AFBA 5Star Fund, Inc.
Expense Limitation
Agreement
AGREEMENT made the 31st day of January 2007, between AFBA 5Star Fund,
Inc., a Maryland corporation (the "Company"), on behalf of each series of the
Company reflected on Schedule A hereto (each a "Fund," together the "Funds"), as
such schedule may be amended from time to time, and AFBA Investment Management
Company, a Virginia corporation (the "Advisor").
WHEREAS, the Advisor has entered into a Management Agreement with the
Company, originally dated April 1, 2001 pursuant to which the Advisor provides,
or arranges for the provision of, investment advisory and management services to
each Fund, and for which it is compensated based on the average daily net assets
of each such Fund; and
WHEREAS, the Company and the Advisor have determined that it is
appropriate and in the best interests of each Fund and its shareholders to limit
the total expenses of each Fund as listed on Schedule A of this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Fee Waiver and Expense Payments by the Advisor. The Advisor agrees to waive
or reduce all or a portion of its management fee for each Fund and, if
necessary, to bear certain other expenses associated with operating the Fund, to
the extent necessary to limit the annualized expenses of the Fund (exclusive of
12b-1 fees and extraordinary expenses such as litigation and merger or
reorganization costs) to the rates reflected in Schedule A to this Agreement.
Notwithstanding the foregoing, the Advisor shall not bear expenses to the extent
that doing so would result in income to the Fund that would cause the Fund to
lose its regulated investment company status under the Internal Revenue Code of
1986, as amended.
2. Duty of Fund to Reimburse. Subject to approval by the Company's Board of
Directors, each Fund agrees to reimburse the Advisor on a monthly basis such
waived fees and expenses borne pursuant to paragraph 1 together ("Deferred
Amounts"), in later periods provided, however, that a Fund may not reimburse any
such Deferred Amount more than three years after the end of the fiscal year in
which the Deferred Amount was waived or borne and will only pay such Deferred
Amounts to the extent that the Fund's annual operating expenses plus the
Deferred Amount being reimbursed do not exceed the expense cap amount for that
Fund listed in Schedule A.
3. Assignment. No assignment of this Agreement shall be made by the Advisor
without the prior consent of the Company.
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4. Duration and Termination. This Agreement shall be effective as to each Fund
for the period provided in Schedule A for that Fund and shall continue in effect
for a one year period thereafter provided each such continuance is specifically
approved by the Advisor and is approved on behalf of the Fund by a majority of
the Directors of the Company who (i) are not "interested persons" of the Company
or any other party to this Agreement, as defined in the Investment Company Act
of 1940, as amended, (the "Disinterested Directors") and (ii) have no direct or
indirect financial interest in the operation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
AFBA 5Star Fund, Inc. AFBA 5Star Investment
Management Company
By: /s/ Xxxxxx X. Xxxxxxxx, Xx. By: /s/ Xxxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx, Xx. Name: Xxxxxxx X. Xxxxxxxx
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Title: President Title: Vice President
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SCHEDULE A
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Expense Cap Expense Cap Amount*
Fund Time Period
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AFBA 5Star Balanced Fund August 1, 2007- July 31, 2008 1.08%
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AFBA 5Star Large Cap Fund August 1, 2007- July 31, 2008 1.28%
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AFBA 5Star High Yield Fund August 1, 2007- July 31, 2008 1.08%
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AFBA 5Star Mid Cap Fund August 1, 2007- July 31, 2008 1.28%
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AFBA 5Star Science & Technology Fund August 1, 2007- July 31, 2008 1.50%
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AFBA 5Star Small Cap Fund August 1, 2007- July 31, 2008 1.28%
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AFBA 5Star USA Global Fund August 1, 2007- July 31, 2008 1.28%
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* This amount is exclusive of the 12b-1 distribution and shareholder servicing
fees that apply to Classes A, B, C and R of the Funds, as well as extraordinary
expenses such as litigation and merger or reorganization costs.
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