HOMESERVICES COM INC, S-1/A, 1999-08-24

HOMESERVICES COM INC
S-1/A, 1999-08-24
REAL ESTATE AGENTS & MANAGERS (FOR OTHERS)

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 24, 1999.
REGISTRATION NO. 333-82997
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------

AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

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

HOMESERVICES.COM INC.
(Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 6531 41-1945806
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>

HOMESERVICES.COM INC.
6800 FRANCE AVENUE SOUTH, SUITE 600
EDINA, MINNESOTA 55435
(612) 928-5900

(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)

STEVEN A. MCARTHUR, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
HOMESERVICES.COM INC.
6800 FRANCE AVENUE SOUTH, SUITE 600
EDINA, MINNESOTA 55435
(612) 928-5900

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)

Copies to:

<TABLE>
<S> <C>
STACY J. KANTER, ESQ. CLAUDE S. SERFILIPPI, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP CHADBOURNE & PARKE LLP
919 THIRD AVENUE 30 ROCKEFELLER CENTER
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10112
(212) 735-3000 (212) 408-5100
(212) 735-2000 (FAX) (212) 541-5369 (FAX)
</TABLE>

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

Approximate date of commencement of proposed sale to the public: as soon
as practicable after the effective date of this Registration Statement.

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

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to 462(b) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]

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

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.

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

<PAGE>

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
HOMESERVICES MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION RELATING TO THESE SECURITIES
IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT
IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE OR OTHER
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION DATED AUGUST 24, 1999

4,000,000 SHARES

[LOGO]
COMMON STOCK
$ PER SHARE

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

o HomeServices.Com Inc. is offering 2,333,333 shares and MidAmerican Energy
Holdings Company, as the selling stockholder, is offering 1,666,667 shares.

o HomeServices anticipates that the initial public offering price will be
between $14 and $16 per share.

o This is HomeServices' initial public offering.

o HomeServices has applied to list the common stock on The Nasdaq Stock
Market's National Market under the proposed trading symbol "HMSV."

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

THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 11.

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

<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- -------------
<S> <C> <C>
Public offering price .................... $ $
Underwriting discount .................... $ $
Proceeds to HomeServices ................. $ $
Proceeds to selling stockholder .......... $ $
</TABLE>

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

The underwriters have a 30-day option to purchase up to 600,000 additional
shares of common stock to cover over-allotments, if any.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

U.S. Bancorp Piper Jaffray Credit Suisse First Boston

THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE>

[Graphics for inside cover to be filed by amendment.]

<PAGE>

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ......................................... 1
Risk Factors ............................................... 11
Special Note Regarding Forward-looking Statements .......... 19
Use of Proceeds ............................................ 20
Dividend Policy ............................................ 20
Dilution ................................................... 21
Capitalization ............................................. 22
Unaudited Pro Forma Condensed Consolidated
Financial Information .................................... 23
Selected Consolidated Financial Data ....................... 31
Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................... 34
Business ................................................... 46
Management ................................................. 60
Principal and Selling Stockholders ......................... 70
Certain Relationships and Related Transactions ............. 71
Description of Capital Stock ............................... 74
Description of Indebtedness ................................ 79
Shares Eligible for Future Sale ............................ 81
United States Federal Tax Considerations Relating to
Non-United States Holders ................................ 82
Underwriting ............................................... 85
Legal Matters .............................................. 88
Experts .................................................... 88
Additional Information ..................................... 88
Index to Financial Statements .............................. F-1
</TABLE>

-------------------------------
You should rely only on the information contained in this prospectus.
HomeServices has not, and the underwriters have not, authorized any other
person to provide you with different information. This prospectus is not an
offer to sell, nor is it seeking an offer to buy, these securities in any state
where the offer or sale is not permitted. The information in this prospectus is
complete and accurate as of the date on the front cover, but the information
may have changed since that date. Information contained on HomeServices' and
its real estate brokerage subsidiaries' websites is not part of this
prospectus.
<PAGE>

PROSPECTUS SUMMARY

The items in the following summary are described in more detail later in
this prospectus. This summary provides an overview of selected information and
does not contain all the information you should consider. Therefore, you should
read the entire prospectus, including the financial data and related notes,
before making an investment decision. Unless otherwise indicated, the
information contained in this prospectus:

o gives effect to a merger of MidAmerican Realty Services Company, an
Iowa corporation, with and into HomeServices and the issuance of
approximately 650.6 shares of HomeServices' common stock in exchange for
each share of common stock of MidAmerican Realty Services Company, which
merger will occur immediately before the closing of the offering;

o assumes that the underwriters' over-allotment option is not exercised;
and

o assumes that all pro forma information is unaudited and gives effect to
historical acquisitions completed in the third and fourth quarters of
1998 and the third quarter of 1999 and the offering as if they were
consummated at the beginning of the earliest period presented.

As used in this prospectus, unless the context otherwise requires,
references to "HomeServices" mean HomeServices.Com Inc., which was incorporated
in July 1999, and its subsidiaries and predecessor. "Transaction sides" or
"closed transaction sides" mean either the buy side or sell side of any closed
home purchase and "closed transaction value" mean the gross price for a closed
home purchase.

Statistical information on the residential real estate brokerage industry
has been derived from publicly available sources, which HomeServices has not
independently verified but believes to be reliable.

HOMESERVICES.COM INC.

HomeServices is the second largest residential real estate brokerage
firm in the United States based on aggregate closed transaction sides in 1998
for the various brokerage firm operating subsidiaries that comprise
HomeServices. HomeServices also offers integrated real estate services,
including mortgage and title insurance services, and is developing various
related E-commerce services. HomeServices currently operates primarily under
the Edina Realty, Iowa Realty, J.C. Nichols, CBS HOME and Paul Semonin Realtors
brand names in ten states primarily in the Midwest. HomeServices is the market
leader in the Midwestern residential real estate brokerage industry based on
aggregate closed transaction sides for the year ended December 31, 1998 of the
various brokerage firm operating subsidiaries that comprise HomeServices.
Measured on the same basis, HomeServices also occupies the number one or number
two market share position in each of its major markets. The real estate
brokerage firms that comprise HomeServices collectively manage 136 branch
offices and have more than 5,100 sales associates. While HomeServices commenced
operations in May 1998 with the acquisition of two residential real estate
brokerage firms and since that date has acquired four additional firms, the
real estate brokerage firms which now comprise HomeServices have operated for
between 12 and 84 years, with an average operating history of approximately 51
years.

In addition to providing traditional residential real estate brokerage
services, HomeServices also cross sells to its existing real estate customers
preclosing services, such as mortgage origination, closing administrative
services and title abstracting and provides referrals for other preclosing and
postclosing services provided by third parties, such as home warranty, home
inspection, home security, property and casualty insurance, home maintenance
and home repair. HomeServices intends to significantly expand these services in
the future, particularly through E-commerce. In August 1999, HomeServices
launched preliminary activities under its E-commerce platform with the
commencement of its on-line mortgage origination business and on-line referral
services for home warranty, home security, home inspection and property and
casualty insurance. While this on-line business has just commenced and has not
yet produced any significant revenues, HomeServices believes that its
E-commerce business will allow it to significantly increase sales of existing
products and services and to offer new products and services, such as E-loans
and on-line referrals for preclosing and postclosing services.

1
<PAGE>

GROWTH STRATEGY. HomeServices' business objective is to become a seamless
one-source provider of a comprehensive menu of products and services for the
total home ownership experience, particularly by means of E-commerce.
HomeServices' growth strategy comprises the following elements:

o Selective acquisitions and consolidations. HomeServices will continue
to seek acquisition and consolidation opportunities in the highly
fragmented United States residential real estate brokerage industry.

o Expanding its presence in its existing markets. HomeServices will seek to
expand the coverage of its existing markets under the same brand names,
primarily through opening additional offices, hiring additional sales
associates and incremental acquisitions in existing service areas.

o Offering referrals for various home care and other products and services,
particularly by means of E-commerce. While HomeServices derived less than
1% of its revenues from referral and related products and services in
1998, HomeServices plans to significantly expand its referral services to
include various additional home care products and services that serve the
needs of homeowners throughout the complete home ownership cycle. In
addition, as HomeServices continues to develop its E-commerce operations
which were launched in August 1999, HomeServices is seeking to generate
on-line banner advertising and sponsorship revenues.

COMPETITIVE STRENGTHS. HomeServices believes that the following
competitive strengths differentiate it from its residential real estate
brokerage competitors:

o Long-established presence in its markets with well-recognized brand names
and leading market shares. While HomeServices' predecessor was formed in
May 1998, the real estate brokerage firms that comprise HomeServices have
operated for between 12 and 84 years, with an average operating history of
approximately 51 years. These companies occupy the number one or number
two position in each of HomeServices' major markets and enjoy strong
brand-name recognition.

o Comprehensive range of services. HomeServices' ability to offer brokerage,
preclosing and postclosing products and services in a "one-stop shopping"
experience preferred by customers differentiates it from most of its
competitors and enables it to generate incremental revenues by cross
selling services to its existing realty customer base.

o Larger scale of operation than the competition. As one of the leading
companies in the industry, HomeServices enjoys certain economies of scale
which allow it to spread costs and investments, such as marketing and
technology, over a larger revenue base and is better able to take
advantage of acquisition and consolidation opportunities.

2
<PAGE>

local markets with an understanding of industry trends and a proven
ability to identify, effect and integrate acquisitions. They have served
as agents and brokers as well as managers of their respective firms.

HOMESERVICES STRUCTURE AND RECENT ACQUISITIONS

HomeServices is a real estate brokerage holding company which immediately
prior to the offering will be 95.2% owned by MidAmerican Energy Holdings
Company, a large Midwestern utility holding company (MEC:NYSE). After giving
effect to the offering, MidAmerican Holdings will beneficially own 57.2% of
HomeServices' common stock, or 53.0% if the underwriters' over-allotment option
is exercised in full. As a result, MidAmerican Holdings will continue to have
the power to elect the entire board of directors and approve matters submitted
to a vote of stockholders.

In May 1998, HomeServices acquired Iowa Realty Co. Inc. and Edina Realty
Home Services of Minnesota, both formerly part of AmerUs Home Services Inc.
HomeServices expanded its real estate brokerage business with the purchases in
August 1998 of two real estate brokerage firms in Omaha, Nebraska, HOME Real
Estate Holdings Inc. and CBS Real Estate Company, which were merged to form CBS
HOME. In September 1998, HomeServices acquired J.C. Nichols Residential, Inc.
in Kansas City, Missouri. In July 1999, HomeServices acquired Paul Semonin
Realtors, a Louisville, Kentucky real estate brokerage firm with 11 offices and
a leading market share in Louisville, and operations in Lexington, Kentucky and
southern Indiana.

Immediately prior to the offering, MidAmerican Realty Services Company,
which is currently 95.2% owned by MidAmerican Holdings, will be merged with and
into HomeServices, a then wholly owned subsidiary of MidAmerican Holdings, with
HomeServices being the surviving entity. Accordingly, MidAmerican Realty
Services Company, which began operations in May 1998 and currently owns the
HomeServices operating subsidiaries, will be the predecessor entity to
HomeServices. Following consummation of the merger and before the offering,
HomeServices will own the HomeServices brokerage firm operating subsidiaries
and be 95.2% owned by MidAmerican Holdings.

RELATIONSHIP WITH MIDAMERICAN ENERGY HOLDINGS COMPANY

MidAmerican Holdings, headquartered in Des Moines, Iowa, has approximately
9,700 employees, and through its retail utility subsidiaries, MidAmerican
Energy Company in the United States and Northern Electric in the United
Kingdom, MidAmerican Holdings provides electric service to 2.2 million
customers and natural gas service to 1.2 million customers worldwide.

MidAmerican Holdings provides services to HomeServices, including
management, advisory, financial, accounting, legal, employee benefit plan and
insurance administration and other services, and will continue to do so
following the offering on terms HomeServices believes to be as favorable as
HomeServices could obtain from an unrelated third party. HomeServices is
required to pay MidAmerican Holdings a monthly fee in an amount equal to
$50,000 plus reimbursement for all reasonable employee and out-of-pocket costs
and expenses incurred by MidAmerican Holdings in

3
<PAGE>

connection with providing these services to HomeServices. In connection with
the offering, HomeServices and MidAmerican Holdings will enter into various
intercompany agreements that are described under "Certain Relationships and
Related Transactions--Relationship with MidAmerican Holdings."

HomeServices is a holding company and conducts all of its operations
through its real estate brokerage subsidiaries. The following chart is a
summary of HomeServices' organizational structure, including its principal real
estate brokerage subsidiaries, after giving effect to the offering. The chart
also includes the states in which each real estate brokerage subsidiary
operates and the year each real estate brokerage subsidiary began operations.

MidAmerican Energy HomeServices' Public
Holdings Company management Stockholders
and directors

57.2% 3.8% 39.1%

HomeServices.Com Inc.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Edina Realty Home
Services of Minnesota J.C. Nichols Residential Iowa Realty Co., Inc. CBS HOME Real Paul Semonin
(Minnesota, Wisconsin, (Kansas, Missouri) (Iowa) Estate* Realtors
North Dakota (1915) (1952) (Nebraska, Iowa) (Kentucky, Indiana)
South Dakota) (1964) (1915)
(1955)
</TABLE>

- ----------
* CBS HOME Real Estate was formed in 1998 as a result of a merger between
HOME Real Estate Holdings Inc., which began operations in 1987, and CBS
Real Estate Company, which began operations in 1964.

* * * * *

HomeServices.Com Inc. was incorporated in Delaware in July 1999. It is a
newly formed subsidiary of MidAmerican Holdings organized to effect the
offering. HomeServices' principal executive offices are located at 6800 France
Avenue South, Suite 600, Edina, Minnesota 55435 and its telephone number is
(612) 928-5900. HomeServices maintains a website that is hyperlinked to the
separate websites maintained by its real estate brokerage subsidiaries. The
information contained in these websites is not part of this prospectus.

4
<PAGE>

THE OFFERING

Common stock offered by:

HomeServices............. 2,333,333 shares
MidAmerican Holdings..... 1,666,667 shares
Total................ 4,000,000 shares

Common stock to be outstanding
after the offering....... 10,237,287 shares

Use of proceeds............. HomeServices intends to use the net proceeds of
the offering for (1) general corporate purposes,
which are expected to include the continued
development of its E-commerce operations, and (2)
acquisitions of real estate brokerage firms and
their related service businesses. The Company has
no pending acquisitions other than as described
in the prospectus and therefore is unable to
specify any amount earmarked to future
acquisitions. HomeServices will not receive any
of the proceeds from the sale of shares by
MidAmerican Holdings.

Proposed Nasdaq National Market
trading symbol.............. HMSV

5
<PAGE>

SUMMARY FINANCIAL AND OTHER DATA

The following tables present summary historical and pro forma financial
and other data for HomeServices, after giving effect to the merger of
MidAmerican Realty Services Company into HomeServices. For additional
information, you should refer to "Selected Consolidated Financial Data,"
"Unaudited Pro Forma Condensed Consolidated Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes
included elsewhere in this prospectus. The pro forma data is provided for
informational purposes only and is not necessarily indicative of the financial
position or the results of operations of HomeServices had the events described
below occurred on the dates specified. In addition, the pro forma data is not
indicative of HomeServices' future financial condition or results of
operations.

Results of operations for 1994 and 1995 reflect only the results of Iowa
Realty and its consolidated subsidiaries. In 1996, Edina Realty became a
subsidiary of Iowa Realty through a reorganization effected by their parent
company. In July 1997, Iowa Realty acquired HOME Real Estate Holdings, Inc. On
May 8, 1998, which was before HomeServices acquired Iowa Realty, Iowa Realty
sold HOME Real Estate to a third party. Accordingly, the results of operations
of the predecessor for 1996, 1997 and 1998 include the results of Iowa Realty
and Edina Realty and their consolidated subsidiaries, which, from July 1, 1997
to May 7, 1998, also include the results of HOME Real Estate.

<TABLE>
<CAPTION>
HISTORICAL DATA
YEAR ENDED DECEMBER 31,
-------------------------------------------------
PREDECESSOR
-------------------------------------------------
1994 1995 1996 1997
----------- ----------- ------------ ------------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT AMOUNTS
PER SHARE)
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Commission revenue ......................... $ 50,967 $ 58,409 $ 179,378 $ 191,083
Title fees ................................. -- -- 14,821 16,203
Other (b) .................................. 15,050 12,672 22,092 7,410
Total revenues ............................ 66,017 71,081 216,291 214,696
Commission expense ......................... 30,792 35,433 115,331 125,148
Acquisition related costs .................. -- -- -- --
Depreciation and amortization .............. 1,762 2,123 5,103 5,619
All other operating expenses (b) ........... 28,769 29,767 85,162 72,808
Total operating expenses ................. 61,323 67,323 205,596 203,575
Operating income (loss) .................... 4,694 3,758 10,695 11,121
Interest and other income (expense),
net ....................................... (324) (942) (2,582) (903)
Income (loss) before income taxes .......... 4,370 2,816 8,113 10,218
Income taxes (benefit) ..................... 1,853 1,471 3,263 4,725
Minority interest .......................... -- -- 1,276 633
Net income (loss) .......................... $ 2,517 $ 1,345 $ 3,574 $ 4,860
Pro forma earnings (loss) per share:*
Basic and diluted ........................ $ 0.39 $ 0.21 $ 0.55 $ 0.75
Pro forma weighted average shares
outstanding:*
Basic and diluted ........................ 6,506 6,506 6,506 6,506
OTHER DATA:
EBITDA (c) ................................. $ 6,456 $ 5,881 $ 15,798 $ 16,740
Net cash provided by (used in)
operating activities ...................... $ 68 $ (2,503) $ 2,134 $ 5,297
Net cash used in investing activities ...... $ (4,004) $ (6,502) $ (8,874) $ (6,759)
Net cash provided by (used in) financing
activities ................................ $ 3,820 $ 9,571 $ 10,664 $ (1,575)

<PAGE>

<CAPTION>
HISTORICAL DATA
YEAR ENDED
DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------- -------------------------
TOTAL TOTAL HOMESERVICES
-------------- ----------- -------------
1998(A) 1998(A) 1999
-------------- ----------- -------------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
AMOUNTS PER
SHARE)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Commission revenue ......................... $ 244,540 $ 94,056 $148,979
Title fees ................................. 21,729 10,030 10,644
Other (b) .................................. 10,559 4,663 8,101
Total revenues ............................ 276,828 108,749 167,724
Commission expense ......................... 162,332 61,400 102,085
Acquisition related costs .................. 18,271 4,744 --
Depreciation and amortization .............. 6,470 2,853 3,718
All other operating expenses (b) ........... 90,391 37,150 52,242
Total operating expenses ................. 277,464 106,147 158,045
Operating income (loss) .................... (636) 2,602 9,679
Interest and other income (expense),
net ....................................... (1,428) (44) (1,775)
Income (loss) before income taxes .......... (2,064) 2,558 7,904
Income taxes (benefit) ..................... (583) 1,241 3,278
Minority interest .......................... -- -- --
Net income (loss) .......................... $ (1,481) $ 1,317 $ 4,626
Pro forma earnings (loss) per share:*
Basic and diluted ........................ $ (0.23) $ 0.20 $ 0.71
Pro forma weighted average shares
outstanding:*
Basic and diluted ........................ 6,506 6,506 6,506

OTHER DATA:
EBITDA (c) ................................. $ 24,105 $ 10,199 $ 13,397
Net cash provided by (used in)
operating activities ...................... $ 17,419 $ 14,010 $ 16,198
Net cash used in investing activities ...... $ (100,017) $(75,163) $ (5,890)
Net cash provided by (used in) financing
activities ................................ $ 87,872 $ 70,118 $ (1,878)
</TABLE>

* Earnings (loss) per share is computed using the weighted average shares of
MidAmerican Realty Services Company as of June 30, 1999, after giving
effect to the stock exchange to be effected by its merger with
HomeServices.

6
<PAGE>

<TABLE>
<CAPTION>
PREDECESSOR HOMESERVICES
------------------------------------------------ ---------------------------
AS OF AS OF
AS OF DECEMBER 31, DECEMBER 31, JUNE 30,
------------------------------------------------ -------------- ----------
1994 1995 1996 1997 1998 1999
--------- ---------- ---------- ---------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ................ $ 871 $ 1,437 $ 5,627 $ 2,590 $ 3,114 $ 11,544
Total assets (b) ......................... 52,782 68,341 95,504 62,346 128,520 131,788
Long-term debt, including current portion 5,651 6,090 16,397 7,651 61,445 59,567
Stockholders' equity ..................... 18,396 19,741 33,699 36,791 35,194 39,938
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------ -------------------------
PREDECESSOR TOTAL TOTAL HOMESERVICES
------------------------------------------------ ----------- ----------- -------------
1994 1995 1996 1997 1998(A) 1998(A) 1999
----------- ----------- ----------- ----------- ----------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Transaction sides ....................... 15,726 16,233 47,836 48,631 60,158 24,452 33,393
Average home sales price ................ $ 104.7 $ 106.7 $ 120.9 $ 127.1 $ 136.3 $ 133.8 $ 146.0
Home sales volume (in millions) ......... $ 1,671 $ 1,928 $ 5,783 $ 6,183 $ 8,199 $ 3,271 $ 4,877
Average sales commission (%)
(Commission revenues divided by
home sales volume) ..................... 3.1% 3.0% 3.1% 3.1% 3.0% 2.9% 3.1%
Number of branch offices (at period
end) ................................... 31 32 103 98 126 97 136
Number of sales associates (at period
end) ................................... 944 911 3,063 3,298 4,282 3,150 4,503
</TABLE>

PRO FORMA DATA

The following pro forma statements of income and balance sheet data give
effect to (1) the offering and the application of the estimated net proceeds to
HomeServices and (2) the acquisitions described under "Unaudited Pro Forma
Condensed Consolidated Financial Information."

<TABLE>
<CAPTION>
HOMESERVICES
-----------------------------------------
PRO FORMA
PRO FORMA SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -------------------------
1998 1998 1999
------------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT AMOUNTS PER
SHARE)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Commission revenue ............................... $320,216 $ 138,664 $164,972
Title fees ....................................... 22,965 10,344 10,644
Other ............................................ 14,656 7,580 8,510
Total revenues .................................. 357,837 156,588 184,126
Commission expense ............................... 216,335 93,431 113,183
Acquisition related costs ........................ 19,971 19,971 --
Depreciation and amortization .................... 8,521 4,183 4,162
All other operating expenses ..................... 112,149 49,042 56,411
Total operating expenses ........................ 356,976 166,627 173,756
Operating income (loss) .......................... 861 (10,039) 10,370
Interest and other income (expense), net ......... (3,170) (1,971) (1,812)
Income (loss) before income taxes ................ (2,309) (12,010) 8,558
Income taxes (benefit) ........................... (832) (4,809) 3,542
Net income (loss) ................................ (1,477) (7,201) 5,016
</TABLE>

7
<PAGE>

<TABLE>
<CAPTION>
HOMESERVICES
------------------------------------
PRO FORMA PRO FORMA
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------- ---------------------
1998 1998 1999
-------------- ---------- ----------
(DOLLARS AND SHARES IN THOUSANDS,
EXCEPT AMOUNTS PER SHARE)
<S> <C> <C> <C>
Earnings per share:
Basic ...................................................... $ (0.14) $ (0.70) $ 0.49
Diluted .................................................... $ (0.14) $ (0.69) $ 0.48
Weighted average shares outstanding:
Basic ...................................................... 10,237 10,237 10,237
Diluted .................................................... 10,451 10,451 10,451
OTHER DATA:
EBITDA (c) .................................................. $ 29,353 $ 14,532
Net cash provided by (used in) operating activities ......... 24,722 16,845
Net cash used in investing activities ....................... (99,585) (5,945)
Net cash provided by (used in) financing activities ......... 79,709 (2,609)
OPERATING DATA:
Transaction sides ........................................... 79,598 35,417 37,419
Average sales price per home ................................ $ 138.9 $ 136.5 $ 145.6
Home sales volume (in millions) ............................. $ 11,053 $ 4,834 $ 5,447
Average sales commission (%)
(Commission revenues divided by home sales volume) ......... 2.9 % 2.9 % 3.0 %
Number of branch offices (at period end) .................... 137 135 136
Number of sales associates (at period end) .................. 4,959 4,957 5,169
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-------------------------
HISTORICAL PRO FORMA
------------ ----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ......................... $ 11,544 $ 36,992
Total assets (b) .................................. 131,788 172,321
Long-term debt, including current portion ......... 59,567 60,002
Stockholders' equity .............................. 39,938 78,688
</TABLE>

- ----------
(a) These amounts are twelve-month and six-month totals, respectively,
arrived at by summing the 1998 results of the predecessor and
HomeServices as shown in the following tables. The May 28, 1998
through December 31, 1998 amounts for HomeServices include results of
CBS HOME, J.C. Nichols Residential, Inc. and Nebraska Land Title &
Abstract after they were acquired by HomeServices in the third and
fourth quarters of 1998. The May 28, 1998 through June 30, 1998
amounts for HomeServices include Edina Realty and Iowa Realty. No
amounts are reflected below for Paul Semonin Realtors, which was
acquired in July 1999. Shares outstanding and earnings per share for
the year ended December 31, 1998 and for the six months ended June 30,
1998 reflect HomeServices' shares outstanding for the entire period,
after giving effect to the exchange of 650.6 shares of HomeServices
for each share of MidAmerican Realty in the merger.

8
<PAGE>

COMPUTATION OF TWELVE-MONTH AMOUNTS:

<TABLE>
<CAPTION>
PREDECESSOR HOMESERVICES
JANUARY 1, 1998 MAY 28, 1998 TOTAL
THROUGH THROUGH YEAR ENDED
MAY 27, 1998 DECEMBER 31, 1998 DECEMBER 31, 1998
----------------- ------------------- ------------------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT AMOUNTS PER
SHARE)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Commission revenue .......................................... $ 74,893 $ 169,647 $244,540
Title fees .................................................. 7,575 14,154 21,729
Other ....................................................... 3,769 6,790 10,559
Total revenues ............................................. 86,237 190,591 276,828
Commission expense .......................................... 49,107 113,225 162,332
Acquisition related costs ................................... -- 18,271 18,271
Depreciation and amortization ............................... 2,293 4,177 6,470
All other operating expenses ................................ 31,126 59,265 90,391
Total operating expenses ................................... 82,526 194,938 277,464
Operating income (loss) ..................................... 3,711 (4,347) (636)
Interest and other income (expense), net .................... (94) (1,334) (1,428)
Income (loss) before income taxes ........................... 3,617 (5,681) (2,064)
Income taxes (benefit) ...................................... 1,664 (2,247) (583)
Net income (loss) ........................................... $ 1,953 $ (3,434) $ (1,481)
Earnings (loss) per share:
Basic and diluted .......................................... $ (0.23)(a)
Weighted average shares outstanding:
Basic and diluted .......................................... 6,506 (a)

OTHER DATA:
EBITDA(c) ................................................... $ 6,004 $ 18,101 $ 24,105
Net cash provided by operating activities ................... $ 4,991 $ 12,428 $ 17,419
Net cash used in investing activities ....................... $ (891) $ (99,126) $(100,017)
Net cash provided by (used in) financing activities ......... $ (1,940) $ 89,812 $ 87,872
</TABLE>

9
<PAGE>

COMPUTATION OF SIX-MONTH AMOUNTS:

<TABLE>
<CAPTION>
PREDECESSOR HOMESERVICES TOTAL
JANUARY 1, 1998 MAY 28, 1998 SIX MONTHS
THROUGH THROUGH ENDED
MAY 27, 1998 JUNE 30, 1998 JUNE 30, 1998
----------------- --------------- --------------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT AMOUNTS
PER SHARE)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Commission revenue .......................................... $ 74,893 $ 19,163 $ 94,056
Title fees .................................................. 7,575 2,455 10,030
Other ....................................................... 3,769 894 4,663
Total revenues ............................................. 86,237 22,512 108,749
Commission expense .......................................... 49,107 12,293 61,400
Acquisition related costs ................................... -- 4,744 4,744
Depreciation and amortization ............................... 2,293 560 2,853
All other operating expenses ................................ 31,126 6,024 37,150
Total operating expenses ................................... 82,526 23,621 106,147
Operating income (loss) ..................................... 3,711 (1,109) 2,602
Interest and other income (expense), net .................... (94) 50 (44)
Income (loss) before income taxes ........................... 3,617 (1,059) 2,558
Income taxes (benefit) ...................................... 1,664 (423) 1,241
Net income (loss) ........................................... $ 1,953 $ (636) $ 1,317
Earnings (loss) per share:
Basic and diluted .......................................... $ 0.20
Weighted average shares outstanding:
Basic and diluted .......................................... 6,506
OTHER DATA:
EBITDA (c) .................................................. $ 6,004 $ 4,195 $ 10,199
Net cash provided by operating activities ................... $ 4,991 $ 9,019 $ 14,010
Net cash used in investing activities ....................... $ (891) $(74,272) $(75,163)
Net cash provided by (used in) financing activities ......... $ (1,940) $ 72,058 $ 70,118
</TABLE>

(b) Prior to 1997, the predecessor was also engaged in real estate
development operations in addition to real estate brokerage
operations in some of the periods presented. All real estate
brokerage and development activities were operated by the same
corporate entity using shared management, office space and other
related services. At the beginning of 1997, the majority of the
assets associated with the development operations was transferred to
the parent company. These development operations contributed only
$0.4 million to the line item "Other" revenues in 1997. Based on the
way the brokerage and development operations were managed, only
certain revenues, expenses, assets and liabilities can be
specifically identified in the predecessor's statements of income
and balance sheets. Revenues from the sale of real estate
development projects of $13.9 million, $10.6 million and $14.0
million are included in the line item "Other" revenues for the years
ended December 31, 1994, 1995 and 1996, respectively. Cost of real
estate sales totaling $11.0 million, $7.4 million and $11.3 million
are included in the line item "All other operating expenses" for the
years ended December 31, 1994, 1995 and 1996, respectively. Real
estate contracts and real estate inventory of $22.5 million, $29.4
million and $23.2 million are included in the line item "Total
assets" for the years ended December 31, 1994, 1995 and 1996,
respectively. Since 1997, HomeServices has not been engaged in real
estate development operations to any significant degree.

(c) EBITDA is defined as net income (loss) before income taxes (benefit)
and interest and other income (expense), net, plus depreciation and
amortization and acquisition related costs. HomeServices believes
that EBITDA is a widely accepted financial indicator used by
investors and analysts to compare the operating performance of
companies. While EBITDA is routinely used by investors and analysts,
EBITDA is not necessarily comparable to other similarly titled
measures of other companies due to potential differences in the
methods of calculation. EBITDA is not intended to represent cash
flows for the periods presented, nor has it been presented as an
alternative to operating income or as an indicator of operating
performance. EBITDA should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles.

10
<PAGE>

RISK FACTORS

Set forth below is a description of material risks to investors
considering an investment in the common stock. You should consider carefully
the following risks and other information in this prospectus before deciding to
invest in shares of common stock. HomeServices may also face some nonmaterial
risks which are not discussed below. HomeServices' business, results of
operations or financial condition could be materially adversely affected if any
of the following risks do occur. If HomeServices' business, results of
operations or financial condition were materially adversely affected, the
trading price of its common stock could decline, and you could lose all or part
of your investment.

HOMESERVICES CANNOT ASSURE YOU OF ITS ABILITY TO SUCCESSFULLY COMPLETE AND
INTEGRATE FUTURE ACQUISITIONS

HomeServices has pursued an active acquisition strategy to strengthen its
position within the Midwestern residential real estate markets by integrating
acquisitions into its operations to achieve economies of scale, and it intends
to continue to do so as part of its growth strategy. As a result, HomeServices
has derived a substantial portion of its revenues and profits from acquired
real estate brokerage firms. The success of HomeServices' future acquisition
strategy will continue to depend upon its ability to find suitable acquisition
candidates on favorable terms and to finance and complete these transactions
despite increasing competition for acquisition candidates. After completing an
acquisition, HomeServices may encounter difficulties in:

o the assimilation of the operations, technologies, products and personnel
of the acquired company;

o retaining key employees and sales associates of the acquired company;

o cross selling services to customers of the acquired company; and

o maintaining effective and consistently applied standards, controls,
procedures and policies.

If HomeServices is unable to successfully integrate an acquired company,
HomeServices may not realize anticipated benefits of the acquisition.

In addition, HomeServices' growth strategy could be materially adversely
affected if it is unable to complete realty company acquisitions in general. By
pursuing an active acquisition strategy, HomeServices could also divert
management's attention away from focusing on its core business operations.
Because HomeServices expects that its future acquisitions will continue to be
accounted for under the purchase method, its goodwill amortization could
increase significantly and have a material adverse effect on its results of
operations. In addition, depending on a number of factors, including the then
current market price of HomeServices' common stock, HomeServices may decide to
pay for these acquisitions in whole or in part by issuing additional shares of
common stock. The issuance of such shares in an acquisition may result in
dilution if the agreed upon per share valuation for purposes of the acquisition
is less than the fair market value of the issued common stock.

HOMESERVICES' PROPOSED REFERRAL STRATEGY DEPENDS ON ACCEPTANCE BY HOMEOWNERS OF
A NEW MEANS OF OFFERING TRADITIONAL HOME SERVICES

HomeServices plans to offer referral services for various services,
particularly by means of E-commerce, including Concierge Services and Home
Dividends. This is a relatively new business for HomeServices and represents a
new means of offering traditional home services to homeowners. HomeServices
began offering and generating revenues from certain referral services, such as
home warranty, home security, home inspection and property and casualty
insurance, in 1998, and launched preliminary activities under its E-commerce
platform, with the commencement of its on-line mortgage origination business
and on-line referral services for home warranty, home security, home inspection
and property and casualty insurance in August 1999. HomeServices cannot assure
you that this new way of offering traditional home services will gain
sufficient market acceptance. Furthermore, because many elements of this
business will be new to it, HomeServices' management may not have the
experience necessary to successfully introduce and operate this new business.
The lack of market acceptance of, or HomeServices' inability to generate
satisfactory revenues from, this new business could have a material adverse
effect on its business and results of operations.

11
<PAGE>

HOMESERVICES' LIMITED OPERATING HISTORY MAKES EVALUATING ITS BUSINESS AND ITS
PROSPECTS DIFFICULT

While HomeServices' predecessors have operated real estate brokerage firms
for a significant period, as a combined organization, HomeServices has operated
only since May 1998, when HomeServices acquired the assets of Iowa Realty Co.
Inc. and Edina Realty Home Services. Including Iowa Realty and Edina Realty,
HomeServices has acquired six major residential real estate businesses since
May 1998. As a result, HomeServices and its acquired operations have a limited
combined operating history upon which you can evaluate HomeServices and its
prospects.

HOMESERVICES MAY NOT BE ABLE TO SUSTAIN OR SUCCESSFULLY MANAGE ITS RAPID GROWTH

HomeServices intends to pursue an aggressive growth strategy by:

o completing selected acquisitions and consolidations;

o expanding its market presence in its existing markets;

o cross selling real estate related products and services; and

o offering referrals for various home care and other products and services,
particularly by means of E-commerce.

Any significant future growth will place demands on HomeServices'
resources. HomeServices' future success and profitability will depend, in part,
on its ability to enhance its operating, accounting and management information
systems and obtain financing for capital expenditures and strategic
acquisitions. HomeServices may not be able to sustain or successfully manage
any significant expansion or obtain adequate financing on favorable terms.

SEASONAL FLUCTUATIONS IN THE RESIDENTIAL REAL ESTATE BROKERAGE BUSINESS COULD
ADVERSELY AFFECT HOMESERVICES

The residential real estate brokerage business is subject to seasonal
fluctuations. Historically, HomeServices' revenues have been strongest in the
second and third quarters of the calendar year. While HomeServices pays
commissions to its sales associates only upon the sale of a home, some of its
other expenses, such as rent, personnel and expenses incidental to being a
public company, are or will be fixed and cannot be reduced during a seasonal
slowdown. As a result, HomeServices may be required to borrow cash in order to
fund its operations during seasonal slowdowns or at other times. HomeServices'
inability to finance its funding needs during a seasonal slowdown or at other
times could have a material adverse effect on its results of operations and
financial condition.

CYCLICAL FLUCTUATIONS IN THE RESIDENTIAL REAL ESTATE BROKERAGE BUSINESS COULD
ADVERSELY AFFECT HOMESERVICES

The residential real estate brokerage industry tends to experience cycles
of greater and lesser activity and profitability and is typically affected by
changes in economic conditions which are beyond HomeServices' control. Any of
the following could have a material adverse effect on HomeServices' business by
causing a general decline in the number of home sales or sale prices and the
demand for Concierge Services or Home Dividends services which, in turn, would
adversely affect revenues and profitability:

o periods of economic slowdown or recession;

o natural disasters such as floods, hurricanes or tornadoes;

o rising interest or unemployment rates;

o decreasing home ownership rates; and

o declining demand for real estate.

NEGATIVE ECONOMIC CONDITIONS OR A DOWNTURN IN THE RESIDENTIAL REAL ESTATE
MARKET IN HOMESERVICES' PRIMARY SERVICE AREAS COULD HAVE AN ADVERSE EFFECT ON
ITS BUSINESS

HomeServices' current primary service area is Minnesota, Iowa, Kansas,
Missouri, Kentucky, Nebraska, Wisconsin, Indiana, North Dakota and South
Dakota. HomeServices intends to expand its

12
<PAGE>

operations beyond its existing service area as part of its acquisition strategy
and its future results of operations may be affected to a larger extent than
its past results of operations by changes in economic conditions in its
expansion markets. A downturn in residential real estate markets or economic
conditions in HomeServices' current markets or in HomeServices' future markets
could have a material adverse effect on it.

HOMESERVICES' SUCCESS DEPENDS IN PART ON THE CONTINUED GROWTH OF INTERNET
COMMERCE AND ITS ABILITY TO SUCCESSFULLY IMPLEMENT CHANGING TECHNOLOGIES

HomeServices believes that expansion through E-commerce will enable it to
more readily achieve its business objective of becoming a one-source provider
of products and services relating to the home ownership experience.
HomeServices' ability to meet these expansion goals through E-commerce depends
substantially upon the widespread acceptance and use of the Internet as an
effective medium of commerce by consumers. Rapid growth in commercial on-line
businesses is a recent phenomenon and demand for recently introduced services
and products over the Internet is, accordingly, subject to a high level of
uncertainty. The development of the Internet as a viable means of marketing
products directly to consumers is subject to a number of factors, including:

o continued growth in the number of users who purchase services over the
Internet;

o concerns about transaction security;

o continued development of the necessary technological infrastructure; and

o the development of complementary services and products.

Failure of the Internet and on-line businesses to become a viable means of
marketing products directly to consumers would adversely affect HomeServices'
business and financial condition.

The development of on-line commerce using the Internet is characterized by
rapidly changing technologies, evolving industry standards, frequent new
product or service introductions and changing consumer preferences.
HomeServices' growth strategy to expand its product offerings by means of
E-commerce and its future success will depend, in part, on its ability to
successfully adapt to these rapidly changing technologies and industry
standards and to meet the changing demands of its customers. HomeServices
cannot assure you that it will be able to implement its strategy in a
successful and timely manner.

BREACHES OF ON-LINE SECURITY COULD HARM HOMESERVICES' E-COMMERCE OPERATIONS

A significant barrier to on-line commerce is the secure transmission of
confidential information over public networks. As HomeServices expands its
developing E-commerce operations, it will rely on technology from third parties
to effectively secure transmission of confidential information, such as that
required on a mortgage loan application. A compromise of HomeServices' on-line
security could injure its reputation and impact the success of its developing
E-commerce operations.

LEGAL UNCERTAINTIES COULD ADD ADDITIONAL COSTS TO E-COMMERCE AND MAY DECREASE
USE OF THE INTERNET

HomeServices' developing E-commerce operations are not currently subject
to direct regulation by any governmental agency in the United States beyond
mortgage-related regulations and regulations applicable to businesses
generally.

A number of legislative and regulatory proposals under consideration by
federal, state, local and foreign governmental organizations may lead to laws
or regulations concerning various aspects of the Internet, including:

o on-line content;

o user privacy;

o taxation;

13
<PAGE>

o access charges; and

o jurisdiction.

The adoption of new laws or the unfavorable application of existing laws
may decrease the use of the Internet, which would decrease the demand for
HomeServices' developing E-commerce services, increase its cost of doing
business or otherwise have an adverse effect on its business and growth
strategy. In addition, the applicability to the Internet of existing laws is
uncertain, including the following:

On-line content and user privacy

Although there are very few laws and regulations directly applicable to
the protection of consumers in an on-line environment, it is possible that
legislation will be enacted in this area and could cover such topics as
permissible on-line content and user privacy, including the collection, use,
retention and transmission of personal information provided by an on-line user.
Furthermore, the growth and demand for on-line commerce could result in more
stringent consumer protection laws that impose additional compliance burdens on
on-line companies. Such consumer protection laws could result in substantial
compliance costs and interfere with the conduct and growth of HomeServices'
business.

Taxation

The tax treatment of the Internet and electronic commerce is currently
unsettled. A number of proposals have been made that could impose taxes on the
sale of goods and services and certain other Internet activities. Recently, the
Internet Tax Information Act was signed into law placing a three-year
moratorium on new state and local taxes on Internet commerce. This moratorium
is expected to end on October 21, 2001. Nonetheless, HomeServices cannot assure
you that future laws imposing taxes or other regulations would not
substantially impair the growth of its business and its financial condition.

Access Charges

Certain local telephone carriers claim that the increasing popularity of
the Internet has burdened the existing telecommunications infrastructure and
that many areas with high Internet use are experiencing interruptions in
telephone service. These carriers have petitioned the Federal Communications
Commission to impose access fees on Internet service providers. If these access
fees are imposed, the cost of communicating on the Internet could increase,
which would decrease demand for HomeServices' developing E-commerce services
and increase its cost of doing business.

Jurisdiction

Because HomeServices' on-line services will be available over the Internet
in multiple states, and as a result, HomeServices expects to sell to numerous
consumers resident in such states, such jurisdictions may claim in the future
that HomeServices is required to qualify to do business as a foreign
corporation or obtain other qualifications in each such state. HomeServices is
qualified to do business in those ten states in which it currently operates, and
its failure in the future to qualify as a foreign corporation in a jurisdiction
where it is required to do so could subject it to taxes and penalties for the
failure to so qualify and limit its ability to conduct litigation in such
states.

CHANGES IN MORTGAGE RESALE MARKETS COULD HAVE AN ADVERSE EFFECT ON
HOMESERVICES' MORTGAGE ORIGINATION BUSINESS

HomeServices' business depends in part on selling to investors the
mortgage loans that it originates as a broker. Less than 1% of HomeServices'
revenues in 1998 was derived from its mortgage operations. As part of
HomeServices' growth strategy, it intends to increase its mortgage origination
business, particularly through its on-line mortgage origination services which
HomeServices

14
<PAGE>

launched in August 1999. Accordingly, any significant change in the secondary
mortgage market, including the operations, level of activity or underwriting
criteria of Fannie Mae or the Federal Home Loan Mortgage Corporation, could
have an adverse effect on HomeServices' business and results of operations.

HOMESERVICES MAY BE REQUIRED TO REPURCHASE MORTGAGES IT HAS ORIGINATED IF THE
REPRESENTATIONS AND WARRANTIES MADE BY HOMESERVICES ARE INACCURATE

In the ordinary course of business, HomeServices makes representations and
warranties to the purchasers and insurers of mortgage loans that it originates,
including representations and warranties as to compliance with applicable
underwriting guidelines. Any loss resulting from a material inaccuracy in these
representations and warranties could have an adverse effect on HomeServices.
From time to time, HomeServices may be obligated to repurchase loans as a
result of such representations and warranties and such repurchases could
adversely affect its results of operations or financial condition. HomeServices
cannot assure you that it will not be required to repurchase any mortgage loan
that it originates in the future.

HOMESERVICES MAY BE UNABLE TO RESELL MORTGAGES IT HAS UNDERWRITTEN

Plaza Mortgage, a wholly owned subsidiary of J.C. Nichols, also
underwrites mortgage loans originated by it. In 1998, mortgages originated and
underwritten by Plaza Mortgage accounted for approximately 15% of HomeServices'
total mortgage operations. Plaza Mortgage's underwriting loan commitments are
contractual obligations in its own name to mortgage loan applicants. Before
underwriting the loan commitment, Plaza Mortgage performs a credit analysis to
confirm that the loan would meet the particular guidelines established by
several investors with whom Plaza Mortgage has established relationships. Prior
to closing with the mortgage applicant, Plaza Mortgage obtains a commitment
that an investor will purchase the loan after the closing at an agreed upon
price on the condition that the loan meets the investor's particular investment
guidelines. The investor's final review is then typically conducted after the
closing of the loan with the mortgage loan applicant. As a result, if
HomeServices subsequently fails to satisfy the terms of the commitment made
with such investor to purchase the loan, then HomeServices would have to find
another purchaser for the loan. HomeServices may incur losses on the resale of
such loan, particularly in cases where mortgage interest rates for the kind of
loan made to the mortgage loan applicant rise after the commitment to the
applicant is made.

THE LOSS OF ITS SENIOR MANAGEMENT TEAM OR KEY SALES ASSOCIATES COULD ADVERSELY
AFFECT HOMESERVICES' BUSINESS

HomeServices' ability to continue to expand its business depends to a
significant extent on the experience and service of its senior management team
and key sales associates. HomeServices' management team is led by Ronald J.
Peltier, its President and Chief Executive Officer, and also consists of Dwayne
J. Coben, Senior Vice President and Chief Financial Officer; Jack W. Frost,
President and Chief Executive Officer of J.C. Nichols; R. Michael Knapp,
President and Chief Executive Officer of Iowa Realty; Arne M. Rovick, Vice
Chairman and General Counsel of Edina Realty; Joseph J. Valenti, President and
Chief Executive Officer of CBS HOME; and George E. Gans, President and Chief
Executive Officer of Paul Semonin Realtors. HomeServices does not carry any key
man life insurance. HomeServices also depends on its key sales associates,
namely those that are sales leaders. The loss of the services of any member of
HomeServices' senior management or a significant number of key sales associates
could adversely affect its business and growth prospects.

HOMESERVICES MAY NOT BE ABLE TO ATTRACT AND RETAIN EMPLOYEES WITH INFORMATION
TECHNOLOGY SKILLS THAT HOMESERVICES NEEDS TO GROW

In addition, HomeServices' business strategy to grow through E-commerce
offerings depends highly on its ability to attract and retain employees with
highly developed information technology skills. Individuals with information
technology skills are in short supply and competition for qualified

15
<PAGE>

information technology personnel is intense. The failure to attract new
information technology personnel could adversely affect its business and growth
prospects.

CHANGES IN GOVERNMENT REGULATION COULD ADVERSELY AFFECT HOMESERVICES

HomeServices' business activities are subject to substantial regulation by
governmental authorities. The jurisdictions in which HomeServices does business
have established requirements governing the licensing and conduct of real
estate brokerage, mortgage and brokerage-related businesses. In addition, the
federal Real Estate Settlement Procedures Act and comparable state statutes
impose restrictions on how HomeServices may conduct its business. More
restrictive laws, regulations or interpretations could be adopted in the future
that could make HomeServices' ability to comply with such regulations more
difficult or expensive. Furthermore, regulatory authorities have broad
discretion to grant, renew and revoke licenses and approvals and to implement
regulations. Accordingly, these regulatory authorities could prevent or
temporarily suspend HomeServices from carrying on some or all of its activities
or otherwise penalize it if its practices were found not to comply with the
then current regulatory or licensing requirements or any interpretation of
these requirements by the regulatory authority. HomeServices' failure to comply
with any of these requirements or interpretations could have a material adverse
effect on its operations and financial performance.

THE TERMS OF CERTAIN INDEBTEDNESS RESTRICT HOMESERVICES' BUSINESS ACTIVITIES

The terms and conditions of HomeServices' revolving credit facility and
7.12% senior notes restrict the ability of HomeServices and its subsidiaries to
incur debt, pay dividends and other distributions, create liens, sell assets
and make investments. The terms of the revolving credit facility also require
HomeServices to maintain specified financial ratios, including an interest
coverage ratio for the last twelve months of not less than 2.50 to 1. Similar
provisions are also contained in debt agreements of MidAmerican Holdings,
HomeServices' parent. Although HomeServices and its subsidiaries are not a
party to such debt agreements, the restrictions contained in them apply to
HomeServices and its subsidiaries. These restrictive and financial maintenance
provisions could limit HomeServices' ability to obtain additional funds for its
operations or future acquisitions, which could have a material adverse effect
on its operations and acquisition strategy.

HOMESERVICES IS A HOLDING COMPANY AND DEPENDS ON DIVIDENDS AND DISTRIBUTIONS
FROM ITS OPERATING SUBSIDIARIES TO FUND ITS OPERATIONS

HomeServices is a holding company and its only assets are the capital
stock of its subsidiaries. As a holding company with no operating assets or
independent means of generating operating revenue, HomeServices will depend on
dividends and other payments from its subsidiaries to pay its obligations.
HomeServices' obligations may include salaries of its executive officers,
insurance, professional fees, expenses incidental to being a public company and
any debt and associated interest charges that it may incur from time to time.
Financial covenants under existing or future debt agreements entered into by
HomeServices' subsidiaries or the laws of the states of incorporation of those
subsidiaries may limit the ability of its subsidiaries to make sufficient
dividend or other payments to permit it to fund its obligations. Creditors of
HomeServices' subsidiaries will have a prior claim to the assets of its
subsidiaries prior to the holders of its common stock.

YEAR 2000 PROBLEMS COULD DISRUPT HOMESERVICES' BUSINESS

Many existing computer systems and software products are coded to accept
only two-digit entries in the date code field and cannot properly recognize
dates in the year 2000 and beyond. Consequently, these systems and software
products need to be either upgraded or replaced to function properly on and
after January 1, 2000.

If, due to hardware or software problems, HomeServices' systems were
unable to operate due to year 2000 problems, it would face the risks of
incurring additional costs to correct its year 2000 problems or losing revenue
due to its inability to deliver services to its customers. These costs or

16
<PAGE>

losses, if incurred, could have a material adverse effect on HomeServices. For
a description of HomeServices' year 2000 readiness efforts, you should refer to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance."

HomeServices cannot assure you, however, that the systems of those
companies will be converted in a timely manner or that the third parties will
mitigate the effects of non-readiness. Any failure by HomeServices' third-party
vendors and service providers to comply in a timely manner could have a
material adverse effect on its operations.

HOMESERVICES WILL CONTINUE TO BE CONTROLLED BY MIDAMERICAN HOLDINGS AFTER THE
OFFERING

Before the offering, HomeServices was a 95.2%-owned subsidiary of
MidAmerican Holdings. Immediately following the offering, MidAmerican Holdings
will continue to own 57.2% of its common stock or 53.0% if the underwriters'
over-allotment option is exercised in full.

As a result of its common stock ownership, MidAmerican Holdings will
continue to have the power to elect HomeServices' entire board of directors and
approve other matters submitted to a vote of HomeServices' stockholders.
HomeServices may not engage in any consolidation, merger or other significant
corporate transaction, even if beneficial to the interests of its other
stockholders, without the approval of MidAmerican Holdings. This concentration
of ownership could also delay or impede a change of control, even if a change
of control would be beneficial to HomeServices' other stockholders. In addition
to a change of control, there may be other instances in which the interests of
HomeServices' public stockholders differ from the interests of MidAmerican
Holdings, which will have the ability to control corporate policies by electing
its directors and officers to serve as directors and officers of HomeServices.

MidAmerican Holdings could decide to sell a substantial portion of its
remaining equity interest in HomeServices to a third-party. A sale involving a
change of control of HomeServices may adversely affect the market price of the
common stock and could affect HomeServices' business.

PROVISIONS OF HOMESERVICES' RESTATED CERTIFICATE OF INCORPORATION, AMENDED AND
RESTATED BYLAWS AND RIGHTS AGREEMENT COULD DETER TAKEOVER ATTEMPTS

HomeServices' restated certificate of incorporation and amended and
restated bylaws include provisions that:

o divide the board of directors into three classes of directors serving
staggered three-year terms;

o authorize the board of directors to fill vacant directorships or increase
the size of the board of directors;

o deny the stockholders the right to cumulate votes in the election of
directors;

o eliminate the ability of stockholders to act by written consent;

o provide that special meetings of HomeServices' stockholders may be called
only by the chairman of the board of directors or a majority of the board
of directors; and

o require stockholders seeking to bring business before an annual meeting of
stockholders, or to nominate candidates for election as directors at an
annual meeting of the stockholders to provide timely notice in writing.

Following the offering, these provisions could delay or impede the removal
of incumbent directors or discourage a third-party from attempting to acquire
control of it, even if doing so would be beneficial to you as a common
stockholder.

In addition, HomeServices' rights agreement contains rights that have
potential antitakeover effects. The rights under the rights agreement may cause
substantial dilution to an acquirer who attempts to acquire HomeServices
without obtaining consent from HomeServices' board of directors or conditioning
the offer on a substantial number of rights being acquired or redeemed.
Accordingly,

17
<PAGE>

these rights have the potential to deter a potential acquirer from making
takeover proposals or tender offers that are not negotiated with HomeServices'
board of directors.

THE CREDIT AGREEMENT WITH MIDAMERICAN HOLDINGS MAY NOT BE THE RESULT OF
ARM'S-LENGTH NEGOTIATIONS

Currently, HomeServices has an existing credit agreement with MidAmerican
Holdings pursuant to which HomeServices had borrowed up to $54.2 million.
Although the credit agreement primarily requires HomeServices to pay
MidAmerican Holdings its cost of funds, the credit agreement may not be the
result of arm's-length negotiations because before the offering HomeServices
was a 95.2%-owned subsidiary of MidAmerican Holdings. If HomeServices did not
have the existing credit agreement and had to obtain a loan from an
unaffiliated third party, it could have difficulty obtaining the loan or only
be able to obtain the loan on less favorable terms than under its existing
credit agreement. HomeServices believes that the terms of its credit agreement
are no less favorable to it than one that could be negotiated with unaffiliated
third parties. However, HomeServices cannot assure you that this is the case.
For a description of the credit agreement, see "Description of
Indebtedness--Revolving Credit Facility."

THE SERVICES AGREEMENT AND REGISTRATION RIGHTS AGREEMENT WITH MIDAMERICAN
HOLDINGS MAY NOT BE THE RESULT OF ARM'S-LENGTH NEGOTIATIONS

Before the closing of the offering, HomeServices will enter into a
services agreement and a registration rights agreement with MidAmerican
Holdings. Although the services agreement will require HomeServices to
reimburse MidAmerican Holdings its reasonable employee and out-of-pocket costs
and expenses in addition to a monthly fee of $50,000, it may not be the result
of arm's length negotiations because before the offering HomeServices was a
95.2%-owned subsidiary of MidAmerican Holdings. HomeServices believes that the
terms of its services agreement and registration rights agreement will be no
less favorable to it than agreements that could be negotiated with unaffiliated
third parties. However, HomeServices cannot assure you that this will be the
case. Furthermore, if HomeServices were required to obtain the services
provided under the services agreement from an unaffiliated third party, the
terms on which such services were provided may be less favorable to
HomeServices than the terms of the services agreement. For a description of
these agreements, see "Certain Relationships and Related
Transactions--Registration Rights Agreement" and "--Services Agreement."

THE ABSENCE OF A TRADING MARKET FOR THE COMMON STOCK COULD MAKE IT DIFFICULT
FOR INVESTORS TO RESELL THEIR SHARES AT OR ABOVE THE INITIAL PUBLIC OFFERING
PRICE

Before the offering, there was no trading market for the common stock.
Although HomeServices will apply to have the common stock approved for
quotation on the Nasdaq National Market, HomeServices does not know whether its
application for quotation will be approved or, if it is approved, whether a
liquid trading market for the common stock will develop. Investors may not be
able to resell their shares at or above the initial public offering price. The
initial public offering price for the shares of common stock will be determined
through negotiations among HomeServices, MidAmerican Holdings and
representatives of the underwriters. The initial public offering price may be
higher than the market price of the common stock after the offering.

NEW INVESTORS WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE VALUE
OF THEIR INVESTMENT

The initial public offering price of the common stock will be
substantially higher than the pro forma net tangible book value per share of
the outstanding common stock. As a result, HomeServices currently expects that
new investors will experience immediate dilution of $15.56 per share in the net
tangible book value per share of the common stock from the initial public
offering price, assuming an initial public offering price of $15.00 per share,
the midpoint of the estimated range of the initial public offering price per
share. If HomeServices issues additional shares of common stock in the future,
investors may experience further dilution. Any further dilution could adversely
affect the price of its common stock.

18
<PAGE>

HOMESERVICES DOES NOT EXPECT TO PAY DIVIDENDS ON ITS COMMON STOCK

HomeServices does not anticipate paying any cash dividends on its common
stock in the foreseeable future. Any payment of future dividends and the
amounts thereof will depend upon HomeServices' earnings, financial requirements
and other factors deemed relevant by its board of directors. In addition,
covenants contained in the revolving credit facility and the 7.12% senior notes
limit the ability of HomeServices and its subsidiaries to pay dividends unless,
after payment of such dividends, the aggregate amount of such payments and
certain investments does not exceed a specified basket equal to $5 million plus
75% of cumulative consolidated net income since June 30, 1998 plus cash
proceeds of certain equity offerings. See "Description of Indebtedness."

THE AVAILABILITY OF A SIGNIFICANT NUMBER OF SHARES FOR FUTURE SALE BY
MIDAMERICAN HOLDINGS AND OTHER SHARES ELIGIBLE FOR PUBLIC SALE COULD ADVERSELY
AFFECT THE MARKET PRICE OF HOMESERVICES' COMMON STOCK

Immediately after the closing of the offering, HomeServices will have
10,237,287 shares of common stock issued and outstanding or 10,587,287 shares
if the underwriters' over-allotment option is exercised in full. Of these
shares, all of the shares sold in the offering will be freely tradeable without
restrictions or further registration under the Securities Act, except for any
shares purchased by HomeServices' affiliates, which are persons that directly
or indirectly control, are controlled by, or are under common control with,
HomeServices. Any shares held by affiliates, whether purchased in the offering
or otherwise, will be eligible for sale subject to meeting the volume and
manner of sale limitations and other conditions contained in Rule 144 and the
expiration of any lock-up agreements entered into with the underwriters.

In addition, after completing the offering, HomeServices intends to file a
registration statement on Form S-8 under the Securities Act covering the
shares of common stock reserved for issuance under HomeServices' employee stock
option plan. The registration statement on Form S-8 will automatically become
effective upon filing. Subject to vesting and the exercise of the issued and
outstanding options, shares registered under the registration statement on Form
S-8 will be freely tradeable and available for sale in the open market.

Subject to applicable federal securities laws and restrictions contained
in the underwriting agreement with the underwriters, MidAmerican Holdings can
sell any or all of its shares of common stock. In addition, under the
registration rights agreement, MidAmerican Holdings has registration rights
with respect to the shares of its common stock, which would facilitate any
future disposition. Sales in the public market of substantial amounts of common
stock, or the perception that such sales could occur, could cause the
prevailing market price for HomeServices' common stock to decrease.
HomeServices cannot predict how long MidAmerican Holdings will maintain its
current majority ownership of common stock after the offering.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve
substantial risks and uncertainties. These statements may be found under
"Prospectus Summary," "Risk Factors," "Unaudited Pro Forma Condensed
Consolidated Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business." Forward-looking
statements contain the words "believes," "anticipates," "expects" and words of
similar import. Because these statements involve risks and uncertainties,
actual results could differ materially from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. Factors that could cause these differences include
those discussed under "Risk Factors" in this prospectus. The forward-looking
statements are made as of the date of this prospectus.

19
<PAGE>

USE OF PROCEEDS

HomeServices estimates that the net proceeds to it from the offering,
after deducting applicable underwriting discounts and commissions and estimated
offering expenses payable by it, will be approximately $30.3 million.
HomeServices expects to use the net proceeds of the offering for (1) general
corporate purposes, which are expected to include the continued development of
its E-commerce operations, and (2) acquisitions of real estate brokerage firms
and their related service businesses. The Company has no pending acquisitions
other than as described in this prospectus and therefore is unable to specify
any amount earmarked to future acquisitions. Pending such use, HomeServices
will invest the net proceeds from the offering in short-term treasury,
municipal or investment grade securities.

HomeServices will not receive any proceeds from the sale of shares by
MidAmerican Holdings.

DIVIDEND POLICY

HomeServices does not anticipate paying cash dividends to its common
stockholders in the foreseeable future after the offering. The timing, amount
and form of future dividends, if any, will be at the discretion of
HomeServices' board of directors and will depend on HomeServices' results of
operations, financial condition, cash requirements and other factors considered
relevant by the board of directors.

Before the offering, HomeServices paid cash dividends on the common stock
of $0.39 per share in 1997. HomeServices did not pay any cash dividends on the
common stock during 1998 or 1999.

20
<PAGE>

DILUTION

At June 30, 1999, the adjusted net tangible book value of HomeServices,
after giving effect to the intended approximate 650.6-for-1 share exchange to be
effected as part of the merger with MidAmerican Realty Services Company and the
acquisition of Paul Semonin Realtors, was approximately $(36.0) million, or
$(4.55) per share. Net tangible book value is defined as the book value of all
assets of HomeServices, less all liabilities and intangible assets.
HomeServices' intangible assets consist primarily of goodwill. Without taking
into account any changes in net tangible book value after June 30, 1999, other
than to give effect to the offering and the application of the estimated net
proceeds, the pro forma adjusted net tangible book value of HomeServices' common
stock as of June 30, 1999 would have been approximately $(5.8) million, or
$(0.56) per share. The following table gives effect to the offering as if it had
occurred on June 30, 1999 at an assumed initial public offering price of $15.00
per share, which is the midpoint of the estimated range of the initial public
offering price per share, before deduction of the underwriting discount and
commission and other expenses payable by HomeServices. The table illustrates the
immediate increase in net tangible book value of $3.99 per share to
HomeServices' existing stockholders and an immediate dilution of $15.56 per
share to new investors:

<TABLE>
<S> <C> <C>
Public offering price per share ................................. $ 15.00
Adjusted net tangible book value per share as of June 30, 1999 .. $ (4.55)
Increase in adjusted net tangible book value per share
attributable to the offering .................................. $ 3.99
Pro forma adjusted net tangible book value per share as of
June 30, 1999, after giving effect to the offering ............ $ (0.56)
--------
Immediate dilution per share to new investors ................... $ 15.56
========
</TABLE>

The following table presents as of June 30, 1999, on a pro forma basis
after giving effect to the offering, the positions of existing common
stockholders and new investors with respect to the number of shares of common
stock purchased from HomeServices, the total consideration paid and the average
price paid per share, at an assumed initial public offering price of $15.00 per
share, which is the midpoint of the estimated range of the initial public
offering price per share, before deduction of the underwriting discount and
commission and other expenses payable by HomeServices.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------------- ------------------------- PRICE PER
NUMBER PERCENTAGE AMOUNT PERCENTAGE SHARE
------------ ------------ ---------- ------------ ----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
New investors ........................ 4,000,000 39.1% $ 60,000 55.5% $ 15.00
Existing common stockholders ......... 6,237,287 60.9 48,015 44.5 7.70
--------- ----- -------- ----- --------
Total ................................ 10,237,287 100.0% $108,015 100.0% $ 10.51
</TABLE>

21
<PAGE>

CAPITALIZATION

The following table sets forth HomeServices' cash and cash equivalents and
capitalization as of June 30, 1999 on an actual basis and on a pro forma basis
after giving effect to:

o the offering and the application of the estimated net proceeds to
HomeServices;

o the merger of MidAmerican Realty Services Company with and into
HomeServices and the issuance of approximately 650.6 shares of
HomeServices' common stock for each share of common stock of MidAmerican
Realty Services Company, which merger will occur immediately before the
closing of the offering;

o the amendment and restatement of HomeServices' certificate of
incorporation to increase the authorized shares of capital stock and adopt
a rights plan before the closing of the offering; and

o the acquisition of Paul Semonin Realtors.

You should read this table together with the consolidated financial
statements and the related notes, "Unaudited Pro Forma Condensed Consolidated
Financial Information" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
------------------------
ACTUAL(A) PRO FORMA
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents ............................................ $ 11,544 $36,992
======== =======
Long-term debt (including current portion):
Revolving credit facility (b) ....................................... $ 23,500 $23,500
7.12% senior notes .................................................. 35,000 35,000
Other ............................................................... 1,067 1,502
-------- -------
Total long-term debt .............................................. 59,567 60,002
-------- -------
Stockholders' equity:
Preferred stock, $0.01 par value, no shares authorized (actual);
shares authorized (pro forma); no shares issued and
outstanding (actual); no shares issued and outstanding (pro forma) -- --
Common stock, $0.01 par value, 1,000,000 shares authorized (actual);
10,000 shares authorized (pro forma); 10,000 shares issued and
outstanding (actual); 10,237,287 shares issued and outstanding (pro
forma) ............................................................ 10 33
Additional paid-in capital .......................................... 39,505 78,232
Notes receivable (c) ................................................ (753) (753)
Accumulated other comprehensive income (loss) ....................... (16) (16)
Retained earnings (accumulated deficit) ............................. 1,192 1,192
-------- --------
Total stockholders' equity ........................................ 39,938 78,688
-------- --------
Total capitalization .............................................. $ 99,505 $138,690
======== ========
</TABLE>

- ----------

(a) Represents capitalization of MidAmerican Realty Services Company.

(b) At August 16, 1999, an aggregate of $23.5 million in borrowings were
outstanding under the revolving credit facility.

(c) Represents promissory notes issued by certain members of
HomeServices' management as consideration for their aggregate 4.8%
ownership (3.8% ownership on a pro forma basis) of the common stock
of HomeServices. See "Certain Relationships and Related
Transactions--Management Indebtedness."

22
<PAGE>

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated financial
information of HomeServices presents the unaudited pro forma condensed
consolidated statements of income for the year ended December 31, 1998, and the
six months ended June 30, 1999, and June 30, 1998, and the pro forma condensed
consolidated balance sheet as of June 30, 1999 after giving effect to the
merger of MidAmerican Realty Services Company into HomeServices.

The unaudited pro forma condensed consolidated statements of income for
the year ended December 31, 1998, and the six months ended June 30, 1998, give
effect to the following acquisitions completed or expected to be completed
during 1998 and 1999 as if they occurred on January 1, 1998:

o Predecessor which consists of Iowa Realty Co., Inc. and its consolidated
subsidiaries, which at the time of acquisition by HomeServices included
Edina Realty Home Services of Minnesota;

o J.C. Nichols Residential, Inc.;

o Other acquisitions which consist of CBS Real Estate Company, HOME Real
Estate Holdings Inc. and Nebraska Land Title & Abstract; and

o Paul Semonin Realtors.

The unaudited pro forma condensed consolidated statements of income for
the six months ended June 30, 1999 give effect to the acquisition of Paul
Semonin Realtors as if it occurred on January 1, 1998.

The pro forma statements of income do not give effect to the interest
income that would have been earned on proceeds of the offering that are not
used by HomeServices had such transaction occurred on January 1, 1998.

The unaudited pro forma condensed consolidated balance sheet as of June
30, 1999 gives effect to the following transactions as if they occurred on June
30, 1999: (1) the offering, (2) the application of the estimated net proceeds
to HomeServices from the offering and (3) the acquisition of Paul Semonin
Realtors.

HomeServices' acquisitions have been accounted for using the purchase
method of accounting. Accordingly, assets acquired and liabilities assumed have
been recorded at their estimated fair values. Management does not expect that
the final allocations of the purchase prices for the acquisitions will differ
materially from the preliminary allocations.

The pro forma adjustments reflect HomeServices' determination of all
adjustments necessary to present fairly HomeServices' pro forma financial
position and results of operations. These adjustments are based on available
information and assumptions HomeServices considers reasonable under the
circumstances. All material intercompany eliminations have been made. The
unaudited pro forma condensed consolidated financial information is provided
for informational purposes only. This information is not necessarily indicative
of the financial position or the results of operations of HomeServices had the
transactions referred to above occurred on the dates specified. In addition,
this information is not necessarily indicative of the financial condition or
results of operations which may exist in the future. You should read the
unaudited pro forma condensed consolidated financial information together with
the historical consolidated financial statements of HomeServices, its
predecessor and acquired companies and the related notes included elsewhere in
this prospectus.

23
<PAGE>

HOMESERVICES.COM INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PREDECESSOR* MIDAMERICAN
(1)(2) REALTY (2)(3) J.C. NICHOLS (4)
-------------- --------------- ------------------
<S> <C> <C> <C>
Revenues:
Commission revenue ............... $74,893 $169,647 $25,715
Title fees ....................... 7,575 14,154 --
Other ............................ 3,769 6,790 2,163
------- -------- -------
Total revenues .................. 86,237 190,591 27,878
------- -------- -------
Operating expenses:
Commission expense ............... 49,107 113,225 18,173
Acquisition related costs ........ -- 18,271 --
Depreciation and amortization..... 2,293 4,177 292
All other operating expenses ..... 31,126 59,265 7,266
------- -------- -------
Total operating expenses ........ 82,526 194,938 25,731
------- -------- -------
Operating income (loss) ........... 3,711 (4,347) 2,147
Interest and other income
(expense), net ................... (94) (1,334) 28
Minority interest ................. -- -- (97)
------- -------- -------
Income (loss) before income
taxes ............................ 3,617 (5,681) 2,078
Income taxes (benefit) ............ 1,664 (2,247) 792
------- -------- -------
Net income (loss) ................. $ 1,953 $ (3,434) $ 1,286
======= ======== =======
Per share information:
Earnings per share -
Basic ...........................
Diluted .........................
Weighted average shares
Outstanding -
Basic ...........................
Diluted .........................

<PAGE>

<CAPTION>
OTHER
PAUL ACQUISITIONS HOMESERVICES
SEMONIN (5) (2)(6) ADJUSTMENTS PRO FORMA
------------- -------------- ------------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Commission revenue ............... $30,663 $19,298 $ -- $320,216
Title fees ....................... -- 1,236 22,965
Other ............................ 1,180 754 14,656
------- ------- --------
Total revenues .................. 31,843 21,288 -- 357,837
------- ------- ----------- --------
Operating expenses:
Commission expense ............... 21,408 14,422 216,335
Acquisition related costs ........ -- -- 1,700 (7) 19,971
Depreciation and amortization..... 501 228 1,030 (8) 8,521
All other operating expenses ..... 8,126 6,366 112,149
------- ------- --------
Total operating expenses ........ 30,035 21,016 2,730 356,976
------- ------- ----------- --------
Operating income (loss) ........... 1,808 272 (2,730) 861
Interest and other income
(expense), net ................... 440 78 (2,191)(9) (3,073)
Minority interest ................. -- -- (97)
------- ------- --------
Income (loss) before income
taxes ............................ 2,248 350 (4,921) (2,309)
Income taxes (benefit) ............ 913 296 (2,250)(10) (832)
------- ------- ----------- --------
Net income (loss) ................. $ 1,335 $ 54 $ (2,671) $ (1,477)
======= ======= =========== ========
Per share information:
Earnings per share -
Basic ........................... $ (0.14)
Diluted ......................... $ (0.14)
Weighted average shares
Outstanding -
Basic ........................... 10,237
Diluted ......................... 10,451
</TABLE>

See Notes to Unaudited Pro Forma Condensed Consolidated Statement of
Income for the Year Ended December 31, 1998.

- ----------

* Predecessor refers to Iowa Realty and its consolidated subsidiaries which,
at the time Iowa Realty and Edina Realty were acquired in May 1998,
included Edina Realty.

24
<PAGE>

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1998

(1) Reflects the historical results of the predecessor for the period from
January 1, 1998 through May 27, 1998, the day prior to the predecessor's
acquisition by HomeServices.

(2) Prior to HomeServices' acquisition of Iowa Realty, Iowa Realty sold its
subsidiary, HOME Real Estate Holdings Inc., to a third party. On August
18, 1998, HomeServices acquired HOME Real Estate from the third party in
an unrelated transaction. Accordingly, the historical results of HOME Real
Estate are reflected as follows: (a) in HomeServices' results for the
period from August 19, 1998, the date following acquisition by
HomeServices, to December 31, 1998, (b) in the predecessor's results for
the period from January 1, 1998 to May 7, 1998, the day prior to the
predecessor's sale of HOME Real Estate to a third party, and (c) in the
Other Acquisitions column for the period from May 8, 1998 to August 18,
1998, which represents the period during which HOME Real Estate was not
owned by either HomeServices or the predecessor.

(3) Reflects historical results of HomeServices for the period from May 28,
1998, its inception date, to December 31, 1998 and includes the historical
results for the acquisitions completed in 1998 from their respective dates
of acquisition.

(4) Reflects the historical results of J.C. Nichols for the period from
January 1, 1998 through August 31, 1998, the date of acquisition by
HomeServices.

(5) Reflects the historical results of Paul Semonin Realtors for the year
ended December 31, 1998.

(6) Reflects the historical results of the following companies acquired by
HomeServices: (a) CBS Real Estate Company for the period from January 1,
1998 through August 17, 1998, the date of acquisition by HomeServices, (b)
HOME Real Estate for the period from May 8, 1998 to August 18, 1998 (see
note (2) above) and (c) Nebraska Land Title & Abstract for the period from
January 1, 1998 through December 16, 1998, the date of acquisition by
HomeServices.

(7) Reflects the value of real estate sales contracts that were pending at the
date of acquisition. The established asset is charged to expense as the
contracts close, based on HomeServices' estimate of when contracts
typically result in closed transactions.

(8) Reflects amortization of goodwill over a 30-year life specifically related
to the purchase of the acquired businesses along with the amortization of
non-compete agreements over the life of the respective agreements.

(9) Reflects interest expense on the $25.0 million revolving credit facility
at the blended interest rate of 6.51% and annual interest expense on $35.0
million of private placement notes at the stated rate of 7.12%.

The average interest rate on the revolver was calculated based on the
weighted average outstanding balance of the revolving credit agreement
including the swap agreement. If interest rates were to fluctuate by 1/8%
on the portion of the revolver not covered by the swap agreement, income
from operations would be affected $16,000 annually.

(10) Reflects the income tax benefit that would have been realized if the
acquired businesses had been combined at the beginning of the period.
Calculated as income before taxes adjusted for permanent book/tax
differences of approximately $258,000 at December 31, 1998. A combined
federal and state statutory tax rate of 40.59% was applied in the
calculation.

(11) A reconciliation of Net Income (Loss) and Shares for the Basic and Diluted
per share computations for income from continuing operations for the year
ended December 31, 1998 is as follows (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
NET
INCOME PER SHARE
(LOSS) SHARES AMOUNT
------------ -------- ----------
<S> <C> <C> <C>
INCOME (LOSS) FROM CONTINUING OPERATIONS $ (1,477)
--------
BASIC EPS
Income Available to Common Shareholders.. (1,477) 10,237 $ (0.14)
EFFECT OF DILUTIVE SECURITIES
Stock Options ........................... -- 214
-------- ------
DILUTED EPS
Income Available to Common Shareholders.. $ (1,477) 10,451 $ (0.14)
======== ====== =======
</TABLE>

25
<PAGE>

HOMESERVICES.COM INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
MIDAMERICAN J.C.
PREDECESSOR* (1) REALTY NICHOLS (2)
------------------ ------------- -------------
<S> <C> <C> <C>
Revenues:
Commission
revenue ............ $74,893 $ 19,163 $16,604
Title fees .......... 7,575 2,455
Other ............... 3,769 894 1,510
------- -------- -------
Total revenues ..... 86,237 22,512 18,114
------- -------- -------
Operating expenses:
Commission
expense ............ 49,107 12,293 11,858
Acquisition
related costs ...... -- 4,744 --
Depreciation and
amortization ....... 2,293 560 201
All other
operating
expenses ........... 31,126 6,024 5,071
------- -------- -------
Total operating
expenses .......... 82,526 23,621 17,130
------- -------- -------
Operating income
(loss) .............. 3,711 (1,109) 984
Interest and other
income (expense),
net ................. (94) 50 (18)
------- -------- -------
Income (loss) before
income taxes ........ 3,617 (1,059) 966
Income taxes
(benefit) ........... 1,486 (423) 394
------- -------- -------
Net income (loss) .... $ 2,131 $ (636) $ 572
======= ======== =======

Per share information:
Earnings per share -
Basic ...............
Diluted .............
Weighted average shares
Outstanding -
Basic ...............
Diluted .............

<PAGE>

<CAPTION>
PAUL OTHER HOMESERVICES
SEMONIN (3) ACQUISITIONS (4) ADJUSTMENTS PRO FORMA
------------- ------------------ ----------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Commission
revenue ............ $14,692 $13,312 $ -- $ 138,664
Title fees .......... -- 314 10,344
Other ............... 525 882 7,580
------- ------- ---------
Total revenues ..... 15,217 14,508 156,588
------- ------- ---------
Operating expenses:
Commission
expense ............ 10,153 10,020 93,431
Acquisition
related costs ...... -- -- 15,227 (5) 19,971
Depreciation and
amortization ....... 227 135 767 (6) 4,183
All other
operating
expenses ........... 3,748 3,073 49,042
------- ------- ---------
Total operating
expenses .......... 14,128 13,228 15,994 166,627
------- ------- ------------- ---------
Operating income
(loss) .............. 1,089 1,280 (15,994) (10,039)
Interest and other
income (expense),
net ................. 114 37 (2,060)(7) (1,971)
------- ------- ------------- ---------
Income (loss) before
income taxes ........ 1,203 1,317 (18,054) (12,010)
Income taxes
(benefit) ........... 491 571 (7,328)(8) (4,809)
------- ------- ------------- ---------
Net income (loss) .... $ 712 $ 746 $ (10,726) $ (7,201)
======= ======= ============= =========
Per share information:
Earnings per share -
Basic .............. $ (0.70)
Diluted............. (0.69)
Weighted average
shares
Outstanding -
Basic .............. 10,237
Diluted............. 10,451
</TABLE>

See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income
for the Six Months Ended June 30, 1998.

- ----------

* Predecessor refers to Iowa Realty and its consolidated subsidiaries which,
at the time Iowa Realty and Edina Realty were acquired in May 1998,
included Edina Realty.

26
<PAGE>

NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1998

(1) Reflects the historical results of the predecessor, including HOME Real
Estate, for the period presented.

(2) Reflects the historical results of J.C. Nichols for the period presented.

(3) Reflects the historical results of Paul Semonin Realtors for the period
presented.

(4) Reflects the historical results of CBS Real Estate Company and Nebraska
Land Title & Abstract for the period presented.

(5) Reflects the value of real estate sales contracts that were pending at the
date of acquisition. The established asset is charged to expense as the
contracts close, based on HomeServices' estimate of when contracts
typically result in closed transactions.

(6) Reflects amortization of goodwill over a 30-year life specifically related
to the purchase of the acquired businesses along with the amortization of
non-compete agreements over the life of the respective agreements.

(7) Reflects interest expense on the $25.0 million revolving credit facility
at the blended interest rate of 6.51% and annual interest expense on $35.0
million of private placement notes at the stated rate of 7.12%.

(8) Reflects the income tax benefit that would have been realized if the
acquired businesses had been combined at the beginning of the period.
Calculated as income before taxes adjusted for permanent book/tax
differences of approximately $161,000 at June 30, 1998. A combined federal
and state statutory tax rate of 40.59% was applied in the calculation.

(9) A reconciliation of Net Income (Loss) and Shares for the Basic and Diluted
per share computations for income from continuing operations for the year
ended June 30, 1998 is as follows (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
NET
INCOME PER SHARE
(LOSS) SHARES AMOUNT
------------- -------- ----------
<S> <C> <C> <C>
INCOME (LOSS) FROM CONTINUING OPERATIONS $ (7,201)
---------

BASIC EPS
Income Available to Common Shareholders . (7,201) 10,237 $ (0.70)
EFFECT OF DILUTIVE SECURITIES
Stock Options ........................... -- --
--------- ------
DILUTED EPS
Income Available to Common Shareholders . $ (7,201) 10,451 $ (0.69)
========= ====== =======
</TABLE>

27
<PAGE>

HOMESERVICES.COM INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1999

(IN THOUSANDS)

<TABLE>
<CAPTION>
MIDAMERICAN PAUL HOMESERVICES
REALTY SEMONIN (1) ADJUSTMENTS PRO FORMA
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Commission revenue .............................. $148,979 $15,993 $ $164,972
Title fees ...................................... 10,644 -- 10,644
Other ........................................... 8,101 409 8,510
-------- ------- --------
Total revenues ................................. 167,724 16,402 184,126
-------- ------- --------
Operating expenses:
Commission expense .............................. 102,085 11,098 113,183
Acquisition related costs ....................... -- -- -- --
Depreciation and amortization ................... 3,718 274 170 (2) 4,162
All other operating expenses .................... 52,242 4,169 56,411
-------- ------- --------
Total operating expenses ....................... 158,045 15,541 170 173,756
-------- ------- ------ --------
Operating income (loss) .......................... 9,679 861 (170) 10,370
Interest and other income (expense), net ......... (1,775) (37) (1,812)
-------- ------- --------
Income (loss) before income taxes ................ 7,904 824 (170) 8,558
Income taxes (benefit) ........................... 3,278 339 (75)(3) 3,542
-------- ------- ------ --------
Net income (loss) ................................ $ 4,626 $ 485 $ (95) $ 5,016
======== ======= ====== ========
Per share information:
Earnings per share -
Basic .......................................... $ 0.71 $ 0.49
Diluted ........................................ $ 0.71 $ 0.48
Weighted average shares
Outstanding -
Basic .......................................... 6,506 10,237
Diluted ........................................ 6,506 10,451
</TABLE>

- ----------
(1) Reflects the historical results of Paul Semonin Realtors for the period
presented.

(2) Reflects amortization of goodwill over a 30-year life specifically
related to the purchase of the acquired businesses along with the
amortization of non-compete agreements over the life of the respective
agreements.

(3) Reflects the income tax benefit that would have been realized if the
acquired business had been combined at the beginning of the period.
Calculated as income before taxes adjusted for permanent book/tax
differences of approximately $167,000 at June 30, 1999. A combined federal
and state statutory tax rate of 40.59% was applied in the calculation.

(4) A reconciliation of Net Income (Loss) and Shares for the Basic and Diluted
per share computations for income from continuing operations for the six
months ended June 30, 1999 is as follows (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
NET
INCOME PER SHARE
(LOSS) SHARES AMOUNT
-------- -------- ----------
<S> <C> <C> <C>
INCOME (LOSS) FROM CONTINUING OPERATIONS $5,016
------

BASIC EPS
Income Available to Common Shareholders.. 5,016 10,237 $ 0.49
EFFECT OF DILUTIVE SECURITIES
Stock Options ........................... -- 214
------ ------
DILUTED EPS
Income Available to Common Shareholders.. $5,016 10,451 $ 0.48
====== ====== ======
</TABLE>

28
<PAGE>

HOMESERVICES.COM INC.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

JUNE 30, 1999

(IN THOUSANDS)

<TABLE>
<CAPTION>
PAUL
MIDAMERICAN SEMONIN
REALTY ACQUISITION(1)
ASSETS ------------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................. $ 11,544 $ (4,802)
Mortgage loans held for sale and other
receivables ......................................... 12,477 1,700
Receivable from affiliates ............................ --
Cash held in trust .................................... 9,489
Income taxes receivable ............................... 1,432
Other current assets .................................. 1,789 820
-------- --------
36,731 (2,282)
-------- --------
Other assets:
Office property and equipment, net .................... 18,147 1,198
Intangible assets, net of accumulated
amortization of $2,327............................... 74,266 10,177
Investment in 50% or less owned entities .............. 841 830
Held-to-maturity securities ........................... 858
Available-for-sale securities ......................... 355
Other assets .......................................... 590 360
-------- --------
95,057 12,565
-------- --------
Total assets ....................................... $131,788 $ 10,283
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ...................................... $ 3,876 $ --
Accrued expenses ...................................... 10,528
Payable to affiliates ................................. 635
Cash held in trust .................................... 9,489
Current portion of agent profit sharing ............... 433
Current portion of long-term debt ..................... 3,162 40
Other current liabilities ............................. 1,896 1,010
-------- --------
30,019 1,050
-------- --------
Other liabilities:
Deferred taxes ........................................ 267
Long-term debt ........................................ 56,405 395
Agent profit sharing .................................. 5,069
Other noncurrent liabilities .......................... 90 338
-------- --------
61,831 733
-------- --------
Total liabilities .................................. 91,850 1,783
======== ========
Stockholders' equity:
Common stock, no par; 1,000,000 shares
authorized 10,000 shares issued and
outstanding ......................................... 10
Additional paid-in capital ............................ 39,505 8,500
Notes receivable ...................................... (753)
Accumulated other comprehensive loss .................. (16)
Accumulated earnings .................................. 1,192
--------
Total stockholders' equity ......................... 39,938 8,500
-------- --------
Total liabilities and stockholders' equity ......... $131,788 $ 10,283
======== ========

<PAGE>
<CAPTION>
PRO FORMA
BEFORE OFFERING HOMESERVICES
OFFERING ADJUSTMENTS(2) PRO FORMA
ASSETS ------------ ---------------- -------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ............................. $ 6,742 $30,250 $ 36,992
Mortgage loans held for sale and other
receivables ......................................... 14,177 14,177
Receivable from affiliates ............................ -- --
Cash held in trust .................................... 9,489 9,489
Income taxes receivable ............................... 1,432 1,432
Other current assets .................................. 2,609 2,609
-------- --------
34,449 30,250 64,699
-------- ------- --------
Other assets:
Office property and equipment, net .................... 19,345 19,345
Intangible assets, net of accumulated
amortization of $2,327............................... 84,443 84,443
Investment in 50% or less owned entities .............. 1,671 1,671
Held-to-maturity securities ........................... 858 858
Available-for-sale securities ......................... 355 355
Other assets .......................................... 950 950
-------- --------
107,622 -- 107,622
-------- ------- --------
Total assets ....................................... $142,071 $30,250 $172,321
======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ...................................... $ 3,876 $ -- $ 3,876
Accrued expenses ...................................... 10,528 10,528
Payable to affiliates ................................. 635 635
Cash held in trust .................................... 9,489 9,489
Current portion of agent profit sharing ............... 433 433
Current portion of long-term debt ..................... 3,202 3,202
Other current liabilities ............................. 2,906 2,906
-------- --------
31,069 -- 31,069
-------- ------- --------
Other liabilities:
Deferred taxes ........................................ 267 267
Long-term debt ........................................ 56,800 56,800
Agent profit sharing .................................. 5,069 5,069
Other noncurrent liabilities .......................... 428 428
-------- --------
62,564 -- 62,564
-------- ------- --------
Total liabilities .................................. 93,633 93,633
======== ========
Stockholders' equity:
Common stock, no par; 1,000,000 shares
authorized 10,000 shares issued and
outstanding ......................................... 10 23 33
Additional paid-in capital ............................ 48,005 30,227 78,232
Notes receivable ...................................... (753) (753)
Accumulated other comprehensive loss .................. (16) (16)
Accumulated earnings .................................. 1,192 1,192
-------- --------
Total stockholders' equity ......................... 48,438 30,250 78,688
-------- ------- --------
Total liabilities and stockholders' equity ......... $142,071 $30,250 $172,321
======== ======= ========
</TABLE>

See Notes to Unaudited Pro Forma Consolidated Balance Sheet.

29
<PAGE>

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

(1) The amounts shown in this column represent the fair value of assets and
liabilities received/assumed in the acquisition of Paul Semonin Realtors,
as well as the following adjustments to effect the acquisition.

<TABLE>
<CAPTION>
LINE ITEM DESCRIPTION AMOUNT
- ------------------------------------------ ----------------------------------------------- ------------
<S> <C> <C>
Cash Cash on hand used $ (4,802)
Mortgage loans held for sale and other
receivables Value of pending real estate contracts 1,700
Intangible assets, net Goodwill 10,177
Additional paid-in capital Contribution from parent (8,500)
</TABLE>

(2) The amounts shown in this column reflect the estimated effect of
HomeServices issuance of 2,333,333 shares of its common stock at an
assumed initial public offering price of $15 per share, the midpoint of
the estimated range of the initial public offering price per share, less
estimated fees and expenses of $4.8 million to be paid by HomeServices.

30
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below as of December 31,
1996, 1997 and 1998 and for the years ended December 31, 1996, 1997 and for the
periods ended May 28, 1998 and December 31, 1998 are derived from the audited
consolidated financial statements of MidAmerican Realty Services Company and its
predecessor, which will be merged with and into HomeServices. The selected
consolidated financial data presented below as of December 31, 1994 and 1995 and
for the year ended December 31, 1994 and 1995 are derived from the unaudited
consolidated financial statements of the predecessor. The selected consolidated
financial data as of and for the periods ended May 28, 1999 and June 30, 1999,
are derived from the unaudited consolidated financial statements of MidAmerican
Realty Services Company, and the selected consolidated financial data as of and
for the periods ended May 28, 1998 and June 30, 1998 are derived from the
unaudited consolidated financial statements of MidAmerican Realty Services
Company and its predecessor. Results for the six months ended June 30, 1999 are
not necessarily indicative of HomeServices' results to be expected for the full
year.

Results of operations for 1994 and 1995 reflect only the results of Iowa
Realty and its consolidated subsidiaries. In 1996, Edina Realty became a
subsidiary of Iowa Realty through a reorganization effected by their parent
company. HomeServices and its predecessor acquired companies in 1997 and 1998
and accounted for the acquisitions by the purchase method of accounting.
Accordingly, the results of operations of the acquired companies have been
included in the consolidated operating results of HomeServices and its
predecessor only from their dates of acquisition.

In July 1997, Iowa Realty acquired HOME Real Estate Holdings, Inc. On May
8, 1998, which was before HomeServices acquired Iowa Realty, Iowa Realty sold
HOME Real Estate to a third party. Accordingly, the results of operations of
the predecessor for 1996, 1997 and 1998 include the results of Iowa Realty and
Edina Realty and their consolidated subsidiaries, which, from July 1, 1997 to
May 7, 1998, also include the results of HOME Real Estate. HomeServices
purchased its predecessor in May 1998 and acquired various other companies
thereafter.

You should read the financial data presented below together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of MidAmerican Realty
Services Company, which will be merged with and into HomeServices, and its
predecessor and the related notes appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
PREDECESSOR
---------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------- JAN 1 -
MAY 27,
1994 1995 1996 1997 1998
---------- ---------- ----------- ----------- -----------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT AMOUNTS PER
SHARE)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Commission revenue ................... $50,967 $58,409 $179,378 $191,083 $74,893
Title fees ........................... -- -- 14,821 16,203 7,575
Other (a) ............................ 15,050 12,672 22,092 7,410 3,769
Total revenues ...................... 66,017 71,081 216,291 214,696 86,237
Commission expense ................... 30,792 35,433 115,331 125,148 49,107
Acquisition related costs ............ -- -- -- -- --
Depreciation and amortization ........ 1,762 2,123 5,103 5,619 2,293
All other operating expenses (a) ..... 28,769 29,767 85,162 72,808 31,126
Total operating expenses ............ 61,323 67,323 205,596 203,575 82,526
Operating income (loss) .............. 4,694 3,758 10,695 11,121 3,711
Interest and other income
(expense), net ...................... (324) (942) (2,582) (903) (94)
Income (loss) before income taxes 4,370 2,816 8,113 10,218 3,617
Income taxes (benefit) ............... 1,853 1,471 3,263 4,725 1,664
Minority interest .................... -- -- 1,276 633 --
Net income (loss) .................... $ 2,517 $ 1,345 $ 3,574 $ 4,860 $ 1,953
Earnings (loss) per share:
Basic and diluted ................... $ 3.94 $ 2.10 $ 5.59 $ 2.19 $ 0.41
Weighted average shares
outstanding:
Basic and diluted ................... 639 639 639 2,224 4,748

<PAGE>

<CAPTION>
HOMESERVICES
-----------------------------------
SIX MONTHS
MAY 28 - MAY 28 - ENDED
DEC. 31, JUNE 30, JUNE 30,
1998 1998 1999
------------ ---------- -----------
(DOLLARS AND SHARES IN THOUSANDS,
EXCEPT
AMOUNTS PER SHARE)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Commission revenue ................... $169,647 $ 19,163 $148,979
Title fees ........................... 14,154 2,455 10,644
Other (a) ............................ 6,790 894 8,101
Total revenues ...................... 190,591 22,512 167,724
Commission expense ................... 113,225 12,293 102,085
Acquisition related costs ............ 18,271 4,744 --
Depreciation and amortization ........ 4,177 560 3,718
All other operating expenses (a) ..... 59,265 6,024 52,242
Total operating expenses ............ 194,938 23,621 158,045
Operating income (loss) .............. (4,347) (1,109) 9,679
Interest and other income
(expense), net ...................... (1,334) 50 (1,775)
Income (loss) before income taxes (5,681) (1,059) 7,904
Income taxes (benefit) ............... (2,247) (423) 3,278
Minority interest .................... -- -- --
Net income (loss) .................... $ (3,434) $ (636) $ 4,626
Earnings (loss) per share:
Basic and diluted ................... $ (0.53) $ (0.10) $ 0.71
Weighted average shares
outstanding:
Basic and diluted ................... 6,506 6,506 6,506
</TABLE>

31
<PAGE>

PREDECESSOR
---------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1994 1995 1996 1997
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT AMOUNTS PER SHARE)
<S> <C> <C> <C> <C>
OTHER DATA:
EBITDA (b) .................................... $ 6,456 $ 5,881 $ 15,798 $ 16,740
Net cash provided by (used in)
operating activities ......................... $ 68 $ (2,503) $ 2,134 $ 5,297
Net cash used in investing activities ......... $ (4,004) $ (6,502) $ (8,874) $ (6,759)
Net cash provided by (used in)
financing activities ......................... $ 3,820 $ 9,571 $ 10,664 $ (1,575)

PREDECESSOR HOMESERVICES
------------ ------------------------------------
SIX MONTHS
JAN 1 - MAY 28 - MAY 28 - ENDED
MAY 27, DEC. 31, JUNE 30, JUNE 30,
1998 1998 1998 1999
------------ ------------- ---------- -----------
(DOLLARS IN THOUSANDS, EXCEPT AMOUNTS PER SHARE)
<S> <C> <C> <C> <C>
OTHER DATA:
EBITDA (b) .................................... $ 6,004 $ 18,101 $ 4,668 $ 13,397
Net cash provided by (used in)
operating activities ......................... $ 4,991 $ 12,428 9,019 $ 16,198
Net cash used in investing activities ......... $ (891) $ (99,126) (74,272) $ (5,890)
Net cash provided by (used in)
financing activities ......................... $ (1,940) $ 89,812 72,058 $ (1,898)
</TABLE>

<TABLE>
<CAPTION>
PREDECESSOR HOMESERVICES
------------------------------------------ --------------------------
AS OF AS OF
AS OF DECEMBER 31, DECEMBER 31, JUNE 30,
------------------------------------------ -------------- ----------
1994 1995 1996 1997 1998 1999
--------- --------- --------- --------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ......... $ 871 $ 1,437 $ 5,627 $ 2,590 $ 3,114 $ 11,544
Total assets (a) .................. 52,782 68,341 95,504 62,346 128,520 131,788
Long-term debt, including current
portion .......................... 5,651 6,090 16,397 7,651 61,445 59,567
Stockholders' equity .............. 18,396 19,741 33,699 36,791 35,194 39,938
</TABLE>

PREDECESSOR
-----------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1994 1995 1996 1997
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT AMOUNTS PER SHARE)
<S> <C> <C> <C> <C>
OPERATING DATA:
Transaction sides ....................... 15,726 16,233 47,836 48,631
Average home sales price ................ $ 104.7 $ 106.7 $ 120.9 $ 127.1
Home sales volume (in millions) ......... $ 1,671 $ 1,928 $ 5,783 $ 6,183
Average sales commission (%)
(Commission revenue divided by
home sales volume) ..................... 3.1% 3.0% 3.1% 3.1%
Number of branch offices (at
period end) ............................ 31 32 103 98
Number of sales associates (at
period end) ............................ 944 911 3,063 3,298

PREDECESSSOR HOMESERVICES
------------ ---------------------------------
SIX MONTHS
JAN 1 - MAY 28 - MAY 28 - ENDED
MAY 27, DEC. 31, JUNE 30, JUNE 30,
1998 1998 1998 1999
--------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS, EXCEPT AMOUNTS PER
SHARE)
<S> <C> <C> <C> <C>
OPERATING DATA:
Transaction sides ....................... 18,578 41,580 5,874 33,393
Average home sales price ................ $ 132.3 $ 138.1 $ 138.5 $ 146.0
Home sales volume (in millions) ......... $ 2,458 $ 5,741 $ 813 $ 4,877
Average sales commission (%)
(Commission revenue divided by
home sales volume) ..................... 3.0% 3.0% 2.5% 3.1%
Number of branch offices (at
period end) ............................ 124 126 136 136
Number of sales associates (at
period end) ............................ 4,305 4,282 4,503 4,503
</TABLE>

- ----------

(a) Prior to 1997, the predecessor was also engaged in real estate
development operations in addition to real estate brokerage
operations in some of the periods presented. All real estate
brokerage and development activities were operated by the same
corporate entity using shared management, office space and other
related services. At the beginning of 1997, the majority of the
assets associated with the development operations was transferred to
the parent company. These development operations contributed only
$0.4 million to "Other" revenues in 1997. Based on the way the
brokerage and development operations were managed, only certain
revenues, expenses, assets, and liabilities can be specifically
identified in the

32
<PAGE>

predecessor's statements of income and balance sheets. Revenues
from the sale of real estate development projects of $13.9
million, $10.6 million and $14.0 million are included in the line
item "Other" revenues for the years ended December 31, 1994, 1995
and 1996, respectively. Cost of real estate sales totaling $11.0
million, $7.4 million and $11.3 million are included in the line
item "All other operating expenses" for the years ended December
31, 1994, 1995 and 1996, respectively. Real estate contracts and
real estate inventory of $22.5 million, $29.4 million and $23.2
million are included in the line item "Total assets" for the
years ended December 31, 1994, 1995 and 1996, respectively. Since
1997, HomeServices has not been engaged in real estate
development operations to any significant degree.

(b) EBITDA is defined as net income (loss) before income taxes (benefit)
and interest and other income (expense), net, plus depreciation and
amortization and acquisition related costs. HomeServices believes
that EBITDA is a widely accepted financial indicator used by
investors and analysts to compare the operating performance of
companies. While EBITDA is routinely used by investors and analysts,
EBITDA is not necessarily comparable to other similarly titled
measures of other companies due to potential differences in the
methods of calculation. EBITDA is not intended to represent cash
flows for the periods presented, nor has it been presented as an
alternative to operating income or as an indicator of operating
performance. EBITDA should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles.

33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read together with the
consolidated financial statements and related notes appearing elsewhere in this
prospectus.

The following discussion and analysis is based on comparing the
predecessor's and HomeServices' combined results to the predecessor's results in
order to provide meaningful comparisons.

ACQUISITION HISTORY

HomeServices, as successor by merger to MidAmerican Realty Services
Company, entered the real estate brokerage business in May 1998 by acquiring
Iowa Realty Co. Inc. and Edina Realty Home Services of Minnesota, both formerly
part of AmerUs Home Services Inc. HomeServices expanded its business with the
purchases in August 1998 of two additional established real estate brokerage
firms in Omaha, Nebraska, HOME Real Estate Holdings Inc. and CBS Real Estate
Company, which were merged to form CBS HOME Real Estate Company. In September
1998, HomeServices acquired J.C. Nichols Residential, Inc., a brokerage firm
operating in the greater Kansas City area. In December 1998, HomeServices
acquired Nebraska Land Title & Abstract. In July 1999, HomeServices acquired
Paul Semonin Realtors, a Louisville, Kentucky real estate brokerage firm
operating in Kentucky and southern Indiana.

OVERVIEW

Revenues

HomeServices' commission revenue consists of sales commissions earned by
providing real estate brokerage services to customers in the purchase and sale
of new and existing homes. Sales commissions typically range from approximately
5% to 7% of the sales price and may be shared between the seller's broker and
the buyer's broker. In transactions in which HomeServices is acting as a broker
on either the buy side or the sell side of a transaction and a third-party
broker is acting as a broker on the other side of the transaction, HomeServices
will typically share approximately 50% of the sales commission with the other
broker. In transactions in which HomeServices is acting as the sole broker,
HomeServices receives 100% of the sales commission. Commission revenue from
sales commissions is recorded as revenue upon the closing of the home sale
transaction.

In addition, to a lesser extent, HomeServices earns fee revenue by
providing the following services:

o mortgage origination services for which HomeServices receives various
fees--approximately 1% of revenues for the six months ended June 30, 1999;

o title services for which HomeServices receives a fee from the title
insurance underwriters or from the home buyer--approximately 5% of
revenues for the six months ended June 30, 1999;

o escrow and other closing administrative services for which HomeServices
typically receives a fee from home buyers--approximately 1% of revenues
for the six months ended June 30, 1999; and

o relocation services for corporate customers; franchise services in which
HomeServices provide third parties with the right to use any one of its
brand names in connection with the residential activities conducted by
such third parties, and for which HomeServices receives a fee from such
third parties; and preclosing and home care services for which
HomeServices generally receives referral fees from third-party providers.
These services comprised less than 1% of HomeServices' overall revenues
for the six months ended June 30, 1999.

Revenue derived from title and other services is recorded as revenue at
the time that the services are performed.

34
<PAGE>

To date a substantial portion of HomeServices' revenues have been derived
from traditional real estate brokerage services. While to date HomeServices has
not derived any significant revenues from its E-commerce operations, as
HomeServices develops its E-commerce platform, it expects a larger percentage
of its revenues will be derived from services other than traditional real
estate brokerage services.

Expenses

Commission expense represents commissions paid to HomeServices' sales
associates and is based on a percentage of the sales commission earned by
HomeServices. Typically, the percentage of the sales commissions that is paid
to HomeServices' sales associates will vary based on such factors as sales
associate productivity and rates that are paid to competing associates in the
same local or regional market. The percentage of total commissions which
HomeServices has paid to sales associates has averaged approximately 65% over
the past three years. Similar to commission revenue, commission expense is
recorded as an expense upon the closing of the home sale transaction.

Acquisition related costs result from charges to expense for the value of
real estate sales contracts that are pending when real estate brokerage firms
are acquired. Upon the acquisition of real estate brokerage firms, HomeServices
establishes an asset for the value of pending real estate sales contracts.
HomeServices expensed pending real estate sales contracts for its 1998
acquisitions over three months, reflecting the period over which HomeServices
estimated that such contracts resulted in closed real estate transactions.

HomeServices' office property and equipment are depreciated over their
estimated useful lives, which range from three to 33 years using straight-line
and accelerated methods. As of June 30, 1999, approximately 55.4% of total
assets on HomeServices' balance sheet consisted of goodwill, net of accumulated
amortization. Goodwill represents the excess of the purchase price that
HomeServices paid for each business acquired over the fair value of the net
identifiable assets acquired. Goodwill is an accumulation of various factors
that HomeServices believes will lead to profits above those that might normally
be expected from just acquiring the tangible assets of a business. It can
reflect different things for each business acquisition, including factors such
as market share, name recognition, competitive position and management.
HomeServices amortizes goodwill over its projected life of 30 years on a
straight-line basis.

All other operating expenses consist primarily of the following: (1)
salaries and employee benefits paid to employees rather than sales associates;
(2) occupancy costs, such as rent and utilities; (3) business promotion and
advertising costs; and (4) other general and administrative expenses, including
telecommunications, office supplies, professional and management fees, and
corporate charges for services provided by MidAmerican Holdings.

Income tax expense reflects the tax effect of book income and expense for
each period presented. Although HomeServices and its predecessor were owned by
different parents in each period presented, the amounts were calculated for
HomeServices as if it filed a separate return.

RESULTS OF OPERATIONS

The information presented below for 1997 and 1996 reflects the results of
operations of Iowa Realty and its subsidiaries, including Edina Realty, which
was a subsidiary of Iowa Realty at the time of their acquisition by
HomeServices in May 1998. Iowa Realty and its consolidated subsidiaries,
including Edina Realty, are referred to below as the "predecessor" of
HomeServices for periods prior to their acquisition by HomeServices on May 28,
1998.

The information presented below for the year ended December 31, 1998,
reflects the results of operations of the predecessor for the entire period and
includes the results of operations of the entities acquired by HomeServices
after May 28, 1998, namely, CBS Real Estate Company, HOME Real Estate Holdings
Inc. and J.C. Nichols from their respective acquisition dates in the third
quarter of 1998 and Nebraska Land Title & Abstract in the fourth quarter of
1998. CBS Real Estate

35
<PAGE>

Company, HOME Real Estate Holdings Inc., J.C. Nichols and Nebraska Land Title &
Abstract are referred to below as the "nonpredecessor" acquired entities.
Information for the six months ended June 30, 1998, reflect the operations of
all entities acquired in 1998. Accordingly, the period-to-period comparisons
have been affected by HomeServices' acquisition activity.

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998

The following table reflects selected information for the periods
indicated in dollars and as a percentage of total revenues. The amounts
reflected in the Predecessor column reflect the results of operations of the
predecessor from January 1, 1998, to May 27, 1998. The amounts reflected in the
HomeServices column reflect results of operations of consolidated HomeServices
from May 28, 1998, to June 30, 1998. The amounts reflected in the June 30, 1999
column reflect the results of operations of consolidated HomeServices.
Accordingly, no amounts are reflected below for the nonpredecessor acquired
entities in 1998. Dollars are in thousands unless otherwise noted.

<TABLE>
<CAPTION>
TOTAL
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
------------------------ ---------------------
<S> <C> <C> <C> <C>
Commission revenue .............. $148,979 88.8 % $94,056 86.5%
Title fees ...................... 10,644 6.4 % 10,030 9.2%
Other ........................... 8,101 4.8 % 4,663 4.3%
-------- --------- ------- -----
Gross revenues ................ 167,724 100.0 % 108,749 100.0%
-------- --------- ------- -----
Commission expense .............. 102,085 60.9 % 61,400 56.5%
Acquisition related costs ....... -- -- 4,744 4.4%
Depreciation and
amortization ................... 3,718 2.2 % 2,853 2.6%
All other operating expenses..... 52,242 31.1 % 37,150 34.2%
-------- --------- ------- -----
Total operating expenses....... 158,045 94.2 % 106,147 97.6%
-------- --------- ------- -----
Operating income (loss) ......... 9,679 5.8 % 2,602 2.4%
Other income (expense) .......... (1,775) (1.0)% (44) --%
-------- ----- ------- ------
Income (loss) before income
taxes .......................... 7,904 4.7 % 2,558 2.4%
Income taxes .................... 3,278 2.0 % 1,273 1.2%
-------- --------- ------- -----
Net income (loss) ............... $ 4,626 2.8 % $1,285 1.2%
======== ========= ======= =====
Selected Statistics:
Closed transaction sides ........ 33,393 24,452
Home sales volume (in
millions) ...................... $ 4,877 $3,271
Average home sales price ........ $ 146.0 $133.8

PREDECESSOR HOMESERVICES
JANUARY 1, 1998 MAY 28, 1998
THROUGH THROUGH
MAY 27, 1998 JUNE 30, 1998
----------------------- -----------------------
<S> <C> <C> <C> <C>
Commission revenue .............. $74,893 86.8 % $19,163 85.1%
Title fees ...................... 7,575 8.8 % 2,455 10.9%
Other ........................... 3,769 4.4 % 894 4.0%
------- --------- ------- -----
Gross revenues ................ 86,237 100.0 % 22,512 100.0%
------- --------- ------- -----
Commission expense .............. 49,107 56.9 % 12,293 54.6%
Acquisition related costs ....... -- -- 4,744 21.1%
Depreciation and
amortization ................... 2,293 2.7 % 560 2.5%
All other operating expenses..... 31,126 36.1 % 6,024 26.7%
------- --------- ------- -----
Total operating expenses....... 82,526 95.7 % 23,621 104.9%
------- --------- ------- -----
Operating income (loss) ......... 3,711 4.3 % (1,109) (4.9)%
Other income (expense) .......... (94) (0.1)% 50 0.2%
------- ----- ------- -----
Income (loss) before income
taxes .......................... 3,617 4.2 % (1,059) (4.7)%
Income taxes .................... 1,664 1.9 % (391) (1.7)%
------- --------- ------- -----
Net income (loss) ............... $1,953 2.3 % $ (668) (3.0)%
======= ========= ======= =====
Selected Statistics:
Closed transaction sides ........ 18,578 5,874
Home sales volume (in
millions) ...................... $2,458 $ 813
Average home sales price ........ $ 132.3 $138.4
</TABLE>

Seasonality

Some of HomeServices' real estate brokerage business is subject to
seasonal fluctuations because fewer home sale transactions tend to close during
the first and fourth quarters of the year. Accordingly, revenues of some of
HomeServices' operating subsidiaries have historically been weakest in the
first and fourth quarters. Although commission expense is variable with closed
transactions, many of HomeServices' other expenses, such as rent, are fixed. On
a consolidated basis, the relationship between HomeServices' expenses and
revenues may be subject to significant fluctuation on a quarter-to-quarter
basis. As a result, on a consolidated basis, HomeServices' operating results
and profitability are lower in the first and fourth quarters relative to the
remainder of the year. Accordingly, HomeServices does not believe that its
results of operations for the six months ended June 30, 1999 will be indicative
of its results of operations for the year ending December 31, 1999.

Revenues

Total revenues for the first six months of 1999 were $167.7 million, an
increase of $59.0 million, or 54.2%, compared to the same period in 1998.
Commission revenue from the brokerage operations increased $54.9 million
compared to the same period in 1998. The increase in commission revenue was
primarily a result of the increase in closed transaction sides of HomeServices
to 33,393, an increase of

36
<PAGE>

8,941, or 36.6%, compared to the same period in 1998. The inclusion of the
nonpredecessor acquired entities accounted for 8,354, or 93.4%, of the increase
in closed transaction sides. Commission revenue also increased as a result of
an increase in the average home sales price for the first six months of 1999
compared to the same period in 1998.

Title fees for the first six months of 1999 were $10.6 million, an
increase of $0.6 million, or 6.1%, compared to same period in 1998. The
increase in title fees in the first six months of 1999 compared to the same
period in 1998 was due to the acquisition of a title services company in
December 1998 and an increase in title services provided as a result of an
increase in the number of brokerage transactions.

Other revenues for the first six months of 1999 were $8.1 million, an
increase of $3.4 million, or 73.7%, compared to the same period in 1998. The
increase was due to the addition of revenues from the nonpredecessor acquired
entitites in the 1999 period. Other revenues of the predecessor companies were
relatively unchanged.

Commission Expense

Commission expense from the real estate brokerage operations for the first
six months of 1999 was $102.1 million, an increase of $40.7 million, or 66.3%,
compared to the same period in 1998. Of the total increase in commission
expense, $6.3 million was attributable to the predecessor and the remainder was
attributable to the nonpredecessor acquired entities. Commission expense as a
percentage of commission revenue increased from 65.3% in the first six months
of 1998 to 68.5% in the first six months of 1999 primarily due to higher
commission pay schedules at the nonpredecessor acquired entities.

Commission revenue less commission expense, or net commission revenue, for
the first six months of 1999 was $46.9 million, an increase of $14.2 million,
or 43.4%, compared to the same period in 1998. Of this increase, $12.6 million
is attributable to the nonpredecessor acquired entities.

Acquisition Related Costs

Upon acquiring the real estate brokerage companies, HomeServices
established an asset for the value of pending real estate sales contracts. The
value of these acquired contracts for 1998 was $18.3 million. One-third, or
$4.7 million, of such contracts was expensed in June 1998. This was a noncash
expense.

Depreciation and Amortization

Depreciation and amortization for the first six months of 1999 increased
$0.9 million, or 30.3%, compared to the same period 1998, primarily as a result
of increased fixed assets and amortization of goodwill related to the
acquisitions.

All Other Operating Expenses

All other operating expenses for the first six months of 1999 were $53.0
million, an increase of $15.8 million, or 42.6%, compared to the same period in
1998. The inclusion of the nonpredecessor acquired entities in 1999 accounted
for $13.5 million of this increase. The remaining increase in other operating
expenses resulted primarily from increases of $0.9 million in salaries and
benefits, $0.6 million in business promotion and advertising and $0.4 million
in occupancy costs. The increase in salaries and benefits was due to increased
medical claims and salaries. As a percentage of total revenues, all other
operating expenses decreased to 31.6% from 34.2%.

Other Income (Expense), Net

Other income (expense) for the first six months of 1999 and 1998 consisted
primarily of interest expense. Interest expense for the first six months 1999
was $2.1 million, an increase of $0.8 million compared to the same period in
1998. Interest expense increased in 1999 primarily because HomeServices
increased its outstanding indebtedness to finance the acquisitions of the
nonpredecessor acquired entities. Initial financing was obtained through
borrowings from MidAmerican Holdings. In

37
<PAGE>

the fourth quarter of 1998, most of those borrowings were refinanced with the
proceeds of a $35.0 million private placement of 7.12% senior notes and
borrowings of $25.0 million under a revolving credit facility. Other income was
primarily interest income.

Income Taxes (Benefit)

The increase in the income tax expense reflected in the six months ended
June 30, 1999 as compared to the six months ended June 30, 1998 is due to the
increase in income before income taxes between the same periods.

Net Income (Loss)

Net income for the first six months of 1999 was $4.6 million compared to
net income of $1.3 million for the same period in 1998. Net income for the 1998
period included the expensing of one-third of the value of real estate sales
contracts that were pending at the date of acquisition. Expensing the
acquisition related costs resulted in a $4.7 million noncash charge which
reduced net income for the six months ended June 30, 1998, by $2.8 million. Net
income from the nonpredecessor acquired entities and improved operating income
of the predecessor was partially offset by the increase in interest expense, as
more fully described above.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

The following table reflects selected information for the periods
indicated in dollars and as a percentage of total revenues. The amounts
reflected in the predecessor column reflect the results of operations of the
predecessor from January 1, 1998 to May 28, 1998. The amounts reflected in the
HomeServices column reflect the results of operations of the predecessor from
May 28, 1998 to December 31, 1998 and the results of operations of the
nonpredecessor acquired entities from their respective acquisition dates
through December 31, 1998. Accordingly, no amounts are reflected below for the
nonpredecessor acquired entities before they were acquired by HomeServices in
the third and fourth quarters of 1998. Dollars are in thousands unless
otherwise noted.

<TABLE>
<CAPTION>
1998
-------------------------------------------------------------------------------
PREDECESSOR HOMESERVICES TOTAL
----------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Commission revenue .................... $74,893 86.8% $ 169,647 89.0% $ 244,540 88.4%
Title fees ............................ 7,575 8.8 14,154 7.4 21,729 7.8
Other ................................. 3,769 4.4 6,790 3.6 10,559 3.8
------- ------ --------- ------ --------- ------
Total revenues ....................... 86,237 100.0 190,591 100.0 276,828 100.0
------- ------ --------- ------ --------- ------
Commission expense .................... 49,107 56.9 113,225 59.4 162,332 58.6
Acquisition related costs ............. -- -- 18,271 9.6 18,271 6.6
Depreciation and amortization ......... 2,293 2.7 4,177 2.2 6,470 2.3
All other operating expense ........... 31,126 36.1 59,265 31.1 90,391 32.7
------- ------ --------- ------ --------- ------
Total operating expenses ............. 82,526 95.7 194,938 102.3 277,464 100.2
------- ------ --------- ------ --------- ------
Operating income (loss) ............... 3,711 4.3 (4,347) (2.3) (636) (0.2)
Other income (expense), net ........... (94) (0.1) (1,334) (0.7) (1,428) (0.5)
------- ------ --------- ------ --------- ------
Income (loss) before income taxes ..... 3,617 4.2 (5,681) (3.0) (2,064) (0.7)
Income taxes (benefit) ................ 1,664 1.9 (2,247) (1.2) (583) (0.2)
Minority interest ..................... -- -- -- -- -- --
------- ------ --------- ------ --------- ------
Net income (loss) ..................... $ 1,953 2.3 $ (3,434) (1.8) $ (1,481) (0.5)
======= ====== ========= ====== ========= ======
Selected Statistics:
Closed transaction sides .............. 18,578 41,580 60,158
Home sales volume (in millions) ....... $ 2,458 $ 5,741 $ 8,199
Average home sales price .............. $ 132.3 $ 138.1 $ 136.3

<CAPTION>
1997
------------------------
PREDECESSOR
------------------------
<S> <C> <C>
Commission revenue .................... $191,083 89.0%
Title fees ............................ 16,203 7.5
Other ................................. 7,410 3.5
-------- ------
Total revenues ....................... 214,696 100.0
-------- ------
Commission expense .................... 125,148 58.3
Acquisition related costs ............. -- --
Depreciation and amortization ......... 5,619 2.6
All other operating expense ........... 72,808 33.9
-------- ------
Total operating expenses ............. 203,575 94.8
-------- ------
Operating income (loss) ............... 11,121 5.2
Other income (expense), net ........... (903) ( 0.4)
-------- ------
Income (loss) before income taxes ..... 10,218 4.8
Income taxes (benefit) ................ 4,725 2.2
Minority interest ..................... 633 0.3
-------- ------
Net income (loss) ..................... $ 4,860 2.3
======== ======
Selected Statistics:
Closed transaction sides .............. 48,631
Home sales volume (in millions) ....... $ 6,183
Average home sales price .............. $ 127.1
</TABLE>

Revenues

Total revenues for 1998 were $276.8 million, an increase of $62.1 million,
or 28.9%, compared to 1997. Commission revenue from the real estate brokerage
operations for 1998 was $244.5 million, an increase of $53.5 million, or 28.0%,
compared to 1997. The increase in commission revenue for 1998 was a result of
an increase in closed transaction sides. Closed transaction sides totaled
60,158 in 1998, an increase of 11,527, or 23.7%, compared to 1997, which
includes the addition of the 6,136 closed

38
<PAGE>

transaction sides for the nonpredecessor acquired entities from their
respective acquisition dates in 1998. The increase in commission revenue was
also a result of the increase in average home sales price, which increased 7.2%
in 1998 compared to 1997.

Title fees for 1998 were $21.7 million, an increase of $5.5 million, or
34.1%, compared to 1997. The increase in the title fees in 1998 was due to an
increase in the number of brokerage transactions and an increase in the number
of refinancing transactions. The number of refinancing transactions increased
in 1998 compared to 1997 primarily as a result of more favorable interest
rates.

Other revenues for 1998 were $10.6 million, an increase of $3.1 million,
or 42.5%, compared to 1997, of which increase $1.2 million was attributable to
nonpredecessor companies. The increase in other revenues of the predecessor was
primarily a result of increased administrative fees, franchise fees and
referral fees.

Commission Expense

Commission expense from the real estate brokerage operations for 1998 was
$162.3 million, an increase of $37.2 million, or 29.7%, compared to 1997. Of
the total increase in commission expense, $19.4 million was attributable to the
predecessor and the other $17.8 million was attributable to the nonpredecessor
acquired entities. Commission expense as a percentage of commission revenue
increased from 64.9% in 1997 to 66.4% in 1998 primarily due to a higher ratio
of commission expense to commission revenue at the nonpredecessor acquired
entities.

Net commission revenue from the real estate brokerage operations for 1998
was $82.2 million, an increase of $16.3 million, or 24.7%, compared to 1997. Of
the total increase in net commission revenues, $9.1 million was attributable to
the predecessor and the other $7.2 million was attributable to the
nonpredecessor acquired entities.

Acquisition Related Costs

Upon acquiring the real estate brokerage companies, HomeServices
established an asset for the value of pending real estate sales contracts. The
value of these acquired contracts for 1998 was $18.3 million, compared to none
in 1997. The entire $18.3 million value of such contracts was expensed in 1998.
This was a noncash expense.

Depreciation and Amortization

Depreciation and amortization for 1998 was $6.5 million, an increase of
$0.9 million, or 15.1%, compared to 1997, primarily as a result of amortization
of goodwill related to business acquisitions.

All Other Operating Expenses

All other operating expenses for 1998 totaled $90.4 million, an increase
of $17.6 million, or 24.1%, compared to 1997. The inclusion of the
nonpredecessor acquired entities accounted for $7.3 million of this increase.
The remaining increase in other operating expenses resulted from a $5.2 million
increase in salaries and benefits, of which included $3.0 million in bonuses, a
$2.3 million increase in business promotion and advertising expenses and a $3.0
million increase in other general expenses with respect to the predecessor. The
bonus portion of salaries and benefits and business promotion and advertising
costs for the real estate brokerage business were each affected by the
increased transaction volume. As a percentage of total revenue, all other
operating expenses decreased to 32.7% from 33.9%.

Other Income (Expense), Net

Other income (expense) for 1998 and 1997 consisted primarily of interest
expense. Interest expense for 1998 was $2.2 million, an increase of $0.7
million, or 42.7%, compared to 1997. Interest expense increased in 1998
primarily because HomeServices increased its outstanding indebtedness to
finance the acquisitions of the nonpredecessor acquired entities. Initial
financing was obtained through

39
<PAGE>

borrowings from MidAmerican Holdings. In the fourth quarter of 1998, most of
those borrowings were refinanced with the proceeds of a $35.0 million private
placement of 7.12% senior notes and borrowings of $25.0 million under a
revolving credit facility. The other income was primarily interest income.

Income Taxes (Benefit)

The income taxes (benefit) for 1998 is the summation of the income taxes
of HomeServices and the predecessor. The predecessor had a higher effective tax
rate because of amortization of goodwill that provided no tax deduction.

Net Income (Loss)

Net income for the predecessor for the period from January 1, 1998 through
May 27, 1998, the date HomeServices acquired the predecessor, was $1.9 million.
HomeServices reported a net loss of $3.4 million for the period from May 28,
1998 through December 31, 1998. HomeServices' results of operations for 1998
include the expensing of the value of real estate sales contracts that were
pending at the date of acquisition, which resulted in an acquisition related
noncash charge of $18.3 million that reduced 1998 net income by $10.9 million
on an after-tax basis. The entire balance of such contracts was expensed as of
December 31, 1998.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

The following table reflects selected information of the predecessor for
the periods indicated in dollars and as a percentage of total revenues. Dollars
are in thousands unless otherwise noted.

<TABLE>
<CAPTION>
PREDECESSOR
-------------------------------------------------------
1997 1996
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Commission revenue ...................... $191,083 89.0% $179,378 82.9%
Title fees .............................. 16,203 7.5 14,821 6.9
Other ................................... 7,410 3.5 22,092 10.2
-------- ------ -------- ------
Total revenues ......................... 214,696 100.0 216,291 100.0
-------- ------ -------- ------
Commission expense ...................... 125,148 58.3 115,331 53.3
Depreciation and amortization ........... 5,619 2.6 5,103 2.4
All other operating expenses ............ 72,808 33.9 85,162 39.4
-------- ------ -------- ------
Total operating expenses ............... 203,575 94.8 205,596 95.1
-------- ------ -------- ------
Operating income (loss) ................. 11,121 5.2 10,695 4.9
Other income (expense), net ............. (903) (0.4) (2,582) (1.2)
-------- ------ -------- ------
Income before income taxes .............. 10,218 4.8 8,113 3.8
Income taxes ............................ 4,725 2.2 3,263 1.5
Minority interest ....................... 633 0.3 1,276 0.6
-------- ------ -------- ------
Net income .............................. $ 4,860 2.3 $ 3,574 1.7
======== ====== ======== ======
Selected Statistics:
Closed transaction sides ................ 48,631 47,836
Home sales volume (in millions) ......... $ 6,183 $ 5,783
Average home sales price ................ $ 127.1 $ 120.9
</TABLE>

Revenues

Total revenues for 1997 were $214.7 million, a decrease of $1.6 million,
or 0.7%, compared to 1996. Commission revenue for 1997 was $191.1 million, an
increase of $12.4 million, or 6.9%, compared to 1996. The acquisition by the
predecessor in July 1997 of HOME Real Estate accounted for approximately $10.0
million of the increase. The number of brokerage transactions involving the

40
<PAGE>

predecessor, excluding the July acquisition of HOME Real Estate, was 46,225 in
1997, a decrease of 1,611, or 3.4%, compared to 1996, primarily as a result of
a change in market conditions. The decrease in the predecessor's transactions
was more than offset by a 4.8% increase in the average home sales price
resulting in an overall increase of 1.3% in the total dollar value of homes
sold.

Title fees for 1997 were $16.2 million, an increase of $1.4 million, or
9.3%, compared to 1996. The increase in title fees in 1997 was due to an
overall increase in the number of brokerage transactions compared to 1996.

Other revenues for 1997 were $7.4 million in 1997, a decrease of $14.7
million, or 66.5%, compared to 1996. In 1996, the predecessor had real estate
development operations that contributed $14.0 million to other revenues. As
part of its strategy, the predecessor reduced the significance of this line of
business, which contributed only $0.4 million of other revenues in 1997.

Commission Expense

Commission expense from the real estate brokerage operations for 1997 was
$125.1 million, an increase of $9.8 million, or 8.5%, compared to 1996. Of the
total increase in commission expense, $7.7 million was attributable to the
acquisition of HOME Real Estate by the predecessor. Commission expense as a
percentage of commission revenue increased from 64.3% in 1996 to 64.9% in 1997.

Net commission revenue from the real estate brokerage operations for 1997
was $65.9 million, an increase of $1.9 million, or 2.9%, compared to 1996.

Depreciation and Amortization

Depreciation and amortization for 1997 was $5.6 million, an increase of
$0.5 million, or 10.1%, compared to 1996, primarily as a result of a $2.2
million increase in office property and equipment.

All Other Operating Expenses

All other operating expenses for 1997 were $72.8 million, a decrease of
$12.4 million, or 14.5%, compared to 1996. Although other operating expenses
increased in 1997 by $2.1 million due to the acquisition of HOME Real Estate by
the predecessor, these increases were more than offset by decreases resulting
from a decrease in real estate development related costs. Cost of sales for the
real estate development operations discussed under "Other" revenues above
totaled $11.3 million in 1996. Additionally, the decrease resulted from the
closure of seven offices in the Iowa area and the decrease in related costs,
and reduced activity levels for 1997 as compared to 1996. As a percentage of
total revenue, all other operating expenses decreased to 33.9% from 39.4%.

Other Income (Expense)

Other income (expense) for 1997 and 1996 consisted primarily of interest
expense. Interest expense for 1997 was $1.5 million, a decrease of $2.1
million, or 57.7%, compared to 1996. The decrease in interest expense is
attributable to a $20.8 million reduction in borrowings under the predecessor's
line of credit and the retirement of $4.0 million of subsidiary subordinated
notes.

Income taxes

The higher amount of income tax expense for the year ended December 31,
1997 as compared to the same period in 1996 is primarily the result of the
difference in income before income taxes between the periods.

Net Income

The predecessor's net income for 1997 was $4.9 million, an increase of
$1.3 million compared to 1996. The major reasons for the increase included the
acquisition of HOME Real Estate in July of 1997, decreased operating expense,
decreased interest expense and a reduction in the minority owners' interest in
its Edina Realty subsidiary.

41
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

HomeServices' capital requirements consist primarily of working capital,
capital expenditures and acquisitions. Historically, HomeServices has funded
its working capital and capital expenditures using cash and cash equivalents on
hand. Acquisitions have been financed through borrowings under its revolving
credit facility, the private placement of the 7.12% senior notes, loans from
MidAmerican Holdings and capital contributions. HomeServices' cash and cash
equivalents totaled $11.5 million at June 30, 1999, compared to $3.1 million and
$6.8 million at December 31, 1998, and June 30, 1998, respectively.

Cash provided by operating activities was $16.2 million for the six months
ended June 30, 1999, compared to cash used by operating activities of $14.1
million for the six months ended June 30, 1998. Cash provided by operating
activities was $17.4 million for 1998, $5.3 million for 1997 and $2.1 million
for 1996. The cash provided from operating activities for the year ended
December 31, 1998 includes $5.0 million contributed by the predecessor and
$12.4 million contributed by HomeServices. Cash provided by operating
activities for the year ended December 31, 1998 was positively affected by the
improvement in earnings excluding the effect of the $18.3 million noncash
charge to earnings for acquisition related costs of HomeServices.

Cash used in investing activities was $5.9 million for the six months
ended June 30, 1999 compared to $75.2 million for the six months ended June
30, 1998. Cash used in investing activities was $100.0 million for 1998, $6.8
million for 1997 and $8.9 million for 1996. In 1998, cash used in investing
activities was primarily a result of $74.4 million for the acquisition of the
predecessor and $22.1 million for the acquisitions of the nonpredecessor
acquired entities, net of cash received.

Cash used by financing activities was $1.9 million for the six months
ended June 30, 1999 compared to cash provided by financing activities of $70.1
million for the six months ended June 30, 1998. Cash provided by financing
activities was $87.9 million for 1998 and $10.7 million for 1996, while cash
used by financing activities was $1.6 million in 1997. Cash provided by
financing activities in 1998 was primarily a result of capital contributions,
borrowings under HomeServices' revolving credit facility, the issuance of its
7.12% senior notes and a loan from MidAmerican Holdings. Cash used by financing
activities in 1997 was primarily a result of the repayment of certain
indebtedness of the predecessor. In 1996, cash provided by financing activities
was primarily a result of an increase in notes and contracts payable.

In May 1998, HomeServices entered into a revolving credit agreement with
MidAmerican Holdings to borrow funds from time to time, primarily to support
the acquisition of the predecessor and the nonpredecessor acquired companies.
The maximum indebtedness during the life of the agreement through June 30,
1999, was $54.2 million. The interest rate on borrowings is equal to the 30-day
LIBOR rate plus 1%, which was 5.94% at June 30, 1999. Interest expense recorded
on this agreement totaled $1.3 million through June 30, 1999. As of December
31, 1998 and June 30, 1999, there were no borrowings under this agreement. On
June 24, 1999, the revolving credit agreement with MidAmerican Holdings was
amended to reduce MidAmerican Holdings' total commitment and HomeServices'
borrowing capacity thereunder from $100.0 million to $10.0 million. Amounts
borrowed are payable upon demand from MidAmerican Holdings.

In November 1998, HomeServices obtained a $25.0 million, five year
revolving credit facility with $23.5 million utilized as of June 30, 1999. The
credit availability under the revolving credit facility declines by $1.5
million every six months beginning in May 1999 through November 2003 with an
$11.5 million balloon payment due in November 2003. Amounts outstanding under
this revolving credit facility bear interest at either the prime lending rate
or LIBOR plus a fixed spread of 1.00% to 2.00% which varies based on
HomeServices' cashflow leverage ratio. Also, in November 1998, HomeServices
issued $35.0 million of 7.12% senior notes due in annual increments of $5.0
million starting in 2004, with the final payment due in 2010. Under the terms
of the 7.12% senior notes and the revolving credit facility, HomeServices may
not issue, assume or guarantee debt that would cause its total debt to exceed
65% of total capitalization and must maintain equity capitalization of at least
$25.5 million. In addition, HomeServices is required to comply with certain
other covenants that are listed under "Description of Indebtedness."

42
<PAGE>

HomeServices believes that the net proceeds that it receives from the
offering, together with its cash flow from operations and borrowings under the
revolving credit facility, will be adequate to meet its needs for working
capital, capital expenditures, debt service, planned acquisitions and the
continued development of its E-commerce platform for at least the next year.
If, however, net proceeds from the offering and cash flow from operations are
insufficient to satisfy HomeServices' liquidity requirements, it may need to
raise additional funds through public or private financings or the formation of
strategic joint ventures. HomeServices cannot assure you that such additional
funding, if needed, will be available on favorable terms, or at all. If
HomeServices raises additional funds in the future by issuing equity
securities, the percentage ownership of its then current stockholders would be
reduced, and those equity securities could be preferred securities having
rights senior to the common stock.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

HomeServices is subject to changes in interest rates which could
negatively impact its business. HomeServices' fixed rate long-term debt does
not expose HomeServices to the risk of earnings loss from increased interest
expense as a result of changes in the market interest rate, because the rate is
fixed. HomeServices has managed its interest rate risk for its variable rate
debt, which is based on LIBOR rates, by entering into interest rate swap
agreements. The swap arrangements effectively fix the interest rate for that
portion of the variable rate debt. In the future, HomeServices may continue
using interest rate swaps to reduce risk on the variable debt or, when
appropriate, may replace the variable rate debt with fixed rate debt. The table
below shows data for HomeServices' interest rate sensitive financial
instruments as of December 31, 1998. Amounts are in thousands of dollars and
represent face value unless indicated otherwise. The average interest rate for
variable rate debt and the receive rate for the swap are based on the implied
forward rates in the six-month LIBOR yield curve at December 31, 1998. There
have been no material changes in the following information between December 31,
1998, and June 30, 1999.

<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
----------------------------------------------------------------------------
FAIR
1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE
---------- ---------- ---------- ---------- ---------- ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES
Long-term Debt:
Fixed rate debt ................. 436 243 261 281 224 35,000 36,445 37,389
Average interest rate ......... 6.02% 7.56% 7.56% 7.57% 7.25% 7.12%
Variable rate debt .............. 3,000 3,000 3,000 3,000 13,000 _ 25,000 25,000
Average interest rate ......... 6.28% 6.28% 6.52% 6.59% 6.68% --
Interest Rate Swap:
Variable to fixed ............... -- -- 12,500 -- -- -- 12,500 10
Pay rate ...................... -- -- 5.05% -- -- --
Receive rate .................. -- -- 5.27% -- -- --
</TABLE>

HomeServices is currently negotiating a new $75 million senior secured
revolving credit agreement with its existing commercial bank and other banks,
which is expected to replace its current revolving credit facility. The new
revolving credit agreement is expected to have a term of three years from the
date of completion of the offering and to be secured by a pledge of the capital
stock of all of the subsidiaries of HomeServices. Other than this stock pledge,
HomeServices expects that the covenants, events of default and other terms of
the new revolving credit agreement will be substantially the same as those of
the existing revolving credit facility.

YEAR 2000 COMPLIANCE

What is generally known as the year 2000 computer issue arose because many
existing computer programs and embedded systems use only the last two digits to
refer to a year. Therefore, those

43
<PAGE>

computer programs do not properly distinguish between a year that begins with
"20" instead of "19". If not corrected, many computer applications could fail
or create erroneous results. The failure to correct a material year 2000 item
could result in an interruption in, or a failure of, certain normal business
activities or operations. Such failures could materially and adversely affect
HomeServices' results of operations, liquidity and financial condition.

The year 2000 issue could potentially impact systems critical to
HomeServices including real estate listing, agent support, accounting, vendor
and agent payment processing, payroll, and loan origination systems.
HomeServices has performed an inventory of its potential year 2000 issues and
has verified the readiness of approximately 90-95% of its systems through a
systematic process of assessment, remediation and testing. Under the current
plan, HomeServices expects that all of its material systems will be upgraded by
September 30, 1999. To date, HomeServices has incurred $1.5 million in costs
related to addressing the year 2000 issue. HomeServices does not expect the
total remaining cost of readiness to exceed $800,000.

Additionally, HomeServices' business operations are heavily dependent upon
service providers, most significantly communication providers. HomeServices is
inquiring of its third-party vendors and service providers, including multiple
listing service providers, regarding the status of their year 2000 readiness
preparations. HomeServices expects to have this assessment complete and a
contingency plan in place by the end of August 1999. To date, over 50 percent
of HomeServices' material third parties have been contacted to determine their
Year 2000 readiness status. It is anticipated that this process will be
completed by the end of August 1999. The process used to solicit information
from material third parties entails administering orally (in person or via
telephone) a series of questions designed to enable an overall evaluation of
their Year 2000 preparations. Specific questions are posed regarding the status
of the third party's readiness, supply chain assessment and contingency
planning activities. The results of each interview are documented and returned
to the material third party for verification, clarification or correction. It
is important to note that the purpose of HomeServices' supply chain/business
partner assessment initiative is not to obtain specific assurances that its
material third parties are Year 2000 compliant (which is an attribute of
hardware and software, not of organizations), but rather to determine they have
taken appropriate actions to minimize the risk of problems stemming from Year
2000 problems that would impede their ability to maintain a business
relationship with HomeServices. Due to inescapable uncertainties about the Year
2000 issue, HomeServices cannot assure you that material third parties will be
unaffected by Year 2000-related problems. Any failure by HomeServices'
third-party vendors and service providers to comply in a timely manner could
have a material adverse effect on its operations.

Year 2000 risk scenarios that are applicable to HomeServices have been
identified and written contingency plans are scheduled for completion before
the end of August 1999. The objective of HomeServices' contingency planning
effort is to determine the potential causes, symptoms, triggers and effects of
specific risks and to develop individual plans in response to each of these
risks. Each plan, in its completed state, will consist of mitigation and
recovery tasks to minimize impact in the event of occurrence of a specific risk
scenario. Scenarios that have been identified as applicable to HomeServices
include, but are not limited to, loss of internal and external voice and data
communications, inability to occupy facilities, loss of business applications,
and miscellaneous business interruptions. The contingency plans under
development by HomeServices specify staffing requirements, preventive actions
to be taken, and transition and validation activities, as well as recovery
tasks to be exercised in the event that Year 2000 problems are encountered
during the transition to 2000. The contingency plans will be subjected to
ongoing review and refinement through the remainder of the year.

In each of HomeServices' future acquisitions, HomeServices intends to
evaluate the systems of the acquired companies to determine whether their
systems are year 2000 ready. If an acquired company's systems are not year 2000
ready, HomeServices intends to prepare a plan to bring the systems into a state
of readiness. While HomeServices cannot guarantee you that all future acquired
companies will be year 2000 ready on a timely basis, the cost of bringing such
companies into a state of readiness is not expected to have a material adverse
effect on HomeServices' financial condition or results of operations.

44
<PAGE>

SEASONALITY

HomeServices' real estate brokerage business is subject to seasonal
fluctuations because fewer home sale transactions tend to close during the
first and fourth quarters of the year. Accordingly, revenues of some of
HomeServices' operating subsidiaries historically have been strongest in the
second and third quarters of the calendar year. While commissions are paid to
sales associates only upon the sale of a home, many of HomeServices' other
expenses, such as rent, are fixed. As a result, on a consolidated basis, the
relationship between HomeServices' expenses and revenues may be subject to
significant fluctuation on a quarter-to-quarter basis.

IMPACT OF INFLATION AND INTEREST RATE CHANGES

HomeServices' results of operations are sensitive to changes in the U.S.
economy and the economies of the markets in which it operates and, to a lesser
extent, interest rates, particularly home mortgage rates. During periods of
inflation, the value of residential real estate increases. While increases in
the value of residential real estate typically lead to corresponding increases
in HomeServices' commissions per transaction side, inflation typically also
causes mortgage interest rates to increase. As mortgage interest rates
increase, the level of residential transaction volume declines, leading to
decreased commission revenue and decreased revenue from the related ancillary
services. Additionally, HomeServices' title businesses receive revenues from
refinancing transactions that also decline during periods of high interest
rates.

45
<PAGE>

BUSINESS

OVERVIEW

HomeServices.Com Inc. is the second largest residential real estate
brokerage firm in the United States based on aggregate closed transaction sides
in 1998 for the various brokerage firm operating subsidiaries that comprise
HomeServices. HomeServices also offers integrated real estate services,
including mortgage and title insurance services, and is developing various
related E-commerce services. HomeServices currently operates primarily under
the Edina Realty, Iowa Realty, J.C. Nichols, CBS HOME and Paul Semonin Realtors
brand names in the following ten states: Minnesota, Iowa, Kansas, Missouri,
Kentucky, Nebraska, Wisconsin, Indiana, North Dakota and South Dakota.
HomeServices is the market leader in the Midwestern residential real estate
brokerage industry based on aggregate closed transaction sides for the year
ended December 31, 1998 of the various brokerage firm operating subsidiaries
that comprise HomeServices. Measured on the same basis, HomeServices also
occupies the number one or number two market share position in each of its
major markets. The real estate brokerage firms that comprise HomeServices
collectively manage 136 branch offices and have more than 5,100 sales
associates. While HomeServices commenced operations in May 1998 with the
acquisition of two residential real estate brokerage firms and since that date
has acquired four additional firms, the real estate brokerage firms which now
comprise HomeServices have operated for between 12 and 84 years, with an
average of approximately 51 years.

According to National Association of Realtors, the average home ownership
life cycle lasts seven years. This seven-year cycle includes the process of
buying a home, maintaining and repairing the home over the years, and
eventually reselling and purchasing a new home. Of this seven-year cycle, the
real estate broker's relationship with its customer during the listing process
and sale and purchase transaction has typically lasted for 90-120 days.
According to a 1997 survey conducted for the National Association of Realtors,
78% of the recent home buyers who responded to the survey stated that the
opportunity to handle some or all of their home buying services through their
real estate company would be appealing to them, while 66% stated that if they
had the opportunity to redo their own home buying experience, they would choose
a real estate company that offers "one-stop shopping." HomeServices believes
that by being a one-source provider of products and services and referral
services to its customers, it can offer its customers a "one-stop shopping"
experience. HomeServices believes that the strong relationships it develops
with its customers afford it a unique opportunity to expand its business by
maintaining and strengthening its customer relationships by offering, at no
cost to its customers, referrals for additional basic home services initiated
at closing and a variety of other products and services used after the closing
of a home purchase. HomeServices receives referral fees from the service
providers under contracts entered into with the service providers. HomeServices
believes that by offering these additional services to its customers,
particularly by means of E-commerce, it can assist its customers through each
stage of the average seven-year home ownership life cycle and maintain its
customers throughout the home ownership experience. HomeServices believes that
the customer knowledge that it gains during the sale and/or purchase process
allows it to

46
<PAGE>

target its particular services to the home buyer's specific needs. In addition,
as HomeServices further develops its E-commerce operations launched in August
1999, it will seek to generate banner advertising and sponsorship revenues from
its E-commerce operations.

HomeServices' consumer-centric business model of the typical home
ownership experience is illustrated by the diagram below which depicts the
stages of the average home ownership life cycle and the business opportunities
for HomeServices throughout the cycle:

CONSUMER-CENTRIC BUSINESS MODEL OF THE TYPICAL HOME OWNERSHIP EXPERIENCE

HOME DIVIDENDS* PROSPECTING/ BUY/SELL
(YEAR 1-7+) LISTING THE HOME HOME TRANSACTION

o mechanical repair/replacement
o lawn maintenance
o snow removal
o roofing
o lighting, etc.

REAL ESTATE CUSTOMERS FOR LIFE
7+ YEAR CYCLE
(ENTIRE HOME OWNERSHIP EXPERIENCE)

MORTGAGE CLOSING CONCIERGE/HOME
ORIGINATION/ TRANSACTION CONNECTIONS SERVICES
TRANSACTION (CLOSING DATE THRU 1ST YEAR)
(INCLUDING E-LOAN) o waste o cable
o gas o long distance, etc.
o electric

HOME DIVIDENDS*
(1ST YEAR)
o decorating o remodeling
o appliances o repair, etc.

- ----------

* HomeServices plans to make these referral services available to Internet
customers generally by means of E-commerce at no cost to the customer.
HomeServices currently provides referrals for a variety of Concierge
Services and Home Dividends services to its existing customers for no
charge. HomeServices generates referral fees from service providers
pursuant to agreements with the service providers. In addition, as
HomeServices further develops its E-commerce operations, it will seek to
generate banner advertising and sponsorship revenues in the future as a
result of its E-commerce operations.

47
<PAGE>

The following chart lists the preclosing services and Concierge Services
currently being offered or referred by each of HomeServices' real estate
brokerage subsidiaries.

<TABLE>
<CAPTION>
EDINA REALTY IOWA REALTY J.C. NICHOLS CBS HOME PAUL SEMONIN
-------------- ------------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Services offered:
Title ......................... - - - -
Escrow ........................ - - - -
Mortgage ...................... - - - - -
Services referred:
Property and casualty insurance - - -
Home warranty ................. - - - - -
Home inspection ............... - - -
Home security ................. - - - -
</TABLE>

GROWTH STRATEGY

HomeServices' business objective is to become a seamless one-source
provider of a comprehensive menu of products and services for the total home
ownership experience, particularly by means of E-commerce. HomeServices' growth
strategy comprises the following elements:

o Selective acquisitions and consolidations. HomeServices intends to
continue to expand into new geographic markets within the highly
fragmented United States residential real estate brokerage industry
through the acquisition of real estate brokerage firms with high
transaction sides volume, local brand name recognition and significant
market share in their existing markets, which may be city, state or
regional markets. HomeServices will also continue to pursue opportunities
to consolidate two or more acquired companies where such consolidation
would create a leading real estate brokerage firm within its existing
market while providing the new entity opportunities to increase revenues
through cross selling its products and services. HomeServices is
demonstrating its ability to successfully close and integrate real estate
brokerage acquisitions. Since May 1998, HomeServices has acquired and
integrated into its operations six major residential real estate brokerage
firms.

o Expanding its presence in its existing markets. HomeServices is the market
leader in the Midwestern residential real estate brokerage industry based
on aggregate closed transaction sides of the brokerage firms that comprise
HomeServices, occupying the number one or number two market share position
in each of its major markets. HomeServices believes that each of its real
estate brokerage firms has achieved brand recognition and a reputation
among consumers for quality and consistency. HomeServices also believes
that it is well positioned to expand the coverage of its existing markets
under the same brand names primarily through opening additional offices,
hiring additional sales associates and the incremental acquisitions in
HomeServices' existing service areas.

o Cross selling real estate related products and services. HomeServices
intends to use the information it learns about consumers through home
purchasing transactions, such as the characteristics of their properties,
length of ownership, their age and financial circumstances, to cross sell
its existing products and services and to generate referrals for new
products and services provided by third parties, including home
maintenance and repair, to its existing realty customer base. These
existing products and services include, most significantly, mortgage
origination, title insurance and escrow services, as well as referrals for
services such as property and casualty insurance, home warranty, home
inspection and home security. HomeServices earns fees from the providers
of these services for loans or sales originated by it at no cost to the
customer. As HomeServices acquires additional real estate brokerage firms,
it will expand the cross selling of such products to the customers of the
newly acquired companies, thereby further maximizing revenue opportunities
from its real estate buyers.

o Offering referrals for various home care and other products and services,
particularly by means of E-commerce. While HomeServices derived less than
1% of its revenues from referral and

48
<PAGE>

related products and services in 1998, HomeServices plans to
significantly expand its referral services to include various additional
home care products and services, including Concierge Services, Home
Dividends services, E-commerce related services and nonrealty related
services. HomeServices believes that by offering these additional
products and services, it will be able to serve the needs of homeowners
throughout the complete home ownership cycle. HomeServices expects these
referrals to be accessible by telephone as well as the Internet.
HomeServices will provide these services to its customers at no cost
while generating referral fees from third-party service providers of such
products and services. In addition, as HomeServices continues to develop
its E-commerce operations which were launched in August 1999,
HomeServices is seeking to generate banner advertising and sponsorship
revenues from its E-commerce operations. HomeServices expects to offer
the following types of services to new and existing customers,
particularly through HomeServices' developing E-commerce platform:

-- Concierge Services to assist home purchasers at and after closing.
Through its Concierge Services, HomeServices intends to offer its home
buyers the opportunity to obtain in a timely and efficient manner the
basic home services that are initiated at closing and are necessary to
operate a new home. These offerings generally include the following
services, some of which HomeServices currently provides referrals for:
local and long distance telephone service, Internet service, cable
television, newspaper delivery, home security, home warranty, property
and casualty insurance, electricity and natural gas, waste disposal and
moving. Since these services are necessary to the home buyer and a
consumer decision usually must be made by closing, HomeServices
believes that, given its strong relationship with and access to its
customers, there are significant opportunities to earn revenues by
offering referrals for such services to its customers.

-- Home Dividends services to assist home purchasers with home maintenance
and repair. Through its Home Dividends services, HomeServices plans to
offer referrals for home maintenance and repair products and services
that home owners generally need shortly following a home purchase and
throughout the typical cycle of home ownership. HomeServices intends to
offer customers referrals for quality products and services such as
roofing, siding, decking, remodeling, windows, landscaping, plumbing,
electrical, heating, ventilation and air conditioning and appliances.

-- Broad-based E-commerce services. Through its developing E-commerce
operations, HomeServices intends to offer E-loans to its existing real
estate customers and other Internet users, as well as provide referrals
for other products and services offered as part of HomeServices'
Concierge Services and Home Dividends operations. HomeServices believes
that it will have the capability to offer E-loan services by the end of
the third quarter of 1999.

-- Nonrealty related referrals. HomeServices believes that as an extension
of its Concierge Services and Home Dividends programs, it will have the
opportunity to offer referrals to vendors of products and services that
are not directly related to home ownership. HomeServices believes that
these referrals may include entertainment, leisure and recreational
activities and consumer products and services of a more general nature
for its existing realty customer base and for Internet customers
generally.

While HomeServices currently provides some of these products and services
through traditional means, such as referrals for certain Concierge
Services including home warranty, home inspection and home security, it
believes that as it continues to develop its E-commerce platform, which
was launched in August 1999, this aspect of its business will grow
proportionately.

COMPETITIVE STRENGTHS

HomeServices believes that the following competitive strengths
differentiate it from its real estate brokerage competitors:

49
<PAGE>

o Long-established presence in its markets with well-recognized brand names
and leading market shares. While HomeServices' predecessor was formed in
May 1998, the real estate brokerage firms that comprise HomeServices have
operated for between 12 and 84 years, with an average operating history in
excess of approximately 51 years. These companies occupy the number one or
number two position in each of HomeServices' major markets and enjoy
strong brand-name recognition, attributes from which HomeServices expects
to benefit as it expands its service offerings.

o Comprehensive range of services. HomeServices' current product offerings
position it as one of the few full-service providers in the residential
real estate industry. HomeServices' ability to offer brokerage, preclosing
and postclosing products and services in a "one-stop shopping" experience
preferred by customers differentiates it from most of its competitors and
enables it to generate incremental revenues by cross selling services to
its existing realty customer base.

o Larger scale of operation than the competition. As one of the leading
companies in the industry, HomeServices enjoys certain economies of scale
and is able to spread costs and investments, such as marketing and
technology, over a larger revenue base. In addition, HomeServices' size
permits it to offer and cross sell efficiently a broader array of services
than smaller firms and enables it to take advantage of acquisition and
consolidation opportunities.

o Experienced management. The five chief executive officers of HomeServices
and its real estate brokerage subsidiaries have between 22 and 39 years
experience in the real estate industry, with an average of 27 years,
including leadership positions in national realty organizations. This
senior management team combines a deep knowledge of HomeServices' local
markets with an understanding of industry trends and a proven ability to
identify, effect and integrate acquisitions. They have served as agents
and brokers as well as managers of their respective firms.

o Efficient sales associates. HomeServices is dedicated to the recruitment,
training and retention of both new and experienced sales associates and
provides extensive programs aimed at improving sales associates' marketing
skills and increasing their knowledge and awareness of the issues and laws
affecting the real estate industry. Based on information provided by Real
Trends, an industry publication, the productivity of the sales associates
at the various brokerage firm operating subsidiaries that comprise
HomeServices of 16.2 aggregate closed transaction sides per sales
associate in 1998 compares favorably to an industry average of 13.2 for
the top 500 residential real estate brokerage firms, excluding Home
Services. HomeServices believes the productivity level of its sales
associates is among the highest in the industry based on aggregate closed
transaction sides. HomeServices intends to continue to recruit additional
highly qualified sales associates, targeting, in particular, sales
associates with experience in the real estate industry and longstanding
referral relationships within the community. Since January 1, 1998, the
brokerage firm operating subsidiaries that comprise HomeServices have
added approximately 275 sales associates to the HomeServices branch
network.

INDUSTRY

HomeServices believes that the residential real estate industry has
undergone a period of continued growth which, combined with certain
characteristics and trends creates an opportunity for HomeServices to leverage
its strengths to its competitive advantage. HomeServices believes most
important of these industry characteristics and trends are:

o Fragmentation. The residential real estate brokerage industry remains
primarily a local and highly fragmented industry. According to Real
Trends, in 1998, the companies comprising HomeServices and the other top
four residential brokers accounted for only 5.1% of the total national
market based on closed transaction sides, while the top 500 firms
accounted for less than 20.0%. HomeServices believes this fragmentation
presents it with numerous acquisition opportunities.

50
<PAGE>

o Emergence of the Internet. In the real estate and mortgage business, the
Internet is fast becoming a major marketing tool. According to a report
issued by Strategic Planning Services, mortgage originations over the
Internet are expected to grow from $4.1 billion in 1998 to nearly $100.8
billion by 2003 as customers recognize the convenience and benefits of
shopping for and refinancing their mortgages and home equity loans
on-line. HomeServices believes that in addition to marketing its
traditional residential brokerage, mortgage and title services on-line,
the Internet provides it with significant opportunities to offer its
Concierge Services and Home Dividends services. As part of its strategy,
HomeServices will seek to attract Internet customers outside of its
existing realty customer base by providing a broad array of E-commerce
offerings, which may be tailored to the local or regional markets in which
it operates or provided on a more expansive basis.

o Size and Recent Growth of Market. Based on information reported by the
National Association of Realtors and the United States Census Bureau, the
1998 domestic residential real estate market for existing and new home
sales consisted of more than 11.7 million transaction sides, representing
more than $950.0 billion in closed transaction value. In recent years, the
overall domestic residential real estate market has demonstrated continued
growth in home sales and rising home prices. According to the National
Association of Realtors, sales of existing single-family homes in the
Midwest reached 1.2 million in 1998, which represents an average annual
growth rate of 5.6% since 1990. In addition, the sales growth has
accelerated in recent years, as evidenced by average annual growth of 7.0%
since 1995. In 1998, the Midwest regional median price for existing
single-family homes was $114,300, which represents an average annual
increase of 6.8% from 1990. Rising home prices, however, have apparently
not impaired home affordability, with the National Association of
Realtors' Housing Affordability Index remaining relatively stable
since 1994.

REAL ESTATE BROKERAGE OPERATIONS

The following chart depicts the number of branch offices, sales associates
and employees as of June 30, 1999 and the number and volume of transactions for
1998 for HomeServices. All figures are presented on a pro forma basis.

<TABLE>
<CAPTION>
PAUL HOMESERVICES
EDINA REALTY IOWA REALTY J.C. NICHOLS CBS HOME SEMONIN (TOTAL)
-------------- ------------- -------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Branch Offices ................ 71 29 16 9 11 136
Sales Associates .............. 2,351 958 700 494 666 5,169
Employees ..................... 668 299 166 125 114 1,372
Number of Transactions(1) for
1998 ......................... 31,000 20,000 10,000 10,000 8,000 79,000
Volume of Transactions for 1998
(in billions) ................ $ 4.6 $ 2.4 $ 1.5 $ 1.5 $ 1.1 $ 11.1
</TABLE>

- ----------

(1) This figure includes the buying and selling sides of a home purchase
transaction. 79,000 represents the total number of closed transaction
sides, of which approximately 40,000 were buy side transactions.

HomeServices acts as a broker or agent in residential real estate
transactions. In performing these residential real estate services,
HomeServices represents either the seller, as the listing broker, or the buyer,
as the buyer's agent, in the sale. When acting as a broker for the seller,
HomeServices provides its customers with the following services:

o assisting the seller in pricing the property and preparing it for sale;

o advertising the property and showing it to the buyer;

o assisting the seller in negotiating the terms of the sale;

o ensuring that the transaction is in compliance with any applicable
federal, state and local regulations; and

51
<PAGE>

o closing the transaction.

In exchange for providing these services as the seller's broker, the
seller pays HomeServices a commission upon the closing of the real estate
transaction, which is generally a fixed percentage of the sales price. Gross
listing commissions typically range from 5% to 7% of the sales price and may be
shared between the seller's broker and the buyer's broker. When acting as the
seller's broker, HomeServices enters into an exclusive agency relationship with
the seller, which means that HomeServices is entitled to receive a sales
commission upon the closing of the sale transaction regardless of whether
HomeServices, the seller or any other person locates the buyer.

When acting as a broker for the buyer, HomeServices provides its customers
with the following services:

o assisting the buyer in locating properties that come within the buyer's
personal and financial specifications;

o showing properties to the buyer;

o assisting the buyer in negotiating the terms of the sale;

o monitoring compliance of the transaction and the property with any
applicable federal, state and local regulations; and

o closing the transaction.

In exchange for providing these services as the buyer's broker,
HomeServices receives a commission upon the closing of the real estate
transaction that is generally a fixed percentage of the purchase price. With
the consent of the seller's broker, this commission is usually payable from the
sales commission paid by the seller to the seller's broker.

In transactions in which HomeServices is acting as a broker on either the
buy side or sell side of a transaction and a third-party broker is acting as
broker on the other side of the transaction, HomeServices will typically share
approximately 50% of the sales commission with the other broker. In certain
circumstances, and only with the consent of both the buyer and seller,
HomeServices may act as the buyer's broker and the seller's broker in the same
transaction. HomeServices receives 100% of the sales commission in transactions
in which it acts as the sole broker.

Typically, the percentage of the real estate commissions that is paid to
HomeServices' sales associates will vary based on factors determined by
HomeServices, such as sales associate productivity and rates that are paid to
competing associates in the same local or regional market. The percentage of
total commissions which HomeServices has paid to sales associates has averaged
approximately 65% over the past three years.

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<PAGE>

The following table sets forth the real estate sales commissions and
related data of HomeServices during the periods indicated below. These results
are shown on a pro forma basis, including all entities shown in the June 30,
1999 unaudited pro forma financial statements.

<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
--------------------------------------- -----------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sides ................................ 70,792 69,833 79,598 35,417 37,419
Average sales price per home ......... $ 122.3 $ 130.0 $ 138.9 $ 4,834 $ 5,447
Average commission rate per side ..... 3.0% 3.0% 2.9% 2.9% 3.0%
Real estate sales commissions ........ $263,805 $273,111 $320,216 $138,664 $164,972
</TABLE>

SALES ASSOCIATES

HomeServices had more than 5,100 sales associates as of June 30, 1999
after giving effect to the Paul Semonin Realtors acquisition. Sales associates
are not employees of HomeServices, but operate under independent contractor
agreements. Each sales associate signs an independent contractor agreement with
HomeServices that establishes the relationship between the sales associate and
HomeServices as that of an independent contractor rather than employee and
employer. Under this agreement, HomeServices agrees that the sales associate
may share with other sales associates and sales assistants the use of
HomeServices' offices and facilities for the purposes of engaging in the real
estate brokerage business. The sales associate agrees to be responsible for his
or her personal business expenses and payment of all state and federal income
taxes and self-employment taxes. The sales associate further agrees that all
listings will remain the separate and exclusive property of HomeServices.
Either HomeServices or the sales associate can terminate the independent
contractor relationship at any time upon written notice given to the other.

As independent contractors, sales associates are paid solely by commission
on the basis of closed sales transactions and do not receive a salary or
benefits from HomeServices, although they may have access to certain benefits
through HomeServices' plans. Upon the consummation of the offering, sales
associates will be eligible to participate in HomeServices' non-employee stock
purchase plan. Sales associates have participated in prior stock purchase plans
maintained on their behalf. HomeServices maintains errors and omissions
insurance coverage, referred to herein as E&O insurance, for each of its sales
associates. Some of HomeServices' real estate brokerage subsidiaries require
their sales associates to contribute towards the maintenance of such E&O
insurance.

HomeServices is dedicated to the recruitment, training and retention of
its sales associates. HomeServices provides extensive training programs for its
new and experienced sales associates aimed at improving their marketing skills
and increasing their knowledge and awareness of the issues and laws affecting
the real estate industry and their productivity. New sales associates attend a
four-week training program which prepares them for entry into the real estate
brokerage industry. Additional training is provided after sales associates have
worked in the field. Finally, more seasoned sales associates have access to an
eight-week program which is structured to improve their business and
professional skills. While industry results vary widely, from 1996 to 1998, the
annual productivity of the sales associates employed by the individual
companies that comprise HomeServices increased by 7.1% from 15.4 to 16.2
transaction sides per sales associates. Based on closed transaction sides for
sales associates, which HomeServices believes is the optimal indicator of sales
associate productivity, HomeServices believes the productivity level of its
sales associates is among the highest in the industry.

MORTGAGE OPERATIONS

HomeServices offers mortgage origination services, primarily for loans in
which it acted as the broker in the home purchase transaction. Originations
refer to the general process of arranging mortgage financing on behalf of the
customer for the purchase of property or for the refinancing of an

53
<PAGE>

existing mortgage. HomeServices currently provides a substantial portion of
these mortgage origination services through a residential joint venture with
Norwest Mortgage Inc., a subsidiary of Norwest Bank and one of the largest
mortgage originators in the United States. Pursuant to the joint venture,
HomeServices evaluates the mortgage loans it originates against underwriting
standards of Norwest Mortgage. The joint venture employs loan originators and
supervisory staff and purchases processing, underwriting and closing services
from Norwest Mortgage. Under the joint venture, Norwest Mortgage provides these
services for a fee plus reimbursement for processing fees. Since Norwest
Mortgage underwrites and services the mortgages, HomeServices retains none of
the servicing responsibilities or liabilities for the mortgages it originates
and Norwest Mortgage bears the losses from any failure by a mortgagor to pay
principal, interest or other amounts under a mortgage.

Plaza Mortgage, a wholly owned subsidiary of J.C. Nichols, also
originates, processes, underwrites and closes mortgages. Plaza Mortgage's
underwriting loan commitments are contractual obligations in its own name to
mortgage loan applicants. Before underwriting the loan commitment, Plaza
Mortgage performs a credit analysis to confirm that the loan would meet the
particular guidelines established by several investors with whom Plaza Mortgage
has established relationships. Prior to closing with the mortgage applicant,
Plaza Mortgage obtains a commitment that an investor will purchase the loan
after the closing at an agreed upon price on the condition that the loan meets
the investor's particular investment guidelines. Plaza Mortgage then sells the
mortgage, typically within two weeks, to the investor and, after it is sold,
retains no service rights or interest carrying costs.

In 1998, HomeServices originated approximately $461.2 million in
mortgages, of which approximately 80% represented mortgages originated by
HomeServices through its joint venture with Norwest Mortgage Inc., 15%
represented mortgages originated and underwritten by Plaza Mortgage and
approximately 5% represented mortgages originated by Plaza Mortgage and
underwritten by loan providers other than Norwest Mortgage and Plaza Mortgage.
On a pro forma basis for the year ended December 31, 1998 and the six months
ended June 30, 1999, approximately $2.2 million and $1.2 million of
HomeServices' revenues were generated by its mortgage operations.

TITLE, ESCROW AND CLOSING SERVICES

In all markets in which it operates other than Iowa and Kansas,
HomeServices performs abstracting, examination, search, endorsements,
recordation, preparation of title policy documents when acting as agent for
Chicago Title and other title insurance companies and closing services as part
of its title insurance services. HomeServices acts as a title agent in such
transactions and does not underwrite the insurance. Iowa is the only state that
does not authorize residential title insurance. Instead, Iowa uses abstract
companies to provide the history (abstract) to lawyers for their review and
warranty. In Iowa, HomeServices prepares property abstracts for titles for real
estate agencies, attorneys, financial institutions and other parties involved
in the selling or financing of real estate. Kansas significantly restricts
residential real estate brokers from also performing title operations.
HomeServices receives fees for all of the above services in addition to
retaining a substantial portion of title insurance premiums in states other
than Iowa and Kansas.

In addition, HomeServices owns an escrow services company which provides a
range of real estate closing services to home buyers and sellers, including
third-party closings in which HomeServices is not otherwise involved. These
services include escrowing funds and processing closing documents. Revenues
from title, escrow and closing services are generated by transaction fees,
which tend to fluctuate with HomeServices' brokerage revenues. A total of 32%
of title, escrow and closing revenues have come from transactions in which
HomeServices is not the real estate broker. On a pro forma basis for the year
ended December 31, 1998 and the six months ended June 30, 1999, approximately
$24.5 million and $11.9 million of HomeServices' revenues were generated by its
title, escrow and closing services.

RELOCATION SERVICES

HomeServices offers corporations a variety of specialized services
primarily concerned with facilitating the resettlement of transferred
employees. HomeServices believes that these relocation

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<PAGE>

services minimize the stress and inconvenience for the transferees and their
families while maximizing cost-effectiveness to the corporations. These
relocation services generally include:

o home-finding assistance;

o home-selling assistance;

o group-move coordination;

o inspection services;

o international relocation assistance;

o cost-of-living comparisons;

o school and neighborhood comparisons;

o moving services;

o mortgage services; and

o expense management.

HomeServices believes that the relocation services it provides to
corporate clients, directly or indirectly through major third-party relocation
companies, enable it to develop longstanding relationships with the transferred
employees themselves. HomeServices believes that these transferred employees
are particularly in need of Concierge Services and Home Dividends services
because they most likely would be relocating to areas unfamiliar to them. In
1998, HomeServices generated approximately $206,000 in fees for relocation
services.

CONCIERGE SERVICES

HomeServices believes that it will be able to effectively provide its
customers, and particularly its buy-side customers, a broader and more
comprehensive range of services than its competitors by offering Concierge
Services, at no cost. Concierge Services arrange for the initiation at closing
of basic home services necessary to the home buyer, such as local and
long-distance telephone service, Internet service, cable television, newspaper
delivery, home security, home warranty, property and casualty insurance,
electricity, natural gas, waste disposal and moving. HomeServices believes it
is especially well-positioned to offer Concierge Services, on a targeted basis,
to its captive buy-side customers with whom it has developed relationships
during the home purchasing experience.

HomeServices has begun to offer referrals for a variety of these Concierge
Services through Edina Realty and certain other subsidiaries and intends to
commence offering these services on a company-wide basis in the fourth quarter
of 1999. HomeServices is currently offering referrals for the following
Concierge Services:

o local and long distance telephone service;

o Internet service account establishment;

o newspaper delivery;

o home security, including monthly monitoring;

o home warranty, which is provided by the seller to the buyer as to the
nonstructural condition of the home, such as the condition of the heating
and air conditioning units;

o home inspection;

o property and casualty insurance;

o waste disposal;

o lawn service;

o moving; and

o locksmith.

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<PAGE>

HomeServices currently provides referrals to its existing real estate
customers through traditional means. HomeServices intends to make these
Concierge Services available to its existing realty customer base and Internet
customers generally by means of E-commerce.

HomeServices continues to evaluate the types of Concierge Services that it
provides and opportunities for expansion. HomeServices receives third-party
referral fees for the services listed above from the service providers pursuant
to contracts that it has already entered into with the service providers. On a
pro forma basis for the year ended December 31, 1998 and the six months ended
June 30, 1999, approximately $651,000 and $733,000 of HomeServices' revenues
were generated by these Concierge Services. HomeServices plans to significantly
expand the types of Concierge Services that it provides and expects to derive a
greater percentage of its revenues in the future from Concierge Services.

HOME DIVIDENDS SERVICES

As part of promoting a "one-stop shopping" experience for its customers at
closing and throughout the seven-year home ownership cycle, HomeServices plans
to provide to its existing customers and to Internet customers generally,
through E-commerce, at no cost, referrals for house maintenance and repair
related products and services. These products and services will be provided by
third-party providers. HomeServices believes that these Home Dividends services
will assist a new homeowner through each stage of the home ownership cycle by
simplifying their search process for third-party service providers.
HomeServices intends to screen and monitor these third-party service providers
to ensure that they meet pre-established quality performance standards,
although HomeServices does not intend to make any contractual representations
to customers as to the quality performance of these providers or to guarantee
their performance. The third-party providers are expected to offer services
such as:

o roofing;

o siding;

o decking;

o remodeling;

o windows;

o landscaping;

o plumbing;

o electrical;

o heating, ventilation and air conditioning; and

o appliances.

In exchange for referring its existing customers to these third-party
providers, HomeServices will receive referral fees from the actual third-party
providers. HomeServices plans to make these Home Dividends services accessible
through the Internet as part of its E-commerce operations. HomeServices
believes it will generate revenues from banner advertising on its websites in
addition to the referral fees it receives.

E-LOANS

As a part of its E-commerce operations, HomeServices intends to offer to
its existing real estate customers and other Internet customers generally the
opportunity to originate and refinance mortgages and home equity loans on-line.
HomeServices currently provides mortgage origination services but intends to
transition these services on-line through E-loans. HomeServices believes its
E-commerce operations will position it to earn banner advertising revenues from
its websites in addition to the fee-based origination and referral fees.

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<PAGE>

MARKETING

Real Estate

HomeServices markets its real estate brokerage, mortgage origination,
insurance and other ancillary services through a multimedia program. This
program includes advertising through major area and local newspapers, the
Internet, real estate publications, radio, television, catalogs and direct
mail. HomeServices also promotes its websites and E-commerce offerings through
these media outlets. HomeServices' advertising and marketing expenses vary
based on closed transaction volume and are funded both through commission
revenue earned by HomeServices and a marketing fee paid by sales associates to
HomeServices. In 1998, HomeServices incurred $13.8 million in business
promotion and advertising expense.

HomeServices' individual sales associates also often market HomeServices'
business through similar marketing tools as HomeServices. Sales associates are
responsible for purchasing the marketing tools they use in their business.

E-commerce Offerings to an Expanded Customer Base

HomeServices believes that it can attract Internet customers outside of
its existing realty customer base by providing a broad array of E-commerce
services. These E-commerce services, which currently include E-loans and
referrals for home warranty, home security, home inspection and property and
casualty insurance and, in the future, will include additional referrals for
products and services offered as a part of HomeServices' Concierge Services and
Home Dividends, may be tailored to the local or regional market in which
HomeServices operates or provided on a more expansive basis. HomeServices
intends to market its E-commerce service and product offerings, particularly
through on-line advertising and reciprocal hyperlinks to other websites that
are likely to attract potential home buyers. HomeServices believes that it has
already established an on-line presence through its own website and the
websites of its brokerage subsidiaries. Certain of HomeServices' brokerage firm
operating subsidiaries have already established hyperlinks with leading
Internet real estate websites, such as Realtor.com and HomeAdvisor.com, and
with websites of local newspapers in HomeServices' existing markets. These
hyperlinks enable HomeServices' brokerage firm operating subsidiaries to access
both their existing customers and Internet customers generally without having
to incur significant advertising expense.

COMPETITION

The residential real estate brokerage business throughout the United
States is highly competitive and is characterized by many small independent
real estate brokerage firms, a few major regional players, including Weichert
Realtors, Long & Foster and GMAC, and a multiregional player, NRT Incorporated.
Despite the fragmented nature of the real estate brokerage business, each of
HomeServices' residential real estate brokerage firms commands the number one
or number two position in each of its respective major markets. The different
types of real estate operations include independent brokers, franchises and
co-owned stores.

In the residential real estate brokerage business, HomeServices' real
estate brokerage firms compete in their existing markets with regional
multioffice independent and franchise real estate organizations, such as
Coldwell Banker Burnet and J. D. Reece Realtors, as well as local single office
independent real estate organizations. HomeServices also competes nationally
with franchise real estate organizations, such as RE/MAX franchises, GMAC, The
Prudential and NRT Incorporated, which operates a number of offices under the
franchised Century-21, ERA and Coldwell Banker brand names. Companies compete
for real estate brokerage business primarily on the basis of services offered,
reputation, personal contacts, and, to some degree, price. HomeServices
believes that its major competitors in 1999 in the acquisition of other real
estate brokerage businesses will be franchise organizations, such as NRT
Incorporated and RE/MAX.

In the real estate brokerage business, companies also compete to obtain
the most qualified and experienced sales associates. Competition for these
sales associates is based on commission fee rates, services the company offers,
its reputation and personal contacts.

57
<PAGE>

In its mortgage loan origination business, HomeServices competes with
other mortgage originators, such as mortgage bankers, state and national banks,
and thrift institutions, some of which have substantially greater resources
than HomeServices. HomeServices competes for loan origination business based on
services offered, price and available terms and its ability to obtain referrals
through its sales and marketing services. HomeServices employs full-time
mortgage consultants who are assigned to various real estate brokerage offices
and title offices. The mortgage consultants currently originate mortgage loans
primarily from HomeServices' real estate customers. In the E-loans business,
which is fragmented with no single dominant player, HomeServices will compete
generally with other mortgage originators providing services over the Internet.
HomeServices believes it will have a competitive advantage over these rivals
because they typically do not have a direct relationship with the customer.

In the Concierge Services and Home Dividends business, HomeServices will
continue to compete with other referral services, such as other referral
companies or the yellow pages. However, these competitors, unlike HomeServices,
typically do not have a direct relationship with the customer.

In the E-commerce business, HomeServices will compete with Internet
websites such as Realtor.com and Homestore.com that provide access to similar
products or services. HomeServices believes it will have a competitive
advantage over these competitors because, unlike HomeServices, these others are
not licensed real estate brokers and therefore, typically do not have a direct
relationship with the customer.

EMPLOYEES AND SALES ASSOCIATES

As of June 30, 1999, HomeServices employed approximately 1,260
individuals, including 360 part-time employees, and had more than 4,500 sales
associates who are independent contractors, not employees. On a pro forma
basis, HomeServices employed approximately 1,375 individuals, including
approximately 385 part-time employees, and had more than 5,100 sales
associates. None of HomeServices' employees or sales associates is covered by a
collective bargaining agreement. Management believes that HomeServices'
relations with its employees and sales associates are good.

SERVICES AGREEMENT

Prior to the consummation of this offering, HomeServices and MidAmerican
Holdings will enter into a services agreement under which MidAmerican Holdings
will provide management, advisory, financial, accounting, legal, employee
benefit plan and insurance administration and other services to HomeServices.
HomeServices is required to pay a monthly fee in an amount equal to $50,000
plus reimbursement for all reasonable employee and out-of-pocket costs and
expenses incurred by MidAmerican Holdings in connection with providing these
services. See "Certain Relationships and Related Transactions--Services
Agreement."

REGULATION

Real estate brokerage is regulated at both the state and federal levels in
the United States. HomeServices' real estate brokerage firms and all sales
associates are licensed by their respective state regulatory agencies. State
statutes contain general standards for and prohibitions on the conduct of real
estate brokers and sales associates and set standards in:

o disclosure when acting in an agency and dual agency capacity (i.e.,
representing a seller and a buyer in a transaction);

o collecting commissions;

o continuing broker and sales associate education;

o administering trust funds;

o advertising; and

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<PAGE>

o disclosing information in real estate forms.

Under state law, each of HomeServices' realty companies has a duty to
supervise and is responsible for the conduct of its sales associates. The
states enforce their regulatory authority by responding to consumer complaints
and, if appropriate, by taking action against the licensee. The action may
include a warning letter or reprimand, a temporary suspension of license or a
revocation of license with fines imposed. Each of HomeServices' licensed realty
companies strives to avert regulatory complaints by educating its sales
associates about state regulations with established training programs.
HomeServices' in-house legal department takes primary responsibility for
handling any regulatory complaints received by the realty companies concerning
their operations and sales associates. HomeServices believes that to date none
of the regulatory complaints received by the realty companies have been
material. Further, the majority of those complaints have not resulted in any
action being taken by the regulatory authority. There are currently no
regulatory investigations that, if found to merit regulatory action, would
adversely affect HomeServices' ability to conduct business.

On the federal level, HomeServices' real estate brokerage activities are
subject to the Real Estate Settlement Procedures Act and the regulations
promulgated thereunder which prohibit discrimination and require the disclosure
of certain information to borrowers concerning settlement costs.

HomeServices mortgage loan organization activities are subject on the
federal level to the Real Estate Settlement Procedures Act, the Equal Credit
Opportunity Act, the Federal Truth-in-Lending Act and the regulations
promulgated thereunder which prohibit discrimination and require the disclosure
of certain information to borrowers concerning credit and settlement costs. As
an approved Fannie Mae and Federal Home Loan Mortgage Corporation mortgage
seller, HomeServices is required to comply with Fannie Mae and Federal Home
Loan Mortgage Corporation seller guidelines for secondary sale of mortgages.
Additionally, there are various state laws affecting HomeServices' mortgage
operations, including licensing requirements and substantive limitations on the
interest and fees that may be charged. States also have the right to conduct
financial and regulatory audits of the loans under their jurisdiction.
HomeServices, through its subsidiaries, is licensed to provide mortgage
origination services in the jurisdictions in which it operates.

HomeServices' title and escrow services are regulated by state regulatory
authorities that possess broad powers relating to the granting and revocation
of licenses. These state authorities also regulate insurance rates and the form
of policies.

HomeServices' business depends on the validity of, and HomeServices'
continued good standing under, the licenses and approvals under which it
operates and HomeServices' continued compliance with pertinent regulations.
HomeServices therefore devotes a significant amount of effort toward
maintaining its licenses and ensuring compliance with applicable regulations,
which efforts include maintaining a staff of in-house compliance officers.

LEGAL PROCEEDINGS

In the ordinary course of business, HomeServices and its subsidiaries are
involved in legal proceedings incidental to their operations. HomeServices and
its subsidiaries are not currently involved in any legal proceedings that
management believes would have a material adverse effect on the operations or
financial condition of HomeServices and its subsidiaries taken as a whole.

PROPERTIES

HomeServices' principal offices are located in Edina, Minnesota, where
HomeServices leases approximately 46,000 square feet of office space. This
lease expires in 2003. The rent under this lease is approximately $600,000 per
year. In addition, HomeServices has a total of 136 branch offices,
substantially all of which are leased. HomeServices' office leases generally
have initial terms ranging from three to ten years, with an option to extend
the lease for additional periods. The leases are typically net leases, which
means that HomeServices is required to pay property taxes, utilities and
maintenance. HomeServices believes that its present facilities are adequate for
its current level of operations.

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<PAGE>

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth information concerning the executive
officers, directors and key employees of HomeServices. Ages are as of June 30,
1999. There are no family relationships among any of HomeServices' executive
officers, directors and key employees.

<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- ----- ----------------------------------------------------------------
<S> <C> <C>
David L. Sokol(1)(2) ................. 42 Chairman; Director
Ronald J. Peltier(1) ................. 49 President and Chief Executive Officer; Director
Dwayne J. Coben ...................... 40 Senior Vice President and Chief Financial Officer
Jack W. Frost ........................ 66 President and Chief Executive Officer of J.C. Nichols; Director
R. Michael Knapp ..................... 48 President and Chief Executive Officer of Iowa Realty; Director
Steven A. McArthur(1)(2)(3) .......... 41 Senior Vice President, General Counsel and Secretary; Director
James L. Anderson .................... 39 Director of Information Technology
Arne M. Rovick ....................... 55 Vice Chairman and General Counsel of Edina Realty
Joseph J. Valenti .................... 51 President and Chief Executive Officer of CBS HOME
George E. Gans ....................... 60 President and Chief Executive Officer of Paul Semonin Realtors
Gregory E. Abel ...................... 37 Director
Richard R. Jaros(1)(2)(3) ............ 47 Director
W. David Scott(2)(3) ................. 37 Director
</TABLE>

- ----------
(1) Member of the executive committee.

(2) Member of the compensation committee.

(3) Member of the audit committee.

The following sets forth biographical information of HomeServices'
executive officers, directors and key employees:

DAVID L. SOKOL has been Chairman of HomeServices since its inception in
July 1999. He has also been the Chairman of MidAmerican Energy Company since
March 1999. Mr. Sokol has been Chairman of MidAmerican Holdings since May 1994
and Chief Executive Officer of MidAmerican Holdings since April 1993. He has
been a director of MidAmerican Holdings since 1991 and served as President of
MidAmerican Holdings from April 1993 to January 1995. Before his service with
MidAmerican Holdings, Mr. Sokol held a variety of senior executive positions in
the independent power industry.

RONALD J. PELTIER has been President and Chief Executive Officer of
HomeServices since its inception in July 1999. He was Chairman, President and
Chief Executive Officer of Edina Realty from 1992 to May 1999. Mr. Peltier also
serves as a director for the National Association of Realtors, a director for
the RELO Network and is a founder and director for the Realty Alliance, a trade
group consisting of the nation's leading brokers. Mr. Peltier joined Edina
Realty in 1977, became General Sales Manager in 1983, and became Senior Vice
President and General Manager in 1991, where he was responsible for all sales
operations and long-range planning for Edina Realty.

DWAYNE J. COBEN has been Senior Vice President and Chief Financial Officer
of HomeServices since its inception in July 1999. He has also been the Vice
President, Utility Development of MidAmerican Energy Company since April 1999.
He was a Director, Corporate Development from August 1997 to March 1998 and
Corporate Development Vice President from April 1998 to March 1999. Before
joining MidAmerican Energy Company, Mr. Coben was Controller, Marketing and
Customer Services for BC Hydro from December 1994 to August 1997, and held
various business development management positions with BC Hydro from 1990 to
1994.

JACK W. FROST has been a director of HomeServices since its inception in
July 1999 and President and Chief Executive Officer of J.C. Nichols since
February 1, 1990. In 1978, he sold Hardin Stockton,

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<PAGE>

a residential real estate brokerage firm, to Coldwell Banker and, five years
later, became the Executive Vice President and National General Manager for
Coldwell Banker Residential Group serving in that capacity until 1988. In 1990,
Mr. Frost purchased the 75-year-old residential brokerage operation of the J.C.
Nichols Company. Mr. Frost is a former Commissioner and Chairman of the Kansas
Real Estate Commission.

R. MICHAEL KNAPP has been a director of HomeServices since its inception
in July 1999 and President and Chief Executive Officer of Iowa Realty since
1991. Prior to 1991, Mr. Knapp held numerous positions at Iowa Realty including
General Sales Manager of the residential division and Senior Vice President.
Mr. Knapp is an active member of Pacesetters and the Vision Group, two
organizations comprised of the top real estate brokers and owners from across
the nation.

STEVEN A. MCARTHUR has been Senior Vice President, General Counsel,
Secretary and a director of HomeServices since its inception in July 1999. He
has been Senior Vice President, Mergers and Acquisitions of MidAmerican
Holdings since March 1999 and had previously served as Executive Vice President
and General Counsel of MidAmerican Holdings from February 1991 to March 1999.
Mr. McArthur joined MidAmerican Holdings in 1991. From 1988 to 1991, he was an
attorney in the Corporate Finance Group at Shearman & Sterling in San
Francisco. From 1984 to 1988, Mr. McArthur was an attorney in the Corporate
Finance Group at Winthrop, Stimson, Putnam & Roberts in New York.

JAMES L. ANDERSON has been the Director of Information Technology of
HomeServices since its inception in July 1999. He has been the Vice President
of Business Development for Northern Aurora since April 1998. From 1988 to
April 1998, Mr. Anderson held a variety of technology-related positions at
Sierra Pacific Power Company, a west coast investor-owned public utility
company, including project manager for commercial and industrial billing from
1996 to 1998 and senior systems analyst from 1991 to 1996.

ARNE M. ROVICK has been Vice Chairman and General Counsel of Edina Realty
since 1986. His other positions at Edina Realty include Chief Administrative
Officer, Senior Vice President and Secretary. Prior to such time, Mr. Rovick
practiced law in Phoenix, Arizona with the firm of Evans, Kitchel and Jenckes,
P.C. In 1986, Mr. Rovick returned to Minnesota as Vice President, General
Counsel for Edina Realty.

JOSEPH J. VALENTI has been President and Chief Executive Officer of CBS
HOME since its formation in August 1998. He was licensed in the real estate
business and worked as a sales associate and office manager from 1976 through
1985. In 1985, Mr. Valenti and two other individuals purchased Wurdeman of
Omaha and he became President of the company. In 1987, Wurdeman of Omaha was
merged with two other Omaha residential companies to form HOME Realty and he
became President of that entity. Upon the acquisition of HOME Realty and CBS
Realty by HomeServices, Mr. Valenti became the president of CBS HOME, the
merged entity. Mr. Valenti is a past President of the Omaha Area Board of
Realtors. He has also been a member and chairperson of multiple local and state
realtor committees from 1979 to the present. Mr. Valenti is active in the Omaha
Chamber of Commerce and several charities in the Omaha area.

GEORGE E. GANS has been President and Chief Executive Officer of Paul
Semonin Realtors since 1985. Mr. Gans also serves as a director for Realty
Alliance and the National Association of Realtors, serves as a member of the
Board of Governors for Norton Health Care and for the Norton Hospital Advisory
Board and serves on the Advisory Board and Executive Committee for Bank One,
Kentucky, NA. Mr. Gans joined Paul Semonin Realtors in 1973 as a sales
associate, became an office manager in 1979 and Executive Vice President in
1984.

GREGORY E. ABEL has been a director of HomeServices since its inception in
July 1999. He has been Chief Executive Officer of MidAmerican Energy Company
since March 1999. Mr. Abel held various executive positions at MidAmerican
Holdings from 1992 to March 1999, including responsibility for engineering,
construction, accounting and various administrative functions. He has

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been President and Chief Operating Officer of MidAmerican Holdings since March
1998. Mr. Abel is a Chartered Accountant and from 1984 to 1992 was employed by
Price Waterhouse in San Francisco, where he was responsible for clients in the
energy industry.

RICHARD R. JAROS has been a director of HomeServices since its inception
in July 1999. Mr. Jaros has also been a director of MidAmerican Holdings since
March 1991. Mr. Jaros served as President and Chief Operating Officer of
MidAmerican Holdings from January 8, 1992 to April 19, 1993 and as Chairman of
the Board from April 19, 1993 to May 1994. Until July 1997, Mr. Jaros was
Executive Vice President and Chief Financial Officer of Peter Kiewit Sons' Inc.
and President of Kiewit Diversified Group, Inc., which is now Level 3
Communications. From 1990 until January 8, 1992, Mr. Jaros served as a Vice
President of Peter Kiewit Sons' Inc. Mr. Jaros serves as a director of
Commonwealth Telephone, RCN Corporation and Level 3.

W. DAVID SCOTT has been a director of HomeServices since its inception in
July 1999. Mr. Scott formed Magnum Resources, Inc., a commercial real estate
holding company, in October 1994 and has served as its President and Chief
Executive Officer since its inception. Mr. Scott has directed the development
and expansion of Magnum Resources and its primary commercial real estate
subsidiary, the Mega Corporation, through a series of acquisitions as well as a
merger of Magnum Resources and the Mega Corporation. Before forming Magnum
Resources, Mr. Scott worked for America First Companies, Cornerstone Banking
Group and the Kiewit Companies. Mr. Scott has been a director of America First
Mortgage Investments, Inc., a mortgage REIT, since 1998.

CLASSIFIED BOARD OF DIRECTORS

HomeServices' board of directors is divided into three classes of
directors serving staggered three-year terms. As a result, approximately
one-third of the board of directors will be elected each year. These
provisions, together with the provisions of the restated certificate of
incorporation that allow the board of directors to fill vacancies in or
increase the size of the board of directors, would prevent a stockholder from
removing incumbent directors and filling such vacancies with its nominees in
order to gain control of the board.

HomeServices' board has resolved that Messrs. Abel and Frost will serve as
Class I Directors whose terms expire at the 2000 annual meeting of
stockholders. Messrs. Knapp, Scott and Peltier will serve as Class II Directors
whose terms expire at the 2001 annual meeting of stockholders. Messrs. Sokol,
McArthur and Jaros will serve as Class III Directors whose terms expire at the
2002 annual meeting of stockholders.

COMMITTEES OF THE BOARD OF DIRECTORS

HomeServices' board of directors currently has three standing committees:
an executive committee, a compensation committee and an audit committee.

HomeServices' executive committee has certain selected powers and rights
to exercise the authority of the board of directors between meetings of the
board of directors. The current members of the executive committee are Messrs.
Sokol, Peltier, McArthur and Jaros.

HomeServices' compensation committee reviews and approves or recommends to
the board of directors for approval salaries, benefits and stock option grants
for all employees, consultants, directors and other individuals, such as sales
associates. The compensation committee also oversees the administration of
HomeServices' stock option, stock purchase and other employee benefits plans.
The compensation committee currently consists of Messrs. Sokol, McArthur, Jaros
and Scott.

HomeServices' audit committee reviews HomeServices' internal accounting
procedures and considers and reports to the board of directors of HomeServices
on other auditing and accounting matters, including the selection of
HomeServices' independent accountants, the scope of annual audits, fees to be
paid to HomeServices' independent accountants and the performance of
HomeServices' independent accountants. The audit committee currently consists
of Messrs. McArthur, Jaros and Scott.

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<PAGE>

COMPENSATION OF DIRECTORS

Nonemployee directors of HomeServices or directors of HomeServices who are
full-time employees of MidAmerican Holdings receive, as compensation for their
service as directors:

o an annual retainer of $10,000;

o $500 of committee fees for each committee meeting; and

o reimbursement for reasonable expenses incurred in connection with
attendance at board and committee meetings.

Each director of HomeServices has received, as compensation for agreeing
to serve as a director, fully vested options to purchase 50,000 shares of
common stock at an exercise price equal to the book value of the common stock.

EXECUTIVE COMPENSATION

The following table sets forth the compensation earned for all services
rendered to the predecessor to HomeServices.Com Inc. and its subsidiaries in
all capacities during 1998 by the Chief Executive Officer of HomeServices and
the four other most highly compensated executive officers of HomeServices and
its subsidiaries, who earned more than $100,000 in 1998 and who were serving as
executive officers of HomeServices and its subsidiaries as of December 31,
1998.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------- ALL OTHER
NAME AND POSITION(1) YEAR SALARY BONUS COMPENSATION(2)
- ------------------------------------------------- ------ ----------- ----------- ----------------
<S> <C> <C> <C> <C>
Ronald J. Peltier, President and
Chief Executive Officer of
HomeServices(3) ................................ 1998 $325,000 $123,500 $132,037
Jack W. Frost, President and Chief
Executive Officer of J.C. Nichols .............. 1998 250,000 100,000 2,457
R. Michael Knapp, President and
Chief Executive Officer of Iowa Realty ......... 1998 225,000 200,250 162,588
Arne M. Rovick, Vice Chairman and
General Counsel of Edina Realty ................ 1998 250,000 95,000 132,849
Joseph J. Valenti, President and Chief
Executive Officer of CBS HOME .................. 1998 250,000 28,583 5,000
</TABLE>

- ----------

(1) Each of the executive officers listed earned their 1998 compensation in
their capacities as executive officers of subsidiaries of MidAmerican
Realty Services, the predecessor to HomeServices.

(2) Amounts for 1998 consist of (a) HomeServices' matching contributions to a
defined contribution plan of $4,188, $2,457 and $7,344 for Messrs.
Peltier, Frost and Knapp, respectively, and $5,000 for each of Messrs.
Rovick and Valenti; and (b) long-term compensation earned in the form of
a $127,849 credit towards payment of a promissory note for each of
Messrs. Peltier, Knapp and Rovick. In addition, the amount for Mr. Knapp
includes HomeServices' contributions totaling $18,886 to a supplemental
executive retirement plan, a $6,400 contribution to a defined
contribution plan and premiums on his behalf totaling $2,109 for
long-term disability insurance.

(3) Mr. Peltier received compensation in his capacity as Chairman, President
and Chief Executive Officer of Edina Realty, the position he held from
1992 to May 1999.

EMPLOYMENT AGREEMENTS

In May 1998, HomeServices entered into employment agreements with each of
Messrs. Peltier, Knapp and Rovick. In August 1998, HomeServices entered into an
employment agreement with Mr. Valenti and in September 1998 it entered into an
employment agreement with Mr. Frost.

Mr. Peltier

Mr. Peltier's employment agreement provides for an annual base salary of
$325,000. Mr. Peltier is also eligible to receive a target award of 30% of base
salary, with a maximum award equal to 45% of

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<PAGE>

base salary for each of the fiscal years during which he is employed. Mr.
Peltier will receive this award upon the achievement of certain performance
criteria and after the compensation committee of the board of directors
approves the incentive award computations, based upon the recommendation of the
Chief Executive Officer of MidAmerican Holdings.

Mr. Peltier has also entered into a long term incentive compensation plan
with HomeServices. Under this plan, Mr. Peltier purchased from HomeServices a
total of 81,323 shares of HomeServices' common stock for a purchase price of
$381,376. The purchase price was payable to HomeServices contemporaneously with
the execution of the employment agreement by delivery of a promissory note in
such amount. Mr. Peltier acquired his shares at a purchase price of $4.69 per
share, a 68.7% discount to the assumed initial public offering price of $15.00
per share, which is the midpoint of the estimated range of the initial public
offering price per share. Each promissory note will mature in May 2003.
Mr. Peltier is eligible to have a portion of principal and interest owing under
his promissory note forgiven for each of the fiscal years during which he is
employed. The credit will be given to Mr. Peltier upon the achievement of
certain financial performance goals, each as approved annually by the
compensation committee of the board of directors, and upon the recommendation
of the Chief Executive Officer of MidAmerican Holdings. The target amount to be
forgiven for each fiscal year is 20% of the amount due on the promissory note.
The maximum amount to be forgiven for each fiscal year is 40%. If Mr. Peltier
does not attain his performance goals and so no amount is to be forgiven,
principal and interest on the promissory note are payable by Mr. Peltier when
due.

Mr. Peltier is also eligible to participate in the tax-qualified
retirement plan and welfare benefit plans of HomeServices in accordance with
the terms and conditions of the plans.

If the employment of Mr. Peltier is terminated by HomeServices for reasons
other than good cause or if Mr. Peltier should resign for good reason, he will
be entitled to receive until the third anniversary of the termination date (1)
his base salary as in effect as of his termination date at HomeServices' normal
payroll intervals and (2) target awards equal to the average annual target
awards made to him under the agreement prior to his termination. Mr. Peltier's
employment agreement terminates in May 2003.

Mr. Frost

Mr. Frost's employment agreement provides for an annual base salary of
$250,000. Mr. Frost is also eligible to receive a target award of 40% of base
salary, with a maximum award equal to 60% of base salary for each of the fiscal
years during which he is employed. Mr. Frost will receive this award upon the
achievement of certain performance criteria and after the compensation
committee of the board of directors approves the incentive award computations,
based upon the recommendation of the Chief Executive Officer of MidAmerican
Holdings.

Mr. Frost is also eligible to participate in the tax-qualified retirement
plan and welfare benefit plans of HomeServices in accordance with the terms and
conditions of the plans.

If the employment of Mr. Frost is terminated by HomeServices for reasons
other than good cause or if Mr. Frost should resign for good reason, he will be
entitled to receive until the third anniversary of the termination date (1) his
base salary as in effect as of his termination date at HomeServices' normal
payroll intervals and (2) target awards equal to the average annual target
awards made to him under the agreement prior to his termination. Mr. Frost's
employment agreement terminates in September 2003.

Mr. Knapp

Mr. Knapp's employment agreement provides for an annual base salary of
$225,000. Mr. Knapp is also eligible to receive a target award of 70% of base
salary, with a maximum award equal to 100% of base salary for each of the
fiscal years during which he is employed. Mr. Knapp will receive this award
upon the achievement of certain performance criteria and after the compensation
committee of the board of directors approves the incentive award computations,
based upon the recommendation of the Chief Executive Officer of MidAmerican
Holdings.

64
<PAGE>

Mr. Knapp has also entered into a long term incentive compensation plan
with HomeServices. Under this plan, Mr. Knapp purchased from HomeServices a
total of 81,323 shares of HomeServices' common stock for a purchase price of
$381,376. The purchase price was payable to HomeServices contemporaneously with
the execution of the employment agreement by delivery of a promissory note in
such amount. Mr. Knapp acquired his shares at a purchase price of $4.69 per
share, a 68.7% discount to the assumed initial offering price of $15.00 per
share, which is the midpoint of the estimated range of the initial public
offering price per share. Each promissory note will mature in May 2003. Mr.
Knapp is eligible to have a portion of principal and interest owing under his
promissory note forgiven for each of the fiscal years during which he is
employed. The credit will be given to Mr. Knapp upon the achievement of certain
financial performance goals, each as approved annually by the compensation
committee of the board of directors, and upon the recommendation of the Chief
Executive Officer of MidAmerican Holdings. The target amount to be forgiven for
each fiscal year is 20% of the amount due on the promissory note. The maximum
amount to be forgiven for each fiscal year is 40%. If Mr. Knapp does not attain
his performance goals and so no amount is to be forgiven, principal and
interest on the promissory note are payable by Mr. Knapp.

If the employment of Mr. Knapp is terminated by HomeServices for reasons
other than good cause or if Mr. Knapp should resign for good reason, he will be
entitled to receive until the third anniversary of the termination date (1) his
base salary as in effect as of his termination date at HomeServices' normal
payroll intervals and (2) target awards equal to the average annual target
awards made to him under the agreement prior to his termination. Mr. Knapp's
employment agreement terminates in May 2003.

Mr. Rovick

Mr. Rovick's employment agreement provides for an annual base salary of
$250,000. Mr. Rovick is also eligible to receive a target award of 30% of base
salary, with a maximum award equal to 100% of base salary for each of the
fiscal years during which he is employed. Mr. Rovick will receive this award
upon the achievement of certain performance criteria and after the compensation
committee of the board of directors approves the incentive award computations,
based upon the recommendation of the Chief Executive Officer of MidAmerican
Holdings.

Mr. Rovick has also entered into a long term incentive compensation plan
with HomeServices. Under this plan, Mr. Rovick purchased from HomeServices a
total of 81,323 shares of HomeServices' common stock for a purchase price of
$381,376. The purchase price was payable to HomeServices contemporaneously with
the execution of the employment agreement by delivery of a promissory note in
such amount. Mr. Rovick acquired his shares at a purchase price of $4.69 per
share, a 68.7% discount to the assumed initial public offering price of $15.00
per share, which is the midpoint of the estimated range of the initial public
offering price per share. Each promissory note will mature in May 2003. Mr.
Rovick is eligible to have a portion of principal and interest owing under his
promissory note forgiven for each of the fiscal years during which he is
employed. The credit will be given to Mr. Rovick upon the achievement of
certain financial performance goals, each as approved annually by the
compensation committee of the board of directors, and upon the recommendation
of the Chief Executive Officer of MidAmerican Holdings. The target amount to be
forgiven for each fiscal year is 20% of the amount due on the promissory note.
The maximum amount to be forgiven for each fiscal year is 40%. If Mr. Rovick
does not attain his performance goals and so no amount is to be forgiven,
principal and interest on the promissory note are payable by Mr. Rovick when
due.

Mr. Rovick is also eligible to participate in the tax-qualified retirement
plan and welfare benefit plans of HomeServices in accordance with the terms and
conditions of the plans.

If the employment of Mr. Rovick is terminated by HomeServices for reasons
other than good cause or if Mr. Rovick should resign for good reason, he will
be entitled to receive until the third anniversary of the termination date (1)
his base salary as in effect as of his termination date at HomeServices' normal
payroll intervals and (2) target awards equal to the average annual target
awards made to him under the agreement prior to his termination. Mr. Rovick's
employment agreement terminates in May 2003.

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<PAGE>

Mr. Valenti

Mr. Valenti's employment agreement provides for an annual base salary of
$175,000. Mr. Valenti is also eligible to receive a target award of 70% of base
salary, with a maximum award equal to 100% of base salary for each of the
fiscal years during which he is employed. Mr. Valenti will receive this award
upon the achievement of certain performance criteria and after the compensation
committee of the board of directors approves the incentive award computations,
based upon the recommendation of the Chief Executive Officer of MidAmerican
Holdings.

In addition, Mr. Valenti receives an annual supplement of $75,000 and is
entitled under his employment agreement to receive minimum gross compensation
of $250,000 per year. Therefore, if the total of Mr. Valenti's annual base
salary ($175,000) and annual target awards does not exceed $250,000 for any
year, HomeServices will not pay to Mr. Valenti any incentive compensation for
that year. If the total of Mr. Valenti's annual base salary and target award
for any year exceeds $250,000, then HomeServices will pay Mr. Valenti the
excess as incentive compensation.

Mr. Valenti is also eligible to participate in the tax-qualified
retirement plan and welfare benefit plans of HomeServices in accordance with
the terms and conditions of the plans.

If the employment of Mr. Valenti is terminated by HomeServices for reasons
other than good cause or if Mr. Valenti should resign for good reason, he will
be entitled to receive until the third anniversary of the termination date (1)
his base salary as in effect as of his termination date at HomeServices' normal
payroll intervals and (2) target awards equal to the average annual target
awards made to him under the agreement prior to his termination. Mr. Valenti's
employment agreements terminates in August 2002.

Mr. Gans

Mr. Gans' employment agreement provides for an annual base salary of
$175,000. The term of Mr. Gans' employment agreement is for 18 months, at which
time HomeServices and Mr. Gans may mutually agree to continue the agreement or
negotiate mutually acceptable terms and conditions for a term of an additional
18 months.

Prior to the closing of the offering, HomeServices intends to amend the
financial performance goals contained in the existing employment agreements
with Messrs. Peltier, Knapp and Rovick so that the goals reflect HomeServices'
business strategy.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The compensation committee of the board of directors of HomeServices
consists of Messrs. Sokol, McArthur, Jaros and Scott. Mr. Sokol is Chairman of
the board of directors of HomeServices. Mr. McArthur is Senior Vice President,
General Counsel and Secretary of HomeServices.

EMPLOYEE STOCK PURCHASE PLAN

HomeServices has adopted, and MidAmerican Holdings, as the majority
shareholder of HomeServices, has approved, an employee stock purchase plan,
effective as of the consummation of the offering. The purpose of the employee
stock purchase plan is to align the interests of employees and stockholders by
encouraging participants to purchase shares of common stock. The employee stock
purchase plan is intended to comply with the requirements of Section 423 of the
Internal Revenue Code of 1986, as amended, and to provide participants with the
tax advantages provided by Section 423. A total of 35,000 shares of common
stock has been authorized for issuance under the employee stock purchase plan,
subject to adjustment in the event of a recapitalization, stock split, stock
dividend or other similar transaction. The description of the employee stock
purchase plan set forth herein is qualified by reference to the form of
employee stock purchase plan filed as an exhibit to the registration statement
that includes this prospectus.

The employee stock purchase plan will be administered by the compensation
committee. The compensation committee may make rules and regulations and
establish procedures for the administration of the employee stock purchase plan
as it deems appropriate.

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<PAGE>
Subject to certain procedural requirements, all employees of HomeServices
who have at least one year of service and work more than twenty hours per week
will be eligible to participate in the employee stock purchase plan, except
that employees who are "highly compensated" within the meaning of Section
414(q) of the Code and employees who are five percent or more stockholders of
HomeServices or a subsidiary of HomeServices will not be eligible to
participate. Designations of corporations participating in the employee stock
purchase plan may be made from time to time by the compensation committee from
among the subsidiaries of HomeServices, including corporations which become
subsidiaries after approval and adoption of the employee stock purchase plan.

Pursuant to the employee stock purchase plan, each eligible employee will
be permitted to purchase shares of common stock through regular payroll
deductions in an aggregate amount equal to % to % of the employee's base pay.
Under the employee stock purchase plan, a participant's right to purchase
shares of common stock cannot accrue at a rate which exceeds $25,000 of fair
market value of common stock in any calendar year.

Participating employees will be able to purchase shares of common stock
with payroll deductions on the last day of each purchase period within each
cycle, at a purchase price equal to the lesser of:

o 85 percent of the fair market value of common stock on the date the cycle
begins; and

o 85 percent of the fair market value of common stock on the last day of the
purchase period.

A right to purchase shares of common stock which is granted to a
participant under the employee stock purchase plan is transferable only by will
or the laws of descent and distribution, and is exercisable, during the
participant's lifetime, only by the participant.

The compensation committee may from time to time amend or terminate the
employee stock purchase plan. No such amendment or termination may adversely
affect the rights of any participant without the consent of such participant
and, to the extent required by Section 423 of the Code or any other law,
regulation or stock exchange rule, no amendment will be effective without the
approval of stockholders entitled to vote on the amendment. Additionally, the
compensation committee may make such amendments as it deems necessary to comply
with applicable laws, rules and regulations.

Since the amount of benefits to be received by each participant is
determined by his or her elections, the amount of future benefits to be
allocated to any individual or group of individuals under the employee stock
purchase plan is not determinable.

NON-EMPLOYEE STOCK PURCHASE PLAN

HomeServices has adopted, and MidAmerican Holdings, as the majority
shareholder of HomeServices, has approved, a non-employee stock purchase plan,
effective as of the consummation of the offering. The non-employee stock
purchase plan will be made available to HomeServices' sales associates. The
purpose of the non-employee stock purchase plan is to align the interests of
sales associates with the interests of HomeServices' stockholders by
encouraging participants to purchase shares of common stock. The non-employee
stock purchase plan will operate substantially the same as the employee stock
purchase plan described above, except that non-employees will not be entitled
to any of the tax benefits afforded to employees. A total of 35,000 shares of
common stock has been authorized for issuance under the non-employee stock
purchase plan, subject to adjustment in the event of a recapitalization, stock
split, stock dividend or other similar transaction. The description of the
non-employee stock purchase plan is qualified by reference to the form of
non-employee stock purchase plan filed as an exhibit to the registration
statement that includes this prospectus.

1999 EQUITY INCENTIVE PLAN

On , 1999, HomeServices adopted, and on , 1999, MidAmerican
Holdings, as its majority stockholder, approved, HomeServices' 1999 equity
incentive plan. A maximum of shares of common stock has been reserved for
issuance under the equity plan. The number of shares authorized is generally
subject to equitable adjustment upon the occurrence of any stock dividend or
other distribution, recapitalization, stock split, reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase or
share exchange, or other similar corporate transaction or event.

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<PAGE>

Pursuant to the equity plan, HomeServices may grant awards which may
consist of:

o stock options, including incentive stock options and nonqualified stock
options;

o restricted stock; and/or

o other stock-based awards.

From and after the consummation of the offering, the equity plan is
intended to satisfy any applicable requirements of Rule 16b-3 promulgated under
Section 16 of the Securities Exchange Act of 1934 and Section 162(m) of the
Code, and will be interpreted in a manner consistent with the requirements of
those rules and regulations.

The equity plan will be administered by the compensation committee
established by the board of directors, which has been organized so as to
satisfy the provisions of Rule 16b-3 and Section 162(m). The compensation
committee has full authority, subject to the provisions of the equity plan, to,
among other things, determine the persons to whom awards will be granted,
determine the terms and conditions, including any applicable performance
criteria, of the awards, and prescribe, amend and rescind rules and regulations
relating to the equity plan.

Grants of awards may be made under the equity plan to selected employees,
independent contractors and directors of HomeServices.

Stock Options

Stock options may be either "incentive stock options," as such term is
defined in Section 422 of the Code, or nonqualified stock options. Pre-offering
option awards will be made at "book value" and post-offering grants will be
based upon the average of the high and low sales price of HomeServices' stock
at the date of grant. Options granted pursuant to the equity plan will become
exercisable at such times and under such conditions as the compensation
committee may prescribe. The option exercise price is payable by any one of the
following methods or a combination thereof: (1) in cash or by personal check,
certified check, bank cashier's check or wire transfer; (2) in stock owned by
the participant for at least six months prior to the date of exercise and
valued at its fair market value on the effective date of such exercise; or (3)
in such other manner as the compensation committee may authorize. The
compensation committee may also authorize "reload options" which is an option
for the number of shares surrendered in exercising a previously granted option.
Generally, unless the optionee voluntarily resigns or is terminated for cause,
previously vested options will remain outstanding for the remainder of the
option term.

No person may be granted stock options under the equity plan in any
calendar year representing an aggregate of more than shares of common stock,
which number shall be subject to equitable adjustment as described above.

Restricted Stock

A restricted stock award is an award of common stock which is subject to
restrictions on transferability and other restrictions, if any, as the
compensation committee may impose at the date of grant. The restrictions may
lapse separately or in combination at such times, under such circumstances,
including, without limitation, a specified period of employment, or upon the
satisfaction of pre-established performance goals, as the compensation
committee may determine. These goals may be based upon one or more of the
following criteria: pretax or after-tax income; operating profit; return on
equity, assets, capital or investment; earnings or book value per share; sales
or revenues; operating expenses; stock price appreciation; and the
implementation or completion of critical projects or processes. Except to the
extent restricted under the award agreement relating to the restricted stock, a
participant granted restricted stock will have all of the rights of a
stockholder, including, without limitation, the right to vote and the right to
receive dividends on the restricted stock.

Upon termination of employment or termination of the independent
contractor relationship or termination of service as a director during the
applicable restriction period, restricted stock and any

68
<PAGE>

accrued but unpaid dividends that are at that time subject to restrictions will
be forfeited unless the compensation committee provides otherwise. The
compensation committee can determine, by rule or regulation or in any award
agreement, or in any individual case, that restrictions or forfeiture
conditions relating to restricted stock will be waived in whole or in part in
the event of terminations resulting from specified causes. The compensation
committee can accelerate the lapsing of all or any portion of any outstanding
restrictions on the restricted stock.

No person may be granted restricted stock under the equity plan in any
calendar year representing an aggregate of more than shares of common stock,
subject to equitable adjustment as described above.

Other Awards; Change in Control

Other awards valued in whole or in part by reference to, or otherwise
based on, common stock may be granted either alone or in addition to other
awards under the equity plan. The compensation committee has the sole and
complete authority to determine the terms and conditions of these awards.

Upon the occurrence of a "change in control" following the offering, all
then outstanding options will become fully exercisable and any restrictions or
other conditions to the vesting of restricted shares or other equity awards
will be removed. "Change in control" is as defined in the equity plan, which
excludes a variety of transactions involving MidAmerican Holdings' ownership.

Transferability

Except as otherwise determined by the compensation committee, awards
granted under the equity plan may be transferred only by will or by the laws of
descent and distribution.

Amendment and Termination

The equity plan may, at any time and from time to time, be altered,
amended, suspended, or terminated by the board of directors or the compensation
committee, in whole or in part, except that no amendment that requires
stockholder approval in order for the equity plan to continue to comply with
Section 162(m), state law, stock exchange requirements or other applicable law
will be effective unless the amendment has received the required stockholder
approval. In addition, no amendment may be made which adversely affects any of
the rights of any award holder previously granted an award, without the
holder's consent.

Outstanding Awards

On , 1999, HomeServices granted to stock options to acquire
shares of common stock at an exercise price of $ . These stock options vest.

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<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The table below presents information regarding the beneficial ownership of
the common stock as of August 15, 1999 and as adjusted to reflect the sale of
the shares of common stock offered hereby by:

o each person known by HomeServices to be the beneficial owner of five
percent or more of its outstanding common stock;

o each of the executive officers of HomeServices listed in the Summary
Compensation Table above;

o each of the directors of HomeServices; and

o all directors and executive officers of HomeServices as a group.

Unless otherwise indicated, HomeServices believes that each beneficial
owner below has sole voting and investment power over such shares.

<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY SHARES SHARES OF COMMON STOCK
OWNED BEFORE THE BEING BENEFICIALLY OWNED
OFFERING SOLD(1) AFTER THE OFFERING
------------------------ ----------- -----------------------
NAME OF BENEFICIAL OWNER NUMBER(2) PERCENTAGE NUMBER NUMBER PERCENTAGE
- ----------------------------------------------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
MidAmerican Energy Holdings Company(3)......... 7,525,964 95.22% 1,666,667 5,859,297 57.20%
Ronald J. Peltier ............................. 148,889 1.88 -- 148,889 1.45
Jack W. Frost ................................. -- -- -- -- --
R. Michael Knapp .............................. 98,889 1.25 -- 98,889 *
Arne M. Rovick ................................ 98,889 1.25 -- 98,889 *
Joseph J. Valenti ............................. -- -- -- -- --
David L. Sokol ................................ 50,000 * -- 50,000 *
Steven A. McArthur ............................ 50,000 * -- 50,000 *
Gregory E. Abel ............................... 50,000 * -- 50,000 *
Richard R. Jaros .............................. 50,000 * -- 50,000 *
W. David Scott ................................ 50,000 * -- 50,000 *
All executive officers and directors as a group
(14 persons) ................................. 346,397 4.36
</TABLE>

- ----------
* Less than one percent.

(1) Represents shares of common stock to be sold by MidAmerican Holdings.

(2) Beneficial ownership of common stock owned before the offering includes
the fully vested options to purchase 50,000 shares of common stock
granted to each director of HomeServices.

(3) MidAmerican Holdings' address is 666 Grand Avenue, Des Moines, Iowa
50303.

(4) Messrs. Sokol, McArthur and Abel are officers of MidAmerican Holdings and
expressly disclaim beneficial ownership of any shares of HomeServices'
common stock owned by MidAmerican Holdings.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATIONSHIP WITH MIDAMERICAN HOLDINGS

After giving effect to the merger and before the offering, MidAmerican
Holdings will own 95.2% of the common stock of HomeServices. After giving
effect to the offering, MidAmerican Holdings will beneficially own 57.2% of
HomeServices' common stock, or 53.0% if the underwriters' over-allotment option
is exercised in full. As a result, MidAmerican Holdings will continue to have
the power to elect the entire board of directors of HomeServices and approve
matters submitted to a vote of stockholders.

Before the offering, MidAmerican Holdings provided limited management
assistance to HomeServices including some financial, accounting, legal and
human resources services. MidAmerican Holdings provided these services
intermittently and at arm's length. HomeServices paid MidAmerican Holdings a
total of $1,552,000 during 1998 and $1,105,000 for the six months ended June
30, 1999 pursuant to this arrangement. The costs for these services are charged
directly to HomeServices.

In connection with the offering, HomeServices and MidAmerican Holdings
will enter into the registration rights and service agreements summarized
below. While HomeServices believes that these agreements will have terms no
less favorable to HomeServices than could be obtained from unaffiliated third
parties, there can be no assurance that this will be the case.

The agreements summarized below are included as exhibits to the
registration statement of which this prospectus forms a part. The following
summaries do not contain all of the information contained in the exhibits.

REGISTRATION RIGHTS AGREEMENT

Pursuant to a registration rights agreement, HomeServices will grant to
MidAmerican Holdings certain "demand" and "piggyback" registration rights for
the registration under the Securities Act of 1933 of the shares of common stock
MidAmerican Holdings owns as described below. Under the registration rights
agreement, upon MidAmerican Holdings' request, HomeServices is required to use
its best efforts to register the shares.

MidAmerican Holdings will be entitled to request two demand registrations
per year of all or any portion of its common stock for so long as it owns at
least 5.0% of the common stock of HomeServices. In addition, for so long as
MidAmerican Holdings owns at least 5.0% of the common stock of HomeServices,
MidAmerican Holdings may request HomeServices to use its reasonable efforts to
register shares of common stock held by it in other registrations initiated by
HomeServices on its own behalf or on behalf of any other stockholder of
HomeServices. All reasonable out-of-pocket costs and expenses, other than
underwriting discounts and commissions, of any registration under the
registration rights agreement will be paid by HomeServices. The registration
rights agreement will also contain customary provisions with respect to
registration procedures, underwritten offerings and indemnification and
contribution rights in connection with the registration of common stock on
behalf of MidAmerican Holdings.

SERVICES AGREEMENT

HomeServices and MidAmerican Holdings will enter into a services agreement
under which MidAmerican Holdings will provide management, advisory, financial,
accounting, legal, employee benefit plan and insurance administration and other
services to HomeServices. In consideration for these services, HomeServices is
required to pay MidAmerican Holdings a monthly fee in an amount equal to
$50,000, plus an amount for the reimbursement for all reasonable employee and
out-of-pocket costs and expenses incurred by MidAmerican Holdings in connection
with providing these services. Out-of-pocket costs and expenses reimbursable to
MidAmerican Holdings will not include any mark-up or profit factor for
MidAmerican Holdings but will include all indirect costs and an appropriate
allocation for overhead costs associated with performing these services.

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MANAGEMENT INDEBTEDNESS

Messrs. Peltier, Knapp and Rovick, who are executive officers and
employees of HomeServices, were issued shares of common stock in HomeServices
upon its formation, with a corresponding note receivable recorded for the fair
value of the stock. The value of the issued shares and corresponding note
receivable was $381,000 each. The shares carry the same dividend and voting
rights as the shares held by MidAmerican Holdings. The officers and employees
held a 5.0% ownership interest as of June 30, 1999. See "Management--Employment
Agreements."

As certain performance levels are achieved over a five-year period, a
portion of the applicable note receivable balance, which consists of principal
and accrued interest, is forgiven and considered compensation to the officers
and employees. The amount accrued to the allowance for estimated forgiveness
and expensed, as compensation, in 1998 was $520,000 or $173,000 each. The
balance of the notes receivable, net of the allowance, at June 30, 1999 was
$188,000 each. HomeServices charges interest on the outstanding note receivable
balance at a rate equal to its average annual borrowing rate, which was 6.87%
for 1998. Interest income recorded on this note was approximately $116,000 as
of June 30, 1999.

INDEBTEDNESS WITH MIDAMERICAN HOLDINGS AND AFFILIATES

In May 1998, HomeServices entered into a revolving credit agreement with
MidAmerican Holdings to borrow funds from time to time, primarily to support
the acquisition of the predecessor and the nonpredecessor acquired companies.
The maximum indebtedness during the life of the agreement through June 30, 1999
was $54.2 million. The interest rate on borrowings is equal to the 30-day LIBOR
rate plus 1.0%, which was 5.94% at June 30, 1999. Interest expense recorded on
this agreement totaled $1.3 million through June 30, 1999. As of December 31,
1998 and June 30, 1999, there were no borrowings under this agreement. On June
24, 1999, the revolving credit agreement with MidAmerican Holdings was amended
to reduce MidAmerican Holdings' total commitment and HomeServices' borrowing
capacity thereunder from $100.0 million to $10.0 million. Amounts borrowed are
payable upon demand from MidAmerican Holdings.

In May 1998, HomeServices also entered into a revolving credit agreement
with MidAmerican Holdings to advance HomeServices' excess funds to MidAmerican
Holdings. The maximum amount advanced during the life of the agreement through
June 26, 1999 was $3.3 million. Interest accrued daily at 30 day LIBOR rate
plus 0.25%, which was 5.20% at June 30, 1999. Interest income recorded for
advances under this agreement totaled approximately $15,000 through June 30,
1999. The agreement was terminated effective June 26, 1999.

UNREGISTERED ISSUANCES OF STOCK

On July 13, 1999, HomeServices issued 1,000 shares of common stock to
MidAmerican Energy Holdings Company for consideration of $10.

On August 8, 1999, an aggregate of 2,149 shares of common stock of
HomeServices' predecessor were issued in connection with the acquisition of
Paul Semonin Realtors at a purchase price of $3,955.90 per share based on the
predecessor's June 30, 1999 book value ($6.08 per share after giving effect to
the merger). Pursuant to a pre-existing agreement among HomeServices'
predecessors and its stockholders, all of the stockholders were offered the
opportunity to make a capital contribution in a percentage equal to the
percentage ownership held by each of the shareholders immediately prior to the
capital contribution to fund such acquisition. One of HomeServices' predecessor
stockholders, James Koolhof, declined to participate in the capital
contribution. Because Mr. Koolhof declined to make his pro rata share of such
capital contribution, the shares that were offered to Mr. Koolhof were
purchased by MidAmerican Holdings. The shares were issued to reflect the
capital contributions of the other stockholders and to dilute Mr. Koolhof's
interest as a result of his not making the contribution.

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<PAGE>

In May 1998, HomeServices' predecessor issued an aggregate of 325,300
shares of common stock at a purchase price of $4.69 per share to
Ronald J. Peltier, R. Michael Knapp, James Koolhof and Arne M. Rovick, who are
all executive officers of HomeServices, for an aggregate purchase price of
$1,525,657.

Prior to the offering, HomeServices intends to merge with MidAmerican
Realty Services Company, which is a 95.2% owned subsidiary of MidAmerican
Energy Holdings Company. HomeServices will be the surviving corporation in the
merger. In the merger, HomeServices intends to issue approximately 650.6 shares
of its common stock for each share of common stock of MidAmerican Realty
Services Company. Accordingly, HomeServices will issue in the merger 7,525,964
shares to MidAmerican Energy Holdings Company, 98,889 shares to R. Michael
Knapp, 81,323 shares to James Koolhof, 98,889 shares to Ronald J. Peltier and
98,889 shares to Arne M. Rovick.

LEASES WITH RELATED PARTIES

HomeServices has the following leases with its directors or executive
officers, or their affiliated entities. HomeServices believes that the terms of
such leases are no less favorable than the terms that could be obtained from
non-affiliated parties, though there can be no assurance that this in fact is
the case.

<TABLE>
<CAPTION>
RELATIONSHIP TO HOMESERVICES'
LEASE INTERESTED PARTY HOMESERVICES 1998 RENT
- ----------------- -------------------- --------------------- --------------
<S> <C> <C> <C>
Office lease Ronald J. Peltier, President and Chief $277,560
expiring partner in lessor Executive Officer;
March 31, 2001 entity Director

Office lease Ronald J. Peltier, President and Chief $165,200
expiring partner in lessor Executive Officer;
April 30, 2001 entity Director

Office lease Ronald J. Peltier, President and Chief $ 76,077
expiring lessor Executive Officer;
Jan. 31, 2005 Director

Office lease Ronald J. Peltier, President and Chief $179,446
expiring partner in lessor Executive Officer;
June 30, 2006 entity Director

Office lease Jack W. Frost, President and Chief $143,813
expiring trustee of lessor Executive Officer of
March 31, 2003 trust J.C. Nichols;
Director

Office lease Joseph J. Valenti, President and Chief $ 87,763
expiring partner in lessor Executive Officer of
Sept. 30, 1999 entity CBS HOME

Office lease Joseph J. Valenti, President and Chief $ 20,706
expiring partner in lessor Executive Officer of
Nov. 30, 2003 entity CBS HOME

Office lease Joseph J. Valenti, President and Chief $ 16,346
expiring partner in lessor Executive Officer of
Aug. 31, 2002 entity CBS HOME
</TABLE>

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DESCRIPTION OF CAPITAL STOCK

Upon the closing of the offering, HomeServices will have:

o shares of common stock authorized, of which 10,237,287 shares of common
stock will be issued and outstanding or 10,587,287 shares if the
underwriters' over-allotment option is exercised in full; and

o shares of preferred stock authorized, of which none will be issued and
outstanding.

The following summary of the capital stock of HomeServices is qualified by
reference to HomeServices' restated certificate of incorporation and its
amended and restated bylaws, which will become effective before the closing of
the offering. Forms of HomeServices' restated certificate of incorporation and
amended and restated bylaws are filed as exhibits to the registration statement
that includes this prospectus.

COMMON STOCK

Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available for this purpose
at the times and in the amounts as the board of directors may from time to time
determine. Each stockholder is entitled to one vote for each share of common
stock held on all matters submitted to a vote of stockholders. Cumulative
voting for the election of directors is not provided for in HomeServices'
restated certificate of incorporation, which means that the holders of a
majority of the shares voted can elect all of the directors then standing for
election. The common stock is not entitled to preemptive rights and is not
subject to conversion or redemption. Upon the occurrence of a liquidation,
dissolution or winding-up of HomeServices, the holders of shares of common
stock would be entitled to share ratably in the distribution of all of
HomeServices' assets remaining available for distribution after satisfaction of
all its liabilities and the payment of the liquidation preference of any
outstanding preferred stock. Each outstanding share of common stock is, and all
shares of common stock to be outstanding upon completion of this offering will
be, fully paid and nonassessable.

PREFERRED STOCK

The board of directors has the authority, within the limitations and
restrictions stated in HomeServices' restated certificate of incorporation, to
provide for the issuance of shares of preferred stock, in one or more classes
or series, and to fix the rights, preferences, privileges and restrictions of
this preferred stock, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and the number of shares
constituting any series or the designation of such series. The issuance of
preferred stock could have the effect of decreasing the market price of the
common stock and could adversely affect the voting and other rights of the
holders of common stock.

ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND HOMESERVICES'
RESTATED CERTIFICATE OF INCORPORATION AND AMENDED AND RESTATED BYLAWS

Some provisions of HomeServices' restated certificate of incorporation and
amended and restated bylaws, which provisions are summarized in the following
paragraphs, may be deemed to have an antitakeover effect and may delay, defer
or prevent a tender offer or takeover attempt that a stockholder might consider
in its best interest, including those attempts that might result in a premium
over the market price for the shares held by stockholders.

Classified Board of Directors

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incorporation authorizing the board of directors to fill vacant directorships
or increase the size of the board of directors, may deter a stockholder from
removing incumbent directors and simultaneously gaining control of the board of
directors by filling the vacancies created by such removal with its own
nominees.

Cumulative Voting

HomeServices' restated certificate of incorporation expressly denies
stockholders the right to cumulate votes in the election of directors.

Stockholder Action; Special Meeting of Stockholders

HomeServices' restated certificate of incorporation eliminates the ability
of stockholders to act by written consent. HomeServices' amended and restated
bylaws provide that special meetings of HomeServices' stockholders may be
called only by the chairman of the board of directors or a majority of the
board of directors.

Advance Notice Requirements for Stockholder Proposals and Director Nominations

HomeServices' amended and restated bylaws provide that stockholders
seeking to bring business before an annual meeting of stockholders, or to
nominate candidates for election as directors at an annual meeting of
stockholders, must provide timely notice in writing. To be timely, a
stockholder's notice must be delivered to or mailed and received at
HomeServices' principal executive offices not less than 60 days nor more than
90 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders; provided, that in the event that the annual meeting is
called for a date that is not within 30 days before or after such anniversary
date, notice by the stockholder in order to be timely must be received not
later than the close of business on the tenth day following the date on which
notice of the date of the annual meeting was mailed to stockholders or made
public, whichever first occurs. In the case of a special meeting of
stockholders called for the purpose of electing directors, timely notice by the
stockholder must be received not later than the close of business of the tenth
day following the day on which notice of the date of the special meeting was
mailed or public disclosure of the date of the special meeting was made,
whichever first occurs. HomeServices' amended and restated bylaws also specify
certain requirements as to the form and content of a stockholder's notice.
These provisions may preclude stockholders from bringing matters before an
annual meeting of stockholders or from making nominations for directors at an
annual meeting of stockholders.

AUTHORIZED BUT UNISSUED SHARES

The authorized but unissued shares of common stock and preferred stock are
available for future issuance without stockholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued shares of
common stock and preferred stock could render more difficult or discourage an
attempt to obtain control of HomeServices by means of a proxy contest, tender
offer, merger or otherwise.

AMENDMENTS; SUPERMAJORITY VOTE REQUIREMENTS

The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or bylaws,
unless a corporation's certificate of incorporation or bylaws, as the case may
be, requires a greater percentage. HomeServices' restated certificate of
incorporation imposes supermajority vote requirements in connection with
business combination transactions and the amendment provisions of HomeServices'
restated certificate of incorporation and amended and restated bylaws,
including those provisions relating to the classified board of directors,
action by written consent and the ability of stockholders to call special
meetings.

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RIGHTS AGREEMENT

Under Delaware law, every corporation may create and issue rights
entitling the holders of such rights to purchase from the corporation shares of
its capital stock of any class or classes, subject to any provisions in its
certificate of incorporation. The price and terms of such shares must be stated
in the certificate of incorporation or in a resolution adopted by the board of
directors for the creation or issuance of such rights.

HomeServices has entered into a stockholder rights agreement. As with most
stockholder rights agreements, the terms of HomeServices' rights agreement are
complex and not easily summarized, particularly as they relate to the
acquisition of HomeServices' common stock and to exercisability. This summary
may not contain all of the information that is important to you. Accordingly,
you should carefully read HomeServices' rights agreement, which has been filed
as an exhibit to the registration statement of which this prospectus forms a
part.

HomeServices' rights agreement provides that each share of its prospective
common stock outstanding will have one right to purchase one one-hundredth of a
preferred share attached to it. The purchase price per one one-hundredth of a
preferred share under the stockholder rights agreement is four times the
average closing price of HomeServices' common stock for the first five days of
trading after the consummation of this offering.

Initially, the rights under HomeServices' rights agreement are attached to
outstanding certificates representing HomeServices' common stock and no
separate certificates representing the rights will be distributed. The rights
will separate from HomeServices' common stock and be represented by separate
certificates approximately 10 days after someone acquires or commences a tender
offer for 15% of HomeServices' outstanding common stock.

After the rights separate from HomeServices' common stock, certificates
representing the rights will be mailed to record holders of the common stock.
Once distributed, the rights certificates alone will represent rights.

All shares of HomeServices' common stock issued before the date the rights
separate from the common stock will be issued with the rights attached. The
rights are not exercisable until the date the rights separate from the common
stock. The rights will expire on the tenth anniversary of the date of the
completion of this offering unless earlier redeemed or exchanged by
HomeServices.

If an acquiror obtains or has the rights to obtain 15% or more of
HomeServices' common stock, then each right will entitle the holder to purchase
a number of shares of HomeServices' common stock equal to twice the purchase
price of each right.

Each right will entitle the holder to purchase a number of shares of
common stock of the acquiror having a then current market value of twice the
purchase price if an acquiror obtains 15% or more of HomeServices' common stock
and any of the following occurs:

o HomeServices merges into another entity;

o an acquiring entity merges into HomeServices; or

o HomeServices sells more than 50% of its assets or earning power;

provided, however, that the foregoing will not include any transaction or
series of transactions pursuant to which MidAmerican Holdings sells, exchanges
or otherwise disposes of all or any portion of its common stock of
HomeServices, including, but not limited to, any public offering of
HomeServices' common stock by MidAmerican Holdings or a disposition of
HomeServices' common stock by means of a spin-off or other distribution to
MidAmerican Holdings' stockholders.

Under HomeServices' rights agreement, any rights that are or were owned by
an acquiror of more than 15% of HomeServices' outstanding common stock will be
null and void.

HomeServices' rights agreement contains exchange provisions which provide
that after an acquiror obtains 15% or more, but less than 50%, of HomeServices'
respective outstanding common

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stock, HomeServices' board of directors may, at its option, exchange all or
part of the then outstanding and exercisable rights for common shares. In such
an event, the exchange ratio is one common share per right, adjusted to reflect
any stock split, stock dividend or similar transaction.

HomeServices' board of directors may, at its option, redeem all of the
outstanding rights under its rights agreement before the earlier of (1) the
time that an acquiror obtains 15% or more of HomeServices' outstanding common
stock or (2) the final expiration date of the rights agreement. The redemption
price under HomeServices' rights agreement is $0.01 per right, subject to
adjustment. The right to exercise the rights will terminate upon the action of
HomeServices' board ordering the redemption of the rights and the only right of
the holders of the rights will be to receive the redemption price.

Holders of rights will have no rights as HomeServices' stockholders,
including the right to vote or receive dividends, simply by virtue of holding
the rights.

HomeServices' rights agreement provides that the provisions of the rights
agreement may be amended by the board of directors, without the approval of the
holders of the rights within the ten-day period after someone acquires or
commences a tender offer for 15% of HomeServices' outstanding common stock.
After this ten-day period, however, the rights agreement may not be amended in
any manner which would adversely affect the interests of the holders of the
rights, excluding the interests of an acquiror. In addition, HomeServices'
rights agreement provides that no amendment may be made to adjust the time
period governing redemption at a time when the rights are not redeemable.

HomeServices' rights agreement contains rights that have potential
antitakeover effects. The rights may cause substantial dilution to a person or
group that attempts to acquire HomeServices without obtaining consent of
HomeServices' board of directors or conditioning the offer on a substantial
number of rights being acquired or redeemed. Accordingly, the existence of the
rights have the potential to deter potential acquirors from making takeover
proposals or tender offers that are not negotiated with the board of directors.
Nevertheless, the rights are not intended to prevent a takeover, but rather are
designed to enhance the ability of HomeServices' board to negotiate with an
acquiror on behalf of all its stockholders. In addition, the rights should not
interfere with a proxy contest.

DELAWARE BUSINESS COMBINATION STATUTE

Section 203 of the Delaware General Corporation Law imposes a three-year
moratorium on business combinations between a Delaware corporation and an
"interested stockholder" which is in general, a stockholder owning 15% or more
of a corporation's outstanding voting stock, or an affiliate or associate
thereof unless:

o prior to an interested stockholder becoming an interested stockholder,
the board of directors of the corporation approved either the business
combination or the transaction resulting in the interested stockholder
becoming an interested stockholder;

o upon consummation of the transaction resulting in an interested
stockholder becoming an interested stockholder, the interested
stockholder owns 85% of the voting stock outstanding at the time the
transaction commenced, excluding, from the calculation of outstanding
shares, shares beneficially owned by directors who are also officers and
certain employee stock plans; or

o on or after an interested stockholder becomes an interested stockholder,
the business combination is approved by the board of directors and
holders of at least 662/3% of the outstanding shares, other than those
shares beneficially owned by the interested stockholder, at a meeting of
stockholders.

Section 203 of the Delaware General Corporation Law applies to any corporation
incorporated in the State of Delaware unless the corporation expressly elects
not to be governed by such legislation. HomeServices has not made such an
election and is therefore subject to Section 203.

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LIMITATIONS ON DIRECTORS' LIABILITY

HomeServices' restated certificate of incorporation provides that no
director of HomeServices shall be liable to HomeServices or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability:

o for any breach of the director's duty of loyalty to HomeServices or its
stockholders;

o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

o in respect of certain unlawful dividend payments or stock redemptions or
repurchases; or

o for any transaction from which the director derived an improper personal
benefit.

The effect of these provisions is to eliminate the rights of HomeServices and
its stockholders, through stockholders' derivative suits on behalf of
HomeServices, to recover monetary damages against a director for breach of
fiduciary duty as a director, including breaches resulting from grossly
negligent behavior, except in the situations described above. These provisions
do not limit the liability of directors under federal securities laws.

LISTING

HomeServices has applied to have the common stock approved for quotation
on The Nasdaq Stock Market's National Market under the symbol "HMSV."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is Chase Mellon
Shareholder Services, L.L.C. Its address is 2323 Bryan Street, Suite 2300,
Dallas, Texas 75201-2656 and its telephone number is 1-800-635-9270.

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DESCRIPTION OF INDEBTEDNESS

The following is a summary of all material debt instruments of
HomeServices. The agreements summarized below are included as exhibits to the
registration statement of which this prospectus forms a part. The following
summaries do not contain all of the information contained in the exhibits.

REVOLVING CREDIT FACILITY

HomeServices is a party to an unsecured revolving credit facility with a
commercial bank. The following is a summary of the material terms and
conditions of HomeServices' existing revolving credit facility. Before the
completion of the offering, HomeServices intends to enter into a new $75.0
million revolving credit facility which it is currently negotiating with its
existing commercial bank and other banks. The new revolving credit agreement is
expected to have a term of three years and to be secured by a pledge of the
capital stock of all of the subsidiaries of HomeServices. Other than this stock
pledge, HomeServices expects that the covenants, events of default or other
terms of the new revolving credit agreement will be substantially the same as
those of the existing revolving credit facility.

Under the existing revolving credit facility, HomeServices may borrow up
to the maximum commitment. When HomeServices entered into the revolving credit
facility in November 1998, the maximum commitment was $25.0 million. The
maximum commitment declines by $1.5 million every six months throughout the
five-year term of the revolving credit facility. HomeServices may use
borrowings under the revolving credit facility to finance acquisitions and for
its general corporate needs in the ordinary course of business.

At the option of HomeServices, each individual borrowing under the
revolving credit facility may be designated and maintained as either a prime
rate loan or a LIBOR loan. Interest accrues on prime rate loans at the prime
lending rate. Interest accrues on LIBOR loans at a rate equal to the British
Bankers' Association interest settlement rate or, if not available, by
reference to the London interbank market rate, for United States dollars plus a
fixed spread of 1.00% to 2.00%, that varies based on HomeServices' cash flow
leverage ratio, which is the ratio of debt then outstanding to EBITDA for the
preceding four fiscal quarters then ended. Interest is payable at the earlier
of the LIBOR loan maturity date or every 90 days. As of June 30, 1999, the
blended average interest rate on the revolving credit facility loans was 6.25%.

As of June 30, 1999, HomeServices had borrowed $23.5 million under the
revolving credit facility, which was the maximum commitment available.
HomeServices is obligated to reduce its borrowings under the revolving credit
facility whenever the amount borrowed is more than the maximum commitment. In
addition, the maximum commitment gets reduced by the same percentage as any
decrease in the amount of 7.12% senior notes that are outstanding.

The credit facility contains a number of covenants, including limitations
on (1) restricted payments and investments in excess of a specified basket
equal to $5 million plus 75% of cumulative consolidated net income since June
30, 1998 plus proceeds of certain equity offerings; and (2) incurrence of
indebtedness unless consolidated debt does not exceed 65% of consolidated
capitalization following such incurrence. Other covenants include limitations
on changes in lines of business, consolidations, mergers, asset dispositions,
liens, loans and advances, payment of dividends, transactions with affiliates
and modifications of HomeServices' certificate of incorporation. HomeServices
is also required to maintain compliance with financial performance covenants,
including covenants containing a minimum interest coverage ratio of 2.5 to 1
and a minimum consolidated net worth amount of $25.5 million plus 25% of
cumulative consolidated net income since January 1, 1998.

Events of default under the credit facility include nonpayment of
principal when due, nonpayment of interest or fees following a five business
day grace period, material inaccuracy of representations and warranties,
failure to comply with covenants following a 30-day grace period, default under
other agreements, bankruptcy events, ERISA events and judgments against
HomeServices or its subsidiaries.

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7.12% SENIOR NOTES

In November 1998, HomeServices issued $35.0 million of 7.12% senior notes
due November 1, 2010 in a private placement. Interest is payable under the
7.12% senior notes semiannually on May 1 and November 1. HomeServices is
required to prepay principal in the amount of $5.0 million per year commencing
on November 1, 2004. At HomeServices' option, the 7.12% senior notes may be
redeemed at any time, in whole or in part so long as the amount being redeemed
is at least 10.0% of the then outstanding aggregate amount, at a redemption
price equal to 100.0% of the principal amount plus a make whole premium. To
date, no senior notes have been redeemed.

The 7.12% senior notes are senior unsecured indebtedness of HomeServices
and rank on an equal basis with borrowings outstanding under the revolving
credit facility.

The notes purchase agreement governing the terms of the 7.12% senior notes
contains substantially the same restrictive covenants and events of default as
those contained in the revolving credit facility that are discussed above.

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SHARES ELIGIBLE FOR FUTURE SALE

Immediately after the closing of the offering, HomeServices will have
10,237,287 shares of common stock issued and outstanding or 10,587,287 shares
if the underwriters' over-allotment option is exercised in full. All of the
shares of common stock to be sold in the offering will be freely tradeable
without restrictions or further registration under the Securities Act, except
that shares purchased by an affiliate of HomeServices will be subject to the
resale limitations of Rule 144. An affiliate of HomeServices is any person that
directly or indirectly controls, is controlled by, or is under common control
with, HomeServices.

In general, under Rule 144, within any three-month period, no more than 1%
of HomeServices' common stock then outstanding or the average weekly trading
volume in the common stock during the four calendar weeks preceding the date on
which the required notice of such sale was filed, whichever is greater, may be
sold by the following classes of person:

o any person, or persons whose shares are required to be aggregated, who
owns shares of common stock which have been held for at least one year
since such shares were sold by HomeServices or by one of its affiliates
in a transaction or chain of transactions not involving a public
offering; or

o any of HomeServices' affiliates who holds shares of common stock that
are not restricted securities.

Sales under Rule 144 are also subject to provisions concerning the manner
and notice of sale and availability of current public information about
HomeServices. HomeServices' affiliates must comply with the requirements of
Rule 144, including the one-year holding period requirement, to sell shares of
common stock that are restricted securities. If at least two years have elapsed
from the date restricted securities were acquired from HomeServices or one of
its affiliates, a holder of such restricted securities who is not its affiliate
at the time of the sale and has not been an affiliate of HomeServices at any
time during the three months before such sale would be entitled to sell such
shares without regard to the volume limitation and other conditions described
above.

In addition, after completing the offering, HomeServices intends to file a
registration statement on Form S-8 under the Securities Act covering the
shares of common stock reserved for issuance under the employee stock purchase
plan. The registration statement on Form S-8 will automatically become
effective upon filing. Subject to vesting and the exercise of the issued and
outstanding options, shares registered under the registration statement on Form
S-8 will be freely tradeable and available for sale in the open market.

Each of HomeServices, its executive officers and directors, and
MidAmerican Holdings has agreed not to offer, sell or otherwise dispose of any
shares of common stock, other than in the offering, or any security convertible
into or exchangeable or exercisable for shares of common stock, without the
prior written consent of U.S. Bancorp Piper Jaffray on behalf of the
underwriters for a period of 180 days after the date of this prospectus, unless
such offer, sale or disposition is expressly permitted by the underwriting
agreement.

Before the offering, there was no public market for common stock. Although
HomeServices can make no prediction as to the effect, if any, that sales of
shares of common stock by MidAmerican Holdings would have on the market price
prevailing from time to time, sales of substantial amounts of common stock or
the availability of such shares for sale could adversely affect prevailing
market prices.

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<PAGE>

UNITED STATES FEDERAL TAX
CONSIDERATIONS RELATING TO NON-UNITED STATES HOLDERS

The following is a general discussion of the material United States
federal income and estate tax consequences of the ownership and disposition of
the common stock applicable to Non-United States Holders of such common stock.
For the purpose of this discussion, a "Non-United States Holder" is any holder
who for United States federal income tax purposes is not a "United States
person," as defined below. This discussion does not address all aspects of
United States federal income and estate taxation that may be relevant in light
of such Non-United States Holder's particular facts and circumstances, such as
being a U.S. expatriate, and does not address any tax consequences arising
under the laws of any state, local or non-United States taxing jurisdiction.
Furthermore, the following discussion is based on current provisions of the
Internal Revenue Code of 1986, as amended, and administrative and judicial
interpretations thereof, all as in effect on the date hereof, and all of which
are subject to change, possibly with retroactive effect. HomeServices has not
and will not seek a ruling from the Internal Revenue Service with respect to
the United States Federal income and estate tax consequences described below,
and as a result, there can be no assurance that the IRS will not disagree with
or challenge any of the conclusions set forth in this discussion. For purposes
of this discussion, the term "United States person" means:

o a citizen or resident of the United States;

o a corporation, partnership, or other entity created or organized in the
United States or under the laws of the United States or of any political
subdivision thereof;

o an estate whose income is included in gross income for United States
federal income tax purposes regardless of its source; or

o a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons who
have the authority to control all substantial decisions of the trust.

DIVIDENDS

If HomeServices pays a dividend, any dividend paid to a Non-United States
Holder of common stock generally will be subject to United States withholding
tax either at a rate of 30% of the gross amount of the dividend or such lower
rate as may be specified by an applicable tax treaty. Dividends received by a
Non-United States Holder that are effectively connected with a United States
trade or business conducted by such Non-United States Holder are exempt from
such withholding tax. However, such effectively connected dividends, net of
certain deductions and credits, are taxed at the same graduated rates
applicable to United States persons.

In addition to the graduated tax described above, dividends received by a
corporate Non-United States Holder that are effectively connected with a United
States trade or business of the corporate Non-United States Holder may also be
subject to a branch profits tax at a rate of 30% or such lower rate as may be
specified by an applicable tax treaty.

A Non-United States Holder of common stock that is eligible for a reduced
rate of withholding tax pursuant to a tax treaty may obtain a refund of any
excess amounts currently withheld by filing an appropriate claim for refund
with the IRS.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-United States Holder generally will not be subject to United States
federal income tax on any gain realized upon the sale or other disposition of
his common stock unless:

o such gain is effectively connected with a United States trade or
business of the Non-United States Holder which, in the case of a
corporate Non-United States Holder, must also be taken into account for
branch profits tax purposes;

82
<PAGE>

o the Non-United States Holder is an individual who holds such common
stock as a capital asset within the meaning of Section 1221 of the Code,
and who is present in the United States for a period or periods
aggregating 183 days or more during the calendar year in which such sale
or disposition occurs and certain other conditions are met; or

o HomeServices is or has been a "United States real property holding
corporation" for federal income tax purposes at any time within the
shorter of the five-year period preceding such disposition or such
holder's holding period. HomeServices has determined that it was not, is
not and does not believe that it will become a "United States real
property holding corporation" for United States federal income tax
purposes.

BACKUP WITHHOLDING AND INFORMATION REPORTING

Generally, HomeServices must report annually to the IRS the amount of
dividends paid, the name and address of the recipient, and the amount, if any,
of tax withheld. A similar report is sent to the holder. Pursuant to tax
treaties or other agreements, the IRS may make its reports available to tax
authorities in the recipient's country of residence.

Dividends paid to a Non-United Sates Holder at an address within the
United States may be subject to backup withholding at a rate of 31% if the
Non-United States Holder fails to establish that it is entitled to an exemption
or fails to provide a correct taxpayer identification number and certain other
information to the payer. Backup withholding will generally not apply to
dividends paid to Non-United States Holders at an address outside the United
States on or prior to December 31, 1999, unless the payer has knowledge that
the payee is a United States person. Under recently finalized Treasury
Regulations regarding withholding and information reporting (the "Final
Regulations"), payment of dividends to Non-United States Holders at an address
outside the United States after December 31, 1999 may be subject to backup
withholding at a rate of 31% unless such Non-United States Holder satisfies
certain certification requirements.

Under current Treasury Regulations, the payment of the proceeds of the
disposition of common stock to or through the United States office of a broker
is subject to information reporting and backup withholding at a rate of 31%
unless the holder certifies its non-United States status under penalties of
perjury or otherwise establishes an exemption. Generally, the payment of the
proceeds of the disposition by a Non-United States Holder of common stock
outside the United States to or through a foreign office of a broker will not
be subject to backup withholding but will be subject to information reporting
requirements if the broker is:

o a United States person;

o a "controlled foreign corporation" for United States tax purposes; or

o a foreign person, 50% or more of whose gross income for certain periods
is from the conduct of a United States trade or business, unless such
broker has documentary evidence in its files of the holder's non-United
States status and certain conditions are met or the holder otherwise
establishes an exemption.

In general, the recently promulgated Final Regulations, described above,
do not significantly alter the substantive withholding and information
reporting requirements but would alter the procedures for claiming the benefits
of an income tax treaty and change the certification procedures relating to the
receipt by intermediaries of payments on behalf of the beneficial owner of
shares of common stock. Non-United States Holders are urged to consult their
tax advisors regarding the effect, if any, of the Final Regulations on an
investment in the common stock. The Final Regulations are generally effective
for payments made after December 31, 1999.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the IRS.

83
<PAGE>

ESTATE TAX

An individual Non-United States Holder who owned common stock at the time
of his death or had made certain lifetime transfers of an interest in common
stock will be required to include the value of such common stock in such
holder's gross estate for United States federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise.

The foregoing discussion is a summary of the principal federal income and
estate tax consequences of the ownership, sale or other disposition of common
stock by Non-United States Holders. Accordingly, investors are urged to consult
their own tax advisors with respect to the income tax consequences of the
ownership and disposition of common stock, including the application and effect
of the laws of any state, local, foreign or other taxing jurisdiction.

84
<PAGE>

UNDERWRITING

The underwriters named below have agreed to buy, subject to the terms of
the purchase agreement, the number of shares listed opposite their names below.
The underwriters are committed to purchase and pay for all the shares if any
are purchased.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ----------------------------------------------------- ------------
<S> <C>
U.S. Bancorp Piper Jaffray Inc. ................
Credit Suisse First Boston Corporation .........

---------
Total .......................................... 4,000,000
=========
</TABLE>

The underwriters have advised HomeServices and MidAmerican Holdings that
they propose to offer the shares to the public at $ per share. The
underwriters propose to offer the shares to certain dealers at the same price
less a concession of not more that $ per share. The underwriters may allow
and the dealers may reallow a concession of not more than $ per share on
sales to certain other brokers and dealers. After the offering, these figures
may be changed by the underwriters.

HomeServices has granted to the underwriters an option to purchase up to
an additional 350,000 shares of common stock and MidAmerican Holdings has
granted to the underwriters an option to purchase up to an additional 250,000
shares of common stock, at the same price to the public, and with the same
underwriting discount, as set forth in the table above. The underwriters may
exercise this option any time during the 30-day period after the date of this
prospectus, but only to cover over-allotments, if any. To the extent the
underwriters exercise the option, each underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage of
the additional shares as it was obligated to purchase under the purchase
agreement.

The following table summarizes the underwriting fees and estimated
expenses HomeServices and MidAmerican Holdings will pay, assuming (1) the
underwriters do not exercise their overallotment option; and (2) the
underwriters exercise their overallotment option in full:

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------------------------------- --------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Underwriting discounts and commissions
paid by HomeServices ........................
Expenses payable by HomeServices
(including registration fees and fees of
financial printers, counsel and
accountants) ................................
Underwriting discounts and commissions
paid by MidAmerican Holdings ................
Expenses payable by MidAmerican
Holdings (including registration fees and
fees of financial printers, counsel and
accountants) ................................
</TABLE>

The underwriting fees were negotiated among HomeServices, MidAmerican
Holdings and the underwriters. It is currently anticipated that the
underwriting fees will equal between 6% and 7% of the aggregate initial public
offering price.

HomeServices and MidAmerican Holdings have agreed to indemnify the
underwriters against certain liabilities, including civil liabilities under the
Securities Act, or contribute to payments that the

85
<PAGE>

underwriters may be required to make in respect of those liabilities. Such
indemnification and contribution by MidAmerican Holdings relates only to
information in this prospectus provided by MidAmerican Holdings.

The underwriters have informed HomeServices and MidAmerican Holdings that
they do not expect discretionary sales to exceed 5.0% of the shares of common
stock being offered.

HomeServices and each of its directors and executive officers and
MidAmerican Holdings have agreed to certain restrictions on their ability to
sell additional shares of our common stock for a period of 180 days after the
date of this prospectus. HomeServices has agreed not to directly or indirectly
offer for sale, sell, contract to sell, grant any option for the sale of, or
otherwise issue or dispose of, any shares of common stock, options or warrants
to acquire shares of common stock, or any related security or instrument,
without the prior written consent of U.S. Bancorp Piper Jaffray on behalf of
the underwriters. The agreements provide exceptions for:

o sales to underwriters pursuant to the purchase agreement;

o sales in connection with the exercise of options granted and the granting
of options under HomeServices' stock option plan and sales of common stock
under HomeServices' stock purchase plans;

o issuances of shares of common stock on conversion or exchange of
convertible or exchangeable securities or on exercise of warrants or
options outstanding on the date of the underwriting agreement;

o filing with the Commission a registration statement relating to shares of
common stock described in the preceding two clauses;

o pledges of shares of common stock by MidAmerican Holdings made to secure
debt issued by MidAmerican Holdings, if the pledgee agrees in writing to
be bound by the foregoing transfer limitations; and

o transfers of shares of common stock by a director or officer of
HomeServices to an immediate family member, a trust of which they are a
beneficiary, their estate or to any other person as a bona fide gift, if
the transferee agrees in writing to be bound by the foregoing transfer
limitations.

At the request of HomeServices, the underwriters have reserved for sale,
at the initial public offering price, up to shares of common stock for
HomeServices' employees, directors, officers and sales associates who have
expressed an interest in purchasing common stock in the offering. The number of
shares available for sale to the general public in the offering will be reduced
to the extent such persons purchase such reserved shares. Any reserved shares
not so purchased will be offered by the underwriters to the general public on
the same terms as the other shares. The reserved shares sold to directors and
officers will be subject to the sale restrictions described in the preceding
paragraph.

HomeServices has applied to list its shares of common stock on The Nasdaq
Stock Market's National Market under the symbol "HMSV."

Each of U.S. Bancorp Piper Jaffray and Credit Suisse First Boston
Corporation and their affiliates has provided customary financial advisory
services to MidAmerican Holdings and certain of their affiliates other than
HomeServices, for which they have received customary compensation and
indemnification, and in the future may provide such services.

Prior to this offering, there has been no public market for the common
stock. The initial public offering price for the shares of common stock offered
by this prospectus was negotiated among HomeServices, MidAmerican Holdings and
the underwriters. The factors considered in determining the initial public
offering price include:

o the information set forth in this prospectus and otherwise available to
the underwriters,

o the history of and the prospects for the industry in which HomeServices
competes,

86
<PAGE>

o the ability of HomeServices' management,

o HomeServices' past and present operations,

o HomeServices' present state of development and its present financial
condition,

o HomeServices' historical results of operations,

o HomeServices' prospects for, and timing of, future earnings, the recent
market prices of, and recent demand for, securities of generally
comparable companies and

o the general condition of the securities markets at the time of the
offering.

There can be no assurance that the initial public offering price of the
common stock will correspond to the price at which the common stock will trade
in the public market subsequent to this offering or that an active public
market for the common stock will develop and continue after this offering.

To facilitate the offering, the underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the common stock
during and after the offering. Specifically, the underwriters may over-allot or
otherwise create a short position in the common stock for their own account by
selling more shares of common stock than have been sold to them by HomeServices
and MidAmerican Holdings. The underwriters may elect to cover any such short
position by purchasing shares of common stock in the open market or by
exercising the over-allotment option granted to the underwriters. In addition,
the underwriters may stabilize or maintain the price of the common stock by
bidding for or purchasing shares of common stock in the open market and may
impose penalty bids. If penalty bids are imposed, selling concessions allowed
to syndicate members or other broker-dealers participating in the offering are
reclaimed if shares of common stock previously distributed in the offering are
repurchased, whether in connection with stabilization transactions or
otherwise. The effect of these transactions may be to stabilize or maintain the
market price of the common stock at a level above that which might otherwise
prevail in the open market. The imposition of a penalty bid may also affect the
price of the common stock to the extent that it discourages resales of the
common stock. The magnitude or effect of any stabilization or other
transactions is uncertain. These transactions may be effected on The Nasdaq
Stock Market's National Market or otherwise and, if commenced, may be
discontinued at any time.

87
<PAGE>

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for HomeServices by Skadden, Arps, Slate, Meagher & Flom LLP, New York,
New York. Legal matters in connection with the sale of shares of common stock
in the offering will be passed upon for the underwriters by Chadbourne & Parke
LLP. Certain legal matters in connection with the sale of shares by MidAmerican
Holdings in the offering will be passed upon by Skadden, Arps, Slate, Meagher &
Flom LLP. Skadden, Arps, Slate, Meagher & Flom LLP has from time to time
represented, currently represents and may continue to represent MidAmerican
Holdings, the underwriters and their respective affiliates in connection with
legal matters. Chadbourne & Parke LLP has from time to time represented and may
continue to represent MidAmerican Holdings and its affiliates in connection
with legal matters.

EXPERTS

The financial statement of HomeServices.Com Inc. as of July 13, 1999
included in this prospectus has been audited by PricewaterhouseCoopers LLP,
independent accountants, as stated in their report appearing in this prospectus
and has been so included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.

The consolidated financial statements of MidAmerican Realty Services
Company and subsidiaries, including the predecessor, as of December 31, 1998
and for the periods ended May 27, 1998 and December 31, 1998 included in this
prospectus have been audited by PricewaterhouseCoopers LLP, independent
accountants, as stated in their report appearing in this prospectus and have
been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

The consolidated financial statements of J.C. Nichols Real Estate, now
known as J.C. Nichols Residential Inc., and subsidiaries as of December 31, 1997
and for the years ended December 31, 1997 and 1996, and the eight months ended
August 31, 1998, included in this prospectus have been audited by
PricewaterhouseCoopers LLP, independent accountants, as stated in their report
appearing in this prospectus and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.

The consolidated financial statements of Iowa Realty Co., Inc. and
subsidiaries as of December 31, 1997 and for the years ended December 31, 1997
and 1996, have been included in this prospectus and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, appearing elsewhere herein and upon the authority of said firm as
experts in accounting and auditing.

The financial statements of Paul Semonin Company, now known as Paul
Semonin Realtors, as of December 31, 1998 and 1997, and for the periods ended
December 31, 1998 and 1997, included in this prospectus have been audited by
PricewaterhouseCoopers LLP, independent accountants, as stated in their report
appearing in this prospectus and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.

The financial statements of HOME Real Estate Company of Omaha for the
period May 8, 1998 through August 18, 1998, included in this prospectus have
been audited by PricewaterhouseCoopers LLP, independent accountants, as stated
in their report appearing in this prospectus and have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.

ADDITIONAL INFORMATION

HomeServices has filed with the SEC a registration statement on Form S-1
under the Securities Act with respect to the common stock to be sold in the
offering. This prospectus is a part of the registration statement and does not
contain all the information in the registration statement, as permitted by the
rules and regulations of the SEC. Statements contained in this prospectus as to
the

88
<PAGE>

content of any contract, agreement or other document are not necessarily
complete. You should note that any statements in this prospectus as to the
content of any contract, agreement or other document filed as an exhibit to the
registration statement is not necessarily complete, and you should refer to the
copy of such contract, agreement or other document filed as an exhibit to the
registration statement for a complete statement of its terms. The registration
statement, and the reports and other information to be filed by HomeServices
with the SEC following the offering in accordance with the Securities Exchange
Act of 1934, can be inspected and copied at the principal office of the SEC at
Room 1024, Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549, and
at the following regional offices of the Commission: 7 World Trade Center, 13th
Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these materials
may be obtained from the SEC's website, http://www.sec.gov, and from the Public
Reference Room of the SEC at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the fees required by the SEC. Investors
may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330.

After the closing of the offering, HomeServices will be subject to the
informational requirements of the Securities Exchange Act of 1934 and will file
reports, proxy and information statements and other information with the SEC.
These reports, proxy and information statements and other information can be
inspected and copied at the addresses described above. HomeServices intends to
furnish to its stockholders annual reports containing audited consolidated
financial statements, including an opinion on the audited financial statements
expressed by HomeServices' independent auditors.

89
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
FINANCIAL STATEMENT OF HOMESERVICES.COM INC.
Report of Independent Accountants ..................................................... F-3
Balance Sheet as of July 13, 1999 ..................................................... F-4
Notes to Financial Statement .......................................................... F-5
CONSOLIDATED FINANCIAL STATEMENTS OF MIDAMERICAN REALTY SERVICES COMPANY
AND SUBSIDIARIES (INCLUDING PREDECESSOR)
Report of Independent Accountants ..................................................... F-6
Consolidated Balance Sheets as of December 31, 1998 and June 30, 1999 (unaudited) ..... F-7
Consolidated Statements of Income for the periods ended December 31, 1998 and May
27, 1998, the six months ended June 30, 1999 (unaudited) and May 28, 1998 through
June 30, 1998 (unaudited) ............................................................ F-8
Consolidated Statements of Changes in Stockholders' Equity for the periods ended
May 27, 1998 and December 31, 1998 and the six months ended June 30, 1999
(unaudited) .......................................................................... F-9
Consolidated Statements of Cash Flows for the periods ended December 31, 1998 and
May 27, 1998, the six months ended June 30, 1999 (unaudited) and May 28, 1998
through June 30, 1998 (unaudited) .................................................... F-10
Notes to Consolidated Financial Statements ............................................ F-11
CONSOLIDATED FINANCIAL STATEMENTS OF J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES
Report of Independent Accountants ..................................................... F-27
Consolidated Balance Sheet as of December 31, 1997 .................................... F-28
Consolidated Statements of Income for the eight months ended August 31, 1998 and the
years ended December 31, 1997 and 1996 ............................................... F-30
Consolidated Statements of Changes in Partners' Capital for the years ended December
31, 1996 and 1997 and the eight months ended August 31, 1998 ......................... F-31
Consolidated Statements of Cash Flows for the eight months ended August 31, 1998 and
the years ended December 31, 1997 and 1996 ........................................... F-32
Notes to Consolidated Financial Statements ............................................ F-33
CONSOLIDATED FINANCIAL STATEMENTS OF IOWA REALTY CO., INC. AND SUBSIDIARIES
(INCLUDING EDINA REALTY HOME SERVICES)
Independent Auditors' Report .......................................................... F-39
Consolidated Balance Sheet as of December 31, 1997 .................................... F-40
Consolidated Statements of Income for the years ended December 31, 1997 and 1996 ...... F-41
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1997 and 1996 ........................................................... F-42
Consolidated Statements of Cash Flows for the years ended December 31, 1997 and 1996. F-43
Notes to Consolidated Financial Statements ............................................ F-44
FINANCIAL STATEMENTS OF PAUL SEMONIN COMPANY
Report of Independent Accountants ..................................................... F-54
Balance Sheets as of December 31, 1998 and 1997 ....................................... F-55
Statements of Income for the years ended December 31, 1998 and 1997 ................... F-56
Statements of Changes in Stockholders' Equity for the years ended December 31, 1998
and 1997 ............................................................................. F-57
Statements of Cash Flows for the years ended December 31, 1998 and 1997 ............... F-58
Notes to Financial Statements ......................................................... F-59
</TABLE>

F-1
<PAGE>

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
FINANCIAL STATEMENTS OF HOME REAL ESTATE COMPANY OF OMAHA
Report of Independent Accountants .................................................. F-66
Statement of Income for the period from May 8, 1998 through August 18, 1998 ........ F-67
Statement of Changes in Stockholders' Equity for the period from May 8, 1998 through
August 18, 1998 ................................................................... F-68
Statement of Cash Flows for the period from May 8, 1998 through August 18, 1998 .... F-69
Notes to Financial Statements ...................................................... F-70
</TABLE>

F-2
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
HomeServices.Com Inc.

In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of HomeServices.Com Inc. at July 13,
1999, in conformity with generally accepted accounting principles. This
financial statement is the responsibility of the Company's management; our
responsibility is to express an opinion on this financial statement based on our
audit. We conducted our audit of this statement in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall balance sheet presentation. We believe that our audit of the balance
sheet provides a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

Kansas City, Missouri
July 13, 1999

F-3
<PAGE>

HOMESERVICES.COM INC.

BALANCE SHEET

<TABLE>
<CAPTION>
JULY 13, 1999
ASSETS --------------
<S> <C>
Current Assets:
Cash ................................................................... $10
---
Total Assets ........................................................... $10
===
LIABILITIES AND STOCKHOLDER'S EQUITY
Stockholder's Equity:
Common Stock, $.01 par, 1,000 shares authorized, 1,000 shares issued and
outstanding .......................................................... $10
---
Total Liabilities and Stockholder's Equity ............................. $10
===
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-4
<PAGE>

HOMESERVICES.COM INC.

NOTES TO FINANCIAL STATEMENT

(1) NATURE OF OPERATIONS

HomeServices.Com Inc., (the Company), a Delaware corporation is a wholly
owned subsidiary of MidAmerican Energy Holdings Company (Parent). Currently,
the Company's only asset is the $10 cash received from Parent as consideration
for the issuance of 1,000 shares of the Company's common stock.

The Company was formed on July 13, 1999 for the purpose of merging with
MidAmerican Realty Services Company (Realty). Realty, formed in May 1998, is
currently 95.2% owned by Parent. Realty currently owns 100% of the capital
stock of Edina Realty Home Services of Minnesota, J.C. Nichols Real Estate,
Iowa Realty Co., Inc., CBS HOME Realty Co., Inc. and Paul Semonin Company.

Immediately prior to the consummation of the initial public offering of
the Company, Realty will merge with and into the Company, with the Company
being the surviving corporation. At the time of the merger each holder of
Realty common stock will receive a percentage of the Company's common stock
equal to the percentage of Realty common stock owned by such holder immediately
prior to the merger.

F-5
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
MidAmerican Realty Services Company

In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of changes in stockholders' equity,
and of cash flows present fairly, in all material respects, the financial
position of MidAmerican Realty Services Company and its subsidiaries (the
"Company") at December 31, 1998 and the results of its operations and its cash
flows for the periods ended May 27, 1998 (Predecessor) and December 31, 1998 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

As discussed in Note 1 to the consolidated financial statements, the
Company was formed on April 6, 1998. The Company had no substantive operations
prior to the acquisition of Iowa Realty Co., Inc. ("Iowa Realty") on May 27,
1998 and commenced operations on May 28, 1998. The results of operations,
changes in stockholders' equity and cash flows of Iowa Realty from January 1,
1998 through its acquisition by the Company are presented in the consolidated
financial statements and are designated as "Predecessor".

Kansas City, Missouri /s/ PricewaterhouseCoopers LLP
May 28, 1999

F-6
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, 1999
1998 (UNAUDITED)
ASSETS -------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................................... $ 3,114 $ 11,544
Mortgage loans held for sale and other receivables, net of allowance of
$1,346 and $1,555...................................................... 17,320 12,477
Receivable from affiliates .............................................. 69 --
Cash held in trust ...................................................... 7,932 9,489
Income taxes receivable ................................................. 3,902 1,432
Other current assets .................................................... 2,074 1,789
-------- --------
34,411 36,731
-------- --------
Other assets:
Office property and equipment, net ...................................... 15,453 18,147
Intangible assets, net of accumulated amortization of $1,568 and $3,020.. 75,122 74,266
Investment in 50% or less owned entities ................................ 269 841
Held-to-maturity securities ............................................. 651 858
Available-for-sale security ............................................. 297 355
Deferred taxes .......................................................... 2,148 --
Other assets ............................................................ 169 590
-------- --------
94,109 95,057
-------- --------
Total assets ......................................................... $128,520 $131,788
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................ $ 5,448 $ 3,876
Accrued expenses ........................................................ 11,345 10,528
Payable to affiliates ................................................... 367 635
Cash held in trust ...................................................... 7,932 9,489
Current portion of agent profit sharing ................................. 433 433
Current portion of long-term debt ....................................... 3,436 3,162
Other current liabilities ............................................... 1,191 1,896
-------- --------
30,152 30,019
-------- --------
Other liabilities:
Deferred taxes .......................................................... -- 267
Long-term debt .......................................................... 58,009 56,405
Agent profit sharing .................................................... 5,074 5,069
Other noncurrent liabilities ............................................ 91 90
-------- --------
63,174 61,831
-------- --------
Total liabilities .................................................... 93,326 91,850
======== ========
Commitments and contingencies (note 13) .................................. -- --
Stockholders' equity:
Common stock, no par; 1,000,000 shares authorized, 10,000 shares issued
and outstanding ....................................................... 10 10
Additional paid-in capital .............................................. 39,505 39,505
Notes receivable ........................................................ (896) (753)
Accumulated other comprehensive income (loss) ........................... 9 (16)
Accumulated deficit ..................................................... (3,434) 1,192
-------- --------
Total stockholders' equity .............................................. 35,194 39,938
-------- --------
Total liabilities and stockholders' equity .............................. $128,520 $131,788
======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-7
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

The accompanying notes are an integral part of these financial statements.

F-8
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(IN THOUSANDS EXCEPT SHARES)

<TABLE>
<CAPTION>
ACCUMULATED RETAINED
COMMON STOCK ADDITIONAL OTHER EARNINGS
---------------------- PAID-IN NOTES COMPREHENSIVE (ACCUMULATED
SHARES AMOUNT CAPITAL RECEIVABLE INCOME (LOSS) DEFICIT) TOTAL
------------- -------- ------------ ------------ --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Predecessor:
Balance, January 1, 1998 .............. 4,758,850 $47 $31,665 $ -- $ -- $ 5,079 36,791
Net income ............................ -- -- -- -- -- 1,953 1,953
Distribution to parent ................ -- -- -- -- -- (1,961) (1,961)
Share acquisition ..................... (64,692) (1) (699) -- -- -- (700)
Dividends ............................. -- -- -- -- -- (3,699) (3,699)
Capital contribution .................. -- -- 9,150 -- -- -- 9,150
--------- ----- ------- --------- ----- --------- ------
Balance, May 27, 1998 ................. 4,694,158 $46 $40,116 $ -- $ -- $ 1,372 $ 41,534
========= ===== ======= ========= ===== ========= ========

================================================================================================================================
Company:
Balance, May 28, 1998 ................. -- $-- $ -- $ -- $ -- $ -- $ --
Comprehensive income (loss):
Net loss ............................. -- -- -- -- -- (3,434) (3,434)
Unrealized gain on
investments (gross $15, net
of $6 taxes)......................... -- -- -- -- 9 -- 9
--------- ----- ------- --------- ----- --------- --------
Total comprehensive income
(loss) ............................... -- -- -- -- -- -- (3,425)
Initial capitalization ................ 10,000 10 30,505 (1,525) -- -- 28,990
Capital contribution .................. -- -- 9,000 -- -- -- 9,000
Allowance for forgiveness of
notes receivable, net of
accrued interest ..................... -- -- -- 629 -- -- 629
--------- ----- ------- --------- ----- --------- --------
Balance, December 31, 1998 ............ 10,000 10 39,505 (896) 9 (3,434) 35,194
--------- ----- ------- --------- ----- --------- --------
Comprehensive income (loss):
Net income (unaudited) ............... -- -- -- -- -- 4,626 4,626
Unrealized loss on
investments (unaudited)
(gross $42, net of
$17 taxes)................. ......... -- -- -- -- (25) -- (25)
--------- ----- ------- --------- ----- --------- --------
Total comprehensive income
(unaudited) .......................... -- -- -- -- -- -- 4,601
Allowance for forgiveness of
notes receivable, net of
accrued interest (unaudited) ......... -- -- -- 143 -- -- 143
--------- ----- ------- --------- ----- --------- --------
Balance, June 30, 1999
(unaudited) .......................... 10,000 $10 $39,505 $ (753) $ (16) $ 1,192 $ 39,938
========= ===== ======= ========= ===== ========= ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-9
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
COMPANY PREDECESSOR COMPANY COMPANY
-------------- ----------------- --------------- --------------
MAY 28, 1998 SIX MONTHS MAY 28, 1998
THROUGH JANUARY 1, 1998 ENDED THROUGH
DECEMBER 31, THROUGH JUNE 30, 1999 JUNE 30, 1998
1998 MAY 27, 1998 (UNAUDITED) (UNAUDITED)
-------------- ----------------- --------------- --------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) .................................... $ (3,434) $ 1,953 $ 4,626 $ (636)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ...................... 4,177 2,293 3,718 560
Acquisition related costs .......................... 18,271 -- -- 4,744
Loss (gain) on sale of office property &
equipment ......................................... 197 (6) (2) --
Decrease in notes receivable ....................... 630 -- 143 --
Deferred income taxes .............................. (336) 79 2,415 --
Change in assets and liabilities net of effects
from purchase of subsidiaries:
Decrease (increase) in income taxes receivable..... (1,893) -- 2,470 1,179
Decrease (increase) in mortgage loans held for
sale and other receivables ...................... (7,287) (281) 4,685 3,662
Decrease (increase) in other assets ............... 728 1,252 (435) (1,565)
Increase (decrease) in accounts payable ........... (929) (315) (1,304) 1,685
Increase (decrease) in accrued expenses ........... 922 (261) (817) (1,518)
Increase (decrease) in agent profit sharing ....... 1,169 (164) (5) --
Increase (decrease) in other liabilities .......... 213 441 704 908
--------- --------- --------- ---------
Net cash provided by (used in) operating
activities ..................................... 12,428 4,991 16,198 9,019
--------- --------- --------- ---------
Cash flows from investing activities:
Purchase of subsidiaries, net of cash acquired ....... (96,478) -- (800) (74,035)
Proceeds from sale of subsidiary ..................... -- -- 70 --
Proceeds from sale of property and equipment ......... 2 9 68 --
Purchase of property and equipment ................... (2,650) (900) (4,938) (237)
Purchase of investments .............................. -- -- (290) --
--------- --------- --------- ---------
Net cash used in investing activities ........... (99,126) (891) (5,890) (74,272)
--------- --------- --------- ---------
Cash flows from financing activities:
Payment on long-term debt ............................ (7,753) (872) (378)
Proceeds from issuance of private placement notes..... 35,000 -- -- --
Net change in revolving credit facility .............. 25,000 -- (1,500) --
Proceeds from capital transactions ................... 37,990 -- -- 28,990
Distributions and dividends to parent ................ -- (1,068) -- --
Net change in note payable to parent ................. -- -- -- 43,068
Loan costs ........................................... (425) -- -- --
--------- --------- --------- ---------
Net cash provided by (used in) financing
activities ..................................... 89,812 (1,940) (1,878) 72,058
--------- --------- --------- ---------
Net increase in cash and cash equivalents ............. 3,114 2,160 8,430 6,805
Cash and cash equivalents at beginning of period ...... -- 2,590 3,114 --
--------- --------- --------- ---------
Cash and cash equivalents at end of period ............ $ 3,114 $ 4,750 $11,544 $ 6,805
========= ========= ========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-10
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF BUSINESS ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES AND
PRACTICES

CORPORATE OVERVIEW

MidAmerican Realty Services Company (the Company), is a majority owned
subsidiary of MidAmerican Energy Holdings Company (Parent) that will be merged
into HomeServices Inc. The Company was formed on April 6, 1998, to operate
primarily as a home services company specializing in real estate brokerage and
complimentary products. These complimentary products and services include
mortgage origination, title insurance, abstracting services, escrow services,
home warranty coverage, as well as property and casualty insurance products.
The Company operates in the eight contiguous midwest states of Minnesota, Iowa,
Kansas, Missouri, Nebraska, Wisconsin, North Dakota and South Dakota. The
Company entered into the real estate brokerage business in May 1998, with the
acquisition of Iowa Realty Co., Inc. The Company has approximately 4,300 agents
under contract across the eight contiguous states. See note 2 on acquisitions.

The accompanying financial statements include the operations of Iowa
Realty Co., Inc., including Edina Realty Home Service, prior to being acquired
by MidAmerican on May 27, 1998 and are referred to as the Predecessor. The
Company had no substantive operations prior to the acquisition of Iowa Realty
Co., Inc. and the financial statements of MidAmerican reflect its operations
from May 28, 1998, the date it commenced operations.

CONSOLIDATION AND BASIS OF PRESENTATION

The consolidated financial statements include MidAmerican Realty Services
Company and its active, wholly or majority owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.

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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

INTERIM FINANCIAL DATA

The interim financial data is unaudited; however, in the opinion of the
Company, the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position,
results of operations and cash flows for the interim periods.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents include
cash and interest-bearing deposits in depository institutions purchased with
maturity of three months or less, excluding cash held in trust.

Supplemental disclosure of cash flow information (in thousands) --

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------- --------
<S> <C> <C>
Cash paid for interest .......... $ 695 $1,292
Cash paid for taxes ............. $1,648 $4,258
</TABLE>

F-11
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Supplemental schedule of noncash investing and financing activities (in
thousands) --

<TABLE>
<CAPTION>
COMPANY
--------
<S> <C>
Acquisition payment in accounts payable ............... $ 919
Common stock issued to minority shareholders .......... $1,525
</TABLE>

The Company purchased the stock of various subsidiaries during 1998 for
$106,732. In conjunction with the acquisitions, liabilities were assumed as
follows:

<TABLE>
<S> <C>
Fair value of assets acquired ........... $ 146,664
Cash paid for the capital stock ......... (106,732)
----------
Liabilities assumed ..................... $ 39,932
==========
</TABLE>

INVESTMENTS

50 Percent or less owned entities

The Company accounts for its investment in 50 percent or less owned
entities using the equity method unless the Company does not have the ability
to exercise significant influence over the invested operating and financial
policies, in which case the investment is accounted for using the cost method.

Investment securities

Marketable debt securities are classified as available-for-sale or
held-to-maturity. Management determines the appropriate classification of debt
securities at the time of purchase. Debt securities classified as
available-for-sale are stated at fair value, with unrealized gains and losses
reported in a separate component of stockholders' equity. Realized gains and
losses on sales of investments are included in other revenues. Debt securities
are classified as held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity. Held-to-maturity securities are
stated at amortized cost. Interest on debt securities is included in interest
income.

Certain investments in equity securities are accounted for as
available-for-sale securities and adjusted to market value with unrealized
gains or (losses) reported as a separate component of stockholders' equity.

OFFICE PROPERTY AND EQUIPMENT

Property and equipment is carried at cost less accumulated depreciation.
Major renewals and betterments are capitalized, while maintenance and repairs
that do not improve or extend the life of the respective assets are charged
against earnings in the current period.

Depreciation and amortization are provided on straight-line and
accelerated methods over the following estimated useful lives:

<TABLE>
<S> <C>
Buildings ...................... 18-31 years
Furniture and fixtures ......... 3-10 years
Leasehold improvements ......... Shorter of the life of the underlying
lease or the estimated useful life of the
improvement.
</TABLE>

INTANGIBLE ASSETS

Intangible assets consist of the excess cost over acquired net assets
(goodwill) which has been capitalized and is being amortized on a straight line
basis over 30 years. Whenever events or changes

F-12
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

in circumstances indicate that the carrying amount of goodwill may not be
recoverable, the Company reviews the carrying value of goodwill for impairment
based on the operating cash flows (undiscounted and without interest) of the
related business unit. If the projection of operating cash flows over the
remaining life of the goodwill proves to be less than the carrying value of
goodwill, an impairment is recognized. The amount of the impairment is
calculated by taking the excess of the goodwill over the present value of
estimated expected future cash flows over the remaining life of the goodwill
using an appropriate discount rate. Non-compete agreements are stated at cost
and amortized over the lives of the agreements.

CASH HELD IN TRUST

The Company maintains separately designated trust accounts for home
buyers' earnest money and other deposits. The Company holds such funds until
sold properties are closed and subsequently disburses amounts in accordance
with the settlement instructions. At December 31, 1998, the Company held
approximately $7.9 million of funds in trust.

INCOME TAXES

Income taxes are accounted for using the asset and liability method, which
requires deferred taxes to be recognized by applying enacted statutory rates
applicable to future years to the differences between the carrying amounts and
the tax basis of existing assets and liabilities.

The Company files a consolidated income tax return with its Parent and
calculates its income tax provision as if it filed a separate return. The
Company remits to its Parent all current tax expense and receives from its
Parent the benefit of current income deductions and credits utilized.

REVENUE RECOGNITION

Commission income from real estate brokerage transactions and related
amounts due to agents are recognized when title has transferred from seller to
buyer.

Fees related to loan originations are recognized when the related loan is
delivered to the third party purchasers. At December 31, 1998, the Company had
$13.4 million in mortgage loans held for sale and other receivables related to
undelivered loans for which purchase commitments had been received.

BUSINESS PROMOTION AND ADVERTISING

Advertising and promotion costs are expensed as incurred.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
Because no market exists for a significant portion of the Company's financial
instruments, fair value estimates are based on judgements regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments and other factors. These estimates are subjective
in nature and involve uncertainties and matters of significant judgement and,
therefore, cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.

The Company discloses the estimated fair value for its financial
instruments using the methods and assumptions set forth below:

F-13
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Cash and cash equivalents

The carrying amount approximates the estimated fair value due to the
short-term nature of the investments.

Securities

Fair values of securities available for sale are based on quoted market
prices where available. If quoted market prices are not available, fair values
are based on quoted market prices of comparable instruments.

Mortgage loans held for sale and other receivables

Mortgage loans held for sale are carried at the lower of cost or market,
computed on the aggregate basis. Market value is computed using the outstanding
commitment price from the investors. The carrying amount approximates the
estimated fair value.

The carrying amount of other receivables approximates the estimated fair
value due to the short-term nature of the investments.

Long-term debt

Rates currently available to the Company for such borrowings with similar
terms and remaining maturities are used to discount the future cash flows to
estimate fair value for notes payable. The fair value of the private placement
notes was approximately $36 million at December 31, 1998. The carrying value of
the revolving credit facility at December 31, 1998 approximated fair value as
the facility has a floating rate based upon the current interest rate. The fair
value of the interest rate swap at December 31, 1998 was $10,000.

Derivative Financial Instruments

The Company uses interest rate swaps to reduce the impact of changes in
interest rates on variable-rate debt. The net effect of these agreements is
recorded as interest expense. Interest rate swap agreements effectively fix the
interest rates on a portion of the Company's variable-rate debt. These
agreements are not adjusted to market value as they are used only to manage
interest expense and the intent is to hold them until their termination date.

BRANDING AGREEMENTS

The Company recognizes branding revenue as cash is received under the
terms of the agreement and the earnings process is complete.

The Company entered into an agreement with a third party providing for
such party to use the Company's name in conjunction with the residential and
commercial activities conducted by the third party. The agreement also provides
the Company with a 60-day right of first refusal to purchase a controlling
interest in the third party's operation should a sale be initiated. The Company
has agreed to pay $10,000 monthly for these rights. The agreement was dated
October 13, 1998, and has a term of five years with an additional five-year
renewal option by the third party.

FRANCHISE SALES

The Company sells real estate brokerage franchises. In exchange for
certain fees, the Company provides the right to use certain names and related
trademarks. In addition, the Company provides brand marketing, operational
guidelines, sales and promotion materials and training. In 1998, the Company
recognized net revenue of $602,000 related to the franchise operation. Through
May 28, 1998, the Predecessor had recognized net revenues of $282,000 related
to the franchise operation.

F-14
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Revenue from franchising activities includes initial franchise fees which are
recognized in revenue at the time the franchise agreement is signed. The
Company also receives continuing franchise fee revenue based on the gross
commission income realized by the franchise. Revenue related to ongoing fees is
recognized upon the sale of individual real estate contracts. The Company
provides brand marketing, operational guidelines, sales promotion materials and
training in support of its ongoing franchise fees.

NEW ACCOUNTING PRONOUNCEMENTS

In April 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) No. 98-5, Reporting on the Costs of Start-Up
Activities. SOP No. 98-5 requires that the cost of start-up activities
previously capitalized be charged against income and reported as a cumulative
effect of a change in accounting principle, and further requires that such
costs subsequent to adoption be expensed as incurred. The Company adopted this
standard in 1999 and expensed applicable unamortized costs of $145,000
previously capitalized in connection with the start-up of all acquired
companies in the first quarter of 1999. As this amount is immaterial, the
cumulative effect of the change is included in depreciation and amortization
expense on the statement of income.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative
Instruments and Hedging Activities. The statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in the fair value of a
derivative depends on the intended use of the derivative and the resulting
designation. The statement will become effective for the Company in fiscal
2001. Adoption of this statement is not expected to have a material impact on
the Company's financial position, results of operations or cash flows.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 (SFAS 131), Disclosures About Segments
of an Enterprise and Related Information, which establishes standards for the
way companies report information about operating segments in annual financial
statements. It also establishes standards for related disclosure about products
and services, geographic areas and major customers. The Company conducts its
business activity in a single operating segment. Commission revenue from real
estate brokerage services comprised approximately 87% and 89% of total revenue
for the predecessor and the Company, respectively. The Company has no other
single source of revenue greater than 7%.

F-15
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) ACQUISITIONS

In 1998, the Company purchased the following companies from third parties:

<TABLE>
<CAPTION>
PURCHASE PRICE
ACQUISITION DATE COMPANY LOCATION (IN THOUSANDS)
- ------------------- -------------------------- ----------------- ---------------
<S> <C> <C> <C>
May 27, 1998 Iowa Realty Co., Inc., Des Moines, IA $78,300
including Edina Realty Minneapolis, MN
Home Services of Springfield, MO
Minnesota
(Predecessor)
August 18, 1998 HOME Real Estate Omaha, NE $ 5,200
Company of Omaha
August 18, 1998 CBS Real Estate Omaha, NE $ 5,300
Company
September 1, 1998 J.C. Nichols Real Estate Kansas City, MO $16,800
December 18, 1998 Nebraska Land Title & Omaha, NE $ 800
Abstract
</TABLE>

Each acquisition was accounted for as a purchase business combination. All
identifiable assets acquired and liabilities assumed were assigned a portion of
the acquisition price equal to their fair value at the date of acquisition. The
following is the goodwill recorded and liabilities assumed upon the purchase of
each company (in thousands):

<TABLE>
<CAPTION>
GOODWILL RECORDED LIABILITIES ASSUMED
------------------- --------------------
<S> <C> <C>
Iowa Realty Co., Inc. ................... $54,607 $27,641
HOME Real Estate Company ................ 3,145 301
J.C. Nichols Real Estate ................ 13,128 7,708
CBS Real Estate Company ................. 3,512 637
Nebraska Land Title & Abstract .......... 346 138
</TABLE>

F-16

<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following significantly identifiable assets were acquired with each
purchase:

<TABLE>
<CAPTION>
PENDING
REAL ESTATE OTHER FIXED CASH AND
SALES CONTRACTS RECEIVABLES ASSETS INVESTMENTS
----------------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Iowa Realty Co., Inc. .................. $14,231 $12,281 $12,706 $5,222
Home Real Estate Company ............... 1,157 225 502 434
J.C. Nichols Real Estate ............... 1,831 4,799 1,734 2,106
CBS Real Estate Company ................ 1,052 52 618 430
Nebraska Land Title & Abstract ......... 13 62 357
</TABLE>

Upon acquisition of the real estate brokerage companies, the Company
established an asset for the value of pending real estate sales contracts. In
the accompanying statements of income, the asset, referred to as acquisition
related costs, is charged to income in the period in which the related revenues
are reflected. The value of these contracts for 1998 business acquisitions was
$18.3 million. As of December 31, 1998, the entire value of the pending real
estate sales contracts has been charged to income.

On May 8, 1998, the predecessor sold 80% of its 100% interest in HOME Real
Estate Holdings, Inc. (formerly Home Real Estate Company), valued at $3
million, to its minority shareholders. In addition, 64,692 shares of common
stock of the predecessor, held by the minority shareholders and valued at
$700,000, were exchanged for the remaining 20% of HOME Real Estate Holdings,
Inc. The proceeds from the sale of the 80% interest were received by the
predecessor's parent company and are reflected as a dividend in the statement
of changes in shareholders' equity.

Immediately prior to the acquisition of the predecessor by the Company,
the predecessor liquidated a joint venture with an investment balance of
approximately $3.1 million (the investment balance at December 31, 1997 was
$2.6 million). In connection with the liquidation, $1,168,000 was included in
assets purchased by the Company and $1,961,000 was transferred to the
predecessor's parent (AmerUs Group, Inc., an unrelated third party) as
reflected on the statement of changes in stockholder's equity. Income of
$477,000 was recorded for this investment in 1998 by the predecessor and is
included in other revenue on the statement of income.

Additionally, immediately prior to the acquisition of the predecessor by
the Company, the predecessor's parent acquired the $2,815,000 minority interest
in Edina Financial Services (a subsidiary of Edina Realty Home Services) for
cash of $9,150,000 which was recorded as a capital contribution and additional
goodwill of $6,335,000.

The acquisitions were partially funded through the issuance of 10,000
shares of common stock to its parent, valued at approximately $29 million.
Additional financing was provided through a $9 million capital contribution
from our parent, MidAmerican Energy Holdings Company, the issuance of private
placement notes and a revolving credit facility provided by third party
lenders.

The following pro forma financial information represents the unaudited pro
forma results of operations as if the aforementioned acquisitions had been
completed on January 1, 1998, after giving effect to certain adjustments
including increased amortization of goodwill generated from the acquisitions.
These pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of the results of operations which would have been
achieved had these acquisitions been completed as of January 1, 1998, nor are
the results indicative of the Company's future results of operations.

F-17
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1998
(IN THOUSANDS)
-------------------
<S> <C>
Revenues ................... $325,994
Operating expenses ......... 324,902
Net (loss) ................. (1,602)
</TABLE>

(3) SALE-LEASEBACK TRANSACTIONS

The Company is party to sale-leaseback transactions for certain brokerage
offices. The leases are classified as operating leases, and gains realized on
the sales transactions were deferred and are being credited to income as
occupancy expense adjustments over the lease terms. At December 31, 1998,
deferred income related to these transactions was $14,000.

(4) LONG-TERM DEBT

Long-term debt consisted of the following at December 31, 1998 (in
thousands):

<TABLE>
<S> <C>
7.12% Private placement notes ......... $35,000
Revolving credit facility ............. 25,000
Other ................................. 1,445
-------
61,445
Less current portion .................. 3,436
-------
$58,009
=======
</TABLE>

PRIVATE PLACEMENT NOTES

In November 1998, the Company issued $35 million of 7.12% fixed rate
private placement senior notes due in annual increments of $5 million beginning
in 2004. Cash interest is due semi-annually on May 1 and November 1 of each
year.

REVOLVING CREDIT FACILITY

In November 1998, the Company obtained a $25 million, 5-year credit
facility of which the Company had drawn down the entire amount as of December
31, 1998. The credit availability declines $1.5 million every six months for
five years, and a commitment fee of 0.3% is charged on any unused portion of
the facility. The credit agreement has a variable interest rate (LIBOR) plus a
credit spread based on certain financial ratios. During 1998, the Company
entered into a 3-year interest swap agreement covering $12.5 million (notional
amount) of the credit facility, which effectively fixed the interest rate on
this portion at 6.3%. As of December 31, 1998, the blended interest rate on the
entire facility was 6.51%. Interest is payable every 90 days. The fair value of
this derivative, estimated using termination cash value, was not material at
December 31, 1998.

The private placement notes and credit facility agreement contain various
financial covenants, including among other things, a minimum net worth of $25
million plus 25% of consolidated net earnings, maintenance of certain operating
ratios, 75% dividend payment restriction, and maximum allowable indebtedness to
net worth of 65% to 35%.

F-18
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Aggregate maturities of notes payable for the next five years and
thereafter are as follows (in thousands):

<TABLE>
<S> <C>
1999 .................... $ 3,436
2000 .................... 3,242
2001 .................... 3,261
2002 .................... 3,281
2003 .................... 13,225
Thereafter .............. 35,000
-------
$61,445
=======
</TABLE>

(5) MORTGAGE LOANS HELD FOR SALE AND OTHER RECEIVABLES

Mortgage loans held for sale and other receivables consisted of the
following at December 31, 1998 (in thousands):

<TABLE>
<S> <C>
Mortgage loans held for sale ......... $13,384
Other ................................ 5,282
-------
18,666
Less allowance ....................... 1,346
-------
$17,320
=======
</TABLE>

(6) OFFICE PROPERTY AND EQUIPMENT

Office property and equipment consisted of the following at December 31,
1998 (in thousands):

<TABLE>
<S> <C>
Land .................................. $ 219
Buildings ............................. 3,929
Furniture and equipment ............... 13,914
-------
18,062
Less accumulated depreciation ......... 2,609
-------
$15,453
=======
</TABLE>

Depreciation expense for the Company in 1998 totaled $2,609,000 while the
predecessor charged $1,488,000 against income for depreciation through May 27,
1998.

The Company rents office space for its various brokerage offices. Future
minimum rental payments under noncancelable operating leases at December 31,
1998, were as follows (in thousands):

<TABLE>
<CAPTION>
TO RELATED TO THIRD
PARTIES PARTIES TOTAL
------------ --------- ----------
<S> <C> <C> <C>
Year ending December 31:
1999 ........................ $ 3,181 $ 8,443 $11,624
2000 ........................ 2,809 7,034 9,843
2001 ........................ 1,579 5,429 7,008
2002 ........................ 1,269 4,519 5,788
2003 ........................ 980 3,082 4,062
Thereafter .................. 1,301 4,486 5,787
------- ------- -------
$11,119 $32,993 $44,112
======= ======= =======
</TABLE>

Total occupancy expense under noncancelable operating leases during 1998
was $4.9 million for the predecessor and $8.9 million for the Company.

F-19
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) INTANGIBLE ASSETS

Intangible assets consisted of the following at December 31, 1998 (in
thousands):

<TABLE>
<S> <C>
Goodwill .............................. $74,738
Non-compete agreements ................ 1,350
Other intangibles ..................... 602
-------
76,690
Less accumulated amortization ......... 1,568
-------
$75,122
=======
</TABLE>

The Company amortized $1,568,000 in 1998 while the predecessor recorded
amortization of $805,000 for intangible assets through May 27, 1998.

(8) INVESTMENTS IN 50 PERCENT OR LESS OWNED ENTITIES

Condensed unaudited financial information for entities accounted for under
the equity method is as follows at December 31, 1998 (in thousands):

<TABLE>
<S> <C>
Total assets .............. $1,633
======
Total liabilities ......... $ 364
======
Net income ................ $ 521
======
</TABLE>

Net earnings in entities accounted for under the equity method were $-0-
and $260,000 for the predecessor and the Company, respectively.

(9) EMPLOYEE BENEFIT PLANS

CONTRIBUTION PLAN

The Company maintains various defined contribution salary deferral plans
covering substantially all employees under section 401(k) of the Internal
Revenue Code. The plans allow for matching and employer contributions not to
exceed the maximum allowable for tax purposes. The Company match ranges from 50
to 125 percent of the employee contribution for the first 4 to 6 percent of the
employee's annual compensation depending upon the specific plan. Additionally,
one plan provides for a Company contribution equal to a percent of annual
compensation for each active, eligible employee on December 31 of each year.
Two other plans provide for additional Company contributions at the discretion
of the Company. For the period ended December 31, 1998, the Company recognized
expense of $1.2 million for the plans, while the predecessor recognized expense
of $100,000 through May 27, 1998.

POST-RETIREMENT BENEFITS OTHER THAN PENSIONS

The Company offered a post-retirement benefit plan, which provided certain
eligible participants with medical, dental and life insurance benefits. The
plan was terminated effective January 1, 1999. The plan was unfunded, and the
benefits were generally based on a combination of age and years of service at
retirement. The plan provided no vesting rights for participants. Upon
termination of the plan, there was one retiree collecting benefits. The medical
and dental insurance plan was contributory, with retirees' contributions
adjusted annually, and contained other cost sharing features such as a
deductible limit and coinsurance. The life insurance plan was reduced by 4
percent each month on a straight-line basis, upon retirement of the
participant, to a $10,000 minimum level. At

F-20
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 1998, the Company has accrued $467,000 related to this plan. The
Company had net post-retirement benefit plan expense of $59,000 for the period
from May 28, 1998 to December 31, 1998, while the predecessor recognized an
expense of $55,000 through May 27, 1998.

DEFERRED COMPENSATION PLAN

Two subsidiaries of the Company provide a nonqualified deferred
compensation plan for certain sales agents. Under one plan, adopted in 1985 by
a prior owner, the board of directors of the subsidiary determines annually
which agents shall be entitled to participate, the benefit amount (based upon a
percentage of annual commissions paid to the participants) and the benefit
payment date. The plan is not funded. At December 31, 1998, the Company has
accrued approximately $4.7 million for estimated future payments to qualifying
sales agents. For 1998, the Company incurred expenses of $969,000 for the sales
agents' deferred compensation plan, while the predecessor recognized expenses
of $136,000 for this plan.

The second plan, adopted in 1994 by a prior owner, provides for a benefit
based on profits generated by participating agents. Benefits are payable after
ten years of continuous licensed contract with the subsidiary. At December 31,
1998, the Company has accrued $851,000 for estimated future payments to
qualifying sales agents. The Company holds U.S. Treasury Strips (principal
only) to fund this obligation. For 1998, the Company incurred expenses of
$200,000 for the sales agents' deferred compensation plan.

(10) INCOME TAXES

Income taxes for the year ended December 31, 1998, were as follows (in
thousands):

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------- -----------
<S> <C> <C>
Current .......................... $1,585 $ (23)
Deferred ......................... 79 (2,224)
------ --------
Total expense (benefit) .......... $1,664 $ (2,247)
====== ========
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax asset and deferred tax liabilities as of December
31, 1998 were as follows (in thousands):

Deferred tax assets related to:

<TABLE>
<S> <C>
NOL carryforward ........................... $1,888
Bad debt reserves .......................... 334
Employee benefits .......................... 2,275
Self-insurance reserves .................... 377
Deferred gain on real estate sales ......... 87
Other ...................................... 83
------
Total deferred tax asset .................. 5,044
------
</TABLE>

Deferred tax liabilities related to:

<TABLE>
<S> <C>
Intangibles ............................. 2,824
Depreciable property .................... 72
-----
Total deferred tax liabilities ......... 2,896
-----
Net deferred tax asset ................. $2,148
======
</TABLE>

F-21
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company has a net operating loss carryforward at December 31, 1998 of
$4,651,000 which will expire commencing in 2019 and is available to offset
future taxable income.

The following table is a reconciliation between the effective income tax
rate indicated by the Consolidated Statement of Income and the statutory
federal income tax rate for the year ended December 31, 1998:

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------- ----------
<S> <C> <C>
Statutory federal income tax rate ....................... 35.0% 35.0%
State income tax, net of federal income tax benefit ..... 7.0 5.4
Amortization of acquisition costs ....................... -- 0.3
Other ................................................... 4.0 (1.1)
---- ----
Effective federal and state income tax rate ............. 46.0% 39.6%
==== ====
</TABLE>

The Company is required to establish a "valuation allowance" for any
portion of the deferred tax assets that management believes will not be
realized. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning strategies in
making this assessment. In order to fully realize the deferred tax assets, the
Company will need to generate future taxable income. Based upon the levels of
historical taxable income and projections for future taxable income, management
believes it is more likely than not the Company will realize the benefits of
the deferred tax assets and, therefore, no such valuation allowance has been
established.

F-22
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(11) RELATED-PARTY TRANSACTIONS

Related parties consist of entities associated by common ownership or
controlled by officers or directors of the Company. The Company had the
following balances and transactions with related parties during the year ended
December 31, 1998 (in thousands):

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------- -----------
<S> <C> <C>
Assets:
Advances receivable ...................... $69
====
Liabilities:
Accounts payable ......................... $354
Accrued expenses ......................... 13
-----
$367
=====
Stockholders' equity:
Notes receivable for shares sold ......... $896
=====
Revenues:
Title fees ............................... $ 387 $ --
Other .................................... 11 --
------ ----
$ 398 $ --
====== ====
Expenses:
Occupancy ................................ $ 292 $ 913
Corporate allocations .................... 359 1,552
------ -------
$ 651 $ 2,465
====== =======
Other income (expense):
Interest income .......................... $ 25 $ 64
Interest expense ......................... (485) (1,246)
------ -------
$ (460) $(1,182)
====== ======
</TABLE>

Certain officers and employees of the Company were issued shares of common
stock in the Company upon its formation, with a corresponding receivable
recorded for the fair value of the stock. The value of the 500 issued shares
and corresponding receivables was $1.5 million. The shares carry the same
dividend and voting rights as the shares held by the Parent. The officers and
employees held a 5% ownership interest as of December 31, 1998.

As certain performance levels are achieved over a five-year period, a
portion of the receivable balance is forgiven and considered compensation to
the officers and employees. In 1998, the amount accrued to the allowance for
estimated forgiveness and expensed as compensation was $629,000. The balance of
the notes receivable at December 31, 1998 was $896,000. The Company charges
interest on the outstanding receivable balance at a rate equal to its average
annual borrowing rate (6.87% at December 31, 1998). Interest income recorded on
the notes was $64,000 in 1998.

As of December 31, 1998, the Company had advanced its excess funds to
affiliated companies. Interest accrues daily at LIBOR plus 25 basis points
(6.62% at December 31, 1998) and is receivable upon demand.

In May 1998, the Company entered into a revolving credit agreement with
its parent to borrow funds from time to time. The interest rate on borrowings
is equal to the 30-day LIBOR rate plus 1%. Interest expense recorded on this
agreement totaled $1.2 million through December 31, 1998. No outstanding debt
remained at December 31, 1998.

F-23
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company is charged for direct costs incurred by the parent on its
behalf. In 1998 these costs were comprised of direct labor costs for legal,
accounting and human resource services of $394,000, professional fees of
$293,000, airplane usage of $25,000, as well as advertising fees and other of
$169,000. The Company has also allocated indirect costs from its parent for
corporate overhead such as executive costs, directors fees, and parent
interest. The Parent allocates indirect costs to its subsidiaries based on
their individual total assets and payroll. In 1998 the Company recorded
indirect costs of $671,000. Management believes this method for allocating
indirect cost is reasonable, and the costs reasonably approximate those costs
that would have been incurred on a stand-alone basis. The Parent has not
incurred or recorded any debt that is directly attributed to the Company or any
of its subsidiaries.

(12) INVESTMENT SECURITIES

The investment securities held at December 31, 1998 were (in thousands):

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------ ------------ ------------ ------
<S> <C> <C> <C> <C>
Available-for-sale:
Highwoods Properties Inc. ......... $288 $ 9 $ -- $297
==== ==== ====== ====
Held-to-maturity:
U.S. Treasury Strips (principal
only) ............................ $364 $ 90 $ -- $454
Agency obligation .................. 287 10 -- 297
---- ---- ------ ----
$651 $100 $ -- $751
==== ==== ====== ====
</TABLE>

The maturities of held-to-maturity investment securities and their
approximate fair value at December 31, 1998 were as follows (in thousands):

<TABLE>
<CAPTION>
FAIR
COST VALUE
------ ------
<S> <C> <C>
Due in one year or less ........................ $ -- $ --
Due after one through five years ............... 287 297
Due after five years through ten years ......... 364 454
</TABLE>

(13) COMMITMENTS AND CONTINGENCIES

The Company is a party to a number of lawsuits, claims and assessments
arising from the operation of its business. While the results of lawsuits or
other matters against the Company cannot be predicted with certainty,
management, in consultation with legal counsel, does not expect these matters
to have a material adverse effect on the financial position, results of
operations or cash flows of the Company.

The Company has employment agreements and arrangements with its executive
officers and certain management personnel. The agreements generally continue
for a period of one month to four years, and provide for severance payments
under certain circumstances. The agreements include a covenant against
competition with the Company, which extends for a period of time after
termination for any reason. As of December 31, 1998, if all employees under
contract were to be terminated by the Company without good cause, the Company's
liability would be approximately $9.6 million.

The Company assumed an outstanding contingent obligation as part of the
J.C. Nichols Real Estate asset purchase. The obligation related to an
acquisition of a residential real estate brokerage

F-24
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

operating by J.C. Nichols Real Estate Co. on May 14, 1998. J.C. Nichols paid
$463,000 cash at closing and is to pay $20,000 per month for a period of twelve
months beginning July 1, 1998, for the balance of the purchase price of
$240,000. In addition, J.C. Nichols is to pay, as a monthly referral fee, a
percentage of gross profit generated by sales agents of the Seller who join
J.C. Nichols. Sales generated by these agents during the thirty-nine months
after the date of the purchase are subject to the following referral fee on
gross profit:

15% of the closed transactions within the first 12 months
10% of the closed transactions within the next 12 months
5% of the closed transactions within the last 15 months

J.C. Nichols has guaranteed that the referral fees will be no less than
$204,000. The monthly referral fees are reduced to the extent of the $20,000
monthly payments for the acquisition. Any balance due shall be paid to the
Seller at the end of the first year. If note payments exceed the amount of the
referral fees during the first twelve months, the excess will be carried
forward to apply to referral fees during subsequent months. The referral fees
are expensed as the related revenue is recognized.

The J.C. Nichols Real Estate asset purchase agreement also requires
certain installment payments be made, after the closing date, based on certain
profitability levels achieved. The payments are required 60 days after the
close of calendar year 1998, 1999 and 2000. The maximum amount payable under
the agreement is $500,000 per year. These payments will be recorded as
additional costs of acquisition.

The CBS Real Estate Company stock purchase agreement requires certain
installment and retention payments after the closing date based on agent
retention and profitability levels. These payments are required 60 days, 120
days and 17 months after the close date. A $250,000 installment payment was
made in late 1998, with subsequent net installment payments of $200,000 made in
early 1999. A final retention payment not to exceed $100,000 is due 17 months
from the closing date based on certain levels of retained agent profitability.
These payments have been and will be recorded as additional costs of
acquisition.

Through its mortgage subsidiary, the Company had commitments to sell
mortgage loans to investors of $13.4 million at year end.

Commitments to sell mortgage loans to investors are contracts in which the
Company agrees to deliver mortgage loans at specific future dates at specified
prices or yields. Risks may arise from the possible inability of counterparties
to meet the terms of their contracts.

(14) SUBSEQUENT EVENTS (UNAUDITED)

On June 15, 1999, management at CBS HOME negotiated a reduction in the
annual salary paid to two non-executive employees under four year employment
agreements. As a result, the annual salary for the employees will be reduced to
$50,000 from $175,000 over the remaining term (39 months) of the employment
agreements. These agreements were entered into at the time of the acquisition
by the Company. These individuals are required to pay back a portion of the
lump sum amount if they leave the Company prior to the end of the employment
agreements. This lump sum payment was recorded as a prepaid expense included
within other assets and will be amortized straight line over the remaining term
of the employment agreements.

In June 1999, HomeServices signed a purchase agreement to acquire Paul
Semonin Company, a Louisville, Kentucky real estate brokerage firm with 11
offices and a leading market share in Louisville, and also operates in
Lexington, Kentucky and southern Indiana. This transaction closed on July 8,
1999.

F-25
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following pro forma financial information represents the unaudited pro
forma results of operations as if the aforementioned acquisitions, and the
acquisitions described in note 2, had been completed on January 1, 1998, after
giving effect to certain adjustments including increased amortization of
goodwill generated from the acquisitions. These pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
the results of operations which would have been achieved had these acquisitions
been completed as of January 1, 1998, nor are the results indicative of the
Company's future results of operations.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1998
(IN THOUSANDS)
-------------------
<S> <C>
Revenues .......................... $357,837
Operating expenses ................ 356,976
Net (loss) ........................ (1,477)
</TABLE>

F-26
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
J.C. Nichols Real Estate

In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of changes in partners' capital, and
of cash flows present fairly, in all material respects, the financial position
of J.C. Nichols Real Estate and its subsidiaries (the "Company") at December
31, 1997 and the results of its operations and its cash flows for the eight
months ended August 31, 1998 and the years ended December 31, 1997 and 1996 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

Kansas City, Missouri /s/ PricewaterhouseCoopers LLP
June 30, 1999

F-27
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
1997
ASSETS -------------
<S> <C>
Current assets:
Cash and cash equivalents ....................................................... $ 542
Cash held in trust .............................................................. 781
Commission revenue receivable ................................................... 197
Mortgage loans held for sale .................................................... 4,952
Other accounts receivable, net of allowance for uncollectible accounts of $3..... 95
Notes receivable, net of allowance for uncollectible notes of $4................. 109
Current portion of held-to-maturity securities .................................. 147
Prepaid expenses ................................................................ 147
------
Total current assets ......................................................... 6,970
------
Property and equipment:
Furniture and fixtures .......................................................... 1,740
Computers and electronic equipment .............................................. 851
Leasehold improvements .......................................................... 127
------
2,718
Less accumulated depreciation ................................................... 1,493
------
Net property and equipment ................................................... 1,225
------
Other assets:
Held-to-maturity securities ..................................................... 364
Available-for-sale security ..................................................... 369
Investment in less than 50% owned entity ........................................ 30
Other noncurrent assets ......................................................... 18
------
Total other assets ........................................................... 781
------
Total assets ................................................................. $8,976
======
</TABLE>

F-28
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET, CONTINUED
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
1997
LIABILITIES AND PARTNERS' CAPITAL -------------
<S> <C>
Current liabilities:
Short-term bank borrowings ........................ $4,409
Cash overdraft .................................... 132
Accounts payable .................................. 227
Accrued commissions ............................... 135
Accrued expenses .................................. 501
Deposits on loans in process ...................... 97
Cash held in trust ................................ 781
Current portion of long-term debt ................. 88
Other current liabilities ......................... 7
------
Total current liabilities ...................... 6,377
------
Long-term liabilities:
Long-term debt .................................... 421
Deferred compensation ............................. 651
------
Total long-term liabilities .................... 1,072
------
Commitments and contingencies (note 10) ............ --
Minority interest in subsidiaries .................. 55
------
Partners' capital:
Partners' capital ................................. 1,211
Accumulated other comprehensive income ............ 261
------
Total partners' capital ........................ 1,472
------
Total liabilites and partners' capital ......... $8,976
======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-29
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARES

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)

<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED YEAR ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------- -------------- -------------
<S> <C> <C> <C>
Revenues:
Commission revenue ....................................... $25,715 $27,860 $25,538
Other .................................................... 2,163 2,314 1,655
------- ------- -------
Total revenues ......................................... 27,878 30,174 27,193
------- ------- -------
Operating expenses:
Commission expense ....................................... 18,173 19,738 17,805
Salaries and employee benefits ........................... 3,227 3,982 3,378
Occupancy ................................................ 962 1,117 1,331
Business promotion and advertising ....................... 1,291 1,409 1,268
Depreciation and amortization ............................ 292 344 227
Operating, administrative and other ...................... 1,786 1,967 1,353
------- ------- -------
Total operating expenses .............................. 25,731 28,557 25,362
------- ------- -------
Other income (expense):
Interest income .......................................... 40 91 72
Other income ............................................. 32 7 --
Interest expense ......................................... (44) (103) (63)
Other expense ............................................ -- (4) --
Minority interest ........................................ (97) (60) (15)
------- -------- -------
Net other expense ..................................... (69) (69) (6)
------- -------- -------
Net income ............................................ $ 2,078 $1,548 $1,825
======= ======== =======
Income before income taxes ............................... $ 2,078 $1,548 $1,825
Pro forma provision for income taxes (unaudited) ......... 792 598 704
------- -------- -------
Pro forma net income (unaudited) ...................... $ 1,286 $ 950 $1,121
======= ======== =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-30
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
OTHER
PARTNER'S PARTNER'S COMPREHENSIVE
CAPITAL-JCN CAPITAL-NM INCOME TOTAL
------------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
Balance, January 1, 1996 ............... $ 221 $ 330 $ 14 $ 565
--------
Comprehensive income:
Net income ............................ 730 1,095 1,825
Unrealized gain on investment ......... 48 48
--------
Total comprehensive income ............ 1,873
Capital distributions .................. (400) (600) (1,000)
------ -------- ----- --------
Balance, December 31, 1996 ............. 551 825 62 1,438
--------
Comprensive income:
Net income ............................ 619 929 1,548
Unrealized gain on investment ......... 199 199
--------
Total comprehensive income ............ 1,747
Capital contributions .................. 187 187
Capital distributions .................. (760) (1,140) (1,900)
------ -------- ----- --------
Balance, December 31, 1997 ............. 410 801 261 1,472
--------
Comprehensive income:
Net income ............................ 831 1,247 2,078
Unrealized loss on investment ......... (81) (81)
--------
Total comprehensive income ............ 1,997
Capital distributions .................. (837) (1,255) (2,092)
------ -------- ----- --------
Balance, August 31, 1998 ............... $ 404 $ 793 $ 180 $ 1,377
====== ======== ===== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-31
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
EIGHT MONTHS YEAR ENDED YEAR ENDED
ENDED DECEMBER 31, DECEMBER 31,
AUGUST 31, 1998 1997 1996
----------------- -------------- -------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .............................................. $ 2,078 $ 1,548 $ 1,825
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ......................... 292 344 227
Minority interest in subsidiaries ..................... 97 60 15
Noncash compensation expense .......................... -- 187 --
Deferred compensation expense ......................... -- 171 185
Change in current assets and liabilities (net of
acquisition):
(Increase) decrease in:
Commission revenue receivable ...................... (453) (197) 107
Mortgage loans receivable .......................... 927 (855) (1,722)
Other accounts receivable .......................... 24 22 (8)
Prepaid expenses ................................... (38) -- (15)
Other assets ....................................... 7 (14) --
Increase (decrease) in:
Accounts payable ................................... 2,398 (35) 105
Accrued commissions ................................ 354 104 14
Accrued expenses ................................... (416) (25) 228
Deposits on loans in process ....................... (49) (85) (40)
Other current liabilities .......................... (7) 5 (4)
---------- -------- ------------
Net cash provided by (used in) operating
activities ...................................... 5,214 1,230 917
--------- -------- ------------
Cash flows from investing activities:
Purchases of property and equipment ..................... (337) (564) (471)
Proceeds from sale of property and equipment ............ 4 -- 52
Acquisition of business ................................. (463) -- --
Proceeds from notes receivable .......................... 58 52 (102)
Purchase of investments ................................. (140) (61) (319)
--------- -------- ------------
Net cash used in investing activities ................. (878) (573) (840)
--------- -------- ------------
Cash flows from financing activities:
Payments on long-term debt .............................. (95) (51) (62)
Net increase in short-term bank borrowings .............. (3,201) 2,075 766
Change in cash overdraft ................................ (132) (1,344) 1,167
Distributions to partners ............................... (1,213) (1,900) (1,000)
Distributions to minority interest shareholders ......... (9) (27) (56)
---------- -------- ------------
Net cash provided by (used in) financing
activities ........................................... (4,650) (1,247) 815
--------- -------- ------------
Net increase (decrease) in cash .................... (314) (590) 892
Cash and cash equivalents at beginning of period ......... 542 1,132 240
--------- -------- ------------
Cash and cash equivalents at end of period ............... $ 228 $ 542 $ 1,132
========= ======== ============
Supplemental cash flow information:
Interest paid ............................................ $ 44 $ 103 $ 60
========= ======== ============
Noncash investing activity:
Capital lease obligations ............................... $ -- $ -- $ 23
========= ======== ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-32
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) THE COMPANY AND BASIS OF PRESENTATION

J.C. Nichols Real Estate (the Company) operates primarily as a home
services company specializing in residential real estate brokerage, specialized
services for building new homes, and complimentary products, which include
mortgage origination, home inspection/warranty assistance and relocation
assistance. The Company has over 650 sales associates working from 16 branch
offices located in Kansas and Missouri.

The consolidated financial statements include the accounts, after
inter-company eliminations, of J.C. Nichols Real Estate, its majority owned
subsidiary, Plaza Financial Services (which owns 90% of Plaza Mortgage
Services), and its majority owned subsidiary, J.C. Nichols Alliance. J.C.
Nichols Alliance markets J.C. Nichols Real Estate franchises to cities in
Missouri and Kansas.

On August 31, 1998, the Company sold all of its assets to MidAmerican
Realty Services for $16,500,000. The asset purchase agreement also requires
certain installment payments be made after the closing date based on certain
profitability levels achieved. The payments are required 60 days after the
close of calendar years 1998, 1999 and 2000. The maximum amount payable under
the agreement is $500,000 per year. In February 1999, a $500,000 installment
was made to J.C. Nichols in accordance with the purchase agreement.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents include
cash and interest-bearing deposits in depository institutions purchased with a
maturity of three months or less, excluding cash held in trust.

CASH HELD IN TRUST

Balances of $781,000 at December 31, 1997 are restricted from use for
general operations and are held in a trust as escrow funds from real estate
transactions.

PROPERTY AND EQUIPMENT

Property and equipment is carried at cost less accumulated depreciation.
Major renewals and betterments are capitalized, and maintenance and repairs
which do not improve or extend the life of the respective assets are charged
against earnings in the current period.

Depreciation and amortization are provided on straight-line and
accelerated methods over the following estimated useful lives:

<TABLE>
<S> <C>
Furniture and fixtures ..................... 5-10 years
Computers and electronic equipment ......... 3-5 years
Leasehold improvements ..................... 5-10 years
</TABLE>

F-33
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INVESTMENTS

Less Than 50 Percent Owned Entity

The investment in Reliance Relocation Services consists of a small common
stock interest in a broker-to-broker real estate referral network specializing
in relocation services. The investment is carried at cost, which approximates
market value.

Investment Securities

Marketable debt securities are classified as available-for-sale or
held-to-maturity. Management determines the appropriate classification of debt
securities at the time of purchase. Debt securities classified as
available-for-sale are stated at fair value, with unrealized gains and losses
reported in a separate component of partners' capital. Realized gains and
losses on sales of investments are included in other revenues. Debt securities
are classified as held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity. Held-to-maturity securities are
stated at amortized cost. Interest on debt securities is included in interest
income.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
Where no market exists for financial instruments, fair value estimates are
based on judgements regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments and other
factors. These estimates are subjective in nature and involve uncertainties and
matters of significant judgement and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.

The Company discloses the estimated fair value for its financial
instruments using the methods and assumptions set forth below:

Cash and cash equivalents

The carrying amount approximates the estimated fair value due to the
short-term nature of the investments.

Securities

Mortgage loans held for sale

Short-term borrowings

The carrying amount of short-term bank borrowings approximates the
estimated fair value.

Long-term debt

Rates currently available to the Company for such borrowings with similar
terms and remaining maturities are used to discount the future cash flows to
estimate fair value for debt.

F-34
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INTANGIBLES

Costs associated with the organization of the Company are being amortized
over 5 years, and are included in other assets. At December 31, 1997, the book
value was $4,000, net of accumulated amortization of $20,000.

Goodwill of $240,000 resulting from a business acquisition in May 1998 is
being amortized over 15 years (see note 9).

DEPOSITS ON LOANS IN PROGRESS

Deposits on loans in progress consist of funds to be paid for loan
origination fees, appraisal fees, title fees and processing fees on behalf of
the buyer. These funds are disbursed at closing or at the time of funding.

REVENUE RECOGNITION

Commission income from real estate brokerage transactions and related
amounts due to agents are recognized when title has transferred from seller to
buyer.

Income from underwriting and sales of residential mortgages is recognized
when such mortgages are sold to designated investors and funds have been
received from the respective investors.

In exchange for fees, the Company provides the right to use certain names
and related trademarks. This franchise revenue is recognized upon receipt.

BUSINESS PROMOTION AND ADVERTISING

Advertising and promotion costs are expensed as incurred.

INCOME TAXES

The Company has elected under the Internal Revenue Code to be taxed as a
partnership. The Company's subsidiary, Plaza Financial Services, is a limited
liability company and is taxed as a partnership. The partners/members are taxed
on their proportionate share of the Company's taxable income, and accordingly,
no provision for federal or state income taxes has been made. Pro forma income
taxes are calculated at a combined federal and state statutory rate of 38%. The
income tax provision for J.C. Nichols Alliance, a corporation, is included in
other expenses on the statement of income.

(3) INVESTMENT SECURITIES

The investment securities held at December 31, 1997 were (in thousands):

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------ ------------ ------------ ------
<S> <C> <C> <C> <C>
Available-for-sale:
J.C. Nichols Co. common stock ................. $108 $261 $ -- $369
Held-to-maturity:
U.S. Treasury Strips (principal only) ......... $511 $ 36 $ -- $547
</TABLE>

F-35
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The maturities of marketable debt securities and their approximate market
value at December 31, 1997 were as follows (in thousands):

<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
----------- -------
<S> <C> <C>
Due in one year or less ........................ $147 $147
Due after one year through five years .......... -- --
Due after five years through ten years ......... $364 $400

</TABLE>

(4) SHORT-TERM BORROWINGS

Short-term borrowings consist of two line of credit agreements. The first
agreement is a $2,000,000 line of credit due June 30, 1999, collateralized by
the Company's portion of commissions on pending transactions. The borrowings
are payable at a fixed rate of 8.0%. There were no amounts outstanding on the
line of credit at December 31, 1997.

The second agreement is a $7,000,000 line of credit due April 30, 1999,
collateralized by the underlying mortgages. The borrowings are payable at a
fixed rate of 8.5%. The line of credit balance at December 31, 1997 was
$4,409,000. The loan is subject to a financial covenant requiring tangible net
worth of at least $150,000 in Plaza Mortgage Services.

(5) LONG-TERM DEBT

Long-term debt at December 31, 1997 consists of the following (in
thousands):

<TABLE>
<S> <C>
Note payable to J.C. Nichols Company, interest at 8.5%, payable
in monthly installments of $10 including interest, until
maturity in April 2003 .......................................... $490
Capital lease obligations, collateralized by equipment, payable in
monthly installments of $1 including interest, through January
2000 ............................................................ 19
----
509
Less current maturities .......................................... 88
----
Total long-term debt .......................................... $421
====
</TABLE>

As of December 31, 1997, scheduled maturities of long-term debt during the
next five years ending December 31, are as follows (in thousands):

<TABLE>
<S> <C>
1998 ....................... $ 88
1999 ....................... 89
2000 ....................... 90
2001 ....................... 98
2002 ....................... 106
Thereafter ................. 38
----
$509
====
</TABLE>

(6) RELATED PARTY TRANSACTIONS

As discussed in note 5, the Company has a note payable to one of its
partners, J.C. Nichols Company, in the amount of $490,000 at December 31, 1997.
In addition, as discussed in note 3, the Company had an investment in the
common stock of J.C. Nichols Company.

F-36
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company has a license agreement with J.C. Nichols Company to use the
"J.C. Nichols" tradename and servicemark for a royalty equal to $120,000 of net
income per year. Royalty expense for the year ended December 31, 1996, 1997,
and the eight months ended August 31, 1998, totaled $120,000, $120,000 and
$80,000, respectively.

The Company recognized expense in the amount of $18,000 and $12,000 for
the year ended December 31, 1997 and the eight months ended August 31, 1998,
respectively, to reimburse J.C. Nichols Company for the services of one of its
employees.

The Company leases office space from J.C. Nichols Company. Total rent
expense for the years ended December 31, 1996, 1997 and the eight months ended
August 31, 1998 was $374,000, $407,000 and $330,000, respectively.

The Company leases office space from an officer and owner of the Company.
Total rent expense for 1996, 1997 and the first eight months of 1998 was
$87,000, $98,000 and $94,000, respectively.

(7) RETIREMENT AND PROFIT SHARING PLANS

The Company maintains a 401(k) plan for the benefit of its employees. The
plan allows for matching and discretionary employer contributions not to exceed
the maximum allowable for tax purposes. Contributions are determined annually
by the Company. The consolidated statements of income for 1996, 1997 and for
the first eight months of 1998 reflect an expense of $46,000, $70,000 and
$41,000, respectively, for the employer match for the periods, based on
budgeted profits and contribution levels for the current plan years.

The Company has a nonqualified deferred compensation plan which covers
real estate agents licensed with the Company. The plan, adopted in 1994,
provides for a benefit based on profits generated by participating agents.
Benefits are payable after ten years of continuous licensed association with
the Company. The Company holds U.S. Treasury Strips (principal only) to fund
this obligation. Contributions to the plan are discretionary and are determined
annually by the Company. The Company expensed $167,000 and $140,000 in 1996 and
1997, respectively.

(8) LEASES

OPERATING

The Company leases certain equipment and office space under noncancelable
operating leases. The following is a schedule of future minimum rental payments
required under operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of December 31, 1997 (in thousands):

<TABLE>
<CAPTION>
RELATED
PARTY OTHER TOTAL
-------- --------- ---------
<S> <C> <C> <C>
Year ending December 31:
1998 ........................ $144 $1,389 $1,533
1999 ........................ 154 1,522 1,676
2000 ........................ 160 1,367 1,527
2001 ........................ 165 1,186 1,351
2002 ........................ 171 1,104 1,275
---- ------ ------
$794 $6,568 $7,362
==== ====== ======
</TABLE>

Total rent expense under operating leases for 1996, 1997 and the first
eight months of 1998 was $906,000, $1,116,000 and $962,000, respectively.

F-37
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

CAPITAL

Cost of leased property under capital leases at December 31, 1997 includes
(in thousands):

<TABLE>
<S> <C>
Equipment ............................. $39
Less accumulated amortization ......... 11
---
$28
===
</TABLE>

Minimum future obligations on capital leases at December 31, 1997 are as
follows (in thousands):

<TABLE>
<S> <C>
Year ending December 31:
1998 ....................................... $14
1999 ....................................... 7
2000 ....................................... --
---
21
Less amount representing interest ........... (2)
----
Present value of minimum obligation ......... $19
===
</TABLE>

Total payments under capital leases for 1996, 1997 and the first eight
months of 1998 were $51,000, $24,000 and $11,000, respectively.

(9) BUSINESS ACQUISITION

In May 1998, the Company acquired certain assets of Eugene D. Brown
Company (the Seller). The acquisition was accounted for using the purchase
method. The purchase price was $703,000. The Company paid $463,000 cash at
closing and is to pay $20,000 per month for a period of twelve months beginning
July 1, 1998 (in the form of a note payable), for the balance of the purchase
price. Assets acquired included furniture, office equipment and leasehold
improvements with a fair value of $463,000, with the balance ($240,000)
allocated to goodwill. Under the terms of the agreement, the Company is to pay,
as a monthly referral fee, a percentage of gross profit generated by sales
agents of the Seller who join the Company. Sales generated by these agents
during the thirty-nine months after the date of the purchase are subject to the
following referral fee on gross profit:

15% of the closed transactions within the first 12 months
10% of the closed transactions within the next 12 months
5% of the closed transactions within the last 15 months

The Company has guaranteed that the referral fees will be no less than
$204,000.

The monthly referral fees are reduced to the extent of the $20,000 monthly
note payments for the acquisition. Any balance due shall be paid to the Seller
at the end of the first year. If note payments exceed the amount of the
referral fees during the first twelve months, the excess will be carried
forward to apply to referral fees due in subsequent months.

In connection with the acquisition, the Company entered into a five year
non-compete agreement with the Seller valued at $300,000.

(10) COMMITMENTS AND CONTINGENCIES

The Company is a party to lawsuits, claims and assessments arising during
the normal course of business. While the results of lawsuits or other matters
against the Company cannot be predicted with certainty, management, in
consultation with legal counsel, does not expect these matters to have a
material adverse effect on the consolidated financial position or results of
operations of the Company.

At August 31, 1998, the Company had capital distributions payable of
$878,000.

F-38
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Iowa Realty Co., Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheet of Iowa Realty Co.,
Inc. and subsidiaries as of December 31, 1997, and the related consolidated
statements of income, changes in stockholder's equity and cash flows for the
years ended December 31, 1997 and 1996. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Iowa Realty Co., Inc. and
subsidiaries as of December 31, 1997, and the results of their operations and
their cash flows for the years ended December 31, 1997 and 1996 in conformity
with generally accepted accounting principles.

/s/ KPMG LLP
KPMG, LLP
Des Moines, Iowa

February 3, 1998, except for note 15
which is as of April 3, 1998

F-39
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1997

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
1997
ASSETS ---------
<S> <C>
Cash and cash equivalents .............................................................. $ 2,590
Real estate contracts, net (note 2) .................................................... 361
Real estate ............................................................................ 964
Office property and equipment, net (note 3) ............................................ 14,061
Investments in 50% or less owned entities (note 4) ..................................... 2,651
Other assets (note 6) .................................................................. 41,719
-------
$62,346
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes and contracts payable (note 7) .................................................. $ 7,651
Accrued expenses and other liabilities ................................................ 13,717
Income taxes payable primarily to parent company ...................................... 1,307
-------
Total liabilities ................................................................... 22,675
-------
Minority interest ...................................................................... 2,880
-------
Stockholders' equity:
Serial preferred stock, $.01 par value;
2,000,000 shares authorized; no shares issued and outstanding ....................... --
Common stock, $.01 par value; 23,000,000 shares authorized; 4,758,850 shares issued
and outstanding at December 31, 1997 ................................................ 47
Additional paid-in capital ............................................................ 31,665
Retained earnings ..................................................................... 5,079
-------
Total stockholders' equity .......................................................... 36,791
-------
Commitment and contingencies (notes 3, 6, 7, 8, and 14) ................................
$62,346
=======
</TABLE>

See accompanying notes to consolidated financial statements.

F-40
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 1997 AND 1996

(IN THOUSANDS)

<TABLE>
<CAPTION>
1997 1996
------------------------- ------------------------
<S> <C> <C> <C> <C>
Revenues:
Commissions revenue ....................... $191,083 179,378
Title fees ................................ 16,203 14,821
Real estate sales ......................... 449 14,022
Other ..................................... 6,961 8,070
-------- -------
Total revenues .......................... 214,696 216,291
Operating expenses:
Commission expense ........................ $125,148 115,331
Salaries and employee benefits ............ 33,688 35,296
Occupancy ................................. 13,091 12,377
Advertising ............................... 10,565 10,192
Depreciation and amortization ............. 5,619 5,103
Cost of real estate sales ................. 191 11,281
Other ..................................... 15,273 16,016
======== =======
Total operating expenses ................ 203,575 205,596
Other income (expense):
Interest income ........................... 633 1,050
Interest expense .......................... (1,536) (3,632)
======== =======
Net other income (expense) .............. (903) (2,582)
-------- -------
Income before income taxes and
minority interest ...................... 10,218 8,113
Income taxes (note 9) ...................... 4,725 3,263
-------- -------
Income before minority interest ......... 5,493 4,850
Minority interest .......................... 633 1,276
-------- -------
Net income .............................. $ 4,860 3,574
======== =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-41
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1997 AND 1996

(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
-------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 ............................. $ 6 12,862 10,874 23,742
Capital contributions, net ............................... -- 7,028 -- 7,028
Net income ............................................... -- -- 3,574 3,574
Dividends ................................................ -- -- (645) (645)
--- ------ ------ ------
Balance at December 31, 1996 ............................. 6 19,890 13,803 33,699
Capital contributions, net ............................... -- 11,116 -- 11,116
Net income ............................................... -- -- 4,860 4,860
Dividends ................................................ -- -- (13,584) (13,584)
Common stock issued in acquisition of subsidiary ......... 1 699 -- 700
Restructure of authorized classes of stock ............... 40 (40) -- --
--- ------ ------- -------
Balance at December 31, 1997 ............................. $47 31,665 5,079 36,791
=== ====== ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-42
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1997 AND 1996

(IN THOUSANDS)

<TABLE>
<CAPTION>
1997 1996
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income .............................................................. $ 4,860 3,574
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation ......................................................... 3,737 3,450
Amortization ......................................................... 2,009 1,653
Deferred income taxes ................................................ 706 386
Loss in undistributed earning of 50% or less owned entities .......... 240 179
Loss on sale of office property and equipment ........................ 260 413
Deferred gains on real estate sales .................................. (130) (203)
Increase in other assets ............................................. (1,672) (13,208)
Increase (decrease) in accrued expense and other liabilities ......... (6,441) 7,950
Increase (decrease) in income taxes payable .......................... 1,095 (3,336)
Minority interest earnings ........................................... 633 1,276
--------- -------
Net cash provided by operating activities .......................... 5,297 2,134
--------- -------
Cash flows from investing activities:
Cash used in acquisition ................................................ (2,800) --
Cash received from acquisition .......................................... 502 --
Proceeds from sale of office property and equipment ..................... 222 599
Purchases of office property and equipment .............................. (3,669) (9,102)
Net decrease (increase) in real estate contracts receivable ............. 1,842 (1,589)
Proceeds from sale of real estate ....................................... 1,035 1,218
Advances to affiliates (net) ............................................ (3,891) --
--------- -------
Net cash used in investing activities .............................. (6,759) (8,874)
--------- -------
Cash flows from financing activities:
Proceeds from notes and contracts payable ............................... 62,964 42,459
Repayments on notes and contracts payable ............................... (66,461) (31,907)
Subsidiaries' dividends to parent ....................................... (878) (645)
Capital contribution .................................................... 2,800 757
--------- -------
Net cash provided by (used in) financing activities ................ (1,575) 10,664
--------- -------
Net increase (decrease) in cash and cash equivalents ............... (3,037) 3,924
Cash and cash equivalents at beginning of year ........................... 5,627 1,703
--------- -------
Cash and cash equivalents at end of year ................................. $ 2,590 5,627
========= =======
Supplemental disclosure of cash flow information --
Cash paid for:
Interest .............................................................. $ 408 4,022
Income taxes .......................................................... 3,282 5,289
========= =======
Supplemental schedule of noncash investing and financing activities:
Noncash asset dividends ............................................... $ 12,706 --
Stock issued in acquisition ........................................... 700 --
Noncash assets contributed by parent .................................. 8,316 6,271
========= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-43
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996

(1) SUMMARY OF BUSINESS ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES AND
PRACTICES

DESCRIPTION OF THE BUSINESS

Iowa Realty Co., Inc., headquartered in Des Moines, Iowa, is a wholly
owned subsidiary of AmerUs Group Co. AmerUs Group Co. is a wholly owned
subsidiary of American Mutual Holding Company (AMHC), headquartered in Des
Moines, Iowa. Iowa Realty Co., Inc. is primarily engaged in real estate
brokerage.

As part of a corporate reorganization during 1997, Iowa Realty Co., Inc.
contributed its investments in the following companies to AmerUs Group Co.;
AmerUs Mortgage, Inc.; Sunset Homes, Inc. (f/k/a Midland Homes Inc.); Iowa
Realty Development Co.; and Central Realty Advisors, Inc. Due to the common
ownership and control of the contributed companies, prior periods have been
restated except as follows:

The predecessor company was active in both real estate development
operations and real estate brokerage operations in 1996. The development and
brokerage activities were conducted by the company using shared management,
office space and related services. Effective January 1, 1997, the assets and
liabilities associated with the development operations were transferred to the
parent company.

Development assets and liabilities transferred effective January 1, 1997
included (in thousands):

<TABLE>
<S> <C>
Real estate ....................................... $16,416
Real estate contracts receivable .................. 6,808
Investments in 50% or less owned entities ......... 5,810
Other assets ...................................... 1,300
Notes and contracts payable ....................... 18,355
</TABLE>

Development operations for 1996 included the following direct revenue and
expense (in thousands):

<TABLE>
<S> <C>
Real estate sales ......... $14,022
Costs of sales ............ 11,281
Interest income ........... 498
Interest expense .......... 1,036
</TABLE>

CONSOLIDATION AND BASIS OF PRESENTATION

The consolidated financial statements include Iowa Realty, Co., and its
wholly or majority owned subsidiaries (collectively the Company):

<TABLE>
<S> <C>
Iowa Realty Co. Edina Realty, Inc.
IMO Co., Inc. HOME Real Estate Company (note 12)
Midland Inspection Services, Inc. First Realty, Ltd.
AmerUs Insurance, Inc. Midland Escrow Services, Inc.
Edina Financial Services, Inc. (74.5% owned) Iowa Title Company
Edina Realty Title Services, Inc. Referral Company
</TABLE>

F-44
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

All significant intercompany balances and transactions have been
eliminated in consolidation.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents include
cash and interest-bearing deposits in depository institutions with maturity of
three months or less, excluding cash held in trust.

INVESTMENT IN 50 PERCENT OR LESS OWNED ENTITIES

The Company accounts for its investment in 50 percent or less owned
entities using the equity method, unless the Company does not have the ability
to exercise significant influence over the investee's operating and financial
policies, in which case the investment is accounted for using the cost method.

OFFICE PROPERTY AND EQUIPMENT

Office property and equipment are stated at cost less depreciation.
Depreciation is calculated over the estimated useful lives of the assets, which
range from 18-31 years for buildings and from 3-7 years for furniture,
fixtures, and equipment, primarily using accelerated depreciation methods.

INTANGIBLE ASSETS

Intangible assets primarily consist of the purchase price in excess of the
fair market value of net assets acquired, organizational costs, and noncompete
agreements and are being amortized on a straight-line basis over 5-25 years.

INCOME TAXES

The Company files a consolidated income tax return with its ultimate
parent company, AMHC, and calculates its income tax provision as if it filed a
separate return. The Company's share of the consolidated tax liability is
payable to AMHC upon demand.

REVENUE RECOGNITION

Commission income from real estate brokerage transactions and related
amounts paid to agents are recognized when title has transferred from buyer to
seller.

Revenue resulting from the sale of real estate inventory is recognized
when the Company receives a sufficient down payment, and the buyer is required
to maintain a continuing investment in the property. When these conditions are
not satisfied, the gain (or a portion thereof) on the sale of real estate
inventory is deferred.

F-45
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company discloses the estimated fair value for its financial
instruments using the methods and assumptions set forth below:

CASH AND CASH EQUIVALENTS

The carrying amount approximates the estimated fair value due to the
short-term nature of the investments.

REAL ESTATE CONTRACTS RECEIVABLE

The fair value of real estate contracts receivable is calculated by
discounting cash flows through the estimated maturity using estimated market
discount rates that reflect the credit risk inherent in the real estate
contract.

NOTES AND CONTRACTS PAYABLE

LIMITATIONS

Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instruments.
Because no market exists for a significant portion of the Company's financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.

(2) REAL ESTATE CONTRACTS

Real estate contracts receivable are secured by developed land and bear
interest at rates ranging from 8 percent to 12 percent, with maturities
extending to August 2008. The land which secures the contracts is primarily
concentrated in central Iowa. At December 31, 1997, the allowance for doubtful
accounts was approximately $12,000.

(3) OFFICE PROPERTY AND EQUIPMENT

Office property and equipment consisted of the following at December 31,
1997 (in thousands):

<TABLE>
<S> <C>
Land .................................. $ 233
Buildings ............................. 6,387
Furniture and equipment ............... 21,229
-------
27,849
Less accumulated depreciation ......... 13,788
-------
$14,061
=======
</TABLE>

F-46
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

The Company rents office space for its various brokerage offices. Future
minimum rental payments under noncancelable operating leases at December 31,
1997, were as follows (in thousands):

<TABLE>
<CAPTION>
TO RELATED TO THIRD
PARTIES PARTIES TOTAL
------------ --------- --------
<S> <C> <C> <C>
Year ending December 31:
1998 ........................ $1,353 6,747 8,100
1999 ........................ 1,337 5,849 7,186
2000 ........................ 1,337 4,544 5,881
2001 ........................ 394 3,002 3,396
2002 ........................ 241 2,350 2,591
Thereafter .................. 885 4,867 5,752
------ ----- -----
Total ..................... $5,547 27,359 32,906
====== ====== ======
</TABLE>

Total rent expense under noncancelable operating leases during 1997 and
1996 was approximately $8,543,000 and $7,940,000, respectively.

(4) INVESTMENTS IN 50% OR LESS OWNED ENTITIES

The investment in unconsolidated entities are accounted for using the
equity method. Condensed unaudited financial information for such entities
follows (in thousands):

<TABLE>
<S> <C>
Total assets .............. $6,776
======
Total liabilities ......... $1,473
======
Net income (loss) ......... $ (148)
======
</TABLE>

(5) SALE-LEASEBACK TRANSACTIONS

The Company is party to sale-leaseback transactions for certain brokerage
offices. The leases are classified as operating leases, and gains realized on
the sales transactions were deferred and are being credited to income as rent
expense adjustments over the lease terms. At December 31, 1997 and 1996,
deferred income related to these transactions was $228,000 and $403,000,
respectively.

(6) OTHER ASSETS

Other assets at December 31, 1997 were as follows (in thousands):

<TABLE>
<S> <C>
Intangible assets, net of accumulated amortization of
approximately $7,671 and $3,362 in 1997 and 1996, respectively $27,938
Cash held in trust ............................................. 1,782
Fees and other receivables ..................................... 3,566
Net deferred income tax asset (note 9) ......................... 2,068
Advances to affiliates ......................................... 3,891
Other .......................................................... 2,474
-------
$41,719
=======
</TABLE>

F-47
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

As described in note 7 (A), the Company participates in a line of credit
with affiliates. As of December 31, 1997, the Company has advanced their excess
funds to affiliated companies through the line of credit agreement. Interest
accrues daily at 6.90 percent and is receivable upon demand.

(7) NOTES AND CONTRACTS PAYABLE

Notes and contracts payable, net of original discount of $740,000 at
December 31, 1997 consisted of the following (in thousands):

<TABLE>
<S> <C> <C>
Borrowings on line of credit ................. (A) $ --
Subsidiary senior term note .................. (B) 5,643
Subsidiary junior subordinated notes ......... (C) --
Various notes and contracts payable .......... (D) 2,008
------
$7,651
======
</TABLE>

(A) The Company and its subsidiaries participate in a $30 million line of
credit agreement with other affiliated companies. Interest rate was 7.56
percent at December 31, 1997. The line of credit is due in 1998.

(B) The Company issued a senior term note in the amount of $7,978,000 in
connection with the acquisition of two subsidiaries. The note has an interest
rate of 1.25 percent over prime and is payable in quarterly installments from
September 30, 1996 to December 31, 2003. The balance is net of original issue
discount of $740,000 remaining at December 31, 1997.

(C) The Company issued a junior subordinated note in the amount of
$4,000,000 in connection with the acquisition of two subsidiaries. The note had
an interest rate of 12 percent, with principal and interest payable in
quarterly installments. During 1997, the note was extinguished prior to
maturity and without penalty.

(D) The Company has issued various notes and contracts payable primarily
for the purchase of real estate brokerage operations. Interest rates range from
7 percent to 9 percent; due annually through 2003.

In addition, a subsidiary of the Company has a $3.5 million secured line
of credit for operating purposes that is unused as of December 31, 1997. The
line of credit expires December 31, 1999; its interest rate is the prime rate;
and it is secured by assets of the subsidiary.

Aggregate maturities of notes and contracts payable, including aggregate
original issue discount of $740,000 at December 31, 1997, for the next five
years and thereafter are as follows:

<TABLE>
<S> <C>
1998 .................... $2,058
1999 .................... 1,353
2000 .................... 1,227
2001 .................... 1,238
2002 .................... 1,251
Thereafter .............. 1,264
------
Total ................... $8,391
======
</TABLE>

F-48
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

(8) EMPLOYEE BENEFIT PLANS

CONTRIBUTION PLANS

The Company has a defined contribution salary deferral plan covering
substantially all employees under section 401(k) of the Internal Revenue Code.
The Plan allows eligible employees to contribute up to 15 percent of their
annual compensation. The Company matches 125 percent of employee contributions
up to 4 percent of their annual compensation. Additionally, the Company
contributes 4 percent of annual compensation for each active employee on
December 31 of each year. For the years ended December 31, 1997 and 1996, the
Company incurred expenses of $693,000 and $670,000, respectively, for the Plan.

A subsidiary of the Company has a defined contribution salary deferral
plan covering substantially all employees under Section 401(k) of the Internal
Revenue Code. The plan allows eligible employees to contribute up to 15 percent
of their annual compensation. The Company matches 50 percent of employee
contributions up to 6 percent of their annual compensation. The Company
recognized expense for contributions to the plan of $299,000 and $279,000
during 1997 and 1996, respectively.

POST-RETIREMENT BENEFITS OTHER THAN PENSIONS

The Company participated in an affiliated company's post-retirement
benefit plan, which provides certain eligible participants with medical,
dental, and life insurance benefits. The plan is unfunded, and the benefits are
generally based on a combination of age and years of service at retirement. The
medical and dental insurance plan is contributory, with retiree contributions
adjusted annually, and contains other cost sharing features such as deductibles
and coinsurance. The accounting for the medical and dental insurance plan
anticipates future cost sharing changes to the written plan that are consistent
with the Company's expressed intent to increase the retiree contribution rate
annually for the expected inflation rate for that year. The life insurance plan
is reduced by 4 percent each month on a straight-line basis, upon retirement of
the participant. The actuarial present values of the accumulated plan benefits
and net assets available for benefits relating to the participants are
accounted for on a group basis and are not available at the Company level. The
Company had net post-retirement benefit plan expense of $279,574 and $-0- for
the years ended December 31, 1997 and 1996, respectively.

DEFERRED COMPENSATION PLAN

A nonqualified deferred compensation plan is provided for sales agents.
The board of directors annually determines which agents shall be entitled to
participate, the benefit amount (based upon a percentage of annual commissions
paid to the participants), and the benefit payment date. The plan is not
funded. At December 31, 1997 and 1996, the Company has accrued approximately
$3,854,000 and $3,569,000, respectively, for estimated future payments to
qualifying sales agents. For 1997 and 1996, the Company has incurred expenses
of $658,000 and $358,000, respectively, for the sales agents' deferred
compensation under the plan.

(9) INCOME TAXES

Income taxes for the years ended December 31, 1997 and 1996, were as
follows (in thousands):

F-49
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Current ................ $4,019 2,877
Deferred ............... 706 386
------ -----
Total .................. $4,725 3,263
====== =====
</TABLE>

F-50
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

The following is a reconciliation of the effective income tax rate
indicated by the Consolidated Statements of Income for the years ended December
31, 1997 and 1996:

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Statutory federal income tax rate .......... 35.0% 35.0%
Amortization of Goodwill ................... 7.2% 6.8%
Other ...................................... 4.0% (1.6)%
---- ----
46.2% 40.2%
==== ====
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of December
31, 1997 are as follows (in thousands):

<TABLE>
<S> <C>
Deferred income tax assets:
Employee benefits ............................... $2,293
Deferred gains on real estate sales ............. 144
Valuation reserves .............................. 195
Self-insurance reserves ......................... 103
Other ........................................... 145
------
Total deferred income tax asset ............... 2,880
Deferred income tax liabilities:
Office property and equipment ................... 791
Other ........................................... 21
------
Total deferred income tax liabilities ......... 812
------
Net deferred income tax asset ................. $2,068
======
</TABLE>

The Company is required to establish a "valuation allowance" for any
portion of the deferred tax asset that management believes will not be
realized. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment. In order to fully realize the deferred tax asset, the
Company will need to generate future taxable income. Based upon the levels of
historical taxable income and projections for future taxable income, management
believes it is more likely than not the Company will realize the benefits of
the deferred tax assets and, therefore, no such valuation allowance has been
established.

(10) FUNDS HELD IN TRUST AND REFUNDABLE DEPOSITS

The Company maintains a separately designated trust account for home
buyers' earnest money and other deposits. The Company holds such funds until
sold properties are closed and then disburses amounts in accordance with the
settlement instructions. At December 31, 1997, the Company held approximately
$1.8 million of funds in trust and deposits, which are included in accrued
expenses and other liabilities.

(11) RELATED-PARTY TRANSACTIONS

F-51
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Assets
Accounts and other receivables ........... $ 94 172
Advances to affiliates ................... 3,891 --
------ ---
$3,985 172
====== ===
Liabilities -- accounts payable and accrued
expenses ................................. $ 192 115
====== ===
Revenues:
Interest ................................. $ 998 138
Brokerage commissions .................... 113 39
Other .................................... 1,262 407
------ ---
$2,373 584
====== ===
Expenses:
Occupancy ................................ $1,384 1,280
Interest ................................. 228 1,210
Data processing .......................... 11 14
Other expenses ........................... 659 644
------ -----
$2,282 3,148
====== =====
</TABLE>

(12) BUSINESS COMBINATIONS

In July 1997, the Company acquired all of the common stock of a real
estate brokerage operation located in Omaha, Nebraska for approximately
$2,800,000 cash, stock of $700,000, and liabilities assumed of $533,000. The
acquisition was accounted for using the purchase method, with results of
operations included in the financial statements from the acquisition date. The
fair value of the assets acquired, excluding goodwill, was approximately
$983,000.

(13) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of the Company's financial instruments (as
described in note 1) at December 31, 1997 were as follows (in thousands):

<TABLE>
<CAPTION>
RECORDED FAIR
AMOUNT VALUE
---------- --------
<S> <C> <C>
Financial assets:
Cash and cash equivalents ........... $2,590 2,540
Real estate contracts ............... 361 361
Financial liabilities --
Notes and contracts payable ......... 7,651 7,651
====== =====
</TABLE>

(14) COMMITMENTS AND CONTINGENCIES

A subsidiary of the Company has guaranteed repayment of borrowings of a
general partnership, solely owned by the subsidiary's former shareholders, in
the amount of approximately $3.7 million at December 31, 1997.

F-52
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

The Company acts as escrow agent in connection with the performance of its
real estate services. Accordingly, the Company held escrow funds totaling
approximately $1.1 million at December 31, 1997. These funds are not recorded
in the Company's consolidated financial statements.

The Company has guaranteed the repayment of approximately $1.7 million in
construction loans for various builders at December 31, 1997. The guarantees
are secured by the land and improvements made under the construction loan.

The Company is a party to a number of lawsuits, claims, and assessments
arising from the operation of its business. While the results of lawsuits or
other matters against the Company cannot be predicted with certainty,
management, in consultation with legal counsel, does not expect these matters
to have a material adverse effect on the consolidated financial position or
results of operations of the Company.

One of the Company's subsidiaries has employment and severance agreements
with key management members which expire on January 1, 1999.

(15) PROPOSED ACQUISITION OF THE COMPANY

On April 3, 1998, the Company's parent company, AmerUs Group Co., executed
a letter of intent where MidAmerican Energy Holdings Company will acquire all
of the shares of the Company's common stock. The proposed acquisition is
subject to regulatory and certain other conditions.

F-53
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
Paul Semonin Company

In our opinion, the accompanying balance sheets and the related statements
of income, of changes in stockholders' equity, and of cash flows present
fairly, in all material respects, the financial position of Paul Semonin
Company (the Company) at December 31, 1998 and 1997 and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

New York, New York
July 14, 1999

F-54
<PAGE>

PAUL SEMONIN COMPANY

BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARES)

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................... $1,116 $1,179
Cash held in trust ...................................................... 722 452
Receivables, net of allowance for doubtful accounts of $15 and $28....... 192 210
Receivable from affiliate ............................................... 28 200
Other current assets .................................................... 18 11
------ ------
Total current assets .................................................. 2,076 2,052
------ ------
Property and equipment:
Furniture and equipment ................................................. 2,788 2,472
Leasehold improvements .................................................. 954 762
------ ------
3,742 3,234
Less accumulated depreciation ........................................... 2,255 1,866
------ ------
Net property and equipment ............................................ 1,487 1,368
------ ------
Other assets:
Available-for-sale securities ........................................... -- 1,227
Investments in less than 50% owned entities ............................. 30 41
Restricted investments .................................................. 125 103
Other noncurrent assets ................................................. 35 58
------ ------
Total other assets .................................................... 190 1,429
------ ------
Total assets ............................................................. $3,753 $4,849
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................ $ 225 $ 326
Accrued expenses ........................................................ 518 370
Cash held in trust ...................................................... 722 452
Commissions payable ..................................................... 802 688
Dividends payable ....................................................... -- 885
Current maturities of long-term debt .................................... 455 390
------ ------
Total current liabilities ............................................. 2,722 3,111
------ ------
Long-term liabilities:
Long-term debt .......................................................... 825 800
Deferred compensation ................................................... 188 122
------ ------
Total long-term liabilities ........................................... 1,013 922
------ ------
Commitments and contingencies (note 11) .................................. -- --
Stockholders' equity:
Common stock, stated value $.0273 per share; 1,000,000 shares
authorized; 301,459 shares issued and outstanding ..................... 8 8
Accumulated other comprehensive income .................................. -- 196
Retained earnings ....................................................... 10 612
------ ------
Total stockholders' equity ............................................ 18 816
------ ------
Total liabilities and stockholders' equity ............................... $3,753 $4,849
====== ======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-55
<PAGE>

PAUL SEMONIN COMPANY

STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Commission revenue ...................................... $30,663 $25,707
Other ................................................... 1,180 975
------- -------
Total revenues ........................................ 31,843 26,682
------- -------
Operating expenses:
Commission expense ...................................... 21,408 17,885
Salaries and employee benefits .......................... 3,626 3,182
Occupancy ............................................... 1,620 1,549
Business promotion and advertising ...................... 1,441 1,177
Depreciation and amortization ........................... 501 527
Operating, administrative and other ..................... 1,439 1,271
------- -------
Total operating expenses .............................. 30,035 25,591
------- -------
Other income (expense):
Interest and dividend income ............................ 46 145
Other income, net ....................................... 499 174
Interest expense ........................................ (105) (140)
------- -------
440 179
------- -------
Net income ............................................... $ 2,248 $ 1,270
======= =======
Income before income taxes ............................... $ 2,248 $ 1,270
Pro forma provision for income taxes (unaudited) ......... 913 514
------- -------
Pro forma net income (unaudited) ........................ $ 1,335 $ 756
======= =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-56
<PAGE>

PAUL SEMONIN COMPANY

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK OTHER
-------------------- COMPREHENSIVE RETAINED
SHARES AMOUNT INCOME EARNINGS TOTAL
--------- -------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 ......... 301,459 $ 8 $ 49 $ 449 $ 506
--------
Comprehensive income:
Net income ........................ -- -- -- 1,270 1,270
Unrealized gain on
investments ..................... -- -- 147 -- 147
--------
Total comprehensive income ......... -- -- -- -- 1,417
Dividends .......................... -- -- -- (1,107) (1,107)
------- --- ------ -------- --------
Balance, December 31, 1997 ......... 301,459 8 196 612 816
--------
Comprehensive income:
Net income ........................ -- -- -- 2,248 2,248
Unrealized gain on
investments ..................... -- -- (196) -- (196)
--------
Total comprehensive income ......... -- -- -- -- 2,052
Dividends .......................... -- -- -- (2,850) (2,850)
------- --- ------ -------- --------
Balance, December 31, 1998 ......... 301,459 $ 8 $ -- $ 10 $ 18
======= === ====== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-57
<PAGE>

PAUL SEMONIN COMPANY

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income ............................................................. $ 2,248 $ 1,270
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization ........................................ 501 527
Gain on sale of land ................................................. (18) --
Loss on investments .................................................. 11 --
Realized gain on available-for-sale securities ....................... (269) (1)
Change in assets and liabilities:
(Increase) decrease in:
Receivables ....................................................... 18 (40)
Receivable from affiliate ......................................... 172 (63)
Other assets ...................................................... (6) 111
Increase (decrease) in:
Accounts payable .................................................. (101) 65
Accrued expenses .................................................. 148 (81)
Commissions payable ............................................... 114 261
Dividends payable ................................................. (885) 727
Deferred compensation ............................................. 66 1
--------- ---------
Net cash provided by operating activities ............................ 1,999 2,777
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment .................................... (528) (645)
Proceeds from sale of property and equipment ........................... -- 1
Proceeds from sale of land ............................................. 20 --
Proceeds from sale of available-for-sale securities .................... 1,516 403
Purchase of available-for-sale securities .............................. (216) (726)
--------- ---------
Net cash provided by (used in) investing activities .................. 792 (967)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt ............................... 1,210 1,813
Payments on long-term debt ............................................. (1,214) (1,543)
Dividends declared ..................................................... (2,850) (1,107)
--------- ---------
Net cash used in financing activities ................................ (2,854) (837)
--------- ---------
Net (decrease) increase in cash and cash equivalents .................... (63) 973
Cash and cash equivalents at beginning of year .......................... 1,179 206
--------- ---------
Cash and cash equivalents at end of year ................................ $ 1,116 $ 1,179
========= =========
Cash paid during the year for interest .................................. $ 110 $ 141
========= =========
Non-cash additions to property and equipment for capital leases ......... $ 94 $ 173
========= =========
Non-cash additions to long term debt for capital leases ................. $ 94 $ 173
--------- ---------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-58
<PAGE>

PAUL SEMONIN COMPANY

NOTES TO FINANCIAL STATEMENTS

(1) THE COMPANY AND BASIS OF PRESENTATION

Paul Semonin Company (the Company) operates as a residential real estate
broker with operations in central Kentucky and southern Indiana. The Company
has approximately 658 sales associates working from eleven branch offices.

In July 1999, the Company was purchased by HomeServices, Inc. Home
Services, Inc. is the second largest residential real estate brokerage firm in
the United States, and is based out of Edina, Minnesota.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

RESTRICTED INVESTMENTS

Restricted investments is an investment account funded by the Company for
a deferred compensation agreement with an independent contractor. The
investment is stated at market value with the unrealized gain or loss included
in the deferred compensation liability.

CASH HELD IN TRUST

Balances of $570,000 and $367,000 at December 31, 1998 and 1997,
respectively, represent cash maintained in a separately designated trust
account for home buyers' ernest money. The Company holds such funds until
properties are closed and subsequently disburses amounts in accordance with
settlement instructions.

In 1997, the Company created a legal defense fund whereby agents make
nonrefundable payments to an escrow trust fund on deposit in a special bank
account. The fund will be used to settle potential lawsuits. The deposit and
related liability as of December 31, 1998 and 1997 totaled $152,000 and
$85,000, respectively.

PROPERTY AND EQUIPMENT

Depreciation and amortization are provided on straight-line and
accelerated methods over the following estimated useful lives:

Furniture and equipment 5-10 years
Leasehold improvements Shorter of the life of the underlying lease or
the estimated useful life of the improvement.

F-59
<PAGE>

PAUL SEMONIN COMPANY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Impairment losses on long lived assets are recognized when expected future
cash flows are less than the asset carrying value. When indicators of
impairment are present, the Company evaluates the carrying value of the long
lived assets in relation to the operating performance and expected future
undiscounted cash flows and adjusts net book value if appropriate. There was no
impairment for the years ended December 31, 1998 and 1997.

INVESTMENTS

Securities

Marketable securities are classified as available-for-sale. Management
determines the appropriate classification of investments in debt and equity
securities at the time of purchase. Securities classified as available-for-sale
are stated at fair value, with unrealized holding gains and losses reported in
a separate component of stockholders' equity. Mutual fund investments expose
the Company to market risk in the form of equity price risk; that is, the
potential future loss of value that would result from a decline in the fair
values of the mutual funds. Each fund and its underlying net assets are also
subject to market risk which may arise from changes in equity prices, credit
ratings, and interest rates.

Less Than 50 Percent Owned Entities

The Company has a 2% common stock interest in a broker-to-broker real
estate referral network specializing in relocation services. The investment is
carried at cost, which approximates market value.

At December 31, 1997, the Company held an investment in a broker-to-broker
real estate referral network. The investment was carried at cost and was
written off at December 31, 1998. An $11,000 loss was recorded in other income,
net on the statement of income.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
Where no market exists for financial instruments, fair value estimates are
based on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments and other
factors. These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.

The Company discloses the estimated fair value for its financial
instruments using the methods and assumptions set forth below:

Cash and cash equivalents

The carrying amount approximates the estimated fair value due to the
short-term nature of the investments.

Securities

Receivables

The carrying amount of other receivables approximates the estimated fair
value due to the short-term nature of the receivables.

Long-term debt

Rates currently available to the Company for such borrowings with similar
terms and remaining maturities are used to discount the future cash flows to
estimate fair value for debt. The notes payable balances reported at December
31, 1998 and 1997 approximate fair value.

F-60
<PAGE>

PAUL SEMONIN COMPANY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

INTANGIBLE ASSETS

Non-compete agreements are amortized over the life of the related
agreements using the straight-line method. At December 31, 1998 the non-compete
agreements were fully amortized. At December 31, 1997, the book value of the
non-compete agreement included in noncurrent other assets was $33,000, net of
accumulated amortization of $342,000.

REVENUE RECOGNITION

Commission revenue from real estate brokerage transactions and related
amounts due to agents are recognized when title has transferred from seller to
buyer.

BUSINESS PROMOTION AND ADVERTISING

Advertising and promotion costs are expensed as incurred.

INCOME TAXES

The Company has elected to be taxed as an S Corporation under the Internal
Revenue Code. The stockholders are taxed on their proportionate share of the
Company's taxable income, and accordingly, no provision for federal or state
income taxes has been made. Pro forma income taxes are calculated at a combined
federal and state statutory rate of 40.4% and are reported on the statements of
income.

NEW PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative
Instruments and Hedging Activities. The statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for change in the fair value of a
derivative depends on the intended use of the derivative and the resulting
designation. The statement will become effective for the Company in fiscal
2001; however, adoption of this statement is not expected to have a material
impact on the Company's financial position, results of operations or cash
flows.

(3) INVESTMENT SECURITIES

The investment securities classified as available-for-sale at December 31,
1997 were sold and paid out as a dividend in 1998. The securities were as
follows at December 31, 1997 (in thousands):

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
The One Group Large Company Growth Fund ..... $ 345 $ 84 $-- $ 429
The One Group Growth Opportunities Fund ..... 136 -- (1) 135
The One Group Growth Equity Index Fund ...... 184 52 -- 236
The One Group Large Company Value Fund ...... 251 43 -- 294
The One Group Small Capitalization Fund ..... 115 18 -- 133
------ ---- ----- ------
Total available-for-sale securities ....... $1,031 $197 $(1) $1,227
====== ==== ===== ======
</TABLE>

Unrealized holding gains and losses on available-for-sale securities are
reported on the balance sheet in a separate component of stockholders' equity.

F-61
<PAGE>

PAUL SEMONIN COMPANY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(4) LONG-TERM DEBT

Long-term debt at December 31 consists of the following (in thousands):

<TABLE>
<CAPTION>
1998 1997
------ -------
<S> <C> <C>
Notes Payable
Tom Helm, Inc. (a related party) -- monthly payments of $1,997
including interest at a rate of 10.5%; due March 31, 1999; unsecured. ... $ 6 $ 28
Bank One -- monthly payments of $6,944 plus interest at the bank's
index rate*; due December 30, 2000; collateralized by various fixed
assets. ................................................................. 167 250
Bank One -- monthly payments of $3,525 including interest at a rate of
7.772%; due November 1, 2003; collateralized by various fixed assets. ... 172 --
Fenley Office, LLC -- monthly payments of $4,821 including interest at
rates ranging from 8.85% to 9.50%; due August 6, 2003; unsecured. ....... 219 255
Bank One -- monthly payments of $5,512 including interest at the bank's
index rate*; due September 30, 1999; collateralized by various fixed
assets .................................................................. 76 133
Robert Jones -- monthly payments of $1,353 including interest at a rate
of 8.5%; due December 1, 1999, unsecured. ............................... 15 30
Bank One -- monthly payments of $6,759 including interest at a rate of
8.06%; due December 21, 2001 ............................................ 215 --
---- ----
870 696
Less current portion ..................................................... 315 214
---- ----
Total long-term notes payable ............................................ 555 482
---- ----
*The index rate at Bank One at December 31, 1998 and 1997 was 8.25%.
Capital Lease Obligations
Various capital lease obligations with imputed interest rates ranging from
3.86% to 11.42% and maturities extending through October 31, 2003. ...... 410 494
Less current portion ..................................................... 140 176
---- ----
Total long-term capital lease obligations ................................ 270 318
---- ----
Total long-term debt ..................................................... $825 $800
---- ----
</TABLE>

Maturities on notes payable for each of the five years succeeding December
31, 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31:
- ----------------------
<S> <C>
1999 ............... $315
2000 ............... 232
2001 ............... 161
2002 ............... 90
2003 ............... 72
----
$870
====
</TABLE>

F-62
<PAGE>

PAUL SEMONIN COMPANY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(5) CURRENT NOTES PAYABLE

The Company has a $1,500,000 line of credit with Bank One which matures
August 31, 1999. Interest is incurred at the bank's index rate. The line of
credit is cosigned by the Company's president. There was no outstanding balance
on this line of credit at December 31, 1998 or 1997.

(6) RELATED PARTY TRANSACTIONS

Since 1994, the Company has provided bookkeeping services to Semonin
Mortgage Services, Inc., a related party. Income under this arrangement
included in the 1997 statement of income is $18,000. There was no income from
this arrangement in 1998.

The Company pays certain expenses on behalf of Semonin Mortgage Services,
Inc. At December 31, 1998 and 1997, the Company had a receivable of $28,000 and
$200,000, respectively, related to these expenses.

The Company's president is a member of Bank One's Advisory Board and
Executive Committee. The Company has investments held at Bank One as well as
debt outstanding with the bank.

The Company has a note payable to a former employee in the amount of
$6,000 and $28,000 at December 31, 1998 and 1997, respectively.

(7) RETIREMENT PLAN

The Company has a defined contribution retirement plan under section
401(k) of the Internal Revenue Code which covers substantially all employees.
In 1998 and 1997, the Company matched 25% of employees'contributions. The
matching applies only to the first 4% of compensation for non-highly
compensated employees. Employer contributions for the years ended December 31,
1998 and 1997 totaled $14,000 and $8,000, respectively.

(8) LEASES

OPERATING

The Company leases office space and equipment at various locations under
non-cancelable operating lease agreements which expire at various dates through
2005. Future minimum lease payments for these leases are as follows (in
thousands):

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31:
- ---------------------------
<S> <C>
1999 .................... $ 814
2000 .................... 708
2001 .................... 687
2002 .................... 590
2003 .................... 569
Thereafter .............. 1,084
------
Total ................... $4,452
======
</TABLE>

Total rent expense under operating leases was $927,000 and $827,000 for
the years ended December 31, 1998 and 1997, respectively.

F-63
<PAGE>

PAUL SEMONIN COMPANY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

CAPITAL

Cost of leased property under capital leases includes:

<TABLE>
<CAPTION>
1998 1997
------ -------
<S> <C> <C>
Equipment .............................. $909 $854
Less accumulated depreciation .......... 302 222
---- ----
$607 $632
==== ====
</TABLE>

Payments on capital leases for the next five years are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- -------------------------------------------------
<S> <C>
1999 .................................... $159
2000 .................................... 106
2001 .................................... 94
2002 .................................... 76
2003 .................................... 17
----
Total .................................... 452
Less interest ............................ 42
----
Present value of future payments ......... 410
Less current portion ..................... 140
----
Long-term portion ........................ $270
====
</TABLE>

(9) INTANGIBLE ASSETS

In 1992, the Company was a party in an asset purchase agreement which
resulted in a five-year non-compete agreement. The Company paid $250,000 for
this asset, which was fully amortized in 1997.

In 1996, the Company entered into a non-compete agreement with a former
employee whereby he agreed not to compete with the Company for a period of two
years. The Company agreed to pay the employee the sum of $125,000, as follows:

$40,000 paid in 1996
$25,000 paid on July 15,1998; and
$60,000 paid in 24 monthly installments of $2,500 each, commencing on
August 15, 1998

The amount charged to expense for amortization of intangible assets in
1998 and 1997 was $33,000 and $81,000, respectively.

(10) OFF-BALANCE SHEET RISK

The Company's primary business is the brokerage of residential real estate
within the states of Kentucky and Indiana and thus its business is dependent on
the real estate market and general economics of those states.

Financial instruments which potentially subject the Company to credit risk
include cash on deposit with one financial institution amounting to $1,224,000
and $627,000 at December 31, 1998 and 1997, respectively.

(11) COMMITMENTS AND CONTINGENCIES

The Company has an arrangement with the stockholders of record to pay
minimum dividends amounting to the federal taxable income multiplied by the
highest individual federal income tax rate including surtax. This arrangement
will continue as long as the Company remains an Internal Revenue Code
sub-chapter S Corporation.

F-64
<PAGE>

PAUL SEMONIN COMPANY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

In 1994, the Company entered into a deferred compensation agreement with
an independent contractor associated with the Company. The agreement requires
the Company to credit 5% of commissions paid to the Company on sales activities
generated by the contractor on behalf of the Company. The Company currently
makes quarterly payments of the estimate due to the contractor, to a separately
maintained investment account. Quarterly payments will be made to the
contractor from this account for five years, beginning 90 days after the
contractor's association with the Company terminates. Expense under this
agreement was $29,000 and $24,000 in 1998 and 1997, respectively. The total
amount funded as of December 31, 1998 and 1997 was $125,000 and $103,000,
respectively, held as restricted investments.

Effective July 12, 1996, an employee terminated his employment with the
Company and exercised his rights under a Phantom Stock Agreement dated January
1, 1994. The amount due to the employee under this agreement was $13,000 as of
December 31, 1997. This liability is recorded in accrued expenses at December
31, 1997.

In April 1996, the Company purchased certain assets of Steve Hall &
Associates, Inc. No money exchanged hands at the time of purchase, however, the
Company agreed to pay Steve Hall 10% of profits earned by Hall associates on a
quarterly basis up to a maximum of $100,000 as long as Steve Hall is employed
by the Company. In exchange, Steve Hall has agreed not to compete with the
Company for five years after the date of his termination. The Company
recognized expenses of $8,000 and $11,000 in 1998 and 1997, respectively, for
this agreement.

On June 1, 1998, the Company entered into a phantom stock agreement with
an employee of the Company, as a deferred compensation arrangement. Effective
June 1, 1998, the Company granted the employee 6,030 shares of phantom stock
and agreed to grant the employee additional shares of phantom stock on July 1
of each of the years 1998 through 2000 at 1% of the issued and outstanding
common stock as of such date. Each share of phantom stock shall have a value as
agreed upon in the phantom stock agreement. Deferred compensation under this
agreement of $50,000 was charged to expense in 1998.

F-65
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
HOME Real Estate Company of Omaha

In our opinion, the accompanying statements of income, changes in
stockholders' equity, and cash flows present fairly, in all material respects,
the results of operations and cash flows of HOME Real Estate Company of Omaha
for the period from May 8, 1998 through August 18, 1998 in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards, which require that we perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.

Kansas City, Missouri /s/ PricewaterhouseCoopers LLP
July 2, 1999

F-66
<PAGE>

HOME REAL ESTATE COMPANY OF OMAHA

STATEMENT OF INCOME
(IN THOUSANDS)

<TABLE>
<CAPTION>
MAY 8, 1998
THROUGH
AUGUST 18,
1998
------------
<S> <C>
Revenues:
Commission revenues ......................... $8,751
Other ....................................... 37
------
Total revenues .............................. 8,788
------
Operating expenses:
Commission expense .......................... 6,470
Salaries and employee benefits .............. 1,211
Occupancy ................................... 240
Business promotion and advertising .......... 242
Depreciation and amortization ............... 63
Operating, administrative and other ......... 247
------
Total operating expenses .................... 8,473
------
Other income:
Interest income ............................. 16
------
Other income ................................ 16
------
Income before income taxes ................ 331
Income taxes ................................. 132
------
Net income .................................. $ 199
======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-67
<PAGE>

HOME REAL ESTATE COMPANY OF OMAHA

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
------------------- PAID IN RETAINED COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS INCOME TOTAL
-------- -------- ----------- ---------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, May 8, 1998 ............. -- $-- $ -- $ -- $-- $ --
Initial capitalization ........... 85 85 3,515 -- -- 3,600
Comprehensive income:
Net income ...................... -- -- -- 199 -- 199
-- --- ------ ---- --- ------
Balance, August 18, 1998 ......... 85 $85 $3,515 $199 $-- $3,799
== === ====== ==== === ======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-68
<PAGE>

HOME REAL ESTATE COMPANY OF OMAHA

STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
MAY 8, 1998
THROUGH
AUGUST 18,
1998
------------
<S> <C>
Cash flows from operating activities:
Net income .................................................................... $ 199
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation ................................................................ 30
Amortization ................................................................ 33
Change in current assets and liabilities:
(Increase) decrease in:
Receivables ................................................................ (20)
Prepaid expenses ........................................................... 40
Increase (decrease) in:
Accounts payable ........................................................... (11)
Accrued commissions ........................................................ (74)
Accrued expenses ........................................................... (39)
Income taxes payable ....................................................... 132
------
Net cash provided by operating activities ................................ 290
Net cash provided by (used in) investing activities ...................... --
Net cash provided by (used in) financing activities ...................... --
Net increase in cash ..................................................... 290
Cash and cash equivalents at beginning of period ............................... 144
------
Cash and cash equivalents at end of period ..................................... $ 434
======
Supplemental disclosure of cash flow information:
Cash paid for interest ........................................................ $ --
Cash paid for taxes ........................................................... --
Supplemental schedule of noncash investing activities:
Contribution of assets to HOME Real Estate Company of Omaha by parent ......... $3,600
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-69
<PAGE>

HOME REAL ESTATE COMPANY OF OMAHA

NOTES TO FINANCIAL STATEMENTS (IN THOUSANDS)

(1) THE COMPANY AND BASIS OF PRESENTATION

HOME Real Estate Company of Omaha (the Company), a subsidiary of Home Real
Estate Holdings, Inc., operates primarily as a home services company
specializing in residential real estate brokerage, specialized services for
building new homes, and complimentary products, which include mortgage
origination, home inspection/warranty assistance and relocation assistance. The
Company has over 260 sales associates working from 5 branch offices in Omaha,
Nebraska.

The Company was formed on September 14, 1987. Effective July 31, 1997, the
Company was sold to AmerUs Home Services, Inc. On May 8, 1998, the original
owners repurchased the Company from AmerUs Home Services, Inc. for total
consideration of $3,600 and contributed the assets purchased to the Company. On
August 18, 1998, the Company sold all of its assets to MidAmerican Realty
Services Company, a wholly owned subsidiary of MidAmerican Energy Holdings
Company, for $5,217. These financial statements for the Company are presented
for the period May 8, 1998 through August 18, 1998 at which time the Company
was independent. The Company's fiscal year end is December 31.

The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

PROPERTY AND EQUIPMENT

Depreciation and amortization are provided on the straight-line method
over the following estimated useful lives:

<TABLE>
<S> <C>
Furniture and fixtures ......... 5-10 years
Leasehold improvements ......... Term of lease
</TABLE>

INTANGIBLES

Goodwill of $3,088 resulting from the acquisition is being amortized over
25 years.

REVENUE RECOGNITION

Commission income from real estate brokerage transactions and related
amounts due to agents are recognized when title has transferred from seller to
buyer.

BUSINESS PROMOTION AND ADVERTISING

Advertising and promotion costs are expensed as incurred.

INCOME TAXES

F-70
<PAGE>

HOME REAL ESTATE COMPANY OF OMAHA

NOTES TO FINANCIAL STATEMENTS (IN THOUSANDS) (CONTINUED)

(3) LEASES

<TABLE>
<CAPTION>
RELATED
PARTY OTHER TOTAL
-------- --------- ---------
<S> <C> <C> <C>
Period from August 19, 1998 to December 31, 1998 ......... $ 74 $ 225 $ 299
Year ended December 31:
1999 .................................................... 253 479 732
2000 .................................................... 170 408 578
2001 .................................................... 170 295 465
2002 .................................................... 164 156 320
Thereafter .............................................. 125 -- 125
---- ------ ------
$956 $1,563 $2,519
==== ====== ======
</TABLE>

Total rent expense under operating leases for the period was $240,
including $38 to related parties.

(4) RETIREMENT AND PROFIT SHARING PLANS

The Company maintains a 401(k) plan for the benefit of its employees.
Under the plan, the Company matches up to 50% of the first 6% of an employee's
salary. The statement of income reflects an expense of $26 for the employer
match for the period.

(5) INCOME TAXES

Income taxes for the period ended August 18, 1998 were as follows:

<TABLE>
<S> <C>
Current ......... $132
----
</TABLE>

For the period ended August 18, 1998, deferred taxes were not significant.
Therefore, the Company did not record a deferred tax expense or a deferred tax
benefit.

The following table is a reconciliation between the effective income tax
rate indicated by the statement of income and the statutory federal income tax
rate for the period ended August 18, 1998:

<TABLE>
<S> <C>
Statutory federal income tax rate ................................ 35.0%
State income tax rate, net of federal income tax benefit ......... 4.9
----
Effective federal and state income tax rate ...................... 39.9%
====
</TABLE>

(6) COMMITMENTS AND CONTINGENCIES

F-71
<PAGE>

4,000,000 SHARES
HOMESERVICES.COM INC.
COMMON STOCK

HOME SERVICES.COM

-------------------------------
P R O S P E C T U S
-------------------------------

Until , 1999 (25 days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to unsold allotments or subscriptions.

U.S. Bancorp Piper Jaffray

Credit Suisse First Boston

, 1999
<PAGE>

PART II

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table indicates the estimated expenses to be incurred in
connection with the offering, all of which will be paid by HomeServices.

<TABLE>
<S> <C>
SEC registration fee ........................................ $ 19,182
--------
NASD fee .................................................... 7,400
--------
Nasdaq National Market listing fee .......................... *
Accounting fees and expenses ................................ *
Legal fees and expenses ..................................... *
Printing and engraving ...................................... *
Transfer agent's fees ....................................... *
Blue sky fees and expenses (including counsel fees) ......... *
Miscellaneous expenses ...................................... *
--------
Total ..................................................... *
========
</TABLE>
- ----------
* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

As permitted by Section 102(b)(7) of the General Corporation Law of the
State of Delaware, the restated certificate of incorporation of HomeServices
(to be filed herewith as Exhibit 3.3) provides that no director shall be liable
to HomeServices or its stockholders for monetary damages for breach of
fiduciary duty as a director other than for (i) breaches of the directors' duty
of loyalty to HomeServices and its stockholders, (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) the unlawful payment of dividends or unlawful stock purchases or
redemptions under Section 174 of the Delaware General Corporation Law and (iv)
any transaction from which the director derived an improper personal benefit.

Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines or amounts paid in settlement actually and reasonably
incurred by them in connection with the defense of any action by reason of
being or having been directors or officers, if such person shall have acted in
good faith in a manner reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful, except that if such action shall be in the right of the corporation,
no such indemnification shall be provided as to any claim, issue or matter as
to which such person shall have been adjudged to have been liable to the
corporation unless and only to the extent that the Delaware Court of Chancery
or the court in which the action was brought shall determine upon application
that, in view of all of the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which the Court of
Chancery or other court shall deem proper.

The restated certificate of incorporation and the amended and restated
bylaws of HomeServices (to be filed herewith as Exhibit 3.4) provide for
indemnification of officers and directors of HomeServices, both past and
present, to the fullest extent permitted by the Delaware General Corporation
law, and allow HomeServices to advance or reimburse litigation expenses upon
submission by the director or officer of an undertaking to repay such advances
or reimbursements if it is ultimately determined that indemnification is not
available to such director or officer pursuant to

II-1
<PAGE>

the amended and restated bylaws. The amended and restated bylaws also authorize
HomeServices to purchase and maintain insurance on behalf of an officer or
director, past or present, against any liability asserted against him in any
such capacity whether or not HomeServices would have the power to indemnify him
against such liability under the provisions of its certificate of incorporation
or Section 145 of the Delaware General Corporation Law.

HomeServices intends to provide liability insurance for each of its
directors and officers against certain losses arising from claims made against
them while acting in their capacities as directors or officers of HomeServices,
whether or not HomeServices would have the power to indemnify such person
against such losses, as permitted by law.

The form of Underwriting Agreement filed herewith as Exhibit 1.1 provides,
among other things, for the indemnification by the underwriters of directors
and certain officers of HomeServices against certain liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On July 13, 1999, HomeServices issued 1,000 shares of common stock to
MidAmerican Energy Holdings Company for consideration of $10.

On November 1, 1998, HomeServices' predecessor issued $35 million
aggregate principal amount of 7.12% Senior Notes to Massachusetts Mutual Life
Insurance Company and various of its related entities, at a purchase price
equal to 100% of their aggregate principal amount.

In May 1998, HomeServices' predecessor issued an aggregate of 325,300
shares of common stock at a purchase price of $4.69 per share, on a post-split
basis, to Ronald J. Peltier, R. Michael Knapp, James Koolhof and Arne M. Rovick,
who are all executive officers of HomeServices, for an aggregate purchase price
of $1,525,504.

The foregoing transactions were exempt from the registration requirements
of the Securities Act of 1933, as amended, in reliance on Section 4(2) of the
Securities Act on the basis that such transactions did not involve a public
offering.

Prior to the offering, HomeServices intends to merge with MidAmerican
Realty Services Company, which is a 95.2% owned subsidiary of MidAmerican Energy
Holdings Company, with HomeServices being the surviving corporation in the
merger. In connection with such merger, HomeServices intends to issue
approximately 650.6 shares of its common stock for each share of common stock of
MidAmerican Realty Services Company. Accordingly, HomeServices will issue in the
merger 7,525,964 shares to MidAmerican Energy Holdings Company, 98,889 shares to
R. Michael Knapp, 81,323 shares to James Koolhof, 98,889 shares to Ronald J.
Peltier and 98,889 shares to Arne M. Rovick.

The foregoing transaction will be exempt from the registration
requirements of the Securities Act of 1933, as amended, in reliance on Section
4(2) of the Securities Act on the basis that such transaction will not involve
a public offering.

II-2
<PAGE>

ITEM 16. EXHIBITS

(A) EXHIBITS:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ----------- --------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 + Certificate of Incorporation.
3.2 + Bylaws.
3.3* Form of Restated Certificate of Incorporation of HomeServices.Com Inc.
3.4* Form of Amended and Restated Bylaws of HomeServices.Com Inc.
4.1* Specimen of Common Stock Certificate.
4.2* Form of Rights Agreement.
5.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, regarding legality of securities
being registered.
10.1 + Credit Agreement, dated as of November 12, 1998, between MidAmerican Realty
Services Company and LaSalle National Bank.
10.2 + Note Purchase Agreement dated as of November 1, 1998 between MidAmerican Realty
Services Company and the purchasers listed in Schedule A thereto.
10.3* Form of Registration Rights Agreement.
10.4* Form of Services Agreement.
10.5* Form of Stock Option Plan.
21.1 + Subsidiaries of HomeServices.Com Inc.
23.1* Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of KPMG LLP.
24.1 + Power of Attorney (included on page II-4).
27.1 Financial Data Schedule.
</TABLE>

- ----------
* To be filed by amendment.

+ Previously filed.

(B) FINANCIAL STATEMENT SCHEDULES:

None.

ITEM 17. UNDERTAKINGS

(a) HomeServices hereby undertakes to provide to the underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of HomeServices by HomeServices pursuant to the Underwriting Agreement,
the restated certificate of incorporation, the amended and restated bylaws, the
Delaware General Corporation Law or otherwise, HomeServices has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by HomeServices of expenses
incurred or paid by a director, officer or controlling person of HomeServices
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, HomeServices will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question

II-3
<PAGE>

whether such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by HomeServices pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed tobe the initial bona fide offering thereof.

II-4
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN EDINA, MINNESOTA,
ON AUGUST 24, 1999.

HomeServices.Com Inc.

By: /s/ Ronald J. Peltier

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

Name: Ronald J. Peltier
Title: President and Chief Executive
Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- ------------------------------------ ----------------
<S> <C> <C>
* Chairman and Director August 24, 1999
- -----------------------------
David L. Sokol

/s/ Ronald J. Peltier President, Chief Executive Officer August 24, 1999
- ----------------------------- and Director
Ronald J. Peltier

/s/ Dwayne J. Coben Senior Vice President and Chief August 24, 1999
- ----------------------------- Financial Officer
Dwayne J. Coben (principal financial and
accounting officer)

* Director August 24, 1999
- -----------------------------
Jack W. Frost

* Director August 24, 1999
- -----------------------------
R. Michael Knapp

/s/ Steven A. McArthur Director August 24, 1999
- -----------------------------
Steven A. McArthur

* Director August 24, 1999
- -----------------------------
Gregory E. Abel

* Director August 24, 1999
- -----------------------------
Richard R. Jaros

* Director August 24, 1999
- -----------------------------
W. David Scott

* By: /s/ Steven A. McArthur
------------------------
Steven A. McArthur
Attorney-in-Fact

</TABLE>

II-5
<PAGE>

EXHIBIT INDEX

- ----------
* To be filed by amendment.
+ Previously filed.

<PAGE>

Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated May 28, 1999, relating to the consolidated financial statements of
MidAmerican Realty Services Company, of our report dated June 30, 1999, relating
to the financial statements of J.C. Nichols Real Estate, of our report dated
July 2, 1999, relating to the financial statements of HOME Real Estate Company
of Omaha, of our report dated July 13, 1999, relating to the financial
statements of HomeServices.Com Inc., and of our report dated July 14, 1999,
relating to the financial statements of Paul Semonin Company, which appear in
such Registration Statement. We also consent to the references to us under the
heading "Experts" in such Registration Statement.

/s/ PricewaterhouseCoopers LLP
-------------------------------------
PricewaterhouseCoopers LLP

Kansas City, Missouri
August 24, 1999

<PAGE>

[KPMG LOGO]

2500 Ruan Center
666 Grand Avenue
Des Moines, IA 50309

CONSENT OF INDEPENDENT AUDITOR

The Board of Directors
MidAmerican Realty Services Company:

We consent to the use of our reports included herein and to the references to
our firm under the heading "Experts" in the prospectus.

/s/ KPMG LLP

KPMG LLP
Des Moines, Iowa
August 23, 1999

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE (A) CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
HOMESERVICES.COM INC.'S CONSOLIDATED BALANCE SHEETS AS OF JULY 13, 1999,
AS INDICATED BELOW, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENT AND (B) AMENDS A PREVIOUSLY FILED FINANCIAL DATA SCHEDULE
FOR THE DECEMBER 31, 1998 AND THE MARCH 31, 1999 PERIODS REFLECTED BELOW (THE
PRIOR AMOUNTS FOR SUCH PERIODS WERE THOSE OF MIDAMERICAN REALTY SERVICES
COMPANY, WHICH ITS PARENT COMPANY PLANS TO MERGE WITH HOMESERVICES.COM INC. IN
CONJUNCTION WITH HOMESERVICES.COM INC.'S INITIAL PUBLIC OFFERING).
</LEGEND>
<MULTIPLIER> 1

<S> <C> <C> <C>
<PERIOD-TYPE> OTHER OTHER 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1999
<PERIOD-START> JUL-13-1999 MAY-28-1998 JAN-01-1999
<PERIOD-END> JUL-13-1999 DEC-31-1998 MAR-31-1999
<CASH> 10 0 0
<SECURITIES> 0 0 0
<RECEIVABLES> 0 0 0
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 0 0 0
<PP&E> 0 0 0
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 0 0 0
<CURRENT-LIABILITIES> 0 0 0
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 10 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 0 0
<SALES> 0 0 0
<TOTAL-REVENUES> 0 0 0
<CGS> 0 0 0
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> 0 0 0
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 0 0 0
<EPS-BASIC> 0 0 0
<EPS-DILUTED> 0 0 0

</TABLE>