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Wells S&P REIT Index Fund
-------------------------
ANNUAL REPORT
December 31, 1998
INVESTMENT ADVISER ADMINISTRATOR
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WELLS ASSET MANAGEMENT, INC. COUNTRYWIDE FUND SERVICES, INC.
3885 Holcomb Bridge Road 312 Walnut Street
Atlanta, Georgia 30092 Cincinnati, Ohio 45201-5354
1.800.282.1581
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<PAGE>
WELLS REAL ESTATE FUNDS
February 19, 1999
Dear Shareholder:
At Wells, we are pleased to present the 1998 annual results for the Wells S&P
REIT Index Fund. The Fund is the first of its kind to meet the increasing demand
for a real estate investment alternative offering broad diversification and
liquidity, along with growth and income opportunities. The Fund primarily seeks
investment results that correspond to the performance of the S&P REIT Index and
normally invests at least 90% of assets in stocks included in the Index, in
approximately the same proportion. It also seeks a correlation between the
performance of the Fund and that of the Index of at least 0.95, not including
expenses.
Throughout the year, the S&P REIT Index represented approximately 90% of the
total U.S. REIT market capitalization, and 100% of REIT property types. These
investments included 105 REITs, 103 of which are on the New York Stock Exchange,
one on the American Stock Exchange, and one on the NASDAQ Stock Exchange. From
its inception on March 2, 1998, until April 1, 1998, the Fund was primarily
invested in cash. As a result, the Fund was unable to participate in the first
REIT market rally of 1998. For the period from inception through December 31,
1998, the Fund's total return (excluding the impact of applicable sales loads)
was -19.62%, which trailed the S&P REIT Index's total return of -17.65% by
1.97%. Of course, the S&P REIT Index does not reflect any expenses. As of
year-end, the Fund's portfolio was fully invested with no more than 5% of its
holdings in cash.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE WELLS S&P REIT INDEX FUND AND THE S&P REIT INDEX
WELLS S&P REIT INDEX FUND:
--------------------------
MONTHLY
DATE RETURN BALANCE
03/02/98 9,600
03/31/98 0.30% 9,629
04/30/98 -3.99% 9,245
05/31/98 -0.93% 9,158
06/30/98 -0.84% 9,082
07/31/98 -7.46% 8,404
08/31/98 -9.56% 7,600
09/30/98 5.99% 8,055
10/31/98 -3.05% 7,810
11/30/98 1.00% 7,889
12/31/98 -2.18% 7,717
S&P REIT INDEX:
---------------
MONTHLY
DATE RETURN BALANCE
03/02/98 10,000
03/31/98 1.96% 10,196
04/30/98 -3.62% 9,827
05/31/98 -0.79% 9,749
06/30/98 -0.62% 9,689
07/31/98 -7.50% 8,963
08/31/98 -9.84% 8,081
09/30/98 6.15% 8,577
10/31/98 -2.90% 8,329
11/30/98 0.96% 8,409
12/31/98 -2.07% 8,235
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Wells S&P REIT Index Fund
Total Return
Since Inception* (22.83)%
-------------------------
* Commencement of operations was March 2, 1998. The total return shown includes
the effect of the maximum 4% sales load and is not annualized.
Past performance is not predictive of future performance.
Wells Real Estate Funds o P.O. Box 5354 o Cincinnati, Ohio 45202 o 800.282.1581
<PAGE>
UNDERSTANDING WHY THE REIT MARKET WAS OFF IN 1998:
Understanding why the REIT market was off in 1998 is important to projecting
1999. We believe two main factors caused the correction of 1998: high valuation
and decelerating earnings growth.
HIGH VALUATION - at the beginning of 1998 REITs were trading at peak
valuations based on historical measures.
DECELERATING EARNINGS GROWTH - 1998 turned out to be a great year for
cash-flow growth, about 13-14%. This clearly has to be seen as a peak
earnings year. Growth is anticipated to slow in 1999 and 2000 to about 9.5%
and 9%, respectively. Many people focused on the fact that growth was
better than the broader market but failed to recognize the importance of
the marginal direction, which was down.
Weakening fundamentals and too much equity issuance also contributed to the low
returns in the REIT market in 1998 but, in our opinion, to a smaller degree of
impact.
THE OUTLOOK FOR THE REIT MARKET IN 1999:
The outlook for the REIT market in 1999 looks very bullish. Research analysts
believe low valuations have overshot the fundamentals and lower cash flow
estimates should be met in 1999 and 2000. Also, vacancy rates are at or near all
time lows and rent growth should continue. 1999 and 2000 should be characterized
by moderating fundamentals, lower inflation, and lower interest rates. Total
return expectations are projected to be in the positive double-digit range.
THE LONG-TERM OUTLOOK FOR THE REIT MARKET:
Substantial, long-term growth has been maintained and continues to be expected.
The total REIT market (as tracked by the National Association of Real Estate
Investment Trusts, "NAREIT") which the S&P REIT Index mimics has a 25-year
performance history of an average total return of 12.01% compared to the S&P 500
Index total return of 11.25%. The S&P REIT Index dividend yield during the same
period has averaged 9.56% while the S&P 500 averaged 3.90%. The 1998 S&P REIT
Index total return was less than 1% off that of the NAREIT 1998 total return.
We are proud of the Wells S&P REIT Index Fund and we're looking forward to
adding many more distinctive products to our product base in the next few years.
We are also pleased to offer you more information about the Wells organization
via our website at www.WellsREF.com. This site is regularly updated.
----------------
Thank you for investing in the Wells S&P REIT Index Fund. Your questions and
comments are always welcome. Please do not hesitate to call us at (800) 282-1581
with any of your needs.
Yours truly,
/s/ Leo F. Wells, III
Leo F. Wells, III
President
<PAGE>
WELLS S&P REIT INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
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ASSETS
Investment securities:
At acquisition cost $ 13,434,959
============
At market value (Note 1) $ 11,977,023
Dividends receivable 84,326
Receivable for capital shares sold 62,230
Receivable for securities sold 74,117
Organization expenses, net (Note 1) 31,558
Other assets 29,632
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TOTAL ASSETS 12,258,886
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LIABILITIES
Dividends payable 14,767
Payable for capital shares redeemed 80,638
Payable for securities purchased 139,527
Payable to affiliates (Note 3) 24,182
Other accrued expenses and liabilities 14,094
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TOTAL LIABILITIES 273,208
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NET ASSETS $ 11,985,678
============
Net assets consist of:
Paid-in capital $ 13,629,272
Accumulated net realized losses from security transactions (185,658)
Net unrealized depreciation on investments (1,457,936)
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Net assets $ 11,985,678
============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 1,546,689
============
Net asset value and redemption price per share (Note 1) $ 7.75
============
Maximum offering price per share (Note 1) $ 8.07
============
See accompanying notes to financial statements.
<PAGE>
WELLS S&P REIT INDEX FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1998 (A)
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INVESTMENT INCOME
Dividends $ 335,133
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EXPENSES
Custodian fees 38,887
Investment advisory fees (Note 3) 26,576
Registration fees 24,365
Insurance expense 19,644
Accounting services fees (Note 3) 18,000
Postage and supplies 11,311
Transfer agent fees (Note 3) 10,800
Administrative services fees (Note 3) 10,042
Amortization of organization expenses (Note 1) 6,311
Professional fees 4,141
Trustees' fees and expenses 2,250
Pricing expenses 2,108
Reports to shareholders 1,075
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TOTAL EXPENSES 175,510
Fees waived and expenses reimbursed by the Adviser (Note 3) (123,606)
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NET EXPENSES 51,904
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NET INVESTMENT INCOME 283,229
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REALIZED AND UNREALIZED LOSSES
ON INVESTMENTS
Net realized losses from security transactions (185,658)
Net change in unrealized appreciation/
depreciation on investments (1,457,936)
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NET REALIZED AND UNREALIZED
LOSSES ON INVESTMENTS (1,643,594)
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NET DECREASE IN NET ASSETS FROM
OPERATIONS $(1,360,365)
===========
(A) Represents the period from the commencement of operations (March 2, 1998)
through December 31, 1998.
See accompanying notes to financial statements.
<PAGE>
WELLS S&P REIT INDEX FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998 (A)
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FROM OPERATIONS:
Net investment income $ 283,229
Net realized losses from security transactions (185,658)
Net change in unrealized appreciation/depreciation
on investments (1,457,936)
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Net decrease in net assets from operations (1,360,365)
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FROM DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (283,229)
Return of capital (61,104)
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Decrease in net assets from distributions to shareholders (344,333)
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FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 13,598,352
Net asset value of shares issued in
reinvestment of distributions to shareholders 318,441
Payments for shares redeemed (326,417)
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Net increase in net assets from capital share transactions 13,590,376
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TOTAL INCREASE IN NET ASSETS 11,885,678
NET ASSETS:
Beginning of period (Note 1) 100,000
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End of period $ 11,985,678
============
CAPITAL SHARE ACTIVITY:
Shares sold 1,537,513
Shares issued in reinvestment of
distributions to shareholders 39,308
Shares redeemed (40,132)
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Net increase in shares outstanding 1,536,689
Shares outstanding, beginning of period (Note 1) 10,000
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Shares outstanding, end of period 1,546,689
============
(A) Represents the period from the commencement of operations (March 2, 1998)
through December 31, 1998.
See accompanying notes to financial statements.
<PAGE>
WELLS S&P REIT INDEX FUND
FINANCIAL HIGHLIGHTS
FOR THE PERIOD ENDED DECEMBER 31, 1998 (A)
================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING
THROUGHOUT THE PERIOD:
Net asset value at beginning of period $ 10.00
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Income from investment operations:
Net investment income 0.26
Net realized and unrealized losses on investments (2.20)
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Total from investment operations (1.94)
----------
Less distributions:
Dividends from net investment income (0.26)
Return of capital (0.05)
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Total distributions (0.31)
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Net asset value at end of period $ 7.75
==========
RATIOS AND SUPPLEMENTAL DATA:
Total return (B) (19.62)%
==========
Net assets at end of period (000's) $ 11,986
==========
Ratio of net expenses to average net assets (C) 0.99%(D)
Ratio of net investment income to average net assets 5.33%(D)
Portfolio turnover rate 9%(D)
- --------------------------------------------------------------------------------
(A) Represents the period from the commencement of operations (March 2, 1998)
through December 31, 1998.
(B) Total return shown excludes the effect of applicable sales loads and is not
annualized.
(C) Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 3.30% (D).
(D) Annualized.
See accompanying notes to financial statements.
<PAGE>
WELLS S&P REIT INDEX FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
================================================================================
MARKET
COMMON STOCKS - 97.7% SHARES VALUE
- --------------------------------------------------------------------------------
APARTMENT/RESIDENTIAL - 20.2%
Apartment Investment & Management Company - Class A 4,900 $ 182,219
Archstone Communities Trust 14,500 293,625
Associated Estates Realty Corp. 2,200 25,988
Avalon Bay Communities, Inc. 6,474 221,734
Berkshire Realty Company, Inc. 3,800 36,100
BRE Properties, Inc. - Class A 4,500 111,375
Camden Property Trust 4,475 116,350
Chateau Communities, Inc. 2,800 82,075
Colonial Properties Trust 2,600 69,225
Cornerstone Realty Income Trust, Inc. 4,300 45,150
Equity Residential Properties Trust 11,755 475,342
Essex Property Trust, Inc. 1,700 50,575
Gables Residential Trust 2,700 62,606
Irvine Apartment Communities, Inc. 2,000 63,750
Manufactured Home Communities, Inc. 2,700 67,669
Merry Land Properties, Inc.* 175 634
Mid-America Apartment Communities, Inc. 1,900 43,106
Pennsylvania Real Estate Investment Trust 1,300 25,269
Post Properties, Inc. 3,800 146,063
Smith (Charles E.) Residential Realty, Inc. 1,800 57,825
Summit Properties, Inc. 2,500 43,125
Sun Communities, Inc. 1,700 59,181
United Dominion Realty Trust, Inc. 10,500 108,281
Walden Residential Properties, Inc. 1,800 36,788
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2,424,055
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DIVERSIFIED - 8.3%
CCA Prison Realty Trust 2,200 45,100
Duke Realty Investments, Inc. 8,500 197,625
Franchise Finance Corporation of America 5,000 120,000
Glenborough Realty Trust, Inc. 3,200 65,200
Liberty Property Trust 6,600 162,525
MGI Properties, Inc. 1,400 39,112
National Golf Properties, Inc. 1,200 34,725
Pacific Gulf Properties, Inc. 2,000 40,125
Spieker Properties, Inc. 6,300 218,138
Washington Real Estate Investment Trust 3,600 67,050
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989,600
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HEALTH CARE - 8.3%
American Health Properties, Inc. 2,500 51,562
Health Care Property Investors, Inc. 3,100 95,325
Health Care REIT, Inc. 2,800 72,450
Healthcare Realty Trust, Inc. 4,033 89,986
HRPT Properties Trust 13,400 188,438
LTC Properties, Inc. 2,700 44,888
Meditrust Corp. 15,300 231,412
<PAGE>
WELLS S&P REIT INDEX FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
================================================================================
MARKET
COMMON STOCKS - 97.7% SHARES VALUE
- --------------------------------------------------------------------------------
HEALTH CARE - 8.3% (CONTINUED)
National Health Investors, Inc. 2,400 $ 59,250
Nationwide Health Properties, Inc. 4,700 101,344
OMEGA Healthcare Investors, Inc. 2,100 63,394
------------
998,049
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HOTEL - 7.6%
Equity Inns, Inc. 3,600 34,650
FelCor Lodging Trust, Inc. 6,900 159,131
Hospitality Properties Trust 4,300 103,738
MeriStar Hospitality Corp. 4,700 87,244
Patriot American Hospitality, Inc. 14,500 87,000
RFS Hotel Investors, Inc. 2,500 30,625
Starwood Hotels & Resorts 17,500 397,031
Winston Hotels, Inc. 1,600 13,100
------------
912,519
------------
INDUSTRIAL/OFFICE - 27.2%
AMB Property Corp. 8,700 191,400
Arden Realty, Inc. 6,300 146,081
Bedford Property Investors, Inc. 2,300 38,812
Boston Properties, Inc. 6,400 195,200
Brandywine Realty Trust 3,900 69,712
CarrAmerica Realty Corp. 6,800 163,200
CenterPoint Properties Corp. 2,000 67,625
Cornerstone Properties, Inc. 10,300 160,938
Cousins Properties, Inc. 3,200 103,200
Crescent Real Estate Equities Company 12,200 280,600
EastGroup Properties, Inc. 1,700 31,344
Equity Office Properties Trust 26,200 628,800
First Industrial Realty Trust, Inc. 3,800 101,888
Highwoods Properties, Inc. 6,000 154,500
Kilroy Realty Corp. 2,800 64,400
Koger Equity, Inc. 2,600 44,688
Mack-Cali Realty Corp. 5,700 175,988
Meridian Industrial Trust, Inc. 3,200 75,200
Prentiss Properties Trust 3,900 87,019
ProLogis Trust 12,500 259,375
Reckson Associates Realty Corp. 4,100 90,969
TriNet Corporate Realty Trust, Inc. 2,500 66,875
Weeks Corp. 2,000 56,375
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3,254,189
------------
MORTGAGE - 0.8%
Dynex Capital, Inc. 4,500 20,812
Indymac Mortgage Holdings, Inc. 7,600 80,275
------------
101,087
------------
RETAIL CENTERS - 20.6%
Bradley Real Estate, Inc. 2,400 49,200
<PAGE>
WELLS S&P REIT INDEX FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
================================================================================
MARKET
COMMON STOCKS - 97.7% SHARES VALUE
- --------------------------------------------------------------------------------
RETAIL CENTERS - 20.6% (CONTINUED)
Burnham Pacific Properties, Inc. 3,200 $ 38,600
CBL & Associates Properties, Inc. 2,500 64,531
Chelsea GCA Realty, Inc. 1,500 53,438
Commercial Net Lease Realty 2,900 38,425
Developers Diversified Realty Corp. 6,000 106,500
Federal Realty Investment Trust 4,100 96,862
General Growth Properties, Inc. 3,600 136,350
Glimcher Realty Trust 2,400 37,650
IRT Property Company 3,300 33,000
JDN Realty Corp. 3,300 71,156
JP Realty, Inc. 1,800 35,325
Kimco Realty Corp. 5,800 230,188
Kranzco Realty Trust 1,000 14,938
Macerich Company (The) 3,200 82,000
Mills Corp. 2,500 49,688
New Plan Excel Realty Trust 8,960 198,800
Prime Retail, Inc. 4,377 42,949
Realty Income Corp. 2,700 67,162
Simon Property Group, Inc. 16,900 481,650
Taubman Centers, Inc. 5,300 72,875
Urban Shopping Centers, Inc. 1,800 58,950
Vornado Realty Trust 8,500 286,875
Weingarten Realty Investors 2,700 120,488
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2,467,600
------------
SELF STORAGE - 4.7%
Public Storage, Inc. 12,400 335,575
Shurgard Storage Centers, Inc. - Class A 2,900 74,856
Sovran Self Storage, Inc. 1,200 30,150
Storage Trust Realty 1,600 37,400
Storage USA, Inc. 2,800 90,474
------------
568,455
------------
TOTAL COMMON STOCKS (COST $13,173,490) 11,715,554
------------
CASH EQUIVALENTS - 2.2%
Star Treasury Fund (Cost $261,469) 261,469
------------
TOTAL INVESTMENTS SECURITIES - 99.9% (COST $13,434,959) 11,977,023
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.1% 8,655
------------
NET ASSETS - 100.0% $ 11,985,678
============
* Non-income producing security.
See accompanying notes to financial statements.
<PAGE>
WELLS S&P REIT INDEX FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
The Wells S&P REIT Index Fund (the Fund) is a diversified series of the Wells
Family of Real Estate Funds (the Trust), an open-end management investment
company registered under the Investment Company Act of 1940. The Trust was
organized as an Ohio business trust on June 4, 1997. The Fund was capitalized on
December 22, 1997, when Leo F. Wells III, the President of the Fund's investment
adviser, Wells Asset Management, Inc. (the Adviser), purchased the initial
10,000 shares of the Fund at $10.00 per share. The public offering of shares of
the Fund commenced on March 2, 1998. The Fund had no operations prior to the
public offering of shares except for the initial issuance of shares.
The Fund seeks to provide investment results corresponding to the performance of
the S&P REIT Index (the Index) by investing in the stocks included in the Index.
The following is a summary of the Fund's significant accounting policies:
Securities valuation -- The Fund's portfolio securities are valued as of the
close of the regular session of trading on the New York Stock Exchange,
currently 4:00 p.m., Eastern time. Securities traded on stock exchanges or
quoted by NASDAQ are valued their last sales price on the principal exchange
where the security is traded or, if not traded on a particular day, at the
closing bid price. Securities traded in the over-the-counter market, and which
are not quoted by NASDAQ, are valued at their last sales price or, if not
available, at their last quoted bid price.
Share valuation -- The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding, rounded to the nearest cent. The offering price
per share of the Fund is equal to the net asset value per share plus a sales
load equal to 4.17% of the net asset value (or 4% of the offering price). The
redemption price per share of the Fund is equal to the net asset value per
share.
Investment income -- Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned.
Distributions to shareholders -- Distributions to shareholders arising from net
investment income are declared and paid quarterly. Net realized short-term
capital gains, if any, may be distributed throughout the year and net realized
long-term capital gains, if any, are distributed at least once each year. Income
dividends and capital gain distributions are determined in accordance with
income tax regulations.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Organization expenses - Expenses of organization, net of certain expenses paid
by the Adviser, have been capitalized and are being amortized on a straight-line
basis over five years.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
<PAGE>
WELLS S&P REIT INDEX FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code (the Code) available to regulated
investment companies. As provided therein, in any fiscal year in which the Fund
so qualifies and distributes at least 90% of its taxable net income, the Fund
(but not the shareholders) will be relieved of federal income tax on the income
distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
As of December 31, 1998, the Fund had capital loss carryforwards for federal
income tax purposes of $61,580, which expire on December 31, 2006. In addition,
the Fund elected to defer until its subsequent tax year $41,550 of capital
losses incurred after October 31, 1998. These capital loss carryforwards and
"post-October" losses may be utilized in future years to offset net realized
capital gains prior to distribution to shareholders.
As of December 31, 1998, net unrealized depreciation on investments was
$1,540,464 for federal income tax purposes, of which $135,913 related to
appreciated securities and $1,676,377 related to depreciated securities based on
a federal income tax cost basis of $13,517,487. The difference between the
federal income tax cost of portfolio investments and the acquisition cost is due
to certain timing differences in the recognition of capital losses under income
tax regulations and generally accepted accounting principles.
Reclassification of capital accounts -- On December 31, 1998, the Fund
reclassified $61,104 of overdistributed net investment income against paid-in
capital. This reclassification has no effect on the Fund's net assets or net
asset value per share.
2. INVESTMENT TRANSACTIONS
During the period ended December 31, 1998, cost of purchases and proceeds from
sales of portfolio securities, other than short-term investments, amounted to
$13,914,593 and $482,415, respectively.
3. TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Trust are also officers of the Adviser or
of Countrywide Fund Services, Inc. (CFS), the administrative services agent,
shareholder servicing and transfer agent, and accounting services agent for the
Trust.
ADVISORY AGREEMENT
The Adviser has overall supervisory responsibility for the general management
and investment of the Fund's assets and portfolio securities pursuant to the
terms of an Advisory Agreement. The Fund pays the Adviser an investment advisory
fee, computed and accrued daily and paid monthly, at an annual rate of 0.50% of
the average daily net assets of the Fund.
<PAGE>
WELLS S&P REIT INDEX FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
In order to reduce the operating expenses of the Fund, the Adviser voluntarily
waived its investment advisory fees of $26,576 and reimbursed the Fund for
$97,030 of other operating expenses during the period ended December 31, 1998.
SUB-ADVISORY AGREEMENT
Gateway Investment Advisers, L.P. (the Sub-Adviser) has been retained by the
Adviser to provide portfolio management services for the Fund's investments
pursuant to the terms of a Sub-Advisory Agreement between the Sub-Adviser, the
Adviser and the Trust. The Adviser (not the Fund) pays the Sub-Adviser a fee,
computed and accrued daily and paid monthly, at an annual rate of 0.15% of the
Fund's average daily net assets up to $100 million; 0.10% of such net assets
from $100 million to $200 million; and 0.07% of such net assets in excess of
$200 million, subject to a $3,000 minimum monthly fee.
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement, CFS supplies non-investment
related administrative and compliance services for the Fund. CFS supervises the
preparation of tax returns, reports to shareholders, reports to and filings with
the Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For these services, CFS
receives a monthly fee from the Fund at an annual rate of 0.15% of the Fund's
average daily net assets up to $50 million; 0.125% of such net assets from $50
million to $100 million; and 0.10% of such net assets in excess of $100 million,
subject to a $1,000 minimum monthly fee.
TRANSFER AGENT AND SHAREHOLDER SERVICING AGREEMENT
Under the terms of a Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement, CFS maintains the records of each shareholder's account,
answers shareholders' inquiries concerning their accounts, processes purchases
and redemptions of the Fund's shares, acts as dividend and distribution
disbursing agent and performs other shareholder service functions. For these
services, CFS receives a monthly fee from the Fund at an annual rate of $20 per
shareholder account, subject to a $1,200 minimum monthly fee. In addition, the
Fund pays out-of-pocket expenses including, but not limited to, postage and
supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of an Accounting Services Agreement, CFS calculates the daily
net asset value per share and maintains the financial books and records of the
Fund. For these services, CFS receives a monthly fee, based on current asset
levels, of $2,000 from the Fund. In addition, the Fund pays certain
out-of-pocket expenses incurred by CFS in obtaining valuations of the Fund's
portfolio securities.
UNDERWRITING AGREEMENT
Under the terms of an Underwriting Agreement, Wells Investment Securities, Inc.
(the Underwriter) serves as the exclusive agent for the distribution of the
Fund's shares. For these services, the Underwriter earned $35,084 from
underwriting and broker commissions on the sale of Fund shares during the period
ended December 31, 1998. The Underwriter is an affiliate of the Adviser.
<PAGE>
WELLS S&P REIT INDEX FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
PLAN OF DISTRIBUTION
The Trust has adopted a Plan of Distribution (the Plan) pursuant to Rule 12b-1
under the 1940 Act. The Plan provides that the Fund may directly incur or
reimburse the Underwriter for certain costs related to the distribution of the
Fund's shares, not to exceed 0.25% of average daily net assets. For the period
ended December 31, 1998, the Fund incurred no such expenses under the Plan.
<PAGE>
ARTHUR ANDERSEN LLP
Report of Independent Public Accountants
----------------------------------------
To the Shareholders and Board of Trustees of the Wells S&P REIT Index Fund:
We have audited the accompanying statement of assets and liabilities of the
Wells S&P REIT Index Fund of the Wells Family of Real Estate Funds, including
the portfolio of investments, as of December 31, 1998, and the related statement
of operations, the statement of changes in net assets, and the financial
highlights for the periods indicated thereon. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Wells S&P REIT Index Fund of the Wells Family of Real Estate Funds as of
December 31, 1998, the results of its operations, the changes in its net assets,
and the financial highlights for the periods indicated thereon, in conformity
with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Cincinnati, Ohio,
January 13, 1999
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<ARTICLE> 6
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<NAME> WELLS FAMILY OF REAL ESTATE FUNDS
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 13,434,959
<INVESTMENTS-AT-VALUE> 11,977,023
<RECEIVABLES> 220,673
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 61,190
<TOTAL-ASSETS> 12,258,886
<PAYABLE-FOR-SECURITIES> 139,527
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 133,681
<TOTAL-LIABILITIES> 273,208
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,629,272
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<SHARES-COMMON-PRIOR> 10,000
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<DIVIDEND-INCOME> 335,133
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<APPREC-INCREASE-CURRENT> (1,457,936)
<NET-CHANGE-FROM-OPS> (1,360,365)
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<DISTRIBUTIONS-OF-INCOME> 283,229
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<DISTRIBUTIONS-OTHER> 61,104
<NUMBER-OF-SHARES-SOLD> 1,537,513
<NUMBER-OF-SHARES-REDEEMED> 40,132
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