Exhibit(d)(10)
FORM OF
FORWARD FUNDS, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT, effective as of ______, among Pictet International Management
Ltd., a United Kingdom limited liability company, (the "Sub-Adviser"), Forward
Funds, Inc. (the "Company"), and Forward Management, LLC (the "Adviser") on
behalf of the Pictet Global Emerging Markets Fund (the "PGEM Fund") and the
Pictet International Small Companies Fund ("the PISC Fund") (collectively "the
Funds",) series of the Company.
WHEREAS, the Company is a Maryland corporation of the series type organized
under Articles of Incorporation dated October 3, 1997 (the "Articles") and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end, diversified management investment company, and the Funds
are series of the Company; and
WHEREAS, the Adviser has been retained by the Company to provide investment
advisory services to the Funds with regard to the Funds' investments as further
described in the Company's registration statement on Form N-1A (the
"Registration Statement") and pursuant to an Investment Management Agreement
dated June 6, 2002 ("Investment Management Agreement"); and
WHEREAS, the Company's Board of Directors (the "Directors"), including a
majority of the Directors who are not "interested persons," as defined in the
1940 Act, and the Funds' stockholders have approved the appointment of the
Sub-Adviser to perform certain investment advisory services for the Company, on
behalf of the Funds pursuant to this Sub-Advisory Agreement and as described in
the Registration Statement, and the Sub-Adviser is willing to perform such
services for the Funds; and
WHEREAS, the Sub-Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act").
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed among the Adviser, the Company and the Sub-Adviser as
follows:
1. Appointment. The Adviser hereby appoints the Sub-Adviser to perform
advisory services to the Funds for the periods and on the terms set forth in
this Sub-Advisory Agreement. The Sub-Adviser accepts such appointment and agrees
to furnish the services herein set forth, for the compensation herein provided.
2. Investment Advisory Duties. Subject to the supervision of the
Directors of the Funds and the Adviser, the Sub-Adviser will, in coordination
with the Adviser as described below, (a) provide a program of continuous
investment management for the Funds; (b) make
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investment decisions for the Funds; and (c) place orders to purchase and sell
securities for the Funds which fulfill the Funds' investment objectives,
policies and limitations as stated in the Funds' Prospectus and Statement of
Additional Information included as part of the Funds' Registration Statement
filed with the Securities and Exchange Commission, as they may be amended from
time to time.
In performing its investment management services to the Funds under the
terms of this Agreement, the Sub-Adviser will provide the Funds with ongoing
investment guidance and policy direction. The Sub-Adviser further agrees that,
in performing its duties hereunder, it will:
(a) comply with the 1940 Act and all rules and regulations
thereunder, the Advisers Act, the U.S. Internal Revenue Code of 1986, as amended
(the "Code") and all other applicable federal and state laws and regulations,
and with any applicable procedures adopted by the Directors, as they may be
amended from time to time, copies of which shall be provided to the Sub-Adviser
by the Adviser;
(b) use reasonable efforts to manage the Funds so that it will
qualify, and continue to qualify, as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder; provided, however,
the Sub-Adviser shall not be responsible for the tax effect or decisions made by
any other person;
(c) place orders pursuant to its investment determinations for the
Funds, in accordance with applicable policies expressed in the Funds' Prospectus
and/or Statement of Additional Information established through written
guidelines determined by the Funds and provided to the Sub-Adviser by the
Adviser , and in accordance with applicable legal requirements
(d) furnish to the Company and the Adviser whatever statistical
information the Company or the Adviser may reasonably request with respect to
the Funds' assets or contemplated investments. In addition, the Sub-Adviser will
keep the Company, the Adviser and the Directors informed of developments which
the Sub-Adviser reasonably believes will materially affect the Funds' portfolio
and shall, on the Sub-Adviser's own initiative, furnish to the Funds from time
to time whatever information the Sub-Adviser believes appropriate for this
purpose;
(e) make available to the Funds' administrator, PFPC Inc. (the
"Administrator"), the Adviser and the Company, promptly upon their request, such
copies of its investment records and ledgers with respect to the Funds as may be
required to assist the Adviser, the Administrator and the Company in their
compliance with applicable laws and regulations. The Sub-Adviser will furnish
the Directors, the Administrator, the Adviser and the Company with such periodic
and special reports regarding the Funds as they may reasonably request;
(f) meet periodically with the Adviser and the Directors, in person
or by teleconference, to explain its investment management activities, and any
reports related to the Funds as may reasonably be requested by the Adviser
and/or the Company;
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(g) immediately notify the Adviser and the Funds to the extent
required by applicable law in the event that the Sub-Adviser or any of its
affiliates: (1) becomes aware that it is subject to a statutory disqualification
that prevents the Sub-Adviser from serving as an investment adviser pursuant to
this Sub-Advisory Agreement; or (2) becomes aware that it is the subject of an
administrative proceeding or enforcement action by the Securities and Exchange
Commission ("SEC") or other regulatory authority. The Sub-Adviser further agrees
to notify the Funds and the Adviser immediately of any material fact known to
the Sub-Adviser respecting or relating to the Sub-Adviser that is not contained
in the Funds' Registration Statement, or any amendment or supplement thereto,
but that is required to be disclosed therein, and of any statement contained
therein that becomes untrue in any material respect;
(h) immediately notify the Adviser if the Sub-Adviser suffers a
material adverse change in its business that would materially impair its ability
to perform its relevant duties for the Funds. For the purposes of this
paragraph, a "material adverse change" shall include, but is not limited to, a
material loss of assets or accounts under management or the departure of senior
investment professionals to the extent such professionals are not replaced
promptly with professionals of comparable experience and quality;
(i) use no inside information that may be in its possession in making
investment decisions for the Fund nor will he Sub-Adviser seek to obtain any
such information.
3. Futures and Options. The Sub-Adviser's investment authority shall
include, to the extent permitted under Section 2, the authority to purchase,
sell, cover open positions, and generally to deal in financial futures contracts
and options thereon.
The Sub-Adviser may: (i) open and maintain brokerage accounts for financial
futures and options (such accounts hereinafter referred to as "Brokerage
Accounts") on behalf of and in the name of the Fund; and (ii) execute for and on
behalf of the Brokerage Accounts, standard customer agreements with a broker or
brokers. The Sub-Adviser may, using such of the securities and other property in
the Brokerage Accounts as the Sub-Adviser deems necessary or desirable, direct
the custodian to deposit on behalf of the Funds, original and maintenance
brokerage deposits and otherwise direct payments of cash, cash equivalents and
securities and other property into such brokerage accounts and to such brokers
as the Sub-Adviser deems desirable or appropriate.
PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION (THE
"COMMISSION") IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE CLIENTS, THIS
BROCHURE OR ACCOUNT DOCUMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH
THE COMMISSION. THE COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN
A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY TRADING ADVISOR
DISCLOSURE. CONSEQUENTLY, THE COMMISSION HAS NOT REVIEWED OR APPROVED THIS
TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT DOCUMENT.
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The Funds represent and warrant that each is a "qualified eligible client"
within the meaning of CFTC Regulations Section 4.7 and, as such, consent to be
treated in accordance with the exemption contained in CFTC Regulations Section
4.7(b).
4. Investment Guidelines. In addition to the information to be provided
to the Sub-Adviser under Section 2 hereof, the Company or the Adviser shall
supply the Sub-Adviser with such other information as the Sub-Adviser shall
reasonably require concerning the Funds' investment policies, restrictions,
limitations, tax position, liquidity requirements and other information useful
in managing the Fund's investments.
5. Representations, Warranties and Covenants of the Company, Adviser and
Sub-Adviser. The Company represents, warrants and covenants that (i) a copy of
its Registration Statement together with all amendments thereto, is on file in
the office of the U.S. Securities and Exchange Commission, (ii) the appointment
of the Adviser has been duly authorized, (iii) the appointment of the
Sub-Adviser has been duly authorized, and (iv) it has acted and will continue to
act in conformity with all applicable laws.
The Adviser represents, warrants and covenants that (i) it is authorized to
perform the services herein, (ii) the appointment of the Sub-Adviser has been
duly authorized, and (iii) it has and will continue to act in conformity with
all applicable laws.
The Sub-Adviser represents and warrants that (i) it is registered as an
investment adviser with the SEC, (ii) it is not barred by operation of law, or
any rule, or order of the SEC or any other regulatory body from acting as an
investment adviser.
6. Use of Securities Brokers and Dealers. Purchase and sale orders will
usually be placed with brokers which are selected by the Sub-Adviser as able to
achieve "best execution" of such orders. "Best execution" shall mean prompt and
reliable execution at the most favorable securities price, taking into account
the other provisions hereinafter set forth. Whenever the Sub-Adviser places
orders, or directs the placement of orders, for the purchase or sale of
portfolio securities on behalf of the Funds, in selecting brokers or dealers to
execute such orders, the Sub-Adviser is expressly authorized to consider the
fact that a broker or dealer has furnished statistical, research or other
information or services which enhance the Sub-Adviser's research and portfolio
management capability generally. It is further understood in accordance with
Section 28(e) of the Securities Exchange Act of 1934, as amended, that the
Sub-Adviser may negotiate with and assign to a broker a commission which may
exceed the commission which another broker would have charged for effecting the
transaction if the Sub-Adviser determines in good faith that the amount of
commission charged was reasonable in relation to the value of brokerage and/or
research services (as defined in Section 28(e)) provided by such broker, viewed
in terms either of the Funds' or the Sub-Adviser's overall responsibilities to
the Sub-Adviser's discretionary accounts.
Neither the Sub-Adviser nor any parent, subsidiary or related firm shall
act as a securities broker with respect to any purchases or sales of securities
which may be made on behalf of the Funds. Unless otherwise directed by the
Company or the Adviser in writing, the Sub-Adviser may utilize the service of
whatever independent securities brokerage firm or firms it deems
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appropriate to the extent that such firms are competitive with respect to price
of services and execution.
7. Compensation. The management fee for the PGEM Fund will remain at 125
bps. Of this amount, the Company agrees to pay 80 bps to the Sub-Adviser for
services specified in this Agreement, subject to adjustment for the expense cap
as set out below.
The management fee for the PISC Fund will remain at 100 bps. Of this
amount, the Company agrees to pay 65 bps to the Sub-Adviser for services
specified in this Agreement, subject to adjustment for the expense cap as set
out below.
The Sub-Advisory Fee shall be computed and accrued daily and paid quarterly
in arrears based on the average daily net asset value of the Funds as determined
according to the manner provided in the then-current prospectus of the Funds.
The expense cap of each of the Funds will remain at its present level. The
Adviser and the Sub-Adviser will waive their fees from each of the Funds
proportionately to maintain this expense cap. The Sub-Adviser's obligation to
waive its fee will stop when the Sub-Adviser's fee reaches 30 bps. The
Sub-Adviser is entitled to receive a minimum of 30 bps from the management fee
for each of the Funds without regard to the expense cap waiver.
7. Fees and Expenses
Except as expressly set forth herein, each party shall be responsible
for its own costs and expenses, including legal counsel, in connection with the
transactions contemplated hereby. Forward shall be responsible for (i) the
printing, mailing, proxy and proxy solicitation costs of the Reorganization (ii)
drafting (with appropriate input from the Sub-Adviser) and filing the
proxy-statement/prospectus on Form N-14 and Agreement and Plan of Reorganization
and (iii) the costs of preparation and delivery of tax opinions by counsel to
the Forward Funds to the effect that each Reorganization will constitute a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986.
8. Books and Records. The Sub-Adviser agrees to maintain such books and
records with respect to its services to the Funds as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by that Section, and those rules and legal provisions. The Sub-Adviser
also agrees that records it maintains and preserves pursuant to Rules 31a-1 and
Rule 31a-2 under the 1940 Act and otherwise in connection with its services
hereunder are the property of the Funds and will be surrendered promptly to the
Company upon its request except that the Sub-Adviser may retain copies of such
documents as may be required by law. The Sub-Adviser further agrees that it will
furnish to regulatory authorities having the requisite authority any information
or reports in connection with its services hereunder which may be requested in
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order to determine whether the operations of the Funds are being conducted in
accordance with applicable laws and regulations.
9. Aggregation of Orders. Provided the investment objectives, policies
and restrictions of the Funds are adhered to, the Funds agree that the
Sub-Adviser may aggregate sales and purchase orders of securities held in the
Funds with similar orders being made simultaneously for other accounts managed
by the Sub-Adviser or with accounts of the affiliates of the Sub-Adviser, if in
the Sub-Adviser's reasonable judgment such aggregation shall result in an
overall economic benefit to the Funds taking into consideration the advantageous
selling or purchase price, brokerage commission and other expenses. The Funds
acknowledge that the determination of such economic benefit to the Funds by the
Sub-Adviser represents the Sub-Adviser's evaluation that the Funds may be
benefited by relatively better purchase or sales prices, lower commission
expenses and beneficial timing of transactions or a combination of these and
other factors.
10. Liability. Neither the Sub-Adviser nor its officers, directors,
employees, affiliates, agents or controlling persons shall be liable to the
Company, the Funds, their shareholders and/or any other person for the acts,
omissions, errors of judgment and/or mistakes of law of any other fiduciary
and/or person with respect to the Funds.
Neither the Sub-Adviser nor its officers, directors, employees, affiliates,
agents or controlling persons or assigns shall be liable for any act, omission,
error of judgment or mistake of law and/or for any loss suffered by the Company,
the Funds, their shareholders and/or any other person in connection with the
matters to which this Agreement relates; provided that no provision of this
Agreement shall be deemed to protect the Sub-Adviser against any liability to
the Company, the Funds and/or their shareholders which it might otherwise be
subject by reason of any willful misfeasance, bad faith or gross negligence in
the performance of its duties or the reckless disregard of its obligations and
duties under this Agreement.
The Company on behalf of the Funds, hereby agrees to indemnify and hold
harmless the Sub-Adviser, its directors, officers and employees and agents and
each person, if any, who controls the Sub-Adviser (collectively, the
"Indemnified Parties") against any and all losses, claims damages or liabilities
(including reasonable attorneys fees and expenses), joint or several, relating
to the Company or Funds, to which any such Indemnified Party may become subject
under the Securities Act of 1933, as amended (the "1933 Act"), the Securities
Exchange Act of 1934, as amended, the Advisers Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (1) any act, omission, error and/or mistake of any other
fiduciary and/or any other person; or (2) any untrue statement or alleged untrue
statement of a material fact or any omission or alleged omission to state a
material fact required to be stated or necessary to make the statements made not
misleading in (a) the Registration Statement, the prospectus or any other
filing, (b) any advertisement or sales literature authorized by the Company for
use in the offer and sale of shares of the Funds, or (c) any application or
other document filed in connection with the qualification of the Company or
shares of the Funds under the Blue Sky or securities laws of any jurisdiction,
except insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any such untrue statement or
omission or alleged untrue statement or omission (i) in a document prepared by
the
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Sub-Adviser, or (ii) made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Sub-Adviser pertaining to or
originating with the Sub-Adviser for use in connection with any document
referred to in clauses (a), (b) or (c).
It is understood, however, that nothing in this paragraph 11 shall protect
any Indemnified Party against, or entitle any Indemnified Party to,
indemnification against any liability to the Company, Fund and/or its
shareholders to which such Indemnified Party is subject, by reason of its
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of any reckless disregard of its obligations and duties
under this Agreement.
11. Limited Exclusivity. The Sub-Adviser agrees that it will not provide
similar services to any other mutual fund which holds itself out to the public
as a "global emerging markets fund" or an "international small companies fund"
within the common meanings of those terms. Other than that the services of the
Sub-Adviser are not exclusive, and that nothing in this Agreement shall prevent
the Sub-Adviser from providing similar services to other investment advisory
clients, including but not by way of limitation, investment companies or to
other series of investment companies, including the Company or from engaging in
other activities, provided such other services and activities do not, during the
term of this Agreement, interfere in a material manner with the Sub-Adviser's
ability to meet its obligations to the Funds hereunder. When the Sub-Adviser
recommends the purchase or sale of a security for other investment companies and
other clients, and at the same time the Sub-Adviser recommends the purchase or
sale of the same security for the Funds it is understood that in light of its
fiduciary duty to the Funds, such transactions will be executed on a basis that
is fair and equitable to the Fund. In connection with purchases or sales of
portfolio securities for the account of the Funds, neither the Sub-Adviser nor
any of its directors, officers or employees shall act as a principal or agent or
receive any commission. If the Sub-Adviser provides any advice to its clients
concerning the shares of the Funds, the Sub-Adviser shall act solely as
investment counsel for such clients and not in any way on behalf of the Company
or the Funds.
The Sub-Adviser provides investment advisory services to numerous other
investment advisory clients, including but not limited to other funds and may
give advice and take action which may differ from the timing or nature of action
taken by the Sub-Adviser with respect to the Funds. Nothing in this Agreement
shall impose upon the Sub-Adviser any obligations other than those imposed by
law to purchase, sell or recommend for purchase or sale, with respect to the
Funds, any security which the Sub-Adviser, or the shareholders, officers,
directors, employees or affiliates may purchase or sell for their own account or
for the account of any client.
12. Materials. The Sub-Adviser will be provided with any Registration
Statements containing references or information with respect to the Sub-Adviser
prior to the filing of same with any regulatory authority and afforded the
opportunity to comment thereon.
13. Duration and Termination. This Agreement shall continue until
_________, and thereafter shall continue automatically for successive annual
periods, provided such continuance is specifically approved at least annually by
(i) the Directors or (ii) a vote of a "majority" (as defined in the 0000 Xxx) of
the Fund's outstanding voting securities (as defined in the 1940 Act), provided
that in either event the continuance is also approved by a majority of the
Directors who
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are not parties to this Agreement or "interested persons" (as defined in the
0000 Xxx) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval.
Notwithstanding the foregoing, this Agreement may be terminated: (a) at any
time without penalty by the either or both of the Funds upon the vote of a
majority of the Directors or by vote of the majority of the Fund's outstanding
voting securities, upon twenty-five (25) days' written notice to the
Sub-Adviser; (b) by the Adviser at any time without penalty, upon twenty-five
(25) days' written notice to the Sub-Adviser or (c) by the Sub-Adviser at any
time without penalty, upon sixty (60) days' written notice to the Company. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act).
The Agreement will terminate immediately upon written notification from the
Adviser or the Company if the Investment Management Agreement terminates with
respect to the Funds.
14. Amendments. This Agreement may be amended at any time but only by the
mutual agreement of the parties.
15. Proxies. Unless the Company gives written instructions to the
contrary, the Sub-Adviser shall vote all proxies solicited by or with respect to
the issuers of securities invested in by the Fund. The Sub-Adviser shall
maintain a record of how the Sub-Adviser voted and such record shall be
available to the Company upon its request. The Sub-Adviser shall use its best
good faith judgment to vote such proxies in a manner which best serves the
interests of the Funds' shareholders.
16. Notices. Any written notice required by or pertaining to this
Agreement shall be personally delivered to the party for whom it is intended, at
the address stated below, or shall be sent to such party by prepaid first class
mail or facsimile.
If to the Company:
Forward Funds, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
If to the Sub-Adviser:
[Name]
[Address]
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[Address]
If to the Adviser:
Forward Management, LLC
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
17. Confidential Information. The Sub-Adviser shall maintain the strictest
confidence regarding the business affairs of the Funds. Written reports
furnished by the Sub-Adviser to the Company and the Adviser shall be treated by
all of the parties as confidential and for the exclusive use and benefit of the
Company and the Funds except as disclosure may be required by applicable law.
Notwithstanding any provision herein to the contrary, the Sub-Adviser
hereby agrees on behalf of itself and its directors, officers, and employees (1)
to treat confidentially and as proprietary information of the Company (a) all
records and other information relative to the Funds and their prior, present or
potential shareholders (and clients of said shareholders) and (b) any Nonpublic
Personal Information, as defined under Section 248.3(t) of Regulation S-P
("Regulation S-P"), promulgated under the Xxxxx-Xxxxx-Xxxxxx Act (the "Act"),
and (2) not to use such records and information for any purpose other than the
performance of its responsibilities and duties hereunder, or as otherwise
permitted by the privacy policies adopted by the Company, Regulation S-P or the
Act, except after prior notification to and approval in writing by the Company.
Such written approval shall not be required where the Sub-Adviser may be exposed
to civil or criminal contempt proceedings for failure to comply after being
requested to divulge such information by duly constituted authorities, or when
so requested by the Company.
18. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder.
(b) Concurrently with the execution of this Agreement, the
Sub-Adviser is delivering to the Adviser and the Company a copy of Part II of
its Form ADV, as revised, on file with the SEC. The Adviser and the Company
hereby acknowledge receipt of such copy.
(c) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(d) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
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(e) Nothing herein shall be construed as constituting the Sub-Adviser
as an agent of the Company or the Fund, except as otherwise contemplated herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of _________________, 2002.
FORWARD FUNDS, INC.
By:
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President
PICTET INTERNATIONAL MANAGEMENT LTD.
By:
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Name:
Title:
FORWARD MANAGEMENT, LLC
By:
-------------------------------------
Name:
Title:
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