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HOMESTEAD FUNDS, INC.
SUPPLEMENT TO PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1996
At a Special Meeting of Shareholders of the Daily Income Fund held on November
25, 1996 and held on November 27, 1996 for the Value Fund, the shareholders
approved amendments to the Investment Management Agreements. The Expense
Limitation Agreements for the Daily Income Fund and Value Fund were amended to
change the operating expense limit for the Daily Income Fund and to eliminate
any rights for RE Advisers Corporation ("RE Advisers" or "the Adviser") to
receive reimbursement of any operating expenses assumed and paid by the
Adviser on behalf of the Daily Income Fund and Value Fund, whether previously
paid or paid in the future by the Adviser.
The following sentence addresses changes to the sections of the prospectus and
statement of additional information entitled: "Investment Manager."
The Homestead Funds pays RE Advisers, on a monthly basis, an investment
management fee based on each Fund's average daily net assets at the following
annualized rates: with respect to the Daily Income Fund 0.50% of the average
daily net assets, and with respect to the Value Fund 0.65% of the average
daily net assets up to $200 million; 0.50% of the average daily net assets up
to the next $200 million; and 0.40% of the average daily net assets in excess
of $400 million.
The following sentences address changes to the section of the prospectus and
statement of additional information entitled: "Expenses."
RE Advisers has agreed, as part of the Expense Limitation Agreements entered
into with the Homestead Funds with respect to each such Fund, to assume as its
own expense and reimburse each Fund for all Fund Operating Expenses, which in
any year exceed 0.80% of the average daily net assets of the Daily Income
Fund. The Adviser will not receive reimbursement of any Operating Expenses
assumed and paid by the Adviser on behalf of the Daily Income Fund and Value
Fund.
December 2, 1996
