<PAGE> 1
A MESSAGE FROM THE INVESTMENT MANAGER
Dear Shareholder:
The economy in the first half of 1996 began with falling interest rates, modest
employment growth and the absence of any inflationary pressures. This
environment proved the ideal backdrop for both the stock and bond markets. As
the first few months passed, however, the economy proved to be stronger than
expected.
In February, reports began to emerge suggesting that the economy was growing
faster than anticipated. A sharp rise in employment, coupled with increases in
the prices of oil and other agricultural commodities, seemed to confirm these
fears. The perceived threat of a pick-up in the economy would be followed by
rising inflation and higher interest rates, thus sending bond prices lower.
VALUE FUND
Despite higher interest rates, stocks, as measured by the S&P 500 Index, posted
positive results for both the first and second quarters of this year. The
market's return, for six months ended June 30, 1996, was 10.1%. For the same
time period, the total return of the Value Fund was 9.0%.
The Fund experienced solid gains in many of the sectors it favors. Cyclical
companies, which often depend on the economy for prosperity, produced favorable
investment gains. Stocks in the chemical, energy and depressed retail sectors
appreciated sharply during this time period. Thus, the Fund benefitted from its
investments in companies such as Dillard Department Stores, Inc., Sears,
Roebuck & Co., Monsanto Company and Texaco Inc. Significant holdings in the
financial sector, which include banks and insurance companies, also added to
overall Fund performance during the first half of 1996.
When the year began, worries that the economy could not sustain its pace led
many investors into the "defensive" sectors of the market. These sectors, which
include food, beverages and pharmaceuticals, are generally expected to produce
better-than-average operating results in a slow economy, since demand for these
products is not directly related to economic activity. In the Value Fund, we
believe that the current high profit margins of these companies are at risk as
increased competition for market share will erode profitability, resulting in
lower share prices. As such, the Value Fund has a lower percentage of these
companies than the overall market (as measured by the S&P 500) and did not
fully benefit from the early gains experienced in this sector.
The Fund continues to avoid new investments in technology, which are still
expensive despite a significant drop in share prices, and electric utility
companies, which face heightened competition and continued uncertainty from the
prospects of further deregulation.
SHORT-TERM BOND FUND
Interest rates on longer-term, fixed-income securities began to climb suddenly
in February as strong economic data renewed inflation fears. Data released
subsequently throughout the first half of 1996 further substantiated
expectations of rising interest rates and inflation. During that same six month
period, the 30 day SEC yield went from 5.4% to 6.1%. In this environment, the
Short-Term Bond Fund produced a total return of 1.7% for the six month period
ended June 30, 1996.
Portfolio composition remained essentially unchanged. Portfolio strategy
continued to emphasize high-quality corporate issues as well as government and
mortgage investments. Average Fund maturity remained essentially unchanged at
2.9 years.
<PAGE> 2
A MESSAGE FROM THE INVESTMENT MANAGER
(CONTINUED)
SHORT-TERM GOVERNMENT SECURITIES FUND
The Short-Term Government Securities Fund produced a total return of 1.2% for
the six months ended June 30, 1996. During that period, the average maturity
was extended from 1.8 years to 2.2 years. The Fund invests exclusively in
securities backed by the full faith and credit of the United States Government.
The Fund began the year with a 30 day SEC yield of 4.8%, as compared to the
5.5% yield as of June 30, 1996.
DAILY INCOME FUND
While interest rates on longer-term, fixed-income securities rose during the
first half of 1996, money market rates continued the decline that began in
1995. The Federal Reserve Board, reacting to expectations of a slower economy,
began reducing short-term rates in January in an attempt to stimulate economic
activity. As a result of these changes in interest rates over the past six
months, the Daily Income Fund, which began the year with a 7 day effective
yield of 5.2%, ended on June 30, 1996 with a yield of 4.8%.
The Daily Income Fund continues to be managed using the same conservative
investment policies that have served us well in the past. This includes
avoiding investments in lower-quality issues because their additional yield
does not compensate shareholders for the extra risk.
If you have any questions concerning your Homestead account, please feel free
to contact us at 1-800-258-3030.
Sincerely,
/s/ PETER R. MORRIS
- -------------------
Peter R. Morris
Director of Investments
<PAGE> 3
STATEMENTS OF ASSETS AND LIABILITIES
HOMESTEAD FUNDS, INC.
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHORT-TERM
DAILY INCOME SHORT-TERM GOVERNMENT VALUE
FUND BOND FUND SECURITIES FUND FUND
------------ ---------- --------------- -----
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost: $54,484,226; $73,780,571;
$5,075,551; $154,114,101) . . . . . . . $54,484,226 $73,663,551 $5,055,712 $197,268,785
Receivables
Investment securities sold . . . . . . - 1,366 - -
Dividends and interest . . . . . . . . 365,384 908,790 71,190 176,881
Capital shares sold . . . . . . . . . . 159,951 5,894 1,376 41,795
Prepaid expenses . . . . . . . . . . . . . 13,718 14,924 9,079 27,407
----------- ----------- ---------- ------------
Total assets . . . . . . . . . . . . . 55,023,279 74,594,525 5,137,357 197,514,868
----------- ----------- ---------- ------------
LIABILITIES
Payables
Investment securities purchased . . . . 612,504 982,585 - 614,500
Accrued expenses . . . . . . . . . . . 11,541 16,034 6,507 43,963
Due to Manager . . . . . . . . . . . . 31,775 42,149 2,165 106604
Capital shares redeemed . . . . . . . . 10,890 7,700 - 41,500
Dividends . . . . . . . . . . . . . . . 5,009 26,087 1,224 25,520
----------- ----------- ---------- ------------
Total liabilities . . . . . . . . . . . 671,719 1,074,555 9,896 832,087
----------- ----------- ---------- ------------
NET ASSETS . . . . . . . . . . . . . . . . . $54,351,560 $73,519,970 $5,127,461 $196,682,781
=========== =========== ========== ============
NET ASSETS CONSIST OF:
Unrealized appreciation (depreciation)
of investments . . . . . . . . . . . . $ - $ (117,020) (19,839) 43,154,684
Realized gain . . . . . . . . . . . . . . - 55,272 1,329 1,875,305
Paid-in-capital applicable to outstanding
shares of 54,351,560 of Daily Income Fund,
14,332,109 of Short-Term Bond Fund,
1,020,579 of Short-Term Government Securities
Fund, and 9,876,917 of Value Fund . . . . 54,351,560 73,581,718 5,145,971 151,652,792
----------- ----------- ---------- ------------
$54,351,560 $73,519,970 $5,127,461 $196,682,781
=========== =========== ========== ============
NET ASSET VALUE PER SHARE . . . . . . . . . . $1.00 $5.13 $5.02 $19.91
=========== =========== ========== ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
<PAGE> 4
STATEMENTS OF OPERATIONS
HOMESTEAD FUNDS, INC.
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHORT-TERM
DAILY INCOME SHORT-TERM GOVERNMENT VALUE
FUND BOND FUND SECURITIES FUND FUND
------------ ---------- --------------- -----
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . $1,457,375 $2,164,868 $104,657 $ 545,704
Dividends . . . . . . . . . . . . . . . . - - - 1,914,783
---------- ---------- -------- -----------
Total income . . . . . . . . . . . . . 1,457,375 2,164,868 104,657 2,460,487
---------- ---------- -------- -----------
Expenses
Management fees . . . . . . . . . . . . 133,058 159,809 8,947 429,594
Custodian and accounting fees . . . . . 32,378 50,893 22,992 58,556
Shareholder servicing . . . . . . . . . 20,356 20,746 14,320 66,340
Registration expense . . . . . . . . . 15,032 12,934 3,698 29,818
Legal and audit fees . . . . . . . . . 4,511 5,563 265 15,445
Insurance . . . . . . . . . . . . . . . 3,799 4,386 185 11,543
Communication . . . . . . . . . . . . . 2,189 2,417 402 12,412
Printing . . . . . . . . . . . . . . . 2,106 2,710 442 12,422
Directors fees . . . . . . . . . . . . 1,077 1,366 59 3,740
Other expenses . . . . . . . . . . . . 3,350 4,261 394 10,565
---------- ---------- -------- -----------
Total expenses . . . . . . . . . . . 217,856 265,085 51,704 650,435
Less fees waived and expenses
paid by Manager . . . . . . . . . (18,270) (12,443) (38,350) -
---------- ---------- -------- -----------
Net expenses . . . . . . . . . . . . 199,586 252,642 13,354 650,435
---------- ---------- -------- -----------
NET INVESTMENT INCOME . . . . . . . . . . . . 1,257,789 1,912,226 91,303 1,810,052
---------- ---------- -------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on investments . . . . . - 55,272 1,329 1,875,305
Net change in unrealized appreciation
(depreciation) . . . . . . . . . . . . - (883,589) (43,779) 10,447,470
---------- ---------- -------- -----------
NET GAIN (LOSS) ON INVESTMENTS . . . . . . . - (828,317) (42,450) 12,322,775
---------- ---------- -------- -----------
NET INCREASE IN NET ASSETS
FROM OPERATIONS . . . . . . . . . . . . . $1,257,789 $1,083,909 $ 48,853 $14,132,827
========== ========== ======== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE> 5
STATEMENTS OF CHANGES IN NET ASSETS
HOMESTEAD FUNDS, INC.
<TABLE>
<CAPTION>
DAILY INCOME FUND SHORT-TERM BOND FUND
------------------------------------- ------------------------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1996 December 31, June 30, 1996 December 31,
(Unaudited) 1995 (Unaudited) 1995
--------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
OPERATIONS
Net investment income . . . . . . . . . . $ 1,257,789 $ 2,385,572 $ 1,912,226 $ 3,195,639
Net realized gain on investments . . . . . - - 55,272 40,352
Net change in unrealized
appreciation (depreciation) . . . . . . - - (883,589) 2,737,120
----------- ----------- ----------- -----------
Increase in net assets from operations . . 1,257,789 2,385,572 1,083,909 5,973,111
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income . . . . . . . . . . (1,257,789) (2,385,572) (1,912,226) (3,195,639)
Net realized gain on investments . . . . . - - - (39,502)
CAPITAL SHARE TRANSACTIONS, NET . . . . . . . 1,652,411 16,030,967 12,223,291 7,129,945
----------- ----------- ----------- -----------
TOTAL INCREASE IN NET ASSETS . . . . . . . . 1,652,411 16,030,967 11,394,974 9,867,915
NET ASSETS
Beginning of year . . . . . . . . . . . . 52,699,149 36,668,182 62,124,996 52,257,081
----------- ----------- ----------- -----------
END OF PERIOD . . . . . . . . . . . . . . $54,351,560 $52,699,149 $73,519,970 $62,124,996
=========== =========== =========== ===========
</TABLE>
5
<PAGE> 6
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
HOMESTEAD FUNDS, INC.
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT
SECURITIES FUND VALUE FUND
--------------------------------- ------------------------------
May 1, 1995
Six Months (Commencement of Six Months
Ended Operations) to Ended Year Ended
June 30, 1996 December 31, June 30, 1996 December 31,
(Unaudited) 1995 (Unaudited) 1995
------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
OPERATIONS
Net investment income . . . . . . . . . . $ 91,303 $ 50,982 $ 1,810,052 $ 2,997,202
Net realized gain on investments . . . . . 1,329 469 1,875,305 4,035,929
Net change in unrealized
appreciation (depreciation) . . . . . . (43,779) 23,940 10,447,470 27,067,900
---------- ---------- ------------ ------------
Increase in net assets from operations . . 48,853 75,391 14,132,827 34,101,031
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income . . . . . . . . . . (91,303) (50,982) (1,810,052) (2,997,202)
Net realized gain on investments . . . . . - (469) - (4,035,929)
CAPITAL SHARE TRANSACTIONS, NET . . . . . . . 2,511,711 2,634,260 36,854,215 28,826,300
---------- ---------- ------------ ------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . 2,469,261 2,658,200 49,176,990 55,894,200
NET ASSETS
Beginning of year . . . . . . . . . . . . 2,658,200 - 147,505,791 91,611,591
---------- ---------- ------------ ------------
END OF PERIOD . . . . . . . . . . . . . . $5,127,461 $2,658,200 $196,682,781 $147,505,791
========== ========== ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
6
<PAGE> 7
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
DAILY INCOME FUND
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
-------- -------- ------ -----
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (65.4% of portfolio)
AIG Funding Inc. . . . . . . . . . . . . . . . 5.35% 07/02/96 $2,200,000 $ 2,199,673
American Express Credit Corp. . . . . . . . . . 5.34 07/05/96 1,125,000 1,124,333
American Express Credit Corp. . . . . . . . . . 7.88 12/01/96 547,000 552,176
American General Finance Corp. . . . . . . . . 5.32 07/09/96 300,000 299,645
American General Finance Corp. . . . . . . . . 7.38 11/15/96 100,000 100,803
Associates Corp. of North America . . . . . . . 5.36 07/03/96 175,000 174,948
Baltimore Gas & Electric Co. . . . . . . . . . 5.25 07/11/96 2,500,000 2,496,354
Beneficial Corp. . . . . . . . . . . . . . . . 5.35 07/24/96 2,442,000 2,433,653
Chevron Oil Finance Co. . . . . . . . . . . . . 5.32 07/10/96 2,600,000 2,596,542
CIT Group Holdings, Inc. . . . . . . . . . . . 5.34 07/25/96 1,435,000 1,429,891
CIT Group Holdings, Inc. . . . . . . . . . . . 5.36 08/12/96 1,000,000 993,747
Commercial Credit Co. . . . . . . . . . . . . . 5.37 07/16/96 1,000,000 997,763
Commercial Credit Co. . . . . . . . . . . . . . 5.38 07/09/96 1,450,000 1,448,266
E. I. Dupont Co. . . . . . . . . . . . . . . . 8.07 08/15/96 300,000 300,858
Eli Lilly & Co. . . . . . . . . . . . . . . . . 6.55 12/20/96 300,000 300,939
Ford Motor Credit Corp. . . . . . . . . . . . . 5.36 07/18/96 875,000 872,786
General Electric Capital Corp. . . . . . . . . 5.27 07/12/96 1,100,000 1,098,229
Household Finance Corp. . . . . . . . . . . . . 5.31 07/05/96 600,000 599,646
IBM Credit Corp. . . . . . . . . . . . . . . . 5.32 07/17/96 1,100,000 1,097,399
IBM Credit Corp. . . . . . . . . . . . . . . . 5.28 07/19/96 1,500,000 1,496,040
John Deere Capital Corp. . . . . . . . . . . . 5.35 07/23/96 1,200,000 1,196,077
John Deere Capital Corp. . . . . . . . . . . . 5.28 07/08/96 500,000 499,487
Merrill Lynch & Co. . . . . . . . . . . . . . . 5.32 07/15/96 1,600,000 1,596,690
Norwest Financial, Inc. . . . . . . . . . . . . 5.36 07/26/96 1,800,000 1,793,300
Norwest Financial, Inc. . . . . . . . . . . . . 5.29 07/08/96 700,000 699,280
Pepsico, Inc. . . . . . . . . . . . . . . . . . 5.30 07/01/96 1,156,000 1,156,000
Prudential Funding Corp. . . . . . . . . . . . 5.28 07/03/96 1,800,000 1,799,472
Prudential Funding Corp. . . . . . . . . . . . 5.29 07/09/96 500,000 499,412
Schering-Plough Corp. . . . . . . . . . . . . . 5.25 08/27/96 2,000,000 1,983,375
Transamerica Finance Corp. . . . . . . . . . . 5.36 07/22/96 1,800,000 1,794,371
-----------
Total Commercial Paper (Cost $35,631,155) . . . . . . . . . . . . . . . . . . . . . . . 35,631,155
-----------
CORPORATE NOTES (11.9% of portfolio)
Associates Corp. of North America . . . . . . . 4.58 11/30/96 100,000 99,552
Associates Corp. of North America . . . . . . . 4.75 08/01/96 127,000 126,901
Associates Corp. of North America . . . . . . . 6.88 01/15/97 400,000 403,468
Associates Corp. of North America . . . . . . . 8.70 01/01/97 300,000 305,381
Commercial Credit Co. . . . . . . . . . . . . . 8.13 03/01/97 240,000 243,327
E. I. Dupont Co. . . . . . . . . . . . . . . . 8.45 10/15/96 734,000 740,212
Ford Motor Credit Corp. . . . . . . . . . . . . 8.00 10/01/96 253,000 254,455
Ford Motor Credit Corp. . . . . . . . . . . . . 7.88 10/15/96 175,000 176,096
Ford Motor Credit Corp. . . . . . . . . . . . . 8.25 07/15/96 195,000 195,167
Ford Motor Credit Corp. . . . . . . . . . . . . 7.88 01/15/97 202,000 204,177
Ford Motor Credit Corp. . . . . . . . . . . . . 8.88 08/01/96 575,000 576,541
</TABLE>
7
<PAGE> 8
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
DAILY INCOME FUND (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
-------- -------- ------ -----
<S> <C> <C>
CORPORATE NOTES -- continued
Ford Motor Credit Corp. . . . . . . . . . . . . 9.10% 07/05/96 $ 250,000 $ 250,090
General Electric Capital Corp. . . . . . . . . 7.14 09/06/96 100,000 100,216
General Electric Capital Corp. . . . . . . . . 8.75 11/26/96 215,000 217,817
General Electric Capital Corp. . . . . . . . . 7.85 07/17/96 200,000 200,187
Merrill Lynch & Co. . . . . . . . . . . . . . . 5.00 12/15/96 175,000 174,392
Norwest Financial, Inc. . . . . . . . . . . . . 8.88 07/01/96 50,000 50,000
Pepsico, Inc. . . . . . . . . . . . . . . . . . 7.00 11/15/96 260,000 261,259
Pepsico, Inc. . . . . . . . . . . . . . . . . . 5.00 02/24/97 295,000 293,617
PHH Corp. . . . . . . . . . . . . . . . . . . . 8.00 01/01/97 325,000 328,534
Philip Morris Cos., Inc. . . . . . . . . . . . 8.88 07/01/96 200,000 200,000
Philip Morris Cos., Inc. . . . . . . . . . . . 8.75 12/01/96 190,000 192,453
Shell Oil Co. . . . . . . . . . . . . . . . . . 6.00 01/15/97 175,000 175,267
Transamerica Finance Corp. . . . . . . . . . . 5.85 07/15/96 750,000 750,085
-----------
Total Corporate Notes (Cost $6,519,194) . . . . . . . . . . . . . . . . . . . . . . . 6,519,194
-----------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (19.8% of portfolio)
Federal Farm Credit Bank . . . . . . . . . . . 5.17 10/01/96 350,000 349,576
Federal Farm Credit Bank . . . . . . . . . . . 6.12(a) 03/17/97 500,000 502,798
Federal Home Loan Bank . . . . . . . . . . . . 4.17 09/09/96 50,000 49,857
Federal Home Loan Mortgage Corp. . . . . . . . 5.10 08/23/96 50,000 49,967
Federal National Mortgage Association . . . . . 5.60 11/01/96 500,000 499,686
Federal National Mortgage Association . . . . . 5.47 11/14/96 100,000 99,896
Tennessee Valley Authority . . . . . . . . . . 8.25 11/15/96 150,000 151,445
Tennessee Valley Authority . . . . . . . . . . 6.00 01/15/97 80,000 80,000
U. S. Treasury Note . . . . . . . . . . . . . . 7.88 07/31/96 1,000,000 1,001,535
U. S. Treasury Note . . . . . . . . . . . . . . 6.88 10/31/96 3,000,000 3,016,398
U. S. Treasury Note . . . . . . . . . . . . . . 6.88 04/30/97 500,000 504,447
U. S. Treasury Note . . . . . . . . . . . . . . 4.75 02/15/97 4,500,000 4,482,065
-----------
Total U. S. Government & Agency Obligations (Cost $10,787,670) . . . . . . . . . . . 10,787,670
-----------
CORPORATE MASTER NOTE (2.7% of portfolio)
Associates Corp. of North America, 5.15% (a) . . . . . . . . . . . . . . . . 1,450,000 1,450,000
-----------
Total Corporate Master Note (Cost $1,450,000) . . . . . . . . . . . . . . . . . . . . . 1,450,000
-----------
MONEY MARKET ACCOUNT (0.2% of portfolio)
State Street Bank and Trust Seven Seas Money Fund, 5.05% (b) . . . . . . . . 96,207 96,207
-----------
Total Money Market Account (Cost $96,207) . . . . . . . . . . . . . . . . . . . . . . . 96,207
-----------
TOTAL INVESTMENTS IN SECURITIES (COST $54,484,226) -- 100% . . . . . . . . . . . . . . $54,484,226
===========
</TABLE>
- ----------
(a) Variable coupon rate as of June 28, 1996.
(b) One day yield at June 28, 1996.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
-------- -------- ------ -----
<S> <C> <C> <C> <C>
CORPORATE BONDS (43.4% of portfolio)
BASIC INDUSTRIES - 6.5%
Allied Corp. . . . . . . . . . . . . . . 5.68-5.70% 09/15/98 $475,000 $ 409,094
Allied Corp. . . . . . . . . . . . . . . . 5.90-6.32(a) 08/01/97 229,000 214,115
Allied Corp. . . . . . . . . . . . . . . . 6.12-6.22(a) 08/01/99 109,000 89,644
Allied Corp. . . . . . . . . . . . . . . . 6.07-6.20(a) 08/01/01 275,000 194,219
Corning, Inc. . . . . . . . . . . . . . . 8.38 11/01/96 500,000 503,750
Corning, Inc. . . . . . . . . . . . . . . 7.10 08/14/00 100,000 100,000
Corning, Inc. . . . . . . . . . . . . . . 7.75 11/15/98 888,000 888,000
Ford Capital BV . . . . . . . . . . . . . 9.13 05/01/98 500,000 523,750
Ford Motor Co. . . . . . . . . . . . . . . 5.78 01/01/99 400,000 392,436
Philip Morris Cos., Inc. . . . . . . . . . 8.75 12/01/96 644,000 651,245
Philip Morris Cos., Inc. . . . . . . . . . 9.75 05/01/97 300,000 308,625
Philip Morris Cos., Inc. . . . . . . . . . 9.25 12/01/97 200,000 208,500
Philip Morris Cos., Inc. . . . . . . . . . 6.38 01/15/98 250,000 250,000
Texaco Capital, Inc. . . . . . . . . . . . 8.95 01/15/00 50,000 50,597
----------
Total Basic Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,783,975
----------
CONSUMER NON-DURABLE GOODS - 2.5%
Beverages
Anheuser Busch Cos. . . . . . . . . . . . 7.43 05/04/00 500,000 502,100
Pepsico Capital Resources, Inc. . . . . . 6.54(a) 04/01/98 100,000 89,500
Department Stores
J.C. Penney & Co. . . . . . . . . . . . . 10.00 10/15/97 300,000 313,125
Sears Roebuck and Co. . . . . . . . . . . 8.55 08/01/96 100,000 100,250
Medical Supplier
Baxter International . . . . . . . . . . . 6.25 03/11/97 180,000 180,000
Johnson & Johnson Co. . . . . . . . . . . 8.00 09/01/98 250,000 250,625
Photography
Eastman Kodak Co. . . . . . . . . . . . . 9.88 11/01/04 360,000 380,700
Recreational
Walt Disney Co. . . . . . . . . . . . . . 1.50 10/20/99 50,000 42,406
----------
Total Consumer Non-Durable Goods . . . . . . . . . . . . . . . . . . . . . . . . . . 1,858,706
----------
CONSUMER SERVICES - 0.5%
Healthcare
Hospital Corp. of America . . . . . . . . 6.90(a) 06/01/99 111,000 89,216
Schering-Plough Corp. . . . . . . . . . . 6.80-8.00(a) 12/02/96 300,000 292,875
----------
Total Consumer Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382,091
----------
ENERGY - 1.2%
Domestic Oil
Atlantic Richfield Co. . . . . . . . . . . 10.25 07/02/00 850,000 892,500
----------
Total Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 892,500
----------
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
-------- -------- ------ -----
<S> <C> <C> <C> <C>
FINANCE - 24.2%
Banks
Bank America Corp. . . . . . . . . . . . . 6.65%(b) 05/17/99 $ 100,000 $ 99,944
Bankers Trust NY Corp. . . . . . . . . . . 8.25 07/02/96 110,000 110,000
Bankers Trust NY Corp. . . . . . . . . . . 7.25 11/01/96 200,000 200,546
Barclays N.A. Capital Corp. . . . . . . . 9.75 05/15/21 306,000 349,222
Citicorp . . . . . . . . . . . . . . . . . 6.50 09/16/01 75,000 73,508
Chase Manhattan Corp. . . . . . . . . . . 8.00 04/15/02 1,000,000 1,015,000
Chase Manhattan Corp. . . . . . . . . . . 8.80 01/31/00 50,000 50,750
Chase Manhattan Corp. . . . . . . . . . . 8.00 05/01/05 500,000 506,250
International Bank for Recon. & Dev. . . . 4.59(a) 08/15/96 258,000 256,388
International Bank for Recon. & Dev. . . . 4.75-6.40(a) 02/15/97 934,000 900,143
International Bank for Recon. & Dev. . . . 5.47(a) 02/15/98 125,000 113,125
International Bank for Recon. & Dev. . . . 7.20(a) 08/15/98 26,000 22,783
International Bank for Recon. & Dev. . . . 5.93-7.89(a) 02/15/99 732,000 618,540
International Bank for Recon. & Dev. . . . 6.16-6.54(a) 08/15/99 525,000 429,187
NationsBank Corp. . . . . . . . . . . . . 4.75 08/15/96 100,000 99,803
Wells Fargo & Co. . . . . . . . . . . . . 8.20 11/01/96 172,000 172,980
Financial Services
American Express Co. . . . . . . . . . . . 11.63 12/12/00 300,000 325,500
Associates Corp. of North America . . . . 8.38 01/15/98 50,000 51,500
Avco Financial Services, Inc. . . . . . . 8.50 10/15/99 50,000 52,625
Beneficial Corp. . . . . . . . . . . . . . 9.80 05/12/97 110,000 113,440
CIT Group Holdings, Inc. . . . . . . . . . 6.00 02/15/97 150,000 150,007
CM International . . . . . . . . . . . . . 6.02-7.41(a) 09/11/00 430,000 317,394
Commercial Credit Co. . . . . . . . . . . 6.75 01/15/97 400,000 402,080
Dauphin Deposit Co. . . . . . . . . . . . 8.70 11/15/96 250,000 252,430
Dean Witter Discover Co. . . . . . . . . . 5.71(b) 03/02/99 525,000 519,750
Ford Motor Credit Corp. . . . . . . . . . 8.88 08/01/96 450,000 451,134
Ford Motor Credit Corp. . . . . . . . . . 5.52(b) 03/14/97 200,000 200,000
Ford Motor Credit Corp. . . . . . . . . . 5.67(b) 02/03/98 200,000 200,000
Franklin Universal Trust . . . . . . . . . 5.63 09/01/98 500,000 492,500
General Electric Capital Corp. . . . . . . 6.65(b) 04/14/08 500,000 501,260
General Electric Capital Corp. . . . . . . 5.47(b) 07/26/96 725,000 724,094
General Electric Capital Corp. . . . . . . 5.39(b) 08/01/96 150,000 150,001
General Electric Capital Corp. . . . . . . 7.98(b) 12/15/07 750,000 757,927
General Electric Capital Corp. . . . . . . 6.20 03/15/97 251,100 251,974
General Electric Capital Corp. . . . . . . 8.25 08/01/96 250,000 250,533
General Electric Capital Corp. . . . . . . 8.00 10/01/96 228,000 229,334
Heller Financial Corp. . . . . . . . . . . 6.45 02/15/97 37,500 37,644
Household Finance Corp. . . . . . . . . . 8.88 07/05/99 300,000 300,000
ITT Hartford . . . . . . . . . . . . . . . 8.20 10/15/98 357,000 369,495
Lincoln National Corp. . . . . . . . . . . 7.13 07/15/99 150,000 151,125
Morgan Stanley Group, Inc. . . . . . . . . 7.32 01/15/97 250,000 251,920
Texaco Capital Inc. . . . . . . . . . . . 9.00 11/15/96 365,000 369,329
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
-------- -------- ------ -----
<S> <C> <C> <C> <C>
FINANCE -- continued
Transamerica Finance Corp. . . . . . . . . 8.75% 10/01/99 $ 50,000 $ 52,813
U. S. West Cap. Funding Inc. . . . . . . . 8.00 10/15/96 50,000 50,290
Xerox Credit Corp. . . . . . . . . . . . . 9.63 09/01/97 182,000 188,825
Xerox Credit Corp. . . . . . . . . . . . . 6.78 05/21/01 500,000 498,125
Insurance
CIGNA Corp. . . . . . . . . . . . . . . . 8.00 09/01/96 126,000 126,394
CNA Financial . . . . . . . . . . . . . . 8.88 03/01/98 500,000 518,750
ITT Hartford Group, Inc. . . . . . . . . . 7.25 12/01/96 150,000 150,886
Liberty Mutual Cap. Corp. . . . . . . . . 8.50 07/08/96 250,000 250,000
Liberty Mutual Cap. Corp. . . . . . . . . 7.98 12/01/02 500,000 511,995
Manufacturers Life Mortgage Sec. . . . . . 8.25 03/01/97 250,000 252,813
Security & Commodity Brokers
J.P. Morgan & Co., Inc. . . . . . . . . . 5.37-6.38(a) 04/01/98 1,104,000 990,840
Lehman Brothers, Inc. . . . . . . . . . . 6.09 05/16/98 590,000 522,887
Lehman Brothers, Inc. . . . . . . . . . . 7.00 05/15/97 250,000 251,697
Lehman Brothers, Inc. . . . . . . . . . . 7.63 08/01/98 150,000 152,625
Salomon Bros., Inc. . . . . . . . . . . . 9.38 07/12/96 150,000 150,120
Salomon Bros., Inc. . . . . . . . . . . . 6.44(b) 08/06/96 250,000 250,313
Salomon Bros., Inc. . . . . . . . . . . . 6.55 05/15/97 40,000 40,116
-----------
Total Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,850,654
-----------
TECHNOLOGY - 0.9%
Computer & Business Equipment
Texas Instruments Corp. . . . . . . . . . . . 9.00 07/15/99 650,000 650,813
-----------
Total Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 650,813
-----------
TRANSPORTATION - 0.6%
Railroad
Atchison Topeka Santa Fe RR Co. . . . . . 5.37 09/15/99 228,000 219,735
St. Louis-San Francisco Railway Co. . . . 4.00 01/01/97 250,000 245,000
-----------
Total Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464,735
-----------
UTILITIES - 7.0%
Electric & Gas
Arkansas Power & Light Co. . . . . . . . . 5.88 03/01/97 200,000 199,250
Cincinnati Gas & Electric Co. . . . . . . 8.13 08/01/03 250,000 255,937
Commonwealth Edison Company . . . . . . . 2.75 04/01/99 100,000 88,875
Connecticut Light & Power Co. . . . . . . 7.25 07/01/99 247,000 247,618
Consolidated Edison Company of New York . 5.90 12/15/96 155,000 155,000
Consumers Power Co. . . . . . . . . . . . 6.88 05/01/98 200,000 200,250
International Standard Electric Corp. . . 6.59 03/15/97 110,000 105,050
Iowa Electric Light & Power Co. . . . . . 7.88 12/01/00 198,000 200,228
Iowa Southern Utilities . . . . . . . . . 6.13 06/01/97 50,000 50,000
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
-------- -------- ------ -----
<S> <C> <C> <C> <C>
UTILITIES -- continued
Louisiana Power & Light Co. . . . . . . . . 7.13% 03/01/98 $100,000 $ 100,250
Missouri Power & Light Co. . . . . . . . . . 5.63 04/01/97 100,000 99,625
New Orleans Public Service Co. . . . . . . . 5.88 04/01/97 250,000 249,375
Ohio Power Co. . . . . . . . . . . . . . . . 8.30 04/01/97 47,000 47,608
Pacific Gas & Electric Co. . . . . . . . . . 4.63 06/01/97 195,000 192,075
Potomac Electric Power Co. . . . . . . . . . 5.00 09/01/02 626,000 566,530
South Carolina Electric & Gas Co. . . . . . 6.50 09/01/98 240,000 239,400
Southern California Gas Co. . . . . . . . . 5.25 03/01/98 114,000 112,005
Western Massachusetts Electric Co. . . . . . 5.75 03/01/97 196,000 195,265
Telephone
AT&T Corp. . . . . . . . . . . . . . . . . . 7.50(b) 09/06/09 500,000 500,595
General Telephone Co. of Florida . . . . . . 6.50 11/01/97 200,000 199,750
General Telephone Co. of Indiana . . . . . . 6.38 08/01/98 300,000 298,125
General Telephone Co. of Indiana . . . . . . 7.50 12/01/01 100,000 101,375
GTE California . . . . . . . . . . . . . . . 7.13 12/01/98 250,000 251,250
GTE Southwest . . . . . . . . . . . . . . . 6.88 03/01/98 100,000 100,250
Hawaiian Telephone Co. . . . . . . . . . . . 6.75 04/01/98 100,000 100,125
Pacific Gas & Electric Co. . . . . . . . . . 4.87 12/09/96 250,000 248,750
Southwestern Bell Telephone Co. . . . . . . 6.05 02/09/98 50,000 49,562
-----------
Total Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,154,123
-----------
Total Corporate Bonds (Cost $32,044,929) . . . . . . . . . . . . . . . . . . . . . 32,037,597
-----------
FOREIGN BONDS (0.5% of portfolio)
Israel Trust Government Trust Certificates . . 9.05 11/15/96 15,000 15,113
Kingdom of Sweden . . . . . . . . . . . . . . . 6.15(a) 04/01/97 215,000 205,325
Metropolis of Tokyo . . . . . . . . . . . . . . 7.50 03/18/97 119,000 120,041
-----------
Total Foreign Bonds (Cost $342,449) . . . . . . . . . . . . . . . . . . . . . . . . . 340,479
-----------
ASSET-BACKED SECURITIES (5.1% of portfolio)
Bear Sterns Secured Investors Trust 1987-2 D . 9.95 10/20/18 188,822 194,550
CIT Revenue Grantor Trust 1994-A A . . . . . . 4.90 07/15/09 214,499 208,309
Case Equipment Loan Trust 1993-B A . . . . . . 4.30 05/17/99 24,136 23,955
Caterpillar Financial Asset Trust 1994-A A2 . . 6.10 06/25/00 27,380 27,420
Chase Manhattan Credit Card Master Trust 92-1 A 7.40 05/15/00 50,000 50,450
Chase Manhattan Grantor Trust 1993-A A . . . . 4.20 04/15/99 38,737 38,391
Chase Manhattan Grantor Trust 95-A A . . . . . 6.00 09/17/01 126,396 126,098
Daimler-Benz Vehicle Trust 1994-A A . . . . . . 5.95 12/15/00 53,308 53,276
Discover Card Trust 1992-B A . . . . . . . . . 6.80 06/16/00 85,000 85,484
Fleet Finance, Inc. 1993-1 A . . . . . . . . . 5.45 03/20/23 153,594 152,311
Ford Credit Grantor Trust . . . . . . . . . . . 4.30 07/15/98 47,255 46,577
Green Tree Financial Corp. 1993-2 A1 . . . . . 5.93 07/15/18 20,638 20,640
Green Tree Financial Corp. 1994-A A . . . . . . 6.90 02/15/04 193,314 191,465
Honda 1992-A Grantor Trust . . . . . . . . . . 4.90 06/15/98 12,665 12,618
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
-------- -------- ------ -----
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES -- continued
Household Affinity Credit Card Master
Trust 93-2 A . . . . . . . . . . . . . . . . 5.60% 05/15/02 $100,000 $ 96,598
MBNA Master Credit Card Trust 1993-3 . . . . . 5.40 09/15/00 148,000 144,463
Merrill Lynch Asset Backed Corp. 1993-1 A2 . . 5.13 07/15/98 7,827 7,817
Navistar Financial Corp. 1993-A A2 . . . . . . 4.48 10/15/98 62,702 62,655
Nissan Auto Rec. 1994-A A . . . . . . . . . . . 6.45 09/15/99 128,210 128,633
Olympic Auto Receivable Trust 1994-A A . . . . 5.65 01/15/01 131,555 130,857
Olympic Auto Receivable Trust 1996-A . . . . . 5.85 02/15/99 75,000 73,395
Premier Auto Trust 1992-4 A . . . . . . . . . . 5.05 01/15/98 265,264 263,778
Premier Auto Trust 1992-5 A . . . . . . . . . . 4.55 03/15/98 124,822 123,574
Premier Auto Trust . . . . . . . . . . . . . . 4.90 10/15/98 98,436 97,393
Premier Auto Trust 1993-3 A3 . . . . . . . . . 4.90 12/15/98 283,201 280,369
Premier Auto Trust 1993-4 A2 . . . . . . . . . 4.65 02/02/99 221,349 219,003
Premier Auto Trust . . . . . . . . . . . . . . 4.75 02/02/00 65,526 64,870
Premier Auto Trust 1995-1 A6 . . . . . . . . . 8.05 04/04/00 150,000 154,815
Railcar Trust 1992-1 A . . . . . . . . . . . . 7.75 06/01/04 98,528 102,564
Sears Credit Acct. Master Trust 1992-1 A . . . 5.90 11/15/98 208,333 208,739
Toyota Auto Rec. Grantor Trust 1993-A A . . . . 3.90 08/15/98 86,397 84,629
Volvo Auto Rec. 1991-A A . . . . . . . . . . . 5.65 12/15/98 132,671 132,267
Volvo Auto Rec. 1992-A A . . . . . . . . . . . 4.65 06/15/98 27,701 27,561
World Omni Leasing 1993-1 A . . . . . . . . . . 4.60 05/17/99 123,590 123,281
----------
Total Asset Backed Securities (Cost $3,751,576) . . . . . . . . . . . . . . . . . . . 3,758,804
----------
MORTGAGE BACKED SECURITIES (19.4% of portfolio)
Advanta Home Equity Loan Trust 1993-2 A1 . . . 6.15 10/25/09 171,290 164,609
Advanta Home Equity Loan Trust 1993-3 A1 . . . 4.90 10/25/09 275,346 261,757
Advanta Home Equity Loan Trust 1992-4 A . . . . 7.20 11/25/08 87,301 86,864
American Financial Home Equity Loan 1991-1A . . 8.00 07/25/06 198,135 200,928
American Housing Trust SER XI 3 B . . . . . . . 7.50 08/25/12 94,977 94,977
BW Home Equity Trust 1990-1A . . . . . . . . . 9.25 09/15/05 179,356 182,350
Chase Mortgage Finance Corp. 1993-G A1 . . . . 7.00 04/25/01 123,445 121,947
CITICORP Mortgage Securities Inc. 1992-3 A3 . . 7.50 07/25/06 7,249 7,203
CITICORP Mortgage Securities, Inc. . . . . . . 7.50 09/25/22 82,789 81,224
CITICORP Mortgage Trust 3 A5 . . . . . . . . . 9.00 01/25/20 100,000 102,066
CMC Securities Corp. 1992-D D3S . . . . . . . . 6.80(b) 12/25/23 66,455 66,363
CMC Securities Corp. 1993-E S9 . . . . . . . . 6.50 11/25/08 903,683 820,536
CMO Trust 14 . . . . . . . . . . . . . . . . . 8.00 01/01/17 265,276 264,496
CMO Trust 15 . . . . . . . . . . . . . . . . . 5.00 03/20/18 116,462 105,951
CMO Trust 17 B . . . . . . . . . . . . . . . . 7.25 04/20/18 91,712 92,203
Contimortgage Home Equity Loan Trust 95-3 A 1 . 6.65 07/15/09 310,299 312,236
Corestates Home Equity Trust 1994-1 . . . . . . 6.65 05/15/09 53,667 52,736
Daiwa Mortgage Acceptance 1992-1 . . . . . . . 7.88 10/25/19 43,723 43,614
EQCC Home Equity Loan Trust 95-3 A 2 . . . . . 6.45 11/15/08 250,000 245,533
Equicon Home Equity Loan Trust 1992-7 . . . . . 5.90 09/18/05 61,867 60,800
Equicon Home Equity Loan Trust 1995-2 A1 . . . 6.45 07/18/10 237,591 237,263
FHLB DA-99 . . . . . . . . . . . . . . . . . . 5.62 03/25/99 292,298 285,028
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
-------- -------- ------ -----
<S> <C> <C> <C> <C>
MORTGAGE BACKED SECURITIES -- continued
FHLMC . . . . . . . . . . . . . . . . . . . . . 8.50% 06/01/02 $ 96,462 $ 98,693
FHLMC 1221 G . . . . . . . . . . . . . . . . . 7.00 09/15/05 103,019 102,997
FHLMC 135 A . . . . . . . . . . . . . . . . . . 8.75 05/15/00 75,919 78,396
FHLMC 144 A . . . . . . . . . . . . . . . . . . 8.75 06/15/00 69,008 71,578
FHLMC 1458 M . . . . . . . . . . . . . . . . . 7.00 01/15/08 250,000 241,004
FHLMC 1459 TC . . . . . . . . . . . . . . . . . 7.50 10/15/01 50,000 49,948
FHLMC 1662 H . . . . . . . . . . . . . . . . . 6.25 01/15/09 231,928 230,620
FHLMC 1663 A . . . . . . . . . . . . . . . . . 7.00 07/15/23 198,035 191,738
FHLMC 39 ED . . . . . . . . . . . . . . . . . . 8.50 03/25/24 165,000 167,354
FHLMC . . . . . . . . . . . . . . . . . . . . . 6.50 10/15/12 180,002 179,957
FHLMC # 230013 . . . . . . . . . . . . . . . . 7.25 08/01/98 40,810 40,784
FHLMC #218209 . . . . . . . . . . . . . . . . . 7.00 03/15/13 94,136 94,228
FNMA #016782 . . . . . . . . . . . . . . . . . 6.00 09/01/99 5,013 4,556
FNMA 1992-33 G . . . . . . . . . . . . . . . . 7.75 05/25/19 41,842 41,940
FNMA 1992-73 E . . . . . . . . . . . . . . . . 7.50 05/25/19 61,226 61,585
FNMA 1993-85 E . . . . . . . . . . . . . . . . 6.50 11/25/07 282,545 281,685
FNMA G92-40 C . . . . . . . . . . . . . . . . . 7.00 05/25/97 42,807 42,835
FNMA REMIC 1992-203 K . . . . . . . . . . . . . 6.50 11/25/07 330,944 324,831
FNMA REMIC 1993-140 L . . . . . . . . . . . . . 7.00 07/25/12 169,687 167,635
FNMA REMIC 1993-15 K . . . . . . . . . . . . . 7.00 02/25/08 190,146 182,877
FNMA REMIC 1993-68 Z . . . . . . . . . . . . . 6.00 05/25/08 153,023 138,013
FNMA REMIC 1993-88 B . . . . . . . . . . . . . 5.40 06/25/00 428,423 399,579
FNMA REMIC 1994-4 K . . . . . . . . . . . . . . 6.50 12/25/06 562,849 555,851
First Alliance Mortgage Loan Trust . . . . . . 7.83 10/25/25 170,439 170,134
Fleet Finance Home Equity Trust 91-2 A . . . . 6.70 10/15/06 370,682 370,776
GE Capital Mortgage Services, Inc. 1993-3 A . . 7.50 03/25/19 157,089 157,324
GE Capital Mortgage Services, Inc. 1994-18 A3 . 7.00 08/25/24 100,000 99,551
GE Capital Mortgage Services, Inc. 1994-95 . . 5.50 02/25/24 100,000 94,406
Goldman Sachs Trust 2 B 3 . . . . . . . . . . . 8.95 07/01/17 127,512 132,926
HFC Home Equity Loan . . . . . . . . . . . . . 6.10 11/20/06 78,176 77,163
HFC Home Equity Loan 1992-1 A3 . . . . . . . . 5.80 05/20/07 11,732 11,552
HFC Home Equity Loan . . . . . . . . . . . . . 4.75 05/20/08 79,714 76,138
Housing Securities, Inc. . . . . . . . . . . . 7.25 01/25/07 250,000 249,922
Housing Securities, Inc. 1992-EA A4 . . . . . . 7.50 10/25/07 451,000 440,000
Merrill Lynch 1994-A A4 . . . . . . . . . . . . 6.41(b) 02/15/09 196,268 183,405
Merrill Lynch 91-1 A . . . . . . . . . . . . . 8.00 06/15/10 49,946 50,598
Mid-State Trust 3 A . . . . . . . . . . . . . . 7.63 04/01/22 277,768 280,227
Morgan Stanley Mortgage Trust T6 . . . . . . . 8.75 07/20/19 139,903 145,183
Nomura Asset Securities Corp. 1994-4B 4A . . . 8.30 09/25/24 64,654 63,968
Novus Home Equity Loan Trust 1993 - 1 A . . . . 5.95(b) 12/31/03 52,049 52,179
Old Stone Credit Corp. Home Equity Trust 92-2 A1 6.85 05/15/07 496,457 494,995
PNC Mortgage Securities Corp. 95-2 A 5 . . . . 7.00 07/25/08 225,624 220,961
Pru-Bache Secured Fin. . . . . . . . . . . . . 9.40 09/25/19 483,583 481,610
Prudential Home Mortgage 1992-44 A1 . . . . . . 6.00 01/25/98 190,594 188,738
Prudential Home Mortgage 1993-10 A 1 . . . . . 6.50 02/25/00 152,704 150,450
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
-------- -------- ------ -----
<S> <C> <C> <C>
MORTGAGE BACKED SECURITIES -- continued
Prudential Home Mortgage 1994-31 A 11 . . . . . 8.00% 11/25/09 $ 435,942 $ 433,230
RFMSI 1987-S2 A . . . . . . . . . . . . . . . . 8.50 04/01/02 37,022 37,827
RFMSI 1992-S19 . . . . . . . . . . . . . . . . 8.50 03/25/22 252,732 255,834
RFMSI 1993-S25 A1 . . . . . . . . . . . . . . . 6.50 07/25/08 98,361 97,776
RFMSI 93-57 A6 . . . . . . . . . . . . . . . . 7.15 02/25/08 60,056 59,910
Ryland 26C . . . . . . . . . . . . . . . . . . 9.00 12/01/16 330,668 340,420
Ryland Mortgage Acceptance Corp. 93-4 A 5 . . . 7.50 08/25/24 293,834 294,648
Sears Mortgage Securities Corp. 1992-10 A7 . . 8.00 03/25/22 153,360 153,360
TMS Equity Trust 1993-C2 A3 . . . . . . . . . . 5.75 10/15/22 182,581 175,651
TMS Home Equity Loan 1993D-A1 . . . . . . . . . 5.68 02/15/09 154,669 148,939
UCFC Home Equity Loan 1994-A A1 . . . . . . . . 4.83 03/10/05 1,314 1,311
UCFC Home Equity Loan 1994-C1 A1 . . . . . . . 6.78 03/10/05 18,730 18,763
Vanderbilt Mortgage Finance 95-B A 3 . . . . . 6.68 05/07/06 250,000 247,910
Zions Home Ref. Loan Trust 1993-1 . . . . . . . 5.15 09/25/03 163,553 156,356
-----------
Total Mortgage Backed Securities (Cost $14,335,018) . . . . . . . . . . . . . . . . . 14,253,509
-----------
U. S. GOVERNMENT & AGENCY OBLIGATIONS (26.8% of portfolio)
Certificates on Government Receipts . . . . . . 5.00(a) 11/15/96 56,000 54,848
Chattanooga Valley Corp. . . . . . . . . . . . 5.61 07/01/98 158,000 138,843
Chattanooga Valley Corp. . . . . . . . . . . . 5.78 01/01/01 256,000 187,520
Chattanooga Valley Corp. . . . . . . . . . . . 5.83 07/01/01 204,000 145,179
Federal Farm Credit Bank . . . . . . . . . . . 6.96 06/06/00 250,000 249,975
Federal Farm Credit Bank . . . . . . . . . . . 6.50 04/29/99 500,000 498,665
Federal Farm Credit Bank . . . . . . . . . . . 6.60 05/27/99 500,000 499,955
Federal Farm Credit Bank . . . . . . . . . . . 7.03 12/17/99 500,000 502,405
Federal Home Loan Bank . . . . . . . . . . . . 5.74(b) 12/23/98 500,000 492,535
Federal Home Loan Bank . . . . . . . . . . . . 7.87 12/15/97 250,000 256,657
Federal Home Loan Bank . . . . . . . . . . . . 6.67 10/30/00 1,000,000 993,370
Federal Home Loan Bank . . . . . . . . . . . . 6.32 12/20/00 250,000 244,945
Federal Home Loan Bank . . . . . . . . . . . . 6.45 03/06/01 500,000 491,260
Federal Home Loan Bank . . . . . . . . . . . . 6.38 03/13/01 500,000 490,230
Federal Home Loan Bank . . . . . . . . . . . . 7.20 07/02/01 400,000 400,000
Federal Home Loan Mortgage Corp. . . . . . . . 7.06 05/22/01 250,000 250,740
Federal Home Loan Mortgage Corp. . . . . . . . 6.77 04/03/01 500,000 496,335
Federal Home Loan Mortgage Corp. . . . . . . . 4.75(b) 09/20/00 500,000 484,515
Federal National Mortgage Assn. . . . . . . . . 8.00(a) 12/20/01 750,000 727,492
Federal National Mortgage Assn. . . . . . . . . 6.99 05/18/01 250,000 250,072
Federal National Mortgage Assn. . . . . . . . . 5.77 08/25/98 250,000 246,660
Federal National Mortgage Assn. . . . . . . . . 5.75(b) 02/09/99 250,000 245,902
Government Export . . . . . . . . . . . . . . . 5.69 02/01/98 100,000 99,802
Private Export Funding Corp. . . . . . . . . . 5.75 04/30/98 331,000 328,518
Student Loan Marketing Assn. . . . . . . . . . 5.59(b) 01/21/98 70,000 69,563
Student Loan Marketing Assn. . . . . . . . . . 5.45(b) 12/20/96 455,000 455,000
Treasury Bond Receipt . . . . . . . . . . . . . 5.40(a) 11/15/97 49,875 45,860
Treasury Bond Receipt . . . . . . . . . . . . . 5.00(a) 11/15/96 76,000 74,374
</TABLE>
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
-------- -------- ------ -----
<S> <C> <C>
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- continued
U. S. Treasury Bond . . . . . . . . . . . . . . 7.13% 02/29/00 $ 250,000 $ 255,883
U. S. Treasury Note . . . . . . . . . . . . . . 5.13 03/31/98 550,000 541,794
U. S. Treasury Note . . . . . . . . . . . . . . 5.25 07/31/98 250,000 245,885
U. S. Treasury Note . . . . . . . . . . . . . . 4.38 11/15/96 750,000 747,165
U. S. Treasury Note . . . . . . . . . . . . . . 5.00 01/31/99 750,000 728,430
U. S. Treasury Note . . . . . . . . . . . . . . 6.75 06/30/99 1,250,000 1,265,475
U. S. Treasury Note . . . . . . . . . . . . . . 6.50 08/15/97 500,000 503,435
U. S. Treasury Note . . . . . . . . . . . . . . 7.25 11/30/96 250,000 251,765
U. S. Treasury Note . . . . . . . . . . . . . . 7.25 02/15/98 250,000 254,620
U. S. Treasury Note . . . . . . . . . . . . . . 5.75 10/31/00 2,250,000 2,192,692
U. S. Treasury Note . . . . . . . . . . . . . . 6.38 03/31/01 500,000 498,020
U. S. Treasury Note . . . . . . . . . . . . . . 6.38 05/15/99 500,000 501,180
U. S. Treasury Note . . . . . . . . . . . . . . 8.00 10/15/96 2,300,000 2,316,882
-----------
Total U. S. Government & Agency Obligations (Cost $19,757,884) . . . . . . . . . . . 19,724,446
-----------
MUNICIPAL (1.0% of portfolio)
Albany NY Industrial Development Agency IDR . . 6.75(b) 02/01/99 750,000 750,000
-----------
Total Municipal (Cost $750,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . 750,000
-----------
COMMERCIAL PAPER (1.4% of portfolio)
Associates Corp. of North America . . . . . . . 5.36 07/03/96 1,000,000 999,258
-----------
Total Commerical Paper (Cost $999,258) . . . . . . . . . . . . . . . . . . . . . . . 999,258
-----------
CORPORATE MASTER NOTE (0.4% of portfolio)
Associates Corp. of North America, 5.15% (b) . . . . . . . . . . . . . . . . . . 300,000 300,000
-----------
Total Corporate Master Note (Cost $300,000) . . . . . . . . . . . . . . . . . . . . . 300,000
-----------
REPURCHASE AGREEMENT (1.9% of portfolio)
With Lehman Brothers, issued 06/28/96, 5.30%, due 07/01/96, collateralized by
$1,165,000 U. S. Treasury Bond, 9.00%, due 11/15/18 having a market
value of $1,430,238. Total proceeds at maturity are $1,400,618. . . . . . . . . . . . 1,400,000
-----------
Total Repurchase Agreement (Cost $1,400,000) . . . . . . . . . . . . . . . . . . . . 1,400,000
-----------
MONEY MARKET ACCOUNT (0.1% of portfolio)
State Street Bank and Trust Seven Seas Money Fund, 5.05% (c) . . . . . . . . . . . . . . 99,457
-----------
Total Money Market Account (Cost $99,457). . . . . . . . . . . . . . . . . . . . . . 99,457
-----------
TOTAL INVESTMENTS IN SECURITIES (Cost $73,780,571) -- 100% . . . . . . . . . . . . . . . $73,663,551
===========
</TABLE>
- -----------
(a) Yield-to-maturity at purchase.
(b) Variable Coupon rate as of June 28, 1996.
(c) One day yield at June 28, 1996.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
16
<PAGE> 17
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM GOVERNMENT SECURITIES FUND
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
-------- -------- ------ -----
<S> <C> <C>
MORTGAGE BACKED SECURITIES (1.9% of portfolio)
GNMA 1994-4 A . . . . . . . . . . . . . . . . . 7.99% 09/16/22 $ 96,915 $ 96,601
-----------
Total Mortgage Backed Securities (Cost $97,399) . . . . . . . . . . . . . . . . . . 96,601
-----------
U. S. GOVERNMENT & AGENCY OBLIGATIONS (94.5% of portfolio)
Franklin Steamship Co. Title XI . . . . . . . . 7.10 05/31/98 29,000 29,373
Private Export Funding Corp. . . . . . . . . . 5.52(a) 02/28/99 250,000 249,063
Private Export Funding Corp. . . . . . . . . . 5.48 09/15/03 225,000 213,750
Private Export Funding Corp. . . . . . . . . . 8.35 01/31/01 25,000 26,656
U. S. Treasury Note . . . . . . . . . . . . . . 7.00 04/15/99 450,000 458,339
U. S. Treasury Note . . . . . . . . . . . . . . 6.00 11/30/97 250,000 250,217
U. S. Treasury Note . . . . . . . . . . . . . . 5.25 07/31/98 1,650,000 1,622,841
U. S. Treasury Note . . . . . . . . . . . . . . 4.75 10/31/98 700,000 678,790
U. S. Treasury Note . . . . . . . . . . . . . . 4.38 11/15/96 600,000 597,732
U. S. Treasury Note . . . . . . . . . . . . . . 6.50 04/30/97 450,000 452,907
U. S. Treasury Note . . . . . . . . . . . . . . 5.75 10/31/00 100,000 97,453
U. S. Treasury Note . . . . . . . . . . . . . . 6.38 03/31/01 50,000 49,802
U. S. Treasury Note . . . . . . . . . . . . . . 6.38 05/15/99 50,000 50,118
-----------
Total U. S. Government & Agency Obligations (Cost $4,796,082) . . . . . . . . . . . 4,777,040
-----------
MONEY MARKET ACCOUNT (3.6% of portfolio)
Vanguard Money Market Reserves, U. S. Treasury, 4.93% (b) . . . . . . . . . . . . . . . . 182,070
-----------
Total Money Market Account (Cost $182,070) . . . . . . . . . . . . . . . . . . . . . 182,070
-----------
TOTAL INVESTMENTS IN SECURITIES (Cost $5,075,551) -- 100% . . . . . . . . . . . . . . . $ 5,055,712
===========
</TABLE>
- ------------------
(a) Variable coupon rate as of June 28, 1996.
(b) 7-day yield at June 28, 1996.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
17
<PAGE> 18
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
VALUE FUND
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Shares/
Face Amount Value
----------- -----------
<S> <C> <C>
COMMON STOCKS (89.3% of portfolio)
BASIC INDUSTRIES - 18.3%
Aluminum
Alcan Aluminum Ltd. . . . . . . . . . . . . . . . . . . . . . . . . 136,200 shs. $ 4,154,100
Chemicals
Avery Dennison Corp. . . . . . . . . . . . . . . . . . . . . . . . . 48,800 2,677,900
Betz Laboratories, Inc. . . . . . . . . . . . . . . . . . . . . . . 89,000 3,904,875
Dow Chemical Co. . . . . . . . . . . . . . . . . . . . . . . . . . . 20,200 1,535,200
Monsanto Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,000 3,087,500
Nalco Chemical Co. . . . . . . . . . . . . . . . . . . . . . . . . . 122,200 3,849,300
Forest Products
Pope & Talbot, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 125,500 1,898,188
Weyerhauser Co. . . . . . . . . . . . . . . . . . . . . . . . . . . 46,500 1,976,250
Packaging/Containers
Bemis Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 112,500 3,937,500
Paper
Champion International Corp. . . . . . . . . . . . . . . . . . . . . 41,500 1,732,625
International Paper Co. . . . . . . . . . . . . . . . . . . . . . . 95,000 3,503,125
Rubber
Cooper Tire & Rubber Co. . . . . . . . . . . . . . . . . . . . . . . 170,000 3,782,500
-----------
Total Basic Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,039,063
-----------
CAPITAL GOODS - 3.9%
Industrial Machinery
Bearings, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,250 2,436,750
Parker-Hannifin Corp. . . . . . . . . . . . . . . . . . . . . . . . 51,450 2,180,194
Trinova Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,500 3,020,438
-----------
Total Capital Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,637,381
-----------
CONSUMER DURABLE GOODS - 4.4%
Household Appliances & Furnishings
Maytag Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174,400 3,640,600
Juno Lighting, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 127,000 2,159,000
Oneida Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,700 2,881,875
-----------
Total Consumer Durable Goods . . . . . . . . . . . . . . . . . . . . . . . . . 8,681,475
-----------
CONSUMER NON-DURABLE GOODS - 14.8%
Drugs & Health Care
American Home Products Corp. . . . . . . . . . . . . . . . . . . . . 50,000 3,006,250
SmithKline Beecham Plc. . . . . . . . . . . . . . . . . . . . . . . 43,000 2,338,125
Photography
Eastman Kodak Co. . . . . . . . . . . . . . . . . . . . . . . . . . 39,500 3,071,125
</TABLE>
18
<PAGE> 19
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
VALUE FUND (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Shares/
Face Amount Value
----------- -----
<S> <C> <C>
CONSUMER NON-DURABLE GOODS -- continued
Retail
Dillard Department Stores, Inc. . . . . . . . . . . . . . . . . . . 100,000 shs. $ 3,650,000
K Mart Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,700 2,112,412
Longs Drug Stores Corp. . . . . . . . . . . . . . . . . . . . . . . 74,700 3,333,488
May Department Stores Co. . . . . . . . . . . . . . . . . . . . . . 57,500 2,515,625
Rite Aid Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,000 4,075,750
Ruddick Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 253,700 3,329,813
Sears Roebuck and Co. . . . . . . . . . . . . . . . . . . . . . . . 35,400 1,721,325
-----------
Total Consumer Non-Durable Goods . . . . . . . . . . . . . . . . . . . . . . . 29,153,912
-----------
CONSUMER SERVICES - 4.4%
Restaurants
Brinker International Inc. (a) . . . . . . . . . . . . . . . . . . . 229,600 3,444,000
Cracker Barrel Old Country Store, Inc. . . . . . . . . . . . . . . . 40,000 970,000
Wendy's International, Inc. . . . . . . . . . . . . . . . . . . . . 227,700 4,240,912
-----------
Total Consumer Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,654,912
-----------
ENERGY - 8.9%
Domestic Oil
Atlantic Richfield Co. . . . . . . . . . . . . . . . . . . . . . . 18,400 2,180,400
International Oil
Amoco Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,500 3,075,938
Chevron Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 2,950,000
Texaco Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,700 3,497,588
Petroleum Services
Dresser Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . 99,200 2,926,400
Halliburton Co. . . . . . . . . . . . . . . . . . . . . . . . . . . 55,300 3,069,150
-----------
Total Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,699,475
-----------
FINANCE - 17.6%
Banks
Banc One Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,800 3,869,200
BankAmerica Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 42,000 3,181,500
Chase Manhattan Corp. . . . . . . . . . . . . . . . . . . . . . . . 71,200 5,028,500
CITICORP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,500 3,181,062
Commerce Bancshares, Inc. . . . . . . . . . . . . . . . . . . . . . 101,823 3,474,710
Southern National Corp. . . . . . . . . . . . . . . . . . . . . . . 57,400 1,822,450
Insurance
Allstate Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,817 3,869,776
Chubb Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,000 3,291,750
Ohio Casualty Corp. . . . . . . . . . . . . . . . . . . . . . . . . 115,200 4,003,200
Transamerica Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 37,300 3,049,275
-----------
Total Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,771,423
-----------
</TABLE>
19
<PAGE> 20
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
VALUE FUND (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Shares/
Face Amount Value
----------- -----------
<S> <C> <C>
GENERAL BUSINESS - 4.0%
Business Services
Deluxe Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,300 shs. $ 3,986,650
Donnelley, R.R. & Sons Co. . . . . . . . . . . . . . . . . . . . . . 111,100 3,874,613
------------
Total General Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,861,263
------------
TECHNOLOGY - 4.2%
Aerospace
Sundstrand Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 64,000 2,344,000
Computers & Business Equipment
Digital Equipment Corp. (a) . . . . . . . . . . . . . . . . . . . . 38,500 1,732,500
Xerox Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,500 2,327,250
Electronics
Harris Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,500 1,860,500
------------
Total Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,264,250
------------
TRANSPORTATION - 2.0%
Air Travel
Southwest Airlines Co. . . . . . . . . . . . . . . . . . . . . . . . 133,400 3,885,275
------------
Total Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,885,275
------------
UTILITIES - 6.8%
Electric
American Electric Power Co. . . . . . . . . . . . . . . . . . . . . 35,300 1,504,662
Gas & Pipeline
Questar Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,900 4,212,600
Sonat, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,000 4,005,000
Telephone
Bellsouth Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 91,000 3,856,125
------------
Total Utilties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,578,387
------------
Total Common Stocks (Cost $133,157,482) . . . . . . . . . . . . . . . . . . . 176,226,816
------------
PREFERRED STOCKS (0.7% of portfolio)
K Mart Corp. 7.75% Convertible Preferred . . . . . . . . . . . . . . . 25,200 1,367,100
------------
Total Preferred Stocks (Cost $1,281,750) . . . . . . . . . . . . . . . . . . 1,367,100
------------
COMMERCIAL PAPER (4.3% of portfolio)
American Express Credit Corp., 5.28%, due 07/03/96 . . . . . . . . . . $2,500,000 2,499,267
Beneficial Corp., 5.35%, due 07/18/96 . . . . . . . . . . . . . . . . . 3,000,000 2,992,421
Ford Motor Credit Co., 5.33%, due 07/11/96 . . . . . . . . . . . . . . 3,000,000 2,995,558
------------
Total Commercial Paper (Cost $8,487,246) . . . . . . . . . . . . . . . . . . 8,487,246
------------
</TABLE>
20
<PAGE> 21
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
VALUE FUND (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Shares/
Face Amount Value
----------- -----------
<S> <C>
CORPORATE MASTER NOTE (2.5% of portfolio)
Associates Corp. of North America, 5.15% (b) . . . . . . . . . . . . . . . . . . . $ 5,000,000
------------
Total Corporate Master Note (Cost $5,000,000) . . . . . . . . . . . . . . . 5,000,000
------------
MONEY MARKET ACCOUNT (0.1% of portfolio)
State Street Bank and Trust Seven Seas Money Fund, 5.05% (c) . . . . . . . . . . . 87,623
------------
Total Money Market Account (Cost $87,623) . . . . . . . . . . . . . . . . . . 87,623
------------
REPURCHASE AGREEMENT (3.1% of portfolio)
With Lehman Brothers, issued 06/28/96, 5.30%, due 07/01/96, collateralized by
$4,565,000 U.S. Treasury Bond, 11.75%, due 02/15/10 having a market
value of $6,229,684. Total Proceeds at maturity are $6,102,694. . . . . . . . . 6,100,000
------------
Total Repurchase Agreement (Cost $6,100,000) . . . . . . . . . . . . . . . . 6,100,000
------------
TOTAL INVESTMENTS IN SECURITIES (Cost $154,114,101) -- 100% . . . . . . . . . . . $197,268,785
============
</TABLE>
- --------------
(a) Non-income producing.
(b) Variable coupon rate as of June 28, 1996.
(c) One-day yield at June 28, 1996.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
HOMESTEAD FUNDS, INC.
(UNAUDITED)
1. ORGANIZATION
Homestead Funds, Inc. (Homestead Funds) is a Maryland corporation registered
with the Securities and Exchange Commission under the Investment Company Act of
1940 as a no-load, open-end diversified management investment company.
Homestead Funds currently consists of four funds: Daily Income Fund, Short-Term
Bond Fund, Short-Term Government Securities Fund and Value Fund. The Daily
Income Fund and Value Fund commenced operations on November 19, 1990, the
Short-Term Bond Fund commenced operations on November 5, 1991, and the
Short-Term Government Securities Fund commenced operations on May 1, 1995.
Each Fund is a separate investment portfolio with distinct investment
objectives, investment programs, policies and restrictions. The investment
objectives of the Funds as well as the nature and risks of the investment
activities of each Fund are set forth more fully in the Homestead Funds'
Prospectus and Statement of Additional Information.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security valuation: With respect to the Daily Income Fund, all money market
instruments are valued on an amortized cost basis, which approximates market
value. Under the amortized cost method, discounts and premiums on securities
purchased are amortized over the life of the respective securities.
With respect to the Short-Term Bond Fund, the Short-Term Government Securities
Fund and the Value Fund, investments in common stocks, preferred stocks, and
convertible preferred stocks traded on national securities exchanges and
certain over-the-counter securities are valued at the last quoted sale price at
the close of the New York Stock Exchange. Short-term debt instruments with a
remaining maturity of more than 60 days, intermediate and long-term bonds,
convertible bonds, and other debt securities are generally valued at market
prices furnished by an independent pricing service. Where such prices are not
available, valuations are obtained from brokers who are market makers for such
securities. Over-the-counter issues not quoted on the NASDAQ system, other
equity securities and debt instruments for which a sale price is not available
are valued at the mean of the closing bid and asked prices, or the last
available sale price may be used for exchange-traded debt securities.
Securities with a maturity of 60 days or less are valued on an amortized cost
basis, which approximates market value.
Distributions to shareholders: Dividends to shareholders are recorded on the
ex-dividend date. Income dividends for the Daily Income Fund, the Short-Term
Bond Fund and the Short-Term Government Securities Fund are declared daily and
paid monthly. With respect to the Value Fund, income dividends are declared and
paid semi-annually. Capital gains dividends, if any, are declared and paid at
the end of each fiscal year.
Other: The financial statements reflect all adjustments, which are of a normal
recurring nature, and which, in the opinion of management, are necessary to a
fair statement of results for the six months ended June 30, 1996. Dividend
income is recorded on the ex-dividend date. Interest income and expenses are
recorded on the accrual basis. Investment transactions are recorded on the
trade date. Realized gains and losses from investment transactions are reported
on the identified cost basis.
3. FEDERAL INCOME TAXES
The Funds comply with the provisions of the Internal Revenue Code that are
applicable to regulated investment companies and distribute all of their
taxable income to their shareholders. Therefore, no provision for federal
income or excise tax is required.
At June 30, 1996, the aggregate costs of investments for the Daily Income Fund,
the Short-Term Bond Fund, the Short-Term Government Securities Fund and the
Value Fund for federal income tax is the same as for financial
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
HOMESTEAD FUNDS, INC. (CONTINUED)
(UNAUDITED)
reporting purposes. With respect to the Short-Term Bond Fund at June 30, 1996,
net unrealized depreciation aggregated $117,020, of which $370,740 related to
gross unrealized appreciation and $487,760 related to gross unrealized
depreciation. With respect to the Short-Term Government Securities Fund at June
30, 1996, net unrealized depreciation aggregated $19,839, of which $6,875
related to gross unrealized appreciation and $26,714 related to gross
unrealized depreciation. With respect to the Value Fund at June 30, 1996, net
unrealized appreciation aggregated $43,154,684, of which $45,103,182 related to
gross unrealized appreciation and $1,948,498 related to gross unrealized
depreciation.
4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term and U.S.
Government securities, for the six months ended June 30, 1996, were as follows:
<TABLE>
<CAPTION>
SHORT-TERM
SHORT-TERM GOVERNMENT VALUE
BOND-FUND SECURITIES FUND FUND
--------- --------------- ------------
<S> <C> <C> <C>
Purchases $26,496,336 $536,299 $43,850,016
Proceeds from Sales $13,679,109 $21,480 $4,268,292
</TABLE>
For the Short-Term Bond Fund and Short-Term Government Securities Fund,
purchases of long-term U.S. Government securities were $4,719,409 and
$2,380,914 respectively, for the six months ended June 30, 1996, and sales of
U. S. Government securities for the same period were $2,482,461 and $322,641,
respectively.
5. INVESTMENT MANAGER
The investment management agreements between Homestead Funds, with respect to
each Fund, and RE Advisers Corporation (Manager), an indirect, wholly-owned
subsidiary of National Rural Electric Cooperative Association (NRECA), provide
for an annual investment management fee, computed daily and paid monthly, based
on each Fund's average daily net assets at the following annualized rates: with
respect to the Daily Income Fund, .50% of the average daily net assets up to
$100 million, .40% of the average daily net assets up to the next $100 million,
.30% of the average daily net assets up to the next $300 million, and .25% of
such assets in excess of $500 million; with respect to the Short-Term Bond Fund
and the Short-Term Government Securities Fund, .50% of the average daily net
assets up to $50 million, .40% of the average daily net assets up to the next
$50 million, and .30% of such assets in excess of $100 million; and, with
respect to the Value Fund, .65% of the average daily net assets up to $50
million, .50% of the average daily net assets up to the next $50 million, and
.40% of such assets in excess of $100 million.
The Manager has agreed, as part of the Expense Limitation Agreements entered
into with Homestead Funds, with respect to each Fund, to reimburse for all Fund
operating expenses, excluding certain non-recurring expenses, which in any year
exceed .75% of the average daily net assets of the Daily Income Fund, the
Short-Term Bond Fund and the Short-Term Government Securities Fund, and 1.25%
of the average daily net assets of the Value Fund. If, in any subsequent year,
a Fund's operating expenses are less than the operating expense limit for that
Fund and the assets of that Fund exceed $50 million, the Fund's operating
expenses previously assumed and paid by the Manager on that Fund's behalf may
be reimbursed by the Fund to the Manager, provided that in doing so the
operating expense limit for that Fund was not exceeded. The period during which
amounts may be reimbursed by the Fund to the Manager will not exceed five years
from the date on which the first payment, if any, is made by the Fund.
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
HOMESTEAD FUNDS, INC. (CONTINUED)
(UNAUDITED)
Pursuant to the Expense Limitation Agreements, $18,270 of management fees for
the Daily Income Fund were waived, $12,443 of management fees for the
Short-Term Bond Fund were waived, and $8,947 of management fees were waived and
$29,403 of operating expenses of the Short-Term Government Securities Fund were
reimbursed by the Manager for the six months ended June 30, 1996. At June 30,
1996, cumulative fees and reimbursed expenses which may be subject to payment
by the funds in future years pursuant to such Agreements, amount to $454,279,
$378,201, and $92,168 for the Daily Income Fund, the Short-Term Bond Fund, and
the Short-Term Government Securities Fund, respectively. All costs and expenses
incurred in the organization of each of the Funds were assumed by the Manager.
At June 30, 1996 certain officers and directors of the Homestead Funds, and
NRECA and its affiliates owned 8.6% of the Daily Income Fund shares
outstanding, 1.6% of the Short-Term Bond Fund shares outstanding, 8.6% of the
Short-Term Government Securities Fund shares outstanding, and 1.0% of the Value
Fund shares outstanding.
6. CAPITAL SHARE TRANSACTIONS
As of June 30, 1996, 250 million shares of $.01 par value capital shares are
authorized for each Fund. Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Shares Issued Total Total
Shares In Reinvestment Shares Shares Net
Sold of Dividends Issued Redeemed Increase
---- ------------ ------ -------- --------
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 1996
In Dollars
Daily Income Fund . . . . . . . . . . . . $12,647,201 $1,220,771 $13,867,972 ($12,215,561) $1,652,411
Short-Term Bond Fund . . . . . . . . . . . $18,833,405 $1,768,493 $20,601,898 ($8,378,607) $12,223,291
Short-Term Government Securities Fund . . $3,192,363 $82,847 $3,275,210 ($763,499) $2,511,711
Value Fund . . . . . . . . . . . . . . . . $45,477,919 $1,794,817 $47,272,736 ($10,418,521) $36,854,215
In Shares
Daily Income Fund . . . . . . . . . . . . 12,647,201 1,220,771 13,867,972 (12,215,561) 1,652,411
Short-Term Bond Fund . . . . . . . . . . . 3,650,733 343,654 3,994,387 (1,624,804) 2,369,583
Short-Term Government Securities Fund . . 633,517 16,445 649,962 (151,449) 498,513
Value Fund . . . . . . . . . . . . . . . . 2,330,679 90,147 2,420,826 (541,174) 1,879,652
YEAR ENDED DECEMBER 31, 1995
In Dollars
Daily Income Fund . . . . . . . . . . . . $32,402,034 $2,300,431 $34,702,465 ($18,671,498) $16,030,967
Short-Term Bond Fund . . . . . . . . . . . $18,717,052 $2,927,165 $21,644,217 ($14,514,272) $7,129,945
Short-Term Government Securities Fund . . $2,732,242 $49,005 $2,781,247 ($146,987) $2,634,260
Value Fund . . . . . . . . . . . . . . . . $39,949,688 $6,936,475 $46,886,163 ($18,059,863) $28,826,300
In Shares
Daily Income Fund . . . . . . . . . . . . 32,402,034 2,300,431 34,702,465 (18,671,498) 16,030,967
Short-Term Bond Fund . . . . . . . . . . . 3,679,842 571,497 4,251,339 (2,848,599) 1,402,740
Short-Term Government Securities Fund . . 541,405 9,676 551,081 (29,015) 522,066
Value Fund . . . . . . . . . . . . . . . . 2,378,552 382,894 2,761,446 (1,084,229) 1,677,217
</TABLE>
24
<PAGE> 25
FINANCIAL HIGHLIGHTS
HOMESTEAD FUNDS, INC.
DAILY INCOME FUND
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 1996 -------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR . . . . . . . . . . . . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
Income from investment operations
Net investment income (a) . . . . 0.02 0.05 0.04 0.03 0.03 0.06
----- ----- ----- ----- ----- -----
Total from investment operations . 0.02 0.05 0.04 0.03 0.03 0.06
----- ----- ----- ----- ----- -----
Distributions
Net investment income . . . . . . (0.02) (0.05) (0.04) (0.03) (0.03) (0.06)
----- ----- ----- ----- ----- -----
Total distributions . . . . . . . (0.02) (0.05) (0.04) (0.03) (0.03) (0.06)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD . . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
TOTAL RETURN . . . . . . . . . . . . . 2.37%(c) 5.38% 3.63% 2.68% 3.39% 5.67%
===== ===== ===== ===== ===== =====
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(thousands) . . . . . . . . . . . $54,352 $52,669 $36,668 $25,159 $22,330 $24,396
Ratio of expenses to average
net assets (a) . . . . . . . . . . 0.75%(b) 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of net investment income to
average net assets (a) . . . . . . 4.73%(b) 5.25% 3.66% 2.64% 3.34% 5.44%
Ratio of gross expenses before
voluntary expense limitation to
average net assets . . . . . . . . 0.82%(b) 0.87% .99% 1.11% 1.21% 1.27%
</TABLE>
- -----------
(a) Excludes investment management fees and other expenses in excess of 0.75%,
pursuant to the Expense Limitation Agreement with the Manager (See Note 5 to
financial statements).
(b) Annualized.
(c) Aggregate total return for the period.
25
<PAGE> 26
FINANCIAL HIGHLIGHTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
November 5, 1991
Six Months (Commencement
Ended Year Ended December 31, of Operations) to
June 30, 1996 -------------------------------------------------- December 31,
(Unaudited) 1995 1994 1993 1992 1991
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD . . . . . . . . . . . . . . . . . . $5.19 $4.95 $5.19 $5.10 $5.06 $5.00
----- ----- ----- ----- ----- -----
Income from investment operations
Net investment income (a) . . . . . . 0.15 0.28 0.24 0.24 0.26 0.04
Net realized and unrealized gain
(loss) on investments . . . . . . . (0.06) 0.24 (0.24) 0.09 0.04 0.06
----- ----- ----- ----- ----- -----
Total from investment operations . . . . 0.09 0.52 0.00 0.33 0.30 0.10
----- ----- ----- ----- ----- -----
Distributions
Net investment income . . . . . . . . (0.15) (0.28) (0.24) (0.24) (0.26) (0.04)
----- ----- ----- ----- ----- -----
Total distributions . . . . . . . . . (0.15) (0.28) (0.24) (0.24) (0.26) (0.04)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD . . . . . . . $5.13 $5.19 $4.95 $5.19 $5.10 $5.06
===== ===== ===== ===== ===== =====
TOTAL RETURN . . . . . . . . . . . . . . . . 1.66%(c) 10.81% 0.09% 6.62% 6.30% 1.99%(c)
===== ===== ===== ===== ===== =====
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(thousands) . . . . . . . . . . . . . $73,520 $62,125 $52,257 $37,046 $10,991 $1,268
Ratio of expenses to average
net assets (a) . . . . . . . . . . . . 0.75%(b) 0.75% 0.75% 0.75% 0.75% 0.75%(b)
Ratio of net investment income to
average net assets (a) . . . . . . . . 5.67%(b) 5.49% 4.84% 4.58% 5.20% 5.59%(b)
Ratio of gross expenses before
voluntary expense limitation to
average net assets . . . . . . . . . . 0.79%(b) 0.86% 0.98% 1.16% 1.94% 5.61%(b)
Portfolio turnover rate . . . . . . . . . 25% 35% 13% 14% 19% 0%
</TABLE>
- -----------
(a) Excludes investment management fees and other expenses in excess of 0.75%,
pursuant to the Expense Limitation Agreement with the Manager (See Note 5
to financial statements).
(b) Annualized.
(c) Aggregate total return for the period.
26
<PAGE> 27
FINANCIAL HIGHLIGHTS
HOMESTEAD FUNDS, INC.
SHORT-TERM GOVERNMENT SECURITIES FUND
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
May 1, 1995
Six Months (Commencement
Ended of Operations) to
June 30, 1996 December 31,
(Unaudited) 1995
------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . $5.09 $5.00
----- -----
Income from investment operations
Net investment income (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.13 0.18
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . (0.07) 0.09
----- -----
Total from investment operations . . . . . . . . . . . . . . . . . . . . . . . . . . 0.06 0.27
----- -----
Distributions
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.13) (0.18)
----- -----
Total distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.13) (0.18)
----- -----
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5.02 $5.09
===== =====
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.15%(c) 5.44%(c)
===== =====
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands) . . . . . . . . . . . . . . . . . . . . . . . $5,127 $2,658
Ratio of expenses to average net assets (a) . . . . . . . . . . . . . . . . . . . . 0.75%(b) 0.75%(b)
Ratio of net investment income to average net assets (a) . . . . . . . . . . . . . . 5.10%(b) 5.18%(b)
Ratio of gross expenses before voluntary expense limitation to average net assets . 2.89%(b) 6.21%(b)
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10% 7%
</TABLE>
- -----------
(a) Excludes investment management fees and other expenses in excess of 0.75%,
pursuant to the Expense Limitation Agreement with the Manager (See Note 5
to financial statements).
(b) Annualized.
(c) Aggregate total return for the period.
27
<PAGE> 28
FINANCIAL HIGHLIGHTS
HOMESTEAD FUNDS, INC.
VALUE FUND
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 1996 ---------------------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR . . . . . . . . . . . . . . . . . $18.44 $14.50 $14.54 $12.49 $11.48 $10.15
------ ------ ------ ------ ------ ------
Income from investment operations
Net investment income (a) . . . . . . 0.19 0.41 0.29 0.22 0.25 0.39
Net realized and unrealized
gain on investments . . . . . . . . 1.47 4.47 .07 2.12 1.09 1.34
------ ------ ------ ------ ------ ------
Total from investment operations . . . 1.66 4.88 .36 2.34 1.34 1.73
------ ------ ------ ------ ------ ------
Distributions
Net investment income . . . . . . . . (0.19) (0.41) (0.29) (0.22) (0.25) (0.39)
Net realized gain . . . . . . . . . . - (0.53) (0.11) (0.07) (0.08) (0.01)
------ ------ ------ ------ ------ ------
Total distributions . . . . . . . . . (0.19) (0.94) (0.40) (0.29) (0.33) (0.40)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD . . . . . . . $19.91 $18.44 $14.50 $14.54 $12.49 $11.48
====== ====== ====== ====== ====== ======
TOTAL RETURN . . . . . . . . . . . . . . . . 8.98%(d) 33.78% 2.50% 18.83% 11.68% 17.16%
====== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands) . . $196,683 $147,506 $91,612 $53,616 $19,730 $10,398
Ratio of expenses to average
net assets (a) . . . . . . . . . . . . 0.76%(c) 0.84% 1.15% 1.25% 1.25% 1.25%
Ratio of net investment income
to average net assets (a) . . . . . . 2.11%(c) 2.50% 2.19% 1.92% 2.33% 3.80%
Ratio of gross expenses before
voluntary expense limitation to
average net assets . . . . . . . . . . n/a n/a 1.15%(b) 1.25%(b) 1.61% 1.75%
Portfolio turnover rate . . . . . . . . . 3% 10% 4% 2% 5% 26%
Average commission rate paid
per share transacted . . . . . . . . . $0.0500 - - - - -
</TABLE>
- -----------
(a) Excludes investment management fees and other expenses in excess of 1.25%,
pursuant to the Expense Limitation Agreement with the Manager (See Note 5
to financial statements).
(b) Includes investment management fees reimbursed to the manager pursuant to
the Expense Limitation Agreement with the Manager (See Note 5 to financial
statements).
(c) Annualized
(d) Aggregate total return for the period.
28
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HOMESTEAD FUNDS, INC.
---------------------------
SEMI-ANNUAL REPORT
JUNE 30, 1996
[HOMESTEAD FUNDS INC. LOGO]
c/o Rodney Square Management Corp.
PO Box 8987
Wilmington, DE 19899
1-800-258-3030
