SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant / /
Filed by a Party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12

CILCORP INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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[LOGO]

March 13, 1998

To Our Shareholders:

You are cordially invited to attend the Annual Meeting of Shareholders
of CILCORP Inc. which will be held at 300 Liberty Street, Peoria,
Illinois, on April 28, 1998 at 10:00 AM, Central Time. Detailed
information as to the business to be transacted at the meeting is
contained in the accompanying Notice of Annual Meeting and Proxy
Statement.

It is important that your shares be represented at the meeting. Please
complete, sign and date the enclosed Proxy and return it in the
envelope provided as soon as possible.

Your continued interest and cooperation are greatly appreciated.

Sincerely,

Robert O. Viets
President and Chief
Executive Officer

CILCORP INC.
300 HAMILTON BOULEVARD, SUITE 300
PEORIA, ILLINOIS 61602
NOTICE OF ANNUAL MEETING

March 13, 1998
Dear Shareholders:

The Annual Meeting of Shareholders of CILCORP Inc. will be held on Tuesday,
April 28, 1998 at 10:00 AM, Central Time, at 300 Liberty Street, Peoria,
Illinois 61602 for the following purposes:

1. To elect three members of the Board of Directors;

2. To transact such other business as may properly come before the meeting.

Shareholders of record at the close of business on February 20, 1998 are
entitled to vote at the meeting.

By Order of the Board of Directors,
John G. Sahn
Vice President, General Counsel and Secretary

IMPORTANT
It is important that your shares be represented at the meeting.
Please mark, sign, date and return the enclosed proxy promptly in
order that your shares will be voted.

PROXY STATEMENT

GENERAL

This statement is furnished in connection with a solicitation of proxies
by the Board of Directors of CILCORP Inc. (the "Company" or "CILCORP"), for use
at the Annual Meeting of Shareholders to be held on Tuesday, April 28, 1998 at
10:00 AM, Central Time, at 300 Liberty Street, Peoria, Illinois, and any
adjournment thereof. The executive offices of the Company are located at 300
Hamilton Boulevard, Suite 300, Peoria, Illinois 61602. The shares represented by
your proxy will be voted as directed therein if the proxy is duly executed and
returned prior to the meeting. If no choice has been specified, the persons
named in the proxy intend to vote for the election of the nominees listed
herein. You may revoke your proxy by a duly executed later proxy, or at any time
before it is exercised by written notice to the Secretary of the Company,
received prior to the time of the meeting, or orally at the meeting.

Shareholders of record participating in the Company's Investors Choice
Automatic Reinvestment and Stock Purchase Plan will receive one proxy for shares
held of record as well as shares held for that person's account under such Plan.
Shares in the account of an employee participating in the savings plans of the
Company's subsidiaries, Central Illinois Light Company ("CILCO") or QST
Enterprises Inc. ("QST"), will be voted in accordance with the employee's
instructions; or, if no instructions are given, pursuant to the trust agreements
pertaining to the plans.

The expense of the solicitation of proxies is being borne by the Company.
In addition to solicitation by mail, officers and regular employees of the
Company may solicit proxies either personally, or by telephone, e-mail or fax.
The Company will reimburse banks, brokers or other similar agents or fiduciaries
for forwarding proxy material to their principals, the beneficial owners of the
stock. The Company has arranged for D. F. King & Co., Inc., for a fee of
approximately $8,500, to assist in the solicitation of proxies. Such
solicitation may be made by mail, telephone, e-mail, fax or in person.

The annual report of the Company for the year ended December 31, 1997 is
being sent, along with the Notice of Annual Meeting, this Proxy Statement and
the accompanying Proxy, to all shareholders of record at the close of business
on February 20, 1998, which is the record date for the determination of
shareholders entitled to vote at the meeting. These items are to be first mailed
to shareholders on or about March 13, 1998.

VOTING SECURITIES AND PRINCIPAL HOLDERS

On February 20, 1998, the record date for the meeting, the outstanding
voting stock of the Company consisted of 13,610,680 shares of common stock, no
par value (the "common stock"). Each share of common stock entitles the holder
thereof to one vote

upon each matter coming before the meeting. Votes cast by proxy or in person at
the annual meeting will be tabulated by the election inspectors appointed for
the meeting who will determine whether or not a quorum is present. The election
inspectors will treat abstentions as shares that are present and entitled to
vote for purposes of determining the presence of a quorum but as unvoted for
purposes of determining the approval of any matter submitted to the shareholders
for a vote. If a broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with respect
to that matter.

As of March 3, 1998, the following information, regarding beneficial
ownership of the Company's equity securities, is furnished with respect to each
person or group of persons acting together who, as of such date, is shown on the
Company's stock records to be the registered owner of more than 5% of any class
of the Company's voting securities and no independent inquiry has been made to
determine whether any shareholder is the beneficial owner of shares not
registered in the name of such shareholder or whether any shareholder is the
beneficial owner of shares not registered in the name of such shareholder or
whether any shareholder is a member of a shareholder group.

AMOUNT AND
NATURE OF
CLASS OF BENEFICIAL PERCENT OF
STOCK NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
- ----------- --------------------------------------- ------------ -----------

Common FMR Corp. 819,700(1) 6.02%
82 Devonshire Street
Boston, MA 02109

- -------

(1) According to schedule 13G dated February 14, 1998, filed by FMR Corp., they
have sole voting power regarding 147,000 shares and sole dispositive power
with respect to 819,700 shares.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth as of December 31, 1997 the beneficial
ownership of the Company's common stock (including ownership of stock in the
CILCO Employees' Savings Plan and the QST Enterprises Inc. Profit Sharing and
Savings Plan as of December 31, 1997) by all directors (including nominees for
director), the executive officers included in the Summary Compensation Table
herein, and all directors and officers as a group. The following table also sets
forth as of January 1, 1998 the common stock units held by directors
participating in the Company's and CILCO's Deferred Compensation Stock Plans.

COMMON STOCK
------------------------
NAME OF BENEFICIAL OWNER SHARES(1) UNITS(2)
- ------------------------------------------------------------------ ----------- -----------

Marcus Alexis 1,100 3,838
John R. Brazil 400 52
Willard Bunn III 1,200 1,544
Jerry D. Caulder 100
Homer J. Holland 500 93
H. Safford Peacock 1,000 7,301
Katherine E. Smith 958 4,635
Richard N. Ullman 1,646 5,501
Robert O. Viets 10,843 7,601
Murray M. Yeomans 1,250 7,058
J. Mark Elliott 801
William M. Shay 7,069
James F. Vergon 5,810
Thomas S. Romanowski 4,465
All directors and officers as a group 39,564 37,623

- -------

(1) In each case, the named individual or his spouse has sole voting and
investment power. The directors and officers individually and as a group own
less than one percent of the Company's common stock.

(2) Compensation deferred under the Deferred Compensation Stock Plans is
converted into units of common stock based upon the market price of such
stock on the trading date next following the date payment would have been
made to the director. Additional amounts are credited to the director's
account equal to common stock dividends paid, and are treated as
automatically reinvested in the Company's common stock.

1. ELECTION OF DIRECTORS

The Board of Directors consists of ten members, divided into three
classes, with members of each class serving a three-year term. At the 1998
Annual Meeting, the shareholders will elect three persons as directors with
terms continuing until the Annual Meeting of Shareholders in 2001 or until their
respective successors are elected and qualified. The remaining seven directors
will continue to serve as set forth below, with three directors having terms
expiring April 1999 and four directors having terms expiring April 2000. To be
elected a director, a nominee must receive the affirmative vote of a majority of
the Company's outstanding shares represented at the meeting and entitled to
vote. In a case where there are more nominees than vacancies, the nominees
receiving the highest number of votes will be elected. All of the nominees are
now directors of the Company and all have agreed to serve if elected. The
nominees and directors are listed below, together with biographical information.

The Board of Directors has no reason to believe that the nominees will not
be available, but in the event that a vacancy among the original nominees is
occasioned by death or any other reason prior to the meeting, the proxy will be
voted for a substitute nominee or nominees designated by the Board of Directors.

NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR THREE-YEAR TERMS EXPIRING APRIL 2001

WILLARD BUNN III
SENIOR VICE PRESIDENT AND MANAGING DIRECTOR IN [PHOTO1]
THE FINANCIAL SERVICES UNIT
ABN AMRO INCORPORATED, CHICAGO, ILLINOIS
Director of CILCORP since 1994
Member of Audit and Finance Committees
Mr. Bunn was born at Springfield, Illinois in 1943.
He graduated from Princeton University in 1966 with a
degree in history and received his master's degree in
business administration from The Darden School at the
University of Virginia in 1968. He was associated with
Chemical Bank from 1968 to 1978 serving in various
capacities, including vice president and group head of
domestic depository institutions. He joined Marine Bank of
Springfield in 1978 as an executive vice president and was
subsequently elected president in 1980 and chairman and
chief executive officer in 1989. In 1992, Mr. Bunn became
chairman and chief executive officer of Banc One Illinois
Corporation (which merged with Marine Bank). He retired
from these positions on December 31, 1994 and joined The
Chicago Corporation (which later merged to become ABN AMRO
Incorporated) on April 1, 1995. Mr. Bunn serves on the
boards of various local and state business and civic
organizations.

HOMER J. HOLLAND
PRESIDENT OF HOLLAND PARTNERS, INC. [PHOTO]
CHICAGO,
ILLINOIS
Director of CILCORP since 1994
Member of Compensation and Director Affairs Committees
Mr. Holland was born at Madison, Wisconsin in 1941.
He is a 1963 graduate of the U.S. Military Academy and
served in the U.S. Army from 1963 to 1971. He received
Masters of Science degrees in physics and electrical
engineering from Massachusetts Institute of Technology in
1967 and a Doctor of Business Administration degree from
George Washington University in 1972. Following military
service, he was associated with the First National Bank of
Chicago from 1971 to 1979, last serving as senior vice
president. He was president of Exchange National Bank of
Chicago from 1979 to 1983. Mr. Holland founded Holland
Partners, Inc. in 1983 and through this company acquired
control of six Illinois savings banks and one Texas savings
bank. He sold his banks in 1995 and 1996 and now
concentrates on investments in financial services and real
estate. He is a director of Lifeline Shelter Systems, Inc.,
Wisconsin Industrial Products Inc., First Financial
Training Services and the Institute for the International
Education of Students.

KATHERINE E. SMITH
GROUP EXECUTIVE [PHOTO]
DAIRY MANAGEMENT INC., CHICAGO, ILLINOIS
Director of CILCORP since 1985
Member of Audit and Director Affairs Committees
Ms. Smith was born at Chicago, Illinois in 1940. She
is a 1961 graduate of Oregon State University with a degree
in family and consumer science. She was named to her
current position in 1995. From 1982 to 1994, Ms. Smith was
vice president, consumer affairs, U. S. Grocery Products
Division of The Quaker Oats Company. She was formerly with
The Great Atlantic & Pacific Tea Company, Inc. from 1976 to
1982 as vice president, consumer affairs and marketing
services, and prior to that was associated with The
Pillsbury Company. She began her business career with
Southern California Gas Company, a division of Pacific
Lighting Corporation, where she advanced through various
positions related to customer services. Ms. Smith is active
in a number of professional and civic associations
including the American Association of Family & Consumer
Science. In addition, she is a trustee of the Oregon State
University Foundation.

MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING APRIL 1999

JOHN R. BRAZIL
PRESIDENT OF BRADLEY UNIVERSITY, PEORIA, ILLINOIS [PHOTO]
Director of CILCORP since 1993
Member of Audit and Director Affairs Committees
Dr. Brazil was born at Los Angeles, California in
1946. He received a bachelor's degree in history from
Stanford University in 1968 and a master's degree and Ph.D.
in American studies from Yale University in 1972 and 1975,
respectively. In 1980, he was a Fulbright senior scholar in
English and American studies at the University of Sydney,
Australia. Prior to joining Bradley University as president
in January 1992, he served as chancellor and professor of
English at the University of Massachusetts Dartmouth
(formerly known as Southeastern Massachusetts University)
from 1984 through 1991. Dr. Brazil was previously
associated with San Jose' State University in California
for eleven years, last serving as professor of humanities
and American studies and vice president for academic
affairs. He is a director of First of America Bank-
Illinois, N.A. Peoria Regional Advisory Board, Methodist
Health Services Corporation, National Association of
Independent Colleges and Universities and past chair of the
Walter Byers Post- Graduate Scholarship Committee of the
National Collegiate Athletic Association.

JERRY D. CAULDER
CHAIRMAN EMERITUS OF MYCOGEN CORPORATION, [PHOTO]
SAN DIEGO, CALIFORNIA
Director of CILCORP since 1996
Member of Audit and Compensation Committees
Dr. Caulder was born in Gideon, Missouri in 1942. He
received a Bachelor of Science degree in botany and zoology
from Southeast Missouri State University in 1964 and a
Master's degree and a Doctorate in agronomy and plant
physiology in 1969 from the University of Missouri as well
as an Honorary Doctorate of Science in 1997. In 1984, Dr.
Caulder joined Mycogen Corporation (agricultural
biotechnology products and services) as president and chief
executive officer and was elected chairman of the board in
1989. Prior to joining Mycogen, he managed various aspects
of both the international and domestic business of Monsanto
Company for over 15 years. He serves as a consultant and
speaker to various organizations, including the Brookings
Institute (Washington, D.C.), The Keystone Group (Keystone,
Colorado) and the World Economic Forum (Geneva,
Switzerland).

MURRAY M. YEOMANS
RETIRED CHAIRMAN OF YEOMANS DISTRIBUTING COMPANY, [PHOTO]
PEORIA, ILLINOIS
Director of CILCORP since 1987
Member of Executive and Director Affairs Committees
Mr. Yeomans was born at Philadelphia, Pennsylvania in
1935. He is a 1958 graduate of Miami University (Ohio) with
a degree in business administration. He joined Yeomans
Distributing Company (wholesale appliances and central
heating and cooling equipment) in 1960 and was named
president in 1972 and chairman and chief executive officer
in 1991. In June of 1996 Mr. Yeomans, who was the sole
shareholder of Yeomans Distributing Company, sold the
company to the employees through an Employee Stock
Ownership Plan (ESOP) and retired from the company. He is
chairman of the Peoria Area Community Foundation Depository
and a director of Peoria Area Community Foundation. In
addition, he is a member of the Saint Francis Medical
Center Advisory Board, the First of America Bank-Illinois,
N.A. Peoria Regional Advisory Board and a director of the
Illinois Neurological Institute. Mr. Yeomans is active in
civic and charitable activities.

MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING APRIL 2000

MARCUS ALEXIS
BOARD OF TRUSTEES PROFESSOR OF ECONOMICS AND [PHOTO]
PROFESSOR OF MANAGEMENT AND STRATEGY
NORTHWESTERN UNIVERSITY, EVANSTON, ILLINOIS
Director of CILCORP since 1988
Member of Compensation and Finance Committees
Dr. Alexis was born at New York, New York in 1932. He
graduated from Brooklyn College in 1953 with a degree in
economics. Dr. Alexis received a Master of Arts degree in
economics from Michigan State University in 1954, and a
Ph.D degree in economics from the University of Minnesota
in 1959. He initially joined Northwestern University in
1970 and served as chairman of the Department of Economics
from 1976-1979 and 1982-1985. During the period 1979 to
1981, he was a member, vice chairman and acting chairman of
the Interstate Commerce Commission. He joined the
University of Illinois at Chicago in 1985 as dean of the
College of Business Administration and professor of
economics. He returned to Northwestern University in 1990.
He is former Chairman of the Federal Reserve Bank of
Chicago and serves on the board of the Teachers Insurance
and Annuity Association, the Metropolitan Planning Council
in Chicago, and is also a director of the Lincoln Park
Zoological Society.

H. SAFFORD PEACOCK
INVESTMENT MANAGEMENT AND FARMING [PHOTO]
Director of CILCORP since 1985
Member of Executive and Finance Committees
Mr. Peacock was born at Monmouth, Illinois in 1928.
He graduated from the Massachusetts Institute of Technology
in 1950. He joined Myers Industries, Inc. (manufacturers of
store fixtures and storage shelving) in Lincoln, Illinois
in 1953 in an engineering capacity, and was elected vice
president of manufacturing and director in 1960. He served
as vice president and general manager from 1974 until his
retirement in 1977. He is active in investment management,
including farming operations and industrial real estate. He
is a trustee and past chairman of the board of trustees of
Lincoln College and a trustee and past chairman of the
board of trustees of Monmouth College. He also serves as a
director of the National Defense University Foundation in
Washington, D.C. He was a director of CILCO from 1978 to
1994.

RICHARD N. ULLMAN
PRESIDENT OF FEDERAL COMPANIES, PEORIA, ILLINOIS [PHOTO]
Director of CILCORP since 1988
Member of Executive and Finance Committees
Mr. Ullman was born at Peoria, Illinois in 1934. He
graduated from DePauw University in 1956 with a liberal
arts degree. He joined Federal Warehouse Company in 1957.
In 1973 he was named president of that company and of
Federal Companies (commercial warehousing, local and long
distance moving). He is a director of First of America
Bank-Illinois, N.A. Peoria Regional Advisory Board,
Keystone Consolidated Industries, Inc. and the Peoria
Medical Research Corporation. Mr. Ullman is a member of the
Saint Francis Medical Center Advisory Board, a member of
the advisory board of Children's Hospital of Illinois at
Saint Francis Medical Center, and serves as a member of the
board of trustees of Bradley University. He is active in a
number of professional and civic organizations.

ROBERT O. VIETS
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF CILCORP [PHOTO]
Director of CILCORP since 1988
Member of Executive Committee
Mr. Viets was born at Girard, Kansas in 1943. He
graduated from Washburn University in 1965 with a degree in
economics and received his law degree from Washington
University School of Law in 1969. He is a certified public
accountant and has had experience with a national
accounting firm. Mr. Viets joined CILCO in 1973 as manager
of special studies and was appointed manager of rates and
regulatory affairs in 1976. He was elected assistant vice
president, regulatory and legislative affairs, in 1980;
vice president, financial services in 1981; vice president
(finance group) in 1983; senior vice president of the
Company and CILCO in 1986 and to his present position with
the Company in 1988. He is also chairman and chief
executive officer of CILCO and QST Enterprises Inc. and a
director of CILCORP Investment Management Inc. and QST
Environmental Inc. Mr. Viets is a director of Consumers
Water Company; First of America Bank-Illinois, N.A. Peoria
Regional Advisory Board; RLI Corp.; Lincoln Office Supply
Co., Incorporated; the Peoria Medical Research Corporation
and Methodist Health Services Corporation. He serves as a
member of the board of trustees of Bradley University.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

The Board of Directors has, among others, Audit, Compensation and Director
Affairs Committees.

The Audit Committee is responsible for reviewing audits made by the
Company's independent accountants, including the scope of the auditors' reports
and reviewing such other matters, such as the effectiveness of internal
controls, as the Committee may deem appropriate. The Audit Committee recommends
to the Board of Directors the independent accounting firm which will be engaged
to audit the Company's financial statements. The Committee also reviews the
activities of the Company's internal auditors. Directors serving as members of
the Committee are Messrs. Brazil, Bunn, Caulder and Ms. Smith. During 1997, the
Committee held four meetings.

The Compensation Committee considers and makes recommendations to the
Board of Directors with respect to the compensation of the Company's executive
officers. Directors serving as members of the Committee are Messrs. Alexis,
Caulder and Holland. During 1997, the Committee held seven meetings.

The Director Affairs Committee, in addition to monitoring governance
policies of the Board, reviews and recommends to the Board of Directors nominees
to serve on the Board. The Committee considers nominees brought to its attention
by other members of the Board, by members of management and by shareholders.
Shareholders may submit recommendations to the Committee with respect to
nominees by writing to the Secretary of the Company. Under the Company's
By-laws, written notice of any shareholder nomination of an individual for
election as a director at the Annual Meeting must be received by the Secretary
of the Company at 300 Hamilton Boulevard, Suite 300, Peoria, Illinois 61602, not
later than sixty days prior to the first anniversary of the date of the last
Annual Meeting of Shareholders and set forth the name, age, business and
residential address, principal occupation, number of shares of common stock
owned and such other information concerning the nominee as may be required by
the federal securities laws in respect of an individual nominated as a director
for whom proxies are solicited. (A copy of the Company's By-laws specifying the
requirements for shareholder nominations will be furnished to any shareholder
without charge upon written request to the Secretary.) Directors serving as
members of the Committee are Ms. Smith and Messrs. Brazil, Holland and Yeomans.
During 1997, the Committee held five meetings.

During 1997, the Board of Directors held a total of seven meetings.

DIRECTORS' COMPENSATION

No fees are paid to directors who are employees of the Company or its
subsidiaries. Non-employee members of the Board receive a total annual retainer
fee of $18,000 for serving on the Company's Board and on the Board of any of the
Company's subsidiaries,

prorated for less than a year's service. Non-employee directors also receive an
attendance fee of $1,000 for attending meetings of the Board of Directors of the
Company and an attendance fee of $1,000 for each meeting attended of committees
of the Board. Directors also are reimbursed for their travel expenses for each
Board or committee meeting attended.

EXECUTIVE COMPENSATION

The following table sets forth the annual and long-term compensation
earned for the years 1997, 1996 and 1995 for the Chief Executive Officer and the
four most highly compensated executive officers of the Company and its
subsidiaries who perform policy-making functions for the Company.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION LONG-TERM
COMPENSATION
--------------------- --------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY LTIP PAYOUTS(1) COMPENSATION(2)
- ----------------------------------------- --------- ---------- --------------- ----------------

Robert O. Viets 1997 $ 406,423 $ 61,272 $ 37,817
President and Chief Executive 1996 382,544 64,500 31,894
Officer of the Company 1995 327,756 17,819 34,925

J. Mark Elliott 1997 232,269 82,400 18,511
President and Chief Operating 1996 30,288 0 0
Officer of QST Enterprises Inc. (3) 1995 0 0 0

William M. Shay 1997 207,737 66,467 26,844
Executive Vice President and 1996 194,398 81,981 22,948
Chief Legal Officer 1995 185,838 54,641 24,812
of the Company (4)

James F. Vergon 1997 207,738 65,616 16,831
President and Chief 1996 194,564 86,542 14,634
Operating Officer of CILCO 1995 181,661 61,437 15,610

Thomas S. Romanowski 1997 152,121 127,614 16,461
Vice President of CILCO 1996 145,449 72,492 13,749
1995 133,584 56,662 14,442

(1) Amounts paid were paid pursuant to the Company's or Central Illinois Light
Company's EVA-Registered Trademark--Based Incentive Compensation Plans.

(2) Amounts shown in this column for 1997 represent (a) employer contributions
under the CILCO Employees' Savings Plan to Mr. Viets $4,734, Mr. Shay
$4,758, Mr. Vergon $4,750, Mr. Romanowski $4,945 and, under the QST
Enterprises Inc. Profit Sharing

and Savings Plan, to Mr. Elliott $3,511; (b) earnings on deferred
compensation to Mr. Viets, $33,083, Mr. Shay $22,086, Mr. Vergon, $12,081
and Mr. Romanowski $11,516 and (c) an additional bonus of $15,000 paid to
Mr. Elliott.

(3) Mr. Elliott joined QST Enterprises Inc. as President and Chief Operating
Officer in November 1996.

(4) Mr. Shay became Chief Legal Officer on November 4, 1997 in addition to being
Executive Vice President of the Company.

EVA-REGISTERED TRADEMARK--BASED INCENTIVE COMPENSATION PLAN

Incentive compensation is awarded in accordance with the Company's
EVA-Registered Trademark--Based Incentive Compensation Plan (the "EVA-Registered
Trademark- Plan"). The purpose of the EVA-Registered Trademark- Plan is to
provide an incentive to eligible officers and senior managers to increase and
maintain shareholder value by rewarding the achievement of these objectives.
EVA-Registered Trademark- is a measure of profitability that is based on the
difference between the return earned on the capital invested in an enterprise
and the cost of that capital. This difference can be either positive or negative
and results in an addition to or a deduction from award balances accumulated
from prior years. Each year, one third of the net balance accumulated is paid to
the participant. That portion of the incentive compensation which has been
deferred is "at risk" since a negative EVA-Registered Trademark- in a subsequent
year may eliminate previously accumulated balances. The calculation of the award
pool is based, in part, on a fixed percentage of the improvement in
EVA-Registered Trademark- from the prior year and, in part, on a fixed
percentage of the average of EVA-Registered Trademark- contributed over a
three-year period. These percentages, which do not change from year to year,
were determined when the EVA-Registered Trademark- Plan was originally
established and were designed, using historical financial data, to create an
award pool of sufficient size to achieve the Plan objectives and are used only
for that purpose. Annually, at the outset of each plan year, the Compensation
Committee determines the portion of the award pool to be allocated to each
participant, including the executive officers, based on that individual's job
responsibilities and the Committee's evaluation of the effect which that
individual's performance is expected to have on the size of the award pool. A
portion of the award pool is allocated, at the Committee's discretion, at the
conclusion of each plan year. Discretionary awards are determined on the basis
of the CEO's recommendation and the compensation policies established by the
Committee. Both the non-discretionary and discretionary portions of an award are
added to each participant's account balance, one third of which is paid and the
remainder of which remains at risk in the account balance. Effective January 28,
1997, the Board of Directors of the Company terminated the EVA-Registered
Trademark- Plan for all participants except Mr. Viets, Mr. Elliott, Mr. Shay and
Mr. Vergon replacing it with the CILCORP 1997 Incentive Compensation Plan. Award
balances accumulated in prior years were distributed to all terminating
participants.

CILCORP 1997 INCENTIVE COMPENSATION PLAN

All of the Company's officers, except those participating in the
EVA-Registered Trademark- Plan, and other management employees who play key
roles in achieving annual financial and operating objectives participated in the
Company's 1997 Incentive Compensation Plan. The Plan includes a target bonus
opportunity at a pre-determined percent of annual base compensation. 50% of the
bonus payout is based upon the achievement of targeted earnings per share and
50% of the bonus payout is based upon individual achievement of pre-determined
goals established between employee and supervisor. The minimum threshold for the
bonus payout based upon earnings per share is 80% of the targeted earnings per
share with a maximum payout based upon 120% of targeted earnings per share.

EXECUTIVE EMPLOYMENT AGREEMENTS

In 1997, the Company, with the approval of the Board of Directors, entered
into employment agreements with Messrs. Viets and Shay, and Messrs. Elliott and
Vergon entered into comparable employment agreements with QST Enterprises Inc.
and Central Illinois Light Company, respectively. The term of each agreement is
for a period of three years unless a notice of termination or an event of
termination (resignation following a reduction in compensation or change of the
officer's principal place of employment) occurs, in which event the compensation
and benefit payments under the agreement will terminate three years following
termination of employment. During the period following such termination of
employment, each officer is entitled to compensation consisting of annual base
salary, continued participation in certain employee benefit plans, and a single
payment in a sum equal to the officer's last three annual incentive awards and
any balance remaining in the officer's award bank under the Company's
EVA-Registered Trademark--Based Incentive Compensation Plan. Following
termination, the officer may not compete for a period of one year with the
Company and is obliged to make reasonable efforts to obtain other comparable
employment. The agreements also provide additional payments to the officer in an
amount equal to any excise tax imposed by the Internal Revenue Code. Salary and
benefit payments do not continue in the event the employee is terminated for
cause or as a result of death or disability.

SHAREHOLDER RETURN INCENTIVE COMPENSATION PLAN

The purposes of the Shareholder Return Incentive Compensation Plan are to
promote growth in the value of the Company's common stock, to attract and retain
executives of outstanding ability, to encourage teamwork among the executives of
the Company and its subsidiaries, and to reward performance based on the
successful achievement of pre-established corporate financial goals.
Participants under this Plan are eligible key employees of the Company or its
subsidiaries, who, due to the nature and scope of their positions, regularly and
directly make or influence policy decisions which

impact the overall long-term results or success of the Company. Performance
share grants are made by a committee of the Board (comprised of disinterested
directors) which has discretion to establish the performance periods, the number
of performance shares granted and the threshold price above which performance
share grants may be exercised. Performance shares are exercisable by
participants at such times as the market price of the Company's common stock
exceeds the threshold price. The number of performance shares granted determines
the number of shares of common stock which may be awarded. Any exercise of
performance shares which would result in an award in excess of the number of
shares of common stock available under the Plan is paid as a separate cash bonus
based on the market price of the excess shares. With the exception of Mr.
Romanowski, the executive officers listed in the Summary Compensation Table
received performance share grants under this Plan in 1997 as set forth in the
table below. This represents 100% of the performance shares granted.

LONG TERM INCENTIVE PLANS--AWARDS IN 1997 (1)

ESTIMATED FUTURE PAYOUTS
PERFORMANCE OR OTHER ----------------------------------------------------------------
NUMBER OF SHARES, PERIOD UNTIL
UNITS OR OTHER RIGHTS MATURATION OR PAYOUT THRESHOLD(4) TARGET(5) MAXIMUM(6)
---------------------- ---------------------- ------------------------- ------------------------ -----------
EVA-REGISTERED EVA-REGISTERED EVA-REGISTERED EVA-REGISTERED EVA-REGISTERED
NAME TRADEMARK-(2) SRP(3) TRADEMARK-(4) SRP TRADEMARK-(5) SRP(6) TRADEMARK-(7) SRP(8) TRADEMARK-(9)
- ------------ ----------- --------- ----------- --------- ---------- ------------- ----------- ----------- -----------

R. O. Viets $ 44,400 190,000 -- 1997-1998 $ 40,848 0 $ 55,648 41,304 $ 122,545
J. M.
Elliott $ 22,200 42,000 -- 1997-1998 $ 54,933 0 $ 62,333 9,130 $ 164,800
W. M. Shay $ 22,200 59,000 -- 1997-1998 $ 44,312 0 $ 56,125 12,826 $ 132,935
J. F. Vergon $ 22,200 59,000 -- 1997-1998 $ 40,180 0 $ 51,664 12,826 $ 120,541

NAME SRP(10)
- ------------ -----------

R. O. Viets 67,858
J. M.
Elliott 15,000
W. M. Shay 21,071
J. F. Vergon 21,071

- -------

(1) Amounts listed under columns headed "EVA-Registered Trademark-" are dollar
amounts under the Company's EVA-Registered Trademark--Based Incentive
Compensation Plan. Columns headed "SRP" pertain to the Company's Shareholder
Return Incentive Compensation Plan.

(2) Amounts listed are the net increases accrued during the 1997 plan year to
previously accumulated balances.

(3) Amounts listed are the number of performance shares allocated in 1997.

(4) Each year, one-third of the net balance accumulated in the EVA-Registered
Trademark- Plan is paid to the participant. (See Summary Compensation Table
for amounts paid in 1997.)

(5) Amounts listed are payable if net change in EVA-Registered Trademark- in
1998 is zero.

(6) Represents minimum amount received if market price of Company stock does
not exceed $36 per share.

(7) Amounts listed are payable if net change in EVA-Registered Trademark- in
1998 is the same as in 1997.

(8) Amounts listed are the number of shares of common stock of the Company
received upon exercise of all performance shares if the market price is $46
per share.

(9) Amounts listed are accumulated balances at the beginning of the 1998 plan
year.

(10) Amounts listed are the number of shares of common stock of the Company
received upon exercise of all performance shares if the market price is $56
per share. A market price in excess of $56 per share would result in the
payment of a cash bonus based on the amount of such excess and the number of
performance shares held.

CERTAIN PLANS

CILCO BENEFIT REPLACEMENT PLAN. The CILCO Board of Directors has
established a Benefit Replacement Plan (the "Benefit Replacement Plan"). The
Benefit Replacement Plan provides for payments to participants from CILCO's
general funds to restore the retirement benefit under the CILCO non-contributory
Pension Plan for Management, Office and Technical Employees (the "Pension
Plan"), when such benefit is restricted by (1) the maximum defined benefit
limitation of Section 415(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), (2) the indexed compensation limitation of Section 401(a)(17) of
the Code, and (3) participation in certain deferred compensation plans. The
Benefit Replacement Plan generally covers all Pension Plan participants affected
by these restrictions and provides for payment at the times and in the forms of
the Pension Plan.

CILCO PENSION PLAN. Pension benefits are provided to Company employees
through CILCO's Pension Plan. Directors who are not employees do not participate
in this Plan. Pension benefits are determined using a formula based on years of
service and highest average rate of monthly earnings for any sixty consecutive
month period. The normal retirement date specified in the Pension Plan is age
65. Retirement prior to age 62 results in an appropriate reduction in pension
benefits.

The following table shows the aggregate annual benefits payable on a
straight life annuity basis upon retirement at normal retirement age under the
Pension Plan and under the Benefit Replacement Plan discussed above. The amounts
shown are not subject to any deduction for Social Security benefits or other
offset amounts other than that for an optional survivorship provision.

PENSION PLAN TABLE

YEARS OF SERVICE
----------------------------------------------------------
REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------- ---------- ---------- ---------- ---------- ----------

200,000 42,750 57,000 71,250 85,500 99,750
225,000 48,096 64,128 80,160 96,192 112,224
250,000 53,442 71,250 89,064 106,878 124,692
300,000 64,128 85,500 106,878 128,250 149,628
350,000 74,814 99,750 124,692 149,628 174,564
400,000 85,500 114,000 142,500 171,000 199,500
500,000 106,878 142,500 178,128 213,715 249,378

The sum of annual and long-term compensation shown for the executive
officers listed in the above Summary Compensation Table is substantially
compensation as covered by the Pension Plan and the Benefit Replacement Plan. At
January 1, 1998, the credited years of service under the Pension Plan for such
officers are as follows: R. O. Viets--24 years, W. M. Shay--15 years, J. F.
Vergon--26 years and T. S. Romanowski--26 years. Mr. Elliott is not a
participant in the CILCO Pension Plan.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

BACKGROUND AND POLICIES. The Compensation Committee of the Board of
Directors (the "Committee") is comprised of three non-employee members of the
Board. The Committee considers and makes recommendations to the Board with
respect to the compensation of the executive officers (the president and vice
presidents) of the Company. The Committee's compensation policies with respect
to the executive officers are as follows:

1. Compensation levels should be established which are internally fair and
equitable, bearing in mind (a) past practices, patterns and
relationships, and (b) the relationship between officer level
compensation and the compensation provided for top level managers
throughout the Company.

2. Compensation should be comparable and reasonable in relation to similar
positions in other companies of like size, structure and purpose. A
group of utility and utility holding companies of comparable size and
nature was used for comparative purposes. This group includes
consideration of thirteen holding companies with revenues under $1
billion that had a utility as a major subsidiary and non-regulated
businesses. The group differs from the group of companies identified for
comparative stock performance purposes.

3. Compensation of the executive officers should be directly related to the
economic value created for the Company's shareholders.

4. A compensation program should be designed to attract and retain superior
management.

EXECUTIVE OFFICER COMPENSATION PROGRAM. The Company's current executive
officer compensation program is comprised of two major components: base salary
and incentive compensation. Base salary levels for the Company's executive
officers are set by the Committee relative to other utility and utility holding
companies of similar size. In addition, the Committee also considers the
individual officer's experience and performance. Salaries of the executive
officers are reviewed each year by the Committee and may be adjusted based on
the individual's contribution to the Company's performance, as well as
competitive pay levels.

The Company has not yet developed a policy with respect to qualifying
certain performance-based compensation paid to its named executive officers
under the EVA-Registered Trademark- Plan and the Shareholder Return Plan for
corporate deductibility under Section 162(m) of the Internal Revenue Code. The
total compensation paid to each of these officers in 1997 was significantly
below the $1,000,000 deductibility cap specified in Section 162(m). If and when
it is anticipated that the total compensation paid to any of these named
executive officers will reach this limit, the Company will establish such a
policy.

PRESIDENT'S COMPENSATION. All outside directors of the Company are
engaged annually in a review of the president and chief executive officer's
performance prior to approving his compensation. The Compensation Committee of
the Board reviews such evaluations and makes a recommendation to the full Board
regarding compensation for the ensuing year.

Upon the Committee's recommendation, Mr. Viets was awarded a salary of
$410,000 commencing April 1, 1997, representing an increase of 3.6% over his
prior salary level. The Committee based its decision on studies which indicated
that Mr. Viets' base salary was similar to the base salary compensation of the
Chief Executive Officers at comparable companies. The Committee considered the
achievement of the Company's objectives in the preceding year, under Mr. Viets'
direction, and the development of additional capabilities within the
organization that will prove to be valuable in deregulated energy markets. The
Committee recognized Mr. Viets' vision and direction in placing the Company in a
leadership position within the utility industry. The Committee's evaluation also
focused on management of the ongoing operations of the Company and its
subsidiaries, as well as communications with all relevant constituencies. Mr.
Viets also received an award of $61,272 pertaining to the Company's 1997
EVA-Registered Trademark-based Incentive Compensation Plan.

Compensation Committee
Homer J. Holland, CHAIRPERSON
Marcus Alexis
Jerry D. Caulder

COMPARATIVE STOCK PERFORMANCE

The graph below compares the yearly percentage change in the cumulative
total shareholder return on the common stock of the Company during the five
years ended December 31, 1997 with the cumulative total return on the S&P 500
Index and the S&P Utility Index over the same period. The S & P Utility Index
includes gas pipeline and telecommunications companies in addition to electric
and combination gas and electric companies. The comparison assumes $100 was
invested on December 31, 1992 in the Company's common stock and in each of the
foregoing indices, and assumes reinvestment of dividends.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

CILCORP INC. S&P 500 S&P UTILITIES

1992 $100.00 $100.00 $100.00
1993 $100.51 $110.08 $114.44
1994 $93.08 $111.53 $105.35
1995 $131.09 $153.45 $149.62
1996 $120.27 $188.68 $154.29
1997 $170.61 $251.63 $192.33

2. OTHER MATTERS

The Board has no knowledge of any business to be presented for
consideration at the Annual Meeting other than that discussed above. Should any
other business properly come before the meeting or any adjournment thereof, it
is intended that the shares represented by proxies will be voted with respect
thereto in accordance with the best judgment of the persons named in such
proxies.

INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors has appointed Arthur Andersen LLP, independent
public accountants, to audit the accounts of the Company for 1998. A
representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting and will be given an opportunity to make a statement if he so desires
and to respond to appropriate questions.

PROPOSALS OF SHAREHOLDERS

Proposals of shareholders to be presented at the April 27, 1999 Annual
Meeting must be received not later than November 13, 1998, for inclusion in the
proxy statement and form of proxy relating to that meeting. Proposals should be
sent to the Secretary, CILCORP Inc., 300 Hamilton Boulevard, Suite 300, Peoria,
Illinois 61602.

By Order of the Board of Directors,

John G. Sahn
Vice President, General Counsel and
Secretary

March 13, 1998

EVA-Registered Trademark- is a registered trademark of Stern Stewart & Co