Document ID: SEC-2009-0306-0001
Agency: sec
Document Type: Notice
Title: Applications: Forward Funds, et al.
Posted Date: 2009-03-09T04:00Z

[Federal Register: March 9, 2009 (Volume 74, Number 44)]
[Notices]               
[Page 10102-10104]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09mr09-91]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28640; 812-13543]

 
Forward Funds, et al.; Notice of Application

March 3, 2009.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 17(d) of the 
Investment Company Act of 1940 (``Act'') and rule 17d-1 under the Act.

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SUMMARY: Applicants request an order to permit certain registered open-
end investment companies in the same group of investment companies to 
enter into a special servicing agreement (``Special Servicing 
Agreement'').

Applicants: Forward Funds, on behalf of its series, Accessor Aggressive 
Growth Allocation Fund, Accessor Balanced Allocation Fund, Accessor 
Growth Fund, Accessor Growth Allocation Fund, Accessor Growth And 
Income Allocation Fund, Accessor High Yield Bond Fund, Accessor Income 
Allocation Fund, Accessor Income And Growth Allocation Fund, Accessor 
Intermediate Fixed-Income Fund, Accessor International Equity Fund, 
Accessor Mortgage Securities Fund, Accessor Short-Intermediate Fixed-
Income Fund, Accessor Small To Mid Cap Fund, Accessor Strategic 
Alternatives Fund, Accessor U.S. Government Money Fund and Accessor 
Value Fund, Forward Management LLC (``Forward Management'') and each 
existing or future registered open-end management investment company or 
series thereof that is part of the same ``group of investment 
companies'' as Forward Funds (the ``Trust'') under Section 
12(d)(1)(G)(ii) of the Act and is advised by Forward Management or any 
entity controlling, controlled by, or under common control with Forward 
Management. (such investment companies or series thereof, together with 
the Trust and its series, the ``Funds'').\1\
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    \1\ All entities that currently intend to rely on the order have 
been named as applicants. Any other entity that relies on the order 
in the future will comply with the terms and conditions of the 
application.

DATES: The application was filed on July 3, 2008, and amended on 
December 19, 2008. Applicants have agreed to file an amendment during 
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the notice period, the substance of which is reflected in this notice.

Hearing or Notification of Hearing: An order granting the application 
will be

[[Page 10103]]

issued unless the Commission orders a hearing. Interested persons may 
request a hearing by writing to the Commission's Secretary and serving 
applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the Commission by 5:30 p.m. on March 27, 
2009, and should be accompanied by proof of service on applicants, in 
the form of an affidavit or, for lawyers, a certificate of service. 
Hearing requests should state the nature of the writer's interest, the 
reason for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request notification by writing to the 
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090; Applicants, 433 California 
Street, 11th Floor, San Francisco, CA 94104.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at 
(202) 551-6817, or Julia Kim Gilmer, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Commission's Public Reference Room, U.S. Securities and Exchange 
Commission, 100 F Street, NE., Washington, DC 20549-1520 (telephone 
(202) 551-5850).

Applicants' Representations

    1. The Trust is a Delaware statutory trust registered under the Act 
as an open-end management investment company. The Trust currently 
offers 34 series, 6 of which are ``Top-Tier Funds'' \2\ and 10 of which 
are ``Underlying Funds.'' \3\ The Top-Tier Funds will invest 
substantially all of their assets in the Underlying Funds.\4\ The Top-
Tier Funds and the Underlying Funds currently offer multiple classes of 
shares in reliance on rule 18f-3 under the Act. Forward Management, an 
investment adviser registered under the Investment Advisers Act of 
1940, serves as investment adviser to the Funds.
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    \2\ ``Top-Tier Funds'' refers to Accessor Aggressive Growth 
Allocation Fund, Accessor Balanced Allocation Fund, Accessor Growth 
Allocation Fund, Accessor Growth and Income Allocation Fund, 
Accessor Income Allocation Fund and Accessor Income and Growth 
Allocation Fund and any other Fund that invests substantially all of 
its assets in the Underlying Funds (as defined below).
    \3\ ``Underlying Funds'' refers to Accessor Growth Fund, 
Accessor High Yield Bond Fund, Accessor Intermediate Fixed-Income 
Fund, Accessor International Equity Fund, Accessor Mortgage 
Securities Fund, Accessor Short-Intermediate Fixed-Income Fund, 
Accessor Small to Mid Cap Fund, Accessor Strategic Alternatives 
Fund, Accessor U.S. Government Money Fund and Accessor Value Fund 
and any other Fund in which a Top-Tier Fund may invest.
    \4\ The Top-Tier Funds will not be Underlying Funds and no Top-
Tier Fund will invest in another Top-Tier Fund.
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    2. Forward Management and the Trust propose to enter into a Special 
Servicing Agreement that would allow an Underlying Fund to bear the 
expenses of a Top-Tier Fund (other than investment management fees, 
rule 12b-1 fees and class-specific administrative service fees). Under 
the Special Servicing Agreement, each Underlying Fund will bear 
expenses of a Top-Tier Fund in proportion to the estimated benefits to 
the Underlying Fund arising from the investment in the Underlying Fund 
by the Top-Tier Fund (``Underlying Fund Benefits'').
    3. Applicants state that the Underlying Fund Benefits are expected 
to result primarily from the incremental increase in assets resulting 
from investment in the Underlying Funds by the Top-Tier Funds and the 
large asset size of each shareholder account that represents an 
investment by a Top-Tier Fund relative to other shareholder accounts. A 
shareholder account that represents a Top-Tier Fund will experience 
fewer shareholder transactions and greater predictability of 
transaction activity than other shareholder accounts. As a result, the 
shareholder servicing costs to any Underlying Fund for servicing one 
account registered to a Top-Tier Fund will be significantly less than 
the cost to that same Underlying Fund of servicing the same pool of 
assets contributed by a large group of shareholders owning relatively 
small accounts in one or more Underlying Funds.
    4. No Fund will enter into a Special Servicing Agreement unless the 
Special Servicing Agreement: (a) Precisely describes the services 
provided to the Top-Tier Funds and the amount of expenses for services 
charged to the Top-Tier Fund that may be paid by an Underlying Fund 
(``Underlying Fund Payments''); (b) provides that no affiliated person 
of the Top-Tier Funds, or affiliated person of such person, will 
receive, directly or indirectly, any portion of the Underlying Fund 
Payments, except for bona fide transfer agent services approved by the 
board of trustees (``Board'') of the Underlying Fund, including a 
majority of trustees who are not ``interested persons'' (within the 
meaning of section 2(a)(19) of the Act) (``Independent Trustees''); (c) 
provides that the Underlying Fund Payments may not exceed the amount of 
actual expenses incurred by the Top-Tier Funds; (d) provides that, in 
instances where transfer agent expenses are calculated based on a fixed 
fee per account, no Underlying Fund will reimburse transfer agent 
expenses of a Top-Tier Fund, including sub-accounting expenses and 
other out-of-pocket expenses, at a rate in excess of the average per 
account transfer agent expenses of the Underlying Fund, including sub-
accounting expenses and other out-of-pocket expenses, expressed as a 
basis point charge (for purposes of calculating the Underlying Fund's 
average per account transfer agent expense, the Top-Tier Fund's 
investment in the Underlying Fund will be excluded); and (e) has been 
approved by the Fund's Board, including a majority of the Independent 
Trustees, as being in the best interests of the Fund and its 
shareholders and not involving overreaching on the part of any person 
concerned.

Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 under the Act provide 
that an affiliated person of, or a principal underwriter for, a 
registered investment company, or an affiliate of such person or 
principal underwriter, acting as principal, shall not participate in, 
or effect any transaction in connection with, any joint enterprise or 
other joint arrangement in which the registered investment company is a 
participant unless the Commission has issued an order approving the 
arrangement. Forward Management, as investment adviser, is an 
affiliated person of each of the Underlying Funds and Top-Tier Funds, 
which in turn could be deemed to be under common control of Forward 
Management and therefore affiliated persons of each other. The Top-Tier 
Funds and the Underlying Funds also may be affiliated persons by virtue 
of a Top-Tier Fund's ownership of more than 5% of the outstanding 
voting securities of an Underlying Fund. Consequently, the Special 
Servicing Agreement could be deemed to be a joint transaction among the 
Top-Tier Funds, the Underlying Funds and Forward Management.
    2. Rule 17d-1 under the Act provides that, in passing upon a joint 
arrangement under the rule, the Commission will consider whether 
participation of the investment company in the joint enterprise or 
joint arrangement on the basis proposed is consistent with the 
provisions, policies, and purposes of the Act and the extent to which 
the participation is on a basis different from or less advantageous 
than that of other participants.

[[Page 10104]]

    3. Applicants request an order under section 17(d) and rule 17d-1 
to permit the proposed expense sharing arrangements. Applicants state 
that participation by the Top-Tier Funds, the Underlying Funds and 
Forward Management in the proposed expense sharing arrangements is 
consistent with the provisions, policies and purposes of the Act, and 
that the terms of the Special Servicing Agreement and the conditions 
set forth below will ensure that no participant will participate on a 
basis less advantageous than that of other participants.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. No Fund will enter into a Special Servicing Agreement unless the 
Special Servicing Agreement: (a) Precisely describes the services 
provided to the Top-Tier Funds and the Underlying Fund Payments; (b) 
provides that no affiliated person of the Top-Tier Funds, or affiliated 
person of such person, will receive, directly or indirectly, any 
portion of the Underlying Fund Payments, except for bona fide transfer 
agent services approved by the Board of the Underlying Fund, including 
a majority of the Independent Trustees; (c) provides that the 
Underlying Fund Payments may not exceed the amount of actual expenses 
incurred by the Top-Tier Funds; (d) provides that, in instances where 
transfer agent expenses are calculated based on a fixed fee per 
account, no Underlying Fund will reimburse transfer agent expenses of a 
Top-Tier Fund, including sub-accounting expenses and other out-of-
pocket expenses, at a rate in excess of the average per account 
transfer agent expenses of the Underlying Fund, including sub-
accounting expenses and other out-of-pocket expenses, expressed as a 
basis point charge (for purposes of calculating the Underlying Fund's 
average per account transfer agent expense, the Top-Tier Fund's 
investment in the Underlying Fund will be excluded); and (e) has been 
approved by the Fund's Board, including a majority of the Independent 
Trustees, as being in the best interests of the Fund and its 
shareholders and not involving overreaching on the part of any person 
concerned.
    2. In approving a Special Servicing Agreement, the Board of an 
Underlying Fund will consider, without limitation: (a) The reasons for 
the Underlying Fund's entering into the Special Servicing Agreement; 
(b) information quantifying the Underlying Fund Benefits; (c) the 
extent to which investors in the Top-Tier Fund could have purchased 
shares of the Underlying Fund; (d) the extent to which an investment in 
the Top-Tier Fund represents or would represent a consolidation of 
accounts in the Underlying Funds, through exchanges or otherwise, or a 
reduction in the rate of increase in the number of accounts in the 
Underlying Funds; (e) the extent to which the expense ratio of the 
Underlying Fund was reduced following investment in the Underlying Fund 
by the Top-Tier Fund and the reasonably foreseeable effects of the 
investment by the Top-Tier Fund on the Underlying Fund's expense ratio; 
(f) the reasonably foreseeable effects of participation in the Special 
Servicing Agreement on the Underlying Fund's expense ratio; and (g) any 
conflicts of interest that Forward Management, any affiliated person of 
Forward Management, or any other affiliated person of the Underlying 
Fund may have relating to the Underlying Fund's participation in the 
Special Servicing Agreement.
    3. Prior to approving a Special Servicing Agreement on behalf of an 
Underlying Fund, the Board of the Underlying Fund, including a majority 
of the Independent Trustees, will determine that: (a) The Underlying 
Fund Payments under the Special Servicing Agreement are expenses that 
the Underlying Fund would have incurred if the shareholders of the Top-
Tier Fund had instead purchased shares of the Underlying Fund through 
the same broker-dealer or other financial intermediary; (b) the amount 
of the Underlying Fund Payments is less than the amount of Underlying 
Fund Benefits; and (c) by entering into the Special Servicing 
Agreement, the Underlying Fund is not engaging, directly or indirectly, 
in financing any activity which is primarily intended to result in the 
sale of shares issued by the Underlying Fund.
    4. In approving a Special Servicing Agreement, the Board of a Fund 
will request and evaluate, and Forward Management will furnish, such 
information as may reasonably be necessary to evaluate the terms of the 
Special Servicing Agreement and the factors set forth in condition 2 
above, and make the determinations set forth in conditions 1 and 3 
above.
    5. Approval by the Fund's Board, including a majority of the 
Independent Trustees, in accordance with conditions 1 through 4 above, 
will be required at least annually after the Fund's entering into a 
Special Servicing Agreement and prior to any material amendment to a 
Special Servicing Agreement.
    6. To the extent Underlying Fund Payments are treated, in whole or 
in part, as a class expense of an Underlying Fund, or are used to pay a 
class-based expense of a Top-Tier Fund, conditions 1 through 5 above 
must be met with respect to each class of a Fund as well as the Fund as 
a whole.
    7. Each Fund will maintain and preserve the Board's findings and 
determinations set forth in conditions 1 and 3 above, and the 
information and considerations on which they were based, for the 
duration of the Special Servicing Agreement, and for a period not less 
than six years thereafter, the first two years in an easily accessible 
place.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-4875 Filed 3-6-09; 8:45 am]

BILLING CODE 8011-01-P