FOREIGN CUSTODY MANAGER DELEGATION AGREEMENT
AGREEMENT made as of this 2nd day of March, 1998 between Forward Funds,
Inc. (the "Fund") on behalf of each of the portfolios listed on Appendix B
hereto (each a "Fund" and collectively the "Funds"), each Fund a management
investment company registered with the Securities and Exchange Commission (the
"Commission") under the Investment Company Act of 1940, as amended, (the "Act"),
acting through its Board of Directors/Trustees or its duly appointed
representative, and ▇▇▇▇▇ BROTHERS ▇▇▇▇▇▇▇▇ & CO., a New York limited
partnership with an office in Boston, Massachusetts (the "Delegate").
WITNESSETH
WHEREAS the Fund has appointed the Delegate as custodian (the "Custodian")
of the Fund's Assets pursuant to a Custodian Agreement dated March 2, 1998 (the
"Custodian Agreement");
WHEREAS the Fund may, from time to time, determine to invest and maintain
some or all of the Fund's Assets outside the United States;
WHEREAS the Board of Directors/Trustees of the Fund (the "Board") wishes to
delegate to the Delegate certain functions with respect to the custody of Fund's
Assets outside the United States;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Fund and the Delegate agree as follows. Capitalized terms
shall have the meaning indicated in Section 12 unless otherwise indicated .
1. Maintenance of Fund's Assets Abroad. The Fund, acting through its Board
or its duly authorized representative, hereby instructs Delegate pursuant to the
terms of the Custodian Agreement to place and maintain the Fund's Assets within
the countries listed in Schedule 1 attached hereto (as such Schedule may be
amended from time to time in accordance herewith). Such instruction shall be
deemed to include an instruction to use any Compulsory Securities Depository in
any such country and shall represent a Proper Instruction under the terms of the
Custodian Agreement. Countries may be added to Schedule 1 by written instruction
of the Fund that is accepted in writing by the Delegate as an amendment to
Schedule 1. With respect to amendments adding countries to Schedule 1, the Fund
acknowledges that - (a) the Delegate shall perform services hereunder only with
respect to the countries where it provides custodial services to the Fund under
the Custodian Agreement; (b) depending on conditions in the particular country,
advance notice may be required before the Delegate shall be able to perform its
duties hereunder in or with respect to such country (such advance notice to be
reasonable in light of the specific facts and circumstances attendant to
performance of duties in such country); and (c) nothing in this Agreement shall
require the Delegate to provide delegated or custodial services in any country
not listed in Schedule 1 until such amended Schedule 1 has been accepted by the
Delegate in accordance herewith.
2. Delegation. Pursuant to the provisions of Rule 17f-5 under the Act as
amended, the Board hereby delegates to the Delegate, and the Delegate hereby
accepts such delegation and agrees to perform, only those duties set forth in
this Agreement concerning the safekeeping of the Fund's Assets in each of the
countries set forth in Schedule 1 hereto as amended from time to time. The
Delegate is hereby authorized to take such actions on behalf of or in the name
of the Fund as are reasonably required to discharge its duties under this
Agreement, including, without limitation, to cause the Fund's Assets to be
placed with a particular Eligible Foreign Custodian in accordance herewith. The
Fund confirms to the Delegate that the Fund or its investment adviser has
considered the Sovereign Risk and prevailing country risk as part of its
continuing investment decision process, including such factors as may be
reasonably related to the systemic risk of maintaining the Fund's Assets in a
particular country, including, but not limited to, financial infrastructure,
prevailing custody and settlement systems and practices (including the use of
any Compulsory Securities Depository), and the laws relating to the safekeeping
and recovery of the Fund's Assets held in custody pursuant to the terms of the
Custodian Agreement.
3. Selection of Eligible Foreign Custodian and Contract Administration. The
Delegate shall perform the following duties with respect to the selection of
Eligible Foreign Custodians and administration of certain contracts governing
the Fund's foreign custodial arrangements:
(a) Selection of Eligible Foreign Custodian. The Delegate shall place
and maintain the Fund's Assets with an Eligible Foreign Custodian; provided
that the Delegate shall have determined that the Fund's Assets will be
subject to reasonable care based on the standards applicable to custodians
in the relevant market after considering all factors relevant to the
safekeeping of such assets including without limitation:
(i) The Eligible Foreign Custodian's practices, procedures, and
internal controls, including, but not limited to, the physical
protections available for certificated securities (if applicable), the
controls and procedures for dealing with any Securities Depository,
the method of keeping custodial records, and the security and data
protection practices;
(ii) Whether the Eligible Foreign Custodian has the requisite
financial strength to provide reasonable care for the Fund's Assets;
(iii) The Eligible Foreign Custodian's general reputation and
standing and, in the case of a Securities Depository, the depository's
operating history and number of participants; and
(iv) Whether the Fund will have jurisdiction over and be able to
enforce judgments against the Eligible Foreign Custodian, such as by
virtue of the existence of any offices of such Eligible Foreign
Custodian in the United States or such Eligible Foreign Custodian's
appointment of an agent for service of process in the United States or
consent to jurisdiction in the United States.
The Delegate shall be required to make the foregoing determination to the best
of its knowledge and belief based only on information reasonably available to
it.
(b) Contract Administration. In the case of an Eligible Foreign
Custodian that is not a Securities Depository or a U.S. Bank, the Delegate
shall cause that the foreign custody arrangements shall be governed by a
written contract that the Delegate has determined will provide reasonable
care for Fund assets based on the standards applicable to custodians in the
relevant market. Each such contract shall, except as set forth in the last
paragraph of this subsection (b), include provisions that provide:
(i) For indemnification or insurance arrangements (or any
combination of the foregoing) such that the Fund will be adequately
protected against the risk of loss of assets held in accordance with
such contract;
(ii) That the Fund's Assets will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the
Eligible Foreign Custodian or its creditors except a claim of payment
for their safe custody or administration or, in the case of cash
deposits, liens or rights in favor of creditors of such Custodian
arising under bankruptcy, insolvency or similar laws;
(iii) That beneficial ownership of the Fund's Assets will be
freely transferable without the payment of money or value other than
for safe custody or administration; (iv) That adequate records will be
maintained identifying the Fund's Assets as belonging to the Fund or
as being held by a third party for the benefit of the Fund;
(v) That the Fund's independent public accountants will be given
access to those records described in (iv) aboveor confirmation of the
contents of such records; and
(vi) That the Delegate will receive sufficient and timely
periodic reports with respect to the safekeeping of the Fund's Assets,
including, but not limited to, notification of any transfer to or from
the Fund's account or a third party account containing the Fund's
Assets.
Such contract may contain, in lieu of any or all of the provisions
specified in this Section 3 (b), such other provisions that the
Delegate determines will provide, in their entirety, the same or a
greater level of care and protection for the Fund's Assets as the
specified provisions, in their entirety.
(c) Limitation to Delegated Selection. Notwithstanding anything in
this Agreement to the contrary, the duties under this Section 3 shall apply
only to Eligible Foreign Custodians selected by the Delegate and shall not
apply to Compulsory Securities Depositories or to any Eligible Foreign
Custodian that the Delegate is directed to use pursuant to Section 7.
4. Monitoring. The Delegate shall establish a system to monitor at
reasonable intervals (but at least annually) the appropriateness of maintaining
the Fund's Assets with each Eligible Foreign Custodian that has been selected by
the Delegate pursuant to Section 3 of this Agreement. The Delegate shall monitor
the continuing appropriateness of placement of the Fund's Assets in accordance
with the criteria established under Section 3(a) of this Agreement. The Delegate
shall monitor the continuing appropriateness of the contract governing the
Fund's arrangements in accordance with the criteria established under Section
3(b) of this Agreement.
5. Reporting. At least annually and more frequently as mutually agreed
between the parties, the Delegate shall provide to the Board written reports
specifying placement of the Fund's Assets with each Eligible Foreign Custodian
selected by the Delegate pursuant to Section 3 of this Agreement and shall
promptly report as to any material changes to such foreign custody arrangements.
Delegate will prepare such a report with respect to any Eligible Foreign
Custodian that the Delegate has been instructed to use pursuant to Section 7
only to the extent specifically agreed with respect to the particular situation.
6. Withdrawal of Fund's Assets. If the Delegate determines that an
arrangement with a specific Eligible Foreign Custodian selected by the Delegate
under Section 3 of this Agreement no longer meets the requirements of said
Section, Delegate shall withdraw the Fund's Assets from the non-complying
arrangement as soon as reasonably practicable; provided, however, that if in the
reasonable judgment of the Delegate, such withdrawal would require liquidation
of any of the Fund's Assets or would materially impair the liquidity, value or
other investment characteristics of the Fund's Assets, it shall be the duty of
the Delegate to provide information regarding the particular circumstances and
to act only in accordance with Proper Instructions of the Fund or its Investment
Advisor with respect to such liquidation or other withdrawal.
7. Direction as to Eligible Foreign Custodian. Notwithstanding this
Delegation Agreement, the Fund, acting through its Board, its Investment Adviser
or its other authorized representative, may direct the Delegate to place and
maintain the Fund's Assets with a particular Eligible Foreign Custodian. In such
event, the Delegate shall be entitled to rely on any such instruction as a
Proper Instruction under the terms of the Custodian Agreement and shall have no
duties under this Delegation Agreement with respect to such arrangement save
those that it may undertake specifically in writing with respect to each
particular instance.
8. Standard of Care. In carrying out its duties under this Agreement, the
Delegate agrees to exercise reasonable care, prudence and diligence such as a
person having responsibility for safekeeping the Fund's Assets would exercise.
9. Representations. The Delegate hereby represents and warrants that it is
a U.S. Bank and that this Agreement has been duly authorized, executed and
delivered by the Delegate and is a legal, valid and binding agreement of the
Delegate.
The Fund hereby represents and warrants that its Board of Directors has
determined that it is reasonable to rely on the Delegate to perform the
delegated responsibilities provided for herein and that this Agreement has been
duly authorized, executed and delivered by the Fund and is a legal, valid and
binding agreement of the Fund.
10. Effectiveness; termination. This Agreement shall be effective as of the
date on which this Agreement shall have been accepted by the Delegate, as
indicated by the date set forth below the Delegate's signature. This Agreement
may be terminated at any time, without penalty, by written notice from the
terminating party to the non-terminating party. Such termination shall be
effective on the 30th day following the date on which the non-terminating party
shall receive the foregoing notice. The foregoing to the contrary
notwithstanding, this Agreement shall be deemed to have been terminated
concurrently with the termination of the Custodian Agreement.
11. Notices. Notices and other communications under this Agreement are to
be made in accordance with the arrangements designated for such purpose under
the Custodian Agreement unless otherwise indicated in a writing referencing this
Agreement and executed by both parties.
12. Definitions. Capitalized terms in this agreement have the following
meanings:
a. Compulsory Securities Depository - shall mean a Securities
Depository the use of which is mandatory (i) under applicable law or
regulation; (ii) because securities cannot be withdrawn from the
depository; or, (iii) because maintaining securities outside the Securities
Depository is not consistent with prevailing custodial practices.
b. Eligible Foreign Custodian - shall have the meaning set forth in
Rule 17f-5(a)(1) and shall also include a U.S. Bank.
c. Fund's Assets - shall mean any of the Fund's investments (including
foreign currencies) for which the primary market is outside the United
States, and such cash and cash equivalents as are reasonably necessary to
effect the Fund's transactions in such investments.
d. Proper Instructions - shall have the meaning set forth in the
Custodian Agreement.
e. Securities Depository - shall have the meaning set forth in Rule
17f-5(a)(6).
f. Sovereign Risk - shall have the meaning set forth in Section 10.5
of the Custodian Agreement.
g. U.S. Bank - shall mean a bank which qualifies to serve as a
custodian of assets of investment companies under Section 17(f) of the Act.
13. Governing Law and Jurisdiction. This Agreement shall be construed in
accordance with the laws of the State of New York. The parties hereby submit to
the exclusive jurisdiction of the Federal courts sitting in the State of New
York or the Commonwealth of Massachusetts or of the state courts of either such
State or such Commonwealth.
14. Fees. Delegate shall perform its functions under this agreement for the
compensation determined under the Custodian Agreement.
15. Integration. This Agreement sets forth all of the Delegate's duties
with respect to the selection and monitoring of Eligible Foreign Custodians, the
administration of contracts with Eligible Foreign Custodians, the withdrawal of
assets from Eligible Foreign Custodians and the issuance of reports in
connection with such duties. The terms of the Custodian Agreement shall apply
generally as to matters not expressly covered in this Agreement, including
dealings with the Eligible Foreign Custodians in the course of discharge of the
Delegate's obligations under the Custodian Agreement.
NOW THEREFORE, the parties have caused this Agreement to be executed by its duly
authorized representatives, effective as of the date first above written.
▇▇▇▇▇ BROTHERS ▇▇▇▇▇▇▇▇ & CO. Forward Funds, Inc. on behalf of the
Portfolios listed on Appendix B
By: _______________________________ By: ____________________________
Name: ____________________ Name: ___________________
Title: ___________________ Title: ________________
Date: __________________ Date: _________________
APPENDIX "B"
TO
THE FOREIGN CUSTODY MANAGER DELEGATION AGREEMENT
BETWEEN
FORWARD FUNDS, INC. on behalf of the Funds listed on Appendix B
and
▇▇▇▇▇ BROTHERS ▇▇▇▇▇▇▇▇ & CO.
Dated as of ___________________1998
The following is a list of Funds for which the Delegate shall serve under a
Foreign Custody Manager Delegation Agreement dated as of ______________ to
provide foreign custody manager services to the Funds. (the "Agreement"):
The Global Fund
IN WITNESS WHEREOF, each of the parties hereto have caused this Appendix to be
executed in its name and on behalf of each such Fund.
Forward Funds, Inc.
On behalf of each Fund
listed above ▇▇▇▇▇ BROTHERS ▇▇▇▇▇▇▇▇ & CO.
By:____________________ By:_________________________________
Name: Name:
Title: Title: