Exhibit (d)(16)
FORWARD FUNDS, INC.
SUBADVISORY AGREEMENT
AGREEMENT, effective commencing on March 30, 2005, between Netols Asset
Management, Inc (the "Subadvisor"), Forward Management, LLC (the "Investment
Advisor") and Forward Funds, Inc. (the "Company"), on behalf of the Forward
Legato 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 Investment Advisor 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 March 3, 2005, ("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 Subadvisor 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 Subadvisor is willing to perform such services for the Fund; and
WHEREAS, the Subadvisor 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 Investment Advisor and the Subadvisor as
follows:
1. Appointment The Investment Advisor hereby appoints the Subadvisor
to perform advisory services to the Fund for the periods and on the terms set
forth in this Subadvisory Agreement. The Subadvisor 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 Investment Advisor, the Subadvisor will, in
coordination with the Investment Advisor, (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 ("SEC"), as they may
be amended from time to time, copies of which shall be promptly provided to the
Subadvisor by the Investment Advisor; (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
Subadvisor 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 Subadvisor 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
Directors;
(b) use reasonable efforts to manage the Subadvisor's portion of the
Fund and coordinate with the Investment Advisor and PFPF, Inc (the
"Administrator") 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 Investment Advisor and/or PFPC, Inc.
(the "Administrator") whatever statistical information the Company,
the Investment Advisor or the Administrator may reasonably request
with respect to the Fund's assets or contemplated investments. In
addition, the Subadvisor will keep the Company, the Investment
Advisor, the Administrator and the Directors informed of developments
materially affecting the Fund's portfolio and shall, on the
Subadvisor's own initiative, furnish to the Fund from time to time
whatever information the Subadvisor reasonably believes appropriate
for this purpose;
(e) make available to the Administrator, the Investment Advisor, and
the Company, promptly upon their reasonable request, such copies of
its investment records and ledgers with respect to the Fund as may be
required to assist the Investment Advisor, the Administrator, and the
Company in their compliance with applicable laws and regulations. The
Subadvisor will furnish the Directors, the Administrator, the
Investment Advisor, 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
Investment Advisor 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 Investment Advisor and/or the
Company;
(g) immediately notify the Investment Advisor and the Fund in the
event that the Subadvisor or any of its affiliates: (1) becomes aware
that it is subject to a statutory disqualification that prevents the
Subadvisor 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 SEC or other
regulatory authority. The Subadvisor further agrees to notify the Fund
and the Investment Advisor immediately of any material fact known to
the Subadvisor respecting or relating to the Subadvisor 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 Investment Advisor shall
promptly supply the Subadvisor with such information as the Subadvisor 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 Subadvisor as able
to achieve "best execution" of such orders. "Best execution" shall mean prompt
and reliable execution at the most favorable securities price, under the
circumstances, taking into account the other provisions hereafter set forth.
Whenever the Subadvisor 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 Subadvisor is expressly
authorized to consider the fact that a broker or dealer has furnished
statistical, research or other information or services which enhance the
Subadvisor'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 Subadvisor 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 Subadvisor 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 Subadvisor's overall responsibilities to the
Subadvisor's discretionary accounts.
Unless otherwise directed by the Company or the Investment Advisor in writing,
the Subadvisor may utilize the service of whatever 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. After March 31, 2006, the Investment Advisor will pay
the Subadvisor at the end of each calendar month an advisory fee computed daily
at an annual rate equal to 0.60 % of the Fund's average daily net assets with
respect to the portion of the Fund's portfolio allocated to the Subadvisor. The
Subadvisor agrees to waive its fee hereunder through March 31, 2006. The
Subadvisor may be reimbursed by the Investment Advisor on or before the fourth
anniversary of the Fund's commencement of operations for the subadvisory fees
waived during the period prior to March 31, 2006 in an amount in proportion to
any amounts recouped from the Fund by the Investment Advisor pursuant to the
expense limitation agreement between the Investment Advisor and the Company with
respect to the Fund for such period.
6. Fees and Expenses. The Subadvisor shall not be required to pay any
expenses of the Fund other than those specifically allocated to the Subadvisor
in this section. In particular, but without limiting the generality of the
foregoing, the Subadvisor 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 Subadvisor's overhead and employee
costs); fees payable to the Subadvisor 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 Subadvisor; and travel expenses (or an appropriate
portion thereof) of officers or directors of the Company who are officers,
directors or employees of the Subadvisor 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 Subadvisor 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 Subadvisor
also agrees that copies of 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 provided promptly to
the Fund upon its reasonable request. And the Subadvisor further agrees that it
will furnish to regulatory authorities having the requisite authority any
information or copies of 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. The
Subadvisor further agrees to
provide originals of the books and records described in this section if such
originals are required by any regulatory of self-regulatory organization with
relevant jurisdiction.
8. Aggregation of Orders. Provided the investment objectives, policies
and restrictions of the Fund are adhered to, the Company agrees that the
Subadvisor may aggregate sales and purchase orders of securities held in the
Fund with similar orders being made simultaneously for other accounts managed by
the Subadvisor or with accounts of the affiliates of the Subadvisor, if in the
Subadvisor'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
Subadvisor represents the Subadvisor'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 Subadvisor shall
exercise its reasonable judgment in rendering the services provided by it under
this Subadvisory Agreement. The Subadvisor 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 Subadvisor against any liability to
the Fund or to holders of the Fund's shares to which the Subadvisor 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
Subadvisor's reckless disregard of its obligations and duties under this
Subadvisory Agreement. As used in this Section 9, the term "Subadvisor" shall
include any officers, directors, employees or other affiliates of the Subadvisor
performing services for the Fund.
. The Subadvisor is indemnified against misrepresentations by the
Investment Advisor in selling the Fund.
. The Fund and the Investment Advisor are ultimately responsible for
problems with the custodian that are outside of the Subadvisor's
control.
10. Services Not Exclusive. It is understood that the services of the
Subadvisor are not exclusive, and that nothing in this Subadvisory Agreement
shall prevent the Subadvisor from providing similar services to other investment
companies or other accounts (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 Subadvisor's
ability to meet its obligations to the Fund hereunder. When the Subadvisor
recommends the purchase or sale of a security for other investment companies and
other clients, and at the same time the Subadvisor 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 Subadvisor nor any
of its directors, officers or employees shall act as a principal or agent or
receive any commission. If the Subadvisor provides any advice to its clients
concerning the shares of the Fund, the Subadvisor shall act solely as investment
counsel for such clients and not in any way on behalf of the Fund.
Nothing in this agreement shall limit or restrict Subadvisor or any of its
directors, officers, affiliates or employees from buying, selling or trading in
any securities or other assets for its or their own account or accounts, and
Investment Advisor acknowledges that Subadvisor, its directors, officers,
affiliates or employees and other clients of Subadvisor, may at any time have,
acquire, increase, decrease or dispose of positions in investments which are at
the same time be acquired, held or disposed of for the investment accounts of
clients of Subadvisor. Notwithstanding anything else in this section, all
trading by the Subadvisor or its directors, officers, affiliates or employees
must be done in accord with Subadvisor's personal trading Code of Ethics.
11. Duration and Termination. This Subadvisory Agreement shall
continue for a period of two years unless sooner terminated as provided herein.
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 Subadvisor, (b) by the
Subadvisor at any time without penalty, upon sixty (60) days' written notice to
the Fund or (c) by the Investment Advisor at any time without penalty, upon
sixty (60) days' written notice to the Subadvisor. This Subadvisory Agreement
will also terminate automatically in the event of its assignment (as defined in
the 0000 Xxx) or the assignment or termination of the Investment Management
Agreement.
12. Amendments. No provision of this Subadvisory Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Subadvisory
Agreement shall be effective until approved by an affirmative vote of (i) a
majority of the outstanding voting securities of the Fund, and (ii) a majority
of the Directors of the Fund, including a majority of Directors who are not
interested persons of any party to this Subadvisory Agreement, cast in person at
a meeting called for the purpose of voting on such approval, if such approval is
required by applicable law.
13. Proxies/Class Action. Unless the Company gives written
instructions to the contrary, the Subadvisor shall vote all proxies solicited by
or with respect to the issuers of securities in which assets of the Fund may be
invested. The Subadvisor shall maintain a record of how the Subadvisor voted and
such record shall be available to the Company upon its request. The Subadvisor
shall use its best good faith judgment to vote such proxies in a manner which
best serves the interests of the Fund's shareholders. Subadvisor shall have no
responsibility to file any claim in connection with a class action or other
lawsuit filed with respect to any security held by the Fund, such responsibility
shall be solely with the administrator and/or Advisor.
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 Investment Advisor:
Forward Management, LLC
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
If to the Subadvisor:
Netols Asset Management
0000 Xxxx Xxxx Xxxx Xxxx, Xxxxx#000
Xxxxxx, XX 00000
15. Confidential Information The Subadvisor shall maintain the
strictest confidence regarding the business affairs of the Fund. Written reports
furnished by the Subadvisor, as well as any information related to investment
advice the sub-advisor provides to the Company or the Investment Advisor 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
Subadvisor is delivering to the Investment Advisor and the
Company a current copy of Part II of its Form ADV, as revised.
The Investment Advisor 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
Subadvisor as an agent of the Company or the Fund.
(f) The Subadvisor shall be entitled to review and comment on
marketing materials prepared by the Investment Advisor regarding
the Forward Legato Fund prior to release. The Subadvisor's
comments must be received by the Investment Advisor no later than
fifteen (15) days prior to release. The Investment Advisor shall
have authority to make final decisions as to the form and content
of Fund marketing materials.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of March 30, 2005.
NETOLS ASSET MANAGEMENT, INC
By /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
FORWARD MANAGEMENT, LLC
By /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: CFO
FORWARD FUNDS, INC.
By /s/ J. Xxxx Xxxx
--------------------------------
Name: J. Xxxx Xxxx
Title: President
