EX.99(d)(5)
FORWARD FUNDS, INC.
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, effective as of March 3, 2005, 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, in which case any of the duties of the Investment
Advisor set forth herein may be delegated to such investment sub-advisers
subject to approval by the Board of Directors; (c) if investment sub-advisers
are appointed with respect to the Funds, monitor and evaluate the performance of
the investment sub-advisers under their respective sub-advisory agreements in
light of the investment objectives and policies of the respective Fund, and
render to the Directors such periodic and special reports related to such
performance monitoring as the Directors may reasonably request, and analyze and
recommend changes in investment sub-advisers as the Investment Advisor may deem
appropriate; and (d) place orders to purchase and sell investments in the
Portfolios for 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.
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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 therein, and of any statement
contained therein that becomes untrue in any material respect; and
(h) in making investment decisions for the Portfolios, use no material
non-public 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. The Investment Advisor is responsible for decisions to buy and sell
securities and other investments for the Fund, broker-dealer selection, and
negotiation of brokerage commission rates. The Investment Advisor's primary
consideration in effecting a security transaction will be to obtain the best
execution for the Fund, taking into account the factors specified in the
Registration Statement, or other factors that may be specified by the Board. The
price to a Fund in any transaction may be less favorable than that available
from another broker-dealer if the difference is reasonably justified, in the
judgment of the Investment Advisor in the exercise of its fiduciary obligations
to the Fund, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board may determine and consistent with Section
28(e) of the Securities Exchange Act of 1934, as amended (the "1934 Act") or
other applicable law, the Investment Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker-dealer for
effecting a portfolio investment transaction in excess of the amount of
commission another broker-dealer would have charged for effecting that
transaction, if the Investment Advisor determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker-dealer, viewed in terms of either that
particular transaction or the Investment Advisor's overall responsibilities with
respect to the Fund and to its other clients as to which it exercises investment
discretion. To the extent consistent with these standards and in accordance with
Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder and Section 17(e) of
the 1940 Act and Rule 17e-1 thereunder, the Investment Advisor is further
authorized to allocate the orders placed by it on behalf of the Fund to the
Investment Advisor if it is registered as a broker-dealer with the Securities
and Exchange Commission ("SEC"), to an affiliated broker-dealer, or to such
brokers and dealers who also provide research or statistical material or other
services to the Fund, the Investment Advisor or an affiliate of the Investment
Advisor. Such allocation shall be in such amounts and proportions as the
Investment Advisor shall determine consistent with the above standards, and the
Investment Advisor will report on said allocation regularly to the Board if and
as required under applicable law or regulation, indicating the broker-dealers to
which such allocations have been made and the basis therefore.
5. Compensation. For its investment advisory services specified in Section
2 of 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 Agreement. 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
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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
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; expenses of establishing, or
implementing the Funds' compliance program; expenses, salaries, or other costs
of any officers of the Funds, including, but not limited to any officers of the
Funds who may also be officers, employees, or other affiliates of the Investment
Advisor; 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 with respect
to matters concerning the Funds (including officers, Directors or employees of
the Funds who are "interested persons" of the Investment Advisor) as may be
agreed upon between the Corporation and the Investment Advisor.
Notwithstanding anything herein to the contrary, the Investment Advisor may, if
requested: (a) 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,
provided that the Investment Advisor may be compensated for providing such
services as agreed to between the Investment Advisor and the Corporation from
time to time pursuant to a support services or similar agreement; (b) provide
the services of its officers as officers or administrative executives of the
Funds (including but not limited to the Chief Compliance Officer of the Funds
and any compliance staff) and the services of any Directors of the Corporation
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, provided that the Investment Advisor
may be compensated for providing such services as agreed to between the
Investment Advisor and the Corporation from time to time pursuant to a support
services or similar agreement; and (c) provide office space, secretarial and
clerical services and wire and telephone services, and monitor and review
Corporation contracted services and expenditures pursuant to the distribution
plans of the Funds, provided that the Investment Advisor may be compensated for
providing such services as agreed to between the Investment Advisor and the
Corporation from time to time pursuant to a support services or similar
agreement.
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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.
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. 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.
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11. Duration and Termination. This Agreement shall continue with respect to
each of the Funds, until March 3, 2007, 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, and consistent with the requirements of the
1940 Act.
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
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Advisor as confidential and for the exclusive use and benefit of the Corporation
except as disclosure may be required by applicable law.
16. Use of Names. It is understood that the names "Forward Funds, Inc.,"
"Forward Management," and "Forward Funds" or any derivative thereof or logo
associated with those names are the valuable property of the Investment Advisor
and its affiliates, and that the Fund and/or the Fund have the right to use such
names (or derivatives or logos) only so long as this Agreement shall continue
with respect to such Fund and/or Fund. Upon termination of this Agreement, the
Fund (or Fund) shall forthwith cease to use such names (or derivatives or logos)
and, in the case of the Fund, shall promptly amend its Articles of Incorporation
to change its name (if such name is included therein) and remove Forward Funds
logos.
17. Corporation Obligation. A copy of the Corporation's Articles of
Incorporation, as amended, is on file with the State of Maryland and notice is
hereby given that this Agreement has been executed on behalf of the Corporation
by a Director or officer of the Corporation in his or her capacity as such and
not individually. The obligations of this Agreement shall only be binding upon
the assets and property of the Corporation and shall not be binding upon any
trustee, officer or shareholder of the Corporation individually. The debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular Fund shall be enforceable against the
assets and property of that Fund only, and not against the assets or property of
any other series of the Corporation, or against any of the Directors, officers,
employees or shareholders of the Corporation individually.
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 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 acknowledges 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.
(e) Nothing herein shall be construed as constituting the Investment
Advisor as an agent of the Corporation or the Funds.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of March 3, 2005.
FORWARD FUNDS, INC.
By:
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Name: J. Xxxx Xxxx, Jr
Title: President
FORWARD MANAGEMENT, LLC
By:
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Name: Xxxxxx X. Xxxxx
Title: Chief Financial Officer
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Exhibit A
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Fund Advisory Fee
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Forward Legato Fund 1.00% up to $500 million
0.85% over $500 million
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