Exhibit (d)(3)
FORWARD FUNDS, INC.
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, effective as of December 23, 2003, between Forward Management,
LLC ("Forward Management" or the "Investment Advisor") and Forward Funds, Inc.
(the "Corporation") on behalf of the series of the Corporation listed on Exhibit
A (the "Funds").
WHEREAS, the Corporation 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 Corporation; and
WHEREAS, the Investment Advisor is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended ("Advisers Act"); and
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Corporation and the Investment Advisor as
follows:
1. Appointment. The Investment Advisor is hereby appointed to act as
investment adviser to the Funds for the periods and on the terms set forth in
this Agreement. The Investment Advisor 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 Corporation, the Investment Advisor will (a) provide a program
of continuous investment management for the Funds with regard to the Funds'
investment of their assets (the "Portfolios") in accordance with the Funds'
investment objectives, policies and limitations as stated in the Funds'
prospectus and statement of additional information included as part of the
registration statement (the "Registration Statement") filed with the Securities
and Exchange Commission (the "SEC"), as they may be amended from time to time,
copies of which shall be provided to the Investment Advisor by the Corporation;
(b) make investment decisions for the Funds with regard to the Portfolios,
including, but not limited to, the selection and management of investment
sub-advisers for the Funds; (c) place orders to purchase and sell investments in
the Portfolios for the Funds; (d) furnish to the Funds the services of its
employees and agents in the management and conduct of the corporate business and
affairs of the Funds; (e) if requested, provide the services of its officers as
administrative executives of the Funds and the services of any directors of the
Fund who are "interested persons" of the Corporation or its affiliates, as that
term is defined in the 1940 Act, subject in each case to their individual
consent to serve and to applicable legal limitations; and (f) provide office
space, secretarial and clerical services and wire and telephone services (not
including toll charges, which will be reimbursed by the Funds), and monitor and
review Fund contracted services and expenditures pursuant to the distribution
plans of the Funds.
In performing its investment management services to the Funds under the
terms of this Agreement, the Investment Advisor will provide the Funds with
ongoing investment guidance and policy direction.
The Investment Advisor 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 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 Board of Directors;
(b) use reasonable efforts to manage the Portfolios so that the Funds will
qualify, and continue to qualify, as regulated investment companies under
Subchapter M of the Code and regulations issued thereunder;
(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 Corporation and provided to the Investment Advisor, and in
accordance with applicable legal requirements;
(d) furnish to the Corporation whatever statistical information the
Corporation may reasonably request with respect to the Portfolios. In addition,
the Investment Advisor will keep the Corporation and the Directors informed of
developments materially affecting the Portfolios and shall, on the Investment
Advisor's own initiative, furnish to the Corporation from time to time whatever
information the Investment Advisor believes appropriate for this purpose;
(e) make available to the Corporation's administrator, PFPC Inc. (the
"Administrator"), and the Corporation, promptly upon their request, such copies
of its investment records and ledgers with respect to the Portfolios as may be
required to assist the Administrator and the Corporation in their compliance
with applicable laws and regulations. The Investment Advisor will furnish the
Directors with such periodic and special reports regarding the Funds as they may
reasonably request;
(f) meet quarterly with the Corporation's Board of Directors to explain
its investment management activities, and any reports related to the Portfolios
as may reasonably be requested by the Corporation;
(g) immediately notify the Corporation in the event that the Investment
Advisor or any of its affiliates: (1) becomes aware that it is subject to a
statutory disqualification that prevents the Investment Advisor from serving as
investment adviser pursuant to this Agreement; or (2) becomes aware that it is
the subject of an administrative proceeding or enforcement action by the SEC or
other regulatory authority. The Investment Advisor further agrees to notify the
Corporation immediately of any material fact known to the Investment Advisor
respecting or relating to the Investment Advisor that is not contained in the
Registration Statement regarding the Funds, or any amendment or supplement
thereto, but that is required to be disclosed thereon, and of any statement
contained therein that becomes untrue in any material respect; and
(h) in making investment decisions for the Portfolios, use no inside
information that may be in its possession or in the possession of any of its
affiliates, nor will the Investment Advisor seek to obtain any such information.
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3. Investment Guidelines. The Corporation shall supply the Investment
Advisor with such information as the Investment Advisor shall reasonably require
concerning the Funds' investment policies, restrictions, limitations, tax
position, liquidity requirements and other information useful in managing the
Portfolios.
4. Use of Securities Brokers and Dealers. Purchase and sale orders will
usually be placed with brokers which are selected by the Investment Advisor 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 Investment
Advisor 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 Investment Advisor is expressly authorized
to consider the fact that a broker or dealer has furnished statistical, research
or other information or services which enhance the Investment Advisor'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 Investment Advisor 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 Investment Advisor 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 Investment
Advisor's overall responsibilities to the Investment Advisor's discretionary
accounts.
Neither the Investment Advisor 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, provided that this
limitation shall not prevent the Investment Advisor from utilizing the services
of a securities broker which is a parent, subsidiary or related firm, provided
such broker effects transactions on a "cost only" or "nonprofit" basis to itself
and provides competitive execution. Unless otherwise directed by the Corporation
in writing, the Investment Advisor may utilize the service of whatever
independent securities brokerage firm or firms it deems appropriate to the
extent that such firms are competitive with respect to price of services and
execution.
5. Compensation. For its services specified in this Agreement, the
Corporation agrees to pay annual fees to the Investment Advisor equal to the
amounts listed opposite the respective Fund on Exhibit A. Fees shall be computed
and accrued daily and paid monthly based on the average daily net asset value of
shares of the Funds as determined according to the manner provided in the
then-current prospectus of the Funds. The Investment Advisor shall be
responsible for compensating any investment sub-advisers employed by the Funds.
6. Fees and Expenses. The Investment Advisor shall not be required to pay
any expenses of the Funds other than those specifically allocated to the
Investment Advisor in this section 6. In particular, but without limiting the
generality of the foregoing, the Investment Advisor shall not be responsible for
the following expenses of the Funds: organization and certain offering expenses
of the Funds (including out-of-pocket expenses, but not including the Investment
Advisor's overhead and employee costs); fees payable to the Investment Advisor
and to any other of the Funds' advisers or consultants; legal expenses; auditing
and accounting expenses; interest expenses; taxes and governmental fees; fees,
dues and expenses incurred by or
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with respect to the Fund in connection with membership in investment company
trade organizations; cost of insurance relating to fidelity coverage for the
Corporation's officers and employees; fees and expenses of the Funds'
Administrator or of any custodian, subcustodian, transfer agent, registrar, or
dividend disbursing agent of the Funds; payments to the Administrator for
maintaining the Funds' financial books and records and calculating its daily net
asset value; other payments for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates; other expenses in connection with the issuance,
offering, distribution or sale of securities issued by the Funds; expenses
relating to investor and public relations; expenses of registering and
qualifying shares of the Funds for sale; freight, insurance and other charges in
connection with the shipment of the Funds' portfolio securities; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
or other assets of the Funds, or of entering into other transactions or engaging
in any investment practices with respect to the Funds; expenses of printing and
distributing prospectuses, Statements of Additional Information, reports,
notices and dividends to stockholders; costs of stationery or other office
supplies; any litigation expenses; costs of stockholders' and other meetings;
the compensation and all expenses (specifically including travel expenses
relating to the Funds' businesses) of officers, directors and employees of the
Corporation who are not interested persons of the Investment Advisor; and travel
expenses (or an appropriate portion thereof) of officers or directors of the
Corporation who are officers, directors or employees of the Investment Advisor
to the extent that such expenses relate to attendance at meetings of the Board
of Directors of the Corporation with respect to matters concerning the Funds, or
any committees thereof or advisers thereto.
7. Books and Records. The Investment Advisor 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
Investment Advisor 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 Corporation and will be
surrendered promptly to the Corporation upon its request. The Investment Advisor
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 order to determine whether the operations of
the Funds are being conducted in accordance with applicable laws and
regulations.
8. Aggregation of Orders. Provided the investment objectives, policies
and restrictions of the Funds are adhered to, the Corporation agrees that the
Investment Advisor may aggregate sales and purchase orders of securities held in
the Funds with similar orders being made simultaneously for other accounts
managed by the Investment Advisor or with accounts of the affiliates of the
Investment Advisor, if in the Investment Advisor's reasonable judgment such
aggregation shall result in an overall economic benefit to the respective Fund
taking into consideration the advantageous selling or purchase price, brokerage
commission and other expenses. The Corporation acknowledges that the
determination of such economic benefit to the Funds by the Investment Advisor
represents the Investment Advisor's evaluation that the Funds are benefited by
relatively better purchase or sales prices, lower commission expenses and
beneficial timing of transactions or a combination of these and other factors.
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9. Liability. The Investment Advisor shall not be liable to the
Corporation for the acts or omissions of any other fiduciary or other person
respecting the Funds or for anything done or omitted by the Investment Advisor
under the terms of this Agreement if the Investment Advisor shall have acted in
good faith and shall have exercised the degree of prudence, competence and
expertise customarily exhibited by managers of institutional portfolios. Nothing
in this Agreement shall in any way constitute a waiver or limitation of any
rights which may not be so limited or waived in accordance with applicable law.
10. Services Not Exclusive. It is understood that the services of the
Investment Advisor are not exclusive, and that nothing in this Agreement shall
prevent the Investment Advisor from providing similar services to other
investment companies or to other series of investment companies, including the
Corporation (whether or not their investment objectives and policies are similar
to those of the Funds) 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 Investment Advisor's ability to meet its obligations
to the Funds hereunder. When the Investment Advisor recommends the purchase or
sale of a security for other investment companies and other clients, and at the
same time the Investment Advisor 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 Funds. In connection with purchases or sales of portfolio
securities for the account of the Funds, neither the Investment Advisor nor any
of its directors, officers or employees shall act as a principal or agent or
receive any commission. If the Investment Advisor provides any advice to its
clients concerning the shares of the Funds, the Investment Advisor shall act
solely as investment counsel for such clients and not in any way on behalf of
the Corporation or the Funds.
11. Duration and Termination. This Agreement shall continue with respect
to each of the Funds, until December 22, 2005, 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 a 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 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 with respect to a
Fund upon the vote of a majority of the Directors or by vote of the majority of
that Fund's outstanding voting securities, upon sixty (60) days' written notice
to the Investment Advisor or (b) by the Investment Advisor at any time without
penalty, upon sixty (60) days' written notice to the Corporation. This Agreement
will also terminate automatically in the event of its assignment (as defined in
the 1940 Act). Any termination of this Agreement will be without prejudice to
the completion of transactions already initiated by the Investment Advisor on
behalf of the Funds at the time of such termination. The Investment Advisor
shall take all steps reasonably necessary after such termination to complete any
such transactions and is hereby authorized to take such steps.
12. Amendments. This Agreement may be amended at any time but only by the
mutual agreement of the parties.
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13. Proxies. Unless the Corporation gives written instructions to the
contrary, the Investment Advisor shall vote all proxies solicited by or with
respect to the issuers of securities in the Portfolios. The Investment Advisor
shall maintain a record of how the Investment Advisor voted and such record
shall be available to the Corporation upon its request. The Investment Advisor
shall use its best good faith judgment to vote such proxies in a manner which
best serves the interests of the Funds' shareholders.
14. 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 Corporation:
Forward Funds, Inc.:
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
If to the Investment Advisor:
Forward Management, LLC
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
15. Confidential Information. The Investment Advisor shall maintain the
strictest confidence regarding the business affairs of the Funds. Written
reports furnished by the Investment Advisor to the Corporation shall be treated
by the Corporation and the Investment Advisor as confidential and for the
exclusive use and benefit of the Corporation except as disclosure may be
required by applicable law.
16. 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 Investment
Advisor is delivering to the Corporation a copy of Part II of its Form ADV, as
revised, on file with the Securities and Exchange Commission. The Corporation
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 hereby 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 Investment
Advisor as an agent of the Corporation or the Funds.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of December 4, 2003.
FORWARD FUNDS, INC.
By: /s/ J. Xxxx Xxxx, Jr.
---------------------------------
Name: J. Xxxx Xxxx, Jr.
Title: President
FORWARD MANAGEMENT, LLC
By: /s/Xxxx X. XxXxxxx
---------------------------------
Name: Xxxx X. XxXxxxx
Title: COO
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Exhibit A
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Fund Advisory Fee
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The Forward International Small Companies Fund 1.00%
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