As filed with the U.S. Securities and Exchange Commission on February 24, 1998.
Securities Act File No. 333-37367
Investment Company Act File No. 811-8419
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM N-1A
Registration Statement Under The Securities Act Of 1933 X
Pre-Effective Amendment No. 2 X
Post-Effective Amendment No. __
and/or
Registration Statement Under The Investment Company Act Of 1940 X
Amendment No.
(Check appropriate box or boxes)
--------------------
Forward Funds, Inc.
(Exact Name of Registrant as Specified in Charter)
433 California Street
Suite 1010
San Francisco, California 94104
(Address of Principal Executive Offices)
Registrant's Telephone number, including Area Code: 1-800-999-6809
--------------------
Ronald Pelosi
Forward Funds, Inc.
433 California Street
Suite 1010
San Francisco, California 94104
(Name and Address of Agent for Service)
--------------------
With copies to:
Jeffrey L. Steele, Esq.
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this registration statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The Registrant hereby elects to register an indefinite number of shares under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940.
<PAGE>
FORWARD FUNDS, INC.
CROSS REFERENCE SHEET
<TABLE>
<S> <C>
N-1A Item Location in Prospectus
(Caption)
Part A
Item 1. Cover Page.........................................................Cover Page
Item 2. Synopsis...........................................................Prospectus Summary
Item 3. Condensed Financial Information....................................Fund Expenses, Fee Table
Item 4. General Description of Registrant..................................Investment Objective
................................................................... and Policies;
................................................................... Risk Factors; Investment
................................................................... Techniques; Investment
................................................................... Restrictions
Item 5. Management of the Registrant.......................................Management of the Fund
Item 5A. Management's Discussion of Company Performance.....................Not Applicable
Item 6. Capital Stock and Other Securities.................................Valuation of Shares;
................................................................... Redeeming Shares;
................................................................... Dividends and Taxes;
................................................................... Exchange Privilege;
................................................................... Shareholder Service Plan;
...................................................................General Information
Item 7. Purchase of Securities Being Offered...............................Purchasing Shares
Item 8. Redemption or Repurchase...........................................Redeeming Shares
Item 9. Pending Legal Proceedings..........................................Not Applicable
Location in Statement of
Part B Additional Information
(Caption)
Item 10. Cover Page.........................................................Cover Page
Item 11. Table of Contents..................................................Table of Contents
Item 12. General Information and History....................................Organization of
................................................................... Forward Funds, Inc.
Item 13. Investment Objectives and Policies.................................Supplemental Discussion of
................................................................... Investment Techniques and
................................................................... Risks Associated with the
................................................................... Fund's Investment Policies
................................................................... and Investment Techniques;
................................................................... Portfolio Transactions;
................................................................... Investment Objective and
................................................................... Policies
Item 14. Management of the Company..........................................Management of the Fund
Item 15. Control Persons and Principal Holders of Securities................Management of the Fund
Item 16. Investment Advisory and Other Services.............................Management of the Fund
Item 17. Brokerage Allocation and Other Practices...........................Portfolio Transactions
Item 18. Capital Stock and Other Securities.................................Shareholder Services and
................................................................... Privileges; Distributions;
................................................................... Shareholder Information
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered.........................................Determination of Share Price;
................................................................... Additional Purchase and
................................................................... Redemption Information
Item 20. Tax Status.........................................................Tax Considerations
Item 21. Underwriters.......................................................Not Applicable
Item 22. Calculation of Performance Data....................................Calculation of Performance
................................................................... Data
Item 23. Financial Statements...............................................Financial Statements
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF SUCH STATE.
Prospectus
FORWARD FUNDS, INC.
433 California Street, Suite 1010
San Francisco, California 94104
1-800-999-6809
Forward Funds, Inc. (the "Company") is an open-end management investment company
which offers one diversified investment portfolio, The Global Fund (referred to
herein as the "Fund" or "The Global Fund"). Barclays Global Fund Advisors
("Barclays"), Templeton Investment Counsel, Inc. ("Templeton"), and Pacific
Investment Management Company ("PIMCO") serve as investment advisors
(collectively referred to herein as the "Investment Advisors" or the "Advisors")
to The Global Fund. Barclays manages The Global Fund's U.S. equity investments.
Templeton manages The Global Fund's non-U.S. equity investments. PIMCO manages
those assets of The Global Fund that are invested in fixed income and other debt
securities. Sutton Place Management Co., Inc. (the "Business Manager") acts as
business manager to the Fund. The Fund currently offers one class of shares (the
"Shares").
The Shares of the Fund are not insured or guaranteed by the United States
Government nor are they deposits or obligations of, or endorsed, insured or
guaranteed by, any bank, the Federal Deposit Insurance Corporation, or any other
agency. An investment in the Fund involves investment risk, including the
possible loss of principal.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Investors should read this
Prospectus and retain it for future reference. A Statement of Additional
Information ("SAI") about the Fund, dated, __________1998, has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated herein by
reference. The SAI is available free upon request by calling the Company at the
telephone number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _____________, 1998.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY.............................................................1
Shares Offered........................................................1
Offering Price........................................................1
Investment Objective..................................................1
Investment Policies...................................................1
Risk Factors..........................................................1
Investment Advisors...................................................1
Business Manager......................................................1
Dividends and Capital Gains...........................................2
Custodian, Administrator, Distributor, and Transfer Agent.............2
FUND EXPENSES..................................................................3
FEE TABLE......................................................................3
INVESTMENT OBJECTIVE AND POLICIES..............................................4
General...............................................................4
Investment Policies...................................................5
RISK FACTORS...................................................................6
INVESTMENT TECHNIQUES..........................................................9
Equity Securities.....................................................9
Corporate Debt Securities.............................................9
Convertible Securities................................................9
Foreign Investments and Foreign Currency Transactions.................9
Depositary Receipts..................................................11
Loan Participations and Assignments..................................11
Variable and Floating Rate Securities................................11
Inflation-Indexed Bonds..............................................12
Mortgage-Related and Other Asset-Backed Securities...................13
Repurchase Agreements................................................14
Reverse Repurchase Agreements and Dollar Roll Agreements.............14
Certificates of Deposit and Time Deposits............................15
Commercial Paper.....................................................15
Derivatives..........................................................15
When-Issued and Delayed-Delivery Transactions........................18
Securities Issued by Other Investment Companies......................19
U.S. Government Obligations..........................................19
Lending of Portfolio Securities......................................19
Illiquid Securities..................................................19
INVESTMENT RESTRICTIONS.......................................................20
MANAGEMENT OF THE FUND........................................................21
Directors............................................................21
Investment Advisors..................................................21
The Business Manager.................................................23
Other Service Providers..............................................24
Portfolio Transactions...............................................24
VALUATION OF SHARES...........................................................24
PURCHASING SHARES.............................................................24
EXCHANGE PRIVILEGE............................................................25
REDEEMING SHARES..............................................................26
Signature Guarantee..................................................26
By Wire Transfer.....................................................26
By Telephone.........................................................27
By Mail..............................................................27
Payments to Shareholders.............................................28
SHAREHOLDER SERVICE PLAN......................................................28
DIVIDENDS AND TAXES...........................................................29
Federal Taxes........................................................29
GENERAL INFORMATION...........................................................30
Description of the Company and Its Shares............................30
Performance Information..............................................31
Account Services.....................................................31
Miscellaneous........................................................31
<PAGE>
PROSPECTUS SUMMARY
Shares Offered
Shares of The Global Fund, a diversified investment portfolio of Forward Funds,
Inc., are being offered to the public. The Company is a Maryland corporation and
is registered with the SEC as an open-end management investment company.
Offering Price
The public offering price of The Global Fund is equal to its net asset value per
share. The share price of the Fund is expected to fluctuate and the price paid
may be higher or lower than the price at a time when an investor wishes to
redeem shares of the Fund. No sales charges or redemption fees are charged with
respect to the Fund.
Investment Objective
The Fund seeks total return (capital appreciation and income) by investing
primarily in the global stock and bond markets.
Investment Policies
The Fund invests primarily in publicly traded equity and debt securities issued
by governments and companies in the United States and in other industrialized
nations and emerging markets.
Risk Factors
An investment in The Global Fund involves a certain amount of risk and may not
be suitable for all investors. See "RISK FACTORS." The Fund invests in foreign
securities, which may be subject to price volatility, currency fluctuations and
other risks. The Fund may also invest in various types of equity and debt
securities that may be considered volatile or speculative.
Investment Advisors
Barclays acts as investment advisor for The Global Fund's U.S. equity
investments, Templeton acts as investment advisor for the Fund's non-U.S. equity
investments, and PIMCO manages the Fund's investments in fixed income and other
debt securities. The Advisors to The Global Fund receive a fee based on a
percentage of net assets in The Global Fund which they manage. Each of the
Advisors has substantial amounts of assets under management for their clients
and substantial investment experience. See "MANAGEMENT OF THE FUND - Investment
Advisors."
Business Manager
Sutton Place Management Co., Inc. serves as Business Manager to the Fund and
receives from the Fund a fee based on a percentage of net assets of the Fund.
See "MANAGEMENT OF THE FUND - Business Manager."
Dividends and Capital Gains
Dividends from net income, including short-term capital gains, are declared and
paid quarterly by The Global Fund. Distributions of net realized capital gains
are made at least annually by The Global Fund. Dividend and capital gains
distributions of the Fund are automatically invested in additional Shares unless
the Shareholder elects otherwise in writing to the Business Manager.
Custodian, Administrator, Distributor, and Transfer Agent
Brown Brothers Harriman & Co. is the Fund's custodian. As custodian, Brown
Brothers Harriman & Co. will be responsible for the custody of the Fund's assets
and as foreign custody manager will also oversee the custody of any Fund assets
held outside of the United States. First Data Investor Services Group, Inc.
("Investor Services Group," "Administrator," or "Transfer Agent"), whose
principal business address is 53 State Street, Boston, Massachusetts 02109,
serves as administrator, registrar and transfer agent to the Fund. First Data
Distributors, Inc., an affiliate of Investment Services Group, serves as the
Fund's distributor. Investor Services Group is a wholly-owned subsidiary of
First Data Corporation. The Administrator generally assists the Fund in an
administrative and operational capacity, including the maintenance of financial
records and fund accounting. Shareholder inquiries may be directed to Investor
Services Group at P.O. Box 5184, Westborough, Massachusetts 01581-5184.
FUND EXPENSES
The following expense table indicates costs and expenses that an investor should
anticipate incurring either directly or indirectly as a Shareholder of the Fund.
FEE TABLE
The Global
Fund
----------------
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases and
Reinvested Dividends......................... 0
Deferred Sales Charge on Redemptions......... 0
Wire Transfer Fee1........................... $8.00
Account Closeout Fee1;....................... $3.00
Annual Fund Operating Expenses are paid out of the
Fund's assets. The Fund pays a management fee to
the Business Manager. Expenses are factored into
the Fund's Share price or dividends and are not
charged directly to Shareholder accounts.
Annual Fund Operating Expenses (as a percentage
of average net assets annualized)
Investor Advisory Fee4 ..................... .46%
Business Management Fee after Waiver2....... 0
Shareholder Service Fee..................... .35%
Other Expenses2............................. .59%
Total Fund Operating Expenses after Waiver3. 1.40%
- -----------------------
1 These fees do not apply to transactions effected through an omnibus
account of a broker-dealer or other financial institution which has
entered into a shareholder servicing agreement with the Company or its
Distributor.
2 Sutton Place Management Co., Inc. has agreed to temporarily waive a
portion of its fees for the Fund for the current fiscal year. Waived
fees will not be recovered at a future date. Absent the management fee
waiver, "Management Fees" as a percentage of the average daily net
assets would be .30% for the Fund. See "MANAGEMENT OF THE FUND -
Business Manager."
3 Absent the waiver of the Business Manager fees, "Total Fund Operating
Expenses" as a percentage of average daily net assets would be 1.70%
for The Global Fund.
4 Assuming that each Advisor is managing one-third of the Fund's assets.
The purpose of this table is to assist the prospective investor in understanding
the various costs and expenses that a Shareholder in the Fund will bear directly
or indirectly. For a more complete description of the management fee, see
"MANAGEMENT OF THE FUND." For shareholder service plan fees, see "SHAREHOLDER
SERVICE PLAN."
Example*
In the following example, an investor would pay the following expenses on a
$1,000 investment in the Fund, assuming (1) 5% annual return, and (2) redemption
at the end of each time period:
The
Global Fund
1 Year........................ $14
2 Years....................... $44
3 Years....................... $77
10 Years...................... $168
* This example should not be considered a representation of future
expenses, which may be more or less than those shown. The assumed 5% annual
return is hypothetical and should not be considered a representation of past or
future annual return. Actual return may be greater or less than the assumed
amount.
INVESTMENT OBJECTIVE AND POLICIES
General
The Global Fund seeks total return (capital appreciation and income) by
investing in the global stock and bond markets. It may invest in equity and debt
securities issued by companies and governments throughout the world to achieve
this objective.
The investment objective of the Fund is a fundamental policy and as such may not
be changed without a vote of the holders of a majority of the outstanding Shares
of the Fund. Other policies of the Fund may be changed by the Company's
Directors, without a vote of the holders of a majority of outstanding Shares of
the Fund unless (i) the policy is expressly deemed to be a fundamental policy or
(ii) the policy is expressly deemed to be changeable only by such majority vote.
There can be no assurance that the investment objective of the Fund will be
achieved.
Investment Policies
The Global Fund may invest in all types of equity and debt securities,
including, but not limited to, common stocks, preferred stocks, convertible
securities, warrants, options, restricted securities, trust units or
certificates, bonds, debentures, notes, commercial paper and various types of
depositary receipts. There are no limits on the various types of equity or debt
securities that may be purchased. Securities may be issued by companies located
in the United States or in any other country and may include securities issued
by governments or their agencies and instrumentalities. The Global Fund
diversifies its holdings and does not concentrate its investments in any
industry sector. Securities issued by foreign companies and governments are
likely to be denominated in a foreign currency.
As noted above, The Global Fund's investments may be in both equity and debt
securities. The Global Fund has engaged the services of three professional
investment management firms - each to manage a portion of The Global Fund's
assets. Barclays will manage the equity securities of U.S. issuers and Templeton
will manage the equity securities of foreign issuers. PIMCO will manage all debt
investments. Generally, issuers are characterized as U.S. or foreign depending
on the country where the business was organized or is primarily located.
However, there will be issuers who will be deemed foreign issuers whose
securities may be traded on U.S. exchanges. Securities which are traded directly
or through depository receipts in the United States may be purchased by Barclays
and securities which are traded outside the United States or through depository
receipts in the United States may be purchased by Templeton. Because some
securities are traded both inside and outside the United States, these
securities are eligible to be purchased by both Barclays and Templeton.
A committee consisting of members of the Board of Directors will be authorized
based upon the recommendations of the Advisors or other consultants to allocate
The Global Fund's holdings among the Advisors. Subsequently, allocations of
additional cash investments and reallocations may be made at any time. This
committee does not anticipate meeting more frequently than quarterly and is not
obligated to reallocate assets among the Advisors for any particular reason. The
Committee is, however, authorized to do so if for any reason its members believe
it would be in the best interests of shareholders to do so. It is anticipated
that initially The Global Fund will allocate its assets among the three Advisors
based upon the Committee's assessment of current market conditions so that each
Advisor will manage a given proportion of the Fund's assets. The proceeds of
shareholder purchases will be allocated to the Advisors using a methodology
which approximates the most recent Committee allocation decision. Changes in
allocation and reallocations of assets may, however, be made at any time.
Barclays anticipates making equity security selections generally from securities
included in the Russell 3000(R) Index. Barclays is not restricted to securities
in this Index and may deviate from the Index's characteristics. The Index
consists of the 3,000 largest U.S. companies and represents over 90% of the
investable U.S. equity market. Barclays may also invest the Fund's assets in
futures contracts and other instruments described herein.
Templeton anticipates following a flexible investment policy in selecting
foreign equity securities, seeking out those investments which it believes will
achieve The Global Fund's long-term objective of total return.
Similarly, PIMCO may invest in debt securities of all types issued by companies
as well as governments located throughout the world. Debt securities held by The
Global Fund may include securities rated in any rating category by a nationally
recognized securities rating organization ("NRSRO") or that are unrated. As a
result, The Global Fund may invest in high risk, lower quality debt securities,
commonly referred to as "junk bonds." The Global Fund will limit its investment
in junk bonds (i.e., those rated lower than the four highest rating categories
or if unrated of comparable quality) to not more than 10% of The Global Fund's
total assets.
Securities purchased by the Fund may be listed or unlisted in the markets where
they trade and may be issued by companies in various industries, with various
levels of market capitalization. The Global Fund will not invest more than 25%
of its assets in securities issued by companies in any one industry. The Global
Fund expects to limit its investments in emerging markets to less than 50% of
its total assets. As a global investment, The Global Fund will invest at least
65% of its total assets in a minimum of three different countries, although the
Fund expects to invest in a larger number of countries than three. As a
temporary defensive measure the Fund may invest a substantial portion of its
assets in securities issued by U.S. issuers.
The Advisors manage the Fund with the intent of avoiding the costs typically
associated with a high portfolio turnover rate. Templeton and Barclays
anticipate that the portfolio turnover rate for the Fund's equity investments
will be less than 50%. PIMCO expects a far higher turnover rate for the debt
securities managed by it, estimated at 700%, but the turnover rate for this
portion of the Fund's holdings does not typically involve brokerage commissions
although it can involve indirect costs of dealer spreads. PIMCO generally
intends to increase the Fund's total return through its trading strategies in
debt securities. Accordingly, The Global Fund does not anticipate incurring the
higher costs generally associated with a high portfolio turnover rate.
* * * *
Subject to the foregoing general limitations, the Fund expects to employ the
investment practices and invest in the types of securities discussed below under
"INVESTMENT TECHNIQUES." Moreover, all investments carry certain risks which are
discussed below under "RISK FACTORS" and "INVESTMENT TECHNIQUES."
RISK FACTORS
As with all investments, there is a risk that an investor will lose money when
investing in the Fund.
The Global Fund invests in the world's stock and bond markets and so the price
of its shares are subject to a wide array of forces which may cause the value of
The Global Fund shares to increase or decrease with movements in the broader
equity and bond markets. Factors affecting the value and income generated by The
Global Fund's holdings, general and regional economic conditions and market
factors may influence share value. A decline in the stock market of any country
in which The Global Fund has invested may also be reflected in declines in the
price of the shares of The Global Fund. Changes in currency valuations will also
affect the price of the shares of The Global Fund. History reflects both
decreases and increases in worldwide stock markets and currency valuations, and
these may recur unpredictably in the future. The value of debt securities held
by The Global Fund generally will vary inversely with changes in prevailing
interest rates.
The Global Fund has the right to purchase securities in any foreign country,
developed or developing. Investors should therefore consider carefully the risks
involved in investing in securities issued by companies of foreign nations,
which are in addition to the usual risks inherent in domestic investments. There
is the possibility of expropriation, nationalization or confiscatory taxation,
taxation of income earned in foreign nations or other taxes imposed with respect
to investments in foreign nations, foreign investment controls on daily stock
market movements, political or social instability, or diplomatic developments
which could affect investments in securities of issuers in foreign nations. Some
countries may withhold portions of interest and dividends at the source. In
addition, in many countries there is less publicly available information about
issuers than is available in reports about companies in the United States.
Foreign companies are not generally subject to uniform accounting, auditing and
financial reporting standards, and auditing practices and requirements may not
be comparable to those applicable to United States companies. The Global Fund
may encounter difficulties or be unable to vote proxies, exercise shareholder
rights, pursue legal remedies, and obtain judgments in foreign courts.
Brokerage commissions, custodial services and other costs relating to investment
in foreign countries are generally more expensive than in the United States. In
addition, the foreign securities markets of many of the countries in which The
Global Fund may invest may also be smaller, less liquid, and subject to greater
price volatility than those in the United States. Foreign securities markets
also have different clearance and settlement procedures, and in certain markets
there have been times when settlements have been unable to keep pace with the
volume of securities transactions, making it difficult to conduct such
transactions. Delays in settlement could result in temporary periods when assets
of The Global Fund are uninvested and no return is earned thereon. The inability
of The Global Fund to make intended security purchases due to settlement
problems could cause The Global Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to The Global Fund due to subsequent
declines in value of the portfolio security or, if The Global Fund has entered
into a contract to sell the security, could result in possible liability to the
purchaser.
In many foreign countries, there is less government supervision and regulation
of business and industry practices, stock exchanges, brokers and listed
companies than in the United States. There is an increased risk, therefore, of
uninsured loss due to lost, stolen, or counterfeit stock certificates.
Prior governmental approval of foreign investments may be required under certain
circumstances in some developing countries, and the extent of foreign investment
in domestic companies may be subject to limitation in other developing
countries. Foreign ownership limitations also may be imposed by the charters of
individual companies in developing countries to prevent, among other concerns,
violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. The Global Fund could be adversely affected by delays in
or a refusal to grant any required governmental registration or approval for
such repatriation.
Further, the economies of developing countries generally are heavily dependent
upon international trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been and may
continue to be adversely affected by economic conditions in the countries with
which they trade.
The Global Fund is also authorized to invest in medium quality or high-risk,
lower quality debt securities that are rated between BBB and as low as CCC by
Standard & Poor's Corporation ("S&P") and between Baa and as low as Caa by
Moody's Investors Service, Inc. ("Moody's") or, if unrated, are of equivalent
investment quality as determined by the Advisors. High-risk, lower quality debt
securities, commonly referred to as "junk bonds," are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation and may be in
default. Unrated debt securities are not necessarily of lower quality than rated
securities but they may not be attractive to as many buyers. Regardless of
rating levels, all debt securities considered for purchase (whether rated or
unrated) will be carefully analyzed by the appropriate Advisor to insure, to the
extent possible, that the planned investment is sound. The Global Fund may, from
time to time, purchase defaulted debt securities if, in the opinion of the
appropriate Advisor, the issuer may resume interest payments in the near future.
As an operating policy, which may be changed by the Board of Directors without
shareholder approval, The Global Fund will not invest more than 10% of its total
assets in debt securities rated lower than BBB by S&P or Baa by Moody's, or in
defaulted debt securities, which may be illiquid.
The Global Fund usually effects currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign exchange market. However,
some price spread on currency exchanges (to cover service charges) will be
incurred when the Fund converts assets from one currency to another. There are
further risk considerations, including possible losses through the holding of
securities in domestic and foreign custodial banks and depositaries, described
in the SAI.
Successful use by The Global Fund of stock and bond index futures contracts and
options on securities indexes is subject to certain special risk considerations.
A liquid options or futures market may not be available when The Global Fund
seeks to offset adverse market movements. In addition, there may be an imperfect
correlation between movements in the securities included in the index and
movements in the securities in The Global Fund's portfolio. Successful use of
index futures contracts and options on securities indexes is further dependent
on the Advisors' ability to predict correctly movements in the direction of the
underlying securities markets and no assurance can be given that their judgment
in this respect will be correct. Risks in the purchase and sale of index futures
and options are further referred to in the SAI.
INVESTMENT TECHNIQUES
Equity Securities
The Fund may invest in all types of equity securities, including common stocks,
preferred stocks, warrants, options, convertible securities, restricted
securities and depositary receipts. Certain of these types of securities are
discussed below in greater detail.
Corporate Debt Securities
Corporate debt securities include corporate bonds, debentures, notes and other
similar corporate debt instruments, including convertible securities. Debt
securities may be acquired with warrants attached. Corporate income-producing
securities may also include forms of preferred or preference stock. The rate of
interest on a corporate debt security may be fixed, floating or variable, and
may vary inversely with respect to a reference rate. See "Variable and Floating
Rate Securities" below. The rate of return or return of principal on some debt
obligations may be linked or indexed to the level of exchange rates between the
U.S. dollar and a foreign currency or currencies. Investments in corporate debt
securities that are rated below investment grade (rated below Baa (Moody's) or
BBB (S&P)) are described as "speculative" both by Moody's and S&P. See "RISK
FACTORS" above. Rating agencies may periodically change the rating assigned to a
particular security. While the Advisors will take into account such changes in
deciding whether to hold or sell a security, the Fund does not require an
Advisor to sell a security that is downgraded to any particular rating.
Convertible Securities
The Fund may invest in convertible securities, which may offer higher income
than the common stocks into which they are convertible. Each of the Fund's
Advisors may invest in convertible securities. Typically, convertible securities
are callable by the company, which may, in effect, force conversion before the
holder would otherwise choose.
The convertible securities in which the Fund may invest consist of bonds, notes,
debentures and preferred stocks which may be converted or exchanged at a stated
or determinable exchange ratio into underlying shares of common stock. The Fund
may be required to permit the issuer of a convertible security to redeem the
security, convert it into the underlying common stock, or sell it to a third
party. Thus, the Fund may not be able to control whether the issuer of a
convertible security chooses to convert that security. If the issuer chooses to
do so, this action could have an adverse effect on the Fund's ability to achieve
its investment objective.
Foreign Investments and Foreign Currency Transactions
The Global Fund invests a substantial amount of its assets in foreign
investments. Investment in foreign securities is subject to special investment
risks that differ in some respects from those related to investments in
securities of U.S. domestic issuers. See "RISK FACTORS" above.
If a security is denominated in foreign currency, the value of the security to
the Fund will be affected by changes in currency exchange rates and in exchange
control regulations, and costs will be incurred in connection with conversions
between currencies. Currency risks generally increase in lesser developed
markets. Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments to
different countries, actual or perceived changes in interest rates and other
complex factors, as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by intervention (or the failure to
intervene) by U.S. or foreign governments or central banks, by currency controls
or political developments in the U.S. or abroad. Currencies in which the Fund's
assets are denominated may be devalued against the U.S. dollar, resulting in a
loss to The Global Fund.
The Fund may buy and sell foreign currencies on a spot and forward basis to
reduce the risks of adverse changes in foreign exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be a fixed number of days from the date of
the contract agreed upon by the parties, at a price set at the time of the
contract. By entering into a forward foreign currency exchange contract, the
Fund "locks in" the exchange rate between the currency it will deliver and the
currency it will receive for the duration of the contract. As a result, The
Global Fund reduces its exposure to changes in the value of the currency it will
deliver and increases its exposure to changes in the value of the currency it
will exchange into. The effect on the value of the Fund is similar to selling
securities denominated in one currency and purchasing securities denominated in
another. Contracts to sell foreign currency would limit any potential gain which
might be realized by the Fund if the value of the hedged currency increases. The
Global Fund may enter into these contracts for the purpose of hedging against
foreign exchange risk arising from The Global Fund's investment or anticipated
investment in securities denominated in foreign currencies. The Global Fund also
may enter into these contracts for purposes of increasing exposure to a foreign
currency or to shift exposure to foreign currency fluctuations from one country
to another. The Global Fund may use one currency (or a basket of currencies) to
hedge against adverse changes in the value of another currency (or a basket of
currencies) when exchange rates between the two currencies are positively
correlated. The Fund will segregate assets determined to be liquid by the
Advisor, in accordance with procedures established by the Board of Directors, in
a segregated account to cover its obligations under forward foreign currency
exchange contracts entered into for non-hedging purposes. The Fund also may
invest in options on foreign currencies and foreign currency futures and options
thereon. The Fund also may invest in foreign currency exchange-related
securities, such as foreign currency warrants and other instruments whose return
is linked to foreign currency exchange rates.
For many foreign securities, U.S. dollar denominated American Depositary
Receipts ("ADRs"), which are traded in the United States on exchanges or
over-the-counter, are issued by domestic banks. ADRs represent the right to
receive securities of foreign issuers deposited in a domestic bank or a
correspondent bank. ADRs do not eliminate all the risk inherent in investing in
the securities of foreign issuers. However, by investing in ADRs rather than
directly in foreign issuers' stock, The Global Fund can avoid currency risks
during the settlement period for either purchases or sales.
Depositary Receipts
The Fund may purchase sponsored or unsponsored American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts
("GDRs") (collectively, "Depositary Receipts"). ADRs are Depositary Receipts
typically used by a U.S. bank or trust company which evidence ownership of
underlying securities issued by a foreign corporation. EDRs and GDRs are
typically issued by foreign banks or foreign trust companies, although they also
may be issued by U.S. banks or trust companies, and evidence ownership of
underlying securities issued by either a foreign or a U.S. corporation.
Generally, Depositary Receipts in registered form are designed for use in the
U.S. securities market and Depositary Receipts in bearer form are designed for
use in securities markets outside the United States. Depositary Receipts may not
necessarily be denominated in the same currency as the underlying securities
into which they may be converted. Depositary Receipts may be issued pursuant to
sponsored or unsponsored programs. In sponsored programs, an issuer has made
arrangements to have its securities traded in the form of Depositary Receipts.
In unsponsored programs, the issuer may not be directly involved in the creation
of the program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value of
the Depositary Receipts. Depositary Receipts also involve the risks of other
investments in foreign securities, as further discussed below in this section.
For purposes of the Fund's investment policies, the Fund's investments in
Depositary Receipts will be deemed to be investments in the underlying
securities.
Loan Participations and Assignments
The Global Fund may invest in fixed- and floating-rate loans arranged through
private negotiations between an issuer of debt instruments and one or more
financial institutions ("lenders"). Generally, the Fund's investments in loans
are expected to take the form of loan participations and assignments of portions
of loans from third parties.
Large loans to corporations or governments may be shared or syndicated among
several lenders, usually banks. The Fund may participate in such syndicates, or
can buy part of a loan, becoming a direct lender. Participations and assignments
involve special types of risk, including limited marketability and the risks of
being a lender. See "Illiquid Securities" for a discussion of the limits on the
Fund's investments in loan participations and assignments with limited
marketability. If the Fund purchases a participation, it may only be able to
enforce its rights through the lender, and may assume the credit risk of the
lender in addition to that of the borrower. In assignments, the Fund's rights
against the borrower may be more limited than those held by the original lender.
Variable and Floating Rate Securities
Variable and floating rate securities provide for a periodic adjustment in the
interest rate paid on the obligations. The terms of such obligations must
provide that interest rates are adjusted periodically based upon an interest
rate adjustment index as provided in the respective obligations. The adjustment
intervals may be regular, and range from daily up to annually, or may be event
based, such as based on a change in the prime rate.
The Fund may engage in credit spread trades and invest in floating rate debt
instruments ("floaters"). A credit spread trade is an investment position
relating to a difference in the prices or interest rates of two securities or
currencies, where the value of the investment position is determined by
movements in the difference between the prices or interest rates, as the case
may be, of the respective securities or currencies. The interest rate on a
floater is a variable rate which is tied to another interest rate, such as a
money-market index or Treasury bill rate. The interest rate on a floater resets
periodically, typically every six months. Because of the interest rate reset
feature, floaters provide the Fund with a certain degree of protection against a
rise in interest rates, the Global Fund will participate in any declines in
interest rates as well.
The Global Fund may also invest in inverse floating rate debt instruments
("inverse floaters"). The interest rate on an inverse floater resets in the
opposite direction from the market rate of interest to which the inverse floater
is indexed. An inverse floating rate security may exhibit greater price
volatility than a fixed rate obligation of similar credit quality. The Global
Fund will not invest more than 5% of its net assets in any combination of
inverse floater, interest only ("IO"), or principal only ("PO") securities. See
"Mortgage-Related and Other Asset-Backed Securities" for a discussion of IOs and
POs.
Inflation-Indexed Bonds
The Fund may invest in inflation-indexed bonds. Inflation-indexed bonds are
fixed income securities whose principal value is periodically adjusted according
to the rate of inflation. Such bonds generally are issued at an interest rate
lower than typical bonds, but are expected to retain their principal value over
time. The interest rate on these bonds is fixed at issuance, but over the life
of the bond this interest may be paid on an increasing principal value, which
has been adjusted for inflation.
If the periodic adjustment rate measuring inflation falls, the principal value
of inflation-indexed bonds will be adjusted downward, and consequently the
interest payable on these securities (calculated with respect to a smaller
principal amount) will be reduced. Repayment of the original bond principal upon
maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury
inflation-indexed bonds, even during a period of deflation. However, the current
market value of the bonds is not guaranteed, and will fluctuate. The Fund may
also invest in other inflation related bonds which may or may not provide a
similar guarantee. If a guarantee of principal is not provided, the adjusted
principal value of the bond repaid at maturity may be less than the original
principal.
The value of inflation-indexed bonds is expected to change in response to
fluctuations in real interest rates. Real interest rates in turn are tied to the
relationship between nominal interest rates and the rate of inflation.
Therefore, if inflation were to rise at a faster rate than the nominal interest
rates, real interest rates might decline, leading to an increase in value of
inflation-indexed bonds. In contrast, if nominal interest rates increased at a
faster rate than inflation, real interest rates might rise, leading to a
decrease in value of inflation-indexed bonds.
While inflation-indexed bonds are expected to be protected from long-term
inflationary trends, short-term increases in inflation may lead to a decline in
value. If interest rates rise due to reasons other than inflation (for example,
due to changes in currency exchange rates), investors in these securities may
not be protected to the extent that the increase is not reflected in the bond's
inflation measure.
Mortgage-Related and Other Asset-Backed Securities
The Global Fund may invest in mortgage-related or other asset-backed securities.
The value of some mortgage-related or asset-backed securities in which The
Global Fund invests may be particularly sensitive to changes in prevailing
interest rates, and, like the other investments of the Fund, the ability of a
fund to successfully utilize these instruments may depend in part upon the
ability of the Advisor to correctly forecast interest rates and other economic
factors.
Mortgage Pass-Through Securities are securities representing interests in
"pools" of mortgage loans secured by residential or commercial real property in
which payments of both interest and principal on the securities are generally
made monthly, in effect "passing through" monthly payments made by the
individual borrowers on the mortgage loan which underlie the securities (net of
fees paid to the issuer or guarantor of the securities). Early repayment of
principal on some mortgage-related securities (arising from prepayments of
principal due to sale of the underlying property, refinancing, or foreclosure,
net of fees and costs which may be incurred) may expose the Fund to a lower rate
of return upon reinvestment of principal. Also, if a security subject to
prepayment has been purchased at a premium, the value of the premium would be
lost in the event of prepayment. Like other fixed income securities, when
interest rates rise, the value of a mortgage-related security generally will
decline; however, when interest rates are declining, the value of
mortgage-related securities with prepayment features may not increase as much as
other fixed income securities. The rate of prepayments on underlying mortgages
will affect the price and volatility of a mortgage-related security, and may
have the effect of shortening or extending the effective maturity of the
security beyond what was anticipated at the time of purchase. To the extent that
unanticipated rates of prepayment on underlying mortgages increase the effective
maturity of a mortgage-related security, the volatility of such securities can
be expected to increase.
Collateralized Mortgage Obligations ("CMOs") are hybrid mortgage-related
instruments. Interest and pre-paid principal on a CMO are paid, in most cases,
on a monthly basis. CMOs may be collateralized by whole mortgage loans but are
more typically collateralized by portfolios of mortgage pass-through securities
guaranteed by the Government National Mortgage Association ("GNMA"), the Federal
Home Loan Mortgage Corporation ("FHLMC") or the Federal National Mortgage
Association ("FNMA"). CMOs are structured into multiple classes, with each class
bearing a different stated maturity. Monthly payments of principal, including
prepayments, are first returned to investors holding the shortest maturity
class; investors holding the longer maturity classes receive principal only
after the first class has been retired. CMOs that are issued or guaranteed by
the U.S. Government or by any of its agencies or instrumentalities will be
considered U.S. Government securities by the Fund, while other CMOs, even if
collateralized by U.S. Government securities, will have the same status as other
privately issued securities for purposes of applying the Fund's diversification
tests.
Commercial Mortgage-Backed Securities include securities that reflect an
interest in, and are secured by, mortgage loans on commercial real property. The
market for commercial mortgage-backed securities developed more recently and in
terms of total outstanding principal amount of issues is relatively small
compared to the market for residential single-family mortgage-backed securities.
Many of the risks of investing in commercial mortgage-backed securities reflect
the risks of investing in the real estate securing the underlying mortgage
loans. These risks reflect the effects of local and other economic conditions on
real estate markets, the ability of tenants to make loan payments, and the
ability of a property to attract and retain tenants. Commercial mortgage-backed
securities may be less liquid and exhibit greater price volatility than other
types of mortgage-related or asset-backed securities.
Mortgage-Related Securities include securities other than those described above
that directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans on real property, such as mortgage dollar rolls
(see "Reverse Repurchase Agreements and Dollar Roll Arrangements" below), CMO
residuals or stripped mortgage-backed securities ("SMBS"), and may be structured
in classes with rights to receive varying proportions of principal and interest.
A common type of SMBS will have one class receiving some of the interest and
most of the principal from the mortgage assets, while the other class will
receive most of the interest and the remainder of the principal. In the most
extreme case, one class will receive all of the interest (the interest-only, or
"IO" class), while the other class will receive all of the principal (the
principal-only, or "PO" class). The yield to maturity on an IO class is
extremely sensitive to the rate of principal payments (including prepayments) on
the related underlying mortgage assets, and a rapid rate of principal payments
may have a material adverse effect on the Fund's yield to maturity from these
securities. The Fund will not invest more than 5% of its net assets in any
combination of IO, PO, or inverse floater securities. The Fund may invest in
other asset-backed securities that have been offered to investors. For a
discussion of the characteristics of some of these instruments, see the
Supplemental Discussion of Investment Techniques and Risks section of the SAI.
Repurchase Agreements
Securities held by the Fund may be subject to repurchase agreements. Under the
terms of a repurchase agreement, the Fund would acquire securities from
financial institutions, subject to the seller's agreement to repurchase such
securities at a mutually agreed upon date and price, which includes interest
negotiated on the basis of current short-term rates. The seller under a
repurchase agreement will be required to maintain at all times the value of
collateral held pursuant to the agreement at not less than the repurchase price
(including accrued interest). If a seller defaults on its repurchase
obligations, the Fund may suffer a loss in disposing of the security subject to
the repurchase agreement.
Reverse Repurchase Agreements and Dollar Roll Agreements
The Fund may also borrow funds by entering into reverse repurchase agreements
and dollar roll agreements in accordance with applicable investment
restrictions. Pursuant to such agreements, the Fund would sell portfolio
securities to financial institutions such as banks and broker-dealers, and agree
to repurchase them, or substantially similar securities in the case of a dollar
roll agreement, at a mutually agreed-upon date and price. A dollar roll
agreement is identical to a reverse repurchase agreement except for the fact
that substantially similar securities may be repurchased. At the time the Fund
enters into a reverse repurchase agreement or dollar roll agreement, it will
place in a segregated custodial account assets such as U.S. Government
securities or other liquid high grade debt securities consistent with the Fund's
investment restrictions having a value equal to the repurchase price (including
accrued interest), and subsequently will continually monitor the account to
ensure that such equivalent value is maintained at all times. Reverse repurchase
agreements and dollar roll agreements involve the risk that the market value of
the securities sold by the Fund may decline below the price at which the Fund is
obligated to repurchase the securities.
Certificates of Deposit and Time Deposits
The Global Fund may invest in certificates of deposit and time deposits of
domestic and foreign banks and savings and loan associations if (a) at the time
of investment the depository institution has capital, surplus, and undivided
profits in excess of one hundred million dollars ($100,000,000) (as of the date
of its most recently published financial statements), or (b) the principal
amount of the instrument is insured in full by the Federal Deposit Insurance
Corporation.
Commercial Paper
The Fund may invest in short-term promissory notes issued by corporations
(including variable amount master demand notes) rated at the time of purchase
within the two highest categories assigned by an NRSRO (e.g., A-2 or better by
S&P, Prime-2 or better by Moody's or F-2 or better by Fitch Investors Service,
L.P.) or, if not rated, judged by the Company, pursuant to guidelines adopted by
the Board of Directors, to be of comparable quality to instruments that are so
rated. Instruments may be purchased in reliance upon a rating only when the
rating organization is not affiliated with the issuer or guarantor of the
instrument.
Derivative Instruments
The Fund may purchase and write call and put options on securities, securities
indexes and foreign currencies, and enter into futures contracts and use options
on futures contracts as further described below. The Fund may also enter into
swap agreements with respect to foreign currencies, interest rates, and
securities indexes. The Fund may use these techniques to hedge against changes
in interest rates, foreign currency exchange rates or securities prices or as
part of their overall investment strategies. The Fund may also purchase and sell
options relating to foreign currencies for purposes of increasing exposure to a
foreign currency or to shift exposure to foreign currency fluctuations from one
country to another. The Global Fund will maintain a segregated account
consisting of assets determined to be liquid by the Advisor in accordance with
procedures established by the Board of Directors (or, as permitted by applicable
regulation, enter into certain offsetting positions) to cover its obligations
under options, futures, and swaps to avoid leveraging the portfolio of the Fund.
The Global Fund considers derivative instruments to consist of securities or
other instruments whose value is derived from or related to the value of some
other instrument or asset, and not to include those securities whose payment of
principal and/or interest depends upon cash flows from underlying assets, such
as mortgage-related or asset-backed securities. The value of some derivative
instruments in which the Fund invests may be particularly sensitive to changes
in prevailing interest rates, and, like the other investments of the Fund, the
ability of a fund to successfully utilize these instruments may depend in part
upon the ability of the Advisor to correctly forecast interest rates and other
economic factors. If the Advisor incorrectly forecasts such factors and has
taken positions in derivative instruments contrary to prevailing market trends,
the Fund could be exposed to the risk of loss. The Global Fund might not employ
any of the strategies described below, and no assurance can be given that any
strategy used will succeed.
Options on Securities, Securities Indexes, and Currencies. The Global Fund may
purchase put options on securities and indexes. One purpose of purchasing put
options is to protect holdings in an underlying or related security against a
substantial decline in market value. The Global Fund may also purchase call
options on securities and indexes. One purpose of purchasing call options is to
protect against substantial increases in prices of securities. The Global Fund
intends to purchase such options depending on its ability to invest in such
securities in an orderly manner. An option on a security (or index) is a
contract that gives the holder of the option, in return for a premium, the right
to buy from (in the case of a call) or sell to (in the case of a put) the writer
of the option the security underlying the option (or the cash value of the
index) at a specified exercise price at any time during the term of the option.
The writer of an option on a security has the obligation upon exercise of the
option to deliver the underlying security upon payment of the exercise price or
to pay the exercise price upon delivery of the underlying security. Upon
exercise, the writer of an option on an index is obligated to pay the difference
between the cash value of the index and the exercise price multiplied by the
specified multiplier for the index option. An index is designed to reflect
specified facets of a particular financial or securities market, a specific
group of financial instruments or securities, or certain economic indicators.
The Global Fund may sell put or call options it has previously purchased, which
could result in a net gain or loss depending on whether the amount realized on
the sale is more or less than the premium and other transaction costs paid on
the put or call option which is sold. The Global Fund may write a call or put
option only if the option is "covered" by the Fund holding a position in the
underlying securities or by other means which would permit immediate
satisfaction of the Fund's obligation as writer of the option. Prior to exercise
or expiration, an option may be closed out by an offsetting purchase or sale of
an option of the same series.
The Global Fund may write covered straddles consisting of a combination of a
call and a put written on the same underlying security. A straddle will be
covered when sufficient assets are deposited to meet the Fund's immediate
obligations. The Global Fund may use the same liquid assets to cover both the
call and put options where the exercise price of the call and put are the same,
or the exercise price of the call is higher than that of the put. In such cases,
The Global Fund will also segregate liquid assets equivalent to the amount, if
any, by which the put is "in the money."
The purchase and writing of options involves certain risks. During the option
period, the covered call writer has, in return for the premium on the option,
given up the opportunity to profit from a price increase in the underlying
security above the exercise price, but, as long as its obligation as a writer
continues, has retained the risk of loss should the price of the underlying
security decline. The writer of an option has no control over the time when it
may be required to fulfill its obligation as a writer of the option. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option and
must deliver the underlying security at the exercise price. If a put or call
option purchased by The Global Fund is not sold when it has remaining value, and
if the market price of the underlying security remains equal to or greater than
the exercise price (in the case of a put), or remains less than or equal to the
exercise price (in the case of a call), The Global Fund will lose its entire
investment in the option. Also, where a put or call option on a particular
security is purchased to hedge against price movements in a related security,
the price of the put or call option may move more or less than the price of the
related security. There can be no assurances that a liquid market will exist
when The Global Fund seeks to close out an option position. Furthermore, if
trading restrictions or suspensions are imposed on the options markets, The
Global Fund may be unable to close out a position.
Funds that invest in foreign currency-denominated securities may buy or sell put
and call options on foreign currencies. Currency options traded on U.S. or other
exchanges may be subject to position limits which may limit the ability of The
Global Fund to reduce foreign currency risk using such options. Over-the-counter
options differ from traded options in that they are two-party contracts, with
price and other terms negotiated between buyer and seller, and generally do not
have as much market liquidity as exchange-traded options. The Global Fund may be
required to treat as illiquid over-the-counter options purchased and securities
being used to cover certain written over-the-counter options.
Swap Agreements. The Global Fund may enter into interest rate, index, equity and
currency exchange rate swap agreements. These transactions would be entered into
in an attempt to obtain a particular return when it is considered desirable to
do so, possibly at a lower cost to The Global Fund than if The Global Fund had
invested directly in the asset that yielded the desired return. Swap agreements
are two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard swap
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments, which may be adjusted for an interest factor. The gross returns to
be exchanged or "swapped" between the parties are generally calculated with
respect to a "normal amount," i.e., the return on or increase in value of a
particular dollar amount invested at a particular interest rate, in a particular
foreign currency, or in a "basket" of securities representing a particular
index. Forms of swap agreements include interest rate caps, under which, in
return for a premium, one party agrees to make payments to the other to the
extent that interest rates exceed a specified rate, or "cap;" interest rate
floors, under which, in return for a premium, one party agrees to make payments
to the other to the extent that interest rates fall below a specified level, or
"floor;" and interest rate collars, under which a party sells a cap and
purchases a floor or vice versa, in an attempt to protect itself against
interest rate movements exceeding given minimum or maximum levels.
Futures Contracts and Options on Futures Contracts. The Global Fund may invest
in interest rate, stock index and foreign currency futures contracts and options
thereon.
There are several risks associated with the use of futures and futures options
for hedging purposes. There can be no guarantee that there will be a correlation
between price movements in the hedging vehicle and in the portfolio securities
being hedged. An incorrect correlation could result in a loss on both the hedged
securities in the Fund and the hedging vehicle so that the portfolio return
might have been greater had hedging not been attempted. There can be no
assurance that a liquid market will exist at a time when the Fund seeks to close
out a futures contract or a futures option position. Most futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures contract
prices during a single day; once the daily limit has been reached on a
particular contract, no trades may be made that day at a price beyond that
limit. In addition, certain of these instruments are relatively new and without
a significant trading history. As a result, there is no assurance that an active
secondary market will develop or continue to exist. Lack of a liquid market for
any reason may prevent the Fund from liquidating an unfavorable position, and
the Fund would remain obligated to meet margin requirements until the position
is closed.
The Global Fund may write covered straddles consisting of a call and a put
written on the same underlying futures contract. A straddle will be covered when
sufficient assets are deposited to meet the Fund's immediate obligations. The
Fund may use the same liquid assets to cover both the call and put options where
the exercise price of the call and put are the same, or the exercise price of
the call is higher than that of the put. In such cases, The Fund will also
segregate liquid assets equivalent to the amount, if any, by which the put is
"in the money."
The Global Fund will only enter into futures contracts or futures options which
are standardized and traded on a U.S. or foreign exchange or board of trade, or
similar entity, or quoted on an automated quotation system. The Global Fund will
use financial futures contracts and related options only for "bona fide hedging"
purposes, as such term is defined in applicable regulations of the Commodity
Futures Trading Commission ("CFTC"). With respect to positions in financial
futures and related options that do not qualify as "bona fide hedging," the Fund
will enter such positions only to the extent that aggregate initial margin
deposits plus premiums paid by it for open futures option positions, less the
amount by which any such positions are `in-the-money," would not exceed 5% of
the Fund's net assets.
When-Issued and Delayed-Delivery Transactions
The Fund may purchase securities on a when-issued or delayed-delivery basis. The
Fund will engage in when-issued and delayed-delivery transactions only for the
purpose of acquiring portfolio securities consistent with its investment
objective and policies, not for investment leverage. When-issued securities are
securities purchased for delivery beyond the normal settlement date at a stated
price and yield and thereby involve a risk that the yield obtained in the
transaction will be less than that available in the market when delivery takes
place. The Fund will not pay for such securities or start earning interest on
them until they are received. When the Fund agrees to purchase securities, its
Custodian will set aside cash or liquid securities equal to the amount of the
commitment in a segregated account. Securities purchased on a when-issued basis
are recorded as an asset and are subject to changes in value based upon changes
in the general level of interest rates. In when-issued and delayed-delivery
transactions, the Fund relies on the seller to complete the transaction; the
seller's failure to do so may cause the Fund to miss an advantageous price or
yield.
Securities Issued by Other Investment Companies
The Fund may invest up to 10% of its total assets in shares of money market
mutual funds for cash management purposes. The Fund will incur additional
expenses due to the duplication of expenses as a result of investing in other
investment companies.
U.S. Government Obligations
Although the primary focus of The Global Fund is on other types of financial
instruments The Global Fund may invest in U.S. Government securities for
liquidity and investment purposes.
Obligations of certain agencies and instrumentalities of the U.S. Government,
such as the GNMA, are supported by the full faith and credit of the U.S.
Treasury; others, such as those of the FNMA, are supported by the right of the
issuer to borrow from the Treasury; others, such as those of the Student Loan
Marketing Association, are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; still others, such as those of
the Federal Farm Credit Banks or the FHLMC, are supported only by the credit of
the instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law.
Lending of Portfolio Securities
In order to generate additional income, the Fund from time to time may lend
portfolio securities to broker-dealers, banks or institutional borrowers of
securities. The Fund must receive 102% collateral in the form of cash or U.S.
Government securities. This collateral must be valued daily and, should the
market value of the loaned securities increase, the borrower must furnish
additional collateral to the Fund. During the time portfolio securities are on
loan, the borrower pays the Fund any dividends or interest paid on such
securities. Loans are subject to termination by the Fund or the borrower at any
time. While the Fund does not have the right to vote securities on loan, they
intend to terminate the loan and regain the right to vote if that is considered
important with respect to the investment. In the event the borrower defaults on
its obligation to the Fund, the Fund could experience delays in recovering its
securities and possible capital losses. The Fund will only enter into loan
arrangements with broker-dealers, banks or other institutions which the Advisor
has determined to be creditworthy under guidelines established by the Board of
Directors that permit the Fund to loan up to 33-1/3% of the value of its total
assets.
Illiquid Securities
The Global Fund may invest up to 15% of its net assets in illiquid securities.
Illiquid securities for which market quotations are not readily available
require pricing at fair value as determined in good faith under the supervision
of the Board of Directors. The Advisors may be subject to significant delays in
disposing of illiquid securities, and transactions in illiquid securities may
entail registration expenses and other transaction costs that are higher than
transactions in liquid securities. The term "illiquid securities" for this
purpose means securities that cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the Fund has
valued the securities. Illiquid securities are considered to include, among
other things, written over-the-counter options, securities or other liquid
assets being used as cover for such options, repurchase agreements with
maturities in excess of seven days, certain loan participation interests,
fixed-time deposits which are not subject to prepayment or provide for
withdrawal penalties upon prepayment (other than overnight deposits), securities
that are subject to legal or contractual restrictions on resale and other
securities whose disposition is restricted under the federal securities laws
(other than securities issued pursuant to Rule 144A under the Securities Act of
1933, as amended (the "1933 Act"), and certain commercial paper that an Advisor
has determined to be liquid under procedures approved by the Board of
Directors).
Illiquid securities may include privately placed securities, which are sold
directly to a small number of investors, usually institutions. Unlike public
offerings, such securities are not registered under the federal securities laws.
Although certain of these securities may be readily sold, for example, under
Rule 144A, others may be illiquid, and their sale may involve substantial delays
and additional costs.
* * * * *
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies of the Fund that may not be
changed without the approval of the holders of a majority of the Fund's
outstanding voting securities. A majority of the Fund's outstanding voting
securities means the lesser of (a) 67% or more of the voting securities present
at a meeting if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy or (b) more than 50% of the
outstanding voting securities. If a percentage restriction on investment or use
of assets set forth below is adhered to at the time a transaction is effected,
later changes will not be considered a violation of the restriction, except that
the Fund will take reasonably practicable steps to attempt to continuously
monitor and comply with its liquidity standards. Also, if the Fund receives
subscription rights to purchase securities of an issuer whose securities the
Fund holds, and if the Fund exercises such subscription rights at a time when
the Fund's portfolio holdings of securities of that issuer would otherwise
exceed the limits set forth in paragraph 1 below, it will not constitute a
violation if, prior to the receipt of securities from the exercise of such
rights, and after announcement of such rights, the Fund sells at least as many
securities of the same class and value as it would receive on exercise of such
rights. As a matter of fundamental policy, the Fund may not:
(1) invest 25% or more of the total value of its assets in a
particular industry;
(2) issue senior securities, except to the extent permitted by the
Investment Company Act of 1940; or borrow money, except that the
Fund may borrow up to 15% of its total assets from banks for
temporary or emergency purposes;
(3) purchase or sell commodities or commodity contracts, except that
the Fund may engage in futures transactions as described in this
Prospectus;
(4) make loans, except that the Fund may (a) purchase and hold debt
instruments (including bonds, debentures or other obligations and
certificates of deposit, bankers' acceptances and fixed-time
deposits) in accordance with its investment objective and
policies, (b) invest in loans through Participations and
Assignments, (c) enter into repurchase agreements with respect to
portfolio securities, and (d) make loans of portfolio securities,
as described in this Prospectus;
(5) underwrite the securities of other issuers, except to the extent
that, in connection with the disposition of portfolio securities,
the Fund may be deemed to be an underwriter;
(6) purchase real estate, real estate mortgage loans or real estate
limited partnership interests (other than securities secured by
real estate or interests therein or securities issued by
companies that invest in real estate or interests therein); or
(7) purchase securities on margin (except for delayed delivery or
when-issued transactions or such short-term credits as are
necessary for the clearance of transactions).
MANAGEMENT OF THE FUND
Directors
Overall responsibility for management of the Fund rests with the Directors of
the Company, who are elected by the Shareholders of the Company. There are
currently three directors, two of whom are not "interested persons" of the
Company within the meaning of that term under the Investment Advisers Act of
1940, as amended (the "Advisers Act"). The Directors, in turn, elect the
officers of the Company to supervise its day-to-day operations.
Investment Advisors
The Fund has three investment advisors.
Barclays Global Fund Advisors ("Barclays") serves as investment advisor for The
Global Fund's investments in U.S. equity instruments. Barclays, a registered
investment advisor under the 1940 Act, is an operating subsidiary of Barclays
Global Investors N.A. ("BGI"), a limited purpose national banking association.
BGI is a wholly owned indirect subsidiary of Barclays Bank PLC. Barclays is
located at 45 Fremont Street, San Francisco, California 94105. As of December
31, 1997, BGI provided investment advisory services for approximately $500
billion in assets. An investment committee of Barclay's investment professionals
makes investment decisions for the portion of the Fund's portfolio they manage.
No single individual acts in the capacity of a portfolio manager.
Templeton Investment Counsel, Inc. ("Templeton") acts as investment advisor for
The Global Fund's non-U.S. equity investments. Templeton is an indirect wholly
owned subsidiary of Franklin Resources, Inc. ("Franklin"), a publicly owned
company. Through its subsidiaries, Franklin is engaged in various aspects of the
financial services industry. Templeton and its affiliates serve as advisors for
a wide variety of public investment mutual funds and private clients in many
nations and as of December 31, 1997, provided investment advisory services for
over $223.7 billion in assets. The Templeton organization has been investing
globally since 1940. Templeton and its affiliates have global equity research
offices in Australia, Bahamas, Canada, France, Germany, Italy, Luxembourg,
Scotland and the United States. Templeton's principal business address is 500
East Broward Boulevard, Suite 2100, Fort Lauderdale, Florida 33394.
Templeton uses a disciplined, long-term approach to value-oriented global and
international investing. It has an extensive global network of investment
research sources. Securities are selected for The Global Fund's portfolio on the
basis of fundamental company-by-company analysis. Many different selection
methods are used for different funds and clients and these methods are changed
and improved by Templeton's research on superior selection methods.
Peter A. Nori, CFA, will manage the Fund's investments in non-U.S. equity
securities on behalf of Templeton. Mr. Nori is Vice President and a Portfolio
Manager and analyst for Templeton. His current responsibilities include covering
data processing software and hardware industries, the steel stocks industries,
and country coverage of Austria. In addition to his portfolio management duties
involving institutional and mutual fund accounts, Mr. Nori is lead manager for
the Templeton Global Smaller Companies Fund and backup for Templeton Foreign
Smaller Companies Fund. Mr. Nori received a bachelor of science degree in
finance and a master of business administration degree with an emphasis in
finance from the University of San Francisco. Mr. Nori is a Chartered Financial
Analyst (CFA) and a member of the Association for Investment Management and
Research (AIMR).
Simon Rudolph and Edward Ramos have secondary portfolio management
responsibilities for the Fund. Mr. Rudolph is a vice president of Templeton. He
joined Templeton in 1997 as a portfolio manager and research analyst and
currently has research responsibility for the worldwide transport and shipping
industry, as well as country coverage of India. Mr. Rudolph also researches
small-cap companies throughout Asia and presently manages small-cap mutual
funds. He holds a Bachelor of Arts degree in economic history from Durham
University in England, and is a Chartered Accountant and a member of the
Institute of Chartered Accountants of England and Wales. Mr. Ramos is also a
Vice President of Templeton. His responsibilities include analysis of the
merchandising, financial services and brokerage industries, as well as country
coverage of Taiwan, Egypt and Israel. Mr. Ramos received a Master of Business
Administration degree with emphasis in finance, accounting and international
business from The Columbia Graduate School of Business and a Bachelor of Science
degree in finance from Lehigh University. He is a Chartered Financial Analyst
(CFA).
Pacific Investment Management Company ("PIMCO") serves as investment advisor
pursuant to an investment advisory contract for The Global Fund's investments in
fixed income and other debt securities. PIMCO is an investment counseling firm
founded in 1971, and as of December 31, 1997 provided investment advisory
services for over $118 billion in assets. PIMCO is a subsidiary partnership of
PIMCO Advisors L.P. ("PIMCO Advisors"). A majority interest in PIMCO Advisors is
held by PIMCO Partners, G.P., a general partnership between Pacific Investment
Management Company, a California corporation and indirect wholly-owned
subsidiary of Pacific Life Insurance Company ("Pacific Life"), and PIMCO
Partners, LLC, a limited liability company controlled by the PIMCO Managing
Directors. PIMCO's address is 840 Newport Center Drive, Suite 360, Newport
Beach, California 92660. PIMCO is registered as an investment adviser with the
SEC and as a commodity trading advisor with the CFTC.
The Portfolio Manager for PIMCO's duties on behalf of The Global Fund is Lee R.
Thomas, III, Managing Director and Senior International Portfolio Manager. As a
Fixed Income Portfolio Manager, Mr. Thomas has managed the PIMCO Foreign Bond,
Global Bond and International Bond Funds since July 13, 1995, and the PIMCO
Global Bond Fund II since October 1, 1995. Prior to joining PIMCO in 1995, Mr.
Thomas was associated with Investcorp as a member of the management committee
responsible for global securities and foreign exchange trading. Prior to
Investcorp, he was associated with Goldman Sachs as an Executive Director in
foreign fixed income.
Subject to the general supervision of the Company's Board of Directors and in
accordance with the investment objective, policies and restrictions of the Fund,
the Advisors manage the Fund, make decisions with respect to, and place orders
for, all purchases and sales of the Fund's securities.
For the services provided pursuant to their Investment Management Agreements
with the Company, the Advisors receive a fee from the Fund. The fee is computed
daily and paid monthly and is computed as a percentage of the Fund's average
daily net assets for which the respective Advisor has investment management
responsibility. The Global Fund pays Barclays at a rate of 0.37 1/2% on the
first $100 million of assets under management, 0.30% on the next $400 million of
assets under management, and 0.25% on assets over $500 million. The Global Fund
pays Templeton at a rate of 0.70% on the first $25 million of assets under
management, 0.55% on the next $25 million of assets under management, 0.50% on
the next $50 million of assets under management, 0.40% on the next $150 million
of assets under management, 0.35% on the next $250 million of assets under
management, and 0.30% on amounts over $500 million. The Global Fund pays PIMCO
at a rate of 0.35% of assets under management less than $200 million and 0.30%
on amounts over $200 million.
The Business Manager
Pursuant to an agreement with the Fund, Sutton Place Management Co., Inc.
provides the facilities and services required to carry on the Fund's general
administrative and corporate affairs. The Business Manager maintains its
principal business at 433 California Street, Suite 1010, San Francisco,
California 94104.
The Business Management Agreement provides that the Fund will pay the Business
Manager a fee of 0.30% per annum of the Fund's average daily net assets. The fee
is computed daily and paid monthly.
Other Service Providers
First Data Investor Services Group, Inc. serves as the Fund's administrator,
transfer agent, and registrar and also provides certain accounting services for
the Fund ("Investor Services Group," "Administrator," or "Transfer Agent"). An
affiliate of Investor Services Group, First Data Distributors, Inc., serves as
the Fund's Distributor (the "Distributor"). The Distributor acts as agent for
the Fund in the distribution of its Shares and, in such capacity, solicits
orders for the sale of Shares. The Distributor and Investor Services Group's
principal business address is 53 State Street, Boston, Massachusetts 02109.
Investor Services Group is a wholly-owned subsidiary of First Data Corporation.
The Administrator generally assists the Fund in the administration of its
affairs, including the maintenance of financial records and fund accounting.
Investor Services Group also serves as the Funds' transfer agent and dividend
disbursing agent. Shareholder inquiries may be directed to Investor Services
Group at P.O. Box 5184, Westborough, Massachusetts 01581-5184.
Arthur Andersen LLP serves as independent public auditors for the Company. Brown
Brothers Harriman & Co. is the Fund's custodian. See "MANAGEMENT OF THE FUND" in
the SAI for further information.
The Fund pays all expenses not assumed by the Advisors, Administrator or
Business Manager. Expenses paid by the Fund include: custodian, stock transfer
and dividend disbursing fees and accounting and recordkeeping expenses;
shareholder service expenses pursuant to a Shareholder Service Plan; costs of
designing, printing and mailing reports, prospectuses, proxy statements and
notices to its shareholders; taxes and insurance; expenses of the issuance, sale
or repurchase of Shares of the Fund (including federal and state registration
and qualification expenses); legal and auditing fees and expenses; compensation,
fees and expenses paid to Directors who are not interested persons of the Fund;
association dues; and costs of stationery and forms prepared exclusively for the
Fund.
Portfolio Transactions
Pursuant to the Investment Management Agreements, each Advisor places orders for
the purchase and sale of portfolio investments with brokers or dealers selected
by the Advisor in its discretion.
VALUATION OF SHARES
The net asset value of the Fund is determined and its Shares are priced as of
the close of regular trading on the New York Stock Exchange ("NYSE") (generally
4:00 p.m., Eastern Time) (the "Valuation Time") on each Business Day. As used
herein a "Business Day" is a day on which the NYSE is open for trading and the
Federal Reserve Bank of San Francisco ("FRB") is open, except days on which
there are insufficient changes in the value of the Fund's portfolio securities
to materially affect the Fund's net asset value or days on which no Shares are
tendered for redemption and no order to purchase any Shares is received.
Currently, the NYSE and/or the FRB are closed on the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per Share of the Fund will fluctuate as the value of the
Fund's investments change. Net asset value per Share for the Fund for purposes
of pricing sales and redemptions is calculated by dividing the value of all
securities and other assets belonging to the Fund, less the liabilities charged
to the Fund by the number of the Fund's outstanding Shares.
PURCHASING SHARES
This Prospectus offers individual investors three methods of purchasing Shares.
Shares may be purchased through a broker-dealer who has established a dealer
agreement with the Distributor or the Distributor. In addition, Shares of the
Fund are continuously offered and may be purchased either by mail, by telephone,
or by wire. There are no initial sales loads for shares of the Fund. The minimum
initial purchase amount for shares of The Global Fund is $2,500 for
non-retirement accounts, and $250 for retirement accounts and for subsequent
investments.
Purchases of Shares of the Fund will be executed at the next calculated net
asset value per Share ("public offering price") following the receipt by the
Company or its authorized agents of an order to purchase Shares in good form. In
the case of orders for the purchase of Shares placed through a broker-dealer,
the applicable public offering price will be the net asset value as so
determined, but only if the dealer receives the order prior to the Valuation
Time for that day and transmits it to the Company by the Valuation Time. The
broker-dealer is responsible for transmitting such orders promptly. If the
broker-dealer fails to do so, the investor's right to that day's closing price
must be settled between the investor and the broker-dealer. Purchases of Shares
in the Fund will be effected only on a Business Day. An order received prior to
the Valuation Time on any Business Day will be executed at the net asset value
determined as of the Valuation Time on the date of receipt. An order received
after the Valuation Time on any Business Day will be executed at the net asset
value determined as of the Valuation Time on the next Business Day of the Fund.
Depending upon the terms of a particular Shareholder account, a Shareholder may
be charged account fees for services provided in connection with an investment
in the Fund. Information concerning these services and any charges may be
obtained from the Company, Distributor or dealer assessing the charges. This
Prospectus should be read in conjunction with any such information so received.
An account may be opened by mailing a check or other negotiable bank draft in
the minimum amounts described above (payable to Forward Funds, Inc.) with a
completed and signed Account Application Form to Forward Funds, Inc., c/o First
Data Investor Services Group, Inc., P.O. Box 5184, Westborough, Massachusetts
01581-5184. An Account Application Form may be obtained by calling
1-800-999-6809. The completed investment application must indicate a valid
taxpayer identification number and must be certified as such. Additionally,
investors may be subject to penalties if they falsify information with respect
to their taxpayer identification numbers.
The issuance of Shares is recorded on the books of the Fund. Every Shareholder
will receive a confirmation of, or account statement reflecting, each new
transaction in the Shareholder's account, which will also show the total number
of Shares of the Fund owned by the Shareholder. Shareholders may rely on these
statements in lieu of certificates. Certificates representing Shares of the Fund
will not be issued.
The Company reserves the right to reject any order for the purchase of its
Shares in whole or in part, including purchases made through the use of third
party checks and drafts drawn on foreign financial institutions.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged with a money market fund, the U.S.
Government Money Market Fund (Vista class), a portfolio of Mutual Fund Trust.
There will be no fees for exchanges. An exchange may be made by written
instruction or, if a written authorization for telephone exchanges is on file
with the Transfer Agent by calling 1-800-999-6809. Under certain circumstances,
before an exchange can be made, additional documents may be required to verify
the authority or legal capacity of the person seeking the exchange. Exchanges
must be for amounts of at least $1,000. In order to make an exchange into a new
account, the exchange must satisfy the applicable minimum initial investment
requirement. Exchange requests cannot be revoked once they have been received in
good order. This exchange privilege is available only in U.S. states where
Shares of the Fund being acquired may legally be sold and may be modified,
limited or terminated at any time by the Fund upon 60 days' written notice.
Investors should not view the exchange privilege as a means for market timing
(taking advantage of short-term swings in the market), and the Fund limits the
number of exchanges each Shareholder may make to four exchanges per account (or
two rounds trips) per calendar year. The Company also reserves the right to
prohibit exchanges during the first 15 days following an investment in the Fund.
The Company may terminate or change the terms of the exchange privilege at any
time. In general, Shareholders will receive notice of any material change to the
exchange privilege at least 60 days prior to the change. For federal income tax
purposes, an exchange constitutes a sale of Shares, which may result in a
capital gain or loss.
REDEEMING SHARES
Shareholders may redeem their Shares on any day that net asset value is
calculated (see "VALUATION OF SHARES"). Redemptions will be effected at the net
asset value per Share next determined after receipt of a redemption request by
the Distributor or the Company or its agents. Redemptions may be made by check,
wire transfer, telephone or mail. The Company intends to pay cash for all Shares
redeemed, but in unusual circumstances may make payment wholly or partly in
portfolio securities at their then market value equal to the redemption price.
In such cases, a Shareholder may incur brokerage costs in converting such
securities to cash.
Signature Guarantee
If the proceeds of the redemption are greater than $50,000, or are to be paid to
someone other than the registered holder, or to other than the Shareholder's
address of record, or if the Shares are to be transferred, the owner's signature
must be guaranteed by a commercial bank, trust company, savings association or
credit union as defined by the Federal Deposit Insurance Act, or by a securities
firm having membership on a recognized national securities exchange. No
signature guarantees are required for Shares when an application is on file with
the Transfer Agent and payment is to be made to the Shareholder of record at the
Shareholder's address of record. The Transfer Agent reserves the right to reject
any signature guarantee if (1) it has reason to believe that the signature is
not genuine, (2) it has reason to believe that the transaction would otherwise
be improper, or (3) the guarantor institution is a broker or dealer that is
neither a member of a clearing corporation nor maintains net capital of at least
$100,000.
By Wire Transfer
If a Shareholder has given authorization for expedited wire redemption, Shares
can be redeemed and the proceeds sent by federal wire transfer to a single
previously designated bank account. Requests received by the Company prior to
the close of the NYSE will result in Shares being redeemed that day at the next
determined net asset value and normally the proceeds will be sent to the
designated bank account the following business day. The bank must be a member of
the Federal Reserve wire system. Delivery of the proceeds of a wire redemption
request may be delayed by the Company for up to seven (7) days if the
Distributor deems it appropriate under then current market conditions. Redeeming
Shareholders will be notified if a delay in transmitting proceeds is
anticipated. Once authorization is on file, the Company will honor requests by
any person identifying themselves as the owner of an account or the owner's
broker by telephone at 1-800-999-6809 or by written instructions. The Company
cannot be responsible for the efficiency of the Federal Reserve wire system or
the Shareholder's bank. The Shareholder is responsible for any charges imposed
by the Shareholder's bank. The minimum amount that may be wired is $2,500. The
Company reserves the right to change this minimum or to terminate the wire
redemption privilege. Shares purchased by check may not be redeemed by wire
transfer until such Shares have been owned (i.e., paid for) for at least 15
days. Expedited wire transfer redemptions may be authorized by completing a form
available from the Distributor. To change the name of the single bank account
designated to receive wire redemption proceeds, it is necessary to send a
written request with signatures guaranteed to Investor Services Group, P.O. Box
5184, Westborough, Massachusetts 01581-5184. This redemption option does not
apply to Shares held in broker "street name" accounts. A wire transfer fee will
be charged by the Fund. See "FEE TABLE."
By Telephone
Shares may be redeemed by telephone if the Account Application Form reflects
that the Shareholder has elected that privilege. If the telephone feature was
not originally selected, the Shareholder must provide written instructions to
the Company to add it. The Shareholder may have the proceeds mailed to his or
her address or mailed or wired to a commercial bank account previously
designated on the Account Application Form. Under most circumstances, payments
by wire will be transmitted on the next Business Day. Wire redemption requests
may be made by the Shareholder by telephone to the Company at 1-800-999-6809.
Although there are no redemption fees, a Shareholder may be charged wire
transfer and account closeout fees, as applicable. See "FEE TABLE."
The Company's Account Application Form provides that none of the Business
Manager, the Transfer Agent, the Advisors, the Company or any of their
affiliates or agents will be liable for any loss, expense or cost when acting
upon any oral, wired or electronically transmitted instructions or inquiries
believed by them to be genuine. While precautions will be taken, as more fully
described below, Shareholders bear the risk of any loss as the result of
unauthorized telephone redemptions or exchanges believed by Investor Services
Group to be genuine. The Company will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. These procedures
include recording all phone conversations, sending confirmations to Shareholders
within 72 hours of the telephone transaction, verifying the account name and
sending redemption proceeds only to the address of record or to a previously
authorized bank account. If a Shareholder is unable to contact the Funds by
telephone, a Shareholder may also mail the redemption request to Investor
Services Group.
By Mail
A written request for redemption must be received by the Transfer Agent in order
to honor the request. See "FEE TABLE." The Transfer Agent's address is: First
Data Investor Services Group, Inc., P.O. Box 5184, Westborough, Massachusetts
01581-5184. The Transfer Agent will require a signature guarantee by an eligible
guarantor institution. The signature guarantee requirement will be waived if all
of the following conditions apply: (1) the redemption check is payable to the
Shareholder(s) of record, (2) the redemption check is mailed to the
Shareholder(s) at the address of record and (3) an application is on file with
the Transfer Agent. Signature guarantees are also waived if the proceeds of the
redemption request will meet the above conditions and be less than $50,000. The
Shareholder may also have the proceeds mailed to a commercial bank account
previously designated on the Account Application Form. There is no charge for
having redemption proceeds mailed to a designated bank account. To change the
address to which a redemption check is to be mailed, a written request therefor
must be received by the Transfer Agent. In connection with such request, the
Transfer Agent will require a signature guarantee by an eligible guarantor
institution.
For purposes of this policy, the term "eligible guarantor institution" shall
include banks, brokers, dealers, credit unions, securities exchanges and
associations, clearing agencies and savings associations as those terms are
defined in the Securities Exchange Act of 1934, as amended (the "1934 Act").
Payments to Shareholders
Redemption orders are effected at the net asset value per Share next determined
after the Shares are properly tendered for redemption, as described above.
Payment to Shareholders for Shares redeemed generally will be made within seven
days after receipt of a valid request for redemption.
At various times, the Company may be requested to redeem Shares for which it has
not yet received good payment. In such circumstances, the forwarding of proceeds
may be delayed until payment has been collected for the purchase of such Shares,
which delay may be for 15 days or more. The Fund intends to forward such
redemption proceeds upon determining that good payment for purchase orders has
been received. Such delay may be avoided if Shares are purchased by wire
transfer of federal funds. The Company intends to pay cash for all Shares
redeemed, but under abnormal conditions which make payment in cash unwise,
payment may be made wholly or partly in portfolio securities at their then
market value equal to the redemption price. In such cases, an investor may incur
brokerage costs in converting such securities to cash.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION -- Matters Affecting
Redemption" and "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION - Net Asset
Value" in the SAI for examples of when the Company may suspend the right of
redemption or redeem Shares involuntarily.
SHAREHOLDER SERVICE PLAN
The Company has adopted a Shareholder Service Plan (the "Plan") with respect to
the Shares of the Fund. Pursuant to the Plan, the Fund is authorized to pay
third party service providers for certain expenses that are incurred in
connection with providing services to shareholders. Payments under the Plan will
be calculated daily and paid monthly at an annual rate not to exceed 0.35% of
the average daily net assets of the Fund.
Payments under the Plan may be used to pay banks and their affiliates and other
institutions, including broker-dealers (each a "Participating Organization"),
for administrative and/or shareholder service assistance. Such Participating
Organizations will be compensated at an annual rate of up to 0.35% of the
average daily net assets of the Shares held of record or beneficially by such
customers. Payments pursuant to the Plan will be used to compensate
Participating Organizations for providing Shareholder services with respect to
their Customers who are, from time to time, beneficial or record holders of
Shares.
Fees paid pursuant to the Plan are accrued daily and paid monthly, and are
charged as expenses of Shares of the Fund as accrued.
The Plan may be terminated by a vote of a majority of the Directors who are not
"interested persons" (as defined in the 1940 Act) of the Company and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan ("Independent Directors"), or by a vote of a
majority of the holders of the outstanding voting securities of the class of
Shares subject thereto.
DIVIDENDS AND TAXES
The Fund expects to pay dividends of net investment income quarterly and to
distribute capital gains annually. A Shareholder will automatically receive all
income, dividends and capital gains distributions in additional full and
fractional Shares at net asset value as of the date of declaration, unless the
Shareholder elects to receive dividends or distributions in cash. Such election,
or any revocation thereof, must be made in writing to the Transfer Agent at
First Data Investor Services Group, Inc., P.O. Box 5184, Westborough,
Massachusetts 01581-5184, and will become effective with respect to dividends
and distributions having record dates after its receipt by the Transfer Agent.
Federal Taxes
The Fund intends to qualify annually and elect to be treated as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"), so that it generally will not be subject to federal income tax on its
taxable income and gains that are distributed to Shareholders. In order to avoid
a 4% federal excise tax, the Fund intends to distribute each calendar year
substantially all of its taxable income and gains.
Distributions from the Fund's investment company taxable income (which includes,
among other items, dividends, taxable interest and the excess, if any, of net
short-term capital gains over net long-term capital losses), whether received in
cash or reinvested in Fund shares, are taxable to Shareholders as ordinary
income. Distributions of net capital gains (other than short-term capital gain),
whether received in cash or reinvested in Fund shares, will be taxable to
Shareholders at the applicable capital gains rate (generally, a maximum rate of
20% or 28%, depending upon the Fund's holding period in the assets sold),
regardless of how long the Shareholder has held the Fund's Shares.
Dividends declared by the Fund in October, November or December and paid during
the following January will be treated as having been received by Shareholders on
December 31 in the year the distributions were declared.
Any dividend or other distribution paid by the Fund has the effect of reducing
the Fund's net asset value per Share. Since the Fund does not declare dividends
daily, a dividend or other distribution paid shortly after a purchase of Shares
would represent, in substance, a return of capital to the Shareholder (to the
extent it is paid on the Shares so purchased), even though subject to income
taxes.
The Fund may be subject to income taxes imposed by the countries in which it
invests with respect to dividends, capital gains and interest income. The Fund
may, under certain circumstances, elect to treat certain of these taxes as if
paid by its shareholders. Shareholders would then be required to include such
taxes as income but may be entitled, subject to certain limitations, to a tax
credit or deduction.
The Fund may be required to withhold federal income tax at the rate of 31% of
all taxable distributions paid to Shareholders who fail to provide the Fund with
their correct taxpayer identification number or to make required certifications
or who have been notified by the Internal Revenue Service ("IRS") that they are
subject to backup withholding. Corporate Shareholders and certain other
Shareholders specified in the Code are exempt from backup withholding. Backup
withholding is not an additional tax and any amounts withheld may be credited
against the Shareholder's federal income tax liability.
Shareholders will be furnished annually with information relating to the nature
and amounts of distributions made by the Fund.
The preceding discussion is only a summary of some of the federal income tax
considerations generally affecting the Fund and its Shareholders and does not
address every possible situation. Distributions may be subject to state, local
and foreign taxes, and non-U.S. Shareholders may be subject to U.S. tax rules
that differ significantly from those discussed. Prospective Shareholders should
consult their tax advisors with respect to the effect of investing in the Fund.
For additional information relating to taxes, see "TAX CONSIDERATIONS" in the
SAI.
GENERAL INFORMATION
Description of the Company and Its Shares
The Company was organized as a Maryland corporation in 1997 and consists of the
Fund described in this Prospectus. The Shares of the Company are currently
offered as a single class. Each Share represents an equal proportionate interest
in the Fund with other Shares of the Fund, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the Fund as
are declared at the discretion of the Directors. Shareholders are entitled to
one vote for each Share owned.
An annual or special meeting of Shareholders to conduct necessary business is
not required by the Articles of Incorporation, the 1940 Act or other authority
except, under certain circumstances, to elect Directors, amend the Certificate
of Incorporation, approve an investment advisory agreement and satisfy certain
other requirements. To the extent that such a meeting is not required, the
Company may elect not to have an annual or special meeting.
The Company will call a special meeting of Shareholders for purposes of
considering the removal of one or more Directors upon written request therefor
from Shareholders holding not less than 10% of the outstanding votes of the
Company. At such a meeting, a quorum of Shareholders (constituting a majority of
votes attributable to all outstanding Shares of the Company), by majority vote,
has the power to remove one or more Directors.
Performance Information
From time to time performance information for the Fund showing its average
annual total return, aggregate total return and/or yield may be presented in
advertisements, sales literature and Shareholder reports. Such performance
figures are based on historical earnings and are not intended to indicate future
performance.
Investors may also judge the performance of the Fund by comparing or referencing
it to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indexes such as
those prepared by various services, which indexes may be published by such
services or by other services or publications, including, but not limited to,
ratings published by Morningstar, Inc. In addition to performance information,
general information about the Fund that appears in such publications may be
included in advertisements, in sales literature and in reports to Shareholders.
For further information regarding such services and publications, see
"CALCULATION OF PERFORMANCE DATA" in the SAI.
Total return and yield are functions of the type and quality of instruments held
in the portfolio, operating expenses, and market conditions. Any fees charged
with respect to customer accounts for investing in Shares of the Fund will not
be included in performance calculations; such fees, if charged, will reduce the
actual performance from that quoted.
Account Services
Shareholders of the Company may obtain current price, yield and other
performance information on any of the Funds or any of the Company's funds 24
hours a day by calling 1-800-999-6809 from any touch-tone telephone.
Miscellaneous
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants. Inquiries regarding the Company may
be directed in writing to Investor Services Group, P.O. Box 5184, Westborough,
Massachusetts 01581-5184, or by calling toll free 1-800-999-6809.
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Fund or
its Distributor. This Prospectus does not constitute an offering by the Fund or
by the Distributor in any jurisdiction in which such offering may not lawfully
be made.
<PAGE>
FORWARD FUNDS, INC.
433 California Street
Suite 1010
San Francisco, California 94104
1-800-999-6809
Statement of Additional Information
dated ____________, 1998
Forward Funds, Inc. (the "Company") is an open-end management investment company
commonly known as a mutual fund. The Company offers one diversified investment
portfolio, The Global Fund (referred to herein as "The Global Fund" or the
"Fund"). There is no assurance that the Fund will achieve its objective.
This Statement of Additional Information ("SAI") is not a prospectus and it
should be read in conjunction with the Funds' Prospectus, dated ______________,
1998 ("Prospectus"), which has been filed with the Securities and Exchange
Commission ("SEC"). Copies of the Prospectus may be obtained free of charge by
calling the Business Manager at 415-982-2525.
TABLE OF CONTENTS
Page
ORGANIZATION OF FORWARD FUNDS, INC.............................................2
MANAGEMENT OF THE FUND.........................................................2
INVESTMENT OBJECTIVE AND POLICIES..............................................7
SUPPLEMENTAL DISCUSSION OF INVESTMENT TECHNIQUES AND RISKS ASSOCIATED
WITH THE FUND'S INVESTMENT POLICIES AND INVESTMENT TECHNIQUES.............8
PORTFOLIO TRANSACTIONS........................................................15
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................................16
DETERMINATION OF SHARE PRICE..................................................17
SHAREHOLDER SERVICES AND PRIVILEGES...........................................18
DISTRIBUTIONS.................................................................19
SHAREHOLDER INFORMATION.......................................................24
CALCULATION OF PERFORMANCE DATA...............................................24
GENERAL INFORMATION...........................................................26
FINANCIAL STATEMENTS..........................................................27
APPENDIX......................................................................28
<PAGE>
ORGANIZATION OF FORWARD FUNDS, INC.
Forward Funds, Inc. is an open-end management investment company which offers
one diversified investment portfolio, The Global Fund. The Company was
incorporated in Maryland on October 3, 1997.
The authorized capital stock of the Company consists of six hundred (600)
million shares of one class of common stock having a par value of $0.001 per
share. The Board of Directors of the Company has designated the stock into one
series, The Global Fund, and has authorized the series to offer two classes. The
Fund currently offers one class of shares (the "Shares"). Holders of Shares of
the Fund of the Company have one vote for each Share held, and a proportionate
fraction of a vote for each fractional Share. All Shares issued and outstanding
are fully paid and non-assessable, transferable, and redeemable at the option of
the shareholder. Shares have no preemptive rights.
The Board of Directors may classify or reclassify any unissued Shares of the
Company into Shares of another class or series by setting or changing in any one
or more respects, from time to time, prior to the issuance of such Shares, the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or qualifications of such Shares.
MANAGEMENT OF THE FUND
Board of Directors. The Fund is managed by the Company's Board of Directors. The
Directors and Officers of the Company are listed below. Their affiliations over
the last five years are set forth below. An asterisk (*) has been placed next to
the name of each Director who is an "interested person," as that term is defined
in the Investment Company Act of 1940, as amended (the "1940 Act"), by virtue of
that person's affiliation with the Company, its distributor, its investment
advisors or otherwise.
Haig G. Mardikian, Hearst Building, Suite 1000, San Francisco, California 94118.
(Age 50). Director. Mr. Mardikian is primarily involved in real estate
investments and development projects. Owner of Haig G. Mardikian Enterprises, a
real estate investment business; general partner of M&B Development; general
partner of George M. Mardikian Enterprises; and president and director of
Adiuvana-Invest, Inc. In addition to his involvement with the above-mentioned
investment businesses, Mr. Mardikian has served as Managing Director of United
Broadcasting Company and Chairman and Director of SIFE Trust Fund.
Leo T. McCarthy, One Market, Steuart Tower, Suite 1604, San Francisco,
California 94105. (Age 67). Director. President, The Daniel Group, an
international trade consulting partnership (January 1995 -present); Director,
Linear Technology Corporation (July 1994 - present); Lieutenant Governor of the
State of California (January 1983 - December 1994).
Ronald Pelosi,* 433 California Street, Suite 1010, San Francisco, California
94104. (Age 63). Director. President, Sutton Place Management Co., Inc. (June
1997 - Present); Principal, Grayville Associates, a business consulting firm
(June 1996 - Present). Mr. Pelosi was formerly a Vice President of Korn Ferry
International, an executive search consulting firm (June 1994 - June 1996) and
President of Ironstone Partners, business consultants (January 1993 - June
1994).
The Fund pays each Director who is not an interested person (as defined under
the 1940 Act) an annual fee of $6,000. Officers of the Fund and Directors who
are interested persons of the Fund do not receive any compensation from the Fund
or any other funds managed by the Business Manager or Investment Advisors. None
of the officers or Directors of the Fund are affiliated with the Investment
Advisors.
Officers.
Ronald Pelosi, President. 433 California Street, Suite 1010, San Francisco,
California 94104. (Age 63). See "Board of Directors."
Steven Levy, Treasurer. 433 California Street, Suite 1010, San Francisco,
California 94104. (Age 33). Vice President of Fund Accounting and Administration
Operations for First Data Investor Services Group, Inc. (January 1997 -
present); Vice President of Investment Operations at Franklin Templeton Group,
San Mateo, California (January 1996 - December 1996); Assistant Vice President
in Fund Accounting at Scudder, Stevens & Clark, Inc. (December 1994 - January
1996); Fund Accounting Division, Putnam Investments, Inc. (1986 - November
1994).
Julie A. Tedesco, Secretary. 433 California Street, Suite 1010, San Francisco,
California 94104. (Age 40). Counsel to First Data Investor Services Group, Inc.
(May 1994 - present); Assistant Vice President and Counsel, The Boston Company
Advisors, Inc. (July 1992 - May 1994).
Kristin Kowal, Assistant Treasurer. 433 California Street, Suite 1010, San
Francisco, California 94104. (Age 30). Director of Client Services, First Data
Investor Services Group, Inc. (August 1997 - present); Fund Accountant, Mutual
Fund Accounting Division, First Data Investor Services Group, Inc. (December
1991 - July 1997).
Therese M. Hogan, Assistant Secretary. 433 California Street, Suite 1010, San
Francisco, California 94104. (Age 35). Manager (State Regulations), First Data
Investor Services Group, Inc. (June 1994 - present); Senior Legal Assistant,
Palmer & Dodge (October 1993 - May 1994).
Investment Advisors. The Investment Advisors serve as investment advisors for
the Fund and have certain responsibilities for the investment management of the
assets of the Company (collectively referred to herein as "Investment Advisors"
or "Advisors"). The Investment Management Agreements between the Company and the
Investment Advisors require the Investment Advisors to oversee the provision of
all investment advisory and portfolio management services for the Fund with
respect to the assets allocated to them. There are three Investment Advisors for
the Fund. Barclays Global Fund Advisors ("Barclays") manages The Global Fund's
U.S. equity investments. Templeton Investment Counsel, Inc. ("Templeton")
manages The Global Fund's non-U.S. equity investments. Pacific Investment
Management Company ("PIMCO") manages those assets of The Global Fund that are
invested in fixed income and other debt securities.
The Investment Advisors are not required to furnish any personnel, overhead
items, or facilities for the Company.
Barclays serves as investment advisor for The Global Fund's investments in U.S.
equity instruments. Barclays, a registered investment advisor under the 1940
Act, is an operating subsidiary of Barclays Global Investors N.A. ("BGI"), a
limited purpose national banking association. Barclays is located at 45 Fremont
Street, San Francisco, California 94105. As of July 1997, Barclays and its
affiliates provided investment advisory services for over $465 billion of
assets. Barclays uses a team management approach to manage investment
portfolios.
Templeton acts as investment advisor for The Global Fund's non-U.S. equity
investments. Templeton is an indirect wholly owned subsidiary of Franklin
Resources, Inc. ("Franklin"), a publicly owned company. Through its
subsidiaries, Franklin is engaged in various aspects of the financial services
industry. Templeton and its affiliates serve as advisors for a wide variety of
public investment mutual funds and private clients in many nations and manage
over $172 billion in assets. The Templeton organization has been investing
globally since 1940. Templeton and its affiliates have offices in Australia,
Bahamas, Canada, France, Germany, Italy, Luxembourg, Scotland and the United
States. Templeton's principal business address is 500 East Broward Boulevard,
Suite 2100, Fort Lauderdale, Florida 33394.
Templeton uses a disciplined, long-term approach to value-oriented global and
international investing. It has an extensive global network of investment
research sources. Securities are selected for The Global Fund's portfolio on the
basis of fundamental company-by-company analysis. Many different selection
methods are used for different funds and clients and these methods are changed
and improved by Templeton's research on superior selection methods.
PIMCO serves as investment advisor pursuant to an investment advisory contract
for The Global Fund's investments in fixed income and other debt securities.
PIMCO is an investment counseling firm founded in 1971, and had approximately
$118 billion in assets under management as of December 31, 1997. PIMCO is a
subsidiary partnership of PIMCO Advisors L.P. ("PIMCO Advisors"). PIMCO Advisors
has two general partners, PIMCO Advisors Holdings L.P., a Delaware limited
partnership (formerly Oppenheimer Capital, L.P.) and PIMCO Partners, G.P., a
general partnership between Pacific Investment Management Company, a California
corporation and indirect wholly owned subsidiary of Pacific Life Insurance
Company, and PIMCO Partners, LLC, a Delaware limited liability company
controlled by the PIMCO Managing Directors. PIMCO Partners, G.P. is also the
general partner of PIMCO Advisors Holdings L.P. PIMCO's address is 840 Newport
Center Drive, Suite 360, Newport Beach, California 92660. PIMCO is registered as
an investment advisor with the Securities and Exchange Commission and as a
commodity trading advisor with the CFTC. The portfolio management team which
will handle The Global Fund's investments on PIMCO's behalf is currently led by
Lee R. Thomas, III, Managing Director and Senior International Portfolio Manager
for PIMCO. A Fixed Income Portfolio Manager, Mr. Thomas has managed the PIMCO
Foreign Bond, Global Bond and International Bond Funds since July 13, 1995, and
the PIMCO Global Bond Fund II since October 1, 1995. Prior to joining PIMCO in
1995, Mr. Thomas was associated with Investcorp as a member of the management
committee responsible for global securities and foreign exchange trading. Prior
to Investcorp, he was associated with Goldman Sachs as an Executive Director in
foreign fixed income.
The Fund pays Templeton annual fees equal to 0.70% of the first $25 million of
Fund assets invested by Templeton, 0.55% of 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 Investment Manager.
The Fund pays Barclays annual fees equal to 0.375% of the first $100 million of
Fund assets managed by Barclays, 0.30% on the next $400 million under
management, and 0.25% on all assets above $500 million managed by Barclays.
PIMCO is paid annual fees equal to 0.35% of the first $200 million of Fund
assets it manages and 0.30% of all assets above $200 million that it manages.
All fees paid to the Investment Advisors by the Fund are computed and accrued
daily and paid monthly based on the net asset value of shares of the Fund.
Each Investment Management Agreement will remain in effect for two years
following its date of execution, and thereafter will automatically continue for
successive annual periods as long as such continuance is specifically approved
at least annually by (a) the Board of Directors or (b) the vote of a "majority"
(as defined in the 1940 Act) of the Company's outstanding Shares voting as a
single class; provided, that in either event the continuance is also approved by
at least a majority of the Board of Directors who are not "interested persons"
(as defined in the 1940 Act) of the Investment Advisor by vote cast in person at
a meeting called for the purpose of voting on such approval.
Each Investment Management Agreement is terminable without penalty with not less
than 60 days' notice by the Board of Directors or by a vote of the holders of a
majority of a Fund's outstanding Shares voting as a single class, or upon not
less than 60 days' notice by the Investment Advisor. Each Investment Management
Agreement will terminate automatically in the event of its "assignment" (as
defined in the 1940 Act).
Business Manager. Sutton Place Management Co., Inc. (the "Business Manager")
performs certain administrative functions as Business Manager for the Fund,
including:
o providing office space, telephone, office equipment and supplies
for the Fund;
o paying compensation of the Fund's officers who are affiliated
with the Business Manager for services rendered as such;
o authorizing expenditures and approving bills for payment on
behalf of the Fund;
o supervising preparation of annual and semiannual reports to
Shareholders, notices of dividends, capital gain distributions
and tax credits, and attending to correspondence and other
special communications with Shareholders and service providers to
the Fund;
o monitoring relationships with organizations serving the Fund;
o and providing executive, clerical and secretarial help needed to
carry out these responsibilities.
For its services the Business Manager receives a fee from the Fund of 0.30% per
annum of the Fund's average daily net assets. The fee is computed daily and paid
monthly. The Business Management Agreement between the Business Manager and the
Fund shall continue in effect for two years from the date of its execution and
year to year thereafter, provided that each such continuance is approved at
least annually by (a) the vote of a majority of the entire Board of Directors of
the Company, or by the vote of the outstanding securities of the Company, and
(b) the vote of a majority of those directors who are not parties to the
Business Management Agreement or interested persons (as that term is defined in
the 1940 Act). The Business Management Agreement may be terminated at any time
by either party upon 60 days' prior written notice and terminates automatically
in the event of its assignment (as defined in the 1940 Act).
Distributor. Shares of the Fund are distributed pursuant to an Agreement between
the Company and First Data Distributors, Inc. (the "Distributor"). The
Distribution Agreement requires the Distributor to solicit orders for the sale
of Fund shares and to undertake such advertising and promotion as the
Distributor believes reasonable in connection with such solicitation. The Fund
and the Distributor have agreed to indemnify each other against certain
liabilities. The Distribution Agreement will remain in effect for two years and
from year to year thereafter only if its continuance is approved annually by a
majority of the Board of Directors who are not parties to such agreement or
"interested persons" of any such party and must be approved either by votes of a
majority of the Directors or a majority of the outstanding voting securities of
the Fund. The Distribution Agreement may be terminated by either party on at
least 60 days' written notice and will terminate automatically in the event of
its assignment (as defined in the 1940 Act).
Administrator and Transfer Agent. First Data Investor Services Group, Inc.
(hereinafter "Investor Services Group," "Administrator" and "Transfer Agent"),
whose principal business address is 53 State Street, Boston, Massachusetts
02109, acts as the Company's administrator and transfer agent. As Administrator,
Investor Services Group will perform corporate secretarial, treasury and blue
sky services and act as fund accounting agent for the Fund. For its services as
Administrator, the Fund will pay Investor Services Group a monthly fee based on
the average amount of assets invested in the Fund. Investor Services Group will
receive an annual fee of 0.20% up to and including the first $500 million Fund
assets; 0.17% for assets between $500 million and $1 billion and 0.125% for all
assets over $1 billion. In addition, the Fund will pay Investor Services Group
certain accounting fees, and other expenses. The Administration Agreement
between the Fund and Investor Services Group has an initial term of five years
and will renew automatically for successive two year terms. Pursuant to a
Transfer Agency and Services Agreement, Investor Services Group also acts as
transfer agent and dividend disbursing agent for the Fund. The Transfer Agency
and Services Agreement has a term of five years and automatically renews for
successive two year terms. Investor Services Group and First Data Distributors,
Inc. are wholly-owned subsidiaries of First Data Corporation. Shareholder
inquiries may be directed to Investor Services Group or First Data Distributors,
Inc. at P.O. Box 5184, Westborough, Massachusetts 01581-5184. See the Prospectus
for information on how to purchase, sell and exchange Shares of the Fund, and
the charges and expenses associated with an investment.
The Shares of the Fund are sold without a sales charge. The Business Manager
and/or the Distributor may use their own financial resources to pay expenses
associated with activities primarily intended to result in the promotion and
distribution of the Fund's Shares to pay expenses associated with providing
other services to Shareholders. In some instances, additional compensation or
promotional incentives may be offered to dealers that have sold or may sell
significant amounts of Shares during specified periods of time. Such
compensation and incentives may include, but are not limited to, cash,
merchandise, trips and financial assistance to dealers in connection with
pre-approved conferences or seminars, sales or training programs for invited
sales personnel, payment for travel expenses (including meals and lodging)
incurred by sales personnel and members of their families, or other invited
guests, to various locations for such seminars or training programs, seminars
for the public, advertising and sales campaigns regarding the Company and/or
other events sponsored by dealers. See the Prospectus for information on how to
purchase and sell Shares of the Fund, and the charges and expenses associated
with an investment.
Shareholder Service Plan. The Fund has a Shareholder service plan applicable to
Shares of the Fund ("Shareholder Service Plan"). The Company intends to operate
the Shareholder Service Plan in accordance with its terms. Under the Shareholder
Service Plan, third party service providers may be entitled to payment each
month in connection with the offering, sale, and shareholder servicing of Shares
in amounts not to exceed 0.35% of the average daily net assets of the Shares of
the Fund.
Under the Shareholder Service Plan, ongoing payments may be made on a quarterly
basis to Participating Organizations for both distribution and shareholder
servicing at the annual rate of 0.35% of the Fund's average daily net assets of
Shares that are registered in the name of that Participating Organization as
nominee or held in a Shareholder account that designates that Participating
Organization as the dealer of record. These fees may also be used to cover the
expenses of the Distributor primarily intended to result in the sale of Fund
Shares, including payments to Participating Organizations for selling shares of
the Fund and for servicing shareholders. Activities for which these fees may be
used include: overhead of the Distributor; printing of prospectuses and SAIs
(and supplements thereto) and reports for other than existing Shareholders;
payments to dealers and others that provide Shareholder services; and costs of
administering the Shareholder Service Plan.
In the event a Shareholder Service Plan is terminated in accordance with its
terms, the obligations of the Fund to make payments to the Distributor pursuant
to the Shareholder Service Plan will cease and the Fund will not be required to
make any payments for expenses incurred after the date the Plan terminates. The
Fund will receive payment under the Shareholder Service Plan without regard to
actual distribution expenses incurred.
The Shareholder Service Plan has been approved by the Company's Board of
Directors, including all of the Directors who are not interested persons of the
Company, as defined in the 1940 Act. The Shareholder Service Plan must be
renewed annually by the Board of Directors, including a majority of the
Directors who are not interested persons of the Company and who have no direct
or indirect financial interest in the operation of the Shareholder Service Plan,
cast in person at a meeting called for that purpose. The Shareholder Service
Plan may be terminated as to the Company at any time, without any penalty, by
such Directors or by a vote of a majority of the Company's outstanding Shares on
60 days' written notice.
Any change in the Shareholder Service Plan of the Fund that would increase
materially the expenses paid by a Fund requires Shareholder approval; otherwise,
the Shareholder Service Plan may be amended by the Board of Directors of the
Fund, including a majority of those Directors who are not "interested persons'
and who have no direct or indirect financial interest in the operation of the
Shareholder Service Plan or in any agreements related to it (the "Independent
Directors"), by a vote cast in person.
Third party service providers are required to report in writing to the Board of
Directors at least quarterly on the monies reimbursed to them under the
Shareholder Service Plan, as well as to furnish the Board with such other
information as may reasonably be requested in connection with the payments made
under the Shareholder Service Plan in order to enable the Board to make an
informed determination of whether the Shareholder Service Plan should be
continued.
INVESTMENT OBJECTIVE AND POLICIES
General
The Global Fund seeks total return (capital appreciation and income) by
investing primarily in the global stock and bond markets.
The investment objective of the Fund is a fundamental policy and as such may not
be changed without a vote of the holders of a majority of the outstanding Shares
of the Fund. Non-fundamental policies of the Fund may be changed by the
Company's Directors, without a vote of the holders of a majority of outstanding
Shares of the Fund unless (i) the policy is expressly deemed to be a fundamental
policy or (ii) the policy is expressly deemed to be changeable only by such
majority vote. There can be no assurance that the investment objective of the
Fund will be achieved.
Investment Policies
The Global Fund may invest in all types of equity and debt securities,
including, but not limited to, common stocks, preferred stocks, convertible
securities, warrants, trust units or certificates, bonds, debentures, notes,
commercial paper and various types of depository receipts. There are no limits
on the types of equity or debt securities that may be purchased so long as they
are publicly traded. Securities may be issued by companies located in the United
States or in any other country and may include securities issued by governments
or their agencies and instrumentalities.
The Global Fund will not invest more than 50% of its assets in securities of
emerging markets. The Investment Advisors making non-U.S. investments for the
Fund (as described in the Prospectus) have broad discretion to identify and
invest in countries they consider to qualify as emerging markets' securities.
However, an emerging market will generally be considered as one located in any
country that is defined as an emerging or developing economy by any of the
following: the International Bank for Reconstruction and Development (e.g., the
World Bank), including its various offshoots, such as the International Finance
Corporation, or the United Nations or its authorities. Debt securities held by
The Global Fund may include securities rated in any rating category by a
nationally recognized securities rating organization ("NRSRO") or that are
unrated. As a result, The Global Fund may invest in high risk, lower quality
debt securities, commonly referred to as "junk bonds." The Global Fund will
limit its investment in junk bonds (i.e., those rated lower than the four
highest rating categories or if unrated determined to be of comparable quality)
to not more than 10% of The Global Fund's total assets.
Securities purchased by The Global Fund may be listed or unlisted in the markets
where they trade and may be issued by companies in various industries, with
various levels of market capitalization. The Global Fund will not invest more
than 25% of its total assets in securities issued by companies in any one
industry.
* * * * * * *
SUPPLEMENTAL DISCUSSION OF INVESTMENT TECHNIQUES
AND RISKS ASSOCIATED WITH THE FUND'S INVESTMENT
POLICIES AND INVESTMENT TECHNIQUES
Additional information concerning investment techniques and risks associated
with certain of the Fund's investments is set forth below.
Inflation-Indexed Bonds
Inflation-indexed securities issued by the U.S. Treasury will initially have
maturities of ten years, although it is anticipated that securities with other
maturities will be issued in the future. The securities will pay interest on a
semi-annual basis, equal to a fixed percentage of the inflation adjusted
principal amount. For example, if the Fund purchased an inflation-indexed bond
with a par value of $1,000 and a 3% real rate of return coupon (payable 1.5%
semi-annually), and inflation over the first six months were 1%, the mid-year
par value of the bond would be $1,010 and the first semi-annual payment would be
$15.15 ($1,010 times 1.5%). If inflation during the second half of the year
reached 3%, the end-of-year par value of the bond would be $1,030 and the second
semi-annual interest payment would be $15.45 ($1,030 times 1.5%).
The U.S. Treasury has only recently commenced issuing inflation-indexed bonds.
As such, there is no trading history of these securities, and there can be no
assurance that a liquid market in these instruments will develop, although one
is expected. Lack of a liquid market may impose the risk of higher transaction
costs and the possibility that the Fund may be forced to liquidate its position
when it would not be advantageous to do so. There also can be no assurance that
the U.S. Treasury will issue any particular amount of inflation-indexed bonds.
Certain foreign governments, such as the United Kingdom, Canada and Australia,
have a longer history of issuing inflation-indexed bonds, and there may be a
more liquid market in certain of these countries for these securities.
The periodic adjustment of U.S. inflation-indexed bonds is tied to the Consumer
Price Index for Urban Consumers ("CPI-U"), which is calculated monthly by the
U.S. Bureau of Labor Statistics. The CPI-U is a measurement of changes in the
cost of living, made up of components such as housing, food, transportation and
energy. Inflation-indexed bonds issued by a foreign government are generally
adjusted to reflect a comparable inflation index, calculated by that government.
There can be no assurance that the CPI-U or any foreign inflation index will
accurately measure the real rate of inflation in the prices of goods and
services. Moreover, there can be no assurance that the rate of inflation in a
foreign country will be correlated to the rate of inflation in the United
States.
Any increase in the principal amount of an inflation-indexed bond will be
considered taxable ordinary income, even though investors do not receive their
principal until maturity.
Mortgage-Related and Other Asset-Backed Securities
Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government (in the case of securities guaranteed by
the Government National Mortgage Association or "GNMA"); or guaranteed by
agencies or instrumentalities of the U.S. Government (in the case of securities
guaranteed by the Federal National Mortgage Association or "FNMA" or the Federal
Home Loan Mortgage Corporation or "FHLMC"), which are supported only by the
discretionary authority of the U.S. Government to purchase the agency's
obligations). Mortgage-related securities created by non-governmental issuers
(such as commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers) may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit, which may be
issued by governmental entities, private insurers or the mortgage poolers.
Repurchase Agreements
In a repurchase agreement, the Fund purchases a security and simultaneously
commits to sell that security back to the original seller at an agreed-upon
price. The resale price reflects the purchase price plus an agreed-upon
incremental amount which is unrelated to the coupon rate or maturity of the
purchased security. To protect the Fund from risk that the original seller will
not fulfill its obligations, the securities are held in accounts of the Fund at
a bank, marked-to-market daily, and maintained at a value at least equal to the
sale price plus the accrued incremental amount. While it does not presently
appear possible to eliminate all risks from these transactions (particularly the
possibility that the value of the underlying security will be less than the
resale price, as well as costs and delays to the Fund in connection with
bankruptcy proceedings), it is the Fund's current policy to engage in repurchase
agreement transactions with parties whose creditworthiness has been reviewed and
found satisfactory by the Investment Advisors.
Reverse Repurchase Agreements
In a reverse repurchase agreement, the Fund sells a portfolio instrument to
another party, such as a bank or broker-dealer, in return for cash and agrees to
repurchase the instrument at a particular price and time. While a reverse
repurchase agreement is outstanding, the Fund will maintain appropriate liquid
assets in a segregated custodial account to cover its obligation under the
agreement. The Fund will enter into reverse repurchase agreements only with
parties whose creditworthiness has been found satisfactory by the Investment
Advisors. Such transactions may increase fluctuations in the market value of the
Fund's assets and may be viewed as a form of leverage.
Derivative Instruments
Most swap agreements entered into by The Global Fund calculate the obligations
of the parties to the agreement on a "net basis." Consequently, The Global
Fund's current obligations (or rights) under a swap agreement will generally be
equal only to the net amount to be paid or received under the agreement based on
the relative values of the positions held by each party to the agreement (the
"net amount"). The Global Fund's current obligations under a swap agreement will
be accrued daily (offset against amounts owed to The Global Fund), and any
accrued but unpaid net amounts owed to a swap counterparty will be covered by
the maintenance of a segregated account consisting of assets determined to be
liquid by the Investment Advisor in accordance with procedures established by
the Board of Directors, to limit any potential leveraging of The Global Fund's
portfolio.
Obligations under swap agreements so covered will not be construed to be "senior
securities" for purposes of the Fund's investment restriction concerning senior
securities. The Global Fund will not enter into a swap agreement with any single
party if the net amount owed or to be received under existing contracts with
that party would exceed 5% of The Global Fund's assets.
Whether The Global Fund's use of swap agreements will be successful in
furthering its investment objective will depend on the Investment Advisor's
ability to correctly predict whether certain types of investments are likely to
produce greater returns than other investments. Because they are two-party
contracts and because they may have terms of greater than seven days, swap
agreements may be considered to be illiquid investments. Moreover, The Global
Fund bears the risk of loss of the amount expected to be received under a swap
agreement in the event of the default or bankruptcy of a swap agreement
counterparty. The Global Fund will enter into swap agreements only with
counterparties that meet certain standards for creditworthiness (generally, such
counterparties would have to be eligible counterparties under the terms of The
Global Fund's repurchase agreement guidelines). Certain restrictions imposed on
The Global Fund by the Internal Revenue Code of 1986, as amended (the "Code"),
may limit The Global Fund's ability to use swap agreements. The swap market is a
relatively new market and is largely unregulated. It is possible that
developments in the swap market, including potential government regulation,
could adversely affect The Global Fund's ability to terminate existing swap
agreements or to realize amounts to be received under such agreements.
Illiquid Securities
The Fund may invest in an illiquid or restricted security if the Investment
Advisor believes that it presents an attractive investment opportunity.
Generally, a security is considered illiquid if it cannot be disposed of within
seven days. Its illiquidity might prevent the sale of such a security at a time
when the Investment Advisor might wish to sell, and these securities could have
the effect of decreasing the overall level of the Fund's liquidity. Further, the
lack of an established secondary market may make it more difficult to value
illiquid securities, requiring the Fund to rely on judgments that may be
somewhat subjective in determining value, which could vary from the amount that
the Fund could realize upon disposition.
Restricted securities, including placements, are subject to legal or contractual
restrictions on resale. They can be eligible for purchase without SEC
registration by certain institutional investors known as "qualified
institutional buyers," and under the Fund's procedures, restricted securities
could be treated as liquid. However, some restricted securities may be illiquid
and restricted securities that are treated as liquid could be less liquid than
registered securities traded on established secondary markets. The Global Fund
may not invest more than 15% of its total assets in illiquid securities,
measured at the time of investment.
Borrowing
The Fund may borrow up to 15% of the value of its total assets from banks for
temporary or emergency purposes. Under the 1940 Act, the Fund is required to
maintain continuous asset coverage of 300% with respect to such borrowings and
to sell (within three days) sufficient portfolio holdings to restore such
coverage if it should decline to less than 300% due to market fluctuations or
otherwise, even if such liquidations of the Fund's holdings may be
disadvantageous from an investment standpoint. The Fund does not engage in
leveraging by means of borrowing which may exaggerate the effect of any increase
or decrease in the value of portfolio securities or the Fund's net asset value.
Money borrowed will be subject to interest and other costs (which may include
commitment fees and/or the cost of maintaining minimum average balances) which
may or may not exceed the income received from the securities purchased with
borrowed funds.
Debt Securities
The Fund may invest in debt securities that are rated between BBB and as low as
CCC by Standard & Poor's Corporation ("S&P") and between Baa and as low as Caa
by Moody's Investors Service, Inc. ("Moody's") or, if unrated, are of equivalent
investment quality as determined by the Investment Advisors. The market value of
debt securities generally varies in response to changes in interest rates and
the financial condition of each issuer. During periods of declining interest
rates, the value of debt securities generally increases. Conversely, during
periods of rising interest rates, the value of such securities generally
declines. These changes in market value will be reflected in the Fund's net
asset value.
Bonds which are rated Baa by Moody's are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds which are rated C by
Moody's are the lowest rated class of bonds, and issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing.
Bonds rated BBB by S&P are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories. Bonds rated D by S&P are
the lowest rated class of bonds, and generally are in payment default. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Although they may offer higher yields than higher rated securities, high-risk,
low rated debt securities (commonly referred to as "junk bonds") and unrated
debt securities generally involve greater volatility of price and risk of
principal and income, including the possibility of default by, or bankruptcy of,
the issuers of the securities. In addition, the markets in which low rated and
unrated debt securities are traded are more limited than those in which higher
rated securities are traded. The existence of limited markets for particular
securities may diminish the Fund's ability to sell the securities at fair value
either to meet redemption requests or to respond to a specific economic event
such as a deterioration in the creditworthiness of the issuer. Reduced secondary
market liquidity for certain low rated or unrated debt securities may also make
it more difficult for the Fund to obtain accurate market quotations for the
purposes of valuing the Fund's portfolio. Market quotations are generally
available on many low rated or unrated securities only from a limited number of
dealers and may not necessarily represent firm bids of such dealers or prices
for actual sales.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of low rated debt securities,
especially in a thinly traded market. Analysis of the creditworthiness of
issuers of low rated debt securities may be more complex than for issuers of
higher rated securities, and the ability of the Fund to achieve its investment
objective may, to the extent of investment in low rated debt securities, be more
dependent upon such creditworthiness analysis than would be the case if the Fund
were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of low rated debt securities have been found to be less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection of
an economic downturn or of a period of rising interests rates, for example,
could cause a decline in low rated debt securities prices because the advent of
a recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the issuer of low
rated debt securities defaults, the Fund may incur additional expenses seeking
recovery.
Options on Securities, Indexes and Futures
The Fund may write covered put and call options and purchase put and call
options on securities, securities indexes and futures contracts that are traded
on U.S. and foreign exchanges and over-the-counter. An option on a security or a
futures contract is a contract that gives the purchaser of the option, in return
for the premium paid, the right to buy a specified security or futures contract
(in the case of a call option) or to sell a specified security or futures
contract (in the case of a put option) from or to the writer of the option at a
designated price during the term of the option. An option on a securities index
gives the purchaser of the option, in return for the premium paid, the right to
receive from the seller cash equal to the difference between the closing price
of the index and the exercise price of the option.
The Fund may write a call or put option only if the option is "covered." A call
option on a security or futures contract written by a fund is "covered" if the
fund owns the underlying security or futures contract covered by the call or has
an absolute and immediate right to acquire that security without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other securities held in its
portfolio. A call option on a security or futures contract is also covered if a
fund holds a call on the same security or futures contract and in the same
principal amount as the call written where the exercise price of the call held
(a) is equal to or less than the exercise price of the call written or (b) is
greater than the exercise price of the call written if the difference is
maintained by the fund in cash or high-grade U.S. government securities in a
segregated account with its custodian. A put option on a security or futures
contract written by a fund is "covered" if the fund maintains cash or
fixed-income securities with a value equal to the exercise price in a segregated
account with its custodian, or else holds a put on the same security or futures
contract and in the same principal amount as the put written where the exercise
price of the put held is equal to or greater than the exercise price of the put
written.
The Fund will cover call options on securities indexes that it writes by owning
securities whose price changes, in the opinion of the Investment Advisor, are
expected to be similar to those of the index, or in such other manner as may be
in accordance with the rules of the exchange on which the option is traded and
applicable laws and regulations. Nevertheless, where the Fund covers a call
option on a securities index through ownership of securities, such securities
may not match the composition of the index. In that event, the Fund will not be
fully covered and could be subject to risk of loss in the event of adverse
changes in the value of the index. The Fund will cover put options on securities
indices that it writes by segregating assets equal to the option's exercise
price, or in such other manner as may be in accordance with the rules of the
exchange on which the option is traded and applicable laws and regulations.
The Fund will receive a premium from writing a put or call option, which
increases its gross income in the event the option expires unexercised or is
closed out at a profit. If the value of a security, index or futures contract on
which the Fund has written a call option falls or remains the same, the Fund
will realize a profit in the form of the premium received (less transaction
costs) that could offset all or a portion of any decline in the value of the
portfolio securities being hedged. If the value of the underlying security,
index or futures contract rises, however, the Fund will realize a loss in its
call option position, which will reduce the benefit of any unrealized
appreciation in its investments. By writing a put option, the Fund assumes the
risk of a decline in the underlying security, index or futures contract. To the
extent that the price changes of the portfolio securities being hedged correlate
with changes in the value of the underlying security, index or futures contract,
writing covered put options will increase the Fund's losses in the event of a
market decline, although such losses will be offset in part by the premium
received for writing the option.
The Fund may also purchase put options to hedge its investments against a
decline in value. By purchasing a put option, the Fund will seek to offset a
decline in value of the portfolio securities being hedged through appreciation
of the put option. If the value of the Fund's investments does not decline as
anticipated, or if the value of the option do not increase, the Fund's loss will
be limited to the premium paid for the option plus related transaction costs.
The success of this strategy will depend, in part, on the accuracy of the
correlation between the changes in value of the underlying security, index or
futures contract and the changes in value of the Fund's security holdings being
hedged.
The Fund may purchase call options on individual securities or futures contracts
to hedge against an increase in the price of securities or futures contracts
that it anticipates purchasing in the future. Similarly, the Fund may purchase
call options on a securities index to attempt to reduce the risk of missing a
broad market advance, or an advance in an industry or market segment, at a time
when the Fund holds uninvested cash or short-term debt securities awaiting
reinvestment. When purchasing call options, the Fund will bear the risk of
losing all or a portion of the premium paid if the value of the underlying
security, index or futures contract does not rise.
There can be no assurance that a liquid market will exist when the Fund seeks to
close out an option position. Trading could be interrupted, for example, because
of supply and demand imbalances arising from a lack of either buyers or sellers,
or the options exchange could suspend trading after the price has risen or
fallen more than the maximum specified by the exchange. Although the Fund may be
able to offset to some extent any adverse effects of being unable to liquidate
an option position, it may experience losses in some cases as a result of such
inability. The value of over-the-counter options purchased by the Fund, as well
as the cover for options written by the Fund, are considered not readily
marketable and are subject to the Company's limitation on investments in
securities that are not readily marketable.
The Fund's ability to reduce or eliminate its futures and related options
positions will depend upon the liquidity of the secondary markets for such
futures and options. The Fund intends to purchase or sell futures and related
options only on exchanges or boards of trade where there appears to be an active
secondary market, but there is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. Use of futures and
options for hedging may involve risks because of imperfect correlations between
movements in the prices of the futures or options and movements in the prices of
the securities being hedged. Successful use of futures and related options by
the Fund for hedging purposes also depends upon the Investment Advisors' ability
to predict correctly movements in the direction of the market, as to which no
assurance can be given.
There are several risks associated with transactions in options on securities
indexes. For example, there are significant differences between the securities
and options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. A decision
as to whether, when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events. There can be no
assurance that a liquid market will exist when the Fund seeks to close out an
option position. If the Fund were unable to close out an option that it had
purchased on a securities index, it would have to exercise the option in order
to realize any profit or the option may expire worthless. If trading were
suspended in an option purchased by the Fund, it would not be able to close out
the option. If restrictions on exercise were imposed, the Fund might be unable
to exercise an option it had purchased. Except to the extent that a call option
on an index written by the Fund is covered by an option on the same index
purchased by the Fund, movements in the index may result in a loss to the Fund;
however, such losses may be mitigated by changes in the value of the Fund's
securities during the period the option was outstanding.
Investment in Foreign and Developing Markets
The Fund may purchase securities in any foreign country, developed or
developing. Potential investors in the Fund should consider carefully the
substantial risks involved in securities of companies and governments of foreign
nations, which are in addition to the usual risks inherent in domestic
investments.
There may be less publicly available information about foreign companies
comparable to the reports and ratings published about companies in the United
States. Most foreign companies are not generally subject to uniform accounting
and financial reporting standards, and auditing practices and requirements may
not be comparable to those applicable to U.S. companies. The Fund, therefore,
may encounter difficulty in obtaining market quotations for purposes of valuing
its portfolio and calculating its net asset value. Foreign markets have
substantially less volume than the New York Stock Exchange ("NYSE") and
securities of some foreign companies are less liquid and more volatile than
securities of comparable U.S. companies. Commission rates in foreign countries,
which are generally fixed rather than subject to negotiation as in the United
States, are likely to be higher. In many foreign countries there is less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the United States.
Investments in businesses domiciled in developing countries may be subject to
potentially higher risks than investments in developed countries. These risks
include: (i) less social, political and economic stability; (ii) the small
current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict the
Fund's investment opportunities, including restrictions on investment in issuers
or industries deemed sensitive to national interests; (iv) foreign taxation; (v)
the absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property; (vi) the absence,
until recently in certain Eastern European countries, of a capital market
structure or market-oriented economy; and (vii) the possibility that recent
favorable economic developments in Eastern Europe may be slowed or reversed by
unanticipated political or social events in such countries.
The Fund attempts to buy and sell foreign currencies on as favorable a basis as
practicable. Some price spread on currency exchanges (to cover service charges)
may be incurred, particularly when the Fund changes investments from one country
to another or when proceeds of the sale of shares in U.S. dollars are used for
the purchase of securities in foreign countries. Also, some countries may adopt
policies which would prevent the Fund from transferring cash out of the country
or withhold portions of interest and dividends at the source. There is the
possibility of cessation of trading on national exchanges, expropriation,
nationalization or confiscatory taxation, withholding and other foreign taxes on
income or other amounts, foreign exchange controls (which may include suspension
of the ability to transfer currency from a given country), default in foreign
government securities, political or social instability, or diplomatic
developments which could affect investments in securities of issuers in foreign
nations.
The Fund may be affected either unfavorably or favorably by fluctuations in the
relative rates of exchange between the currencies of different nations, by
exchange control regulations and by indigenous economic and political
developments. Some countries in which the Fund may invest may also have fixed or
managed currencies that are not free-floating against the U.S. dollar. Further,
certain currencies may not be internationally traded. Certain of these
currencies have experienced a steady devaluation relative to the U.S. dollar.
Any devaluation in the currencies in which the Fund's portfolio securities are
denominated may have a detrimental impact on the Fund.
Year 2000 Concerns
The services provided to the Fund by the Advisors, Business Manager, Investor
Services Group and the Distributor are dependent upon the operation of these
service providers' computer systems. Many computer software systems in use today
cannot distinguish between the year 2000 and the year 1900 because of the way
dates are encoded and calculated (the "Year 2000 Problem"). The failure to make
this distinction could have a negative implication on handling securities
trades, pricing and account services. Each of the Advisors, Business Manager,
Investor Services Group and the Distributor are taking steps that each believes
are reasonably designed to address the Year 2000 Problem with respect to the
computer systems that they use. Although there can be no assurances, the Fund
believes these steps will be sufficient to avoid any adverse impact on the Fund.
PORTFOLIO TRANSACTIONS
The Investment Advisors are authorized to select the brokers or dealers that
will execute transactions to purchase or sell investment securities for the
Fund. In all purchases and sales of securities for the Fund, the primary
consideration is to obtain the most favorable price and execution available.
Pursuant to the Investment Management Agreements, each Investment Advisor
determines which brokers are to be eligible to execute portfolio transactions of
the Fund. Purchases and sales of securities in the over-the-counter market will
generally be executed directly with a "market-maker," unless in the opinion of
the Investment Advisor, a better price and execution can otherwise be obtained
by using a broker for the transaction.
In placing portfolio transactions, each Investment Advisor will use its best
efforts to choose a broker capable of providing the brokerage services necessary
to obtain the most favorable price and execution available. The full range and
quality of brokerage services available will be considered in making these
determinations, such as the size of the order, the difficulty of execution, the
operational facilities of the firm involved, the firm's risk in positioning a
block of securities, and other factors such as the firm's ability to engage in
transactions in shares of banks and thrifts that are not listed on an organized
stock exchange. Consideration may also be given to those brokers that supply
research and statistical information to the Fund and/or the Investment Advisor,
and provide other services in addition to execution services. Consistent with
this policy, neither the Investment Advisors 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. The placement of
portfolio brokerage with broker-dealers who have sold Shares of the Fund is
subject to rules adopted by the National Association of Securities Dealers, Inc.
("NASD"). The Investment Advisors may also consider the sale of their shares as
a factor in the selection of broker-dealers to execute its portfolio
transactions.
While it will be the Company's general policy to seek to obtain the most
favorable price and execution available, in selecting a broker to execute
portfolio transactions for the Fund, the Company may also give weight to the
ability of a broker to furnish brokerage and research services to the Fund or
the Investment Advisor. In negotiating commissions with a broker, the Company
may therefore pay a higher commission than would otherwise be the case if no
weight were given to the furnishing of these supplemental services, provided
that the amount of such commission has been determined in good faith by the
Investment Advisor to be reasonable in relation to the value of the brokerage
and research services provided by such broker, which services either produce a
direct benefit to the Fund or assist the Investment Advisor in carrying out its
responsibilities to the Fund or its other clients.
Purchases of the Fund's Shares also may be made directly from issuers or from
underwriters. Where possible, purchase and sale transactions will be effected
through dealers which specialize in the types of securities which the Fund will
be holding, unless better executions are available elsewhere. Dealers and
underwriters usually act as principals for their own account. Purchases from
underwriters will include a concession paid by the issuer to the underwriter and
purchases from dealers will include the spread between the bid and the asked
price. If the execution and price offered by more than one dealer or underwriter
are comparable, the order may be allocated to a dealer or underwriter which has
provided such research or other services as mentioned above.
Some securities considered for investment by the Fund may also be appropriate
for other clients served by the Fund's Investment Advisors. If the purchase or
sale of securities consistent with the investment policies of the applicable
Fund and one or more of these other clients serviced by the Investment Advisor
is considered at or about the same time, transactions in such securities will be
allocated among the Fund and the Investment Advisors' other clients in a manner
deemed fair and reasonable by the Investment Advisor. There is no specified
formula for allocating such transactions.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Fund are offered at the net asset value next computed following
receipt of the order by the dealer and/or by the Company's Distributor or
Transfer Agent. The Distributor, at its expense, may provide additional
promotional incentives to dealers in connection with the sales of Shares of the
Fund and other funds managed by the Investment Advisors. In some instances, such
incentives may be made available only to dealers whose representatives have sold
or are expected to sell significant amounts of such Shares. The incentives may
include payment for travel expenses, including lodging, incurred in connection
with trips taken by qualifying registered representatives and members of their
families to locations within or outside of the United States, merchandise or
other items. Dealers may not use sales of the Fund Shares to qualify for the
incentives to the extent such may be prohibited by the laws of any state in the
United States.
Telephone Redemption and Exchange Privileges. As discussed in the Prospectus,
the telephone redemption and exchange privileges are available for all
Shareholder accounts; however, retirement accounts may not utilize the telephone
redemption privilege. The telephone privileges may be modified or terminated at
any time. The privileges are subject to the conditions and provisions set forth
below and in the Prospectus.
1. Telephone redemption and/or exchange instructions received in
good order before the pricing of the Fund on any day on which the
NYSE is open for business (a "Business Day"), but not later than
4:00 p.m., Eastern time, will be processed at that day's closing
net asset value. There is no fee for redemptions.
2. Telephone redemptions and/or exchange instructions should be
made by dialing 1-800-999-6809.
3. The Transfer Agent will not permit exchanges in violation of
any of the terms and conditions set forth in the Company's
Prospectus or herein.
4. Telephone redemption requests must meet the following
conditions to be accepted by the Transfer Agent:
(a) Proceeds of the redemption may be directly deposited
into a predetermined bank account, or mailed to the
current address on the application. This address cannot
reflect any change within the previous sixty (60) days.
(b) Certain account information will need to be provided
for verification purposes before the redemption will be
executed.
(c) Only one telephone redemption (where proceeds are being
mailed to the address of record) can be processed
within a 30 day period.
(d) The maximum amount which can be liquidated and sent to
the address of record at any one time is $50,000.
(e) The minimum amount which can be liquidated and sent to
a predetermined bank account is $5,000.
Matters Affecting Redemptions. Payments to Shareholders for Shares redeemed will
be made within seven days after receipt by the Fund's Transfer Agent of the
request in proper form (payments by wire will generally be transmitted on the
next Business Day), except that the Company may suspend the right of redemption
or postpone the date of payment as to the Fund during any period when (a)
trading on the NYSE is restricted as determined by the SEC or such exchange is
closed for other than weekends and holidays; (b) an emergency exists as
determined by the SEC making disposal of portfolio securities or valuation of
net assets of the Fund not reasonably practicable; or (c) for such other period
as the SEC may permit for the protection of the Fund's Shareholders. At various
times, the Fund may be requested to redeem Shares for which it has not yet
received good payment. Accordingly, the Fund may delay the mailing of a
redemption check until such time as the Fund has assured itself that good
payment has been collected for the purchase of such Shares, which may take up to
15 days.
Net Asset Value. The Fund intends to pay in cash for all Shares redeemed, but
under abnormal conditions that make payment in cash unwise, the Fund may make
payment wholly or partly in securities at their then current market value equal
to the redemption price. In such case, an investor may incur brokerage costs in
converting such securities to cash. In the event the Fund liquidates portfolio
securities to meet redemptions, the Fund reserves the right to reduce the
redemption price by an amount equivalent to the pro-rated cost of such
liquidation not to exceed one percent of the net asset value of such Shares.
Due to the relatively high cost of handling small investments, the Fund reserves
the right, upon 30 days' written notice, to redeem, at net asset value, the
Shares of any Shareholder whose account has a value of less than $1,000 in the
Fund, other than as a result of a decline in the net asset value per Share.
Before the Fund redeems such Shares and sends the proceeds to the Shareholder,
it will notify the Shareholder that the value of the shares in the account is
less than the minimum amount and will allow the Shareholder 60 days to make an
additional investment in an amount that will increase the value of the account
to at least $1,000 before the redemption is processed. This policy will not be
implemented where the Company has previously waived the minimum investment
requirements and involuntary redemptions will not result from fluctuations in
the value of the Shareholder's Shares.
The value of Shares on redemption or repurchase may be more or less than the
investor's investment, depending upon the market value of the portfolio
securities at the time of redemption or repurchase.
DETERMINATION OF SHARE PRICE
The net asset value and offering price of the Fund's Shares will be determined
once daily as of the close of trading on the NYSE (4:00 p.m., Eastern time)
during each day on which the NYSE is open for trading, the Federal Reserve Bank
of San Francisco is open, and any other day except days on which there are
insufficient changes in the value of the Fund's portfolio securities to affect
the Fund's net asset value or days on which no Shares are tendered for
redemption and no order to purchase any Shares is received. As of the date of
this SAI, the NYSE and/or the Federal Reserve Bank of San Francisco are closed
on the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
Portfolio securities listed or traded on a national securities exchange or
included in the NASDAQ National Market System will be valued at the last
reported sale price on the valuation day. Securities traded on an exchange or
NASDAQ for which there has been no sale that day and other securities traded in
the over-the-counter market will be valued at the average of the last reported
bid and ask price on the valuation day. In cases in which securities are traded
on more than one exchange, the securities are valued on the exchange designated
by or under the authority of the Board of Directors as the primary market.
Portfolio securities which are primarily traded on foreign securities exchanges,
other than the London Stock Exchange, are generally valued at the preceding
closing values of such securities on their respective exchanges, except when an
occurrence subsequent to the time a value was so established is likely to have
changed such value. In such an event, the fair value of those securities will be
determined through the consideration of other factors by or under the direction
of the Board of Directors. Securities for which quotations are not readily
available and all other assets will be valued at their respective fair values as
determined in good faith by or under the direction of the Board of Directors of
the Company. Puts, calls and futures contracts purchased and held by the Fund
are valued at the close of the securities or commodities exchanges on which they
are traded. Options on securities and indices purchased by the Fund generally
are valued at their last bid price in the case of exchange-traded options or, in
the case of options traded on the over the counter market, the average of the
last bid price as obtained from two or more dealers unless there is only one
dealer, in which case that dealer's price is used. Futures contracts will be
valued with reference to established futures exchanges. The value of options on
futures contracts is determined based upon the current settlement price for a
like option acquired on the day on which the option is being valued. A
settlement price may not be used for the foregoing purposes if the market makes
a limit move with respect to a particular commodity. The value of all assets and
liabilities expressed in foreign currencies will be converted into U.S. dollar
values at the mean between the buying and selling rates of such currencies
against U.S. dollars last quoted by any major bank or broker-dealer. The Global
Fund generally values its holdings through the use of independent pricing
agents, except for securities which are valued under the direction of the Board
of Directors or which are valued by the Advisors using methodologies approved by
the Board of Directors.
The net asset value per Share of The Global Fund will fluctuate as the value of
the Fund's investments change. Net asset value per Share for The Global Fund for
purposes of pricing sales and redemptions is calculated by dividing the value of
all securities and other assets belonging to the Fund, less the liabilities
charged to that Fund by the number of such Fund's outstanding Shares.
Orders received by dealers prior to the close of trading on the NYSE will be
confirmed at the offering price computed as of the close of trading on the NYSE
provided the order is received by the Transfer Agent prior to its close of
business that same day (normally 4:00 p.m., Eastern time). It is the
responsibility of the dealer to insure that all orders are transmitted in a
timely manner to the Fund. Orders received by dealers after the close of trading
on the NYSE will be confirmed at the next computed offering price as described
in the Fund's Prospectus.
SHAREHOLDER SERVICES AND PRIVILEGES
For investors purchasing Shares under a tax-qualified individual retirement or
pension plan or under a group plan through a person designated for the
collection and remittance of monies to be invested in Shares on a periodic
basis, the Fund may, in lieu of furnishing confirmations following each purchase
of Fund shares, send statements no less frequently than quarterly, pursuant to
the provisions of the Securities Exchange Act of 1934, as amended ("1934 Act"),
and the rules thereunder. Such quarterly statements, which would be sent to the
investor or to the person designated by the group for distribution to its
members, will be made within five business days after the end of each quarterly
period and shall reflect all transactions in the investor's account during the
preceding quarter.
All Shareholders will receive a confirmation of each new transaction in their
accounts. CERTIFICATES REPRESENTING SHARES OF THE COMPANY WILL NOT BE ISSUED
UNLESS THE SHAREHOLDER REQUESTS THEM IN WRITING.
Self-Employed and Corporate Retirement Plans. For self-employed individuals and
corporate investors that wish to purchase Shares, there is available through the
Company a Prototype Plan and Custody Agreement. For further details, including
the right to appoint a successor Custodian, see the Plan and Custody Agreements
as provided by the Company. Employers who wish to use Shares of the Company
under a custodianship with another bank or trust company must make individual
arrangements with such institution.
Individual Retirement Accounts. Investors having earned income are eligible to
purchase Shares of the Funds under an individual retirement account ("IRA")
pursuant to Section 408(a) of the Code. An individual who creates an IRA may
contribute annually certain dollar amounts of earned income, and an additional
amount if there is a non-working spouse. Simplified Employee Pension Plans
("Simple IRAs") which employers may establish on behalf of their employees are
also available. Full details on the IRA and Simple IRA are contained in Internal
Revenue Service required disclosure statements, and the Custodian will not open
an IRA until seven days after the investor has received such statement from the
Company. An IRA funded by Shares of the Funds may also be used by employers who
have adopted a Simplified Employee Pension Plan.
Purchases of Shares by Section 403(b) retirement plans and other retirement
plans are also available. It is advisable for an investor considering the
funding of any retirement plan to consult with an attorney or to obtain advice
from a competent retirement plan consultant.
DISTRIBUTIONS
Shareholders have the privilege of reinvesting both income dividends and capital
gains distributions, if any, in additional Shares of the Fund at the then
current net asset value, with no sales charge. Alternatively, a Shareholder can
elect at any time to receive dividends and/or capital gains distributions in
cash. In the absence of such an election, each purchase of Shares of the Fund is
made upon the condition and understanding that the Transfer Agent is
automatically appointed the Shareholder's agent to receive the investor's
dividends and distributions upon all Shares registered in the investor's name
and to reinvest them in full and fractional Shares of the Fund at the applicable
net asset value in effect at the close of business on the reinvestment date. A
Shareholder may still at any time after a purchase of Shares of the Fund request
that dividends and/or capital gains distributions be paid to the investor in
cash.
TAX CONSIDERATIONS
The following discussion summarizes certain U.S. federal tax considerations
generally affecting the Fund and its Shareholders. This discussion does not
provide a detailed explanation of all tax consequences, and Shareholders are
advised to consult their own tax advisers with respect to the particular
consequences to them of an investment in the Fund.
Qualification as a Regulated Investment Company. The Fund intends to qualify as
a regulated investment company under the Code. To so qualify, the Fund must,
among other things, in each taxable year: (a) derive at least 90% of its gross
income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock or securities and gains from
the sale or other disposition of foreign currencies, or other income (including
gains from options, futures contracts and forward contracts) derived with
respect to the Fund's business of investing in stocks, securities or currencies;
(b) diversify its holdings so that, at the end of each quarter, (i) at least 50%
of the value of the Fund's total assets is represented by cash and cash items,
U.S. Government securities, securities of other regulated investment companies,
and other securities, with such other securities limited in respect of any one
issuer to an amount not greater in value than 5% of the Fund's total assets and
to not more than 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of the Fund's total assets is invested in
the securities (other than U.S. Government securities or securities of other
regulated investment companies) of any one issuer or of any two or more issuers
that the Fund controls and that are determined to be engaged in the same
business or similar or related businesses; and (c) distribute at least 90% of
its investment company taxable income (which includes, among other items,
dividends, interest and net short-term capital gains in excess of net long-term
capital losses).
The status of the Fund as a regulated investment company does not involve
government supervision of management or of its investment practices or policies.
As a regulated investment company, the Fund generally will be relieved of
liability for U.S. federal income tax on that portion of its investment company
taxable income and net realized capital gains which it distributes to its
Shareholders. Amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement also are subject to a nondeductible 4%
excise tax. To prevent application of the excise tax, the Fund intends to make
distributions in accordance with the calendar year distribution requirement.
Distributions. Dividends of investment company taxable income (including net
short-term capital gains) are taxable to Shareholders as ordinary income,
whether received in cash or reinvested in Fund Shares. The Fund's distributions
of investment company taxable income may be eligible for the corporate
dividends-received deduction to the extent attributable to the Fund's dividend
income from U.S. corporations, and if other applicable requirements are met.
However, the alternative minimum tax applicable to corporations may reduce the
benefit of the dividends-received deduction. Distributions of net capital gains
(the excess of net long-term capital gains over net short-term capital losses)
designated by the Fund as capital gains dividends are taxable to Shareholders,
whether received in cash or reinvested in Fund Shares, as either "20% Rate Gain"
or "28% Rate Gain," depending upon the Fund's holding period for the assets
sold. "20% Rate Gains" arise from sales of assets held by the Fund for more than
18 months and are subject to a maximum tax rate of 20%; "28% Rate Gains" arise
for sales of assets held by the Fund for more than one year but not more than 18
months and are subject to a maximum tax rate of 28%. Distributions are subject
to these tax rates regardless of the length of time the Fund's Shares have been
held by a Shareholder, and are not eligible for the dividends-received
deduction. Any distributions that are not from the Fund's investment company
taxable income or net capital gains may be characterized as a return of capital
to Shareholders or, in some cases, as capital gains. Shareholders will be
notified annually as to the federal tax status of dividends and distributions
they receive and any tax withheld thereon.
Dividends, including capital gain dividends, declared in October, November, or
December with a record date in such month and paid during the following January
will be treated as having been paid by the Fund and received by Shareholders on
December 31 of the calendar year in which declared, rather than the calendar
year in which the dividends are actually received.
Distributions by the Fund reduce the Net Asset Value of the Fund's Shares.
Should a distribution reduce the net asset value below a Shareholder's cost
basis, the distribution nevertheless may be taxable to the Shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implication of
buying Shares just prior to a distribution by the Fund. The price of Shares
purchased at that time includes the amount of the forthcoming distribution, but
the distribution will generally be taxable to the Shareholder.
Original Issue Discount. Certain debt securities acquired by the Fund may be
treated as debt securities that were originally issued at a discount. Original
issue discount can generally be defined as the difference between the price at
which a security was issued and its stated redemption price at maturity.
Although no cash income is actually received by the Fund, original issue
discount that accrues on a debt security in a given year generally is treated
for federal income tax purposes as interest and, therefore, such income would be
subject to the distribution requirements of the Code.
Some debt securities may be purchased by the Fund at a discount which exceeds
the original issue discount on such debt securities, if any. This additional
discount represents market discount for federal income tax purposes. The gain
realized on the disposition of any taxable debt security having market discount
generally will be treated as ordinary income to the extent it does not exceed
the accrued market discount on such debt security. Generally, market discount
accrues on a daily basis for each day the debt security is held by the Fund at a
constant rate over the time remaining to the debt security's maturity or, at the
election of the Fund, at a constant yield to maturity which takes into account
the semi-annual compounding of interest.
Options, Futures and Foreign Currency Forward Contracts; Straddle Rules. The
Fund's transactions in foreign currencies, forward contracts, options, and
futures contracts (including options and futures contracts on foreign
currencies) will be subject to special provisions of the Code that, among other
things, may affect the character of gains and losses realized by the Fund (that
is, may affect whether gains or losses are ordinary or capital), accelerate
recognition of income to the Fund, defer Fund losses, and affect the
determination of whether capital gains and losses are treated as long-term or
short-term capital gains or losses. These rules could therefore, in turn, affect
the character, amount, and timing of distributions to Shareholders. These
provisions also may require the Fund to mark-to-market certain positions in its
portfolio (that is, treat them as if they were sold), which may cause the Fund
to recognize income without receiving cash to use to make distributions in
amounts necessary to avoid income and excise taxes. The Fund will monitor its
transactions and may make such tax elections as Fund management deems
appropriate with respect to foreign currency, options, futures contracts,
forward contracts, or hedged investments. The Fund's status as a regulated
investment company may limit its ability to engage in transactions involving
foreign currency, futures, options, and forward contracts.
Certain transactions undertaken by the Fund may result in "straddles" for
federal income tax purposes. The straddle rules may affect the character of
gains (or losses) realized by the Fund, and losses realized by the Fund on
positions that are part of a straddle may be deferred under the straddle rules,
rather than being taken into account in calculating the taxable income for the
taxable year in which the losses are realized. In addition, certain carrying
charges (including interest expense) associated with positions in a straddle may
be required to be capitalized rather than deducted currently. Certain elections
that the Fund may make with respect to its straddle positions may also affect
the amount, character and timing of the recognition of gains or losses from the
affected positions.
Constructive Sales. Recently enacted rules will affect the timing and character
of gain if the Fund engages in certain transactions which reduce or eliminate
the risk of loss with respect to appreciated financial positions, including
stock and securities. For example, if the Fund enters into a short sale of
property while holding property substantially identical to that sold short, the
entry into the contract will generally constitute a constructive sale and the
Fund will recognize gain (but not loss) as if the property it held had been
sold. The character of gain from a constructive sale will depend upon the Fund's
holding period in the property. If a short sale results in loss, the loss will
be recognized at the time of the closing of the short sale, and its character
may be affected by the straddle rules described above.
Currency Fluctuation - Section 988 Gains and Losses. Gains or losses
attributable to fluctuations in foreign currency exchange rates that occur
between the time the Fund accrues receivables or expenses denominated in a
foreign currency and the time the Fund actually collects such receivables or
pays such liabilities generally are treated as ordinary income or loss.
Similarly, on disposition of certain investments (including debt securities
denominated in a foreign currency and certain futures contracts, forward
contracts, and options), gains or losses attributable to fluctuations in the
value of foreign currency between the date of acquisition of the security or
other instrument and the date of disposition also are treated as ordinary income
or loss. These gains or losses, referred to under the Code as "section 988"
gains or losses, may increase or decrease the amount of the Fund's investment
company taxable income available to be distributed to its Shareholders as
ordinary income.
Passive Foreign Investment Companies. The Fund may invest in the stock of
foreign companies that may be classified under the Code as passive foreign
investment companies ("PFICs"). In general, a foreign corporation is classified
as a PFIC if at least one-half of its assets constitute passive assets (such as
stocks or securities) or if 75% or more of its gross income is passive income
(such as, but not limited to, interest, dividends, and gain from the sale of
securities). If the Fund receives an "excess distribution" with respect to PFIC
stock, the Fund will generally be subject to tax on the distribution as if it
were realized ratably over the period during which the Shareholder held the PFIC
stock. The Fund will be subject to tax on the portion of an excess distribution
that is allocated to prior Fund taxable years, and an interest factor will be
added to the tax, as if it were payable in such prior taxable years. Certain
distributions from a PFIC and gain from the sale of PFIC Shares are treated as
excess distributions. Excess distributions are characterized as ordinary income
even though, absent application of the PFIC rules, certain excess distributions
might have been classified as capital gain.
The Fund may be eligible to elect alternative tax treatment with respect to PFIC
stock. Under an election that is available in some circumstances, the Fund
generally would be required to include in its gross income its Share of the
earnings of a PFIC on a current basis, regardless of whether distributions were
received from the PFIC in a given year. If this election were made, the rules
relating to the taxation of excess distributions would not apply. In addition,
another election would involve marking-to-market the Fund's PFIC shares at the
end of each taxable year, with the result that unrealized gains would be treated
as though they were realized and reported as ordinary income. Any mark-to-market
losses and any loss from an actual disposition of PFIC Shares would be
deductible as ordinary losses to the extent of any net mark-to-market gains
included in income in prior years.
Other Investment Companies. It is possible that by investing in other investment
companies, the Fund may not be able to meet the calendar year distribution
requirement and may be subject to federal income and excise tax. The
diversification and distribution requirements applicable to the Fund may limit
the extent to which the Fund will be able to invest in other investment
companies.
Sale or Other Disposition of Shares. Upon the sale or exchange of his Shares, a
Shareholder will realize a taxable gain or loss depending upon his basis in the
Shares. Such gain or loss will be treated as capital gain or loss if the Shares
are capital assets in the Shareholder's hands; gain will generally be subject to
a maximum tax rate of 20% if the Shareholder's holding period for the Shares is
more than 18 months, and a maximum tax rate of 28% if the Shareholder's holding
period is more than one year but not more than 18 months. Gain from disposition
of Shares held not more than one year will be treated as short-term capital
gain. Any loss realized on a sale or exchange will be disallowed to the extent
that the Shares disposed of are replaced (including replacement through the
reinvesting of dividends and capital gain distributions) within a period of 61
days beginning 30 days before and ending 30 days after the disposition of the
Shares. In such a case, the basis of the Shares acquired will be adjusted to
reflect the disallowed loss. Any loss realized by a Shareholder on the sale of
Fund Shares held by the Shareholder for six months or less will be treated for
federal income tax purposes as a long-term capital loss to the extent of any
distributions of capital gain dividends received by the Shareholder with respect
to such Shares.
In some cases, Shareholders will not be permitted to take sales charges into
account for purposes of determining the amount of gain or loss realized on the
disposition of their Shares. This prohibition generally applies where (1) the
Shareholder incurs a sales charge in acquiring Fund Shares, (2) the Shares are
disposed of before the 91st day after the date on which they were acquired, and
(3) the Shareholder subsequently acquires Shares of the same or another Fund and
the otherwise applicable sales charge is reduced or eliminated under a
"reinvestment right" received upon the initial purchase of Shares. In that case,
the gain or loss recognized will be determined by excluding from the tax basis
of the Shares exchanged all or a portion of the sales charge incurred in
acquiring those Shares. This exclusion applies to the extent that the otherwise
applicable sales charge with respect to the newly acquired Shares is reduced as
a result of having incurred a sales charge initially. Sales charges affected by
this rule are treated as if they were incurred with respect to the Shares
acquired under the reinvestment right. This provision may be applied to
successive acquisitions of Shares.
Backup Withholding. The Fund generally will be required to withhold federal
income tax at a rate of 31% ("backup withholding") from dividends paid, capital
gain distributions, and redemption proceeds to Shareholders if (1) the
Shareholder fails to furnish the Fund with the Shareholder's correct taxpayer
identification number or social security number and to make such certifications
as the Fund may require, (2) the IRS notifies the Shareholder or the Fund that
the Shareholder has failed to report properly certain interest and dividend
income to the IRS and to respond to notices to that effect, or (3) when required
to do so, the Shareholder fails to certify that he is not subject to backup
withholding. Any amounts withheld may be credited against the Shareholder's
federal income tax liability.
Foreign Shareholders. Taxation of the Fund Shareholder who, as to the United
States, is a nonresident alien individual, foreign trust or estate, foreign
corporation, or foreign partnership ("foreign shareholder"), depends on whether
the income from the Fund is "effectively connected" with a U.S. trade or
business carried on by such Shareholder.
If the income from the Fund is not effectively connected with a U.S. trade or
business carried on by a foreign Shareholder, ordinary income dividends will be
subject to U.S. withholding tax at the rate of 30% (or lower treaty rate) upon
the gross amount of the dividend. The foreign Shareholder would generally be
exempt from U.S. federal income tax on gains realized on the sale of Shares of
the Fund, capital gain dividends and amounts retained by the Fund that are
designated as undistributed capital gains.
If the income from the Fund is effectively connected with a U.S. trade or
business carried on by a foreign Shareholder, then ordinary income dividends,
capital gain dividends and any gains realized upon the sale of Shares of the
Funds will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
Foreign noncorporate Shareholders may be subject to backup withholding on
distributions that are otherwise exempt from withholding tax (or taxable at a
reduced treaty rate) unless such Shareholders furnish the Fund with proper
certification of their foreign status.
The tax consequences to a foreign Shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
Shareholders are urged to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Fund, including the
applicability of foreign taxes.
Future Changes in Law; Other Taxes. The foregoing general discussion of U.S.
federal income tax consequences is based on the Code and the Treasury
Regulations issued thereunder as in effect on the date of this Prospectus.
Future legislative or administrative changes or court decisions may
significantly change the preceding conclusions, and any changes or decisions may
have a retroactive effect.
Rules of state and local taxation of ordinary income dividends and capital gains
dividends from regulated investment companies often differ from the rules for
U.S. federal income taxation described above. Shareholders are urged to consult
their tax advisers as to the consequences of these and other state and local tax
rules affecting investment in the Fund.
SHAREHOLDER INFORMATION
Certificates representing Shares of the Fund will not normally be issued to
Shareholders. The Transfer Agent will maintain an account for each Shareholder
upon which the registration and transfer of Shares are recorded, and any
transfers shall be reflected by bookkeeping entry, without physical delivery.
The Transfer Agent will require that a Shareholder provide requests in writing,
accompanied by a valid signature guarantee form, when changing certain
information in an account (i.e., wiring instructions, telephone privileges,
etc.).
The Company reserves the right, if conditions exist that make cash payments
undesirable, to honor any request for redemption or repurchase order with
respect to Shares of the Fund by making payment in whole or in part in readily
marketable securities chosen by the Company and valued as they are for purposes
of computing the Fund's net asset value (redemption-in-kind). If payment is made
in securities, a Shareholder may incur transaction expenses in converting theses
securities to cash. The Company has elected, however, to be governed by Rule
18f-1 under the 1940 Act as a result of which the Fund is obligated to redeem
Shares with respect to any one Shareholder during any 90-day period solely in
cash up to the lesser of $250,000 or 1% of the net asset value of the Fund at
the beginning of the period.
CALCULATION OF PERFORMANCE DATA
The Fund may, from time to time, include "total return" in advertisements or
reports to Shareholders or prospective investors. Quotations of average annual
total return will be expressed in terms of the average annual compounded rate of
return of a hypothetical investment in the Fund over periods of 1, 5 and 10
years (up to the life of the Fund), calculated pursuant to the following formula
which is prescribed by the SEC:
P(1 + T)n = ERV
Where:
P= a hypothetical initial payment of $1,000,
T= the average annual total return,
n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period.
All total return figures assume that all dividends are reinvested when paid.
From time to time, the Fund may advertise its average annual total return over
various periods of time. These total return figures show the average percentage
change in the value of an investment in the Fund from the beginning date of the
measuring period. These figures reflect changes in the price of the Fund's
Shares and assume that any income dividends and/or capital gains distributions
made by the Fund during the period were reinvested in Shares of the Fund.
Figures will be given for 1, 5 and 10 year periods (if applicable) and may be
given for other periods as well (such as from commencement of the Fund's
operations, or on a year-by-year basis).
Quotations of yield for the Fund will be based on all investment income per
Share earned during a particular 30-day period (including dividends and
interest), less expenses accrued during the period ("net investment income") and
are computed by dividing net investment income by the maximum offering price per
Share on the last day of the period, according to the following formula:
[Formula omitted]
Where:
a = dividends and interest earned during the period,
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of Shares outstanding during the period
that were entitled to receive dividends, and
d = the maximum offering price per Share on the last day of the period.
Additional Performance Quotations. Advertisements of total return will always
show a calculation that includes the effect of the maximum sales charge but may
also show total return without giving effect to that charge. Because these
additional quotations will not reflect the maximum sales charge payable, these
performance quotations will be higher than the performance quotations that
reflect the maximum sales charge.
Total returns are based on past results and do not predict future performance.
Performance Comparisons. In reports or other communications to Shareholders or
in advertising material, the Fund may compare the performance of its Shares with
that of other mutual funds as listed in the rankings prepared by Lipper
Analytical Services, Inc., Morningstar, Inc., CDA Technologies, Inc., or similar
independent services that monitor the performance of mutual funds or with other
appropriate indexes of investment securities. In addition, certain indexes may
be used to illustrate historic performance of select asset classes. The
performance information may also include evaluations of the Fund published by
nationally recognized ranking services and by financial publications that are
nationally recognized, such as Business Week, Forbes, Fortune, Institutional
Investor, Money and The Wall Street Journal. If the Fund compares its
performance to other funds or to relevant indexes, the Fund's performance will
be stated in the same terms in which such comparative data and indexes are
stated, which is normally total return rather than yield. For these purposes the
performance of the Fund, as well as the performance of such investment companies
or indexes, may not reflect sales charges, which, if reflected, would reduce
performance results.
Reports and promotional literature may also contain the following information:
(i) a description of the gross national or domestic product and populations,
including age characteristics, of various countries and regions in which the
Fund may invest, as compiled by various organizations, and projections of such
information; (ii) the performance of U.S. equity and debt markets; (iii) the
geographic distribution of the Company's portfolios; and (iv) the number of
Shareholders in the Fund and the dollar amount of the assets under management.
In addition, reports and promotional literature may contain information
concerning the Investment Advisors or affiliates of the Company, including (i)
performance rankings of other funds managed by the Investment Advisors, or the
individuals employed by the Investment Advisors who exercise responsibility for
the day-to-day management of the Company, including rankings of mutual funds
published by Lipper Analytical Services, Inc., Morningstar, Inc., CDA
Technologies, Inc., or other rating services, companies, publications or other
persons who rank mutual funds or other investment products on overall
performance or other criteria; and (ii) lists of clients, the number of clients,
or assets under management.
GENERAL INFORMATION
Custodian. The Fund's cash and securities owned by the Company are held by Brown
Brothers Harriman & Co., as Custodian, which takes no part in the decisions
relating to the purchase or sale of the Company's portfolio securities. As
Custodian, Brown Brothers Harriman & Co. also acts as Foreign Custody Manager
for the foreign securities of the Fund.
Legal Counsel. Legal matters for the Company are handled by Dechert Price &
Rhoads, 1775 Eye Street, N.W., Washington, D.C. 20006.
Independent Auditors. Arthur Andersen, LLP, Spear Street Tower, 1 Market, Suite
3500, San Francisco, California 94105-9019, acts as independent auditors for the
Company.
Other Information. The Company is registered with the SEC as an open-end
management investment company. Such registration does not involve supervision of
the management or policies of the Company by any governmental agency. The Fund's
Prospectus and this SAI omit certain of the information contained in the
Registration Statement filed with the SEC and copies of this information may be
obtained from the SEC upon payment of the prescribed fee or examined at the SEC
in Washington, D.C. without charge.
Investors in the Fund will be kept informed of their investments in the Fund
through annual and semi-annual reports showing portfolio composition,
statistical data and any other significant data, including financial statements
audited by the independent certified public accountants.
FINANCIAL STATEMENTS
Unaudited financial statements relating to the Fund will be prepared
semi-annually and distributed to Shareholders. Audited financial statements will
be prepared annually and distributed to Shareholders. Since the Company was only
recently organized and this is the first offering of the Fund's Shares, there
are no financial statements at this time, other than an initial balance sheet
for the Fund.
<PAGE>
Report of Independent Public Accountants
To the Shareholder and Board of Directors of Forward Funds, Inc.:
We have audited the accompanying balance sheet of Forward Funds, Inc. (a
Maryland corporation) as of February 17, 1998. This balance sheet is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted accounting
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
materials respects, the financial position of Forward Funds, Inc. as of February
17, 1998, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
San Francisco, California
February 17, 1998
<PAGE>
FORWARD FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
February 17, 1998
Forward
Global
Fund
-------
ASSETS:
Cash $100,000
Deferred organizational expenses (Note 1) 61,393
------
Total Assets 161,393
LIABILITIES:
Accrued organizational expenses (Note 1) 61,393
------
Total Liabilities 61,393
NET ASSETS: $100,000
========
SHARES OF BENEFICIAL INTEREST
OUTSTANDING: 10,000
========
SHARES:
Net asset value, offering and redemption
price per share of beneficial interest
outstanding $10.00
========
<PAGE>
Forward Funds, Inc.
Notes to Balance Sheet
February 17, 1998
1. Organization
Forward Funds, Inc. (the "Company"), organized as a Maryland corporation in
1997, is being registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 (the 1940 Act) as a open-end management
investment company which offers one diversified portfolio, The Global Fund (the
"Fund"). Since inception, the Company's activities have been limited to
organizational matters with no operating activities. The Company intends to
qualify under Subchapter M of the Internal Revenue Code of 1986, as amended. All
of the initial Fund shares outstanding at February 17, 1998 are owned by Sutton
Place Management Co., Inc. (Sutton). The investment objective of the Fund is to
seek total return (capital appreciation and income) by investing in the global
stock and bond markets.
The Board of Directors has authorized the issuance of one class of shares of the
Fund. No sales or redemption fees are charged with respect to the Fund.
2. Organizational Costs
As of February 17, 1998, the Company deferred organization-related costs of
$61,393, which will be amortized on a straight-line basis over a period of up to
five years. Included in organizational costs are $58,393 of such costs payable
to Sutton, as reimbursement for costs paid for the benefit of the Fund by
Sutton.
If any of the original shares are redeemed by any holder thereof prior to the
end of the amortization period, the redemption proceeds will be decreased by the
pro rata share of the unamortized expenses as of the date of redemption. The pro
rata share will be derived by dividing the number of original shares redeemed by
the total number of original shares outstanding at the time of redemption.
3. Investment Advisor Agreements
The Company has entered into investment advisory agreements with three advisors,
Barclays Global Fund Advisors ("Barclays"), Templeton Investment Counsel, Inc.
("Templeton"), and Pacific Investment Management Company ("PIMCO") for
management of the Fund. Barclays will manage The Global Fund's U.S. equity
investments. Templeton will manage The Global Fund's non-U.S. equity
investments. PIMCO will manage those assets of The Global Fund that are invested
in fixed income and other debt securities.
Investment advisory fees will be calculated daily as a percentage of the Fund's
average daily net assets for which each adviser has investment responsibility,
based on the contracted rates for each adviser. Each advisory agreement provides
for declining advisory rates based on specified levels of assets under
management. The highest potential rates under the agreements are 0.375% for
Barclays, 0.70% for Templeton and 0.35% for PIMCO.
4. Management Agreement
Sutton will act as the business manager, under which Sutton will provide
facilities and services required to carry on the Fund's general administrative
and corporate affairs. Management fees will be calculated daily at the annual
rate of 0.30% of the Fund's average daily net assets.
Sutton has agreed to temporarily waive a portion of its fees for the Fund for
the current fiscal year.
5. Distribution and Other Agreements
Certain affiliates of First Data Corporation will serve as the Fund's
distributor and transfer agent and will provide certain administrative services
to the Fund, such as the maintenance of financial records and fund accounting.
The Company has adopted a Shareholder Service Plan (the "Plan") with respect to
the shares of the Fund. Pursuant to the Plan, the Fund is authorized to pay
third party service providers for certain expenses that are incurred in
connection with providing services to shareholders. Payments under the Plan will
be calculated daily and paid monthly at an annual rate not to exceed 0.35% of
the average daily net assets of the Fund.
Certain usual and customary expenses, including accounting and recordkeeping,
custodian, stock transfer and dividend disbursing fees, shareholder service
expenses, legal, printing and mailing will be paid by the Fund.
<PAGE>
APPENDIX A
Rated Investments
Corporate Bonds
Excerpts from Moody's Investors Services, Inc. ("Moody's") description of
its bond ratings:
"Aaa": Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
"Aa": Bonds that are rated "Aa" are judged to be of high-quality by all
standards. Together with the "Aaa" group they comprise what are generally known
as "high-grade" bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in "Aaa" securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.
"A": Bonds that are rated "A" possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
"Baa": Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appears adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
"Ba": Bonds that are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
"B": Bonds that are rated "B" generally lack characteristics of
desirable investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
"Caa": Bonds that are rated "Caa" are of poor standing. These issues may be
in default or present elements of danger may exist with respect to principal or
interest.
Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds
rated "Aa" through "B." The modifier 1 indicates that the bond being rated ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category.
Excerpts from Standard & Poor's Corporation ("S&P") description of its bond
ratings:
"AAA": Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
"AA": Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from "AAA" issues by a small degree.
"A": Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
"BBB": Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
"BB," "B" and "CCC": Bonds rated "BB" and "B" are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligations. "BB" represents a
lower degree of speculation than "B" and "CCC" the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
To provide more detailed indications of credit quality, the "AA" or "A"
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Commercial Paper
The rating "Prime-1" is the highest commercial paper rating assigned by
Moody's. These issues (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issues rated "Prime-2" (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics of "Prime-1" rated issues, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Commercial paper ratings of S&P are current assessments of the likelihood
of timely payment of debt having original maturities of no more than 365 days.
Commercial paper rated "A-1" by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted "A-1+."
Commercial paper rated "A-2" by S&P indicates that capacity for timely payment
is strong. However, the relative degree of safety is not as high as for issues
designated "A-1."
Commercial Paper
Rated commercial paper purchased by a Fund must have (at the time of
purchase) the highest quality rating assigned to short-term debt securities or,
if not rated, or rated by only one agency, are determined to be of comparative
quality pursuant to guidelines approved by a Fund's Boards of Trustees and
Directors. Highest quality ratings for commercial paper for Moody's and S&P are
as follows:
Moody's: The rating "Prime-1" is the highest commercial paper rating
category assigned by Moody's. These issues (or related supporting institutions)
are considered to have a superior capacity for repayment of short-term
promissory obligations.
S&P: Commercial paper ratings of S&P are current assessments of the
likelihood of timely payment of debts having original maturities of no more than
365 days. Commercial paper rated in the "A-1" category by S&P indicates that the
degree of safety regarding timely payment is either overwhelming or very strong.
Those issuers determined to possess overwhelming safety characteristics are
denoted "A-1+."
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements
Attached hereto is an audited Initial Statement of Assets
and Liabilities.
(b) Exhibits
(1) -- Articles of Incorporation*
(2) -- Bylaws*
(3) -- Not Applicable
(4) -- Not Applicable
(5) -- (a) Form of Investment Management Agreement
between the Company and Templeton
(b) Form of Investment Management Agreement
between the Company and PIMCO
(c) Form of Investment Management Agreement
between the Company and Barclays
(6) -- Form of Distribution Agreement
(7) -- Not Applicable
(8) -- (a) Form of Custodian Agreement
(b) Amendment to Custodian Agreement
(c) Form of Foreign Custody Manager Agreement
(9) -- (a) Form of Business Management Agreement
(b) Form of Transfer Agency and Services
Agreement
(c) Form of Administration Agreement
(10) -- Opinion and Consent of Dechert Price & Rhoads
(11) -- Consent of Independent Accountants
(12) -- Not Applicable
(13) -- Initial Subscription Documents
(14) -- Not Applicable
(15) -- Not Applicable
(16) -- Not Applicable+
(17) -- Not Applicable+
(18) -- Not Applicable
* - Previously filed in Registrant's initial Registration Statement on Form
N-1A, as filed with the Securities and Exchange Commission on October 7, 1997.
+ Because the Fund has not commenced operations there are no quotations or
financial data at this time.
ITEM 25. Persons Controlled by or under Common Control with Registrant
Not Applicable.
ITEM 26. Number of Holders of Securities
As of the date of this Registration Statement, there is one Shareholder
of record holding Shares of the Company.
ITEM 27. Indemnification
Section 2-418 of the General Corporation Law of the State of Maryland,
Article VII of the Company's Articles of Incorporation, Article VI of the
Company's Bylaws, and the Business Management Agreement filed as Exhibit 5
provide for indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant, pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such a director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. Business and Other Connections of the Investment Adviser
Information as to the directors and officers of the Investment
Advisors, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by the directors and
officers of the Investment Advisors in the last two years, is included in their
applications for registration as investment advisers on Form ADV filed under the
Investment Advisers Act of 1940 and is incorporated herein by reference thereto.
ITEM 29. Principal Underwriters
(a) Not Applicable
(b) Not Applicable
(c) Not Applicable
ITEM 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained at the offices of the First Data Investor Services
Group, Inc. whose principal business address is 53 State Street, Boston,
Massachusetts 02109.
ITEM 31. Management Services
Not Applicable
ITEM 32. Undertakings
(a) Not Applicable
(b) Registrant undertakes to file a post-effective amendment, using
financial statements, which need not be certified, within four to six months
from the effective date of this registration statement under the Securities Act
of 1933, as amended, or on the date on which Registrant becomes operational.
(c) Not Applicable
(d) Registrant undertakes to call a meeting of Shareholders for the
purpose of voting upon the question of removal of a Director or Directors when
requested to do so by the holders of at least 10% of the Registrant's
outstanding Shares of beneficial interest and in connection with such meeting to
comply with the Shareholders communications provisions of Section 16(c) of the
Investment Company Act of 1940, as amended.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Registrant has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco and State of California
on the 24th day of February, 1998.
FORWARD FUNDS, INC.
By: /s/ Ronald Pelosi
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Robert Helm, Jeffrey S. Puretz,
Jack W. Murphy and Jeffrey L. Steele or any one of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign any and all pre- and post-effective amendments to this
Registration Statement, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
/s/ Ronald Pelosi Director, President February 24, 1998
/s/ Haig G. Mardikian Director February 24, 1998
/s/ Leo T. McCarthy Director February 24, 1998
/s/ Steven Levy Treasurer February 24, 1998
(Principal Financial Officer)
FORWARD FUNDS, INC.
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, effective as of March 2, 1998, among Templeton Investment
Counsel, Inc. ("Templeton" or the "Investment Manager"), Sutton Place Management
Co., Inc. (the "Business Manager") and Forward Funds, Inc. (the "Corporation")
on behalf of The Global Fund (the "Fund").
WHEREAS, the Corporation is a Maryland corporation of the series type
organized under Articles of Incorporation dated October 3, 1997 (the "Articles")
and is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end, diversified management investment company, and the
Fund is a series of the Corporation; and
WHEREAS, the Business Manager is responsible for managing the business
affairs of the Corporation and coordinating the activities of service providers
to the Fund; and
WHEREAS, the Corporation and the Business Manager wish to retain the
Investment Manager to render investment advisory services to a portion of the
Fund with regard to the Fund's investments in equity securities of non-U.S.
issuers as further described in the Corporation's registration statement on Form
N-1A (the "Registration Statement"), and the Investment Manager is willing to
furnish such services to the Fund; and
WHEREAS, the Investment Manager 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 Business Manager, the Corporation and
the Investment Manager as follows:
1. Appointment. The Investment Manager is hereby appointed to act as
investment adviser to the Fund for the periods and on the terms set forth in
this Agreement. The Investment Manager accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. Investment Advisory Duties. Subject to the supervision of the
Directors of the Corporation, the Investment Manager will (a) provide a program
of continuous investment management for the Fund with regard to the Fund's
investments in equity securities of non-U.S. issuers 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 Investment Manager by the Corporation; (b) make investment
decisions for the Fund with regard to the Fund's investments in equity
securities of non-U.S. issuers; and (c) place orders to purchase and sell equity
securities of non-U.S. issuers for the Fund.
In performing its investment management services to the Fund under the
terms of this Agreement, the Investment Manager 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 Investment Manager 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 Investment Manager
shall not be responsible for making passive foreign investment corporation
("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, except that the Investment Manager
shall not be responsible for the tax effect of decisions made by unaffiliated
advisers on other portions of the Fund's assets;
(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
Corporation and provided to the Investment Manager, and in accordance with
applicable legal requirements;
(d) furnish to the Corporation and/or the Business Manager whatever
statistical information the Corporation and/or the Business Manager may
reasonably request with respect to the portion of the Fund's assets it manages
or contemplated investments for such portion. In addition, the Investment
Manager will keep the Corporation, the Business Manager and the Directors
informed of developments materially affecting the Fund's portfolio and shall, on
the Investment Manager's own initiative, furnish to the Corporation from time to
time whatever information the Investment Manager believes appropriate for this
purpose;
(e) make available to the Corporation's administrator, First Data
Investor Services Group, Inc. (the "Administrator"), the Business Manager and
the Corporation, 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 Business Manager and the Corporation in their compliance with
applicable laws and regulations. The Investment Manager will furnish the
Business Manager and the Directors with such periodic and special reports
regarding the Fund as they may reasonably request;
(f) meet quarterly with the Business Manager and the Corporation's Board
of Directors to explain its investment management activities, and any reports
related to transactions for the portion of the Fund's portfolio assets it
advises and securities held in the portfolio as may reasonably be requested by
the Business Manager and/or the Corporation;
(g) immediately notify the Corporation in the event that the Investment
Manager or any of its affiliates: (1) becomes aware that it is subject to a
statutory disqualification that prevents the Investment Manager 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
Investment Manager further agrees to notify the Corporation immediately of any
material fact known to the Investment Manager respecting or relating to the
Investment Manager 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 Adviser seek to obtain any such information.
3. Investment Guidelines. The Corporation shall supply the Investment
Manager with such information as the Investment Manager 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 Investment Manager
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 Investment
Manager 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 Investment Manager is expressly authorized
to consider the fact that a broker or dealer has furnished statistical, research
or other information or services which enhance the Investment Manager'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 Investment Manager 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 Investment Manager 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 Investment
Manager's overall responsibilities to the Investment Manager's discretionary
accounts.
Neither the Investment Manager 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 Corporation or the Business Manager in writing, the Investment
Manager 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
Corporation agrees to pay annual fees to the Investment Manager equal to 0.70%
of the first $25 million of Fund assets managed by the Investment Manager, 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 Investment Manager. 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 Investment Manager shall not be required to
pay any expenses of the Fund other than those specifically allocated to the
Investment Manager in this section 6. In particular, but without limiting the
generality of the foregoing, the Investment Manager 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 Investment
Manager's overhead and employee costs); fees payable to the Investment Manager
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 Corporation'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 Corporation who are not interested persons of the Investment Manager; and
travel expenses (or an appropriate portion thereof) of officers or directors of
the Corporation 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 Corporation with respect to matters concerning the
Fund, or any committees thereof or advisers thereto.
7. Books and Records. The Investment Manager 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
Investment Manager also agrees that records it maintains and preserves pursuant
to Rules 31a-1 and Rule 31a-2 under the 1940 Act and otherwise in connection
with its services hereunder are the property of the Corporation and will be
surrendered promptly to the Corporation upon its request; except that the
Investment Manager may retain copies of such documents as are required to be
maintained by advisers under the Advisers Act. The Investment Manager 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 Corporation agrees that the
Investment Manager may aggregate sales and purchase orders of securities held in
the Fund with similar orders being made simultaneously for other accounts
managed by the Investment Manager or with accounts of the affiliates of the
Investment Manager, if in the Investment Manager'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 Corporation acknowledges that the determination of such
economic benefit to the Fund by the Investment Manager represents the Investment
Manager'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 Investment Manager shall not be liable to the
Corporation for the acts or omissions of any other fiduciary or other person
respecting the Fund or for anything done or omitted by the Investment Manager
under the terms of this Agreement if the Investment Manager shall have acted in
good faith and shall have exercised the degree of prudence, competence and
expertise customarily exhibited by managers of institutional portfolios. Nothing
in this Agreement shall in any way constitute a waiver or limitation of any
rights which may not be so limited or waived in accordance with applicable law.
10. Services Not Exclusive. It is understood that the services of the
Investment Manager are not exclusive, and that nothing in this Agreement shall
prevent the Investment Manager from providing similar services to other
investment companies or to other series of investment companies, including the
Corporation (whether or not their investment objectives and policies are similar
to those of the 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 Investment Manager's ability to meet its obligations
to the Fund hereunder. When the Investment Manager recommends the purchase or
sale of a security for other investment companies and other clients, and at the
same time the Investment Manager 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 Investment Manager nor any
of its directors, officers or employees shall act as a principal or agent or
receive any commission. If the Investment Manager provides any advice to its
clients concerning the shares of the Fund, the Investment Manager shall act
solely as investment counsel for such clients and not in any way on behalf of
the Corporation or the Fund. The Investment Manager 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
Investment Manager with respect to the Fund. Nothing in this Agreement shall
impose upon the Investment Manager 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 Investment Manager, 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 Corporation 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 Investment Manager intends to invest in companies located
in countries which the Investment Manager considers to have relatively stable
and friendly governments, the Corporation is cognizant of and hereby accepts the
possibility that countries in which the Investment Manager 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 Corporation 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
March 2, 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 1940 Act) 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 1940 Act) 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 Investment Manager or (b) by the Investment Manager at any
time without penalty, upon sixty (60) days' written notice to the Corporation.
This Agreement will also terminate automatically in the event of its assignment
(as defined in the 1940 Act). Any termination of this Agreement will be without
prejudice to the completion of transactions already initiated by the Investment
Manager on behalf of the Fund at the time of such termination. The Investment
Manager 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 Corporation gives written instructions to the
contrary, the Investment Manager shall vote all proxies solicited by or with
respect to the issuers of securities in which assets of the Fund may be
invested. The Investment Manager shall maintain a record of how the Investment
Manager voted and such record shall be available to the Corporation upon its
request. The Investment Manager shall use its best good faith judgment to vote
such proxies in a manner which best serves the interests of the Fund's
shareholders.
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 Corporation:
Forward Funds, Inc.
433 California Street, Suite 1010
San Francisco, CA 94104
If to the Business Manager:
Sutton Place Management Co., Inc.
433 California Street, Suite 1010
San Francisco, CA 94104
Attention: Mr. Ronald Pelosi
If to the Investment Manager:
Elizabeth M. Knoblock
Senior Vice President, Secretary and General Counsel
Templeton Investment Counsel, Inc.
500 East Broward Boulevard, Suite 2100
Fort Lauderdale, Florida 33394-3091
16. Confidential Information. The Investment Manager shall maintain
the strictest confidence regarding the business affairs of the Fund. Written
reports furnished by the Investment Manager to the Corporation shall be treated
by the Corporation and the Investment Manager as confidential and for the
exclusive use and benefit of the Corporation 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 Investment
Manager is delivering to the Business Manager and the Corporation a copy of Part
II of its Form ADV, as revised, on file with the Securities and Exchange
Commission. The Business Manager and the Corporation 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 Investment
Manager as an agent of the Corporation or the Fund.
f. Both the Fund and the Investment Manager acknowledge that all sales
literature for investment companies are subject to strict regulatory oversight.
The Fund agrees to submit to the Invesment Manager any and all sales literature
referencing "Templeton," "Templeton 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 March 2, 1998.
FORWARD FUNDS, INC.
By: _______________________________
President
TEMPLETON INVESTMENT COUNSEL, INC.
By: ________________________________
Name: Charles E. Johnson
Title: Chairman
SUTTON PLACE MANAGEMENT CO., INC.
By: ______________________________
Name: ______________________________
Title: ______________________________
FORWARD FUNDS, INC.
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, effective as of March 2, 1998, among Pacific Investment
Management Company ("PIMCO" or the "Investment Manager"), Sutton Place
Management Co., Inc. (the "Business Manager") and Forward Funds, Inc. (the
"Corporation") on behalf of The Global Fund (the "Fund").
WHEREAS, the Corporation is a Maryland corporation of the series type
organized under Articles of Incorporation dated October 3, 1997 (the "Articles")
and is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end, diversified management investment company, and the
Fund is a series of the Corporation; and
WHEREAS, the Business Manager is responsible for managing the business
affairs of the Corporation and coordinating the activities of service providers
to the Fund; and
WHEREAS, the Corporation and the Business Manager wish to retain the
Investment Manager to render investment advisory services to the Fund with
regard to the Fund's investments in fixed income and other debt securities as
further described in the Corporation's registration statement on Form N-1A (the
"Registration Statement"), and the Investment Manager is willing to furnish such
services to the Fund; and
WHEREAS, the Investment Manager 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 Business Manager, the Corporation and
the Investment Manager as follows:
1. Appointment. The Investment Manager is hereby appointed to act as
investment adviser to the Fund for the periods and on the terms set forth in
this Agreement. The Investment Manager accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. Investment Advisory Duties. Subject to the supervision of the
Directors of the Corporation, the Investment Manager will (a) provide a program
of continuous investment management for the Fund with regard to the Fund's
investments in fixed income and other debt securities 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 to the
Investment Manager by the Corporation; (b) make investment decisions for the
Fund with regard to the Fund's investments in fixed income and other debt
securities; and (c) place orders to purchase and sell fixed income and other
debt securities for the Fund.
In performing its investment management services to the Fund under the
terms of this Agreement, the Investment Manager 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 Investment Manager 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;
(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, established through written guidelines
determined by the Corporation and provided to the Investment Manager, and in
accordance with applicable legal requirements;
(d) furnish to the Corporation and/or the Business Manager whatever
statistical information the Corporation and/or the Business Manager may
reasonably request with respect to the Fund's assets or contemplated
investments. In addition, the Investment Manager will keep the Corporation, the
Business Manager and the Directors informed of developments materially affecting
the Fund's portfolio and shall, on the Investment Manager's own initiative,
furnish to the Corporation from time to time whatever information the Investment
Manager believes appropriate for this purpose;
(e) make available to the Corporation's administrator, First Data
Investor Services Group, Inc. (the "Administrator"), the Business Manager and
the Corporation, 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 Business Manager and the Corporation in their compliance with
applicable laws and regulations. The Investment Manager will furnish the
Business Manager and the Directors with such periodic and special reports
regarding the Fund as they may reasonably request;
(f) meet quarterly with the Business Manager and the Corporation's Board
of Directors to explain its investment management activities, and any reports
related thereto as may reasonably be requested by the Business Manager and/or
the Corporation;
(g) immediately notify the Corporation in the event that the Investment
Manager: (1) becomes aware that it is subject to a statutory disqualification
that prevents the Investment Manager 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 Investment Manager further
agrees to notify the Corporation immediately of any material fact known to the
Investment Manager respecting or relating to the Investment Manager 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 Adviser seek to obtain any such information.
3. Futures and Options. The Investment Manager'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 Investment Manager will assist the Business Manager to:
(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
Account, standard customer agreements with a broker or brokers. The Investment
Manager may, using such of the securities and other property in the Brokerage
Account as the Investment Manager 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
Investment Manager deems desirable or appropriate.
The Investment Manager has delivered to the Business Manager
and the Corporation a copy of its Disclosure Document, as amended, dated July 3,
1997, on file with the Commodity Futures Trading Commission. The Business
Manager and the Corporation hereby acknowledge receipt of such copy.
4. Investment Guidelines. The Corporation shall supply the Investment
Manager with such information as the Investment Manager 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.
5. Use of Securities Brokers and Dealers. Purchase and sale orders
will usually be placed with brokers which are selected by the Investment Manager
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 Investment
Manager 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 Investment Manager is expressly authorized
to consider the fact that a broker or dealer has furnished statistical, research
or other information or services which enhance the Investment Manager'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 Investment Manager 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 Investment Manager 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 Investment
Manager's overall responsibilities to the Investment Manager's discretionary
accounts.
Neither the Investment Manager 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 Corporation or the Business Manager in writing, the Investment
Manager 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
Corporation agrees to pay annual fees to the Investment Manager equal to 0.35%
of the first $200 million of Fund assets managed by the Investment Manager and
0.30% of all assets above $200 million managed by the Investment Manager. Fees
shall be computed and accrued daily and paid monthly based on the average daily
net asset value of shares of the Fund as determined according to the manner
provided in the then-current prospectus of the Fund.
7. Fees and Expenses. The Investment Manager shall not be required to
pay any expenses of the Fund other than those specifically allocated to the
Investment Manager in this section 7. In particular, but without limiting the
generality of the foregoing, the Investment Manager 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 Investment
Manager's overhead and employee costs); fees payable to the Investment Manager
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 Corporation'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 Corporation who are not interested persons of the Investment Manager; and
travel expenses (or an appropriate portion thereof) of officers or directors of
the Corporation 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 Corporation with respect to matters concerning the
Fund, or any committees thereof or advisers thereto.
8. Books and Records. The Investment Manager 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
Investment Manager also agrees that records it maintains and preserves pursuant
to Rules 31a-1 and Rule 31a-2 under the 1940 Act and otherwise in connection
with its services hereunder are the property of the Corporation and original and
correct copies will be surrendered promptly to the Corporation upon its request.
The Investment Manager 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.
9. Aggregation of Orders. Provided the investment objectives, policies
and restrictions of the Fund are adhered to, the Corporation agrees that the
Investment Manager may aggregate sales and purchase orders of securities held in
the Fund with similar orders being made simultaneously for other accounts
managed by the Investment Manager or with accounts of the affiliates of the
Investment Manager, if in the Investment Manager'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 Corporation acknowledges that the determination of such
economic benefit to the Fund by the Investment Manager represents the Investment
Manager'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.
10. Liability. The Investment Manager shall not be liable to the
Corporation for the acts or omissions of any other fiduciary or other person
respecting the Fund or for anything done or omitted by the Investment Manager
under the terms of this Agreement if the Investment Manager 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.
11. Services Not Exclusive. It is understood that the services of the
Investment Manager are not exclusive, and that nothing in this Agreement shall
prevent the Investment Manager from providing similar services to other
investment companies or to other series of investment companies, including the
Corporation (whether or not their investment objectives and policies are similar
to those of the 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 Investment Manager's ability to meet its obligations
to the Fund hereunder. When the Investment Manager recommends the purchase or
sale of a security for other investment companies and other clients, and at the
same time the Investment Manager 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 Investment Manager nor any
of its directors, officers or employees shall act as a principal or agent or
receive any commission. If the Investment Manager provides any advice to its
clients concerning the shares of the Fund, the Investment Manager shall act
solely as investment counsel for such clients and not in any way on behalf of
the Corporation or the Fund.
12. Duration and Termination. This Agreement shall continue until
February 6, 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
1940 Act) 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 1940 Act) 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 Investment Manager or (b) by the Investment
Manager at any time without penalty, upon sixty (60) days' written notice to the
Corporation. This Agreement will also terminate automatically in the event of
its assignment (as defined in the 1940 Act). Any termination of this Agreement
will be without prejudice to the completion of transactions already initiated by
the Investment Manager on behalf of the Fund at the time of such termination.
The Investment Manager 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 Corporation gives written instructions to the
contrary, the Investment Manager shall vote all proxies solicited by or with
respect to the issuers of securities in which assets of the Fund may be
invested. The Investment Manager shall maintain a record of how the Investment
Manager voted and such record shall be available to the Corporation upon its
request. The Investment Manager shall use its best good faith judgment to vote
such proxies in a manner which best serves the interests of the Fund's
shareholders.
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 Corporation:
Forward Funds, Inc.
433 California Street, Suite 1010
San Francisco, CA 94104
If to the Business Manager:
Sutton Place Management Co., Inc.
433 California Street, Suite 1010
San Francisco, CA 94104
Attention: Mr. Ronald Pelosi
If to the Investment Manager:
Pacific Investment Management Company
840 Newport Center Drive, Suite 360
Newport Beach, CA 92660
714-720-1376 (fax)
Attention: John S. Loftus, Executive Vice President
Confidential Information. The Investment Manager shall
maintain the strictest confidence regarding the business affairs of the Fund.
Written reports furnished by the Investment Manager to the Corporation shall be
treated by the Corporation and the Investment Manager as confidential and for
the exclusive use and benefit of the Corporation 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 Investment
Manager is delivering to the Business Manager and the Corporation a copy of Part
II of its Form ADV, as revised, on file with the Securities and Exchange
Commission. The Business Manager and the Corporation 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 Investment
Manager as an agent of the Corporation or the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of March 2, 1998.
FORWARD FUNDS, INC.
By:
President
PACIFIC INVESTMENT MANAGEMENT COMPANY
By: PIMCO Management, Inc.,
a general partner
By: ______________________________
Name: James Muzzy
Title: Managing Director
SUTTON PLACE MANAGEMENT CO., INC.
By: ____________________________
Name: ____________________________
Title: ____________________________
FORWARD FUNDS, INC.
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, effective as of March 2, 1998, among Barclays Global Fund
Advisors ("Barclays" or the "Investment Manager"), Sutton Place Management Co.,
Inc. (the "Business Manager") and Forward Funds, Inc. (the "Corporation") on
behalf of The Global Fund (the "Fund").
WHEREAS, the Corporation is a Maryland corporation of the series type
organized under Articles of Incorporation dated October 3, 1997 (the "Articles")
and is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end, diversified management investment company, and the
Fund is a series of the Corporation; and
WHEREAS, the Business Manager is responsible for managing the business
affairs of the Corporation and coordinating the activities of service providers
to the Fund; and
WHEREAS, the Corporation and the Business Manager wish to retain the
Investment Manager to render investment advisory services to the Fund with
regard to the Fund's investment of its assets in a portfolio of equity
securities traded on U.S. exchanges and derivatives ("Portfolio") as further
described in the Corporation's registration statement on Form N-1A (the
"Registration Statement"), and the Investment Manager is willing to furnish such
services to the Fund; and
WHEREAS, the Investment Manager 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 Business Manager, the Corporation and
the Investment Manager as follows:
1. Appointment. The Investment Manager is hereby appointed to act as
investment adviser to the Fund for the periods and on the terms set forth in
this Agreement. The Investment Manager accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. Investment Advisory Duties. Subject to the supervision of the
Directors of the Corporation, the Investment Manager will (a) provide a program
of continuous investment management for the Fund with regard to the Portfolio 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 to the Investment Manager by the Corporation; (b) make investment
decisions for the Fund with regard to the Portfolio; and (c) place orders to
purchase and sell investments in the Portfolio for the Fund.
Barclays' duties shall not include and Barclays 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 Barclays.
In performing its investment management services to the Fund under the
terms of this Agreement, the Investment Manager will provide the Fund with
ongoing investment guidance and policy direction.
The Investment Manager 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;
(b) use reasonable efforts to manage the Portfolio so that the Fund will
qualify, and continue to qualify, as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder; provided, however,
Barclays 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 Corporation and provided to the Investment Manager, and in
accordance with applicable legal requirements;
(d) furnish to the Corporation and/or the Business Manager whatever
statistical information the Corporation and/or the Business Manager may
reasonably request with respect to the Portfolio. In addition, the Investment
Manager will keep the Corporation, the Business Manager and the Directors
informed of developments materially affecting the Portfolio and shall, on the
Investment Manager's own initiative, furnish to the Corporation from time to
time whatever information the Investment Manager believes appropriate for this
purpose;
(e) make available to the Corporation's administrator, First Data
Investor Services Group, Inc. (the "Administrator"), the Business Manager and
the Corporation, promptly upon their request, such copies of its investment
records and ledgers with respect to the Portfolio as may be required to assist
the Administrator, the Business Manager and the Corporation in their compliance
with applicable laws and regulations. The Investment Manager will furnish the
Business Manager and the Directors with such periodic and special reports
regarding the Fund as they may reasonably request;
(f) meet quarterly with the Business Manager and the Corporation's Board
of Directors to explain its investment management activities, and any reports
related to the Portfolio as may reasonably be requested by the Business Manager
and/or the Corporation;
(g) immediately notify the Corporation in the event that the Investment
Manager or any of its affiliates: (1) becomes aware that it is subject to a
statutory disqualification that prevents the Investment Manager 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
Investment Manager further agrees to notify the Corporation immediately of any
material fact known to the Investment Manager respecting or relating to the
Investment Manager 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 Portfolio, use no inside
information that may be in its possession or in the possession of any of its
affiliates, nor will the Investment Manager seek to obtain any such information.
3. Futures and Options. The Investment Manager'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 Investment Manager 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 Account, standard customer agreements
with a broker or brokers. The Investment Manager may, using such of the
securities and other property in the Brokerage Account as the Investment Manager
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 Investment Manager 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 Portfolio in accordance with the exemption contained
in CFTC Regulations Section 4.7(b).
4. Investment Guidelines. The Corporation shall supply the Investment
Manager with such information as the Investment Manager shall reasonably require
concerning the Fund's investment policies, restrictions, limitations, tax
position, liquidity requirements and other information useful in managing the
Portfolio.
5. Use of Securities Brokers and Dealers. Purchase and sale orders
will usually be placed with brokers which are selected by the Investment Manager
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 Investment
Manager 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 Investment Manager is expressly authorized
to consider the fact that a broker or dealer has furnished statistical, research
or other information or services which enhance the Investment Manager'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 Investment Manager 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 Investment Manager 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 Investment
Manager's overall responsibilities to the Investment Manager's discretionary
accounts.
Neither the Investment Manager 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 Corporation or the Business Manager in writing, the Investment Manager 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
Corporation agrees to pay annual fees to the Investment Manager equal to 0.375%
of the first $100 million of Fund assets managed by the Investment Manager,
0.30% on the next $400 million under management, and 0.25% on all assets above
$500 million managed by the Investment Manager. Fees shall be computed and
accrued daily and paid monthly based on the average daily net asset value of
shares of the Fund as determined according to the manner provided in the
then-current prospectus of the Fund.
7. Fees and Expenses. The Investment Manager shall not be required to
pay any expenses of the Fund other than those specifically allocated to the
Investment Manager in this section 7. In particular, but without limiting the
generality of the foregoing, the Investment Manager 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 Investment
Manager's overhead and employee costs); fees payable to the Investment Manager
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 Corporation'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 Corporation who are not interested persons of the Investment Manager; and
travel expenses (or an appropriate portion thereof) of officers or directors of
the Corporation 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 Corporation with respect to matters concerning the
Fund, or any committees thereof or advisers thereto.
8. Books and Records. The Investment Manager 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
Investment Manager also agrees that records it maintains and preserves pursuant
to Rules 31a-1 and Rule 31a-2 under the 1940 Act and otherwise in connection
with its services hereunder are the property of the Corporation and will be
surrendered promptly to the Corporation upon its request except that the
Investment Manager may return copies of such documents as may be required by
law. The Investment Manager 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.
9. Aggregation of Orders. Provided the investment objectives, policies
and restrictions of the Fund are adhered to, the Corporation agrees that the
Investment Manager may aggregate sales and purchase orders of securities held in
the Fund with similar orders being made simultaneously for other accounts
managed by the Investment Manager or with accounts of the affiliates of the
Investment Manager, if in the Investment Manager'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 Corporation acknowledges that the determination of such
economic benefit to the Fund by the Investment Manager represents the Investment
Manager'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.
10. Liability.
a. Neither Investment Manager nor its officers, directors, employees,
affiliates, agents or controlling persons shall be liable to the Corporation,
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.
b. Neither the Investment Manager 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 Corporation, 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 Investment Manager
against any liability to the Corporation, 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.
c. The Corporation on behalf of the Fund, hereby agrees to indemnify
and hold harmless the Investment Manager, its directors, officers and employees
and agents and each person, if any, who controls the Investment Manager
(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 Corporation 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 "1940
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 Corporation 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 Corporation 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 Investment Manager, or (ii) made in
reliance upon and in conformity with information furnished to the Corporation by
or on behalf of the Investment Manager pertaining to or originating with the
Investment Manager for use in connection with any document referred to in
clauses (a), (b) or (c).
d. It is understood, however, that nothing in this paragraph 10 shall
protect any Indemnified Party against, or entitle any Indemnified Party to,
indemnification against any liability to the Corporation, 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.
11. Services Not Exclusive. It is understood that the services of the
Investment Manager are not exclusive, and that nothing in this Agreement shall
prevent the Investment Manager from providing similar services to other
investment companies or to other series of investment companies, including the
Corporation (whether or not their investment objectives and policies are similar
to those of the 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 Investment Manager's ability to meet its obligations
to the Fund hereunder. When the Investment Manager recommends the purchase or
sale of a security for other investment companies and other clients, and at the
same time the Investment Manager 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 Investment Manager nor any
of its directors, officers or employees shall act as a principal or agent or
receive any commission. If the Investment Manager provides any advice to its
clients concerning the shares of the Fund, the Investment Manager shall act
solely as investment counsel for such clients and not in any way on behalf of
the Corporation or the Fund.
The Investment Manager provides investment advisory services to
numerous other funds and bank collective funds and may give advice and take
action which may differ from the timing or nature of action taken by the
Investment Manager with respect to the Fund. Nothing in this Agreement shall
impose upon the Investment Manager 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 Investment Manager, or the shareholders, officers,
directors, employees or affiliates may purchase or sell for their own account or
for the account of any client.
12. Duration and Termination. This Agreement shall continue until
February 6, 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
1940 Act) 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 1940 Act) 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 Investment Manager or (b) by the Investment
Manager at any time without penalty, upon sixty (60) days' written notice to the
Corporation. This Agreement will also terminate automatically in the event of
its assignment (as defined in the 1940 Act). Any termination of this Agreement
will be without prejudice to the completion of transactions already initiated by
the Investment Manager on behalf of the Fund at the time of such termination.
The Investment Manager 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 Corporation gives written instructions to the
contrary, the Investment Manager shall vote all proxies solicited by or with
respect to the issuers of securities in the Portfolio. The Investment Manager
shall maintain a record of how the Investment Manager voted and such record
shall be available to the Corporation upon its request. The Investment Manager
shall use its best good faith judgment to vote such proxies in a manner which
best serves the interests of the Fund's shareholders.
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 Corporation:
Forward Funds, Inc.
433 California Street, Suite 1010
San Francisco, CA 94104
If to the Business Manager:
Sutton Place Management Co., Inc.
433 California Street, Suite 1010
San Francisco, CA 94104
Attention: Mr. Ronald Pelosi
If to the Investment Manager:
Barclays Global Fund Advisors
45 Fremont Street
San Francisco, CA 94105
16. Confidential Information. The Investment Manager shall maintain
the strictest confidence regarding the business affairs of the Fund. Written
reports furnished by the Investment Manager to the Corporation shall be treated
by the Corporation and the Investment Manager as confidential and for the
exclusive use and benefit of the Corporation 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 Investment
Manager is delivering to the Business Manager and the Corporation a copy of Part
II of its Form ADV, as revised, on file with the Securities and Exchange
Commission. The Business Manager and the Corporation 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 Investment
Manager as an agent of the Corporation or the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of March 2, 1998.
FORWARD FUNDS, INC.
By:
President
BARCLAYS GLOBAL FUND ADVISORS
By: ______________________________
Name:
Title:
SUTTON PLACE MANAGEMENT CO., INC.
By: ____________________________
Name: ____________________________
Title: ____________________________
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this 2nd day of March, 1998 (the
"Agreement") by and between the Forward Funds, Inc., a Maryland corporation (the
"Company") and First Data Distributors, Inc. (the "Distributor"), a
Massachusetts corporation.
WHEREAS, the Company is registered as a diversified, open-end
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and is currently offering units of beneficial interest
(such units of all series are hereinafter called the "Shares"), representing
interests in investment portfolios of the Company identified on Schedule A
hereto (the "Funds") which are registered with the Securities and Exchange
Commission (the "SEC") pursuant to the Company's Registration Statement on Form
N-1A (the "Registration Statement"); and
WHEREAS, the Company desires to retain the Distributor as distributor
for the Funds to provide for the sale and distribution of the Shares of the
Funds identified on Schedule A and for such additional classes or series as the
Company may issue, and the Distributor is prepared to provide such services
commencing on the date first written above.
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein and intending to be legally bound hereby the parties hereto
agree as follows:
1. Service as Distributor
1.1 The Distributor will act on behalf of the Company for the distribution
of the Shares covered by the Registration Statement under the
Securities Act of 1933, as amended (the "1933 Act").
1.2 The Distributor agrees to use efforts deemed appropriate by the
Distributor to solicit orders for the sale of the Shares and will
undertake such advertising and promotion as it believes reasonable in
connection with such solicitation. To the extent that the Distributor
receives shareholder services fees under any shareholder services plan
adopted by the Company, the Distributor agrees to furnish, and/or enter
into arrangements with others for the furnishing of, personal and/or
account maintenance services with respect to the relevant shareholders
of the Company as may be required pursuant to such plan. It is
contemplated that the Distributor will enter into sales or servicing
agreements with securities dealers, financial institutions and other
industry professionals, such as investment advisers, accountants and
estate planning firms.
1.3 The Company understands that the Distributor is now, and may in the
future be, the distributor of the shares of several investment
companies or series (collectively, the "Investment Entities"),
including Investment Entities having investment objectives similar to
those of the Company. The Company further understands that investors
and potential investors in the Company may invest in shares of such
other Investment Entities. The Company agrees that the Distributor's
duties to such Investment Entities shall not be deemed in conflict with
its duties to the Company under this Section 1.3.
1.4 All activities by the Distributor and its employees, as distributor of
the Shares, shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations
made or adopted by the SEC or the National Association of Securities
Dealers.
1.5 The Distributor will transmit any orders received by it for purchase
or redemption of the Shares to the transfer agent for the Company.
1.6 Whenever in its judgment such action is warranted by unusual market,
economic or political conditions or abnormal circumstances of any kind,
the Company may decline to accept any orders for, or make any sales of,
the Shares until such time as the Company deems it advisable to accept
such orders and to make such sales, and the Company advises the
Distributor promptly of such determination.
1.7 The Company agrees to pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933, as amended,
and all expenses in connection with maintaining facilities for the
issue and transfer of Shares and for supplying information, prices and
other data to be furnished by the Fund hereunder, and all expenses in
connection with the preparation and printing of the Fund's prospectuses
and statements of additional information for regulatory purposes and
for distribution to shareholders.
1.8 The Company agrees at its own expense to execute any and all documents
and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the
qualification of the Shares for sale in such states as the Distributor
may designate. The Company shall notify the Distributor in writing of
the states in which the Shares may be sold and shall notify the
Distributor in writing of any changes to the information contained in
the previous notification.
1.9 The Company shall furnish from time to time, for use in connection with
the sale of the Shares, such information with respect to the Company
and the Shares as the Distributor may reasonably request; and the
Company warrants that the statements contained in any such information
shall fairly show or represent what they purport to show or represent.
The Company shall also furnish the Distributor upon request with: (a)
audited annual statements and unaudited semi-annual statements of a
Fund's books and accounts prepared by the Company, (b) quarterly
earnings statements prepared by the Company, (c) a monthly itemized
list of the securities in the Funds, (d) monthly balance sheets as soon
as practicable after the end of each month, and (e) from time to time
such additional information regarding the financial condition of the
Company as the Distributor may reasonably request.
1.10 The Company represents to the Distributor that all Registration
Statements and prospectuses filed by the Company with the SEC under the
1933 Act with respect to the Shares have been prepared in conformity
with the requirements of the 1933 Act and the rules and regulations of
the SEC thereunder. As used in this Agreement, the term "Registration
Statement" shall mean any Registration Statement and any prospectus and
any statement of additional information relating to the Company filed
with the SEC and any amendments or supplements thereto at any time
filed with the SEC. Except as to information included in the
Registration Statement in reliance upon information provided to the
Company by the Distributor or any affiliate of the Distributor
expressly for use in the Registration Statement, the Company represents
and warrants to the Distributor that any Registration Statement, when
such Registration Statement becomes effective, will contain statements
required to be stated therein in conformity with the 1933 Act and the
rules and regulations of the SEC; that all statements of fact contained
in any such Registration Statement will be true and correct when such
Registration Statement becomes effective; and that no Registration
Statement when such Registration Statement becomes effective will
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of the Shares. The
Company may but shall not be obligated to propose from time to time
such amendment or amendments to any Registration Statement and such
supplement or supplements to any prospectus as, in the light of future
developments, may, in the opinion of the Company's counsel, be
necessary or advisable. The Company shall not file any amendment to any
Registration Statement or supplement to any prospectus without giving
the Distributor reasonable notice thereof in advance; provided,
however, that nothing contained in this Agreement shall in any way
limit the Company's right to file at any time such amendments to any
Registration Statements and/or supplements to any prospectus, of
whatever character, as the Company may deem advisable, such right being
in all respects absolute and unconditional.
1.11 The Company authorizes the Distributor to use any prospectus or
statement of additional information in the form furnished from time to
time in connection with the sale of the Shares. The Company agrees to
indemnify and hold harmless the Distributor, its officers, directors,
and employees, and any person who controls the Distributor within the
meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, costs, expenses (including reasonable
attorneys' fees) losses, damages, charges, payments and liabilities of
any sort or kind which the Distributor, its officers, directors,
employees or any such controlling person may incur under the 1933 Act,
under any other statute, at common law or otherwise, arising out of or
based upon: (i) any untrue statement, or alleged untrue statement, of a
material fact contained in the Company's Registration Statement,
prospectus, statement of additional information, or sales literature
(including amendments and supplements thereto), or (ii) any omission,
or alleged omission, to state a material fact required to be stated in
the Company's Registration Statement, prospectus, statement of
additional information or sales literature (including amendments or
supplements thereto), necessary to make the statements therein not
misleading, provided, however, that insofar as losses, claims, damages,
liabilities or expenses arise out of or are based upon any such untrue
statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information furnished to the Company
by the Distributor or its affiliated persons for use in the Company's
Registration Statement, prospectus, or statement of additional
information or sales literature (including amendments or supplements
thereto), such indemnification is not applicable. The Company
acknowledges and agrees that in the event that the Distributor, at the
request of the Company, is required to give indemnification comparable
to that set forth in this Section 1.11 to any broker-dealer selling
Shares of the Company and such broker-dealer shall make a claim for
indemnification against the Distributor, the Distributor shall make a
similar claim for indemnification against the Company.
1.12 The Distributor agrees to indemnify and hold harmless the Company, its
several officers and Directors and each person, if any, who controls a
Fund within the meaning of Section 15 of the 1933 Act against any and
all claims, costs, expenses (including reasonable attorneys' fees),
losses, damages, charges, payments and liabilities of any sort or kind
which the Company, its officers, Directors or any such controlling
person may incur under the 1933 Act, under any other statute, at common
law or otherwise, but only to the extent that such liability or expense
incurred by the Company, its officers or Directors, or any controlling
person resulting from such claims or demands arose out of the
acquisition of any Shares by any person which may be based upon any
untrue statement, or alleged untrue statement, of a material fact
contained in the Company's Registration Statement, prospectus or
statement of additional information (including amendments and
supplements thereto), or any omission, or alleged omission, to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission was
made in reliance upon information furnished or confirmed in writing to
the Company by the Distributor or its affiliated persons (as defined in
the 1940 Act).
1.13 In any case in which one party hereto (the "Indemnifying Party") may be
asked to indemnify or hold the other party hereto (the "Indemnified
Party") harmless, the Indemnified Party will notify the Indemnifying
Party promptly after identifying any situation which it believes
presents or appears likely to present a claim for indemnification (an
"Indemnification Claim") against the Indemnifying Party, although the
failure to do so shall not prevent recovery by the Indemnified Party,
and shall keep the Indemnifying Party advised with respect to all
developments concerning such situation. The Indemnifying Party shall
have the option to defend the Indemnified Party against any
Indemnification Claim which may be the subject of this indemnification,
and, in the event that the Indemnifying Party so elects, such defense
shall be conducted by counsel chosen by the Indemnifying Party and
satisfactory to the Indemnified Party, and thereupon the Indemnifying
Party shall take over complete defense of the Indemnification Claim and
the Indemnified Party shall sustain no further legal or other expenses
in respect of such Indemnification Claim. The Indemnified Party will
not confess any Indemnification Claim or make any compromise in any
case in which the Indemnifying Party will be asked to provide
indemnification, except with the Indemnifying Party's prior written
consent. The obligations of the parties hereto under this Section 1.13
and Section 3.1 shall survive the termination of this Agreement.
In the event that the Company is the Indemnifying Party and the
Indemnifying Party does not elect to assume the defense of any such
suit, or in case the Distributor reasonably does not approve of counsel
chosen by the Company, or in case there is a conflict of interest
between the Company or the Distributor, the Company will reimburse the
Distributor, its officers, directors and employees, or the controlling
person or persons named as defendant or defendants in such suit, for
the fees and expenses of any counsel retained by the Distributor or
them. The Company's indemnification agreement contained in this Section
1.13 and Section 3.1 and the Company's representations and warranties
in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the
Distributor, its officers, directors and employees, or any controlling
person, and shall survive the delivery of any Shares. This agreement of
indemnity will inure exclusively to the Distributor's benefit, to the
benefit of its several officers, directors and employees, and their
respective estates and to the benefit of the controlling persons and
their successors. The Company agrees promptly to notify the Distributor
of the commencement of any litigation or proceedings against the
Company or any of its officers or directors in connection with the
issue and sale of any Shares.
1.14 No Shares shall be offered by either the Distributor or the Company
under any of the provisions of this Agreement and no orders for the
purchase or sale of Shares hereunder shall be accepted by the Company
if and so long as effectiveness of the Registration Statement then in
effect or any necessary amendments thereto shall be suspended under any
of the provisions of the 1933 Act, or if and so long as a current
prospectus as required by Section 5(b)(2) of the 1933 Act is not on
file with the SEC; provided, however, that nothing contained in this
Section 1.14 shall in any way restrict or have any application to or
bearing upon the Company's obligation to redeem Shares tendered for
redemption by any shareholder in accordance with the provisions of the
Company's Registration Statement, Declaration of Company, or bylaws.
1.15 The Company agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor:
(a) of any request by the SEC for amendments to the Registration
Statement, prospectus or statement of additional information then in
effect or for additional information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement, prospectus
or statement of additional information then in effect or the initiation
by service of process on the Company of any proceeding for that
purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the Registration Statement, prospectus or
statement of additional information then in effect or that requires the
making of a change in such Registration Statement, prospectus or
statement of additional information in order to make the statements
therein not misleading; and
(d) of all actions of the SEC with respect to any amendments to any
Registration Statement, prospectus or statement of additional
information which may from time to time be filed with the SEC.
For purposes of this section, informal requests by or acts of the Staff
of the SEC shall not be deemed actions of or requests by the SEC.
2. Term
2.1 This Agreement shall become effective on the date first written above
and, unless sooner terminated as provided herein, shall continue for an
initial two-year term and thereafter shall be renewed for successive
one-year terms, provided such continuance is specifically approved at
least annually by (i) the Company's Board of Directors or (ii) by a
vote of a majority (as defined in the 1940 Act and Rule 18f-2
thereunder) of the outstanding voting securities of the Company,
provided that in either event the continuance is also approved by a
majority of the Directors who are not parties to this Agreement and who
are not interested persons (as defined in the 1940 Act) of any party to
this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable
without penalty, on at least sixty days' written notice, by the
Company's Board of Directors, by vote of a majority (as defined in the
1940 Act and Rule 18f-2 thereunder) of the outstanding voting
securities of the Company, or by the Distributor. This Agreement will
also terminate automatically in the event of its assignment (as defined
in the 1940 Act and the rules thereunder).
2.2 In the event a termination notice is given by the Company, all expenses
associated with movement of records and materials and conversion
thereof will be borne by the Company.
3. Limitation of Liability
3.1 The Distributor shall not be liable to the Company for any error of
judgment or mistake of law or for any loss suffered by the Company in
connection with the performance of its obligations and duties under
this Agreement, except a loss resulting from the Distributor's willful
misfeasance, bad faith or negligence in the performance of such
obligations and duties, or by reason of its reckless disregard thereof.
The Company will indemnify the Distributor against and hold it harmless
from any and all claims, costs, expenses (including reasonable
attorneys' fees), losses, damages, charges, payments and liabilities of
any sort or kind which may be asserted against the Distributor for
which the Distributor may be held to be liable in connection with this
Agreement or the Distributor's performance hereunder (a "Section 3.1
Claim"), unless such Section 3.1 Claim resulted from a negligent act or
omission to act or bad faith by the Distributor in the performance of
its duties hereunder. The provisions of Section 1.12 shall apply to any
indemnification provided by the Company pursuant to this Section 3.1.
The obligations of the parties hereto under this Section 3.1 shall
survive termination of this Agreement.
3.2 Each party shall have the duty to mitigate damages for which the other
party may become responsible.
3.3 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL THE DISTRIBUTOR, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY
THEORY OF TORT, CONTRACT, STRICT LIABILITY OF OTHER LEGAL OR EQUITABLE
THEORY FOR LOST PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL,
INDIRECT OR CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY
AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE
FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
4. EXCLUSION OF WARRANTIES
THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, THE DISTRIBUTOR DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE COMPANY, A FUND OR ANY
OTHER PERSON, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING
QUALITY, SUITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE
OR OTHERWISE (IRRESPECTIVE OF ANY COURSE OF DEALING, CUSTOM OR USAGE OF
TRADE) OF ANY SERVICES OR ANY GOODS PROVIDED INCIDENTAL TO SERVICES
PROVIDED UNDER THIS AGREEMENT. THE DISTRIBUTOR DISCLAIMS ANY WARRANTY
OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE SET FORTH IN THIS
AGREEMENT.
5. Modifications and Waivers
No change, termination, modification, or waiver of any term or
condition of the Agreement shall be valid unless in writing signed by
each party. No such writing shall be effective as against the
Distributor unless said writing is executed by a Senior Vice President,
Executive Vice President or President of the Distributor. A party's
waiver of a breach of any term or condition in the Agreement shall not
be deemed a waiver of any subsequent breach of the same or another term
or condition.
6. No Presumption Against Drafter
The Distributor and the Company have jointly participated in the
negotiation and drafting of this Agreement. The Agreement shall be
construed as if drafted jointly by the Company and the Distributor, and
no presumptions arise favoring any party by virtue of the authorship of
any provision of this Agreement.
7. Publicity
Neither the Distributor nor the Company shall release or publish news
releases, public announcements, advertising or other publicity relating
to this Agreement or to the transactions contemplated by it without
prior review and written approval of the other party; provided,
however, that either party may make such disclosures as are required by
legal, accounting or regulatory requirements after making reasonable
efforts in the circumstances to consult in advance with the other
party.
8. Severability
The parties intend every provision of this Agreement to be severable.
If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or
invalidity shall not affect the validity of the remainder of this
Agreement. In such case, the parties shall in good faith modify or
substitute such provision consistent with the original intent of the
parties. Without limiting the generality of this paragraph, if a court
determines that any remedy stated in this Agreement has failed of its
essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall
remain fully effective.
9. Force Majeure
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default
or delay is caused, directly or indirectly, by (i) fire, flood,
elements of nature or other acts of God; (ii) any outbreak or
escalation of hostilities, war, riots or civil disorders in any
country, (iii) any act or omission of the other party or any
governmental authority; (iv) any labor disputes (whether or not the
employees' demands are reasonable or within the party's power to
satisfy); or (v) nonperformance by a third party or any similar cause
beyond the reasonable control of such party, including without
limitation, failures or fluctuations in telecommunications or other
equipment. In any such event, the non-performing party shall be excused
from any further performance and observance of the obligations so
affected only for so long as such circumstances prevail and such party
continues to use commercially reasonable efforts to recommence
performance or observance as soon as practicable.
10. Miscellaneous
10.1 Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Company or the Distributor shall be
sufficiently given if addressed to the party and received by it at its
office set forth below or at such other place as it may from time to
time designate in writing.
To the Company:
Forward Funds, Inc.
433 California Street
Suite 1010
San Francisco, California 94104
To the Distributor:
First Data Distributors, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to the Distributors Chief Legal Officer
10.2 The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, and the applicable provisions of the 1940 Act shall
govern the interpretation, validity, and enforcement of this Agreement.
To the extent the provisions of Massachusetts law or the provisions
hereof conflict with the 1940 Act, the 1940 Act shall control. All
actions arising from or related to this Agreement shall be brought in
the state and federal courts sitting in the City of Boston, and the
Distributor and the Company hereby submit themselves to the exclusive
jurisdiction of those courts
10.3 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and which collectively shall be
deemed to constitute only one instrument.
10.4 The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
10.5 This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and is not intended
to confer upon any other person any rights or remedies hereunder.
11. Confidentiality
11.1 The parties agree that the Proprietary Information (defined below) and
the contents of this Agreement (collectively "Confidential
Information") are confidential information of the parties and their
respective licensers. The Company and the Distributor shall exercise
reasonable care to safeguard the confidentiality of the Confidential
Information of the other. The Company and the Distributor may each use
the Confidential Information only to exercise its rights or perform its
duties under this Agreement. The Company and the Distributor shall not
duplicate, sell or disclose to others the Confidential Information of
the other, in whole or in part, without the prior written permission of
the other party. The Company and the Distributor may, however, disclose
Confidential Information to its employees who have a need to know the
Confidential Information to perform work for the other, provided that
each shall use reasonable efforts to ensure that the Confidential
Information is not duplicated or disclosed by its employees in breach
of this Agreement. The Company and the Distributor may also disclose
the Confidential Information to independent contractors, auditors and
professional advisors, provided they first agree in writing to be bound
by the confidentiality obligations substantially similar to this
Section 11. Notwithstanding the previous sentence, in no event shall
either the Company or the Distributor disclose the Confidential
Information to any competitor of the other without specific, prior
written consent.
11.2 Proprietary Information means:
(a) any data or information that is completely sensitive material, and
not generally known to the public, including, but not limited to,
information about product plans, marketing strategies, finance,
operations, customer relationships, customer profiles, sales estimates,
business plans, and internal performance results relating to the past,
present or future business activities of the Company or the
Distributor, their respective subsidiaries and affiliated companies and
the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Company or the
Distributor a competitive advantage over its competitors: and
(c) all confidential or proprietary concepts, documentation, reports,
data, specifications, computer software, source code, object code, flow
charts, databases, inventions, know-how, show-how and trade secrets,
whether or not patentable or copyrightable.
11.3 Confidential Information includes, without limitation, all documents,
inventions, substances, engineering and laboratory notebooks, drawings,
diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either
party which now exist or come into the control or possession of the
other.
11.4 The Company acknowledges that breach of the restrictions on use,
dissemination or disclosure of any Confidential Information would
result in immediate and irreparable harm, and money damages would be
inadequate to compensate the Distributor for that harm. The Distributor
shall be entitled to equitable relief, in addition to all other
available remedies, to redress any such breach.
11.5 The obligations of confidentiality and restriction on use herein shall
not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this Agreement or
subsequently came into the public domain through no fault of such
party; or
(b) Was lawfully received by the party from a third party free of any
obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to receipt
thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining such
information in confidence have been exhausted including, but not
limited to, giving the other party as much advance notice of the
possibility of such disclosure as practical so the other party may
attempt to stop such disclosure or obtain a protective order concerning
such disclosure; or
(e) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the
Confidential Information disclosed under this Agreement.
12. Director/Trustee Liability
The Company and the Distributor agree that the obligations of the
Company under the Agreement shall not be binding upon any of the
Directors, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Company individually, but are
binding only upon the assets and property of the Company, as provided
in the Articles of Incorporation. The execution and delivery of this
Agreement have been authorized by the Directors of the Company, and
signed by an authorized officer of the Company, acting as such, and
neither such authorization by such Directors nor such execution and
delivery by such officer shall be deemed to have been made by any of
them or any shareholder of the Company individually or to impose any
liability on any of them or any shareholder of the Company personally,
but shall bind only the assets and property of the Company as provided
in the Articles of Incorporation.
13. Entire Agreement
This Agreement, including all Schedules hereto, constitutes the entire
agreement between the parties with respect to the subject matter hereof
and supersedes all prior and contemporaneous proposals, agreements,
contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
FORWARD FUNDS, INC.
By:_________________________
Name:_______________________
Title:______________________
FIRST DATA DISTRIBUTORS, INC.
By:_________________________
Name:_______________________
Title:______________________
<PAGE>
SCHEDULE A
to the Distribution Agreement
between the Forward Funds, Inc. and
First Data Distributors, Inc.
Name of Funds
The Global Fund
CUSTODIAN AGREEMENT
AGREEMENT made as of this 2nd day of March, 1998 between Forward Funds,
Inc. (the "Fund") on behalf of each of the portfolios listed on Appendix B
hereto as the same may be amended from time to time (each a "Fund" and
collectively the "Funds"), and BROWN BROTHERS HARRIMAN & CO. (the "Custodian").
WITNESSETH
WHEREAS the Fund is organized as a Maryland Corporation with one or more
series of shares, and is an open-end management investment company registered
with the Securities and Exchange Commission;
WHEREAS, the Fund does not desire to have custody of any assets, including
securities of the Fund, and, under interpretations of the Securities and
Exchange Commission, will not be deemed to have custody if the procedures set
forth below are followed; and
WHEREAS each Fund represents an interest in a separate portfolio of cash,
securities and other assets (all references to a "Fund" or the "Funds" shall be
deemed to include each portfolio within the Fund as the context may make
appropriate); and
WHEREAS the Fund wishes to employ the Custodian and the Custodian has
agreed to provide custodial, banking and related services to the Fund in
accordance with the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Fund and the Custodian agree as follows:
1. Appointment of Custodian. Upon the terms and conditions set forth in
this Agreement, the Fund hereby appoints the Custodian as a custodian, and the
Custodian hereby accepts such appointment. The Fund shall deliver or shall cause
to be delivered to the Custodian cash, securities and other property
("Property") owned by the Fund from time to time during the term of this
Agreement. The Custodian shall be under no obligation to request or to require
that any or all Property of the Fund be delivered to it, and the Custodian shall
have no responsibility with respect to any Property not delivered to it.
The Fund may in the future authorize the establishment of separate accounts
which hold Property of the Fund and with respect to which a certain investment
adviser or manager will be authorized to act and give instructions to the
Custodian (an "Investment Adviser"). The Fund shall notify the Custodian in
writing by a Proper Instruction of such authorization, whereupon the Custodian
may accept and act on Proper Instructions it reasonably believes to be sent by
such Investment Adviser.
2. Definitions.
In this Agreement, the following words shall, unless the context otherwise
requires, have the following meanings:
(i) "1940 Act" - the Investment Company Act of 1940 and the rules and
regulations thereunder.
(ii) "Advances" - shall have the meaning ascribed to it in Section 11 hereof.
(iii) "Agency Accounts" - shall have the meaning ascribed to it in Section 5
hereof.
(iv) "Agent" - shall have the meaning ascribed to it in Section 7 hereof.
(v) "BBH Accounts" - shall have the meaning ascribed to it in Section 5
hereof.
(vi) "Book-Entry Agent" - shall have the meaning ascribed to it in Section
4.1(b) hereof.
(vii) "Derivative Instruments and Commodities" - any form of risk transfer
contract in which a gain or loss is recognized from fluctuations in
market price levels or rates, indexes or benchmarks, and which includes
without limitation futures, forwards, options, swaps, forward rate and
forward exchange contracts, leverage- or commodity-related similar
contracts and any other risk transfer contract whether traded on or off
an exchange.
(viii) "Electronic Instructions" - shall have the meaning ascribed to it in
Section 8.3 hereof.
(ix) "Electronic Reports" - shall have the meaning ascribed to it in Section
8.3 hereof.
(x) "Force Majeure" - shall have the meaning ascribed to it in Section 10.4
hereof.
(xi) "Investments" - assets of the Fund, other than Property held by the
Custodian, a Subcustodian or a Securities Depository, but which the
Custodian may note on its records as being assets of the Fund including
without limitation Derivative Instruments and Commodities.
(xii) "Investment Adviser" - shall have the meaning ascribed to it in Section
1 hereof.
(xiii) "Liability" - shall have the meaning ascribed to it in Section 11
hereof.
(xiv) "Margin Account" - shall have the meaning ascribed to it in Section
4.2(d) hereof.
(xv) "Margin Agreement" - shall have the meaning ascribed to it in Section
4.2(d) hereof.
(xvi) "Omnibus Accounts" - accounts established in the name of the Custodian
on behalf of its customers in which assets on deposit with the Custodian
by one or several customers may be deposited. Omnibus Accounts may be
established for the purpose of holding cash or securities.
(xvii) "Proper Instructions" - any direction to take or not to take action in
respect of Property (including cash) or Investments which the Custodian
reasonably believes to be sent by an authorized person and to be
genuine. Proper Instructions may be sent via the media set forth in
Section 6 hereof or as otherwise agreed between the Custodian and the
Fund.
(xviii) "Property" - shall have the meaning ascribed to it in Section 1 hereof.
(xix) "Securities Accounts" - shall have the meaning ascribed to it in Section
4 hereof.
(xx) "Securities Depository" - a generally recognized book-entry system or a
clearing agency which acts as a securities depository in any country in
which securities are maintained under this Agreement and with which the
Custodian or a Subcustodian may maintain securities or other Property
owned by or held on behalf of the Fund, pursuant to the provisions
hereof, including Euroclear and Cedel.
(xxi) "Segregated Accounts" - shall have the meaning ascribed to it in Section
4.2(d) hereof.
(xxii) "Subcustodian" - shall mean any subcustodian appointed pursuant to
Section 7 of this Agreement.
(xxiii) "Voluntary Corporate Actions" - corporate actions (as further described
in Section 4) in respect of portfolio securities of the Fund which
require an investment decision.
3. Representations, Warranties and Covenants of the Fund. The Fund represents
and warrants that the execution, delivery and performance by the Fund of this
Agreement are within the Fund's corporate, trust or other constitutive powers,
have been duly authorized by all necessary corporate, trust or other appropriate
action under its constitutive documents, and do not contravene or constitute a
default under any provision of applicable law or regulation or of the
constitutive documents of the Fund or of any agreement, judgment, injunction,
order, decree or other instrument binding upon the Fund. The Fund agrees to
inform the Custodian reasonably promptly if any statement set forth in this
Section 3 or elsewhere made by the Fund in this Agreement ceases to be true and
correct. The Fund shall safeguard and shall solely be responsible for the
safekeeping of any testkeys, identification codes, other security devices or
statements of account with which the Custodian provides it. If and when
applicable, the Fund shall execute a license agreement or sublicense agreement
governing its use of any electronic instruction system proprietary to the
Custodian or an affiliate of the Custodian or proprietary to a third party which
has licensed such system to the Custodian or an affiliate of the Custodian.
The Fund hereby represents and warrants that it has disclosed appropriately
and adequately, or will appropriately and adequately disclose, all material
investments risks, including without limitation those relating to the custody,
settlement or servicing of foreign securities in the markets in which the Fund
invests or intends to invests, to the shareholders or other investors in the
Fund or to other persons who have property or contractual rights to or interests
in the assets of the Fund which are the subject of this Custodian Agreement.
4. Securities Account. The Fund hereby authorizes the Custodian to open and
maintain, with itself or with Subcustodians, securities accounts (the
"Securities Account") and authorizes the Custodian to deposit or record, as the
case may be, in such Securities Account the Fund's Property delivered to and
accepted by the Custodian, or such other Investments as the Fund requests the
Custodian to record by notation only. The Custodian shall keep safely all
Property delivered to it. In the event of a loss of a security for which the
Custodian would be liable under the provisions of this Agreement, the Custodian
shall be responsible for either replacing the security or for reimbursing the
Fund the value of the security as of the date the loss is first discovered by
the Fund or the Custodian. The Securities Account shall be maintained in the
manner and on the terms set forth below. (All references in this Section to the
Custodian shall include a Subcustodian, Securities Depository or any agent of
the Custodian.)
4.1 Manner of Holding or Recording Securities and Other Investments.
(a) Securities Represented by Physical Certificate. Securities
represented by share certificates or other instruments may be held in
registered or bearer form (i) in the Custodian's vault, (ii) in the vault
of a Subcustodian or other agent of the Custodian, (iii) in an account
maintained by the Custodian or a Subcustodian at a Securities Depository,
or (iv) in accordance with customary market practice in the Custodian's
discretion (x) in the country in which settlement is to occur or (y) for
the particular security in respect of which settlement is instructed.
Securities held at a Subcustodian will be held subject to the terms of
the Subcustodian Agreement in effect between the Custodian and the
Subcustodian and may be held in Omnibus Accounts.
Securities held in a Securities Depository will be held subject to the
agreement, rules, statement of terms and conditions or other document or
conditions effective between the Securities Depository and the Custodian or
the Subcustodian. Such securities shall be held (i) in an account which
contains only assets of the Custodian held as custodian or otherwise on
behalf of others if such account is maintained by the Custodian with a
Securities Depository (unless market practice or Securities Depository
rules and regulations require the Custodian also to hold its own assets in
such account), or (ii) in an account which contains only assets of the
Subcustodian or other agent held as custodian or otherwise on behalf of
others if such account is maintained by the Subcustodian or other agent
with a Securities Depository (unless market practice or Securities
Depository rules and regulations require a Subcustodian also to hold its
own assets in such account).
Registered securities of the Fund may be registered in the name of the
Custodian, the Fund or a nominee of either of them and may be held in any
manner set forth above, with or without any indication of fiduciary
capacity, provided that securities are held in an account of the Custodian
or a Subcustodian containing only assets of the Fund or only assets held by
the Custodian or a Subcustodian as custodian for its customers or are
otherwise held on behalf of others.
(b) Securities Represented by Book Entry. Securities represented by
book-entry on the books of the issuer, a registrar, a clearing agency or
other agent of the issuer (a "Book-Entry Agent") may be so held in an
account of the Custodian or a Subcustodian or other Agent maintained with
such Book-Entry Agent provided such account contains only assets of the
Fund or only assets held as custodian for customers or are otherwise held
on behalf of others.
(c) Other Investments. At the specific request of the Fund, the
Custodian may note on its records Investments owned by the Fund that are
not represented by physical securities or by book-entry, including without
limitation Derivative Instruments and Commodities. The Fund acknowledges
that such notation is for recordkeeping purposes only, that the Custodian
may not be able to exercise control over such Investments and that such
Investments may represent contractual rights of the Fund which the
Custodian cannot enforce. The Fund shall be responsible for requesting that
any statements applicable to such Investments, including brokerage
statements, be sent to the Custodian.
4.2 Powers and Duties of the Custodian with Respect to the Securities
Account. The Custodian shall have the following powers and duties with respect
to the Securities Account:
(a) Purchases. Upon receipt of Proper Instructions, insofar as funds
are available or as funds are otherwise provided by the Custodian at its
discretion pursuant to Section 11 hereof for the purpose, to pay for and
receive securities purchased for the account of the Fund, payment being
made (i) upon receipt of the securities by the Custodian, by a clearing
corporation of a securities exchange of which the Custodian or a
Subcustodian is a member, or by a Securities Depository, or (ii) otherwise
in accordance with (A) governmental regulations, (B) rules of Securities
Depositories or other U.S. or foreign clearing agencies, (C) generally
accepted trade practice in the applicable local market, (D) the terms of
the instrument representing the security, or (E) the terms of Proper
Instructions.
(b) Sales. Upon receipt of Proper Instructions, to make delivery of
securities which have been sold for the account of the Fund (i) against
payment therefor in cash, by check or by bank wire transfer; (ii) by credit
to the account of the Custodian or Subcustodian with a clearing corporation
of a securities exchange of which the Custodian or a Subcustodian is a
member; (iii) by credit to the account of the Custodian or Subcustodian
with a Securities Depository; or (iv) otherwise in accordance with (A)
governmental regulations, (B) rules of Securities Depositories or other
U.S. or foreign clearing agencies, (C) generally accepted trade practice in
the applicable local market, (D) the terms of the instrument representing
the security, or (E) the terms of Proper Instructions.
(c) Other Transfers. To deliver Property of the Fund to a
Subcustodian, another custodian or another third party as necessary to
effect transactions authorized by Proper Instructions, and upon receipt of
Proper Instructions, to make such other disposition of Property of the Fund
in a manner other than or for purposes other than as enumerated elsewhere
in this Agreement, provided that the instructions relating to such
disposition shall state the amount of Property to be delivered and the name
of the person or persons to whom delivery is to be made.
(d) Futures; Options; Segregated Accounts. Upon the receipt of Proper
Instructions and the execution of any agreements relating to margin in
respect of a Derivative Instrument or Commodity ("Margin Agreements"), to
establish and maintain on its books a segregated account or accounts for
and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities of the Fund in accordance with the terms
of such Margin Agreements and any Proper Instructions ("Segregated
Accounts").
Upon receipt of Proper Instructions or upon receipt of instructions
given pursuant to any Margin Agreement, or pursuant to the terms of such
Agreement, the Custodian shall (i) receive and retain, to the extent the
same are provided to the Custodian, confirmations or other documents
evidencing the purchase or sale of such Derivative Instruments or
Commodities by the Fund; (ii) deposit and maintain, pursuant to a Margin
Agreement, in a segregated account, either physically or by book-entry in a
Securities Depository, for the benefit of any futures commission merchant
("Margin Account"), or pay pursuant to Proper Instructions to such broker,
dealer or futures commission merchant, such securities, cash or other
assets as are designated by the Fund as initial, maintenance or variation
"margin" deposits or other collateral intended to secure the Fund's
performance of its obligations under the terms of any Derivative Instrument
or Commodity, in accordance with the provisions of any Margin Agreement
relating thereto; and (iii) otherwise pay, release and/or transfer
securities, cash or other assets into or out of such Margin Accounts only
in accordance with the provisions of any such Margin Agreement. The
Custodian shall not be responsible for the sufficiency of assets held in
any segregated account established in compliance with applicable margin
maintenance requirements or for the performance of the other terms of any
agreement relating to a Derivative Instrument or Commodity.
Notwithstanding anything in this Agreement to the contrary, the Fund
agrees that the Custodian's responsibility for any Derivative Instruments
and Commodities shall be limited to the exercise of reasonable care with
respect to any confirmations or other documents evidencing the purchase or
sale of such Derivative Instrument by the Fund which the Custodian
receives.
(e) Stock Lending. Upon receipt of Proper Instructions, to deliver
securities of the Fund, in connection with loans of securities by the Fund,
to the borrower thereof prior to receipt of the collateral, if any, for
such borrowing.
(f) Non-Discretionary Details. Without the necessity of express
authorization from the Fund, (1) to attend to all nondiscretionary details
in connection with the sale, exchange, substitution, purchase, transfer or
other dealings with securities, cash or other Property of the Fund held by
the Custodian except as otherwise directed from time to time by the
Directors or Trustees of the Fund, and (2) to make payments to itself or
others for minor expenses of handling securities or other similar items
relating to the Custodian's duties under this Agreement, provided that all
such payments shall be accounted for to the Fund.
4.3 Corporate Actions. Unless the Custodian receives timely Proper
Instructions to the contrary, the Custodian will perform or will cause the
Subcustodian to perform the following:
(i) exchange securities held by it for the account of the Fund for
other securities in connection with any reorganization, recapitalization,
split-up of shares, change of par value, conversion or other event relating
to the securities or the issuer of such securities, and shall deposit any
such securities in accordance with the terms of any reorganization or
protective plan;
(ii) surrender securities in temporary form for definitive securities;
surrender securities for transfer into the name of the Custodian, the Fund
or a nominee of either of them, as permitted by Section 4.1(a); and
surrender securities for a different number of certificates or instruments
representing the same number of shares or same principal amount of
indebtedness;
(iii) deliver warrants, puts, calls, rights or similar securities to
the issuer or trustee thereof, or to the agent of such issuer or trustee,
for the purpose of exercise or sale, and deposit securities upon
invitations for tenders thereof;
(iv) take all necessary action to comply with the terms of all
mandatory or compulsory exchanges, calls, tenders, redemptions, or similar
rights of security ownership, and promptly notify the Fund of such action,
and collect all stock dividends, rights and other items of like nature;
(v) collect amounts due and payable to the Fund with respect to
portfolio securities of the Fund, and promptly credit to the account of the
Fund all income and other payments relating to portfolio securities and
other assets held by the Custodian hereunder upon Custodian's receipt of
such income or payments or as otherwise agreed in writing by the Custodian
and the Fund, provided that the Custodian shall not be responsible for the
collection of amounts due and payable with respect to portfolio securities
that are in default;
(vi) endorse and deliver any instruments required to effect collection
of any amount due and payable to the Fund with respect to securities;
execute ownership and other certificates and affidavits on the Fund's
behalf for all federal, state and foreign tax purposes in connection with
receipt of income, capital gains or other payments with respect to
portfolio securities and other assets of the Fund, or in connection with
the purchase, sale or transfer of such securities or other assets; and file
any certificates or other affidavits for the refund or reclaim of foreign
taxes paid;
(vii) deliver to the Fund all forms of proxies, all notices of
meetings, and any other notices or announcements affecting or relating to
securities owned by the Fund that are received by the Custodian, any
Subcustodian, or any nominee of either of them, and, upon receipt of Proper
Instructions, the Custodian shall execute and deliver, or cause such
Subcustodian or nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Proper
Instructions, neither the Custodian nor any Subcustodian or nominee shall
vote upon any such securities, or execute any proxy to vote thereon, or
give any consent or take any other action with respect thereto.
In fulfilling the duties set forth above, the Custodian shall be
responsible for sending to the Fund all information pertaining to the relevant
terms of a corporate action which it in fact receives, provided that the
Custodian shall not be responsible for incorrect information it receives, or
information it has not received but should have received, from industry-accepted
third-party securities information vendors.
Notwithstanding any provision of this Agreement to the contrary, with
respect to portfolio securities registered in so-called street name, the
Custodian shall use reasonable efforts to collect cash or share entitlements due
and payable to the Fund but shall not be responsible for its inability to
collect such cash or share entitlements.
The Custodian shall only be responsible for acting on the Proper
Instructions of the Fund in respect of any Voluntary Corporate Action which
requires an investment decision by the Investment Adviser provided the Custodian
has received a Proper Instruction which requesting such action a reasonable time
prior to expiration of the time within which action in respect of such Voluntary
Corporate Action may be taken, in order to ensure that Custodian has sufficient
time to take such action. The deadline for the acceptance of such instruction
may be set forth by the Custodian in its communication of the terms of such
action to the Fund and shall take into consideration delays which occur due to
(i) the involvement of a Subcustodian, Securities Depository or other
intermediary; (ii) differences in time zones; or (iii) other factors particular
to a given market, exchange or issuer.
Any advance credit of cash or shares by the Custodian or a Subcustodian
expected to be received as a result of any corporate event shall be subject to
actual collection and may, when the Custodian deems such collection unlikely, be
reversed by the Custodian upon written notice to the Fund. As used herein, an
"advance credit of cash or shares" shall mean any credit of cash or shares to
any account maintained hereunder prior to actual receipt and collection of such
cash or shares in anticipation of a distribution expected to be received in the
future.
5. Cash Accounts.
5.1 Opening and Maintaining Cash Accounts. Subject to the terms and
conditions set forth in this Section 5, the Fund hereby authorizes the Custodian
to open and maintain, with itself or with Subcustodians, cash accounts in United
States Dollars and in such other currencies as the Fund shall from time to time
request or as are in the Custodian's discretion required in order for the
Custodian to carry out the terms of this Agreement. The Custodian shall make
payments from or deposits to any of said accounts upon its receipt of Proper
Instructions from the Fund providing sufficient details to effect such
transaction.
Cash accounts opened on the books of the Custodian ("BBH Accounts") shall
be opened in the name of the Fund. Subject always to the provisions of Section
10 hereof, the Custodian shall be liable for repayment of any and all deposits
carried on its books as principal, whether denominated in United States Dollars
or in other currencies.
Cash accounts opened on the books of Subcustodians appointed pursuant to
Section 7 hereof may be opened in the name of the Fund or the Custodian or in
the name of the Custodian for its customers generally ("Agency Accounts"). Such
deposits shall be treated as portfolio securities, and accordingly the Custodian
shall be responsible for the exercise of reasonable care in respect of the
administration of such Agency Accounts but shall not be liable for their
repayment in the event the Subcustodian fails to make repayment (including in
the event of the Subcustodian's bankruptcy or insolvency). Both BBH Accounts and
Agency Accounts shall have the benefit of the provisions of Section 10 of this
Agreement.
The Fund bears all risks of holding or transacting in any currency. Any
credit made to any Agency or BBH Account shall be provisional and may be
reversed by the Custodian in the event such payment is not actually collected.
The Custodian shall not be liable for any loss or damage arising from the
applicability of any law or regulation now or hereafter in effect, or from the
occurrence of any event, which may delay or affect the transferability,
convertibility or availability of any currency in the country (i) in which such
BBH or Agency Accounts are maintained or (ii) in which such currency is issued,
and in no event shall the Custodian be obligated to make payment of a deposit
denominated in a currency during the period during which its transferability,
convertibility or availability has been affected by any such law, regulation or
event. Without limiting the generality of the foregoing, neither the Custodian
nor any Subcustodian shall be required to repay any deposit made at a foreign
branch of either the Custodian or Subcustodian if such branch cannot repay the
deposit due to (i) an act of war, insurrection or civil strife; or (ii) an
action by a foreign government or instrumentality, whether de jure or de facto,
in the country in which the branch is located preventing such repayment, unless
the Custodian or such Subcustodian expressly agrees in writing to repay the
deposit under such circumstances.
All currency transactions in any account opened pursuant to this Agreement
are subject to exchange control regulations of the United States and of the
country where such currency is the lawful currency or where the account is
maintained. Any taxes, costs, charges or fees imposed on the convertibility of a
currency held by the Fund shall be for the account of the Fund.
5.2 Foreign Exchange Transactions. The Custodian shall, pursuant to Proper
Instructions, settle foreign exchange transactions (including contracts,
futures, options and options on futures) on behalf and for the account of the
Fund with such currency brokers or banking institutions, including
Subcustodians, as the Fund may direct pursuant to Proper Instructions. The
Custodian shall be responsible for the transmission of cash and instructions to
and from the currency broker or banking institution with which the contract or
option is made and the safekeeping of all certificates and other documents and
agreements evidencing or relating to such foreign exchange transactions as the
Custodian may receive. In connection with such transactions, the Custodian is
authorized to make free outgoing payments of cash in the form of U. S. Dollars
or foreign currency without receiving confirmation of a foreign exchange
contract or option or confirmation that the countervalue currency completing the
foreign exchange contract has been delivered or received or that the option has
been delivered or received. The Fund accepts full responsibility for its use of
third-party foreign exchange dealers and for execution of said foreign exchange
contracts and options and understands that the Fund shall be responsible for any
and all costs and interest charges which may be incurred by the Fund or the
Custodian as a result of the failure or delay of third parties to deliver
foreign exchange.
Foreign exchange transactions (including without limitation contracts,
futures, options, and options on futures), other than those executed with the
Custodian as principal, but including those executed with Subcustodians, shall
be deemed to be portfolio securities of the Fund and accordingly the Custodian
shall only be responsible for delivering or receiving currency on behalf of the
Fund in respect of such contracts pursuant to Proper Instructions subject to the
fourth paragraph of this Section 5. The Custodian shall not be responsible for
the failure of any counterparty in such agency transaction to perform its
obligations thereunder.
Alternatively, such transactions may be undertaken by the Custodian as
principal, if instructed by the Fund and accepted by the Custodian, which
instructions may be in the form of a standing instruction.
The obligations of the Custodian in respect of all foreign exchange
transactions shall be contingent on the free, unencumbered transferability of
the currency transacted on the actual settlement date of the transaction.
5.3 Delays. In the event a delay is caused by the negligence or willful
misconduct of the Custodian in carrying out a Proper Instruction to transfer
cash in connection with any transaction referred to in Section 5.1 or 5.2 above,
the Custodian shall be liable to the Fund for interest to be calculated at the
rate customarily paid by the Custodian on overnight deposits at the time the
delay occurs for the period from the day when the transfer should have been
effected until the day it is in fact effected. The Custodian shall not be liable
for delays in carrying out such instructions to transfer cash which are not due
to the Custodian's own negligence or willful misconduct.
6. Proper Instructions. Proper Instructions shall include, in the following
order of the preferred method of giving such instructions, authenticated
electromechanical communications including direct electronic transmissions,
authenticated SWIFT and tested telex, including Electronic Instructions as
described in Section 8.3,; a written request signed by two or more authorized
persons as set forth below; telefax transmissions; and oral instructions,
including telephone. Proper Instructions may also include such other methods of
communicating Proper Instructions as the parties hereto may from time to time
agree. Each of the first four methods of communicating Proper Instructions is
described and defined below and may from time to time be described and defined
in written operating memoranda between the Custodian and the Fund. The Custodian
is hereby authorized to act on instructions sent via any of the foregoing
methods from any director, employee or officer of the Fund or from the
Investment Adviser or other agent of the Fund as the Fund shall from time to
time instruct.
Authenticated electro-mechanical communications shall include
communications effected directly between electromechanical or electronic devices
or systems, including authenticated SWIFT and tested telex transmissions, and
other forms of communications involving or between such electro-mechanical or
electronic devices or systems as the parties may from time to time agree upon in
writing. In the event media other than tested telex transmissions are agreed
upon, the Custodian may in its discretion require that the Fund, its Investment
Adviser or other agent and the Custodian enter into certain operating memoranda
which shall set forth the media through which such Proper Instructions shall be
transmitted and the data which must be included in such Proper Instructions in
order for such instructions to be complete. Once such operating memoranda shall
have been instituted, the Fund, its Investment Adviser or other Agent shall be
responsible for sending instructions which meet the requirements set forth in
such operating memoranda and the Custodian shall only be responsible for acting
on instructions which meet such requirements. The Custodian shall not be liable
for damages of any kind, including direct or consequential losses resulting from
technological or equipment failures or communications system failures of any
kind in respect of instructions sent or attempted to be sent via
electromechanical communications.
A written request signed by two or more authorized persons shall include a
written request, direction, instruction or certification signed or initialed on
behalf of the Fund by two or more persons as the Directors or Trustees of the
Fund shall have from time to time authorized, or by such other written procedure
as the Custodian and the Fund shall from time to time agree in writing. Those
persons authorized to give Proper Instructions may be identified by the
Directors or Trustees by name, title or position (including any of its
directors, employees or agents or any investment manager or adviser or person or
entity with similar responsibilities which is authorized to give Proper
Instructions on behalf of the Fund to the Custodian) and will include at least
one officer empowered by the Directors or Trustees to name other individuals or
entities who are authorized to give Proper Instructions on behalf of the Fund.
Telephonic or other oral instructions or instructions given by telefax
transmission may be given by any one of the persons referred to in the preceding
paragraph and will be considered Proper Instructions if the Custodian believes
them to have been given by a person authorized to give such instructions with
respect to the transaction involved.
With respect to telefax transmissions, the Fund and the Custodian hereby
acknowledge that receipt of legible instructions cannot be assured, and that the
Custodian cannot verify that authorized signatures on telefax instructions are
original or properly affixed. Accordingly, the Custodian shall not be
responsible for losses or expenses incurred through actions taken in reliance on
inaccurately stated, illegible or unauthorized telefax instructions.
Oral instructions will be confirmed by authenticated electro-mechanical
communications or written instructions in the manner set forth above, but the
lack of such confirmation shall in no way affect any action taken by the
Custodian in reliance upon such oral instructions. The Fund hereby authorizes
the Custodian to tape record any and all telephonic or other oral instructions
given to the Custodian by or on behalf of the Fund (including any of its
Directors, Trustees, employees or agents or any Investment Adviser or person or
entity with similar responsibilities which is authorized to give Proper
Instructions on behalf of the Fund to the Custodian).
Proper Instructions may relate to specific transactions or to types or
classes of transactions, and may be in the form of standing instructions
The Custodian shall not be responsible for its failure to act on any
instruction received from the Fund which the Custodian in good faith believes
does not meet the requirements set forth herein.
7. Authority to Appoint Subcustodian and Agents and to Utilize Securities
Depositories. Subject to the provisions hereinafter set forth in this Section 7,
the Fund hereby authorizes the Custodian to utilize Securities Depositories to
act on behalf of the Fund and to appoint from time to time and to utilize
Subcustodians.
The Custodian may deposit and/or maintain Property of the Fund in any
non-U.S. Securities Depository provided such Securities Depository meets the
requirements of an "eligible foreign custodian" under Rule 17f-5 promulgated
under the 1940 Act, or any successor rule or regulation ("Rule 17f-5") or which
by order of the Securities and Exchange Commission is exempted therefrom. The
Custodian may deposit and/or maintain, either directly or through one or more
agents appointed by the Custodian, Property of the Fund in any Securities
Depository in the United States, including The Depository Trust Company,
provided such Depository meets applicable requirements of the Federal Reserve
Bank or of the Securities and Exchange Commission. Notwithstanding anything in
this Agreement to the contrary, any Property held in a Securities Depository,
whether or not the Custodian is a direct participant or member, will be held
subject to the rules, regulations, operating memoranda or other conditions of
participation in such Securities Depository.
The Custodian may, at any time and from time to time, appoint any bank as
defined in Section 2(a)(5) of the 1940 Act meeting the requirements of a
custodian under Section 17(f) of the 1940 Act and the rules and regulations
thereunder, to act on behalf of the Fund as a subcustodian for purposes of
holding Property of the Fund in the United States. Additionally, the Custodian
may, at any time and from time to time, appoint (i) any bank, trust company or
other entity meeting the requirements of an "eligible foreign custodian" under
Rule 17f-5 or which by order of the Securities and Exchange Commission is
exempted therefrom, or (ii) any bank as defined in Section 2(a)(5) of the 1940
Act meeting the requirements of a custodian under Section 17(f) of the 1940 Act
and the rules and regulations thereunder, to act on behalf of the Fund as a
subcustodian for purposes of holding Property of the Fund outside the United
States. Any bank, trust company or other entity appointed pursuant to the
foregoing provisions shall be a Subcustodian.
Prior to the appointment of any Subcustodian for purposes of holding
Property of the Fund outside the United States, the Custodian shall have
obtained written confirmation of the approval of the Board of Trustees or
Directors of the Fund with respect to; the country or countries in which, and
the Securities Depositories, if any, through which, a Subcustodian may hold
Property of the Fund. Each Subcustodian and the countries where and Securities
Depositories through which they may hold Property of the Customer shall be
listed on Appendix A attached hereto as the same may from time to time be
amended. The Custodian may, at any time in its discretion, remove any
Subcustodian but will promptly notify the Fund of any such action.
The Fund shall be responsible for informing the Custodian sufficiently in
advance of a proposed investment which is to be held in a country in which no
Subcustodian is authorized to act in order that the Custodian shall have
sufficient time to establish a subcustodial arrangement in accordance herewith.
In the event, however, the Custodian is unable to establish such arrangements
prior to the time such investment is to be acquired, the Custodian is authorized
to designate at its discretion a local safekeeping agent, and the use of such
local safekeeping agent shall be at the sole risk of the Fund, and accordingly
the Custodian shall be responsible to the Fund for the actions of such agent if
and only to the extent the Custodian shall have recovered from such agent for
any damages caused the Fund by such agent.
With respect to securities and funds held by a Subcustodian, either
directly or indirectly (including by a Securities Depository or clearing
agency), notwithstanding any provisions of this Agreement to the contrary,
payment for securities purchased and delivery of securities sold may be made
prior to receipt of securities or payment, respectively, and securities or
payment may be received in a form, in accordance with (i) governmental
regulations, (ii) rules of Securities Depositories and clearing agencies, (iii)
generally accepted trade practice in the applicable local market, (iv) the terms
of the instrument representing the security, or (v) the terms of Proper
Instructions.
In the event the Custodian receives a claim from a Subcustodian under the
indemnification provisions of any subcustodian agreement, the Custodian shall
promptly give written notice to the Fund of such claim. No more than thirty days
after written notice to the Fund of the Custodian's intention to make such
payment, the Fund will reimburse the Custodian the amount of such payment except
in respect of any negligence or misconduct of the Custodian.
The Custodian may at any time or times in its discretion appoint (and may
at any time remove) any other bank or trust company as its agent (an "Agent") to
carry out such of the provisions of this Agreement as the Custodian may from
time to time direct, provided, however, that the appointment of such Agent shall
not relieve the Custodian of any of its responsibilities under this Agreement.
8. Reporting Records. The Custodian shall have and perform the following duties
with respect to recordkeeping.
8.1 Records. The Custodian shall create, maintain and retain such records
relating to its activities and obligations under this Agreement as (i) will
enable the Custodian to comply with its obligations hereunder, (ii) may be
necessary to give a complete record of all Property held by it under this
Agreement, (iii) and as are customarily maintained by a professional custodian.
8.2 Access to Records. The books and records maintained by the Custodian
pursuant to this Section 8 shall at reasonable times during the Custodian's
regular business hours be open to inspections and audit by the auditors and by
employees and agents of the Fund provided that all such individuals shall
observe all security requirements of the Custodian applicable to its own
employees having access to similar records and such rules as may be reasonably
imposed by the Custodian. To the extent consistent with the laws of the
jurisdiction in which a Subcustodian operates as such, and with the rules of any
securities depository or clearing agency utilized by such Subcustodian, the
Custodian shall also seek to obtain from each Subcustodian an undertaking to
permit the persons specified in this section reasonable access to the records of
such Subcustodian relating to the Property or confirmation of the contents of
such records.
8.3 Electronic Records and Communications. The Custodian may make any of
its records available to the Fund or its Investment Adviser via electronic
reporting which may include without limitation on-line software systems
("Electronic Reports"). The Fund understands that such Electronic Reports may
include data provided to the Custodian by outside sources which may not have
been independently verified by the Custodian and is subject to change.
Accordingly, the Custodian shall not be liable for inaccuracies, errors or
incomplete information furnished by such sources.
The Custodian may also make available to the Fund or its Investment Adviser
certain software to be used to initiate payment and securities transfer
instructions, affirm brokerage transactions reported through the Institutional
Delivery System or initiate other transaction instructions for the Custodian's
processing ("Electronic Instructions").
The Fund agrees that it shall be responsible for protecting and maintaining
the confidentiality and security of any codes assigned in respect of the Fund's
or its Investment Adviser's access to such Electronic Reports or Electronic
Instructions and that any instructions received through such system using the
client code assigned to the Fund shall be deemed to have originated from or on
behalf of the Fund and to be Proper Instructions.
The Custodian shall not be responsible for information added to, changed or
omitted by electronic programming malfunction, unauthorized access or other
failure of such systems unless such actions are the direct result of the
Custodian's negligence, bad faith or willful malfeasance.
8.4 Review of Records. The Fund agrees to examine all records howsoever
produced or transmitted promptly upon receipt thereof and to notify the
Custodian promptly of any discrepancy or error therein. Unless the Fund delivers
written notice of any such discrepancy or error to the Custodian within a
reasonable period of time after its receipt thereof, such records shall be
deemed true and accurate.
8.5 Reports. The Custodian shall furnish to the Fund from time to time, as
mutually agreed upon, a statement of all Property held by the Custodian or
Subcustodian on behalf of the Fund.
9. Responsibility of Custodian. In carrying out the provisions of this
Agreement, the Custodian shall be held to the exercise of reasonable care,
provided that the Custodian shall not thereby be required to take any action
which is in contravention of any law, rule or regulation or any order of any
court of competent jurisdiction. As used in this Agreement, "reasonable care"
shall mean the level of care which a professional custodian providing custody
services to institutional investors would provide in light of the circumstances
and events which reasonably influence its performance in the market where the
securities are held or the transaction is effected, including without limitation
local market practices relating to securities settlement and safekeeping, and
"negligence" shall mean the failure to exercise reasonable care as herein
defined. The Custodian shall, subject to the provisions set forth in Sections 9
and 10 hereof, be responsible to the Fund for any direct loss or damage (without
taking into account special circumstances) which the Fund incurs by reason of
the Custodian's negligence, bad faith or willful malfeasance.
With respect to securities and funds held by a Subcustodian, either
directly or indirectly (including by a Securities Depository or foreign clearing
agency), including demand deposits, currencies or other deposits and foreign
exchange contracts as referred to herein, the Custodian shall be liable to the
Fund if and only to the extent that such Subcustodian is liable to the Custodian
and the Custodian recovers under the applicable subcustodian agreement.
With respect to the securities, cash and other Property of the Fund held by
a Securities Depository utilized by the Custodian or any Subcustodian or any
agent of the Custodian, the Custodian shall not be liable for the acts and
omissions of such Securities Depository unless and only to the extent that such
Securities Depository is liable to the Custodian and the Custodian recovers from
such Securities Depository, provided always that the Custodian shall be liable
to the Fund only for any direct loss or damage to the Fund resulting from use of
the Securities Depository if caused by the negligence, bad faith or willful
malfeasance of the Custodian.
The Fund agrees to indemnify and hold harmless the Custodian and its
nominees from all claims and liabilities (including counsel fees) incurred or
assessed against it or its nominees in connection with the performance of this
Agreement, except such as may arise from its or its nominees breach of the
relevant standard of conduct set forth herein. Without limiting the foregoing
indemnification obligation of the Fund, the Fund agrees to indemnify the
Custodian and any nominee in whose name portfolio securities or other property
of the Fund is registered against any liability the Custodian or such nominee
may incur by reason of taxes assessed to the Custodian or such nominee or other
costs, liability or expense incurred by the Custodian or such nominee resulting
directly or indirectly from the fact that portfolio securities or other property
of the Fund is registered in the name of the Custodian or such nominee.
10. Limitations to Custodian's Responsibility.
10.1 Liability in General. Except as otherwise provided in this Agreement,
the Custodian shall be responsible for loss or damage which the Fund may incur
by reason of the Custodian's negligence, bad faith or willful malfeasance,
provided always that such loss or damage shall be limited to direct damages
incurred by the Fund without taking into account special circumstances, and
provided further that the Custodian shall in no event be liable for indirect or
consequential damages or for loss of goodwill, even if the Custodian has been
advised of the likelihood of such loss or damage and regardless of the form of
action.
10.2 Liability of the Custodian with Respect to Proper Instructions;
Evidence of Authority; Etc. The Custodian shall not be liable for, and shall be
indemnified by the Fund for losses or damages incurred or assessed against the
Custodian as a result of, any action taken or omitted in reliance upon Proper
Instructions or upon any other written notice, request, direction, instruction,
certificate or other instrument believed by it to be genuine.
The Custodian shall be entitled, at the expense of the Fund, to receive and
act upon advice of (a) its own counsel or counsel which it selects, (b) counsel
for the Fund, or (c) such other counsel as the Fund and the Custodian may agree
upon, with respect to all matters. The Custodian shall be without liability for
any action taken or omitted pursuant to such advice.
10.3 Title to Securities, Fraudulent Securities. So long as and to the
extent that it is in the exercise of reasonable care, the Custodian shall not be
responsible for the title, validity or genuineness of any Property or evidence
of title thereto received by it or delivered by it pursuant to this Agreement.
10.4 Force Majeure. Notwithstanding any other provision contained herein,
the Custodian shall not be liable for any action taken, or for any failure to
take any action required to be taken hereunder, or otherwise for its failure to
fulfill its obligations hereunder (including without limitation the failure to
receive or deliver securities or the failure to receive or make any payment) in
the event and to the extent that the taking of such action or such failure
arises out of or is caused by civil commotion, act of God, accident, fire, water
damage, explosion, mechanical breakdown, computer or system failure or other
equipment failure, malfunction or failure caused by computer virus, failure or
malfunctioning of any communications medium for whatever reason, interruption
(whether partial or total) of power supplies or other utility service, strike or
other stoppage (whether partial or total) of labor, market conditions which
prevent the orderly execution of securities transactions or affect the value of
Property, any law, decree, regulation or order of any government or governmental
body, de facto or de jure (including any court or tribunal), rules or
regulations of any Securities Depository or clearing agency or any other cause
whatsoever (whether similar or dissimilar to the foregoing) beyond its control
or the control of its Subcustodian or other agent (collectively, "Force
Majeure").
10.5 Soverign Risk. Without limiting the generality of the foregoing
Section 10.4, the Custodian shall not be liable for any losses resulting from a
Sovereign Risk. As used herein, a Sovereign Risk shall mean any act of war,
terrorism, riot, insurrection or civil commotion; the imposition of exchange
control restrictions; confiscation, expropriation or nationalization of any
property including without limitation cash, cash equivalents, securities or the
assets of any issuer of securities by any governmental or quasi-governmental
authority (including without limitation those authorities which are judicial,
legislative, executive, military or religious in nature), whether de facto or de
jure; currency devaluation or revaluation; the imposition of taxes, levies or
other charges affecting the Fund's property, or any other political risk
(whether similar or dissimilar to the foregoing) incurred in respect of the
country in which the issuer of such securities is organized or in which such
securities are held or such payments are held or effected.
10.6 Currency Risks. The Fund bears all risks of holding or transacting in
any currency. Without limiting the generality of the foregoing, the Fund bears
all risks that rules or procedures imposed by Securities Depositories, exchange
controls, asset freezes or other laws or regulations shall prohibit or impose
burdens on or costs relating to the transfer by or for the account of the Fund
of securities, cash or currency held outside the United States or denominated in
a currency other than U. S. dollars or on the conversion of any currency so
held. The Custodian shall in no event be obligated to substitute another
currency (including U.S. dollars) for a currency whose transferability,
convertibility or availability has been affected by any such law, regulation,
rule or procedure.
10.7 Investment Risks not assumed by Custodian. The Custodian shall have
no liability in respect of any loss or damage suffered by the Fund, insofar as
such loss or damage arises from commercial or other investment risks inherent in
investing in capital markets or in holding securities in a particular
jurisdiction or country including without limitation: (i) political, legal,
economic, settlement and custody infrastructure, exchange rate and currency
risks; (ii) investment and repatriation restrictions; (iii) the Fund's or
Custodian's inability to protect and enforce any local legal rights including
rights of title and beneficial ownership; (iv) corruption and crime in the local
market; (v) unreliable information which emanates from the local market; (vi)
volatility of banking and financial systems and infrastructure; (vii) bankruptcy
and insolvency risks of any and all local banking agents, counterparties to cash
and securities transactions or registrars or transfer agents; (viii) risk of
issuer insolvency or default; and (ix) market conditions which prevent the
orderly execution of transactions or the value of assets.
10.8 Investment Limitations. In performing its duties generally, and more
particularly in connection with the purchase, sale and exchange of securities
made by or for the Fund, the Custodian may assume unless and until notified in
writing to the contrary that Proper Instructions received by it are not in
conflict with or in any way contrary to any provisions of the Fund's Declaration
of Trust or Certificate of Incorporation or By-Laws (or comparable documents) or
votes or proceedings of the shareholders or Trustees or Directors of the Fund.
The Custodian shall in no event be liable to the Fund and shall be indemnified
by the Fund for any violation which occurs in the course of carrying out
instructions given by the Fund or any Investment Adviser of any investment
limitations to which the Fund is subject or other limitations with respect to
the Fund's powers to make expenditures, encumber securities, borrow or take
similar actions affecting the Fund.
10.9 Foreign Ownership Limitations. The Fund shall be responsible for
monitoring foreign ownership limitations in any markets in which it invests.
10.10 Restricted Securities. The Custodian shall only be responsible for
notifying the Fund of any restrictions on the transfer of securities held in the
Securities Account of which the Custodian is in fact aware. In no event shall
the Custodian be responsible for the inability of a Fund to sell or transfer
restricted securities or for delays incurred in the sale or transfer of
restricted securities if such inability or delay is the result of the terms of
the security itself, actions of the issuer, its counsel or other representative
(including without limitation its registrar), or limitations due to laws,
regulations or other applicable rules. The Custodian shall only be responsible
for transmitting information to the Fund as to those corporate actions in
respect of restricted securities which it in fact receives.
10.11 Market Information. The Custodian may in its discretion make market
information available to the Fund. This service is for informational purposes
only and is not to be construed as a recommendation to buy or sell a particular
security, to invest or not to invest in a particular country, or to take any
action whatsoever. Although information reported therein is believed to be
accurate, the Custodian does not represent or warrant its accuracy or
completeness. The Fund accordingly acknowledges that the Custodian provides
market information on a best efforts basis and recognizes its responsibility to
consult with its own independent sources before making any investment or other
decisions.
11. Advances and Security for Advances. In the event that the Custodian is
directed by Proper Instructions to make any payment or transfer of funds from
any BBH or Agency Account on behalf of the Fund for which there would be, at the
close of business on the date of such payment or transfer, whether known at that
time or subsequently determined, insufficient funds held by the Custodian or any
Subcustodian, Securities Depository, or otherwise on behalf of the Fund, or if
the Custodian or any nominee thereof shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with the
performance of this Agreement (collectively a "Liability"), the Custodian may,
in its discretion without further Proper Instructions, provide or authorize an
advance ("Advance") for the account of the Fund in an amount sufficient to
satisfy such Liability or to allow the settlement or completion of the
transaction by reason of which such payment or transfer of funds is to be made.
Any Advance shall be payable on demand made by the Custodian, unless otherwise
agreed by the Fund and the Custodian, and shall accrue interest from the date of
the Advance to the date of payment by the Fund at a rate agreed upon from time
to time by the Custodian and the Fund or otherwise at the rate the Custodian
customarily charges on loans to customers. It is understood that any transaction
in respect of which the Custodian shall have made an Advance, including but not
limited to a foreign exchange contract or transaction in respect of which the
Custodian is not acting as a principal, is for the account of and at the risk of
the Fund, and not, by reason of such Advance, deemed to be a transaction
undertaken by the Custodian for its own account and risk. If the Custodian shall
make or authorize any Advance to the Fund or incur any Liability, then in such
event any property in the amount of such Advance or Liability at any time held
for the account of the Fund by the Custodian, a Subcustodian, a Securities
Depository or otherwise ("Collateral") shall be security for such Liability or
for such Advance and the interest thereon, and if the Fund shall fail to pay
such Advance or interest when due or shall fail to reimburse or indemnify the
Custodian promptly in respect of a Liability, the Custodian shall be entitled to
utilize available cash and to dispose of the Fund's property, including
securities and balances in any BBH or Agency Account, to the extent necessary
(which shall include the right to sell or assign securities or otherwise assign
its security interest to third parties) to obtain repayment, reimbursement or
indemnification.
For purposes of this Section 11, all such Collateral shall be treated as
financial assets credited to securities accounts under revised Articles 8 and 9
of the Uniform Commercial Code (1994), whether such Articles have in fact been
adopted in the jurisdiction in which the securities are held or the Advance is
granted. Accordingly, with respect to any Collateral, the Custodian shall have
the rights and benefits of a secured creditor that is a securities intermediary
for the Fund under the Uniform Commercial Code as revised.
Deposits maintained in Agency Accounts and BBH Accounts (including all
accounts denominated in any currency) shall collectively constitute a single and
indivisible current account with respect to the Fund's obligations to the
Custodian or any Subcustodian hereunder. Accordingly, balances in all such
Agency and BBH Accounts shall at all times be available for satisfaction of the
Fund's obligations under this Agreement to the Custodian or any of its
Subcustodians or agents including without limitation any Advances incurred
pursuant to this Section.
12. Compensation. The Fund shall pay the Custodian a custody fee based on such
fee schedule as may from time to time be agreed upon in writing by the Custodian
and the Fund. Such fee, together with all out-of-pocket expenses for which the
Custodian is to be reimbursed, shall be billed to the Fund and be paid by cash
or wire transfer to the Custodian.
13. Termination. This Agreement shall continue in full force and effect until
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid, to the other party, such termination to take effect not sooner
than ninety (90) days after the date of such delivery or mailing. In the event
of termination the Custodian shall be entitled to receive, prior to delivery of
the securities, cash and other Property held by it, payment of all accrued fees
and unreimbursed expenses and all Advances and Liabilities, upon receipt by the
Fund of a statement setting forth such fees, expenses, Advances and Liabilities.
In the event of the appointment of a successor custodian, it is agreed that
the cash, securities and other Property owned by the Fund and held by the
Custodian or any Subcustodian shall be delivered to the successor custodian, and
the Custodian agrees to cooperate with the Fund in execution of documents and
performance of other actions necessary or desirable in order to substitute the
successor custodian for the Custodian under this Agreement.
14. Miscellaneous. The following miscellaneous provisions shall govern the
relationship between the parties --
14.1 Execution of Documents, Etc. Upon request, the Fund shall execute and
deliver to the Custodian such proxies, powers of attorney or other instruments
as may be reasonable and necessary or desirable in connection with the
performance by the Custodian or any Subcustodian of their respective obligations
to the Fund under this Agreement or any applicable subcustodian agreement with
respect to the Fund.
14.2 Entire Agreement. This Agreement constitutes the entire understanding
and agreement of the Fund, on the one hand, and the Custodian, on the other,
with respect to the subject matter hereof and accordingly, supersedes as of the
effective date of this Agreement any custodian agreement or other oral or
written agreements heretofore in effect between the Fund and the Custodian with
respect to custody of the Fund's Property.
14.3 Waivers and Amendments. No provision of this Agreement may be waived,
amended or terminated except by a statement in writing signed by the party
against which enforcement of such waiver, amendment or termination is sought;
provided however any appendix or addendum to this Agreement may be added or
amended from time to time by the Fund's execution and delivery to the Custodian
of such additional or amended appendix or addendum, in which case the terms
thereof shall take effect immediately upon execution by the Custodian or
otherwise as set forth in this Agreement.
14.4 Interpretation. In connection with the operation of this Agreement,
the Custodian and the Fund may agree in writing from time to time on such
provisions interpretative of or in addition to the provisions of this Agreement
with respect to the Fund as may be consistent with the general tenor of this
Agreement. No interpretative or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Agreement.
14.5 Captions. Headings contained in this Agreement, which are included as
convenient references only, shall have no bearing upon the interpretation of the
terms of the Agreement or the obligations of the parties hereto.
14.6 Governing Law. The provisions of this Agreement shall be construed in
accordance with and governed by the laws of the State of New York without giving
effect to principles of conflicts of law. The parties hereto irrevocably consent
to the exclusive jurisdiction of the courts of the State of New York and the
federal courts located in New York City in the borough of Manhattan.
14.7 Notices. Except in the case of Proper Instructions, notices and other
writings contemplated by this Agreement shall be delivered by hand or by
facsimile transmission (provided that in the case of delivery by facsimile
transmission, such notice or other writing shall also be mailed postage prepaid)
to the parties at the following addresses:
(a) If to the Fund:
Ronald Pelosi
Sutton Place Management Company, Inc.
433 California Street, Suite 1010
San Francisco, CA 94104
(b) If to the Custodian:
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Attn: Manager, Securities Department
Telephone (617) 742-1818
Telefax: (617) 772-2263
or to such other address as the Fund or the Custodian may have designated in
writing to the other.
14.8 Assignment. This Agreement shall be binding on and shall inure to the
benefit of the Fund and the Custodian and their respective successors and
assigns, provided that neither the Custodian nor the Fund may assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other party.
14.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
the Fund and the Custodian.
14.10 Confidentiality; Survival of Obligations. The parties hereto agree
that each shall treat confidentially the terms and conditions of this Agreement
and all information provided by each party to the other regarding its business
and operations. All confidential information provided by a party hereto shall be
used by any other party hereto solely for the purpose of rendering or obtaining
services pursuant to this Agreement and, except as may be required in carrying
out this Agreement, shall not be disclosed to any third party without the prior
consent of such providing party. The foregoing shall not be applicable to any
information that is publicly available when provided or thereafter becomes
publicly available other than through a breach of this Agreement, or that is
required to be disclosed by or to any bank examiner of the Custodian or any
Subcustodian, any regulatory authority, any auditor of the parties hereto, or by
judicial or administrative process or otherwise by applicable law or regulation.
The provisions of this Agreement and any other rights or obligations incurred or
accrued by any party hereto prior to termination of this Agreement shall survive
any termination of this Agreement. The Custodian shall seek to obtain an
agreement from each Subcustodian that shall require each Subcustodian, to the
extent permitted by law, to treat all matters regarding the Fund, and this
Agreement with the same degree of confidentiality as the Custodian has agreed
hereunder.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
FORWARD FUNDS, INC. BROWN BROTHERS HARRIMAN & CO.
On behalf of the portfolios
Listed on the attached Appendix B
By ________________________ By ___________________________
Name: Name:
Title: Title:
<PAGE>
APPENDIX "B"
TO
THE CUSTODIAN AGREEMENT
BETWEEN
FORWARD FUNDS, INC. on behalf of the Funds listed on Appendix B
and
BROWN BROTHERS HARRIMAN & CO.
Dated as of ___________________1998
The following is a list of Funds for which the Custodian shall serve under a
Custodian Agreement dated as of ______________ to provide custodial services to
the Funds. (the "Agreement"):
The Global Fund
IN WITNESS WHEREOF, each of the parties hereto have caused this Appendix to be
executed in its name and on behalf of each such Fund.
Forward Funds, Inc.
On behalf of each Fund
listed above BROWN BROTHERS HARRIMAN & CO.
By:____________________ By:________________________________
Name: Name:
Title: itle:
AMENDMENT TO THE CUSTODIAN AGREEMENT
AMENDMENT entered into as of this 2nd day of March, 1998 to the Custodian
Agreement between Forward Funds, Inc. on behalf of the portfolios listed on
Appendix B hereto as the same may be amended from time to time (each a "Fund"
and collectively the "Funds") and BROWN BROTHERS HARRIMAN & CO. (the
"Custodian") dated as of March 2, 1998 (the "Agreement").
In consideration of the Custodian's offering subcustodial services to the
Fund in Russia, the Fund and the Custodian agree that the Agreement is hereby
amended as follows:
1. Section 4. Securities Account is amended by the addition of the
following phrase at the end of said Section:
"provided, however, that the Custodian's responsibility for safekeeping
equity securities of Russian issuers ("Russian Equities") hereunder
shall be limited to the safekeeping of relevant share extracts from the
share registration books maintained by the entities providing share
registration services to issuers of Russian Equities (each a
"Registrar") indicating an investor's ownership of such securities
(each a "Share Extract")."
2. Section 4.1 (b) Securities Represented by Book-Entry, is amended by the
addition of the following at the end of said Section:
"However, with respect to Russian Equities, the Custodian shall
instruct a Subcustodian to endeavor to assure that registration thereof
shall be reflected on the books of the issuer's Registrar, subject to
the following conditions, but shall in no event be liable for losses or
costs incurred as a result of delays or failures in the registration
process, including without limitation the inability to obtain or
enforce relevant Share Extracts. Such registration may be in the name
of a nominee of a Subcustodian. In the event registration is in the
name of a Fund, such Fund hereby acknowledges that only the Custodian
or Subcustodian may give instructions to the Registrar to transfer or
engage in other transactions involving the Russian Equities so
registered.
A Subcustodian may from time to time enter into contracts with
Registrars with respect to the registration of Russian Equities
("Registrar Contracts"). Such Registrar Contracts may provide for (i)
regular share confirmations by the Subcustodian, (ii) reregistrations
within set timeframes, (iii) use of a Subcustodian's nominee name, (iv)
direct access by auditors of the Subcustodian or its clients to share
registers, and (v) specification of the Registrar's responsibilities
and liabilities. It is hereby acknowledged and agreed that the
Custodian does not represent or warrant that such Registrar Contracts
are enforceable.
If the Fund instructs the Custodian to settle a purchase of a
Russian Equity, the Custodian will instruct a Subcustodian to endeavor
on a best efforts basis to reregister the Russian Equity and obtain a
Share Extract in a timely manner.
After completion of reregistration of a Russian Equity in
respect of which a Subcustodian has entered into a Registrar Contract,
the Custodian shall instruct the Subcustodian to monitor such registrar
on a best efforts basis and to notify the Custodian upon the
Subcustodian's obtaining knowledge of the occurrence of any of the
following events ("Registrar Events"): (i) a Registrar has eliminated a
shareholder from the register or has altered registration records; (ii)
a Registrar has refused to register securities in the name of a
particular purchaser and the purchaser or seller has alleged that the
registrar's refusal to so register was unlawful; (iii) a Registrar
holds for its own account shares of an issuer for which it serves as
registrar; (iv) if a Registrar Contract is in effect with a Registrar,
the Registrar notifies the Subcustodian that it will no longer be able
materially to comply with the terms of the Registrar Contract; or (v)
if a Registrar Contract is in effect with a Registrar, the Registrar
has materially breached such Contract. The Custodian shall inform the
Funds of the occurrence of a Registrar Event provided the Custodian has
in fact received actual notice thereof from the Subcustodian.
It shall be the sole responsibility of the Fund to contact the
Custodian prior to executing any transaction in a Russian Equity to
determine whether a Registrar Contract exists in respect of such
issuer.
If the Fund instructs the Custodian by Proper Instruction to
settle a purchase of a Russian Equity in respect of which the
Subcustodian has not entered into a Registrar Contract, then the
Custodian shall instruct the Subcustodian to endeavor to settle such
transaction in accordance with the Proper Instruction and with the
provisions of Section 4.2 (a) of this Agreement, notwithstanding the
absence of any such Registrar Contract and without the Custodian being
required to notify the Fund that no such Registrar Contract is then in
effect, and it being understood that neither the Custodian nor the
Subcustodian shall be required to follow the procedure set forth in the
second preceding paragraph."
3. Section 4.2 (a) Purchases, is amended by the addition of the following
at the end of said Section:
"Without limiting the generality of the foregoing, the
following provisions shall apply with respect to settlement of
purchases of securities in Russia. Unless otherwise instructed by
Proper Instructions acceptable to the Custodian, the Custodian shall
only authorize a Subcustodian to make payment for purchases of Russian
Equities upon receipt of the relevant Share Extract in respect of the
Fund's purchases. With respect to securities other than Russian
Equities, settlement of purchases shall be made in accordance with
securities processing or settlement practices which the Custodian in
its discretion determines to be a market practice. The Custodian shall
only be responsible for securities purchased upon actual receipt of
such securities at the premises of its Subcustodian, provided that the
Custodian's responsibility for securities represented by Share Extracts
shall be limited to the safekeeping of the relevant Share Extract upon
actual receipt of such Share Extract at the premises of the
Subcustodian."
4. Section 4.2 (b) Sales, is amended by the addition of the following at
the end of said Section:
"Without limiting the generality of the foregoing, the
following provisions shall apply with respect to settlement of sales of
securities in Russia. Unless otherwise expressly instructed by Proper
Instructions acceptable to the Custodian, settlement of sales of
securities shall be made in accordance with securities processing or
settlement practices which the Custodian in its discretion determines
to be a market practice. The Fund hereby expressly acknowledges that
such market practice might require delivery of securities prior to
receipt of payment and that the Fund bears the risk of payment in
instances where delivery of securities is made prior to receipt of
payment therefor in accordance with Proper Instructions received by the
Custodian or pursuant to the Custodian's determination in its
discretion that such delivery is in accordance with market practice.
The Custodian shall not be responsible for any securities delivered
from the premises of the Subcustodian from the time they leave such
premises."
5. Section 7 Authority to Appoint Subcustodians and Agents and to Utilize
Securities Depositories is amended by the addition of the following at the end
of the first paragraph of Section 7:
"With respect to Russia, the Fund hereby expressly
acknowledges that a Subcustodian for Russian securities may from time
to time delegate any of its duties and responsibilities to any
securities depository, clearing agency, share registration agent or
sub-subcustodian (collectively, "Russian Agent") in Russia, including
without limitation Rosvneshtorgbank (also called Vneshtorgbank RF)
("VTB"). The Fund acknowledges that the rights of the Subcustodian
against any such Russian Agent may consist only of a contractual claim
against the Russian Agent.
Notwithstanding any provision of this Agreement to the
contrary, neither the Custodian nor the Subcustodian shall be
responsible or liable to the Fund or its shareholders for the acts or
omissions of any such Russian Agent. In the event of a loss of
securities or cash held on behalf of the Fund through any Russian
Agent, the Custodian shall not be responsible to the Fund or its
shareholders unless and to the extent it in fact recovers from the
Subcustodian."
6. Section 10.2 Liability of the Custodian with respect to Proper
Instructions; Evidence of Authority; Etc. is amended by the insertion of the
following at the end of the first paragraph of said Section:
"It is also agreed that the Fund shall be responsible for
preparation and filing of tax returns, reports and other documents on
any activities it undertakes in Russia which are to be filed with any
relevant governmental or other authority and for the payment of any
taxes, levies, duties or similar liability the Fund incurs in respect
of property held or sold in Russia or of payments or distributions
received in respect thereof in Russia. Accordingly, the Fund hereby
agrees to indemnify and hold harmless the Custodian from any loss, cost
or expense resulting from the imposition or assessment of any such tax,
duty, levy or liability or any expenses related thereto."
7. A new Section 15, Risk Disclosure Acknowledgment, is added at the end of
the present Section 14.10:
"The Fund hereby acknowledges that it has received, has read
and has understood the Custodian's Risk Disclosure Statement, a copy of
which is attached hereto and is incorporated herein by reference. The
Fund further acknowledges that the Risk Disclosure Statement is not
comprehensive, and warrants and represents to the Custodian that it has
undertaken its own review of the risks associated with investment in
Russia and has concluded that such investment is appropriate for the
Fund and in no way conflicts with the Fund's constitutive documents,
investment objective, duties to its shareholders or with any regulatory
requirements applicable to the Fund."
Except as amended above, all the provisions of the Agreement as heretofore
in effect shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first set forth above.
Forward Funds, Inc. on behalf of BROWN BROTHERS HARRIMAN & CO.
The portfolios listed on Appendix B
hereto
- ---------------------------------- -----------------------------------
Name: Name:
Title: Title:
FOREIGN CUSTODY MANAGER DELEGATION AGREEMENT
AGREEMENT made as of this 2nd day of March, 1998 between Forward Funds,
Inc. (the "Fund") on behalf of each of the portfolios listed on Appendix B
hereto (each a "Fund" and collectively the "Funds"), each Fund a management
investment company registered with the Securities and Exchange Commission (the
"Commission") under the Investment Company Act of 1940, as amended, (the "Act"),
acting through its Board of Directors/Trustees or its duly appointed
representative, and BROWN BROTHERS HARRIMAN & CO., a New York limited
partnership with an office in Boston, Massachusetts (the "Delegate").
WITNESSETH
WHEREAS the Fund has appointed the Delegate as custodian (the "Custodian")
of the Fund's Assets pursuant to a Custodian Agreement dated March 2, 1998 (the
"Custodian Agreement");
WHEREAS the Fund may, from time to time, determine to invest and maintain
some or all of the Fund's Assets outside the United States;
WHEREAS the Board of Directors/Trustees of the Fund (the "Board") wishes to
delegate to the Delegate certain functions with respect to the custody of Fund's
Assets outside the United States;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Fund and the Delegate agree as follows. Capitalized terms
shall have the meaning indicated in Section 12 unless otherwise indicated .
1. Maintenance of Fund's Assets Abroad. The Fund, acting through its Board
or its duly authorized representative, hereby instructs Delegate pursuant to the
terms of the Custodian Agreement to place and maintain the Fund's Assets within
the countries listed in Schedule 1 attached hereto (as such Schedule may be
amended from time to time in accordance herewith). Such instruction shall be
deemed to include an instruction to use any Compulsory Securities Depository in
any such country and shall represent a Proper Instruction under the terms of the
Custodian Agreement. Countries may be added to Schedule 1 by written instruction
of the Fund that is accepted in writing by the Delegate as an amendment to
Schedule 1. With respect to amendments adding countries to Schedule 1, the Fund
acknowledges that - (a) the Delegate shall perform services hereunder only with
respect to the countries where it provides custodial services to the Fund under
the Custodian Agreement; (b) depending on conditions in the particular country,
advance notice may be required before the Delegate shall be able to perform its
duties hereunder in or with respect to such country (such advance notice to be
reasonable in light of the specific facts and circumstances attendant to
performance of duties in such country); and (c) nothing in this Agreement shall
require the Delegate to provide delegated or custodial services in any country
not listed in Schedule 1 until such amended Schedule 1 has been accepted by the
Delegate in accordance herewith.
2. Delegation. Pursuant to the provisions of Rule 17f-5 under the Act as
amended, the Board hereby delegates to the Delegate, and the Delegate hereby
accepts such delegation and agrees to perform, only those duties set forth in
this Agreement concerning the safekeeping of the Fund's Assets in each of the
countries set forth in Schedule 1 hereto as amended from time to time. The
Delegate is hereby authorized to take such actions on behalf of or in the name
of the Fund as are reasonably required to discharge its duties under this
Agreement, including, without limitation, to cause the Fund's Assets to be
placed with a particular Eligible Foreign Custodian in accordance herewith. The
Fund confirms to the Delegate that the Fund or its investment adviser has
considered the Sovereign Risk and prevailing country risk as part of its
continuing investment decision process, including such factors as may be
reasonably related to the systemic risk of maintaining the Fund's Assets in a
particular country, including, but not limited to, financial infrastructure,
prevailing custody and settlement systems and practices (including the use of
any Compulsory Securities Depository), and the laws relating to the safekeeping
and recovery of the Fund's Assets held in custody pursuant to the terms of the
Custodian Agreement.
3. Selection of Eligible Foreign Custodian and Contract Administration. The
Delegate shall perform the following duties with respect to the selection of
Eligible Foreign Custodians and administration of certain contracts governing
the Fund's foreign custodial arrangements:
(a) Selection of Eligible Foreign Custodian. The Delegate shall place
and maintain the Fund's Assets with an Eligible Foreign Custodian; provided
that the Delegate shall have determined that the Fund's Assets will be
subject to reasonable care based on the standards applicable to custodians
in the relevant market after considering all factors relevant to the
safekeeping of such assets including without limitation:
(i) The Eligible Foreign Custodian's practices, procedures, and
internal controls, including, but not limited to, the physical
protections available for certificated securities (if applicable), the
controls and procedures for dealing with any Securities Depository,
the method of keeping custodial records, and the security and data
protection practices;
(ii) Whether the Eligible Foreign Custodian has the requisite
financial strength to provide reasonable care for the Fund's Assets;
(iii) The Eligible Foreign Custodian's general reputation and
standing and, in the case of a Securities Depository, the depository's
operating history and number of participants; and
(iv) Whether the Fund will have jurisdiction over and be able to
enforce judgments against the Eligible Foreign Custodian, such as by
virtue of the existence of any offices of such Eligible Foreign
Custodian in the United States or such Eligible Foreign Custodian's
appointment of an agent for service of process in the United States or
consent to jurisdiction in the United States.
The Delegate shall be required to make the foregoing determination to the best
of its knowledge and belief based only on information reasonably available to
it.
(b) Contract Administration. In the case of an Eligible Foreign
Custodian that is not a Securities Depository or a U.S. Bank, the Delegate
shall cause that the foreign custody arrangements shall be governed by a
written contract that the Delegate has determined will provide reasonable
care for Fund assets based on the standards applicable to custodians in the
relevant market. Each such contract shall, except as set forth in the last
paragraph of this subsection (b), include provisions that provide:
(i) For indemnification or insurance arrangements (or any
combination of the foregoing) such that the Fund will be adequately
protected against the risk of loss of assets held in accordance with
such contract;
(ii) That the Fund's Assets will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the
Eligible Foreign Custodian or its creditors except a claim of payment
for their safe custody or administration or, in the case of cash
deposits, liens or rights in favor of creditors of such Custodian
arising under bankruptcy, insolvency or similar laws;
(iii) That beneficial ownership of the Fund's Assets will be
freely transferable without the payment of money or value other than
for safe custody or administration; (iv) That adequate records will be
maintained identifying the Fund's Assets as belonging to the Fund or
as being held by a third party for the benefit of the Fund;
(v) That the Fund's independent public accountants will be given
access to those records described in (iv) aboveor confirmation of the
contents of such records; and
(vi) That the Delegate will receive sufficient and timely
periodic reports with respect to the safekeeping of the Fund's Assets,
including, but not limited to, notification of any transfer to or from
the Fund's account or a third party account containing the Fund's
Assets.
Such contract may contain, in lieu of any or all of the provisions
specified in this Section 3 (b), such other provisions that the
Delegate determines will provide, in their entirety, the same or a
greater level of care and protection for the Fund's Assets as the
specified provisions, in their entirety.
(c) Limitation to Delegated Selection. Notwithstanding anything in
this Agreement to the contrary, the duties under this Section 3 shall apply
only to Eligible Foreign Custodians selected by the Delegate and shall not
apply to Compulsory Securities Depositories or to any Eligible Foreign
Custodian that the Delegate is directed to use pursuant to Section 7.
4. Monitoring. The Delegate shall establish a system to monitor at
reasonable intervals (but at least annually) the appropriateness of maintaining
the Fund's Assets with each Eligible Foreign Custodian that has been selected by
the Delegate pursuant to Section 3 of this Agreement. The Delegate shall monitor
the continuing appropriateness of placement of the Fund's Assets in accordance
with the criteria established under Section 3(a) of this Agreement. The Delegate
shall monitor the continuing appropriateness of the contract governing the
Fund's arrangements in accordance with the criteria established under Section
3(b) of this Agreement.
5. Reporting. At least annually and more frequently as mutually agreed
between the parties, the Delegate shall provide to the Board written reports
specifying placement of the Fund's Assets with each Eligible Foreign Custodian
selected by the Delegate pursuant to Section 3 of this Agreement and shall
promptly report as to any material changes to such foreign custody arrangements.
Delegate will prepare such a report with respect to any Eligible Foreign
Custodian that the Delegate has been instructed to use pursuant to Section 7
only to the extent specifically agreed with respect to the particular situation.
6. Withdrawal of Fund's Assets. If the Delegate determines that an
arrangement with a specific Eligible Foreign Custodian selected by the Delegate
under Section 3 of this Agreement no longer meets the requirements of said
Section, Delegate shall withdraw the Fund's Assets from the non-complying
arrangement as soon as reasonably practicable; provided, however, that if in the
reasonable judgment of the Delegate, such withdrawal would require liquidation
of any of the Fund's Assets or would materially impair the liquidity, value or
other investment characteristics of the Fund's Assets, it shall be the duty of
the Delegate to provide information regarding the particular circumstances and
to act only in accordance with Proper Instructions of the Fund or its Investment
Advisor with respect to such liquidation or other withdrawal.
7. Direction as to Eligible Foreign Custodian. Notwithstanding this
Delegation Agreement, the Fund, acting through its Board, its Investment Adviser
or its other authorized representative, may direct the Delegate to place and
maintain the Fund's Assets with a particular Eligible Foreign Custodian. In such
event, the Delegate shall be entitled to rely on any such instruction as a
Proper Instruction under the terms of the Custodian Agreement and shall have no
duties under this Delegation Agreement with respect to such arrangement save
those that it may undertake specifically in writing with respect to each
particular instance.
8. Standard of Care. In carrying out its duties under this Agreement, the
Delegate agrees to exercise reasonable care, prudence and diligence such as a
person having responsibility for safekeeping the Fund's Assets would exercise.
9. Representations. The Delegate hereby represents and warrants that it is
a U.S. Bank and that this Agreement has been duly authorized, executed and
delivered by the Delegate and is a legal, valid and binding agreement of the
Delegate.
The Fund hereby represents and warrants that its Board of Directors has
determined that it is reasonable to rely on the Delegate to perform the
delegated responsibilities provided for herein and that this Agreement has been
duly authorized, executed and delivered by the Fund and is a legal, valid and
binding agreement of the Fund.
10. Effectiveness; termination. This Agreement shall be effective as of the
date on which this Agreement shall have been accepted by the Delegate, as
indicated by the date set forth below the Delegate's signature. This Agreement
may be terminated at any time, without penalty, by written notice from the
terminating party to the non-terminating party. Such termination shall be
effective on the 30th day following the date on which the non-terminating party
shall receive the foregoing notice. The foregoing to the contrary
notwithstanding, this Agreement shall be deemed to have been terminated
concurrently with the termination of the Custodian Agreement.
11. Notices. Notices and other communications under this Agreement are to
be made in accordance with the arrangements designated for such purpose under
the Custodian Agreement unless otherwise indicated in a writing referencing this
Agreement and executed by both parties.
12. Definitions. Capitalized terms in this agreement have the following
meanings:
a. Compulsory Securities Depository - shall mean a Securities
Depository the use of which is mandatory (i) under applicable law or
regulation; (ii) because securities cannot be withdrawn from the
depository; or, (iii) because maintaining securities outside the Securities
Depository is not consistent with prevailing custodial practices.
b. Eligible Foreign Custodian - shall have the meaning set forth in
Rule 17f-5(a)(1) and shall also include a U.S. Bank.
c. Fund's Assets - shall mean any of the Fund's investments (including
foreign currencies) for which the primary market is outside the United
States, and such cash and cash equivalents as are reasonably necessary to
effect the Fund's transactions in such investments.
d. Proper Instructions - shall have the meaning set forth in the
Custodian Agreement.
e. Securities Depository - shall have the meaning set forth in Rule
17f-5(a)(6).
f. Sovereign Risk - shall have the meaning set forth in Section 10.5
of the Custodian Agreement.
g. U.S. Bank - shall mean a bank which qualifies to serve as a
custodian of assets of investment companies under Section 17(f) of the Act.
13. Governing Law and Jurisdiction. This Agreement shall be construed in
accordance with the laws of the State of New York. The parties hereby submit to
the exclusive jurisdiction of the Federal courts sitting in the State of New
York or the Commonwealth of Massachusetts or of the state courts of either such
State or such Commonwealth.
14. Fees. Delegate shall perform its functions under this agreement for the
compensation determined under the Custodian Agreement.
15. Integration. This Agreement sets forth all of the Delegate's duties
with respect to the selection and monitoring of Eligible Foreign Custodians, the
administration of contracts with Eligible Foreign Custodians, the withdrawal of
assets from Eligible Foreign Custodians and the issuance of reports in
connection with such duties. The terms of the Custodian Agreement shall apply
generally as to matters not expressly covered in this Agreement, including
dealings with the Eligible Foreign Custodians in the course of discharge of the
Delegate's obligations under the Custodian Agreement.
NOW THEREFORE, the parties have caused this Agreement to be executed by its duly
authorized representatives, effective as of the date first above written.
BROWN BROTHERS HARRIMAN & CO. Forward Funds, Inc. on behalf of the
Portfolios listed on Appendix B
By: _______________________________ By: ____________________________
Name: ____________________ Name: ___________________
Title: ___________________ Title: ________________
Date: __________________ Date: _________________
<PAGE>
APPENDIX "B"
TO
THE FOREIGN CUSTODY MANAGER DELEGATION AGREEMENT
BETWEEN
FORWARD FUNDS, INC. on behalf of the Funds listed on Appendix B
and
BROWN BROTHERS HARRIMAN & CO.
Dated as of ___________________1998
The following is a list of Funds for which the Delegate shall serve under a
Foreign Custody Manager Delegation Agreement dated as of ______________ to
provide foreign custody manager services to the Funds. (the "Agreement"):
The Global Fund
IN WITNESS WHEREOF, each of the parties hereto have caused this Appendix to be
executed in its name and on behalf of each such Fund.
Forward Funds, Inc.
On behalf of each Fund
listed above BROWN BROTHERS HARRIMAN & CO.
By:____________________ By:_________________________________
Name: Name:
Title: Title:
BUSINESS MANAGEMENT AGREEMENT
AGREEMENT made this 2nd day of March, 1998, between Forward Funds,
Inc. (a Maryland corporation, hereinafter referred to as the "Fund") and Sutton
Place Management Co., Inc. (a Delaware corporation, hereinafter referred to as
the "Corporation").
WHEREAS, the Fund is a registered investment company under the
Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Corporation is experienced and able to act as business
manager of the Fund;
NOW, THEREFORE, for good and valuable consideration, the receipt
whereof is hereby acknowledged, and the mutual performance of undertakings
herein, it is agreed by and between the parties hereto as follows:
1. Services to be Provided by the Corporation. The Corporation, as
business manager for the Fund, will, at its own expense:
(a) Furnish to the Fund the services of its employees and
agents in the management and conduct of the corporate business and
affairs of the Fund;
(b) If requested, provide the services of its officers as
administrative executives of the Fund and the services of any directors
of the Fund who are "interested persons" of the Corporation or its
affiliates, as that term is defined in the Act, subject in each case to
their individual consent to serve and to applicable legal limitations;
(c) Provide office space, secretarial and clerical services and wire
and telephone services (not including toll charges, which will be
reimbursed by the Fund), and monitor and review Fund contracted
services and expenditures pursuant to the distribution plan of the
Fund;
(d) Prepare periodic reports to the Fund's stockholders and prepare and
file, with such advice of counsel as reasonably deemed necessary by the
Corporation, such documents and other papers as may be required to
comply with the rules, regulations and requirements of the Securities
and Exchange Commission ("SEC") and other governmental agencies,
whether state or federal, except that the Fund shall bear the expenses
provided for in Section 2 hereof (Special services, if any, rendered to
individual stockholders or groups of stockholders shall not be included
in the services to be rendered by the Corporation pursuant to this
paragraph, but the Corporation shall be reimbursed for the actual cost
of such services pursuant to the provisions of paragraph 2 below.); and
(e) Report to the Directors concerning its activities pursuant to this
Agreement at regular meetings of the Directors and at such other times
as the Directors may request.
2. Expenses. The Corporation shall bear expenses incurred by it which
are necessary for the performance of its duties and activities specified in this
Agreement, except such expenses as are assumed by the Fund under this agreement.
The Corporation (or its affiliates, as applicable) will also pay the
compensation and expenses of all officers and executive employees of the Fund
who are directors, officers or employees of the Corporation or of its affiliates
and will make available or cause to be made available, without expense to the
Fund, the services of such of the directors, officers and employees of the
Corporation or its affiliates as may fully be elected officers or directors of
the Fund, subject to their individual consent to serve and to any limitations
imposed by law. The fund shall bear all of its other expenses incurred in its
operation and not specifically assumed by the Corporation. The expenses assumed
by the Fund shall include, without limitation: organizational expenses of the
Fund; fees and expenses incurred in connection with the Fund's membership in
investment company organizations; fees of the investment advisers; interest
expenses, taxes and governmental fees; distribution fees; brokerage commissions
and other expenses incurred in acquiring or disposing of the Fund's portfolio
securities; expenses of registering and qualifying the Fund's shares for sale
with the Securities and Exchange Commission and with various state securities
authorities; the expenses of qualifying the Fund to do business in jurisdictions
where such qualification is required; accounting, auditing and legal costs; the
cost of preparing share certificates or any other expenses, including clerical
and administrative expenses, related to the issue, redemption and repurchase of
Fund shares; insurance premiums; fees and expenses of the Custodian and Transfer
Agent for the Fund and for any related services; expenses of obtaining
quotations on the Fund's portfolio securities and pricing of the Fund's shares;
expenses of shareholders' meetings; expenses of preparing and distributing
reports, proxies and prospectuses to existing shareholders; and expenses and
fees of the Fund's Directors who are not "interested persons" of the Fund, as
that term is defined in the 1940 Act.
3. Compensation. For the services provided and the expenses assumed by
the Corporation, the Fund shall pay to the Corporation a fee, computed daily and
to be paid on the last business day of each month, equal on an annual basis to:
0.30% of the average daily net assets of the Fund.
The term "average daily net assets of the Fund" is defined as the
average of the values placed on the net assets of the Fund as of the close of
the New York Stock Exchange, on each day on which the net asset value of the
portfolio of the Fund is determined consistent with the provisions of Rule 22c-1
under the 1940 Act or, if the Fund lawfully determines the value of the net
assets of its portfolio as of some other time on each business day, as of such
time. The value of the net assets of the Fund shall be determined pursuant to
the applicable provisions of the Fund's then current registration statement
under the 1940 Act and the Securities Act of 1933 ("Registration Statement").
If, pursuant to such provisions, the determination of net asset value is
suspended for any particular business day, then for the purposes of this Section
3, the value of the net assets of the Fund shall be deemed to be the value of
such net assets as last determined in accordance with the Registration
Statement. If the determination of the net asset value of the Fund has been
suspended pursuant to the Registration Statement for a period including a month
for which payment pursuant to this Agreement is due, the Corporation's
compensation payable at the end of such month shall be computed on the basis of
the value of the net assets of the Fund as last determined (whether during or
prior to such month).
4. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Corporation hereby agrees that all records which it
maintains or causes to be maintained for the Fund are the property of the Fund
and further agrees to surrender promptly to the Fund any of such records upon
the Fund's request. The Corporation further agrees to preserve or cause to be
preserved for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
5. Sub-contracts. The Corporation may, from time to time, at its own
expense, employ or associate with itself such person or persons as it believes
necessary to assist it in carrying out its obligations under this Agreement.
6. Limitations of Liability. Except as may otherwise be required by the
1940 Act or the rules thereunder, neither the Corporation nor its stockholders,
officers, directors, employees or agents shall be subject to any liability for,
or any damages, expenses or losses incurred in connection with, any act or
omission connected with our arising out of any services rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Corporation's duties or by reason of
reckless disregard of the Corporation's obligations and duties under this
Agreement. Notwithstanding the foregoing, the Corporation shall not be liable to
the Fund for the acts and omissions of any party engaged by the Corporation to
assist it in carrying out its obligations under this Agreement except to the
extent that such party is liable to the Corporation for such acts and omissions
pursuant to the contract under which the Corporation shall have retained such
party. Any person, even though also employed by the Corporation, who may be or
become an employee of and paid by the Fund shall be deemed, when acting within
the scope of his employment by the Fund, to be acting in such employment solely
for the Fund and not as the employee or agent of the Corporation.
7. Service Not Exclusive. It is understood that the services of the
Corporation are not exclusive, and nothing in this Agreement, shall prevent the
Corporation, or any affiliate thereof, from providing similar services to other
investment companies or other clients or from engaging in other activities.
8. Duration and Termination. This Agreement shall become effective as
of February 6, 1998 and shall continue in force until February 6, 2000, if not
sooner terminated. This Agreement shall continue in effect for successive
12-month periods, unless terminated, provided that each such continuance is
specifically approved at least annually by (a) the vote of a majority of the
entire board of Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act), and (b)
the vote of a majority of those Directors who are not parties to this Agreement
or interested persons (as such term is defined in the 1940 Act) of any such
party case in person at a meeting called for the purpose of voting on such
approval. This Agreement may be terminated at any time without payment of any
penalty, by the Fund upon the vote of a majority of the Fund's Board of
Directors or by a majority of the outstanding voting securities of the Fund, or
by the Corporation, in each case, on sixty (60) days' written notice to the
other party. This agreement shall automatically terminate in the event of its
assignment (as such term is defined in the 1940 Act).
9. Amendments. No provision of this 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.
10. Miscellaneous.
a. This Agreement shall be construed in accordance with the laws of the
State of Maryland, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, as amended, or rules or orders of the Securities
and Exchange Commission thereunder.
b. The captions of this Agreement are included for convenience only and
in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect.
c. If any provisions 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 thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
d. The Corporation shall for all purposes herein be deemed to be an
independent contractor and shall have, unless otherwise expressly provided or
authorized, no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
FORWARD FUNDS, INC.
By:___________________________
Name:
Title:
SUTTON PLACE MANAGEMENT
CO., INC.
By:___________________________
Name:
Title:
TRANSFER AGENCY AND SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 2nd day of March, 1998 between the FORWARD
FUNDS, INC. (the "Fund"), a Maryland corporation having its principal place of
business at 433 California Street, Suite 1010, San Francisco, California 94104
and FIRST DATA INVESTOR SERVICES GROUP, INC. ("Investor Services Group"), a
Massachusetts corporation with principal offices at 4400 Computer Drive,
Westboro, Massachusetts 01581.
WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities or other assets;
WHEREAS, the Fund initially intends to offer Shares in those Portfolios
identified in the attached Exhibit 1, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint
Investor Services Group as its transfer agent, dividend disbursing agent and
agent in connection with certain other activities and Investor Services Group
desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and Investor Services Group agree as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended
from time to time.
(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Fund; or (ii) any person, whether or not such
person is an officer or employee of the Fund, duly authorized to give
Oral Instructions or Written Instructions on behalf of the Fund as
indicated in writing to Investor Services Group from time to time.
(c) "Board of Directors" shall mean the Board of Directors or
Board of Trustees of the Fund, as the case may be.
(d) "Commission" shall mean the Securities and Exchange
Commission.
(e) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custodian Agreement.
(f) "Fund Home Page" shall mean the Fund's proprietary web
site on the Internet used by the Fund to provide information to its
shareholders and potential shareholders.
(g) "Internet" shall mean the communications network comprised
of multiple communications networks linking education, government,
industrial and private computer networks.
(h) "1934 Act" shall mean the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(i) "1940 Act" shall mean the Investment Company Act of 1940
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(j) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by Investor Services Group from
a person reasonably believed by Investor Services Group to be an
Authorized Person;
(k) "Portfolio" shall mean each separate series of shares
offered by the Fund representing interests in a separate portfolio of
securities and other assets;
(l) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto if any, which has become effective under the
Securities Act of 1933 and the 1940 Act.
(m) "Shares" refers collectively to such shares of capital
stock or beneficial interest, as the case may be, or class thereof, of
each respective Portfolio of the Fund as may be issued from time to
time.
(n) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(o) "Transfer Agent Secure Net Gateway" shall mean the system
of computer hardware and software and network established by the
Transfer Agent to provide access between the Transfer Agent
recordkeeping system and the Internet.
(p) "Transfer Agent Web Transaction Engine" shall mean the
system of computer hardware and software created and established by the
Transfer Agent in order to enable Shareholders of the Fund to perform
the transactions contemplated hereunder.
(q) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by Investor Services Group to be
an Authorized Person and actually received by Investor Services Group.
Written Instructions shall include manually executed originals and
authorized electronic transmissions, including telefacsimile of a
manually executed original or other process.
Article 2 Appointment of Investor Services Group.
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
Investor Services Group as its sole and exclusive transfer agent and dividend
disbursing agent for Shares of each respective Portfolio of the Fund and as
shareholder servicing agent for the Fund and Investor Services Group hereby
accepts such appointments and agrees to perform the duties hereinafter set
forth.
Article 3 Duties of Investor Services Group.
3.1 Investor Services Group shall be responsible for:
(a) Administering and/or performing the customary services of
a transfer agent; acting as service agent in connection with dividend
and distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance,
transfer and redemption or repurchase (including coordination with the
Custodian) of Shares of each Portfolio, as more fully described in the
written schedule of Duties of Investor Services Group annexed hereto as
Schedule A and incorporated herein, and in accordance with the terms of
the Prospectus of the Fund on behalf of the applicable Portfolio,
applicable law and the procedures established from time to time between
Investor Services Group and the Fund.
(b) Recording the issuance of Shares and maintaining pursuant
to Rule 17Ad-10(e) of the 1934 Act a record of the total number of
Shares of each Portfolio which are authorized, based upon data provided
to it by the Fund, and issued and outstanding. Investor Services Group
shall provide the Fund on a regular basis with the total number of
Shares of each Portfolio which are authorized and issued and
outstanding and shall have no obligation, when recording the issuance
of Shares, to monitor the issuance of such Shares or to take cognizance
of any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Fund.
(c) In addition to providing the foregoing services, the Fund
hereby engages Investor Services Group as its exclusive service
provider with respect to the Print/Mail Services as set forth in
Schedule B for the fees also identified in Schedule B. Investor
Services Group agrees to perform the services and its obligations
subject to the terms and conditions of this Agreement.
(d) Notwithstanding any of the foregoing provisions of this
Agreement, Investor Services Group shall be under no duty or obligation
to inquire into, and shall not be liable for: (i) the legality of the
issuance or sale of any Shares or the sufficiency of the amount to be
received therefor; (ii) the legality of the redemption of any Shares,
or the propriety of the amount to be paid therefor; (iii) the legality
of the declaration of any dividend by the Board of Directors, or the
legality of the issuance of any Shares in payment of any dividend; or
(iv) the legality of any recapitalization or readjustment of the
Shares.
3.2 In addition, the Fund shall (i) identify to Investor Services Group
in writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of Investor Services Group for the
Fund's blue sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.
3.3 Investor Services Group agrees to provide the services set forth
herein in accordance with the performance standards annexed hereto as Exhibit
1-A of Schedule A and incorporated herein (the "Performance Standards"). Such
Performance Standards may be amended from time to time upon written agreement of
the parties.
3.4 In connection with the Electronic Commerce Services to be provided
by Investor Services Group, as described in Schedule A to this Agreement, the
Fund shall be responsible for the following: (a) establishment and maintenance
of the Fund Home Page on the Internet; (b) services and relationships between
the Fund and any third party on-line service providers to enable the
Shareholders to access the Fund Home Page; and (c) providing Investor Services
Group with access to and information regarding the Fund Home Page in order to
enable Investor Services Group to provide the services contemplated hereunder.
3.5 In addition to the duties set forth herein, Investor Services Group
shall perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the Fund
and Investor Services Group.
Article 4 Recordkeeping and Other Information.
4.1 Investor Services Group shall create and maintain all records
required of it pursuant to its duties hereunder and as set forth in Schedule A
in accordance with all applicable laws, rules and regulations, including records
required by Section 31(a) of the 1940 Act. Where applicable, such records shall
be maintained by Investor Services Group for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such section, and will be surrendered
promptly to the Fund on and in accordance with the Fund's request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, Investor Services Group will endeavor to notify
the Fund of such request and secure Written Instructions as to the handling of
such request. Investor Services Group reserves the right, however, to exhibit
the Shareholder records to any person whenever it is advised by its counsel that
it may be held liable for the failure to comply with such request.
Article 5 Fund Instructions.
5.1 Investor Services Group will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund. Investor Services Group will also have no liability when
processing Share certificates which it reasonably believes to bear the proper
manual or facsimile signatures of the officers of the Fund and the proper
countersignature of Investor Services Group.
5.2 At any time, Investor Services Group may request Written
Instructions from the Fund and may seek advice from legal counsel for the Fund,
or its own legal counsel, with respect to any matter arising in connection with
this Agreement, and it shall not be liable for any action taken or not taken or
suffered by it in good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Fund or for Investor Services
Group. Written Instructions requested by Investor Services Group will be
provided by the Fund within a reasonable period of time.
5.3 Investor Services Group, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Fund only if said representative is an
Authorized Person. The Fund agrees that all Oral Instructions shall be followed
within one business day by confirming Written Instructions, and that the Fund's
failure to so confirm shall not impair in any respect Investor Services Group's
right to rely on Oral Instructions.
Article 6 Compensation.
6.1 The Fund on behalf of each of the Portfolios will compensate
Investor Services Group for the performance of its obligations hereunder in
accordance with the fees set forth in the written Fee Schedule annexed hereto as
Schedule B and incorporated herein.
6.2 In addition to those fees set forth in Section 6.1 above, the Fund
on behalf of each of the Portfolios agrees to pay, and will be billed separately
for, out-of-pocket expenses incurred by Investor Services Group in the
performance of its duties hereunder. Out-of-pocket expenses shall include, but
shall not be limited to, the items specified in the written schedule of
out-of-pocket charges annexed hereto as Schedule C and incorporated herein.
Schedule C may be modified by written agreement between the parties. Unspecified
out-of-pocket expenses shall be limited to those out-of-pocket expenses
reasonably incurred by Investor Services Group in the performance of its
obligations hereunder.
6.3 The Fund on behalf of each of the Portfolios agrees to pay all fees
and out-of-pocket expenses to Investor Services Group by Federal Funds Wire
within fifteen (15) business days following the receipt of the respective
invoice. In addition, with respect to all fees under this Agreement, Investor
Services Group may charge a service fee equal to the lesser of (i) one and one
half percent (1 1/2%) per month or (ii) the highest interest rate legally
permitted on any past due invoiced amounts.
6.4 Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule B, a revised Fee Schedule executed and dated by
the parties hereto.
6.5 The Fund acknowledges that the fees that Investor Services Group
charges the Fund under this Agreement reflect the allocation of risk between the
parties, including the disclaimer of warranties in Section 9.3 and the
limitations on liability and exclusion of remedies in Section 11.2 and Article
12. Modifying the allocation of risk from what is stated here would affect the
fees that Investor Services Group charges, and in consideration of those fees,
the Fund agrees to the stated allocation of risk.
Article 7 Documents.
In connection with the appointment of Investor Services Group, the Fund
shall, on or before the date this Agreement goes into effect, but in any case
within a reasonable period of time for Investor Services Group to prepare to
perform its duties hereunder, deliver or caused to be delivered to Investor
Services Group the documents set forth in the written schedule of Fund Documents
annexed hereto as Schedule D.
Article 8 Transfer Agent System.
8.1 Investor Services Group shall retain title to and ownership of any
and all data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions, discoveries,
patentable or copyrightable matters, concepts, expertise, patents, copyrights,
trade secrets, and other related legal rights developed by Investor Services
Group in connection with the services provided by Investor Services Group to the
Fund herein (the "Investor Services Group System").
8.2 Investor Services Group hereby grants to the Fund a limited license
to the Investor Services Group System for the sole and limited purpose of having
Investor Services Group provide the services contemplated hereunder and nothing
contained in this Agreement shall be construed or interpreted otherwise and such
license shall immediately terminate with the termination of this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of the
Fund or any third party acting on behalf of the Fund is provided with direct
access to the Investor Services Group System for either account inquiry or to
transmit transaction information, including but not limited to maintenance,
exchanges, purchases and redemptions, such direct access capability shall be
limited to direct entry to the Investor Services Group System by means of
on-line mainframe terminal entry or PC emulation of such mainframe terminal
entry and any other non-conforming method of transmission of information to the
Investor Services Group System is strictly prohibited without the prior written
consent of Investor Services Group.
Article 9 Representations and Warranties.
9.1 Investor Services Group represents and warrants to the Fund that:
(a) it is a corporation duly organized, existing and in
good standing under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory
agency as a transfer agent and such registration will remain in effect
for the duration of this Agreement; and
(e) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
9.2 The Fund represents and warrants to Investor Services Group that:
(a) it is duly organized, existing and in good standing under
the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize
it to enter into this Agreement;
(d) a registration statement under the Securities Act of 1933,
as amended, and the 1940 Act on behalf of each of the Portfolios is
currently effective and will remain effective, and all appropriate
state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale;
and
(e) all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with
the terms of the Fund's Articles of Incorporation and its Prospectus
with respect to each Portfolio, such Shares shall be validly issued,
fully paid and non-assessable.
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, INVESTOR SERVICES GROUP DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF
ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS
PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. INVESTOR SERVICES
GROUP DISCLAIMS ANY WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE
SET FORTH IN THIS AGREEMENT.
Article 10 Indemnification.
10.1 Investor Services Group shall not be responsible for and the Fund
on behalf of each Portfolio shall indemnify and hold Investor Services Group
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against Investor Services Group or for
which Investor Services Group may be held to be liable (a "Claim") arising out
of or attributable to any of the following:
(a) any actions of Investor Services Group required to be
taken pursuant to this Agreement unless such Claim resulted from a
negligent act or omission to act or bad faith by Investor Services
Group in the performance of its duties hereunder;
(b) Investor Services Group's reasonable reliance on, or
reasonable use of information, data, records and documents (including
but not limited to magnetic tapes, computer printouts, hard copies and
microfilm copies) received by Investor Services Group from the Fund, or
any authorized third party acting on behalf of the Fund, including but
not limited to the prior transfer agent for the Fund, in the
performance of Investor Services Group's duties and obligations
hereunder;
(c) the reliance on, or the implementation of, any Written or
Oral Instructions or any other instructions or requests of the Fund on
behalf of the applicable Portfolio;
(d) the offer or sales of shares in violation of any
requirement under the securities laws or regulations of any state that
such shares be registered in such state or in violation of any stop
order or other determination or ruling by any state with respect to the
offer or sale of such shares in such state; and
(e) the Fund's refusal or failure to comply with the terms of
this Agreement, or any Claim which arises out of the Fund's negligence
or misconduct or the breach of any representation or warranty of the
Fund made herein.
10.2 In any case in which the Fund may be asked to indemnify or hold
Investor Services Group harmless, Investor Services Group will notify the Fund
promptly after identifying any situation which it believes presents or appears
likely to present a claim for indemnification against the Fund although the
failure to do so shall not prevent recovery by Investor Services Group and shall
keep the Fund advised with respect to all developments concerning such
situation. The Fund shall have the option to defend Investor Services Group
against any Claim which may be the subject of this indemnification, and, in the
event that the Fund so elects, such defense shall be conducted by counsel chosen
by the Fund and satisfactory to Investor Services Group, and thereupon the Fund
shall take over complete defense of the Claim and Investor Services Group shall
sustain no further legal or other expenses in respect of such Claim. Investor
Services Group will not confess any Claim or make any compromise in any case in
which the Fund will be asked to provide indemnification, except with the Fund's
prior written consent. The obligations of the parties hereto under this Article
10 shall survive the termination of this Agreement.
10.3 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
(a) one year after the Fund becomes aware of the event
for which indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.4 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
Investor Services Group's sole and exclusive remedy for claims or other actions
or proceedings to which the Fund's indemnification obligations pursuant to this
Article 10 may apply.
Article 11 Standard of Care.
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Fund unless said errors are caused by
Investor Services Group's own negligence, bad faith or willful misconduct or
that of its employees.
11.2 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL INVESTOR SERVICES GROUP, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY THEORY OF
TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR LOST
PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL
DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS
OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written above
and shall continue for a period of five (5) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of two (2) years ("Renewal Terms")
each, unless the Fund or Investor Services Group provides written notice to the
other of its intent not to renew. Such notice must be received not less than
ninety (90) days and not more than one-hundred eighty (180) days prior to the
expiration of the Initial Term or the then current Renewal Term.
13.3 In the event a termination notice is given by the Fund, all
expenses associated with movement of records and materials and conversion
thereof to a successor transfer agent will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If Investor Services Group is the Non-Defaulting Party,
its termination of this Agreement shall not constitute a waiver of any other
rights or remedies of Investor Services Group with respect to services performed
prior to such termination of rights of Investor Services Group to be reimbursed
for out-of-pocket expenses. In all cases, termination by the Non-Defaulting
Party shall not constitute a waiver by the Non-Defaulting Party of any other
rights it might have under this Agreement or otherwise against the Defaulting
Party.
13.5 Notwithstanding anything contained in this Agreement to the
contrary, in the event that a merger, acquisition or change in control of the
Fund or an affiliate (as defined under the 1940 Act) of the Fund results, either
directly or indirectly, in the termination of this Agreement (an "Early
Termination") during the Initial Term of this Agreement, the Fund shall pay to
Investor Services Group within 30 days of the notice of termination the fee set
forth in Schedule C (the "Early Termination Fee"). Such Early Termination Fee
shall not be payable if Investor Services Group provides to a successor in
interest of the Fund services substantially similar to those services provided
to the Fund hereunder. A liquidation of the Fund or a Portfolio thereof (a
"Liquidation") shall not be deemed a termination of the Agreement subject to the
Early Termination Fee so long as such Liquidation did not result from a merger
or acquisition of the Fund or Portfolio; provided, however, that in the event of
the Liquidation of the Fund, the Fund shall pay to Investor Services Group
within 30 days of the notice of termination the fee set forth in Schedule C (the
"Liquidation Fee").
Article 14 Additional Portfolios
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Exhibit 1, with respect to which the Fund
desires to have Investor Services Group render services as transfer agent under
the terms hereof, the Fund shall so notify Investor Services Group in writing,
and if Investor Services Group agrees in writing to provide such services,
Exhibit 1 shall be amended to include such additional Portfolios.
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined below)
and the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The Fund
and Investor Services Group shall exercise at least the same degree of care, but
not less than reasonable care, to safeguard the confidentiality of the
Confidential Information of the other as it would exercise to protect its own
confidential information of a similar nature. The Fund and Investor Services
Group shall not duplicate, sell or disclose to others the Confidential
Information of the other, in whole or in part, without the prior written
permission of the other party. The Fund and Investor Services Group may,
however, disclose Confidential Information to their respective parent
corporation, their respective affiliates, their subsidiaries and affiliated
companies and employees, provided that each shall use reasonable efforts to
ensure that the Confidential Information is not duplicated or disclosed in
breach of this Agreement. The Fund and Investor Services Group may also disclose
the Confidential Information to independent contractors, auditors, and
professional advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 15.1.
Notwithstanding the previous sentence, in no event shall either the Fund or
Investor Services Group disclose the Confidential Information to any competitor
of the other without specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, and internal performance results relating to
the past, present or future business activities of the Fund or Investor
Services Group, their respective subsidiaries and affiliated companies
and the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or
Investor Services Group a competitive advantage over its competitors;
and
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
15.4 The obligations of confidentiality and restriction on use herein
shall not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this
Agreement or subsequently came into the public domain through no fault
of such party; or
(b) Was lawfully received by the party from a third party free
of any obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to
receipt thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or
administrative proceeding after all reasonable legal remedies for
maintaining such information in confidence have been exhausted
including, but not limited to, giving the other party as much advance
notice of the possibility of such disclosure as practical so the other
party may attempt to stop such disclosure or obtain a protective order
concerning such disclosure; or
(f) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the
Confidential Information disclosed under this Agreement.
Article 16 Force Majeure.
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly, by (i) fire, flood, elements of nature or
other acts of God; (ii) any outbreak or escalation of hostilities, war, riots or
civil disorders in any country, (iii) any act or omission of the other party or
any governmental authority; (iv) any labor disputes (whether or not the
employees' demands are reasonable or within the party's power to satisfy); or
(v) nonperformance by a third party or any similar cause beyond the reasonable
control of such party, including without limitation, failures or fluctuations in
telecommunications or other equipment. In any such event, the non-performing
party shall be excused from any further performance and observance of the
obligations so affected only for as long as such circumstances prevail and such
party continues to use commercially reasonable efforts to recommence performance
or observance as soon as practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
Investor Services Group may, in its sole discretion, assign all its right, title
and interest in this Agreement to an affiliate, parent or subsidiary, or to the
purchaser of substantially all of its business. Investor Services Group may, in
its sole discretion, engage subcontractors to perform any of the obligations
contained in this Agreement to be performed by Investor Services Group.
Article 18 Notice.
Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or Investor Services Group, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
Forward Funds, Inc.
433 California Street
Suite 1010
San Francisco, California 94104
Attention: Mr. Ronald Pelosi
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
Article 19 Governing Law/Venue.
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement of
this agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in the City of Boston, and
Investor Services Group and Client hereby submit themselves to the exclusive
jurisdiction of those courts.
Article 20 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 21 Captions.
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 22 Publicity.
Neither Investor Services Group nor the Fund shall release or publish
news releases, public announcements, advertising or other publicity relating to
this Agreement or to the transactions contemplated by it without the prior
review and written approval of the other party; provided, however, that either
party may make such disclosures as are required by legal, accounting or
regulatory requirements after making reasonable efforts in the circumstances to
consult in advance with the other party.
Article 23 Relationship of Parties/Non-Solicitation.
23.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
23.2 During the term of this Agreement and for one (1) year afterward,
the Fund shall not recruit, solicit, employ or engage, for the Fund or others,
Investor Services Group's employees.
Article 24 Entire Agreement; Severability.
24.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of Investor
Services Group. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
24.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
FORWARD FUNDS, INC.
By:
Title:
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:
Title:
<PAGE>
Exhibit 1
LIST OF PORTFOLIOS
The Global Fund
<PAGE>
Schedule A
DUTIES OF INVESTOR SERVICES GROUP
1. Shareholder Information. Investor Services Group shall maintain a record
of the number of Shares held by each Shareholder of record which shall include
name, address, taxpayer identification and which shall indicate whether such
Shares are held in certificates or uncertificated form.
2. Shareholder Services. Investor Services Group shall respond as
appropriate to all inquiries and communications from Shareholders relating to
Shareholder accounts with respect to its duties hereunder and as may be from
time to time mutually agreed upon between Investor Services Group and the Fund.
3. Share Certificates.
(a) At the expense of the Fund, the Fund shall supply Investor
Services Group with an adequate supply of blank share certificates to meet
Investor Services Group requirements therefor. Such Share certificates
shall be properly signed by facsimile. The Fund agrees that,
notwithstanding the death, resignation, or removal of any officer of the
Fund whose signature appears on such certificates, Investor Services Group
or its agent may continue to countersign certificates which bear such
signatures until otherwise directed by Written Instructions.
(b) Investor Services Group shall issue replacement Share certificates
in lieu of certificates which have been lost, stolen or destroyed, upon receipt
by Investor Services Group of properly executed affidavits and lost certifi-
cate bonds, in form satisfactory to Investor Services Group, with the
Fund and Investor Services Group as obligees under the bond.
(c) Investor Services Group shall also maintain a record of each certifi-
cate issued, the number of Shares represented thereby and the Shareholder of
record. With respect to Shares held in open accounts or uncertificated form
(i.e., no certificate being issued with respect thereto) Investor Services
Group shall maintain comparable records of the Shareholders thereof, including
their names, addresses and taxpayer identification. Investor Services Group
shall further maintain a stop transfer record on lost and/or replaced certifi-
cates.
4. Mailing Communications to Shareholders; Proxy Materials. Investor
Services Group will address and mail to Shareholders of the Fund, all reports to
Shareholders, dividend and distribution notices and proxy material for the
Fund's meetings of Shareholders. In connection with meetings of Shareholders,
Investor Services Group will prepare Shareholder lists, mail and certify as to
the mailing of proxy materials, process and tabulate returned proxy cards,
report on proxies voted prior to meetings, act as inspector of election at
meetings and certify Shares voted at meetings.
5. Sales of Shares.
(a) Investor Services Group shall not be required to issue any
Shares of the Fund where it has received a Written Instruction from the Fund or
official notice from any appropriate authority that the sale of the Shares of
the Fund has been suspended or discontinued. The existence of such Written
Instructions or such official notice shall be conclusive evidence of the right
of Investor Services Group to rely on such Written Instructions or official
notice.
(b) In the event that any check or other order for the payment
of money is returned unpaid for any reason, Investor Services Group will
endeavor to: (i) give prompt notice of such return to the Fund or its designee;
(ii) place a stop transfer order against all Shares issued as a result of such
check or order; and (iii) take such actions as Investor Services Group may from
time to time deem appropriate.
6. Transfer and Repurchase.
(a) Investor Services Group shall process all requests to transfer
or redeem Shares in accordance with the transfer or repurchase proce-
dures set forth in the Fund's Prospectus.
(b) Investor Services Group will transfer or repurchase Shares
upon receipt of Oral or Written Instructions or otherwise pursuant to the
Prospectus and Share certificates, if any, properly endorsed for transfer or
redemption, accompanied by such documents as Investor Services Group reasonably
may deem necessary.
(c) Investor Services Group reserves the right to refuse to
transfer or repurchase Shares until it is satisfied that the endorsement on the
instructions is valid and genuine. Investor Services Group also reserves the
right to refuse to transfer or repurchase Shares until it is satisfied that the
requested transfer or repurchase is legally authorized, and it shall incur no
liability for the refusal, in good faith, to make transfers or repurchases which
Investor Services Group, in its good judgement, deems improper or unauthorized,
or until it is reasonably satisfied that there is no basis to any claims adverse
to such transfer or repurchase.
(d) When Shares are redeemed, Investor Services Group shall, upon
receipt of the instructions and documents in proper form, deliver to the
Custodian and the Fund or its designee a notification setting forth the number
of Shares to be repurchased. Such repurchased shares shall be reflected on
appropriate accounts maintained by Investor Services Group reflecting
outstanding Shares of the Fund and Shares attributed to individual accounts.
(e) Investor Services Group shall upon receipt of the monies
provided to it by the Custodian for the repurchase of Shares, pay such monies as
are received from the Custodian, all in accordance with the procedures described
in the written instruction received by Investor Services Group from the Fund.
(f) Investor Services Group shall not process or effect any
repurchase with respect to Shares of the Fund after receipt by Investor Services
Group or its agent of notification of the suspension of the determination of the
net asset value of the Fund.
7. Dividends.
(a) Upon the declaration of each dividend and each capital
gains distribution by the Board of Directors of the Fund with respect to Shares
of the Fund, the Fund shall furnish or cause to be furnished to Investor
Services Group Written Instructions setting forth the date of the declaration of
such dividend or distribution, the ex-dividend date, the date of payment
thereof, the record date as of which Shareholders entitled to payment shall be
determined, the amount payable per Share to the Shareholders of record as of
that date, the total amount payable on the payment date and whether such
dividend or distribution is to be paid in Shares at net asset value.
(b) On or before the payment date specified in such resolution
of the Board of Directors, the Fund will provide Investor Services Group with
sufficient cash to make payment to the Shareholders of record as of such payment
date.
(c) If Investor Services Group does not receive sufficient
cash from the Fund to make total dividend and/or distribution payments to all
Shareholders of the Fund as of the record date, Investor Services Group will,
upon notifying the Fund, withhold payment to all Shareholders of record as of
the record date until sufficient cash is provided to Investor Services Group.
8. In addition to and neither in lieu nor in contravention of the
services set forth above, Investor Services Group shall: (i) perform all the
customary services of a transfer agent, registrar, dividend disbursing agent and
agent of the dividend reinvestment and cash purchase plan as described herein
consistent with those requirements in effect as at the date of this Agreement.
The detailed definition, frequency, limitations and associated costs (if any)
set out in the attached fee schedule, include but are not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting lists,
mailing proxies, tabulating proxies, mailing Shareholder reports to current
Shareholders, withholding taxes on U.S. resident and non-resident alien accounts
where applicable, preparing and filing U.S. Treasury Department Forms 1099 and
other appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders.
9. Electronic Commerce. Investor Services Group agrees to provide the
following services to the Fund:
(a) in accordance with the written procedures established
between the Fund and Investor Services Group, enable the Fund and its
Shareholders utilize the Internet in order to access Fund information maintained
by Investor Services Group through the use of the Transfer Agent Web Transaction
Engine and Secure Net Gateway;
(b) allow the Shareholders to perform account inquiries and
transactions;
(c) maintenance of the Transfer Agent Secure Net Gateway and
the Transfer Agent Web Transaction Engine.
<PAGE>
Schedule B
FEE SCHEDULE
1. Standard Fees
Per Open Account: $20.00
Per Closed Account: $ 3.00
Portfolio Minimum (up to 2 classes) $12,000 per Portfolio per year
After the one year anniversary of the effective date of this Agreement, Investor
Services Group may adjust the above fees once per calendar year, upon thirty
(30) days prior written notice in an amount not to exceed the cumulative
percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U)
U.S. City Average, All items (unadjusted) - (1982-84=100), published by the U.S.
Department of Labor since the last such adjustment in the Client's monthly fees
(or the Effective Date absent a prior such adjustment).
2. Programming Costs
(a) Dedicated Team:
Programmer $100,000 per annum
BSA $ 85,000 per annum
Tester $ 65,000 per annum
(b) System Enhancements (Non Dedicated Team):
Programmer $135.00 per hour
The above rates are subject to an annual 5% increase after the one year
anniversary of the effective date of this Agreement.
3. Early Termination Fee; Liquidation Fee: The Early Termination Fee shall
be an amount equal to the lesser of (a) the previous month's fee multiplied
by the number of months remaining on the Initial Term of the Agreement, or
(b) the previous month's fee multiplied by twelve to reflect one year's
fee. If a Liquidation (as such term is defined in Section 13.5 hereof) occurs
during the first year of this Agreement, the Liquidation Fee shall be an
amount equal to the fees paid to Investor Services Group by the Fund under this
Agreement for the previous month annualized to reflect one year's fee (the
"Annual Fee"). If such Liquidation occurs during the second year of this
Agreement, the Liquidation Fee shall equal two-thirds of the Annual Fee. If such
Liquidation occurs during the third year of this Agreement, the Liquidation Fee
shall equalone-third of the Annual Fee.
4. Print/Mail Fees.
Implementation Fee $5,000
Testing Application or Data Requirements $2.50/fax to client or record
keeper
Work Order $15.00 per work order
Daily Work (Confirms)
Hand $71/M with $75.00 minimum
$0.07/each insert (up to 3
inserts at no charge)
Machine $42/M with $50.00 minimum
$0.01/each insert (up to 3
inserts at no charge)
Daily Checks
Hand $91/M with $100.00 minimum
daily
$0.08/each insert (up to 3
inserts at no charge)
Machine $52/M with $75.00 minimum
daily
$0.01/each insert (up to 3
inserts at no charge)
There is a $2.50 charge for each Form 3606 sent.
Statements
Hand $78/M with $75.00 minimum
$0.08/each insert (up to 3
inserts at no charge)
$125/M for intelligent
inserting
Machine $52/M with $75.00 minimum
$0.01/each insert (up to 3
inserts at no charge)
$58/M for intelligent
inserting
Periodic Checks
Hand $91/M with $100.00 minimum
$0.08/each insert (up to 3
inserts at no charge)
Machine $52/M with $100.00 minimum
$0.01/each insert (up to 3
inserts at no charge)
12b-1/Dealer Commission
Checks/Statements $0.78/each envelope with
$100.00 minimum
Spac Reports/Group Statements $78/M with $75.00 minimum
Listbills $0.78 per envelope with
$75.00 minimum
Printing Charges $0.08/confirm/statement/page
$0.10/check
Folding (Machine) $18/M
Folding (Hand) $12 each
Presort Charge $0.277 postage rate
$0.035/piece
Courier Charge $15.00 for each on call
courier trip/or actual cost
for on demand
Overnight Charge $3.50/package service charge
plus Inventory Charge
$20.00 for each inventory
location as of the 15th of
the month
Hourly Work: Special Projects,
Opening Envelopes, etc. $24.00/hour
Special Pulls $2.50 per account pull
Boxes/Envelopes
Shipping Boxes $0.85 each
Oversized Envelopes $0.45 each
Forms Development/Programming Fee $100.00/hour
Cutting Charges $10.00/M
5. Electronic Commerce.
Web Transaction Engine:
Set up Fee: $150.00 per hour
Reviewing client network requirements and signing off on the
requirements Recommending method of linking to the Web Transaction
Engine Installing the network hardware and software Implementing the
network connectivity Testing the network connectivity and performance
Transaction Cost:
Account Inquiry $.10 per inquiry
Financial Transactions $.50 per transaction
Annual Maintenance Fee: $20,000 per annum
Releases of new versions of Web Transaction Engine (does not include
customization)
Maintain security infrastructure with auditing function
Monthly Usage Reports
Help Desk Support
Hardware Maintenance Fee: $20,000 per annum
Does not include client hardware and software requirements. That is an
out-of-pocket expense for the client
Installation of hardware is billed as time and materials Does not
include third party hardware and software maintenance agreements
Customized Development: $150 per hour
Call Center Services for Registration (one-time): $2.50 per call
Shareholder Notification campaign: priced per campaign
<PAGE>
Schedule C
OUT-OF-POCKET EXPENSES
The Fund shall reimburse Investor Services Group monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
o Microfiche/microfilm production
o Magnetic media tapes and freight
o Printing costs, including certificates, envelopes, checks and
stationery
o Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct pass
through to the Fund
o Due diligence mailings
o Telephone and telecommunication costs, including all lease, mainte-
nance and line costs
o Ad hoc reports
o Proxy solicitations, mailings and tabulations
o Daily & Distribution advice mailings
o Shipping, Certified and Overnight mail and insurance
o Year-end form production and mailings
o Terminals, communication lines, printers and other equipment
and any expenses incurred in connection with such terminals
and lines Duplicating services
o Courier services
o Incoming and outgoing wire charges
o Federal Reserve charges for check clearance
o Overtime, as approved by the Fund
o Temporary staff, as approved by the Fund
o Travel and entertainment, as approved by the Fund
o Record retention, retrieval and destruction costs, including, but
not limited to exit fees charged by third party record keeping
vendors
o Third party audit reviews
o Ad hoc SQL time
o Insurance
o Such other miscellaneous expenses reasonably incurred by Investor
Services Group in performing its duties and responsibilities under
this Agreement.
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with Investor Services Group. In addition,
the Fund will promptly reimburse Investor Services Group for any other
unscheduled expenses incurred by Investor Services Group whenever the Fund and
Investor Services Group mutually agree that such expenses are not otherwise
properly borne by Investor Services Group as part of its duties and obligations
under the Agreement.
<PAGE>
Schedule D
FUND DOCUMENTS
o Certified copy of the Articles of Incorporation of the Fund, as amended
o Certified copy of the By-laws of the Fund, as amended
o Copy of the resolution of the Board of Directors authorizing the
execution and delivery of this Agreement
o Specimens of the certificates for Shares of the Fund, if
applicable, in the form approved by the Board of Directors of the
Fund, with a certificate of the Secretary of the Fund as to such
approval
o All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service offered by
the Fund
o Certified list of Shareholders of the Fund with the name, address
and taxpayer identification number of each Shareholder, and the
number of Shares of the Fund held by each, certificate numbers and
denominations (if any certificates have been issued), lists of any
accounts against which stop transfer orders have been placed,
together with the reasons therefore, and the number of Shares
redeemed by the Fund
o All notices issued by the Fund with respect to the Shares in
accordance with and pursuant to the Articles of Incorporation or
By-laws of the Fund or as required by law and shall perform such
other specific duties as are set forth in the Articles of
Incorporation including the giving of notice of any special or
annual meetings of shareholders and any other notices required
thereby.
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT, dated as of this 2nd day of March,
1998 (the "Agreement"), between FIRST DATA INVESTOR SERVICES GROUP, INC., a
Massachusetts corporation ("Investor Services Group"), and the FORWARD FUNDS,
INC., a Maryland corporation (the "Fund").
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund desires to retain Investor Services Group to render
certain administrative services with respect to each investment portfolio listed
in Schedule A hereto, as the same may be amended from time to time by the
parties hereto (collectively, the "Portfolios"), and Investor Services Group is
willing to render such services;
WITNESSETH:
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended
from time to time.
(b) "Authorized Person" shall be deemed to include (i) any
officer of the Fund; or (ii) any person, whether or not such person is
an officer or employee of the Fund, duly authorized to give Oral
Instructions or Written Instructions on behalf of the Fund as indicated
in writing to Investor Services Group from time to time.
(c) "Board Members" shall mean the Directors or Trustees of
the governing body of the Fund, as the case may be.
(d) "Board of Directors" shall mean the Board of Directors or
Board of Trustees of the Fund, as the case may be.
(e) "Commission" shall mean the Securities and Exchange
Commission.
(f) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custody Agreement.
(g) "1933 Act" shall mean the Securities Act of 1933 and the
rules and regulations promulgated thereunder, all as amended from time
to time.
(h) "1940 Act" shall mean the Investment Company Act of 1940
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(i) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by Investor Services Group from
a person reasonably believed by Investor Services Group to be an
Authorized Person.
(j) "Portfolio" shall mean each separate series of shares
offered by the Fund representing interests in a separate portfolio of
securities and other assets.
(k) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto if any, which has become effective under the 1933
Act and the 1940 Act.
(l) "Shares" refers collectively to such shares of capital
stock or beneficial interest, as the case may be, or class thereof, of
each respective Portfolio of the Fund as may be issued from time to
time.
(m) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(n) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by Investor Services Group to be
an Authorized Person and actually received by Investor Services Group.
Written Instructions shall include manually executed originals and
authorized electronic transmissions, including telefacsimile of a
manually executed original or other process.
Article 2 Appointment of Investor Services Group.
The Fund hereby appoints Investor Services Group to act as
Administrator of the Fund on the terms set forth in this Agreement. Investor
Services Group accepts such appointment and agrees to render the services herein
set forth for the compensation herein provided.
Article 3 Duties of Investor Services Group.
3.1 Investor Services Group shall be responsible for the following:
performing the certain services of an administrator, including corporate
secretarial, treasury and blue sky services, and fund accounting agent for the
Fund, as more fully described in the written schedule of Duties of Investor
Services Group annexed hereto as Schedule B and incorporated herein, and subject
to the supervision and direction of the Board of Directors of the Fund.
3.2 In performing its duties under this Agreement, Investor Services
Group: (a) will act in accordance with the Articles of Incorporation, By-Laws,
Prospectuses and with the Oral Instructions and Written Instructions of the Fund
and will conform to and comply with the requirements of the 1940 Act and all
other applicable federal or state laws and regulations; and (b) will consult
with legal counsel to the Fund, as necessary and appropriate. Furthermore,
Investor Services Group shall not have or be required to have any authority to
supervise the investment or reinvestment of the securities or other properties
which comprise the assets of the Fund or any of its Portfolios and shall not
provide any investment advisory services to the Fund or any of its Portfolios.
3.3 Investor Services Group agrees to provide the services set forth
herein in accordance with the Performance Standards annexed hereto as Exhibit 1
of Schedule B and incorporated herein (the "Performance Standards"). Such
Performance Standards may be amended from time to time by the parties.
3.4 In addition to the duties set forth herein, Investor Services Group
shall perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the Fund
and Investor Services Group.
Article 4 Recordkeeping and Other Information.
4.1 Investor Services Group shall create and maintain all records
required of it pursuant to its duties hereunder and as set forth in Schedule B
in accordance with all applicable laws, rules and regulations, including records
required by Section 31(a) of the 1940 Act. Where applicable, such records shall
be maintained by Investor Services Group for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such section, and will be surrendered
promptly to the Fund on and in accordance with the Fund's request.
Article 5 Fund Instructions.
5.1 Investor Services Group will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund.
5.2 At any time, Investor Services Group may request Written
Instructions from the Fund and may seek advice from legal counsel for the Fund,
or its own legal counsel, with respect to any matter arising in connection with
this Agreement, and it shall not be liable for any action taken or not taken or
suffered by it in good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Fund or for Investor Services
Group. Written Instructions requested by Investor Services Group will be
provided by the Fund within a reasonable period of time.
5.3 Investor Services Group, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Fund only if said representative is an
Authorized Person. The Fund agrees that all Oral Instructions shall be followed
within one business day by confirming Written Instructions, and that the Fund's
failure to so confirm shall not impair in any respect Investor Services Group's
right to rely on Oral Instructions.
Article 6 Compensation.
6.1 Investor Services Group will from time to time employ or associate
with itself such person or persons as Investor Services Group may believe to be
particularly suited to assist it in performing services under this Agreement.
Such person or persons may be officers and employees who are employed by both
Investor Services Group and the Fund. The compensation of such person or persons
shall be paid by Investor Services Group and no obligation shall be incurred on
behalf of the Fund in such respect.
6.2 Investor Services Group shall not be required to pay any of the
following expenses incurred by the Fund: membership dues in the Investment
Company Institute or any similar organization; investment advisory expenses;
costs of printing and mailing stock certificates, prospectuses, reports and
notices; interest on borrowed money; brokerage commissions; stock exchange
listing fees; taxes and fees payable to Federal, state and other governmental
agencies; fees of Board Members of the Fund who are not affiliated with Investor
Services Group; outside auditing expenses; outside legal expenses; Blue Sky
registration or filing fees; or other expenses not specified in this Section 6.2
which may be properly payable by the Fund. Investor Services Group shall not be
required to pay any Blue Sky registration or filing fees unless and until it has
received the amount of such fees from the Fund.
6.3 The Fund on behalf of each of the Portfolios will compensate
Investor Services Group for the performance of its obligations hereunder in
accordance with the fees set forth in the written Fee Schedule annexed hereto as
Schedule C and incorporated herein.
6.4 In addition to those fees set forth in Section 6.3 above, the Fund
on behalf of each of the Portfolios agrees to pay, and will be billed separately
for, out-of-pocket expenses incurred by Investor Services Group in the
performance of its duties hereunder. Out-of-pocket expenses shall include, but
shall not be limited to, the items specified in the written schedule of
out-of-pocket charges annexed hereto as Schedule D and incorporated herein.
Schedule D may be modified by written agreement between the parties. Unspecified
out-of-pocket expenses shall be limited to those out-of-pocket expenses
reasonably incurred by Investor Services Group in the performance of its
obligations hereunder.
6.5 Investor Services Group will bill the Fund as soon as practicable
after the end of each calendar month, and said billings will be detailed in
accordance with the out-of-pocket schedule. The Fund will pay to Investor
Services Group the amount of such billing by Federal Funds Wire within fifteen
(15) business days after the Fund's receipt of said bill. In addition, Investor
Services Group may charge a service fee equal to the lesser of (a) one and one
half percent (1-1/2%) per month or (b) the highest interest rate legally
permitted on any past due billed amount.
6.6 Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule C a revised Fee Schedule executed and dated by the
parties hereto.
6.7 The Fund acknowledges that the fees that Investor Services Group
charges the Fund under this Agreement reflect the allocation of risk between the
parties, including the disclaimer of warranties in Section 9.3 and the
limitations on liability and exclusion of remedies in Section 11.2 and Article
12. Modifying the allocation of risk from what is stated here would affect the
fees that Investor Services Group charges, and in consideration of those fees,
the Fund agrees to the stated allocation of risk.
Article 7 Documents.
In connection with the appointment of Investor Services Group, the Fund
shall, on or before the date this Agreement goes into effect, but in any case
within a reasonable period of time for Investor Services Group to prepare to
perform its duties hereunder, deliver or caused to be delivered to Investor
Services Group the documents set forth in the written schedule of Fund Documents
annexed hereto as Schedule E.
Article 8 Fund Accounting System.
8.1 Investor Services Group shall retain title to and ownership of any
and all data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions, discoveries,
patentable or copyrightable matters, concepts, expertise, patents, copyrights,
trade secrets, and other related legal rights developed by Investor Services
Group in connection with the services provided by Investor Services Group to the
Fund herein (the "Investor Services Group System").
8.2 Investor Services Group hereby grants to the Fund a limited license
to the Investor Services Group System for the sole and limited purpose of having
Investor Services Group provide the services contemplated hereunder and nothing
contained in this Agreement shall be construed or interpreted otherwise and such
license shall immediately terminate with the termination of this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of the
Fund or any third party acting on behalf of the Fund is provided with direct
access to the Investor Services Group System, such direct access capability
shall be limited to direct entry to the Investor Services Group System by means
of on-line mainframe terminal entry or PC emulation of such mainframe terminal
entry and any other non-conforming method of transmission of information to the
Investor Services Group System is strictly prohibited without the prior written
consent of Investor Services Group.
Article 9 Representations and Warranties.
9.1 Investor Services Group represents and warrants to the Fund that:
(a) it is a corporation duly organized, existing and in
good standing under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement; and
(d) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
9.2 The Fund represents and warrants to Investor Services Group that:
(a) it is duly organized, existing and in good standing under
the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize
it to enter into this Agreement; and
(d) a registration statement under the 1933 Act and the 1940
Act on behalf of each of the Portfolios is currently effective and will
remain effective.
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, INVESTOR SERVICES GROUP DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE COMPANY OR ANY OTHER PERSON,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF
ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS
PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. INVESTOR SERVICES
GROUP DISCLAIMS ANY WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE
SET FORTH IN THIS AGREEMENT.
Article 10 Indemnification.
10.1 The Fund shall indemnify and hold Investor Services Group harmless
from and against any and all claims, costs, expenses (including reasonable
attorneys' fees), losses, damages, charges, payments and liabilities of any sort
or kind which may be asserted against Investor Services Group or for which
Investor Services Group may be held to be liable in connection with this
Agreement or Investor Services Group's performance hereunder (a "Claim"), unless
such Claim resulted from a negligent act or omission to act or bad faith by
Investor Services Group in the performance of its duties hereunder.
10.2 In any case in which the Fund may be asked to indemnify or hold
Investor Services Group harmless, Investor Services Group will notify the Fund
promptly after identifying any situation which it believes presents or appears
likely to present a claim for indemnification against the Fund although the
failure to do so shall not prevent recovery by Investor Services Group and shall
keep the Fund advised with respect to all developments concerning such
situation. The Fund shall have the option to defend Investor Services Group
against any Claim which may be the subject of this indemnification, and, in the
event that the Fund so elects, such defense shall be conducted by counsel chosen
by the Fund and satisfactory to Investor Services Group, and thereupon the Fund
shall take over complete defense of the Claim and Investor Services Group shall
sustain no further legal or other expenses in respect of such Claim. Investor
Services Group will not confess any Claim or make any compromise in any case in
which the Fund will be asked to provide indemnification, except with the Fund's
prior written consent. The obligations of the parties hereto under this Article
10 shall survive the termination of this Agreement.
10.3 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
(a) one year after the Fund becomes aware of the event for
which indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.4 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
Investor Services Group's sole and exclusive remedy for claims or other actions
or proceedings to which the Fund's indemnification obligations pursuant to this
Article 10 may apply.
Article 11 Standard of Care.
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Fund unless said errors are caused by
Investor Services Group's own negligence, bad faith or willful misconduct or
that of its employees.
11.2 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
11.3 Without in any way limiting the foregoing, in the event Investor
Services Group shall provide Blue Sky services to the Fund, Investor Services
Group shall have no liability for failing to file on a timely basis any material
to be provided by the Fund or its designee that it has not received on a timely
basis from the Fund or its designee, nor shall Investor Services Group have any
responsibility to review the accuracy or adequacy of materials it receives from
the Fund or its designee for filing or bear any liability arising out of the
timely filing of such materials; nor shall Investor Services Group have any
liability for monetary damages for the sale of securities in jurisdictions where
Shares are not properly registered, or in jurisdictions where Shares are sold in
excess of the lawfully registered amount unless such failure of proper
registration or excess sales is due to the willful misfeasance, bad faith or
negligence of Investor Services Group. Investor Services Group shall not be
liable for any errors which result from inaccurate or inadequate information
reported to Investor Services Group directly or indirectly from the Fund's
transfer agent. Investor Services Group shall be under no obligation to
investigate or confirm the accuracy or adequacy of any information provided to
Investor Services Group by the Fund's transfer agent.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL INVESTOR SERVICES GROUP, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY THEORY OF
TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR LOST
PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL
DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS
OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written above
and shall continue for a period of five (5) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of two (2) years ("Renewal Terms")
each, unless the Fund or Investor Services Group provides written notice to the
other of its intent not to renew. Such notice must be received not less than
ninety (90) days and not more than one-hundred eighty (180) days prior to the
expiration of the Initial Term or the then current Renewal Term.
13.3 In the event a termination notice is given by the Fund, all
expenses associated with movement of records and materials and conversion
thereof to a successor administrator will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If Investor Services Group is the Non-Defaulting Party,
its termination of this Agreement shall not constitute a waiver of any other
rights or remedies of Investor Services Group with respect to services performed
prior to such termination of rights of Investor Services Group to be reimbursed
for out-of-pocket expenses. In all cases, termination by the Non-Defaulting
Party shall not constitute a waiver by the Non-Defaulting Party of any other
rights it might have under this Agreement or otherwise against the Defaulting
Party.
13.5 Notwithstanding anything contained in this Agreement to the
contrary, in the event that a merger, acquisition or change in control of the
Fund or an affiliate (as defined under the 1940 Act) of the Fund results, either
directly or indirectly, in the termination of this Agreement (an "Early
Termination") during the Initial Term of this Agreement, the Fund shall pay to
Investor Services Group within 30 days of the notice of termination the fee set
forth in Schedule C (the "Early Termination Fee"). Such Early Termination Fee
shall not be payable if Investor Services Group provides to a successor in
interest of the Fund services substantially similar to those services provided
to the Fund hereunder. A liquidation of the Fund or a Portfolio thereof (a
"Liquidation") shall not be deemed a termination of the Agreement subject to the
Early Termination Fee so long as such Liquidation did not result from a merger
or acquisition of the Fund or Portfolio; provided, however, that in the event of
the Liquidation of the Fund, the Fund shall pay to Investor Services Group
within 30 days of the notice of termination the fee set forth in Schedule C (the
"Liquidation Fee").
Article 14 Additional Portfolios
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the Fund
desires to have Investor Services Group render services as administrator under
the terms hereof, the Fund shall so notify Investor Services Group in writing,
and if Investor Services Group agrees in writing to provide such services,
Schedule A shall be amended to include such additional Portfolios.
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined below)
and the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The Fund
and Investor Services Group shall exercise at least the same degree of care, but
not less than reasonable care, to safeguard the confidentiality of the
Confidential Information of the other as it would exercise to protect its own
confidential information of a similar nature. The Fund and Investor Services
Group shall not duplicate, sell or disclose to others the Confidential
Information of the other, in whole or in part, without the prior written
permission of the other party. The Fund and Investor Services Group may,
however, disclose Confidential Information to their respective parent
corporation, their respective affiliates, their subsidiaries and affiliated
companies and employees, provided that each shall use reasonable efforts to
ensure that the Confidential Information is not duplicated or disclosed in
breach of this Agreement. The Fund and Investor Services Group may also disclose
the Confidential Information to independent contractors, auditors, and
professional advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 15.1.
Notwithstanding the previous sentence, in no event shall either the Fund or
Investor Services Group disclose the Confidential Information to any competitor
of the other without specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, and internal performance results relating to
the past, present or future business activities of the Fund or Investor
Services Group, their respective subsidiaries and affiliated companies
and the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or
Investor Services Group a competitive advantage over its competitors;
and
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
15.4 The obligations of confidentiality and restriction on use herein
shall not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this
Agreement or subsequently came into the public domain through no fault of such
party; or
(b) Was lawfully received by the party from a third party free
of any obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to
receipt thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or
administrative proceeding after all reasonable legal remedies for maintaining
such information in confidence have been exhausted including, but not limited
to, giving the other party as much advance notice of the possibility of such
disclosure as practical so the other party may attempt to stop such disclosure
or obtain a protective order concerning such disclosure; or
(e) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the Confidential
Information disclosed under this Agreement.
Article 16 Force Majeure.
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly, by (i) fire, flood, elements of nature or
other acts of God; (ii) any outbreak or escalation of hostilities, war, riots or
civil disorders in any country, (iii) any act or omission of the other party or
any governmental authority; (iv) any labor disputes (whether or not the
employees' demands are reasonable or within the party's power to satisfy); or
(v) nonperformance by a third party or any similar cause beyond the reasonable
control of such party, including without limitation, failures or fluctuations in
telecommunications or other equipment. In any such event, the non-performing
party shall be excused from any further performance and observance of the
obligations so affected only for as long as such circumstances prevail and such
party continues to use commercially reasonable efforts to recommence performance
or observance as soon as practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
Investor Services Group may, in its sole discretion, assign all its right, title
and interest in this Agreement to an affiliate, parent or subsidiary, or to the
purchaser of substantially all of its business. Investor Services Group may, in
its sole discretion, engage subcontractors to perform any of the obligations
contained in this Agreement to be performed by Investor Services Group.
Article 18 Notice.
Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or Investor Services Group, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
Forward Funds, Inc.
433 California Street
Suite 1010
San Francisco, California 94104
Attention: Mr. Ronald Pelosi
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
Article 19 Governing Law/Venue.
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement of
this agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in the City of Boston, and
Investor Services Group and the Fund hereby submit themselves to the exclusive
jurisdiction of those courts.
Article 20 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 21 Captions.
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 22 Publicity.
Neither Investor Services Group nor the Fund shall release or publish
news releases, public announcements, advertising or other publicity relating to
this Agreement or to the transactions contemplated by it without the prior
review and written approval of the other party; provided, however, that either
party may make such disclosures as are required by legal, accounting or
regulatory requirements after making reasonable efforts in the circumstances to
consult in advance with the other party.
Article 23 Relationship of Parties/Non-Solicitation.
23.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
23.2 During the term of this Agreement and for one (1) year afterward,
the Fund shall not recruit, solicit, employ or engage, for the Fund or others,
Investor Services Group's employees.
Article 24 Entire Agreement; Severability.
24.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of Investor
Services Group. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
24.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
Article 25 Miscellaneous.
The Fund and Investor Services Group agree that the obligations of the
Fund under the Agreement shall not be binding upon any of the Board Members,
shareholders, nominees, officers, employees or agents, whether past, present or
future, of the Fund individually, but are binding only upon the assets and
property of the Fund, as provided in the Articles of Incorporation. The
execution and delivery of this Agreement have been authorized by the Board
Members of the Fund, and signed by an authorized officer of the Fund, acting as
such, and neither such authorization by such Board Members nor such execution
and delivery by such officer shall be deemed to have been made by any of them or
any shareholder of the Fund individually or to impose any liability on any of
them or any shareholder of the Fund personally, but shall bind only the assets
and property of the Fund as provided in the Articles of Incorporation.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed and delivered by their duly authorized officers as of the date
first written above.
FORWARD FUNDS, INC.
By:
Name:
Title:
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:
Name:
Title:
<PAGE>
SCHEDULE A
LIST OF PORTFOLIOS
The Global Fund
<PAGE>
SCHEDULE B
DUTIES OF INVESTOR SERVICES GROUP
(a) Furnishing data processing services and clerical services and standard
stationery and office supplies;
(b) Performing fund accounting and bookkeeping services (including the
maintenance of such accounts, books and records of the Fund as may be required
by Section 31(a) of the 1940 Act) as follows:
o Daily, Weekly, and Monthly Reporting
o Portfolio and General Ledger Accounting
o Daily Valuation of all Portfolio Securities
o Daily Valuation and NAV Calculation
o Comparison of NAV to market movement
o Review research of price tolerance/fluctuation report to
market movements and events
o Research of items appearing on the price exception report
o Weekly cost monitoring along with market-to-market valuations
in accordance with Rule 2a-7
o Security trade processing
o Daily cash and position reconciliation with the custodian bank
o Daily updating of price and distribution rate information to
the Transfer Agent/Insurance Agent
o Daily support and report delivery to Portfolio Management
o Daily calculation of Portfolio adviser fees and waivers
o Daily calculation of distribution rates
o Daily investable cash call
o Monitor and research aged receivables
o Collect aged income items and perform reclaims
o Update NASDAQ reporting
o Daily maintenance of each Portfolio's general ledger including
expense accruals
o Daily NAV per share notification to other vendors as required
o Calculation of 30-day SEC yields and total returns
o Preparation of month-end reconciliation package
o Monthly reconciliation of Portfolio expense records
o Application of monthly pay down gain/loss
o Preparation of all annual and semi-annual audit work papers
(c) Performing all functions ordinarily performed by the office of a
corporate treasurer, and furnishing the services and facilities ordinarily
incident thereto, as follows:
o Expense Accrual Monitoring
o Determination of Dividends
o Preparation materials for review by the Board, e.g., Rules
2a-7,10f-3, 17a-7, 17e-1 and 144A
o Tax and Financial Counsel
o Creation of expense pro formas for new Portfolios/classes
o Reporting to investment company reporting agencies (i.e.,
Lipper)
o Compliance Testing including Section 817(h) (daily, weekly or
monthly)
(d) Preparing reports to the Fund's Shareholders and the SEC including, but
not necessarily limited to, Annual Reports and Semi-Annual Reports on Form
N-SAR;
(e) Preparing and filing the Fund's tax returns and providing shareholder
tax information to the Fund's transfer agent;
(f) Assisting the Adviser, at the Adviser's request, in monitoring and
developing compliance procedures for the Fund which will include, among other
matters, procedures to assist the Adviser in monitoring compliance with each
Portfolio's investment objective, policies, restrictions, tax matters and
applicable laws and regulations;
(g) Performing "Blue Sky" compliance functions, as follows:
o Effecting and maintaining, as the case may be, the
registration of Shares of the Fund for sale under the
securities laws of the jurisdictions listed in the Written
Instructions of the Fund, which instructions will include
the amount of Shares to be registered as well as the warning
threshold to be maintained. Any Written Instructions not
received at least 45 days prior to the date the Fund
intends to offer or sell its Shares cannot be
guaranteed a timely notification to the states. In
addition, Investor Services Group shall not be responsible
for providing to any other service provider of the Fund a
list of the states in which the Fund may offer and sell its
Shares.
o Filing with each appropriate jurisdiction the appropriate
materials relating to the Fund. The Fund shall be responsible
for providing such materials to Investor Services Group, and
Investor Services Group shall make such filings promptly after
receiving such materials.
o Providing to the Fund quarterly reports of sales activity in
each jurisdiction in accordance with the Written Instructions
of the Fund. Sales will be reported by shareholder residence.
NSCC trades and order clearance will be reported by the state
provided by the dealer at the point of sale. Trades by omnibus
accounts will be reported by trustee state of residence in
accordance with the Written Instructions of the Fund outlining
the entities which are permitted to maintain omnibus positions
with the Fund.
o In the event sales of Shares in a particular jurisdiction
reach or exceed the warning levels provided in the Written
Instructions of the Fund, Investor Services Group will
promptly notify the Fund with a recommendation of the amount
of Shares to be registered in such jurisdiction and the fee
for such registration. Investor Services Group will not
register additional Shares in such jurisdiction unless and
until Investor Services Group shall have received written
instructions from the Fund to do so.
(h) Performing the following legal services:
o Prepare and file annual Post-Effective Amendment
o Prepare and file Rule 24f-2 Notice
o Review and file Form N-SAR
o Review, Edgarize and file Annual and Semi-Annual Financial Reports
o Communicate significant regulatory or legislative developments to
Fund management and directors and provide related planning
assistance where needed
o Consult with Fund management regarding portfolio compliance and
Fund corporate and regulatory issues as needed
o Coordinate the printing and mailing process with outside printers
for all shareholder publications
o Arrange D&O/E&O insurance and fidelity bond coverage for Fund
o Assist in monitoring Fund Code of Ethics reporting and provide
such reports to the person designated under the Fund's Code
(i) Performing, in accordance with the Written Instructions of the Fund, the
following Special Legal Services in accordance with the pricing structure listed
on the Fee Schedule attached to this Agreement as Schedule C:
o Assist in managing SEC audits of Funds
o Assist in conversion
Coordinate time and responsibility schedules
Draft notice, agenda, memoranda, resolutions and background
materials for board approval
o Assist in new Portfolio start-up (to the extent requested)
Coordinate time and responsibility schedules
Prepare Fund corporate documents (MTA/by-laws)
Draft/file registration statement (including investment
objectives/policies and prospectuses)
Respond to and negotiate SEC comments
Draft notice, agenda and resolutions for organizational
meeting; attend board meeting; make presentations where
appropriate; prepare minutes and follow up on issues
o Assist in developing compliance guidelines and procedures to
improve overall compliance by Fund and service providers
o Prepare notice, agenda, memoranda and background materials for
special board meetings, make presentations where appropriate,
prepare minutes and follow up on issues
o Prepare proxy material for special meetings (including fund merger
documents)
o Prepare Post-Effective Amendments for special purposes (e.g., new
funds or classes, changes in advisory relationships, mergers,
restructurings)
o Prepare special Prospectus supplements where needed
o Assist in extraordinary non-recurring projects, including
providing consultative legal services, e.g.,
Arrange CDSC financial programs
Prospectus simplification
Profile prospectuses
Exemptive order applications
<PAGE>
SCHEDULE C
FEE SCHEDULE
For the services to be rendered, the facilities to be furnished and the
payments to be made by Investor Services Group, as provided for in this
Agreement, the Fund, on behalf of each Portfolio, will pay Investor Services
Group on the first business day of each month a fee for the previous month at
the rates listed below.
o Legal and Fund Administration Fees:
Fund assets less than $500 million 20 basis points
Fund assets $500 million to $1 billion 17 basis points
Fund assets greater than $1 billion 12.5 basis points
o Fund Accounting Fees:
Per Fund Domestic International
Each additional class $35,000 $55,000
Plus out of pockets $5,000 $5,000
o Early Termination Fee; Liquidation Fee: The Early Termination
Fee shall be an amount equal to the lesser of (a) the previous
month's fee multiplied by the number of months remaining on the
Initial Term of the Agreement, or (b) the previous month's fee
multiplied by twelve to reflect one year's fee. If a Liquidation
(as such term is defined in Section 13.5 hereof) occurs during
the first year of this Agreement, the Liquidation Fee shall be an
amount equal to the fees paid to Investor Services Group by the
Fund under this Agreement for the previous month annualized to
reflect one year's fee (the "Annual Fee"). If such Liquidation
occurs during the second year of this Agreement, the Liquidation
Fee shall equal two-thirds of the Annual Fee. If such Liquidation
occurs during the third year of this Agreement, the Liquidation
Fee shall equal one-third of the Annual Fee.
o Investor Services Group shall be entitled to the following fee
for the performance of any Special Legal Services as described in
Schedule B in accordance with the Written Instructions of the
Fund: $185 per hour subject to certain project caps as may be
agreed to by Investor Services Group and the Fund. Services and
charges may vary based on volume.
o Investor Services Group shall be entitled to collect all
out-of-pocket fees described in Schedule D.
<PAGE>
SCHEDULE D
OUT-OF-POCKET EXPENSES
Out-of-pocket expenses include, but are not limited to, the following:
o Courier services
o Delivery costs of Board meetings materials and other materials to
the Fund's Board members and service providers (including
overnight or other courier services)
o Telecommunictions charges (including FAX) with respect to
communications with the Fund's Board Members, officers and service
providers
o Duplicating charges with respect to filings with Federal and
state authorities and Board meeting materials
o Travel to and from Board meetings and other meetings with Fund
management
o Pricing services (or services used to determine Fund NAV)
o Forms and supplies for the preparation of Board meetings and
other materials for the Fund
o Vendor set-up charges for Blue Sky services
o Customized programming requests
o Blue Sky filing or registration fees
o SAS 70
o Cold Storage
o Document Retrieval
o Vendor pricing comparison
o Manual pricing
o Such other expenses as are agreed to by Investor Services Group
and the Fund
<PAGE>
SCHEDULE E
FUND DOCUMENTS
o Certified copy of the Articles of Incorporation of the Fund, as
amended
o Certified copy of the By-laws of the Fund, as amended,
o Copy of the resolution of the Board of Directors authorizing
the execution and delivery of this Agreement
o Copies of all agreements between the Fund and its service
providers.
o All notices issued by the Fund with respect to the Shares in
accordance with and pursuant to the Articles of Incorporation or
By-laws of the Fund or as required by law and shall perform
such other specific duties as are set forth in the
Articles of Incorporation including the giving of notice of
any special or annual meetings of shareholders and any other
notices required thereby.
DECHERT PRICE & RHOADS
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
(202) 261-3300
February 24, 1998
Forward Funds, Inc.
433 California Street
Suite 1010
San Francisco, California 94104
Ladies and Gentlemen:
In connection with the registration under the Securities Act of 1933 of
an indefinite number of shares of common stock of Forward Funds, Inc. (the
"Company"), we have examined such matters as we have deemed necessary to give
this opinion.
On the basis of the foregoing, it is our opinion that the shares have
been duly authorized and, when paid for as contemplated by the Company's
Registration Statement, will be validly issued, fully paid, and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references to our firm therein.
Very truly yours,
/s/ DECHERT PRICE & RHOADS
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder and Board of Directors of Forward Funds, Inc.:
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
San Francisco, California
February 19, 1998
FORWARD FUNDS, INC.
433 California Street, Suite 1010
San Francisco, California 94104
February 6, 1998
Sutton Place Management Co., Inc.
433 California Street, Suite 1010
San Francisco, California 94104
Re: Acceptance of Subscription for the Purchase of Shares of
Beneficial Interest of The Global Fund
Dear Sirs:
Forward Funds, Inc. (the "Company"), on behalf of The Global Fund (the
"Fund"), hereby accepts your offer to purchase 10,000 shares of the Fund at a
price of $10.00 per share for an aggregate purchase price of $100,000. This
agreement is subject to the understanding that you have no present intention of
selling or redeeming the shares so acquired.
Any redemption of these shares by you will be reduced by a pro rate
portion of any then unamortized organization expenses of the Fund. This
proration will be calculated by dividing the number of shares to be redeemed by
the aggregate number of shares held which represent the initial capital of the
Fund.
Sincerely,
/s/ Ronald Pelosi
Sutton Place Management Co., Inc.
Ronald Pelosi
President
Accepted: /s/ Ronald Pelosi
Forward Funds, Inc.
Title: President
<PAGE>
SUTTON PLACE MANAGEMENT CO., INC.
433 California Street, Suite 1010
San Francisco, California 94104
February 6, 1998
Forward Funds, Inc.
433 California Street, Suite 1010
San Francisco, California 94104
Re: Subscription for the Purchase of Shares of Beneficial
Interest of The Global Fund
Dear Sirs:
The undersigned hereby subscribes to purchase 10,000 shares of
beneficial interest of The Global Fund, at a price of $10.00 per share, and
agrees to pay therefor upon demand in cash the amount of $100,000.
Very truly yours,
SUTTON PLACE MANAGEMENT CO., INC.
By: /s/ Ronald Pelosi
Title: President
