AMENDED AND RESTATED INVESTMENT MANAGEMENT AGREEMENT
Exhibit. d(9)
AMENDED AND RESTATED
INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT
Investment Management Agreement made as of the 28th day of September, 2007, by and between
Homestead Funds, Inc., a Maryland corporation (the “Company”), on behalf of the International Value
Fund (the “Fund”), and RE Advisers Corporation, a Virginia corporation (the “Investment Manager”).
WHEREAS, the Company engages in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended (the “1940 Act”); and
WHEREAS, the Company is a series type investment company currently consisting of eight series,
each with its own investment program, policies, and investment objectives, and restrictions; and
WHEREAS, the Investment Manager is engaged principally in the business of rendering investment
management services and is registered as an investment manager under the Investment Advisers Act of
1940, as amended; and
WHEREAS, the Fund had been since its inception a passively managed index fund and the Company
previously retained the Investment Manager to render administrative services to the Fund pursuant
to an agreement dated January 23, 2001 and amended and restated as of September 15, 2004 and June
12, 2006; and
WHEREAS, because the Fund is converting to an actively managed fund, the Company desires to
retain the investment management services of the Investment Manager with respect to the Fund and
the Investment Manager desires to render such services to the Fund;
NOW THEREFORE, the parties hereto agree as follows:
1. Duties and Responsibilities of the Investment Manager.
1.1 Investment Advisory Services. The Investment Manager shall act as the investment
manager to the Fund and shall, subject to the supervision of the Company’s Board of Directors,
provide the following investment advisory services: (i) supervise and monitor the investment
activities of any subadviser approved for the Fund by the Board of Directors of the Company; (ii)
delegate all or any portion of its responsibilities hereunder to one or more subadvisers subject to
the supervision and oversight of the Investment Manager and the Board of Directors of the Company;
(iii) formulate and implement a continuing program for the management of the assets and resources
of the Fund in a manner consistent with the Fund’s investment objectives, investment program,
policies and restrictions, that may be amended and updated, from time to time, to reflect changes
in financial and economic conditions; (iv) make all determinations with respect to the investment
of the Fund’s assets in accordance with applicable law and the Fund’s
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investment objectives, investment program, policies, and restrictions as provided in the Company’s
Prospectus and Statement of Additional Information, as amended from time to time, provisions of the
Internal Revenue Code of 1986, as amended, relating to regulated investment companies, and such
other limitations as the Board of Directors of the Company may impose by notice in writing to the
Investment Manager; (v) make all determinations as to the purchase and sale of the portfolio
securities, including advising the Board of Directors as to certain matters involving the Fund’s
portfolio securities that are not in the nature of investment decisions; (vi) obtain and evaluate
such business and financial information relating to the economy, industries, businesses, securities
markets, and securities as it may deem necessary or useful in discharging its responsibilities
under this Agreement; (vii) furnish the Board of Directors with periodic reports concerning the
Investment Manager’s economic outlook and investment strategy, as well as information concerning
the Fund’s portfolio activity and investment performance; (viii) determine the creditworthiness of
the issuers, obligors, or guarantors of money market and debt securities utilized by the Fund; and
(ix) evaluate the creditworthiness of any entities with which the Fund proposes to engage in
repurchase transactions. In furtherance of this duty, the Investment Manager, as agent and
attorney-in-fact with respect to the Fund, is authorized, in its discretion and without prior
consultation with the Fund and the Board of Directors of the Company to buy, sell, exchange,
convert for the Fund’s use, and otherwise trade in any money market instruments’ bonds, and other
securities or assets, and to select the broker-dealers, underwriters or issuers to be used and to
place orders and negotiate commissions (if any) for the execution of transactions in securities
with or through such broker-dealers, underwriters, or issuers.
1.2 Administrative Services. In addition to investment advisory services set forth
above in 1.1, the Investment Manager shall oversee the administration of all aspects of the
Company’s business and affairs with respect to the Fund and shall provide certain services required
for effective administration of the Company with respect to the Fund, in connection therewith, the
Investment Manager shall:
1.2.1 Office and Other Facilities. Furnish, without cost to the Company, or provide
and pay the cost of, such office facilities, furnishings, and office equipment as are adequate for
the Company’s needs.
1.2.2 Personnel. Provide, without additional remuneration from or other cost to the
Company, the services of individuals competent to perform all of the Company’s executive,
administrative, compliance, and clerical functions that are not covered by 2.2.9 below or performed
by or through employees or other persons or agents engaged by the Company (including, e.g., the
custodian, accounting services agent, transfer agent, dividend disbursing agent and shareholder
servicing agent).
1.2.3 Agents. Assist the Company in selecting, coordinating the activities of,
supervising, and acting as liaison with any other persons and agents engaged by the Company,
including the Company’s custodian, accounting services agent, transfer agent, dividend disbursing
agent, shareholder servicing agent, independent accountants, and independent legal counsel. The
Investment Manager shall also monitor the functions
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of such persons and agents, including, in particular, the accounting services agent in its
evaluation of the Fund’s portfolio securities.
1.2.4 Directors and Officers. Authorize and permit the Investment Manager’s
directors, officers and employees who may be elected or appointed as directors or officers of the
Company to serve in such capacities, without remuneration from or additional cost to the Company.
1.2.5 Books and Records. Ensure that all financial, accounting, corporate, and other
records required to be maintained and preserved by the Company or on its behalf will be maintained
and preserved by the Company or on its behalf will be maintained in accordance with applicable laws
and regulations and that the Company’s corporate existence will be maintained.
1.2.6 Reports to the Company. Furnish to or place at the disposal of the Company such
information, reports, evaluations, analyses, and opinions relating to its administrative functions
as the Company may, at any time or from time to time, reasonably request or as the Investment
Manager may deem helpful to the Company.
1.2.7 Reports and Filings. Assist in the development and preparation of all reports
and communications by the Company to the Fund’s shareholders and all reports and filings necessary
to maintain the registrations and qualifications of the Company’s shares under federal and state
law.
2. Allocation of Expenses
2.1 Expenses Paid by Investment Manager.
2.1.1 Salaries and Fees of Directors and Officers. As between the Fund and the
Investment Manager, the Investment Manager shall pay all salaries, expenses and fees, if any of the
directors, officers or employees of the Investment Manager who are directors, officers or employees
of the Company. The Investment Manager has obtained such personnel through an agreement with
National Rural Electric Cooperative Association, which has primary responsibility for the salaries,
expenses and fees of persons provided to serve as directors, officers and employees of the
Investment Manager.
2.1.2 Waiver or Assumption and Reimbursement of the Company’s Expenses by
Investment Manager. The waiver of assumption and reimbursement by the Investment Manager of
any expense of the Company that the Investment Manager is not required by this Agreement to waive,
or assume and reimburse, shall not obligate the Investment Manager to waive, or assume or
reimburse, the same or any similar expense of the Company on any subsequent occasion, unless so
required pursuant to a separate agreement between the Company and the Investment Manager.
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2.1.3 Organizational Expenses. The Investment Manager shall pay or assume all
organizational expenses of the Company.
2.2 Expenses paid by the Company. The Company, with respect to the Fund, shall bear
all expenses of its operations and business not specifically waived, assumed or agreed to be paid
by the Investment Manager as provided in this Agreement or any other agreement between the Company
and the Investment Manager. In particular, the expenses hereby allocated to the Company, with
respect to the Fund, include, but are not limited to:
2.2.1 Custody and Accounting Services. All fees and expenses of depositories,
custodians, accounting service agents, and other agents for the transfer, receipt, safekeeping,
servicing of and accounting for the Fund’s cash, securities, and other property, including, among
other things, fees and expenses for the calculation of standardized effective and compound yield
quotations for the Fund, maintenance of ledgers, position and income reports, and settlement of
fund purchases and sales.
2.2.2 Transfer Agency, Shareholder Servicing, and Dividend Disbursement. All costs of
establishing, maintaining, and servicing accounts of shareholders of the Fund, including the Fund’s
proportionate share of all fees and expenses of the Company’s transfer agent, shareholder services
agent, dividend disbursing agent and any other agents engaged by the Company to service such Fund
accounts. In addition, the Company shall reimburse the Investment Manager and charge to the Fund
the Fund’s proportionate share of all expenses incurred by the Investment Manager in responding to
telephonic and written inquiries from, and in mailing information to Fund shareholders and others
who may request information on behalf of Fund shareholders, regarding matters such as shareholder
account or transaction status, net asset value of Fund shares, Fund performance, and general
information about the Fund.
2.2.3 Shareholder Reports. All costs of preparing, setting in type, printing, and
distributing reports and other communications to shareholders of the Fund.
2.2.4 Prospectuses. All costs of preparing, setting in type, printing and mailing to
shareholders of the Fund annual or more frequent revisions of the Company’s Prospectus and
Statement of Additional Information and any supplements thereto.
2.2.5 Shareholder Meetings. All costs incidental to holding meetings of shareholders
of the Fund, including the printing of notices and proxy materials, and proxy solicitations
therefore.
2.2.6 Pricing and Portfolio Valuation. All costs of daily valuation of the individual
portfolio securities of the Fund and daily computation of the net asset value per share of the
Fund, including (i) a proportionate share of the cost of any equipment obtained by the Company, the
Investment Manager or agents of the Company or a proportionate share of the cost of any equipment
currently owned by the Investment
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Manager that will be used to price the Fund’s shares or value the Fund’s assets, or (ii) the cost
of the services of any agents engaged by the Company for the purpose of pricing Fund shares or
valuing the assets of the Fund.
2.2.7 Communications. All charges for equipment or services used for communications
between the Investment Manager or the Company and the custodian, accounting services agent,
transfer agent, shareholder servicing agent, dividend disbursing agent, or any other agent engaged
by the Company to provide services to the Fund.
2.2.8 Independent Legal and Accounting Fees. The Fund’s proportionate share of all
charges for services and expenses of the Company’s independent legal counsel and independent
accountants.
2.2.9 Directors’ Fees and Expenses. The Fund’s proportionate share of all
compensation of directors (other than those directors affiliated with the Investment Manager), all
expenses incurred in connection with their services as directors, and all expenses of meetings of
the Board of Directors and committees of the Board of Directors.
2.2.10 Federal Registration Fees. The Fund’s proportionate share of all fees and
expenses of maintaining the registration of the Company under the 1940 Act and maintaining the
registration of the Fund’s shares or registering additional shares of the Fund under the Securities
Act of 1933, as amended (the “1933 Act”), including all fees and expenses incurred in connection
with the preparation, setting in type, printing, and filing of any post-effective amendments or
supplements to the Registration Statement, Prospectus, and Statement of Additional Information for
the Company under the 1933 Act or the 1940 Act that may be prepared from time to time.
2.2.11 State Registration Fees. The Fund’s proportionate share of all fees and
expenses of maintaining the registration and qualification of the Company and of the Fund’s shares
for sale under the securities laws of various states and jurisdictions and registering and
qualifying additional shares of the Fund, and of maintaining the registration and qualification of
the Company under all other laws applicable to the Company or its business activities.
2.2.12 Issue, Redemption, and Transfer of the Fund’s Shares. All expenses incurred in
connection with the issue, redemption, and transfer of the Fund’s shares, including the expenses of
confirming all share transactions and of transmitting share certificates for the Fund.
2.2.13 Bonding and Insurance. All expenses of bond, liability, and other insurance
coverage required by law or regulation or deemed advisable by the Board of Directors of the
Company, including, without limitation, such bond, liability and other insurance expense that may
from time to time be allocated to the Fund in a manner approved by its Board of Directors.
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2.2.14 Brokerage Commissions. All brokers’ commissions, if any, and other charges
incident to the purchase or sale of the Fund’s portfolio securities.
2.2.15 Taxes. The Fund’s proportionate share of all taxes or governmental fees
payable to federal, state or other governmental agencies, domestic or foreign, including issue,
stamp, or transfer taxes.
2.2.16 Trade Association Fees. The Fund’s proportionate share of all fees, dues and
other expenses incurred in connection with the Company’s trade association or other membership in
any investment organization.
2.2.17 Nonrecurring and Extraordinary Expenses. The Fund’s proportionate share of
such nonrecurring and extraordinary expenses as may arise, including the costs of actions, suits,
or proceedings to which the Company is a party and the expenses the Company may incur as a result
of its legal obligation to provide indemnification to its officers, directors, employees, and
agents.
3. Management Fee.
3.1 Compensation. The Company, with respect to the Fund, shall pay the Investment
Manager as compensation for all services rendered, facilities provided and expenses waived or
assumed and reimbursed by the Investment Manager, investment management fees computed as follows,
based on the value of the average daily net assets of the Fund:
3.1.1 Rate. The fees with respect to the Fund shall be at the following annualized
rates: .75% of average daily net assets up to $300 million; .65% of average daily net assets up to
the next $100 million; .55% of average daily net assets up to the next $100 million, and .50% in
excess of $500 million.
3.1.2 Method of Computation. The fee shall accrue each calendar day and the sum of
the daily fee accruals for the Fund shall be paid monthly to the Investment Manager in arrears
within 30 days after the last business day of the relevant month. The daily fee accruals shall be
computed by multiplying the fraction of one over the number of calendar days in the year by the
applicable annual rates for the Fund, described in subparagraph 3.1.1, above, and multiplying the
product by the net assets of the Fund as determined in accordance with the Company’s Prospectus as
of the close of business on the previous business day on which the Company was open for business.
3.1.3 Proration of Fee. If this Agreement becomes effective or terminates before the
end of any month, the fee for the period from the effective date to the end of such month or from
the beginning of such month to the date of termination, as the case may be, shall be prorated
according to the proportion which such period bears to the full month in which such effectiveness
or termination occurs.
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4. Brokerage. Subject to seeking best execution, and subject to any policies or procedures
as then approved by the Company’s Board of Directors, the Investment Manager, in carrying out its
duties under Paragraph 1.1, may cause the Fund to pay a broker-dealer that furnishes brokerage and
research services (as such services are defined under Section 28(e) of the Securities Exchange Act
of 1934, as amended (the “1934 Act”)) a higher commission than that which might be charged by
another broker-dealer that does not furnish brokerage and research services or which furnished
brokerage and research services deemed to be of lesser value, if the Investment Manager determines
in good faith that the amount of such commission is reasonable in relation to the value of the
brokerage and research services provided by the broker-clearer viewed in terms of either that
particular transaction or the overall responsibilities of the Investment Manager with respect to
the other accounts, if any, as to which it exercises investment discretion (as such term is defined
under Section 3(a)(35) of the 1934 Act).
5. Investment Manager’s Use of the Service of Others. The Investment Manager may at its
own cost (except as contemplated by Paragraph 4 of this Agreement) employ, retain or otherwise
avail itself of the services or facilities of other persons or organizations for the purpose of
providing the Investment Manager, the Company, or the Fund with (i) such subadvisory services
referred to in Paragraph 1.1; (ii) such statistical and other factual information; (iii) such
advice regarding economic factors and trends; (iv) such advice as to occasional transactions in
specific securities; or (v) such other information, advice or assistance as the Investment Manager
may deem necessary, appropriate or convenient for the discharge of its obligations hereunder or
otherwise helpful to the Company or the Fund, or in the discharge or the Investment Manager’s
overall responsibilities with respect to the other accounts for which it serves as an investment
manager.
6. Ownership of Records. All records required to be maintained and preserved by the
Company, with respect to the Fund, pursuant to the provisions of rules or regulations of the
Securities and Exchange Commission under Section 31(a) of the 1940 Act and maintained and preserved
by the Investment Manager on behalf of the Company, with respect to the Fund, are the property of
the Company and shall be surrendered by the Investment Manager promptly on request by the Company.
7. Reports to Investment Manager. The Company shall furnish or otherwise make available to
the Investment Manager such Prospectuses, Statements of Additional Information, financial
statements, proxy statements, reports, and other information relating to the business and affairs
of the Company, with respect to the Fund, as the Investment Manager may, at any time or from time
to time, reasonably require in order to discharge its obligations under this Agreement.
8. Services to Other Clients. Nothing herein contained shall limit the freedom of the
Investment Manager or any affiliated person of the Investment Manager to render investment
supervisory and corporate administrative services to other investment companies, to act as
investment counselor to other persons, firms or corporations, or to engage in other business
activities; however, so long as this Agreement or any extension,
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renewal or amendment hereof shall remain in effect or until the Investment Manager shall otherwise
consent, the Investment Manager shall be the only investment manager to the Company.
9. Limitation of Liability of Investment Manager. Neither the Investment Manager nor any
of its officers, directors, or employees, nor any persons performing executive, administrative,
trading, or other functions for the Company, with respect to the Fund or the Investment Manager (at
the direction or request of the Investment Manager) in connection with the Investment Manager’s
discharge of its obligations undertaken or reasonably assumed with respect to this Agreement, shall
be liable for any error of judgment or mistake of law or for any loss suffered by the Company, with
respect to the Fund, in connection with the matters to which this Agreement relates, except for
loss resulting from willful misfeasance, bad faith, or gross negligence in the performance of its
or their duties on behalf of the Company or from reckless disregard by the Investment Manager or
any such persons of the duties of the Investment Manager under this Agreement.
10. Term of Agreement. This Agreement shall continue in effect for a period of more than
two years only so long as such continuance is specifically approved at least annually by the Board
of Directors of the Company or by vote of a majority of the outstanding voting securities of the
Fund in accordance with the requirements of the 1940 Act, and in either event by the vote of a
majority of the Board of Directors of the Company who are not “interested persons” (as defined in
the 1940 Act and rules thereunder) of any such party, cast, in person, at a meeting called for the
purpose of voting on such approval.
Any approval of this Agreement by the holders of a majority of the outstanding voting
securities (as defined in the 1940 Act and rules thereunder) of the Fund shall be effective to
approve or continue this Agreement with respect to the Fund, notwithstanding (i) that a comparable
agreement has not been approved by the holders of a majority of the outstanding voting securities
of any other series of the Company and (ii) that this Agreement has not been approved by the vote
of a majority of the outstanding voting securities of the Company, unless such approval shall be
required by any other applicable law or otherwise. The Investment Manager shall furnish to the
Company, promptly upon its request, such information as may be reasonably necessary to evaluate the
terms of this Agreement or any extension, renewal or amendment thereof.
11. Amendment and Assignment of Agreement. This Agreement may not be amended without the
affirmative vote of a majority of the outstanding voting securities of the Fund, and this Agreement
shall automatically and immediately terminate in the event of its assignment.
12. Termination of Agreement. This Agreement may be terminated by either party hereto,
without the payment of any penalty, upon 60 days prior notice in writing to the other party;
provided, that in the case of termination by the Company such action shall have been authorized by
resolution of a majority of the Board of Directors of the
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Company who are not parties to this Agreement or interested persons of any such party, or by vote
of a majority of the outstanding voting securities of the Fund.
13. Miscellaneous.
13.1 Captions. The captions in this Agreement are included for convenience of
reference only and in no other way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
13.2 Interpretation. Nothing herein contained shall be deemed to require the Company
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 Company.
13.3 Definitions. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to interpretations
thereof, if any, by the United States courts or, in the absence of any controlling decision of any
such court, by rules, regulations or orders of the Securities and Exchange Commission validly
issued pursuant to the 1940 Act. Specifically, the terms “vote of a majority of the outstanding
voting securities”, “interested person”, “assignment”, and “affiliated person” shall have the
meanings assigned to them by Section 2(a) of the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is relaxed by a rule,
regulation or order of the Securities and Exchange Commission, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such rule, regulation or
order.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective
officers thereunto duly authorized as of the day and year first above written.
| ATTEST: | HOMESTEAD FUNDS, INC. | |||||
| On behalf of the International Value Fund | ||||||
/s/ Xxxxxxxx Xxxxxxxxxx
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By: | /s/ Xxxxx X. Xxxxxx
|
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| ATTEST: | RE ADVISERS CORPORATION | |||||
/s/ Xxxxxxxx Xxxxxxxxxx
|
By: | /s/ Xxxxx X. Xxxxxx
|
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