FORM OF
FORWARD FUNDS, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT, effective as of ______ 2000, among Xxxxxxxxxx Investment
Management, LLC (the "Sub-Adviser"), Forward Funds, Inc. (the "Company"), and
Xxxxxxx Investment Management Company, LLC (the "Adviser") on behalf of the
Xxxxxxxxxx U.S. 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 August 8, 1998 ("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 Sub-Adviser to perform
certain investment advisory services for the Company, on behalf of the Fund
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 Fund;
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 Fund 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 Board
of Directors of the Fund and the Adviser, the Sub-Adviser 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 Sub-Adviser 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 under the
terms of this Agreement, the Sub-Adviser will provide the Fund with ongoing
investment guidance and policy direction.
The Sub-Adviser's duties shall not include and the Sub-Adviser shall
have no responsibility for the following: tax reporting; securities lending and
cash collateral; allocation, diversification, management and investment of the
overall assets of the Fund; management and investment of the liquidity account;
and management, investment, and compliance with respect to any assets of the
fund not allocated by the Board of Directors to the Sub-Adviser.
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 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; 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
Fund, in accordance with applicable policies expressed in the Fund's Prospectus
and/or Statement of Additional Information established through written
guidelines determined by the Fund and provided to the Sub-Adviser, and in
accordance with applicable legal requirements;
(d) furnish to the Company, the Adviser whatever statistical
information the Company or the Adviser may reasonably request with respect to
the Fund's assets or contemplated investments. In addition, the Sub-Adviser will
keep the Company, the Adviser and the Directors informed of developments
materially affecting the Fund's portfolio and shall, on the Sub-Adviser's own
initiative, furnish to the Fund from time to time whatever information the
Sub-Adviser believes appropriate for this purpose;
(e) make available to the Fund's 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 Fund 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 Fund as they may reasonably request;
(f) meet quarterly 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
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 Fund 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 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; and
(h) in making investment decisions for the Fund, use no inside
information that may be in its possession or in the possession of any of its
affiliates, nor will the Sub-Adviser seek to obtain any such information.
3. Futures and Options. The Sub-Adviser's investment authority shall
include the authority to purchase, sell, cover open positions, and generally to
deal in financial futures contracts and options thereon.
The Sub-Adviser will: (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 Fund, 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.
The Fund represents and warrants that it is a "qualified eligible
client" within the meaning of CFTC Regulations Section 4.7 and, as such,
consents to treat the Fund 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 Fund's investment policies, restrictions,
limitations, tax position, liquidity requirements and other information useful
in managing the Fund's investments.
5. 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 Fund, 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 Fund 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 Fund. 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 appropriate
to the extent that such firms are competitive with respect to price of services
and execution.
6. Compensation. For its services specified in this Agreement, the
Company agrees to pay annual fees to the Sub-Adviser equal to 0.55% million of
the first $100 million of Fund assets managed by the Sub-Adviser, 0.50% on the
next $400 million and 0.45% of all assets above $500 million managed by the
Sub-Adviser. Fees shall be computed and accrued daily and paid monthly based on
the average daily net asset value of the Fund's shares as determined according
to the manner provided in the then-current prospectus of the Fund.
7. Most Favored Customer. It is the intent of the parties to this
Agreement that the services be provided to the Adviser on a "most-favored
customer" basis and all terms in this Agreement (including without limitation,
type and level of services provided, fees charged and staffing levels) shall be
interpreted and construed to effect such intent. Any term or condition that is
offered by the Sub-Adviser or agreed upon by the Sub-Adviser with any registered
investment company having a U.S. equity fund managed by the Sub-Adviser shall be
irrevocably offered in writing to the Adviser by the Sub-Adviser with ten (10)
days of the offer of such term or condition or agreement upon such term with
such Sub-Adviser. The terms and conditions of which offer, if accepted by the
Adviser in writing at any time after such offer, shall be deemed to constitute
an amendment of the terms and conditions of this Agreement.
8. Fees and Expenses. The Sub-Adviser shall not be required to pay any
expenses of the Fund other than those specifically allocated to the Sub-Adviser
in this section 8. In particular, but without limiting the generality of the
foregoing, the Sub-Adviser 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 Sub-Adviser's overhead and
employee costs); fees payable to the Sub-Adviser 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 Investment Manager; and travel expenses (or an
appropriate portion thereof) of officers or directors of the Company who are
officers, directors or employees of the Investment Manager 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.
9. Books and Records. The Sub-Adviser 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 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 Fund 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
order to determine whether the operations of the Fund are being conducted in
accordance with applicable laws and regulations.
10. Aggregation of Orders. Provided the investment objectives, policies
and restrictions of the Fund are adhered to, the Fund agrees that the
Sub-Adviser may aggregate sales and purchase orders of securities held in the
Fund 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 Fund taking into consideration the advantageous selling
or purchase price, brokerage commission and other expenses. The Fund
acknowledges that the determination of such economic benefit to the Fund by the
Sub-Adviser represents the Sub-Adviser'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.
11. Liability.
Neither the Sub-Adviser nor its officers, directors, employees, affiliates,
agents or controlling persons shall be liable to the Company, the Fund, its
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
Fund.
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 Fund, its 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 Fund and/or its 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 Fund, 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 Fund, to which any such Indemnified Party may become subject under
the Securities Act of 1933, as amended (the "1933 Act"), the 1934 Act, the
Investment Advisers Act of 1940, 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 Fund,
or (c) any application or other document filed in connection with the
qualification of the Company or shares of the Fund 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 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 X 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.
12. Services Not Exclusive. It is understood 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 (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 Agreement, interfere in a material manner with
the Sub-Adviser's ability to meet its obligations to the Fund 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 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 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
Fund, the Sub-Adviser shall act solely as investment counsel for such clients
and not in any way on behalf of the Company or the Fund.
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 Fund. 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
Fund, 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.
13. Duration and Termination. This Agreement shall continue until
_________, 2002, 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 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 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 Sub-Adviser; (b) by the Adviser at any time
without penalty, upon sixty (60) 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). Any termination of this
Agreement will be without prejudice to the completion of transactions already
initiated by the Sub-Adviser on behalf of the Fund at the time of such
termination. The Sub-Adviser shall take all steps reasonably necessary after
such termination to complete any such transactions and is hereby authorized to
take such steps.
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 Fund's 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:
Xxxxxxxxxx Investment Management, LLC
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
If to the Adviser:
Xxxxxxx Investment Management Co., 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 Fund. 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 Fund except as disclosure may be required by applicable law.
18. Name Reservation. The Adviser acknowledges and agrees that the
Sub-Adviser has property rights relating to the use of the terms "Xxxxxxxxxx
Investment Management" and "Xxxxxxxxxx" (the "Xxxxxxxxxx Name") and has
permitted the use of the Xxxxxxxxxx Name by the Fund and its U.S. Equity Fund
series. The Adviser agrees that, unless otherwise authorized by the Sub-Adviser:
(i) it will use the term "Xxxxxxxxxx" only as a component of the name of the
Fund and for no other purposes; (ii) it will not purport to grant to any third
party any rights in any Xxxxxxxxxx Name; and (iii) the Sub-Adviser may use or
grant to others the right to use a Xxxxxxxxxx Name, or any abbreviation thereof,
as all or a portion of a corporate or business name or for any commercial
purpose, including a grant of such right to any other investment company. Upon
termination of this Agreement, the Adviser shall, at the request of the
Sub-Adviser, cease to use all Xxxxxxxxxx Names in any of its materials or in any
manner except with the consent of the Sub-Adviser, which shall not be
unreasonably withheld. In the event of any such request by the Sub-Adviser that
use by the Adviser of a Xxxxxxxxxx Name shall cease and in the absence of any
such consent, the Adviser shall cause its officers, directors and employees to
take any and all such actions which the Sub-Adviser may reasonably request to
effect such request.
19. 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 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.
(f) Nothing herein shall be construed as constituting the Sub-Adviser
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 _________, 2000.
FORWARD FUNDS, INC.
By:
President
Xxxxxxxxxx Investment Management, LLC
By:
Name:
Title:
XXXXXXX INVESTMENT MANAGEMENT CO., LLC
By:
Name:
Title:
