<PAGE> 1
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A MESSAGE FROM THE INVESTMENT MANAGER
Dear Shareholder:
During the past several years, investors have benefited from an environment of
solid economic growth, low levels of inflation and rising corporate profits.
Productivity gains and continued cost cutting have resulted in earnings growth
without price increases even as employment costs have risen. In general, it
would be difficult to improve upon these trends or imagine a more favorable
investment environment.
Late in the first quarter, however, numerous economic indicators suggested that
the rate of economic growth was accelerating beyond consensus expectations.
Taken together, such reports heightened fears of rising inflation, sending both
the stock and bond markets lower. Rising inflation is bad news for the stock
market because it usually causes the Federal Reserve Board to raise interest
rates. This in turn hits corporate profits and raises the yield on investment
alternatives to stocks, such as CD's and other fixed-income securities. The
S&P 500, which during the first two months had gained nearly 10%, ended the
quarter up only 2.7%. As the second quarter began, the sell-off continued
sending the S&P 500 down, about 10% from the previous quarter highs. The
decline, however, was short-lived as investors used the lows of April as a
buying opportunity, which sent the S&P 500 up 17.4% for the second quarter and
20.2% year-to-date.
The standard measures of valuation such as a price/earnings ratio or dividend
yield seem irrelevant in today's market. While the levels of the Dow Jones
Industrial and the S&P 500 indices illustrate this point, the stock market as a
whole can hardly be described as cheap. If the current economic environment
can be described as "near perfect", then any market related surprises are
likely to deter rather than enhance the overall market environment.
Nevertheless, we continue to find opportunities which meet our investment
criteria. Value investing often requires patience but over time this approach
has produced positive and consistent investment results.
VALUE FUND
For the six months ended June 30, 1997, the Value Fund returned 16.9%.
Portfolio strategy continued to emphasize three important sectors of the
economy. The consumer cyclicals sector, which comprises 25% of the portfolio,
includes such companies as Maytag, May Department Stores and Dillard Department
Stores. An increase in the pace of consumer spending, tightened cost controls
and modest valuations make this sector an attractive investment at this time.
The financial sector represents 16% of the portfolio and has been a core
investment holding for several years. Stable interest rates, significant
balance sheet improvement and continued industry-wide cost cutting have helped
this sector produce solid investment results for the Fund. The basic industry
and manufacturing sectors comprised of paper and forest products, chemicals and
other companies tied to the economic cycle also represent important holdings in
the Fund. This sector which endured painful downsizing and plant closings is
now benefiting from improved profit margins and increased cash flow.
Valuations in this sector remain attractive, making it a good place to seek new
investments.
SHORT-TERM BOND FUND
The Short-Term Bond Fund had a total return of 2.9% for the six months ending
June 30, 1997. The Fund began the year with a 30-day yield of 6.0%, which then
rose to 6.2% in April, before declining in June to end the second quarter at
6.1%. Within the portfolio, investments in asset-backed securities increased
from 6.4% in January to 15.6% in June. Investments in corporate securities
were reduced modestly. During the period, the average-weighted maturity of the
portfolio remained unchanged at 2.9 years.
<PAGE> 2
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A MESSAGE FROM THE INVESTMENT MANAGER
(CONTINUED)
DAILY INCOME FUND
Money market rates rose during the first half of 1997 as the Federal Reserve
Board increased the benchmark Federal Fund rate from 5.3% to 5.5% in late
March. This increase was reflected in the Fund's one-day yield, which began
the year at 4.6% and ended on June 30 at 4.9%. The Fund's average maturity was
lengthened by 12 days to 45 days as fears of further rate increases proved
unwarranted. In managing the Daily Income Fund, we continue to maintain our
conservative investment approach. The credit quality of the portfolio is high,
even when compared to the regulatory standards of money market investing.
SHORT-TERM GOVERNMENT SECURITIES FUND
For the six months ending June 30, 1997, the Short-Term Government Securities
Fund had a total return of 2.4%. The Fund began the year with a 30-day SEC
Yield of 5.1% and ended the second quarter at 5.2%. The average maturity of
the Fund was 1.6 years on June 30, compared to 1.9 years on January 1.
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
2
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STATEMENTS OF ASSETS AND LIABILITIES
HOMESTEAD FUNDS, INC.
JUNE 30, 1997
(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: $61,651,250; $96,168,949;
$13,056,978; $229,380,957).................... $61,651,250 $96,436,560 $13,066,073 $324,859,687
Receivables
Investment securities sold................... - 153,038 - 664,890
Dividends and interest....................... 578,347 1,280,324 156,236 329,355
Capital shares sold.......................... 337,074 4,291 - 373,742
Due from Manager............................. - - 61 -
Prepaid expenses................................ 20,258 23,474 9,390 54,075
----------- ----------- ----------- ------------
Total assets................................. 62,586,929 97,897,687 13,231,760 326,281,749
----------- ----------- ----------- ------------
LIABILITIES
Payables
Investment securities purchased.............. - 1,592,241 102,035 -
Accrued expenses............................. 25,023 33,247 13,915 67,781
Due to Manager............................... 25,818 39,845 - 157,693
Capital shares redeemed...................... 138,609 323,383 - 147,671
Dividends.................................... 6,341 30,726 5,079 39,758
----------- ----------- ----------- ------------
Total liabilities............................ 195,791 2,019,442 121,029 412,903
----------- ----------- ----------- ------------
NET ASSETS......................................... $62,391,138 $95,878,245 $13,110,731 $325,868,846
=========== =========== =========== ============
NET ASSETS CONSIST OF:
Unrealized appreciation of investments.......... $ - $ 267,611 $ 9,095 $ 95,478,730
Realized gain................................... - 29,886 386 2,687,995
Paid-in-capital applicable to outstanding shares
of 62,391,138 of Daily Income Fund, 18,604,320
of Short-Term Bond Fund, 2,599,491 of
Short-Term Government Securities Fund, and
13,379,564 of Value Fund...................... 62,391,138 95,580,748 13,101,250 227,702,121
----------- ----------- ----------- ------------
$62,391,138 $95,878,245 $13,110,731 $325,868,846
=========== =========== =========== ============
NET ASSET VALUE PER SHARE.......................... $1.00 $5.15 $5.04 $24.36
=========== =========== =========== ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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STATEMENTS OF OPERATIONS
HOMESTEAD FUNDS, INC.
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(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......................................... $1,650,078 $2,931,229 $ 331,022 $ 616,764
Dividends........................................ - - - 2,886,138
---------- ---------- -------- -----------
Total income.................................. 1,650,078 2,931,229 331,022 3,502,902
---------- ---------- -------- -----------
Expenses
Management fees.................................. 152,076 268,748 25,214 840,282
Custodian and accounting fees.................... 37,849 60,630 24,017 69,728
Shareholder servicing............................ 21,574 24,859 15,218 86,583
Registration expense............................. 16,788 20,169 6,818 43,161
Legal and audit fees............................. 3,957 5,673 607 16,983
Communication.................................... 3,035 3,438 737 18,976
Insurance........................................ 2,798 3,917 373 11,520
Printing......................................... 1,817 2,481 526 10,684
Directors fees................................... 537 791 75 2,353
Other expenses................................... 3,639 4,490 507 15,111
---------- ---------- -------- -----------
Total expenses................................ 244,070 395,196 74,092 1,115,381
Less fees waived and expenses paid by
Manager..................................... (5,235) (59,740) (32,249) -
---------- ---------- -------- -----------
Net expenses.................................. 238,835 335,456 41,843 1,115,381
---------- ---------- -------- -----------
NET INVESTMENT INCOME............................... 1,411,243 2,595,773 289,179 2,387,521
---------- ---------- -------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on investments................. - 29,886 386 2,687,995
Net change in unrealized appreciation
(depreciation)................................. - 29,143 (2,695) 39,194,712
---------- ---------- -------- -----------
NET GAIN (LOSS) ON INVESTMENTS...................... - 59,029 (2,309) 41,882,707
---------- ---------- -------- -----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.......... $1,411,243 $2,654,802 $ 286,870 $44,270,228
========== ========== ======== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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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, 1997 December 31, June 30, 1997 December 31,
(Unaudited) 1996 (Unaudited) 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income.................................... $ 1,411,243 $ 2,531,400 $ 2,595,773 $ 4,118,739
Net realized gain on investments......................... - - 29,886 83,511
Net change in unrealized appreciation (depreciation)..... - - 29,143 (528,101)
------------ ------------ ------------ ------------
Increase in net assets from operations................... 1,411,243 2,531,400 2,654,802 3,674,149
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.................................... (1,411,243) (2,531,400) (2,595,773) (4,118,739)
Net realized gain on investments......................... - - - (83,511)
CAPITAL SHARE TRANSACTIONS, NET.......................... 4,519,659 5,172,330 14,349,304 19,873,017
------------ ------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS............................. 4,519,659 5,172,330 14,408,333 19,344,916
NET ASSETS
Beginning of year........................................ 57,871,479 52,699,149 81,469,912 62,124,996
------------ ------------ ------------ ------------
END OF PERIOD............................................ $62,391,138 $ 57,871,479 $95,878,245 $ 81,469,912
============ ============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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6
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STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
HOMESTEAD FUNDS, INC.
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT
SECURITIES FUND VALUE FUND
---------------------------------- ------------------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1997 December 31, June 30, 1997 December 31,
(Unaudited) 1996 (Unaudited) 1996
------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income............................. $ 289,179 $ 257,316 $ 2,387,521 $ 4,020,746
Net realized gain on investments.................. 386 1,913 2,687,995 3,956,651
Net change in unrealized appreciation
(depreciation).................................. (2,695) (12,151) 39,194,712 23,576,803
----------- ---------- ------------ ------------
Increase in net assets from operations............ 286,870 247,078 44,270,228 31,554,200
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. (289,179) (257,316) (2,387,521) (4,020,746)
Net realized gain on investments.................. - (1,913) - (3,956,651)
CAPITAL SHARE TRANSACTIONS, NET................... 5,420,629 5,046,362 45,435,959 67,467,585
----------- ---------- ------------ ------------
TOTAL INCREASE IN NET ASSETS...................... 5,418,320 5,034,211 87,318,666 91,044,389
NET ASSETS
Beginning of year................................. 7,692,411 2,658,200 238,550,180 147,505,791
----------- ---------- ------------ ------------
END OF PERIOD..................................... $13,110,731 $ 7,692,411 $ 325,868,846 $ 238,550,180
=========== ========== ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
DAILY INCOME FUND
JUNE 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
-------- -------- ---------- -----------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (50.2% of portfolio)
American Express Credit Corp. .................................. 5.54% 07/24/97 $ 600,000 $ 597,876
American Express Credit Corp. .................................. 5.53 07/28/97 1,322,000 1,316,517
American General Finance Corp. ................................. 5.57 07/03/97 1,000,000 999,691
American General Finance Corp. ................................. 5.52 07/08/97 131,000 130,859
American General Finance Corp. ................................. 5.57 07/09/97 1,162,000 1,160,562
American General Finance Corp. ................................. 5.59 09/02/97 600,000 594,130
Beneficial Corp. ............................................... 5.61 07/21/97 1,228,000 1,224,173
Beneficial Corp. ............................................... 5.54 07/31/97 1,184,000 1,178,534
CIT Group Holdings, Inc. ....................................... 5.60 08/13/97 643,000 638,699
CIT Group Holdings, Inc. ....................................... 5.64 07/22/97 900,000 897,039
Chevron Oil Finance Corp. ...................................... 5.50 07/02/97 2,081,000 2,080,682
Commercial Credit Co. .......................................... 5.52 07/18/97 1,125,000 1,122,067
Commercial Credit Co. .......................................... 5.55 07/23/97 1,500,000 1,494,913
Ford Motor Credit Corp. ........................................ 5.57 07/11/97 1,400,000 1,397,834
General Electric Capital Corp. ................................. 5.61 07/10/97 1,597,000 1,594,760
General Electric Capital Corp. ................................. 5.54 07/31/97 374,000 372,273
General Electric Capital Corp. ................................. 5.62 08/19/97 119,000 118,090
General Electric Capital Corp. ................................. 5.62 09/04/97 300,000 296,967
General Electric Capital Corp. ................................. 5.57 09/10/97 148,000 146,374
Household Finance Corp. ........................................ 6.08 07/01/97 2,732,000 2,732,000
IBM Credit Corp. ............................................... 5.56 07/18/97 383,000 381,994
IBM Credit Corp. ............................................... 5.53 07/24/97 613,000 610,834
IBM Credit Corp. ............................................... 5.56 07/29/97 2,000,000 1,991,351
Merrill Lynch & Co. ............................................ 5.57 07/16/97 963,000 960,765
Merrill Lynch & Co. ............................................ 5.62 09/02/97 1,193,000 1,181,284
Norwest Financial, Inc. ........................................ 5.61 07/08/97 1,000,000 998,909
Norwest Financial, Inc. ........................................ 5.63 08/06/97 950,000 944,652
Pacific Gas & Electric Co. ..................................... 5.57 07/24/97 500,000 498,221
Philip Morris Cos., Inc. ....................................... 5.55 07/21/97 1,495,000 1,490,390
Prudential Funding Corp. ....................................... 5.61 07/14/97 430,000 429,129
Prudential Funding Corp. ....................................... 5.61 07/15/97 415,000 414,095
Prudential Funding Corp. ....................................... 5.60 08/14/97 937,000 930,587
-----------
Total Commercial Paper (Cost $30,926,251)....................................................................... 30,926,251
-----------
</TABLE>
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PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
DAILY INCOME FUND (CONTINUED)
JUNE 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
-------- -------- ---------- -----------
<S> <C> <C> <C> <C>
CORPORATE NOTES (25.8% of portfolio)
American General Finance Corp................................... 7.70% 11/15/97 $ 85,000 $ 85,606
Associates Corp. of North America............................... 5.88 08/15/97 300,000 300,069
Associates Corp. of North America............................... 6.75 07/15/97 500,000 500,225
Beneficial Corp. ............................................... 6.40 09/03/97 500,000 500,643
Beneficial Corp. ............................................... 6.79 11/20/97 200,000 200,702
Campbell Soup Co. .............................................. 9.00 11/01/97 500,000 504,752
CIT Group Holdings, Inc. ....................................... 8.75 07/01/97 690,000 690,000
CIT Group Holdings, Inc. ....................................... 7.00 09/30/97 300,000 300,966
E. I. Dupont Co. ............................................... 8.65 12/01/97 682,000 689,933
Ford Motor Credit Corp. ........................................ 9.38 12/15/97 25,000 25,357
Ford Motor Credit Corp. ........................................ 7.13 12/01/97 204,000 205,081
Ford Motor Credit Corp. ........................................ 6.80 08/15/97 1,255,000 1,256,666
General Electric Capital Corp. ................................. 7.00 08/18/97 310,000 310,553
Household Finance Corp. ........................................ 6.25 10/15/97 365,000 365,378
Johnson & Johnson............................................... 7.38 11/09/97 1,313,000 1,319,169
John Deere Capital Corp. ....................................... 6.07 08/25/97 700,000 700,071
Merrill Lynch & Co. ............................................ 7.78 11/18/97 1,000,000 1,006,801
Norwest Financial, Inc. ........................................ 6.50 11/15/97 50,000 50,117
Pacific Gas & Electric Co. ..................................... 9.08 12/15/97 750,000 760,384
Pepsico, Inc. .................................................. 8.00 12/28/97 1,657,000 1,671,653
Philip Morris Cos., Inc. ....................................... 9.25 12/01/97 50,000 50,664
Texaco Capital Corp. ........................................... 9.00 11/15/97 1,040,000 1,052,361
Transamerica Finance Corp. ..................................... 6.75 08/15/97 300,000 300,410
Wal-Mart Stores................................................. 5.50 09/15/97 3,059,000 3,057,572
-----------
Total Corporate Notes (Cost $15,905,133)........................................................................ 15,905,133
-----------
</TABLE>
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PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
DAILY INCOME FUND (CONTINUED)
JUNE 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
-------- -------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS (15.7% of portfolio)
Federal Farm Credit Bank........................................ 5.62% 09/03/97 $ 300,000 $ 300,039
Federal Farm Credit Bank........................................ 5.93 07/01/97 150,000 150,000
Federal Farm Credit Bank........................................ 5.85 08/01/97 275,000 275,090
Federal Farm Credit Bank........................................ 5.34 07/01/97 1,315,000 1,315,000
Federal Home Loan Bank.......................................... 6.31 07/01/97 200,000 200,000
Federal Home Loan Bank.......................................... 6.50 07/07/97 1,000,000 1,000,166
Federal Home Loan Bank.......................................... 6.44 07/25/97 500,000 500,316
Federal Home Loan Bank.......................................... 5.95 09/05/97 250,000 250,201
Federal Home Loan Mortgage Corp. ............................... 5.20 08/04/97 1,000,000 999,543
Federal Home Loan Mortgage Corp. ............................... 5.82 07/15/97 500,000 500,082
Federal National Mortgage Association........................... 5.83 09/15/97 400,000 400,222
Federal National Mortgage Association........................... 8.80 07/25/97 125,000 125,278
Federal National Mortgage Association........................... 8.95 07/10/97 25,000 25,020
Federal National Mortgage Association........................... 9.55 12/10/97 100,000 101,607
Federal National Mortgage Association........................... 5.12 07/30/97 1,000,000 995,875
Federal National Mortgage Association........................... 7.09 10/14/97 25,000 25,107
Federal National Mortgage Association........................... 6.45 12/08/97 300,000 301,130
Federal National Mortgage Association........................... 5.40 12/05/97 175,000 174,630
U.S. Treasury Note.............................................. 8.75 10/15/97 2,000,000 2,017,667
-----------
Total U.S. Government & Agency Obligations (Cost $9,656,973)............................................ 9,656,973
-----------
CORPORATE MASTER NOTE (3.3% of portfolio)
Associates Corp. of North America............................... 5.57(a) 2,064,000 2,064,000
-----------
Total Corporate Master Note (Cost $2,064,000)........................................................... 2,064,000
-----------
REPURCHASE AGREEMENT (5.0% of portfolio)
With Lehman Brothers, issued 06/30/97, 5.85%, due 07/01/97,
collateralized by $3,090,000 Federal Farm Credit Bank, 5.85%
due 08/01/97 having a market value of $3,162,707. Total
proceeds at maturity are $3,097,503........................................................ 3,097,000 3,097,000
-----------
Total Repurchase Agreement (Cost $3,097,000)............................................................... 3,097,000
-----------
MONEY MARKET ACCOUNT
State Street Bank and Trust SSgA Fund........................... 5.26(b) 1,893 1,893
-----------
Total Money Market Account (Cost $1,893)................................................................ 1,893
-----------
TOTAL INVESTMENTS IN SECURITIES (COST $61,651,250) -- 100%.................................................... $61,651,250
===========
</TABLE>
- --------------
(a) Variable coupon rate as of June 30, 1997.
(b) One day yield at June 30, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND
JUNE 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
--------- -------- ---------- -----------
<S> <C> <C> <C> <C>
CORPORATE BONDS (35.3% of portfolio)
BASIC INDUSTRIES - 5.1%
Allied Corp. ............................................... 5.68-5.70%(a) 09/15/98 $ 475,000 $ 441,797
Allied Corp. ............................................... 5.69-6.32(a) 08/01/97 566,000 563,368
Allied Corp. ............................................... 6.12-6.22(a) 08/01/99 109,000 95,588
Allied Corp. ............................................... 6.07-6.20(a) 08/01/01 275,000 208,656
Corning, Inc. .............................................. 7.10 08/14/00 100,000 101,625
Ford Capital BV............................................. 9.13 05/01/98 500,000 513,295
Ford Motor Co. ............................................. 5.78 01/01/99 400,000 397,960
Hoechst-Celanese Corp. ..................................... 9.63 09/01/99 600,000 603,000
McKesson Corp. ............................................. 4.50 03/01/04 575,000 497,375
Philip Morris Cos., Inc. ................................... 9.25 12/01/97 200,000 202,756
Philip Morris Cos., Inc. ................................... 6.38 01/15/98 1,091,000 1,092,735
Ryder System, Inc. ......................................... 7.56 08/15/00 85,000 87,231
Texaco Capital, Inc. ....................................... 8.50 06/01/99 150,000 152,625
-----------
Total Basic Industries.................................................................................. 4,958,011
-----------
CONSUMER NON-DURABLE GOODS - 2.0%
Beverages
Pepsico Capital Resources, Inc. ............................ 6.54(a) 04/01/98 100,000 95,742
Photography
Eastman Kodak Co. .......................................... 9.88 11/01/04 625,000 647,656
Recreation
Walt Disney Co. ............................................ 1.50 10/20/99 50,000 44,813
Retail
J.C. Penney & Co. .......................................... 10.00 10/15/97 900,000 910,449
Sears Roebuck and Co. ...................................... 9.25 08/01/97 85,000 85,221
Wal-Mart Stores............................................. 5.50 09/15/97 100,000 99,959
-----------
Total Consumer Non-Durable Goods........................................................................ 1,883,840
-----------
CONSUMER SERVICES - 0.1%
Healthcare
Hospital Corp. of America................................... 6.90(a) 06/01/99 111,000 95,460
-----------
Total Consumer Services................................................................................. 95,460
-----------
ENERGY - 1.8%
Domestic Oil
Atlantic Richfield Co. ..................................... 10.25 07/02/00 1,687,000 1,716,523
-----------
Total Energy............................................................................................ 1,716,523
-----------
FINANCE - 19.2%
Banks
Bank America Corp. ......................................... 6.65(b) 05/17/99 400,000 396,518
Bank America Corp. ......................................... 8.95 11/15/04 510,000 534,225
Barclays N.A. Capital Corp. ................................ 9.75 05/15/21 306,000 346,162
Chase Manhattan Corp. ...................................... 8.80 02/01/00 100,000 100,000
</TABLE>
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PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND (CONTINUED)
JUNE 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
--------- -------- ---------- -----------
<S> <C> <C> <C> <C>
FINANCE -- continued
Chase Manhattan Corp. ...................................... 9.05% 02/01/02 $ 150,000 $ 150,000
Chase Manhattan Corp. ...................................... 8.00 04/15/02 1,025,000 1,026,281
Chase Manhattan Corp. ...................................... 8.00 05/01/05 500,000 506,250
Chemical New York Corp. NV.................................. 6.05(a) 02/16/98 115,000 110,983
CITICORP.................................................... 8.63 11/01/04 250,000 260,000
CITICORP.................................................... 6.50 09/16/01 75,000 74,226
First Interstate Bancorp. .................................. 8.15 03/15/02 1,000,000 1,013,750
International Bank for Recon. & Dev. ....................... 5.47(a) 02/15/98 125,000 120,625
International Bank for Recon. & Dev. ....................... 7.20(a) 08/15/98 26,000 24,342
International Bank for Recon. & Dev. ....................... 5.93-7.89(a) 02/15/99 732,000 663,375
International Bank for Recon. & Dev. ....................... 6.16-6.54(a) 08/15/99 525,000 460,688
Irving Bank Corp. .......................................... 8.50 06/01/02 233,000 233,149
J.P. Morgan & Co., Inc. .................................... 5.37-6.38(a) 04/01/98 1,104,000 1,058,062
Financial Services
American Express Co. ....................................... 11.63 12/12/00 870,000 908,228
American RE Corp. .......................................... 10.88 09/15/04 334,000 359,050
Associates Corp. of North America........................... 8.38 01/15/98 50,000 50,696
Associates Corp. of North America........................... 6.75 07/15/97 76,000 76,037
AVCO Financial Services, Inc. .............................. 8.50 10/15/99 50,000 52,375
Bell Atlantic Financial Corp. .............................. 6.63 11/30/97 250,000 250,728
CM International............................................ 6.02-7.41(a) 09/11/00 1,105,000 895,050
Dean Witter Discover Co. ................................... 5.54(b) 03/02/99 1,045,000 1,046,954
Ford Motor Credit Corp. .................................... 5.92(b) 02/03/98 200,000 199,998
Franklin Universal Trust.................................... 5.63 09/01/98 500,000 498,375
General Electric Capital Corp. ............................. 6.65(b) 04/14/08 500,000 502,475
Household Finance Corp. .................................... 6.08 03/08/06 585,000 559,651
IBM Credit Corp. ........................................... 9.68 07/01/08 100,000 110,170
IBM Credit Corp. ........................................... 6.75 08/22/00 500,000 499,375
John Deere Capital Corp. ................................... 6.07 08/25/97 300,000 300,222
Lincoln National Corp. ..................................... 7.13 07/15/99 150,000 151,688
Midland American Capital Corp. ............................. 12.75 11/15/03 115,000 123,625
Reliance Financial Services Corp. .......................... 7.87 12/01/00 45,000 45,012
Sears Overseas Finance Co. ................................. 6.28-6.79(a) 07/12/98 200,000 187,884
Transamerica Finance Corp. ................................. 8.75 10/01/99 50,000 52,375
Xerox Credit Corp. ......................................... 6.78 05/21/01 500,000 501,250
Xerox Credit Corp. ......................................... 9.63 09/01/97 182,000 183,056
Insurance
CNA Financial............................................... 8.88 03/01/98 500,000 509,370
ITT Hartford Group, Inc. ................................... 8.20 10/15/98 357,000 366,482
Liberty Mutual Capital Corp. ............................... 7.98 12/01/02 500,000 514,935
Security & Commodity Brokers
Lehman Brothers, Inc. ...................................... 5.62-7.11(a) 05/16/98 2,098,000 1,992,198
Lehman Brothers, Inc. ...................................... 6.25-6.40(a) 05/16/98 313,000 297,215
Lehman Brothers, Inc. ...................................... 7.63 08/01/98 150,000 152,262
-----------
Total Finance................................................................................................... 18,465,372
-----------
</TABLE>
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12
<PAGE> 13
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND (CONTINUED)
JUNE 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
--------- -------- ---------- -----------
<S> <C> <C> <C> <C>
TRANSPORTATION - 0.6%
Airlines
Delta Airlines, Inc. ....................................... 9.60% 05/26/00 $ 50,000 $ 53,457
Railroad
Atchison Topeka Santa Fe RR Co. ............................ 5.37 09/15/99 228,000 223,725
Norfolk & Western Railway Co. .............................. 8.13 11/15/00 100,000 104,412
Seaboard System Railroad.................................... 11.13 04/01/98 200,000 207,195
-----------
Total Transportation.................................................................................... 588,789
-----------
UTILITIES - 6.5%
Electric & Gas
Central Power & Light Co.................................... 6.63 01/01/98 260,000 260,000
Commonwealth Edison Co. .................................... 2.75 04/01/99 95,000 88,231
Commonwealth Edison Co. .................................... 7.50 01/01/01 150,000 150,562
Connecticut Light & Power Co. .............................. 7.25 07/01/99 247,000 250,088
Consumers Power Co. ........................................ 6.88 05/01/98 200,000 200,750
Duke Power Co. ............................................. 7.41 02/10/04 250,000 253,437
Florida Power Corp. ........................................ 7.38 06/01/02 502,000 508,275
Florida Power Corp. ........................................ 7.25 11/01/02 250,000 253,750
Georgia Power Co. .......................................... 7.00 10/01/00 1,000,000 1,001,250
Louisiana Power & Light Co. ................................ 7.13 03/01/98 135,000 135,000
Northern States Power Co. .................................. 7.38 03/01/02 585,000 591,581
Portland General Electric Co. .............................. 6.60 10/01/97 159,000 159,199
Potomac Electric Power Co. ................................. 5.00 09/01/02 386,000 356,568
Sierra Pacific Power Co. ................................... 6.50 07/01/97 532,000 532,000
South Carolina Electric & Gas Co. .......................... 6.50 09/01/98 490,000 491,225
Southern California Gas Co. ................................ 5.25 03/01/98 114,000 113,573
Telephone
AT&T Corp. ................................................. 7.50(b) 09/01/09 500,000 500,521
General Telephone Co. of Indiana............................ 6.38 08/01/98 300,000 300,375
Hawaiian Telephone Co. ..................................... 6.75 04/01/98 100,000 100,000
Southwestern Bell Telephone Co. ............................ 6.05 02/09/98 50,000 50,000
-----------
Total Utilities......................................................................................... 6,296,385
-----------
Total Corporate Bonds (Cost $33,414,794)................................................................ 34,004,380
-----------
FOREIGN BONDS (0.9% of portfolio)
Hydro-Quebec................................................... 6.27 01/03/26 80,000 78,600
Province of Ontario............................................ 15.25 08/31/12 700,000 750,750
-----------
Total Foreign Bonds (Cost $825,885)..................................................................... 829,350
-----------
ASSET BACKED SECURITIES (15.6% of portfolio)
Americredit Automobile Receivables Trust 96-B A................ 6.50 01/12/02 94,031 94,310
Bear Sterns Secured Investors Trust 87-2 D..................... 9.95 10/20/18 204,462 216,802
Case Equipment Loan Trust 94-A A............................... 4.65 08/15/99 225,389 224,420
Caterpillar Financial Asset Trust 95-A A3...................... 6.30 08/25/01 773,821 777,764
Chase Manhattan Credit Card Master Trust 92-1 A................ 7.40 05/15/00 12,500 12,496
</TABLE>
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13
<PAGE> 14
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND (CONTINUED)
JUNE 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
--------- -------- ---------- -----------
<S> <C> <C> <C> <C>
ASSET BACKED SECURITIES -- continued
Chase Manhattan Grantor Trust 95-A A........................... 6.00% 09/17/01 $ 182,396 $ 182,547
CIT Revenue Grantor Trust 94-A A............................... 4.90 07/15/09 163,677 160,030
Citibank Credit Card Master Trust 97-3 A....................... 6.84 02/10/04 750,000 755,183
CSFBTLC Trust II 94-1.......................................... 8.80 12/25/01 527,816 525,298
Discover Card Trust 94-1 A..................................... 6.70 02/16/00 350,000 350,579
Discover Card Trust 92-B A..................................... 6.80 06/16/00 370,000 371,581
First Chicago Master Trust II 92-E A........................... 6.25 08/15/99 400,000 400,288
First Security Auto Grantor Trust 95-A A....................... 6.25 01/15/01 256,839 258,188
Ford Credit Grantor Trust 93-B A............................... 4.30 07/15/98 1,203,857 1,202,169
Ford Credit Grantor Trust 95-A A............................... 5.90 05/15/00 403,322 404,535
Green Tree Financial Corp. 95-9 A2............................. 6.00 01/15/27 935,598 931,931
Green Tree Financial Corp. 96-1 A1............................. 5.50 03/15/27 608,393 606,324
Green Tree Financial Corp. 92-1 A2............................. 6.15 10/15/17 160,312 160,787
Household Affinity Credit Card Master Trust 93-2 A............. 5.60 05/15/02 100,000 97,849
Keycorp Auto Grantor Trust 95-A A.............................. 5.80 07/15/00 191,503 191,160
MBNA Master Credit Card Trust 93-3............................. 5.40 09/15/00 148,000 146,867
MMCA Automobile Trust 95-1 A................................... 5.70 11/15/00 334,397 333,948
Navistar Financial Corp. Owner Trust 96-A A2................... 6.35 11/15/02 507,198 509,608
Nissan Auto Receivables Grantor Trust 94-A A................... 6.45 09/15/99 68,052 68,398
Nissan Auto Receivables Grantor Trust 95-A A................... 6.10 08/15/01 121,885 122,101
Olympic Auto Receivable Trust 94-A A........................... 5.65 01/15/01 533,213 533,624
Olympic Auto Receivable Trust 96-A A4.......................... 5.85 07/15/01 75,000 74,348
Premier Auto Trust 93-2 A3..................................... 4.90 10/15/98 30,675 30,651
Premier Auto Trust 94-1 A3..................................... 4.75 02/02/00 20,612 20,542
Premier Auto Trust 93-3 A3..................................... 4.90 12/15/98 354,358 353,995
Premier Auto Trust 93-4 A2..................................... 4.65 02/02/99 241,382 240,918
Premier Auto Trust 95-1 A6..................................... 8.05 04/04/00 312,000 318,367
Prime Credit Card Master Trust 92-1 A1......................... 7.05 02/15/01 150,000 151,117
Railcar Trust 92-1 A........................................... 7.75 06/01/04 91,369 94,770
Resolution Trust Corporation 92-2 A............................ 7.92(b) 08/25/21 282,549 286,349
Small Business Administration 92-10 C.......................... 7.15 09/01/02 238,263 238,737
Standard Credit Card Master Trust 95-8 A....................... 6.70 09/07/02 1,000,000 1,004,970
Standard Credit Card Trust 90-6 A.............................. 9.38 09/10/98 610,000 610,799
Union Acceptance Corp. 95-C A.................................. 6.40 10/10/02 79,345 79,586
Union Acceptance Corp. 95-D A.................................. 5.97 01/07/03 404,385 403,922
Union Federal Savings Bank Trust 93-C A........................ 4.88 02/15/00 178,501 177,215
Western Financial Grantor Trust 95-4 A1........................ 6.20 02/01/02 231,827 232,250
Western Financial Grantor Trust 93-2 A1........................ 4.70 10/01/98 541,083 540,177
World Omni Automobile Lease Securitization 96-A A.............. 6.55 06/25/02 590,000 594,198
-----------
Total Asset Backed Securities (Cost $15,023,207)................................................................ 15,091,698
-----------
MORTGAGE BACKED SECURITIES (21.0% of portfolio)
Advanta Home Equity Loan Trust 93-2 A1......................... 6.15 10/25/09 133,513 131,311
Advanta Home Equity Loan Trust 93-3 A1......................... 4.90 10/25/09 188,119 178,748
Advanta Home Equity Loan Trust 92-4 A.......................... 7.20 11/25/08 64,148 64,132
</TABLE>
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14
<PAGE> 15
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND (CONTINUED)
JUNE 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
--------- -------- ---------- -----------
<S> <C> <C> <C> <C>
MORTGAGE BACKED SECURITIES -- continued
Advanta Mortgage Loan Trust 93-4 A3............................ 5.70% 03/25/25 $ 341,442 $ 327,272
American Financial Home Equity Loan 91-1 A..................... 8.00 07/25/06 137,396 139,433
American Housing Trust SER X1 3 B.............................. 7.50 08/25/12 10,786 10,758
Chase Mortgage Finance Corp. 93-G A1........................... 7.00 04/25/01 99,470 99,114
CITICORP Mortgage Securities, Inc. 92-16 A1.................... 7.50 09/25/22 65,698 65,334
CITICORP Mortgage Trust 3 A5................................... 9.00 01/25/20 100,000 99,621
CMC Securites Corp. 92-D D3S................................... 7.05(b) 12/25/23 57,149 58,238
CMC Securities Corp. 93-E S9................................... 6.50 11/25/08 903,683 864,705
CMO Trust 27 A................................................. 7.25 04/23/17 385,408 384,456
CMO Trust 14................................................... 8.00 01/01/17 217,667 220,247
CMO Trust 15................................................... 5.00 03/20/18 94,576 87,185
CMO Trust 17 B................................................. 7.25 04/20/18 71,854 72,098
Corestates Home Equity Trust 94-1.............................. 6.65 05/15/09 371,629 371,392
Daiwa Mortgage Acceptance 92-1................................. 7.88 10/25/19 24,038 23,991
EQCC Home Equity Loan Trust 95-3 A2............................ 6.45 11/15/08 200,687 200,511
EQCC Home Equity Loan Trust 96-2 A1............................ 6.15 06/15/03 1,341,691 1,341,691
Equicon Home Equity Loan Trust 92-7............................ 5.90 09/18/05 34,327 34,144
Equicon Home Equity Loan Trust 95-2 A1......................... 6.45 07/18/10 61,974 62,001
Equicon Home Equity Loan Trust 94-1............................ 6.05 09/18/11 122,488 121,927
FHLB DA-99..................................................... 5.62 03/25/99 228,448 225,666
FHLMC 1927 N................................................... 7.50 09/15/18 655,657 661,107
FHLMC #218209.................................................. 8.50 06/01/02 72,991 74,838
FHLMC 1771 PN.................................................. 8.00 03/15/24 218,480 218,621
FHLMC # 230013................................................. 7.25 08/01/98 8,602 8,645
FHLMC 1221 G................................................... 7.00 09/15/05 52,583 52,766
FHLMC 1330 G................................................... 7.00 09/15/99 591,838 596,727
FHLMC 135 A.................................................... 8.75 05/15/00 39,679 40,789
FHLMC 144 A.................................................... 8.75 06/15/00 32,652 33,540
FHLMC 1458 M................................................... 7.00 01/15/08 250,000 243,936
FHLMC 1459 TC.................................................. 7.50 10/15/01 50,000 50,039
FHLMC 1662 H................................................... 6.25 01/15/09 191,885 190,046
FHLMC 1663 A................................................... 7.00 07/15/23 177,693 176,879
FHLMC 39 ED.................................................... 8.50 03/25/24 162,735 163,889
FHLMC 1224 F................................................... 6.80 08/15/05 54,605 54,720
FNMA #016782................................................... 6.00 09/01/99 1,092 1,016
FNMA 92-73 E................................................... 7.50 05/25/19 20,492 20,458
FNMA 93-85 E................................................... 6.50 11/25/07 180,324 178,938
FNMA 94-88 E................................................... 7.50 01/25/05 89,379 89,984
FNMA REMIC 92-203 K............................................ 6.50 11/25/07 261,936 260,264
FNMA REMIC 93-140 L............................................ 7.00 07/25/12 154,911 154,848
FNMA REMIC 93-15 K............................................. 7.00 02/25/08 182,542 181,253
FNMA REMIC 93-68 Z............................................. 6.00 05/25/08 153,684 141,662
FNMA REMIC 93-88 B............................................. 5.40 06/25/00 428,423 416,100
FNMA REMIC 94-4 K.............................................. 6.50 12/25/06 522,690 519,102
First Alliance Mortgage Loan Trust 94-3 A1..................... 7.83 10/25/25 125,590 126,878
Fleet Finance Home Equity Trust 91-2 A......................... 6.70 10/15/06 139,804 140,763
</TABLE>
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15
<PAGE> 16
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND (CONTINUED)
JUNE 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
--------- -------- ---------- -----------
<S> <C> <C> <C> <C>
MORTGAGE BACKED SECURITIES -- continued
Fleet Finance, Inc. 93-1 A..................................... 5.45% 03/20/23 $ 23,825 $ 23,816
GE Capital Mortgage Services, Inc 93-3 A....................... 7.50 03/25/19 109,346 109,886
GE Capital Mortgage Services, Inc 94-18 A3..................... 7.00 08/25/24 100,000 100,201
GE Capital Mortgage Services, Inc. 94-18 A2.................... 7.00 08/25/24 615,001 613,623
GE Capital Mortgage Services, Inc. 96-17 A1.................... 7.00 12/25/26 455,805 454,470
GE Capital Mortgage Services, Inc. 94-95....................... 5.50 02/25/24 100,000 95,434
HFC Home Equity Loan 92-1 A3................................... 4.75 05/20/08 122,503 121,554
Housing Securities Inc. 92-EA A4............................... 7.50 10/25/07 451,000 454,548
Housing Securities Inc. 92-NB 1G............................... 7.25 01/25/07 141,503 141,724
Housing Securities Inc. 94-2 A1................................ 6.50 07/25/09 229,446 223,689
Independent National Mortgage Assn 96-E A2..................... 6.93 05/25/26 1,040,557 1,034,227
Merrill Lynch 94-A A4.......................................... 6.40(b) 02/15/09 175,503 165,427
Merrill Lynch 91-1 A........................................... 8.00 06/15/10 21,292 21,431
Mid-State Trust 3 A............................................ 7.63 04/01/22 219,955 222,691
Morgan Stanley Mortgage Trust T6............................... 8.75 07/20/19 152,552 155,574
Nomura Asset Securities Corp. 94-4 B........................... 8.30 09/25/24 49,100 50,224
Novus Home Equity Loan Trust 93-1 A............................ 6.14(b) 12/31/03 22,129 22,170
Old Stone Credit Corp. Home Equity Trust 92-2 A1............... 6.85 05/15/07 334,926 334,868
Paine Webber Mortgage Acceptance Corp. 93-7 A1................. 7.50 07/25/23 518,114 521,430
PNC Mortgage Securities Corp. 95-2 A5.......................... 7.00 07/25/08 197,073 196,384
Prudential Home Mortgage 93-10 A1.............................. 6.50 02/25/00 191,040 189,455
Prudential Home Mortgage 93-29 A6.............................. 6.75 08/25/08 75,340 74,914
Prudential Home Mortgage 94-31 A11............................. 8.00 11/25/09 386,214 384,701
Prudential Home Mortgage 92-44 A1.............................. 6.00 01/25/98 130,748 130,254
Prudential Securities 18-D..................................... 7.00 06/25/19 75,796 75,549
RFMSI 92-S19................................................... 8.50 03/25/22 185,047 187,130
RFMSI 93-S25 A1................................................ 6.50 07/25/08 76,913 76,669
RFMSI 93-57 A6................................................. 7.15 02/25/08 42,187 42,215
Residential Accredit Loans, Inc................................ 6.90 01/25/20 491,188 491,538
Ryland Acceptance Corp. 26 C................................... 9.00 12/01/16 283,887 295,905
Ryland Mortgage Securities Corp. 93-4 A5....................... 7.50 08/25/24 260,854 262,619
Ryland Mortgage Securities Corp. 92-18 C....................... 7.75 09/25/19 100,000 100,840
Sears Mortgage Securities Corp. 92-10 A7....................... 8.00 03/25/22 83,617 84,296
Structured Mortgage Asset Residential Trust 92-10 B............ 7.80 08/25/21 217,436 219,149
Structured Mortgage Asset Residential Trust 92-11 B............ 7.80 08/25/21 143,582 144,312
TMS Home Equity Trust 95-B A10................................. 6.53 12/15/04 710,704 710,886
TMS Home Equity Trust 92-A..................................... 6.95 01/15/07 98,103 98,393
TMS Home Equity Trust 93-C2 A3................................. 5.75 10/15/22 147,369 143,928
TMS Home Equity Trust 93-D A1.................................. 5.68 02/15/09 120,690 117,312
TMS Home Equity Trust 96-B..................................... 7.55 02/15/20 360,000 367,796
UCFC Home Equity Loan 95-A1 A5................................. 8.55 01/20/20 550,000 584,567
Vanderbilt Mortgage Finance 95-B A3............................ 6.68 05/07/06 250,000 248,825
Zions Home Ref. Loan Trust 93-1................................ 5.15 09/25/03 114,039 110,561
-----------
Total Mortgage Backed Securities (Cost $20,671,783)............................................................. 20,186,968
-----------
</TABLE>
- ----------------------------------------------------------------
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16
<PAGE> 17
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND (CONTINUED)
JUNE 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
--------- -------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (23.4% of portfolio)
Chattanooga Valley Corp. ...................................... 5.61%(a) 07/01/98 $ 158,000 $ 148,915
Chattanooga Valley Corp. ...................................... 5.78(a) 01/01/01 256,000 202,560
Chattanooga Valley Corp. ...................................... 5.83(a) 07/01/01 204,000 156,454
Federal Farm Credit Bank....................................... 6.50 04/29/99 500,000 499,975
Federal Farm Credit Bank....................................... 6.86 07/23/99 250,000 250,022
Federal Farm Credit Bank....................................... 6.61 10/06/99 830,000 830,100
Federal Home Loan Bank......................................... 5.74(b) 12/23/98 500,000 499,570
Federal Home Loan Bank......................................... 7.87 12/15/97 250,000 252,645
Federal Home Loan Bank......................................... 6.67 10/30/00 1,000,000 995,580
Federal Home Loan Bank......................................... 6.32 12/20/00 250,000 247,230
Federal Home Loan Bank......................................... 6.45 03/06/01 500,000 496,240
Federal Home Loan Bank......................................... 6.38 03/13/01 500,000 495,730
Federal Home Loan Bank......................................... 7.20 07/02/01 400,000 400,912
Federal Home Loan Bank......................................... 7.20 11/13/01 250,000 249,998
Federal Home Loan Bank......................................... 6.89 12/27/01 750,000 747,753
Federal Home Loan Bank......................................... 7.10 05/21/01 250,000 250,080
Federal Home Loan Mortgage Corp. .............................. 5.50(b) 09/20/00 500,000 497,740
Federal Home Loan Mortgage Corp. .............................. 7.06 05/22/01 250,000 250,000
Federal Home Loan Mortgage Corp. .............................. 6.77 04/03/01 500,000 499,935
Federal National Mortgage Assn. ............................... 6.99 05/18/01 250,000 251,315
Federal National Mortgage Assn. ............................... 6.32(b) 05/11/99 1,000,000 1,001,410
Federal National Mortgage Assn. ............................... 6.56 08/25/99 250,000 250,054
Federal National Mortgage Assn. ............................... 7.12 04/19/02 500,000 503,105
Federal National Mortgage Assn. ............................... 7.08 05/06/02 250,000 252,046
Federal National Mortgage Assn. ............................... 5.77 08/25/98 250,000 249,620
Federal National Mortgage Assn. ............................... 5.75(b) 02/09/99 250,000 247,875
Federal National Mortgage Assn. ............................... 7.10 08/08/01 250,000 249,992
Government Export.............................................. 5.69 02/01/98 50,000 49,936
Private Export Funding Corp. .................................. 5.75 04/30/98 331,000 330,586
Student Loan Marketing Assn. .................................. 5.42(b) 01/21/98 70,000 70,096
Student Loan Marketing Assn. .................................. 6.79 08/08/00 1,000,000 1,000,040
Student Loan Marketing Assn. .................................. 5.27(b) 02/22/99 75,000 74,839
U.S. Treasury Bond Receipt..................................... 5.40(a) 11/15/97 49,875 48,814
U.S. Treasury Bond............................................. 7.13 02/29/00 250,000 255,490
U.S. Treasury Note............................................. 5.88 11/30/01 1,750,000 1,715,262
U.S. Treasury Note............................................. 6.38 05/15/00 800,000 802,920
U.S. Treasury Note............................................. 5.13 03/31/98 550,000 548,031
U.S. Treasury Note............................................. 5.25 07/31/98 250,000 248,545
U.S. Treasury Note............................................. 5.00 01/31/99 750,000 738,825
U.S. Treasury Note............................................. 6.75 06/30/99 1,250,000 1,265,475
U.S. Treasury Note............................................. 6.50 08/15/97 500,000 500,730
U.S. Treasury Note............................................. 7.25 02/15/98 250,000 252,307
U.S. Treasury Note............................................. 5.75 10/31/00 2,250,000 2,215,102
U.S. Treasury Note............................................. 6.38 03/31/01 500,000 500,840
</TABLE>
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17
<PAGE> 18
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM BOND FUND (CONTINUED)
JUNE 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
--------- -------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- continued
U.S. Treasury Note............................................. 6.38% 05/15/99 $ 500,000 $ 502,605
U.S. Treasury Note............................................. 6.00 08/15/99 500,000 498,880
-----------
Total U.S. Government and Agency Obligations (Cost $22,561,205)......................................... 22,596,179
-----------
MUNICIPAL BONDS (0.9% of portfolio)
Albany NY Industrial Development Agency IDR.................... 7.20(b) 02/01/99 735,000 735,000
Rhode Island Housing & Mortgage Finance Corp................... 6.62 04/01/02 150,000 149,438
-----------
Total Municipal Bonds (Cost $828,528)................................................................... 884,438
-----------
COMMERCIAL PAPER (2.8% of portfolio)
Household Finance Corp......................................... 6.08 07/01/97 2,742,000 2,742,000
-----------
Total Commercial Paper (Cost $2,742,000)................................................................ 2,742,000
-----------
CORPORATE MASTER NOTE (0.1% of portfolio)
Associates Corp. of North America.............................. 5.57(b) 100,000 100,000
-----------
Total Corporate Master Note (Cost $100,000)............................................................. 100,000
-----------
MONEY MARKET ACCOUNT
State Street Bank & Trust SSgA Fund............................ 5.26(c) 1,547 1,547
-----------
Total Money Market Account (Cost $1,547)................................................................ 1,547
-----------
TOTAL INVESTMENTS IN SECURITIES (COST $96,168,949) -- 100%.................................................... $96,436,560
===========
</TABLE>
- --------------
(a) Yield-to-maturity at purchase.
(b) Variable coupon rate as of June 30, 1997.
(c) One day yield at June 30, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
- ----------------------------------------------------------------
- ----------------------------------------------------
18
<PAGE> 19
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
SHORT-TERM GOVERNMENT SECURITIES FUND
JUNE 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Interest Maturity Face
Rate Date Amount Value
-------- -------- ---------- -----------
<S> <C> <C> <C> <C>
ASSET BACKED SECURITIES (3.6% of portfolio)
Guaranteed Trade Trust 92-A A................................... 7.02% 09/01/04 $ 218,750 $ 221,580
Small Business Administration 92-10 A........................... 6.70 01/01/02 97,983 97,244
Small Business Administration 92-10 C........................... 7.15 09/01/02 142,958 143,242
-----------
Total Asset Backed Securities (Cost $459,690)................................................................... 462,066
-----------
MORTGAGE BACKED SECURITIES (2.1% of portfolio)
GNMA Pool 362840................................................ 6.75 12/15/98 33,879 34,028
GNMA 94-2....................................................... 7.99 04/16/10 94,700 95,047
GNMA 94-3 EG.................................................... 7.50 06/16/13 78,000 77,734
GNMA 94-4 A..................................................... 7.99 09/16/22 71,079 71,452
-----------
Total Mortgage Backed Securities (Cost $277,604)................................................................ 278,261
-----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (92.2% of portfolio)
Private Export Funding Corp..................................... 8.35 01/31/01 25,000 26,406
Private Export Funding Corp..................................... 5.75 04/30/98 67,000 66,916
Private Export Funding Corp..................................... 5.48 09/15/03 195,000 190,612
Private Export Funding Corp..................................... 5.35(a) 02/28/99 250,000 250,155
U.S. Treasury Note.............................................. 5.88 11/30/01 350,000 343,052
U.S. Treasury Note.............................................. 6.38 05/05/00 100,000 100,365
U.S. Treasury Note.............................................. 7.00 04/15/99 450,000 457,218
U.S. Treasury Note.............................................. 5.63 08/31/97 1,000,000 1,000,170
U.S. Treasury Note.............................................. 6.00 11/30/97 250,000 250,458
U.S. Treasury Note.............................................. 5.25 07/31/98 2,500,000 2,485,450
U.S. Treasury Note.............................................. 4.75 10/31/98 4,400,000 4,333,164
U.S. Treasury Note.............................................. 5.75 10/31/00 100,000 98,449
U.S. Treasury Note.............................................. 5.25 12/31/97 1,300,000 1,298,674
U.S. Treasury Note.............................................. 6.38 03/31/01 50,000 50,084
U.S. Treasury Note.............................................. 6.38 05/15/99 50,000 50,261
U.S. Treasury Note.............................................. 6.00 08/15/99 200,000 199,552
U.S. Treasury Note.............................................. 5.88 11/15/99 850,000 844,296
-----------
Total U.S. Government and Agency Obligations (Cost $12,039,220)................................................. 12,045,282
-----------
MONEY MARKET ACCOUNT (2.1% of portfolio)
Vanguard Money Market Reserves, U.S. Treasury................... 5.05(b) 280,464 280,464
-----------
Total Money Market Account (Cost $280,464)...................................................................... 280,464
-----------
TOTAL INVESTMENTS IN SECURITIES (COST $13,056,978) -- 100%............................................................$13,066,073
===========
</TABLE>
- --------------
(a) Variable coupon rate as of June 30, 1997.
(b) 7-day yield at June 30, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
----------------------------------------------------------------
- ----------------------------------------------------
19
<PAGE> 20
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
VALUE FUND
JUNE 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Shares/
Face Amount Value
----------- ------------
<S> <C> <C>
COMMON STOCKS
(91.6% of portfolio)
BASIC INDUSTRIES - 19.4%
Aluminum
Alcan Aluminum Ltd. ....... 151,200 shs. $ 5,244,750
Chemicals
Avery Dennison Corp. ...... 137,600 5,521,200
Betz Dearborn Laboratories,
Inc. .................... 89,000 5,874,000
Dow Chemical Co. .......... 55,200 4,809,300
Monsanto Co. .............. 70,000 3,014,375
Nalco Chemical Co. ........ 162,200 6,264,975
Forest Products
Pope & Talbot, Inc. ....... 140,500 2,309,469
Weyerhaeuser Co. .......... 86,500 4,498,000
Packaging/Containers
Bemis Co., Inc. ........... 122,500 5,298,125
Paper
Champion International
Corp. ................... 114,000 6,298,500
International Paper Co. ... 142,000 6,895,875
Rubber
Cooper Tire & Rubber
Co. ..................... 321,900 7,081,800
------------
Total Basic Industries.......................... 63,110,369
------------
CAPITAL GOODS - 5.0%
Industrial Machinery
Aeroquip-Vickers, Inc. .... 155,500 7,347,375
Applied Industrial
Technology, Inc. ........ 130,250 4,689,000
Parker-Hannifin Corp. ..... 71,450 4,336,122
------------
Total Capital Goods............................. 16,372,497
------------
CONSUMER DURABLE GOODS - 5.4%
Household Appliances & Furnishings
Maytag Corp. .............. 274,400 7,168,700
Juno Lighting, Inc. ....... 269,400 4,377,750
Housewares
Oneida Ltd. ............... 133,700 3,568,119
Rubbermaid, Inc. .......... 78,900 2,347,275
------------
Total Consumer Durable Goods.................... 17,461,844
------------
CONSUMER NON-DURABLE GOODS - 19.5%
Drugs & Health Care
American Home Products
Corp. ................... 75,000 5,737,500
SmithKline Beecham Plc. ... 43,000 3,939,875
Food Processing
J.M. Smucker Co. .......... 368,600 shs. 7,994,013
Photography
Eastman Kodak Co. ......... 84,500 6,485,375
Retail
Dillard Department Stores,
Inc. .................... 202,000 6,994,250
K Mart Corp. (a)........... 325,700 3,989,825
Longs Drug Stores Corp. ... 180,800 4,734,700
May Department Stores
Co. ..................... 127,500 6,024,375
Rite Aid Corp. ............ 124,000 6,184,500
Ruddick Corp. ............. 333,000 5,494,500
Trucks & Auto Parts
Genuine Parts Co. ......... 168,300 5,701,162
------------
Total Consumer Non-Durable Goods................ 63,280,075
------------
CONSUMER SERVICES - 3.7%
Restaurants
Brinker International, Inc.
(a)...................... 461,900 6,582,075
Wendy's International,
Inc. .................... 207,200 5,374,250
------------
Total Consumer Services......................... 11,956,325
------------
ENERGY - 7.7%
Domestic Oil
Atlantic Richfield Co. .... 36,800 2,594,400
International Oil
Amoco Corp. ............... 42,500 3,694,844
Chevron Corp. ............. 55,000 4,066,562
Texaco, Inc. .............. 41,700 4,534,875
Petroleum Services
Dresser Industries,
Inc. .................... 153,400 5,714,150
Halliburton Co. ........... 55,300 4,382,525
------------
Total Energy.................................... 24,987,356
------------
FINANCE - 15.7%
Banks
Banc One Corp. ............ 143,800 6,965,312
BankAmerica Corp. ......... 84,000 5,423,250
BB&T Corp. ................ 67,400 3,033,000
Chase Manhattan Corp. ..... 64,200 6,231,413
CITICORP................... 38,500 4,641,656
Commerce Bancshares,
Inc. .................... 106,914 4,837,859
Insurance
Allstate Corp. ............ 84,817 6,191,641
Chubb Corp. ............... 71,000 4,748,125
</TABLE>
- ----------------------------------------------------------------
- ----------------------------------------------------
20
<PAGE> 21
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
HOMESTEAD FUNDS, INC.
VALUE FUND (CONTINUED)
JUNE 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Shares/
Face Amount Value
----------- ------------
<S> <C> <C>
FINANCE -- continued
Ohio Casualty Corp. ....... 115,200 shs. $ 5,068,800
Transamerica Corp. ........ 42,300 3,957,694
------------
Total Finance........................... 51,098,750
------------
GENERAL BUSINESS - 4.0%
Business Services
Deluxe Corp. .............. 178,100 6,077,662
Donnelley, R.R. & Sons
Co. ..................... 191,100 6,999,038
------------
Total General Business.................. 13,076,700
------------
TECHNOLOGY - 4.5%
Aerospace
Sundstrand Corp. .......... 64,000 3,456,000
Computer & Business Equipment
Digital Equipment Corp.
(a)...................... 88,500 3,136,219
Xerox Corp. ............... 70,500 5,560,687
Electronics
Harris Corp. .............. 30,500 2,562,000
------------
Total Technology........................ 14,714,906
------------
TRANSPORTATION - 2.2%
Air Travel
Southwest Airlines Co. .... 275,400 7,125,975
------------
Total Transportation.................... 7,125,975
------------
UTILITIES - 4.5%
Gas & Pipeline
Questar Corp. ............. 117,400 4,740,025
Sonat, Inc. ............... 89,000 4,561,250
Telephone
Bellsouth Corp. ........... 116,000 5,379,500
------------
Total Utilities......................... 14,680,775
------------
Total Common Stocks (Cost
$202,484,792)......................... 297,865,572
------------
PREFERRED STOCKS (0.4% of portfolio)
K Mart Corp., 7.75%
Convertible Preferred...... 25,200 1,379,700
------------
Total Preferred Stocks (Cost
$1,281,750)........................... 1,379,700
------------
COMMERCIAL PAPER
(7.2% of portfolio)
Household Finance Corp.,
6.08%, due 07/01/97........ $16,000,000shs. 16,000,000
Merrill Lynch & Co., 5.58%,
due 07/09/97............... 3,094,000 3,090,163
Merrill Lynch & Co., 5.60%,
due 09/03/97............... 4,240,000 4,197,789
------------
Total Commercial Paper (Cost
$23,287,952).......................... 23,287,952
------------
CORPORATE MASTER NOTE (0.1% of portfolio)
Associates Corp. of North
America, 5.57% (b)......... 100,000 100,000
------------
Total Corporate Master Note (Cost
$100,000)............................. 100,000
------------
REPURCHASE AGREEMENT (0.7% of portfolio)
With Lehman Brothers, issued 6/30/97,
5.85%, due 07/01/97, collateralized by
$2,210,000 Federal Home Loan Mortgage,
8.06%, due 03/24/10 having a market value
of $2,274,274. Total proceeds at maturity
are
$2,225,362. .............................. 2,225,000
------------
Total Repurchase Agreement (Cost
$2,225,000)........................... 2,225,000
------------
MONEY MARKET ACCOUNT
State Street Bank and Trust
SSgA Fund, 5.26% (c)....... 1,463 1,463
------------
Total Money Market Account (Cost
$1,463)............................... 1,463
------------
TOTAL INVESTMENTS IN SECURITIES (COST
$229,380,957) - 100%...................... $324,859,687
============
</TABLE>
- --------------
(a) Non-income producing.
(b) Variable coupon rate at June 30, 1997.
(c) One-day yield at June 30, 1997.
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.
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.
Use of Estimates in the Preparation of Financial Statements: 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.
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, 1997. 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, 1997, 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 reporting
purposes. With respect to the Short-Term Bond Fund at June 30, 1997, net
unrealized appreciation aggregated $267,611, of which $513,865 related to gross
unrealized appreciation and $246,254 related to gross unrealized depreciation.
With respect to the Short-Term Government Securities Fund at June 30, 1997, net
unrealized appreciation aggregated $9,095, of which $25,668 related to gross
unrealized appreciation and $16,573 related to gross unrealized depreciation.
With respect to the Value
- ----------------------------------------------------------------
- ----------------------------------------------------
22
<PAGE> 23
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
HOMESTEAD FUNDS, INC. (CONTINUED)
(unaudited)
Fund at June 30, 1997, net unrealized appreciation aggregated $95,478,730, of
which, $97,421,289 related to gross unrealized appreciation and $1,942,559
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, 1997, were as follows:
<TABLE>
<CAPTION>
SHORT-TERM
SHORT-TERM GOVERNMENT VALUE
BOND FUND SECURITIES FUND FUND
------------ --------------- -----------
<S> <C> <C> <C>
Purchases $ 26,861,483 $ 218,750 $50,787,061
Proceeds from
Sales $ 13,300,105 $53,053 $5,756,022
</TABLE>
For the Short-Term Bond Fund and Short-Term Government Securities Fund,
purchases of long-term U.S. Government securities were $6,071,384 and $4,585,362
respectively, for the six months ended June 30, 1997, and sales of U.S.
Government securities for the same period were $1,900,000 and $502,138,
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. The annualized management fee rates
are: with respect to the Daily Income Fund, .50% of average daily net assets;
with respect to the Short-Term Bond Fund, .60% of average daily net assets; with
respect to the Short-Term Government Securities Fund, .45% of average daily net
assets; with respect to the Value Fund, .65% of average daily net assets up to
$200 million, .50% of average daily net assets up to the next $200 million, .40%
of average daily net assets in excess of $400 million.
The Manager has agreed, as part of the Expense Limitation Agreements entered
into with Homestead Funds, with respect to each Fund, to waive its management
fee and/or reimburse for all Fund operating expenses, excluding certain
non-recurring expenses, which in any year exceed .80% of the average daily net
assets of the Daily Income Fund, .75% of the average daily net assets of 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.
Pursuant to the Expense Limitation Agreements, $5,235 of management fees for the
Daily Income Fund were waived, $59,740 of management fees for the Short-Term
Bond Fund were waived, and $25,214 of management fees were waived and $7,035 of
operating expenses of the Short-Term Government Securities Fund were reimbursed
by the Manager for the six months ended June 30, 1997.
>At June 30, 1997 certain officers and directors of the Homestead Funds, and
NRECA and its affiliates owned 2.2% of the Daily Income Fund shares outstanding,
3.5% of the Short-Term Government Securities Fund shares outstanding, and less
than 1% of the Short-Term Bond Fund and Value Fund shares outstanding.
----------------------------------------------------------------
- ----------------------------------------------------
23
<PAGE> 24
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
HOMESTEAD FUNDS, INC. (CONTINUED)
(unaudited)
6. CAPITAL SHARE TRANSACTIONS
As of June 30, 1997, 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, 1997
In Dollars
Daily Income Fund............. $22,296,155 $1,366,827 $23,662,982 ($19,143,323) $4,519,659
Short-Term Bond Fund.......... $23,885,013 $2,401,173 $26,286,186 ($11,936,882) $14,349,304
Short-Term Government
Securities Fund.............. $7,107,174 $265,631 $7,372,805 ($1,952,176) $5,420,629
Value Fund.................... $69,687,327 $2,349,123 $72,036,450 ($26,600,491) $45,435,959
In Shares
Daily Income Fund............. 22,296,155 1,366,827 23,662,982 (19,143,323) 4,519,659
Short-Term Bond Fund.......... 4,644,091 467,164 5,111,255 (2,322,597) 2,788,658
Short-Term Government
Securities Fund.............. 1,410,568 52,748 1,463,315 (387,371) 1,075,944
Value Fund.................... 3,116,178 96,430 3,212,608 (1,197,380) 2,015,229
YEAR ENDED DECEMBER 31, 1996
In Dollars
Daily Income Fund............. $28,353,723 $2,454,388 $30,808,111 ($25,635,781) $5,172,330
Short-Term Bond Fund.......... $32,737,236 $3,902,324 $36,639,560 ($16,766,543) $19,873,017
Short-Term Government
Securities Fund.............. $7,070,135 $236,513 $7,306,648 ($2,260,286) $5,046,362
Value Fund.................... $85,367,500 $7,869,999 $93,237,499 ($25,769,914) $67,467,585
In Shares
Daily Income Fund............. 28,353,723 2,454,388 30,808,111 (25,635,781) 5,172,330
Short-Term Bond Fund.......... 6,351,110 758,347 7,109,457 (3,256,320) 3,853,137
Short-Term Government
Securities Fund.............. 1,403,653 46,915 1,450,568 (449,087) 1,001,481
Value Fund.................... 4,285,509 379,578 4,665,087 (1,298,015) 3,367,072
</TABLE>
- ----------------------------------------------------------------
- ----------------------------------------------------
24
<PAGE> 25
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
HOMESTEAD FUNDS, INC.
DAILY INCOME FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 1997 ---------------------------------------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992
--------------------------------------------------------------------------------------------------
<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 0.05 0.04 0.03 0.03
------- ------- ------- ------- ------- -------
Total from investment
operations.......... 0.02 0.05 0.05 0.04 0.03 0.03
------- ------- ------- ------- ------- -------
Distributions
Net investment
income.............. (0.02) (0.05) (0.05) (0.04) (0.03) (0.03)
------- ------- ------- ------- ------- -------
Total distributions... (0.02) (0.05) (0.05) (0.04) (0.03) (0.03)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
TOTAL RETURN................ 2.37%(C) 4.81% 5.38% 3.63% 2.68% 3.39%
======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(thousands)............ $62,391 $57,871 $52,699 $36,668 $25,159 $22,330
Ratio of expenses to
average net assets
(a).................... 0.80%(b) 0.76% 0.75% 0.75% 0.75% 0.75%
Ratio of net investment
income to average net
assets (a)............. 4.73%(b) 4.71% 5.25% 3.66% 2.64% 3.34%
Ratio of gross expenses
before voluntary
expense limitation to
average net assets..... 0.81%(b) 0.81% 0.87% 0.99% 1.11% 1.21%
</TABLE>
- --------------
(a) Excludes investment management fees and other expenses in excess of 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 EACH PERIOD
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 1997 ---------------------------------------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR................... $ 5.15 $ 5.19 $ 4.95 $ 5.19 $ 5.10 $ 5.06
------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income
(a)................. 0.15 0.29 0.28 0.24 0.24 0.26
Net realized and
unrealized gain
(loss) on
investments......... 0.00 (0.04) 0.24 (0.24) 0.09 0.04
------- ------- ------- ------- ------- -------
Total from investment
operations.......... 0.15 0.25 0.52 0.00 0.33 0.30
------- ------- ------- ------- ------- -------
Distributions
Net investment
income.............. (0.15) (0.29) (0.28) (0.24) (0.24) (0.26)
------- ------- ------- ------- ------- -------
Total distributions... (0.15) (0.29) (0.28) (0.24) (0.24) (0.26)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD.................... $ 5.15 $ 5.15 $ 5.19 $ 4.95 $ 5.19 $ 5.10
======= ======= ======= ======= ======= =======
TOTAL RETURN................ 2.91%(C) 5.16% 10.81% 0.09% 6.62% 6.30%
======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(thousands)............ $95,878 $81,470 $62,125 $52,257 $37,046 $10,991
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)............. 5.79%(b) 5.72% 5.49% 4.84% 4.58% 5.20%
Ratio of gross expenses
before voluntary
expense limitation to
average net assets..... 0.88%(b) 0.76% 0.86% 0.98% 1.16% 1.94%
Portfolio turnover
rate................... 19% 49% 35% 13% 14% 19%
</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 EACH PERIOD
<TABLE>
<CAPTION>
May 1, 1995
Six Months (Commencement
Ended Year Ended of Operations) to
June 30, 1997 December 31, December 31,
(Unaudited) 1996 1995
------------- ------------ -----------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 5.05 $ 5.09 $ 5.00
------ ------ ------
Income from investment operations
Net investment income (a)............................. 0.13 0.26 0.18
Net realized and unrealized gain (loss) on
investments......................................... (0.01) (0.04) 0.09
------ ------ ------
Total from investment operations...................... 0.12 0.22 0.27
------ ------ ------
Distributions
Net investment income................................. (0.13) (0.26) (0.18)
------ ------ ------
Total distributions................................... (0.13) (0.26) (0.18)
------ ------ ------
NET ASSET VALUE, END OF PERIOD.............................. $ 5.04 $ 5.05 $ 5.09
====== ====== ======
TOTAL RETURN................................................ 2.38%(C) 4.46% 5.44%(C)
====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands).................... $13,111 $7,692 $2,658
Ratio of expenses to average net assets (a).............. 0.75%(b) 0.75% 0.75%(b)
Ratio of net investment income to average net assets
(a).................................................... 5.16%(b) 5.07% 5.18%(b)
Ratio of gross expenses before voluntary expense
limitation to average net assets....................... 1.32%(b) 2.26% 6.21%(b)
Portfolio turnover rate.................................. 6% 21% 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.
----------------------------------------------------------------
- ----------------------------------------------------
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- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
HOMESTEAD FUNDS, INC.
VALUE FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 1997 ---------------------------------------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR................... $ 20.99 $ 18.44 $ 14.50 $ 14.54 $ 12.49 $ 11.48
-------- -------- -------- ------- ------- -------
Income from investment
operations
Net investment income
(a)................. 0.18 0.39 0.41 0.29 0.22 0.25
Net realized and
unrealized gain on
investments......... 3.37 2.91 4.47 0.07 2.12 1.09
-------- -------- -------- ------- ------- -------
Total from investment
operations.......... 3.55 3.30 4.88 0.36 2.34 1.34
-------- -------- -------- ------- ------- -------
Distributions
Net investment
income.............. (0.18) (0.39) (0.41) (0.29) (0.22) (0.25)
Net realized gain..... 0.00 (0.36) (0.53) (0.11) (0.07) (0.08)
-------- -------- -------- ------- ------- -------
Total distributions... (0.18) (0.75) (0.94) (0.40) (0.29) (0.33)
-------- -------- -------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD.................... $ 24.36 $ 20.99 $ 18.44 $ 14.50 $ 14.54 $ 12.49
======== ======== ======== ======= ======= =======
TOTAL RETURN................ 16.91%(c) 17.94% 33.78% 2.50% 18.83% 11.68%
======== ======== ======== ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(thousands)............ $325,869 $238,550 $147,506 $91,612 $53,616 $19,730
Ratio of expenses to
average net assets
(a).................... 0.81%(b) 0.73% 0.84% 1.15% 1.25% 1.25%
Ratio of net investment
income to average net
assets (a)............. 1.73%(b) 2.08% 2.50% 2.19% 1.92% 2.33%
Ratio of gross expenses
before voluntary
expense limitation to
average net assets..... n/a n/a n/a 1.15% 1.25% 1.61%
Portfolio turnover
rate................... 2% 5% 10% 4% 2% 5%
Average commission rate
paid per share
transacted (d)......... $0.0480 $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) Annualized.
(c) Aggregate total return for the period.
(d) Required disclosure for fiscal years beginning after December 1, 1995
pursuant to SEC regulations.
- ----------------------------------------------------------------
- ----------------------------------------------------
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[PHOTO]
HOMESTEAD FUNDS, INC.
SEMI-ANNUAL REPORT
JUNE 30, 1997
[HOMESTEAD FUNDS LOGO]
