HOMESTEAD FUNDS

PROSPECTUS

May 1, 2005

[PICTURE]

DAILY INCOME FUND

SHORT-TERM GOVERNMENT SECURITIES FUND

SHORT-TERM BOND FUND

STOCK INDEX FUND

VALUE FUND

SMALL-COMPANY STOCK FUND

INTERNATIONAL STOCK INDEX FUND

NASDAQ-100 INDEX TRACKING STOCK(SM) FUND

As with all mutual funds, neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities. The Securities and Exchange Commission has not determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

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Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the Federal Deposit Insurance Corporation, Federal Reserve Board or any other agency, and are subject to investment risks, including the possible loss of the principal amount invested.

THE FUNDS	THE DAILY INCOME FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE.

DAILY INCOME FUND

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ASSET ALLOCATION

money market

CREDIT RISK

low

EXPECTED DEGREE OF SHARE PRICE VOLATILITY

very low

TICKER

HDIXX

RISKS

An investment in the Daily Income Fund is subject to the following general risks:

-	CREDIT RISK—the chance an issuer will not make timely payments of principal or interest.

Some types of securities in which the Fund invests pose specific risks. These include...

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REPURCHASE AGREEMENTS—A repurchase agreement is essentially a short-term loan collateralized by securities. The buyer, in this case the Fund, purchases securities with an agreement that the seller will buy them back at a mutually agreed upon price and time. If the seller were to go bankrupt or default, the Fund could experience costs or delays in liquidating the security and might incur a loss if the security had declined in value.

-	OTHER MUTUAL FUNDS—The Fund may invest up to 5% of total assets in any one mutual fund and up to 10% of assets in all mutual funds. The Fund’s return on its investment will reflect the performance of and operating expenses incurred by the other investment companies.

The Fund has adopted certain policies to reduce risk. The Fund will not...

-	invest more than 5% of its total assets at the time of purchase in any one issuer’s securities.

-	purchase more than 10% of the outstanding voting securities of any one issuer. This restriction applies to 75% of the Fund’s total assets and does not apply to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.

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invest 25% or more of its total assets at the time of purchase in securities of companies in the same industry. This restriction does not apply to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities or to securities issued by domestic branches of U.S. banks and savings and loans or U.S. branches of foreign banks that are subject to the same regulations as domestic banks.

-	borrow more than 10% of its total assets. The Fund will only borrow in order to facilitate redemption requests that might otherwise require the Fund to sell securities at a time that would be disadvantageous.

CHANGES TO INVESTMENT OBJECTIVE—The Fund’s investment objective is fundamental and may not be changed by the Board of Directors without shareholder approval.

THE FUNDS	THIS FUND PROVIDES AN EXTRA MEASURE OF CREDIT PROTECTION AS IT INVESTS PRIMARILY IN FIXED-INCOME SECURITIES WHOSE PRINCIPAL AND INTEREST PAYMENTS ARE GUARANTEED BY THE U.S. GOVERNMENT. THE U.S. GOVERNMENT DOES NOT GUARANTEE THE FUND’S PRICE OR YIELD. THESE WILL FLUCTUATE WITH MARKET CONDITIONS.

SHORT-TERM GOVERNMENT SECURITIES FUND

ASSET ALLOCATION

fixed income

CREDIT RISK

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very low

EXPECTED DEGREE OF SHARE PRICE VOLATILITY

low

TICKER

HOSGX

OBJECTIVE

The Short-Term Government Securities Fund seeks to generate current income while maintaining a low degree of share price fluctuation. The Fund is designed for investors who seek a higher level of income than is normally provided by money market investments and less principal fluctuation than is experienced by longer term bond funds.

STRATEGY

PORTFOLIO COMPOSITION—The Fund invests at least 80% of its total assets in fixed-income securities whose principal and interest payments are guaranteed by the U.S. Government. Investments can include...

-	U.S. Treasury securities
-	securities issued by U.S. Government agencies and instrumentalities (including mortgage pass-through securities and collateralized mortgage obligations (CMOs))

-	repurchase agreements collateralized by the above-mentioned securities
-	zero-coupon bonds issued by U.S. Government guaranteed agencies.

Some types of securities, including repurchase agreements, pose specific risks. See “Risks” for more information.

CREDIT QUALITY—The Fund will invest at least 80% of its total assets in securities backed by the full faith and credit of the U.S. Government.

MATURITY—The dollar-weighted average effective maturity of the Fund’s portfolio will not exceed three years. There is no limit on the maturity of the individual securities in the Fund’s portfolio.

RISKS

An investment in the Short-Term Government Securities Fund is subject to the following general risks:

-	INCOME RISK—the chance a decline in interest rates will cause the Fund’s yield to decline.

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INTEREST RATE RISK—the chance a rise in interest rates will cause the Fund’s price to decline. The Fund seeks to minimize share price fluctuation by investing in short-term securities. Prices of short-term securities decline less in response to a change in rates than those of longer term securities.

-	MANAGER RISK—the chance the manager’s decisions, particularly security selection, will cause the Fund to under-perform other similar investments.

Some types of securities in which the Fund may invest pose specific risks. These include...

-	REPURCHASE AGREEMENTS—A repurchase agreement is essentially a short-term loan collateralized by securities. The buyer, in this case the Fund, purchases securities with an agreement that the seller will buy them back at a mutually agreed upon price and

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time. If the seller were to go bankrupt or default, the Fund could experience costs or delays in liquidating the security and might incur a loss if the security had declined in value.

-	WHEN-ISSUED SECURITIES—The Fund may purchase securities on a when-issued basis. In this case, the price of the security is fixed at the time of the commitment, but delivery and payment may take place up to 90 days later. There is a risk the value of the security will decline during this period.

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COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)—These are debt securities backed by the principal and interest payments owed on pools of underlying mortgages. CMOs are separated into multiple classes, each of which may have different cash flow characteristics depending on underlying prepayment assumptions. The manager’s CMO class selections could increase or decrease the Fund’s price sensitivity. In addition, there is a risk that unscheduled or early repayment of principal would negatively affect the Fund’s return as the Fund could be forced to reinvest in lower yielding securities.

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OTHER MUTUAL FUNDS—The Fund may invest up to 5% of total assets in any one fund that invests exclusively in U.S. Government securities and up to 10% of assets in all mutual funds that invest exclusively in U.S. Government securities. The Fund’s return on its investment will reflect the performance of and operating expenses incurred by other investment companies.

The Fund has adopted certain policies to reduce risk. The Fund will not...

-	invest more than 5% of its total assets at the time of purchase in any one issuer’s securities. This restriction does not apply to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.

-	purchase more than 10% of the outstanding voting securities of any one issuer. This restriction applies to 75% of the Fund’s total assets and does not apply to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.

-	borrow more than 10% of its total assets. The Fund will only borrow in order to facilitate redemption requests that might otherwise require the Fund to sell securities at a time that would be disadvantageous.

CHANGES TO INVESTMENT OBJECTIVE—The Fund’s investment objective is fundamental and may not be changed by the Board of Directors without shareholder approval.

THE FUNDS	THE FUND’S SHORT MATURITY IS INTENDED TO REDUCE THE EFFECT OF INTEREST RATE CHANGES ON ITS SHARE PRICE. PRICES OF SHORT-TERM SECURITIES DECLINE LESS IN RESPONSE TO A RISE IN INTEREST RATES THAN THOSE OF LONGER TERM SECURITIES.

SHORT-TERM BOND FUND

ASSET ALLOCATION

fixed income

CREDIT RISK

low

EXPECTED DEGREE OF SHARE PRICE VOLATILITY

low

TICKER

HOSBX

The Short-Term Bond Fund seeks to generate current income while maintaining a low degree of share price fluctuation. The Fund is designed for investors who seek a higher level of income than is normally provided by money market investments and less principal fluctuation than is experienced by longer term bond funds.

Strategy

PORTFOLIO COMPOSITION—The Fund will ordinarily invest at least 80% of its total assets in debt securities in the three highest credit categories as ranked by a nationally recognized statistical rating organization (NRSRO) (for example, securities rated AAA, AA and A by Standard & Poor’s Corporation). Investments can include...

-	corporate debt securities
-	U.S. Treasury securities
-	securities issued by U.S. Government agencies and instrumentalities
-	mortgage pass-through securities issued by U.S. Government and non-Government agencies
-	collateralized mortgage obligations (CMOs)
-	asset-backed securities
-	zero-coupon bonds
-	U.S. dollar-denominated debt securities of foreign issuers
-	convertible bonds.

A portion of the Fund’s net assets can be invested in other types of securities. These can include...

-	debt securities in the fourth highest credit category (for example, securities rated BBB by Standard & Poor’s Corporation) or, if unrated, of comparable credit quality as determined by RE Advisers, limited to no more than 5% of the Fund’s net assets at the time of purchase

-	preferred stocks, American Depository Receipts (ADRs) and investment-grade debt securities (those rated in the top four credit categories) convertible into or exchangeable for common stocks

-	privately-placed securities, limited to no more than 10% of the Fund’s net assets at the time of purchase

-	money market securities that meet the Daily Income Fund’s high standards for credit quality. As a defensive or temporary strategy, the Fund may invest in money market securities without limitation.

These securities may have variable-rate demand features. Some types of securities pose specific risks. See “Risks” for more information.

CREDIT QUALITY—The Fund will ordinarily invest at least 80% of its assets in securities rated within the three highest credit categories, as determined by a NRSRO, or, if unrated, of comparable credit quality as determined by RE Advisers.

MATURITY—The dollar-weighted average effective maturity of the Fund’s portfolio will not exceed three years. There is no limit on the maturity of the individual securities in the Fund’s portfolio.

RISKS

An investment in the Short-Term Bond Fund is subject to the following general risks:

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-	CREDIT RISK—the chance a bond issuer will not make timely payments of principal or interest.

-	INCOME RISK—the chance a decline in interest rates will cause the Fund’s yield to decline.

-	INTEREST RATE RISK—the chance a rise in interest rates will cause the Fund’s price to decline. The Fund seeks to minimize share price fluctuation by investing in short-term securities.

-	MANAGER RISK—the chance the manager’s decisions, particularly security selection, will cause the Fund to underperform other similar investments.

Some types of securities in which the Fund may invest pose specific risks. These include...

-

REPURCHASE AGREEMENTS—A repurchase agreement is essentially a short-term loan collateralized by securities. The buyer, in this case the Fund, purchases securities with an agreement that the seller will buy them back at a mutually agreed upon price and time. If the seller were to go bankrupt or default, the Fund could experience costs or delays in liquidating the security and might incur a loss if the security had declined in value.

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U.S. DOLLAR-DENOMINATED SECURITIES OF FOREIGN ISSUERS—These securities may respond negatively to adverse foreign political or economic developments. In the case of foreign companies not registered in the U.S., there is generally less publicly available information regarding the issuer, and foreign companies are subject to different accounting, auditing and financial reporting standards. These conditions may have an impact on rating organizations’ and RE Advisers’ ability to accurately assess and monitor an issuer’s credit quality.

-	CONVERTIBLE BONDS—Convertible bonds are debt securities that can be exchanged for a specific number of shares of the issuer’s stock. Prices of convertible bonds tend to be less volatile than those of the underlying stock but more volatile than those of non-convertible debt securities.

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AMERICAN DEPOSITORY RECEIPTS (ADRs)—ADRs are U.S. dollar-denominated certificates representing shares of stock in a foreign company. ADRs are traded on domestic stock exchanges or in the U.S. over-the-counter market. ADRs offer certain advantages over direct ownership in foreign companies. First, ADRs are easily transferable and quotes are readily available. Second, issuers are subject to the same auditing, accounting and financial reporting standards as a U.S.-based company. However, as with other U.S. dollar-denominated securities of foreign issuers, ADRs may respond negatively to adverse foreign political or economic developments.

-	WHEN-ISSUED SECURITIES—The Fund may purchase securities on a when-issued basis. In this case, the price of the security is fixed at the time of the commitment, but delivery and payment may take place up to 90 days later. There is a risk the value of the security will decline during this period.

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MORTGAGE PASS-THROUGH SECURITIES—These represent a share in the principal and interest payments made on a pool of underlying mortgages. There is a risk that unscheduled or early repayment of principal on mortgage pass-through securities (arising from prepayments of principal due to the sale of the underlying property, refinancing or foreclosure) would negatively affect the Fund’s return, as the Fund could be forced to reinvest the proceeds in lower yielding securities. As with other fixed-income securities, when interest rates rise, the value of mortgage pass-through securities generally declines. However, when interest rates decline, the value of mortgage pass-through securities may not increase as much as other fixed-income securities of comparable maturity because a decline in interest rates increases the likelihood that borrowers will prepay.

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COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs)—These are debt securities backed by the principal and interest payments owed on pools of underlying mortgages. CMOs are separated into multiple classes, each of which may have different cash flow characteristics depending on underlying prepayment assumptions. The manager’s CMO class selections could increase or decrease the Fund’s price sensitivity. In addition, there is a risk that unscheduled or early repayment of principal would negatively affect the Fund’s return as the Fund could be forced to reinvest in lower yielding securities.

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ASSET-BACKED SECURITIES—These securities represent either fractional interests or participation in pools of leases, retail installment loans or revolving credit receivables. Underlying automobile sales contracts and credit card receivables are subject to prepayment, which may shorten the securities’ weighted average life and reduce the overall return. Investors may also experience delays in payment if the full amounts due on underlying loans, leases or receivables are not realized because of unanticipated legal

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ZERO-COUPON BONDS — Zero-coupon bonds do not make regular interest payments. Instead, they are sold at a deep discount from their face value. The investor (in this case, the Fund) is paid back at face value when the security matures. Prices of zero-coupon bonds fluctuate more in response to changes in interest rates than those of other types of comparable maturity fixed-income securities.

-	OTHER MUTUAL FUNDS — The Fund may invest up to 5% of total assets in any one mutual fund and up to 10% of assets in all mutual funds. The Fund’s return on its investment will reflect the performance of and operating expenses incurred by the other investment companies.

The Fund has adopted certain policies to reduce risk. The Fund will not...

-	invest more than 5% of its total assets at the time of purchase in any one issuer’s securities.

-	purchase more than 10% of the outstanding voting securities of any one issuer. This restriction applies to 75% of the Fund’s total assets and does not apply to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.

-	invest 25% or more of its total assets at the time of purchase in securities of companies in the same industry. This restriction does not apply to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.

-	borrow more than 10% of its total assets. The Fund will only borrow in order to facilitate redemption requests that might otherwise require the Fund to sell securities at a time that would be disadvantageous.

CHANGES TO INVESTMENT OBJECTIVE — The Fund’s investment objective is fundamental and may not be changed by the Board of Directors without shareholder approval.

THE FUNDS	THE STOCK INDEX FUND IS MANAGED TO TRACK THE PERFORMANCE OF THE STANDARD & POOR’S 500 STOCK INDEX.

STOCK INDEX FUND

ASSET ALLOCATION

stock

PORTFOLIO CHARACTERISTICS

similar to the Standard & Poor’s 500 Stock Index

EXPECTED DEGREE OF SHARE PRICE VOLATILITY

high

TICKER

HSTIX

OBJECTIVE

The Stock Index Fund seeks to match, as closely as possible, before expenses, the performance of the Standard & Poor’s 500 Stock Index (the “Index”), which emphasizes stocks of large U.S. companies. The primary component of the Fund’s total return is likely to

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be capital appreciation (or depreciation). Any dividend or interest income is incidental to the pursuit of its objective.

Because the underlying investments — stocks and other securities that function like stocks — are inherently volatile, the Fund is appropriate for long-term investors who can tolerate fluctuations in the value of their investment.

STRATEGY

PORTFOLIO COMPOSITION — The Stock Index Fund invests all of its assets in the State Street Equity 500 Index Portfolio (the “Equity 500 Index Portfolio”), a separate investment company managed by SSgA Funds Management, Inc. (“SSgA”), a subsidiary of State Street Corp. and an affiliate of State Street Bank. The Equity 500 Index Portfolio’s investment objective is identical to the Stock Index Fund’s. In this document, statements regarding the Stock Index Fund’s investments refer to investments made by the Equity 500 Index Portfolio. We use the term Stock Index Fund to mean either the Stock Index Fund or the Equity 500 Index Portfolio.

The Stock Index Fund is not managed according to traditional methods of “active” investment management, which involve the buying and selling of securities based upon economic, financial and market analysis and investment judgment. Instead, the Stock Index Fund, using a “passive” or “indexing” investment approach, attempts to match, before expenses, the performance of the Index. The Index is a well-known stock market index that includes common stocks of 500 companies from several industrial sectors representing a significant portion of the market value of all stocks publicly traded in the United States. SSgA seeks a correlation of 0.95 or better between the Stock Index Fund’s performance before expenses and the performance of the Index (1.00 would represent perfect correlation.) See tracking error risk on page 14 for more information.

The Stock Index Fund intends to invest in all 500 stocks comprising the Index in proportion to their weighting in the Index. However, under various circumstances, it may not be possible or practicable to purchase all 500 stocks in those weightings. In those circumstances, the Stock Index Fund may purchase a sample of the stocks in the Index in proportions expected by the adviser to match generally the performance of the Index as a whole. In addition, from time to time stocks are added to or removed from the Index. The Stock Index Fund may sell stocks that are represented in the Index, or purchase stocks that are not yet represented in the Index in anticipation of their removal from or addition to the Index.

In addition, the Stock Index Fund may at times purchase or sell futures contracts on the Index, or options on those futures, in lieu of investing directly in the stocks making up the Index. For example, futures and options may be used to give the Fund flexibility in managing cash flow or exposure to equity securities prior to making direct investment in specific stocks. The Stock Index Fund may also, to the extent permitted by applicable law, invest in shares of other mutual funds whose investment objectives and policies are similar to those of the Stock Index Fund. The Stock Index Fund may also enter into other derivatives transactions, including the purchase or sale of options or enter into swap transactions, to assist in matching the performance of the Index.

MASTER-FEEDER STRUCTURE — The Stock Index Fund is a feeder index fund that invests all of its investable assets in a master index fund with the same investment objective. The master index fund purchases securities for investment. This structure works as follows:

This feeder index fund can withdraw its investment in the master index fund at any time if the Board of Directors determines that it is in the best interest of the Fund and its shareholders. If this happens, the Board may choose another master index fund, hire an investment adviser for the Fund or may otherwise invest the Fund’s assets according to the investment policies and restrictions described in this prospectus.

INDEXING — Indexing is different than an active management approach in that portfolio securities are selected based on their ability to keep the Stock Index Fund’s return in line with the return of the Index. SSgA does not make decisions based on its opinion of the securities’ investment potential.

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INDEX DESCRIPTION AND CONSTRUCTION — The Index is a well-known stock market index that includes common stocks of 500 companies from several industrial sectors representing a significant portion of the market value of all common stocks publicly traded in the United States, most of which are listed on the New York Stock Exchange, Inc. (the “NYSE”). Stocks in the Index are weighted according to their market capitalizations (i.e., the number of shares outstanding multiplied by the stock’s current price). The companies selected for inclusion in the Index generally have the largest market value within their respective industries. The composition of the Index is determined by Standard & Poor’s and is based on such factors as the market capitalization and trading activity of each stock and its adequacy as a representation of stocks in a particular industry group, and may be changed from time to time. “Standard & Poor’s(R),” “S&P,” “S&P 500,” “Standard & Poor’s 500” and “500” are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by the Stock Index Fund. The Stock Index Fund is not sponsored, endorsed, sold or promoted by S&P, and S&P makes no representation regarding the advisability of investing in the Stock Index Fund.

RISKS

An investment in the Stock Index Fund is subject to the following general risks:

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INVESTMENT RISK—the chance the value of an investment will decline in response to a company, industry or market setback. For example, the value of the stock market as a whole could decline. It is also possible that returns for large-company stocks, the primary driver of performance for the Index and therefore for the Stock Index Fund, could trail returns on other types of investments. As is true for other specific market sectors, large-company stocks tend to go through cycles of outperformance or underperformance relative to the full stock market. These periods can last for several years. An investment in the Stock Index Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The value of an investment in the Stock Index Fund will fluctuate up and down. When you sell your shares of the Stock Index Fund, they could be worth less than what you paid for them.

-	TRACKING ERROR RISK—the chance the Stock Index Fund’s return will not closely track the return of the Index. The leading causes of tracking error are...

-	expenses—The Index is a hypothetical portfolio and incurs no expenses. The Stock Index Fund has to pay for trading, accounting, recordkeeping and other services.

-	composition—The composition of the Index and the stocks held by the Stock Index Fund may occasionally diverge.

-	cash flows—The Stock Index Fund’s ability to closely trail the Index may be affected by the timing and magnitude of cash flows in to and out of the Stock Index Fund.

Some of the types of securities in which the Stock Index Fund invests pose specific risks. These include...

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FUTURES AND OPTIONS—The Stock Index Fund may buy and sell futures contracts on the Index and options on these futures contracts. Futures and options are agreements to buy or sell units of an index at an agreed upon price on a specific future date. With a futures contract, the Stock Index Fund is obligated either to buy or sell the security at the agreed upon terms or to sell the contract to another party (at a loss or gain) before the settlement date. With an option agreement, the Stock Index Fund has the right but not the obligation to buy or sell the security at the agreed upon terms. The Stock Index Fund uses futures and options as a way of sharing in the performance of the Index without owning all Index securities directly. This strategy enhances the Stock Index Fund’s ability to track the Index and improves liquidity. Options and futures prices can be highly volatile, and the loss from an investment in futures could be greater than the contract’s original cost. To mitigate these risks, the Stock Index Fund will not use options or futures for speculative purposes or as leveraged investments that would further magnify the gains or losses of these investments. The Stock Index Fund will invest only in futures and options whose values are tied to the Index. The Stock Index Fund invests in futures and options to keep cash on hand to meet shareholder redemptions or other needs while maintaining exposure to the stock market.

CHANGES TO INVESTMENT OBJECTIVE — The Stock Index Fund’s investment objective is not fundamental and may be changed by the Board of Directors without shareholder approval.

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THE FUNDS	THE VALUE FUND INVESTS PRIMARILY IN STOCKS AND STOCK PRICES FLUCTUATE WITH BUSINESS, MARKET AND ECONOMIC CONDITIONS. THE FUND’S SHARE PRICE CAN RISE AND FALL SIGNIFICANTLY OVER THE SHORT TERM, REFLECTING CHANGES IN THE VALUE OF THE UNDERLYING INVESTMENTS.

VALUE FUND

ASSET ALLOCATION

stock

PORTFOLIO CHARACTERISTICS large- and medium-sized, U.S.-based companies

INVESTMENT STYLE

value

EXPECTED DEGREE OF SHARE PRICE VOLATILITY

high

TICKER

HOVLX

OUR APPROACH TO VALUE INVESTING—This Fund invests in stocks of companies selling below what RE Advisers believes to be fundamental value and poised for share price improvement. RE Advisers considers many factors in determining whether a stock is underpriced relative to its fundamental value, including:

-	the relationship of a company’s potential earning power to the current market price of its stock

-	the company’s current financial ratios relative to either its historical results or to the current ratios for other similar companies

-  any competitive advantages, including well-recognized trademarks or brand names.

There are a number of reasons a stock may be trading at a discount. The company may be experiencing a temporary earnings decline, its industry may be out of favor due to short-term market or economic conditions or it may have drawn unfavorable publicity.

RISKS

An investment in the Value Fund is subject to the following general risks:

-	INVESTMENT RISK—the chance the value of an investment will decline in response to a company, industry or market setback.

-	MANAGER RISK—the chance the manager’s decisions, particularly security selection, will cause the Fund to underperform other similar investments.

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STYLE RISK—the chance that returns on stocks within the specific sectors in which the Fund invests (medium-and large-sized companies, value investments) will trail returns from other groups or the market overall. Periods of relative over- or underperformance tend to be cyclical and may last for several years.

Some types of securities in which the Fund invests pose specific risks. These include...

-

REPURCHASE AGREEMENTS—A repurchase agreement is essentially a short-term loan collateralized by securities. The buyer, in this case the Fund, purchases securities with an agreement that the seller will buy them back at a mutually agreed upon price and time. If the seller were to go bankrupt or default, the Fund could experience costs or delays in liquidating the security and might incur a loss if the security had declined in value.

-

U.S. DOLLAR-DENOMINATED DEBT SECURITIES OF FOREIGN ISSUERS—These securities may respond negatively to adverse foreign political or economic developments. In the case of foreign companies not registered in the U.S., there is generally less publicly available information regarding the issuer, and foreign companies are subject to different accounting, auditing and financial reporting standards. These conditions may have an impact on rating organizations’ and RE Adviser’s ability to accurately assess and monitor an issuer’s financial condition.

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AMERICAN DEPOSITORY RECEIPTS (ADRs)—ADRs are U.S. dollar-denominated certificates representing shares of stock in a foreign company. ADRs are traded on domestic stock exchanges or in the U.S. over-the-counter market. ADRs offer certain advantages over direct ownership in foreign companies. First, ADRs are easily transferable and quotes are readily available. Second, issuers are subject to the same auditing, accounting and financial reporting standards as a U.S.-based company. However, as with other U.S. dollar-denominated securities of foreign issuers, ADRs may respond negatively to adverse foreign political or economic developments.

-	WHEN-ISSUED SECURITIES—The Fund may purchase securities on a when-issued basis. In this case, the price of the security is fixed at the time of the commitment, but delivery and payment may take place up to 90 days later. There is a risk the value of the security will decline during this period.

-	OTHER MUTUAL FUNDS—The Fund may invest up to 5% of total assets in any one mutual fund and up to 10% of assets in all mutual funds. The Fund’s return on its investment will reflect the performance of and operating expenses incurred by the other investment companies.

The Fund has adopted certain policies to reduce risk. The Fund will not...

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-	purchase more than 10% of the outstanding voting securities of any one issuer. This restriction applies to 75% of the Fund’s total assets and does not apply to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.

-	borrow more than 10% of its total assets. The Fund will only borrow in order to facilitate redemption requests that might otherwise require the Fund to sell securities at a time that would be disadvantageous.

CHANGES TO INVESTMENT OBJECTIVE—The Fund’s investment objective is fundamental and may not be changed by the Board of Directors without shareholder approval.

SMALL-COMPANY STOCKS HAVE STRONG GROWTH POTENTIAL, BUT THIS AGGRESSIVE INVESTMENT APPROACH ENTAILS GREATER RISK.

-	U.S. dollar-denominated securities of foreign issuers, including American Depository Receipts (ADRs)
-	high-quality money market securities
-	investment-grade debt securities convertible into or exchangeable for common stocks.

See “Risks” for more information on specific types of securities.

FOCUS ON SMALL-CAPITALIZATION COMPANIES — The Small-Company Stock Fund focuses on companies with market capitalizations of $2 billion or less. On December 31, 2004, the average market capitalization for companies held in the Fund’s portfolio was $1.8 billion. Market capitalization is a measure of the company’s total stock market value. It is calculated by multiplying the share price by the number of shares outstanding.

OUR APPROACH TO VALUE INVESTING — This Fund invests in stocks of companies selling below what RE Advisers believes to be fundamental value and poised for share price improvement. RE Advisers considers many factors in determining whether a stock is underpriced relative to its fundamental value, including:

-	the relationship of a company’s potential earning power to the current market price of its stock

-	the company’s financial ratios relative to either the company’s historical results or to the current ratios for other similar companies
-	any competitive advantages, including well-recognized trademarks or brand names.

There are a number of reasons a stock may be trading at a discount. The company may be experiencing a temporary earnings decline, its industry may be out of favor due to short-term market or economic conditions or it may have drawn unfavorable publicity.

RISKS

An investment in the Small-Company Stock Fund is subject to the following general risks:

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INVESTMENT RISK—the chance the value of an investment will decline in response to a company, industry or market setback. The Fund’s value orientation could potentially limit volatility, since a stock already selling at a low valuation relative to expectations may not fall as far in response to a setback as one that was selling at a high valuation.

-	MANAGER RISK—the chance the manager’s decisions, particularly security selection, will cause the Fund to underperform other similar investments.

-	STYLE RISK—the chance that returns on stocks within the specific sectors in which the Fund invests (small-sized companies, value investments) will trail returns from other groups or the market overall. Periods of relative over- or underperformance tend to be cyclical and may last for several years.

Some of the types of securities in which the Fund invests pose specific risks. These include...

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REPURCHASE AGREEMENTS—A repurchase agreement is essentially a short-term loan collateralized by securities. The buyer, in this case the Fund, purchases securities with an agreement that the seller will buy them back at a mutually agreed upon price and time. If the seller were to go bankrupt or default, the Fund could experience costs or delays in liquidating the security and might incur a loss if the security had declined in value.

-

U.S. DOLLAR-DENOMINATED DEBT SECURITIES OF FOREIGN ISSUERS—These securities may respond negatively to adverse foreign political or economic developments. In the case of foreign companies not registered in the U.S., there is generally less publicly available information regarding the issuer, and foreign companies are subject to different accounting, auditing and financial reporting standards. These conditions may have an impact on rating organizations’ and RE Adviser’s ability to accurately assess and monitor an issuer’s financial condition.

-	AMERICAN DEPOSITORY RECEIPTS (ADRs)—ADRs are U.S. dollar-denominated certificates representing shares of stock in a foreign company. ADRs are traded on domestic stock exchanges or in the U.S. over-the-counter market. ADRs offer certain

17

advantages over direct ownership in foreign companies. First, ADRs are easily transferable and quotes are readily available. Second, issuers are subject to the same auditing, accounting and financial reporting standards as a U.S.-based company. However, as with other U.S. dollar-denominated securities of foreign issuers, ADRs may respond negatively to adverse foreign political or economic developments.

-	WHEN-ISSUED SECURITIES—The Fund may purchase securities on a when-issued basis. In this case, the price of the security is fixed at the time of the commitment, but delivery and payment may take place up to 90 days later. There is a risk the value of the security will decline during this period.

-	OTHER MUTUAL FUNDS—The Fund may invest up to 5% of total assets in any one mutual fund and up to 10% of assets in all mutual funds. The Fund’s return on its investment will reflect the performance of and operating expenses incurred by the other investment companies.

The Fund has adopted certain policies to reduce risk. The Fund will not...

-	purchase more than 10% of the outstanding voting securities of any one issuer. This restriction applies to 75% of the Fund’s total assets and does not apply to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.

-	borrow more than 10% of its total assets. The Fund will only borrow in order to facilitate redemption requests that might otherwise require the Fund to sell securities at a time that would be disadvantageous.

CHANGES TO INVESTMENT OBJECTIVE—The Fund’s investment objective is fundamental and may not be changed by the Board of Directors without shareholder approval.

THE FUNDS    INVESTING IN INTERNATIONAL STOCKS CAN ENHANCE PORTFOLIO DIVERSIFICATION.

INTERNATIONAL STOCK INDEX FUND

ASSET ALLOCATION

international stock

PORTFOLIO CHARACTERISTICS

similar to the MSCI(R) EAFE(R) Index

appropriate for long-term investors who can tolerate fluctuations in the value of their investment.

STRATEGY

PORTFOLIO COMPOSITION—The International Stock Index Fund invests all of its assets in the State Street MSCI(R) EAFE(R) Index Portfolio (the “MSCI(R) EAFE(R) Index Portfolio”), a separate investment company managed by SSgA Funds Management, Inc. (“SSgA”), a subsidiary of State Street Corporation and an affiliate of State Street Bank and Trust Company. The MSCI(R) EAFE(R) Index Portfolio’s investment objective is identical to the International Stock Index Fund’s. In this document, statements regarding the International Stock Index Fund’s investments refer to investments made by the MSCI(R) EAFE(R) Index Portfolio. We use the term International Stock Index Fund to mean either the International Stock Index Fund or the MSCI(R) EAFE(R) Index Portfolio.

The International Stock Index Fund uses a passive management strategy designed to track the performance of the Index. The Index is a well-known international stock market index that includes approximately 1,000 securities listed on the stock exchanges of 21 developed market countries (but not the United States).

The International Stock Index Fund is not managed according to traditional methods of “active” investment management, which involve the buying and selling of securities based upon economic, financial and market analysis and investment judgment. Instead, the International Stock Index Fund, using a “passive” or “indexing” investment approach, attempts to replicate, before expenses, the performance of the Index. SSgA seeks a correlation of 0.95 or better between the International Stock Index Fund’s performance and the performance of the Index; a figure of 1.00 would represent perfect correlation. See tracking error risk on page 24 for more information.

The International Stock Index Fund may invest in all of the stocks comprising the Index in proportion to their weightings in the Index. However, under various circumstances, it may not be possible or practicable to purchase all of those stocks in those weightings. In those circumstances, the Fund may purchase a sample of the stocks in the Index in proportions expected by the adviser to replicate generally the performance of the Index as a whole. In addition, from time to time stocks are added to or removed from the Index. The International Stock Index Fund may sell stocks that are represented in the Index, or purchase stocks that are not yet represented in the Index, in anticipation of their removal from or addition to the Index.

In addition, the International Stock Index Fund may at times purchase or sell futures contracts on the Index, or options on those futures, in lieu of investment directly in the stocks making up the Index. The Fund might do so, for example, in order to increase its investment exposure pending investment of cash in the stocks comprising the Index. Alternatively, the Fund might use futures or options on futures to reduce its investment exposure to the Index in situations where it intends to sell a portion of the stocks in its portfolio but the sale has not yet been completed. The Fund may also, to the extent permitted by applicable law, invest in shares of other mutual funds whose investment objectives and policies are similar to those of the MSCI(R) EAFE(R) Index Portfolio. The International Stock Index Fund may also enter into other derivatives transactions, including the purchase or sale of options or entering into swap transactions, to assist in replicating the performance of the Index.

MASTER-FEEDER STRUCTURE—The International Stock Index Fund is a feeder index fund that invests all of its investable assets in a master index fund with the same investment objective. The master index fund purchases securities for investment. This structure works as follows:

This feeder index fund can withdraw its investment in the master index fund at any time if the Board of Directors determines that it is in the best interest of the Fund and its shareholders. If this happens, the Board may choose another master index fund, hire an investment adviser for the Fund or may otherwise invest the Fund’s assets according to the investment policies and restrictions described in this prospectus.

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INDEXING—Indexing is different than an active management approach in that portfolio securities are selected based on their ability to keep the International Stock Index Fund’s return in line with the return of the Index. SSgA does not make decisions based on its opinion of the securities’ investment potential.

INDEX DESCRIPTION AND CONSTRUCTION—The International Stock Index Fund’s model, the Index, is an arithmetic, market value-weighted average of the performance of approximately 1,000 securities listed on the stock exchanges of the countries determined by MSCI(R) to be “developed.” Although the list of developed markets may change over time, at the date of this prospectus, these included: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The designation of a market as “developed”, by MSCI(R), arises from several factors, the most common of which is minimum GDP per capita. The Index is structured to represent the opportunities available to an international investor in developed markets. MSCI(R) targets 85% of the available market capitalization of each country for inclusion in the index. Securities selected by MSCI(R) for inclusion in the Index must have acceptable levels of liquidity and free float. MSCI(R) also avoids inclusion of companies which have a significant ownership stake in another company since substantial cross-ownership can skew industry weights, distort country-level valuations and overstate a country’s true market size. The inclusion of a stock in the Index in no way implies that MSCI(R) believes the stock to be an attractive investment, nor is MSCI(R) a sponsor or in any way affiliated with the MSCI(R) EAFE(R) Index Portfolio. The Index is the exclusive property of MSCI(R). Morgan Stanley Capital International is a service mark of MSCI(R) and has been licensed for use by the International Stock Index Fund.

RISKS

An investment in the International Stock Index Fund is subject to the following general risks:

-	MARKET RISK—stock values could decline generally or could underperform other investments.

-	RISK OF INCREASED VOLATILITY—the share price performance of foreign stocks could be more volatile than that of U.S. stocks.

-	RISKS OF FOREIGN INVESTMENT—foreign investments are subject to a variety of risks not associated with investing in the United States, including currency fluctuations, economic or financial instability, lack of timely or reliable information and unfavorable political or legal developments.

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TRACKING ERROR RISK—the International Stock Index Fund’s return may not match the return of the Index for a number of reasons. For example, the Portfolio incurs a number of operating expenses not applicable to the Index, and incurs costs in buying and selling securities. The International Stock Index Fund may not be fully invested at times, either as a result of cash flows into the Fund or reserves of cash held by the Fund to meet redemptions. The return on the sample of stocks purchased by the adviser, or futures or other derivative positions taken by the adviser, to replicate the performance of the Index may not correlate precisely with the return of the Index.

Some types of securities in which the Fund invests pose specific risks. These include:

INDEX FUTURES CONTRACTS AND RELATED OPTIONS—The International Stock Index Fund may buy and sell futures contracts on the Index and options on those futures contracts. An “index future” is a contract to buy or sell units of an index at an agreed price on a specified future date. Depending on the change in value of the index between the time when the Fund enters into and terminates an index future or option transaction, the Fund realizes a gain or loss. Options and futures transactions involve risks. For example, it is possible that changes in the prices of futures contracts on the Index will not correlate precisely with changes in the value of the Index. In those cases, use of futures contracts and related options might decrease the correlation between the return of the International Stock Index Fund and the return of the Index. In addition, the International Stock Index Fund incurs transactions costs in entering into, and closing out, positions in futures contracts and related options. These costs typically have the effect of reducing the correlation between the return of the Fund and the return of the Index.

OTHER DERIVATIVE TRANSACTIONS—The International Stock Index Fund may enter into derivatives transactions involving options and swaps. These transactions involve many of the same risks as those described above under “Index Futures Contracts and Related Options.” In addition, because many of such transactions are conducted directly with counterparties and not on an exchange or board of trade, the International Fund’s ability to realize any investment return on such transactions may be dependent on the counterparty’s ability or willingness to meet its obligations.

20

REPURCHASE AGREEMENTS AND SECURITIES LOANS—The International Stock Index Fund may enter into repurchase agreements and securities loans. Under a repurchase agreement, the Fund purchases a debt instrument for a relatively short period (usually not more than one week), which the seller agrees to repurchase at a fixed time and price, representing the Fund’s cost plus interest. Under a securities loan, the Fund lends portfolio securities. The Fund will enter into repurchase agreements and securities loans only with commercial banks and with registered broker-dealers who are members of a national securities exchange or market makers in government securities, and in the case of repurchase agreements, only if the debt instrument is a U.S. government security. Although the adviser will monitor these transactions to ensure that they will be fully collateralized at all times, the Fund bears a risk of loss if the other party defaults on its obligation and the Fund is delayed or prevented from exercising its rights to dispose of the collateral. If the other party should become involved in bankruptcy or insolvency proceedings, it is possible that the Fund may be treated as an unsecured creditor and be required to return the underlying collateral to the other party’s estate.

CHANGES TO FUND POLICIES—The International Stock Index Fund’s Directors may change the Fund’s investment strategies and other policies without shareholder approval, except as otherwise indicated. The Directors will not materially change the Fund’s investment objective without shareholder approval.

THE FUNDS	THE NASDAQ-100 INDEX TRACKING STOCK(SM) FUND IS MANAGED TO TRACK THE PERFORMANCE OF THE NASDAQ-100 INDEX(R).

NASDAQ-100 INDEX TRACKING STOCK(SM) FUND

ASSET ALLOCATION

stock

PORTFOLIO CHARACTERISTICS

Similar to the Nasdaq-100 Index (R)

EXPECTED DEGREE OF SHARE PRICE VOLATILITY

very high

TICKER

HNASX

to keep the Fund’s return in line with the Index. The Fund’s manager does not make decisions based on his or her opinion of the securities’ investment potential.

Over the long term, the investment adviser seeks a correlation of .98 or better, before expenses, between the Fund’s total return and that of the Index. (A figure of 1.00 would indicate perfect correlation.)

INDEX DESCRIPTION AND CONSTRUCTION — The Fund’s model, the Nasdaq-100 Index(R), is composed of the 100 largest and most actively traded non-financial, domestic and international common stocks listed on the Nasdaq Stock Market. The Index was first published in 1985 and has achieved wide acceptance by both investors and market professionals. It reflects Nasdaq’s largest companies across major industry groups, including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. In order to limit domination of the Index by a few large stocks, the Index is calculated under a “modified capitalization weighted” methodology. This capitalization weight distribution is evaluated by Nasdaq on a quarterly basis and is re-balanced, if necessary.

To be eligible for inclusion in the Index, a security must be traded on the Nasdaq National Market tier of the Nasdaq Stock Market and meet several specific trading volume and issuer criteria. Index securities are ranked by market value and are evaluated annually based on these rankings to determine which securities will be included in the Index. The list of annual additions and deletions is publicly announced via a press release in the early part of December. Replacements are made effective after the close of trading on the third Friday in December. Moreover, if at any time during the year an Index security is no longer trading on the Nasdaq Stock Market, or is otherwise determined by Nasdaq to become ineligible for continued inclusion in the Index, the security will be replaced with the largest market capitalization security not currently in the Index that meets the Index eligibility criteria.

THE TRACKING STOCK — The Fund may invest in one or more securities that are designed to track the performance of the Index. One such tracking stock is issued by the Nasdaq-100 Trust(SM) (the “Trust”). The Trust is a separate, unmanaged investment company whose investment objective is to provide investment results that generally correspond to the price and yield performance of the component securities of the Index. The Trust’s assets consist of substantially all of the securities, in substantially the same weighting, as the component securities of the Index. The securities issued by the Trust that are purchased by the Fund are called Nasdaq-100 Shares(SM) and are traded on the American Stock Exchange (“Amex”) under the symbol “QQQQ”. Nasdaq-100 Shares(SM) represent proportionate undivided interests in the Trust’s assets.

RISKS

An investment in the Fund is subject to the following general risks:

-	INVESTMENT RISK — the chance the value of an investment will decline in response to company, industry or market setback. For example, the value of the stock market as a whole could decline. Stock market prices tend to move in cycles, with periods of rising stock prices and periods of falling stock prices. Market value may be affected by a variety of factors including: general stock market movements, changes in financial condition of an issuer or an industry, changes in perceptions about an issuer or an industry, interest rates and inflation, government policies and litigation. The value of an investment in the Fund will fluctuate up and down. When you sell your shares of the Fund, they could be worth more or less than what you paid for them.
	In the event of a trading halt, market quotations may not be readily available to value the Fund’s holdings of Nasdaq-100 Shares(SM). Under these and other appropriate circumstances, the Fund will value Nasdaq-100 Shares(SM) it owns based on their fair value as determined in good faith by the Board of Directors of the Fund. If Nasdaq-100 Shares(SM) were to be valued in this manner, it is possible that the Fund may not achieve its objective of matching, as closely as possible, the performance of the Index.

-	TRACKING ERROR — the chance that the Fund’s return will not closely track the Index’s return. The leading causes of tracking error are...

	-	expenses — The Index is a hypothetical portfolio and incurs no expenses. The Fund has to pay for trading, accounting, recordkeeping and other services.
	-	composition — the composition of the Index and the stocks held by the Fund may occasionally diverge.
	-	cash flows — the Fund’s ability to closely track the Index may be affected by the timing and magnitude of cash flows into and out of the Fund.

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THE FUNDS

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NON-DIVERSIFIED STATUS — the Fund is classified as “non-diversified.” As a result, the proportion of the Fund’s assets that may be invested in the securities of a single issuer is not limited. Depending upon the composition of the Index, a relatively high percentage of the Fund’s assets may be invested in the securities of a limited number of issuers. The Fund is therefore more susceptible to any single economic, political or regulatory occurrence and to the financial conditions of the issuers in which it invests. Although the Fund may invest a relatively high percentage of its assets in certain issuers as it seeks to track the Index, in order to meet federal tax requirements, at the close of each quarter, the Fund may not have more than 25% of its total assets invested in any one issuer and, with respect to 50% of its total assets, not more than 5% of its total assets invested in any one issuer.

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CONCENTRATION — the Fund may concentrate its assets in issuers of a single industry or industries. Currently, the Index generally includes a concentration of technology and technology-related companies. Consequently, a relatively large portion of the Fund’s assets may be invested in companies in this industry, such as companies that manufacture or design computers, computer-related equipment, communication systems, electronic products and other related products or in a particular issuer in this industry. The Fund therefore stands a greater chance of being hurt by adverse changes affecting the technology industry and those issuers. In the past, technology common stocks have experienced extreme price and volume fluctuations. This market volatility may adversely affect the price of the Fund’s shares.

Some of the types of securities in which the Fund invests pose specific risks. These include...

-	ADDITIONAL TRACKING RISK — The Fund does not control whether or how well the Trust tracks the Nasdaq-100 Index(SM).

-

BUYING AND SELLING NASDAQ-100 SHARES(SM) — the Fund may not be able to buy or sell Nasdaq-100 Shares(SM) during any period in which the Amex halts trading. An exchange may halt trading as the result of the activation of market-wide “circuit-breakers,” or whenever officials of the applicable exchange determine it is appropriate in the interest of a fair and orderly market or to protect investors. A circuit breaker is a measure instituted by the various exchanges to halt trading temporarily when the market falls by an amount based on a specified percentage decline in a specified period.

-

NET ASSET VALUE AND MARKET PRICE — the market value of the Nasdaq-100 Shares(SM) may differ from the net asset value of the Trust. This difference in price may be due to the fact that the supply and demand in the market for Nasdaq-100 Shares(SM) at any point in time is not always identical to the supply and demand in the market for the underlying basket of securities held by the Trust.

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FUTURES AND OPTIONS — futures and options are agreements to buy or sell securities at a set price on a set date. With a futures contract, the Fund is obligated either to buy or sell the security at the agreed upon terms or to sell the contract to another party (at a loss or gain) before the settlement date. With an option agreement, the Fund has the right but not the obligation to buy or sell the security at the agreed upon terms. The Fund may use futures and options as a way of sharing in the performance of the Index without owning all 100 securities directly. This strategy enhances the Fund’s ability to track the Index and improves liquidity. Options and futures prices can be highly volatile, and the loss from an investment in futures could be greater than the contract’s original cost. To mitigate these risks, the Fund will not use options or futures for speculative purposes or as leveraged investments that would further magnify the gains or losses of these investments. The Fund will invest only in futures and options whose values are tied to the Index. The Fund intends to buy futures in anticipation of buying stocks.

CHANGES TO INVESTMENT OBJECTIVE — The Fund’s investment objective is not fundamental and may be changed by the Board of Directors without shareholder approval.

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PERFORMANCE

The information below provides some indication of the risks of investing in each Fund by showing changes in each Fund’s performance from year to year and by showing how each Fund’s average annual returns for one, five and ten years or the period since the Fund’s inception compare with those of a broad measure of market performance.

RETURNS BEFORE TAXES do not reflect the effects of any income or capital gains taxes. All after-tax returns are calculated using the historical highest individual federal marginal income tax rates. They do not reflect the impact of any state or local tax. RETURNS AFTER TAXES ON DISTRIBUTIONS reflect the taxed return on the payment of dividends and capital gains. RETURNS AFTER TAXES ON DISTRIBUTIONS AND SALE OF FUND SHARES assume the shares were sold at period end, and, therefore, are also adjusted for any capital gains or losses incurred. RETURNS FOR MARKET INDICES do not include expenses, which are deducted from Fund returns, or taxes.

Your own actual after-tax returns will depend on your specific tax situation and may differ from what is shown here. After-tax returns are not relevant to investors who hold fund shares in tax-deferred accounts such as individual retirement accounts (IRAs) or employer-sponsored retirement plans.

Past performance, as measured by the Funds’ before- and after-tax returns, is not an indication or prediction of how the Funds will perform in the future.

DAILY INCOME FUND

Average Annual Total Returns for Periods Ended 12/31/04

[BAR CHART]

Best Quarter:

Worst Quarter:

For the Fund’s current yield, call 1-800-258-3030.

SHORT-TERM BOND FUND

Average Annual Total Returns for Periods Ended 12/31/04

[BAR CHART]

ended December 31, 2003 were as follows:

(c)	The fees for Stock Index Fund shown in this table and used in the example below reflect expenses of both the feeder fund and the master portfolio. The management fee represents the total expenses of the State Street Equity 500 Index Portfolio.

(d)	The fees for the International Stock Index Fund shown in this table and used in the example below reflect expenses of both the feeder fund and the master portfolio. The management fee represents the total expenses of the State Street MSCI® EAFE® Index Portfolio.

(e)	The Other Expenses for Stock Index Fund and International Stock Index Fund include a .25% Administrative Fee paid to RE Advisers.

EXAMPLE

The example is intended to help you compare the cost of investing in the Funds to the cost of investing in other mutual funds. The example assumes you invest $10,000 in a Fund with a redemption at the end of each time period. It also assumes each Fund has a 5% return each year and that the operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

Association (NRECA), a non-profit organization which serves and represents the nation’s consumer-owned rural electric cooperatives.

In 2004, the Funds paid RE Advisers the following investment management fees, expressed as a percent of fund assets:

RE Advisers serves as the administrator for the Stock Index Fund and the International Stock Index Fund. Pursuant to an administrative service agreement with each Fund, RE Advisers provides certain administrative services to the Funds and generally assists in all aspects of their operation. In 2003, RE Advisers charged each Fund a fee of .25% of net assets for its services, but waived a portion of the fee for Stock Index Fund and all of the fee for International Stock Index Fund in accordance with the Funds’ expense limitation agreements. After waivers the Stock Index Fund paid RE Advisers .08% and the International Stock Index Fund paid .00%.

PORTFOLIO MANAGERS

Portfolio managers oversee the Funds’ day-to-day operations.

Daily Income Fund

Patricia Murphy

Ms. Murphy has managed the Fund since 1998 and is a money market portfolio manager for RE Advisers and director of pension investments for NRECA. She has been with NRECA since 1997.

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

Douglas Kern

Mr. Kern has managed the Funds since their inception and has been a senior fixed-income portfolio manager for NRECA since 1985.

Value Fund, Small-Company Stock Fund and Nasdaq-100 Index Tracking Stock(SM) Fund

Peter Morris

Mr. Morris is a senior equity portfolio manager. He also serves as president and director of RE Advisers and vice president and chief investment officer of NRECA. He has been with NRECA since 1974.

Stuart Teach

Mr. Teach is a senior equity portfolio manager for RE Advisers and NRECA. He and Mr. Morris have co-managed the Funds since their inception. Mr. Teach also serves as vice president and director of RE Advisers. He has been with NRECA since 1985.

Mark Ashton

Mr. Ashton is an equity portfolio manager for RE Advisers and NRECA. He and co-managers Mr. Morris and Mr. Teach oversee the investment activities of the Value Fund, the Small-Company Stock Fund and the Nasdaq-100 Tracking Stock(SM) Fund. Mr. Ashton has been with RE Advisers and NRECA since 1999.

     The Statement of Additional Information provides additional information about the portfolio managers’ compensation, other accounts

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managed by the portfolio managers, and the portfolio managers’ ownership of securities in the Homestead Funds.

DISTRIBUTION SCHEDULE

Each Fund intends to distribute substantially all of its ordinary income and capital gains. You may elect to have distributions automatically reinvested in your Fund account. Whether reinvested or received, distributions are generally taxable to non-retirement account investors. We’ll mail you IRS Form 1099 at the end of January indicating the federal tax status of your income and capital gains distributions for the prior year. Distributions are declared and paid according to the following schedule:

Interest Income

Capital Gains

ALL FUNDS

If any, declared and paid no less frequently than annually

SHORT - TERM GOVERNMENT SECURITIES FUND

FINANCIAL HIGHLIGHTS

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

SHORT - TERM BOND FUND

FINANCIAL HIGHLIGHTS

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

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STOCK INDEX FUND

FINANCIAL HIGHLIGHTS

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

VALUE FUND

FINANCIAL HIGHLIGHTS

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

33

SMALL - COMPANY STOCK FUND

FINANCIAL HIGHLIGHTS

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

INTERNATIONAL STOCK INDEX FUND