As Filed with the Securities and Exchange Commission on February 29, 2000
File No. 333-37367
File No. 811-8419
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
=============================
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 13 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 15 /X/
THE FORWARD FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
433 California Street, Suite 1010
San Francisco, California 94104
(Address of Principal Executive Office) (Zip Code)
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 of process)
COPIES TO:
ROBERT W. HELM
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
=============================
It is proposed that this filing will become effective on May 1, 2000 pursuant to
paragraph (a)(1) of Rule 485.
<PAGE>
FORWARD FUNDS, INC.
The Hansberger International Growth Fund
The Uniplan Real Estate Investment Fund
The Hoover Small Cap Equity Fund
The Garzarelli U.S. Equity Fund
Prospectus dated May 1, 2000
The Garzarelli U.S. Equity Fund, Hansberger International Growth Fund and Hoover
Small Cap Equity Fund are designed for investors desiring high total return
(generally capital appreciation and income). The Uniplan Real Estate Investment
Fund is designed for investors primarily seeking income with capital
appreciation as a secondary goal
Our Funds are mutual funds. Mutual funds employ professionals to manage the
investments made on behalf of the persons who invest in them, the shareholders
of the mutual fund. Our funds, like other mutual funds, try to meet their stated
investment goals but there is no guarantee that the goals will be met.
Investments in our Funds are not bank deposits; they are not insured by the FDIC
or the federal government or any other agency.
You should understand that an investment in the Funds involves certain risks,
including the loss of some or all of your investment.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. It is a criminal
offense to say otherwise.
<PAGE>
TABLE OF CONTENTS
Page
THE HANSBERGER INTERNATIONAL GROWTH FUND.......................................4
Objective.............................................................4
Principal Investment Strategies - Investing in International Growth
Securities..........................................................4
What are the Principal Risks of Investing in the Hansberger
International Growth Fund?............................................5
Performance History...................................................5
Shareholder Fees and Expenses.........................................6
THE UNIPLAN REAL ESTATE INVESTMENT FUND........................................9
Objective.............................................................9
Principal Investment Strategies - Investing in Equity Securities of
Real-Estate Focused Companies.......................................9
What are the Principal Risks of Investing in the Uniplan Real Estate
Investment Fund?.....................................................10
Performance History..................................................11
Shareholder Fees and Expenses........................................11
THE HOOVER SMALL CAP EQUITY FUND..............................................14
Objective............................................................14
Principal Investment Strategy - Investing in Equity Securities of
Companies with Small Market Capitalization.........................14
What are the Principal Risks of Investing in the Hoover Small Cap
Equity Fund..........................................................14
Performance History..................................................15
Shareholder Fees and Expenses........................................16
THE GARZARELLI U.S. EQUITY FUND...............................................19
Objective............................................................19
Principal Investment Strategy - Investing in Domestic Equity
Securities...........................................................19
What are the Principal Risks of Investing in the Garzarelli U.S. Equity
Fund?................................................................19
Performance History..................................................20
Shareholder Fees and Expenses........................................20
ADDITIONAL INVESTMENT STRATEGIES AND RISKS....................................24
MANAGEMENT OF THE FUNDS.......................................................26
Investment Adviser and Sub-Advisers..................................26
VALUATION OF SHARES...........................................................30
PURCHASING SHARES.............................................................32
How to Buy Shares....................................................32
EXCHANGE PRIVILEGE............................................................34
<PAGE>
REDEEMING SHARES..............................................................34
Signature Guarantee..................................................35
By Wire Transfer.....................................................35
By Telephone.........................................................36
By Mail..............................................................36
Payments to Shareholders.............................................36
INTERNET TRANSACTIONS.........................................................37
DISTRIBUTION AND SHAREHOLDER SERVICE PLANS....................................37
DIVIDENDS AND TAXES...........................................................38
Federal Taxes........................................................38
GENERAL INFORMATION...........................................................39
Shareholder Communications...........................................39
FINANCIAL HIGHLIGHTS..........................................................39
<PAGE>
THE HANSBERGER INTERNATIONAL GROWTH FUND
Objective
The Hansberger International Growth Fund seeks to achieve high total return
(capital appreciation and income).
Principal Investment Strategies - Investing in International Growth Securities
The Hansberger International Growth Fund seeks to achieve its investment
objective by investing primarily (at least 65% of total assets) in the equity
securities (common, preferred and convertible securities) of companies organized
or located outside of the United States. Even though these companies are based
outside of the United States, their securities may be traded on U.S. securities
markets and the Fund may purchase these securities. The Fund will invest in at
least three different countries and expects to be invested in more than three
countries, including countries considered to be emerging market countries. The
Fund will not invest more than 25% of its total assets in emerging markets. The
Fund will primarily invest in common stock.
The Hansberger International Growth Fund invests a substantial amount of its
assets in foreign investments which are denominated in other currencies besides
the U.S. dollar, and can be affected by fluctuations in exchange rates.
For hedging purposes and to reduce the risks of fluctuating exchange rates, the
Fund may enter into forward foreign currency exchange contracts which obligate a
party to buy or sell a specific currency on a future date at a fixed price. The
Fund "locks in" an exchange rate. For hedging purposes, the Fund may also invest
in options on foreign currencies, in foreign currency futures and options and in
foreign currency exchange-related securities like foreign currency warrants and
other instruments linked to foreign currency exchange rates. The Fund's
sub-adviser generally chooses not to hedge the Fund's currency exposure.
The Fund's sub-adviser anticipates following a flexible investment policy which
will allow it to select those investments best suited to achieve the Fund's
investment objective over the long term. The Fund's sub-adviser uses a
disciplined, long-term approach to international investing. It has an extensive
global network of investment research sources. The sub-adviser focuses primarily
on identifying successful companies that have favorable, anticipated long-term
prospects. Securities are selected for the Fund's portfolio on the basis of
fundamental company-by-company analysis. In choosing equity instruments, the
Fund's sub-adviser typically will focus on the market price of a company's
securities relative to its evaluation of the company's long-term earnings and
cash flow potential. In addition, a company's valuation measures, including, but
not limited to price/earnings ratio and price/book ratio will customarily be
considered. The sub-adviser generally sells a security if the sub-adviser's
price target is met, the company's fundamentals change, or if the portfolio is
fully invested and a better investment opportunity arises. There are no
limitations on the size of the companies in which the Fund may invest.
<PAGE>
What are the Principal Risks of Investing in the Hansberger International
Growth Fund?
As with any investment, an investment in the Hansberger International Growth
Fund may cause you to lose some or all of the money you invested. Because the
securities in which the Hansberger International Growth Fund invests may
decrease in value, the net asset value of the Fund may decrease and the value of
your investment may also decrease. On the other hand, you could experience an
increase in the value of your investment as the Hansberger International Growth
Fund's net asset value increases. You should consider your own investment goals,
time horizon and risk tolerance before investing in the Hansberger International
Growth Fund.
o Foreign Securities
Investments in foreign securities may present more risk than investing
in U.S. securities because of factors such as unstable international political
and economic conditions, currency fluctuations, foreign controls on investment
and currency exchange, withholding taxes, exit levies, a lack of adequate
company information, less liquid and more volatile markets, and a lack of
government regulation. Investments in emerging markets involve even greater
risks such as immature economic structures and different legal systems.
o Currency Transactions
If a security is denominated in a foreign currency, the value of the
security fluctuates if there is a change in currency exchange rates or exchange
control regulations, and adverse currency fluctuations will reduce the value of
the Fund's shares. Costs are incurred by a Fund in connection with conversions
between currencies. Currency risks are greater in lesser developed markets and
can be unpredictably affected by external events. Fund managers are authorized
to hedge against currency risks but are not required to do so and may choose not
to do so because of the cost or for other reasons. In accordance with its
investment philosophy, the Fund's sub-adviser generally chooses not to hedge the
Fund's currency exposure.
o Common Stocks
The Hansberger International Growth Fund invests in the equity
securities of companies, which exposes the Fund and its shareholders to the
risks associated with common stock investing. These risks include the financial
risk of selecting individual companies that do not perform as anticipated, the
risk that the stock markets in which the Fund invests may experience periods of
turbulence and instability, and the general risk that domestic and global
economies may go through periods of decline and cyclical change. Many factors
affect an individual company's performance, such as the strength of its
management or the demand for its product or services. The Fund's sub-adviser
follows a growth at a reasonable price style of management and if the market
does not come to share the sub-adviser's assessment of an investment's long-term
growth, the Fund may underperform other mutual funds or international stock
indices.
<PAGE>
Performance History
The chart below shows the Fund's annual total return for 1999, the first full
year in which the Fund was operational, together with the best and worst
quarters since inception. The accompanying chart gives an indication of the
risks of investing in the Fund by comparing the Fund's performance to that of
the ____ Index, an unmanaged index of [stock performance]. The presentations
below assume reinvestment of dividends and distributions. Past results are not
an indication of future performance.
[Bar Chart]
1999 25.15%
Best Quarter (x/x/xx) %
Worst Quarter (x/x/xx) %
Annual Total Return as of 12/31/99 1 Year Since Inception
================================================================================
Hansberger International Growth Fund(1) 25.15% 32.10%
The Morgan Stanley World (ex U.S.) Index(2) [ ]% [ ]%
- ----------------
1 Hansberger Global Investors, Inc. has been the Fund's sub-adviser since
March 1, 2000; however, prior to this time the Fund was managed by a
different sub-adviser.
2 The Morgan Stanley World (ex. U.S.) Index is unmanaged and investors cannot
invest directly in the index.
Shareholder Fees and Expenses
This table describes the fees and expenses that you may pay if you buy shares of
the Hansberger International Growth Fund.
<PAGE>
----------------------------------------------------------- -------------------
Shareholder Fees (fees paid directly from your
investment):
----------------------------------------------------------- -------------------
Maximum Sales Charge (Load) on Purchases (as a % of your NONE
purchase price)(1)
----------------------------------------------------------- -------------------
Maximum Deferred Sales Charge (Load) NONE
----------------------------------------------------------- -------------------
Maximum Sales Charge (Load) Imposed on Reinvested NONE
Dividends
----------------------------------------------------------- -------------------
Redemption Fee(2) NONE
----------------------------------------------------------- -------------------
Transaction Fee (3) 0.25%
----------------------------------------------------------- -------------------
Exchange Fees NONE
----------------------------------------------------------- -------------------
Maximum Account Fee (4) $10.00
----------------------------------------------------------- -------------------
- ---------------
1 You will be charged $1.50 for checks and $8.00 for wire transfers. There is
no wire transfer fee for transfers involving an omnibus account of a
broker-dealer or other entity that has an agreement with Forward Funds,
Inc. or its distributor to service shareholders.
2 If you redeem your shares by mail there is a $1.00 charge. If you choose to
receive the proceeds from your redemption via wire transfer, there is an
$8.00 charge. There is no wire transfer fee for transfers involving an
omnibus account of a broker-dealer or other entity that has an agreement
with Forward Funds, Inc. or its distributor to service shareholders. There
is no charge for transactions effected via the Internet or ACH transfers by
phone or Internet.
<PAGE>
----------------------------------------------------------- -------------------
Annual Fund Operating Expenses (expenses that are
deducted from Fund assets)(5)
----------------------------------------------------------- -------------------
Management Fee [0.95%]
----------------------------------------------------------- -------------------
Distribution and Service (12b-1) Fees (6) 0.25%
----------------------------------------------------------- -------------------
Other Expenses 1.11%
----------------------------------------------------------- -------------------
Total Annual Fund Operating Expenses [2.31%]
----------------------------------------------------------- -------------------
Fee Waiver (7) [0.66%]
----------------------------------------------------------- -------------------
Net Expenses 1.65%
----------------------------------------------------------- -------------------
Example
This example is intended to help you compare the costs of investing in the
Hansberger International Growth Fund with the costs of investing in other mutual
funds.
- ---------------
3 There is a 0.25% transaction fee based on the amount purchased. If you
maintain your account with us through a broker-dealer or other financial
institution, the fee will be charged only when you redeem shares and would
be based on the amount redeemed; all other investors pay the fee at the
time they purchase shares. This fee is applied directly against transaction
costs incurred by the Fund. It is not applied to reinvested dividends or
capital gains distributions. See "Purchasing Shares" for circumstances
under which shares may be offered without a 0.25% transaction fee.
4 Shareholders who elect to receive cash dividends will pay a $10.00 annual
account administration fee which is deducted out of dividends. If the cash
dividend is less than the account administration fee then shares are sold
from your account to make up the difference. This allows us to allocate
administrative costs in a fair manner among shareholders. You may avoid
this fee by electing to reinvest your dividends in Fund shares.
5 These expenses are paid directly out of the Fund's assets. Expenses are
factored into the share price or dividends and are not charged directly to
shareholder accounts.
6 The Fund's shareholders have adopted a Distribution Plan pursuant to which
up to 0.25% of the Fund's average daily net assets may be used to pay
shareholder servicing and distribution fees. The Fund has also adopted a
Shareholder Servicing Plan pursuant to which up to 0.10% of the Fund's
average net assets could be used to pay shareholder servicing fees. The
expenses of the Shareholder Servicing Plan are reflected as part of "Other
Expenses" of the Fund.
7 The Fund's Investment Adviser has contractually agreed to wave a portion of
its fees until January 2001 in amounts necessary to limit the Fund's
operating expenses to an annual rate of 1.65% (as a percentage of average
daily net assets and exclusive of 12b-1 and shareholder servicing fees).
For the two years following January, 2000, the Investment Adviser is
entitled to a reimbursement from the Fund of any fees waived under this
arrangement if such reimbursement does not cause the Fund to exceed
existing expense limitations.
<PAGE>
The Example assumes that you invest $10,000 in the Hansberger International
Growth Fund for the periods indicated and then redeem all of your shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's total annual Fund operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<PAGE>
Hansberger
International
Growth
Fund+
-------
1 Year........................ [$188]
3 Years....................... [$678]
5 Years....................... [$1,196]
10 Years...................... [$2,616]
You would pay the following expenses if you did not redeem your shares:
Hansberger
International
Growth
Fund+
-------
1 Year........................ [$163]
3 Years....................... [$653]
5 Years....................... [$1,171]
10 Years...................... [$2,591]
- ---------------
[+The examples above include imposition of the transaction fee and incorporate
the contractual fee waiver in place for the Fund for its current fiscal year.]
<PAGE>
THE UNIPLAN REAL ESTATE INVESTMENT FUND
Objective
The Uniplan Real Estate Investment Fund seeks income with capital appreciation
as a secondary goal.
Principal Investment Strategies - Investing in Equity Securities of Real-Estate
Focused Companies
The Uniplan Real Estate Investment Fund invests in real estate securities,
including common stock and units of beneficial interest of real estate
investment trusts, preferred stock, rights to purchase common stock and
securities which may convert into common stock of real estate companies. The
Fund expects to normally invest at least 65% of its assets in these securities
and up to 35% of its assets in debt securities issued or guaranteed by real
estate companies. A real estate investment trust or "REIT" is a company which
primarily owns and operates income-producing real estate, such as apartments,
shopping centers, offices and warehouses. A REIT is legally required to pay
virtually all of its taxable income to its shareholders each year. REITs were
created as a means for average investors to access investments in large
commercial properties through pooling arrangements, much like mutual funds.
Income is produced through commercial real estate ownership and finance.
For the purpose of the Uniplan Real Estate Investment Fund, a real estate
company is one that derives at least 50% of its revenue from real estate related
activities or has at least 50% of its assets in real estate. Other than REITs,
most real estate companies do not pay dividends at a meaningful level. The
Fund's sub-adviser expects that the Fund's investments in real estate companies
will be directed toward REITs and other real estate operating companies that pay
higher dividends relative to the stock market as a whole. There are no size
limitations on the companies in which the Fund invests. The Fund primarily
invests in equity REITs which are REITs that own real estate and whose revenue
come principally from rent.
Prior to selecting specific investments for the Fund, the Fund's sub-adviser
generally tracks real estate supply and demand across the United States by
separating the country into eight geographic regions and then further into major
metropolitan markets within those regions. Within each region, the Fund's
sub-adviser compiles a profile of supply and demand factors including: (1)
vacancy rates by property type; (2) visible supply of new property based on
building permit activity; (3) regional population, job and economic growth; and
(4) local trends in rental and property capitalization rates. The Fund's
sub-adviser uses this data to determine which property types in which regions
appear to be most favorably poised to outperform similar properties in other
regions. The Fund's sub-adviser then proceeds to select investments that attempt
to take advantage of those factors. The Fund's sub-adviser generally sells a
security if the security becomes over-valued in the opinion of the sub-adviser,
the company's fundamentals change or if better investment opportunities arise.
<PAGE>
What are the Principal Risks of Investing in the Uniplan Real Estate
Investment Fund?
As with any investment, an investment in the Uniplan Real Estate Investment Fund
may cause you to lose some or all of the money you invested. Because the
securities in which the Uniplan Real Estate Investment Fund invests may decrease
in value, the net asset value of the Fund may decrease and the value of your
investment may also decrease. On the other hand, you could experience an
increase in the value of your investment as the Fund's net asset value
increases. You should consider your own investment goals, time horizon and risk
tolerance before investing in the Uniplan Real Estate Investment Fund.
o Real Estate Securities and Uniplan Real Estate Investment Fund Risks
Because the Uniplan Real Estate Investment Fund concentrates its
investments on opportunities in the real estate industry, the Uniplan Real
Estate Investment Fund has certain risks associated with investments in entities
focused on real estate activities.
The organizational documents of a REIT may give the trust's sponsors the
ability to control the operation of the real estate investment trust even though
another person or entity could own a majority of the interests of the trust.
These trusts may also contain provisions which would delay or make a change in
control of the real estate investment trust difficult. In addition, the
performance of these types of investments can be affected by changes in the tax
laws or failure to qualify for tax-free pass-through of income as well as events
affecting the value of real estate.
The Fund is also subject to the risks associated with direct ownership of
real estate. Real estate values can fluctuate as a result of general and local
economic conditions, overbuilding and increased competition, increases in
property taxes and operating expenses, changes in zoning laws, casualty or
condemnation losses, regulatory limitations on rents, changes in neighborhood
values, changes in the appeal of properties to tenants and increases in interest
rates. The value of equities which service the real estate business sector may
also be affected by such risks.
The Uniplan Real Estate Investment Fund is also a non-diversified fund
which means it is not subject to a limit on the percentage of its assets that
may be invested in the securities of a single issuer. Less diversification may
make the Uniplan Real Estate Investment Fund more vulnerable to adverse
economic, political or regulatory developments affecting a single issuer than if
the Fund were more diversified. The Fund must, however, comply with tax
diversification laws which require it to be diversified with respect to at least
half of its assets.
o Common Stocks
The Uniplan Real Estate Investment Fund invests in the equity securities of
companies, which exposes the Fund and its shareholders to the risks associated
with common stock investing. These risks include the financial risk of selecting
individual companies that do not perform as anticipated, the risk that the stock
markets in which the Fund invests may experience periods of turbulence and
instability, and the general risk that domestic and global economies may go
through periods of decline and cyclical change. Many factors affect an
individual company's performance, such as the strength of its management or the
demand for its product or services.
<PAGE>
Performance History
The chart below shows the Fund's annual total return for 1999, the first full
year in which the Fund was operational. The accompanying chart gives an
indication of the risks of investing in the Fund by comparing the Fund's
performance to that of the NAREIT Equity Index, an unmanaged index of [stock
performance]. The presentations below assume reinvestment of dividends and
distributions. Past results are not an indication of future performance.
%
%
Annual Total Return as of 12/31/99 Since Inception (May 10, 1999)
================================================================================
Uniplan Real Estate Investment Fund %
NAREIT Equity Index Index1 %
- ---------------
1 The National Association of Real Estate Investment Trusts Equity Index is
unmanaged and investors cannot invest directly in the index.
Shareholder Fees and Expenses
This table describes the fees and expenses that you may pay if you buy shares of
the Uniplan Real Estate Investment Fund.
----------------------------------------------------------- -------------------
Shareholder Fees (fees paid directly from your
investment):
----------------------------------------------------------- -------------------
Maximum Sales Charge (Load) on Purchases (as a % of your NONE
purchase price)(1)
----------------------------------------------------------- -------------------
Maximum Deferred Sales Charge (Load) NONE
----------------------------------------------------------- -------------------
Maximum Sales Charge (Load) Imposed on Reinvested NONE
Dividends
----------------------------------------------------------- -------------------
Redemption Fee(2) NONE
----------------------------------------------------------- -------------------
Transaction Fee (3) 0.25%
----------------------------------------------------------- -------------------
Exchange Fees NONE
----------------------------------------------------------- -------------------
Maximum Account Fee (4) $10.00
----------------------------------------------------------- -------------------
- ---------------
1 You will be charged $1.50 for checks and $8.00 for wire transfers. There is
no wire transfer fee for transfers involving an omnibus account of a
broker-dealer or other entity that has an agreement with Forward Funds,
Inc. or its distributor to service shareholders.
2 If you redeem your shares by mail there is a $1.00 charge. If you choose to
receive the proceeds from your redemption via wire transfer, there is an
$8.00 charge. There is no wire transfer fee for transfers involving an
omnibus account of a broker-dealer or other entity that has an agreement
with Forward Funds, Inc. or its distributor to service shareholders. There
is no charge for transactions effected via the Internet or ACH transfers by
phone or Internet. There is no charge for transactions effected via the
Internet or ACH transfers by phone or Internet.
<PAGE>
----------------------------------------------------------- -------------------
Annual Fund Operating Expenses (expenses that are
deducted from Fund assets)(5)
----------------------------------------------------------- -------------------
Management Fee [1.00%]
----------------------------------------------------------- -------------------
Distribution and Service (12b-1) Fees (6) [0.25%
----------------------------------------------------------- -------------------
Other Expenses [1.59%]
----------------------------------------------------------- -------------------
Total Annual Fund Operating Expenses [2.84%]
----------------------------------------------------------- -------------------
Fee Waiver (7) [1.04%]
----------------------------------------------------------- -------------------
Net Expenses [1.80%]
----------------------------------------------------------- -------------------
Example
This example is intended to help you compare the costs of investing in the
Uniplan Real Estate Investment Fund with the costs of investing in other mutual
funds.
- ---------------
3 There is a 0.25% transaction fee based on the amount purchased. If you
maintain your account with us through a broker-dealer or other financial
institution, the fee will be charged only when you redeem shares and would
be based on the amount redeemed; all other investors pay the fee at the
time they purchase shares. This fee is applied directly against transaction
costs incurred by the Fund. It is not applied to reinvested dividends or
capital gains distributions. See "Purchasing Shares" for circumstances
under which shares may be offered without a 0.25% transaction fee.
4 Shareholders who elect to receive cash dividends will pay a $10.00 annual
account administration fee which is deducted out of dividends. If the cash
dividend is less than the account administration fee then shares are sold
from your account to make up the difference. This allows us to allocate
administrative costs in a fair manner among shareholders. You may avoid
this fee by electing to reinvest your dividends in Fund shares.
5 These expenses are paid directly out of the Fund's assets. Expenses are
factored into the share price or dividends and are not charged directly to
shareholder accounts.
6 The Fund's shareholders have adopted a Distribution Plan pursuant to which
up to 0.25% of the Fund's average daily net assets may be used to pay
shareholder servicing and distribution fees. The Fund has also adopted a
Shareholder Servicing Plan pursuant to which up to 0.10% of the Fund's
average net assets could be used to pay shareholder servicing fees. The
expenses of the Shareholder Servicing Plan are reflected as part of "Other
Expenses" of the Fund.
7 The Fund's Investment Adviser has contractually agreed to waive a portion
of its fees until January 2001 in amounts necessary to limit the Fund's
operating expenses to an annual rate of 1.80% (as a percentage of average
daily net assets and exclusive of 12b-1 and shareholder servicing fees).
For the two years following January, 2000, the Investment Adviser is
entitled to a reimbursement from the Fund of any fees waived under this
arrangement if such reimbursement does not cause the Fund to exceed
existing expense limitations.
<PAGE>
The Example assumes that you invest $10,000 in the Uniplan Real Estate
Investment Fund for the periods indicated and then redeem all of your shares at
the end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's total annual Fund operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
Uniplan
Real Estate
Investment
Fund+
-------
1 Year........................ [$208]
3 Years....................... [$807]
5 Years....................... [$1,432]
10 Years...................... [$3,117]
You would pay the following expenses if you did not redeem your shares:
Uniplan
Real Estate
Investment
Fund+
-------
1 Year........................ [$183]
3 Years....................... [$782]
5 Years....................... [$1,407]
10 Years...................... [$3,092]
- ---------------
+The examples above include imposition of the transaction fee and incorporate
the contractual fee waiver in place for the Fund for its current fiscal year.
<PAGE>
THE HOOVER SMALL CAP EQUITY FUND
Objective
The Hoover Small Cap Equity Fund seeks to achieve high total return. The Fund
anticipates that its investment returns are likely to be in the form of capital
appreciation rather than income, since small capitalization companies often do
not pay regular dividends.
Principal Investment Strategy - Investing in Equity Securities of Companies
with Small Market Capitalization
The Hoover Small Cap Equity Fund invests primarily in the equity securities
(common, preferred and convertible securities) of companies that have small
market capitalizations and offer future growth potential. At least 65% of the
Fund's total assets are invested in the securities of companies whose market
capitalization is no larger than companies which are included in the Russell
2000(R) Index at the time of initial purchase. The Russell 2000(R) Index
comprises the 2,000 smallest companies in the Russell 3000(R) Index, which
represents approximately 11% of the total market capitalization of the Russell
3000(R) Index. The Fund expects that the median and weighted average market
capitalization of the companies in which it invests will remain less than $1
billion, although this market capitalization level may increase with growth in
the market capitalization of the Russell 2000(R) Index. The Hoover Small Cap
Equity Fund may invest up to 20% of its assets in foreign investments. The
Hoover Small Cap Equity Fund will not invest more than 5% of its net assets in
foreign investments denominated in a foreign currency and will limit its
investments in any single non-U.S. country to 5% of its total assets.
In making its investments, the Fund's sub-adviser seeks out companies with
characteristics such as significant potential for future growth in earnings,
ability to compete in its business, a clearly defined business focus, strong
financial health and management ownership. The Fund's sub-adviser attempts to
locate out of favor and undiscovered companies and industries that are selling
at low relative valuations. The sub-adviser's investment process focuses on
specific companies but also takes into account macroeconomic and industry sector
developments. The sub-adviser is not required to sell a stock for which the
market capitalization grows beyond that of the Russell 2000(R) Index although it
may do so. The sub-adviser generally sells a security if the sub-adviser's price
target is met, the security becomes over-valued in the opinion of the
sub-adviser, the company's fundamentals change or if better investment
opportunities arise.
What are the Principal Risks of Investing in the Hoover Small Cap Equity Fund
As with any investment, an investment in the Hoover Small Cap Equity Fund may
cause you to lose some or all of the money you invested. Because the securities
in which the Hoover Small Cap Equity Fund invests may decrease in value, the net
asset value of the Hoover Small Cap Equity Fund may decrease and the value of
your investment may also decrease. On the other hand, you could experience an
increase in the value of your investment as the Hoover Small Cap Equity Fund's
net asset value increases. You should consider your own investment goals, time
horizon and risk tolerance before investing in the Hoover Small Cap Equity Fund.
<PAGE>
o Small Capitalization Stocks
Smaller companies may offer great investment value, but they may present
greater investment risks than investing in the securities of large companies.
These risks include greater price volatility, greater sensitivity to changing
economic conditions and less liquidity than the securities of larger, more
mature companies. Smaller companies can also have limited product lines, markets
or financial resources and may not have sufficient management strength.
o Common Stocks
The Fund invests in the equity securities of companies, which expose the
Fund and its shareholders to the risks associated with common stock investing.
These risks include the financial risk of selecting individual companies that do
not perform as anticipated, the risk that the stock markets in which the Fund
invests may experience periods of turbulence and instability, and the general
risk that domestic and global economies may go through periods of decline and
cyclical change. Many factors affect an individual company's performance, such
as the strength of its management or the demand for its product or services.
o Foreign Investments and Foreign Currency Transactions
Since many foreign investments are denominated in currencies other than the
U.S. dollar, the Fund may be adversely affected by fluctuations in exchange
rates.
Performance History
The chart below shows the Fund's annual total return for 1999, the first full
year in which the Fund was operational, together with the best and worst
quarters since inception. The accompanying chart gives an indication of the
risks of investing in the Fund by comparing the Fund's performance to that of
the Russell 2000 (R) Index, an unmanaged index of [stock performance]. The
presentations below assume reinvestment of dividends and distributions. Past
results are not an indication of future performance.
[Bar Chart]
Best Quarter (x/x/xx) %
Worst Quarter (x/x/xx) %
Annual Total Return as of 12/31/99 1 year Since Inception (10/1/98)
==============================================================================
Hoover Small Cap Equity Fund %
[Investor Class/Institutional Class]
Russell 2000(R)Index1 %
- ---------------
1 The Russell 2000(R)Index is unmanaged and investors cannot invest directly
in the index.
<PAGE>
Shareholder Fees and Expenses
This table describes the fees and expenses that you may pay if you buy shares of
the Hoover Small Cap Equity Fund.
- ----------------------------------------- -------------- --------------------
Shareholder Fees (fees paid directly Investor Class Institutional Class
from your investment):
- ----------------------------------------- -------------- --------------------
Maximum Sales Charge (Load) on Purchases NONE NONE
(as a % of your purchase price)(1)
- ----------------------------------------- -------------- --------------------
Maximum Deferred Sales Charge (Load) NONE NONE
- ----------------------------------------- -------------- --------------------
Maximum Sales Charge (Load) Imposed on NONE NONE
Reinvested Dividends
- ----------------------------------------- -------------- --------------------
Redemption Fee(2) NONE NONE
- ----------------------------------------- -------------- --------------------
Transaction Fee(3) 0.25% NONE
- ----------------------------------------- -------------- --------------------
Exchange Fees NONE NONE
- ----------------------------------------- -------------- --------------------
Maximum Account Fee(4) $10.00 $10.00
- ----------------------------------------- -------------- --------------------
- ---------------
1 You will be charged $1.50 for checks and $8.00 for wire transfers. There is
no wire transfer fee for transfers involving an omnibus account of a
broker-dealer or other entity that has an agreement with Forward Funds,
Inc. or its distributor to service shareholders.
2 If you redeem your shares by mail there is a $1.00 charge. If you choose to
receive the proceeds from your redemption via wire transfer, there is an
$8.00 charge. There is no wire transfer fee for transfers involving an
omnibus account of a broker-dealer or other entity that has an agreement
with Forward Funds, Inc. or its distributor to service shareholders. There
is no charge for transactions effected via the Internet or ACH transfers by
phone or Internet.
3 For the Investor class of shares, there is a 0.25% transaction fee based on
the amount purchased. If you maintain your account with us through a
broker-dealer or other financial institution, the fee will be charged only
when you redeem shares and would be based on the amount redeemed; all other
investors pay the fee at the time they purchase shares. This fee is applied
directly against transaction costs incurred by the Fund. It is not applied
to reinvested dividends or capital gains distributions. See "Purchasing
Shares" for circumstances under which shares may be offered without a 0.25%
transaction fee.
4 Shareholders who elect to receive cash dividends will pay a $10.00 annual
account administration fee which is deducted out of dividends. If the cash
dividend is less than the account administration fee then shares are sold
from your account to make up the difference. This allows us to allocate
administrative costs in a fair manner among shareholders. You may avoid
this fee by electing to reinvest your dividends in Fund shares.
<PAGE>
- ----------------------------------------- -------------- --------------------
Annual Fund Operating Expenses (expenses Investor Class Institutional Class
that are deducted from Fund assets)(5)
- ----------------------------------------- -------------- --------------------
Management Fee [1.05%] [1.05%]
- ----------------------------------------- -------------- --------------------
Distribution and Service (12b-1) Fees (6) [0.25%] NONE
- ----------------------------------------- -------------- --------------------
Other Expenses [0.68%] [0.68%]
- ----------------------------------------- -------------- --------------------
Total Annual Fund Operating Expenses [1.98%] [1.73%]
- ----------------------------------------- -------------- --------------------
Fee Waiver (7) [0.48%] N/A
- ----------------------------------------- -------------- --------------------
Net Expenses 1.50% N/A
- ----------------------------------------- -------------- --------------------
Example
This example is intended to help you compare the costs of investing in the
Hoover Small Cap Equity Fund with the costs of investing in other mutual funds.
The Example assumes that you invest $10,000 in either the Investor or
Institutional class of shares of the Hoover Small Cap Equity Fund for the
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's total annual Fund operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
- ---------------
5 These expenses are paid directly out of the Fund's assets. Expenses are
factored into the share price or dividends and are not charged directly to
shareholder accounts.
6 The Fund's shareholders have adopted a Distribution Plan pursuant to which
up to 0.25% of the average daily net assets of the Investor Class may be
used to pay shareholder servicing and distribution fees. The Fund has also
adopted a Shareholder Servicing Plan pursuant to which up to 0.10% of the
average daily net assets of the Investor Class, and up to 0.35% of the
average daily net assets of the Institutional Class of the Fund's average
net assets could be used to pay shareholder servicing fees. The expenses of
the Shareholder Servicing Plan are reflected as part of "Other Expenses" of
the Fund.
7 The Fund's Investment Adviser has contractually agreed to waive a portion
of its fees, relating to the Investor Class Shares, until January 2001 in
amounts necessary to limit the Fund's operating expenses to an annual rate
of 1.50% (as a percentage of average daily net assets and exclusive of
12b-1 and Shareholder servicing fees.) For the two years following January,
2000, the Investment Adviser is entitled to a reimbursement from the Fund
of any fees waived under this arrangement if such reimbursement does not
cause the Fund to exceed existing expense limitations.
<PAGE>
Hover Hoover
Small Cap Small Cap
Equity Equity
Fund Fund
Investor Class+ Institutional Class
-------- --------
1 Year.................[$173] 1 Year.................[$201]
3 Years................[$595] 3 Years................[$570]
5 Years...............[$1,044] 5 Years................[$964]
10 Years..............[$2,289] 10 Years..............[$2,066]
You would pay the following expenses if you did not redeem your shares:
PAGE>
Hover Hoover
Small Cap Small Cap
Equity Equity
Fund Fund
Investor Class+ Institutional Class
-------- --------
1 Year.................[$148] 1 Year.................[$176]
3 Years................[$570] 3 Years................[$545]
5 Years...............[$1,019] 5 Years................[$939]
10 Years..............[$2,264] 10 Years..............[$2,041]
- ---------------
+The examples above include imposition of the transaction fee and incorporate
the contractual fee waiver in place for the Fund for its current fiscal year.
<PAGE>
THE GARZARELLI U.S. EQUITY FUND
Objective
The Garzarelli U.S. Equity Fund seeks to maximize capital appreciation with
current income over the long-term by providing direct and effective exposure to
a diverse portfolio primarily composed of mid to large cap U.S. equities.
Principal Investment Strategy - Investing in Domestic Equity Securities
The Garzarelli U.S. Equity Fund attempts to achieve its investment objective by
investing primarily in the equity securities (common, preferred and convertible
securities) of companies located in the United States. At least 65% of the
Fund's total assets are invested in the equity securities of companies organized
or primarily in the United States. The Fund may also invest in the equity
securities of companies that are based outside the United States if their stock
is traded on a U.S. stock exchange or through the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"). The Garzarelli U.S.
Equity Fund may also invest in the equity securities of small companies.
In managing the Fund, the Fund's sub-adviser uses a proprietary econometric
model that seeks to identify industries and securities primarily in the Russell
1000 and S&P 500 Indices that are trading at attractive prices relative to
underlying value. Along with the use of the proprietary econometric model, the
Fund's sub-adviser also employs proprietary quantitative and qualitative
fundamental measures to identify such securities. The Fund's portfolio
characteristics may differ somewhat from the Russell 1000 and S&P 500 Indices.
The investment process involves identifying industries of the market that are
projected to out/underperform the market. This is done by analyzing each
industry sector's earnings and valuations and comparing it to both the Russell
1000 and the S&P 500 Indices. These techniques are combined with the structured
approach to identify undervalued stocks that exhibit strong earnings momentum,
estimate revisions and relative strength.
What are the Principal Risks of Investing in the Garzarelli U.S. Equity Fund?
As with any investment, an investment in the Garzarelli U.S. Equity Fund may
cause you to lose some or all of the money you invested. Because the securities
in which the Garzarelli U.S. Equity Fund invests may decrease in value, the net
asset value of the Fund may decrease and the value of your investment may also
decrease. On the other hand, you could experience an increase in the value of
your investment as the Garzarelli U.S. Equity Fund's net asset value increases.
You should consider your own investment goals, time horizon and risk tolerance
before investing in the Garzarelli U.S. Equity Fund.
o Common Stocks
The Garzarelli U.S. Equity Fund invests in the equity securities of
companies, which exposes the Fund and its shareholders to the risks associated
with common stock investing. These risks include the financial risk of selecting
individual companies that do not perform as anticipated, the risk that the stock
markets in which the Fund invests may experience periods of turbulence and
instability, and the general risk that domestic and global economies may go
through periods of decline and cyclical change. Many factors affect an
individual company's performance, such as the strength of its management or the
demand for its product or services.
<PAGE>
o Small Capitalization Stocks
Although smaller companies may offer great investment value, they
present greater investment risks than investing in the securities of large
companies. These risks include greater price volatility, greater sensitivity to
changing economic conditions and less liquidity than the securities of larger,
more mature companies. Smaller companies can also have limited product lines,
markets or financial resources and may not have sufficient management strength.
Performance History
The chart below shows the Fund's annual total return for 1999, the first full
year in which the Fund was operational, together with the best and worst
quarters since inception. The accompanying chart gives an indication of the
risks of investing in the Fund by comparing the Fund's performance to that of
the Russell 3000 Index, an unmanaged index of [stock performance]. The
presentations below assume reinvestment of dividends and distributions. Past
results are not an indication of future performance.
[Bar chart]
Best Quarter (x/x/xx) %
Worst Quarter (x/x/xx) %
Annual Total Return as of 12/31/99 1 Year Since Inception (10/1/98)
===============================================================================
Garzarelli U.S. Equity Fund (1) 19.50% 34.19%
Russell 3000 Index (2) [ ]% [ ]%
1 Garzarelli Investment Management, LLC has been the Fund's sub-adviser since
March 1, 2000; however, prior to this time the Fund was managed by a
different sub-adviser.
2 The Russell 3000 Index is unmanaged and investors cannot invest directly in
the index.
Shareholder Fees and Expenses
This table describes the fees and expenses that you may pay if you buy shares of
the Garzarelli U.S. Equity Fund.
- ----------------------------------------------------------- ------------------
Shareholder Fees (fees paid directly from your investment)
- ----------------------------------------------------------- ------------------
Maximum Sales Charge (Load) on Purchases (as a % of your NONE
purchase price)1
- ----------------------------------------------------------- ------------------
- ---------------
1 You will be charged $1.50 for checks and $8.00 for wire transfers. There is
no wire transfer fee for transfers involving an omnibus account of a
broker-dealer or other entity that has an agreement with Forward Funds,
Inc. or its distributor to service shareholders.
<PAGE>
- ----------------------------------------------------------- ------------------
Maximum Deferred Sales Charge (Load) NONE
- ----------------------------------------------------------- ------------------
Redemption Fee (2) NONE
---------------------------------------------------------- ------------------
Transaction Fee (3) 0.25%
- ----------------------------------------------------------- ------------------
Exchange Fees NONE
- ----------------------------------------------------------- ------------------
Maximum Account Fee (4) $10.00
- ----------------------------------------------------------- ------------------
Annual Fund Operating Expenses (expenses that are
deducted from Fund assets) (5)
- ----------------------------------------------------------- ------------------
Management Fee 0.80%
- ----------------------------------------------------------- ------------------
- ---------------
2 If you redeem your shares by mail there is a $1.00 charge. If you choose to
receive the proceeds from your redemption via wire transfer, there is an
$8.00 charge. There is no wire transfer fee for transfers involving an
omnibus account of a broker-dealer or other entity that has an agreement
with Forward Funds, Inc. or its distributor to service shareholders. There
is no charge for transactions effected via the Internet or ACH transfers by
phone or Internet. There is no charge for transactions effected via the
Internet or ACH transfers by phone or Internet.
3 There is a 0.25% transaction fee based on the dollar amount purchased. If
you maintain your account with us through a broker-dealer or other
financial institution, the fee may be charged only when you redeem shares
and would be based on the amount redeemed; all other investors pay the fee
at the time they purchase shares. This fee is applied directly against
transaction costs incurred by the Fund. It is not applied to reinvested
dividends or capital gains distributions. See "Purchasing Shares" for
circumstances under which shares may be offered without a 0.25% transaction
fee.
4 Shareholders who elect to receive cash dividends will pay a $10.00 annual
account administration fee which is deducted out of dividends. If the cash
dividend is less than the account administration fee then shares are sold
from your account to make up the difference. This allows us to allocate
administrative costs in a fair manner among shareholders. You may avoid
this fee by electing to reinvest your dividends in Fund shares.
5 These expenses are paid directly out of the Fund's assets. Expenses are
factored into the share price or dividends and are not charged directly to
shareholder accounts.
<PAGE>
- ----------------------------------------------------------- -------------------
Distribution and Service (12b-1) Fee (6) 0.25%
- ----------------------------------------------------------- -------------------
Other Expenses 0.72%
- ----------------------------------------------------------- -------------------
Total Annual Fund Operating Expenses [1.77%]
- ----------------------------------------------------------- -------------------
Fee Waiver (7) [0.32%]
- ----------------------------------------------------------- -------------------
Net Expenses 1.45%
- ----------------------------------------------------------- -------------------
Example
This example is intended to help you compare the costs of investing in the
Garzarelli U.S. Equity Fund with the costs of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Garzarelli U.S. Equity Fund
for the periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's total annual Fund operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
Garzarelli
U.S. Equity
Fund+
-------
1 Year........................ [$168]
3 Years....................... [$510]
5 Years....................... [$877]
10 Years...................... [$1,908]
You would pay the following expenses if you did not redeem your shares:
- ---------------
6 The Fund's shareholders have adopted a Distribution Plan pursuant to which
up to 0.25% of the Fund's average daily net assets may be used to pay
shareholder servicing and distribution fees. The Fund has also adopted a
Shareholder Servicing Plan pursuant to which up to 0.10% of the Fund's
average net assets could be used to pay shareholder servicing fees. The
expenses of the Shareholder Servicing Plan are reflected as part of "Other
Expenses" of the Fund.
7 The Fund's Investment Adviser has contractually agreed to waive a portion
of its fees until January 2001 in amounts necessary to limit the Fund's
operating expenses to an annual rate of 1.45% (as a percentage of average
daily net assets and exclusive of 12b-1 and shareholder servicing fees).
For the two years following January, 2000, the Investment Adviser is
entitled to a reimbursement from the Fund of any fees waived under this
arrangement if such reimbursement does not cause the Fund to exceed
existing expense limitations.
<PAGE>
Garzarelli
U.S. Equity
Fund+
-------
1 Year........................ [$143]
3 Years....................... [$485]
5 Years....................... [$852]
10 Years...................... [$1,883]
- ---------------
+The examples above include imposition of the transaction fee and incorporate
the contractual fee waiver in place for the Fund for its current fiscal year.
<PAGE>
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
The following information applies to all of the Forward Funds:
o Defensive Positions; Cash Reserves
Under adverse market conditions or to meet anticipated redemption requests,
each Fund may deviate from its principal investment strategy and may invest
without limit in money market securities, U.S. government obligations and
short-term debt securities. This could have a negative effect on each Fund's
ability to achieve its investment objective.
o Portfolio Turnover
Although each Fund's sub-adviser seeks to minimize the frequency with which
portfolio securities are bought and sold (known as portfolio turnover) so as to
avoid possible income tax consequences, portfolio turnover will not be a
limiting factor when the sub-adviser believes portfolio changes are appropriate.
A higher turnover rate (100% or more) will involve correspondingly greater
transaction costs which will be borne directly by a Fund, and may increase the
potential for more taxable dividends and distributions being paid to
shareholders.
The Hoover Small Cap Equity Fund's portfolio turnover rate is expected to
be less than 200% under normal market conditions. The Garzarelli U.S. Equity and
Hansberger International Growth Funds' portfolio turnover rate is expected to be
less than 100% under normal market conditions. [Portfolio turnover rates for the
Uniplan Real Estate Investment Funds should be less than 50%].
o Derivatives
Some of the instruments in which the Funds may invest may be referred to as
"derivatives," because their value "derives" from the value of an underlying
asset, reference rate or index. These instruments include options, futures
contracts, forward currency contracts, swap agreements and similar instruments.
There is limited consensus as to what constitutes a "derivative" security. For
our purposes, derivatives also include specially structured types of mortgage-
and asset-backed securities and dollar denominated securities whose value is
linked to foreign currencies. The market value of derivative instruments and
securities sometimes is more volatile than that of other instruments, and each
type of derivative instrument may have its own special risks. The investment
adviser and sub-advisers take these risks into account in their management of
the Funds.
Investing for hedging purposes may result in certain transaction costs
which may reduce a Fund's performance. In addition, no assurance can be given
that each derivative position will achieve a perfect correlation with the
security or currency that it is being hedged against.
<PAGE>
o Illiquid Securities
A Fund may invest up to 15% of its net assets in illiquid securities.
Illiquid securities are securities which cannot be disposed of in the ordinary
course of business at the normal value of the securities.
o Debt Securities
Debt securities in which the Funds invest are subject to several types of
investment risk. They may have market or interest rate risk which means their
value will be affected by fluctuations in the prevailing interest rates. There
may be credit risk, a risk that the issuer may be unable to make timely interest
payments and repay the principal upon maturity. Call or income risk exists with
corporate bonds during periods of falling interest rates because of the
possibility that securities with high interest rates will be prepaid or "called"
by the issuer before they mature. The Fund would have to reinvest the proceeds
at a possibly lower interest rate. A Fund may also suffer from event risk which
is the possibility that corporate debt securities held by a Fund may suffer a
substantial decline in credit quality and market value if the issuer
restructures.
Generally, debt securities increase in value during periods of falling
interest rates and decline in value if interest rates increase. Usually, the
longer the remaining maturity of a debt security, the greater the effect of
interest rate changes on its market value.
o Investment Grade Debt Securities and High Yield ("Junk") Bonds
Investment grade debt securities are securities rated at least Baa by
Moody's Investor Services, Inc. or BBB by Standard & Poor's Ratings Service
(nationally recognized statistical ratings organizations), or if unrated, are
determined to be of the same quality by the investment sub-adviser. Generally,
debt securities in these categories should have adequate capacity to pay
interest and repay principal but their capacity is more likely than higher grade
debt securities to be weakened if there is a change in economic conditions or
other circumstances.
High yield ("junk") bonds are considered speculative with regard to the
issuer's capacity to pay interest and repay principal and may be in default.
Except for the Hoover Small Cap Equity Fund which does not expect to invest more
than 10% of its total assets in these types of securities, the Funds do not
anticipate investing more than 5% of their total assets in these types of
securities.
o When-Issued and Delayed-Delivery Transactions
The Funds may purchase securities on a when-issued and delayed-delivery
basis. When a Fund agrees to purchase securities, the Custodian will set aside
cash or liquid securities equal to the amount of the commitment in a segregated
account to cover its obligation. 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, a 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. A Fund may, however, sell a when-issued security prior to the settlement
date.
<PAGE>
o Certain Other Strategies
All of the Funds may directly purchase particular types of debt and equity
securities, such as corporate debt securities, convertible securities,
depositary receipts, loan participations and assignments, mortgage and other
asset-backed securities, certificates of deposit and time deposits and
commercial paper. Each of the Funds may enter into repurchase and reverse
repurchase agreements and dollar roll agreements, when-issued and delayed
delivery transactions; and may purchase illiquid securities. The Funds may also
lend their portfolio securities. [From time to time, particular funds may
purchase these securities or enter into these strategies to an extent that is
more than incidental.] Please review the Statement of Additional Information if
you wish to know more about these types of securities and their associated
risks.
MANAGEMENT OF THE FUNDS
Investment Adviser and Sub-Advisers
Investment Adviser
Webster Investment Management Company, LLC ("Webster") serves as investment
adviser to each Fund. Webster is a registered investment adviser that supervises
the activities of each sub-adviser and has the authority to engage the services
of different sub-advisers with the approval of the Directors of each of the
respective Funds. Webster is located at 433 California Street, Suite 1010, San
Francisco, California, 94104.
Webster has the authority to manage the Funds and, in accordance with the
investment objective, policies and restrictions of the Funds subject to general
supervision of the Company's Board of Directors, but has delegated this
authority to sub-advisers for all of the Funds. It also provides the Funds with
ongoing management supervision and policy direction. [Shareholders of the Funds
have approved a proposal which would permit Webster to hire and terminate
sub-advisers without shareholder approval and Webster is seeking authority to do
so from the Securities and Exchange Commission.] Webster has managed the Funds
since September, 1998 and the Funds are its principal investment advisory
clients. Daily investment decisions are made by the sub-adviser to each Fund,
whose investment experience is described below.
Each Fund pays an investment advisory fee, which is computed daily and paid
monthly, at the following annual rates based on the average daily net asset
value of the respective funds: [Garzarelli U.S. Equity Fund, 0.80% for the first
$100 million of assets under management, 0.725% for the next $400 million of
assets under management, 0.65% on assets over $500 million; Hansberger
International Growth Fund, 0.85% for the first $50 million of assets under
management, 0.75% for the next $50 million of assets under management, 0.65% for
the next $150 million of assets under management, 0.60% for the next $250
million of assets under management, and 0.55% on assets over $500 million;
Hoover Small Cap Equity Fund, 1.05% of average daily net assets; Uniplan Real
Estate Investment Fund, 1.00% for the first $100 million of assets under
management, 0.85% for the next $400 million of assets under management, and
0.70% on assets over $500 million.] The Funds pay these advisory fees to
Webster, which in turn pays each sub-adviser a sub-advisory fee.
<PAGE>
Sub-Advisers
The Sub-advisers manage the Funds and make decisions with respect to, and place
orders for, all purchases and sales of the Fund's securities, subject to the
general supervision of Forward Fund, Inc.'s Board of Directors and in accordance
with the investment objectives, policies and restrictions of the Funds.
The Hansberger International Growth Fund -
Prior to February, 2000, the Hansberger International Growth Fund was known as
the International Growth Fund and its sub-adviser was Templeton Investment
Counsel, Inc. On March 1, 2000, Hansberger Global Investors, Inc. ("HGI") became
the sub-adviser to the Fund. HGI, a wholly-owned subsidiary of Hansberger Group,
Inc., with is principal offices at 515 East Las Olas Blvd., Fort Lauderdale,
Florida, as well as offices in Burlington, Ontario, Hong Kong and Moscow,
conducts a world wide portfolio management business that provides a broad range
of portfolio management services to customers in the United States and abroad.
As of December 31, 1999, HGI had approximately $2.9 billion assets under
management. The Hansberger International Growth Fund is team-managed. The
portfolio team includes Thomas R.H. Tibbles, CFA, Eric H. Melis, CFA and Barry
A. Lockhart, CFA.
The Uniplan Real Estate Investment Fund -
Prior to February, 2000, the Uniplan Real Estate Investment Fund was known
as the Real Estate Investment Fund. Uniplan, Inc. ("Uniplan") serves as
sub-adviser for the Uniplan Real Estate Investment Fund. Uniplan is located at
839 N. Jefferson Street, Milwaukee, Wisconsin 53202. Uniplan also provides
investment advice to other mutual funds and individual and institutional clients
with substantial investment portfolios. As of [March 31, 1999 ] Uniplan and its
affiliates managed approximately [$246 million] in assets. Uniplan has been in
the business of providing investment advisory services for over 15 years. Mr.
Richard Imperiale is the Portfolio Manager for the Uniplan Real Estate
Investment Fund. He has been President of Uniplan since its inception. Mr.
Imperiale holds a B.S. in finance from Marquette University Business School and
has completed a postgraduate lecture series in corporate finance from the
University of Chicago.
The Hoover Small Cap Equity Fund -
Prior to February, 2000, the Hoover Small Cap Equity Fund was known as the
Small Capitalization Equity Fund. Hoover Investment Management, LLC ("Hoover")
serves as sub-adviser for the Hoover Small Cap Equity Fund. Hoover is located at
650 California Street, 30th Floor, San Francisco, California 94108. As of
December 31, 1999, Hoover managed more than $226 million in the
small-capitalization sector for institutional and individual investors. Hoover
was founded in 1998 by Irene G. Hoover, the Fund's portfolio manager. Ms. Hoover
is the Managing Member of Hoover. Ms. Hoover has approximately 20 years of
investment management experience.
<PAGE>
Prior to forming Hoover, she was Director of Research and a member of the
three-person investment committee, with more than $5 billion under management,
at Jurika and Voyles, Inc., an investment management firm in Oakland,
California. She was employed at that firm from 1991-1997. Ms. Hoover is a
Chartered Financial Analyst; she holds a B.A. from Stanford University and an
M.A. from Northwestern University.
The Garzarelli U.S. Equity Fund -
Prior to February, 2000, the Garzarelli U.S. Equity Fund was known as the
U.S. Equity Fund and its sub-adviser was Barclays Global Fund Advisors. On March
1, 2000 Garzarelli Investment Management, LLC ("Garzarelli") became the
sub-adviser for the Garzarelli U.S. Equity Fund. Garzarelli is located at 433
California Street, Suite 1010, San Francisco, California 94104. Garzarelli
serves as an investment adviser to ten private accounts with combined assets of
$3.4 million. Webster owns 47% of Garzarelli's authorized, issued shares and
Garzarelli Capital, Inc., at the same address as Garzarelli, owns 51% of such
shares. Elaine Garzarelli owns 100% of Garzarelli Capital, Inc. Ms. Garzarelli
and Mr. Gregory R. Lai, CFA manage the Fund. Ms. Garzarelli founded Garzarelli
in 1995, and has served as its Chairperson since its inception. Prior thereto,
she served as Managing Director and Chief Quantitative Strategist for Shearson
Lehman Bros. and its predecessors and its successors from 1984 to 1994. She has
over 20 years experience as a stock market strategist. Mr. Gregory R. Lai, CFA
is a principal of Garzarelli and works in consultation with Ms. Garzarelli.
Prior thereto, he was a portfolio manager and research analyst at PIMCO from
1988 to 1992.
Uniplan, Inc. Performance History
Presented below are the performance results up to December 31, 1999 for
Uniplan, Inc., the sub-adviser to the Uniplan Real Estate Investment Fund, in
managing accounts for private clients and/or other mutual funds with
substantially similar investment objectives, policies and strategies. The
results are not the performance record of the Uniplan Real Estate Investment
Fund which commenced operations on May 10, 1999. Performance results indicated
below are not, and should not be interpreted as, indicative of future results.
UNIPLAN INC. - REIT PORTFOLIO
[Barchart]
Uniplan REIT (net) NAREIT Equity Index
----------------- -------------------
1 Year -1.99% -_____%
3 Year 1.89% -1.83%
5 Year 10.54% _____%
7 year 12.00% _____%
10Year 12.30% _____%
Inception 1/89 - 12/99 12.86% _____%
ANNUAL RETURNS (1989 - 1999)
Uniplan REIT (net) NAREIT Equity Index
----------------- -------------------
1989 12.75% 8.83%
1990 -9.88% -15.35%
1991 38.71% 35.70%
1992 15.48% 14.59%
1993 30.07% 19.96%
1994 2.96% 3.18%
1995 14.61% 15.26%
1996 36.17% 35.26%
1997 22.01% 20.27%
1998 -11.55% -17.51%
1999 -1.99% -4.62%
STANDARD DEVIATION (as of December 31, 1999)
Uniplan REIT (net) NAREIT Equity Index
----------------- -------------------
1 Year 16.07% 16.90%
3 Year 6.15% 6.44%
5 Year 3.31% 3.47%
7 year 2.94% 3.34%
10Year 0.67% 0.63%
- ---------------
* The NAREIT Equity Index is comprised of all the publicly-traded equity real
estate investment trusts listed on the New York Stock Exchange, the
American Stock Exchange, and the National Association of Securities
Dealers, Inc. and is prepared by the National Association of Real Estate
Investment Trusts.
<PAGE>
Except as otherwise provided herein, the performance records regarding similar
private accounts presented above have been prepared in compliance with the
Performance Presentation Standards of the Association for Investment Management
and Research ("AIMR") and have been provided to Forward Funds, Inc. by Uniplan,
Inc. Forward Funds, Inc. has not independently audited or verified the results.
The results are for all private accounts and/or mutual funds managed with
substantially similar investment objectives, policies and strategies. These
accounts are not subject to the restrictions and limitations of the Investment
Company Act of 1940, as amended (the "1940 Act"), and the Internal Revenue Code
of 1986, as amended (the "Code"), which may adversely affect performance
results. The results reflect the deduction of advisory and other fees and the
reinvestment of dividends.
VALUATION OF SHARES
The price you pay for a share of a Fund, and the price you receive upon selling
or redeeming a share of a Fund, is called the Fund's net asset value or NAV. The
net asset value of each Fund is usually 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) on each Business Day. 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 a 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. To the extent that a Fund holds securities
listed primarily on a foreign exchange that trades on days when the Fund is not
open for business or the NYSE is not open for trading, the value of your shares
may change on days that you cannot buy or sell shares.
The net asset value per share of each Fund fluctuates as the market value of
that Fund's investments changes. Net asset value is calculated by taking the
total value of a Fund's assets, subtracting its liabilities, and then dividing
by the number of shares that have already been issued. A Fund's assets are
valued generally by using available market quotations or at fair value as
determined in good faith by the Board of Directors.
<PAGE>
PURCHASING SHARES
How to Buy Shares
Investor Shares
Purchase Choices:
Through your financial adviser
Through our Distributor, Provident Distributors, Inc.
By Internet, Mail, Telephone or Wire
Individual investors can choose from the following methods to purchase shares of
a Fund. Individual investors can purchase shares through a broker-dealer who has
established a dealer or other appropriate agreement with the Distributor or the
Funds, or through the Distributor directly. In addition, shares of the Funds can
be purchased at any time via the Internet, mail, telephone, or wire. There are
no initial sales loads for shares of the Funds. There is a 0.25% transaction fee
based on the amount purchased. All investors except those whose accounts are
held through a broker or financial institution pay the fee at the time of
purchase. These other investors may be charged when they redeem their shares.
The Fund charges the 0.25% transaction fee to shareholders so that other
shareholders do not indirectly pay for purchases or redemptions that do not
relate to their shares. Forward Funds, Inc. reserves the right to add a similar
purchase or redemption fee in the future on all transactions if we think it is
necessary to protect the Funds' long-term investors. Shares of the Fund's may be
offered without a 0.25% transaction fee to:
(1) tax-exempt organizations enumerated in section 501(c)(3) of
the Internal Revenue code of 1986, as amended (the "Code") and
private, charitable foundations that in each case make
lump-sum purchases of $100,000 or more;
(2) qualified employee benefit plans established pursuant to
Section 457 of the Code that have established omnibus
accounts with the Funds;
(3) qualified employee benefit plans having more than one hundred
eligible employees and a minimum of $1 million in plan assets
invested in the Funds (plan sponsors are encouraged to notify
the Funds' distributor when they first satisfy the
requirements);
(4) any unit investment trusts registered under the Investment
Company Act of 1940 which have shares of the Funds as a
principal investment;
(5) employee participants of organizations adopting a 401(k) Plan;
(6) financial institutions purchasing shares of the Funds for
clients participating in a fee based asset allocation program
or wrap fee program which has been approved by the
distributor; and
<PAGE>
(7) registered investment advisers or financial planners who place
trades for their own accounts or the accounts of their clients
and who charge a management, consulting or other fee for their
services; and clients of such investment advisers or financial
planners who place trades for their own accounts if the
accounts are linked to the master account of such investment
adviser or financial planner on the books and records of a
broker or agent.
Minimum Initial Investment Amount:
$2,500 for non-retirement accounts
$250 for retirement accounts
Subsequent investments for all Funds and classes require a minimum of $250.
Broker-dealers may charge their customers a transaction or service fee.
Institutional Shares: Offered to certain investors of the Hoover Small Cap
Equity Fund
Certain financial institutions, pension or 401(k) plans, or investment advisers
or individuals purchasing more than $250,000 worth of shares of the Hoover Small
Cap Equity Fund may elect to purchase Institutional Class Shares. Under a
shareholder services plan for Institutional Class shares, the Hoover Small Cap
Equity Fund may pay an authorized firm up to 0.35% of average daily net assets
attributable to its customers who are Institutional Class shareholders. For this
fee, the authorized firms provide various recordkeeping or administrative
services and/or shareholder service assistance. Holders of Institutional Class
shares pay all fees and expenses attributable to those shares. The authorized
firms may charge extra for services other than those provided under the
shareholder services plan and should furnish clients who own Institutional Class
shares with a schedule explaining the fees.
About Your Purchase:
When you purchase shares, you will pay the net asset value that is next
calculated after we receive your order. If you place an order for the purchase
of shares through a broker-dealer, the sale price will be the net asset value as
so determined, but only if the dealer receives the order and transmits it to
Forward Funds, Inc. The broker-dealer is responsible for transmitting such
orders promptly. If the broker-dealer fails to transmit your order before the
daily pricing time, your right to that day's closing price must be settled
between the broker-dealer and you. Purchases of shares of a Fund will be
effected only on a Business Day. An order received prior to the daily pricing
time on any Business Day is processed at that day's NAV. An order received after
the pricing time on any Business Day is processed at the net asset value
determined as of the pricing time on the next Business Day of the Funds.
Depending upon the terms of your account, you may pay account fees for services
provided in connection with your investment in a Fund. Forward Funds, Inc.,
Provident Distributors, Inc. or your dealer can provide you with information
about these services and charges. You should read this Prospectus in conjunction
with any such information you receive.
<PAGE>
To open an account you can mail a check or other negotiable bank draft in the
minimum amounts described above (payable to the particular Fund) with a
completed and signed Account Application Form to Forward Funds, Inc., c/o PFPC,
Inc., P.O. Box 5184, Westborough, Massachusetts 01581-5184. Call 1-800-999-6809
for an Account Application Form. A completed investment application must
indicate a valid taxpayer identification number and must be certified as your
taxpayer identification number. You may be subject to penalties if you falsify
information with respect to your taxpayer identification numbers.
The issuance of shares is recorded on the books of the Fund electronically. You
will receive a confirmation of, or account statement reflecting, each new
transaction in your account, which will also show the total number of shares of
the Fund you own. You can rely on these statements in lieu of certificates.
Certificates representing shares of the Funds will not be issued.
Forward Funds, Inc. reserves the right to refuse any request to purchase
shares of its Funds.
EXCHANGE PRIVILEGE
You can exchange your shares of any Fund for shares of any other Fund or with a
money market fund, the Vista U.S. Government Money Market Fund, a portfolio of
Mutual Fund Trust, for which The Chase Manhattan Bank acts as investment
adviser. The Institutional Class of shares are not exchangeable. There are no
fees for exchanges. However, transaction fees will be applied to any exchanges
made above the annual limit of four exchanges per account (or two round trips).
You may also pay a transaction fee if you initially purchased shares of the
money market fund and exchange them for shares of a Fund. Before you decide to
exchange shares, you should read the prospectus information about the Fund or
money market fund involved in your exchange. You can send a written instruction
specifying your exchange or, if you have authorized telephone exchanges
previously and we have a record of your authorization, you can call the Transfer
Agent at 1-800-999-6809 to execute your exchange. 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. Once your exchange is received in proper form, it cannot be
revoked. This exchange privilege is available only in U.S. states where shares
of the Funds being acquired may legally be sold and may be modified, limited or
terminated at any time by a fund upon 60 days' written notice.
You should not view the exchange privilege as a means for market timing (taking
advantage of short-term swings in the market), and we limit the number of
exchanges you may make to four exchanges per account (or two rounds trips) per
calendar year without a transaction fee. Forward Funds, Inc. also reserves the
right to prohibit exchanges during the first 15 days following an investment in
a Fund. Forward Funds, Inc. may terminate or change the terms of the exchange
privilege at any time. In general, you 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
You may redeem your shares on any business day. Redemptions are priced at the
net asset value per share next determined after receipt of a redemption request
by the Distributor or Forward Funds, Inc. or its agents. Redemptions may be made
by check, wire transfer, telephone, mail or through the Internet. Forward Funds,
Inc. intends to pay cash for all shares redeemed, but in unusual circumstances
may make payment wholly or partly in portfolio securities at a market value
equal to the redemption price. In such cases, you may incur brokerage costs in
converting the portfolio securities to cash. Broker-dealers may charge their
customers a transaction or service fee.
<PAGE>
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, your 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. These signature
guarantees are not 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
You can arrange for the proceeds of redemption to be sent by federal wire
transfer to a single previously designated bank account if you have given
authorization for expedited wire redemption on your Account Application Form. If
a request for expedited wire redemption is received by Forward Funds, Inc. prior
to the close of the New York Stock Exchange the shares will be redeemed that day
at the next determined net asset value and the proceeds will generally be sent
to the designated bank account the next 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 Forward Funds, Inc. 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, Forward Funds, Inc. will
honor requests by any person identifying himself or herself as the owner of an
account or the owner's broker by telephone at 1-800-999-6809 or by written
instructions. Forward Funds, Inc. cannot be responsible for the efficiency of
the Federal Reserve wire system or the shareholder's bank. You are responsible
for any charges imposed by your bank. The minimum amount that may be wired is
$2,500. Forward Funds, Inc. 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 the 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 PFPC, Inc.,
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 Funds and the fee is specified for each Fund in the
Expense Table.
<PAGE>
By Telephone
You may redeem your shares by telephone if you choose that option on your
Account Application Form. If you did not originally select the telephone option,
you must provide written instructions to Forward Funds, Inc. to add it. You may
have the proceeds mailed to your 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.
Forward Funds, Inc.'s Account Application Form provides that none of Webster,
the Transfer Agent, the Sub-Advisers, Forward Funds, Inc. 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, you bear the risk of any loss as the result of unauthorized
telephone redemptions or exchanges believed by the Funds' administrator, PFPC,
Inc., to be genuine. Forward Funds, Inc. 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 you are unable to contact the Funds by
telephone, you may also mail the redemption request to Forward Funds, Inc.
By Mail
To redeem by mail, you must send a written request for redemption to the
Transfer Agent. The Transfer Agent's address is: PFPC, 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. You 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, you
must send a written request to the Transfer Agent. In connection with that
request, the Transfer Agent will require a signature guarantee by an eligible
guarantor institution.
For purposes of this policy, the term "eligible guarantor institution" includes
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.
Payments to Shareholders
Redemption orders are valued at the net asset value per share next determined
after the shares are properly tendered for redemption, as described above.
Payment for shares redeemed generally will be made within seven (7) days after
receipt of a valid request for redemption.
<PAGE>
At various times, Forward Funds, Inc. may be requested to redeem shares for
which it has not yet received good payment. If this is the case, the forwarding
of proceeds may be delayed until payment has been collected for the purchase of
the shares. The delay may last ten (10) business days or more. The Funds intend
to forward the redemption proceeds as soon as good payment for purchase orders
has been received. This delay may be avoided if shares are purchased by wire
transfer of federal funds. Forward Funds, Inc. intends to pay cash for all
shares redeemed, but under abnormal conditions which make payment in cash
unwise, payment for certain large redemptions may be made wholly or partly in
portfolio securities which have a market value equal to the redemption price.
You may incur brokerage costs in converting the portfolio securities to cash.
INTERNET TRANSACTIONS
You may purchase and redeem shares of the Funds through the Internet. Please
note that to purchase Fund shares you must be an existing shareholder of a Fund.
You may not open an account with the Fund via the Internet. To effect
transactions in Fund shares via the Internet, you must first contact Forward
Funds, Inc. at 1-800-999-6809 to obtain a password and a Personal Identification
Number ("PIN"). Second, visit the Forward Funds, Inc. web site at
http://www.forwardfunds.com and follow the directions specified on the web site
for transactions in Fund shares. Note that general information about Forward
Funds, Inc. and specific information about your accounts is also available on
the web site.
DISTRIBUTION AND SHAREHOLDER SERVICE PLANS
Forward Funds, Inc. has adopted a distribution plan under Rule 12b-1 (the
"Plan") which allows each Fund to pay for the sale and distribution of its
shares at an annual rate of up to 0.25% of the Fund's average daily net assets.
Each Fund may make payments under the Plan for the purpose of financing any
activity primarily intended to result in the sale of its shares. In addition,
payments under the Plan may be made to banks and their affiliates and other
institutions, including broker-dealers, for the provision of administrative
and/or shareholder services. Because these fees are paid out of each Fund's
assets on an on-going basis, over time these fees will increase the cost of an
investment in a Fund and may cost more than other types of sales charges.
Shareholders owning Institutional Class shares of the Hoover Small Cap Equity
Fund will not be subject to the Plan or any 12b-1 fees.
Forward Funds, Inc. has adopted a Shareholder Service Plan with respect to the
shares of each Fund. Under the Shareholder Service Plan, each Fund is authorized
to pay third party service providers for certain expenses incurred in connection
with providing services to shareholders. Payments under the Plan are calculated
daily and paid monthly at an annual rate not to exceed 0.10% of the average
daily net assets of a Fund. Institutional Class shares of the Hoover Small Cap
Equity Fund are subject to a Shareholder Service Plan fee of up to 0.35% of
average daily net assets.
These Plans may be terminated by a vote of a majority of the Directors who are
not "interested persons" (as defined in the 1940 Act) of Forward Funds, Inc. and
who have no direct or indirect financial interest in the operation of the Plans
or in any agreements related to the Plans, or by a vote of a majority of the
shares subject to the Plans.
<PAGE>
DIVIDENDS AND TAXES
The Garzarelli U.S. Equity, Hoover Small Cap Equity, and Hansberger
International Growth Funds expect to pay dividends of net investment income and
to distribute capital gains annually. The Uniplan Real Estate Investment Fund
expects to declare and pay income dividends 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. To elect to receive your dividends
in cash or to revoke your election, write to the Transfer Agent at PFPC, Inc.,
P.O. Box 5184, Westborough, Massachusetts 01581-5184.
Federal Taxes
The following information is meant as a general summary for U.S. shareholders.
Please see the Statement of Additional Information for additional information.
You should rely on your own tax advisor for advice about the particular federal,
state and local tax consequences to you of investing in a Fund.
Each Fund will distribute most of its net investment income and net capital
gains to its shareholders each year. Although the Funds will not be taxed on
amounts they distribute, most shareholders will be taxed on amounts they
receive.
A particular distribution generally will be taxable as either ordinary income or
long-term capital gains. The tax status of a particular distribution will be the
same for all of a Fund's shareholders. It does not matter how long you have held
your Fund shares or whether you elect to receive your distributions in cash or
reinvest them in additional Fund shares. For example, if a fund designates a
particular distribution as a long-term capital gains distribution, it will be
taxable to you at your long-term capital gains rate.
Dividends declared by a Fund in October, November or December and paid during
the following January may be treated as having been received by shareholders in
the year the distributions were declared.
If you invest through a tax-deferred account, such as a retirement plan, you
generally will not have to pay tax on dividends until they are distributed from
the account. These accounts are subject to complex tax rules, and you should
your tax adviser about investment through a tax-deferred account.
There may be tax consequences to you if you sell or redeem Fund shares. You will
generally have a capital gain or loss, which will be long-term or short-term,
generally depending on how long you hold those shares. If you exchange shares,
you may be treated as if you sold them.
Each year, the Funds will send shareholders tax reports detailing the tax status
of any distributions for that year.
<PAGE>
As with all mutual funds, a Fund may be required to withhold U.S. federal income
tax at the rate of 31% of all taxable distributions payable to you if you fail
to provide the Fund with your correct taxpayer identification number or to make
required certifications, or if you have been notified by the IRS that you are
subject to backup withholding. Backup withholding is not an additional tax;
rather, it is a way in which the IRS ensures it will collect taxes otherwise
due. Any amounts withheld may be credited against your U.S. federal income tax
liability.
GENERAL INFORMATION
Shareholder Communications
You may obtain current price, yield and other performance information on any of
the Funds between the hours of 9:00 a.m. to 5:00 p.m. Eastern Standard time by
calling 1-800-999-6809 from any touch-tone telephone. You can request
shareholder reports that contain performance information. These are available
free of charge.
Our shareholders receive unaudited semi-annual reports and annual reports
audited by independent public accountants. If you have any questions about
Forward Funds, Inc. write to PFPC, P.O. Box 5184, Westborough, Massachusetts
01581-5184, or call toll free at 1-800-999-6809.
You should rely only on the information provided in this Prospectus and the
Statement of Additional Information concerning the offering of the Funds'
shares. We have not authorized anyone to give any information that is not
already contained in this Prospectus. Shares of the Funds are offered only where
the sale is legal.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Funds'
financial performance and other financial information since inception. Certain
information reflects financial results for a single Fund share. "Total return"
shows how much an investment in each Fund increased assuming reinvestment of all
dividends and distributions. This information has been audited by Arthur
Andersen LLP, Forward Funds, Inc.'s independent public accountants. The Funds'
financial statements are incorporated by reference from the Funds' annual report
which was filed with the Securities and Exchange Commission on _____________,
2000.
<PAGE>
FINANCIAL HIGHLIGHTS
For a Fund Share Outstanding Throughout the Period.
<TABLE>
Uniplan
Garzarelli Hansberger Hoover Real Estate
U.S. Equity International Growth Small Cap Equity Fund(1) Investment
Fund(1) Fund (1) Fund(2)
Period Year Period Year Period Year Ended Period
Ended Ended Ended Ended Ended December Ended
December December December December December 31, 1999 December
31, 1998 31, 1999 31, 1998 31, 1999 31, 1998 31, 1999
- ----------------------------------- ----------- ----------- ----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.00 $12.08 $10.00 $11.29 $10.00 $11.40 $10.00
Income (loss) from Investment
Operations
Net Investment Income/(loss) 0.01 0.00+ 0.02 0.21 0.00+ (0.07) 0.41
Net realized and unrealized
gain/(loss) on investments 2.08 2.36 1.30 2.63 1.41 0.86 (1.24)
----------- ----------- ----------- ----------- ----------- ------------ -----------
Total from Investment Operations 2.09 2.36 1.32 2.84 1.41 0.79 (0.83)
----------- ----------- ----------- ----------- ----------- ------------ -----------
Less Dividends:
From net investment income (0.01) (0.00) (0.02) (0.20) (0.00)+ (0.00)+ (0.38)
In excess of net investment income (0.00)+ -- (0.01) -- (0.01) (0.00)+ --
From capital gains -- (0.06) -- -- -- -- --
Tax return of capital -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ------------ -----------
Total Dividends (0.01) (0.06) (0.03) (0.20) (0.01) (0.00) (0.38)
----------- ----------- ----------- ----------- ----------- ------------ -----------
Net increase/(decrease) in net asset
value 2.08 2.30 1.29 2.64 1.40 0.79 (1.21)
Net Asset Value, End of Period $12.08 $14.38 $11.29 $13.93 $11.40 $12.19 $8.79
=========== =========== =========== =========== =========== ============ ===========
Total Return(A) 20.93% 19.50% 13.23% 25.15% 13.99% 7.03% (9.10)%
Rates/Supplemental Data
Net Assets, End of Period (000s) $36,407 $40,432 $23,170 $25,887 $31,838 $46,748 $4,568
Ratios to average net assets:
Net investment income/(loss)
including reimbursement/waiver 0.24%* (0.02)% 0.87%* 1.65% 0.21%* (0.54)% 5.64%*
Operating expenses including
reimbursement/waiver: 1.40%* 1.40% 1.60%* 1.60% 1.45%* 1.45%* 1.80%*
Operating expenses excluding
reimbursement/waiver 1.60%* 1.46% 2.46%* 2.30% 3.19%* 2.00% 4.02%*
Portfolio turnover rate 26% 30% 8% 31% 23% 134% 0%
</TABLE>
- -------------------
* Annualized
+ Amount represents less than $0.01 per share.
(1) The Fund commenced operations on October 1, 1998.
(2) The Fund commenced operations on May 10, 1999.
(A) Assumes investment at the net asset value at the beginning of the
period, reinvestment of all distributions, a complete redemption of the
investment at the net asset value at the end of the period.
<PAGE>
(Inside Prospectus back cover page)
Forward Funds, Inc.
The Hansberger International Growth Fund
The Uniplan Real Estate Investment Fund
The Hoover Small Cap Equity Fund
The Garzarelli U.S. Equity Fund
Investment Adviser
Webster Investment Management Company, LLC
Sub-Advisers
<TABLE>
<S> <C>
Garzarelli Investment Management, LLC (The Garzarelli U.S. Equity Fund)
Hoover Investment Management, LLC (The Hoover Small Cap Equity Fund)
Hansberger Global Investors Inc. (The Hansberger International Growth Fund)
Uniplan, Inc. (The Uniplan Real Estate Investment Fund)
</TABLE>
Administrator
PFPC, Inc.
Distributor
Provident Distributors, Inc.
Counsel
Dechert Price & Rhoads
Independent Public Accountants
Arthur Andersen, LLP
Custodian
Brown Brothers Harriman & Co.
Transfer Agent
PFPC, Inc.
<PAGE>
(Outside Prospectus back cover page)
(LOGO)
FORWARD FUNDS, INC.
The Hansberger International Growth Fund
The Uniplan Real Estate Investment Fund
The Hoover Small Cap Equity Fund
The Garzarelli U.S. Equity Fund
Want more information?
You can find out more about our funds by viewing the following documents:
Annual and semi-annual reports
Our annual and semi-annual reports list the holdings of each Fund, describe each
Fund's performance, include the Funds' financial statements, and discuss the
market conditions and strategies that significantly affected the Funds'
performance.
Statement of Additional Information
The Statement of Additional Information ("SAI") contains additional and more
detailed information about each Fund, and is considered a part of this
Prospectus.
How do I obtain a copy of these documents?
By following one of the three procedures below:
1. Call or write, and copies will be sent to you free of charge:
Forward Funds, Inc.
433 California Street, Suite 1010
San Francisco, CA 94104
1-202-942-8090
2. Call or write to the Public Reference Section of the Securities and Exchange
Commission ("SEC") and ask them to mail you a copy. The SEC charges a fee for
this service. You can also drop by the Public Reference Section and copy the
documents while you are there. Information about the Public Reference Section
may be obtained by calling the number below.
Public Reference Section of the SEC
Washington, D.C. 20549-6009
1-202-942-8090
3. Go to the SEC's web site at www.sec.gov and download to your computer a
free text-only copy.
4. After paying a duplicating fee, you may also send an electronic request
to the SEC at [email protected]. [SEC File Number: 811-8419]
<PAGE>
FORWARD FUNDS, INC.
433 California Street
Suite 1010
San Francisco, California 94104
1-800-999-6809
Statement of Additional Information
dated May 1, 2000
Forward Funds, Inc. (the "Company") is an open-end management investment company
commonly known as a mutual fund. The Company offers three diversified investment
portfolios, The Hansberger International Growth Fund (formerly known as The
International Equity Fund), The Hoover Small Cap Equity Fund (formerly The Small
Capitalization Equity Fund), and The Garzarelli U.S. Equity Fund (formerly the
U.S. Equity Fund) and one non-diversified investment portfolio, The Uniplan Real
Estate Investment Fund (formerly known as The Real Estate Investment Fund)
(collectively, the "Funds"). There is no assurance that any of the Funds 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 May 1, 2000
("Prospectus"), which has been filed with the Securities and Exchange Commission
("SEC"). A copy of the Prospectus for the Funds may be obtained free of charge
by calling the Distributor at 1-800-999-6809.
TABLE OF CONTENTS
Page
ORGANIZATION OF FORWARD FUNDS, INC.............................................2
MANAGEMENT OF THE FUNDS........................................................2
INVESTMENT OBJECTIVES AND POLICIES............................................11
INVESTMENT RESTRICTIONS.......................................................13
SUPPLEMENTAL DISCUSSION OF INVESTMENT TECHNIQUES AND RISKS ASSOCIATED WITH
THE FUNDS' INVESTMENT POLICIES AND INVESTMENT TECHNIQUES ..................14
PORTFOLIO TRANSACTIONS........................................................28
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................................29
DETERMINATION OF SHARE PRICE..................................................31
SHAREHOLDER SERVICES AND PRIVILEGES...........................................32
DISTRIBUTIONS.................................................................33
TAX CONSIDERATIONS............................................................33
<PAGE>
SHAREHOLDER INFORMATION.......................................................38
CALCULATION OF PERFORMANCE DATA...............................................39
GENERAL INFORMATION...........................................................40
FINANCIAL STATEMENTS..........................................................42
APPENDIX A....................................................................43
<PAGE>
ORGANIZATION OF FORWARD FUNDS, INC.
Forward Funds, Inc. is an open-end management investment company which offers
three diversified investment portfolios and one non-diversified investment
portfolio. The Company was incorporated in Maryland on October 3, 1997.
The authorized capital stock of the Company consists of one billion four hundred
million (1,400,000,000) shares of two classes of common stock having a par value
of $0.001 per share (fifty million shares are allocated as Institutional Class
shares of the Hoover Small Cap Equity Fund). The Board of Directors of the
Company has designated the stock into four series, the Hoover Small Cap Equity
Fund, the Garzarelli U.S. Equity Fund, the Hansberger International Growth Fund,
and the Uniplan Real Estate Investment Fund, and has authorized the series to
offer two classes. Each Fund other than the Hoover Small Cap Equity Fund
currently offers one class of shares. The Hoover Small Cap Fund offers a second
class of shares called the Institutional Shares to institutional investors and
investors meeting certain purchase qualifications. These shares and the other
shares offered by the Funds are described herein as Shares. Holders of Shares of
the Funds 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 FUNDS
Board of Directors. The Company's Board of Directors oversees the management and
business of the Funds. The Directors are elected by Shareholders of the Company.
There are currently three directors, two of whom are not "interested persons" 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 advisers or otherwise. 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."
<PAGE>
<TABLE>
<S> <C> <C>
PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE POSITIONS HELD WITH THE FUND DURING THE PAST FIVE YEARS
Haig G. Mardikian Director Owner of Haig G. Mardikian
Hearst Building, Suite 1000 Enterprises, a real estate
San Francisco, CA 94118 investment business; a general
[DOB: ] partner of M & B Development;
Age: 50 general partner of George M.
Mardikian Enterprises; and
president and director of
Adiuvana-Invest, Inc. Mr.
Mardikian has served as Managing
Director of the United
Broadcasting Company and Chairman
and Director of SIFE Trust Fund.
Leo T. McCarthy Director President, The Daniel Group, an
One Market, Steuart Tower international trade consulting
Suite 1604 partnership (January 1995 -
San Francisco, CA 94105 present); Director, Parnassus
[DOB: ] Funds (1998 - present); Director,
Age: 67 Linear Technology Corporation
(July 1994 - present);
Lieutenant Governorof
the State of California (January 1983-
December 1994).
Ronald Pelosi* President, Director. Owner, Grayville & Co., LLC
433 California Street, Suite 1010 (December 1998 - present);
San Francisco, CA 94104 President and Managing Director,
[DOB: ] Webster Investment Management
Age: 63 Company LLC (August 1998 - presents);
President, Sutton Place Management
Co., Inc. (June 1997 - August 1998);
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
(June 1994 - June 1996)and President
of Ironstong Partners, business consultants
January 1993 - June 1994).
<PAGE>
PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE POSITIONS HELD WITH THE FUND DURING THE PAST FIVE YEARS
Carl Katerndahl Executive Vice President and Owner, Grayville & Co., LLC
433 California Street, Suite 1010 Secretary (December 1998 - present);
San Francisco, CA 94104 Executive Vice President and
[DOB: ] Managing Director, Webster
Age: 36 Investment Management Company LLC
August 1998 - presents);
Managing Director and Secretary,
Sutton Place Management Co.,
Inc.(April 1998 - August);
Client Service/Sales Representative,
NWQ Investment Management Group
(April 1997 - March 1998); Consultant,
Morgan Stanley Dean Witter (April 1993 -
March 1997); Senior Portfolio Manager,
Prudential Securities (April 1998 -
March 1990).
John P. McGowan Treasurer Senior Vice President, Webster
433 California Street, Suite 1010 Investment Management LLC June
San Francisco, CA 94104 1999 - present; Vice President,
[DOB: ] Client Services, First Data
Age: 35 Investor Services Group, June 1998 -
May 1999; Assistant Vice President,
Trust and Investment Services
Division, M & T Bank, November 1992 -
May 1998.
Therese M. Hogan Assistant Secretary Manager (State Regulations), PFPC,
433 California Street, Suite 1010 Inc. (June 1994 - present); Senior
San Francisco, CA 94104 Legal Assistant, Palmer & Dodge
[DOB: ] (October 1993 - 1994).
Age: 35
Susan T. Naughton Assistant Treasurer Section Manager, Treasury/Financial
433 California Street, Suite 1010 Reporting Department, PFPC, Inc.
San Francisco, CA 94104 (January 1995 - present);
[DOB: ] Supervisor, International Funds,
Age: 39 Mutual Funds Accounting
Department, PFPC, Inc. (1993 -
1995).
Brian O'Neill Assistant Treasurer Director, Accounting Services Unit
433 California Street, Suite 1010 of PFPC, Inc. (January 1994 -
San Francisco, CA 94104 present); Supervisor, Accounting
[DOB: ] Services Unit, PFPC, Inc. (1992 -
Age: 31 1994).
</TABLE>
COMPENSATION RECEIVED FROM FUNDS
AS OF DECEMBER 31, 1999
<TABLE>
<S> <C> <C> <C> <C>
Pension or
Aggregate Retirement Benefits Estimated Annual Total Compensation
Compensation From Accrued As Part of Benefits Upon From Fund and Fund
the Funds Funds' Expenses Retirement Complex
- ------------------------- --------------------- --------------------- --------------------- ---------------------
Haig G. Mardikian [$12,000] $0 $0 [$12,000]
Leo T. McCarthy [$12,000] $0 $0 [$12,000]
Ronald Pelosi $0 $0 $0 $0
</TABLE>
The Funds pay each Director who is not an interested person (as defined under
the 1940 Act) an annual fee of $12,000 (Directors receive $3,000 per regular
meeting and $1,000 for each special meeting attended in person, and receive half
that amount if they participate by telephone). Officers of the Funds and
Directors who are interested persons of the Funds do not receive any
compensation from the Funds or any other funds managed by the Investment Adviser
or Sub-Advisers. As of December 31, 1999, the Officers and Directors owned less
than 1% of the outstanding shares of the Funds.
Investment Advisers. Webster Investment Management Company LLC ("Webster" or the
"Investment Adviser"), serves as the Investment Adviser to each Fund. Webster is
a registered investment adviser under the Investment Advisers Act of 1940
("Advisers Act") that supervises the activities of each Sub-Adviser and has the
authority to engage the services of different sub-advisers with the approval of
the Directors of each of the respective Funds. Webster is located at 433
California Street, Suite 1010, San Francisco, California, 94104.
Webster has the authority to manage the Funds in accordance with the investment
objective, policies and restrictions of the Funds and subject to general
supervision of the Company's Board of Directors, but has delegated this
authority to sub-advisers for all of the Funds. It also provides the Funds with
ongoing management supervision and policy direction. Shareholders of the Funds
have approved a proposal which would permit Webster to hire and terminate
sub-advisers without shareholder approval and Webster is seeking authority to do
so from the Securities and Exchange Commission. Webster has managed the Funds
since September, 1998 and the Funds are its principal investment advisory
clients. Daily investment decisions are made by the Sub-Adviser to each Fund,
whose investment experience is described below. (Webster and the Sub-Advisers
are collectively referred to herein as "Investment Advisers", "Advisers" or
"Sub-Advisers").
The Garzarelli U.S. Equity Fund. Prior to February, 2000, the Garzarelli U.S.
Equity Fund was known as the U.S. Equity Fund and its sub-adviser was Barclays
Global Fund Advisors. Webster has engaged the services of Garzarelli Investment
Management, LLC ("Garzarelli") to act as Sub-Adviser for the Garzarelli U.S.
Equity Fund. Garzarelli is a registered investment adviser under the Advisers
Act. [Webster owns 47% of Garzarelli's authorized, issued shares and Garzarelli
Capital, Inc., at the same address as Garzarelli, owns 51% of such shares.
Elaine Garzarelli owns 100% of Garzarelli Capital, Inc.] Garzarelli is located
at 433 California Street, Suite 1010, San Francisco, California 94104. [As of
December 31, 1999, Garzarelli served as investment adviser to ten private
accounts with combined assets of $3.4 million. ]
<PAGE>
The Hansberger International Growth Fund. Prior to February, 2000, the
Hansberger International Growth Fund was known as the International Equity Fund
and its sub-adviser was Templeton Investment Counsel, Inc. Webster has engaged
the services of Hansberger Global Investors, Inc. ("HGI") to act as Sub-Adviser
for The Hansberger International Growth Fund. HGI, a registered investment
adviser under the Advisers Act, is located at 515 East Las Olas Blvd., Suite
1300, Fort Lauderdale, Florida 33301. As of December 31, 1999, HGI served as
investment adviser or investment sub-adviser to 15 U.S. and foreign investment
companies and 30 private accounts with combined assets of approximately $2.9
billion. HGI is a wholly-owned subsidiary of Hansberger Group, Inc. Mr. Thomas
L. Hansberger owns in excess 25% of the authorized, issued shares of Hansberger
Group. None of the Officers or Directors of the Fund are affiliated with HGI.
The Uniplan Real Estate Investment Fund. Prior to February, 2000 the Uniplan
Real Estate Investment Fund was known as the Real Estate Investment Fund.
Webster has engaged the services of Uniplan, Inc. ("Uniplan") to act as
Sub-Adviser for the Uniplan Real Estate Investment Fund. Uniplan, Inc. is an
investment management and counseling firm founded in 1984 and is registered
under the Advisers Act. Uniplan and its affiliates had approximately [$246]
million in assets under management as of [March 31, 1999]. Uniplan uses a
value-oriented quantitative approach to investing in equity, fixed income, and
REIT securities. Uniplan provides investment advice to other mutual funds,
institutional clients and individual clients with substantial investment
portfolios. Mr. Richard Imperiale is the portfolio manager for the Uniplan Real
Estate Investment Fund. He is the President and founder of Uniplan. None of the
Officers or Directors of the Fund are affiliated with Uniplan.
The Hoover Small Cap Equity Fund. Webster serves as Investment Adviser for the
Hoover Small Cap Equity Fund. Webster has engaged the services of Hoover
Investment Management, LLC ("HIM") to manage the Hoover Small Cap Equity Fund's
assets on a day to day basis. HIM is a San Francisco-based registered investment
advisor under the Adviser Act, formed in 1997 to provide asset management
services to pension plans, endowments, foundations and high net worth
individuals. As of December 31, 1999, HIM served as an investment adviser or
investment subadviser to 10 separate accounts with assets of $226 million under
management. The company focuses in the small capitalization sector using a
combination of macro/top down as well as company specific/bottom up investment
research. HIM invests in profitable, cash flow generating businesses that are
undervalued and prefers companies with little Wall Street sponsorship and low
institutional ownership. The goal is to find companies that are not in favor
with Wall Street and identify a catalyst for growth, which will propel both the
earnings and market recognition. This allows our investors to benefit from
investments in companies entering periods of increased internal growth as well
as from the expanding price-earnings multiples that ensuing market recognition
can bring. Irene Hoover, CFA, is the portfolio manager for the Hoover Small Cap
Equity Fund. She is the Managing member and Founder of HIM and owns 51% of the
firm. Webster Investment Management, who provides sales, marketing and client
service support to the firm owns the remaining 49% of HIM.
Investment Management and Subadvisory Agreements. Each Fund pays an investment
advisory fee, which is computed daily and paid monthly, at the following annual
rates based on the average daily net asset value of the respective funds:
[Hansberger International Growth Fund, 0.85% of the first $50 million of assets
under management, 0.75% of the next $50 million, 0.65% of the next 150 million,
0.60% of the next $250 million and 0.55% on assets over $500 million; Uniplan
Real Estate Investment Fund, 1.00% for the first $100 million of assets under
management, 0.85% for the next $400 million of assets under management, and
0.70% on assets over $500 million; Hoover Small Cap Equity Fund, 1.05% of
average daily net assets; and the Garzarelli U.S. Equity Fund, 0.80% for the
first $100 million of assets under management, 0.725% for the next $400 million,
and 0.65% on assets over $500 million.]
Neither the Investment Adviser nor the Sub-Advisers are required to furnish any
personnel, overhead items, or facilities for the Company. All fees paid to the
Investment Adviser by the Funds are computed and accrued daily and paid monthly
based on the net asset value of shares of the Funds.
<PAGE>
For the services provided pursuant to their Sub-Advisory Agreements with
Webster, each Sub-Adviser receives a fee from Webster. [For its services to the
Hansberger International Growth Fund, Webster pays Hansberger at a rate of 0.50%
of average daily net assets. For its services to the Uniplan Real Estate
Investment Fund, Webtser pays Uniplan 0.60% on the first $100 million of assets,
0.55% on assets over $100 million and up to $500 million and 0.45% on assets
over $500 million. For its services to the Hoover Small Cap Equity Fund, Webster
pays Hoover at a rate of 0.80% of that Fund's assets less than $500 million and
0.70% on amounts over $500 million. For its services to the Garzarelli U.S.
Equity Fund, Webster pays Garzarelli at a rate of 0.55% on the first $100
million of that Fund's assets, 0.50% on the next $400 million, and 0.45% on
assets over $500 million.]
[For the period ended December 31, 1998, the Funds paid investment advisory fees
in the amounts of: $53,157 for the Hansberger International Growth Fund,
$________ for the Uniplan Real Estate Investment Fund, $37,190 for the Hoover
Small Cap Equity Fund and $54,438 for the Garzarelli U.S. Equity Fund. For the
year ended December 31, 1999, the Funds paid investment advisory fees in the
amounts of: $224,592 for the Hansberger International Growth Fund, $30,008 for
the Uniplan Real Estate Investment Fund, $480,061 for the Hoover Small Cap
Equity Fund and $232,611 for the Garzarelli U.S. Equity Fund.]
[For the period ended December 31, 1998, Webster paid fees under the
Subadvisory Agreements in the amount of: $________, for the Hansberger
International Growth Fund, $_____ for the Uniplan Real Estate Investment Fund,
$_______ for the Hoover Small Cap Equity Fund and $______ for the Garzarelli
U.S. Equity Fund. For the year ended December 31, 1999, Webster paid fees under
the Subadvisory Agreements in the amount of: $________, for the Hansberger
International Growth Fund, $_____ for the Uniplan Real Estate Investment Fund,
$_______ for the Hoover Small Cap Equity Fund and $______ for the Garzarelli
U.S. Equity Fund.] Prior to [_________], Barclays Global Fund Advisors served as
Sub-Adviser to the U.S. Equity Fund (currently the Garzarelli U.S. Equity Fund)
and Templeton Investment Counsel, Inc. served as Sub-Adviser to International
Equity Fund (currently the Hansberger International Growth Fund) and received
payments under the Subadvisory Agreements.
Each Investment Management or Subadvisory 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 respective Fund's
outstanding Shares, as applicable, 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 Adviser by vote cast in person at a meeting called for the
purpose of voting on such approval.
Each such 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
the Fund's outstanding Shares voting as a single class, or upon not less than 60
days' notice by such Adviser. Each Agreement will terminate automatically in the
event of its "assignment" (as defined in the 1940 Act).
As described in the Prospectus the Adviser has agreed to limit the total
expenses of each Fund (excluding interest, taxes, brokerage and extraordinary
expenses) to an annual rate of 1.65% for the Hansberger International Growth
Fund, 1.80% for the Uniplan Real Estate Investment Fund, 1.50% for the Hoover
Small Cap Equity Fund and 1.45% for the Garzarelli U.S. Equity Fund. Pursuant to
this agreement, each Fund will reimburse the Adviser for any fee waivers or
expense reimbursements made by the Adviser, provided that any such
reimbursements made by a Fund to the Adviser will not cause the Fund's expense
limitation to exceed the amounts set forth above and the reimbursement is made
within two years after the year in with he Adviser incurred the expense. Under
the expense limitation agreement, Webster has waived advisory fees for the years
ended December 31, 1998 and 1999 in the amounts of $48,389 and $163,751
respectfully for the Hansberger International Growth Fund; $0 and $66,901 for
the Uniplan Real Estate Investment Fund; $61,755 and $249,280 for the Hoover
Small Cap Equity Fund; and $17,420 and $21,615 for the Garzarelli U.S. Equity
Fund.
<PAGE>
Distributor. Shares of the Funds are distributed pursuant to an Agreement
between the Company and Provident Distributors, Inc. (the "Distributor"),
located at Four Falls Corporate Center, 6th Floor, West Conshohocken,
Pennsylvania 19428. The Distribution Agreement requires the Distributor to
solicit orders for the sale of Shares and to undertake such advertising and
promotion as the Distributor believes reasonable in connection with such
solicitation. The Funds 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 Funds. 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).
The Shares of the Funds are sold without a sales charge. The Distributor may use
its own financial resources to pay expenses associated with activities primarily
intended to result in the promotion and distribution of the Funds' 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 of the Funds for
information on how to purchase and sell Shares of the Funds, and the charges and
expenses associated with an investment.
Codes of Ethics. The Company, Webster, the Sub-Advisers and the Distributor have
adopted Codes of Ethics governing personal trading activities of all of their
directors and officers and persons who, in connection with their regulation
functions, play a role in the recommendation of any purchase or sale of a
security by the Funds or obtain information pertaining to such purchase or sale.
The Codes of Ethics permits personnel subject to the Code to invest in
securities, including securities that may be purchased or held by the Fund.
Administrative Services and Transfer Agent. PFPC, Inc. (formerly First Data
Investors Services Group, Inc.) (hereinafter "PFPC", "Administrator" and
"Transfer Agent"), whose principal business address is 4400 Computer Drive,
Westborough, Massachusetts 01581, acts as the Company's administrator and
transfer agent. As Administrator, PFPC will perform corporate secretarial,
treasury and blue sky services and act as fund accounting agent for the Funds.
For its services as Administrator, the Funds will pay PFPC a monthly fee based
on the average amount of assets invested in the Funds. PFPC will receive an
annual fee of 0.20% up to and including the first $500 million in assets; 0.17%
for assets between $500 million and $1 billion and 0.125% for all assets over $1
billion. In addition, the Funds will pay PFPC certain accounting fees and other
expenses. The Administration Agreement between the Funds and PFPC has an initial
term of five years and will renew automatically for successive two year terms.
Pursuant to a Transfer Agency and Services Agreement, PFPC also acts as transfer
agent and dividend disbursing agent for the Funds. The Transfer Agency and
Services Agreement has a term of five years and automatically renews for
successive two year terms. PFPC is a majority-owned subsidiary of PNC Bank
Corporation. Shareholder inquiries may be directed to PFPC at P.O. Box 5184,
Westborough, Massachusetts 01581-5184.
<PAGE>
Garzarelli Investment Management, LLC, sub-adviser to the Garzarelli U.S. Equity
Fund, has hired Webster to perform certain administrative services that
Garzarelli would otherwise be required to perform under its subadvisory
agreement with Webster. These services include assistance with certain
recordkeeping and reporting requirements, as well as assistance with certain
other regulatory and administrative matters. As compensation for these services,
Garzarelli pays Webster a fee at an annual rate of 0.15% of the average daily
net assets of the Fund.
Other Service Providers
Each Fund pays all expenses not assumed by Webster, the Sub-Advisers or the
Administrator. Expenses paid by the Funds include: custodian, stock transfer and
dividend disbursing fees and accounting and recordkeeping expenses; Rule 12b-1
fees and shareholder service expenses pursuant to a Shareholder Service Plan and
Distribution 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 Company; association dues; and costs of
stationery and forms prepared exclusively for the Funds.
Shareholder Service and Distribution Plans. Each Fund has a Shareholder Service
Plan and Distribution Plan applicable to Shares of the Funds (collectively,
"Shareholder Service Plans"). The Company intends to operate the Shareholder
Service Plans in accordance with their terms. Under the Shareholder Service
Plans, 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 0.10% under the Shareholder Service Plan (except for
Institutional Shares of the Hoover Small Cap Equity Fund which shall not exceed
0.35%) and 0.25% under the Distribution Plan (except for Institutional Shares of
the Hoover Small Cap Equity Fund which are not subject to the Distribution Plan)
of the average daily net assets of the shares of each Fund.
Under the Shareholder Service Plans, ongoing payments may be made on a quarterly
basis to Participating Organizations for both distribution and shareholder
servicing 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 shares of the Funds, including payments to Participating Organizations
for selling shares of the Funds 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 a 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
Funds will receive payment under the Shareholder Service Plans without regard to
actual distribution expenses incurred.
The Shareholder Service Plans have 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 Plans 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
Plans, cast in person at a meeting called for that purpose. The Shareholder
Service Plans 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.
<PAGE>
Any change in the Shareholder Service Plans of the Funds that would materially
increase the expenses paid by the Funds requires Shareholder approval;
otherwise, the Shareholder Service Plans may be amended by the Board of
Directors of the Funds, 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 Plans 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 Plans, 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 Plans in order to enable the Board to make an
informed determination of whether the Shareholder Service Plans should be
continued.
[For the fiscal year ended December 31, 1999, the following amounts
were paid under the Distribution Plan:
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- ----------------------------------- ------------------ --------------- --------------- ------------------ ----------------
Hansberger Uniplan Real Hoover Garzarelli U.S. Total
International Estate Small Cap Equity Fund
Growth Fund Investment Equity Fund
Fund
- ----------------------------------- ------------------ --------------- --------------- ------------------ ----------------
Advertising $__________ $__________ $__________
- ----------------------------------- ------------------ --------------- --------------- ------------------ ----------------
Printing and Mailing of $__________ $__________ $__________
Prospectuses to other than
current shareholders
- ----------------------------------- ------------------ --------------- --------------- ------------------ ----------------
Compensation to Underwriters $__________ $__________ $__________
- ----------------------------------- ------------------ --------------- --------------- ------------------ ----------------
Compensation to Broker-Dealers $__________ $__________ $__________
- ----------------------------------- ------------------ --------------- --------------- ------------------ ----------------
Other* $__________ $__________ $__________
- ----------------------------------- ------------------ --------------- --------------- ------------------ ----------------
Total $__________ $__________ $__________
- ----------------------------------- ------------------ --------------- --------------- ------------------ ----------------
</TABLE>
[* This includes consulting fees, miscellaneous shipping, filing and travel
expenses, and storage of printed items. ]
Administration of the Distribution Plan is regulated by Rule 12b-1
under the 1940 Act, which includes requirements that the Board of Directors
receive and review, at least quarterly, reports concerning the nature and
qualification of expenses which are made, that the Board of Directors approve
all agreements implementing the Distribution Plan and that the Distribution Plan
may be continued from year-to-year only if the Board of Directors concludes at
least annually that continuation of the Distribution Plan is likely to benefit
shareholders.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each of the Funds 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 relevant Fund. Non-fundamental policies of each of the
Funds may be changed by the Company's Directors, without a vote of the holders
of a majority of outstanding Shares of a 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 Funds will be achieved.
<PAGE>
Investment Policies
The Garzarelli U.S. Equity Fund. The Equity Fund will seek its investment
objective by investing primarily in equity securities of companies located in
the United States.
The Hansberger International Growth Fund. The Hansberger International Growth
Fund will seek its investment objective by investing primarily in equity
securities of companies located outside the United States.
The Uniplan Real Estate Investment Fund. For the purpose of the Uniplan Real
Estate Investment Fund, a real estate company is one that derives at least 50%
of its revenue from real estate related activities or has at least 50% of its
assets in real estate. Other than real estate investment trusts ("REITs"), most
real estate companies do not pay dividends at a meaningful level. The Fund's
sub-adviser expects that the Fund's investment in real estate companies will be
directed toward REITs and other real estate operating companies that pay higher
dividends relative to the stock market as a whole.
Prior to selecting specific investments for the Fund, the Fund's Sub-Adviser
generally tracks real estate supply and demand across the United States by
separating the country into eight geographic regions and then further into major
metropolitan markets within those regions. Within each region, the Fund's
Sub-Adviser compiles a profile of supply and demand factors including: (1)
vacancy rates by property type; (2) visible supply of new property based on
building permit activity; (3) regional population, job and economic growth; and
(4) local trends in rental and property capitalization rates. The Fund's
sub-adviser uses this data to determine which property types in which regions
appear to be most favorably poised to outperform similar properties in other
regions. The Fund's Sub-Adviser then proceeds to select investments that attempt
to take advantage of those factors.
The Hoover Small Cap Equity Fund. The Hoover Small Cap Equity Fund will invest
at least 65% of its total assets in the equity securities of companies with
market capitalizations at the time of purchase no larger than the largest market
capitalization of the companies included in the Russell 2000 Index as most
recently reported. The Hoover Small Cap Equity Fund expects to invest
predominantly in common stocks, but may also invest in all types of equity and
debt securities including preferred stocks, convertible securities, warrants and
foreign securities. There are no limits on 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 Fund may continue to hold an investment even if its
market capitalization exceeds the range of the Fund's other investments.
The Hoover Small Cap Equity Fund may invest up to 5% of its assets in securities
of emerging markets. The Sub-Adviser has broad discretion to identify and invest
in countries it considers 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.
<PAGE>
Debt securities held by the Hoover Small Cap Equity 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 Hoover Small Cap
Equity Fund may invest in high risk, lower quality debt securities, commonly
referred to as "junk bonds." Investment grade debt securities are securities
rated at least Baa by Moody's Investors Services, Inc. or BBB by Standard &
Poor's Ratings Service (nationally recognized statistical ratings
organizations), or if unrated, are determined to be of the same quality by the
Sub-Adviser. Generally, debt securities in these categories should have adequate
capacity to pay interest and repay principal but their capacity is more likely
than higher grade debt securities to be weakened if there is a change in
economic conditions or other circumstances. High yield ("junk") bonds are
considered speculative with regard to the issuer's capacity to pay interest and
repay principal and may be in default. The Hoover Small Cap Equity Fund will
invest in debt securities rated at least Ba or B by Moody's or BB or B by
Standard & Poor's or, if unrated, determined by the Sub-Adviser to be of the
same quality. The Hoover Small Cap Equity 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
Fund's total assets.
Securities purchased by the Hoover Small Cap Equity 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 Hoover
Small Cap Equity Fund will not invest more than 25% of its total assets in
securities issued by companies in any one industry.
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies of each Fund that may not be
changed without the approval of the holders of a majority of that Fund's
outstanding voting securities. A majority of a 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
a Fund will take reasonably practicable steps to attempt to continuously monitor
and comply with its liquidity standards. Also, if a 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, each Fund may not:
(1) invest 25% or more of the total value of its assets
in a particular industry, except that the Uniplan Real Estate
Investment Fund will invest over 25% of its assets in the real
estate industry;
(2) issue senior securities, except to the extent
permitted by the Investment Company Act of 1940, as amended
(the "1940 Act"), or borrow money, except that a 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 each Fund may engage in futures transactions as
described in the Prospectus;
(4) make loans, except that each 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;
<PAGE>
(5) underwrite the securities of other issuers, except to
the extent that, in connection with the disposition of
portfolio securities, a Fund may be deemed to be an
underwriter;
(6) purchase real estate (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).
* * * * * * *
SUPPLEMENTAL DISCUSSION OF INVESTMENT TECHNIQUES AND RISKS ASSOCIATED WITH
THE FUNDS' INVESTMENT POLICIES AND INVESTMENT TECHNIQUES
Additional information concerning investment techniques and risks associated
with certain of the Funds' investments is set forth below. Unless otherwise
indicated, the discussion below pertains to all of the Funds.
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 to annually, or may be
event-based, such as based on a change in the prime rate.
The Funds 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 a Fund with a certain degree of protection against a
rise in interest rates, although a Fund will participate in any declines in
interest rates as well.
The Funds 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, and a Fund may
accordingly be forced to hold such an instrument for long periods of time and/or
may experience losses of principal in such investment. Each 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.
<PAGE>
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.
The Funds may invest in mortgage-related or other asset-backed securities. The
value of some mortgage-related or asset-backed securities in which the Funds
invest may be particularly sensitive to changes in prevailing interest rates,
and, like the other investments of a Fund, the ability of a Fund to successfully
utilize these instruments may depend in part upon the ability of its Sub-Adviser
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 a 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 GNMA, the FHLMC or the 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 each 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 a 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.
<PAGE>
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 a Fund's yield to maturity from these
securities. A Fund will not invest more than 5% of its net assets in any
combination of IO, PO, or inverse floater securities. The Funds 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.
U.S. Government Obligations
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.
Convertible Securities
Each Fund may invest in convertible securities, which may offer higher income
than the common stocks into which they are convertible. 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 a 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. A 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 force conversion of that security. If the issuer
chooses to do so, this action could have an adverse effect on a Fund's ability
to achieve its investment objective.
Securities Issued by Other Investment Companies
Each Fund may invest up to 10% of its total assets in shares of other investment
companies. A Fund will incur additional expenses due to the duplication of
expenses as a result of investing in other investment companies.
<PAGE>
Repurchase Agreements
Securities held by a Fund may be subject to repurchase agreements. In a
repurchase agreement, a 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 a 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. If a seller defaults on its
repurchase obligations, a Fund may suffer a loss in disposing of the security
subject to the repurchase agreement. 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 Funds in connection with bankruptcy
proceedings), it is the current policy of the Funds to engage in repurchase
agreement transactions with parties whose creditworthiness has been reviewed and
found satisfactory by the Sub-Advisers.
Reverse Repurchase Agreements and Dollar Roll Agreements
The Funds may borrow funds by entering into reverse repurchase agreements and
dollar roll agreements in accordance with applicable investment restrictions. In
a reverse repurchase agreement, a 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. A dollar roll
agreement is identical to a reverse repurchase agreement except for the fact
that substantially similar securities may be repurchased. While a reverse
repurchase agreement is outstanding, the Funds will maintain appropriate liquid
assets in a segregated custodial account to cover its obligation under the
agreement. The Funds will enter into reverse repurchase agreements only with
parties whose creditworthiness has been found satisfactory by the Sub-Advisers.
Such transactions may increase fluctuations in the market value of a Fund's
assets and may be viewed as a form of leverage. Reverse repurchase agreements
and dollar roll agreements involve the risk that the market value of the
securities sold by a Fund may decline below the price at which the Fund is
obligated to repurchase the securities.
Derivative Instruments
The Funds 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 Funds may also enter into
swap agreements with respect to foreign currencies, interest rates, and
securities indexes. A 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 Funds 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. A Fund will maintain a segregated account consisting of
assets determined to be liquid by its Sub-Adviser 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.
<PAGE>
The Funds consider 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 a Fund invests may be particularly sensitive to changes in
prevailing interest rates, and, like the other investments of a Fund, the
ability of a Fund to successfully utilize these instruments may depend in part
upon the ability of its Sub-Adviser to correctly forecast interest rates and
other economic factors. If a Sub-Adviser incorrectly forecasts such factors and
has taken positions in derivative instruments contrary to prevailing market
trends, a Fund could be exposed to the risk of loss. The Funds might not employ
any of the strategies described below, and no assurance can be given that any
strategy used will succeed.
Swap Agreements. The Funds 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 a Fund than if the 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.
Most swap agreements entered into by a Fund calculate the obligations of the
parties to the agreement on a "net basis". Consequently, the 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 Fund's current obligations under a swap agreement will be accrued daily
(offset against amounts owed to the 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
Sub-Advisers in accordance with procedures established by the Board of
Directors, to limit any potential leveraging of the Fund's portfolio.
Obligations under swap agreements so covered will not be construed to be "senior
securities" for purposes of the Funds' investment restriction concerning senior
securities. A 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 Fund's assets.
Whether a Fund's use of swap agreements will be successful in furthering its
investment objective will depend on the Investment Adviser or Sub-Adviser'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, a 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. A 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 Fund's repurchase agreement
guidelines). Certain restrictions imposed on the Funds by the Internal Revenue
Code of 1986, as amended (the "Code"), may limit a 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 Fund's ability to
terminate existing swap agreements or to realize amounts to be received under
such agreements.
<PAGE>
Options on Securities, Securities Indexes and Futures
The Funds 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. 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. 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. One purpose of purchasing put
options is to protect holdings in an underlying or related security against a
substantial decline in market value.
One purpose of purchasing call options is to protect against substantial
increases in prices of securities. The Funds 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 Funds 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 a Fund's immediate obligations. The
Funds 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, a Fund will also
segregate liquid assets equivalent to the amount, if any, by which the put is
"in the money."
<PAGE>
The Funds will cover call options on securities indexes that they write by
owning securities whose price changes, in the opinion of the Investment Adviser
or Sub-Adviser, 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 a 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. A 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 Funds will receive a premium from writing a put or call option, which
increases their 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 a 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, a 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.
A 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 does 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.
A 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, a 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, a 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.
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 a 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 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.
<PAGE>
There can be no assurance that a liquid market will exist when a 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 a 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 a Fund, as well as
the cover for options written by a Fund, are considered not readily marketable
and are subject to the Company's limitation on investments in securities that
are not readily marketable.
A 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. Each 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 a
Fund for hedging purposes also depends upon the Investment Adviser's or
Sub-Advisers' 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 a Fund seeks to close out an
option position. If a 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 a Fund, it would not be able to close out
the option. If restrictions on exercise were imposed, a Fund might be unable to
exercise an option it had purchased. Except to the extent that a call option on
an index written by a 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.
Futures Contracts and Options on Futures Contracts. The Funds 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 a 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 a 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 a Fund from liquidating an unfavorable position, and the
Fund would remain obligated to meet margin requirements until the position is
closed.
<PAGE>
The Funds 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. A 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, a Fund will also segregate liquid
assets equivalent to the amount, if any, by which the put is "in the money" .
The Funds 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 Funds will use
financial futures contracts and related options 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," a 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.
A 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, a 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 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 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 a
Fund if the value of the hedged currency increases. The Funds may enter into
these contracts for the purpose of hedging against foreign exchange risk arising
from a Fund's investment or anticipated investment in securities denominated in
foreign currencies. The Funds 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 Funds 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. A Fund will segregate
assets determined to be liquid by its Sub-Adviser, 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 Funds also may invest in options on foreign
currencies, in foreign currency futures and options thereon, and in foreign
currency exchange-related securities, such as foreign currency warrants and
other instruments whose return is linked to foreign currency exchange rates.
Illiquid Securities
The Funds may invest in an illiquid or restricted security if the Investment
Adviser or Sub-Adviser believes that it presents an attractive investment
opportunity. Each of the Funds may not invest more than 15% of its total assets
in illiquid securities, measured at the time of investment. 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
Sub-Adviser might wish to sell, and these securities could have the effect of
decreasing the overall level of the Funds' liquidity. Further, the lack of an
established secondary market may make it more difficult to value illiquid
securities, requiring the Funds to rely on judgments that may be somewhat
subjective in determining value, which could vary from the amount that the Funds
could realize upon disposition.
<PAGE>
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 a Sub-Adviser has determined to be liquid under procedures
approved by the Board of Directors).
A Fund's investments 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.
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 Funds' 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.
Lending of Portfolio Securities
In order to generate additional income, the Funds from time to time may lend
portfolio securities to broker-dealers, banks or institutional borrowers of
securities. The lending 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 lending Fund. During the time portfolio securities
are on loan, the borrower pays the lending Fund any dividends or interest paid
on such securities. Loans are subject to termination by the lending Fund or the
borrower at any time. While the lending Fund does not have the right to vote
securities on loan, it intends 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 lending Fund, the lending
Fund could experience delays in recovering its securities and possible capital
losses.
Borrowing
Each of the Funds may borrow up to 15% of the value of its total assets from
banks for temporary or emergency purposes. Under the 1940 Act, each of the Funds
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 a Fund's holdings may be
disadvantageous from an investment standpoint. The Funds may 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 Funds' net asset values.
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.
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 by Moody's
Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's Rating Service
("S&P")) are described as "speculative" both by Moody's and S&P. Rating agencies
may periodically change the rating assigned to a particular security. While the
Sub-Advisers will take into account such changes in deciding whether to hold or
sell a security, a Sub-Adviser is not required to sell a security that is
downgraded to any particular rating.
<PAGE>
Debt Securities
The Funds may invest in debt securities that are rated between BBB and as low as
CCC by S&P and between Baa and as low as Caa by Moody's or, if unrated, are of
equivalent investment quality as determined by the Investment Adviser or
Sub-Advisers. 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 Funds' net asset values.
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 can be regarded as having
extremely poor prospects of 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 Funds' 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 Funds to obtain accurate market quotations for the
purposes of valuing their portfolios. 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.
<PAGE>
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 Funds to achieve their
investment objectives 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 Funds 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 Funds may incur additional expenses seeking
recovery.
Depositary Receipts
The Funds 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 issued 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, the underlying issuer
has made arrangements to have its securities traded in the form of Depositary
Receipts. In unsponsored programs, the underlying 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 underlying issuer
that has participated in the creation of a sponsored program. Accordingly, there
may be less information available regarding underlying issuers of securities in
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 each Fund's investment
policies, a Fund's investments in Depositary Receipts will be deemed to be
investments in the underlying securities.
Loan Participations and Assignments
The Funds 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, a Fund's investments in loans are expected
to take the form of loan participations and assignments of loans from third
parties. Large loans to corporations or governments may be shared or syndicated
among several lenders, usually banks. A 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 Funds' investments in loan participations and assignments with
limited marketability. If a 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, a Fund's rights
against the borrower may be more limited than those held by the original lender.
<PAGE>
Investment in Foreign and Developing Markets
The Hansberger International Growth Fund may purchase securities in any foreign
country, developed or developing. Potential investors in The Hansberger
International Growth 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 U.S. companies. 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. Transaction costs and custodian expenses are
likely to be higher in foreign markets. 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 investments 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 withholding portions of interest and dividends at the source. There is the
possibility of cessation of trading on national exchanges, expropriation,
nationalization or confiscatory taxation, exit levies, 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.
<PAGE>
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 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 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 Fund may enter into
these contracts for the purpose of hedging against foreign exchange risk arising
from its investment or anticipated investment in securities denominated in
foreign currencies. The Fund 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 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 its Sub-Adviser, 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 may invest in options on foreign currencies, in foreign
currency futures and options thereon, and in foreign currency exchange-related
securities, such as foreign currency warrants and other instruments whose return
is linked to foreign currency exchange rates.
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.
Certificates of Deposit and Time Deposits
Each 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.
PORTFOLIO TRANSACTIONS
The Investment Adviser and Sub-Advisers (the "Adviser" or "Advisers") are
authorized to select the brokers or dealers that will execute transactions to
purchase or sell investment securities for the Funds. In all purchases and sales
of securities for the Funds, the primary consideration is to obtain the most
favorable price and execution available. Pursuant to the Investment Management
Agreement and/or Sub-Advisory Agreements, each Adviser determines which brokers
are to be eligible to execute portfolio transactions of the Funds. 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 Adviser, a better
price and execution can otherwise be obtained by using a broker for the
transaction.
<PAGE>
In placing portfolio transactions, each Adviser 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 Funds and/or the Advisers, and
provide other services in addition to execution services. The placement of
portfolio brokerage with broker-dealers who have sold Shares of the Funds is
subject to rules adopted by the National Association of Securities Dealers, Inc.
("NASD"). The Advisers 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 Funds, an Adviser may also give weight to the
ability of a broker to furnish brokerage and research services to the Funds or
the Adviser. In negotiating commissions with a broker, the Adviser 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 Adviser 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
Funds or assists the Adviser in carrying out its responsibilities to the Funds
or its other clients.
Purchases of the Funds' 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 Funds 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 Funds may also be appropriate
for other clients served by the Funds' Advisers. 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 Adviser is considered at or
about the same time, transactions in such securities will be allocated among the
Funds and the Advisers' other clients in a manner deemed fair and reasonable by
the Adviser. There is no specified formula for allocating such transactions.
[For the year ended December 31, 1999, the Hansberger International
Growth Fund paid $__________ , the Uniplan Real Estate Investment Fund paid
$_______, the Hoover Small Cap Equity Fund paid $__________and the Garzarelli
U.S. Equity Fund paid $__________, in commissions to brokers. The Funds did not
pay any commissions to brokers who were affiliated with the Fund, the Adviser,
or the Distributor, and any affiliated person of the foregoing.
[During the fiscal year ended December 31, 1999, the Funds directed brokerage
transactions to brokers because of research services provided. The amount of
such transactions and related commissions were as follows: for the Hansberger
International Growth Equity Fund, $__________ in transactions and $__________
related commissions; for the Uniplan Real Estate Investment Fund, $__________ in
transactions and $__________ in related commissions; for the Hoover Small Cap
Equity Fund $_______ in transactions and $_______ in related commissions; and
for the Garzarelli U.S. Equity Fund, $_________ in transactions and $______ in
related commissions]
<PAGE>
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Funds 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 Funds may authorize one or more brokers to receive, on their
behalf, purchase and redemption orders and such brokers are authorized to
designate other intermediaries as approved by the Funds to receive purchase and
redemption orders on the Funds' behalf. The Funds will be deemed to have
received a purchase or redemption order when an authorized broker or, if
approved by the Funds, a broker's authorized designee, receives the order. The
Distributor, at its expense, may provide additional promotional incentives to
dealers in connection with the sales of Shares and other funds managed by the
Advisers. 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 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 Funds'
Prospectus, the telephone redemption and exchange privileges are available for
all Shareholder accounts except retirement accounts. The 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 Funds 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 an exchange. If you redeem your shares by mail
there is a $1.00 charge. If you choose to receive the proceeds from
your redemption via wire transfer, there is an $8.00 charge.
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 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.
<PAGE>
Matters Affecting Redemptions. Payments to shareholders for Shares redeemed will
be made within seven days after receipt by the 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 Funds 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 Funds
not reasonably practicable; or (c) for such other period as the SEC may permit
for the protection of the Funds' shareholders. At various times, a Fund may be
requested to redeem Shares for which it has not yet received good payment.
Accordingly, a 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 10 business days.
The Funds intend to pay in cash for all Shares redeemed, but under abnormal
conditions that make payment in cash unwise, the Funds 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 Funds liquidate portfolio
securities to meet redemptions, the Funds reserve 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 Funds reserve
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 a
Fund, other than as a result of a decline in the net asset value per Share.
Before a 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 each of the Funds' 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 a Fund's portfolio securities to affect
that 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
<PAGE>
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 Funds
are valued at the close of the securities or commodities exchanges on which they
are traded. Options on securities and indices purchased by the Funds 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 Funds
generally value their 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 Investment Adviser and/or Sub-Advisers
using methodologies approved by the Board of Directors.
The net asset value per Share of each of the Funds will fluctuate as the value
of the Funds' investments change. Net asset value per Share for each of the
Funds for purposes of pricing sales and redemptions is calculated by dividing
the value of all securities and other assets belonging to a 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 a 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 Funds' 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 Funds 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.
<PAGE>
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 Funds 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. Shareholders who elect to receive cash dividends will pay a $10.00 annual
account administration fee which is deducted out of dividends.
In the absence of such an election, each purchase of Shares of the Funds 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 Funds 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 Funds 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 Funds and their 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 Funds.
Qualification as a Regulated Investment Company. Each of the Funds intends to
qualify as a regulated investment company under the Code. To so qualify, a 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)
<PAGE>
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 Funds as regulated investment companies does not involve
government supervision of management or of their investment practices or
policies. As a regulated investment company, each 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 Funds
intend 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 Funds' distributions
of investment company taxable income may be eligible for the corporate
dividends-received deduction to the extent attributable to the Funds' 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 Funds as capital gains dividends are taxable to Shareholders,
whether received in cash or reinvested in Fund Shares, as long-term capital
gains, regardless of the length of time the Funds' Shares have been held by a
Shareholder, and are not eligible for the dividends-received deduction. Any
distributions that are not from the Funds' 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 Funds 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 a Fund reduce the Net Asset Value of that 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 a 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 a 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 a 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.
<PAGE>
Some debt securities may be purchased by a 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 a 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. A
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. A Fund will monitor its
transactions and may make such tax elections as management deems appropriate
with respect to foreign currency, options, futures contracts, forward contracts,
or hedged investments. A 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 Funds may result in "straddles" for
federal income tax purposes. The straddle rules may affect the character of
gains (or losses) realized by the Funds, and losses realized by the Funds 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 Funds 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. Under certain circumstances, a Fund may recognize a gain
from a constructive sale of an "appreciated financial position" it holds if it
enters into a short sale, forward contract or other transaction that
substantially reduces the risk of loss with respect to the appreciated position.
In that event, the Fund would be treated as if it had sold and immediately
repurchased the property and would be taxed on any gain (but not loss) from the
constructive sale. The character of gain from a constructive sale would depend
upon the Fund's holding period in the property. Loss from a constructive sale
would be recognized when the property was substantially disposed of, and its
character would depend on the Fund's holding period and the application of
various loss deferral provisions of the Code. Constructive sale treatment does
not apply to transactions closed in the 90-day period ending with the 30th day
after the close of the taxable year, if certain conditions are met.
Currency Fluctuation - Section 988 Gains and Losses. Gains or losses
attributable to fluctuations in foreign currency exchange rates that occur
between the time the Funds accrue receivables or expenses denominated in a
foreign currency and the time the Funds actually collect such receivables or pay
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 a Fund's investment company taxable income
available to be distributed to its Shareholders as ordinary income.
<PAGE>
Passive Foreign Investment Companies. Some of the Funds 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 a 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 Fund 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 Funds may be eligible to elect alternative tax treatment with respect to
PFIC stock. Under an election that is available in some circumstances, a 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 Funds 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 Funds may limit
the extent to which the Funds will be able to invest in other investment
companies.
Real Estate Investment Fund Investments. A Fund may invest in real estate
investment trusts ("REITs") that hold residual interests in real estate mortgage
investment conduits ("REMICs"). Although the Adviser does not intend to invest
Fund assets in REITs that hold primarily residual interests in REMICS, under
applicable Treasury regulations, a portion of the Fund's income from a REIT that
is attributable to the REIT's residual interest in a REMIC (referred to in the
Code as an "excess inclusion") may be subject to federal income tax. Excess
inclusion income of the Fund may be allocated to shareholders of the Fund in
proportion to the dividends received by the shareholders, with the same tax
consequences as if the shareholder held the REMIC residual interest directly. In
general, excess inclusion income allocated to shareholders (i) cannot be offset
by net operating losses (subject to a limited exception for certain thrift
institutions), (ii) will constitute unrelated business taxable income to
entities (including qualified pension plans, individual retirement accounts or
other tax-exempt entities) subject to tax on unrelated business income, thereby
potentially requiring such an entity to file a tax return and pay tax on such
income, and (iii) in the case of a foreign shareholder, will not qualify for any
reduction in U.S. federal withholding tax. In addition, if at any time during
any taxable year a "disqualified organization" (as defined in the Code) is a
record holder of Fund shares, then the Fund will be subject to a tax equal to
that portion of its excess inclusion income for the taxable year that is
allocable to the disqualified organization, multiplied by the highest federal
income tax rate imposed on corporations. The Adviser has not historically
invested in Mortgage REITs or vehicles that primarily hold residual interest in
REMICs and does not intend to do so in the future.
<PAGE>
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 taxed as
long-term capital gain if the Shareholder's holding period is more than one
year. 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 Funds 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 a Shareholder if (1) the
Shareholder fails to furnish the Funds with the Shareholder's correct taxpayer
identification number or social security number and to make such certifications
as the Funds may require, (2) the IRS notifies the Shareholder or the Funds 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 a 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 applicable Fund is "effectively connected" with a U.S. trade or business
carried on by such Shareholder.
<PAGE>
If the income from the applicable 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 applicable Fund, capital gain dividends and amounts retained by
the applicable Fund that are designated as undistributed capital gains.
If the income from the applicable 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 applicable Fund 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 Funds 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 Funds, including the
applicability of foreign taxes.
Liquidation of Funds. The Board of Directors of the Company may determine to
close and liquidate a Fund at any time, which may have adverse tax consequences
to shareholders. In the event of a liquidation, shareholders will receive a
liquidating distribution in cash or in-kind equal to their proportionate
interest in the Fund. A liquidating distribution may be a taxable event to
shareholders, resulting in a gain or loss for tax purposes, depending upon a
shareholders basis in his or her shares of the Fund.
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 SAI. 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 Funds.
SHAREHOLDER INFORMATION
Certificates representing Shares of the Funds 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 Funds 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 Funds' net asset values (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 Funds are 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
relevant Fund at the beginning of the period.
<PAGE>
A Fund may effect a redemption in-kind to an "affiliated person" of a Fund, as
defined under the 1940 Act, under procedures adopted by the Board of Directors
designed to ensure that: (i) the redemption in-kind is effected at approximately
the affiliated person's proportionate share of the distributing Fund's current
net assets, and thus does not result in the dilution of the interests of the
remaining shareholders; (ii) the distributed securities are valued in the same
manner as they are valued for purposes of computing the distributing Fund's net
asset value; (iii) the redemption in-kind is consistent with the Fund's
Prospectus and SAI; and (iv) neither the affiliated person nor any other party
with the ability and the pecuniary incentive to influence the redemption in kind
selects, or influences the selection of, the distributed securities.
CALCULATION OF PERFORMANCE DATA
The Funds 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 Funds over periods of 1, 5 and 10
years (up to the life of the Funds), 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 Funds may advertise their 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 Funds 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 Funds during the period were reinvested in Shares of
the Funds. 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
applicable Fund's operations, or on a year-by-year basis).
Quotations of yield for the Funds 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:
2[(a-b+1)6 - 1]
----
cd
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.
<PAGE>
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, each 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 Funds 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 Funds compare their
performance to other funds or to relevant indexes, the Funds' 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 Funds, 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
Funds 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 Funds and the dollar amount of the assets under management.
In addition, reports and promotional literature may contain information
concerning the Sub-Advisers, or affiliates of the Company, including (i)
performance rankings of other funds managed by the Sub-Advisers, or the
individuals employed by the Sub-Advisers 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
Description of the Company and Its Shares
The Company was organized as a Maryland corporation in 1997 and consists of the
four Funds described in the Prospectus and this SAI. Each Fund has one class of
shares, except the Hoover Small Cap Equity Fund which has two classes of shares.
Each Share represents an equal proportionate interest in a Fund with other
Shares of that Fund, and is entitled to such dividends and distributions out of
the income earned on the assets belonging to that Fund as are declared at the
discretion of the Directors. Shareholders are entitled to one vote for each
Share owned.
<PAGE>
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.
HOOVER SMALL CAP EQUITY FUND:
- ----------------------------
The following individuals owned more than 25% of voting securities of
the Fund as of February 24, 2000.
Name and Address Percentage
- ---------------- ----------
Charles Schwab & Company Inc. 56.50
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 9410004-4122
Sutton Place Associates 30.46
One Embarcedero Center, Suite 1050
San Francisco, CA 94111
MUIR & Co. 6.69
C/O Frost National Bank
P.O. Box 2479
San Antonio, TX 78298-2479
HANSBERGER INTERNATIONAL GROWTH FUND
- ------------------------------------
The following individuals owned more than 25% of voting securities of
the Fund as of February 24, 2000.
Name and Address Percentage
- ---------------- ----------
Sutton Place Associates 98.96
One Embarcedero Center, Suite 1050
San Francisco, CA 94111
GARZARELLI U.S. EQUITY FUND:
- ---------------------------
The following individuals owned more than 25% of voting securities of
the Fund as of February 24, 2000.
Name and Address Percentage
- ---------------- ----------
Sutton Place Associates 99.54
One Embarcedero Center, Suite 1050
San Francisco, CA 94111
UNIPLAN REAL ESTATE INVESTMENT FUND:
- -----------------------------------
The following individuals owned more than 25% of the voting securities
of the Fund as of February 24, 2000.
Name and Address Percentage
- ---------------- ----------
Sutton Place Associates 99.50
One Embarcedero Center, Suite 1050
San Francisco, CA 94111
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 Funds'
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 Funds will be kept informed of their investments in the Funds
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.
<PAGE>
Performance Information
From time to time performance information for a 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 a 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 a 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."
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 a Fund will not be
included in performance calculations; such fees, if charged, will reduce the
actual performance from that quoted.
Custodian. Brown Brothers Harriman & Co. is each Fund's custodian. Its principal
business address is 40 Water Street, Boston, Massachusetts 02109. Brown Brothers
is responsible for the custody of each Fund's assets and, as foreign custody
manager, will oversee the custody of any Fund assets held outside the United
States. Brown Brothers Harriman & Co. takes no part in the decisions relating to
the purchase or sale of the Company's portfolio securities.
<PAGE>
Legal Counsel. Legal matters for the Company are handled by Dechert Price &
Rhoads, 1775 Eye Street, N.W., Washington, D.C. 20006.
Independent Public Accountants. Arthur Andersen, LLP, Spear Street Tower, 1
Market, Suite 1100, San Francisco, California 94105-3601, acts as independent
auditors for the Company.
FINANCIAL STATEMENTS
Unaudited financial statements relating to the Funds will be prepared
semi-annually and distributed to shareholders. The financial statements of the
Funds appearing in the Annual Report to Shareholders for those funds for the
year ended December 31, 1999 have been audited by Arthur Andersen LLP,
independent public accountants. Such financial statements are incorporated
herein by reference.
<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.
<PAGE>
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
<PAGE>
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 23. EXHIBITS
(a)(1) Articles of Incorporation(1)
(2) Articles Supplementary dated August 14, 1998(4)
(3) Articles Supplementary dated April 30, 1999(5)
(b) By-Laws(1)
(c) Not Applicable
(d)(1) Form of Amended Investment Management Agreement between the
Company and Webster Investment Management LLC(5)
(2) Form of Amended and Restated Investment Management Agreement
(3) Form of Investment Sub-Advisory Agreement between Hansberger
Global Investors, Inc., the Company, and Webster Investment
Management Company LLC on behalf of the Hansberger International
Growth Fund
(4) Form of Investment Sub-Advisory Agreement between Garzarelli
Investment Management, LLC, the Company and Webster Investment
Management LLC on behalf of the Garzarelli U.S. Equity Fund
(5) Form of Investment Sub-Advisory Agreement between Hoover Capital
Management, LLC, the Company and Webster Investment Management
Company, LLC on behalf of the Hoover Small Cap Equity Fund (3)
(6) Form of Investment Sub-Advisory Agreement between Uniplan, Inc.,
the Company and Webster Investment Management Company, LLC on
behalf of the Uniplan Real Estate Investment Fund. (5)
(e)(1) Form of Distribution Agreement(1)
(2) Amendment to Distribution Agreement dated August, 1998(3)
(3) Form of Amendment to Distribution Agreement dated April 30,
1999 (5)
(f) Not Applicable
(g)(1) Form of Custodian Agreement (2)
(2) Amendment to Custodian Agreement dated March 2, 1998 (2)
<PAGE>
(3) Amendment to Custodian Agreement dated August, 1998 (3)
(4) Form of Amendment to Custodian Agreement dated April 30, 1999(5)
(5) Form of Foreign Custody Manager Delegation Agreement (2)
(h)(1) Form of Transfer Agency Services Agreement (2)
(2) Amendment to Form of Transfer Agency and Service Agreement
dated August, 1998 (3)
(3) Amendment to Transfer Agency and Services Agreement
dated August, 1998 (3)
(4) Form of Administration Agreement (2)
(5) Amendment to Form of Administration Agreement dated
August, 1998 (3)
(6) Form of Amendment to Administration Agreement dated
April 30, 1999 (5)
(7) Form of Administrative Agreement Between Webster
Investment Management and Garzarelli Asset Management
(8)
(a) Expense Waiver Agreements (5)
(b) Amended and Restated Expense Limitation Agreement for the
U.S. Equity Fund
(c) Amended and Restated Expense Limitation Agreement For the
International Equity Fund
(d) Amended and Restated Expense Limitation Agreement for
Hoover Small Cap Equity Fund
(e) Amended and Restated Expense Limitation Agreement for
Uniplan Real Estate Investment Fund
(9) (a) Shareholder Services Plan for Hoover Small Cap Equity Fund
Investor Class, Hansberger International Growth Fund,
Garzarelli U.S. Equity Fund and Uniplan Real Estate
Investment Fund.
(b) Shareholder Services Plan for Hoover Small Cap Equity Fund
Institutional Class.
(c) Amended and Restated Shareholder Services Plan.
(i) Legal Opinion of Dechert Price & Rhoads
(j) Consent of Independent Accountants
(k) Not Applicable
(l) Initial Subscription Documents (5)
<PAGE>
(m) Rule 12b-1 Plan (5)
(n) Rule 18f-3 Plan
(1) Filed in Registrant's initial Registration Statement on October 7, 1997 and
incorporated by reference herein.
(2) Filed in Registrant's Pre-Effective Amendment No. 2 on February 24, 1998
and incorporated by reference herein.
(3) Filed in the Registrant's Post-Effective Amendment No. 6 on August 10, 1998
and incorporated by reference herein.
(4) Filed in Registrant's Post-Effective Amendment No. 8 on September 18, 1998
and incorporated by reference herein.
(5) Filed in Registrant's Post-Effective Amendment No. 12 on April 23, 1999 and
incorporated by reference herein.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
-------------------------- --------------------------- -----------
Hansberger International Fox & Co. [98.89%]
Growth Fund P.O. Box 976
New York, NY 01268
-------------------------- --------------------------- -----------
Hoover Small Cap Charles Schwab & Co. [61.76%]
Equity Fund 101 Montgomery Street
San Francisco, CA 94104
Fox & Co.
P.O. Box 976 [26.02%]
New York, NY 01268
Muir & Co.
c/o Frost National Bank [5.46%]
P.O. Box 2479
San Antonio, TX 78298
-------------------------- --------------------------- -----------
Garzarelli U.S. Fox & Co. [99.79%]
Equity Fund P.O. Box 976
New York, NY 01268
-------------------------- --------------------------- -----------
<PAGE>
ITEM 25. INDEMNIFICATION
Section 2-418 of the General Corporation Law of the State of Maryland,
Article VII of the Company's Articles of Incorporation, and Article VI of the
Company's Bylaws 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 Registration 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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information as to the directors and officers of the investment adviser
and the sub-advisers, together with information as to any other business,
professions, vocation or employment of a substantial nature engaged in by the
directors and officers of the investment adviser and sub-advisers 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 27. PRINCIPAL UNDERWRITER
(a) Not Applicable
(b) Not Applicable
(c) Not Applicable
ITEM 28. 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 PFPC, Inc. whose principal business
address is 53 State Street, Boston, Massachusetts 02109.
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
<PAGE>
ITEM 30. UNDERTAKINGS
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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 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 the State of California, on
this 29th day of February, 2000.
FORWARD FUNDS, INC.
By: /s/ RONALD PELOSI
--------------------------
Ronald Pelosi,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
SIGNATURE TITLE DATE
/s/ Haig G. Mardikian Chairman February 29, 2000
- ----------------------
Haig G. Mardikian
/s/ Leo T. McCarthy Director February 29, 2000
- ----------------------
Leo T. McCarthy
/s/ Ronald Pelosi Director, President, Treasurer February 29, 2000
- ---------------------- (Principal Executive Officer)
Ronald Pelosi
<PAGE>
FORWARD FUNDS
EXHIBIT INDEX
Exhibit No. Exhibit Page
(d)(2) Form of Amended and Restated Investment Management Agreement
(d)(3) Form of Forward Funds, Inc. Investment Sub-Advisory Agreement
(d)(4) Form of Forward Funds, Inc. Investment Sub-Advisory Agreement
(h)(7) Form of Administration Agreement
(h)8(b) Form of Amended and Restated Expense Limitation Agreement
(h)8(c) Amended and Restated Expense Limitation Agreement (The
International Equity Fund)
(h)8(d) Amended and Restated Expense Limitation Agreement
(Hoover Small Cap Equity Fund)
(h)8(e) Amended and Restated Expense Limitation Agreement
(UniPlan Real Estate Investment Fund)
(h)9(a) Shareholder Services Plan
(Hoover Small Cap Equity Fund Investor class, Hansberger
International Growth Fund, Garzarelli U.S. Equity
Fund and UniPlan Real Estate Investment Fund)
(h)9(b) Shareholder Services Plan (Hoover Institutional Class)
(h)9(c) Amended and Restated Shareholder Services Plan
(i) Legal Opinion of Dechert Price & Rhoads
(j) Consent of Independent Accountants
FORWARD FUNDS, INC.
AMENDED AND RESTATED INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, Effective as of April 30, 1999, between Webster Investment
Management Company LLC ("Webster" or the "Investment Manager") and Forward
Funds, Inc. (the "Corporation") on behalf of the series of the Corporation
listed on Exhibit A (the "Funds").
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
Funds are series of the Corporation; and
WHEREAS, the Corporation retained the Investment Manager to render
investment advisory services to the Equity Fund, International Equity Fund,
Global Bond Fund, Global Asset Allocation Fund and Small Capitalization Stock
Fund with regard to these Funds' investments of their assets (the "Portfolios")
as further described in the Corporation's registration statement on Form N-1A
(the "Registration Statement"), pursuant to an Investment Management Agreement
dated September ___, 1998; and
WHEREAS, the Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended ("Advisers Act"); and
WHEREAS, the Corporation wishes to amend the Investment Management
Agreement to reflect the addition of a new Fund to Exhibit A and certain name
changes to the Funds;
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Corporation and the Investment
Manager as follows:
1. Appointment. The Investment Manager is hereby appointed to act as
investment adviser to the Funds 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 Funds with regard to the Portfolios
in accordance with the Funds' investment objectives, policies and limitations as
stated in the Funds' 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 Funds with regard to the Portfolios, including, but not
limited to, the selection and management of investment sub-advisers for the
Funds; (c) place orders to purchase and sell investments in the Portfolios for
the Funds; (d) furnish to the Funds the services of its employees and agents in
the management and conduct of the corporate business and affairs of the Funds;
(e) if requested, provide the services of its officers as administrative
executives of the Funds 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 1940 Act, subject in each case to their individual consent to
serve and to applicable legal limitations; and (f) provide office space,
secretarial and clerical services and wire and telephone services (not including
toll charges, which will be reimbursed by the Funds), and monitor and review
Fund contracted services and expenditures pursuant to the distribution plans of
the Funds.
In performing its investment management services to the Funds under the
terms of this Agreement, the Investment Manager will provide the Funds 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 Portfolios so that the Funds
will qualify, and continue to qualify, as regulated investment companies under
Subchapter M of the Code and regulations issued thereunder;
(c) place orders pursuant to its investment determinations for the
Funds in accordance with applicable policies expressed in the Funds' 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 whatever statistical information the
Corporation may reasonably request with respect to the Portfolios. In addition,
the Investment Manager will keep the Corporation and the Directors informed of
developments materially affecting the Portfolios 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"), and the Corporation,
promptly upon their request, such copies of its investment records and ledgers
with respect to the Portfolios as may be required to assist the Administrator
and the Corporation in their compliance with applicable laws and regulations.
The Investment Manager will furnish the Directors with such periodic and special
reports regarding the Funds as they may reasonably request;
(f) meet quarterly with the Corporation's Board of Directors to explain
its investment management activities, and any reports related to the Portfolios
as may reasonably be requested by 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 Funds, 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 Portfolios, 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. Investment Guidelines. The Corporation shall supply the Investment
Manager with such information as the Investment Manager shall reasonably require
concerning the Funds' investment policies, restrictions, limitations, tax
position, liquidity requirements and other information useful in managing the
Portfolios.
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 Funds, 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 Funds 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 Funds, provided that this
limitation shall not prevent the Investment Manager from utilizing the services
of a securities broker which is a parent, subsidiary or related firm, provided
such broker effects transactions on a "cost only" or "nonprofit" basis to itself
and provides competitive execution. Unless otherwise directed by the Corporation
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 the
amounts listed opposite the respective Fund on Exhibit A. Fees shall be computed
and accrued daily and paid monthly based on the average daily net asset value of
shares of the Funds as determined according to the manner provided in the
then-current prospectus of the Funds. The Investment Manager shall be
responsible for compensating any investment sub-advisers employed by the Funds.
6. Fees and Expenses. The Investment Manager shall not be required to
pay any expenses of the Funds 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 Funds: organization and certain offering expenses
of the Funds (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 of the Funds' 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 Funds' Administrator or of any custodian, subcustodian, transfer
agent, registrar, or dividend disbursing agent of the Funds; payments to the
Administrator for maintaining the Funds' 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 Funds; expenses relating to investor and public relations;
expenses of registering and qualifying shares of the Funds for sale; freight,
insurance and other charges in connection with the shipment of the Funds'
portfolio securities; brokerage commissions or other costs of acquiring or
disposing of any portfolio securities or other assets of the Funds, or of
entering into other transactions or engaging in any investment practices with
respect to the Funds; 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 Funds'
businesses) 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 Funds, 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 Funds 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. 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 Funds are being conducted in accordance with applicable laws and
regulations.
8. Aggregation of Orders. Provided the investment objectives, policies
and restrictions of the Funds are adhered to, the Corporation agrees that the
Investment Manager may aggregate sales and purchase orders of securities held in
the Funds 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 respective 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 Funds by the Investment Manager
represents the Investment Manager's evaluation that the Funds are 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 Funds 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 Funds) 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 Funds 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 Funds, it is understood that in light of its fiduciary duty to
the Funds, such transactions will be executed on a basis that is fair and
equitable to the Funds. In connection with purchases or sales of portfolio
securities for the account of the Funds, 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 Funds, the Investment Manager shall act
solely as investment counsel for such clients and not in any way on behalf of
the Corporation or the Funds.
11. Duration and Termination. This Agreement shall continue with
respect to each of the Funds, other than the Real Estate Investment Fund, until
September __, 2000, and with the Real Estate Investment Fund until
_________________, 2001, 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 a Fund's outstanding voting securities (as defined in the
1940 Act), provided that in either event the continuance is also approved by a
majority of the Directors who are not parties to this 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 with respect to a Fund upon the vote of a majority of the
Directors or by vote of the majority of that 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 Funds
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.
12. Amendments. This Agreement may be amended at any time but only by
the mutual agreement of the parties.
13. 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 Portfolios. 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 Funds' shareholders.
14. Notices. Any written notice required by or pertaining to this
Agreement shall be personally delivered to the party for whom it is intended, at
the address stated below, or shall be sent to such party by prepaid first class
mail or facsimile.
If to the Corporation:
Forward Funds, Inc.
433 California Street, Suite 1010
San Francisco, CA 94104
If to the Investment Manager:
Webster Investment Management Co., LLC
433 California Street, Suite 1010
San Francisco, CA 94104
15. Confidential Information. The Investment Manager shall maintain the
strictest confidence regarding the business affairs of the Funds. 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 Corporation a copy of Part II of its Form ADV, as
revised, on file with the Securities and Exchange Commission. 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 Funds.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of April 30, 1999.
FORWARD FUNDS, INC.
By: _____________________________
President
WEBSTER INVESTMENT
MANAGEMENT CO., LLC
By: _____________________________
Name:
Title:
<PAGE>
EXHIBIT A
Name of Fund Advisory Fee
U.S. Equity Fund:
0.80% for first $100 million of assets under
management; 0.725% for next $400 million of
assets under management; 0.65% on assets
over $500 million
Global Bond Fund:
0.60% of assets under management less than
$200 million; and 0.55% of assets under
management over $200 million
Global Asset Allocation Fund:
0.05% of average daily net assets
International Equity Fund:
0.85% for first $50 million of assets under
management; 0.75% for next $50 million of
assets under management; 0.65% for the next
$150 million of assets under management;
0.60% for the next $250 million of assets
under management; 0.55% on assets over $500
million
Small Capitalization Equity Fund:
1.05% of average daily net assets
Real Estate Investment Fund:
1.00% of the first $100 million of assets
under management; 0.85% of the next $400
million of assets under management; and
0.70% on assets over $500 million
FORM OF
FORWARD FUNDS, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT, effective as of ______ 2000, among Hansberger Global
Investors, Inc. (the "Sub-Adviser"), Forward Funds, Inc. (the "Company"), and
Webster Investment Management Company, LLC (the "Adviser") on behalf of the
Hansberger International Growth Fund (the "Fund"), a series of the Company.
WHEREAS, the Company is a Maryland corporation of the series type
organized under Articles of Incorporation dated October 3, 1997 (the "Articles")
and is registered under the Investment Company Act of 1940, as amended (the
"1940 Act") as an open-end, diversified management investment company, and the
Fund is a series of the Company; and
WHEREAS, the Adviser has been retained by the Company to provide
investment advisory services to the Fund with regard to the Fund's investments
as further described in the Company's registration statement on Form N-1A (the
"Registration Statement") and pursuant to an Investment Management Agreement
dated August 8, 1998 ("Investment Management Agreement"); and
WHEREAS, the Fund's Board of Directors, including a majority of the
directors who are not "interested persons," as defined in the 1940 Act, and the
Fund's stockholders have approved the appointment of the Sub-Adviser to perform
certain investment advisory services for the Company, on behalf of the Fund
pursuant to this Sub-Advisory Agreement and as described in the Registration
Statement and the Sub-Adviser is willing to perform such services for the Fund;
and
WHEREAS, the Sub-Adviser is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed among the Adviser, the Company and the
Sub-Adviser as follows:
1. Appointment. The Adviser hereby appoints the Sub-Adviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Sub-Advisory Agreement. The Sub-Adviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. Investment Advisory Duties. Subject to the supervision of the Board of
Directors of the Fund and the Adviser, the Sub-Adviser will, in coordination
with the Adviser, (a) provide a program of continuous investment management for
the Fund in accordance with the Fund's investment objectives, policies and
limitations as stated in the Fund's Prospectus and Statement of Additional
Information included as part of the Fund's Registration Statement filed with the
Securities and Exchange Commission, as they may be amended from time to time,
copies of which shall be provided to the Sub-Adviser by the Adviser; (b) make
investment decisions for the Fund; and (c) place orders to purchase and sell
securities for the Fund.
<PAGE>
In performing its investment management services to the Fund under the
terms of this Agreement, the Sub-Adviser will provide the Fund with ongoing
investment guidance and policy direction.
The Sub-Adviser's duties shall not include and the Sub-Adviser shall
have no responsibility for the following: tax reporting; securities lending and
cash collateral; allocation, diversification, management and investment of the
overall assets of the Fund; management and investment of the liquidity account;
and management, investment, and compliance with respect to any assets of the
fund not allocated by the Board of Directors to the Sub-Adviser.
The Sub-Adviser further agrees that, in performing its duties hereunder, it
will:
(a) comply with the 1940 Act and all rules and regulations thereunder,
the Advisers Act, the U.S. Internal Revenue Code of 1986, as amended (the
"Code") and all other applicable federal and state laws and regulations, and
with any applicable procedures adopted by the Directors, as they may be amended
from time to time, copies of which shall be provided to the Sub-Adviser by the
Adviser;
(b) use reasonable efforts to manage the Fund so that it will qualify,
and continue to qualify, as a regulated investment company under Subchapter M of
the Code and regulations issued thereunder; provided, however, the Sub-Adviser
shall not be responsible for the tax effect or decisions made by any other
person;
(c) place orders pursuant to its investment determinations for the
Fund, in accordance with applicable policies expressed in the Fund's Prospectus
and/or Statement of Additional Information established through written
guidelines determined by the Fund and provided to the Sub-Adviser, and in
accordance with applicable legal requirements;
(d) furnish to the Company, the Adviser whatever statistical
information the Company or the Adviser may reasonably request with respect to
the Fund's assets or contemplated investments. In addition, the Sub-Adviser will
keep the Company, the Adviser and the Directors informed of developments
materially affecting the Fund's portfolio and shall, on the Sub-Adviser's own
initiative, furnish to the Fund from time to time whatever information the
Sub-Adviser believes appropriate for this purpose;
(e) make available to the Fund's administrator, PFPC Inc. (the
"Administrator"), the Adviser and the Company, promptly upon their request, such
copies of its investment records and ledgers with respect to the Fund as may be
required to assist the Adviser, the Administrator and the Company in their
compliance with applicable laws and regulations. The Sub-Adviser will furnish
the Directors, the Administrator, the Adviser and the Company with such periodic
and special reports regarding the Fund as they may reasonably request;
(f) meet quarterly with the Adviser and the Company's Board of
Directors to explain its investment management activities, and any reports
related to the Fund as may reasonably be requested by the Adviser and/or the
Company;
<PAGE>
(g) immediately notify the Adviser and the Fund in the event that the
Sub-Adviser or any of its affiliates: (1) becomes aware that it is subject to a
statutory disqualification that prevents the Sub-Adviser from serving as an
investment adviser pursuant to this Sub-Advisory Agreement; or (2) becomes aware
that it is the subject of an administrative proceeding or enforcement action by
the Securities and Exchange Commission ("SEC") or other regulatory authority.
The Sub-Adviser further agrees to notify the Fund and the Adviser immediately of
any material fact known to the Sub-Adviser respecting or relating to the
Sub-Adviser that is not contained in the Fund's Registration Statement, or any
amendment or supplement thereto, but that is required to be disclosed therein,
and of any statement contained therein that becomes untrue in any material
respect; and
(h) in making investment decisions for the Fund, use no inside
information that may be in its possession or in the possession of any of its
affiliates, nor will the Sub-Adviser seek to obtain any such information.
3. Futures and Options. The Sub-Adviser's investment authority shall
include the authority to purchase, sell, cover open positions, and generally to
deal in financial futures contracts and options thereon.
The Sub-Adviser will: (i) open and maintain brokerage accounts for
financial futures and options (such accounts hereinafter referred to as
"Brokerage Accounts") on behalf of and in the name of the Fund; and (ii) execute
for and on behalf of the Brokerage Accounts, standard customer agreements with a
broker or brokers. The Sub-Adviser may, using such of the securities and other
property in the Brokerage Accounts as the Sub-Adviser deems necessary or
desirable, direct the custodian to deposit on behalf of the Fund, original and
maintenance brokerage deposits and otherwise direct payments of cash, cash
equivalents and securities and other property into such brokerage accounts and
to such brokers as the Sub-Adviser deems desirable or appropriate.
PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION
(THE "COMMISSION") IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE CLIENTS,
THIS BROCHURE OR ACCOUNT DOCUMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED
WITH THE COMMISSION. THE COMMISSION DOES NOT PASS UPON THE MERITS OF
PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY
TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE COMMISSION HAS NOT REVIEWED OR
APPROVED THIS TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT DOCUMENT.
The Fund represents and warrants that it is a "qualified eligible
client" within the meaning of CFTC Regulations Section 4.7 and, as such,
consents to treat the Fund in accordance with the exemption contained in CFTC
Regulations Section 4.7(b).
4. Investment Guidelines. In addition to the information to be provided
to the Sub-Adviser under Section 2 hereof, the Company or the Adviser shall
supply the Sub-Adviser with such other information as the Sub-Adviser shall
reasonably require concerning the Fund's investment policies, restrictions,
limitations, tax position, liquidity requirements and other information useful
in managing the Fund's investments.
<PAGE>
5. Representations, Warranties and Covenants of the Company, Adviser
and Sub-Adviser.
The Company represents, warrants and covenants that (i) a copy of its
Registration Statement together with all amendments thereto, is on file in the
office of the U.S. Securities and Exchange Commission, (ii) the appointment of
the Adviser has been duly authorized, (iii) the appointment of the Sub-Adviser
has been duly authorized, and (iv) they have acted and will continue to act in
conformity with all applicable laws.
The Adviser represents, warrants and covenants that (i) it is
authorized to perform the services herein, (ii) the appointment of the
Sub-Adviser has been duly authorized, and (iii) it has and will continue to act
in conformity with all applicable laws.
The Sub-Adviser represents and warrants that it is registered as an
investment adviser with the U.S. Securities and Exchange Commission.
6. Use of Securities Brokers and Dealers. Purchase and sale orders will
usually be placed with brokers which are selected by the Sub-Adviser as able to
achieve "best execution" of such orders. "Best execution" shall mean prompt and
reliable execution at the most favorable securities price, taking into account
the other provisions hereinafter set forth. Whenever the Sub-Adviser places
orders, or directs the placement of orders, for the purchase or sale of
portfolio securities on behalf of the Fund, in selecting brokers or dealers to
execute such orders, the Sub-Adviser is expressly authorized to consider the
fact that a broker or dealer has furnished statistical, research or other
information or services which enhance the Sub-Adviser's research and portfolio
management capability generally. It is further understood in accordance with
Section 28(e) of the Securities Exchange Act of 1934, as amended, that the
Sub-Adviser may negotiate with and assign to a broker a commission which may
exceed the commission which another broker would have charged for effecting the
transaction if the Sub-Adviser determines in good faith that the amount of
commission charged was reasonable in relation to the value of brokerage and/or
research services (as defined in Section 28(e)) provided by such broker, viewed
in terms either of the Fund or the Sub-Adviser's overall responsibilities to the
Sub-Adviser's discretionary accounts.
Neither the Sub-Adviser nor any parent, subsidiary or related firm
shall act as a securities broker with respect to any purchases or sales of
securities which may be made on behalf of the Fund. Unless otherwise directed by
the Company or the Adviser in writing, the Sub-Adviser may utilize the service
of whatever independent securities brokerage firm or firms it deems appropriate
to the extent that such firms are competitive with respect to price of services
and execution.
7. Compensation. For its services specified in this Agreement, the
Company agrees to pay annual fees to the Sub-Adviser equal to 0.50% of Fund
assets managed by the Sub-Adviser. Fees shall be computed and accrued daily and
paid monthly based on the average daily net asset value of the Fund's shares as
determined according to the manner provided in the then-current prospectus of
the Fund.
8. Most Favored Customer. It is the intent of the parties to this
Agreement that the initial fees to be charged to the Fund by the Sub-Adviser
with respect to any U.S. open-end investment company having an international
equity growth mandate shall be the same or lower than those fees charged by the
Sub-Adviser on other similar U.S. open-end investment companies of similar size
having an international equity growth mandate (managed by the Hansberger
International Growth Team) to which the Sub-Adviser provides investment
sub-advisory services at the time the relationship is established and which
investment sub-advisory agreements are entered into by the Sub-Adviser after the
date hereof. Any such fees offered by or agreed upon by the Sub-Adviser shall be
irrevocably offered in writing to the Adviser by the Sub-Adviser within ten (10)
days of the offer of such sub-advisory fees by the Sub-Adviser. The terms and
conditions of which fees, if accepted by the Adviser in writing within thirty
(30) days of such offer, shall be deemed to constitute an amendment of the fees
charged by the Sub-Adviser to the Fund pursuant to this Agreement.
<PAGE>
9. Fees and Expenses. The Sub-Adviser shall not be required to pay any
expenses of the Fund other than those specifically allocated to the Sub-Adviser
in this Section 9. In particular, but without limiting the generality of the
foregoing, the Sub-Adviser shall not be responsible for the following expenses
of the Fund: organization and certain offering expenses of the Fund (including
out-of-pocket expenses, but not including the Sub-Adviser's overhead and
employee costs); fees payable to the Sub-Adviser and to any other Fund advisers
or consultants; legal expenses; auditing and accounting expenses; interest
expenses; taxes and governmental fees; fees, dues and expenses incurred by or
with respect to the Fund in connection with membership in investment company
trade organizations; cost of insurance relating to fidelity coverage for the
Company's officers and employees; fees and expenses of the Fund's Administrator
or of any custodian, subcustodian, transfer agent, registrar, or dividend
disbursing agent of the Fund; payments to the Administrator for maintaining the
Fund's financial books and records and calculating its daily net asset value;
other payments for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates; other expenses in connection with the issuance, offering,
distribution or sale of securities issued by the Fund; expenses relating to
investor and public relations; expenses of registering and qualifying shares of
the Fund for sale; freight, insurance and other charges in connection with the
shipment of the Fund's portfolio securities; brokerage commissions or other
costs of acquiring or disposing of any portfolio securities or other assets of
the Fund, or of entering into other transactions or engaging in any investment
practices with respect to the Fund; expenses of printing and distributing
Prospectuses, Statements of Additional Information, reports, notices and
dividends to stockholders; costs of stationery or other office supplies; any
litigation expenses; costs of stockholders' and other meetings; the compensation
and all expenses (specifically including travel expenses relating to the Fund's
business) of officers, directors and employees of the Company who are not
interested persons of the Investment Manager; and travel expenses (or an
appropriate portion thereof) of officers or directors of the Company who are
officers, directors or employees of the Investment Manager to the extent that
such expenses relate to attendance at meetings of the Board of Directors of the
Company with respect to matters concerning the Fund, or any committees thereof
or advisers thereto.
10. Books and Records. The Sub-Adviser agrees to maintain such books
and records with respect to its services to the Fund as are required by Section
31 under the 1940 Act, and rules adopted thereunder, and by other applicable
legal provisions, and to preserve such records for the periods and in the manner
required by that Section, and those rules and legal provisions. The Sub-Adviser
also agrees that records it maintains and preserves pursuant to Rules 31a-1 and
Rule 31a-2 under the 1940 Act and otherwise in connection with its services
hereunder are the property of the Fund and will be surrendered promptly to the
Company upon its request except that the Sub-Adviser may retain copies of such
documents as may be required by law. The Sub-Adviser further agrees that it will
furnish to regulatory authorities having the requisite authority any information
or reports in connection with its services hereunder which may be requested in
order to determine whether the operations of the Fund are being conducted in
accordance with applicable laws and regulations.
<PAGE>
11. Aggregation of Orders. Provided the investment objectives, policies
and restrictions of the Fund are adhered to, the Fund agrees that the
Sub-Adviser may aggregate sales and purchase orders of securities held in the
Fund with similar orders being made simultaneously for other accounts managed by
the Sub-Adviser or with accounts of the affiliates of the Sub-Adviser, if in the
Sub-Adviser's reasonable judgment such aggregation shall result in an overall
economic benefit to the Fund taking into consideration the advantageous selling
or purchase price, brokerage commission and other expenses. The Fund
acknowledges that the determination of such economic benefit to the Fund by the
Sub-Adviser represents the Sub-Adviser's evaluation that the Fund is benefited
by relatively better purchase or sales prices, lower commission expenses and
beneficial timing of transactions or a combination of these and other factors.
12. Liability.
Neither the Sub-Adviser nor its officers, directors, employees, affiliates,
agents or controlling persons shall be liable to the Company, the Fund, its
shareholders and/or any other person for the acts, omissions, errors of judgment
and/or mistakes of law of any other fiduciary and/or person with respect to the
Fund.
Neither the Sub-Adviser nor its officers, directors, employees, affiliates,
agents or controlling persons or assigns shall be liable for any act, omission,
error of judgment or mistake of law and/or for any loss suffered by the Company,
the Fund, its shareholders and/or any other person in connection with the
matters to which this Agreement relates; provided that no provision of this
Agreement shall be deemed to protect the Sub-Adviser against any liability to
the Company, the Fund and/or its shareholders which it might otherwise be
subject by reason of any willful misfeasance, bad faith or gross negligence in
the performance of its duties or the reckless disregard of its obligations and
duties under this Agreement.
The Company on behalf of the Fund, hereby agrees to indemnify and hold harmless
the Sub-Adviser, its directors, officers and employees and agents and each
person, if any, who controls the Sub-Adviser (collectively, the "Indemnified
Parties") against any and all losses, claims damages or liabilities (including
reasonable attorneys fees and expenses), joint or several, relating to the
Company or Fund, to which any such Indemnified Party may become subject under
the Securities Act of 1933, as amended (the "1933 Act"), the 1934 Act, the
Investment Advisers Act of 1940, as amended (the "Advisers Act") or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (1) any act, omission, error and/or
mistake of any other fiduciary and/or any other person; or (2) any untrue
statement or alleged untrue statement of a material fact or any omission or
alleged omission to state a material fact required to be stated or necessary to
make the statements made not misleading in (a) the Registration Statement, the
prospectus or any other filing, (b) any advertisement or sales literature
authorized by the Company for use in the offer and sale of shares of the Fund,
or (c) any application or other document filed in connection with the
qualification of the Company or shares of the Fund under the Blue Sky or
securities laws of any jurisdiction, except insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any such untrue statement or omission or alleged untrue statement or
omission (i) in a document prepared by the Sub-Adviser, or (ii) made in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Sub-Adviser pertaining to or originating with the Sub-Adviser for use in
connection with any document referred to in clauses (a), (b) or (c).
<PAGE>
It is understood, however, that nothing in this paragraph X shall protect any
Indemnified Party against, or entitle any Indemnified Party to, indemnification
against any liability to the Company, Fund and/or its shareholders to which such
Indemnified Party is subject, by reason of its willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of any reckless
disregard of its obligations and duties under this Agreement.
13. Services Not Exclusive. It is understood that the services of the
Sub-Adviser are not exclusive, and that nothing in this Agreement shall prevent
the Sub-Adviser from providing similar services to other investment advisory
clients, including but not by way of limitation, investment companies or to
other series of investment companies, including the Company (whether or not
their investment objectives and policies are similar to those of the Fund) or
from engaging in other activities, provided such other services and activities
do not, during the term of this Agreement, interfere in a material manner with
the Sub-Adviser's ability to meet its obligations to the Fund hereunder. When
the Sub-Adviser recommends the purchase or sale of a security for other
investment companies and other clients, and at the same time the Sub-Adviser
recommends the purchase or sale of the same security for the Fund, it is
understood that in light of its fiduciary duty to the Fund, such transactions
will be executed on a basis that is fair and equitable to the Fund. In
connection with purchases or sales of portfolio securities for the account of
the Fund, neither the Sub-Adviser nor any of its directors, officers or
employees shall act as a principal or agent or receive any commission. If the
Sub-Adviser provides any advice to its clients concerning the shares of the
Fund, the Sub-Adviser shall act solely as investment counsel for such clients
and not in any way on behalf of the Company or the Fund.
The Sub-Adviser provides investment advisory services to numerous other
investment advisory clients, including but not limited to other funds and may
give advice and take action which may differ from the timing or nature of action
taken by the Sub-Adviser with respect to the Fund. Nothing in this Agreement
shall impose upon the Sub-Adviser any obligations other than those imposed by
law to purchase, sell or recommend for purchase or sale, with respect to the
Fund, any security which the Sub-Adviser, or the shareholders, officers,
directors, employees or affiliates may purchase or sell for their own account or
for the account of any client.
14. Materials. The Adviser shall not publish or distribute or allow the
Fund to publish or distribute any advertising or promotional material regarding
the provision of investment advisory services by the Sub-Adviser pursuant to
this Agreement, without the prior written consent of the Sub-Adviser, which
consent shall not be unreasonably withheld or delayed. If the Sub-Adviser has
not notified the Adviser of its disapproval of sample materials within twenty
(20) days after its receipt thereof, such materials shall be deemed approved.
Materials substantially similar to materials approved on an earlier occasion
shall also be deemed approved. The Sub-Adviser will be provided with any
Registration Statements containing references or information with respect to the
Sub-Adviser prior to the filing of same with any regulatory authority and
afforded the opportunity to comment thereon.
<PAGE>
15. Duration and Termination. This Agreement shall continue until
_________, 2002, and thereafter shall continue automatically for successive
annual periods, provided such continuance is specifically approved at least
annually by (i) the Directors or (ii) a vote of a "majority" (as defined in the
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 Sub-Adviser; (b) by the Adviser at any time
without penalty, upon sixty (60) days' written notice to the Sub-Adviser or (c)
by the Sub-Adviser at any time without penalty, upon sixty (60) days' written
notice to the Company. This Agreement will also terminate automatically in the
event of its assignment (as defined in the 1940 Act). Any termination of this
Agreement will be without prejudice to the completion of transactions already
initiated by the Sub-Adviser on behalf of the Fund at the time of such
termination. The Sub-Adviser shall take all steps reasonably necessary after
such termination to complete any such transactions and is hereby authorized to
take such steps.
16. Amendments. This Agreement may be amended at any time but only by
the mutual agreement of the parties.
17. Proxies. Unless the Company gives written instructions to the
contrary, the Sub-Adviser shall vote all proxies solicited by or with respect to
the issuers of securities invested in by the Fund. The Sub-Adviser shall
maintain a record of how the Sub-Adviser voted and such record shall be
available to the Company upon its request. The Sub-Adviser shall use its best
good faith judgment to vote such proxies in a manner which best serves the
interests of the Fund's shareholders.
18. Notices. Any written notice required by or pertaining to this
Agreement shall be personally delivered to the party for whom it is intended, at
the address stated below, or shall be sent to such party by prepaid first class
mail or facsimile.
If to the Company:
Forward Funds, Inc.
433 California Street, Suite 1010
San Francisco, CA 94104
If to the Sub-Adviser:
Hansberger Global Investors, Inc.
515 East Los Olas Boulevard, Suite 1300
Fort Lauderdale, FL 33301
If to the Adviser:
Webster Investment Management Co., LLC
433 California Street, Suite 1010
San Francisco, CA 94104
<PAGE>
19. Confidential Information. The Sub-Adviser shall maintain the
strictest confidence regarding the business affairs of the Fund. Written reports
furnished by the Sub-Adviser to the Company and the Adviser shall be treated by
all of the parties as confidential and for the exclusive use and benefit of the
Company and the Fund except as disclosure may be required by applicable law.
20. Name Reservation. The Adviser acknowledges and agrees that the
Sub-Adviser has property rights relating to the use of the terms "Hansberger
Global Investors", "HGI" and "Hansberger" (the "Hansberger Name") and has
permitted the use of the Hansberger Name by the Fund and its International
Equity Fund series. The Adviser agrees that, unless otherwise authorized by the
Sub-Adviser: (i) it will use the term "Hansberger" only as a component of the
name of the Fund and for no other purposes; (ii) it will not purport to grant to
any third party any rights in any Hansberger Name; and (iii) the Sub-Adviser may
use or grant to others the right to use a Hansberger Name, or any abbreviation
thereof, as all or a portion of a corporate or business name or for any
commercial purpose, including a grant of such right to any other investment
company. Upon termination of this Agreement, the Adviser shall, at the request
of the Sub-Adviser, cease to use all Hansberger Names in any of its materials or
in any manner except with the consent of the Sub-Adviser, which shall not be
unreasonably withheld. In the event of any such request by the Sub-Adviser that
use by the Adviser of a Hansberger Name shall cease and in the absence of any
such consent, the Adviser shall cause its officers, directors and employees to
take any and all such actions which the Sub-Adviser may reasonably request to
effect such request.
21. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder.
(b) Concurrently with the execution of this Agreement, the Sub-Adviser
is delivering to the Adviser and the Company a copy of Part II of its Form ADV,
as revised, on file with the Securities and Exchange Commission. The Adviser and
the Company hereby acknowledge receipt of such copy.
(c) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(d) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected hereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(f) Nothing herein shall be construed as constituting the Sub-Adviser
as an agent of the Company or the Fund.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of _________, 2000.
FORWARD FUNDS, INC.
By:
President
Hansberger Global Investors, Inc.
By: ______________________________
Name:
Title:
WEBSTER INVESTMENT MANAGEMENT CO., LLC
By:
Name:
Title:
FORM OF
FORWARD FUNDS, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT, effective as of ______ 2000, among Garzarelli Investment
Management, LLC (the "Sub-Adviser"), Forward Funds, Inc. (the "Company"), and
Webster Investment Management Company, LLC (the "Adviser") on behalf of the
Garzarelli U.S. Equity Fund (the "Fund"), a series of the Company.
WHEREAS, the Company is a Maryland corporation of the series type
organized under Articles of Incorporation dated October 3, 1997 (the "Articles")
and is registered under the Investment Company Act of 1940, as amended (the
"1940 Act") as an open-end, diversified management investment company, and the
Fund is a series of the Company; and
WHEREAS, the Adviser has been retained by the Company to provide
investment advisory services to the Fund with regard to the Fund's investments
as further described in the Company's registration statement on Form N-1A (the
"Registration Statement") and pursuant to an Investment Management Agreement
dated August 8, 1998 ("Investment Management Agreement"); and
WHEREAS, the Fund's Board of Directors, including a majority of the
directors who are not "interested persons," as defined in the 1940 Act, and the
Fund's stockholders have approved the appointment of the Sub-Adviser to perform
certain investment advisory services for the Company, on behalf of the Fund
pursuant to this Sub-Advisory Agreement and as described in the Registration
Statement and the Sub-Adviser is willing to perform such services for the Fund;
and
WHEREAS, the Sub-Adviser is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed among the Adviser, the Company and the
Sub-Adviser as follows:
1. Appointment. The Adviser hereby appoints the Sub-Adviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Sub-Advisory Agreement. The Sub-Adviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. Investment Advisory Duties. Subject to the supervision of the Board
of Directors of the Fund and the Adviser, the Sub-Adviser will, in coordination
with the Adviser, (a) provide a program of continuous investment management for
the Fund in accordance with the Fund's investment objectives, policies and
limitations as stated in the Fund's Prospectus and Statement of Additional
Information included as part of the Fund's Registration Statement filed with the
Securities and Exchange Commission, as they may be amended from time to time,
copies of which shall be provided to the Sub-Adviser by the Adviser; (b) make
investment decisions for the Fund; and (c) place orders to purchase and sell
securities for the Fund.
<PAGE>
In performing its investment management services to the Fund under the
terms of this Agreement, the Sub-Adviser will provide the Fund with ongoing
investment guidance and policy direction.
The Sub-Adviser's duties shall not include and the Sub-Adviser shall
have no responsibility for the following: tax reporting; securities lending and
cash collateral; allocation, diversification, management and investment of the
overall assets of the Fund; management and investment of the liquidity account;
and management, investment, and compliance with respect to any assets of the
fund not allocated by the Board of Directors to the Sub-Adviser.
The Sub-Adviser further agrees that, in performing its duties hereunder, it
will:
(a) comply with the 1940 Act and all rules and regulations thereunder,
the Advisers Act, the U.S. Internal Revenue Code of 1986, as amended (the
"Code") and all other applicable federal and state laws and regulations, and
with any applicable procedures adopted by the Directors, as they may be amended
from time to time, copies of which shall be provided to the Sub-Adviser by the
Adviser;
(b) use reasonable efforts to manage the Fund so that it will qualify,
and continue to qualify, as a regulated investment company under Subchapter M of
the Code and regulations issued thereunder; provided, however, the Sub-Adviser
shall not be responsible for the tax effect or decisions made by any other
person;
(c) place orders pursuant to its investment determinations for the
Fund, in accordance with applicable policies expressed in the Fund's Prospectus
and/or Statement of Additional Information established through written
guidelines determined by the Fund and provided to the Sub-Adviser, and in
accordance with applicable legal requirements;
(d) furnish to the Company, the Adviser whatever statistical
information the Company or the Adviser may reasonably request with respect to
the Fund's assets or contemplated investments. In addition, the Sub-Adviser will
keep the Company, the Adviser and the Directors informed of developments
materially affecting the Fund's portfolio and shall, on the Sub-Adviser's own
initiative, furnish to the Fund from time to time whatever information the
Sub-Adviser believes appropriate for this purpose;
(e) make available to the Fund's administrator, PFPC Inc. (the
"Administrator"), the Adviser and the Company, promptly upon their request, such
copies of its investment records and ledgers with respect to the Fund as may be
required to assist the Adviser, the Administrator and the Company in their
compliance with applicable laws and regulations. The Sub-Adviser will furnish
the Directors, the Administrator, the Adviser and the Company with such periodic
and special reports regarding the Fund as they may reasonably request;
(f) meet quarterly with the Adviser and the Company's Board of
Directors to explain its investment management activities, and any reports
related to the Fund as may reasonably be requested by the Adviser and/or the
Company;
(g) immediately notify the Adviser and the Fund in the event that the
Sub-Adviser or any of its affiliates: (1) becomes aware that it is subject to a
statutory disqualification that prevents the Sub-Adviser from serving as an
investment adviser pursuant to this Sub-Advisory Agreement; or (2) becomes aware
that it is the subject of an administrative proceeding or enforcement action by
the Securities and Exchange Commission ("SEC") or other regulatory authority.
The Sub-Adviser further agrees to notify the Fund and the Adviser immediately of
any material fact known to the Sub-Adviser respecting or relating to the
Sub-Adviser that is not contained in the Fund's Registration Statement, or any
amendment or supplement thereto, but that is required to be disclosed therein,
and of any statement contained therein that becomes untrue in any material
respect; and
<PAGE>
(h) in making investment decisions for the Fund, use no inside
information that may be in its possession or in the possession of any of its
affiliates, nor will the Sub-Adviser seek to obtain any such information.
3. Futures and Options. The Sub-Adviser's investment authority shall
include the authority to purchase, sell, cover open positions, and generally to
deal in financial futures contracts and options thereon.
The Sub-Adviser will: (i) open and maintain brokerage accounts for
financial futures and options (such accounts hereinafter referred to as
"Brokerage Accounts") on behalf of and in the name of the Fund; and (ii) execute
for and on behalf of the Brokerage Accounts, standard customer agreements with a
broker or brokers. The Sub-Adviser may, using such of the securities and other
property in the Brokerage Accounts as the Sub-Adviser deems necessary or
desirable, direct the custodian to deposit on behalf of the Fund, original and
maintenance brokerage deposits and otherwise direct payments of cash, cash
equivalents and securities and other property into such brokerage accounts and
to such brokers as the Sub-Adviser deems desirable or appropriate.
PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION
(THE "COMMISSION") IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE CLIENTS,
THIS BROCHURE OR ACCOUNT DOCUMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED
WITH THE COMMISSION. THE COMMISSION DOES NOT PASS UPON THE MERITS OF
PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY
TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE COMMISSION HAS NOT REVIEWED OR
APPROVED THIS TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT DOCUMENT.
The Fund represents and warrants that it is a "qualified eligible
client" within the meaning of CFTC Regulations Section 4.7 and, as such,
consents to treat the Fund in accordance with the exemption contained in CFTC
Regulations Section 4.7(b).
4. Investment Guidelines. In addition to the information to be provided
to the Sub-Adviser under Section 2 hereof, the Company or the Adviser shall
supply the Sub-Adviser with such other information as the Sub-Adviser shall
reasonably require concerning the Fund's investment policies, restrictions,
limitations, tax position, liquidity requirements and other information useful
in managing the Fund's investments.
<PAGE>
5. Use of Securities Brokers and Dealers. Purchase and sale orders will
usually be placed with brokers which are selected by the Sub-Adviser as able to
achieve "best execution" of such orders. "Best execution" shall mean prompt and
reliable execution at the most favorable securities price, taking into account
the other provisions hereinafter set forth. Whenever the Sub-Adviser places
orders, or directs the placement of orders, for the purchase or sale of
portfolio securities on behalf of the Fund, in selecting brokers or dealers to
execute such orders, the Sub-Adviser is expressly authorized to consider the
fact that a broker or dealer has furnished statistical, research or other
information or services which enhance the Sub-Adviser's research and portfolio
management capability generally. It is further understood in accordance with
Section 28(e) of the Securities Exchange Act of 1934, as amended, that the
Sub-Adviser may negotiate with and assign to a broker a commission which may
exceed the commission which another broker would have charged for effecting the
transaction if the Sub-Adviser determines in good faith that the amount of
commission charged was reasonable in relation to the value of brokerage and/or
research services (as defined in Section 28(e)) provided by such broker, viewed
in terms either of the Fund or the Sub-Adviser's overall responsibilities to the
Sub-Adviser's discretionary accounts.
Neither the Sub-Adviser nor any parent, subsidiary or related firm
shall act as a securities broker with respect to any purchases or sales of
securities which may be made on behalf of the Fund. Unless otherwise directed by
the Company or the Adviser in writing, the Sub-Adviser may utilize the service
of whatever independent securities brokerage firm or firms it deems appropriate
to the extent that such firms are competitive with respect to price of services
and execution.
6. Compensation. For its services specified in this Agreement, the
Company agrees to pay annual fees to the Sub-Adviser equal to 0.55% million of
the first $100 million of Fund assets managed by the Sub-Adviser, 0.50% on the
next $400 million and 0.45% of all assets above $500 million managed by the
Sub-Adviser. Fees shall be computed and accrued daily and paid monthly based on
the average daily net asset value of the Fund's shares as determined according
to the manner provided in the then-current prospectus of the Fund.
7. Most Favored Customer. It is the intent of the parties to this
Agreement that the services be provided to the Adviser on a "most-favored
customer" basis and all terms in this Agreement (including without limitation,
type and level of services provided, fees charged and staffing levels) shall be
interpreted and construed to effect such intent. Any term or condition that is
offered by the Sub-Adviser or agreed upon by the Sub-Adviser with any registered
investment company having a U.S. equity fund managed by the Sub-Adviser shall be
irrevocably offered in writing to the Adviser by the Sub-Adviser with ten (10)
days of the offer of such term or condition or agreement upon such term with
such Sub-Adviser. The terms and conditions of which offer, if accepted by the
Adviser in writing at any time after such offer, shall be deemed to constitute
an amendment of the terms and conditions of this Agreement.
8. Fees and Expenses. The Sub-Adviser shall not be required to pay any
expenses of the Fund other than those specifically allocated to the Sub-Adviser
in this section 8. In particular, but without limiting the generality of the
foregoing, the Sub-Adviser shall not be responsible for the following expenses
of the Fund: organization and certain offering expenses of the Fund (including
out-of-pocket expenses, but not including the Sub-Adviser's overhead and
employee costs); fees payable to the Sub-Adviser and to any other Fund advisers
or consultants; legal expenses; auditing and accounting expenses; interest
expenses; taxes and governmental fees; fees, dues and expenses incurred by or
with respect to the Fund in connection with membership in investment company
trade organizations; cost of insurance relating to fidelity coverage for the
Company's officers and employees; fees and expenses of the Fund's Administrator
or of any custodian, subcustodian, transfer agent, registrar, or dividend
<PAGE>
disbursing agent of the Fund; payments to the Administrator for maintaining the
Fund's financial books and records and calculating its daily net asset value;
other payments for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates; other expenses in connection with the issuance, offering,
distribution or sale of securities issued by the Fund; expenses relating to
investor and public relations; expenses of registering and qualifying shares of
the Fund for sale; freight, insurance and other charges in connection with the
shipment of the Fund's portfolio securities; brokerage commissions or other
costs of acquiring or disposing of any portfolio securities or other assets of
the Fund, or of entering into other transactions or engaging in any investment
practices with respect to the Fund; expenses of printing and distributing
Prospectuses, Statements of Additional Information, reports, notices and
dividends to stockholders; costs of stationery or other office supplies; any
litigation expenses; costs of stockholders' and other meetings; the compensation
and all expenses (specifically including travel expenses relating to the Fund's
business) of officers, directors and employees of the Company who are not
interested persons of the Investment Manager; and travel expenses (or an
appropriate portion thereof) of officers or directors of the Company who are
officers, directors or employees of the Investment Manager to the extent that
such expenses relate to attendance at meetings of the Board of Directors of the
Company with respect to matters concerning the Fund, or any committees thereof
or advisers thereto.
9. Books and Records. The Sub-Adviser agrees to maintain such books and
records with respect to its services to the Fund as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by that Section, and those rules and legal provisions. The Sub-Adviser
also agrees that records it maintains and preserves pursuant to Rules 31a-1 and
Rule 31a-2 under the 1940 Act and otherwise in connection with its services
hereunder are the property of the Fund and will be surrendered promptly to the
Company upon its request except that the Sub-Adviser may retain copies of such
documents as may be required by law. The Sub-Adviser further agrees that it will
furnish to regulatory authorities having the requisite authority any information
or reports in connection with its services hereunder which may be requested in
order to determine whether the operations of the Fund are being conducted in
accordance with applicable laws and regulations.
10. Aggregation of Orders. Provided the investment objectives, policies
and restrictions of the Fund are adhered to, the Fund agrees that the
Sub-Adviser may aggregate sales and purchase orders of securities held in the
Fund with similar orders being made simultaneously for other accounts managed by
the Sub-Adviser or with accounts of the affiliates of the Sub-Adviser, if in the
Sub-Adviser's reasonable judgment such aggregation shall result in an overall
economic benefit to the Fund taking into consideration the advantageous selling
or purchase price, brokerage commission and other expenses. The Fund
acknowledges that the determination of such economic benefit to the Fund by the
Sub-Adviser represents the Sub-Adviser's evaluation that the Fund is benefited
by relatively better purchase or sales prices, lower commission expenses and
beneficial timing of transactions or a combination of these and other factors.
<PAGE>
11. Liability.
Neither the Sub-Adviser nor its officers, directors, employees, affiliates,
agents or controlling persons shall be liable to the Company, the Fund, its
shareholders and/or any other person for the acts, omissions, errors of judgment
and/or mistakes of law of any other fiduciary and/or person with respect to the
Fund.
Neither the Sub-Adviser nor its officers, directors, employees, affiliates,
agents or controlling persons or assigns shall be liable for any act, omission,
error of judgment or mistake of law and/or for any loss suffered by the Company,
the Fund, its shareholders and/or any other person in connection with the
matters to which this Agreement relates; provided that no provision of this
Agreement shall be deemed to protect the Sub-Adviser against any liability to
the Company, the Fund and/or its shareholders which it might otherwise be
subject by reason of any willful misfeasance, bad faith or gross negligence in
the performance of its duties or the reckless disregard of its obligations and
duties under this Agreement.
The Company on behalf of the Fund, hereby agrees to indemnify and hold harmless
the Sub-Adviser, its directors, officers and employees and agents and each
person, if any, who controls the Sub-Adviser (collectively, the "Indemnified
Parties") against any and all losses, claims damages or liabilities (including
reasonable attorneys fees and expenses), joint or several, relating to the
Company or Fund, to which any such Indemnified Party may become subject under
the Securities Act of 1933, as amended (the "1933 Act"), the 1934 Act, the
Investment Advisers Act of 1940, as amended (the "Advisers Act") or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (1) any act, omission, error and/or
mistake of any other fiduciary and/or any other person; or (2) any untrue
statement or alleged untrue statement of a material fact or any omission or
alleged omission to state a material fact required to be stated or necessary to
make the statements made not misleading in (a) the Registration Statement, the
prospectus or any other filing, (b) any advertisement or sales literature
authorized by the Company for use in the offer and sale of shares of the Fund,
or (c) any application or other document filed in connection with the
qualification of the Company or shares of the Fund under the Blue Sky or
securities laws of any jurisdiction, except insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any such untrue statement or omission or alleged untrue statement or
omission (i) in a document prepared by the Sub-Adviser, or (ii) made in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Sub-Adviser pertaining to or originating with the Sub-Adviser for use in
connection with any document referred to in clauses (a), (b) or (c).
It is understood, however, that nothing in this paragraph X shall protect any
Indemnified Party against, or entitle any Indemnified Party to, indemnification
against any liability to the Company, Fund and/or its shareholders to which such
Indemnified Party is subject, by reason of its willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of any reckless
disregard of its obligations and duties under this Agreement.
12. Services Not Exclusive. It is understood that the services of the
Sub-Adviser are not exclusive, and that nothing in this Agreement shall prevent
the Sub-Adviser from providing similar services to other investment advisory
clients, including, but not by way of limitation, investment companies or to
other series of investment companies, including the Company (whether or not
their investment objectives and policies are similar to those of the Fund) or
from engaging in other activities, provided such other services and activities
do not, during the term of this Agreement, interfere in a material manner with
the Sub-Adviser's ability to meet its obligations to the Fund hereunder. When
the Sub-Adviser recommends the purchase or sale of a security for other
investment companies and other clients, and at the same time the Sub-Adviser
recommends the purchase or sale of the same security for the Fund, it is
understood that in light of its fiduciary duty to the Fund, such transactions
will be executed on a basis that is fair and equitable to the Fund. In
connection with purchases or sales of portfolio securities for the account of
the Fund, neither the Sub-Adviser nor any of its directors, officers or
employees shall act as a principal or agent or receive any commission. If the
Sub-Adviser provides any advice to its clients concerning the shares of the
Fund, the Sub-Adviser shall act solely as investment counsel for such clients
and not in any way on behalf of the Company or the Fund.
<PAGE>
The Sub-Adviser provides investment advisory services to numerous other
investment advisory clients, including but not limited to other funds and may
give advice and take action which may differ from the timing or nature of action
taken by the Sub-Adviser with respect to the Fund. Nothing in this Agreement
shall impose upon the Sub-Adviser any obligations other than those imposed by
law to purchase, sell or recommend for purchase or sale, with respect to the
Fund, any security which the Sub-Adviser, or the shareholders, officers,
directors, employees or affiliates may purchase or sell for their own account or
for the account of any client.
13. Duration and Termination. This Agreement shall continue until
_________, 2002, and thereafter shall continue automatically for successive
annual periods, provided such continuance is specifically approved at least
annually by (i) the Directors or (ii) a vote of a "majority" (as defined in the
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 Sub-Adviser; (b) by the Adviser at any time
without penalty, upon sixty (60) days' written notice to the Sub-Adviser or (c)
by the Sub-Adviser at any time without penalty, upon sixty (60) days' written
notice to the Company. This Agreement will also terminate automatically in the
event of its assignment (as defined in the 1940 Act). Any termination of this
Agreement will be without prejudice to the completion of transactions already
initiated by the Sub-Adviser on behalf of the Fund at the time of such
termination. The Sub-Adviser shall take all steps reasonably necessary after
such termination to complete any such transactions and is hereby authorized to
take such steps.
14. Amendments. This Agreement may be amended at any time but only by
the mutual agreement of the parties.
15. Proxies. Unless the Company gives written instructions to the
contrary, the Sub-Adviser shall vote all proxies solicited by or with respect to
the issuers of securities invested in by the Fund. The Sub-Adviser shall
maintain a record of how the Sub-Adviser voted and such record shall be
available to the Company upon its request. The Sub-Adviser shall use its best
good faith judgment to vote such proxies in a manner which best serves the
interests of the Fund's shareholders.
<PAGE>
16. Notices. Any written notice required by or pertaining to this
Agreement shall be personally delivered to the party for whom it is intended, at
the address stated below, or shall be sent to such party by prepaid first class
mail or facsimile.
If to the Company:
Forward Funds, Inc.
433 California Street, Suite 1010
San Francisco, CA 94104
If to the Sub-Adviser:
Garzarelli Investment Management, LLC
2010 Main Street, Suite 1225
Irvine, CA 92614
If to the Adviser:
Webster Investment Management Co., LLC
433 California Street, Suite 1010
San Francisco, CA 94104
17. Confidential Information. The Sub-Adviser shall maintain the
strictest confidence regarding the business affairs of the Fund. Written reports
furnished by the Sub-Adviser to the Company and the Adviser shall be treated by
all of the parties as confidential and for the exclusive use and benefit of the
Company and the Fund except as disclosure may be required by applicable law.
18. Name Reservation. The Adviser acknowledges and agrees that the
Sub-Adviser has property rights relating to the use of the terms "Garzarelli
Investment Management" and "Garzarelli" (the "Garzarelli Name") and has
permitted the use of the Garzarelli Name by the Fund and its U.S. Equity Fund
series. The Adviser agrees that, unless otherwise authorized by the Sub-Adviser:
(i) it will use the term "Garzarelli" only as a component of the name of the
Fund and for no other purposes; (ii) it will not purport to grant to any third
party any rights in any Garzarelli Name; and (iii) the Sub-Adviser may use or
grant to others the right to use a Garzarelli Name, or any abbreviation thereof,
as all or a portion of a corporate or business name or for any commercial
purpose, including a grant of such right to any other investment company. Upon
termination of this Agreement, the Adviser shall, at the request of the
Sub-Adviser, cease to use all Garzarelli Names in any of its materials or in any
manner except with the consent of the Sub-Adviser, which shall not be
unreasonably withheld. In the event of any such request by the Sub-Adviser that
use by the Adviser of a Garzarelli Name shall cease and in the absence of any
such consent, the Adviser shall cause its officers, directors and employees to
take any and all such actions which the Sub-Adviser may reasonably request to
effect such request.
19. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder.
<PAGE>
(b) Concurrently with the execution of this Agreement, the Sub-Adviser
is delivering to the Adviser and the Company a copy of Part II of its Form ADV,
as revised, on file with the Securities and Exchange Commission. The Adviser and
the Company hereby acknowledge receipt of such copy.
(c) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(d) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected hereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(f) Nothing herein shall be construed as constituting the Sub-Adviser
as an agent of the Company or the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of _________, 2000.
FORWARD FUNDS, INC.
By:
President
Garzarelli Investment Management, LLC
By:
Name:
Title:
WEBSTER INVESTMENT MANAGEMENT CO., LLC
By:
Name:
Title:
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT, made this day of February, 2000, between Webster
Investment Management Company, LLC ("Webster") and Garzarelli Investment
Management, LLC ("Garzarelli").
W I T N E S S E T H:
WHEREAS, Webster is the Investment Adviser to Forward Funds, Inc. (the
"Company"), an open-end investment management company registered under the
Investment Company Act of 1940, as amended; and WHEREAS, Webster, with the
approval of the Directors of the Company, has retained Garzarelli as sub-adviser
to make the day-to-day investment decisions with respect to the Garzarelli U.S.
Equity Fund (the "Fund"), a portfolio of the Company; and WHEREAS, Garzarelli
desires to retain Webster for certain administrative services and Webster is
willing to furnish such administrative services on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, the parties agree as follows:
Garzarelli hereby appoints Webster to provide the services set forth below, for
the period and on the terms set forth in this Agreement. Webster hereby
accepts such appointment and agrees during such period to render the
services herein described and to assume the obligations set forth
herein, for the compensation herein provided.
Webster shall provide office facilities and personnel adequate to perform the
following services for Garzarelli:
(a) assist in the maintenance of such books and records with
respect to Garzarelli's services to the Fund as are required
by Section 31 of the Investment Company Act of 1940, and the
rules adopted thereunder, and by other applicable legal
provisions, and preservation of such records for the periods
and in the manner required by that Section, and the rules
adopted thereunder;
(b) assist in the furnishing of any information or reports to
regulatory authorities in connection with Garzarelli's
services to the Fund;
(c) assist in the furnishing of whatever statistical information
that the Company may reasonably request with respect to the
Fund's assets or contemplated investments;
(d) assist with the preparation of materials in connection with
Garzarelli's services to the Fund required for inclusion in
the Board Books for the Company's Board of Directors meetings;
and
(e) assist in the preparation of the Company's Registration
Statement or other filings in connection with Garzarelli's
services to the Fund.
All services to be furnished by Webster under this Agreement may be furnished
through the medium of any of its directors, officers or employees, or any other
agents.
Garzarelli will pay Webster a fee at the annual rate of 0.15% of the average
daily net assets of the Fund, payable at the end of each calendar
month.
Webster assumes no responsibility under this Agreement other than to render the
services called for hereunder.
Webster shall not be liable for any error of judgment or for any loss suffered
by Garzarelli in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad faith or
gross negligence on its part in the performance of, or from reckless
disregard by it of its obligations and duties under this Agreement.
This Agreement shall remain in full force and effect until ______ years from
__________, 2000.
This Agreement may be terminated by Garzarelli at any time on sixty (60) days'
written notice without payment of penalty.
Any notice or other communication required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to Webster at 433 California
Street, Suite 1010, San Francisco, California 94104 or (2) to
Garzarelli at 2010 Main Street, Suite 1225, Irvine, CA 92614.
<PAGE>
This Agreement shall be governed by and construed in accordance with the laws
of the State of Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
WEBSTER INVESTMENT MANAGEMENT COMPANY, LLC.
By: ____________________________________
GARZARELLI INVESTMENT MANAGEMENT, LLC.
By: ____________________________________
AMENDED AND RESTATED
EXPENSE LIMITATION AGREEMENT
for
the U.S. EQUITY fund
THIS AGREEMENT, dated as of February 25, 1999, and amended and restated
January 27, 2000, is made and entered into by and between Forward Funds, Inc., a
Maryland corporation (the "Company"), on behalf of its series The U.S. Equity
Fund (the "Fund"), and Webster Investment Management Co., LLC (the "Adviser").
WHEREAS, the Adviser has been appointed the investment adviser of the
Fund pursuant to an Investment Management Agreement dated September, 1998,
between the Company, on behalf of the Fund, and the Adviser (the "Advisory
Agreement"); and
WHEREAS, the Company and the Adviser desire to enter into the
arrangements described herein relating to certain expenses of the Fund;
NOW, THEREFORE, the Company and the Adviser hereby agree as follows:
1. Until further notice from the Adviser to the Company, the Adviser
agrees, subject to Section 2 hereof, to reduce the fees payable to it under the
Advisory Agreement (but not below zero) to the extent necessary to limit the
operating expenses of the Fund (exclusive of brokerage costs, interest, taxes
and dividend and extraordinary expenses) as follows:
For the period of one year from the date of this Agreement, the Adviser
shall limit its fee so that the operating expenses of the Fund shall be
limited to an annual rate (as a percentage of the Fund's average daily
net assets) of 1.45% (exclusive of any and all 12b-1 and shareholder
servicing fees).
2. The Fund agrees to pay to the Adviser the amount of fees that, but
for Section 1 hereof, would have been payable by the Fund to the Adviser
pursuant to the Advisory Agreement (the "Deferred Fees") for a period of two
years following the end of the period provided for in Section 1 (the "Recoupment
Period"), subject to the limitations provided in this Section. Such repayment
shall be made monthly, but only if the operating expenses of the Fund (exclusive
of brokerage costs, interest, taxes and dividend and extraordinary expenses),
without regard to such repayment, are at an annual rate (as a percentage of the
average daily net assets of the Fund) of 1.45% or less. Furthermore, the amount
of Deferred Fees paid by the Fund in any month shall be limited so that the sum
of (a) the amount of such payment and (b) the other operating expenses of the
Fund (exclusive of brokerage costs, interest, taxes and extraordinary expenses)
do not exceed the foregoing annual percentage rate. In no event will the Fund be
obligated to pay any fees waived or deferred by the Adviser with respect to any
other series of the Company.
<PAGE>
3. The Adviser may by notice in writing to the Company terminate, in
whole or in part, its obligation under Section 1 to reduce its fees with respect
to the Fund in any period following the date specified in such notice (or change
the percentage specified in Section 1), but no such change shall affect the
obligation (including the amount of the obligation) of the Fund to repay amounts
of Deferred Fees with respect to periods prior to the date specified in such
notice.
4. A copy of the Agreement and Certificate of Incorporation
establishing the Company is on file with the Secretary of State of Maryland, and
notice is hereby given that this Agreement is executed by the Company on behalf
of the Fund by an officer of the Company as an officer and not individually and
that the obligations of or arising out of this Agreement are not binding upon
any of the Directors, officers or shareholders individually but are binding only
upon the assets and property belonging to the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
Forward Funds, Inc.
on behalf of its series
The U.S. Equity Fund Webster Investment Management Co., LLC
By: ------------------------ By: ------------------------
Name: ------------------------ Name: ------------------------
Title: ------------------------ Title: ------------------------
AMENDED AND RESTATED
EXPENSE LIMITATION AGREEMENT
FOR
THE INTERNATIONAL EQUITY FUND
THIS AGREEMENT, dated as of February 25, 1999, and amended and restated
January 27, 2000, is made and entered into by and between Forward Funds, Inc., a
Maryland corporation (the "Company"), on behalf of its series The International
Equity Fund (the "Fund"), and Webster Investment Management Co., LLC (the
"Adviser").
WHEREAS, the Adviser has been appointed the investment adviser of the
Fund pursuant to an Investment Management Agreement dated September, 1998,
between the Company, on behalf of the Fund, and the Adviser (the "Advisory
Agreement"); and
WHEREAS, the Company and the Adviser desire to enter into the
arrangements described herein relating to certain expenses of the Fund;
NOW, THEREFORE, the Company and the Adviser hereby agree as follows:
1. Until further notice from the Adviser to the Company, the Adviser
agrees, subject to Section 2 hereof, to reduce the fees payable to it under the
Advisory Agreement (but not below zero) to the extent necessary to limit the
operating expenses of the Fund (exclusive of brokerage costs, interest, taxes
and dividend and extraordinary expenses) as follows:
For the period of one year from the date of this Agreement,
the Adviser shall limit its fee so that the operating expenses
of the Fund shall be limited to an annual rate (as a
percentage of the Fund's average daily net assets) of 1.65%
(exclusive of any and all 12b-1 and shareholder servicing
fees).
2. The Fund agrees to pay to the Adviser the amount of fees that, but
for Section 1 hereof, would have been payable by the Fund to the Adviser
pursuant to the Advisory Agreement (the "Deferred Fees") for a period of two
years following the end of the period provided for in Section 1 (the "Recoupment
Period"), subject to the limitations provided in this Section. Such repayment
shall be made monthly, but only if the operating expenses of the Fund (exclusive
of brokerage costs, interest, taxes and dividend and extraordinary expenses),
without regard to such repayment, are at an annual rate (as a percentage of the
average daily net assets of the Fund) of 1.65% or less. Furthermore, the amount
of Deferred Fees paid by the Fund in any month shall be limited so that the sum
of (a) the amount of such payment and (b) the other operating expenses of the
Fund (exclusive of brokerage costs, interest, taxes and extraordinary expenses)
do not exceed the foregoing annual percentage rate. In no event will the Fund be
obligated to pay any fees waived or deferred by the Adviser with respect to any
other series of the Company.
<PAGE>
3. The Adviser may by notice in writing to the Company terminate, in
whole or in part, its obligation under Section 1 to reduce its fees with respect
to the Fund in any period following the date specified in such notice (or change
the percentage specified in Section 1), but no such change shall affect the
obligation (including the amount of the obligation) of the Fund to repay amounts
of Deferred Fees with respect to periods prior to the date specified in such
notice.
4. A copy of the Agreement and Certificate of Incorporation
establishing the Company is on file with the Secretary of State of Maryland, and
notice is hereby given that this Agreement is executed by the Company on behalf
of the Fund by an officer of the Company as an officer and not individually and
that the obligations of or arising out of this Agreement are not binding upon
any of the Directors, officers or shareholders individually but are binding only
upon the assets and property belonging to the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
Forward Funds, Inc.
on behalf of its series
The International Equity Fund Webster Investment Management Co., LLC
By: ------------------------ By: ------------------------
Name: ------------------------ Name: ------------------------
Title: ------------------------ Title: ------------------------
AMENDED AND RESTATED
EXPENSE LIMITATION AGREEMENT
FOR
HOOVER SMALL CAP EQUITY FUND
THIS AGREEMENT, dated as of February 25, 1999, and amended and restated
January 27, 2000, is made and entered into by and between Forward Funds, Inc., a
Maryland corporation (the "Company"), on behalf of its series Hoover Small Cap
Equity Fund (the "Fund"), and Webster Investment Management Co., LLC (the
"Adviser").
WHEREAS, the Adviser has been appointed the investment adviser of the
Fund pursuant to an Investment Management Agreement dated September, 1998,
between the Company, on behalf of the Fund, and the Adviser (the "Advisory
Agreement"); and
WHEREAS, the Company and the Adviser desire to enter into the
arrangements described herein relating to certain expenses of the Fund;
NOW, THEREFORE, the Company and the Adviser hereby agree as follows:
1. Until further notice from the Adviser to the Company, the Adviser
agrees, subject to Section 2 hereof, to reduce the fees payable to it under the
Advisory Agreement (but not below zero) to the extent necessary to limit the
operating expenses of the Fund (exclusive of brokerage costs, interest, taxes
and dividend and extraordinary expenses) as follows:
For the period of one year from the date of this Agreement,
the Adviser shall limit its fee so that the operating expenses
of the Fund shall be limited to an annual rate (as a
percentage of the Fund's average daily net assets) of 1.50%
(exclusive of any and all 12b-1 and shareholder servicing
fees).
2. The Fund agrees to pay to the Adviser the amount of fees that, but
for Section 1 hereof, would have been payable by the Fund to the Adviser
pursuant to the Advisory Agreement (the "Deferred Fees") for a period of two
years following the end of the period provided for in Section 1 (the "Recoupment
Period"), subject to the limitations provided in this Section. Such repayment
shall be made monthly, but only if the operating expenses of the Fund (exclusive
of brokerage costs, interest, taxes and dividend and extraordinary expenses),
without regard to such repayment, are at an annual rate (as a percentage of the
average daily net assets of the Fund) of 1.50% or less. Furthermore, the amount
of Deferred Fees paid by the Fund in any month shall be limited so that the sum
of (a) the amount of such payment and (b) the other operating expenses of the
Fund (exclusive of brokerage costs, interest, taxes and extraordinary expenses)
do not exceed the foregoing annual percentage rate. In no event will the Fund be
obligated to pay any fees waived or deferred by the Adviser with respect to any
other series of the Company.
<PAGE>
3. The Adviser may by notice in writing to the Company terminate, in
whole or in part, its obligation under Section 1 to reduce its fees with respect
to the Fund in any period following the date specified in such notice (or change
the percentage specified in Section 1), but no such change shall affect the
obligation (including the amount of the obligation) of the Fund to repay amounts
of Deferred Fees with respect to periods prior to the date specified in such
notice.
4. A copy of the Agreement and Certificate of Incorporation
establishing the Company is on file with the Secretary of State of Maryland, and
notice is hereby given that this Agreement is executed by the Company on behalf
of the Fund by an officer of the Company as an officer and not individually and
that the obligations of or arising out of this Agreement are not binding upon
any of the Directors, officers or shareholders individually but are binding only
upon the assets and property belonging to the Fund.
in witness whereof, the parties hereto have executed this Agreement as
of the date first above written.
Forward Funds, Inc.
on behalf of its series
Hoover Small Cap Equity Fund Webster Investment Management Co., LLC
By: ------------------------ By: ------------------------
Name: ------------------------ Name: ------------------------
Title: ------------------------ Title: ------------------------
AMENDED AND RESTATED
EXPENSE LIMITATION AGREEMENT
FOR
UNIPLAN REAL ESTATE INVESTMENT FUND
THIS AGREEMENT, dated as of February 25, 1999, and amended and restated
January 27, 2000, is made and entered into by and between Forward Funds, Inc., a
Maryland corporation (the "Company"), on behalf of its series Uniplan Real
Estate Investment Fund (the "Fund"), and Webster Investment Management Co., LLC
(the "Adviser").
WHEREAS, the Adviser has been appointed the investment adviser of the
Fund pursuant to an Investment Management Agreement dated September, 1998,
between the Company, on behalf of the Fund, and the Adviser (the "Advisory
Agreement"); and
WHEREAS, the Company and the Adviser desire to enter into the
arrangements described herein relating to certain expenses of the Fund;
NOW, THEREFORE, the Company and the Adviser hereby agree as follows:
1. Until further notice from the Adviser to the Company, the Adviser
agrees, subject to Section 2 hereof, to reduce the fees payable to it under the
Advisory Agreement (but not below zero) to the extent necessary to limit the
operating expenses of the Fund (exclusive of brokerage costs, interest, taxes
and dividend and extraordinary expenses) as follows:
For the period of one year from the date of this Agreement,
the Adviser shall limit its fee so that the operating expenses
of the Fund shall be limited to an annual rate (as a
percentage of the Fund's average daily net assets) of 1.80%
(exclusive of any and all 12b-1 and shareholder servicing
fees).
2. The Fund agrees to pay to the Adviser the amount of fees that, but
for Section 1 hereof, would have been payable by the Fund to the Adviser
pursuant to the Advisory Agreement (the "Deferred Fees") for a period of two
years following the end of the period provided for in Section 1 (the "Recoupment
Period"), subject to the limitations provided in this Section. Such repayment
shall be made monthly, but only if the operating expenses of the Fund (exclusive
of brokerage costs, interest, taxes and dividend and extraordinary expenses),
without regard to such repayment, are at an annual rate (as a percentage of the
average daily net assets of the Fund) of 1.80% or less. Furthermore, the amount
of Deferred Fees paid by the Fund in any month shall be limited so that the sum
of (a) the amount of such payment and (b) the other operating expenses of the
Fund (exclusive of brokerage costs, interest, taxes and extraordinary expenses)
do not exceed the foregoing annual percentage rate. In no event will the Fund be
obligated to pay any fees waived or deferred by the Adviser with respect to any
other series of the Company.
<PAGE>
3. The Adviser may by notice in writing to the Company terminate, in
whole or in part, its obligation under Section 1 to reduce its fees with respect
to the Fund in any period following the date specified in such notice (or change
the percentage specified in Section 1), but no such change shall affect the
obligation (including the amount of the obligation) of the Fund to repay amounts
of Deferred Fees with respect to periods prior to the date specified in such
notice.
4. A copy of the Agreement and Certificate of Incorporation
establishing the Company is on file with the Secretary of State of Maryland, and
notice is hereby given that this Agreement is executed by the Company on behalf
of the Fund by an officer of the Company as an officer and not individually and
that the obligations of or arising out of this Agreement are not binding upon
any of the Directors, officers or shareholders individually but are binding only
upon the assets and property belonging to the Fund.
in witness whereof, the parties hereto have executed this Agreement as
of the date first above written.
Forward Funds, Inc.
on behalf of its series
Uniplan Real Estate Investment Fund Webster Investment Management Co., LLC
By: ------------------------ By: ------------------------
Name: ------------------------ Name: ------------------------
Title: ------------------------ Title: ------------------------
SHAREHOLDER SERVICES PLAN
This Shareholder Services Plan (the "Plan") dated October 1, 1998 constitutes
the shareholder services plan of the Shares (the "Shares") of Forward Funds,
Inc. (the "Company"), a Maryland corporation. The Plan relates to the Shares of
the Series of the Company listed on Exhibit A (the "Funds").
Section 1. Each Fund is authorized to pay to banks and their affiliates
and other institutions, including broker-dealers ("Participating Organizations")
an aggregate fee in an amount not to exceed on an annual basis 0.10% of the
average daily net asset value of the Shares of such Fund (the "Plan Fee")
attributable to or held in the name of a Participating Organization for its
clients as compensation for providing "service activities" pursuant to an
agreement with a Participating Organization.
Section 2. The Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority of both (a) the
Directors of the Company, and (b) the Independent Directors of the Company, cast
in person at a meeting called for the purpose of voting on the Plan or such
agreement.
Section 3. The Plan shall continue in effect for a period beyond one
year from the date hereof only so long as such continuance is specifically
approved at least annually in the manner provided for approval of the Plan in
Section 2.
Section 4. Any person authorized to direct the disposition of monies
paid or payable by the Funds pursuant to the Plan or any related agreement shall
provide to the Directors of the Company, and the Directors shall review, at
least quarterly, a written report of the amounts so expended.
Section 5. The Plan may be terminated at any time by vote of a majority
of the Independent Directors, or by vote of a majority of the outstanding Shares
of a Fund.
Section 6. All agreements with any person relating to implementation of
the Plan shall be in writing, and any agreements related to the Plan shall
provide:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Independent Directors or by
vote of a majority of the outstanding Shares of a Fund, on not more than 60
days' written notice to any other party to the agreement; and
<PAGE>
(b) That such agreement shall terminate automatically in the event
of its assignment.
Section 7. The Plan may not be amended to increase materially the
amount of the Plan Fee permitted pursuant to Section 1 hereof, and no material
amendments to the Plan shall be made, unless approved in the manner provided for
approval of the Plan in Section 2.
Section 8. As used in the Plan, (a) the term "Independent Directors"
shall mean those Directors of the Company who are not interested persons of the
Company, and have no direct or indirect financial interest in the operation of
the Plan or any agreements related to it, and (b) the terms "assignment" and
"interested person" shall have the respective meanings specified in the
Investment Company Act of 1940, as amended, and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission.
FORWARD FUNDS, INC.
By: ____________________________
Name: Ronald Pelosi
Title: President
<PAGE>
EXHIBIT A
HOOVER SMALL CAP EQUITY FUND INVESTOR CLASS SHARES
THE HANSBERGER INTERNATIONAL EQUITY GROWTH FUND
THE GARZARELLI U.S. EQUITY FUND
UNIPLAN REAL ESTATE INVESTMENT FUND
SHAREHOLDER SERVICES PLAN
This Shareholder Services Plan (the "Plan") dated October 1, 1998 constitutes
the shareholder services plan of the Shares (the "Shares") of Forward Funds,
Inc. (the "Company"), a Maryland corporation. The Plan relates to the Shares of
the Series of the Company listed on Exhibit A (the "Funds").
Section 1. Each Fund is authorized to pay to banks and their affiliates
and other institutions, including broker-dealers ("Participating Organizations")
an aggregate fee in an amount not to exceed on an annual basis 0.35% of the
average daily net asset value of the Shares of such Fund (the "Plan Fee")
attributable to or held in the name of a Participating Organization for its
clients as compensation for providing "service activities" pursuant to an
agreement with a Participating Organization.
Section 2. The Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority of both (a) the
Directors of the Company, and (b) the Independent Directors of the Company, cast
in person at a meeting called for the purpose of voting on the Plan or such
agreement.
Section 3. The Plan shall continue in effect for a period beyond one
year from the date hereof only so long as such continuance is specifically
approved at least annually in the manner provided for approval of the Plan in
Section 2.
Section 4. Any person authorized to direct the disposition of monies
paid or payable by the Funds pursuant to the Plan or any related agreement shall
provide to the Directors of the Company, and the Directors shall review, at
least quarterly, a written report of the amounts so expended.
Section 5. The Plan may be terminated at any time by vote of a majority
of the Independent Directors, or by vote of a majority of the outstanding Shares
of a Fund.
Section 6. All agreements with any person relating to implementation of
the Plan shall be in writing, and any agreements related to the Plan shall
provide:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Independent Directors or by
vote of a majority of the outstanding Shares of a Fund, on not more than 60
days' written notice to any other party to the agreement; and
(b) That such agreement shall terminate automatically in the event
of its assignment.
<PAGE>
Section 7. The Plan may not be amended to increase materially the
amount of the Plan Fee permitted pursuant to Section 1 hereof, and no material
amendments to the Plan shall be made, unless approved in the manner provided for
approval of the Plan in Section 2.
Section 8. As used in the Plan, (a) the term "Independent Directors"
shall mean those Directors of the Company who are not interested persons of the
Company, and have no direct or indirect financial interest in the operation of
the Plan or any agreements related to it, and (b) the terms "assignment" and
"interested person" shall have the respective meanings specified in the
Investment Company Act of 1940, as amended, and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission.
FORWARD FUNDS, INC.
By: ____________________________
Name: Ronald Pelosi
Title: President
<PAGE>
EXHIBIT A
Hoover Small Cap Equity Fund Institutional Class Shares
AMENDMENT DATED FEBRUARY 22, 2000
TO THE
SHAREHOLDER SERVICES PLAN (the "Plan")
DATED OCTOBER 1, 1998
OF FORWARD FUNDS, INC.
Pursuant to Section 2 of the Plan, Section 1 and Exhibit A of the Plan are
amended as follows:
Section 1. Each Fund is authorized to pay banks and their affiliates and
other institutions, including broker-dealers ("Participating
Organizations") an aggregate fee in an amount not to exceed on an
annual basis 0.35% for Institutional Class Shares and 0.10% for
Investor Class Shares (collectively, the "Shares") of the average
daily net asset value of the respective class of Shares of such
Fund (the "Plan Fee") attributable to or held in the name of a
Participating Organization for its clients as compensation for
providing "service activities" pursuant to an agreement with a
Participating Organization.
<PAGE>
Exhibit A
Hoover Small Cap Equity Fund
The International Equity Fund
The U.S. Equity Fund
Uniplan Real Estate Investment Fund
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, DC 20006-2401
Forward Funds, Inc.
433 California Street, Suite 1010
San Francisco, California 94104
Re: Forward Funds, Inc.
Ladies and Gentlemen:
As counsel to Forward Funds, Inc. and its series The Hansberger
International Growth Fund, The Uniplan Real Estate Investment Fund, The Hoover
Small Cap Equity Fund and The Garzarelli U.S. Equity Fund (the "Fund" or
"Funds"), we are familiar with the Fund's registration statement under the
Investment Company Act of 1940, as amended, and with the registration statement
relating to its shares under the Securities Act of 1933, as amended (File No.
333-37367) (the "Registration Statement"). We have also examined such other
corporate records, agreements, documents and instruments as we deemed
appropriate.
On the basis of the foregoing, we are of the opinion that the shares of
common stock of the Fund being registered under the Securities Act of 1933 in
Post-Effective Amendment No. 13 to the Registration Statement will be legally
and validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with and as part of
Amendment No. 13 to the Registration Statement.
Very truly yours,
/s/ Dechert Price & Rhoads
-------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated February 18, 2000 and to all references to our
Firm, in post-effective Amendment Number 13 and Amendment Number 15 to
Registration Statement File numbers 333-37367 under the Securities Act of 1933
and 811-8419 under the Investment Company Act of 1940, respectively.
/s/ Arthur Andersen LLP
------------------------
Arthur Andersen LLP
February 28, 2000
San Francisco, California
FORWARD FUNDS, INC.
AMENDED AND RESTATED
18f-3 PLAN
________________________________________________________________________________
WHEREAS, the Board of Directors of Forward Funds, Inc. (the "Company")
have considered the following multi-class plan (the "Plan") under which the
Company may offer multiple classes of shares of its now existing and hereafter
created series pursuant to Rule 18f-3 under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, a majority of the Directors of the Company and a majority of
the Directors who are not interested persons of the Company have found the Plan,
as proposed, to be in the best interests of each series of the Company
individually and the Company as a whole;
NOW, THEREFORE, the Directors hereby approve and adopt the following
Plan pursuant to Rule 18f-3(d) of the 1940 Act.
THE PLAN
Each now existing and hereafter created series ("Portfolio") of the
Fund may from time to time issue one or more of the following classes of shares:
Investor Class shares and Institutional Class shares.1 Each class is subject to
such investment minimums and other conditions of eligibility as are set forth in
the Funds' prospectus as from time to time in effect with respect to such class
(the "Prospectus"). The differences in expenses among these classes of shares,
and the exchange features of each class of shares, are set forth below in this
Plan, which is subject to change, to the extent permitted by law and by the
Articles of Incorporation and By-laws of the Funds, by action of the Board of
Directors of the Funds.
Initial Sales Charge
Investor Class and Institutional Class shares of the Portfolios are
offered at their per share net asset value, without an initial sales charge.
- ---------------
1 Prior to February 25, 1999, each Portfolio of the Fund has issued, and
may issue, shares of a single class identified as shares of Common
Stock. The Board of Directors has authorized the classification of all
shares of The Small Cap Equity Fund issued and outstanding at the close
of business on May 1, 1999 as "Institutional Class" shares of the
Common Stock of such Portfolio, and has authorized the offer, sale and
issuance after that date of additional Investor Class shares and of
"Institutional Class" shares of the Common Stock.
<PAGE>
Transaction Fee
Each Portfolio assesses a transaction fee on share purchases of 0.25%
of the dollar amount involved, except with respect to investors who maintain
accounts through an omnibus account of a broker-dealer or other financial
institution. Notwithstanding the foregoing sentence, no transaction fee will be
imposed upon purchases of the Institutional Class Shares.
Separate Arrangements and Expense Allocations of Each Class
Investor Class and Institutional Class shares will pay the expenses
associated with their different distribution and shareholder servicing
arrangements. The Investor Class will pay its distributor for payments for the
purpose of financing or assisting in the financing of any activity which is
primarily intended to result in the sale of Investor Class shares of the Fund
and for servicing accounts of holders of Investor Class shares ("Service and
Distribution Fees"). Service and Distribution Fees are paid pursuant to a plan
adopted for the Investor Class pursuant to Rule 12b-1 under the 1940 Act (the
"12b-1 Plan"). Shares of the Investor Class of a Portfolio pay, pursuant to the
12b-1 Plan, a Service and Distribution Fee of up to 0.25% per annum of the
average daily net assets of such Portfolio attributable to such class, as
described in the Prospectus for that class. The Institutional Class has not
adopted a 12b-1 Plan.
Each Fund is authorized to pay banks and their affiliates and other
institutions, including broker-dealers ("Participating Organizations") an
aggregate fee in an amount not to exceed on an annual basis 0.35% for
Institutional Class Shares and 0.10% for Investor Class Shares (collectively,
the "Shares") of the average daily net asset value of the respective class of
Shares of such Fund (the "Plan Fee") attributable to or held in the name of a
Participating Organization for its clients as compensation for providing
"service activities" pursuant to an agreement with a Participating Organization.
Each class may, at the Directors' discretion, also pay a different
share of other expenses, not including advisory or custodial fees or other
expenses related to the management of the Portfolio's assets, if these expenses
are actually incurred in a different amount by that class, or if the class
receives services of a different kind or to a different degree than other
classes. All other expenses will be allocated to each class on the basis of the
net asset value of that class in relation to the net asset value of the
particular Portfolio. However, any Portfolio which may hereafter be established
to operate as a money market fund in reliance on Rule 2a-7 under the 1940 Act
and which will make daily distributions of its net investment income, may
allocate such other expenses to each share regardless of class, or based on
relative net assets (i.e., settled shares), as permitted by Rule 18f-3(c)(2)
under the 1940 Act.
Exchange and Conversion Features
Exchange Features
A shareholder may exchange shares of any Portfolio for shares of the
same class of any other Portfolio and for Investor Class Shares of a Portfolio
in an account with identical registration on the basis of their respective net
asset values. A shareholder may exchange shares of the Institutional Class
Shares of a Portfolio for shares of the Institutional Class Shares of any other
Portfolio.
<PAGE>
Conversion Features
Shares of one class do not convert into shares of another class.
Dividends/Distributions
Each Portfolio pays out as dividends substantially all of its net
investment income (which comes from dividends and interest it receives from its
investments) and net realized short-term capital gains.
All dividends and/or distributions will be paid, at the election of the
shareholder, either in the form of additional shares of the class of shares of
the Portfolio to which the dividends and/or distributions relate or in cash.
Dividends paid with respect to each class of a Portfolio are calculated in the
same manner and at the same time as dividends paid with respect to each other
class of that Portfolio.
Voting Rights
Each share entitles the shareholder of record to one vote. Each
Portfolio will vote separately on matters which require a shareholder vote and
which relate solely to that Portfolio. In addition, each class of shares of a
Portfolio shall have exclusive voting rights on any matter submitted to
shareholders that relates solely to that class, and shall have separate voting
rights on any matter submitted to shareholders in which the interests of one
class differ from the interests of any other class. However, all Portfolio
shareholders will have equal voting rights on matters that affect all Portfolio
shareholders equally. Under the current terms of this Plan and of the 12b-1
Plan, the Portfolios' Investor Class will vote separately only with respect to
their 12b-1 Plan.
FORWARD FUNDS, INC.
----------------------------
Ronald Pelosi
President
Initially approved: February 25, 1999
Last approved: [February 22, 2000]
