https://www.sec.gov/Archives/edgar/data/889188/000119312516752839/d262690d497.htm497 1 d262690d497.htm FORM 497
FORWARD FUNDS
Supplement dated October 31, 2016
to the Salient EM Corporate Debt Fund Investor Class and Institutional Class Prospectus, Salient EM Corporate Debt Fund Class C and Advisor Class Prospectus and Salient EM Corporate Debt Fund Statement of Additional Information each dated May 1, 2016, as supplemented
NOTICE OF LIQUIDATION OF SALIENT EM CORPORATE DEBT FUND
On October 18, 2016, the Board of Trustees of Forward Funds (the “Trust”), including all of the Trustees who are not “interested persons” of the Trust (as that term is defined in the Investment Company Act of 1940, as amended), approved the liquidation of the Salient EM Corporate Debt Fund (the “Fund”), a series of the Trust. The Fund will be liquidated pursuant to a Board-approved Plan of Liquidation on or around February 28, 2017 (the “Liquidation Date”). On the Liquidation Date, the Fund will distribute pro rata to its respective shareholders of record as of the close of business on the business day preceding the Liquidation Date all of the assets of the Fund in complete cancellation and redemption of all of the outstanding shares of beneficial interest, except for cash, bank deposits or cash equivalents in an estimated amount necessary to (i) discharge any unpaid liabilities and obligations of the Fund on the Fund’s books on the Liquidation Date, including, but not limited to, income dividends and capital gains distributions, if any, payable through the Liquidation Date, and (ii) pay such contingent liabilities as the officers of the Trust deem appropriate.
As the Liquidation Date approaches, the Fund will likely increase its holdings in cash and cash equivalents in anticipation of redemption requests and liquidation. As a result, the Fund may invest without limit in money market securities, U.S. Government obligations, and short-term debt securities. This could have a negative effect on the Fund’s ability to achieve its investment objective.
Certain investors may expect to receive an additional communication from their financial advisor or intermediary concerning this announcement.
IN CONNECTION WITH THE PLANNED LIQUIDATION, EFFECTIVE NO LATER THAN FEBRUARY 10, 2017, SHARES OF THE SALIENT EM CORPORATE DEBT FUND WILL CEASE TO BE OFFERED FOR PURCHASE TO NEW INVESTORS OR EXISTING INVESTORS (EXCEPT THROUGH REINVESTED DIVIDENDS) OR BE AVAILABLE FOR EXCHANGES FROM OTHER FUNDS OF THE TRUST.
PLEASE KEEP THIS SUPPLEMENT FOR FUTURE REFERENCE
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Comments
Regards,
Jeff Ptak
Morningstar
I did see the new summary prospectus filed prior to the liquidation notice above. I thought it was little strange. Maybe more details will develop as time progresses.
Here may be some news from another filing:
https://www.sec.gov/Archives/edgar/data/889188/000119312516752870/d278526d497.htm
Excerpt:
ORGANIZATION OF THE TRUSTS
The Salient MF Trust was organized on November 15, 2011 as a Delaware statutory trust under the laws of the State of Delaware and is an open-end investment management company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Salient MF Trust presently has four series, Salient Adaptive Growth Fund, Salient MLP & Energy Infrastructure Fund, Salient Trend Fund and Salient Tactical Plus Fund (each a “Salient MF Fund”). ...
Jeff Ptak
Morningstar
The supplement is attached to all four existing classes of the fund - FFXRX , FFXIX , FFXCX , and FFXMX . So no share class appears excluded from the supplement that writes about the fund, not the classes anyway.
Here's the fee filing (also Oct. 31st date):
https://www.sec.gov/Archives/edgar/data/889188/000119312516752799/d269563d497.htm
A fee reduction for a fund going out of business three months hence (fee reduction starting Dec 1, fund liquidated Feb 28, 2017) is rearranging chairs on the Titanic. Nevertheless, there is a certain logic to it, as a fund that's cashing out should have somewhat lower operating expenses (reflected in the fee changes). It is interesting that they also removed the 12b-1 fees - why pay advisors to choose replacement funds (sell away)?
What I find confusing is the extent to which the name "Forward" is still used. Notice that "Forward Funds" appears at the top of the supplements (both the liquidation supplement and the fee supplement). Yet this fund is currently branded Salient.
"Prior to May 1, 2016 ... the Salient EM Corporate Debt Fund was named the Forward EM Corporate Debt Fund". That's from another filing, which also notes that this fund (along with 19 others) are organized as series of the Salient FF Trust. (The Salient MF Trust holds four other funds, as noted by Shadow, above.)
https://www.sec.gov/Archives/edgar/data/889188/000119312516752870/d278526d497.htm
Morningstar also appears confused, as a quote search for "Forward EM Corporate Debt C" does not come up empty. The website recognizes the obsolete(?) name and takes you to FFXCX (Salient EM Corp Debt C). That's using the old site, not the newer beta site.
In any case, when share classes (and not funds) are liquidated, shareholders are typically moved to an existing (or new) share class in a tax-free exchange. I don't see anything that suggests any of the four existing classes is not being liquidated - so the fund will go poof.
I'd like to think our website's handling is helpful (to those that might, for whatever reason, be entering it by the old name), not confusing? Sorry if that's causing you aggravation.
The move to reduce fees of a soon-to-be-merged fund is extremely unusual. In general, they're charging the same freight all the way to the liquidation date, even with the usual cautions to investors that the fund might hold increasing amounts of cash, etc. What made this even stranger was their not reducing the fees by an even greater amount than they did -- if you're going to go to the trouble of reducing the fees then I guess why not cut deeper? The reduced fees are hardly low. In any event, given the rarity of this kind of thing, that led me to believe that they were keeping some shareclasses around but, yes, it's indeed possible that they're getting rid of the whole fund.
Regards,
Jeff Ptak
Morningstar
Regards,
Jeff Ptak
Morningstar
Thanks for the confirmation.
I assume also that they are still liquidating the other funds as well? Seems strange to issue new fund(s) SAI only to decide the liquidate the fund(s) shortly thereafter.
Keep up the good work, TheShadow.
Regards,
Jeff Ptak
Morningstar
http://abcnews.go.com/Politics/donald-trump-rode-escalator-2016-presidential-announcement/story?id=31801433 (candidacy announcement)
http://www.prnewswire.com/news-releases/salient-partners-completes-acquisition-of-forward-management-300096863.html (June 10, 2015)
Salient's acquisition involved only the management company. Unlike most acquisitions, Salient didn't restructure the funds. Usually what happens is that shell funds (like shell corps) are created that absorb the old funds.
For example, here's the agreement for Wells Fargo's acquisition of Strong funds (dare I comment on one firm of questionable ethics acquiring another?): https://www.sec.gov/Archives/edgar/data/1081400/000084051904000454/agreeandplan.txt (Exhibit from N-14AE filing dated 9/15/2004)
In contrast, looks like there was no reorganization of the Forward Funds. Further, even the management company did not change - Forward Management, not Salient, continued as the fund manager. SAI, Jan 4, 2016.
https://www.sec.gov/Archives/edgar/data/889188/000119312516420390/d102511d497.htm
So you are correct that technically, legally, these are still Forward Funds, unlike what happens in typical acquisitions, where the funds are restructured and the trusts change.
Regarding M*'s websites (plural) ... Try to find a fund beginning with "Salient EM" in the "classic" site's quote box. This comes up empty, but the site has no problem finding "Forward EM" funds. In contrast, the "beta" site gets it right - it finds the former, but does not recognize the obsolete Forward names. Calling this discrepancy a "feature" does not help matters.
The problem appears to be that M* is not keeping its "classic" database current. The resulting inconsistency between its websites merely adds to the confusion that Salient created by changing the funds' branding without changing their legal structure.
Finally, regarding the fee change. I misread the change - I should have looked at the older filings. This isn't a reduction in fees, but an increase. What changed was the addition of footnote (3) - a new fee "waiver" agreement, that actually results in higher fees getting charged.
What happened was that there had been a fee waiver agreement in place until May 1, 2014. The financials in the current (May 1, 2016) prospectus state that. That expired fee agreement may be found here.
As noted in footnote (2) to the fee table, the management company was unable to recoup the fees it waived because this fee agreement expired. So what it did was put a new agreement in place, with a higher expense limitation. For example, instead of limiting ER of the Investor shares to 1.34%, the expense will now be "limited" to 1.85%. Since the actual expenses are running "just" 1.74%, this new agreement allows the management company to recoup 0.11% (i.e. charge the full 1.85%). It had been unable to do that once the old agreement expired.
In other words, this looks like a money grab by the management company down to the very last minute.
Re our website -- that's quite strange. I'm on the 'old' site and am able to input 'Salient EM' and pull up the fund. I will bring this to the attention of the folks on the M*.com side.
W/re to the fee change, I misread it as well (or rather, I assumed if they were going to the bother of amending their fee table they were lowering the fees). I did some comparing of the before/after fee tables myself this morning but your analysis is more complete. If what you state is accurate, and I have no reason to doubt it, that's one of the more outrageous things I've seen.
Nice work.
Thanks.
Jeff Ptak
Morningstar