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, 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 April 30, 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 ............................................... 23

ITEM 6.  Exhibits and Reports on Form 8-K................................. 24

Signatures................................................................ 25

                                      -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 March 31,  2001,  and the
related  consolidated  statements  of income and cash flows for the  three-month
periods  ended  March 31,  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
April 18, 2001


                                      -3-
<PAGE>


                            MIDAMERICAN FUNDING, LLC
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                                 (IN THOUSANDS)

                                                  THREE MONTHS
                                                 ENDED MARCH 31,
                                              ---------------------
                                                 2001        2000
                                              ---------   ---------

OPERATING REVENUES
Regulated electric ........................   $ 294,390    $ 278,463
Regulated gas .............................     366,858      179,902
Nonregulated ..............................     228,309       64,189
                                              ---------    ---------
                                                889,557      522,554
                                              ---------    ---------
OPERATING EXPENSES
Regulated:
   Cost of fuel, energy and capacity ......      65,800       57,360
   Cost of gas sold .......................     292,450      111,497
   Other operating expenses ...............      96,452       96,520
   Maintenance ............................      27,790       24,739
   Depreciation and amortization ..........      50,810       44,343
   Property and other taxes ...............      17,274       19,299
                                              ---------    ---------
                                                550,576      353,758
                                              ---------    ---------
Nonregulated:
   Cost of sales ..........................     219,476       55,651
   Other ..................................      15,080       17,482
                                              ---------    ---------
                                                234,556       73,133
                                              ---------    ---------
   Total operating expenses ...............     785,132      426,891
                                              ---------    ---------

OPERATING INCOME ..........................     104,425       95,663
                                              ---------    ---------

NON-OPERATING INCOME
Interest income ...........................       6,037        3,816
Dividend income ...........................         738        1,113
Marketable securities gains and losses, net      (2,238)       1,336
Other, net ................................      (3,782)        (542)
                                              ---------    ---------
                                                    755        5,723
                                              ---------    ---------
FIXED CHARGES
Interest on long-term debt ................      27,311       27,248
Other interest expense ....................       1,183        2,974
Preferred dividends of subsidiaries .......       3,295        3,234
Allowance for borrowed funds ..............        (492)        (379)
                                              ---------    ---------
                                                 31,297       33,077
                                              ---------    ---------

INCOME BEFORE INCOME TAXES ................      73,883       68,309
INCOME TAXES ..............................      34,571       31,720
                                              ---------    ---------
NET INCOME ................................   $  39,312    $  36,589
                                              =========    =========


        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,
                                                                                    2001          2000
                                                                                 -----------  ------------
                                                                                 (UNAUDITED)


<S>                                                                              <C>          <C>
ASSETS
UTILITY PLANT
Electric .....................................................................   $4,489,092   $4,471,839
Gas ..........................................................................      837,033      831,203
                                                                                 ----------   ----------
                                                                                  5,326,125    5,303,042
Less accumulated depreciation and amortization ...............................    2,728,440    2,680,420
                                                                                 ----------   ----------
                                                                                  2,597,685    2,622,622
Construction work in progress ................................................       38,362       38,584
                                                                                 ----------   ----------
                                                                                  2,636,047    2,661,206
POWER PURCHASE CONTRACT ......................................................       80,335       82,231
                                                                                 ----------   ----------
CURRENT ASSETS
Cash and cash equivalents ....................................................       12,068       10,018
Marketable securities, trading ...............................................       49,645            -
Receivables ..................................................................      400,446      527,078
Inventories ..................................................................       23,902       69,130
Prepaid taxes ................................................................       23,956       22,889
Other ........................................................................       13,204       14,218
                                                                                 ----------   ----------
                                                                                    523,221      643,333
                                                                                 ----------   ----------

INVESTMENTS AND NONREGULATED PROPERTY, NET ...................................      524,205      502,167
EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED, NET .......................    1,304,956    1,313,558
OTHER ASSETS .................................................................      287,459      290,226
                                                                                 ----------   ----------
TOTAL ASSETS .................................................................   $5,356,223   $5,492,721
                                                                                 ==========   ==========

CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Member's equity ..............................................................   $1,914,620   $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 ....................................       50,000       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) ...................................    1,545,520    1,345,703
                                                                                 ----------   ----------
                                                                                  3,641,899    3,402,249
                                                                                 ----------   ----------
CURRENT LIABILITIES
Notes payable ................................................................       45,600       81,600
Current portion of long-term debt ............................................      124,893      324,933
Current portion of power purchase contract ...................................       16,554       16,554
Accounts payable .............................................................      268,519      405,887
Taxes accrued ................................................................      139,693      131,378
Interest accrued .............................................................       17,953       27,955
Other ........................................................................       38,381       37,853
                                                                                 ----------   ----------
                                                                                    651,593    1,026,160
                                                                                 ----------   ----------
OTHER LIABILITIES
Power purchase contract ......................................................       35,728       35,728
Deferred income taxes ........................................................      587,061      591,667
Investment tax credit ........................................................       64,247       66,209
Other ........................................................................      375,695      370,708
                                                                                 ----------   ----------
                                                                                  1,062,731    1,064,312
                                                                                 ----------   ----------
TOTAL CAPITALIZATION AND LIABILITIES .........................................   $5,356,223   $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>

                                                                   THREE MONTHS
                                                                  ENDED MARCH 31,
                                                              ----------------------
                                                                 2001         2000
                                                              ---------    ---------

<S>                                                           <C>          <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................   $  39,312    $  36,589
Adjustments to reconcile net income to net cash provided:
  Depreciation and amortization ...........................      59,812       54,423
  Deferred income taxes and investment tax credit, net ....      (6,793)        (157)
  Amortization of other assets and liabilities ............      12,422        5,015
  Gain on sale of securities, assets and other investments.      (1,386)      (1,461)
  Cash inflows of accounts receivable securitization ......           -       12,877
  Impact of changes in working capital ....................      35,172       69,247
  Other ...................................................       1,443         (576)
                                                              ---------    ---------
    Net cash provided .....................................     139,982      175,957
                                                              ---------    ---------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures .........................     (26,805)     (28,988)
Quad Cities Generating Station decommissioning
  trust fund ..............................................      (2,075)      (2,075)
Nonregulated capital expenditures .........................      (1,103)        (687)
Purchase of assets and long-term investments ..............        (146)      (2,571)
Purchase of available-for-sale securities .................           -       (7,806)
Proceeds from sale of available-for-sale securities .......           -       11,643
Proceeds from sale of assets and other investments ........          22          264
Notes receivable from affiliate ...........................     (68,429)     (31,300)
Other investing activities, net ...........................      (1,506)      (1,443)
                                                              ---------    ---------
  Net cash used ...........................................    (100,042)     (62,963)
                                                              ---------    ---------

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     (200,040)    (110,142)
Net increase (decrease) in notes payable ..................     (36,000)      (3,452)
                                                              ---------    ---------
  Net cash used ...........................................     (37,890)    (113,594)
                                                              ---------    ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......       2,050         (600)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ..........      10,018        6,235
                                                              ---------    ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................   $  12,068    $   5,635
                                                              =========    =========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized .................   $  36,918    $  40,783
                                                              =========    =========
Income taxes paid .........................................   $  12,232    $  15,182
                                                              =========    =========

</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. 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, 2001 was $25 million.  The  estimate  consists of $3 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:

     A pricing plan settlement  agreement entered into in 1997 among MidAmerican
Energy,  the Office of Consumer  Advocate and other  parties  pursuant to a rate
proceeding  before the Iowa Utilities Board  establishing  MidAmerican  Energy's
Iowa  retail  electric  rates,  expired  on  December  31,  2000.  With  limited
exceptions,  the pricing plan settlement agreement precluded  MidAmerican Energy
from  seeking an increase in these rates and the other  parties,  including  the
Office of Consumer  Advocate,  from seeking a decrease in rates prior to January
1, 2001.  The rates  established by the pricing plan  settlement  agreement will
remain in effect  until  either  the plan is  renegotiated  by the  parties or a
change in rates is established pursuant to a rate proceeding,  both of which are
subject to approval by the Iowa Utilities Board.

     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.   This  filing  is  being  contested  by
MidAmerican  Energy and, under Iowa law, the Iowa  Utilities  Board must rule on
the petition within ten months from March 14, 2001. The Iowa Utilities Board has
established  a procedural  schedule  that sets a hearing  date of September  24,
2001.  Iowa law  provides  that the  rates  collected  after  the  filing of the
petition  are subject to refund  with  interest  if they  exceed  rates  finally
approved by the Iowa Utilities Board.

     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,  or  Nonregulated  Operating
Revenues, depending upon the nature of the physical transaction being hedged.

     For the quarter  ended March 31, 2001,  $33,000 of net gains were  realized
from the ineffectiveness of cash flow hedges. During the twelve months beginning
April 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 reclassified into earnings.

                                      -10-
<PAGE>

     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.  A net pre-tax  gain of $69,000,  representing
the  ineffectiveness  of fair value hedges,  is included in Nonregulated Cost of
Sales.

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

     As of March 31, 2001, the following instruments were held as hedges:

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

Natural Gas Futures - Net Short        240,000      MMBtu       $2,456,840
Natural Gas Swaps                      895,607      MMBtu          528,478
Electricity Forward
   Contracts - Net Short               120,800        MWh         (925,600)

     A $1/MMBtu  increase  in the price of natural gas would  increase  the fair
value of the natural  gas  instruments  by $1.1  million.  A $5/MWh  increase in
electricity  would decrease the fair value of the electricity  forward contracts
by $0.6 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.  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 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
                                     Ended March 31,
                                 ----------------------
                                    2001         2000
                                 ---------    ---------

Revenues
    Electric .................   $ 294,390    $ 278,463
    Gas ......................     366,858      179,902
    Nonregulated and other (a)     228,309       64,189
                                 ---------    ---------
                                 $ 889,557    $ 522,554
                                 =========    =========
Net Income:
    Electric .................   $  34,435    $  27,771
    Gas ......................      17,875       14,838
    Nonregulated and other (a)     (12,998)      (6,020)
                                 ---------    ---------
                                 $  39,312    $  36,589
                                 =========    =========

(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, 2001 and 2000,  MidAmerican  Funding's
total  comprehensive  income was $39.8 million and $34.1 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 was $3.2 million and
$2.7 million as of March 31, 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. and MidAmerican
Services Company.

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
                                            Ended March 31,
                                            ---------------
                                             2001    2000
                                             ----    ----
                                             (In millions)
        Operating revenues ...............   $294    $278
        Cost of fuel, energy and capacity.     66      57
                                             ----    ----
          Electric gross margin ..........   $228    $221
                                             ====    ====

     Electric  gross margin for the first  quarter of 2001  increased $7 million
compared  to the first  quarter of 2000.  Temperatures  during the three  months
ended March 31,  2001,  were colder than  temperatures  in the first  quarter of
2000, resulting in a $9 million increase in electric margin. Other usage factors
not dependent on weather  decreased  electric margin by $7.3 million compared to
the first quarter of 2000. In total, retail sales of electricity  increased 2.0%
for the three months ended March 31, 2001.

                                      -13-
<PAGE>

     MidAmerican  Energy's  margins on  wholesale  sales,  net of a reserve  for
revenue  sharing,  increased $3.3 million compared to the first quarter of 2000.
Sales volumes for  wholesale  sales  increased  20.2% for the three months ended
March 31, 2001,  relative to the comparable period in 2000.  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
three months ended March 31, 2001, reflect a gain of $3.2 million on the sale of
emission allowances.

     Regulated Gas Gross Margin -

                                    Three Months
                                   Ended March 31,
                                   ---------------
                                   2001      2000
                                   ----      ----
                                    (In millions)

     Operating revenues.......     $367      $180
     Cost of gas sold.........      292       111
                                   ----      ----
       Gas gross margin.......     $ 75      $ 69
                                   ====      ====

     Regulated gas revenues  include  purchase gas  adjustment  clauses  through
which MidAmerican Energy is allowed to recover the cost of gas sold from most of
its gas utility customers. Consequently, fluctuations in the cost of gas sold do
not  affect  gross  margin or net income  because  revenues  reflect  comparable
fluctuations in revenues from the purchase gas adjustment  clauses.  An increase
in the  per-unit  cost of gas for the  three-month  period ended March 31, 2001,
compared to the same period in 2000,  increased revenues and cost of gas sold by
approximately $160 million.

     Temperatures during the three months ended March 31, 2001, were colder than
temperatures in the first quarter of 2000, resulting in a $7 million increase in
gas gross margin.  Other rate and usage factors  decreased  gross margin by $0.4
million compared to the first quarter of 2000.

REGULATED OPERATING EXPENSES

     Regulated other operating expenses were relatively  unchanged for the first
quarter of 2001  compared  to the first  quarter of 2000.  An increase in Cooper
Nuclear  Station costs  resulted in a $4.7 million  increase to other  operating
expenses. The increase was offset by reductions in health care and other benefit
costs,  energy efficiency program costs, Quad Cities Station operating expenses,
information   technology   expenses  and  assessments  from  utility  regulatory
agencies.

     Maintenance  expenses  increased  $3.1  million for the three  months ended
March 31,  2001,  compared  to the 2000  period  due  principally  to  increased
electric and gas distribution expenses.

     Depreciation  and amortization  expense  increased $6.5 million compared to
the first quarter of 2000 due  principally  to the increase in utility plant and
an increase in depreciation rates implemented in 2001.

     Property and other taxes  decreased $2.0 million for the three months ended
March 31, 2001,  compared to the 2000 period due to a decrease in Iowa  property
taxes and an adjustment to payroll taxes in the first quarter of 2001.

                                      -14-

<PAGE>


NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

     Nonregulated Gross Margin -

                                     Three Months
                                    Ended March 31,
                                    ---------------
                                     2001     2000
                                     ----     ----
                                     (In millions)
     Operating revenues...........   $228     $ 64
     Cost of sales................    219       56
                                     ----     ----
       Gross margin...............   $  9     $  8
                                     ====     ====

     Nonregulated   revenues  and  cost  of  sales  consist   substantially   of
nonregulated  natural  gas  marketing  operations.  Revenues  from  nonregulated
natural gas marketing  operations increased $168.5 million compared to the first
quarter of 2000 to $216.3  million for the first quarter of 2001. An increase in
the average  price per unit sold,  reflective  of a 166% increase in the average
cost of gas,  accounted  for $132.4  million of the increase in revenues.  Sales
volumes  increased 13 million MMBtus (76%) resulting in a $36.1 million increase
in revenues.  Cost of sales  increased  $167.7 million to $213.5 million for the
three months ended March 31, 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 $0.8 million to $2.9 million for the first quarter of 2001.
The  improvement  in gross  margin  reflects  an increase in margin per unit and
sales volumes.

     Nonregulated  revenues  for the first  quarter of 2001 include $3.6 million
from MidAmerican Energy's market access service project compared to $4.2 million
in the first  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 decreased $1.3 million to $3.3 million related
to the market access service project.

     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
March 31,  2001,  compared to the three  months  ended March 31,  2000,  related
revenues  increased  $2.1  million to $3.6  million,  and related  cost of sales
increased $0.4 million to $1.9 million,  resulting in a $1.7 million increase in
gross margin.

     MidAmerican  Energy's  nonregulated  revenues in the first three  months of
2000  include  $1.0  million  of  pre-tax  income  from an award for  successful
performance under an incentive gas procurement  program. A similar award was not
recorded in the 2001 period.

     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 $2.4 million for the three
months ended March 31, 2001,  due to the first  quarter of 2000  including  $1.7
million in costs related to the security  system  operations sold in April 2000.
An increase in costs related to MidAmerican Energy's  nonregulated  distribution
services partially offset the comparative decrease.  Amortization of MidAmerican
Funding goodwill decreased $0.9 million to $8.6 million for the first quarter of
2001.

                                      -15-

<PAGE>

NON-OPERATING INCOME AND INTEREST EXPENSE

     Interest and Dividend Income -

     The  increase  in interest  income was due  principally  to a $2.5  million
increase in 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 decreased $3.6 million to a net loss of
$2.2  million for the first  quarter of 2001  compared  to the first  quarter of
2000. The first quarter of 2001 includes 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,  reduced  Non-operating  Income by $3.8  million and $0.5  million in the
three months ended March 31, 2001 and 2000, respectively.  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 bad debt expense,  subservicer fees, monthly  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 $5.5  million and $2.1 million in the
first quarter of 2001 and 2000,  respectively.  Other, Net for the first quarter
of 2001 also reflects a $1.4 million gain on the sale of MidAmerican Energy rail
cars.  Income from  MidAmerican  Capital's  equity  investments  decreased  $0.8
million compared to the first quarter of 2000.

     Fixed Charges -

     The  increase  in interest  on  long-term  debt 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.  MidAmerican  Funding also retired and refunded $200 million in
long-term  debt in the first  quarter of 2001,  resulting  in a net  decrease to
interest expense.

     Other interest expense decreased  compared to the first quarter of 2000 due
principally to a reduction in short-term debt outstanding at MidAmerican Energy.

                                      -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 operating  activities was $140 million and $176
million for the three months ended March 31, 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  three  months  of  2001,  utility  construction
expenditures  totaled $27  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 and $871  million for 2002
through 2005. 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  $41 million during the
period 2001 through 2005 to external  trusts  established  for the investment of
funds for decommissioning Quad Cities Station.  Approximately 55% 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. The funds that were previously  provided
to Nebraska Public Power District,  with the  understanding  that Cooper will be
shut down in September 2004, are invested  predominately in U.S.  Treasury Bonds
and  other  U.S.  Government  securities.  Approximately  30% of the  funds  are
invested in domestic corporate debt.  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 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.

                                      -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.

     Investments -

     MidAmerican Capital re-characterized its marketable securities 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.

     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 March 31, 2001,  the
revolving  cash  balance was $70 million  and the amount  outstanding  under the
subordinated  note was

                                      -18-
<PAGE>

$213.0  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 March 31, 2001, $284.8 million of accounts receivable, net
of reserves, was sold under the agreement.

     Other Financing Information -

     As of March 31,  2001,  MHC had a $4 million  line of credit to provide for
short-term financing needs, all of which was unused.

     As of March 31, 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 March 31,
2001, all of which matures annually through 2002.

OPERATING ACTIVITIES AND OTHER MATTERS

     Industry Evolution -

     Legislation to initiate retail  electric  competition was introduced in the
Iowa legislature in the 2000 session,  but it did not pass.  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.  MidAmerican  Energy cannot predict the
timing or ultimate outcome of any potential electric  restructuring  legislation
or gas restructuring in Iowa.

     The  introduction of competition in the wholesale  market has resulted in a
proliferation of power marketers and a substantial  increase in market activity.
The  wholesale  market has also  increased in price  volatility.  As this market
matures, volatility may decline.

     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  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.

     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

                                      -19-
<PAGE>

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 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 March 31, 2001,  MidAmerican  Funding had $221.8  million of
regulatory assets, net of regulatory  liabilities,  on its Consolidated  Balance
Sheet.

     Energy Efficiency -

     MidAmerican Energy's regulatory assets as of March 31, 2001, included $16.0
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 -

     A pricing plan settlement  agreement entered into in 1997 among MidAmerican
Energy,  the Office of Consumer  Advocate and other  parties  pursuant to a rate
proceeding  before the Iowa Utilities Board  establishing  MidAmerican  Energy's
Iowa  retail  electric  rates,  expired  on  December  31,  2000.  With  limited
exceptions,  the pricing plan settlement agreement precluded  MidAmerican Energy
from  seeking an increase in these rates and the other  parties,  including  the
Office of Consumer  Advocate,  from seeking a decrease in rates prior to January
1, 2001.  The rates  established by the pricing plan  settlement  agreement will
remain in effect  until  either  the plan is  renegotiated  by the  parties or a
change in rates is established pursuant to a rate proceeding,  both of which are
subject to approval by the Iowa Utilities  Board.  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.

                                      -20-
<PAGE>

     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.   This  filing  is  being  contested  by
MidAmerican  Energy and, under Iowa law, the Iowa  Utilities  Board must rule on
the petition within ten months from March 14, 2001. The Iowa Utilities Board has
established  a procedural  schedule  that sets a hearing  date of September  24,
2001.  Iowa law  provides  that the  rates  collected  after  the  filing of the
petition  may be subject to refund with  interest if they exceed  rates  finally
approved by the Iowa Utilities Board.

     Under the pricing plan settlement agreement, if MidAmerican Energy's annual
Iowa electric jurisdictional return on common equity exceeded 12%, then earnings
above the 12% level were to be shared equally between  customers and MidAmerican
Energy.  If the return  exceeded 14%, then  two-thirds of  MidAmerican  Energy's
share of those  earnings  above  the 14% level  were to be used for  accelerated
recovery of certain regulatory assets. In the first quarter of 2001, MidAmerican
Energy credited $21.6 million to its Iowa non-contract  customers related to the
return  calculation  for 2000,  which was approved by the Iowa Utilities  Board,
subject to additional refund.

     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
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 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, 2001, was $25 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

                                      -21-
<PAGE>

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.  MidAmerican  Energy was able to  maintain  its  capacity  reserve
requirement during the 2000 cooling season and was not adversely affected by the
seasonal high prices in the wholesale market.

     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.  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.

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  Energy  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 Energy's
financial statements.

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.

                                      -22-
<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;

                                      -23-
<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  issues  one and  five in the  second  paragraph  above.
Additionally,   it  remanded  the  case  for  trial  on  all  other  claims  and
counterclaims. It is not likely that a trial will occur prior to fall of 2001.

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

(A)      EXHIBITS

         None

(B)      REPORTS ON FORM 8-K

         None.

                                      -24-
<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 11, 2001                             /s/  Patrick J. Goodman
    --------------                             ----------------------------
                                                    Patrick J. Goodman
                                               Vice President and Treasurer



                                      -25-