HOMESERVICES COM INC, 424B4, 1999-10-08

HOMESERVICES COM INC
424B4, 1999-10-08
REAL ESTATE AGENTS & MANAGERS (FOR OTHERS)

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<PAGE>
Filed Pursuant to Rule: 424(b)(4)
Registration File No.: 333-82997

3,250,000 SHARES

[GRAPHIC OF HOMESERVICES.COM]

COMMON STOCK

$15.00 PER SHARE

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o HomeServices.Com Inc. is offering 2,187,500 shares and MidAmerican Energy
Holdings Company, the selling stockholder, is offering 1,062,500 shares.

o This is our initial public offering.

o Trading symbol: Nasdaq Stock National Market--HMSV

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THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 12.

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<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- --------------
<S> <C> <C>
Public offering price .................... $ 15.00 $48,750,000
Underwriting discount .................... $ 1.05 $ 3,412,500
Proceeds to HomeServices ................. $ 13.95 $30,515,625
Proceeds to selling stockholder .......... $ 13.95 $14,821,875
</TABLE>

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The underwriters have a 30-day option to purchase up to 487,500 additional
shares of common stock to cover over-allotments, if any.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OF ANYONE'S INVESTMENT IN 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 OCTOBER 7, 1999.
<PAGE>

[Edina Realty Logo] [Iowa Realty Logo] [J.C. Nichols Residential Logo]
[CBS Home Real Estate Logo] [Paul Semonin Realtors Logo]
[Long Realty Company Logo]

146 Office Locations

o = Office Location(s)
* = Major Market

[Map of HomeServices' branch offices]

Managing the Full Homeownership Life Cycle
(Median 7 Year Cycle)
[Computer graphic]
[Home Services.com Logo]

Prospecting/ Buy/Sell
Listing Home
the Home Transaction

Home Dividends Mortgage
Referrals for: Origination
o mechanical repair/replacement Transaction
o lawn maintenance
o roofing

CUSTOMER
FOR LIFE
Home Dividends Closing
Referrals for: Transaction
o decorating
o remodeling
o appliances
o repair

Home Connections
Referrals for:
o waste
o gas
o electric
o cable
o long-distance

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary .................................................... 2
Risk Factors ............................................... 12
Special Note Regarding Forward-looking Statements .......... 22
Use of Proceeds ............................................ 22
Dividend Policy ............................................ 22
Dilution ................................................... 23
Capitalization ............................................. 24
Unaudited Pro Forma Condensed Consolidated Financial
Information ................................................ 25
Selected Consolidated Financial Data ....................... 34
Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................. 38
Business ................................................... 53
Management ................................................. 68
Principal and Selling Stockholders ......................... 81
Certain Relationships and Related Transactions ............. 82
Description of Capital Stock ............................... 86
Description of Indebtedness ................................ 91
Shares Eligible for Future Sale ............................ 93
United States Federal Tax Considerations Relating to
Non-United States Holders .................................. 94
Underwriting ............................................... 97
Legal Matters .............................................. 100
Experts .................................................... 100
Where You Can Find More Information ........................ 101
Index to Financial Statements .............................. F-1
</TABLE>

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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.

1
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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 also
read the more detailed information set out in this prospectus, the financial
statements and the other information in this prospectus. 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
677.87 shares of HomeServices' common stock in exchange for each
share of common stock of MidAmerican Realty Services Company, which
merger occurred on the date of this prospectus;
o assumes that the underwriters' over-allotment option is not
exercised; and
o that is pro forma gives effect to the historical acquisitions of
all of HomeServices' brokerage firm operating subsidiaries which
were completed during the third and fourth quarters of 1998 and the
third quarter of 1999 and to the offering as if they had occurred
at the beginning of the earliest period presented.

HOMESERVICES

HomeServices is the second largest residential real estate brokerage firm in
the United States based on aggregate closed transaction sides in 1998 for its
various brokerage firm operating subsidiaries. Closed transaction sides mean
either the buy side or sell side of any closed home purchase and is the
standard used by industry participants and publications to rank real estate
brokerage firms. HomeServices' operations are largely concentrated in the
Midwest. In addition to providing traditional residential real estate brokerage
services, HomeServices cross sells to its existing real estate customers
preclosing services, such as mortgage origination, closing administrative
services and title abstracting, 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 and is developing various related E-commerce services.
HomeServices currently operates primarily under the Edina Realty, Iowa Realty,
J.C. Nichols, CBS HOME, Paul Semonin Realtors and Long Realty brand names in
eleven states primarily in the Midwest. HomeServices occupies the number one or
number two market share position in each of its major markets based on
aggregate closed transaction sides for the year ended December 31, 1998.
HomeServices' major markets consist of the following metropolitan areas:
Minneapolis and St. Paul, Minnesota; Des Moines, Iowa; Omaha, Nebraska; Kansas
City, Kansas; Louisville, Kentucky; Springfield, Missouri; and Tucson, Arizona.
The largest residential real estate brokerage firm in the United States,
including all of its company owned franchise offices, had 348,134 aggregate
closed transaction sides in 1998 compared to 88,000 aggregate closed
transaction sides in 1998 for the various brokerage firm operating subsidiaries
that comprise HomeServices.

While HomeServices commenced operations in May 1998 with its acquisition of
Iowa Realty and Edina Realty, the real estate brokerage firms that currently
comprise HomeServices collectively manage 146 branch offices, have more than
5,800 sales associates and have operated for between 12 and 84 years, with an
average operating history of approximately 54 years. Sales associates are not
employees of HomeServices, but operate under independent contractor agreements.
HomeServices is a newly formed holding company that was incorporated in
Delaware in July 1999.

Immediately prior to the offering, HomeServices will be 95.2% owned by
MidAmerican Energy Holdings Company, a large Midwestern utility holding company
(MEC:NYSE). After giving effect to the offering, HomeServices will continue to
be a subsidiary of MidAmerican Holdings, which will then own 65.0% of
HomeServices' common stock, or 61.6% if the underwriters' over-allotment option
is

2
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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. 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 pursuant to a services agreement which will be on
terms HomeServices believes to be as favorable as it could obtain from an
unrelated third party. Under the services agreement, HomeServices will be
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 connection with providing
these services to HomeServices. In addition to the services agreement,
HomeServices and MidAmerican Holdings will enter into a registration rights
agreement and a tax indemnity agreement in connection with the offering.

GROWTH STRATEGY. HomeServices' business objective is to become a seamless
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 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. By continuing to develop its E-commerce operations
which were launched in August 1999, HomeServices also seeks to
generate on-line banner advertising and sponsorship revenues.

3
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HOMESERVICES' ORGANIZATIONAL STRUCTURE

As a holding company, HomeServices 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 merger and 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

65.0% 3.8% 31.2%

HomeServices.Com Inc.
(1999)

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Edina Realty J.C. Nichols Residential Iowa Realty CBS HOME Real Paul Semonin Long Realty
(Minnesota, Wisconsin, (Kansas, Missouri) (Iowa) Estate* Realtors (Arizona)
North Dakota, (1915) (1952) (Nebraska, Iowa) (Kentucky, Indiana) (1926)
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' 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
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THE OFFERING

Common stock offered:

By HomeServices..................... 2,187,500 shares
By MidAmerican Holdings............. 1,062,500 shares
Total........................... 3,250,000 shares

Common stock outstanding
after the offering..................... 10,422,942 shares

Offering price......................... $15.00 per share

Use of proceeds........................ HomeServices intends to use the net
proceeds of the offering for (1) the
continued development of its
E-commerce operations, (2) working
capital and (3) general corporate
purposes, which include acquisitions
of real estate brokerage firms and
their related service businesses. The
Company has no pending acquisitions
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. You should read "Use of
Proceeds" on page 22 for an expanded
discussion.

Nasdaq National Market symbol.......... HMSV

5
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SUMMARY FINANCIAL AND OTHER DATA

The following tables present summary historical and pro forma financial and
other data for HomeServices. The pro forma financial and other data give effect
to (1) the merger of MidAmerican Realty Services Company into HomeServices, (2)
the offering and the application of the estimated net proceeds to HomeServices
and (3) the acquisitions described under "Unaudited Pro Forma Condensed
Consolidated Financial Information." 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.

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, in Louisville, Kentucky. In August 1999, HomeServices acquired Long
Realty, in Tucson, Arizona.

Historical data for 1996 reflects the results of Iowa Realty and its
consolidated subsidiaries and Edina Realty, which 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. Accordingly, the
predecessor historical data for 1997 includes the results of Iowa Realty and
Edina Realty and their consolidated subsidiaries, which from July 1, 1997 to
December 31, 1997 also includes the results of HOME Real Estate.

6
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HISTORICAL DATA

<TABLE>
<CAPTION>
PREDECESSOR HOMESERVICES
------------------------------------- --------------------------------------
SIX MONTHS
JAN 1 - MAY 28 - MAY 28 - ENDED
YEAR ENDED DECEMBER 31, MAY 27, DEC 31, JUNE 30, JUNE 30,
------------------------- ----------- ------------ ------------ -----------
1996 1997 1998 1998 1998 1999
------------ ------------ ----------- ------------ ------------ -----------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT AMOUNTS PER SHARE)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Commission revenue ............................... $ 179,378 $ 191,083 $ 74,893 $ 169,647 $ 26,244 $148,979
Title fees ....................................... 14,821 16,203 7,575 14,154 2,455 10,644
Other(a) ......................................... 22,092 7,410 3,769 6,790 1,019 8,101
Total revenues .................................. 216,291 214,696 86,237 190,591 29,718 167,724
Commission expense ............................... 115,331 125,148 49,107 113,225 16,687 102,085
Amortization of pending real estate sales
contracts ....................................... -- -- -- 18,271 4,744 --
Depreciation and amortization .................... 5,103 5,619 2,293 4,177 600 3,718
All other operating expenses(a) .................. 85,162 72,808 31,126 59,265 7,878 52,242
Total operating expenses ...................... 205,596 203,575 82,526 194,938 29,909 158,045
Operating income (loss) .......................... 10,695 11,121 3,711 (4,347) (191) 9,679
Interest and other income (expense), net ......... (2,582) (903) (94) (1,334) (228) (1,775)
Income (loss) before income taxes ................ 8,113 10,218 3,617 (5,681) (419) 7,904
Income taxes (benefit) ........................... 3,263 4,725 1,664 (2,247) (166) 3,278
Minority interest ................................ 1,276 633 -- -- -- --
Net income (loss) ................................ $ 3,574 $ 4,860 $ 1,953 $ (3,434) $ (253) $ 4,626
Pro forma earnings (loss) per share:(b)
Basic and diluted ............................. $ 0.53 $ 0.72 $ 0.29 $ (0.51) $ (0.04) $ 0.68
Pro forma weighted average shares
outstanding:(b)
Basic and diluted ............................. 6,779 6,779 6,779 6,779 6,779 6,779
OTHER DATA:
EBITDA(c) ........................................ $ 15,798 $ 16,740 $ 6,004 $ 18,101 $ 5,153 $ 13,397
Net cash provided by (used in) operating
activities ...................................... 2,134 5,297 4,991 12,428 5,014 16,198
Net cash used in investing activities ............ (8,874) (6,759) (891) (99,126) (70,342) (5,890)
Net cash provided by (used in) financing
activities ...................................... 10,664 (1,575) (1,940) 89,812 72,133 (1,878)
</TABLE>

7
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HISTORICAL DATA

<TABLE>
<CAPTION>
PREDECESSOR HOMESERVICES
----------------------- ---------------------------
AS OF AS OF
AS OF DECEMBER 31, DECEMBER 31, JUNE 30,
----------------------- -------------- ----------
1996 1997 1998 1999
---------- ---------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ......................... $ 5,627 $ 2,590 $ 3,114 $ 11,544
Total assets(a) ................................... 95,504 62,346 128,520 132,001
Long-term debt, including current portion ......... 16,397 7,651 61,445 59,567
Stockholders' equity .............................. 33,699 36,791 35,194 39,938
</TABLE>

<TABLE>
<CAPTION>
PREDECESSOR HOMESERVICES
----------------------------------- ---------------------------------
SIX MONTHS
MAY 28 - MAY 28 - ENDED
YEAR ENDED DECEMBER 31, JAN 1 - DEC 31, JUNE 30, JUNE 30,
----------------------- MAY 27, ---------- ---------- -----------
1996 1997 1998 1998 1998 1999
----------- ----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Closed transaction sides ........................... 47,836 48,631 18,578 41,580 6,530 33,393
Average home sales price (in thousands) ............ $ 120.9 $ 127.1 $ 132.3 $ 138.1 $ 130.8 $ 146.0
Closed transaction volume
(Closed transaction sides multiplied by
average home sales price) (in millions) ........... $ 5,783 $ 6,183 $ 2,458 $ 5,741 $ 854 $ 4,877
Average sales commission (%)
(Commission revenues divided by home sales
volume) ........................................... 3.1% 3.1% 3.0% 3.0% 3.1% 3.1%
Number of branch offices (at period end) ........... 103 103 98 124 97 123
Number of sales associates (at period end) ......... 3,063 3,298 3,056 4,282 3,032 4,303
</TABLE>

8
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PRO FORMA DATA

<TABLE>
<CAPTION>
HOMESERVICES PRO FORMA
-------------------------------------------
YEAR ENDED SIX MONTHS ENDED JUNE 30,
DECEMBER 31, ---------------------------
1998 1998 1999
------------- ------------- -----------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
AMOUNTS PER SHARE)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Commission revenue .......................................... $ 356,433 $ 162,432 $188,952
Title fees .................................................. 22,965 10,344 10,644
Other(a) .................................................... 15,032 7,844 8,759
Total revenues ............................................. 394,430 180,620 208,355
Commission expense .......................................... 243,036 110,024 130,879
Amortization of pending real estate sales contracts ......... 21,026 21,026 --
Depreciation and amortization ............................... 9,410 4,215 4,609
All other operating expenses(a) ............................. 119,714 54,516 61,123
Total operating expenses ................................. 393,186 189,781 196,611
Operating income (loss) ..................................... 1,244 (9,161) 11,744
Interest and other income (expense), net .................... (3,118) (1,612) (2,012)
Income (loss) before income taxes ........................... (1,874) (10,773) 9,732
Income taxes (benefit) ...................................... (654) (4,307) 4,019
Net income (loss) ........................................... $ (1,220) $ (6,466) $ 5,713
Pro forma earnings (loss) per share:(b)
Basic .................................................... $ (0.12) $ (0.62) $ 0.55
Diluted .................................................. $ (0.12) $ (0.62) $ 0.54
Pro forma weighted average shares outstanding:(b)
Basic .................................................... 10,423 10,423 10,423
Diluted .................................................. 10,423 10,423 10,666
OTHER DATA:
EBITDA(c) ................................................... $ 31,680 $ 16,080 $ 16,353
Net cash provided by (used in) operating activities ......... 25,998 18,058 19,376
Net cash used in investing activities ....................... (128,377) (126,099) (6,011)
Net cash provided by (used in) financing activities ......... 113,830 108,041 (3,898)
</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 $ 27,399
Total assets(a) ................................... 132,001 180,574
Long-term debt, including current portion ......... 59,567 60,578
Stockholders' equity .............................. 39,938 76,210
</TABLE>

9
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PRO FORMA DATA

<TABLE>
<CAPTION>
HOMESERVICES PRO FORMA
-----------------------------------------
YEAR ENDED SIX MONTHS ENDED JUNE 30,
DECEMBER 31, -------------------------
1998 1998 1999
------------- ----------- -----------
<S> <C> <C> <C>
OPERATING DATA:
Closed transaction sides .................................... 87,974 39,282 42,482
Average home sales price (in thousands) ..................... $ 138.0 $ 136.7 $ 146.1
Closed transaction volume
(Closed transaction sides multiplied by average
home sales price) (in millions) ............................ $12,137 $ 5,368 $ 6,208
Average sales commission (%)
(Commission revenues divided by home sales volume) ......... 2.9% 3.0% 3.0%
Number of branch offices (at period end) .................... 148 148 146
Number of sales associates (at period end) .................. 5,769 5,608 5,822
</TABLE>

- ---------------------------
(a) Prior to 1997, the predecessor was also engaged in real estate
development operations in addition to real estate brokerage
operations. 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 $14.0 million are included in
the line item "Other" revenues for the year ended December 31, 1996.
Cost of real estate sales totaling $11.3 million are included in the
line item "All other operating expenses" for the year ended December
31, 1996. Real estate contracts and real estate inventory of $23.2
million are included in the line item "Total assets" as of December
31, 1996. Since 1997, HomeServices has not been engaged in real
estate development operations to any significant degree.
(b) Pro forma earnings (loss) per share for the predecessor is computed
using the historical weighted average shares of MidAmerican Realty
Services Company as of June 30, 1999 of 10,000 shares, after giving
effect to the exchange of 677.87 shares of HomeServices common stock
for each share of MidAmerican Realty Services Company common stock
in the merger of the two which was consummated on the date of this
prospectus. Pro forma earnings per share for the HomeServices pro
forma data is computed using the historical weighted average shares
of MidAmerican Realty Services Company as of June 30, 1999 of
10,000, after giving effect to the following events as if they had
occurred at the beginning of the period: (a) the issuance of 2,149
shares issued in August 1999 in connection with the acquisition of
Paul Semonin Realtors, (b) the exchange of 677.87 shares of
HomeServices common stock for each share of MidAmerican Realty
Services Company common stock in a merger of the two which was
consummated on the date of this prospectus and (c) the issuance
of the 2,187,500 shares to be sold by HomeServices in the offering
after the merger.
(c) EBITDA is defined as net income (loss) before minority interest,
income taxes (benefit) and interest and other income (expense), net,
plus depreciation and amortization and amortization of pending real
estate sales contracts. HomeServices has included information
concerning EBITDA because it believes that it is useful to an
investor in evaluating the operating performance of HomeServices as
it compares to other companies and because this measure 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, it may not necessarily be
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 or results
of operations in accordance with generally accepted accounting
principles. EBITDA should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles.

10
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(footnote continued)

The following table presents the calculation of EBITDA on a historical
basis for each of the periods shown:

<TABLE>
<CAPTION>
PREDECESSOR HISTORICAL HOMESERVICES HISTORICAL
--------------------------------- -------------------------------------
SIX
YEAR ENDED DECEMBER MONTHS
31, JAN. 1- MAY 28- MAY 28- ENDED
--------------------- MAY 27, DEC 31, JUNE 30, JUNE 30,
1996 1997 1996 1998 1998 1999
--------- --------- --------- ------------ ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) ..................... $ 3,574 $ 4,860 $1,953 $ (3,434) $ (253) $ 4,626
Minority interest ..................... 1,276 633 -- -- -- --
Income taxes (benefit) ................ 3,263 4,725 1,664 (2,247) (166) 3,278
Interest and other (income) expense,
net .................................. 2,582 903 94 1,334 228 1,775
------- ------- ------ -------- ------- -------
Operating income (loss) ............... 10,695 11,121 3,711 (4,347) (191) 9,679
Depreciation and amortization ......... 5,103 5,619 2,293 4,177 600 3,718
Amortization of pending real estate
sales contracts ...................... -- -- -- 18,271 4,744 --
------- ------- ------ -------- ------- -------
EBITDA ................................ $15,798 $16,740 $6,004 $ 18,101 $ 5,153 $13,397
</TABLE>

The following table presents the calculation of EBITDA on a pro forma
basis for each of the periods shown:

<TABLE>
<CAPTION>
HOMESERVICES PRO FORMA
---------------------------------------
YEAR
ENDED SIX MONTHS ENDED JUNE
DECEMBER 30,
31, ------------------------
1998 1998 1999
------------ ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net income (loss) ........................................... $ (1,220) $ (6,466) $ 5,713
Income taxes (benefit) ...................................... (654) (4,307) 4,019
Interest and other (income) expense, net .................... 3,118 1,612 2,012
-------- -------- -------
Operating income (loss) ..................................... 1,244 (9,161) 11,744
Depreciation and amortization ............................... 9,410 4,215 4,609
Amortization of pending real estate sales contracts ......... 21,026 21,026 --
-------- -------- -------
EBITDA ...................................................... $ 31,680 $ 16,080 $16,353
</TABLE>

11
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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

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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.

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 seven 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. HomeServices believes its charges for occupancy,
telecommunications, professional fees, data processing, equipment leasing,
office expense, corporate charges and depreciation, which approximated 11% of
total 1998 operating expenses on a historical basis, are costs that cannot be
significantly reduced in the short-term during a seasonal slow down.

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:

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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, Arizona, Kansas,
Missouri, Kentucky, Nebraska, Wisconsin, Indiana, North Dakota and South
Dakota. HomeServices intends to expand its 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.

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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;

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. The Federal Communications Commission recently characterized
dial-up Internet traffic bound for Internet service providers as
jurisdictionally mixed but largely interstate in nature. However, the Federal
Communications Commission has made it clear that its position does not affect
its long-standing rule that Internet and other information services are exempt
from interstate access charges, that it does not change the manner in which
consumers obtain and pay for access to the Internet nor does it transform the
nature of traffic routed through Internet service providers. 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, but not consumers. If these access
fees are imposed on the Internet service providers, 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,

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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' pro forma
1998 revenues 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 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 the investor's
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 A SIGNIFICANT NUMBER OF 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 the services of its key sales associates. HomeServices' management team is
led by Ronald J. Peltier, its President and Chief Executive

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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; George E.
Gans, President and Chief Executive Officer of Paul Semonin Realtors; and
Stephen E. Quinlan, President and Chief Executive Officer of Long Realty.
HomeServices does not carry any key man life insurance. The loss of the
services of Messrs. Peltier, Coben, Frost, Knapp, Rovick, Valenti, Gans or
Quinlan 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 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' senior secured revolving credit
agreement 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
agreement also require HomeServices to maintain specified financial ratios,
including an interest coverage ratio at quarter end of not more than 2.50 to 1,
a fixed charge coverage ratio at quarter end of not less than 1.25 to 1, a
total debt to EBITDA ratio at quarter end of not more than 3.25 to 1 and a
consolidated debt to consolidated total capitalization ratio at quarter end of
not more than 0.65 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, which stock are pledged to secure borrowings under the senior
secured revolving credit agreement. As a

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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
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 and the lenders
under HomeServices' senior secured revolving credit facility will have a prior
claim to the assets of its subsidiaries prior to the holders of HomeServices'
common stock.

HOMESERVICES RECORDS A SIGNIFICANT AMOUNT OF GOODWILL ON ITS BALANCE SHEET AND
CANNOT ASSURE YOU AS TO THE RECOVERABILITY OF THIS AMOUNT

As of June 30, 1999, goodwill, net of accumulated amortization, comprised
approximately 55.3% of HomeServices' total assets and approximately 186.0% of
stockholders' equity. Goodwill arises when an acquirer accounts for a business
acquisition under the purchase method of accounting and the purchase price is
more than the fair value of the tangible and separately measurable intangible
net assets of that business. Generally accepted accounting principles require
that this goodwill and all other intangible assets be amortized over the period
benefitted. Amortization represents a noncash deduction in the determination of
operating income and so reduces reported earnings, but it does not reduce cash
flows.

HomeServices, in accordance with generally accepted accounting principles,
analyzes the recoverability of goodwill at each balance sheet date and
determines at that time the recoverability of any intangible assets. Management
has determined that the period of benefit to be derived from goodwill is at
least 30 years. If management had overlooked factors indicating that shorter
benefit periods were appropriate for material portions of goodwill, earnings
for periods immediately following the acquisition would be overstated. In later
years, HomeServices would then be burdened by the continuing charge against
earnings without receiving the associated benefits to income expected by
management earlier in arriving at the consideration paid for that business. In
that case, earnings in later years could even be impaired if management later
determines that the goodwill period selected earlier was not appropriate or if
management later determines that goodwill is not recoverable as a result of
events or changes in circumstances. The amount of the impairment or writeoff
would be the difference between the goodwill and the present value of the
estimated expected future cash flows over the remaining life of the goodwill.
Such writeoff could adversely affect HomeServices' business, financial
condition and the market price of its common stock.

Management has reviewed with its independent accountants all of the factors and
expected associated future cash flows which it considered in determining the
amount paid to acquire companies. Management has concluded that the expected
associated future cash flows from goodwill will continue for at least 30 years
and that there was no material evidence to indicate that any material portion
of the expected benefits from goodwill would dissipate in a shorter period.

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 losses, if
incurred, could have a material adverse effect on HomeServices. For a
description of HomeServices' year 2000

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<PAGE>

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 65.0% of its common stock or 61.6% 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

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conditioning the offer on a substantial number of rights being acquired or
redeemed. Accordingly, 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 revolving credit agreement with
MidAmerican Holdings pursuant to which HomeServices may borrow up to $10.0
million. This agreement was amended on June 24, 1999 to reduce MidAmerican
Holdings' total commitment from $100.0 million to $10.0 million. The maximum
amount that HomeServices had borrowed during the life of the agreement to date
is $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, REGISTRATION RIGHTS AGREEMENT AND TAX INDEMNITY
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, a registration rights agreement and a tax indemnity 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 may not
unilaterally terminate the services agreement. As a result, HomeServices will
be required to make the monthly fee and reimbursement payments under the
services agreement to MidAmerican Holdings until the earlier of (a) the date
HomeServices and MidAmerican Holdings mutually agree to terminate the agreement
and (b) the 180th day after MidAmerican Holdings notifies HomeServices that it
no longer owns at least 5% of the HomeServices common stock. HomeServices
believes that the terms of its services agreement, registration rights
agreement and tax indemnity 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,"
"--Services Agreement" and "--Tax Indemnity 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' common stock has been approved for quotation on the Nasdaq
National Market, HomeServices does not know 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.

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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 $17.20 per share in the net tangible book
value per share of the common stock from the initial public offering price of
$15.00 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.

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
10,422,942 shares of common stock issued and outstanding or 10,751,067 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 up to
3,500,000 shares of common stock reserved for issuance under HomeServices'
employee stock option plan, the employee and non-employee stock purchase plans
and the options granted to directors for their initial agreement to serve. 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.

21
<PAGE>

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.

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 $27.8 million.
HomeServices has not yet decided how it will use the proceeds of this offering.
However, HomeServices currently has tentative plans to use the balance of the
proceeds of this offering in the manner outlined below:

o approximately $7 million towards the continued development of
HomeServices' E-commerce operations;

o approximately $5 million for working capital; and

o the balance to general corporate purposes, including acquisitions of
real estate brokerage firms and their related service businesses.

You should note that these plans may change and HomeServices may decide not to
allocate proceeds or to allocate more or less proceeds to a specified use.

The Company has no pending acquisitions 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
$0.19 per share in 1997. HomeServices did not pay any cash dividends on the
common stock during 1998 or 1999.

22
<PAGE>

DILUTION

At June 30, 1999, the adjusted net tangible book value of HomeServices, after
giving effect to the 677.87-for-1 share exchange which was effected as
part of the merger with MidAmerican Realty Services Company and the
acquisitions of Paul Semonin Realtors and Long Realty, was approximately
$(50.7) million, or $(6.16) 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 adjusted 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 $(22.9) million, or $(2.20) per share. The following table gives
effect to the offering as if it had occurred on June 30, 1999 at the initial
public offering price of $15.00 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 $3.96 per
share to HomeServices' existing stockholders and an immediate dilution of
$17.20 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 ........ $ (6.16)
Increase in adjusted net tangible book value per share attributable
to the offering ..................................................... $ 3.96
Pro forma adjusted net tangible book value per share as of June
30, 1999, after giving effect to the offering ....................... $ (2.20)
--------
Immediate dilution per share to new investors ......................... $ 17.20
========
</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 the initial public offering price of $15.00 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 ........................ 3,250,000 31.2% $48,750 53.8% $ 15.00
Existing common stockholders ......... 7,172,942 68.8 41,818 46.2 5.83
--------- ----- ------- -----
Total ................................ 10,422,942 100.0% $90,568 100.0%
</TABLE>

23
<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 677.87 shares of HomeServices'
common stock for each share of common stock of MidAmerican Realty
Services Company, which merger occurred on the date of this
prospectus;

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 acquisitions of Paul Semonin Realtors and Long Realty.

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 $ 27,399
======= ========
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 2,078
------- --------
Total long-term debt ...................................................... 59,567 60,578
------- --------
Stockholders' equity:
Preferred stock, $0.01 par value, no shares authorized, no shares issued
and outstanding (actual); $0.01 par value, 2,000,000 shares authorized,
no shares issued and outstanding (pro forma) .............................. -- --
Common stock, no par value, 1,000,000 shares authorized, 10,000 shares
issued and outstanding (actual); $0.01 par value, 38,000,000 shares
authorized, 10,422,942 shares issued and outstanding (pro forma) .......... 10 104
Additional paid-in capital .................................................. 39,505 75,683
Notes receivable(c) ......................................................... (753) (753)
Accumulated other comprehensive loss ........................................ (16) (16)
Retained earnings ........................................................... 1,192 1,192
------- ----------
Total stockholders' equity ................................................ 39,938 76,210
------- ----------
Total capitalization ...................................................... $99,505 $136,788
======= ==========
</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."

24
<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 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;

o Paul Semonin Realtors; and

o Long Realty.

The unaudited pro forma condensed consolidated statement of income for the six
months ended June 30, 1999 gives effect to the acquisition of Paul Semonin
Realtors and Long Realty as if they 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 acquisitions of Paul Semonin
Realtors and Long Realty.

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.

Prior to the offering, HomeServices will enter into a service agreement with
MidAmerican Holdings. In consideration for services provided, HomeServices will
pay a monthly fee of $50,000, plus an amount for the reimbursement of all
reasonable employee and out-of-pocket costs incurred by MidAmerican Holdings in
connection with providing these services. No adjustment has been made in the
pro forma statements of income as charges are already reflected in the
historical amounts for costs of similar services provided to MidAmerican Realty
Services Company and the predecessor by their respective parent companies.

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.

25
<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>
MIDAMERICAN J.C. PAUL
PREDECESSOR (1)(2) REALTY (2)(3) NICHOLS (4) SEMONIN (5)
-------------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Commission revenue .......... $74,893 $169,647 $25,715 $30,663
Title fees .................. 7,575 14,154 -- --
Other ....................... 3,769 6,790 2,163 1,180
------- -------- ------- -------
Total revenues ............. 86,237 190,591 27,878 31,843
------- -------- ------- -------
Operating expenses:
Commission expense .......... 49,107 113,225 18,173 21,408
Amortization of pending
real estate sales
contracts .................. -- 18,271 -- --
Depreciation and
amortization ............... 2,293 4,177 292 501
All other operating
expenses ................... 31,126 59,265 7,266 8,126
------- -------- ------- -------
Total operating
expenses .................. 82,526 194,938 25,731 30,035
------- -------- ------- -------
Operating income (loss) ...... 3,711 (4,347) 2,147 1,808
Interest and other income
(expense), net .............. (94) (1,334) (69) 440
------- -------- ------- -------
Income (loss) before
income taxes ................ 3,617 (5,681) 2,078 2,248
Income taxes (benefit) ....... 1,664 (2,247) 792 913
------- -------- ------- -------
Net income (loss) ............ $ 1,953 $ (3,434) $ 1,286 $ 1,335
======= ======== ======= =======
Per share information(12):
Earnings per share -
Basic and diluted ..........
Weighted average shares
Outstanding -
Basic and diluted .........

<CAPTION>
OTHER HOMESERVICES
LONG (6) ACQUISITIONS (2)(7) ADJUSTMENTS PRO FORMA
---------- --------------------- ------------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Commission revenue .......... $36,217 $19,298 $ -- $356,433
Title fees .................. -- 1,236 22,965
Other ....................... 376 754 15,032
------- ------- --------
Total revenues ............. 36,593 21,288 -- 394,430
------- ------- ----------- --------
Operating expenses:
Commission expense .......... 26,701 14,422 243,036
Amortization of pending
real estate sales
contracts .................. -- -- 2,755 (8) 21,026
Depreciation and
amortization ............... 422 228 1,497 (9) 9,410
All other operating
expenses ................... 7,565 6,366 119,714
------- ------- --------
Total operating
expenses .................. 34,688 21,016 4,252 393,186
------- ------- ----------- --------
Operating income (loss) ...... 1,905 272 (4,252) 1,244
Interest and other income
(expense), net .............. (27) 78 (2,112)(10) (3,118)
------- ------- ----------- --------
Income (loss) before
income taxes ................ 1,878 350 (6,364) (1,874)
Income taxes (benefit) ....... 763 296 (2,835)(11) (654)
------- ------- ----------- --------
Net income (loss) ............ $ 1,115 $ 54 $ (3,529) $ (1,220)
======= ======= =========== ========
Per share information(12):
Earnings per share -
Basic and diluted .......... $ (0.12)
Weighted average shares
Outstanding -
Basic and diluted ......... 10,423
</TABLE>

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

26
<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. 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.

(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 Long Realty for the year ended December
31, 1998.

(7) 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.

(8) Reflects the value of real estate sales contracts that were pending at the
date of acquisition. The established asset was amortized over three
months, based on HomeServices' estimate of when contracts typically result
in closed transactions.

(9) 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.

(10) Reflects interest expense on the $25.0 million revolving credit facility
at the blended interest rate of 6.51%, annual interest expense on $35.0
million of private placement notes at the stated rate of 7.12% and
interest expense on the $8.0 million loan from parent at 5.94%. 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.

(11) 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 $260,000 at December 31, 1998. A combined
federal and state statutory tax rate of 40.59% was applied in the
calculation.

(12) Earnings per share on a pro forma basis is computed using the historical
weighted average shares of MidAmerican Realty Services Company as of
December 31, 1998 of 10,000, after giving effect to the following events
as if they had occurred at the beginning of the period: (a) the issuance
of 2,149 shares issued in August 1999 in connection with the acquisition
of Paul Semonin Realtors, (b) the exchange of 677.87 shares of
HomeServices common stock for each share of MidAmerican Realty Services
Company common stock in the merger of the two which was consummated on
the date of this prospectus and (c) the issuance of the 2,187,500 shares
to be sold by HomeServices in the offering after the merger.

27
<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. PAUL
PREDECESSOR (1) REALTY NICHOLS (2) SEMONIN (3)
----------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Commission revenue......... $74,893 $26,244 $16,604 $14,692
Title fees ................ 7,575 2,455 -- --
Other ..................... 3,769 1,019 1,510 525
------- ------- ------- -------
Total revenues ........... 86,237 29,718 18,114 15,217
------- ------- ------- -------
Operating expenses:
Commission expense......... 49,107 16,687 11,858 10,153
Amortization of
pending real estate
sales contracts .......... -- 4,744 -- --
Depreciation and
amortization ............. 2,293 600 201 227
All other operating
expenses ................. 31,126 7,878 5,071 3,748
------- ------- ------- -------
Total operating
expenses ................ 82,526 29,909 17,130 14,128
------- ------- ------- -------
Operating income (loss) 3,711 (191) 984 1,089
Interest and other
income (expense), net (94) (228) (18) 114
------- ------- ------- -------
Income (loss) before
income taxes .............. 3,617 (419) 966 1,203
Income taxes (benefit) ..... 1,664 (166) 394 491
------- ------- ------- -------
Net income (loss) .......... $ 1,953 $ (253) $ 572 $ 712
======= ======= ======= =======
Per share information(10):
Earnings per share -
Basic and diluted ........
Weighted average shares
Outstanding -
Basic and diluted

<CAPTION>
OTHER HOMESERVICES
LONG (4) ACQUISITIONS (5) ADJUSTMENTS PRO FORMA
---------- ------------------ ----------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Commission revenue......... $16,687 $13,312 $ -- $ 162,432
Title fees ................ -- 314 10,344
Other ..................... 139 882 7,844
------- ------- ---------
Total revenues ........... 16,826 14,508 180,620
------- ------- ---------
Operating expenses:
Commission expense......... 12,199 10,020 110,024
Amortization of
pending real estate
sales contracts .......... -- -- 16,282 (6) 21,026
Depreciation and
amortization ............. 256 135 503 (7) 4,215
All other operating
expenses ................. 3,620 3,073 54,516
------- ------- ---------
Total operating
expenses ................ 16,075 13,228 16,785 189,781
------- ------- ------------- ---------
Operating income (loss) 751 1,280 (16,785) (9,161)
Interest and other
income (expense), net 25 37 (1,448)(8) (1,612)
------- ------- ------------- ---------
Income (loss) before
income taxes .............. 776 1,317 (18,233) (10,773)
Income taxes (benefit) ..... 315 571 (7,576)(9) (4,307)
------- ------- ------------- ---------
Net income (loss) .......... $ 461 $ 746 $ (10,657) $ (6,466)
======= ======= ============= =========
Per share information(10):
Earnings per share -
Basic and diluted ........ $ (0.62)
Weighted average shares
Outstanding -
Basic and diluted 10,423
</TABLE>

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

28
<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 for January 1, 1998 to
May 27, 1998, including HOME Real Estate for the period January 1, 1998,
through May 7, 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.

(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 Long Realty for the period presented.

(5) Reflects the historical results of CBS Real Estate Company and Nebraska
Land Title & Abstract for the period presented and the results of HOME
Real Estate for May 8, 1998, through June 30, 1998.

(6) Reflects the value of real estate sales contracts that were pending at the
date of acquisition. The established asset was amortized over three
months, based on HomeServices' estimate of when contracts typically result
in closed transactions.

(7) 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.

(8) Reflects interest expense on the $25.0 million revolving credit facility
at the blended interest rate of 6.51%, annual interest expense on $35.0
million of private placement notes at the stated rate of 7.12% and
interest expense on the $8.0 million loan from parent at 5.94%. 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.

(9) 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 $162,000 at June 30, 1998. A combined federal
and state statutory tax rate of 40.59% was applied in the calculation.

(10) Earnings per share on a pro forma basis is computed using the historical
weighted average shares of MidAmerican Realty Services Company as of June
30, 1999 of 10,000, after giving effect to the following events as if they
had occurred at the beginning of the period: (a) the issuance of 2,149
shares issued in August 1999 in connection with the acquisition of Paul
Semonin Realtors, (b) the exchange of 677.87 shares of HomeServices common
stock for each share of MidAmerican Realty Services Company common stock
in the merger of the two which was consummated on the date of this
prospectus and (c) the issuance of the 2,187,500 shares to be sold by
HomeServices in the offering after the merger.

29
<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) LONG (2) ADJUSTMENTS PRO FORMA
------------- ------------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Commission revenue .............................. $148,979 $15,993 $23,980 $ $188,952
Title fees ...................................... 10,644 -- -- 10,644
Other ........................................... 8,101 409 249 8,759
-------- ------- ------- ------ --------
Total revenues ................................ 167,724 16,402 24,229 208,355
-------- ------- ------- ------ --------
Operating expenses:
Commission expense .............................. 102,085 11,098 17,696 130,879
Depreciation and amortization ................... 3,718 274 214 403 (3) 4,609
All other operating expenses .................... 52,242 4,169 4,712 61,123
-------- ------- ------- -------- --------
Total operating expenses ...................... 158,045 15,541 22,622 403 196,611
-------- ------- ------- -------- --------
Operating income (loss) .......................... 9,679 861 1,607 (403) 11,744
Interest and other income (expense), net ......... (1,775) (37) 38 (238)(4) (2,012)
-------- ------- ------- ------- --------
Income (loss) before income taxes ................ 7,904 824 1,645 (641) 9,732
Income taxes (benefit) ........................... 3,278 339 669 (267)(5) 4,019
-------- ------- ------- ------- --------
Net income (loss) ................................ $ 4,626 $ 485 $ 976 $ (374) $ 5,713
======== ======= ======= ======= ========
Per share information(6):
Earnings per share -
Basic .......................................... $ 0.68 $ 0.55
Diluted ........................................ $ 0.68 $ 0.54
Weighted average shares
Outstanding -
Basic .......................................... 6,779 10,423
Diluted ........................................ 6,779 10,666
</TABLE>

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

(2) Reflects the historical results of Long Realty for the period presented.

(3) 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.

(4) Reflects interest expense on the $8.0 million loan from parent at 5.94%.

(5) 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 $170,000 at June 30, 1999. A combined federal
and state statutory tax rate of 40.59% was applied in the calculation.

(6) Historical earnings per share for MidAmerican Realty is computed using its
historical weighted average shares of 10,000 as of June 30, 1999, times
the exchange rate of 677.87 shares of HomeServices common stock for each
share of MidAmerican Realty Services Company common stock in a merger of
the two expected to be consummated immediately prior to the offering.

Earnings per share on a pro forma basis is computed using the historical
weighted average shares of MidAmerican Realty Services Company as of June
30, 1999 of 10,000, after giving effect to the following events as if they
had occurred at the beginning of the period: (a) the issuance of

30
<PAGE>

(footnote continued)

2,149 shares issued in August 1999 in connection with the acquisition of
Paul Semonin Realtors, (b) the exchange of 677.87 shares of HomeServices
common stock for each share of MidAmerican Realty Services Company common
stock in the merger of the two which was consummated on the date of this
prospectus and (c) the issuance of the 2,187,500 shares to be sold by
HomeServices in the offering after the merger. 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 .................. $5,713
------

Basic EPS
Income Available to Common
Shareholders ................ 5,713 10,423 $ 0.55
======
Effect of Dilutive Securities
Stock Options ............... -- 243
------ ------
Diluted EPS
Income Available to Common
Shareholders ................ $5,713 10,666 $ 0.54
====== ====== ======
</TABLE>

31
<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
Cash held in trust .............................. 9,489
Income taxes receivable ......................... 1,645
Other current assets ............................ 1,789 820
-------- --------
36,944 (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 ................................. $132,001 $ 10,283
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................ $ 3,876 $ --
Accrued expenses ................................ 10,915
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
-------- --------
30,406 1,050
-------- --------
Other liabilities:
Deferred taxes .................................. 93
Long-term debt .................................. 56,405 395
Agent profit sharing ............................ 5,069
Other noncurrent liabilities .................... 90 338
-------- --------
61,657 733
-------- --------
Total liabilities ............................ 92,063 1,783
-------- --------
Stockholders' equity:
Common stock, no par value, 10,000
shares issued and outstanding (actual);
$0.01 par value, 10,422,942 shares
issued and outstanding (pro forma) ............ 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 ...................................... $132,001 $ 10,283
======== ========

<PAGE>

<CAPTION>
PRO FORMA
LONG BEFORE OFFERING HOMESERVICES
ACQUISITION (2) OFFERING ADJUSTMENTS(3) PRO FORMA
ASSETS ----------------- ------------ ---------------- -------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents ....................... $ (7,115) $ (373) $27,772 $ 27,399
Mortgage loans held for sale and other
receivables ................................... 1,355 15,532 15,532
Cash held in trust .............................. 245 9,734 9,734
Income taxes receivable ......................... 1,645 1,645
Other current assets ............................ 2,609 2,609
-------- -------- ------- --------
(5,515) 29,147 27,772 56,919
-------- -------- ------- --------
Other assets:
Office property and equipment, net .............. 1,296 20,641 20,641
Intangible assets, net of accumulated
amortization of $2,327......................... 14,700 99,143 99,143
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 .................................... 37 987 987
-------- -------- ------- --------
16,033 123,655 -- 123,655
-------- -------- ------- --------
Total assets ................................. $ 10,518 $152,802 $27,772 $180,574
======== ======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................ $ 123 $ 3,999 $ -- $ 3,999
Accrued expenses ................................ 1,574 12,489 12,489
Payable to affiliates ........................... 8,000 8,635 8,635
Cash held in trust .............................. 245 9,734 9,734
Current portion of agent profit sharing ......... 433 433
Current portion of long-term debt ............... 169 3,371 3,371
Other current liabilities ....................... 2,906 2,906
-------- -------- ------- --------
10,111 41,567 -- 41,567
-------- -------- ------- --------
Other liabilities:
Deferred taxes .................................. 93 93
Long-term debt .................................. 407 57,207 57,207
Agent profit sharing ............................ 5,069 5,069
Other noncurrent liabilities .................... 428 428
-------- -------- ------- --------
407 62,797 -- 62,797
-------- -------- ------- --------
Total liabilities ............................ 10,518 104,364 -- 104,364
-------- -------- ------- --------
Stockholders' equity:
Common stock, no par value, 10,000
shares issued and outstanding (actual);
$0.01 par value, 10,422,942 shares
issued and outstanding (pro forma) ............ 10 94 104
Additional paid-in capital ...................... 48,005 27,678 75,683
Notes receivable ................................ (753) (753)
Accumulated other comprehensive loss ............ (16) (16)
Accumulated earnings ............................ 1,192 1,192
-------- -------- --------- --------
Total stockholders' equity ................... -- 48,438 27,772 76,210
-------- -------- ------- --------
Total liabilities and stockholders'
equity ...................................... $ 10,518 $152,802 $27,772 $180,574
======== ======== ======= ========
</TABLE>

See Notes to Unaudited Pro Forma Consolidated Balance Sheet.

32
<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 (dollars in
thousands).

<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 represent the fair value of assets and
liabilities received/assumed in the acquisition of Long Realty, as well as
the following adjustments to effect the acquisition (dollars in
thousands).

<TABLE>
<CAPTION>
LINE ITEM DESCRIPTION AMOUNT
- ------------------------------------------------------- ---------------------------------------- ------------
<S> <C> <C>
Cash Cash on hand used, net of cash
acquired of $885 $ (7,115)
Mortgage loans held for sale and other receivables Value of pending real estate contracts 1,055
Intangible assets, net Goodwill 14,700
Payable to affiliates Loan from parent 8,000
</TABLE>

(3) The amounts shown in this column reflect the estimated effect of
HomeServices issuance of 2,187,500 shares of its common stock at the
initial public offering price of $15.00 per share, less estimated fees
and expenses of $5.0 million to be paid by HomeServices.

33
<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 years 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 six months ended 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
Amortization of pending real
estate sales contracts .................. -- -- -- -- --
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

<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 $26,244 $148,979
Title fees ............................... 14,154 2,455 10,644
Other (a) ................................ 6,790 1,019 8,101
Total revenues .......................... 190,591 29,718 167,724
Commission expense ....................... 113,225 16,687 102,085
Amortization of pending real
estate sales contracts .................. 18,271 4,744 --
Depreciation and amortization ............ 4,177 600 3,718
All other operating expenses (a) ......... 59,265 7,878 52,242
Total operating expenses ................ 194,938 29,909 158,045
Operating income (loss) .................. (4,347) (191) 9,679
Interest and other income
(expense), net .......................... (1,334) (228) (1,775)
Income (loss) before income taxes (5,681) (419) 7,904
Income taxes (benefit) ................... (2,247) (166) 3,278
Minority interest ........................ -- -- --
Net income (loss) ........................ $ (3,434) $ (253) $ 4,626
</TABLE>

34
<PAGE>

<TABLE>
<CAPTION>
PREDECESSOR HOMESERVICES
----------------------------------------------------------- -------------------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, JAN 1 - MAY 28 - MAY 28 - ENDED
----------------------------------------------- MAY 27, DEC. 31, JUNE 30, JUNE 30,
1994 1995 1996 1997 1998 1998 1998 1999
----------- ----------- ----------- ----------- ----------- ------------ ------------ -----------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT AMOUNTS PER SHARE)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA: (CONT.)
Earnings (loss) per share:(b)
Basic and diluted ............ $ 0.54 $ 0.29 $ 0.76 $ 1.03 $ 0.41 $ (0.51) $ (0.04) $ 0.68
Weighted average shares
outstanding:(b)
Basic and diluted ............ 4,694 4,694 4,694 4,719 4,748 6,779 6,779 6,779
OTHER DATA:
EBITDA (c) .................... $ 6,456 $ 5,881 $ 15,798 $ 16,740 $ 6,004 $ 18,101 $ 5,153 $ 13,397
Net cash provided by (used in)
operating activities ......... 68 (2,503) 2,134 5,297 4,991 12,428 5,014 16,198
Net cash used in investing
activities ................... (4,004) (6,502) (8,874) (6,759) (891) (99,126) (70,342) (5,890)
Net cash provided by (used in)
financing activities ......... 3,820 9,571 10,664 (1,575) (1,940) 89,812 72,133 (1,878)
</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 62,346 128,520 132,001
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
----------- ----------- ----------- -----------
OPERATING DATA:
<S> <C> <C> <C> <C>
Closed transaction sides ............. 15,726 16,233 47,836 48,631
Average home sales price
(in thousands) ...................... $ 106.3 $ 118.8 $ 120.9 $ 127.1
Closed transaction volume
(Closed transaction sides
multiplied by average home
sales price) (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 32 103 103
Number of sales associates (at
period end) ......................... 944 911 3,063 3,298

PREDECESSOR HOMESERVICES
----------- ---------------------------------
SIX MONTHS
JAN 1 - MAY 28 - MAY 28 - ENDED
MAY 27, DEC. 31, JUNE 30, JUNE 30,
1998 1998 1998 1999
----------- ---------- ---------- -----------
OPERATING DATA:
<S> <C> <C> <C> <C>
Closed transaction sides ............. 18,578 41,580 6,530 33,393
Average home sales price
(in thousands) ...................... $ 132.3 $ 138.1 $ 130.8 $ 146.0
Closed transaction volume
(Closed transaction sides
multiplied by average home
sales price) (in millions) .......... $ 2,458 $ 5,741 $ 854 $ 4,877
Average sales commission (%)
(Commission revenue divided by
home sales volume) .................. 3.0% 3.0% 3.1% 3.1%
Number of branch offices (at
period end) ......................... 98 124 97 123
Number of sales associates (at
period end) ......................... 3,056 4,282 3,032 4,303
</TABLE>

35
<PAGE>

- -------------------------------
(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
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" as of December
31, 1994, 1995 and 1996, respectively. Since 1997, HomeServices has not
been engaged in real estate development operations to any significant
degree.

(b) Earnings (loss) per share of the predecessor is computed using restated
weighted average shares outstanding, after giving effect to a
restructuring of its common stock which occurred in 1997. Earnings (loss)
per share of HomeServices is computed using the historical weighted
average shares of MidAmerican Realty Services Company as of June 30, 1999
of 10,000 shares, after giving effect to the exchange of 677.87 shares of
HomeServices common stock for each share of MidAmerican Realty Services
Company common stock in the merger of the two which was consummated on the
date of this prospectus.

(c) EBITDA is defined as net income (loss) before minority interest, income
taxes (benefit) and interest and other income (expense), net, plus
depreciation and amortization and amortization of pending real estate
sales contracts. HomeServices has included information concerning EBITDA
because it believes that it is useful to an investor in evaluating the
operating performance of HomeServices as it compares to other companies
because this measure 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, it may not
necessarily be 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,
or results of operations in accordance with generally accepted accounting
principles. EBITDA should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles.

36
<PAGE>

(footnote continued)

The following table presents the calculation of EBITDA for each of the
periods shown:

<TABLE>
<CAPTION>
PREDECESSOR HOMESERVICES
------------------------------------------------- -----------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------- SIX MONTHS
JAN 1 - MAY 28 - MAY 28 - ENDED
MAY 27, DEC. 31, JUNE 30, JUNE 30,
1994 1995 1996 1997 1998 1998 1998 1999
--------- --------- --------- --------- --------- ------------ ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) ............... $2,517 $1,345 $ 3,574 $ 4,860 $1,953 $ (3,434) $ (253) $ 4,626
Minority interest ............... -- -- 1,276 633 -- -- -- --
Income taxes (benefit) .......... 1,853 1,471 3,263 4,725 1,664 (2,247) (166) 3,278
Interest and other (income)
expense, net ................... 324 942 2,582 903 94 1,334 228 1,775
------ ------ ------- ------- ------ -------- ------ -------
Operating income (loss) ......... 4,694 3,758 10,695 11,121 3,711 (4,347) (191) 9,679
Depreciation and
amortization ................... 1,762 2,123 5,103 5,619 2,293 4,177 600 3,718
Amortization of pending real
estate sales contracts ......... -- -- -- -- -- 18,271 4,744 --
------ ------ ------- ------- ------ -------- ------ -------
EBITDA .......................... $6,456 $5,881 $15,798 $16,740 $6,004 $ 18,101 $5,153 $13,397
</TABLE>

37
<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.

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 with
11 offices and a leading market share in Louisville in terms of closed
transaction sides, and operations in Lexington, Kentucky and southern Indiana.
In August 1999, HomeServices acquired Long Realty, a Tucson, Arizona real
estate brokerage firm with 12 offices and a leading market share in Tucson in
terms of closed transaction sides.

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.
Acquired identifiable assets consisted primarily of receivables and property
and equipment. The following table displays the purchase price, goodwill
recorded and liabilities assumed for the above acquisitions, in thousands of
dollars.

<TABLE>
<CAPTION>
PURCHASE GOODWILL LIABILITIES
PRICE RECORDED ASSUMED
---------- ---------- ------------
<S> <C> <C> <C>
Iowa Realty and Edina Realty ........... $78,300 $54,607 $31,641
Home Real Estate ....................... 5,200 3,145 301
CBS Real Estate ........................ 5,300 3,512 637
J.C. Nichols ........................... 16,800 13,128 7,708
Nebraska Land Title & Abstract ......... 800 346 273
Paul Semonin ........................... 13,300 10,177 1,783
Long Realty ............................ 16,000 14,700 2,518
</TABLE>

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. For the six months ended June 30, 1999,
on a pro forma basis, commission revenues represented approximately 91% of
total revenues.

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 on a pro forma basis for the six
months ended June 30, 1999;

38
<PAGE>

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

o relocation services for corporate customers; franchise services in
which HomeServices provides 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--less than 1% of HomeServices' overall revenues on a pro
forma basis 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.

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 or its predecessor has paid to sales associates 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.

Amortization of pending real estate sales contracts is the expensing of 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 amortized 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.

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 $5.89, which was the book value of the
common stock on June 30, 1999, after giving effect to the issuance of
approximately 677.87 shares of HomeServices' common stock in exchange for each
share of common stock of MidAmerican Realty Services Company, which merger
occurred on the date of this prospectus. HomeServices expects to take a
one-time charge against net income of $2.2 million in the fourth quarter of
1999.

HomeServices' office property and equipment are depreciated over their
estimated useful lives, which range from three to 39 years using straight-line
and accelerated methods. As of June 30, 1999, goodwill, net of accumulated
amortization, comprised approximately 55.3% of HomeServices' total assets and
approximately 186.0% of stockholders' equity. Goodwill arises when an acquirer
accounts for a business acquisition under the purchase method of accounting and
the purchase price is more than the fair value of the tangible and separately
measurable intangible net assets of that business. 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

39
<PAGE>

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. Generally accepted accounting principles require that this
goodwill and all other intangible assets be amortized over the period
benefitted. Amortization represents a noncash deduction in the determination of
operating income and so reduces reported earnings, but it does not reduce cash
flows.

All other operating expenses consist primarily of the following: (1) salaries
and employee benefits paid to employees, which excludes 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 following discussions of the historical results of operations of
HomeServices and its predecessor describe the results of operations of each
entity for its respective periods. Additionally, a discussion of pro forma
results for the six months ended June 30, 1999 compared to pro forma results
for the six months ended June 30, 1998 is included. Although the pro forma
results of operations are not necessarily indicative of the future results of
operations of HomeServices, management believes the discussion provides
meaningful insight into the operations of the entities which now comprise
HomeServices.

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. 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 are included from
their respective acquisition dates in the third quarter of 1998 and for
Nebraska Land Title & Abstract in the fourth quarter of 1998. CBS Real Estate
Company, HOME Real Estate Holdings Inc., J.C. Nichols and Nebraska Land Title &
Abstract are referred to below as the "nonpredecessor" acquired entities.

40
<PAGE>

HISTORICAL RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999,
AND PERIODS IN 1998

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

<TABLE>
<CAPTION>
HOMESERVICES PREDECESSOR
------------------------------------------------------------------------- -----------------------
SIX MONTHS MAY 28, 1998 MAY 28, 1998 JANUARY 1, 1998
ENDED THROUGH THROUGH THROUGH
JUNE 30, 1999 DECEMBER 31, 1998 JUNE 30, 1998 MAY 27, 1998
------------------------ ------------------------ ----------------------- -----------------------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commission revenue ......... $148,979 88.8 % $169,647 89.0 % $26,244 88.3 % $74,893 86.8 %
Title fees ................. 10,644 6.4 % 14,154 7.4 % 2,455 8.3 % 7,575 8.8 %
Other ...................... 8,101 4.8 % 6,790 3.6 % 1,019 3.4 % 3,769 4.4 %
-------- --------- -------- --------- ------- --------- ------- ---------
Gross revenues ........... 167,724 100.0 % 190,591 100.0 % 29,718 100.0 % 86,237 100.0 %
-------- --------- -------- --------- ------- --------- ------- ---------
Commission expense ......... 102,085 60.9 % 113,225 59.4 % 16,687 56.2 % 49,107 56.9 %
Amortization of pending
real estate sales
contracts ................. -- -- 18,271 9.6 % 4,744 15.9 % -- --
Depreciation and
amortization .............. 3,718 2.2 % 4,177 2.2 % 600 2.0 % 2,293 2.7 %
All other operating
expenses .................. 52,242 31.1 % 59,265 31.1 % 7,878 26.5 % 31,126 36.1 %
-------- --------- -------- --------- ------- --------- ------- ---------
Total operating
expenses ................ 158,045 94.2 % 194,938 102.3 % 29,909 100.6 % 82,526 95.7 %
-------- --------- -------- --------- ------- --------- ------- ---------
Operating income (loss) .... 9,679 5.8 % (4,347) (2.3)% (191) (0.6)% 3,711 4.3 %
Other income (expense),
net ....................... (1,775) (1.1)% (1,334) (0.7)% (228) (0.8)% (94) (0.1)%
-------- ----- -------- ----- ------- ----- ------- -----
Income (loss) before
income taxes .............. 7,904 4.7 % (5,681) (3.0)% (419) (1.4)% 3,617 4.2 %
Income taxes (benefit) ..... 3,278 2.0 % (2,247) (1.2)% (166) (0.6)% 1,664 1.9 %
-------- --------- -------- ----- ------- ----- ------- ---------
Net income (loss) .......... $ 4,626 2.7 % $ (3,434) (1.8)% $ (253) (0.8)% $ 1,953 2.3 %
======== ========= ======== ===== ======= ===== ======= =========
Selected Statistics:
Closed transaction sides ... 33,393 41,580 6,530 18,578
Closed transaction volume
(in millions) ............. $ 4,877 $ 5,741 $ 854 $ 2,458
Average home sales price.... $ 146.0 $ 138.1 $ 130.8 $ 132.3
</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 the
brokerage firms have historically been weakest in the first and fourth
quarters. Although commission expense is variable with closed transactions,
many 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.

RESULTS OF OPERATIONS OF HOMESERVICES FOR THE SIX MONTHS ENDED JUNE 30,
1999

REVENUES. Total revenues for the first six months of 1999 were $167.7 million.
Commission revenue accounted for 88.8% of total revenues and was generated by
the companies acquired by HomeServices in 1998. Compared to the last six months
of 1998, the first six months of 1999 reflected a 4.7% increase in the average
price of homes. Title fees totaling $10.6 million accounted for 6.4% of total
revenues and included title revenues of the brokerage firms and a title
services company acquired in December 1998. Other revenues include escrow and
closing revenue, mortgage service fee income, franchise fees, relocation and
referral revenue and various other revenues.

COMMISSION EXPENSE. Commission expense totaled $102.1 million, or 68.5% of
commission revenue, for the six months ended June 30, 1999. Commission expense
as a percentage of commission revenue will vary due to sales associate
productivity, seasonality and pay scales of the various subsidiaries.

41
<PAGE>

DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the first six
months of 1999 totaled $3.7 million which included $1.2 million of amortization
of goodwill related to the 1998 acquisitions.

ALL OTHER OPERATING EXPENSES. All other operating expenses for the first six
months of 1999 totaled $52.2 million. Salaries and employee benefits accounted
for $24.3 million of the total. Included in salaries and employee benefits for
the 1999 six-month period was a higher than usual amount of medical claims and
the initiation of the sales agent stock purchase plan. Also included in other
operating expenses were additional occupancy and start-up costs due to
expansion of the title business in Omaha.

OTHER INCOME (EXPENSE), NET. Other income (expense) for the first six months of
1999 consisted primarily of interest expense. Interest expense for the first
six months of 1999 was $2.1 million. Interest expense in 1999 reflected a full
six-month amount of interest related to debt used to finance the acquisitions
of the nonpredecessor acquired entities in 1998. Initial financing was obtained
through 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. Other income was primarily interest income.

INCOME TAXES (BENEFIT). The effective tax rate for the six months ended June
30, 1999, was 41.5% which is higher than HomeServices statutory rate of
approximately 40.6% due to permanent tax differences for certain goodwill
amortization and other non-deductible expenses.

NET INCOME (LOSS). Net income for the first six months of 1999 was $4.6
million, reflecting operations of the entities acquired in 1998 for the full
period.

RESULTS OF OPERATIONS OF HOMESERVICES FOR THE PERIOD FROM MAY 28, 1998
THROUGH DECEMBER 31, 1998

The results of operations for this period reflect the operations of Iowa Realty
and Edina Realty and their subsidiaries for the entire period. They also
include the results of operations for the nonpredecessor acquired entities from
their date of acquisition through December 31, 1998, which acquisition dates
are disclosed above under "--Acquisition History."

REVENUES. Total revenues for the period were $190.6 million. Commission revenue
from the real estate brokerage operations was $169.6 million, or 89.0% of total
revenues. Title fees for the period were $14.2 million, or 7.4% of total
revenues. The amount of title fees is affected by the number of brokerage and
refinancing transactions. The number of refinancing transactions during the
period was favorably affected by interest rates which were lower than in 1997.
Other revenues were $6.8 million, or 3.6% of total revenues. Other revenues
include escrow and closing revenue, mortgage service fee income, franchise
fees, relocation and referral revenue and various other revenues.

COMMISSION EXPENSE. Commission expense from the real estate brokerage
operations was $113.2 million, or 66.7% of commission revenue.

AMORTIZATION OF PENDING REAL ESTATE SALES CONTRACTS. 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
the 1998 acquisitions was $18.3 million, which was fully amortized to expense
in the period ended December 31, 1998. This was a noncash expense.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the period was
$4.2 million, of which $1.3 million was the amortization of goodwill related to
the 1998 business acquisitions.

ALL OTHER OPERATING EXPENSES. All other operating expenses for the period
totaled $59.3 million, or 31.1% of total revenues. All other operating expenses
included salaries and employee benefits of $27.6 million, occupancy costs of
$9.1 million, business promotion and advertising expenses of $8.6

42
<PAGE>

million and other operating costs. Although the overall operation of the
entities acquired by HomeServices continued basically the same as prior to
their acquisition, the period reflects costs related to the acquisitions, such
as changing signage and other transition costs.

OTHER INCOME (EXPENSE), NET. Other income (expense) consisted primarily of
interest expense, totaling $1.9 million. Initial financing for the acquisitions
was obtained through 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 effective tax rate for the period was 39.6% which
is lower than HomeServices statutory rate of approximately 40.6% due to
permanent tax differences for certain goodwill amortization and other
non-deductible expenses.

NET INCOME (LOSS). HomeServices net loss for the period from May 28, 1998,
through December 31, 1998, was $3.4 million. The net loss included the
amortization of the value of real estate sales contracts that were pending at
the date of acquisition of the entities acquired by HomeServices in 1998.
Amortization of these sales contracts resulted in an $18.3 million noncash
charge that reduced net income by $10.9 million. The entire balance of such
contracts was expensed as of December 31, 1998.

RESULTS OF OPERATIONS OF HOMESERVICES FOR THE PERIOD FROM MAY 28, 1998
THROUGH JUNE 30, 1998

The results of operations for this period reflect the operations of Iowa Realty
and Edina Realty and their subsidiaries.

REVENUES. Total revenues for the period were $29.7 million. Commission revenue
from the real estate brokerage operations was $26.2 million, or 88.3% of total
revenues. Title fees were $2.5 million, or 8.3% of total revenues. Other
revenues were $1.0 million, or 3.4% of total revenues.

COMMISSION EXPENSE. Commission expense from the real estate brokerage
operations was $16.7 million, or 63.6% of commission revenue.

AMORTIZATION OF PENDING REAL ESTATE SALES CONTRACTS. 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
the acquisition of the predecessor was $14.2 million, one-third of which was
amortized to expense in the period.

ALL OTHER OPERATING EXPENSES. All other operating expenses for the period
totaled $7.9 million, or 26.5% of total revenues. All other operating expenses
included salaries and employee benefits of $3.5 million, occupancy costs of
$1.2 million, business promotion and advertising expenses of $1.4 million and
other operating costs. Although the overall operation of the entities acquired
by HomeServices continued basically the same as prior to their acquisition, the
period reflects costs related to the acquisitions, such as changing signage and
other transition costs.

OTHER INCOME (EXPENSE), NET. Other income (expense) consisted primarily of
interest expense of $0.3 million related to borrowings from MidAmerican
Holdings to finance the acquisition.

NET INCOME (LOSS). HomeServices net loss for the period from May 28, 1998,
through June 30, 1998, was $0.3 million. The net loss included the amortization
of the value of real estate sales contracts that were pending at the date of
acquisition of the entities acquired by HomeServices in May 1998. Amortization
of one-third of these sales contracts resulted in a $4.7 million noncash charge
that reduced net income by $2.8 million.

43
<PAGE>

RESULTS OF OPERATIONS OF PREDECESSOR FOR THE PERIOD FROM JANUARY 1, 1998
THROUGH MAY 27, 1998

The results of operations for this period reflect the operations of Iowa Realty
and Edina Realty and their subsidiaries for the entire period. Iowa Realty sold
Home Realty on May 7, 1998. Accordingly, Home Realty's results of operations
are not included for the period following the sale.

REVENUES. Total revenues for the period were $86.2 million. Commission revenue
from the real estate brokerage operations was $74.9 million, or 86.8% of total
revenues. Title fees for the period were $7.6 million, or 8.8% of total
revenues. Other revenues were $3.8 million, or 4.4% of total revenues. Other
revenues include escrow and closing revenue, mortgage service fee income,
franchise fees, relocation and referral revenue and various other revenues.

COMMISSION EXPENSE. Commission expense from the real estate brokerage
operations was $49.1 million, or 65.6% of commission revenue.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the period was
$2.3 million, of which $0.8 million was the amortization of intangibles,
including goodwill related to acquisitions.

ALL OTHER OPERATING EXPENSES. All other operating expenses for the period
totaled $31.1 million, or 36.1% of total revenues. All other operating expenses
included salaries and employee benefits of $14.6 million, occupancy costs of
$5.6 million, business promotion and advertising expenses of $5.2 million and
other operating costs.

INCOME TAXES (BENEFIT). The effective tax rate for the period was 46.0% which
is higher than the predecessor's statutory rate due to permanent tax
differences for certain goodwill amortization and other non-deductible
expenses.

NET INCOME (LOSS). The predecessors net income for the period from January 1,
1998, through May 28, 1998, was $2.0 million.

44
<PAGE>

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 3.7
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 1.6
======== ====== ======== ======
Selected Statistics:
Closed transaction sides ........................ 48,631 47,836
Closed transaction 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 $11.7 million, or 6.5%, 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 predecessor, excluding the July acquisition of HOME
Real Estate, was 46,225 in 1997, a decrease of 1,611, or 3.5%, 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.

45
<PAGE>

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 $2.5 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.

46
<PAGE>

PRO FORMA RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999
COMPARED TO PRO FORMA RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE
30, 1998

The following table reflects selected information of HomeServices on a pro
forma basis for the six month periods ended June 30, 1999 and 1998. The
information is shown in dollars and as a percentage of total revenues. For each
period, the pro forma amounts reflect the results of operations of all entities
acquired by HomeServices as discussed above under "--Acquisition History."
Although the amounts shown in the following table are not necessarily
indicative of those that HomeServices would have had if the acquisitions had
actually taken place on January 1, 1998, management believes they provide
useful insight into the operations of what is now HomeServices. Such belief is
based in part on the fact that the operations of the individual entities remain
basically intact as they were prior to the respective acquisitions. Dollars are
in thousands unless otherwise noted.

<TABLE>
<CAPTION>
PRO FORMA SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------
1999 1998
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Commission revenue ...................................... $188,952 90.7 % $ 162,432 89.9 %
Title fees .............................................. 10,644 5.1 % 10,344 5.7 %
Other ................................................... 8,759 4.2 % 7,844 4.4 %
-------- --------- --------- ---------
Gross revenue .......................................... 208,355 100.0 % 180,620 100.0 %
-------- --------- --------- ---------
Commission expense ...................................... 130,879 62.8 % 110,024 60.9 %
Amortization of pending real estate sales contracts ..... -- -- % 21,026 11.7 %
Depreciation and amortization ........................... 4,609 2.2 % 4,215 2.3 %
All other operating expenses ............................ 61,123 29.4 % 54,516 30.2 %
-------- --------- --------- ---------
Total operating expenses ............................... 196,611 94.4 % 189,781 105.1 %
-------- --------- --------- ---------
Operating income (loss) ................................. 11,744 5.6 % (9,161) (5.1)%
Other income (expense), net ............................. (2,012) (0.9)% (1,612) (0.9)%
-------- --------- ---------- --------
Income (loss) before income taxes ....................... 9,732 4.7 % (10,773) (6.0)%
Income taxes (benefit) .................................. 4,019 2.0 % (4,307) (2.4)%
-------- --------- --------- -----
Net income (loss) ....................................... $ 5,713 2.7 % $ (6,466) (3.6)%
======== ========= ========= =====
Selected Statistics:
Closed transaction sides ................................ 42,482 39,282
Closed transaction volume (in millions) ................. $ 6,208 $ 5,368
Average home sales price ................................ $ 146.1 $ 136.7
</TABLE>

REVENUES. Total revenues for the first six months of 1999 were $208.4 million,
an increase of $27.7 million, or 15.4%, compared to the same period in 1998.
Commission revenue from the brokerage operations increased $26.5 million, or
16.3%, compared to the same period in 1998. The increase in commission revenue
was due to an 8.1% increase in closed transaction sides and a 6.9% increase in
the average home sales price. Closed transaction sides increased in part due to
acquisitions in May 1998 of residential real estate brokerage firms by two of
the HomeServices companies prior to their being acquired by HomeServices.

Title fees for the first six months of 1999 were $10.6 million, an increase of
$0.3 million, or 2.9%, 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 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 $8.8 million, an increase
of $0.9 million compared to the same period in 1998.

47
<PAGE>

COMMISSION EXPENSE. Commission expense from the real estate brokerage
operations for the first six months of 1999 was $130.9 million, an increase of
$20.9 million, or 19.0%, compared to the same period in 1998. The increase is
due primarily to the increase in commission revenue. Additionally, commission
expense as a percentage of commission revenue increased from 67.7% in the first
six months of 1998 to 69.3% in the first six months of 1999. Commission pay
rates are affected by factors such as the number of transaction sides, sales
associate productivity, sales associate recruitment programs and the mix of
where the transaction sides are produced. Some areas have higher pay schedules
and will cause HomeServices overall commission expense percentage of commission
revenues to increase if a greater portion of the transaction sides are from
that market. The three subsidiaries of HomeServices with the highest payout
percentages accounted for 33.4% of HomeServices closed transaction sides for
the six months ended June 30, 1999, compared to 30.1% for the same period in
1998. Another factor contributing to the increase in commission expense was
that the combined commission expense as a percentage of commission revenue
increased by 1.0% for these subsidiaries.

AMORTIZATION OF PENDING REAL ESTATE SALES CONTRACTS. 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 was
$21.0 million, which was fully amortized to expense in the 1998 six-month
period. This was a noncash expense.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the first six
months of 1999 increased $0.4 million to $4.6 million for the six month ended
June 30, 1999. Amortization of goodwill related to the acquisition of the
HomeServices companies totaled $1.7 million in each of the periods.

ALL OTHER OPERATING EXPENSES. All other operating expenses for the first six
months of 1999 were $61.1 million, an increase of $6.6 million, or 12.1%,
compared to the same period in 1998. Approximately $3.2 million of the increase
relates to salaries and employee benefits as a result of higher bonuses due to
increased sales, improved benefits for some of the acquired entities, the
impact of the companies acquired by two of HomeServices subsidiaries in May
1998, and general increases due to inflation. Increased occupancy costs also
contributed to the increase. As a percentage of total revenues, all other
operating expenses decreased to 29.4% from 30.2%.

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 $2.4 million, an increase of $0.2 million compared to
the same period in 1998. Other income was primarily interest income, which
decreased in the 1999 period compared to the 1998 period.

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 $5.7 million
compared to a net loss of $6.5 million for the same period in 1998. The net
loss for the 1998 period included the amortization of the value of real estate
sales contracts that were pending at the dates of acquisition of entities
acquired by HomeServices. The amortization resulted in a $21.0 million noncash
charge which reduced net income for the six months ended June 30, 1998, by
$12.5 million. Excluding the impact of the noncash charge, net income decreased
slightly, due primarily to the affect of the increase in commission expense as
a percentage of commission revenues.

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

48
<PAGE>

June 30, 1999, compared to $3.1 million and $6.8 million at December 31, 1998,
and June 30, 1998, respectively.

HomeServices' cash provided by operating activities was $16.2 million for the
six months ended June 30, 1999, $12.4 million for the period May 28, 1998,
through December 31, 1998, and $5.0 million for the period May 28, 1998,
through June 30, 1998. The predecessor's cash provided by operating activities
was $5.0 million for the period January 1, 1998, through May 27, 1998, $5.3
million for 1997 and $2.1 million for 1996. The most significant adjustment to
net income (loss) for HomeServices' 1998 periods was the amortization of
pending real estate sales contracts. For the six months ended June 30, 1999,
and at least in the near future, depreciation and amortization, including
goodwill amortization, will be a material adjustment to reconcile net income to
cash flow from operating activities.

HomeServices' cash used in investing activities was $5.9 million for the six
months ended June 30, 1999, $99.1 million for the period May 28, 1998, through
December 31, 1998, and $70.3 million for the period May 28, 1998, through June
30, 1998. The predecessor's cash used in investing activities was $0.9 million
for January 1, 1998, through May 27, 1998, $6.8 million for 1997 and $8.9
million for 1996. HomeServices' cash used in investing activities for its 1998
periods was primarily a result of $70.1 million for the acquisition of the
predecessor and $26.4 million for the acquisitions of the nonpredecessor
acquired entities, net of cash received.

HomeServices' cash used by financing activities was $1.9 million for the six
months ended June 30, 1999, and cash provided by financing activities of $89.8
million for the period May 28, 1998, through December 31, 1998, and $72.1
million for the period May 28, 1998, through June 30, 1998. The predecessor's
cash provided by financing activities was $10.7 million for 1996, while cash
used by financing activities was $1.9 million for January 1, 1998, through May
27, 1998, and $1.6 million in 1997. HomeServices' cash provided by financing
activities in 1998 was the 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. As of December 31, 1998 and June 30, 1999, there were
no borrowings under this agreement. 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.
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. As of June 30, 1999, the blended average interest rate on the
revolving credit facility borrowings was 6.25%. 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."

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<PAGE>

On September 20, 1999, HomeServices entered into a new $75 million senior
secured revolving credit agreement with its existing commercial bank and other
banks which amended and restated its then existing $25.0 million revolving
credit facility. The senior secured revolving credit agreement has a term of
three years and is secured by a pledge of the capital stock of all of the
existing and future subsidiaries of HomeServices. The terms of the $75.0
million senior secured revolving credit agreement are described in more detail
under the caption "Description of Indebtedness."

HomeServices believes that the net proceeds that it receives from the offering,
together with its cash flow from operations and borrowings under its amended
and restated $75 million 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 and borrowings under HomeServices' revolving credit facilities
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. The weighted 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. The following table reflects
the scheduled maturities of each respective instrument and does not assume any
prepayment. 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
---------- ---------- ----------- ---------- ----------- ------------ ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES
Long-term Debt:
Fixed rate debt (principal) ........ $ 436 $ 243 $ 261 $ 281 $ 224 $ 35,000 $36,445 $37,389
Weighted average interest rate.... 6.02% 7.56% 7.56% 7.57% 7.25% 7.12%
Variable rate debt (principal) ..... $3,000 $3,000 $ 3,000 $3,000 $13,000 -- $25,000 $25,000
Weighted average interest rate.... 6.28% 6.28% 6.52% 6.59% 6.68% --
Interest Rate Swap:
Variable to fixed (notional
amount) .......................... -- -- $12,500 -- -- -- $12,500 $ 10
Weighted average pay rate ........ -- -- 5.05% -- -- --
Weighted average receive rate..... -- -- 5.27% -- -- --
</TABLE>

50
<PAGE>

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 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 $1.7 million in costs related to
addressing the year 2000 issue. HomeServices does not expect the total
remaining cost of readiness to exceed $500,000.

Additionally, HomeServices' business operations are heavily dependent upon
service providers, most significantly communication providers. HomeServices is
inquiring of its material 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
by the end of September 1999. To date, HomeServices has assessed over 70% of
its material third party vendors and service providers to determine that they
have taken actions to minimize the risk of year 2000 problems that would impede
their ability to maintain a business relationship with HomeServices.
Approximately 67% of HomeServices material third parties have responded
affirmatively. HomeServices is continuing to follow up with its material third
parties which did not respond or whose response was not adequate enough to be
considered by HomeServices as affirmative at this time. The process used to
assess material third parties entails obtaining information about their year
2000 preparedness activities via correspondence, published reports and/or
websites, and by direct contact (in person or via telephone) as necessary for
additional details about their year 2000 readiness, supply chain assessment,
contingency planning activities and other relevant information. The results of
each assessment 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 party vendors and service providers will be
unaffected by year 2000-related problems. Any failure by HomeServices' material
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 have been developed. 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 consists 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. HomeServices' contingency plans under
development by

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<PAGE>

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.
Nonetheless, HomeServices may experience material unexpected costs associated
with bringing such companies into a state of readiness.

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. HomeServices believes
its charges for occupancy, telecommunications, professional fees, data
processing, equipment leasing, office expense, corporate charges, and
depreciation, which approximated 11% of total 1998 operating expenses on a
historical basis, are costs that can not be significantly reduced in the
short-term during a seasonal slow down.

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.

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<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 its various brokerage firm operating subsidiaries. HomeServices' operations
are largely concentrated in the Midwest. 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, Paul
Semonin Realtors and Long Realty brand names in the following eleven states:
Minnesota, Iowa, Arizona, Kansas, Missouri, Kentucky, Nebraska, Wisconsin,
Indiana, North Dakota and South Dakota. HomeServices occupies the number one or
number two market share position in each of its major markets based on
aggregate closed transaction sides for the year ended December 31, 1998.
HomeServices' major markets consist of the following metropolitan areas:
Minneapolis and St. Paul, Minnesota; Des Moines, Iowa; Omaha, Nebraska; Kansas
City, Kansas; Louisville, Kentucky; Springfield, Missouri; and Tucson, Arizona.
The real estate brokerage firms that comprise HomeServices collectively manage
146 branch offices, have more than 5,800 sales associates and have operated for
between 12 and 84 years, with an average of approximately 54 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
produced any revenues to date, HomeServices has been receiving mortgage and
referral applications on-line and has transactions in process. However, no
revenues will be recognized from these services until the transactions close.
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.

According to National Association of Realtors, the median length of the home
ownership life cycle is seven years, which means that half of all homes are
owned by the same person for seven years or more and half of all homes are
owned by the same person for less than seven years. This home ownership life
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
home ownership life 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 many services
required in connection with settlement of a home purchase, such as real estate
listings, mortgage applications, inspections, appraisals, title insurance and
legal work, which the survey refers to as "one-stop shopping." HomeServices
provides many of the services that are considered by the survey to be "one-stop
shopping." 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

53
<PAGE>

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 median
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 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
home ownership life cycle and the business opportunities for HomeServices
throughout the cycle:

CONSUMER-CENTRIC BUSINESS MODEL OF THE TYPICAL HOME OWNERSHIP EXPERIENCE

[GRAPHIC OMITTED]

- -------------------------------
* 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.

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<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 LONG
-------------- ------------- -------------- ---------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Services offered:
Title ......................... x x x x
Escrow ........................ x x x
Mortgage ...................... x x x x x x
Services referred:
Property and casualty insurance x x x
Home warranty ................. x x x x x x
Home inspection ............... x x x
Home security ................. x x x x
</TABLE>

GROWTH STRATEGY

HomeServices' business objective is to become a seamless 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 by
generally targeting the acquisition of real estate brokerage firms
with the following primary attributes: local brand name recognition,
significant market share in their existing markets, which may be city,
state or regional markets, strong sales associate relationships,
successful operators and operations, fee income upside and significant
closed transaction sides volume. HomeServices will also continue to
pursue opportunities to consolidate two or more acquired companies
where such consolidation would create a real estate brokerage firm
with significant closed transaction volume within its existing market
while providing it with 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 seven major residential real estate brokerage
firms.

o Expanding its presence in its existing markets. Based on aggregate
closed transaction sides, the brokerage firms that comprise
HomeServices occupy the number one or number two market share position
in each of HomeServices' major markets. HomeServices 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

55
<PAGE>

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 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

56
<PAGE>

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:

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 54 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 believes that its
current product offerings position it as a full-service provider in
the residential real estate industry. HomeServices believes its
ability to offer brokerage, preclosing and postclosing products and
services 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 15.8 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

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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
435 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 5.2% 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.

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 aggregate closed transaction
value. Closed transaction value represents the gross sales price for a
closed home purchase and is a standard measure of market size. 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.

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.

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<PAGE>

<TABLE>
<CAPTION>
PAUL HOMESERVICES
EDINA REALTY IOWA REALTY J.C. NICHOLS CBS HOME SEMONIN LONG (TOTAL)
-------------- ------------- -------------- ------------ --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Branch Offices ............... 69 29 16 9 11 12 146
Sales Associates ............. 2,151 958 700 494 666 853 5,822
Employees .................... 668 299 166 125 114 120 1,492
Number of Transactions(1)
for 1998 .................... 31,300 20,300 9,900 10,300 7,800 8,400 88,000
Volume of Transactions
for 1998 (in billions) ...... $4.6 $2.4 $1.5 $1.4 $1.1 $1.1 $12.1
</TABLE>

- -------------------------------
(1) This figure includes the buying and selling sides of a home purchase
transaction. 88,000 represents the total number of closed transaction
sides, of which approximately 45,000 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

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.

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<PAGE>

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 received by
HomeServices that is then 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.

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 .............................. 76,021 75,761 87,974 39,282 42,482
Average sales price per home ....... $ 121.8 $ 129.8 $ 138.0 $ 136.7 $ 146.1
Average sales commission (%)
(Gross commission revenues
divided by home sales volume) ..... 3.1% 3.1% 2.9% 3.0% 3.0%
Real estate sales commissions ...... $288,138 $309,326 $356,433 $162,432 $188,952
</TABLE>

SALES ASSOCIATES

HomeServices had more than 5,800 sales associates as of June 30, 1999 after
giving effect to the Paul Semonin Realtors and Long Realty acquisitions. 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

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<PAGE>

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 9.7% from 14.4
to 15.8 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 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 a services agreement between Norwest Mortgage and the joint venture,
Norwest Mortgage provides these services and is reimbursed by the joint venture
for the costs incurred on comparable terms to those Norwest Mortgage is
reimbursed by its own loan production offices. Profits earned by the joint
venture after payment of the amounts owed to Norwest Mortgage which amount
varies, and all other expenses are then divided equally between HomeServices
and Norwest Mortgage. 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. During the period after Plaza
Mortgage closes the loan and before it sells the mortgage to the investor,
Plaza Mortgage would incur the cost if the interest rate paid by HomeServices
on borrowings made by it to fund the loan at closing is higher than the
interest rate paid on the mortgage by the mortgagee.

On a pro forma basis for the year ended December 31, 1998, HomeServices
originated approximately $590.4 million in mortgages, of which approximately
45% represented mortgages originated by HomeServices through its joint venture
with Norwest Mortgage Inc., 23% represented mortgages originated and
underwritten by Plaza Mortgage and approximately 32% represented mortgages
originated and underwritten by loan providers whose arrangements are no longer
in place. 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,
respectively, 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

61
<PAGE>

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 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. On a pro
forma basis for the year ended December 31, 1998, HomeServices generated
approximately $258,000 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

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<PAGE>

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.

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 $791,000 and $751,000 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;

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<PAGE>

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.

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, on a pro forma basis, HomeServices
incurred $18.4 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.
HomeServices has already established a hyperlink with Realtor.com, a leading
Internet real estate website. In addition, certain of HomeServices' brokerage
firm operating

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<PAGE>

subsidiaries have established hyperlinks with Realtor.com and HomeAdvisor.com,
another leading Internet real estate website, and with websites of local
newspapers in HomeServices' existing markets. These hyperlinks enable
HomeServices and its 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. The
largest residential real estate brokerage firm in the United States, including
all of its company owned franchise offices, had 348,134 aggregate closed
transaction sides in 1998 compared to 88,000 aggregate closed transaction sides
in 1998 for the various brokerage firm operating subsidiaries that comprise
HomeServices. 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 GMAC.

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.

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.

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<PAGE>

EMPLOYEES AND SALES ASSOCIATES

As of June 30, 1999, HomeServices employed approximately 1,260 individuals,
including 360 part-time employees, and had more than 4,300 sales associates,
who are independent contractors and not employees. On a pro forma basis,
HomeServices employed approximately 1,490 individuals, including approximately
420 part-time employees, and had more than 5,800 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

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

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<PAGE>

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 146 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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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
Steven A. McArthur(1)(2)(3) .......... 41 Senior Vice President, General Counsel and Secretary; Director
Dwayne J. Coben ...................... 40 Senior Vice President and Chief Financial Officer
James L. Anderson .................... 39 Director of Information Technology
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
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 III ................... 60 President and Chief Executive Officer of Paul Semonin Realtors
Stephen E. Quinlan ................... 46 President and Chief Executive Officer of Long Realty
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.

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.

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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.

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.

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, 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.

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 III 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.

STEPHEN E. QUINLAN has been President and Chief Executive Officer of Long
Realty since August of 1994. From 1976 through 1994, Mr. Quinlan has held a
variety of positions at Long Realty including

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<PAGE>

Sales Associate in residential and commercial areas, Branch Manager, General
Manager, and Designated Broker. Mr. Quinlan serves as a member of the Boards of
Directors and/or Advisory Boards for Sotheby's International Realty, Cendant
Mobility Services, Arizona Compass Bank and Southern Arizona Leadership
Council. Mr. Quinlan is also Vice President of a local Realtor Association and
a member of the Vision Group.

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 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.

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<PAGE>

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.

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 $5.89, which was the book value of the
common stock on June 30, 1999, after giving effect to the issuance of
approximately 677.87 shares of HomeServices' common stock in exchange for each
share of common stock of MidAmerican Realty Services Company, which merger
occurred on the date of this prospectus. Upon exercise of these options, each of
the directors will pay $294,500 to purchase 50,000 shares of HomeServices common
stock having an aggregate market value of $750,000, assuming that the market
value per share of common stock is $15.00, the initial public offering price per
share.

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>

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<PAGE>

- -------------------------------
(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 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 84,734 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 $4.50 per
share, a 70.0% discount to the initial public offering price of $15.00 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.

HomeServices expects, shortly following the consummation of the offering, to
amend the financial performance goals contained in the existing employment
agreement with Mr. Peltier so that the goals are related to the achievement of
certain performance criteria for HomeServices on a consolidated basis rather
than solely for Edina Realty.

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<PAGE>

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.

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
84,734 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 $4.50 per share, a
70.0% discount to the initial offering price of $15.00 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 84,734 shares of HomeServices'

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<PAGE>

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 $4.50 per share, a 70.0% discount to the
initial public offering price of $15.00 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.

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 of $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.

In connection with the acquisitions of Paul Semonin Realtors and Long Realty in
1999, HomeServices entered into employment agreements with Messrs. Gans and
Quinlan.

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.

MR. QUINLAN. Mr. Quinlan's employment agreement provides for an annual base
salary of $225,000. Mr. Quinlan is also eligible to receive an award of up to a
maximum of 45% of base salary for each of

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<PAGE>

the fiscal years during which he is employed. Mr. Quinlan will receive this
award upon the achievement of certain performance criteria and after the
compensation committee of the board of directors of HomeServices approves the
incentive award computations, based upon the recommendation of the President of
HomeServices. The term of Mr. Quinlan's employment agreement is for five years.

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 its shareholders, including MidAmerican Holdings,
have 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 250,000 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.

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 a specified percentage of the employee's base
pay or a whole dollar amount to be withheld from 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% of the fair market value of common stock on the date the cycle
begins; and

o 85% 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.

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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.

A brief summary of certain of the federal income tax consequences to the
participant and HomeServices with respect to the purchase of common stock under
the employee stock purchase plan may be found at page 78, under "Certain Federal
Income Tax Effects--Incentive Stock Options."

NON-EMPLOYEE STOCK PURCHASE PLAN

HomeServices has adopted, and its shareholders, including MidAmerican Holdings,
have 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 250,000 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.

A brief summary of certain of the federal income tax consequences to the
participant and HomeServices with respect to the purchase of common stock under
the non-employee stock purchase plan may be found at page 78, under
"Certain Federal Income Tax Effects--Nonqualified Stock Options."

1999 EQUITY INCENTIVE PLAN

HomeServices has adopted, and its shareholders, including MidAmerican Holdings,
have approved, HomeServices' 1999 equity incentive plan. A maximum of 3,000,000
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.

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).

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<PAGE>

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 3,000,000 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 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 3,000,000 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.

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<PAGE>

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. Shortly after the closing of the offering, HomeServices
expects to grant stock options pursuant to the 1999 equity incentive plan. As
of the date of this prospectus, no decision has been made as to the number, the
identity of the recipients or the other terms of stock option awards.

CERTAIN FEDERAL INCOME TAX EFFECTS

The following is a brief summary of the federal income tax consequences to
persons who are granted options under the 1999 equity incentive plan or who are
participants in the employee stock purchase plan or the non-employee stock
purchase plan. It is recommended that holders of nonqualified stock options or
incentive stock options and participants in the employee stock purchase plan or
the non-employee stock purchase plan consult their tax advisers before the
exercise of any such option or the purchase of any such shares and before
disposing of any shares of common stock acquired upon the exercise of an option
or purchased under either of the stock purchase plans. Different rules may
apply in the case of a participant in the 1999 equity incentive plan, the
employee stock purchase plan or the non-employee stock purchase plan who is
also subject to Section 16 of the Exchange Act with respect to HomeServices.

NONQUALIFIED STOCK OPTIONS. An optionee generally will not be taxed upon the
grant of a nonqualified stock option. Rather, at the time of exercise of such
nonqualified stock option (and in the case of an untimely exercise of an
incentive stock option), the optionee will recognize ordinary income for
federal income tax purposes in an amount equal to the excess of the fair market
value of the shares purchased over the option price. HomeServices will
generally be entitled to a tax deduction at such time and in the same amount
that the optionee recognizes ordinary income.

If shares of common stock acquired upon exercise of a nonqualified stock option
(or upon untimely exercise of an incentive stock option) are later sold or
exchanged, then the difference between the sales price and the fair market
value of such stock on the date that ordinary income was recognized with
respect thereto will generally be taxable as long-term or short-term capital
gain or loss (if the stock is a capital asset of the optionee) depending upon
the length of time the shares of common stock were held by the optionee.

INCENTIVE STOCK OPTIONS. An optionee will not be in receipt of taxable income
upon the grant of an incentive stock option. Exercise of an incentive stock
option will be timely if made during its term and if the optionee remains an
employee of HomeServices or a subsidiary of HomeServices at all times during
the period beginning on the date of grant of the incentive stock option and
ending on the date three months before the date of exercise (or one year before
the date of exercise in the case of a disabled optionee). Exercise of an
incentive stock option will also be timely if made by the legal representative
of an optionee who dies either while in the employ of the Company or a
subsidiary or within three months after termination of employment. The tax
consequences of an untimely exercise

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<PAGE>

of an incentive stock option will be determined in accordance with the rules
applicable to nonqualified stock options. (See "--Nonqualified Stock Options.")

If common stock acquired pursuant to the timely exercise of an incentive stock
option is later disposed of, the optionee will, except as noted below,
recognize long-term capital gain or loss (if the stock is a capital asset of
the optionee) equal to the difference between the amount realized upon such
sale and the option price. HomeServices, under these circumstances, will not be
entitled to any federal income tax deduction in connection with either the
exercise of the incentive stock option or the sale of such common stock by the
optionee.

If, however, common stock acquired pursuant to the exercise of an incentive
stock option is disposed of by the optionee prior to the expiration of two
years from the date of grant of the incentive stock option or within one year
from the date such common stock is transferred to him upon exercise (a
"disqualifying disposition"), any gain realized by the optionee generally will
be taxable at the time of such disqualifying disposition as follows: (i) the
gain realized by the optionee will be taxable at ordinary income rates to the
extent of the difference between the option price and the lesser of the fair
market value of the stock on the date the incentive stock option is exercised
or the amount realized on such disqualifying disposition and (ii) if the stock
is a capital asset of the optionee, the gain realized by the optionee will be
taxable as short-term or long-term capital gain to the extent of any excess of
the amount realized on such disqualifying disposition over the fair market
value of the stock on the date which governs the determination of his ordinary
income. In such case, HomeServices may claim a federal income tax deduction at
the time of such disqualifying disposition for the amount taxable to the
optionee as ordinary income. Any capital gain recognized by the optionee will
be long-term or short-term capital gain, depending on the length of time the
shares of common stock were held by the optionee.

The amount by which the fair market value of the stock on the exercise date of
an incentive stock option exceeds the option price will be an item of
adjustment for purposes of the "alternative minimum tax" imposed by Section 55
of the Code.

EXERCISE WITH SHARES. According to a published ruling of the Internal Revenue
Service, an optionee who pays the option price upon exercise of a nonqualified
stock option, in whole or in part, by delivering shares of common stock already
owned by him will recognize no gain or loss for federal income tax purposes on
the shares surrendered, but otherwise will be taxed according to the rules
described above for nonqualified stock options. (See "--Nonqualified Stock
Options.") With respect to shares of common stock acquired upon exercise which
are equal in number to the shares of common stock surrendered in payment of the
option price of the nonqualified stock option, the basis of those shares of
common stock will be equal to the basis of the shares of common stock
surrendered, and the holding period of the shares of common stock acquired will
include the holding period of the shares of common stock surrendered. The basis
of additional shares received upon exercise will be equal to the fair market
value of such shares on the date which governs the determination of the
optionee's ordinary income, and the holding period for such additional shares
will commence on such date.

The Treasury Department has issued proposed regulations that, if adopted in
their current form, would appear to provide for the following rules with respect
to the exercise of an incentive stock option by surrender of previously owned
shares of common stock. If the shares of common stock surrendered in payment of
the exercise price of an incentive stock option are "statutory option stock"
(which includes stock acquired pursuant to the exercise of an incentive stock
option) and if, at the date of surrender, the applicable holding period for such
shares of common stock had not been met, the surrender of those shares of common
stock will constitute a "disqualifying disposition" and any gain realized on
such transfer will be taxable to the optionee, as discussed above under
"--Incentive Stock Options." Otherwise, when shares of common stock are
surrendered upon exercise of an incentive stock option, in general, (i) no gain
or loss will be

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<PAGE>

recognized as a result of the exchange, (ii) with respect to shares of common
stock acquired upon exercise which are equal in number to the shares of common
stock surrendered in payment of the option price of the nonqualified stock
option will have a basis equal to the shares surrendered and, except for
purposes of determining whether a disposition will be a disqualifying
disposition, will have a holding period that includes the holding period of the
shares exchanged, and (iii) any additional shares of common stock received will
have a zero basis and will have a holding period that begins on the date of
exercise of the nonqualified stock option. If any of the shares received are
disposed of within two years of the date of grant of the incentive stock option
or within one year after exercise, the shares of common stock with the lowest
basis will be deemed to be disposed of first, and the disposition will be a
disqualifying disposition giving rise to ordinary income as discussed above
under "--Incentive Stock Options."

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<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The table below presents information regarding the beneficial ownership of the
common stock as of September 1, 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)......... 7,841,600 95.22% 1,062,500 6,779,100 65.04%
Ronald J. Peltier ............................. 153,036 1.85 -- 153,036 1.46
Jack W. Frost ................................. 50,000 * -- 50,000 *
R. Michael Knapp .............................. 153,036 1.85 -- 153,036 1.46
Arne M. Rovick ................................ 103,036 1.25 -- 103,036 *
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) ................................. 709,108 8.21 -- 709,108 6.55
</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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<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATIONSHIP WITH MIDAMERICAN HOLDINGS

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.

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 own 65.0% of HomeServices' common stock, or
61.6% 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

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<PAGE>

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. The services agreement will terminate on the earlier to occur of (a)
the date HomeServices and MidAmerican Holdings mutually agree to terminate the
agreement and (b) the 180th day after MidAmerican Holdings notifies
HomeServices that it no longer owns at least 5% of the HomeServices common
stock.

TAX INDEMNITY AGREEMENT

HomeServices will enter into a tax indemnity agreement with MidAmerican
Holdings that reflects each party's rights and obligations with respect to
payments and refunds of taxes attributable to periods beginning prior to and
including the date of completion of the offering. The tax indemnity agreement
will provide for payments between the two companies for certain tax adjustments
made after the offering. HomeServices will be required to pay MidAmerican
Holdings the amount of taxes attributable to the business and operations of
HomeServices and its subsidiaries for any taxable year or period ending on or
before the closing of the offering, and MidAmerican Holdings will be required
to pay HomeServices the amount of tax benefits, including refunds, attributable
to the business and operations of HomeServices and its subsidiaries for any
taxable year or period ending on or before the closing of the offering. For
purposes of calculating the payments required to be made, the tax indemnity
agreement requires MidAmerican Holdings to compute its tax liability as if
MidAmerican Holdings and HomeServices were two separate tax group filers and as
if they were both one consolidated tax group. If MidAmerican Holdings' tax
liability as one consolidated group was greater than its tax liability if it
were to file separately from HomeServices, then HomeServices would be required
under the tax indemnity agreement to pay the difference to MidAmerican
Holdings. If, however, its tax liability as one consolidated group was less
than its tax liability if it were to file separately from HomeServices, then
MidAmerican Holdings would be required to pay the difference to HomeServices.
HomeServices is unable to estimate at this time the amount of tax liability
that it may be required to pay to MidAmerican Holdings or the amount of tax
benefit that it may be entitled to receive from MidAmerican Holdings under the
actual terms of the tax indemnity agreement. During 1998, HomeServices paid to
MidAmerican Holdings $4,257,800 for its estimated share of consolidated federal
and state income tax liabilities. If, however, the tax indemnity agreement had
been in place during 1998, HomeServices would have been required to pay the
same amount to MidAmerican Holdings based on the facts and circumstances that
existed at the time of the payments. Other provisions in the tax indemnity
agreement cover the filing of tax returns, handling of audits, settlements,
elections and cooperation with respect to these matters.

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

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<PAGE>

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. On August 16, 1999, HomeServices
borrowed $8.0 million from MidAmerican Holdings under the revolving credit
agreement to fund a portion of the acquisition of Long Realty.

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
MidAmerican Realty Service Company's estimated June 30, 1999 book value based
on preliminary financial results (which is equivalent to a purchase price of
$5.84 per share of HomeServices after giving effect to the exchange of 677.87
shares of HomeServices common stock for each share of MidAmerican Realty
Services Company common stock in 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.

In May 1998, HomeServices' predecessor issued an aggregate of 338,936 shares of
common stock at a purchase price of $4.50 per share to Ronald J. Peltier, R.
Michael Knapp, James Koolhof and Arne M. Rovick, who are all executive officers
of HomeServices or one of its subsidiaries, for an aggregate purchase price of
$1,525,657.

On the date of this prospectus, MidAmerican Realty Services Company, a then
95.2% owned subsidiary of MidAmerican Energy Holdings Company, was merged with
and into HomeServices, a then wholly owned subsidiary of MidAmerican Holdings.
HomeServices was the surviving corporation in the merger. In the merger,
HomeServices issued 677.87 shares of its common stock for each share

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<PAGE>

of common stock of MidAmerican Realty Services Company. Accordingly,
HomeServices issued in the merger 7,841,600 shares to MidAmerican Energy
Holdings Company, 103,036 shares to R. Michael Knapp, 84,734 shares to James
Koolhof, 103,036 shares to Ronald J. Peltier and 103,036 shares to Arne M.
Rovick. Following this merger and before consummation of the offering,
HomeServices became the holding company for the HomeServices' real estate
brokerage firm operating subsidiaries and was 95.2% owned by MidAmerican
Holdings.

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 $165,520
expiring partner in lessor Executive Officer;
April 30, 2001 entity Director

Office lease Ronald J. Peltier, President and Chief $ 74,277
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, 2004 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>

Additionally, HomeServices has entered into a ten-year office lease agreement
to commence on or before March 31, 2000, with an annual rent of $192,173.
Stephen E. Quinlan, President and Chief Executive Officer of Long Realty, is a
partner in the lessor entity.

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DESCRIPTION OF CAPITAL STOCK

Upon the closing of the offering, HomeServices will have:

o 38,000,000 shares of common stock authorized, of which 10,422,942
shares of common stock will be issued and outstanding or 10,751,067
shares if the underwriters' over-allotment option is exercised in
full; and

o 2,000,000 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.

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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, when coupled with the provision of HomeServices' restated
certificate of 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 90 days nor more than
120 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-thousandth of
a preferred share attached to it. The purchase price per one one-thousandth 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.

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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 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 66 2/3% of the outstanding shares,
other than those shares beneficially owned by the interested
stockholder, at a meeting of stockholders.

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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. The restated certificate of
incorporation of HomeServices contains a provision electing not to be governed
by Section 203.

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' common stock has been 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 AGREEMENT

On September 20, 1999, HomeServices entered into a $75.0 million senior secured
revolving credit agreement which amended and restated its then existing $25.0
million unsecured revolving credit facility. The revolving credit agreement has
a term of three years and is secured by a pledge of the capital stock of all of
the existing and future subsidiaries of HomeServices.

Under the revolving credit agreement, HomeServices may borrow up to the maximum
commitment of $75.0 million. However, the maximum commitment will get reduced
if HomeServices purchases any of the 7.12% senior notes by the same percentage
as any decrease in the amount of 7.12% senior notes then outstanding.
HomeServices may use borrowings under the revolving credit agreement for
general corporate purposes, including, but not limited to, working capital,
financings of up to $25.0 million in any one year for non-hostile acquisitions
of entities in a similar line of business, capital expenditures and letters of
credit. In addition, the revolving credit agreement requires the consent of the
lenders for any individual acquisition in excess of $18 million or to finance
more than 55% of any acquisition from the proceeds of bank debt.

At the option of HomeServices, each individual borrowing under the revolving
credit agreement 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
as published by The Wall Street Journal. 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 1.25% to 2.50%, that varies based on
HomeServices' cash flow leverage ratio, which is the ratio of total debt then
outstanding to EBITDA for the preceding four fiscal quarters then ended.
Interest is payable at the earlier of the last day of each LIBOR interest
period or every 90 days.

The revolving credit agreement contains a number of covenants, including
limitations on (1) restricted dividends and other payments and restricted
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 to
certain affiliates, transactions with affiliates and modifications of
HomeServices' certificate of incorporation. HomeServices is required to
maintain compliance with financial performance covenants, including covenants
containing a minimum interest coverage ratio of 2.5 to 1, a minimum fixed
charge coverage ratio of 1.25 to 1, a maximum total debt to EBITDA ratio of
3.25 to 1 and a minimum consolidated net worth amount of $25.5 million plus 50%
of cumulative consolidated net income for each completed fiscal year beginning
with 1998 plus 50% of the net proceeds received from sales of HomeServices'
stock from the closing of the offering. In addition, the revolving credit
agreement requires HomeServices to offer to prepay all borrowings outstanding
thereunder, plus accrued interest, if MidAmerican Holdings ceases to own at
least 51% of the common stock of HomeServices.

Events of default under the revolving credit agreement 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.

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

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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.

On September 20, 1999, in connection with the amendment and restatement of the
revolving credit agreement, the 7.12% senior notes became secured by a pledge
of the capital stock of all of the subsidiaries of HomeServices. Prior to
September 20, 1999, the 7.12% senior notes were unsecured. The 7.12% senior
notes rank on an equal basis with borrowings outstanding under the revolving
credit agreement.

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 agreement that are discussed above.

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SHARES ELIGIBLE FOR FUTURE SALE

Immediately after the closing of the offering, HomeServices will have
10,422,942 shares of common stock issued and outstanding or 10,751,067 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 up to
3,500,000 shares of common stock reserved for issuance under the employee stock
option plan, the employee and non-employee stock purchase plans and the options
granted to directors for their initial agreement to serve. 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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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;

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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.

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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.

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.

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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
UNDERWRITERS OF SHARES
- ----------------------------------------------------------- ------------
<S> <C>
U.S. Bancorp Piper Jaffray Inc. ................. 1,145,000
Credit Suisse First Boston Corporation .......... 1,145,000
Banc of America Securities LLC .................. 70,000
BancBoston Robertson Stephens Inc. .............. 70,000
Bear, Stearns & Co. Inc. ........................ 70,000
Deutsche Bank Securities Inc. ................... 70,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ................................... 70,000
J.P. Morgan Securities Inc. ..................... 70,000
Prudential Securities Incorporated .............. 70,000
SG Cowen Securities Corporation ................. 70,000
George K. Baum & Company ........................ 40,000
William Blair & Company, L.L.C. ................. 40,000
J.C. Bradford & Co. ............................. 40,000
Dain Rauscher Wessels ........................... 40,000
Friedman Billings Ramsey ........................ 40,000
John G. Kinnard & Company, Incorporated ......... 40,000
Kirkpatrick, Pettis, Smith, Polian Inc. ......... 40,000
Legg Mason Wood Walker, Incorporated ............ 40,000
Wedbush Morgan Securities Inc. .................. 40,000
Nessuah Zannex Ltd. ............................. 40,000
---------
Total ........................................... 3,250,000
=========
</TABLE>

The underwriters have advised HomeServices and MidAmerican Holdings that they
propose to offer the shares to the public at $15.00 per share. The underwriters
propose to offer the shares to certain dealers at the same price less a
concession of not more than $0.63 per share. The underwriters may allow and the
dealers may reallow a concession of not more than $0.10 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 328,125 shares of common stock and MidAmerican Holdings has granted
to the underwriters an option to purchase up to an additional 159,375 shares of
common stock, on a pro rata basis, 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:

97
<PAGE>

<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 .................... $ 1.05 $ 1.05 $2,296,875 $2,641,406
Expenses payable by HomeServices
(including registration fees and fees of
financial printers, counsel and
accountants) ............................ 1.25 1.09 2,743,500 2,743,500
Underwriting discounts and commissions
paid by MidAmerican Holdings ............ 1.05 1.05 1,115,625 1,282,969
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.

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

98
<PAGE>

At the request of HomeServices, the underwriters have reserved for sale, at the
initial public offering price, up to approximately 10% of the shares of common
stock being sold in the offering 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' common stock has been approved for quotation on The Nasdaq Stock
Market's National Market under the symbol "HMSV."

Each of U.S. Bancorp Piper Jaffray Inc. 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. An affiliate of
U.S. Bancorp Piper Jaffray Inc. is a lender under HomeServices' $75 million
senior secured revolving credit facility.

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,

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.

99
<PAGE>

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed upon
for HomeServices by Steven A. McArthur, Senior Vice President, General Counsel
and Secretary of HomeServices. 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 other legal matters in connection with the
sale of shares by HomeServices and 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. As of the date of
this prospectus, Mr. McArthur beneficially owned approximately 50,000 shares of
HomeServices common stock and 300,000 shares of MidAmerican Holdings common
stock.

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 years 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.

The consolidated financial statements of Roy H. Long Realty Co., Inc., now
known as Long Realty, as of December 31, 1998 and for the year ended December
31, 1998, included in this prospectus have been audited by
PricewaterhouseCoopers LLP, independent accountants, as stated in their report

100
<PAGE>

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.

WHERE YOU CAN FIND MORE INFORMATION

We have 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
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.

101
<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-26
Consolidated Balance Sheet as of December 31, 1997 .................................... F-27
Consolidated Statements of Income for the eight months ended August 31, 1998 and the
years ended December 31, 1997 and 1996 ............................................... F-29
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-30
Consolidated Statements of Cash Flows for the eight months ended August 31, 1998 and
the years ended December 31, 1997 and 1996 ........................................... F-31
Notes to Consolidated Financial Statements ............................................ F-32
CONSOLIDATED FINANCIAL STATEMENTS OF IOWA REALTY CO., INC. AND SUBSIDIARIES
(INCLUDING EDINA REALTY HOME SERVICES)
Independent Auditors' Report .......................................................... F-38
Consolidated Balance Sheet as of December 31, 1997 .................................... F-39
Consolidated Statements of Income for the years ended December 31, 1997 and 1996 ...... F-40
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1997 and 1996 ........................................................... F-41
Consolidated Statements of Cash Flows for the years ended December 31, 1997 and 1996. F-42
Notes to Consolidated Financial Statements ............................................ F-43
FINANCIAL STATEMENTS OF PAUL SEMONIN COMPANY
Report of Independent Accountants ..................................................... F-52
Balance Sheets as of December 31, 1998 and 1997 ....................................... F-53
Statements of Income for the years ended December 31, 1998 and 1997 ................... F-54
Statements of Changes in Stockholders' Equity for the years ended December 31, 1998
and 1997 ............................................................................. F-55
Statements of Cash Flows for the years ended December 31, 1998 and 1997 ............... F-56
Notes to Financial Statements ......................................................... F-57
</TABLE>

F-1
<PAGE>

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
FINANCIAL STATEMENTS OF HOME REAL ESTATE COMPANY OF OMAHA
Report of Independent Accountants .................................................. F-64
Statement of Income for the period from May 8, 1998 through August 18, 1998 ........ F-65
Statement of Changes in Stockholders' Equity for the period from May 8, 1998 through
August 18, 1998 ................................................................... F-66
Statement of Cash Flows for the period from May 8, 1998 through August 18, 1998 .... F-67
Notes to Financial Statements ...................................................... F-68
CONSOLIDATED FINANCIAL STATEMENTS OF ROY H. LONG REALTY CO., INC.
Report of Independent Accountants .................................................. F-70
Consolidated Balance Sheet as of December 31, 1998 ................................. F-71
Consolidated Statement of Income for the year ended December 31, 1998 .............. F-72
Consolidated Statement of Changes in Stockholders' Equity for the year ended
December 31, 1998 ................................................................. F-73
Consolidated Statement of Cash Flows for the year ended December 31, 1998 .......... F-74
Notes to Consolidated Financial Statements ......................................... F-75
</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 1,645
Other current assets .................................................... 2,074 1,789
-------- --------
34,411 36,944
-------- --------
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 $132,001
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................ $ 5,448 $ 3,876
Accrued expenses ........................................................ 11,345 10,915
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 30,406
-------- --------
Other liabilities:
Deferred taxes .......................................................... -- 93
Long-term debt .......................................................... 58,009 56,405
Agent profit sharing .................................................... 5,074 5,069
Other noncurrent liabilities ............................................ 91 90
-------- --------
63,174 61,657
-------- --------
Total liabilities .................................................... 93,326 92,063
-------- --------
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)
Retained earnings (accumulated deficit) ................................. (3,434) 1,192
-------- --------
Total stockholders' equity .............................................. 35,194 39,938
-------- --------
Total liabilities and stockholders' equity .............................. $128,520 $132,001
======== ========
</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)

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>
Revenues:
Commission revenue ........................... $ 169,647 $74,893 $148,979 $26,244
Title fees ................................... 14,154 7,575 10,644 2,455
Other ........................................ 6,790 3,769 8,101 1,019
--------- ------- -------- -------
Total revenues .............................. 190,591 86,237 167,724 29,718
--------- ------- -------- -------
Operating expenses:
Commission expense ........................... 113,225 49,107 102,085 16,687
Amortization of pending real estate
sales contracts (note 2) .................... 18,271 -- -- 4,744
Salaries and employee benefits ............... 27,603 14,620 24,272 3,521
Occupancy .................................... 9,081 5,564 9,026 1,218
Business promotion and advertising ........... 8,632 5,184 7,218 1,419
Depreciation and amortization ................ 4,177 2,293 3,718 600
Operating, administrative and other .......... 13,949 5,758 11,726 1,720
--------- ------- -------- -------
Total operating expenses .................... 194,938 82,526 158,045 29,909
--------- ------- -------- -------
Other income (expense):
Interest income ............................... 595 169 308 82
Interest expense .............................. (1,929) (263) (2,083) (310)
--------- ------- -------- -------
Other income (expense), net ................. (1,334) (94) (1,775) (228)
--------- ------- -------- -------
Income (loss) before income taxes ........... (5,681) 3,617 7,904 (419)
Income taxes (benefit) ........................ (2,247) 1,664 3,278 (166)
--------- ------- -------- -------
Net income (loss) ........................... $ (3,434) $ 1,953 $ 4,626 $ (253)
========= ======= ======== =======
Net income (loss) per share:
Basic and Diluted ........................... $ (343.40) $ 0.41 $ 462.60 $ 25.30
========= ======= ======== =======
Weighted average shares outstanding ......... 10 4,748 10 10
========= ======= ======== =======
</TABLE>

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 $ (253)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ...................... 4,177 2,293 3,718 600
Amortization of pending real estate sales
contracts ......................................... 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 92
Change in assets and liabilities net of effects
from purchase of subsidiaries:
Decrease (increase) in income taxes receivable..... (1,893) -- 2,470 (359)
Decrease (increase) in mortgage loans held for
sale and other receivables ...................... (7,287) (281) 4,912 910
Decrease (increase) in other assets ............... 728 1,252 (662) (1,565)
Increase (decrease) in accounts payable ........... (929) (315) (1,304) 668
Increase (decrease) in accrued expenses ........... 922 (261) (817) 3
Increase (decrease) in agent profit sharing ....... 1,169 (164) (5) --
Increase (decrease) in other liabilities .......... 213 441 704 174
--------- --------- --------- ---------
Net cash provided by (used in) operating
activities ..................................... 12,428 4,991 16,198 5,014
--------- --------- --------- ---------
Cash flows from investing activities:
Purchase of subsidiaries, net of cash acquired ....... (96,478) -- (800) (70,139)
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) (203)
Purchase of investments .............................. -- -- (290) --
--------- --------- --------- ---------
Net cash used in investing activities ........... (99,126) (891) (5,890) (70,342)
--------- --------- --------- ---------
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 ................. -- -- -- 43,143
Loan costs ........................................... (425) -- -- --
--------- --------- --------- ---------
Net cash provided by (used in) financing
activities ..................................... 89,812 (1,940) (1,878) 72,133
--------- --------- --------- ---------
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.Com 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>

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 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.

F-12
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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:

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.

F-13
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 may enter into branding agreements with third parties, which
allow the Company's tradenames and logos to be associated with the activities
conducted by the third parties. Revenue from these agreements is recognized as
service is provided or, in the case of up-front payments, when no additional
services or obligations are required of the Company.

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 to established
brokerage companies. In exchange for certain fees, the Company provides the
right to use certain names and related trademarks. 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.

Revenue from franchising activities includes an initial franchise fee as
well as continuing franchise fee revenue based on the gross commission income
realized by the franchisee. The initial franchise fee, designed to cover
administrative costs incurred by the Company, is recognized as revenue when the
franchise agreement is effective, at which time all initial services are
provided, the Company has no remaining material conditions or obligations and
the franchisee has begun operating under the new name. Revenue related to
ongoing franchise revenue is recognized upon the closing of real estate sales
transactions. The Company provides advertising, supervision, training and
assistance in support of its ongoing franchisees.

F-14
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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%.

(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>

F-15
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 table reconciles the fair value of assets acquired and the
liabilities assumed to the purchase price:

<TABLE>
<CAPTION>
HOME CBS NEBRASKA
IOWA REALTY REAL ESTATE J.C. NICHOLS REAL ESTATE LAND TITLE &
CO., INC. COMPANY REAL ESTATE COMPANY ABSTRACT TOTAL
------------- ------------- -------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets recorded
Pending real estate contracts .......... $ 14,231 $1,157 $ 1,831 $1,052 $ - - $ 18,271
Other receivables ...................... 12,281 225 4,799 52 13 17,370
Fixed assets ........................... 12,706 502 1,734 618 62 15,622
Cash, cash held in trust &
investments ........................... 12,701 452 2,106 504 357 16,120
Other intangibles and prepaids ......... 3,415 20 910 199 295 4,839
Goodwill ............................... 54,607 3,145 13,128 3,512 346 74,738
-------- ------ ------- ------ --------- --------
Fair value of assets acquired ......... 109,941 5,501 24,508 5,937 1,073 146,960
Liabilities assumed ..................... 31,641 301 7,708 637 273 40,560
-------- ------ ------- ------ --------- --------
Purchase price ........................ $ 78,300 $5,200 $16,800 $5,300 $ 800 $106,400
======== ====== ======= ====== ========= ========
</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 was amortized over three
months, 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 amortized.

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. The sale of HOME Real Estate Holdings, Inc.
by the predecessor was at book value and therefore no gain or loss on the sale
was recorded.

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

F-16
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 ................... $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 an interest rate swap agreement to reduce the impact of changes in
interest rates on a portion of its 5 year credit facility. At December 31,
1998, the Company had outstanding one interest rate swap agreement with a
financial institution having a total notional principal amount of $12,500,000.
This agreement effectively changes the Company's interest rate exposure on
$12,500,000 of its floating credit facility to a fixed 6.3%. Interest rate
swaps are subject to market risk as interest rates fluctuate. In the event that
interest rates would rise above the fixed rate, the Company is exposed to
credit loss in the event of nonperformance by the other party to the interest
rate swap agreement. However, the Company does not anticipate nonperformance by
the counterparty.

F-17
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

At December 31, 1998 and June 30, 1999, respectively, the fair value of
this swap agreement was $9,721 and $236,884 using cash termination value.
Assuming a 1% increase in interest rates, the fair value of the swap agreement
would have been $293,454 and $458,864 at December 31, 1998 and June 30, 1999,
respectively.

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%.

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.

F-18
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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.

(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

F-19
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 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>

F-20
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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>

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-21
<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 $100 million 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-22
<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-23
<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 December 31, 1998 and $6.8
million at June 30, 1999.

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, the revolving credit agreement with the Company's parent
(see note 11) was amended to reduce the amount available under the agreement
from $100 million to $10 million.

In June 1999, the Company 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-24
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On August 23, 1999, the Company closed the purchase of Roy H. Long Realty
Co., Inc. (Long Realty), a Tucson, Arizona based real estate agency and
brokerage business. Long Realty has approximately 853 sales associates working
from 12 branch offices in Arizona.

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 .......................... $394,430
Operating expenses ................ 393,186
Net (loss) ........................ (1,220)
</TABLE>

F-25
<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-26
<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-27
<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-28
<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-29
<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-30
<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-31
<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-32
<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-33
<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-34
<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-35
<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-36
<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-37
<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-38
<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-39
<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-40
<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-41
<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-42
<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-43
<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-44
<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-45
<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-46
<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-47
<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.

F-48
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

(9) INCOME TAXES

Income taxes for the years ended December 31, 1997 and 1996, were as
follows (in thousands):

<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Current ................ $4,019 2,877
Deferred ............... 706 386
------ -----
Total .................. $4,725 3,263
====== =====
</TABLE>

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.

F-49
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

(11) RELATED-PARTY TRANSACTIONS

<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>

F-50
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

(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.

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-51
<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-52
<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-53
<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-54
<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-55
<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-56
<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 MidAmerican Realty Services
Company, 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-57
<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.

F-58
<PAGE>

PAUL SEMONIN COMPANY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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.

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>

F-59
<PAGE>

PAUL SEMONIN COMPANY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Unrealized holding gains and losses on available-for-sale securities are
reported on the balance sheet in a separate component of stockholders' equity.

(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-60
<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-61
<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-62
<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-63
<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-64
<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-65
<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-66
<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-67
<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-68
<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-69
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
Roy H. Long Realty Co., Inc.

In our opinion, the accompanying consolidated balance sheet and the
related consolidated statement of income, of changes in stockholders' equity,
and of cash flows present fairly, in all material respects, the financial
position of Roy H. Long Realty Co., Inc. and its subsidiary (the "Company") at
December 31, 1998 and the results of its operations and its cash flows for the
year 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 audit. We conducted our audit 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 audit provides a reasonable basis for the
opinion expressed above.

Kansas City, Missouri /s/ PricewaterhouseCoopers LLP
August 27, 1999 PricewaterhouseCoopers LLP

F-70
<PAGE>

ROY H. LONG REALTY CO., INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS EXCEPT SHARES)

<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................ $ 1,064
Cash held in trust ............................................... 257
Commission revenue receivable .................................... 171
Other accounts receivable, net of allowance of $5................. 164
Receivable from affiliate ........................................ 39
Prepaid expenses ................................................. 7
-------
Total current assets .......................................... 1,702
-------
Property and equipment:
Furniture and fixtures ........................................... 287
Computers and electronic equipment ............................... 665
Leasehold improvements ........................................... 984
Automobiles ...................................................... 23
-------
1,959
Less accumulated depreciation .................................... 923
-------
Net property and equipment .................................... 1,036
-------
Other noncurrent assets:
Intangible assets, net of accumulated amortization of $24......... 219
Other noncurrent assets .......................................... 14
-------
Total other noncurrent assets ................................. 233
-------
Total assets .................................................. $ 2,971
=======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term bank borrowings ....................................... $ 200
Accounts payable ................................................. 110
Accrued commissions .............................................. 467
Accrued expenses ................................................. 226
Cash held in trust ............................................... 257
Current portion of long-term debt ................................ 274
-------
Total current liabilities ..................................... 1,534
-------
Long-term liabilities:
Long-term debt ................................................... 327
-------
Commitments and contingencies (note 8) ............................ --
Stockholders' equity:
Common stock, $1 par value, 1,000,000 shares authorized,
10,000 shares issued and outstanding ........................... 10
Additional paid-in capital ....................................... 388
Retained earnings ................................................ 712
-------
Total stockholders' equity .................................... 1,110
-------
Total liabilities and stockholders' equity .................... $ 2,971
=======
</TABLE>

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

F-71
<PAGE>

ROY H. LONG REALTY CO., INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)

<TABLE>
<S> <C>
Revenues:
Commission revenue ....................................... $ 36,217
Other .................................................... 376
--------
Total revenues ........................................ 36,593
--------
Operating expenses:
Commission expense ....................................... 26,701
Salaries and employee benefits ........................... 3,946
Occupancy ................................................ 1,610
Business promotion and advertising ....................... 1,221
Depreciation and amortization ............................ 422
Operating, administrative and other ...................... 788
--------
Total operating expenses .............................. 34,688
--------
Other income (expense):
Interest income .......................................... 90
Other income ............................................. 45
Interest expense ......................................... (70)
Other expense ............................................ (92)
--------
Net other expense ..................................... (27)
--------
Net income ............................................ $ 1,878
========
Income before income taxes ............................... $ 1,878
Pro forma provision for income taxes (unaudited) ......... 763
--------
Pro forma net income (unaudited) ...................... $ 1,115
========
</TABLE>

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

F-72
<PAGE>

ROY H. LONG REALTY CO., INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS EXCEPT SHARES)

<TABLE>
<CAPTION>
COMMON ADDITIONAL
SHARES COMMON PAID-IN RETAINED
OUTSTANDING STOCK CAPITAL EARNINGS TOTAL
------------- -------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1998 ............ 10,000 $ 10 $ 383 $ 888 $ 1,281
--------
Comprehensive income:
Net income ......................... 1,878 1,878
--------
Total comprehensive income ......... 1,878
--------
Capital distributions ............... (2,054) (2,054)
Capital contribution ................ 5 5
Shares issued ....................... --
--------
Balance, December 31, 1998 .......... 10,000 $ 10 $ 388 $ 712 $ 1,110
====== ==== ===== ======== ========
</TABLE>

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

F-73
<PAGE>

ROY H. LONG REALTY CO., INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)

<TABLE>
<S> <C>
Cash flows from operating activities:
Net income ........................................................................ $ 1,878
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ................................................... 422
Loss on disposal of fixed assets ................................................ 92
Change in current assets and liabilities (net of acquisitions):
(Increase) decrease in:
Commission revenue receivable .................................................. 19
Affiliate and other accounts receivable ........................................ (111)
Prepaid expenses ............................................................... 5
Other assets ................................................................... (4)
Increase (decrease) in:
Accounts payable ............................................................... (70)
Accrued commissions ............................................................ 102
Accrued expenses ............................................................... (197)
Other liabilities .............................................................. --
---------
Net cash provided by operating activities .................................... 2,136
---------
Cash flows from investing activities:
Purchases of property and equipment ............................................... (209)
Proceeds from notes receivable .................................................... 99
Acquisition of businesses ......................................................... (265)
---------
Net cash used in investing activities .......................................... (375)
---------
Cash flows from financing activities:
Payments on long-term debt ........................................................ (302)
Net increase in short-term bank borrowings ........................................ 200
Distributions to stockholders ..................................................... (2,054)
Contribution from stockholders .................................................... 5
---------
Net cash used in financing activities .......................................... (2,151)
---------
Net decrease in cash ........................................................... (390)
Cash and cash equivalents at beginning of period ................................... 1,454
---------
Cash and cash equivalents at end of period ......................................... $ 1,064
=========
Supplemental cash flow information:
Interest paid ..................................................................... $ 48
=========
Non-cash addition to property and equipment for capital leases ..................... $ 107
=========
Non-cash additions to long-term debt for capital leases ............................ $ 107
=========
</TABLE>

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

F-74
<PAGE>

ROY H. LONG REALTY CO., INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) THE COMPANY AND BASIS OF PRESENTATION

Roy H. Long Realty Co., Inc. (the Company) operates as a general real
estate agency and brokerage business engaged to act as agent, broker or
attorney in fact for any person or corporation in buying, selling or dealing in
real estate and real property 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 approximately 853 sales
associates working from 12 branch offices in Arizona.

The consolidated financial statements include the accounts of Roy H. Long
Realty Co., Inc. and its 100% owned subsidiary, RHL Referral Company, L.L.C.
The majority shareholder contributed the interest in the limited liability
company as additional paid-in capital in 1998.

On August 23, 1999, the Company sold all of its assets to MidAmerican
Realty Services Company, a residential real estate brokerage firm based in
Edina, Minnesota.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

CASH HELD IN TRUST

A balance of $257,000, at December 31, 1998 is restricted from use for
general operations and is held in a trust. Included in this amount is $236,000
in rent deposits from subleases and $21,000 in marketing advances collected
from sellers to be forwarded to an international real estate marketing company.

PROPERTY AND EQUIPMENT

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

<TABLE>
<S> <C>
Furniture and fixtures ..................... 5-7 years
Computers and electronic equipment ......... 3-7 years
Leasehold improvements ..................... Shorter of life of improvement
or remaining life of lease
Automobiles ................................ 5 years
</TABLE>

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

F-75
<PAGE>

ROY H. LONG REALTY CO., INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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.

Receivables

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

Short-term bank 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.

INTANGIBLES

Intangible assets include goodwill and a non-compete agreement amortized
on a straight-line basis as follows:

<TABLE>
<S> <C>
Goodwill ...................... 30 years
Non-compete agreement ......... Life of agreement (5 years)
</TABLE>

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.

In exchange for fees, the Company provides the right to use certain names
and related trademarks. This revenue is recognized upon receipt and included in
other revenue.

The Company subleases various properties and recognizes rental income in
the period in which it is earned. In 1998, the Company recognized $184,000 in
rental income which is included in other revenue on the statement of income.

BUSINESS PROMOTION AND ADVERTISING

Advertising and promotion costs are expensed as incurred.

INCOME TAXES

F-76
<PAGE>

ROY H. LONG REALTY CO., INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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) SHORT-TERM BANK BORROWINGS

The Company has a $200,000 revolving line of credit agreement with Bank
One, Arizona, N.A. which matured in May 1999. The line of credit is not
collateralized and bears interest at the rate of 1% above the bank's prime rate
of interest. The Company had drawn down the entire amount as of December 31,
1998, at which time the bank's prime rate of interest was 8.25%.

(4) LONG-TERM DEBT

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

NOTES PAYABLE

<TABLE>
<S> <C>
Note payable to Arizona Bank, due in monthly installments of
$3 plus interest at the bank's prime rate (8.25% at December
31, 1998), but not less than 9.25%, through December 1, 2000,
at which time the entire principal balance is due and payable........ $ 58
Note payable to Arizona Bank, due in monthly installments of
$10 plus interest at the bank's prime rate maturing at various
dates through April 2002, with floors ranging from 7.25% to
9.00% ............................................................... 177
Note payable assumed upon purchase of Green Valley Realty,
payable in minimum quarterly installments of $10 (including
interest) up to 8% of net company dollar. Interest imputed on
this note is 17.29% ................................................. 28
Note payable to Bank One, due in monthly installments of $1
plus interest at the bank's prime rate through May 2001,
collateralized by a building. At December 31, 1998, this note
has been unofficially assigned to an L.L.C., however, it is still
in the Company's name ............................................... 37
Note payable to Vistoso Properties, due in 24 monthly
installments of $1 including interest at 10%, through March
1999 ................................................................ 2
Note payable to Bank One, due in monthly installments
including interest at 8.25% through July 2001, collateralized by
vehicle ............................................................. 11
----
313
Less current portion ................................................. 166
----
Total long-term notes payable ........................................ $147
====
</TABLE>

F-77
<PAGE>

ROY H. LONG REALTY CO., INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

CAPITAL LEASE OBLIGATIONS

<TABLE>
<S> <C>
Various capital lease obligations with inputted interest rates ranging
from 8.25% to 11.95% and maturities extending through November
2003 ................................................................ $288
Less current portion ................................................. 108
----
Total capital lease obligations ...................................... 180
----
Total long-term debt ................................................. $327
====
</TABLE>

As of December 31, 1998, scheduled maturities of notes payable during the
next four years ending December 31 are as follows (in thousands):

At December 31, 1998, the Company is in compliance with all debt covenants
or has obtained waivers from the respective banks.

(5) RELATED PARTY TRANSACTIONS

The Company leases one of its office facilities from a limited liability
company that was owned during the first month of 1998 proportionately by all
shareholders of the Company. From February through December 1998, the Company's
majority shareholder held a minority interest in the limited liability company.
Rent paid to the limited liability company during 1998 was $18,000. In
addition, at December 31, 1997, the Company assigned a note payable to the
limited liability company; however, the Company is still considered the
official holder of the note. A receivable from affiliate has been recorded for
the corresponding note payable balance on the Company's books.

In January 1998, the Company paid off notes to two prior shareholders
totaling $88,000.

During 1998, two shareholders paid off notes receivable held by the
Company through non-cash distributions totaling $99,000 plus accrued interest.

The Company's majority shareholder is a member of Arizona Bank's Board of
Directors. The Company has investments held at Arizona Bank as well as debt
outstanding with the bank.

(6) LEASES

OPERATING

The Company leases certain equipment and office space under non-cancelable
operating lease agreements which expire at various dates through August 2004.
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, 1998 (in thousands):

F-78
<PAGE>

ROY H. LONG REALTY CO., INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31:
- ---------------------------
<S> <C>
1999 .................... $ 828
2000 .................... 721
2001 .................... 616
2002 .................... 538
2003 .................... 388
Thereafter .............. 151
------
$3,242
======
</TABLE>

Total rent expense under operating leases for 1998 was $845,000.

CAPITAL

Cost of leased property under capital leases at December 31, 1998 includes
(in thousands):

<TABLE>
<S> <C>
Computers and electronic equipment ......... $ 458
Less accumulated amortization .............. (186)
------
$ 272
======
</TABLE>

Minimum future obligations on capital leases at December 31, 1998 are as
follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31:
- -------------------------------------------------
<S> <C>
1999 .................................... $132
2000 .................................... 111
2001 .................................... 64
2002 .................................... 17
2003 .................................... 9
----
Total .................................... 333
Less interest ............................ 45
----
Present value of future payments ......... 288
Less current portion ..................... 108
----
Long-term portion ........................ $180
====
</TABLE>

Total payments under capital leases for 1998 was $88,000.

(7) BUSINESS ACQUISITIONS

In 1998, the Company purchased three real estate companies, accounting for
each as a purchase business combination. All identifiable assets acquired were
assigned a portion of the acquisition price equal to their fair value at the
date of acquisition. The goodwill associated with the acquisitions in 1998
totaled $202,000, and is being amortized over 30 years using the straight-line
method. The following companies were purchased for cash consideration during
the year:

F-79
<PAGE>

ROY H. LONG REALTY CO., INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
PURCHASE
ACQUISITION DATE COMPANY PRICE
- ------------------ ----------------------------------- -----------
<S> <C> <C>
April 30, 1998 Mountain Vista Realty Inc. $ 60,000
May 1, 1998 Axiom Realty Group L.L.C. $175,000
July 11, 1998 Property Management portion
of Century 21 Gateway West Realty $ 30,000
</TABLE>

(8) COMMITMENTS AND CONTINGENCIES

F-80
<PAGE>

3,250,000 SHARES

HOMESERVICES.COM INC.

COMMON STOCK

[GRAPHIC OF HOMESERVICES.COM]

-----------------------------
PROSPECTUS
-----------------------------

Until November 1, 1999, 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 dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

U.S. BANCORP PIPER JAFFRAY

CREDIT SUISSE FIRST BOSTON

October 7, 1999