EXPENSE LIMITATION AGREEMENT
Exhibit (h)(2)
This Expense Limitation Agreement (“Agreement”) is made as of the 29th day of April, 2008, by
and between Homestead Funds, Inc., a Maryland corporation (“Homestead Funds”), on behalf of each
series of the Homestead Funds set forth on Schedule A hereto (each, a “Fund” and collectively, the
“Funds”), and RE Advisers Corporation, a Virginia corporation (“RE Advisers”).
WHEREAS, Homestead Funds, on behalf of each Fund other than the Stock Index Fund, and RE
Advisers have entered into an investment management agreement (with respect to each such Fund, a
“Management Agreement”), pursuant to which RE Advisers renders investment management services to
the Funds for compensation based on the value of the net assets of each such Fund (the “Management
Fee”); and
WHEREAS, Homestead Funds, on behalf of the Stock Index Fund, and RE Advisers have entered into
an Administrative Service Agreement (the “Administrative Service Agreement”), pursuant to which RE
Advisers provides administrative services to the Stock Index Fund for compensation based on the net
assets of the Stock Index Fund (the “Administrative Fee”); and
WHEREAS, Homestead Funds and RE Advisers have determined that is it appropriate and in the
best interests of each Fund and its shareholders to maintain the expenses of the Funds at levels
below the levels to which the Funds might otherwise be subject.
NOW THEREFORE, the parties hereto agree as follows:
1. Expense Limitation.
1.1 Operating Expense Limit. During the term of this Agreement, each Fund shall be
subject to a limit on Operating Expenses (the “Operating Expense Limit”) equal to the amount set
forth in Schedule A hereto.
1.2 Operating Expenses. As used in this Agreement, the term “Operating Expenses”
includes all operating expenses incurred by a Fund, including, but not limited to, (i) in the case
of a Fund other than the Stock Index Fund, the Management Fee, and (ii) in the case of the Stock
Index Fund, the Administrative Fee and the fees indirectly incurred by the Stock Fund Index Fund
through its investment in the S&P 500 Index Master Portfolio (the “Master Portfolio”).
Notwithstanding the foregoing, Operating Expenses do not include the following expenses: (i)
interest; (ii) taxes; (iii) brokerage commissions; (iv) other expenditures that are capitalized in
accordance with generally accepted accounting principles; (v) other extraordinary expenses not
incurred in the ordinary course of a Fund’s business; and (vi) in the case of each Fund other than
the Stock Index Fund, the fees and expenses associated with an investment in (a) an investment
company or (b) any company that would be an investment company under
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Section 3(a) of the Investment Company Act of 1940, as amended (the “1940 Act”), but for the
exceptions to that definition provided for in Sections 3(c)(1) and 3(c)(7) of the 1940 Act.
1.3 Method of Computation. On a monthly basis, RE Advisers shall determine, with
respect to each Fund, whether the aggregate fiscal year to date Operating Expenses for the Fund
exceed the Fund’s Operating Expense Limit, as such Operating Expense Limit has been pro-rated to
the date of such determination (the “Pro-Rated Operating Expense Limit”). If on the date of such
determination, the aggregate fiscal year to date Operating Expenses for the Fund exceed the
Pro-Rated Operating Expense Limit, RE Advisers shall be liable to the extent of such excess amount
(the “Excess Operating Amount”).
1.4 Payment. In the event that RE Advisers is liable for an Excess Operating Amount
with respect to a Fund pursuant to Section 1.3, RE Advisers shall pay such Excess Operating Amount
by first waiving or reducing (i) its Management Fee for such month, in the case of a Fund other
than the Stock Index Fund, or (ii) its Administrative Fee for such month, in the case of the Stock
Index Fund. In the event the Excess Operating Amount exceeds the amount of the Management Fee or
Administrative Fee for the month, as applicable, RE Advisers, in addition to waiving its entire
Management Fee or Administrative 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 Management Fee or
Administrative Fee.
2. Term and Termination.
2.1 Term of Agreement. This Agreement will become effective on April 30, 2008 and
will continue in effect with respect to each Fund until the date set forth on Schedule A. This
Agreement may be extended upon agreement of the parties, at which time Schedule A shall be amended
to reflect the new term.
2.2 Termination of Agreement. This Agreement will terminate with respect to a Fund:
(1) immediately upon termination of (a) the Management Agreement, in the case of a Fund other than
the Stock Index Fund, or (b) the Administrative Service Agreement, in the case of the Stock Index
Fund, and (2) by either party without payment of any penalty, upon a one-year prior written notice
to the other party at its principal place of business; provided that, in the case of termination by
Homestead Funds, such termination be authorized by resolution of the Board of Directors of
Homestead Funds (the “Board”).
3. Amendment. This Agreement may be amended only by a written agreement signed by each of
the parties hereto.
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.
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4.2 Interpretation. Nothing herein contained shall be deemed to require 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 its responsibility for and control of the conduct of the affairs of
Homestead Funds.
4.3 Definitions. Any questions of interpretation of any term or provision of this
Agreement, including but not limited to the Management Fee, the Administrative 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 as of the day and year first above written.
HOMESTEAD FUNDS, INC.
on behalf of each of its series set forth on Schedule A
on behalf of each of its series set forth on Schedule A
/s/ Xxxxx Xxxxxx
|
||
Title: President |
RE ADVISERS CORPORATION
/s/ Xxxxx Xxxxxx
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||
Title: President |
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SCHEDULE A
Amendment No. 3
Effective May 1, 2010
Amendment No. 3
Effective May 1, 2010
Operating Expense Limits
| Operating Expense | Expiration of Term | |||||
| Fund | Limit | of Agreement | ||||
Daily Income Fund
|
0.80 | % | April 30, 2011 | |||
Short-Term Government Securities Fund
|
0.75 | % | April 30, 2011 | |||
Short-Term Bond Fund
|
0.80 | % | April 30, 2011 | |||
Stock Index Fund
|
0.75 | %* | April 30, 2011 | |||
Value Fund
|
1.25 | % | April 30, 2011 | |||
Growth Fund
|
0.95 | % | April 30, 2011 | |||
Small-Company Stock Fund
|
1.50 | % | April 30, 2011 | |||
International Value Fund
|
0.99 | % | April 30, 2011 | |||
| * | As set forth in Section 1, the Operating Expense Limit with respect to the Stock Index Fund applies to all operating expenses incurred by the Stock Index Fund, including, but not limited to, expenses indirectly incurred by the Stock Index Fund through its investment in the Master Portfolio. |
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.
HOMESTEAD FUNDS, INC.
on behalf of each of its series set forth on Schedule A
By: Name: |
/s/ Xxxxx X. Xxxxxx
|
|||
Title:
|
President |
RE ADVISERS CORPORATION
By: Name: |
/s/ Xxxxx X. Xxxxxx
|
|||
Title:
|
President |
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