Homestead Funds N-CSRS Certified semi-annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act File number:  811-06136

HOMESTEAD FUNDS, INC.

________________________________________

(Exact name of registrant as specified in charter)

4301 Wilson Boulevard

Arlington, VA 22203

________________________________________

(Address of principal executive office – Zip code)

Kelly Bowers Whetstone, Esq.

Homestead Funds, Inc.

4301 Wilson Boulevard

Arlington, VA 22203

________________________________________

(Name and address of agent for service)

Copies to:

Bibb L. Strench, Esq.

Seward & Kissel LLP

901 K Street, NW

Washington, DC 20001

________________________________________

(Name and addresses of agent for service)

Registrant’s telephone number, including area code:  (703) 907-5953

Date of fiscal year end:  December 31

Date of reporting period:  June 30, 2012

Item 1. Reports to Stockholders.

4301 WILSON BOULEVARD

ARLINGTON, VA 22203-1860

1-800-258-3030

www.homesteadfunds.com

August 15, 2012

Dear Shareholder:

Enclosed is your copy of the 2012 Homestead Funds semi-annual report. The report contains information on each of the eight Homestead Funds, including portfolio holdings, performance information, and a review of market conditions.

The capital markets headed into the summer worried that slow growth at home and in the Eurozone would dampen the United States’ economic recovery. As in 2010 and 2011, stocks turned down sharply on European debt worries. While the economy had seemed resistant to European weakness, the lack of U.S. job creation prompted doubt that this would continue. The market rebounded, however, with the S&P 500 Index posting a strong gain on the last trading day of the second quarter. Overall, U.S. stock and bond markets finished with a positive return for the six-month period ending June 30th.

Looking ahead to the second half of the year, unemployment persists at high levels, retail sales are sluggish, and the so-called “fiscal cliff” looms at year’s end (when tax increases and deep spending cuts will take effect unless Congress reaches a budget agreement). Uncertainty surrounding these issues leaves some companies reluctant to expand and hire. On the positive side, corporate balance sheets, in general, have strengthened, the housing market has shown signs of improvement, and higher levels of manufacturing have become more evident. These positives could eventually set the stage for increased consumer spending, an essential ingredient for growth.

I hope this information will be helpful in understanding how your investments have performed so far this year. Additionally, I encourage you to take a look at our other fund offerings. Homestead Funds’ representatives can help you with your portfolio, relative to your financial goals and risk tolerance. Please give them a call at 1-800-258-3030 between the hours of 8:30 am and 5:00 pm, ET.

We appreciate your business and continued trust as an investor in Homestead Funds.

Sincerely,

Peter R. Morris

President and CEO

Must be preceded or accompanied by a prospectus. RE Investment Corporation, Distributor. 8/12

Daily Income Fund (HDIXX)

Short-Term Government Securities Fund (HOSGX)

Short-Term Bond Fund (HOSBX)

Stock Index Fund (HSTIX)

Value Fund (HOVLX)

Growth Fund (HNASX)

Small-Company Stock Fund (HSCSX)

International Value Fund (HISIX)

SEMI-ANNUAL REPORT

JUNE 30, 2012

                                                                                                                                                                                                               

Table of Contents
PERFORMANCE EVALUATION
Daily Income Fund	2
Short-Term Government Securities Fund and Short-Term Bond Fund	4
Stock Index Fund	8
Value Fund	10
Growth Fund	12
Small-Company Stock Fund	14
International Value Fund	16
EXPENSE EXAMPLE	18
REGULATORY AND SHAREHOLDER MATTERS	20
PORTFOLIO OF INVESTMENTS
Daily Income Fund	21
Short-Term Government Securities Fund	23
Short-Term Bond Fund	27
Stock Index Fund	36
Value Fund	37
Growth Fund	38
Small-Company Stock Fund	40
International Value Fund	42
STATEMENTS OF ASSETS AND LIABILITIES	44
STATEMENTS OF OPERATIONS	46
STATEMENTS OF CHANGES IN NET ASSETS	48
FINANCIAL HIGHLIGHTS
Daily Income Fund	50
Short-Term Government Securities Fund	51
Short-Term Bond Fund	52
Stock Index Fund	53
Value Fund	54
Growth Fund	55
Small-Company Stock Fund	56
International Value Fund	57
NOTES TO FINANCIAL STATEMENTS	58
DIRECTORS AND OFFICERS	62
APPENDIX-S&P 500 STOCK MASTER PORTFOLIO	63

The investment commentaries on the following pages were prepared for each fund by its portfolio manager. The views expressed are those of the portfolio manager for each fund as of June 30, 2012, and may have changed since that date. The opinions stated may contain forward-looking statements and may discuss the impact of domestic and foreign markets, industry and economic trends and governmental regulations of the funds and their holdings. Such statements are subject to uncertainty, and the impact on the funds might be materially different from what is described here.

PERFORMANCE EVALUATION

Daily Income Fund

MARKET CONDITIONS

During the first half of 2012, the Federal Reserve maintained its accommodative policy of exceptionally low interest rates and extended its outlook for keeping rates low through late 2014. Consequently, short-term interest rates in high-quality credit markets of the type in which the Daily Income Fund invests have remained at historically low levels. Employment growth, which had been encouraging early in the year, has slowed in recent months, prompting fears that the economy is heading into another recession. The lack of a political consensus on handling the federal budget deficit has contributed to a general sense of uncertainty.

FUND PERFORMANCE

The Daily Income Fund earned an annualized total return of 0.01% for the first half of 2012. The seven-day effective annualized yield was 0.01%, unchanged from December 2011. Interest income for the Fund is netted against operating expenses. With interest income at historic lows, RE Advisers, investment manager to the Funds, continues to voluntarily waive fees and/or reimburse expenses to assist the Fund in maintaining a positive yield. As long as the Federal Reserve continues to maintain a federal funds rate close to zero, the Daily Income Fund will continue to earn very little interest income.

OUTLOOK

The Federal Reserve has indicated its intention to maintain interest rates at exceptionally low levels through late 2014. We anticipate a stable share price but little investment return until economic activity surprises to the upside, credit demand increases and the Federal Reserve moves away from its policy of low short-term interest rates.

2 |Performance Evaluation

Daily Income Fund

AVERAGE ANNUAL TOTAL RETURNS	1 Year			5 Year			10 Year
periods ended 06/30/12
Daily Income Fund		0.01	%		0.94	%		1.55	%

The returns quoted in the above table represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment may be worth more or less than its original cost. An investment in the Daily Income Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. While the Daily Income Fund seeks to maintain a constant $1.00 per share price, it is possible to lose money investing in the Fund. The Daily Income Fund’s average annual total returns are net of any fee waivers and reimbursements. Returns do not reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.

YIELD
Annualized 7-day effective yield quoted 06/30/12					0.01	%
SECURITY DIVERSIFICATION	on 12/31/11			on 06/30/12
(% of total investments)
Commercial paper		67.9	%		69.8	%
U.S. Government obligations		18.2	%		17.1	%
Corporate bonds		4.2	%		3.3	%
Short-term and other assets		9.7	%		9.8	%
Total		100.0	%		100.0	%
MATURITY	on 12/31/11			on 06/30/12
Average Weighted Maturity	51 days			45 days

Performance Evaluation |3

PERFORMANCE EVALUATION

Short-Term Government Securities Fund and Short-Term Bond Fund

MARKET CONDITIONS

During the first half of 2012, the bond market generated modest positive returns as most of the same issues that dominated 2011 persisted into the New Year. The Federal Reserve continued its zero interest rate monetary policy, along with an expanding balance sheet; economic growth remained anemic given the amount of monetary and fiscal stimulus employed; the unemployment rate remained stubbornly high; and troubles in Europe continued as the European sovereign debt crisis engulfed Spain and Italy. While the housing market began to show real signs of life and auto sales remained firm, worries about Europe, a slowing Chinese economy and the potential “fiscal cliff” of tax increases and spending cuts that the economy faces at year-end led the Federal Reserve to downgrade its assessment for U.S. growth and employment at the June 20, 2012 Federal Open Market Committee (FOMC) meeting. The Fed also announced an extension of “Operation Twist”, i.e., the selling of shorter-term Treasuries and the buying of longer-term Treasuries, that was due to expire in June but will now carry through to the end of 2012. The Fed continued to follow its dual mandate of both full employment and keeping inflation low in conducting monetary policy, and while the June unemployment rate of 8.2% was not close to a full employment level, inflation as measured by the Consumer Price Index fell to 1.7% year over year in May, compared to 3.8% in the year-earlier period. While “core” CPI rose to 2.3% from 1.5% over the same time period and would normally be seen as worrisome, the absolute level gives the Fed no obstacle in pursuing its current aggressive monetary policy.

The European sovereign debt crisis continued to be the focus of the market’s attention as Spanish government bond yields rose sharply because of Spanish bank bailouts and a resultant jump in Spanish borrowing needs— which the government would have difficulty financing as 10-year yields flirted with 7% as compared to the 5% area at the end of 2011. This yield surge spilled over somewhat into Italian bond yields and, given the government bond holdings of most of the major financial institutions in both Spain and Italy, created a negative feedback loop (i.e., the higher sovereign bond yields go the weaker the bank balance sheets become). While the near-term liquidity of large banks was addressed by the European Central Bank’s (ECB) long-term refinancing operations, which supplied cheap three-year funding, bank solvency ultimately would be questioned if Spain and/or Italy were to default. While the ECB could have resumed the purchase of Spanish and Italian debt in order to drive down yields, it preferred to keep pressure on sovereign countries to get their fiscal houses in order by waiting on the start of the European Stability Mechanism bailout fund, which could take on the role of sovereign bond buyer. Other ideas such as joint Eurobond issuance, while favored by nations under financial stress, were not welcomed by the few remaining “AAA” EU members like Germany and Finland, whose own credit ratings would undoubtedly face downward pressure should Eurobonds be issued. At the end of June, the EU agreed to restructure Spanish banks directly instead of lending funds to the Spanish government, thereby avoiding another situation as in Ireland whose bank recapitalization needs were so large that they destroyed the country’s borrowing ability. The Spanish bank plan is contingent on the establishment of a central bank regulatory board.

While U.S. Gross Domestic Product was growing at a rate of about 2%, which is not strong enough to substantially lower the unemployment rate, several indicators continued to show strength. Auto sales averaged an annualized 14.3 million units in 2012 as compared to 12.6 million in 2011’s first half, and the downtrodden housing market appeared to be bottoming as the National Association of Home Builders market index averaged 27 during the period after an average of 16 in 2011. The most recent reading of 29 was a five-year high. In spite of suspect employment prospects, consumer sentiment improved, according to the University of Michigan survey, which averaged 75.9, as

4 |Performance Evaluation

compared to 72.5 in the first half of 2011. Although wage growth has only averaged about 2% over the last year, consumer credit use (excluding real estate) exploded upwards, with an average monthly increase of $12.9 billion through the end of May, versus $6.4 billion over the same period in 2011. Even with the consumer doing their part, slower growth in China and Europe’s recession had their impact on manufacturing as the June ISM manufacturing survey dipped to 49.7, a contractionary level, after averaging 53.0 in the first half of 2012 and 55.2 for calendar year 2011. In spite of the weak ISM number, however, industrial production through May rose 1.4%, compared to just 0.6% over the same period in 2011.

The FOMC maintained its federal funds rate target in a range of 0.00% to 0.25%. At its January 25, 2012 meeting, the FOMC announced that economic conditions were likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. The FOMC subsequently reaffirmed this pledge, and at its June 20, 2012 meeting pledged to take further action as appropriate to support the economy.

FUND PERFORMANCE

The Short-Term Government Securities Fund returned 0.65% for the first half of 2012 compared to the benchmark return of 0.40%. Relative outperformance was a result of narrowing credit spreads during the period, which had a spillover impact into government-guaranteed bonds other than U.S. Treasuries as investors sought investment vehicles with greater return potential. All of the Fund’s sectors contributed positively to performance, with no one sector strongly outperforming or underperforming the others.

The Short-Term Bond Fund returned 2.18% for the first half of 2012 compared to the benchmark return of 1.24%. Relative outperformance was a result of tighter credit spreads, particularly for financial issuers in both the domestic and Yankee space, as investors chased yield given the lack of attractive risk-free alternatives.  Mortgages were also strong relative performers for the period, while the asset-backed sector underperformed compared to the other sectors in the Fund.

OUTLOOK

The domestic economy likely will continue to grow at a modest pace given the Fed’s very easy monetary policy, the positive wealth effect from rising equity prices, positive, though sluggish, job growth, a turning residential real estate market and the recent decline in energy prices. While various economic headwinds exist, we believe that the Chinese economy is unlikely to slow sharply from here given recent renewed stimulus measures. It is also our opinion that European leaders are likely to do just enough to keep the Eurozone together and that Washington will reach a last-minute solution to avoid falling off the “fiscal cliff” in 2013.

Interest rates are extremely low and are likely to remain so for the foreseeable future, yet on any growth scare (e.g., economic data comes in stronger than forecast), yields could experience a short, sharp violent reaction upwards. Given the Federal Reserve’s anchoring of short-term rates at zero and investors’ voracious appetite for income, any back-up in rates is likely to be short-lived.

Performance Evaluation |5

Short-Term Government Securities Fund

AVERAGE ANNUAL TOTAL RETURNS	1 Year			5 Year			10 Year
periods ended 06/30/12
Short-Term Government Securities Fund		1.76	%		3.34	%		2.91	%
BofA Merrill Lynch 1-5 Year U.S. Treasury Index		2.22	%		4.45	%		3.72	%

SECURITY DIVERSIFICATION	on 12/31/11			on 06/30/12
(% of total investments)
Government-guaranteed agencies		57.0	%		57.6	%
U.S. Treasuries		19.9	%		15.4	%
Corporate bonds		6.8	%		8.5	%
Mortgage-backed securities		5.9	%		4.4	%
Municipal bonds		5.2	%		3.9	%
Asset-backed securities		2.1	%		1.7	%
Short-term and other assets		3.1	%		8.5	%
Total		100.0	%		100.0	%
MATURITY	on 12/31/11			on 06/30/12
Average Weighted Maturity	2.75 years			2.89 years

PERFORMANCE COMPARISON

Comparison of the change in value of a $10,000 investment in the Fund and the BofA Merrill Lynch 1-5 Year U.S. Treasury Index made on December 31, 2001.

The returns quoted in the above table and chart represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment will fluctuate such that shares, when redeemed, may be worth more or less than their original cost. The Short-Term Government Securities Fund’s average annual total returns are net of any fee waivers and reimbursements. Returns do not reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.

6 |Performance Evaluation

Short-Term Bond Fund

AVERAGE ANNUAL TOTAL RETURNS	1 Year			5 Year			10 Year
periods ended 06/30/12
Short-Term Bond Fund		2.51	%		4.88	%		3.94	%
BofA Merrill Lynch 1-5 Year Corp./Gov. Index		2.53	%		4.66	%		4.08	%

SECURITY DIVERSIFICATION	on 12/31/11			on 06/30/12
(% of total investments)
Corporate bonds		34.8	%		30.6	%
Yankee bonds		13.6	%		18.2	%
Asset-backed securities		14.8	%		15.4	%
Municipal bonds		16.2	%		15.2	%
Mortgage-backed securities		9.2	%		8.1	%
U.S. Government obligations		8.6	%		6.1	%
Short-term and other assets		2.8	%		6.4	%
Total		100.0	%		100.0	%
MATURITY	on 12/31/11			on 06/30/12
Average Weighted Maturity	2.79 years			2.73 years

PERFORMANCE COMPARISON

Comparison of the change in value of a $10,000 investment in the Fund and the BofA Merrill Lynch 1-5 Year Corp./Gov. Index made on December 31, 2001.

The returns quoted in the above table and chart represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment will fluctuate such that shares, when redeemed, may be worth more or less than their original cost. The Short-Term Bond Fund’s average annual total returns are net of any fee waivers and reimbursements. Returns do not reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.

Performance Evaluation |7

PERFORMANCE EVALUATION

Stock Index Fund

MARKET CONDITIONS

Following a highly volatile 2011, financial markets began the New Year with relative calm as the debt situation in Europe stabilized and global liquidity conditions returned to normal, due mainly to the European Central Bank’s long-term refinancing operations. U.S. economic indicators were positive, with particularly encouraging reports from the labor market, and the outlook for the global economy brightened. As the investment environment improved and corporate earnings continued to be strong, U.S. equities moved boldly higher through the first two months of 2012.

The rally softened in March when the tone of global news flow darkened. Investors reverted to “risk off” mode, and heightened volatility returned to the markets as Europe’s debt problems boiled over once again. Political instability in Greece caused anxiety about whether the country would continue its membership in the Eurozone. In Spain, political leaders faced severe deficit and policymaking issues, while the nation’s banks clamored for liquidity and yields on Spanish government debt rose to levels deemed unsustainable. Heavily-indebted Italy saw its borrowing costs rise amid mounting pressure across the region. Stock markets around the world saw increased volatility as investors reacted to news from Europe where leaders conferred and debated vehemently over the need for fiscal integration among the 17 Eurozone nations.

Alongside the drama in Europe, investors became discouraged by gloomy economic reports from various parts of the world. A slowdown in China, a key powerhouse for global growth, was of particular concern. Chinese manufacturing and exports suffered due to weakening demand from larger, developed countries such as those in Europe. Many European countries fell into recession. In the United States, disappointing jobs reports in the second quarter dealt a crushing blow to sentiment for the U.S. economy after the labor market had been a bright spot earlier in the year.

The resurgence of concerns about global growth and Europe’s debt problems drove equity prices down through April and May. In June, U.S. stocks began a modest rebound as European leaders ramped up their efforts to move toward fiscal unity and investors anticipated additional stimulus from central banks on both sides of the Atlantic.

INDEX AND FUND PERFORMANCE

For the six months ended June 30, 2012, the Stock Index Fund returned 9.12%, while the U.S. large-cap market metric and the Fund’s benchmark, the Standard & Poor’s (S&P) 500 Index, advanced 9.49%. The S&P 500 Index is a market capitalization-weighted index composed of 500 common stocks issued by primarily large-capitalization companies in a wide range of industries. The stocks included in the index collectively represent a substantial portion of all common stocks publicly traded in the United States.

The U.S. economy remained strong relative to other parts of the world, and year-to-date, U.S. stocks generally outperformed international equity markets, which experienced higher levels of volatility amid global uncertainty. Telecommunications Services (+16.51%) was the strongest-performing sector in the S&P 500 Index for the period. Financials (+13.72%) staged a rebound from their 2011 lows. Information Technology (+13.34%), Consumer Discretionary (+12.95%) and Health Care stocks (+10.97%) also performed particularly well. Energy (-2.34%) was the only sector to finish in negative territory as falling natural gas prices hurt returns.

During the six-month period, as changes were made to the composition of the S&P 500 Index, the S&P 500 Stock Master Portfolio, the master portfolio in which the Fund invests, purchased and sold securities to maintain its objective of replicating the risks and return of the benchmark index.

8 |Performance Evaluation

Stock Index Fund

AVERAGE ANNUAL TOTAL RETURNS	1 Year			5 Year			10 Year
periods ended 06/30/12
Stock Index Fund		4.84	%		-0.32	%		4.68	%
Standard & Poor’s 500 Stock Index		5.45	%		0.22	%		5.33	%

INDUSTRY DIVERSIFICATION	% of TotalLong-TermInvestmentsat 06/30/12*				% of TotalLong-TermInvestmentsat 06/30/12*
Information technology		19.8	%	Energy		10.8	%
Financials		14.4	%	Industrials		10.4	%
Health care		12.0	%	Utilities		3.7	%
Consumer staples		11.3	%	Materials		3.4	%
Consumer discretionary		11.0	%	Telecommunication services		3.2	%
Total						100.0	%

TOP TEN EQUITY HOLDINGS	% of TotalLong-TermInvestmentsat 06/30/12*				% of TotalLong-TermInvestmentsat 06/30/12*
Apple Inc.		4.4	%	AT&T Inc.		1.7	%
Exxon Mobil Corp.		3.3	%	Chevron Corp.		1.7	%
Microsoft Corp.		1.9	%	Johnson & Johnson		1.5	%
International Business Machines Corp.		1.8	%	Wells Fargo & Co.		1.4	%
General Electric Co.		1.8	%	The Coca-Cola Co.		1.4	%

PERFORMANCE COMPARISON

Comparison of the change in value of a $10,000 investment in the Fund and the Standard & Poor’s 500 Stock Index made on December 31, 2001. The returns quoted in the above table and chart represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment will fluctuate such that shares, when redeemed, may be worth more or less than their original cost. The Stock Index Fund’s average annual total returns are net of any fee waivers and reimbursements. Returns do not reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.

*Holdings information is for the S&P 500 Stock Master Portfolio, managed by BlackRock Fund Advisors, the portfolio in which the Stock Index Fund invests all of its investable assets. Please refer to the Appendix for the complete semi-annual report of the S&P 500 Stock Master Portfolio.

Performance Evaluation |9

PERFORMANCE EVALUATION

Value Fund

MARKET CONDITIONS

Major equity indexes increased through the end of March, then reversed course through the end of May. Markets recovered again to finish the first half up nearly 10% as measured by the S&P 500 Stock Index.

The year began with forecasts for an improving economy, and results initially exceeded expectations. Strong performance can be attributed to a number of factors, including the fact that a very mild winter in North America brought forward more economic activity earlier than would be the case in a more typical year. However, as the first half wore on, economic progress waned, and fears over Europe’s banking and debt troubles began to outweigh the economic progress of the first three months of 2012 in the eyes of some investors.

Elsewhere, commodity prices remained constrained with oil hovering at or below $90 per barrel. Inflation remained in abeyance, and expectations for low inflation continue for the immediate future. Businesses are still cautious about capital investment and hiring, as uncertainty about regulation and tax policy persists.

FUND PERFORMANCE

The Value Fund returned 6.48% for the first six months of 2012, and its benchmark index, the unmanaged S&P 500 Stock Index, increased 9.49%. Underperformance was due primarily to Information Technology sector holdings. The Fund’s positions in Hewlett Packard Company, Dell Inc. and Cisco Systems, Inc. had a detrimental effect on results for the first half. Outside Information Technology, sector results were in line with those of the benchmark. Dean Foods Company, Dillard’s Inc. and Abbott Laboratories all had better results than the overall index.

OUTLOOK

The outlook for the economy is one of tepid growth. Business remains cautious and appears to be prepared for a number of potential outcomes. Uncertainty persists in the areas of global economic growth, financial turbulence in Europe, China’s slowing economy and the November elections in the United States. This last issue will have important consequences for fiscal, tax and regulatory policy, both immediately after the election in a lame duck session and during the new Congress in January 2013.

The general consensus is for real U.S. Gross Domestic Product growth of 1.5% for the remainder of the year. Unfortunately, that rate of economic growth is slow enough that it feels like a recession. Corporate balance sheets remain liquid due to the hesitation of management to commit large amounts of capital on new expansion. Instead, some managers are opting to return capital to shareholders while awaiting greater clarity about the future. Commodity prices remain in check as economies around the globe have slowed. Housing in the United States has shown improvement, but it is likely to progress in fits and starts. Unemployment remains high and job growth anemic.

On the positive side, managements continue to make adjustments to their companies’ operations and strive to be more efficient and competitive. In this uncertain market environment, we continue to search for and find what we believe to be attractive investment opportunities for our investors.

10 |Performance Evaluation

Value Fund

AVERAGE ANNUAL TOTAL RETURNS	1 Year			5 Year			10 Year
periods ended 06/30/12
Value Fund		0.04	%		-1.65	%		5.54	%
Standard & Poor’s 500 Stock Index		5.45	%		0.22	%		5.33	%

INDUSTRY DIVERSIFICATION	% of Total Investment at 06/30/12				% of Total Investment at 06/30/12
Health care		22.3	%	Consumer discretionary		6.9	%
Industrials		17.5	%	Materials		6.1	%
Information technology		16.3	%	Consumer staples		4.5	%
Energy		14.4	%	Short-term and other assets		3.8	%
Financials		8.2	%
Total						100.0	%

TOP TEN EQUITY HOLDINGS	% of Total Investment at 06/30/12				% of Total Investment at 06/30/12
Bristol-Myers Squibb Co.		5.1	%	Chevron Corp.		3.6	%
Intel Corp.		5.1	%	General Electric Co.		3.5	%
Abbott Laboratories		4.4	%	Genuine Parts Co.		3.3	%
Pfizer Inc.		4.4	%	Parker-Hannifin Corp.		3.3	%
Dow Chemical Co. (The)		3.8	%	Cisco Systems, Inc.		3.0	%

PERFORMANCE COMPARISON

Comparison of the change in value of a $10,000 investment in the Fund and the Standard & Poor’s 500 Stock Index made on December 31, 2001.

The returns quoted in the above table and chart represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment will fluctuate such that shares, when redeemed, may be worth more or less than their original cost. The Value Fund’s average annual total returns are net of any fee waivers and reimbursements. Returns do not reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.

Performance Evaluation |11

PERFORMANCE EVALUATION

Growth Fund

MARKET CONDITIONS

U.S. stocks produced moderate gains in the first half of 2012, extending the rebound that started last October. Market volatility was high, driven by global economic uncertainty and European sovereign debt concerns. Stocks rose briskly in the first quarter amid optimism about U.S. economic growth, particularly employment trends. However, equities surrendered some of their gains in the second quarter as U.S. job growth moderated, the Chinese economy decelerated and the situation in the Eurozone deteriorated. The period ended with a European summit that resulted in policy announcements reflecting concrete steps toward greater European integration.

FUND PERFORMANCE

The Fund returned 11.37% for the past six months and outperformed its benchmark, the Russell 1000 Growth Index, which increased 10.08%. Sector allocation, notably overweight positions in Health Care and Information Technology, drove results versus the index. Stock selection was also beneficial, especially in the Consumer Discretionary, Health Care and Telecommunication Services sectors.

The Fund’s Consumer Discretionary stocks outpaced those in the benchmark, led by Priceline.com, Inc. and Amazon.com, Inc. Both companies were top absolute contributors. The share price of Priceline.com rose as booking travel online continues to increase. Amazon.com’s share price rose during the period after the company reported an improvement in revenue and repurchased $960 million of stock.

The Health Care sector outperformed, helped by stock selection and an overweight position. Edwards Lifesciences Corporation, a maker of products to treat cardiovascular disease, reported strong first-quarter earnings and received approval from the U.S. Food and Drug Administration to use its transcatheter heart valve in patients.

Stock selection in the Telecommunication Services sector also provided a boost to relative performance. Fund holding Crown Castle International Corp. and other wireless tower companies have benefited from demand for higher data capacity as consumers worldwide continue to adopt smartphones.

The Fund’s Information Technology stocks trailed those in the index. In particular, Juniper Networks, Inc., San- Disk Corporation and Google, Inc. hampered performance in the sector. Juniper Networks and other networking companies were impacted as macroeconomic concerns led businesses to reduce infrastructure spending. SanDisk, a manufacturer of flash memory used in smartphones, was hurt by oversupply in the market, which resulted in lower memory prices. Google saw advertising rates decline more than expected. In addition, the company continues to face antitrust battles, which may have concerned investors.

OUTLOOK

The market environment has changed dramatically in recent months. Although the U.S. economy continues to demonstrate slow, steady growth, developments in Europe have led to growing caution among investors. A softer Chinese economy and fiscal uncertainty in the U.S. have further dampened risk appetites.

Despite risks to the global economy, U.S. corporate fundamentals generally appear strong. Stock valuations look appealing once again following May’s sharp sell-off and June’s volatility. We believe our disciplined, bottom-up approach to investing, rather than attempting to gauge the impact of macroeconomic events on financial markets, will continue to serve our investors well in the coming months.

12 |Performance Evaluation

Growth Fund

AVERAGE ANNUAL TOTAL RETURNS	1 Year			5 Year			10 Year
periods ended 06/30/12
Growth Fund*		4.06	%		3.91	%		7.58	%
Russell 1000 Growth Index		5.76	%		2.87	%		6.03	%
Standard & Poor’s 500 Stock Index		5.45	%		0.22	%		5.33	%

INDUSTRY DIVERSIFICATION	% of Total Investment at 06/30/12				% of Total Investment at 06/30/12
Information technology		36.6	%	Materials		3.3	%
Consumer discretionary		18.6	%	Telecommunication services		2.9	%
Health care		15.0	%	Financials		2.5	%
Industrials		13.0	%	Consumer staples		0.5	%
Energy		6.0	%	Short-term and other assets		1.6	%
Total						100.0	%

TOP TEN EQUITY HOLDINGS	% of Total Investment at 06/30/12				% of Total Investment at 06/30/12
Apple Inc.		10.1	%	Crown Castle International Corp.		2.9	%
Google Inc. (Class A)		4.1	%	MasterCard Inc.		2.6	%
Amazon.com, Inc.		3.6	%	Starbucks Corp.		2.5	%
Priceline.com Inc.		3.5	%	Boeing Co. (The)		2.3	%
Danaher Corp.		3.3	%	Union Pacific Corp.		2.2	%

PERFORMANCE COMPARISON

Comparison of the change in value of a $10,000 investment in the Fund and its benchmark indices made on December 31, 2001.

The returns quoted in the above table and chart represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment will fluctuate such that shares, when redeemed, may be worth more or less than their original cost. The Growth Fund’s average annual total returns are net of any fee waivers and reimbursements. Returns do not reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.

*Performance information for the Growth Fund (formerly the Nasdaq-100 Index Tracking StockSM Fund) reflects its previous investment strategy from inception through December 5, 2008, of matching, as closely as possible, before expenses, the performance of the Nasdaq-100 Stock Index.

Performance Evaluation |13

PERFORMANCE EVALUATION

Small-Company Stock Fund

MARKET CONDITIONS

Markets began 2012 much like the two previous years—with expectations for the economy to improve throughout the year. Small-capitalization indexes appreciated through mid-March before turning negative at the end of May. Subsequently, they turned upward again, finishing the first half of the year in positive territory.

FUND PERFORMANCE

The Fund returned 9.13% in the first half of 2012, while its benchmark, the Russell 2000 Index, increased 8.53%. Outperformance was helped by larger than index positions in Industrials, Consumer Discretionary, and Consumer Staples. Appreciation in the stock prices of Dean Foods Company, United Natural Foods, Inc. and The Manitowoc Company, Inc. contributed to the better than index results. Positions in ManTech International Corporation and Rofin-Sinar Technologies, Inc., along with SM Energy Company, Helmerich & Payne, Inc. and Cimarex Energy Co. detracted from returns during the period.

New names included Cass Information Systems, Inc., a provider of freight and utility invoice payment services; Dycom Industries, Inc., which provides engineering, construction and maintenance services to U.S.-based telecom providers; Matthews International Corporation, a designer and manufacturer of memorialization products; and UMB Financial Corporation, a multi-bank holding company covering the central Midwest in the United States.

OUTLOOK

As the second half of 2012 commences, the outlook for the economy remains mixed, echoing the previous two summers. Some U.S. indicators point toward improvement, while others show an economy still tepid, though probably not so weak as to slip into recession—for now.

Expectations that the second half of 2012 would show improvement are beginning to evaporate as businesses remain reluctant to hire or to commit capital in light of uncertainty and lack of clear direction in the economy, let alone unresolved regulatory, tax and fiscal policy.

This leaves out the impact of European debt problems and weakness in China and India, which further complicate matters. Underlying these impediments to global growth is too much financial leverage, which remains a concern.

In this environment, however, businesses are not idle in regards to their operations and are constantly tweaking their processes to improve their competitive positions and financial returns. As we continue to screen for these companies, we appreciate your trust and investment.

14 |Performance Evaluation

Small-Company Stock Fund

AVERAGE ANNUAL TOTAL RETURNS	1 Year			5 Year			10 Year
periods ended 06/30/12
Small-Company Stock Fund		1.28	%		5.69	%		8.77	%
Russell 2000 Index		-2.08	%		0.54	%		7.00	%

INDUSTRY DIVERSIFICATION	% of Total Investment at 06/30/12				% of Total Investment at 06/30/12
Industrials		25.4	%	Financials		6.9	%
Consumer staples		14.5	%	Energy		2.9	%
Consumer discretionary		12.9	%	Health care		2.9	%
Information technology		9.1	%	Short-term and other assets		18.0	%
Materials		7.4	%
Total						100.0	%

TOP TEN EQUITY HOLDINGS	% of Total Investment at 06/30/12				% of Total Investment at 06/30/12
iShares Russell 2000 Value Index		4.1	%	Cracker Barrel Old Country Store, Inc.		3.0	%
iShares S&P SmallCap 600 Value Index		4.0	%	Belden Inc.		3.0	%
Dean Foods Co.		3.8	%	United Natural Foods, Inc.		3.0	%
Applied Industrial Technologies, Inc.		3.2	%	Olin Corp.		3.0	%
Harris Teeter Supermarkets, Inc.		3.2	%	STERIS Corp.		2.9	%

PERFORMANCE COMPARISON

Comparison of the change in value of a $10,000 investment in the Fund and the Russell 2000 Index made on December 31, 2001.

The returns quoted in the above table and chart represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment will fluctuate such that shares, when redeemed, may be worth more or less than their original cost. The Small-Company Stock Fund’s average annual total returns are net of any fee waivers and reimbursements. Returns do not reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.

Performance Evaluation |15

PERFORMANCE EVALUATION

International Value Fund

MARKET CONDITIONS

Following a strong start to the year, global equity markets declined in the latter part of the period. Volatility and correlations rose as risk aversion returned. Investors focused on the unrelenting European sovereign debt crisis and signs of slowing global growth. Much of the weakness occurred following the Greek elections and their subsequent inability to form a government, calling into question both the country’s commitment to stay in the Eurozone and concerns of potential contagion spreading to other countries. During the second half of the six-month period, value investors faced a hostile market environment. Defensive stocks that were more expensive on a relative basis outperformed, while attractively valued stocks underperformed, becoming even cheaper. Traditional value metrics such as low price/earnings and low price/book have been out of favor for an extended period of time.

FUND PERFORMANCE

For the six-month period ending June 30, 2012, the Fund returned 1.51% versus MSCI EAFE, which gained 2.96%.

Top contributors on a country basis were Hong Kong, the Netherlands and the United Kingdom, while the top detractors included Brazil, Portugal and Germany. On a sector basis, the top contributors were Materials, Energy and Information Technology, while Consumer Staples, Financials and Health Care detracted.

Best performing stocks for the period included New World Development Company Ltd. (Hong Kong/Financials), Nikon Corporation (Japan/Consumer Discretionary) and Aegon N.V. (Netherlands/Financials). Stocks that most detracted from performance included Banco Espirito Santo SA (Portugal/Financials), Rossi Residencial SA (Brazil/Consumer Discretionary) and Credit Suisse Group AG (Switzerland/Financials).

OUTLOOK

In Europe, policy response thus far has been insufficient to quell the debt crisis. Despite the hiccups, we remain steadfast in our belief that the Euro will remain intact. The cost of a breakup is much higher to all member countries than the cost to stay together. Ultimately, the solution is a political one with Germany as the linchpin. Developments late in the period indicated that Germany is willing to compromise and is committed to the Euro and the periphery. European markets are likely to remain volatile and highly sensitive to news flow, but with valuations approaching 30-year lows, we believe there is potential for significant gains for patient investors.

Stocks are especially cheap relative to bonds. In many countries, especially Germany and Switzerland, short-term bond yields are negative, meaning risk aversion is so high that some investors are willing to pay a premium to ensure safety of principal. Such an extreme is unlikely to persist, especially with dividend yields at two to three times comparable long-term interest rates. Corporate managers are beginning to take notice of this anomaly.

While Europe remains in the spotlight, other areas of the world bear watching. Large developing economies like China, India and Brazil, once relied on as key drivers of global economic growth, have decelerated in recent months. The three aforementioned nations are cutting interest rates aggressively to stimulate economic activity. The selloff seen in several of these markets may create opportunities for investment as we believe their growth rates will be superior to the developed world over the long term.

In the past 25 years, we have experienced our share of international crises. Each resulted in a brief period of underperformance followed by significant outperformance. Managing market volatility is challenging, and this volatility can be precipitated by unpredictable events. We believe during times like this that the best course of action is to adhere to a disciplined investment approach, focus on fundamentals and be positioned for an eventual recovery.

16 |Performance Evaluation

International Value Fund

AVERAGE ANNUAL TOTAL RETURN	1 Year			5 Year			10 Year
periods ended 06/30/12
International Value Fund*		-19.09	%		-6.55	%		4.37	%
MSCI® EAFE® Index		-13.83	%		-6.10	%		5.14	%

COUNTRY DIVERSIFICATION	% of Total Investment at 06/30/12				% of Total Investment at 06/30/12
Japan		19.0	%	Spain		1.9	%
Switzerland		12.6	%	Denmark		1.9	%
Britain		12.1	%	Singapore		1.8	%
France		10.0	%	Canada		1.5	%
Germany		7.5	%	Brazil		1.5	%
Netherlands		4.5	%	Australia		1.1	%
Italy		3.8	%	Finland		1.0	%
Republic of South Korea		3.7	%	Portugal		1.0	%
Thailand		3.7	%	Norway		0.9	%
Hong Kong		2.8	%	China		0.9	%
Israel		1.9	%	Short-term and other assets		4.9	%
Total						100.0	%

TOP TEN EQUITY HOLDINGS	% of Total Investment at 06/30/12				% of Total Investment at 06/30/12
WPP Group PLC		2.6	%	Roche Holding AG		2.4	%
Sumitomo Corp.		2.6	%	BAE Systems PLC		2.3	%
Bridgestone Corp.		2.5	%	PTT Public Company Ltd.		2.3	%
Nikon Corp.		2.5	%	Nissan Motor Co., Ltd.		2.3	%
AEGON NV		2.4	%	Eni SpA		2.3	%

PERFORMANCE COMPARISON

Comparison of the change in value of a $10,000 investment in the Fund and the MSCI® EAFE® Index made on December 31, 2001.

The returns quoted in the above table and chart represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment will fluctuate such that shares, when redeemed, may be worth more or less than their original cost. The International Value Fund’s average annual total returns are net of any fee waivers and reimbursements. Returns do not reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.

*The performance information for the International Value Fund (formerly the International Stock Index Fund) reflects its investment experience in the State Street MSCI® EAFE® Index Portfolio from inception through October 16, 2005, and in the Vanguard Developed Markets Index Fund from October 17, 2005 to June 9, 2006. Mercator Asset Management, L.P.’s role as subadvisor began June 12, 2006.

Performance Evaluation |17

Expense Example

As a shareholder, you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, service fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in each of the Homestead Funds and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at January 1, 2012 and held through June 30, 2012.

ACTUAL EXPENSES

The first line for each Fund in the table on the following page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period. Although the Funds charge no sales loads or transaction fees, you will be charged a redemption fee equal to 2.00% of the net amount of the redemption (except for the Daily Income Fund, Short- Term Government Securities Fund, and Short-Term Bond Fund), if you redeem your shares or exchange your shares for shares of another Fund less than 30 calendar days after you purchase them.

Individual Retirement Arrangements (IRAs) and Educational Savings Accounts (ESAs) are charged a $15.00 annual custodial fee. The charge is automatically deducted from your account in the fourth quarter or, if you close your account, at the time of redemption. A fee is collected for each IRA or ESA account, as distinguished by account type (Traditional IRA, Roth IRA, or ESA) and Social Security Number. For example, if you have both a Traditional IRA and a Roth IRA account, each would be charged a fee. But only one fee would be collected for each account type, regardless of the number of Funds held by each account type. These fees are not included in the example below. If included, the costs shown would be higher.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second line for each Fund in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as the redemption fee charged on sales of shares held less than 30 days, or the custodial account fee. Therefore, the hypothetical information in the example is useful in comparing your ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

18 |Expense Example

	Beginning Account Value January 1, 2012		Ending Account Value June 30, 2012		Expenses Paid During the Perioda		Annualized Expense Ratio for the Six Month Period Ended June 30, 2012
DAILY INCOME FUND
Actual Return	$	1,000.00	$	1,000.05	$	0.65		0.13	%
Hypothetical (5% return before expenses)	$	1,000.00	$	1,024.46	$	0.66		0.13	%
SHORT-TERM GOVERNMENT SECURITIES FUND
Actual Return	$	1,000.00	$	1,006.52	$	3.48		0.70	%
Hypothetical (5% return before expenses)	$	1,000.00	$	1,021.58	$	3.51		0.70	%
SHORT-TERM BOND FUND
Actual Return	$	1,000.00	$	1,022.00	$	3.82		0.76	%
Hypothetical (5% return before expenses)	$	1,000.00	$	1,021.27	$	3.82		0.76	%
STOCK INDEX FUNDb
Actual Return	$	1,000.00	$	1,094.74	$	3.12		0.60	%
Hypothetical (5% return before expenses)	$	1,000.00	$	1,022.08	$	3.02		0.60	%
VALUE FUND
Actual Return	$	1,000.00	$	1,066.57	$	3.52		0.69	%
Hypothetical (5% return before expenses)	$	1,000.00	$	1,021.65	$	3.45		0.69	%
GROWTH FUND
Actual Return	$	1,000.00	$	1,119.22	$	4.99		0.95	%
Hypothetical (5% return before expenses)	$	1,000.00	$	1,020.32	$	4.76		0.95	%
SMALL-COMPANY STOCK FUND
Actual Return	$	1,000.00	$	1,094.84	$	5.40		1.04	%
Hypothetical (5% return before expenses)	$	1,000.00	$	1,019.87	$	5.21		1.04	%
INTERNATIONAL VALUE FUND
Actual Return	$	1,000.00	$	1,015.20	$	4.96		0.99	%
Hypothetical (5% return before expenses)	$	1,000.00	$	1,020.11	$	4.97		0.99	%

a.	The dollar amounts shown as “Expenses Paid During the Period” are equal to each Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 182, then divided by 366.
b.	The Stock Index Fund is a feeder fund that invests substantially all of its assets in a master portfolio. The example reflects the expenses of both the feeder fund and the master portfolio.

Expense Example|19

Regulatory and Shareholder Matters

PROXY VOTING POLICIES AND PROCEDURES

The policies and procedures used to determine how to vote proxies relating to the Funds’ portfolio securities are available without charge online at www.homestead funds.com or upon request by calling 1-800-258-3030. This information is also on the Securities and Exchange Commission’s website at www.sec.gov.

PROXY VOTING RECORD

For the most recent twelve-month period ended June 30, information regarding how proxies relating to portfolio securities were voted on behalf of each of the Funds is available without charge upon request by calling 1-800-258-3030 and on the Securities and Exchange Commission’s website at www.sec.gov.

QUARTERLY DISCLOSURE OF PORTFOLIO HOLDINGS

The Funds file complete schedules of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. Portfolio holdings for the second and fourth quarter of each fiscal year are filed as part of the Funds’ semi-annual and annual reports. The Funds’ Form N-Q, semi-annual and annual reports are available on the Commission’s website at www.sec.gov, and may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The most recent quarterly portfolio holdings and semi-annual and annual report also can be accessed on the Funds’ website at www.homesteadfunds.com.

20 |Regulatory and Shareholder Matters

PORTFOLIO OF INVESTMENTS: Daily Income Fund

June 30, 2012 (Unaudited)

CORPORATE NOTES	InterestRate/Yield			Maturity Date	Face Amount		Value
(3.3% of portfolio)
General Electric Capital Corp.		3.50	%	08/13/12	$	2,828,000	$	2,838,118
General Electric Capital Corp.		5.25		10/19/12		1,414,000		1,434,599
John Deere Capital Corp.		5.25		10/01/12		500,000		506,160
John Deere Capital Corp.		4.95		12/17/12		489,000		499,392
PACCAR Financial Corp.		1.95		12/17/12		1,000,000		1,007,415
Total Corporate Notes (Cost $6,285,684)								6,285,684

COMMERCIAL PAPER
(69.8% of portfolio)
Air Liquide US LLC (a)	0.17	07/09/12	2,000,000	1,999,925
Air Liquide US LLC (a)	0.17	07/20/12	7,500,000	7,499,327
American Honda Finance Corp.	0.17	07/25/12	944,000	943,893
American Honda Finance Corp.	0.17	09/05/12	3,000,000	2,999,065
Coca-Cola Co. (a)	0.15	07/27/12	2,500,000	2,499,729
Coca-Cola Co. (a)	0.20	08/20/12	2,000,000	1,999,444
Coca-Cola Co. (a)	0.21	10/02/12	2,000,000	1,998,915
Coca-Cola Co. (a)	0.21	10/05/12	2,000,000	1,998,880
Coca-Cola Co. (a)	0.23	10/17/12	1,000,000	999,310
ConocoPhillips Qatar Funding Ltd. (a)	0.15	07/03/12	1,600,000	1,599,987
ConocoPhillips Qatar Funding Ltd. (a)	0.19	07/23/12	1,000,000	999,884
ConocoPhillips Qatar Funding Ltd. (a)	0.19	09/07/12	3,000,000	2,998,923
ConocoPhillips Qatar Funding Ltd. (a)	0.20	09/18/12	2,000,000	1,999,122
Deere & Co. (a)	0.16	07/26/12	3,000,000	2,999,667
E.I. Du Pont De Nemours & Co. (a)	0.20	08/20/12	1,100,000	1,099,694
E.I. Du Pont De Nemours & Co. (a)	0.17	08/20/12	1,000,000	999,764
E.I. Du Pont De Nemours & Co. (a)	0.23	09/18/12	2,000,000	1,998,991
E.I. Du Pont De Nemours & Co. (a)	0.19	09/28/12	3,000,000	2,998,591
General Electric Capital Corp.	0.25	10/22/12	2,000,000	1,998,431
Google Inc. (a)	0.14	07/20/12	2,000,000	1,999,852
Google Inc. (a)	0.13	08/08/12	5,000,000	4,999,314
Google Inc. (a)	0.15	08/10/12	2,000,000	1,999,667
John Deere Bank SA (a)	0.17	07/19/12	1,000,000	999,915
John Deere Bank SA (a)	0.19	08/14/12	2,000,000	1,999,536
John Deere Bank SA (a)	0.17	08/21/12	2,000,000	1,999,518
Johnson & Johnson (a)	0.13	07/13/12	5,000,000	4,999,783
L’Oreal USA Inc. (a)	0.14	07/09/12	2,000,000	1,999,938
L’Oreal USA Inc. (a)	0.15	07/24/12	3,000,000	2,999,713
L’Oreal USA Inc. (a)	0.12	07/25/12	2,000,000	1,999,840
L’Oreal USA Inc. (a)	0.14	08/07/12	2,000,000	1,999,712
Metlife Funding Inc.	0.15	07/11/12	9,500,000	9,499,604
Nestle Capital Corp. (a)	0.17	08/16/12	3,000,000	2,999,348
Nestle Capital Corp. (a)	0.16	08/29/12	2,000,000	1,999,476
Nestle Capital Corp. (a)	0.15	10/16/12	2,000,000	1,999,108
PACCAR Financial Corp.	0.16	08/16/12	2,000,000	1,999,591
PACCAR Financial Corp.	0.17	09/12/12	4,000,000	3,998,621
PepsiCo, Inc. (a)	0.14	08/17/12	2,000,000	1,999,634
PepsiCo, Inc. (a)	0.12	08/24/12	2,450,000	2,449,559
Procter & Gamble Co. (a)	0.14	07/30/12	4,400,000	4,399,504
Procter & Gamble Co. (a)	0.14	09/12/12	2,000,000	1,999,432
Total Capital Canada, Ltd. (a)	0.17	07/10/12	5,000,000	4,999,788
Total Capital Canada, Ltd. (a)	0.19	08/02/12	2,000,000	1,999,662
Total Capital Canada, Ltd. (a)	0.25	10/26/12	1,000,000	999,188
Toyota Motor Credit Corp.	0.15	07/02/12	4,000,000	3,999,983
Toyota Motor Credit Corp.	0.25	10/02/12	2,500,000	2,498,385
Toyota Motor Credit Corp.	0.20	10/23/12	2,000,000	1,998,733
UBS Finance Delaware LLC	0.22	08/27/12	2,000,000	1,999,319
Unilever Capital Corp. (a)	0.14	08/02/12	2,500,000	2,499,689

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

Portfolio of Investments |21

PORTFOLIO OF INVESTMENTS: Daily Income Fund (continued)

June 30, 2012 (Unaudited)

	Interest Rate/Yield			Maturity Date	Face Amount		Value
(Commercial Paper continued)
Unilever Capital Corp. (a)		0.15	%	08/27/12	$	1,000,000	$	999,763
Unilever Capital Corp. (a)		0.21		08/31/12		2,000,000		1,999,288
Unilever Capital Corp. (a)		0.17		10/04/12		3,000,000		2,998,654
Wal-Mart Stores, Inc. (a)		0.15		08/06/12		4,000,000		3,999,400
Total Commercial Paper (Cost $134,964,059)								134,964,059
U.S. GOVERNMENT OBLIGATIONS
(17.1% of portfolio)
U.S. Treasury Note		1.50		07/15/12		5,000,000		5,002,680
U.S. Treasury Note		4.38		08/15/12		6,000,000		6,031,564
U.S. Treasury Note		0.38		08/31/12		11,000,000		11,004,490
U.S. Treasury Note		1.38		09/15/12		6,000,000		6,015,389
U.S. Treasury Note		3.88		10/31/12		5,000,000		5,061,984
Total U.S. Government Obligations (Cost $33,116,107)								33,116,107
MONEY MARKET ACCOUNT
(9.8% of portfolio)
State Street Institutional Liquid Reserves Fund		0.20	(b)			19,048,751		19,048,751
Total Money Market Account (Cost $19,048,751)								19,048,751
TOTAL INVESTMENTS IN SECURITIES (Cost $193,414,601)—100%							$	193,414,601

(a)	Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. The security has been determined to be liquid under criteria established by the Fund’s Board of Directors. The total of such securities at period-end amounts to $103,028,434 and represents 53.3% of total investments.
(b)	7-day yield at June 30, 2012.

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

22 |Portfolio of Investments

PORTFOLIO OF INVESTMENTS: Short-Term Government Securities Fund

June 30, 2012 (Unaudited)

ASSET BACKED SECURITIES	Interest Rate			Maturity Date	Face Amount		Value
(1.7% of portfolio)
Small Business Administration 93-20J		5.90	%	10/01/13	$	8,594	$	8,829
Small Business Administration 98-20D		6.15		04/01/18		17,946		19,555
Small Business Administration 98-20E		6.30		05/01/18		20,366		22,280
Small Business Administration 98-20H		6.15		08/01/18		8,715		9,500
Small Business Administration 99-20D		6.15		04/01/19		30,595		33,590
Small Business Administration 04-20B		4.72		02/01/24		79,271		87,095
Small Business Administration 04-20C		4.34		03/01/24		107,823		118,331
Small Business Administration 05-10E		4.54		09/01/15		20,308		21,086
Small Business Administration Pool # 100075		3.50		05/25/19		30,844		31,238
Small Business Administration Pool # 500724		4.00	(a)	12/25/13		3,691		3,726
Small Business Administration Pool # 502261		1.38	(a)	10/25/17		12,351		12,374
Small Business Administration Pool # 502477		1.25	(a)	09/25/18		35,751		35,723
Small Business Administration Pool # 502684		1.25	(a)	07/25/19		2,927		2,957
Small Business Administration Pool # 503278		0.88	(a)	02/25/21		28,766		28,958
Small Business Administration Pool # 503463		1.13	(a)	09/25/21		20,975		20,995
Small Business Administration Pool # 504305		0.88	(a)	10/25/23		5,126		5,115
Small Business Investment Companies 02-20K		5.08		11/01/22		30,627		33,952
Small Business Investment Companies 02-P10B		5.20		08/10/12		46,263		46,510
Small Business Investment Companies 03-10A		4.63		03/10/13		356,285		364,409
Small Business Investment Companies 03-10B		3.39		03/01/13		5,779		5,826
Small Business Investment Companies 03-P10A		4.52		02/10/13		3,598		3,670
Small Business Investment Companies 03-P10B		5.14		08/10/13		24,580		25,502
Small Business Investment Companies 04-10A		4.12		03/10/14		78,431		81,258
Small Business Investment Companies 04-10B		4.68		09/10/14		179,268		187,846
Small Business Investment Companies 04-P10A		4.50		02/10/14		26,209		26,965
Small Business Investment Companies 05-10B		4.94		09/10/15		140,331		150,998
Small Business Investment Companies 05-P10A		4.64		02/10/15		32,012		33,954
Small Business Investment Companies 07-10A		5.38		03/10/17		62,028		68,266
Total Asset Backed Securities (Cost $1,394,956)								1,490,508
MORTGAGE BACKED SECURITIES
(4.4% of portfolio)
FDIC Structured Sale Guaranteed Notes 2010-S3 (b)		2.74		12/03/20		663,291		669,459
GNMA #2602		6.00		06/20/28		50,103		56,490
GNMA #2707		5.50		01/20/14		3,076		3,340
GNMA #8004		1.63	(a)	07/20/22		21,518		22,255
GNMA #8006		1.63	(a)	07/20/22		22,298		23,062
GNMA #8038		1.63	(a)	08/20/22		13,222		13,675
GNMA #8040		2.00	(a)	08/20/22		35,111		36,391
GNMA #8054		1.63	(a)	10/20/22		8,504		8,811
GNMA #8076		1.63	(a)	11/20/22		14,406		14,926
GNMA #8102		4.00	(a)	02/20/16		3,341		3,514
GNMA #8103		4.00	(a)	02/20/16		13,773		14,496
GNMA #8157		1.63	(a)	03/20/23		23,233		24,090
GNMA #8191		2.38	(a)	05/20/23		40,309		41,866
GNMA #8215		2.38	(a)	04/20/17		2,844		2,954
GNMA #8259		1.63	(a)	08/20/23		11,747		12,149
GNMA #8297		4.00	(a)	12/20/17		9,428		9,893
GNMA #8332		3.50	(a)	03/20/18		6,489		6,807
GNMA #8344		3.50	(a)	04/20/18		16,240		17,022
GNMA #8384		1.63	(a)	03/20/24		5,937		6,156
GNMA #8393		4.00	(a)	08/20/18		6,448		6,786
GNMA #8400		2.00	(a)	08/20/18		9,060		9,390
GNMA #8405		4.00	(a)	09/20/18		10,036		10,561
GNMA #8423		2.38	(a)	05/20/24		7,126		7,401
GNMA #8429		4.00	(a)	11/20/18		11,423		11,986
GNMA #8459		1.63	(a)	07/20/24		11,239		11,623
GNMA #8499		3.00	(a)	05/20/19		7,584		7,934

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

Portfolio of Investments |23

PORTFOLIO OF INVESTMENTS: Short-Term Government Securities Fund (continued)

June 30, 2012 (Unaudited)

 

	Interest Rate			Maturity Date	Face Amount		Value
(Mortgage Backed Securities continued)
GNMA #8518		1.63	%(a)	10/20/24	$	10,893	$	11,286
GNMA #8532		2.50	(a)	10/20/24		14,571		15,130
GNMA #8591		1.63	(a)	02/20/25		34,748		36,031
GNMA #8638		2.38	(a)	06/20/25		12,810		13,305
GNMA #8648		1.63	(a)	07/20/25		21,158		21,882
GNMA #8663		2.00	(a)	07/20/25		16,081		16,667
GNMA #8680		3.50	(a)	08/20/20		14,185		14,908
GNMA #8687		2.50	(a)	08/20/25		4,156		4,320
GNMA #8702		3.00	(a)	10/20/20		5,813		6,078
GNMA #8747		1.63	(a)	11/20/25		10,756		11,144
GNMA #8807		1.63	(a)	07/20/21		13,970		14,448
GNMA #8836		1.63	(a)	09/20/21		12,467		12,894
GNMA #8847		2.38	(a)	04/20/26		13,644		14,171
GNMA #8869		1.63	(a)	11/20/21		40,177		41,627
GNMA #8873		2.50	(a)	11/20/21		19,043		19,775
GNMA #8877		2.38	(a)	05/20/26		3,388		3,519
GNMA #8883		1.63	(a)	12/20/21		14,519		15,043
GNMA #8915		1.63	(a)	02/20/22		13,653		14,158
GNMA #8934		1.63	(a)	03/20/22		24,109		25,000
GNMA #8978		2.38	(a)	05/20/22		58,581		60,844
GNMA #80053		1.63	(a)	03/20/27		2,931		3,040
GNMA #80058		2.38	(a)	04/20/27		3,078		3,197
GNMA #80185		2.38	(a)	04/20/28		29,327		30,460
GNMA #80264		1.63	(a)	03/20/29		25,690		26,639
GNMA #80283		2.38	(a)	05/20/29		19,702		20,463
GNMA #80300		1.63	(a)	07/20/29		17,445		18,043
GNMA #80309		1.63	(a)	08/20/29		7,228		7,476
GNMA #80363		1.63	(a)	01/20/30		61,703		63,981
GNMA #80426		1.63	(a)	07/20/30		2,581		2,670
GNMA #80452		1.63	(a)	09/20/30		17,620		18,223
GNMA #80475		1.63	(a)	12/20/30		34,300		35,538
GNMA #80577		1.63	(a)	02/20/32		4,938		5,136
GNMA #80684		2.38	(a)	04/20/33		14,609		15,173
GNMA #81129		2.50	(a)	10/20/34		223,932		232,647
GNMA #510280		6.00		08/15/14		4,271		4,675
GNMA #583189		4.50		02/20/17		38,993		42,249
GNMA #607494		5.00		04/15/19		24,950		26,915
GNMA #616274		5.00		02/15/19		25,156		27,512
GNMA 1996-4		7.00		04/16/26		4,002		4,539
GNMA 2001-53		5.50		10/20/31		22,013		23,230
GNMA 2001-53		0.59	(a)	10/20/31		4,060		4,069
GNMA 2002-15		5.50		11/20/31		39,765		42,094
GNMA 2002-20		4.50		03/20/32		21,593		23,926
GNMA 2002-88		5.00		05/16/31		5,427		5,442
GNMA 2003-11		4.00		10/17/29		36,401		39,101
GNMA 2003-12		4.50		02/20/32		18,623		19,663
GNMA 2003-26		0.69	(a)	04/16/33		11,411		11,468
GNMA 2003-97		4.50		03/20/33		46,703		50,480
GNMA 2004-17		4.50		12/20/33		113,505		124,444
GNMA 2004-102		5.50		04/20/34		66,866		75,818
GNMA 2005-56		5.00		08/20/31		1,115		1,115
GNMA 2010-113		2.50		02/16/40		673,977		693,915
NCUA Guaranteed Notes 2010-C1		1.60		10/29/20		837,681		848,906
Total Mortgage Backed Securities (Cost $3,838,786)								3,977,514

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

24 |Portfolio of Investments

PORTFOLIO OF INVESTMENTS: Short-Term Government Securities Fund (continued)

June 30, 2012 (Unaudited)

MUNICIPAL BONDS	Interest Rate/Yield			Maturity Date	Face Amount		Value
(3.9% of portfolio)
Arizona State University		5.38	%	07/01/19	$	700,000	$	700,000
Bel Aire, Kansas		7.50		05/01/35		435,000		458,198
Bel Aire, Kansas		7.75		05/01/41		555,000		585,730
Fiscal Year 2005 Securitization Corp. New York		3.51		10/01/12		30,000		30,213
Illinois Housing Development Authority, Illinois		4.13		10/20/16		860,000		881,354
Miami-Dade County, Florida Educational Facilities Authority		4.70		04/01/14		560,000		597,330
Michigan State Housing Development Authority		4.40		04/20/13		180,000		181,978
Total Municipal Bonds (Cost $3,402,919)								3,434,803
CORPORATE BONDS
(8.5% of portfolio)
Ally Bank		1.00		06/10/13		250,000		250,973
American Express Centurion Bank		1.40		10/06/14		250,000		251,754
BMW Bank of North America		1.00		06/10/13		250,000		250,973
CIT Bank		1.10		11/25/13		250,000		251,164
Compass Bank		0.95		06/23/14		250,000		249,138
Discover Bank		1.35		06/16/14		250,000		251,664
FirstBank Puerto Rico		1.65		02/20/13		250,000		251,847
GE Capital Financial Inc.		1.00		06/10/13		250,000		250,973
GE Money Bank		1.75		07/23/13		250,000		253,197
GMAC LLC		2.20		12/19/12		500,000		504,590
Goldman Sachs Bank USA		1.50		11/24/14		250,000		251,579
Petroleos Mexicanos		2.00		12/20/22		1,000,000		1,003,030
Safina LTD		2.00		12/30/23		2,000,000		1,999,660
Sayarra LTD		2.77		10/29/21		43,582		45,178
Southern Community Bank & Trust		0.97	(a)	02/18/14		250,000		249,790
State Bank of India NY		1.10		09/23/13		250,000		251,230
Union 11 Leasing LLC		2.41		01/23/24		981,908		1,004,521
Total Corporate Bonds (Cost $7,523,593)								7,571,261
U. S. GOVERNMENT AND AGENCY OBLIGATIONS
(73.0% of portfolio)
FDIC Structured Sale Guaranteed Notes (b)		0.00	(c)	10/25/12		1,500,000		1,498,965
Government Trust Certificate (Israel Trust)		0.00	(c)	04/01/15		2,750,000		2,650,508
National Archives Facility Trust		8.50		09/01/19		39,346		49,268
Overseas Private Investment Corp.		1.45	(d)	09/20/13		1,000,000		1,247,160
Overseas Private Investment Corp.		1.45	(d)	09/20/13		3,015,000		3,117,932
Overseas Private Investment Corp.		3.46	(d)	07/12/14		1,000,000		1,132,570
Overseas Private Investment Corp.		1.84	(d)	07/12/14		1,500,000		1,579,260
Overseas Private Investment Corp.		4.10		11/15/14		73,360		76,156
Overseas Private Investment Corp.		1.34	(e)	11/20/19		2,000,000		2,033,820
Overseas Private Investment Corp.		1.05	(e)	12/09/16		2,000,000		2,019,240
Overseas Private Investment Corp.		3.56	(d)	12/14/14		2,331,082		2,716,596
Overseas Private Investment Corp.		3.74		04/15/15		50,608		51,585
Overseas Private Investment Corp.		3.50	(e)	05/02/16		1,000,000		1,151,910
Overseas Private Investment Corp.		4.81	(e)	07/12/16		1,000,000		1,218,940
Overseas Private Investment Corp.		4.87	(e)	09/07/16		700,000		875,196
Overseas Private Investment Corp.		4.87	(e)	09/07/16		1,000,000		1,250,280
Overseas Private Investment Corp.		0.80	(e)	09/07/16		1,140,000		1,141,277
Overseas Private Investment Corp.		3.56	(d)	04/23/17		3,000,000		3,546,060
Overseas Private Investment Corp.		1.50	(e)	11/17/17		1,000,000		1,012,300
Overseas Private Investment Corp.		1.01	(e)	12/10/17		2,500,000		2,521,850
Overseas Private Investment Corp.		1.55	(e)	03/15/18		1,600,000		1,632,064
Overseas Private Investment Corp.		5.66	(e)	06/10/18		900,000		1,279,368
Overseas Private Investment Corp.		1.84	(e)	06/10/18		1,000,000		1,053,720

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

Portfolio of Investments |25

PORTFOLIO OF INVESTMENTS: Short-Term Government Securities Fund (continued)

June 30, 2012 (Unaudited)

 

	Interest Rate/Yield			Maturity Date	Face Amount		Value
(U. S. Government and Agency Obligations continued)
Overseas Private Investment Corp.		1.14	%(e)	06/10/18	$	4,000,000	$	3,993,520
Overseas Private Investment Corp.		2.53	(e)	07/07/19		1,000,000		1,091,430
Overseas Private Investment Corp.		3.37		05/15/21		948,453		1,035,597
Overseas Private Investment Corp.		2.07		05/15/21		990,000		1,010,216
Philippine Power Trust I (b)		5.40		09/26/18		386,905		438,864
Private Export Funding Corp.		4.97		08/15/13		1,100,000		1,157,566
Private Export Funding Corp.		2.13		07/15/16		500,000		527,075
SALLIE MAE		7.30		08/01/12		1,875,000		1,885,714
The Financing Corp.		0.00	(c)	02/08/18		500,000		460,341
The Financing Corp.		0.00	(c)	10/06/17		500,000		464,561
U.S. Department of Housing and Urban Development		6.33		08/01/13		89,000		89,142
U.S. Department of Housing and Urban Development		6.93		08/01/13		10,000		10,023
U.S. Department of Housing and Urban Development		7.72		08/01/13		50,000		50,091
U.S. Department of Housing and Urban Development		7.63		08/01/14		30,000		30,008
U.S. Department of Housing and Urban Development		7.91		08/01/17		37,000		37,208
U.S. Department of Housing and Urban Development		5.77		08/01/17		1,000,000		1,004,346
U.S. Department of Housing and Urban Development		2.91		08/01/17		1,000,000		1,094,301
U.S. Department of Housing and Urban Development		7.93		08/01/18		80,000		80,444
U.S. Department of Housing and Urban Development		6.07		08/01/21		500,000		502,114
U.S. Department of Housing and Urban Development		6.12		08/01/22		1,000,000		1,004,197
U.S. Department of Housing and Urban Development		5.77		08/01/26		500,000		581,686
United States Treasury Note		1.50		07/15/12		1,000,000		1,000,469
United States Treasury Note		1.38		09/15/12		3,000,000		3,007,617
United States Treasury Note		1.13		12/15/12		1,000,000		1,004,258
United States Treasury Note		1.38		02/15/13		3,000,000		3,022,032
United States Treasury Note		1.38		05/15/13		1,000,000		1,009,844
United States Treasury Note		2.38		02/28/15		1,500,000		1,578,399
United States Treasury Note		1.50		06/30/16		1,000,000		1,035,938
United States Treasury Note		1.00		08/31/16		1,000,000		1,015,703
United States Treasury Note		1.38		09/30/18		1,000,000		1,023,750
Total U.S. Government and Agency Obligations (Cost $63,986,560)								65,102,479
COMMERCIAL PAPER
(8.2% of portfolio)
Atlantic City Electric Co.		0.37		07/03/12		4,400,000		4,399,910
South Jersey Gas Co. (f)		0.40		07/02/12		2,900,000		2,899,968
Total Commercial Paper (Cost $7,299,878)								7,299,878
MONEY MARKET ACCOUNT					Shares
(0.3% of portfolio)
State Street Institutional Liquid Reserves Fund		0.20	(g)			292,862		292,862
								292,862
TOTAL INVESTMENTS IN SECURITIES (Cost $87,739,554) - 100%							$	89,169,305

(a)	Variable coupon rate as of June 30, 2012.
(b)	144A security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. The total of such securities at period-end amounts to $2,607,288 and represents 2.9% of total investment.
(c)	Zero coupon rate.
(d)	Interest is paid at maturity.
(e)	Interest is paid at put date.
(f)	144A security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. The security has been determined to be liquid under criteria established by the Fund’s Board of Directors. The total of such securities at period-end amounts to $2,899,968 or 3.3% of total investments.
(g)	7-day yield at June 30, 2012.

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

26 |Portfolio of Investments

PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund

June 30, 2012 (Unaudited)

CORPORATE BONDS	Interest Rate			Maturity Date	Face Amount		Value
(30.6% of portfolio)
BASIC INDUSTRIES - 7.3%
Danaher Corp.		1.30	%	06/23/14	$	525,000	$	530,462
Dun & Bradstreet Corp.		6.00		04/01/13		700,000		725,869
Dun & Bradstreet Corp.		2.88		11/15/15		90,000		195,351
Eaton Corp.		0.80	(a)	06/16/14		1,025,000		1,028,133
Engelhard Corp.		4.25		05/15/13		550,000		559,264
General Dynamics Corp.		1.38		01/15/15		775,000		785,660
Emerson Electric Co.		0.00	(a)	10/26/39		125,000		124,768
Emerson Electric Co.		0.00	(a)	03/27/40		1,100,000		1,090,594
General Electric Co.		5.00		02/01/13		1,625,000		1,666,559
Ingersoll-Rand Global Holding Co. Ltd.		9.50		04/15/14		350,000		397,817
PACCAR Inc.		1.64	(a)	09/14/12		1,100,000		1,103,010
PPG Industries Inc.		5.75		03/15/13		470,000		486,409
Raytheon Co.		1.40		12/15/14		275,000		279,013
SeaRiver Maritime, Inc.		0.00	(c)	09/01/12		18,825,000		18,716,304
United Technologies Corp.		0.74	(a)	12/02/13		800,000		802,836
United Technologies Corp.		1.20		06/01/15		525,000		531,109
Total Basic Industries								29,023,158
CONSUMER STAPLES - 1.3%
Food Products
Archer-Daniels Midland Co.		0.63	(a)	08/13/12		5,000,000		5,003,000
Total Consumer Staples								5,003,000
CONSUMER DISCRETIONARY - 0.1%
Textiles, Apparel, & Luxury Goods
VF Corp.		1.22	(a)	08/23/13		540,000		540,002
Total Consumer Discretionary								540,002
FINANCE - 13.3%
Banks
Abbey National Treasury Services Stamford, CT		1.77	(a)	04/25/13		1,600,000		1,573,432
Abbey National Treasury Services Stamford, CT		1.82	(a)	06/10/13		9,900,000		9,712,791
Allied Irish Banks NY		2.72	(a)	08/13/12		3,500,000		3,466,946
Allied Irish Banks NY		3.61	(a)	09/28/12		2,450,000		2,405,366
Bank of America Corp.		7.23		08/15/12		200,000		200,346
Bank of America NA		0.75	(a)	06/15/16		2,025,000		1,787,862
Bank of America NA		0.77	(a)	06/15/17		1,550,000		1,318,757
Citigroup Inc.		6.00		12/13/13		975,000		1,024,677
Dexia Crédit Local New York (b)		0.87	(a)	03/05/13		350,000		343,395
Intesa Sanpaolo NY		2.38		12/21/12		6,675,000		6,509,507
Key Bank NA		7.41		10/15/27		1,050,000		1,179,418
Landesbank Baden-Wueterttemberg NY		5.05		12/30/15		100,000		107,651
Societe Generale NY		1.47	(a)	02/22/13		1,250,000		1,248,959
Union Bank NA		5.95		05/11/16		525,000		586,545
Consumer Loans
American Express Credit Corp.		7.30		08/20/13		525,000		561,309
American General Finance Corp.		4.88		07/15/12		375,000		374,062
Caterpillar Financial Services Corp.		6.00		12/15/12		250,000		254,969
FIA Card Services NA		7.13		11/15/12		2,200,000		2,241,136
General Electric Capital Corp.		0.77	(a)	03/20/13		1,650,000		1,637,133
General Electric Capital Corp.		0.54	(a)	12/20/13		700,000		684,079
General Electric Capital Corp.		0.62	(a)	09/15/14		2,350,000		2,318,721
General Electric Capital Corp.		0.00	(a)	10/01/53		525,000		521,708
HSBC Finance Corp.		0.72	(a)	01/15/14		1,650,000		1,631,774
Insurance
American International Group, Inc.		4.25		05/15/13		3,425,000		3,493,377
American International Group, Inc.		3.65		01/15/14		275,000		280,891
Berkshire Hathaway Finance Corp.		1.50		01/10/14		625,000		633,977
Genworth Global Funding		5.75		05/15/13		175,000		177,496

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

Portfolio of Investments |27

PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)

June 30, 2012 (Unaudited)

	Interest Rate			Maturity Date	Face Amount		Value
(Corporate Bonds continued)
Protective Life Secured Trust		4.23	%(a)	07/10/12	$	750,000 $		749,753
Travelers Insurance Co. Institutional Funding Ltd.		5.01		01/03/13		3,700,000		3,697,073
Investment Banker/Broker
Morgan Stanley		0.77	(a)	01/09/14		1,775,000		1,688,112
Morgan Stanley		4.10		01/26/15		700,000		696,058
Total Finance								53,107,280
HEALTH CARE - 2.6%
Health Care Equipment & Supplies
Johnson & Johnson		1.20		05/15/14		1,375,000		1,393,678
Medtronic Inc.		1.63		04/15/13		7,825,000		7,844,563
Thermo Fisher Scientific Inc.		2.05		02/21/14		750,000		766,469
Pharmaceuticals
Novartis Capital Corp.		1.90		04/24/13		475,000		480,917
Total Health Care								10,485,627
INFORMATION TECHNOLOGY - 1.4%
Communication Equipment
Dell Inc.		1.40		09/10/13		650,000		654,679
Dell Inc.		2.10		04/01/14		1,250,000		1,275,030
Hewlett Packard Co.		2.02	(a)	09/19/14		3,700,000		3,741,669
Total Information Technology								5,671,378
TRANSPORTATION - 0.8%
Airlines
Southwest Airlines Inc.		7.22		07/01/13		239,990		241,082
Road & Rail
Burlington Northern & Santa Fe Railway Co.		6.20		05/01/13		225,000		234,422
Burlington Northern & Santa Fe Railway Co.		4.58		01/15/21		863,517		933,413
Burlington Northern & Santa Fe Railway Co.		4.83		01/15/23		136,021		151,716
Consolidated Rail Corp.		6.76		05/25/15		47,593		51,508
CSX Transportation Inc.		8.38		10/15/14		209,870		238,349
CSX Transportation Inc.		9.00		05/15/15		575,000		684,516
GATX Corp.		9.00		11/15/13		201,624		219,569
GATX Corp.		8.75		05/15/14		125,000		140,934
Union Pacific Railroad Co.		6.85		01/02/19		61,107		71,132
Total Transportation								2,966,641
UTILITIES - 3.8%
Electric & Gas
Aquila Inc.		11.88		07/01/12		250,000		250,000
Delmarva Power & Light Co.		6.40		12/01/13		340,000		363,989
Entergy Louisiana LLC		1.88		12/15/14		1,800,000		1,843,832
FPL Group Capital Inc.		0.87	(a)	11/09/12		2,475,000		2,472,570
Georgia Power Co.		0.79	(a)	03/15/13		1,650,000		1,651,602
Michigan Consolidated Gas Co.		8.25		05/01/14		1,075,000		1,206,663
NSTAR Electric Co.		4.88		04/15/14		600,000		640,241
Southern California Gas Co.		4.80		10/01/12		165,000		166,629
Telephone
Ameritech Capital Funding Corp.		6.45		01/15/18		1,200,000		1,379,039
AT&T Inc.		0.88		02/13/15		1,350,000		1,348,991
Nextel Communications, Inc.		7.38		08/01/15		1,350,000		1,351,687
Southwestern Bell Telephone Co.		7.00		07/01/15		525,000		608,687
Verizon Communications, Inc.		1.95		03/28/14		500,000		511,025
Verizon New York, Inc.		7.00		06/15/13		1,100,000		1,159,308
Verizon Virginia, Inc.		7.63		12/01/12		275,000		282,577
Total Utilities								15,236,840
Total Corporate Bonds (Cost $120,978,305)								122,033,926

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

28 |Portfolio of Investments

PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)

June 30, 2012 (Unaudited)

YANKEE BONDS	Interest Rate			Maturity Date	Face Amount		Value
(18.2% of portfolio)
Abbey National Treasury Services PLC		2.88	%	04/25/14	$	750,000	$	731,394
BAA Funding Ltd. (b)		2.50		06/25/15		275,000		276,539
Bayerische Landesbank		5.05		12/20/12		5,000,000		5,045,530
Coca-Cola HBC Finance BV		5.13		09/17/13		825,000		849,264
Commonwealth Bank of Australia (b)		1.71	(a)	03/31/17		800,000		799,274
Compagnie de Financement Foncier (b)		2.25		03/07/14		700,000		704,270
DEPFA ACS Bank		0.40	(a)	06/09/13		4,300,000		4,175,541
DEPFA ACS Bank (b)		4.88		10/28/15		500,000		509,009
Dexia Crédit Local (b)		2.75		01/10/14		925,000		914,639
Dexia Crédit Local (b)		2.75		04/29/14		5,175,000		5,049,972
Dexia Crédit Local (b)		0.95	(a)	04/29/14		375,000		352,786
Dexia Municipal Agency		0.38	(a)	06/20/14		900,000		885,886
Dexia Municipal Agency		5.25		02/16/17		1,100,000		1,151,788
Eni Coordination Center SA		4.80		08/10/15		1,775,000		1,900,766
France Telecom		4.38		07/08/14		6,200,000		6,512,759
France Telecom		2.13		09/16/15		825,000		829,597
Hydro-Quebec		6.27		01/03/26		80,000		107,162
Iberdrola Finance Ireland Ltd. (b)		3.80		09/11/14		775,000		754,138
Instituto de Crédito Oficial		2.50		09/17/12		550,000		547,599
Instituto de Crédito Oficial		3.25		05/14/13		950,000		920,721
International Bank for Reconstruction and Development		0.00	(c)	08/15/13		210,000		208,211
International Bank for Reconstruction and Development		0.00	(c)	02/15/15		820,000		799,987
Irish Life & Permanent (b)		3.60		01/14/13		7,900,000		7,655,843
Korea Development Bank		8.00		01/23/14		500,000		545,497
Mitsubishi Corp.		2.75		09/16/15		300,000		310,192
Norsk Hydro ASA		9.13		07/15/14		2,125,000		2,458,141
OEBB Infrastruktur AG		4.75		10/28/13		1,250,000		1,310,600
OEBB Infrastruktur AG		4.63		11/21/13		1,275,000		1,321,131
Royal Bank of Scotland PLC		3.40		08/23/13		1,225,000		1,237,685
Royal Bank of Scotland PLC		3.25		01/11/14		2,500,000		2,509,890
Sanofi-Aventis		0.66	(a)	03/28/13		750,000		752,162
Sanofi-Aventis		1.63		03/28/14		500,000		508,409
Santander US Debt SA Unipersonal (b)		2.49		01/18/13		2,200,000		2,155,351
Santander US Debt SA Unipersonal (b)		2.99		10/07/13		1,300,000		1,250,029
Santander US Debt SA Unipersonal (b)		3.72		01/20/15		900,000		837,104
Scottish Power Ltd.		5.38		03/15/15		4,675,000		4,830,841
Shell International Finance BV		1.88		03/25/13		700,000		707,526
Société Générale SCF		1.89	(a)	03/19/14		1,400,000		1,394,095
Société Générale SCF		1.94	(a)	06/19/14		1,400,000		1,370,492
Total Capital Canada Ltd.		1.63		01/28/14		5,075,000		5,154,566
Total Capital		3.00		06/24/15		900,000		955,146
Trans-Canada Pipelines Ltd.		0.88		03/02/15		1,000,000		998,191
Total Yankee Bonds (Cost $72,616,388)								72,289,723
ASSET BACKED SECURITIES
(15.4% of portfolio)
Access Group Inc. 01		0.83	(a)	05/25/29		1,864,072		1,639,509
Access Group Inc. 04-A		0.71	(a)	04/25/29		1,287,567		1,211,709
Access Group Inc. 05-B		0.70	(a)	07/25/22		846,280		826,072
AEP Texas Central Transition Funding 06-A		4.98		07/01/15		127,506		129,511
Ally Master Owner Trust 12-1		1.04	(a)	02/15/17		2,175,000		2,186,469
Americredit Automobile Receivables Trust 08-AF		6.96		10/14/14		199,010		202,606
Bush Truck Leasing LLC II-A (b)		5.00		09/25/18		538,744		537,300
CIT Marine Trust 99-A		6.25		11/15/19		162,508		166,242
Community Reinvestment Revenue Notes 19 (b)		4.68		08/01/35		720,000		683,071
CPS Auto Trust 07-C (b)		5.92		05/15/14		464,557		465,558
CPS Auto Trust 08-A (b)		6.48		07/15/13		33,298		33,460
CPS Auto Trust 10-A (b)		2.89		03/15/16		89,944		90,030
CPS Auto Trust 11-A (b)		2.82		04/16/18		760,631		764,700

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

Portfolio of Investments|29

PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)

June 30, 2012 (Unaudited)

	Interest Rate			Maturity Date	Face Amount		Value
(Asset Backed Securities continued)
CPS Auto Trust 11-B (b)		3.68	%	09/17/18	$	389,490	$	398,896
CPS Auto Trust 11-C (b)		4.21		03/15/19		637,087		654,632
CPS Auto Trust 12-A (b)		2.78		06/17/19		640,272		640,553
First Financial Credit Card Master Note Trust II 10-B (b)		3.00		07/17/17		3,050,000		3,051,473
First Financial Credit Card Master Note Trust II 10-C (b)		5.19		09/17/18		450,000		460,384
First Financial Credit Card Master Note Trust II 10-D (b)		3.72		06/17/19		1,725,000		1,762,766
First Investors Auto Owner Trust 12-1A (b)		1.96		11/15/17		500,000		504,252
First National Master Note Trust 09-3		1.59	(a)	07/15/15		1,450,000		1,449,182
KeyCorp Student Loan Trust 99-B		0.90	(a)	08/25/27		53,644		53,054
KeyCorp Student Loan Trust 00-A		0.79	(a)	05/25/29		1,838,272		1,677,107
KeyCorp Student Loan Trust 00-B		0.78	(a)	07/25/29		1,655,421		1,348,196
KeyCorp Student Loan Trust 01-A		0.73	(a)	06/27/31		905,827		741,381
KeyCorp Student Loan Trust 04-A		0.77	(a)	10/28/41		2,783,045		2,603,510
KeyCorp Student Loan Trust 04-A		0.90	(a)	01/27/43		881,902		742,809
KeyCorp Student Loan Trust 05-A		0.69	(a)	09/28/26		1,534,435		1,484,454
KeyCorp Student Loan Trust 05-A		0.86	(a)	09/27/40		762,834		653,201
KeyCorp Student Loan Trust 06-A		0.54	(a)	06/27/25		832,334		823,965
LAI Vehicle Lease Securitization Trust 10-A (b)		2.55		09/15/16		506,873		506,535
LEAF II Receivables Funding LLC 10-3 (b)		5.00		02/20/22		2,375,000		2,317,762
Marriott Vacation Club Owners Trust 06-1A (b)		5.74		04/20/28		80,853		82,017
Marriott Vacation Club Owners Trust 08-1A (b)		7.20		05/20/30		259,996		282,452
Merrill Auto Trust Securitization 07-01		0.30	(a)	12/15/13		5,324		5,323
National Collegiate Student Loan Trust 04-1		0.73	(a)	06/25/27		3,939,148		3,553,618
National Collegiate Student Loan Trust 05-1		0.39	(a)	10/26/26		591,245		577,446
National Collegiate Student Loan Trust 05-3		0.49	(a)	07/25/28		668,110		619,749
National Collegiate Student Loan Trust 06-1		0.44	(a)	05/25/26		746,149		684,872
National Collegiate Student Loan Trust 07-1		0.29	(a)	06/25/25		110,360		110,270
Prestige Auto Receivables Trust 09-1A (b)		5.67		04/15/17		159,670		161,379
Santander Drive Auto Receivables Trust 11-2		2.66		01/15/16		2,000,000		2,032,199
Santander Drive Auto Receivables Trust 12-1		1.25		04/15/15		1,375,000		1,381,003
SLC Student Loan Trust 06-A		0.77	(a)	07/15/36		3,275,000		2,765,295
SLC Student Loan Trust 06-A		0.92	(a)	07/15/36		5,300,000		3,262,533
SLM Student Loan Trust 03-B		0.87	(a)	03/15/22		3,383,102		3,277,729
SLM Student Loan Trust 04-A		0.67	(a)	03/16/20		1,261,793		1,233,689
SLM Student Loan Trust 05-A		0.61	(a)	12/15/20		169,029		166,693
SLM Student Loan Trust 05-A		0.67	(a)	06/15/23		3,550,000		3,004,878
SLM Student Loan Trust 06-A		0.61	(a)	06/15/22		2,866,430		2,841,642
SLM Student Loan Trust 06-C		0.60	(a)	06/15/21		1,300,000		1,277,774
SLM Student Loan Trust 07-A		0.59	(a)	09/15/25		3,250,000		3,079,280
Small Business Administration 02-20K		5.08		11/01/22		107,193		118,832
Small Business Administration 03-10B		3.39		03/01/13		13,002		13,107
Small Business Administration 03-P10B		5.14		08/10/13		29,496		30,603
Small Business Administration 05-10E		4.54		09/01/15		50,770		52,714
Tidewater Auto Receivable Trust 10-A (b)		5.92		05/15/17		42,509		42,836
Total Asset Backed Securities (Cost $60,142,322)								61,468,282
MORTGAGE BACKED SECURITIES
(8.1% of portfolio)
ABN Amro Mortgage Corp. 03-9		4.52		08/25/18		442,028		416,803
Accredited Mortgage Loan Trust 03-1		4.33	(a)	06/25/33		192,234		163,527
ACE Securities Corp. 06-ASL1		0.39	(a)	02/25/36		591,274		178,554
ACE Securities Corp. 06-GP1		0.38	(a)	02/25/31		152,839		126,114
ACE Securities Corp. 06-SL1		0.57	(a)	09/25/35		192,913		47,067
Adjustable Rate Mortgage Trust 05-10		2.89	(a)	01/25/36		147,816		83,132
American Business Financial Services 02-1		7.01		12/15/32		84,170		48,655
American Home Mortgage Investment Trust 05-01		2.74	(a)	06/25/45		256,531		240,959
American Home Mortgage Investment Trust 05-03		4.97		09/25/35		38,973		38,793
Amresco Residential Securities 98-1		7.57		10/25/27		76,966		79,636
Banc of America Alternative Loan Trust Inc. 07-2		5.75		06/25/37		212,628		152,645

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

30 |Portfolio of Investments

PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)

June 30, 2012 (Unaudited)

	Interest Rate			Maturity Date	Face Amount		Value
(Mortgage Backed Securities continued)
Banc of America Funding Corp. 04-A		5.48	%(a)	09/20/34	$	49,155	$	49,789
Banc of America Funding Corp. 05-G		5.20	(a)	10/20/35		866,575		776,971
Banc of America Funding Corp. 07-5		6.50		07/25/37		119,866		116,568
Banc of America Mortgage Securities Inc. 02-J		3.53	(a)	09/25/32		3,675		3,632
Banc of America Mortgage Securities Inc. 05-1		5.00		02/25/20		47,905		48,353
Banc of America Mortgage Securities Inc. 05-C		3.13	(a)	04/25/35		73,261		58,089
Bayview Financial Acquisition Trust 06-D		5.93		12/28/36		4,450,000		3,086,146
Bayview Financial Asset Trust 07-SR1A (b)		0.70	(a)	03/25/37		276,002		198,134
Bear Stearns Adjustable Rate Mortgage Trust 04-10		2.79	(a)	01/25/35		455,808		402,115
Bear Stearns Adjustable Rate Mortgage Trust 05-12		5.37	(a)	02/25/36		82,662		72,213
Bear Stearns ALT-A Trust 04-11		2.94	(a)	11/25/34		23,294		16,008
Bear Stearns ALT-A Trust 05-4		2.89	(a)	05/25/35		149,554		118,746
Bear Stearns ALT-A Trust 05-9		5.27	(a)	11/25/35		92,590		62,582
Bear Stearns ALT-A Trust 06-6		2.79	(a)	11/25/36		229,811		125,959
Bear Stearns Asset Backed Securities Trust 03-3		0.84	(a)	06/25/43		71,591		63,159
Bear Stearns Asset Backed Securities Trust 04-HE5		2.12	(a)	07/25/34		374,267		257,063
Bear Strearns Structured Products Inc., 00-1		5.71	(a)	08/28/33		7,228		6,316
CDC Mortgage Capital Trust 02-HE1		0.87	(a)	01/25/33		485,357		370,700
Chase Mortgage Finance Corp. 03-S2		5.00		03/25/18		16,509		16,910
Chase Mortgage Finance Corp. 05-A1		5.23	(a)	12/25/35		34,446		32,510
Chaseflex Trust 05-2		6.00		06/25/35		153,960		121,241
CITICORP Mortgage Securities, Inc. 07-1		5.50		01/25/22		92,516		92,151
CITICORP Mortgage Securities, Inc. 07-1		5.89	(d)	03/25/37		350,000		338,296
Citigroup Mortgage Loan Trust, Inc. 05-7		2.62	(a)	09/25/35		369,710		210,254
Cityscape Home Equity Loan Trust 96-2		8.10		08/25/26		105,223		105,952
CMO Trust 17		7.25		04/20/18		464		488
Conseco Finance Securitizations Corp. 01-2		6.60		02/01/33		212,582		220,593
Contimortgage Home Equity Loan Trust 95-2		8.10		08/15/25		37,322		36,954
Countrywide Alternative Loan Trust 04-24CB		6.00		11/25/34		86,978		84,093
Countrywide Alternative Loan Trust 05-11CB		5.50		06/25/35		80,566		151,368
Countrywide Alternative Loan Trust 05-43		5.27	(a)	10/25/35		55,015		40,029
Countrywide Asset Backed Certificate 02-S2		5.98		01/25/17		223,066		210,146
Countrywide Asset Backed Certificate 02-S4		5.22	(a)	10/25/17		342,688		334,325
Countrywide Asset Backed Certificate 04-S1		4.62		02/25/35		93,100		88,618
Countrywide Asset Backed Certificate 06-S7		5.71	(a)	11/25/35		163,437		116,652
Countrywide Asset Backed Certificate 07-S1		5.69		11/25/36		193,252		156,175
Countrywide Home Loans 03-49		4.58	(a)	12/19/33		76,566		75,946
Countrywide Home Loans 03-J13		5.25		01/25/24		186,504		182,240
Countrywide Home Loans 05-HYB8		4.86	(a)	12/20/35		199,623		141,233
Countrywide Home Loans 06-HYB5		2.87	(a)	09/20/36		103,304		51,311
Credit Suisse First Boston Mortgage 03-21		4.75		08/25/18		90,490		93,180
Credit Suisse First Boston Mortgage 03-AR24		2.72	(a)	10/25/33		351,839		326,190
Credit Suisse First Boston Mortgage 03-FFA		6.10	(a)	02/25/33		188,288		173,172
Credit Suisse First Boston Mortgage 04-AR3		2.94	(a)	04/25/34		102,348		94,580
Credit Suisse First Boston Mortgage 05-10		5.25		11/25/20		190,756		186,812
Credit Suisse First Boston Mortgage 06-1		0.38	(a)	05/25/36		144,706		139,201
Credit Suisse First Boston Mortgage 06-2		5.41	(a)	07/25/36		1,120,000		128,896
DLJ Mortgage Acceptance Corp. 91-3		1.97	(a)	01/25/21		23,798		23,565
Encore Credit Receivables Trust 05-3		0.74	(a)	10/25/35		675,000		401,564
FHLMC 2419		5.50		03/15/17		4,455		4,885
FHLMC 2586		3.50		12/15/32		44,168		44,412
FHLMC 2649		4.50		07/15/18		295,970		313,769
FHLMC 3061		5.50		07/15/16		294,443		303,239
FHLMC 780754		4.68	(a)	08/01/33		12,196		12,999
FHLMC R009		5.75		12/15/18		36,162		36,546
FHLMC R010		5.50		12/15/19		158,109		160,569
FHLMC R013		6.00		12/15/21		6,295		6,303
First Alliance Mortgage Loan Trust 94-1		5.85		04/25/25		20,620		17,304
First Alliance Mortgage Loan Trust 94-2		7.63		07/25/25		17,136		15,923
First Horizon Mortgage Alternative Mortgage Securities 04-AA3		2.56	(a)	09/25/34		40,844		35,792

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

Portfolio of Investments|31

PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)

June 30, 2012 (Unaudited)

	Interest Rate			Maturity Date	Face Amount		Value
(Mortgage Backed Securities continued)
First Horizon Mortgage Pass-Through Trust 05-AR2		2.54	%(a)	05/25/35	$	206,093	$	169,326
FNMA 03-05		4.25		08/25/22		27,123		27,597
FNMA 03-38		5.00		03/25/23		53,875		7,293
FNMA 03-81		4.75		09/25/18		173		174
FNMA 03-86		4.50		09/25/18		243,706		254,682
FNMA 04-34		5.50		05/25/19		58,365		58,995
FNMA 813842		2.16	(a)	01/01/35		28,646		30,091
GMAC Mortgage Corp. Loan Trust 05-AR3		3.34	(a)	06/19/35		61,885		61,712
GMAC Mortgage Corp. Loan Trust 06-HE3		5.75		10/25/36		80,015		58,166
GMAC Mortgage Corp. Loan Trust 07-HE1		5.95		08/25/37		1,100,000		714,184
GNMA 02-15		5.50		11/20/31		29,426		31,149
GNMA 02-88		5.00		05/16/31		2,713		2,721
GNMA 03-11		4.00		10/17/29		189,005		203,025
GNMA 03-12		4.50		02/20/32		37,245		39,326
GNMA 03-26		0.69	(a)	04/16/33		25,675		25,802
GNMA 04-17		4.50		12/20/33		47,553		52,136
GNMA 583189		4.50		02/20/17		23,396		25,349
Green Tree Financial Corp. 98-5		6.22		03/01/30		168,617		184,130
GS Mortgage Loan Trust 03-3F		5.00		04/25/33		8,764		8,838
GS Mortgage Loan Trust 03-10		4.65	(a)	10/25/33		219,347		195,438
GS Mortgage Loan Trust 05-8F		5.50		10/25/20		91,607		88,861
GS Mortgage Loan Trust 05-AR3		3.00	(a)	05/25/35		123,678		100,563
GS Mortgage Loan Trust 05-AR6		2.61	(a)	09/25/35		88,123		81,285
Home Equity Mortgage Trust 06-1		5.30	(a)	05/25/36		1,430,000		850,806
Home Savings of America 9		3.92	(a)	11/25/17		108,055		103,603
Home Savings of America 11		4.81	(a)	01/25/18		145,573		139,474
Household Home Equity Loan Trust 06-2		0.39	(a)	03/20/36		1,172,870		1,105,951
IMPAC Secured Assets Corp. 03-3		4.20		08/25/32		263,343		271,123
Indymac Indx Mortgage Loan Trust 04-AR6		2.83	(a)	10/25/34		13,225		10,059
Indymac Indx Mortgage Loan Trust 05-AR15		4.85	(a)	09/25/35		55,823		41,549
Indymac Indx Mortgage Loan Trust 05-L1		0.65	(a)	07/25/13		289,835		82,777
JP Morgan Mortgage Trust 04-A3		4.87	(a)	07/25/34		75,573		76,584
JP Morgan Mortgage Trust 05-A2		5.07	(a)	04/25/35		407,484		402,106
JP Morgan Residential Mortgage Acceptance Corp. 06-R1 (b)		2.67	(a)	09/28/44		136,177		131,097
Lehman ABS Manufactured Housing Contract 01-B		4.35		04/15/40		117,150		119,065
Long Beach Mortgage Loan Trust 05-3		0.53	(a)	08/25/45		94,576		93,147
Master Adjustable Rate Mortgages Trust 04-13		2.63	(a)	04/21/34		51,257		50,749
Master Adjustable Rate Mortgages Trust 05-1		5.25	(a)	01/25/35		45,582		43,029
Master Alternative Loans Trust 03-5		6.00		08/25/33		84,463		89,985
Master Asset Backed Securities Trust 07-NCW (b)		0.55	(a)	05/25/37		682,230		519,313
Master Asset Securitization Trust 03-6		5.00		07/25/18		23,290		23,817
Master Asset Securitization Trust 07-1		6.00		10/25/22		71,937		69,127
Merrill Lynch Mortgage Investors Trust 03-A2		2.24	(a)	02/25/33		51,051		50,459
Merrill Lynch Mortgage Investors Trust 06-SL1		0.43	(a)	09/25/36		480,868		320,084
Morgan Stanley Capital Inc. 04-1		5.00		11/25/18		182,510		187,211
Morgan Stanley Mortgage Loan Trust 05-5AR		5.26	(a)	09/25/35		59,234		41,535
Morgan Stanley Mortgage Loan Trust 06-1AR		2.90	(a)	02/25/36		151,041		84,251
Morgan Stanley Mortgage Loan Trust 07-10XS		6.00		07/25/47		611,578		143,404
MSDWCC HELOC Trust 03-2A		0.77	(a)	04/25/16		242,298		231,689
New Century Home Equity Loan Trust 97-NC5		7.20		10/25/28		120		120
Nomura Asset Acceptance Corporation 06-AF2		0.35	(a)	08/25/36		195,935		52,569
Nomura Asset Acceptance Corporation 07-1		5.96		03/25/47		293,034		258,020
Oakwood Mortgage Investors, Inc. 99-D		7.84		11/15/29		351,673		347,076
Oakwood Mortgage Investors, Inc. 02-A		0.49	(a)	09/15/14		195,506		158,456
Option One Mortgage Loan Trust 07-6		0.31	(a)	07/25/37		853,806		825,280
Option One Mortgage Loan Trust 07-FXD1		5.60		01/25/37		1,100,077		1,037,763
Option One Mortgage Loan Trust 07-FXD2		5.90		03/25/37		48,787		48,113
Ownit Mortgage Loan Asset Backed Certificate 05-5		0.54	(a)	10/25/36		378,438		347,492
Prime Mortgage Trust 05-2		5.00		07/25/20		93,851		97,765
Residential Accredit Loans, Inc. 02-QS9		0.85	(a)	07/25/32		6,279		5,815

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

32 |Portfolio of Investments

PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)

June 30, 2012 (Unaudited)

	Interest Rate			Maturity Date	Face Amount		Value
(Mortgage Backed Securities continued)
Residential Accredit Loans, Inc. 05-QS5		5.70	%	04/25/35	$	60,350	$	47,325
Residential Accredit Loans, Inc. 06-QS4		6.00		04/25/36		455,576		295,690
Residential Asset Mortgage Products Inc. 02-RS5		4.75		09/25/32		245,248		231,710
Residential Asset Mortgage Products Inc. 03-RZ3		4.62		06/25/33		132,117		77,454
Residential Asset Securitization Trust 04-A3		5.25		06/25/34		104,652		101,998
Residential Asset Securitization Trust 05-A14		5.50		12/25/35		243,979		193,279
Residential Funding Mortgage Securities 00-HI5		7.98		12/25/25		573,401		520,878
Residential Funding Mortgage Securities 03-HS2		3.88		07/25/33		69,901		66,512
Residential Funding Mortgage Securities I 03-S15		4.50		08/25/18		62,722		64,537
Residential Funding Mortgage Securities I 05-SA2		3.06	(a)	06/25/35		47,077		31,787
Residential Funding Mortgage Securities I 06-SA1		5.67	(a)	02/25/36		47,285		33,360
Ryland Acceptance Corp. 64 E		3.50	(a)	04/01/18		36,503		36,711
SACO I Trust 05-6		0.83	(a)	09/25/35		458,920		210,095
Salomon Brothers Mortgage Securities 97-LB6		6.82		12/25/27		21		21
Structured Adjustable Rate Mortgage Loan Trust 04-3AC		2.75	(a)	03/25/34		27,587		25,284
Structured Adjustable Rate Mortgage Loan Trust 04-4		5.40	(a)	04/25/34		1,746,158		1,712,810
Structured Adjustable Rate Mortgage Loan Trust 04-11		2.88	(a)	08/25/34		52,687		50,122
Structured Adjustable Rate Mortgage Loan Trust 04-18		2.83	(a)	12/25/34		102,299		32,429
Structured Adjustable Rate Mortgage Loan Trust 05-11		2.71	(a)	05/25/35		458,117		334,379
Structured Adjustable Rate Mortgage Loan Trust 06-1		5.30	(a)	02/25/36		43,554		30,061
Structured Adjustable Rate Mortgage Loan Trust 06-1		5.43	(a)	02/25/36		83,861		81,673
Structured Adjustable Rate Mortgage Loan Trust 06-4		5.43	(a)	05/25/36		136,702		92,629
Structured Adjustable Rate Mortgage Loan Trust 06-4		5.35	(a)	05/25/36		137,794		104,710
Structured Asset Mortgage Investments 04-AR5		2.49	(a)	10/19/34		35,986		30,055
Structured Asset Securities Corp. 98-RF1 (b)		7.71	(a)	04/15/27		45,043		45,241
Structured Asset Securities Corp. 03-8		5.00		04/25/33		92,192		94,569
Structured Asset Securities Corp. 03-37A		2.78	(a)	12/25/33		261,821		243,651
Structured Asset Securities Corp. 04-3		5.42	(a)	03/25/24		245,351		256,978
Terwin Mortgage Trust 04-5HE		0.84	(a)	06/25/35		489,286		434,899
Vanderbilt Mortgage & Finance 03-A		0.89	(a)	05/07/26		334,185		315,063
Vericrest Opportunity Loan Trust 12-NL1A (b)		4.21		03/25/49		619,155		623,419
Wachovia Mortgage Loan Trust 06-A		3.73	(a)	05/20/36		210,133		189,708
Washington Mutual Mortgage Securities Corp. 04-AR3		2.58	(a)	06/25/34		85,344		84,900
Washington Mutual Mortgage Securities Corp. 04-AR14		2.45	(a)	01/25/35		144,391		139,943
Washington Mutual Mortgage Securities Corp. 05-AR12		2.46	(a)	10/25/35		11,118		10,646
Washington Mutual MSC Mortgage Pass-Through Certificates 03-MS2		5.00		03/25/18		70,718		72,585
Wells Fargo Mortgage Backed Securities Trust 04-B		4.96	(a)	02/25/34		32,923		33,447
Wells Fargo Mortgage Backed Securities Trust 04-BB		2.62	(a)	01/25/35		19,720		19,795
Wells Fargo Mortgage Backed Securities Trust 04-E		4.90	(a)	05/25/34		49,926		50,089
Wells Fargo Mortgage Backed Securities Trust 04-EE		2.92	(a)	12/25/34		31,863		32,287
Wells Fargo Mortgage Backed Securities Trust 04-F		4.74	(a)	06/25/34		237,845		242,160
Wells Fargo Mortgage Backed Securities Trust 04-I		2.71	(a)	07/25/34		6,845		6,793
Wells Fargo Mortgage Backed Securities Trust 04-K		2.62	(a)	07/25/34		145,612		145,437
Wells Fargo Mortgage Backed Securities Trust 04-K		4.72	(a)	07/25/34		73,640		74,809
Wells Fargo Mortgage Backed Securities Trust 04-K		4.72	(a)	07/25/34		190,457		194,705
Wells Fargo Mortgage Backed Securities Trust 04-R		2.62	(a)	09/25/34		84,821		85,398
Wells Fargo Mortgage Backed Securities Trust 05-AR13		5.24	(a)	05/25/35		67,983		67,997
Wells Fargo Mortgage Backed Securities Trust 05-AR14		5.34	(a)	08/25/35		46,509		45,997
Wells Fargo Mortgage Backed Securities Trust 05-AR15		5.00	(a)	09/25/35		324,388		296,134
Wells Fargo Mortgage Backed Securities Trust 05-AR16		5.17	(a)	10/25/35		78,238		75,124
Wells Fargo Mortgage Backed Securities Trust 06-AR4		5.61	(a)	04/25/36		67,336		63,229
Wells Fargo Mortgage Backed Securities Trust 06-AR19		5.41	(a)	12/25/36		41,332		38,736
Total Mortgage Backed Securities (Cost $37,036,109)								32,055,368

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

Portfolio of Investments|33

PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)

June 30, 2012 (Unaudited)

MUNICIPAL BONDS	Interest Rate			Maturity Date	Face Amount		Value
(15.2% of portfolio)
Alaska Housing Finance Corp.		2.80	%	12/01/26	$	780,000	$	802,534
Carteret NJ Redevelopment Agency		2.00		11/21/12		550,000		550,655
Casino Reinvestment Development Authority NJ		5.14		06/01/15		1,145,000		1,150,633
Cuyahoga County Ohio Economic Development		3.22		12/01/14		1,725,000		1,810,301
Detroit Michigan		4.97		05/01/13		300,000		302,265
Detroit Michigan City School District		5.00		05/01/13		135,000		139,533
Downtown Smyrna Development Authority GA		3.21		02/01/15		100,000		104,401
Fiscal Year 2005 Securitization Corp. New York		3.51		10/01/12		30,000		30,213
Genesee County Michigan		1.75	(a)	09/01/12		250,000		250,005
Greater Orlando Florida Aviation Authority		5.00		10/01/12		275,000		277,929
Greene County Missouri		1.50		08/01/12		1,825,000		1,824,872
Illinois Housing Development Authority		5.50		12/01/14		240,000		241,937
Illinois Municipal Electric Agency		2.47		02/01/13		585,000		586,931
Illinois Municipal Electric Agency		3.20		02/01/14		890,000		906,065
Illinois, State of		3.32		01/01/13		550,000		556,886
Illinois, State of		4.01		07/01/13		975,000		1,005,079
Illinois, State of		2.00		01/01/14		3,025,000		3,032,079
Illinois, State of		4.03		03/01/14		825,000		853,166
Illinois, State of		4.51		03/01/15		1,645,000		1,742,499
Illinois, State of Sales Tax Revenue		1.36		06/15/16		2,200,000		2,189,088
Indianapolis, Indiana Local Public Improvement Bond Bank		1.19		06/01/15		325,000		324,288
Indianapolis, Indiana Local Public Improvement Bond Bank		1.58		06/01/16		600,000		598,728
Industry California Sales Tax Revenue		3.75		01/01/13		675,000		678,841
Irvine Ranch Water District California Joint Powers Agency		2.61		03/15/14		500,000		517,390
Irvine Ranch Water District California Joint Powers Agency		7.71		03/15/14		1,000,000		1,007,960
Kentucky Asset/Liability Commission		2.94		04/01/14		955,000		982,485
Louisa Virginia Industrial Development Authority		2.50	(a)	09/01/30		2,635,000		2,691,468
Louisiana Local Government Environmental Facilities & Community Development Authority		1.11		02/01/16		608,775		609,439
Louisiana State Gas & Fuels Tax		3.00	(a)	05/01/43		450,000		450,846
Luzerne County Pennsylvania		5.20		11/15/13		335,000		341,911
Maryland State Transportation Authority		5.89		07/01/12		325,000		325,000
Mashantucket Western Pequot Tribe Connecticut (b)		6.57		09/01/13		385,000		384,607
Massachusetts Municipal Wholesale Electric Company		0.23	(a)	07/01/14		100,000		96,038
Metropolitan Nashville, Tennessee Airport Authority		3.17		07/01/13		125,000		126,499
Michigan Strategic Fund		3.05	(a)	08/01/24		250,000		251,425
Mississippi Business Finance Corp.		2.25	(a)	12/01/40		125,000		126,059
Monroe County Michigan Economic Development Corp.		2.35	(a)	10/01/24		1,000,000		1,010,910
New Jersey Economic Development Authority		3.61		09/01/14		650,000		684,255
New York State Energy Research & Development Authority		1.45	(a)	06/01/36		3,750,000		3,758,662
North Carolina Housing Finance Agency		4.00		01/01/30		2,515,000		2,639,694
Oakland California Redevelopment Agency		6.50		09/01/13		225,000		231,275
Oakland California Redevelopment Agency		5.34		09/01/13		1,075,000		1,088,061
Oakland California Redevelopment Agency		7.25		09/01/15		400,000		433,336
Orange County California Pension Obligation		0.00	(c)	09/01/12		1,650,000		1,641,288
Orleans Parish School Board, Louisiana		1.85		02/01/14		750,000		753,128
Pasadena California Pension Obligation		1.76	(a)	05/15/41		800,000		806,632
Philadelphia Pennsylvania Authority for Industrial Development		0.00	(c)	04/15/14		785,000		740,757
Philadelphia Pennsylvania Authority for Industrial Development		0.00	(c)	04/15/15		4,075,000		3,723,898
Regional Transportation Authority, Illinois		2.84		07/01/12		975,000		975,000
Richmond California Joint Powers Financing Authority		6.30		07/01/13		800,000		814,160
San Antonio Texas Airport System		3.20		07/01/14		550,000		563,530
Stockton California Pension Obligation		5.14		09/01/17		1,550,000		1,533,244
Utah Infrastructure Agency		3.20		10/15/16		820,000		871,102
Washington Economic Development Finance Authority		2.90		10/01/14		1,850,000		1,864,356
Washington Economic Development Finance Authority		3.20		10/01/15		2,350,000		2,366,497
Wayne County Michigan		4.74	(a)	09/15/12		1,150,000		1,149,758
Wayne County Michigan		3.00		03/15/13		2,725,000		2,737,262
Wayne County Michigan Building Authority		6.22		12/01/14		665,000		682,982

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

34 |Portfolio of Investments

PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)

June 30, 2012 (Unaudited)

	Interest Rate			Maturity Date	Face Amount		Value
(Municipal Bonds continued)
Wayne County Michigan Building Authority		6.82	%	12/01/15	$	730,000	$	764,573
Wayne County Michigan Building Authority		7.33		12/01/16		740,000 7		91,437
Total Municipal Bonds (Cost $59,219,984)								60,495,852
U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(6.1% of portfolio)
Farmer Mac		1.25		12/06/13		1,250,000		1,264,775
Federal Farm Credit Bank		1.93		05/13/15		1,250,000		1,256,486
Federal Farm Credit Bank		1.79		06/07/19		1,800,000		1,780,722
Federal Home Loan Bank		1.00	(d)	04/26/19		2,025,000		2,025,658
Overseas Private Investment Corp.		1.45	(e)	09/20/13		1,275,000		1,590,129
Overseas Private Investment Corp.		4.10		11/15/14		230,560		239,349
Overseas Private Investment Corp.		3.56	(e)	12/14/14		133,205		155,234
Overseas Private Investment Corp.		3.50	(f)	05/02/16		1,000,000		1,138,697
Overseas Private Investment Corp.		4.81	(f)	07/12/16		5,000,000		6,094,700
Overseas Private Investment Corp.		4.87	(f)	09/07/16		1,100,000		1,375,308
Overseas Private Investment Corp.		1.05	(f)	12/09/16		1,000,000		1,009,620
Overseas Private Investment Corp.		3.56	(e)	04/23/17		1,000,000		1,182,020
Overseas Private Investment Corp.		1.50	(f)	11/17/17		1,100,000		1,113,530
Overseas Private Investment Corp.		1.01	(f)	12/10/17		875,000		882,648
Overseas Private Investment Corp.		1.55	(f)	03/15/18		1,120,000		1,142,445
Overseas Private Investment Corp.		1.34	(f)	11/20/19		1,000,000		1,016,910
The Financing Corp.		0.00	(c)	05/11/13		210,000		208,835
U.S. Department of Housing & Urban Development		6.07		08/01/21		115,000		115,486
U.S. Department of Housing & Urban Development		6.12		08/01/22		675,000		677,833
Total U.S. Government and Agency Obligations (Cost $24,116,817)								24,270,385
COMMERCIAL PAPER
(6.4% of portfolio)
Atlantic City Electric Co.		0.35		07/03/12		8,000,000		7,999,844
Eni Finance International SA (g)		0.50		07/02/12		17,500,000		17,499,757
Total Commercial Paper (Cost $25,499,601)								25,499,601
MONEY MARKET ACCOUNT					Shares
(less than 0.1% of portfolio)
State Street Institutional Liquid Reserves Fund		0.20	(h)			25,334		25,334
Total Money Market Account (Cost $25,334)								25,334
TOTAL INVESTMENTS IN SECURITIES (Cost $399,634,860) - 100%							$	398,138,471

(a)	Variable coupon rate as of June 30, 2012.
(b)	144A security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. The total of such securities at period-end amounts to $36,944,216 and represents 9.3% of total investments.
(c)	Zero coupon security, purchased at a discount.
(d)	Step coupon security, the current rate may be adjusted upwards before maturity date.
(e)	Interest is paid at maturity.
(f)	Interest is paid at put date.
(g)	144A security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. The security has been determined to be liquid under criteria established by the Fund’s Board of Directors. The total of such securities at period-end amounts to $17,499,757 or 4.4% of total investment.
(h)	7-day yield at June 30, 2012.

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

Portfolio of Investments|35

PORTFOLIO OF INVESTMENTS: Stock Index Fund

June 30, 2012 (Unaudited)

	Cost		Value
Investment in S&P 500 Stock Master Portfolio	$	46,590,664	$	68,070,928

Substantially all the assets of the Stock Index Fund are invested in the S&P 500 Stock Master Portfolio managed by BlackRock Fund Advisors. As of June 30, 2012, the Stock Index Fund’s ownership interest in the S&P 500 Stock Master Portfolio was 4.04%. See the Appendix for the Portfolio of Investments for the S&P 500 Stock Master Portfolio.

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

36 |Portfolio of Investments

PORTFOLIO OF INVESTMENTS: Value Fund

June 30, 2012 (Unaudited)

COMMON STOCKS	Shares		Value
(96.2% of portfolio)
CONSUMER DISCRETIONARY—6.9%
Auto Components
Cooper Tire & Rubber Co.		440,000	$	7,717,600
Distributors
Genuine Parts Co.		315,400		19,002,850
Multiline Retail
Dillard’s, Inc. (Class A)		207,700		13,226,336
Total Consumer Discretionary				39,946,786
CONSUMER STAPLES—4.5%
Food Products
Dean Foods Co. (a)		859,800		14,642,394
J.M. Smucker Co. (The)		148,853		11,241,379
Total Consumer Staples				25,883,773
ENERGY—14.4%
Energy Equipment & Services
Baker Hughes Inc.		187,000		7,685,700
Oil, Gas, & Consumable Fuels
Chevron Corp.		200,000		21,100,000
ConocoPhillips		259,000		14,472,920
Marathon Oil Corp.		461,000		11,787,770
Marathon Petroleum Corp.		189,000		8,489,880
Phillips 66 (a)		129,500		4,304,580
QEP Resources, Inc.		337,400		10,111,878
Questar Corp.		271,000		5,653,060
Total Energy				83,605,788
FINANCIALS—8.2%
Commercial Banks
Commerce Bancshares, Inc.		29,975		1,136,053
Wells Fargo & Co.		158,000		5,283,520
Diversified Financial Services
Bank of America Corp.		290,200		2,373,836
JPMorgan Chase & Co.		442,600		15,814,098
Insurance
Allstate Corp. (The)		369,000		12,948,210
Chubb Corp. (The)		122,000		8,884,040
Principal Financial Group, Inc.		55,600		1,458,388
Total Financials				47,898,145
HEALTH CARE—22.3%
Health Care Equipment & Supplies
Covidien PLC		207,600		11,106,600
Pharmaceuticals
Abbott Laboratories		399,000		25,723,530
Bristol-Myers Squibb Co.		829,700		29,827,715
GlaxoSmithKline plc ADR		354,000		16,131,780
Hospira, Inc. (a)		379,400		13,271,412
Merck & Co., Inc.		193,194		8,065,850
Pfizer Inc.		1,107,000		25,461,000
Total Health Care				129,587,887
INDUSTRIALS—17.5%
Airlines
Southwest Airlines Co.		844,100		7,782,602
Commercial Services & Supplies
Avery Dennison Corp.		520,000		14,216,800
Industrial Conglomerates
General Electric Co.		979,000		20,402,360
Honeywell International Inc.		281,100		15,696,624
Tyco International Ltd.		164,850		8,712,322
Machinery
Flowserve Corp.		95,300		10,935,675
Parker-Hannifin Corp.		246,400		18,943,232
Distributors
Applied Industrial Technologies, Inc.		130,500		4,808,925
Total Industrials				101,498,540
INFORMATION TECHNOLOGY—16.3%
Communications Equipment
Cisco Systems, Inc.		1,018,500		17,487,645
Computers & Peripherals
Dell Inc. (a)		1,282,000		16,050,640
Hewlett-Packard Co.		772,500		15,534,975
Electronic Equipment, Instruments & Components
TE Connectivity Ltd.		262,850		8,387,543
IT Services
SAIC, Inc. (a)		603,000		7,308,360
Semiconductors & Semiconductor Equipment
Intel Corp.		1,113,000		29,661,450
Total Information Technology				94,430,613
MATERIALS—6.1%
Chemicals
Dow Chemical Co. (The)		696,900		21,952,350
Containers & Packaging
Bemis Co., Inc.		433,600		13,589,024
Total Materials				35,541,374
Total Common Stocks (Cost $416,610,318)				558,392,906
MONEY MARKET ACCOUNT
(3.8% of portfolio)
State Street Institutional Liquid Reserves Fund, 0.20% (b)		22,016,360		22,016,360
Total Money Market Account (Cost $22,016,360)				22,016,360
TOTAL INVESTMENTS IN SECURITIES (Cost $438,626,678)—100%			$	580,409,266

(a)	Non-income producing.
(b)	7-day yield at June 30, 2012.
ADR-	American Depositary Receipt

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

Portfolio of Investments|37

PORTFOLIO OF INVESTMENTS: Growth Fund

June 30, 2012 (Unaudited)

COMMON STOCKS	Shares		Value
(98.4% of portfolio)
CONSUMER DISCRETIONARY—18.6%
Hotels, Restaurants & Leisure
Carnival Corp.		22,300	$	764,221
Chipotle Mexican Grill Inc. (a)		1,160		440,742
Las Vegas Sands Corp.		13,600		591,464
Starbucks Corp.		18,300		975,756
Starwood Hotels & Resorts Worldwide, Inc.		12,100		641,784
Internet & Catalog Retail
Amazon.com, Inc. (a)		6,080		1,388,368
Groupon, Inc. (a)		18,100		192,403
Netflix, Inc. (a)		2,700		184,869
priceline.com Inc. (a)		2,000		1,329,040
Specialty Retail
Fossil, Inc. (a)		5,100		390,354
Ralph Lauren Corp.		1,050		147,063
Tractor Supply Co.		1,500		124,590
Total Consumer Discretionary				7,170,654
CONSUMER STAPLES—0.5%
Food & Staples Retailing
Whole Foods Market, Inc.		2,100		200,172
Total Consumer Staples				200,172
ENERGY—6.0%
Energy Equipment & Services
Schlumberger Ltd.		7,700		499,807
Oil, Gas, & Consumable Fuels
Cimarex Energy Co.		7,400		407,888
EOG Resources Inc.		4,300		387,473
Pioneer Natural Resources Co.		1,200		105,852
Range Resources Corp.		7,500		464,025
Southwestern Energy Co. (a)		7,200		229,896
Williams Cos., Inc. (The)		7,500		216,150
Total Energy				2,311,091
FINANCIALS—2.5%
Capital Markets
Franklin Resources Inc.		5,400		599,346
TD Ameritrade Holding Corp.		22,000		374,000
Total Financials				973,346
HEALTH CARE—15.0%
Biotechnology
Alexion Pharmaceuticals Inc. (a)		3,900		387,270
Biogen Idec Inc. (a)		3,000		433,140
Celgene Corp. (a)		4,050		259,848
Gilead Sciences, Inc. (a)		14,200		728,176
Human Genome Sciences, Inc. (a)		5,200		68,276
Health Care Equipment & Supplies
Catalyst Health Solutions, Inc. (a)		800		74,752
DENTSPLY International Inc.		6,700		253,327
Edwards Lifesciences Corp. (a)		6,000		619,800
Stryker Corp.		7,500		413,250
Health Care Providers & Services
Express Scripts Inc. (a)		10,600		591,798
McKesson Corp.		7,700		721,875
Unitedhealth Group Inc.		11,200		655,200
Health Care Technology
SXC Health Solutions Corp. (a)		2,300		228,183
Pharmaceuticals
Valeant Pharmaceuticals International, Inc. (a)		7,100		318,009
Total Health Care				5,752,904
INDUSTRIALS—13.0%
Airlines
United Continental Holdings Inc. (a)		11,400		277,362
Aerospace & Defense
Boeing Co. (The)		11,900		884,170
Precision Castparts Corp.		3,800		625,062
Air Freight & Logistics
United Parcel Service, Inc. (Class B)		8,700		685,212
Machinery
Danaher Corp.		24,500		1,275,960
Road & Rail
Union Pacific Corp.		7,100		847,101
Trading Companies & Distributors
Fastenal Co.		9,900		399,069
Total Industrials				4,993,936
INFORMATION TECHNOLOGY—36.6%
Communications Equipment
Juniper Networks, Inc. (a)		51,300		836,703
QUALCOMM, Inc.		14,600		812,928
Computers & Peripherals
Apple Inc. (a)		6,665		3,892,360
EMC Corp. (a)		25,500		653,565
SanDisk Corp. (a)		19,100		696,768
Internet Software & Services
Akamai Technologies, Inc. (a)		6,300		200,025
Baidu, Inc. ADR (a)		5,600		643,888
eBay Inc. (a)		11,600		487,316
Google Inc. (Class A) (a)		2,685		1,557,488
LinkedIn Corp. (a)		1,800		191,286
Zynga Inc. (a)		8,700		47,328
IT Services
IHS Inc. (Class A) (a)		1,900		204,687
MasterCard Inc.		2,365		1,017,210
Semiconductors & Semiconductor Equipment
Atmel Corp. (a)		48,400		324,280
Broadcom Corp. (Class A)		17,900		605,020
Software
Autodesk, Inc. (a)		5,600		195,944
Informatica Corp. (a)		6,000		254,160
Nuance Communications, Inc. (a)		17,200		409,704
Red Hat, Inc. (a)		8,000		451,840
salesforce.com, Inc. (a)		3,700		511,562
Tibco Software Inc. (a)		2,700		80,784
Total Information Technology				14,074,846

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

38 |Portfolio of Investments

PORTFOLIO OF INVESTMENTS: Growth Fund (continued)

June 30, 2012 (Unaudited)

	Shares		Value
(Common Stocks continued)
MATERIALS—3.3%
Chemicals
Praxair Inc.		6,580	$	715,444
Sherwin-Williams Co.		4,200		555,870
Total Materials				1,271,314
TELECOMMUNICATION SERVICES—2.9%
Wireless Telecommunication Services
Crown Castle International Corp. (a)		18,900		1,108,674
Total Telecommunication Services				1,108,674
Total Common Stocks (Cost $33,234,221)				37,856,937
MONEYMARKET ACCOUNT
(1.6% of portfolio)
State Street Institutional Liquid Reserves Fund, 0.20% (b)		602,161		602,161
Total Money Market Account (Cost $602,161)				602,161
TOTAL INVESTMENTS IN SECURITIES (Cost $33,836,382)—100%			$	38,459,098

(a)	Non-income producing.
(b)	7-day yield at June 30, 2012.
ADR-	American Depositary Receipt

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

Portfolio of Investments|39

PORTFOLIO OF INVESTMENTS: Small-Company Stock Fund

June 30, 2012 (Unaudited)

COMMON STOCKS	Shares		Value
(82.0% of portfolio)
CONSUMER DISCRETIONARY—12.9%
Auto Components
Cooper Tire & Rubber Co.		409,000	$	7,173,860
Diversified Consumer Services
Matthews International Corp. (Class A)		39,642		1,287,969
Multiline Retail
Nordstrom, Inc.		90,000		4,472,100
Restaurants
Brinker International, Inc.		200,000		6,374,000
Cracker Barrel Old Country Store, Inc.		141,600		8,892,480
Wendy’s Co. (The)		1,379,200		6,509,824
Specialty Retail
Sally Beauty Holdings, Inc. (a)		114,000		2,934,360
Total Consumer Discretionary				37,644,593
CONSUMER STAPLES—14.5%
Food Distribution
Core-Mark Holding Company, Inc.		57,500		2,768,050
United Natural Foods, Inc. (a)		159,600		8,755,656
Food Products
Dean Foods Co. (a)		650,000		11,069,500
J.M. Smucker Co. (The)		40,868		3,086,351
Food & Staples Retailing
Fred’s, Inc.		473,000		7,232,170
Harris Teeter Supermarkets, Inc.		228,100		9,349,819
Total Consumer Staples				42,261,546
ENERGY—2.9%
Energy Equipment & Services
Helmerich & Payne, Inc.		35,000		1,521,800
Oil, Gas, & Consumable Fuels
Cimarex Energy Co.		59,400		3,274,128
QEP Resources, Inc.		26,600		797,202
Questar Corp.		26,600		554,876
SM Energy Co.		49,000		2,406,390
Total Energy				8,554,396
FINANCIALS—6.9%
Commercial Banks
Cardinal Financial Corp.		315,300		3,871,884
Middleburg Financial Corp.		97,700		1,660,900
National Bankshares, Inc. (Virginia)		131,700		3,966,804
Southcoast Financial Corp. (a)		56,507		140,137
Valley National Bancorp		211,890		2,246,034
Consumer Finance
Encore Capital Group, Inc. (a)		168,600		4,993,932
Diversified Financial Services
Asset Acceptance Capital Corp. (a)		299,815		2,038,742
UMB Financial Corp.		20,269		1,038,381
Total Financials				19,956,814
HEALTH CARE—2.9%
Health Care Equipment & Supplies
STERIS Corp.		272,100		8,535,777
Total Health Care				8,535,777
INDUSTRIALS—25.4%
Aerospace & Defense
Huntington Ingalls Industries, Inc. (a)		136,805		5,505,033
Triumph Group, Inc.		136,800		7,697,736
Construction & Engineering
Dycom Industries, Inc. (a)		18,126		340,009
Distributors
Applied Industrial Technologies, Inc.		254,402		9,374,714
Electrical Equipment
Rofin-Sinar Technologies Inc. (a)		438,200		8,295,126
Industrial Conglomerates
Carlisle Companies Inc.		125,600		6,659,312
CLARCOR Inc.		87,100		4,194,736
Standex International Corp.		19,500		830,115
Machinery
Flowserve Corp.		14,500		1,663,875
Gorman-Rupp Co. (The)		184,658		5,502,809
Manitowoc Co., Inc. (The)		709,400		8,299,980
Regal Beloit Corp.		58,500		3,642,210
Road & Rail
Knight Transportation, Inc.		255,600		4,087,044
Werner Enterprises, Inc.		343,990		8,217,921
Total Industrials				74,310,620
INFORMATION TECHNOLOGY— 9.1%
Communications Equipment
Belden Inc.		263,492		8,787,458
Computers & Peripherals
Western Digital Corp. (a)		70,000		2,133,600
IT Services
Cass Information Systems, Inc.		34,252		1,378,643
Computer Services, Inc.		183,346		5,903,741
ManTech International Corp.		356,700		8,371,749
Total Information Technology				26,575,191
MATERIALS—7.4%
Chemicals
Olin Corp.		413,668		8,641,525
PolyOne Corp.		329,310		4,504,961
Polypore International, Inc. (a)		59,800		2,415,322
Westlake Chemical Corp.		115,700		6,046,482
Total Materials				21,608,290
Total Common Stocks (Cost $186,949,401)				239,447,227

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

40 |Portfolio of Investments

PORTFOLIO OF INVESTMENTS: Small-Company Stock Fund (continued)

June 30, 2012 (Unaudited)

EXCHANGE TRADED FUND	Shares		Value
(8.1% of portfolio)
iShares Russell 2000 Value Index		172,000	$	12,107,080
iShares S&P SmallCap 600 Value Index		158,000		11,576,660
Total Exchange Traded Fund (Cost $22,639,688)				23,683,740
COMMERCIAL PAPER	Face Amount
(0.3% of portfolio)
Deere & Co., .13%, due 08/02/12 (b)		1,000,000		999,884
Total Commercial Paper (Cost $999,884)				999,884
MONEY MARKET ACCOUNT	Shares		Value
(9.6% of portfolio)
State Street Institutional Liquid Reserves Fund, 0.20% (c)		28,150,583	$	28,150,583
Total Money Market Account (Cost $28,150,583)				28,150,583
TOTAL INVESTMENTS IN SECURITIES (Cost $238,739,556)—100%			$	292,281,434

(a)	Non-income producing.
(b)	144A security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. The total of such securities at period-end amounts to $999,884 and represents 0.3% of total investment.
(c)	7-day yield at June 30, 2012.

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

Portfolio of Investments|41

PORTFOLIO OF INVESTMENTS: International Value Fund

June 30, 2012 (Unaudited)

COMMON STOCKS	Shares		Value
(95.1% of portfolio)
AUSTRALIA—1.1%
BHP Billiton Ltd.		49,450	$	1,611,899
Total Australia				1,611,899
BRAZIL—1.5%
Petroleo Brasileiro SA—ADR		83,800		1,572,926
Rossi Residencial SA		235,550		578,173
Total Brazil				2,151,099
BRITAIN—12.1%
BAE Systems PLC		746,550		3,378,423
HSBC Holdings PLC—ADR		67,400		2,974,362
Pearson PLC		79,250		1,573,994
Tesco PLC		641,950		3,120,427
Vodafone Group PLC		1,030,174		2,894,414
WPP Group PLC		317,000		3,852,917
Total Britain				17,794,537
CANADA—1.5%
Encana Corp.		104,400		2,174,652
Total Canada				2,174,652
CHINA—0.9%
Guangzhou Automobile Group Co., Ltd.		1,616,050		1,360,062
Total China				1,360,062
DENMARK—1.9%
Danske Bank Group		197,150		2,746,901
Total Denmark				2,746,901
FINLAND—1.0%
Neste Oil OYJ		134,000		1,509,868
Total Finland				1,509,868
FRANCE—10.0%
AXA SA		222,500		2,977,986
Cap Gemini SA		80,950		2,984,147
Compagnie de Saint-Gobain SA		77,928		2,883,683
Total SA		65,500		2,955,958
Vivendi SA		154,550		2,873,181
Total France				14,674,955
GERMANY—7.5%
Commerzbank AG		1,734,800		2,946,876
Daimler AG REG		70,000		3,148,174
Deutsche Böerse AG		56,150		3,030,540
Metro AG		65,750		1,917,965
Total Germany				11,043,555
HONG KONG—2.8%
Hutchison Whampoa Ltd.		279,900		2,420,823
New World Development Co. Ltd.		1,371,225		1,617,057
Total Hong Kong				4,037,880
ITALY—3.8%
Eni SpA		155,450		3,317,514
Telecom Italia SpA		2,734,400		2,199,550
Total Italy				5,517,064
ISRAEL—1.9%
Teva Pharmaceutical Industries Ltd.—ADR		70,700		2,788,408
Total Israel				2,788,408
JAPAN—19.0%
Bridgestone Corp.		159,450		3,657,425
Daiichi Sankyo Co., Ltd.		164,950		2,777,270
Daiwa Securities Group Inc.		793,850		2,988,865
Mori Seiki Co., Ltd.		131,300		1,139,938
MS & AD Insurance Group Holdings, Inc.		161,705		2,830,387
Nikon Corp.		118,800		3,609,060
Nippon Sheet Glass Co. Ltd.		497,750		549,961
Nissan Motor Co., Ltd.		353,150		3,344,577
Sumitomo Corp.		269,300		3,767,643
Sumitomo Mitsui Trust Holdings, Inc.		1,103,700		3,297,291
Total Japan				27,962,417
NETHERLANDS—4.5%
AEGON NV		770,350		3,588,357
DSM NV		60,950		3,007,111
Total Netherlands				6,595,468
NORWAY—0.9%
Statoil ASA		57,745		1,380,800
Total Norway				1,380,800
PORTUGAL—1.0%
Banco Espirito Santo SA		2,111,750		1,442,085
Total Portugal				1,442,085
REPUBLIC OF SOUTH KOREA—3.7%
Posco		8,900		2,841,865
SK Telecom Co., Ltd.		9,032		985,091
SK Telecom Co., Ltd.—ADR		135,953		1,645,031
Total Republic of South Korea				5,471,987
SINGAPORE—1.8%
Keppel Corp. Ltd.		323,410		2,650,052
Total Singapore				2,650,052
SPAIN—1.9%
Banco Bilbao Vizcaya Argentaria SA		384,762		2,773,117
Total Spain				2,773,117

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

42 |Portfolio of Investments

PORTFOLIO OF INVESTMENTS: International Value Fund (continued)

June 30, 2012 (Unaudited)

	Shares		Value
(Common Stocks continued)
SWITZERLAND—12.6%
Adecco SA REG		60,500	$	2,692,352
Credit Suisse Group AG		142,450		2,602,387
Givaudan SA REG		2,382		2,339,549
Holcim Ltd.		49,586		2,747,157
Nestlé SA REG		23,450		1,398,826
Novartis AG REG		56,350		3,143,200
Roche Holding AG		20,400		3,521,599
Total Switzerland				18,445,070
THAILAND—3.7%
Bangkok Bank Public Company Ltd.		317,900		2,079,626
PTT Public Company Ltd.		331,750		3,373,906
Total Thailand				5,453,532
Total Common Stocks (Cost $160,835,211)				139,585,408
MONEY MARKET ACCOUNT
(4.9% of portfolio)
State Street Institutional Liquid Reserves Fund, 0.20% (a)		7,158,087		7,158,087
Total Money Market Account (Cost $7,158,087)				7,158,087
TOTAL INVESTMENTS IN SECURITIES (Cost $167,993,298)—100%			$	146,743,495

(a)	7-day yield at June 30, 2012.
SA -	Sociedad Anónima or Société Anonyme
ADR -	American Depositary Receipt
PLC -	Public Limited Company
OYJ -	Julkinen Osakeyhtiö
AG -	Aktiengesellschaft
REG -	Registered shares
SpA -	Società per Azioni
NV -	Naamloze Vennottschap
ASA -	Allmennaksjeselskap

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

Portfolio of Investments|43

STATEMENTS OF ASSETS AND LIABILITIES

June 30, 2012 (Unaudited)

ASSETS	Daily Income Fund			Short-Term Government Securities Fund			Short-Term Bond Fund
Investments in securities, at value (cost: $193,414,601; $87,739,554 $399,634,860; $46,590,664; $438,626,678; $33,836,382; $238,739,556; $167,992,718)	$	193,414,601		$	89,169,305		$	398,138,471
Cash		7,000,000			—			3,436
Receivables
Investment securities sold		—			—			—
Dividends and interest		438,900			339,734			2,247,738
Capital shares sold		66,466			3,125			169,661
Prepaid expenses		25,476			12,653			34,996
Total assets		200,945,443			89,524,817			400,594,302
LIABILITIES
Payables
Investment securities purchased		—			1,000,000			—
Accrued expenses		66,881			25,674			64,386
Due to Board Members		28,626			10,810			45,326
Due to RE Advisers		5,399			34,937			205,102
Capital shares redeemed		99,429			38,043			58,015
Dividends		18			2,232			23,873
Total liabilities		200,353			1,111,696			396,702
NET ASSETS	$	200,745,090		$	88,413,121		$	400,197,600
NET ASSETS CONSIST OF:
Unrealized appreciation (depreciation) of Investments	$	—		$	1,429,751		$	(1,496,389	)
Undistributed (over distributed) net investment income		(28,627	)		(10,831	)		(45,759	)
Undistributed net realized gain (loss) from investments and futures transactions		—			46,212			(550,841	)
Paid-in-capital applicable to outstanding shares of 200,773,676 of Daily Income Fund, 16,774,153 Short-Term Government Securities Fund, 77,501,208 of Short-Term Bond Fund, 6,687,022 of Stock Index Fund, 17,914,956 of Value Fund, 6,676,799 of Growth Fund, 11,673,451 of Small-Company Stock Fund, and 24,416,343 International Value Fund		200,773,717			86,947,989			402,290,589
NET ASSETS	$	200,745,090		$	88,413,121		$	400,197,600
NET ASSET VALUE PER SHARE	$	1.00		$	5.27		$	5.16

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

44 |Statements of Assets and Liabilities

Stock Index Fund			Value Fund			Growth Fund			Small-Company Stock Fund		International Value Fund
$	68,070,928		$	580,409,266		$	38,459,098		$	292,281,434	$	146,743,495
	—			—			—			—		127,703
	—			—			176,657			—		1,816,875
	—			1,102,241			12,900			213,715		592,164
	4,747			190,645			2,903			1,649,710		1,211,351
	14,401			40,707			9,917			24,186		15,547
	68,090,076			581,742,859			38,661,475			294,169,045		150,507,135
	—			64,875			157,362			2,196,865		3,993,684
	36,024			152,779			31,202			60,514		53,429
	8,739			81,576			3,812			18,916		20,445
	15,180			255,803			15,653			192,648		85,406
	6,388			451,181			51,827			101,332		24,708
	42			256,785			97			—		6,146
	66,373			1,262,999			259,953			2,570,275		4,183,818
$	68,023,703		$	580,479,860		$	38,401,522		$	291,598,770	$	146,323,317
$	21,480,264		$	141,782,588		$	4,622,716		$	53,541,878	$	(21,258,672	)
	513,734			(82,346	)		(70,272	)		253,643		3,027,243
	(1,995,754	)		(4,237,452	)		1,047,253			926,574		(34,813,552	)
	48,025,459			443,017,070			32,801,825			236,876,675		199,368,298
$	68,023,703		$	580,479,860		$	38,401,522		$	291,598,770	$	146,323,317
$	10.17		$	32.40		$	5.75		$	24.98	$	5.99

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

Statements of Assets and Liabilities|45

STATEMENTS OF OPERATIONS

For the Six Months Ended June 30, 2012 (Unaudited)

INVESTMENT INCOME	Daily Income Fund			Short-Term Government Securities Fund			Short-Term Bond Fund
Interest	$	132,915		$	853,844		$	6,893,689
Dividends		—			—			—
Allocated from Master
Income		—			—			—
Expense		—			—			—
Total investment income		132,915			853,844			6,893,689
EXPENSES
Management fees		492,705			193,445			1,169,027
Shareholder servicing fees		71,856			34,475			77,584
Custodian and accounting fees		21,533			28,984			82,197
Directors and Board meeting expenses		28,483			11,482			51,344
Legal and audit fees		19,449			8,239			34,693
Registration fees		21,012			11,392			25,191
Printing		11,059			5,234			15,297
Insurance		7,129			3,340			12,779
Communication		2,546			1,282			3,706
Other expenses		4,612			2,194			8,086
Administration fees		—			—			—
Total expenses before waivers and expense reimbursements		680,384			300,067			1,479,904
Less fees waived and expenses reimbursed by RE Advisers		(551,091	)		—			—
Net expenses		129,293			300,067			1,479,904
NET INVESTMENT INCOME (LOSS)		3,622			553,777			5,413,785
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments		—			46,642			147,417
Net change in unrealized appreciation (depreciation)		—			(16,294	)		2,710,195
NET GAIN ON INVESTMENTS		—			30,348			2,857,612
NET INCREASE IN NET ASSETS FROM OPERATIONS	$	3,622		$	584,125		$	8,271,397

(a) Represents realized and unrealized gain on investments allocated from the master portfolio.

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

46 |Statements of Operations

Stock Index Fund			Value Fund		Growth Fund			Small-Company Stock Fund		International Value Fund
$	—		$	13,622	$	593		$	27,268	$	2,869
	—			7,275,670		108,264			1,528,773		3,790,424
	711,808			—		—			—		—
	(16,697	)		—		—			—		—
	695,111			7,289,292		108,857			1,556,041		3,793,293
	—			1,490,460		120,909			1,032,030		567,739
	48,262			180,942		38,626			104,839		50,178
	5,490			47,825		19,590			26,184		70,335
	7,179			75,516		6,527			34,558		23,051
	7,910			48,466		4,300			22,535		16,976
	13,186			27,479		13,174			23,486		17,149
	10,925			46,023		7,019			26,503		10,097
	2,355			17,431		1,384			7,659		6,016
	2,216			11,364		1,691			6,522		2,475
	1,888			12,678		1,990			5,988		4,000
	82,954			—		—			—		—
	182,365			1,958,184		215,210			1,290,304		768,016
	—			—		(38,741	)		—		(18,422	)
	182,365			1,958,184		176,469			1,290,304		749,594
	512,746			5,331,108		(67,612	)		265,737		3,043,699
	8,112,777	(a)		8,792,172		1,170,938			1,030,085		(2,188,264	)
	(2,944,951	)(a)		20,751,340		2,603,616			17,021,426		2,244,153
	5,167,826			29,543,512		3,774,554			18,051,511		55,889
$	5,680,572		$	34,874,620	$	3,706,942		$	18,317,248	$	3,099,588

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

Statements of Operations|47

STATEMENTS OF CHANGES IN NET ASSETS

 

	Daily Income Fund
INCREASE (DECREASE) IN NET ASSETS	Six Months Ended June 30, 2012 (Unaudited)			Year Ended December 31, 2011
Operations
Net investment income (loss)	$	3,622		$	11,268
Net realized gain (loss) on investments		—			—
Net change in unrealized appreciation (depreciation)		—			—
Increase (decrease) in net assets from operations		3,622			11,268
Distributions to Shareholders
Net investment income		(9,728	)		(18,842	)
Net realized gain on investments		—			—
Total distributions to shareholders		(9,728	)		(18,842	)
Capital Share Transactions
Net capital share transactions (See Note 6)		5,578,502			8,091,181
Redemption fees received (See Note 5)		—			—
Total increase (decrease) in net assets from capital transactions		5,578,502			8,091,181
TOTAL INCREASE (DECREASE) IN NET ASSETS		5,572,396			8,083,607
NET ASSETS
Beginning of period		195,172,694			187,089,087
End of period	$	200,745,090		$	195,172,694
Undistributed (over distributed) net investment income	$	(28,627	)	$	(22,521	)
	Value Fund
INCREASE (DECREASE) IN NET ASSETS	Six Months Ended June 30, 2012 (Unaudited)			Year Ended December 31, 2011
Operations
Net investment income (loss)	$	5,331,108		$	8,773,460
Net realized gain (loss) on investments		8,792,172			18,779,971
Net change in unrealized appreciation (depreciation)		20,751,340			(18,877,353	)
Increase (decrease) in net assets from operations		34,874,620			8,676,078
Distributions to Shareholders
Net investment income		(5,349,575	)		(8,796,293	)
Net realized gain on investments		—			—
Total distributions to shareholders		(5,349,575	)		(8,796,293	)
Capital Share Transactions
Net capital share transactions (See Note 6)		10,181,071			(6,741,844	)
Redemption fees received (See Note 5)		1,370			17,978
Total increase (decrease) in net assets from capital transactions		10,182,441			(6,723,866	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		39,707,486			(6,844,081	)
NET ASSETS
Beginning of period		540,772,374			547,616,455
End of period	$	580,479,860		$	540,772,374
Undistributed (over distributed) net investment income	$	(82,346	)	$	(63,879	)

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

48 |Statements of Changes in Net Assets

Short-Term Government Securities Fund						Short-Term Bond Fund						Stock Index Fund
Six Months Ended June 30, 2012 (Unaudited)			Year Ended December 31, 2011			Six Months Ended June 30, 2012 (Unaudited)			Year Ended December 31, 2011			Six Months Ended June 30, 2012 (Unaudited)			Year Ended December 31, 2011
$	553,777		$	1,435,391		$	5,413,785		$	11,053,622		$	512,746		$	941,353
	46,642			47,858			147,417			89,770			8,112,777			(1,021,110	)
	(16,294	)		96,921			2,710,195			(4,550,429	)		(2,944,951	)		1,145,081
	584,125			1,580,170			8,271,397			6,592,963			5,680,572			1,065,324
	(556,443	)		(1,438,814	)		(5,426,232	)		(11,071,051	)		—			(935,337	)
	—			(48,048	)		—			—			—			—
	(556,443	)		(1,486,862	)		(5,426,232	)		(11,071,051	)		—			(935,337	)
	3,825,986			8,329,281			22,795,104			70,029,482			498,662			1,074,528
	—			—			—			—			—			16,063
	3,825,986			8,329,281			22,795,104			70,029,482			498,662			1,090,591
	3,853,668			8,422,589			25,640,269			65,551,394			6,179,234			1,220,578
	84,559,453			76,136,864			374,557,331			309,005,937			61,844,469			60,623,891
$	88,413,121		$	84,559,453		$	400,197,600		$	374,557,33		$	68,023,703		$	61,844,469
$	(10,831	)	$	(8,165	)	$	(45,759	)	$	(33,312	)	$	513,734		$	988
Growth Fund						Small-Company Stock Fund						International Value Fund
Six Months Ended June 30, 2012 (Unaudited)			Year Ended December 31, 2011			Six Months Ended June 30, 2012 (Unaudited)			Year Ended December 31, 2011			Six Months Ended June 30, 2012 (Unaudited)			Year Ended December 31, 2011
$	(67,612	)	$	(62,078	)	$	265,737		$	269,068		$	3,043,699		$	3,536,249
	1,170,938			2,377,833			1,030,085			1,197,226			(2,188,264	)		308,739
	2,603,616			(3,208,993	)		17,021,426			(3,011,852	)		2,244,153			(30,947,223	)
	3,706,942			(893,238	)		18,317,248			(1,545,558	)		3,099,588			(27,102,235	)
	—			—			—			(275,650	)		(1,441,926	)		(8,271,282	)
	(53,408	)		(2,960,164	)		—			—			—			—
	(53,408	)		(2,960,164	)		—			(275,650	)		(1,441,926	)		(8,271,282	)
	2,313,355			7,236,020			82,840,125			78,066,318			244,927			44,338,775
	140			525			15,667			21,946			102			433
	2,313,495			7,236,545			82,855,792			78,088,264			245,029			44,339,208
	5,967,029			3,383,143			101,173,040			76,267,056			1,902,691			8,965,691
	32,434,493			29,051,350			190,425,730			114,158,674			144,420,626			135,454,935
$	38,401,522		$	32,434,493		$	291,598,770		$	190,425,730		$	146,323,317		$	144,420,626
$	(70,272	)	$	(2,660	)	$	253,643		$	(12,094	)	$	3,027,243		$	1,425,470

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

Statements of Changes in Net Assets|49

FINANCIAL HIGHLIGHTS: Daily Income Fund

For a Share Outstanding Throughout Each Period

	Six Months Ended June 30, 2012			Year Ended December 31,
	(Unaudited)			2011			2010			2009			2008			2007
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,b)		—	(a,b)		—	(a,b)		—	(a,b,c)		0.02			0.05
Net realized and unrealized gain (loss) on investments		—			—			—			—			—	(b)		—
Total from investment operations		—			—			—			—			0.02			0.05
Distributions
Net investment income		—	(b)		—	(b)		—	(b)		—	(b)		(0.02	)		(0.05	)
Net realized gain		—			—			—			—			—			—
Total distributions		—			—			—			—			(0.02	)		(0.05	)
Redemption fee (d)		—			—			—			—			—			—
NET ASSET VALUE, END OF PERIOD	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
TOTAL RETURN		0.01	%(e)		0.01	%		0.01	%		0.31	%		2.14	%		4.62	%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands)	$	200,745		$	195,173		$	187,089		$	191,492		$	182,011		$	149,303
Ratio of gross expenses before voluntary expense limitation to average net assets		0.69	%(f)		0.68	%		0.69	%		0.73	%		0.69	%		0.71	%
Ratio of net investment income to average net assets		0.00	%(a,c,f,g)		0.01	%(a,c)		0.01	%(a,c)		0.30	%(a,c)		2.08	%		4.52	%
Ratio of expenses to average net assets		0.13	%(a,c,f)		0.14	%(a,c)		0.24	%(a,c)		0.47	%(a,c)		0.69	%		0.71	%

(a)	Excludes excess investment management fees and other expenses voluntarily waived and reimbursed by RE Advisers.
(b)	Less than $0.01 per share.
(c)	On January 27, 2009, RE Advisers voluntarily and temporarily reduced the amount of the expense limitation from 0.80% to 0.50%. Additionally, effective August 14, 2009, RE Advisers agreed to further waive fees or reimburse expenses to the extent necessary to assist the Fund in attempting to maintain a positive yield. The temporary waiver continued throughout 2010, 2011, and through the date of this report.
(d)	The Daily Income Fund does not charge a redemption fee.
(e)	Aggregate total return for the period.
(f)	Annualized.
(g)	Less than 0.01%.

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

50 |Financial Highlights

FINANCIAL HIGHLIGHTS: Short-Term Government Securities Fund

For a Share Outstanding Throughout Each Period

	Six Months Ended June 30, 2012			Year Ended December 31,
	(Unaudited)			2011			2010			2009			2008			2007
NET ASSET VALUE, BEGINNING OF YEAR	$	5.27		$	5.26		$	5.25		$	5.26		$	5.17		$	5.10
Income from investment operations
Net investment income		0.03			0.09			0.12			0.14	(a)		0.16	(a)		0.20	(a)
Net realized and unrealized gain (loss) on investments		—	(b)		0.01			0.01			—	(b)		0.10			0.07
Total from investment operations		0.03			0.10			0.13			0.14			0.26			0.27
Distributions
Net investment income		(0.03	)		(0.09	)		(0.12	)		(0.14	)		(0.16	)		(0.20	)
Net realized gain		—			—	(b)		—	(b)		(0.01	)		(0.01	)		—
Total distributions		(0.03	)		(0.09	)		(0.12	)		(0.15	)		(0.17	)		(0.20	)
Redemption fee (c)		—			—			—			—			—			—
NET ASSET VALUE, END OF PERIOD	$	5.27		$	5.27		$	5.26		$	5.25		$	5.26		$	5.17
TOTAL RETURN		0.65	%(d)		2.03	%		2.57	%		2.85	%		5.16	%		5.50	%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands)	$	88,413		$	84,559		$	76,137		$	65,682		$	55,354		$	39,463
Ratio of gross expenses before voluntary expense limitation to average net assets		0.70	%(e)		0.71	%		0.75	%		0.78	%		0.82	%		0.87	%
Ratio of net investment income to average net assets		1.29	%(e)		1.76	%		2.27	%		2.73	%(a)		3.06	%(a)		4.00	%(a)
Ratio of expenses to average net assets		0.70	%(e)		0.71	%		0.75	%		0.75	%(a)		0.75	%(a)		0.75	%(a)
Portfolio turnover rate		19	%		32	%		26	%		28	%		50	%		47	%

(a)	Excludes excess investment management fees and other expenses in accordance with the Expense Limitation Agreement with RE Advisers.
(b)	Less than $.01 per share.
(c)	The Short-Term Government Securities Fund does not charge a redemption fee.
(d)	Aggregate total return for the period.
(e)	Annualized.

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

Financial Highlights |51

FINANCIAL HIGHLIGHTS: Short-Term Bond Fund

For a Share Outstanding Throughout Each Period

	Six Months Ended June 30, 2012			Year Ended December 31,
	(Unaudited)			2011			2010			2009			2008			2007
NET ASSET VALUE, BEGINNING OF YEAR	$	5.12		$	5.19		$	5.13		$	4.72		$	5.17		$	5.16
Income from investment operations
Net investment income		0.07			0.17			0.23			0.33	(a)		0.27	(a)		0.22	(a)
Net realized and unrealized gain (loss) on investments		0.04			(0.07	)		0.06			0.42			(0.45	)		0.01
Total from investment operations		0.11			0.10			0.29			0.75			(0.18	)		0.23
Distributions
Net investment income		(0.07	)		(0.17	)		(0.23	)		(0.33	)		(0.27	)		(0.22	)
Net realized gain		—			—			—			(0.01	)		—			—
Total distributions		(0.07	)		(0.17	)		(0.23	)		(0.34	)		(0.27	)		(0.22	)
Redemption fee (b)		—			—			—			—			—			—
NET ASSET VALUE, END OF PERIOD	$	5.16		$	5.12		$	5.19		$	5.13		$	4.72		$	5.17
TOTAL RETURN		2.18	%(c)		1.90	%		5.73	%		16.38	%		(3.52	)%		4.62	%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands)	$	400,198		$	374,557		$	309,006		$	246,420		$	204,332		$	228,591
Ratio of gross expenses before voluntary expense limitation to average net assets		0.76	%(d)		0.77	%		0.80	%		0.83	%		0.81	%		0.82	%
Ratio of net investment income to average net assets		2.78	%(d)		3.22	%		4.38	%		6.62	%(a)		5.49	%(a)		4.33	%(a)
Ratio of expenses to average net assets		0.76	%(d)		0.77	%		0.80	%		0.80	%(a)		0.80	%(a)		0.80	%(a)
Portfolio turnover rate		21	%		31	%		38	%		52	%		56	%		41	%

(a)	Excludes excess investment management fees and other expenses in accordance with the Expense Limitation Agreement with RE Advisers.
(b)	The Short-Term Bond Fund does not charge a redemption fee.
(c)	Aggregate total return for the period.
(d)	Annualized.

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

52 |Financial Highlights

FINANCIAL HIGHLIGHTS: Stock Index Fund

For a Share Outstanding Throughout Each Period

	Six Months Ended June 30, 2012			Year Ended December 31,
	(Unaudited)			2011			2010			2009			2008			2007
NET ASSET VALUE, BEGINNING OF YEAR	$	9.32		$	9.31		$	8.24		$	6.64		$	10.94		$	10.57
Income from investment operations
Net investment income		0.08			0.14			0.12			0.11			0.17			0.15
Net realized and unrealized gain (loss) on investments		0.77			0.01			1.07			1.60			(4.25	)		0.37
Total from investment operations		0.85			0.15			1.19			1.71			(4.08	)		0.52
Distributions
Net investment income		—			(0.14	)		(0.12	)		(0.11	)		(0.22	)		(0.15	)
Net realized gain		—			—			—			—			—			—
Total distributions		—			(0.14	)		(0.12	)		(0.11	)		(0.22	)		(0.15	)
Redemption fee		—	(a)		—	(a)		—	(a)		—	(a)		—	(a)		—	(a)
NET ASSET VALUE, END OF PERIOD	$	10.17		$	9.32		$	9.31		$	8.24		$	6.64		$	10.94
TOTAL RETURN		9.12	%(b)		1.65	%		14.47	%		25.83	%		(37.41	)%		4.91	%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands)	$	68,024		$	61,844		$	60,624		$	51,847		$	39,786		$	62,332
Ratio of net investment income to average net assets		1.55	%(c)		1.52	%		1.45	%		1.66	%		1.82	%		1.44	%
Ratio of expenses to average net assets		0.60	%(c)		0.61	%		0.62	%		0.75	%		0.59	%		0.64	%
Portfolio turnover rate (d)		N/A			N/A			N/A			N/A			N/A			N/A

(a)	Less than $.01 per share.
(b)	Aggregate total return for the period.
(c)	Annualized.
(d)	See Appendix for the portfolio turnover of the S&P 500 Stock Master Portfolio.

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

Financial Highlights |53

FINANCIAL HIGHLIGHTS: Value Fund

For a Share Outstanding Throughout Each Period

	Six Months Ended June 30, 2012			Year Ended December 31,
	(Unaudited)			2011			2010			2009			2008			2007
NET ASSET VALUE, BEGINNING OF YEAR	$	30.71		$	30.70		$	27.52		$	22.03		$	35.48		$	35.94
Income from investment operations
Net investment income		0.30			0.50			0.38			0.40			0.59			0.83
Net realized and unrealized gain (loss) on investments		1.69			—	(a)		3.18			5.49			(13.45	)		0.37
Total from investment operations		1.99			0.50			3.56			5.89			(12.86	)		1.20
Distributions
Net investment income		(0.30	)		(0.49	)		(0.38	)		(0.40	)		(0.59	)		(0.83	)
Net realized gain		—			—			—			—			—			(0.83	)
Total distributions		(0.30	)		(0.49	)		(0.38	)		(0.40	)		(0.59	)		(1.66	)
Redemption fee		—	(a)		—	(a)		—	(a)		—	(a)		—	(a)		—	(a)
NET ASSET VALUE, END OF PERIOD	$	32.40		$	30.71		$	30.70		$	27.52		$	22.03		$	35.48
TOTAL RETURN		6.48	%(b)		1.60	%		13.05	%		26.98	%		(36.43	)%		3.25	%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands)	$	580,480		$	540,772		$	547,616		$	497,076		$	422,740		$	723,406
Ratio of net investment income to average net assets		1.87	%(c)		1.59	%		1.32	%		1.71	%		1.96	%		2.23	%
Ratio of expenses to average net assets		0.69	%(c)		0.70	%		0.73	%		0.80	%		0.70	%		0.66	%
Portfolio turnover rate		1	%		6	%		4	%		3	%		6	%		4	%

(a)	Less than $.01 per share.
(b)	Aggregate total return for the period.
(c)	Annualized.

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

54 |Financial Highlights

FINANCIAL HIGHLIGHTS: Growth Fund

For a Share Outstanding Throughout Each Period

	Six Months Ended June 30, 2012			Year Ended December 31,
	(Unaudited)			2011			2010			2009			2008			2007
NET ASSET VALUE, BEGINNING OF YEAR	$	5.17		$	5.80		$	5.02		$	3.31		$	5.87		$	5.22
Income from investment operations
Net investment loss		(0.01	)		(0.01	)		(0.01	)		—	(a)		(0.03	)		(0.05	)
Net realized and unrealized gain (loss) on investments		0.60			(0.11	)		0.79			1.71			(2.37	)		0.91
Total from investment operations		0.59			(0.12	)		0.78			1.71			(2.40	)		0.86
Distributions
Net investment income		—			—			—			—			—			—
Net realized gain		(0.01	)		(0.51	)		—			—			(0.16	)		(0.21	)
Total distributions		(0.01	)		(0.51	)		—			—			(0.16	)		(0.21	)
Redemption fee		—	(a)		—	(a)		—	(a)		—	(a)		—	(a)		—	(a)
NET ASSET VALUE, END OF PERIOD	$	5.75		$	5.17		$	5.80		$	5.02		$	3.31		$	5.87
TOTAL RETURN		11.37	%(b)		(2.09	)%		15.54	%		51.66	%		(40.93	)%		17.55	%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands)	$	38,402		$	32,434		$	29,051		$	19,059		$	6,707		$	9,001
Ratio of gross expenses before voluntary expense limitation to average net assets		1.16	%(c)		1.14	%		1.23	%		1.74	%		1.30	%		1.26	%
Ratio of net investment income (loss) to average net assets		(0.36	)%(c,d)		(0.19	)%(d)		(0.17	)%(d)		(0.09	)%(d)		(0.61	)%(d)		(0.93	)%
Ratio of expenses to average net assets		0.95	%(c,d)		0.95	%(d)		0.95	%(d)		0.95	%(d)		0.93	%(d)		1.26	%
Expense ratio of underlying exchange traded fund		N/A			N/A			N/A			N/A			0.18	%(e)		0.20	%
Effective expense ratio		0.95	%(c,d)		0.95	%		0.95	%		0.95	%		1.11	%		1.46	%
Portfolio turnover rate		29	%		67	%		67	%		66	%		96	%(f)		19	%

(a)	Less than $.01 per share.
(b)	Aggregate total return for the period.
(c)	Annualized.
(d)	Excludes excess investment management fees and other expenses in accordance with the Expense Limitation Agreement with RE Advisers. On April 29, 2008 the expense limitation agreement was revised from 1.50% to 0.75%. Further, on December 5, 2008 the expense limitation agreement was revised from 0.75% to 0.95%.
(e)	On December 5, 2008, the Nasdaq-100 Index Tracking Stock Fund changed its name, investment strategies and objective. At that time the Fund sold its entire position in PowerShares QQQ, the underlying exchange traded fund. The expense ratio of the underlying exchange traded fund is prorated for January 1, 2008 to December 4, 2008.
(f)	The portfolio turnover is unusually high because on December 5, 2008, the Nasdaq-100 Index Tracking Stock Fund sold its entire position in the PowerShares QQQ and invested the entire portfolio in individual securities with a new investment strategy and objective.

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

Financial Highlights |55

FINANCIAL HIGHLIGHTS: Small-Company Stock Fund

For a Share Outstanding Throughout Each Period

	Six Months Ended June 30, 2012			Year Ended December 31,
	(Unaudited)			2011			2010			2009			2008			2007
NET ASSET VALUE, BEGINNING OF YEAR	$	22.89		$	22.79		$	17.04		$	11.81		$	18.16		$	19.06
Income from investment operations
Net investment income (loss)		0.03			0.03			0.03			0.10			0.11			0.19
Net realized and unrealized gain (loss) on investments		2.06			0.10			5.75			5.23			(6.35	)		0.06
Total from investment operations		2.09			0.13			5.78			5.33			(6.24	)		0.25
Distributions
Net investment income		—			(0.03	)		(0.03	)		(0.10	)		(0.11	)		(0.19	)
Net realized gain		—			—			—			—			—			(0.96	)
Total distributions		—			(0.03	)		(0.03	)		(0.10	)		(0.11	)		(1.15	)
Redemption fee		—	(a)		—	(a)		—	(a)		—	(a)		—	(a)		—	(a)
NET ASSET VALUE, END OF PERIOD	$	24.98		$	22.89		$	22.79		$	17.04		$	11.81		$	18.16
TOTAL RETURN		9.13	%(b)		0.58	%		33.94	%		45.10	%		(34.33	)%		1.36	%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands)	$	291,599		$	190,426		$	114,159		$	65,833		$	45,041		$	66,910
Ratio of net investment income (loss) to average net assets		0.21	%(c)		0.17	%		0.20	%		0.71	%		0.73	%		0.99	%
Ratio of expenses to average net assets		1.04	%(c)		1.06	%		1.17	%		1.23	%		1.25	%		1.19	%
Portfolio turnover rate		1	%		2	%		4	%		9	%		26	%		18	%

(a)	Less than $.01 per share.
(b)	Aggregate total return for the period.
(c)	Annualized.

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

56 |Financial Highlights

FINANCIAL HIGHLIGHTS: International Value Fund

For a Share Outstanding Throughout Each Period

	Six Months Ended June 30, 2012			Year Ended December 31,
	(Unaudited)			2011			2010			2009			2008			2007
NET ASSET VALUE, BEGINNING OF YEAR	$	5.96		$	7.57		$	7.27		$	5.90		$	9.84		$	9.72
Income from investment operations
Net investment income (a)		0.09			0.16			0.14			0.18			0.23			0.36
Net realized and unrealized gain (loss) on investments		—			(1.40	)		0.27			1.35			(3.68	)		0.44
Total from investment operations		0.09			(1.24	)		0.41			1.53			(3.45	)		0.80
Distributions
Net investment income		(0.06	)		(0.37	)		(0.11	)		(0.16	)		(0.37	)		(0.29	)
Net realized gain		—			—			—			—			(0.12	)		(0.39	)
Total distributions		(0.06	)		(0.37	)		(0.11	)		(0.16	)		(0.49	)		(0.68	)
Redemption fee		—	(b)		—	(b)		—	(b)		—	(b)		—	(b)		—	(b)
NET ASSET VALUE, END OF PERIOD	$	5.99		$	5.96		$	7.57		$	7.27		$	5.90		$	9.84
TOTAL RETURN		1.51	%(c)		(16.55	)%		5.73	%		25.93	%		(35.43	)%		8.21	%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands)	$	146,323		$	144,421		$	135,455		$	122,920		$	92,716		$	140,971
Ratio of gross expenses before voluntary expense limitation to average net assets		1.01	%(d)		1.00	%		1.02	%		1.06	%		1.01	%		1.00	%
Ratio of net investment income to average net assets (a)		4.02	%(d)		2.44	%		2.08	%		2.23	%		2.73	%		2.81	%
Ratio of expenses to average net assets (a)		0.99	%(d)		0.99	%		0.99	%		0.99	%		0.98	%		0.99	%
Portfolio turnover rate		13	%		34	%		44	%		47	%		25	%		22	%

(a)	Excludes excess investment management fees and other expenses in accordance with the Expense Limitation Agreement with RE Advisers.
(b)	Less than $.01 per share.
(c)	Aggregate total return for the period.
(d)	Annualized.

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

Financial Highlights |57

Notes to Financial Statements

(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 amended (“the Act”), as an open-end management investment company. Homestead Funds currently consists of eight funds: Daily Income Fund, Short-Term Government Securities Fund, Short-Term Bond Fund, Stock Index Fund, Value Fund, Growth Fund, Small-Company Stock Fund, and International Value Fund (the “Funds”).

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 Homestead Funds’ Prospectus and Statement of Additional Information.

The Stock Index Fund seeks to achieve its investment objective by investing substantially all of its investable asset in one or more securities that are designed to track the performance of the S&P 500 Index. At June 30, 2012, the Stock Index Fund was operating as a feeder fund, whereby substantially all of its assets are invested in the S&P 500 Stock Master Portfolio (“Master Portfolio”), an open-end investment company managed by BlackRock Fund Advisors. At June 30, 2012, the Stock Index Fund’s investment constituted 4.04% of the Master Portfolio. The financial statements of the Master Portfolio are contained in the Appendix of this report and should be read in conjunction with the financial statements for the Stock Index Fund.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Security valuation:  The Funds investments are valued as of the close of the New York Stock Exchange (usually 4:00 pm). Equity securities and exchange traded funds are valued at the closing price from the primary market in which the security trades. Fixed income securities are valued using the bid price provided by external pricing services. Short-term debt instruments held by the Daily Income Fund and commercial paper held by all Funds are valued at amortized cost, which approximates market value. Under the amortized cost method, discounts and premiums on securities purchased are amortized over the life of the respective securities. Registered investment companies are valued at the net asset value determined by the registered investment company after the close of the New York Stock Exchange on valuation date. The Stock Index Fund records its investment in the Master Portfolio at the market value of its proportionate interest in the net assets of the Master Portfolio.

Various inputs may be used to determine the value of the Funds’ investments. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine valuations are classified into three broad levels as follows:

·   Level 1—quoted prices in active markets for identical investments;

·   Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.); and

·   Level 3—significant unobservable inputs (including the Fund’s own assumptions).

The Funds normally obtain prices for equities and fixed income securities from pricing services. Equity securities that trade on a major exchange are categorized as Level 1 in the hierarchy. In determining prices for fixed income securities, the pricing services employ methodologies designed to identify the market value of debt instruments, which may include reference to actual market transactions, broker-dealer supplied quotations or valuations, matrix pricing, or other valuation techniques. These techniques generally consider such factors as prices, yields, maturities, call features, ratings and developments relating to specific securities in arriving at valuations and are generally categorized as Level 2 in the hierarchy. In the event a pricing service is unable to provide a price for a particular security, the security is priced at fair value as determined in good faith in accordance with policies approved by the Board of Directors and are generally categorized as Level 2 or Level 3 in the hierarchy depending on the observability of market inputs. The International Value Fund, utilizes a pricing service to fair value foreign equity securities based on the impact of market events between the close of foreign markets and the time the net asset value is calculated. These securities are categorized as Level 2 in the hierarchy. Investments in commercial paper are valued at amortized cost and are categorized as Level 2 in the hierarchy. The Funds invest in regulated investment companies that seek to maintain a share price of $1.00 and are categorized as Level 1 in the hierarchy. The Stock Index Fund invests all of its assets in the Master Portfolio. The Board of Trustees of the Master Portfolio has adopted valuation policies and procedures. The policies and procedure are discussed in the notes to the Master Portfolio’s financial statements, included in the Appendix of this report. Additionally, the level classifications of the Master Portfolio as of June 30, 2012 are included in the Appendix.

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the level classifications as of June 30, 2012:

	Level 1		Level 2		Level 3		Total
Daily Income Fund
Commercial Paper	$	—	$	134,964,059	$	—	$	134,964,059
U.S. Government Obligations	$	—	$	33,116,107	$	—	$	33,116,107
Corporate Notes	$	—	$	6,285,684	$	—	$	6,285,684
Cash Equivalents	$	19,048,751	$	—	$	—	$	19,048,751
	$	19,048,751	$	174,365,850	$	—	$	193,414,601
Short-Term Government Securities Fund
U.S. Government Obligations	$	—	$	65,102,479	$	—	$	65,102,479
Corporate Bonds	$	—	$	7,571,261	$	—	$	7,571,261
Commercial Paper	$	—	$	7,299,878	$	—	$	7,299,878
Mortgage Backed Securities	$	—	$	3,977,514	$	—	$	3,977,514
Municipal Bonds	$	—	$	3,434,803	$	—	$	3,434,803
Asset Backed Securities	$	—	$	1,490,508	$	—	$	1,490,508
Cash Equivalents	$	292,862	$	—	$	—	$	292,862
	$	292,862	$	88,876,443	$	—	$	89,169,305

58 |Notes to Financial Statements

	Level 1		Level 2		Level 3		Total
Short-Term Bond Fund
Corporate Bonds	$	—	$	122,033,926	$	—	$	122,033,926
Yankee Bonds	$	—	$	72,289,723	$	—	$	72,289,723
Asset Backed Securities	$	—	$	61,468,282	$	—	$	61,468,282
Municipal Bonds	$	—	$	60,495,852	$	—	$	60,495,852
Mortgage Backed Securities	$	—	$	32,055,368	$	—	$	32,055,368
Commercial Paper	$	—	$	25,499,601	$	—	$	25,499,601
U.S. Government Obligations	$	—	$	24,270,385	$	—	$	24,270,385
Cash Equivalents	$	25,334	$	—	$	—	$	25,334
	$	25,334	$	398,113,137	$	—	$	398,138,471
Value Fund
Common Stocks	$	558,392,906	$	—	$	—	$	558,392,906
Cash Equivalents	$	22,016,360	$	—	$	—	$	22,016,360
	$	580,409,266	$	—	$	—	$	580,409,266
Growth Fund
Common Stocks	$	37,856,937	$	—	$	—	$	37,856,937
Cash Equivalents	$	602,161	$	—	$	—	$	602,161
	$	38,459,098	$	—	$	—	$	38,459,098
Small-Company Stock Fund
Common Stocks	$	239,447,227	$	—	$	—	$	239,447,227
Exchange Traded Fund	$	23,683,740	$	—	$	—	$	23,683,740
Commercial Paper	$	—	$	999,884	$	—	$	999,884
Cash Equivalents	$	28,150,583	$	—	$	—	$	28,150,583
	$	291,281,550	$	999,884	$	—	$	292,281,434
International Value Fund
Common Stocks
Foreign Equities	$	—	$	127,851,855	$	—	$	127,851,855
Foreign Equities—not fair valued	$	2,752,826	$	—	$	—	$	2,752,826
American Depository Receipts	$	8,980,727	$	—	$	—	$	8,980,727
Cash Equivalents	$	7,158,087	$	—	$	—	$	7,158,087
	$	18,891,640	$	127,851,855	$	—	$	146,743,495

Since January 1, 2012 there have not been any transfers between Levels 1 and 2 or between Levels 2 and 3.

Foreign currency: The International Value Fund may use foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contract’s terms. Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at the end of the period. Purchases and sales of investment securities and income and dividends received are translated into U.S. dollars at the exchange rate in effect on the transaction date. Currency gains and losses and the effects of exchange rate fluctuations on investments are included with the realized and unrealized gain (loss) on investment securities.

Distributions to shareholders: Dividends to shareholders are recorded on the ex-dividend date. Income dividends for the Daily Income, Short-Term Government Securities and Short-Term Bond Funds are declared daily and paid monthly. Income dividends for Value Fund are declared and paid semi-annually. Income dividends for the Stock Index, Growth, Small-Company Stock, and International Value Funds are declared and paid annually. Capital gains dividends, if any, are declared and paid at the end of each fiscal year, or more frequently, if necessary.

Use of estimates in the preparation of financial statements: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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: Dividend income is recorded on the ex-dividend date. Interest income, including amortization of premiums and accretion of discount, and expenses are recorded on the accrual basis. Investment transactions are recorded as of the trade date. Realized gains and losses from investment transactions are reported on the identified cost basis.

The Stock Index Fund records a pro rata share of the Master Portfolio’s income, expenses, and realized and unrealized gains and losses in addition to the Fund’s own expenses which are accrued daily.

In the normal course of business, the Funds enter into contracts that provide general indemnifications. The Funds’ maximum exposure under these arrangements is dependent on claims that may be made against the Funds in the future and therefore cannot be estimated; however, based on experience, the risk of material loss from claims is considered remote.

Management considered events occurring between the date of this report, June 30, 2012, and the date of issuance of this report in determining adjustments to the financial statement or necessary disclosures in this report.

3. FEDERAL INCOME TAX INFORMATION

The Funds intend to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and will distribute all net investment income to its shareholders. Therefore, no provision for Federal income taxes is required.

Each Fund files U.S. federal, state, and local tax returns as required. Each Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after filing of the tax return but could be longer in certain circumstances.

Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatments for futures and options transactions, foreign currency transactions, losses deferred due to wash sales, losses deferred due to post-October losses, partnership investments, deferred compensation payable and REIT transactions.

Permanent book and tax basis differences, relating to shareholder distributions will result in reclassifications to paid-in capital.

At June 30, 2012, the cost of securities for federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value was as follows:

	Tax Cost		Tax Unrealized Gain		Tax Unrealized (Loss)			Net Unrealized Gain (Loss)
Daily Income Fund	$	193,414,601	$	—	$	—		$	—
Short-Term Government Securities Fund	$	87,739,554	$	1,492,081	$	(62,330	)	$	1,429,751
Short-Term Bond Fund	$	399,634,860	$	6,162,180	$	(7,658,569	)	$	(1,496,389	)
Value Fund	$	438,626,678	$	186,679,437	$	(44,896,849	)	$	141,782,588
Growth Fund	$	33,959,696	$	5,781,895	$	(1,282,493	)	$	4,499,402
Small-Company Stock Fund	$	238,739,556	$	61,390,960	$	(7,849,082	)	$	53,541,878
International Value Fund	$	168,663,454	$	6,480,047	$	(28,400,006	)	$	(21,919,959	)

Notes to Financial Statements |59

Net unrealized appreciation/(depreciation) of Stock Index Fund in the Master Portfolio consists of an allocated portion of the portfolio’s unrealized appreciation/(depreciation). For information pertaining to the unrealized appreciation/(depreciation) for the Master Portfolio, please refer to the Appendix of this report.

4.  INVESTMENT TRANSACTIONS

Purchases and proceeds from sales of securities, other than short-term and U.S. Government securities, for the period ended June 30, 2012, were as follows:

	Purchases		Proceeds from Sale
Short-Term Government Securities Fund		4,293,201		4,539,049
Short-Term Bond Fund		80,153,693		58,886,323
Value Fund		6,512,818		11,606,671
Growth Fund		12,591,688		10,720,850
Small-Company Stock Fund		73,981,323		2,004,592
International Value Fund		19,573,265		19,947,313

Purchases and proceeds from sales of long-term U.S. Government securities, for the period ended June 30, 2012, were as follows:

	Purchases		Proceeds from Sale
Short-Term Government Securities Fund		11,170,439		11,159,323
Short-Term Bond Fund		5,896,644		13,807,563

5.  RELATED PARTIES

The investment management agreements between Homestead Funds, with respect to each Fund (other than the Stock Index Fund), and RE Advisers Corporation (“RE Advisers”), 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 for the Funds are 0.50% of average daily net assets for Daily Income Fund; 0.45% of average daily net assets for Short-Term Government Securities Fund; 0.60% of average daily net assets for Short-Term Bond Fund; 0.65% of average daily net assets up to $200 million, 0.50% of average daily net assets up to the next $200 million, 0.40% of average daily net assets in excess of $400 million for Value Fund; 0.65% of average daily net assets up to $250 million and 0.60% of average daily net assets in excess of $250 million for the Growth Fund; 0.85% of average daily net assets up to $200 million and 0.75% of average daily net assets in excess of $200 million for Small-Company Stock Fund; and 0.75% of average daily net assets up to $300 million, 0.65% of average daily net assets up to the next $100 million, 0.55% of average daily net assets up to the next $100 million, and 0.50% of average daily net assets in excess of $500 million for International Value Fund.

T. Rowe Price Associates, Inc. (“T. Rowe”) is the Subadvisor for the Growth Fund and Mercator Asset Management, L.P. (“Mercator”) is the Subadvisor for the International Value Fund. The Subadvisors select, buy, and sell securities under the supervision of RE Advisers and the Board of Directors. RE Advisers pays the Subadvisors from the fees it receives from the Funds.

With respect to the Stock Index Fund, an Administrative Service Agreement with RE Advisers has been contracted, under which RE Advisers provides certain administrative services to the Fund. Pursuant to this agreement, RE Advisers receives a fee of 0.25% of the Fund’s average daily net assets. In addition, the Stock Index Fund is allocated a management fee from the Master Portfolio, calculated daily at an annual rate of 0.05% of its average daily net assets. This fee includes advisory, custody, and administrative fees provided by the Master Portfolio on behalf of its investors. The financial information for the Master Portfolio is included in the Appendix.

RE Advisers has agreed, as part of the Expense Limitation Agreement 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 0.80% of the average daily net assets of the Daily Income Fund and Short-Term Bond Fund, 0.75% of the average daily net assets of the Short-Term Government Securities Fund and Stock Index Fund, 1.25% of the average daily net assets of Value Fund, 0.95% of the average daily net assets of Growth Fund, 1.50% of the average daily net assets of Small-Company Stock Fund and 0.99% of the average daily net assets of the International Value Fund.

On August 14, 2009, RE Advisers agreed to waive fees and/or reimburse expenses, if necessary, in order to assist the Daily Income Fund in maintaining a minimum yield. The temporary waiver continued throughout 2010, 2011, and through the date of issuance of this report.

Pursuant to the Expense Limitation Agreement, management fees waived for the period ended June 30, 2012, amounted to $465,705 for Daily Income Fund, $36,393 for Growth Fund, and $16,790 for International Value Fund. Additionally, RE Advisers paid the Daily Income Fund, $13,584 during the period, for expense reimbursements.

The Stock Index, Value, Growth, Small-Company Stock, and International Value Funds each receive a 2% redemption fee on shares sold within 30 days of purchase.

60 | Notes to Financial Statements

6.  CAPITAL SHARE TRANSACTIONS

As of June 30, 2012, 500 million shares of $.01 par value capital shares are authorized for Daily Income Fund, 200 million shares for Short-Term Bond Fund, and 100 million shares for Short-Term Government Securities Fund, Stock Index Fund, Value Fund, Growth Fund, Small-Company Stock Fund, and International Value Fund. Transactions in capital shares were as follows:

	Shares Sold		Shares Issued In Reinvestment of Dividends		Total Shares Issued		Total Shares Redeemed			Net Increase (Decrease)
Year Ended December 31, 2012
In Dollars
Daily Income Fund	$	58,515,391	$	9,558	$	58,524,949	$	(52,946,447	)	$	5,578,502
Short-Term Government Securities Fund	$	10,827,159	$	540,118	$	11,367,277	$	(7,541,291	)	$	3,825,986
Short-Term Bond Fund	$	53,374,291	$	5,273,529	$	58,647,820	$	(35,852,716	)	$	22,795,104
Stock Index Fund	$	5,055,463	$	—	$	5,055,463	$	(4,556,801	)	$	498,662
Value Fund	$	43,189,591	$	5,092,774	$	48,282,365	$	(38,101,294	)	$	10,181,071
Growth Fund	$	8,097,144	$	53,311	$	8,150,455	$	(5,837,100	)	$	2,313,355
Small-Company Stock Fund	$	111,046,936	$	—	$	111,046,936	$	(28,206,811	)	$	82,840,125
International Value Fund	$	19,738,419	$	1,435,443	$	21,173,862	$	(20,928,935	)	$	244,927
In Shares
Daily Income Fund		58,515,391		9,558		58,524,949		(52,946,447	)		5,578,502
Short-Term Government Securities Fund		2,055,410		102,487		2,157,897		(1,431,480	)		726,417
Short-Term Bond Fund		10,341,167		1,021,004		11,362,171		(6,945,961	)		4,416,210
Stock Index Fund		505,645		—		505,645		(456,363	)		49,282
Value Fund		1,317,064		157,183		1,474,247		(1,166,427	)		307,820
Growth Fund		1,401,016		9,811		1,410,827		(1,011,462	)		399,365
Small-Company Stock Fund		4,489,622		—		4,489,622		(1,136,207	)		3,353,415
International Value Fund		3,166,129		239,640		3,405,769		(3,205,604	)		200,165
Year Ended December 31, 2011
In Dollars
Daily Income Fund	$	122,413,140	$	18,440	$	122,431,580	$	(114,340,399	)	$	8,091,181
Short-Term Government Securities Fund	$	25,931,557	$	1,439,305	$	27,370,862	$	(19,041,581	)	$	8,329,281
Short-Term Bond Fund	$	114,074,745	$	10,741,470	$	124,816,215	$	(54,786,733	)	$	70,029,482
Stock Index Fund	$	13,063,451	$	928,041	$	13,991,492	$	(12,916,964	)	$	1,074,528
Value Fund	$	86,985,952	$	8,238,045	$	95,223,997	$	(101,965,841	)	$	(6,741,844	)
Growth Fund	$	12,153,152	$	2,947,026	$	15,100,178	$	(7,864,158	)	$	7,236,020
Small-Company Stock Fund	$	130,698,821	$	264,621	$	130,963,442	$	(52,897,124	)	$	78,066,318
International Value Fund	$	56,095,681	$	8,223,937	$	64,319,618	$	(19,980,843	)	$	44,338,775
In Shares
Daily Income Fund		122,413,140		18,440		122,431,580		(114,340,399	)		8,091,181
Short-Term Government Securities Fund		4,925,115		273,289		5,198,404		(3,616,420	)		1,581,984
Short-Term Bond Fund		22,071,323		2,079,917		24,151,240		(10,602,625	)		13,548,615
Stock Index Fund		1,385,272		99,589		1,484,861		(1,355,465	)		129,396
Value Fund		2,790,319		259,231		3,049,550		(3,279,646	)		(230,096	)
Growth Fund		2,084,304		556,127		2,640,431		(1,369,801	)		1,270,630
Small-Company Stock Fund		5,637,790		11,561		5,649,351		(2,337,788	)		3,311,563
International Value Fund		7,762,335		1,321,106		9,083,441		(2,750,584	)		6,332,857

Notes to Financial Statements |61

Directors and Officers

James F. Perna, Director and Chairman of the Board

Peter R. Morris, Director, President and Chief Executive Officer

Douglas W. Johnson, Director and Chairman of the Audit Committee

Kenneth R. Meyer, Director and Chairman of the Compensation Committee

Anthony M. Marinello, Director

Sheldon C. Petersen, Director

Mark Rose, Director

Peter J. Tonetti, Director

Anthony C. Williams, Director

Cynthia L. Dove, Vice President and Chief Operations Officer

Amy M. DiMauro, Treasurer

Danielle C. Sieverling, Chief Compliance Officer

Kelly Bowers Whetstone, Secretary

62 |Directors and Officers

PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio

June 30, 2012 (Unaudited)

COMMON STOCKS	Shares		Value
(96.7% of net assets)
Aerospace & Defense—2.4%
The Boeing Co.		99,386	$	7,384,380
General Dynamics Corp. (a)		47,819		3,154,141
Goodrich Corp.		16,739		2,124,179
Honeywell International, Inc.		103,373		5,772,348
L-3 Communications Holdings, Inc.		12,887		953,767
Lockheed Martin Corp. (a)		35,325		3,076,101
Northrop Grumman Corp. (a)		33,332		2,126,248
Precision Castparts Corp.		19,296		3,173,999
Raytheon Co. (a)		44,307		2,507,333
Rockwell Collins, Inc. (a)		19,315		953,195
Textron, Inc. (a)		37,335		928,522
United Technologies Corp.		120,932		9,133,994
Total Aerospace & Defense				41,288,207
Air Freight & Logistics—1.0%
C.H. Robinson Worldwide, Inc. (a)		21,530		1,260,151
Expeditors International of Washington, Inc. (a)		28,275		1,095,656
FedEx Corp. (a)		41,827		3,831,771
United Parcel Service, Inc., Class B		127,323		10,027,960
Total Air Freight & Logistics				16,215,538
Airlines—0.1%
Southwest Airlines Co.		101,558		936,365
Total Airlines				936,365
Auto Components—0.2%
BorgWarner, Inc. (a)(b)		15,262		1,001,034
The Goodyear Tire & Rubber Co. (b)		32,402		382,668
Johnson Controls, Inc. (a)		90,204		2,499,553
Total Auto Components				3,883,255
Automobiles—0.4%
Ford Motor Co.		506,291		4,855,331
Harley-Davidson, Inc.		30,670		1,402,539
Total Automobiles				6,257,870
Beverages—2.7%
Beam, Inc.		20,930		1,307,915
Brown-Forman Corp., Class B (a)		13,162		1,274,740
The Coca-Cola Co.		299,494		23,417,436
Coca-Cola Enterprises, Inc. (a)		39,794		1,115,824
Constellation Brands, Inc. Class A (b)		21,522		582,385
Dr Pepper Snapple Group, Inc. (a)		28,101		1,229,419
Molson Coors Brewing Co., Class B (a)		20,810		865,904
Monster Beverage Corp. (b)		20,330		1,447,496
PepsiCo Inc. (a)		207,644		14,672,125
Total Beverages				45,913,244
Biotechnology—1.4%
Alexion Pharmaceuticals, Inc. (b)		25,465		2,528,675
Amgen, Inc.		103,277		7,543,352
Biogen Idec, Inc. (b)		31,777		4,587,963
Celgene Corp. (b)		58,424		3,748,484
Gilead Sciences, Inc. (b)		100,554		5,156,409
Total Biotechnology				23,564,883
Building Products—0.0%
Masco Corp. (a)		47,341		656,620
Total Building Products				656,620
Capital Markets—1.8%
Ameriprise Financial, Inc.		29,086		1,520,034
The Bank of New York Mellon Corp. (a)		158,472		3,478,460
BlackRock, Inc. (c)		17,008		2,888,299
The Charles Schwab Corp. (a)		143,892		1,860,524
E*TRADE Financial Corp. (b)		33,642		270,482
Federated Investors, Inc., Class B (a)		12,457		272,185
Franklin Resources, Inc. (a)		18,822		2,089,054
The Goldman Sachs Group, Inc.		65,325		6,262,055
Invesco Ltd.		59,580		1,346,508
Legg Mason, Inc.		16,805		443,148
Morgan Stanley		202,377		2,952,680
Northern Trust Corp. (a)		31,949		1,470,293
State Street Corp. (a)		64,874		2,895,975
T Rowe Price Group, Inc. (a)		33,810		2,128,678
Total Capital Markets				29,878,375
Chemicals—2.3%
Air Products & Chemicals, Inc. (a)		28,034		2,263,185
Airgas, Inc.		9,224		774,908
CF Industries Holdings, Inc.		8,731		1,691,544
The Dow Chemical Co.		158,579		4,995,239
E.I. du Pont de Nemours & Co.		124,320		6,286,863
Eastman Chemical Co. (a)		18,367		925,146
Ecolab, Inc. (a)		38,746		2,655,263
FMC Corp.		18,265		976,812
International Flavors & Fragrances, Inc. (a)		10,723		587,620
Monsanto Co. (a)		70,767		5,858,092
The Mosaic Co.		39,599		2,168,441
PPG Industries, Inc.		20,241		2,147,975
Praxair, Inc. (a)		39,637		4,309,731
The Sherwin-Williams Co. (a)		11,355		1,502,834
Sigma-Aldrich Corp. (a)		16,091		1,189,608
Total Chemicals				38,333,261
Commercial Banks—2.8%
BB&T Corp. (a)		92,734		2,860,844
Comerica, Inc. (a)		26,186		804,172
Fifth Third Bancorp		121,889		1,633,313
First Horizon National Corp. (a)		33,133		286,600
Huntington Bancshares, Inc. (a)		114,531		732,998
KeyCorp		126,276		977,376
M&T Bank Corp. (a)		16,839		1,390,396
PNC Financial Services Group, Inc. (c)		70,138		4,286,133
Regions Financial Corp.		187,004		1,262,277
SunTrust Banks, Inc.		71,300		1,727,599
U.S. Bancorp		251,535		8,089,366
Wells Fargo & Co.		705,268		23,584,162
Zions Bancorporation		24,399		473,829
Total Commercial Banks				48,109,065

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

Appendix |63

PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio (continued)

June 30, 2012 (Unaudited)

	Shares		Value
(Common Stocks continued)
Commercial Services & Supplies—0.4%
Avery Dennison Corp. (a)		13,641	$	372,945
Cintas Corp. (a)		14,611		564,131
Iron Mountain, Inc.		22,669		747,170
Pitney Bowes, Inc. (a)		26,471		396,271
R.R. Donnelley & Sons Co. (a)		23,649		278,349
Republic Services, Inc.		41,681		1,102,879
Stericycle, Inc. (b)		11,329		1,038,529
Waste Management, Inc. (a)		61,444		2,052,230
Total Commercial Services & Supplies				6,552,504
Communications Equipment—1.8%
Cisco Systems, Inc.		711,254		12,212,231
F5 Networks, Inc. (b)		10,569		1,052,250
Harris Corp. (a)		15,088		631,433
JDS Uniphase Corp. (b)		30,452		334,972
Juniper Networks, Inc. (b)		70,358		1,147,539
Motorola Solutions, Inc.		38,702		1,861,953
QUALCOMM, Inc.		227,500		12,667,200
Total Communications Equipment				29,907,578
Computers & Peripherals—5.5%
Apple, Inc. (b)		124,114		72,482,576
Dell, Inc. (a)(b)		197,594		2,473,877
EMC Corp. (b)		278,590		7,140,262
Hewlett-Packard Co.		262,344		5,275,738
Lexmark International, Inc., Class A (a)		9,324		247,832
NetApp, Inc. (a)(b)		48,098		1,530,478
SanDisk Corp. (b)		32,396		1,181,806
Seagate Technology Plc		50,197		1,241,372
Western Digital Corp. (b)		30,998		944,819
Total Computers & Peripherals				92,518,760
Construction & Engineering—0.1%
Fluor Corp.		22,394		1,104,920
Jacobs Engineering Group, Inc. (b)		17,216		651,798
Quanta Services, Inc. (b)		28,419		684,045
Total Construction & Engineering				2,440,763
Construction Materials—0.0%
Vulcan Materials Co. (a)		17,125		680,034
Total Construction Materials				680,034
Consumer Finance—0.9%
American Express Co. (a)		132,967		7,740,009
Capital One Financial Corp.		76,976		4,207,508
Discover Financial Services (a)		70,492		2,437,613
SLM Corp.		64,963		1,020,569
Total Consumer Finance				15,405,699
Containers & Packaging—0.1%
Ball Corp.		20,874		856,878
Bemis Co., Inc. (a)		13,659		428,073
Owens-Illinois, Inc. (b)		21,784		417,599
Sealed Air Corp. (a)		25,969		400,961
Total Containers & Packaging				2,103,511
Distributors—0.1%
Genuine Parts Co. (a)		20,747		1,250,007
Total Distributors				1,250,007
Diversified Consumer Services—0.1%
Apollo Group, Inc., Class A (b)		14,348		519,254
DeVry, Inc.		7,915		245,127
H&R Block, Inc. (a)		38,809		620,168
Total Diversified Consumer Services				1,384,549
Diversified Financial Services—2.8%
Bank of America Corp.		1,430,088		11,698,120
Citigroup, Inc.		389,103		10,665,313
CME Group, Inc.		8,834		2,368,484
IntercontinentalExchange, Inc. (b)		9,681		1,316,423
JPMorgan Chase & Co.		505,384		18,057,370
Leucadia National Corp. (a)		26,250		558,338
Moody’s Corp. (a)		26,275		960,351
The NASDAQ OMX Group, Inc.		16,102		365,032
NYSE Euronext (a)		33,585		859,104
Total Diversified Financial Services				46,848,535
Diversified Telecommunication Services—2.9%
AT&T, Inc.		778,337		27,755,497
CenturyLink, Inc. (a)		82,382		3,253,265
Frontier Communications Corp. (a)		131,843		504,959
Verizon Communications, Inc.		377,046		16,755,924
Windstream Corp. (a)		78,430		757,634
Total Diversified Telecommunication Services				49,027,279
Electric Utilities—2.1%
American Electric Power Co., Inc.		64,309		2,565,929
Duke Energy Corp. (a)		177,488		4,092,873
Edison International (a)		43,316		2,001,199
Entergy Corp.		23,555		1,599,149
Exelon Corp.		113,068		4,253,618
FirstEnergy Corp. (a)		55,579		2,733,931
NextEra Energy, Inc. (a)		55,317		3,806,363
Northeast Utilities (a)		41,711		1,618,804
Pepco Holdings, Inc. (a)		30,158		590,192
Pinnacle West Capital Corp. (a)		14,476		748,988
PPL Corp. (a)		77,105		2,144,290
Progress Energy, Inc.		39,287		2,363,899
Southern Co.		115,246		5,335,890
Xcel Energy, Inc.		64,746		1,839,434
Total Electric Utilities				35,694,559
Electrical Equipment—0.5%
Cooper Industries Plc		21,151		1,442,075
Emerson Electric Co.		97,318		4,533,073
Rockwell Automation, Inc.		18,990		1,254,479
Roper Industries, Inc. (a)		12,940		1,275,625
Total Electrical Equipment				8,505,252
Electronic Equipment, Instruments & Components—0.4%
Amphenol Corp., Class A		21,448		1,177,924
Corning, Inc. (a)		201,658		2,607,438
FLIR Systems, Inc. (a)		20,410		397,995

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

64 |Appendix

PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio (continued)

June 30, 2012 (Unaudited)

	Shares		Value
(Common Stocks continued)
Jabil Circuit, Inc. (a)		23,972	$	487,351
Molex, Inc. (a)		18,194		435,564
TE Connectivity Ltd.		56,783		1,811,946
Total Electronic Equipment, Instruments & Components				6,918,218
Energy Equipment & Services—1.6%
Baker Hughes, Inc. (a)		58,240		2,393,664
Cameron International Corp. (b)		32,762		1,399,265
Diamond Offshore Drilling, Inc. (a)		9,211		544,647
FMC Technologies, Inc. (b)		31,679		1,242,767
Halliburton Co.		122,630		3,481,466
Helmerich & Payne, Inc.		14,229		618,677
Nabors Industries Ltd. (b)		38,784		558,490
National Oilwell Varco, Inc.		56,530		3,642,793
Noble Corp. (a)(b)		33,414		1,086,957
Rowan Cos. Plc, Class A (b)		16,586		536,225
Schlumberger Ltd.		176,967		11,486,928
Total Energy Equipment & Services				26,991,879
Food & Staples Retailing—2.3%
Costco Wholesale Corp. (a)		57,424		5,455,280
CVS Caremark Corp.		170,174		7,952,231
The Kroger Co. (a)		74,610		1,730,206
Safeway, Inc. (a)		31,853		578,132
Sysco Corp. (a)		77,810		2,319,516
Wal-Mart Stores, Inc. (a)		229,101		15,972,922
Walgreen Co.		114,622		3,390,519
Whole Foods Market, Inc. (a)		21,652		2,063,868
Total Food & Staples Retailing				39,462,674
Food Products—1.7%
Archer Daniels Midland Co.		87,312		2,577,450
Campbell Soup Co. (a)		23,389		780,725
ConAgra Foods, Inc.		55,072		1,428,017
Dean Foods Co. (b)		24,410		415,702
General Mills, Inc.		85,844		3,308,428
H.J. Heinz Co. (a)		42,520		2,312,238
The Hershey Co. (a)		20,142		1,450,828
Hormel Foods Corp. (a)		18,192		553,401
The J.M. Smucker Co.		15,022		1,134,461
Kellogg Co.		32,805		1,618,271
Kraft Foods, Inc., Class A (a)		235,266		9,085,973
McCormick & Co., Inc. (a)		17,629		1,069,199
Mead Johnson Nutrition Co.		27,102		2,181,982
Tyson Foods, Inc., Class A (a)		38,163		718,609
Total Food Products				28,635,284
Gas Utilities—0.1%
AGL Resources, Inc. (a)		15,516		601,245
ONEOK, Inc.		27,665		1,170,506
Total Gas Utilities				1,771,751
Health Care Equipment & Supplies—1.7%
Baxter International, Inc. (a)		73,148		3,887,816
Becton Dickinson & Co.		26,949		2,014,438
Boston Scientific Corp. (b)		190,275		1,078,859
C.R. Bard, Inc.		11,138		1,196,667
CareFusion Corp. (b)		29,329		753,169
Covidien Plc		64,046		3,426,461
DENTSPLY International, Inc. (a)		18,821		711,622
Edwards Lifesciences Corp. (b)		15,236		1,573,879
Intuitive Surgical, Inc. (b)		5,264		2,915,151
Medtronic, Inc. (a)		138,156		5,350,782
St. Jude Medical, Inc. (a)		41,744		1,666,003
Stryker Corp. (a)		43,041		2,371,559
Varian Medical Systems, Inc. (b)		14,748		896,236
Zimmer Holdings, Inc. (a)		23,432		1,508,083
Total Health Care Equipment & Supplies				29,350,725
Health Care Providers & Services—2.0%
Aetna, Inc.		46,189		1,790,748
AmerisourceBergen Corp.		33,377		1,313,385
Cardinal Health, Inc.		46,013		1,932,546
Cigna Corp. (a)		38,204		1,680,976
Coventry Health Care, Inc.		19,017		604,550
DaVita, Inc. (b)		12,516		1,229,196
Express Scripts Holding Co. (b)		106,862		5,966,105
Humana, Inc.		21,620		1,674,253
Laboratory Corp. of America Holdings (b)		12,879		1,192,724
McKesson Corp.		31,281		2,932,594
Patterson Cos., Inc. (a)		11,600		399,852
Quest Diagnostics Inc. (a)		21,115		1,264,789
Tenet Healthcare Corp. (b)		54,320		284,637
UnitedHealth Group, Inc.		137,763		8,059,135
WellPoint, Inc.		43,959		2,804,145
Total Health Care Providers & Services				33,129,635
Health Care Technology—0.1%
Cerner Corp. (b)		19,462		1,608,729
Total Health Care Technology				1,608,729
Hotels, Restaurants & Leisure—1.9%
Carnival Corp. (a)		60,245		2,064,596
Chipotle Mexican Grill, Inc. (b)		4,201		1,596,170
Darden Restaurants, Inc. (a)		17,019		861,672
International Game Technology		39,419		620,849
Marriott International, Inc., Class A (a)		35,065		1,374,548
McDonald’s Corp.		134,859		11,939,067
Starbucks Corp. (a)		100,624		5,365,272
Starwood Hotels & Resorts Worldwide, Inc. (a)		26,185		1,388,852
Wyndham Worldwide Corp. (a)		19,338		1,019,886
Wynn Resorts Ltd.		10,523		1,091,446
Yum! Brands, Inc. (a)		61,168		3,940,443
Total Hotels, Restaurants & Leisure				31,262,801
Household Durables—0.2%
D.R. Horton, Inc. (a)		37,398		687,375
Harman International Industries, Inc. (a)		9,299		368,240
Leggett & Platt, Inc. (a)		18,552		392,004
Lennar Corp., Class A (a)		21,505		664,720
Newell Rubbermaid, Inc.		38,653		701,165
PulteGroup, Inc. (b)		44,610		477,327
Whirlpool Corp.		10,309		630,499
Total Household Durables				3,921,330

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

Appendix | 65

PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio (continued)

June 30, 2012 (Unaudited)

	Shares		Value
(Common Stocks continued)
Household Products—2.0%
The Clorox Co.		17,308	$	1,254,138
Colgate-Palmolive Co. (a)		63,380		6,597,858
Kimberly-Clark Corp.		52,012		4,357,045
The Procter & Gamble Co.		363,768		22,280,790
Total Household Products				34,489,831
Independent Power Producers & Energy Traders—0.1%
The AES Corp. (b)		85,831		1,101,212
NRG Energy, Inc. (a)(b)		30,168		523,716
Total Independent Power Producers & Energy Traders				1,624,928
Industrial Conglomerates—2.7%
3M Co.		92,140		8,255,744
Danaher Corp. (a)		76,264		3,971,829
General Electric Co. (a)		1,406,255		29,306,354
Tyco International Ltd.		61,382		3,244,039
Total Industrial Conglomerates				44,777,966
Insurance—3.4%
ACE Ltd.		44,915		3,329,549
Aflac, Inc.		62,142		2,646,628
The Allstate Corp. (a)		65,315		2,291,903
American International Group, Inc. (b)		84,993		2,727,425
Aon Plc (a)		43,305		2,025,808
Assurant, Inc. (a)		11,288		393,274
Berkshire Hathaway, Inc., Class B (b)		233,394		19,448,722
Chubb Corp. (a)		35,788		2,606,082
Cincinnati Financial Corp. (a)		21,503		818,619
Genworth Financial, Inc., Class A (b)		65,106		368,500
Hartford Financial Services Group, Inc. (a)		58,333		1,028,411
Lincoln National Corp.		38,037		831,869
Loews Corp.		40,485		1,656,241
Marsh & McLennan Cos., Inc.		72,329		2,331,164
MetLife, Inc.		140,871		4,345,870
Principal Financial Group, Inc. (a)		39,944		1,047,731
The Progressive Corp. (a)		81,028		1,687,813
Prudential Financial, Inc.		62,278		3,016,124
Torchmark Corp. (a)		13,003		657,302
The Travelers Cos., Inc.		51,691		3,299,954
Unum Group (a)		37,779		722,712
XL Group Plc		41,219		867,248
Total Insurance				58,148,949
Internet & Catalog Retail—1.0%
Amazon.com, Inc. (b)		47,856		10,927,918
Expedia, Inc.		12,043		578,907
NetFlix, Inc. (b)		7,343		502,775
priceline.com, Inc. (b)		6,614		4,395,135
TripAdvisor, Inc. (b)		12,720		568,457
Total Internet & Catalog Retail				16,973,192
Internet Software & Services—1.8%
Akamai Technologies, Inc. (b)		23,891		758,539
eBay, Inc. (b)		152,468		6,405,181
Google, Inc., Class A (b)		33,750		19,577,363
VeriSign, Inc. (a)(b)		20,895		910,395
Yahoo!, Inc. (b)		161,574		2,557,716
Total Internet Software & Services				30,209,194
IT Services—3.8%
Accenture Plc, Class A		85,489		5,137,034
Automatic Data Processing, Inc. (a)		64,861		3,610,163
Cognizant Technology Solutions Corp., Class A (b)		40,370		2,422,200
Computer Sciences Corp. (a)		20,547		509,977
Fidelity National Information Services, Inc.		31,605		1,077,098
Fiserv, Inc. (b)		18,162		1,311,660
International Business Machines Corp. (a)		153,128		29,948,774
MasterCard, Inc., Class A		14,099		6,064,121
Paychex, Inc.		42,740		1,342,463
SAIC, Inc.		36,619		443,822
Teradata Corp. (b)		22,349		1,609,352
Total System Services, Inc.		21,272		509,039
Visa, Inc., Class A (a)		66,071		8,168,358
The Western Union Co. (a)		81,560		1,373,470
Total IT Services				63,527,531
Leisure Equipment & Products—0.1%
Hasbro, Inc. (a)		15,584		527,830
Mattel, Inc.		45,234		1,467,391
Total Leisure Equipment & Products				1,995,221
Life Sciences Tools & Services—0.4%
Agilent Technologies, Inc.		46,062		1,807,473
Life Technologies Corp. (b)		23,780		1,069,862
PerkinElmer, Inc. (a)		15,034		387,877
Thermo Fisher Scientific, Inc. (a)		48,695		2,527,757
Waters Corp. (b)		11,801		937,826
Total Life Sciences Tools & Services				6,730,795
Machinery—1.8%
Caterpillar, Inc.		86,555		7,349,385
Cummins, Inc.		25,539		2,474,985
Deere & Co. (a)		52,838		4,273,009
Dover Corp.		24,335		1,304,599
Eaton Corp.		44,749		1,773,403
Flowserve Corp. (a)		7,285		835,954
Illinois Tool Works, Inc.		63,421		3,354,337
Ingersoll-Rand Plc		39,658		1,672,774
Joy Global, Inc. (a)		14,022		795,468
PACCAR, Inc. (a)		47,288		1,853,217
Pall Corp. (a)		15,430		845,718
Parker Hannifin Corp.		20,090		1,544,519
Snap-on, Inc. (a)		7,737		481,628
Stanley Black & Decker, Inc. (a)		22,636		1,456,853
Xylem, Inc. (a)		24,739		622,681
Total Machinery				30,638,530
Media—3.3%
Cablevision Systems Corp., New York Group, Class A (a)		28,156		374,193
CBS Corp., Class B		86,008		2,819,342
Comcast Corp, Class A (a)		357,787		11,438,450

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

66 |Appendix

PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio (continued)

June 30, 2012 (Unaudited)

	Shares		Value
(Common Stocks continued)
DIRECTV, Class A (b)		87,017	$	4,248,170
Discovery Communications, Inc., Class A (b)		33,904		1,830,816
Gannett Co., Inc. (a)		31,393		462,419
Interpublic Group of Cos., Inc.		59,110		641,344
The McGraw-Hill Cos., Inc.		37,072		1,668,240
News Corp., Class A (a)		279,812		6,237,009
Omnicom Group, Inc. (a)		36,148		1,756,793
Scripps Networks Interactive, Inc., Class A (a)		12,360		702,790
Time Warner Cable, Inc.		41,440		3,402,224
Time Warner, Inc.		127,508		4,909,058
Viacom, Inc., Class B		70,130		3,297,513
The Walt Disney Co. (a)		237,185		11,503,472
The Washington Post Co., Class B (a)		645		241,114
Total Media				55,532,947
Metals & Mining—0.7%
Alcoa, Inc. (a)		141,264		1,236,060
Allegheny Technologies, Inc.		14,137		450,829
Cliffs Natural Resources, Inc.		18,979		935,475
Freeport-McMoRan Copper & Gold, Inc.		125,901		4,289,447
Newmont Mining Corp.		65,798		3,191,861
Nucor Corp. (a)		42,172		1,598,319
Titanium Metals Corp. (a)		11,215		126,841
United States Steel Corp. (a)		19,080		393,048
Total Metals & Mining				12,221,880
Multi-Utilities—1.3%
Ameren Corp.		32,150		1,078,311
Centerpoint Energy, Inc.		56,874		1,175,586
CMS Energy Corp. (a)		34,515		811,102
Consolidated Edison, Inc.		38,930		2,421,057
Dominion Resources, Inc.		75,804		4,093,416
DTE Energy Co.		22,618		1,341,926
Integrys Energy Group, Inc. (a)		10,373		589,913
NiSource, Inc. (a)		37,786		935,203
PG&E Corp. (a)		55,992		2,534,758
Public Service Enterprise Group, Inc. (a)		67,055		2,179,287
SCANA Corp. (a)		15,517		742,333
Sempra Energy (a)		31,880		2,195,894
TECO Energy, Inc. (a)		28,594		516,408
Wisconsin Energy Corp. (a)		30,537		1,208,349
Total Multi-Utilities				21,823,543
Multiline Retail—0.8%
Big Lots, Inc. (a)(b)		8,373		341,535
Dollar Tree, Inc. (b)		30,848		1,659,622
Family Dollar Stores, Inc.		15,451		1,027,182
J.C. Penney Co., Inc. (a)		19,573		456,247
Kohl’s Corp. (a)		31,901		1,451,176
Macy’s, Inc.		54,884		1,885,265
Nordstrom, Inc. (a)		21,327		1,059,739
Sears Holdings Corp. (a)(b)		5,054		301,724
Target Corp.		87,821		5,110,304
Total Multiline Retail				13,292,794
Office Electronics—0.1%
Xerox Corp. (a)		178,509		1,404,866
Total Office Electronics				1,404,866
Oil, Gas & Consumable Fuels—8.8%
Alpha Natural Resources, Inc. (b)		29,151		253,905
Anadarko Petroleum Corp.		66,264		4,386,677
Apache Corp. (a)		51,842		4,556,393
Cabot Oil & Gas Corp. (a)		27,803		1,095,438
Chesapeake Energy Corp. (a)		88,104		1,638,734
Chevron Corp.		261,886		27,628,973
ConocoPhillips (a)		167,914		9,383,034
CONSOL Energy, Inc. (a)		30,090		909,922
Denbury Resources, Inc. (b)		51,713		781,383
Devon Energy Corp.		53,724		3,115,455
EOG Resources, Inc.		35,764		3,222,694
EQT Corp. (a)		19,808		1,062,303
Exxon Mobil Corp.		620,747		53,117,321
Hess Corp.		40,326		1,752,165
Kinder Morgan, Inc.		67,132		2,162,993
Marathon Oil Corp.		93,684		2,395,500
Marathon Petroleum Corp.		45,308		2,035,235
Murphy Oil Corp. (a)		25,844		1,299,695
Newfield Exploration Co. (b)		17,928		525,470
Noble Energy, Inc.		23,568		1,999,038
Occidental Petroleum Corp.		107,624		9,230,910
Peabody Energy Corp.		36,075		884,559
Phillips 66 (b)		83,094		2,762,045
Pioneer Natural Resources Co. (a)		16,333		1,440,734
QEP Resources, Inc.		23,801		713,316
Range Resources Corp.		21,474		1,328,596
Southwestern Energy Co. (b)		46,250		1,476,763
Spectra Energy Corp.		86,646		2,517,933
Sunoco, Inc. (a)		13,989		664,478
Tesoro Corp. (b)		18,769		468,474
Valero Energy Corp.		73,243		1,768,818
The Williams Cos., Inc.		82,947		2,390,533
WPX Energy, Inc. (b)		26,317		425,809
Total Oil, Gas & Consumable Fuels				149,395,296
Paper & Forest Products—0.1%
International Paper Co. (a)		57,916		1,674,352
MeadWestvaco Corp.		22,991		660,991
Total Paper & Forest Products				2,335,343
Personal Products—0.2%
Avon Products, Inc.		57,518		932,367
The Estee Lauder Cos., Inc., Class A		29,980		1,622,517
Total Personal Products				2,554,884
Pharmaceuticals—6.0%
Abbott Laboratories (a)		208,801		13,461,401
Allergan, Inc.		40,788		3,775,745
Bristol-Myers Squibb Co. (a)		224,120		8,057,114
Eli Lilly & Co.		135,552		5,816,536
Forest Laboratories, Inc. (b)		35,184		1,231,088
Hospira, Inc. (b)		21,828		763,544
Johnson & Johnson (a)		364,503		24,625,823
Merck & Co., Inc.		403,656		16,852,638

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

Appendix | 67

PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio (continued)

June 30, 2012 (Unaudited)

	Shares		Value
(Common Stocks continued)
Mylan, Inc. (b)		57,049	$	1,219,137
Perrigo Co. (a)		12,429		1,465,752
Pfizer, Inc.		994,107		22,864,461
Watson Pharmaceuticals, Inc. (b)		16,958		1,254,722
Total Pharmaceuticals				101,387,961
Professional Services—0.1%
The Dun & Bradstreet Corp. (a)		6,323		450,008
Equifax, Inc.		16,047		747,790
Robert Half International, Inc.		19,091		545,430
Total Professional Services				1,743,228
Real Estate Investment Trusts (REITs)—2.1%
American Tower Corp.		52,331		3,658,460
Apartment Investment & Management Co., Class A		17,457		471,863
AvalonBay Communities, Inc. (a)		12,679		1,793,825
Boston Properties, Inc.		19,856		2,151,795
Equity Residential (a)		39,949		2,491,220
HCP, Inc. (a)		55,612		2,455,270
Health Care REIT, Inc. (a)		28,328		1,651,522
Host Hotels & Resorts, Inc. (a)		95,160		1,505,431
Kimco Realty Corp.		53,926		1,026,212
Plum Creek Timber Co., Inc. (a)		21,387		849,064
Prologis, Inc.		61,132		2,031,416
Public Storage		18,912		2,731,082
Simon Property Group, Inc.		40,254		6,265,938
Ventas, Inc.		38,419		2,425,007
Vornado Realty Trust (a)		24,649		2,070,023
Weyerhaeuser Co. (a)		71,495		1,598,628
Total Real Estate Investment Trusts (REITs)				35,176,756
Real Estate Management & Development—0.0%
CBRE Group, Inc., Class A (b)		43,454		710,907
Total Real Estate Management & Development				710,907
Road & Rail—0.8%
CSX Corp.		138,081		3,087,491
Norfolk Southern Corp.		43,288		3,106,780
Ryder System, Inc.		6,780		244,148
Union Pacific Corp. (a)		63,240		7,545,164
Total Road & Rail				13,983,583
Semiconductors & Semiconductor Equipment—2.2%
Advanced Micro Devices, Inc. (b)		77,740		445,450
Altera Corp. (a)		42,921		1,452,447
Analog Devices, Inc.		39,687		1,495,009
Applied Materials, Inc.		169,841		1,946,378
Broadcom Corp., Class A (a)(b)		65,737		2,221,911
First Solar, Inc. (a)(b)		7,604		114,516
Intel Corp. (a)		667,696		17,794,099
KLA-Tencor Corp. (a)		22,277		1,097,142
Lam Research Corp. (a)(b)		26,685		1,007,092
Linear Technology Corp. (a)		30,664		960,703
LSI Corp. (b)		75,097		478,368
Microchip Technology, Inc. (a)		25,762		852,207
Micron Technology, Inc. (b)		130,888		825,903
NVIDIA Corp. (b)		81,895		1,131,789
Teradyne, Inc. (a)(b)		24,705		347,352
Texas Instruments, Inc.		152,013		4,361,253
Xilinx, Inc.		35,004		1,175,084
Total Semiconductors & Semiconductor Equipment				37,706,703
Software—3.6%
Adobe Systems, Inc. (b)		65,761		2,128,684
Autodesk, Inc. (b)		30,409		1,064,011
BMC Software, Inc. (b)		21,454		915,657
CA, Inc. (a)		47,098		1,275,885
Citrix Systems, Inc. (b)		24,722		2,075,165
Electronic Arts, Inc. (b)		42,449		524,245
Intuit, Inc.		38,925		2,310,199
Microsoft Corp.		992,355		30,356,139
Oracle Corp.		515,220		15,302,034
Red Hat, Inc. (b)		25,592		1,445,436
Salesforce.com, Inc. (b)		18,294		2,529,328
Symantec Corp. (b)		95,891		1,400,967
Total Software				61,327,750
Specialty Retail—2.0%
Abercrombie & Fitch Co., Class A		10,856		370,624
AutoNation, Inc. (a)(b)		5,600		197,568
AutoZone, Inc. (b)		3,545		1,301,618
Bed Bath & Beyond, Inc. (b)		30,903		1,909,805
Best Buy Co., Inc. (a)		36,955		774,577
CarMax, Inc. (b)		30,395		788,446
GameStop Corp., Class A (a)		17,469		320,731
The Gap, Inc.		44,281		1,211,528
The Home Depot, Inc. (a)		203,240		10,769,688
Limited Brands, Inc. (a)		32,148		1,367,254
Lowe’s Cos., Inc.		156,313		4,445,542
O’Reilly Automotive, Inc. (b)		16,705		1,399,378
Ross Stores, Inc.		29,992		1,873,600
Staples, Inc. (a)		91,229		1,190,538
Tiffany & Co. (a)		16,822		890,725
The TJX Cos., Inc.		98,429		4,225,557
Urban Outfitters, Inc. (b)		14,712		405,904
Total Specialty Retail				33,443,083
Textiles, Apparel & Luxury Goods—0.6%
Coach, Inc. (a)		38,131		2,229,901
Fossil, Inc. (b)		6,877		526,366
NIKE, Inc., Class B		48,648		4,270,321
Ralph Lauren Corp.		8,636		1,209,558
VF Corp.		11,467		1,530,271
Total Textiles, Apparel & Luxury Goods				9,766,417
Thrifts & Mortgage Finance—0.1%
Hudson City Bancorp, Inc. (a)		69,901		445,269
People’s United Financial, Inc. (a)		46,970		545,322
Total Thrifts & Mortgage Finance				990,591
Tobacco—2.0%
Altria Group, Inc.		270,197		9,335,306
Lorillard, Inc. (a)		17,350		2,289,333
Philip Morris International, Inc.		226,431		19,758,369
Reynolds American, Inc.		43,925		1,970,915
Total Tobacco				33,353,923

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

68 |Appendix

PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio (continued)

June 30, 2012 (Unaudited)

	Shares		Value
(Common Stocks continued)
Trading Companies & Distributors—0.2%
Fastenal Co. (a)		39,126	$	1,577,169
W.W. Grainger, Inc. (a)		8,117		1,552,295
Total Trading Companies & Distributors				3,129,464
Wireless Telecommunication Services—0.2%
Crown Castle International Corp. (b)		34,174		2,004,647
MetroPCS Communications, Inc. (b)		38,903		235,363
Sprint Nextel Corp. (b)		397,165		1,294,758
Total Wireless Telecommunication Services				3,534,768
Total Long-Term Investments (Cost—$1,328,749,437)				1,634,341,563
SHORT-TERM SECURITIES
(15.5% of net assets)
MONEY MARKET FUNDS—15.3%
BlackRock Cash Funds:
Institutional, SL Agency Shares, 0.25% (c)(d)(e)		215,816,336		215,816,336
Prime, SL Agency Shares, 0.24% (c)(d)(e)		46,364,712		46,364,712
Total Money Market Funds				262,181,048

	Par (000)		Value
U.S. TREASURY OBLIGATIONS—0.2%
U.S. Treasury Bill, 0.08%, 9/20/12 (f)(g)	$	3,155	$	3,154,492
Total U.S. Treasury Obligations				3,154,492
Total Short-Term Securities (Cost $265,335,350)				265,335,540
TOTAL INVESTMENTS (Cost $1,594,084,787*)—112.4%				1,899,677,103
LIABILITIES IN EXCESS OF OTHER ASSETS—(12.4)%				(209,636,878	)
NET ASSETS—100%			$	1,690,040,225

* As of June 30, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

Tax cost	$	1,666,307,254
Gross unrealized appreciation		428,744,635
Gross unrealized depreciation		(195,375,056	)
Net unrealized appreciation	$	233,369,579

(a)	Security, or a portion of security, is on loan.
(b)	Non-income producing security.
(c)	Investments in companies considered to be an affiliate of the Master Portfolio during the period, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at December 31, 2011		Shares Purchased			Shares Sold			Shares Held at June 30, 2012		Value at June 30, 2012		Realized Gain (Loss)			Income
BlackRock Cash Funds: Institutional, SL Agency Shares		170,771,686		45,044,650	1		—			215,816,336	$	215,816,336	$	—		$	248,776
BlackRock Cash Funds: Prime, SL Agency Shares		53,764,558		—			(7,399,846	)2		46,364,712	$	46,364,712	$	—		$	52,453
BlackRock Inc.		18,408		4,969			(6,369	)		17,008	$	2,888,299	$	(107,398	)	$	54,642
PNC Financial Services Group, Inc.		96,666		6,051			(32,579	)		70,138	$	4,286,133	$	324,801		$	73,396

1           Represents net shares purchased.

2           Represents net shares sold.

(d)	Represents the current yield as of report date.
(e)	All or a portion of security was purchased with the cash collateral from loaned securities.
(f)	All or a portion of security has been pledged as collateral in connection with open financial futures contracts.
(g)	Represents the current yield as of report date.

For Master Portfolio compliance purposes, the Master Portfolio’s sector and industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Master Portfolio management. These definitions may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease.

Financial futures contracts purchased as of June 30, 2012 were as follows:

Contracts	Issue	Exchange	Expiration Date	Notional Value	Unrealized Appreciation
761	S&P 500 E-Mini	Chicago Mercantile	September 2012	$51,611,020	$2,100,741

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

Appendix | 69

PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio (continued)

June 30, 2012 (Unaudited)

Fair Value Measurements—Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

·   Level 1 – unadjusted price quotations in active markets/exchanges for identical assets and liabilities

·   Level 2 – other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

·   Level 3 – unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Master Portfolio’s own assumptions used in determining the fair value of investments and derivative financial instruments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy as of June 30, 2012:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks1	$	1,634,341,563		—		—	$	1,634,341,563
Short-Term Securities:
Money Market Funds		262,181,048		—		—		262,181,048
U.S. Treasury Obligations		—	$	3,154,492		—		3,154,492
Total	$	1,896,522,611	$	3,154,492		—	$	1,899,677,103

1           See above Schedule of Investments for values in each industry.

	Level 1		Level 2		Level 3		Total
Derivative Financial Instruments2
Assets:
Equity contracts	$	2,100,741		—		—	$	2,100,741

2           Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

Certain of the Master Portfolio’s liabilities are held at carrying amount which approximates fair value for financial statement purposes. As of June 30, 2012, collateral on securities loaned at value of $215,495,106 are categorized as Level 2 within the disclosure hierarchy.

There were no transfers between levels during the period ended June 30, 2012.

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

70 |Appendix

STATEMENT OF ASSETS AND LIABILITIES: S&P 500 Stock Master Portfolio

June 30, 2012 (Unaudited)

ASSETS
Investments at value—unaffiliated (including securities loaned of $215,447,389) (cost—$1,324,640,137)	$	1,630,321,623
Investments at value—affiliated (cost—$269,444,650)		269,355,480
Investments sold receivable		1,463,756
Contributions receivable from investors		4,068,696
Receivable from custodian		3,847
Dividends receivable		2,129,522
Securities lending income receivable—affiliated		5,167
Interest receivable		8,848
Variation margin receivable		1,329,716
Total assets		1,908,686,655
LIABILITIES
Collateral on securities loaned at value		215,495,106
Investments purchased payable		2,636,583
Withdrawals payable to investors		416,672
Investment advisory fees payable		58,814
Professional fees payable		25,224
Trustees’ fees payable		14,031
Total liabilities		218,646,430
NET ASSETS	$	1,690,040,225
NET ASSETS CONSIST OF
Investors’ capital		1,382,347,168
Net unrealized appreciation/depreciation		307,693,057
NET ASSETS	$	1,690,040,225

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

Appendix | 71

STATEMENT OF OPERATIONS: S&P 500 Stock Master Portfolio

Six Months Ended June 30, 2012 (Unaudited)

INVESTMENT INCOME
Dividends—unaffiliated	$	21,914,775
Dividends—affiliated		128,038
Securities lending—affiliated		243,791
Income—affiliated		57,438
Interest		1,032
Total income		22,345,074
EXPENSES
Investment advisory		534,967
Professional		20,374
Independent Trustees		30,142
Total expenses		585,483
Less fees waived by advisor		(50,516	)
Total expenses after fees waived		534,967
NET INVESTMENT INCOME		21,810,107
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments		(22,561,249	)
Investments—affiliated		217,403
Redemptions-in-kind		231,258,145
Financial futures contracts		(469,938	)
Net realized gain		208,444,361
Net change in unrealized appreciation/depreciation on:
Investments		(44,779,648	)
Financial futures contracts		2,041,704
Net change in unrealized appreciation/depreciation		(42,737,944	)
TOTAL REALIZED AND UNREALIZED GAIN		165,706,417
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	187,516,524

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

72 |Appendix

STATEMENT OF CHANGES IN NET ASSETS: S&P 500 Stock Master Portfolio

INCREASE (DECREASE) IN NET ASSETS	Six Month Ended June 30, 2012 (Unaudited)			Year Ended December 31, 2011
Operations
Net investment income	$	21,810,107		$	45,199,220
Net realized gain (loss)		208,444,361			(26,094,326	)
Net change in unrealized appreciation/depreciation		(42,737,944	)		26,305,661
Net increase in net assets resulting from operations		187,516,524			45,410,555
Capital Transactions
Proceeds from contributions		253,220,032			195,530,480
Value of withdrawals		(859,012,539	)		(291,341,608	)
Net decrease in net assets derived from capital transactions		(605,792,507	)		(95,811,128	)
NET ASSETS
Total decrease in net assets		(418,275,983	)		(50,400,573	)
Beginning of period		2,108,316,208			2,158,716,781
End of period	$	1,690,040,225		$	2,108,316,208

FINANCIAL HIGHLIGHTS: S&P 500 Stock Master Portfolio

	Six Months Ended June 30, 2012			Year Ended December 31,
	(Unaudited)			2011			2010			2009			2008			2007
TOTAL INVESTMENT RETURN		9.48	%1		2.13	%		15.06	%		26.63	%		(36.86	)%		5.54	%
RATIOS TO AVERAGE NET ASSETS
Total expenses		0.05	%2		0.06	%		0.05	%		0.05	%		0.05	%		0.05	%
Total expenses after fees waived		0.05	%2		0.05	%		0.05	%		0.05	%		0.05	%		0.05	%
Net investment income		2.04	%2		2.08	%		2.01	%		2.35	%		2.32	%		1.98	%
SUPPLEMENTAL DATA
Net assets, end of year (000)	$	1,690,040		$	2,108,316		$	2,158,717		$	2,049,062		$	1,690,980		$	2,920,748
Portfolio turnover		7	%		5	%		9	%		5	%		8	%	7		%

1           Aggregate total investment return.

2           Annualized

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

Appendix | 73

NOTES TO FINANCIAL STATEMENTS: S&P 500 Stock Master Portfolio

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

S&P 500 Stock Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust. The Master Portfolio’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements.  Actual results may differ from those estimates.

Reorganization: On May 16, 2012, the Board of Trustees of MIP (“the Board”) approved a plan of reorganization whereby the Master Portfolio will acquire substantially all of the assets and assume certain stated liabilities of Master S&P 500 Index Series, a series of Quantitative Master Series LLC (the “Target Master Portfolio”). The reorganization is subject to shareholder approval by the shareholders of the feeder funds that invest their assets in the Target Master Portfolio and certain other conditions. If approved, the reorganization is expected to close in the fourth quarter of 2012.

The following is a summary of significant accounting policies followed by the Master Portfolio:

Valuation: US GAAP defines fair value as the price the Master Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolio fair values its financial instruments at market value using independent dealers or pricing services under policies approved annually by the Board . The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Master Portfolio for all financial instruments.

Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the security. Financial futures contracts traded on exchanges are valued at their last sale price. Investments in open-end registered investment companies are valued at net asset value each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the market value of such investment or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor deems relevant. These factors include but are not limited to (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and/or default rates. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches, including regular due diligence of the Master Portfolio’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Preferred Stock: The Master Portfolio may invest in preferred stocks. Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that the Master Portfolio either deliver collateral or segregate assets in connection with certain investments (e.g., financial futures contracts), the Master Portfolio will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on its books and records cash or liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, each party to such transactions has requirements to deliver/deposit securities as collateral for certain investments.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income

74 |Appendix

NOTES TO FINANCIAL STATEMENTS: S&P 500 Stock Master Portfolio (continued)

received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain.
 

Redemptions-In-Kind: The Master Portfolio transferred securities and cash to shareholders in connection with a redemption-in-kind transaction. For purposes of US GAAP, these transactions were treated as a sale of securities and the resulting gains and losses were recognized based on the market value of the securities on the date of the transfer. For tax purposes, no gains or losses were recognized. Gains and losses resulting from such redemptions-in-kind are shown as redemption-in-kind transactions in the Statement of Operations.

Securities Lending: The Master Portfolio may lend securities to approved borrowers, such as banks, brokers, and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. Securities lending income, as disclosed in the Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Master Portfolio earns dividend or interest income on the securities loaned but does not receive interest income on the securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Master Portfolio could experience delays and costs in gaining access to the collateral. The Master Portfolio also could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received. During the six months ended June 30, 2012, any securities on loan were collateralized by cash.

Income Taxes: The Master Portfolio is classified as a partnership for federal income tax purposes. As such, each investor in the Master Portfolio is treated as the owner of its proportionate share of net assets, income, expenses and realized and unrealized gains and losses of the Master Portfolio. Therefore, no federal income tax provision is required. It is intended that the Master Portfolio’s assets will be managed so an investor in the Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

The Master Portfolio files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s US federal tax returns remains open for each of the four years ended December 31, 2011. The statutes of limitations on the Master Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

Recent Accounting Standard: In December 2011, the Financial Accounting Standards Board issued guidance that will expand current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financials instruments subject to master netting or similar agreements which are eligible for offset in the Statements of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the financial statements. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Master Portfolio’s financial statement disclosures.

Other: Expenses directly related to the Master Portfolio are charged to the Master Portfolio. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods.

2. DERIVATIVE FINANCIAL INSTRUMENTS

The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the return of the Master Portfolio and/or to economically hedge, or protect, its exposure to certain risks such as equity risk. These contracts may be transacted on an exchange.

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. Counterparty risk related to exchange-traded financial futures contracts is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.

Financial Futures Contracts: The Master Portfolio purchases or sells financial futures contracts to gain exposure to, or economically hedge against, changes in the value of equity securities (equity risk). Financial futures contracts are agreements between the Master Portfolio and counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. Pursuant to the contract, a Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Master Portfolio as unrealized appreciation or depreciation. When the contract is closed, the Master Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest rates and the underlying assets.

Derivative Financial Instruments Categorized by Risk Exposure:

Fair Value of Derivative Financial Instruments as of June 30, 2012
	Asset Derivatives
	Statement of Assets and Liabilities Location	Value
Equity Contracts	Net unrealized appreciation/depreciation*	$	2,100,741

* Includes cumulative appreciation/depreciation on financial futures contracts as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

Appendix | 75

NOTES TO FINANCIAL STATEMENTS: S&P 500 Stock Master Portfolio (continued)

The Effect of Derivative Instruments on the Statement of Operations Six Months Ended June 30, 2012
	Net Realized Loss From Financial Futures Contracts			Net Change in Unrealized Appreciation/Depreciation on Financial Futures Contracts
Equity Contracts:
Financial futures contracts	$	(469,938	)	$	2,041,704

For the six months ended June 30, 2012, the average quarterly balances of outstanding derivative financial instruments were as follows:

Financial futures contracts:
Average number of contracts purchased		881
Average notional value of contracts purchased	$	60,921,842

3. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. (“PNC”) is the largest stockholder and an affiliate, for 1940 Act purposes, of BlackRock, Inc. (“BlackRock”).

MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement (the “Investment Advisory Agreement”) with BlackRock Fund Advisors (“BFA”), the Master Portfolio’s investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory services. Pursuant to the Investment Advisory Agreement with MIP, BFA is responsible for the management of the Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Master Portfolio. For such services, the Master Portfolio pays BFA a monthly fee based on a percentage of the Master Portfolio’s average daily net assets at an annual rate of 0.05%.

The fees and expenses of the MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolio. BFA has contractually agreed to cap the expenses of the Master Portfolio at the rate at which the Master Portfolio pays an advisory fee to BFA by providing an offsetting credit against the investment advisory fees paid by the Master Portfolio in an amount equal to the independent expenses. The contractual waiver is effective through April 30, 2013. The amount of the waiver, if any, is shown as fees waived in the Statement of Operations.

MIP entered into an administration services arrangement with BlackRock Institutional Trust Company, N.A. (“BTC”,) which has agreed to provide general administration services (other than investment advice and related portfolio activities). BTC may delegate certain of its administration duties to sub-administrators. BTC, in consideration thereof, has agreed to bear all of the Master Portfolio’s and MIP’s ordinary operating expenses excluding, generally, investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Master Portfolio.

BTC is not entitled to compensation for providing administration services to the Master Portfolio, for so long as BTC is entitled to compensation for providing administration services to corresponding feeder funds that invest substantially all of their assets in the Master Portfolio, or BTC (or an affiliate) receives investment advisory fees from the Master Portfolio.

The Master Portfolio received an exemptive order from the SEC permitting it, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BTC, as the securities lending agent. BTC may, on behalf of the Master Portfolio, invest cash collateral received by the Master Portfolio for such loans, among other things, in a private investment company managed by BTC or in registered money market funds advised by BTC or its affiliates. As securities lending agent, BTC is responsible for all transaction fees and all other operational costs relating to securities lending activities, other than extraordinary expenses. BTC does not receive any fees for managing the cash collateral. The market value of securities on loan and the value of the related collateral, if applicable, are shown in the Statement of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BTC is disclosed in the Schedule of Investments, if any. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The Master Portfolio retains 65% of securities lending income and pays a fee to BTC equal to 35% of such income. The share of income earned by the Master Portfolio is shown as securities lending—affiliated in the Statement of Operations. For the six months ended June 30, 2012, BTC received $131,272 in securities lending agent fees related to securities lending activities for the Master Portfolio.

Certain officers and/or trustees of MIP are officers and/or directors of BlackRock or its affiliates.

4. INVESTMENTS

Purchases and sales of investments excluding short-term securities for the period ended June 30, 2012, were $149,080,035 and $191,576,288, respectively.

5. BORROWINGS

The Master Portfolio, along with certain other funds managed by the Manager and its affiliates, is a party to a $500 million credit agreement with a group of lenders. The Master Portfolio may borrow under the credit agreement to fund shareholder redemptions. Effective November 2011 to November 2012, the credit agreement has the following terms: a commitment fee of 0.065% per annum based on the Master Portfolio’s pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, paid administration and arrangement fees were allocated to the Master Portfolio based on its net assets as of October 31, 2011. The Master Portfolio’s commitment, administration and arrangement fees were paid by the investment advisor. The Master Portfolio did not borrow under the credit agreement during the six months ended June 30, 2012.

6. MARKET AND CREDIT RISK

In the normal course of business, the Master Portfolio invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all of its obligations (issuer credit risk). The value of securities held by the Master Portfolio may decline in response to

76 |Appendix

NOTES TO FINANCIAL STATEMENTS: S&P 500 Stock Master Portfolio (continued)

certain events, including those directly involving the issuers whose securities are owned by the Master Portfolio; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Master Portfolio may be exposed to counterparty credit risk, or the risk that an entity with which the Master Portfolio has unsettled or open transactions may fail to or be unable to perform on its commitments. The Master Portfolio manages counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Master Portfolio to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Master Portfolio’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Master Portfolio’s Statement of Assets and Liabilities, less any collateral held by the Master Portfolio.

7. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Master Portfolio through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

Appendix | 77

Disclosure of Investment Advisory Agreement

The Board of Trustees (the “Board”, and members of which are referred to as “Board Members”) of Master Investment Portfolio (the “Master Fund”) met on April 17, 2012 and May 15-16, 2012 to consider the approval of the Master Fund’s investment advisory agreement (the “Agreement”) with BlackRock Fund Advisors (“BlackRock”), the Master Fund’s investment advisor, on behalf of S&P 500 Stock Master Portfolio (the “Master Portfolio”), a series of the Master Fund.

Activities and Composition of the Board: The Board consists of fourteen individuals, twelve of whom are not “interested persons” of the Master Fund as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Master Fund, and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Co-Chairs of the Board are each Independent Board Members. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight and Contract Committee and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee, which also has one interested Board Member).

The Agreement: Pursuant to the 1940 Act, the Board is required to consider the continuation of the Agreement on an annual basis. The Board has four quarterly meetings per year, each extending over two days, and a fifth meeting to consider specific information surrounding the consideration of renewing the Agreement. In connection with this process, the Board assessed, among other things, the nature, scope and quality of the services provided to the Master Portfolio by BlackRock, its personnel and its affiliates, including investment management, administrative and shareholder services, oversight of fund accounting and custody, marketing services, risk oversight, compliance and assistance in meeting applicable legal and regulatory requirements.

The Board, acting directly and through its committees, considers at each of its meetings, and from time to time as appropriate, factors that are relevant to its annual consideration of the renewal of the Agreement, including the services and support provided by BlackRock to the Master Portfolio and its shareholders. Among the matters the Board considered were: (a) investment performance of an affiliated feeder fund that invests all of its investable assets in the Master Portfolio (the “representative feeder fund”) for one-, three- and fiveyear periods, as applicable, against peer funds, and applicable benchmarks, if any, as well as senior management’s and portfolio managers’ analysis of the reasons for any over performance or underperformance against its peers and/or benchmark, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Master Portfolio for services, such as marketing and distribution, call center and fund accounting; (c) Master Portfolio operating expenses and how BlackRock allocates expenses to the Master Portfolio; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Master Portfolio’s investment objective, policies and restrictions; (e) the Master Fund’s compliance with its Code of Ethics and other compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) the use of brokerage commissions and execution quality of portfolio transactions; (j) BlackRock’s implementation of the Master Fund’s valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment objectives across the open-end fund, exchange traded fund (“ETF”), closed-end fund and institutional account product channels, as applicable; (l) BlackRock’s compensation methodology for its investment professionals and the incentives it creates; and (m) periodic updates on BlackRock’s business.

The Board has engaged in an ongoing strategic review with BlackRock of opportunities to consolidate funds and of BlackRock’s commitment to investment performance. In addition, the Board requested, to the extent reasonably possible, an analysis of the risk and return relative to selected funds in peer groups. BlackRock provides information to the Board in response to specific questions. These questions covered issues such as profitability, investment performance and management fee levels. The Board considered the importance of: (i) managing fixed income assets with a view toward preservation of capital; (ii) portfolio managers’ investments in the funds they manage; (iii) BlackRock’s controls surrounding the coding of quantitative investment models; and (iv) BlackRock’s oversight of relationships with third party service providers.

BOARD CONSIDERATIONS IN APPROVING THE AGREEMENT

The Approval Process: Prior to the April 17, 2012 meeting, the Board requested and received materials specifically relating to the Agreement. The Board is engaged in a process with its independent legal counsel and BlackRock to review periodically the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April meeting included (a) information independently compiled and prepared by Lipper, Inc. (“Lipper”) on fees and expenses of the Master Portfolio and the representative feeder fund, as applicable, and the investment performance of the representative feeder fund as compared with a peer group of funds as determined by Lipper (collectively, “Peers”), as well as the gross investment performance of the representative feeder fund as compared with its benchmark; (b) information on the profitability of the Agreement to BlackRock and a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees (a combination of the advisory fee and the administration fee, if any) charged to other clients, such as institutional clients, ETFs and closed-end funds, under similar investment mandates, as well as the performance of such other clients, as applicable; (d) the existence, impact and sharing of economies of scale; (e) a summary of aggregate amounts paid by the Master Portfolio to BlackRock; and (f) if applicable, a comparison of management fees to similar BlackRock open-end funds, as classified by Lipper.

At an in-person meeting held on April 17, 2012, the Board reviewed materials relating to its consideration of the Agreement. As a result of the discussions that occurred during the April 17, 2012 meeting, and as a culmination of the Board’s year-long deliberative process, the Board presented BlackRock with questions and requests for additional

78 |Appendix

Disclosure of Investment Advisory Agreement (continued)

information. BlackRock responded to these requests with additional written information in advance of the May 15-16, 2012 Board meeting.

At an in-person meeting held on May 15-16, 2012, the Board of the Master Fund, including all the Independent Board Members, unanimously approved the continuation of the Agreement between the Manager and the Master Fund with respect to the Master Portfolio for a one-year term ending June 30, 2013. In approving the continuation of the Agreement, the Board of the Master Fund considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Master Portfolio and BlackRock; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with the Master Portfolio; (d) economies of scale; (e) fall-out benefits to BlackRock as a result of its relationship with the Master Portfolio and the Portfolio; and (f) other factors deemed relevant by the Board Members.

The Board also considered other matters it deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to securities lending, services related to the valuation and pricing of portfolio holdings of the Master Portfolio, direct and indirect benefits to BlackRock and its affiliates from their relationship with the Master Portfolio and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as controlling, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of the Master Portfolio. Throughout the year, the Board compared the representative feeder fund’s performance to the performance of a comparable group of mutual funds and/or the performance of a relevant benchmark, if any. The Board met with BlackRock’s senior management personnel responsible for investment operations, including the senior investment officers. The Board also reviewed the materials provided by the portfolio management team discussing the performance of the representative feeder fund and the Master Portfolio’s investment objective, strategies and outlook.

The Board considered, among other factors, the number, education and experience of BlackRock’s investment personnel generally and the Master Portfolio’s portfolio management team, investments by portfolio managers in the funds they manage, BlackRock’s portfolio trading capabilities, BlackRock’s use of technology, BlackRock’s commitment to compliance, BlackRock’s credit analysis capabilities, BlackRock’s risk analysis and oversight capabilities and BlackRock’s approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board engaged in a review of BlackRock’s compensation structure with respect to the Master Portfolio’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to advisory services, the Board considered the quality of the administrative and non-investment advisory services provided to the Master Portfolio. BlackRock and its affiliates provide the Master Portfolio with certain administrative, shareholder and other services (in addition to any such services provided to the Master Portfolio by third parties) and officers and other personnel as are necessary for the operations of the Master Portfolio. In particular, BlackRock and its affiliates provide the Master Portfolio with the following administrative services, including, among others: (i) preparing disclosure documents, such as the prospectus, the statement of additional information and periodic shareholder reports; (ii) assisting with daily accounting and pricing; (iii) overseeing and coordinating the activities of other service providers; (iv) organizing Board meetings and preparing the materials for such Board meetings; (v) providing legal and compliance support; and (vi) performing other administrative functions necessary for the operation of the Master Portfolio, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Board reviewed the structure and duties of BlackRock’s fund administration, accounting, legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Master Portfolio and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of the Master Portfolio. The Board noted that the Master Portfolio’s investment results correspond directly to the investment results of the representative feeder fund. In preparation for the April 17, 2012 meeting, the Board worked with its independent counsel, BlackRock and Lipper to develop a template for, and was provided with, reports independently prepared by Lipper, which included a comprehensive analysis of the representative feeder fund’s performance. The Board also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper’s rankings. In connection with its review, the Board received and reviewed information regarding the investment performance of the representative feeder fund as compared to funds in the representative feeder fund’s applicable Lipper category and the gross investment performance of the representative feeder fund as compared with its benchmark. The Board was provided with a description of the methodology used by Lipper to select peer funds and periodically meets with Lipper representatives to review their methodology. The Board and the Board’s Performance Oversight and Contract Committee regularly review, and meet with Master Portfolio management to discuss, the performance of the Master Portfolio and the representative feeder fund, as applicable, throughout the year.

The Board noted that the representative feeder fund’s gross performance, as agreed upon by the Board, was within tolerance of its benchmark index during the one-year period reported. Also, the representative feeder fund’s gross performance exceeded its benchmark index during the three- and five-year periods reported. Based on its discussions with BlackRock and the Board’s review of the representative feeder fund’s investment performance compared to its Lipper Peer Group, the methodology used by Lipper to select peer funds, and other relevant information provided by BlackRock, the Board noted that the representative feeder fund’s gross investment performance as compared to its benchmark index provided a more meaningful comparison of the Portfolio’s relative performance.

C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Master Portfolio: The Board, including

Appendix | 79

Disclosure of Investment Advisory Agreement (continued)

the Independent Board Members, reviewed the Master Portfolio’s contractual advisory fee rate compared with the other funds in the representative feeder fund’s Lipper category. It also compared the representative feeder fund’s total expense ratio, as well as the Master Portfolio’s actual advisory fee rate, to those of other funds in the representative feeder fund’s Lipper category. The Board considered the services provided and the fees charged by BlackRock to other types of clients with similar investment mandates, including separately managed institutional accounts.

The Board received and reviewed statements relating to BlackRock’s financial condition and profitability with respect to the services it provided the Master Portfolio. The Board was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Master Portfolio. The Board reviewed BlackRock’s profitability with respect to the Master Portfolio, and other funds the Board currently oversees for the year ended December 31, 2011 compared to available aggregate profitability data provided for the years ended December 31, 2010 and December 31, 2009. The Board reviewed BlackRock’s profitability with respect to other fund complexes managed by BlackRock and/or its affiliates. The Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, expense allocations and business mix, and the difficulty of comparing profitability as a result of those factors.

The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Board considered BlackRock’s operating margin, in general, compared to the operating margin for leading investment management firms whose operations include advising open-end funds, among other product types. In addition, the Board considered, among other things, certain third party data comparing BlackRock’s operating margin with that of other publicly-traded asset management firms. The Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management and the relative product mix.

In addition, the Board considered the cost of the services provided to the Master Portfolio by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management and distribution of the Master Portfolio and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Board reviewed BlackRock’s methodology in allocating its costs to the management of the Master Portfolio. The Board also considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreement and to continue to provide the high quality of services that is expected by the Board.

The Board noted that the Master Portfolio’s contractual advisory fee ratio was lower than or equal to the median contractual advisory fee ratio paid by the representative feeder fund’s Peers, in each case before taking into account any expense reimbursements or fee waivers. The Board noted that BlackRock and its affiliates have agreed to provide an offsetting credit against certain expenses incurred by the Master Portfolio.

D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of the Master Portfolio increase, as well as the existence of expense caps. The Board also considered the extent to which the Master Portfolio benefits from such economies and whether there should be changes in the advisory fee rate or structure in order to enable the Master Portfolio to participate in these economies of scale, for example through the use of breakpoints in the advisory fee based upon the asset level of the Master Portfolio. In its consideration, the Board took into account the existence of expense caps and further considered the continuation and/or implementation, as applicable, of such caps.

E. Other Factors Deemed Relevant by the Board Members: The Board, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from their respective relationships with the Master Portfolio, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Master Portfolio, including for administrative, distribution, securities lending and cash management services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Board further noted that it had considered the investment by BlackRock’s funds in ETFs without any offset against the management fees payable by the funds to BlackRock.

In connection with its consideration of the Agreement, the Board also received information regarding BlackRock’s brokerage and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

CONCLUSION

The Board, including all the Independent Board Members, unanimously approved the continuation of the Agreement between BlackRock and the Master Fund, with respect to the Master Portfolio, for a one-year term ending June 30, 2013. Based upon its evaluation of all of the aforementioned factors in their totality, the Board of the Master Fund, including the Independent Board Members, was satisfied that the terms of the Agreement were fair and reasonable and in the best interest of the Master Portfolio and its shareholders. In arriving at its decision to approve the Agreement, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for the Master Portfolio reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.

80 |Appendix

Officers and Trustees

Ronald W. Forbes, Co-Chair of the Board and Trustee

Rodney D. Johnson, Co-Chair of the Board and Trustee

Paul L. Audet, Trustee

David O. Beim, Trustee

Henry Gabbay, Trustee

Dr. Matina S. Horner, Trustee

Herbert I. London, Trustee

Ian A. MacKinnon, Trustee1

Cynthia A. Montgomery, Trustee

Joseph P. Platt, Trustee

Robert C. Robb, Jr., Trustee

Toby Rosenblatt, Trustee

Kenneth L. Urish, Trustee

Frederick W. Winter, Trustee

John M. Perlowski, President and Chief Executive Officer

Richard Hoerner, CFA, Vice President

Brendan Kyne, Vice President

Simon Mendelson, Vice President

Christopher Stavrakos, CFA, Vice President

Neal Andrews, Chief Financial Officer

Jay Fife, Treasurer

Brian Kindelan, Chief Compliance Officer and Anti-Money Laundering Officer

Benjamin Archibald, Secretary2

1 Effective May 14, 2012, Ian A. MacKinnon became a Trustee of the Trust/MIP.

2 Effective May 16, 2012, Ira P. Shapiro resigned as Secretary of the Trust/MIP and Benjamin Archibald became Secretary of the Trust/MIP.

Appendix | 81

��

Homestead Funds

4301 Wilson Blvd.

Arlington, VA 22203

1-800-258-3030

www.homesteadfunds.com

This report is authorized for distribution to

shareholders and others who have received

a copy of the prospectus.

Distributor: RE Investment Corporation.

Item 2.  Code of Ethics.

Not required in this filing.

Item 3.  Audit Committee Financial Expert.

Not required in this filing.

Item 4.  Principal Accountant Fees and Services.

Not required in this filing.

Item 5.  Audit Committee of Listed Registrants.

Not applicable.

Item 6.  Investments.

(a) The Registrant’s schedule of investments in unaffiliated issuers is included in the report to shareholders under Item 1 of this Form N-CSR.

(b)           Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

Item 8.  Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 11. Controls and Procedures.

(a)  Disclosure Controls and Procedures.  The registrant’s principal executive officer and principal financial officer concluded that the registrant's Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.

(b)  Internal Control.  There were no changes in registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.

Item 12. Exhibits.

(a)(1) Not required with this filing.

(a)(2) A separate certification for the principal executive officer and principal financial officer of the registrant, as required by Rule 30a-2(a) under the Investment Company Act of 1940, is filed herewith.

(a)(3) Not applicable.

(b) A certification by the registrant’s principal executive officer and principal financial officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HOMESTEAD FUNDS, INC.

By:	/s/ Peter R. Morris
	Peter R. Morris
	President, Chief Executive Officer and Director

Date:           September 7, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ Peter R. Morris
	Peter R. Morris
	President, Chief Executive Officer and Director

Date           September 7, 2012

By:	/s/ Amy M. DiMauro
	Amy M. DiMauro
	Treasurer

Date:           September 7, 2012