EXHIBIT 4.(f).
INVESTMENT MANAGEMENT AGREEMENT
Investment Management Agreement, made as of the first day of January,
2001, by and between Homestead Funds, Inc., a Maryland corporation (the
"Company"), on behalf of the NASDAQ 100 Index Tracking Stock 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 six series, the Daily Income Fund, the Value Fund, the Short-Term
Bond Fund, the Short-Term Government Securities Fund, the Small Company Stock
Fund and the Stock Index Fund, 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 registered as an investment
manager under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Company retained the Investment Manager pursuant to an
Investment Management Agreement initially dated as of September 17, 1990 and
desires to continue to retain the Investment Manager to render investment
management services (i.e., investment advisory and administrative services) to
it on behalf of the Fund in the manner and on the terms and conditions
hereinafter set forth;
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) 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; (ii) make all determinations with respect to the investment
of the Fund's assets in accordance with applicable law and the Fund's investment
objectives, investment program, policies, and restrictions as provided in the
Company's Prospectus and Statement of Additional Information, as amended from
time to
Page 2
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; (iii) make all determinations as to the purchase and sale of 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; (iv) 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; (v) 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; (vi) determine the creditworthiness of the
issuers, obligors, or guarantors of money market and debt securities utilized by
the Fund; and (vii) 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 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).
Page 3
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 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 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.
Page 4
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.
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
Page 5
of the Fund.
2.2.4 Prospectuses. All cost 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 therefor.
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 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,
Page 6
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 Funds 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.
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 Fees.
3.1 Compensation. The Company, with respect to the Fund,
Page 7
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: 0.25% of average daily net assets.
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 on the first business day of the next calendar 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.
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 which 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 Acted")) a higher commission than that which
might be charged by another broker-dealer which 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 Services 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
Page 8
other persons or organizations for the purpose of providing the Investment
Manager or the Company with (i) such statistical and other factual information;
(ii) such advice regarding economic factors and trends; (iii) such advice as to
occasional transactions in specific securities; (iv) or 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 of the Investment
Manager's overall responsibilities with respect to the other accounts 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, 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
Page 9
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 Manger or any such persons of the
duties of the Investment Manager under this Agreement.
10. Term of Agreement. This Agreement shall have a term of 12 months
beginning on the first day of the month following the affirmative vote of a
majority of the outstanding voting securities of the Fund approving this
Agreement. This Agreement shall thereafter continue from year to year, but 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 shares (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 shares 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 shares 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 maybe 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 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.
Page 10
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.
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 NASDAQ 100 Index
Tracking Stock Fund
/s/ XXXXX X. XXXXXX By: /s/ XXXXXXX X. XXXXXXXXX
---------------------------- --------------------------------
Xxxxx X. Xxxxxx, Secretary Xxxxxxx X. XxXxxxxxx, Vice-
President
Page 11
ATTEST: RE ADVISERS CORPORATION
/s/ XXXXX X. XXXXXX By: /s/ XXXXX XXXX
---------------------------- --------------------------------
Xxxxx X. Xxxxxx, Secretary Xxxxx Xxxx, President
