FORWARD FUNDS, INC.
SUBADVISORY AGREEMENT
AGREEMENT, effective as of ______, 1998, among Xxxxxxxxx Investment
Counsel, Inc. ("Templeton" or the "Subadviser"), Xxxxxxx Investment Management
Company LLC (the "Adviser") and Forward Funds, Inc. (the "Company"), on behalf
of The International 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 September 4, 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 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 among the Adviser, the Company and the Subadviser as
follows:
1. Appointment. The Subadviser is hereby appointed to act as investment
adviser to the Fund for the periods and on the terms set forth in this
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 Directors
of the Company, the Subadviser will (a) provide a program of continuous
investment management for the Fund with regard to the Fund's investments 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 Registration Statement filed with the Securities and Exchange
Commission, as they may be amended from time to time, copies of which shall be
provided promptly to the Subadviser by the Company or the Adviser; (b) make
investment decisions for the Fund with regard to the Fund's investments; 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 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, to the extent
consistent with the Subadviser's investment philosophy 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 Board of Directors, except that the Subadviser shall not be
responsible for making passive foreign investment Company ("PFIC") elections on
behalf of the Fund or determining whether or not to treat a security as a PFIC
(although it may render the Fund reasonable assistance in making its PFIC
determinations);
(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, written guidelines determined by the
Company and provided to the Subadviser, and in accordance with applicable legal
requirements;
(d) furnish to the Company and the Adviser whatever statistical information
such entities may reasonably request with respect to the Fund's assets or
contemplated investments. In addition, the Subadviser will keep the Company, the
Adviser and the Directors informed of developments materially affecting the
Fund's portfolio and shall, on the Subadviser's own initiative, furnish to the
Company from time to time whatever information the Subadviser believes
appropriate for this purpose;
(e) make available to the Company's administrator, First Data Investor
Services Group, 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 Administrator, the
Adviser and the Company in their compliance with applicable laws and
regulations. The Subadviser will furnish the Adviser and the Directors with such
periodic and special reports regarding the Fund's portfolio assets 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 subadvisory activities, and
any reports related to transactions for its investments on behalf of the Fund as
may reasonably be requested by the Adviser and/or the Company;
(g) immediately notify the Company 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 investment adviser
pursuant to this 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 Company immediately of any material fact known to the Subadviser
respecting or relating to the Subadviser that is not contained in the
Registration Statement regarding the Fund, or any amendment or supplement
thereto, but that is required to be disclosed thereon, and of any statement
contained therein that becomes untrue in any material respect; and
(h) in making investment decisions for the Fund, use no inside information
that may be in its possession or in the possession of any of its affiliates, nor
will the Subadviser seek to obtain any such information.
3. Investment Guidelines. The Company and/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 hereinafter 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. For its services specified in this Agreement, the Company
agrees to pay annual fees to the Subadviser equal to 0.70% of the first $25
million of Fund assets managed by the Subadviser, 0.55% on the next $25 million,
0.50% on the next $50 million, 0.40% on the next $150 million, 0.35% on the next
$250 million and 0.30% of all assets above $500 million managed by the
Subadviser. 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.
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; other third party expenses, including
ballot handling services; 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 Company and will be surrendered promptly to
the Company upon its request; except that the Subadviser may retain copies of
such documents as are required to be maintained by advisers under the Advisers
Act. 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. Liability. The Subadviser shall not be liable to the Company for the
acts or omissions of any other fiduciary or other person respecting the Fund or
for anything done or omitted by the Subadviser under the terms of this Agreement
if the Subadviser 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
Subadviser are not exclusive, and that nothing in this Agreement shall prevent
the Subadviser from providing similar services to other 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 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 Company or the Fund. The Subadviser provides investment advisory services
to numerous other funds and accounts and may give advice and take action which
may differ from the timing or nature of action taken by the Subadviser with
respect to the Fund. Nothing in this Agreement shall impose upon the Subadviser
any obligation other than those imposed by law to purchase or sell or to
recommend for purchase or sale, with respect to the Fund, any security which the
Subadviser, or its shareholders, directors, officers, employees or affiliates
may purchase or sell for its or their own account(s) or for the account of any
other client.
11. Acknowledgment of Investment Risk. The Company recognizes and
acknowledges that investment in securities of companies in foreign countries
involves certain special considerations which are not typically associated with
investing in securities of U.S. companies. Such risk considerations include, but
are not limited to, foreign currency considerations, investment and repatriation
restrictions and economic and political risks.
Although the Subadviser intends to invest in companies located in countries
which the Subadviser considers to have relatively stable and friendly
governments, the Company is cognizant of and hereby accepts the possibility that
countries in which the Subadviser invests may expropriate or nationalize
properties of foreigners or impose confiscatory taxation or exchange controls
(which may include suspension of the ability to transfer currency from a given
country.) Moreover, the countries in which the Fund may invest also may be
subject to political or social instability or diplomatic developments that could
affect investments in securities of issuers in those countries.
The Company recognizes and acknowledges that this Fund is designed for
investors seeking international diversification, and is not intended as a
complete investment program.
12. Duration and Termination. This Agreement shall continue until _____,
2000, 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 Subadviser; (b) by the Adviser at any time without penalty upon
sixty (60) day's 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 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 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.
13. Amendments. This Agreement may be amended at any time but only by the
mutual agreement of the parties.
14. 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. However, the Subadviser will not be
expected or required to take any action other than the rendering of
investment-related advice with respect to lawsuits involving securities
presently or formerly held in the Fund, or the issuers thereof, including
actions involving bankruptcy. If the Subadviser undertakes litigation against an
issuer on behalf of accounts which it manages that are shareholders of such
issuer and the Fund holds shares purchased by the Subadviser on the Fund's
behalf, the Fund agrees to pay its portion of any applicable legal fees
associated with the action only if the Fund has consented in writing to the
Subadviser's pursuit of the action; if the Fund does not consent to the pursuit
of the action, the Fund shall forfeit any claim to any recovery obtained by the
Subadviser, shall hold the Subadviser harmless from the Fund's exclusion from
the case and the Fund shall not be held liable for the actions of the Subadviser
in such case.
15. 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:
Xxxxxxx Investment Management Company LLC
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
If to the Subadviser:
Xxxxxxxxx X. Xxxxxxxx, Esq.
Senior Vice President, Secretary and General Counsel
Xxxxxxxxx Investment Counsel, Inc.
000 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000-0000
16. 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 or the Adviser shall be treated by the Company,
Adviser and Subadviser as confidential and for the exclusive use and benefit of
the Company except as disclosure may be required by applicable law.
17. 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.
f. Both the Fund and the Subadviser acknowledge that all sales literature
for investment companies are subject to strict regulatory oversight. The Fund
agrees to submit to the Subadviser any and all sales literature referencing
"Templeton," "Xxxxxxxxx Investment Counsel, Inc." or an affiliate thereof, for
review and approval prior to the public release of any such literature. Nothing
herein shall be construed as an obligation or duty on the part of either party
to produce sales literature for the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of , 1998.
FORWARD FUNDS, INC.
By: --------------------------------
President
XXXXXXXXX INVESTMENT COUNSEL, INC.
By: --------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman
XXXXXXX INVESTMENT MANAGEMENT COMPANY LLC
By: --------------------------------
Name: --------------------------------
Title: --------------------------------
