Exhibit (d)(4)
FORWARD FUNDS, INC.
AMENDED AND RESTATED
SUBADVISORY AGREEMENT
AGREEMENT, effective commencing on October 1, 1998, and amended and
restated on March 7, 2002 and June 6, 2002, between Xxxxxx Investment Management
Co., LLC (the "Subadviser"), and Forward Management, LLC (the "Adviser") and
Forward Funds, Inc. (the "Company"), on behalf of the Forward Xxxxxx Small Cap
Equity Fund (the "Fund"), a 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 Fund is a
series of the Company; and
WHEREAS, the Adviser has been retained by the Company to provide investment
advisory services to the Fund with regard to the Fund's 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 Fund's Board of Directors, including a majority of the
directors who are not "interested persons," as defined in the 1940 Act, and the
Fund's stockholders have approved the appointment of the Subadviser to perform
certain investment advisory services for the Company, on behalf of the Fund
pursuant to this Subadvisory Agreement and as described in the Registration
Statement and the Subadviser is willing to perform such services for the Fund;
and
WHEREAS, the Subadviser 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 between the Adviser and the Subadviser as follows:
1. Appointment. The Adviser hereby appoints the Subadviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Subadvisory Agreement. The Subadviser 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 Board of
Directors of the Fund and the Adviser, the Subadviser will, in coordination with
the Adviser, (a) provide a program of continuous investment management for the
Fund in accordance with the Fund's investment objectives, policies and
limitations as stated in the Fund's prospectus and Statement of Additional
Information included as part of the Fund's Registration Statement filed with the
Securities and Exchange Commission, as they may be amended from time to time,
copies of which shall be provided to the Subadviser by the Adviser; (b) make
investment decisions for the Fund; and (c) place orders to purchase and sell
securities for the Fund.
In performing its investment management services to the Fund hereunder, the
Subadviser will provide the Fund with ongoing investment guidance and policy
direction, including oral and written research, analysis, advice, statistical
and economic data and judgments regarding individual investments, general
economic conditions and trends and long-range investment policy.
The Subadviser 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 (the "Code") and all other applicable
federal and state laws and regulations, and with any applicable procedures
adopted by the Directors;
(b) use reasonable efforts to manage the Fund so that it will qualify, and
continue to qualify, as a regulated investment company under Subchapter M of the
Code and regulations issued thereunder;
(c) place orders pursuant to its investment determinations for the Fund in
accordance with applicable policies expressed in the Fund's prospectus and/or
Statement of Additional Information and in accordance with applicable legal
requirements;
(d) furnish to the Company, the Adviser and/or PFPC, Inc. (the
"Administrator") whatever statistical information the Company, the Adviser or
the Administrator may reasonably request with respect to the Fund's assets or
contemplated investments. In addition, the Subadviser will keep the Company, the
Adviser, the Administrator and the Directors informed of developments materially
affecting the Fund's portfolio and shall, on the Subadviser's own initiative,
furnish to the Fund from time to time whatever information the Subadviser
believes appropriate for this purpose;
(e) make available to the Administrator, the Adviser, and the Company,
promptly upon their request, such copies of its investment records and ledgers
with respect to the Fund as may be required to assist the Adviser, the
Administrator, and the Company in their compliance with applicable laws and
regulations. The Subadviser will furnish the Directors, the Administrator, the
Adviser, and the Company with such periodic and special reports regarding the
Fund as they may reasonably request;
(f) meet quarterly either in person or by conference call with the Adviser
and the Company's Board of Directors to explain its investment management
activities, and any reports related to the Fund as may reasonably be requested
by the Adviser and/or the Company;
(g) immediately notify the Adviser and the Fund in the event that the
Subadviser or any of its affiliates: (1) becomes aware that it is subject to a
statutory disqualification that prevents the Subadviser from serving as an
investment adviser pursuant to this Subadvisory 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 Subadviser further agrees to notify the Fund and the Adviser immediately of
any material fact known to the Subadviser respecting or relating to the
Subadviser that is not contained in the Fund's 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.
3. Investment Guidelines. The Company or the Adviser shall supply the
Subadviser with such information as the Subadviser shall reasonably require
concerning the Fund's investment policies, restrictions, limitations, tax
position, liquidity requirements and other information useful in managing the
Fund's assets.
4. Use of Securities Brokers and Dealers. Purchase and sale orders will
usually be placed with brokers which are selected by the Subadviser 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 hereafter set forth. Whenever the Subadviser places orders,
or directs the placement of orders, for the purchase or sale of portfolio
securities on behalf of the Fund, in selecting brokers or dealers to execute
such orders, the Subadviser is expressly authorized to consider the fact that a
broker or dealer has furnished statistical, research or other information or
services which enhance the Subadviser'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 Subadviser 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 Subadviser 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 Fund or the Subadviser's overall responsibilities to the Subadviser's
discretionary accounts.
Neither the Subadviser 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 Fund. Unless otherwise directed by the
Company or the Adviser in writing, the Subadviser 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. As compensation for the services provided and expenses
assumed by the Subadviser under this Agreement, the Adviser will pay the
Subadviser at the end of each calendar month an advisory fee computed daily at
an annual rate equal to 0.70% of the Fund's daily net assets. Effective January
1, 2003, the Adviser will pay the Subadviser at the end of each calendar month
an advisory fee computed daily at an annual rate equal to 0.70% of the Fund's
daily net assets up to the first $100 million in Fund assets and 0.65% of the
Fund's daily net assets over $100 million. Fees shall be computed and accrued
daily and paid monthly based on the average daily net assets of the Fund as
determined according to the manner provided in the then-current prospectus of
the Fund.
6. Fees and Expenses. The Subadviser shall not be required to pay any
expenses of the Fund other than those specifically allocated to the Subadviser
in this section 6. In particular, but without limiting the generality of the
foregoing, the Subadviser shall not be responsible for the following expenses of
the Fund: organization and certain offering expenses of the Fund (including
out-of-pocket expenses, but not including the Subadviser's overhead and employee
costs); fees payable to the Subadviser and to any other Fund 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
Company's officers and employees; fees and expenses of the Fund's Administrator
or of any custodian, subcustodian, transfer agent, registrar, or dividend
disbursing agent of the Fund;
payments to the Administrator for maintaining the Fund's 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 Fund; expenses relating to investor and public relations; expenses
of registering and qualifying shares of the Fund for sale; freight, insurance
and other charges in connection with the shipment of the Fund's portfolio
securities; brokerage commissions or other costs of acquiring or disposing of
any portfolio securities or other assets of the Fund, or of entering into other
transactions or engaging in any investment practices with respect to the Fund;
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 Fund's business) of officers, directors and employees
of the Company who are not interested persons of the Subadviser; and travel
expenses (or an appropriate portion thereof) of officers or directors of the
Company who are officers, directors or employees of the Subadviser to the extent
that such expenses relate to attendance at meetings of the Board of Directors of
the Company with respect to matters concerning the Fund, or any committees
thereof or advisers thereto.
7. Books and Records. The Subadviser agrees to maintain such books and
records with respect to its services to the Fund 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 Subadviser
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 Fund and will be surrendered promptly to the
Fund upon its request. And the Subadviser 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 Fund are being conducted in accordance
with applicable laws and regulations.
8. Aggregation of Orders. Provided the investment objectives, policies
and restrictions of the Fund are adhered to, the Company agrees that the
Subadviser may aggregate sales and purchase orders of securities held in the
Fund with similar orders being made simultaneously for other accounts managed by
the Subadviser or with accounts of the affiliates of the Subadviser, if in the
Subadviser's reasonable judgment such aggregation shall result in an overall
economic benefit to the Fund taking into consideration the advantageous selling
or purchase price, brokerage commission and other expenses. The Company
acknowledges that the determination of such economic benefit to the Fund by the
Subadviser represents the Subadviser's evaluation that the Fund is 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. Standard of Care and Limitation of Liability. The Subadviser shall
exercise its best judgment in rendering the services provided by it under this
Subadvisory Agreement. The Subadviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund or the holders
of the Fund's shares in connection with the matters to which this Subadvisory
Agreement relates, provided that nothing in this Subadvisory Agreement shall be
deemed to protect or purport to protect the Subadviser against any liability to
the Fund or to holders of the Fund's shares to which the Subadviser would
otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Subadviser's reckless disregard of
its obligations and duties under this Subadvisory Agreement. As used in this
Section 9, the term "Subadviser" shall include any officers, directors,
employees or other affiliates of the Subadviser performing services for the
Fund.
10. Services Not Exclusive. It is understood that the services of the
Subadviser are not exclusive, and that nothing in this Subadvisory Agreement
shall prevent the Subadviser from providing similar services to other investment
companies (whether or not their investment objectives and policies are similar
to those of the Fund) or from engaging in other activities, provided such other
services and activities do not, during the term of this Subadvisory Agreement,
interfere in a material manner with the Subadviser's ability to meet its
obligations to the Fund hereunder. When the Subadviser recommends the purchase
or sale of a security for other investment companies and other clients, and at
the same time the Subadviser recommends the purchase or sale of the same
security for the Fund, it is understood that in light of its fiduciary duty to
the Fund, 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 Fund, neither the Subadviser nor any of its
directors, officers or employees shall act as a principal or agent or receive
any commission. If the Subadviser provides any advice to its clients concerning
the shares of the Fund, the Subadviser shall act solely as investment counsel
for such clients and not in any way on behalf of the Fund.
11. Duration and Termination. This Subadvisory Agreement shall continue
for a period of one year, unless terminated sooner, 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 Subadvisory Agreement or "interested persons" (as defined in the 0000
Xxx) of any party to this Subadvisory Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. Notwithstanding the
foregoing, this Subadvisory Agreement may be terminated: (a) at any time without
penalty by the Fund upon the vote of a majority of the Directors or by vote of
the majority of the Fund's outstanding voting securities, upon sixty (60) days'
written notice to the Subadviser; (b) by the Adviser at any time without
penalty, upon sixty (60) days' written notice to the Subadviser; or (c) by the
Subadviser at any time without penalty, upon sixty (60) days' written notice to
the Company. This Subadvisory Agreement will also terminate automatically in the
event of its assignment (as defined in the 1940 Act). Any termination of this
Subadvisory Agreement will be without prejudice to the completion of
transactions already initiated by the Subadviser on behalf of the Fund at the
time of such termination. The Subadviser 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 Subadvisory Agreement may be amended at any time but
only by the mutual agreement of the parties.
13. Proxies. Unless the Company gives written instructions to the
contrary, the Subadviser shall vote all proxies solicited by or with respect to
the issuers of securities in which assets of the Fund may be invested. The
Subadviser shall maintain a record of how the Subadviser voted and such record
shall be available to the Company upon its request. The
Subadviser shall use its best good faith judgment to vote such proxies in a
manner which best serves the interests of the Fund's 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 Company:
Forward Funds, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
If to the Adviser:
Forward Management, LLC
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
If to the Subadviser:
Xxxxxx Investment Management, LLC
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
15. Confidential Information. The Subadviser shall maintain the strictest
confidence regarding the business affairs of the Fund. Written reports furnished
by the Subadviser to the Company, the Adviser or the Business Manager shall be
treated by such entities as confidential and for the exclusive use and benefit
of the Company 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 Subadviser is
delivering to the Adviser and the Company a copy of Part II of its Form ADV, as
revised, on file with the Securities and Exchange Commission. 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 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 Subadviser as an
agent of the Company or the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of June 6, 2002.
XXXXXX INVESTMENT MANAGEMENT CO., LLC
By /s/ Xxxxx Xxxxxx
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Name: Xxxxx Xxxxxx
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Title: Managing Member
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FORWARD MANAGEMENT, LLC
By /s/ Xxxx X. XxXxxxx
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Name: Xxxx X. XxXxxxx
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Title: COO
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FORWARD FUNDS, INC.
By /s/ J. Xxxx Xxxx, Jr.
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Name: J. Xxxx Xxxx, Jr.
--------------------------
Title: President
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