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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, Value Fund,
Short-Term Bond Fund and Short-Term Government Securities Fund held on November
25, 1996, November 27, 1996 and December 12, 1996, respectively, the
shareholders approved amendments to the Investment Management Agreements. The
Expense Limitation Agreements for the Daily Income Fund, Short-Term Bond Fund,
Short-Term Government Securities 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 each 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; with respect to the Short-Term Bond Fund, 0.60% of the
average daily net assets; with respect to the Short-Term Government Securities
Fund, 0.45% 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 each Fund.
January 2, 1997
