<DOCUMENT>
<TYPE>EX-99.H.5
<SEQUENCE>2
<FILENAME>exhh-5.txt
<DESCRIPTION>EXPENSE CAP/REIMBUR. AGREE.
<TEXT>

EXHIBIT H.5


                       EXPENSE CAP/REIMBURSEMENT AGREEMENT


         This Agreement is entered into as of the 19th day of July, 2006 between
Badgley, Phelps and Bell, Inc. (the "Adviser") and Badgley Funds, Inc. (the
"Company") on behalf of the Badgley Growth Fund (the "Growth Fund") and the
Badgley Balanced Fund (the "Balanced Fund") (collectively, the "Funds").

         WHEREAS, the Adviser desires to contractually agree to waive a portion
of its advisory fee or reimburse certain of each Fund's operating expenses to
ensure that the Fund's total operating expenses do not exceed the level
described below.

         NOW THEREFORE, the parties agree as follows:

         The Adviser agrees that until September 30, 2007, it will reduce its
compensation as provided for in the Investment Advisory Agreement between the
Company and the Adviser dated June 23, 1998, and/or assume expenses for the
applicable Fund to the extent necessary to ensure that the Growth Fund's total
operating expenses (on an annual basis) do not exceed 1.50% of the Growth Fund's
average daily net assets and that the Balanced Fund's total operating expenses
(on an annual basis) do not exceed 1.30% of the Balanced Fund's average daily
net assets.

         The Adviser shall be entitled to recoup such amounts for a period of up
to three (3) years following the fiscal year in which the Adviser reduced its
compensation and/or assumed expenses for the applicable Fund, provided that the
total operating expenses including this recoupment do not exceed the established
cap on expenses for that year.



                                  BADGLEY, PHELPS AND BELL, INC.


                                  By: /S/ STEVEN C. PHELPS
                                      ------------------------------------------
                                      Steven C. Phelps, Chief Executive Officer




                                  BADGLEY FUNDS, INC.


                                  By: /S/ J. KEVIN CALLAGHAN
                                      ------------------------------------------
                                      J. Kevin Callaghan, President

</TEXT>
</DOCUMENT>