Exhibit No. 8(h)
EXPENSE LIMITATION AGREEMENT
Expense Limitation Agreement, made as of the 12th day of November, 2002
by and between Homestead Funds, Inc., a Maryland corporation ("Homestead
Funds"), on behalf of the Stock Index (the "Fund"), and RE Advisers Corporation,
a Virginia corporation ("RE Advisers").
WHEREAS, Homestead Funds and RE Advisers have entered into an
Administrative Service Agreement pursuant to which RE Advisers will provide
administrative services to the Fund;
WHEREAS, Homestead Funds and RE Advisers 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 fees the Fund incurs indirectly through its investment in the BT Fund
(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 RE Advisers.
1.2 Method of Computation. To determine RE Adviser'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, RE Advisers shall first waive or
reduce its administrative 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 administrative fee for such month, RE Advisers, in addition to
waiving its entire administrative fee for such month, shall also remit 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.
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2.1 Limitation. To the extent that Fund Operating Expenses in
any year exceed .75% of the Fund's average daily net assets (the "Operating
Expense Limit"), such excess amount (the "Excess Operating amount") shall be the
liability of RE Advisers.
2.2 Method of Computation. To determine RE Adviser'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, RE Advisers shall
first waive or reduce its administrative 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 administrative fee for the
month, RE Advisers, in addition to waiving its entire 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 administrative 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.
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.
4.3 Definitions. Any questions of interpretation of any term or
provision of this Agreement, including but not limited to 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
Administrative Service 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 Stock Index Fund
/s/Hope X. Xxxxxx By: /s/Xxxxxx Xxxxxxxx
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Hope X. Xxxxxx, Secretary Xxxxxx Xxxxxxxx, Vice President
ATTEST: RE ADVISERS CORPORATION
/s/Hope X. Xxxxxx By: /s/Xxxxx X. Xxxxxx
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Hope X. Xxxxxx, Secretary Xxxxx X. Xxxxxx, President
