1
EXHIBIT 9(G)
EXPENSE LIMITATION AGREEMENT
Expense Limitation Agreement, made as of the first day of March,
1998, by and between Homestead Funds, Inc., a Maryland corporation (the
"Homestead Funds"), on behalf of the Small Company Stock Fund (the "Fund"), and
RE Advisers Corporation, a Virginia corporation (the "Investment Manager").
WHEREAS, the Homestead Funds, on behalf of the Fund, and the
Investment Manager have entered into an Investment Management Agreement, dated
as of the first day of March, 1998, (the "Investment Management Agreement")
pursuant to which the Investment Manager will render investment management
services to the Fund for compensation based on the value of the net assets of
the Fund; and
WHEREAS, the Homestead Funds and the Investment Manager have
determined that it is appropriate and in the best interests of the Fund and its
shareholders to set a limit of the level of expenses to which the Fund will be
subject;
NOW THEREFORE, the parties hereto agree as follows:
1. State Expense Limit
1.1 Limitation. To the extent that the
aggregate expenses of every character incurred by the Fund in any fiscal year,
including but not limited to investment management fees of the Investment
Manager (but excluding interest, taxes, brokerage commissions and other
expenditures which are capitalized in accordance with generally accepted
accounting principles, and other extraordinary expenses not incurred in the
ordinary course of the Fund's business) (the "Fund Operating Expenses"), exceed
the lowest applicable limit actually enforced by any state in which the Fund's
shares are qualified for sale (the "State Expense Limits") such excess amount
(the "Excess Amounts") shall be the liability of the Investment Manager.
1.2 Method of Computation. To determine the
Investment Manager's liability for the Excess Amount, the Fund Operating
Expenses shall be annualized monthly as of the last day of the month. If the
annualized Fund operating Expenses for any month exceed the State Expense
Limit, the Investment Manager shall first waive or reduce its investment
management fee for such month, as appropriate, to the extent necessary to pay
such Excess Amount. In the event the Excess Amount exceeds the amount of the
investment management fee for such month, the Investment Manager, in addition
to waiving its entire investment management fee for such month, shall also
remit
2
Page 2
to the Fund the difference between the Excess Amount and the amount due as the
investment management fee; provided, however, that an adjustment shall be made
on or before the last day of the first month of the next succeeding fiscal year
if the aggregate Fund Operating Expenses for the fiscal year do not exceed the
State Expense Limit.
2. Operating Expense Limit.
2.1 Limitation. To the extent that Fund
Operating Expenses in any year exceed 1.50% of the Fund's average daily net
assets (the "Operating Expense Limit"), such excess amount (the "Excess
Operating amount") shall be the liability of the Investment Manager.
2.2 Method of Computation. To determine the
Investment Manager's liability for the Excess Operating Amount, the Fund
Operating Expenses shall be annualized monthly as of the last day of the month.
If the annualized Fund Operating Expenses for any month exceed the Operating
Expense Limit, the Investment Manager shall first waive or reduce its
investment management fee for such month, as appropriate, to the extent
necessary to pay such Excess Operating Amount. In the event the Excess
Operating Amount exceeds the amount of the investment management fee for the
month, the Investment Manager, in addition to waiving its entire investment
management fee for such month, shall also assume as its own expense and
reimburse the Fund for the difference between the Excess Operating Amount and
the investment management fee up to the amount of the State Expense Limit;
provided, however, that an adjustment shall be made on or before the last day
of the first month of the next succeeding fiscal year if the aggregate Fund
Operating Expenses for the fiscal year do not exceed the Operating Expense
Limit.
3. Termination of Agreement. This Agreement shall continue
in effect for a period of one year from the date of execution. This Agreement
shall continue thereafter from month to month and may then be terminated by
either party without payment of any penalty, upon 90 days prior notice in
writing to the other party at its principal place of business; provided that,
in the case of termination by the Homestead Funds, be authorized by resolution
of the Board of Homestead Funds.
3
Page 3
4. Miscellaneous.
4.1 Captions. The captions in this Agreement
are included for convenience or reference only and in no other way define or
delineate any of the provisions hereof or otherwise affect their construction
or effect.
4.2 Interpretation. Nothing herein contained
shall be deemed to require the Homestead Funds to take any action contrary to
its Articles of Incorporation or By-Laws, or any applicable statutory or
regulatory requirement to which it is subject or by which it is bound, or to
relieve or deprive the Board of Directors of its responsibility for and control
of the conduct of the affairs of the Homestead Funds.
4
Page 4
4.3 Definitions. Any questions of
interpretation of any term or provision of this Agreement, including but not
limited to the investment management fee, the computations of net asset values
and the allocation of expenses, having a counterpart in or otherwise derived
from the terms and provisions of the Investment Management Agreement, shall
have the same meaning as and be resolved by reference to such agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their respective officers thereunto duly authorized and their
respective corporate seals to be hereunto affixed, as of the day and year first
above written.
ATTEST: HOMESTEAD FUNDS, INC.
on behalf of the Small Company
Stock Fund
By:
-------------------------------- --------------------------------------
Xxxxx X. Xxxxxx, Secretary Xxxxxxx X. XxXxxxxxx, Vice
President
ATTEST: RE ADVISERS CORPORATION
By:
-------------------------------- --------------------------------------
Xxxxx X. Xxxxxx, Secretary Xxxxxxx X. Xxxxxxxx, President
