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

                                    FORM 10-Q

(Mark One)
[x]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the quarterly period ended      June 30, 1997
                               -----------------------------------------------

                                       or

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from      to
                               -----------------------------------------------
Commission      Registrant, State of Incorporation,       IRS Employer
File Number        Address and Telephone Number           Identification No.
-----------     -----------------------------------       --------------------

1-12459         MIDAMERICAN ENERGY HOLDINGS COMPANY               42-1451822
                        (AN IOWA CORPORATION)
                      666 GRAND AVE. PO BOX 657
                          DES MOINES, IOWA 
                          515-242-4300

1-11505             MIDAMERICAN ENERGY COMPANY                    42-1425214
                      (AN IOWA CORPORATION)
                    666 GRAND AVE. PO BOX 657
                     DES MOINES, IOWA 50303                                  
                          515-242-4300

     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
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes  X * No
                                              ----   ----
     Indicate  the  number of  shares  outstanding  of each of the  issuers'
classes of common stock as of the latest practicable date.

    Registrant             Class        Shares Outstanding at July 31, 1997
------------------   -----------------  -----------------------------------
MidAmerican Energy   Common Stock       97,370,213
  Holdings Company   without par value

MidAmerican Energy   Common Stock       100,751,713 (all of which were held by
  Company            without par value  MidAmerican Energy Holdings Company)

*    MidAmerican  Energy Holdings Company  (Holdings)  became the parent holding
     company  for  MidAmerican  Energy  Company  (MidAmerican)   pursuant  to  a
     statutory  share  exchange.  The effective  date of the share  exchange was
     December 1, 1996, and prior to such effective date,  Holdings had no assets
     or operations. Prior to such effective date, MidAmerican was subject to the
     requirements of Section 13 or 15(d) of the Securities Exchange act of 1934,
     as amended  (Exchange  Act), and  accordingly  filed in a timely manner all
     reports  required  to be  filed  pursuant  to  Sections  13 or 15(d) of the
     Exchange act during the preceding 12 months.

<PAGE>


     This combined Form 10-Q represents  separate filings by MidAmerican  Energy
Holdings   Company   (Company  or  Holdings)  and  MidAmerican   Energy  Company
(MidAmerican).  MidAmerican  makes  no  representations  as to  the  information
relating to Holdings' nonregulated operations.



                       MIDAMERICAN ENERGY HOLDINGS COMPANY
                                       AND
                           MIDAMERICAN ENERGY COMPANY

                                      INDEX

                                                                      PAGE NO.
                         PART I. FINANCIAL INFORMATION

ITEM 1.       Financial Statements

                       MidAmerican Energy Holdings Company

              Consolidated Statements of Income.......................   3
              Consolidated Balance Sheets.............................   4
              Consolidated Statements of Cash Flows...................   5
              Notes to Consolidated Financial Statements..............   6

                           MidAmerican Energy Company

              Consolidated Statements of Income.......................  10
              Consolidated Balance Sheets.............................  11
              Consolidated Statements of Cash Flows...................  12
              Notes to Consolidated Financial Statements..............  13

ITEM 2.       Management's Discussion and Analysis of
                Financial Condition and Results of Operations.........  15

                           PART II. OTHER INFORMATION

ITEM 1.       Legal Proceedings.......................................  33

ITEM 4.       Submission of Matters to a Vote of Security Holders.....  34

ITEM 6.       Exhibits and Reports on Form 8-K........................  35

Signatures............................................................  36



<PAGE>
<TABLE>
                       MIDAMERICAN ENERGY HOLDINGS COMPANY
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
                                                     THREE MONTHS            SIX MONTHS              TWELVE MONTHS
                                                     ENDED JUNE 30          ENDED JUNE 30            ENDED JUNE 30
                                                  --------------------   --------------------    ----------------------
                                                    1997       1996        1997       1996          1997        1996
                                                  ---------  ---------   ---------  ---------    ----------  ----------
<S>                                               <C>        <C>         <C>        <C>          <C>         <C>
OPERATING REVENUES
Electric utility................................  $ 261,801  $ 266,580   $ 516,117  $ 528,854    $1,086,271  $1,114,138
Gas utility.....................................     80,913     85,618     292,478    281,604       547,627     493,365
Nonregulated....................................     47,901     39,268     166,415     88,604       314,662     135,925
                                                  ---------  ---------   ---------  ---------    ----------  ----------
                                                    390,615    391,466     975,010    899,062     1,948,560   1,743,428
                                                  ---------  ---------   ---------  ---------    ----------  ----------

OPERATING EXPENSES
Utility:
   Cost of fuel, energy and capacity............     52,141     55,123     111,424    116,498       229,243     234,690
   Cost of gas sold.............................     45,099     48,689     186,932    171,425       360,521     299,519
   Other operating expenses.....................     98,691     90,168     192,298    177,769       364,703     392,662
   Maintenance..................................     22,349     25,139      46,098     43,875        90,844      86,043
   Depreciation and amortization................     42,060     41,062      84,068     82,006       166,654     162,746
   Property and other taxes.....................     24,853     23,925      50,343     49,102        93,871      93,216
                                                  ---------  ---------   ---------  ---------    ----------  ----------
                                                    285,193    284,106     671,163    640,675     1,305,836   1,268,876
                                                  ---------  ---------   ---------  ---------    ----------  ----------

Nonregulated:
   Cost of sales................................     42,595     34,503     155,801     77,250       296,807     112,978
   Other........................................      7,432      7,853      15,418     15,992        34,796      35,069
                                                  ---------  ---------   ---------  ---------    ----------  ----------
                                                     50,027     42,356     171,219     93,242       331,603     148,047
                                                  ---------  ---------   ---------  ---------    ----------  ----------
   Total operating expenses.....................    335,220    326,462     842,382    733,917     1,637,439   1,416,923
                                                  ---------  ---------   ---------  ---------    ----------  ----------

OPERATING INCOME................................     55,395     65,004     132,628    165,145       311,121     326,505
                                                  ---------  ---------   ---------  ---------    ----------  ----------

NON-OPERATING INCOME
Interest income.................................      1,562      1,019       3,115      2,524         4,603       4,965
Dividend income.................................      3,707      4,396       7,255      8,902        15,338      18,067
Realized gains and losses on securities, net....         98        509         616      3,234          (723)      3,568
Other, net......................................      3,279      3,056       7,264      4,728        (1,484)    (16,177)
                                                  ---------  ---------   ---------  ---------    ----------  ----------
                                                      8,646      8,980      18,250     19,388        17,734      10,423
                                                  ---------  ---------   ---------  ---------    ----------  ----------
INTEREST CHARGES
Interest on long-term debt......................     22,829     25,600      46,292     51,705        97,496     104,146
Other interest expense..........................      4,119      2,687       5,448      5,723        10,666       9,542
Preferred dividends of subsidiaries.............      3,231      2,184       8,000      4,661        14,028       8,157
Allowance for borrowed funds....................       (603)    (1,020)     (1,312)    (2,456)       (3,068)     (5,421)
                                                  ---------  ---------   ---------  ---------    ----------  ----------
                                                     29,576     29,451      58,428     59,633       119,122     116,424
                                                  ---------  ---------   ---------  ---------    ----------  ----------
INCOME FROM CONTINUING OPERATIONS
   BEFORE INCOME TAXES..........................     34,465     44,533      92,450    124,900       209,733     220,504
INCOME TAXES....................................     10,289     19,434      34,100     51,396        81,126      85,876
                                                  ---------  ---------   ---------  ---------    ----------  ----------
INCOME FROM CONTINUING OPERATIONS...............     24,176     25,099      58,350     73,504       128,607     134,628

DISCONTINUED OPERATIONS
Income from operations (net of income taxes)....        408      3,896         698      6,538        (3,723)      7,974
Loss on disposal (net of income taxes)..........          -          -        (524)         -       (15,356)          -
                                                  ---------  ---------   ---------  ---------    ----------  ---------- 
                                                        408      3,896         174      6,538       (19,079)      7,974
                                                  ---------  ---------   ---------  ---------    ----------  ----------

NET INCOME......................................  $  24,584  $  28,995   $  58,524  $  80,042    $  109,528  $  142,602
                                                  =========  =========   =========  =========    ==========  ==========

AVERAGE COMMON SHARES OUTSTANDING...............     98,621    100,752      99,534    100,752       100,096     100,752

EARNINGS PER COMMON SHARE
Continuing operations...........................  $    0.24  $    0.25   $    0.59  $    0.73    $     1.28  $     1.34
Discontinued operations.........................       0.01       0.04           -       0.06         (0.19)        .08
                                                  ---------  ---------   ---------  ---------    ----------  ----------
Earnings per average common share...............  $    0.25  $    0.29   $    0.59  $    0.79    $     1.09  $     1.42
                                                  =========  =========   =========  =========    ==========  ==========

DIVIDENDS DECLARED PER SHARE....................  $    0.30  $    0.30   $    0.60  $    0.60    $     1.20  $     1.20
                                                  =========  =========   =========  =========    ==========  ==========
</TABLE>
The accompanying notes are an integral part of these statements.

                                       -3-
<PAGE>
<TABLE>
                       MIDAMERICAN ENERGY HOLDINGS COMPANY
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<CAPTION>
                                                                             AS OF
                                                            ------------------------------------------
                                                                     JUNE 30               DECEMBER 31
                                                            ------------------------       -----------
                                                               1997          1996             1996
                                                            ----------    ----------       ----------
                                                                      (UNAUDITED)
<S>                                                         <C>           <C>              <C>         
ASSETS
UTILITY PLANT
Electric...............................................     $4,050,767    $3,973,331       $4,010,847
Gas....................................................        731,978       693,564          723,491
                                                            ----------    ----------       ----------
                                                             4,782,745     4,666,895        4,734,338
Less accumulated depreciation and amortization.........      2,215,077     2,103,783        2,153,058
                                                            ----------    ----------       ----------
                                                             2,567,668     2,563,112        2,581,280
Construction work in progress..........................         37,880        68,393           49,305
                                                            ----------    ----------       ----------
                                                             2,605,548     2,631,505        2,630,585
                                                            ----------    ----------       ----------

POWER PURCHASE CONTRACT................................        190,504       209,178          190,897
                                                            ----------    ----------       ----------

INVESTMENT IN DISCONTINUED OPERATIONS..................         14,130      219,979           196,356
                                                            ----------    ----------       ----------

CURRENT ASSETS
Cash and cash equivalents..............................         57,297        24,140           97,749
Receivables............................................        207,198       164,987          312,930
Inventories............................................         69,796        78,190           90,864
Other..................................................         10,227        10,122           11,696
                                                            ----------    ----------       ----------
                                                               344,518       277,439          513,239
                                                            ----------    ----------       ----------

INVESTMENTS............................................        598,345       634,346          628,791
                                                            ----------    ----------       ----------

OTHER ASSETS...........................................        386,543       407,259          399,415
                                                            ----------    ----------       ----------

TOTAL ASSETS...........................................     $4,139,588    $4,379,706       $4,559,283
                                                            ==========    ==========       ==========

CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholders' equity............................     $1,186,313    $1,242,588       $1,239,946
MidAmerican preferred securities, not subject to
   mandatory redemption................................         31,765        78,577           31,769
Preferred securities, subject to mandatory redemption:
   MidAmerican preferred securities....................         50,000        50,000           50,000
   MidAmerican-obligated preferred securities of
      subsidiary trust holding solely MidAmerican
      junior subordinated debentures...................        100,000             -          100,000
Long-term debt (excluding current portion).............      1,109,531     1,405,350        1,395,103
                                                            ----------    ----------       ----------
                                                             2,477,609     2,776,515        2,816,818
                                                            ----------    ----------       ----------
CURRENT LIABILITIES
Notes payable..........................................        146,185       164,490          161,990
Current portion of long-term debt .....................        129,756        64,461           79,598
Current portion of power purchase contract.............         13,717        13,029           13,718
Accounts payable.......................................         89,947        83,862          169,806
Taxes accrued..........................................         81,795        78,733           82,254
Interest accrued.......................................         26,457        29,643           28,513
Other..................................................         50,830        19,087           30,229
                                                            ----------    ----------       ----------
                                                               538,687       453,305          566,108
                                                            ----------    ----------       ----------
OTHER LIABILITIES
Power purchase contract................................         97,504       112,700           97,504
Deferred income taxes..................................        710,021       725,081          752,336
Investment tax credit..................................         85,985        92,141           88,842
Other .................................................        229,782       219,964          237,675
                                                            ----------    ----------       ----------
                                                             1,123,292     1,149,886        1,176,357
                                                            ----------    ----------       ----------
TOTAL CAPITALIZATION AND LIABILITIES...................     $4,139,588    $4,379,706       $4,559,283
                                                            ==========    ==========       ==========

The accompanying notes are an integral part of these statements.
</TABLE>
                                       -4-
<PAGE>

<TABLE>
                       MIDAMERICAN ENERGY HOLDINGS COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<CAPTION>
                                                                       THREE MONTHS ENDED            SIX MONTHS ENDED
                                                                         ENDED JUNE 30                 ENDED JUNE 30
                                                                      --------------------        -----------------------
                                                                        1997        1996            1997           1996
                                                                      --------    --------        --------       --------

<S>                                                                   <C>         <C>             <C>            <C>   
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net Income.....................................................       $ 24,584    $ 28,995        $ 58,524       $ 80,042
Adjustments to reconcile net income to net cash provided:
     Depreciation and amortization.............................         47,573      49,108          95,982         94,073
     Net decrease in deferred income taxes and
         investment tax credit, net............................         (6,715)       (338)        (41,574)        (1,573)
     Amortization of other assets..............................          5,596       4,650          12,474         10,684
     Capitalized cost of real estate sold......................            506       2,231             796          2,498
     Income from discontinued operations.......................           (408)     (3,896)           (174)        (6,538)
     Gain on sale of securities, assets and other investments..           (362)       (503)         (1,827)        (3,573)
     Other-than-temporary decline in value of investments......             92         336             252          2,566
     Impact of changes in working capital, net of effects
         from discontinued operations..........................        (77,613)    (56,815)         66,496          8,961
     Other.....................................................          3,584        (908)           (751)         1,900
                                                                      --------    --------        --------       --------
         Net cash provided (used)..............................         (3,163)     22,860         190,198        189,040
                                                                      --------    --------        --------       --------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures..............................        (37,426)    (37,075)        (64,029)       (65,593)
Quad Cities Nuclear Power Station decommissioning trust fund...         (2,140)     (2,159)         (4,280)        (4,318)
Deferred energy efficiency expenditures........................         (2,626)     (5,497)         (6,349)        (7,448)
Nonregulated capital expenditures..............................         (4,377)    (23,837)         (7,002)       (25,129)
Purchase of securities.........................................        (53,064)    (52,098)       (116,407)      (134,294)
Proceeds from sale of securities...............................         53,397      82,409         132,049        164,090
Proceeds from sale of assets and other investments.............            526       1,125          13,670          1,308
Investment in discontinued operations..........................              -     (45,435)        182,749        (39,243)
Other investing activities, net................................         (4,265)      4,897          (2,665)         4,334
                                                                      --------    --------        --------       --------
     Net cash provided (used)..................................        (49,975)    (77,670)        127,736       (106,293)
                                                                      --------    --------        --------       --------

NET CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid..........................................        (29,544)    (30,218)        (59,723)       (60,440)
Retirement of long-term debt, including reacquisition cost.....        (32,765)       (409)        (61,790)        (1,047)
Reacquisition of preferred shares..............................             (1)     (2,975)             (4)       (11,725)
Reacquisition of common shares.................................        (26,235)          -         (46,564)             -
Increase (decrease) in MidAmerican Capital Company
     unsecured revolving credit facility.......................              -      24,000        (174,500)         2,000
Net increase (decrease) in notes payable.......................        105,975      64,690         (15,805)       (20,310)
                                                                      --------    --------        --------       --------
     Net cash provided (used)..................................         17,430      55,088        (358,386)       (91,522)
                                                                      --------    --------        --------       --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...........        (35,708)        278         (40,452)        (8,775)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD...............         93,005      23,862          97,749         32,915
                                                                      --------    --------        --------       --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.....................       $ 57,297    $ 24,140        $ 57,297       $ 24,140
                                                                      ========    ========        ========       ========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized......................       $ 19,708    $ 19,857        $ 49,978       $ 55,428
                                                                      ========    ========        ========       ========
Income taxes paid..............................................       $ 76,690    $ 50,794        $ 76,753       $ 53,884
                                                                      ========    ========        ========       ========
</TABLE>
The accompanying notes are an integral part of these statements.

                                       -5-
<PAGE>




                       MIDAMERICAN ENERGY HOLDINGS COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A)  GENERAL:

     The consolidated financial statements included herein have been prepared by
Holdings, 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 the Company,  all adjustments  have been made to
present fairly the financial position, the results of operations and the changes
in cash flows for the periods presented.  Although the Company 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  the
Company's latest Annual Report on Form 10-K.

B)  ENVIRONMENTAL MATTERS:

    1)  Manufactured Gas Plant Facilities:

     The  United  States   Environmental   Protection  Agency  (EPA)  and  state
environmental  agencies have determined that  contaminated  wastes  remaining at
certain decommissioned manufactured gas plant (MGP) 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 is evaluating 26 properties  which were, at one time,  sites of
gas  manufacturing  plants in which it may be a  potentially  responsible  party
(PRP). The purpose of these  evaluations is to determine whether waste materials
are present,  whether such materials constitute an environmental or health risk,
and whether MidAmerican has any responsibility for remedial action.  MidAmerican
is currently  conducting field  investigations at seventeen of the sites and has
completed  investigations  at one of the sites.  In  addition,  MidAmerican  has
completed removals at three of the sites.  MidAmerican is continuing to evaluate
several of the sites to determine the future  liability,  if any, for conducting
site investigations or other site activity.

     MidAmerican's   estimate  of  probable  remediation  costs  for  the  sites
discussed  above as of June 30,  1997,  is $23 million.  This  estimate has been
recorded as a liability and a regulatory asset for future recovery. The Illinois
Commerce  Commission  (ICC) has approved the use of a tariff rider which permits
recovery  of the  actual  costs of  litigation,  investigation  and  remediation
relating to former MGP sites.  MidAmerican's present rates in Iowa provide for a
fixed annual  recovery of MGP costs.  MidAmerican  intends to pursue recovery of
the remediation costs from other PRPs and its insurance carriers.

     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.

     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's financial position or results of operations.



                                       -6-
<PAGE>

     2)  Clean Air Act:

     The EPA has  recently  promulgated  revisions  to the  ambient  air quality
standards for ozone and particulate  matter.  The impact of the new standards on
MidAmerican  will depend on  implementation  of the applicable  regulations and,
ultimately,  the  attainment  status  of  the  areas  surrounding  MidAmerican's
operations.  MidAmerican  will continue to evaluate the potential  impact of the
new regulations which is currently unknown.

C)  RATE MATTERS:

     On June 4, 1996, MidAmerican filed an electric pricing proposal in Iowa and
Illinois.  The proposal was later withdrawn in Illinois following negotiation of
a settlement in a related Illinois proceeding. The settlement resulted in annual
reductions of $13.1 million and $2.4 million,  effective  November 3, 1996,  and
June 1, 1997, respectively.

     On June 27,  1997,  the Iowa  Utilities  Board  (IUB)  issued an order in a
consolidated  rate proceeding  involving  MidAmerican's  pricing  proposal and a
filing by the Iowa Office of Consumer Advocate (OCA). The order approved a March
1997 settlement agreement between MidAmerican,  the OCA and other parties to the
proceeding.  The agreement includes a number of characteristics of MidAmerican's
pricing  proposal.  Prices for  residential  customers were reduced $8.5 million
annually and $10.0 million  annually,  effective  November 1, 1996, and July 11,
1997,  respectively,  and will be reduced an additional $5.0 million annually on
June 1, 1998, for a total annual decrease of $23.5 million. Rates for commercial
and industrial customers will be reduced a total of $10 million annually by June
1, 1998, through pilot projects, negotiated rates with individual customers and,
if needed, a base rate reduction  effective June 1, 1998. The agreement includes
a tracking  mechanism  to  currently  recover  the cost of capital  improvements
required by the Cooper  Nuclear  Station Power Purchase  Contract.  The tracking
mechanism will offset approximately $9 million of these reductions.

     In addition,  the agreement accepts MidAmerican's proposal to eliminate the
Iowa energy  adjustment  clause (EAC) which was the mechanism through which fuel
costs were collected from Iowa customers  prior to July 11, 1997. The EAC flowed
the cost of fuel to  customers  on a current  basis,  and thus,  fuel costs have
little impact on net income.  Prospectively,  base rates for Iowa customers will
include a factor for recovery of a  representative  level of fuel costs.  To the
extent  actual  fuel  costs  vary from that  factor,  pre-tax  earnings  will be
impacted.  The fuel cost factor will be reviewed in February  1999 and  adjusted
prospectively  if actual fuel costs vary 15% above or below the factor  included
in base rates.

         Under  the   agreement,   if   MidAmerican's   annual   Iowa   electric
jurisdictional  return on  common  equity  exceeds  12%,  then an equal  sharing
between customers and shareholders begins; if it exceeds 14%, then two-thirds of
MidAmerican's share will be used for accelerated  recovery of certain regulatory
assets.  The agreement  permits  MidAmerican to file for increased  rates if 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  provides  that  MidAmerican  will develop a pilot
program for a market access service which allows customers with at least 4 MW of
load to choose energy suppliers. The pilot program, which is subject to approval
by the IUB,  is  limited  to 60 MW of  participation  the first  year and can be
expanded by 15 MW annually  until the  conclusion  of the  program.  Any loss of
revenues  associated  with the pilot program will be considered  part of the $10
million annual reduction for commercial and industrial  customers but may not be
recovered  from other customer  classes.  The program is expected to be filed by
the fall of 1997.


                                       -7-
<PAGE>

D)  ACCOUNTING FOR THE EFFECTS OF CERTAIN TYPES OF REGULATION:

     Statement  of  Financial  Accounting  Standards  (SFAS)  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 that SFAS 71 may
no longer apply. MidAmerican's electric and gas utility operations are currently
subject to the  provisions  of SFAS 71, but its  applicability  is  periodically
reexamined. If a portion of MidAmerican's utility operations no longer meets the
criteria of SFAS 71, MidAmerican would be required to eliminate from its balance
sheet the regulatory  assets and  liabilities  related to those  operations that
resulted  from  actions  of its  regulators.  Although  the  amount  of  such an
elimination would depend on the specific circumstances, a material adjustment to
earnings in the appropriate  period could result from  discontinuing SFAS 71. As
of June 30, 1997,  MidAmerican  had  approximately  $363  million of  regulatory
assets in its Consolidated  Balance Sheet because these costs are expected to be
recovered in future charges to utility customers.

E)  MIDAMERICAN-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES:

     The  MidAmerican-Obligated  Mandatorily  Redeemable Preferred Securities of
Subsidiary  Trust Holding  Solely  MidAmerican  Junior  Subordinated  Debentures
included in the  Consolidated  Balance Sheets were issued by MidAmerican  Energy
Financing I (the Trust), a wholly-owned statutory business trust of MidAmerican.
The sole assets of the Trust are $103.1  million of  MidAmerican  7.98% Series A
Debentures due 2045.

F)  COMMON SHAREHOLDERS' EQUITY:

     In March 1997, Holdings announced its plan to repurchase up to $200 million
of the  Company's  common  stock.  The Company plans to purchase the shares from
time to time as market  conditions  warrant,  with the intent of completing  the
entire repurchase program by December 31, 1998. As of June 30, 1997, the Company
had repurchased approximately 2.7 million shares for $46.6 million.

G)  ACCOUNTING FOR DERIVATIVES:

     1)  Preferred Stock Hedge Instruments:

     The Company is exposed to market value risk from changes in interest  rates
for certain fixed rate sinking fund  preferred and  perpetual  preferred  stocks
(fixed rate  preferred  stocks)  included  in  Investments  on the  Consolidated
Balance  Sheets.  The Company  reviews the interest  rate  sensitivity  of these
securities and purchases put options on U.S.  Treasury  securities (put options)
to reduce interest rate risk on preferred stocks.  The Company does not purchase
or sell put  options  for  speculative  purposes.  The  Company's  intent  is to
substantially  offset  any change in market  value of the fixed  rate  preferred
stocks due to a change in  interest  rates with a change in market  value of the
put options.

     The preferred stocks are publicly traded  securities and, as such,  changes
in their fair value are reported,  net of income taxes, as a separate  component
of  shareholders'  equity.  Unrealized  gains and losses on the  associated  put
options are  included in the  determination  of the fair value of the  preferred
stocks.  The fair  value of the put  options,  including  unrealized  gains  and
losses,  included  in the  determination  of the  fair  value  of the  preferred
securities  as of June 30, 1997 and 1996 and December 31, 1996 was $2.7 million,
$3.4 million and $5.1 million,  respectively.  Realized  gains and losses on the
put options are included in Realized Gains and Losses on Securities,  Net in the
Consolidated  Statements  Income in the period the underlying  hedged fixed rate
preferred stocks are sold.



                                       -8-

<PAGE>
     
     2)  Gas Futures Contracts and Swaps:

     The Company  uses gas futures  contracts  and swap  contracts to reduce its
exposure to changes in the price of natural gas  purchased  to meet the needs of
its  customers  and to manage  margins on  natural  gas  storage  opportunities.
Investments in natural gas futures contracts, which were not material during the
periods  presented,  are included in  Receivables  on the  Consolidated  Balance
Sheets.  Gains and  losses  on gas  futures  contracts  that  qualify  for hedge
accounting  are deferred and reflected as  adjustments  to the carrying value of
the hedged item or included in Other Assets on the  Consolidated  Balance Sheets
until the underlying physical  transaction is recorded if the instrument is used
to hedge an anticipated future transaction.  The net gain or loss on gas futures
contracts is included in the  determination  of income in the same period as the
expense for the physical  delivery of the natural gas. Realized gains and losses
on gas futures  contracts  and the net amounts  exchanged  or accrued  under the
natural  gas swap  contracts  are  included  in Cost of Gas  Sold,  Other Net or
Nonregulated-Costs  of  Sales  consistent  with  the  expense  for the  physical
commodity.  Deferred net gains  (losses)  related to the  Company's  gas futures
contracts are zero, $(1.0) million and $0.8 million as of June 30, 1997 and 1996
and December 31, 1996, respectively.

     The Company  periodically  evaluates the  effectiveness  of its natural gas
hedging programs. If a high degree of correlation between prices for the hedging
instruments and prices for the physical delivery is not achieved,  the contracts
are  recorded  at fair  value  and the  gains  or  losses  are  included  in the
determination of income.

                                       -9-

<PAGE>
<TABLE>
                           MIDAMERICAN ENERGY COMPANY
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<CAPTION>

                                                         THREE MONTHS            SIX MONTHS            TWELVE MONTHS
                                                         ENDED JUNE 30          ENDED JUNE 30          ENDED JUNE 30
                                                      -------------------    -------------------   ----------------------
                                                        1997       1996        1997       1996        1997        1996
                                                      --------   --------    --------   --------   ----------  ----------
<S>                                                   <C>        <C>         <C>        <C>        <C>         <C>
OPERATING REVENUES
Electric utility..................................    $261,801   $266,580    $516,117   $528,854   $1,086,271  $1,114,137
Gas utility.......................................      80,913     85,618     292,478    281,604      547,627     493,365
                                                      --------   --------    --------   --------   ----------  ----------
                                                       342,714    352,198     808,595    810,458    1,633,898   1,607,502
                                                      --------   --------    --------   --------   ----------  ----------
OPERATING EXPENSES
Cost of fuel, energy and capacity.................      52,141     55,123     111,424    116,498      229,243     234,690
Cost of gas sold..................................      45,099     48,689     186,932    171,425      360,521     299,519
Other operating expenses..........................      98,691     90,168     192,298    177,769      364,703     392,662
Maintenance.......................................      22,349     25,139      46,098     43,875       90,844      86,043
Depreciation and amortization.....................      42,060     41,062      84,068     82,006      166,654     162,746
Property and other taxes..........................      24,853     23,925      50,343     49,102       93,871      93,216
Income taxes......................................      12,917     21,034      36,421     53,364       94,263     104,050
                                                      --------   --------    --------   --------   ----------  ----------
                                                       298,110    305,140     707,584    694,039    1,400,099   1,372,926
                                                      --------   --------    --------   --------   ----------  ----------

OPERATING INCOME..................................      44,604     47,058     101,011    116,419      233,799     234,576
                                                      --------   --------    --------   --------   ----------  ----------

NON-OPERATING INCOME
Interest and dividend income......................         421        306       1,327        818        2,107       1,445
Non-operating income taxes........................      (1,374)      (641)     (2,293)      (434)      (3,580)        369
Other, net........................................       3,008      1,352       4,339        404        6,335      (3,865)
                                                      --------   --------    --------   --------   ----------  ----------
                                                         2,055      1,017       3,373        788        4,862      (2,051)
                                                      --------   --------    --------   --------   ----------  ----------

INTEREST CHARGES
Interest on long-term debt........................      19,332     19,942      39,218     39,768       78,884      79,790
Other interest expense............................       4,113      2,307       5,442      5,630       10,654       9,814
Preferred dividends of subsidiary trust...........       1,995          -       3,990          -        4,278           -
Allowance for borrowed funds......................        (603)    (1,020)     (1,312)    (2,456)      (3,068)     (5,421)
                                                      --------   --------    --------   --------   ----------  ----------
                                                        24,837     21,229      47,338     42,942       90,748      84,183
                                                      --------   --------    --------   --------   ----------  ----------

INCOME FROM CONTINUING OPERATIONS.................      21,822     26,846      57,046     74,265      147,913     148,342

INCOME (LOSS) FROM DISCONTINUED OPERATIONS........           -      4,333           -     10,438      (20,599)      2,417
                                                      --------   --------    --------   --------   ----------  ----------    
NET INCOME........................................      21,822     31,179      57,046     84,703      127,314     150,759
PREFERRED DIVIDENDS...............................       1,236      2,184       4,010      4,661        9,750       8,157
                                                      --------   --------    --------   --------   ----------  ----------

EARNINGS ON COMMON STOCK..........................    $ 20,586   $ 28,995    $ 53,036   $ 80,042   $  117,564  $  142,602
                                                      ========   ========    ========   ========   ==========  ==========
</TABLE>
The accompanying notes are an integral part of these statements.

                                      -10-
<PAGE>
<TABLE>
                           MIDAMERICAN ENERGY COMPANY
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
<CAPTION>
                                                                                       AS OF
                                                                ------------------------------------------
                                                                        JUNE 30                DECEMBER 31
                                                                ------------------------       -----------
                                                                   1997          1996              1996
                                                                ----------    ----------        ----------
                                                                      (UNAUDITED)
<S>                                                             <C>           <C>               <C>  
ASSETS
UTILITY PLANT
Electric...............................................         $4,053,770    $3,976,334        $4,013,851
Gas....................................................            731,978       693,564           723,491
                                                                ----------    ----------        ----------
                                                                 4,785,748     4,669,898         4,737,342
Less accumulated depreciation and amortization.........          2,216,806     2,104,975         2,154,505
                                                                ----------    ----------        ----------
                                                                 2,568,942     2,564,923         2,582,837
Construction work in progress..........................             37,880        68,393            49,305
                                                                ----------    ----------        ----------
                                                                 2,606,822     2,633,316         2,632,142
                                                                ----------    ----------        ----------

POWER PURCHASE CONTRACT................................            190,504       209,178           190,897
                                                                ----------    ----------        ----------

INVESTMENT IN DISCONTINUED OPERATIONS..................                  -       293,315                 -
                                                                ----------    ----------        ----------

CURRENT ASSETS
Cash and cash equivalents..............................             15,515         9,266            84,215
Receivables............................................            180,386       146,594           253,944
Inventories............................................             68,158        78,190            90,864
Other..................................................              4,243         4,906             7,776
                                                                ----------    ----------        ----------
                                                                   268,302       238,956           436,799
                                                                ----------    ----------        ----------

INVESTMENTS............................................             98,808       104,809           118,344
                                                                ----------    ----------        ----------

OTHER ASSETS...........................................            371,253       404,677           396,471
                                                                ----------    ----------        ----------
TOTAL ASSETS...........................................         $3,535,689    $3,884,251        $3,774,653
                                                                ==========    ==========        ==========

CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholder's equity............................         $  968,569    $1,242,588        $  986,825
MidAmerican preferred securities, not subject to
   mandatory redemption................................             31,765        78,577            31,769
Preferred shares, subject to mandatory redemption:
   MidAmerican preferred securities....................             50,000        50,000            50,000
   MidAmerican-obligated preferred securities of
      subsidiary trust holding solely MidAmerican
      junior subordinated debentures...................            100,000             -           100,000
Long-term debt (excluding current portion).............            975,047     1,109,683         1,086,955
                                                                ----------    ----------        ----------
                                                                 2,125,381     2,480,848         2,255,549
                                                                ----------    ----------        ----------

CURRENT LIABILITIES
Notes payable..........................................            144,300       166,317           161,700
Current portion of long-term debt......................             99,900           392            49,560
Current portion of power purchased contract............             13,717        13,029            13,718
Accounts payable.......................................             73,677        78,907           122,974
Taxes accrued..........................................             62,435        73,730            82,338
Interest accrued.......................................             22,424        24,137            24,245
Other..................................................             24,153         8,718            24,452
                                                                ----------    ----------        ----------
                                                                   440,606       365,230           478,987
                                                                ----------    ----------        ----------

OTHER LIABILITIES
Power purchase contract................................             97,504       112,700            97,504
Deferred income taxes..................................            615,846       619,731           616,567
Investment tax credit..................................             85,985        92,141            88,842
Other .................................................            170,367       213,601           237,204
                                                                ----------    ----------        ----------
                                                                   969,702     1,038,173         1,040,117
                                                                ----------    ----------        ----------
TOTAL CAPITALIZATION AND LIABILITIES...................         $3,535,689    $3,884,251        $3,774,653
                                                                ==========    ==========        ==========
</TABLE>
The accompanying notes are an integral part of these statements.

                                      -11-
<PAGE>
<TABLE>

                           MIDAMERICAN ENERGY COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)
<CAPTION>



                                                                      THREE MONTHS ENDED         SIX MONTHS ENDED
                                                                            JUNE 30                 JUNE 30
                                                                      -------------------      --------------------
                                                                        1997       1996          1997        1996
                                                                      --------   --------      --------    --------
<S>                                                                   <C>        <C>           <C>         <C>   
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income.........................................................   $ 21,822   $ 31,179      $ 57,046    $ 84,703
Adjustments to reconcile net income to net cash provided:
   Depreciation and amortization...................................     46,784     45,298        94,428      91,935
   Net decrease in deferred income taxes and
      investment tax credit, net...................................     (1,789)    (1,298)       (3,578)     (1,794)
   Amortization of other assets....................................      5,472      5,074        12,092      10,332
   Income from discontinued operations.............................          -     (4,333)            -     (10,438)
   Other-than-temporary decline in value of investments............          -          -             -       2,230
   Impact of changes in working capital, net of effects
      from discontinued operations.................................    (59,177)   (64,053)       28,477      (3,994)
   Other...........................................................     (7,694)     9,252       (25,162)       (324)
                                                                      --------   --------      --------    --------
      Net cash provided............................................      5,418     21,119       163,303     172,650
                                                                      --------   --------      --------    --------

NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures..................................    (37,426)   (37,075)      (64,029)    (65,593)
Quad Cities Nuclear Power Station decommissioning trust fund.......     (2,140)    (2,159)       (4,280)     (4,318)
Deferred energy efficiency expenditures............................     (2,626)    (5,497)       (6,349)     (7,448)
Nonregulated capital expenditures..................................     (1,602)      (948)       (3,306)     (1,273)
Investment in discontinued operations..............................          -     (4,549)            -       5,269
Other investing activities, net....................................        829     (3,428)          927      (3,079)
                                                                      --------   --------      --------    --------
   Net cash used...................................................    (42,965)   (53,656)      (77,037)    (76,442)
                                                                      --------   --------      --------    --------

NET CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid.....................................................    (41,236)   (32,402)      (75,510)    (65,101)
Retirement of long-term debt, including reacquisition cost.........    (32,896)      (525)      (62,052)       (691)
Reacquisition of preferred shares..................................         (1)    (2,618)           (4)    (11,368)
Net increase (decrease) in notes payable...........................    104,275     66,517       (17,400)    (18,483)
                                                                      --------   --------      --------    --------
   Net cash provided (used)........................................     30,142     30,972      (154,966)    (95,643)
                                                                      --------   --------      --------    --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...............     (7,405)    (1,565)      (68,700)        565
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD...................     22,920     10,831        84,215       8,701
                                                                      --------   --------      --------    --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.........................   $ 15,515   $  9,266      $ 15,515    $  9,266
                                                                      ========   ========      =========   ========

ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized..........................   $ 12,215   $ 11,966      $ 42,663    $ 40,016
                                                                      ========   ========      ========    ========
Income taxes paid .................................................   $ 54,247   $ 56,858      $ 67,465    $ 61,270
                                                                      ========   ========      ========    ========
</TABLE>
The accompanying notes are an integral part of these statements.


                                      -12-

<PAGE>


                           MIDAMERICAN ENERGY COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A)  GENERAL:

     The consolidated financial statements included herein have been prepared by
MidAmerican,  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,  all adjustments  have been made to
present fairly the financial position, the results of operations and the changes
in cash flows for the periods presented.  Although MidAmerican 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's latest Annual Report on Form 10-K.

B)  ENVIRONMENTAL MATTERS:

     Refer to Note B of Holdings' Notes to Consolidated Financial Statements for
information regarding MidAmerican's environmental matters.

C)  RATE MATTERS:

     Refer to Note C of Holdings' Notes to Consolidated Financial Statements for
information regarding MidAmerican's rate matters.

D)  ACCOUNTING FOR THE EFFECTS OF CERTAIN TYPES OF REGULATION:

     Refer to Note D of Holdings' Notes to Consolidated Financial Statements for
information regarding MidAmerican's  accounting for the effects of certain types
of regulation.

E)  MIDAMERICAN-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES:

     Refer to Note E of Holdings' Notes to Consolidated Financial Statements for
information regarding the MidAmerican-Obligated Mandatorily Redeemable Preferred
Securities.

F)  ACCOUNTING FOR DERIVATIVES:

    1)  Gas Futures Contracts and Swaps:

     MidAmerican  uses gas futures  contracts  and swap  contracts to reduce its
exposure to changes in the price of natural gas  purchased  to meet the needs of
its  customers  and to manage  margins on  natural  gas  storage  opportunities.
Investments in natural gas futures contracts, which were not material during the
periods  presented,  are included in  Receivables  on the  Consolidated  Balance
Sheets.  Gains and  losses  on gas  futures  contracts  that  qualify  for hedge
accounting  are deferred and reflected as  adjustments  to the carrying value of
the hedged item or included in Other Assets on the  Consolidated  Balance Sheets
until the underlying physical  transaction is recorded if the instrument is used
to hedge an anticipated future transaction.  The net gain or loss on gas futures
contracts is included in the  determination  of income in the same period as the
expense for the

                                      -13-

<PAGE>


physical  delivery of the natural gas.  Realized gains and losses on gas futures
contracts  and the net amounts  exchanged or accrued  under the natural gas swap
contracts  are  included  in Cost of Gas Sold or Other Net  consistent  with the
expense for the physical  commodity.  Deferred net gains (losses) related to the
Company's gas futures  contracts are zero, $(0.7) million and $0.1 million as of
June 30, 1997 and 1996 and December 31, 1996, respectively

         MidAmerican periodically evaluates the effectiveness of its natural gas
hedging programs.  If the correlation between prices for the hedging instruments
and prices for the physical delivery is less than 80 percent,  the contracts are
recorded at fair value and the gains or losses are included in the determination
of income.


                                      -14-
<PAGE>

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


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

COMPANY STRUCTURE

     MidAmerican Energy Holdings Company (Holdings or the Company), is an exempt
public utility  holding company  headquartered  in Des Moines,  Iowa.  Effective
December  1, 1996,  Holdings  became the parent  company of  MidAmerican  Energy
Company  (MidAmerican),  MidAmerican Capital Company  (MidAmerican  Capital) and
Midwest  Capital  Group,  Inc.  (Midwest  Capital).  Prior to  December 1, 1996,
MidAmerican Capital and Midwest Capital were subsidiaries of MidAmerican.

     MidAmerican  was  formed on July 1, 1995,  as a result of the  merger  (the
merger) of  Iowa-Illinois  Gas and  Electric  Company,  Midwest  Resources  Inc.
(Resources) and Midwest Power Systems Inc., the utility subsidiary of Resources.

     MidAmerican  is a public  utility with electric and natural gas  operations
and is the  principal  subsidiary of Holdings.  MidAmerican  Capital and Midwest
Capital are Holdings' nonregulated subsidiaries.  Midwest Capital functions as a
regional  business   development   company  in  MidAmerican's   utility  service
territory.  MidAmerican  Capital  manages  rail service  businesses,  marketable
securities and passive investment activities,  nonregulated wholesale and retail
natural gas businesses and other energy related,  nonregulated  activities.  The
Company completed the sale of MidAmerican  Capital's oil and gas exploration and
development operations in January 1997.

DESCRIPTION OF FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND
ANALYSIS

     The  MidAmerican  merger is accounted  for as a  pooling-of-interests.  The
consolidated  financial  statements of MidAmerican  present  amounts  related to
MidAmerican  Capital  and Midwest  Capital as  discontinued  operations  for all
periods that include months prior to December 1, 1996, in order to reflect their
transfer to Holdings in December 1996.

     This   management's   discussion  and  analysis   addresses  the  financial
statements  of Holdings  and  MidAmerican  as  presented  in this joint  filing.
Information related to MidAmerican also relates to Holdings. Information related
to MidAmerican  Capital and Midwest  Capital  pertains only to the discussion of
the financial  condition  and results of  operations of Holdings.  To the extent
necessary,  certain  discussions  have been  segregated  to allow the  reader to
identify information applicable only to Holdings.


                                      -15-

<PAGE>

FORWARD-LOOKING STATEMENTS

     From time to time, the Company 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  the  Company  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
the Company's expectations,  beliefs,  future plans and strategies,  anticipated
events or trends and similar comments concerning matters that are not historical
facts. Investors and other users of the forward-looking statements are cautioned
that such  statements  are not a guarantee of future  performance of the Company
and that such forward-looking  statements are subject to risks and uncertainties
that could cause actual results to differ materially from those expressed in, or
implied by, such statements.  Some, but not all, of the risks and  uncertainties
include weather effects on sales and revenues, fuel prices, competitive factors,
general economic conditions in the Company's service territory,  interest rates,
inflation and federal and state regulatory actions.


                              RESULTS OF OPERATIONS
                              ---------------------

Holdings:
---------

         The following table provides a summary of the earnings contributions of
the Company's operations for each of the periods presented:
<TABLE>
<CAPTION>

                                                                     Periods Ended June 30
                                                   ---------------------------------------------------------
                                                     Three Months        Six Months           Twelve Months
                                                    ---------------    ----------------      ---------------
                                                     1997     1996      1997      1996        1997     1996
                                                    ------   ------    ------    ------     ------    ------
     <S>                                            <C>      <C>       <C>       <C>        <C>       <C>
     Net Income (in millions)
        Continuing operations
             Electric utility                       $ 20.8   $ 25.3    $ 34.4    $ 47.4     $109.8    $117.8
             Gas utility                              (0.2)    (0.6)     18.6      22.2       28.4      22.4
                                                    ------   ------    ------    ------     ------    ------
                Total                                 20.6     24.7      53.0      69.6      138.2     140.2
             Nonregulated operations                   3.6      0.4       5.3       3.9       (9.6)     (5.6)
        Discontinued operations                        0.4      3.9       0.2       6.5      (19.1)      8.0
                                                    ------   ------    ------    ------     ------    ------
             Consolidated earnings                  $ 24.6   $ 29.0    $ 58.5    $ 80.0     $109.5    $142.6
                                                    ======   ======    ======    ======     ======    ======

     Earnings Per Common Share
        Continuing operations
             Electric utility                       $ 0.21   $ 0.25    $ 0.34    $ 0.47     $ 1.10    $ 1.17
             Gas utility                                 -        -      0.19      0.22       0.28      0.22
                                                    ------   ------    ------    ------     ------    ------
                Total                                 0.21     0.25      0.53      0.69       1.38      1.39
             Nonregulated operations                  0.03        -      0.06      0.04      (0.10)    (0.05)
        Discontinued operations                       0.01     0.04         -      0.06      (0.19)     0.08
                                                    ------   ------    ------    ------     ------    ------
             Consolidated earnings                  $ 0.25   $ 0.29    $ 0.59    $ 0.79     $ 1.09    $ 1.42
                                                    ======   ======    ======    ======     ======    ======
</TABLE>


                                      -16-

<PAGE>



MidAmerican:
------------

     The following  table  provides a summary of the earnings  contributions  of
MidAmerican's  operations for each of the periods presented:  
<TABLE>
<CAPTION>


                                            Periods Ended June 30
                              ------------------------------------------------- 
                                Three Months     Six Months      Twelve Months
                              ---------------  ---------------   --------------  
                               1997     1996    1997     1996     1997    1996
                              ------   ------  ------   ------   ------  ------ 
                                                (in millions) 

<S>                           <C>      <C>     <C>      <C>      <C>     <C>
Earnings on Common Stock 
  Continuing operations 
    Electric utility          $ 20.8   $ 25.3  $ 34.4   $ 47.4   $109.8  $117.8 
    Gas utility                 (0.2)    (0.6)   18.6     22.2     28.4    22.4
                              ------   ------  ------   ------   ------  ------ 
      Total                     20.6     24.7    53.0     69.6    138.2   140.2  
  Discontinued operations*         -      4.3       -     10.4    (20.6)    2.4  
                              ------   ------  ------   ------   ------  ------  
    Consolidated earnings     $ 20.6   $ 29.0  $ 53.0   $ 80.0   $117.6  $142.6 
                              ======   ======  ======   ======   ======  ======
</TABLE>

  *  Includes the income  (loss) of  MidAmerican  Capital and Midwest  Capital
     prior to their transfer to Holdings on December 1, 1996.

EARNINGS DISCUSSION

     The  Company's  earnings per share for the 1997  three-month  and six-month
periods  decreased  4 cents and 20  cents,  respectively,  compared  to the 1996
periods. Some of the significant variances which resulted in the decrease are as
follows, on a Holdings per share basis:

<TABLE>
<CAPTION>

                                                     Three Months    Six Months
                                                     ------------    ----------
     <S>                                              <C>             <C>
     MidAmerican  
       Net reduction in electric and gas
         gross margin due to -
           Variation in the effect of weather         $ (0.02)        $(0.07)
           Electric retail rate reductions              (0.03)         (0.06)
             Improvements due to other factors           0.03           0.05
       Increase in nuclear O&M expenses                 (0.01)         (0.04)
       Increase in other O&M expenses                   (0.02)         (0.05)
       Losses on reacquired preferred stock
         and reacquired long-term debt                      -          (0.02)

     Nonregulated subsidiaries continuing operations      0.03           0.02

     Discontinued operations                             (0.03)         (0.06)
</TABLE>

     Earnings for the twelve months ended June 30, 1997,  decreased 33 cents per
share compared to twelve months ended June 30, 1996. The impact of  discontinued
operations  resulted in a 27 cents per share decrease.  Utility electric and gas
margins  decreased 17 cents per share due to a less favorable  impact of weather
and rate reductions.  Losses on reacquired preferred stock reduced earnings by 2
cents per share for the 1997 twelve-month-period. For the Company's nonregulated
subsidiaries,  earnings from  continuing  operations for the twelve months ended
June 30, 1997,  decreased 6 cents per share,  excluding items discussed later in
this

                                      -17-

<PAGE>



section.  Following  is  a  discussion  of  several  other  significant  factors
affecting the twelve months ended comparison.

     In  August  1996,  the  Company  announced  a  proposal  to merge  with IES
Industries Inc. (IES), a holding company  headquartered  in Cedar Rapids,  Iowa.
The IES board of directors rejected the Company's proposal in favor of a pending
merger with WPL Holdings and Interstate  Power Co. (the Wisconsin  Transaction).
At their  September 5, 1996,  annual  meeting,  the holders of a majority of IES
common  stock  voted in  favor of the  Wisconsin  Transaction,  and the  Company
discontinued its attempt to merge with IES. In the effort,  MidAmerican incurred
tax deductible  costs of $8.7 million in 1996 which reduced  earnings by 5 cents
per share for the 1997 twelve-month period.

     The Company's and  MidAmerican's  earnings for twelve months ended June 30,
1996,  were reduced by costs related to the MidAmerican  merger.  As part of the
process of combining the operations of MidAmerican's  predecessors,  the Company
developed  a  restructuring   plan  which  included  employee   incentive  early
retirement,  relocation  and  separation  programs.  The Company  recorded $27.4
million of restructuring  costs during the twelve months ended June 30, 1996, of
which $25.9 million is included in utility operations. These costs are reflected
in Other Operating Expenses in the Consolidated Statements of Income.

     In addition, MidAmerican incurred transaction costs to complete the merger.
MidAmerican  expensed  $3.9  million of merger  transaction  costs in the twelve
months  ended June 30,  1996.  These  costs are  included  in Other,  Net in the
Consolidated Statements of Income.

     In  total,  restructuring  and  transaction  costs  reduced  the  Company's
earnings for the 1996 twelve-month period by 20 cents per share.

     Write-downs of certain assets,  primarily  alternative energy projects,  of
the Company's nonregulated  subsidiaries reduced earnings for each of the twelve
months ended June 30. The  write-downs,  which reflect  declines in the value of
those nonregulated investments,  reduced earnings by approximately $9.4 million,
or 9 cents per share, and $10.2 million,  or 10 cents per share, in the 1997 and
1996 twelve-month periods, respectively. The pre-tax amounts of the write-downs,
which are  included  in Other,  Net in the  Consolidated  Statements  of Income,
totaled  $15.6  million  and  $18.0  million  for the  1997  and  1996  periods,
respectively.

     Discontinued Operations -

Holdings:
---------

     The Company is redeploying certain of its nonregulated  investments as part
of its  strategy  of  becoming  the  leading  regional  provider  of energy  and
complementary services. As discussed below, the Company discontinued some of its
nonregulated  operations  during the second half of 1996.  The related income or
loss from  operations  and the  anticipated  losses on disposal are reflected as
discontinued  operations  in each of the periods  presented in the  Consolidated
Statements of Income.  Net assets of the discontinued  operations are separately
presented in the  Consolidated  Balance  Sheets as  Investment  in  Discontinued
Operations.

     In the fourth  quarter of 1996,  the Company and KCS Energy,  Inc. (KCS) of
Edison,  New  Jersey,  signed a  definitive  agreement  to sell a portion of the
Company's  nonregulated  operations  to KCS for $210 million in cash and 435,000
warrants to purchase KCS common stock.  The sale,  which  included the Company's
oil and gas  exploration and  development  operations,  was completed in January
1997. The

                                      -18-

<PAGE>



Company  recorded an after-tax loss of $7.1 million for the  transaction in 1996
and an additional $0.5 million in the first quarter of 1997.

     The  Company  also  intends  to  divest a  subsidiary  that  developed  and
continues to operate a computerized  information system  facilitating  real-time
exchange of power in the electric industry.  The Company expects the disposition
to occur  during  1997 and,  accordingly,  recorded a $4.0  million  anticipated
after-tax loss on disposal of those operations in September 1996.

MidAmerican:
------------

     MidAmerican  received $15.3 million in cash in 1996 as final settlement for
the sale of a former coal mining  subsidiary which was reflected as discontinued
operations in 1982 by one of  MidAmerican's  predecessors.  The final settlement
included  reacquisition  by the buyer of preferred  equity issued to MidAmerican
and the settlement of reclamation  reserves.  MidAmerican  recorded an after-tax
loss on disposal of $3.3 million for the  transaction  in September  1996.  This
transaction is included in discontinued operations in the consolidated financial
statements  of  MidAmerican  as well as  Holdings.  Discontinued  operations  of
MidAmerican  also  includes the net  earnings/loss  of  MidAmerican  Capital and
Midwest Capital for periods prior to the December 1, 1996, transfer to Holdings.

UTILITY GROSS MARGIN
<TABLE>
<CAPTION>

     Electric Gross Margin:
     ----------------------
                                              Periods Ended June 30
                                     -----------------------------------------
                                     Three Months   Six Months   Twelve Months
                                     ------------   -----------  -------------
                                     1997    1996   1997   1996   1997    1996
                                     ----    ----   ----   ----  ------  ------
                                                     (In millions)

     <S>                             <C>     <C>    <C>    <C>   <C>     <C>   
     Operating revenues              $262    $267   $516   $529  $1,086  $1,114
     Cost of fuel, 
       energy and capacity             52      55    111    116     229     235
                                     ----    ----   ----   ----  ------  ------
       Electric gross margin         $210    $212   $405   $413  $  857  $  879
                                     ====    ====   ====   ====  ======  ======
</TABLE>

     Variations  in gross  margin are the result of changes in  revenues  due to
price and sales volume  variances.  Changes in the cost of electric fuel, energy
and capacity  (collectively,  Energy Costs) reflect  fluctuations  in generation
levels and mix, fuel cost, and energy and capacity  purchases.  MidAmerican  has
been allowed to recover Energy Costs from most of its electric utility customers
through energy  adjustment  clauses  (EACs) in revenues.  Variations in revenues
collected through the EACs, reflecting changes in Energy Costs per unit sold and
volumes sold,  have not affected gross margin or net income.  Effective July 11,
1997, the EAC was  eliminated for Iowa customers as part of a recently  approved
settlement agreement in Iowa. As a result,  fluctuations in fuel costs will have
an impact on future gross margin and net income.  Refer to "Rate  Matters" under
the  Operating  Activities  and Other  Matters  section of Liquidity and Capital
Resources for further discussion of the settlement agreement.

     Electric  gross  margin for three  months  ended June 30,  1997,  decreased
compared to the 1996  three-month  period due to rate reductions and milder 1997
temperatures.  Reductions in electric retail rates decreased  revenues and gross
margin by $4.2 million  compared to the second  quarter of 1996.  Weather in the
second  quarter  of 1997  was  milder  than  normal  resulting  in a $2  million
reduction in electric gross margin while

                                      -19-

<PAGE>



weather in the 1996 second  quarter was slightly  warmer than normal.  In total,
electric  retail  sales  increased  3%  due to  modest  customer  growth  and an
improvement in sales not dependent upon weather.

     Reductions in electric retail service rates affected  customers in Iowa and
Illinois.  In October  1996,  the Illinois  Commerce  Commission  (ICC)  ordered
MidAmerican to reduce rates for its Illinois  customers by 10%, or $13.1 million
in annual revenues,  effective November 3, 1996. A negotiated termination of the
rate  reduction  proceeding  left in place  the  initial  $13.1  million  annual
reduction and included a second price  reduction of $2.4 million  annually to be
effective on June 1, 1997.  In Iowa,  MidAmerican  reduced its  electric  retail
rates by $8.7 million effective November 1, 1996. The reduction lowered rates to
levels in  MidAmerican's  pricing  proposal  filed in June 1996.  Refer to "Rate
Matters" in Liquidity and Capital Resources later in this discussion for further
information regarding the Iowa proceeding.

     Rate reductions  reduced  revenues and gross margin by $9.3 million for the
six months ended June 30, 1997,  relative to the 1996 period.  Weather variation
from normal  reduced gross margin for the 1997 period by $5 million  compared to
an increase in margin of $3 million for the 1996 period. These decreases in 1997
gross margin were  partially  offset by increases  due to other  factors such as
customer  growth and  increases  in sales not  dependent  on weather.  In total,
electric retail sales increased 2% in the 1997 six-month  period compared to the
six months ended June 30, 1996.

     Electric  gross margin  decreased  $22 million for the twelve  months ended
June 30, 1997, compared to the 1996 period. In addition to the impact of weather
discussed above, cooler weather conditions in the 1996 third quarter compared to
the 1995 third quarter  caused a decrease in  weather-related  sales in the 1997
twelve-month  period relative to the comparable 1996 period. In total,  electric
retail sales  increased 1% due to modest  customer  growth and an improvement in
sales not dependent upon weather. Sales to the more weather-sensitive  customers
have a higher margin per unit than sales to other  customers.  As a result,  the
decrease  in sales to those  customers  had a  greater  impact  on  margin  than
increases  in sales to other  customers.  The rate  reductions  discussed  above
reduced  electric  gross  margin by $13.0  million for the twelve  months  ended
comparison. In addition, electric revenues and gross margin were reduced by $3.7
million in the twelve months ended June 30, 1997,  for a rate refund reserve for
revenues  between  August 1 and October 31, 1996,  in  connection  with the Iowa
proceeding.

     Gas Gross Margin:
     -----------------
<TABLE>
<CAPTION>
                                            Periods Ended June 30
                               ------------------------------------------------
                               Three Months      Six Months      Twelve Months
                               ------------     ------------     --------------
                               1997    1996     1997    1996     1997      1996
                               ----    ----     ----    ----     ----      ----
                                               (In millions)

        <S>                    <C>     <C>      <C>     <C>      <C>       <C> 
        Operating revenues     $ 81    $ 86     $292    $282     $548      $493
        Cost of gas sold         45      49      187     172      361       300
                               ----    ----     ----    ----     ----      ----
           Gas gross margin    $ 36    $ 37     $105    $110     $187      $193
                               ====    ====     ====    ====     ====      ====
</TABLE>

     Variations in gas gross margin are the result of changes in revenues due to
price and sales  volume  variances.  MidAmerican  has been allowed to recover in
revenues  the cost of gas sold from most of its gas  utility  customers  through
purchase gas adjustment clauses (PGAs). Variations in revenues collected through
the PGAs,  reflecting  changes in the cost of gas per unit and volumes  sold, do
not affect gross margin or net income.

                                      -20-

<PAGE>


     Gas gross  margin for the six  months  ended June 30,  1997,  decreased  $5
million  compared  to the 1996  six-month  period due  primarily  to warmer 1997
weather.  Weather in the first quarter of 1997 was milder than normal  resulting
in a $1 million  decrease in gas gross  margin  while  weather in the 1996 first
quarter was colder than  normal,  contributing  $2 million to the gas margin for
that period. Retail sales of natural gas decreased 8% compared to the six months
ended June 30, 1996.

     Gas gross margin  decreased $6 million for the twelve months ended June 30,
1997,  compared to the 1996  period.  Retail  sales of natural gas  decreased 8%
compared to twelve months ended June 30, 1996.  The decrease is due primarily to
the impact of weather.  In addition,  revenues  decreased  due to a reduction of
non-sales related revenues.

UTILITY OPERATING EXPENSES

     Utility other operating  expenses increased for three months and six months
ended June 30,  1997,  compared to the 1996  periods due in part to increases of
$2.0 million and $4.7  million,  respectively,  in  operating  costs at the Quad
Cities  Nuclear  Station (Quad Cities  Station).  In addition,  the 1997 periods
reflect increases in legal and consulting services fees,  uncollectible accounts
expense,  marketing  expenses,   employee  incentive  compensation  and  various
operations  expenses.  The decrease in utility other operating  expenses for the
1997 twelve  months ended  period was due  primarily to costs in the 1996 twelve
months ended period of the restructuring  plan discussed under "Earnings" in the
Results  of  Operations  section.  In  addition,  the 1997  twelve-month  period
includes a full year of cost savings  resulting  from the merger.  The decreases
were  partially  offset by  increases  in legal and  consulting  services  fees,
uncollectible   accounts  expense,   marketing   expenses  and  amortization  of
previously deferred energy efficiency costs.

     Maintenance  expenses  decreased  for three  months  ended  June 30,  1997,
compared  to the 1996  three-month  period  due to the  timing  of  power  plant
maintenance.  Maintenance  expenses increased for the six-month and twelve-month
1997 periods compared to the respective 1996 periods.  The timing of power plant
maintenance and increased  nuclear  maintenance  costs accounted for much of the
variation between the periods. For the 1997 six-month period,  maintenance costs
at the Quad Cities Station  increased $2.5 million  compared to the 1996 period.
For the twelve  months ended June 30  comparison,  maintenance  expenses for the
Quad Cities Station increased $4.9 million.  Steam power  maintenance  increased
$6.1 million for the twelve-month  comparison,  but was offset by a $6.2 million
reduction  from an  adjustment  in the 1996  fourth  quarter to align  inventory
accounting of predecessor companies.

     Based on information currently available,  MidAmerican expects 1997 nuclear
operations  and  maintenance  expenses to be $11-15 million above the 1996 level
due in part to scheduled  outage costs and other  activities  at the Quad Cities
Station and Cooper Nuclear Station  (Cooper).  MidAmerican is a 25% owner of the
Quad Cities  Station  and  purchases  50% of the output of Cooper  under a power
sales contract.  MidAmerican  does not operate either of the facilities.  Actual
nuclear operations and maintenance  expenses could differ significantly from the
expected  level  due to,  but not  limited  to,  unplanned  outages,  additional
maintenance needs or regulatory intervention.


                                      -21-

<PAGE>

NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES

Holdings:
---------

     Revenues of MidAmerican  Capital and Midwest  Capital  increased a total of
$8.6 million,  $77.8 million and $178.7 million for the  three-month,  six-month
and  twelve-month  periods ended June 30, 1997,  relative to the comparable 1996
periods.  The  increase  was due  primarily  to  respective  increases  of $10.4
million,  $77.7  million,  and  $175.2  million in  revenues  from  natural  gas
marketing  subsidiaries,  one of which did not exist in 1995.  Sales volumes for
the natural gas marketing  firms  increased 5 million  MMBtu's (43%), 27 million
MMBtu's (100%) and 68 million MMBtu's (157%) for the 1997 three,  six and twelve
months ended  periods  compared to the 1996  periods.  In addition,  the average
price of natural gas increased for the 1997 six-month and  twelve-month  periods
compared to the 1996 levels.

     Cost of sales includes  expenses  directly related to sales of natural gas.
Increases in gas sales volumes was the primary cause of the increase in the cost
of sales for each 1997 period compared to the 1996 periods.

     While sales volumes for the  nonregulated  natural gas businesses have been
increasing,  average margins per unit (total price less cost of gas) on sales of
natural gas decreased in the 1997 six-month and twelve-month periods compared to
the 1996 periods due in part to increased competition in the industry.  Compared
to the 1996  periods,  total  gross  margin on  nonregulated  natural  gas sales
increased $1.6 million for the  three-months  ended June 30, 1997, and decreased
$2.7 million for the twelve-month  period.  Total gross margin was unchanged for
the comparable six-month periods.

NON-OPERATING INCOME AND INTEREST EXPENSE

MidAmerican:
------------

     Other, Net -

     The three-month  period ended June 30, 1997,  reflects a 1997 award of $1.7
million  in  pre-tax  income  for  successful  performance  under  MidAmerican's
incentive gas procurement plan during the May to October 1996 period.

     In the first quarter of 1996,  MidAmerican  recorded a $2.2 million reserve
for a dispute with a vendor.  Following successful  resolution of the dispute in
the fourth  quarter of 1996,  MidAmerican  reversed  the reserve and recorded an
initial  pre-tax  gain of $3.2  million on its sale of the  related  storage gas
supplies.  MidAmerican  reflected an additional  $0.8 million gain in the second
quarter of 1997 after receiving  favorable treatment on the transaction from the
Iowa Utilities Board (IUB).  The impact of these  transactions on the comparison
of Other, Net between the three, six and twelve months ended June 30 periods was
an increase to the 1997  periods  over the 1996  periods of $0.8  million,  $3.0
million and $8.4 million, respectively.

     The  twelve-month  comparison  is also  affected by $2.7 million of pre-tax
income  recorded  in the  fourth  quarter  of 1996  as a  result  of  successful
performance  under the incentive gas  procurement  program  during the 1995-1996
heating season.  Other, Net for the 1997 twelve-month period was reduced by $8.7
million  for costs  incurred  by  MidAmerican  for its  merger  proposal  to IES
Industries Inc. Merger  transaction  costs related to MidAmerican's  1995 merger
reduced Other, Net by $3.9 million for the twelve months ended June 30, 1996.


                                      -22-

<PAGE>



     Interest Charges -

     A decrease in the average amount of commercial paper  outstanding  compared
to the 1996 periods resulted in a decrease in related other interest expense for
the 1997 periods.  Interest  expense  related to IRS  settlements  in the second
quarter  of 1997  resulted  in higher  expense  for that  period  and offset the
decreases  in  commercial   paper   interest   expense  for  the  six-month  and
twelve-month periods.

Holdings:
---------

     Realized Gains and Losses on Securities, Net -

     Net realized  gains on  securities  decreased  for the 1997  six-month  and
twelve-month  periods compared to the 1996 periods.  During the first quarter of
1996,  MidAmerican  Capital  began  liquidation  of certain  common  equity fund
holdings,  realizing  gains on such sales.  Losses on continued  liquidation  of
common equity fund holdings and managed  preferred stock  portfolios in the last
six months of 1996  resulted in a net loss on  securities  for the twelve months
ended June 30, 1997.

     Other, Net -

     As  discussed  in the  "Earnings"  section at the  beginning  of Results of
Operations,  write-downs of nonregulated  investments  decreased  Other,  Net by
$15.6  million and $18.0  million for the 1997 and 1996 twelve months ended June
30 periods,  respectively.  The $18.0 million includes a $3.0 million write-down
in December  1995 of a Des Moines  office  building.  The carrying  value of the
property  was  previously  written  down by $5.8 million in 1992 to reflect then
anticipated  market  values.  In the  third  quarter  of 1996,  Midwest  Capital
recorded a $1.8 million  pre-tax gain on the sale of the  building.  Each of the
period comparisons was also affected by reductions in the 1997 periods of income
from equity investments due to liquidation activity discussed above.

INCOME TAXES

Holdings:
---------

     During  the second  quarter of 1997,  the  Company  contributed  part of an
appreciated  common stock  investment to its tax exempt  foundation and realized
$2.9 million of tax benefit.


                                      -23-

<PAGE>



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

     The Company 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.

     For the  first six  months of 1997,  Holdings  had net cash  provided  from
operating  activities  of $190  million  compared  to $189  million for the same
period in 1996.  MidAmerican's  net cash provided from operating  activities was
$163 million for the first six months of 1997 and $173 million for the first six
months of 1996.

INVESTING ACTIVITIES AND PLANS

MidAmerican:
------------

     MidAmerican's   primary   need  for   capital   is   utility   construction
expenditures.  Utility construction expenditures,  including allowance for funds
used during construction (AFUDC), Quad Cities Station nuclear fuel purchases and
Cooper  capital  improvements,  were $64 million for the first half of 1997. All
such expenditures were met with cash generated from utility  operations,  net of
dividends.

     Forecasted  utility  construction  expenditures  for 1997 are $200  million
including  AFUDC.   Capital   expenditures   needs  are  reviewed  regularly  by
MidAmerican's  management  and may  change  significantly  as a  result  of such
reviews. For the years 1997 through 2001, MidAmerican forecasts $840 million for
utility  construction  expenditures.  MidAmerican  presently  expects  that  all
utility  construction  expenditures  for 1997 through 2001 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.

     Operators of a nuclear  facility are required to set aside funds to provide
for costs of future  decommissioning  of their  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  expects to
contribute  approximately  $47 million during the period 1997 through 2001 to an
external trust established for the investment of funds for  decommissioning  the
Quad  Cities  Station.  Currently,  the  funds  are  invested  predominately  in
investment  grade  municipal  and U.S.  Treasury  bonds.  In  1997,  MidAmerican
directed  the  trust to begin  investing  a  portion  of the  funds in  domestic
corporate  debt and common  equity  securities.  In  addition,  a portion of the
payments  made  under a power  purchase  contract  with  Nebraska  Public  Power
District (NPPD) are for  decommissioning  funding related to Cooper.  The Cooper
costs are reflected in Other Operating  Expenses in the Consolidated  Statements
of Income. Based on NPPD estimates, MidAmerican expects to pay approximately $57
million to NPPD for Cooper  decommissioning during the period 1997 through 2001.
NPPD  invests the funds  predominantly  in U.S.  Treasury  Bonds.  MidAmerican'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.  See
Part II, Item 1 - Legal  Proceedings for a discussion of a lawsuit filed by NPPD
seeking a declaration of MidAmerican's rights and obligations in connection with
Cooper nuclear  decommissioning  funding.  MidAmerican  currently  recovers Quad
Cities Station decommissioning costs charged to Illinois customers

                                      -24-

<PAGE>



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

Holdings:
---------

     Capital  expenditures of nonregulated  subsidiaries were $7 million for the
first six months of 1997.  Capital  expenditures  of  nonregulated  subsidiaries
depend  primarily upon the  availability  of suitable  investment  opportunities
which  meet  the  Company's  objectives.   The  Company  continues  to  evaluate
nonstrategic,  nonregulated investments and may redeploy certain assets in 1997.
External  financing  may  also be  used  to  provide  for  nonregulated  capital
expenditures.

     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 lines  Purchase of  Securities  and Proceeds from Sale of Securities
consist primarily of the gross amounts of these activities,  including  realized
gains and losses on investments in marketable securities.

     MidAmerican  Capital has received  approximately  $28 million from sales of
its  venture  capital  funds.  Most of the  proceeds  of these  sales  have been
transferred  to Holdings by way of a dividend for use in the  repurchase  of the
Company's common stock.

FINANCING ACTIVITIES, PLANS AND AVAILABILITY

MidAmerican:
------------

     MidAmerican  currently has  authority  from the Federal  Energy  Regulatory
Commission  (FERC) to issue  short-term debt in the form of commercial paper and
bank notes aggregating $400 million. As of June 30, 1997, MidAmerican had a $250
million revolving credit facility  agreement and a $10 million line of credit to
provide short-term  financing for utility operations.  MidAmerican's  commercial
paper borrowings,  which totaled $144 million at June 30, 1997, are supported by
the revolving  credit  facility and the line of credit.  MidAmerican  also has a
revolving  credit  facility  which is  dedicated  to provide  liquidity  for its
obligations  under   outstanding   pollution  control  revenue  bonds  that  are
periodically remarketed.

     During  1996,  MidAmerican  redeemed  all shares of its  $1.7375  Series of
preferred securities. In October 1996, MidAmerican reacquired $28 million of its
6.95% Series first  mortgage bonds due 2025 and $3.5 million of its 7.45% Series
first mortgage bonds due 2023. In December 1996, MidAmerican issued $103 million
of 7.98% Series subordinated debt debentures to a subsidiary  statutory business
trust which in turn issued $100 million of 7.98%  Series A redeemable  preferred
securities.  MidAmerican  also  issued in December  1996 $100  million of 6 1/2%
Medium-Term  Notes due 2001.  Proceeds from these financings were used to redeem
all $40 million of MidAmerican's  8.15% Series first mortgage bonds due 2001 and
the remaining  $45.8 million of $1.7375 Series  preferred  securities  mentioned
above.  The  balance  of the  proceeds  was  used  to  reduce  commercial  paper
outstanding.

     During the first half of 1997,  MidAmerican  repurchased  $36.4  million of
first mortgage bonds with annual interest rates from 6.95% to 7.70%.



                                      -25-

<PAGE>



     MidAmerican  currently has regulatory authority to issue an additional $300
million of preferred  securities and long-term debt,  including issues under its
medium-term  note  program.  It is  management's  intent  to  refinance  certain
MidAmerican  debt  securities  with  additional  issuances of unsecured debt and
preferred securities of a subsidiary trust as market conditions allow.

     As of June  30,  1997,  MidAmerican  had $423  million  of  long-term  debt
maturities and sinking fund requirements for 1997 through 2001.

Credit Ratings -

     MidAmerican's  access  to  external  capital  and its cost of  capital  are
influenced by the credit ratings of its securities. MidAmerican's credit ratings
as of August 1, 1997, are shown in the table below. The ratings reflect only the
views of such rating agencies, and each rating should be evaluated independently
of  any  other  rating.  Generally,   rating  agencies  base  their  ratings  on
information  furnished  to them by the  issuing  company  and on  investigation,
studies and assumptions by the rating  agencies.  There is no assurance that any
particular rating will continue for any given period of time or that it will not
be  changed or  withdrawn  entirely  if in the  judgment  of the  rating  agency
circumstances so warrant.  Such ratings are not a recommendation to buy, sell or
hold securities.

                                          Moody's
                                          Investors                  Standard
                                           Service                   & Poor's
                                          ---------                  --------

         Mortgage Bonds                        A2                       A+
         Unsecured Medium-Term Notes           A3                       A
         Preferred Stocks                      a3                       A
         Commercial Paper                      P-1                      A-1

     The  following is a summary of the meanings of the ratings  shown above and
the relative rank of  MidAmerican's  rating within each agency's  classification
system.

     Moody's top four bond ratings (Aaa, Aa, A and Baa) are generally considered
"investment  grade."  Obligations  which are rated "A"  possess  many  favorable
investment  attributes  and are  considered  as upper medium grade  obligations.
Factors giving  security to principal and interest are  considered  adequate but
elements may be present which suggest a susceptibility to impairment sometime in
the future.  A numerical  modifier ranks the security within the category with a
"1" indicating the high end, a "2" indicating the mid-range and a "3" indicating
the low end of the category. Standard & Poor's top four bond ratings (AAA, AA, A
and BBB) are considered "investment grade". Debt rated "A" has a strong capacity
to pay interest and repay principal  although it is somewhat more susceptible to
the adverse effects of changes in economic  conditions than debt in higher rated
categories. Standard & Poor's may use a plus (+) or minus (-) sign after ratings
to designate the relative position of a credit within the rating category.

     Ratings of preferred stocks are an indication of a company's ability to pay
the  preferred  dividend and any sinking  fund  obligations  on a timely  basis.
Moody's top four  preferred  stock  ratings  (aaa,  aa, a and baa) are generally
considered  "investment grade".  Moody's "a" rating is considered to be an upper
medium grade preferred  stock.  Earnings and asset protection are expected to be
maintained at adequate levels in the

                                      -26-

<PAGE>



foreseeable future. Standard & Poor's top four preferred stock ratings (AAA, AA,
A and BBB) are  considered  "investment  grade".  Standard  & Poor's  "A" rating
indicates adequate earnings and asset protection.

     Moody's top three commercial paper ratings (P-1, P-2 and P-3) are generally
considered  "investment grade".  Issuers rated "P-1" have a superior ability for
repayment of senior  short-term debt obligations and repayment  ability is often
evidenced by a  conservative  structure,  broad margins in earnings  coverage of
fixed  financial  charges and well  established  access to a range of  financial
markets and assured sources of alternate liquidity. Standard & Poor's commercial
paper ratings are a current  assessment of the  likelihood of timely  payment of
debt having an original  maturity less than 365 days.  The top three  Standard &
Poor's  commercial  paper ratings (A-1, A-2 and A-3) are considered  "investment
grade".  Issues rated "A-1" indicate that the degree of safety  regarding timely
payment is either  overwhelming  or very  strong.  Those  issues  determined  to
possess overwhelming safety are denoted with a plus (+) sign designation.

Preferred Dividends -

     Preferred  dividends  include net gains or losses on the  reacquisition  of
MidAmerican  preferred shares.  Net losses on reacquisitions  totaled zero, $1.4
million and $2.8 million for the 1997  three-month,  six-month and  twelve-month
periods,  respectively,  and $0.1 million, $0.3 million and $0.2 million for the
comparable 1996 periods.  Excluding these losses,  preferred dividends increased
for the 1997 periods  compared to the 1996 periods due primarily to the increase
in preferred stock outstanding.

Holdings:
---------

     As of June 30,  1997,  Holdings  had lines of credit  totaling  $50 million
available to provide for short-term financing needs.

     In addition,  Holdings has the  necessary  authority to issue shares of its
common stock through its Shareholder  Options Plan (a dividend  reinvestment and
stock  purchase  plan).  Since July 1, 1995,  the  Company  has used open market
purchases of its common stock  rather than  original  issue shares to meet share
obligations  under its Employee Stock Purchase Plan and the Shareholder  Options
Plan.  Holdings  currently plans to continue using open market purchases to meet
share obligations under these plans.

     In March 1997, Holdings announced its plan to repurchase up to $200 million
of the  Company's  common  stock.  The Company plans to purchase the shares from
time to time as market  conditions  warrant,  with the intent of completing  the
entire repurchase program by December 31, 1998. As of June 30, 1997, the Company
had repurchased approximately 2.7 million shares for $46.6 million.

     On July  21,  1997,  Holdings'  board of  directors  declared  a  quarterly
dividend on common  shares of $0.30 per share  payable  September  1, 1997.  The
dividend represents an annual rate of $1.20 per share.

     As of June 30, 1997,  MidAmerican  Capital had unsecured  revolving  credit
facilities in the amount of $114 million.  Currently  MidAmerican  Capital has a
zero balance  outstanding under these facilities.  MidAmerican  Capital has $142
million of long-term  debt  maturities  and sinking fund  requirements  for 1997
through 2001, of which $30 million is in 1997.

     Midwest   Capital   currently  has  a  $25  million  line  of  credit  with
MidAmerican, of which $5 million was outstanding at June 30, 1997.

                                      -27-

<PAGE>



OPERATING ACTIVITIES AND OTHER MATTERS

     The Company continues to adjust its strategies and operations for
changes it expects in the electric utility industry. The merger that resulted in
MidAmerican and the subsequent reorganization of utility operations were some of
the first  steps taken to better  position  the  Company  for  competition.  The
following  discussion  addresses some of the changes  affecting the industry and
actions the Company is taking to better position itself as the industry evolves.

Holdings:
---------

     During 1996, the Company began to reevaluate its nonregulated  investments.
Through the evaluation process,  management will determine which investments fit
the Company's objectives and which should be divested. The method of divestiture
could  include  alternatives  from  finding an  immediate  buyer to holding  the
investment  until  maturity.  In the  twelve  months  ended June 30,  1997,  the
evaluation of nonregulated  investments  resulted in a net reduction in earnings
of  approximately  $21  million  due  primarily  to  the  loss  on  disposal  of
discontinued  nonregulated  operations  and  the  writedowns  discussed  in  the
"Earnings" section of this discussion. The process will continue for the next 12
to 18 months and could  result in  additional  losses if the Company  decides to
divest of investments for less than carrying value.

MidAmerican:
------------

     Regulatory Evolution and Competition -

     MidAmerican  is  subject  to  regulation  by  several  utility   regulatory
agencies. The operating environment and the recoverability of costs from utility
customers  are  significantly  influenced by the  regulation of those  agencies.
MidAmerican supports changes in the electric utility industry that will create a
more  competitive  environment  for the  entire  electric  industry,  as long as
appropriate  transitional  steps  are in  place  to  accommodate  moving  from a
regulated  cost-of-service  industry to a competitive  industry.  Although these
anticipated changes may create  opportunities,  they will also create additional
challenges and risks for utilities.

     MidAmerican  is taking steps to address the future  introduction  of retail
competition  in the  electric  utility  industry.  MidAmerican  is, and will be,
negotiating  long-term  contracts with its industrial and commercial  customers,
the customer classes currently mostly likely to have alternate supplier choices.
In March  1997,  MidAmerican  initiated  an  advertising  campaign  designed  to
establish MidAmerican's brand identity within MidAmerican's service territory. A
distinctive  brand identity will become  increasingly  important as the electric
industry is restructured to allow customer choice.

     In  December  1996,  MidAmerican  was  selected  from  among  20  potential
suppliers to provide electric service for the Resale Power Group of Iowa (RPGI).
The RPGI includes 27 municipal  utilities,  a rural electric  cooperative and an
investor-owned utility. Members of the RPGI serve nearly 27,000 retail customers
and purchase  approximately  500,000  megawatt  hours  annually.  The  five-year
contract with RPGI is effective  January 1, 1999.  MidAmerican  expects to offer
electric system maintenance  services,  energy efficiency  services and economic
development  assistance to the RPGI  utilities.  None of the RPGI  utilities are
presently  customers  of  MidAmerican.  This  opportunity  provided  MidAmerican
valuable experience in the evolving competitive electric market.



                                      -28-

<PAGE>



     MidAmerican  is  a  member  of  the  Illinois   Coalition  for  Responsible
Electricity Choice (the Coalition). The Coalition has produced draft legislation
(the  Proposal) that would  restructure  Illinois'  electric  industry and allow
Illinois  customers to choose their electric service  provider.  The Proposal is
designed to, among other things, balance tax and regulatory burdens;  transition
the industry to a competitive  electric  marketplace in phases between the years
2000 and 2005; stabilize or reduce tariffed electric rates; provide for recovery
of prior mandated  investments of the utilities;  and increase  flexibility  for
utilities  while  providing for oversight of reliability  and safety by the ICC.
The Proposal and others are being addressed by the Illinois legislature in 1997,
and MidAmerican is an active participant in the legislative subcommittee that is
developing  a single  bill.  The  Illinois  legislature  previously  passed laws
allowing the filing of  alternative  pricing  plans by utilities  and  increased
flexibility for agreements with industrial customers.

     In Iowa, no  legislation  has yet been  introduced  to allow  generation or
retail service  competition.  MidAmerican expects legislation on competition and
utility  industry  restructuring  may be introduced in the 1998 Iowa legislative
session.  MidAmerican  is  preparing  its  own  legislative  proposal  regarding
electric industry restructuring to be offered at the appropriate time.

     In 1996,  the IUB  directed  MidAmerican  and another  Iowa  investor-owned
utility to sign  alternative  energy  contracts by March 11,  1997.  MidAmerican
reached agreement with Zond Development  Corporation to supply  MidAmerican with
wind-generated  energy.  The agreement  received FERC and IUB acceptance in July
1997.  Zond is required to begin  supplying  energy to MidAmerican  within three
years after the IUB and FERC accepted the agreement.  Energy  received under the
20-year contract with Zond,  together with 10 MW of electricity already received
from other alternate energy producers,  will fulfill  MidAmerican's  requirement
under Iowa law to purchase 55 MW of  electricity  generated by alternate  energy
sources in Iowa.  The cost of energy for this purchase  will be flowed  directly
through to retail  customers on a monthly basis.  Due to the declining  per-unit
cost  over the life of the  contract,  the  impact  on the  Company's  financial
position or results of operations will be minimal.

     In April 1996,  the FERC issued Order Nos. 888 and 889 which require public
utilities and other transmission  providers and users to provide other companies
the same transmission access,  service and pricing that they provide themselves.
In compliance with Order 888, which was effective July 9, 1996,  MidAmerican has
filed a pro forma open access  transmission  tariff and is  currently  operating
under it. In May 1997,  MidAmerican  filed revisions to the tariff in accordance
with Order No. 888-A which was issued in March 1997.  In  accordance  with Order
889, which was effective January 3, 1997, MidAmerican has separated its electric
wholesale marketing and transmission operation functions.  Order 889 establishes
standards  of  conduct  for this  functional  separation  and  further  requires
transmission providers such as MidAmerican to either create or participate in an
Open Access Same Time  Information  System  (OASIS).  MidAmerican is a long-time
member  of  the  Mid-Continent  Area  Power  Pool  (MAPP)  and  has  elected  to
participate in the MAPP OASIS. These  developments  assure that all transmission
customers  of  MidAmerican,  including  MidAmerican's  own  wholesale  marketing
function,  can obtain transmission  information at the same time and can request
service on the same basis.

     A possible  consequence  of  competition  in the  utility  industry is that
Statement of Financial  Accounting  Standards (SFAS) 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.  MidAmerican's  electric  and gas  utility  operations  are  currently
subject to the  provisions  of SFAS 71, but its  applicability  is  periodically
reexamined. If a portion of MidAmerican's utility operations no longer meets the
criteria of SFAS 71,

                                      -29-

<PAGE>



MidAmerican would be required to eliminate from its balance sheet the assets and
liabilities  related  to those  operations  that  resulted  from  actions of its
regulators.  Although  the  amount of such an  elimination  would  depend on the
specific  circumstances,  a material  adjustment to earnings in the  appropriate
period  could  result from the  discontinuance  of SFAS 71. As of June 30, 1997,
MidAmerican had $363 million of regulatory  assets in its  Consolidated  Balance
Sheet.

     Energy Efficiency -

     On July 1, 1996, new legislation in Iowa became effective  enhancing energy
efficiency program flexibility, eliminating mandatory spending levels for energy
efficiency  programs  and  allowing  more timely  recovery of energy  efficiency
expenditures as determined by the IUB. Previously, electric and gas utilities in
Iowa were required to spend  approximately 2% and 1.5%,  respectively,  of their
annual Iowa jurisdictional  revenues on energy efficiency  activities.  On April
24, 1997, the IUB issued an order adopting final rules, effective June 25, 1997,
for  energy   efficiency  cost  recovery  and  prudence  review  under  the  new
legislation. MidAmerican plans to file in the third quarter of 1997 for approval
to accelerate  recovery of deferred and current  energy  efficiency  costs.  The
Consolidated  Balance  Sheet as of June  30,  1997,  included  $113  million  of
deferred energy efficiency  costs. Of that total,  approximately $19 million has
been  approved  for  collection  from  customers.   Currently,   MidAmerican  is
collecting  approximately  $14.3 million  annually  related to those costs.  The
remaining $94 million of deferred  energy  efficiency  costs will be included in
future energy efficiency cost recovery filings.

     Rate Matters -

     On June 4, 1996, MidAmerican filed an electric pricing proposal in Iowa and
Illinois.  The proposal was later withdrawn in Illinois following negotiation of
a settlement in a related Illinois proceeding. The settlement resulted in annual
reductions of $13.1 million and $2.4 million,  effective  November 3, 1996,  and
June 1, 1997, respectively.

     On June 27, 1997, the IUB issued an order in a consolidated rate
proceeding  involving  MidAmerican's  pricing  proposal and a filing by the Iowa
Office of Consumer  Advocate  (OCA).  The order approved a March 1997 settlement
agreement between MidAmerican,  the OCA and other parties to the proceeding. The
agreement  includes  a  number  of  characteristics  of  MidAmerican's   pricing
proposal.  Prices for residential  customers were reduced $8.5 million  annually
and $10.0  million  annually,  effective  November 1, 1996,  and July 11,  1997,
respectively, and will be reduced an additional $5.0 million annually on June 1,
1998,  for a total annual  decrease of $23.5  million.  Rates for commercial and
industrial  customers will be reduced a total of $10 million annually by June 1,
1998, through pilot projects, negotiated rates with individual customers and, if
needed, a base rate reduction  effective June 1, 1998. The agreement  includes a
tracking  mechanism  to  currently  recover  the  cost of  capital  improvements
required by the Cooper  Nuclear  Station Power Purchase  Contract.  The tracking
mechanism will offset approximately $9 million of these reductions.

     In addition,  the agreement accepts MidAmerican's proposal to eliminate the
energy  adjustment clause (EAC) which was the mechanism through which fuel costs
were collected  from Iowa  customers  prior to July 11, 1997. The EAC flowed the
cost of fuel to customers on a current  basis,  and thus,  fuel costs had little
impact on net income. Prospectively,  base rates for Iowa customers will include
a factor for  recovery of a  representative  level of fuel costs.  To the extent
actual fuel costs vary from that factor,  pre-tax earnings will be impacted. The
fuel cost factor will be reviewed in February 1999 and adjusted prospectively if
actual fuel costs vary 15% above or below the factor included in base rates.

                                      -30-

<PAGE>



     Under the  agreement,  if  MidAmerican's  annual  return  on common  equity
exceeds 12%, then an equal sharing between customers and shareholders begins; if
it  exceeds  14%,  then  two-thirds  of  MidAmerican's  share  will be used  for
accelerated  recovery  of  certain  regulatory  assets.  The  agreement  permits
MidAmerican  to file for  increased  rates if 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 provides that  MidAmerican  will develop a pilot program
for a market access service which allows customers with at least 4 MW of load to
choose energy suppliers. The pilot program, which is subject to IUB approval, is
limited to 60 MW of  participation  the first year and can be  expanded by 15 MW
annually  until the conclusion of the program.  Any loss of revenues  associated
with  the  pilot  program  will be  considered  part of the $10  million  annual
reduction for commercial and industrial  customers but may not be recovered from
other customer classes. The program is expected to be filed by the fall of 1997.

     In April 1997, MidAmerican refunded  approximately $2.4 million,  including
interest, to Iowa customers for revenues between August 1, 1996, and October 31,
1996, that were in excess of the levels provided for in the settlement.

     Environmental Matters -

     The  United  States   Environmental   Protection  Agency  (EPA)  and  state
environmental  agencies have determined that  contaminated  wastes  remaining at
certain  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.

     The Company is evaluating 26 properties  which were, at one time,  sites of
gas  manufacturing  plants in which it may be a  potentially  responsible  party
(PRP). The purpose of these  evaluations is to determine whether waste materials
are present,  whether such materials constitute an environmental or health risk,
and  whether  the  Company  has any  responsibility  for  remedial  action.  The
Company's present estimate of probable  remediation costs for these sites is $23
million.  This estimate has been recorded as a liability and a regulatory  asset
for future recovery through the regulatory  process.  Refer to Note (B) of Notes
for further  discussion of the  Company's  environmental  activities  related to
manufactured gas plant sites and cost recovery.

     Although the timing of potential  incurred  costs and recovery of such cost
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 the Company's financial position or results of operations.

     The U.S. EPA has recently promulgated  revisions to the ambient air quality
standards for ozone and particulate  matter.  The impact of the new standards on
MidAmerican  will depend on  implementation  of the applicable  regulations and,
ultimately,  the  attainment  status  of  the  areas  surrounding  MidAmerican's
operations.  MidAmerican  will continue to evaluate the potential  impact of the
new regulations, which is currently unknown.

     Other Matters -

     MidAmerican has initiated an incentive  compensation  plan which covers all
of its salaried  employees.  One goal in the plan is achievement of a designated
threshold  earnings target.  The 1997 earnings target,  which was established by
management, results in a 12.9% return on average common equity for MidAmerican.

                                      -31-

<PAGE>



ACCOUNTING ISSUES

     The staff of the Securities and Exchange  Commission has questioned certain
of the current  accounting  practices of the electric utility industry regarding
the recognition, measurement and classification of nuclear decommissioning costs
in the financial statements. In response to these questions, the FASB has issued
an Exposure  Draft,  "Accounting for Certain  Liabilities  Related to Closure or
Removal of Long-Lived  Assets,"  which  addresses the accounting for closure and
removal costs,  including  decommissioning  of nuclear power plants.  If current
electric  utility industry  accounting  practices for such  decommissioning  are
changed, the annual provision for decommissioning could increase relative to the
current  level,  and the  total  estimated  cost  for  decommissioning  could be
recorded as a liability  with  recognition of an increase in the cost of related
nuclear power plant. Due to the continuing  evolution of the exposure draft, the
Company is uncertain as to the impact on its results of operations and financial
position.

     The Financial  Accounting  Standards Board has issued SFAS No. 128 and SFAS
No. 130. SFAS 128, which  addresses the  calculation  of earnings per share,  is
effective  for periods  ending  after  December  15,  1997.  The standard is not
expected to have a material effect on the Company's  calculation of earnings per
share.  SFAS 130, which is effective for fiscal years  beginning  after December
15, 1997,  requires that all items  required to be recognized  under  accounting
standards  as changes in equity  during a period,  except those  resulting  from
investments by owners and  distributions  to owners,  be reported in a financial
statement  that is displayed  with the same  prominence  as the other  financial
statements.  The  display  can be a  separate  statement  or an  addition  to an
existing  statement.  The material  components  of the  Company's  comprehensive
income will  include net income and the  aftertax  effect of changes in the fair
value of investments classified as available for resale.

                                      -32-

<PAGE>



PART II - OTHER INFORMATION

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

     The Company and its subsidiaries have no material legal proceedings  except
for the following:

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

     For information relating to the Company's Environmental Matters,  reference
is made to Part I, Note (B) of Notes to Consolidated Financial Statements.

Cooper Litigation I
-------------------

     On May 26, 1995, the Company filed a lawsuit naming  Nebraska  Public Power
District (NPPD) as defendant. The action is filed in the U.S. District Court for
the Southern District of Iowa and is identified as No. 4-95-CV-80356.  The legal
proceeding  is based upon a  long-term  power  purchase  agreement  between  the
Company and NPPD, pursuant to which the Company purchases one-half the output of
NPPD's Cooper Nuclear  Station  (Cooper) and pays one-half the cost of operating
Cooper.  NPPD,  in turn,  is obligated to operate the plant in an efficient  and
economical  manner  consistent  with good business and utility  practices and in
compliance  with the terms of its operating  license issued to it by the Nuclear
Regulatory  Commission  (NRC).  In 1993 and 1994, as a response to NPPD actions,
the NRC issued  numerous  notices of  violations  to NPPD;  as a result of these
violations  and other  safety  issues  identified  by the NRC and  NPPD,  Cooper
experienced  unplanned outages and outages were unduly extended.  NPPD's failure
to meet its  obligations  with respect to the  operation of Cooper  deprived the
Company of the  benefits it was entitled to under the power  purchase  contract,
causing the  Company to lose  profits and incur  increased  costs of  operation,
which damages the Company  seeks to collect from NPPD.  Similar  litigation  has
been filed  against  NPPD by the  Lincoln  Electric  System  (LES),  a municipal
utility serving the City of Lincoln,  Nebraska, and purchasing one-eighth of the
output of Cooper  pursuant to a similar power purchase  contract.  The LES legal
proceeding is pending in Nebraska state court.

     MidAmerican  and NPPD have now reached an  agreement  which will settle the
parties' disputes and resolve MidAmerican's claims without the need for a trial.
Under the settlement, MidAmerican and NPPD will attempt to negotiate a new power
purchase contract. If these discussions do not result in a new agreement between
the parties,  NPPD will make a cash payment to MidAmerican  and the parties will
amend the  existing  power  purchase  contract.  The  amendments  would  concern
operating standards and dispute resolution  procedures.  Either of these options
would cause the lawsuit to be dismissed.

Cooper Litigation II
--------------------

     On July 23, 1997,  NPPD filed a Complaint,  in the United  States  District
Court for the District of Nebraska,  naming  MidAmerican  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, NPPD
seeks a declaratory judgment in the following respects:  (1) that MidAmerican is
obligated to pay 50% of all costs and expenses  associated with  decommissioning
Cooper,  and that in the event NPPD continues to operate Cooper after expiration
of the power purchase agreement (September,  2004),  MidAmerican 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.

                                      -33-

<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------

     The Company held its 1997 Annual Meeting of Shareholders on April 23, 1997.
At the annual meeting,  shareholders elected the fifteen persons nominated.  The
results of the votes are as follows:


                                  For                   Against
                               ----------              ---------
Election of Directors:
Name -
John W. Aalfs                  78,590,416              1,827,813
S. J. Bright                   78,493,243              1,924,986
R. D. Christensen              78,502,387              1,915,842
R. E. Christiansen             78,477,618              1,940,611
J. W. Colloton                 78,350,627              2,067,602
F. S. Cottrell                 78,557,711              1,860,518
J. W. Eugster                  78,550,740              1,867,489
M. Foster, Jr.                 78,406,202              2,012,027
N. Gentry                      78,575,000              1,843,229
J. M. Hoak, Jr.                78,558,733              1,859,496
R. L. Lawson                   78,489,010              1,929,219
R. L. Peterson                 78,281,195              2,137,034
N. L. Seifert                  78,510,332              1,907,897
W. S. Tinsman                  78,608,931              1,809,298
L. L. Woodruff                 78,518,744              1,899,485




                                      -34-

<PAGE>



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

(a)      Exhibits

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

         Holdings

                  Exhibit  12.1 -  Computation  of ratios of  earnings  to fixed
                  charges and computation of ratios of earnings to fixed charges
                  plus preferred dividend requirements.

         MidAmerican

                  Exhibit  12.2 -  Computation  of ratios of  earnings  to fixed
                  charges  and  computations  of  ratios  of  earnings  to fixed
                  charges plus preferred dividend requirements.

         Exhibit 27 - Financial Data Schedules

(b)      Reports on Form 8-K

                  On April 4,  1997,  the  Company  filed a report  on Form 8-K,
         dated April 4, 1997,  regarding the announcement  that it had purchased
         more than 1.1 million  shares of common stock as part of its previously
         announced  stock  repurchase  program.  The  press  release  issued  in
         conjunction  with  the  announcement  was  filed as an  Exhibit  to the
         report.

                  On April 25,  1997,  Holdings  and  MidAmerican  filed a joint
         report  on  Form  8-K,  dated  April  23,  1997.  The  report  included
         information   regarding  a  change  in  the   registrants'   certifying
         accountant.


                                      -35-

<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 ENERGY HOLDINGS COMPANY
                                          MIDAMERICAN ENERGY COMPANY
                                                (Registrants)                   





Date  August 8, 1997                            P. G. Lindner
    ------------------        -------------------------------------------------
                                                P. G. Lindner
                              Senior Vice President and Chief Financial Officer





                                      -36-