“We designed this Fund to track the performance of the Nasdaq-100 Index,” explains portfolio manager and Homestead Funds president, Peter Morris. “The index is made up of the 100 largest and most actively traded, non-financial, and domestic and international stocks listed on the Nasdaq stock market.”

Because the share price of the Fund is likely to experience wide swings in value, it is suitable for investors who want the potential to deliver higher returns and have at least five or 10 years to recover from a possible setback in the Nasdaq stock market.

Performance

The tables below show the Fund’s average annual and year-to-date total returns for various holding periods compared to its benchmark index. An index is a collection of securities intended to represent some slice of the total securities market.

The bar chart shows the Fund's annual return in each of the last 10 years or for each year since the Fund's inception. This indicates how widely performance has varied year-by-year.

NASDAQ-100 INDEX TRACKING STOCKSM Fund Historical Annual Total Returns

The total returns shown above represent past performance which does not guarantee future results. Investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted.

Portfolio Composition

The following tables show holdings information for the NASDAQ-100 Index Tracking Stock^(sm) the exchange traded fund in which the NASDAQ-100 Index Tracking Stock^(sm) Fund invests substantially all it assets.

Nasdaq-100 Index Tracking Stock(sm) Industry Diversification

On 09/30/08  On 06/30/08  Information technology 61.6% 64.2% Healthcare 16.9% 14.5% Consumer discretionary 13.1% 12.4% Industrials   4.7%  4.9% Consumer staples   1.5%  1.4% Telecommunication services   1.5%  1.7% Materials   0.7%  0.9% Total 100% 100%

Nasdaq-100 Index Tracking Stock(sm) Top Ten Holdings
% of Total Investment at 09/30/08 Apple Inc. 10.3% QUALCOMM Inc.  6.3% Microsoft Corp.  6.2% Google Inc. Class A  3.7% Cisco Systems Inc.  3.5% Oracle Corp.  3.2% Gilead Sciences Inc.  3.0% Oracle Corp.  2.8% Intel Corp.  2.7% Amgen Inc.  2.2% Total 43.9%

Fund assets on 10/31/08

$7,798,000

Comparison of Growth

This line graph is a comparison of the change in value of a $10,000 investment in the Fund and the Nasdaq-100 Index Tracking Stock ^(sm) Fund.

Nasdaq-100 Index Tracking Stock(sm) Fund Growth of $10,000

The Nasdaq-100 Index Tracking Stock (sm) 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.

Distributions

If this Fund has declared income or capital gains distributions in the current year, they will be listed in the table below.  See Track Earnings Distributions for the Fund's distribution schedule.

Nasdaq-100 Index Tracking Stock(sm) Fund 2008 Earnings Distributions
Distribution Type Declaration Date $/Per Share Long Term Gains 06/30/08 $0.0144

Nasdaq-100 Index Tracking Stock(sm) Fund 2007 Earnings Distributions
Distribution Type Declaration Date $/Per Share Long Term Capital Gains 06/29/07 $0.0481 Long Term Capital Gains 12/31/07   $0.2143

Share Price History

This table shows how widely the Fund’s share price has fluctuated over time.

Nasdaq-100 Index Tracking Stock(sm) Fund Share Price History

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Year End N/A N/A N/A N/A $5.50 $3.40 $5.44 $5.44 $5.06 $5.22 $5.87  Year High N/A N/A N/A N/A $10.31 $7.60 $5.02 $5.46 $5.38 $5.53  $6.53 Year Low N/A N/A N/A N/A $4.08 $4.08 $3.31 $4.41 $4.47 $4.43  $5.08