EXPENSE LIMITATION AGREEMENT
Exhibit
h.(1)
Expense Limitation Agreement made as of the 12th day of June, 2006, by and
between Homestead Funds, Inc., a Maryland corporation (“Homestead Funds”), on behalf of the
International Value Fund (the “Fund”), and RE Advisers Corporation, a Virginia corporation (the
“Investment Manager”).
WHEREAS, Homestead Funds, on behalf of the Fund, and the Investment Manager have entered
into an agreement dated as of June 12, 2006 (the “Investment Management Agreement”), pursuant to
which the Investment Manager renders investment management services to the Fund for compensation
based on the value of the net assets of the Fund; and
WHEREAS, Homestead Funds and the Investment Manager have determined that it is appropriate and
in the best interest of the Fund and its shareholders to set a limit on the level of expenses to
which the Fund will be subject;
NOW THEREFORE, the parties hereto agree as follows:
1. Operating 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)
(“Fund Operating Expenses”), exceed .99% 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.
1.2 Method of Computation. To determine the Investment Manager’s liability for the
Excess Operating Amount, Fund Operating Expenses are compared to the Operating Expense Limit. If
the year to date Fund Operating Expenses for any month exceed the year to date 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; 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.
2. 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 Homestead Funds, such termination be authorized by resolution of the
Board of Homestead Funds.
3. Miscellaneous.
3.1 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.
3.2 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 Directors of its responsibility for and control of the conduct of the
affairs of Homestead Funds.
3.3 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 as of the day and year first above written.
ATTEST: | HOMESTEAD FUNDS, INC. on behalf of the International Value Fund |
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By:
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/s/ Xxxxxxxx X. Xxxxxxxxxx | By: | /s/ Xxxxxx Xxxxxxxx | |||
Xxxxxxxx X. Xxxxxxxxxx, Secretary | Xxxxxx Xxxxxxxx, Vice President and Counsel |
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ATTEST: | RE ADVISERS CORPORATION | |||||
By:
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/s/ Xxxxxxxx X. Xxxxxxxxxx | By: | /s/ Xxxxx X. Xxxxxx | |||
Xxxxxxxx X. Xxxxxxxxxx, Secretary | Xxxxx X. Xxxxxx, President |
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