale of securities
   Available for sale ......................................         11,643           2,553          72,468
   Held to maturity ........................................             --              --           2,984
Proceeds from sale of assets and other investments .........            264               8           1,097
Notes receivable from affiliate ............................        (31,300)             --              --
Purchase of MHC, net of cash received ......................             --      (2,429,532)             --
Other investing activities, net ............................         (1,443)         (3,660)         (7,754)
                                                                  ---------     -----------       ---------
   Net cash provided by (used in) continuing operations ....        (62,963)     (2,447,701)         31,177
   Net cash used in discontinued operations ................             --          (1,107)         (1,056)
                                                                  ---------     -----------       ---------
   Net cash used in investing activities ...................        (62,963)     (2,448,808)         30,121
                                                                  ---------     -----------       ---------

</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -6-
<PAGE>

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

                                                                               MIDAMERICAN               MHC
                                                                                 FUNDING            (PREDECESSOR)
                                                                  -------------------------------   ------------
                                                                       THREE       MARCH 12, 1999   JAN. 1, 1999
                                                                      MONTHS          THROUGH          THROUGH
                                                                       ENDED          MARCH 31,       MARCH 11,
                                                                  MARCH 31, 2000        1999            1999
                                                                  --------------   --------------   ------------
                                                                             (UNAUDITED)

<S>                                                                 <C>            <C>              <C>
NET CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid .........................................     $      --      $        --      $ (30,359)
Issuance of long-term debt, net of issuance costs and rate swap            --          706,525             --
Retirement of long-term debt, including reacquisition cost ....      (110,142)              (7)          (127)
Reacquisition of common shares ................................            --               --        (50,629)
Equity contribution from parent ...............................            --        1,727,651             --
Repayment of MidAmerican Capital Company unsecured
   revolving credit facility ..................................            --               --        (34,600)
Net increase (decrease) in notes payable ......................        (3,452)          18,433        (15,274)
                                                                    ---------      -----------      ---------
   Net cash provided by (used in) continuing operations .......      (113,594)       2,452,602       (130,989)
   Net cash provided by (used in) discontinued operations .....            --           (1,876)         1,719
                                                                    ---------      -----------      ---------
   Net cash provided by (used in) financing activities ........      (113,594)       2,450,706       (129,270)
                                                                    ---------      -----------      ---------

NET (INCREASE) DECREASE IN CASH AND CASH EQUIVALENTS
   OF DISCONTINUED OPERATIONS .................................            --              450           (234)
                                                                    ---------      -----------      ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..........          (600)          15,636          4,140
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ..............         6,235               --          6,107
                                                                    ---------      -----------      ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ....................     $   5,635      $    15,636      $  10,247
                                                                    =========      ===========      =========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized .....................     $  40,783      $     2,327      $  15,458
                                                                    =========      ===========      =========
Income taxes paid .............................................     $  15,182      $        --      $   8,401
                                                                    =========      ===========      =========

</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -7-
<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  and a direct
wholly owned  subsidiary of MidAmerican  Energy  Holdings  Company.  MidAmerican
Funding's  direct wholly owned  subsidiary is MHC Inc., an exempt public utility
holding company.  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. and MidAmerican Services Company.

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 which 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 March 31, 2000 was $28 million.  The  estimate  consists of $3 million for
investigation  costs,  $10  million  for  remediation  costs,  $13  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.

                                      -8-
<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. In addition,
insurance  recoveries  for some or all of the  costs  may be  possible,  but the
liabilities recorded have not been reduced by any estimate of such recoveries.

     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.  The
Environmental Protection Agency filed a petition for a writ of certiorari to the
United  States  Supreme Court on January 27, 2000,  seeking  review of the lower
court's decision.

     As a result of the court's  initial  decision and the current status of the
standards,  the impact of any new standards on  MidAmerican  Energy is currently
unknown. If the Environmental Protection Agency successfully appeals the court's
decision,  however,  and the new standards  are  implemented,  then  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

                                      -9-
<PAGE>

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:

     Under a 1997  pricing  plan  settlement  agreement  resulting  from an Iowa
Utilities  Board  rate  proceeding,  electric  prices  for Iowa  industrial  and
commercial  customers  were  reduced  through  a retail  access  pilot  project,
negotiated  individual electric contracts and a tariffed rate reduction for some
non-contract commercial customers.

     The negotiated  electric  contracts have differing  terms and conditions as
well as prices.  The contracts range in length from five to ten years,  and some
have price renegotiation and early termination  provisions exercisable by either
party.  The vast majority of the contracts are for terms of seven years or less,
although, some large customers have agreed to ten-year contracts. 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.

     If  MidAmerican  Energy's  annual Iowa  electric  jurisdictional  return on
common  equity  exceeds 12%,  then  earnings  above the 12% level will be shared
equally  between  customers and MidAmerican  Energy;  if the return exceeds 14%,
then  two-thirds of  MidAmerican  Energy's share of those earnings above the 14%
level will be used for  accelerated  recovery  of  regulatory  assets.  The 1997
pricing plan settlement  agreement precludes  MidAmerican Energy from filing for
increased  rates prior to 2001 unless the return falls below 9%.  Other  parties
signing the agreement are prohibited from filing for reduced rates prior to 2001
unless the return after reflecting credits to customers, exceeds 14%.

     Under an  Illinois  restructuring  law enacted in 1997,  a similar  sharing
mechanism is in place for MidAmerican Energy's Illinois electric  operations.  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. The benchmark
is a calculation of average  30-year  Treasury Bond rates plus 5.5% for 1998 and
1999 and 8.5% for 2000  through  2004.  The initial  calculation,  which was due
March 31, 2000, was based on 1998 and 1999 results.

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.

     Statement of Financial  Accounting  Standards No. 71 sets forth  accounting
principles  for  operations  that are regulated and meet certain  criteria.  For
operations  that meet the  criteria,  SFAS 71 allows,  among other  things,  the
deferral of costs that would  otherwise be expensed  when  incurred.  A possible
consequence  of  the  changes  in  the  utility  industry  is  the  discontinued
applicability  of SFAS  71.

                                      -10-
<PAGE>

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.   SEGMENT INFORMATION:

     MidAmerican  Funding has two reportable  operating  segments:  electric and
gas.  The  electric  segment  derives  most of its revenue  from retail sales of
regulated electricity to residential,  commercial,  and industrial customers and
sales to other  utilities.  The gas segment  derives  most of its  revenue  from
retail sales of regulated 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 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 loss of investees are
allocated to each segment.

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

                                        MIDAMERICAN                  MHC
                                          FUNDING                (PREDECESSOR)
                               -------------------------------   ------------
                                   THREE        MARCH 12, 1999   JAN. 1, 1999
                                  MONTHS           THROUGH          THROUGH
                                   ENDED          MARCH 31,        MARCH 11,
                               MARCH 31, 2000       1999             1999
                               --------------   --------------   ------------
Revenues
  Electric....................    $278,463         $53,165         $208,963
  Gas.........................     179,902          31,214          139,564
  Nonregulated and other (a)..      64,189           9,207           34,539
                                  --------         -------         --------
                                   522,554          93,586          383,066
                                  ========         =======         ========

Net Income:
  Electric....................    $ 27,771         $   797         $ 11,878
  Gas.........................      14,838           1,311           13,010
  Nonregulated and other (a)..      (6,020)             (4)          (7,678)
                                  --------         -------         --------
                                    36,589           2,104           17,210
                                  ========         =======         ========

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

F.   OTHER COMPREHENSIVE INCOME:

     For the three months ended March 31,  2000,  and for the periods  March 12,
1999  through  March 31,  1999,  and January 1, 1999,  through  March 11,  1999,
MidAmerican Funding's total comprehensive income was $34.1 million, $2.1 million
and $58.8  million,  respectively.  The  differences  from Net Income are due to
unrealized holding gains and losses of marketable securities during the periods.
Accumulated other comprehensive  income (loss) was $(2.5) million and zero as of
March 31, 2000, and December 31, 1999, respectively.

                                      -11-

<PAGE>

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

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

     MidAmerican  Funding,  LLC is an Iowa  limited  liability  company that was
formed in March 1999. MidAmerican Funding is a direct wholly owned subsidiary of
MidAmerican  Energy  Holdings  Company.  MidAmerican  Funding  owns  all  of the
outstanding  common  stock of MHC Inc.,  formerly  known as  MidAmerican  Energy
Holdings  Company,  which owns all of the  common  stock of  MidAmerican  Energy
Company,   MidAmerican   Capital  Company,   Midwest  Capital  Group,  Inc.  and
MidAmerican Services Company.

     On March 12,  1999,  MidAmerican  Funding  acquired  MHC. As a part of this
transaction,  the former CalEnergy  Company,  Inc, a Delaware  corporation,  was
reincorporated as an Iowa corporation and changed its name to MidAmerican Energy
Holdings Company.  As a result, MHC and all direct and indirect  subsidiaries of
MHC each became a subsidiary of MidAmerican Funding.

     Prior to October 1999,  MidAmerican  Energy Holdings' real estate brokerage
and related services were conducted through MHC's subsidiary, MidAmerican Realty
Services.  In October 1999,  MidAmerican  Realty,  was  dividended  from MHC and
MidAmerican Funding to MidAmerican Energy Holdings.

DESCRIPTION OF FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS

     Management's   Discussion  and  Analysis  (MD&A)  addresses  the  financial
statements  of  MidAmerican  Funding  and  MHC.  The  financial   statements  of
MidAmerican  Funding  include the results of MHC  beginning  March 12, 1999.  As
discussed  above,  MHC's  investment in  MidAmerican  Realty was  distributed to
MidAmerican Energy Holdings in October 1999. Accordingly,  the operating results
of MidAmerican Realty, which was acquired in 1998, are reflected as discontinued
operations in the 1999 periods.

     Final  valuations  associated with the purchase of MHC were  established in
the  first  quarter  of  2000.  Due to the  failure  of  electric  restructuring
legislation to pass in the Iowa  legislature's  2000 session,  adjustments  were
made to utility assets and  liabilities,  primarily  impacting  Electric  Plant,
Power Purchase Contract,  and Excess of Cost Over Fair Value of Assets Acquired,
Net on the Consolidated Balance Sheet as of March 31, 2000.

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

                                      -12-
<PAGE>

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

     The  following is a discussion  of the  historical  results of  MidAmerican
Funding for the quarter ended March 31, 2000, and for the period March 12, 1999,
through March 31, 1999, and of its predecessor, MHC, for the year to date period
ended March 11, 1999. Results for MidAmerican Funding include the results of MHC
beginning  March  12,  1999,  in  conjunction  with  the  acquisition  of MHC by
MidAmerican  Energy  Holdings.  The impact of the  acquisition  is  reflected in
MidAmerican  Funding's  results of operations,  predominately  interest costs on
debt issued by MidAmerican  Funding to complete the  acquisition and the effects
of  purchase  accounting,   including  goodwill   amortization  and  fair  value
adjustments to the carrying value of assets and  liabilities.  Since the periods
discussed  are not  comparable  to a similar  prior  period,  the emphasis is on
fluctuations  from "normal" or unusual items that may cause the reported results
of operations to not necessarily be indicative of future operating results.

RESULTS OF OPERATIONS OF MIDAMERICAN FUNDING FOR THE THREE MONTHS ENDED
-----------------------------------------------------------------------
MARCH 31, 2000
--------------

UTILITY GROSS MARGIN

     Regulated Electric Gross Margin -

     MidAmerican Energy's electric gross margin for the three months ended March
31, 2000, totaled $220 million.  Temperatures  during the period were 19% warmer
than normal,  reducing electric margin by approximately $8 million.  MidAmerican
Energy's electric revenues from the recovery of energy efficiency  program costs
totaled  $8.9  million for the period.  Revenues  from  energy  efficiency  cost
recovery are  substantially  offset by  corresponding  costs in other  operating
expenses.  MidAmerican  Energy also  recorded  an accrual for a revenue  sharing
arrangement under its 1997 pricing plan settlement. The accrual reduced revenues
and electric margin by $3.4 million for the quarter.

     Regulated Gas Gross Margin -

     MidAmerican Energy's regulated gas gross margin totaled $69 million for the
three  months  ended  March 31,  2000.  Temperatures  during the period were 19%
warmer than normal temperature conditions,  resulting in a decrease in gas gross
margin of  approximately  $12  million.  Revenues  from  recovery  of gas energy
efficiency  program costs totaled $2.9 million for the period.  Again,  revenues
from energy efficiency cost recovery are  substantially  offset by corresponding
costs in other operating expenses.

     The quarter  ended  March 31,  2000,  reflects  rate  increases  which were
implemented  since March 31, 1999. On January 22, 1999, the Iowa Utilities Board
approved a $6.7  million  annual  interim  increase in gas rates for Iowa retail
customers effective  immediately.  An additional increase was implemented on

                                      -13-
<PAGE>

May 27, 1999, as a result of the Iowa Utilities Board's approval of a final rate
increase of $13.9 million annually.  Rates for South Dakota customers  increased
$2.4 million annually effective May 1, 1999.

REGULATED OPERATING EXPENSES

     Other operating  expenses  totaled $96.5 million for the three months ended
March 31, 2000. As mentioned in the gross margin  discussions,  other  operating
expenses  include energy  efficiency  program  costs.  These costs totaled $10.2
million for the period.

NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

     For the year to date period ended March 31, 2000,  nonregulated natural gas
marketing   activities   accounted  for  $47.8  million  and  $46.3  million  of
nonregulated revenues and nonregulated cost of sales, respectively.

     Revenues  include $4.2  million from  MidAmerican  Energy's  market  access
service  project,  which began in the third  quarter of 1999.  The pilot project
allows Iowa customers  with at least 4 megawatts of load 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 for the first quarter of 2000 includes $4.6 million related to the
market access service project.

     Beginning October 1, 1999, some  non-residential  customers in Illinois are
allowed to select their electric power supplier.  MidAmerican  Energy's revenues
related to these  supply  services  are  included in  nonregulated  revenues and
totaled $1.5 million.

     MidAmerican Energy's nonregulated revenues also include pre-tax income from
awards for successful  performance under its incentive gas procurement  program.
Under  the  program,  if  MidAmerican  Energy's  cost  of  gas  varies  from  an
established  reference  price range,  then the savings or cost is shared between
customers and shareholders.  The first quarter of 2000 reflects an award of $1.0
million.

     Nonregulated  revenues include $4.4 million from security system operations
which were sold in April 2000.

     Nonregulated  other  operating  costs  include  $9.5  million  of  goodwill
amortization related to the acquisition of MHC.

NON-OPERATING INCOME AND INTEREST EXPENSE

     Realized Gains and Losses on Securities, Net -

     Net  realized  gains and losses on  securities  for the year to date period
ended March 31, 2000,  reflects a $2.0  million  pre-tax gain on the sale of the
remaining shares of McLeodUSA common stock held by MidAmerican Funding.

     Other, Net -

     Other,  net  non-operating  income  for the  period  ended  March 31,  2000
includes  $2.1  million of  expense  related to  MidAmerican  Energy's  accounts
receivables  sold.

                                      -14-
<PAGE>

RESULTS OF OPERATIONS OF MIDAMERICAN  FUNDING FOR THE PERIOD MARCH 12, 1999,
----------------------------------------------------------------------------
THROUGH MARCH 31, 1999
----------------------

     There are no material  unusual items reflected in the results of operations
for the period March 12, 1999, through March 31, 1999.

RESULTS OF OPERATIONS OF MHC FOR THE PERIOD JANUARY 1, 1999 THROUGH
-------------------------------------------------------------------
MARCH 11, 1999
--------------

UTILITY GROSS MARGIN

     Regulated Electric Gross Margin -

     MidAmerican  Energy's electric gross margin for the period January 1, 1999,
through  March 12, 1999,  totaled $169 million.  Temperatures  during the period
were warmer than normal,  reducing  electric margin by approximately $4 million.
Approximately  $7 million of  MidAmerican  Energy's  electric  revenues  for the
period were from the recovery of energy efficiency program costs.  Revenues from
energy efficiency cost recovery are substantially  offset by corresponding costs
in other operating  expenses.  MidAmerican Energy also recorded an accrual for a
revenue sharing arrangement under its 1997 pricing plan settlement.  The accrual
reduced revenues and electric margin by $3 million during the period.

     Regulated Gas Gross Margin -

     MidAmerican Energy's regulated gas gross margin totaled $60 million for the
period  January 1, 1999,  through March 11, 1999.  Revenues from recovery of gas
energy efficiency program costs totaled approximately $3 million for the period.
Again, revenues from energy efficiency cost recovery are substantially offset by
corresponding costs in other operating expenses.

     On January 22,  1999,  the Iowa  Utilities  Board  approved a $6.7  million
annual  interim  increase  in gas  rates  for Iowa  retail  customers  effective
immediately.  Temperatures during the period were warmer than normal,  resulting
in a decrease in gas gross margin of approximately $4 million.

REGULATED OPERATING EXPENSES

     Other operating expenses totaled $94 million for the period January 1, 1999
through  March 11, 1999.  As mentioned  in the gross margin  discussions,  other
operating expenses includes energy efficiency program costs. These costs totaled
$8 million for the period.  MidAmerican  Energy also incurred  approximately  $2
million in operating costs related to its year 2000 readiness efforts.

NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

     For the year to date period ended March 11, 1999,  nonregulated natural gas
marketing  activities  accounted for $29 million and $28 million of nonregulated
revenues and nonregulated cost of sales, respectively.

     Nonregulated  other  operating  costs include $3 million from  nonregulated
marketing initiatives at MidAmerican Energy.

                                      -15-

<PAGE>


NON-OPERATING INCOME AND INTEREST EXPENSE

     Realized Gains and Losses on Securities, Net -

     Realized  gains and losses on  securities  net for the year to date  period
ending March 11, 1999, reflects a $16 million pre-tax gain on the sale of shares
of McLeodUSA common stock held by MHC.

     Other, Net -

     Other,  net  non-operating  income  for the  period  ended  March 11,  1999
includes approximately $19 million of costs related to the acquisition of MHC by
MidAmerican  Energy  Holdings.  In  addition,  it includes $2 million of expense
related to accounts receivables sold.


                                      -16-


<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  continuing  operating  activities  was $176
million for the three months ended March 31, 2000 and $13 million for the period
March  12,  1999,  through  March  31,  1999.  MHC's  net cash  from  continuing
operations  totaled $104 million for the period  January 1, 1999,  through March
11, 1999.

INVESTING ACTIVITIES AND PLANS

     Utility Construction Expenditures -

     MidAmerican  Energy's  primary  need for  capital is  utility  construction
expenditures.   For  the  first  three  months  of  2000,  utility  construction
expenditures  totaled $29  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.

     Forecasted utility construction expenditures, including allowance for funds
used during  construction  for 2000 are $211  million and $732  million for 2001
through 2004. Capital expenditure needs are reviewed regularly by management and
may  change  significantly  as a  result  of such  reviews.  MidAmerican  Energy
presently expects that all utility  construction  expenditures for the next five
years will be met with 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  $42 million during the
period 2000 through 2004 to an external trust  established for the investment of
funds for decommissioning Quad Cities Station.  Approximately 65% of the trust's
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.

     In addition, MidAmerican Energy makes payments to the Nebraska Public Power
District  related to  decommissioning  Cooper.  These  payments are reflected in
other  operating  expenses  in  the  Consolidated  Statements  of  Income.  NPPD
estimates call for MidAmerican  Energy to pay  approximately $57 million to NPPD
for Cooper  decommissioning  during the period 2000 through  2004.  The Nebraska
Public Power District invests the funds predominately in U.S. Treasury Bonds and
other U.S.  Government  securities.  Approximately  20% was invested in domestic
corporate debt.  MidAmerican Energy's obligation for Cooper  decommissioning may
be  affected  by the  actual  plant  shutdown  date and the  status of the power
purchase contract at that time. In July 1997, the Nebraska Public Power District
filed a lawsuit in United  States  District  Court for the  District of Nebraska
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 I, Item 3. Legal Proceedings, for further
discussion of the litigation.

                                      -17-

<PAGE>

     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 that is reviewed annually.

     Investments -

     MidAmerican Capital invests in a variety of marketable  securities which it
holds for  indefinite  periods of time. In the  Consolidated  Statements of Cash
Flows, the line "Purchase of  Available-for-Sale  Securities" and the line under
"Proceeds  from Sale of  Securities"  consist  primarily of the gross amounts of
these  activities,  including  realized  gains  and  losses  on  investments  in
marketable securities.

FINANCING ACTIVITIES, PLANS AND AVAILABILITY

     Issuance of MidAmerican Funding Debt -

     On March 11, 1999,  MidAmerican Funding issued $200 million of 5.85% Senior
Secured Notes due March 2001,  $175 million of 6.339%  Senior  Secured Notes due
2009,  and $325 million of 6.927% Senior  Secured  Bonds due 2029.  Prior to the
offering, MidAmerican Funding entered into three separate rate swap arrangements
of $125 million each,  which at closing  created a $13.6 million cash payment to
MidAmerican  Funding due to an increase in interest rates. The net amount of the
rate  swap  arrangements  and $7.0  million  of debt  offering  costs  are being
amortized using the effective interest method over the life of each of the three
traunches.  The proceeds from the offering were used to complete the acquisition
of MHC. On March 7, 2000, MidAmerican Funding exchanged its senior secured notes
for like senior secured exchange notes.

     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  $400  million.  As of March 31,  2000,  MidAmerican
Energy had in place a $325 million  commercial  paper program which is supported
by $325 million of revolving credit facilities. In addition,  MidAmerican Energy
has a $5 million  bank line of credit.  MidAmerican  Energy also has a revolving
credit  facility which is dedicated to providing  liquidity for its  obligations
under  outstanding   pollution  control  revenue  bonds  that  are  periodically
remarketed.

     MidAmerican Energy has on file with the Securities and Exchange  Commission
a  registration  statement  to issue  approximately  $130  million of  preferred
securities and long-term debt.  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 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.

                                      -18-

<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.  Funding Corp. in turn sells receivable interests to outside
investors.  In  consideration  for the sale,  MidAmerican  Energy  received  $70
million in cash and the remaining  balance in the form of a  subordinated  note,
bearing  interest at 8%, from Funding Corp. As of March 31, 2000,  the revolving
cash balance was $70 million,  and the amount outstanding under the subordinated
note was $62 million.  As part of the agreement,  the creditors of Funding Corp.
will be entitled to be satisfied out of the assets of Funding Corp. 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 March 31, 2000, $134.2 million of accounts receivable, net
of reserves, were sold under the agreement.

     Other Financing Information -

     MidAmerican   Funding  uses   distributions   that  it  receives  from  its
subsidiaries to make payments on the Notes and Bonds.  These  subsidiaries  must
make  payments  on  their  own  indebtedness  before  making   distributions  to
MidAmerican  Funding.  The distributions are also subject to utility  regulatory
restrictions  agreed to by MidAmerican Energy in March 1999 whereby it committed
to the Iowa Utilities Board to use commercially  reasonable  efforts to maintain
an  investment  grade  rating on its  long-term  debt and to maintain its common
equity level above 42% of total  capitalization  unless circumstances beyond its
control  result in the  common  equity  level  decreasing  to below 39% of total
capitalization.  MidAmerican Energy must seek the approval of the Iowa Utilities
Board of a reasonable  utility capital structure if MidAmerican  Energy's common
equity level decreases below 42% of total capitalization, unless the decrease is
beyond the control of MidAmerican Funding.  MidAmerican Funding is also required
to seek the approval of the Iowa Utilities Board if MidAmerican  Energy's equity
level  decreases  to below 39%,  even if the  decrease  is due to  circumstances
beyond the control of MidAmerican Funding.

     Each of MidAmerican  Funding's direct or indirect subsidiaries is organized
as a legal  entity  separate  and apart from  MidAmerican  Funding and its other
subsidiaries.  It should  not be  assumed  that any asset of any  subsidiary  of
MidAmerican  Funding will be available to satisfy the obligations of MidAmerican
Funding or any of its other  subsidiaries;  provided however,  that unrestricted
cash or other  assets  which are  available  for  distribution  may,  subject to
applicable  law and the terms of  financing  arrangements  of such  parties,  be
advanced,  loaned, paid as dividends or otherwise  distributed or contributed to
MidAmerican   Funding,   one  of  its   subsidiaries   or  affiliates   thereof.
Approximately  80%  of  MidAmerican   Energy's  gross  utility  plant  has  been
encumbered to secure mortgage bonds.

     As of March 31,  2000,  MHC had lines of credit  totaling  $44  million  to
provide for short-term financing needs, under which $20 million was outstanding.

     As of March 31, 2000,  MidAmerican  Capital had unsecured  revolving credit
facilities  in the amount of $6 million,  under  which no debt was  outstanding.
MidAmerican  Capital has $70 million of long-term debt  outstanding at March 31,
2000, which will mature by the end of 2002.

     Midwest Capital currently has a $25 million line of credit with MidAmerican
Energy, of which $5 million was outstanding at March 31, 2000.

                                      -19-

<PAGE>

OPERATING ACTIVITIES AND OTHER MATTERS

     Industry Evolution -

     The utility industry  continues to evolve into an increasingly  competitive
environment. In many regions of the country,  legislative and regulatory actions
are being taken which  result in  customers  having more choices in their energy
decisions.

     In  the  electric  industry,   the  traditional   vertical  integration  of
generation,  delivery and marketing is being unbundled,  with the generation and
marketing functions becoming deregulated. For local gas distribution businesses,
the supply, local delivery and marketing functions are similarly being separated
and  opened  to  competitors  for all  classes  of  customers.  Retail  electric
competition  is presently not permitted in Iowa,  MidAmerican  Energy's  primary
market.   Legislation  to  initiate  competition  was  introduced  in  the  Iowa
legislature in the 2000 session, but it did not pass.  MidAmerican Energy cannot
predict the timing or ultimate outcome of any potential  electric  restructuring
legislation in Iowa.  Deregulation of the gas supply  function  related to small
volume  customers  is  also  being  considered  by  the  Iowa  Utilities  Board.
MidAmerican  Energy has actively  participated in the legislative and regulatory
processes.

     The  generation  and  retail  portions  of  MidAmerican  Energy's  electric
business will be most affected by competition.  The  introduction of competition
in the wholesale market has resulted in a proliferation of power marketers and a
substantial increase in market activity.  As retail choice evolves,  competition
from other traditional utilities,  power marketers and customer-owned generation
could put pressure on utility margins.

     During the  transition  to full  competition,  increased  volatility in the
marketplace  can be  expected.  With the  elimination  of the energy  adjustment
clause in Iowa, MidAmerican Energy is financially exposed to movements in energy
prices.  Although  MidAmerican  Energy has sufficient low cost generation  under
typical  operating  conditions for its retail electric needs, a loss of adequate
generation by  MidAmerican  Energy at a time of high market prices could subject
MidAmerican Energy to losses on its energy sales.

     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,   beginning  October  1,  1999,  larger
non-residential  customers in Illinois and 33% of the remaining  non-residential
Illinois  customers  are allowed to select  their  provider  of electric  supply
services. All other non-residential customers will have supplier choice starting
December 31, 2000.  Residential  customers all receive the opportunity to select
their electric supplier on May 1, 2002.

     In addition to rate  reductions  implemented  in 1998, the law provides for
Illinois  earnings above a certain level of return on common equity to be shared
equally  between  customers  and  MidAmerican  Energy  beginning  in April 2000.
MidAmerican  Energy's  return on common  equity level will be based on a rolling
two-year average, with the first determination being based on an average of 1998
and 1999.  The level of return at which  MidAmerican  Energy will be required to
share  earnings is a multi-step  calculation  of average  30-year  Treasury Bond
rates plus 5.50% for 1998 and 1999.  Legislation  passed in July 1999  increased
the  benchmark  for 2000  through 2004 to 8.5% above the 30-year  Treasury  bond
rate.  The two-year  average above which sharing must occur for 1999 was 11.21%.
Using the same 30-year Treasury bond average, the computed level of return would
be 12.71% for 2000 and 14.21% for 2001 through

                                      -20-
<PAGE>


2004.  The law allows  MidAmerican  Energy to  mitigate  the sharing of earnings
above  the  threshold   return  on  common  equity  through   accelerated   cost
recognition.

     MidAmerican  Energy  continues its involvement in proceedings  which detail
the new  competitive  environment  and to evaluate  the impact of the law on its
operations  and  the  opportunities  the  law  presents,  including  proceedings
involving the unbundling of customer billing and meter reading.


     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 are 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.
MidAmerican Energy, which was not a member of an independent system operator, is
presently analyzing the impact that the order may have on its operations.

     Accounting Effects of Industry Restructuring -

     A possible  consequence  of  competition  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
certain criteria.  For operations that meet the criteria,  SFAS 71 allows, among
other  things,  the  deferral of costs that would  otherwise  be  expensed  when
incurred. A majority of 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
March 31, 2000,  MidAmerican Energy had $269 million of net regulatory assets on
its Consolidated Balance Sheet.

     Energy Efficiency -

     MidAmerican Energy's regulatory assets as of March 31, 2000, included $38.1
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.  Recovery  of these  costs is being  collected  from
customers  based  on  projected  annual  costs of $17.4  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. The total of such costs
for the years 2000 and 2001 is  estimated  to be $40  million  and $35  million,
respectively.

     Rate Matters: Electric -

     Under a 1997  pricing  plan  settlement  agreement  resulting  from an Iowa
Utilities Board rate proceeding,  electric prices for MidAmerican  Energy's Iowa
industrial and commercial  customers were reduced  through a retail access pilot
project,  negotiated individual electric contracts and a tariffed rate reduction
for some non-contract commercial customers.

     The negotiated  electric  contracts have differing  terms and conditions as
well as prices.  The contracts range in length from five to ten years,  and some
have price renegotiation and early termination  provisions exercisable by either
party.  The vast majority of the contracts are for terms of seven years or

                                      -21-
<PAGE>

less, although,  some large customers have agreed to ten-year contracts.  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. MidAmerican Energy presently
intends to manage this risk through hedging and other similar  arrangements.  On
an aggregate  basis the annual  revenues under contract are  approximately  $180
million.

     Under the 1997 pricing plan settlement  agreement,  if MidAmerican Energy's
annual Iowa electric  jurisdictional  return on common equity  exceeds 12%, then
earnings  above  the 12% level  will be shared  equally  between  customers  and
MidAmerican  Energy.  If the return exceeds 14%, then  two-thirds of MidAmerican
Energy's  share  of  those  earnings  above  the 14%  level  will  be  used  for
accelerated  recovery of certain  regulatory assets. The pricing plan settlement
agreement precludes  MidAmerican Energy from filing for increased rates prior to
2001 unless the return falls below 9%. Other  parties  signing the agreement are
prohibited from filing for reduced rates prior to 2001 unless the return,  after
reflecting  credits to  customers,  exceeds 14%. The agreement  also  eliminated
MidAmerican  Energy's energy adjustment  clause,  and, as a result,  the cost of
fuel is not directly passed on to customers.

     Rate Matters: Gas -

     On September 1, 1999,  MidAmerican  Energy filed with the Illinois Commerce
Commission  requesting a rate increase  totaling  $3.2 million  annually for its
Illinois retail gas customers. A decision by the Illinois Commerce Commission is
anticipated prior to August 2000.

     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 which 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 March 31, 2000, was $28 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.

                                      -22-
<PAGE>


     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.  As a result of the court's initial decision
and the current  status of the  standards,  the impact of any new  standards  on
MidAmerican  Energy is currently  unknown.  If the EPA successfully  appeals the
court's  decision,  however,  and  the  new  standards  are  implemented,   then
MidAmerican Energy would incur increased costs and a decrease in revenues. Refer
to  Note  B(2)  of  Notes  to  Consolidated  Financial  Statements  for  further
discussion of this issue.

     Quad Cities Nuclear Power Station -

     Quad Cities Station is operated by, and 75% owned by,  Commonwealth  Edison
Company. On May 3, 1999, the Nuclear Regulatory Commission advised ComEd that it
had classified Quad Cities Station in its Routine Oversight category for nuclear
power  plants,  which  is the best of the  commission's  three  new  categories,
removing the station from the Trending  (adversely)  Letter status  initiated in
January  1998.  During  1999,  Quad Cities  Station's  capacity  factor based on
maximum  dependable  capacity was in excess of 96.0% compared to 51.7% for 1998.
The lower capacity  factor in 1998 reflects the extended  outages at both of the
Quad Cities Station units during the first five months of 1998.

     Generating Capability -

     In July 1999,  retail  customer usage of electricity  caused an hourly peak
demand of 3,833 MW on MidAmerican Energy's energy system.  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.  MidAmerican
Energy was able to maintain  its  capacity  reserve  requirement  during the hot
weather in July 1999 and was not adversely affected by the resultant high prices
in the off-system market.

     MidAmerican  Energy believes it has adequate  electric capacity reserve and
continues to manage its  generating  resources to ensure an adequate  reserve in
the future. 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.

     Sale of Security System Companies -

     In April 2000, MidAmerican Capital sold all of its interest in its security
systems  subsidiaries.  The  sale  included  AAA  Security,  one of the  largest
residential and commercial  security systems companies in the Midwest. In total,
MidAmerican   Capital's  security  operations  had  more  than  20,000  security
customers in the Midwest. Revenues and net income in the quarter ended March 31,
2000,  for the  security  operations  sold were $4.4  million and less than $0.1
million, respectively.

                                      -23-

<PAGE>

ACCOUNTING ISSUES

     In June 1998, the Financial  Accounting  Standards Board (FASB) issued SFAS
133, "Accounting for Derivative  Instruments and Hedging Activities",  which was
delayed by SFAS 137 and is effective for MidAmerican  Funding  beginning January
1, 2001.  SFAS 133 requires an entity to  recognize  all of its  derivatives  as
either assets or liabilities in its statement of financial  position and measure
those  instruments  at fair  value.  MidAmerican  Funding  is in the  process of
evaluating the impact of this accounting standard.

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. The exposure to changes
in market  prices  and  interest  rates at March  31,  2000,  is not  materially
different than at December 31,1999.

                                      -24-
<PAGE>


                                     PART II

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

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

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

     For information  relating to 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;

     (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;

                                      -25-
<PAGE>

     (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 has appealed the court's summary  judgment ruling and is participating in
ongoing mediation efforts.

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

(A)  EXHIBITS

Exhibits Filed Herewith
-----------------------

     Exhibit 27 - Financial Data Schedules (for electronic filing only).

(B)  REPORTS ON FORM 8-K

None.

                                      -26-
<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  May 10, 2000                                   /s/  Patrick J. Goodman
    --------------                                ----------------------------
                                                          Patrick J. Goodman
                                                  Vice President and Treasurer




<PAGE>


                                  EXHIBIT INDEX

Exhibit No.
-----------

27   Financial Data Schedule (for electronic filing only)





                                      -28-